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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
eVentures Group, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2233445
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Evertrust Plaza, 8th Floor,
Jersey City, New Jersey 07302
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(Address of Principal Executive Offices) (Zip Code)
201-200-5515
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Registrant's telephone number, including area code
Securities to be registered pursuant to Section 12(g) of the Act:
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Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Common Stock NASDAQ National Market System
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
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(Title of Class)
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Explanatory Note:
The financial information and other statistical data contained herein
represent the financial condition and results of operations of (i) e.Volve
Technology Group, Inc. ("e.Volve") for all periods prior to July 1, 1998 and
(ii) the accounting acquirer pursuant to a series of reorganization transactions
completed on September 22, 1999 and October 19, 1999 (the "Reorganization")
described herein for all periods from July 1, 1998 through September 30, 1999.
As a result, throughout this Form 10, our financial statements as of any date
and for any period beginning July 1, 1998 and ending on or prior to September
30, 1999 reflect the financial condition and results of operations of e.Volve
Technology Group, Inc., ("e.Volve") as if we had acquired the interest of
Infinity Investors Limited ("IIL"), IEO Investments, Limited ("IEOIL"), and
Infinity Emerging Subsidiary Limited ("IESL") (collectively, the "Infinity
Entities") in e.Volve on July 1, 1998, except that (a) our balance sheet as of
June 30, 1999 reflects the acquisition of our minority interest in i2v2.com,
Inc. ("i2v2.com") and (b) our balance sheet as of September 30, 1999 reflects
the acquisition of Axistel Communications, Inc. ("Axistel"). Financial
information and other data as of any date after September 30, 1999 is financial
information and other data of eVentures Group, Inc. ("eVentures" or the
"Company").
Item 1. Business
COMPANY OVERVIEW
HISTORY OF THE COMPANY; REORGANIZATION TRANSACTION
We are an Internet-based communications services provider and network
company based on Internet Protocol ("IP") and Asynchronous Transfer Mode ("ATM")
technologies. Our business strategy is to focus on operating, developing,
investing in and acquiring businesses that:
o provide communications services to businesses and consumers
using the Internet or Internet-related transmission
infrastructures;
o provide communications products to businesses and consumers to
take advantage of the Internet or Internet-related
transmission infrastructures;
o operate Internet-based or Internet-related communications
networks; and
o supply products or services that support the foregoing
business models such as Internet marketing, Internet
consulting and web design and hosting.
We were originally incorporated in 1987 as "Adina, Inc." We allowed our
corporate existence to lapse in March 1996 and were subsequently reinstated as
"eVentures Group, Inc." in August 1999. From 1987 until the Reorganization, we
were an inactive company. As a result of the Reorganization, our business is now
based on the operations of two wholly owned subsidiaries and strategic
investments in three companies.
The Infinity Entities had made loans to and equity investments in
e.Volve, Axistel and i2v2.com from June 1998 to September 1999. In connection
with the Reorganization, we acquired the ownership of 66.67% of e.Volve, 100% of
Axistel and 17% of i2v2.com on September 22, 1999. Subsequent to, but as an
extension of, the Reorganization, we acquired the 33.33% of e.Volve that was not
owned by the Infinity Entities.
FINANCIAL INFORMATION; BUSINESS SEGMENTS
Operating Businesses
We operate in one business segment, the provision of Internet-based
communications services and operation of Internet-based communications networks
based on IP and ATM technologies. We currently have network
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facilities and points of presence in the United States and five foreign
countries: Mexico, India, Syria, Sri Lanka and the United Kingdom.
We have generated increasing revenues over the last three years. On a
historical basis, after giving effect to the Reorganization, we generated net
revenues and net losses of $921,599 and $375,707 for the period from inception
through the fiscal year ended June 30, 1997, $1.7 million and $4.9 million for
the Fiscal Year ended June 30, 1998, and $27.2 million and $5.5 million for the
Fiscal Year ended June 30, 1999, respectively. For the quarter ended September
30, 1999, we had net revenues of $8.7 million and net losses of $3.3 million. As
of June 30, 1998, we had assets of $4.3 million and as of June 30, 1999, we had
assets of $15.7 million. At September 30, 1999, we had total assets of $41.7
million.
Description of Operating Companies
Our operating companies are e.Volve and Axistel. They provide
communications services and operate communications networks based on IP and ATM
technologies. Our operating companies provide high quality communications
services, including offering international voice, data, Internet access and
other value-added applications over private fiber optic networks and the
Internet. Our customers include corporate and governmental communications
service providers and individual business customers in the United States and
internationally.
Both the e.Volve and Axistel networks are scalable networks built
around digital packet switching equipment. This switching equipment, together
with other components of the networks, incorporate ATM and IP technologies. The
networks meet voice over internet protocol ("VOIP") standards. Internationally,
our networks offer communications services through leased or owned fiber optic
cable under direct operating agreements with telecommunications authorities and
internet service providers ("ISP").
Our operating companies provide the following services:
High Quality Voice, Data and IP Services. We can complete voice calls
and provide data transmission services (such as frame relay, ATM, ethernet, fax,
and Internet uploads and downloads) over both the AxisTel and e.Volve networks,
with quality superior to that of traditional circuit-switched networks. Through
our network operations centers we are able to monitor our network and route
traffic over dedicated private lines or traditional circuit-switched lines when
necessary to maintain high quality. This enables us to provide consistently high
quality services to communications service providers.
Cost Effective Solutions. Our transmission costs are lower because
packet switching is more efficient than traditional circuit switching. Our
packet-based scaleable solution also allows us to better match our investment in
equipment with capacity needs, and provide lower cost world-class operating
support systems.
International High Capacity Network. We provide data transport services
over our network. Our network consists of gateways and other points of presence,
leased or owned fiber optic cable and our network operating center. By providing
customers with access to our network, they can transmit data worldwide. Our
networks allow us to complete calls worldwide. During our third quarter ended
September 30, 1999, we transported approximately 75 million minutes of traffic
over our network.
Strategic Investments
In conjunction with our operations, we also intend to make strategic
acquisitions and investments. These investments may be in companies at an early,
middle or late stage of development. We also may, from time to time, form a
company following a business model if we want to make a strategic investment but
cannot find an appropriate investment vehicle. Although we may from time to time
vary the types of companies in which we make strategic investments, we intend to
focus our strategic investments on companies that are well-positioned to take
advantage of next-generation networks and services and that can exploit the
growth of the Internet as a medium for communications, commerce and the
provision of information. In making these investments, we intend to provide
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(in addition to capital) operational assistance and strategic relationships,
including strategic relationships with our operating companies.
As of December 16th, 1999, we have made strategic investments in the
following companies:
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Company Name Date of Investment Percentage Ownership
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Innovative Calling Technologies LLC April, 1999 50.0%
i2v2.com (d/b/a PhoneFree.com) June, 1999 16.0%
FonBox, Inc. November, 1999 8.0%
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Description of Strategic Investments
ICT
In April 1999, e.Volve formed a joint venture whereby we received 50%
ownership of Innovative Calling Technologies, LLC ("ICT"), a Nevada limited
liability company.
ICT is a provider of automated operator services with emphasis on
software development, billing solutions and network applications for the
Internet and voice telephony environment. ICT focuses on the processing and
billing of credit card, third party, collect, prepaid and long distance calls
over private networks and the Internet. ICT provides its services primarily to
the tele-marketing, call center and hotel industries.
i2v2.com
In June 1999, we acquired 21% of the common stock of i2v2.com.
Subsequently, our ownership interest was diluted to 17% due to a sale of common
stock by i2v2.com in July of 1999 and was diluted further to 16% due to a sale
of common stock by i2v2.com in December of 1999. Four of our directors are
members of the board of directors of i2v2.com.
i2v2.com, a Delaware corporation, develops and markets an Internet
Telephony product and operates a web site called PhoneFree.com at the Internet
address (www.phonefree.com). The PhoneFree software, which can be downloaded
from the web site, allows users to conduct "real-time" duplex voice
conversations from PC to PC and PC to phone. This software functions with normal
multimedia PC hardware over the Internet. PC to PC calls are free to users with
ISP connections, regardless of their duration and destination while PC to phone
service in the U.S. is generally available for a flat monthly fee.
FONBOX
On November 23, 1999, we acquired 500,000 shares of Series A preferred
stock of Fonbox Inc. ("FonBox"), representing approximately 8.0% of the
outstanding equity interests of FonBox. We have an option, which expires on
December 23, 1999, to acquire up to 35% of the outstanding equity interests of
Fonbox. We have a verbal agreement to extend this option to December 30, 1999.
FonBox is a development stage company which offers Internet based
communications solutions for the Portuguese-speaking and Spanish-speaking market
in Latin America and abroad. They intend to exploit cross messaging, natural
language access, and phone-based Internet access technologies through their
Lineabox (www.lineabox.com), unified messaging product. Our chief executive
officer is a member of the board of directors of FonBox.
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OUR OPERATING STRATEGY
We intend to become a leading provider of high quality IP and ATM
communication services to telecommunications carriers, other communications
service providers, public and private communications providers, businesses and
consumers. We plan to accomplish this by pursuing the following strategies:
1) Focus on High Volume Communications Service Providers. We are
focused on providing communications services to high-volume carriers,
and service provider customers. By initially focusing on the needs of
the largest users in each market we serve, rather than the end-users,
we are able to avoid the time and expense associated with building a
retail sales channel, and supporting infrastructure and absorb the
additional overhead focusing on the middle-markets.
2) Provide Carrier-Class Services Using Our Private Networks and the
Internet. Through our proprietary networks, we offer high quality voice
and data transmission services. We can also use the Internet in
combination with our networks. By using our own networks, we are able
to control quality of service, which we feel is critical to meeting the
needs of our high volume customers. We intend to continue to use our
own networks and the Internet, where appropriate, to provide our high
quality services at competitive prices. We will continue to introduce
only those services that we can offer at carrier-class quality.
3) Focus on the International Market and Expand our Presence Through
Partnerships and Acquisitions. We intend to build a leading
international ATM and IP network to allow carriers to use us for their
international and domestic Internet telephony services around the
world. We will focus on attractive market segments and, where
appropriate, partner with communications service providers. We will
also consider acquiring complementary domestic or international
businesses or other technologies if attractive opportunities arise.
4) Remain at the Forefront of IP and ATM Communications Technology. In
order to provide these high quality services and stay at the forefront
of next-generation based communications technology and service
offerings, we will continue to invest in improving our technology, and
partner with leaders in Internet-based communications hardware and
software.
5) Increase Sales and Marketing Efforts and Brand Awareness. We will
continue to expand our sales and marketing activities, while focusing
on communications services providers domestically as well as
internationally. We intend to build our business into a premier IP and
ATM based communications provider and will strive to provide our
customers with high quality, value-added Internet-based communications
services. We are in the process of hiring additional sales, sales
support and marketing professionals with specific experience in our
target markets and regions.
6) Offer Additional Internet-based Communications Services. We intend
to introduce new services that carriers can offer over our network or
their own networks. These services may be provided through strategic
relationships or through partnering with businesses in which we make
strategic investments. We are focused on applications that will allow
carriers to expand their business, improve service quality and cut
costs. We also intend to offer new services such as dedicated Internet
and circuit-switched network access, which will help our customers
enter new markets quickly. We believe that these new services will
increase our customer base and allow us to cross-sell other services to
communications service providers once they are our customers.
OUR INVESTMENT STRATEGY
We also intend to make strategic investments. When we consider
strategic investments, we apply the following criteria:
o SIZE OF MARKET. We prefer to invest in companies that provide
products or services to a potentially large market.
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o MARKET LEADER. We will invest in a company only if we believe
that it can become a leader in its particular market. Our
assessment may be based on the company's products, its
business plan, or its ability to be an innovator in its
particular market.
o REVENUE AND PROFITABILITY GROWTH. We attempt to identify
companies that are capable of sustained revenue growth and
eventual profitability. To a certain degree, this is dependent
upon the two factors mentioned above. We also take into
account whether the particular company can assert leverage in
its market, whether its customers will have high switching
costs, and the degree of advertising and marketing investment
required to achieve our goals.
o TECHNOLOGY. We attempt to invest in companies with management
that is both experienced and adaptable. We look for
entrepreneurs with good track records and senior management
that has faced and managed the challenges of emerging
companies with new technologies.
When we make strategic investments, we generally use the following
guidelines:
o SIGNIFICANT EQUITY STAKE. We will generally invest in a
company only if we believe that we can acquire a significant
equity stake (which we generally feel is 25% or more). From
time to time, we may seek to acquire entire companies if they
fit a strategic need or complement one of our strategic
investments. Alternatively, we may take a small minority
position in a company if we feel that we can generate an
attractive return on the investment or if there are other
factors that preclude a larger involvement, such as the
presence of other investors with whom we want to participate.
o SENIORITY IN CAPITAL STRUCTURE. We will generally structure
our investments as "senior equity", in the form of convertible
preferred stock or convertible debt. We may also purchase
common stock or similar equity interests. From time to time,
we may negotiate options to invest additional amounts at what
we feel are attractive valuations.
o ACTIVE ROLE IN DEVELOPMENT OF BUSINESS. We will usually invest
in companies where we can obtain board representation and we
prefer to take an active role in the development of businesses
in which we make strategic investments. Depending on the
circumstances of a particular strategic investment, we may
seek to have control over key financing, marketing, personnel
and growth decisions.
o VALUE ADDED BY PARTNERING WITH OPERATING COMPANIES. We intend
to create interlocking relationships between our operating
companies and companies in which we make strategic
investments. We also intend to provide operational synergies
by sharing personnel, legal, accounting, finance, sales,
marketing and business development functions where practical.
OUR GLOBAL NETWORK
Over our international networks we deliver large volumes of high
quality data, voice, fax and other value-added services. Our networks consist of
the following elements:
Gateways. Gateways are the entrance points for communications traffic
over our global network. Gateways translate voice to data for transmission and
retrieval over our data network, and provide IP, ATM, and leased line data
services. Our gateways are connected to the public switched telephone network,
Internet (network access points) ("NAPs") as well as entrance facilities to the
world's largest carriers.
Our customers can interconnect with our global network through
dedicated circuits from their facilities to one of our gateways, located in
Jersey City, New York, Philadelphia, Atlanta, Boston, Miami, Dallas, Kansas
City, Los Angeles, London, Mexico City, Colombo, Damascus, New Delhi and Madras.
Alternatively, our customers may elect to co-locate and install equipment
directly at our facilities to eliminate the cost of back-hauling traffic from
their facilities to one of our enhanced points of presence.
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The gateways on our network are scaleable and flexible platforms
designed for interconnection with our network as well as others. The scalability
of our gateways permits us to quickly increase capacity in discrete increments
at relatively low cost, either for a region or a customer. In addition, the
point of presence flexible architecture is designed to easily integrate and
support the new services we intend to offer.
The Internet. We use the Internet to transmit some of our voice and fax
traffic and deliver other value-added services, because of its global coverage,
rapid growth and flexible connectivity. By using the Internet, we avoid having
to build a private, dedicated network of fiber and cable connections, which
would delay our time-to-market in many locations and would be more costly to
deploy. However, until technology allows us to provide guaranteed levels of
service the Internet will remain as a secondary means of transmission. We have
addressed the challenges present in using the Internet by:
o selecting only high quality, service-oriented Internet service
providers as our vendors;
o purchasing high-speed connections into the major NAP's and
MAE's; and
o continuously pursue private and public peering arrangements
with any internet backbone in the world.
OUR VOICE SERVICES.
Global Packet-Voice. Through the use of IP and ATM technology, we bring
the benefits of packet-switched services to the wholesale market. We have
deployed gateways throughout our network to implement IP and ATM technology
service and interconnect with the public switched network. We provide IP and ATM
services primarily on a wholesale basis to our carrier and service provider
customers. We offer global call completion services, and other value-added
services, that provide our customers with a high quality, efficient alternative
for voice and fax transport.
Voice Transport. Through the utilization of our voice transport ("VT")
service, carriers and service provider customers can leverage our network
elements to their advantage. By compressing traditional circuit switched phone
calls and passing them through our packet switched network, we are able to
provide customers a traditional circuit switched handoff (T-1/E-1) at prices 50%
to 60% below traditional leased line services.
OUR DATA SERVICES
International and Domestic Private Line Services. We offer point to
point services with a wide range of capacities, providing connections between
customers' location based on customers' bandwidth needs. These can be monitored
and maintained by our network operating control center.
Hub Service. Hub service provides our customers the ability to
aggregate and distribute bandwidth, saving time and money. For customers who
need to distribute circuits to multiple locations in a city or multiple
locations, we can provide the connectivity between our hub site and a customer's
locations creating a simple manageable networking solution.
Virtual Private WAN(SM). We can extend a customer's network and can
provide the high-speed links needed to facilitate any amount of bandwidth. We
incorporate voice, data and Internet services over a single network platform,
and provide a fully managed, secure network. We can monitor and maintain a
virtual private WAN through our network operations control center.
OUR INTERNET ACCESS SERVICES
Direct Access. We offer dedicated Internet services that meet the needs
of the smallest commercial user to the most sophisticated high bandwidth
customers. We provide a complete end-to-end solution, allowing the service
implementation process to be smooth and transparent to the end user.
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Server Collocation. Our gateway facilities offer complete
environmentally controlled areas for customers to house web servers. Options for
server hosting space include open racks, secured cabinets and caged secured
areas. We work with customers to find the solution that is right for their
business.
OUR FUTURE SERVICES
We intend to add new services that leverage components of our networks
to generate additional sources of revenue. We believe that our ability to deploy
new Internet-based communication services makes us an attractive partner for
application developers. We also believe that the ability to offer these new
services will be beneficial to our customers, regardless of whether or not they
directly charge their end-users for these services, because they will help our
customers attract new subscribers and retain and "up-sell" their existing
subscriber base. Some of the services that we may choose to introduce in the
future include:
o 1) Basic Messaging. We may offer additional basic messaging
services, including outsourced voicemail, store-and-forward
fax, or faxmail, and e-mail.
o 2) Advanced Messaging. We may offer advanced messaging
services including unified messaging, which enables
subscribers to access different message types, e.g., voicemail
and e-mail, from multiple user interfaces; one-number service,
which allows subscribers to consolidate existing office, home,
and mobile numbers into a single contact or "follow-me"
number; Internet call management services such as caller ID,
call waiting and call forwarding; and message delivery that
includes the recording and scheduling of a message, repeated
delivery attempts and message delivery confirmation. These
services may in some cases leverage components of our network
to provide international call-termination services and
operational support services.
o 3) Information Services. We may offer Internet-based
information services that deliver detailed, metered billing
information that can help customers to understand better how
their network is being used.
o 4) Directory Services. We may offer subscriber-based directory
services that maintain important customer information. This
would enable communications service providers to customize and
automate their services.
o 5) Internet and Circuit Switched Infrastructure. We may offer
circuit-switched access, dedicated Internet access, and
equipment co-location services to help our customers meet
their time-to-market objectives.
o 6) Conferencing Services. We may offer audio, video and data
conferencing services.
o 7) Billing Services. We may offer additional outsourced
billing services such as on-line bill presentment and Internet
telephony clearinghouse settlement services.
OUR MARKETS AND CUSTOMERS
Telephone companies are usually classified by size into first tier,
second tier and third tier carriers. First tier carriers generally have annual
revenues in excess of $2 billion and include large domestic and international
carriers, such as MCI/WorldCom, Cable & Wireless and certain
government-affiliated monopolies, such as the Japanese telecommunications
carrier KDD. Second tier carriers have revenues generally in the $750 million to
$2 billion range, and have fewer direct operating agreements with other carriers
and fewer international facilities than first tier carriers. Second tier
carriers include RSL Com ("RSL"), WorldxChange Communications, World Access
Telecomm Group, Star Telecom ("Star") and Pacific Gateway Exchange. Third tier
carriers are typically switch-based resellers with revenues of less than $750
million.
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We provide services to members of all three tiers of United States
carriers, who transmit voice and fax traffic through our New York or Los Angeles
points of presence for completion overseas. For Fiscal Year ended June
1999, our business was comprised of 65% with Qwest, 18% with RSL, and 16% with
Star. Through September 30, 1999, our business was comprised of at least 90%
with Qwest and the rest with other companies. As of September 30, 1999, we were
providing services to seven of the top thirteen highest volume United
States-based international carriers. The ability to provide quality consistently
acceptable to these classes of carriers is of vital importance, because these
carriers often have traffic volumes that regularly exceed their capacity.
Overseas we have established relationships with in-country companies
and local service providers that have local market expertise and relationships
to build strong businesses. Some of our overseas partners/customers are very
large well-established national carriers. Others are emerging carriers or
Internet service providers who are able to provide the services necessary to
terminate minutes for us in their country.
OUR SALES AND MARKETING STRATEGIES
Our sales efforts target leading telecommunications carriers both in
the United States and overseas. Our sales personnel have long-time relationships
in the telecommunications industry and are frequently supplemented by senior
members of management. In the United States, we sell directly to carriers and
have successfully developed brand awareness and beneficial relationships through
numerous channels including the Web, trade shows, speaking engagements and joint
marketing programs. The ability to provide quality acceptable to leading
carriers is a strong selling point for us. These carriers have traffic that
frequently exceeds their capacity and compels them to seek alternative channels
that offer comparable quality, particularly where those channels can offer
better pricing. Our sales process often involves a test by our potential
customers of our services with traffic to a particular country. Our experience
has been that once a carrier has begun to use our network for a single country
and has found our quality to be acceptable, the sales process for other
countries becomes easier.
In overseas markets, we seek to establish relationships with local
service providers that have the local market expertise to provide the
termination services we need. We believe that the opportunity we offer these
companies to terminate a substantial number of minutes makes us an attractive
partner. Prime candidates for overseas partners are carriers, call back
companies, cellular, PCS and paging companies and Internet service providers.
Our marketing strategy includes public relations campaigns, interaction
with industry analysts and attendance at trade shows. We aggressively pursue
favorable coverage in the trade and business press and participate in a variety
of industry trade shows, including Voice on the Net, Telecommunications
Resellers Association and Telecom Business.
OUR STRATEGIC TECHNOLOGY RELATIONSHIPS
We have entered into strategic technology relationships with a number
of leading technology providers in the Internet telephony industry, including
Lucent Technologies and Siemens AG, and Network Equipment Technologies. We
believe that our strategic technology relationships are important because they
give us early access to new technologies.
COMPETITION
The market for international voice and fax call completion services is
highly competitive. We face competition from a variety of sources, including
large communications service providers with more resources, longer operating
histories and more established positions in the telecommunications marketplace,
some of whom have begun to develop Internet telephony capabilities. Many of our
competitors are larger companies. We also compete with small companies who have
focused primarily on Internet telephony. We believe that we compete principally
on quality of service, price, convenience and bandwidth. We also expect that the
ability to offer enhanced service capabilities, including new services, will
become an increasingly important competitive factor in the near future.
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Telecommunications Companies and Long Distance Providers
Large carriers around the world carry a substantial majority of the
traffic. These carriers, such as British Telecom and Deutsche Telecom, have
started to deploy packet-switched networks for voice and fax traffic. These
carriers have substantial resources and have large budgets available for
research and development. In addition, several companies, many with significant
resources, such as Level 3 and Qwest Communications, are building fiber optic
networks, primarily in the United States, for Internet telephony traffic. These
networks can be expected to carry voice and fax and these newer companies may
expand into international markets.
The nature of the telecommunications marketplace is such that carriers
buy from and sell to each other. Most carriers have multiple routes to virtually
every destination, and frequently buy and sell based on the strength and
capacity to a particular country. We have relationships with many of these
carriers and have carried traffic for them in the past. We expect to continue to
exchange traffic with many of these companies in the future, even as they begin
to devote more resources to competing in the Internet telephony market.
Internet Telephony Service Providers
A number of companies have started Internet telephony operations in
last few years. AT&T Clearinghouse, GRIC Communications and IXC Communications
sell international voice and fax over the Internet and compete directly with us.
Other Internet telephony companies, including Net2Phone, deltathree.com, and
PhoneFree.com are currently focusing on the retail market and personal
computer-based Internet telephony, but may compete with us in the future.
GOVERNMENT REGULATION
Regulation of Internet Telephony.
The use of the Internet to provide telephone service is a recent market
development. Currently, the Federal Communications Commission (the "FCC") is
considering whether to impose surcharges or additional regulations upon certain
providers of Internet telephony. On April 10, 1998, the FCC issued its report to
Congress concerning the implementation of the universal service provisions of
the Telecommunications Act. In the report, the FCC indicated that it would
examine the question of whether certain forms of phone-to-phone Internet
telephony are information services or telecommunications services. The FCC noted
that it did not have, as of the date of the report, an adequate record on which
to make a definitive pronouncement, but that the record suggested that certain
forms of phone-to-phone Internet telephony appear to have the same functionality
as non-Internet telecommunications services and lack the characteristics that
would render them information services. If the FCC were to determine that
certain services are subject to FCC regulation as telecommunications services,
the FCC may require providers of Internet telephony services to make universal
service contributions, pay access charges or be subject to traditional common
carrier regulation. It is also possible that PC-to-phone and phone-to-phone
services may be regulated by the FCC differently. In addition, the FCC sets the
access charges on traditional telephony traffic and if it reduces these access
charges, the cost of traditional long distance telephone calls will probably be
lowered, thereby decreasing our competitive pricing advantage.
Changes in the legal and regulatory environment relating to the
Internet connectivity market, including regulatory changes which affect
telecommunications costs or that may increase the likelihood of competition from
the regional Bell operating companies or other telecommunications companies,
could increase our costs of providing service. For example, the FCC recently has
determined that subscriber calls to Internet service providers should be
classified for jurisdictional purposes as interstate calls. This determination
could affect a telephone carrier's costs for provision of service to these
providers by eliminating the payment of reciprocal compensation to carriers
terminating calls to these providers. The FCC has pending a proceeding to
encourage the development of cost-based compensation mechanisms for the
termination of calls to Internet service providers. Meanwhile, state agencies
will determine whether carriers receive reciprocal compensation for these calls.
If new compensation mechanisms increase the costs to carriers of terminating
calls to Internet service providers or if states eliminate reciprocal
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compensation payments, the affected carriers could increase the price of service
to Internet service providers to compensate, which could raise the cost of
Internet access to consumers.
In addition, although the FCC to date has determined that providers of
Internet services should not be required to pay interstate access charges, this
decision may be reconsidered in the future. This decision could occur if the FCC
determines that the services provided are basic interstate telecommunications
services and no longer subject to the exemption from access charges that are
currently enjoyed by providers of enhanced services. Access charges are assessed
by local telephone companies to long-distance companies for the use of the local
telephone network to originate and terminate long- distance calls, generally on
a per minute basis. The FCC has stated publicly that it would be inclined to
hold the provision of phone-to-phone Internet protocol telephony to be a basic
telecommunications service and therefore subject to access charges and universal
service contribution requirements. In a Notice of Inquiry released September 29,
1999, the FCC again asked for comments on the regulatory status of Internet
telephony. Specifically, the FCC asked commentator to address whether Internet
telephony service generally, and phone-to-phone service in particular, may be
regulated as a basic telecommunications service. If the FCC concludes that any
or all Internet telephony should be regulated as basic communications service,
it eventually could require that Internet telephony providers must contribute to
universal service funds and pay access charges to local telephone companies. The
imposition of access charges or universal service contributions would
substantially increase our costs of serving dial-up customers.
To our knowledge, there are currently no domestic and few foreign laws
or regulations that prohibit voice communications over the Internet. State
public utility commissions may retain jurisdiction to regulate the provision of
intrastate Internet telephony services. A number of countries that currently
prohibit competition in the provision of voice telephony have also prohibited
Internet telephony. Other countries permit but regulate Internet telephony. If
Congress, the FCC, state regulatory agencies or foreign governments begin to
regulate Internet telephony, such regulation may materially adversely affect our
business, financial condition or results of operations.
In addition, access to our services may also be limited in foreign
countries where laws and regulations otherwise do not prohibit voice
communication over the Internet. We have negotiated agreements to provide our
services in various countries. No assurances can be given that we will continue
to be successful in these negotiations.
Regulation of the Internet
Congress has recently adopted legislation that regulates certain
aspects of the Internet, including online content, user privacy, taxation,
access charges, liability for third-party activities and jurisdiction. In
addition, a number of initiatives pending in Congress and state legislatures
would prohibit or restrict advertising or sale of certain products and services
on the Internet, which may have the effect of raising the cost of doing business
on the Internet generally. The European Union has also enacted several
directives relating to the Internet, one of which addresses online commerce. In
addition, federal, state, local and foreign governmental organizations are
considering other legislative and regulatory proposals that would regulate the
Internet. Increased regulation of the Internet may decrease its growth, which
may negatively impact the cost of doing business via the Internet or otherwise
materially adversely affect our business, results of operations and financial
condition.
The Federal Trade Commission (the "FTC") has adopted regulations
regarding the collection and use of personal identifying information obtained
from minors when accessing Web sites, and may adopt additional online privacy
regulations. These regulations may include requirements that companies establish
certain procedures to disclose and notify users of privacy and security
policies, obtain consent from users for certain collection and use of
information and to provide users with the ability to access, correct and delete
personal information stored by the company. These regulations may also include
enforcement and redress provisions. There can be no assurance that we will adopt
policies that conform with any regulations adopted by the FTC. Moreover, even in
the absence of those regulations, the FTC has begun investigations into the
privacy practices of companies that collect information on the Internet. One
investigation resulted in a consent decree pursuant to which an Internet company
agreed to establish programs to implement the principles noted above. We may
become subject to a similar investigation, or the FTC's regulatory and
enforcement efforts may adversely affect the ability to collect demographic and
personal
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<PAGE> 12
information from users, which could have an adverse effect on our ability to
provide highly targeted opportunities for advertisers and electronic commerce
marketers. Any of these developments would materially adversely affect our
business, results of operations and financial condition.
The European Union has adopted a directive that imposes restrictions on
the collection and use of personal data. Under the directive, citizens of the
European Union are guaranteed rights to access their data, rights to know where
the data originated, rights to have inaccurate data rectified, rights to
recourse in the event of unlawful processing and rights to withhold permission
to use their data for direct marketing. The directive could, among other things,
affect United States companies that collect information over the Internet from
individuals in European Union member countries, and may impose restrictions that
are more stringent than current Internet privacy standards in the United States.
In particular, companies with offices located in European Union countries will
not be allowed to send personal information to countries that do not maintain
adequate standards of privacy. The directive does not, however, define what
standards of privacy are adequate. As a result, the directive may adversely
affect the activities of entities such as us that engage in data collection from
users in European Union member countries.
INTELLECTUAL PROPERTY
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success, and we
rely on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with our employees, customers, partners and others to
protect our proprietary rights. We pursue the registration of our trademarks and
service marks in the United States and have applied for the registration of
certain of our trademarks and service marks.
EMPLOYEES
As of September 30, 1999, we had 36 full-time employees and one
part-time employee. We also employ a limited number of independent contractors
and temporary employees on a periodic basis. Our employees are not represented
by a labor union and we consider our labor relations to be good.
THE REORGANIZATION TRANSACTIONS
On September 22, 1999, we completed the acquisition of all of the
outstanding shares of AxisTel, two-thirds of the outstanding shares of e.Volve
and $8.0 million of e.Volve debentures, and approximately 17% of the outstanding
shares of i2v2.com pursuant to the terms of an Agreement and Plan of
Reorganization dated September 22, 1999 (the "Reorganization Agreement"). In
connection with the Reorganization:
(a) Mick Y. Wettreich ("Wettreich") sold 8.5 million of his shares
of our common stock to participants in the Reorganization. The
Infinity Entities purchased an aggregate of $8,225,000 of such
shares.
(b) IEOH was merged into one of our subsidiaries that had been
formed to acquire IEOH. As a result of the merger, IEOIL and
IESL, the two shareholders of IEOH, received an aggregate of
14,562,193 shares of our common stock. Immediately prior to
the reorganization, IEOH owned 1,200 shares of common stock of
e.Volve representing one-third of outstanding equity interests
in e.Volve, a warrant to purchase shares of e.Volve (the "IEOH
Warrants") and a 50% interest in e.Volve debentures in an
aggregate principal amount of $4,020,000 (the "IEOH
Debentures"), 1,449 class A shares of common stock that when
exercised and combined with one class B share of common stock
represented 50% of the outstanding equity interest in AxisTel,
and 1,832,880 shares of common stock representing
approximately 17% of the outstanding equity interest in
i2v2.com.
(c) The shareholders of AxisTel, other than IEOH, contributed
their stock in AxisTel to eVentures in exchange for 6,381,000
shares of our common stock.
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<PAGE> 13
(d) IIL contributed to eVentures 1,200 shares of common stock
representing one-third of the outstanding equity interest in
e.Volve, a warrant to purchase shares of e.Volve (the "IIL
Warrants") and a 50% interest in e.Volve debentures in an
aggregate principal amount of $4,020,000 (the " IIL
Debentures") in exchange for 5,682,807 shares of our common
stock. All of the warrants have been cancelled.
The Infinity Entities are investment funds whose assets are managed by
HW Capital, L.P. and HW Partners, L.P. Immediately prior to the Reorganization,
Wettreich owned 10,145,830 shares of the 10,330,610 shares of our common stock
outstanding and was our controlling shareholder. As of December 16, 1999, the
Infinity Entities owned approximately 29 million shares of our outstanding
common stock, representing approximately 63.1% of our outstanding shares.
Upon the consummation of the reorganization, Daniel Wettreich resigned
as our sole director and appointed Messrs. Fred A. Vierra, Clark K. Hunt, Olaf
Guerrand-Hermes, Mark R. Graham and Barrett N. Wissman to serve on our board of
directors. Information about these individuals appears on pages 30-31 of this
Form 10. Also, Mr. Wettreich resigned as our president, and the following
persons were appointed as our officers:
<TABLE>
<S> <C>
Fred Vierra -Chairman of the Board
Barrett N. Wissman -President and Chief Executive Officer
Stuart Chasanoff -Vice President of Business Development,
General Counsel and Secretary
John Stevens Robling, Jr. -Vice President and Chief Financial Officer
Samuel Litwin -Managing Director of Communications Holdings
Mitchell Arthur -Managing Director of Communications Holdings
</TABLE>
Information about these persons appears on pages 30-32 of this Form 10.
Subsequent to, but as a continuation of, the Reorganization, on October
19, 1999, we consummated the acquisition of the outstanding shares of e.Volve
not owned by us, representing one third of the outstanding equity interests in
e.Volve. As a result of this acquisition, e.Volve became one of our wholly owned
subsidiaries. This acquisition was consummated pursuant to an Agreement and Plan
of Exchange dated as of October 19, 1999 (the "Exchange Agreement").
Acquired Businesses
Pursuant to the Reorganization Agreement, we acquired all of the
outstanding shares of AxisTel, two-thirds of the outstanding shares of e.Volve,
and approximately 17% of the outstanding shares of i2v2.com. We issued an
aggregate of 26,626,000 shares of our common stock to acquire these assets.
Prior to the Reorganization, the Infinity Entities (through IEOH and IIL)
collectively held (a) shares representing approximately 67% of the outstanding
equity interests in e.Volve, warrants to purchase additional shares of capital
stock of e.Volve and certain debentures of e.Volve, and (b) 50% of the
outstanding shares of AxisTel, and may be viewed as having controlled both
e.Volve and AxisTel. However, each person's participation in the reorganization
was voluntary. We determined the number of shares to be issued to each
participant in the reorganization after consideration of the relative values of
each of the entities involved and arm's-length negotiations with the
shareholders of e.Volve and AxisTel (other than the Infinity Entities). At the
closing of the Exchange Agreement, we issued to the former shareholders of
e.Volve an aggregate of 5,831,253 shares. We determined the number of shares to
be issued to each participant in the acquisition after considering the value of
the interests exchanged and arms'-length negotiations with the other
shareholders of e.Volve.
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<PAGE> 14
RISK FACTORS
Investors considering acquiring shares of our common stock should
consider carefully risks associated with our forward-looking statements, as well
as the following investment considerations. Any of the following risks, as well
as other risks and uncertainties that are not yet identified or that we
currently believe are immaterial, could harm our business, financial condition
and operating results, could cause the trading price of our common stock to
decline and could result in the complete loss of any investment.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this Form 10 that are
subject to risks and uncertainties. These statements generally include the words
"believe," "expect," "anticipate," "intend," "estimate" or similar expressions.
These statements reflect our current views with respect to future events that
are subject to certain risks, uncertainties and assumptions, including without
limitation any statements regarding the following: market opportunities,
strategies, competition, expected activities, additional financing, strategic
alliances and projected expenditures. If one or more of these risks or
uncertainties materialize, or should our assumptions prove incorrect, actual
results may vary materially from those described in this Form 10. We cannot
assure our investors that the anticipated results will occur, that these
judgments or assumptions will prove correct or that unforeseen developments will
not occur.
WE MAY HAVE FUTURE CAPITAL NEEDS AND MAY NOT BE ABLE TO OBTAIN SUITABLE
FINANCING
We expect positive developments in our operations and financial
condition as a result of our business strategy. However, we may exhaust our
existing cash resources within twelve months for capital expenditures, strategic
investments and working capital. Due to our limited operating history and the
nature of the Internet industry, our future capital needs are difficult to
predict. We may require additional capital to fund any of the following:
o advertising, maintenance and expansion;
o sales, marketing, research and development;
o unanticipated opportunities;
o operating losses from changing business conditions;
o operating losses from unanticipated competitive pressures;
o strategic investments; and
o strategic alliances.
We cannot assure our investors that adequate levels of additional
financing will be available at all or on acceptable terms. Any additional
financing could result in significant dilution to our existing stockholders. If
we are unable to raise additional capital, our growth and development could be
impeded. If we do not have sufficient capital, we may not be able to take
advantage of growth opportunities, respond to competitive pressures or pursue
our business plan. Our failure to have sufficient capital could have a material
adverse effect on our business, operating results and financial condition.
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<PAGE> 15
GOVERNMENTAL REGULATIONS REGARDING THE INTERNET MAY BE PASSED, WHICH COULD
IMPEDE OUR BUSINESS.
The legal and regulatory environment that pertains to the Internet is
uncertain and is changing rapidly as the use of the Internet increases. For
example, in the United States, the FCC is considering whether to impose
surcharges or additional regulations upon certain providers of Internet
telephony.
In addition, regulatory treatment of Internet Telephony outside the
United States varies from country to country. There can be no assurance that
there will not be interruptions in Internet Telephony in these and other foreign
countries or that we will be able to return to the level of service we had in
each of these countries prior to any interruptions. Other similar actions in
foreign countries may adversely affect our continuing ability to offer services
in other countries, causing us to lose customers and revenue.
New regulations could increase our costs of doing business and prevent
us from delivering our products and services over the Internet, which could
adversely effect our customer base and our revenue. The growth of the Internet
may also be significantly slowed. This could delay growth in demand for our
products and services and limit the growth of our revenue. In addition to new
regulations being adopted, existing laws may be applied to the Internet. See
"Business - Government Regulation." New and existing laws may cover issues that
include:
o sales and other taxes;
o access charges;
o user privacy;
o pricing controls;
o characteristics and quality of products and services;
o consumer protection;
o contributions to the universal service fund, an
FCC-administered fund for the support of local telephone
service in rural and high cost areas;
o cross-border commerce;
o copyright, trademark and patent infringement; and
o other claims based on the nature and content of Internet
materials.
DEPENDENCE ON SELECT SUPPLIERS AND CUSTOMERS
We depend on a select group of suppliers and customers. If we cannot
maintain these relationships on favorable terms, or if these relationships
terminate, we would have to enter into new relationships. We may not be able to
replace any of its suppliers or customers on reasonable terms, if at all. If we
cannot replace these important relationships, it could lose business, which may
adversely affect our revenues. For example, since a majority of our business is
dependent on Qwest, we would suffer adverse financial consequences should we
lose our business with Qwest. Even if we replace any relationships or enters
into new relationships, we may incur increased costs in order to pay for these
relationships.
These other parties may not regard their relationship with us as
important to their business. Therefore, they could elect to terminate their
relationship with us in the future or develop competitive services.
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<PAGE> 16
IF WE FAIL TO MANAGE OUR GROWTH AND INTEGRATE OUR ACQUIRED BUSINESSES, OUR
BUSINESS WILL BE ADVERSELY AFFECTED
We are in essence a new company formed by the combination of two
separate and distinct businesses with separate and distinct management teams:
AxisTel and e.Volve. We are faced with significant integration issues with
respect to these businesses and their management teams. We may not be successful
in integrating these management teams, and we may not be able to hire and retain
the quality of personnel we need to sustain our business. To the extent that we
continue to grow internally or through strategic alliances, we will be faced
with many risks, including risks associated with the establishment of new
operations, web sites and personnel; the diversion of resources from our
existing businesses; and our management's ability to manage increased traffic.
The Reorganization has resulted in significant growth of our operations. To
manage this growth, we will be required to implement and improve our operating
and financial systems and controls, and to expand, train and manage our employee
base. We will be dependent upon our management to assume and perform the
management functions formerly performed by management of each of the parties to
the Reorganization. To the extent that our management is unable to assume or
perform these combined duties, our business, results of operations and financial
condition could be adversely affected. There can be no assurance that the
management, systems and controls currently in place or any steps taken to
improve such management, systems and controls will be adequate in the future. In
addition, the integration of the acquired entities and their operations will
require our management to make and implement a number of strategic and
operational decisions. The timing and manner of the implementation of these
decisions will materially impact our business operations.
WE MUST RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL PERSONNEL TO BE
COMPETITIVE
Our success depends to a significant extent on the continued
contributions, experience and knowledge of our senior management team and key
technical and marketing personnel. Our success also depends upon our ability to
identify, attract, hire, train, retain and motivate highly skilled technical,
managerial, sales and marketing personnel. No assurance can be given that we
will be able to successfully attract, assimilate or retain a sufficient number
of qualified personnel. The failure to do so could have a material adverse
effect on our business.
OPERATING INTERNATIONALLY EXPOSES US TO FLUCTUATIONS IN FOREIGN CURRENCIES AND
POLITICAL INSTABILTY
We intend to build on our current relationships in Syria, Mexico,
India, Sri Lanka and other countries and to expand our existing operations
outside of the United States. International operations are subject to inherent
risks, including:
o potentially weaker protection of intellectual property rights;
o political instability
o unexpected changes in regulations and tariffs
o varying tax consequences; and
o fluctuations in exchange rates.
In particular, because our agreements with our Mexican suppliers are
denominated in Mexican pesos, we may be exposed to fluctuations in the Mexican
peso, as well as to downturns in the Mexican economy, all of which may adversely
affect our profitability.
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<PAGE> 17
WE OPERATE IN AN INDUSTRY WITH EVOLVING TECHNOLOGY TRENDS AND INDUSTRY STANDARDS
Our success, in part, depends upon our ability to develop and provide
new services that meet customers' changing requirements. The Internet service
industry has been characterized by significant technological changes, frequent
new system and product enhancements, evolving industry standards and changes in
customer needs that have had and will continue to have a significant impact on
the industry and industry participants. While the communications industry has
moved at a relatively moderate pace, we believe that most carriers are adopting
new technologies and that the communications industry will take on
characteristics similar to the Internet service industry in the near future. New
technologies and standards could render existing systems obsolete and ultimately
result in lost revenues. Our future success will depend, in part, on our ability
to effectively use leading technologies, continue to develop our technological
expertise, enhance our currently planned services, develop and implement new
services that meet changing customer needs, anticipate changes and influence and
respond to emerging industry standards and other technological changes on a
timely and cost effective basis. No assurance can be made that we will keep pace
with ever changing technological trends and evolving industry standards.
OUR MARKET IS RAPIDLY EVOLVING
The market for Internet-based products and services has only recently
begun to develop. This market is rapidly evolving and is speculative in nature.
Our market is typical for a new and rapidly evolving industry, and demand and
market acceptance for our services are subject to a high level of uncertainty
and risk. Our business prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in the new and
rapidly evolving market for Internet-based products and services. Some of the
risks include our ability to design, build, operate and expand our communication
networks; create awareness of our brand, products and services; obtain strategic
relationships and alliances; effectively compete with existing and unforeseen
competitors; and develop products and services to meet the evolving needs of our
customers.
WE HAVE AN UNPROVEN BUSINESS MODEL
We are unable to predict the extent of demand for our services. Our
ability to generate revenues also depends somewhat upon whether we can establish
strategic relationships with telecommunications carriers or systems integrators
to provide us with an adequate revenue stream. If we cannot achieve or sustain
an adequate revenue stream or if our services do not achieve or sustain broad
market acceptance, our business, operating results and financial condition will
be materially adversely affected. Our ability to generate future revenues
depends on a number of factors, many of which are beyond our control, including
among other things, the risk factors described in this Form 10. Therefore, we
are unable to forecast our revenues with any degree of accuracy.
WE EXPECT TO FACE STRONG COMPETITION FROM ANTICIPATED AND UNFORESEEN COMPETITORS
We believe that the primary competitive factors in providing
communication products and services via the Internet include name recognition,
variety of value-added products and services, ease of use, pricing, quality of
service, availability of customer support, reliability, technical expertise and
experience. Our success will depend upon our ability to provide quality,
reliable communications services to our customers, along with cutting-edge
technology and value-added Internet products and services. Our failure to
compete successfully would have a material adverse effect on our business,
results of operations and financial condition. Many of our potential competitors
in the Internet and communication businesses have longer operating histories,
significantly greater financial, technical and marketing resources, greater name
recognition and larger existing customer bases than we do. These competitors may
be able to respond more quickly to new or emerging technologies and changes in
customer requirements and devote greater resources to the development, promotion
and sale of their products or services. We cannot assure our investors that we
will be able to successfully compete.
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<PAGE> 18
WE HAVE A LIMITED OPERATING HISTORY
Although we have been in existence since 1987, our business operations
were insignificant before the Reorganization because we were an inactive
company, and thus we have a limited operating history. We have had no material
assets or operations, except for the interests in AxisTel, e.Volve, ICT and
i2v2.com obtained in the Reorganization, and the November 1999 investment in
Fonbox. All of these companies were recently formed and have limited operating
histories.
WE HAVE INCURRED HISTORICAL LOSSES AND MAY NOT HAVE ANY FUTURE PROFITS
We have incurred and may continue to incur operating losses while we
expand and build our business. Additionally, companies in which we have made
strategic investments may incur similar operating losses. As start-up companies,
these companies will continue to incur significant increases in expenses. We
also anticipate that a substantial portion of other companies in which we make
strategic investments will incur operating losses. These operating losses may
adversely impact our business and financial condition, including the value of
our strategic investments.
OUR COMMON STOCK HAS A LIMITED TRADING HISTORY AND AN ILLIQUID MARKET
There has only been a limited public market for our common stock. We
cannot predict the extent to which an active trading market will develop or how
liquid that market might become. The price of our common stock issued in the
reorganization may not be indicative of prices that will prevail in the trading
market.
WE INTEND TO MAKE STRATEGIC INVESTMENTS IN COMPANIES WE DO NOT WHOLLY OWN
We hold approximately 16% of the outstanding stock of i2v2.com, 8.0% of
the outstanding equity interests in Fonbox, and 50% of ICT. We do not control
the management or policies of these companies. Although we have representation
on the board of directors of i2v2.com and Fonbox, no assurance can be given that
our representatives will be able to influence their future direction in a manner
which results in increased value to us through our minority ownership interests.
THE INFINITY ENTITIES OWN A MAJORITY OF OUR COMMON STOCK AND MAY HAVE CONFLICTS
OF INTEREST
The Infinity Entities own a majority of our shares of capital stock.
The Infinity Entities, therefore, may exercise significant control over our
business, policies and affairs and, in general, determine the outcome of any
corporate transaction or other matters submitted to the stockholders for
approval, all in a manner that could conflict with the interests of other
shareholders.
SYSTEMS ON WHICH WE RELY MAY NOT PROPERLY FUNCTION IN THE YEAR 2000
Like many businesses, we rely upon computers for the daily conduct of
our business. Many software applications and operational programs are not
designed to recognize calendar dates beginning in the year 2000. The failure of
such applications or systems to properly recognize the dates beginning in the
year 2000 could result in miscalculations or system failures. We have not tested
all of our systems. In addition, there can be no assurance that the systems of
other companies and vendors on which we rely or other companies on the Internet
will not have an adverse affect on our systems. Any failures or delays by our
own systems, systems of other companies on which we rely, or other third-parties
in recognizing or processing dates beginning in the year 2000 could have a
material adverse effect on our business, financial condition or results of
operation.
WE DO NOT PLAN TO PAY DIVIDENDS ON OUR CAPITAL STOCK
We have never paid a dividend on our capital stock and do not expect to
pay dividends in the future. We anticipate that we will retain any earnings used
in the development of new services or the expansion of business
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<PAGE> 19
operations. There can be no assurance that we will ever recognize a gain from
our business operations or pay a dividend on our capital stock.
THE SHARES ELIGIBLE FOR FUTURE SALE MAY DECREASE THE PRICE OF OUR COMMON STOCK
If our shareholders sell substantial amounts of their common stock in
the public market, including shares issued upon the exercise of outstanding
options, then the market price of our common stock could fall. Restrictions
under the securities laws and certain lock-up agreements currently in effect
limit the number of shares of common stock available for sale in the public
market. The holders of shares received in the Reorganization and private
placement of our common and preferred stock have agreed not to sell in the
public market any of our shares for two years after the reorganization without
the prior written consent of our principal stockholders. These principal
stockholders may, in their discretion, release all or any portion of the
securities subject to the lock-up agreements. However, these holders have demand
or piggy-back registration rights. We also may shortly file a registration
statement to register all shares of common stock under our stock option plans
which, if declared effective, would permit the shares of common stock issued
upon exercise of stock options under our option plan to be resold in the public
market without restriction.
OUR RIGHT TO ISSUE PREFERRED STOCK AND ANTI-TAKEOVER PROVISIONS UNDER DELAWARE
LAW COULD MAKE A THIRD PARTY ACQUISITION OF US DIFFICULT
Our certificate of incorporation provides that our board of directors
may issue preferred stock without shareholder approval. The issuance of
preferred stock could make it more difficult for a third-party to acquire us
without the approval of its board. Additionally, Delaware corporate law imposes
certain restrictions on corporate control transactions that could make it more
difficult for a third-party to acquire us without the approval of our board.
Available Information
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports and other information with the Securities and
Exchange Commission, as amended (the "Commission"). Such filings can be
inspected and copied at the Public Reference Section of the commission located
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and
at regional public reference facilities maintained by the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and at Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained from the Public Reference Section of the
Commission at prescribed rates. Such material may also be accessed
electronically by means of the commission's home page on the Internet
(http://www.sec.gov).
Item 2. Financial Information
Selected Financial Data
The financial information and other statistical data contained herein
represent the financial condition and results of operations of (i) e.Volve for
all periods prior to July 1, 1998 and (ii) the accounting acquirer pursuant to a
series of reorganization transactions completed on September 22, 1999 and
October 19, 1999 (the "Reorganization") described herein for all periods from
July 1, 1998 through September 30, 1999. As a result, throughout this Form 10,
our financial statements as of any date and for any period beginning July 1,
1998 and ending on or prior to September 30, 1999 reflect the financial
condition and results of operations of e.Volve as if we had acquired the
interest of the Infinity Entities in e.Volve on July 1, 1998, except that (a)
our balance sheet as of June 30, 1999 reflects the acquisition of our minority
interest in i2v2.com and (b) our balance sheet as of September 30, 1999 reflects
the acquisition of Axistel. Financial information and other data as of any date
after September 30, 1999 is financial information and other data of eVentures.
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<PAGE> 20
For accounting purposes prior to July 1, 1998, the accounting acquiror
had no interest in e.Volve.
"Pro Forma" results are unaudited and reflect the results of AxisTel
for the year ended June 30, 1999 and the three months ended September 30, 1999,
as though the reverse merger and acquisition of AxisTel had occurred on July 1,
1998 (the transaction closed on September 22, 1999). The unaudited pro forma
results are not necessarily indicative of future results, or actual results of
operations that would have occurred had the reverse merger and acquisition been
made on July 1, 1998.
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<PAGE> 21
<TABLE>
<CAPTION>
e.VOLVE INFINITY ENTITIES
------------------------------- ---------------------------------------------------
INCEPTION YEAR ENDED YEAR ENDED 3 MONTHS 3 MONTHS
THROUGH ENDED ENDED
CONSOLIDATED STATEMENTS OF OPERATIONS DATA JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999 SEPT. 30, 1998 SEPT. 30, 1999
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net revenue $ 921,599 $ 1,713,403 $ 27,248,273 $ 4,205,662 $ 8,675,719
Direct costs 578,944 1,944,073 23,311,584 3,495,587 8,729,520
Selling, general and administrative 718,362 4,505,798 7,551,131 1,588,526 1,816,032
------------ ------------ ------------ ------------ ------------
Loss from operations before other (income)
expense and provision for taxes (375,707) (4,736,468) (3,614,442) (878,451) (1,869,833)
Interest expense, net -- 105,099 1,704,459 359,435 519,231
Equity in loss of unconsolidated
subsidiaries -- -- 33,776 -- 18,730
Foreign currency (gain) loss -- -- 126,575 8,238 (6,502)
Debt discount and other -- 12,604 (16,930) 7,946 911,027
------------ ------------ ------------ ------------ ------------
Loss from operations before taxes (375,707) (4,854,171) (5,462,322) (1,254,070) (3,312,319)
Provision for taxes -- -- -- -- --
============ ============ ============ ============ ============
Net loss $ (375,707) $ (4,854,171) $ (5,462,322) $ (1,254,070) $ (3,312,319)
============ ============ ============ ============ ============
Net loss per share - (basic and
diluted) $ (0.34) $ (0.08) $ (0.17)
Weighted average shares outstanding -
(basic and diluted) 16,000,000 16,000,000 19,744,397
<CAPTION>
PRO FORMA
--------------------------------
YEAR ENDED 3 MONTHS
ENDED
CONSOLIDATED STATEMENTS OF OPERATIONS DATA JUNE 30, 1999 SEPT. 30, 1999
------------- --------------
<S> <C> <C>
Net revenue $ 35,215,916 $ 14,695,002
Direct costs 30,308,717 14,805,280
Selling, general and administrative 12,690,917 3,669,538
------------ ------------
Loss from operations before other (income)
expense and provision for taxes (7,783,718) (3,779,816)
Interest expense, net 473,675 34,369
Equity in loss of unconsolidated
subsidiaries 33,776 18,730
Foreign currency (gain) loss 126,575 (6,502)
Debt discount and other 2,083,070 --
------------ ------------
Loss from operations before taxes (10,500,814) (3,826,413)
Provision for taxes 300 --
============ ============
Net loss $(10,501,114) $ (3,826,413)
============ ============
Net loss per share - (basic and
diluted) $ (0.28) $ (0.15)
Weighted average shares outstanding -
(basic and diluted) 37,863.610 37,863,610
</TABLE>
<TABLE>
<CAPTION>
INFINITY ENTITIES
e.VOLVE ----------------------------- PRO FORMA
AS OF AS OF AS OF AS OF
CONSOLIDATED BALANCE SHEET DATA JUNE 30, JUNE 30, SEPT. 30, SEPT. 30,
------------ ------------ ------------ ------------
1998 1999 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 2,417,216 $ 39,379 $ 6,346,023 $ 11,463,066
Working (deficit) capital (715,832) (6,590,569) (3,412,117) 3,576,095
Total assets 4,305,175 15,661,317 41,663,441 58,442,990
Capital lease obligations, net of current portion 487,665 2,031,513 1,750,160 1,750,160
Long term debt 5,410,000 6,828,948 -- --
Total shareholders' equity (5,121,478) (2,859,313) 25,999,660 47,086,646
</TABLE>
-21-
<PAGE> 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES. THE RESULTS HEREIN ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS TO BE EXPECTED IN ANY FUTURE PERIODS. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS BASED ON CURRENT EXPECTATIONS, WHICH INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY
DIFFER SIGNIFICANTLY FROM THOSE PROJECTED IN SUCH FORWARD-LOOKING STATEMENTS DUE
TO A NUMBER OF FACTORS.
OVERVIEW
The financial information and other statistical data contained herein
represent the financial condition and results of operations of (i) e.Volve for
all periods prior to July 1, 1998 and (ii) the accounting acquirer pursuant
to a series of reorganization transactions completed on September 22, 1999 and
October 19, 1999 (the "Reorganization") described herein for all periods from
July 1, 1998 through September 30, 1999. As a result, throughout this Form 10,
our financial statements as of any date and for any period beginning July 1,
1998 and ending on or prior to September 30, 1999 reflect the financial
condition and results of operations of e.Volve as if we had acquired the
interest of the Infinity Entities in e.Volve on July 1, 1998, except that (a)
our balance sheet as of June 30, 1999 reflects the acquisition of our minority
interest in i2v2.com and (b) our balance sheet as of September 30, 1999 reflects
the acquisition of Axistel. Financial information and other data as of any date
after September 30, 1999 is financial information and other data of eVentures.
We were originally incorporated in 1987 as "Adina, Inc." We allowed our
corporate existence to lapse in March 1996 and were subsequently reinstated as
"eVentures Group, Inc." in August 1999. From 1987 until the Reorganization, we
were an inactive company. As a result of the Reorganization, our business is now
based on the operations of two wholly owned subsidiaries, e.Volve and strategic
investments in three companies.
NET REVENUES. Net revenues are generated through the sale of
international Internet telephony minutes on a wholesale basis to other U.S.
long-distance providers. The Company's agreements with its wholesale customers
are short term in duration and the rates charged to customers are subject to
change from time to time. Due to increasing competition, management expects
these rates to decline, which could have a material adverse effect on our
financial condition or results of operation. The Company's three largest
customers accounted for substantially all its net revenues.
DIRECT COSTS. Direct costs include per minute termination charges and
lease payments and fees for fiber optic cable. Prior to September 1999, the
Company only provided international telecommunication services from the United
States to Mexico. The majority of the termination fees and certain fiber optic
lease payments were payable in Mexican pesos. As a result we were exposed to
exchange rate risk due to the fluctuation of the Mexican peso compared to the US
dollar. Continued fluctuation in the exchange rate may have a material adverse
impact on our financial condition or results of operation. During September 1999
we began providing international telecommunication services from the United
States to India. All direct costs related to the India operation is billed in US
dollars. Two vendors in Mexico provided substantially all of our terminating
capabilities in Mexico. If one of these vendor relationships were terminated, it
could have a material adverse effect on our financial condition and results of
operation.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses include
corporate expenses and management salaries, sales and marketing expenses, travel
and development expenses, benefits, occupancy costs, and administrative
expenses. The Company maintains a corporate office and two switch facilities.
Due to the international nature of its business, travel and development costs
have been significant and could continue to increase as we seek to expand our
network.
-22-
<PAGE> 23
SUMMARY OF OPERATING RESULTS
The table below summarizes the Company's operating results:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
------------------------------------------------------------------
1997 % 1998 % 1999 %
--------- ----- ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 921,599 100.0% $ 1,713,403 100.0% $27,248,273 100.00%
Direct costs 578,944 62.8% 1,944,073 113.5% 23,311,584 85.6%
--------- ----- ----------- ------ ----------- ------
Gross profit 342,655 37.2% (230,670) (13.5)% 3,936,689 14.4%
Selling, general and
administrative expenses 718,362 77.9% 4,505,798 263.0% 7,551,131 27.7%
--------- ----- ----------- ------ ----------- ------
Loss from operations (375,707) (40.8)% (4,736,468) (276.4)% (3,614,442) (13.3)%
Other (income) expenses
Interest expense, net -- 0.0% 105,099 6.1% 1,704,459 6.3%
Write off of unamortized
debt discount -- 0.0% -- 0.0% -- 0.0%
Equity in loss of
unconsolidated -- 0.0% -- 0.0% 33,776 0.1%
Foreign currency (gain) -- 0.0% -- 0.0% 126,575 0.5%
Other -- 0.0% 12,604 0.7% (16,930) (0.1)%
--------- ----- ----------- ------ ----------- ------
-- 0.0% 117,703 6.8% 1,847,678 7.9%
--------- ----- ----------- ------ ----------- ------
Loss from operation before
provision for taxes (375,707) (40.8)% (4,854,171) (283.3)% (5,462,322) (20.0)%
Provision for taxes -- 0.0% -- 0.0% -- 0.0%
--------- ----- ----------- ------ ----------- ------
Net loss $(375,707) (40.8)% $(4,854,171) (283.3)% $(5,462,322) (20.0)%
========= ===== =========== ====== =========== ======
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------
1998 % 1999 %
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Revenues $ 4,205,662 100.00% $ 8,675,719 100.00%
Direct costs 3,495,587 83.1% 8,729,520 100.6%
----------- ------ ----------- ------
Gross profit 710,075 16.9% (53,801) (0.6)%
Selling, general and
administrative expenses 1,588,526 37.8% 1,816,032 20.9%
----------- ------ ----------- ------
Loss from operations (878,451) (20.9)% (1,869,833) (21.6)%
Other (income) expenses
Interest expense, net 359,435 8.5% 519,231 6.0%
Write off of unamoritzed
debt discount
Equity in loss of -- 0.0% 917,615 10.6%
unconsolidated -- 0.0% 18,730 0.2%
Foreign currency (gain) 8,238 0.2% (6,502) (0.1)%
Other 7,946 0.2% (6,588) (0.1)%
----------- ------ ----------- ------
375,619 8.9% 1,442,486 16.6%
----------- ------ ----------- ------
Loss from operation before
provision for taxes (1,254,070) (29.8)% (3,312,319) (38.2)%
Provision for taxes -- 0.0% -- 0.0%
----------- ------ ----------- ------
Net loss $(1,254,070) (29.8)% $(3,312,319) (38.2)%
=========== ====== =========== ======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
NET REVENUES. Net revenues increased to $8.7 million during the three
months ended September 30, 1999 from $4.2 million during the three months ended
September 30, 1998, an increase of 106.3%. This primarily resulted from an
increase in traffic transmitted to Mexico and the startup of providing
VOIP services to India during September 1999, offset by a decrease in the
average net revenue per minute as a result of increased competition in the
Mexican market.
DIRECT COSTS. Direct costs increased to $8.7 million during the three
months ended September 30, 1999 from $3.5 million during the three months ended
September 30, 1998, an increase of 149.7%. This increase in direct costs
resulted from an increase in termination fees associated with the increase in
traffic transmitted to Mexico, additional costs related to the termination of
traffic in India and an increase in costs for fiber optic connections between
our points of presence. As a percentage of revenues, direct costs during the
three months ended September 30, 1999 increased to 100.6% from 83.1%.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased to $1.8 million during the three months ended
September 30, 1999 from $1.6 million during the three months ended September 30,
1998, an increase of 14.3%. This increase resulted primarily from an increase in
operating staff and general operating activities, and an increase in
depreciation expense.
INTEREST EXPENSE, NET. Interest expense, net increased to $519,231
during the three months ended September 30, 1999 from $359,435 during the three
months ended September 30, 1998, a increase of 44.5%. This increase was a result
of higher charges related to capital leases for new equipment.
WRITE OFF OF UNAMORTIZED DEBT DISCOUNT. The write off of unamortized
debt discount during the three months ended September 30, 1999 resulted from the
purchase of e.Volve's outstanding debentures by eVentures and the subsequent
elimination upon consolidation of these debentures in our consolidated
balance sheet.
EQUITY IN LOSS OF UNCONSOLIDATED SUBSIDIARIES. Equity in loss of
unconsolidated subsidiaries was $18,730 during the three months ended September
30, 1999. These losses occurred at a joint venture formed e.Volve in April 1999.
-23-
<PAGE> 24
FOREIGN CURRENCY (GAIN) LOSS. Foreign currency (gain) loss during the
three months ended September 30, 1999 was a gain of $6,502 compared with a loss
of $8,238 during the three months ended September 30, 1998.
OTHER. Other income of $6,588 during the three months ended September
30, 1999 changed from an expense of $7,946 during the three months ended
September 30, 1998.
FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
NET REVENUES. Net revenues increased to $27.2 million during the year
ended June 30, 1999 from $1.7 million during the year ended June 30, 1998, an
increase of 1,490.3%. This primarily resulted from a successful launch in July
1998 of our enhanced communications services and an increase in the traffic
transmitted to Mexico.
DIRECT COSTS. Direct costs increased to $23.3 million during the year
ended June 30, 1999 from $1.9 million during the year ended June 30, 1998, an
increase of 1,099.1%. This increase in direct costs resulted from an increase in
termination fees associated with the increase in traffic transmitted to Mexico
and an increase in the fees for the fiber optic connections between our points
of presence. As a percentage of revenues, direct costs during the year-ended
June 30, 1999 decreased to 85.6% from 113.5% during the year-ended June 30,
1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased to $7.6 million during the year ended June 30,
1999 from $4.5 million during the year ended June 30, 1998, an increase of
67.6%. This increase resulted primarily from an increase in the operating staff
and general operating activities, and an increase in depreciation costs.
INTEREST EXPENSE, NET. Interest expense, net increased to $1.7 million
during the year ended June 30, 1999 from $105,099 during the year ended June 30,
1998, a increase of 1,521.8%. This increase was a result of higher charges
related to new equipment capital leases and interest on the debentures.
EQUITY IN LOSS OF UNCONSOLIDATED SUBSIDIARIES. Equity in loss of
unconsolidated subsidiaries was $33,776 during the year ended June 30, 1999.
These losses occurred at a joint venture the Company formed in April 1999.
FOREIGN CURRENCY (GAIN) LOSS. Foreign currency (gain) loss during the
year ended June 30, 1999 was a loss of $126,575.
OTHER. Other income was $16,930 during the year ended June 30, 1999
compared with an expense of $12,604 during the year ended June 30, 1998.
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
NET REVENUES. Net revenues increased to $1.7 million during the year
ended June 30, 1998 from $921,599 during the year ended June 30, 1997, an
increase of 85.9%. This primarily resulted from an increase in the minutes
transmitted to Mexico.
DIRECT COSTS. Direct costs increased to $1.9 million during the year
ended June 30, 1998 from $578,944 during the year ended June 30, 1997, an
increase of 235.8%. This increase in direct costs resulted from an increase in
the total minutes transmitted to Mexico. As a percentage of revenues, direct
costs during the year-ended June 30, 1998 increase to 113.5% from 62.8% during
the year-ended June 30, 1997.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased to $4.5 million during the year ended June 30,
1998 from $718,362 during the year ended June 30, 1997, an increase of 527.2%.
This increase resulted primarily from an increase in the operating staff and
general operating activities, and an increase in depreciation costs.
-24-
<PAGE> 25
INTEREST EXPENSE, NET. Interest expense, net was $105,099 during the
year ended June 30, 1998. This expense was a result of charges related to
capital leases of new equipment.
OTHER. Other expense was $12,604 during the year ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded the operations of the Company primarily
through cash from operations and from the private placement of common stock,
preferred stock, warrants to purchase common stock and debt. As of September 30,
1999, we have raised a total $15.0 million to finance operations and to fund
capital expenditures primarily through borrowings from and equity investments by
the Infinity Entities and the proceeds of capital leases.
On September 28, 1999, we completed a private placement of common and
preferred stock of approximately $6.0 million. Proceeds from these issuances
were used for general corporate purposes and as capital for new investments and
projects.
Our principal uses of cash are to fund working capital requirements,
capital expenditures and the operating losses.
As of September 30, 1999, we had current assets of $10.5 million,
including cash, cash equivalents and short-term investments of $7.4 million, and
a working capital deficit of $3.4 million. Current assets included restricted
cash of $1.8 million and a tax refund receivable of $2.4 million.
CASH FLOWS FROM OPERATING ACTIVITIES:
Our operating activities generated cash of $26,000 during the period
between inception and June 30, 1997, used cash of $1.8 million during the year
ended June 30, 1998, used cash of $1.4 million during the year ended June 30,
1999, and generated cash $152,801 during the three months ended September 30,
1999. During the period between inception and June 30, 1997 cash flows from
operating activities primarily resulted from a combination of increases in
accounts payable, non-cash expenses, and increases in other accrued expenses,
offset by net losses and increases in accounts receivable and other receivables.
During the year ended June 30, 1998 cash used in operating activities primarily
resulted from a net loss, offset by non-cash expenses, increases in accounts
payable and customer deposits. During the year ended June 30, 1999 cash used in
operating activities primarily resulted from a net loss, an increase in tax
refund receivable and the securing of two letters of credit with restricted
cash, offset by increases in accounts payable and customer deposits, and
depreciation and amortization. During the three months ended September 30, 1999
cash flows from operating activities primarily resulted from non-cash
depreciation and amortization expenses, an increase in accounts payable, an
increase in customer deposits and a decrease in tax refund receivable, off-set
by net losses and an increase in restricted cash.
CASH FLOWS FROM INVESTING ACTIVITIES:
Our cash flow used by investing activities was $13,363 during the
period between inception and June 30, 1997, $1.8 million during the year ended
June 30, 1998, and $1.3 million during the year ended June 30, 1999, and we
generated cash flow from investing activities of $350,426 during the three
months ended September 30, 1999. During the period between inception and June
30, 1997 cash used by investing activities primarily resulted from deposits.
During the year ended June 30, 1998 cash used by investing activities primarily
resulted from investments in affiliates, purchases of fixed assets and the
purchase of securities. During the year ended June 30, 1999 cash used by
investing activities primarily resulted from purchases of fixed assets and
deposits, offset by proceeds from the sale of securities. During the three
months ended September 30, 1999 cash generated by investing activities primarily
consisted of cash acquired in the reverse merger acquisitions offset by uses to
purchase equipment, fund a recently formed joint venture, and make certain
deposits.
-25-
<PAGE> 26
CASH FLOWS FROM FINANCING ACTIVITIES:
Our cash flow from financing activities was $100 between the period
between inception and June 30, 1997, $6.0 million during the year ended June 30,
1998, $322,408 during the year ended June 30, 1999, and $5.8 million during the
three months ended September 30, 1999. During the period between inception and
June 30, 1997 cash provided by financing activities was immaterial. During the
year ended June 30, 1998 cash provided by financing activities was generated
primarily through the issuance of $6.0 of debentures. During the year ended June
30, 1999 cash provided by financing activities was generated through the
issuance of $2.0 million of debentures, offset by capital lease payments. During
the three months ended September 30, 1999 cash provided was attributable to the
issuance of $6.0 million of common stock and preferred stock, offset by capital
lease payments.
RECENTLY ADOPTED ACCOUNTING STANDARDS
See Note 3 to the Consolidated Financial Statements.
GENERAL
Our business plans will continue to require a substantial amount of
capital to fund its expansion of existing and recently acquired markets,
continuing to develop its network and fund operating losses and debt and capital
lease service requirements. We also continue to make strategic investments and
to evaluate acquisitions in light of our long range plans. Such strategic
investments and acquisitions, if realized, could require expenditure of a
material portion of our financial resources and would accelerate the need for
raising additional capital in the future. Sources of funding for our financing
requirements may include vendor financing, bank loans and public offerings or
private placements of equity and/or debt securities. There can be no assurance
that additional financing will be available or, if available, that financing can
be obtained on a timely basis and on acceptable terms. The failure to obtain
such financing on acceptable terms could have a material adverse effect on our
business and prospects.
Our cash and short-term investments are expected to provide sufficient
liquidity to meet our capital requirements for approximately the next twelve
months.
EQUIPMENT LEASING AND FINANCING. We have leased equipment manufactured
by various equipment manufacturers including Network Equipment Technologies,
Inc. and Harris Corporation. We have entered into approximately $5.7 million of
capital leases BA Capital Corp. and Arrendadora BankAmerica, S.A.
SUBSEQUENT EVENTS
On October 5, 1999 we allowed a vendor to draw on our $1.1 million
letter of credit to settle certain accounts payable due to the vendor.
On October 15, 1999 we entered into an agreement to exchange common
stock to a vendor to settle certain accounts payable due to the vendor in the
amount of $3.2 million.
On November 18 and 26 and December 15 of 1999 we raised an aggregate of
$7.0 million in a private placement of preferred stock.
On November 30, 1999 we agreed to issue shares of common stock to
extinguish $1.1 million of notes payable to a vendor.
IMPACT OF THE YEAR 2000
The "year 2000 issue" generally describes the various problems that may
result from the improper processing of dates and date-sensitive calculations by
computers and other equipment as a result of computer hardware and software
using two digits to identify the year in a date. If a computer program or other
piece of equipment fails to
-26-
<PAGE> 27
properly process dates including and after the year 2000, date-sensitive
calculations may be inaccurate as a result of those computers and software
failing to distinguish dates in the 2000's from dates in the 1900's. The failure
to process dates could result in system failures or miscalculations causing
disruptions in operations including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.
STATE OF READINESS. We have identified two areas for review: (i)
internal issues (including our information technology ("IT") assets and non-IT
systems); and (ii) external issues (including third-party manufactured products
sold by us, and issues with customers, vendors and suppliers). We are in the
process of contacting manufacturers and suppliers of IT and non-IT assets used
internally by us for services such as customer billing, customer service and
financial reporting, including manufacturers and suppliers of computer
equipment, software programs, telephone systems, data systems, systems
comprising our enterprise networks and equipment used to provide services to
customers. These contacts will help us to determine the extent to which these
systems could cause a material adverse effect on our operations in the event
that the systems fail to properly process date-sensitive calculations following
the year 2000. We are also actively identifying potential external issues which
could have an impact on our operations. These include issues with (i) the
functioning of third-party manufactured products sold by us to our customers;
(ii) significant customer systems, including customer-owned and operated systems
and systems that are connected to our networks; (iii) vendors and suppliers such
as credit facility providers, third-party service providers (e.g., local and
long distance wholesale providers and interconnection providers) and employee
benefit plan providers (e.g., 401(k) plan administrators).
Our evaluation of its state of year 2000 readiness is not complete. As
a result, we may in the future identify a significant internal or external year
2000 issue which, if not remediated in a timely manner, could have a material
adverse effect on our business, financial condition and results of operations.
COSTS. Other than time spent by our personnel which could be spent on
other matters, we have not incurred any significant costs in identifying year
2000 issues. We do not anticipate any significant further costs. Because no
material year 2000 issues have yet been identified, and therefore no contingency
plans have been finalized, we cannot reasonably estimate further costs relating
to remediation of any year 2000 issues at this time, or costs of contingency
plans. As we continue to gather information regarding its year 2000 issues, we
will reevaluate its ability to estimate costs associated with the year 2000
issue. There can be no assurance that as additional year 2000 issues are
addressed, our costs to correct such issues will be consistent with historical
costs.
RISKS OF YEAR 2000 ISSUES. Because no material year 2000 issues have
yet been identified, we cannot reasonably ascertain the extent of the risks
involved in the event that any one system fails to process date-sensitive
calculations accurately. Potential risks include the inability to process
customer billing accurately or in a timely manner, the inability to provide
accurate financial reporting to management, auditors, investors and others,
litigation costs associated with potential suits from customers and investors,
delays in implementing other IT projects as a result of work by internal
personnel on year 2000 issues, and delays in receiving payment or equipment from
customers or suppliers as a result of their systems' failure. Any one of these
risks, if they materialize, could individually have a material adverse effect on
our business, financial condition or results of operations.
As almost all of our IT and non-IT systems and products relating to our
internal and external issues are manufactured or supplied by third parties which
are outside of our control, there can be no assurance that all of those third
parties' systems will be year 2000 ready. If some or all of our internal and
external systems fail, or if any critical IT or non-IT systems are overlooked or
are not year 2000 ready in a timely manner, there could be a material adverse
effect on our business, financial condition or results of operations.
CONTINGENCY PLANS. Because no material year 2000 issues have yet been
identified, no contingency plans have yet been finalized.
-27-
<PAGE> 28
EFFECTS OF INFLATION
Management does not believe that its business is impacted by inflation
to a significantly different extent than is the general economy. However, there
can be no assurances that inflation will not have a material effect on the
Company's operations in the future.
Item 3. Properties
We are headquartered at One Evertrust Plaza in Jersey City, NJ and
maintain facilities as described in the following chart. We believe that our
existing facilities are adequate for our current needs and that suitable
additional or alternative space will be available in the future on commercially
reasonable terms.
<TABLE>
<CAPTION>
LOCATION COMPANY SQUARE FEET DESCRIPTION OF USE LEASE EXPIRATION
-------- ------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C>
Jersey City, NJ eVentures 10,800 Switch and network operations center March 1, 2009
e.Volve Executive and administrative officers 5-year renewal option
AxisTel
Mexico City, Mexico e.Volve 2,324 Switch and network operations center November 2002
5-year renewal option
Overland, KS e.Volve 3,573 Switch, engineering, administrative January 2005
network operations center
</TABLE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the
beneficial ownership of our outstanding common stock as of December 16, 1999 by:
o each person who is the beneficial owner of more than 5% of our
capital stock;
o each of our directors;
o each of our named executive officers; and
o all of our named executive officers and directors as a group.
All of the shares indicated in the table are shares of common stock.
<TABLE>
<CAPTION>
Percentage
Number of Shares Beneficially
Holders Beneficially Owned Owned(1)
- ------- ------------------ --------
<S> <C> <C>
IEO Investments Limited ("IEOIL")(2) 11,816,200 25.8%
Infinity Emerging Subsidiary Limited("IESL")(3) 8,683,800 19.0
Infinity Investors Limited("IIL")(4) 8,500,000 18.6
Clark K. Hunt(5) 20,638,913 45.1
Barrett N. Wissman(6) 17,512,713 38.3
Fred A. Vierra(7) 25,000 *
Stuart Chasanoff(8) 57,500 *
Mark Graham(9) 175,000 *
Stuart Subotnik(10) 250,000 *
John Stevens Robling, Jr.(11) 120,000 *
Samuel Litwin(12) 2,000,000 4.4
Mitchell Arthur(13) 2,000,000 4.4
Officers and Directors as a Group
(9 Persons) 33,991,413 74.3
</TABLE>
-28-
<PAGE> 29
* Represents less than one percent.
(1) Percentage of beneficial ownership is based on 45,207,673 shares of
common stock outstanding at December 15, 1999, 200,000 shares of common
stock issuable upon conversion of 1,000 shares of our Series A
Convertible Preferred Stock and 514,246 shares of common stock issuable
upon conversion of 7,000 shares of Series B stock. On November 11,
1999, we issued a notice to the holder of the Series A Convertible
preferred stock exercising our right to convert those shares into
200,000 shares of our common stock, but we have not yet issued those
shares. Also, on October 15, 1999, we agreed to issue approximately
240,000 shares of common stock to a vendor in exchange for $3.2 million
of accounts payable owed to such vendor and on November 30, 1999 we
agreed to issue 125,000 shares of common stock to a different vendor in
exchange for $1,100,000 of notes payable owed to such vendor. All of
these issuances have been approved by our board of directors as of
December 15, 1999. If all of such shares had been issued, we would have
had 46,486,919 shares of common stock outstanding. All percentage
calculations assume that all shares of our Series B stock have been
converted into shares of our common stock.
(2) The address of IEOIL is Hunkins Waterfront Plaza, Main Street P.O. Box
556, Charlestown, Nevis, West Indies.
(3) The address of IESL is Hunkins Waterfront Plaza, Main Street P.O. Box
556, Charlestown, Nevis, West Indies.
(4) The address of IIL is Hunkins Waterfront Plaza, Main Street P.O. Box
556, Charlestown, Nevis, West Indies.
(5) Represents 11,816,200 shares of common stock owned by IEOIL, 8,683,800
shares of common stock owned by IESL, 103,913 shares of common stock
owned by HW Capital, L.P., and 35,000 shares of common stock owned by
Mr. Hunt. Mr. Hunt disclaims beneficial ownership of the shares of
common stock held by IEOIL and IESL. Mr. Hunt's address is 4000
Thanksgiving Tower, 1601 Elm Street, Dallas, Texas 75201.
(6) Represents 8,683,800 shares of common stock owned by IESL, 8,500,000
shares of common stock owned by IIL, 103,913 shares of common stock
owned by HW Capital, L.P., 200,000 shares of common stock owned by the
Sienna Trust, and 25,000 shares of common stock owned by Mr. Wissman.
Mr. Wissman disclaims beneficial ownership of the shares of common
stock held by IESL and IIL. Mr. Wissman's address is 4000 Thanksgiving
Tower, 1601 Elm Street, Dallas, Texas 75201.
(7) Represents 25,000 shares of common stock owned by Mr. Vierra and his
wife as joint tenants. Mr. Vierra's address is 6400 W. Fiddler's Green
Circle, Suite 710, Englewood, Colorado 80111.
(8) Mr. Chasanoff's address is 4000 Thanksgiving Tower, 1601 Elm Street,
Dallas, Texas 75201.
(9) Represents 125,000 shares of common stock owned by Pinnacle
Investments, Ltd. and 50,000 shares of common stock owned by Mr.
Graham. Mr. Graham's address is 500 College, Haverford, Pennsylvania
19041.
(10) Mr. Subotnik's address is 215 East 67th Street, 7th Floor, New York,
New York 10021.
(11) Mr. Robling's address is 1 Evertrust Plaza, 8th Floor, Jersey City, NJ
07302.
(12) Mr. Litwin's address is 1 Evertrust Plaza, 8th Floor, Jersey City, NJ
07302.
(13) Mr. Arthur's address is 1 Evertrust Plaza, 8th Floor, Jersey City, NJ
07302.
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<PAGE> 30
Item 5. Directors and Executive Officers
The following persons are our directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Fred A. Vierra 68 Chairman of the Board
Barrett N. Wissman 37 President and Chief Executive Officer, Director
Clark K. Hunt 34 Director
Mark R. Graham 41 Director
Olaf Guerrand-Hermes 35 Director
Stuart Subotnick 57 Nominee for Board of Directors
Jan Robert Horsfall 39 Chief Internet Strategist, Nominee for Board of Directors
Stuart Chasanoff 34 Vice President of Business Development,
General Counsel and Secretary
John Stevens Robling, Jr. 49 Vice President, Chief Financial Officer, Treasurer and
Assistant Secretary
Samuel Litwin 44 Managing Director of Communications Holdings
Mitchell Arthur 32 Managing Director of Communications Holdings
</TABLE>
DIRECTORS
Fred A. Vierra, 67, has been our Chairman of the Board and one of our
directors as of September 22, 1999. He was Chief Executive Officer of
Tele-Communications International, Inc., the international arm of
Tele-Communications, Inc. ("TCI"), from 1994 to 1997. He was also Vice Chairman
of the Board of Directors until November 1998. Prior to joining TCI, Mr. Vierra
was President and Chief Operating Officer of United Artists Entertainment
Company ("UAEC"), where he was in charge of all day-to-day operations and
ongoing strategies for the corporation. In this position, Mr. Vierra also
directed the activities of both UAEC's cable television and theater division
presidents. He also served as President of United Cable Television Corporation,
which was merged into UAEC in 1989. Mr. Vierra began his career in the cable
industry as Executive Vice President, Investment Banking, for Daniels &
Associates, the leading financial services company for the cable industry. Mr.
Vierra has served on the Boards of Turner Broadcasting, Discovery Channel,
Princes Holdings Ltd., Australas Media Ltd., Torneos y Competencias S.A.,
Tele-Communications International, Inc., and Telewest plc. Currently, Mr. Vierra
is Chairman of the Board of VeloCom Inc. and a Board member of Flextech plc,
Formus Communications, Inc., and Jones International Networks, Ltd.
Barrett N. Wissman, 37, has been our President and Chief Executive
Officer and one of our directors as of September 22, 1999. He is sole manager of
HW Partners, L.P., and a Managing Director of HW Capital, L.P. and related
investment advisory companies. Prior to co-founding these entities, Mr. Wissman
served as Chief Executive Officer of Athena Products Corporation, a manufacturer
and marketer of chemicals, fertilizers and household consumer products and its
subsidiaries and affiliates (collectively, "Athena") and oversaw all aspects of
Athena's operations, including administration, finance, marketing and
production. Mr. Wissman ultimately orchestrated the sale of Athena's assets,
including the licensing of several of Athena's manufacturing processes and
trademarks. From 1985 to 1987 Mr. Wissman was an analyst at Lazard Freres & Co.,
L.L.C. in the areas of international mergers and acquisitions and international
project finance. Mr. Wissman holds Bachelor of Arts degrees, cum laude, in
economics and political science from Yale University and a Master of Arts degree
in music from Southern Methodist University.
Clark K. Hunt, 34, has been one of our directors as of September 22,
1999. He is President of Hunt Financial Group, L.L.C., a Dallas, Texas based
financial service firm and is a manager of HW Capital, L.P., Hunt Financial
Partners, L.P. and related investment advisory companies. Prior to co-founding
these entities, Mr. Hunt was an analyst at Goldman, Sachs & Co. in New York and
Los Angeles. At Goldman Sachs, he participated in financing transactions with an
aggregate value in excess of $1 billion. These transactions included mergers,
acquisitions, initial public offerings, cross-currency swaps and leveraged
buy-outs. Mr. Hunt is also involved with several
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<PAGE> 31
family controlled enterprises including venture capital investor Hunt Capital
Group, real estate and mining conglomerate, Hunt Midwest Enterprises, and Hunt
Sports Group. Hunt Sports Group is the management company responsible for
overseeing the Hunt family's investments in the Kansas City Chiefs of the
National Football League, the Chicago Bulls of the National Basketball
Association and two franchises in the newly launched Major League Soccer. Mr.
Hunt serves as a director of United Petroleum Corporation and Granite Golf
Corporation. Mr. Hunt attended Southern Methodist University, where he graduated
first in his class with a Bachelor of Business Administration and was a two-time
recipient of the University's highest academic award, the Provost Award for
Outstanding Scholar.
Mark R. Graham, 41, has been one of our directors as of September 22,
1999. He has been a private investor based in Philadelphia, Pennsylvania since
1997. Mr. Graham co-founded Drake Goodwin & Graham, a private equity investment
firm, in 1992 and served as a director until 1997. Prior to co-founding Drake
Goodwin & Graham, Mr. Graham was employed with Morgan Stanley in its Mergers &
Acquisitions department, serving as an associate and thereafter as a Vice
President from 1987 to 1992. Mr. Graham served as an associate with E.F. Hutton
LBO Inc., the leveraged buyout group of E.F. Hutton & Co. from 1984 to 1987.
From 1983 to 1984, Mr. Graham was an associate attorney with Bracewell &
Patterson, Houston, Texas. Mr. Graham received a Bachelor of Arts in History,
cum laude, from the University of Michigan and a Juris Doctor degree from
Georgetown University Law Center.
Olaf Guerrand-Hermes, 35, has been one of our directors as of September
22, 1999. He has been investing privately in Europe and in the United States
since the early 1990s. He is a Managing Partner at Blue Growth Capital, LLC, an
investment partnership. Prior to organizing Blue Growth Capital, Mr.
Guerrand-Hermes was Managing Director of International Equities at The Athena
Group, a private international investment management company. At The Athena
Group, Mr. Guerrand-Hermes was primarily responsible for international projects
as well as raising equity capital for proposed investments. Prior to joining The
Athena Group, Mr. Guerrand-Hermes was Vice President at Nomura Securities
International, Inc., specializing in structured finance products such as
commercial mortgage backed securities. In addition to his experience in the
field of finance, Mr. Guerrand-Hermes was an associate with Sullivan & Cromwell,
a New York law firm, where he was involved in a variety of international
transactions, including public offerings and private placements in the United
States by European and other foreign companies and governments. Mr.
Guerrand-Hermes is a member of the New York bar, a graduate of New York
University School of Law and holds two masters from the University of
Pantheon-Assas (Paris II) in Paris, France. Mr. Guerrand-Hermes is a member of
the board of directors of various companies including Hermes-Sellier.
Stuart Subotnik, 57, is a nominee to our Board of Directors and has
accepted a position as one of our directors effective as of January 1, 2000. Mr.
Subotnik has been retained as a consultant to eVentures for the period prior to
his joining our board as of the special meeting held by the Board of Directors
dated October 14, 1999. He is a general partner and an owner of Metromedia
Company. He is also Chief Executive Officer of Metromedia International Group,
Chairman of Big City Radio, Inc. and a director of Metromedia Fiber Network,
Inc. Mr. Subotnik will act on a consulting basis with eVentures until January 1,
2000 when he formally takes his seat on our board. Since 1981, Mr. Subotnick has
operated investments in businesses such as long distance providers, motion
picture companies, restaurant chains, hotels, a diesel pump manufacturer,
medical equipment research groups, software developers, Internet providers,
laser disc distributors and Major League Soccer.
Jan Robert Horsfall, 39, is a nominee to our Board of Directors and
has accepted a position as one of our directors effective as of January 1, 2000.
Mr. Horsfall is also our Chief Internet Strategist as of the special meeting
held by the Board of Directors dated October 14, 1999. Mr. Horsfall is Chief
Executive Officer and President of i2v2.com, a company 16% owned by eVentures
Group, Inc. and also known as PhoneFree.com. Prior to his position with i2v2.com
and eVentures and between 1996 and 1999, Mr. Horsfall was Vice President of
Marketing for Lycos Inc., where he was responsible for all marketing, public
relations, database marketing, product management, advertising and promotion.
Prior to joining Lycos, Mr. Horsfall was Vice President of Consumer Brands at
The Valvoline Company, a division of Ashland, Inc. Mr. Horsfall has a Bachelor
of Science degree from Colorado State University.
EXECUTIVE OFFICERS THAT ARE NOT DIRECTORS
Stuart Chasanoff, 34, has been our Vice President of Business
Development, General Counsel and Secretary as of September 22, 1999. Prior to
joining eVentures, Mr. Chasanoff was Senior Vice President and General Counsel
to HW Partners, L.P., a Texas limited partnership that manages pooled investment
vehicles for
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<PAGE> 32
high net worth and institutional investors. At HW Partners, Mr. Chasanoff was
responsible for developing investments in a portfolio of publicly held microcap
companies and privately held start up companies in a variety of fields,
including telecommunications, high technology manufacturing, entertainment and
retailing. Mr. Chasanoff also oversaw the development of various investment
vehicles and was involved in all phases of HW Partners' day to day operations.
Between 1990 and 1994, and again in 1996, Mr. Chasanoff was an associate
corporate attorney with the New York office of White & Case specializing in
mergers and acquisitions, capital markets, corporate reorganizations and
financial services. Additionally, he served as in-house counsel at PepsiCo.,
Inc. from 1994 to 1995, practicing in the areas mergers and acquisitions,
capital markets, international joint ventures and derivative transactions. Mr.
Chasanoff has been a director of United Petroleum Corporation a Florida based
chain of convenience stores, since November 12, 1999, a director of Granite Golf
Group, Inc. a Scottsdale, Arizona based golf course management company, since
November 1998 and a director of Tamboril Cigar Company, a Miami based
manufacturer of cigars, since December 1998. Mr. Chasanoff is a member of the
New York bar, a 1990 cum laude graduate of the Fordham University School of Law
and a 1987 graduate of the University of Virginia with a Bachelor of Arts degree
in Political and Social Thought.
John Stevens Robling, Jr., 49 has been our Vice President, Chief
Financial Officer and Assistant Secretary as of September 22, 1999 and our
Treasurer as of September 22, 1999. Mr. Robling is also currently serving as
Chief Financial Officer of i2v2, one of the investment holdings of eVentures
Group, Inc. Prior to his appointment in these positions, Mr. Robling was Chief
Financial Officer of Axistel Communications, Inc., and he continues to hold this
position. Before joining Axistel in 1998, Mr. Robling was an independent
financial advisor and specialized in offering private equity investment services
to various clients. From 1992 to 1997, Mr. Robling was a principal, board
member, and member of the investment committee of Hamilton Lane Advisors, Inc.
("Hamilton Lane"). Hamilton Lane is a private equity consulting firm
headquartered in Philadelphia, Pennsylvania. Prior to joining Hamilton Lane, Mr.
Robling was a Vice President at Lazard Freres & Co. in its International and
Mergers and Acquisitions departments. In these capacities, he assisted clients
in 18 financial advisory or capital markets assignments which had an overall
transaction value in excess of $3 billion dollars. He was also a member of the
Country Advisory Group, an informal partnership among Lazard Freres & Co., S.G.
Warburg and Lehman Brothers which advised the sovereign governments of
developing countries. In connection with these engagements, Mr. Robling provided
financial advisory services to national telecommunications authorities and
multi-national telecommunications companies. Mr. Robling received an MBA from
the University of Chicago and graduated with distinction from Georgetown
University, where he majored in economics.
Samuel Litwin, 44, has been our Managing Director of Communications
Holdings as of the special meeting held by the Board of Directors dated
September 22, 1999. He is also Chief Executive Officer of AxisTel
Communications, Inc., a company wholly owned by eVentures Group, Inc.
Mitchell Arthur, 32, has been our Managing Director of Communications
Holdings as of the special meeting held by the Board of Directors dated
September 22, 1999. He is also President of AxisTel Communications, Inc., a
company wholly owned by eVentures Group, Inc.
Committee of the Board of Directors
Our Board of Directors has established an Audit Committee consisting of
Messrs. Vierra and Guerrand-Hermes, and a Compensation Committee, consisting of
Messrs. Graham, Hunt and Wissman. Neither committee has held any meetings as of
December 15, 1999.
Item 6. Executive Compensation
Summary Compensation Table for Fiscal Year 2000
Prior to September 22, 1999, we did not have any employees. Daniel L.
Wettriech served as our President during the fiscal year ended April 30, 1999
and continued as President until the Reorganization. The following
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<PAGE> 33
table identifies the officers who we believe will be our most highly compensated
executive officers during fiscal year 2000. All of the named executive officers
listed below have served as executive officers of eVentures since September 22,
1999. In addition, all of the named executive officers listed below are being
compensated by eVentures during fiscal 2000, except for Barrett N. Wissman who
receives a salary of $120,000 from HW Partners. We are obligated to reimburse
HW Partners for Mr. Wissman's salary pursuant to the Management Services
Agreement described in Item 7 below.
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Name and Principal Position Fiscal Salary($) Bonus($) Restricted Securities LTIP All Other
Year Stock Underlying Payouts Compensation
Award(s)($) Options/SARs ($) ($)
(#)
- -------------------------------------------------------------------------------------------------------------------------------
Barrett N. Wissman 2000 $120,000 None None 100,000 None None
President and Chief
Executive Officer
- -------------------------------------------------------------------------------------------------------------------------------
Stuart Chasanoff 2000 $160,000 discretionary None 500,000 None None
Vice President of Business
Development, General Counsel
and Secretary
- -------------------------------------------------------------------------------------------------------------------------------
John Stevens Robling Jr. 2000 $180,000 discretionary None 425,000 None None
Vice President, Chief
Financial Officer, Treasurer
and Assistant Secretary
- -------------------------------------------------------------------------------------------------------------------------------
Samuel Litwin 2000 $180,000 discretionary None 425,000 None None
Managing Director of
Communications Holdings
- -------------------------------------------------------------------------------------------------------------------------------
Mitchell Arthur 2000 $180,000 discretionary None 425,000 None None
Managing Director of
Communications Holdings
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Option Grants During Fiscal Year 2000
Prior to September 22, 1999, we did not grant any stock options. We
have never granted any stock appreciation rights ("SARs"). The following table
describes the options to acquire shares of our common stock granted to the
individuals named above during fiscal year 2000 to date. All of the named
executive officers listed below have served as our executive officers since
September 22, 1999:
- --------------------
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<PAGE> 34
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Number of % of Total Potential Realizable
Securities Options/SARs Value at Assumed
Underlying Granted to Annual Rates of
Name eVentures Employees Exercise or Stock Price
Options/SARs in Fiscal Year Base Price Expiration Appreciation for
Granted (#) (%)(2) ($/Sh) Date Option Term(1)
- -----------------------------------------------------------------------------------------------------------
5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Barrett N. Wissman 100,000 4.71% $10 9/22/2009 $713,456 $1,136,059
President and Chief
Executive Officer
- -----------------------------------------------------------------------------------------------------------
Stuart Chasanoff 500,000 23.53% $2.50, 9/22/2009
Vice President of $5.00
Business Development $7.50
General Counsel and
Secretary Total $3,567,272 $5,680,285
- -----------------------------------------------------------------------------------------------------------
John Stevens Robling Jr. 425,000 20.00% $10 9/22/2009 $3,032,187 $4,828,252
Vice President, Chief
Financial Officer,
Treasurer and Assistant
Secretary
- -----------------------------------------------------------------------------------------------------------
Samuel Litwin 425,000 20.00% $10 9/22/2009 $3,032,187 $4,828,252
Managing Director of
Communications Holdings
- -----------------------------------------------------------------------------------------------------------
Mitchell Arthur 425,000 20.00% $10 9/22/2009 $3,032,187 $4,828,252
Managing Director of
Communications Holdings
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes that the fair market value of our common stock on the date of
each grant was $4.38 per share, which was the average of the closing bid and
asked price of the common stock on that date.
(2) Percentage of total options granted to employees in fiscal year 2000 is
based on 1,875,000 options granted to employees in accordance with employment
agreements entered into in connection with the Reorganization Plan, 150,000
options received by Jan Robert Horsfall as part of the consideration for his
employment as our Chief Internet Strategist and his agreement to serve as one of
our directors, and 100,000 options received by Stuart Subotnik as part of the
consideration for his agreement to act as a our consultant and his agreement to
serve as one of our directors.
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<PAGE> 35
Aggregated Option Exercises and Year-End Option Values in Fiscal Year 2000
The following table describes the value of our options exercised in
fiscal year 2000 and the value of unexercised options held by our officers at
December 16, 1999. 1 None of the other individuals named in the Summary
Compensation Table for fiscal year 2000 were granted options to purchase our
shares prior to September 22, 1999.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Number of Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised Options in-the-Money Options at
Names Exercise(1)(#) Realized($) at Fiscal Year End(1)(#) Fiscal Year-End($)
--------------------------------------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barrett N. Wissman _ _ _ _ N/A N/A
President and Chief
Executive Officer
- ----------------------------------------------------------------------------------------------------------------------------
Stuart Chasanoff _ _ _ _ N/A N/A
Vice President of Business
Development General Counsel
and Secretary
- ----------------------------------------------------------------------------------------------------------------------------
John Stevens Robling Jr. _ _ _ _ N/A N/A
Vice President, Chief
Financial Officer, Treasurer
and Assistant Secretary
- ----------------------------------------------------------------------------------------------------------------------------
Samuel Litwin _ _ _ _ N/A N/A
Managing Director of
Communications Holdings
- ----------------------------------------------------------------------------------------------------------------------------
Mitchell Arthur _ _ _ _ N/A N/A
Managing Director of
Communications Holdings
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) (Covers the period between September 22, 1999 and December 20, 1999,
which is the period during which these persons were directors)
(2) Subsequent to our Fiscal year end, we granted options to each of the
named individuals (see chart on page (38)).
Compensation of Directors
On September 22, 1999, pursuant to our 1999 Omnibus Securities Plan
described below, we granted a total of 600,000 options to purchase shares of our
common stock to our newly appointed directors. In addition, on October 14, 1999,
pursuant to our 1999 Omnibus Securities Plan described below, we granted an
additional 350,000 options to purchase shares of our common stock to Stuart
Subotnik and Jan Robert Horsfall, in connection with their agreement to serve as
our directors. Other than as provided by our 1999 Omnibus Securities Plan
described below and the reimbursement of reasonable expenses incurred with
attending board and committee meetings, we have not yet adopted specific
policies on directors' compensation and benefits as of the date of this filing.
Employment Agreements
Barrett N. Wissman is employed as our President and Chief Executive
Officer pursuant to a Management Services Agreement with HW Partners, L.P. dated
as of September 22, 1999. See "Item 7-Related Party Transactions".
Stuart Chasanoff, our Vice President of Business Development, General
Counsel and Secretary, is employed pursuant to an employment agreement that was
entered into on September 22, 1999. The agreement commenced on September 22,
1999 and will expire on September 21, 2002, and will automatically be extended
for additional terms of successive one year periods unless either we or Mr.
Chasanoff notifies the other in writing at least sixty days prior to the
expiration of the then current term that the extension will not take effect. Mr.
Chasanoff will receive an annual base salary of (a) $160,000 for the period
October 1, 1999 through September 21, 2000;
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<PAGE> 36
(b) $172,800 for the period September 22, 2000 through September 21, 2001; and
(c) $186,624 for the period September 22, 2001 through September 21, 2002. Mr.
Chasanoff's employment agreement provides him with the eligibility to receive
discretionary bonuses payable by us on such terms and conditions as determined
by the board of directors or the compensation committee of such board. In
addition, Mr. Chasanoff's employment agreement also grants him an option to
purchase 500,000 shares of our common stock, pursuant to our 1999 Omnibus
Securities Plan described below. These options have an exercise price and shall
vest as follows: (a) $2.50 per share for 166,666 shares which shall vest on
September 21, 2000; (b) $5.00 per share for $166,667 shares which shall vest on
September 21, 2001; and (c) $7.50 per share for 166,667 shares which shall vest
on September 21, 2002. These options will vest immediately (a) if we terminate
Mr. Chasanoff's employment without cause, (b) if Mr. Chasanoff terminates his
employment for good reason or (c) if the options are accelerated upon a change
of control of our company. Mr. Chasanoff's employment may be terminated for
cause, without cause, by voluntary resignation, death or disability. If at least
thirty days prior to the expiration of the employment term we have failed to
offer to extend the term for a period of at least one year on substantially
identical terms as set forth in the agreement, then Mr. Chasanoff shall be
entitled to receive payments of an amount equal to his then monthly rate of base
salary for a period of six months following the date of termination.
Mitchell Arthur, our Managing Director of Communications Holdings and
the President of AxisTel Communications, Inc., a company wholly owned by
eVentures Group, Inc., is employed by AxisTel Communications, Inc. pursuant to
an employment agreement that was entered into on October 28, 1998 and amended
and restated on September 22, 1999. The amended and restated employment
agreement commenced on September 22, 1999 and shall continue for twenty-four
months, expiring on September 21, 2001. Upon the end of this initial term,
AxisTel has agreed to offer to extend the term of employment for one additional
year ending September 21, 2002 on substantially identical terms and base salary
applicable at the time of expiration of the initial term of employment, but
without the requirement for the issuance of any additional stock options. In
addition, the employment agreement may be renewed by mutual agreement of the
parties at the end of each term for additional one year periods. Under the
amended and restated employment agreement, Mr. Arthur will receive an annual
base salary of $180,000 during each fiscal year of the term of employment. This
compensation shall be reviewed at least annually by our board of directors, and
any appropriate increases to this base salary may be made at the sole discretion
of our board. Mr. Arthur's employment agreement provides him with the
eligibility to receive discretionary bonuses payable by us on such terms and
conditions as determined by our board of directors or the compensation committee
of such board. In addition, Mr. Arthur's employment agreement also grants him an
option to purchase 425,000 shares of our common stock, pursuant to our 1999
Omnibus Securities Plan described below. These options have an exercise price of
$10 per share and shall vest as follows: (a) 141,166 shares (1/3) shall vest on
September 21, 2000; (b) 141,167 shares (1/3) shall vest on September 21, 2001;
and (c) 141,167 shares (1/3) which shall vest on September 21, 2002. These
options will vest immediately (a) if we terminate Mr. Arthur's employment
without cause, (b) if we fail to extend, as agreed, Mr. Arthur's term of
employment for an additional year after the expiration of the initial term or
(c) if the options are accelerated upon a change of control of our company. Mr.
Arthur's employment may be terminated for cause, without cause, by voluntary
resignation, death or disability. If AxisTel terminates Mr. Arthur's employment
during the term of the agreement without cause, then Mr. Arthur shall be
entitled to receive his base salary then in effect for the remainder of the term
and the contractual restriction on Mr. Arthur's ability to sell any shares of
our common stock set forth in the registration rights agreement executed on
September 22, 1999 shall terminate and cease to apply to Mr. Arthur .
Mr. Samuel Litwin, our Managing Director of Communications Holdings and
the President of AxisTel Communications, Inc., a company wholly owned by
eVentures Group, Inc., is employed by AxisTel Communications, Inc. pursuant to
an employment agreement that was entered into on October 28, 1998 and amended
and restated on September 22, 1999. The amended and restated employment
agreement commenced on September 22, 1999 and shall continue for twenty-four
months, expiring on September 21, 2001. Upon the end of this initial term,
AxisTel has agreed to offer to extend the term of employment for one additional
year ending September 21, 2002 on substantially identical terms and base salary
applicable at the time of expiration of the initial term of employment, but
without the requirement for the issuance of any additional stock options. In
addition, the employment agreement may be renewed by mutual agreement of the
parties at the end of each term for additional one year periods. Under the
amended and restated employment agreement, Mr. Litwin will receive an annual
base salary of $180,000 during each fiscal year of the term of employment. This
compensation shall be reviewed at least
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<PAGE> 37
annually by our board of directors, and any appropriate increases to this base
salary may be made at the sole discretion of our board. Mr. Litwin's employment
agreement provides him with the eligibility to receive discretionary bonuses
payable by us on such terms and conditions as determined by our board of
directors or the compensation committee of such board. In addition, Mr. Litwin's
employment agreement also grants him a stock option to purchase 425,000 shares
of our common stock, pursuant to our 1999 Omnibus Securities Plan described
below. These options have an exercise price of $10 per share and shall vest as
follows: (a) 141,166 shares (1/3) shall vest on September 21, 2000; (b) 141,167
shares (1/3) shall vest on September 21, 2001; and (c) 141,167 shares (1/3)
which shall vest on September 21, 2002. These options will vest immediately (a)
if we terminate Mr. Litwin's employment without cause, (b) if we fail to extend,
as agreed, Mr. Litwin's term of employment for an additional year after the
expiration of the initial term or (c) if the options are accelerated upon a
change of control of our company. Mr. Litwin's employment may be terminated for
cause, without cause, by voluntary resignation, death or disability. If AxisTel
terminates Mr. Litwin's employment during the term of the agreement without
cause, then Mr. Litwin shall be entitled to receive his base salary then in
effect for the remainder of the term and the contractual restriction on Mr.
Litwin's ability to sell any shares of our common stock set forth in the
registration rights agreement executed on September 22, 1999 shall terminate and
cease to apply to Mr. Litwin.
At present, none of the other named executive officers or key employees is party
to an employment agreement with us.
1999 Omnibus Securities Plan
The Board of Directors and our stockholders adopted and approved our
1999 Omnibus Securities Plan (the "Omnibus Plan") as of September 22, 1999.
Under the Omnibus Plan, our officers, directors, key employees and consultants,
together with those of our subsidiaries, are eligible to receive stock options,
restricted and unrestricted stock awards, dividend equivalent rights, interest
equivalents, stock appreciation rights, and performance stock awards. No person
can be granted in any calendar year awards under the Omnibus Plan covering more
than 500,000 shares of our common stock.
We have authorized and reserved 15 percent of our issued and
outstanding shares of common stock, at any time, for delivery upon the exercise
of stock options, or under other awards, granted pursuant to the Omnibus Plan,
as that number of shares is determined in calculating our fully diluted earnings
per share for our fiscal year immediately preceding such time; however, we may
not deliver more than a total of 4,000,000 shares of our common stock upon the
exercise of "incentive stock options." The shares of our common stock that may
be issued under the Omnibus Plan may be either authorized and unissued shares or
previously issued shares held as treasury shares. Options to purchase 2,450,000
shares of our common stock were granted on September 22, 1999 in relation to the
Reorganization Plan, and options to purchase 350,000 shares were granted on
October 14, 1999 to eligible individuals. As of December 16, 1999, no options
granted under the Omnibus Plan have been exercised, and no types of awards other
than options have been granted under the Omnibus Plan. These options granted
under the Omnibus Plan have a weighted average exercise price of 8.75 per share.
The following table summarizes, for each option granted and outstanding under
the Omnibus Plan as of December 16, 1999, the date of grant, recipient, vesting
schedule, exercise price and total number of shares covered by such option.
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<PAGE> 38
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Vesting Schedule
----------------------------------------------------------
Grant Date Name Total Number of Number of Shares Date Vesting Exercise Price
Shares Granted Vesting
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 22, 1999 Stuart Chasanoff 500,000 166,666 September 21, 2000 $2.50
----------------------------------------------------------
166,667 September 21, 2001 $5.00
----------------------------------------------------------
166,667 September 21, 2002 $7.50
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Samuel L. Litwin 425,000 141,166 September 21, 2000 $10.00
----------------------------------------------------------
141,167 September 21, 2001 $10.00
----------------------------------------------------------
141,167 September 21, 2002 $10.00
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Mitchell Arthur 425,000 141,166 September 21, 2000 $10.00
----------------------------------------------------------
141,167 September 21, 2001 $10.00
----------------------------------------------------------
141,167 September 21, 2002 $10.00
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 John Stevens 425,000 141,166 September 21, 2000 $10.00
Robling, Jr.
----------------------------------------------------------
141,167 September 21, 2001 $10.00
----------------------------------------------------------
141,167 September 21, 2002 $10.00
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Annette Dickson 15,000 5,000 September 21, 2000 $2.50
----------------------------------------------------------
5,000 September 21, 2001 $2.50
----------------------------------------------------------
5,000 September 21, 2002 $2.50
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 William Carroll 60,000 20,000 September 21, 2000 $2.50
----------------------------------------------------------
20,000 September 21, 2001 $2.50
----------------------------------------------------------
20,000 September 21, 2002 $2.50
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Fred Vierra 200,000 100,000 September 21, 1999 $10.00
----------------------------------------------------------
100,000 September 21, 2000 $10.00
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Clark Hunt 100,000 50,000 September 21, 1999 $10.00
----------------------------------------------------------
50,000 September 21, 2000 $10.00
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Barrett N. 100,000 50,000 September 21, 1999 $10.00
Wissman ----------------------------------------------------------
50,000 September 21, 2000 $10.00
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Mark Graham 100,000 50,000 September 21, 1999 $10.00
----------------------------------------------------------
50,000 September 21, 2000 $10.00
- ----------------------------------------------------------------------------------------------------------------------
September 22, 1999 Olaf Guerrand- 100,000 50,000 September 21, 1999 $10.00
Hermes
----------------------------------------------------------
50,000 September 21, 2000 $10.00
- ----------------------------------------------------------------------------------------------------------------------
50,000 October 14, 1999 $10.00
October 14, 1999 Jan Robert 100,000 50,000 October 14, 2000 $10.00
Horsfall ----------------------------------------------------------
50,000 October 14, 2000 $10.00
150,000 50,000 October 14, 2001 $10.00
50,000 October 14, 2002 $10.00
- ------------------------------------------ ----------------------------------------------------------
50,000 October 14, 1999 $10.00
October 14, 1999 Stuart Subotnik 100,000 50,000 October 14, 2000 $10.00
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
The Omnibus Plan is administered by the Board of Directors. Subject to
the provisions of the Omnibus Plan, the Board of Directors has the authority to
determine the type of award, when and to whom awards will be granted, the number
of shares covered by each award and the terms and conditions of each such award.
The Board of Directors interprets the Omnibus Plan and may at any time adopt the
rules and regulations for the Omnibus Plan as it deems advisable. The Board of
Directors may accelerate the vesting or right to exercise a previously granted
award, in accordance with the terms of the Omnibus Plan. The Omnibus Plan grants
the Board of Directors the authority to appoint a stock plan committee,
comprised of at least two members of the Board of Directors, and delegate to
such committee the administration of the Omnibus Plan, subject to the right of
the Board of Directors to exercise duties and responsibilities delegated to the
stock plan committee under the Omnibus Plan. At the discretion of the Board of
Directors, this stock plan committee may be the same as the compensation
committee of the Board of Directors.
Stock Options. Stock options may be granted and will become exercisable
under the terms and conditions determined by the Board of Directors in
accordance with the Omnibus Plan. Options granted under the Omnibus Plan may be
"incentive stock options," within the meaning of Section 422 of the Internal
Revenue Code, or "non-qualified stock options," which are not intended to
receive the special income tax treatment accorded incentive stock options under
the Internal Revenue Code. The Board of Directors may impose such restrictions
on the ownership and transferability of the shares purchasable upon the exercise
of an option as it deems appropriate. Options granted under the Omnibus Plan
have an exercise price per share at least equal to the fair market value of a
share of our common stock on the date of grant. However, the Board of Directors
may, subject to certain limitations in the Omnibus Plan, amend the exercise
price of an outstanding option to be not less than the fair market value of our
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<PAGE> 39
common stock on the date of such amendment. Once vested, options granted under
the Omnibus Plan may be exercised for a period of up to ten years from the date
of grant. Options (and other awards requiring payment by the holder) under the
Omnibus Plan may be paid by the recipient in cash or any other consideration
permitted by law and authorized by the Board of Directors (including, without
limitation, using shares of our capital stock previously purchased by the
recipient or a broker-assisted or similar exercise procedure). Furthermore, the
Board of Directors may authorize loans to individuals to finance their exercise
of vested options.
Restricted Stock Awards. The Board of Directors has the authority to
grant restricted stock awards entitling the recipient to acquire shares of our
common stock at par value or such other purchase price, and subject to such
restrictions and conditions, as the Board of Directors may determine at the time
of grant. Upon delivery of the shares of restricted stock, a recipient shall
have all the rights of a stockholder with respect to such shares, subject to the
restrictions established by the Board of Directors at the time of grant, as
described below. All shares of restricted stock shall be subject to such
restrictions as the Board of Directors shall provide and may include
restrictions concerning voting rights and transferability and restrictions based
on duration of employment or engagement with us or our affiliates. The Board of
Directors may also impose such restrictions and conditions on shares of
restricted stock granted under the Omnibus Plan as it deems appropriate, which
may be based on continuing employment or other business relationships with us or
one of our affiliates or the achievement of pre-established, objective
performance goals that are determined over a measurement period established by
the Board of Directors and relate to one or more performance criteria described
in the Omnibus Plan. Restricted stock awarded under the Omnibus Plan may not be
sold, transferred, assigned or encumbered and may not be disposed of, except by
will or the laws of descent and distribution, for a period of time determined by
the Board of Directors until all restrictions lapse. If the recipient of a
restricted stock award under the Omnibus Plan fails to satisfy applicable
conditions established by the Board of Directors in the award, the restricted
stock may be forfeited and revert back to us or we may repurchase such shares of
restricted stock at a cash price per share equal to the price paid by the
recipient for such shares. Restricted stock shall vest and become free of
restrictions on the date, and/or by satisfaction of conditions, specified by the
Board of Directors on the date of grant.
Unrestricted Stock Awards. The Board of Directors also has the
authority to grant or sell an unrestricted stock award to any eligible person,
pursuant to which such person may receive shares of our common stock free of any
vesting restrictions under the Omnibus Plan. Unrestricted stock awards may be
granted or sold as a bonus in respect to past services or other valid
consideration or in lieu of any cash compensation to such an eligible person.
Performance Stock Awards. The Board of Directors may grant performance
stock awards to eligible individuals under the Omnibus Plan. Performance stock
awards entitle the recipient to acquire shares of our common stock upon the
attainment of objective performance goals, established in advance by the Board
of Directors, based on performance criteria set forth in the Omnibus Plan.
Dividend Equivalent Rights and Interest Equivalents. The Board of
Directors may grant to eligible individuals dividend equivalent rights with
other awards under the Omnibus Plan or independent of any other awards. Dividend
equivalent rights entitle the recipient to receive cash or additional shares of
our common stock based on cash dividends that would be paid on a specified
number of shares of our common stock. Settlement of certain awards may, if
permitted by the Board of Directors, be deferred under the Omnibus Plan, and,
during the period of such deferral, such awards may be credited with interest
equivalents as specified in the award agreement.
Stock Appreciation Rights. The Omnibus Plan also permits the Board of
Directors to grant stock appreciation rights with respect to all or any portion
of the shares of common stock covered by options granted under the Omnibus Plan,
or, independent of options, with respect to a specified number of shares of
common stock. A stock appreciation right may be exercised only when the related
option is exercisable (or, in the case of an independent stock appreciation
right, as specified in the applicable award agreement). Upon exercise of a stock
appreciation right, the recipient will receive for each share for which such
stock appreciation right is exercised, an amount, in cash or common stock, as
determined by the Board of Directors, equal to the excess of the fair market
value of a share of common stock on the date the stock appreciation right is
exercised over the exercise price per share of the option to which the stock
appreciation right relates (or, in the case of an independent stock appreciation
right, the exercise price stated in the applicable award agreement).
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<PAGE> 40
Other Provisions of the Plan. Except in the event of his or her death,
the recipient of an award under the Omnibus Plan may not transfer such award
until shares of our common stock have been issued to such recipient and all
restrictions applicable to such shares have lapsed, unless such transfer is
approved by the Board of Directors in accordance with the terms of the Omnibus
Plan. Incentive stock options granted under the Omnibus Plan may not be
transferred if such transfer would disqualify the option from "incentive stock
option" treatment under the Internal Revenue Code.
The Board of Directors will make appropriate adjustments in the maximum
number and kind of shares available for issuance under the Omnibus Plan, the
maximum number of shares that can be covered by awards granted to an individual
in any one year under the Omnibus Plan, and the number and kind of shares, and
price per share, subject to awards outstanding under the Omnibus Plan in the
event of certain changes in our capital, such as a stock dividend, merger,
recapitalization, spin-off, or extraordinary dividend.
The Omnibus Plan and awards granted, whether or not vested, will
automatically terminate in the event that there is a reorganization or a
transaction involving a "change in control" of our company (as defined in the
Omnibus Plan), unless a provision is made in writing for the continuance of the
Omnibus Plan and for the assumption or substitution of such awards in connection
with such transaction, or the Board of Directors provides for the acceleration
of vesting or exercisability of outstanding awards and/or conversion of such
awards into a right to receive cash or other consideration that could be
received in such change in control with respect to the shares of common stock
underlying such award (net of any exercise price). If the Omnibus Plan and any
outstanding awards granted thereunder shall terminate by reason of such a change
in control without provision for assumption or substitution, or acceleration, or
conversion of outstanding awards, then any holder of an outstanding award shall
have the immediate right, as the Board of Directors may designate, to exercise,
claim or convert his or her award to the full extent not theretofore exercised,
claimed or converted. In the event we consummate any merger, consolidation or
other reorganization not involving such a "change in control," outstanding
awards under the Omnibus Plan may thereafter be exercised or claimed only for
the kind and amount of securities, cash and/or other consideration that could
have been received in such transaction by a holder of the number of shares of
common stock covered by such award.
The Board of Directors may amend or terminate the Omnibus Plan and may
amend any award previously granted under the Omnibus Plan. However, if required
by any law, regulation or stock exchange rule, no such change in the Omnibus
Plan shall be effective without the approval of our stockholders. In addition,
no such change may materially impair an award previously granted, except with
the written consent of the recipient of such award.
No awards may be granted under the Omnibus Plan after September 22,
2009; however, awards granted prior to such date will remain in effect
thereafter, until they are exercised or terminate or expire in accordance with
their terms.
Compensation Committee Interlocks and Insider Participation
We did not have a compensation committee during the Fiscal year ended
June 30, 1999. Compensation decisions relating to our executive officers, key
employees and other senior personnel were made primarily by our Board of
Directors.
Item 7. Certain Relationships and Related Transactions
Reorganization
In connection with the Reorganization, we issued and sold shares of our
common stock to the Infinity Entities as consideration in connection with the
acquisition of shares of certain of our subsidiaries and investments, and the
acquisition of certain debentures of e.Volve.
-40-
<PAGE> 41
e.Volve Shares.
On June 11, 1998, the Company entered into a securities purchase
agreement with the IEOH and IIL (the "Securities Purchase Agreement"), pursuant
to which e.Volve issued and sold 1,200 shares of its common stock, representing
one third of the outstanding capital stock of e.Volve, to each of IEOH and IIL
for $0.01 per share, and e.Volve assumed certain liabilities incurred by IEOH
and IIL in connection with the abandoned acquisition of Touch Tone America by
e.Volve.
e.Volve Debentures.
In connection with the Securities Purchase Agreement, e.Volve entered
into a debenture agreement under which e.Volve issued an aggregate of $6.0
million of debentures to IEOH and IIL (the "Debenture Agreement"). The Debenture
Agreement was amended on August 19, 1998, February 9, 1999, April 15, 1999,
April 29, 1999, and April 30, 1999 to increase the amounts available to e.Volve
by $850,000, $390,000, $200,000, $500,000, and $100,000, respectively.
e.Volve issued debentures (the "Debentures") under the Debenture
Agreement aggregating $8,040,000 to IEOH and IIL during 1998 and 1999. The
Debentures bear interest at 8% per annum, and generally mature within a two-year
period following issuance.
The Debentures issued on June 11, 1998, August 19, 1998 and April 15,
1999 were repayable monthly with accrued interest at various amounts, with all
unpaid principal and interest due on maturity at June 30, 1999. At June 30,
1999, e.Volve was in default of its payment obligations in connection with these
Debentures. IEOH and IIL waived their right to demand repayment of these
Debentures.
The Debenture issued on February 9, 1999 was payable in full on
June 30, 1999. In the event the amount is not paid in full by that date, the
balance is convertible into common stock of e.Volve at the option of the lender,
at a conversion price of $2,778 per share, which was the deemed fair value of
shares at the issue date. The April 29 and 30, 1999 debentures were repayable on
the respective maturity dates of August 27, 1999 and August 28, 1999.
On September 22, 1999, in connection with the Reorganization, we
acquired the Debentures from IEOH and IIL and the Debentures were restructured
into a single debenture with a maturity date of December 31, 1999. As a result
of such purchase, the Debentures eliminate in consolidations.
e.Volve Warrants.
In connection with amendment to the Debenture Agreement on April 15,
1999, e.Volve issued warrants to purchase shares of e.Volve common stock (the
"Warrants") to IEOH and IIL granting them the right to acquire an aggregate of
340 shares of common stock of e.Volve. The Warrants had an exercise price of
$2,778 per share and had an expiration date of April 15, 2004. These warrants
were cancelled in connection with the Reorganized Warrants.
AxisTel Notes.
On October 28, 1998, AxisTel issued notes to IEOL in an aggregate
amount of $2,000,000 pursuant to a note agreement (the "Note Agreement").
Pursuant to the Note Agreement, AxisTel issued additional notes to IEOL in the
amounts of $500,000 and $1,000,000 on March 10, 1999 and April 19, 1999,
respectively. Interest on the notes is calculated at 8% per annum and is payable
monthly. The outstanding principal balance and any unpaid interest shall be due
and payable on October 28, 2000. The notes are secured by all assets and equity
interests of AxisTel.
As of December 31, 1998, AxisTel had not met, but was subsequently
granted waivers with respect to, certain reporting requirements under such
notes.
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<PAGE> 42
AxisTel Shares.
In connection with the Note Agreement, AxisTel issued one share of
Class B common stock of AxisTel to IEOL at a purchase price of $1.00. Such share
of Class B common stock carries voting rights entitling IEOL to vote 50% of all
issued and outstanding shares of the common stock of AxisTel.
AxisTel Warrants.
In connection with the Note Agreement, AxisTel issued warrants to
purchase 1,499 shares of Class B common stock, par value $.01 per share, of
AxisTel at an exercise price of $2,333.33 per share. The warrants were valued at
approximately $274,000 using the Black-Scholes model and AxisTel recorded the
amount as a debt discount, with a related credit to additional paid-in capital.
The debt discount is being amortized over the life of the loan. As of December
31, 1998, the balance of the debt discount, net of amortization, was $251,075.
On September 22, 1999, IEOL exercised its warrants to purchase 1,499
Class A shares of AxisTel. Such shares, in addition the share of Class B common
stock owned by IEOL, represent 50% of the outstanding shares of AxisTel. IEOL
exchanged its shares in AxisTel for shares of eVentures.
Stockholders' Equity
As a result of the options granted during the three months ending
September 30, 1999, the Company recorded deferred compensation of $1,319,000 on
September 22, 1999 with a related credit to additional paid in capital. The
amount of the deferred compensation was based upon the intrinsic value of
options granted to employees which had an exercise price lower than the market
price of the underlying stock on the day of the grant. The deferred compensation
will be amortized over the three-year vesting period and recorded as
compensation expense in the statement of operations.
Management Services Agreement
In September 1999, we entered into a Management Services Agreement with
HW Partners, L.P., a Texas limited partnership ("HWP"), the general partner of
which is an entity controlled by two of our directors, Barrett Wissman and Clark
Hunt. Under this agreement, we pay for Barrett Wissman, Susan Blaine, and Judith
Brooks York, all employees of HWP, to provide various management services. It is
estimated that the Company will pay HWP over $60,000 in Fiscal 2000.
Employment Agreements
The Company is party to employment agreements with Stuart Chasanoff,
Mitchell Arthur and Samuel Litwin. See "Item 6 -- Employment Agreements".
Joint Venture
On April, 19, 1999, the Company entered into a non-formalized joint
venture agreement ("JVA") with Dataten Technologies to form Innovative Calling
Technologies, LLC ("ICT") with each party owning 50% of ICT. The Company does
not exercise majority control of the joint venture and thus accounts for its
investments pursuant to the equity method. Under the equity method, the Company
initially records its investment at cost and adjusts the carrying amount of the
investment to recognize its share of the income or losses of the joint venture
after the date of acquisition. Joint venture income and losses are allocated in
accordance with each party's respective ownership interest. During Fiscal 1999,
the Company recorded an initial investment of $125,130, reduced by equity in
loss of unconsolidated subsidiary of $33,776.
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<PAGE> 43
Transactions with Affiliates
During Fiscal 1998 and 1999, the Company shared office space, payroll
and certain other administrative expenses with an affiliate ("Orix Systems").
During that period, the Company paid Orix Systems $408,734, $676,227 and
$156,597 respectively, with respect to such expenses.
AxisTel had notes payable to one of its stockholders aggregating
$10,000 at December 31, 1997 and two of its stockholders aggregating $25,000 at
December 31, 1998. Interest is calculated at 5% per annum. The outstanding
principal balance and any unpaid interest was due and payable on October 28,
1999, and the notes were therefore classified as short term.
Advances from Shareholder
Advances due from a shareholder relate to advances made by the Majority
Shareholder of the Old Company. The advances are non-interest bearing and are
due on demand. As of June 30, 1998 and 1999, advances due from the shareholder
totaled $60,920 and $0, respectively.
Recent Sales of Unregistered Securities
The Company issued and sold unregistered securities in several
transactions to related parties. See "Item 10 - Recent Sales of Unregistered
Securities."
Other Transactions
Revenues for AxisTel included revenues for the year ended December 31,
1998 from Debit Card Technologies, Inc. ("Debit Card") totaling approximately
$264,000. Debit Card is wholly owned by an employee's spouse. All revenues for
the period August 28, 1997 (inception) to December 31, 1997 were received from
Debit Card.
Item 8. Legal Proceedings
In March 1998, Orix Global Communications ("Orix"), a subsidiary of the
Company, filed a lawsuit against Eltrax, Inc. ("Eltrax") in Clark County
District Court for the State of Nevada for breach of contract and other related
claims, alleging that Eltrax failed to deliver equipment and services pursuant
to an agreement between the parties. Eltrax counterclaimed for breach of
contract and damages of $381,802. The matter is currently before the United
States District Court for the District of Nevada for pre-trial motions.
In November 1999, IXC Communications, Inc. ("IXC") threatened to filed
a lawsuit against Orix alleging a breach of contract and damages in the amount
of $330,153.50 if payment or payment arrangements for said amount are not made
within thirty (30) days. No lawsuit has yet been filed.
In November 1998, representatives of Mexico's Federal
Telecommunications Commission ("COFETEL") entered the premises of the Company's
wholly owned subsidiary, Latin Gate, and attempted to confiscate Latin Gate's
equipment pursuant to a visitation order under a verification administrative
proceeding (procedimiento administrativo de verificacion). Latin Gate filed a
Federal constitutional court action known as juicio de amparo against COFETEL in
a Mexican Federal district court (juzgado de distrito), principally alleging
that the visitation order failed to comply with Mexican constitutional
requirements and that the search and seizure were illegal under Mexican law. A
juicio de amparo has two stages: the suspension of the acts of authority
complained of and a constitutional review. The former stage has two phases:
temporary restraining order (suspension provisional) and a final restraining
order (suspension definitiva). The purpose of the constitutional review is to
determine whether the acts of authority complained of are constitutional. Should
the court determine that the acts of authority complained of are
unconstitutional, a final judgment (sentencia final) is rendered, the principal
effect of which is the granting of the protection of the Federal courts against
such acts. On November 24, 1998, Latin Gate obtained a temporary restraining
order which preserved the status quo of the Latin Gate equipment and suspended
the administrative
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<PAGE> 44
proceeding, therefore prohibiting COFETEL from re-entering Latin Gate's
premises. On December 21, 1998, Latin Gate obtained a final restraining order
(suspension definitiva). On May 24, 1999, a final judgment was rendered by the
district court in favor of Latin Gate, which judgment declared COFETEL's acts
unconstitutional and, as a consequence, granted Latin Gate the protection of the
Federal courts. On July 7, 1999, COFETEL appealed, through a recurso de
revision, to a higher court (tribunal colegiado de circuito) seeking the review
of the district court judgment. It is anticipated that a ruling with respect to
such appeal would be rendered sometime in late January 2000. It may not be
possible to ascertain the definitive outcome of this matter but Latin Gate
continues to defend itself in Mexican courts. The loss of Latin Gate's equipment
might have an adverse effect on the Company's financial condition. The cost of
litigation, regardless of the outcome, may have an adverse effect on the
Company's financial condition.
In September 1999, Yurie Systems Inc. ("Yurie") filed a lawsuit in the
United States District Court of Maryland against Orix, a subsidiary of the
Company, claiming Orix owed Yurie approximately $283,497 arising from a previous
sale of telecommunications equipment from Yurie to Orix in June and July of
1997. Orix denies the claim because it never agreed to accept the equipment. The
equipment has failed field testing and did not meet either Orix's or Yurie's
standards. Orix has filed a counterclaim for lost business opportunities and
lost profits in an amount to be determined at trial. Discovery will begin soon.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
Our common stock is traded on the NASDAQ OTC Bulletin Board (the
"OTCBB") under the symbol EVNT. Prior to August 25, 1999, our common stock
traded on the OTCBB under the symbol ADII and our former name, Adina, Inc. Until
recently, the market for the stock has been relatively inactive. The range of
high and low bid quotations for the quarters since April, 1997 are taken from
the "pink sheets" of the National Quotation Bureau. They reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
BID PRICE
---------------------
Quarter Ending Low High
-------------- --- ----
<S> <C> <C>
September 30, 1999 1.38 12.50
June 30, 1999(1) 1.50 1.50
April 30, 1999 0.02734 0.625
January 31, 1999 0.02734 0.02734
October 31, 1998 0.02734 0.02734
July 31, 1998 0.02734 0.02734
April 30, 1998 0.015625 0.25
January 31, 1998 0.015625 0.25
October 31, 1997 0.015625 0.25
July 31, 1997 0.015625 0.25
</TABLE>
(1) Represents the transition period between April 30, 1999 and June 30,
1999.
The last sale price reported for the common stock on the OTCBB on
December 17, 1999 was $30.00. As of December 16, 1999, there were
approximately 890 shareholders of record of our common stock.
Dividend Policy
The holders of our common stock are entitled to receive dividends at
such time and in such amounts as may be determined by our Board of Directors.
However, we have not paid any dividends in the past and do not intend to pay
cash dividends on our capital stock for the foreseeable future. Instead, we
intend to retain all earnings for use in the operation and expansion of our
business.
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<PAGE> 45
Item 10. Recent Sales of Unregistered Securities
In the past three years, we have issued and sold unregistered
securities in the transactions described below.
On May 15, 1997, we issued 42,450,000 shares of common stock to Daniel
Wettreich, then the President of Adina, Inc., in exchange for a majority of the
outstanding common shares of Alexander Mark Investments (USA), Inc. ("AMI") in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Regulation D, Section 4(2) and/or Rule 506 promulgated pursuant to
the Securities Act. No general solicitations were made in connection with this
transaction.
On April 28, 1998, we issued and sold 11,700,000 shares of common stock
to Forsam Venture Funding, Inc., a private company of which Mr. Wettreich was a
director and officer, for $117,000 in a transaction exempt from the registration
requirements of the Securities Act pursuant to Regulation D, Section 4(2) and/or
Rule 506 promulgated pursuant to the Securities Act. No general solicitations
were made in connection with this transaction.
On September 22, 1999, in connection with the Reorganization, we issued
and sold:
(i) an aggregate of 14,562,193 shares of common stock to IEOIL and
IESL as merger consideration for all of the equity interests
in IEOH;
(ii) an aggregate of 6,381,000 shares of common stock to certain
shareholders of AxisTel in exchange for the outstanding shares
of capital stock of AxisTel not owned by IEOH; and
(iii) 5,682,807 shares of common stock to IIL in exchange for shares
of capital stock of e.Volve representing approximately
one-third of the outstanding capital stock of e.Volve.
The issuance of such shares was exempt from the registration
requirements of the Securities Act pursuant to Regulation D, Section 4(2) and/or
Rule 506 promulgated pursuant to the Securities Act.
On September 22, 1999, we issued and sold 1,000 shares of Series A
Compatible Preferred stock to an investor for $1,000,000 in a transaction exempt
from the registration requirements of the Securities Act pursuant to Regulation
D, Section 4(2) and/or Rule 506 promulgated pursuant to the Securities Act. No
general solicitations were made in connection with this transaction.
On September 22, 1999, we issued and sold an aggregate of 2,482,500
shares of common stock to 25 investors for $4,965,000 in a transaction exempt
from the registration requirements of the Securities Act pursuant to Regulation
D, Section 4(2) and/or Rule 506 promulgated pursuant to the Securities Act. No
general solicitations were made in connection with this transaction.
On October 15, 1999 we entered into an agreement to exchange common
stock to a vendor to settle certain accounts payable due to the vendor in the
amount of $3.2 million.
On October 19, 1999, pursuant to the Exchange Agreement, we issued and
sold an aggregate of 5,831,253 shares to certain shareholders of e.Volve in
exchange for the outstanding shares of capital stock of e.Volve not owned by
eVentures in a transaction exempt from the registration requirements of the
Securities Act pursuant to Regulation D, Section 4(2) and/or Rule 506
promulgated pursuant to the Securities Act.
On November 11, 1999, we gave notice of the exercise of our option to
convert the shares of our Series A preferred stock into 200,000 shares of our
common stock to the holder of the shares of our Series A preferred stock upon
conversion of such Series A preferred stock in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 3(a)(9).
On November 19, 1999, we issued and sold 2,500 shares of our Series B
preferred stock to an investor for $2,500,000 in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
-45-
<PAGE> 46
of the Securities Act, Regulation D and/or Rule 506 promulgated pursuant to the
Securities Act. No general solicitations were made in connection with this
transaction.
On November 24, 1999, we issued and sold 3,725 shares of our Series B
preferred stock to an investor for $3,725,000 in a transaction exempt from the
registration requirements of the Securities Act pursuant to Regulation D,
Section 4(2) and/or Rule 506 promulgated pursuant to the Securities Act. No
general solicitations were made in connection with this transaction.
On November 30, 1999 we agreed to issue shares of common stock to
extinguish $1.1 million of notes payable to a vendor.
On December 15, 1999, we issued and sold 775 shares of our Series B
preferred stock to an aggregate of 14 investors for $775,000 in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Regulation D, Section 4(2) and/or Rule 506 promulgated pursuant to the
Securities Act. No general solicitations were made in connection with this
transaction.
Item 11. Description of Registrant's Securities to be Registered
Authorized Capital Stock
The Certificate of Incorporation authorizes 80,000,000 shares of
capital stock consisting of:
75,000,000 shares of common stock, $0.00002 par value; and
5,000,000 shares of preferred stock, $0.00002 par value, of which:
o 1,200 shares have been designated as Series A convertible
preferred stock; and
o 25,000 shares have been designated as Series B convertible
preferred stock.
On December 16, 1999, 45,207,673 shares of our common stock, no shares
of our Series A Convertible Preferred Stock and 7,000 shares of our Series B
Convertible Preferred Stock were outstanding. On that date, there were
approximately 890 holders of our common stock and 16 holders of our Series B
convertible preferred stock.
Common Stock
General. As of December 16, 1999, there were 45,207,673 shares of
common stock outstanding. An additional 514,246 shares of common stock are
issuable upon conversion of our outstanding Series B convertible preferred
stock.
Voting Rights. The holders of common stock are entitled to one vote per
share. Stockholders are not entitled to vote cumulatively for the election of
directors, and no other class of outstanding capital stock is entitled to vote
in any election of directors. The Infinity Entities hold 64.1 % of our common
stock and have effective control of us through the voting power of their shares
of our outstanding capital stock. Therefore, the Infinity Entities have the
ability to elect all of our directors and to effect or prevent certain corporate
transactions which require majority approval of the common stock, including
mergers and other business combinations.
Dividends and Liquidation. Holders of common stock have an equal right
to receive dividends when and if declared by the board of directors out of
legally available funds. In the event of a liquidation, dissolution or winding
up, holders of the shares of common stock are entitled to share equally,
share-for-share, in the assets available for distribution after payment of all
creditors and the liquidation preferences of our preferred stock.
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<PAGE> 47
Other Provisions. Holders of common stock have no preemptive rights to
subscribe to any additional securities of any class which we may issue and there
are no redemption provisions or sinking fund provisions applicable to the common
stock, nor is the common stock subject to calls or assessments by us. The
rights, preferences, and privileges of the holders of common stock are subject
to and may be adversely affected by, the rights of the holders of any series of
preferred stock.
Preferred Stock
The Certificate of Incorporation provides that eVentures may issue up
to 5,000,000 shares of preferred stock in one or more series as may be
determined by the board of directors of eVentures who may establish the number
of shares to be included in each such series, fix the designation, powers,
preferences and relative rights of the shares of each such series and any
qualifications, limitations, or restrictions thereof, and increase or decrease
the number of shares of any such series without any further vote or action by
the stockholders. 1,200 shares of the preferred stock have been designated as
Series A and 25,000 shares of the preferred stock have been designated as Series
B. The board of directors may authorize, without stockholder approval, the
issuance of preferred stock with voting and conversion rights that could
adversely affect the voting power and other rights of holders of common stock.
Preferred stock could be issued quickly with terms designated to delay or
prevent a change in control of eVentures or to make the removal of management
more difficult. This could have the effect of decreasing the market price of the
common stock.
On September 22, 1999, we issued and sold 1,000 shares of Series A
convertible preferred stock pursuant to a Series A Subscription Agreement. On
November 11, 1999, we exercised our right to convert the 1,000 outstanding
shares of Series A convertible preferred stock into an aggregate of 200,000
shares of our common stock. The shares of our Series A convertible preferred
stock have been canceled and we may not reissue them.
On November 19, 1999 and November 24, 1999, we issued and sold an
aggregate of 6,225 shares of our Series B convertible preferred stock pursuant
to two Series B Subscription Agreements.
On December 15, 1999, we issued and sold 775 shares of Series B
convertible preferred stock pursuant to a Series B Subscription Agreement.
We believe that the ability of the board to issue one or more series of
preferred stock will provide us with flexibility in structuring possible future
financings and acquisitions, and in meeting other corporate needs that might
arise. The authorized shares of preferred stock, as well as shares of common
stock, will be available for issuance without further action by our
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which our securities may be
listed or traded.
Although the board has no intention at the present time of doing so, it
could issue a series of preferred stock that could, depending on the terms of
such series, impede the completion of a merger, tender offer or other takeover
attempt. The board will make any determination to issue such shares based on its
judgment as to our best interests and the best interests of our stockholders.
The board could issue preferred stock having terms that could discourage an
acquisition attempt through which an acquirer may be able to change the
composition of the board, including a tender offer or other transaction that
some, or a majority, of our stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then current market price.
Certain Anti-Takeover Effects. Certain provisions of the certificate of
incorporation and bylaws, summarized in the following paragraphs, may be
considered to have an anti-takeover effect and may delay, deter or prevent a
tender offer, proxy contest or other takeover attempt that a stockholder might
consider to be in such stockholder's best interest, including such an attempt
that might result in payment of a premium over the market price for shares held
by stockholders.
The Amended and Restated Bylaws provide that a special meeting of
stockholders may be called by the Chief Executive Officer or the Board of
Directors. In addition, a special meeting of stockholders must be called by the
Chief Executive Officer or Secretary at the written request of the stockholders
owning ten percent (10%) of our capital stock issued and outstanding and
entitled to vote.
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<PAGE> 48
Section 203 of the Delaware General Corporation Law provides that,
subject to certain exceptions specified therein, an "interested stockholder" of
a Delaware corporation shall not engage in any business combinations, including
mergers or consolidations or acquisitions of additional shares of the
corporation, with the corporation for a three-year period following the date
that such stockholder becomes an interested stockholder unless:
prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
upon consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares); or
on or subsequent to such date, the business combination is approved by
the board of directors of the corporation and authorized at an annual
or special meeting of stockholders by the affirmative vote of at least
66.67% of the outstanding voting stock that is not owned by the
interested stockholder.
Except as otherwise specified in Section 203 of the Delaware General
Corporation Law, an interested stockholder is defined to include (x) any person
that owns (or, within the prior three years, did own) 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within three years immediately prior to the date
of determination and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the Delaware General
Corporation Law makes it more difficult for a person who would be an interested
stockholder to effect various business combinations with a corporation for a
three-year period. We have not elected to be exempt from the restrictions
imposed under Section 203 of the Delaware General Corporation Law. The
provisions of Section 203 of the Delaware General Corporation Law may encourage
persons interested in acquiring us to negotiate in advance with the board, since
the stockholder approval requirement would be avoided if a majority of the
directors then in office approves either the business combination or the
transaction which results in any such person becoming an interested stockholder.
Such provisions also may have the effect of preventing changes in our
management. It is possible that such provisions could make it more difficult to
accomplish transactions that our stockholders may otherwise deem to be in their
best interests.
Transfer Agent and Registrar
The Stock Transfer Company of America will be the transfer agent and
registrar for the common stock.
Item 12. Liability and Indemnification of Directors and Officers.
The Certificate of Incorporation contains a provision that is designed
to limit directors' liability to the extent permitted by the Delaware General
Corporation Law ("DGCL"). Specifically, directors will not be held liable to
eVentures or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability as a result of:
any breach of the duty of loyalty to eVentures or eVentures
stockholders;
actions or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
payment of an improper dividend or improper repurchase of eVentures
stock under Section 174 of the Delaware General Corporation Law; or
actions or omissions pursuant to which the director received an
improper personal benefit.
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<PAGE> 49
Section 102 of the DGCL, as amended, allows a corporation to eliminate
the personal liability of directors of a corporation to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director,
except where the director breached his duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a law, authorized
the payment of a dividend or approved a stock repurchase in violation of
Delaware corporate law or obtained an improper personal benefit.
The principal effect of the limitation of liability provision is that a
stockholder is unable to prosecute an action for monetary damages against a
director of eVentures unless the stockholder can demonstrate one of the
specified bases for liability. The provision, however, does not eliminate or
limit director liability arising in connection with causes of action brought
under the federal securities laws. The Certificate of Incorporation does not
eliminate a director's duty of care. The inclusion of this provision in the
Certificate of Incorporation may discourage or deter stockholders or management
from bringing a lawsuit against directors for a breach of their fiduciary
duties, even though such an action, if successful, might otherwise have
benefited eVentures and its stockholders. This provision should not affect the
availability of equitable remedies such as injunction or rescission based upon a
director's breach of the duty of care.
Also, Section 174 of the DGCL provides, among other things, that a
director, who willfully or negligently approves of an unlawful payment of
dividends or an unlawful stock purchase or redemption, may be held liable for
such actions. A director who was either absent when the unlawful actions were
approved or dissented at the time, may avoid liability by causing his or her
dissent to such actions be entered in the books containing the minutes of the
meetings of the board of directors at the time such action occurred or
immediately after such absent director receives notice of the unlawful acts.
In addition, the Certificate of Incorporation and the Amended and
Restated By-Laws also provide that eVentures will indemnify its directors and
officers, and may indemnify any of its employees and agents, to the fullest
extent permitted by Delaware law. eVentures is generally required to indemnify
its directors and officers for all judgments, fines, penalties, settlements,
legal fees and other expenses incurred in connection with pending, threatened or
completed legal proceedings because of the director's or officer's position with
eVentures or another entity that the director or officer serves at eVentures's
request, subject to certain conditions, and to advance funds to its directors
and officers to enable them to defend against such proceedings.
Section 145 of the DGCL provides, among other things, that the Company
may 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 (other
than an action by or in the right of the Company) by reason of the fact that the
person is or was a director, officer, agent or employee of the Company or is or
was serving at the Company's request as a director, officer, agent or employee
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgment, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding. The power to indemnify applies (a) if such
person is successful on the merits or otherwise in defense of any action, suit
or proceeding, or (b) if such person acted in good faith and in a manner he
reasonably believed to be in the best interest, or not opposed to the best
interest, of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The power to
indemnify applies to actions brought by or in the right of the Company as well
but only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and not
to any satisfaction of judgment or settlement of the claim itself, and with the
further limitation that in such actions no indemnification shall be made in the
event of any adjudication of negligence or misconduct in the performance of his
duties of the Company, unless the court believes that in light of all the
circumstances indemnification should apply.
-49-
<PAGE> 50
At present, there is no pending or threatened litigation or proceeding
involving any director or officer, employee or agent of eVentures where such
indemnification will be required or permitted.
Item 13. Financial Statements and Supplementary Data
See pages F-1 to F-45 of this Form 10.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 15. Financial Statements and Exhibits
(a) Financial Statements.
The following financial statements are Exhibits to the Form
10:
(i) Consolidated Financial Statements of eVentures Group,
Inc. as of June 30, 1998 and 1999 and as of September
30, 1999 and for the years ended June 30, 1997, 1998
and 1999 and for the three months ended September 30,
1998 and 1999;
(ii) Unaudited Financial Statements of AxisTel
Communications, Inc. as of December 31, 1997 and 1998
and June 30, 1999 and for the period from August 28,
1997 (inception) to December 31, 1997, the year ended
December 31, 1998 and for the six months ended June
30, 1998 and 1999;
(iii) Unaudited Pro Forma Combined Consolidated Balance
Sheet of eVentures Group, Inc. as of September 30,
1999; and
(iv) Unaudited Pro Forma Condensed Combined Consolidated
Statements of Operations of eVentures Group, Inc. for
the year ended June 30, 1999 and for the three months
ended September 30, 1999.
(b) Exhibits
2.1 Agreement and Plan of Reorganization, dated as of September
22, 1999, among the Registrant, eVentures Holdings, L.L.C.,
IEO Holdings Limited, Infinity Investors Limited, Mick Y.
Wettreich, the purchasers listed on Schedule 1-A thereto and
the Contributing Persons listed on Schedule 1-B thereto
(incorporated by reference to Exhibit 2.1 to the report filed
on Form 8-K on October 7, 1999).
2.2 Agreement and Plan of Exchange, dated as of October 19, 1999,
among eVentures Group, Inc., and the persons set forth on
Schedule 1 thereto (incorporated by reference to Exhibit 2.1
to the report filed on Form 8-K on November 3, 1999).
3.1 Certificate of Incorporation of eVentures, dated November 19,
1987.
-50-
<PAGE> 51
3.2 Certificate of Amendment, dated April 27, 1994, to the
Certificate of Incorporation.
3.3 Certificate of Amendment, dated as of October 20, 1997, to the
Certificate of Incorporation.
3.4 Certificate of Renewal dated August 19, 1999 for eVentures
Group, Inc.
3.5 Certificate of Amendment, dated September 17, 1999, to the
Certificate of Incorporation (incorporated by reference to
Exhibit 3.2 to the report filed on Form 8-K on October 7,
1999).
3.6 Amended and Restated Certificate of Designation of Rights,
Preferences and Privileges of Series A Convertible Preferred
Stock, dated October 14, 1999.
3.7 Certificate of Designation of Rights, Preferences and
Privileges of Series B Convertible Preferred Stock, dated as
of November 10, 1999.
3.8 Certificate of Amendment, dated as of December 15, 1999, to
the Certificate of Designation of Rights, Preferences and
Privileges of Series B Convertible Preferred Stock.
3.9 Amended and Restated By-Laws of eVentures Group, Inc.
(incorporated by reference to Exhibit 3.1 to the report filed
on Form 8-K on October 7, 1999).
4.1 Registration Rights Agreement, dated as of September 22, 1999,
among the Registrant and the persons and entities set forth on
Schedule 1 thereto (the "First Registration Rights Agreement")
(incorporated by reference to Exhibit 4.1 to the report filed
on Form 8-K on October 7, 1999).
4.2 Addendum to the First Registration Rights Agreement, dated as
of October 19, 1999, among eVentures Group, Inc., the persons
set forth on Schedule 1 thereto and the other parties to the
First Registration Rights Agreement.
4.3 Registration Rights Agreement, dated as of November 19, 1999,
between eVentures Group, Inc. and Geronimo Partners, L.P.
4.4 Schedule identifying other agreements, the dates thereof and
the parties thereto, substantially identical to the
Registration Rights Agreement, dated as of November 19, 1999,
between eVentures Group, Inc. and Geronimo Partners, L.P.
10.1 Securities Purchase Agreement, dated as of June 11, 1998,
among Orix Global Communications, Inc., certain of its
shareholders and the purchasers named thereunder.
10.2 Debenture, dated as of June 11, 1998.
10.3 Letter Agreement, dated as of August 19, 1998 between Orix
Global Communications and Infinity Investors Limited.
10.4 Debenture, dated as of August 19, 1998.
10.5 Letter Agreement, dated as of February 9, 1999 between Orix
Global Communications and Infinity Investors Limited.
10.6 Debenture, dated as of February 9, 1999.
10.7 Letter Agreement, dated as of April 15, 1999 among Orix Global
Communications, Inc., Infinity Investors Limited and the
Founders (as defined therein).
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<PAGE> 52
10.8 Amended and Restated Debenture, dated as of April 15, 1999.
10.9 Letter Agreement, dated as of April 29, 1999 between Orix
Global Communications and Infinity Investors Limited.
10.10 Debenture, dated as of April 29, 1999.
10.11 Letter Agreement, dated as of April 30, 1999, between Orix
Global Communications, Inc. and Infinity Investors Limited.
10.12 Debenture, dated as of April 30, 1999.
10.13 Lease Agreement, dated December, 1998, between AxisTel
International, Inc. and Evergreen America Corporation.
10.14 Lease Agreement, dated November 24, 1997, between Orix Global
Communications, Inc. and Trust F/3959 of Banco del Atlantico.
10.15 Assignment Agreement, dated April 1, 1998, among Orix Global
Communications, Inc., Latin Gate de Mexico S.A. de C.V. and
Trust F/3959 of Banco del Atlantico.
10.16 Office Lease, dated January 23, 1998, between Orix Global
Communications, Inc. and 2526 Investment Co.
10.17 Lease Agreement, dated July 30, 1999, between e.Volve
Technology and Green Valley Executive Suites LLC.
10.18 Lease Agreement, dated September 1, 1999, between e.Volve
Technology and Green Valley Executive Suites LLC.
10.19 Lease Agreement, dated as of October 1, 1999, between AxisTel
Communications, Inc. and Telecommunications Finance Group.
10.20 Guaranty Agreement by eVentures Group, Inc. as inducement to
Telecommunications Finance Group to provide a lease to
AxisTel Communications, Inc., dated as of October 13, 1999.
10.21 Management Services Agreement, dated as of September 22, 1999,
between eVentures Group, Inc. and HW Partners, L.P.
10.22 1999 Omnibus Securities Plan, dated as of September 22, 1999.
10.23 Employment Agreement, dated as of September 22, 1999, between
eVentures Group, Inc. and Stuart J. Chasanoff.
10.24 Amended and Restated Employment and Noncompetition Agreement,
dated as of September 21, 1999, between AxisTel
Communications, Inc. and Samuel L. Litwin.
10.25 Amended and Restated Employment and Noncompetition Agreement,
dated as of September 22, 1999, between AxisTel
Communications, Inc. and Mitchell Arthur.
21.1 Subsidiaries of eVentures Group, Inc.
27.1 Financial Data Schedule.
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<PAGE> 53
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
eVentures Group, Inc.
December 20, 1999
By /s/ JOHN STEVENS ROBLING, JR.
------------------------------
Name: John Stevens Robling, Jr.
Title: Chief Financial Officer
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<PAGE> 54
eVENTURES GROUP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of June 30, 1998 and 1999 and September 30, 1999
(Unaudited) F-3
Consolidated Statements of Operations for the years ended June 30, 1997,
1998 and 1999 and for the three months ended September 30, 1998 and 1999
(Unaudited) F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
June 30, 1997, 1998 and 1999 and for the three months ended September 30,
1998 and 1999 (Unaudited) F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1997, 1998 and
1999 and for the three months ended September 30, 1998 and 1999 (Unaudited) F-6
Notes to Consolidated Financial Statements F-10
Report of Independent Certified Public Accountants (AxisTel) F-33
AxisTel Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999
(Unaudited) F-34
AxisTel Statements of Income and Retained Earnings for the period from August 28,
1997 (inception) to December 31, 1997 ("the 1997 Period"), the year ended
December 31, 1998 and for the six months ended June 30, 1998 and 1999
(Unaudited) F-35
AxisTel Statements of Cash Flows for the 1997 Period, the year ended December 31,
1998 and for the six months ended June 30, 1998 and 1999 (Unaudited) F-37
AxisTel Notes to Financial Statements F-40
Unaudited Pro Forma Consolidated Financial Information P-1
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1999 P-2
Unaudited Pro Forma Consolidated Financial Information P-3
Unaudited Pro Forma Consolidated Statements of Operations for the Year Ended June
30, 1999 and for the three months ended September 30, 1999 P-4
</TABLE>
F-1
<PAGE> 55
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
eVentures Group, Inc.
Jersey City, NJ
We have audited the accompanying balance sheet of eVentures Group, Inc. (the
"Company") as of June 30, 1999 and the related statements of operations,
shareholders' equity (deficit) and cash flows for the year then ended ("Company
Period"). We have also audited the balance sheet as of June 30, 1998 and the
statements of operations, shareholders' equity (deficit) and cash flows of Old
Company (see Note 1) for each of the years in the two-year period ended June 30,
1998 ("Old Company Periods"). These financial statements are the responsibility
of the Company's and Old Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, the Old Company business was
acquired in a transaction accounted for as a purchase. As a result of this
transaction, the financial information for the period after the sale is
presented on a different cost basis than that for the period before the sale
and, therefore, is not comparable.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at June 30, 1999,
and the results of its operations and its cash flows for the Company Period in
conformity with generally accepted accounting principles. Further, in our
opinion, the Old Company financial statements referred to above present fairly,
in all material respects, the financial position at June 30, 1998 and the
results of its operations and its cash flows for the Old Company Periods in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
November 30, 1999
F-2
<PAGE> 56
eVENTURES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
OLD COMPANY THE COMPANY
-------------- --------------------------------
AS OF
SEPTEMBER
AS OF JUNE 30, AS OF JUNE 30, 30, 1999
1998 1999 (UNAUDITED)
-------------- -------------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,417,216 $ 39,379 $ 6,346,023
Accounts receivable 104,422 6,129 1,158,221
Other receivables 5,821 11,164 71,988
Prepaid expenses and other -- 13,250 189,933
Deposits 35,141 242,310 299,071
VAT tax receivable -- 2,757,368 2,436,268
Available-for-sale securities 250,556 -- --
------------- ------------- -------------
2,813,156 3,069,600 10,501,504
------------- ------------- -------------
LONG-TERM ASSETS
Restricted cash -- 1,107,437 1,820,752
Property and equipment, net 1,447,244 6,219,874 7,429,945
VAT receivable 44,775 -- --
Investment in affiliate -- 91,354 140,746
Investment in i2v2 -- 2,100,144 2,100,144
Goodwill, net -- 3,072,908 19,591,050
Other -- -- 79,300
------------- ------------- -------------
1,492,019 12,591,717 31,161,937
------------- ------------- -------------
$ 4,305,175 $ 15,661,317 $ 41,663,441
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 1,831,863 $ 4,609,806 $ 7,716,609
Accrued other 525,297 1,477,757 2,037,272
Accrued interest payable 13,412 383,163 25,512
Advances from shareholder 60,920 -- --
Customer deposits and deferred revenues 200,000 1,272,682 2,106,447
Notes payable -- -- 26,250
Debentures, current portion 590,000 -- --
Capital leases, current portion 307,496 1,916,761 2,001,531
------------- ------------- -------------
3,528,988 9,660,169 13,913,621
------------- ------------- -------------
LONG-TERM LIABILITIES
Debentures, net of current portion 5,410,000 6,828,948 --
Capital leases, net of current portion 487,665 2,031,513 1,750,160
------------- ------------- -------------
5,897,665 8,860,461 1,750,160
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 25,100 36 757
Preferred stock -- -- --
Additional paid-in capital 83,300 4,310,144 36,933,715
Accumulated deficit (5,229,878) (7,169,493) (10,481,812)
Deferred compensation -- -- (453,000)
------------- ------------- -------------
(5,121,478) (2,859,313) 25,999,660
------------- ------------- -------------
$ 4,305,175 $ 15,661,317 $ 41,663,441
============= ============= =============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE> 57
eVENTURES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
OLD COMPANY THE COMPANY
---------------------------- ---------------------------------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
YEAR ENDED YEAR ENDED YEAR ENDED 30, 1998 30, 1999
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999 (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 921,599 $ 1,713,403 $ 27,248,273 $ 4,205,662 $ 8,675,719
Direct Costs 578,944 1,944,073 23,311,584 3,495,587 8,729,520
------------ ------------ ------------ ------------ ------------
Gross Profit (Loss) 342,655 (230,670) 3,936,689 710,075 (53,801)
Selling, general, and administrative expenses 718,362 4,505,798 7,551,131 1,588,526 1,816,032
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Loss from operations, before other (income) expense (375,707) (4,736,468) (3,614,442) (878,451) (1,869,833)
------------ ------------ ------------ ------------ ------------
Other (income) expense
Interest income -- (6,084) (55,417) (12,711) (13,341)
Interest expense -- 111,183 1,759,876 372,146 532,572
Write off of unamortized debt discount -- -- -- -- 917,615
Equity in loss of unconsolidated affiliate -- -- 33,776 -- 18,730
Foreign currency (gain) loss -- -- 126,575 8,238 (6,502)
Other -- 12,604 (16,930) 7,946 (6,588)
------------ ------------ ------------ ------------ ------------
-- 117,703 1,847,880 375,619 1,442,486
------------ ------------ ------------ ------------ ------------
Net Loss $ (375,707) $ (4,854,171) $ (5,462,322) $ (1,254,070) $ (3,312,319)
============ ============ ============ ============ ============
Net loss per share (basic and diluted) $ (.34) $ (.08) $ (.17)
------------ ------------ ------------
Weighted average number of shares outstanding 16,000,000 16,000,000 19,744,397
------------ ------------ ------------
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE> 58
eVENTURES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
================================================================================
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------------------- ----------------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OLD COMPANY
Balance July 1, 1996 -- -- 1,000 $ 100 $ --
Issuance of shares for fixed assets,
at book value -- -- 200 25,000 --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1997 -- -- 1,200 25,100 --
Gift of stock to employees -- -- -- -- 83,300
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1998 -- -- 1,200 $ 25,100 $ 83,300
============ ============ ============ ============ ============
THE COMPANY
Issuance of common stock, July 1, 1998 -- $ -- 3,600 $ 36 $ --
Fair value of shares issued in connection
with debentures -- -- -- -- 2,000,000
Fair value of warrants granted in connection
with debentures -- -- -- -- 210,000
Cost investment in i2v2 -- -- -- -- 2,100,144
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1999 -- -- 3,600 36 4,310,144
REVERSE MERGER
Net effect of reverse merger (Unaudited)
(Note 1) 1,000 -- 37,860,010 721 32,170,571
Intrinsic value of stock options -- -- -- -- 453,000
Net loss (unaudited) -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, September 30, 1999 (Unaudited) 1,000 $ -- 37,863,610 $ 757 $ 36,933,715
============ ============ ============ ============ ============
<CAPTION>
TOTAL
ACCUMULATED DEFERRED STOCKHOLDERS'
DEFICIT COMPENSATION EQUITY/(DEFICIT)
------------ ------------ ----------------
<S> <C> <C>
OLD COMPANY
Balance July 1, 1996 $ -- $ -- $ 100
Issuance of shares for fixed assets,
at book value -- -- 25,000
Net Loss (375,707) -- (375,707)
------------ ------------ ------------
Balance, June 30, 1997 (375,707) -- (350,607)
Gift of stock to employees -- -- 83,300
Net loss (4,854,171) -- (4,854,171)
------------ ------------
Balance, June 30, 1998 $ (5,229,878) -- $ (5,121,478)
============ ============ ============
THE COMPANY
Issuance of common stock, July 1, 1998 $ -- -- $ 36
Fair value of shares issued in connection
with debentures (1,707,171) -- 292,829
Fair value of warrants granted in connection
with debentures -- -- 210,000
Cost investment in i2v2 -- -- 2,100,144
Net loss (5,462,322) -- (5,462,322)
------------ ------------ ------------
Balance, June 30, 1999 (7,169,493) -- (2,859,313)
Net effect of reverse merger (Unaudited)
(Note 1) -- -- 32,171,292
Intrinsic value of stock options -- (453,000) --
Net loss (unaudited) (3,312,319) -- (3,312,319)
------------ ------------ ------------
Balance, September 30, 1999 (Unaudited) $(10,481,812) $ (453,000) $ 25,999,660
============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE> 59
eVENTURES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
OLD COMPANY THE COMPANY
------------------------------ -------------
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (375,707) $(4,854,171) $(5,462,322)
Adjustments to reconcile net income to net cash
(used in) provided by net operating activities:
Depreciation and amortization -- 105,544 2,283,505
Other expenses 148,381 171,259 932,509
Write-off accounts receivable - Touchtone -- 615,232 --
Write-off certain intangible assets -- 420,000 --
Foreign currency (gain) loss -- -- 126,575
Equity in loss of unconsolidated affiliate -- -- 33,776
Change in operating assets and liabilities:
Accounts receivable (73,587) (30,835) 98,293
Other receivables (47,200) 41,379 (5,343)
Prepaid expenses and other -- -- (13,250)
VAT receivable -- (44,775) (2,611,318)
Restricted cash -- -- (1,107,437)
Accounts payable 306,113 1,525,750 2,550,093
Accrued other 68,000 75,495 301,695
Accrued interest payable -- 13,412 369,751
<CAPTION>
THE COMPANY
-------------------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1998 30, 1999
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(1,254,070) $(3,312,319)
Adjustments to reconcile net income to net cash
(used in) provided by net operating activities:
Depreciation and amortization 522,064 1,708,406
Other expenses 370,689 --
Write-off accounts receivable - Touchtone -- --
Write-off certain intangible assets -- --
Foreign currency (gain) loss 8,238 (6,502)
Equity in loss of unconsolidated affiliate -- 18,730
Change in operating assets and liabilities:
Accounts receivable (989,939) (97,493)
Other receivables (37,152) (60,824)
Prepaid expenses and other (16,038) (7,263)
VAT receivable (334,936) 321,100
Restricted cash (1,067,490) (713,315)
Accounts payable 835,036 1,170,492
Accrued other (53,406) 309,516
Accrued interest payable 129,220 142,508
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 60
eVENTURES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
OLD COMPANY THE COMPANY
---------------------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Customer deposits -- 200,000 1,072,682
---------- ---------- ----------
Net cash (used in) provided by operating activities 26,000 (1,761,710) (1,430,791)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits (13,000) (22,141) (207,169)
Proceeds from sale of available-for-sale securities -- 26,000 246,580
Purchase of available-for-sale securities -- (277,057) --
Purchases of property and equipment (363) (518,944) (1,183,735)
Net cash acquired in reverse merger acquisitions -- -- --
Investment in Touchtone -- (615,232) --
Investment in UCI Teleport -- (420,000) --
Investment in ICT -- -- (125,130)
---------- ---------- ----------
Net cash (used in) provided by investing activities (13,363) (1,827,374) (1,269,454)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances - shareholders -- 60,920 (60,920)
Issuance of common stock and preferred stock 100 -- --
Proceeds from issuance of debenture -- 6,000,000 2,040,000
Payments on capital leases -- (67,357) (1,656,672)
---------- ---------- ----------
Net cash (used in) provided by financing activities 100 5,993,563 322,408
---------- ---------- ----------
<CAPTION>
THE COMPANY
-----------------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1998 30, 1999
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C>
Customer deposits (200,000) 679,765
---------- ----------
Net cash (used in) provided by operating activities (2,087,784) 152,801
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits 2,906 (56,761)
Proceeds from sale of available-for-sale securities 246,580 --
Purchase of available-for-sale securities -- --
Purchases of property and equipment (1,131,808) (574,379)
Net cash acquired in reverse merger acquisitions -- 1,049,688
Investment in Touchtone -- --
Investment in UCI Teleport -- --
Investment in ICT -- (68,122)
---------- ----------
Net cash (used in) provided by investing activities (882,322) 350,426
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances - shareholders 10,688 --
Issuance of common stock and preferred stock -- 6,000,000
Proceeds from issuance of debenture 850,000 --
Payments on capital leases (46,517) (196,583)
---------- ----------
Net cash (used in) provided by financing activities 814,171 5,803,417
---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 61
eVENTURES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
OLD COMPANY THE COMPANY
----------------------------- -----------------------------------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
YEAR ENDED YEAR ENDED YEAR ENDED 30, 1998 30, 1999
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999 (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET CHANGE IN CASH 12,737 2,404,479 (2,377,837) (2,155,935) $ 6,306,644
CASH AND CASH EQUIVALENTS, beginning of year -- 12,737 2,417,216 2,417,216 39,379
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 12,737 $ 2,417,216 $ 39,379 $ 261,281 $ 6,346,023
=========== =========== =========== =========== ===========
Supplemental disclosure of cash flows information:
Cash paid for interest for:
Interest $ -- $ 98,000 $ 376,000 $ -- $ --
=========== =========== =========== =========== ===========
Taxes $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 62
eVENTURES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
OLD COMPANY THE COMPANY
----------------------------------- ---------------
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Supplemental schedule of non-cash investing and
financing activities
Issuance of common stock for property and equipment $ 25,000 $ -- $ --
================= ================= =================
Purchases of equipment under litigation $ 170,462 $ -- $ --
================= ================= =================
Purchases of equipment under capital leases $ -- $ 862,518 $ 4,809,785
================= ================= =================
Fair value of original issue discount on warrants
granted pursuant to certain of the debentures $ -- $ -- $ 210,000
================= ================= =================
Fair value of original issue discount on revaluation of
Company at July 1, 1998, arising from change in
ownership $ -- $ -- $ 2,000,000
================= ================= =================
Goodwill arising from change in ownership
and reverse merger acquisitions $ -- $ -- $ 3,414,343
================= ================= =================
Net assets of subsidiaries acquired through an issue
of stock $ -- $ -- $ --
================= ================= =================
<CAPTION>
THE COMPANY
--------------------------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1998 30, 1999
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C>
Supplemental schedule of non-cash investing and
financing activities
Issuance of common stock for property and equipment $ -- $ --
================= =================
Purchases of equipment under litigation $ -- $ --
================= =================
Purchases of equipment under capital leases $ -- $ --
================= =================
Fair value of original issue discount on warrants
granted pursuant to certain of the debentures $ -- $ --
================= =================
Fair value of original issue discount on revaluation of
Company at July 1, 1998, arising from change in
ownership $ -- $ --
================= =================
Goodwill arising from change in ownership
and reverse merger acquisitions $ -- $ 16,639,971
================= =================
Net assets of subsidiaries acquired through an issue
of stock $ -- $ 1,241,162
================= =================
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 63
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
1. ORGANIZATION, ORGANIZATION
BUSINESS AND
BASIS OF PRESENTATION eVentures Group, Inc., ("eVentures" or the
"Company") was incorporated in the state of
Delaware on June 24, 1987 and was a public
shell with no operations prior to the
transactions consummated on September 22,
1999, which are described below. The Company
was formerly known as Adina, Inc.
On September 22, 1999, the Company acquired
all of the outstanding shares of AxisTel
Communications, Inc., ("AxisTel"),
approximately 66.67% of the outstanding
shares of e.Volve Technology Group, Inc.,
("e.Volve"), and approximately 17% of the
outstanding shares of i2v2.com, Inc.
("i2v2.com"), (collectively the "Acquired
Entities") and $8,540,159 Notes Receivable
including accrued interest ("Notes") from
e.Volve held by our Major Shareholders as
defined below. All the acquisitions and the
purchase of the Notes were settled through
issuance of stock of eVentures. (the
"Transaction"). As a result of the
Transaction, approximately 77% of the Common
Stock of the Company was owned by three
shareholders that are affiliated with each
other (the "Major Shareholders"). In October
1999, the remaining 33.33% of e.Volve was
acquired. (see Note 15)
Prior to the Transaction, the Major
Shareholders had directly and indirectly
held interests in the Acquired Entities, as
follows: 66.67% of e.Volve, 21% of i2v2.com,
and 0.7% of AxisTel. Certain of these
interests, along with the Major
Shareholders' Notes receivable from e.Volve,
were sold to eVentures in exchange for the
Company's stock as part of the Transaction.
The remainder were acquired through a merger
of one of the Major Stockholders with a
wholly owned subsidiary of the Company. Also
as part of the Transaction, one of the
Major Stockholders exercised a warrant and
purchased a further 49.3% of AxisTel, and
sold this to eVentures in exchange for
eVentures stock. The remaining 50% of
AxisTel was then purchased from AxisTel's
founding shareholders.
BASIS OF PRESENTATION
The financial statements presented through
June 30, 1999 represent the combined
interests of the Major Shareholders in each
of the Acquired Entities prior to the
Transaction. This combination of the Major
Shareholders' interests in the Acquired
Entities is deemed to be the "Accounting
Acquirer". The financial statements as of
and for the three months ended September 30,
1999 reflect the consummation of the
Transaction, and therefore are consolidated
financial statements of eVentures and
Subsidiaries as of September 30, 1999 and
for the period
F-10
<PAGE> 64
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
1. ORGANIZATION, from September 22, 1999 through September
BUSINESS AND 30, 1999.
BASIS OF PRESENTATION
(CONTINUED) On June 11, 1998, the Major Shareholders or
predecessors in interest acquired their
66.67% interest in e.Volve. This transaction
was accounted for by eVolve as a purchase.
The operations of eVolve between June 11,
1998 and June 30, 1998 were immaterial, and,
therefore the date used for the effective
date of the purchase was July 1, 1998. The
financial statements through June 30, 1998
are described as "Old Company", and those
subsequent to June 30, 1998 are described as
"The Company". The cost basis of The Company
was assigned to the assets acquired based on
their estimated fair values at the
acquisition date. As a result, the financial
statements for the period subsequent to the
change of control are presented on a
different cost basis than those for prior
periods and, therefore, are not comparable.
BUSINESS
The Company provides Internet-based
communications services and operates
Internet-based communications networks, and
makes strategic investments in companies
which the Company believes have exceptional
growth prospects.
Operations
During the three years ended June 30, 1999,
the Company's operations were primarily those
of e.Volve and its wholly owned subsidiary,
Latin Gate de Mexico, S.A. de C.V. ("Latin
Gate"). e.Volve was incorporated on June 26,
1996 as Orix Global Communications, Inc.
Through June 30, 1999, its services included
the provision of international voice and data
applications over its fiber optic network,
primarily to Mexico. The network is scalable,
built around digital packet switching
equipment and incorporates Asynchronous
Transfer Mode ("ATM") and Internet Protocol
("IP") technologies. As part of the
Transaction, the Company acquired AxisTel.
AxisTel is developing international and
domestic voice and data applications similar
to those of e.Volve. AxisTel has the
additional business of retail communications
services, including prepaid telephony.
Strategic Investments
During the year ended June 30, 1999, the
Company acquired a minority interest in
i2v2.com (doing business as PhoneFree.com).
The Company also entered into a joint
venture to form Innovative Calling
Technologies, LLC ("ICT") -- See Note 3. The
degree of involvement of the Company in
management varies for each strategic
investment.
F-11
<PAGE> 65
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
2. RISKS AND CONCENTRATIONS OF CREDIT RISKS
UNCERTAINTIES
The Company has concentrations of credit
risk related cash, customers and vendors, as
follows:
CASH CONCENTRATIONS
The Company places its cash with high credit
quality institutions. Accounts at each
institution are insured by the Federal
Deposit Insurance Corporation ("FDIC") up to
$100,000. From time to time, the Company
maintains cash balances in excess of the
FDIC limit.
CUSTOMER CONCENTRATIONS
During the year ended June 30, 1997, e.Volve
received a significant portion of its
business from Star Communication, Inc.
("Star") and Total Communications, Inc.
("Total"). During the year ended June 30,
1997, sales to these customers totaled 87%
and 10% of e.Volve's revenues, respectively.
During Fiscal 1998, e.Volve received a
significant portion of its business from
Star and Total. During Fiscal 1998, sales to
these customers totaled 65% and 25% of
e.Volve's revenues, respectively. As of June
30, 1998, amounts due from Star and Total
totaled 96% and 0% of e.Volve's accounts
receivables, respectively.
During Fiscal 1999, e.Volve received a
significant portion of its business from
Qwest Communications, Inc. ("Qwest"), RSL
Communications, Inc. ("RSL") and Star.
During Fiscal 1999, sales to these customers
totaled 65%, 18% and 16% of e.Volve's
revenues, respectively. As of June 30, 1999,
there were no significant amounts due from
these customers. As of June 30, 1999,
deposits from Qwest totaled 100% of
e.Volve's customer deposits.
If the relationship between the Company and
these customers were altered, the future
results of operations and financial
condition could be adversely affected.
VENDOR CONCENTRATIONS
During the year ended June 30, 1997, e.Volve
purchased a significant portion of its
carrier and termination costs ("Direct
Costs") from four major vendors. During the
year ended June 30, 1997, purchases from
these four vendors totaled 45%, 22%, 12% and
10% of e.Volve's Direct Costs, respectively.
F-12
<PAGE> 66
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
2. RISKS AND During Fiscal 1998 and 1999, e.Volve
UNCERTAINTIES purchased a significant portion of its
(CONTINUED) Direct Costs from one vendor. During Fiscal
1998 and 1999, purchases from this vendor
totaled 75% and 92% of Direct Costs,
respectively. As of June 30, 1998 and 1999,
amounts due to this vendor totaled 54% and
62% of e.Volve's accounts payable,
respectively.
If the relationship between the Company and
these vendors was altered, the future
results of operations and financial
condition could be adversely affected.
GEOGRAPHIC CONCENTRATION
The Company provides data transport and
conversion services from the United States
to Mexico and India over the e.Volve
Network. Although the Company plans to
further expand data transport and conversion
services to other destination countries, the
Company's operations may remain concentrated
in the United States, Mexico and India for
the foreseeable future. The data transport
and conversion market for Mexico and India
is highly competitive and is occupied by
industry participants which are much larger
than the Company and have greater financial
resources and may have lower costs than the
Company. There can be no assurance that the
Company will be able to compete effectively
against such larger and better-capitalized
industry participants or that the Company
will be successful in pursuing other
destination countries with existing and
potential customers.
REGULATORY ENVIRONMENT
The Company provides "enhanced" or
"value-added" services to its international
customers and therefore is not subject to
regulation by the FCC or other international
telecommunication regulatory bodies within
its target markets. However, the use of the
Internet protocols to provide telephone
services is a recent market development.
Currently, the FCC is considering whether or
not to impose surcharges or additional
regulations upon certain providers of
Internet telephony. On April 10, 1998, the
FCC issued its Report to Congress concerning
its implementation of the universal service
provisions of the Telecommunications Act.
In the Report, the FCC indicated that it
would examine the question of whether
certain forms of "phone-to-phone" Internet
telephony are information services or
telecommunications services. It noted that
the FCC did not have, as of the date of the
Report, an adequate record on which to make
any definitive pronouncements, but that the
record before it suggested that certain
forms of phone-to-phone Internet telephony
appear to have the same functionality as
non-IP telecommunications services and lack
the characteristics that would render them
information services. If the FCC were to
determine that certain services are subject
to FCC regulations as telecommunications
services, the FCC noted that it may find it
reasonable
F-13
<PAGE> 67
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
2. RISKS AND to require ISPs to make universal service
UNCERTAINTIES contributions, pay access charges or to be
(CONTINUED) subject to traditional common carrier
regulation.
To the Company's knowledge, there are
currently no domestic and few foreign laws
or regulations that prohibit voice
communications over the Internet. Several
efforts have been made to enact federal
legislation that would either regulate or
exempt from regulation services provided
over the Internet. State public utility
commissions may also retain jurisdiction to
regulate the provision of intrastate
Internet telephony services, and could
initiate proceedings to do so. A number of
countries that currently prohibit
competition in the provision of voice
telephony have also prohibited Internet
telephony. Other countries permit but
regulate Internet telephony. If Congress,
the FCC, state regulatory agencies or
foreign governments begin to regulate
Internet telephony, there can be no
assurances that any such regulations will
not materially adversely affect the
Company's business, financial conditions or
results of operations.
TELECOMMUNICATIONS MARKET AND INDUSTRY
COMPETITION
Currently, the Company competes with (a) long
distance resellers and providers, including
large carriers such as AT&T, MCI/WorldCom,
Qwest, and Sprint; (b) foreign PTTs (Post
Telephone and Telegraph administrations); (c)
other providers of international long
distance services such as STAR
Telecommunications, Inc., Pacific Gateway
Exchange, Inc., RSL Communications Ltd. and
Telegroup, Inc.; (d) alliances that provide
wholesale carrier services, such as "Global
One" (Sprint, Deutsche Telekom AG, and France
Telecom S.A.) and Uniworld (AT&T,
Unisource-Telecom Netherlands, Telia AB,
Swiss Telecom PTT and Telefonica de Espana
S.A.); (e) new entrants to the domestic long
distance market such as RBOCs (Regional Bell
Operating Companies) in the U.S., who have
entered or have announced plans to enter the
U.S. interstate long distance market pursuant
to recent legislation authorizing such entry,
and utilities such as RWE Aktiengesellschaft
in Germany; and (f) small long distance
resellers.
Many of the Company's competitors are
significantly larger and have substantially
greater market presence, as well as greater
financial, technical, operational,
marketing, and other resources and
experience than the Company. The Company
competes for customers in the
telecommunications markets primarily based
on price and, to a lesser extent, the type
and quality of service offered. Increased
competition could force the Company to
reduce its prices and profit margins if its
competitors are able to procure rates or
enter into service agreements that are
comparable to or better than those the
Company obtains, or are able to offer
F-14
<PAGE> 68
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
2. RISKS AND other incentives to existing and potential
UNCERTAINTIES customers. Similarly, the Company has no
(CONTINUED) control over the prices set by its
competitors in the long distance resale
carrier-to-carrier market.
The Company could also face significant
pricing pressure if it experiences a
decrease in the volume of minutes that it
carries on its network, as the Company's
ability to obtain favorable rates and
tariffs from its carrier suppliers depends,
to a significant extent, on the Company's
total volume of international long distance
call traffic. There is no guarantee that the
Company will be able to maintain the volume
of international and domestic long distance
traffic necessary to obtain favorable rates
and tariffs. Although the Company has no
reason to believe that its competitors will
adopt aggressive pricing policies that could
adversely affect the Company, there can be
no assurance that such price competition
will not occur or that the Company will be
able to compete successfully in the future.
In addition, the Company is aware that its
ability to market its long distance resale
services depends upon the existence of
spreads between the rates offered by the
Company and those offered by the IXC's with
which it competes, as well as those from
which it obtains service. A decrease in such
spreads could have a material adverse effect
on the Company's business, financial
condition or results of operations.
FOREIGN CURRENCY
The Company currently provides data
transport and conversion services to certain
foreign countries and regions, primarily to
Mexico and India. The direct costs, profit
margins and competitive position of the
Company are consequently affected by the
strength of the currencies in countries
where it provides services relative to the
strength of the currencies in the countries
where its services are performed. The
Company's results of operations and
financial condition may be adversely
affected by fluctuations in foreign
currencies and by translations of the
financial statement of the Latin Gate from
local currencies into U. S. dollars.
Further, the Company's international
operations are generally subject to various
risks that are not present in domestic
operations, including restrictions on
dividends and repatriation of funds.
ACCOUNTS RECEIVABLE
The Company sells its data transport and
conversion services to customers throughout
the United States and in some foreign
countries. The Company performs periodic
credit evaluations of its customers and does
not obtain collateral with which to secure
its accounts receivables. The Company
maintains reserves for potential credit
losses based upon the Company's
F-15
<PAGE> 69
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
2. RISKS AND historical experience related to credit
UNCERTAINTIES losses. Although the Company expects to
(CONTINUED) collect amounts due, actual collections may
differ. As of June 30, 1998 and 1999, the
Company has not recorded a reserve for
potential credit losses, since accounts
receivable for such periods were
insignificant.
3. SUMMARY OF PRINCIPLES OF CONSOLIDATION
SIGNIFICANT
ACCOUNTING The consolidated financial statements
POLICIES include the accounts of the Company and all
wholly owned and majority-owned
subsidiaries. Investments in companies in
which (i) ownership interests range from 20
to 50 percent and (ii) the Company exercises
significant influence over operating and
financial policies are accounted for using
the equity method. Other investments,
including the investment in i2v2.com, are
accounted for using the cost method. All
significant intercompany accounts and
transactions have been eliminated.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
The consolidated financial statements as of
September 30, 1999 and for the three months
ended September 30, 1998 and 1999 are
unaudited, and have been prepared on the
same basis as the audited financial
statements included herein. In the opinion
of management, such unaudited financial
statements include all adjustments
consisting of normal recurring accruals
necessary to present fairly the information
set forth therein. Results for interim
periods are not necessarily indicative of
results to be expected for an entire year.
DEPOSITS
Deposits represent security deposits for
facility leases, advance payments to vendors
for the purchases of property and equipment
and Direct Costs.
AVAILABLE-FOR-SALE SECURITIES
The Company accounts for its
available-for-sale securities in accordance
with Statement of Financial Accounting
Standards No. 115 ("SFAS 115"), "Accounting
for Certain Investments in Debt and Equity
Securities." SFAS 115 addresses the
accounting and reporting for investments in
equity securities which have readily
determinable fair values and all investments
in debt securities.
The Company's marketable equity securities
are classified as available-for-sale under
SFAS 115 and are reported at fair value,
with changes in the unrealized holding gain
or loss included in shareholders' deficit.
As of June 30, 1998, available-for-sale
securities consisted of a 5% Treasury Bill,
which
F-16
<PAGE> 70
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
3. SUMMARY OF totaled $250,556. During Fiscal 1999, the
SIGNIFICANT Company sold the Treasury Bill and
ACCOUNTING recognized a loss of $3,420. During any
POLICIES period presented, there were no unrealized
(CONTINUED) gains or loss on available-for-sale
securities.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost
and are depreciated using the straight-line
method over the estimated useful lives of
the related assets, ranging from five to
seven years. Maintenance and repairs are
charged to expense as incurred. Significant
renewals and betterments are capitalized. As
of the time of retirement or other
disposition of property and equipment, the
cost and accumulated depreciation are
removed from the accounts and any resulting
gain or loss is reflected in operations.
The Company assesses the recoverability of
property and equipment by determining
whether the depreciation and amortization of
property and equipment over its remaining
life can be recovered through projected
undiscounted future cash flows. The amount
of property and equipment impairment, if
any, is measured based on fair value and is
charged to operations in the period in which
property and equipment impairment is
determined by management. During the years
ended June 30, 1997 and 1998, the Company
recorded impairment losses on certain
property and equipment totaling $25,000 and
$278,324, respectively. The amount of the
impairment was the book value of assets which
were taken out of use during the related
periods. The impairment is recorded as a
component of selling, general and
administrative expenses.
INVESTMENT IN AFFILIATE
On April 19, 1999, the Company entered into
a joint venture with Dataten Technologies to
form Innovative Calling Technologies, LLC
("ICT") with each party owning 50% of ICT.
The Company does not exercise majority
control of the joint venture and thus
accounts for its investments pursuant to the
equity method. Under the equity method, the
Company initially records its investment at
cost and adjusts the carrying amount of the
investment to recognize its share of the
income or losses of the joint venture after
the date of acquisition. Joint venture
income and losses are allocated in
accordance with each party's respective
ownership interest. During Fiscal 1999, the
Company recorded an initial investment of
$125,130, reduced by equity in loss of
unconsolidated subsidiary of $33,776.
GOODWILL
Goodwill arising from a change in ownership
on July 1, 1998 and the Transaction (see
Note 1) is amortized on a straight-line
basis over a ten-year life.
F-17
<PAGE> 71
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
3. SUMMARY OF The Company assesses the recoverability of
SIGNIFICANT goodwill by determining whether the
ACCOUNTING amortization over its remaining life can be
POLICIES recovered through projected undiscounted
(CONTINUED) future cash flows. The amount of impairment,
if any, is measured based on fair value and
is charged to operations in the period in
which impairment is determined by
management. As of June 30, 1999, the
Company's management has not identified any
material impairment of goodwill.
REVENUE RECOGNITION AND CUSTOMER DEPOSITS
Revenues are recognized upon rendering of
services to customers. Nonrefundable
deposits received from customers are
deferred as customer deposits and are
recognized when the related services are
rendered.
FOREIGN CURRENCY GAIN OR LOSS
The financial statements of the Latin Gate
are remeasured into the U.S. dollar
functional currency for consolidation and
reporting purposes. Current rates of
exchange are used to remeasure monetary
assets and liabilities and historical rate
of exchange are used for nonmonetary assets
and related elements of expense. Revenue and
other expense elements are remeasured at
rates which approximate the rates in effect
on the transaction dates. Gains and losses
resulting from this remeasurement process
are recognized currently in the consolidated
statement of operations. During fiscal 1998
and 1999, there were no significant gains or
losses with respect to this remeasurement
process.
Mexican-based vendors invoice e.Volve in
Mexican pesos. Certain of these transactions
are remeasured at the time in which the
services are rendered to the Company and are
settled in US dollars at the time of payment
for such services, which results in foreign
currency gain or loss. During fiscal 1998
and 1999, foreign currency gains and losses
totaled $0 and $126,575, respectively.
INCOME TAXES
The Company accounts for income taxes in
accordance with Statement of Financial
Accounting Standards No.109 ("SFAS 109"),
"Accounting for Income Taxes." Under the
asset and liability method of SFAS 109,
deferred tax assets and liabilities are
recognized for the future tax consequences
attributable to differences between the
financial statements carrying amounts of
existing assets and liabilities and their
respective tax bases. 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
F-18
<PAGE> 72
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
3. SUMMARY OF expected to be recovered or settled. Under
SIGNIFICANT SFAS 109, the effect on the deferred tax
ACCOUNTING assets and liabilities of a change in tax
POLICIES rates is recognized in income in the period
(CONTINUED) that includes the enactment date. A
valuation allowance is provided for
significant deferred tax assets when it is
more likely than not that such assets will
not be recovered.
STOCK BASED COMPENSATION
The Financial Accounting Standards Board
issued Statement of Financial Accounting
Standards No. 123 ("SFAS#123"), "Accounting
for Stock Based Compensation," which defines
a fair value based method of accounting for
stock-based compensation. However, SFAS#123
allows an entity to continue to measure
compensation cost related to stock and stock
options issued to employees using the
intrinsic method of accounting prescribed by
Accounting Principles Board Opinion No. 25
("APB#25"), "Accounting for Stock Issued to
Employees". Entities electing to remain with
the accounting method of APB#25 must take
pro forma disclosures of net income and
earnings per share, as if the fair value
method of accounting defined in SFAS#123 had
been applied. The Company has elected to
account for its stock-based compensation to
employees under APB#25.
EARNINGS PER SHARE
The Financial Accounting Standards Board
issued Statement of Financial Accounting
Standards ("SFAS#128"), Earnings Per Share
("EPS"). SFAS#128 requires dual presentation
of basic EPS and diluted EPS on the face of
all income statements issued after December
15, 1997 for all entities with complex
capital structures. Basic EPS is computed as
net income divided by the weighted average
number of common shares outstanding for the
period. Diluted EPS reflects the potential
dilution that could occur from common shares
issuable through stock options, warrants and
convertible debentures. Diluted EPS has not
been presented for the effects of stock
options, warrants and convertible debentures
as the effect would be antidilutive.
Accordingly, basic and diluted EPS did not
differ for any period presented. EPS is not
presented for the Old Company. For purposes
of computation of EPS, the shares issued for
the acquisition of e.Volve (16,000,000
shares) are deemed to have been in existence
for the entire period.
COMPREHENSIVE INCOME(LOSS)
The Financial Accounting Standards Board
issued Statement of Financial Accounting
Standards ("SFAS#130"), "Reporting
Comprehensive Income." This statement
establishes standards for reporting the
components of comprehensive income and
requires that all items that are required to
be recognized under accounting standards as
components of comprehensive income(loss) be
included in a financial statement that is
displayed with the same prominence as other
financial statements. Comprehensive income
F-19
<PAGE> 73
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
3. SUMMARY OF includes net income(loss) as well as certain
SIGNIFICANT items that are reported directly within a
ACCOUNTING separate component of stockholders' deficit
POLICIES and bypass net loss. The Company adopted the
(CONTINUED) provisions of this statement in Fiscal 1998.
These disclosure requirements had no impact
on the Company's financial statements.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
The American Institute of Certified Public
Accountants has issued Statement of Position
98-5 ("SOP 98-5"), "Reporting on the Costs
of Start-Up Activities.". This SOP defines
start-up activities as those one-time
activities related to opening a new
facility, introducing a new product or
service, conducting business in a new
territory, conducting business with a new
class of customers, initiating a new process
in an existing facility, or commencing some
new operation. SOP 98-5 requires that these
start-up costs be expensed as incurred. This
SOP is effective for financial statements
for fiscal years beginning after December
15, 1998, and therefore was adopted on July
1, 1999 for the Company. The adoption of
SOP 98-5 has not materially impacted the
results of operations, financial position,
and financial statement disclosures, and is
not expected to have a significant impact on
future financial statements.
In June 1998, the Financial Accounting
Standards Board, issued Statement of
Financial Accounting Standards No. 133
("SFAS#133"); "Accounting for Derivative
Instruments and Hedging Activities,"
SFAS#133 requires companies to recognize all
derivatives as either assets or liabilities
in the statement of financial position and
measure those instruments at fair value.
SFAS#133 is effective for fiscal years
beginning after June 15, 2000. The Company
does not presently enter into any
transactions involving derivative financial
instruments and, accordingly, does not
anticipate the new standard will have any
effect on its financial statements for the
foreseeable future.
ACCOUNTING ESTIMATES
The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect
the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements, and the reported
amounts of revenues and expenses during the
reported periods. Actual results could
materially differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments
approximated fair value as of June 30, 1998
and 1999 due to either short maturity or
terms similar to those available to similar
companies in the open market.
SEGMENT INFORMATION
The Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise
and Related Information" for fiscal 1999. The
statement requires disclosure of certain
financial information related to operating
segments. The Company has determined that it
operates in one reportable segment (see
Note 1).
F-20
<PAGE> 74
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
4. RESTRICTED CASH Restricted cash consists of two certificates
of deposits (including accrued interest)
that serve as collateral on a certain letter
of credit totaling $1,061,000. As of June
30, 1999 and September 30, 1999, no amounts
were drawn down on such letter of credit. The
full amount of the letter of credit was
drawn down on October 5, 1999.
5. PROPERTY AND EQUIPMENT Property and equipment consist of the
following as of:
June 30,
<TABLE>
<CAPTION>
1998 1999
------------ -----------
<S> <C> <C>
Leasehold Improvements $ 182,308 $ 257,217
Network equipment under capital leases 862,518 5,985,121
Other equipment 497,375 751,512
Furniture and fixtures 10,086 10,552
------------ -----------
1,552,287 7,004,402
Accumulated depreciation and (105,043) (784,528)
amortization
------------ ------------
$ 1,447,244 $ 6,219,874
============ ============
</TABLE>
During the years ended June 30, 1997, 1998
and 1999, depreciation and amortization
expense totaled $0, $105,043 and $957,966,
respectively.
Property and equipment included assets under
capital leases at June 30, 1999 and 1998
with a cost of $5,985,121 and $862,518,
respectively, and accumulated amortization
of $757,900 and $35,642, respectively.
6. VAT RECEIVABLE VAT is a tax similar in nature to a sale
and/or use tax. VAT is assessed by vendors
operating in foreign countries, specifically
Mexico. The tax is paid by e.Volve directly
to the assessing vendor who remits the tax
to the Mexican taxing authority ("MTA").
Based on an injunction received from the
MTA, e.Volve is exempt from incurring this
tax. As of June 30, 1998 and 1999, VAT
receivable consists of amounts due and
payable to e.Volve by either the assessing
vendor or MTA (as applicable). Subsequent to
year-end, all such amounts due at year-end
have been refunded to e.Volve.
7. DEBENTURES During Fiscal 1998 and 1999, the Company
issued debentures aggregating $8,040,000 to
the Major Stockholders or predecessors in
interest. The debentures bear interest at 8%
per annum, and generally mature within a two
year period. The debenture agreement was
amended with each additional issue, in some
instances resulting in extended maturity
dates. The issues (as amended) were as
follows:
F-21
<PAGE> 75
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
7. DEBENTURES
(CONTINUED)
<TABLE>
<CAPTION>
ISSUANCE DATE MATURITY DATE AMOUNT
---------------------- ---------------------- ------------------
<S> <C> <C>
June 11, 1998 June 30, 2000 $ 6,000,000
August 19, 1998 June 30, 2000 850,000
April 15, 1999 June 30, 2000 200,000
--------------
April 15, 1999 June 30, 2000 7,050,000
February 9, 1999 June 30, 1999 390,000
April 29, 1999 August 27, 1999 500,000
April 30, 1999 August 28, 1999 100,000
--------------
$ 8,040,000
==============
</TABLE>
In connection with the June 11, 1998
debenture, the Company issued a total of 2400
common shares to one of the Major
Stockholders or predecessors in interest,
which gave such Major Stockholder a 66.7%
interest in the common shares of the Company.
(See Note 1). The value of the shares issued
was recorded at estimated fair value, and a
debt discount of $2,000,000 was recorded,
with an offsetting credit to Additional Paid
In Capital. The debt discount is amortized
over the contractual period of the related
debentures as a component of interest
expense.
The June 11, 1998, August 19, 1998 and April
15, 1999 debentures are repayable monthly
with accrued interest at various amounts,
with all unpaid principal and interest due
upon maturity. At June 30, 1999 the Company
was in default of its payment obligations in
connection with these debentures. The Major
Stockholders or predecessors in interest that
owned such debenture waived its right to
demand immediate repayment of these
debentures and subsequently sold its Notes
Receivable (see below).
The February 9, 1999 debenture is payable in
full (including interest) on the maturity
date. In the event the amount is not paid in
full by that date, the balance is
convertible into common stock of e.Volve at
the option of the lender, at a conversion
price of $2,778 per share, which was the
deemed fair value of shares at the issue
date.
The April 29 and 30, 1999 debentures are
repayable on the maturity date.
On September 22, 1999, as part of the
Transaction (see Note 1), the Major
Stockholders or predecessors in interest that
owned such debentures sold their related
notes receivable from e.Volve to eVentures
and, as a result, debentures are reflected as
long term liabilities on the June 30, 1998
and 1999 balance sheets. At the time of the
Transaction, the unamortized debt discount of
$917,615 on June 11, 1998 debenture was
written off. In addition, as part of this
transaction, the debentures were restructured
into a single debenture with a maturity date
of December 31, 1999. At September 30, 1999,
the amount of the
F-22
<PAGE> 76
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
7. DEBENTURES e.Volve's debentures and eVentures' notes
(CONTINUED) receivable eliminate on consolidation.
8. OBLIGATIONS UNDER The Company is a lessee under certain
CAPITAL LEASES noncancelable capital leases, which are
secured by certain property and equipment
(see Note 5). Terms of the leases call for
monthly payments ranging from $1,061 to
$32,711, including implicit rates ranging
from 10.0% to 13.6% per annum. Future
minimum lease payments under these capital
leases are as follows:
<TABLE>
<CAPTION>
For the year ended June 30, 1999
-----------------
<S> <C>
2000 $ 2,140,641
2001 1,313,304
2002 937,570
-----------------
4,391,515
Amount representing interest (443,241)
-----------------
Present value 3,948,274
Current portion (1,916,761)
-----------------
$ 2,031,513
=================
</TABLE>
9. STOCKHOLDERS' EQUITY COMMON STOCK
(DEFICIT)
Common stock consisted of the following:
September 30, 1999
Common Stock ($.00002 par value,
75,000,000 shares authorized, 37,863,610
issued and outstanding)
June 30, 1999
Common Stock ($.01 par value, 3,600 shares
authorized, issued and outstanding)
June 30, 1998
Common Stock ($.1 par value, 3,600 shares
authorized, issued and outstanding)
PREFERRED STOCK
Series A Convertible Preferred Stock
consisted of the following:
September 30, 1999 Series A Convertible
Preferred Stock ($.00002 par value,
5,000 shares authorized, 1,000 shares
issued and outstanding)
F-23
<PAGE> 77
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
9. STOCKHOLDERS EQUITY STOCK OPTIONS
(DEFICIT)
(CONTINUED) e.Volve had a non-formalized stock option
plan (the "Plan"), whereby incentive stock
options may be granted to certain employees,
directors, officers and others to purchase
shares of e.Volve's common stock. Options
granted pursuant to the Plan vest at various
percentages within two years of the date of
grant and expire within five years from the
date of grant or upon termination of
employment (as defined).
During Fiscal 1999, the Company granted 90
stock options to an officer of the Company
with an exercise price of $2,778, of which
45 options vested immediately and the
remaining 45 options will become fully
vested on December 31, 1999. During Fiscal
1999, pursuant to an employment agreement
(see Note 12), the Company granted 90 stock
options to an Officer of the Company with an
exercise price of $7,077 (the deemed fair
value of the stock), of which 45 options
vested on March 8, 1999 and the remaining 45
options became fully vested on March 23,
1999. During Fiscal 1999, the Company
granted 600 stock options to certain
officers and employees of the Company with
an exercise prices of $2,778, of which 301
options vested on April 30, 1999 and the
remaining 299 options becoming fully vested
on April 1, 2000. With respect to the grant
of all such options, the Company did not
record non-cash compensation expense
pursuant to APB#25. As of June 30, 1999, 436
of such options were exercisable.
Pro forma information regarding net income
(loss) is required by SFAS 123, and has been
determined as if the Company had accounted
for its 780 stock options granted during
Fiscal 1999 under the fair value method
pursuant to SFAS 123, rather than the method
pursuant to APB#25 discussed herein. The
fair value for these options was estimated
at the date of grant using a Black-Scholes
option pricing model with the following
assumptions: stock price of $2,778 per
share; risk-free interest rates ranging from
5.1% to 5.4%(depending on the expected term
of the option and the date of grant);
dividend yield of 0.0%; volatility factor of
the expected market price of the Company's
common stock of 0.0% (due to no significant
market for trading of the Company's common
stock, volatility has been assessed at 0.0%;
the result of excluding volatility in
estimating an option's value is an amount
commonly termed minimum value); and expected
terms of 5 years.
The Black-Scholes valuation model was
developed for use in estimating the fair
value of traded options which have no
vesting restrictions and are fully
transferable. In addition, option valuation
models require the input of highly
subjective assumptions including the
expected stock price volatility. Because
the Company's employee stock options have
F-24
<PAGE> 78
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
9. STOCKHOLDERS EQUITY characteristics significantly different from
(DEFICIT) those of traded options, and because changes
(CONTINUED) in the subjective input assumptions can
materially affect the fair value estimate,
in management's opinion, the existing models
do not necessarily provide a reliable single
measure of the fair value of its employee
stock options.
For purposes of pro forma disclosure, the
estimated fair value of the options is
amortized to expense over the options'
vesting period. The Company's pro forma
information relative to e.Volve's option
plan is as follows:
F-25
<PAGE> 79
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
9. STOCKHOLDERS EQUITY
(DEFICIT)
(CONTINUED)
<TABLE>
<CAPTION>
Fiscal
1999
--------------
<S> <C> <C>
PRO FORMA NET LOSS:
Net loss as reported $ (5,803,756)
Additional compensation
compensation expense under
SFAS#123 (453,000)
--------------
$ (6,256,756)
==============
</TABLE>
During the years ended June 30, 1997 and
1998, no options were granted and therefore
proforma information has only been presented
for fiscal 1999.
On September 22, 1999, the Company terminated
the share option plans of e.Volve and AxisTel
and adopted a new share option plan (the
"Plan") for its employees, officers,
directors and consultants (whether or not
employees) as part of the Agreement and Plan
of Reorganization entered into in connection
with the Transaction (see Note 1). The Plan
provides for the grant of non-qualified share
options, of which, the exercise price shall
not be less than 100% of the fair market
value of the common shares on the date the
option is granted. The Plan provides that
options granted vest in two or three
installments: the first vest in equal annual
installments over a three-year period
commencing September 22, 1999, the second
vest in equal annual installments over a
two-year period commencing September 22,
1999.
The number of shares authorized for grants
under the Share Option Plan is 15% of
outstanding, provided that no more than
4 million options can be "incentive" stock
options. As of September 30, 1999, no options
were exercised.
The following options were granted during
the three months ended September 30, 1999:
<TABLE>
<CAPTION>
Number of Exercise
Shares Price Date of issue Vesting Period
--------- -------- ------------------ --------------
<S> <C> <C> <C> <C>
241,666 $ 2.50 September 22, 1999 Three-years
166,667 $ 5.00 September 22, 1999 Three-years
166,667 $ 7.50 September 22, 1999 Three-years
1,275,000 $ 10.00 September 22, 1999 Three-years
600,000 $ 10.00 September 22, 1999 Two-years
---------
2,450,000
---------
</TABLE>
As a result of the above, the Company
recorded deferred compensation of $453,000 on
September 22, 1999 with a related credit to
additional paid in capital. The amount of the
deferred compensation was based upon the
intrinsic value of options granted to
employees which had an exercise price lower
than the market price of the underlying stock
on the day of the grant. The deferred
compensation will be amortized over the three
year vesting period and recorded as
compensation expense in the statement of
operations.
WARRANTS
In connection with the issuance of the
Amended and Restated Debenture Agreement
dated April 15, 1999 (see Note 7), the
Company issued common stock purchase
warrants (the "Warrants") to the Debenture
Holder granting the right to acquire 340
shares of Common Stock. The Warrants have an
exercise price of $2,778 per share and
expire within five years of the date of
grant (as defined). As of June 30, 1999,
none of the Warrants have been exercised.
The Company has accounted for its 340 common
stock debenture warrants granted during
Fiscal 1999 at fair value. The Company has
estimated the fair value of the Warrants,
original issue discount ("OID"), at
$210,000. The OID has been reflected as an
increase in additional paid-in capital and
as a reduction of the February Debenture and
is being amortized to interest expense
utilizing the effective interest method over
the term of the Note. During Fiscal 1999,
amortization of OID on the February
Debentures totaled $40,281. The fair value
for these warrants was estimated at the date
of grant using a Black-Scholes option
pricing model with the following
assumptions: stock price of $2,778 per
share; risk-free interest rate of 5.0%
(based on the expected term of the option
and the date of grant); dividend yield of
0.0%; volatility factor of the expected
market price of the Company's common stock
of 0.0% (due to no significant market for
trading of the Company's common stock,
volatility has been assessed at 0.0%; the
result of excluding volatility in estimating
an option's value is an amount commonly
termed minimum value); and expected terms of
5 years.
F-26
<PAGE> 80
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
10. INCOME TAXES There is no provision for income tax expense
since the Company incurred net losses for
all periods presented.
Deferred tax assets of approximately
$1,015,000 and $2,226,000 as at June 30,
1998 and 1999 result primarily from Net
Operating Losses ("NOL's") and have been
fully offset by valuation allowances due to
the lack of certainty as to the ultimate
realization of any benefits resulting from
such NOLs.
As at June 30, 1999, e.Volve had NOLs of
approximately $6,547,000. Due to
restrictions on use of NOLs following a
change in ownership, these NOLs may not be
used by the Company prior to their
expiration, which is in various years
through 2018.
11. RELATED PARTY ADMINISTRATIVE EXPENSES
TRANSACTIONS
During the years ended June 30, 1997, 1998
and 1999, the Company shared office space,
payroll and certain other administrative
expenses with a related party ("Orix
Systems"). The Company paid Orix Systems
$408,734, $676,227 and $156,597, for the
years ended June 30, 1997, 1998, and 1999
respectively, with respect to such expenses
ADVANCES FROM SHAREHOLDER
Advances due from shareholder relate to
advances made by the majority shareholder of
the Old Company. The advances are
non-interest bearing and are due on demand.
As of June 30, 1998 and 1999, advances due
from shareholder totaled $60,920 and $0,
respectively.
F-27
<PAGE> 81
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
12. COMMITMENTS AND OPERATING LEASES
CONTINGENCIES
The Company is a lessee under certain
noncancelable operating leases. Terms of the
leases call for monthly payments ranging
from $400 to $10,000. Future minimum lease
payments under these noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
For the year ended June 30, 1999
----------------
<S> <C>
2000 $ 249,920
2001 165,358
2002 147,168
2003 114,137
2004 66,101
Thereafter 38,556
----------------
$ 781,240
================
</TABLE>
During the years ended June 30, 1997, 1998
and 1999, the Company incurred rent expense
of $0, $55,100 and $308,900 respectively.
(see Note 11)
LITIGATION
The Company is a defendant in two lawsuits
arising out of the ordinary course of
business. In each case the plaintiff is
seeking damages against the Company primarily
for breach of contract. As of June 30, 1998
and 1999, the Company has expensed and
accrued a total of $381,802 and $665,299,
respectively, pursuant to these claims, which
is expected to be the Company's total
exposure. The related costs are included as a
component of selling, general and
administrative expenses.
In November 1998, representatives of Mexico's
Federal Telecommunications Commission
("COFETEL") entered the premises of the
Company's wholly owned subsidiary, Latin
Gate, and attempted to confiscate Latin
Gate's equipment pursuant to a visitation
order under a verification administrative
proceeding (procedimiento administrativo de
verificacion). Latin Gate filed a Federal
constitutional court action known as juicio
de amparo against COFETEL in a Mexican
Federal district court (juzgado de distrito),
principally alleging that the visitation
order failed to comply with Mexican
constitutional requirements and that the
search and seizure were illegal under Mexican
law. A juicio de amparo has two stages: the
suspension of the acts of authority
complained of and a constitutional review.
The former stage has two phases: temporary
restraining order (suspension provisional)
and a final restraining order (suspension
definitiva). The purpose of the
constitutional review is to determine whether
the acts of authority complained of are
constitutional. Should the court determine
that the acts of authority complained of are
unconstitutional, a final judgment (sentencia
final) is rendered, the principal effect of
which is the granting of the protection of
the Federal courts against such acts. On
November 24, 1998, Latin Gate obtained a
temporary restraining order which preserved
the status quo of the Latin Gate equipment
and suspended the administrative proceeding,
therefore prohibiting COFETEL from
re-entering Latin Gate's premises. On
December 21, 1998, Latin Gate obtained a
final restraining order (suspension
definitiva). On May 24, 1999, a final
judgment was rendered by the district court
in favor of Latin Gate, which judgment
declared COFETEL's acts unconstitutional and,
as a consequence, granted Latin Gate the
protection of the Federal courts. On July 7,
1999, COFETEL appealed, through a recurso de
revision, to a higher court (tribunal
colegiado de circuito) seeking a review of
the district court judgment. It is
anticipated that a ruling with respect to
such appeal would be rendered sometime in
late January 2000. It may not be possible to
ascertain the definitive outcome of this
matter but Latin Gate continues to defend
itself in Mexican courts. The loss of Latin
Gate's equipment might have an adverse effect
on the Company's financial condition. The
cost of litigation, regardless of the
outcome, may have an adverse effect on the
Company's financial condition. As of June 30,
1999 no amounts have been accrued for this
matter.
The Company is involved in other litigation
arising out of the ordinary course of
business. Management believes, based in part
on the advice of outside counsel, that these
matters will not have a material adverse
effect on the accompanying consolidated
financial statements.
CONSULTING AGREEMENT
On April 15, 1999, the Company entered into a
consulting agreement with an individual,
calling for monthly payments of approximately
$20,000 per month, terminating April 15,
2000.
F-28
<PAGE> 82
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
12. COMMITMENTS AND EMPLOYMENT AGREEMENTS
CONTINGENCIES
(CONTINUED) The Company has entered into multi-year
employment agreements or management contracts
with six of its senior executives. These
agreements mature at various times beginning
in June 2000 and ending in September 2002.
These agreements provide for annual salaries
ranging between $100,000 and $200,000. In
addition, certain of these employees were
granted options to purchase common stock
under the Company's Share Option Plan. These
options, if exercised, would represent the
right to purchase 1,850,000 shares of common
stock at various exercise prices ranging from
$2.50 to $10.00 per option (See
Note 9).
MARKETING AGREEMENTS
On January 1, 1999, the Company entered into
an agreement with Corpovision S.A. de C.V.
("Corpovision") to provide marketing
services to locate and develop clients for
telecommunications services. As long as e.
Volve conducts business with the clients
listed in the agreement, the Company must
pay a minimum compensation amount of
$100,000 per month in any month sales are
made, within thirty days after the end of
each period. The payment must be in the form
of cash or a subordinated, non-recourse
promissory note to be paid with any available
cash flow. The term of the agreement is for
thirty years. As of June 30, 1999, the
Company had paid compensation amounting to
$200,000 and had a note outstanding for the
remaining months of $300,000. During Fiscal
1999, the Company incurred compensation
expense related to such agreement totaling
$500,000. On November 30, this agreement was
terminated (See Note 15).
AGREEMENTS WITH VENDORS
On October 9, 1996, the Company entered into
an agreement with a vendor to provide sundry
telecom services which expired on October 9,
1999.
F-29
<PAGE> 83
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
12. COMMITMENTS AND On April 29, 1998, the Company entered
CONTINGENCIES into an agreement with Qwest for
(CONTINUED) telecommunication services. The agreement
can be terminated at any time by either
party upon a thirty-day notice and can be
automatically renewed for successive
one-year periods. Rates for services
disclosed in the agreement are subject to
change at any time.
F-30
<PAGE> 84
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
13. PRO FORMA FINANCIAL DATA On September 22, 1999, the Company acquired
(UNAUDITED) all of the outstanding shares of AxisTel,
approximately 66.67% of the outstanding
shares of e.Volve, and approximately 17% of
the outstanding shares of i2v2.com. All of
the acquisitions were settled through the
issuance of stock of eVentures.
Set forth below is the Company's unaudited
pro forma condensed statement of operations
for the year ended June 30, 1999 and the
three months ended September 30, 1999 as
though the reverse merger and acquisition of
AxisTel had occurred on July 1, 1998 and July
1, 1999, respectively, after adjustments
related to goodwill, amortization of
intangible assets and debt discount and
interest expense relating to the e.Volve
debentures. The unaudited pro forma results
are not necessarily indicative of either
actual results of operations that would have
occurred had the reverse merger and
acquisition been made on July 1, 1998 and
July 1, 1999, respectively, or of future
results.
<TABLE>
<CAPTION>
Year ended Three months ended
June 30, 1999 September 30, 1999
<S> <C> <C>
Total revenues $ 35,215,916 $ 14,695,002
Net loss $(10,501,114) $ (5,826,413)
Net loss per share $ .28 $ .15
</TABLE>
14. GOODWILL Goodwill of $3,414,319 arose upon the change
of control on July 1, 1998 (see Note 1).
Goodwill of $16,639,971 arose upon the
acquisition of AxisTel on September 22, 1999
as part of the Transaction (see Note 1).
Accumulated amortization as of June 30, 1999
and September 30, 1999 was $341,434 and
$463,240 respectively.
15. SUBSEQUENT EVENTS On October 14, 1999, eVentures exchanged
accounts payable to a vendor of $4,307,437
for $1,107,967 cash plus 221,000 shares of
eVentures' Common Stock.
To consummate the September 22, 1999
Transaction (see Note 1), eVentures acquired
the remaining 33.3% of e.Volve on October 19,
1999, through an extension of eVentures
original offer. This purchase was settled
through an issuance of 5,831,253 shares of
F-31
<PAGE> 85
eVENTURES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1999 IS UNAUDITED)
- -------------------------------------------------------------------------------
15. SUBSEQUENT EVENTS eVentures' Common Stock.
(CONTINUED)
On November 18, 1999, eVentures issued 2,500
shares of Series B Convertible Preferred
Stock and on November 24, 1999 eVentures
issued 3,725 shares of Series B Convertible
Preferred Stock, both at a price of $1,000
per share. The par value of both classes of
shares is $0.00002. The shares are
convertible to Common Stock at a price of
$13.80 per share, subject to normal
anti-dilution adjustments. The conversion
price was determined using the average of the
closing bid price per share of eVentures
common stock for the 10 trading days ended
October 29, 1999. These shares convert to
eVentures common stock on the second
anniversary of date of issue.
On November 30, 1999 the Company terminated
its marketing agreement with Corpovision
(see Note 12). The Company settled its
liability to Corpovision and terminated the
agreement through an issue of 137,500 shares
of eVentures. As a result, the Company will
record a charge in the statement of
operations of approximately $1,000,000 in
November, 1999 for the difference between
the value of the shares issued and the book
value of the note payable to Corpovision.
F-32
<PAGE> 86
INDEPENDENT AUDITORS' REPORT
To the Stockholders
AxisTel Communications, Inc.
Jersey City, New Jersey
We have audited the accompanying balance sheets of AxisTel Communications, Inc.
as of December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the period from August 28,
1997 (inception) to December 31, 1997 and the year ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AxisTel Communications, Inc. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from August 28, 1997 (inception) to December 31, 1997 and the
year ended December 31, 1998, in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
New York, New York
October 29, 1999
F-33
<PAGE> 87
AXISTEL COMMUNICATIONS, INC.
BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1997 1998 1999
------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT:
Cash $ 31,712 $ 1,418,070 $ 630,571
Accounts receivable - net of allowances for doubtful
accounts of $-0-, $25,000 and $75,000,
respectively 38,250 302,100 1,054,563
Prepaid expenses and other current assets 2,443 35,898 217,300
------------- ------------- -------------
TOTAL CURRENT ASSETS 72,405 1,756,068 1,902,434
RESTRICTED CASH -- -- 750,000
PROPERTY, EQUIPMENT, AND CERTAIN INTANGIBLES AT COST, NET
OF ACCUMULATED DEPRECIATION -- 1,693,055 394,583
LOAN ORIGINATION COSTS - NET OF ACCUMULATED AMORTIZATION
OF $5,000 AND $55,000, RESPECTIVELY -- 55,000 --
OTHER ASSETS -- 46,800 46,800
------------- ------------- -------------
$ 72,405 $ 3,550,923 $ 3,093,817
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of notes payable - Eraatel Corp. $ -- $ 427,600 $ --
Notes payable - stockholders 10,000 25,000 25,625
Accounts payable and accrued expenses 47,204 369,604 1,203,760
Deferred revenue -- 110,000 176,230
------------- ------------- -------------
TOTAL CURRENT LIABILITIES 57,204 932,204 1,405,615
NOTES PAYABLE:
Eraatel Corp. -- 1,072,400 --
Stockholder -- 1,748,925 3,317,425
------------- ------------- -------------
TOTAL LIABILITIES 57,204 3,753,529 4,723,040
------------- ------------- -------------
COMMITMENTS AND CONTINGENCY
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 15 15 15
Additional paid-in capital 985 312,395 312,395
Retained earnings (deficit) 14,201 (515,016) (1,941,633)
------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 15,201 (202,606) (1,629,223)
------------- ------------- -------------
$ 72,405 $ 3,550,923 $ 3,093,817
============= ============= =============
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
F-34
<PAGE> 88
AXISTEL COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Period from
August 28, 1997
(inception) to Year ended
December 31, December 31, Six months ended June 30,
--------------------------------
1997 1998 1998 1999
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 69,250 $ 2,304,887 $ 529,241 $ 6,191,997
CARRIER CHARGES 49,042 1,853,873 659,709 5,187,071
------------- ------------- ------------- -------------
20,208 451,014 (130,468) 1,004,926
------------- ------------- ------------- -------------
OTHER OPERATING EXPENSES:
Selling, general and administrative 5,707 648,943 56,431 1,615,783
Line charges -- 199,977 44,149 460,070
Cellular phones -- 47,463 -- --
Printing -- 38,780 -- --
------------- ------------- ------------- -------------
TOTAL OTHER OPERATING EXPENSES 5,707 935,163 100,580 2,075,853
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) 14,501 (484,149) (231,048) (1,070,927)
OTHER EXPENSES:
Interest expense, net -- 44,768 -- 255,690
Other expense -- -- -- 100,000
------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE TAXES ON INCOME 14,501 (528,917) (231,048) (1,426,617)
TAXES ON INCOME 300 300 -- --
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 14,201 $ (529,217) $ (231,048) $ (1,426,617)
_ ============= ============= ============= =============
</TABLE>
F-35
See accompanying summary of accounting policies and
notes to financial statements.
<PAGE> 89
AXISTEL COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
================================================================================
Period from August 28, 1997 (inception) to December 31, 1997, year ended
December 31, 1998 and six months ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common stock, Class A Common stock, Class B
---------------- ----------------- ------------- -----------------
Shares Par value Shares Par value
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
BALANCE, AUGUST 28, 1997 -- $ -- -- $ --
Issuance of common stock 1,500 15 -- --
Net income -- -- -- --
---------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1997 1,500 15 -- --
Issuance of common stock -- -- 1 --
Officer's salary-imputed -- -- -- --
Options granted -- -- -- --
Warrants granted -- -- -- --
Net loss -- -- -- --
---------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1998 1,500 15 1 --
Net loss (Unaudited) -- -- -- --
---------- ----------- --------- -----------
BALANCE, JUNE 30, 1999 (UNAUDITED) 1,500 $ 15 1 $ --
========== =========== ========= ===========
<CAPTION>
Additional Retained Stockholders'
paid-in earnings equity
capital (deficit) (deficit)
----------- ----------- ----------------
<S> <C> <C> <C>
BALANCE, AUGUST 28, 1997 $ -- $ -- $ --
Issuance of common stock 985 -- 1,000
Net income -- 14,201 14,201
----------- ----------- ----------------
BALANCE, DECEMBER 31, 1997 985 14,201 15,201
Issuance of common stock -- -- --
Officer's salary-imputed 12,000 -- 12,000
Options granted 25,510 -- 25,510
Warrants granted 273,900 -- 273,900
Net loss -- (529,217) (529,217)
----------- ----------- ----------------
BALANCE, DECEMBER 31, 1998 312,395 (515,016) (202,606)
Net loss (Unaudited) -- (1,426,617) (1,426,617)
----------- ----------- ----------------
BALANCE, JUNE 30, 1999 (UNAUDITED) $ 312,395 $(1,941,633) $(1,629,223)
=========== =========== ================
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
F-36
<PAGE> 90
AXISTEL COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(NOTE 9)
================================================================================
<TABLE>
<CAPTION>
Period from
August 28,
1997
(inception)
to Year ended Six months ended June 30,
December 31, December 31, -------------------------------
1997 1998 1998 1999
------------- ------------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 14,201 $ (529,217) $ (231,048) $ (1,426,617)
------------- ------------- ------------- -------------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization -- 15,564 -- 20,627
Amortization of loan origination costs -- 27,825 -- 123,500
Other expense -- -- -- 100,000
Stock options issued in lieu of payment
for services -- 25,510 -- --
Officer's salary - imputed -- 12,000 -- --
Decrease (increase) in:
Accounts receivable (38,250) (278,100) 30,992 (752,463)
Prepaid expenses and other assets (2,443) (72,697) (4,492) (181,402)
Restricted cash -- -- -- (750,000)
Increase in:
Accounts payable and accrued expenses 47,204 329,092 174,419 834,156
Deferred revenue -- 110,000 25,000 66,230
------------- ------------- ------------- -------------
Total adjustments 6,511 169,194 225,919 (539,352)
------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities 20,712 (360,023) (5,129) (1,965,969)
------------- ------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures -- (208,619) -- (322,155)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Proceeds from:
Issuance of common stock 1,000 -- -- --
Notes payable, net of loan origination costs -- 1,940,000 -- 1,500,000
Loans from stockholders 10,000 15,000 25,000 625
------------- ------------- ------------- -------------
Net cash provided by financing
activities 11,000 1,955,000 25,000 1,500,625
------------- ------------- ------------- -------------
Net increase (decrease) in cash 31,712 1,386,358 19,871 (787,499)
Cash, beginning of period -- 31,712 31,712 1,418,070
------------- ------------- ------------- -------------
Cash, end of period $ 31,712 $ 1,418,070 $ 51,583 $ 630,571
============= ============= ============= =============
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
F-37
<PAGE> 91
AXISTEL COMMUNICATIONS, INC.
SUMMARY OF ACCOUNTING POLICIES
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND 1999 IS UNAUDITED)
================================================================================
DESCRIPTION OF BUSINESS AxisTel Communications, Inc. (the
"Company") was incorporated in the State
of Delaware on August 28, 1997. Its
services include the provision of
international and domestic voice and
data applications over Company leased
and third party fiber optic networks and
retail communication services, including
prepaid telephony.
UNAUDITED INTERIM FINANCIAL STATEMENTS The financial statements as of June 30,
1999 and for the six months ended June
30, 1998 and 1999 are unaudited, and
have been prepared on the same basis as
the audited financial statements
included herein. In the opinion of
management, such unaudited financial
statements include all adjustments
consisting of normal recurring accruals
necessary to present fairly the
information set forth therein. Results
for interim periods are not necessarily
indicative of results to be expected for
an entire year.
PROPERTY, EQUIPMENT AND CERTAIN Property and equipment is stated at
INTANGIBLES cost. Depreciation is computed using the
straight-line method over the estimated
useful lives.
LOAN ORIGINATION COSTS Loan origination costs are amortized
based on the interest method over the
contractual period of the loan (see Note
5).
INCOME TAXES Income taxes are calculated using the
liability method specified by Statement
of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires a company
to recognize deferred tax liabilities
and assets for the expected future tax
consequences of events that have been
recognized in a company's financial
statements or tax returns. Under this
method, deferred tax liabilities and
assets are determined based on the
difference between the financial
statement carrying amounts and tax basis
of assets and liabilities using enacted
tax rates in effect in the years in
which the differences are expected to
reverse. Deferred tax assets are reduced
by a valuation allowance to the extent
realization is uncertain.
F-38
<PAGE> 92
AXISTEL COMMUNICATIONS, INC.
SUMMARY OF ACCOUNTING POLICIES
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND 1999 IS UNAUDITED)
================================================================================
REVENUE RECOGNITION Prepaid phone card revenues are earned
when the prepaid phone cards are used.
Deferred revenues of $-0- and $110,000
at December 31, 1997 and 1998,
respectively, represent unused prepaid
phone cards.
USE OF ESTIMATES The preparation of financial statements
in conformity with generally accepted
accounting principles requires
management to make estimates and
assumptions that affect the reported
amounts of assets and liabilities and
disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the
reporting period. Actual results could
differ from those estimates.
LONG-LIVED ASSETS Long-lived assets, such as property and
equipment, are evaluated for impairment
when events or changes in circumstances
indicate that the carrying amount of the
assets may not be recoverable through
the estimated undiscounted future cash
flows from the use and sale of these
assets. When any such impairment exists,
the related assets will be written down
to fair value. No impairment losses have
been recognized through June 30, 1999.
F-39
<PAGE> 93
AXISTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND 1999 IS UNAUDITED)
================================================================================
1. TRANSACTIONS WITH Included in revenues for the year ended
RELATED PARTIES December 31, 1998 were revenues from
Debit Card Technologies Inc. totaling
approximately $264,000. Debit Card
Technologies Inc. is wholly owned by an
employee's spouse. All revenues for the
period August 28, 1997 (inception) to
December 31,1997 were received from
Debit Card Technologies, Inc.
2. PROPERTY AND EQUIPMENT AND Major classes of property and equipment
CERTAIN INTANGIBLES and certain intangibles are as follows:
<TABLE>
<CAPTION>
Estimated
December 31, 1997 1998 useful lives
- ------------ ----------- ------------- ------------
<S> <C> <C> <C>
Indefeasible Right of Use
of phone line $ -- $ 1,600,000 25 years
Equipment -- 108,619 3-4 years
----------- ------------- ------------
-- 1,708,619
Less: Accumulated
depreciation -- (15,564)
----------- ------------- ------------
$ -- $ 1,693,055
=========== ============= ============
</TABLE>
3. NOTES PAYABLE - On December 3, 1998, the Company entered
ERAATEL CORP. into an Indefeasible Right of Use
("IRU") agreement with Eraatel
Corporation which provides for the use
of the phone line for 25 years. The
Company leased the phone line between
New York City, New York and Miami,
Florida for a one-time IRU fee of
$1,600,000. The Company paid $100,000
upon the execution of the agreement. The
balance due of $1,500,000 is payable in
equal monthly installments over a term
of 36 months with interest accruing at
15%. As of December 31, 1998, $427,600
was classified as current and $1,072,400
was classified as long-term debt.
In April 1999, the Company was notified
that Eraatel Corporation had misled the
Company and, in fact, only had rights to
the IRU for four months. As a result,
the above agreement was terminated and
the related asset and notes payable were
written off. The $100,000 payment has
been recorded as other expense.
F-40
<PAGE> 94
AXISTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND 1999 IS UNAUDITED)
================================================================================
4. MAJOR CUSTOMERS Two customers accounted for
approximately 40% of accounts receivable
at December 31, 1998. Revenues from
these customers accounted for
approximately 6% of revenues for the
year ended December 31, 1998.
5. NOTES PAYABLE - On October 28, 1998, the Company issued
STOCKHOLDERS notes to Infinity Emerging Opportunities
Limited ("IEOL") in an aggregate amount
of $2,000,000. As of December 31, 1998,
the aggregate principal balance due was
$2,000,000. The note agreement provides
for a further $1,500,000, of which
$500,000 was received on March 10, 1999
and $1,000,000 was received on April 19,
1999, and is subject to certain
conditions as set forth in the
agreement. Interest is calculated at 8%
per annum and is payable monthly. The
outstanding principal balance and any
unpaid interest shall be due and payable
on October 28, 2000. The notes are
secured by all assets and equity
interests of the Company.
As of December 31, 1998, the Company had
not met, but was subsequently granted
waivers with respect to, certain
reporting requirements under the above
notes.
In connection with the notes, the
Company issued warrants to purchase
1,499 shares of Class B common stock,
par value $.01 per share, of the Company
at an exercise price of $2,333.33 per
share. The warrants were valued at
approximately $274,000 using the
Black-Scholes model and the Company
recorded the amount as a debt discount,
with a related credit to additional
paid-in capital. The debt discount is
being amortized over the life of the
loan. As of December 31, 1998, the
balance of the debt discount, net of
amortization, was $251,075.
As additional consideration for the
notes payable, the Company issued one
share of Class B common stock of the
Company to IEOL at a purchase price of
$1 (approximate fair value), with voting
rights as set forth in the Certificate
of Incorporation of the Company
entitling the purchasers to vote 50% of
all issued and outstanding shares of the
common stock of the Company.
F-41
<PAGE> 95
AXISTEL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND 1999 IS UNAUDITED)
================================================================================
The Company had notes payable to one of
its stockholders aggregating $10,000 at
December 31, 1997. The Company had notes
payable to two of its stockholders
aggregating $25,000 at December 31,
1998. Interest is calculated at 5% per
annum. The outstanding principal balance
and any unpaid interest was due and
payable on October 28, 1999 and the
notes were therefore classified as short
term.
6. COMMON STOCK Common stock is comprised of the
following:
<TABLE>
<CAPTION>
December 31, 1997 1998
------------ ---- ----
<S> <C> <C>
Class A shares; par value $.01, 45,000
shares authorized, 1,500 shares issued
and outstanding $15 $15
Class B shares; par value $.01, 45,000
shares authorized, 1 share issued and
outstanding -- --
Class C shares; nonvoting par value $.01,
10,000 shares authorized, none issued and
outstanding -- --
---- ----
$15 $15
==== ====
</TABLE>
7. STOCK OPTIONS On November 18, 1998, IEOL retained a
consultant to perform services for the
Company. The consultant was granted
stock options to purchase 30 shares of
Class C, nonvoting common stock, par
value $.01, of the Company at an
exercise price of $2,333.33 per share.
The stock options vest on May 18, 1999.
The options were valued at $25,510 using
the Black-Scholes model and the Company
recorded the amount as compensation
expense with a related credit to
additional paid-in capital.
F-42
<PAGE> 96
8. COMMITMENTS Leases
Minimum annual commitments under all
noncancellable operating leases with
terms in excess of one year approximate:
<TABLE>
Year ended December 31,
----------------------- -------------
<S> <C>
1999 $ 210,600
2000 280,800
2001 280,800
2002 280,800
2003 280,800
Thereafter 1,582,200
-------------
Total minimum lease payments $ 2,916,000
-------------
</TABLE>
Rent expense for the period from August
28, 1997 (inception) to December 31,
1997 and the year ended December 31,
1998 was approximately $1,000 and
$12,000, respectively.
9. STATEMENTS OF CASH
FLOW
<TABLE>
<CAPTION>
Period from
August 28,
1997
(inception) to Year ended Six months ended June 30,
December 31, December 31, -------------------------
1997 1998 1998 1999
-------------- ---------------- -------- ------------
<S> <C> <C> <C> <C>
Supplemental disclosure
of cash flow
information:
Cash paid during the
period for:
Interest $ -- $ 13,333 $ -- $ 90,000
Taxes -- -- -- 1,100
Noncash investing and
financing activities:
Capital leases
entered into
during the period -- 1,500,000 -- --
Warrants and
options issued
during the period -- 299,410 -- --
----- -------------- ---- ----------
</TABLE>
F-43
<PAGE> 97
10. INCOME TAXES
The Company has a deferred tax asset
amounting to approximately $197,000 at
December 31, 1998, principally relating
to net operating loss carryforwards and
a basis difference in the carrying
amount of trade accounts receivable for
financial reporting purposes and the
amount used for income tax purposes. The
Company recorded a valuation allowance
amounting to the entire deferred tax
asset balance due to the Company's
financial condition and its lack of a
history of consistent earnings, giving
rise to uncertainty as to whether the
deferred tax asset is realizable. No
amount of deferred Federal or state
income tax is therefore presented.
Deferred income taxes are not material
for the period ended December 31, 1997.
As of December 31, 1998, the Company had
net operating loss income tax
carryforwards of approximately $529,000,
which expire in the years 1999 through
2018.
F-44
<PAGE> 98
11. SUBSEQUENT EVENTS On September 22, 1999, the following
significant transactions occurred: IEOL
exercised its warrants to purchase 1,499
Class A shares of the Company, which
gave it 50% of the total outstanding
shares of the Company. IEOL exchanged
its shares in the Company for shares of
eVentures Group, Inc. ("eVentures").
eVentures acquired the other 50% of the
Company's Class A shares from the
founding shareholders of the Company,
settled through an issue of shares of
eVentures. These transactions
consummated the acquisition of all of
the outstanding shares of the Company by
eVentures.
F-45
<PAGE> 99
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
"Unaudited Pro Forma Consolidated Financial Information") has been derived from
the application of pro forma adjustments to eVentures' consolidated historical
balance sheet as of September 30, 1999 included elsewhere herein.
The Unaudited Pro Forma Consolidated Financial Information gives effect to
the purchase of the remaining 33.3% of eVolve and certain financing transactions
(all of which occurred in October and November, 1999) as if each had occurred on
September 30, 1999. The pro forma adjustments are described in the accompanying
notes. There are no adjustments pertaining to the reverse merger and acquisition
of AxisTel, since these events were already included in the historical balance
sheet as at September 30, 1999.
The Unaudited Pro Forma Consolidated Financial Information is presented for
informational purposes only and does not purport to represent what eVentures'
financial position would actually have been if the aforementioned events had
occurred on the date specified or to project eVentures' financial position at
any future date. The Unaudited Pro Forma Consolidated Financial Information
should be read in conjunction with eVentures' consolidated historical financial
statements, and the notes thereto, included elsewhere herein.
P-1
<PAGE> 100
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
FINANCING
Assets HISTORICAL ADJUSTMENTS PRO FORMA
--------------- --------------- ---------------
<S> <C> <C> <C>
Current:
Cash $ 6,346,023 $ (1,107,957)(1) $ 11,463,066
6,225,000 (2)
Accounts Receivable 1,158,221 -- 1,158,221
Other receivables - Employee Advances 71,988 -- 71,988
Prepaid and Other Current Assets 189,933 -- 189,933
Deposits 299,071 -- 299,071
Available-for-sale securities -- -- --
--------------- --------------- ---------------
Total Current Assets 8,065,236 5,117,043 13,182,279
--------------- --------------- ---------------
Long term:
Restricted Cash 1,820,752 -- 1,820,752
Property and equipment, net 7,429,945 -- 7,429,945
VAT taxes receivable 2,436,268 -- 2,436,268
Investment in affiliate 140,746 -- 140,746
Investments in i2v2 2,100,144 -- 2,100,144
Goodwill, net 19,591,050 11,662,506 (3) 31,253,556
Other 79,300 -- 79,300
--------------- --------------- ---------------
Total Long term Assets 33,598,205 11,662,506 45,260,711
--------------- --------------- ---------------
Total Assets $ 41,663,441 $ 16,779,549 $ 58,442,990
=============== =============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current:
Current Portion of Long-Term Notes
& Capital leases $ 2,027,781 $ -- $ 2,027,781
Accounts Payable 7,716,609 (4,307,437)(1) 3,409,172
Accrued Liabilities 2,062,784 -- 2,062,784
Customer Deposits 1,952,447 -- 1,952,447
Deferred Revenue 154,000 -- 154,000
--------------- --------------- ---------------
Total Current Liabilities 13,913,621 (4,307,437) 9,606,184
--------------- --------------- ---------------
Long-Term Liabilities
Capital Leases, Net of Current Portion 1,750,160 -- 1,750,160
--------------- --------------- ---------------
Total Long-Term Liabilities 1,750,160 -- 1,750,160
--------------- --------------- ---------------
Stockholders' Equity
Common Stock 757 -- 757
Preferred Stock -- -- --
Additional Paid in Capital 36,480,715 11,662,506 (3) 57,567,701
3,199,480 (1)
6,225,000 (2)
Accumulated Deficit (10,481,812) -- (10,481,812)
--------------- --------------- ---------------
Total Stockholders' Equity 25,999,660 21,086,986 47,086,646
--------------- --------------- ---------------
Total Liabilities & Stockholders' Equity $ 41,663,441 $ 16,779,549 $ 58,442,990
=============== =============== ===============
</TABLE>
(1) Represents the exchange of accounts payable of $4,307,437 for cash of
$1,107,957 and Common stock of eVentures.
(2) Represents the issuance of a total of 6,225 shares of Preferred stock at a
price of $1,000 per share on November 24, 1999 and November 18, 1999.
(3) Represents the purchase of 1/3 of eVolve for 5,831,253 shares of the
Company at market price of $15.375 on October 19, 1999.
P-2
<PAGE> 101
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
"Unaudited Pro Forma Consolidated Financial Information") has been derived from
the application of pro forma adjustments to eVentures' consolidated historical
audited statement of operations for the year ended June 30, 1999 and the three
months ended September 30, 1999 included elsewhere herein.
The Unaudited Pro Forma Consolidated Financial Information gives effect to
the reverse merger, the acquisition of AxisTel and the acquisition of the
remaining 33.3% of e.Volve as if each had occurred on July 1, 1998. There is no
adjustment to minority interest since 100% of the losses were already recorded
in the historical financial statements. The pro forma adjustments are described
in the accompanying notes.
The Unaudited Pro Forma Consolidated Financial Information is presented for
informational purposes only and does not purport to represent what eVentures'
results of operations would actually have been if the aforementioned events had
occurred on the date specified or to project eVentures' results of operations
for any future periods. The Unaudited Pro Forma Consolidated Financial
Information should be read in conjunction with eVentures' consolidated
historical financial statements, and the notes thereto, included elsewhere
herein.
P-3
<PAGE> 102
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
SEPTEMBER 22, 1999 EVENTS
---------------------------- SUBSEQUENT
(1) PRO FORMA EVENTS
HISTORICAL AXISTEL ADJUSTMENTS SUB TOTAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 27,248,273 $ 7,967,643 $ -- $ 35,215,916 $ -- $ 35,215,916
Direct Costs 23,311,584 6,381,235 -- 29,692,819 -- 29,692,819
------------ ------------ ------------ ------------ ------------ ------------
3,936,689 1,586,408 -- 5,523,097 -- 5,523,097
Selling, General & Administrative 7,551,131 2,118,557 1,663,997(2) 11,333,685 1,166,251(6) 12,499,936
Line Charges -- 615,898 -- 615,898 -- 615,898
Other -- 190,981 -- 190,981 -- 190,981
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses 7,551,131 2,925,436 1,663,997 12,140,564 1,166,251 13,306,815
------------ ------------ ------------ ------------ ------------ ------------
Operating Income (3,614,442) (1,339,028) (1,663,997) (6,617,467) (1,166,251) (7,783,718)
Other (Income) Expense:
Interest Expense, Net 1,704,459 285,457 (557,574)(5) 473,675 -- 473,675
(958,667)(4)
Equity in Sub Income (Minority
Interest) 33,776 -- -- 33,776 -- 33,776
Foreign currency gain (loss) 126,575 -- -- 126,575 -- 126,575
Debt discount -- -- 2,000,000(3) 2,000,000 -- 2,000,000
Other (16,930) 100,000 -- 83,070 -- 83,070
------------ ------------ ------------ ------------ ------------ ------------
Total Other (Income) Expense: 1,847,880 385,457 483,759 2,717,096 -- 2,717,096
------------ ------------ ------------ ------------ ------------ ------------
Pre-Tax Income (5,462,322) (1,724,485) (2,147,756) (9,334,563) (1,166,251) (10,500,814)
Income Taxes -- 300 -- 300 -- 300
------------ ------------ ------------ ------------ ------------ ------------
Net Income $ (5,462,322) $ (1,724,785) $ (2,147,756) $ (9,334,863) $ (1,166,251) $(10,501,114)
============ ============ ============ ============ ============ ============
</TABLE>
- -------------------------
(1) Reflects the consolidation of the results of operations of AxisTel for the
period July 1, 1998 to June 30, 1999.
(2) Reflects the amortization of goodwill.
(3) Reflects the write off of the Original Issue Discount on the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(4) Reflects the reversal of amortization relating to the Original Issue
Discount on the e.Volve debentures for which the related Notes Receivable
were exchanged for stock of eVentures by one of the Major Shareholders on
September 22, 1999.
(5) Reflects the reversal of the interest expense relating to the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(6) Reflects the amortization of the goodwill arising from the purchase of 1/3
of e.Volve on October 19, 1999 over a period of 10 years.
P-4
<PAGE> 103
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SEPTEMBER 22, 1999 EVENTS
---------------------------- SUBSEQUENT
(1) PRO FORMA EVENTS
HISTORICAL AXISTEL ADJUSTMENTS SUB TOTAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues $ 8,675,719 $ 6,019,283 $ -- $ 14,695,002 $ -- $ 14,695,002
Direct Costs 8,729,520 5,550,300 -- 14,279,820 -- 14,279,820
------------ ------------ ------------ ------------ ------------ ------------
(53,801) 468,983 -- 415,182 -- 415,182
------------ ------------ ------------ ------------ ------------ ------------
Operating Expenses: --
Selling, General & Administrative 1,816,032 1,145,944 415,999(2) 3,377,975 291,563(6) 3,669,538
Line Charges -- 525,460 -- 525,460 -- 525,460
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses 1,816,032 1,671,404 415,999 3,903,435 291,563 4,194,998
------------ ------------ ------------ ------------ ------------ ------------
Operating Income (1,869,833) (1,202,421) (415,999) (3,488,253) (291,563) (3,779,816)
Other (Income) Expense:
Interest Expense, Net 519,231 (30,625) (160,800)(5) 34,369 -- 34,369
(293,437)(4)
Equity in Sub Income (Minority
Interest) 18,730 -- -- 18,730 -- 18,730
Foreign currency gain (loss) (6,502) -- -- (6,502) -- (6,502)
Debt discount and other 911,027 -- (911,027)(4) -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total Other (Income) Expense: 1,442,486 (30,625) (1,365,264) 46,597 -- 46,597
------------ ------------ ------------ ------------ ------------ ------------
Pre-Tax Income (3,312,319) (1,171,796) (949,265) (3,534,850) (291,563) (3,826,413)
Income Taxes -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Income $ (3,312,319) $ (1,171,796) $ (949,265) $ (3,534,850) $ (291,563) $ (3,826,413)
============ ============ ============ ============ ============ ============
</TABLE>
- -----------------------
(1) Reflects the consolidation of the results of operations of AxisTel for the
period July 1, 1999 to September 22, 1999.
(2) Reflects the amortization of goodwill.
(3) Reflects the write off of the Original Issue Discount on the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(4) Reflects the reversal of amortization relating to the Original Issue
Discount on the e.Volve debentures for which the related Notes Receivable
were exchanged for stock of eVentures by one of the Major Shareholders on
September 22, 1999.
(5) Reflects the reversal of the interest expense relating to the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(6) Reflects the amortization of the goodwill arising from the purchase of 1/3
of e.Volve on October 19, 1999 over a period of 10 years.
P-5
<PAGE> 104
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of September 22, 1999, among the
Registrant, eVentures Holdings, L.L.C., IEO Holdings Limited, Infinity Investors
Limited, Mick Y. Wettreich, the purchasers listed on Schedule 1-A thereto and the
Contributing Persons listed on Schedule 1-B thereto (incorporated by reference to Exhibit
2.1 to the report filed on Form 8-K on October 7, 1999).
2.2 Agreement and Plan of Exchange, dated as of October 19, 1999, among eVentures Group, Inc.,
and the persons set forth on Schedule 1 thereto (incorporated by reference to Exhibit 2.1
to the report filed on Form 8-K on November 3, 1999).
3.1 Certificate of Incorporation of eVentures, dated November 19, 1987 (incorporated by
reference to Exhibit 3(a) to the registration statement filed on Form S-1 on December 29,
1987).
3.2 Certificate of Amendment, dated April 27, 1994, to the Certificate of Incorporation.
3.3 Certificate of Amendment, dated as of October 20, 1997, to the Certificate of
Incorporation.
3.4 Certificate of Renewal dated August 19, 1999 for eVentures Group, Inc.
3.5 Certificate of Amendment, dated September 17, 1999, to the Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to the report filed on Form 8-K on October 7,
1999).
3.6 Amended and Restated Certificate of Designation of Rights, Preferences and Privileges of
Series A Convertible Preferred Stock, dated October 14, 1999.
3.7 Certificate of Designation of Rights, Preferences and Privileges of Series B Convertible
Preferred Stock, dated as of November 10, 1999.
3.8 Certificate of Amendment, dated as of December 15, 1999, to the Certificate of Designation
of Rights, Preferences and Privileges of Series B Convertible Preferred Stock.
3.9 Amended and Restated By-Laws of eVentures Group, Inc. (incorporated by reference to
Exhibit 3.1 to the report filed on Form 8-K on October 7, 1999).
4.1 Registration Rights Agreement, dated as of September 22, 1999, among the Registrant and
the persons and entities set forth on Schedule 1 thereto (the "First Registration Rights
Agreement") (incorporated by reference to Exhibit 4.1 to the report filed on Form 8-K on
October 7, 1999).
</TABLE>
<PAGE> 105
<TABLE>
<S> <C>
4.2 Addendum to the First Registration Rights Agreement, dated as of October 19, 1999, among
eVentures Group, Inc., the persons set forth on Schedule 1 thereto and the other parties
to the First Registration Rights Agreement.
4.3 Registration Rights Agreement, dated as of November 19, 1999, between eVentures Group,
Inc. and Geronimo Partners, L.P.
4.4 Schedule identifying other agreements, the dates thereof and the parties thereto,
substantially identical to the Registration Rights Agreement, dated as of November 19,
1999, between eVentures Group, Inc. and Geronimo Partners, L.P.
10.1 Securities Purchase Agreement, dated as of June 11, 1998, among Orix Global
Communications, Inc., certain of its shareholders and the purchasers named thereunder.
10.2 Debenture, dated as of June 11, 1998.
10.3 Letter Agreement, dated as of August 19, 1998 between Orix Global Communications and
Infinity Investors Limited.
10.4 Debenture, dated as of August 19, 1998.
10.5 Letter Agreement, dated as of February 9, 1999 between Orix Global Communications and
Infinity Investors Limited.
10.6 Debenture, dated as of February 9, 1999.
10.7 Letter Agreement, dated as of April 15, 1999 among Orix Global Communications, Inc.,
Infinity Investors Limited and the Founders (as defined therein).
10.8 Amended and Restated Debenture, dated as of April 15, 1999.
10.9 Letter Agreement, dated as of April 29, 1999 between Orix Global Communications and
Infinity Investors Limited.
10.10 Debenture, dated as of April 29, 1999.
10.11 Letter Agreement, dated as of April 30, 1999, between Orix Global Communications,
Inc. and Infinity Investors Limited.
10.12 Debenture, dated as of April 30, 1999.
</TABLE>
<PAGE> 106
<TABLE>
<S> <C>
10.13 Lease Agreement, dated December, 1998, between AxisTel International, Inc. and Evergreen
America Corporation.
10.14 Lease Agreement, dated November 24, 1997, between Orix Global Communications, Inc. and
Trust F/3959 of Banco del Atlantico.
10.15 Assignment Agreement, dated April 1, 1998, among Orix Global Communications, Inc., Latin
Gate de Mexico S.A. de C.V. and Trust F/3959 of Banco del Atlantico.
10.16 Office Lease, dated January 23, 1998, between Orix Global Communications, Inc. and 2526
Investment Co.
10.17 Lease Agreement, dated July 30, 1999, between e.Volve Technology and Green Valley
Executive Suites LLC.
10.18 Lease Agreement, dated September 1, 1999, between e.Volve Technology and Green Valley
Executive Suites LLC.
10.19 Lease Agreement, dated as of October 1, 1999, between AxisTel Communications, Inc.
and Telecommunications Finance Group.
10.20 Guaranty Agreement by eVentures Group, Inc. as inducement to Telecommunications Finance
Group to provide a lease to AxisTel Communications, Inc., dated as of October 13, 1999.
10.21 Management Services Agreement, dated as of September 22, 1999, between eVentures Group,
Inc. and HW Partners, L.P.
10.22 1999 Omnibus Securities Plan, dated as of September 22, 1999.
10.23 Employment Agreement, dated as of September 22, 1999, between eVentures Group, Inc. and
Stuart J. Chasanoff.
10.24 Amended and Restated Employment and Noncompetition Agreement, dated as of September 21,
1999, between AxisTel Communications, Inc. and Samuel L. Litwin.
10.25 Amended and Restated Employment and Noncompetition Agreement, dated as of September 22,
1999, between AxisTel Communications, Inc. and Mitchell Arthur.
21.1 Subsidiaries of eVentures Group, Inc.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF
"eVENTURES GROUP, INC." AS RECEIVED AND FILED IN THIS OFFICE.
THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED:
CERTIFICATE OF INCORPORATION, FILED THE NINETEENTH DAY OF NOVEMBER, A.D.
1987, AT 9 O'CLOCK A.M.
CERTIFICATE OF AMENDMENT, FILED THE SECOND DAY OF MAY, A.D. 1994, AT 11:30
O'CLOCK A.M.
CERTIFICATE OF RENEWAL, CHANGING ITS NAME FROM "ADINA, INC." TO "eVENTURES
GROUP, INC.", FILED THE NINETEENTH DAY OF AUGUST, A.D. 1999, AT 9 O'CLOCK A.M.
CERTIFICATE OF AMENDMENT, FILED THE TWENTIETH DAY OF SEPTEMBER, A.D. 1999,
AT 11:30 O'CLOCK A.M.
CERTIFICATE OF DESIGNATION, FILED THE TWENTY-SEVENTH DAY OF SEPTEMBER,
A.D. 1999, AT 10:30 O'CLOCK A.M.
CERTIFICATE OF DESIGNATION, FILED THE TWENTY-FIFTH DAY OF OCTOBER, A.D.
1999, AT 12:30 O'CLOCK P.M.
CERTIFICATE OF DESIGNATION, FILED THE SIXTEENTH DAY OF NOVEMBER, A.D.
1999, AT 4:30 O'CLOCK P.M.
2144057 8100H 0147698
991544330 12-17-99
[SEAL] /s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
DATE:
<PAGE> 2
FILED
NOVEMBER 19, 1987
[ILLEGIBLE]
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
ADINA, INC.
--------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, the known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "corporation")
is
ADINA, INC.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 229 South
State Street, City of Dover, County of Kent; and the name of the registered
agent of the corporation in the State of Delaware is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is Twenty-Five Million (25,000,000). The par value of
each of such shares is One Mil ($.001). All such shares are of one class and
are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
T.M. Bonovich 229 South State Street, Dover, Delaware
SIXTH: The corporation is to have perpetual existence.
<PAGE> 3
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of directors
need be by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received
-2-
<PAGE> 4
any payment for any of its stock, the power to adopt, amend, or repeal the
By-Laws of the corporation may be exercised by the Board of Directors of
the corporation; provided, however, that any provision for the
classification of directors of the corporation for staggered terms pursuant
to the provisions of subsection (d) of Section 141 of the General
Corporation Law of the State of Delaware shall be set forth in an initial
By-Law or in a By-Law adopted by the stockholders entitled to vote of the
corporation unless provisions for such classification shall be set forth in
this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share entitle the holder thereof to notice
of, and the right to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under
the provisions of the certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders except as the
provisions of paragraph (2) of subsection (b) of section 242 of the General
Corporation Law of the State of Delaware shall otherwise require; provided,
that no share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or decrease in
the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of
subsection (b) of Section 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any and all
of the expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
-3-
<PAGE> 5
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on November 19, 1987
/s/ T. M. BONOVICH
---------------------------
T. M. Bonovich
Incorporator
-4-
<PAGE> 1
EXHIBIT 3.2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:30 AM 05/02/1994
944076710 - 2144057
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION OF
ADINA, INC.
Pursuant to actions taken in accordance with Sections 228 and 242 of the
Delaware General Corporation Law, the Certificate of Incorporation of Adina,
Inc. (hereinafter called the "Corporation") is hereafter amended by striking
out Article Fourth thereof and by substituting in lieu of said Article the
following:
"Article Fourth"
The total number of shares of stock which the corporation shall have
authority to issue is, all of which are of one class, and the par
value, if any, of said shares or a statement that said shares are
without par value, are as follows:
<TABLE>
<CAPTION>
Par Value per Share
or Statement that
Total Number of Shares Shares are Without Par Value
---------------------- ----------------------------
<S> <C>
75,000,000 $.00002
</TABLE>
The amendment of the certificate of Incorporation herein certified has been
duly adopted in accordance with the provision of Section 228 and 242 of the
General Corporation Law of the State of Delaware.
Signed and attested to on April 27, 1994.
/s/ DANNY WETTREICH
--------------------------
Danny Wettreich, President
Attest
/s/ JEANETTE FITZGERALD
- ------------------------------
Jeanette Fitzgerald, Secretary
<PAGE> 1
[STATE OF DELAWARE STAMP]
CERTIFICATE OF AMENDMENT
Adina, Inc. a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Adina, Inc. resolutions
were duly adopted setting forth a proposed amendment of the Certificate of
Incorporation of said corporation, declaring said amendment to be advisable
and calling a meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changed the Article thereof numbered "Four" so that, as
amended, said Article shall be and read as follows:
"see attached.
----------------------------------------------------------------------
----------------------------------------------------------------------
---------------------------------------------------------------------"
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation
Law of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said Adina, Inc. has caused this certificate to be signed
by its authorized officer this 20th day of October, 1997.
BY: /s/ ROBERT GREGORY
--------------------------
Authorized Officer
Robert Gregory
<PAGE> 2
ADINA, INC. ARTICLES OF AMENDMENT
"Fourth: The total number of shares of all classes which the corporation shall
have authority to issue is 40,000,000, of which 25,000,000 shares shall be
Common Stock of $.00002 par value and of which 15,000,000 shares shall be
Preferred Stock of the par value of $.01 (the "Preferred Stock",) with
following designations, powers, preferences, rights, qualifications,
limitations, or restrictions:
1. The Board of Directors is expressly authorized at any time, and from time to
time, to provide for the issuance of shares of Preferred Stock in one more
series, with such voting powers, full or limited, but not to exceed one vote
per share, or without voting powers and with designations, preferences and
relative, participating, optional or other annual rights, and qualifications,
limitations, or restrictions thereof, as shall be expressed in the resolution or
resolutions providing for the issue thereof adopted by the Board of Directors
and as not expressed in this Certificate of Incorporation or any amendment
thereto, including, but without limiting the generality of the foregoing, the
following:
a) the designation of such series;
b) the dividend rate of such series, the conditions and dates upon which
such dividends shall be payable, the preferences or relation which
such dividends shall bear to the dividends payable or any other class
or classes of capital stock of the Corporation, and whether such
dividends shall be cumulative or non-cumulative;
c) whether the shares of such series shall be subject to redemption, the
times, prices and other terms and conditions of such redemption:
d) the terms and amount of any sinking fund provided for the purchase or
redemption of the shares of such series;
e) whether the shares of such series shall be convertible into or
exchangeable for shares of any other class or classes or of any other
series of any class or classes of capital stock of the Corporation,
and, if provision be made for conversion or exchange, the times,
prices, rates, adjustments, and other terms and conditions of such
conversion or exchange;
f) the extent, if any, to which the holders of the shares of such series
shall be entitled to vote as a class or otherwise with respect to the
election of directors or otherwise, provided, however, that in no
event shall any holder of any series of Preferred Stock be entitled to
more than one vote for each share of such Preferred Stock held by him;
g) the restrictions and conditions, if any, upon the issue or reissue of
any additional Preferred Stock ranking on a parity with or prior to
such shares as to dividends or upon dissolution;
h) the rights of the holders of the shares of such series upon the
dissolution of or upon the distribution of assets of, the Corporation,
which rights may be different in the case of a voluntary dissolution
than in the case of an involuntary dissolution.
2. except as otherwise required by law and except for such voting powers with
respect to the election of directors or other matters as may be stated in the
resolution of the Board of Directors creating any series of Preferred Stock,
the holders of any such series shall have no voting power whatsoever.
All shares, when issued shall be fully paid and nonassessable; and the private
property of stockholders shall not be liable for corporate debts. Stockholders
shall have no preemptive rights.
All matters properly presented for shareholder vote shall be affirmed by a
majority of the shareholders voting unless the laws of the state of Delaware
absolutely require a larger vote."
<PAGE> 1
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RENEWAL
OF "ADINA, INC.", CHANGING ITS NAME FROM "ADINA, INC." TO "EVENTURES GROUP,
INC.", FILED IN THIS OFFICE ON THE NINETEENTH DAY OF AUGUST, A.D. 1999, AT
9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ EDWARD J. FREEL
-----------------------------------
[SEAL] Edward J. Freel, Secretary of State
2144057 8100 AUTHENTICATION: 9931913
991347487 DATE: 08-20-99
<PAGE> 2
[STATE OF DELAWARE STAMP]
STATE OF DELAWARE
CERTIFICATE FOR RENEWAL
AND REVIVAL OF CHARTER
eVENTURES GROUP, INC. (Formerly Adina, Inc.), a corporation organized under the
laws of Delaware, the charter of which was voided for non-payment of taxes, now
desires to procure a restoration, renewal and revival of its charter, and hereby
certifies as follows:
1. The name of this corporation is eVentures Group, Inc. (Formerly known
as Adina, Inc.).
2. Its registered office in the State of Delaware is located at 1013
Centre Road, City of Wilmington Zip Code 19805 County of Newcastle the
name and address of its registered agent is The Prentice-Hall
Corporation System, Inc. at the address above.
3. The date of filing of the original Certificate of Incorporation in
Delaware was November 19, 1987.
4. The date when restoration, renewal, and revival of the charter of
this company is to commence is the 29th day of February 1996, same
being prior to the date of the expiration of the charter. This renewal
and revival of the charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March A.D. 1996, at
which time its charter became inoperative and void for non-payment of
taxes and this certificate for renewal and revival is filed by
authority of the duly elected directors of the corporation in
accordance with the laws of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312
of the General Corporation Law of the State of Delaware, as amended, providing
for the renewal, extension and restoration of charters, DANIEL WETTREICH the
last and acting authorized officer hereunto set his/her hand to this
certificate this 17th day of August 1999.
By: /s/ DANIEL WETTREICH
---------------------------------
Authorized Officer
Name: DANIEL WETTREICH
-------------------------------
Print or Type
Title: President
-------------------------------
<PAGE> 3
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
PAGE 1
------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "eVENTURES GROUP, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO FAR
AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE TWENTIETH DAY OF AUGUST, A.D.
1999.
/s/ EDWARD J. FREEL
[SEAL] -------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2144057 8300 9931914
DATE:
991347487 08-20-99
<PAGE> 4
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RENEWAL
OF "ADINA, INC.", CHANGING ITS NAME FROM "ADINA, INC." TO "EVENTURES GROUP,
INC.", FILED IN THIS OFFICE ON THE NINETEENTH DAY OF AUGUST, A.D. 1999, AT
9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ EDWARD J. FREEL
-----------------------------------
[SEAL] Edward J. Freel, Secretary of State
2144057 8100 AUTHENTICATION: 9931913
991347487 DATE: 08-20-99
<PAGE> 5
[STATE OF DELAWARE STAMP]
STATE OF DELAWARE
CERTIFICATE FOR RENEWAL
AND REVIVAL OF CHARTER
eVENTURES GROUP, INC. (Formerly Adina, Inc.), a corporation organized under the
laws of Delaware, the charter of which was voided for non-payment of taxes, now
desires to procure a restoration, renewal and revival of its charter, and hereby
certifies as follows:
1. The name of this corporation is eVentures Group, Inc. (formerly known
as Adina, Inc.).
2. Its registered office in the State of Delaware is located at 1013
Centre Road, City of Wilmington Zip Code 19805 County of Newcastle the
name and address of its registered agent is The Prentice-Hall
Corporation System, Inc. at the address above.
3. The date of filing of the original Certificate of Incorporation in
Delaware was November 19, 1987.
4. The date when restoration, renewal, and revival of the charter of
this company is to commence is the 29th day February 1996, same being
prior to the date of the expiration of the charter. This renewal and
revival of the charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charger until the 1st day of March, A.D. 1996, at
which time its charter became inoperative and void for non-payment of
taxes and this certificate for renewal and revival is filed by
authority of the duly elected directors of the corporation in
accordance with the laws of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312
of the General Corporation Law of the State of Delaware, as amended, providing
for the renewal, extension and restoration of charters. DANIEL WETTREICH the
last and acting authorized officer hereunto set his/her hand to this
certificate this 17th day of August 1999.
By: /s/ DANIEL WETTREICH
---------------------------------
Authorized Officer
Name: DANIEL WETTREICH
-------------------------------
Print or Type
Title: President
-------------------------------
<PAGE> 6
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
PAGE 1
------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "eVENTURES GROUP, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO FAR
AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE TWENTIETH DAY OF AUGUST, A.D.
1999.
/s/ EDWARD J. FREEL
[SEAL] -------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2144057 8300 9931914
DATE:
991347487 08-20-99
<PAGE> 1
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCE
AND RIGHTS OF SERIES A CONVERTIBLE
PREFERRED STOCK OF eVENTURES GROUP, INC.
I, STUART J. CHASANOFF, being the Vice President and Secretary of
eVENTURES GROUP, INC., a corporation organized and existing under the laws of
Delaware (the "Corporation"), DO HEREBY CERTIFY that, pursuant to authority
conferred upon the Board of Directors by the Amended Certificate of
Incorporation and Section 151 of the Delaware General Corporation Law, the Board
of Directors, at a meeting duly called and held on the 14th day of October,
1999, adopted the following resolution providing for the issuance of a series of
Preferred Stock:
RESOLVED, that pursuant to authority vested in the Board of Directors
by Article Fourth of the Amended Certificate of Incorporation of this
Corporation, a series of 1,200 shares of Preferred Stock, par value
$0.00002 per share, is hereby established, the distinctive designation
of which shall be "Series A Convertible Preferred Stock" (such series
being hereinafter called "Series A Stock"), and the preferences and
relative, participating, optional or other special rights of Series A
Stock, and the qualifications, limitations or restrictions thereof (in
addition to the relative powers, preferences and rights, and
qualifications, limitations or restrictions thereof, set forth in
Article Fourth of the Amended Certificate of Incorporation of the
Corporation which are applicable to shares of Preferred Stock of all
series) shall be as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
PART 1. DIVIDENDS.
1.01 NO DIVIDEND OBLIGATION. The holders of the Series A Stock shall
have no rights to the payment of dividends on the Series A Stock
(regardless of whether the Corporation declares or pays dividends on
any other class of preferred stock or common stock of the Corporation).
PART 2. REDEMPTION.
2.01 OPTIONAL REDEMPTION. All or any shares of Series A Stock may be
redeemed by the Corporation at its election at any time and from time
to time expressed by resolution of its Board of Directors, in the
manner prescribed in this Part 2, provided that in any redemption under
this Section 2.01 the Corporation shall redeem not less than 750 shares
of Series A Stock.
2.02 [INTENTIONALLY OMITTED.]
1.
<PAGE> 2
2.03 REDEMPTION NOTICE. Before making any redemption pursuant to
Section 2.01, the Corporation shall mail by certified or registered
mail, return receipt requested, to each record holder of any shares of
Series A Stock at the address shown on the Corporation's records, a
written notice (a "Redemption Notice"), stating: (i) the number of
shares of Series A Stock held by record by such holder which the
Corporation proposes to redeem; (ii) the date (herein called the
"Redemption Date") on which the Corporation proposes to pay the
Redemption Price for the shares to be redeemed; (iii) the Redemption
Price which is to be paid for each share repurchased; and (iv) the
place at which the shares to be redeemed may be surrendered in exchange
for the Redemption Price for such shares. Upon the mailing of a
Redemption Notice with respect to any optional repurchase which the
Corporation may choose to make pursuant to rights granted in Section
2.01, the Corporation shall become obligated to redeem the shares of
Series A Stock specified in such notice on the date specified in such
notice as the Redemption Date. Each Redemption Notice under Section
2.01 shall be mailed at least 10 days before the Redemption Date,
provided that if the Corporation fails to pay the Redemption Price on
such date ( for a reason other than a holder's failure to deposit
Series A Stock share certificates pursuant to Section 2.05(b)), the
Redemption Date shall be the date on which the Corporation actually
pays the Redemption Price.
2.04 DETERMINATION OF NUMBER OF EACH HOLDER'S SHARES TO BE REDEEMED.
The number of shares of Series A Stock to be redeemed from each holder
thereof in repurchases under Section 2.01 shall be determined by
multiplying the total number of shares of Series A Stock to be redeemed
times a fraction, the numerator of which shall be the total number of
shares of Series A Stock held by such holder and the denominator of
which shall be the total number of shares of Series A Stock
outstanding.
2.05 REDEMPTION PRICE.
(a) For each share of Series A Stock which shall be redeemed
by the Corporation at any time for any reason in redemptions pursuant
to Section 2.01, the Corporation shall be obligated to pay to the
holder of such share an amount (herein called the "Redemption Price"
for such share) equal to the Liquidation Value of such share. Such
payments shall be deemed to become "due" for all purposes of this
Section regardless of whether the Corporation shall be able or legally
permitted to make such payments on such Redemption Date.
(b) Each holder of Series A Stock shall be entitled to receive
on or at any time after any Redemption Date the full Redemption Price
for each share of Series A Stock held by such holder which the
Corporation shall be obligated to redeem on such Redemption Date upon
surrender by such holder at the Corporation's principal office of the
certificate representing such share duly endorsed in blank or
accompanied by an appropriate form of assignment duly endorsed in
blank. After the payment by the Corporation in the manner required
2.
<PAGE> 3
by Section 4.03 of the full Redemption Price for any Series A Stock,
all rights of the holder of such share shall have been surrendered for
cancellation) cease and terminate with respect to such shares except,
Series A Stock as provided in Section 8 hereof.
2.06 ALLOCATION OF PARTIAL REDEMPTION PAYMENTS AMONG HOLDERS OF SERIES
A STOCK. If any time the Corporation shall not be able to pay the full
Redemption Price for all Series A Stock which the Corporation shall
have become obligated to redeem at or prior to such time in redemptions
under Section 2.01, each holder of shares of Series A Stock shall have
the right to have redeemed by the Corporation a number of such holder's
shares of Series A Stock equal to the product derived by multiplying
the total number of shares of Series A Stock which the Corporation
shall be able to redeem at such time times a fraction, the numerator of
which shall be the total number of shares of Series A Stock which the
Corporation shall have become obligated to redeem from such holder at
or prior to such time (but which the Corporation shall not have
redeemed at or prior to such time) and the denominator of which shall
be the total number of shares of Series A Stock which the Corporation
shall have become obligated to redeem at or prior to such time (but
which the Corporation shall not have redeemed at or prior to such
time).
2.07 REDEEMED SHARES OF SERIES A STOCK TO BE CANCELED. The Corporation
shall cancel each share of Series A Stock which it shall redeem or for
any other reason acquire, and no share of Series A Stock which shall be
redeemed or otherwise acquired by the Corporation shall thereafter be
reissued, sold, or transferred by the Corporation to any person. The
number of shares of Series A Stock which the Corporation shall be
authorized to issue shall be deemed to be reduced by the number of
shares of Series A Stock which the Corporation shall redeem or
otherwise acquire.
PART 3. LIQUIDATION.
3.01 RIGHTS OF HOLDERS OF SERIES A STOCK. In the event of any voluntary
or involuntary liquidation (whether complete or partial), dissolution
or winding up of the Corporation, the holders of shares of Series A
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from capital,
surplus or earnings, an amount in cash equal to the sum of one thousand
dollars ($1,000) per share (the "Liquidation Value").
3.02 ALLOCATION OF LIQUIDATION PAYMENTS AMONG HOLDERS OF STOCK. If upon
any dissolution, liquidation (whether complete or partial), or winding
up of the Corporation, the assets of the Corporation available for
distribution to holders of shares of Series A Stock (hereinafter in
this Section 3.02 called the "Total Amount Available") shall be
insufficient to pay the holders of outstanding shares of Series A Stock
the full amounts to which they shall be entitled under Section 3.01,
each holder of shares of Series A Stock shall be entitled to receive an
amount equal to the
3.
<PAGE> 4
product derived by multiplying the Total Amount Available times a
fraction the numerator of which shall be the number of shares of Series
A Stock held by such holder and the denominator of which shall be the
total number of shares of Series A Stock then outstanding.
PART 4. ADDITIONAL PROVISIONS GOVERNING CUMULATIVE PREFERRED STOCK.
4.01 [INTENTIONALLY OMITTED.]
4.02 VOTING RIGHTS.
(a) Except as otherwise provided by the Certificate of
Incorporation or under the law, the entire voting power for the
election of directors and for all other purposes shall be vested
exclusively in the holders of the outstanding Common Stock and the
holder of shares of Series A Stock shall have no voting rights.
4.03 METHOD OF PAYMENT.
(a) Ordinary Payments. Any payment at any time due with
respect to any share of Series A Stock (including but not limited to
the payment of the Redemption Price for such share, and any payment due
on such share under Part 3) shall be made by means of a check (drawn
upon funds which are immediately available not later than the due date
of the payment being made by such check) to the order of the record
holder of such Share at the address for such record holder shown on the
Corporation's records, which check shall be mailed by United States
mail (by first class or any other class reasonably expected to effect
earlier delivery at such time so that such check should reasonably be
expected to arrive at the address to which it is required under this
sentence to be mailed) not later than the due date of the payment being
made by such check.
(b) When Payment Deemed to Have Been Made. Any payment at any
time due with respect to any share of Series A Stock (including but not
limited to payment of the Redemption Price for such share and any
payment due on such share under Part 3) shall be deemed to have been
paid by the Corporation at the time such payment shall have been
delivered pursuant to Section 4.03(a) the payment shall be deemed to
have been made on the date on which such check reasonably could have
been expected to be received by the addressee; and (ii) if any check or
other medium by which any payment shall be made shall prove not to be
immediately collectible on the due date of the payment being so made,
such payment shall not be deemed to have been made until cash in the
amount of such payment shall actually be received by the person
entitled to receive such payment.
4.04 AMENDMENT AND WAIVER. No change in the provision of this Section
affecting any interests of the holders of any shares of Series A Stock
shall be
4.
<PAGE> 5
binding or effective unless such change shall have been approved in
writing by the holders of at least 66 2/3% of the shares of Series A
Stock outstanding at the time such change shall be made.
4.05 REGISTRATION OF TRANSFER OF PREFERRED STOCK. The Corporation will
keep at its principal office a register for the registration of the
shares of Series A Stock Upon the surrender of any certificate
representing shares of Series A Stock at the Corporation's principal
office, the Corporation will, at the request of the registered holder
of such certificate, execute and deliver, at the Corporation's expense,
a new certificate or certificates in exchange representing the number
of shares of Series A Stock represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall
represent such number of shares of Series A Stock as shall be requested
by the holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.
4.06 REPLACEMENT. Upon receipt by the Corporation of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any certificate evidencing one or more
shares of Series A Stock (an affidavit of the Registered Holder,
without bond shall be satisfactory) the Corporation at its expense will
execute and deliver in lieu of such certificate, a new certificate of
like kind, representing the number of shares of Series A Stock which
shall have been represented by such lost, stolen, destroyed, or
mutilated certificate.
PART 5. [INTENTIONALLY OMITTED.]
PART 6. INTERPRETATION OF THIS INSTRUMENT.
6.01 DEFINITIONS. Each term defined in this Section 6.01 has the
meaning indicated in this instrument whenever such term is used in this
instrument.
(a) "AGREEMENT" means any agreement, as amended, modified or
extended, between the Corporation and any person holding Preferred
Stock, including, without limitation, Subscription Agreements executed
by the Corporation and such person.
(b) COMMON STOCK AND EXISTING COMMON STOCK. The term "Common
Stock" or "Common Shares" designates and includes the Corporation's
Existing Common Stock of all classes and any capital stock of any class
of the Corporation authorized after the date of the Agreement which
shall not be limited to a fixed sum or a percentage of par value in
respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or
involuntary liquidation or winding up of the Corporation. The term
"Existing Common Stock" designates the Corporation's authorized Common
Stock, par value $0.00002 per share, of all classes, as constituted on
the Closing Date as set forth in the Agreement.
5.
<PAGE> 6
(c) CONVERSION SHARE. The term "Conversion Share" means one
share of the Corporation's authorized Common Stock, provided that if
under the provisions hereof, there shall be a change such that the
securities purchasable hereunder shall be issued by an entity other
than the Corporation or class of securities purchasable hereunder, then
the term "Conversion Share" shall mean one share of the security
purchasable upon the exercise of the rights granted hereunder if such
security shall be issuable in shares or shall mean the smallest unit in
which such security shall be issuable if such security shall not be
issuable in shares.
(d) CONVERSION SHARES. The term "Conversion Shares" means the
aggregate Conversion Shares at any time issuable upon conversion of the
Series A Stock at such time.
(e) CONVERSION PRICE. The term "Conversion Price" means the
Initial Conversion Price of five dollars ($5.00), as such price may be
adjusted from time to time pursuant to the provisions of Section 8
hereof.
(f) CORPORATION. The term "Corporation" means the corporation
filing this certificate and is sometimes herein referred to the
"Company".
(g) REGISTERED HOLDER. The term "Registered Holder" means the
holder of a share of Series A Stock as shown on the books and records
of the Corporation.
PART 7. CONVERSION RIGHTS.
7.01 DESCRIPTION AND CONVERSION PROCEDURE. The Series A shares shall be
convertible into an aggregate of 240,000 shares of the Common Stock of
the Corporation as hereinafter set forth.
(a) CONVERSION RiGHTS.
(i) Optional Conversion by the Holder. Except as expressly
herein provided otherwise, the Registered Holder of each share
of Series A Stock may exercise all or a portion of the
conversion rights at any time or from time to time after the
date of issuance and prior to the earlier to occur of (x) the
Corporation Conversion Date, (y) the Mandatory Conversion
Date, or (z) the date of redemption of the shares of such
Series A Stock;
(ii) Mandatory Conversion. On June 30, 2001 (the "Mandatory
Conversion Date"), each share of Series A Stock shall,
automatically and without further action on the part of any
Registered Holder of Series A Stock, be converted into the
number of shares of fully paid and nonassessable Common Stock
derived by dividing the Liquidation Preference by the
Conversion Price. Upon such conversion, each share of
6.
<PAGE> 7
Series A Stock shall be canceled and not subject to
reissuance. On or before the twentieth (20th) Business Day
prior to the Mandatory Conversion Date, the Corporation shall
provide written notice (the "Mandatory Conversion Notice") to
the holders hereof of the Corporation's intention not to
exercise the redemption option provided for in Section 3
hereof and to allow the shares of Series A Stock to
automatically convert pursuant to this Section 7.01 (a) (ii).
The immediately preceding sentence notwithstanding, the
Corporation shall not be deemed to have waived its right to
redeem the Series A Stock pursuant to Section 3 hereof by
virtue of the issuance of the Mandatory Conversion Notice;
(iii) Optional Conversion by the Corporation. On the tenth
(10th) Business Day (the "Corporation Conversion Date")
immediately following the fifth (5th) consecutive Trading Day
(the "Trigger Date") on which the Market Price of the Common
Stock equals or exceeds ten dollars ($10.00) per share (the
"Target Price"), the Corporation may (but has no obligation
to) cause each outstanding shares of Series A Stock
(automatically and without further action on the part of any
holder of outstanding shares of Series A Stock) be converted
into the number of shares of fully paid and nonassessable
Common Stock derived by dividing the Liquidation Preference by
the Conversion Price. Upon such conversion, each share of
Series A Stock shall be canceled and not subject to
reissuance. On or before the fifth (5th) Business Day
following the Trigger Date, the Corporation shall provide
written notice (the "Corporation Conversion Notice") to the
holders of shares of Series A Stock of the Corporation's
intention not to exercise the redemption option provided for
in Section 3 hereof and to allow the shares of Series A Stock
to automatically convert pursuant to this Section 7.01 (a)
(iii). The immediately preceding sentence notwithstanding, the
Corporation shall not be deemed to have waived its right to
redeem the Series A stock pursuant to Section 3 hereof by
virtue of the issuance of the Corporation Conversion Notice.
Notwithstanding the foregoing, the Corporation may elect not
to exercise the conversion rights set forth in this paragraph
7.01 (a) (iii) by delivery of a written notice to that effect
at any time prior to the Trigger Date (whether or not a
Corporation Conversion Notice has been issued). Any waiver of
a particular Trigger Date shall not prejudice in any manner
the Corporation's rights under this paragraph 7.01 (a) (iii)
or Section 3. hereof.
(b) EXERCISE PROCEDURE. Any shares of Series A Stock shall be
deemed to have been exercised (the "Exercise Time") when the
Corporation shall have received the Certificate evidencing such shares
appropriately endorsed to reflect conversion thereof; whereupon the
Corporation shall issue so many shares of its Common Stock ("Conversion
Stock") computed on the basis of one share of Common Stock for five
dollars ($5.00) of Liquidation Value of the shares of Series A Stock so
converted.
7.
<PAGE> 8
(c) DELIVERY OF NEW CERTIFICATES. Certificates for Conversion
Shares shall be delivered to the Holder named therein within 15 days
after the Exercise Time, acquirable Purchase Rights described in
Section 8.08. Unless all of the shares of Series A Stock evidenced by
the certificate delivered shall have been converted or shall have been
redeemed, the Corporation shall within a 15 day period prepare a new
certificate, substantially identical to that surrendered, representing
the balance of the shares of Series A Stock formerly represented by the
certificate which shall not have converted or redeemed and shall within
the said 15 day period deliver such certificate to the person
designated as the holder thereof.
(d) PAYMENT OF CONVERSION PRICE. Each share of Series A Stock
surrendered shall constitute payment of the Conversion Price equal to
the Liquidation Value of such share surrendered.
(e) RETURN OF CERTIFICATE. The certificates evidencing the
Series A Stock shall be endorsed to reflect the conversion of all or
such portion thereof as the Registered Holder determines to convert.
Unless the certificate surrendered contains an appropriate legend, the
certificate shall be accompanied by an appropriate investment
representation for purposes of confirming the availability of an
exemption from applicability of the registration provisions of the
Securities Act of 1933, as amended, signed by the Registered Holder of
such shares of Series A Stock. If the Conversion Shares are not to be
issued in the name of the Holder to whom the shares of Series A Stock
are registered, such Registered Holder shall also state the name of the
Person to whom the certificate for the Conversion Shares are to be
issued, and if the Conversion Shares to be issued shall not be all the
Conversion Shares into which the shares of Series A Stock may be
converted upon surrender of the shares of Series A Stock certificates
so surrendered, the name of the person to whom shall be delivered a new
certificate evidencing the balance of the shares of Series A Stock.
(f) ASSIGNMENT. Assignment of shares of Series A Stock shall
be in the form set forth on the reverse side of the certificate
evidencing same.
(g) AUTHORIZATION AND ISSUANCE. The Corporation covenants and
agrees that:
(i) the Conversion Shares issuable upon any conversion of any
shares of Series A Stock shall be deemed to have been issued
to the person exercising such conversion privilege at the
Exercise Time, and the person exercising such conversion
privilege shall be deemed for all purposes to have become the
record holder of such Conversion Shares at the Exercise Time;
8.
<PAGE> 9
(ii) all Conversion Shares which may be issued upon any
conversion of any shares of Series A Stock will, upon
issuance, be fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof;
(iii) The Corporation will take all such action as may be
necessary to assure that all Conversion Shares issuable upon
conversion of Series A Stock may be issued without violation
of any applicable law or regulation or of any requirements of
any domestic securities exchange upon which securities of the
same class may be listed. The Corporation will not take any
action which would result in any adjustment of the Conversion
Price if the total number of shares of Common Stock issuable
after such action upon conversion of all Series A Stock
together with all shares of Common Stock then outstanding and
all shares of Common Stock then issuable upon the exercise of
all outstanding options, warrants, conversion and other
rights, would exceed the total number of shares of Common
Stock then authorized by the Corporation's Certificate of
Incorporation;
(iv) the issuance of certificates for Conversion Shares upon
conversion of Series A Stock shall be made without charge to
the Registered Holder thereof for any issuance tax in respect
thereof or other cost incurred by the Corporation in
connection with the conversion of the Series A Stock and the
related issuance of Conversion Shares; and
(v) The Corporation will at no time close its transfer books
against the transfer of the Series A Stock or of any
Conversion Share issued or issuable upon the conversion of the
Series A Stock in any manner which interferes with the timely
conversion of the Series A Stock.
(h) TRANSFERABILITY. The shares of Series A Stock and all
rights evidenced thereby are transferable on the Corporation's books by
the Registered Holder in person or by duly authorized attorney upon
surrender of certificate(s) evidencing said shares of Series A Stock
properly endorsed at the Corporation's principal office provided that
the Registered Holder complies with the provisions governing transfer
set forth in Section 4 of the Agreement.
(i) BREAKUP OF CERTIFICATES. Each certificate evidencing
shares of Series A Stock is exchangeable, upon the surrender of the
certificate by the Registered Holder at the Corporation's principal
office, for a new certificate or certificates of like tenor
representing in the aggregate the right to purchase the number of
Conversion Shares which may be purchased under the Certificate
surrendered, each of which new certificates shall represent the right
to purchase the number of Conversion Shares as shall be designated by
the Registered Holder of this certificate at the time of such
surrender.
9.
<PAGE> 10
PART 8. ANTIDILUTION PROVISIONS.
8.01 ADJUSTMENT OF NUMBER OF SHARES. In order to prevent dilution of
the rights granted hereunder, the Conversion Price shall be subject to
adjustment from time to time in accordance with this Part 8. At any
given time the Conversion Price, whether as the Initial Price of five
dollars ($5.00) per share or as last adjusted, shall be that dollar (or
part of a dollar) amount the payment of which shall be sufficient at
the given time to acquire one Conversion Share. Upon each adjustment of
the Conversion Price pursuant to this Part 8, the Registered Holder of
the shares of Series A Stock shall thereafter be entitled to acquire
upon exercise, at the Conversion Price resulting from such adjustment,
the number of Conversion Shares obtainable by multiplying the
Conversion Price in effect immediately prior to such adjustment by the
number of Conversion Shares acquirable immediately prior to such
adjustment and dividing the product thereof by the Conversion Price
resulting from such adjustment.
8.02 LIQUIDATING DIVIDENDS. In the event the Corporation shall declare
a dividend upon the Common Stock (other than a dividend payable in
Common Stock) payable otherwise than out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles,
including the making of appropriate deductions for minority interests,
if any, in subsidiaries (herein referred to as "Liquidating
Dividends"), then as soon as possible after the conversion of any
shares of Series A Stock the Corporation shall pay to the person
converting such shares of Series A Stock an amount equal to the
aggregate value at the time of such exercise of all Liquidating
Dividends (including but not limited to the Common Stock which would
have been issued at the time of such earlier exercise and all other
securities which would have been issued with respect to such Common
Stock by reason of stock splits, stock dividends, mergers or
reorganizations, or for any other reason). For the purposes of this
Section 8.02, a dividend other than in cash shall be considered payable
out of earnings or earned surplus only to the extent that such earnings
or earned surplus are charged an amount equal to the fair value of such
dividend.
8.03 SUBDIVISION OR COMBINATION OF STOCK. In case the Corporation shall
at any time subdivide (other than by means of a dividend payable in
Common Stock) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be appropriately reduced, and, conversely, in
case the outstanding shares of Common Stock of the Corporation shall be
combined into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be proportionately
increased.
8.04 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization or reclassification of the capital stock
of the Corporation, or consolidation or merger of the Corporation with
another corporation, or the sale of all or substantially all of its
assets to another corporation shall be effected in such a way that
holders of Common Stock shall be
10.
<PAGE> 11
entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provision shall be made whereby the Registered Holders of the shares of
Series A Stock shall thereafter have the right to acquire and receive
upon conversion of the shares of Series A Stock such shares of stock,
securities or assets as would have been issuable or payable (as part of
the reorganization, reclassification, consolidation, merger or sale)
with respect to or in exchange for such number of outstanding shares of
the Corporation's Common Stock as would have been received upon
conversion of the Series A Stock immediately before such
reorganization, reclassification, consolidation, merger or sale and the
number of Common Shares that would have been so received), and in any
such case appropriate provisions shall be made with respect to the
rights and interests of the holders of the Series A Stock to the end
that the provisions hereof (including without limitation provisions for
adjustments of the Conversion Price and of the number of Conversion
Shares acquirable and receivable upon the conversion of the Series A
Stock) shall thereafter be applicable, in relation to any shares of
stock, securities or assets thereafter deliverable upon the conversion
of the Series A Stock. In the event of a merger or consolidation of the
Corporation with or into another corporation or the sale of all or
substantially all of its assets as a result of which a number of shares
of Common Stock of the surviving or purchasing corporation, greater or
lesser than the number of shares of Common Stock of the Corporation
outstanding immediately prior to such merger, consolidation or purchase
are issuable to holders of Common Stock of the Corporation, then the
Conversion Price in effect immediately prior to such merger,
consolidation or purchase shall be adjusted in the same manner as
though there were a subdivision or combination of the outstanding
shares of Common Stock of the Corporation.
8.05 NOTICES. In the event that:
(a) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to,
another corporation; or
(b) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in connection with such event, the Company shall give to the
Registered Holders of the shares of Series A Stock at least twenty (20)
days prior written notice of the date when the same shall take place.
Such notice shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization,
reclassification, consolidation, merger or sale, dissolution,
liquidation or winding up, as the case may be. Each such written notice
shall be given by first class mail, postage prepaid, address to the
Registered Holders of the Series A Stock.
11.
<PAGE> 12
8.07 CERTAIN EVENTS. If any event occurs as to which, in the opinion of
the Board of Directors of the Company, the provisions of this Part 8
are not strictly applicable or if strictly applicable would not fairly
protect the rights of the holders of the Series A Stock in accordance
with the essential intent and principles of such provisions, then the
Board of Directors shall make an adjustment in the application of such
provision, in accordance with such essential intent and principles, so
as to protect such rights as aforesaid, but in no event shall any
adjustment have the effect of increasing the Conversion Price as
otherwise determined pursuant to any of the provisions of this Part 8
except in the case of a combination of shares of a type contemplated in
Section 8.03.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of
October, 1999, and we hereby affirm that the foregoing Certificate is
my act and deed and the act and deed of the Corporation and that the
facts stated therein are true.
---------------------------------------
Stuart J. Chasanoff,
Vice President and Secretary
12.
<PAGE> 1
CERTIFICATE OF DESIGNATION, PREFERENCE
AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK OF eVENTURES GROUP, INC.
I, STUART J. CHASANOFF, being the Vice President and Secretary of
eVENTURES GROUP, INC., a corporation organized and existing under the laws of
Delaware (the "Corporation"), DO HEREBY CERTIFY that, pursuant to authority
conferred upon the Board of Directors by the Amended Certificate of
Incorporation and Section 151 of the Delaware General Corporation Law, the Board
of Directors, at a special meeting held on the 10th day of November, 1999,
adopted the following resolution providing for the issuance of a series of
Preferred Stock:
RESOLVED, that pursuant to authority vested in the Board of Directors
by Article Fourth of the Amended Certificate of Incorporation of this
Corporation, a series of 25,000 shares of Preferred Stock, par value
$0.00002 per share, is hereby established, the distinctive designation
of which shall be "Series B Convertible Preferred Stock" (such series
being hereinafter called "Series B Stock"), and the preferences and
relative, participating, optional or other special rights of Series B
Stock, and the qualifications, limitations or restrictions thereof (in
addition to the relative powers, preferences and rights, and
qualifications, limitations or restrictions thereof, set forth in
Article Fourth of the Amended Certificate of Incorporation of the
Corporation which are applicable to shares of Preferred Stock of all
series) shall be as follows:
SERIES B CONVERTIBLE PREFERRED STOCK
1. Dividends. The holders of the Series B Stock shall have no
rights to the payment of dividends on the Series B Stock (regardless of whether
the Corporation declares or pays dividends on any other class of preferred stock
or common stock of the Corporation).
2. Redemption.
2.1. Optional Redemption. The Corporation may, at any time and
from time to time, pursuant to a resolution of its Board of Directors, redeem
all or any of the outstanding shares of Series B Stock in the manner prescribed
in this Section 2; provided that the Corporation shall not redeem less than 750
shares of Series B Stock pursuant to any single Redemption Notice.
2.2. Redemption Notice. At any time that the Corporation
elects to redeem shares of Series B Stock pursuant to Section 2.1, the
Corporation shall mail by certified or registered mail, return receipt
requested, to each holder of any shares of Series B Stock as shown on the books
and records of the Corporation (each, a "Registered Holder") at the address
shown on the Corporation's records, a written notice (a "Redemption Notice"),
stating: (i) the number of shares of Series B Stock held of record by such
Registered Holder which the Corporation proposes to redeem; (ii) the date on
which the Corporation proposes to redeem such shares (the "Redemption Date");
(iii) that in consideration for such shares, the Corporation will pay to such
<PAGE> 2
holder the Liquidation Value (as defined below) of each such share (the
"Redemption Price"); and (iv) the place at which the shares to be redeemed may
be surrendered in exchange for the Redemption Price for such shares. Upon the
mailing of a Redemption Notice, the Corporation shall become obligated to redeem
the shares of Series B Stock specified in such notice on the Redemption Date.
Each Redemption Notice shall be mailed at least 10 days prior to the Redemption
Date stated therein.
2.3. Determination of Number of Each Holder's Shares to be
Redeemed. At any time that the Corporation elects to redeem shares of Series B
Stock pursuant to Section 2.1, the number of shares of Series B Stock that the
Corporation shall redeem from each holder of Series B Stock shall be equal to
the product of (i) the total number of shares of Series B Stock to be redeemed
(the "Redeemed Shares"), and (ii) a fraction, the numerator of which shall be
the total number of shares of Series B Stock held by such holder on the
Redemption Date, and the denominator of which shall be the total number of
shares of Series B Stock outstanding on the Redemption Date.
2.4. Status of Redemption Obligation; Payment of Redemption
Price.
(a) Payment of the Redemption Price with respect to each share
of Series B Stock subject to a Redemption Notice shall be deemed to
become "due" on the Redemption Date regardless of whether the
Corporation shall be able or legally permitted to make such payments on
the Redemption Date.
(b) Each holder of Series B Stock shall be entitled to receive
on or at any time after any Redemption Date the aggregate Redemption
Price for the Redeemed Shares held by such holder upon surrender by
such holder at the place specified in the Redemption Notice of the
certificate representing such Redeemed Shares duly endorsed in blank or
accompanied by an appropriate form of assignment duly endorsed in
blank. Payment of the Redemption Price shall be made promptly following
any holder's surrender of certificates for Redeemed Shares in the
manner set forth in Section 4.2. Upon payment of the Redemption Price
with respect to any Redeemed Shares, all rights of the holder of such
Redeemed Shares shall cease and terminate with respect to such Redeemed
Shares. Unless all of the shares of Series B Stock evidenced by any
certificate delivered shall have been redeemed, the Corporation shall
within a 15 day period prepare a new certificate, substantially
identical to that surrendered, representing the balance of the shares
of Series B Stock formerly represented by the certificate which shall
not have been redeemed and shall within such 15 day period deliver such
certificate to the Registered Holder thereof.
2.5. Redeemed Shares to be Canceled. The Corporation shall
cancel each share of Series B Stock which it shall redeem or for any other
reason acquire, and no share of Series B Stock which shall be redeemed or
otherwise acquired by the Corporation shall thereafter be reissued, sold, or
transferred by the Corporation to any person. The number of shares of Series B
Stock which the Corporation shall be authorized to issue shall be deemed to be
reduced by the number of shares of Series B Stock which the Corporation shall
redeem or otherwise acquire.
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<PAGE> 3
2.6. Allocation of Partial Redemption Payments Among Holders
of Series B Stock. If any time the Corporation shall not be able to pay the full
Redemption Price for all Series B Stock which the Corporation shall have become
obligated to redeem at or prior to such time pursuant to this Section 2, each
holder of shares of Series B Stock shall have the right to require the
Corporation to redeem a number of such holder's shares of Series B Stock equal
to the product of (i) the total number of shares of Series B Stock which the
Corporation shall be able to redeem at such time, and (ii) a fraction, the
numerator of which shall be the total number of shares of Series B Stock which
the Corporation shall have become obligated to redeem from such holder at or
prior to such time (but which the Corporation shall not have redeemed at or
prior to such time), and the denominator of which shall be the total number of
shares of Series B Stock which the Corporation shall have become obligated to
redeem at or prior to such time (but which the Corporation shall not have
redeemed at or prior to such time).
3. Liquidation.
3.1. Rights of Holders of Series B Stock. In the event of any
voluntary or involuntary liquidation (whether complete or partial), dissolution
or winding up of the Corporation (a "Dissolution"), the holders of shares of
Series B Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings and pari passu with the holders of any outstanding shares of Series A
Convertible Preferred Stock, par value $0.00002 per share, of the Corporation
(the "Series A Stock"), an amount in cash equal to the sum of one thousand
dollars ($1,000) per share (the "Liquidation Value").
3.2. Allocation of Liquidation Payments Among Holders of
Stock. If upon any Dissolution, the assets of the Corporation available for
distribution to holders of shares of Series A Stock and Series B Stock (the
"Total Amount Available") shall be insufficient to pay the holders of
outstanding shares of Series A Stock and Series B Stock the full amounts to
which they shall be entitled under Section 3.1 and the Certificate of
Designation with respect to the Series A Stock, each holder of shares of Series
B Stock shall be entitled to receive an amount equal to the product derived by
multiplying the Total Amount Available times a fraction the numerator of which
shall be the number of shares of Series B Stock held by such holder and the
denominator of which shall be the total number of shares of Series A Stock and
Series B Stock then outstanding.
4. Additional Provisions Governing Preferred Stock.
4.1. Voting Rights. (a) Except as otherwise provided herein,
by the Certificate of Incorporation or by applicable law, the shares of
Series B Stock shall have no voting rights.
(b) No change in the provision of this Certificate of
Designation affecting any interests of the holders of any shares of
Series B Stock shall be binding or effective unless such change shall
have been approved in writing by the holders of at least 66 2/3% of the
shares of Series B Stock outstanding at the time such change shall be
made.
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<PAGE> 4
4.2. Method of Payment.
(a) Payments. Any payment at any time due with respect to any
share of Series B Stock (including but not limited to the payment of
the Redemption Price for such share, and any payment due with respect
to such share under Section 3) shall be made by means of a check (drawn
upon funds which are immediately available not later than the due date
of the payment being made by such check) to the order of the Registered
Holder of such share which check shall be mailed by United States
certified or registered mail, return receipt requested, to the address
for such Registered Holder shown on the Corporation's records.
(b) When Payment Deemed to Have Been Made. Any payment at any
time due with respect to any share of Series B Stock (including but not
limited to payment of the Redemption Price for such share and any
payment due on such share under Section 3) shall be deemed to have been
paid by the Corporation at the time the Corporation shall have received
a receipt for from the U.S. postal service.
4.3. Registration and Transfer
(a) The Corporation will keep at its principal office a
register for the registration of the shares of Series B Stock.
(b) The Corporation will record a transfer in such register of
any share or shares of Series B Stock and all rights evidenced thereby
upon the request of the Registered Holder thereof in person or by duly
authorized attorney upon the surrender of the certificate(s)
representing such share of Series B Stock with the form of assignment
set forth on the reverse of such certificate properly completed and
executed, properly endorsed at the Corporation's principal office. For
so long as such certificate bears any legend to such effect, prior to
any registration of transfer of any shares of Series B Stock, the
Corporation shall have received an appropriate investment
representation for purposes of confirming the availability of an
exemption from applicability of the registration provisions of the
Securities Act of 1933, as amended, signed by the Registered Holder of
such shares of Series B Stock.
(c) Upon the surrender of any certificate representing shares
of Series B Stock at the Corporation's principal office, the
Corporation will, at the request of the registered holder of such
certificate, execute and deliver, at the Corporation's expense, a new
certificate or certificates in exchange representing the number of
shares of Series B Stock represented by the surrendered certificate.
Each such new certificate shall be registered in the name of such
Registered Holder or, if any such shares are to be transferred to
another person in compliance with this Section 4.3, such other person
and shall represent such number of shares of Series B Stock as shall be
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate,
provided that that if the certificate is to be issued in a name other
than that of a Registered Holder, the Corporation shall not be required
to issue or deliver any such certificate unless and until the person
requesting the issuance thereof shall have paid to the Corporation the
amount of any tax that may be payable with respect to any transfer
involved in the
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<PAGE> 5
issuance and delivery of such certificate or has established to the
satisfaction of the Corporation that such tax has been paid.
4.4. Replacement Certificates. Upon receipt by the Corporation
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate evidencing one or more
shares of Series B Stock (an affidavit of the Registered Holder, shall be
satisfactory) the Corporation at its expense will execute and deliver in lieu of
such certificate, a new certificate of like kind, representing the number of
shares of Series B Stock which shall have been represented by such lost, stolen,
destroyed, or mutilated certificate. If required by the Corporation, an
indemnity bond sufficient in the judgment of the Corporation to protect itself
from any loss which it may suffer if a certificate is replaced must be
delivered. The Corporation may charge such Registered Holder for reasonable
expenses directly related to replacing the certificate.
5. Interpretation of this Instrument.
5.1. Definitions. As used in this Certificate of Designation,
each term defined in this Section 5.1 has the meaning set forth below:
(a) Business Day. The term "Business Day" means any day except
Saturday, Sunday and any day which shall be in New York or Texas a
legal holiday or a day on which banking institutions are authorized or
required by law or other government action to close.
(b) Common Stock. The term "Common Stock" designates and
includes the Corporation's common stock, par value $0.00002 per share.
(c) Conversion Price. The term "Conversion Price" means the
Initial Conversion Price of $13.80, as such price may be adjusted from
time to time pursuant to the provisions of Section 7 hereof.
(d) Conversion Share. The term "Conversion Share" means one
share of the Corporation's authorized Common Stock, provided that if
under the provisions hereof, there shall be a change in the class of
securities purchasable hereunder or such that the securities
purchasable hereunder shall be issued by an entity other than the
Corporation. The term "Conversion Share" shall mean one share of the
security purchasable upon the exercise of the rights granted hereunder
if such security shall be issuable in shares or shall mean the smallest
unit in which such security shall be issuable if such security shall
not be issuable in shares.
(e) Market Value. The term "Market Value" means the average
closing bid price of the Common Stock for the 10 preceding days.
(f) Trading Day. The term "Trading Day" means any Business
Day in which the Common Stock may be traded in a securities market or
exchange in the United States.
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6. Conversion Rights. Each share of Series B Stock shall be
convertible into 72.46377 shares (subject to adjustment in Section 7) of Common
Stock as set forth in this Section 6.
(a) Conversion Rights.
(i) Optional Conversion by the Holder. At any time or
from time to time prior to the earlier to occur of (x) the
Corporation Conversion Date (as defined below), (y) the
Mandatory Conversion Date (as defined below), or (z) the
Redemption Date (as defined below) with respect to all
outstanding shares of Series B Stock, each Registered Holder
shall have the right to convert any or all of such Registered
Holder's shares of Series B Stock into the number of shares of
fully paid and nonassessable Common Stock derived by dividing
the Liquidation Value of each such share by the Conversion
Price by delivering the certificate representing such shares
to the Corporation, duly endorsed in blank or accompanied by
an appropriate form of assignment duly endorsed in blank,
together with a written notice stating that the Registered
Holder is converting such shares;
(ii) Mandatory Conversion. On the earlier of November
[__]1, 2001 or such date on which the Corporation completes an
underwritten offering with proceeds of no less than $25
million at a price per share of no less than $20.00 (the
"Mandatory Conversion Date"), each share of Series B Stock
shall, automatically and without further action on the part of
any Registered Holder of Series B Stock, be converted into the
number of shares of fully paid and nonassessable Common Stock
derived by dividing the Liquidation Value of each such share
by the Conversion Price. Upon such conversion, each share of
Series B Stock shall be canceled and not subject to
reissuance. On or prior to the twentieth (20th) Business Day
prior to the Mandatory Conversion Date, the Corporation may
mail by certified or registered mail, return receipt
requested, to each Registered Holder of any shares of Series B
Stock at the address shown on the Corporation's records, a
written notice (the "Mandatory Conversion Notice"), stating
that the Corporation (x) does not intend to exercise the
redemption option provided for in Section 3 hereof, and (y)
does intend to allow the shares of Series B Stock to
automatically convert pursuant to this Section 6.1(a)(ii).
Notwithstanding the delivery of any Mandatory Conversion
Notice, the Corporation shall not be deemed to have waived its
right to redeem the Series B Stock pursuant to Section 3
hereof by virtue of the issuance of the Mandatory Conversion
Notice;
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(1) Insert date that is two years after Closing Date.
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<PAGE> 7
(iii) Optional Conversion by the Corporation. At any
time that any shares of the Series B Stock are outstanding, on
the tenth (10th) Business Day (the "Corporation Conversion
Date") immediately following the last of any five consecutive
Trading Days (the "Trigger Date") on which the Market Price of
the Common Stock equals or exceeds an amount equal to 2.5
multiplied by the Conversion Price per share (the "Target
Price"), the Corporation may (but has no obligation to) elect
to convert each outstanding share of Series B Stock
(automatically and without further action on the part of any
holder of outstanding shares of Series B Stock) into the
number of shares of fully paid and nonassessable Common Stock
derived by dividing the Liquidation Value of each such share
by the Conversion Price. Upon such conversion, each share of
Series B Stock shall be canceled and not subject to
reissuance. On or before the fifth (5th) Business Day
following any Trigger Date, the Corporation may provide
written notice (the "Corporation Conversion Notice") to the
holders of shares of Series B Stock that the Corporation has
elected to convert the outstanding shares of Series B Stock
pursuant to this Section 6.1(a)(iii). The immediately
preceding sentence notwithstanding, the Corporation shall not
be deemed to have waived its right to redeem the Series B
stock pursuant to Section 3 hereof by virtue of the issuance
of the Corporation Conversion Notice. The failure of the
Corporation to elect to convert the shares of Series B Stock
following any particular Trigger Date shall not prejudice in
any manner the Corporation's rights under this paragraph
6.1(a)(iii) with respect to any other Trigger Date or under
Section 3 hereof.
(b) Delivery of Series B Certificates. Following a conversion
pursuant to Section 6(a)(ii) or (iii), each holder of Series B Stock
shall be entitled to receive a certificate or certificates representing
the shares of Common Stock into which such holder's Series B Stock was
converted upon surrender by such holder at the place specified in the
Mandatory Conversion Notice or Corporate Conversion Notice of the
certificate representing such shares of Series B Stock, duly endorsed
in blank or accompanied by an appropriate form of assignment duly
endorsed in blank. Each share of Series B Stock surrendered pursuant to
Section 6(a)(i) or this Section 6(b) shall constitute payment of the
Conversion Price equal to the Liquidation Value of such share
surrendered.
(c) Delivery of Certificates for Conversion Shares.
Certificates for Conversion Shares shall be issued and delivered to the
Registered Holder of the converted shares of Series B Stock within 15
days after the delivery of the certificates representing the shares of
Series B Stock to be converted. Unless all of the shares of Series B
Stock evidenced by any certificate delivered shall have been converted,
the Corporation shall within a 15 day period prepare a new certificate,
substantially identical to that surrendered, representing the balance
of the shares of Series B Stock formerly represented by the certificate
which shall not have been converted and shall within such 15 day period
deliver such certificate to the Registered Holder thereof.
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<PAGE> 8
(d) Fractional Shares. The Corporation may, if it so elects,
issue fractional shares of Common Stock or scrip representing
fractional shares upon the conversion of shares of Series B Stock. If
the Corporation does not elect to issue fractional shares, the
Corporation shall pay to the holder of the shares of Series B Stock
which were converted a cash adjustment in respect of such fractional
shares in an amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the
day of such conversion. The determination as to whether or not any
fractional shares are issuable shall be based upon the total number of
shares of Series B Stock being converted at any one time by any holder
thereof, not upon each share of Series B Stock being converted.
(e) Authorization and Issuance. The Corporation covenants and
agrees that:
(i) the Conversion Shares issuable upon any
conversion of any shares of Series B Stock shall be deemed to
have been issued to the Registered Holder of such shares of
Series B Stock at the time of such conversion, such Registered
Holder shall be deemed for all purposes to have become the
Registered Holder of such Conversion Shares at such time, and
all rights of such Registered Holder with respect to such
Redeemed Shares (other than the right to surrender the
certificates therefor and receive in exchange certificates for
Conversion Shares) shall cease and terminate;
(ii) all Conversion Shares which may be issued upon
any conversion of any shares of Series B Stock will, upon
issuance, be fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof;
(iii) The Corporation will take all such action as
may be necessary to assure that all Conversion Shares issuable
upon conversion of Series B Stock may be issued without
violation of any applicable law or regulation or of any
requirements of any domestic securities exchange upon which
securities of the same class may be listed. The Corporation
will not take any action which would result in any adjustment
of the Conversion Price if the total number of shares of
Common Stock issuable after such action upon conversion of all
Series B Stock together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon
the exercise of all outstanding options, warrants, conversion
and other rights, would exceed the total number of shares of
Common Stock then authorized by the Corporation's Certificate
of Incorporation;
(iv) the issuance of certificates for shares of
Common Stock issuable upon conversion shall be made without
charge to the Registered Holder; provided, however, that if
any certificate is to be issued in a name other than that of
the Registered Holder of the shares being converted, the
Corporation shall not be required to issue or deliver any such
certificate unless and until the person requesting the
issuance thereof shall have paid to the Corporation the amount
of any tax that may be payable with respect to any transfer
involved in the issuance
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<PAGE> 9
and delivery of such certificate or has established to the
satisfaction of the Corporation that such tax has been paid;
(v) The Corporation will at no time close its
transfer books against the transfer of the Series B Stock or
of any Conversion Share issued or issuable upon the conversion
of the Series B Stock in any manner which interferes with the
timely conversion of the Series B Stock; and
(vi) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of issuance upon
conversion of the outstanding shares of Series B Stock, such
number of shares of Common Stock as shall be issuable upon the
conversion of all such shares of Series B Stock then
outstanding.
7. Anti-dilution Provisions.
7.1. Adjustment of Number of Shares. In order to prevent
dilution of the rights granted hereunder, the Conversion Price shall be subject
to adjustment from time to time in accordance with this Section 7. At any given
time the Conversion Price, whether as the Initial Price of Thirteen and 80/100
dollars ($13.80) per share or as last adjusted, shall be that dollar (or part of
a dollar) amount the payment of which shall be sufficient at the given time to
acquire one Conversion Share. Upon each adjustment of the Conversion Price
pursuant to this Section 7, the Registered Holder of the shares of Series B
Stock shall thereafter be entitled to acquire upon exercise, at the Conversion
Price resulting from such adjustment, the number of Conversion Shares obtainable
by multiplying the Conversion Price in effect immediately prior to such
adjustment by the number of Conversion Shares acquirable immediately prior to
such adjustment and dividing the product thereof by the Conversion Price
resulting from such adjustment.
7.2. Liquidating Dividends. In the event the Corporation shall
declare a dividend upon the Common Stock (other than a dividend payable in
Common Stock) payable otherwise than out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles,
including the making of appropriate deductions for minority interests, if any,
in subsidiaries (herein referred to as "Liquidating Dividends"), then as soon as
possible after the conversion of any shares of Series B Stock the Corporation
shall pay to the person converting such shares of Series B Stock an amount equal
to the aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been issued at
the time of such earlier exercise and all other securities which would have been
issued with respect to such Common Stock by reason of stock splits, stock
dividends, mergers or reorganizations, or for any other reason). For the
purposes of this Section 7.2, a dividend other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus is charged an amount equal to the fair value of such dividend.
7.3. Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide (other than by means of a dividend
payable in Common Stock) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect
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<PAGE> 10
immediately prior to such subdivision shall be appropriately reduced, and,
conversely, in case the outstanding shares of Common Stock of the Corporation
shall be combined into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be proportionately increased.
7.4. Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of the capital stock
of the Corporation, or consolidation or merger of the Corporation with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the Registered Holders of the shares of Series B Stock
shall thereafter have the right to acquire and receive upon conversion of the
shares of Series B Stock such shares of stock, securities or assets as would
have been issuable or payable (as part of the reorganization, reclassification,
consolidation, merger or sale) with respect to or in exchange for such number of
outstanding shares of the Corporation's Common Stock as would have been received
upon conversion of the Series B Stock immediately before such reorganization,
reclassification, consolidation, merger or sale and the number of shares of
Common Stock that would have been so received), and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holders
of the Series B Stock to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price and of the number
of Conversion Shares acquirable and receivable upon the conversion of the Series
B Stock) shall thereafter be applicable, in relation to any shares of stock,
securities or assets thereafter deliverable upon the conversion of the Series B
Stock. In the event of a merger or consolidation of the Corporation with or into
another corporation or the sale of all or substantially all of its assets as a
result of which a number of shares of Common Stock of the surviving or
purchasing corporation, greater or lesser than the number of shares of Common
Stock of the Corporation outstanding immediately prior to such merger,
consolidation or purchase are issuable to holders of Common Stock of the
Corporation, then the Conversion Price in effect immediately prior to such
merger, consolidation or purchase shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock of the Corporation.
7.5. Notices. In the event that:
(a) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation; or
(b) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall give to the
Registered Holders of the shares of Series B Stock at least twenty (20) days
prior written notice of the date when the same shall take place.
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<PAGE> 11
Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger or sale, dissolution, liquidation or winding up, as the
case may be. Each such written notice shall be given by first class mail,
postage prepaid, address to the Registered Holders of the Series B Stock.
7.6. Certain Events. If any event occurs as to which, in the
opinion of the Board of Directors of the Corporation, the provisions of this
Section 7 are not strictly applicable or if strictly applicable would not fairly
protect the rights of the holders of the Series B Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provision, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of increasing
the Conversion Price as otherwise determined pursuant to any of the provisions
of this Section 7 except in the case of a combination of shares of a type
contemplated in Section 7.3.
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IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
November, 1999, and we hereby affirm that the foregoing Certificate is my act
and deed and the act and deed of the Corporation and that the facts stated
therein are true.
---------------------------------------
Stuart J. Chasanoff,
Vice President and Secretary
<PAGE> 1
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF DESIGNATION, PREFERENCE
AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK OF eVENTURES GROUP, INC.
I, STUART J. CHASANOFF, being the Vice President and Secretary of
eVENTURES GROUP, INC., a corporation organized and existing under the laws of
Delaware (the "Corporation"), DO HEREBY CERTIFY that, pursuant to authority
conferred upon the Board of Directors by the Amended Certificate of
Incorporation and pursuant to Section 242 of the Delaware General Corporation
Law, the Board of Directors, at a special meeting held on the 15th day of
December, 1999 and all the holders of the Series B Convertible Preferred Stock
by written consent, adopted the following resolution:
RESOLVED, that the Certificate of Designation, Preference and Rights of
Series B Convertible Preferred Stock of eVentures Group, Inc. filed
with the Delaware Secretary of State on November 16, 1999 shall be
amended to read in its entirety as follows:
SERIES B CONVERTIBLE PREFERRED STOCK
1. Dividends. The holders of the Series B Stock shall have no
rights to the payment of dividends on the Series B Stock (regardless of whether
the Corporation declares or pays dividends on any other class of preferred stock
or common stock of the Corporation).
2. Redemption.
2.1. Optional Redemption. The Corporation may, at any time and
from time to time, pursuant to a resolution of its Board of Directors, redeem
all or any of the outstanding shares of Series B Stock in the manner prescribed
in this Section 2; provided that the Corporation shall not redeem less than 750
shares of Series B Stock pursuant to any single Redemption Notice.
2.2. Redemption Notice. At any time that the Corporation
elects to redeem shares of Series B Stock pursuant to Section 2.1, the
Corporation shall mail by certified or registered mail, return receipt
requested, to each holder of any shares of Series B Stock as shown on the books
and records of the Corporation (each, a "Registered Holder") at the address
shown on the Corporation's records, a written notice (a "Redemption Notice"),
stating: (i) the number of shares of Series B Stock held of record by such
Registered Holder which the Corporation proposes to redeem; (ii) the date on
which the Corporation proposes to redeem such shares (the "Redemption Date");
(iii) that in consideration for such shares, the Corporation will pay to such
holder the Liquidation Value (as defined below) of each such share (the
"Redemption Price"); and (iv) the place at which the shares to be redeemed may
be surrendered in exchange for the Redemption Price for such shares. Upon the
mailing of a Redemption Notice, the Corporation shall become obligated to redeem
the shares of Series B Stock specified in such notice on the
<PAGE> 2
Redemption Date. Each Redemption Notice shall be mailed at least 10 days prior
to the Redemption Date stated therein.
2.3. Determination of Number of Each Holder's Shares to be
Redeemed. At any time that the Corporation elects to redeem shares of Series B
Stock pursuant to Section 2.1, the number of shares of Series B Stock that the
Corporation shall redeem from each holder of Series B Stock shall be equal to
the product of (i) the total number of shares of Series B Stock to be redeemed
(the "Redeemed Shares"), and (ii) a fraction, the numerator of which shall be
the total number of shares of Series B Stock held by such holder on the
Redemption Date, and the denominator of which shall be the total number of
shares of Series B Stock outstanding on the Redemption Date.
2.4. Status of Redemption Obligation; Payment of Redemption
Price.
(a) Payment of the Redemption Price with respect to each share
of Series B Stock subject to a Redemption Notice shall be deemed to
become "due" on the Redemption Date regardless of whether the
Corporation shall be able or legally permitted to make such payments on
the Redemption Date.
(b) Each holder of Series B Stock shall be entitled to receive
on or at any time after any Redemption Date the aggregate Redemption
Price for the Redeemed Shares held by such holder upon surrender by
such holder at the place specified in the Redemption Notice of the
certificate representing such Redeemed Shares duly endorsed in blank or
accompanied by an appropriate form of assignment duly endorsed in
blank. Payment of the Redemption Price shall be made promptly following
any holder's surrender of certificates for Redeemed Shares in the
manner set forth in Section 4.2. Upon payment of the Redemption Price
with respect to any Redeemed Shares, all rights of the holder of such
Redeemed Shares shall cease and terminate with respect to such Redeemed
Shares. Unless all of the shares of Series B Stock evidenced by any
certificate delivered shall have been redeemed, the Corporation shall
within a 15 day period prepare a new certificate, substantially
identical to that surrendered, representing the balance of the shares
of Series B Stock formerly represented by the certificate which shall
not have been redeemed and shall within such 15 day period deliver such
certificate to the Registered Holder thereof.
2.5. Redeemed Shares to be Canceled. The Corporation shall
cancel each share of Series B Stock which it shall redeem or for any other
reason acquire, and no share of Series B Stock which shall be redeemed or
otherwise acquired by the Corporation shall thereafter be reissued, sold, or
transferred by the Corporation to any person. The number of shares of Series B
Stock which the Corporation shall be authorized to issue shall be deemed to be
reduced by the number of shares of Series B Stock which the Corporation shall
redeem or otherwise acquire.
2.6. Allocation of Partial Redemption Payments Among Holders
of Series B Stock. If any time the Corporation shall not be able to pay the full
Redemption Price for all Series B Stock which the Corporation shall have become
obligated to redeem at or prior to such time pursuant to this Section 2, each
holder of shares of Series B Stock shall have the right to require the
Corporation to redeem a number of such holder's shares of Series B Stock equal
to the
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product of (i) the total number of shares of Series B Stock which the
Corporation shall be able to redeem at such time, and (ii) a fraction, the
numerator of which shall be the total number of shares of Series B Stock which
the Corporation shall have become obligated to redeem from such holder at or
prior to such time (but which the Corporation shall not have redeemed at or
prior to such time), and the denominator of which shall be the total number of
shares of Series B Stock which the Corporation shall have become obligated to
redeem at or prior to such time (but which the Corporation shall not have
redeemed at or prior to such time).
3. Liquidation.
3.1. Rights of Holders of Series B Stock. In the event of any
voluntary or involuntary liquidation (whether complete or partial), dissolution
or winding up of the Corporation (a "Dissolution"), the holders of shares of
Series B Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings and pari passu with the holders of any outstanding shares of Series A
Convertible Preferred Stock, par value $0.00002 per share, of the Corporation
(the "Series A Stock"), an amount in cash equal to the sum of one thousand
dollars ($1,000) per share (the "Liquidation Value").
3.2. Allocation of Liquidation Payments Among Holders of
Stock. If upon any Dissolution, the assets of the Corporation available for
distribution to holders of shares of Series A Stock and Series B Stock (the
"Total Amount Available") shall be insufficient to pay the holders of
outstanding shares of Series A Stock and Series B Stock the full amounts to
which they shall be entitled under Section 3.1 and the Certificate of
Designation with respect to the Series A Stock, each holder of shares of Series
B Stock shall be entitled to receive an amount equal to the product derived by
multiplying the Total Amount Available times a fraction the numerator of which
shall be the number of shares of Series B Stock held by such holder and the
denominator of which shall be the total number of shares of Series A Stock and
Series B Stock then outstanding.
4. Additional Provisions Governing Preferred Stock.
4.1. Voting Rights. (a) Except as otherwise provided herein,
by the Certificate of Incorporation or by applicable law, the shares of
Series B Stock shall have no voting rights.
(b) No change in the provision of this Certificate of
Designation affecting any interests of the holders of any shares of
Series B Stock shall be binding or effective unless such change shall
have been approved in writing by the holders of at least 66 2/3% of the
shares of Series B Stock outstanding at the time such change shall be
made.
4.2. Method of Payment.
(a) Payments. Any payment at any time due with respect to any
share of Series B Stock (including but not limited to the payment of
the Redemption Price for such share, and any payment due with respect
to such share under Section 3) shall be made by means of a check (drawn
upon funds which are immediately available not later than the
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<PAGE> 4
due date of the payment being made by such check) to the order of the
Registered Holder of such share which check shall be mailed by United
States certified or registered mail, return receipt requested, to the
address for such Registered Holder shown on the Corporation's records.
(b) When Payment Deemed to Have Been Made. Any payment at any
time due with respect to any share of Series B Stock (including but not
limited to payment of the Redemption Price for such share and any
payment due on such share under Section 3) shall be deemed to have been
paid by the Corporation at the time the Corporation shall have received
a receipt for from the U.S. postal service.
4.3. Registration and Transfer
(a) The Corporation will keep at its principal office a
register for the registration of the shares of Series B Stock.
(b) The Corporation will record a transfer in such register of
any share or shares of Series B Stock and all rights evidenced thereby
upon the request of the Registered Holder thereof in person or by duly
authorized attorney upon the surrender of the certificate(s)
representing such share of Series B Stock with the form of assignment
set forth on the reverse of such certificate properly completed and
executed, properly endorsed at the Corporation's principal office. For
so long as such certificate bears any legend to such effect, prior to
any registration of transfer of any shares of Series B Stock, the
Corporation shall have received an appropriate investment
representation for purposes of confirming the availability of an
exemption from applicability of the registration provisions of the
Securities Act of 1933, as amended, signed by the Registered Holder of
such shares of Series B Stock.
(c) Upon the surrender of any certificate representing shares
of Series B Stock at the Corporation's principal office, the
Corporation will, at the request of the registered holder of such
certificate, execute and deliver, at the Corporation's expense, a new
certificate or certificates in exchange representing the number of
shares of Series B Stock represented by the surrendered certificate.
Each such new certificate shall be registered in the name of such
Registered Holder or, if any such shares are to be transferred to
another person in compliance with this Section 4.3, such other person
and shall represent such number of shares of Series B Stock as shall be
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate,
provided that that if the certificate is to be issued in a name other
than that of a Registered Holder, the Corporation shall not be required
to issue or deliver any such certificate unless and until the person
requesting the issuance thereof shall have paid to the Corporation the
amount of any tax that may be payable with respect to any transfer
involved in the issuance and delivery of such certificate or has
established to the satisfaction of the Corporation that such tax has
been paid.
4.4. Replacement Certificates. Upon receipt by the Corporation
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of
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<PAGE> 5
any certificate evidencing one or more shares of Series B Stock (an affidavit of
the Registered Holder, shall be satisfactory) the Corporation at its expense
will execute and deliver in lieu of such certificate, a new certificate of like
kind, representing the number of shares of Series B Stock which shall have been
represented by such lost, stolen, destroyed, or mutilated certificate. If
required by the Corporation, an indemnity bond sufficient in the judgment of the
Corporation to protect itself from any loss which it may suffer if a certificate
is replaced must be delivered. The Corporation may charge such Registered Holder
for reasonable expenses directly related to replacing the certificate.
5. Interpretation of this Instrument.
5.1. Definitions. As used in this Certificate of Designation,
each term defined in this Section 5.1 has the meaning set forth below:
(a) Business Day. The term "Business Day" means any day except
Saturday, Sunday and any day which shall be in New York or Texas a
legal holiday or a day on which banking institutions are authorized or
required by law or other government action to close.
(b) Common Stock. The term "Common Stock" designates and
includes the Corporation's common stock, par value $0.00002 per share.
(c) Conversion Price. The term "Conversion Price" means the
Initial Conversion Price of $13.80, as such price may be adjusted from
time to time pursuant to the provisions of Section 7 hereof.
(d) Conversion Share. The term "Conversion Share" means one
share of the Corporation's authorized Common Stock, provided that if
under the provisions hereof, there shall be a change in the class of
securities purchasable hereunder or such that the securities
purchasable hereunder shall be issued by an entity other than the
Corporation. The term "Conversion Share" shall mean one share of the
security purchasable upon the exercise of the rights granted hereunder
if such security shall be issuable in shares or shall mean the smallest
unit in which such security shall be issuable if such security shall
not be issuable in shares.
(e) Market Value. The term "Market Value" means the average
closing bid price of the Common Stock for the 10 preceding days.
(f) Trading Day. The term "Trading Day" means any Business
Day in which the Common Stock may be traded in a securities market or
exchange in the United States.
6. Conversion Rights. Each share of Series B Stock shall be
convertible into 72.46377 shares (subject to adjustment in Section 7) of Common
Stock as set forth in this Section 6.
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<PAGE> 6
(a) Conversion Rights.
(i) Optional Conversion by the Holder. At any time or
from time to time prior to the earlier to occur of (x) the
Corporation Conversion Date (as defined below), (y) the
Mandatory Conversion Date (as defined below), or (z) the
Redemption Date (as defined below) with respect to all
outstanding shares of Series B Stock, each Registered Holder
shall have the right to convert any or all of such Registered
Holder's shares of Series B Stock into the number of shares of
fully paid and nonassessable Common Stock derived by dividing
the Liquidation Value of each such share by the Conversion
Price by delivering the certificate representing such shares
to the Corporation, duly endorsed in blank or accompanied by
an appropriate form of assignment duly endorsed in blank,
together with a written notice stating that the Registered
Holder is converting such shares;
(ii) Mandatory Conversion. On the date following (i)
the completion by the Corporation of an underwritten offering
with proceeds of no less than $50 million at a price per share
of no less than $27.60 and (ii) the date upon which the
trading volume for shares of common stock of the Corporation
for the preceding three consecutive calendar months has
equaled or exceeded 700,000 shares per month (the "Mandatory
Conversion Date"), each share of Series B Stock shall,
automatically and without further action on the part of any
Registered Holder of Series B Stock, be converted into the
number of shares of fully paid and nonassessable Common Stock
derived by dividing the Liquidation Value of each such share
by the Conversion Price. Upon such conversion, each share of
Series B Stock shall be canceled and not subject to
reissuance. On or prior to the twentieth (20th) Business Day
prior to the Mandatory Conversion Date, the Corporation may
mail by certified or registered mail, return receipt
requested, to each Registered Holder of any shares of Series B
Stock at the address shown on the Corporation's records, a
written notice (the "Mandatory Conversion Notice"), stating
that the Corporation (x) does not intend to exercise the
redemption option provided for in Section 3 hereof, and (y)
does intend to allow the shares of Series B Stock to
automatically convert pursuant to this Section 6.1(a)(ii).
Notwithstanding the delivery of any Mandatory Conversion
Notice, the Corporation shall not be deemed to have waived its
right to redeem the Series B Stock pursuant to Section 2
hereof by virtue of the issuance of the Mandatory Conversion
Notice;
(iii) Optional Conversion by the Corporation. At any
time that (i) any shares of the Series B Stock are outstanding
and (ii) the trading volume for shares of common stock of the
Corporation has equaled or exceeded 700,000 shares per month
for three consecutive calendar months, on the tenth (10th)
Business Day (the "Corporation Conversion Date") immediately
following the last of any five consecutive Trading Days (the
"Trigger Date") on which the Market Price of the Common Stock
equals or exceeds an amount equal to 2.5 multiplied by the
Conversion Price per share (the "Target Price"), the
Corporation may (but has no obligation to) elect to convert
each outstanding share of Series B Stock
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<PAGE> 7
(automatically and without further action on the part of any
holder of outstanding shares of Series B Stock) into the
number of shares of fully paid and nonassessable Common Stock
derived by dividing the Liquidation Value of each such share
by the Conversion Price. Upon such conversion, each share of
Series B Stock shall be canceled and not subject to
reissuance. On or before the fifth (5th) Business Day
following any Trigger Date, the Corporation may provide
written notice (the "Corporation Conversion Notice") to the
holders of shares of Series B Stock that the Corporation has
elected to convert the outstanding shares of Series B Stock
pursuant to this Section 6.1(a)(iii). The immediately
preceding sentence notwithstanding, the Corporation shall not
be deemed to have waived its right to redeem the Series B
stock pursuant to Section 2 hereof by virtue of the issuance
of the Corporation Conversion Notice. The failure of the
Corporation to elect to convert the shares of Series B Stock
following any particular Trigger Date shall not prejudice in
any manner the Corporation's rights under this paragraph
6.1(a)(iii) with respect to any other Trigger Date or under
Section 2 hereof. .
(b) Delivery of Series B Certificates. Following a conversion
pursuant to Section 6(a)(ii) or (iii), each holder of Series B Stock
shall be entitled to receive a certificate or certificates representing
the shares of Common Stock into which such holder's Series B Stock was
converted upon surrender by such holder at the place specified in the
Mandatory Conversion Notice or Corporate Conversion Notice of the
certificate representing such shares of Series B Stock, duly endorsed
in blank or accompanied by an appropriate form of assignment duly
endorsed in blank. Each share of Series B Stock surrendered pursuant to
Section 6(a)(i) or this Section 6(b) shall constitute payment of the
Conversion Price equal to the Liquidation Value of such share
surrendered.
(c) Delivery of Certificates for Conversion Shares.
Certificates for Conversion Shares shall be issued and delivered to the
Registered Holder of the converted shares of Series B Stock within 15
days after the delivery of the certificates representing the shares of
Series B Stock to be converted. Unless all of the shares of Series B
Stock evidenced by any certificate delivered shall have been converted,
the Corporation shall within a 15 day period prepare a new certificate,
substantially identical to that surrendered, representing the balance
of the shares of Series B Stock formerly represented by the certificate
which shall not have been converted and shall within such 15 day period
deliver such certificate to the Registered Holder thereof.
(d) Fractional Shares. The Corporation may, if it so elects,
issue fractional shares of Common Stock or scrip representing
fractional shares upon the conversion of shares of Series B Stock. If
the Corporation does not elect to issue fractional shares, the
Corporation shall pay to the holder of the shares of Series B Stock
which were converted a cash adjustment in respect of such fractional
shares in an amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the
day of such conversion. The determination as to whether or not any
fractional shares are issuable shall be based upon the total number of
shares of Series B Stock being converted
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<PAGE> 8
at any one time by any holder thereof, not upon each share of Series B
Stock being converted.
(e) Authorization and Issuance. The Corporation covenants
and agrees that:
(i) the Conversion Shares issuable upon any
conversion of any shares of Series B Stock shall be deemed to
have been issued to the Registered Holder of such shares of
Series B Stock at the time of such conversion, such Registered
Holder shall be deemed for all purposes to have become the
Registered Holder of such Conversion Shares at such time, and
all rights of such Registered Holder with respect to such
Redeemed Shares (other than the right to surrender the
certificates therefor and receive in exchange certificates for
Conversion Shares) shall cease and terminate;
(ii) all Conversion Shares which may be issued upon
any conversion of any shares of Series B Stock will, upon
issuance, be fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof;
(iii) The Corporation will take all such action as
may be necessary to assure that all Conversion Shares issuable
upon conversion of Series B Stock may be issued without
violation of any applicable law or regulation or of any
requirements of any domestic securities exchange upon which
securities of the same class may be listed. The Corporation
will not take any action which would result in any adjustment
of the Conversion Price if the total number of shares of
Common Stock issuable after such action upon conversion of all
Series B Stock together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon
the exercise of all outstanding options, warrants, conversion
and other rights, would exceed the total number of shares of
Common Stock then authorized by the Corporation's Certificate
of Incorporation;
(iv) the issuance of certificates for shares of
Common Stock issuable upon conversion shall be made without
charge to the Registered Holder; provided, however, that if
any certificate is to be issued in a name other than that of
the Registered Holder of the shares being converted, the
Corporation shall not be required to issue or deliver any such
certificate unless and until the person requesting the
issuance thereof shall have paid to the Corporation the amount
of any tax that may be payable with respect to any transfer
involved in the issuance and delivery of such certificate or
has established to the satisfaction of the Corporation that
such tax has been paid;
(v) The Corporation will at no time close its
transfer books against the transfer of the Series B Stock or
of any Conversion Share issued or issuable upon the conversion
of the Series B Stock in any manner which interferes with the
timely conversion of the Series B Stock; and
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<PAGE> 9
(vi) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of issuance upon
conversion of the outstanding shares of Series B Stock, such
number of shares of Common Stock as shall be issuable upon the
conversion of all such shares of Series B Stock then
outstanding.
7. Anti-dilution Provisions.
7.1. Adjustment of Number of Shares. In order to prevent
dilution of the rights granted hereunder, the Conversion Price shall be subject
to adjustment from time to time in accordance with this Section 7. At any given
time the Conversion Price, whether as the Initial Price of Thirteen and 80/100
dollars ($13.80) per share or as last adjusted, shall be that dollar (or part of
a dollar) amount the payment of which shall be sufficient at the given time to
acquire one Conversion Share. Upon each adjustment of the Conversion Price
pursuant to this Section 7, the Registered Holder of the shares of Series B
Stock shall thereafter be entitled to acquire upon exercise, at the Conversion
Price resulting from such adjustment, the number of Conversion Shares obtainable
by multiplying the Conversion Price in effect immediately prior to such
adjustment by the number of Conversion Shares acquirable immediately prior to
such adjustment and dividing the product thereof by the Conversion Price
resulting from such adjustment.
7.2. Liquidating Dividends. In the event the Corporation shall
declare a dividend upon the Common Stock (other than a dividend payable in
Common Stock) payable otherwise than out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles,
including the making of appropriate deductions for minority interests, if any,
in subsidiaries (herein referred to as "Liquidating Dividends"), then as soon as
possible after the conversion of any shares of Series B Stock the Corporation
shall pay to the person converting such shares of Series B Stock an amount equal
to the aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been issued at
the time of such earlier exercise and all other securities which would have been
issued with respect to such Common Stock by reason of stock splits, stock
dividends, mergers or reorganizations, or for any other reason). For the
purposes of this Section 7.2, a dividend other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus is charged an amount equal to the fair value of such dividend.
7.3. Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide (other than by means of a dividend
payable in Common Stock) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be appropriately reduced, and, conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
7.4. Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of the capital stock
of the Corporation, or consolidation or merger of the Corporation with another
corporation, or the sale of all or substantially all of its
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<PAGE> 10
assets to another corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the Registered Holders of the shares of
Series B Stock shall thereafter have the right to acquire and receive upon
conversion of the shares of Series B Stock such shares of stock, securities or
assets as would have been issuable or payable (as part of the reorganization,
reclassification, consolidation, merger or sale) with respect to or in exchange
for such number of outstanding shares of the Corporation's Common Stock as would
have been received upon conversion of the Series B Stock immediately before such
reorganization, reclassification, consolidation, merger or sale and the number
of shares of Common Stock that would have been so received), and in any such
case appropriate provisions shall be made with respect to the rights and
interests of the holders of the Series B Stock to the end that the provisions
hereof (including without limitation provisions for adjustments of the
Conversion Price and of the number of Conversion Shares acquirable and
receivable upon the conversion of the Series B Stock) shall thereafter be
applicable, in relation to any shares of stock, securities or assets thereafter
deliverable upon the conversion of the Series B Stock. In the event of a merger
or consolidation of the Corporation with or into another corporation or the sale
of all or substantially all of its assets as a result of which a number of
shares of Common Stock of the surviving or purchasing corporation, greater or
lesser than the number of shares of Common Stock of the Corporation outstanding
immediately prior to such merger, consolidation or purchase are issuable to
holders of Common Stock of the Corporation, then the Conversion Price in effect
immediately prior to such merger, consolidation or purchase shall be adjusted in
the same manner as though there were a subdivision or combination of the
outstanding shares of Common Stock of the Corporation.
7.5. Notices. In the event that:
(a) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation; or
(b) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall give to the
Registered Holders of the shares of Series B Stock at least twenty (20) days
prior written notice of the date when the same shall take place.
Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger or sale, dissolution, liquidation or winding up, as the
case may be. Each such written notice shall be given by first class mail,
postage prepaid, address to the Registered Holders of the Series B Stock.
7.6. Certain Events. If any event occurs as to which, in the
opinion of the Board of Directors of the Corporation, the provisions of this
Section 7 are not strictly applicable or if strictly applicable would not fairly
protect the rights of the holders of the Series B Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provision, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of increasing
the Conversion Price as otherwise determined pursuant to any of the provisions
of this Section 7 except in the case of a combination of shares of a type
contemplated in Section 7.3.
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<PAGE> 11
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of
December, 1999, and we hereby affirm that the foregoing Certificate is my act
and deed and the act and deed of the Corporation and that the facts stated
therein are true.
/s/ STUART J. CHASANOFF
---------------------------------------
Stuart J. Chasanoff,
Vice President and Secretary
<PAGE> 1
ADDENDUM
TO
eVENTURES GROUP, INC. REGISTRATION RIGHTS AGREEMENT
DATED SEPTEMBER 22, 1999
This Addendum (the "Addendum") is made effective as of the 19th day of
October, 1999, by and among each of the persons listed on Schedule 1 hereto
(each, a "New Shareholder"), eVentures Group, Inc., a Delaware corporation (the
"Company"), and other shareholders (the "Shareholders") of the Company that are
parties to that certain Registration Rights Agreement dated as of September 22,
1999 (as amended, modified, supplemented or restated, the "Agreement"), between
the Company and its shareholders.
R E C I T A L S:
A. The Company and the Shareholders entered into the Agreement to
impose certain restrictions and obligations upon themselves and the shares of
stock (the "Stock") of the Company.
B. Each New Shareholder is desirous of becoming a Shareholder of the
Company.
C. Holders of a majority of the Registrable Shares have consented to
including each New Shareholder as a "Stockholder" under the Agreement, and each
New Shareholder desires to enter into an Addendum to extend to each New
Shareholder the benefits of and obligations under the Agreement to the same
extent as if they were original parties thereto.
NOW THEREFORE, in consideration of the mutual promises of the parties,
the parties agree as follows:
1. Each New Shareholder acknowledges that he or she has read the
Agreement, which is attached hereto as Exhibit A and incorporated herein for all
purposes, and knows and understands its content.
2. Each New Shareholder shall be bound by, and shall have the benefit
of, all the terms and conditions set out in the Agreement to the same extent as
if the New Shareholder were an original party thereto, but only effective as of
the date of this Addendum Agreement.
3. This Addendum shall be attached to, be incorporated into and become
part of the Agreement.
4. Except to the extent defined in this Addendum, all defined terms
shall have the meaning set forth in the Agreement.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned parties have executed this Addendum
as of the date first written above.
NEW SHAREHOLDER
-----------------------------------------
Name:
------------------------------------
<PAGE> 3
AGREED TO AND ACCEPTED
On behalf of the shareholders and the Company
COMPANY:
eVentures Group, Inc.
By: /s/ STUART CHASANOFF
-----------------------------------
Name: Stuart Chasanoff
---------------------------------
Title: Vice President
--------------------------------
<PAGE> 1
eVENTURES GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into on the 19th day of November, 1999, by and among eVENTURES GROUP,
INC., a Delaware corporation (the "Company"), and the persons and entities
signatories hereto (collectively, the "Stockholders"), as holders of shares of
Series B Convertible Preferred Stock, par value $0.00002 per share, of the
Company ("Series B Stock").
W I T N E S S E T H:
WHEREAS, the Company and the Stockholders have entered into that
certain Preferred Stock Subscription Agreement dated as of November 24, 1999
(the "Subscription Agreement"), pursuant to which certain of the Stockholders
acquired shares of the Company's Series B Stock; and
WHEREAS, in connection with the Subscription Agreement, the parties
have agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and in the Subscription Agreement, the sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
1. REGISTRABLE SHARES. For purposes of this Agreement "Registrable
Shares" shall mean, at any time, and with respect to any Stockholder or
Qualified Transferee (as defined in Section 8(g) below), any Restricted
Securities (as defined below) held by such Stockholder or Qualified Transferee,
and "Holder" shall mean any Stockholder or Qualified Transferee holding
Registrable Shares. As to any particular Registrable Shares, once issued, such
Registrable Shares shall cease to be Registrable Shares (1) when such
Registrable Shares have been registered under the Securities Act of 1933, as
amended or any successor Federal statute (the "Act"), the Registration Statement
in connection therewith has been declared effective and they have been disposed
of pursuant to and in the manner described in such effective Registration
Statement, (2) when such Registrable Shares are sold or distributed pursuant to
Rule 144, (3) when such Registrable Shares have ceased to be outstanding, or (4)
when such Registrable Shares have been transferred to a person or entity other
than a Qualified Transferee. For purposes of this Agreement, the term
"Restricted Securities" shall mean, at any time and with respect to any
Stockholder or Qualified Transferee, the shares of Series B Stock and any other
securities which by their terms are directly or indirectly exercisable or
exchangeable for or convertible into Common Stock (other than stock options
granted to employees or directors of the Company in their capacity as such, or
Common Stock issuable upon the exercise thereof), and any securities received on
or with respect to any of the foregoing securities, which are held by such
Stockholder or Qualified Transferee and which theretofor have not been sold to
the public pursuant to a Registration Statement or pursuant to Rule 144 under
the Act. For purposes of this Agreement, the term "Registration Statement" shall
mean any registration statement of the Company which covers any of the
Registrable Shares, and all amendments and supplements to any such
<PAGE> 2
Registration Statement, including post-effective amendments, in each case
including the Prospectus (defined herein) contained therein, all exhibits
thereto and all material incorporated by reference therein. For purposes of this
Agreement, the term "Prospectus" shall mean the prospectus included in a
Registration Statement, including any prospectus subject to completion, and any
such Prospectus as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable Shares
and, in each case, by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein. For purposes of this Agreement, the term
"Rule 144" shall mean Rule 144 promulgated under the Act or any successor or
similar rule thereto, as may be enacted by the Securities and Exchange
Commission (the "Commission") from time to time.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. If the Company proposes to register any
of its securities under the Act (other than pursuant to (i) a
registration solely in connection with an employee benefit or stock
ownership plan on Form S-8 or any comparable or successor form, (ii) a
registration solely in connection with an acquisition consummated in a
manner which would permit registration of such securities to the public
on Form S-4 or any comparable or successor form or (iii) a "shelf" or
similar registration for use solely in connection with future
acquisitions), and the registration form to be used may be used for the
registration of Registrable Shares (a "Piggyback Registration"), the
Company will give prompt written notice to all Holders of Registrable
Shares of its intention to effect such a registration (each a
"Piggyback Notice"). Subject to Section 2(b) below, the Company will
include in such registration all shares of Registrable Shares which
Holders of Registrable Shares request the Company to include in such
registration by written notice given to the Company within twenty (20)
days after the date of sending of the Piggyback Notice.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration relates to an underwritten public offering of equity
securities by the Company and the managing underwriters for such
offering advise the Company in writing that in their opinion the number
of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a
price range acceptable to the Company, the Company will include in such
registration (i) first, the securities proposed to be sold by the
Company, (ii) second, the securities proposed to be sold by any other
persons with registration rights prior to those of the Holder, (iii)
third, the Registrable Shares requested to be included in such
registration, pro rata among the Holders of such Registrable Shares on
the basis of the number of shares owned by each such Holder, and (iv)
fourth, other securities requested to be included in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration relates to an underwritten public offering of equity
securities held solely by Holders of the Company's securities and the
managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the Holders
initially requesting such registration, the Company will include
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<PAGE> 3
in such registration (i) first, the securities requested to be included
therein by the Holders requesting such registration, (ii) second, the
securities proposed to be sold by any other persons with registration
rights prior to those of the Holder, (iii) third, the Registrable
Shares requested to be included in such registration, pro rata among
the Holders of such Registrable Shares on the basis of the number of
shares owned by each such Holder, and (iv) fourth, other securities
requested to be included in such registration.
3. REGISTRATION PROCEDURES. Whenever the Holders of Registrable Shares
have requested that any Registrable Shares be registered pursuant to this
Agreement, the Company will use its best efforts to effect the registration and
the sale of such Registrable Shares in accordance with the intended method of
distribution thereof and will as expeditiously as possible:
(i) prepare and file with the Commission a Registration Statement
with respect to such Registrable Shares on any appropriate form under
the Act, which form shall be selected by the Company and shall be
available for the sale of Registrable Shares in accordance with the
intended method or methods of distribution thereof and use its best
efforts to cause such Registration Statement to become effective,
provided that before filing a Registration Statement or Prospectus or
any amendments or supplements thereto, the Company will furnish to the
counsel selected by the Holders of a majority of the Registrable Shares
included in such Registration Statement copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement and
supplements to the Prospectus used in connection therewith (and to file
the Prospectus, as so supplemented, under Rule 424 under the Act, if
required) as may be necessary to keep such Registration Statement
effective for a period of up to one (1) year, and comply with the
provisions of the Act with respect to the disposition of all securities
included in such Registration Statement during such period in
accordance with the intended methods of distribution by the selling
Holders thereof set forth in such Registration Statement or supplement
to such Prospectus;
(iii) furnish to each selling Holder of Registrable Shares such
number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits), the
Prospectus included in such Registration Statement (including each
preliminary Prospectus) and such other documents as such selling Holder
may reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such selling Holder;
(iv) notify the selling Holders of Registrable Shares and the
managing underwriters, if any, promptly and (if requested by any such
Stockholder) confirm such advice in writing, (A) when a Prospectus,
including any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (B) of
any request by the Commission for amendments or supplements to a
Registration Statement or related Prospectus or for additional
3
<PAGE> 4
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (D) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (E) of the existence of any fact which results in a
Registration Statement, a Prospectus or any document incorporated
therein by reference containing an untrue statement of a material fact
or omitting to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(v) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such
jurisdictions as any selling Holder reasonably requests and do any and
all other acts and things which may be reasonably necessary or
advisable to enable such selling Holder to consummate the disposition
in such jurisdictions of the Registrable Shares owned by such selling
Holder, provided that the Company will not be required (A) to qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (B) to
subject itself to taxation in any such jurisdiction, or (C) to consent
to general service of process in any such jurisdiction;
(vi) notify each selling Holder of such Registrable Shares, at
any time when a Prospectus relating thereto is required to be delivered
under the Act, of the happening of any event referred to in clause
(iv)(E) of this Section 3, and, at the request of any such seller,
prepare a supplement to such Prospectus or a post-effective amendment
to such Registration Statement so that, as thereafter delivered to the
purchasers of such Registrable Shares, such Prospectus will not contain
an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(vii) cause all such Registrable Shares to be listed on each
securities exchange on which similar securities issued by the Company
are then listed and to be qualified for trading on each system on which
similar securities issued by the Company are from time to time
qualified;
(viii) provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such
Registration Statement and thereafter maintain such transfer agent and
registrar;
(ix) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
Holders of a majority of the Registrable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Shares;
(x) in connection with an underwritten offering, use its best
efforts to (A) obtain opinions of counsel to the Company and updates
thereof, which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the
4
<PAGE> 5
managing underwriters, addressed to the underwriters, covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; and (B) obtain "cold comfort" letters and updates thereof
from the Company's independent certified public accountants, addressed
to the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with underwritten offerings; make available
for inspection during normal business hours by any underwriter
participating in any disposition pursuant to a registration statement,
and any attorney or accountant retained by such underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by such
underwriter, attorney or accountant in connection with such
registration statement; provided that such underwriters execute prior
thereto an agreement with the Company that all such records,
information or documents shall be kept confidential by such persons
unless (1) disclosure of such records, information or documents is
required by law or by a court or administrative order or (2) such
records, information or documents are or become (but only when they
become) generally available to the public other than as a result of
disclosure in violation of this paragraph; and make available for
inspection by any underwriter participating in any disposition pursuant
to such registration statement and any attorney, accountant or other
agent retained by any such underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
underwriter, attorney, accountant or agent in connection with such
registration statement;
(xi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission;
(xii) permit any Holder of Registrable Shares which might be
deemed, in the sole and exclusive judgment of such Holder, to be an
underwriter or a controlling person of the Company, to participate in
the preparation of such registration or comparable statement and to
require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such Holder and its
counsel should be included;
(xiii) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Shares included in such
registration statement for sale in any jurisdiction, the Company will
use its reasonable efforts promptly to obtain the withdrawal of such
order; and
(xiv) provide a CUSIP number for all Registrable Shares, not
later than the effective date of the applicable registration statement.
5
<PAGE> 6
If any such registration or comparable statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company and if, in the sole and
exclusive judgment of such Holder, such Holder is or might be deemed to be a
controlling person of the Company, such Holder shall have the right to require
(a) the inclusion in such registration statement of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
of such securities by such Holder is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (b) in the event
that such reference to such Holder by name or otherwise is not required by the
Act or any similar federal statute then in force, the deletion of the reference
to such Holder; provided, that with respect to this clause (b) such Holder shall
furnish to the Company an opinion of counsel to such effect, which opinion and
counsel shall be reasonably satisfactory to the Company.
4. REGISTRATION EXPENSES.
(a) DEFINITION. The term "Registration Expenses" means any
expenses incident to the Company's performance of or compliance with
this Agreement, including, without limitation, all registration and
filing fees, listing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, internal expenses, the fees and expenses of counsel for the
Company (but not the fees and expenses of counsel to the Holders of the
Registrable Shares included in such registration) and all independent
certified public accountants, underwriting fees and expenses (excluding
discounts and commissions attributable to the Registrable Shares, which
shall be paid by the selling Holders out of the proceeds of the
offering) and the fees and expenses of any other Persons (defined
below) retained by the Company. For purposes of this Agreement, the
term "Person" shall be construed as broadly as possible and shall
include an individual or natural person, a partnership (including a
limited liability partnership), a company, an association, a joint
stock company, a limited liability company, a trust, a joint venture,
an unincorporated entity and a governmental authority.
(b) PAYMENT. The Company shall pay the Registration Expenses in
connection with any and all Piggyback Registrations.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the extent permitted by law, each Holder of Registrable
Shares, such holder's general and limited partners, officers and
directors and each Person who controls such Holder (within the meaning
of the Act) against all losses, claims, damages, liabilities and
expenses caused by any untrue or alleged untrue statement of material
fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder
expressly for use therein. In connection with an underwritten offering,
the Company will indemnify such underwriters, their officers and
directors and each Person
6
<PAGE> 7
who controls such underwriters (within the meaning of the Act) to the
same extent as provided above with respect to the indemnification of
the Holders of Registrable Shares.
(b) INDEMNIFICATION BY HOLDERS. In connection with any
registration statement in which a Holder of Registrable Shares is
participating, each such Holder will furnish to the Company in writing
such information and affidavits as the Company reasonably requests for
use in connection with any such Registration Statement or Prospectus
and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within
the meaning of the Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue
statement or omission is contained in any written information or
affidavit so furnished in writing by such Holder; provided, that the
obligation to indemnify will be individual to each Holder and will be
limited to the net amount of proceeds received by such Holder from the
sale of Registrable Shares pursuant to such registration statement.
(c) NOTICE; DEFENSE OF CLAIMS. Any Person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability
for any settlement made by the indemnified party without its consent
(but such consent will not be unreasonably withheld or delayed). An
indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses
of more than one special and one local counsel for all parties
indemnified by such indemnifying party with respect to such claim.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 5 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage,
or expense in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party on the other from the offering of
the Registrable Shares or (ii) if the allocation provided for by the
foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party
or parties on the one hand and the indemnified party on the other hand
in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities
(or actions in respect thereof). The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material
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<PAGE> 8
fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. The
obligation to contribute will be individual to each Holder of
Registrable Shares and will be limited to the amount by which the net
amount of proceeds received by such Holder from the sale of Registrable
Shares exceeds the amount of losses, liabilities, damages, and expenses
which such Holder has otherwise been required to pay by reason of such
statements or omissions.
(e) SURVIVAL. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and
will survive the transfer of securities.
(f) UNDERWRITING AGREEMENT. To the extent that the provisions on
indemnification and contribution contained in the underwriting
agreement entered into in connection with an underwritten public
offering are in conflict with the provisions of this Section 5, the
provisions contained in the underwriting agreement shall control.
6. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
Holder of Registrable Shares included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such Holder and
such Holder's intended method of distribution, and (iii) if requested by the
managing underwriter or underwriters or the Demanding Persons (as defined in the
Registration Rights Agreement, dated as of September 22, 1999, among the Company
and the persons and entities set forth on Schedule 1 thereto), agrees not to
sell Registrable Shares or other securities held by such Person in any
transaction other than pursuant to such underwriting for such period following
the effective date of the registration statement relating to such underwriting
as determined by either the Board of Directors or the Demanding Persons;
provided that no Holder of Registrable Shares shall be required to enter into
such an agreement unless each other Holder of Registrable Shares, each director
and executive officer of the Company and each other Holder of at least one
percent of the Series B Stock then outstanding enters into a substantially
identical agreement relating to such underwriting.
7. STOCKHOLDER LOCK-UP; AGREEMENT NOT TO SELL. Prior to the first
anniversary of the date hereof, no Holder of Registrable Shares may make any
public sale of Registrable Shares (pursuant to a Registration Statement, Rule
144 or otherwise); provided, however, that nothing herein shall prevent any
Holder (a) that is a partnership or corporation from making a distribution of
Registrable Shares to the partners or shareholders thereof that are otherwise in
compliance with applicable securities laws, so long as such permitted
distributees agree to be bound by the terms and conditions of the Lock-up
Conditions; (b) that desires to sell any Registrable Shares in a private
transaction in compliance with applicable securities laws from consummating such
a sale so long as the purchaser in any private sale agrees in writing to be
bound by the restrictions set
8
<PAGE> 9
forth in this Section 7; or (c) that is an individual, from making a transfer of
Registrable Shares by gift, will or the laws of descent and distribution,
subject to the restrictions set forth in this Section 7.
8. MISCELLANEOUS.
(a) INFORMATION AND REPORTING.
(i) The Company shall, at all times during which it is
neither subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), nor exempt from reporting pursuant to Rule
12g3-2(b) under the Exchange Act, upon the written request of any
Stockholder, provide in writing to such Stockholder and to any
prospective transferee of the Registrable Shares of such
Stockholder the information concerning the Company described in
Rule 144A(d)(4) or any successor rule under the Act ("Rule 144A
Information"). Upon the written request of any Stockholder, the
Company shall cooperate with and assist such Stockholder or any
member of the National Association of Securities Dealers, Inc.
PORTAL system in applying to designate and thereafter maintain
the eligibility of the Registrable Shares for trading through
PORTAL. The Company's obligations under this Section 8(a)(i)
shall at all times be contingent upon receipt from the
prospective transferee of Registrable Shares of a written
agreement to take all reasonable precautions to safeguard the
Rule 144A Information from disclosure to anyone other than
Persons who will assist such transferee in evaluating the
purchase of any Registrable Shares.
(ii) When it is first legally required to do so, the Company
shall register its Common Stock under Section 12 of the Exchange
Act and shall keep effective such registration and shall timely
file such information, documents and reports as the Commission
may require or prescribe under Section 13 of the Exchange Act.
From and after the effective date of the first registration
statement filed by the Company under the Act, the Company shall
(whether or not it shall then be required to do so) timely file
such information, documents and reports which a corporation,
partnership or other entity subject to Section 13 or 15(d)
(whichever is applicable) of the Exchange Act is required to
file. The Company shall promptly upon request furnish any Holder
of Registrable Shares (a) a written statement by the Company that
it has complied with the reporting requirements of Section 13 or
15(d) of the Exchange Act, (b) a copy of the most recent annual
or quarterly report of the Company, and (c) such other reports
and documents filed by the Company with the Commission as such
Holder may reasonably request in availing itself of an exemption
for the sale of Registrable Shares without registration under the
Act. The Company acknowledges and agrees that the purposes of the
requirements contained in this Section 8(a)(ii) are to enable any
such Holder to comply with the current public information
requirement contained in paragraph (c) of Rule 144 under the Act,
should such Holder ever wish to dispose of any of the securities
of the Company acquired by it without registration under the Act
in reliance upon Rule 144 (or any other similar exemptive
provision), and to qualify
9
<PAGE> 10
the Company for the use of registration statements on Form S-3.
In addition, the Company shall take such other measures and file
such other information, documents and reports, as shall hereafter
be required by the Commission as a condition to the availability
of Rule 144 under the Act (or any similar exemptive provision
hereafter in effect) and the use of Form S-3. The Company also
covenants to use its best efforts, to the extent that it is
reasonably within its power to do so, to qualify for the use of
Form S-3.
(b) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
(i) enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders of
Registrable Shares in this Agreement, provided, however, that other
purchasers of Series B Stock from the Company may become Holders and
parties to this Agreement by executing and delivering to the Company a
signature page to this Agreement or (ii) grant registration rights that
are superior to the registration rights granted hereunder to any other
Person other than to Persons who purchase Series B Stock from the
Company (unless consented to by a majority vote of the Stockholders).
(c) ADJUSTMENTS AFFECTING REGISTRABLE SHARES. The Company will
not take any action, or permit any change to occur, with respect to its
securities for the purpose of materially and adversely affecting the
ability of the Holders of Registrable Shares to include such
Registrable Shares in a registration undertaken pursuant to this
Agreement or materially and adversely affecting the marketability of
such Registrable Shares in any such registration (including, without
limitation, effecting a stock split or a combination of shares);
provided that this Section 8(c) shall not apply to actions or changes
with respect to the Company's business, balance sheet, earnings or
revenue where the effect of such actions or changes on the Registrable
Shares is merely incidental.
(d) NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be
deemed effectively given when delivered personally or by facsimile
transmission or by overnight delivery service or 72 hours after being
mailed by first class certified or registered mail, return recent
requested, postage prepaid:
(i) If to the Company, c/o Stuart Chasanoff, 1601 Elm
Street, Suite 4000, Dallas, Texas 75201, or at such other
address or addresses as may have been furnished in writing by
the Company to the Stockholders.
(ii) If to a Stockholder, to it at its address as set
forth in the applicable Subscription Agreement, or at such
other address or addresses as may have been furnished in
writing by such Stockholder with a copy to (which shall not
constitute notice): White & Case LLP, 200 S. Biscayne
Boulevard, Suite 4900, Miami, Florida 33131, Attention: Thomas
E Lauria, Esq. (Fax: 305-995-5282).
(e) REMEDIES. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
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<PAGE> 11
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for
specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement.
(f) AMENDMENTS AND WAIVERS. Except as otherwise provided herein,
no amendment, modification, termination or cancellation of this
Agreement shall be effective unless made in writing signed by the
Company and the Holders of a majority of the shares of Registrable
Shares; provided that no amendment may be made to Sections 7 or 8(f) of
this Agreement unless agreed upon by the Company and the Holders of all
the Registrable Shares.
(g) ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Shares pursuant to this Agreement may
be assigned (but only with all related obligations) by a Holder to any
transferee (a "Qualified Transferee") that acquires from a Holder
either (i) 100,000 or more Registrable Shares or (ii) if less than
100,000 Registrable Shares are owned by a Holder at the time of a
transfer, all of the Registrable Shares owned by such Holder, in either
case in connection with the permitted transfer of Registrable Shares.
Such assignment shall not affect the rights of Holders hereunder which
shall remain in full force in accordance with the terms hereof. Any
transferring Holder shall provide the Company with prior written notice
of such transfer(s)/assignment(s); provided, however, that the failure
to provide such notice shall not be deemed to preclude assignment
hereunder.
(h) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(i) ENTIRE AGREEMENT. This Agreement embodies the entire
agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements relating to such subject
matter.
(j) HEADINGS. The headings of this Agreement are for convenience
only and do not constitute a part of this Agreement.
(k) GOVERNING LAW. The construction, validity and interpretation
of this Agreement will be governed by the internal laws of the State of
Texas without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Texas.
(l) FURTHER ASSURANCES. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further
consideration, to execute and deliver any and all such further
documents and take any and all such other actions as may be necessary
or appropriate to carry out the intent and purposes of this Agreement
and to consummate the transactions contemplated hereby.
(m) COUNTERPARTS. This Agreement may be executed by facsimile and
in one or more counterparts, each of which shall be deemed to be an
original, but all of which shall be one and the same document.
(Signature Page Follows)
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<PAGE> 12
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
COMPANY:
EVENTURES GROUP, INC.
By: /s/ STUART CHASANOFF
-------------------------------------
Name: Stuart Chasanoff
-----------------------------------
Title: Vice President
----------------------------------
[SIGNATURE PAGE FOR EACH STOCKHOLDER FOLLOWS]
<PAGE> 13
Signature page to Registration Rights Agreement dated November 19, 1999 among
eVentures Group, Inc. the undersigned and certain of its other Stockholders.
STOCKHOLDER:
GERONIMO PARTNERS, L.P.
By: EFO GENPAR, INC., its General
Partner
By: /s/ LARRY WALLACE
-------------------------------------
Name: Larry Wallace
--------------------------------
Title: President
-------------------------------
<PAGE> 1
EXHIBIT 4.4
Schedule 4.4
Schedule identifying other agreements, the dates thereof and the
parties thereto, substantially identical to the Registration Rights Agreement,
dated as of November 19, 1999, between eVentures Group, Inc. and Geronimo
Partners, L.P.
<TABLE>
<CAPTION>
Date of Agreement Names of parties
----------------- ----------------
<S> <C>
November 24, 1999 eVentures Group, Inc. and
Goff Moore Strategic Partners, L.P.
</TABLE>
<PAGE> 1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") dated as of June
11, 1998 is entered into by and among ORIX GLOBAL COMMUNICATIONS, INC., a Nevada
corporation (the "Company"), KERRY ROGERS, JACK HIGGINS and BOB MICHAELS (the
"Founders") and the Persons listed on the Schedule of Purchasers attached as
Exhibit A (individually, a "Purchaser" and, collectively, the "Purchasers").
This Agreement, together with the Related Agreements (as hereafter defined) are
being executed and delivered as the Additional Agreements, as such term is
defined in that certain letter agreement dated June 11, 1998 by and among
Infinity Investors Limited ("Infinity"), Touch Tone America, Inc. ("Touch
Tone"), the Company and the Founders (the "Letter Agreement"). This Agreement
and the Related Agreements supersede and replace the Letter Agreement.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
1. ASSUMPTION OF DEBT; ISSUANCE OF DEBENTURES AND OTHER SECURITIES.
(a) ASSUMPTION OF TOUCH TONE INDEBTEDNESS. Pursuant to the
terms of the Letter Agreement, the Company has assumed and agreed to
pay and discharge (the "Assumption") $2,610,477 aggregate principal
amount of debentures, together with accrued and unpaid interest of
$87,133 thereon through June 11, 1998 (the "Assumed Debentures"),
issued by Touch Tone to Infinity pursuant to that certain Securities
Purchase Agreement dated December 31, 1997 by and among Touch Tone, the
Company and Infinity. In connection with the Assumption, Infinity has
released and discharged Touch Tone from its obligation to repay the
Assumed Debentures.
(b) RESTATEMENT OF ASSUMED DEBENTURES; ISSUANCE OF ADDITIONAL
DEBENTURES.
The Company and the Purchasers have agreed pursuant to the terms of
this Agreement to (x) amend and restate in their entirety the Assumed
Debentures on the terms set forth herein as a direct obligation of the
Company to Infinity (the "Restated Debentures") and (y) provide for the
issuance of additional debentures of the Company (the "New Debentures")
to the Purchasers in an aggregate principal amount of $6,000,000 minus
the outstanding balance due and owing on the Assumed Debentures on June
11, 1998 (the difference between $6,000,000 and the outstanding balance
due and owing on the Assumed Debentures on June 11, 1998, i.e.,
$3,303,390 being herein referred to as the "New Advance"). The Restated
Debentures and the New Debentures (collectively, the "Debentures")
issued by the Company to the Purchasers pursuant to the terms of this
Agreement shall be (x) in the form attached hereto as Exhibit B, and
(y) secured by a pledge of all of the assets of the Company pursuant to
the terms of the Security Agreement (as hereafter defined).
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SECURITIES PURCHASE AGREEMENT - PAGE 1
<PAGE> 2
(c) FUTURE LETTERS OF CREDIT. At the sole and exclusive
discretion of the Purchasers, from time to time the Purchasers may
provide credit enhancement to the Company and its Subsidiaries (as
hereafter defined) by the issuance of letters of credit or similar
instruments (collectively, the "Letters of Credit"). In the event the
Purchasers provide any Letters of Credit, and amounts thereunder are
drawn upon by the issuing institution, the proceeds so drawn shall be
deemed to be an advance from the Purchasers to the Company in exchange
for a new Debenture in the original principal balance of the amount so
drawn, which Debenture shall be issued on terms identical to the
Debentures set forth on Exhibit B hereto and subject to all of the
terms and conditions of this Agreement and each Related Agreement.
(d) OTHER SECURITIES. As of the date hereof the Company shall
issue to the Purchasers, at a purchase price of $0.01 per share, 2,400
shares (the "Closing Shares") of common stock, no par value, of the
Company ("Common Stock"), representing a 66-2/3% ownership interest in
the issued and outstanding shares of Common Stock of the Company on a
Fully Diluted Basis (as hereafter defined). In addition to all other
remedies available to the Purchasers, in the event the Closing Shares
do not represent at least 66-2/3% of the issued and outstanding shares
of Common Stock of the Company as of the Closing on a Fully Diluted
Basis as specified herein (the "Fully Diluted Representation"), the
Purchasers shall be entitled to receive from the Company, without
additional consideration, such additional shares of Common Stock as
shall be necessary to cause the Fully Diluted Representation to be
accurate.
(e) USE OF PROCEEDS. The Company (x) used the proceeds from
the sale of the Assumed Debentures by Touch Tone and (y) will use the
proceeds from the sale of the New Debentures, in each case for working
capital and other general corporate purposes (and, with respect to the
New Advance, as more fully described in Section 9(h) below).
2. DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
"ACCREDITED INVESTOR" has the meaning as set forth in Regulation D
promulgated under the Securities Act.
"AFFILIATE" means with respect to any Person, a Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, and, in the case of an individual,
includes any relative or spouse of such Person, or any relative or such spouse,
who has the same home as such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
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SECURITIES PURCHASE AGREEMENT - PAGE 2
<PAGE> 3
"APPROVED PLAN" means any written stock option, stock purchase or
similar incentive plan approved by the Board of Directors constituted after the
Closing and the Majority Holders for senior executives of the Company who are
not stockholders of the Company as of the Closing.
"ASSUMED DEBENTURES" has the meaning set forth in Section 1(a).
"ASSUMPTION" has the meaning set forth in Section 1(a).
"AVANTEL" means Avantel, S.A.
"BALANCE SHEET" and "BALANCE SHEET DATE" have the meanings set forth in
Section 4(i).
"BOARD OF DIRECTORS" means the board of directors of the Company.
"BUDGET" has the meaning set forth in Section 9(b)(iv).
"BUSINESS DAY" means any day other than a Saturday, Sunday or any day
that national banks having offices in Texas or New York are required or
authorized to be closed for the transaction of business.
"BUSINESS PLAN" means the Company's business plan entitled "Status
Report Global Gate Network" dated May 14, 1998 and attached hereto as
Exhibit C.
"BYLAWS" means the bylaws of the Company or Subsidiary, as applicable,
as amended and in effect at the Closing.
"CERTIFICATE OF INCORPORATION" means the Company's or Subsidiary's, as
applicable, Certificate of Incorporation, as amended.
"CLOSING SHARES" has the meaning set forth in Section 1(d).
"CLOSING" has the meaning set forth in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" has the meaning set forth in Section 1(c).
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"COMPUTER SYSTEMS" has the meaning set forth in Section 4(y)(i).
"CURRENT STOCKHOLDERS" has the meaning set forth in Section 7(d)(ii).
"DATE DATA" has the meaning set forth in Section 4(y)(iii).
"DEBENTURES" has the meaning set forth in Section 1(b).
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SECURITIES PURCHASE AGREEMENT - PAGE 3
<PAGE> 4
"DEBT" means of any Person at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 7(d)(x).
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 4(s)(iv).
"EQUITY SECURITIES" means any capital stock or similar security of the
Company, including without limitation, securities containing equity features and
securities containing profit participation features, or any security convertible
or exchangeable, with or without consideration, into or for any stock or similar
security of the Company, or any security carrying any warrant or right to
subscribe for or purchase any stock or similar security of the Company, or any
such warrant or right to acquire any security of the Company.
"ERISA" has the meaning set forth in Section 4(t).
"ESTIMATED EXPENSE REIMBURSEMENT FEE" has the meaning set forth in
Section 12(d)(i).
"EVENT OF DEFAULT" has the meaning set forth in the Debentures.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FACILITIES" has the meaning set forth in Section 4(p)(i).
"FAIR MARKET VALUE" has the meaning set forth in the Stockholders
Agreement.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4(i).
"FOUNDERS" has the meaning set forth in the preamble to this Agreement.
"FULLY DILUTED BASIS" means the sum of (i) the shares of Common Stock
outstanding, and (ii) the shares of Common Stock that would be outstanding at
the Closing assuming that (A) all shares of Common Stock issuable pursuant to
all outstanding Equity Securities and other rights to acquire Common Stock
(excluding, however, all options issued or issuable pursuant to any Approved
Plan) had been issued and (B) the Closing Shares had been issued.
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SECURITIES PURCHASE AGREEMENT - PAGE 4
<PAGE> 5
"FULLY DILUTED REPRESENTATION" has the meaning set forth in Section
1(d).
"GAAP" has the meaning set forth in Section 4(i).
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain a minimum net
worth, financial ratio or similar requirements, or otherwise) any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or (ii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term Guarantee used as a verb has a corresponding meaning.
"HAZARDOUS MATERIALS" has the meaning set forth in Section 4(s)(v).
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement
executed by the Company as contemplated by the Stockholders Agreement.
"INFINITY" means Infinity Investors Limited, a Nevis West Indies
corporation.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
4(m).
"LETTER AGREEMENT" has the meaning set forth in the Preamble to this
Agreement.
"LETTERS OF CREDIT" has the meaning set forth in Section 1(c).
"LIEN" means any lien, security interest, pledge, mortgage, deed of
trust, charge or encumbrance in real, personal or mixed property (tangible or
intangible, and wherever located).
"LOSSES" has the meaning set forth in Section 12(o).
"MAJORITY HOLDERS" has the meaning set forth in Section 9(d).
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
Section 4(i).
"NEW ADVANCE" has the meaning set forth in Section 1(b).
"NEW DEBENTURE" has the meaning set forth in Section 1(a).
"OTHER SYSTEMS" has the meaning set forth in Section 4(y)(i).
"PARI PASSU AGREEMENT" has the meaning set forth in Section 7(d)(xi).
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SECURITIES PURCHASE AGREEMENT - PAGE 5
<PAGE> 6
"PERMITS" has the meaning set forth in Section 4(p)(i).
"PERMITTED LIENS" means Liens for taxes and assessments not yet due and
payable or which are being challenged in good faith and with respect to which
adequate reserves have been established in the financial statements of the
Company, informational filings made by equipment lessors under the Uniform
Commercial Code, landlords' liens created by statute and not by affirmative
action of any landlord, and statutory liens created in the ordinary course of
business securing indebtedness or obligations whose payment is not yet due.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization or a governmental entity or
any department, agency or political subdivision thereof.
"PURCHASER DIRECTOR" means a Person serving as a director of the
Company as the designee or nominee of the Purchasers pursuant to the
Stockholders Agreement.
"PURCHASER(S)" has the meaning set forth in the preamble to this
Agreement.
"QUALIFIED PUBLIC OFFERING" has the meaning set forth in the
Stockholders Agreement.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
7(d)(vi).
"RELATED AGREEMENTS" mean any and all agreements other than this
Agreement required to be executed by the parties to this Agreement at or prior
to the Closing pursuant to Section 7, including, without limitation, the
Debentures, the Employment Agreements, the Letter Agreement, the Pari Passu
Agreement, the Stockholders Agreement, the Indemnification Agreement, the
Registration Rights Agreement and the Security Agreement.
"RESTATED DEBENTURES" has the meaning set forth in Section 1(b).
"ROGERS NOTE" has the meaning set forth in Section 7(d)(xi).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITY AGREEMENT" has the meaning as set forth in Section 7(d)(v).
"STOCKHOLDERS AGREEMENT" has the meaning set forth in Section 7(d)(iv).
"SUBSIDIARY" means any corporation more than 50% of the outstanding
voting securities of which are owned by the Company or any Subsidiary, directly
or indirectly, or a partnership or limited liability company in which the
Company or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.
"TOUCH TONE" has the meaning set forth in Section 1(a).
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SECURITIES PURCHASE AGREEMENT - PAGE 6
<PAGE> 7
"USE OF PROCEEDS STATEMENT" has the meaning set forth in Section 9(h).
"YEAR 2000 CAPABILITIES" has the meaning as set forth in
Section 4(y)(iii).
3. THE CLOSING.
(a) The closing of the issuance, sale and purchase of the
Debentures (the "Closing") shall take place on June 11, 1998, at the
offices of Arter & Hadden, LLP, 1717 Main Street, Ste. 4100, Dallas,
Texas at 10:00 a.m., local time.
(b) At the Closing, (x) the Company shall deliver to the
Purchasers the Debentures in the aggregate principal amount of
$6,000,000, and (y) the Purchasers shall deliver to the Company, by
direct payment to Avantel at the direction of the Company, $250,000 of
the New Advance. In addition, at the Closing, the Purchasers shall
deliver a statement of the Estimated Expense Reimbursement Fee (which
is expected to be approximately $35,000), which sum shall be deemed
advanced by the Purchasers to the Company as part of the New Advance at
the Closing. From time to time after the Closing, the Purchasers shall
advance to the Company the remaining portion of the New Advance not
advanced (or deemed advanced) at the Closing, upon receipt of written
request thereof from the Company, provided no Default or Event of
Default then exists. The Company and the Purchasers hereby agree that
notwithstanding the $6,000,000 aggregate stated principal balance of
the Debentures issued at the Closing, interest shall only accrue on the
New Advance from the various dates the proceeds thereof are advanced
(or deemed advanced) to the Company in accordance with the terms of
this Agreement.
(c) In addition to the deliveries specified in subsection (b)
above, at the Closing the Company shall deliver to the Purchasers the
Closing Shares, and the Purchasers shall deliver to the Company $24 in
the aggregate, representing the purchase price of the Closing Shares.
(d) If at the Closing any of the conditions specified in
Section 7 to be fulfilled at or prior to the Closing shall not have
been fulfilled, each of the Purchasers shall, at its election, be
relieved of all of its obligations under this Agreement to be performed
at the Closing without thereby waiving any other rights such Purchaser
may have by reason of such failure or such nonfulfillment.
(e) Immediately preceding the Closing the Purchasers shall
deliver to the Company a Schedule setting forth the allocation among
the Purchasers of the Debentures and Closing Shares to be acquired
pursuant to the terms hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Purchasers that the
statements contained in this Section 4 are true as of the date of this Agreement
and shall be true as of the Closing (as though made then), except as set forth
in the Schedule of Exceptions attached hereto
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SECURITIES PURCHASE AGREEMENT - PAGE 7
<PAGE> 8
as Exhibit D (the "Disclosure Schedule"). The Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered paragraphs contained in
this Section 4. Nothing contained in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made in this
Agreement unless the Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty relates to the existence of the document or other item itself).
(a) ORGANIZATION AND STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has full
corporate power and authority to conduct its business as presently
conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and to carry out the transactions contemplated
by this Agreement. The Company is duly qualified and in good standing
to do business in each jurisdiction where the failure to be so
qualified would have a material adverse effect on the Company. The
Company has furnished to each Purchaser true and complete copies of its
Certificate of Incorporation and Bylaws, and the Certificate of
Incorporation and Bylaws of each of its Subsidiaries, each as amended
to date and currently in effect.
(b) CAPITALIZATION.
The authorized capital stock of the Company, following the amendment
contemplated in Section 7(f)(iii) below, consists of 100,000 shares of
Common Stock, of which 1,200 shares are issued and outstanding. All of
the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
Except (i) as provided in this Agreement or any Related Agreement, or
(ii) as set forth in the Disclosure Schedule: (a) no Equity Securities
or subscription or other right (contingent or otherwise) to purchase or
acquire any shares of capital stock of the Company are authorized or
outstanding; (b) neither the Company nor any Subsidiary has any
obligation (contingent or otherwise) to issue any Equity Securities or
subscription or other such right or to issue or distribute to holders
of any shares of its capital stock any evidences of indebtedness or
assets of the Company or any Subsidiary; and (c) neither the Company
nor any Subsidiary has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock
or any interest therein or to pay any dividend or make any other
distribution in respect thereof. All of the issued and outstanding
shares of capital stock of the Company have been offered, issued and
sold by the Company in compliance with applicable federal and state
securities laws or pursuant to valid exemptions therefrom.
(c) SUBSIDIARIES, ETC.
Except as set forth in the Disclosure Schedule, the Company has no
Subsidiaries and does
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SECURITIES PURCHASE AGREEMENT - PAGE 8
<PAGE> 9
not own or control, directly or indirectly, any shares of capital stock
of any other corporation or any interest in any partnership, joint
venture, limited liability company, professional association or other
business enterprise. Except as set forth in the Disclosure Schedule,
the Company owns 100% of the issued and outstanding capital stock of
each of the Subsidiaries (including, without limitation, Latin Gate,
S.A., whose shares are owned 99% by the Company and 1% by UCI Teleport,
Inc., a wholly-owned subsidiary of the Company) in each case, free and
clear of all Liens. Each of the Company's Subsidiaries is a corporation
organized, validly existing and in good standing under the laws of the
state of its incorporation or formation, as the case may be, and has
full power and authority and all licenses, permits and authorization
necessary to conduct its business and own its properties as presently
conducted and owned and as proposed to be conducted and owned, and to
carry out the transactions contemplated in this Agreement and the
Related Agreements, as applicable. Each of the Company's Subsidiaries
is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or the properties
owned or leased by it requires qualification.
(d) STOCKHOLDER LIST AND AGREEMENTS.
The Disclosure Schedule sets forth a true and complete list of the
stockholders of the Company, showing the number of shares of Common
Stock or other securities of the Company held by each stockholder as of
the date of this Agreement and the consideration paid to the Company,
if any, therefor. Except (i) as provided in this Agreement or any
Related Agreement or (ii) as set forth in the Disclosure Schedule,
there are no agreements, written or oral, between the Company and any
holder of its capital stock or, to the best of the Company's knowledge,
among any holders of its capital stock relating to the acquisition
(including without limitation rights of first refusal or preemptive
rights), transfer, sale or other disposition, registration under the
Securities Act, or voting of the capital stock of the Company. The
Disclosure Schedule sets forth a true and complete list of stockholders
of the Company (x) as of the date hereof and (y) on a Fully Diluted
Basis. As set forth thereon, assuming conversion or exercise in full of
all Equity Securities and any other derivative securities of the
Company outstanding immediately after the Closing, the Purchasers would
own 2,400 shares of Common Stock, representing 66-2/3% of the issued
and outstanding shares of Common Stock of the Company on a Fully
Diluted Basis, without giving effect to any issuance of Common Stock
under any Approved Plan.
(e) ISSUANCE OF SECURITIES.
The issuance, sale and delivery of the Debentures in accordance with
this Agreement and the Related Agreements, and the issuance and
delivery of the Closing Shares have been, or will be prior to the
Closing, duly authorized by all necessary corporate action on the part
of the Company and its officers, directors and stockholders, and all
such Closing Shares have been duly reserved for issuance. The
Debentures and Closing Shares, when so issued, sold and delivered
against payment therefor in accordance with the provisions of this
Agreement and the Related Agreements will be duly and validly issued,
fully paid and non-assessable, free and clear of any taxes, Liens and
charges with respect to issuance and
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SECURITIES PURCHASE AGREEMENT - PAGE 9
<PAGE> 10
shall not be subject to preemptive rights or similar rights of any
other stockholders of the Company. Based in part on the representations
made by each of the Purchasers in Section 6 of this Agreement, the
offer and sale of the Debentures and Closing Shares to each of the
Purchasers will be in compliance with applicable federal and state
securities laws.
(f) AUTHORIZATION.
The execution, delivery and performance by the Company of this
Agreement and all Related Agreements and the consummation by the
Company of the transactions contemplated hereby and thereby, have been
duly authorized by all necessary corporate action. All corporate action
on the part of the Company and its officers, directors and stockholders
necessary for the authorization, execution and delivery of this
Agreement and all Related Agreements, and the performance of all
obligations of the Company hereunder and thereunder has been taken or
will be taken prior to the Closing. This Agreement and each of the
Related Agreements have been duly executed and delivered by the Company
and constitute valid and binding obligations of the Company enforceable
in accordance with their respective terms. The execution, delivery and
performance of the transactions contemplated by this Agreement and the
Related Agreements and compliance with their provisions by the Company
will not violate any provision of law and will not conflict with or
result in any breach of any of the terms, conditions or provisions of,
or constitute a default under, or require a consent or waiver under,
the Certificate of Incorporation or Bylaws (each as amended to date) or
any indenture, lease, agreement or other instrument to which the
Company or any Subsidiary is a party or by which any of them or any of
their properties is bound, or any decree, judgment, order, statute,
rule or regulation applicable to the Company or any such Subsidiary.
(g) GOVERNMENTAL CONSENTS.
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company in
connection with the execution and delivery of this Agreement or the
Related Agreements, the offer, issuance, sale and delivery of the
Closing Shares or Debentures, or the other transactions to be
consummated at the Closing, as contemplated by this Agreement, except
such filings as shall have been made prior to and shall be effective on
and as of the Closing.
(h) LITIGATION.
There is no action, suit or proceeding, or governmental inquiry or
investigation, pending, or, to the best of the Company's knowledge, any
basis therefor or threat thereof, against the Company or any
Subsidiary, which questions the validity of this Agreement or any
Related Agreement or the right of the Company to enter into or perform
this Agreement or any Related Agreement, or which could reasonably be
expected to have, either individually or in the aggregate, any material
adverse effect on the business, prospects, assets or condition,
financial or otherwise, of the Company or any Subsidiary, nor is there
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SECURITIES PURCHASE AGREEMENT - PAGE 10
<PAGE> 11
any litigation pending, or, to the best of the Company's knowledge, any
basis therefor or threat thereof, against the Company or any Subsidiary
by reason of the proposed activities of the Company or negotiations by
the Company with possible investors in the Company.
(i) FINANCIAL STATEMENTS.
The Company has furnished to each of the Purchasers a complete and
correct copy of the following financial statements (collectively, the
"Financial Statements"): (i) the Company's consolidated audited balance
sheet, statements of operations, changes in stockholders' equity and
cash flows for the fiscal year ended December 31, 1997, and (ii) the
Company's consolidated unaudited balance sheet (the "Balance Sheet") as
of April 30, 1998 (the "Balance Sheet Date") and statements of
operations and cash flow for the month ended as of the Balance Sheet
Date (the "Most Recent Financial Statements"). The Financial Statements
are complete and correct, are in accordance with the books and records
of the Company and present fairly the financial condition and results
of operations of the Company and each Subsidiary on a consolidated
basis, as at the dates and for the periods indicated, and have been
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except that the Most Recent Financial
Statements lack footnotes and other presentation items and are subject
to normal year-end audit adjustments, which will not be material,
individually or in the aggregate.
(j) ABSENCE OF LIABILITIES.
Except as disclosed in the Disclosure Schedule, at the Balance Sheet
Date, the Company and its Subsidiaries did not have any liabilities of
any type that in the aggregate exceeded $50,000, whether absolute or
contingent, which were not fully reflected on the Balance Sheet, and,
since the Balance Sheet Date, the Company and its Subsidiaries have not
incurred or otherwise become subject to any such liabilities or
obligations except in the ordinary course of business.
(k) TAXES.
The amount shown on the Balance Sheet as provision for taxes is
sufficient for the payment of all accrued and unpaid federal, state,
county, local and foreign taxes for the period then ended and all prior
periods. The Company and its Subsidiaries have filed all federal,
state, county, local and foreign tax returns which are required to be
filed by it on or prior to the date of the Closing, such returns are
true and correct and all taxes shown thereon to be due have been timely
paid with exceptions not material to the Company and its Subsidiaries.
Federal income tax returns of the Company and its Subsidiaries have not
been audited by the Internal Revenue Service, and no controversy with
respect to taxes of any type is pending or, to the best of the
Company's knowledge, threatened. Neither the Company nor any of its
stockholders has ever filed (i) an election pursuant to Section 1362 of
the Code, that the Company be taxed as an S Corporation or (ii) a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Company and its Subsidiaries have withheld or
collected from each payment made to each of its
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SECURITIES PURCHASE AGREEMENT - PAGE 11
<PAGE> 12
employees, the amount of all taxes (including, without limitation,
federal income taxes, Federal Insurance Contribution Act taxes, Federal
Unemployment Tax Act taxes and Medicare taxes) required to be withheld
or collected therefrom, and has timely paid the same to the proper tax
receiving officers or authorized depositories.
(l) TITLE TO PROPERTY AND ASSETS.
The Company and its Subsidiaries have good and indefeasible title to or
a valid leasehold interest in all of its properties and assets, which
comprise all of the properties and assets reflected in the Balance
Sheet (except those disposed of since the Balance Sheet Date in the
ordinary course of business) and all of the properties and assets
necessary or useful for the conduct of its business as described in the
Business Plan and none of such properties or assets is subject to any
Lien of any nature whatsoever other than those the material terms of
which are described in the Balance Sheet or in the Disclosure Schedule.
(m) INTELLECTUAL PROPERTY.
The Company is the sole owner of or possesses all legal rights to all
trademarks, service marks, trademark and service mark applications,
trade names, copyrights, trade secrets, licenses, information and
proprietary rights and processes presently used by the Company or its
Subsidiaries or necessary for the conduct of the Company's or its
Subsidiaries' business as presently conducted and as proposed to be
conducted (the "Intellectual Property Rights") free and clear of any
Lien, license or other restriction. The Disclosure Schedule contains a
complete list of the Intellectual Property Rights. The Company has
taken all actions reasonable in light of its financial position to
protect the Intellectual Property Rights. The business conducted or
proposed to be conducted by the Company and its Subsidiaries does not
and will not cause the Company or any Subsidiary to infringe or violate
any of the trademarks, service marks, trade names, copyrights,
licenses, trade secrets, patents or other intellectual property rights
of any other Person, and, except as set forth in the Disclosure
Schedule, does not and will not require the Company or any Subsidiary
to obtain any license or other agreement to use any trademarks, service
marks, trade names, copyrights, licenses, patents, trade secrets or
other intellectual property rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the
Intellectual Property Rights, nor is the Company or any Subsidiary
bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and proprietary rights
and processes of any other Person. The Company has not received any
communications alleging that the Company or any Subsidiary has violated
or, by conducting its business as proposed to be conducted, would
violate any of the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and proprietary rights
and processes of any other Person. The Company does not believe that it
is or will be necessary to use any inventions or works of authorship of
its employees (or Persons it currently intends to hire) made prior to
their employment by the Company. Except as set forth in the Disclosure
Schedule, neither the Company nor any Subsidiary have granted rights to
manufacture, produce, assemble, license, market or
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SECURITIES PURCHASE AGREEMENT - PAGE 12
<PAGE> 13
sell its products to any other Person and is not bound by any agreement
that affects the Company's or any Subsidiary's exclusive rights to
develop, manufacture, assemble, distribute, market or sell its
products.
(n) INSURANCE.
The Company and each Subsidiary maintains valid policies of insurance
with respect to its properties and business of the kinds and in the
amounts not less than is customarily obtained by corporations engaged
in the same or similar business and similarly situated, including,
without limitation, workers compensation insurance and insurance
against casualty loss, public liability, libel, slander, defamation,
advertising injury and other risks. The Disclosure Schedule sets forth
a schedule and brief description of the policies of insurance currently
maintained by the Company and each Subsidiary. With respect to each
such insurance policy: (a) the policy is in full force and effect; (b)
neither the Company nor any Subsidiary is in breach or default
(including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default or permit termination,
cancellation, modification or denial of coverage under the policy and
(c) no party to the policy has repudiated any of its provisions.
(o) MATERIAL CONTRACTS AND OBLIGATIONS.
The Disclosure Schedule sets forth a list and description of the
material terms of all material agreements or commitments of any nature
to which the Company or any Subsidiary is a party or by which it is
bound, including without limitation (i) each agreement which requires
future expenditures by the Company or any Subsidiary in excess of
$50,000 or which might result in payments to the Company or any
Subsidiary in excess of $50,000, (ii) all management and similar
agreements, (iii) all employment and consulting agreements, employee
benefit, bonus, pension, profit-sharing, stock option, stock purchase
and similar plans and arrangements, and distributor and sales
representative agreements, (iv) each agreement with any stockholder,
officer or director of the Company or any Subsidiary, or any Affiliate
of such Persons, including without limitation any agreement or other
arrangement providing for the furnishing of services by, rental of real
or personal property from, or otherwise requiring payments to, any such
Person or entity, and (v) any agreement relating to the Intellectual
Property Rights. The Company has delivered to the Purchasers copies of
such of the foregoing agreements as the Purchasers have requested. All
of such agreements and contracts are valid, binding and in full force
and effect.
(p) PERMITS.
(i) The Company and each Subsidiary is and has been in
possession of all (a) material franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents,
certificates, identification and registration numbers, approvals and
orders necessary to own, lease and operate its properties
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SECURITIES PURCHASE AGREEMENT - PAGE 13
<PAGE> 14
(collectively, the "Facilities") and to carry on its business as it is
now being conducted and as proposed to be conducted as set forth in the
Business Plan, and (b) agreements, licenses and certificates or
determinations from all federal, state and local governmental agencies
and accrediting and certifying organizations having jurisdiction over
the Facilities necessary to own, lease and operate the Facilities in
the manner in which they are now being operated and as proposed to be
operated as set forth in the Business Plan (collectively, the
"Permits"). The Disclosure Schedule sets forth a list of each of the
Permits held by Company and the jurisdiction issuing the same, all of
which are now, and as of the Closing shall be, in good standing and not
subject to meritorious challenge. The Disclosure Schedule also sets
forth all actions, proceedings, investigations or surveys pending or,
to the knowledge of the Company, threatened against the Company or any
Subsidiary that could reasonably be expected to result in (1) the loss
or revocation of a Permit necessary to operate one or more Facility or
(2) the suspension or cancellation of any other Permit. Except as set
forth in the Disclosure Schedule, neither the Company nor any
Subsidiary is in conflict with, in default under or in violation of and
has not received from any governmental entity any written notice with
respect to any conflict with, default under or violation of, (A) any
law, regulation or order applicable to the Company or any Subsidiary or
by or to which any of their respective properties is bound or subject,
(B) any judgment, order or decree applicable to the Company or any
Subsidiary or (C) any of the Permits.
(ii) The Company and each Subsidiary have complied in all
material respects with all laws, regulations and orders applicable to
its present and proposed business as conducted and as proposed to be
conducted and has all material Permits and licenses required thereby.
There is no term or provision of any mortgage, indenture, contract,
agreement or instrument to which the Company or any Subsidiary is a
party or by which it is bound or of any provision of any existing
judgment, decree, order, statute, rule or regulation applicable to or
binding upon the Company or any Subsidiary, which materially adversely
affects or, so far as the Company may now reasonably foresee, in the
future is reasonably likely to materially adversely affect, the
business, prospects, assets or condition, financial or otherwise, of
the Company or any Subsidiary.
(iii) To the Company's knowledge, no Founder or any other
employee of the Company or any Subsidiary is obligated under any
contract (including any license, covenant or commitment of any nature),
or subject to any judgment, decree or order of any court or
administrative agency, that would conflict or interfere with (i) the
performance of any employee's duties as an officer, employee or
director of the Company or any Subsidiary, (ii) the use of any
employee's best efforts to promote the interests of the Company or any
Subsidiary, or (iii) the Company's and its Subsidiaries' business as
conducted or proposed to be conducted. To the best of the Company's
knowledge, no employee of the Company is in violation of any term of
any contract or covenant (either with the Company or with another
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SECURITIES PURCHASE AGREEMENT - PAGE 14
<PAGE> 15
entity) relating to employment, patents, proprietary information
disclosure, non-competition or non-solicitation.
(q) ABSENCE OF CHANGES.
Since the Balance Sheet Date, there has been no material adverse change
in the condition, financial or otherwise, net worth or results of
operations of the Company or any Subsidiary, other than changes
occurring in the ordinary course of business which changes have not,
individually or in the aggregate, had a materially adverse effect on
the business, prospects, properties or condition, financial or
otherwise, of the Company or any Subsidiary. Without limiting the
foregoing and except as set forth in the Disclosure Schedule, since the
Balance Sheet Date:
(i) neither the Company nor any Subsidiary has sold,
leased, transferred, or assigned any of its assets, tangible
or intangible, other than for a fair consideration in the
ordinary course of business;
(ii) neither the Company nor any Subsidiary has
entered into any agreement, contract, commitment, lease, or
license (or series of related agreements, contracts,
commitments, leases, and licenses) either involving more than
$50,000 or outside the ordinary course of business;
(iii) no party (including the Company) has
accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $50,000
to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary or their assets are bound;
(iv) neither the Company nor any Subsidiary has
imposed or permitted any other Person to impose any Lien upon
any of its assets, tangible or intangible;
(v) neither the Company nor any Subsidiary has made
any capital expenditure (or series of related capital
expenditures) either involving more than $50,000 or outside
the ordinary course of business;
(vi) neither the Company nor any Subsidiary has made
any capital investment in, any loan to or any acquisition of
the securities or assets of any other Person (or series of
related capital investments, loans and acquisitions) either
involving more than $50,000 outside the ordinary course of
business;
(vii) neither the Company nor any Subsidiary has
issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more
than $25,000 alone or $50,000 in the aggregate;
(viii) [RESERVED];
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SECURITIES PURCHASE AGREEMENT - PAGE 15
<PAGE> 16
(ix) neither the Company nor any Subsidiary has
canceled, compromised, waived, or released any right or claim
(or series of related rights and claims) either involving more
than $50,000 or outside the ordinary course of business;
(x) neither the Company nor any Subsidiary has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property Rights except in the
ordinary course of business;
(xi) neither the Company nor any Subsidiary has
declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(xii) neither the Company nor any Subsidiary has
experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property;
(xiii) neither the Company nor any Subsidiary has
made any loan to, or entered into any other transaction with,
any of its directors, officers and employees outside the
ordinary course of business;
(xiv) neither the Company nor any Subsidiary has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any such
contract or agreement;
(xv) neither the Company nor any Subsidiary has
granted any increase in the base compensation of any of its
directors, officers, and employees outside the ordinary course
of business;
(xvi) neither the Company nor any Subsidiary has
adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, contract
or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect
to any other benefit plan);
(xvii) neither the Company nor any Subsidiary has
made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course
of business;
(xviii) neither the Company nor any Subsidiary has
made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(xix) there has not been any other material
occurrence, event, incident, action, failure to act or
transaction outside the ordinary course of business involving
the Company or any Subsidiary or their assets or business; and
(xx) neither the Company nor any Subsidiary has
committed to do any of the foregoing.
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SECURITIES PURCHASE AGREEMENT - PAGE 16
<PAGE> 17
(r) EMPLOYEES. The Disclosure Schedule sets forth the annual salary and
any related payments or benefits of each (x) officer of the Company and (y)
Person who as an employee, consultant or manager receives annual compensation in
excess of $50,000. None of the employees of the Company or any Subsidiary is
represented by any labor union, and there is no labor strike or other labor
trouble pending with respect to the Company or any Subsidiary (including,
without limitation, any organizational drive) or, to the best of the Company's
knowledge, threatened.
(s) ENVIRONMENTAL MATTERS.
With respect to environmental matters:
(i) The Company and each Subsidiary is and has been
in compliance with all Environmental Laws (as defined below),
and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been made,
given, filed or commenced by any Person, nor has any such
making, giving, filing or commencement been threatened,
against any of them alleging any failure to comply with the
Environmental Laws, or seeking contribution towards, or
participation in, any remediation of any contamination of any
property or thing with Hazardous Materials (as defined in
paragraph 4(s)(v)). Without limiting the generality of the
preceding sentence, the Company and each Subsidiary has
obtained and been, and currently is, in compliance with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws;
(ii) Neither the Company nor any Subsidiary has any
obligation to remediate or any other liabilities of any kind
arising in connection with or under any of the Environmental
Laws, nor is there any basis for such obligation or
liabilities;
(iii) Except as set forth in the Disclosure Schedule,
all properties and equipment used in the business of the
Company and each Subsidiary are and have been free of
Hazardous Materials;
(iv) "Environmental Laws" means all federal, state
and local laws, regulations, ordinances, codes, rules,
permits, decisions, orders or decrees relating or pertaining
to the public health and safety or the environment, or
otherwise governing the generation, use, handling, collection,
treatment, storage, transportation, recovery, recycling,
removal, discharge or disposal of Hazardous Materials,
including, without limitation, the Solid Waste Disposal Act,
42 U.S.C. 6901 et seq., as amended ("SWDA," also known as
"RCRA" for a subsequent amending act), (b) the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. ss.9601 et seq., as amended ("CERCLA", (c) the Clean
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SECURITIES PURCHASE AGREEMENT - PAGE 17
<PAGE> 18
Water Act, 33 U.S.C. ss.1251 et seq., as amended ("CWA"), (d)
the Clean Air Act, 42 U.S.C. ss.7401 et seq., as amended
("CAA"), (e) the Toxic Substances Control Act, 15 U.S.C.
ss.2601 et seq., as amended ("TSCA"), (f) the Emergency
Planning and Community Right To Know Act, 15 U.S.C. ss.2601 et
seq., as amended ("EPCRKA"), and (g) the Occupational Safety
and Health Act, 29 U.S.C. ss. 651 et seq., as amended
("OSHA"); and
(v) Hazardous Materials means, without limitation,
(a) any "hazardous wastes" as defined under RCRA, (b) any
"hazardous substances" as defined under CERCLA, (c) any toxic
pollutants as defined under the Clean Water Act, (d) any
hazardous air pollutants as defined under the Clean Air Act,
(e) any hazardous chemicals as defined under TSCA, (f) any
hazardous substances as defined under EPCRKA, (g) asbestos,
(h) polychlorinated biphenyls, (i) petroleum or petroleum
products, (j) underground storage tanks, whether empty, filled
or partially filled with any substance, (k) any substance the
presence of which on the property in question is prohibited
under any Environmental Law, and (1) any other substance which
under any Environmental Law requires special handling or
notification of or reporting to any federal, state or local
governmental entity in its generation, use, handling,
collection, treatment, storage, re-cycling, treatment,
transportation, recovery, removal, discharge or disposal.
(t) ERISA.
(i) Except as set forth in the Disclosure Schedule, neither
the Company nor any Subsidiary maintains or contributes to any (a)
nonqualified deferred compensation, bonus, retirement or retiree health
plans or arrangements, (b) qualified defined contribution or defined
benefit plans or arrangements which are employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974 ("ERISA")), or (c) employee welfare benefit plans (as
defined in Section 3(l) of ERISA), or material fringe benefit plans or
programs. Neither the Company nor any Subsidiary has within the past
five years, contributed to any multi-employer pension plan (as defined
in Section 3(37) of ERISA). Neither the Company nor any Subsidiary
maintains or contributes to any employee welfare benefit plan which
provides health, accident or life insurance benefits to former
employees, their spouses or dependents, other than in accordance with
Section 4980B of the Code.
(ii) With respect to each employee pension benefit plan, all
contributions which are due (including all employer contributions and
employee salary reduction contributions) have been paid to such
employee pension benefit plan, all contributions, if any, for prior
plan years have been paid and all contributions for the current plan
year will be paid prior to the filing of the federal income tax return
for the Company and each Subsidiary for the current plan year. With
respect to the employee welfare benefit plans, all premiums or other
payments which are due have been paid.
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SECURITIES PURCHASE AGREEMENT - PAGE 18
<PAGE> 19
(iii) The Company has furnished to the Purchasers true and
complete descriptions of each employee pension benefit plan and each
employee welfare benefit plan.
(u) TRANSACTIONS WITH RELATED PARTIES. Except as set forth in the
Disclosure Schedule, no employee, officer, director or stockholder of the
Company or any Subsidiary or member of his or her immediate family is indebted
to the Company or any Subsidiary , nor is the Company or any Subsidiary indebted
(or committed to make loans or extend or guarantee credit) to any of them, other
than (i) for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company or any Subsidiary, and
(iii) for other employee benefits made generally available to all employees. To
the Company's knowledge, none of such persons has any direct or indirect
ownership interest in any Person with which the Company or any Subsidiary is
affiliated or with which the Company or any Subsidiary has a business
relationship, or any Person that competes with the Company or any Subsidiary,
except that employees, stockholders, officers or directors of the Company and
each Subsidiary and members of their immediate families may own less than five
percent (5%) of the outstanding stock in publicly traded companies that may
compete with the Company and each Subsidiary. To the Company's knowledge, no
officer, director or stockholder or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company or
any Subsidiary (other than such contracts as relate to any such person's
ownership of capital stock or other securities of the Company).
(v) BUSINESS PLAN.
The Company has furnished to each Purchaser a complete and correct copy of the
Business Plan. While the Company does not warrant that it will achieve the
financial projections appearing in the Business Plan, the Business Plan
discloses all assumptions used in the preparation of these projections, all such
assumptions are reasonable, the Company has a reasonable basis for making these
projections and has no reason to believe that the Company will be unable to meet
these projections, and these projections fairly present the information which
they purport to show.
(w) NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS. No form of
general solicitation or general advertising was used by the Company or, to the
best of its actual knowledge, any other Person acting on behalf of the Company,
in connection with the offer and sale of the Closing Shares or Debentures.
Neither the Company, nor, to its knowledge, any Person acting on behalf of the
Company, has, either directly or indirectly, sold or offered for sale to any
Person (other than the Purchasers) any Debentures or, within the six months
prior to the date hereof, any shares of Common Stock or security similar to the
Debentures, except as contemplated by this Agreement, and the Company represents
that neither itself nor any Person authorized to act on its behalf (except that
the Company makes no representation as to the Purchasers and their Affiliates)
will sell or offer for sale any such security to, or solicit any offers to buy
any such security from, or otherwise approach or negotiate in respect thereof
with, any Person or Persons so as
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SECURITIES PURCHASE AGREEMENT - PAGE 19
<PAGE> 20
thereby to cause the issuance or sale of any of the securities referenced herein
to be in violation of any of the provisions of Section 5 of the Securities Act.
(x) INTERNAL ACCOUNTING CONTROLS. The minute books of the Company and
each Subsidiary contain complete and accurate records of all meetings and other
corporate actions of its shareholders and its Board of Directors and committees
thereof. The stock ledger of the Company and each Subsidiary is complete and
reflects all issuances, transfers, repurchases and cancellations of shares of
capital stock of the Company and such Subsidiary, as applicable. The Company and
each Subsidiary maintains a system of internal accounting controls sufficient,
in the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) YEAR 2000 COMPLIANCE.
(i) COMPUTER AND OTHER SYSTEMS. (a) All software programs and
computer hardware that are owned, leased or licensed by the Company and
each Subsidiary, or used by third parties on behalf of the Company and
each Subsidiary ("Computer Systems"), are designated to be used prior
to, during and after the calendar year 2000 A.D., including leap years;
(b) all other operational systems that use software or equipment that
are owned, leased, or licensed by the Company and each Subsidiary, or
used by third parties on behalf of the Company and each Subsidiary
("Other Systems"), are designated to be used prior to, during and after
the calendar year 2000 A.D., including leap years; (c) the Computer
Systems and Other Systems will properly operate during each such period
without error or degradation of performance caused by a lack of Year
2000 Capabilities, and (d) the Computer Systems and Other Systems will
properly operate during each such period without requiring intervention
or modification to Date Data.
(ii) CAPABILITIES OF SUPPLIERS, VENDORS AND LANDLORDS. To the
best of the Company's knowledge after specific inquiry of all of its
material suppliers, vendors and landlords, the Company and each
Subsidiary will not suffer a loss from interruption or cessation of
business operations, in whole or in part, as a result of such
suppliers, vendors or landlords failing to provide materials, labor,
supplies or access to leased space for the operation of the Company and
each Subsidiary as a result of such suppliers or vendors not having
Year 2000 Capabilities.
(iii) For purposes of this Agreement, (x) "Year 2000
Capabilities" means the ability to: (i) manage and manipulate data
involving dates, including single century formulas and multi-century
formulas, in a manner that will not cause an
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SECURITIES PURCHASE AGREEMENT - PAGE 20
<PAGE> 21
abnormally ending scenario or generate incorrect values or invalid
results involving such dates, (ii) include the indication of proper
century dates in all date-related user interface functions and date
fields, and (iii) operate with proper century dates in date-related
software or hardware interface functions and (y) "Date Data" means any
existing data or input of date which includes an indication of or
reference to date.
(z) FOREIGN PRACTICES. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any employee or agent of
the Company or any Subsidiary has made any payments of funds of the
Company or any Subsidiary, or received or retained any funds, in each
case in violation of any law, rule or regulation.
(aa) DISCLOSURES. Neither this Agreement, any Related
Agreement nor any exhibit hereto or thereto, nor any report,
certificate or instrument furnished to any of the Purchasers in
connection with the transactions contemplated in this Agreement or the
Related Agreements, when read together, contains any untrue statement
of a material fact or omits to state a material fact necessary in order
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company
knows of no information or fact that has or would have a material
adverse effect on the business, prospects, assets or condition,
financial or otherwise, of the Company and each Subsidiary which has
not been disclosed to the Purchasers in this Agreement, the Related
Agreements, the exhibits hereto or thereto, or other written materials
furnished to the Purchasers.
(bb) REPRESENTATIONS IN RELATED AGREEMENTS. Each of the
representations and warranties contained in this Section 4 is in
addition to, and not in lieu of, any representation or warranty made by
the Company in any Related Agreement.
5. REPRESENTATIONS AND WARRANTIES OF FOUNDERS.
The Founders jointly and severally represent and warrant to each of the
Purchasers as follows:
(a) CONFLICTING AGREEMENTS. The Founders are not, as a result
of the nature of the business conducted or proposed to be conducted by
the Company, or for any other reason, in violation of (i) any fiduciary
or confidential relationship, (ii) any term of any contract or covenant
(either with the Company or with another entity) relating to
employment, patents, proprietary information disclosure,
non-competition or non-solicitation or (iii) any other contract or
agreement, or any judgment, decree or order of any court or
administrative agency, in each case relating to or affecting the right
of any Founder to be employed by the Company. No such relationship,
term, judgment, decree or order conflicts with any Founder's
obligations to use his best efforts to promote the interests of the
Company nor does the execution, delivery and performance of this
Agreement or any Related Agreement by any Founder or the activities of
any Founder as an employee, officer or director of the Company,
conflict with any such relationship, term, judgment, decree or order.
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SECURITIES PURCHASE AGREEMENT - PAGE 21
<PAGE> 22
(b) LITIGATION.
There is no action, suit or proceeding, or governmental inquiry or
investigation, pending or, to the knowledge of any Founder, threatened
against a Founder, and, to the knowledge of any Founder, there is no
basis for any such action, suit, proceedings or governmental inquiry or
investigation which could reasonably be expected to have a material
adverse effect on the Company or to result in any change in ownership
of the Company's capital stock (provided Kerry Rogers has disclosed
that he is under investigation by various federal and state agencies).
(c) STOCKHOLDER AGREEMENTS.
Except as contemplated by this Agreement, no Founder is a party to and
has no knowledge of any agreements, written or oral, relating to the
acquisition (including without limitation rights of first refusal or
preemptive rights), sale, transfer or other disposition, registration
under the Securities Act or voting of the capital stock of the Company.
(d) REPRESENTATIONS CORRECT.
To the knowledge of the Founders, each of the representations and
warranties of the Company contained in Section 4 is true and correct.
(e) DISCLOSURE.
Neither this Agreement, any Related Agreement nor any exhibit hereto or
thereto, nor any report, certificate or instrument furnished to any of
the Purchasers in connection with the transactions contemplated by this
Agreement or the Related Agreements when read together, contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein,
in light of the circumstances under which they were made, not
misleading. The Founders know of no information or fact that has or
would have a material adverse effect on the business, prospects, assets
or condition, financial or otherwise, of the Company and each
Subsidiary which has not been disclosed to the Purchasers in this
Agreement, the Related Agreements, the exhibits hereto or thereto, or
other written materials furnished to the Purchasers.
(f) REPRESENTATIONS IN RELATED AGREEMENTS. Each of the
representations and warranties contained in this Section 5 is in
addition to, and not in lieu of, any representation or warranty made
each Founder in any Related Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each of the Purchasers severally represents and warrants to the Company
as follows:
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SECURITIES PURCHASE AGREEMENT - PAGE 22
<PAGE> 23
(a) PURCHASE FOR INVESTMENT.
Such Purchaser is acquiring the Closing Shares for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or
selling the same, and, except as contemplated by this Agreement, the
Related Agreements, and the exhibits hereto and thereto, such Purchaser
has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition
thereof. Such Purchaser acknowledges the restrictions on transfer of
the Closing Shares as set forth in Section 9 of this Agreement. Nothing
contained in this Agreement shall limit or restrict the ability of a
Purchaser from pledging or granting a Lien in respect of any of the
Debentures or Closing Shares to secure bona fide obligations or
indebtedness of the Purchaser.
(b) AUTHORITY.
Such Purchaser has full power and authority to enter into and to
perform this Agreement in accordance with its terms. Any Purchaser
which is a corporation, partnership or trust represents that it has not
been organized, reorganized or recapitalized specifically for the
purpose of investing in the Company.
(c) ACCREDITED INVESTOR.
Such Purchaser is an "accredited investor," as such term is defined in
Regulation D promulgated under the Securities Act.
7. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS.
The obligation of each of the Purchasers to purchase Debentures at the
Closing is subject to the fulfillment or the waiver by each Purchaser of each of
the following conditions on or before the Closing.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Sections 4 and 5 shall
have been true at and as of the date of this Agreement and shall be
true at and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of
the Closing.
(b) PERFORMANCE.
The Company, each Founder and each other Current Stockholder shall have
performed and complied with all agreements and conditions contained in
this Agreement and the Related Agreements required to be performed or
complied with by the Company or such Founder or other Current
Stockholder prior to or at the Closing.
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SECURITIES PURCHASE AGREEMENT - PAGE 23
<PAGE> 24
(c) OPINION OF COUNSEL.
Each Purchaser shall have received an opinion from counsel for the
Company, dated the date of the Closing, addressed to the Purchasers,
satisfactory in form and substance to the Purchasers and their special
counsel and substantially in the form attached as Exhibit E.
(d) RELATED AGREEMENTS.
(i) Debentures in the aggregate principal amount of
$6,000,000 in the form attached hereto as Exhibit B shall have
been executed and delivered by the Company at the Closing.
(ii) The Stockholders Agreement attached hereto as
Exhibit F (the "Stockholders Agreement") shall have been
executed and delivered by the Company, the Founders and each
of the other current stockholders of the Company
(collectively, with the Founders, the "Current Stockholders")
and each of the Purchasers at or prior to the Closing. All
actions to be taken by the Company and the Current
Stockholders as contemplated by the Stockholders Agreement
shall have occurred, including, without limitation, all
actions necessary to (x) elect a Board of Directors of the
Company of five (5) members, three (3) of which shall be the
Purchaser Directors, (y) appoint Steve Loglisci as the
President and Treasurer of the Company, and (z) appoint Kerry
Rogers as the Chief Technology Officer of the Company.
(iii) [RESERVED].
(iv) [RESERVED].
(v) The Security Agreement and the Pledge Agreement
attached hereto as Exhibits G and H (collectively, the
"Security Agreement") shall have been executed and delivered
by the Company, together with the delivery to the Purchasers
of UCC financing statements duly executed by the Company
necessary to perfect the collateral pledged thereunder (which
represents all of the stock of the Company's two subsidiaries
and all of the assets of the Company).
(vi) The Registration Rights Agreement attached
hereto as Exhibit I (the "Registration Rights Agreement")
shall have been executed and delivered by the Company and each
of the Purchasers at or prior to the Closing.
(vii) [RESERVED].
(viii) [RESERVED].
(ix) The Closing Shares shall have been duly issued
to the Purchasers by the Company at the Closing.
(x) Each of the Founders and the Company shall have
executed and delivered the form of Employment and
Noncompetition Agreement attached hereto as Exhibit J
(collectively, the "Employment Agreements").
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SECURITIES PURCHASE AGREEMENT - PAGE 24
<PAGE> 25
(xi) Kerry Rogers shall execute and deliver to the
Company and the Purchasers the Pari Passu Agreement in the
form attached hereto as Exhibit K (the "Pari Passu Agreement")
which (x) confirms that the only sum owed by the Company or
its Subsidiaries to Mr. Rogers or his Affiliates at the
Closing is $164,000 (the "Rogers Note") and (y) provides the
terms of repayment of the interest and principal due on the
Rogers Note.
(xii) [RESERVED]
(e) [RESERVED]
(f) CERTIFICATES AND DOCUMENTS.
The Company shall have delivered to the Purchasers or special counsel
to the Purchasers:
(i) a certificate dated the date of the Closing
certifying to the fulfillment of the conditions specified in
this Section 7;
(ii) certificates, as of the most recent practicable
dates, as to the existence and corporate good standing of the
Company and each Subsidiary;
(iii) Certificates of Incorporation and Bylaws of the
Company and each Subsidiary, certified by its Secretary as of
the date of the Closing (with the Certificate of Incorporation
of the Company amended in a form acceptable to the Purchasers
to increase the authorized shares of Common Stock to 100,000
shares, waive any preemptive rights of the stockholders, and
provide that a vote of only a majority of the outstanding
Common Stock is necessary to approve any merger, sale of all
or substantially all assets, share exchange or similar action
of the Company);
(iv) resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection
with this Agreement, the Related Agreements and the
transactions contemplated herein and therein, certified by the
Secretary of the Company as of the date of the Closing; and
(v) such other documents relating to the transactions
contemplated in this Agreement and the Related Agreements as
any Purchaser may reasonably request.
(g) EXCHANGE OF ASSUMED DEBENTURES.
At the Closing, Infinity shall have surrendered the Assumed Debentures
to the Company in exchange for the Restated Debentures and in complete
discharge and satisfaction of the indebtedness represented by the
Assumed Debentures.
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SECURITIES PURCHASE AGREEMENT - PAGE 25
<PAGE> 26
(h) SECURITY INTERESTS. The Purchasers shall have received
evidence satisfactory to them that Uniform Commercial Code financing
statements in proper form have been executed by all proper parties,
that such financing statements have been filed in all necessary filing
offices and that all security interests created under the Related
Agreements are of first priority.
(i) USE OF PROCEEDS. The Purchasers shall have received the
Use of Proceeds Statement in a form acceptable to the Purchasers.
(j) AVANTEL AMENDMENT. The contractual agreement between the
Company and Avantel shall have been amended on terms satisfactory to
the Purchasers, with evidence of the execution and delivery of such
amendment in a form acceptable to the Purchasers.
(k) OTHER MATTERS.
All corporate and other proceedings in connection with the transactions
contemplated in this Agreement and the Related Agreements and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and
their special counsel, and the Purchasers and their special counsel
shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
The Purchasers shall advance all of the New Advance to the Company at
the Closing or on such date thereafter as the Company shall request; provided,
the Company shall not pay any more funds to Avantel after the date hereof until
the condition in clause (j) above is satisfied.
8. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to issue and sell Debentures and Closing
Shares to the Purchasers at the Closing are subject to fulfillment or the waiver
by the Company of each of the following conditions on or before the Closing:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchasers contained in
Section 6 shall be true at and as of the Closing with the same effect
as though such representations and warranties had been made on and as
of the date of the Closing.
(b) INVESTMENT.
At the Closing, (a) Infinity shall have surrendered the Assumed
Debentures to the Company as payment of the purchase price for
$2,697,610 of the Debentures to be purchased at the Closing and (b) the
Purchasers shall have tendered to the Company (I) $250,000 of the New
Advance as contemplated by the Letter Agreement (by direct remittance
to Avantel at the direction of the Company) for the purchase of the
remaining Debentures to be purchased at the Closing by such Purchasers
and (II) $24 for the purchase of the Closing Shares to be purchased at
the Closing by the Purchasers.
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SECURITIES PURCHASE AGREEMENT - PAGE 26
<PAGE> 27
(c) OTHER MATTERS.
All corporate and other proceedings in connection with the transactions
contemplated in this Agreement and the Related Agreements and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Company and its
counsel, and the Company and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
9. AFFIRMATIVE COVENANTS OF THE COMPANY.
(a) INSPECTION AND OBSERVATION.
The Company shall permit each Purchaser or any authorized
representative of a Purchaser, to visit and inspect the properties of
the Company and each Subsidiary, including its corporate and financial
records, and to discuss its business and finances with officers of the
Company, during normal business hours following reasonable notice,
without interference to the conduct of the Company's or any
Subsidiary's business and as often as may be reasonably requested.
(b) FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company shall deliver to each Purchaser:
(i) within 90 days after the end of each fiscal year
of the Company, a consolidated audited balance sheet of the
Company and each Subsidiary as at the end of such year and
consolidated audited statements of operations and of cash
flows of the Company and each Subsidiary for such year,
certified by public accountants of established national
reputation selected by the Company, and prepared in accordance
with GAAP;
(ii) within 45 days after the end of each of the
first three fiscal quarters of each fiscal year a consolidated
unaudited balance sheet of the Company and each Subsidiary as
at the end of such quarter and consolidated unaudited
statements of operations and of cash flows of the Company and
each Subsidiary for such quarter and for the current fiscal
year to the end of such quarter, prepared in accordance with
GAAP, and setting forth in comparative form the Company's
Budget for the corresponding periods for the current fiscal
year;
(iii) within 30 days after the end of each month, a
consolidated unaudited balance sheet of the Company and each
Subsidiary as at the end of such month and consolidated
unaudited statements of operations and of cash flows of the
Company and each Subsidiary for such month and for the current
fiscal year to the end of such month, setting forth in
comparative form the Company's Budget for the corresponding
periods for the current fiscal year, accompanied by an
executive
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SECURITIES PURCHASE AGREEMENT - PAGE 27
<PAGE> 28
summary of the activities of the Company and each Subsidiary
during such month, signed by the Company's chief executive
officer and chief financial officer;
(iv) as soon as available, but in any event not later
than 30 days prior to the beginning of each new fiscal year,
an operating and capital budget for the Company and each
Subsidiary for such fiscal year approved by the Board of
Directors (the "Budget"); and
(v) with reasonable promptness, such other notices,
information and data with respect to the Company and each
Subsidiary as the Company delivers to the holders of its
Common Stock and such other information and data as such
Purchaser may from time to time reasonably request.
The financial statements delivered pursuant to clauses (ii) and (iii)
shall be accompanied by a certificate of the chief financial officer of the
Company stating that (x) such statements have been prepared in accordance with
GAAP consistently applied and fairly present the financial condition and results
of operations of the Company and each Subsidiary at the date thereof and for the
periods covered thereby and (y) no Default or Event of Default has occurred or
then exists.
(c) MATERIAL CHANGES AND LITIGATION.
The Company shall promptly notify each Purchaser of any Default or
Event of Default or of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of the Company
or any Subsidiary and of any litigation or governmental proceeding or
investigation brought or, to the Company's knowledge, threatened
against the Company or any Subsidiary, or against any officer,
director, employee or stockholder of the Company or any Subsidiary
materially adversely affecting or which, if adversely determined, could
reasonably be expected to materially adversely affect its business,
prospects, assets or condition, financial or otherwise.
(d) OTHER AFFIRMATIVE COVENANTS.
Unless the prior approval of holders of at least 66-2/3% of the
Debentures (by aggregate outstanding principal balance thereof) (the
"Majority Holders") has been obtained, the Company shall (and shall
cause each Subsidiary to):
(i) maintain in full force and effect all leases,
Permits and other rights necessary to the operation of the
business of the Company and each Subsidiary;
(ii) maintain its corporate existence and its
business and maintain all properties which are reasonably
necessary for the conduct of its business, now or hereafter
owned by it, in good repair, working order and condition,
reasonable wear and tear excepted, and make any replacements
of properties necessary for the successful operation of its
business;
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SECURITIES PURCHASE AGREEMENT - PAGE 28
<PAGE> 29
(iii) maintain on all insurable properties now or
hereafter owned by it insurance against loss or damage by fire
or other casualty to the extent customary with respect to
similar properties of companies conducting business similar to
that conducted by it, and to maintain public liability and
workers' compensation insurance covering it to the extent
customary with respect to companies conducting business
similar to the business conducted by the Company and each
Subsidiary;
(iv) comply in all material respects with all
material contracts, Permits or other agreements or instruments
to which it is now or hereafter a party or by which it or any
of its properties and assets are now or hereafter bound,
unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate
reserves have been established on its books with respect
thereto in accordance with GAAP;
(v) pay and discharge when payable all taxes,
assessments and governmental charges imposed upon its
respective properties or upon the income or profits therefrom
(in each case before the same becomes delinquent and before
penalties accrue thereon) and all claims for labor, materials
or supplies which if unpaid might by law become a lien or
other encumbrance upon any of its respective properties,
unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with GAAP) have been
established on its respective books with respect thereto;
(vi) comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of
which could reasonably be expected to have a material adverse
effect on its financial condition, operating results or
business prospects of the Company or any Subsidiary; and
(vii) maintain proper books of record and account
which fairly represent its financial condition and results of
operations and make provisions on its financial statements for
all such proper reserves as in each case are required in
accordance with GAAP;
(e) KEY PERSONNEL LIFE INSURANCE.
The Company shall on or prior to the Closing obtain, and will use its
best efforts to maintain in force with a financially sound and
reputable insurer, one or more policies for term life insurance on the
life of Kerry Rogers in the aggregate amount of at least $3,000,000.
Each such policy shall name the Purchasers as the sole beneficiary and
as loss payee (to the extent of the indebtedness due under the
Debentures, and thereafter the Company as the sole beneficiary and as
loss payee) of all amounts payable under such policy and shall not be
cancelable by the Company without the prior approval of the Majority
Holders.
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SECURITIES PURCHASE AGREEMENT - PAGE 29
<PAGE> 30
(f) [RESERVED]
(g) ELECTION OF PURCHASER DIRECTORS.
(i) The Company shall use its best efforts to enforce
the obligations of the Current Stockholders under the
Stockholders Agreement and shall not permit to occur any
amendment to the Stockholders Agreement without the prior
written consent of the Majority Holders.
(ii) The Company will promptly reimburse all
Directors for all reasonable costs incurred in connection with
attending any meeting of the Board of Directors of the Company
or otherwise incurred in connection with fulfilling their
duties as Directors of the Company.
(h) USE OF PROCEEDS. The proceeds of the New Advance will be
used by the Company for working capital and other general corporate
purposes. Specifically, at the Closing the Company shall provide a
detailed use of the proceeds of the New Advance and direct payment
instructions for various account payees, their addresses, the amounts
to be so paid, wire transfer instructions, the name of a contact person
of such payee and an explanation of the reason for the incurrence of
such payable (the "Use of Proceeds Statement"). All funds directly paid
to such third parties shall be deemed to have been advanced by the
Purchasers to the Company hereunder and under the Debentures.
(i) STOCK OPTION PLAN. Following the Closing, the Board of
Directors shall adopt a stock option plan of the Company providing for
the issuance of up to a maximum aggregate of 360 shares of Common Stock
(inclusive of all shares previously authorized and/or issued pursuant
to any stock option plan of the Company) to senior executives or other
employees of the Company; provided, however, the Founders acknowledge
that no current intention exists to include the Founders in such plan.
10. NEGATIVE COVENANTS. Unless the prior approval of the Majority
Holders has been obtained, the Company shall not, and shall not allow any
Subsidiary to:
(i) Effect any sale, lease, assignment, transfer,
exchange or other conveyance of all or substantially all of
the assets of the Company or any Subsidiary, or any
consolidation or merger involving the Company or any
reclassification or other change of any capital stock or any
recapitalization of the Company, or any dissolution,
liquidation or winding up of the Company or, make any
agreement or become obligated to do so;
(ii) Enter into or engage in any line of business
other than as described in the Business Plan and related
activities;
(iii) Declare or pay any dividends or declare or make
any other distribution,
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SECURITIES PURCHASE AGREEMENT - PAGE 30
<PAGE> 31
direct or indirect on account of the Common Stock (or any
other shares of capital stock of the Company) or set apart any
sum for any such purpose;
(iv) Purchase, redeem or otherwise acquire for value
(or pay into or set aside as a sinking fund for such purpose)
any of the Common Stock (or any other shares of capital stock
of the Company); provided, however, that this restriction
shall not apply to the repurchase of shares of Common Stock
from employees, officers, directors, consultants or other
persons performing services for the Company or any Subsidiary
pursuant to agreements under which the Company has the option
to repurchase such shares, such as the termination of
employment or service to the Company or any Subsidiary;
(v) Create or commit to create a Subsidiary unless
all of the outstanding securities of such Subsidiary are owned
by the Company or by a Subsidiary of the Company; provided
that the Company owns all of the outstanding securities of
such Subsidiary;
(vi) Incur any Debt not in existence on the date
hereof other than Debt owed to the Purchasers and additional
Debt after the Closing not to exceed $500,000 in the aggregate
(unless approved by the Purchaser Directors);
(vii) Incur any Lien, or permit to exist any Lien, of
any kind against any of the assets or properties of the
Company or any of its Subsidiaries, except the Liens granted
to the Purchasers and Permitted Liens;
(viii) Enter into any transaction with an Affiliate
or make any payment to an Affiliate (whether in cash or
property) or any type except on terms to the Company or such
Subsidiary no less favorable than terms that could be obtained
by the Company or such Subsidiary from a Person that is not an
Affiliate of the Company, as determined in good faith by the
Board of Directors of the Company;
(ix) Make any expenditure not specified in the Budget
in excess of $5,000 or become liable under any agreement which
requires annual payments not specified in the Budget in excess
of $5,000 unless approved in advance by either (i) the
President (currently Steve Loglisci) and Kerry Rogers (so long
as he owns shares of Common Stock) or (ii) the Board of
Directors of the Company; or
(x) Make payments of salary, bonus or otherwise
provide compensation (including benefits) to its officers or
employees in excess of the amounts listed on item 4.r. of the
Disclosure Schedule; provided in no event will any such
Persons or their Affiliates receive any stock options or other
securities as a result of serving as an officer, director,
employee or consultant to or of the Company or any of its
Subsidiaries except as set forth in any Approved Plan.
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SECURITIES PURCHASE AGREEMENT - PAGE 31
<PAGE> 32
11. TRANSFERS OF SECURITIES.
(a) RESTRICTIONS.
The restrictions on the sale or transfer of the Closing Shares set
forth in this Section 11 shall cease to apply to such Closing Shares
(i) upon any sale of such Closing Shares pursuant to the Registration
Rights Agreement, Section 4(l) of the Securities Act, or Rule 144 under
the Securities Act or (ii) at such time as such Closing Shares become
eligible for resale under Rule 144(k) under the Securities Act.
(b) REQUIREMENTS FOR TRANSFER.
(i) The Closing Shares shall not be sold or
transferred unless either (a) they first shall have been
registered under the Securities Act or (b) the Company first
shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that
such sale or transfer is exempt from the registration
requirements of the Securities Act.
(ii) Notwithstanding the foregoing, no registration
or opinion of counsel shall be required for (a) a transfer by
a Purchaser to an Affiliate which agrees in writing to be
subject to the terms of this Section 11 to the same extent as
if such Affiliate were an original Purchaser hereunder, or (b)
a transfer made in accordance with Rule 144 under the
Securities Act.
(c) LEGENDS.
Each certificate representing Closing Shares shall bear a legend
substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."
The foregoing legend shall be removed from the certificates
representing Closing Shares at the request of the holder thereof, at such time
as they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
(d) DEBENTURES. Each Debenture may be sold or transferred,
together with the Security Agreement, by the Purchasers without regard
to the restrictions contained in this Section 11, unless in the written
opinion of counsel to the Company the Debentures are a security (as
such term is defined in Section 2(1) of the Securities Act), whereupon
the Debentures may be sold or transferred on the same basis as the
Closing Shares pursuant to the foregoing provisions.
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SECURITIES PURCHASE AGREEMENT - PAGE 32
<PAGE> 33
(e) RIGHT OF PARTICIPATION. Notwithstanding the foregoing, the
Purchasers may assign or participate 50% or less of the Closing Shares
and any portion of the Debentures (together with all rights of the
Purchasers under this Agreement and the Related Agreements associated
therewith) to AXIS or any other Person without the consent or approval
of the Company or any Founder or any other Current Stockholders, which
assignee shall (x) make representations and warranties to the Company
substantially similar to those set forth in Section 6 hereof as made by
the Purchasers and (y) agree to be bound by the terms of this Agreement
and the Related Agreements (including the transfer restrictions set
forth in this Section 11).
12. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS.
The rights and obligations of each Purchaser under this Agreement and
each Related Agreement may be assigned by such Purchaser to any Person
or entity to which Debentures are transferred by such Purchaser, and
such transferee shall be deemed a "Purchaser" for purposes of this
Agreement.
(b) CONFIDENTIALITY.
Except as required by law, each Purchaser agrees that it will keep
confidential and will not disclose or divulge any confidential,
proprietary or secret information which such Purchaser may obtain from
the Company pursuant to financial statements, reports and other
materials submitted by the Company to such Purchaser pursuant to this
Agreement or otherwise, or pursuant to visitation or inspection rights
granted hereunder, unless such information is known, or until such
information becomes known, to the public; provided, however, that a
Purchaser may disclose such information (i) to its attorneys,
accountants, consultants and other professionals to the extent
necessary to obtain their services in connection with its investment in
the Company, (ii) to any prospective purchaser of any Debentures from
such Purchaser as long as such prospective purchaser agrees in writing
to be bound by the provisions of this Section 12 or (iii) to any
Affiliate of such Purchaser or to a partner or shareholder of such
Purchaser.
(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All agreements, representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the closing of
the transactions contemplated herein, regardless of any investigation
by the Purchasers or on behalf of the Purchasers.
(d) EXPENSES.
The Company agrees to pay and hold the Purchasers and holders of the
Debentures harmless from liability for the payment of:
(i) the fees and expenses of the Purchasers,
including the reasonable fees and
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SECURITIES PURCHASE AGREEMENT - PAGE 33
<PAGE> 34
expenses of Arter & Hadden, LLP, special counsel to the
Purchasers, arising in connection with the negotiation and
execution of this Agreement, the Related Agreements and
consummation of the transactions contemplated herein. At the
Closing, the Purchasers shall provide an estimate of such
reimbursable amounts (the "Estimated Expense Reimbursement
Fee"). To the extent the actual fees and expenses of the
Purchasers exceed the Estimated Expense Reimbursement Fee, the
Company shall promptly pay such excess to the Purchasers or,
at their election, their counsel;
(ii) the fees and expenses incurred with respect to
the interpretation of, or any amendments or waivers to this
Agreement or the Related Agreements (whether or not the same
become effective):
(iii) if a Purchaser or other holder of Debentures or
Conversion Shares desires to sell or otherwise transfer any or
all of the Debentures or Conversion Shares held by it and
counsel for the Company declines to render a legal opinion to
such Purchaser or holder, without cost or expense to such
Purchaser or holder, whether or not registration under the
Securities Act will be required for such sale or transfer, the
fees and expenses of counsel for such Purchaser or holder in
obtaining such an opinion;
(iv) the fees and expenses incurred in reviewing any
registration statement or prospectus or any amendments or
supplements thereto prepared pursuant to the Registration
Rights Agreement;
(v) the fees and expenses incurred in connection with
any requested waiver of the right of any holder of Debentures
or the consent of any holder of Debentures to contemplated
acts of the Company not otherwise permissible by the terms of
this Agreement or the Related Agreements;
(vi) stamp and other taxes, excluding income taxes,
which may be payable with respect to the execution and
delivery of this Agreement or the issuance, delivery or
acquisition of the Debentures or the Closing Shares;
(vii) the fees and expenses incurred in respect of
the enforcement of the rights granted under this Agreement and
the Related Agreements;
(viii) all costs, fees and expenses incurred by the
Company in its performance of and compliance with this
Agreement and the Related Agreements; and
(ix) fees and expenses incurred by each such Person
in any filing with any governmental with respect to its
investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions
such Person.
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SECURITIES PURCHASE AGREEMENT - PAGE 34
<PAGE> 35
(e) NOTICES.
All notices, requests, consents, and other communications under this
Agreement shall be in writing and shall be delivered personally or by
facsimile transmission or by overnight delivery service or 72 hours
after having been mailed by first class certified or registered mail,
return receipt requested, postage prepaid:
If to the Company, at its address set forth on the signature page
hereto, or at such other address or addresses as may have been furnished in
writing by the Company to the Purchasers.
If to a Purchaser, at its address set forth on the signature page
hereto, or at such other address or addresses as may have been furnished to the
Company in writing by such Purchaser.
(f) BROKERS.
The Company, the Founders and the Purchasers each represent and warrant
to the other parties hereto that it has not retained or engaged any
finder or broker in connection with the transactions contemplated in
this Agreement. The Company, the Founders and each Purchaser will
indemnify and save the other parties harmless from and against any and
all claims, liabilities or obligations with respect to brokerage or
finders fees or commissions, or consulting fees in connection with the
transactions contemplated in this Agreement asserted by any Person on
the basis of any statement or representation alleged to have been made
by such indemnifying party.
(g) ENTIRE AGREEMENT.
This Agreement, the exhibits hereto and the Related Agreements embody
the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.
(h) AMENDMENTS AND WAIVERS.
Except as otherwise expressly set forth in this Agreement, any term of
this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), with the written consent of
the Company and the Majority Holders. Any amendment or waiver effected
in accordance with this Section 12 shall be binding upon each holder of
any Debentures, each future holder of all such Debentures and the
Company. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
(i) COUNTERPARTS.
This Agreement may be executed by facsimile signature and in one or
more counterparts,
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SECURITIES PURCHASE AGREEMENT - PAGE 35
<PAGE> 36
each of which shall be deemed to be an original, but all of which shall
be one and the same document.
(j) HEADINGS.
The headings of this Agreement are for convenience only and do not
constitute a part of this Agreement.
(k) SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
(l) RULES OF CONSTRUCTION.
Each covenant contained in this Agreement and each Related Agreement
shall be construed (absent an express contrary provision therein) as
being independent of each other covenant contained herein and therein
and compliance with one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any or all
other covenants. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this
Agreement. The term "to the Company's knowledge" shall mean the
knowledge of the Company after reasonable inquiry and investigation
concerning the subject matter of the representation and warranty. Any
statements, representations or warranties that are based upon the
knowledge of the Company shall be deemed to have been made after
reasonable inquiry by the Company with respect to the matter in
question. Whenever the terms "satisfactory to Purchaser", "determined
by Purchaser", "acceptable to Purchaser", "consent of Purchaser",
"approved by Purchaser", "as Purchaser shall elect", "as Purchaser
shall request" or similar terms used in this Agreement or any Related
Agreement with respect to the Purchasers (or the Majority Holders, as
applicable), except as otherwise specifically provided herein or
therein, such terms shall mean satisfactory to, at the election of,
determined by, acceptable to or requested by, as applicable, such
Purchasers (or Majority Holders, as applicable) in their sole and
absolute discretion.
(m) GOVERNING LAW.
THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEVADA OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEVADA.
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SECURITIES PURCHASE AGREEMENT - PAGE 36
<PAGE> 37
(n) FURTHER ASSURANCES.
Each party to this Agreement hereby covenants and agrees, without the
necessity of any further consideration, to execute and deliver any and
all such further documents and take any and all such other actions as
may be necessary or appropriate to carry out the intent and purposes of
this Agreement and to consummate the transactions contemplated herein.
(o) INDEMNIFICATION.
The Company without limitation as to time, will indemnify each
Purchaser and its agents and representatives against, and hold each
Purchaser and its agents and representatives harmless from, all losses,
claims, damages, liabilities, costs (including the costs of preparation
and attorneys' fees and expenses) (collectively, the "Losses") incurred
pursuant to any investigation or proceeding against the Company, any
Purchaser or any of their agents and representatives arising out of or
in connection with this Agreement, any Related Agreement (or any other
document or instrument executed pursuant hereto or thereto), which
investigation or proceeding requires the participation of, or is
commenced or filed against, one or more of the Purchasers and any of
their agents because of this Agreement, the Related Agreements and the
transactions contemplated herein and therein, other than any Losses
resulting from action on the part of such Purchaser or its agents or
representatives which is finally determined in such proceeding to be
primarily and directly a result of (i) such Purchaser's gross
negligence or willful misconduct, (ii) a breach of a fiduciary duty, if
any, owed by such Purchaser to the Company, (iii) an act or omission
that involves intentional misconduct or a knowing violation of law by
such Purchaser, (iv) a transaction from which the Purchaser received an
improper personal benefit or (v) Losses incurred by or on behalf of an
agent of a Purchaser which are the subject of the Indemnification
Agreement entered into by the Company and such agent pursuant to the
Stockholders Agreement, as to which Losses such Indemnification
Agreement, rather than this Section 12, shall apply. The Company agrees
to reimburse each Purchaser and its agents and representatives promptly
for all such Losses as they are incurred by such Purchaser and its
agents. Each Purchaser agrees to reimburse the Company for any payments
made by the Company to such Purchaser pursuant to this Section 12 for
Losses which are finally determined in such proceeding to primarily and
directly result from the gross negligence or willful misconduct of such
Purchaser. The obligations of the Company to each Purchaser and its
agents and representatives under this Section 12 will be separate
obligations. The obligations of the Company under this Section 12 will
survive any transfer of securities by any Purchaser and the termination
of this Agreement or any Related Agreement.
(p) EXCULPATION AMONG PURCHASERS.
Each Purchaser acknowledges that it is not relying upon any other
Purchaser, or any officer, director, employee, agent, partner or
Affiliate of any such other Purchaser, in making its investment or
decision to invest in the Company or in monitoring such investment.
Each Purchaser agrees that no Purchaser nor any controlling Person,
officer,
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SECURITIES PURCHASE AGREEMENT - PAGE 37
<PAGE> 38
director, shareholder, partner, agent or employee of any Purchaser
shall be liable for any action heretofore or hereafter taken or omitted
to be taken by any of them relating to or in connection with the
Company or the Debentures, or both. Without limiting the foregoing, no
Purchaser (nor any of its Affiliates, officers, directors,
shareholders, partners, agents or employees) or other holder of any
Debentures shall have any obligation, liability or responsibility
whatsoever for the accuracy, completeness or fairness of any or all
information about the Company or any subsidiary or their respective
properties, business or financial and other affairs, acquired by such
Purchaser or holder from the Company or any subsidiary or the
respective officers, directors, employees, agents, representatives,
counsel or auditors of either, and in turn provided to another
Purchaser or holder, nor shall any such Purchaser (or such other
Person) have any obligation or responsibility whatsoever to provide any
such information to any other Purchaser (or such other Person) or
holder or to continue to provide any such information if any
information is provided.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
ORIX GLOBAL COMMUNICATIONS, INC.
By:
Title:
Address: 1771 East Flamingo Road, Ste. B200
Las Vegas, NV 89119
Fax: 702/792-3313
FOUNDERS:
KERRY ROGERS
Address: 1771 East Flamingo Road, Ste. B200
Las Vegas, NV 89119
Fax: 702/792-3313
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 38
<PAGE> 39
JACK HIGGINS
Address: 1771 East Flamingo Road, Ste. B200
Las Vegas, NV 89119
Fax: 702/792-3313
BOB MICHAELS
Address: 1771 East Flamingo Road, Ste. B200
Las Vegas, NV 89119
Fax: 702/792-3313
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 39
<PAGE> 40
PURCHASERS:
INFINITY INVESTORS LIMITED
By:
Title:
Address: 38 Hertford Street
London, England W1Y 7TG
Fax: 011-44-171-355-4975
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 40
<PAGE> 41
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
NAME AMOUNT OF INDEBTEDNESS CLOSING SHARES
- ---- ---------------------- --------------
<S> <C> <C>
Infinity Investors Limited $6,000,000 2,400
</TABLE>
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 41
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBITS:
<S> <C>
Exhibit A Schedule of Purchasers
Exhibit B Form of Debentures
Exhibit C Business Plan
Exhibit D Schedule of Exceptions (Disclosure Schedule)
Exhibit E Opinion of Counsel (for the Company as provided to Purchaser)
Exhibit F Stockholders Agreement
Exhibit G Security Agreement
Exhibit H Pledge Agreement
Exhibit I Registration Rights Agreement
Exhibit J Employment and Noncompetition Agreement
Exhibit K Pari Passu Agreement
</TABLE>
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 42
<PAGE> 1
DEBENTURE
$6,000,000 June 11, 1998
FOR VALUE RECEIVED, on or before June 11, 2000 ("Maturity Date"), the
undersigned and if more than one, each of them, jointly and severally
(hereinafter referred to as "Borrower"), promises to pay to the order of
INFINITY INVESTORS LIMITED ("Lender") at its offices at 38 Hertford Street,
London, England WIY 7TG the principal amount of SIX MILLION and 00/100 DOLLARS
($6,000,000) ("Total Principal Amount"), or such amount less than the Total
Principal Amount which is outstanding from time to time if the total amount
outstanding under this Debenture ("Debenture") is less than the Total Principal
Amount, together with interest on such portion of the Total Principal Amount
which has been advanced to Borrower from the date advanced until paid at a fixed
rate per annum equal to the lesser of (a) the Maximum Rate (as hereinafter
defined) or (b) eight percent (8%), calculated on the basis of actual days
elapsed but computed as if each year consisted of 360 days. The term "Maximum
Rate," as used herein, shall mean at the particular time in question the maximum
rate of interest, if any, which, under applicable law, may then be charged on
this Debenture. If such maximum rate of interest changes after the date hereof
and this Debenture provides for a fluctuating rate of interest, the Maximum Rate
shall be automatically increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective date of each change in
such maximum rate. If applicable law ceases to provide for such a maximum rate
of interest, the Maximum Rate shall be equal to eighteen percent (18%) per
annum.
The principal of and all accrued but unpaid interest on this Debenture
shall be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues,
commencing on the 30th day of June, 1998 and continuing on the last day
of each successive month thereafter during the term of this Debenture;
(b) principal of the Debenture shall be due and payable in
seventeen (17) equal monthly installments in the amount of $50,000
each, commencing on January 31, 1999 and continuing on the last day of
each successive month thereafter;
(c) in addition to the payments pursuant to subsection (b)
above, Borrower shall, on the last day of each calendar month, prepay
all or a portion of the principal balance of this Debenture from all
Available Cash Flow of Borrower. As used herein, Available Cash Flow
means the amount of cash on hand on such last day of such month and
received by Borrower from any source, less the cash expenses of
Borrower, any capital expenditures of Borrower, any principal and
interest payments on indebtedness of Borrower and a reserve maintained
in an amount determined by Borrower's Board of Directors, considering
current needs for operating capital and prudent reserves for future
operating capital; and
(d) the outstanding principal balance of this Debenture,
together with all accrued but unpaid interest, shall be due and payable
on the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a
delinquency charge in an amount equal to the greater of (i) 5.0% of the amount
of the delinquent payment up to the maximum amount of $250.00, or (ii) $25.00.
Upon an Event of Default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, do one or both of
the following: (a) increase the interest rate provided for herein by three
(3.00) percentage points and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Debenture.
This Debenture evidences obligations and indebtedness from time to time
owing by Borrower to Lender pursuant to that certain Securities Purchase
Agreement of even date herewith by and between Borrower and Lender ("Securities
Purchase Agreement"), and is secured by a Security Agreement and Pledge
Agreement, each of even
DEBENTURE - PAGE 1
<PAGE> 2
date herewith by Borrower, covering certain collateral as more particularly
described therein.
This Debenture, the Securities Purchase Agreement, such Security
Agreement and Pledge Agreement, and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Debenture, including but not
limited to those documents described above, are hereinafter collectively
referred to as the "Loan Documents." The holder of this Debenture is entitled to
the benefits and security provided in the Loan Documents.
Borrower may from time to time prepay all or any portion of the
principal of this Debenture without premium or penalty. Unless otherwise agreed
to in writing, or otherwise required by applicable law, payments will be applied
first to unpaid accrued interest, then to principal, and any remaining amount to
any unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the right
to apply payments among principal, interest, delinquency charges, collection
costs and other charges, at its discretion. All prepayments shall be applied to
the indebtedness owing hereunder in such order and manner as Lender may from
time to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Debenture shall be made in lawful money of the
United States of America in immediately available funds, at the address of
Lender indicated above, or such other place as the holder of this Debenture
shall designate in writing to Borrower. If any payment of principal of or
interest on this Debenture shall become due on a day which is not a Business Day
(as hereinafter defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in computing
interest in connection with such payment. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
accrued and unpaid interest on this Debenture.
Borrower agrees that no advances under this Debenture shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due all or any part of the
principal on this Debenture or any other Debenture issued pursuant to
the terms of the Securities Purchase Agreement;
(b) failure of Borrower to pay (i) within twenty (20) Business
Days of the due date thereof any interest on this Debenture or any
other Debenture issued pursuant to the terms of the Securities Purchase
Agreement or (ii) within twenty (20) Business Days following the
delivery of notice to Borrower of any fees or any other amount payable
(not otherwise referred to in (a) above or this clause (b)) by Borrower
under this Debenture or any other Debenture issued pursuant to the
terms of the Securities Purchase Agreement;
(c) any representation, warranty, certification or statement
made by Borrower in the Securities Purchase Agreement or any Related
Agreement (as such term is defined in the Securities Purchase
Agreement) or which is contained in any certificate, document or
financial or other statement furnished at any time under or in
connection with the Securities Purchase Agreement or any Related
Agreement shall prove to have been untrue in any material respect when
made;
(d) failure on the part of Borrower to observe or perform any
of the covenants or agreement contained in Section 10 of the Securities
Purchase Agreement (Negative Covenants);
(e) failure on the part of Borrower to observe or perform any
covenant or agreement contained in the Securities Purchase Agreement or
any Related Document (other than those covered by clauses (a) through
(d) above), which failure is not cured within thirty (30) days of such
failure;
DEBENTURE - PAGE 2
<PAGE> 3
(f) any of the Current Stockholders (as such term is defined
in the Securities Purchase Agreement) shall fail to perform, in any
material respect, any of their respective obligations under, or shall
have breached any material item of, the Securities Purchase Agreement
or any Related Agreement;
(g) Borrower or any Subsidiary (as such term is defined in the
Securities Purchase Agreement) has commenced a voluntary case or other
proceeding seeking liquidation, winding-up, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or has consented to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or has made a general assignment
for the benefit of creditors, or has failed generally to pay its debts
as they become due, or has taken any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding has been commenced
against Borrower or any Subsidiary, seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency, moratorium or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days, or an order for relief has been entered against Borrower or any
Subsidiary under the federal bankruptcy laws as now or hereafter in
effect; or
(i) judgments or orders for the payment of money which in the
aggregate at any one time exceed $250,000 and are not covered by
insurance have been rendered against Borrower or any Subsidiary by a
court of competent jurisdiction and such judgments or orders shall
continue unsatisfied and unstayed for a period of 60 days,
the holder of this Debenture may, at its option, without further notice or
demand, (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Debenture at once due and payable, (ii) refuse to advance any
additional amounts under this Debenture, (iii) foreclose all liens securing
payment hereof, (iv) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to any such rights,
remedies or recourses under the Related Agreements and Loan Documents, at law or
in equity, or (v) pursue any combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this
Debenture or any other right, remedy or recourse available to the holder hereof
upon the occurrence of an Event of Default hereunder shall not constitute a
waiver of the right of the holder of this Debenture to exercise the same at that
time or at any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of the holder hereof,
as provided in this Debenture and in any of the other Loan Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Debenture which is less than the payment in full of all amounts due and payable
at the time of such payment shall not (i) constitute a waiver of or impair,
reduce, release or extinguish any right, remedy or recourse of the holder
hereof, or nullify any prior exercise of any such right, remedy or recourse, or
(ii) impair, reduce, release or extinguish the obligations of any party liable
under any of the Loan Documents as originally provided herein or therein.
This Debenture and all of the other Loan Documents and Related
Agreements are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision hereof or of
any of the other Loan Documents or Related Agreements or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to any other
person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Debenture. If the
DEBENTURE - PAGE 3
<PAGE> 4
applicable law is ever revised, repealed or judicially interpreted so as to
render usurious any amount called for under this Debenture or under any of the
other Loan Documents, or contracted for, charged, taken, reserved or received
with respect to the indebtedness evidenced by this Debenture, or if Lender's
exercise of the option to accelerate the maturity of this Debenture, or if any
prepayment by Borrower results in Borrower having paid any interest in excess of
that permitted by law, then it is the express intent of Borrower and Lender that
all excess amounts theretofore collected by Lender be credited on the principal
balance of this Debenture (or, if this Debenture and all other indebtedness
arising under or pursuant to the other Loan Documents have been paid in full,
refunded to Borrower), and the provisions of this Debenture and the other Loan
Documents and Related Documents immediately be deemed reformed and the amounts
thereafter collectable hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the then applicable
law, but so as to permit the recovery of the fullest amount otherwise called for
hereunder or thereunder. All sums paid, or agreed to be paid, by Borrower for
the use, forbearance, detention, taking, charging, receiving or reserving of the
indebtedness of Borrower to Lender under this Debenture or arising under or
pursuant to the other Loan Documents and Related Agreements shall, to the
maximum extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full
so that the rate or amount of interest on account of such indebtedness does not
exceed the usury ceiling from time to time in effect and applicable to such
indebtedness for so long as such indebtedness is outstanding. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Documents
and Related Agreements, it is not the intention of Lender to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration.
If this Debenture is placed in the hands of an attorney for collection,
or is collected in whole or in part by suit or through probate, bankruptcy or
other legal proceedings of any kind, Borrower agrees to pay, in addition to all
other sums payable hereunder, all costs and expenses of collection, including
but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Debenture
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Any and all payments by Borrower hereunder to any holder of this
Debenture and each "qualified assignee" thereof shall be made free and clear of
and without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes") unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Borrower shall be required by law or the administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable with respect
to this Debenture (i) the sum payable shall be increased as may be necessary so
that after making all required deductions or withholdings (including deductions
or withholdings applicable to additional amounts paid under this paragraph) such
holder of this Debenture receives an amount equal to the sum it would have
received if no such deduction or withholding had been made; (ii) Borrower shall
make such deductions or withholdings; and (iii) Borrower shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a holder of this
Debenture is a person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to Borrower that
payments of Borrower to such assignee under applicable law would not be subject
to any Taxes and (z) from time to time, as and when requested by Borrower,
executes and delivers to Borrower and the Internal Revenue Service forms, and
provides Borrower with any information, necessary to establish such assignee's
continued exemption from Taxes under applicable law. Borrower shall forthwith
pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment made
under this Debenture or the transactions contemplated hereby. Borrower shall
indemnify each holder of this Debenture, or qualified assignee, for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts
DEBENTURE - PAGE 4
<PAGE> 5
payable under this paragraph) paid by each holder of this Debenture, or
qualified assignee, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days from the date such holder of this
Debenture or assignee makes written demand therefor. A certificate as to the
amount of such Taxes or Other Taxes submitted to Borrower by such holder of this
Debenture or assignee shall be conclusive evidence of the amount due from
Borrower to such party. Within 30 days after the date of any payment of Taxes,
Borrower will furnish to each holder of this Debenture the original or a
certified copy of a receipt evidencing payment thereof.
[SIGNATURE PAGE FOLLOWS]
DEBENTURE - PAGE 5
<PAGE> 6
THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE.
BORROWER:
ORIX GLOBAL COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
DEBENTURE - PAGE 6
<PAGE> 1
INFINITY INVESTORS LIMITED
38 Hertford Street
London, England W1Y 7TG
August 19, 1998
Orix Global Communications, Inc.
177 East Flamingo Road
Bldg. B, Suite 200
Las Vegas, NV 89119
Re: ADDITIONAL $850,000 LOAN
Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Purchase Agreement") by and between Orix Global Communications, Inc., a Nevada
corporation (the "Company"), and Infinity Investors Limited, a Nevis West Indies
corporation (the "Lender"), dated as of June 11, 1998, pursuant to which the
Lender issued a $6 million Debenture to Lender (the "Original Debenture").
Pursuant to the terms of this letter agreement (the "Letter
Agreement"), the Company and the Lender now desire to provide for the issuance
of an additional Debenture of $850,000 from the Company to the Lender, on the
terms specified herein (the "New Debenture"). Capitalized terms used herein and
otherwise defined shall have the meanings described thereto in the Purchase
Agreement.
Therefore, the Company and Lender agree as follows:
1. ISSUANCE OF DEBENTURE. On the date hereof, the Company shall issue
to the Lender the New Debenture in the form of Exhibit A attached hereto,
against delivery by the Lender to the Company of $850,000 (the "Loan Proceeds").
The Loan Proceeds shall be used exclusively by the Company as a cash collateral
account to secure the issuance of a Letter of Credit from Wells Fargo (or a
similar financial institution) to Avantel, SA (the "Letter of Credit"). The
Letter of Credit will secure certain performance obligations by the Company
under its contractual agreement with Avantel, SA. The Company hereby
acknowledges and agrees that the New Debenture shall be treated as issued
pursuant to the terms of the Purchase Agreement and each Related Agreement,
including, without limitation, the Security Agreement. It is expressly agreed by
the Company that the Lender shall be provided the same rights, preferences,
privileges, causes of action, security, demands and any and other benefits under
the Purchase Agreement and each Related Agreement with respect to the New
Debenture as exists with respect to the Original Debenture.
<PAGE> 2
2. CONVERSION OF DEBENTURE/REPAYMENT. The New Debenture shall be
payable pursuant to its terms. Notwithstanding any provision of the Original
Debenture to the contrary, the Company shall be authorized to repay the New
Debenture prior to any payment by the Company of the Original Debenture;
provided, however, any repayment of the New Debenture following a Conversion
Date Event (as hereafter defined) shall be made only following ten (10) days
prior written notice to the Lender, during which period Lender shall be afforded
the conversion rights hereafter specified. In the event the Letter of Credit is
drawn upon (and the Company's cash collateral account diminished) by more than
$100,000, or in the event the New Debenture is not repaid in full on or before
November 19, 1998, then upon the occurrence of either such event (each, a
"Conversion Date Event") the New Debenture shall be convertible, in whole or in
part, at any time and from time to time, at the sole and exclusive option of the
Lender, in to such number of shares of common stock of the Company (the "Common
Stock") as set forth in the following formula: each $50,000 principal amount of
the New Debenture shall be convertible into 20 shares of Common Stock (such that
the entire $850,000 principal balance is convertible into 340 shares of Common
Stock). All accrued and unpaid interest shall be paid in cash upon any such
conversion. The conversion formula set forth above shall be subject to
adjustment on a customary basis for stock splits, stock dividends,
reorganizations and similar events.
3. STOCKHOLDER WAIVER AND AMENDMENT. Contemporaneous with the execution
of this Letter Agreement, the Company shall, and shall cause each of its
existing stockholders (collectively, the "Stockholders") to, execute and deliver
that certain First Amendment to Stockholders Agreement attached hereto as
Exhibit B, pursuant to which the Stockholders acknowledge and agree to waive any
preemptive rights associated with the issuance of any shares of Common Stock
upon conversion thereof.
4. PARTICIPATION RIGHT. Consistent with the terms of the Purchase
Agreement and the Related Agreements, the Company hereby acknowledges that the
Lender may participate or assign all or a portion of the New Debenture (and the
conversion rights or Common Stock issued upon conversion) to one or more
persons, each of which shall take the assigned or participated interest with the
same rights, preferences, privileges, causes of action, security and demands and
other benefits as exist with respect to the Lender.
5. GENERAL. The Company hereby agrees that, at any time, and from time
to time, upon request, it shall execute and deliver such further documents and
do such further acts and things as the Lender may reasonably request in order to
fully effect the purposes of this Letter Agreement. This Letter Agreement may be
executed by facsimile signature and in one or more counterparts and it is not
necessary that signatures of all parties appear on the same counterpart, but
such counterparts together shall constitute but one and the same agreement. This
Letter Agreement shall inure to the benefit of and be binding upon the parties
hereto, their respective successors.
2.
<PAGE> 3
To set forth your agreement with the foregoing, please countersign this
Letter Agreement in the space provided below.
Very truly yours,
INFINITY INVESTORS LIMITED
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
ORIX GLOBAL COMMUNICATIONS, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
3.
<PAGE> 4
EXHIBIT A
FORM OF NEW DEBENTURE
<PAGE> 5
EXHIBIT B
FORM OF FIRST AMENDMENT TO
STOCKHOLDERS AGREEMENT
<PAGE> 1
DEBENTURE
$850,000 August 19, 1998
FOR VALUE RECEIVED, on or before June 11, 2000 ("Maturity Date"), the
undersigned and if more than one, each of them, jointly and severally
(hereinafter referred to as "Borrower"), promises to pay to the order of
INFINITY INVESTORS LIMITED ("Lender") at its offices at 38 Hertford Street,
London, England WIY 7TG the principal amount of EIGHT HUNDRED FIFTY THOUSAND
($850,000) ("Total Principal Amount"), or such amount less than the Total
Principal Amount which is outstanding from time to time if the total amount
outstanding under this Debenture ("Debenture") is less than the Total Principal
Amount, together with interest on such portion of the Total Principal Amount
which has been advanced to Borrower from the date advanced until paid at a fixed
rate per annum equal to the lesser of (a) the Maximum Rate (as hereinafter
defined) or (b) eight percent (8%), calculated on the basis of actual days
elapsed but computed as if each year consisted of 360 days. The term "Maximum
Rate," as used herein, shall mean at the particular time in question the maximum
rate of interest, if any, which, under applicable law, may then be charged on
this Debenture. If such maximum rate of interest changes after the date hereof
and this Debenture provides for a fluctuating rate of interest, the Maximum Rate
shall be automatically increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective date of each change in
such maximum rate. If applicable law ceases to provide for such a maximum rate
of interest, the Maximum Rate shall be equal to eighteen percent (18%) per
annum.
The principal of and all accrued but unpaid interest on this Debenture
shall be due and payable as follows:
(a) interest shall be due and payable monthly as it
accrues, commencing on the 31st day of August, 1998 and
continuing on the last day of each successive month thereafter
during the term of this Debenture;
(b) principal of the Debenture shall be due and
payable in seventeen (17) equal monthly installments in the
amount of $50,000 each, commencing on January 31, 1999 and
continuing on the last day of each successive month
thereafter;
(c) in addition to the payments pursuant to
subsection (b) above, Borrower shall, on the last day of each
calendar month, prepay all or a portion of the principal
balance of this Debenture from all Available Cash Flow of
Borrower. As used herein, Available Cash Flow means the amount
of cash on hand on such last day of such month and received by
Borrower from any source, less the cash expenses of Borrower,
any capital expenditures of Borrower, any principal and
interest payments on indebtedness of Borrower and a reserve
maintained in an amount determined by Borrower's Board of
Directors, considering current needs for operating capital and
prudent reserves for future operating capital; and
<PAGE> 2
(d) the outstanding principal balance of this
Debenture, together with all accrued but unpaid interest,
shall be due and payable on the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a
delinquency charge in an amount equal to the greater of (i) 5.0% of the amount
of the delinquent payment up to the maximum amount of $250.00, or (ii) $25.00.
Upon an Event of Default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, do one or both of
the following: (a) increase the interest rate provided for herein by three
(3.00) percentage points and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Debenture.
This Debenture evidences obligations and indebtedness from time to time
owing by Borrower to Lender pursuant to that certain Securities Purchase
Agreement of even date herewith by and between Borrower and Lender ("Securities
Purchase Agreement"), and is secured by a Security Agreement and Pledge
Agreement, each of even date herewith by Borrower, covering certain collateral
as more particularly described therein.
This Debenture, the Securities Purchase Agreement, such Security
Agreement and Pledge Agreement, and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Debenture, including but not
limited to those documents described above, are hereinafter collectively
referred to as the "Loan Documents." The holder of this Debenture is entitled to
the benefits and security provided in the Loan Documents.
Borrower may from time to time prepay all or any portion of the
principal of this Debenture without premium or penalty. Unless otherwise agreed
to in writing, or otherwise required by applicable law, payments will be applied
first to unpaid accrued interest, then to principal, and any remaining amount to
any unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the right
to apply payments among principal, interest, delinquency charges, collection
costs and other charges, at its discretion. All prepayments shall be applied to
the indebtedness owing hereunder in such order and manner as Lender may from
time to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Debenture shall be made in lawful money of the
United States of America in immediately available funds, at the address of
Lender indicated above, or such other place as the holder of this Debenture
shall designate in writing to Borrower. If any payment of principal of or
interest on this Debenture shall become due on a day which is not a Business Day
(as hereinafter defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in computing
interest in connection with such payment. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
accrued and unpaid interest on this Debenture.
Borrower agrees that no advances under this Debenture shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
2.
<PAGE> 3
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due all or any
part of the principal on this Debenture or any other Debenture
issued pursuant to the terms of the Securities Purchase
Agreement;
(b) failure of Borrower to pay (i) within twenty (20)
Business Days of the due date thereof any interest on this
Debenture or any other Debenture issued pursuant to the terms
of the Securities Purchase Agreement or (ii) within twenty
(20) Business Days following the delivery of notice to
Borrower of any fees or any other amount payable (not
otherwise referred to in (a) above or this clause (b)) by
Borrower under this Debenture or any other Debenture issued
pursuant to the terms of the Securities Purchase Agreement;
(c) any representation, warranty, certification or
statement made by Borrower in the Securities Purchase
Agreement or any Related Agreement (as such term is defined in
the Securities Purchase Agreement) or which is contained in
any certificate, document or financial or other statement
furnished at any time under or in connection with the
Securities Purchase Agreement or any Related Agreement shall
prove to have been untrue in any material respect when made;
(d) failure on the part of Borrower to observe or
perform any of the covenants or agreement contained in Section
10 of the Securities Purchase Agreement (Negative Covenants);
(e) failure on the part of Borrower to observe or
perform any covenant or agreement contained in the Securities
Purchase Agreement or any Related Document (other than those
covered by clauses (a) through (d) above), which failure is
not cured within thirty (30) days of such failure;
(f) any of the Current Stockholders (as such term is
defined in the Securities Purchase Agreement) shall fail to
perform, in any material respect, any of their respective
obligations under, or shall have breached any material item
of, the Securities Purchase Agreement or any Related
Agreement;
(g) Borrower or any Subsidiary (as such term is
defined in the Securities Purchase Agreement) has commenced a
voluntary case or other proceeding seeking liquidation,
winding-up, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, or has consented to any such relief or
to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or has made a general assignment for the benefit
of creditors, or has failed generally to pay its debts as they
become due, or has taken any corporate action to authorize any
of the foregoing;
3.
<PAGE> 4
(h) an involuntary case or other proceeding has been
commenced against Borrower or any Subsidiary, seeking
liquidation, winding-up, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period
of 60 days, or an order for relief has been entered against
Borrower or any Subsidiary under the federal bankruptcy laws
as now or hereafter in effect; or
(i) judgments or orders for the payment of money
which in the aggregate at any one time exceed $250,000 and are
not covered by insurance have been rendered against Borrower
or any Subsidiary by a court of competent jurisdiction and
such judgments or orders shall continue unsatisfied and
unstayed for a period of 60 days,
the holder of this Debenture may, at its option, without further notice or
demand, (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Debenture at once due and payable, (ii) refuse to advance any
additional amounts under this Debenture, (iii) foreclose all liens securing
payment hereof, (iv) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to any such rights,
remedies or recourses under the Related Agreements and Loan Documents, at law or
in equity, or (v) pursue any combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this
Debenture or any other right, remedy or recourse available to the holder hereof
upon the occurrence of an Event of Default hereunder shall not constitute a
waiver of the right of the holder of this Debenture to exercise the same at that
time or at any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of the holder hereof,
as provided in this Debenture and in any of the other Loan Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Debenture which is less than the payment in full of all amounts due and payable
at the time of such payment shall not (i) constitute a waiver of or impair,
reduce, release or extinguish any right, remedy or recourse of the holder
hereof, or nullify any prior exercise of any such right, remedy or recourse, or
(ii) impair, reduce, release or extinguish the obligations of any party liable
under any of the Loan Documents as originally provided herein or therein.
This Debenture and all of the other Loan Documents and Related
Agreements are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision hereof or of
any of the other Loan Documents or Related Agreements or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to any other
person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the
4.
<PAGE> 5
usury and other applicable laws now or hereafter governing the interest payable
on the indebtedness evidenced by this Debenture. If the applicable law is ever
revised, repealed or judicially interpreted so as to render usurious any amount
called for under this Debenture or under any of the other Loan Documents, or
contracted for, charged, taken, reserved or received with respect to the
indebtedness evidenced by this Debenture, or if Lender's exercise of the option
to accelerate the maturity of this Debenture, or if any prepayment by Borrower
results in Borrower having paid any interest in excess of that permitted by law,
then it is the express intent of Borrower and Lender that all excess amounts
theretofore collected by Lender be credited on the principal balance of this
Debenture (or, if this Debenture and all other indebtedness arising under or
pursuant to the other Loan Documents have been paid in full, refunded to
Borrower), and the provisions of this Debenture and the other Loan Documents and
Related Documents immediately be deemed reformed and the amounts thereafter
collectable hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the then applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder or thereunder. All sums paid, or agreed to be paid, by Borrower for
the use, forbearance, detention, taking, charging, receiving or reserving of the
indebtedness of Borrower to Lender under this Debenture or arising under or
pursuant to the other Loan Documents and Related Agreements shall, to the
maximum extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full
so that the rate or amount of interest on account of such indebtedness does not
exceed the usury ceiling from time to time in effect and applicable to such
indebtedness for so long as such indebtedness is outstanding. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Documents
and Related Agreements, it is not the intention of Lender to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration.
If this Debenture is placed in the hands of an attorney for collection,
or is collected in whole or in part by suit or through probate, bankruptcy or
other legal proceedings of any kind, Borrower agrees to pay, in addition to all
other sums payable hereunder, all costs and expenses of collection, including
but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Debenture
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Any and all payments by Borrower hereunder to any holder of this
Debenture and each "qualified assignee" thereof shall be made free and clear of
and without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes") unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Borrower shall be required by law or the administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable with respect
to this Debenture (i) the sum payable shall be increased as may be necessary so
that
5.
<PAGE> 6
after making all required deductions or withholdings (including deductions or
withholdings applicable to additional amounts paid under this paragraph) such
holder of this Debenture receives an amount equal to the sum it would have
received if no such deduction or withholding had been made; (ii) Borrower shall
make such deductions or withholdings; and (iii) Borrower shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a holder of this
Debenture is a person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to Borrower that
payments of Borrower to such assignee under applicable law would not be subject
to any Taxes and (z) from time to time, as and when requested by Borrower,
executes and delivers to Borrower and the Internal Revenue Service forms, and
provides Borrower with any information, necessary to establish such assignee's
continued exemption from Taxes under applicable law. Borrower shall forthwith
pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment made
under this Debenture or the transactions contemplated hereby. Borrower shall
indemnify each holder of this Debenture, or qualified assignee, for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this paragraph)
paid by each holder of this Debenture, or qualified assignee, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days from
the date such holder of this Debenture or assignee makes written demand
therefor. A certificate as to the amount of such Taxes or Other Taxes submitted
to Borrower by such holder of this Debenture or assignee shall be conclusive
evidence of the amount due from Borrower to such party. Within 30 days after the
date of any payment of Taxes, Borrower will furnish to each holder of this
Debenture the original or a certified copy of a receipt evidencing payment
thereof.
[Signature Page Follows]
6.
<PAGE> 7
THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE.
BORROWER:
ORIX GLOBAL COMMUNICATIONS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
7.
<PAGE> 1
INFINITY INVESTORS LIMITED
HUNKINS WATERFONT PLAZA
P.O. BOX 556-MAIN STREET
CHARLESTON, NEVIS, WEST INDIES
February 9, 1999
Orix Global Communications, Inc.
177 East Flamingo Road
Bldg. B, Suite 200
Las Vegas, NV 89119
Re: ADDITIONAL $390,000 LOAN
Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Purchase Agreement") by and between Orix Global Communications, Inc., a Nevada
corporation (the "Company"), and Infinity Investors Limited, a Nevis West Indies
corporation (the "Lender"), dated as of June 11, 1998, pursuant to which the
Lender issued a $6 million Debenture to Lender (the "June Debenture").
Pursuant to the terms of a letter agreement dated August 19, 1998 (the
"First Letter Agreement"), the Company and the Lender provided for the issuance
of an additional Debenture of $850,000 from the Company to the Lender (the
"August Debenture"). The August Debenture and the June Debenture are herein
collectively referred to as the "Original Debentures".
Pursuant to the terms of this Letter Agreement (the "Letter
Agreement"), the Company and the Lender now desire to provide for the issuance
of an additional Debenture of $390,000 from the Company to the Lender on the
terms specified herein (the "New Debenture"). Capitalized terms used herein and
otherwise defined shall have the meanings described thereto in the Purchase
Agreement.
Therefore, the Company and Lender agree as follows:
1. ISSUANCE OF DEBENTURE. On the date hereof, the Company shall issue
to the Lender the New Debenture in the form of Exhibit A attached hereto,
against delivery by the Lender to the Company of $390,000 (the "Loan Proceeds").
The Loan Proceeds shall be used exclusively by the Company for working capital
purposes. The Company hereby acknowledges and agrees that the New Debenture
shall be treated as issued pursuant to the terms of the Purchase Agreement and
each Related Agreement, including, without limitation, the Security Agreement.
It is expressly agreed by the Company that the Lender shall be provided the same
rights, preferences, privileges, causes of action, security, demands and any and
other benefits under the Purchase Agreement and each Related Agreement with
respect to the New Debenture
<PAGE> 2
Orix Global Communications, Inc.
February 9, 1999
Page 2
as exists with respect to the Original Debentures (provided, the New Debenture
shall not be convertible into Common Stock of the Company).
2. PARTICIPATION RIGHT. Consistent with the terms of the Purchase
Agreement and the Related Agreements, the Company acknowledges that the Lender
may participate or assign all or a portion of the New Debenture to one or more
Persons, each of which shall take the assigned or participated interest with the
same rights, preferences, privileges, causes of action, security and demands and
other benefits as exist with respect to the Lender. Consistent with this right,
the Lender previously entered into a Participation Agreement with Infinity
Emerging Opportunities Limited, which assigned its rights thereunder to IEO
Holdings Limited ("IEO Holdings"), pursuant to which the Lender participated an
interest in a portion of the Original Debentures. The Company hereby
acknowledges that the Lender intends to participate a 100% interest in the New
Debenture to IEO Holdings, and hereby consents to such participation.
3. GENERAL. The Company hereby agrees that, at any time, and from time
to time, upon request, it shall execute and deliver such further documents and
do such further acts and things as the Lender may reasonably request in order to
fully effect the purposes of this Letter Agreement. This Letter Agreement may be
executed by facsimile signature and in one or more counterparts and it is not
necessary that signatures of all parties appear on the same counterpart, but
such counterparts together shall constitute but one and the same agreement. This
Letter Agreement shall inure to the benefit of and be binding upon the parties
hereto, their respective successors.
[Signature page follows]
<PAGE> 3
Orix Global Communications, Inc.
February 9, 1999
Page 3
To set forth your agreement with the foregoing, please countersign this
Letter Agreement in the space provided below.
Very truly yours,
INFINITY INVESTORS LIMITED
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
ORIX GLOBAL COMMUNICATIONS, INC.
By:
------------------------------------
Steven Loglisci, President
By:
------------------------------------
Bruce Voss, a Director
IEO HOLDINGS LIMITED
(AS THE PARTICIPANT)
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 4
EXHIBIT A
FORM OF NEW DEBENTURE
<PAGE> 1
DEBENTURE
$390,000 February 9, 1999
FOR VALUE RECEIVED, on or before February 17, 1999 ("Maturity Date"),
the undersigned (hereinafter referred to as "Borrower"), promises to pay to the
order of INFINITY INVESTORS LIMITED ("Lender") at its offices at Hawkins
Waterfront Plaza, P.O. Box 556-Main Street, Charleston, Nevis, West Indies, the
principal amount of THREE HUNDRED NINETY THOUSAND ($390,000) ("Total Principal
Amount"), together with interest on such portion of the Total Principal Amount
which has been advanced to Borrower from the date advanced until paid at a fixed
rate per annum equal to the lesser of (a) the Maximum Rate (as hereinafter
defined) or (b) eight percent (8%), calculated on the basis of actual days
elapsed but computed as if each year consisted of 360 days. The term "Maximum
Rate," as used herein, shall mean at the particular time in question the maximum
rate of interest, if any, which, under applicable law, may then be charged on
this Debenture. If such maximum rate of interest changes after the date hereof
and this Debenture provides for a fluctuating rate of interest, the Maximum Rate
shall be automatically increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective date of each change in
such maximum rate. If applicable law ceases to provide for such a maximum rate
of interest, the Maximum Rate shall be equal to eighteen percent (18%) per
annum.
The principal of and all accrued but unpaid interest on this Debenture
shall be due and payable on February 17, 1999, the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a
delinquency charge in an amount equal to the greater of (i) 5.0% of the amount
of the delinquent payment up to the maximum amount of $250.00, or (ii) $25.00.
Upon an Event of Default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, do one or both of
the following: (a) increase the interest rate provided for herein by three
(3.00) percentage points and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Debenture.
This Debenture evidences obligations and indebtedness from time to time
owing by Borrower to Lender pursuant to that certain Securities Purchase
Agreement of even date herewith by and between Borrower and Lender ("Securities
Purchase Agreement"), and is secured by a Security Agreement and Pledge
Agreement, each of even date herewith by Borrower, covering certain collateral
as more particularly described therein.
This Debenture, the Securities Purchase Agreement, such Security
Agreement and Pledge Agreement, and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Debenture, including but not
limited to those documents described above, are hereinafter collectively
referred to as the "Loan Documents." The holder of this Debenture is entitled to
the benefits and security provided in the Loan Documents.
<PAGE> 2
Borrower may from time to time prepay all or any portion of the
principal of this Debenture without premium or penalty. Unless otherwise agreed
to in writing, or otherwise required by applicable law, payments will be applied
first to unpaid accrued interest, then to principal, and any remaining amount to
any unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the right
to apply payments among principal, interest, delinquency charges, collection
costs and other charges, at its discretion. All prepayments shall be applied to
the indebtedness owing hereunder in such order and manner as Lender may from
time to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Debenture shall be made in lawful money of the
United States of America in immediately available funds, at the address of
Lender indicated above, or such other place as the holder of this Debenture
shall designate in writing to Borrower. If any payment of principal of or
interest on this Debenture shall become due on a day which is not a Business Day
(as hereinafter defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in computing
interest in connection with such payment. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
accrued and unpaid interest on this Debenture.
Borrower agrees that no advances under this Debenture shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due all or any
part of the principal on this Debenture or any other Debenture
issued pursuant to the terms of the Securities Purchase
Agreement;
(b) failure of Borrower to pay (i) within twenty (20)
Business Days of the due date thereof any interest on this
Debenture or any other Debenture issued pursuant to the terms
of the Securities Purchase Agreement or (ii) within twenty
(20) Business Days following the delivery of notice to
Borrower of any fees or any other amount payable (not
otherwise referred to in (a) above or this clause (b)) by
Borrower under this Debenture or any other Debenture issued
pursuant to the terms of the Securities Purchase Agreement;
(c) any representation, warranty, certification or
statement made by Borrower in the Securities Purchase
Agreement or any Related Agreement (as such term is defined in
the Securities Purchase Agreement) or which is contained in
any certificate, document or financial or other statement
furnished at any time under or in connection with the
Securities Purchase Agreement or any Related
2.
<PAGE> 3
Agreement shall prove to have been untrue in any material
respect when made;
(d) failure on the part of Borrower to observe or
perform any of the covenants or agreement contained in Section
10 of the Securities Purchase Agreement (Negative Covenants);
(e) failure on the part of Borrower to observe or
perform any covenant or agreement contained in the Securities
Purchase Agreement or any Related Document (other than those
covered by clauses (a) through (d) above), which failure is
not cured within thirty (30) days of such failure;
(f) any of the Current Stockholders (as such term is
defined in the Securities Purchase Agreement) shall fail to
perform, in any material respect, any of their respective
obligations under, or shall have breached any material item
of, the Securities Purchase Agreement or any Related
Agreement;
(g) Borrower or any Subsidiary (as such term is
defined in the Securities Purchase Agreement) has commenced a
voluntary case or other proceeding seeking liquidation,
winding-up, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, or has consented to any such relief or
to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or has made a general assignment for the benefit
of creditors, or has failed generally to pay its debts as they
become due, or has taken any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding has been
commenced against Borrower or any Subsidiary, seeking
liquidation, winding-up, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period
of 60 days, or an order for relief has been entered against
Borrower or any Subsidiary under the federal bankruptcy laws
as now or hereafter in effect; or
(i) judgments or orders for the payment of money
which in the aggregate at any one time exceed $250,000 and are
not covered by insurance have been rendered against Borrower
or any Subsidiary by a court of competent jurisdiction and
such judgments or orders shall continue unsatisfied and
unstayed for a period of 60 days,
the holder of this Debenture may, at its option, without further notice or
demand, (i) declare the
3.
<PAGE> 4
outstanding principal balance of and accrued but unpaid interest on this
Debenture at once due and payable, (ii) refuse to advance any additional amounts
under this Debenture, (iii) foreclose all liens securing payment hereof, (iv)
pursue any and all other rights, remedies and recourses available to the holder
hereof, including but not limited to any such rights, remedies or recourses
under the Related Agreements and Loan Documents, at law or in equity, or (v)
pursue any combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this
Debenture or any other right, remedy or recourse available to the holder hereof
upon the occurrence of an Event of Default hereunder shall not constitute a
waiver of the right of the holder of this Debenture to exercise the same at that
time or at any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of the holder hereof,
as provided in this Debenture and in any of the other Loan Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Debenture which is less than the payment in full of all amounts due and payable
at the time of such payment shall not (i) constitute a waiver of or impair,
reduce, release or extinguish any right, remedy or recourse of the holder
hereof, or nullify any prior exercise of any such right, remedy or recourse, or
(ii) impair, reduce, release or extinguish the obligations of any party liable
under any of the Loan Documents as originally provided herein or therein.
This Debenture and all of the other Loan Documents and Related
Agreements are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision hereof or of
any of the other Loan Documents or Related Agreements or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to any other
person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Debenture. If the applicable law is ever revised,
repealed or judicially interpreted so as to render usurious any amount called
for under this Debenture or under any of the other Loan Documents, or contracted
for, charged, taken, reserved or received with respect to the indebtedness
evidenced by this Debenture, or if Lender's exercise of the option to accelerate
the maturity of this Debenture, or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by law, then it is
the express intent of Borrower and Lender that all excess amounts theretofore
collected by Lender be credited on the principal balance of this Debenture (or,
if this Debenture and all other indebtedness arising under or pursuant to the
other Loan Documents have been paid in full, refunded to Borrower), and the
provisions of this Debenture and the other Loan Documents and Related Documents
immediately be deemed reformed and the amounts thereafter collectable hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the then applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid, or agreed to be paid, by Borrower for the use,
4.
<PAGE> 5
forbearance, detention, taking, charging, receiving or reserving of the
indebtedness of Borrower to Lender under this Debenture or arising under or
pursuant to the other Loan Documents and Related Agreements shall, to the
maximum extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full
so that the rate or amount of interest on account of such indebtedness does not
exceed the usury ceiling from time to time in effect and applicable to such
indebtedness for so long as such indebtedness is outstanding. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Documents
and Related Agreements, it is not the intention of Lender to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration.
If this Debenture is placed in the hands of an attorney for collection,
or is collected in whole or in part by suit or through probate, bankruptcy or
other legal proceedings of any kind, Borrower agrees to pay, in addition to all
other sums payable hereunder, all costs and expenses of collection, including
but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Debenture
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Any and all payments by Borrower hereunder to any holder of this
Debenture and each "qualified assignee" thereof shall be made free and clear of
and without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes") unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Borrower shall be required by law or the administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable with respect
to this Debenture (i) the sum payable shall be increased as may be necessary so
that after making all required deductions or withholdings (including deductions
or withholdings applicable to additional amounts paid under this paragraph) such
holder of this Debenture receives an amount equal to the sum it would have
received if no such deduction or withholding had been made; (ii) Borrower shall
make such deductions or withholdings; and (iii) Borrower shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a holder of this
Debenture is a person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to Borrower that
payments of Borrower to such assignee under applicable law would not be subject
to any Taxes and (z) from time to time, as and when requested by Borrower,
executes and delivers to Borrower and the Internal Revenue Service forms, and
provides Borrower with any information, necessary to establish such assignee's
continued exemption from Taxes under applicable law. Borrower shall forthwith
pay any present or future stamp or documentary taxes or
5.
<PAGE> 6
any other excise or property taxes, charges or similar levies (all such taxes,
charges and levies hereinafter referred to as "Other Taxes") which arise from
any payment made under this Debenture or the transactions contemplated hereby.
Borrower shall indemnify each holder of this Debenture, or qualified assignee,
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
paragraph) paid by each holder of this Debenture, or qualified assignee, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days from the date such holder of this Debenture or assignee makes written
demand therefor. A certificate as to the amount of such Taxes or Other Taxes
submitted to Borrower by such holder of this Debenture or assignee shall be
conclusive evidence of the amount due from Borrower to such party. Within 30
days after the date of any payment of Taxes, Borrower will furnish to each
holder of this Debenture the original or a certified copy of a receipt
evidencing payment thereof.
[Signature Page Follows]
6.
<PAGE> 7
THIS DEBENTURE SHALL BEp DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE.
BORROWER:
ORIX GLOBAL COMMUNICATIONS, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
7.
<PAGE> 1
INFINITY INVESTORS LIMITED
HUNKINS WATERFONT PLAZA
P.O. BOX 556-MAIN STREET
CHARLESTOWN, NEVIS, WEST INDIES
April 15, 1999
Orix Global Communications, Inc.
1771 East Flamingo Road
Bldg. B, Suite 200
Las Vegas, NV 89119
Re: ORIX GLOBAL COMMUNICATIONS, INC.
Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Purchase Agreement") by and between Orix Global Communications, Inc., a Nevada
corporation (the "Company"), the Founders (as defined therein) and Infinity
Investors Limited, a Nevis West Indies corporation (the "Lender"), dated as of
June 11, 1998, pursuant to which the Company issued a $6 million Debenture to
the Lender (the "June Debenture").
Pursuant to the terms of a letter agreement dated August 19, 1998, the
Company issued an additional Debenture of $850,000 to the Lender (the "August
Debenture"). Pursuant to the terms of a letter agreement dated April 15, 1999,
the Company issued an additional Debenture of $200,000 to the Lender (the "April
Debenture"). The August Debenture, April Debenture and the June Debenture are
herein collectively referred to as the "Original Debentures." Pursuant to the
terms of a letter agreement dated February 9, 1999, the Company issued an
additional Debenture of $390,000 to the Lender (the "February Debenture"). As of
the date hereof, no principal payments have been made by the Company on the
Original Debentures or the February Debenture.
Pursuant to the terms of this letter agreement (the "Letter
Agreement"), the Company, the Founders and the Lender now desire to (i) provide
for an extension of the maturity date of the February Debenture from February
17, 1999 to June 30, 1999, on which date the entire unpaid principal balance
thereof and all accrued and unpaid interest thereon shall be due and payable in
full, (ii) amend and restate the Original Debentures to change the repayment
terms thereof as set forth in the Amended and Restated Debenture attached hereto
as Exhibit A (the "Amended Debenture") and (iii) enter into the additional
agreements set forth herein. Capitalized terms used herein and otherwise defined
shall have the meanings described thereto in the Purchase Agreement.
Therefore, the Company, the Founders, the Lender and the other
signatories hereto (collectively, the "Parties") agree as follows:
<PAGE> 2
Orix Global Communications, Inc.
April 15, 1999
Page 2
1. ISSUANCE OF DEBENTURE. On the date hereof, the Company shall issue
to the Lender the Amended Debenture in the form of Exhibit A attached hereto.
The Amended Debenture shall amend, restate and replace in their entirety the
Original Debentures. The Parties hereby acknowledge and agree that the Amended
Debenture and February Debenture shall each be treated as issued pursuant to the
terms of the Purchase Agreement and each Related Agreement, including, without
limitation, the Security Agreement. It is expressly agreed by the Company that
the Lender shall be provided the same rights, preferences, privileges, causes of
action, security, demands and other benefits under the Purchase Agreement and
each Related Agreement with respect to the Amended Debenture and February
Debenture as existed with respect to the Original Debentures.
2. REPAYMENT OF FEBRUARY DEBENTURE. The Lender hereby agrees that the
maturity date of the February Debenture shall be extended until the earlier to
occur of (i) the occurrence of an Event of Default (as defined therein) or (ii)
June 30, 1999 (the earlier to occur of such dates being referred to as the
"February Debenture Maturity Date"), on which date the entire principal balance
thereof shall be due and payable in full. The Company shall be required to pay
accrued and unpaid interest on the February Debenture monthly at the same time
as accrued and unpaid interest is due and payable on the Amended Debenture. In
the event the February Debenture is not repaid in full on or before the February
Debenture Maturity Date, then the principal balance of the February Debenture
shall be convertible, in whole or in part, at any time and from time to time, at
the sole and exclusive option of the Lender, at a conversion price equal to
$2,778 per share of Common Stock (such that the entire $390,000 principal
balance is convertible into 140 shares of Common Stock). All accrued and unpaid
interest shall be paid in cash by the Company upon any such conversion. The
conversion formula set forth herein shall be subject to adjustment on a
customary basis for stock splits, stock dividends, reorganizations and similar
events, and in the same manner as set forth in the Lender Warrants (as hereafter
defined). From and after the February Debenture Maturity Date, the Company shall
not be authorized to prepay any portion of the principal balance thereof without
providing twenty (20) days prior written notice to the Lender, during which
period Lender shall be afforded the conversion rights specified herein.
3. PARTICIPATION RIGHT; STOCK OWNERSHIP. Consistent with the terms of
the Purchase Agreement and the Related Agreements, the Parties acknowledge that
the Lender may from time to time participate or assign all or a portion of the
Amended Debenture to one or more Persons, each of which shall take the assigned
or participated interest with the same rights, preferences, privileges, causes
of action, security, demands and other benefits as exist with respect to the
Lender. Consistent with this right, the Lender previously entered into a
Participation Agreement with Infinity Emerging Opportunities Limited, which
thereafter assigned its rights thereunder to its wholly-owned subsidiary IEO
Holdings Limited ("IEO Holdings"), pursuant to which the Lender participated an
interest in a portion of the Original Debentures and February Debenture (the
"Participation Agreement"). The Parties hereby acknowledge that the Lender
intends to participate an aggregate 50% interest in the Amended Debenture and
February Debenture to IEO Holdings, and hereby consent to such participation.
Further, the Parties hereby acknowledge that pursuant to such rights, the Lender
previously assigned 1,200 shares of Common Stock issued to the Lender in
connection with the Purchase Agreement to IEO
<PAGE> 3
Orix Global Communications, Inc.
April 15, 1999
Page 3
Holdings. The Lender and IEO Holdings shall, among themselves, determine the
funding of the Additional Advance, and thereafter shall, among themselves,
provide for a transfer of funds from IEO Holdings to the Lender as necessary,
such that following such transfer each of IEO Holdings and the Lender shall own
a 50% interest in the Amended Debenture and February Debenture. The Parties
hereby acknowledge and agree that as of the date hereof, (i) 3,600 shares of
Common Stock are issued and outstanding, (ii) 1,200 shares of Common Stock are
owned by the Lender, (iii) 1,200 shares of Common Stock are owned by IEO
Holdings, (iv) the remaining 1,200 shares of Common Stock are owned by the
Founders and their Permitted Assignees as set forth on Exhibit B hereto
(collectively, the "Company Ownership Percentages") and (v) except for the
Option Grants (as hereinafter defined), the shares of Common Stock issuable upon
conversion of the February Debenture (as hereafter described) and the Lender
Warrants, no other securities convertible, exercisable or exchangeable for
shares of Common Stock exist. The Company and each Founder hereby covenant and
agree to forbear from ever challenging the Company Ownership Percentages.
4. AGREEMENT WITH AXIS. The Company is currently negotiating a
potential agreement with DeSarrollo Axis ("Axis") pursuant to which Axis will
provide certain marketing services to the Company in exchange for a payment by
the Company to Axis of a certain portion of the operating profits of the Company
(the "Axis Agreement"). The Parties hereby (i) acknowledge the Company's
intention to enter into the Axis Agreement in a form acceptable to the Company,
and (ii) agree that execution of the Axis Agreement shall not change the Company
Ownership Percentages.
5. FUTURE TRANSACTIONS. The Parties hereby further acknowledge that in
the event the Company determines to conduct business in any area of the world
through additional subsidiaries, affiliates or related entities in the future,
each such subsidiary, affiliate or related entity shall be, directly or
indirectly, owned by the existing stockholders of the Common Stock in the same
Company Ownership Percentages as specified herein (as such percentages may be
prorata reduced after the date thereof through the issuance of any additional
shares of Common Stock, or securities convertible, exchangeable or exercisable
for shares of Common Stock including, without limitation, issuances to local
partners or participants in each applicable market); provided, however, nothing
contained herein shall impose on the Lender or any of its affiliates,
subsidiaries, managers, advisors, agents or representatives (the "Lender Group")
any obligation to offer to the Company or any Founder any opportunities in the
telecommunications industry which the Lender Group may from time to time acquire
or review.
6. MANAGEMENT OPTION PLAN. Consistent with Section 9(i) of the Purchase
Agreement, the Founders, the Lender and the Company had anticipated the
establishment of a Management Option Plan for shares of Common Stock on a Fully
Diluted Basis (the "Approved Plan"). The Approved Plan was to be used, in the
discretion of the Board of Directors of the Company (by majority vote), for
issuance of stock grants to management personnel (whether employees,
consultants, management companies or otherwise) as an incentive to such
individuals to perform services on behalf of the Company and its subsidiaries
and affiliates. The Parties hereby acknowledge that in August, 1998, the Board
of Directors of the Company authorized and
<PAGE> 4
Orix Global Communications, Inc.
April 15, 1999
Page 4
approved a grant of stock options as to 90 shares of Common Stock of the Company
to Steve Loglisci, President of the Company, on the terms set forth on Exhibit
C-1 hereto (the "Loglisci Option Grant"). The Parties hereby ratify and approve
the Loglisci Option Grant. In addition, the Board of Directors of the Company
hereby authorizes and approves grants of stock options for an aggregate of 600
additional shares of Common Stock of the Company (the "Additional Option Grant")
to Kerry Rogers, Jack Higgins, Bruce Voss and Robert Michaels on the terms set
forth on Exhibits C-2, C-3, C-4 and C-5 hereto, as applicable, on the basis of a
Company valuation of $10,000,000 as more fully described on such Exhibits (the
Additional Option Grant, together with the Loglisci Option Grant, are
hereinafter referred to as the "Option Grants"). Further, the Company hereby
covenants and agrees to promptly present to the Board of Directors of the
Company, for review and approval (by a majority vote), a standard stock option
plan which would encompass the Stock Grants and potential future stock grants
thereunder.
7. LENDERS' RIGHT TO APPOINT DIRECTORS; CHANGES IN OFFICERS AND
DIRECTORS, ETC. The Parties hereby acknowledge and agree that (i) the
Stockholders Agreement authorizes the Lender and IEO Holdings to appoint three
(3) of the total of five (5) Directors of the Company, (ii) the Lender and IEO
Holdings are authorized, without the prior approval or consent of the Founders
or the Company, to replace, remove (with or without cause), fill vacancies and
appoint any Persons to serve as their three (3) appointees to the Board of
Directors of the Company, (iii) all actions by the Board of Directors of the
Company shall be taken by an affirmative vote of a majority of the Directors,
(iv) the Board of Directors of the Company shall adopt amended and restated
bylaws of the Company consistent with the provisions of the Stockholders
Agreement and this paragraph 7 in form acceptable to a majority of the Board of
Directors of the Company, and (v) as of the date of this Letter Agreement the
Board of Directors of the Company is comprised of Clark Hunt, Barrett Wissman,
Steve Loglisci, Kerry Rogers and Bruce Voss. Further, the President is hereby
authorized and directed to pay all amounts due and owing on the February
Debenture and Amended Debenture as and when the same are due pursuant to the
terms thereof without the further consent or approval of any other party.
8. RATIFICATIONS; PAYMENT OF INTEREST AS OF APRIL 30, 1999. The terms
and provisions of the Purchase Agreement, as modified by this Letter Agreement,
are ratified and confirmed and shall continue in full force and effect. By
executing this Letter Agreement, the Company and each other party hereto
acknowledges and agrees that (a) the term "Secured Obligations" as defined in
the Security Agreement dated June 11, 1998 includes without limitation all
obligations, liabilities and indebtedness of the Company under the Amended
Debenture, the February Debenture and under the Purchase Agreement, as amended
hereby, and (b) the term "Indebtedness" as defined in the Pledge Agreement dated
June 11, 1998 includes without limitation all obligations, liabilities and
indebtedness of the Company under the Amended Debenture, the February Debenture
and under the Purchase Agreement as amended hereby, and (c) each of the security
and pledge agreements included in the Related Agreements secures, among other
indebtedness, the payment and performance of all indebtedness, liabilities and
obligations of the Company under the Amended Debenture, the February Debenture
and under the Purchase Agreement as amended by this Letter Agreement. The
Founders and the Company acknowledge and agree that the Purchase Agreement, each
of the Related Agreements, as
<PAGE> 5
Orix Global Communications, Inc.
April 15, 1999
Page 5
amended hereby, and the February Debenture are and shall remain in full force
and effect and are and shall continue to be the legal, valid and binding
obligation of the Company and the Founders (where applicable), enforceable
against them in accordance with their respective terms. No dispute, right of
setoff, counterclaim or defense exists with respect to the payment by the
Company of any amounts due under the Original Debentures or the February
Debenture. On April 30, 1999, the Company shall pay to the Lender all accrued
and unpaid interest owing as of April 30, 1999 on both the Amended Debenture and
February Debenture.
9. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Lender and IEO Holdings that (a) the Company does not own any
equity interest in any Person and does not have any Subsidiaries (except for the
Company's ownership of 100% of the outstanding stock of UCI Teleport, Inc. and
Latin Gate); (b) the execution, delivery and performance of each of this Letter
Agreement and the Amended Debenture and all other documents executed and/or
delivered in connection herewith (the "Amendment Agreements") and all
transactions and documents contemplated hereby and thereby have been authorized
by all requisite corporate action on the part of the Company; (c) each of the
Amendment Agreements, all other documents executed and/or delivered in
connection herewith and the February Debenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company, in
accordance with its terms, subject to or limited by applicable liquidation,
bankruptcy, conservatorship, insolvency, reorganization, rearrangement,
moratorium, or other similar laws relating to or affecting the rights of
creditors generally and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law); (d) there is
no provision of law, in the charter or bylaws of the Company, and no provision
of any existing mortgage, contract, lease, indenture or agreement binding on any
of them, which would be contravened by the making or delivery of any of the
Amendment Agreements or any other document executed and/or delivered in
connection herewith, or by the performance or observance of any of the terms
hereof or thereof; (e) the execution, delivery and performance of the Amendment
Agreements and the transactions contemplated hereby and thereby do not require
any approval or consent of, or filing or registration with, any governmental or
any other agency or authority, of stockholders, or of any other party or, if
such approval or consent is required, the same has been obtained; (f) each of
the representations and warranties of the Company and the Founders, as
applicable, contained in the Purchase Agreement, as amended hereby, are true and
correct on and as of the date hereof as though made on such date except for
those limited by their terms to the date given or another specific date; and (g)
as of the date hereof, no Event of Default has occurred and is continuing.
10. GRANT OF WARRANTS. The Company hereby issues to the Lender and IEO
Holdings common stock purchase warrants in the form of Exhibit D hereto granting
each of the Lender and IEO Holdings the right to acquire 170 shares of Common
Stock of the Company (for an aggregate total of 340 shares of Common Stock) (the
"Lender Warrants"). The Lender Warrants shall be considered a Related Agreement.
Such Lender Warrants shall be issued based on a valuation of the Company of
$10,000,000 and shall be exercisable for five (5) years from the date of grant,
as more fully described therein.
<PAGE> 6
Orix Global Communications, Inc.
April 15, 1999
Page 6
11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants made in the Purchase Agreement, any
Related Agreement and this Letter Agreement, or any other document furnished in
connection with this Letter Agreement, shall survive the execution and delivery
of this Letter Agreement, and no investigation by the Lender or any closing
shall affect the representations, warranties and covenants or the right of the
Lender to rely upon them.
12. REFERENCES TO AGREEMENTS. The Purchase Agreement, Amended Debenture
and Related Agreements and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Purchase Agreement, Amended Debenture and
Related Agreements, as amended hereby, are hereby amended so that any reference
therein to the Purchase Agreement, Amended Debenture and Related Agreements
shall mean a reference to such agreements as amended hereby.
13. FURTHER ASSURANCES. The Company agrees that at any time and from
time to time, upon the written request of the Lender, it will execute and
deliver such further documents and do such further acts and things as the Lender
may reasonably request in order to fully effect the purposes of this Letter
Agreement and to provide for the continued perfection and priority of the
security interests granted to the Lender.
14. SEVERABILITY. Any provision of this Letter Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Letter Agreement and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable.
15. APPLICABLE LAW. This Letter Agreement and all other documents
executed pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Nevada.
16. SUCCESSORS AND ASSIGNS. This Letter Agreement is binding upon and
shall inure to the benefit of the Lender, IEO Holdings, the Founders and the
Company, and their respective successors and assigns, except the Company may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Lender.
17. EFFECT OF WAIVER. No consent or waiver, express or implied, by the
Lender to or for any breach of or deviation from any covenant, condition or duty
by the Company shall be deemed a consent or waiver to or of any other breach of
the same or any other covenant, condition or duty.
18. ENTIRE AGREEMENT. THE PURCHASE AGREEMENT AS AMENDED HEREBY, THE
OTHER RELATED AGREEMENTS AND ALL AGREEMENTS EXECUTED IN CONNECTION WITH THIS
LETTER AGREEMENT (INCLUDING THE AMENDED DEBENTURE) REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER THEREOF AND MAY
<PAGE> 7
Orix Global Communications, Inc.
April 15, 1999
Page 7
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
19. HEADINGS. The headings, captions, and arrangements used in this
Letter Agreement are for convenience only and shall not affect the
interpretation of this Letter Agreement. This Letter Agreement, the Amended
Debenture and all other documents and instruments executed and delivered in
connection herewith and therewith, may be executed by facsimile signature and in
one or more counterparts.
20. EXPENSE REIMBURSEMENT. The Company hereby agrees to promptly pay
all fees and costs of the Lender associated with the negotiation and preparation
of this Letter Agreement and the other documents attached hereto (including all
reasonable fees and costs of Arter & Hadden LLP).
21. COUNTERPARTS. This Letter Agreement may be executed by facsimile
signature and in one or more counterparts and it is not necessary that
signatures of all parties appear on the same counterpart, but such counterparts
together shall constitute but one and the same agreement.
[Signature pages follow]
<PAGE> 8
Orix Global Communications, Inc.
April 15, 1999
Page 8
To set forth your agreement with the foregoing, please countersign this
Letter Agreement in the space provided below.
Very truly yours,
INFINITY INVESTORS LIMITED
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
ACKNOWLEDGED AND AGREED:
ORIX GLOBAL COMMUNICATIONS, INC.
By:
--------------------------------
Steven Loglisci, President
FOUNDERS:
- -----------------------------------
Kerry Rogers
- -----------------------------------
Jack Higgins
- -----------------------------------
Robert Michaels
IEO HOLDINGS LIMITED
(AS THE PARTICIPANT OF THE LENDER)
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
<PAGE> 9
Orix Global Communications, Inc.
April 15, 1999
Page 9
UNANIMOUS DIRECTOR WRITTEN ACKNOWLEDGMENT AND CONSENT:
- -----------------------------------
Clark Hunt
- -----------------------------------
Barrett Wissman
- -----------------------------------
Steve Loglisci
- -----------------------------------
Kerry Rogers
- -----------------------------------
Bruce Voss
<PAGE> 10
EXHIBIT A
FORM OF AMENDED AND RESTATED DEBENTURE
<PAGE> 11
EXHIBIT B
CURRENT OWNERSHIP OF SHARES
OF COMMON STOCK
<TABLE>
<CAPTION>
NAME NUMBER PERCENTAGE
---- ------ ----------
<S> <C> <C>
Infinity Investors Limited 1,200 1/3
IEO Holdings Limited 1,200 1/3
Founders and
Permitted Assignees,
as follows: 1,200 (in the aggregate) 1/3
Kerry Rogers 594
Jack Higgins 281
Robert Michaels 92
Bruce Voss 46
Eckley M. Keach 46
Richard W. Weese 27
Neal Matthews 14
Carl Lovell 25
Susan Trimboli 5
Oscar Goodman 45
Lawrence Johnson 25
</TABLE>
<PAGE> 12
EXHIBIT C-1
STEVE LOGLISCI STOCK GRANT
1. 90 shares of common stock, no par value, of the Company, as adjusted
for stock splits, recapitalizations and similar events affecting the common
stock.
2. Exercise price shall be based on a valuation of Company of
$10,000,000. Hence, the exercise price shall be $2,778 per share of common
stock.
3. 45 shares of common stock granted pursuant to the option shall be
vested as of the date of the employment agreement, and the additional 45 shares
shall vest upon the earlier to occur of (i) December 31, 1999, (ii) the death of
Employee or (iii) the consummation of a Material Transaction.
4. The option shall be exercisable at any time after the shares
applicable thereto have been vested; provided (x) the options must be exercised
on the earlier to occur of (i) December 31, 2003 or (ii) the consummation of a
Material Transaction and (y) the options shall be forfeited and terminate (if
not previously exercised) if Employee is terminated for Cause (as hereinafter
defined) or voluntarily resigns before 12/31/99 without the approval of a
majority of the Board.
(a) A Material Transaction shall mean the following:
(i) a Qualified Public Offering;
(ii) the merger or consolidation of the Company with
another entity in which the Company is not the surviving
entity (or survives only as a wholly owned subsidiary of
another entity) other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(iii) the sale of all or substantially all of the
assets of the Company; or
(iv) the dissolution and liquidation of the Company.
(b) A Qualified Public Offering shall mean any underwritten
offering by Company pursuant to an effective registration statement
under the Securities Act of 1933, then in effect, or any comparable
statement under any similar federal statute then in force.
(c) Cause shall mean:
(i) The willful and continued failure by
Employee to materially perform his duties after
demand for performance is delivered by the Company;
(ii) The engaging by Employee during the
term of employment
<PAGE> 13
in criminal conduct or conduct constituting moral
turpitude that is injurious to the Company,
monetarily or otherwise;
(iii) The embezzlement by Employee of any
funds of the Company; and/or
(iv) Acts of dishonesty or other acts
(including any breach of the terms, conditions or
covenants contained in his employment agreement) by
Employee that cause material adverse harm to the
Company (other than as a consequence of good faith
decisions made by Employee in the normal performance
of his duties).
5. The options granted herein shall be issued pursuant to a standard
option agreement approved by the Board of Directors of the Company.
<PAGE> 14
EXHIBIT C-2
KERRY ROGERS STOCK GRANT
1. 212 shares of common stock, no par value, of the Company, as
adjusted for stock splits, recapitalizations and similar events affecting the
common stock.
2. Exercise price shall be based on a valuation of Company of
$10,000,000. Hence, the exercise price shall be $2,778 per share of common
stock.
3. 106 shares of common stock granted pursuant to the option shall vest
as of April 30, 1999, and the additional 106 shares shall vest as of April 1,
2000.
4. The option shall be exercisable at any time after the shares
applicable thereto have been vested; provided (x) the options must be exercised
on the earlier to occur of (i) December 31, 2003 or (ii) the consummation of a
Material Transaction and (y) the options shall be forfeited and terminate (if
not previously exercised) if Consultant is terminated for Cause (as hereinafter
defined) or voluntarily terminates his Consulting Agreement before 6/11/2000
without the approval of a majority of the Board.
(a) A Material Transaction shall mean the following:
(i) a Qualified Public Offering;
(ii) the merger or consolidation of the Company with
another entity in which the Company is not the surviving
entity (or survives only as a wholly owned subsidiary of
another entity) other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(iii) the sale of all or substantially all of the
assets of the Company; or
(iv) the dissolution and liquidation of the Company.
(b) A Qualified Public Offering shall mean any underwritten
offering by Company pursuant to an effective registration statement
under the Securities Act of 1933, then in effect, or any comparable
statement under any similar federal statute then in force.
(c) Cause shall mean:
(i) The willful and continued failure by
Consultant to materially perform his duties after
demand for performance is delivered by the Company;
(ii) The engaging by Consultant during the
term of the Consulting Agreement in criminal conduct
or conduct constituting moral
<PAGE> 15
turpitude that is injurious to the Company,
monetarily or otherwise;
(iii) The embezzlement by Consultant of any
funds of the Company; and/or
(iv) Acts of dishonesty or other acts by
Consultant (including any breach of the terms,
conditions or covenants contained in his consulting
agreement) that cause material adverse harm to the
Company (other than as a consequence of good faith
decisions made by Consultant in the normal
performance of his duties).
5. The options granted herein shall be issued pursuant to a standard
option agreement approved by the Board of Directors of the Company.
<PAGE> 16
EXHIBIT C-3
JACK HIGGINS STOCK GRANT
1. 138 shares of common stock, no par value, of the Company, as
adjusted for stock splits, recapitalizations and similar events affecting the
common stock.
2. Exercise price shall be based on a valuation of Company of
$10,000,000. Hence, the exercise price shall be $2,778 per share of common
stock.
3. 68 shares of common stock granted pursuant to the option shall vest
as of April 30, 1999, and the additional 68 shares shall vest as of April 1,
2000.
4. The option shall be exercisable at any time after the shares
applicable thereto have been vested; provided (x) the options must be exercised
on the earlier to occur of (i) December 31, 2003 or (ii) the consummation of a
Material Transaction and (y) the options shall be forfeited and terminate (if
not previously exercised) if Employee is terminated for Cause (as hereinafter
defined) or voluntarily resigns before 6/11/2000 without the approval of a
majority of the Board.
(a) A Material Transaction shall mean the following:
(i) a Qualified Public Offering;
(ii) the merger or consolidation of the Company with
another entity in which the Company is not the surviving
entity (or survives only as a wholly owned subsidiary of
another entity) other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(iii) the sale of all or substantially all of the
assets of the Company; or
(iv) the dissolution and liquidation of the Company.
(b) A Qualified Public Offering shall mean any underwritten
offering by Company pursuant to an effective registration statement
under the Securities Act of 1933, then in effect, or any comparable
statement under any similar federal statute then in force.
(c) Cause shall mean:
(i) The willful and continued failure by
Employee to materially perform his duties after
demand for performance is delivered by the Company;
(ii) The engaging by Employee during the
term of employment in criminal conduct or conduct
constituting moral turpitude that is injurious to the
Company, monetarily or otherwise;
<PAGE> 17
(iii) The embezzlement by Employee of any
funds of the Company; and/or
(iv) Acts of dishonesty or other acts by
Employee (including any breach of the terms,
conditions or covenants contained in his employment
agreement) that cause material adverse harm to the
Company (other than as a consequence of good faith
decisions made by employee in the normal performance
of his duties).
5. The options granted herein shall be issued pursuant to a standard
option agreement approved by the Board of Directors of the Company.
<PAGE> 18
EXHIBIT C-4
BRUCE VOSS STOCK GRANT
1. 125 shares of common stock, no par value, of the Company, as
adjusted for stock splits, recapitalizations and similar events affecting the
common stock.
2. Exercise price shall be based on a valuation of Company of
$10,000,000. Hence, the exercise price shall be $2,778 per share of common
stock.
3. 63 shares of common stock granted pursuant to the option shall vest
as of April 30, 1999, and the additional 62 shares shall vest as of April 1,
2000.
4. The option shall be exercisable at any time after the shares
applicable thereto have been vested; provided (x) the options must be exercised
on the earlier to occur of (i) December 31, 2003 or (ii) the consummation of a
Material Transaction and (y) the options shall be forfeited and terminate (if
not previously exercised) if Employee is terminated for Cause (as hereinafter
defined) or voluntarily resigns before June 11, 2000 without the approval of a
majority of the Board.
(a) A Material Transaction shall mean the following:
(i) a Qualified Public Offering;
(ii) the merger or consolidation of the Company with
another entity in which the Company is not the surviving
entity (or survives only as a wholly owned subsidiary of
another entity) other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(iii) the sale of all or substantially all of the
assets of the Company; or
(iv) the dissolution and liquidation of the Company.
(b) A Qualified Public Offering shall mean any underwritten
offering by Company pursuant to an effective registration statement
under the Securities Act of 1933, then in effect, or any comparable
statement under any similar federal statute then in force.
(c) Cause shall mean:
(i) The willful and continued failure by
Employee to materially perform his duties after
demand for performance is delivered by the Company;
(ii) The engaging by Employee during the
term of employment in criminal conduct or conduct
constituting moral turpitude that is injurious to the
Company, monetarily or otherwise;
<PAGE> 19
(iii) The embezzlement by Employee of any
funds of the Company; and/or
(iv) Acts of dishonesty or other acts by
Employee (including any breach of the terms,
conditions or covenants contained in his employment
agreement) that cause material adverse harm to the
Company (other than as a consequence of good faith
decisions made by Employee in the normal performance
of his duties).
5. The options granted herein shall be issued pursuant to a standard
option agreement approved by the Board of Directors of the Company.
<PAGE> 20
EXHIBIT C-5
ROBERT MICHAELS STOCK GRANT
1. 125 shares of common stock, no par value, of the Company, as
adjusted for stock splits, recapitalizations and similar events affecting the
common stock.
2. Exercise price shall be based on a valuation of Company of
$10,000,000. Hence, the exercise price shall be $2,778 per share of common
stock.
3. 63 shares of common stock granted pursuant to the option shall vest
as of April 30, 1999, and the additional 62 shares shall vest as of April 1,
2000.
4. The option shall be exercisable at any time after the shares
applicable thereto have been vested; provided (x) the options must be exercised
on the earlier to occur of (i) December 31, 2003 or (ii) the consummation of a
Material Transaction and (y) the options shall be forfeited and terminate (if
not previously exercised) if Employee is terminated for Cause (as hereinafter
defined) or voluntarily resigns before 6/11/2000 without the approval of a
majority of the Board.
(a) A Material Transaction shall mean the following:
(i) a Qualified Public Offering;
(ii) the merger or consolidation of the Company with
another entity in which the Company is not the surviving
entity (or survives only as a wholly owned subsidiary of
another entity) other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(iii) the sale of all or substantially all of the
assets of the Company; or
(iv) the dissolution and liquidation of the Company.
(b) A Qualified Public Offering shall mean any underwritten
offering by Company pursuant to an effective registration statement
under the Securities Act of 1933, then in effect, or any comparable
statement under any similar federal statute then in force.
(c) Cause shall mean:
(i) The willful and continued failure by
Employee to materially perform his duties after
demand for performance is delivered by the Company;
(ii) The engaging by Employee during the
term of employment in criminal conduct or conduct
constituting moral turpitude that is injurious to the
Company, monetarily or otherwise;
<PAGE> 21
(iii) The embezzlement by Employee of any
funds of the Company; and/or
(iv) Acts of dishonesty or other acts by
Employee (including any breach of the terms,
conditions or covenants contained in his employment
agreement) that cause material adverse harm to the
Company (other than as a consequence of good faith
decisions made by Employee in the normal performance
of his duties).
5. The options granted herein shall be issued pursuant to a standard
option agreement approved by the Board of Directors of the Company.
<PAGE> 22
EXHIBIT D
FORM OF LENDER WARRANTS
<PAGE> 1
AMENDED AND RESTATED DEBENTURE
$7,050,000 As of April 15, 1999
FOR VALUE RECEIVED, on or before June 30, 2000 ("Maturity Date"), the
undersigned (hereinafter referred to as "Borrower"), promises to pay to the
order of INFINITY INVESTORS LIMITED ("Lender") at its account set forth on
Exhibit A hereto (as such account may be changed from time to time by written
notice from Lender to Borrower, the principal amount of SEVEN MILLION FIFTY
THOUSAND and 00/100 DOLLARS ($7,050,000) ("Total Principal Amount"), or such
amount less than the Total Principal Amount which is outstanding from time to
time if the total amount outstanding under this Debenture ("Debenture") is less
than the Total Principal Amount, together with interest on such portion of the
Total Principal Amount which has been advanced to Borrower from the date
advanced until paid at a fixed rate per annum equal to the lesser of (a) the
Maximum Rate (as hereinafter defined) or (b) eight percent (8%), calculated on
the basis of actual days elapsed but computed as if each year consisted of 360
days. The term "Maximum Rate," as used herein, shall mean at the particular time
in question the maximum rate of interest, if any, which, under applicable law,
may then be charged on this Debenture. If such maximum rate of interest changes
after the date hereof and this Debenture provides for a fluctuating rate of
interest, the Maximum Rate shall be automatically increased or decreased, as the
case may be, without notice to Borrower from time to time as of the effective
date of each change in such maximum rate. If applicable law ceases to provide
for such a maximum rate of interest, the Maximum Rate shall be equal to eighteen
percent (18%) per annum.
This Debenture (i) has been executed and delivered pursuant to that
certain Securities Purchase Agreement dated as of June 11, 1998 among Borrower,
Lender, Kerry Rogers, Jack Higgins and Bob Michaels, which has been amended by
the letter agreement (the "Letter Agreement") dated the date hereof (as so
amended and as the same may otherwise be amended, the "Securities Purchase
Agreement") among Borrower, Lender and the other parties thereto and (ii) amends
and restates, but does not extinguish, the Original Debentures (as such term is
defined in the Letter Agreement). All of the priorities of the rights, remedies,
liens, equities, powers and privileges securing the payment of the indebtedness
hereby amended, restated and increased are hereby recognized, renewed, extended
and preserved in full to secure payment of this Debenture. This Debenture is
secured by, inter alia, the Security Agreement (as such term is defined in the
Securities Purchase Agreement).
This Debenture, the Securities Purchase Agreement, the Security
Agreement, the Letter Agreement, the Related Agreements (as such term is defined
in the Securities Purchase Agreement) and all other documents evidencing,
securing, governing, guaranteeing and/or pertaining to this Debenture are
hereinafter collectively referred to as the "Loan Documents." The holder of this
Debenture is entitled to the benefits and security provided in the Loan
Documents.
The principal of and all accrued but unpaid interest on this Debenture
shall be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues,
commencing on the last day of April, 1999, and continuing on the last
day of each successive month thereafter during the term of this
Debenture;
(b) he remaining principal of the Debenture shall be due and
payable as follows, in each case on the last day of the applicable
month:
AMENDED AND RESTATED DEBENTURE - PAGE 1
<PAGE> 2
<TABLE>
<CAPTION>
LAST DAY OF
APPLICABLE MONTH REQUIRED PAYMENT PER MONTH
<S> <C>
April 1999 $ 50,000
May 1999 $ 50,000
June 1999 $100,000
July 1999 $100,000
August 1999 $100,000
September 1999 $150,000
October 1999 $150,000
November 1999 $200,000
December 1999 $250,000
January 2000 $250,000
February 2000 $250,000
March 2000 $250,000
April 2000 $250,000
May 2000 $250,000
June 2000 Remainder ($4,650,000 assuming all prior monthly
payments are timely made)
</TABLE>
(d) in addition to the payments pursuant to subsection (b)
above, Borrower shall, on the last day of each calendar month, prepay
all or a portion of the principal balance of this Debenture from all
Available Cash Flow of Borrower as of the last day of the immediately
preceding month. As used herein, Available Cash Flow means the amount
of cash on hand on such last day of such month and received by Borrower
from any source (including, without limitation, debt and equity
financings and asset sales), less the accrued expenses of Borrower, any
approved budgeted capital expenditures of Borrower, any principal and
interest payments on indebtedness of Borrower and a reserve maintained
in an amount determined by Borrower's Board of Directors, considering
current needs for operating capital and prudent reserves for future
operating capital (Borrower shall deliver to Lender, with each
financial statement required to be delivered by it to Lender under
Section 9(b) of the Purchase Agreement, a schedule in form satisfactory
to Lender of Available Cash Flow for the immediately preceding month);
and
(e) if not sooner paid pursuant to the terms of this
Debenture, the remaining outstanding principal balance of this
Debenture, together with all accrued but unpaid interest, shall be due
and payable on the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a
delinquency charge in an amount equal to the greater of (i) 5.0% of the amount
of the delinquent payment up to the maximum amount of $250.00, or (ii) $25.00.
Upon an Event of Default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, do one or both of
the following: (a) increase the interest rate provided for herein by three
(3.00) percentage points and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Debenture.
Borrower may from time to time prepay all or any portion of the
principal of this Debenture without premium or penalty. Unless otherwise agreed
to in writing, or otherwise required by applicable law, payments will be applied
first to unpaid accrued interest, then to principal, and any remaining amount to
any unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the right
to apply payments among principal, interest, delinquency charges, collection
costs and other charges, at its discretion. All prepayments shall be applied to
the indebtedness owing hereunder in such order and manner as Lender may from
time to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Debenture shall be made in lawful money of the
United States of America in immediately available funds, at the address of
Lender indicated above, or such other place as the holder of this Debenture
shall designate in writing to Borrower. If any payment of principal of or
interest on this Debenture shall become due on a day which is not a Business Day
(as hereinafter defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in computing
interest in connection with such payment. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
accrued and unpaid interest on this Debenture.
AMENDED AND RESTATED DEBENTURE - PAGE 2
<PAGE> 3
Borrower agrees that no advances under this Debenture shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due all or any part of the
principal on this Debenture, any other debenture issued pursuant to the
terms of the Securities Purchase Agreement or the February Debenture
(as such term is defined in the Letter Agreement);
(b) failure of Borrower to pay (i) within five (5) Business
Days of the due date thereof any interest on this Debenture, or any
other debenture issued pursuant to the terms of the Securities Purchase
Agreement or the February Debenture or (ii) within five (5) Business
Days following the delivery of notice to Borrower of any fees or any
other amount payable (not otherwise referred to in (a) above or this
clause (b)) by Borrower under this Debenture or any other debenture
issued pursuant to the terms of the Securities Purchase Agreement;
(c) any representation, warranty, certification or statement
made by Borrower in the Letter Agreement, the Securities Purchase
Agreement or any Related Agreement (as such term is defined in the
Securities Purchase Agreement) or which is contained in any
certificate, document or financial or other statement furnished at any
time under or in connection with the Securities Purchase Agreement or
any Related Agreement shall prove to have been untrue in any material
respect when made;
(d) failure on the part of Borrower or any Founder to observe
or perform any of the covenants or agreement contained in Section 10 of
the Securities Purchase Agreement (Negative Covenants);
(e) failure on the part of Borrower or any Founder to observe
or perform any covenant or agreement contained in the Letter Agreement,
the Securities Purchase Agreement (including without limitation the
Affirmative Covenants contained in Section 9 thereof) or any Related
Document (other than those covered by clauses (a) through (d) above),
which failure is not cured within thirty (30) days of such failure;
(f) any of the Founders (as such term is defined in the
Securities Purchase Agreement) shall fail to perform, in any material
respect, any of their respective obligations under, or shall have
breached any material item of, the Letter Agreement, the Securities
Purchase Agreement or any Related Agreement;
(g) Borrower or any Subsidiary (as such term is defined in the
Securities Purchase Agreement) has commenced a voluntary case or other
proceeding seeking liquidation, winding-up, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or has consented to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or has made a general assignment
for the benefit of creditors, or has failed generally to pay its debts
as they become due, or has taken any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding has been commenced
against Borrower or any Subsidiary, seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency, moratorium or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed
AMENDED AND RESTATED DEBENTURE - PAGE 3
<PAGE> 4
for a period of 60 days, or an order for relief has been entered
against Borrower or any Subsidiary under the federal bankruptcy laws as
now or hereafter in effect; or
(i) judgments or orders for the payment of money which in the
aggregate at any one time exceed $250,000 and are not covered by
insurance have been rendered against Borrower or any Subsidiary by a
court of competent jurisdiction and such judgments or orders shall
continue unsatisfied and unstayed for a period of 60 days,
the holder of this Debenture may, at its option, without further notice or
demand, (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Debenture at once due and payable, (ii) refuse to advance any
additional amounts under this Debenture, (iii) foreclose all liens securing
payment hereof, (iv) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to any such rights,
remedies or recourses under the Related Agreements and Loan Documents, at law or
in equity, or (v) pursue any combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this
Debenture or any other right, remedy or recourse available to the holder hereof
upon the occurrence of an Event of Default hereunder shall not constitute a
waiver of the right of the holder of this Debenture to exercise the same at that
time or at any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of the holder hereof,
as provided in this Debenture and in any of the other Loan Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Debenture which is less than the payment in full of all amounts due and payable
at the time of such payment shall not (i) constitute a waiver of or impair,
reduce, release or extinguish any right, remedy or recourse of the holder
hereof, or nullify any prior exercise of any such right, remedy or recourse, or
(ii) impair, reduce, release or extinguish the obligations of any party liable
under any of the Loan Documents as originally provided herein or therein.
This Debenture and all of the other Loan Documents and Related
Agreements are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision hereof or of
any of the other Loan Documents or Related Agreements or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to any other
person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Debenture. If the applicable law is ever revised,
repealed or judicially interpreted so as to render usurious any amount called
for under this Debenture or under any of the other Loan Documents, or contracted
for, charged, taken, reserved or received with respect to the indebtedness
evidenced by this Debenture, or if Lender's exercise of the option to accelerate
the maturity of this Debenture, or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by law, then it is
the express intent of Borrower and Lender that all excess amounts theretofore
collected by Lender be credited on the principal balance of this Debenture (or,
if this Debenture and all other indebtedness arising under or pursuant to the
other Loan Documents have been paid in full, refunded to Borrower), and the
provisions of this Debenture and the other Loan Documents and Related Documents
immediately be deemed reformed and the amounts thereafter collectable hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the then applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid, or agreed to be paid, by Borrower for the use, forbearance,
detention, taking, charging, receiving or reserving of the indebtedness of
Borrower to Lender under this Debenture or arising under or pursuant to the
other Loan Documents and Related Agreements shall, to the maximum extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to such indebtedness
for so long as such indebtedness is outstanding. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents and Related
Agreements, it is not the intention of Lender to accelerate the maturity of any
interest that has not accrued at the time of such acceleration or to collect
unearned interest at the time of such acceleration.
AMENDED AND RESTATED DEBENTURE - PAGE 4
<PAGE> 5
If this Debenture is placed in the hands of an attorney for collection,
or is collected in whole or in part by suit or through probate, bankruptcy or
other legal proceedings of any kind, Borrower agrees to pay, in addition to all
other sums payable hereunder, all costs and expenses of collection, including
but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Debenture
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Any and all payments by Borrower hereunder to any holder of this
Debenture and each "qualified assignee" thereof shall be made free and clear of
and without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes") unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Borrower shall be required by law or the administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable with respect
to this Debenture (i) the sum payable shall be increased as may be necessary so
that after making all required deductions or withholdings (including deductions
or withholdings applicable to additional amounts paid under this paragraph) such
holder of this Debenture receives an amount equal to the sum it would have
received if no such deduction or withholding had been made; (ii) Borrower shall
make such deductions or withholdings; and (iii) Borrower shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a holder of this
Debenture is a person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to Borrower that
payments of Borrower to such assignee under applicable law would not be subject
to any Taxes and (z) from time to time, as and when requested by Borrower,
executes and delivers to Borrower and the Internal Revenue Service forms, and
provides Borrower with any information, necessary to establish such assignee's
continued exemption from Taxes under applicable law. Borrower shall forthwith
pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment made
under this Debenture or the transactions contemplated hereby. Borrower shall
indemnify each holder of this Debenture, or qualified assignee, for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this paragraph)
paid by each holder of this Debenture, or qualified assignee, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days from
the date such holder of this Debenture or assignee makes written demand
therefor. A certificate as to the amount of such Taxes or Other Taxes submitted
to Borrower by such holder of this Debenture or assignee shall be conclusive
evidence of the amount due from Borrower to such party. Within 30 days after the
date of any payment of Taxes, Borrower will furnish to each holder of this
Debenture the original or a certified copy of a receipt evidencing payment
thereof.
[SIGNATURE PAGE FOLLOWS]
AMENDED AND RESTATED DEBENTURE - PAGE 5
<PAGE> 6
THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE.
BORROWER:
ORIX GLOBAL COMMUNICATIONS, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMENDED AND RESTATED DEBENTURE - PAGE 6
<PAGE> 7
EXHIBIT A
PAYMENT ACCOUNT INFORMATION
<PAGE> 1
INFINITY INVESTORS LIMITED
HUNKINS WATERFONT PLAZA
P.O. BOX 556-MAIN STREET
CHARLESTON, NEVIS, WEST INDIES
April 29, 1999
Orix Global Communications, Inc.
177 East Flamingo Road
Bldg. B, Suite 200
Las Vegas, NV 89119
Re: ADDITIONAL $500,000 LOAN
Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Purchase Agreement") by and between Orix Global Communications, Inc., a Nevada
corporation (the "Company"), and Infinity Investors Limited, a Nevis West Indies
corporation (the "Lender"), dated as of June 11, 1998. Reference is also made to
that certain Amended and Restated Debenture dated as of April 15, 1999 pursuant
to which, among other items, the Lender issued a $7,050,000 Debenture to Lender
(the "Debenture") under the terms of the Purchase Agreement. (The Company
acknowledges that it has also issued to the Lender a $390,000 Debenture dated
February 9, 1999, as amended April 15, 1999).
Pursuant to the terms of this Letter Agreement (the "Letter
Agreement"), the Company and the Lender now desire to provide for the issuance
of an additional Debenture of $500,000 from the Company to the Lender on the
terms specified herein (the "New Debenture"). Capitalized terms used herein and
otherwise defined shall have the meanings described thereto in the Purchase
Agreement.
Therefore, the Company and Lender agree as follows:
1. ISSUANCE OF DEBENTURE. On the date hereof, the Company shall issue
to the Lender the New Debenture in the form of Exhibit A attached hereto,
against delivery by the Lender to the Company of $500,000 (the "Loan Proceeds").
The Loan Proceeds shall be used exclusively by the Company for working capital
purposes. The Company hereby acknowledges and agrees that the New Debenture
shall be treated as issued pursuant to the terms of the Purchase Agreement and
each Related Agreement, including, without limitation, the Security Agreement.
It is expressly agreed by the Company that the Lender shall be provided the same
rights, preferences, privileges, causes of action, security, demands and any and
other benefits under the Purchase Agreement and each Related Agreement with
respect to the New Debenture as exists with respect to the Debenture (provided,
the New Debenture shall not be convertible into Common Stock of the Company).
<PAGE> 2
Orix Global Communications, Inc.
April 29, 1999
Page 2
2. PARTICIPATION RIGHT. Consistent with the terms of the Purchase
Agreement and the Related Agreements, the Company acknowledges that the Lender
may participate or assign all or a portion of the New Debenture to one or more
Persons, each of which shall take the assigned or participated interest with the
same rights, preferences, privileges, causes of action, security and demands and
other benefits as exist with respect to the Lender. Consistent with this right,
the Lender previously entered into a Participation Agreement with Infinity
Emerging Opportunities Limited, which assigned its rights thereunder to IEO
Holdings Limited ("IEO Holdings"), pursuant to which the Lender participated an
interest in a portion of the amount owed under the Debenture. The Company hereby
acknowledges that the Lender intends to participate a 50% interest in the New
Debenture to IEO Holdings, and hereby consents to such participation.
3. GENERAL. The Company hereby agrees that, at any time, and from time
to time, upon request, it shall execute and deliver such further documents and
do such further acts and things as the Lender may reasonably request in order to
fully effect the purposes of this Letter Agreement. This Letter Agreement may be
executed by facsimile signature and in one or more counterparts and it is not
necessary that signatures of all parties appear on the same counterpart, but
such counterparts together shall constitute but one and the same agreement. This
Letter Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors.
[Signature page follows]
<PAGE> 3
Orix Global Communications, Inc.
April 29, 1999
Page 3
To set forth your agreement with the foregoing, please countersign this
Letter Agreement in the space provided below.
Very truly yours,
INFINITY INVESTORS LIMITED
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
ORIX GLOBAL COMMUNICATIONS, INC.
By:
------------------------------------
Steven Loglisci, President
IEO HOLDINGS LIMITED
(AS THE PARTICIPANT)
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 4
EXHIBIT A
FORM OF NEW DEBENTURE
<PAGE> 1
DEBENTURE
$500,000 April 29, 1999
FOR VALUE RECEIVED, on or before August 27, 1999 ("Maturity Date"), the
undersigned (hereinafter referred to as "Borrower"), promises to pay to the
order of INFINITY INVESTORS LIMITED ("Lender") at its offices at Hawkins
Waterfront Plaza, P.O. Box 556-Main Street, Charleston, Nevis, West Indies, the
principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000) ("Total Principal
Amount"), together with interest on such portion of the Total Principal Amount
which has been advanced to Borrower from the date advanced until paid at a fixed
rate per annum equal to the lesser of (a) the Maximum Rate (as hereinafter
defined) or (b) eight percent (8%), calculated on the basis of actual days
elapsed but computed as if each year consisted of 360 days. The term "Maximum
Rate," as used herein, shall mean at the particular time in question the maximum
rate of interest, if any, which, under applicable law, may then be charged on
this Debenture. If such maximum rate of interest changes after the date hereof
and this Debenture provides for a fluctuating rate of interest, the Maximum Rate
shall be automatically increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective date of each change in
such maximum rate. If applicable law ceases to provide for such a maximum rate
of interest, the Maximum Rate shall be equal to eighteen percent (18%) per
annum.
The principal of and all accrued but unpaid interest on this Debenture
shall be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues,
commencing on the last day of May, 1999, and continuing on the last day
of each successive month thereafter during the term of this Debenture;
(b) in addition to the payments pursuant to subsections (a)
above and (c) below, Borrower shall, on the last day of each calendar
month, prepay all or a portion of the principal balance of this
Debenture from all Available Cash Flow of Borrower as of the last day
of the immediately preceding month. As used herein, Available Cash Flow
means the amount of cash on hand on such last day of such month and
received by Borrower from any source (including, without limitation,
debt and equity financings and asset sales), less the accrued expenses
of Borrower, any approved budgeted capital expenditures of Borrower,
any principal and interest payments on indebtedness of Borrower and a
reserve maintained in an amount determined by Borrower's Board of
Directors, considering current needs for operating capital and prudent
reserves for future operating capital (Borrower shall deliver to
Lender, with each financial statement required to be delivered by it to
Lender under Section 9(b) of the Securities Purchase Agreement (as
hereinafter defined), a schedule in form satisfactory to Lender of
Available Cash Flow for the immediately preceding month);
<PAGE> 2
(c) in addition to the payments pursuant to subsections (a)
and (b) above, Borrower shall immediately prepay all or a portion of
the principal balance of this Debenture from all proceeds received by
Borrower or any of its subsidiaries (including Latin Gate, S.A.) in
connection with any tax refunds, including, without limitation, any
value added tax refunds received from any governmental entity in Mexico
(the "Tax Proceeds"); and
(d) if not sooner paid pursuant to the terms of this
Debenture, the remaining outstanding principal balance of this
Debenture, together with all accrued but unpaid interest, shall be due
and payable on the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a
delinquency charge in an amount equal to the greater of (i) 5.0% of the amount
of the delinquent payment up to the maximum amount of $250.00, or (ii) $25.00.
Upon an Event of Default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, do one or both of
the following: (a) increase the interest rate provided for herein by three
(3.00) percentage points and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Debenture.
Borrower hereby acknowledges and agrees that this Debenture shall be
treated as issued pursuant to the terms of the Securities Purchase Agreement
dated as of June 11, 1998 among Borrower and Lender, among others (the
"Securities Purchase Agreement") and each Related Agreement (as defined in the
Securities Purchase Agreement), including, without limitation, the Security
Agreement and Pledge Agreement (as such terms are defined in the Securities
Purchase Agreement). It is expressly agreed by Borrower that the Lender shall be
provided the same rights, preferences, privileges, causes of action, security,
demands and any and other benefits under the Securities Purchase Agreement and
each Related Agreement with respect to this Debenture as exists with respect to
any other Debenture issued pursuant to the term of the Securities Purchase
Agreement (provided, this Debenture shall not be convertible into common stock
of Borrower). This Debenture is secured by, inter alia, the Security Agreement
and Pledge Agreement.
This Debenture, the Securities Purchase Agreement, such Security
Agreement and Pledge Agreement, and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Debenture, including but not
limited to those documents described above, are hereinafter collectively
referred to as the "Loan Documents." The holder of this Debenture is entitled to
the benefits and security provided in the Loan Documents.
Borrower may from time to time prepay all or any portion of the
principal of this Debenture without premium or penalty. Unless otherwise agreed
to in writing, or otherwise required by applicable law, payments will be applied
first to unpaid accrued interest, then to principal, and any remaining amount to
any unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the
2.
<PAGE> 3
right to apply payments among principal, interest, delinquency charges,
collection costs and other charges, at its discretion. All prepayments shall be
applied to the indebtedness owing hereunder in such order and manner as Lender
may from time to time determine in its sole discretion. All payments and
prepayments of principal of or interest on this Debenture shall be made in
lawful money of the United States of America in immediately available funds, at
the address of Lender indicated above, or such other place as the holder of this
Debenture shall designate in writing to Borrower. If any payment of principal of
or interest on this Debenture shall become due on a day which is not a Business
Day (as hereinafter defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in computing
interest in connection with such payment. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
accrued and unpaid interest on this Debenture.
Borrower agrees that no advances under this Debenture shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due all or any
part of the principal on this Debenture or any other Debenture
issued pursuant to the terms of the Securities Purchase
Agreement;
(b) failure of Borrower to pay (i) within twenty (20)
Business Days of the due date thereof any interest on this
Debenture or any other Debenture issued pursuant to the terms
of the Securities Purchase Agreement or (ii) within twenty
(20) Business Days following the delivery of notice to
Borrower of any fees or any other amount payable (not
otherwise referred to in (a) above or this clause (b)) by
Borrower under this Debenture or any other Debenture issued
pursuant to the terms of the Securities Purchase Agreement;
(c) any representation, warranty, certification or
statement made by Borrower in the Securities Purchase
Agreement or any Related Agreement (as such term is defined in
the Securities Purchase Agreement) or which is contained in
any certificate, document or financial or other statement
furnished at any time under or in connection with the
Securities Purchase Agreement or any Related Agreement shall
prove to have been untrue in any material respect when made;
(d) failure on the part of Borrower to observe or
perform any of the covenants or agreement contained in Section
10 of the Securities Purchase Agreement (Negative Covenants);
(e) failure on the part of Borrower to observe or
perform any covenant
3.
<PAGE> 4
or agreement contained in the Securities Purchase Agreement or
any Related Document (other than those covered by clauses (a)
through (d) above), which failure is not cured within thirty
(30) days of such failure;
(f) any of the Current Stockholders (as such term is
defined in the Securities Purchase Agreement) shall fail to
perform, in any material respect, any of their respective
obligations under, or shall have breached any material item
of, the Securities Purchase Agreement or any Related
Agreement;
(g) Borrower or any Subsidiary (as such term is
defined in the Securities Purchase Agreement) has commenced a
voluntary case or other proceeding seeking liquidation,
winding-up, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, or has consented to any such relief or
to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or has made a general assignment for the benefit
of creditors, or has failed generally to pay its debts as they
become due, or has taken any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding has been
commenced against Borrower or any Subsidiary, seeking
liquidation, winding-up, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period
of 60 days, or an order for relief has been entered against
Borrower or any Subsidiary under the federal bankruptcy laws
as now or hereafter in effect; or
(i) judgments or orders for the payment of money
which in the aggregate at any one time exceed $250,000 and are
not covered by insurance have been rendered against Borrower
or any Subsidiary by a court of competent jurisdiction and
such judgments or orders shall continue unsatisfied and
unstayed for a period of 60 days,
the holder of this Debenture may, at its option, without further notice or
demand, (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Debenture at once due and payable, (ii) refuse to advance any
additional amounts under this Debenture, (iii) foreclose all liens securing
payment hereof, (iv) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to any such rights,
remedies or recourses under the Related Agreements and Loan Documents, at law or
in equity, or (v) pursue any combination of the foregoing.
4.
<PAGE> 5
The failure to exercise the option to accelerate the maturity of this
Debenture or any other right, remedy or recourse available to the holder hereof
upon the occurrence of an Event of Default hereunder shall not constitute a
waiver of the right of the holder of this Debenture to exercise the same at that
time or at any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of the holder hereof,
as provided in this Debenture and in any of the other Loan Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Debenture which is less than the payment in full of all amounts due and payable
at the time of such payment shall not (i) constitute a waiver of or impair,
reduce, release or extinguish any right, remedy or recourse of the holder
hereof, or nullify any prior exercise of any such right, remedy or recourse, or
(ii) impair, reduce, release or extinguish the obligations of any party liable
under any of the Loan Documents as originally provided herein or therein.
This Debenture and all of the other Loan Documents and Related
Agreements are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision hereof or of
any of the other Loan Documents or Related Agreements or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to any other
person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Debenture. If the applicable law is ever revised,
repealed or judicially interpreted so as to render usurious any amount called
for under this Debenture or under any of the other Loan Documents, or contracted
for, charged, taken, reserved or received with respect to the indebtedness
evidenced by this Debenture, or if Lender's exercise of the option to accelerate
the maturity of this Debenture, or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by law, then it is
the express intent of Borrower and Lender that all excess amounts theretofore
collected by Lender be credited on the principal balance of this Debenture (or,
if this Debenture and all other indebtedness arising under or pursuant to the
other Loan Documents have been paid in full, refunded to Borrower), and the
provisions of this Debenture and the other Loan Documents and Related Documents
immediately be deemed reformed and the amounts thereafter collectable hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the then applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid, or agreed to be paid, by Borrower for the use, forbearance,
detention, taking, charging, receiving or reserving of the indebtedness of
Borrower to Lender under this Debenture or arising under or pursuant to the
other Loan Documents and Related Agreements shall, to the maximum extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to such indebtedness
for so long as such indebtedness is outstanding. Notwithstanding anything to the
contrary contained herein or in any
5.
<PAGE> 6
of the other Loan Documents and Related Agreements, it is not the intention of
Lender to accelerate the maturity of any interest that has not accrued at the
time of such acceleration or to collect unearned interest at the time of such
acceleration.
If this Debenture is placed in the hands of an attorney for collection,
or is collected in whole or in part by suit or through probate, bankruptcy or
other legal proceedings of any kind, Borrower agrees to pay, in addition to all
other sums payable hereunder, all costs and expenses of collection, including
but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Debenture
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Any and all payments by Borrower hereunder to any holder of this
Debenture and each "qualified assignee" thereof shall be made free and clear of
and without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes") unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Borrower shall be required by law or the administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable with respect
to this Debenture (i) the sum payable shall be increased as may be necessary so
that after making all required deductions or withholdings (including deductions
or withholdings applicable to additional amounts paid under this paragraph) such
holder of this Debenture receives an amount equal to the sum it would have
received if no such deduction or withholding had been made; (ii) Borrower shall
make such deductions or withholdings; and (iii) Borrower shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a holder of this
Debenture is a person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to Borrower that
payments of Borrower to such assignee under applicable law would not be subject
to any Taxes and (z) from time to time, as and when requested by Borrower,
executes and delivers to Borrower and the Internal Revenue Service forms, and
provides Borrower with any information, necessary to establish such assignee's
continued exemption from Taxes under applicable law. Borrower shall forthwith
pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment made
under this Debenture or the transactions contemplated hereby. Borrower shall
indemnify each holder of this Debenture, or qualified assignee, for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this paragraph)
paid by each holder of this Debenture, or qualified assignee, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such
6.
<PAGE> 7
Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days from the date such holder of this
Debenture or assignee makes written demand therefor. A certificate as to the
amount of such Taxes or Other Taxes submitted to Borrower by such holder of this
Debenture or assignee shall be conclusive evidence of the amount due from
Borrower to such party. Within 30 days after the date of any payment of Taxes,
Borrower will furnish to each holder of this Debenture the original or a
certified copy of a receipt evidencing payment thereof.
[Signature Page Follows]
7.
<PAGE> 8
THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE.
BORROWER:
ORIX GLOBAL COMMUNICATIONS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
8.
<PAGE> 1
INFINITY INVESTORS LIMITED
HUNKINS WATERFONT PLAZA
P.O. BOX 556-MAIN STREET
CHARLESTON, NEVIS, WEST INDIES
April 30, 1999
Orix Global Communications, Inc.
177 East Flamingo Road
Bldg. B, Suite 200
Las Vegas, NV 89119
Re: ADDITIONAL $100,000 LOAN
Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Purchase Agreement") by and between Orix Global Communications, Inc., a Nevada
corporation (the "Company"), and Infinity Investors Limited, a Nevis West Indies
corporation (the "Lender"), dated as of June 11, 1998. Reference is also made to
that certain Amended and Restated Debenture dated as of April 15, 1999 pursuant
to which, among other items, the Lender issued a $7,050,000 Debenture to Lender
(the "Debenture") under the terms of the Purchase Agreement. (The Company
acknowledges that it has also issued to the Lender a (i) $390,000 Debenture
dated February 9, 1999, as amended April 15, 1999 and (ii) $500,000 Debenture
dated April 29, 1999).
Pursuant to the terms of this Letter Agreement (the "Letter
Agreement"), the Company and the Lender now desire to provide for the issuance
of an additional Debenture of $100,000 from the Company to the Lender on the
terms specified herein (the "New Debenture"). Capitalized terms used herein and
otherwise defined shall have the meanings described thereto in the Purchase
Agreement.
Therefore, the Company and Lender agree as follows:
1. ISSUANCE OF DEBENTURE. On the date hereof, the Company shall issue
to the Lender the New Debenture in the form of Exhibit A attached hereto,
against delivery by the Lender to the Company of $100,000 (the "Loan Proceeds").
The Loan Proceeds shall be used exclusively by the Company for working capital
purposes. The Company hereby acknowledges and agrees that the New Debenture
shall be treated as issued pursuant to the terms of the Purchase Agreement and
each Related Agreement, including, without limitation, the Security Agreement.
It is expressly agreed by the Company that the Lender shall be provided the same
rights, preferences, privileges, causes of action, security, demands and any and
other benefits under the Purchase Agreement and each Related Agreement with
respect to the New Debenture as exists with respect to the Debenture (provided,
the New Debenture shall not be convertible into Common Stock of the Company).
<PAGE> 2
Orix Global Communications, Inc.
April 30, 1999
Page 2
2. PARTICIPATION RIGHT. Consistent with the terms of the Purchase
Agreement and the Related Agreements, the Company acknowledges that the Lender
may participate or assign all or a portion of the New Debenture to one or more
Persons, each of which shall take the assigned or participated interest with the
same rights, preferences, privileges, causes of action, security and demands and
other benefits as exist with respect to the Lender. Consistent with this right,
the Lender previously entered into a Participation Agreement with Infinity
Emerging Opportunities Limited, which assigned its rights thereunder to IEO
Holdings Limited ("IEO Holdings"), pursuant to which the Lender participated an
interest in a portion of the amount owed under the Debenture. The Company hereby
acknowledges that the Lender intends to participate a 50% interest in the New
Debenture to IEO Holdings, and hereby consents to such participation.
3. GENERAL. The Company hereby agrees that, at any time, and from time
to time, upon request, it shall execute and deliver such further documents and
do such further acts and things as the Lender may reasonably request in order to
fully effect the purposes of this Letter Agreement. This Letter Agreement may be
executed by facsimile signature and in one or more counterparts and it is not
necessary that signatures of all parties appear on the same counterpart, but
such counterparts together shall constitute but one and the same agreement. This
Letter Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors.
[Signature page follows]
<PAGE> 3
Orix Global Communications, Inc.
April 30, 1999
Page 3
To set forth your agreement with the foregoing, please countersign this
Letter Agreement in the space provided below.
Very truly yours,
INFINITY INVESTORS LIMITED
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
ORIX GLOBAL COMMUNICATIONS, INC.
By:
----------------------------------
Steven Loglisci, President
IEO HOLDINGS LIMITED
(AS THE PARTICIPANT)
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 4
EXHIBIT A
FORM OF NEW DEBENTURE
<PAGE> 1
DEBENTURE
$100,000 April 30, 1999
FOR VALUE RECEIVED, on or before August 28, 1999 ("Maturity Date"), the
undersigned (hereinafter referred to as "Borrower"), promises to pay to the
order of INFINITY INVESTORS LIMITED ("Lender") at its offices at Hawkins
Waterfront Plaza, P.O. Box 556-Main Street, Charleston, Nevis, West Indies, the
principal amount of ONE HUNDRED THOUSAND DOLLARS ($100,000) ("Total Principal
Amount"), together with interest on such portion of the Total Principal Amount
which has been advanced to Borrower from the date advanced until paid at a fixed
rate per annum equal to the lesser of (a) the Maximum Rate (as hereinafter
defined) or (b) eight percent (8%), calculated on the basis of actual days
elapsed but computed as if each year consisted of 360 days. The term "Maximum
Rate," as used herein, shall mean at the particular time in question the maximum
rate of interest, if any, which, under applicable law, may then be charged on
this Debenture. If such maximum rate of interest changes after the date hereof
and this Debenture provides for a fluctuating rate of interest, the Maximum Rate
shall be automatically increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective date of each change in
such maximum rate. If applicable law ceases to provide for such a maximum rate
of interest, the Maximum Rate shall be equal to eighteen percent (18%) per
annum.
The principal of and all accrued but unpaid interest on this Debenture
shall be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues,
commencing on the last day of May, 1999, and continuing on the last day
of each successive month thereafter during the term of this Debenture;
(b) in addition to the payments pursuant to subsections (a)
above and (c) below, Borrower shall, on the last day of each calendar
month, prepay all or a portion of the principal balance of this
Debenture from all Available Cash Flow of Borrower as of the last day
of the immediately preceding month. As used herein, Available Cash Flow
means the amount of cash on hand on such last day of such month and
received by Borrower from any source (including, without limitation,
debt and equity financings and asset sales), less the accrued expenses
of Borrower, any approved budgeted capital expenditures of Borrower,
any principal and interest payments on indebtedness of Borrower and a
reserve maintained in an amount determined by Borrower's Board of
Directors, considering current needs for operating capital and prudent
reserves for future operating capital (Borrower shall deliver to
Lender, with each financial statement required to be delivered by it to
Lender under Section 9(b) of the Securities Purchase Agreement (as
hereinafter defined), a schedule in form satisfactory to Lender of
Available Cash Flow for the immediately preceding month);
<PAGE> 2
(c) in addition to the payments pursuant to subsections (a)
and (b) above, Borrower shall immediately prepay all or a portion of
the principal balance of this Debenture from all proceeds received by
Borrower or any of its subsidiaries (including Latin Gate, S.A.) in
connection with any tax refunds, including, without limitation, any
value added tax refunds received from any governmental entity in Mexico
(the "Tax Proceeds"); and
(d) if not sooner paid pursuant to the terms of this
Debenture, the remaining outstanding principal balance of this
Debenture, together with all accrued but unpaid interest, shall be due
and payable on the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a
delinquency charge in an amount equal to the greater of (i) 5.0% of the amount
of the delinquent payment up to the maximum amount of $250.00, or (ii) $25.00.
Upon an Event of Default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, do one or both of
the following: (a) increase the interest rate provided for herein by three
(3.00) percentage points and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Debenture.
Borrower hereby acknowledges and agrees that this Debenture shall be
treated as issued pursuant to the terms of the Securities Purchase Agreement
dated as of June 11, 1998 among Borrower and Lender, among others (the
"Securities Purchase Agreement") and each Related Agreement (as defined in the
Securities Purchase Agreement), including, without limitation, the Security
Agreement and Pledge Agreement (as such terms are defined in the Securities
Purchase Agreement). It is expressly agreed by Borrower that the Lender shall be
provided the same rights, preferences, privileges, causes of action, security,
demands and any and other benefits under the Securities Purchase Agreement and
each Related Agreement with respect to this Debenture as exists with respect to
any other Debenture issued pursuant to the term of the Securities Purchase
Agreement (provided, this Debenture shall not be convertible into common stock
of Borrower). This Debenture is secured by, inter alia, the Security Agreement
and Pledge Agreement.
This Debenture, the Securities Purchase Agreement, such Security
Agreement and Pledge Agreement, and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Debenture, including but not
limited to those documents described above, are hereinafter collectively
referred to as the "Loan Documents." The holder of this Debenture is entitled to
the benefits and security provided in the Loan Documents.
Borrower may from time to time prepay all or any portion of the
principal of this Debenture without premium or penalty. Unless otherwise agreed
to in writing, or otherwise required by applicable law, payments will be applied
first to unpaid accrued interest, then to principal, and any remaining amount to
any unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the
2.
<PAGE> 3
right to apply payments among principal, interest, delinquency charges,
collection costs and other charges, at its discretion. All prepayments shall be
applied to the indebtedness owing hereunder in such order and manner as Lender
may from time to time determine in its sole discretion. All payments and
prepayments of principal of or interest on this Debenture shall be made in
lawful money of the United States of America in immediately available funds, at
the address of Lender indicated above, or such other place as the holder of this
Debenture shall designate in writing to Borrower. If any payment of principal of
or interest on this Debenture shall become due on a day which is not a Business
Day (as hereinafter defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in computing
interest in connection with such payment. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
accrued and unpaid interest on this Debenture.
Borrower agrees that no advances under this Debenture shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due all or any
part of the principal on this Debenture or any other Debenture
issued pursuant to the terms of the Securities Purchase
Agreement;
(b) failure of Borrower to pay (i) within twenty (20)
Business Days of the due date thereof any interest on this
Debenture or any other Debenture issued pursuant to the terms
of the Securities Purchase Agreement or (ii) within twenty
(20) Business Days following the delivery of notice to
Borrower of any fees or any other amount payable (not
otherwise referred to in (a) above or this clause (b)) by
Borrower under this Debenture or any other Debenture issued
pursuant to the terms of the Securities Purchase Agreement;
(c) any representation, warranty, certification or
statement made by Borrower in the Securities Purchase
Agreement or any Related Agreement (as such term is defined in
the Securities Purchase Agreement) or which is contained in
any certificate, document or financial or other statement
furnished at any time under or in connection with the
Securities Purchase Agreement or any Related Agreement shall
prove to have been untrue in any material respect when made;
(d) failure on the part of Borrower to observe or
perform any of the covenants or agreement contained in Section
10 of the Securities Purchase Agreement (Negative Covenants);
(e) failure on the part of Borrower to observe or
perform any covenant
3.
<PAGE> 4
or agreement contained in the Securities Purchase Agreement or
any Related Document (other than those covered by clauses (a)
through (d) above), which failure is not cured within thirty
(30) days of such failure;
(f) any of the Current Stockholders (as such term is
defined in the Securities Purchase Agreement) shall fail to
perform, in any material respect, any of their respective
obligations under, or shall have breached any material item
of, the Securities Purchase Agreement or any Related
Agreement;
(g) Borrower or any Subsidiary (as such term is
defined in the Securities Purchase Agreement) has commenced a
voluntary case or other proceeding seeking liquidation,
winding-up, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, or has consented to any such relief or
to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or has made a general assignment for the benefit
of creditors, or has failed generally to pay its debts as they
become due, or has taken any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding has been
commenced against Borrower or any Subsidiary, seeking
liquidation, winding-up, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period
of 60 days, or an order for relief has been entered against
Borrower or any Subsidiary under the federal bankruptcy laws
as now or hereafter in effect; or
(i) judgments or orders for the payment of money
which in the aggregate at any one time exceed $250,000 and are
not covered by insurance have been rendered against Borrower
or any Subsidiary by a court of competent jurisdiction and
such judgments or orders shall continue unsatisfied and
unstayed for a period of 60 days,
the holder of this Debenture may, at its option, without further notice or
demand, (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Debenture at once due and payable, (ii) refuse to advance any
additional amounts under this Debenture, (iii) foreclose all liens securing
payment hereof, (iv) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to any such rights,
remedies or recourses under the Related Agreements and Loan Documents, at law or
in equity, or (v) pursue any combination of the foregoing.
4.
<PAGE> 5
The failure to exercise the option to accelerate the maturity of this
Debenture or any other right, remedy or recourse available to the holder hereof
upon the occurrence of an Event of Default hereunder shall not constitute a
waiver of the right of the holder of this Debenture to exercise the same at that
time or at any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of the holder hereof,
as provided in this Debenture and in any of the other Loan Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Debenture which is less than the payment in full of all amounts due and payable
at the time of such payment shall not (i) constitute a waiver of or impair,
reduce, release or extinguish any right, remedy or recourse of the holder
hereof, or nullify any prior exercise of any such right, remedy or recourse, or
(ii) impair, reduce, release or extinguish the obligations of any party liable
under any of the Loan Documents as originally provided herein or therein.
This Debenture and all of the other Loan Documents and Related
Agreements are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision hereof or of
any of the other Loan Documents or Related Agreements or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to any other
person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Debenture. If the applicable law is ever revised,
repealed or judicially interpreted so as to render usurious any amount called
for under this Debenture or under any of the other Loan Documents, or contracted
for, charged, taken, reserved or received with respect to the indebtedness
evidenced by this Debenture, or if Lender's exercise of the option to accelerate
the maturity of this Debenture, or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by law, then it is
the express intent of Borrower and Lender that all excess amounts theretofore
collected by Lender be credited on the principal balance of this Debenture (or,
if this Debenture and all other indebtedness arising under or pursuant to the
other Loan Documents have been paid in full, refunded to Borrower), and the
provisions of this Debenture and the other Loan Documents and Related Documents
immediately be deemed reformed and the amounts thereafter collectable hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the then applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid, or agreed to be paid, by Borrower for the use, forbearance,
detention, taking, charging, receiving or reserving of the indebtedness of
Borrower to Lender under this Debenture or arising under or pursuant to the
other Loan Documents and Related Agreements shall, to the maximum extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to such indebtedness
for so long as such indebtedness is outstanding. Notwithstanding anything to the
contrary contained herein or in any
5.
<PAGE> 6
of the other Loan Documents and Related Agreements, it is not the intention of
Lender to accelerate the maturity of any interest that has not accrued at the
time of such acceleration or to collect unearned interest at the time of such
acceleration.
If this Debenture is placed in the hands of an attorney for collection,
or is collected in whole or in part by suit or through probate, bankruptcy or
other legal proceedings of any kind, Borrower agrees to pay, in addition to all
other sums payable hereunder, all costs and expenses of collection, including
but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Debenture
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Any and all payments by Borrower hereunder to any holder of this
Debenture and each "qualified assignee" thereof shall be made free and clear of
and without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes") unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Borrower shall be required by law or the administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable with respect
to this Debenture (i) the sum payable shall be increased as may be necessary so
that after making all required deductions or withholdings (including deductions
or withholdings applicable to additional amounts paid under this paragraph) such
holder of this Debenture receives an amount equal to the sum it would have
received if no such deduction or withholding had been made; (ii) Borrower shall
make such deductions or withholdings; and (iii) Borrower shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a holder of this
Debenture is a person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to Borrower that
payments of Borrower to such assignee under applicable law would not be subject
to any Taxes and (z) from time to time, as and when requested by Borrower,
executes and delivers to Borrower and the Internal Revenue Service forms, and
provides Borrower with any information, necessary to establish such assignee's
continued exemption from Taxes under applicable law. Borrower shall forthwith
pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment made
under this Debenture or the transactions contemplated hereby. Borrower shall
indemnify each holder of this Debenture, or qualified assignee, for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this paragraph)
paid by each holder of this Debenture, or qualified assignee, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such
6.
<PAGE> 7
Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days from the date such holder of this
Debenture or assignee makes written demand therefor. A certificate as to the
amount of such Taxes or Other Taxes submitted to Borrower by such holder of this
Debenture or assignee shall be conclusive evidence of the amount due from
Borrower to such party. Within 30 days after the date of any payment of Taxes,
Borrower will furnish to each holder of this Debenture the original or a
certified copy of a receipt evidencing payment thereof.
[Signature Page Follows]
7.
<PAGE> 8
THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE.
BORROWER:
ORIX GLOBAL COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
8.
<PAGE> 1
- --------------------------------------------------------------------------------
LEASE BETWEEN
EVERGREEN AMERICA CORPORATION
LANDLORD
AND
AXISTEL INTERNATIONAL, INC.
TENANT
- --------------------------------------------------------------------------------
<PAGE> 2
INDEX
<TABLE>
<S> <C> <C>
ARTICLE 1. CERTAIN TERMS ............................................................................ 4
ARTICLE 2. DEMISED PREMISES ......................................................................... 6
ARTICLE 3. PREPARATION OF DEMISED PREMISES .......................................................... 6
ARTICLE 4. WHEN DEMISED PREMISES ARE READY FOR OCCUPANCY ............................................ 6
ARTICLE 5. RENT ..................................................................................... 7
ARTICLE 6. EXPENSE ESCALATION ....................................................................... 8
ARTICLE 7. ELECTRICAL ENERGY ........................................................................ 13
ARTICLE 8. VENTILATION AND AIR CONDITIONING ......................................................... 14
ARTICLE 9. LANDLORD'S OTHER SERVICES ................................................................ 15
ARTICLE 10. USE ...................................................................................... 17
ARTICLE 11. ACCESS, CHANGES IN BUILDING FACILITIES, NAME ............................................ 19
ARTICLE 12. TENANT'S CHANGES ......................................................................... 20
ARTICLE 13. TENANT'S PROPERTY ........................................................................ 22
ARTICLE 14. REPAIRS AND MAINTENANCE .................................................................. 23
ARTICLE 15. SECURITY DEPOSIT ......................................................................... 24
ARTICLE 16. INSURANCE ................................................................................ 24
ARTICLE 17. SUBORDINATION, ATTORNMENT, NOTICE TO LESSOR AND MORTGAGEES ............................... 26
ARTICLE 18. ASSIGNMENT, MORTGAGING, SUBLEASING ....................................................... 27
ARTICLE 19. COMPLIANCE WITH LAWS AND REQUIREMENTS OF PUBLIC AUTHORITIES; RULES AND REGULATIONS ....... 29
ARTICLE 20. QUIET ENJOYMENT .......................................................................... 29
ARTICLE 21. NON-LIABILITY AND INDEMNIFICATION ........................................................ 30
ARTICLE 22. DESTRUCTION AND DAMAGE ................................................................... 31
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 23. EMINENT DOMAIN ........................................................................... 32
ARTICLE 24. SURRENDER ................................................................................ 33
ARTICLE 25. CONDITIONS OF LIMITATION ................................................................. 34
ARTICLE 26. RE-ENTRY BY LANDLORD - DEFAULT PROVISIONS ................................................ 35
ARTICLE 27. DAMAGES .................................................................................. 35
ARTICLE 28. WAIVERS .................................................................................. 37
ARTICLE 29. NO OTHER WAIVERS OR MODIFICATIONS ........................................................ 37
ARTICLE 30. DURING TENANT'S DEFAULTS, ADDITIONAL RENT ................................................ 38
ARTICLE 31. NOTICES .................................................................................. 39
ARTICLE 32. ESTOPPEL CERTIFICATE, MEMORANDUM ......................................................... 39
ARTICLE 33. NO OTHER REPRESENTATIONS, CONSTRUCTION, GOVERNING LAW .................................... 40
ARTICLE 34. PARTIES BOUND ............................................................................ 40
ARTICLE 35. SHORING AND NOTICE OF ACCIDENT AND DAMAGE ................................................ 41
ARTICLE 36. VAULT, VAULT SPACE, AREA ................................................................. 41
ARTICLE 37. INABILITY TO PERFORM ..................................................................... 41
ARTICLE 38. LIABILITY OF LANDLORD .................................................................... 42
ARTICLE 39. BROKERAGE ................................................................................ 42
ARTICLE 40. RENEWAL OPTION ........................................................................... 42
ARTICLE 41. MISCELLANEOUS PROVISIONS ................................................................. 43
EXHIBIT A DEMISED PREMISES ......................................................................... 44
EXHIBIT B RULES AND REGULATIONS .................................................................... 45
EXHIBIT C TENANT'S WORK ............................................................................ 49
EXHIBIT C-1 BUILDING RULES AND REGULATIONS FOR TRADES CONDUCTING OPERATIONS .......................... 50
EXHIBIT C-2 INSURANCE REQUIREMENTS FOR TRADES CONDUCTING OPERATIONS IN THE BUILDING .................. 52
EXHIBIT D CLEANING STANDARDS ....................................................................... 53
</TABLE>
- 3 -
<PAGE> 4
OFFICE LEASE
AGREEMENT OF LEASE, made the day of December, 1998, between EVERGREEN
AMERICA CORPORATION, a New Jersey Corporation, (hereinafter called the
"Landlord") and AXISTEL INTERNATIONAL, INC., "Tenant", as hereinafter defined.
ARTICLE I -- CERTAIN TERMS
1.01 The following terms shall have the meanings set forth opposite
each of them, provided that if "None" is set forth opposite any term, then the
provision of the Lease applicable to such term shall be considered deleted and
of no force and effect.
"Tenant" --
a corporation organized under the laws of the State of Delaware, about
to have its offices at One Evertrust Plaza, Eighth Floor, Jersey City,
New Jersey 07302.
"Term" --
The period beginning on the Commencement Date and ending at noon on the
Expiration Date.
"Occupancy Date" --
Upon the signing of this Lease by all parties and the delivery of the
Security Deposit and the Prepaid Rent.
"Commencement Date" --
March 1, 1999.
"Expiration Date" --
The last day of the calendar month in which occurs the end of a ten
(10) year period from the Commencement Date (if the Commencement Date
shall occur on a day other than the first day of a calendar month such
period shall run and be measured from the first day of the calendar
month following the Commencement Date) or ending on an earlier date on
which this Lease may expire or be cancelled or terminated pursuant to
the terms of this Lease.
"Fixed Rent" --
Years One (1) through Five (5) - Two Hundred Eighty Thousand Eight
Hundred Dollars ($280,800.00) per year, payable in monthly installments
of $23,400.00, (as adjusted in accordance with this Lease).
Years Six (6) through Ten (10) - Three Hundred Two Thousand Four
Hundred Dollars ($302,400.00) per year payable in monthly installments
of $25,200.00, (as adjusted in accordance with this Lease).
"Building" --
The Building located in the City of Jersey City, County of Hudson and
State of New Jersey and known as One Evertrust Plaza, Jersey City, New
Jersey.
- 4 -
<PAGE> 5
"Demised Premises" --
That space on the eighth (8th) floor of the Building delineated on the
floor plan attached hereto as Exhibit A, the total area of which is the
Tenant's Floor Space.
"Tenant's Floor Space" --
The total number of square feet of space in the Demised Premises,
which, for purposes of this Lease, the parties agree and stipulate is
10,800 square feet.
"Total Building Floor Space" --
The total number of square feet of space in the Building, which, for
purposes of this Lease, the parties agree and stipulate is 314,503
square feet.
"Tenant's Share" --
3.434%; which is the percentage resulting from dividing the Tenant's
Floor Space by the Total Building Floor Space.
"Security Deposit" --
$46,800.00 deposited pursuant to Article 15 hereof.
"Rent Prepayment" --
$23,400.00 to be applied toward the first month installment of Fixed
Rent.
"Permitted Use" --
General offices, location and installation of Tenant's business
equipment and uses related to its business.
"A.C. Charge" --
$75.00 per hour for additional air conditioning pursuant to Article
8.01 hereof.
"H. Charge" --
$75.00 per hour additional heating pursuant to Article 8.01 hereof.
"Broker" --
Dolan Realty, Inc. which Tenant represents and warrants is the sole
Broker with whom it has dealt in this transaction, and based thereupon
Landlord agrees to pay a brokerage commission in accordance with a
separate agreement between Landlord and Broker.
"Regular Business Hours" --
8:00 a.m. to 6:00 p.m. Monday through Friday; 8:30 a.m. to 12:30 p.m.
on Saturday, except where such days are observed by the Federal or the
New Jersey State government as legal holidays, or as union holidays.
"Number of Parking Spaces" --
Tenant shall have the right to lease up to ten (10) exterior parking
spaces at additional rent of $140.00 for each parking space, payable
monthly. Notwithstanding the foregoing, Landlord may increase the rent
for exterior parking spaces from time to time during the term of this
Lease after the first year of the Term of this Lease. In the event
Landlord builds a parking structure, Tenant's parking shall be
relocated to such parking structure and Tenant shall have the right to
lease up to the same number of exterior parking spaces leased by Tenant
prior to the building of the parking structure at additional rent as
determined by Landlord for each parking space, payable monthly.
Notwithstanding the foregoing, Landlord may increase the rent for
parking spaces in a parking structure from time to time during the term
of this Lease after the first year of operation of the parking
structure.
- 5 -
<PAGE> 6
1.02 Electrical energy consumed by Tenant in the Demised Premises
through wall and floor outlets, for lighting and business equipment shall be
purchased by Tenant as provided in Article 7.
ARTICLE 2 -- DEMISED PREMISES
2. 01 Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Demised Premises for the Term, for the rents hereinafter reserved
and upon and subject to the conditions (including limitations, restrictions and
reservations) and covenants hereinafter provided. Each party hereto agrees to
observe and perform all of the conditions and covenants herein contained on its
part to be observed and performed.
2.02 The general location, size and layout of the Demised Premises are
outlined on Exhibit A, but Exhibit A shall not be deemed to be a warranty,
representation or agreement on the part of Landlord that the Demised Premises
and the Building will be exactly as indicated on Exhibit A.
2.03 Nothing herein contained shall be construed as a grant or demise by
Landlord to Tenant of the roof or exterior walls of the Building, of the space
above and below the Demised Premises, of the parcel of land on which the Demised
Premises are located, and/or of any parking or other areas adjacent to the
Building.
ARTICLE 3 -- PREPARATION OF THE DEMISED PREMISES
3.01 Tenant shall cause to be substantially performed all the work in
the Demised Premises as set forth in Exhibit C to be annexed hereto and made a
part hereof (the "Tenant's Work"), upon the terms and conditions specified
therein. Landlord shall provide a work allowance in the amount of $160,000.00
payable to the contractor as part of the cost of the work. Tenant shall pay to
the contractor the balance of the cost of work. Payment by each party shall be
in proportion to the total cost of the Work divided into each party's
contribution, payable to the Contractor against each invoice submitted for costs
actually incurred or materials actually delivered upon delivery to each party of
evidence of the Work completed.
3.02 All of Tenant's duties and obligations set forth in Article 12
(relating to Tenant's duties and obligations in making Tenant's Changes) shall
be applicable to and binding upon Tenant with respect to any such work.
3.03 Tenant's final plans, specifications and drawings covering all
such work are to be attached hereto as Exhibit C. Tenant shall not commence any
work referred to in Exhibit C until such plans, specifications, and drawings
have been received, receipted and approved by Landlord. Landlord shall respond
to Tenant's request for approval within seven (7) business days of Landlord's
receipt of such plans, specifications and drawings.
ARTICLE 4 -- WHEN DEMISED PREMISES ARE READY FOR
OCCUPANCY
4.01 The Demised Premises shall be deemed ready for occupancy on March
1, 1999. Tenant shall be responsible to secure a Certificate of Occupancy for
the Demised Premises at Tenant's sole cost and expense.
4.02 On the Occupancy Date or at such time as Tenant shall take actual
possession of the whole or part of the Demised Premises, whichever shall be
earlier, it shall be conclusively presumed that the same were as of the
Occupancy Date or the date or
- 6 -
<PAGE> 7
dates of such taking of possession, in the condition in which Landlord was
required to deliver the Demised Premises under this Lease, unless within thirty
(30) days after such date Tenant shall have given Landlord notice specifying in
which respects the Demised Premises were not in satisfactory condition. However,
nothing contained in this Section shall be deemed to relieve Landlord from, and
Landlord shall perform its obligation to complete, with reasonable speed and
diligence, such details of construction, mechanical adjustment and decoration,
if any, as Landlord shall be required to perform under this Lease and as shall
have been unperformed at the time Tenant took actual possession, but Tenant
shall not be entitled to any rent abatement on account of any such incomplete
work.
4.03 If prior to the Commencement Date, Tenant shall enter the Demised
Premises to make any installations of its equipment, fixtures and furnishings,
Landlord shall have no liability or obligation for the care or preservation of
Tenant's property and Tenant shall not interfere with Landlord or Landlord's
contractors.
4.04 Landlord agrees to provide access by the telephone company during
the course of construction to permit Tenant's installation of telephones.
Notwithstanding the foregoing, the parties agree that the failure by the
telephone company to complete the telephone installation and to provide service
on the date that the Demised Premises are otherwise substantially complete (as
hereinabove defined) or occupied by Tenant, shall not delay or defer the
determination of the Commencement Date and the obligation to pay rent
thereafter.
ARTICLE 5 -- RENT
5.01 Tenant shall pay to Landlord without notice or demand and without
abatement, deduction or set-off, in lawful money of the United States of
America, at the office of the Landlord as set forth in Article 1 hereof, or at
such other place as Landlord may designate, the Fixed Rent reserved under this
Lease for each year of the Term, payable in equal monthly installments in
advance on the first day of each and every calendar month during the Term; and
additional rent consisting of all such other sums of money as shall become due
from and payable by Tenant to Landlord hereunder (for default in payment of
which Landlord shall have the same remedies as for a default in payment of Fixed
Rent).
5.02 Tenant shall pay the Fixed Rent and additional rent herein
reserved promptly as and when the same shall become due and payable under this
Lease and shall be liable to the Landlord for an administrative charge of 4% for
rent paid five (5) days subsequent to the date set in Article 5.01. If the
Commencement Date shall occur on a day other than the first day of a calendar
month the Fixed Rent and additional rent shall be prorated for the period from
the Commencement Date to the last day of the said calendar month and shall be
due and payable on the Commencement Date. Notwithstanding the provisions of the
next preceding sentence, Tenant shall pay on account toward the first full
calendar month installment(s) of Fixed Rent, on the execution of this Lease, the
Rent Prepayment specified in Article 1 hereof.
5.03 Whenever used in this Lease, the term (insofar as it pertains to
this Lease) "fixed rent", "minimum rent", "base rent" or "basic rent", or any
such term using the word "rental", "rents" or "rentals" in lieu of "rent", shall
mean Fixed Rent; and whenever used in this Lease, the term (insofar as it
pertains to this Lease) "rent", "rental", "Rent" or the plural of any of them,
shall mean Fixed Rent and additional rent.
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ARTICLE 6 -- EXPENSE ESCALATION
6.01 Tenant shall pay to Landlord, as additional rent, Expense
Escalation in accordance with this Article:
A. Definitions: for the purpose of this Article, the following
definitions shall apply:
(i) The term "Expense Base Factor" shall mean the Expenses as
hereinafter defined for the calendar year 1999.
(ii) The term "comparative year" shall mean the full calendar year in
which, the term of this Lease commences, and each subsequent calendar year
during the Term of this Lease.
(iii) The term "Expenses" shall mean the total of all the costs and
expenses incurred or borne by Landlord with respect to the operation and
maintenance of the Building and the services provided tenants therein including,
but not limited to, the costs and expenses incurred for and with respect to:
water rates and sewer rents; air-conditioning, ventilation and heating; any and
all electricity costs not paid directly to the Landlord by the tenants of the
Building (including Tenant); maintenance of the Building's exterior surfaces;
elevator cabs, lobby maintenance and cleaning; protection and security; lobby
decoration and interior and exterior landscape maintenance; repairs,
replacements and improvements which are appropriate for the continued operation
of the Building as a first-class office Building; maintenance; painting of
non-tenant areas; insurance; supplies; employee salaries and benefits;
administrative expenses; and the annual fee for management of the Building.
Provided, however, that the foregoing costs and expenses shall exclude
or have deducted from them, as the case may be and as shall be appropriate:
(a) leasing commissions and other leasing expenditures;
(b) expenditures of capital improvements except those which under
generally accepted real estate practice are expensed or regarded as deferred
expenses and except for capital expenditures required by law, in either of which
case the cost thereof shall be included in Expenses for the comparative year in
which the costs are incurred and subsequent comparative years, on a straight
line basis, to the extent that such items are amortized over an appropriate
period, but not more than five years, with an interest factor equal to the prime
rate of Citibank at the time of Landlord's having incurred said expenditure.
(c) amounts received by Landlord through proceeds of insurance to the
extent that the proceeds are compensation for expenses which would be or were
previously included in Expenses hereunder;
(d) cost of repairs or replacements incurred by reason of fire or other
casualty or eminent domain;
(e) advertising and promotional expenditures;
(f) legal fees for disputes with tenants and legal and auditing fees,
other than legal and auditing fees reasonably incurred in connection with the
maintenance and operation of the Building or in connection with the preparation
of statements required pursuant to additional rent or lease escalation
provisions; and
(g) costs incurred in performing work or furnishing services for
individual tenants (including Tenant) at such tenant's expense to the extent
that such work or service is in excess of any work or service Landlord at its
expense is obligated to furnish to Tenant;
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<PAGE> 9
If Landlord shall purchase any item of capital equipment or make any
capital expenditure designed to result in savings or reductions in Expenses,
then the costs for same shall be included in Expenses. The costs of capital
equipment or capital expenditures are so to be included in Expenses for the
comparative year in which the costs are incurred and subsequent comparative
years, on a straight line basis, to the extent that such items are amortized
over such period of time as reasonably can be estimated as the time in which
such savings or reductions in Expenses are expected to equal Landlord's costs
for such capital equipment or capital expenditure, with an interest factor equal
to the prime rate of Citibank at the time of Landlord's having incurred said
costs. If Landlord shall lease any such item of capital equipment designed to
result in savings or reductions in Expenses, then the rentals and other costs
paid pursuant to such leasing shall be included in Expenses for the comparative
year in which they were incurred.
6.02 Commencing with the comparative year beginning January 1, 2000, if
the Expenses estimated in the manner provided in Article 6.03 for a comparative
year shall be greater than Expense Base Factor, Tenant shall pay to Landlord,
additional rent for such comparative year, in the manner hereinafter provided,
an amount equal to The Tenant's Share of the excess of the Expenses for such
comparative year over the Expense Base Factor (such amount being hereafter
called the "Expense Payment").
6.03 Commencing with the second comparative year, and each year
thereafter for the balance of the Lease term, thirty (30) days prior to the
commencement of each comparative year, Landlord will submit to Tenant Landlord's
Certified Public Accountant's estimate of projected expenses for such year as
provided in Article 6.04. The estimate shall also set forth the total projected
expenses, if any, due to Landlord from Tenant for such year pursuant to Article
6.02. The rendition of such estimate shall constitute prima facie proof of the
accuracy thereof. If such statement shows an Expense Payment due to Landlord
with respect to the forthcoming comparative year, one-twelfth of this amount
shall be payable monthly as additional rent, commencing with the first month of
such comparative year.
No later than sixty (60) days after the conclusion of each comparative
year Landlord shall deliver to Tenant a final statement from its Certified
Public Accountant as provided in Article 6.04 setting forth the actual Expenses
for the preceding year. Within thirty (30) days of Tenant's receipt of such
statement Landlord and Tenant will make an appropriate cash adjustment for any
underestimate or overestimate of Landlord's Expenses for the preceding
comparative year (which underestimate shall result in additional rent payable as
herein provided).
6.04 The estimated and final statements of Expenses to be furnished by
Landlord as provided above shall be certified by Landlord, and shall be prepared
in reasonable detail for the Landlord by a Certified Public Accountant (who may
be the Certified Public Accountant now or then employed by Landlord for the
audit of its accounts); said Certified Public Accountant may rely on Landlord's
allocations and estimates wherever operating cost allocations or estimates are
needed for this Article. The statements thus furnished to Tenant shall
constitute a final determination as between Landlord and Tenant of the Expenses
for the period represented thereby, unless Tenant within sixty (60) days after
they are furnished shall give a notice to Landlord that it disputes their
accuracy or their appropriateness, which notice shall specify the particular
respects in which the statement is accurate. Pending the resolution of such
dispute, Tenant as herein provided shall pay the additional rent to Landlord in
accordance with the statements furnished by Landlord. After payment of said
additional rent, Tenant shall have the right, during reasonable
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business hours and upon not less than five (5) business days' prior written
notice to Landlord, to have Tenant's Certified Public Accountant examine
Landlord's books and records with respect to the foregoing, provided such
examination is commenced within thirty (30) days and concluded within sixty (60)
days following the rendition of the statement in question.
6.05 In any such dispute as to said statement Landlord and Tenant or
their respective Certified Public Accountants shall select a national "Big Six"
accounting firm whose determination shall be conclusive in the resolution of the
dispute.
6.06. Real Estate Tax Increase Payment.
(1) For each Tax Year (hereinafter defined) after the tax year ending
December 31, 1999 during the Term, Tenant shall pay, as additional rent, the Tax
Payment (hereinafter defined) for such Tax Year.
(2) Tax Definitions:
(a) The term "Real Estate Taxes" shall mean the sum of the real estate
taxes and assessments and special assessments imposed upon the Building and the
plot of land on which the Building stands (the "Land") and any rights or
interests appurtenant thereto payable by Landlord during any Tax Year or any
service charges or other payments in lieu of taxes imposed by any tax abatement
granted the Landlord and payable by the Landlord. If at any time during the Term
the methods of taxation prevailing at the time of the commencement thereof shall
be altered so that in lieu of or as an addition to or as a substitute for the
whole or any part of the taxes, assessments, levies, impositions or charges now
levied, assessed or imposed, there shall be levied, assessed or imposed a tax,
assessment, levy, imposition or charge wholly or partially as a capital levy or
on the rents, licenses or other charges received with respect to the Term, the
Land or the Building, then all such taxes, assessments, levies, impositions or
charges payable shall be deemed to be included within the term "Real Estate
Taxes" for the purposes hereof. A copy of the tax bill of The City of Jersey
City or other taxing authority imposing Real Estate Taxes on the Land or the
Building shall be sufficient evidence of the amount of Real Estate Taxes.
Notwithstanding the fact that the aforesaid additional rent is measured by Real.
Estate Taxes, such amount is additional rent and shall be paid by Tenant as
provided herein regardless of the fact that Tenant may be exempt, in whole or in
part, from the payment of any Real Estate Taxes by reason of Tenant's diplomatic
status or for any other reason whatsoever.
(b) The term "Base Tax Year" shall mean the tax year ending December
31, 1999.
(c) The term "Tax Year" shall mean each real estate fiscal tax year of
the City of Jersey City, New Jersey, following the Base Tax Year, any portion of
which occurs during the Term.
(d) The term "Tax Payment" shall mean Tenant's Share for the Demised
Premises of the amount by which the Real Estate Taxes payable for a Tax Year
exceed the Real Estate Taxes payable for the Base Tax Year, whether such
increase results from a higher tax rate or an increase in the assessed valuation
of the Land or the Building, or both or from any other cause or reason
whatsoever. Notwithstanding the foregoing if there is an increase in assessed
valuation of the Building resulting from an addition or improvement to the
Building by another tenant, then any increase in Real Estate Taxes attributable
to such increase shall not be included in the computation of Tax Payment
hereunder.
(3) With respect to each Tax Year occurring in whole or in part during
the term of the Term, Tenant shall pay to Landlord the
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Tax Payment, in equal monthly installments during the calendar year in which
such Tax Year commences in the manner hereinafter described. At any time during
the calendar year in which a Tax Year commences, Landlord may furnish to Tenant
a written estimate (a "Tax Estimate") of the Tax Payment for such Tax Year
("Estimated Tax Payment"). Such estimate shall be determined by Landlord by
applying to the most recently announced assessed value of the Land and Building
(whether final or otherwise) such tax rate as Landlord shall anticipate is the
tax rate to be finally determined for such Tax Year, but such rate shall in no
event exceed by more than ten (10%) percent the then current tax rate. Subject
to adjustment as hereinafter provided, Tenant shall pay to Landlord on the first
day of each calendar month during such calendar year, an amount equal to
one-twelfth (1/12) of the Estimated Tax Payment for the Tax Year commencing
during such calendar year. If Landlord furnishes a Tax Estimate for a Tax Year
subsequent to the commencement of the calendar year in which such Tax Year
begins, then
(a) until the first day of the month following the month in which the
Tax Estimate is furnished to Tenant, Tenant shall continue to pay to Landlord on
the first day of each month an amount equal to the monthly sum payable by Tenant
to Landlord with respect to the next previous Tax Year.
(b) promptly after the Tax Estimate is furnished to Tenant, Landlord
shall give notice to Tenant stating whether the amount previously paid by Tenant
to Landlord during such calendar year was greater or less than the installments
of the Estimated Tax Payment to be paid during such calendar year in accordance
with the Tax Estimate, and
(i) if there shall be a deficiency, Tenant shall pay the amount thereof
within ten (10) days after demand therefor, or
(ii) if there shall have been an overpayment, Landlord shall credit the
amount thereof against the next monthly installments of the Fixed Annual Rent
payable under this Lease, and
(c) on the first day of the month following the furnishing of Tenant of
the Tax Estimate, and monthly thereafter until the rendering to Tenant of a Tax
Statement (hereinafter defined) for such Tax Year, Tenant shall pay to Landlord
an amount equal to one twelfth (1/12) of the amount shown on such Tax Estimate.
Promptly after the amount of Real Estate Taxes is established for a Tax Year,
(i) Landlord shall furnish to Tenant a written statement (a "Tax
Statement") setting forth the Tax Payment for such Tax Year, and stating whether
the sum of the installments previously paid by Tenant to Landlord pursuant to
the Tax Estimate or otherwise for such Tax Year was greater or less than the sum
of the installments of the Tax Payment to be paid for such Tax Year in
accordance with the Tax Statement,
(ii) any deficiency or overpayment shall be disposed of in the manner
of a deficiency or overpayment in Estimated Tax Payment, and
(iii) on the first day of the month following the month in which the
Tax Statement is furnished to the Tenant, and monthly thereafter until a new Tax
Estimate or Tax Statement is furnished to Tenant, Tenant shall pay to Landlord
an amount equal to one twelfth (1/12) of the Tax Payment shown on the Tax
Statement.
(4). The Tax Estimates and Tax Statements to be furnished by Landlord
as provided above shall be certified by Landlord and a statement thus furnished
to Tenant shall constitute a final determination as between Landlord and Tenant
of the Estimated Tax Payment or Tax Payment, as the case may be, for the period
represented thereby, unless Tenant within sixty (60) days after the within sixty
(60) days after the
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<PAGE> 12
statement is furnished shall give a notice to Landlord that Tenant disputes the
reasonableness, accuracy or appropriateness of such statement, which notice
shall specify the particular respects in which the statement is unreasonable,
inaccurate or inappropriate. Pending the resolution of such dispute, Tenant as
herein provided shall make the Estimated Tax Payment or Tax Payment, as the case
may be, to Landlord without prejudice to Tenant's position. In any such dispute
as to a Tax Estimate or Tax Statement, Landlord and Tenant shall, within ten
(10) days after the giving of Tenant's notice disputing the reasonableness,
accuracy or appropriateness of such statement, select a national "Big Six"
accounting firm whose determination shall be conclusive in the resolution of the
dispute. If the dispute shall be determined in Tenant's favor, Landlord shall
forthwith pay to Tenant the amount of Tenant's overpayment resulting from
compliance with Landlord's statement and shall pay for the cost of the
accounting firm. In the event overpayment is greater than five (5%) percent,
Landlord shall pay interest to Tenant on such overpayment at the rate of 2% in
excess of the prime interest rate as set forth from time to time by Citibank,
N.A. from the date of payment of such amounts by Tenant until repayment of such
overpayment by Landlord. If the dispute shall be determined in Landlord's favor,
Tenant shall pay for the costs of the accounting firm.
(5) Only Landlord shall be eligible to institute tax reduction or other
proceedings to reduce the assessed valuation of the Land or the Building. Should
Landlord be successful in any such reduction proceedings and obtain a rebate for
any Tax Year for which Tenant has paid installments of the Tax Payment,
Landlord, after deducting the expenses incurred in obtaining such rebate
including, without limitation, attorneys' fees, court, or other administrative
costs and disbursements, shall credit Tenant's Share of such rebate against the
next monthly installment of the Fixed Annual Rent payable under this Lease or in
the case of the last month of the Term, pay such amount to Tenant. In the event
that the assessed valuation which had been utilized in computing the Real Estate
Taxes payable for the Base Tax Year is reduced (as a result of settlement, final
determination of legal proceedings or otherwise) then
(i) the Real Estate Taxes for the Base Tax Year shall be retroactively
adjusted to reflect such reduction;
(ii) the monthly installments of Additional Rent shall be adjusted
accordingly; and
(iii) all retroactive Additional Rent resulting from such adjustment
shall be payable by Tenant within twenty (20) days after the rendition of a bill
therefor.
6.07 In no event shall the Fixed Rent due under this Lease be reduced
by virtue of this Article I.
6.08 If the Commencement Date of the term of this Lease is not the
first day of the first comparative year, then the additional rent due hereunder
for such first comparative year shall be a proportionate share of said
additional rent for the entire comparative year, said proportionate share to be
based upon the length of time that the Lease term shall have been in existence
during such first comparative year. Upon the date of any expiration or
termination of this Lease (except termination because of Tenant's default)
whether the same be the date hereinabove set forth for the expiration of the
Term or any prior or subsequent date, a proportionate share of said additional
rent for the comparative year during which such expiration or termination occurs
shall immediately become due and payable by Tenant to Landlord, if it was not
theretofore already billed and paid. The said proportionate share shall be based
upon the length of time that
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this Lease shall have been in existence during such comparative year.
6.09 Landlord's and Tenant's obligation to make the adjustments
referred to in this Article shall survive any expiration or termination of this
Lease.
6.10 Any delay or failure of Landlord in billing any expense escalation
hereinabove provided shall not constitute a waiver of or in any way impair the
continuing obligation of Tenant to pay such expense escalation hereunder.
6.11 Landlord represents that at the time of the signing of this Lease
by the parties, the Building is not subject to any current added assessment or
special assessment or, to Landlord's knowledge, there are no currently projected
added or special assessments.
ARTICLE 7 -- ELECTRICAL ENERGY
7.01 Beginning on the Occupancy Date, electrical energy consumed by
Tenant in the Demised Premises through wall and floor outlets, for lighting and
business equipment and the Tenant's auxiliary HVAC system shall be separately
metered and purchased by Tenant from the utility supplying electricity to the
Building. Landlord shall install as part of the Landlord's Work the electrical
meter(s) for the Demised Premises. Landlord shall install at its own cost the
risers, conduits, feeders and wiring installations in the Building and to the
Demised Premises sufficient to provide the Demised Premises with electrical
energy, in a safe and suitable manner, equal to six (6) watts per square foot of
Tenant's Floor Space, connected load, including lighting and floor outlets. In
the event Tenant requires electrical energy in excess of six (6) watts per
square foot of Tenant's Floor Space, connected load, Tenant, at Tenant's sole
cost and expense and as part of Tenant's Work, may supply such excess wattage to
the Demised Premises. Electricity for heating, ventilating and air conditioning
including for any fan used in connection therewith during Regular Business Hours
shall not be included on such meter and shall be paid for by the Landlord.
Tenant shall pay to Landlord, as additional rent, the cost of electricity for
heating, ventilating and air conditioning including for any fan used in
connection therewith, in the Demised Premises during other than Regular Business
Hours pursuant to Article 8.01.
7.02 Landlord's and Tenant's obligations to make the adjustments and
payments referred to in this Article shall survive any expiration or termination
of this Lease.
7.03 Tenant covenants and agrees that at all times its use of
electrical current shall not exceed the capacity of existing feeders to the
Building or the risers, conduits, or wiring installation in the Building, and
Tenant shall not use any electrical equipment which, in Landlord's opinion
reasonably exercised, will overload such installations or interfere With the use
thereof by other tenants of the Building. In this connection, Landlord agrees,
at Tenant's cost and expense, as an item of extra material and work, to supply
and install an electric meter or meters to measure Tenant's consumption of
electrical energy throughout the Demised Premises.
7.04 Tenant may purchase from Landlord, at Landlord's option, all
replacements of electric fluorescent tubing and shall pay Landlord for
installing same.
7.05 Tenant shall be provided access to Landlord's Emergency Stand-by
Electric Generator ("ESEG") sufficient to furnish ___ KW of electric energy from
the Building's ESEG. Tenant acknowledges
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that the Building's ESEG is intended to supply electric energy to the Demised
Premises only in the event of a temporary failure of the supply of electric
energy to the Building provided by the public electric utility supplier. Tenant
further acknowledges that Landlord does not warranty, guarantee or has ever
represented that the Building's ESEG will in fact operate to supply the Demised
Premises with temporary electric energy in the event of temporary failure of the
supply of electric energy to the Building by the public electric utility
supplier. Neither Landlord nor any agent or employee of Landlord shall be liable
to Tenant, its employees, agents, contractors and licensees, and Tenant shall
hold Landlord harmless from any injury or damage to Tenant, including by way of
example and not limitation, damage, loss or injury to Tenant's computer
hardware, software or computer stored data or interruption of Tenant's business,
in the event that the Building's ESEG fails to provide temporary electric energy
in the event of a temporary emergency failure of the electric power supply to
the Building and the Demised Premises by the public electric utility supplier.
7.06 Landlord, at Tenant's cost and expense, shall cause the Demised
Premises to be connected with the Building's ESEG for use in the event of a
temporary emergency failure of the electric power supply to the Building and the
Demised Premises provided by the public utility supplier. In addition to the
connection charge, Tenant shall pay directly to the Landlord, as and for
Additional Rent under the Lease, $250.00 per year per KW of electric energy
reserved per year for access to the Building's ESEG, payable monthly commencing
on the Occupancy Date and ending on the Lease Expiration Date" (the "ESEG
Charge"). The ESEG Charge shall be subject to adjustment upward from time to
time if the cost of providing same is increased to the Landlord with an
appropriate adjustment to the monthly payment of the ESEG Charge.
ARTICLE 8 -- VENTILATION AND AIR CONDITIONING
8.01 There shall be installed in the Demised Premises, as part of the
work provided for in Section 3.01, the Building heating, ventilating and
air-conditioning systems described and designed to substantially meet the
following performance specifications:
Inside Condition
-----------------
Cooling Season 75 degrees F.D.B.
Heating Season 68 degrees F
Outside Condition
-----------------
Cooling Season 91 degrees F.D.B./76 degrees FWB
Heating Season 10 degrees F.
Landlord shall be under no liability to Tenant if such performance
specifications should not be able to be met prior to the said systems being
balanced. Landlord, at its expense, shall maintain and operate such systems and
shall furnish heat, ventilation and air-conditioning in the Demised Premises
through such systems, subject to Article 9.07, in compliance with such
performance specifications, during Regular Business Hours. if Tenant shall
require ventilating and air-conditioning service or heating service at any other
time other than Regular Business Hours (hereinafter called "after hours"),
Landlord shall furnish after hours ventilating and air-conditioning service or
heating service upon twenty four (24) hour written advance notice from Tenant,
and Tenant shall pay Landlord therefore, as additional rent upon rendition of a
bill, the A.C. charge and the H. charge. The A.C. charge and the H. charge shall
be subject to adjustment upward from time to time.
8.02 Landlord will not be responsible for the failure of the
air-conditioning system to meet the performance specifications set forth above
if such failure results from the occupancy of the
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Demised Premises with more than an average of one person for each 150 square
feet of Tenant's Floor Space or if Tenant installs and operates machines and
appliances, the installed electrical load of which when combined with the load
of all lighting fixtures exceeds 3.5 watts per square foot of Tenant's Floor
Space in any one room or other area. If due to use of the Demised Premises in a
manner exceeding the aforementioned occupancy and electrical load criteria, or
due to rearrangement of partitioning after the initial preparation of the
Demised Premises, interference with normal operation of the air-conditioning in
the Demised Premises results, necessitating changes in the air-conditioning
system servicing the Demised Premises, such changes shall be made by Landlord
upon written notice to Tenant at Tenant's sole cost and expense. Tenant agrees
to lower and close window coverings when necessary because of the sun's position
whenever the said air conditioning system is in operation, and Tenant agrees at
all times to cooperate fully with Landlord and to abide by all the regulations
and requirements which Landlord may prescribe for the proper functioning and
protection of the said air-conditioning system. Landlord throughout the Term,
shall have free and unrestricted access to any and all air-conditioning
facilities in the Demised Premises.
8.03 Any damage caused to heating, air-conditioning, and ventilating
equipment, appliances or appurtenances thereto as a result of the negligence of,
or careless operation of, the same by Tenant or its agents, servants, employees,
licensees, invitees, or visitors, shall be repaired by Landlord, and the cost
and expenses thereof shall be paid by Tenant as additional rent, within ten (10)
days after being billed therefor.
8.04 Tenant shall be provided access to additional condenser water for
Tenant's auxiliary HVAC system, sufficient to furnish tons of supplemental air
conditioning to the Demised Premises, twenty-four (24) hours per day during the
Term of this Lease and Tenant shall pay Landlord therefore, as additional rent
$500.00 per ton of additional condenser water per year, payable $__________ per
month as additional rent. The additional rent for the additional condenser water
shall be subject to adjustment upward from time to time if the out-of-pocket
cost of providing same is increased to Landlord.
ARTICLE 9 -- LANDLORD'S OTHER SERVICES
9.01 Landlord shall provide public elevator service to the floor(s) on
which the Demised Premises are situated during Regular Business Hours, and shall
have at least one elevator subject to call at all other times. The elevator(s),
or any or all of them, if more than one, may be operated by automatic control
and/or by manual control, as Landlord shall determine at any time or from time
to time. Landlord shall not be obligated to furnish an operator for any
automatic elevator and shall have no liability to Tenant for discontinuing the
service of any operator theretofore furnished. If Tenant shall require after
hours service of elevator(s) or of the loading area in the Building under such
circumstances as, in Landlord's reasonable judgment, will require service or
attention by Landlord's personnel, Tenant shall pay Landlord, on demand, a
reasonable charge attributable to such service or attention.
9.02 Provided that Tenant shall keep the Demised Premises in good
order, Landlord shall cause the Demised Premises, including the exterior and the
interior of the windows thereof (subject to Tenant maintaining unrestricted
access to such windows), to be cleaned in accordance with the standards set
forth in Exhibit D annexed hereto and made a part hereof. Tenant will not clean,
nor require, permit or allow any window in the premises to be cleaned from the
outside. Tenant shall pay to Landlord on demand the costs incurred by Landlord
for (a) cleaning work in the Demised Premises
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or the Building required because of (i) misuse or neglect on the part of Tenant
or its employees or visitors, (ii) use of portions of the Demised Premises for
preparation, serving, or consumption of food or beverages, reproducing
operations, private lavatories or toilets or other special purposes requiring
greater or more difficult cleaning work than office area, (iii) interior glass
surfaces, (iv) non-Building standard materials or finishes installed by Tenant
or at its request, (v) increases in frequency or scope in any of the items set
forth in Exhibit D as shall have been requested by Tenant, and (b) removal from
the Demised Premises and the Building of (i) so much of any refuse and rubbish
of Tenant as shall exceed that properly accumulated daily in the routine or
ordinary business office and (ii) all of the refuse and rubbish of Tenant's
machines and the refuse and rubbish of any other eating facilities requiring
special handling (known as "wet garbage"). Landlord and its cleaning
contractor and their employees shall have after hours access to the Demised
Premises and the use of the Tenant's light, power and water in the Demised
Premises as may be reasonably required for the purpose of cleaning the Demised
Premises. Extraordinary waste (such as crates, cartons, boxes, etc. and used
furniture or equipment) shall be removed from the Building by Tenant at Tenant's
own cost and expense. At no time shall Tenant place any waste of any kind in any
public areas. If Tenant does so, the parties agree that everything so placed
shall be deemed abandoned and of no value to Tenant and Landlord may have the
same removed and disposed of at Tenant's expense. Such expenses shall be deemed
additional rent payable by Tenant within ten (10) days after being billed
therefor. This remedy is in addition to any other remedies Landlord may have
under this lease.
9.03 Landlord, at its expense, shall furnish adequate hot and cold
water at ordinary lavatory temperature to each floor of the Building for
drinking, lavatory, and cleaning purposes, together with soap, towels and toilet
tissue for each lavatory. If Tenant uses water for any other purpose Landlord,
at Tenant's expense, may install meters to measure Tenant's consumption of cold
water and/or hot water for such other purposes and/or steam, as the case may be.
Tenant shall pay for the quantities of cold water and hot water shown on such
bills therefor. In connection with permitted kitchen use, the amount of hot
water demand shall not exceed the excess Building design capacity.
9.04 Landlord, at its own expense, and at Tenant's request, shall
insert initial listings on the Building Directory of the names of Tenant, and
any affiliate, and the names of any of their officers and employees, provided
that the names so listed shall not take up more than Tenant's proportionate
share of the space on the Building Directory. All Building Directory changes
made at Tenant's request after the Tenant's initial listings have been placed on
the Building Directory shall be made by Landlord at the expense of Tenant, and
Tenant agrees to promptly pay to Landlord as additional rent the cost of such
changes within ten (10) days after Landlord has submitted an invoice therefor.
9.05 With respect to parking of vehicles (if parking is provided under
Article 1 hereof):
A. Landlord represents that throughout the Term there will be a paved,
illuminated parking area for the Building with the number of Parking Spaces
specified in Article 1. If Landlord so elects, Tenant shall require its
personnel and visitors to park their vehicles only in Parking Spaces designated
by Landlord for Tenant's use for its personnel and visitors on a "first come,
first served" basis. Landlord reserves the right at all times to redesignate
such Parking spaces. Tenant, its personnel and visitors shall not at any time
park any trucks or delivery vehicles in any of the parking areas.
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B. All Parking Spaces and any other parking areas used by Tenant, its
personnel and visitors will be at their own risk, and Landlord shall not be
liable for any injury to person or property, or for loss or damage to any
automobile or its contents, resulting from theft, collision, vandalism or any
other cause whatsoever.
C. Tenant shall agree to all requests by Landlord that Tenant and its
employees and visitors remove their vehicles from the Parking Spaces to another
parking area provided by Landlord at reasonable periods for purposes of cleaning
and maintenance of such spaces or as required for purposes of snow removal,
provided that Landlord will perform such cleaning, maintenance and snow removal
and make such Parking Spaces available to Tenant and its employees and visitors
as promptly as possible.
9.06 Landlord shall keep and maintain the public areas and the public
facilities of the Building and the grounds clean and in good order, and the
sidewalks and parking areas adjoining the Building shall be kept free of
accumulation of snow and ice (except any overnight parking area) or unlawful
obstruction.
9.07 Landlord reserves the right, without any liability to Tenant,
except as otherwise expressly provided in this Lease, and without being in
breach of any covenant of this Lease, to stop, interrupt or suspend service of
any of the heating, ventilating, air conditioning, electric, sanitary, elevator
or other Building systems serving the Demised Premises, or the rendition of any
other services required of Landlord under this Lease, whenever and for so long
as may be necessary, by reason of accidents, emergencies, the making of repairs
or changes which Landlord is required by this Lease or by law to make or in good
faith deems advisable, or by reason of unavoidable delays. In each instance
Landlord shall exercise reasonable diligence to eliminate the cause of stoppage
and to effect restoration of service and shall give Tenant reasonable notice,
when practicable, of the commencement and anticipated duration of such stoppage,
and if any work is required to be performed in or about the Demised Premises for
such purpose, the provision of Section 14.03 shall apply. Tenant shall not be
entitled to any diminution or abatement of rent or other compensation nor shall
this Lease or any of the obligations of Tenant be affected or reduced by reason
of the interruption, stoppage or suspension of any of the Building systems or
services arising out of the causes set forth in this Section.
ARTICLE 10 -- USE
10.01 The "Permitted Use" of the Demised Premises for the purposes
specified in Article 1 hereof shall not in any event be deemed to include, and
Tenant shall not use, or permit the use of, the Demised Premises or any part
thereof for:
(a) sale of, or traffic in, any spirituous liquors, wines, ale or beer
kept in the Demised Premises;
(b) sale at retail of any other products or materials kept in the
Demised Premises, by vending machines or otherwise, or demonstrations to the
public, except as may be specifically agreed to by Landlord in writing;
(c) manufacturing, printing or electronic data processing, except for
the operation of normal business office reproducing and printing equipment,
business machines and electronic data processing equipment incidental to the
conduct of Tenant's business and for Tenant's own requirements at the Demised
Premises, provided that such use shall not exceed that portion of the mechanical
or electrical capabilities of the Building equipment allocable to the Demised
Premises;
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(d) the rendition of medical, dental or other diagnostic or therapeutic
services;
(e) the conduct of a public auction of any kind;
(f) the conduct of a banking, trust company, savings bank, safe
deposit, savings and loan association or loan company business;
(g) the issuance and sale of traveler's checks, foreign drafts, letters
of credit, foreign exchange or domestic money orders (except as incidentally
required in conduct of Tenant's normal business activity);
(h) the receipt of money for transmission (except as is incidentally
required in conduct of Tenant's normal business activity); or
(i) a restaurant, bar, or the sale of confectionery, tobacco,
newspapers, magazines, soda, beverages, sandwiches, ice cream, baked goods or
similar items, or the preparation, dispensing or consumption of food and
beverages in any manner whatsoever.
10.02 Tenant shall not suffer or permit the Demised Premises or any
part thereof to be used in any manner, or anything to be done therein, or suffer
or permit anything to be brought into or kept therein, which would in any way
(i) violate any of the provisions of any grant, lease or mortgage to which this
Lease is subordinate, (ii) violate any laws or requirements of public
authorities, (iii) make void or voidable any fire or liability insurance policy
then in force with respect to the Building, (iv) make unobtainable from
reputable insurance companies authorized to do business in New Jersey at
standard rates any fire insurance with extended coverage, or liability, elevator
or boiler or other insurance required to be furnished by Landlord under the
terms of any lease or mortgage to which this Lease is subordinate, (v) cause or
in Landlord's opinion be likely to cause physical damage to the Building or any
part thereof, (vi) constitute a public or private nuisance, (vii) impair, in the
reasonable opinion of the Landlord, the appearance, character or reputation of
the Building, (viii) discharge objectionable fumes, vapors or odors into the
Building air conditioning system or into Building flues or vents not designed to
receive them or otherwise in such manner as may unreasonably offend other
occupants, (ix) impair or interfere with any of the Building services or the
proper and economic heating, cleaning, air conditioning or other servicing of
the Building or the Demised Premises or impair or interfere with or tend to
impair or interfere with the use of any of the other areas of the Building by,
or occasion annoyance or inconvenience to, Landlord or any of the other tenants
or occupants of the Building, or (x) cause Tenant to default in any of its other
obligations under this Lease. The provisions of this Section, and the
application thereof, shall not be deemed to be limited in any way to or by the
provisions of any of the following Sections of this Article or any of the Rules
and Regulations referred to in Article 20 or Exhibit B attached hereto, except
as may therein be expressly otherwise provided.
10.03 If any governmental license or permit, other than a Certificate
of Occupancy for the Building, shall be required for the proper and lawful
conduct of Tenant's business in the Demised Premises, or any part thereof, and
if failure to secure such license or permit would in any way affect Landlord,
then Tenant, at its expense, shall duly procure and thereafter maintain such
license or permit, but in no event shall failure to procure and maintain same by
Tenant affect Tenant's obligations hereunder. Tenant shall not at any time use
or occupy, or suffer or permit anyone to use or occupy the Demised Premises,
or do or permit anything to be done in the Demised Premises, in violation of the
Certificate of Occupancy for the Demised Premises or for the Building.
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<PAGE> 19
10.04 Tenant shall not place a load upon any floor of the Demised
Premises exceeding one hundred (100) pounds per square foot including partitions
which is the load that the floor was designed to carry. Landlord reserves the
right to prescribe the weight and position of all safes and vaults which must
be placed by Tenant, at Tenant's expense. Business machines and mechanical
equipment shall be positioned and maintained by Tenant, at Tenant's expense, in
such manner as shall be sufficient in Landlord's judgment to absorb and prevent
vibration, noise and annoyance.
ARTICLE 11 -- ACCESS, CHANGES IN
BUILDING FACILITIES, NAME
11.01 All walls, windows and doors bounding the Demised Premises
(including exterior Building walls, core corridor walls and doors and any core
corridor entrance), except the inside surfaces thereof, any terraces or roofs
adjacent to the Demised Premises, and space in or adjacent to the Demised
Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or
other utilities, sinks or other Building facilities, and the use thereof, as
well as access thereto through the Demised Premises for the purposes of
operating, maintenance, decoration and repair, are reserved to Landlord.
11.02 Tenant shall permit Landlord to install, use and maintain pipes,
ducts and conduits within or through the Demised Premises, or through the walls,
columns and ceiling therein, provided that the installation work is performed at
such times and by such methods as will not unreasonably interfere with Tenant's
use and occupancy of the Demised Premises, or damage the appearance thereof,
reduce the Tenant's Floor Space by more than two (2%) percent (without an
appropriate adjustment in rent) or materially affect Tenant's layout. Where
access doors are required for mechanical trades in or adjacent to the Demised
Premises, Landlord shall furnish and install such access doors at its expense,
and confine their location wherever practical to closets, coat rooms, toilet
rooms, corridors, and kitchen or pantry rooms. Landlord and Tenant shall
cooperate with each other in the location of Landlord's and Tenant's facilities
requiring such access doors.
11.03 Landlord or Landlord's agents or employees shall have the right
upon request made on reasonable advance notice to Tenant, or to an authorized
employee of Tenant at the Demised Premises, to enter and/or pass through the
Demised Premises or any part thereof, at reasonable times during reasonable
hours, (i) to examine the Demised Premises or to show them to lessors of
superior leases, holders of mortgages, insurance carriers, or prospective
purchasers, mortgagees or lessees of the land or the Building, or prospective
tenants, and (ii) for the purpose of making such repairs or changes in or to the
Demised Premises or in or to the Building or its facilities as may be provided
for by this Lease or as Landlord may deem necessary or as Landlord may be
required to make by law or in order to repair and maintain the Building or its
fixtures or facilities. Landlord shall be allowed to take into and store upon
the Demised Premises all materials which may be required for such repairs,
changes, or maintenance. However, Landlord's rights under this Section shall be
exercised in such manner as will not unreasonably interfere with Tenant's use
and occupancy of the Demised Premises. Landlord, its agents or employees, shall
also have the right to enter on and/or pass through the Demised Premises, or any
part thereof without notice at such times as such entry shall be required by
circumstances of emergency affecting the Demised Premises or the Building.
11.04 Landlord reserves the right, at any time after completion of the
Building, without incurring any liability to Tenant therefor, to make such
changes in or to the Building and the fixtures and equipment thereof, as well as
in or to the street
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entrances, halls passages, elevators and stairways thereof, as it may deem
necessary or desirable; provided that there be no unreasonably lengthy
interference with the use of the Demised Premises or in the services furnished
to the Demised Premises, and no reduction in the Tenant's Floor Space in excess
of two (2%) percent without an appropriate adjustment in rent.
11.05 Landlord may limit and restrict, as provided in the Rules and
Regulations attached hereto as Exhibit B, the means of access to the Demised
Premises outside of Regular Business Hours, so long as Tenant's employees and
authorized agents have reasonable access to all parts of the Demised Premises.
Tenant, and its agents, employees and visitors shall be entitled to access from
the Demised Premises to, and the right to use, the toilets, lavatories and
powder rooms only on the floor (or floors) on which the Demised Premises are
located.
11.06 Landlord reserves the right to select a name for the Building and
to make such change or changes of name as it may deem appropriate during
Tenant's occupancy, and Tenant agrees not to refer to the Building by any other
name than (i) the name as selected by Landlord, or (ii) the postal address
approved by the U.S. Post Office.
ARTICLE 12 -- TENANT'S CHANGES
12.01 Tenant may, at any time and from time to time during the Term, at
its sole expense, make such other alterations, additions, installations,
substitutions, improvements and decorations, including the installation and
maintenance of such wiring and cable as is necessary to operate and maintain
Tenant's telephone business at the Demised Premises, (hereinafter collectively
called "Changes" and, as applied to including the installation and maintenance
of such wiring and cable as is necessary to operate and maintain its telephone
business at the Demised Premises, changes provided for in this Article,
"Tenant's Changes") to the Demised Premises, excluding structural changes and
changes affecting the mechanical systems, on the following conditions, and
providing such changes will not result in a violation of or require a change in
the Certificate of Occupancy applicable to the Demised Premises: (a) The outside
appearance, character or use of the Building shall not be affected, and no
Tenant's Changes shall weaken or impair the structural strength or, in the
opinion of Landlord, lessen the value of the Building; (b) No part of the
Building outside of the Demised Premises shall be physically affected; (c) The
proper functioning of any of the mechanical, electrical, sanitary and other
service systems of the Building shall not be adversely affected; (d) In
performing the work involved in making such changes Tenant shall be bound by and
observe all of the conditions and covenants contained in this Article; (e) At
the Expiration Date, Tenant shall on Landlord's written request restore the
Demised Premises to their condition prior to the making of any of the changes
permitted by this Article, reasonable wear and tear excepted, and Landlord shall
be entitled to additional security pursuant to Article 15 for the performance of
Tenant's obligation; (f) At least thirty (30) days prior to proceeding with any
change (exclusive of changes in items constituting "Tenant's Property" as
defined in Article 13) Tenant shall submit to Landlord plans and specifications
for the work to be done, for Landlord's approval in writing, which approval
shall not be unreasonably withheld, and, if such change requires approval by or
notice to the lessor of a superior lease or the holder of a superior mortgage,
Tenant shall not proceed with the change until such approval has been received,
or such notice has been given, as the case may be, and all applicable conditions
and provisions of said superior lease or superior mortgage with respect to the
proposed change or alteration have been met or complied with at Tenant's
expense; and Landlord if it approves the change, will request such approval or
give such notice, as the case may be. Any change for which approval has been
received shall be performed strictly in accordance with the approved plans and
specifications,
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<PAGE> 21
and no amendments or additions to such plans and specifications shall be made
without the prior written consent of Landlord. Tenant shall not be permitted to
install and make part of the Demised Premises any materials, fixtures or
articles which are subject to liens, conditional sales contracts, security
agreements or chattel mortgages; and (g) Tenant shall comply with all other
terms and conditions of this Lease in connection with Tenant's Changes.
12.02 All Tenant's Changes shall at all times comply with laws, orders
and regulations of governmental authority having jurisdiction thereof, and all
rules and regulations of Landlord and Tenant at its expense, shall obtain all
necessary governmental permits 'and certificates for the commencement and
prosecution of Tenant's Changes and for final approval thereof upon completion,
and shall cause Tenant's Changes to be performed in compliance therewith and
with all applicable requirements of insurance bodies, and in good and first
class workmanlike manner, using materials and equipment at least equal in
quality and class to the original installations of the Building. Tenant's
Changes shall be performed in such manner as not to interfere with the occupancy
of any other tenant in the Building nor delay, or impose any additional expense
upon Landlord in the construction, maintenance or operation of the Building, and
shall be performed by contractors or mechanics approved by Landlord and in
accordance with the Building Rules and Regulations for Trades Conducting
Operations, attached hereto as Exhibit C-1 and Insurance Requirements for Trades
Conducting Operations in the Building, attached hereto as Exhibit C-2.
Throughout the performance of Tenant's Changes, Tenant, at its expense, shall
carry, or cause to be carried, workmen's compensation insurance in statutory
limits, and general liability insurance for any occurrence on, in or about the
Building, in which Landlord and its managing agent shall be named as parties
insured, in such limits as Landlord may reasonably prescribe (but not less than
those specified in Section 16.02), with insurers reasonably satisfactory to
Landlord. Tenant shall furnish Landlord with reasonably satisfactory evidence
that such insurance is in effect at or before the commencement of Tenant's
Changes and, on request, at reasonable intervals thereafter during the
continuance of Tenant's Changes. No Tenant's Changes shall involve the removal
of any fixtures, equipment or other property in the Demised Premises which are
not "Tenant's Property" (as defined in Article 13), unless Landlord's prior
written consent is first obtained and unless such fixtures, equipment or other
property shall be promptly replaced, at Tenant's expense and free of superior
title, liens and claims, with fixtures, equipment or other property (as the case
may be) of like utility and at least equal value (which replaced fixtures,
equipment or other property shall thereupon become the property of Landlord),
unless Landlord shall otherwise consent in writing.
12.03 Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation arising from
or otherwise connected with Tenant's Changes which shall be issued by the
appropriate department of the municipality in which the Building is located or
any other public authority having jurisdiction. Tenant shall defend, indemnify
and save harmless Landlord against any and all mechanics and other liens in
connection with Tenant's Changes, repairs or installations, including but not
limited to the liens of any conditional sales of, or chattel mortgages upon, any
materials, fixtures, or articles so installed in and constituting part of the
Demised Premises and against all costs, attorney's fees, fines, expenses and
liabilities reasonably incurred in connection with any such lien, conditional
sale or chattel mortgage or any action or proceeding brought thereon. Tenant, at
its expense, shall procure the satisfaction or discharge of all such liens
within thirty (30) days of the filing of such lien against the Demised Premises
or the Building. If Tenant shall fail to cause such lien to be discharged
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<PAGE> 22
within the period aforesaid, then, in addition to any other right or remedy,
Landlord may, but shall not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge of such lien by
deposit or by bonding proceedings, and in any such event Landlord shall be
entitled, if Landlord so elects, to compel the prosecution of any action for the
foreclosure of such lien by the lienor and to pay the amount of the judgment in
favor of the lienor with interest, costs and allowances. Any amount so paid by
Landlord and all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon at the lesser of the maximum permitted
by law or 1 1/2% per month or portion thereof from the respective dates of
Landlord's making of the payment or incurring of the cost and expense shall
constitute additional rent payable by Tenant under this Lease and shall be paid
by Tenant on demand. If Tenant makes any such payment it shall not be entitled
to any set-off against rent due hereunder. Tenant agrees that it will not at any
time prior to or during the Term, either directly or indirectly, use any
contractors, labor or materials in the Demised Premises, if the use of such
contractors, labor or materials would, in the Landlord's reasonable opinion,
create any difficulty with other contractors or labor engaged by Tenant or
Landlord or would in any way disturb harmonious labor relations in the
construction, maintenance or operation of the Building or any part thereof or
any other building owned or operated by Landlord or any affiliate of Landlord.
12.04 If Tenant requires Landlord to perform work during other than
Regular working Hours, or if Tenant desires to perform work through its
contractors, agents or employees during other than Regular Working Hours, Tenant
shall pay as additional rent, the cost of employing such additional help as
shall be required under the rules and regulations of unions employed in
connection with the Building. Payment shall be made by Tenant to Landlord within
ten (10) days after being billed therefor.
12.05 In the event Landlord does not perform the work for Tenant,
Tenant shall pay to Landlord a supervisory fee (which shall include the cost of
review of the proposed Tenant's Changes) equal to Landlord's actual
out-of-pocket expenses for such supervision.
ARTICLE 13 -- TENANT'S PROPERTY
13.01 All fixtures, equipment, improvements and appurtenances attached
to or built into the Demised Premises, shall be deemed the property of Landlord
and shall not be removed by Tenant except as hereinafter in this Article
expressly provided.
13.02 All fixtures, furnishings and equipment, exclusive of work
performed by Landlord at Landlord's cost and expense pursuant to the provisions
of Article 3 hereof, whether or not attached to or built into the Demised
Premises, which are installed in the Demised Premises by or for the account of
Tenant, may be removed by it at any time during the Term; provided that if any
of Tenant's Property is removed, Tenant shall repair or pay the cost of
repairing any damage to the Demised Premises or to the Building resulting from
such removal. Any fixtures, equipment or other property for which Landlord shall
have granted any allowance to the Tenant as a credit or substitution in kind
shall not be deemed to have been installed by or for the account of the Tenant
without expense to Landlord, and shall not be considered Tenant's Property.
Landlord shall not be obligated to return and/or reinstall any partitions
supplied to Tenant which are returned by Tenant to Landlord due to enlargement,
reduction or change in the Demised Premises.
13.03 At or before the expiration of this Lease, Tenant shall remove,
at its expense, from the Demised Premises, all of Tenant's Property and shall
repair any damage and make any replacements to
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the Demised Premises or the Building resulting from or necessitated by such
removal, and shall pay all other costs of such removal.
13.04 Any items of Tenant's Property which shall remain in the Demised
Premises after the expiration of this Lease, may, at the option of the Landlord,
be deemed to have been abandoned, and in such case either may be retained by
Landlord as its property or may be disposed of, without accountability to Tenant
in such manner as Landlord may see fit. Tenant agrees to reimburse Landlord for
the costs of removal and for the cost of repairing any damage to the Demised
Premises or the Building arising out of Tenant's failure to remove Tenant's
Property pursuant to the terms of this Lease.
ARTICLE 14 -- REPAIRS AND MAINTENANCE
14.01 Tenant shall take good care of the Demised Premises and the
fixtures and appurtenances therein, and at its sole cost and expense shall make
all repairs thereto, as and when needed to preserve them in good working order
and condition except as otherwise provided in Section 14.02 hereof. In addition,
Tenant, at its expense, shall promptly make all repairs, ordinary or
extraordinary, interior or exterior, structural or otherwise, in and about the
Demised Premises and the Building as shall be required by reason of (i) the
performance or existence of work by Tenant necessary to suit the Demised
Premises to Tenant's initial occupancy or in connection with Tenant's Changes,
(ii) the installation, use or operation of Tenant's Property in the Demised
Premises, (iii) the moving of Tenant's Property in or out of the Building, or
(iv) the misuse or neglect of Tenant or any of its employees, agents or
contractors. Tenant shall not be responsible, and Landlord shall be responsible,
for any repairs to the Demised Premises as are required by reason of Landlord's
neglect or other fault in the manner of performing any Work provided for in
Article 3 which Landlord is to perform in Tenant's Changes which may be
undertaken by Landlord for Tenant's account or are otherwise required by reason
of neglect or other fault of Landlord or its employees, agents or contractors.
14.02 Landlord shall keep and maintain the Building and its fixtures,
appurtenances, systems and facilities (including the heating, ventilating and
air-conditioning systems and the central or core elevator and plumbing systems),
serving the Demised Premises, in good working order, condition and repair and
shall make all structural repairs, interior and exterior, except as indicated
in the second sentence of Section 14.01, as and when needed in the Building,
except for those repairs for which Tenant is responsible pursuant to any other
provisions of this Lease, and subject to all other provisions of this Lease,
including but not limited to the provisions of Article 22.
14.03 Except as expressly otherwise provided in this Lease, Landlord
shall have no liability to Tenant by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord or any tenant making
any repairs or changes or performing maintenance services, whether or not
Landlord is required or permitted by this Lease or by law to make such repairs
or changes or to perform such services in or to any portion of the Building or
Demised Premises, or in to the fixtures, equipment or appurtenances of the
Building or the Demised Premises, provided that Landlord shall be reasonably
diligent with respect thereto and shall perform such work, except in case of
emergency, at times reasonably convenient to Tenant and otherwise in such manner
and to the extent practical as will not unreasonably interfere with Tenant's use
and occupancy of the Demised Premises.
14.04 When used in this Lease the term "repair" shall be deemed to
include restoration and replacements as may be necessary to achieve and/or
maintain good working order and condition.
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ARTICLE 15 -- SECURITY DEPOSIT
Tenant has deposited with Landlord $46,800.00 as security for the
punctual performance by Tenant of each and every obligation of it under this
Lease, including the restoration of the Premises pursuant to Article 12.01. In
the event of any default by Tenant, Landlord may apply or retain all or any part
of the security to cure the default or to reimburse Landlord for any sum which
Landlord may spend by reason of the default. In the case of every such
application or retention Tenant shall, on demand, pay to Landlord the sum so
applied or retained which shall be added to the Security Deposit so that the
same shall be restored to its original amount. If at the end of the Term Tenant
shall not be in default under this Lease, the Security Deposit, or any balance
thereof, shall be returned to Tenant, within thirty (30) days after the
Expiration Date. In the event of a sale of the land and Building or leasing of
the Building, of which the Demised Premises form a part, Landlord shall have the
right to transfer the security to the vendor or lessee and Landlord shall
thereupon be released by Tenant from all liability for the return of such
security; and Tenant agrees to look to the new Landlord solely for the return of
said security; and it is agreed that the provision hereof shall apply to every
transfer or assignment of the security to a new Landlord. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and neither the Landlord nor its
successors or assign shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
ARTICLE 16 -- INSURANCE
16.01 Tenant shall not violate, or permit the violation of, any
condition imposed by the standard fire insurance policy then issued for office
Buildings in the area in which the Building is located and shall not do, or
permit anything to be done, or keep or permit anything to be kept in the Demised
Premises which would increase the fire or other casualty insurance rate on the
Building or the property therein over the rate which would otherwise than be in
effect (unless Tenant pays the resulting increased amount of premium) or which
would result in insurance companies of good standing refusing to insure the
Building or any of such property in amounts and at normal rates reasonably
satisfactory to Landlord. However, Tenant shall not be subject to liability or
obligation under this Section by reason of the proper use of the Demised
Premises for executive and administrative offices.
16.02 Tenant shall obtain and keep in full force and effect during the
Term at its own cost and expense, Public Liability insurance, such insurance to
afford protection in an amount of not less than $1,000,000.00 for injury or
death to any one person, $3,000,000.00 for injury or death arising out of any
one occurrence, and $500,000.00 for damage to property, protecting the Landlord
and the Tenant as insureds against any and all claims for personal injury, death
or property damage occurring in, upon, adjacent, or connected with the Demised
Premises and any part thereof. Said insurance is to be written by insurance
companies admitted to do business in the State of New Jersey which shall be
reasonably satisfactory to the Landlord. The original insurance policies or
appropriate certificates shall be deposited with Landlord together with any
renewals, replacements or endorsements to the end that said insurance shall be
in full force and effect for the benefit of the Landlord during the Term. In the
event Tenant shall fail to procure and place such insurance, the Landlord may,
but shall not be obligated to, procure and place same, in which event the amount
of the premium paid shall be paid by Tenant to Landlord upon demand and shall in
each instance be collectible on the first day of the month or any subsequent
month following the
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<PAGE> 25
date of payment by Landlord, in the same manner as though, and same shall be
considered to be additional rent reserved hereunder.
16.03 In the event that any dispute should arise between Landlord and
Tenant concerning insurance rates, a schedule or "make up" of rates for the
Building or the Demised Premises, as the case may be, issued by the Fire
Insurance Rating Organization of New Jersey or other similar body making rates
for fire insurance and extended coverage for the premises concerned, shall be
presumptive evidence of the facts therein stated and of the several items and
charges in the fire insurance rates with extended coverage then applicable to
such premises.
16.04 Each party agrees to use its best efforts to include in each of
its insurance policies insuring the Building and Landlord's property therein and
rental value thereof, in the case of Landlord and insuring Tenant's Property and
business interest in the Demised Premises (business interruption insurance) in
the case of Tenant, against loss, damage or destruction by fire or other
casualty, a waiver of the insurer's right of subrogation against the other
party, or if such waiver should be unobtainable or unenforceable (a) an express
agreement that such policy shall not be invalidated if the insured waives the
right of recovery against any party responsible for a casualty covered by the
policy before the casualty or (b) any other form of permission for the release
of the other party. If such waiver, agreement or permission shall not be, or
shall cease to be, obtainable without additional charge or at all, the insured
party shall so notify the other party promptly after learning thereof. In such
case, if the other party shall so elect and shall pay the insurer's additional
charge therefore, such waiver, agreement or permission shall be included in the
policy, or the other party shall be named as an additional insured in the
policy, but not the loss payee. Each such policy which shall so name a party
hereto as an additional insured shall contain agreements by the insurer that the
policy will not be cancelled without at least twenty (20) days prior notice to
both insureds and that the act or omission of one insured will not invalidate
the policy as to the other insured. Any failure by Tenant, if named as an
additional insured promptly to endorse to the order of Landlord, without
recourse, any instrument for the payment of money under or with respect to the
policy of which Landlord is the owner or original or primary insured, shall be
deemed a default under this Lease.
16.05 Each party hereby releases the other party with respect to any
claim (including a claim for negligence) which it might otherwise have against
the other party for loss, damage or destruction with respect to its property
(including rental value or business interruption) occurring during the Term and
with respect and to the extent to which it is insured under a policy or policies
containing a waiver of subrogation or permission to release liability or naming
the other party as an additional insured as provided in Sections 16.04. If
notwithstanding the recovery of insurance proceeds by either party for loss,
damage or destruction of its property (or rental value or business interruption)
the other party is liable to the first party with respect thereto or is
obligated under this Lease to make replacement, repair or restoration or
payment, then provided the first party's right of full recovery under its
insurance policies is not thereby prejudiced or otherwise adversely affected,
the amount of the net proceeds of the first party's insurance against such loss,
damage or destruction shall be offset against the second party's liability to
the first party therefor, or shall be made available to the second party to pay
for replacement, repair or restoration, as the case may be.
16.06 The waiver of subrogation or permission for release referred to
in Section 16.04 shall extend to the agents of each party and its and their
employees and, in the case of Tenant, shall
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also extend to all persons and entities occupying, using or visiting the Demised
Premises in accordance with the terms of this Lease, but only if and to the
extent that such waiver or permission can be obtained without additional charge
(unless such party shall pay such charge). The releases provided for in Section
16.05 shall likewise extend to such agents, employees and other persons and
entities, if and to the extent that such waiver or permission is effective as to
them. Nothing contained in Section 16.05 shall be deemed to relieve either party
of any duty imposed elsewhere in this Lease to repair, restore or rebuild or to
nullify any abatement of rents provided for elsewhere in this Lease. Except as
otherwise provided in Section 16.02, nothing contained in Section 16.04 and
16.05 shall be deemed to impose upon either party any duty to procure or
maintain any of the kinds of insurance referred to therein or any particular
amounts or limits of any such kinds of insurance.
ARTICLE 17 -- SUBORDINATION, ATTORNMENT,
NOTICE TO LESSOR AND MORTGAGEES
17.01 This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all present and future ground leases,
over-riding leases and underlying leases and/or grants of terms of the land
and/or the Building or the portion thereof in which the Demised Premises are
located in whole or in part now or hereafter existing ("superior leases") and to
all mortgages and Building loan agreements, which may now or hereafter affect
the land and/or the Building and/or any of such leases ("superior mortgages")
whether or not the superior leases or superior mortgages shall also cover other
lands and/or Buildings, to each and every advance made or hereafter to be made
under the superior mortgages, and to all renewals, modifications, replacements
and extensions of the superior leases and superior mortgages and spreaders,
consolidations and correlations of the superior mortgages. This Section shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly execute and deliver at
its own cost and expense any instrument, in recordable form if required, that
Landlord, the lessor of any superior lease or the holder of any superior
mortgage or any of their respective successors in interest may request to
evidence such subordination, and Tenant hereby constitutes and appoints Landlord
attorney-in-fact for Tenant to execute any such instrument for and on behalf of
Tenant.
17.02 In the event that the lessor of a superior lease or the holder of
a superior mortgage shall succeed to the rights of the Landlord under this
lease, whether through possessory or foreclosure action or proceeding or through
delivery of a new lease, then at the request of any such party, the Tenant shall
attorn to and recognize such party as its Landlord under this Lease. In any such
event, this Lease shall continue in full force and effect as if it were a direct
lease between such party and the Tenant upon all of the terms, covenants and
conditions set forth in this Lease and shall be applicable after such
attornment, except that such party shall not (a) be obligated to perform any
work in the Building, including the Demised Premises or prepare them for
occupancy; (b) be obligated to repair, replace, rebuild or restore the Building,
or the Demised Premises in the event of damage or destruction, beyond such
repair, replacement, rebuilding or restoration as can reasonably be accomplished
from the net proceeds of insurance actually received by, or made available to,
such party; (c) be liable for any previous act or omission by Landlord; (d) be
subject to any liability or offset which shall theretofore accrue to the Tenant
against Landlord; (e) be bound by any previous modification or extension of this
Lease unless filed with such party and made at arms length, in good faith and in
the honest exercise of reasonable business judgment; (f) be bound by any
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previous pre-payment of more than one month's fixed rent or other charge, or (g)
be bound by any cancellation or surrender of this Lease or any eviction of the
Tenant by Landlord unless made at arms length, in good faith and in the honest
exercise of reasonable business judgment.
17.03 Tenant agrees to waive the provisions of any statute or rule or
law now or hereafter in effect which may give or purport to give Tenant any
right of election to terminate this Lease or to surrender possession of the
Demised Premises in the event a superior lease is terminated or a superior
mortgage is foreclosed, and that unless and until said lessor, or holder, as the
case may be, shall elect to terminate this Lease, this Lease shall not be
affected in any way whatsoever by any such proceeding or termination, and Tenant
shall take no steps to terminate this Lease without giving written notice to
said lessor under the superior lease, or holder of a superior mortgage and a
reasonable opportunity to cure (without such lessor or holder being obligated to
cure), any default on the part of the Landlord under this Lease.
ARTICLE 18 -- ASSIGNMENT, MORTGAGING, SUBLETTING
18.01 Neither this Lease nor the Term and estate hereby granted, nor
any part hereof or thereof, nor the interest of Tenant in any sublease or the
rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant by operation of law or otherwise, and neither
the Demised Premises nor any part thereof, shall be encumbered in any manner by
reason of any act or omission on the part of the Tenant or anyone claiming under
or through Tenant, or shall be sublet or be used or occupied or permitted to be
used or occupied, or utilized for desk space or for mailing privileges, by
anyone other than Tenant or for any purpose other than as permitted by this
Lease, without the prior written consent of Landlord in every case, except as
expressly otherwise provided in this Article.
18.02 If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof be sublet or be used or occupied by anybody
other than Tenant, whether or not in violation of this Lease, Landlord may,
after default by Tenant, and expiration of Tenant's time to cure such default,
collect rent from the subtenant or occupant. In either event, Landlord may apply
the net amount collected to the rents herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of any of the
provisions of Section 18.01, or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to
assignment, mortgaging or subletting, or use or occupancy by others shall in no
wise by considered to relieve Tenant from obtaining the express written consent
of Landlord to any other or further assignment, mortgaging, or subletting or use
or occupancy by others not expressly permitted by this Article. Tenant agrees to
pay to Landlord reasonable counsel fees incurred by Landlord in connection with
any proposed assignment of Tenant's interest in this Lease or any proposed
subletting of the Demised Premises or any part thereof. References in this Lease
to use or occupancy by others, that is anyone other than Tenant, shall not be
construed as limited to subtenants and those claiming under or through Tenant,
immediately or remotely.
18.03 Tenant may, upon written notice to Landlord, but without
Landlord's written consent, permit any corporations or other business entities
which control, are controlled by, or are under common control with Tenant
(herein called "related corporations") to use the whole or part of Demised
Premises for any purposes permitted to Tenant, subject however to compliance
with Tenant's
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obligations under the Lease. Such use shall not be deemed to vest in any such
related corporation any right or interest in this Lease or in the Demised
Premises, nor shall such use release, relieve, discharge or modify any of
Tenant's obligations hereunder.
18.04 With respect to any proposed assignment of this Lease or proposed
subletting of all or a portion of the Demised Premises:
(A) Tenant shall submit to the Landlord a request for consent to such
assignment or sublease together with the name and address of the proposed
assignee or sublessee and such information as to its financial responsibility
and standing as Landlord may require. Upon receipt of such request and upon the
furnishing of such information by the Tenant, Landlord shall have the option to
cancel and terminate this Lease (i) completely, if the request was for an
assignment of this Lease or subletting of all of the Demised Premises, or (ii)
if such request was for or a subletting of a portion of the Demised Premises,
then with respect to such portion.
(B) Landlord shall exercise such option to cancel and terminate by
notice in writing to that effect to Tenant within ten (10) days from receipt of
Tenant's request and the information set forth above, and Landlord's notice
shall set forth the date of cancellation, which date shall be no less than sixty
(60) nor more than ninety (90) days from the date of the service of Landlord's
notice. If such option is so exercised, then upon such date of cancellation the
Lease for the entire Demised Premises or specified portion thereof, as the case
may be, shall cease and terminate with the same force and effect as though the
date set forth in the notice were the date set forth in this Lease as the
expiration of the Term, and the Tenant shall surrender possession of the entire
Demised Premises, or portion thereof, as the case may be, in accordance with the
provisions of the Lease relating to surrender of the Demised Premises at the
expiration of the Term. If Landlord exercises the option to cancel the Lease as
to a portion of the Demised Premises only, the terms of this Lease shall remain
in full force as to the remainder of the Demised Premises, for the balance of
the Term, except to the extent that the area of the Demised Premises is reduced
with a proportionate reduction in rent.
(C) If Landlord does not exercise its option to cancel as
aforementioned than Tenant may assign or sublet all or a portion of the Demised
Premises, provided that Landlord has given its prior written consent and
provided further that: (i) the Tenant is not then in default hereunder; (ii) the
rental provided for in such assignment or sublease is not less than the rental
provided for herein; (iii) the Demised Premises are to be used for executive
offices only by a person, firm or corporation engaged in a lawful commercial
business (other than a business operating data processing machinery in the
Demised Premises larger than desk top size), but not for the practice of
medicine, (iv) such assignee or sublessee shall be financially responsible and
of good reputation; (v) the business of such assignee or sublessees or the use
to which such Demised Premises shall be put shall not be violation of any
restriction against competition contained in any other lease to which Landlord
is a party; (vi) the assignee or sublessee is not engaged in the containerized
shipping business or as a governmental agency of a communist agency and (vii) a
duplicate original of an instrument in writing assigning this Lease or
subletting the Demised Premises, duly executed by the assignor or sublessor and
assignee or sublessee, as the case may be, in recordable form, containing
therein an assumption by said assignee or an agreement by said sublessee to take
subject to (and an agreement by Tenant to remain liable to Landlord for) all the
terms and conditions of this Lease on the part of the Tenant to be performed.
(D) The provisions of this Article 18 shall apply to each such proposed
subletting, none of which shall be effective until all of the foregoing shall
have been complied with. Notwithstanding any
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subletting, Tenant and any future sublessor shall remain liable for the full
performance of all the terms and conditions of this Lease on the part of the
Tenant to be performed.
18.05 Tenant shall not offer to assign or sublet either the entire
Demised Premises or a specified portion thereof to any other Tenant in the
Building or to any party in negotiations with Landlord to lease a portion of the
Building.
18.06 Tenant specifically agrees that it will not, at any time, without
Landlord's prior written consent, advertise or publicize in any way the
availability of all or part of the Demised Premises, or list or publicly
advertise the Demised Premises for subletting, whether through a broker, agent,
representative or otherwise.
ARTICLE 19 -- COMPLIANCE WITH LAWS AND REQUIREMENTS
OF PUBLIC AUTHORITIES: RULES & REGULATIONS
19.01 Tenant shall promptly notify Landlord of any written notice it
receives of the violation of any law or requirements which shall, with respect
to the Building or the Demised Premises or the use and occupation thereof or the
abatement of any nuisance, impose any violation, order or duty on Landlord or
Tenant, arising from (i) Tenant's use of the Demised Premises, (ii) the manner
of conduct of Tenant's business or operation of its installations, equipment or
other property therein, (iii) any cause or condition created by or at the
instance of Tenant, or (iv) breach of any of Tenant's obligations hereunder.
19.02 Tenant shall promptly furnish to Landlord all information
requested by Landlord which may be required for all reports to be filed by
Landlord in accordance with any directives of the Secretary of the United States
Department of Housing and Urban Development or any statute, rule or regulation
of the United States Department of Housing and Urban Development in connection
with the Urban Development Action Grant used to finance part of the construction
of the Building.
19.03 Tenant and its employees and agents shall faithfully observe and
comply with the Rules and Regulations annexed hereto as Exhibit "B". and such
reasonable changes therein (whether by modification, elimination or addition) as
Landlord at any time or times hereafter may make and communicate in writing to
Tenant, which do not unreasonably affect the conduct of Tenant's business in the
Demised Premises; provided, however, that in case of any conflict or
inconsistency between the provisions of this Lease and any Rules and Regulations
changed subsequent to the date of this Lease the provisions of this Lease shall
control.
19.04 Nothing in this Lease contained shall be construed to impose upon
Landlord any duty or obligation to Tenant to enforce the Rules and Regulations
or the terms, covenants or conditions in any other lease, as against any other
tenant unless requested to do so by Tenant, but Landlord shall not be liable to
Tenant for violation of the same by any other tenant or its employees, agents or
visitors.
ARTICLE 20 -- QUIET ENJOYMENT
20.01 Landlord covenants that if, and so long as, Tenant pays all of
the Fixed Rent and additional rent due hereunder, and keeps and performs each
and every covenant, agreement, term, provision and condition herein contained on
the part and on behalf of Tenant to be kept and performed, Tenant shall quietly
enjoy the Demised Premises without hinderance or molestation by Landlord or any
other person lawfully claiming the same, subject to the covenants,
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agreements, terms, provisions and conditions of this Lease and to any superior
leases and/or superior mortgages.
ARTICLE 21 -- NON-LIABILITY & INDEMNIFICATION
21.01 Neither Landlord nor any agent or employee of Landlord shall be
liable to Tenant, its employees, agents, contractors and licensees, and Tenant
shall hold Landlord harmless from any injury or damage to Tenant or to any other
persons for any damage to, or loss (by theft or otherwise) of, any property of
Tenant and/or of any other person, irrespective of the cause of such injury,
damage or loss, unless caused by or due to the gross negligence of Landlord, its
agents or employees without contributory negligence on the part of Tenant.
Landlord shall not be liable in any event for loss of, damage to, any property
entrusted to any of Landlord's employees or agents by Tenant without Landlord's
specific written consent.
21.02 Tenant shall defend, indemnify and save harmless Landlord and its
agent and employees against and from all liabilities, obligations, damages,
penalties, claims, costs, charges and expenses, including reasonable experts'
and attorneys' fees, which may be imposed upon or incurred by or asserted
against Landlord and/or its agents by reason of any of the following occurring
during the Term, or during any period of time prior to the Commencement Date
that Tenant may have been given access to or possession of all or any part of
the Demised Premises: (a) any work or thing done in on or about the Demised
Premises or any part thereof by or at the instance of Tenant, its agents,
contractors, subcontractors, servants, employees, licensees or invitees; (b) any
negligence or otherwise wrongful act or omission on the part of Tenant or any of
its agents, contractors, subcontractors, servants, employees, subtenants,
licensees, or invitees; (c) any accident, injury or damage to any person or
property occurring in on or about the Demised Premises or any part thereof, or
vault, passageway or space adjacent thereto; (d) any failure on the part of
Tenant to perform or comply with any of the covenants, agreements, terms,
provisions, conditions or limitations contained in this Lease on its part to be
performed or complied with. In case any action or proceeding is brought against
Landlord by reason of any such claim, Tenant upon written notice from Landlord
shall at Tenant's expense resist or defend such action or proceeding by Counsel
approved by Landlord in writing, which approval Landlord shall not unreasonably
withhold.
21.03 Whenever either party shall be obligated under the terms of this
Lease to indemnify the other party, the indemnifying party may select legal
counsel (subject to the consent of the indemnified party, which consent shall
not be unreasonably withheld) and shall keep the indemnified party fully
appraised at all times of the status of such defense. Legal counsel of the
insurer for either party is hereby deemed satisfactory to both parties.
21.04 Except as otherwise expressly provided herein, this Lease and the
obligations of Tenant to pay rent hereunder and perform all of the other
covenants, agreements, terms, provisions and conditions hereunder on the part of
Tenant to be performed shall in no wise be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is delayed in supplying any service, express or implied, to
be supplied or is unable to make or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of any
Unavoidable Delays, as defined in Section 3.02 hereof; provided that Landlord
shall in each instance exercise reasonable diligence to effect performance when
and as soon as possible. However, nothing contained in this Section shall be
deemed to extend or otherwise modify or affect any of the time limits and
conditions set forth in Section 22.03.
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ARTICLE 22 -- DESTRUCTION AND DAMAGE
22.01 If the Demised Premises and/or access thereto shall be partially
or totally damaged or destroyed by fire or other casualty, then, Landlord shall,
subject to its rights under Section 22.03 hereof, repair the damage and restore
and rebuild the Demised Premises and/or access thereto as nearly as may be
reasonably practical to its condition and character immediately prior to such
damage or destruction, with reasonable diligence after notice to it of the
damage or destruction.
22.02 It the Demised Premises and/or access thereto shall be partially
or totally damaged or destroyed by fire or other casualty not attributable to
the fault, negligence or misuse of the Demised Premises by the Tenant, its agent
or employees under the provisions of this Lease, the rents payable hereunder
shall be abated to the extent that the Demised Premises shall have been rendered
untenantable from the date of such damage or destruction to the date the damage
shall be substantially repaired or restored or rebuilt. Should Tenant reoccupy a
portion of the Demised Premises during the period that the repair, restoration,
or rebuilding is in progress and prior to the date that the same are made
completely tenantable, rents allocable to such portion shall be payable by
Tenant from the date of such occupancy to the date the Demised Premises are made
tenantable.
22.03 In case of substantial damage or destruction of the Demised
Premises, Tenant may terminate this Lease by notice to Landlord, if Landlord has
not completed the making of required repairs and restored and rebuilt the
Demised Premises and/or access thereto within 9 months from the date of such
damage or destruction, and such additional time after such date (but in no event
exceed 9 months) as shall equal the aggregate period Landlord may have been
delayed in doing so by adjustment of insurance or Unavoidable Delays.
In case the Building shall be so damaged by such fire or other casualty
that substantial renovation, reconstruction or demolition of the Building shall,
in Landlord's opinion, be required (whether or not the Demised Premises shall
have been damaged by such fire or other casualty), then Landlord may, at its
option, terminate this Lease and the Term and estate hereby granted, by
notifying Tenant of such termination, within sixty (60) days after the date of
such damage. If at any time prior to Landlord giving tenant the aforesaid notice
of termination or commencing the repair and restoration pursuant to Section
22.01, the holder of a superior mortgage or the lessor of a superior lease or
any person claiming under or through the holder of such superior mortgage or the
lessor of such superior lease takes possession of the Building through
foreclosure or otherwise, such holder, lessor, or person shall have a further
period of sixty (60) days from the date of so taking possession to terminate
this Lease by appropriate written notice to Tenant. In the event that such a
notice of termination shall be given pursuant to either of the next two
preceding sentences, this Lease and the Term and estate hereby granted shall
expire as of the date of such termination with the same effect as if that were
the date hereinabove set for the expiration of the Term, and the Fixed Rent and
additional rent due and to become due hereunder shall be apportioned as of such
date if not earlier abated pursuant to Section 22.02. Nothing contained in this
Section 22.03 shall relieve Tenant from any liability to Landlord or to its
insurers in connection with any damage to the Demised Premises or the Building
by fire or other casualty if Tenant shall be legally liable in such respect.
22.04 No damages, compensation or claim shall be payable by Landlord
for inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised
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Premises or of the Building pursuant to this Article. Landlord shall use its
best efforts to effect such repair or restoration promptly and in such manner as
not unreasonably to interfere with Tenant's use and occupancy.
22.05 Landlord will not carry insurance of any kind on Tenant's
Property, and, except as provided by law or its breach of any of its obligations
hereunder, shall not be obligated to repair any damage thereto or replace the
same.
22.06 The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises by
fire or other casualty, and any statute or regulation providing for such a
contingency in the absence of, an express agreement, now or hereafter in force,
shall have no application in such case.
22.07 Notwithstanding any of the foregoing provisions of this Lease if
Landlord or the lessor of any superior lease or the holder of any superior
mortgage shall be unable to collect all of the insurance proceeds (including
rent insurance proceeds) applicable to damage or destruction of the Demised
Premises or the Building by fire or other cause, by reason of some action or
inaction on the part of Tenant or any of its employees, agents or contractors,
then, without prejudice to any other remedies which may be available against
Tenant, the abatement of Tenant's rents provided for in this Article shall not
be effective to the extent of the uncollected insurance proceeds.
ARTICLE 23 -- EMINENT DOMAIN
23.01 In the event that the land, Building or any part thereof, or the
Demised Premises or any part thereof, shall be taken in condemnation proceedings
or by the exercise of any right of eminent domain or by agreement between any
superior lessors and lessees and/or Landlord on the one hand and any
governmental authority authorized to exercise such right on the other hand,
Landlord shall be entitled to collect from any condemnor the entire award or
awards that may be made in any such proceeding without deduction therefrom for
any estate hereby vested in or owned by Tenant, to be paid out as in this
Article provided. Tenant hereby expressly assigns to Landlord all of its right,
title and interest in or to every such award (with the exception of that portion
of the award specifically allocated as Tenant's moving expenses, to the extent
that the same does not decrease Landlord's award) and also agrees to execute any
and all further documents that may be required in order to facilitate the
collection thereof by Landlord.
23.02 At any time during the Term if title to the whole or
substantially all of the land, Building and/or Demised Premises shall be taken
in by condemnation proceedings or by the exercise of any right of eminent domain
or by agreement between any superior lessors and lessees and/or Landlord on the
one hand and any governmental authority authorized to exercise such right on the
other hand, this Lease shall terminate and expire on the date of such taking and
the Fixed Rent and additional rent provided to be paid by Tenant shall be
apportioned and paid to the date of such taking.
23.03 However, if substantially all of the land or Building is not so
taken and if only a part of the entire Demised Premises shall be so taken, this
Lease nevertheless shall continue in full force and effect, except that either
party may elect to terminate this Lease if that portion of the Demised Premises
then occupied by Tenant shall be reduced by more than 25%, by notice of such
election to the other party given not later than thirty (30) days after (i)
notice of such taking is given by the condemning authority, or (ii) the date of
such taking, whichever occurs later.
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Upon the giving of such notice this Lease shall terminate on the date of service
of such notice and the Fixed Rent and additional rent due and to become due,
shall be prorated and adjusted as of the date of the taking. If both parties
fail to give such notice upon such partial taking, and this Lease continues in
force as to any part of the Damaged Premises not taken, the rents apportioned to
the part taken shall be prorated and adjusted as of the date of taking and from
such date the Fixed Rent and additional rent shall be reduced to the amount
apportioned to the remainder of the Demised Premises, and the Tenant's Share
shall be recomputed to reflect the number of square feet of Tenant's Floor Space
remaining in the Damaged Premises in relation to the number of square feet of
Total Building Floor Space remaining in the Building.
23.04 Notwithstanding the foregoing provisions of this Article and
subject to the interest of any mortgagees or lessor or grantor under any
superior mortgage or superior lease, Tenant shall be entitled to appear, claim,
prove and receive in the proceedings relating to any taking mentioned in the
preceding Sections of this Article, such portion of each award made therein as
represents the then value of Tenant's Property.
23.05 In the event of any such taking of less than the whole of the
Building which does not result in a termination of this Lease, Landlord, at its
expense, shall proceed with reasonable diligence to repair, alter and restore
the remaining part of the Building and the Demised Premises to substantially the
same condition as it was in immediately prior to such taking to the extent that
the same may be feasible, so as to constitute a tenantable Building and Damaged
Premises, providing that Landlord's liability under this Section shall be
limited to the amount received by Landlord as an award arising out of such
taking.
ARTICLE 24 -- SURRENDER
24.01 On the last day of the Term, or upon any earlier termination of
this Lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant
shall quit and surrender the Demised Premises to the Landlord broom clean, in
good order, condition and repair except for ordinary wear and tear and damage by
fire or other insured casualty, restored as provided in Section 12.01.
24.02 Prior to such surrender, Tenant shall (a) remove Tenant's
Property subject to the provisions of Article 13 hereof, (b) at Landlord's
request remove from the Demised Premises all improvements, alterations,
additions, fixtures and equipment (sometimes herein called "additional work")
other than Tenant's Work attached hereto as Exhibit C whether such additional
work was performed by Tenant or by Landlord on Tenant's behalf, and whether such
additional work consisted of extra or special work or additional items or
quantities of Building standard work, and (c) at Landlord's request, repair any
damage and make any replacements to the Building or the Demised Premises
resulting from or necessitated by such removal, and restore those parts of the
Demised Premises from which the removal referred to in subparagraphs (a) and (b)
above occurred, to a condition which will blend with and be comparable to
adjacent areas. Tenant's removal and repair obligations hereunder with respect
to the Demised Premises shall extend to the core area or any other part of the
Building where any additional work was performed by or on behalf of Tenant. If
Tenant shall fail to perform as provided in this Section 24.02, Landlord shall
have the right to do so at Tenant's cost and expense, without further notice or
demand upon Tenant, and Tenant shall indemnify Landlord against all loss or
liability resulting therefrom, including, without limitation, any delay in
granting occupancy of the Demised Premises to a future occupant.
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ARTICLE 25 -- CONDITIONS OF LIMITATION
25.01 This Lease and the estate hereby granted are subject inter alia
to the limitation that whenever Tenant shall make an assignment for the benefit
of creditors, or shall file a voluntary petition under any bankruptcy or
insolvency law, or an involuntary petition alleging an act of bankruptcy or
insolvency is filed against Tenant, or whenever a petition shall be filed by or
against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
any future federal bankruptcy act or any other present or future applicable
federal, state or other statute or law, or shall seek or consent to or acquiesce
in the appointment of any trustee, receiver or liquidator of Tenant or of all or
any substantial part of its properties, or whenever a permanent or temporary
receiver of Tenant or of, or for, the property of Tenant shall be appointed, or
if Tenant shall plead bankruptcy or insolvency as a defense in any action or
proceeding, then, Landlord, (a) at any time after receipt of notice of the
occurrence of any such event, or (b) if such event occurs without the
acquiescence of Tenant, at any time after the event continues for sixty (60)
days, may give Tenant a notice of intention to end the Term at the expiration of
five (5) days from the service of such notice of intention, and upon the
expiration of said five (5) day period Lease and the Term and estate hereby
granted, whether or not the Term shall theretofore have commenced, shall
terminate with the same effect as if that day were the Expiration Date, but
Tenant shall remain liable for damages as provided as in Article 27.
25.02 This Lease and the Term and estate hereby granted and subject to
the further limitation that, (a) whenever Tenant shall default in the payment of
any installment of Fixed Rent, or in the payment of any additional rent, on any
day upon which the same shall be due and payable and such default shall continue
for five (5) days after the giving of notice thereof by Landlord, or (b)
whenever Tenant shall do or permit anything to be done, whether by action or
inaction, contrary to any of Tenant's obligations hereunder, and if such
situation shall continue and shall not be remedied by Tenant within thirty (30)
days after Landlord shall have given to Tenant a notice specifying the same, or,
in the case of a happening or default which cannot with due diligence be cured
within a period of thirty (30) days and the continuance of which for the period
required for cure will not subject Landlord to the risk of criminal liability or
termination of any superior lease or foreclosure of any superior mortgage, if
Tenant shall not duly institute within such thirty (30) day period and promptly
and diligently prosecute to completion all steps necessary to remedy the same,
or (c) whenever any event shall occur or any contingency shall arise whereby
this Lease or any interest therein or the estate hereby granted or any portion
thereof or the unexpired balance of the Term hereof would, by operation of law
or otherwise, devolve upon or pass to any person, firm or corporation other than
Tenant, except as expressly permitted by Article 18 or (d) whenever Tenant shall
abandon the Demised Premises, or a substantial portion of the Demised Premises
shall remain vacant for a period of thirty (30) consecutive days, unless such
vacancy arises as a result of a casualty; then in any such event covered by
subsections a, b, c or d of this Section 25.2 at any time thereafter, Landlord
may give to Tenant a notice of intention to end the Term of this Lease at the
expiration of three (3) days from the date of the service of such notice of
intention, and upon the expiration of said three (3) days this Lease and the
Term and the estate hereby granted, whether or not the Term shall theretofore
have commenced, shall terminate with the same effect as if that day were the
Expiration Date, but Tenant shall remain liable for damages as provided in
Article 27.
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ARTICLE 26 -- RE-ENTRY BY LANDLORD --
DEFAULT PROVISIONS
26.01 If this Lease shall terminate for any reason whatsoever, Landlord
or Landlord's agents and employees may, without further notice, immediately or
at any time thereafter, enter upon and re-enter the Demised Premises, or any
part thereof, and possess or repossess itself thereof either by summary
dispossess proceedings, ejectment or by any suitable action or proceeding at
law, or by agreement, or by force or otherwise, and may dispossess and remove
Tenant and all other persons and property from the Demised Premises without
being liable to indictment, prosecution or damages therefor, and may repossess
the same, and may remove any persons therefrom, to the end that Landlord may
have, hold and enjoy the Demised Premises and the right to receive all rental
income again as and of its first estate and interest therein. The words "enter"
or "re-enter", "possess" or "repossess" as herein used, are not restricted to
their technical legal meaning. In the event of the termination of this Lease, or
of re-entry by summary dispossess proceedings, ejectment or by any suitable
action or proceeding at law, or by agreement, or by force or otherwise by reason
of default hereunder on the part of Tenant, Tenant shall thereupon pay to
Landlord the Fixed Rent and additional rent due up to the time of such
termination of this Lease or of such recovery of possession of the Demised
Premises by Landlord, as the case may be, and shall also pay to Landlord damages
as provided in Article 27.
26.02 In the event of any breach or threatened breach by Tenant of any
of the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though re-entry, summary proceedings, and other remedies
were not provided for in this Lease.
26.03 Each right and remedy of Landlord 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, and the exercise or beginning of the exercise by
Landlord of any one or more of the right 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 statue or otherwise.
26.04 If this Lease shall terminate under the provisions of Article 25,
or if Landlord shall re-enter the Demised Premises under the provisions of this
Article 26, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Landlord shall be
entitled to retain all monies, if any, paid by Tenant to Landlord, whether as
advance rent, security or otherwise, but such monies shall be credited by
Landlord against any Fixed Rent or additional rent due from Tenant under Article
27 or pursuant to law.
ARTICLE 27 -- DAMAGES
27.01 If this Lease is terminated under the provisions of Article 25,
or if Landlord shall re-enter the Demised Premises under the provisions of
Article 26 or in the event of the termination of this Lease, or of re-entry by
summary dispossess proceedings, ejectment or by any suitable action or
proceeding at law, or by agreement, or by force or otherwise, by reason of
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default hereunder on the part of Tenant, Tenant shall pay to Landlord as
damages, at the election of Landlord, on demand either,
(a) a sum which at the time of such termination of this Lease or at the
time of any such re-entry by Landlord, as the case may be, represents the excess
of (1) the aggregate of the Fixed Rent and the additional rent payable hereunder
which would have been payable by Tenant (conclusively presuming the additional
rent to be the same as was payable for the year immediately preceding such
termination) for the period commencing with such earlier termination of this
Lease or the date of any such re-entry, as the case may be, and ending with the
expiration of the Term, had this Lease not so terminated or had Landlord not so
re-entered the Demised Premises over (2) the aggregate rental value (calculated
as of the date of such termination or re-entry) of the Demised Premises for
the same period, or,
(b) a sum equal to the Fixed Rent and the additional rent (as above
presumed) payable hereunder which would have been payable by Tenant had this
Lease not so terminated, or had Landlord not so re-entered the Demised Premises,
payable quarterly or otherwise upon the terms therefor specified herein
following such termination or such re-entry and until the expiration of the
Term, provided, however, that if Landlord shall relet the Demised Premises or
any portion or portions thereof during said period, Landlord shall credit Tenant
with the net rents such net rents to be determined by first deducting from the
gross rents as and when received by Landlord from such reletting the expenses
incurred or paid by Landlord in terminating this Lease or in re-entering the
Demised Premises and in securing possession thereof, as well as the expenses of
reletting, including altering and preparing the Demised Premises or any portion
or portions thereof for new tenants, brokers' commissions, advertising expenses,
attorneys' fees, and all other expenses properly chargeable against the Demised
Premises and the rental therefrom; it being understood that any such reletting
may be for a period shorter or longer than the remaining Term of this Lease, but
in no event shall Tenant be entitled to receive any excess of such net rents
over the sums payable by Tenant to Landlord hereunder, nor shall Tenant be
entitled in any suit for the collection of damages pursuant to this Subsection
to a credit in respect of any net rents from a reletting, except to the extent
that such net rents are actually received by Landlord. If the Demised Premises
or any part thereof should be relet in combination with other space, then proper
apportionment shall be made of the rent received from such reletting and of the
expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord for
the unexpired portion of the Term, or any part thereof, before presentation of
proof of such damages to any court, commission, or tribunal, the amount of rent
payable upon such reletting shall, prima facie, be the fair and reasonable
rental value for the Demised Premises or any part thereof or evidence of damage
for failure to collect any rent due upon any such reletting.
27.02 Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
so terminated under the provision of Article 26, or under any provision of law,
or had Landlord not re-entered the Demised Premises. Nothing herein contained
shall be construed to limit or preclude recovery by Landlord against Tenant of
any sums or damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default hereunder or
otherwise on the part of Tenant. Nothing herein contained shall be construed to
limit or prejudice the right of the Landlord to prove and obtain as damages by
reason of the termination of this Lease or
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<PAGE> 37
re-entry on the Demised Premises for the default of Tenant under this Lease, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved whether or not such amount be greater, equal to, or less than any of the
sums referred to Section 27.01.
27.03 Anything in this Lease to the contrary notwithstanding, if Tenant
shall at any time be in default hereunder, and if Landlord shall institute an
action or summary proceeding against Tenant based upon such default, or if such
default results from non-payment of Fixed Rent or additional rent whether or not
such an action or proceeding is instituted, then Tenant shall reimburse
Landlord, as additional rent, for the expense of attorneys' fees and
disbursements thereby incurred by Landlord, so far as the same are reasonable.
ARTICLE 28 -- WAIVERS
28.01 Tenant, for itself, and on behalf of any and all persons claiming
through or under Tenant, including creditors of all kinds, does hereby waive and
surrender all right and privilege so far as is permitted by law, which they or
any of them might have under or by reason of any present or future law, of the
service of any notice of intention to re-enter and also waives any and all right
of redemption or re-entry or repossession in case Tenant shall be dispossessed
or ejected by process of law, or in case of re-entry or repossession by
Landlord, or in case of any expiration or termination of this Lease as herein
provided.
28.02 Tenant waives Tenant's rights, if any, to designate the items
against which any payments made by Tenant are to be credited, and Tenant agrees
that Landlord may apply any payments made by Tenant to any items against which
any such payments shall be credited.
28.03 Tenant waives Tenant's rights, if any, to assert a counterclaim
in any summary proceeding brought by Landlord against Tenant, and Tenant agrees
to assert any such claim against Landlord only by way of a separate action or
proceeding, unless prohibited by law or rule of Court.
28.04 To the extent permitted by applicable law, Landlord and Tenant
hereby waive trial by jury in any action, proceeding or counterclaim brought by
either against the other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, or Tenant's
use of occupancy of the Demised Premises, or any emergency or other statutory
remedy with respect thereto.
28.05 The provisions of Article 8 and 9 shall be considered express
agreements governing the services to be furnished by Landlord, and Tenant agrees
that any laws and/or requirements of public authorities, now or hereafter in
force, shall have no application in connection with any enlargement of
Landlord's obligations with respect to such services.
ARTICLE 29 -- NO OTHER WAIVERS OR MODIFICATIONS
29.01 The failure of Landlord to insist on any one or more instances
upon the strict performance of any one or more of the agreements, terms,
covenants, conditions or obligations of this Lease, Exhibits and Riders thereto,
or to exercise any right, remedy or election herein contained, shall not be
construed as a waiver or relinquishment for the future of the performance of
such one or more obligations of this Lease or of the right to exercise such
election, but the same shall continue and remain in full force
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and effect with respect to any subsequent breach, act or omission. The manner of
enforcement or the failure of Landlord to enforce any of the Rules and
Regulations set forth herein, or hereafter adopted against the Tenant and/or any
other tenant in the Building shall not be deemed a waiver of any such Rules and
Regulations. No executory agreement hereafter made between Landlord and Tenant
shall be effective to change, modify, waive, release, discharge, terminate or
affect an abandonment of this Lease, in whole or in part, unless such executory
agreement is in writing, refers expressly to this Lease and is signed by the
party against whom enforcement of the change, modification, waiver, release,
discharge or termination or effectuation of the abandonment is sought.
29.02 The following specific provisions of this Section shall not be
deemed to limit the generality of the foregoing provision of this Article:
(a) no agreement to accept a surrender of all or any part of the
Damaged Premises shall be valid unless in writing and signed by Landlord. The
delivery of keys to an employee of Landlord or of its agent shall not operate as
a termination of this Lease or a surrender of the Damaged Premises. If Tenant
shall at any time request Landlord to sublet the Damaged Premises for Tenant's
account, Landlord or its agent is authorized to receive said keys for such
purposes without releasing Tenant from any of its obligations under this Lease,
and Tenant hereby releases Landlord from any liability for loss or damage to any
of Tenant's Property in connection with such subletting.
(b) the receipt or acceptance by Landlord of rents with knowledge of
breach by Tenant of any term, agreement, covenant, condition or obligation of
this Lease shall not be deemed a waiver of such breach.
(c) no payment by Tenant or receipt by Landlord of a lesser amount than
the correct Fixed Rent or additional rent due hereunder shall be deemed to be
other than a payment on account, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment be deemed to affect or
evidence an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance or pursue
any other remedy in this Lease or provided at law.
(d) if, in connection with obtaining, continuing or renewing financing
for which the Building, land or a leasehold or any interest therein represents
collateral in whole or in part, a bank, insurance company or other lender shall
request reasonable modifications of this Lease as a condition of such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder or adversely affect to a material degree the Tenant's leasehold
interest hereby created.
ARTICLE 30 -- CURING TENANT'S DEFAULTS, ADDITIONAL RENT
30.01 If Tenant shall default in the performance of any of its
obligations under this Lease, Landlord, without thereby waiving such default,
may (but shall not be obligated to) perform the same for the account and at the
expense of Tenant, without notice, in a case of emergency, and in any other
case, only if such default continues after the expiration of ten (10) days from
the date Landlord gives Tenant notice of intention so to do.
30.02 Bills for any expenses incurred by Landlord in connection with
any such performance by it for the account of Tenant, and bills for all costs,
expenses and disbursements of every kind and nature whatsoever, including
reasonable counsel
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fees, involved in collecting or endeavoring to collect the fixed rent or
additional rent or any part thereof or enforcing or endeavoring to enforce any
rights against Tenant, under or in connection with this Lease, or pursuant to
law, including any such cost, expense and disbursement involved in instituting
and prosecuting summary proceedings, as well as bills for any property,
material, labor or services provided, furnished, or rendered, by Landlord may be
sent by Landlord to Tenant monthly, or presented immediately, at Landlord's
option, and, shall be due and payable in accordance with the terms of such
bills.
ARTICLE 31 -- NOTICES -- SERVICE OF PROCESS
31.01 Any notice, statement, demand, request or other communication
required or permitted pursuant to this Lease or otherwise shall be in writing
and shall be deemed to have been properly given if sent by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
other party at the address hereinabove set forth (except that after the
Commencement Date, Tenant's address, unless Tenant shall give notice to the
contrary, shall be the Building), and shall be deemed to have been given on the
expiration of five (5) business days after mailing. Either party may, by notice
as aforesaid, designate a different address or addresses for notices,
statements, demands or other communications intended for it. However, notices
requesting after hours service pursuant to sections 8.01 and 9.01 may be given,
provided they are in writing, by delivery to the Building superintendent or any
other person in the Building designated by Landlord to receive such notices, and
notice of fire, accident or other emergency shall be given by telegram or by
personal delivery of written notice to that address designated for this purpose
from time to time by the respective parties hereto.
31.02 Whenever either party shall consist of more than one person or
entity, any notice, statement, demand, or other communication required or
permitted, or any payment to be made shall be deemed duly given or paid if
addressed to or by (or in the case of payment by check, to the order of) any
such persons or entities who shall be designated from time to time as the
authorized representative of such party. Such party shall promptly notify the
other of the identity of such person or entity who is so to act on behalf of all
persons and entities then comprising such party and of all changes in such
identity.
31.03 Tenant agrees to give any Mortgagee, by Certified Mail, a copy of
any Notice of Default served upon the Landlord by Tenant provided that prior to
such notice Tenant has been notified, in writing, (by way of Notice of
Assignment of Rents and Leases, or otherwise) of the address of such Mortgagee.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the Mortgagee shall have an
additional thirty (30) days within which to cure such default or if such default
cannot be cured within that time, then such additional time as may be necessary
if within such thirty (30) days, any Mortgagee has commenced and is diligently
pursuing the remedies necessary to cure such default, (including but not limited
to commencement of foreclosure proceedings, if necessary to effect such cure) in
which event this lease shall not be terminated while such remedies are being so
diligently pursued.
ARTICLE 32 -- ESTOPPEL CERTIFICATE, MEMORANDUM
32.01 Tenant agrees, at any time and from time to time, as requested by
Landlord, upon not less than ten (10) days' prior notice, to execute and deliver
without cost or expense to the Landlord a statement certifying that this Lease
is unmodified and in full force and effect (or if there have been modifications,
that
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the same is in full force and effect except as modified and stating the
modifications), certifying the dates to which the Fixed Rent and additional rent
have been paid, and stating whether or not, to the best knowledge of the Tenant,
the Landlord is in default in performance of any of its obligations under this
Lease, and, if so, specifying each such default of which the Tenant may have
knowledge, it being intended that any such statement delivered pursuant thereto
may be relied upon by any other person with whom the Landlord may be dealing.
The foregoing obligation shall be deemed a substantial obligation of the
tenancy, the breach of which shall give Landlord those remedies herein provided
for an event of default.
32.02 Tenant agrees not to record this Lease. At the request of either
party, Landlord and Tenant shall promptly execute, acknowledge and deliver a
memorandum with respect to this Lease sufficient for recording which Tenant may
record. Such memorandum shall not in any circumstances be deemed to change or
otherwise affect any of the obligations or provision of this Lease.
ARTICLE 33 -- NO OTHER REPRESENTATIONS,
CONSTRUCTION, GOVERNING LAW
33.01 Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant, in executing and delivering this Lease, is
not relying upon any warranties, representations, promises or statements, except
to the extent that the same are expressly set forth in this Lease or in any
other written agreement which may be made and executed between the parties
concurrently with the execution and delivery of this Lease and shall expressly
refer to this Lease. This Lease and said other written agreement(s) made
concurrently herewith are hereinafter referred to as the "lease documents". It
is understood and agreed that all understandings and agreements heretofore had
between the parties are merged in the Lease documents, which alone fully and
completely express their agreements and that the same are entered into after
full investigation, neither party relying upon any statement or representation
not embodied in the Lease documents, made by the other.
33.02 If any of the provisions 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, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
33.03 This Lease shall be governed in all respects by the laws of the
State of New Jersey.
ARTICLE 34 -- PARTIES BOUND
34.01 The obligations of this Lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 18 shall operate to vest any rights in any successor
or assignee of Tenant, and the provisions of this Article shall not be construed
as modifying the conditions of limitation contained in Article 25. However, the
obligations of Landlord under this Lease shall not be binding upon Landlord
herein named with respect to any period subsequent to the transfer of its
interest in the Building as owner or lessee thereof and in the event of such
transfer said obligation shall thereafter be binding upon each transfer of the
interest of the Landlord herein named as such owner or lessee of the Building,
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but only with respect to the period ending with a subsequent transfer within the
meaning of this Article and such transferee, by accepting such interest shall be
deemed to have assumed such obligations except only as may be expressly
otherwise provided elsewhere in this Lease. A lease of Landlord's entire
interest in the Building as owner or lessee thereof shall be deemed a transfer
wherein the meaning of this Article 34.
ARTICLE 35 -- SHORING AND NOTICE OF ACCIDENTS AND DAMAGE
35.01 If an excavation or other substructure work shall be undertaken
or authorized upon land adjacent to the Building, Tenant, without liability on
the part of Landlord therefor, shall afford to the person causing or authorized
to cause such excavation or other substructure work, license to enter upon the
Demised Premises for the purpose of doing such work as such person shall deem
necessary to protect or preserve any of the walls or structures of the Building
or surrounding lands from injury or damage and to support the same by proper
foundations, pinning and/or underpinning, and, except in case of emergency, if
so requested by Tenant such entry shall be accomplished in the presence of a
representative of Tenant, who shall be designated by Tenant promptly upon
Landlord's request. The said license to enter shall be afforded by Tenant
without any claim for damages or indemnity against the Landlord and Tenant shall
not be entitled to any diminution or abatement of rent on account thereof.
35.02 Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of (i) any accident in or about the Demised Premises or the
Building, (ii) all fires in the Demised Premises, (iii) all damages to or
defects in the Demised Premises, including the fixtures, equipment and
appurtenances thereto, for the repair of which Landlord might be responsible or
which constitutes Landlord's property, and (iv) all damage to or defects in any
parts or appurtenances to the Building's sanitary, electrical, heating,
ventilating, air conditioning, elevator and other systems located in or passing
through the Demised Premises.
ARTICLE 36 -- VAULT, VAULT SPACE, AREA
No vaults, vault space or area whether or not enclosed or covered not
within the property line of the Building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan or anything contained
elsewhere in this Lease to the contrary notwithstanding. Landlord makes no
representation as to the location of the property line of the Building. All
vaults and vault space and all such areas not within the property line of the
Building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Landlord shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent nor shall such revocation diminution or requisition be deemed
constructive or actual eviction. Any tax fee or charge of municipal authorities
for such vault or area shall be paid by Tenant.
ARTICLE 37 -- INABILITY TO PERFORM
This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in no wise be affected, impaired or excused because Landlord
is unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
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<PAGE> 42
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of strike
or labor troubles or any cause whatsoever including but not limited to,
government preemption in connection with a National Emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.
ARTICLE 38--LIABILITY OF LANDLORD
Tenant shall look solely to the estate and interest of Landlord, its
successors and assigns, in the land and Building for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord
in the event of any default by Landlord hereunder, and no other property or
assets of Landlord shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Tenant's remedies under or with respect to
either this Lease, the relationship of Landlord and Tenant hereunder or Tenant's
use and occupancy of the Damaged Premises. Neither the. partners comprising
Landlord (the "Partners"), nor the partners, shareholders, directors and
officers of Landlord or the Partners shall be liable for the performance of
Landlord's obligations under this Lease.
ARTICLE 39--BROKERAGE
Tenant represents and warrant that it has dealt only with Dolan Realty,
Inc. in connection with this Lease and Tenant does hereby agree to indemnify and
hold harmless the Landlord of and from any and all loss, costs, damage or
expense (including, without limitation, attorneys' fees and disbursements)
incurred by the Landlord by reason of any claim of or liability to any other
broker who shall claim to have dealt with Landlord or Tenant in connection with
this Lease.
ARTICLE 40 -- RENEWAL OPTION
40.01 If Tenant shall not be in default under any term, covenant and
condition of this Lease on the part of Tenant to be performed beyond any
applicable grace period, Tenant may by notice in writing given to Landlord at
least six (6) months before the Expiration Date (the "Option Exercise Date")
renew and extend this Lease for the further term of five (5) years (the "Renewal
Option Term") for the entire Demised Premises at Tenant's option according to
the terms and conditions of this Lease, as amended hereunder, with Fixed Rent at
Three Hundred Forty Thousand Two Hundred Dollars ($340,200.00) per year, payable
in monthly installments of $28,350.00 (as adjusted in accordance with this
Lease), plus additional rent as provided in this Lease.
40.02 If Tenant elects to exercise its option hereunder, the Term shall
be extended for the Damaged Premises without execution of an extension or
renewal lease. Within ten (10) days after a request of either party after the
exercise of such option, Landlord and Tenant shall execute, acknowledge and
deliver to each other duplicate originals of any instrument confirming that such
option was effectively exercised, but Tenant may not record such instrument.
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ARTICLE 41 -- MISCELLANEOUS PROVISIONS
41.01 All work, including but not limited to, waxing or additional
cleaning that Tenant does or shall do in the Demised Premises, shall be done by
contractors employing union labor, approved in writing by Landlord and shall at
all times conform to the standards of the Building and shall comply with all
laws and/or requirements of public authorities. Tenant, as additional rent,
shall indemnify and hold harmless Landlord against any loss or damage Landlord
may sustain by reason of, and against, any order, decrees, judgments, attorney's
fees and expenses resulting from, failure of Tenant to comply with the
provisions hereof.
41.02 The Article headings in this Lease and the Table of Contents
prefixed to this Lease are inserted only as a matter of convenience or
reference, and are not to be given any effect whatsoever in construing this
Lease.
IN WITNESS WHEREOF, the parties' hereto have executed this instrument
the day and year first above written.
LANDLORD:
EVERGREEN AMERICA CORPORATION
By: /s/ HOWARD TUNG
-----------------------------
HOWARD TUNG, Deputy Junior
Vice President
Witness for Landlord
/s/ JOHNNY WUN
- ---------------------------
JOHNNY WUN
TENANT:
AXISTEL INTERNATIONAL, INC.
By: /s/ MITCHELL ARTHUR
-----------------------------
MITCHELL ARTHUR, E.V.P., President
Witness for Tenant
/s/ CHARLES J. SIMOLDONI
- ---------------------------
CHARLES J. SIMOLDONI
AN ATTORNEY AT LAW
OF NEW JERSEY
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EXHIBIT A
DEMISED PREMISES
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ONE
EVERTRUST
PLAZA
TYPICAL FLOOR PLAN
8TH FLOOR
[FLOOR PLAN]
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EXHIBIT B -- RULES AND REGULATIONS
1) The sidewalks, entrances, passages, lobby, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
tenant or used for any purpose other than ingress and egress to and from the
Demised Premises and Tenant shall not permit any of its employees, agents or
invitees to congregate in any of said areas. No door mat of any kind whatsoever
shall be placed or left in any public hall or outside any entry door of the
Demised Premises.
2) No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connection with, any window or door of the Demised
Premises, without the prior written consent of Landlord. Such curtains, blinds,
shades or screens must be of a quality, type, design and color, and attached in
the manner, approved by Landlord.
3) No sign, insignia, advertisements, object, notice or other lettering
shall be exhibited, inscribed, painted or affixed by any tenant on any part of
the outside or inside of the Demised Premises or the Building without the prior
written consent of Landlord. In the event of the violation of the foregoing by
any tenant, Landlord may remove the same without any liability, and may charge
the expense incurred in such removal to the tenant or tenants violating this
rule. Interior signs and lettering on doors and the directory shall, if and when
approved by Landlord, be inscribed, painted or affixed for each tenant by
Landlord at the expense of such tenant, and shall be of a size, color and style
acceptable to Landlord.
4) The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels or other articles be placed on the window sills.
5) No showcases or other articles shall be put in front of or affixed
to any part of the exteriors of the Building, nor placed in the halls, corridors
or vestibules.
6) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed or
constructed, and no sweepings, rubbish, rags, acids or other substances shall be
thrown or deposited therein. All damages resulting from any misuse of the
fixtures shall be borne by the tenant who, or whose servants, employees, agents,
visitors or licensees shall have caused the same.
7) No tenant shall mark, paint, drill into or in any way deface any
part of the Damaged Premises or the Building. No boring, cutting or stringing of
wires shall be permitted, except with the prior written consent of Landlord, and
as Landlord may direct. No tenant shall lay linoleum or other similar floor
covering, so that the same shall come in direct contact with the floor of the
Demised Premises, and, if linoleum or other similar floor covering is desired to
be used an interlining of builders deadening felt shall be first affixed to the
floor, by a paste or other material, soluble in water, the use of cement and
other similar adhesive material being expressly prohibited.
8) No bicycles, vehicles animals, fish or birds of any kind shall be
brought into or kept in or about the premises.
9) No noise, including, but not limited to, music or the playing of
musical instruments, recordings, radio or television which, in the judgment of
Landlord, might disturb other tenants in the Building, shall be made or
permitted by any tenant. Nothing shall be done or permitted in the Demised
Premises by Tenant which
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would impair or interfere with the use or enjoyment by any other tenant of any
other space in the Building. No tenant shall throw anything out of the doors,
windows or skylights or down the passageways.
10) Tenant, its servants, employees, agents, visitors or licensees,
shall at no time bring or keep upon the Demised Premises any explosive fluid,
chemical or substance, nor any inflammable or combustible objects or materials
except subject to the provisions of Section 21.02(a) of the foregoing Lease.
11) Additional locks or bolts of any kind which shall not be operable
by the Grand Master Key for the Building shall not be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in locks or the
mechanism thereof which shall make such locks inoperable by said Grand Master
Key. Each tenant shall, upon the termination of its tenancy, turn over to
Landlord all keys of offices and toilet rooms, either furnished to, or otherwise
procured by, such tenant and in the event of the loss of any keys furnished by
Landlord, such tenant shall pay to Landlord the cost thereof.
12) All removals from the Demised Premises or the Building, or the
moving or carrying in or out of the Demised Premises or the Building of any
safes, freight, furniture, packages, boxes, crates or any other object or matter
of any description must take place during such hours and using such elevators as
Landlord or its agent may determine from time to time. All deliveries of any
nature whatsoever to the Building or the Demised Premises must be made only
through Building entrances specified by Landlord for such deliveries. Landlord
reserves the right to inspect all objects and matter to be brought into the
Building and to exclude from the Building all objects and matter which violate
any of these Rules and Regulations or the Lease of which these Rules and
Regulations are a part. Landlord may require any person leaving the Building
with any package or other object or matter, to submit a pass, listing such
package or object or matter from the tenant from whose premises the package or
other object or matter is being removed, but the establishment and enforcement
of such requirement shall not impose any responsibility on the Landlord for the
protection of any tenant against the removal of property from the premises of
such tenant. Landlord shall, in no way, be liable to Tenant for damages or loss
arising from the admission, exclusion or ejection of any person to or from the
Demised Premises or the Building under the provisions of this Rule 12 or Rule 16
hereof.
13) Tenant shall not occupy or permit any portion of the Demised
Premises to be occupied as an office for a public stenographer or public typist,
or for the possession, storage, manufacture, or sale of beer, wine or liquor,
narcotics, dope, tobacco in any form, or as a barber, beauty or manicure shop,
or as an employment bureau. Tenant shall not engage or pay any employees on the
Demised Premises, except those actually working for Tenant on the Demised
Premises, nor advertise for laborers giving an address at the Demised Premises.
Tenant shall not use the Demised Premises or any part thereof, or permit the
Demised Premises or any part thereof to be used, for manufacturing, or for sale
at auction of merchandise, goods or property of any kind.
14) Tenant shall not obtain, purchase or accept for use in the Demised
Premises ice, drinking water, food, beverage, towel, barbering, boot blacking,
cleaning, floor polishing or other similar services from any persons not
authorized by Landlord in writing to furnish such services, provided always that
the charges for such services by persons authorized by Landlord are not
excessive. Such services shall be furnished only at such hours, in such places
within the Demised Premises, and under such regulations as may be fixed by
Landlord. Tenant shall not purchase or contract for waxing, rug shampooing,
venetian blind washing, furniture
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polishing, lamp servicing, cleaning of electric fixtures, removal of garbage or
towel service in the Damaged Premises except from contractors, companies or
persons approved by the Landlord.
15) Landlord shall have the right to prohibit any advertising or
identifying sign by any tenant which in Landlord's judgment tends to impair the
reputation of the Building or its desirability as a Building for offices, and
upon written notice from Landlord, such tenant shall refrain from or discontinue
such advertising or identifying sign.
16) Landlord reserves the right to exclude from the Building during
hours other than Regular Business Hours (as defined in the foregoing Lease) all
persons who do not present a pass to the Building signed by Landlord. All
persons entering and/or leaving the Building during hours other than Regular
Business Hours may be required to sign a register. Landlord will furnish passes
to persons for whom any tenant requests such pass and shall be liable to
Landlord for all acts or omissions of such persons.
17) Tenant, before closing and leaving the Demised Premises at any
time, shall see that all lights are turned out. All entrance doors in the
Demised Premises shall be left locked by Tenant when the Demised Premises are
not in use. Entrance doors shall not be left open at any time.
18) Tenant shall, at Tenant's expense, provide artificial light and
electrical energy for the employees of Landlord and/or Landlord's contractors
while doing janitor service or other cleaning in the Demised Premises and while
making repairs or alterations in the Demised Premises.
19) The Demised Premises shall not be used for lodging or sleeping or
for any immoral or illegal purpose.
20) The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
21) Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
22) There shall not be used in any space, or in any lobbies, corridors,
public halls or other public areas of the Building, either by any tenant or by
jobbers or any others, in the moving or delivery or receipt of safes, freight,
furniture, packages, boxes, crates, paper, office material, or any other object
or thing, any hand trucks except those equipped with rubber tires, side guards,
and such other safeguards as Landlord shall require. No move or delivery of any
object or thing of whatever nature, other than light-weight objects hand-carried
by not more than one person, shall be made without at least 24 hours' prior
written notice by Tenant to Landlord and without Tenant, prior to any such move
or delivery, laying (without affixation or attachment to any part of the floor
or floor covering) adequate masonite or plywood sheets covering all lobby,
corridor, public hall and other public area floors of the Building (whether
carpeted or terrazzo) over which such move or delivery shall take place.
23) Tenant shall not cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to emanate from the Demised
Premises which would annoy other tenants or create a public or private nuisance.
No cooking shall be done in the Demised Premises except as is expressly
permitted in the foregoing Lease.
24) Tenant shall cooperate with Landlord in obtaining maximum
effectiveness of the cooling system by lowering and closing
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venetian blinds and/or drapes and curtains when the sun's ray fall directly on
the windows of the Demised Premises. Tenant shall not permit the heating,
air-conditioning and ventilation system to become blocked by Tenant's curtains,
drapes or other installations.
25) Landlord reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed for the Building when, in its judgment, if
deems it necessary or desirable for the reputation, safety, care or appearance
of the Building, or the preservation of good order therein, or the operation or
maintenance of the Building or the equipment thereof, or the comfort of tenants
or others in the Building. No rescission, alteration or waiver of any rule or
regulation in favor of one tenant shall operate as a rescission, alteration or
waiver in favor of any other tenant.
26) Tenant shall not permit its personnel, agents or visitors to litter
any public areas of the Building or the land or improvements on the land on
which the Building is located (including, without limitation, the walkways and
parking areas located thereon), and Tenant shall be responsible to, and shall
pay Landlord for the cost of removal of such litter within ten (10) days of
notice thereof by Landlord.
27) Subject to the provisions of Paragraph 10.01(c) Landlord shall not
unreasonably withhold its consent to the installation, maintenance and operation
by Tenant in the Demised Premises of data processing machines, office
duplicating machines, teletype machines and other business machines and
machinery customarily used in offices in the ordinary course of business,
provided, however, that Tenant shall comply with all other obligations of this
Lease that are applicable to or result from such installation, or operation.
28) Landlord shall not unreasonably withhold from Tenant any approval
provided for in the Rules and Regulations.
29) Any moving of furniture or equipment into or out of the Demised
Premises must be done by Tenant at its own cost and expense, on Monday through
Friday after 6:00 p.m., or on Saturday, subject however, to the prior written
consent of Landlord. If such move requires use of an elevator, such move shall
not be in excess of such elevator's load capacity.
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EXHIBIT C
TENANT'S WORK
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EXHIBIT C-1 -- BUILDING RULES AND
REGULATIONS FOR TRADES CONDUCTING OPERATIONS
IN THE BUILDING
1. All plans and specifications for any proposed Tenant Work must be
submitted to the Building office for approval by the Building manager
and owners representatives.
2. Prior to the commencement of any work, all contractors must have a
current insurance certificate on file in the Building office. (See
attached insurance requirements for trades conducting operations at One
Evertrust Plaza.)
3. All work is to be performed in a safe and lawful manner, using
contractors approved by the Landlord, which consent shall not be
unreasonably withheld. All work must comply with applicable laws and
all requirements and regulations of Municipal and other governmental or
duly constituted bodies exercising authority, and this compliance shall
include the filing of plans and other documents as required, and the
procuring of any required licenses or permits prior to commencement of
any work. Tenant shall submit the following certificates to Landlord
upon completion of the work:
A. Approvals issued by the building department.
B. Certificate of Occupancy.
C. Air Balance Report.
4. Any work which will require an electrical shutdown or drain down of the
Building's chilled water, condenser water, or domestic water systems
must be performed after 6:00 PM or on the weekends. A written request
for this work to be performed must be received by the Building office
at least five (5) business days prior to the commencement of this work.
In addition to the above, this work must be supervised by a Building
engineer, and the contractor must agree to pay the cost of employing
the Building engineer on overtime at an hourly rate of $55.00 per man
hour.
5. No workers are permitted to make use of passenger elevators while
transporting tools or materials of any kind. Gang boxes or hand trucks
are not permitted on passenger elevators under any circumstances.
6. For the duration of the work, the contractor must provide masonite
protection for all walls and floors throughout all common areas which
lead to the contractors area of work. Any damage to these walls and
floors caused by the contractor is to be repaired immediately with no
cost to the Landlord.
7. Tenant's workmen and mechanics must work in harmony, and not interfere
with any labor employed by the Landlord, Landlord's mechanics or
contractors or by and other tenant or its contractors.
8. All contractors shall comply with the rules of the Building as to the
hours of availability of the Building elevators and the manner of
handling materials, equipment, and debris to avoid conflict and
interference with Building operation. Deliveries are not permitted
between the following periods: 8 AM - 10 AM, 11:30 AM - 1 PM, 4 PM - 6
PM.
9. Contractor shall be required to pay for the use of service elevators
after business hours at Landlord's standard rate of $80.00 per hour.
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10. Demolition must be performed after 6:00 PM or on weekends. The delivery
of materials, equipment, and removal of debris must be arranged to
avoid any inconvenience and annoyance to other tenants. Cleaning must
be controlled to prevent dirt and dust from infiltrating into adjacent
tenant or mechanical areas.
11. Contractor shall make available fire extinguishers based on the
following:
Alterations up to 5,000 sq. ft. - one (1) fire extinguisher
Alterations over 5,000 sq. ft. - one (1) fire extinguisher for every
additional 5,000 sq. ft. thereover. Said fire extinguisher shall be 25
lb. type approved for type A, B, C, fires and shall be kept and
maintained on the premises by Tenant's contractor for the duration of
the work.
12. Contractor shall be required to pay for the temporary use of
electricity and water at the Landlord's standard rate of $15.00 per
day.
13. Landlord reserves the right to stop all work in the event of the breach
of any of the terms or conditions listed above.
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EXHIBIT C-2 -- INSURANCE REQUIREMENTS FOR TRADES
CONDUCTING OPERATIONS IN THE BUILDING
1. The Contractor will, throughout the duration of any contract or any
work authorized under purchase order, at its expense, carry and from
time to time renew, Workman's Compensation Insurance, Public Liability
Insurance in the amount of $1,000,000 single limit covering both Bodily
Injury and Property Damage including coverage for below noted indemnity
agreement in such companies as may be approved by the Landlord which
approval shall not be unreasonably withheld or delayed. Certificates in
the customary form, evidencing that premiums therefore have been paid,
shall be delivered to the Landlord simultaneously with the execution
of any contract and prior to performing any work authorized under a
purchase order or contract, and within fifteen (15) days prior to
expiration of such insurance like certificates shall be delivered to
the Landlord evidencing the renewal of such insurance, together with
evidence satisfactory to the Landlord of the payment of the premium.
All certificates must obtain a definite provision that if such policies
are cancelled or changed during the periods of coverage as stated
therein, in such a manner as to affect this certificate, written notice
will be mailed to the Landlord by registered mail ten (10) days prior
to such cancellation or change.
2. Provision must also be made as provided above to insure the Hold
Harmless Agreement which reads as follows:
"The Contractor hereby agrees to indemnify and save Harmless
the Evergreen America Corporation and any of its subsidiaries
from and against all liability claims and demands on account
of injury to persons including death resulting therefrom and
damage to property arising out of the performance of this
contract by the Contractor, employees and agents of the
Contractor and Contractor's property, except from and against
such claims and demands which may arise out of the sole
negligence of the owner, Evergreen America Corporation or any
of its subsidiaries. The Contractor will at his or its own
expense, defend any and all actions at law brought against the
owner and/or the agent based thereon and shall pay all
attorney fees and all other expenses, and promptly discharge
any judgments arising therefrom. These conditions shall also
apply to any subcontracted operations."
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EXHIBIT D -- CLEANING STANDARDS
I. Plaza and Lobby Levels - Nightly
The entrance lobbies are to be kept neat and clean at all times and the
following minimum cleaning operations shall be maintained to attain this
effect:
a. Sweep with chemically treated dust mop all granite floors, damp mop
any spillage.
b. Wash and spray buff lobby floors nightly.
c. Damp wipe all cigarette urns and replace sand or water as necessary.
d. Damp wipe and dry the Reception Console Center.
e. Damp wipe Directory board plastic with a destatisizer.
f. Damp wipe and dry ledges of flower planters.
g. Damp wipe and dry all elevator starter panels.
h. Wash all metal doors, hand rails and all revolving doors and drums of
revolving doors, interior and exterior.
i. Vacuum all carpeting.
j. Remove any graffiti or obscenities on metal or panels.
k. Remove gum from carpeting.
l. Vacuum floor saddles.
m. Dust mail depository and damp wipe fingerprints.
n. Dust walls and wash if soiled.
o. Wash all glass walls and doors.
p. Wash all rubber mats and/or vacuum carpet runners.
Plaza/Lobby Areas - Periodic
q. High dust all ornamental decorations two times a year.
r. High dust and wash all electrical and air-conditioning diffusers two
times a year.
II. Elevators
a. Vacuum rugs of all elevators nightly and remove gum marks; wash, wax
and polish if tiled.
b. Wipe down panels of elevator cabs nightly and remove any graffiti or
obscenities. Polish same weekly.
c. Wipe down all metal in cabs, indicators and elevator doors nightly
using an approved cleaner.
d. Vacuum clean lobby elevator saddles and tracks nightly.
e. Wash and polish door saddles and frames on floors above lobby twice
per month and vacuum tracks.
f. Remove foreign matter from top of light fixtures in elevator cabs
nightly.
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g. Vacuum tracks and wipe clean nightly.
III. General Office & Lease - Nightly
a. Sweep all hardsurfaced flooring using approved dustdown preparation
and damp mop weekly marble terrazzo, wood or other untreated flooring.
b. Vacuum sweep all carpets and rugs, moving only light furniture (desks,
file cabinets, etc. not to be moved.)
c. Hand dust and wipe clean with damp or chemically treated cloth all
furniture, file cabinets, fixtures, window sills, and wash said sills
and tops if necessary.
d. Dust and wipe clean all telephones.
e. Dust all chair rails, trim, etc.
f. Remove all gum and foreign matter on sight. Spot clean floors.
g. Empty all waste receptacles and remove wastepaper and waste materials
to a designated area.
h. Damp dust interiors of all waste disposal receptacles as necessary.
i. Empty and wipe clean all ashtrays and screen all sand urns; replace
sand as necessary.
j. Wash clean all water fountains and water coolers.
k. Dust all glass furniture tops.
1. Remove hand marks on elevator hatchway doors.
m. Adjust-vertical blinds to uniform standard.
n. Keep service corridors on each floor in clean and orderly condition.
0. Dust all door louvers within reach.
p. Remove finger smudges for all metal partitions and surfaces.
IV. Periodic
a. Hand dust all ventilating louvers.
b. Dust all baseboards once per month remove stains if possible.
c. Dust all lamp shades monthly.
d. High dust and wash all electrical and air-conditioning diffusers twice
a year.
e. High dust all ornamental decorations semi-annually.
f. Wash floors in public and private stairwells throughout the Building
monthly.
g. Wash telephones monthly.
h. Dust quarterly all picture frames, charts and similar hangings which
were not reached in nightly
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i. Dust all vertical surfaces such as walls, partitions, doors, window
frames and other surfaces not reached in nightly cleaning four (4)
times per year.
j. Dust exterior of lighting fixtures twice a year.
k. Dust all vertical blinds quarterly.
1. Dust quarterly all air-conditioning louvers, grills, etc. not reached
in nightly cleaning and surrounding areas twice a year.
m. Clean all interior window metal and other unpainted interior metal
surfaces of the Common Area of the perimeter walls once per year using
a metal cleaning product.
n. Strip and polish lobby floors weekly.
o. Wash all cigarette urns weekly.
V. Lavatories - Nightly
a. Wash and disinfect all floors and baseboards.
b. Wash all mirrors and powder shelves.
c. Wash all bright work.
d. Wash all plumbing fixtures.
e. Wash and disinfect all toilet seats, both sides.
f. Scour, wash and disinfect all basins, toilet bowls and urinals.
g. Empty paper towel receptacles and remove paper to designated area.
h. Wipe and fill toilet tissue holders.
i. Wipe and fill soap, sanitary napkin and paper towel dispensers. Empty
and clean sanitary disposal receptacles.
k. Hand dust and clean all receptacles and dispensers.
1. Remove finger marks from painted surfaces.
m. Remove all graffiti.
n. Dust and clean partitions and walls.
o. Wash tile wall surfaces subject to splashing.
p. Report all mechanical deficiencies, i.e., dripping faucets, etc., to
the Building Manager.
Periodic
a. Wash all partitions and dispensers once a week.
b. Scrub floors as necessary but not less than once a week.
d. Hand dust and wash all tile walls once each month, more
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d. High dusting to be done once each month which includes lights, walls,
and grills; wash such fixtures, including lamps and lenses, twice
every year.
VI. Public Areas
a. Police all public area and stairwells throughout the entire Building
and keep in clean condition, sweep daily and mop, as necessary, but at
least once per month.
b. Clean firehoses, extinguishers and similar equipment as necessary but
at least once per month.
c. Dust all ceilings, etc., weekly and high dust quarterly.
VII. Building Service Areas
a. Hose all ramps, loading dock, trucking areas, garbage storage room,
etc., daily and scrub and steam clean as necessary, but at least once
per month.
b. Keep loading docks and driveway entrance area, ramps and garage areas
in a neat, clean condition at all times. Keep wastepaper, cardboard
and rubbish, etc., stored in approved receptacles or assigned rooms.
Keep floors, walls, driveway, walkway and dock area clean of grease,
oil and other stains. Maintain an adequate stock of absorbent material
for oil and grease stains.
c. Slop sinks are to be cleaned after use. Mops, rags and equipment are
to be cleaned and stored in racks. walls and floors are to be kept
clean at all times.
d. Electric and telephone closets and storerooms are to be kept free from
debris and material. Floors are to be swept weekly and washed monthly.
Report storage of extraneous material and equipment to Building
Manager.
e. Police main Building entrance lobby.
f. Police elevator cabs and clean, dust and rubdown walls as necessary.
g. Police men's lavatories and fill toilet tissue dispensers.
h. Set out rubber mats on rainy days; keep in clean condition.
i. Clean all cigarette urns and replace sand as necessary.
j. Clean all stairwells and fire tower; dust all handrails, spindles and
wash stairs as necessary.
k. Sweep and wash lobby and common area floors daily.
l. Clean roof setbacks as necessary.
m. Keep frames of entrance doors in clean condition.
n. Clean standpipes and Siamese sprinkler connections as necessary.
o. Exterior metal work, marble, etc. of Building entrances to be kept in
clean condition at all times.
p. Properly maintain exterior of Building at the ground level.
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VIII. Window Cleaning
a. Clean all windows on the outside and inside from the ground
floor to the roof twice a year. Window frames and associated metal
to be wiped clean at the same time.
b. Partition glass throughout the Building interior in public areas,
to be cleaned once per month.
c. clean entrance doors two (2) times each day.
d. Clean directory glass daily.
e. Clean all glass on the first floor daily.
f. clean all glass doors and panels daily.
g. Clean all mail chute glass as necessary.
IX. Walkways. Plaza
a. Police walkways and Plaza area two (2) times daily.
b. Remove all gum and foreign matter on sight.
c. Clean all Plaza areas, sidewalks and driveways.
X. Garage (If Applicable)
Police garage daily removing all accumulated debris.
XI. Rest Control
To be furnished as required to prevent infestation.
XII. Duties of Day Matrons
a. Police all ladies lavatories twice each day.
b. Fill toilet tissue dispensers with toilet tissue.
c. Fill paper towel dispensers with paper towels.
d. Fill sanitary napkin dispensers with sanitary napkins.
e. Fill soap dispensers with liquid hand soap.
XIII. Duties of pay Porters
a. Police Plaza entrance five (5) times a day, five (5) days a week.
b. Empty and strain all cigarette urns, three (3) times a day.
c. Elevator cab floors are to be vacuumed two (2) times a day - more
often if necessary.
d. Wipe clean and remove finger marks from all metal and bright work
throughout interior of Plaza and lobby and up to hand reach daily.
e. Sweep walkways, Plaza, ramps, loading dock, trucking area, etc.
twice daily, more often as needed.
f. Lay down and remove lobby runners as necessary.
g. Police roof setbacks.
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h. Sweep and dust the trafficked staircases daily.
i. Wash trafficked staircases weekly.
j. Wash the flooring in the trafficked main engine room, main pump
room, etc., weekly.
k. Police all mens' lavatories two (2) times each day.
1. Fill all dispensers in mens' lavatories as required.
m. keep all public telephones and their enclosures in a clean
condition.
n. Empty waste receptacles on Plaza and clean daily.
o. Police grounds and pick up any loose debris.
Unless otherwise specified, all of the cleaning services listed shall be
done five (5) days each week, Monday through Friday, except on Building
holidays.
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LEASE AGREEMENT
LEASE AGREEMENT (THE "AGREEMENT") ENTERED INTO BY AND BETWEEN: "ORIX GLOBAL
COMMUNICATIONS, INC." AND THE TRUST AND AMONG THE TRUST F/39 59 OF THE BANCO DEL
ATLANTICO, S.A., AS LESSOR (THE "LESSOR") REPRESENTED BY MR. HECTOR FLORES
FIERRO, AND "GLOBAL COMMUNICATIONS, INC., AS LESSEE (THE "LESSEE"), REPRESENTED
BY ROBERT A. MICHEL, IN ACCORDANCE WITH THE FOLLOWING RECITALS AND CLAUSES:
RECITALS
1.- THE LESSOR ACTING THROUGH ITS REPRESENTATIVE DECLARES THAT:
A) THE TRUST 17-2, INCORPORATED BY THE NOTARIAL DEED NUMBER 16,0887, DATED JULY
17,1992. GRANTED BEFORE NOTARY PUBLIC NUMBER 103 OF THE FEDERAL DISTRICT, MR.
ARMANDO GALVEZ PEREZ ARAGON, AND REGISTERED ON THE PUBLIC REGISTRY OF PROPERTY
AND COMMERCE OF THE FEDERAL DISTRICT ON OCTOBER 25,1994, UNDER THE NUMBERS
236069 AND 9206440, DESIGNATES BANCA SERFIN,S.A. AS TRUSTEE, PLACING IN TRUST
THE LOT MENTIONED IN EXHIBIT "C".
B) THE TRUST 3959, INCORPORATED BY THE NOTARIAL DEED NUMBER 36,496, DATED
SEPTEMBER 8, 1994, GRANTED BEFORE NOTARY PUBLIC NUMBER 103 OF THE FEDERAL
DISTRICT, MR. ARMANDO GALVEZ PEREZ ARAGON, AND REGISTERED ON THE PUBLIC REGISTRY
OF PROPERTY AND COMMERCE OF THE FEDERAL DISTRICT ON OCTOBER 28, 1994 UNDER THE
NUMBERS 236069 AND 9206440. ON WHICH THE TRUST COMPANY WAS SUBSTITUTED,
DESIGNATING BANCO DEL ATLANTICO S.A. FIDUCIARIO, PLACING IN TRUST THE LOTS
MENTIONED HEREINBELOW:
C) HOLDS TRUST TITTLE TO LOT NUMBER 1605 ON AVENIDA INSURGENTES SUR AND LOT
NUMBER 84 ON DAMAS MERCADO STREET, BOTH ON THE SAN JOSE INSURGENTES
NEIGHBORHOOD, DELEGACION BENITO JUAREZ OF THE FEDERAL DISTRICT, ON WHICH A
MIXED-USE CENTER DENOMINATED "CENTRO INSURGENTES" IS UNDER CONSTRUCTION WHICH
WILL INCLUDE A COMMERCIAL AREA; THE PREMISES IN "CENTRO INSURGENTES", AS
DESCRIBED IN THE FIRST CLAUSE OF THE AGREEMENT HEREOF, IS OFFERED IN LEASE TO
THE LESSEE IN ACCORDANCE WITH THE PROVISIONS HEREUNDER.
D) ITS REPRESENTATIVE HAS OBTAINED FROM THE COMPETITIVE AUTHORITY THE NECESSARY
ZONING LAWS APPROVAL FOR THE DEVELOPMENT OF THE MIXED-USE CENTER DENOMINATED AS
CENTRO INSURGENTES.
E) CURRENTLY HAS THE BUILDING'S OPERATION REGULATIONS AND CORRESPONDING ZONING
LAWS, AS DESCRIBED IN THE BUILDING AND ADMINISTRATION RULES AND REGULATIONS OF
THE CENTRO INSURGENTES (EXHIBIT "C"), AS WELL AS THE OFFICE-ADAPTATION
REGULATIONS ON WHICH, THE GENERAL GUIDELINES FOR CONSTRUCTION AND OFFICE-SPACE
ADAPTATION ARE INCLUDED (EXHIBIT "D").
F) ONCE THE CONSTRUCTION OF THE BUILDING HAS BEEN COMPLETED, WITH ITS
CORRESPONDING LICENSES AND HAVING RECEIVED THE ABOVE MENTIONED DOCUMENTS, THE
LESSOR SHALL DELIVER THE PREMISES (AS THE TERM DEFINED BELOW) TO THE LESSEE, IN
ACCORDANCE WITH THE TERMS HEREINAFTER PROVIDED.
G) THE BUILDING AND PREMISES (AS THE TERM DEFINED BELOW) WILL HAVE NO HIDDEN
DEFECTS THAT COULD LIMIT ITS USE OR ENJOYMENT BY THE LESSEE.
H) NO CONSENT, APPROVAL, OR AUTHORIZATION IS REQUIRED FOR THE CONSTRUCTION OF
THE BUILDING OR FOR THE EXECUTION AND PERFORMANCE OF THIS AGREEMENT BY THE
LESSOR, EXCEPT FOR THOSE CONSENTS, APPROVALS AND AUTHORIZATIONS THAT HAVE BEEN
OBTAINED AND ARE IN FULL FORCE AND EFFECT.
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I) ITS REPRESENTATIVE, EXECUTES AND DELIVERS THIS AGREEMENT AND SHALL DELIVER
THE LEASE OF THE PREMISES TO LESSEE.
J) AS OF THIS DATE HAS ACQUIRED THE CREDIT WITH BANCO INVERLAT, S.A., OF THE
GRUPO FINANCIERO INVERLAT, WHICH WAS USED FOR THE DEVELOPMENT OF CENTRO
INSURGENTES.
K) MR. HECTOR FLORES FIERRO, AS TRUST REPRESENTATIVE OF THE BANCO DEL ATLANTICO,
S.A. IS DULY AUTHORIZED AND EMPOWERED TO EXECUTE AND DELIVER THIS AGREEMENT ON
BEHALF OF THE LESSOR.
II. THE LESSEE DECLARES THAT:
A).- IT IS A COMMERCIAL CORPORATION DULY INCORPORATED AND VALIDLY EXISTING
PURSUANT TO THE LAWS OF THE NEVADA STATE, AT THE UNITED STATES OF NORTHAMERICA
("UNITED STATES"), AS EVIDENCED BY THE SECRETARY OF STATE OF THE STATE OF NEVADA
WITH A PUBLIC INSTRUMENT, DATED JUNE 20, 1996.
B) MR. ROBERT A. MICHEL AS REPRESENTATIVE OF LESSEE, IS DULY AUTHORIZED AND
EMPOWERED TO EXECUTE AND DELIVER THIS AGREEMENT, AS EVIDENCED BY THE SECRETARY
OF STATE OF THE STATE OF NEVADA WITH A PUBLIC INSTRUMENT, DATED JUNE 20,1996.
C) IT INTENDS TO LEASE THE PREMISES, (AS THE TERM DEFINED BELOW)IN ACCORDANCE
WITH THE TERMS HEREOF IN ORDER TO INSTALL CORPORATE OFFICES.
III. BY VIRTUE OF THE FOREGOING, THE PARTIES HERETO HEREBY AGREE ON THE
FOLLOWING:
CLAUSES
FIRST.- OBJECT OF THE LEASE. THE LESSOR HEREBY GRANTS IN LEASE TO THE LESSEE AND
THE LESSEE HEREBY ACCEPTS, SUBJECT TO THE TERMS OF THIS AGREEMENT: (I) THE
OFFICE-SPACE OF MODULE "D", IN TENTH LEVEL OF THE MIXED-USED CENTRO INSURGENTES
(LEVEL THREE OF THE BUILDING'S OFFICE LEVELS, WHICH APPROXIMATELY MEASURE 215.19
RENTABLE SQUARE METERS, WITH A 85% USEFUL AREA FACTOR, AS PRESENTED IN
THE DRAFT IN EXHIBIT "A", SUBJECT TO VERIFICATION BY BOTH PARTIES BEFORE
POSSESSION DATE, AND (II) THE RIGHT TO FOUR INDIVIDUAL PARKING SPACES OF WHICH
ONE, WILL BE DESIGNATED AND THE REST WILL BE CONSIDERED AS NON-DESIGNATED; AND
SUCH SPACES WILL BE LOCATED IN THE BUILDING, (POINTS (I) AND (II), THE
"PREMISES"), AND THE LESSEE. SHALL PAY THE LESSOR, OR LESSOR ASSIGNEE A MONTHLY
RENT FOR THE LEASE OF THE PREMISES, IN THE AMOUNT AND TERMS HEREUNDER.
LESSOR SHALL PERFORM THE WORK AND SHALL PREPARE PREMISES FOR OCCUPANCY AS IS SET
FORTH IN DETAIL IN EXHIBIT "B" AND MADE PART OF THIS AGREEMENT.
SECOND.- TERM OF LEASE. THE TERM OF THE AGREEMENT SHALL BE FOR BOTH PARTS, FIVE
(5) COMPULSORY YEARS, BEGINNING AT THE EXECUTION OF THE AGREEMENT (HEREINAFTER
REFERRED TO AS THE "LEASE COMMENCEMENT DATE"); THE AGREEMENT HEREOF SHALL BE THE
LESSORS NOTIFICATION TO THE LESSEE THAT THE CONSTRUCTION OF THE BUILDING,
INCLUDING ITS PREMISES AS WELL AS ALL FACILITIES, EQUIPMENT AND SERVICES
DESCRIBED IN EXHIBIT "B" ARE COMPLETED AND SHALL NOT IMPEDE LESSEE TO START THE
SPACE ADAPTATION AND LESSEE SHALL OCCUPY THE PREMISES AS DEFINED IN CLAUSE
FOURTH HEREUNDER.
LESSOR SHALL EXEMPT THE PAYMENT OF THE RENTAL AMOUNT DEFINED IN CLAUSE FIFTH FOR
THE FIRST 90 DAYS AFTER THE COMMENCEMENT DATE.
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THE PARTIES AGREE THAT THIS AGREEMENT SHALL TERMINATE ON THE EXPIRATION DATE OF
ITS INITIAL DATE, PROVIDED, HOWEVER, THAT LESSEE SHALL HAVE THE RIGHT TO
EXERCISE ONE (1) CONSECUTIVE TERM EXTENSION OF FIVE (5) YEARS, UNDER THE SAME
TERMS AND CONDITIONS OF THIS AGREEMENT, INCLUDING THE CURRENT RENT AT THAT TIME
INCLUDING AN ADJUSTMENT ACCORDING TO THE CPI REFERRED AND DEFINED IN CLAUSE
SEVENTH.
THE LESSEE, AT LEAST 120 (ONE HUNDRED AND TWENTY ) CALENDAR DAYS PRIOR THE
EXPIRATION OF THIS AGREEMENT, SHALL GIVE WRITTEN NOTICE (THE "RENEWAL NOTICE")
TO THE LESSOR OF ITS INTEREST TO EITHER TERMINATE OR EXTEND THE IN-FORCE TERM OF
THIS AGREEMENT.
THE LESSOR, AT LEAST 180 (ONE HUNDRED AND EIGHTY) CALENDAR DAYS PRIOR THE
EXPIRATION OF THIS AGREEMENT, SHALL GIVE WRITTEN NOTICE TO THE LESSEE OF THE
FINAL DATE TO RECEIVE THE RENEWAL NOTICE AT THE LESSORS ADDRESS (S) DEFINED IN
CLAUSE TWENTY FIRST, ATTENTION TO THE OFFICE REPRESENTATIVE, OR IN ANOTHER
ADDRESS THAT THE LESSOR INDICATES BY WRITTEN NOTIFICATION FROM TIME TO TIME.
IN THE EVENT THAT LESSEE SHALL NOT EXERCISE THE EXTENSION OPTION, IT SHALL HAVE
THE RIGHT TO A HOLDOVER PERIOD PURSUANT TO THE HOLDOVER NOTICE DEFINED BELOW IN
CLAUSE THIRD.
LESSEE MAY OR NOT EXERCISE THIS OPTION, BUT SHALL BE MANDATORY FOR LESSOR, AND
IN THE EVENT SAME ARE EXERCISED, THE TERM OF SUCH RENEWAL SHALL START
IMMEDIATELY AFTER THE END OF THE INITIAL TERM OF THIS AGREEMENT. THESE RIGHTS
SHALL BE SUBJECT TO AND MAY BE EXERCISED PURSUANT TO THE TERMS AND CONDITIONS
DEFINED PREVIOUSLY IN THIS CLAUSE AND BELOW IN CLAUSE THIRD.
IN THE EVENT LESSEE FAILS TO VACATE THE PREMISES AFTER THE TERM OF THIS
AGREEMENT EXPIRES. INCLUDING ITS RENEWAL, LESSEE SHALL CONTINUE TO PAY THE THEN
CURRENT RENTAL RATE WITH A 20% INCREASE TO THE LESSOR.
THIRD.- HOLDOVER. LESSEE HAS THE RIGHT TO EXERCISE, BY WRITTEN NOTICE ("HOLDOVER
NOTICE") GIVEN TO LESSOR NO LATER THAN 120 CALENDAR DAYS PRIOR TO THE
TERMINATION OF THE ORIGINAL OR EXTENDED TERM OF THIS AGREEMENT, A HOLDOVER
PERIOD NOT TO EXCEED SIX (6) MONTHS AFTER THE SCHEDULED LEASE EXPIRATION, DURING
WHICH TIME LESSEE MAY REMAIN IN THE PREMISES AT THE THEN CURRENT RENTAL RATE,
PLUS THE US CONSUMER PRICE ADJUSTMENT ACCORDING TO THE METHODOLOGY DESCRIBED IN
CLAUSE SEVENTH. THE LESSEE MAY DETERMINE TO A HOLDOVER PERIOD SHORTER THAN THE
PREVIOUSLY REFERRED SIX MONTH TERM AND BY PREVIOUS AUTHORIZATION OF THE LESSOR
MAY EXTEND IT, AS MANY TIMES AS REQUIRED, ESTABLISHING FOR THAT A NEW REASONABLE
PERIOD WITH A NEW DATE TO VACATE THE PREMISES. THE LESSOR'S AUTHORIZATION OF A
NEW DATE WILL NOT BE GIVEN IN THE EVEN THAT LESSOR HAS A COMPROMISE, SUBJECT TO
VERIFICATION, TO DELIVER THE PREMISES TO A NEW TENANT.
IN THE EVENT THAT LESSEE FAILS TO VACATE THE PREMISES AT THE END OF THE AGREED
UPON HOLDOVER PERIOD, INITIAL OR EXTENSION, THEN LESSEE SHALL PAY TO THE LESSOR,
FOR EACH MONTH THAT LESSEE REMAINS IN THE PREMISES, A TOTAL AMOUNT EQUAL TO THE
CURRENT RENT AND AN ADDITIONAL 200% INCREASE.
IN THE EVENT THAT A RENEWAL NOTICE IS NOT DELIVERED AS SET FORTH IN THE
PRECEDING PARAGRAPH, THIS AGREEMENT SHALL AUTOMATICALLY TERMINATE ON THE
EXPIRATION DATE OF THE INITIAL TERM HEREOF OR OF ANY RENEWAL OR HOLDOVER PERIOD.
THE PARTIES AGREE THAT THIS AGREEMENT SHALL TERMINATE ON THE EXPIRATION DATE OF
ITS INITIAL TERM HEREOF, ANY RENEWAL TERM OR HOLDOVER PERIOD, AS DEFINED IN THIS
CLAUSE, WITHOUT THE NECESSITY OF A ANY COURT RESOLUTION.
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FOURTH.- POSSESSION AND DELIVERY OF THE PREMISES.- LESSOR WILL DELIVER
POSSESSION OF THE PREMISES TO LESSEE, FOR TENANT CONSTRUCTION, TWO DAYS AFTER
THE EXECUTION OF THIS AGREEMENT (HEREINAFTER REFERRED TO AS "POSSESSION DATES").
BOTH PARTIES SHALL SIGN A DOCUMENT IN WHICH CONDITIONS OF THE PREMISES AT
DELIVERY ARE DESCRIBED.
FIFTH.- RENT.- STARTING ON THE RENT COMMENCEMENT DATE, LESSEE SHALL PAY FOR THE
USE OF THE PREMISES A MONTHLY RENT FOR THE FIRST YEAR EQUAL TO US$23.00 DOLLARS
PER RENTABLE SQUARE METER, PLUS THE VALUE ADDED VALUE TAX IMPOSED THEREON
CORRESPONDING TO 215.19 RENTABLE SQUARE METERS IN THE PREMISES. ALL RENT
PAYMENTS DUE HEREUNDER (INCLUDING VAT) SHALL BE MADE IN ADVANCE WITHIN THE
FIRST FIVE (5) BUSINESS DAYS OF EACH CALENDAR MONTH, AT THE ADDRESS OF THE
LESSOR SET FORTH IN CLAUSE TWENTY FIRST OR AT SUCH OTHER ADDRESS AS LESSOR, ITS
ASSIGNEE OR DESIGNEE MAY DESIGNATE BY WRITTEN NOTICE FROM TIME TO TIME.
LESSOR SHALL ISSUE TO THE LESSEE THE CORRESPONDING RECEIPTS UPON PAYMENT OF
RENTS, WHICH RECEIPTS SHALL ALWAYS COMPLY WITH THE REQUIREMENTS SET FORTH IN THE
MEXICAN TAX PROVISION IN EFFECT AT THE TIME.
THE RENT SHALL BE PAID BY LESSEE IN US DOLLARS OR ITS MEXICAN PESOS EQUIVALENT
AT THE EXCHANGE RATE FOR PAYMENT OF OBLIGATIONS IN FOREIGN CURRENCY PAYABLE IN
THE REPUBLIC OF MEXICO PUBLISHED BY THE BANCO DE MEXICO IN THE FEDERATION
OFFICIAL JOURNAL (DIARIO OFICIAL DE LA FEDERACION) THE PRIOR BUSINESS DAY TO THE
DATE OF PAYMENT.
THE RENT SHALL BE PAID FOR THE ENTIRE CALENDAR MONTH AND LESSEE MAY NOT REDUCE
THE MONTHLY INSTALLMENTS BY VIRTUE OF OCCUPYING THE PREMISES JUST PART OF A
GIVEN MONTH, EXCEPT FOR THE MONTH ON WHICH THE LEASE COMMENCEMENT DATE OCCURS
AND SUCH, SHALL BE A DAY OTHER THAN THE FIRST DAY OF THE MONTH, IN WHICH CASE
THE PAYMENT SHALL BE EQUIVALENT TO THE NUMBER OF DAYS OF OCCUPANCY BY THE
LESSEE. ADDITIONALLY, LESSEE MAY NOT WITHHOLD THE RENTS DUE TOTALLY OR PARTIALLY
FOR ANY REASON WHATSOEVER, EXCEPT AS DEFINED IN CLAUSE NINTH.
IN THE EVENT OF MORATORIUM AS SET FORTH IN THIS CLAUSE, THE UNPAID AMOUNT OF THE
RENT SHALL BEAR INTEREST AT AN ANNUALIZED PENALTY RATE OF 5.60 (FIVE POINT
SIXTY) PERCENTAGE POINTS AT THE LIBOR RATE, INCREASING 5.0 (FIVE POINT ZERO)
PERCENTAGE POINTS, TIMES ONE AND A HALF TIMES (EXPRESSED AS A DECIMAL NUMBER)
THAT SHALL BE APPLIED TO ANY PAYMENT OF INTERESTS; HOWEVER, IF SAID PENALTY
WOULD BE IN VIOLATION OF APPLICABLE LAWS THEREOF, THEN SAID PENALTY SHALL BE THE
MAXIMUM PENALTY PERMITTED BY THE LAWS AT THAT TIME. THE INTERESTS OF THE PENALTY
AS CALCULATED HEREINBEFORE SHALL HAVE AS BASE THE REAL NUMBER OF DAYS ELAPSED
AND A 365-DAY YEAR.
SIXTH.- SECURITY DEPOSIT AND ADVANCED RENT.- IN ORDER TO GUARANTEE FULFILLMENT
OF ITS OBLIGATIONS UNDER THIS AGREEMENT, LESSEE HEREBY DEPOSITS WITH LESSOR THE
EQUIVALENT TO ONE MONTH'S RENT, WHICH SHALL APPLY IN LIEU OF THE RENT DUE TO THE
LAST MONTHS OF RENT UNDER THIS AGREEMENT, AND AS AN ADVANCE FOR THE FIRST MONTH
OF RENT AT THE EXECUTION OF THIS AGREEMENT.
SEVENTH.- ADJUSTMENTS.- ON THE FOLLOWING DAY OF THE FIRST ANNIVERSARY OF THE
LEASE COMMENCEMENT DATE AND ON EACH ANNIVERSARY DATE THEREAFTER DURING THE LEASE
TERM, THE MONTHLY RENT SHALL BE INCREASED AT A PERCENTAGE EQUAL TO ONE AND A
HALF PERCENTAGE POINTS PLUS THE PERCENTAGE ADJUSTMENT OF THE FINAL GENERAL INDEX
OF THE PRICE CONSUMER INDEX OF THE UNITED STATES AS PUBLISHED BY "BARRONS" (OR
A SIMILAR PUBLICATION IF "BARRONS" IS DISCONTINUED), FOR THE CORRESPONDING
PERIOD TO COMPUTE SUCH ADJUSTMENT, THE DIFFERENCE BETWEEN THE LAST GENERAL
CONSUMER PRICE INDEX PUBLISHED PRIOR THE FIRST MONTH OF THE YEAR OF THE LEASE
FOR WHICH THE ADJUSTMENT IS TO BE MADE ("CURRENT INDEX") VERSUS THE INDEX WHICH
WAS PUBLISHED FOR
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THE MONTH PRIOR TO THE PRIOR ANNIVERSARY DATE ("PRIOR INDEX") WILL PROVIDE THE
PERCENTAGE INCREASE FOR CORRESPONDING RENT ADJUSTMENT. SHOULD THE USE OF THE
CONSUMER PRICE INDEX BE DISCONTINUED OR MODIFIED, THE LESSOR SHALL SUBSTITUTE
THE CURRENT CPI WITH ANY OTHER INDEX OR GOVERNMENTAL INDICATOR THAT SHALL
OBTAIN ESSENTIALLY THE SAME RESULT AS WOULD HAVE BEEN OBTAINED IF THE INDEX HAD
NOT BEEN DISCONTINUED OR MODIFIED.
IN ANY EVENT, THE PAYABLE RENT FOR A YEAR LEASE SHALL NOT BE LESS THAN THE
PAYABLE RENT HEREIN FOR THE IMMEDIATELY PRECEDING YEAR OF LEASE.
WITHIN UP TO 15 CALENDAR DAYS FOLLOWING THE DETERMINATION OF THE RENT INCREASE
AS DEFINED IN THIS CLAUSE, THE LESSOR SHALL NOTIFY IN WRITING TO LESSEE THE
AMOUNT OF SUCH ADJUSTMENT AND THE COMPUTATIONS BY WHICH IT WAS DETERMINED.
WITHIN UP TO 15 BUSINESS DAYS AFTER RECEIPT OF SUCH WRITTEN NOTICE FROM LESSOR,
LESSEE SHALL PAY THE DIFFERENCE BETWEEN THE MONTHLY RENT FOR THE IMMEDIATELY
PRECEDING YEAR AND THE MONTHLY RENT AS ADJUSTED IN ACCORDANCE WITH THIS CLAUSE
SEVENTH AS ADDITIONAL RENT.
EIGHTH.- BUILDING OPERATING EXPENSES. THE LESSOR OR THE COMPANY IN CHARGE OF THE
MANAGEMENT AND MAINTENANCE OF THE BUILDING SHALL GIVE PRIOR WRITTEN NOTICE TO
LESSEE OF THE DATE OF THE COMMENCEMENT OF MAINTENANCE AND MANAGEMENT FEES,
LESSEE SHALL PAY TO LESSOR MONTHLY INSTALLMENTS, AS DEFINED IN CLAUSE FIFTH FOR
BUILDING AND OPERATING EXPENSES ACCORDING TO LESSEE'S OCCUPIED PROPORTION OF THE
BUILDING, WHICH IS OF 0.80% +/- 0.05%. THIS SUM SHALL BE REVIEWED AND ADJUSTED
ON JANUARY 1 AND JUNE 30 OF EVERY YEAR ACCORDING TO THE ACTUAL BUILDING
OPERATING EXPENSES INCURRED. THE LESSOR ACKNOWLEDGES THAT THE LESSEE JUST FOR
OCCUPYING THE PREMISES HAS THE RIGHT TO PARTICIPATE AND EXPRESS ITS OPINION IN
CONDOMINIUM AND SUB CONDOMINIUM MANAGEMENT MEETINGS IN ACCORDANCE TO DECLARATION
II-D.
LESSEE'S RIGHT TO VOTE SHALL BE COMMENSURATE WITH ITS OCCUPANCY OF THE BUILDING
AND SHALL BE VALID SOLELY FOR OPERATIVE AND MANAGEMENT RESOLUTIONS.
WITHIN 15 CALENDAR DAYS FOLLOWING THE DETERMINATION OF THE ACTUAL BUILDING
OPERATIVE EXPENSES PURSUANT TO THIS CLAUSE, LESSOR SHALL NOTIFY LESSEE, IN
WRITING, THE AMOUNT OF ANY DIFFERENCE FROM THE ESTIMATES PAID BY LESSEE FOR THE
PREVIOUS 180 CALENDAR DAYS.
IN THE EVENT OF LESSEE'S DEFICIT, WITHIN UP TO 20 DAYS AFTER RECEIPT OF SUCH
WRITTEN NOTICE FROM LESSOR, LESSEE SHALL PAY THE DIFFERENCE. IN THE EVENT
LESSEE'S FAILURE TO PAY SUCH DEFICIT IN THE TERM HEREINBEFORE MENTIONED, FROM
THE MOMENT THE LESSEE RECEIVES THE LESSOR OR ITS DESIGNEE'S WRITTEN NOTIFICATION
OF SAID DEFICIT, LESSEE SHALL PAY THE DIFFERENCE PLUS THE INTERESTS GENERATED AT
BANCO DEL ATLANTICO'S S.A. RATE FOR 28-DAYS INVESTMENTS.
IN THE EVENT OF LESSEE'S OVERPAYMENT, LESSOR SHALL CREDIT SAID BALANCE AGAINST
THE LESSEE'S IMMEDIATELY SUCCEEDING MONTHLY INSTALLMENT DUE FOR BUILDING
OPERATING EXPENSES.
LESSEE'S OCCUPIED PROPORTION OF THE TOTAL BUILDING OFFICE SPACE IS OF 1.278%
(THE PERCENTAGE THAT 341.00 M2 REPRESENTS WITH RESPECT TO THE BUILDING'S TOTAL
LEASABLE AREA, WHICH IS OF 26,678.00 M2).
FOR PURPOSE OF THIS AGREEMENT, BUILDING OPERATING EXPENSES SHALL MEAN ALL
ACTUAL, DOCUMENTED, REASONABLE AND NECESSARY COSTS OF OPERATING THE BUILDING FOR
THE BENEFIT OF ALL TENANTS (INCLUDING COMMON AREA MAINTENANCE, GENERAL SERVICES
AND LANDLORD'S INSURANCE COSTS). LESSOR SHALL PROVIDE BUILDING SERVICES IN A
TIMELY AND COST-EFFICIENT FASHION THE SERVICES HEREINBELOW FOR THE BUILDING'S
COMMON AREAS, THROUGH ANY PERSON OR FIRM OF ITS CHOICE, AND FOR WHOM LESSEE
SHALL NOT HAVE ANY LIABILITY, OBLIGATION OR RELATION AS FOLLOWS:
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GENERAL SERVICES
BUILDING'S GENERAL MANAGEMENT.
BUILDING'S SECURITY. 24 HOURS A DAY, 7 DAYS A WEEK.
ELECTRIC POWER EXPENSES AS WELL AS LIGHTNING FOR COMMON AREAS
ELEVATOR'S MAINTENANCE, WITH AT LEAST THREE AVAILABLE PASSENGER ELEVATORS FOR
USE IN THE BUILDING'S NORMAL BUSINESS HOURS.
HYDRAULIC SYSTEM AND FIRE-PROTECTION SYSTEM MAINTENANCE.
SUB-STATION MAINTENANCE.
EMERGENCY POWER MAINTENANCE.
CHILLERS AND SMOKE EXTRACTORS MAINTENANCE.
GARBAGE PICK-UP.
COMMON AREA FUMIGATION.
CLEANING SUPPLIES FOR COMMON AREAS.
GENERAL CLEANING OF WINDOWS; COMMON AREA AND EXTERIOR.
COMMON AREAS POLISHING OF FLOORS.
COMMON AREAS MAINTENANCE.
EXTERIOR AND INTERIOR GARDENS OF COMMON AREAS AND PUBLIC PAVEMENT
INSURANCE IN ACCORDANCE TO CLAUSE THIRTEEN.
ALL THIS SERVICES SHALL BE PROVIDED TIMELY AND WITH QUALITY IN ACCORDANCE TO
THE BUDGET PREVIOUSLY PRESENTED BY THE COMPANY HIRED TO PROVIDE SAID SERVICES,
FOR THE BUILDING HEREOF TO LESSEE AS SET FORTH IN THE BUILDING'S RULES AND
REGULATIONS, INTENDING TO MAINTAIN THE BUILDING AT A LEVEL CURRENTLY EQUIVALENT.
BUILDING OPERATING EXPENSES SHALL NOT INCLUDE THE FOLLOWING, WHICH SHALL BE PAID
BY LESSOR:
1).- ALL EXPENSES OF A CAPITAL NATURE, EXCEPT TO THE EXTENT THAT THE CAPITAL
IMPROVEMENTS SERVE TO REDUCE BUILDING'S OPERATING EXPENSES TO THE BENEFIT OF ALL
TENANTS AND THAT ACTUAL ANNUAL SAVINGS EXCEED THE AMORTIZED COST OF
IMPROVEMENTS, IN WHICH CASE THE ANNUAL AMORTIZATION MAY BE CHARGED TO TENANTS.
CAPITAL COSTS INCLUDE SUCH EXPENDITURES AT COST OF REPLACEMENT OF ANY MAJOR
SYSTEM (OR COMPONENT THEREOF) IN THE BUILDING UNDERSTANDING AS MAJOR SYSTEM
WHATEVER IS DEFINED AS SUCH IN MEXICO'S REGULATIONS AT THAT TIME; OR COST OF ANY
ADDITIONS OR CAPITAL IMPROVEMENTS CLASSIFIED AS CAPITAL EXPENDITURES UNDER
ACCOUNTING PRINCIPLES OF GENERAL ACCEPTANCE AND CONSISTENTLY APPLIED; THE COST
OF THE CONSTRUCTION OF ALL OR ANY PART OF THE BUILDING AND RELATED IMPROVEMENTS
AS WELL AS EXPENSES TO CORRECT DEFECTS IN THE BUILDING'S DESIGN OR ANY OTHER
IMPROVEMENT THEREOF NOT INSTALLED BY LESSEE OR TO EXPAND THE BUILDING OR ADD NEW
STRUCTURES OR FACILITIES WITHIN THE BUILDING; ACQUISITION COSTS OF SCULPTURE,
PAINTINGS OR WORKS OF ART; AND RENTALS OR OTHER RELATED EXPENSES INCURRED IN
LEASING AIR-CONDITIONING SYSTEMS, ELEVATORS OR OTHER EQUIPMENT ORDINARILY
CONSIDERED TO BE A CAPITAL ITEM TO THE EXTENT SUCH ITEMS ARE OF THE TYPE WHICH
OWNERS OF OFFICE BUILDINGS CUSTOMARILY PURCHASE RATHER THAN LEASE.
2).- DEPRECIATION, INTERESTS, PRINCIPAL, GROUND RENTAL, DEPOSITS AND ALL OTHER
PAYMENTS MADE ON OR IN RESPECT TO ANY INDEBTEDNESS OR EQUITY PARTICIPATION FOR
FIXED ASSETS BY ANY LENDER OR LESSOR; AND ALL COSTS INCURRED IN CONNECTION WITH
ANY FINANCING, SYNDICATION, HYPOTHECATION, REFINANCING, SALE, TRANSFER OR
CONDOMINIUM OR COOPERATIVE CONVERSION OF ALL OR ANY PART OF THE BUILDING.
3).- ALL MARKETING, SPACE-PLANNING, ACCOUNTING AND ADVERTISING EXPENSES AND
COSTS AND ALL AMOUNTS INCURRED IN CONNECTION WITH THE LEASING OR RE-LEASING OR
SALE OF SPACE IN THE BUILDING.
4).- LEGAL AND OTHER COSTS AND EXPENSES INCURRED IN ENFORCING THE PROVISIONS OF
ANY LEASE FOR SPACE IN THE BUILDING AND IN PREPARING, NEGOTIATING AND REVISING
ANY DOCUMENTATION AFFECTING THE BUILDING.
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5).- CHARGES FOR SERVICES RENDERED OR MATERIALS FURNISHED TO LESS THAN ALL OF
TENANTS OF THE BUILDING OR TO ANY TENANT IN THE BUILDING OTHER THAN LESSEE AND
ALL EXPENDITURES FOR WHICH LESSOR HAS BEEN OR HAS THE RIGHT TO BE REIMBURSED OR
INDEMNIFIED.
6).- EXECUTIVES AND PARTNER WAGES, SALARIES AND BENEFITS.
7).- ANY BAD DEBT LOSS OR RESERVES FOR BAD DEBT LOSS.
8).- COSTS FOR COMPLYING WITH GOVERNMENTAL CODE REGULATIONS.
9).- LESSOR POLITICAL OR CHARITABLE DONATIONS.
10).- ANY COMPENSATION TO EMPLOYEES, OR ATTENDANTS OR OTHER PARTIES OPERATING
COMMERCIAL CONCESSIONS, FOR THE ADDITIONAL PROFIT OF THE LESSOR. INCLUDING
PARKING.
LESSOR IS OBLIGATED TO INFORM LESSEE AT ANY TIME AN OVERCHARGE OR UNDERCHARGE OF
BUILDING OPERATING EXPENSES IS DISCOVERED BY AUDITORS, EMPLOYEES OR OTHER
TENANTS. LESSOR WILL EXERCISE ITS BEST EFFORTS TO MAINTAIN BUILDING OPERATING
EXPENSES AS LOW AS PRACTICABLE.
LESSOR ACKNOWLEDGES THAT AS FOR THIS MOMENT THE BUILDING HEREOF IS CLASSIFIED AS
INTELLIGENT OR FIRST CLASS.
LESSOR SHALL MAINTAIN THE BUILDING IN A FIRST CLASS MANNER COMPARED WITH
BUILDINGS DEFINED AS SUCH WITHIN MEXICO CITY AND SHALL UTILIZE ITS BEST EFFORTS
TO MAINTAIN THE RELATED BUILDING OPERATING EXPENSES WITHIN THE COSTS STANDARDS
OF OTHER BUILDINGS OF SIMILAR QUALITY.
THE COST OF ELECTRICITY USAGE TO THE PREMISES SHALL NOT BE PROVIDED FOR BY
LESSOR. LESSEE SHALL CONTRACT DIRECTLY WITH THE SUPPLIER FOR ITS ELECTRICITY,
ACKNOWLEDGING THAT SAID SERVICE SHALL NOT EXCEED THE CAPACITY OF THE BUILDING
INSTALLATIONS. LESSEE SHALL COVER THE COST OF THIS SERVICE. THE COST OF AFTER
HOURS USAGE OF THE COMMON AREA ELECTRICITY, AS REQUIRED BY LESSEE, SHALL BE
PASSED THROUGH TO LESSEE AT LESSOR'S DIRECT COST, AND THE SAME SHALL APPLY TO
ALL OTHER TENANTS.
EXPENSES FOR THE CONSUMPTION OF WATER SHALL BE PAID BY LESSEE IN ACCORDANCE WITH
LESSEE'S PROPORTIONATE SHARE AS DEFINED IN THE BUILDINGS RULES AND REGULATIONS
ON AV.INSURGENTES SUR #1605.
THE MANAGEMENT AND ADMINISTRATION OF THE BUILDING'S COMMON AREAS SHALL BE DONE
AS SET FORTH IN EXHIBIT "C" AND AS BUILDING OPERATING REGULATIONS WHICH ARE
CURRENTLY GOING THROUGH AN ADJUSTMENT PROCESS.
NINTH.- REPAIRS AND IMPROVEMENTS. LESSOR SHALL MAKE THE NECESSARY REPAIRS OF THE
COMMON AREAS, AND MAY PASS THROUGH SAID COSTS (OTHER THAN CAPITAL COSTS AND
COSTS INCURRED DUE TO HIDDEN OR LATENT DEFECTS IN THE BUILDING OR DUE TO CAUSES
WITHIN LESSOR'S CONTROL OR DUE TO LESSOR'S BAD FAITH OR NEGLIGENCE), TO LESSEE
AS BUILDING OPERATING EXPENSES, INCLUDING BUT NOT LIMITED TO THE ROOF, PLUMBING,
ELEVATORS, PUMPS, ELECTRIC GENERATOR, ELECTRICAL SYSTEM, WINDOWS, BUILDING AIR
CONDITIONING AND OTHER BASIC INSTALLATIONS OF THE BUILDING. LESSEE SHALL
FORTHWITH ADVISE LESSOR IN WRITING OF ANY DAMAGES CAUSED TO THE PREMISES THAT
MUST BE REPAIRED, IN THE EVENT THAT IN LESSEE'S OPINION SAID REPARATIONS ARE
NECESSARY.
SHOULD LESSOR ACTING WITH ALL DUE DILIGENCE FAIL TO TAKE ACTION TO COMPLETE SUCH
REPAIRS WITHIN A REASONABLE PERIOD, LESSEE MAY PROCEED TO MAKE SUCH REPAIRS AT
LESSOR'S COST AND THEREFORE SHALL HAVE THE RIGHT TO DEDUCT FROM FUTURE
MAINTENANCE FEES ALL REASONABLE COSTS DERIVING THEREFROM. SAID EXPENSES MAY BE
INCLUDED IN THE BUILDING OPERATING EXPENSES IN ACCORDANCE WITH CLAUSE EIGHTH.
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IN ORDER TO MAINTAIN THE PREMISES IN GOOD CONDITIONS, LESSEE IS OBLIGED TO MAKE
THE NECESSARY MAINTENANCE AND/OR REPAIRS TO THE PREMISES DERIVED FROM NORMAL
DAILY USE AND WEAR AND FOR ANY IMPUTABLE TO LESSEE OR LESSEE'S EMPLOYEES OR
VISITORS, EXCLUDING REPAIRS THAT ARE NOT CAUSED BY ITS OR THEIR FAULT OR
NEGLIGENCE. MAINTENANCE AND/OR REPAIRS REQUIRES TO BE PERFORMED BY THE LESSEE
WHICH HAVE AN IMPACT ON OR ARE VISIBLE FROM THE COMMON AREAS SHALL BE PERFORMED
IN NO MORE THAN 15 BUSINESS DAYS. IN THE EVENT THAT THE LESSEE FAILS TO PROVIDE
OR COMPLETE MAINTENANCE AND/OR REPAIRS TO THE PREMISES, LESSOR MAY PROCEED TO
MAKE SUCH MAINTENANCE AND/OR REPAIRS USING ITS OWN FUNDS AND THEREFORE BE
ENTITLED TO CHARGE AS MAINTENANCE FEES, ALL REASONABLE EXPENSES DERIVING
THEREFROM.
LESSOR IS OBLIGED AT ITS COST, TO MAKE ALL IMPROVEMENTS AND REPAIRS NEEDED OR
USEFUL (MAJOR AND MINOR) AND TO COVER ALL COSTS IN ORDER TO MAINTAIN THE
PREMISES IN ADEQUATE CONDITIONS FOR THE AGREED USE. IN THE EVENT THAT SUCH
IMPROVEMENTS AND REPAIRS ARE NECESSARY ACCORDING TO LESSEE'S OPINION, LESSEE
SHALL GIVE WRITTEN NOTICE TO LESSOR OF SUCH FOR PURPOSE OF THIS AGREEMENT,
"ADEQUATE CONDITIONS" SHALL MEAN SIMILAR CONDITIONS AS THOSE AT THE COMMENCEMENT
DATE, TAKING INTO CONSIDERATION NORMAL USE AND WEAR. IN THE EVENT THAT LESSOR
FAILS TO MAKE SUCH REPAIRS WITHIN A REASONABLE PERIOD OF TIME, LESSEE MAY
PROCEED TO MAKE SUCH REPAIRS USING ITS OWN FUNDS AND THEREFORE BE ENTITLED TO
DEDUCT FROM FUTURE RENTS ALL REASONABLE EXPENSES DERIVED THEREFROM.
THE LESSOR IS LIABLE FOR ALL HIDDEN DEFECTS THAT MAY IMPAIR OR LIMIT THE NORMAL
OR APPROPRIATE USE OF THE PREMISES.
ALL IMPROVEMENTS OR FITTINGS TO THE PREMISES, INCLUDING THE CEILING SYSTEM AND
LIGHTS, DUCT, LIFE SAFETY SYSTEM, SPRINKLERS, AIR CONDITIONING, ELECTRICAL
DISTRIBUTION AND TRANSFORMER, AIR HANDLING DEVICES AND ANY OTHER PERMANENT
IMPROVEMENTS TO THE PREMISES PLACED BY LESSEE, EITHER FUNCTIONAL OR ORNAMENTAL,
SHALL BE PAID BY LESSEE AND AT THE EXPIRATION OF THIS AGREEMENT, SHALL BECOME
LESSOR'S PROPERTY. LESSEE MAY NOT REMOVE SAID IMPROVEMENTS ON THE TERMINATION OF
THIS AGREEMENT WITHOUT LESSOR'S PRIOR WRITTEN AUTHORIZATION. IN THE EVENT THAT
THE LESSEE MAKES CHANGES WHICH ALTER THE BUILDING STRUCTURE OR THE ORIGINAL
BUILDING DESIGN, THE LESSOR SHALL HAVE THE RIGHT TO DECIDE WHETHER THE LESSEE
SHALL RETURN THE PREMISES IN THE SAME CONDITIONS AS IN WHICH THEY WERE RECEIVED
FROM LESSOR, LESS NORMAL WEAR AND TEAR AND INEVITABLE CAUSES NOT WITHIN LESSEE'S
CONTROL. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY THESE PROVISIONS FOR
RESTORATION DO NOT APPLY TO NORMAL OFFICE IMPROVEMENTS INCLUDING BUT NOT LIMITED
TO CEILINGS, DOORS, FLOOR COVERINGS, AIR CONDITIONING AND DUCT WORK, LIGHTNING,
TELEPHONE AND ELECTRICAL INSTALLATIONS. BEFORE STARTING ANY IMPROVEMENTS OR
RENOVATIONS TO THE PREMISES, LESSEE SHALL PRESENT THE CORRESPONDING PROJECT TO
LESSOR FOR ITS APPROVAL, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR
DELAYED FOR MORE THAN 5 CALENDAR DAYS.
LESSEE SHALL HAVE NO RIGHT TO ANY COMPENSATION FROM LESSOR FOR ANY IMPROVEMENTS
MADE BY LESSEE TO THE PREMISES.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, LESSEE MAY REMOVE FURNITURE AND
EQUIPMENT AND TRADE FIXTURES WHICH ARE NOT PERMANENTLY ATTACHED TO THE PREMISES,
WITHOUT LESSOR'S WRITTEN AUTHORIZATION, PROVIDED THAT LESSEE REPAIRS ANY DAMAGE
CAUSED WHEN REMOVING SAID IMPROVEMENTS.
LESSOR AND LESSEE SHALL NOT DAMAGE OR ALLOW OTHERS TO DAMAGE THE PREMISES.
TENTH.- USE OF THE PREMISES. LESSEE SHALL USE AND OCCUPY THE PREMISES FOR ANY
LAWFUL PURPOSE FOR THE BUILDING AS GOVERNED BY THE PARTIAL PLAN FOR URBAN
DEVELOPMENT OF THE DELEGACION BENITO JUAREZ, WHICH ALLOWS ITS USE SOLELY FOR
GENERAL OFFICE ACTIVITIES, FINANCIAL SERVICES, BUSINESS, DATA PROCESSING AND
LESSEE'S
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OWN ACTIVITIES, THE LESSEE SHALL PROVIDE RELATED AUTHORIZATION(S) FROM
CORRESPONDING AUTHORITIES, IN THE EVENT THESE ARE REQUIRED.
LESSEE IS NOT ALLOWED TO USE THE PREMISES AS A RESIDENCE, COMMERCE, WAREHOUSE OR
ANY OTHER USE DIFFERENT FROM CORPORATE OFFICES.
NEITHER LESSOR NOR LESSEE SHALL BRING OR PERMIT OTHERS TO BRING INTO THE
BUILDING AND THE PREMISES ANY TOXIC, CORROSIVE, FLAMMABLE, RADIOACTIVE,
EXPLOSIVE OR OTHER HAZARDOUS MATERIALS.
THE BUILDING HOURS ARE 8:00 A.M. TO 8:00 P.M. MONDAY THROUGH FRIDAY. HOWEVER,
LESSEE AND LESSEE'S EMPLOYEES AND AUTHORIZED PERSONNEL INCLUDING CONTRACTORS
SHALL HAVE ACCESS TO THE BUILDING 24 HOURS A DAY, 365 DAYS OF THE YEAR STARTING
FROM THE POSSESSION DATE AND UNTIL THIS AGREEMENT IS TERMINATED IN ACCORDANCE
WITH ITS TERMS.
LESSEE AND LESSOR SHALL CONDUCT THEIR BUSINESS AND CONTROL THEIR AGENTS,
EMPLOYEES AND INVITEES IN SUCH A MANNER AS TO AVOID ANY DAMAGE OR INTERFERENCE,
HINDRANCE OR OTHERWISE AFFECT ANY OTHER LESSEE IN THE BUILDING.
LESSOR AND LESSEE, AS APPLICABLE, SHALL STRICTLY COMPLY WITH THE CONDOMINIUM AND
MANAGEMENT CENTRO INSURGENTES REGULATIONS (EXHIBIT "C").
LESSOR HEREBY COVENANTS THAT LESSEE SHALL, DURING THE TERM OF THIS AGREEMENT,
PEACEFULLY AND QUIETLY OCCUPY AND ENJOY POSSESSION OF THE PREMISES WITHOUT
MOLESTATION OR HINDRANCE BY LESSOR OR ANY PARTY CLAIMING TO BE OR ACTING ON
BEHALF OF LESSOR.
ELEVENTH.- RIGHT TO INSPECT PREMISES. LESSOR SHALL HAVE THE RIGHT TO INSPECT THE
PREMISES FROM TIME TO TIME IN ORDER TO CHECK THE CONDITIONS OF THE PREMISES,
FIXTURES, AND EQUIPMENT. FOR THIS PURPOSE, LESSOR SHALL NOTIFY IN WRITING TO
LESSEE OF THE DATE OF THE INSPECTION, FIVE BUSINESS DAYS IN ADVANCE, EXCEPT IN
EMERGENCY CASES.
TWELFTH.- LIABILITY IN CASE OF DAMAGES OR LOSSES. NEITHER PARTY SHALL BE LIABLE
TO THE OTHER FOR ANY DAMAGES OR LOSSES CAUSED TO THE PREMISES DUE TO EARTHQUAKE,
LIGHTNING, EXPLOSION, FLOOD, OR ANY OTHER NATURAL DISASTER OR BY WORKERS STRIKE
OF THE COMPANY THAT PROVIDES THE BUILDING SERVICES. IN SUCH EVENT, LESSOR SHALL
ADVISE LESSEE OF THE TIME REQUIRED TO MAKE REPAIRS NECESSARY TO BRING THE
BUILDING OR PORTION THEREOF TO ITS ORIGINAL CONDITION.
THE LESSOR SHALL BEGIN REPAIRS WITHIN A REASONABLE PERIOD IN THE EVENT OF ANY
SUCH DAMAGE TO THE BUILDING. IF SUCH DAMAGE IS MINOR, (AS INSURANCE COMPANIES
DEFINE MAJOR AND MINOR DAMAGE), THE RENT SHALL BE DECREASED IN PROPORTION AND IN
ACCORDANCE TO WHAT IS ESTABLISHED BY THE INSURANCE COMPANY, FROM THE DATE OF THE
CASUALTY OR DAMAGE UNTIL THE PREMISES ARE REPAIRED, AFTER 90 DAYS IF LESSOR HAS
NOT BEGUN THE PREMISES REPAIR LESSEE MAY CANCEL THIS AGREEMENT. FOR MAJOR DAMAGE
FROM ANY CAUSE, WHERE A THIRD OR MORE OF THE PREMISES CANNOT BE OCCUPIED, ALL
RENT WILL BE ABATED, FROM THE DATE OF CASUALTY OR DAMAGE, AND LESSOR WILL HAVE
THIRTY DAYS TO ASSESS THE DAMAGE, AFTER WHICH, LESSEE WILL HAVE THE RIGHT TO
TERMINATE THIS LEASE AGREEMENT IF IN LESSEE'S OPINION REPAIRS CANNOT BE
COMPLETED WITHIN THE FOLLOWING 90 DAYS. UNDER ANY CONDITION, IF THE REPAIR OF
THE DAMAGE HAS NOT OR CANNOT BE COMPLETED AFTER A PERIOD OF 120 DAYS AFTER SAID
DAMAGE OR CASUALTY OCCURRED, LESSEE WILL HAVE A RIGHT TO TERMINATE THIS LEASE
AGREEMENT WITH NO LIABILITY TO EITHER LESSEE OR LESSOR.
NOTWITHSTANDING ANYTHING ABOVE TO THE CONTRARY, IN THE EVENT OF DAMAGE DUE TO
LESSEE'S NEGLIGENCE, LESSEE SHALL HAVE NO RIGHT TO CANCEL THIS AGREEMENT.
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THIRTEENTH. A INSURANCE. LESSOR SHALL CONTRACT ON HIS BEHALF, WITH AN INSURANCE
COMPANY DULY AUTHORIZED IN MEXICO, THE INSURANCE HEREINBELOW;
A).- PROPERTY AND CASUALTY INSURANCE THAT PERTAINS TO THE BUILDING WITH A
COVERAGE OF ONE HUNDRED PERCENT (100%) OF THE INSURABLE VALUE OF THE BUILDING'S
STRUCTURE AND COMMON AREAS INCLUDING ALL EQUIPMENT AND FIXTURES (EXCEPT FOR
THOSE INSTALLED BY LESSEES), AGAINST FIRE, LIGHTNING. EXPLOSIONS, HURRICANE,
HAIL, THUNDERSTORMS, ACCIDENTAL DUCT FAILURE, EARTHQUAKES AND VOLCANIC ERUPTION,
DAMAGE BY WORKERS STRIKE, VANDALISM, OR UPRISINGS, ON BEHALF OF THE LESSOR. THE
LESSOR SHALL PROVIDE INSURANCE AGAINST ACCIDENTAL BREAKS OF WINDOWS OF THE
BUILDING'S FRONTAGE ON BEHALF OF THE LESSOR.
B).- LIABILITY INSURANCE, WITH A MINIMUM COVERAGE, STANDARD ON THE MEXICAN
MARKET FOR FIRST CLASS FACILITIES, COVERING DAMAGES CAUSED BY THIRD PARTIES OR
PROPERTY THEREOF INCLUDING NEGLIGENT ACTS BY THE LESSOR, LESSEES OR ITS AGENTS,
EMPLOYEES OR PARTNERS.
LESSEE SHALL PROVE THAT IT HAS THE NECESSARY RESOURCES OR THAT IT INTENDS TO
ACQUIRE THE NECESSARY INSURANCE TO COVER ALL DAMAGES TO THE PREMISES AND
LIABILITY FOR DAMAGES CAUSED BY THIRD PARTIES OR PROPERTIES THEREOF, INCLUDING
LESSEE, ITS REPRESENTATIVES, EMPLOYEES OR PARTNERS NEGLIGENCE, WITH A MINIMUM
COVERAGE OF US $120,000.00. SAID FUND OR INSURANCE POLICY SHALL BE IN EFFECT
FROM THE POSSESSION DATE UNTIL OR AFTER THE EXPIRATION DATE OF THIS AGREEMENT,
WHEN LESSEES OBLIGATIONS HEREIN ARE COMPLETELY SATISFIED. LESSOR AND LESSEE
SHALL PROVIDE TO EACH OTHER THE RESPECTIVE COPIES OF THE INSURANCE POLICIES OR A
LEGAL EQUIVALENT WITHIN THE FOLLOWING 30 DAYS TO THE DATE A WRITTEN REQUIREMENT
IS RECEIVED.
LESSEE HEREBY AUTHORIZES LESSOR THAT, AT THE EXPENSE OF LESSEE, TO PAY
REASONABLE EXPENSES OF THE INSURANCE AND PASSED THEM ON TO LESSEE AS BUILDING
OPERATING EXPENSES, IN ACCORDANCE TO THE PROPORTION THAT LESSEE HAS SAID
EXPENSES AS DEFINED IN CLAUSE EIGHTH.
FOURTEENTH.- AIR CONDITIONING SYSTEM. LESSOR SHALL PROVIDE AIR CONDITIONING
CAPACITY EQUIVALENT TO 1 TON PER 37 SQUARE METERS OF THE BUILDING'S LEASABLE
OFFICE SPACE AND SHALL PROVIDE LESSEE COLD WATER IN THE BUILDING FOR LESSEE'S
AIR CONDITIONING SYSTEM, LESSOR SHALL OBTAIN AND MAINTAIN COVENANTS FOR THE
ADEQUATE FUNCTIONING OF SAID SYSTEM IN THE BUILDING.
LESSEE SHALL PAY ALL EXPENSES RELATED TO THE PERIODIC MAINTENANCE OF THE AIR
CONDITIONING GENERAL SYSTEM WITHIN THE PREMISES.
FIFTEENTH.- NAME DISPLAY. LESSEE REQUIRES LESSOR'S APPROVAL TO PLACE ANY SIGNAGE
AT THE BUILDING'S MAIN ENTRANCE OR FRONTAGE. LESSEE'S TRADE NAME CAN BE PLACED
AT THE BUILDING'S DIRECTORY PRIOR LESSOR'S APPROVAL AND SHALL NOT OCCUPY A
LARGER SPACE THAN THAT AUTHORIZED BY LESSOR. LESSOR SHALL PROVIDE AND INSTALL
ALL LETTERS OR NUMBERS REQUIRED TO PLACE LESSEE'S NAME, FLOOR AND OFFICE NUMBER
ON THE BUILDING'S DIRECTORY AND ENTRANCE AND MAY PASS THROUGH SAID COSTS TO
LESSEE.
THE NUMBER OF AVAILABLE LINES FOR LESSEE ARE TWO FOR EACH LEASED FLOOR BY
LESSEE. LESSEE IS ALLOWED, AT HIS OWN EXPENSE, TO INSTALL IN THE DOORS AT THE
PREMISE'S ENTRANCE AS WELL AS IN THE ELEVATOR LOBBIES OF THE FLOORS ENTIRELY
OCCUPIED BY LESSEE, ANY OF THE LESSEE'S OR SUB-LESSEE'S PARTICULAR SIGNAGE.
THE LESSOR HEREBY AGREES, SUBJECT TO CORRESPONDING AUTHORITIES APPROVAL, TO
ALLOW LESSEE TO PLACE PROMINENT SIGNAGE ON THE BUILDING'S GROUNDS, WHICH SHALL
BE OF A SIZE COMMENSURATE WITH LESSEE'S OCCUPANCY OF THE BUILDING. LESSEE SHALL
SUBMIT SPECIFICATIONS WITH THE PROPOSED HEIGHT AND DIMENSIONS OF THE SIGNAGE TO
LESSOR FOR APPROVAL.
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SIXTEENTH.- SUBLEASING AND ASSIGNMENT. LESSEE WILL HAVE THE RIGHT TO SUBLEASE
THE PREMISES OR ASSIGN ITS RIGHTS, WITH THE PRIOR WRITTEN AUTHORIZATION OF
LESSOR, AND UNDER THE LAWS OF MEXICO, WHICH SHALL NOT BE UNREASONABLY WITHHELD
FOR MORE THAN 15 DAYS. LESSEE SHALL NOT SUBLEASE THE PREMISES NOR ASSIGN ITS
RIGHTS HEREOF TO MORE THAN FOUR THIRD PARTIES AT THE SAME TIME, IN THE SAME
BUILDING LEVEL THAT SHOULD BE LEASED AT THAT TIME. NOTWITHSTANDING ANYTHING
ABOVE TO THE CONTRARY, LESSEE MAY SUBLEASE THE PREMISES OR ASSIGN ITS RIGHTS
HEREUNDER, IN WHOLE OR IN PART, TO ANY OF ITS, OR ITS PARENT'S COMPANIES,
AFFILIATES, DIVISIONS OR SUBSIDIARIES OR IN WHICH THERE ARE ITS STOCKHOLDERS,
PRIOR WRITTEN NOTICE TO THE LESSOR. ANY BUSINESS OF THE SAME SIZE OR CREDIT AS
THE LESSEE, SHALL REQUIRE PREVIOUS WRITTEN NOTICE BY THE LESSOR. IN BOTH CASES,
LESSEE SHALL REMAIN LIABLE FOR ALL FINANCIAL OBLIGATIONS HEREUNDER AND SUCH
SUBLEASES SHALL BECOME BOUND BY ALL THE PROVISIONS HEREOF.
SEVENTEENTH.- USE-COMPLIANCE WITH LAWS. LESSOR DECLARES AND GUARANTEES THAT:
A) THE BUILDING MAY BE LEGALLY USED FOR OFFICES, PURSUANT THE LAWS, REGULATIONS
AND LEGAL PROVISIONS NOW IN EFFECT IN MEXICO;
8) THE BUILDING HAS BEEN CONSTRUCTED ABIDING BY ALL CONSTRUCTION LAWS,
AUTHORIZED USES AND OTHER APPLICABLE PROVISIONS AND THAT NO ASBESTOS WERE USED
OR WILL BE USED IN THE CONSTRUCTION OF THE BUILDING;
C) THE BUILDING HAS THE LEGALLY REQUIRES SAFETY, FIRE AND OTHER HAZARD
PREVENTION, AS WELL AS AN EMERGENCY EVACUATION PROGRAM.
EIGHTEENTH.- TAXES AND DUTIES. LESSEE SHALL BE OBLIGED TO PAY TO LESSOR ANY
TAXES LEVIED, WHICH ARE REQUIRED BY LAW TO BE PAID BY LESSEE, ON THE RENTS AND
BUILDING OPERATING EXPENSES (EXCLUDING LESSORS INCOME TAX); ALL TAXES, INCLUDING
REAL ESTATE PROPERTY TAXES, DUTIES AND LEVIES NOW OR HEREAFTER AFFECTING THE
BUILDING SHALL BE PAID BY LESSOR.
NINETEENTH.- ADDITIONAL PARKING SPACE. LESSEE MAY CONTRACT FOR ADDITIONAL
PARKING SPACES WITHIN THE BUILDING, IF AVAILABLE AT LESSOR'S DISCRETION AT
$50.00 FOR NON DESIGNATED SPACES AND $75 FOR DESIGNED SPACES, PER MONTH. THE
COST OF SAID PARKING CONTRACTS SHALL BE ADJUSTED ACCORDING AS SET FORTH IN
CLAUSE SEVENTH.
TWENTIETH.- CAUSES FOR RESCISSION. LESSOR MAY TERMINATE THIS AGREEMENT IN THE
EVENT LESSEE DEFAULTS IN ANY OF ITS OBLIGATIONS HEREUNDER AND UNDER THE LAWS OF
MEXICO, INCLUDING THE LESSEE'S FAILURE TO MEET ITS PAYMENT OBLIGATIONS, AND IN
ANY OF THE FOLLOWING EVENTS:
CAUSES OF RESCISSION INCLUDE, WITH NO LIMITATION:
A) FAILURE TO PAY TWO OR MORE CONSECUTIVE MONTHLY RENTS.
B) THE USE OF THE PREMISES OTHER THAN FOR OFFICE PURPOSES AS PERMITTED IN THIS
AGREEMENT.
C) SUBLETTING OR ASSIGNING ITS RIGHTS HEREUNDER WITHOUT LESSOR'S PRIOR WRITTEN
AUTHORIZATION, EXCEPT AS OTHERWISE PROVIDED FOR IN CLAUSE SIXTEENTH;
D) MODIFYING THE PREMISES OR PERFORMING ALTERATIONS IN A MANNER WHICH MATERIALLY
DAMAGES THE STRUCTURAL INTEGRITY OF THE BUILDING, THE DAMAGE PREVIOUSLY
CONFIRMED BY AN EXPERT OPINION, WITHOUT COMPLYING WITH CLAUSE NINTH;
E) FAILURE TO PAY TWO OR MORE MONTHLY BUILDING OPERATING EXPENSES IN ACCORDANCE
WITH CLAUSE EIGHTH.
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FAILURE TO COMPLY CONSISTENTLY WITH THE BUILDING RULES AND REGULATIONS, AFTER
BEING WARNED ABOUT THE FAILURE, AND HAVING PASSED THE TERM GIVEN TO CORRECT THE
FAILURE DETERMINED IN THIS CLAUSE, SHALL NOT BE THE CAUSE FOR RESCISSION, BUT
SHALL IMPLY A FINE WHICH WILL BE EQUIVALENT TO $10,000., SUCH FINE SHOULD BE
PAID IN THE NEXT 5 DAYS AFTER PRIOR WRITTEN NOTICE OF LESSOR OR THE BUILDING
ADMINISTRATOR. AFTER SUCH TERM, SAID AMOUNT SHALL BEAR AN INTEREST UNDER THE
SAME TERMS AS SPECIFIED IN CLAUSE FIFTH.
IN THE EVENT THAT THE COMPETENT AUTHORITY KNOWS, INTERPRETS, OR EXECUTES ANY
DISPOSITION IN THIS INSTRUMENT AND DECLARES THE RESCISSION OF THE AGREEMENT
HEREIN CAUSED BY ANY DEFAULT OF THE LESSOR, THE LESSOR SHALL PAY TO LESSEE, IN A
TERM NOT EXCEEDING 10 DAYS FROM THE RESOLUTION THAT STATES SO, THE AMOUNTS FOR
RENT AND MAINTENANCE GENERATED BY THIS DEFAULT UNTIL THE DATE THE SITUATION IS
CURED PLUS AND ADDITIONAL FINE THAT SHALL BE EQUIVALENT TO SIX RENT MONTHS
OUTSTANDING AT THE TIME THE SITUATION IS BE CURED, OR THE AMOUNTS ON WHICH BOTH
PARTIES AGREED UPON AT THAT TIME.
ONCE PAID THE AMOUNTS REFERRED HEREINBEFORE TO THE LESSOR, THE LESSEE SHALL BE
EMPOWERED TO USE THE PREMISES UNTIL THE EXPIRATION OF THE AGREEMENT HEREUNDER,
SUCH TERM BEING THE ONE DESIGNATED INITIALLY OR THE EXTENSION.
LIKEWISE, LESSEE MAY TERMINATE THIS AGREEMENT IN THE EVENT LESSOR DEFAULTS IN
ANY OF THE OBLIGATIONS HEREUNDER AND UNDER THE LAWS OF MEXICO, WHICH INCLUDE BUT
ARE NOT LIMITED TO:
A) NON DELIVERY OF THE PREMISES OR FAILURE TO COMPLETE THE BUILDING, WHEN AND As
PROVIDED IN THIS AGREEMENT, TO A DEGREE THAT THE TENANT MAY START AT AN ADEQUATE
LEVEL ITS NORMAL OPERATIONS AT THE TIME OF THE COMMENCEMENT OF ITS OFFICE
ACTIVITIES.
B) FAILURE TO PERFORM REPAIRS OF THE BUILDING SYSTEMS, REPAIRS AND CORRECTION OF
HIDDEN DEFECTS OF THE BUILDING AND PREMISES, WHEN AND AS PROVIDED HEREUNDER.
C) UNDER THE TERMS ESTABLISHED IN THE TWELFTH CLAUSE, IF FOR ANY EVENT,
INEVITABLE ACCIDENT, ACT OF GOD OR ACTS IMPUTABLE TO LESSOR THAT ENTIRELY
PREVENT LESSEE USE OF THE PREMISES.
IN ANY CASE, EITHER THE LESSOR OR LESSEE SHALL PROVIDE, UPON WRITTEN NOTICE OF
ANY DEFAULT, A 90 (NINETY) CALENDAR DAYS PERIOD, TO CURE NON FINANCIAL DEFAULT
BEFORE RESCINDING THIS AGREEMENT. IN THE EVENT A DEFAULT OCCURS REGARDING THE
TIMELY PAYMENT OF RENT OR ANY OTHER DUE AMOUNT DERIVED HEREOF, UPON RECEIPT OF
THE DEFAULT NOTICE, THE LESSOR SHALL GIVE LESSEE 30 (THIRTY) CALENDAR DAYS TO
CURE.
TWENTY FIRST.- NOTICES. ALL NOTICES RELATED TO THIS AGREEMENT SHALL BE SERVED IN
WRITING AT THE PARTIES ADDRESSES. SAID ADDRESSES SHALL BE THE FOLLOWING, UNLESS
OTHERWISE CHANGED BY WRITTEN NOTICE:
FOR LESSOR:
ATTN.: FIDEICOMISO F/3959 BANCO DEL ATLANTICO, S.A.
ING. ARMANDO VALENCIA HERRERA OR DESIGNEE
AV. REVOLUCION NO. 1601
COL. SAN ANGEL
MEXICO, D.F. 01000
FAX: 525-550-3014
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FOR LESSEE:
FOR: ORIX GLOBAL COMMUNICATIONS, INC.
ATTN.: MR. ROBERT A. MICHEL OR DESSIGNEE
1771 E. FLAMINGO RD.
BLDG. B. SUITE 200
LAS VEGAS, NV 89119
TEL: (702)-792-2500
FAX: (702) 792-3313
COPY: INSURGENTES SUR #1605- MODULO "D", TENTH FLOOR OF THE BUILDING
TWENTY SECOND.- ESTOPPEL CERTIFICATE, SUBORDINATION AND DOCUMENTATION OF LEASE
CONTRACT. LESSEE AGREES THAT AT ANY TIME AFTER THE POSSESSION DATE OF THE
PREMISES, AND FROM TIME TO TIME UPON NO LESS THAN 15 (FIFTEEN) DAYS PRIOR
REQUEST BY LESSOR, LESSEE SHALL SIGN AND DELIVER TO LESSOR A STATEMENT PREPARED
BY LESSEE IN WRITING CERTIFYING TO THE EXTENT APPLICABLE: (A) THE DATE UPON
WHICH THE TERM OF THIS AGREEMENT COMMENCES AND TERMINATES; (B) THE DATES ON
WHICH RENTS AND ANY ADDITIONAL MONTHLY RENT HAS BEEN PAID; (C) THE AMOUNT OF ANY
SECURITY DEPOSIT; (D) THAT LESSEE HAS ACCEPTED AND IS OCCUPYING THE PREMISES;
(E) THAT THIS AGREEMENT IS IN FULL FORCE AND EFFECT AND LESSEE SHALL STATE ANY
AMENDMENTS OR ADDITIONS THAT MAY EXIST; (F) THAT ALL IMPROVEMENTS TO THE
PREMISES HAVE BEEN SATISFACTORY COMPLETED, THAT THE SAME SHALL BE OWNED BY THE
LESSEE UNDER THIS LEASE AGREEMENT; (G) THAT THERE ARE NO DEFAULTS OF LESSEE
UNDER THE LEASE NOR ANY EXISTING CONDITION UPON WHICH THE GIVING OR NOTICE OR
LAPSE OF TIME WOULD CONSTITUTE A DEFAULT; (H) THAT LESSEE HAS NOT RECEIVED ANY
CONCESSION; (I) THAT LESSEE HAS RECEIVED NO NOTICE FROM ANY INSURANCE COMPANY OF
ANY DEFECTS OR INADEQUACIES OF THE PREMISES; (J) THAT LESSEE HAS NO OPTION OR
RIGHTS OTHER THAN AS SET FORTH IN THIS AGREEMENT; (K) THAT THE ENDORSEMENT FOR
THE OBLIGATIONS OF LESSEE IS IN FULL FORCE AND EFFECT; AND (L) SUCH OTHER
MATTERS WHICH LESSOR MAY REASONABLY REQUEST INCLUDING LESSEE'S ACKNOWLEDGMENT
AND ACCEPTANCE OF ANY ASSIGNMENT BY LESSOR OF ANY OF ITS RIGHTS HEREUNDER.
IF SUCH STATEMENT IS TO BE DELIVERED TO A PURCHASER OF THE BUILDING, IT SHALL
FURTHER INCLUDE THE AGREEMENT OF LESSEE TO RECOGNIZE SUCH PURCHASER AS LESSOR
UNDER THE LEASE AND TO THEREAFTER PAY RENT TO SUCH PURCHASER OR ITS DESIGNEE IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, (PROVIDED SUCH PURCHASER ASSUMES
ALL OBLIGATIONS IN ACCORDANCE WITH THIS LEASE AGREEMENT) AND LESSEE ACKNOWLEDGES
THAT ANY SUCH PURCHASER MAY RELY ON SUCH STATEMENT. LESSEE'S FAILURE TO COMPLY
WITH THIS SECTION SHALL BE CONSIDERED A MATERIAL BREACH OF THIS AGREEMENT.
LESSOR'S OR LESSEE'S FAILURE TO COMPLY WITH THIS SECTION SHALL BE A MATERIAL
BREACH OF THIS AGREEMENT. LESSOR SHALL BE OBLIGED IN A MUTUAL WAY TO THE LESSEE,
AND LESSOR SHALL DELIVER, WHEN THE LESSEE REQUIRES IT, A SIMILAR CERTIFICATE IN
ACCORDANCE WITH THIS CLAUSE.
TWENTY THIRD.- PURCHASE OPTION. THE PARTIES AGREE THAT LESSEE SHALL HAVE THE
FIRST RIGHT OF PURCHASE AS LONG AS THIS AGREEMENT IS IN FULL FORCE, FOR LESSEE'S
OCCUPIED PREMISES, AT A MARKET PRICE LESS THE VALUE OF IMPROVEMENTS MADE TO THE
PREMISES PAID BY LESSEE, ONLY IN THE EVENT THAT LESSOR'S OFFER TO SELL THE
BUILDING AS A CONDOMINIUM TO THIRD PARTIES; PROVIDED THAT AT THAT TIME, LESSEE
IS NOT UNDER DEFAULT HEREUNDER, ADDITIONALLY, LESSEE SHALL HAVE DURING THE FULL
FORCE OF THIS AGREEMENT, UNDER THE SAME CONDITIONS AS DESCRIBED HEREINBEFORE,
THE RIGHT TO THE SECOND PURCHASE OFFER TO BUY THE PREMISE(S) FROM OTHER
LESSEE(S) IN THE BUILDING, KNOWING THAT IN ANY EVENT THESE OR ANY OTHER PERSON
DESIGNATED BY THE LESSOR SHALL HAVE THE FIRST PURCHASE OFFER.
LESSOR SHALL FORTHWITH NOTIFY LESSEE ITS INTENTION TO SELL CONDOMINIUM SPACE IN
THE BUILDING. LESSEE SHALL HAVE 90 DAYS TO EXERCISE ITS RIGHT FOR THE FIRST
PURCHASE
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OFFER FROM THE DATE THE LESSOR NOTIFIES SUCH INTENTION. LESSEE SHALL NOT HAVE
ANY RIGHT TO PURCHASE THE PREMISES IF THE BUILDING IS OFFERED FOR PURCHASE AS A
WHOLE.
TWENTY FOURTH.- TENANT CONSTRUCTION. LESSEE SHALL BE RESPONSIBLE FOR THE
CONSTRUCTION OF ITS IMPROVEMENTS AND LESSOR SHALL GIVE PRIOR APPROVAL OF SAID
IMPROVEMENTS.
LESSEE SHALL HAVE THE RIGHT TO CHOOSE ITS OWN ARCHITECT(S), ENGINEER(S),
CONTRACTOR(S), AND SUB-CONTRACTOR(S) TO PERFORM INITIAL AND FUTURE TENANT
CONSTRUCTION. THERE SHALL BE NO CHARGE BY LESSOR FOR THE REVIEW OF PLANS OR
INSPECTIONS THAT LESSOR DEEMS NECESSARY DURING AND AFTER LESSEE'S CONSTRUCTION,
OR DURING ANY OF LESSEE'S ALTERATIONS.
LESSEE AGREES TO COMPLY WITH THE RULES AND REGULATIONS FOR OFFICE ADJUSTMENTS AS
SET FORTH IN OFFICE SPACE CONSTRUCTION AND ADJUSTMENTS GENERAL DISPOSITIONS
(EXHIBIT "D").
LESSEE AGREES TO COMPLY WITH LESSORS SPECIFICATIONS IN RESPECT TO WINDOW
COVERINGS FOR ALL WINDOWS IN THE PREMISES, AND ACKNOWLEDGES THAT MAINTENANCE AND
COST THEREOF SHALL BE PAID BY LESSEE.
TWENTY FIFTH.- LANGUAGE. THIS AGREEMENT SHALL BE SIGNED IN SPANISH THE PARTIES
HEREIN STATE THAT THEY KNOW SUCH LANGUAGE AND THAT THEY ARE FULLY AWARE OF THE
LEGAL SCOPE AND CONSEQUENCES OF THE PROVISIONS CONTAINED HEREIN.
TWENTY SIXTH.- SATELLITE DISH INSTALLATION. LESSEE SHALL NOT USE THE FLAT SPACE
ON THE ROOF NOR PLACE A MICROWAVE ANTENNAE OR SIMILAR ANTENNAE OR COMMUNICATION
DEVICE, UNLESS LESSOR PROVIDES ITS EXPRESS CONSENT, ALL THESE AFTER OBTAINING
THE SPECIFIC PERMITS REQUIRED FROM THE COMPETENT AUTHORITIES AND LESSOR'S
APPROVAL. LESSEE SHALL SUBMIT SPECIFICATIONS WITH THE PROPOSED HEIGHT,
DIMENSIONS AND DESIRED LOCATION OF THE EQUIPMENT TO LESSOR FOR APPROVAL. LESSOR
SHALL HAVE FINAL APPROVAL OVER THE PLACEMENT OF SUCH ANTENNAE AND THOSE OF OTHER
TENANT(S), LESSOR'S PLACEMENT SHALL NOT INTERFERE WITH THE ANTENNAE'S FUNCTION.
THE COSTS ASSOCIATED WITH THIS INSTALLATION, REPAIR AND MAINTENANCE SHALL BE
BORNE BY LESSEE.
WITH LESSOR'S PREVIOUS APPROVAL, LESSEE SHALL HAVE ACCESS TO THE ROOF THROUGH
THE FREIGHT ELEVATOR OF THE OFFICE TOWER, WITH THE PURPOSE TO INSTALL ITS
MICROWAVE ANTENNAE.
TWENTY SEVENTH.- EMERGENCY GENERATOR. LESSEE SHALL HAVE THE OPTION TO INSTALL A
LOW TENSION GENERATOR FOR EMERGENCIES, SUBJECT TO REVIEW AND APPROVAL OF LESSOR
AND ITS ARCHITECTS AND ENGINEERS. FOR THIS PURPOSE, LESSOR WILL GRANT LESSEE
SUITABLE SPACE NEXT TO THE BUILDING'S EQUIPMENT FOR A PREVIOUSLY AGREED COST
BETWEEN THE PARTIES DURING THE TERM HEREUNDER.
TWENTY EIGHTH.- GUARANTIES. IN ORDER FOR LESSEE TO GUARANTY ITS OBLIGATIONS
ESTABLISHED HEREIN, LESSEE SHALL TAKE THE GUARANTEE HEREINBELOW, WITH LESSOR'S
TOTAL ACCEPTANCE AND LESSOR SHALL DELIVER ALL DOCUMENTS JUSTIFIABLY REQUIRED,
ACKNOWLEDGING THAT LESSEE SHALL DELIVER SAID GUARANTEE TO LESSOR IN THE TERM
THAT SHALL EXPIRE ON DECEMBER 25, 1997.
A) A GUARANTEE FOR THE AMOUNT OF $32,000.00 MEXICAN PESOS, THAT SHALL COVER
ATTORNEY'S FEES IN CASE THE ARBITRAGE PROCEDURE HEREIN ENTERS INTO EFFECT, SUCH
AS COSTS, AND
8) A GUARANTEE AUTOMATICALLY ANNUALLY RENEWABLE FOR THE AMOUNT OF US $67,139.28
TO GUARANTY PAYMENTS DERIVED FROM CONCEPTS OF RENT AND MAINTENANCE INSTALLMENTS.
SUCH POLICIES SHALL BE EVIDENT AS EXHIBIT HEREUNDER UNTIL ITS EXPIRATION.
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THE COST OF SUCH GUARANTEES SHALL BE PAID BY LESSEE WHICH SHALL PAY IT AT THE
EXECUTION OF THIS AGREEMENT, OR SHALL PRESENT SAID GUARANTEES IN A TERM NO
LONGER THAN 10 BUSINESS DAYS FROM THE EXECUTION OF THIS AGREEMENT.
LESSOR SHALL ANNUALLY RENEW SUCH GUARANTEES WITH LESSEE'S TOTAL APPROVAL, AND
LESSEE COMMITS TO PAY ITS YEARLY COST, DURING THE TERM OF THIS CONTRACT. IN THE
EVENT THAT THE LEASE HOLDER FAILS TO PAY THE GUARANTEE'S RENEWAL, THE LEASE
LENDER SHALL HAVE THE FACULTY TO PAY THE RENEWAL BONUS OF SUCH BOND,
ADDITIONALLY IT WILL HAVE THE FACULTY TO DEMAND OR REBOUND SUCH PAYMENT AGAINST
THE LEASE HOLDER.
TWENTY NINTH.- TRIAL EXPENSES. IN THE EVENT THAT EITHER PARTY DEFAULTS TO ANY OF
THE CLAUSES HEREIN, IN SUCH A WAY THAT THEY GIVE CAUSE FOR THE RESCISSION OF
THIS AGREEMENT, THROUGH CORRESPONDING TRIAL WITH ARBITRATORS DESIGNATED BY THE
PARTIES HEREUNDER, THE PARTY SENTENCED BY DECISION UNDER THIS PROCEEDING,
SHALL BE OBLIGED TO PAY TO THE OTHER PARTY, THE EXPENSES GENERATED BY THIS
PROCEEDING, AS SET FORTH HEREINBELOW.
THE EXPENSES AND COSTS GENERATED BY THE EXECUTION OF SUCH ARBITRAGE PROCEEDING
DESCRIBED HEREIN, BY MUTUAL AGREEMENT THE AMOUNT ESTABLISHED SHALL BE OF
N$32,000.00 WHICH SHALL BE PAID AS SET FORTH IN CLAUSE THIRTY-FIFTH, TRIAL
EXPENSES.
THIRTIETH.- JURISDICTION. THE PARTIES EXPRESSLY AGREE THAT IN THE EVENT OF ANY
DISPUTE ARISING OUT OF OR IN CONNECTION TO THE INTERPRETATION OR COMPLIANCE
(TERMINATION, RESCISSION, PAYMENT OF PESOS) OF THIS LEASE AGREEMENT SHALL BE
SUBMITTED TO AN ARBITRAGE TRIBUNAL, FOR SUCH IN THIS ACT EXECUTE THE
CORRESPONDING ARBITRATORS COMMITMENT AS ESTABLISHED IN ARTICLE 609 OF THE CIVIL
PROCEDURES CODE.
THIRTY FIRST.- ARBITRATION PROCEDURE. THE ARBITRAGE PROCEDURE SHALL BE SUBMITTED
TO THE FOLLOWING ARTICLES: ARTICLE 1.- ALL CONFLICTS RELATED TO A SAME LEASE
AGREEMENT MAY BE PUT IN ONE CLAIM, EVEN IF CLAIMS ARE FROM DIFFERENT PEOPLE
THUS, THE RESCISSION ACTION, THE TERMINATION AND PAYMENT IN PESOS TO THE
BONDSMAN ETC. COULD BE IN THE SAME CLAIM. ARTICLE 2.- THE ARBITERS APPOINTED BY
THE CONTRACTING PARTIES ARE: SERGIO ANTONIO LEYVA PARRA RUIZ GODOY WITH ADDRESS
IN PUEBLA 160 2ND FLOOR, COLONIA ROMA; JESUS MORENO MENDOZA, WITH ADDRESS IN
PUEBLA 160 2ND FLOOR, COLONIA ROMA; AND JORGE ORNELAS SOLIS WITH ADDRESS IN
PUEBLA 160 2ND FLOOR, COL. ROMA. ARTICLE 3.- THE ARBITERS SHALL BE EMPOWERED TO
APPOINT THE AGREEMENT SECRETARY, WHO SHOULD LEAVE EVIDENCE IN WRIT OF THE
ACCEPTANCE AND PROTEST OF SUCH DUTY. ARTICLE 4.- THE ACTING PARTY HAS THE RIGHT
TO CHOOSE ANY OF THE DESIGNATED ARBITERS; IN THE EVENT OF DEATH, OR FAULT OR
IMPEDIMENT TO CONTINUE IN SUCH A DUTY, ONCE ACCEPTED THIS. THE SAME ACTING PARTY
MAY CHOOSE A SUBSTITUTE ARBITER AMONG THE ONES APPOINTED BY THE PARTIES. ARTICLE
5.- IF ANY OF THE APPOINTED ARBITERS BY THE PARTIES CARRY OUT SUCH DUTY DUE TO
NON ACCEPTANCE, FAULT OR IMPEDIMENT, THE ACTING PARTY SHALL GO TO ANY OF THE
FIRST INSTANCE JUDGES AND SHALL ASK FOR THE APPOINTMENT OF A NEW ARBITER
ACKNOWLEDGING THAT IT WILL NOT BE NECESSARY TO BE SUBJECT TO THE OFFICIAL LISTS
AND IN THIS PROCEEDING THE DEFENDANT SHALL NOT INTERVENE. ARTICLE 6.- IT'S
EXPRESSLY AGREED THAT FOR THE ACTING IN THE ARBITRAGE JUDGMENT THERE ALL SHALL
BE CALENDAR DAYS AND TIMES, BUT THE ARBITER SHALL ENDEAVOR TO DESIGNATE WITH
PRUDENCE THE DATES AND TIMES TO CELEBRATE THE AUDIENCES. ARTICLE 7.-FUNCTIONS
AND COMMITMENTS OF THE ARBITERS: A) TO SUBMIT TO THE FORMALITIES AND PROCEDURES
ESTABLISHED AMONG THE PARTIES IN THIS ARBITERS COMMITMENT AND TO ADJUDICATE BY
MEANS OF SUPPLEMENTARY ACTION THE DISPOSITIONS OF THE PROCEDURE CIVIL CODE,
APPLICABLE IN MEXICO CITY WHEN IT MAY SEEM NEEDED AND SHALL NOT BE ANTAGONISTIC
WITH THE OTHER STIPULATIONS ON THIS COMMITMENT; B) TO MAINTAIN PROCEDURAL
EQUILIBRIUM AMONG THE PARTIES ANY TIME; C) TO TRY THAT THE PARTIES HAVE A
FRIENDLY ARRANGEMENT; D) TO WATCH THE CONVENIENT AND EFFICIENT EXECUTION OF THE
AWARD. ARTICLE 8.- ARBITRATION FEES.- FOR THE WHOLE JUDGMENT, THE FEE FOR EACH
ARBITER SHALL CORRESPOND TO THE EQUIVALENT OF TWO HUNDRED DAYS OF MINIMAL WAGE
IN FULL FORCE IN MEXICO CITY. ARTICLE 9.- SECRETARY OBLIGATIONS: A) TO COMPLY
WITH THE PROCEDURAL FORMALITIES ESTABLISHED AMONG THE PARTIES IN THIS PACT; B)
TO INTERVENE TO ATTEST OR CERTIFY IN ALL CASES THAT AN ARBITER MAY BE REQUIRED;
C)
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DELIVER THE CITATION TO THE DEFENDANT AND NOTIFY THE PARTIES THE AGREEMENT WITH
THE FORMALITIES SET FORTH LATER: D) TO HELP THE ARBITER IN EVERYTHING THAT MAY
BE REQUIRED FOR THE FAIR DEVELOPMENT OF THE ARBITRATION PROCEDURE. E) TO RECEIVE
FROM THE PARTIES ANY PROMOTIONS RELATED WITH THE ARBITRAGE AND NOTIFY THE
ARBITER IMMEDIATELY; F) TO DELIVER TO THE PARTIES UPON REQUEST SIMPLE OR
CERTIFICATE COPY OF THE WRIT, ACTING AND AWARD. ARTICLE 10.- SECRETARY FEES.-
THE SECRETARY FEES SHALL CORRESPOND THE EQUIVALENT OF 100 DAYS OF MINIMAL WAGE
IN FULL FORCE IN MEXICO CITY, ACCORDING TO THE ESTABLISHED IN ARTICLE 8. ARTICLE
ll.- PROCEDURE.- THE PROCEDURE STARTS UPON ARBITRATION PROCEEDING FROM ONE OF
THE PARTIES WITH THE FOLLOWING ACTION A) THE PARTY THAT, CONSIDERING THE OTHER
PARTY DEFAULTED IN ANY DISPOSITION OF THE LEASE AGREEMENT OR DAMAGING ANY RIGHT
DERIVED THEREOF, SHALL GO TO ANY OF THE DESIGNATED ARBITERS IN ARTICLE 2 AND THE
ONE WHO ACCEPTS THE DUTY SHALL PLACE THE CLAIM. ARTICLE 12.- THE CLAIM SHALL
HAVE THE FOLLOWING ELEMENTS: A.- NAME AND ADDRESS OF THE PLAINTIFF; B.- NAME AND
ADDRESS OF THE DEFENDANT; C.- DESCRIPTION OF WHATEVER FACTS THAT ESTABLISH AND
CAUSED THE CLAIM; D.- LAW RULES AND PRINCIPLES THAT MAY BE APPLICABLE; E.- ALONG
WITH THE CLAIM THE PLAINTIFF SHALL DELIVER THE DOCUMENTS FOUNDING ITS ACTION,
THE EVIDENCE SHALL BE OFFERED FROM THAT MOMENT ON, THE DOCUMENTS THAT AUTHORIZE
ITS LEGAL STATUS AND COPIES OF THE CLAIM AND ALL SHOWN DOCUMENTS ALONG WITH THE
WRITTEN CLAIM FOR THE NOTIFICATION TO EACH DEFENDANT. ARTICLE 13.- ESTABLISHING
THE CLAIM.- WHEN ESTABLISHING THE CLAIM, THE ARBITER SHALL CHOOSE ANY OF THE
SECRETARIES IN ARTICLE 3. THE AGREEMENT SECRETARY, ONCE ACCEPTING THE DUTY,
SHALL ALLOW THE CLAIM, THE PLACE FOR THE ARBITRAGE ENTRY SHALL DE DESIGNATED;
THE PLAINTIFF REPRESENTATION SHALL BE ANALYZED, ALL THE THINGS RELATED TO THE
EVIDENCE ADMISSION PRESENTED BY THE PLAINTIFF IN THE WRITTEN CLAIM SHALL BE
RESOLVED, AND THE DAY AND TIME FOR THE HEARINGS FOR THE JUDGMENT, WHICH
CELEBRATION SHALL ABIDE A 5 DAY TERM AFTER THE DEFENDANT CITATION. ARTICLE 14.-
THE CITATION SHALL BE DELIVERED BY THE SECRETARY EVEN WHEN THE ADDRESS OF THE
DEFENDANT SHOULD NOT BE IN MEXICO CITY, ACCORDING TO THE FOLLOWING FORMALITIES:
A).- THE PLACE FOR THIS PRACTICE IF ITS AN INDIVIDUAL, SHALL BE THE PLACE THAT
IS BEING LEASED, THE HOME ADDRESS, THE WORKING PLACE EVEN IF IT IS TRANSITORY OR
THE PLACE WHERE HE IS LOCATED; B).- IF THE PLACE BEING LEASED IS A COMPANY, ANY
OF ITS COMMERCIAL SITES, OFFICES, WAREHOUSES, OR IN THE ADDRESS OF ITS LEGAL
REPRESENTATIVE; C).- IN THE EVENT THAT THE DEFENDANT'S ADDRESS SHOULD BE UNKNOWN
THE CITATION SHALL BE BY MEANS OF PUBLISHED SUMMONS IN ANY OF THE LOCAL
NEWSPAPERS AND FOR THIS EVENT, THE FOLLOWING PROCEDURE SHALL BE FOLLOWED. l. IN
THE ENTRANCE DOOR OF THE PLACE BEING LEASED, SHALL BE FIXED A CERTIFICATE WHICH
PRECISES WHAT THE CLAIM IS ABOUT, NAME OF THE ARBITER, OF THE SECRETARY, THE
ADDRESS IN WHICH THE ARBITRAGE SHALL TAKE PLACE AND DATE AND TIME OF THE TRIAL
HEARING. 2.- IN SUCH EVENTS AFTER THE SUMMONS HAVE BEING PLACED THE DEFENDANT
SHALL NOT BE SEARCHED FOR ANY MORE. THE PROCEDURES ESTABLISHED IN FRACTION I OF
THIS ARTICLE SHALL NOT BE NECESSARY IN THE EVENT THE CLAIM MAY BE AGAINST THE
BONDSMAN. ARTICLE 15.- THE SECRETARY SHALL BE AWARE THAT THE PLACE WHERE THE
SERVICE OF SUMMONS TAKE PLACE MAY BE ANY OF THE ABOVE MENTIONED IN ARTICLE 14,
AND UNDERSTAND THE TASK WITH THE DEFENDANT, IN THE EVENT THAT THE DEFENDANT IS
NOT LOCATED, WITH ANY RELATIVE, EMPLOYEE, SERVANT OR NEIGHBOR IN THE SAME
PREMISES AND IN THE EVENT THAT THERE ARE NO MORE TENANTS WITH A NEIGHBOR OF THE
NEAREST PREMISES. IF DEEMED NECESSARY IT SHOULD BE PLACED A FIXED NOTICE ON THE
ENTRANCE DOOR OF THE PREMISES BEING LEASED OR IN A VISIBLE PLACE WITH THE
INFORMATION SET FORTH IN POINT 1 OF PARAGRAPH "C" IN THE PRECEDING ARTICLE. THE
SECRETARY SHALL PLACE NOTIFICATION WITH THE COPIES FROM THE PLAINTIFF, DULY
COMPARED AND WITH A COPY OF THE ADVISORY WRIT OF THE CLAIM. ARTICLE 16.- THE
PARTIES ARE OBLIGED TO GO TO THE DESIGNATED ADDRESS OF THE ARBITRAGE TO BE
NOTIFIED ABOUT WRITS, AGREEMENTS AND AWARD. THE SECRETARY MAY INFORM TO THE
PARTIES BY TELEPHONE ABOUT THE STATE OF ACTIONS IN THE AGREEMENT, WRIT AND AWARD
DISCRETIONAL AUTHORITY DOES NOT DISMISS THE PARTIES OF THE OBLIGATION TO GO
EVERY DAY TO THE PLACE OF THE ARBITRAGE TO CONFIRM ALL THE INFORMATION RECEIVED
BY TELEPHONE OR TO BE NOTIFIED ABOUT THE WRITS, AGREEMENTS AND AWARDS AND SHALL
BE IN FULL FORCE THE NEXT DAY OF ITS DATES. ARTICLE 17.- ANSWER TO THE CLAIM:
A).- THE TERM TO ANSWER THE CLAIM, SHALL MATURE AT THE TIME OF THE TAKING PLACE
OF THE HOLDING OF THE HEARING; B) THE DEFENDANT PARTY MAY EXECUTE RECONVENTIONAL
ACTION AND THE COUNTERCLAIM SHALL COMPLY WITH ALL THE REQUIREMENTS ESTABLISHED
IN ARTICLE 11 AND
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SHALL BRING SUIT WITH A MINIMUM 72 HOURS PRIOR THE HEARING FOR THE TRIAL. IN THE
EVENT, THAT ALL THESE REQUESTS DO NOT COMPLY, THE COUNTERCLAIM SHALL BE UNDONE.
ARTICLE 18.- RECONVENTION SHALL BE PROSECUTED IN ACCORDANCE TO THE FOLLOWING
PROCEDURE: A)- WITH THE COPIES OF THE RECONVENTION WRIT, THE PARTY
RECONVENTIONED SHALL BE NOTIFIED; B).- AT THE TIME OF THE HOLDING OF THE HEARING
THE RECONVENE PARTY MAY REQUIRER TO CELEBRATE A PRINCIPAL HEARING, AND A NEW DAY
AND TIME SHALL BE DESIGNATED TO HOLD THE RECONVENTIONAL HEARING AND IN THIS
EVENT, THE SECOND HEARING SHALL BE HELD IN THE SAME TERMS OF THE PRINCIPAL
HEARING OR, C).- THE RECONVENTION MAY BE ANSWERED AND IT SHALL REQUIRED TO HOLD
A FULL HEARING. ARTICLE 19.- DILATORY EXCEPTIONS.- THIS EXCEPTIONS SHALL BE
ESTABLISHED BY DEFENDANT WITH A MINIMUM 72 HOUR PRIOR THE HOLDING OF THE HEARING
AND SHOULD INCLUDE THE NEXT REQUIREMENTS: A).- TO COVENANT THE COSTS AND FEES OF
THE ARBITERS AND SECRETARY, THROUGH EXHIBIT OF A DEPOSIT IN CASH OF RENT
EQUIVALENT TO 150 DAYS OF MINIMAL WAGE IN FULL FORCE IN MEXICO CITY; B).- TO
DELIVER EVIDENCE WHICH CAN PROVE THE DILATORY EXCEPTIONS IN THE EVENT THAT ANY
OF SUCH EVIDENCE COULD NOT BE PRESENTED IN THE HEARING OF THE JUDGMENT, THE ONE
WHO FILED THE EXCEPTION SHALL COVENANT SOLVED FROM THIS EXCEPTION THROUGH A CASH
DEPOSIT PROOF EQUIVALENT TO 51 RENTAL MONTHS; C).- LIS PENDENS EXCEPTIONS,
SHALL CAUSE CONNECTION, LACK OF PERSONALITY, SHALL THE PREVIOUSLY PROSECUTED AT
THE BEGINNING AT THE END AND OF THE HEARING; D).- THE COUNTERPART SHALL ANSWER
THE EXCEPTION AND RELEASE PERTINENT EVIDENCE, IN THE EVENT THAT SOME EVIDENCE
COULD NOT BE PROVED IN THE HEARING, THE ARBITER SHALL FIX A TERM IN WHICH TO
SHOW IT AND A NEW DAY AND TIME SHALL BE DESIGNATED FOR THE CONTINUATION OF THE
HEARING; E) IN THE EVENT THAT SOME OF THE DEFENDANT'S EXCEPTIONS WERE CONSIDERED
ILLEGAL, THE AMOUNT OF THE ARBITER'S AND SECRETARY FEES SHALL BE DEDUCTED OF
SAID DEPOSITS, PLUS TWO EQUAL FIGURES WHICH SHALL BE PAID IMMEDIATELY AS
COMPENSATION TO THE COUNTERPART. THE REST SHALL BE DEPOSITED WITH THE ARBITER
UNTIL THE END OF THE TRIAL; F) IF THE DILATORY EXCEPTION IS DECLARED LEGAL, THE
TRIAL SHALL BE SUPERSEDED AND THE OTHER PARTY SHALL BE OBLIGED TO PAY THE COSTS.
ALL THE DILATORY EXCEPTIONS THAT DO NOT COMPLY WITH THE REQUIREMENTS IN THIS
ARTICLE SHALL BE DISMISSED. ARTICLE 20.- HEARING.- THE HEARING SHALL COMMENCE
WITH A CONCILIATORY STAGE IN WHICH THE ARBITER SHALL FIRST TRY TO SETTLE THE
PARTIES AND THE FOLLOWING RULES SHALL BE FOLLOWED: A).- IN THE EVENT OF THE
PLAINTIFF'S ABSENCE, THE FINAL WRIT SHALL BE RATIFIED AND THE HEARING SHALL NOT
BE IMPEDED; THE DEFENDANT SHALL DELIVER ITS ANSWER AND THE FINDINGS SHALL BE
PRESENTED; B);.- THE DEFENDANT'S ABSENCE SHALL MEAN THE ACCEPTANCE OF THE CLAIM
BY THE DEFENDANT AND THE AWARD SHALL BE ISSUED BY THE ARBITER. ARTICLE 21.- IN
ANSWERING THE CLAIM ON THE DEFENDANT'S BEHALF, IT SHALL REFER TO EACH AND
EVERYONE OF THE FACTS ESTABLISHED IN THE CLAIM AND SHALL PRESENT THE CONSIDERED
EXCEPTIONS. THE CONTRADICTORY, OBSCURE AND OPPOSED SHALL BE AUTOMATICALLY
DISMISSED BY THE ARBITER, WHEN THE LAWSUIT IS COMPLETE IT SHALL PASS TO THE
EVIDENCE STAGE; EACH PARTY SHALL SHOW THE EVIDENCE THAT IS RIGHT FOR THEMSELVES,
ACKNOWLEDGING THAT THE EVIDENCE NOT SHOWN IN SAID HEARING, SHALL BE ONLY
ADMITTED IF THE OFFERER COVERS THE ARBITER AND SECRETARY FEES THROUGH A CASH
DEPOSIT EQUIVALENT TO 300 DAYS OF MINIMAL WAGE IN FULL FORCE IN MEXICO CITY. THE
ARBITER IS EMPOWERED TO DISMISS ALL EVIDENCE THAT IS NOT RIGHT FOR THE DEBATE
POINTS, AND PRETEND TO HAVE SOME PUBLIC KNOWLEDGE, THAT COULD CAUSE AN
UNNECESSARY DELAY IN THE PROCEDURE COURSE OR EVEN WHEN PRESENTED WITH
SATISFACTION, AND ARE OF NO BENEFIT TO THE PARTY OFFERING IT. ARTICLE 22.- THE
PARTIES SHALL BE CONSIDERED IN THE KNOWLEDGE OF THE DATE OF THE HOLDING OF THE
HEARING: A).- TO APPEAR IN SUCH HEARING TO PRESENT THE EVIDENCE, IN THE EVENT
THAT IT MAY BE OFFERED AND APPEARING WITH NO JUSTIFIED CAUSE, IT SHALL BE
DECLARED AS ACKNOWLEDGING THE PREVIOUSLY LEGAL QUALIFIED POSITIONS PRESENTED
PRIOR THE HOLDING OF THIS HEARING. B).- THE CROSS EXAMINATION MAY BE DONE BY THE
INTERESTED PARTY OR ITS DULY AUTHORIZED ATTORNEY, WHENEVER SAID PARTY REQUIRES
IT. THIS FACULTY IS NOT THE RIGHT OF THE OFFERER; C).- IF THE ACQUITTAL IS DONE
BY THE ATTORNEY THE FOLLOWING FORMALITIES SHALL BE FOLLOWED: 1.- TO BE TAKEN AS
ACKNOWLEDGED THOSE POSITIONS WHERE IT IS SAID THE FACTS ARE UNKNOWN. 2.- UNDER
PROTEST TO TELL THE TRUTH, TO MANAGE WITH STRICT ATTACHMENT TO THE TRUTH AND ITS
RESPONSES TO CORRESPOND WITH THE REAL FACTS THAT IT ACKNOWLEDGES AND THE
INFORMATION GIVEN BY ITS REPRESENTATIVE. D) IF THE ACQUITTER IS OLDER THAN 65
YEARS OLD OR IF IT IS UNABLE BY ILLNESS TO APPEAR IN THE HEARING THE ARBITER,
THE SECRETARY AND THE PARTIES SHALL
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ESTABLISH IN THE ADDRESS IN WHICH SUCH ACQUITTER IS IN TO PRESENT THE EVIDENCE
AND THE NEXT REQUIREMENTS SHALL COMPLY 1. RATIFY MEDICAL CERTIFICATE TO THE
ARBITER IN WHICH THE ILLNESS SHALL BE DESCRIBED AND THE REASONS WHY THE
ACQUITTER IS UNABLE TO ATTEND THE ARBITRAGE. 2. THE DOCTOR WRITING THE
CERTIFICATE SHALL REMAIN DURING THE DURATION OF THE HEARING SO HE CAN CLARIFY
ANY DOUBT RAISED FROM THE ARBITRAGE OR THE PARTIES. 3. THE MEDICAL CERTIFICATE
SHALL INCLUDE IN WRITING THE PLACE WHERE THE ACQUITTER IS CONVALESCING. 4. THE
COUNTERPART OR THE ARBITER MAY DESIGNATE ANOTHER DOCTOR TO REVIEW THE OPINION
AND ALSO TO EXAMINE THE ACQUITTER. 5. THE ARBITER SHALL HAVE FULL FACULTY TO
EXAMINE THE MEDICAL REPORTS AND SOLVE CONTROVERSIAL FINDINGS OR ACKNOWLEDGING
SUCH. 6. IN THE EVENT THAT THE ACQUITTER IS OUTSIDE MEXICO CITY, IT SHALL BE
GIVEN AN ACKNOWLEDGMENT OF THE PREVIOUSLY LEGALLY QUALIFIED PROVISIONS AND
PREVIOUSLY PRESENTED TO THE HEARING. ARTICLE 23. PROOF BY WITNESSES. OFFERING.-
WHEN OFFERING THE PROOF BY WITNESSES THE OFFERER PARTY SHALL APPOINT THE NAME
AND ADDRESS OF THE WITNESSES, THE FACTS THAT THEY HAVE ATTENDED AND THE
INTERROGATORY THAT THEY SHALL BE GIVEN. A). - THE WITNESSES AMOUNT MAY BE
DECREASED AT THE ARBITER'S DISCRETION AND IN THE EVENT THAT THE WITNESSES DID
NOT ATTEND THE HEARING, THE OFFERER SHALL COMPLY WITH THE GUARANTIES ESTABLISHED
IN THE ARTICLE 19. THE ARBITER SHALL BE THE ONE MAKING THE QUESTIONS, HE SHALL
REJECT OBSCURE, CONFUSE, NOT PRECISE, TENDENTIOUS QUESTIONS NOT RELATED WITH THE
PROCESS OR THAT SUGGEST AN ANSWER, IN THE LATTER EVENT, THE SUBJECT OF THE
SUGGESTED QUESTION SHALL NOT BE THE MOTIF OF ANOTHER QUESTION.- THE COUNTERPART
MAY IN TIME, CROSS-EXAMINE IN RELATION WITH THE DIRECT QUESTIONS AND CREDIBILITY
OF THE WITNESS, WITH THE LEGAL MOTIVES OR WITH THE MEAN BY WHICH HE ACKNOWLEDGES
THE FACTS MENTIONED BY THE OFFERER PARTY. B).- IN THE EVENT THE WITNESSES ARE
NOT BE PRESENTED BY THE OFFERER PARTY AND ONCE GRANTED THE CORRESPONDENT
DEPOSIT, THE SECRETARY SHALL MAKE THE SUMMONS ACKNOWLEDGING THAT IN THE EVENT
THE WITNESSES LIVE OUT OF MEXICO CITY. THE NOTICE MAY BE SERVED BY TELEGRAM,
WITH ACKNOWLEDGMENT OF RECEIPT AND IN THE EVENT THE WITNESS SHALL NOT BE PRESENT
AT THE HEARING, THE DAY AND TIME FOR A NEW HEARING SHALL BE APPOINTED, IF THE
OFFERER OF THE EVIDENCE GRANTS SOME MORE GUARANTIES REFERRED TO IN ARTICLE 19,
IN THE EVENT OF THE DEPOSIT NOT BEING GRANTED THIS EVIDENCE SHALL BE DISMISSED.
THE ARBITER MAY DETECT ANY OF THE DECREE MEANS THAT ARE ESTABLISHED IN THE CIVIL
PROCEDURES CODE AND FOR ITS EXECUTION, SHALL BE ASSISTED BY A COURT OF GENERAL
JURISDICTION IN MEXICO CITY, FEDERAL DISTRICT. C).- WITNESS'S ABSENCE DUE TO
ILLNESS SHALL BE SUBJECT TO THE FORMALITIES ESTABLISHED IN ARTICLE 22. ARTICLE
24.- WHENEVER NECESSARY THE PRESENCE OF ANY EXPERT PROOFS, A UNIQUE AND
UNIMPEACHABLE EXPERT SHALL BE NAMED BY THE ARBITER. THE PARTIES MAY ASK THE
EXPERT ANY CLARIFICATION THAT DEEM NEEDED ACCORDING TO ITS JUDGMENT, ONLY THE
ARBITER MAY DECREE THE PLACEMENT OF A JUDGMENT BY A DIFFERENT EXPERT WHEN THIS
MAY BE STRICTLY NECESSARY. ARTICLE 25. - THE PARTY REQUIRING THE EXPERT PROOF
SHALL COVER THE EXPERT FEES SINCE THE PROOF'S IS OFFERED, THROUGH A CASH DEPOSIT
EQUIVALENT TO 300 DAYS OF MINIMAL WAGE IN FULL FORCE IN MEXICO CITY. ARTICLE
26.- DOCUMENTARY EVIDENCE.- THE PARTIES MAY OFFER THEIR RESPECTIVE AVAILABLE
DOCUMENTS AND IN THE EVENT OF OBJECTION BY THE OTHER PARTY, THE FOLLOWING RULES
SHALL BE OBSERVED: 1.- IN THE EVENT THE DOCUMENT MADE AND SUBSCRIBED BY A THIRD
PARTY, THE PARTY PRESENTING THE DOCUMENT TO THE TRIAL SHALL BE OBLIGED TO OFFER
THE EVIDENCE IN SUPPORT OF THE PROBATIVE VALUE. 2.- IF THE EXECUTION OF THE
OBJECTING PARTY, SUCH PARTY SHALL OFFER THE GRAPHOLOGY AND GRAPHOSCOPY EXPERT
REPORT TO CLARIFY THE SIGNATURE'S ORIGIN, IN SUCH CASE THE DEPOSIT REFERRED TO
IN ARTICLE 25 SHALL BE MADE. ARTICLE 25.- THE DOCUMENTS PRESENTED BY THE PARTIES
BUT NOT AVAILABLE AT THAT MOMENT, ONLY SHALL BE ADMITTED IF THE GUARANTY
ESTABLISHED IN ARTICLE 19 IS COMPLIED. THE ARBITER SHALL REQUIRED BY MEANS OF A
FIRST INSTANCE JUDGE THE HELP REQUIRED TO ADDRESS THE AUTHORITIES OR FILES WHERE
THIS DOCUMENTS ARE SO THAT IT MAY BE PRESENTED AS EVIDENCE. ARTICLE 27. -
PRESENTING EVIDENCE.- ARBITER SHALL HAVE THE WHOLE FACULTY TO ESTABLISH THE WAY
THE EVIDENCE SHALL BE PRESENTED. ALL THE EVIDENCE THAT MAY BE NOT PRESENTED IN A
15 DAY CALENDAR TERM SHALL BE DECLARED FORFEITED DUE TO THE INTEREST OF THE
PARTIES THE CLEAR RESOLUTIONS OF THIS ARBITRAGE. THE ARBITER MAY DECREE THE
PRESENTING OF EVIDENCE DIFFERENT FROM THE ONE OFFERED BY THE PARTIES, OR, THE
WIDENING OF THE ONES OFFERED. ARTICLE 28.- APPRAISAL OF EVIDENCE.- THE ARBITER
SHALL BE SUBJECT TO THE FOLLOWING SYSTEM OF APPRAISAL OF EVIDENCE. A) SHALL BE
OF FULL PROBATIVE VALUE: THE
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REPLY TO INTERROGATIVES, DOCUMENTED PUBLIC EVIDENCE, DOCUMENTS NOT DISMISSED
FROM THE PARTIES; B) SHALL HAVE THE PROBATORY VALUE THAT THE ARBITER MAY
GRANTED: REPLY TO INTERROGATIVES, EXPERT EVIDENCE, PRESUMPTIVE EVIDENCE AND ALL
THE OTHER PROBATORY MEANS THAT THE ARBITER MAY HAVE. ARTICLE 29.-ALLEGATION.-
ONCE CONCLUDED THE PRESENTING OF EVIDENCE, THE PARTIES SHALL ORALLY FORMULATE
THEIR ALLEGATION. ARTICLE 30.- ARBITER IS OBLIGED TO GIVE THE AWARD IN THE SAME
HEARING OF THE TRIAL IN THE FORESEEN EVENT IN ARTICLE 20 POINT "B" AND WITHIN A
TERM NO LONGER THAN 10 CALENDAR DAYS AFTER THE CONCLUSION OF THE HEARING; IN THE
EVENT OF NOT DOING SO, IT SHALL LOSE THE RIGHT TO ITS FEES, THE PLAINTIFF MAY BE
ASKED TO FORWARD THE ARBITER ACTS THAT THE PLAINTIFF MAY CHOOSE AMONG THE
DESIGNATED BY THE PARTIES. THE ARBITER WHO DOES NOT COMPLY WITH ITS OBLIGATION
SHALL BE RESPONSIBLE OF THE DAMAGES CAUSED TO THE PARTIES. ARTICLE 31.- THE
PARTIES EXPRESSLY CONVENE THAT THE WRITS, AGREEMENTS AND AWARDS GIVEN IN THE
ARBITRAGE PROCEDURE SHALL BE DEFINITE AND NO APPEAL SHALL PROCEED AGAINST THEM.
HOWEVER, THE ARBITER MAY MODIFY THE WRITS OR AGREEMENTS WHEN IT DEEMS THAT A
PROCEDURE FORMALITY HAS BEEN BREACHED. ARTICLE 32.- IN EVERY AWARD THERE SHALL
BE A SENTENCE IN COSTS WHICH INCLUDE THE ARBITER AND SECRETARY FEES AND THREE
FOLD OF THE TOTAL AMOUNT OF THOSE FIGURES IN FAVOR OF THE COUNTERPART PLUS THE
EXPENSES BROUGHT ABOUT FOR PRESENTING THE EVIDENCE. THE AMOUNT OF COSTS SHALL BE
PASSED TO THE AWARD, EXCEPT FOR A COMPLEMENTARY LIQUIDATION BEING DONE. THE
AWARD SHALL HAVE THE ORDER WITH MANDATORY EFFECT SO THAT IN THE MOMENT OF THE
EXECUTION THE PAYMENT OF THE COSTS MAY BE REQUIRED, AND IN THE EVENT OF NOT
GIVING IT, TO LAY AN EMBARGO ON ENOUGH GOODS TO WARRANT THE AMOUNT OF THE COSTS.
ARTICLE 33.- TO BE SENTENCED IN COSTS: A) THE PLAINTIFF WITH NO FAVORABLE AWARD
IN ANY OF THE CLAIMS; B).- IN ANY OTHER EVENT, TO THE DEFENDANT. ARTICLE 34.- IN
THE AWARD ALL THE FACULTIES TO THE ACTUARY IN CHARGE OF ITS EXECUTION SHALL BE
IMPLICIT, DUE TO THIS, EVEN WITHOUT PREVIOUS AUTHORIZATION MAY BREAK LOCKS, USE
OF THE POLICE POWER, PRACTICE ANY NECESSARY MEASURES TO THE SECURING OF GOODS,
ETC. ARTICLE 36 - TO THE PARTY WITH A FAVORABLE AWARD OR IN FAVOR OF WHOM IS THE
MAIN SENTENCE SHALL CORRESPOND THE FACULTY TO CHOOSE THE JUDGE IN CHARGE OF THE
AWARD EXECUTION. ARTICLE 36.- THE ARBITER AND SECRETARY SHALL BE IN THEIR
POSITION AS LONG AS REQUIRED FOR CARRYING OUT AND THE EXECUTION OF THE AWARD
OVER THE CONFLICTS SUBMITTED BY THE PARTIES HEREOF. ARTICLE 37.- THE PARTIES
EXPRESSLY SUBMIT TO ARBITRAGE LOCATED IN MEXICO CITY, FEDERAL DISTRICT, AND TO
THE LAWS OF SUCH LOCATION, RESIGNING FROM NOW ON TO THE CORRESPONDENT
JURISDICTION OF THEIR PRESENT OR FUTURE ADDRESSES. ARTICLE 38.- THE PARTIES
AGREE THAT THE FINAL AWARD JUDICIAL EXECUTION OF THE AWARD SHALL BE CARRIED OUT
BEFORE THE JUDGE IN TURN OF REAL ESTATE LEASING IN THIS MEXICO CITY, FEDERAL
DISTRICT AND IN THE NEEDED EVENT TO DRAW THE NEEDED LAWFUL REQUISITORIAL.
THIRTY SECOND.- HINDERING THE AWARD. THE PARTY THAT HINDERS OR IMPEDES IN A
DIRECT OR INDIRECT WAY OR MAKE IT DIFFICULT TO CARRY OUT OR TO COMPLY WITH THE
WARRANT AT THE TIME TO CARRY IT OUT, SHALL COMPENSATE ALL DAMAGES CAUSED TO THE
OTHER PARTY, THEREOF, BY MUTUAL AGREEMENT AGREE TO BE 90% OF THE FULL FORCE RENT
TO THE DATE THE AWARD IS ISSUED DURING THE TIME THAT THE EXECUTION SHALL TAKE
PLACE, BEGINNING THE FIRST DAY AFTER THE WARRANT IS ISSUED UNTIL THE DAY OF THE
EXECUTION OR FULFILLMENT OF THE AWARD.
THIRTY THIRD.- MODIFICATIONS. THIS INSTRUMENT INCLUDES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES. ANY MODIFICATION TO THIS INSTRUMENT SHALL BE MADE BY A
WRITTEN AMENDMENT SIGNED BY BOTH PARTIES.
THIRTY FOURTH.- ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES AND THEREFORE SUPERSEDES ANY AND ALL PRIOR
AGREEMENT, DISCUSSIONS OR COVENANTS AMONG THE PARTIES, JUST IN WHAT IS RELATED
TO THE MATER SUBJECT OF THIS AGREEMENT.
IN WITNESS WHEREOF, This lease is executed in Mexico City, Federal District, on
November 24th, 1997.
LESSOR LESSEE
19
<PAGE> 20
/s/ HECTOR FLORES FIERRO /s/ ROBERT A. MICHEL
- --------------------------------- ----------------------------------
BY: MR. HECTOR FLORES FIERRO BY: MR. ROBERT A. MICHEL
TRUST F/3959 OF ORIX GLOBAL COMMUNICATIONS, INC.
BANCO DEL ATLANTICO, S.A. EXECUTIVE VICEPRESIDENT
WITNESSES:
- --------------------------------- ----------------------------------
NAME: BY: TECHNICAL COMMITTEE FOR
---------------------------- TRUST F/3959
MR. HECTOR R. IBARZABAL G. AND/OR
MR. ARMANDO VALENCIA HERRERA
20
<PAGE> 21
EXHIBIT "B" OF THE LEASE AGREEMENT ENTERED INTO BY AND AMONG TRUST F/3950 OF
BANCO DEL ATLANTICO, S.A. REPRESENTED BY ITS TRUST DESIGNEE MR. HECTOR FLORES
FIERRO. HEREINAFTER REFEREED TO AS THE "LESSOR", AND "ORIX GLOBAL COMMUNICATIOS,
INC." "LESSEE", REPRESENTED BY MR. ROBERT A. MICHEL.
OFFICE SPACE INSURGENTES CENTER
TECHNICAL SPECIFICATIONS FOR OFFICE SPACES:
STRUCTURE:
o STEEL AND CONCRETE ASSEMBLED BY WASHERS, SQUARE COLUMNS AND STONE WITH FIRM
COMPRESSION.
FLOOR:
o HARD ROUGH CONCRETE FLOOR, RULED ABOVE STONE.
WALLS:
o NON-SOLID CONCRETE WALL 15 CM. WIDE WITH REGULAR FINISH.
FREE HEIGHT OF PREMISES:
o FREE HEIGHT OF PREMISES 2.44 M. (CONSIDERING FINISHED CEILINGS AND FLOORS)
o FINISHED FLOOR TO BEAM 3.10 M.
HYDRAULIC INSTALLATION:
o ALL QUADRANTS SHALL HAVE A 1/2" ENDINGS, WATER CONSUMPTION WILL BE PRORATED
WITHIN MONTHLY MAINTENANCE PAYMENT.
SANITARY INSTALLATION:
o ALL QUADRANTS SHALL HAVE A DISCHARGE OF 4" OF MELTED IRON
AIR CONDITIONING:
o A CHILLED WATER OUTLET WITH INDIVIDUAL METER PER QUADRANT PER CUSTOMER WITH
MORE THAN ONE QUADRANT.
o USE OF INDIVIDUAL EQUIPMENT.
o THIS EQUIPMENT SHALL BE PAID BY THE CUSTOMER.
o EACH PREMISES CAPACITY SHALL BE PRECISE BY A THERMAL CALCULATION FOR EACH
SPECIFIC EVENT AND THE CUSTOMER SHALL RESPECT THIS.
ELECTRICAL INSTALLATION:
o A CONNECTION WITH EMPTY EXCLUSIVE GUIDED DUCTS.
o THE ELECTRIC LOAD FOR EACH PREMISE IS OF 100 WATTS/M2. FOR LIGHTNING AND
PLUGS WHICH IS THE OFFICE LOAD FOR THIS KIND OF DEVELOPMENT.
o IN THE EVENT THAT MORE LOAD IS REQUIRED IT MAY BE SUPPLIED FOR A REASONABLE
EXTRA COST THAT SHALL BE DISCUSS IN EACH OPPORTUNITY.
TELEPHONE INSTALLATION:
21
<PAGE> 22
o AN EMPTY DUCT CONNECTION SHALL BE GIVEN, WITH GUIDED WIRING TO ITS IDF
(SECTION REGISTRY) AND FROM THIS TO THE MDF. IT IS LEFT WITH STRUCTURAL
WIRING (OPTIC FIBER AND COPPER) WHICH ACCEPTS VOICE AND DATA TRANSMISSIONS.
o THERE ARE 5 LINES PER QUADRANT PLANNED TO BE CONTRACTED BY THE CUSTOMER. IN
THE EVENT IT REQUIRED MORE THEY MAY BE GIVEN PRIOR NEGOTIATION.
GAS INSTALLATION:
o NO GAS OPERATED DEVICE SHALL BE KEPT IN THE OFFICE SPACE.
OFFICE CONDITIONING:
o ALL REQUIRED DOCUMENTATION SHALL BE DELIVERED BEFORE STARTING THE
CONDITIONING.
o TRIPLAY SHALL BE INSTALLED TO "WALL IN" THE ACCESS TO THE PREMISES TO
PERFECTLY DELIMIT THE WORKING AREA.
o IN GENERAL TERMS IT SHALL BE PRESENTED IN ACCORDANCE TO THE ADAPTATION AND
CONDITIONING OF OFFICE SPACE MANUAL DONE SPECIFICALLY FOR THIS.
FIRE PROTECTION SYSTEM:
o THERE IS A POSSIBILITY OF CONNECTING THE CORE DRILLING, WHICH WILL BE
CONNECTED TO THE CENTRAL SAFETY SYSTEM OF THE BUILDING.
o SMOKE DETECTORS, FIRE PROTECTION JOINTS IN THE FACADE WALL UNIONS AND
SPRAYER SYSTEM INSIDE THE OFFICE MODULE IN ACCORDANCE TO THE RULES AND
REGULATIONS FOR THE OFFICE SPACE, ALL PAID BY THE CUSTOMER ACCORDING TO THE
RULES AND REGULATIONS FOR ADAPTING SPACE OFFICE.
22
<PAGE> 23
PLANTA OFICINAS TIPO 1C
[FLOOR PLAN]
<PAGE> 1
ASSIGNMENT AGREEMENT ENTERED INTO BY AND BETWEEN ORIX GLOBAL COMMUNICATIONS,
INC., REPRESENTED BY MR. ROBERT A. MICHEL (HEREINAFTER THE "ASSIGNOR"), AND
LATIN GATE DE MEXICO, S.A. DE C.V, REPRESENTED BY MR. ROBERT A. MICHEL
(HEREINAFTER THE "ASSIGNEE"), WITH THE PARTICIPATION OF TRUST F/3959 OF BANCO
DEL ATLANTICO REPRESENTED BY MR. DIEGO ZAMORA MEES (HEREINAFTER THE "LESSOR"),
PURSUANT TO THE FOLLOWING RECITALS AND CLAUSES:
RECITALS
I. The Assignor declares through its representative:
a. Whereas it is a company duly organized in accordance with the laws of
the State of Nevada, United States of America,
b. Whereas, as Lessee, on November 24, 1997, it entered into a lease
agreement (hereinafter the "Lease") attached hereto as Exhibit "A"
with the Lessor,
c. Whereas Clause Sixteenth of the Lease provides that the Lessee
(Assignor herein) may assign its rights under the Agreement to any of
its subsidiaries and in accordance with Mexican law, subject only to
the advanced written notice from the Lessee and the written consent of
the Lessor,
d. Whereas on March 25, 1998, the Lessee (Assignor herein) notified in
writing to the Lessor its decision to assign its rights and
obligations under the Lease to Assignee, and that on March 27, 1998,
the Lessor authorized in writing the Assignor to assign its rights and
obligations under the Lease to the Assignee and that such writings are
attached hereto as Exhibit B and Exhibit C, respectively.
II. The Assignee declares through its representative.
a. Whereas it is a company duly organized in accordance with the laws of
Mexico, as evidenced by a copy of Public Instrument number 63,233,
dated February 13, 1997, before Carlos Hermosillo Perez, Notary Public
number 44 of the Federal District, attached hereto as Exhibit D.
b. Whereas, Mr. Robert Michel is duly authorized to represent the
Assignee, as evidenced in Public Instrument number 11,084, dated
February 18, 1998, before Mr. Heriberto Castilla. Notary Public number
69 of the Federal District, attached hereto as Exhibit E.
1
<PAGE> 2
c. Whereas it is a subsidiary of the Assignor, duly registered before the
Federal Taxpayers' Registry under LGM 970228 6X2.
d. Whereas it is aware of the contents of and all the rights and
obligations existing under the Lease.
III. The Lessor declares through its representative:
a. Whereas on November 24, 1997, it executed the Lease with the Lessor.
CLAUSES
FIRST. OBJECT. The Assignor hereby assigns to the Assignee, and the Assignee
hereby accepts the assignment of, all the rights and obligations of the Assignor
under the Lease.
SECOND. GUARANTOR In accordance with the provisions of Clause Sixteenth of the
Lease, the Assignor hereby guarantees all the obligations assumed by the
Assignee under the present Agreement.
THIRD. CONSIDERATION. The parties agree that the present assignment be
gratuitous.
FOURTH. EFFECTIVE DATE. This Agreement shall take effect as of the date hereto,
April 1, 1998. Any rents and/or payments of any kind under the Lease payable by
the Assignor to the Lessor prior to the date hereto shall not constitute part of
the present assignment.
FIFTH. NOTICES. Effective as of April 1, 1998, all notices related to the Lease
that shall be given to the assignee shall be served in writing, at the following
address, unless otherwise changed by written notice:
LATIN GATE DE MEXICO, S.A. DE C.V.
Attention: Mr. Robert A. Michel or Designee
Insurgentes Sur 1605 Modulo "D" 10 Floor
Colonia San Jose Insurgentes
Mexico D.F., 01000
SIXTH. CONSENT. Lessor hereby consents to the assignment described herein,
SEVENTH. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the United Mexican States.
2
<PAGE> 3
EIGHTH. LANGUAGE. The present Agreement is signed in triplicate and in both the
Spanish and English language. In the event of a controversy, however, the
Spanish version shall prevail
IN WITNESS WHEREOF, the parties sign this Agreement through their duly
authorized representatives, this 1st day of April 1998.
THE ASSIGNOR THE ASSIGNEE
/s/ ROBERT A. MICHEL /s/ ROBERT A. MICHEL
- ------------------------ ---------------------------
ROBERT A. MICHEL ROBERT A. MICHEL
THE LESSOR
/s/ ROBERT A. MICHEL
---------------------------
DIEGO ZAMORA MEES
3
<PAGE> 1
GROSS LEASE
w/ BASE YEAR
EXPENSE STOP
OFFICE LEASE
FOR
ORIX GLOBAL COMMUNICATIONS, INC.
SUITE 100
EXECUTIVE HILLS BUILDING 26
8500 WEST 110TH STREET
OVERLAND PARK, KANSAS 66210
Lessor: 2526 Investment Co.,
a Kansas partnership
Lessee: ORIX Global Communications, Inc.
a Nevada Corporation
<PAGE> 2
OFFICE LEASE
THIS LEASE AGREEMENT (this "Lease") is made and entered into to be
effective as of January 23, 1998, by and between Lessor and Lessee (as defined
herein), who agree that, in consideration of the obligations of Lessee to pay
rent as herein provided, Lessor hereby leases the Premises (as defined herein)
to Lessee and Lessee hereby leases the Premises from Lessor, subject to all of
the terms, covenants and conditions hereof, as follows;
ARTICLE I - DEFINED TERMS AND GENERAL CONDITIONS
Section 1.1 Defined Terms. The terms listed below ("Defined Terms") shall
have the following meanings throughout this Lease:
<TABLE>
<S> <C>
(a) Lessor: 2526 Investment Co., a Kansas partnership
(b) Lessee: ORIX Global Communications, Inc., a Nevada Corporation
(C) Building: The six story office building with an address of: 8500 West
110th Street, Overland Park, Kansas 66210
(d) Premises: The space shown on Exhibit "A-1," located on the 1st floor
of the Building, to be commonly known as Suite 100.
(e) Property: The Building, adjacent building owned by Lessor (8400 &
$500), and all grounds, parking lots, and common areas owned
by Lessor and associated therewith, and the land on which
they are situated.
(f) Rentable/Usable Area of the Building (approx.); 72,298 r/s/t, 65,768 u/s/f.
(g) Rentable/Usable Area of the Premises (approx.): 3,573 r/s/f, 3,248 u/s/f.
(h) Lessee's Pro Rata Share: 4.9%
(i) Term: A period of eighty-four (84) months, beginning on the
Commencement Date and ending on the Expiration Date.
(see Article 2).
(j) Commencement Date: February 1, 1998.
(k) Expiration Date: January 31, 2005.
(1) Base Rent (see also Articles 3 and 4): monthly Annual
Base Rent Base Rent
--------- ---------
February 1, 1998 through January 31, 2001: $4.760.62 $57,127.44
February 1, 2001 through January 31, 2003: $6,359.60 $64,314.00
February 1, 2003 through January 31, 2005: $5,508.38 $66,100.50
first month's rent to be paid upon execution of
Lease
(m) Base Year: 1998 (see Section 4.2). Note: the Promises shall
be separately metered for electricity which shall
pass through and be paid by Lessee.
(n) Security Deposit: $10,000.00 to be paid upon execution of Lease.
(see Article 5).
(o) Permitted Use: general business offices (see Article 6).
(p) Lessee's Address for Notices: at the Premises address
(q) Lessor's Address for Notices: 2526 Investment Co, with a copy to:
c/o Lioness Realty Group 2526 Investment Co.
3100 Broadway, Suite 303 c/o Paul P. Denzer
Kansas City, MO 64111 13110 Beverly
Attention: James M. Stacy Overland Park, KS 66209
(r) Lessor's Address For Payment of Rent: 2526 Investment Co,
c/o Lioness Realty Group
3100 Broadway, Suite 303
Kansas City, MO 64111
Attention: James M. Stacy
(s) Brokers: Lioness Realty Group, Inc.
(t) Date of Lease: January 23, 1998
(u) Lessor's Construction Allowance: $-0- n/a -"AS IS" (see Exhibit "C").
(v) Normal Hours: Monday through Friday, from 8:00
a.m. to 6:00 p.m. and on Saturday
from 8:00 a.m. to 12:00 noon,
excepting state and/or federal
holidays.
</TABLE>
1.
<PAGE> 3
ARTICLE 2 - COMMENCEMENT DATE
Section 2.1 Delivery of Premises. The Premises will be delivered to Lessee
in "AS IS" condition. Lessor shall use due diligence to deliver possession of
the Premises as nearly to the scheduled Commencement Date as Practicable,
however, Lessor shall not be liable for damages caused by any delay in
delivering the Premises. Delay of the Commencement Date shall be Lessee's sole
remedy for any delay in making the Premises Ready For Occupancy; provided that.
if by no fault of Lessee, said delay extends more than one-hundred twenty (120)
days beyond the scheduled Commencement Date, Lessee may elect to terminate this
Lease.
Section 2.2 Commencement Date. The Term of this Lease shall commence on the
scheduled Commencement Date; provided, however, if delivery of possession Is
delayed, the actual Commencement Date (the "Commencement Date") shall be
automatically extended to the date that Lessee, or any person occupying any of
the Premises with Lessee's permission, commences business operations from the
premises. Lesser and Lessee shall confirm the Commencement Date by signing a
Memorandum of Commencement Date in the form of the attached Exhibit "B".
Section 2.3 QUIET ENJOYMENT. Lessor covenants and agrees that Lessee, upon
performing, observing and keeping the covenants, agreements and conditions of
this Lease on its part to be kept, shall peaceably and quietly hold, occupy and
enjoy the Premises during the Term of this Lease without interference from
Lessor subject to the terms and provisions of this Lease.
ARTICLE 3 - RENT
Section 3.1 BASE RENT. Lessee shall pay the Base Rent as computed and
adjusted from time to time, in advance, on or before the first day of each
calendar month during the entire Term. In addition to the payment of Base Rent,
Lessee shall also pay its Pro Rata Share of any Excess Operating Expenses
computed pursuant to Section 4.2 of this Lease. Concurrently with Lessee's
execution of this Lease and the submission thereof for Lessor's execution,
Lessee shall pay to Lessor the Security Deposit and the Base Rent payable
hereunder for the first full calendar month of the Term.
Section 3.2 SPECIAL CHARGES FOR SPECIAL SERVICES. Lessee agrees to pay to
Lessor all charges for any services, utilities, goods or materials furnished by
Lessor at Lessee's request which are not required to be furnished by Lessor
under this Lease without separate charge or reimbursement (payment to be made
within 5 days of invoice). The Premises shall be separately metered for
electricity which shall pass through and be paid by Lessee.
Section 3.3 DEFINITION OF RENT. All payments of Base Rent and any and all
fees, charges, costs, expenses, insurance obligations, late charges, interest,
Taxes and Operating Expense Adjustments (as defined in Section 4.3), and all
other payments or reimbursements which are attributable to, payable by, or the
responsibility of Lessee under this Lease, constitute "rent" (collectively,
"Rent"). Any Rent payable to Lessor by Lessee for any fractional month shall be
prorated based on a thirty (30) day month. All payments owed by Lessee under
this Lease shall be paid to Lessor in lawful money of the United States of
America at the Lessors Address for Payment of Rent set forth in Section 1.1, or
such other address as Lessor notifies Lessee in writing from time to time. All
payments by Lessee shall be paid without demand, deduction, offset or
counterclaim.
Section 3.4 LATE CHARGE. Lessor and Lessee agree that if Lessor does not
receive a payment of Rent within five (5) days after the date that such payment
is due, Lessee shall pay to Lessor a late charge equal to the greater of five
percent (5%) of the delinquent amount, or $50.00. Further. all portions of Rent
not paid within thirty (30) days following its due date and all late charges
associated therewith shall bear interest at the rate of 10% per annum (the
"Interest Rate"), beginning on the due date and continuing until such Rent, late
charges and interest are paid in full. Acceptance of the late charge and/or
interest by Lessor shall not cure or waive Lessee's default, nor prevent Lessor
from exercising, before or after such acceptance, any and all of the rights and
remedies of Lessor for a default provided by this Lease or at law or in equity.
Payment of the late charge and/or interest is not an alternative means of
performance of Lessee's obligation to pay Rent when due.
ARTICLE 4 -ADJUSTMENTS TO RENT
Section 4.1 BASE RENT INCREASE. Base Rent shall be increased periodically
during the Term in accordance with the Base Rent Schedule set forth in Section
1.1.
Section 4.2 OPERATING EXPENSE ADJUSTMENTS. During the Term of this Lease
and any extension or renewal thereof, Lessee shall pay, as additional rent,
Lessee's Pro Rata Share of any increase in Lessor's Operating Expenses (as
hereinafter defined) for the Building, over and above the amount of such
Operating Expenses Lessor incurred during the Base Year ("Excess Operating
Expenses"), as follows:
(a) Lessor may reasonably estimate in advance the amounts Lessee shall owe
for Excess Operating Expenses for any full or partial year of the Term. In such
event, Lessee shall pay such estimated amounts. on a monthly basis, together
with Lessee's payment of Base Rent.
(b) Within one hundred twenty (120) days after the end of each calendar
year, or as soon thereafter as practicable, Lessor shall provide a statement
(the "Statement") to Lessee showing: to the amount of actual Operating Expenses
for such prior calendar year, (ii) any amount paid by Lessee toward Excess
Operating Expenses during such calendar year on an estimated basis, and (iii)
any revised estimate of Lessee's obligations for Excess Operating Expenses for
the current calendar year. If the Statement shows that Lessee's estimated
payments were less than Lessee's actual obligations for Excess Operating
Expenses for such year, Lessee shall pay the difference, whether or not the Term
has expired or terminated. If the Statement shows an increase in
2.
<PAGE> 4
Lessee's estimated payments for the current calendar year, Lessee shall pay the
difference between the new and former estimates, for the period from January 1
of the current calendar year through the month in which the Statement is sent.
Lessee shall make such payments within thirty (30) days after Lessor sands the
Statement, and shall commence making the increased payment with the next rent
payment due. If the Statement shows that Lessee's estimated payments exceeded
Lessee's actual obligations for Excess Operating Expenses, Lessee shall receive
a credit of such difference against payments by Lessee of Excess Operating
Expenses next due. If the Term shall have expired and no further payments of
Excess Operating Expenses by Lessee shall be due, Lessee shall receive a refund
of such difference within thirty (30) days after Lessor sends the Statement,
provided Lessee was/is not in default of this Lease.
(c) So long as Lessee's obligations hereunder are not materially adversely
affected, Lessor reserves the right to reasonably change, from time to time, the
manner or timing of the foregoing payments. No delay by Lessor in providing the
Statement (or separate Statements) shall be deemed a default by Lessor or a
waiver of Lessor's right to require payment of Lessee's obligations for actual
or estimated Excess Operating Expenses.
(d) If the Term commences other than on the 1st day of January, or ends
other than on the 31st day of December, Lessee's obligations to pay estimated
and actual amounts toward Excess Operating Expenses for such first or final
calendar years shall be prorated to reflect the portion of such years included
in the Term. Such proration shall be made by multiplying the total estimated or
actual (as the case may be) Excess Operating Expenses for such calendar years by
a fraction, the numerator of which shall be the number of days of the Term
during such calendar year, and the denominator of which shall be 365.
Section 4.3 OPERATING EXPENSES DEFINED. "Operating Expenses" are defined to
be the sum of all costs, expenses, and disbursements, of every kind and nature
whatsoever, incurred by Lessor in connection with the ownership, management,
use, maintenance, operation, administration and repair of all or any portion of
the Building and such portion of the Property supporting the Building, and all
areas appurtenant thereto which provide access to or otherwise benefit the
Property, including, but not limited to: (a) All utility costs not otherwise
charged directly to Lessee or any other tenant of the Property; (b) All wages
and benefits and costs of employees or independent contractors engaged in the
operation, supervision, maintenance and security of the Property; (c) All
expenses for janitorial, maintenance, landscape, license fees, security and
safety services; (d) All repairs to and physical maintenance of the Property;
(e) The annual amortization of costs, if any, incurred by Lessor for any capital
improvements installed or paid for by Lessor and required by any new (or change
in) laws, rules or regulations of any governmental or quasi-governmental
authority; (f) The annual amortization of costs, if any, of any equipment,
device or capital improvement purchased or incurred as a labor-saving measure,
to reduce utility consumption, or to effect other economies in the operation or
maintenance of the Property (provided the annual amortized cost does not exceed
the actual cost savings realized and such savings do not redound primarily to
the benefit of any particular tenant); (g) The annual amortization of costs, if
any, for exterior perimeter window draperies or blinds provided by Lessor and
floor coverings and wall coverings in the public areas of the buildings within
the Property; (h) Reasonable management fees, accounting fees, insurance; and
(i) All taxes, assessments, levies, and governmental charges (collectively,
"Taxes") levied or assessed on, imposed upon or attributable to the Property.
The annual amortization of costs as required above shall be determined by Lessor
in its reasonable judgement. Operating Expenses shall be computed according to
the cash and/or the accrual basis of accounting, as Lessor may elect, to
maintain consistency from year to year, in accordance with standard and
reasonable accounting principles employed by Lessor. Lessor shall have the
right, in its discretion, to allocate and prorate any portion or portions or all
of the Operating Expenses on a building-by-building basis, on an aggregate basis
of all buildings in the Property, or any other reasonable manner.
SECTION 4.4 REVIEW OF OPERATING EXPENSES. The determination of Operating
Expenses and allocation of Excess Operating Expenses to Lessee shall be made in
good faith by Lessor and, absent clerical error, shall be binding on Lessee;
provided, however, Lessee shall have a period of thirty (30) days following
receipt of each Statement, within which to review and inspect, at Lessor's
office during normal business hours, Lessor's books and records concerning
Operating Expenses for the preceding calendar year period in question. If Lessee
shall not have availed itself of such inspection, Lessee shall be deemed to have
accepted as final and determinative the amounts shown on the Statement.
ARTICLE 5 - SECURITY DEPOSIT
Concurrently with Lessee's execution of this Lease and submission thereof
for Lessor's execution, Lessee shall pay the Security Deposit to Lessor, which
Security Deposit shall be held by Lessor as security for the full and faithful
performance of Lessee's covenants and obligations under this Lease. The Security
Deposit is not an advance Base Rent deposit, an advance payment of any other
kind, or a measure of Lessor's damages in case of Lessee's default. If Lessee
fails to comply with the full and timely performance of any or all of Lessee's
covenants and obligations set forth in this Lease, then Lessor may, from time to
time, without waiving any other remedy available to Lessor, use the Security
Deposit, or any portion of it, to the extent necessary to cure or remedy such
failure or to compensate Lessor for any or all damages sustained by Lessor
resulting from Lessee's failure to comply fully and timely with its obligations
pursuant to this Lease. Lessee shall immediately pay to Lessor on demand the
amount so applied in order to restore the Security Deposit to its original
amount, and Lessee's failure to immediately do so shall constitute a default
under this Lease. If Lessee is in compliance with the covenants and obligations
set forth in this Lease at the time which is thirty (30) days following the time
of both the expiration (or earlier termination) of this Lease and Lessee's
vacating of the Premises, Lessor shall return the Security Deposit to Lessee
promptly thereafter, less amounts applied to damages. Lessor shall not be
required to maintain the Security Deposit separate and apart from Lessor's
general or other funds, and Lessor may commingle the Security Deposit with any
of Lessor's general or other funds. Lessee shall not at any time be entitled to
interest on the Security Deposit.
3.
<PAGE> 5
ARTICLE 6 - USE
Lessee shall only use and occupy the Premises for the Permitted Use
described in Section 1.1. Lessee agrees, subject to Lessor's obligation to
provide basic janitorial services, to maintain the Premises in a clean, orderly
and healthful condition and to comply with all laws, ordinances, rules and
regulations pertaining to Lessee's occupancy and use of the Premises. Lessee
shall not do or permit to be done in or about the Property nor bring, keep or
permit to be brought or kept therein, anything which is prohibited by the
attached Exhibit "E" or by any standard form fire insurance policy or which will
in any way increase the existing rate of, or affect, any fire or other Insurance
upon the Building or its contents, or which will cause a weight load or stress
on the floor or any other portion of the Premises in excess of the weight load
or stress which the floor or other portion of the Premises is designed to bear.
Lessee, at Lessee's sole cost, shall comply with all laws affecting the
Premises, and with the requirements of any Board of Fire Underwriters or other
similar body now or hereafter instituted, and shall also comply with any order,
directive or certificate of occupancy issued pursuant to any laws which affect
the condition, use or occupancy of the Premises. Lessor shall not be liable to
Lessee for any other occupants or tenants failure to conduct itself in
accordance with the provisions of this Article 6, and Lessee shall not be
released or excused from the performance of any of its obligations due to any
such failure.
ARTICLE 7 - ALTERATIONS AND ADDITIONS
Section 7.1 LESSEE'S RIGHTS TO MAKE ALTERATIONS. Lessee, at its sole cost
and expense, shall have the right upon receipt of Lessor's consent, to make
alterations, additions or improvements to the Premises if such alterations,
additions or improvements are made in accordance with this Article 7. are normal
for general office use, do not adversely affect the utility or value of the
Premises or the Building for future tenants, do not alter the exterior
appearance of the Building, are not of a structural nature, do not require
excessive removal expenses and are not otherwise prohibited under this Lease
(collectively, "Alterations"). All such Alterations shall be made in conformity
with the requirements of Section 7.2 below. Once the Alterations have been
completed, such Alterations shall thereafter be treated as Tenant Improvements.
Section 7.2 LESSEE'S INSTALLATION OF ALTERATIONS. Any Alterations Installed
by Lessee during the Term shall be done in strict compliance with all of the
following: (a) No such work shall proceed without Lessor's prior approval of (i)
Lessee's contractor(s); (ii) certificates of insurance from a company or
companies approved by Lessor, furnished to Lessor by Lessor's contractor(s), for
combined single limit bodily injury and property damage insurance covering
comprehensive general liability, in an amount not less than One Million Dollars
($1,000,000) per person and per occurrence and endorsed to show Lessor as an
additional insured, and for workers' compensation as required by law, endorsed
to show a waiver of subrogation by the insurer to any claims Lessee's contractor
may have against Lessor, Lessor's agents, employees, contractors and other
tenants of the Property (provided, however, nothing in this Section 7.2(a) shall
release Lessee of its other insurance obligations hereunder); and (iii) detailed
plans and specifications for such work; (b) All such work shall be done in a
first-class workmanlike manner and in conformity with a valid building permit
and all other permits and licenses when and where required, copies of which
shall be furnished to Lessor before the work is commenced, and any work not
acceptable to any governmental authority or agency having or exercising
jurisdiction over such work, or not reasonably satisfactory to Lessor, shall be
promptly replaced and corrected at Lessee's expense (Lessor's approval or
consent to any such work shall not impose any liability upon Lessor); and (c)
Lessee shall at all times keep the Premises, the Building and the Property free
from any liens arising out of any work performed, materials furnished, or
obligations incurred by or for Lessee. Lessee agrees to indemnify, defend and
hold Lessor harmless from and against any and all claims for mechanics',
materialmen's or other liens in connection with any Alterations, repairs, or any
work performed, materials furnished or obligations incurred by or for Lessee.
Lessor reserves the right to enter the Premises for the purpose of posting such
notices of non-responsibility as may be permitted by law, or desired by Lessor.
Section 7.3 DISPOSITION OF TENANT IMPROVEMENTS AT END OF LEASE. All
Alterations and Tenant Improvements made by or for Lessee shall be deemed to be
part of the Premises and shall be surrendered to Lessor in good condition upon
expiration of the Term or earlier termination of this Lease without compensation
to Lessee. Lessee shall completely remove all of Lessee's personal property,
including moveable furniture, trade fixtures, and equipment not attached to the
Building or the Premises, prior to the expiration of the Term; provided,
however, that Lessee shall repair all damage caused by such removal, and any of
Lessee's personal property not so removed shall, at the option of Lessor,
automatically become the property of Lessor, who may retain or dispose of said
personal property, without liability,
Section 7.4 LESSEE'S MAINTENANCE OF PREMISES. Lessee shall, at Lessee's
sole cost and expense, keep the Premises in good and sanitary condition and
repair at all times during the Term. All damage, injury or breakage to any part
or portion of the Premises, and all damage, injury or breakage to any portion of
the Property caused by the willful or negligent act or omission of Lessee or
Lessee's agents, employees, contractors, visitors or invitees (collectively,
"Lessee's Employees"), shall be promptly repaired or replaced by Lessee, at
Lessee's sole cost and expense, to the satisfaction of Lessor; provided,
however, that Lessee shall be entitled to receive reimbursement to the extent
that the cost of any such repair or replacement is received by Lessor from
insurance maintained by Lessor as part of Operating Expenses. Lessor may make
any repairs or replacements which are not made by Lessee within a reasonable
amount of time (except in the case of emergency when such repairs or
replacements can be made immediately), and charge Lessee for the cost of such
repairs and replacements. Notwithstanding the foregoing, Lessor shall remain
responsible to maintain, as a part of the Operating Expenses, mechanical, HVAC,
electrical and plumbing systems in the Building, in accordance with other
provisions of this Lease. Lessee shall be solely responsible for the design and
function of all of Lessee's improvements whether or not installed by Lessor at
Lessee's request.
Section 7.5 PERSONAL PROPERTY TAXES AND GOVERNMENTAL ASSESSMENTS. Lessee
shall pay, prior to delinquency, all personal property taxes, charges, duties
and government fees, charges and/or assessments (collectively, "Assessments")
assessed against or levied on Lessee's occupancy, or on trade fixtures,
furnishings,
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equipment or other personal property contained in the Premises (collectively,
"Personal Property"). Lessee shall cause such Assessments upon its Personal
Property to be billed separately from Lessor's property and shall indemnity,
defend and hold Lessor harmless from and against the payment of all such
Assessments.
ARTICLE 8 - BUILDING SERVICES - LESSOR'S REPAIRS
Section 8.1 STANDARD BUILDING SERVICES. Subject to the full performance by
Lessee of all of Lessee's obligations under this Lease, Lessor shall furnish the
Premises with standard building services and utilities as set forth in the
attached Exhibit "D."
Section 8.2 ADDITIONAL SERVICES. Lessee agrees to immediately pay on demand
all reasonable charges imposed by the Lessor from time to time for all building
services and utilities supplied to or used by Lessee in excess of or in addition
to those standard building services and utilities which Lessor agrees to provide
to Lessee in accordance with Exhibit "D" (said excess and additional building
services and utilities are referred to as "Additional Services"). Lessor may at
any time cause a switch and/or metering system to be installed at Lessee's
expense to measure the amount of building services, utilities and/or Additional
Services consumed by Lessee or used in the Premises. Lessee agrees to pay Lessor
for all such Additional Services as shown by said meters, at the rates charged
for such services by the utility furnishing the same, if applicable.
Section 8.3 INTERRUPTION OF SERVICES. Services may be temporarily
interrupted for (a) any accident, emergency, governmental regulation, Act of God
or other cause beyond Lessor's reasonable control; or (b) the making of any
repairs, replacements, additions, alterations or improvements to the Premises or
the Property until said repairs, additions, alterations or improvements shall
have been completed. No such interruption, reduction or cessation of any such
building services or utilities shall constitute an eviction or disturbance of
Lessee's use or possession of the Premises or Property, or an ejection or
eviction of Lessee from the Premises, or a breach by Lessor of any of its
obligations, or entitle Lessee to be relieved from any of its obligations under
this Lease. In the event of any such interruption, reduction or cessation,
Lessor shall use reasonable diligence to restore such service as soon as
possible where it is within Lessor's reasonable control to do so.
Section 8.4 LESSOR'S REPAIRS. So long as no Event of Default (as herein
defined) has occurred, and remains uncured, Lessor shall maintain the
mechanical, HVAC, electrical, and plumbing systems for the Premises, and the
structural elements and the public and common areas of the Building, as same may
exist from time to time, except for non-insured damage or wear and tear which is
the result of a negligent or willful act or omission of Lessee or Lessee's
Employees. Lessor shall have no obligation to make repairs under this Article
until a reasonable time after receipt of written notice of the need for such
repairs. In no event shall any payments owed by Lessee under this Lease be
abated on account of Lessor's failure to make repairs under this Article. Lessor
and Lessor's employees shall have the right to enter the Premises at reasonable
times to make any alterations, additions, improvements, repairs or replacements
to the Premises or the Property which Lessor may deem necessary or desirable.
Lessor shall give reasonable notice to Lessee of Lessor's intent to enter the
Premises, except, however, in an emergency situation, in which case no prior
notice shall be required.
ARTICLE 9 - ASSIGNMENT AND SUBLETTING
Section 9.1 RIGHT TO ASSIGN AND SUBLEASE. Lessee may assign its interest in
this Lease or in the Premises, or sublease all or any part of the Premises, or
allow any other person or entity to occupy or use all or any part of the
Premises, only after first obtaining Lessor's prior written consent, and only if
(a) Lessee is not then in default of this Lease, (b) such assignment or sublease
does not conflict with or result in a breach of the Permitted Use of the
Premises, and (c) such proposed assignee or sublessee of Lessee's proposed
assignment or sublease is reasonably acceptable to Lessor (i.e., is comparable
in quality, financial standing and business reputation to Lessee and whose
business operations are compatible with the business operations of the then
tenants in the Building). Any assignment, encumbrance or sublease without
Lessor's prior written consent shall be voidable, at Lessor's election, and
shall constitute a default by Lessee. No consent to an assignment, encumbrance,
or sublease shall constitute a further waiver of the provisions of this Article.
As a condition for obtaining Lessor's consent to any assignment, encumbrance or
sublease, Lessee shall reimburse Lessor's processing costs and attorneys' fees
incurred in determining whether to give such consent and/or in the preparation
and review of documents required therewith. Notwithstanding any permitted
assignment or subletting, Lessee shall at all times remain directly, primarily
and fully responsible and liable for all payments owed by Lessee under this
Lease and for compliance with all obligations under the terms, provisions and
covenants of this Lease to be performed by Lessee.
Section 9.2 AFFILIATED COMPANIES/RESTRUCTURING OF BUSINESS ORGANIZATION.
Occupancy of all or part of the Premises by a parent or wholly owned subsidiary
company of Lessee or by a wholly owned subsidiary company of Lessee's parent
company (collectively, "affiliated companies") shall not be deemed an assignment
or subletting provided that any such affiliated companies were not formed as a
subterfuge to avoid the obligations of this Article, and such entity fully
assumes the obligations of Lessee herein. If Lessee is a corporation,
unincorporated association, trust or general or limited partnership, then the
sale, assignment, transfer or hypothecation of any shares, partnership interest,
or other ownership interest of such entity which from time to time in the
aggregate exceeds twenty-five percent (25%) of the total outstanding shares,
partnership interests or ownership interests of such entity or which effects a
change in the management or control of Lessee, or the dissolution, merger,
consolidation, or other reorganization of such entity, or the sale, assignment,
transfer or hypothecation of more than forty percent (40%) of the value of the
assets of such entity, shall be deemed an assignment subject to the provisions
of this Article.
Section 9.3 SURRENDER OF LEASE. The voluntary or other surrender of this
Lease by Lessee, or a mutual cancellation of this Lease, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subleases or subtenancies, or may, at the option of Lessor, operate as an
assignment to it of Lessee's interest in any or all such subleases or
subtenancies.
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ARTICLE 10 - SUBSTITUTED PREMISES
ARTICLE 11 - INDEMNIFICATION; INSURANCE
Section 11.1 INDEMNIFICATION. Lessee shall at its expense defend,
indemnify, and hold Lessor and Lessor's agents, contractors, licensees,
employees, directors, officers, partners, trustees and invitees (collectively,
"Lessors Employees") harmless from and against any and all claims, arising out
of or in connection with Lessee's use of the Promises or the Property, the
conduct of Lessee's business, any activity, work or things done, permitted or
allowed by Lessee in or about the Premises or the Property, Lessee's or Lessee's
Employees' nonobservance or nonperformance of any statute, ordinance, rule,
regulation, or other Law, or any negligence or willful act or failure to act of
Lessee or Lessee's Employees.
Section 11.2 INSURANCE. Lessee shall have the following insurance
obligations:
(a) Liability insurance. Lessee shall obtain and keep in full force a
policy of comprehensive general liability and property damage insurance
(including automobile, personal injury, broad form contractual liability and
broad form property damage) under which Lessee is named as the insured and
Lessor and Lessor's managing agent are named as additional insureds and under
which the insurer agrees to indemnify, defend and hold Lessor and its managing
agent harmless from and against any and all costs, expenses and liabilities
arising out of or based upon the indemnification obligations of this Lease. The
minimum limits of liability shall be a combined single limit with respect to
each occurrence of not less than One Million Dollars ($1,000,000.00). The policy
shall contain a cross liability endorsement and shall be primary coverage for
Lessee and Lessor for any liability arising out of Lessee's and Lessee's
Employees' use, occupancy, maintenance, repair and replacement of the Premises
and all areas appurtenant thereto. Such insurance shall provide that it is
primary insurance and not "excess over" or contributory with any other valid,
existing and applicable insurance in force for or on behalf of Lessor. The
policy shall not eliminate cross-liability and shall contain a severability of
interest clause. (b) Lessee's Property Insurance. Lessee at its cost shall
maintain on all of its Personal Property and Lessee's Improvements and
Alterations, in, on, or about the Promises, a policy of standard fire and
extended coverage insurance, with theft, vandalism and malicious mischief
endorsements, to the extent of at least full replacement value without any
deduction for depreciation. The proceeds from any such policy shall be used by
Lessee for the repair, replacement and restoration of such Personal Property,
Lessee Improvements and Alterations. (c) Worker's Compensation. Lessee shall
maintain Worker's Compensation and Employer's Liability insurance as required by
law. (d) Business Interruption. Lessee shall maintain loss of income and
business interruption insurance in such amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent tenants or attributable to prevention of access to the
Premises or to the Building as a result of such perils but in no event in an
amount less than the Rent and all additional rent payable hereunder for twelve
(12) months.
A certificate of the policy(ies) shall be deposited with Lessor at least
ten (10) days prior to the date which Lessor estimates the Commencement Date
will occur provided that Lessee is given written notice of such estimated
Commencement Date (but in no event shall Lessee be obligated to deposit such
policy or certificate with Lessor sooner than five (5) days following such
written notice from Lessor), and on renewal of the policy not less than twenty
(20) days before expiration of the term of the policy. The insurance obligations
of Lessee hereunder and/or the limits on such insurance as described herein
shall in no event waive, release or discharge Lessee of any or all other
obligations and liabilities of Lessee contained in this Lease or otherwise. All
the insurance required under this Lease shall: (i) Be issued by insurance
companies authorized to do business in the State of Kansas, with a reasonably
acceptable financial rating; (ii) Be issued as a primary policy; (iii) Contain
an endorsement requiring thirty (30) days' written notice from the insurance
company to both parties and to Lessor's lender before cancellation or change in
the coverage, scope, or amount of any policy; and (iv) With respect to property
loss or damage by fire or other casualty, a waiver of subrogation must be
obtained.
Section 11.3 ASSUMPTION OF RISK. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to Lessee's Personal
Property, tenant improvements and Alterations, or injury to persons, in, upon or
about the Premises and/or the Property from any cause (except for damage or
Injury caused by the gross negligence or willful misconduct of Lessor) and
Lessee hereby waives all such claims against Lessor. Lessee shall give prompt
notice to Lessor in case of fire or accidents in the Promises or in the
Building. Further, and with the exception of Lessor's gross negligence or
willful misconduct, Lessor and Lessor's Employees shall have no liability to
Lessee or any of Lessee's Employees for any damage, loss, cost or expense
incurred or suffered by any of them (including any damage to Lessee's business),
and Lessee hereby waives
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any claim with respect to Lessor's and Lessor's Employees' acts or omissions
hereunder, including, without limitation, any claims relating to maintenance,
repair, restoration and/or replacement of the Premises, the Building or the
Property, and/or exercise of any other right reserved by or granted herein to
Lessor.
Section 11.4 ALLOCATION OF INSURED RISKS/SUBROGATION. Lessor and Lessee
release each other from any claims and demands of whatever nature for damage,
loss or injury to the Premises and/or the Building, or to the other's Property
in, on or about the Premises and the Building, that are caused by or result from
risks or perils insured against under any insurance policies carried by or
required to be carried by Lessor and/or Lessee under this Lease. Lessor and
Lessee shall cause each insurance policy obtained by them or either of them to
provide that the insurance company waives all right of recovery by way of
subrogation against either Lessor or Lessee in connection with any damage
covered by such policy. Neither Lessor nor Lessee shall be liable to the other
for any damage caused by fire or any of the other types of risks commonly
insured against under any insurance policy required by this Lease. For the
purposes hereof, any insurance deductible and/or level of self insurance shall
be deemed to be full insurance.
ARTICLE 12 - DAMAGE OR DESTRUCTION
If, at any time prior to the expiration or termination of the Lease, the
Premises or the Building or the Property is totally or partially damaged or
destroyed from a fire or other casualty, which damage renders the Premises
inaccessible or unusable to Lessee in the ordinary course of its business,
Lessor may elect, at its sole option, either to (a) terminate this Lease as of
the date of such fire or other casualty, by written notice to Lessee within
sixty (60) days after notice to Lessor of the occurrence of such damage or
destruction; or (b) without termination of this Lease, advise Lessee within
sixty (60) days of Lessor's intent to repair, and then proceed with due
diligence to repair or restore such damage or destruction within one hundred
eighty (180) days thereafter. If Lessor cannot complete the repair and
restoration within such period, Lessee shall have the option to cancel this
Lease. If Lessor elects to repair or restore such damage or destruction, this
Lease shall continue in full force and effect but a proportionate reduction of
Base Rent shall be allowed Lessee for such portion of the Premises as shall be
rendered inaccessible or unusable to Lessee, and which is not used by Lessee,
during the period of time that such portion is unusable or inaccessible and not
used by Lessee. No damages, compensation or claim shall be payable by Lessor for
any inconvenience, any interruption or cessation of Lessee's business, or any
annoyance, arising from any damage to or destruction of all or any portion of
the Premises or the Building or the Property regardless of the cause thereof.
Lessee shall look to its own casualty insurance for protection against business
losses and, as a material inducement to Lessor's entering into this Lease,
irrevocably waives and releases any other rights or claims against Lessor.
ARTICLE 13 - EMINENT DOMAIN
Section 13.1 PERMANENT TAKING - WHEN LEASE CAN BE TERMINATED. If the whole
of the Premises, or so much of the Premises as to render the balance unusable by
Lessee, shall be taken under the power of eminent domain, this Lease shall
automatically terminate as of the date of final judgment in such condemnation,
or as of the date possession is taken by the condemning authority, whichever is
earlier. A sale by Lessor under threat of condemnation shall constitute a
"taking" for the purpose of this Article. No award for any partial or entire
taking shall be apportioned and Lessee assigns to Lessor all awards which may be
made in such taking or condemnation, together with all rights of Lessee to such
award, including, without limitation, any award or compensation for the value of
all or any part of the leasehold estate created hereby; provided that nothing
contained in this Article shall be deemed to give Lessor any interest in or to
require Lessee to assign to Lessor any award made to Lessee for (a) the taking
of Lessee's Personal Property, or (b) interruption of or damage to Lessee's
business, or (c) Lessee's unamortized cost of the Lessee improvements to the
extent paid for by Lessee; provided further that Lessee's award shall in no
event diminish the award to Lessor.
Section 13.2 PERMANENT TAKING - WHEN LEASE CANNOT BE TERMINATED. In the
event of a partial taking which does not result in a termination of this Lease
under Section 13.1, Base Rent shall be proportionately reduced based on the
portion of the Premises rendered unusable, and Lessor shall restore the Premises
or the Building to the extent of available condemnation proceeds.
Section 13.3 TEMPORARY TAKING. No temporary taking of the Premium or any
part of the Premises and/or of Lessee's rights to the Premises or under this
Lease shall terminate this Lease or give Lessee any right to any abatement of
any payments owed to Lessor pursuant to this Lease; any award made to Lessee by
reason of such temporary taking shall belong entirely to Lessee; provided,
however, in no event shall an award to Lessee reduce any award to Lessor.
Section 13.4 EXCLUSIVE REMEDY. This Article shall be Lessee's sole and
exclusive remedy in the event of a taking or condemnation. Upon termination of
this Lease pursuant to this Article, Lessee and Lessor hereby agree to release
each other from any and all obligations and liabilities with respect to this
Lease except such obligations and liabilities which arose or accrued prior to
such termination.
ARTICLE 14 - DEFAULTS
Section 14.1 DEFAULT BY LESSEE. Each of the following events shall be an
"Event of Default" (sometimes referred to herein as a "default") by Lessee and a
material breach of this Lease: (a) Lessee shall fail to make any payment owed by
Lessee under this Lease, as and when due, and such failure is not cured within
three (3) days following written notice thereof to Lessee (any such notice shall
be in lieu of, and not in addition to, any notice required by law); (b) Lessee
shall fail to observe, keep or perform any of the terms, covenants, agreements
or conditions under this Lease that Lessee is obligated to observe or perform,
other than that described in subsection (a) above, for a period of thirty (30)
days after notice to Lessee of said failure; provided, however, that if the
nature of Lessee's default is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default under this Lease if Lessee shall
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commence the cure of such default so specified within said thirty (30) day
period and diligently prosecute the same to completion; (c) Lessee shall (i)
make any general arrangement or assignment for the benefit of creditors'. (ii)
become a "debtor" as defined in 11 U.S.C. Section 101 or any successor statute
thereto (unless, in case of a petition filed against Lessee, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where possession is not restored to
Lessee within thirty (30) days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where such seizure is not discharged
within thirty (30) days; provided, however, in the event that any provision of
this subparagraph is contrary to any applicable law, such provision shall be
limited to the extent necessary to be effective; or (d) The vacating or
abandonment of the Premises by Lessee.
Section 14.2 DEFAULT BY LESSOR. Lessor shall not be in default in the
performance of any obligation required to be performed under this Lease unless
Lessor has failed to perform such obligation within thirty (30) days after the
receipt of written notice from Lessee specifying in detail Lessor's failure to
perform; provided, however, that if the nature of Lessor's obligation is such
that more than thirty (30) days are required for its performance, then Lessor
shall not be deemed in default if it shall commence such performance within
thirty (30) days and thereafter diligently pursue the same to completion. If
Lessor does not cure the default, Lessee may exercise such rights or remedies as
shall be provided or permitted under this Lease and by law to recover any
damages approximately caused by such default. Notwithstanding anything to the
contrary contained in this Lease, Lessee's remedy for any breach or default of
this Lease by Lessor shall be limited to an action for damages. Lessee agrees
that, in the event that it becomes entitled to receive damages from Lessor,
Lessee shall not be allowed to recover from Lessor consequential damages or
damages in excess of the out-of-pocket expenditures incurred by Lessee as a
result of a default by Lessor. In any event, Lessor's liability to Lessee for
damages resulting from Lessor's breach of any provision or provisions of this
Lease shall not exceed Lessor's equity interest in the Building and Lessee shall
look solely to Lessor's estate in the Building for collection. Lessee hereby
waives and relinquishes any right which Lessee may have to terminate this Lease
or withhold any payment owed, on account of any damage, condemnation,
destruction or state of disrepair of the Premises.
ARTICLE 15 - LESSOR'S REMEDIES AND RIGHTS
Section 15.1 TERMINATION OF LEASE. In the event of any default by Lessee,
Lessor shall have the right, in addition to all other rights available to Lessor
under this Lease or now or later permitted by law or equity, to terminate this
Lease by providing Lessee with a notice of termination. Upon termination, Lessor
may recover any damages approximately caused by Lessee's failure to perform
under this Lease, or which are likely in the ordinary course of business to be
incurred, including any amount expended or to be expended by Lessor in an effort
to mitigate damages, as well as any other damages to which Lessor is entitled to
recover under any statute now or later in effect. Lessor's damages include the
worth, at the time of any award, of the amount by which the unpaid Rent for the
balance of the Term after the time of the award exceeds the amount of the Rent
loss that the Lessee proves could be reasonably avoided. Damages to which Lessor
is entitled shall bear interest at the Interest Rate set forth herein, or if
less, the maximum rate allowed by law.
Section 15.2 CONTINUATION OF LEASE. Lessee acknowledges that in the event
Lessee has breached this Lease and abandoned the Premises, this Lease shall
continue in effect for so long as Lessor does not terminate Lessee's right to
possession, and Lessor may enforce all its rights and remedies under this Lease,
including the right to recover the Rent as it becomes due under this Lease. Acts
of maintenance or preservation or efforts to re-let the Premises or the
appointment of a receiver upon initiative of Lessor to protect Lessor's interest
under this Lease shall not constitute a termination of Lessee's right to
possession.
Section 15.3 RIGHT OF ENTRY. In the event of any Event of Default by
Lessee, Lessor shall also have the right, with or without terminating this
Lease, to enter the Premises and remove all persons and personal property from
the Premises, such property being removed and stored in a public warehouse or
elsewhere at Lessee's sole cost and expense for at least thirty (30) days, and
after such thirty (30) day period, Lessor shall have the right to discard or
otherwise dispose of such property without liability therefor to Lessee or any
other person. No removal by Lessor of any persons or property in the Premises
shall constitute an election to terminate this Lease. Such an election to
terminate may only be made by Lessor in writing or decreed by a court of
competent jurisdiction. Lessor's right of entry shall include the right to
remodel the Premises and re-let the Premises. All costs incurred in such entry
and reletting shall be paid by Lessee. Rents collected by Lessor from any other
tenant which occupies the Premises shall be offset against the amounts owed to
Lessor by Lessee. Lessee shall be responsible for any amounts not recovered by
Lessor from any other tenant which occupies the Premises. Any payments made by
Lessee shall be credited to the amounts owed by Lessee in the sole order and
discretion of Lessor, irrespective of any designation or request by Lessee. No
entry by Lessor shall prevent Lessor from later terminating this Lease by
written notice.
Section 15.4 NO REDEMPTION. Lessee hereby waives, for itself and all
persons claiming by and under Lessee, all rights and privileges which it might
have under any present or future law to redeem the Premises or to continue this
Lease after being dispossessed or ejected from the Premises.
Section 15.5 RIGHT TO PERFORM. If Lessee fails to perform any covenant or
condition to be performed by Lessee, Lessor may perform such covenant or
condition at its option, after notice to Lessee (except in the case of an
emergency, where no notice shall be required). All costs incurred by Lessor in
so performing shall immediately be reimbursed to Lessor by Lessee, together with
interest at the rate of 10% computed from the due date. Any performance by
Lessor of Lessee's obligations shall not waive or cure such default. All costs
and expenses incurred by Lessor, including reasonable attorneys' fees (whether
or not legal proceedings are instituted), in collecting Rent or enforcing the
obligations of Lessee under this Lease shall be paid by Lessee to Lessor upon
demand.
Section 15.6 CUMULATIVE REMEDIES. No remedy or election provided, allowed
or given by any
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provision of this Lease shall be deemed exclusive unless so indicated, but
shall, whenever possible, be cumulative with all other remedies in law or in
equity.
ARTICLE 16 - SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
Section 16.1 OBLIGATIONS OF LESSEE. This Lease and the rights granted to
Lessee by this Lease are and shall be subject and subordinate at all times to
(a) all ground or underlying leases affecting all or any part of the Property
now or later existing and all amendments, renewals, modifications, supplements
and extensions of this Lease, and (b) all deeds of trust or mortgages now or
later affecting or encumbering all or any part of the Property and/or any ground
or underlying leasehold estate; provided, however, that if Lessor elects at any
time to have Lessee's interest in this Lease be or become superior, senior or
prior to any such instrument, then upon receipt by Lessee of written notice of
such election, this Lease shall be superior, senior and/or prior to such
instrument. On request, Lessee shall execute all instruments and other documents
required or desired by any lender or lessor confirming the subordination and/or
superiority, as applicable, of this Lease to such mortgage, deed of trust,
ground or underlying lease.
Section 16.2 LESSOR'S RIGHT TO ASSIGN. Lessor shall have the right to sell,
encumber, convoy, transfer, and/or assign any and all of its rights and
obligations under this Lease, including but not limited to assignment to any
mortgagee or trust deed beneficiary as additional security. Nothing in this
Lease shall empower Lessee to do any act without Lessor's prior written consent
which can, shall or may encumber the title of the owner of all or any part of
the Property.
Section 16.3 ATTORNMENT BY LESSEE. In the event of the cancellation or
termination of any or all ground or underlying leases affecting all or any part
of the Property in accordance with its terms or by the surrender thereof,
whether voluntary, involuntary or by operation of law, or by summary
proceedings, or in the event of any foreclosure of any or all mortgages or deeds
of trust encumbering all or any part of the Property by trustee's sale,
voluntary agreement, deed in lieu of foreclosure, or by the commencement of any
judicial action seeking foreclosure, Lessee, at the request of the then landlord
under this Lease, shall attorn to and recognize (a) the ground or underlying
lessor under the ground or underlying lease being terminated or cancelled, and
(b) the beneficiary or purchaser at the foreclosure sale, as Lessee's landlord
under this Lease, and Lessee agrees to execute and deliver at any time upon
request of such ground or underlying lessor, beneficiary, purchaser, or their
successors, any and all instruments to further evidence such attornment. Lessee
hereby waives its right, if any, to elect to terminate this Lease or to
surrender possession of the Premises in the event of any such cancellation or
termination of such ground or underlying lease or foreclosure of any mortgage or
deed of trust.
Section 16.4 ESTOPPEL CERTIFICATES. Lessee shall, at any time and from time
to time upon request of Lessor, within ten (10) days following notice of such
request from Lessor, execute, acknowledge and deliver to Lessor in recordable
form, a certificate ("Estoppel Certificate") in writing in such form as Lessor
or any of its lenders, prospective purchasers, lienholders or assignees may deem
appropriate. Lessee's failure to deliver the Estoppel Certificate within this
ten (10) day period shall constitute an Event of Default hereunder which, at
Lessor's option, shall not be curable. Similarly, if Lessee fails to execute and
deliver, within ten (10) days following request thereof by Lessor, any other
documents or instruments required by this Article, such failure shall constitute
a default under this Lease, which default, at Lessor's option, shall not be
curable.
Section 16.5 SALE BY LESSOR. In the event Lessor shall sell, assign, convey
or transfer (collectively a "conveyance") all or any part of its interest in the
Property, Lessee hereby attorn to such transferee, assignee or now owner, and
upon consummation of such conveyance, Lessor shall automatically be freed and
relieved from all liability and obligations accruing or to be performed from and
after the date of such conveyance. In the event of such conveyance, Lessor shall
transfer to such transferee, assignee or new owner of the Property the balance
of the Security Deposit, if any, remaining after lawful deductions, after notice
to Lessee, and Lessor shall thereupon be relieved of all liability with respect
to the Security Deposit.
ARTICLE 17 - RULES AND REGULATIONS
Lessee shall faithfully observe and comply with the rules and regulations
pertaining to the Property ("Rules"), a copy of which are attached as Exhibit
"E," and all reasonable modifications and additions to the Rules from time to
time put into effect by Lessor; provided, however, that no modifications or
additions to the Rules shall materially interfere with Lessee's permitted use of
the Premises. Lessor shall not be responsible to Lessee for the nonperformance
of any of the Rules by any other occupant or tenant of the Property.
ARTICLE 18 - HOLDING OVER
Lessee shall surrender possession of the Premises immediately upon the
expiration of the Term or termination of this Lease. If Lessee shall continue to
occupy or possess the Premises after such expiration or termination, then unless
Lessor and Lessee have otherwise agreed in writing, Lessee shall be deemed to be
a trespasser. Notwithstanding such status, all of the terms, provisions and
conditions of this Lease shall apply to Lessee's holdover occupancy except those
terms, provisions and conditions pertaining to the Term, and except that the
Base Rent shall be immediately adjusted upward upon the expiration or
termination of this Lease to one hundred fifty percent (150%) of the Base Rent
for the Premises in effect immediately prior to the expiration or termination of
this Lease. This holdover occupancy may be terminated by Lessor upon ten (10)
days prior notice to Lessee. In the event that Lessee fails to surrender the
Premises upon such termination or expiration, then Lessee shall indemnify,
defend and hold Lessor harmless against all loss or liability resulting from or
arising out of Lessee's failure to surrender the Premises, including, but not
limited to, any amounts required to be paid to any tenant or prospective tenant
who was to have occupied the Premises after said termination or expiration and
any related attorneys' fees and brokerage commissions. No payment of money by
Lessee to Lessor after the termination of this Lease by Lessor, or after the
giving of any notice of termination to Lessee by Lessor which Lessor is entitled
to give Lessee under this Lease, shall reinstate, continue or extend the Term of
this Lease or
9.
<PAGE> 11
shall affect any such notice given to Lessee prior to the payment of such money,
it being agreed that after the service of such notice or the commencement of any
suit by Lessor to obtain possession of the Premises, Lessor may receive and
collect when due any and all payments owed by Lessee under this Lease, and
otherwise exercise any and all of its rights and remedies. The making of any
such payments by Lessee or acceptance of same by Lessor shall not waive such
notice of termination, or in any manner affect any pending suit or judgment
obtained.
ARTICLE 19 - MISCELLANEOUS
SECTION 19.1 ATTORNEY'S FEES. If either Lessor or Lessee commences or
engages in, or threatens to commence or engage in, any action, litigation or
arbitration ("legal action") against the other party arising out of or in
connection with this Lease, the Premises, the Building or the Property,
including, but not limited to, any action for recovery of any payment owed by
either party under this Lease, or to recover possession of the Premises, or for
damages for breach of this Lease, the prevailing party shall be entitled to have
and recover from the losing party reasonable attorneys' fees and other costs
incurred in connection with said legal action and in preparation for said legal
action. If Lessor becomes involved in any legal action, threatened or actual, by
or against anyone not a party to this Lease, but arising by reason of or related
to any act or omission of Lessee or Lessee's Employees, Lessee agrees to pay
Lessor's reasonable attorneys fees and other costs incurred in connection with
said action.
Section 19.2 AUTHORIZATION TO SIGN LEASE. If Lessee is a corporation, each
individual executing this Lease on behalf of Lessee represents and warrants that
he/she is duly authorized to execute and deliver this Lease on behalf of Lessee
in accordance with a duly adopted resolution of Lessees Board of Directors, and
Lessee warrants and represents that this Lease is binding upon Lessee in
accordance with its terms. If Lessee is a corporation, Lessee shall,
concurrently with its execution of this Lease, deliver to Lessor upon its
request a certified copy of a resolution of its Board of Directors authorizing
the execution of this Lease. If Lessee is a partnership or trust, each
individual executing this Lease on behalf of Lessee represents and warrants that
he/she is duly authorized to execute and deliver this Lease on behalf of Lessee
in accordance with the terms of such entity's partnership agreement or trust
agreement, respectively, and Lessee warrants and represents that this Lease is
binding upon Lessee in accordance with its terms. If Lessee is a partnership or
trust, Lessee shall, concurrently with its execution of this Lease, deliver to
Lessor upon its request such certificates or written assurances from the
partnership or trust as Lessor may request authorizing the execution of this
Lease.
Section 19.3 BROKERS. Lessor and Lessee each hereby represent and warrant
to the other that it has not engaged or dealt with any real estate brokers,
salespersons, finders or other persons entitled to any compensation relating to
this Lease, other than those listed in Section 1.1. If Lessee's representation
and warranty contained in this paragraph is inaccurate, then Lessee hereby
agrees to indemnify, defend and hold Lessor harmless from and against any and
all liabilities, costs and expenses including, without limitation, attorneys'
fees) incurred by Lessor in connection with the claims of any brokers,
salespersons, finders or other persons not listed in Section 1.1.
Section 19.4 CONFIDENTIALITY. Lessee agrees to keep this Lease document and
the terms of this Lease, and the covenants, obligations and conditions contained
in this Lease strictly confidential and not to disclose such matter to any other
landlord or broker.
Section 19.5 COVENANTS, CONDITIONS AND STANDARDS. (a) All provisions,
whether covenants or conditions, on the part of Lessee shall be deemed to be
both covenants and conditions; (b) Unless this Lease provides for a contrary
standard, whenever in this Lease the consent or approval of the Lessor or Lessee
is required, such consent or approval shall not be unreasonably withheld or
delayed (except, however, with respect to any Lessor consent, for matters which
could possibly have an adverse effect on the Building's plumbing, heating,
mechanical, life safety, ventilation, air conditioning or electrical systems,
which could affect the structural integrity of the Building, or which could
affect the exterior appearance of the Building, Lessor may withhold such consent
or approval in its sole discretion but shall act in good faith).
Section 19.6 EXHIBITS. All Exhibits, and any Riders, which are attached to
this Lease are hereby incorporated by this reference and made a part of this
Lease.
Section 19.7 FORCE MAJEURE. Lessor shall not be chargeable with, liable
for, or responsible to Lessee for anything or in any amount for any failure to
perform or delay caused by: fire; earthquake; explosion; flood, hurricane; the
elements; acts of God or the public enemy; actions, restrictions, limitations or
interference of governmental authorities or agents; war; invasion; insurrection.
rebellion; riots; strikes or lockouts; inability to obtain necessary materials,
goods, equipment, services, utilities or labor; or any other cause whether
similar or dissimilar to the foregoing which is beyond the reasonable control of
Lessor; and any such failure or delay due to said causes or any of them shall
not be deemed a breach or default by Lessor.
Section 19.8 GENDER, DEFINITIONS AND HEADINGS. The words "Lessor" and
"Lessee" as used herein shall include the plural as well as the singular and,
when appropriate, shall refer to action taken by or on behalf of Lessor or
Lessee by their respective employees, agents or authorized representatives.
Words in masculine or neuter gender include the masculine, feminine and neuter.
If there is more than one person constituting Lessee, the obligations hereunder
imposed upon such persons constituting Lessee shall be joint and several. The
paragraph headings of this Lease are not a part of this Lease and shall have no
effect upon the construction or interpretation of any part hereof. Except as
otherwise provided to the contrary in this Lease, the terms, conditions and
agreements of this Lease shall apply to and bind the heirs, successors, legal
representatives and permitted assigns of the parties hereto. Any reference to
the word "persons" shall be deemed to include a corporation, a government
entity, an individual, a general partnership, a limited partnership, a limited
liability company, a joint venture, a trust and/or an association.
10.
<PAGE> 12
Section 19.9 GOVERNING LAW. This Lease shall be governed by and construed
pursuant to the laws of the State of Kansas.
Section 19.10 HAZARDOUS MATERIALS. Lessor represents that, to the best of
Lessor's knowledge, except for cleaning solvents, de-icing supplies, typical
office and Building maintenance supplies, etc., there are presently no
biologically or chemically active or other hazardous substances or materials,
the use, storage or disposal of which is regulated by statute (collectively,
"Hazardous Materials") on, under, above or about the Premises or the Property
except as is typical for general office operations. Lessor will not consent to
any other tenant or third parties bringing, storing or releasing any such
Hazardous Materials on, under, above or about the Promises or the Property.
Lessee shall not (either with or without negligence) cause or permit the escape,
disposal or release of any Hazardous Materials. Lessee shall not allow the
storage or use of Hazardous Materials in any manner not sanctioned by law or by
the highest standards prevailing in the industry for the storage and use of such
substances of materials, nor allow to be brought into the Property any such
materials or substances except office and/or cleaning supplies used in the
ordinary course of Lessee's business, and then only after written notice is
given to Lessor of the identity of such substances or materials. Without
limitation, the term "Hazardous Materials" shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 6901. et seq., any applicable state or local laws,
and the regulations adopted under these acts. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of Hazardous Materials, then the reasonable costs thereof shall be
reimbursed by Lessee to Lessor upon demand as additional rent if such
requirement applies to the Premises, In addition, Lessee shall execute
affidavits, representations and the like from time to time at Lessors request
concerning Lessee's best knowledge and belief regarding the presence of
Hazardous Materials on the Premises. In all events, Lessee shall indemnify
Lessor and Lessor's Employees in the manner elsewhere provided in this Lease
from any release of Hazardous Materials on the Premises or the Property,
occurring while Lessee is in possession of the Premises, or elsewhere If caused
by Lessee, Lessee's Employees or persons acting under Lessee. The within
covenants shall survive expiration of the Term and termination of this Lease.
Section 19.11 INSPECTIONS AND ACCESS. Lessor may enter the Premises at all
reasonable hours by means of a master key or otherwise for any reasonable
purpose. If Lessee shall not be personally present to open and permit an entry
into the Premises at any time when such entry by Lessor is necessary or
permitted under this Lease. Lessor may enter by means of a master key without
liability to Lessee except for any failure to exercise due care for Lessee's
Personal Property, and without affecting this Lease.
Section 19.12 NAME OF BUILDING. Lessee shall not use any name, insignia or
logotype of the Building or the Property or any picture of the Building or the
Property in its advertising, stationary or any other manner. Lessor expressly
reserves the right, in Lessor's discretion, to change the name, insignia, or
logotype of the Building or the Property without in any manner being liable to
Lessee.
Section 19.13 NO OFFER. The submission of this Lease to Lessee shall not be
deemed an offer to lease the Premises to Lessee. This Lease shall only become
binding upon Lessor and Lessee when it is fully executed and a fully-executed
original is delivered by Lessor to Lessee.
Section 19.14 NOTICES. All notices, requests, consents, approvals, payments
in connection with this Lease, or communications that either party desires or is
required or permitted to give or make to the other party under this Lease shall
only be deemed to have been given, made and delivered, when made or given in
writing and personally served, or deposited in the United States mail, certified
or registered mail, return receipt requested, postage prepaid, to the respective
addresses of Lessee or Lessor as set forth in Section 1.1, above. Lessor or
Lessee may from time to time designate other addresses for notice purposes by
written notice to the other in accordance herewith.
Section 19.15 PARKING. Lessor shall maintain an unsecured open air
automobile parking lot ("Parking Facilities") adjacent to the Building. Lessee's
privileges during the term hereof with respect to the Parking Facilities shall
be in accordance with the provisions of the attached Exhibit "F".
Section 19.16 RECORDATION. Neither this Lease nor any abstract hereof shall
be recorded by Lessee.
Section 19.17 RIGHT TO PERFORMANCE. All covenants and agreements to be
performed by Lessee under this Lease shall be performed by Lessee at Lessee's
sole cost and expense. If Lessee shall fail to perform any act on its part to be
performed under this Lease, and such failure shall continue for five (5) days
after notice thereof to Lessee (notice shall not be required in cases of
emergency), Lessor may, but shall not be obligated to do so, without waiving or
releasing Lessee from any obligations of Lessee, perform any such act on
Lessee's part to be made or performed as provided in this Lease. All costs
incurred by Lessor with respect to any such performance by Lessor (including
reasonable attorneys' fees) shall be immediately paid by Lessee to Lessor.
Section 19.18 SEPARABILITY. The illegality, invalidity or un-enforceability
of any term, condition, or provision of this Lease shall in no way impair or
invalidate any other term, provision or condition of this Lease, and all such
other terms, provisions and conditions shall remain In full force and effect.
Section 19.19 TIME IS OF THE ESSENCE. Time shall be of the essence of this
Lease and of each of the provisions hereof.
Section 19.20 WAIVER. The waiver by Lessor or Lessee of any term, covenant,
agreement or condition (collectively "obligation(s)") contained in this Lease
shall not be deemed to be a waiver of any subsequent breach of the same or of
any other obligation or provision of this Lease, nor shall any failure to
enforce compliance with any or all of the obligations or provisions of this
Lease (except as expressly provided in this
11.
<PAGE> 13
Lease), or any custom or practice which may develop between the parties in the
administration of this Lease, be construed to waive or lessen the right of
Lessor or Lessee to insist upon the performance by the other in strict
accordance with all of the obligations and provisions of this Lease. The
subsequent acceptance by Lessor of any payment owed by Lessee to Lessor under
this Lease, or the payment of Rent by Lessee, shall not be deemed to be a waiver
of any preceding breach by Lessee of any obligation or provision of this Lease,
other than the failure of Lessee to make the specific payment so accepted by
Lessor, regardless of Lessor's or Lessee's knowledge of such preceding breach at
the time of the making or acceptance of such payment.
Section 19.21 ENTIRE AGREEMENT. This Lease, taken together with the
Exhibits attached hereto, constitutes the entire agreement of the parties
respecting the Premises and all other matters covered or mentioned in this
Lease, and supersedes all prior oral or written negotiations, agreements or
understandings with respect thereto. This Lease may not be amended except by an
instrument in writing signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Lease to be
effective as of the date first set forth above.
Lessor: Lessee:
2526 Investment Co., ORIX Global Communications, Inc.
a Kansas partnership a Nevada Corporation
By:/s/ PAUL P. DENZER By:/s/ KERRY ROGERS
------------------------------ ------------------------------
Paul P. Denzer, its Managing Kerry Rogers, its President
Partner and CEO
12.
<PAGE> 14
EXHIBIT "A"
FLOOR PLAN OF BUILDING
(SHOWING APPROXIMATE LOCATION OF PREMISES)
Re: Lease dated January 23, 1998 (the "Lease") between 2526 Investment Co., a
Kansas partnership (as "Lessor") and ORIX Global Communications, Inc., a
Nevada Corporation (as "Lessee"), pertaining to Suite 100 (the "Premises"),
8500 West 110th Street, Overland Park, Kansas 66210.
[FLOOR PLAN]
A-1.
<PAGE> 15
EXHIBIT "B"
NOTICE OF COMMENCEMENT DATE
Re: Lease dated January 23,1998 (the "Lease") between 2526 Investment Co., a
Kansas partnership (as "Lessor") and ORIX Global Communications, Inc., a
Nevada Corporation (as "Lessee"), pertaining to Suite 100 (the "Promises"),
8500 West 110th Street, Overland Park, Kansas 66210.
Gentlemen:
In accordance with the subject Lease, we wish to confirm the following:
1. That the Premises have been accepted herewith by the Lessee as being
substantially complete in accordance with the subject Lease, and that there is
no deficiency in construction.
2. That the Lessee has accepted and assumed possession of the subject
Premises and acknowledges that under the provisions of the subject Lease, the
Term of said Lease commenced as of February 1, 1998, for a term of seven (7)
years, ending on January 31, 2005.
3. That in accordance with the subject Lease, rental shall commence and be
payable in full as of February 1, 1998.
5. Rent is due and payable in advance on the first day of each and every
month during the term of said Lease.
Lessor: Lessee:
2526 Investment Co., ORIX Global Communications, Inc,
a Kansas Partnership a Nevada Corporation
By:/s/ PAUL P. DENZER By:/s/ KERRY ROGERS
------------------------------------ --------------------------------
Paul P. Denzer, its Managing Partner KERRY ROGERS, its President and
CEO
B-1
<PAGE> 16
EXHIBIT "C"
CONSTRUCTION WORK MEMORANDUM
Re: Lease dated January 23, 1998 (the "Lease") between 2526 Investment Co., a
Kansas partnership (as "Lessor") and ORIX Global Communications, Inc., a
Nevada Corporation (as "Lessee"), pertaining to Suite 100 (the 'Premises"),
8500 West 110th Street, Overland Park, Kansas 66210.
This Construction Work Memorandum supplements the Lease. The terms used
herein shall have the same meanings as set forth in the Lease, unless such
meanings are expressly contradicted herein. In addition, all rights and remedies
of Lessor and Lessee under the Lease shall apply in the event of a default in
any of the provisions of this Agreement, and this Agreement is hereby made a
part of the Lease.
N/A - NO CONSTRUCTION OR REMODELING IS CONTEMPLATED - Lessee accepts the
Premises in its "AS IS" condition on the effective date of the Lease.
C-1.
<PAGE> 17
EXHIBIT "D"
BUILDING STANDARD SERVICES AND UTILITIES
The furnishing of building services and utilities to Lessee shall be
accomplished in accordance with and subject to the terms and conditions set
forth in this Exhibit "D" and elsewhere in this Lease. Lessor reserves the right
to adopt from time to time such reasonable modifications and additions hereto as
Lessor may deem appropriate.
1. Subject to the full performance by Lessee of all of Lessee's obligations
under this Lease, Lessor shall, during Normal Hours as set forth in Section 1.1
of the Lease, provide the following standard building services: (a) Automatic
elevator facilities; (b) Heating, ventilating, and air conditioning ("HVAC")
when and at such temperatures, in the judgment of Lessor, may be required for
the comfortable occupancy of the Premises for general office purposes (subject,
however, to any governmental act, proclamation or regulation). Lessor shall not
be responsible for any room temperatures if Lessee's lighting and receptacle
loads exceed those listed in Paragraph I(c) of this Exhibit, or if the Premises
are used for other than general office purposes; (c) Electric current for
routine lighting and the operation of general office machines such as
typewriters, dictating equipment, desk model adding machines, photocopy machines
and desk top computers incidental to the conduct of normal general office
business, which use 110/220-volt electric power, not to exceed the reasonable
capacity of building standard office lighting and receptacles, and not in excess
of limits imposed by any governmental authority. Lessee agrees, should its
electrical installation or electrical consumption be in excess of the aforesaid
use or extend beyond Normal Hours, to reimburse Lessor for the excess utilities
as provided in Article 8 of this Lease; (d) Reasonably necessary amounts of
water for rest rooms furnished by Lessor; (e) Janitorial services to the
Premises five days per week (except state and/or federal holidays), provided the
Premises are used exclusively in accordance with Section 1.1 and Article 6 of
this Lease, and are kept reasonably in order by Lessee. Lessee shall pay to
Lessor the cost of removal of any of Lessee's refuse and rubbish, to the extent
that the same exceeds the refuse and rubbish usually attendant upon the use of
the Premises for general office purposes. Lessor shall not be responsible or
liable for any act or omission or commission on the part of the persons employed
to perform said janitorial services, and said janitorial services shall be
performed at Lessor's direction without interference by Lessee or Lessee's
Employees.
2. Lessor shall have the exclusive right to make any replacement of
electric light bulbs, tubes and ballasts in the Premises throughout the Term.
The Lessor may, at Lessor's sole discretion, adopt a system of relamping and
reballasting periodically on a group basis in accordance with good practice.
3. No electrical equipment, air conditioning or heating units, or plumbing
additions shall be installed, nor shall any changes to the Building's HVAC,
electrical or plumbing systems be made which could possibly adversely affect the
Building or such systems without the prior written consent of Lessor, which
consent shall be subject to Lessor's sole and absolute discretion. Lessor
reserves the right to designate and/or approve the contractor to be used by
Lessee. Any permitted installations shall be made under Lessor's supervision.
Lessee shall pay any additional cost on account of any increased support to the
floor or roof load for any Lessee required installation and/or additional
equipment required for such installations, and such installations shall
otherwise be made in accordance with Article 7 of this Lease.
4. Lessor shall not provide the Premises with reception outlets or
television or radio antennas for television or radio broadcast or reception, and
Lessee shall not install any such equipment without the prior written consent of
Lessor, which consent can be withheld in Lessor's sole and absolute discretion.
5. Lessee shall not, without the prior written consent of Lessor, use any
apparatus, machine or device in the Premises, which will in any way increase the
amount of electricity or water usually furnished or supplied for use of the
Premises as general office space, nor connect with electric current, except
through existing outlets in the Premises, any apparatus or device for the
purpose of using electric current in excess of that usually furnished or
supplied for use of the Premises as general office space.
6. Lessee shall separately arrange with the applicable local public
authorities, utility companies and telephone companies, as the case may be, for
the furnishing of, and payment of, all telephone services as may be required by
Lessee in the use of the Premises; provided, however, that Lessee shall neither
bear the cost of nor be responsible for installation of the telephone wiring
stubbed to the telephone room. Lessee shall directly pay for such telephone
services, including the establishment and connection thereof, at the rates
charged for such services by said authority, telephone company or utility, and
the failure of Lessee to obtain or to continue to receive such services for any
reason whatsoever shall not relieve Lessee of any of its obligations under this
Lease nor constitute a breach of this Lease by Lessor.
7. Lessee agrees to cooperate fully at all times with Lessor to assure, and
to abide by all regulations and requirements which Lessor may prescribe for the
proper functioning and protection of the Building's HVAC, electrical, security
(if any), and plumbing systems. Lessee shall comply with all Laws now in force
or which may later be enacted or promulgated in connection with building
services furnished to the Premises, including, without limitation, any
governmental rule or regulation relating to the heating and cooling of the
Building.
D-1.
<PAGE> 18
EXHIBIT "E"
RULES AND REGULATIONS
The rules and regulations described herein shall generally apply to all
lessees of the Executive Hills Office Buildings 25 & 26.
1. The sidewalks, entrances, exits, passages, parking areas, courts,
elevators, vestibules, stairways, corridors, terraces, lobbies or halls shall
not be obstructed or used for any purpose other than ingress and egress. The
halls, passages, entrances, exits, elevators and stairways are not for the use
of the general public, and Lessor shall retain the right to control and prevent
access thereto of all persons whose presence, in the judgment of Lessor, is
deemed to be prejudicial to the safety, character, reputation and interests of
the Building and its tenants. Lessee shall not go up on the roof of the
Building.
2. No curtains, blinds, shades or screens shall be attached to or hung in,
or used in connection with any window of the Premises, other than Lessor's
standard window covering, without Lessor's prior consent Neither the interior
nor exterior of any windows shall be coated or otherwise sun-screened without
consent of Lessor.
3. No signs, pictures, placards, etc., shall be installed, displayed,
placed or affixed by Lessee on any part of the exterior of the Premises, the
Building or the Property, or the interior of the Premises, which is visible from
the exterior of the Premises, without the prior written consent of Lessor. In
the event of the violation of the foregoing by any Lessee, Lessor may remove
same without any liability, and may charge the expense incurred in such removal
to the Lessee violating this rule. Interior signs on doors shall be inscribed,
painted or affixed for each Lessee by the Lessor at such Lessee's expense, and
shall be of a size, color and style acceptable to the Lessor. Nothing may be
placed on the exterior of corridor walls or corridor doors other than Lessor's
building standard sign on the corridor door, applied and installed by Lessor.
4. The Building directory will be provided exclusively for the display of
the name and location of Lessees of the Building and Lessor reserves the right
to exclude any other names therefrom. Any additional name(s) which Lessee shall
desire to have placed on the Building directory must first be approved in
writing by Lessor and paid for by the Lessee.
5. Lessee shall not drill into, or in any way deface any part of the
Premises. No boring, cutting or stringing of wires or laying of linoleum or
other similar floor coverings shall be permitted, except with the prior written
consent of the Lessor.
6. No bicycles, vehicles, birds or animals of any kind shall be brought
into or kept in or about the Premises or the Building, and no cooking shall be
done or permitted by Lessee on the Premises, except that the preparation of
coffee, tea, hot chocolate and similar items for Lessee shall be permitted;
provided, however, that the power required shall not exceed that amount which
can be provided by a 30-amp circuit Lessee shall not cause or permit any
unusual or objectionable odors to be produced or to permeate the Premises or the
Building.
7. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
for general office purposes. Lessee shall not occupy or permit any portion of
the Premises to be occupied as an office for a public stenographer or typist or
for the manufacture or sale of liquor, narcotics or tobacco in any form, or as a
medical office, or as a barber or manicure shop, beauty or hair salon, or as an
employment bureau, or as a travel agency, without the prior written consent of
Lessor. Lessee shall not sell or permit the sale of newspapers, magazines,
periodicals, theater tickets or any other goods or merchandise in or on its
Premises. Lessee shall not engage or pay any employees on its Premises, except
those actually working for such Lessee on its Premises, nor shall any Lessee
advertise for laborers giving an address at its Premises. The Premises shall not
be used for lodging or sleeping or for any immoral or illegal purposes.
8. Lessee shall not make, or permit to be made, any noises which disturb
other occupants of the Building, whether by the use of any musical instrument,
radio, television, phonograph, screening room, loud, unusual or disruptive
noise, or in any other way. No Lessee shall use, keep or permit to be used any
foul or noxious gas or substance in, on or about the Premises.
9. Lessee shall not at any time bring or keep within the Premises or the
Building any flammable, combustible or explosive fluid, chemical substance, or
material. Electric space heaters shall not be used at any time by Lessee.
10. No new or additional locks or bolts of any kind shall be placed upon
any of the doors by Lessee, nor shall any changes be made in existing locks or
the mechanism thereof, without the prior written consent of Lessor. If Lessor
consents in writing to such a lock change, Lessee must furnish Lessor with a
key. Lessee must, upon the termination of its tenancy, give, return, and restore
to Lessor all keys of stores, offices, vaults, and toilet rooms, either
furnished to, or otherwise procured by Lessee, and in the event at any time of
any loss of keys so furnished, Lessee shall pay to Lessor the cost of replacing
the same or of changing the lock or locks opened by such lost key if Lessor
shall deem it necessary to make such changes.
11. Furniture, freight, packages, equipment, safes, bulky matter or
supplies of any description shall be moved in or out of the Building only after
Lessor has been furnished with prior notice and approved thereof in writing and
only during such hours and in such manner as may be prescribed by the Lessor
from time to time. The scheduling and manner of all Lessee move-ins and
move-outs shall be subject to the discretion and approval of Lessor, and said
move-ins and move-outs shall only take place at such times as Lessor may
E-1.
<PAGE> 19
designate. In the event Lessee's movers damage the elevator or any other part of
the Property, Lessee shall immediately pay to Lessor the amount required to
repair said damage. The moving of safes or other fixtures or bulky or heavy
matter of any kind must be done under the Lessor's supervision, and the person
employed by any Lessee for such work must be acceptable to Lessor, but such
persons shall not be deemed to be agents or servants of the Lessor, and
Lessee shall be responsible for all acts of such persons. The Lessor reserves
the right to inspect all safes, freight or other bulky or heavy articles to be
brought into the Building and to exclude from the Building all safes, freight or
other bulky or heavy articles which violate any of these Rules or this Lease of
which these Rules are a part. The Lessor reserves the right to determine the
location and position of all safes, freight, furniture or bulky or heavy matter
brought onto the Premises, and Lessor shall have the right to require that same
be placed upon supports approved in writing by Lessor to distribute the weight.
12. No furniture shall be placed in front of the Building, or in any lobby
or corridor or balcony, without the prior written consent of Lessor.
Lessor shall have the right to remove all non-permitted furniture, without
notice to Lessee, and at the expense of Lessee.
13. Lessee shall not purchase water, ice, towel, janitorial, maintenance,
or other like services, from any person or persons not approved in writing by
Lessor. No Lessee shall obtain or purchase food or beverages on the Property
from any vendor or supplier except at hours and under regulations established by
Lessor.
14. Lessor reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 7:00 a.m., Monday through Friday, and at all hours on
Saturday, Sunday, state and/or federal holidays, all persons who are not
authorized by Lessee. Such authorization shall be in accordance with procedures
established by Lessor in its sole and absolute discretion. Each Lessee shall be
responsible for all persons whom it causes to be present in the Building and
shall be liable to Lessor for all acts of such persons. In the case of invasion,
riot, public excitement, act of God, or other circumstance rendering such action
advisable in Lessor's opinion, Lessor reserves the right to prevent access of
all persons, including Lessee, to the Building during the continuance of the
same by such actions as Lessor may deem appropriate, including the closing and
locking of doors.
15. Any persons employed by Lessee to do any work in or about the Premises
shall, while in the Building and outside of the Promises, be subject to and
under the control and direction of Lessee and Lessee shall be responsible for
all acts of such persons.
16. All doors opening onto public corridors shall be kept closed, except
when in use for ingress and egress. All doors leading to equipment and utility
rooms shall be kept closed.
17. Canvassing, soliciting and peddling in the Building are prohibited and
each Lessee shall cooperate to prevent the same.
18. All office equipment of any electrical nature (other than that office
equipment which is typically used in normal office uses and which does not cause
excessive vibration, noise or annoyance) shall be placed by Lessee in the
Premises in settings and locations approved in writing by Lessor, to absorb or
prevent any vibration, noise or annoyance.
19. No air conditioning or heating units or other similar apparatus shall
be installed or used by Lessee without the prior written consent of Lessor.
20. Lessee shall faithfully observe and comply with the terms of any and
all covenants, conditions and restrictions recorded against the Property.
21. Rest rooms and other water fixtures shall not be used for any purpose
other than that which the same are intended, and any damage resulting to the
same from misuse on the part of Lessee shall be paid for by Lessee. Lessee shall
be responsible for causing all water faucets, water apparatus and utilities to
be shut off before such Lessee leaves the Premises each day, and Lessee shall be
liable for any waste or damage sustained as a result of Lessee's failure to
perform said duty.
E-2.
<PAGE> 20
EXHIBIT "F"
PARKING FACILITIES RULES AND PRIVILEGES
Re: Lease dated January 23, 1998 (the "Lease") between 2526 Investment Co., a
Kansas partnership (as "Lossor") and ORIX Global Communications, Inc., a
Nevada Corporation (as "Lessee"), pertaining to Suite 100 (the "Premises"),
8500 West 110th Street, Overland Park, Kansas 66210.
So long as the Lease to which this Exhibit is attached remains in effect
and Lessee is not in default thereunder, Lessee and Lessee's designated
employees and invited guests shall be entitled, during the term of the Lease, to
parking privileges for up to twelve (12) automobiles in the aggregate. A
condition of any parking shall be compliance by all parkers with parking rules
and regulations and all modifications and additions thereto from time to time
established by Lessor (or Lessor's operator) in their sole discretion, including
any sticker or other identification system established by Lessor (or Lessor's
operator). Lessor (and Lessor's operator) shall not be responsible to Lessee for
the non-performance of any of said rules and regulations by any other parker.
The rules and regulations for the Parking Facilities are as follows:
RULES AND REGULATIONS
1. Parking hours shall generally coincide with regular business hours as
described in the Lease - no overnight parking is allowed.
2. Automobiles must be parked entirely within the stall lines on the
pavement.
3. All directional signs and arrows must be observed.
4. The speed limit shall be 5 miles per hour.
5. Parking is prohibited in areas not striped for parking. Additionally,
Lessor may establish reserved parking spaces for the benefit of any one or more
Lessees of the Property and/or their employees, in Lessor's sole discretion.
Only the Lessee and/or its employees who are expressly authorized to park in
such reserved spaces shall be allowed to park in reserved spaces, and then only
in the reserved space(s) specifically designated for that person's vehicle by
Lessor. All others shall be prohibited from parking in reserved spaces.
6. Parking stickers or any other device or form of identification supplied
by Lessor (if any) shall remain the property of Lessor. Such parking
identification device must be displayed as required.
7. Lessor may refuse to permit any person who violates the within rules to
park in the parking area, and any violation of the rules shall subject the
automobile to removal from the parking area at the parker's expense.
8. Every parker is required to park and lock his/her own automobile. All
responsibility for any loss or damage to automobiles or any personal property
therein is assumed by the parker.
9. Loss or theft from automobiles must be reported to the Lessor
immediately, and a lost or stolen report must be filed by the parker at that
time.
10. The Parking Facilities are for the sole purpose of parking one (1)
automobile per space. Washing, waxing, cleaning or servicing of any vehicle by
the parker of his/her agents is prohibited, except by persons expressly
authorized in writing to do so in advance by Lessor.
11. Lessor reserves the right to refuse the issuance of monthly stickers or
other parking identification devices to any lessee and/or its employees who
refuse to comply with the above Rules and Regulations and all city, state or
federal ordinances, laws or agreements.
12. Lessee agrees to acquaint all employees with these Rules and
Regulations.
F-1
<PAGE> 21
RIDER "1"
Re: Lease dated January 23, 1998 (the "Lease") between 2526 Investment Co., a
Kansas partnership (as "Lessor") and ORIX Global Communications, Inc., a
Nevada Corporation (as "Lessee"), pertaining to Suite 100 (the "Premises"),
8500 West 110th Street, Overland Park, Kansas 66210.
1. EXTENSION OPTION(S)
Lessee shall have two (2) options to extend the Lease Term (the "Extension
Option(s)") with respect to all (but not less than all) of the Premises demised
under this Lease as of the Expiration Date of the initial Term and/or the First
Extension Term, as applicable. The first Extension Option shall be for the
period February 1, 2005 through January 31, 2010 (the "First Extension Term").
The second Extension Option shall be for the period February 1, 2010 through
January 31, 2015 (the "Second Extension Term"). Each Extension Option shall be
subject to the following terms and conditions:
a. Lessee must give Lessor written advance notice of Lessee's election to
exercise the Extension Option, not later than one hundred eighty (180) days
prior to the Expiration Date of the initial or extended Term, as
applicable; and
b. Lessee shall not be in default under the terms of this Lease either on the
date that Lessee exercises the Extension Option, or, unless waived in
writing by the Lessor, on the Expiration Date of the initial Term or
extended Term, as applicable; and
c. The monthly Base Rent for each Extension Term shall be adjusted (upwards
only) to a market rate (i.e., a rate based on the rents then being set by
Lessor for space in the Building), and shall be fixed at such rate for the
Extension Term; provided such adjusted Base Rent not be less than the Rent
due during the last month of the preceding Lease Term (or the preceding
Extension Term, as applicable); and
d. Lessee shall continue in occupancy and accept the Premises on the
commencement date of the Extension Term(s) in its "as-is" condition,
without any warranty, allowance, abatement, adjustment or credit from
Lessor with respect to the condition or improvement thereof; and
e. Promptly following Lessee's exercise of its Extension Option, Lessor and
Lessee shall cooperate to enter into an amendment to this Lease to reflect
the extension of the Lease Term, upon the terms and conditions provided for
herein, which amendment shall be executed within 45-days after the date
upon which Lessee exercises its Extension Option.
Except as set forth above, or as may otherwise be inconsistent with the
terms hereof, all of the terms, conditions and provisions of this Lease shall
continue to apply and continue in effect during and with respect to the
Extension Term(s).
Lessor: Lessee:
2526 Investment Co., ORIX Global Communications, Inc.
a Kansas partnership a Nevada Corporation
By:/s/ PAUL P. DENZER By:/s/ KERRY ROGERS
------------------------------------ -----------------------------------
Paul P. Denzer, its Managing Partner Kerry Rogers, its President and CEO
R1-1.
<PAGE> 22
[REALTOR LOGO] Approved by Legal Counsel for use
in Missouri and Kansas by Members
of the Johnson County and Metropolitan
Kansas City Boards of Realtors(R),
copyright 1997
AGENCY DISCLOSURE ADDENDUM
- --------------------------------------------------------------------------------
SIGNATURES ON THIS FORM ACKNOWLEDGE AGENCY DISCLOSURE ONLY. IF KANSAS PROPERTY
THIS FORM MUST BE SIGNED NO LATER THAN TIME OF CONTRACT; IF MISSOURI PROPERTY,
THIS FORM MUST BE SIGNED AT TIME OF PRESENTATION OF OFFER.
SIGNATURES DO NOT CREATE ANY LEGAL OBLIGATION TO EITHER BUYER OR SELLER.
- --------------------------------------------------------------------------------
LANDLORD: 2526 Investment Co.
-----------------------------------------------------------------------
BUYER/TENANT: ORIX Global Communications, Inc.
-------------------------------------------------------------------
PROPERTY Executive Hills 26, 8500 W. 110th, Suite 100, Overland Park, KS 66210
------------------------------------------------------------------------
THE FOLLOWING DISCLOSURE IS MADE IN COMPLIANCE WITH MISSOURI AND KANSAS REAL
ESTATE LAWS AND RULES AND REGULATIONS
(applicable sections must be checked and completed)
[X] a. Landlord Agency Only. (Buyer/Tenant not represented) Listing Broker
and Listing/Selling Agent are acting as agent for Seller/Landlord only
("Seller's Agents") and not as agent for Buyer/Tenant. Buyer/Tenant is not
represented.
[ ] b. Buyer/Tenant Agency Only. (Seller/Landlord not represented) Selling
Broker and Selling Agent are acting as agents for Buyer/Tenant only
("Buyer's Agents") and not as agent for Seller/Landlord. Seller/Landlord is not
represented.
[ ] c. Separate Single Agency. (Seller/Landlord and Buyer/Tenant each have
separate agents) Listing Broker and Listing Agent are acting as agent for
Seller/Landlord only ("Seller's Agents") and not as agent for Buyer/Tenant.
Selling Broker and Selling Agent are acting as agent for Buyer/Tenant only
("Buyer's Agents") and not as agent for Seller/Landlord.
[ ] d. Seller/Landlord Sub-Agency. (Buyer/Tenant not represented) Listing
Broker and Listing Agent are acting as agent for Seller/Landlord only ("Seller's
Agents") and not as agent for Buyer/Tenant. Selling Broker and Selling Agent are
acting as agent for Seller/Landlord only ("Seller's Sub-Agents") in cooperating
with Listing Broker and Listing Agent and not as agent for Buyer/Tenant. Buyer
is not represented.
[ ] e. Designated Agency. Listing Agent is acting as agent for
Seller/Landlord only ("Seller's Agents") and not as agent for Buyer/Tenant.
Selling Agent has been designated by Broker to act as legal agent for
Buyer/Tenant only ("Designated Agent") and not as agent for Seller/Landlord.
Broker is acting in a limited capacity.
[ ] f. Dual Agency. (Available in Missouri only) Broker, Listing and
Selling Agents are all acting as agents for both Buyer/Tenant and
Seller/Landlord ("Dual Agents"). (NOTE: a Separate Disclosure Form is required.)
[ ] g. Transaction Broker. (available only in Kansas; effective 10/1/97)
Broker and his/her affiliated licensees assist one or more parties without being
an agent or advocate for the interests of any party to the transaction. (NOTE: A
Separate Disclosure Form is required.)
PAYMENT OF COMMISSION. All Agent(s) indicated above will be paid a
commission at closing of the sale of the property as follows: (check applicable
paragraph)
[X] Landlord to Pay all Agents. All Agent(s) will be paid from the Seller's
funds at closing according to the terms of the Listing or other Commission
Agreement.
[ ] Buyer/Tenant to Pay Buyer's Agent. Seller/Landlord's Agent, if any,
will be paid from the Seller's funds at closing according to the terms of the
Listing Agreement. Buyer/Tenant's Agent will be paid from the Buyer's funds
according to the terms of the Buyer/Tenant Agency Agreement.
SIGNATURES. By signing this Addendum, Seller/Landlord and Buyer/Tenant
acknowledge the following:
If Kansas property: The agency relationships described herein were
previously disclosed orally to each of them and/or their respective agents.
Seller/Landlord and Buyer/Tenant also acknowledge that the Real Estate Brokerage
Relationships brochure has been furnished to them.
OR
If Missouri property: Receipt of and signature on the Broker Disclosure
Form.
2526 Investment Co. ORIX Global Communications, Inc.
x /s/ PAUL P. DENZER 2-11-98 x
- --------------------------------- -------------------------------------
LANDLORD DATE TENANT DATE
by: Paul P. Denzer by: Kerry Rogers
- --------------------------------- -------------------------------------
SELLER/LANDLORD DATE BUYER/TENANT DATE
- --------------------------------------------------------------------------------
Agent's signatures below are for the purpose of continuing the agency
relationships described herein.
- --------------------------------------------------------------------------------
Lioness Realty Group, Inc.
by: /s/ JAMES M. STACY 5/9/98
- --------------------------------- -------------------------------------
Listing Agent Date Seller Agent Date
James M. Stacy, President
THIS CONTRACT CONTAINS A TOTAL OF ___ PAGES. PAGE #___
<PAGE> 1
GREEN VALLEY EXECUTIVE SUITES
2920 N. Green Valley Pkwy. Bldg. 3 Ste. 321
Henderson, Nevada 89014
LEASE AGREEMENT
THIS LEASE is made this 30 day of July, 1999 between GREEN VALLEY EXECUTIVE
SUITES L.L. CO. (hereby referred to as GVES), as Landlord, and John Higgins
representing eVolve Technology as Tenant. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, certain space for the purpose of conducting
Tenant's business, together with rights to utilize common areas and the right
to receive certain services provided by Landlord.
1. LOCATION: 2920 N. Green Valley Parkway
Building 3, Suite 321
Henderson, Nevada 89014
2. LEASED SPACE: #14 & #27
3. AUTHORIZED USE:
--------------------------------
4. TERM OF LEASE: SIX
After the Original Term of the Lease, the Tenancy shall be considered
month-to-month until terminated by either party hereto by not less than
(30) days prior written notice.
5. RENT: ONE THOUSAND SEVEN HUNDRED SEVENTY SIX DOLLARS ($1776.00 Per Month).
Inclusive of all services described in Section 6 below provided by
Landlord. If additional services are utilized, see Section 13 and 22 hereof
for additional fees payable during the term hereof by Tenant.
(a) Rent is due on the first day of each month beginning September 1, 1999
during the term hereof;
(b) A Security Deposit will be paid in the amount of Twenty Five Dollars
($25.00) for Key Deposit, of which Twenty Five Dollars will be
refunded when keys are returned to Landlord at the term of Lease.
(c) Tenant agrees to pay all rental, sales and transaction privileges
requested by Tenant and provided by Landlord.
(d) Tenant agrees to pay all costs for damage to walls and carpets during
the term hereof by Tenant.
(e) Rent will be increased by 3% yearly on the first day of August, 2000.
INITIALS: GVES [ILLEGIBLE] TENANT JH
----------- -----------
<PAGE> 2
6. Services and Uses provided by Landlord and included in Monthly Rent:
(a) Exclusive right to occupy the leased space;
(b) Non-Exclusive right to utilize common areas including Reception
Area, Conference Rooms, Kitchen, Hallways, Walkways and Restrooms;
(c) Utilities;
(d) Janitorial Services;
(e) Name Identification on or adjacent to door of office;
(f) Mail sorting and placement of mail in pick-up area;
(g) Receptionist and Telephone Answering Services between 9:00 A.M.
and 12:00 Noon and 1:00 P.M. to 5:00 P.M., Monday through Friday,
with the exception of Holidays.
(h) 24-Hour Voice Mail accessibility at a minimal cost.
(i) Honor this Lease if Landlord sells the business or assigns the
Lease and attorn to such purchaser or assignee;
(k) Pay a late charge of five percent (5%) daily of the amount of any
rent which is not paid by 4:00 P.M. on the Fifth (5th) calendar
day of the month.
10. Landlord shall have no liability to Tenant for any acts except those
shown to be negligent and performed by Landlord or its employees.
Landlord shall have no liability to Tenant for failures of utilities or
other services or for acts of other Tenants. In the event the Leased
Space or Common Areas are materially damaged or destroyed, Landlord
may elect to terminate the Lease. In the event the Leased Space is
taken under the power of eminent domain, this Lease shall terminate and
Landlord shall be entitled to receive the entire condemnation award.
11. Landlord shall supply to Tenant, two (2) set of keys for Tenant's
space and the building entry door. Tenant may not duplicate keys
without consent of Landlord. If a key is lost, Tenant must apply to
Landlord for a replacement key (at a charge of $5.00 per key). If
Tenant loses a key, Tenant assumes responsibility for the acts of the
finder. If Tenant loses the building entry door key, Landlord may
change the lock and replace keys for all tenants in the building and
charge the cost thereof. At the expiration of the term of the lease,
all keys must be surrendered by Tenant to Landlord.
12. The Tenant shall be liable for any damages or theft to the media and
conference rooms while the Tenant is in possession of the keys to said
rooms and is only relieved of this liability when the keys are returned
to Landlord.
INITIALS: GVES [ILLEGIBLE] TENANT JH
----------- -------
2
<PAGE> 3
13. The following additional services are available to Tenant, for which a
separate monthly charge shall be made. Landlord reserves the right to
modify these charges at any time:
(a) Secretarial: $8.00 Per Page (Other To Be Specified)
(b) Photocopying: $ .05 Per Copy
(c) Facsimile Trans: $ .25 Per Page (Long Distance Charge from Phone Co.)
(d) (Other)
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
The extra charges shown here shall be deemed additional rent and billed to
Tenant monthly. Landlord is not responsible for the nature or quality of
services provided through independent contractors.
Typewriters, copy machines, facsimile machines and other office equipment,
except Tenant's computer and facsimile for exclusive use of Tenant, will
not be permitted in the Leased Space nor may any other equipment be so
installed which competes with or adversely affects the Support Services
supplied by Landlord without prior approval.
14. Any failure by Tenant to pay the rent or any other amount to be paid
hereunder as and when due, the abandonment or vacation of the Leased Space
by Tenant, or any failure to observe or perform any other provision of this
Lease to be performed by Tenant is an event of default hereunder.
In the event of default, Landlord shall have all the remedies afforded to
Landlord by law and equity, including summary ejectment procedures. Any
rent, charges, fees or other monies owed by Tenant to Landlord is "rent"
for purposes of this Lease. Landlord shall also have the right of summary
self-help, including locking Tenant out, disconnecting all services,
seizure and sale of Tenant's property situated upon the premises, and
removal and storage of Tenant's property situated upon premises at Tenant's
expense.
Time is of the essence. A waiver of one default does not waive time is of
the essence. Time is of the essence at all times and need not be reinstated
by new notices from Landlord. Except as otherwise required by law, no grace
periods apply nor are any notices of default required to be given by
Landlord to Tenant.
No remedy or election hereunder shall be deemed exclusive but, whenever
possible, all remedies shall be cumulative with all other remedies.
INITIALS: GVES TENANT
------ ------- --------
3
<PAGE> 4
15. In the event of any action or proceedings brought by either party
against the other under this Lease, the prevailing party shall be
entitled to recover its reasonable expenses and attorney's fees
incurred in such action or proceedings, as determined by the court. In
the event Landlord, in order to protect its rights, intervenes in or
becomes a party to, or in the event Landlord is made a party to, any
action or proceeding arising in connection with this Lease, Tenant
will pay to Landlord reasonable expenses and attorney's fees incurred
in such action, if determined by the court that Tenant is at fault.
16. Subject to the provisions restricting Tenant's right to assign and
sublet, the covenants and conditions herein contained shall apply to
and be binding upon heirs, executors, administrators, personnel
representatives, successors and assigns of the parties hereto. This
Lease sets for the entire agreement between Landlord and Tenant with
respect to the Leased Space and supersedes any prior representations or
agreements, oral or written, with respect thereto. Any amendment to
this Lease must be in writing and signed by the paries hereto. Any
notice to Tenant under this Lease may be personally delivered to Tenant
or mailed to Tenant by First Class Mail addressed to Tenant at the
location specified in Section 1 of this Lease. Any notice to Landlord
under this Lease may be personally delivered to Landlord by delivery to
Landlord's Manager or mailed to Landlord by First Class Mail addressed
to Landlord's Manager at the location specified in Section 1 of this
Lease.
17. Parties agree that Tenant shall have the right to exchange office space
to smaller or larger offices inside their term of Lease.
18. The telephone services and equipment requested by Tenant are as
follows:
A. Telephone Set(s).
--------
B. PHONE LINE NUMBER:
-----------------------------------
C. FAX LINE NUMBER:
-------------------------------------
D. MODEM LINE NUMBER:
-----------------------------------
19. Optional Features requested by Tenant include:
----------------------------------------------------------------------
INITIALS: GVES /s/ ILLEGIBLE TENANT /s/ ILLEGIBLE
----------------- -----------------
<PAGE> 5
20. Telephone Installation: One Time Suite Charge:
Phone Line @ $50.00 Ea. Deposit to Central Telephone $ --
----
Fax Line @ $50.00 Ea. Deposit to Central Telephone $ --
----
Modem Line @ $50.00 Ea. Deposit to Central Telephone $ --
----
21. A Total Amount of $______ to be received at execution of this Lease
Agreement, which represents the following services:
$ 1176.00 First Months Rent
--------
$ 25.00 Key Security Deposit
--------
$ -- Telephone/Fax/Modem Deposit
--------
$ -- Other
--------
$ 1801.00 TOTAL AMOUNT DUE
--------
IN WITNESS WHEREOF, the parties hereto have entered into this Lease as of
the day and year first above written.
LANDLORD: TENANT:
GREENVALLEY EXECUTIVE SUITES /s/ [ILLEGIBLE]
-----------------------------
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ------------------------------ -----------------------------
ITS: /s/ [ILLEGIBLE] ITS: /s/ [ILLEGIBLE]
-------------------------- -------------------------
-----------------------------
-----------------------------
BILLING ADDRESS:
(IF DIFFERENT FROM LEASED PREMISES:
TELEPHONE:
INITIALS: GVES ?? TENANT ??
---- ----
<PAGE> 1
GREEN VALLEY EXECUTIVE SUITES
2920 N. GREEN VALLEY PKWY. BLDG. 3 STE. 321
HENDERSON, NEVADA 89014
LEASE AGREEMENT
THIS LEASE is made this 01 day of September, 1999, between GREEN VALLEY
EXECUTIVE SUITES L.L. CO. (hereby referred to as GVES), as Landlord, and
_____________________ representing eVOLVE TECHNOLOGY as Tenant. Landlord hereby
leases to Tenant, and Tenant hereby leases from Landlord, certain space for the
purpose of conducting Tenant's business, together with rights to utilize common
areas and the right to receive certain services provided by Landlord.
1. LOCATION: 2920 N. GREEN VALLEY PARKWAY
BUILDING 3, SUITE 321
HENDERSON, NEVADA 89014
2. LEASED SPACE: #28
3. AUTHORIZED USE: EXEC OFFICE
4. TERM OF LEASE: Six Months
After the Original Term of the Lease, The Tenancy shall be considered
month-to-month until terminated by either party hereto by not less than
thirty (30) days prior written notice.
5. RENT: Six Hundred Sixty Eight Dollars ($668.00 Per Month).
Inclusive of all services described in Section 6 below provided by
Landlord. If additional services are utilized, see Section 13 and 22
hereof for additional fees payable during the term hereof by Tenant.
(a) Rent is due on the first day of each month beginning 01 September, 1999
during the term hereof;
(b) A Security Deposit will be paid in the amount of Twenty Five Dollars
($25.00) for Key Deposit, of which Twenty Five Dollars will be refunded
when keys are returned to Landlord at the term of Lease.
(c) Tenant agrees to pay all rental, sales and transaction privileges
requested by Tenant and provided by Landlord.
(d) Tenant agrees to pay all costs for damage to walls and carpets during
the term hereof by Tenant.
(e) Rent will be increased by 3% yearly on the first day of September 01,
2000.
INITIAL: GVES F TENANT TH
--- ----
<PAGE> 2
6. Services and Uses provided by Landlord and included in Monthly Rent:
(a) Exclusive right to occupy the leased space;
(b) Non-Exclusive right to utilize common areas including Reception Area,
Conference Rooms, Kitchen, Hallways, Walkways and Restrooms;
(c) Utilities;
(d) Janitorial Services;
(e) Name Identification on or adjacent to door of office;
(f) Mail sorting and placement of mail in pick-up area;
(g) Receptionist and Telephone Answering Services between 9:00 A.M. and
12:00 Noon and 1:00 P.M. to 5:00 P.M., Monday through Friday, with the
exception of Holidays.
(h) 24-Hour Voice Mail accessibility at a minimal cost.
(i) Honor this Lease if Landlord sells the business or assigns the Lease and
attorn to such purchaser or assignee;
(j) Pay a late charge of five percent (5%) daily of the amount of any rent
which is not paid by 4:00 P.M. on the Fifth (5th) calendar day of the
month.
7. Landlord shall have no liability to Tenant for any acts except those shown
to be negligent and performed by Landlord or its employees. Landlord shall
have no liability to Tenant for failures of utilities or other services or
for acts of other Tenants. In the event the Leased Space or Common Areas are
materially damaged or destroyed, Landlord may elect to terminate the Lease.
In the event the Leased Space is taken under the power of eminent domain,
this Lease shall terminate and Landlord shall be entitled to receive the
entire condemnation award.
8. Landlord shall supply to Tenant, two (2) sets of keys for Tenant's space
and the building entry door. Tenant may not duplicate keys without consent
of Landlord. If a key is lost, Tenant must apply to Landlord for a
replacement key (at a charge of $5.00 per key). If Tenant loses a key,
Tenant assumes responsibility for the acts of the finder. If Tenant loses
the building entry door key, Landlord may change the lock and replace keys
for all tenants in the building and charge the cost thereof. At the
expiration of the term of the lease, all keys must be surrendered by Tenant
to Landlord.
9. The Tenant shall be liable for any damages or theft to the media and
conference rooms while the Tenant is in possession of the keys to said
rooms and is only relieved of this liability when the keys are returned to
Landlord.
INITIALS: GVES /s/ F TENANT /s/ TLH
------ ---------
<PAGE> 3
10. The following additional services are available to Tenant, for which a
separate monthly charge shall be made. Landlord reserves the right to
modify these charges at any time:
(a) Secretarial: $8.00 Per Page (Other To Be Specified)
(b) Photocopying: $ .05 Per Copy
(c) Facsimile Trans: $ .25 Per Page (Long Distance Charge from Phone Co.)
(d) Other:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
The extra charges shown here shall be deemed additional rent and billed
to Tenant monthly. Landlord is not responsible for the nature or quality of
services provided through independent contractors.
Typewriters, copy machines, facsimile machines and other office equipment,
except Tenant's computer and facsimile for exclusive use of Tenant, will
not be permitted in the Leased Space nor may any other equipment be so
installed which competes with or adversely affects the Support Services
supplied by Landlord without prior approval.
11. Any failure by Tenant to pay the rent or any other amount to be paid
hereunder as and when due, the abandonment or vacation of the Leased Space
by Tenant, or any failure to observe or perform any other provision of this
Lease to be performed by Tenant is an event of default hereunder.
In the event of default, Landlord shall have all the remedies afforded to
Landlord by law and equity, including summary ejectment procedures. Any
rent, charges, fees or other monies owed by Tenant to Landlord is "rent"
for purposes of this Lease. Landlord shall also have the right of summary
self-help, including locking Tenant out, disconnecting all services,
seizure and sale of Tenant's property situated upon the premises, and
removal and storage of Tenant's property situated upon premises at
Tenant's expense.
Time is of the essence. A waiver of one default does not waive time is of
the essence. Time is of the essence at all times and need not be reinstated
by new notices from Landlord. Except as otherwise required by law, no grace
periods apply nor are any notices of default required to be given by
Landlord to Tenant.
No remedy or election hereunder shall be deemed exclusive but, whenever
possible, all remedies shall be cumulative with all other remedies.
INITIALS: GVES F TENANT TLH
-------- ------------
<PAGE> 4
12. In the event of any action or proceedings brought by either party against
the other under this Lease, the prevailing party shall be entitled to
recover its reasonable expenses and attorney's fees incurred in such
action or proceedings, as determined by the court. In the event Landlord,
in order to protect its rights, intervenes in or becomes a party to, or in
the event Landlord is made a party to, any action or proceeding arising in
connection with this Lease, Tenant will pay to Landlord reasonable expenses
and attorney's fees incurred in such action, if determined by the court
that Tenant is at fault.
13. Subject to the provisions restricting Tenant's right to assign and sublet,
the covenants and conditions herein contained shall apply to and be binding
upon the heirs, executors, administrators, personnel representatives,
successors and assigns of the parties hereto. This Lease sets for the
entire agreement between Landlord and Tenant with respect to the Leased
Space and supersedes any prior representations or agreements, oral or
written, with respect thereto. Any amendment to this Lease must be in
writing and signed by the parties hereto. Any notice to Tenant under this
Lease may be personally delivered to Tenant or mailed to Tenant by First
Class Mail addressed to Tenant at the location specified in Section 1 of
this Lease. Any notice to Landlord under this Lease may be personally
delivered to Landlord by delivery to Landlord's Manager or mailed to
Landlord by First Class Mail addressed to Landlord's Manager at the
location specified in Section 1 of this Lease.
14. Parties agree that Tenant shall have the right to exchange office space to
smaller or larger offices inside their term of Lease.
15. The telephone services and equipment requested by Tenant are as follows:
A. ___ Telephone Set(s).
B. PHONE LINE NUMBER:
-----------------------------------------------
C. FAX LINE NUMBER:
-------------------------------------------------
D. MODEM LINE NUMBER:
-----------------------------------------------
16. Optional Features requested by Tenant include:
---------------------------------------------------------------------------
INITIALS: GVES F TENANT TH
---- ----
<PAGE> 5
17. Telephone Installation One Time Suite Charge:
Phone Line @ $50.00 Ea. Deposit to Central Telephone $
-----
Fax Line @ $50.00 Ea. Deposit to Central Telephone $
-----
Modem Line @ $50.00 Ea. Deposit to Central Telephone $
-----
18. A Total Amount of $ to be received at execution of this Lease
------
Agreement, which represents the following services:
$668.00 First Months Rent
$ 25.00 Key Security Deposit
$ -- Telephone/Fax/Modem Deposit
$ -- Other
$693.00 TOTAL AMOUNT DUE
IN WITNESS WHEREOF, the parties hereto have entered into this Lease
as of the day and year first above written.
LANDLORD: TENANT:
GREEN VALLEY EXECUTIVE SUITES e.Volve Technology Group, Inc.
------------------------------
[ILLEGIBLE] TREVOR L. HUFFARD
- ------------------------------ ------------------------------
ITS: Owner ITS: Trevor L. Huffard
------------------------ --------------------------
CFO
--------------------------
--------------------------
BILLING ADDRESS:
(IF DIFFERENT FROM LEASED PREMISES)
TELEPHONE:
INITIALS GVES F TENANT: TLH
--------- ---------
<PAGE> 1
[GUARANTY]
Guaranty made this 13th day of October, 1999, by EVENTURES GROUP, INC., a
Delaware corporation with its principal office located at One Evertrust Plaza,
Eighth Floor, Jersey City, New Jersey 07302, (hereinafter "Guarantor", to
Telecommunications Finance Group (hereinafter "Lessor"), with principal office
located at 400 Rinehart Road, Lake Mary, Florida 32746, as an inducement to
Lessor to provide a Lease to AXISTEL COMMUNICATIONS, INC., a Delaware
corporation with its principal office located at One Evertrust Plaza, Eighth
Floor, Jersey City, New Jersey 07302 (hereinafter "Lessee").
For value received, Guarantor agrees as follows:
1. Guarantor absolutely and unconditionally guarantees to Lessor and its
successors and assigns, the full and complete payment, as and when the same
becomes due and payable, of:
(a) Monthly lease payments and all other payments due under a Lease dated
October 1, 1999, between the Lessor and the Lessee (hereinafter
"Lease"), with an initial Lessors Value, as defined in said Lease, of
Three Million Seven Hundred Thousand Dollars ($3,700,000.00).
(b) All payments due under any and all additions, renewals, amendments
and modifications under the Lease.
(c) All payments due Lessor in accordance with the Lease in the event
Lessor declares the Lease in default.
(d) All attorney's fees, court costs and other costs and expenses
incurred by Lessor in connection with the collection of payments due
under such Lease and/or any of the aforementioned amounts for the
payment of which Lessee is or may become liable, subject to the
limitations specified in the Lease, which term shall include all sums,
fees, costs and expenses mentioned in Paragraphs (b), (c) and (d)
hereof, and without requiring Lessor or the then owner and holder of
all or any part of the Lease to make any demand upon or bring any
action against Lessee or any other party, or to exhaust its remedies
against any security existing in connection with the Lease.
2. Guarantor expressly waives acceptance by Lessor of this instrument,
presentment of the Lease for payment, notice of any kind in bringing and
prosecuting any action on the Lease, and diligence in connection with the
collection of the Lease and the handling of any security existing or to
exist in connection therewith.
3. Guarantor agrees that the liability of Guarantor shall not be released,
diminished, impaired, reduced, or affected by:
(a) The taking or accepting of any other security or guaranty for the
Lease;
(b) Any release, withdrawal, waiver, surrender, exchange, substitution,
subordination, loss or other modification of any other security or
guaranty at any time existing in connection with the Lease; any
partial release of the liability of Guarantor hereunder or under any
other instrument had or to be had in connection with or as security
for the Lease; or the death, insolvency, bankruptcy, disability, or
lack of corporate power of Lessor, Guarantor, or any party at any time
liable for the payment of any part of all of the Lease, whether now
existing or hereafter occurring (it being understood that this
paragraph shall not prevent the extinguishment of this guaranty at
such time as the Lease has been fully satisfied in accordance with the
terms thereof);
(c) Any renewal, extension, modification or consolidation of the payment
of any part or all of the Lease or the performance of any covenant
contained in any instrument had or to be had in connection with or as
security for the Lease, either with or without notice to or consent of
Guarantor of any adjustment, indulgence, forbearance, or compromise
that may be granted or given by Lessor or Lessee;
(d) Any neglect, delay, omission, failure, of refusal or Lessor to take or
prosecute any action for the
<PAGE> 2
collection of the Lease or to foreclose or take or prosecute any
action in connection with any lien, right, or security existing or
to exist in connection with or as security for the Lease;
(e) Any assignment of the Lease by Lessor or Lessee; or
(f) Any other action permitted under the terms of the Lease.
4. Guarantor unconditionally and absolutely guarantees the payment of the
full amount of the Lease, regardless of any act or omission of Lessor
or any party with reference to any part of the Lease or any security or
rights existing or to exist in connection therewith; and Guarantor
agrees that Lessor shall in no way be obligated to bring or prosecute
any action against Lessee for any part of the Lease or make any demand
on Lessee or give any notice of any kind to any party. Lessor shall not
be liable or accountable in any respect, nor shall Guarantor have a
right of recourse against Lessor by reason of any act or omission on
the part of the Lessor in connection with any of the matters herein
mentioned. The right of recovery against Guarantor under this Guarantee
is unlimited.
5. In the event Lessor obtains another guaranty for the same indebtedness,
Guarantor agrees that lessor in its sole discretion may (1) bring suit
against all guarantors of the indebtedness jointly and severally or
against any one or more of them, (2) compound or settle with any one or
more of the guarantors for such consideration as Lessor may deem
proper, and (3) release one or more of the guarantors from liability.
Guarantor further agrees that no such action shall impair the rights of
Lessor to collect the entire note from Guarantor.
6. This guaranty agreement shall remain in full force and effect until all
of the Lease has been fully paid and shall be binding upon Guarantor,
its heirs, successors and assigns and, along with all rights and
benefits existing and to exist hereunder, shall inure to the benefit of
and be available to Lessor, its successors and assigns.
7. Guarantor agrees that the obligations of this guaranty agreement shall
be governed by the laws of the State of Florida as if both parties were
residents of the State of Florida.
8. Guarantor hereby irrevocably consents and agrees that any legal action,
suit or proceeding arising out of or in any way in connection with this
guaranty, shall be instituted or brought in the courts of the State of
Florida or the United States court sitting in the State of Florida, and
by acceptance of this Agreement, hereby irrevocably accepts and submits
to, for itself and in respect of its property generally and
unconditionally, the jurisdiction of any such courts and to all
proceedings in such courts.
9. All sums and amounts owing and to be owing by Lessor to Guarantor, as
well as all rights, liens, claims, and securities existing and to exist
in connection therewith or as security therefor, are declared,
recognized, and made subordinate to the Lease and all rights, titles,
interests, liens, claims and securities existing and to exist in
connection therewith or as security thereof.
10. This guaranty agreement is being executed, acknowledged, and delivered
to Lessor prior to the consummation of the Lease mentioned above. When
received by Lessor, this guaranty agreement shall be considered a
unilateral contractual offer from Guarantor to Lessor, the acceptance
of which shall be in the form of the consummation by Lessor of the
above-mentioned Lease. Unless Lessor shall receive prior written notice
of revocation of this guaranty agreement (receipt being deemed to mean
actual delivery to Lessor at the above address), this guaranty
agreement shall, at such time as the Lease is consummated, constitute
a binding contractual obligation upon Guarantor, its successors and
assigns.
In witness whereof, Guarantor has executed this guaranty at Jersey City, NJ, on
the day and year first above written.
EVENTURES GROUP, INC.
By: /s/ STUART CHASANOFF
---------------------------------------
Stuart Chasanoff, Vice President - Business Development
- -------------------------------------------------------
(Name and Title)
Date Signed: 10/13/99
----------------
<PAGE> 1
LEASE AGREEMENT
This LEASE AGREEMENT, is effective on October 1, 1999 between
TELECOMMUNICATIONS FINANCE GROUP (hereinafter "Lessor"), and AXISTEL
COMMUNICATIONS, INC., a Delaware corporation with its principal office located
at One Evertrust Plaza, Eighth Floor, Jersey City, New Jersey 07302,
(hereinafter "Lessee").
1. Lease.
Lessor, subject to the conditions set forth in Section 25 hereof, agrees
to lease to Lessee and Lessee agrees to lease from Lessor hereunder, those
items of personal property (the "equipment") which are described on Schedule 1
hereto and amendments to Schedule 1. Lessee agrees to execute and deliver to
Lessor a Certificate of Delivery and Acceptance immediately after Acceptance of
the equipment, and such execution shall constitute Lessee's irrevocable
acceptance of such items of equipment for all purposes of this Lease.
2. Definitions.
"Acceptance" shall mean that point in time when the equipment installation
personnel complete testing of the equipment and Lessee concurs that the
installation effort is complete, or when the equipment is placed into
service, whichever first occurs.
"Amortization Deductions" as defined in Section II (b)(i) hereof.
"Appraisal Procedure" shall mean the following procedure for determining
the Fair Market Sale Value of any item of equipment. If either Lessor or
Lessee shall request by notice (the "Appraisal Request") to the other that
such value be determined by the Appraisal Procedure, (i) Lessor and Lessee
shall, within 15 days after the Appraisal Request, appoint an independent
appraiser mutually satisfactory to them, or (ii) if the parties are unable
to agree on a mutually acceptable appraiser within such time, Lessor and
Lessee shall each appoint one independent appraiser (provided that if
either party hereto fails to notify the other party hereto of the identity
of the independent appraiser chosen by it within 30 days after the
Appraisal Request, the determination of such value shall be made by the
independent appraiser chosen by such other party), and (iii) if such
appraisers cannot agree on such value within 20 days after their
appointment and if one appraisal is not within 5% of the other appraisal,
Lessor and Lessee shall choose a third independent appraiser mutually
satisfactory to them (or, if they fail to agree upon a third appraiser
within 25 days after the appointment of the first two appraisers, such
third independent appraiser shall within 20 days thereafter be appointed by
the American Arbitration Association), and such value shall be determined
by such third independent appraiser within 20 days after his appointment,
after consultation with the other two independent appraisers. If the first
two appraisals are within 5% of each other, then the average of the two
appraisals shall be the Fair Market Sale Value. The fees and expenses of
all appraisers shall be paid by Lessee.
"Business Day" shall mean a day other than a Saturday, Sunday or legal
holiday under the laws of the State of Florida.
"Certificate of Delivery and Acceptance" as defined in Section I hereof.
"Code" shall mean the Internal Revenue Code of 1954, as amended, or any
comparable successor law.
"Commencement Date" as defined in Section 3 hereof.
"Default" shall mean any event or condition which after the giving of
notice or lapse of time or both would become an Event of Default.
"Equipment" as defined in Section 1 hereof.
"Event of Default" as defined in Section 18 hereof.
"Event of Loss" shall mean, with respect to any item of equipment, the
actual or constructive total loss of such item of equipment or the use
thereof, due to theft, destruction, damage beyond repair or rendition
thereof permanently unfit for normal use from any reason whatsoever, or
the condemnation, confiscation or seizure of, or requisition of title to
or use of, such item of equipment.
"Fair Market Sale Value" shall, at any time with respect to any item of
equipment, be equal to the sale value of such item of equipment which
would be obtained in an arm's-length transaction between an informed and
willing seller under no compulsion to sell and an informed and willing
buyer-user (other than a lessee currently in possession or a used
equipment or scrap dealer). For purposes of Section 7(b) hereof, Fair
Market Sale Value shall be determined by (i) an independent appraiser (at
Lessee's expense) selected by Lessor or (ii) by the Appraisal Procedure if
the Appraisal Request is made at least 90 days (but not more than 360
days) prior to the termination or expiration of the Lease Term, as the
case may be, which determination shall be made (a) without deduction for
any costs or expenses of dismantling or removal; and (b) on the
assumption that such item of equipment is free and clear of all Liens and
is in the condition and repair in which it is required to be returned
pursuant to Section 7(a) hereof. For purposes of Section 19(c) hereof,
Fair Market Sale Value shall be determined (at Lessee's expense) by an
independent appraiser selected by Lessor, on an "as-is, where-is" basis,
without regard to the provisions of clauses (a) and (b) above; provided
that if Lessor shall have sold any item of equipment pursuant to Section
19(b) hereof prior to giving the notice referred to in Section 19(c)
hereof, Fair Market Sale Value of such item of equipment shall be the net
proceeds of such sale after deduction of all costs and expenses incurred
by Lessor in connection therewith; provided further, that if for any
reason Lessor is not able to obtain possession of any item of equipment
pursuant to Section 19(a) hereof, the Fair Market Sale Value of such item
of equipment shall be zero.
-1-
<PAGE> 2
"Imposition" as defined in Section 11 (a) hereof.
"Indemnitee" as defined in Section 17 hereof.
"Late Charge Rate" shall mean an interest rate per annum equal to the higher of
two percent (2%) over the Reference Rate or eighteen percent (18%), but not to
exceed the highest rate permitted by applicable law.
"Lease" and the terms "hereof", "herein", "hereto" and "hereunder", when used in
this Lease Agreement, shall mean and include this Lease Agreement, Schedules,
and Exhibits hereto as the same may from time to time be amended, modified or
supplemented.
"Lease Term" shall mean, with respect to any item of equipment, the term of the
lease of such item of equipment hereunder specified in Section 3 hereof.
"Lessee" as defined in the introductory paragraph to this Lease.
"Lessor" as defined in the introductory paragraph of this Lease.
"Lessor's Value" shall mean, with respect to any item of equipment and
installation if applicable, the total amount set forth in Schedule 1 hereto.
"Lessor's Liens" shall mean (i) any mortgage, pledge, lien, security interest,
charge, encumbrance, financing statement, title retention or any other right or
claim of any person claiming through or under Lessor, not based upon or relating
to ownership of the equipment or the lease thereof hereunder and (ii) any
mortgage, pledge, lien, security interest, charge, encumbrance, financing
statement, title retention or any other right or claim of Owner (other than
Lessor) claiming through or under Lessor in connection with the transactions
described in Section 21(b) hereof.
"Liens" shall mean any mortgage, pledge, lien, security interest, charge,
encumbrance, financing statement, title retention or any other right or claim of
any person, other than any Lessor's Lien.
"Loss Payment Date" shall mean with respect to any item of equipment the date on
which payment, as described in Section 16(b) hereof, is made to the Lessor by
the Lessee as the result of an Event of Loss with respect to such item. The Loss
Payment Date shall be within ninety (90) days of the said Event of Loss.
"Owner" shall mean the entity or person having ownership interest to the
equipment as contemplated by the provisions of Section 21(b) hereof and may be a
person other than Lessor.
"Owner's Economics" shall mean the after-tax yield and periodic after-tax cash
flow anticipated by Owner as of the date of this Lease, in connection with the
transactions contemplated by this Lease as determined by Owner unless Lessor
shall have transferred its interest in the equipment to another person as
contemplated by the provisions of Section 21(b) hereof in which case "Owner's
Economics" shall mean the after-tax yield and periodic after-tax cash flow
anticipated by such person as of the date of the lease between such person and
Lessor contemplated by said provisions, in connection with transactions
contemplated by such lease as determined by such person.
"Recovery Deductions" as defined in Section 11(b)(i) hereof.
"Reference Rate" shall mean the rate of interest publicly announced by Citibank,
N.A. in New York, New York from time to time as its prime rate.
The reference rate is not intended to be the lowest interest charged by
Citibank, N.A. in connection with extensions of credit to debtors. The
Reference Rate shall be determined at the close of business on the 15th day of
each calendar month (if the 15th day is not a Business Day, then on the first
preceding Business Day) and shall become effective as of the first day of the
calendar month succeeding such determination and shall continue in effect to,
and including, the last day of said calendar month.
"Rent Payment Date" shall mean each date on which an installment of rent is due
and payable pursuant to Section 5(a) hereof.
"Stipulated Loss Value" shall mean, with respect to any item of equipment, the
amount determined by multiplying the Lessor's Value of such item of equipment by
the percentage set forth in Schedule A hereto opposite the applicable Rent
Payment Date provided, that for purposes of Sections 16(b) and 19(c) hereof, any
determination of Stipulated Loss Value as of a date occurring after the final
Rent Payment with respect to such item of equipment, shall be made as of such
final Rent Payment Date.
"Tax Benefits" shall mean the right to claim such deductions, credits, and other
benefits as are provided by the Code to an owner of property, including the
Recovery Deductions And Amortization Deductions.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles.
Lease Term.
The term of the lease of the equipment hereunder shall commence on the
Commencement Date specified in the Certificate of Delivery.
-2-
<PAGE> 3
and Acceptance ("Commencement Date") and, unless earlier terminated pursuant to
the provisions hereof or at law or equity, shall continue for a term of sixty
(60) months from such Commencement Date. The Commencement Date specified in the
Certificate of Delivery and Acceptance shall be the 2nd day of the month
following the date on which Acceptance occurs at a site provided by Lessee in
accordance with the provisions of Section 4 hereof.
4. Installation.
Lessor shall arrange for installation of the equipment, the cost of which
installation shall be deemed to be part of Lessor's Value. Exhibit A hereto
shall indicate whether such cost is included or excluded from the monthly rent
payments due in accordance with Section 5(a) hereof. If excluded from such
monthly rent payments, Lessor shall separately invoice Lessee for such
installation upon completion thereof and Lessee shall pay such invoice with
thirty (30) days from the date thereof. Lessee shall be obligated to timely
provide a suitable site for the installation of the equipment in accordance
with the equipment manufacturer's practices and specifications. Lessee shall be
responsible for compliance with environmental requirements and central office
grounding procedures and for providing adequate space, lighting, heating, air
conditioning and A/C power at the installation site. Unavailability of Lessee
furnished facilities shall be cause for adjustments to the installation price
set forth in Schedule 1 hereto.
5. Rent: Unconditional Obligations.
(a) Lessee agrees to pay to Lessor, at the address specified in Section 24
hereof or at such other address as Lessor may specify, rent for the initial
equipment at a rate equal to $21.742 per $1,000 of the total Lessor's Value of
such items of equipment, as set forth in Schedule I dated October 1, 1999,
(plus applicable sales or use taxes) per month, in sixty (60) consecutive
monthly installments, with the first installment of rent being due on the first
day of the month following the Commencement Date, and succeeding installments
being due on the same date of each month thereafter. In the event of any
additions to the initially leased equipment, the rental rate on any additional
equipment will be the rate as shown on the Amendment to Schedule I adding the
equipment to the lease.
(b) Lessee shall also pay to Lessor, on demand, interest at the Late Charge
Rate on any installment of rent and on any other amount owing hereunder which
is not paid on its due date, for any period for which the same shall be
overdue. Each payment made under this Lease shall be applied first to the
payment of interest then owing and then to rent or other amounts owing
hereunder. Interest shall be computed on the basis of a 360-day year and actual
days elapsed.
(c) This Lease is a net lease, and Lessee's obligation to pay all rent and
all other amounts payable hereunder is ABSOLUTE AND UNCONDITIONAL under any and
all circumstances and shall not be affected by any circumstances of any
character whatsoever, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense, abatement or reduction or any right which
Lessee may have against Lessor, the manufacturer or supplier of any of the
equipment or anyone else for any reason whatsoever; (ii) any defect in the
title, condition, design, or operation of, or lack of fitness for use of, or any
damage to, or loss of, all or any part of the equipment from any cause
whatsoever; (iii) the existence of any Liens with respect to the equipment; (iv)
the invalidity, unenforceability or disaffirmance of this Lease or any other
document related hereto; or (v) the prohibition of or interference with the use
or possession by Lessee of all or any part of the equipment, for any reason
whatsoever, including without limitation, by reason of (1) claims for patent,
trademark or copyright infringement; (2) present or future governmental laws,
rules or orders; (3) the insolvency, bankruptcy or reorganization of any
person; and (4) any other cause whether similar or dissimilar to the foregoing,
any present or future law to the contrary notwithstanding. Lessee hereby waives,
to the extent permitted by applicable law, any and all rights which it may now
have or which may at a time hereafter be conferred upon it, by statute or
otherwise, to terminate, cancel, quit or surrender the lease of any equipment.
If for any reason whatsoever this Lease or any Supplement, other than pursuant
to Section 16(b) hereof, shall be terminated in whole or in part by operation of
law or otherwise, Lessee will nonetheless pay to Lessor an amount equal to each
installment of rent at the time such installment would have become due and
payable in accordance with terms hereof. Each payment of rent or other amount
paid by Lessee hereunder shall be final and Lessee will not seek to recover all
or any part of such payment for Lessor for any reason whatsoever.
6. WARRANTY DISCLAIMER; ASSIGNMENT OF WARRANTIES.
(a) LESSOR NEITHER MAKES NOR SHALL BE DEEMED TO HAVE MADE AND LESSEE HEREBY
EXPRESSLY WAIVES ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS
TO THE EQUIPMENT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS OF THE EQUIPMENT FOR ANY PARTICULAR PURPOSE, FREEDOM
FROM INTERFERENCE OR INFRINGEMENT OR THE LIKE, OR AS TO THE TITLE TO OR LESSOR'S
OR LESSEE'S INTEREST IN THE EQUIPMENT OR AS TO ANY OTHER MATTER RELATING TO THE
EQUIPMENT OR ANY PART THEREOF.
LESSEE CONFIRMS THAT IT HAS SELECTED THE EQUIPMENT AND EACH PART THEREOF ON
THE BASIS OF ITS OWN JUDGEMENT AND EXPRESSLY DISCLAIMS RELIANCE UPON ANY
STATEMENTS, REPRESENTATIONS OR WARRANTIES MADE BY LESSOR.
LESSOR NEITHER MAKES NOR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATIONS
OR WARRANTY AS TO THE ACCOUNTING TREATMENT TO BE ACCORDED TO THE TRANSACTIONS
CONTEMPLATED BY THIS LEASE OR AS TO ANY TAX CONSEQUENCES AND/OR TAX TREATMENT
THEREOF.
-3-
<PAGE> 4
(b) LESSOR HEREBY ASSIGNS TO LESSEE SUCH RIGHTS AS LESSOR MAY HAVE (TO
EXTENT LESSOR MAY VALIDLY ASSIGN SUCH RIGHTS) UNDER ALL MANUFACTURERS' AND
SUPPLIERS' WARRANTIES WITH RESPECT TO THE EQUIPMENT; PROVIDED, HOWEVER, THAT THE
FOREGOING RIGHT'S SHALL AUTOMATICALLY REVERT TO LESSOR UPON THE OCCURRENCE AND
DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT HEREUNDER, OR UPON THE RETURN OF
THE EQUIPMENT TO LESSOR. LESSEE AGREES TO SETTLE ALL CLAIMS WITH RESPECT TO THE
EQUIPMENT DIRECTLY WITH THE MANUFACTURERS OR SUPPLIERS THEREOF, AND TO GIVE
LESSOR PROMPT NOTICE OF ANY SUCH SETTLEMENT AND THE DETAILS OF SUCH SETTLEMENT,
HOWEVER, IN THE EVENT ANY WARRANTIES ARE NOT ASSIGNABLE, THE LESSOR AGREES TO
ACT ON BEHALF OF THE LESSEE IN SETTLING CLAIMS ARISING UNDER THE WARRANTY WITH
THE MANUFACTURER OR SUPPLIER.
(c) IN NO EVENT SHALL LESSOR BE LIABLE FOR LOSS OF REVENUE OR PROFITS,
SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY NATURE OR FROM
ANY CAUSE EVEN IF LESSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
7. Disposition of Equipment.
(a) Return.
Lessee shall, upon the expiration or earlier termination of the Lease
Term of each item of equipment, subject to paragraph (b) below, return such
item of equipment to Lessor at such place within the continental United States
of America as Lessor shall designate in writing to Lessee. Until such item of
equipment is returned to Lessor pursuant to the provisions of this Section, all
of the provisions of this Lease with respect thereto shall continue in full
force and effect. Lessee shall pay all the costs and expenses in connection
with or incidental to the return of the equipment, including, without
limitation, the cost of removing, assembling, packing, insuring and
transporting the equipment. At the time of such return, the equipment shall be
in the condition and repair required to be maintained by Section 12 hereof and
free and clear of all Liens.
(b) Purchase Option.
So long as no Default or Event of Default shall have occurred and be
continuing, Lessee may, by written notice given to Lessor at least 120 days
(but not more than 360 days) prior to the expiration date of the Lease Term of
any item of equipment (which notice shall be irrevocable), elect to purchase
such item of equipment on such expiration date for a cash purchase price equal
to the Fair Market Sale Value of such item of equipment determined as of such
expiration date, plus an amount equal to all taxes (other than income taxes on
any gain on such sale), costs and expenses (including legal fees and expenses)
incurred or paid by Lessor in connection with such sale. Upon payment by
Lessee of such purchase price, and of all other amounts then due and payable by
Lessee, Lessor shall transfer title, if any, to such items of equipment except
computer software to Lessee on an "as-is, where-is" basis, without recourse and
without representation or warranty of any kind, express or implied, other than a
representation and warranty that such item of equipment is free and clear of
any Lessor's Liens.
8. Representation and Warranties.
In order to induce Lessor to enter into this Lease and to lease the
equipment to Lessee hereunder, Lessee represents and warrants that:
(a) Organization.
Lessee in duly organized, validly existing and in good standing under
the laws of the State of Delaware and is duly qualified to do business and is
in good standing in the State in which the equipment will be located.
(b) Power and Authority.
Lessee has full power, authority and legal right to execute, deliver
and perform this Lease, and the execution, delivery and performance hereof has
been duly authorized by Lessee's governing body or officer(s).
(c) Enforceability.
This Lease has been duly executed and delivered by Lessee and
constitutes a legal, valid and binding obligation of Lessee enforceable in
accordance with its terms.
(d) Consents and Permits.
The execution, delivery and performance of this Lease does not require
any approval or consent of any trustee, shareholder, partner, sole proprietor,
or holders of any indebtedness or obligations of Lessee, and will not contravene
any law, regulation, judgement or decree applicable to Lessee, or the
certificate of partnership or incorporation or by-laws of Lessee, or contravene
the provisions of, or constitute a default under, or result in the creation of
any Lien upon any property of Lessee under any mortgage, instrument or other
agreement to which Lessee is a party or by which Lessee or its assets may be
bound or affected; and no authorization, approval, license, filing or
registration with any court or governmental agency or instrumentality is
necessary in connection with the execution, delivery, performance, validity and
enforceability of this Lease.
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(e) Financial Condition of the Lessee.
The financial statements and any other financial information of Lessee
heretofore furnished to Lessor are complete and correct and fairly present the
financial condition of Lessee and the results of its operations for the
respective periods covered thereby, there are no known contingent liabilities or
liabilities for taxes of Lessee which are not reflected in said financial
statements and since the date thereof, there has been no material adverse
change in such financial condition or operations.
(f) No Litigation.
There is no action, suit, investigation or proceeding by or before any
court, arbitrator, administrative agency or other governmental authority
pending or threatened against or affecting Lessee (A) which involves the
transactions contemplated by this Lease or the equipment; or (B) which, if
adversely determined, could have a material adverse effect on the financial
condition, business or operations of Lessee.
(g) United States Source Income.
No items of equipment shall be used in a way that results in the
creation of an item of income to Lessor, the source of which for Federal
Income Tax purposes is without the United States.
9. Liens.
Lessee will not directly or indirectly create, incur, assume, suffer,
or permit to exist any Lien on or with respect to the equipment.
10. Insurance.
Lessee shall maintain at all times on the equipment, at its expense,
property damage, direct damage and liability insurance in such amounts, against
such risks, in such form and with such insurers as shall be reasonably
satisfactory to Lessor and any other Owner; provided, that the amount of direct
damage insurance shall not on any date be less than the greater of the full
replacement value or the Stipulated Loss Value of the equipment as of such date.
Each insurance policy will, among other things, name Lessor and any other Owner
as an additional insured or as loss payee (as the case may be) as their
interests may appear, require that the insurer give Lessor and any such Owner at
least (30) days prior written notice of any alteration in or cancellation of the
terms of such policy, and require that the interest of Lessor and any such Owner
continue to be insured regardless of any breach of or violation by Lessee of any
warranties, declarations or conditions contained in such insurance policy.
Lessee shall furnish to Lessor and such Owner a certificate or other evidence
satisfactory to Lessor that such insurance coverage is in effect provided,
however, that Lessor and such Owner shall be under no duty to ascertain the
existence or adequacy of such insurance.
11. Taxes.
(a) General Tax Provisions.
Lessee shall timely pay, and shall indemnify and hold Lessor harmless
from and against, all fees, taxes (whether sales, use, excise, personal property
or other taxes), imports, duties, withholdings, assessments and other
governmental charges of whatever kind or character, however designated (together
with any penalties, fines or interest thereon), all of the foregoing being
herein collectively called "Impositions", which are at any time levied or
imposed against Lessor, Lessee, this Lease, the equipment or any part thereof by
any Federal, State, or Local Government or taxing authority in the United States
or by any foreign government or any subdivision or taxing authority thereof
upon, with respect to, us a result of or measured by (i) the equipment (or any
part thereof), or this Lease or the interests of the Lessor therein; or (ii) the
purchase, ownership, delivery, leasing, possession, maintenance, use, operation,
return, sale or other disposition of the equipment or any part thereof; or (iii)
the rentals, receipts or earnings payable under this Lease or otherwise arising
from the equipment or any part thereof; excluding, however, taxes based on or
measured by the net income of Lessor that are imposed by (1) the United States
of America, or (2) the State of Florida or any political subdivision of the
State of Florida, or (3) any other State of the United States of America or any
political subdivision of any such State in which Lessor is subject to
impositions as the result (whether solely or in part) of business or
transactions unrelated to this Lease. In case any report or return is required
to be filed with respect to any obligation of Lessee under this Section, Lessee
will notify Lessor of such requirement and make such report or return in such
manner as shall be satisfactory to Lessor; provided, that the payment of any use
taxes shall be made in such manner as specified by Lessor in writing to Lessee;
or (iv) The provisions of this Section shall survive the expiration or earlier
termination of this Lease.
(b) Special Tax Provisions.
(i) The Owner of the items of equipment, shall be entitled to
take into account in computing in Federal income tax liability, Current Tax Rate
and such deductions, credits, and other benefits as are provided by the Code to
an owner of property, including, without limitation:
(A) Recovery deductions ("Recovery Deductions") under Section
168 (a) of the Code for each item of equipment in an amount determined,
commencing with the 1999 taxable year, by multiplying the Owner's Cost of such
item of equipment by the percentages applicable under Section 168 (b) of the
Code with respect to "(5)-year property" within the meaning of Section 168
(c)(2) of the Code;
(B) Amortization of expenses ("Amortization Deductions") paid
or to be paid by Owner in connection with this Lease at a rate no less rapid
than straight line over the Lease Term.
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(ii) For the purposes of this Subsection 11(b) only, the term "Owner"
shall include the "common parent" and all other corporations included in the
affiliated group, within the meaning of Section 1504 of the Code (or any other
successor section thereto), of which Owner is or becomes a member.
12. Compliance with Laws; Operation and Maintenance.
(a) Lessee will use the equipment in a careful and proper manner, will
comply with and conform to all governmental laws, rules and regulations relating
thereto, and will cause the equipment to be operated in accordance with the
manufacturer's or supplier's instructions or manuals.
(b) Lessee will, at its own expense, keep and maintain the equipment
in good repair, condition and working order and furnish all parts, replacements,
mechanisms, devices and servicing required therefor so that the value,
condition and operating efficiency therefor will at all times be maintained and
preserved, reasonable wear and tear excepted. Lessee will, at its own expense,
perform all required acts necessary to maintain any manufacturer's warranties
and guarantees respecting the equipment. All such repairs, parts, mechanisms,
devices and replacements shall immediately, without further act, become the
property of Lessor and part of the equipment.
(c) Lessee will not make or authorize any improvement, change, addition
or alteration to the equipment (i) if such improvement, change, addition or
alteration will impair the originally intended function or use of the equipment
or impair the value of the equipment as it existed immediately prior to such
improvement, change, addition or alteration; or (ii) if any parts installed in
or attached to or otherwise becoming a part of the equipment as a result of any
such improvement, change, addition or alteration shall not be readily removable
without damage to the equipment. Any part which is added to the equipment
without violating the provisions of the immediately preceding sentence and which
is not a replacement or substitution for any property which was a part of the
equipment, shall remain the property of Lessee and may be removed by Lessee at
any time prior to the expiration or earlier termination of the Lease Term. All
such parts shall be and remain free and clear of any Liens. Any such part which
is not so removed prior to the expiration or earlier termination of the Lease
Term shall, without further act, become the property of Lessor.
13. Inspection.
Upon prior notice, Lessor or its authorized representatives may at any
reasonable time or times inspect the equipment when it deems it necessary to
protect its interest therein.
14. Identification.
Lessee shall, at its expense, attach to each item of equipment a
notice satisfactory to Lessor disclosing Owner's ownership of such item of
equipment.
15. Personal Property.
Lessee represents that the equipment shall be and at all times remain
separately identifiable personal property. Lessee shall, at its expense, take
such action (including the obtaining and recording of waivers) as may be
necessary to prevent any third party from acquiring any right to or interest in
the equipment by virtue of the equipment being deemed to be real property or a
part of real property or a part of other personal property, and if at any time
any person shall claim any such right or interest. Lessee shall, at its
expense, cause such claim to be waived in writing or otherwise eliminated to
Lessor's satisfaction within 30 days after such claim shall have first become
known to Lessee.
16. Loss or Damage.
(a) All risk of loss, theft, damage or destruction to the equipment or
any part thereof, however incurred or occasioned, shall be borne by Lessee and,
unless such occurrence constitutes an Event of Loss pursuant to paragraph (b) of
this Section, Lessee shall promptly give Lessor written notice hereof and shall
promptly cause the affected part or parts of the equipment to be replaced or
restored to the condition and repair required to be maintained by Section 12
hereof.
(b) If an Event of Loss with respect to any item of equipment shall
occur, Lessee shall promptly give Lessor written notice thereof, and Lessee
shall pay to Lessor as soon as it receives insurance proceeds with respect to
said Event of Loss but in any event no later than 90 days after the occurrence
of said Event of Loss an amount equal to the sum of (i) the Stipulated Loss
Value of such item of equipment computed as of the Rent Payment Date with
respect to such item of equipment on or immediately preceding the date of the
occurrence of such Event of Loss; and (ii) all rent and other amounts due and
owing hereunder for such item of equipment on or prior to the Loss Payment Date.
Upon payment of such amount to Lessor, the lease of such item of equipment
hereunder shall terminate, and Lessor will transfer within forty days to
Lessee, Lessor's right, title, if any, and interest in and to such item of
equipment, on an "as-is, where-is" basis, without recourse and without
representation or warranty, express or implied, other than a representation and
warranty that such item of equipment is free and clear of any Lessor's Liens.
(c) Any payments received at any time by Lessor or Lessee from any
insurer with respect to loss or damage to the equipment shall be applied as
follows: (i) if such payments are received with respect to an Event of Loss they
shall be paid to Lessor, but to the extent received by Lessor, they shall reduce
or discharge, as the case may be, Lessee's obligation to pay the amounts due to
Lessor under Section 16(b) hereof with respect to such Event of Loss; or (ii) if
such payments are received with respect to any loss of or damage to the
equipment other than an Event of Loss, such payments shall, unless a Default or
Event of Default shall have occurred and be continuing, be paid over to Lessee
to reimburse Lessee for its payment of the costs and expenses incurred by Lessee
in replacing or restoring pursuant to Section 16(a) hereof the part or parts of
the equipment which suffered such loss or damage.
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17. GENERAL INDEMNITY.
Lessee assumes liability for, and shall indemnify, protect, save and keep
harmless Lessor, the partners comprising Lessor, its and their directors,
officers, employees, agents, servants, successors and assigns (an "Indemnitee")
from and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses, including reasonable
legal expenses, of whatsoever kind and nature, imposed on, incurred by or
asserted against any Indemnitee, in any way relating to or arising out of this
Lease or the enforcement hereof, or the manufacture, purchase, acceptance,
rejection, ownership, possession, use, selection, delivery, lease, operation,
condition, sale, return or other disposition of the equipment or any part
thereof (including, without limitation, latent or other defects, whether or not
discoverable by Lessee or any other person, any claim in tort whether or not for
strict liability and any claim for patent, trademark, copyright or other
intellectual property infringement); provided, however, that Lessee shall not
be required to indemnify any Indemnitee for loss or liability arising from acts
or events which occur after the equipment has been returned to Lessor in
accordance with the Lease, or for loss or liability resulting solely from the
willful misconduct or gross negligence of such Indemnitee. The provisions of
this Section shall survive the expiration or earlier termination of this Lease.
18. EVENTS OF DEFAULT.
The following events shall each constitute an event of default (herein
called "Event of Default") under this Lease:
(i) Lessee shall fail to execute and deliver to Lessor (or Lessor's agent)
the "Certificate of Delivery and Acceptance" within twenty-four (24) hours of
Acceptance of the equipment to Lessee.
(ii) Lessee shall fail to commence lease payments on the first day of the
month following the Commencement Date, or such other initiation of lease
payments as specified in Section 5 of this Lease.
(iii) Lessee shall fail to make any payment of rent or other amount owing
hereunder or otherwise after notice has been given that payment is past due; or
(iv) Lessee shall fail to maintain the insurance required by Section 10
hereof or to perform or observe any of the covenants contained in Sections 21
or 22 hereof; or
(v) Lessee shall fail to perform or observe any other covenant, condition
or agreement to be performed or observed by it with respect to this Lease or
any other agreement between Lessor and Lessee and such failure shall continue
unremedied for 30 days after the earlier of (a) the date on which Lessee
obtains, or should have obtained knowledge of such failure; or (b) the date on
which notice thereof shall be given Lessor to Lessee; or
(vi) Any representation or warranty made by Lessee herein or in any
document, certificate or financial or other statement now or hereafter
furnished Lessor in connection with this Lease shall prove at any time to have
been untrue, incomplete or misleading in any material respect as of the time
when made; or
(vii) The entry of a decree or order for relief by a court having
jurisdiction in respect of Lessee, adjudging Lessee a bankrupt or insolvent, or
approving as properly filed a petition seeking a reorganization, arrangement,
adjustment or composition of or in respect of Lessee in an involuntary
proceeding or case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency or
other similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of Lessee or of any substantial
part of its property, or ordering the winding-up or liquidation of its affairs,
and the continuance of any such decree or order unstayed and in effect for a
period of 30 days; or
(viii) The institution by Lessee of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the commencement by Lessee of a voluntary
proceeding or case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal of state bankruptcy, insolvency or
other similar law, or the consent by it to the filing of any such petition or to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of Lessee or of
any substantial part of its property, or the making by it of any assignment for
the benefit of creditors or the admission by of it inability to pay its debts
generally as they become due or its willingness to be adjudicated a bankrupt or
the failure of Lessee generally to pay its debts as they become due or the
taking of corporate action by Lessee in furtherance of any of the foregoing.
19. REMEDIES.
If an Event of Default specified in Subsection 18(vii) or (viii) above
shall occur, then, and in any such event, Lessor shall not be obligated to
purchase or lease any of the equipment and this Lease shall, without any
declaration or other action by Lessor, be in default. If an Event of Default,
other than Event of Default specified in Subsection 18(vii) or (viii) above,
shall occur, Lessor may, at its option, declare this Lease to be in default. At
any time after this Lease is in default under the first sentence of this
Section 19, Lesser has declared this Lease to be in default under the second
sentence of this Section 19, Lessor and/or its representative may do any one
or more of the following with respect to all of the equipment or any part
thereof as Lessor in its sole discretion shall elect, to the extent permitted
by applicable law then in effect;
(a) demand that Lessee, and Lessee shall at its expense upon such demand,
return the equipment promptly to Lessor at such place in the continental United
States of America as Lessor shall specify, or Lessor and\or its agents, at its
option, may with or without entry upon the premises where the equipment is
located and disable the equipment, or make the equipment inoperable permanently
or temporarily in Lessor's sole discretion, and/or take immediate possession of
the equipment and remove the same by summary proceedings or otherwise, all
without
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liability for or by reason of such entry or taking of possession, whether for
the restoration of damage to property caused by such taking or for disabling or
otherwise;
(b) sell the equipment at public or private sale, with or without notice,
advertisement or publication, as Lessor may determine, or otherwise dispose of,
hold, use, operate, lease to others or keep idle the equipment as Lessor in its
sole discretion may determine, all free and clear of any right of Lessee and
without any duty to account to Lessor with respect to such action or inaction
or for any proceeds with respect thereto:
(c) by written notice to Lessee specifying a payment date which shall be
not earlier than 20 days after the date of such notice, demand that Lessee pay
to Lessor, and Lessee shall pay to Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and not as a penalty,
all accrued and unpaid rent for the equipment due on all Rent Payment Dates up
to and including the payment date specified in such notice plus an amount
(together with interest on such amount at the Late Charge Rate, from the payment
date specified in such notice to the date of actual payment) equal to the
excess, if any, of the Stipulated Loss Value of the equipment as of the payment
date specified in such notice over the Fair Market Sale Value of the equipment
as of such date;
(d) Lessor may exercise any other right or remedy which may be available
to it under applicable law or proceed by appropriate court action to enforce
the terms hereof or to recover damages for the breach hereof or to rescind
this Lease. Lessor is entitled to recover any amount that fully compensates
the Lessor for any damages to or loss of the Lessor's residual interest in the
equipment caused by the Lessee's default.
In the event any present value discounting is applied, the discount rate
used shall be the Federal Reserve Board Discount Rate.
In addition, Lessee shall be liable for any and all unpaid rent and other
amounts due hereunder before or during the exercise of any of the foregoing
remedies and for all reasonable legal fees and other costs and expenses
incurred by reason of the occurrence of any Event of Default or the exercise of
Lessor's remedies with respect thereto, including all reasonable costs and
expenses incurred in connection with the placing of the equipment in the
condition required by Section 12 hereof.
No remedy referred to in this Section 19 is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to herein
or otherwise available to Lessor at law or in equity; and the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by Lessor of any or all such other
remedies. No express or implied waiver by Lessor of an Event of Default shall
in any way be, or be construed to be, a waiver of any future or subsequent
Event of Default. To the extent permitted by applicable law, Lessee hereby
waives any rights now or hereafter conferred by statute or otherwise which may
require Lessor to sell or lease or otherwise use the equipment in mitigation of
Lessor's damages or losses or which may otherwise limit or modify any of
Lessor's rights or remedies under this Lease.
20. Lessor's Right to Perform.
If Lessee fails to make any payment, other than rent due hereunder,
required to be made by it hereunder or fails to perform or comply with any of
its other agreements contained herein, Lessor may itself make such payment or
perform or comply with such agreement, and the amount of such payment and the
amount of the reasonable expenses of Lessor incurred in connection with such
payment or the performance of or compliance with such agreement, as the case
may be, together with interest thereon at the Late Charge Rate, shall be deemed
to be additional rent, payable by Lessee within 30 days of notice.
21. LOCATION; ASSIGNMENT OR SUBLEASE; TITLE TRANSFER.
(a) LESSEE WILL NOT REMOVE THE EQUIPMENT FROM THE LOCATION SPECIFIED IN
SCHEDULE 1 WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, SUCH CONSENT NOT TO BE
UNREASONABLY WITHHELD, EXCEPT REMOVAL OUTSIDE THE CONTINENTAL U.S. IS NOT
PERMITTED. THE EQUIPMENT SHALL AT ALL TIMES BE IN THE SOLE POSSESSION AND
CONTROL OF LESSEE AND LESSEE WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR, ASSIGN THIS LEASE OR ANY INTEREST HEREIN OR SUBLEASE OR OTHERWISE
TRANSFER ITS INTEREST IN ANY OF THE EQUIPMENT, AND ANY ATTEMPTED ASSIGNMENT,
SUBLEASE OR OTHER TRANSFER BY LESSEE IN VIOLATION OF THESE PROVISIONS SHALL BE
VOID.
(b) LESSOR AND LESSEE ACKNOWLEDGE THAT LESSOR (i) MAY TRANSFER ITS
INTEREST IN THE EQUIPMENT TO AN OWNER OTHER THAN LESSOR. LESSOR MAY
CONTEMPORANEOUSLY THEREWITH LEASE THE EQUIPMENT BACK FROM SUCH OWNER, AND (ii)
MAY ASSIGN THIS LEASE. LESSEE HEREBY CONSENTS TO EACH OF THE ABOVE-DESCRIBED
TRANSACTIONS, FURTHER LESSEE DOES HEREBY ACKNOWLEDGE (i) THAT ANY SUCH TRANSFER
AND/OR ASSIGNMENT BY LESSOR DOES NOT MATERIALLY CHANGE LESSEE'S DUTIES AND
OBLIGATIONS HEREUNDER, (ii) THAT SUCH TRANSFER AND/OR ASSIGNMENT DOES NOT
MATERIALLY INCREASE THE BURDENS OR RIGHTS IMPOSED ON THE LESSEE, AND (iii) THAT
THE ASSIGNMENT IS PERMITTED EVEN IF THE ASSIGNMENT COULD BE DEEMED TO
MATERIALLY AFFECT THE INTEREST OF THE LESSEE.
22. Status Changes in Lessee.
Lessee will not without thirty (30) days prior written notice to Lessor,
(a) enter into any transaction of merger or consolidation unless it is the
surviving corporation or after giving effect to such merger or consolidation
its net worth equals or exceeds that which existed prior to such merger or
consolidation; or (b) change the form of organization of its business; or (c)
change its name or its chief place of business. Lessee must obtain Lessor's
prior written concurrence before Lessee may undertake any actions to (a)
liquidate, dissolve or any such similar action of the Lessee's organization, or
(b) sell, transfer or otherwise dispose of all or any substantial part of
Lessee's assets.
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23. Further Assurances; Financial Information.
(a) Lessee will, at its expense, promptly and duly execute and deliver
to Lessor such further documents and assurances and take such further action as
Lessor may from time to time reasonably request in order to establish and
protect the rights, interests and remedies created or intended to be created in
favor of Lessor hereunder, including, without limitation, the execution and
filing of Uniform Commercial Code financing statements covering the equipment
and proceeds therefrom in the jurisdictions in which the equipment is located
from time to time. To the extent permitted by applicable law, Lessee hereby
authorizes Lessor to file any such financing statements without the signature of
Lessee.
(b) Lessee will qualify to do business and remain qualified in good
standing, in each jurisdiction in which the equipment is from time to time
located.
(c) Lessee will furnish to Lessor as soon as available, but in any event
not later than 90 days after the end of each fiscal year of Lessee, a
consolidated balance sheet of Lessee as at the end of such fiscal year, and
consolidated statements of income and changes in financial position of Lessee
for such fiscal year, all in reasonable detail, prepared in accordance with
generally accepted accounting principles applied on a basis consistently
maintained throughout the period involved. These reports will not be disclosed
to anyone other than the Lessor and/or the Owner as provided in Section 21(b).
24. Notices.
All notices, demands and other communications hereunder shall be in
writing, and shall be deemed to have been given or made when deposited in the
United States mail, first class postage prepaid, addressed as follows or to such
other address as any of the authorized representatives of the following entities
may from time to time designate in writing to the other listed below:
Lessor: TELECOMMUNICATIONS FINANCE GROUP
Attn: Director, Credit & Leasing
400 Rinehart Road
Lake Mary, Florida 32746
TELECOMMUNICATIONS FINANCE GROUP
Attn: General Counsel
900 Broken Sound Parkway
Boca Raton, Florida 33487
Lessee: AXISTEL COMMUNICATIONS, INC.
One Evertrust Plaza, Eighth Floor
Jersey City, New Jersey 07302
25. Conditions Precedent:
(a) Lessor shall not be obligated to lease the items of equipment
described herein to Lessee hereunder unless:
(i) Such Uniform Commercial Code financing statements
covering equipment and proceeds therefrom and landlord and/or mortgagee waivers
or disclaimers and/or severance agreements with respect to the items of
equipment covered by this Lease as Lessor shall deem necessary or desirable in
order to perfect and protect its interests therein shall have been duly executed
and filed, at Lessee's expense, in such public offices as Lessor shall direct;
(ii) All representations and warranties of Lessee contained
herein or in any document or certificate furnished Lessor in connection herewith
shall be true and correct on and as of the date of this Lease with the
same force and effect as if made on and as of such date; no Event of Default or
Default shall be in existence on such date or shall occur as a result of the
lease by Lessee of the equipment specified in Schedule 1;
(iii) In the sole judgment of Lessor, there shall have been
no material adverse change in the financial condition or business of Lessee;
(iv) All proceedings to be taken in connection with the
transactions contemplated by this Lease, and all documents incidental thereto,
shall be satisfactory in form and substance to Lessor and its counsel;
(v) Lessor shall have received from Lessee, in form and
substance satisfactory to it, such other documents and information as Lessor
shall reasonably request;
(vi) All legal matters in connection with the transactions
contemplated by this Lease shall be satisfactory to Lessor's counsel; and
(vii) No Change in Tax Law, which in the sole judgment of
Lessor would adversely affect Lessor's Economics, shall have occurred or shall
appear, in Lessor's good faith judgment, to be imminent.
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<PAGE> 10
(viii) A deposit equal to 10% of Lessor's value must be
received by Lessor prior to shipment of equipment.
(ix) Lessee to provide an executed Guaranty, and related
Secretary's Certificate, in the form provided by
Lessor, from eVentures Group, Inc.
(x) Lessee to provide financial statements for eVentures
Group, Inc. reflecting an equity cash infusion of no
less than $5,000,000.00.
(xi) Lessee to provide documentation outlining it's exact
legal relationship to eVentures Group, Inc. which will
be reviewed by Lessor's counsel to ensure
acceptability.
26. Software License.
Reference is made to the form of Software Product License Agreement
attached hereto as Exhibit B (the "License Document"). Lessor has arranged for
the equipment manufacturer to grant Lessee a license to use the Software as
defined in the License Document in conjunction with the equipment leased
hereunder in accordance with the terms of the License Document. The original
license fee is contained in the lease rate. To avail itself of the license
grant, Lessee must execute the License Document, upon Commencement of the
Lease. "Buyer" and "Licensee" as used in the License Document are synonymous
with Lessee.
27. LIMITATION OF LIABILITY.
LESSOR SHALL NOT BE LIABLE FOR LOST PROFITS OR REVENUE, SPECIAL, INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY NATURE OR FROM ANY CAUSE
WHETHER BASED IN CONTRACT OR TORT, INCLUDING NEGLIGENCE, OR OTHER LEGAL THEORY
EVEN IF LESSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. LESSEE
HEREBY AGREES THAT LESSOR WILL NOT BE LIABLE FOR ANY LOST PROFITS OR REVENUE OR
FOR ANY CLAIM OR DEMAND AGAINST LESSEE BY ANY OTHER PARTY.
28. Miscellaneous.
(a) Any provision of this Lease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in
any other jurisdiction. To the extent permitted by applicable law, Lessee
hereby waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
(b) No terms or provisions of this Lease may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which the enforcement of the change, waiver, discharge or
termination is sought. No delay or failure on the part of Lessor to exercise
any power or right hereunder shall operate as a waiver thereof, nor as an
acquiesence in any default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. After the occurrence of any Default or Event of
Default, the acceptance by Lessor of any payment of rent or other sum owed by
Lessee pursuant hereto shall not constitute a waiver by Lessor of such Default
or Event of Default, regardless of Lessor's knowledge or lack of knowledge
thereof at the time of acceptance of any such payment, and shall not constitute
a reinstatement of this Lease, if this Lease shall have been declared in
default by Lessor pursuant to Section 18 hereof or otherwise, unless Lessor
shall have agreed in writing to reinstate the Lease and to waive the Default or
Event of Default.
In the event Lessee tenders payment to Lessor by check or draft containing a
qualified endorsement purporting to limit or modify Lessee's liability or
obligations under this Lease, such qualified endorsement shall be of no force
and effect even if Lessor processes the check or draft for payment.
(c) This Lease with exhibits contains the full, final and exclusive
statement of the agreement between Lessor and Lessee relating to the lease of
the equipment.
(d) This Lease shall constitute an agreement of an operating lease, and
nothing herein shall be construed as conveying to Lessee any right, title or
interest in the equipment except as Lessee only.
(e) This Lease and the covenants and agreements contained herein shall be
binding upon, and inure to the benefit of, Lessor and its successors and
assigns and Lessee and, to the extent permitted by Section 21 hereof, its
successors and assigns.
(f) The headings of the Sections are for convenience of reference only,
are not a part of this Lease and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
(g) This Lease may be executed by the parties hereto on any number of
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(h) This Lease is deemed made and entered into in the State of Florida and
shall be governed by and construed under and in accordance with the laws of the
State of Florida as if both parties were residents of Florida.
-10-
TFG
-INITIAL-
<PAGE> 11
(i) Lessee hereby irrevocably consents and agrees that any legal action,
suit, or proceeding arising out of or in any way in connection with
this Lease shall be instituted or brought in the courts of the State of
Florida, or the United States Courts for the District of Florida, and
by execution and delivery of this Lease, Lessee hereby irrevocably
accepts and submits to, for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of any
such court, and to all proceedings in such courts. Lessee irrevocably
consents to service of any summons and/or legal process by registered
or certified United States mail, postage prepaid, to Lessee at the
address set forth in Section 24 hereof, such method of service to
constitute, in every respect, sufficient and effective service of
process in any legal action or proceeding. Nothing in this Lease shall
affect the right to service of process in any other manner permitted by
law or limit the right of Lessor to bring actions, suits or proceedings
in the court of any other jurisdiction. Lessee further agrees that
final judgment against it in any such legal action, suit or proceeding
shall be conclusive and may be enforced in any other jurisdiction,
within or outside the United States of America, by suit on the
judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of the liability.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be duly
executed as of the day and year first above written and by its signature below
Lessee expressly acknowledges that this Lease may not be modified unless done
so in a writing signed by each of the parties hereto or their successors in
interest.
AXISTEL COMMUNICATIONS, INC. (Lessee)
By: /s/ MITCHELL ARTHUR
-----------------------------------
Mitchell Arthur President and COO
-----------------------------------
(Name & Title)
Date Signed: 10/15/99
----------------------------
TELECOMMUNICATIONS FINANCE GROUP (Lessor)
By:
-----------------------------------
Director, Credit & Leasing
-----------------------------------
Authorized Representative
Date Signed:
----------------------------
-11-
<PAGE> 12
AXISTEL COMMUNICATIONS, INC.
JERSEY CITY, NEW JERSEY
ORIGINAL LEASE VALUE -- OCTOBER 1, 1999
0.009166 SCHEDULE A
STIPULATED LOSS VALUE
The Stipulated Loss Value of any item of Equipment as of any Rent Payment Date
with respect of such item of Equipment shall be determined by multiplying the
Lessor's Value of such item of Equipment by the percentage set forth below for
such Rent Payment Date; provided that, any determination of Stipulated Loss
Value as of a date occurring after the final Rent Payment Date with respect to
such item of equipment, shall be made as of such final Rent Payment Date.
<TABLE>
<CAPTION>
After Rent
Payment Number Percentage
<S> <C>
0 105.0000
1 104.0758
2 103.1400
3 102.1926
4 101.2335
5 100.2625
6 99.2795
7 98.2845
8 97.2773
9 96.2579
10 95.2260
11 94.1816
12 93.1246
13 92.0548
14 90.9722
15 89.8766
16 88.7679
17 87.6459
18 86.5107
19 85.3620
20 84.1996
21 83.0236
22 81.8338
23 80.6300
24 79.4121
25 78.1799
26 76.9334
27 75.6725
28 74.3969
29 73.1066
30 71.8014
31 70.4812
32 69.1458
33 67.7951
34 66.4290
35 65.0473
36 63.6499
37 62.2366
38 60.8073
39 59.3618
40 57.9001
41 56.4219
42 54.9271
43 53.4155
44 51.8870
45 50.3414
46 48.7787
47 47.1985
48 45.6008
49 43.5687
50 41.5188
51 39.4509
52 37.3647
53 35.2602
54 33.1372
55 30.9954
56 28.8348
57 26.6552
58 24.4563
59 22.2381
60 [illegible]
</TABLE>
<PAGE> 13
SCHEDULE B
AMENDMENT TO LEASE AGREEMENT DATED OCTOBER 1, 1999 BETWEEN
TELECOMMUNICATIONS FINANCE GROUP (LESSOR) AND
AXISTEL COMMUNICATIONS, INC. (LESSEE)
FOR EQUIPMENT TO BE INSTALLED IN JERSEY CITY, NEW JERSEY
A DEPOSIT EQUAL TO 100% OF LESSOR'S VALUE IS REQUIRED BY LESSOR WHICH WILL BE
APPLIED FIRST TO THE FIRST INSTALLMENT OF LEASE RENT AND THEN TO SUCCEEDING
INSTALLMENTS OF LEASE RENT UNTIL FULLY UTILIZED.
IN THE EVENT OF EARLY TERMINATION OF THE LEASE DUE TO DEFAULT BY LESSEE, ANY
UNAPPLIED PORTION OF THE 10% DEPOSIT IS NON-REFUNDABLE AND WILL BE RETAINED BY
LESSOR.
IN THE EVENT LESSEE HAS MORE THAN ONE LEASE WITH LESSOR, AN EVENT OF DEFAULT FOR
ONE LEASE WILL, IN ITSELF, BE AN EVENT OF DEFAULT ON ALL OTHER LEASES IN THE
NAME OF THE LESSEE.
TELECOMMUNICATIONS FINANCE GROUP AXISTEL COMMUNICATIONS, INC.
By: By: /s/ MITCHELL ARTHUR
----------------------------- --------------------------------
DIRECTOR, CREDIT & LEASING MITCHELL ARTHUR, PRESIDENT & COO
- -------------------------------- -----------------------------------
Authorized Representative (Name & Title)
Date Signed: Date Signed: 10/15/99
-------------------- -----------------------
<PAGE> 14
SCHEDULE C
AMENDMENT TO LEASE AGREEMENT DATED OCTOBER 1, 1999 BETWEEN
TELECOMMUNICATIONS FINANCE GROUP (LESSOR) AND
AXISTEL COMMUNICATIONS, INC. (LESSEE)
FOR EQUIPMENT TO BE INSTALLED IN JERSEY CITY, NEW JERSEY
LESSEE AFFIRMS TO THE FOLLOWING IN REGARDS TO THIRD PARTY VENDOR EQUIPMENT:
ALL ADDITIONS TO THE LEASE WILL BE CONTINGENT UPON LESSEE'S CONTINUED
FULFILLMENT OF ALL OBLIGATIONS UNDER THE LEASE INCLUDING TIMELY PAYMENT OF ALL
AMOUNTS DUE.
ALL THIRD PARTY VENDOR EQUIPMENT TO BE ADDED TO THE LEASE MUST BE APPROVED BY
TELECOMMUNICATIONS FINANCE GROUP AT ITS SOLE DISCRETION.
THE CUMULATIVE TOTAL THIRD PARTY VENDOR EQUIPMENT VALUE, WHICH MAY BE ADDED TO
THE LEASE, CANNOT EXCEED 10% OF THE SIEMENS ORDER VALUE. THE 10% VENDOR
ALLOWANCE SHALL NOT APPLY TO CERTAIN OEM EQUIPMENT CONTAINED IN A SIEMENS ORDER,
I.E. VOICE MAIL EQUIPMENT, ETC. THE THIRD PARTY VENDOR ALLOWANCE SHALL NOT
EXCEED $500,000.00 ON ANY SINGLE LEASE.
THE VENDOR ALLOWANCE SHALL BECOME AVAILABLE AS SIEMENS EQUIPMENT IS SHIPPED.
A DEPOSIT EQUAL TO 10% OF THE THIRD PARTY VENDOR EQUIPMENT IS REQUIRED BY LESSOR
PRIOR TO ISSUING A PURCHASE ORDER TO THE THIRD PARTY VENDOR. THIS DEPOSIT WILL
BE APPLIED FIRST TO THE FIRST INSTALLMENT TO LEASE RENT IN WHICH THE VENDOR
EQUIPMENT IS INCLUDED, AND THEN TO SUCCEEDING INSTALLMENTS OF LEASE RENT UNTIL
FULLY UTILIZED.
IN THE EVENT OF EARLY TERMINATION OF THE LEASE DUE TO DEFAULT BY LESSEE, ANY
UNAPPLIED PORTION OF THE DEPOSIT IS NON REFUNDABLE AND WILL BE RETAINED BY
LESSOR.
A 10% FEE WILL BE ADDED TO THE PRICE OF ALL THIRD PARTY VENDOR EQUIPMENT.
THIS EQUIPMENT WILL BE ADDED TO THE LEASE AT THE THEN CURRENT LEASE RATE AS
DETERMINED BY LESSOR.
TELECOMMUNICATIONS FINANCE GROUP AXISTEL COMMUNICATIONS, INC.
By: By: /s/ MITCHELL ARTHUR
----------------------------- --------------------------------
DIRECTOR, CREDIT & LEASING MITCHELL C. ARTHUR, PRESIDENT & COO
- -------------------------------- -----------------------------------
Authorized Representative (Name & Title)
Date Signed: Date Signed: 10/15/99
-------------------- -----------------------
<PAGE> 15
SCHEDULE I
EQUIPMENT DESCRIPTION
The items of personal property to be leased pursuant to this Lease Agreement,
dated as of OCTOBER 1, 1999 between TELECOMMUNICATIONS FINANCE GROUP, as Lessor,
and AXISTEL COMMUNICATIONS, INC., as Lessee, are described below and in the
attached equipment list(s):
<TABLE>
<CAPTION>
Equipment List
- --------------
Number Description Amount
- ------ ----------- ------
<S> <C> <C>
9907032 EWSD release 16.0 switching system configured with DE5.4 $ 2,618,190.00
Switching Network, 10 SS7 links, and 15,000 Long Distance
DS-0's per proposal 9907032, Issue 2, dated July 20, 1999.
Optional SmartCommander gateway server configured for
OMT1, with local client workstation and traffic package.
EWSD interface to Fast Feature Platform RTC; EWSD DS-1
Interface Hardware; EWSD SS7 A-Link Interface Hardware;
DSX equipment for 834 DS1's (28 DSI's per panel).
Dual Fast Feature Platform-II configuration; FFP-II spares $ 648,010.00
(without CE); Siemens provided Channel Banks to support
SS7 DSU DP's; Siemens provided SS7 DSU DP's;
PPDC Service- Pre-Paid Debit Card Enhanced (905050);
PPDC - Time Remaining Warning (90520)
Cognitronics Model 1623 Expanded Announcer equipped with one
(1) T-1; Additional language libraries for Cognitronics 1623 (Spanish);
Additional T-1 interfaces for Cognitronics 1623; PPDC - Datalogging
(905002); PPDC - Pin to Pin Recharge (905075); PPDC - Hotline
(905003); PPDC - Fractional Cents Usage (905100); PPDC - Zone
Surcharge (905105); PPDC - First Use Surcharge (905040); PPDC -
Origination based Surcharge (905115); PPDC - Call Duration
Surcharge (905130); PPDC - Batch Numbers (905140); PPDC -
Real Time Tax Support (905155); PPDC - Credit card Validation
software (905010):PPDC - Expanded Call History (905095); PPDC -
Activate Upon Use (905145); PPDC - Long Distance (905004);
Enhanced NOO - Geo Routing (905200); International Call Back
with internet activation (904410); Student Phone Home/Stay in Touch
(905400); One Number Service Long Distance (906100).
Inventor system (900300) $ 401,900.00
Customer care network server $ 31,900.00
9907081 Power for 600 AMPS with 8 hour backup including: $ 114,410.00
--------------
1 Lorain Power Board (582I0650I07); 14 Lorain Chargers
(A50B50); 2 GNB Batteries (M81-024-10063-038AAL)
TOTALS $ 3,814,410.00
==============
</TABLE>
The above described equipment to be installed at:
One Evertrust Plaza, Eighth Floor, Jersey City, New Jersey 07302
BY: /s/ [ILLEGIBLE]
------------------------------------
DATE: 10/15/99
----------------------------------
<PAGE> 1
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "AGREEMENT") is made this 22nd
day of September, 1999 (the "EFFECTIVE Date"), by and between eVENTURES GROUP,
INC., a Delaware corporation ("eVENTURES"), and HW PARTNERS, L.P., a Texas
limited partnership ("HW").
W I T N E S S E T H:
WHEREAS, eVentures desires to engage the services of HW during the Term
(as hereafter defined) for the purpose of performing Management Services (as
hereafter defined) for eVentures, and HW agrees to perform such Management
Services, subject to the terms and conditions contained herein.
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
A G R E E M E N T:
1. SERVICES.
a. Description. From time to time, eVentures may request HW to
provide and engage HW to provide various management, operational and
administrative services for eVentures (collectively, the "MANAGEMENT
SERVICES"). HW shall provide HW's employees (each, a "CONSULTANT") to
perform such Management Services agreed upon by the parties on a short-
or long-term basis in accordance with the Work Order (as defined
below). The Consultants will perform only the assignments designated to
them in the Work Orders.
b. Request for Services. After eVentures requests Management
Services and HW agrees to perform such Management Services, eVentures
and HW shall describe the terms and conditions of such services by
completing the Description of Management Services and Fee Arrangements
(a "WORK ORDER") in the form of Exhibit "A" attached hereto and
incorporated herein for all purposes, for each project in which HW is
engaged. Each Work Order shall be Approved By Disinterested Directors
(as defined below). As used herein, the phrase "Approved By
Disinterested Directors" shall mean the approval of a majority of the
directors of eVentures who are not employees, directors or persons
otherwise controlling either HW or any entity (other than eVentures)
controlling, controlled by or under common control with HW.
2. THE MANAGEMENT FEES. The fees to be paid by eVentures to HW for the
Management Services provided under this Agreement (the "MANAGEMENT FEES") shall
be
<PAGE> 2
determined as mutually agreed to by the parties at the time HW is engaged by
eVentures and shall be set forth in the applicable Work Order and Approved by
Disinterested Directors.
3. PAYMENT FOR FEES, COSTS AND EXPENSES. Except as otherwise set forth
in the Work Order, eVentures shall pay for the Management Fees and all other
fees and costs and expenses due and owing under this Agreement and each of the
respective Work Orders within thirty (30) days after the month in which such
fees, costs and expenses were incurred and receipt by eVentures of an invoice
detailing the Management Services provided and such Management Fees and other
fees, costs and expenses.
4. RETENTION OF RECORDS. For a reasonable period of time (not to exceed
three (3) years after the services have been rendered), HW shall retain this
Agreement and such books, documents, and records as are reasonably necessary to
verify the nature and extent of the costs of the Management Services supplied
under this Agreement.
5. OTHER ACTIVITIES. It is expressly understood by and agreed between
the parties hereto that HW shall be permitted to perform management, financial
advisory and other services for any other businesses or entities, including,
without limitation, those engaged in a business the same as or similar to that
of eVentures.
6. TERM AND TERMINATION.
6.1 Term. This Agreement shall be for a term of one (1) year from
the Effective Date and shall automatically renew upon expiration of such term
for successive one (1) year periods, unless terminated pursuant to the terms and
conditions set forth herein below. At the time of termination of this Agreement,
all incomplete service arrangements or tasks under the outstanding Work Orders
shall be deemed terminated effective as of the effective date of termination of
this Agreement unless otherwise agreed to by the parties with Approval By
Disinterested Directors. Either party can terminate this Agreement without cause
upon thirty (30) days written notice to the other party.
6.2 Material Breach. This Agreement may be terminated by either
party by giving thirty (30) days prior written notice of such termination to the
other party if the other party to this Agreement materially breaches this
Agreement and such material breach is not cured within the thirty (30) day
notice period. It is agreed by the parties that reasonable attorneys' fees and
expenses incurred pursuant to this Section 6.2 by the nonbreaching party shall
be paid by the breaching party.
6.3 Insolvency. This Agreement may be terminated immediately by
either party by giving written notice of such termination to the other party if
such other party shall be adjudicated bankrupt, become insolvent, have a
receiver of its assets or property appointed or make a general assignment for
the benefit of creditors, or institute or cause to be instituted any proceeding
in bankruptcy or reorganization or rearrangement of its affairs.
6.4 Remedies. Pursuit of any remedies provided in this Agreement
shall not preclude pursuit of any other remedies provided by law, nor shall
pursuit of any remedy herein
================================================================================
MANAGEMENT SERVICES AGREEMENT - PAGE 2
<PAGE> 3
provided constitute a forfeiture or waiver of any obligation of the defaulting
party hereunder or of any damages accruing by reason of the violation of any of
the terms, provisions, and covenants herein contained. No waiver of any
violation shall be deemed or construed to constitute a waiver of any other
violation or breach of any of the terms, provisions, and covenants herein
contained and forbearance to enforce one or more of the remedies herein provided
upon such a violation or breach shall not be deemed or construed to constitute a
waiver of such violation or breach.
6.5 Obligation After Termination. From and after the effective date
of termination of this Agreement, HW shall not be entitled to compensation for
further services hereunder (unless otherwise agreed to by the parties), provided
that eVentures shall pay HW all Management Fees and shall reimburse HW for all
costs and expenses incurred by HW prior to the effective date of termination, in
accordance with Section 3 hereof.
7. NOTICES. Any notice, report, or other communication required or
permitted to be given hereunder shall be given in writing, unless some other
method of giving such notice, report, or communication is accepted by the party
to whom it is given. Any such notice, report or communication shall be deemed to
have been properly given as following: (a) if hand delivered, on the date of
delivery, (b) if by telecopier, upon receipt by the sender of written
confirmation of successful transmission, (c) if by United States mail,
registered or certified with return receipt requested, postage prepaid, and
addressed to the parties hereto at the addresses set forth below, on the third
business day following the day of deposit; or (d) if sent by Federal Express or
equivalent courier services and properly marked as "next business day," on the
next business day. Such notices shall be addressed to the parties at the
following addresses or at such other address for a party as shall be specified
by like notice (except that notices of change of address shall be effective upon
receipt):
If to eVentures: eVENTURES GROUP, INC.
Attention: Chief Financial Officer
One Evertrust Plaza, 8th Floor
Jersey City, New Jersey 07302
Telephone: 201.200.5515
Facsimile: 201.200.5532
with a copy to: eVENTURES GROUP, INC.
Attention: General Counsel
c/o HW Partners, L.P.
1601 Elm Street, Suite 4000
Dallas, Texas 75201
Telephone: 214.720.1600
Facsimile: 214.720.1612
================================================================================
MANAGEMENT SERVICES AGREEMENT - PAGE 3
<PAGE> 4
If to HW: HW PARTNERS, L.P.
Attention:
----------------------------------------
1601 Elm Street, Suite 4000
Dallas, Texas 75201
Telephone: 214.720.1600
Facsimile: 214.720.1612
8. EMPLOYMENT STATUS. a. General. HW represents and agrees that the
Consultants are the employees of HW. The Consultants are not and shall not for
any purpose be deemed to be employees of eVentures.
b. Compensation of Consultants. HW shall be solely responsible to
pay, when due, and timely report, salaries, wages and other forms of
compensation or reimbursement, and all applicable Federal, state and local
withholding taxes and unemployment taxes, as well as social security, state
disability insurance and all other payroll charges payable to, or in respect of,
the Consultants, irrespective of eVentures' payment of invoices described in
Section 3 hereof, and eVentures shall have no responsibility or liability to pay
or provide any compensation, reimbursement, benefits or such taxes or other
charges to or in respect of the Consultants. No Consultant shall be eligible to
participate in any employee benefit plans or arrangements or fringe benefit
plans or programs or payroll practices of eVentures.
c. Insurance. HW shall maintain workers' compensation and employers'
liability insurance, in accordance with applicable law, covering the
Consultants. HW shall provide to eVentures certificates of insurance or other
documentary evidence of such insurance coverage upon request by eVentures.
d. Supervision and Control. EVentures shall not supervise, control
or direct the manner or means by which any Consultant performs the Management
Services. HW shall be solely responsible for recruiting, evaluating, supervising
and terminating the employment of the Consultants. No Consultant shall have any
authority to act for or on behalf of eVentures or to contractually bind
eVentures without the express prior written consent of eVentures.
9. INDEMNIFICATION. HW shall indemnify, defend and hold harmless
eVentures and its employees, subsidiaries and affiliates (other than HW) from
all losses, costs, expenses, damages, claims, taxes, penalties and liabilities
(including reasonable attorneys' fees and expenses) to which eVentures or such
employees, subsidiaries and affiliates shall be subject, or for which they shall
be liable, arising out of (a) any breach by HW of this Agreement, (b) any action
or omission by the Consultants, HW, or any of its affiliates (other than
eVentures), partners, directors, officers, employees or any third party directly
or indirectly employed by HW or its affiliates (other than eVentures) in
connection with the performance under this Agreement, (iii) any claim by any
Consultant, director, officer, employee or affiliate (other than eVentures) of
HW or any third party directly or indirectly employed by HW or its affiliates
(other than eVentures) in connection with the performance of HW under this
Agreement; or (iv) reclassification of any Consultant as an employee of
eVentures or its subsidiaries or a determination that eVentures shall be
considered the employer of any Consultant for any purpose.
================================================================================
MANAGEMENT SERVICES AGREEMENT - PAGE 4
<PAGE> 5
10. ARBITRATION. The parties agree to use good faith negotiation to
resolve any dispute, claim or controversy that may arise under or relate to this
Agreement and will attempt to reach an amicable resolution of the dispute. In
the event that the parties are not able to resolve any dispute, claim, or
controversy by negotiation or mediation, any such dispute, claim, or controversy
shall be settled by binding arbitration which shall be conducted in Dallas,
Texas, in accordance with the rules and regulations promulgated by the American
Arbitration Association, and judgment on the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. Each party will bear
its own costs in the arbitration and the fees and expenses of arbitration will
be shared equally by the parties. Notwithstanding the foregoing, the arbitrator,
in his sole discretion, may determine that the party against whom the decision
is rendered shall pay the prevailing party's costs and share of the arbitrator's
fees and expenses.
11. MISCELLANEOUS.
11.1 Amendments. This Agreement shall not be changed, modified,
terminated, or discharged in whole or in part except by an instrument in writing
signed by eVentures and HW or their respective successors or assigns.
11.2 Assignment. This Agreement shall not be assigned by either
party without the written consent of the other party; and this Agreement shall
be binding upon and shall inure to the benefit of consented to successors and
assigns.
11.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with applicable federal law and the laws of
the State of Texas; provided that any conflict of laws principle that would
require reference to the laws of another jurisdiction shall not apply hereto and
shall be disregarded.
11.4 Entire Agreement. This Agreement and all attachments and
other documents furnished pursuant to this Agreement and expressly made a part
hereof between the parties hereto constitute the entire agreement of the parties
hereto.
11.5 Confidentiality. The parties agree not to disclose or permit
their respective representatives, attorneys, auditors or agents to disclose,
except as may be required by law or performance hereunder to disclose, any
confidential non-public information of the other which is obtained by any of
them in connection with the transactions contemplated by this Agreement.
11.6 Cooperation; Commercially Reasonable Efforts. The parties
shall cooperate in good faith in connection with all actions to be taken to
consummate the transactions contemplated by, and to enforce the rights created
by and perform the responsibilities imposed by, this Agreement.
11.7 Third Party Beneficiaries. The obligations of each party to
this Agreement shall inure solely to the benefit of the other party, and no
beneficiary or other person or entity shall be a third party beneficiary to this
Agreement.
11.8 Independent Contractors. None of the provisions of this
Agreement are intended to create, nor shall be deemed or construed to create,
any relationship between HW and
================================================================================
MANAGEMENT SERVICES AGREEMENT - PAGE 5
<PAGE> 6
eVentures other than that of independent entities contracting with each other
hereunder solely for the purpose of effecting the provisions of this Agreement.
Neither of the parties hereto, nor any of their respective employees,
contractors or agents, shall be construed to be the agent, partner, co-venturer,
employee or representative of the other.
11.10 Further Acts and Documents. Each of the parties hereto
hereby agrees to execute and deliver such further instruments and do such
further acts and things as may be necessary or desirable to carry out the
purposes of this Agreement.
11.11 Severability. In the event any provision of this Agreement
is held to be invalid, illegal or unenforceable for any reason and in any
respect, such invalidity shall not affect the remainder of this Agreement, which
shall be in full force and effect, enforceable in accordance with its terms.
11.12 Multiple Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same instrument.
[Signature page to follow]
================================================================================
MANAGEMENT SERVICES AGREEMENT - PAGE 6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
through their duly authorized representatives as of the date first above
written.
eVENTURES:
eVENTURES GROUP, INC., a Delaware
corporation
By:
--------------------------------------
Name:
------------------------------------
Date: Title:
------------ -----------------------------------
HW:
HW PARTNERS, L.P., a Texas limited
partnership
By: HW Finance, L.L.C., a Delaware
limited liability company, its sole
general partner
Date: By:
------------ --------------------------------------
Barrett Wissman, Manager
================================================================================
MANAGEMENT SERVICES AGREEMENT - PAGE 7
<PAGE> 1
eVENTURES GROUP, INC.
1999 OMNIBUS SECURITIES PLAN
ADOPTED EFFECTIVE SEPTEMBER 22, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. PURPOSE OF PLAN...............................................................................1
ARTICLE 2. EFFECTIVE DATE AND TERM OF PLAN...............................................................1
2.1 TERM OF PLAN.........................................................................................1
2.2 EFFECT ON AWARDS.....................................................................................1
2.3 STOCKHOLDER APPROVAL.................................................................................1
ARTICLE 3. SHARES SUBJECT TO PLAN........................................................................1
3.1 NUMBER OF SHARES.....................................................................................1
3.2 SOURCE OF SHARES.....................................................................................1
3.3 AVAILABILITY OF UNUSED SHARES........................................................................2
3.4 ADJUSTMENT PROVISIONS................................................................................2
3.5 SUBSTITUTE AWARDS....................................................................................3
ARTICLE 4. ADMINISTRATION OF PLAN........................................................................3
4.1 ADMINISTERING BODY...................................................................................3
4.2 AUTHORITY OF ADMINISTERING BODY......................................................................4
4.3 ELIGIBILITY..........................................................................................5
4.4 NO LIABILITY.........................................................................................5
4.5 AMENDMENTS...........................................................................................5
4.6 OTHER COMPENSATION PLANS.............................................................................6
4.7 PLAN BINDING ON SUCCESSORS...........................................................................6
4.8 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES..............................................6
4.9 ISSUANCES FOR COMPENSATION PURPOSES ONLY.............................................................6
4.10 INVALID PROVISIONS..................................................................................6
4.11 GOVERNING LAW.......................................................................................6
ARTICLE 5. GENERAL AWARD PROVISIONS......................................................................7
5.1 PARTICIPATION IN THE PLAN............................................................................7
5.2 AWARD AGREEMENTS.....................................................................................7
5.3 EXERCISE OF AWARDS...................................................................................8
5.4 PAYMENT FOR AWARDS...................................................................................8
5.5 NO EMPLOYMENT OR OTHER CONTINUING RIGHTS.............................................................9
5.6 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS...................................................9
5.7 ADDITIONAL CONDITIONS...............................................................................10
5.8 NO PRIVILEGES OF STOCK OWNERSHIP....................................................................10
5.9 TRANSFERABILITY OF AWARDS...........................................................................11
5.10 INFORMATION TO RECIPIENTS..........................................................................12
5.11 WITHHOLDING TAXES..................................................................................12
5.12 LEGENDS ON COMMON STOCK CERTIFICATES...............................................................13
5.13 EFFECT OF TERMINATION OF EMPLOYMENT ON AWARDS - EMPLOYEES ONLY.....................................13
5.14 EFFECT OF TERMINATION OF ENGAGEMENT ON AWARDS - NON-EMPLOYEES ONLY.................................14
5.15 TRANSFER; LEAVE OF ABSENCE.........................................................................15
5.16 LIMITS ON AWARDS TO CERTAIN ELIGIBLE PERSONS.......................................................15
5.17 PERFORMANCE-BASED COMPENSATION.....................................................................16
ARTICLE 6. STOCK OPTIONS................................................................................16
6.1 NATURE OF STOCK OPTIONS.............................................................................16
</TABLE>
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) 2
<PAGE> 3
<TABLE>
<S> <C>
6.2 OPTION EXERCISE PRICE...............................................................................16
6.3 OPTION PERIOD AND VESTING...........................................................................17
6.4 SPECIAL PROVISIONS REGARDING INCENTIVE STOCK OPTIONS................................................17
6.5 RELOAD OPTIONS......................................................................................17
6.6 RESTRICTIONS........................................................................................18
ARTICLE 7. RESTRICTED STOCK AWARDS......................................................................18
7.1 NATURE OF RESTRICTED STOCK AWARDS...................................................................18
7.2 RIGHTS AS STOCKHOLDERS..............................................................................18
7.3 RESTRICTION.........................................................................................18
7.4 FORFEITURE OR REPURCHASE OR RESTRICTED STOCK........................................................19
7.5 CERTIFICATES, ESCROWS...............................................................................19
7.6 VESTING OF RESTRICTED STOCK.........................................................................20
7.7 WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS......................................................20
7.8 SECTION 83(b) ELECTION..............................................................................20
ARTICLE 8. UNRESTRICTED STOCK AWARDS....................................................................20
8.1 GRANT OR SALE OF UNRESTRICTED STOCK.................................................................20
ARTICLE 9. PERFORMANCE STOCK AWARDS.....................................................................21
9.1 NATURE OF PERFORMANCE STOCK AWARDS..................................................................21
9.2 RIGHTS AS A STOCKHOLDER.............................................................................21
ARTICLE 10. DIVIDEND EQUIVALENT RIGHTS..................................................................21
10.1 DIVIDEND EQUIVALENT RIGHTS.........................................................................21
10.2 INTEREST EQUIVALENTS...............................................................................22
ARTICLE 11. STOCK APPRECIATION RIGHTS...................................................................22
11.1 GRANT OF STOCK APPRECIATION RIGHTS.................................................................22
11.2 COUPLED STOCK APPRECIATION RIGHTS..................................................................22
11.3 INDEPENDENT STOCK APPRECIATION RIGHTS..............................................................22
11.4 PAYMENT AND LIMITATIONS ON EXERCISE................................................................23
ARTICLE 12. REORGANIZATIONS.............................................................................23
12.1 CORPORATE TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL...........................................23
12.2 CORPORATE TRANSACTIONS INVOLVING A CHANGE IN CONTROL...............................................23
ARTICLE 13. DEFINITIONS.................................................................................24
</TABLE>
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) 3
<PAGE> 4
eVENTURES GROUP, INC.
1999 OMNIBUS SECURITIES PLAN
---------------------------------------
1. PURPOSE OF PLAN
The Company adopted this Plan to promote the interests of the Company,
its Affiliated Entities and their respective stockholders by using investment
interests in the Company to attract, retain and motivate management and other
persons, including officers, directors, employees and certain consultants of the
Company and the Affiliated Entities to encourage and reward such persons'
contributions to the performance of the Company and to align their interests
with the interests of the Company's stockholders. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in Article 13.
2. EFFECTIVE DATE AND TERM OF PLAN
2.1 TERM OF PLAN. This Plan became effective as of the Effective Date
and shall continue in effect until the Expiration Date, at which time this Plan
shall automatically terminate.
2.2 EFFECT ON AWARDS. Awards may be granted during the Plan Term, but
no Awards may be granted after the Plan Term. Notwithstanding the foregoing,
each Award properly granted under this Plan during the Plan Term shall remain in
effect after termination of this Plan until such Award has been exercised,
terminated or expired, as applicable, in accordance with its terms and the terms
of this Plan.
2.3 STOCKHOLDER APPROVAL. This Plan shall be approved by the Company's
stockholders within twelve (12) months after the Effective Date. The
effectiveness of any Awards granted prior to such stockholder approval shall be
specifically subject to, and conditioned upon, such stockholder approval.
3. SHARES SUBJECT TO PLAN
3.1 RESERVED NUMBER OF SHARES. The maximum number of shares of Common
Stock reserved and available for issuance under this Plan shall be four million
(4,000,000), subject to adjustment as set forth in Section 3.4.
3.2 SOURCE OF SHARES. The Common Stock to be issued under this Plan
will be made available, at the discretion of the Board, either from authorized
but unissued shares of Common Stock or from previously issued shares of Common
Stock reacquired by the Company, including without limitation, shares purchased
on the open market.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) 4
<PAGE> 5
3.3 AVAILABILITY OF UNUSED SHARES. Shares of Common Stock subject to
and/or underlying any unexercised, unearned or yet-to-be acquired portions of
any Award granted under this Plan that expire, terminate or are canceled, and
shares of Common Stock issued pursuant to Awards under this Plan that are
reacquired by the Company pursuant to the terms under which such shares were
issued, will again become available for the grant of further Awards under this
Plan. Notwithstanding the provisions of this Section 3.3, no shares of Common
Stock may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the IRC.
3.4 ADJUSTMENT PROVISIONS.
(a) If (i) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of
shares or other securities, or if additional shares or new or different
shares or other securities are distributed in respect of such shares of
Common Stock (or any stock or securities received with respect to such
Common Stock), through merger, consolidation, sale or exchange of all
or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with
respect to such Common Stock), or (ii) the value of the outstanding
shares of Common Stock is reduced by reason of an extraordinary
dividend payable in cash or property, an appropriate and proportionate
adjustment may be made in (1) the maximum number and kind of shares or
securities available for issuance under this Plan, (2) the number and
kind of shares or other securities that can be granted to any one
individual Recipient under his or her Awards, (3) the number and kind
of shares or other securities subject to then outstanding Awards under
this Plan, and/or (4) the price for each share or other unit of any
other securities subject to then outstanding Awards under this Plan.
(b) No fractional interests will be issued under this Plan
resulting from any adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of
Common Stock issuable as a result of such adjustments.
(c) Any adjustments pursuant to this Section 3.4 shall be made
by the Administering Body, in its discretion, to preserve the benefits
or potential benefits intended to be made available under this Plan or
with respect to any outstanding Awards or otherwise necessary to
reflect any capital change or other event described in Section 3.4(a),
whose determination in that respect shall be final, binding and
conclusive.
(d) The grant of Awards pursuant to this Plan shall not affect
in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or
assets.
(e) No adjustment to the terms of an Incentive Stock Option
shall be made unless such
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 5
<PAGE> 6
adjustment would not cause such Incentive Stock Option to lose its
status as an incentive stock option under the provisions of the IRC,
unless the Administering Body determines otherwise.
3.5 SUBSTITUTE AWARDS. The Administering Body may grant Awards under
this Plan in substitution for stock and stock based awards held by employees of
another corporation who become employees of the Company or an Affiliated Entity
as a result of a merger or consolidation of the employing corporation with the
Company or an Affiliated Entity or the acquisition by the Company or an
Affiliated Entity of property or stock of the employing corporation. The
Administering Body may direct that the substitute Awards be granted on such
terms and conditions as the Administering Body considers appropriate in the
circumstances. Any shares of Common Stock delivered under any such substitute
Awards shall not reduce the maximum number of shares of Common Stock available
for issuance under this Plan.
4. ADMINISTRATION OF PLAN
4.1 ADMINISTERING BODY.
(a) This Plan shall be administered by the Board; provided,
however, that if the Board appoints a Stock Plan Committee pursuant to
Section 4.1(b), this Plan shall be administered by the Stock Plan
Committee, subject to the right of the Board to exercise, at any time
and from time to time, any and all of the duties and responsibilities
of the Stock Plan Committee as the Administering Body, including, but
not limited to, establishing procedures to be followed by the Stock
Plan Committee; provided further, however, that the Board shall not
exercise any authority regarding matters which under applicable law,
rule or regulation, including, without limitation, any exemptive rule
under Section 16 of the Exchange Act (including Rule 16b-3) or IRC
Section 162(m), are required to be determined in the sole discretion of
the Stock Plan Committee. The Stock Plan Committee may be (but is not
required to be), in the discretion of the Board, the same as the
compensation committee of the Board, if such committee has been
appointed.
(b)
(i) The Board in its sole discretion may from time to
time appoint a Stock Plan Committee of not less than two (2)
Board members to administer this Plan. The Board may from time
to time increase or decrease (but not below two (2)) the
number of members of the Stock Plan Committee, remove from
membership on the Stock Plan Committee all or any portion of
its members, and/or appoint such person or persons as it
desires to fill any vacancy existing on the Stock Plan
Committee, whether caused by removal, resignation or
otherwise. The Board may disband the Stock Plan Committee at
any time and thereby revest in the Board the administration of
this Plan.
(ii) The Stock Plan Committee shall report to the
Board the names of Eligible Persons granted Awards, the
precise type of Award granted, the number of shares
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 6
<PAGE> 7
of Common Stock issuable pursuant to such Award, if any, and
the terms and conditions of each such Award.
4.2 AUTHORITY OF ADMINISTERING BODY.
(a) Subject to the express provisions of this Plan, the
Administering Body shall have the power to interpret and construe this
Plan and any agreements or other documents defining the rights and
obligations of the Company or any Affiliated Entity and such Eligible
Persons who have been granted Awards hereunder and thereunder, to
determine all questions arising hereunder and thereunder, to adopt and
amend such rules and regulations for the administration hereof and
thereof as it may deem desirable, to correct any errors, supply any
omissions and reconcile any inconsistencies in this Plan and/or any
Award Agreement or any other instrument relating to any Award, and to
otherwise carry out the terms of this Plan and such agreements and
other documents. Such interpretations and constructions by the
Administering Body of any provisions of this Plan or of any Award, as
well as any other decisions, actions or inactions of the Administering
Body relating to this Plan or any Award or Award Agreement, shall be
within the absolute discretion of the Administering Body (subject only
to the express terms of this Plan and the Award Agreement and all
applicable laws, regulations and rules) and shall be final, conclusive
and binding upon all persons.
(b) Subject to the express provisions of this Plan, the
Administering Body may from time to time, in its discretion, select the
Eligible Persons to whom, and the time or times at which, Awards may be
granted; the nature of each Award; the number of shares of Common Stock
that comprise or underlie each Award; the period for the purchase or
exercise of each Award, as applicable and such other terms and
conditions applicable to each individual Award as the Administering
Body shall determine. Subject to Section 5.16(a), the Administering
Body may grant, at any time, new Awards to an Eligible Person who has
previously received Awards whether such prior Awards are still
outstanding, have previously been canceled, disposed of or exercised as
a whole or in part, as applicable, or are canceled in connection with
the issuance of new Awards. The Administering Body may grant Awards
singly, in combination or in tandem with other Awards, as it determines
in its discretion. Subject to Section 5.16(a), any and all terms and
conditions of the Awards, including, without limitation, the purchase
or exercise price, may be established by the Administering Body without
regard to existing Awards.
(c) Any action of the Administering Body with respect to the
administration of this Plan shall be taken pursuant to a majority vote
of the authorized number of members of the Administering Body or by the
unanimous written consent of its members; provided, however, that (i)
if the Administering Body is the Stock Plan Committee and consists of
two (2) members, then actions of the Administering Body must be
unanimous and (ii) if the Administering Body is the Board, actions
taken at a meeting of the Board shall be valid if approved by directors
constituting a majority of the required quorum for such meeting.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 7
<PAGE> 8
(d) Except to the extent prohibited by applicable law,
including, without limitation, the requirements applicable under IRC
Section 162(m) to any Award intended to be "qualified performance-based
compensation," or the requirements for any Award granted to an officer
of the Company or a Director to be covered by any exemptive rule under
Section 16 of the Exchange Act (including Rule 16b-3), or the rules of
a stock exchange or automated quotation system then listing shares of
Common Stock, the Administering Body may, in its discretion, allocate
all or any portion of its responsibilities and powers under this Plan
to any one or more of its members and/or delegate all or any part of
its responsibilities and powers under this Plan to any person or
persons selected by it; provided, however, that the Administering Body
may not delegate its authority to correct errors, omissions or
inconsistencies in this Plan. Any such authority delegated or allocated
by the Administering Body under this paragraph (d) of Section 4.2 shall
be exercised in accordance with the terms and conditions of this Plan
and any rules, regulations or administrative guidelines that may from
time to time be established by the Administering Body, and any such
allocation or delegation may be revoked by the Administering Body at
any time.
4.3 ELIGIBILITY. Only Eligible Persons shall be eligible to receive
Awards under this Plan.
4.4 NO LIABILITY. No member of the Board or the Stock Plan Committee or
any designee thereof will be liable for any action or inaction with respect to
this Plan or any Award or any transaction arising under this Plan or any Award,
except in circumstances constituting bad faith of such member.
4.5 AMENDMENTS.
(a) The Administering Body may, insofar as permitted by
applicable law, rule or regulation, from time to time suspend or
discontinue this Plan or revise or amend it in any respect whatsoever,
and this Plan as so revised or amended will govern all Awards
hereunder, including those granted before such revision or amendment;
provided, however, that, except as otherwise provided by this Plan, no
such revision or amendment shall materially impair or diminish any
rights or obligations under any Award previously granted under this
Plan, without the written consent of the Recipient. Without limiting
the generality of the foregoing, the Administering Body is authorized
to amend this Plan to comply with or take advantage of amendments to
applicable laws, rules or regulations, including amendments to the
Securities Act, Exchange Act or the IRC or any rules or regulations
promulgated thereunder. No such revision or amendment of this Plan
shall be made without first obtaining approval of the stockholders of
the Company to the extent such approval is required by applicable law,
rule or regulation, including, without limitation, the requirements of
any stock exchange or automated quotation system then listing the
shares of Common Stock or any applicable requirements relating to
Incentive Stock Options or for exemption from IRC Section 162(m) or the
then-applicable requirements of Rule 16b-3.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 8
<PAGE> 9
(b) The Administering Body may amend the terms and conditions
of an Award previously granted under this Plan, including any Award
Agreement, retroactively or prospectively, but no such amendment shall
materially impair or diminish any rights or obligations of a Recipient
under such Award without such Recipient's written consent. Without
limiting the generality of the foregoing, the Administering Body may,
in its discretion, at any time and from time to time after the grant of
any Award (i) accelerate or extend the vesting or exercise period, or
lapse of restrictions, applicable to any Award as a whole or in part,
(ii) adjust or reduce the purchase or exercise price, as applicable, of
Awards held by such Recipient by cancellation of such Awards and
granting of Awards at lower purchase or exercise prices or by
modification, extension or renewal of such Awards and (iii) reduce or
otherwise modify the performance goals applicable to any Award.
Notwithstanding any other provision of this Plan to the contrary, no
amendment or modification of this Plan or any outstanding Award shall
cause any outstanding Award granted with the intention that it qualify
as Performance-Based Compensation to fail to continue to so qualify. In
the case of Incentive Stock Options, Recipients acknowledge that
extensions of the exercise period may result in the loss of the
favorable tax treatment afforded incentive stock options under Section
422 of the IRC.
4.6 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, securities purchase, incentive or other
compensation plans in effect for the Company or any Affiliated Entity, and this
Plan shall not preclude the Company or an Affiliated Entity from establishing
any other forms of incentive or other compensation for Employees, Directors,
Consultants or others, whether or not approved by the stockholders of the
Company.
4.7 PLAN BINDING ON SUCCESSORS. This Plan shall be binding upon the
successors and assigns of the Company.
4.8 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES. Any
reference in this Plan to a particular statute, regulation or rule shall also
refer to any successor provision of such statute, regulation or rule.
4.9 ISSUANCES FOR COMPENSATION PURPOSES ONLY. This Plan constitutes an
"employee benefit plan" as defined in Rule 405 promulgated under the Securities
Act. Awards to eligible Employees or Directors shall be granted for any lawful
consideration, including compensation for services rendered, promissory notes or
otherwise. Awards to eligible Consultants shall be granted only in exchange for
bona fide services rendered by such Consultants and such services must not be in
connection with the offer and sale of securities in a capital-raising
transaction.
4.10 INVALID PROVISIONS. In the event that any provision of this Plan
is found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision were not contained herein.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 9
<PAGE> 10
4.11 GOVERNING LAW. This Plan and each Award Agreement shall be
governed by and interpreted in accordance with the internal laws of the State of
Delaware, without giving effect to the principles of the conflicts of laws
thereof.
5. GENERAL AWARD PROVISIONS
5.1 PARTICIPATION IN THIS PLAN.
(a) A person shall be eligible to receive Award grants under
this Plan if, at the time of the grant of such Award, such person is an
Eligible Person.
(b) Incentive Stock Options may be granted only to Employees
meeting the employment requirements of Section 422 of the IRC, or a
similar statute governing Incentive Stock Options.
(c) Notwithstanding anything to the contrary herein, the
Administering Body may, in its discretion, in order to fulfill the
purposes of this Plan, modify grants of Awards to Recipients who are
foreign nationals or employed outside of the United States to recognize
differences in applicable law, tax policy or local custom.
5.2 AWARD AGREEMENTS.
(a) Each Award granted under this Plan shall be evidenced by
an agreement duly executed on behalf of the Company and by the
Recipient or, in the Administering Body's discretion, a confirming
memorandum issued by the Company to the Recipient, setting forth such
terms and conditions applicable to such Award as the Administering Body
may in its discretion determine. Award Agreements may but need not be
identical and shall comply with and be subject to the terms and
conditions of this Plan, a copy of which shall be provided to each
Recipient and incorporated by reference into each Award Agreement. Any
Award Agreement may contain such other terms, provisions and conditions
not inconsistent with this Plan as may be determined by the
Administering Body.
(b) In case of any conflict between this Plan and any Award
Agreement, this Plan shall control except as specifically provided in
the Award Agreement.
(c) In case of any conflict between this Plan and any Award
Agreement, on the one hand, and any employment agreement (an
"Employment Agreement") between a Recipient and either the Company
and/or an Affiliated Entity, on the other hand, the terms and
conditions of the Employment Agreement shall apply with respect to
those items specifically addressed in the Employment Agreement.
(d) In consideration of the granting of an Award under this
Plan, if requested by the
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 10
<PAGE> 11
Company, the Recipient shall agree, in the Award Agreement, to remain
in the employ of (or to consult for or to serve as a Director of, as
applicable) the Company or any Affiliated Entity for a period of at
least one (1) year (or such shorter period as may be fixed in the Award
Agreement or by action of the Administering Body following grant of the
Award) after the Award is granted (or, in the case of a Director, until
the next annual meeting of stockholders of the Company).
5.3 EXERCISE OF AWARDS. No Award granted hereunder shall be issuable or
exercisable except in respect of whole shares, and fractional share interests
shall be disregarded. Not less than 100 shares of Common Stock (or such other
amount as is set forth in the applicable Award Agreement) may be purchased or
issued at one time upon exercise of a Stock Option or under any other Award, and
Stock Options and other Awards must be exercised, issued or purchased, as
applicable, in multiples of 100 shares unless the number of shares purchased is
the total number of shares at the time available under the terms of the Award.
An Award shall be deemed to be claimed or exercised when the Secretary or other
official of the Company designated by the Administering Body receives
appropriate written notice, on such form acceptable to the Administering Body,
from the Recipient together with payment of the applicable purchase or exercise
price, if any, made in accordance with the Award Agreement and any amounts
required under Section 5.11 of this Plan. Notwithstanding any other provision of
this Plan, the Administering Body may impose, by rule and/or in Award
Agreements, such conditions upon the exercise of Awards (including without
limitation conditions limiting the time of exercise to specified periods) as may
be required to satisfy applicable regulatory requirements, including without
limitation Rule 16b-3 and Rule 10b-5 under the Exchange Act, or any other
applicable law, regulation or rule, including, without limitation, any
applicable requirements under the IRC, or the regulations promulgated
thereunder.
5.4 PAYMENT FOR AWARDS.
(a) Awards requiring payment of a purchase or exercise price
shall be payable upon the exercise or purchase of such Award by
delivery of legal tender of the United States or payment of such other
consideration permitted by applicable law as the Administering Body may
from time to time deem acceptable in any particular instance, including
consideration pursuant to paragraph (b) or (c) of this Section 5.4.
(b) The Company may, in the discretion of the Administering
Body, assist any Recipient (including without limitation any Employee,
Director or Consultant) in the payment of the exercise price or other
amounts payable in connection with the receipt or exercise of such
Award, by lending such amounts to such person on such terms and at such
rates of interest and upon such security (if any) as shall be approved
by the Administering Body.
(c) In the discretion of the Administering Body, and subject
to such limitations or conditions as it may prescribe, if permitted by
applicable law, (i) payments for purchase or exercise of Awards may be
by matured capital stock of the Company (i.e., capital stock
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 11
<PAGE> 12
owned longer than six (6) months by the person delivering such capital
stock (or by such person and his or her spouse jointly)) delivered in
transfer to the Company by or on behalf of the Recipient exercising or
purchasing the Award and duly endorsed in blank or accompanied by stock
powers duly endorsed in blank, with signatures guaranteed in accordance
with the Exchange Act if required by the Administering Body (valued at
Fair Market Value as of the exercise or purchase date), or such other
consideration as the Administering Body may from time to time in the
exercise of its discretion deem acceptable in any particular instance;
(ii) the Administering Body may allow the exercise of Stock Options in
a broker-assisted or similar transaction in which the exercise price is
not received by the Company until promptly after exercise; and (iii)
the Administering Body may allow the Company to loan the applicable
purchase or exercise price to the Recipient, if the purchase or
exercise will be followed by a prompt sale of some or all of the
underlying shares and a portion of the sale proceeds is dedicated to
full payment of the purchase or exercise price and amounts required
pursuant to Section 5.11 of this Plan.
5.5 NO EMPLOYMENT OR OTHER CONTINUING RIGHTS. Nothing contained in this
Plan (or in any Award Agreement or in any other agreement or document related to
this Plan or to Awards granted hereunder) shall confer upon (a) any Eligible
Person or Recipient any right to continue in the employ (or other business
relationship) of the Company or any Affiliated Entity or constitute any contract
or agreement of employment or engagement, or interfere in any way with the right
of the Company or any Affiliated Entity to reduce such person's compensation or
other benefits or to terminate the employment or engagement of such Eligible
Person or Recipient, with or without cause; or (b) any Recipient any right to
exercise or claim his or her Award otherwise than in accordance with the express
terms and conditions of his or her Award Agreement and this Plan. Except as
expressly provided in this Plan or in any Award Agreement pursuant to this Plan,
the Company and any Affiliated Entity shall have the right to deal with each
Recipient in the same manner as if this Plan and any such Award Agreement did
not exist, including without limitation with respect to all matters related to
the hiring, retention, discharge, compensation and conditions of the employment
or engagement of the Recipient. Any questions as to whether and when there has
been a termination of a Recipient's employment or engagement, the reason (if
any) for such termination, and/or the consequences thereof under the terms of
this Plan or any statement evidencing the grant of Awards pursuant to this Plan
shall be determined by the Administering Body, and the Administering Body's
determination thereof shall be final and binding.
5.6 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS.
(a) All Awards granted under this Plan shall be subject to the
requirement that, if at any time the Company shall determine, in its
discretion, that the listing, registration or qualification of the
shares subject to any such Award granted under this Plan upon any
securities exchange or under any federal, state or foreign law, or the
consent or approval of any government regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of
such Awards or the issuance, if any, or purchase of shares in
connection therewith, such Awards may not be granted or exercised as a
whole or in part unless and until such listing, registration,
qualification, consent or approval shall have
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 12
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been effected or obtained free of any conditions not acceptable to the
Administering Body. During the term of this Plan, the Company will use
reasonable efforts to seek to obtain from the appropriate regulatory
agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares of its
Common Stock as shall be sufficient to satisfy the requirements of this
Plan. The inability of the Company to obtain from any such regulatory
agency having jurisdiction thereof the qualifications, consents,
approvals or authorizations deemed by the Company to be necessary for
the lawful issuance and sale of any shares of its Common Stock
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such requisite
authorization shall not have been obtained.
(b) The Company shall be under no obligation to register or
qualify the issuance of Awards or underlying shares of Common Stock
under the Securities Act or applicable state securities laws. Unless
the shares of Common Stock applicable to any such Award have been
registered under the Securities Act and qualified or registered under
applicable state securities laws, the Company shall be under no
obligation to issue any shares of Common Stock covered by any Award
unless the Award and underlying shares of Common Stock, as applicable,
may be issued pursuant to applicable exemptions from such registration
or qualification requirements. In connection with any such exempt
issuance, the Administering Body may require the Recipient to provide a
written representation and undertaking to the Company, satisfactory in
form and scope to the Administering Body and upon which the Company may
reasonably rely, that such Recipient is acquiring such shares of Common
Stock for his or her own account as an investment and not with a view
to, or for sale in connection with, the distribution of any such shares
of Common Stock, and that such person will make no transfer of the same
except in compliance with any rules and regulations in force at the
time of such transfer under the Securities Act and other applicable
law, and that if shares of Common Stock are issued under this Plan
without such registration, a legend to this effect (together with any
other legends deemed appropriate by the Administering Body) may be
endorsed upon the certificates evidencing the shares of Common Stock so
issued. The Administering Body may also order its transfer agent to
stop transfers of such shares. The Administering Body may also require
the Recipient to provide the Company such information and other
documents as the Administering Body may request in order to satisfy the
Administering Body as to the investment sophistication and experience
of the Recipient and as to any other conditions for compliance with any
such exemptions from registration or qualification.
5.7 ADDITIONAL CONDITIONS. Any Award may also be subject to such other
provisions (whether or not applicable to any other Award or Eligible Person) as
the Administering Body determines appropriate, in accordance with this Plan and
the Award Agreement, including, without limitation, (a) provisions to assist the
Recipient in financing the purchase of Common Stock issuable as a result of such
Award, (b) provisions for the forfeiture of or restrictions on resale or other
disposition of shares of Common Stock acquired under any Award, (c) provisions
giving the Company the right to repurchase shares of Common Stock acquired under
any Award in the event the Recipient elects to dispose of such shares, and (d)
provisions to comply with
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 13
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federal, state or foreign securities laws and federal, state or foreign income
or employment tax withholding requirements.
5.8 NO PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise set forth
herein, a Recipient shall have no rights as a stockholder with respect to any
shares issuable or issued in connection with an Award until the date of the
exercise of the Option or Stock Appreciation Right, if applicable, in accordance
with the Award Agreement and this Plan, and the receipt by the Company of all
amounts payable in connection with the purchase or exercise, as applicable, of
the Award, the satisfaction or waiver of all applicable performance goals and
performance by the Recipient of all conditions and obligations applicable to the
Award, in accordance with this Plan and the applicable Award Agreement. Status
as an Eligible Person shall not be construed as a commitment that any Award will
be granted under this Plan to an Eligible Person or to Eligible Persons
generally. No person shall have any right, title or interest in any fund or in
any specific asset (including shares of capital stock) of the Company by reason
of any Award granted hereunder. Neither this Plan (nor any documents related
hereto) nor any action taken pursuant hereto (or thereto) shall be construed to
create a trust of any kind or a fiduciary relationship between the Company and
any Person. To the extent that any Person acquires any right with respect to
Awards hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
5.9 TRANSFERABILITY OF AWARDS.
(a) Except as otherwise provided by this Section 5.9 or by the
Administering Body, no Award under this Plan may be sold, pledged,
assigned, transferred, encumbered, alienated, hypothecated or otherwise
disposed of (whether voluntarily or involuntarily or by operation of
law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy)) in any manner other than
by will or the laws of descent and distribution or, subject to the
consent of the Administering Body, pursuant to a DRO, unless and until
such Award has been exercised, if applicable, and the shares of Common
Stock underlying such Award have been issued, and all restrictions
applicable to such shares have lapsed, and no Award or interest or
right therein shall be liable for the debts, contracts, liabilities or
contractual obligations of the Recipient thereof. Any attempted
disposition of an Award or any interest therein shall be null and void
and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
(b) Except as otherwise provided by the Administering Body,
during the lifetime of a Recipient, only he or his court appointed
guardian may exercise an Award (or any portion thereof) granted to him
under this Plan, unless it has been transferred in accordance with
paragraph (c) of this Section 5.9 or, with the consent of the
Administering Body, pursuant to a DRO. After the death of a Recipient,
any exercisable or vested but unpaid portion of an Award may, prior to
the time when such portion becomes unexercisable or is terminated or
expires under this Plan or the applicable Award Agreement, be exercised
by or paid to the beneficiary most recently named by such Recipient in
a written designation thereof filed with the Company, to the extent
permitted by the Recipient's Award
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 14
<PAGE> 15
Agreement, or, in the absence of a validly designated beneficiary, his
or her personal representative or by any person empowered to do so
under the deceased Recipient's will or under the then applicable laws
of descent and distribution. In the event any Award is to be exercised
by, or paid to, the executors, administrators, heirs or distributees of
the estate of a deceased Recipient, or such Recipient's beneficiary, or
an incapacitated Recipient's guardian, or the transferee of such Award,
in any case pursuant to the terms and conditions of this Plan and the
applicable Award Agreement, and in accordance with such terms and
conditions as may be specified from time to time by the Administering
Body, the Company shall be under no obligation to issue shares of
Common Stock or make any payment under such Award unless and until the
Administering Body is satisfied that the person or persons exercising
or to receive payment under such Award is the duly appointed legal
representative of the deceased Recipient's estate or the proper legatee
or distributee thereof.
(c) The Administering Body may, in its discretion, permit the
transfer of an Award to, exercise of an Award by, or payment of an
Award to, a person other than the Recipient who received the grant of
such Award in accordance with the Award Agreement and such terms and
conditions as the Administering Body may specify from time to time.
(d) Notwithstanding the foregoing, no Stock Option owned by a
Recipient subject to Section 16 of the Exchange Act may be assigned or
transferred in any manner inconsistent with Rule 16b-3, and Incentive
Stock Options (or other Stock Options subject to transfer restrictions
under the IRC) may not be assigned or transferred if such assignment or
transfer would cause such an Incentive Stock Option to fail to qualify
under Section 422 of the IRC (or any comparable or successor provision)
or the regulations thereunder.
5.10 INFORMATION TO RECIPIENTS.
(a) The Administering Body in its sole discretion shall
determine what, if any, financial and other information shall be
provided to Recipients and when such financial and other information
shall be provided after giving consideration to applicable federal,
state and foreign laws, rules and regulations, including without
limitation applicable federal, state and foreign securities laws, rules
and regulations.
(b) The furnishing of financial and other information that is
confidential to the Company shall be subject to the Recipient's
agreement that the Recipient shall maintain the confidentiality of such
financial and other information, shall not disclose such information to
third parties, and shall not use the information for any purpose other
than evaluating an investment in the Company's securities under this
Plan. The Administering Body may impose other restrictions on the
access to and use of such confidential information and may require a
Recipient to acknowledge the Recipient's obligations under this Section
5.10(b) (which acknowledgment shall not be a condition to the
Recipient's obligations under this Section 5.10(b)).
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 15
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5.11 WITHHOLDING TAXES. Whenever the granting, vesting, exercise or
payment of any Award granted under this Plan, or the transfer of any shares
issued upon exercise of any Award, gives rise to tax or tax withholding
liabilities or obligations, the Administering Body shall have the right, as a
condition to the issuance of any shares of Common Stock under, or other payment
of, such Award, to require the Recipient to remit to the Company an amount
sufficient to satisfy all such federal, state, local and foreign tax
requirements, and the Company or any Affiliated Entity shall, to the extent
permitted by applicable law, have the right to deduct any such taxes from any
payment of any kind otherwise due to such Recipient. The Administering Body may,
in the exercise of its discretion, permit a Recipient to satisfy such tax
withholding requirements by (a) delivery to the Company of Common Stock owned by
such Recipient (or by such Recipient and his or her spouse jointly) and acquired
more than six (6) months prior to such delivery or (b) electing withholding by
the Company of a portion of the Common Stock otherwise issuable in connection
with such Recipient's Award (provided, however, that the amount of any Common
Stock so withheld shall not exceed the amount necessary to satisfy required
federal, state, local and foreign withholding obligations using the minimum
statutory rate), to the extent permitted by applicable law and pursuant to
procedures approved by the Administering Body.
5.12 LEGENDS ON COMMON STOCK CERTIFICATES. Each certificate
representing shares acquired as a result of any Award granted hereunder shall be
endorsed with all legends, if any, required by applicable federal and state
securities or other laws or the Administering Body to be placed on the
certificate. The determination of which legends, if any, shall be placed upon
such certificates shall be made by the Administering Body in its sole discretion
and such decision shall be final and binding.
5.13 EFFECT OF TERMINATION OF EMPLOYMENT ON AWARDS - EMPLOYEES ONLY.
(a) TERMINATION FOR JUST CAUSE. Subject to Section 5.13(c),
and except as otherwise provided in a written agreement (including,
without limitation, any Award Agreement) between the Company and/or an
Affiliated Entity and the Recipient, which may be entered into at any
time before or after termination of employment of the Recipient, in the
event of a Just Cause Dismissal of an Employee Recipient from
employment with the Company or any Affiliated Entity, all of the
Recipient's unvested Awards shall be terminated and become void, and
all of the Recipient's unexercised Awards (whether or not vested) shall
be forfeited, expire and become void, as of the date of such Just Cause
Dismissal.
(b) TERMINATION OTHER THAN FOR JUST CAUSE DISMISSAL. Subject
to Section 5.13(c), and except as otherwise provided in a written
agreement (including, without limitation, any Award Agreement) between
the Company and/or an Affiliated Entity and the Recipient, which may be
entered into at any time before or after termination of employment, in
the event of an Employee Recipient's termination of employment with the
Company or any Affiliated Entity for:
(i) any reason other than for Just Cause Dismissal,
death, Permanent Disability
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 16
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or Retirement, the Recipient's unvested and/or unexercised
Awards, whether or not vested, shall expire and become void as
of the earlier of (A) the date such Awards would have expired
in accordance with their terms had the Recipient remained
employed and (B) three (3) months after the date of such
termination; or
(ii) death, Permanent Disability or Retirement, the
Recipient's unvested and/or unexercised, whether or not
vested, Awards shall expire and become void as of the earlier
of (A) the date such Awards would have expired in accordance
with their terms had the Recipient remained employed and (B)
one (1) year after the date of such termination; provided,
however, that the one-year period provided in (B) shall be
three (3) months for Incentive Stock Options following
termination of employment for Retirement.
(c) ALTERATION OF VESTING AND EXERCISE PERIODS.
Notwithstanding anything to the contrary in Section 5.13(a) or Section
5.13(b), the Administering Body may in its discretion designate shorter
or longer periods to claim or otherwise exercise Awards following a
Recipient's termination of employment with the Company or any
Affiliated Entity; provided, however, that any shorter periods
determined by the Administering Body shall be effective only if
provided for in the Award Agreement that evidences the Recipient's
Award or if such shorter period is agreed to in writing between the
Recipient and the Company. Notwithstanding anything to the contrary
herein, Awards shall be claimed, paid or exercisable by a Recipient
following such Recipient's termination of employment with the Company
or any Affiliated Entity only to the extent that installments thereof
had become exercisable or vested (i.e., in the case of any Restricted
Stock Awards, to the extent restrictions described in Article 7
applicable to such Awards have lapsed) on or prior to the date of such
termination; and provided further that the Administering Body may, in
its discretion, elect to accelerate the vesting or exercisability of,
or lapse of restrictions applicable to, all or any portion of any
Awards that had not become vested or exercisable on or prior to the
date of such termination, in the event of a termination of employment
due to the Recipient's death or Permanent Disability, or, except with
respect to any Award intended to qualify as Performance-Based
Compensation, in the event of Retirement or otherwise. Furthermore, at
any time prior to a Recipient's termination of employment with the
Company or any Affiliated Entity, the Administering Body may, in its
discretion, accelerate the vesting or exercisability, or waive or,
subject to the other provisions of this Plan, amend any and all of the
goals, restrictions or conditions imposed under any Award; provided,
however, no such acceleration, waiver or amendment shall cause any
Award otherwise intended to qualify as Performance-Based Compensation
to fail to so qualify.
5.14 EFFECT OF TERMINATION OF ENGAGEMENT ON AWARDS - NON-EMPLOYEES
ONLY.
(a) TERMINATION OF ENGAGEMENT. Subject to Section 5.14(b), and
except as otherwise provided in a written agreement between the Company
and/or an Affiliated Entity and the Recipient, which may be entered
into at any time before or after termination
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 17
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of engagement of the Recipient, in the event of the termination of any
non-Employee Recipient's engagement with the Company or any Affiliated
Entity (including any such Recipient who is a Director, but not also an
Employee, or a Consultant), all of the Recipient's unvested Awards
shall be terminated and become void, and all of the Recipient's
unexercised Awards (whether or not vested) shall be forfeited, expire
and become void as of the earlier of (i) the date such Awards would
expire in accordance with their terms had the Recipient remained
engaged by the Company or such Affiliated Entity and (ii)(a) three (3)
months after such termination as a result of death or Permanent
Disability and (b) thirty (30) days after such termination for any
other reason.
(b) ALTERNATION OF VESTING AND EXERCISE PERIODS.
Notwithstanding anything to the contrary in Section 5.14(a), the
Administering Body may, in its discretion, designate shorter or longer
periods to claim or otherwise exercise Awards following a non-Employee
Recipient's termination of engagement with the Company or any
Affiliated Entity; provided, however, that any shorter periods
determined by the Administering Body shall be effective only if
provided for in the Award Agreement that evidences the Recipient's
Award or if such shorter period is agreed to in writing by the
Recipient. Notwithstanding anything to the contrary herein, Awards
shall be claimed, paid or exercisable by a Recipient following such
Recipient's termination of engagement with the Company or any
Affiliated Entity only to the extent that the installments thereof had
become exercisable or vested (i.e., in the case of any Restricted Stock
Awards, to the extent restrictions described in Article 7 applicable to
such Awards have lapsed) on or prior to the date of such termination;
and provided further that the Administering Body may, in its
discretion, elect to accelerate the vesting or exercisability of, or
lapse of restrictions applicable to, all or any portion of any Awards
that had not become vested or exercisable on or prior to the date of
such termination. Furthermore, at any time prior to a Recipient's
termination of engagement with the Company or any Affiliated Entity,
the Administering Body may, in its discretion, accelerate the vesting
or exercisability, or waive or, subject to the other provisions of this
Plan, amend any and all of the goals, restrictions or conditions
imposed under any Award.
5.15 TRANSFER; LEAVE OF ABSENCE. For purposes of this Plan, the
transfer by a Recipient to the employment or engagement of (i) the Company from
an Affiliated Entity, (ii) from the Company to an Affiliated Entity or (iii)
from one Affiliated Entity to another Affiliated Entity (including, with respect
to Consultants, the assignment between the Company and an Affiliated Entity or
between two Affiliated Entities, as applicable, of an agreement pursuant to
which such services are rendered) or, with respect solely to Employees, an
approved leave of absence for military service, sickness, or for any other
purpose approved by the Company, shall not be deemed a termination; provided,
however, that a change in status of a Recipient from an Employee to a
Consultant, or to a Director who is not an Employee, shall be considered a
termination of such Recipient's employment with the Company or an Affiliated
Entity for purposes of this Plan and such Recipient's Awards, except to the
extent that the Administering Body determines, in its discretion, otherwise with
respect to any Award that is not an Incentive Stock Option. In no event,
however, shall an Award be exercisable after the date such Award would expire in
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 18
<PAGE> 19
accordance with its terms had the Recipient remained continuously employed or
engaged in the service of the Company or an Affiliated Entity. Whether a
Recipient's employment or service with the Company or any Affiliated Entity has
terminated, and, if so, whether such termination constituted Just Cause
Dismissal, shall be determined by the Administering Body, in its good faith
discretion, in accordance with this Plan, and any such determination shall be
final, binding and conclusive upon all persons.
5.16 LIMITS ON AWARDS TO CERTAIN ELIGIBLE PERSONS.
(a) LIMITATIONS APPLICABLE TO IRC SECTION 162(m) RECIPIENTS.
Notwithstanding any other provision of this Plan, in order for the
compensation attributable to Awards hereunder to qualify as
Performance-Based Compensation, no one Eligible Person shall be granted
any one or more Awards with respect to more than Five Hundred Thousand
(500,000) shares of Common Stock in any one calendar year. The
limitation set forth in this Section 5.16(a) shall be subject to
adjustment as provided in Section 3.4 and under Article 12, but only to
the extent such adjustment would not affect the status of compensation
attributable to Awards hereunder as Performance-Based Compensation. To
the extent required by Section 162(m) of the IRC, shares of Common
Stock subject to Awards which are canceled shall continue to be counted
against such limitation and if, after the grant of an Award, the price
of shares subject to such Award is reduced and the transaction is
treated as a cancellation of the Award and a grant of a new Award, both
the Award deemed to be canceled and the Award deemed to be granted
shall be counted against such limitation.
(b) LIMITATIONS APPLICABLE TO SECTION 16 PERSONS.
Notwithstanding any other provision of this Plan, this Plan, and any
Award granted or awarded to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16
of the Exchange Act (including Rule 16b-3) that are requirements for
the application of such exemptive rule. To the extent permitted by
applicable law, this Plan and Awards granted or awarded hereunder shall
be deemed amended to the extent necessary to conform to such applicable
exemptive rule.
5.17 PERFORMANCE-BASED COMPENSATION. If the amount of compensation an
Eligible Person may receive under any Award is not based solely on an increase
in the value of Common Stock after the date of grant, the Administering Body, in
order to qualify such Awards as Performance-Based Compensation, may condition
the payment, granting, vesting or exercisability or purchase price of such
Awards on the attainment of one or more pre-established, objective performance
goals that are determined over a measurement period or periods established by
the Administering Body and relate to one or more Performance Criteria. The
Administering Body shall establish and administer any such performance goals.
Payment of compensation in respect of any such Award shall not be made unless
and until the Administering Body certifies in writing that the applicable
performance goals and any other material terms of such Award were in fact
satisfied, except as otherwise provided by the Administering Body in accordance
with this Plan and the applicable
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 19
<PAGE> 20
Award Agreement in the event of termination of a Recipient's employment or
service with the Company or an Affiliated Entity due to death or Disability or
in the event of a Change in Control.
6. STOCK OPTIONS
6.1 NATURE OF STOCK OPTIONS. Subject to the limitations provided
otherwise herein, Stock Options may be Incentive Stock Options or Non-qualified
Stock Options. Each Award Agreement relating to a Stock Option shall state
whether such Option will be treated as an Incentive Stock Option or a
Non-qualified Stock Option.
6.2 OPTION EXERCISE PRICE. The exercise price for each Stock Option
shall be determined by the Administering Body as of the date such Stock Option
is granted and stated in the Award Agreement. The exercise price shall be no
less than the Fair Market Value of the Common Stock subject to the Option on the
date such Option is granted; provided, however, that the Administering Body may,
in its discretion, with the consent of the Recipient in the case of an Incentive
Stock Option, amend the terms of any Stock Option not intended to qualify as
Performance-Based Compensation to provide that the exercise price of the shares
remaining subject to the Stock Option shall be reestablished at a price not less
than 100% of the Fair Market Value of the Common Stock on the effective date of
the amendment.
6.3 OPTION PERIOD AND VESTING. Stock Options granted hereunder shall
vest and may be exercised as determined by the Administering Body and stated in
the Award Agreement, except that exercise of such Stock Options after
termination of the Recipient's employment or engagement shall be subject to
Section 5.13 or 5.14, as the case may be. Each Stock Option granted hereunder
and all rights or obligations thereunder shall expire on such date as shall be
determined by the Administering Body, but not later than ten (10) years after
the date the Stock Option is granted and shall be subject to earlier termination
as provided herein or in the Award Agreement. The Administering Body may, in its
discretion at any time and from time to time after the grant of a Stock Option,
accelerate vesting of such Option as a whole or in part by increasing the number
of shares then purchasable, provided that the total number of shares subject to
such Stock Option may not be increased. Except as otherwise provided herein, a
Stock Option shall become exercisable, as a whole or in part, on the date or
dates, or upon satisfaction of such conditions, specified by the Administering
Body and thereafter shall remain exercisable until the expiration or earlier
termination of the Stock Option.
6.4 SPECIAL PROVISIONS REGARDING INCENTIVE STOCK OPTIONS.
(a) Notwithstanding anything in this Article 6 to the
contrary, the exercise price and vesting period of any Stock Option
intended to qualify as an Incentive Stock Option shall comply with the
provisions of Section 422 of the IRC and the regulations thereunder. As
of the Effective Date, such provisions require, among other matters,
that (i) the exercise price must not be less than the Fair Market Value
of the underlying stock as of the date the Incentive Stock Option is
granted, and not less than 110% of the Fair Market Value as of such
date in the case of a grant to a Significant Stockholder; and (ii) that
the Incentive
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 20
<PAGE> 21
Stock Option not be exercisable after the expiration of five (5) years
from the date of grant in the case of an Incentive Stock Option granted
to a Significant Stockholder.
(b) The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of the Common Stock for which one or
more Incentive Stock Options granted to any Recipient under this Plan
(or any other option plan of the Company or an Affiliated Entity) may
for the first time become exercisable as "incentive stock options"
under the IRC during any one calendar year shall not exceed $100,000.
(c) Any Options granted as Incentive Stock Options pursuant to
this Plan that for any reason fail or cease to qualify as such shall be
treated as Non-qualified Stock Options.
6.5 RELOAD OPTIONS. At the discretion of the Administering Body, Stock
Options granted pursuant to this Plan may include a "reload" feature pursuant to
which a Recipient exercising an Option by the delivery of a number of shares of
matured capital stock in accordance with Section 5.4(c) hereof and the Award
Agreement would automatically be granted an additional Option (with an exercise
price equal to the Fair Market Value of the Common Stock on the date the
additional Option is granted and with the same expiration date as the original
Option being exercised, and with such other terms as the Administering Body may
provide) to purchase that number of shares of Common Stock equal to the number
delivered to exercise the original Option.
6.6 RESTRICTIONS. The Administering Body, in its sole and absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Award Agreement and
may be referred to on the certificates evidencing such shares. The Recipient
shall give the Company prompt notice of any disposition of shares of Common
Stock acquired by exercise of an Incentive Stock Option within (i) two years
from the date of granting (including the date the Option is modified, extended
or renewed for purposes of Section 424(h) of the IRC) such Option to such
Recipient or (ii) one year after the transfer of such shares to such Recipient.
7. RESTRICTED STOCK AWARDS
7.1 NATURE OF RESTRICTED STOCK AWARDS. The Administering Body may grant
Restricted Stock Awards to any Eligible Person. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other purchase
price, if any, determined by the Administering Body (but not less than the par
value thereof unless permitted by applicable state law), shares of Common Stock
subject to such restrictions and conditions as the Administering Body may
determine at the time of grant ("RESTRICTED STOCK"). Conditions may be based on
continuing employment (or other business relationships) with the Company or an
Affiliated Entity and/or, in the case of Restricted Stock Awards intended to be
Performance-Based Compensation, the achievement of pre-established, objective
performance goals that are determined over a measurement period or periods
established by the Administering Body and relate to one or more Performance
Criteria. Any Restricted Stock Award must be accepted by the applicable
Recipient
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 21
<PAGE> 22
within a period of sixty (60) days (or a shorter period as determined by the
Administering Body at the time of award) after the award date, by executing the
applicable Award Agreement and providing to the Administering Body or its
designee a copy of such executed Award Agreement and payment of the applicable
purchase price, if any, of such shares of Restricted Stock.
7.2 RIGHTS AS STOCKHOLDERS. Subject to Section 7.3, upon delivery of
the shares of the Restricted Stock to a Recipient, or creation of a book entry
evidencing a Recipient's ownership of shares of Restricted Stock, pursuant to
Section 7.5, the Recipient shall have, unless otherwise provided by the
Administering Body, all the rights of a stockholder with respect to said shares,
subject to the restrictions in his or her Award Agreement, including the right
to receive all dividends and other distributions paid or made with respect to
the shares; provided, however, that, in the discretion of the Administering
Body, any extraordinary distributions with respect to the Common Stock shall be
subject to the restrictions set forth in Section 7.3.
7.3 RESTRICTION. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Administering Body shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment or
engagement with the Company or its Affiliated Entities, Company performance and
individual performance; provided, however, that, except with respect to shares
of Restricted Stock intended to qualify as Performance-Based Compensation, by
action taken after the Restricted Stock is issued, the Administering Body may,
on such terms and conditions as it may determine to be appropriate, remove any
or all of the restrictions imposed by the terms of the Award Agreement.
Restricted Stock may not be sold, transferred, assigned or encumbered until all
restrictions are terminated or expire.
7.4 FORFEITURE OR REPURCHASE OF RESTRICTED STOCK. The Administering
Body shall provide in the terms of each individual Award Agreement for
forfeiture and reversion to the Company of a Recipient's shares of Restricted
Stock, or that the Company shall have a right to repurchase such shares of
Restricted Stock, at a cash price per share equal to the price, if any, paid by
the Recipient for such shares of Restricted Stock, to the extent such shares are
then subject to restrictions under the Award Agreement, immediately upon any
failure to satisfy applicable conditions set forth in the Award Agreement or
upon a termination of employment (with or without cause and for any reason
whatsoever) or, if applicable, upon a termination of engagement (with or without
cause and for any reason whatsoever) between the Recipient and the Company or
any Affiliated Entity, subject, in any case, to Sections 5.13 and 5.14, as
applicable.
7.5 CERTIFICATES, ESCROWS. Each Recipient receiving a Restricted Stock
Award shall be issued a stock certificate or certificates evidencing the shares
of Common Stock covered by such Award registered in the name of such Recipient.
The Administering Body may require a Recipient who receives a certificate or
certificates evidencing a Restricted Stock Award to immediately deposit such
certificate or certificates, together with a stock power or other appropriate
instrument of transfer, endorsed in blank by the Recipient, with signatures
guaranteed in accordance with the
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 22
<PAGE> 23
Exchange Act if required by the Administering Body, with the Secretary of the
Company or an escrow holder as provided in the immediately following sentence.
The Secretary of the Company or such other escrow holder as the Administering
Body may appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions imposed under the Award Agreement
with respect to the shares evidenced by such certificate expire or shall have
been removed. The foregoing to the contrary notwithstanding, the Administering
Body may, in its discretion, provide that a Recipient's ownership of Restricted
Stock prior to lapse of the restrictions set forth in the Award Agreement shall,
in lieu of certificates, be evidenced by a "book entry" (i.e., a computerized or
manual entry) in the records of the Company or its designated agent in the name
of such Recipient. Such records of the Company or such agent shall, absent
manifest error, be binding on all Recipients who receive Restricted Stock
Awards. The holding of shares of Restricted Stock by the Company or an escrow
holder, in accordance with this Section 7.5, or the use of book entries to
evidence the ownership of shares of Restricted Stock, in accordance with this
Section 7.5, shall not affect the rights of Recipients as owners of their shares
of Restricted Stock, nor affect the restrictions applicable to such shares under
the Award Agreement or this Plan.
7.6 VESTING OF RESTRICTED STOCK. The Administering Body at the time of
grant shall specify and state in the Award Agreement the date or dates and/or,
in the case of Restricted Stock Awards intended to qualify as Performance-Based
Compensation, attainment of performance goals and other conditions, on which
Restricted Stock shall become vested and free of restrictions applicable
thereto, subject to Section 7.4 and to such further rights of the Company or its
assigns as may be specified in the Award Agreement or other instrument
evidencing the Restricted Stock Award. Upon expiration or termination of the
restrictions applicable to a Recipient's shares of Restricted Stock, pursuant to
the applicable Award Agreement and this Plan, the Company shall, subject to
Sections 5.6, 5.11 and 5.12, then deliver to such Recipient a certificate or
certificates evidencing such shares registered in the name of such Recipient.
7.7 WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The Award Agreement
or other written instrument evidencing a Restricted Stock Award may require or
permit the immediate payment, waiver, deferral or investment of dividends paid
on the Restricted Stock.
7.8 SECTION 83(b) ELECTION. If a Recipient of a Restricted Stock Award
makes an election under Section 83(b) of the IRC, or any successor section
thereto, to be taxed with respect to the Restricted Stock as of the date of
transfer of the Restricted Stock rather than as of the date or dates upon which
such Recipient would otherwise be taxable under Section 83(a) of the IRC, such
Recipient shall deliver a copy of such election to the Company immediately after
filing such election with the Internal Revenue Service. Such election shall be
in the sole discretion of any such Recipient. None of the Company or any
Affiliated Entity shall have any liability or responsibility relating to or
arising out of the filing or not filing of any such election or any defects in
its construction.
8. UNRESTRICTED STOCK AWARDS
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 23
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8.1 GRANT OR SALE OF UNRESTRICTED STOCK.
(a) GRANT OR SALE OF UNRESTRICTED STOCK. The Administering
Body may, in its sole discretion, grant (or sell at a purchase price
determined by the Administering Body) an Unrestricted Stock Award to
any Eligible Person, pursuant to which such individual may receive
shares of Common Stock free of any vesting restrictions ("UNRESTRICTED
STOCK") under this Plan. Unrestricted Stock Awards may be granted or
sold as described in the preceding sentence as a bonus in respect of
past services or other valid consideration, or in lieu of any cash
compensation due to such individual.
(b) DEFERRAL OF AWARDS. The Administering Body may, in its
discretion, permit any Recipient who has received shares of
Unrestricted Stock under this Article 8 to elect to defer receipt of up
to 100% of such shares of Unrestricted Stock in accordance with such
rules and procedures as may from time to time be established by the
Administering Body for that purpose, and such election shall be
effective on the later of the date one (1) year from the date of such
election or the beginning of the next calendar year, or such later date
as the Administering Body may specify in the Award Agreement. Any such
deferred Unrestricted Stock shall be entitled to receive Dividend
Equivalent Rights settled in shares of Common Stock.
9. PERFORMANCE STOCK AWARDS
9.1 NATURE OF PERFORMANCE STOCK AWARDS. A Performance Stock Award is an
Award entitling the Recipient to acquire shares of Common Stock upon the
attainment of pre-established, objective performance goals based on Performance
Criteria. The Administering Body may make Performance Stock Awards independent
of or in connection with the granting of any other Award under this Plan.
Performance Stock Awards may be granted under this Plan to any Eligible Person.
The Administering Body, in its sole discretion, shall determine whether and to
whom Performance Stock Awards shall be made, the performance goals applicable
under each such Award, the periods during which performance is to be measured,
and all other limitations and conditions applicable to the awarded shares,
which, in any case, shall be stated in the Award Agreement; provided, however,
that the Administering Body may rely on the performance goals, based on
Performance Criteria, and other standards applicable to other performance unit
plans of the Company in setting the standards for Performance Stock Awards under
this Plan.
9.2 RIGHTS AS A STOCKHOLDER. A Recipient receiving a Performance Stock
Award shall have the rights of a stockholder only as to shares of Common Stock
actually received by the Recipient upon satisfaction or achievement of the terms
and conditions of such Award and not with respect to shares subject to the Award
but not actually issued to such Recipient. Accordingly, a Recipient shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Common Stock under a Performance Stock Award only upon satisfaction of all
conditions specified in the Award Agreement evidencing the Performance Stock
Award (or in a performance plan adopted by the Administering Body).
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 24
<PAGE> 25
10. DIVIDEND EQUIVALENT RIGHTS; INTEREST EQUIVALENTS
10.1 DIVIDEND EQUIVALENT RIGHTS. A Dividend Equivalent Right is an
Award entitling the Recipient to receive credits based on cash dividends that
would be paid on the shares of Common Stock specified in the Dividend Equivalent
Right (or other Award to which it relates) if such shares were held by the
Recipient. A Dividend Equivalent Right may be granted hereunder to any Eligible
Person, as a component of another Award or as a freestanding Award. The terms
and conditions of Dividend Equivalent Rights shall be specified by the
Administering Body and stated in the Award Agreement. Dividend equivalents
credited to the holder of a Dividend Equivalent Right may be paid currently or
may be deemed to be reinvested in additional shares of Common Stock, which may
thereafter accrue additional equivalents. Any such reinvestment shall be at Fair
Market Value on the date of reinvestment or such other price as may then apply
under a dividend reinvestment plan sponsored by the Company, if any. Dividend
Equivalent Rights may be settled in cash or shares of Common Stock or a
combination thereof, in a single installment or installments. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement, or payment
of, or lapse of restrictions on, such other Award and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other Award.
10.2 INTEREST EQUIVALENTS. Any Award under this Plan that is settled in
whole or in part in cash on a deferred basis may provide in the Award Agreement
for interest equivalents to be credited with respect to such cash payment.
Interest equivalents may be compounded and shall be paid upon such terms and
conditions as may be specified at the time of grant in the Award Agreement.
11. STOCK APPRECIATION RIGHTS
11.1 GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may
be granted to any Eligible Person selected by the Administering Body. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of a Stock Option, (b) with respect to previously granted Non-qualified
Stock Options, or (c) independent of a Stock Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with this Plan as
the Administering Body shall impose and shall be evidenced by an Award
Agreement.
11.2 COUPLED STOCK APPRECIATION RIGHTS.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Stock Option and shall be exercisable only when
and to the extent the related Stock Option is exercisable.
(b) A CSAR may be granted to the Recipient for no more than
the number of shares subject to the simultaneously or previously
granted and unexercised Stock Option to which it is coupled.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 25
<PAGE> 26
(c) A CSAR shall entitle the Recipient to surrender to the
Company unexercised a portion of the Stock Option to which the CSAR
relates (to the extent then exercisable pursuant to its terms) and to
receive from the Company in exchange therefor an amount determined by
multiplying the difference obtained by subtracting the Stock Option
exercise price from the Fair Market Value of a share of Common Stock on
the date of exercise of the CSAR by the number of shares of Common
Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Administering Body may impose. An Option with
respect to which a Recipient has elected to exercise a CSAR shall, to
the extent of the shares covered by such exercise, be canceled
automatically and surrendered to the Company. Such Option shall
thereafter remain exercisable according to its terms only with respect
to the number of shares of Common Stock as to which it would otherwise
be exercisable, less the number of such shares with respect to which
such CSAR has been so exercised.
11.3 INDEPENDENT STOCK APPRECIATION RIGHTS.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Stock Option and shall have the terms set by the
Administering Body. An ISAR shall be exercisable in such installments
and subject to such conditions as the Administering Body may determine.
An ISAR shall cover such number of shares of Common Stock as the
Administering Body may determine. The exercise price per share of the
Common Stock subject to each ISAR shall be set by the Administering
Body and, together with the other terms and conditions of the ISAR,
shall be set forth in the Award Agreement.
(b) An ISAR shall entitle the Recipient to exercise all or a
specified portion of the ISAR (to the extent then exercisable pursuant
to its terms) and to receive from the Company an amount determined by
multiplying the difference obtained by subtracting the exercise price
per share of the ISAR from the Fair Market Value of a share of Common
Stock on the date of exercise of the ISAR by the number of shares of
Common Stock with respect to which the ISAR shall have been exercised,
subject to any limitations the Administering Body may impose.
11.4 PAYMENT AND LIMITATIONS ON EXERCISE.
(a) Payment of the amounts determined under Section 11.2(c)
and 11.3(b) above shall be in cash, in Common Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is exercised)
or a combination of both, as determined by the Administering Body. To
the extent such payment is effected in Common Stock it shall be made
subject to satisfaction of all provisions of this Plan pertaining to
Stock Options.
(b) Holders of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including a
window-period limitation, as may be imposed in the discretion of the
Administering Body.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 26
<PAGE> 27
12. REORGANIZATIONS
12.1 CORPORATE TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL. If the
Company shall consummate any Reorganization not involving a Change in Control in
which holders of shares of Common Stock are entitled to receive in respect of
such shares any securities, cash or other consideration (including without
limitation a different number of shares of Common Stock), each Award outstanding
under this Plan shall thereafter be claimed or exercisable, in accordance with
this Plan, only for the kind and amount of securities, cash and/or other
consideration receivable upon such Reorganization by a holder of the same number
of shares of Common Stock as are subject to that Award immediately prior to such
Reorganization, and any adjustments will be made to the terms of the Award, and
the underlying Award Agreement, in the sole discretion of the Administering Body
as it may deem appropriate to give effect to the Reorganization.
12.2 CORPORATE TRANSACTIONS INVOLVING A CHANGE IN CONTROL. As of the
effective time and date of any Change in Control, this Plan and any then
outstanding Awards (whether or not vested) shall automatically terminate unless
(a) provision is made in writing in connection with such transaction for the
continuance of this Plan and for the assumption of such Awards, or for the
substitution for such Awards of new grants covering the securities of a
successor entity or other party to the transaction resulting in such Change in
Control, or an affiliate thereof, with appropriate adjustments as to the number
and kind of securities and exercise prices, in which event this Plan and such
outstanding Awards shall continue or be replaced, as the case may be, in the
manner and under the terms provided by the Administering Body and/or in any
written agreement relating to such Change in Control transaction; or (b) the
Board otherwise has provided or shall provide in writing for such adjustments as
it deems appropriate in the terms and conditions of the then-outstanding Awards
(whether or not vested), including without limitation (i) accelerating the
vesting or exercisability of outstanding Awards and/or (ii) providing for the
cancellation of Awards and their automatic conversion into the right to receive
the securities, cash and/or other consideration that a holder of the shares
underlying such Awards would have been entitled to receive upon consummation of
such Change in Control had such shares been issued and outstanding immediately
prior to the effective date and time of the Change in Control (net of the
appropriate option exercise prices). If, pursuant to the foregoing provisions of
this Section 12.2, this Plan and any outstanding Awards granted hereunder shall
terminate by reason of the occurrence of a Change in Control without provision
for any of the actions described in clause (a) or (b) hereof, then any Recipient
holding outstanding Awards shall have the right, at such time immediately prior
to the consummation of the Change in Control as the Administering Body shall
designate, to convert, claim or exercise, as applicable, the Recipient's Awards
to the full extent not theretofore converted, claimed or exercised, including
any installments which have not yet become vested or exercisable.(1)
- --------
1 The Company's external accountants should review this Article 12 for
potential accounting effects (including "pooling" issues).
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 27
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13. DEFINITIONS
Capitalized terms used in this Plan and not otherwise defined shall
have the meanings set forth below:
"ADMINISTERING BODY" shall mean the Board as long as no Stock Plan
Committee has been appointed and is in effect and shall mean the Stock Plan
Committee as long as the Stock Plan Committee is appointed and in effect.
"AFFILIATED ENTITY" means any parent corporation or subsidiary
corporation.(2)
"AWARD" or "AWARDS," except where referring to a particular category or
grant under this Plan, shall include Incentive Stock Options, Non-qualified
Stock Options, Restricted Stock Awards, Unrestricted Stock Awards, Performance
Stock Awards, Dividend Equivalent Rights and Stock Appreciation Rights.
"AWARD AGREEMENT" means the agreement or confirming memorandum setting
forth the terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means the following and shall be deemed to occur if
any of the events specified in clause (a), (b), (c) or (d) occur:
(a) Any person, within the meaning of Section 13(d) or 14(d)
of the Exchange Act (other than the Company or any corporation or other
such person of which a majority of its voting power or its voting
equity securities or equity interests is owned, directly or indirectly,
by the Company (a "RELATED ENTITY"), or any employee benefit plan (or a
trust forming a part thereof) maintained by the Company or any Related
Entity), becomes, after the Effective Date, the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of fifty percent (50%) or more of the combined
voting power of the Company's then outstanding securities; or
(b) During any period of two (2) consecutive years,
individuals, who at the beginning of such period, constitute the Board
and any new Director of the Company (other than a Director designated
by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c) or (d) of this
definition) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors of the Company then still in office
who
- --------
2 Consider whether to permit employees or consultants of other entities in
which the Company has a significant equity interest (and which are
designated by the Administering Body) to participate in this Plan.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 28
<PAGE> 29
either were Directors of the Company at the beginning of the two-year
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the
Board;
(c) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more
than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that
a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person acquires more
than fifty percent (50%) of the combined voting power of the Company's
then outstanding securities shall not constitute a Change in Control;
and provided further a merger or consolidation in which the Company is
the surviving entity (other than as a wholly owned subsidiary of
another entity) and in which the Board of Directors of the Company or
the successor to the Company, after giving effect to the merger or
consolidation, is comprised of a majority of members who are either (x)
Directors of the Company immediately preceding the merger or
consolidation, or (y) appointed to the Board by the Company (or the
Board) as an integral part of such merger or consolidation, shall not
constitute a Change in Control; or
(d) Approval by the stockholders of the Company or any order
by a court of competent jurisdiction of a plan of liquidation of the
Company, or the sale or disposition by the Company of all or
substantially all of the Company's assets other than (i) the sale or
disposition of all or substantially all of the assets of the Company to
a person or persons who beneficially own, directly or indirectly, at
least fifty percent (50%) or more of the combined voting power of the
outstanding voting securities of the Company at the time of the sale;
or (ii) pursuant to a dividend in kind or spinoff type transaction,
directly or indirectly, of such assets to the stockholders of the
Company.
(e) Notwithstanding the foregoing, a Change in Control of the
type described in paragraph (b), (c) or (d) shall be deemed to be
completed on the date it occurs, and a Change in Control of the type
described in paragraph (a) shall be deemed to be completed as of the
date the entity or group attaining 50% or greater ownership has elected
its representatives to the Board and/or caused its nominees to become
officers of the Company with the authority to terminate or alter the
terms of any Employee's employment.
"COMMON STOCK" means the common stock of the Company, par value $.001
per share, as constituted on the Effective Date, and as thereafter adjusted as a
result of any one or more events requiring adjustment of outstanding Awards
under Section 3.4 above.
"COMPANY" means eVentures Group, Inc., a Delaware corporation.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 29
<PAGE> 30
"CONSULTANT" means any consultant or advisor if:
(a) the consultant or advisor renders bona fide services to
the Company or any Affiliated Entity;
(b) the services rendered by the consultant or advisor are not
in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a
market for the Company's securities; and
(c) the consultant or advisor is a natural person who has
contracted directly with the Company or an Affiliated Entity to render
such services.
"CSAR" means a coupled stock appreciation right as defined in Section
11.2.
"DIRECTOR" means any person serving on the Board or the Board of
Directors of an Affiliated Entity irrespective of whether such person is also an
Employee of the Company or an Affiliated Entity.
"DIVIDEND EQUIVALENT RIGHT" shall mean any Award granted pursuant to
Article 10 of this Plan.
"DRO" shall mean a domestic relations order as defined by the IRC or
Title I of ERISA or the rules thereunder.
"EFFECTIVE DATE" means September 22, 1999, which is the date this Plan
was adopted by the Board.
"ELIGIBLE PERSON" shall include key Employees, Directors and
Consultants of the Company or of any Affiliated Entity.
"EMPLOYEE" means any officer or other employee (as defined in
accordance with Section 3401(c) of the IRC) of the Company or any Affiliated
Entity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" means the tenth anniversary of the Effective Date.
"FAIR MARKET VALUE" of a share of the Company's capital stock as of a
particular date shall be: (a) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the NASDAQ National Market),
the closing sale price of the stock quoted for such date as reported in the
transactions index of each such exchange, as published in The Wall Street
Journal and determined by the Administering Body, or, if no sale price was
quoted in any such index for such date, then as of the next preceding date on
which such a sale price was quoted; or (b) if the stock is not then listed on an
exchange or the NASDAQ National Market, the average of the
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 30
<PAGE> 31
closing bid and asked prices per share for the stock in the over-the-counter
market as quoted on The NASDAQ Small Cap Market, or, if not so quoted, on the
OTC Bulletin Board, on such date; or (c) if the stock is not then listed on an
exchange or quoted in the over-the-counter market, an amount determined in good
faith by the Administering Body; provided, however, that (i) when appropriate,
the Administering Body, in determining Fair Market Value of capital stock of the
Company, may take into account such other factors as it may deem appropriate
under the circumstances and (ii) if the stock is traded on The NASDAQ Small Cap
Market and both sales prices and bid and asked prices are quoted or available,
the Administering Body may elect to determine Fair Market Value under either
clause (a) or (b) above. Notwithstanding the foregoing, the Fair Market Value of
capital stock for purposes of grants of Incentive Stock Options shall be
determined in compliance with applicable provisions of the IRC.
"INCENTIVE STOCK OPTION" means a Stock Option that qualifies as an
incentive stock option under Section 422 of the IRC, or any successor statute
thereto.
"IRC" means the Internal Revenue Code of 1986, as amended.
"ISAR" means an independent stock appreciation right as defined in
Section 11.3.
"JUST CAUSE DISMISSAL" shall mean a termination of a Recipient's
employment for any of the following reasons: (a) the Recipient violates any
reasonable rule or regulation of the Board, the Company's Chief Executive
Officer or the Recipient's superiors that results in material damage to the
Company or an Affiliated Entity or which, after written notice to do so, the
Recipient fails to correct within a reasonable time; (b) any willful misconduct
or gross negligence by the Recipient in the responsibilities assigned to the
Recipient; (c) any willful failure to perform the Recipient's job as required to
meet the Company's or an Affiliated Entity's objectives; (d) any wrongful
conduct of a Recipient which has an adverse impact on the Company or an
Affiliated Entity or which constitutes a misappropriation of assets of the
Company or an Affiliated Entity; (e) the Recipient's performing services for any
other person or entity that competes with the Company or an Affiliated Entity
while the Recipient is employed by the Company or an Affiliated Entity, without
the prior written approval of the Chief Executive Officer of the Company or an
Affiliated Entity; or (f) any other conduct that the Administering Body
determines constitutes just cause for dismissal; provided, however, that if a
Recipient is party to an employment agreement with the Company and/or an
Affiliated Entity providing for just cause dismissal (or some comparable notion)
of such Recipient from his or her employment with the Company or an Affiliated
Entity, "Just Cause Dismissal" for purposes of this Plan shall have the same
meaning as ascribed thereto or to such comparable notion in such employment
agreement.
"NON-QUALIFIED STOCK OPTION" means a Stock Option that is not an
Incentive Stock Option.
"PARENT CORPORATION" means any parent corporation of the Company as
defined in Section 424(e) of the IRC.
"PERFORMANCE-BASED COMPENSATION" means performance-based compensation
as described in Section 162(m)(4)(c) of the IRC.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 31
<PAGE> 32
"PERFORMANCE CRITERIA" shall mean the following business criteria with
respect to the Company, any Affiliated Entity or any division or operating unit
of any thereof: (a) income or net income, (b) pre-tax income, (c) operating
income or net operating income, (d) cash flow, (e) earnings per share (including
earnings before interest, taxes and amortization), (f) return on equity, (g)
return on invested capital or assets, (h) cost reductions or savings, (i) funds
from operations, (j) appreciation in the fair market value of Common Stock, (k)
earnings before any one or more of the following items: interest, taxes,
depreciation or amortization, (l) book value of Common Stock, (m) total
stockholder return, (n) return on capital, (o) return on assets or net assets,
or (p) operating margin.
"PERFORMANCE STOCK AWARDS" means Awards granted pursuant to Article 9.
"PERMANENT DISABILITY" shall mean that the Recipient becomes physically
or mentally incapacitated or disabled so that the Recipient is unable to perform
substantially the same services as the Recipient performed prior to incurring
such incapacity or disability (the Administering Body, at its option and the
Company's expense, may retain a physician to confirm the existence of such
incapacity or disability, and the determination of such physician shall be
binding upon the Company and the Recipient), and such incapacity or disability
continues for a period of three consecutive months or six months in any 12-month
period or such other period(s) as may be determined by the Administering Body
with respect to any Award, provided that for purposes of determining the period
during which an Incentive Stock Option may be exercised pursuant to Section
5.13(b)(ii) hereof, Permanent Disability shall mean "permanent and total
disability" as defined in Section 22(e) of the IRC.
"PLAN" means this 1999 Omnibus Securities Plan of the Company.
"PLAN TERM" means the period during which this Plan remains in effect
(commencing on the Effective Date and ending on the Expiration Date).
"RECIPIENT" means an Eligible Person who has received an Award or
Awards under this Plan or any person who is recognized under this Plan as the
successor in interest to such an Eligible Person with respect to such Eligible
Person's Award.
"REORGANIZATION" means any merger, consolidation or other
reorganization.
"RESTRICTED STOCK" shall have the meaning ascribed thereto in Section
7.1.
"RESTRICTED STOCK AWARDS" means any Award granted pursuant to Article 7
of this Plan.
"RETIREMENT" means normal retirement from employment with the Company
or an Affiliated Entity in accordance with the retirement policies of the
Company or any such Affiliated Entity then in effect, as determined by the
Administering Body.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 32
<PAGE> 33
"RULE 16b-3" means Rule 16b-3 under the Exchange Act, or any successor
or similar rule under the Exchange Act, as the same may be amended from time to
time.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT STOCKHOLDER" is an individual who, at the time an Award is
granted to such individual under this Plan, owns more than 10% of the combined
voting power of all classes of stock of the Company or of any Parent Corporation
or Subsidiary Corporation (after application of the attribution rules set forth
in Section 424(d) of the IRC).
"STOCK APPRECIATION RIGHT" means a stock appreciation right granted
under Article 11 of this Plan.
"STOCK OPTION" or "OPTION" means a right to purchase stock of the
Company granted under Article 6 of this Plan to an Eligible Person.
"STOCK PLAN COMMITTEE" means the committee appointed by the Board to
administer this Plan pursuant to Section 4.1.
"SUBSIDIARY CORPORATION" means any subsidiary corporation of the
Company as defined in Section 424(f) of the IRC.
"UNRESTRICTED STOCK" shall have the meaning ascribed thereto in Section
8.1.
"UNRESTRICTED STOCK AWARD" means any Award granted pursuant to Article
8 of this Plan.
1999 OMNIBUS SECURITIES PLAN (eVENTURES GROUP, INC.) PAGE 33
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of September
22, 1999, by and between, eVENTURES GROUP, INC., a Delaware corporation, with
its principal office at One Evertrust Plaza, 8th Floor, Jersey City, New Jersey
07302, (the "COMPANY"), and STUART J. CHASANOFF residing at 6528 Mimosa Lane,
Dallas, Texas 75230 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective September 22, 1999 (the "COMMENCEMENT DATE"), the
Company desires to employ Executive as a senior executive and Executive desires
to accept such employment; and
WHEREAS, the Company and Executive desire to enter into this agreement
(the "AGREEMENT") as to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment: Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on September 21, 2002. Subject to Section 7 hereof, the Employment
Term shall be automatically extended for additional terms of successive one (1)
year periods unless the Company or Executive gives written notice to the other
at least sixty (60) days prior to the expiration of the then current Employment
Term of the termination of Executive's employment hereunder at the end of such
current Employment Term.
2. Positions.
(a) Executive shall serve as a senior executive of the
Company, initially, as Vice President of Business Development, General
Counsel and Secretary of the Company, reporting directly to the Chief
Executive Officer or President of the Company (the "CHIEF EXECUTIVE
OFFICER"). If requested by the Board of Directors of the Company (the
"BOARD") or the Chief Executive Officer, Executive shall also serve on
the Board and committees thereof, as an executive, officer and director
of subsidiaries and/or as a director of associated companies of the
Company without additional compensation and subject to any policy of
the Compensation Committee of the Company's Board (the "COMPENSATION
COMMITTEE") with regard to retention or turnover of the director's
fees.
(b) Executive shall have such duties and authority, consistent
with his then position as shall be assigned to him from time to time by
the Chief Executive Officer or
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EMPLOYMENT AGREEMENT - Page 1
<PAGE> 2
President. Executive and the Company currently anticipate creating a
job description for Executive consistent with Executive's titles
following the engagement by the Company of a permanent Chief Executive
Officer. In furtherance of the foregoing, Executive acknowledges that
the Company expects to engage division heads for its telecommunications
and Internet investment divisions (and possibly for additional
divisions which may be created in the future) and that, upon the
request of the Chief Executive Officer or President of the Company,
Executive will work in conjunction with (but not report to) such
division heads on business development opportunities for the Company.
Nothing herein shall prohibit Executive from being considered by the
Company for any division head position.
(c) During the Employment Term, Executive shall devote
substantially all of his business time and efforts to the performance
of his duties hereunder. Notwithstanding the foregoing, Executive shall
be entitled to perform services for HW Partners, L.P. pursuant to the
Incentive Compensation Agreement between Executive and HW Partners,
L.P. in existence after the date hereof, as the same may be modified
from time to time (the "HW Partners Agreement"). Further, nothing
contained herein shall be construed to prohibit Executive from (i)
owning less than ten percent (10%) of the outstanding securities of any
publicly traded entity and (ii) pursuing any business opportunity that
is not in Competition, as such term is defined in Section 10(b) below,
with the Company or its subsidiaries or any portfolio company in which
the Company or its subsidiaries hold securities (other than entities in
which the Company or its subsidiaries make a nominal investment)
(provided the time devoted by Executive to such personal investment
does not materially interfere with Executive's duties hereunder) (such
activities, together with the services provided to HW Partners, L.P.
being herein referred to as the "Allowed Activities"). For purposes
hereof, a "nominal investment" of the Company or its subsidiaries will
be determined in relation to the size of investments made from time to
time by the Company or its subsidiaries in its portfolio companies
(including, without limitation, investments made in exchange for cash,
securities or services rendered). If Executive desires to participate
in an investment opportunity that would violate Executive's covenants
contained in this Section 2(c), then Executive may request a written
consent from the Chief Executive Officer or President of the Company
authorizing Executive's participation in such investment opportunity.
3. Base Salary. During the Employment Term, the Company shall pay
Executive a Base Salary as follows: (a) for the period from September 22, 1999
to September 30, 1999, One Dollar ($1.00), (b) for the period October 1, 1999
through September 21, 2000 a Base Salary of $13,333.33 per calendar month
(prorated for the month of September 2000) (representing an annual Base Salary
of $160,000); (c) for the period from September 22, 2000, to September 21, 2001
the sum of $172,800; and (c) for the period from September 22, 2001, to
September 21, 2002 the sum of $186,624. Base Salary shall be payable in
accordance with the usual payroll practices of the Company. Executive's Base
Salary may be reviewed annually by the Board or the Compensation Committee and
may be increased, but not decreased, from time to time by the Board or the
Compensation Committee. The Base Salary as determined as aforesaid, from time
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EMPLOYMENT AGREEMENT - Page 2
<PAGE> 3
to time for the applicable period shall constitute "BASE SALARY" for purposes of
this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be eligible for discretionary bonuses
payable by the Company on such terms and conditions, and subject to
such standards, as shall be determined from time to time in the sole
discretion, from time to time, of the Board or the Compensation
Committee.
(b) Stock Options. The Company hereby grants to Executive
stock options (the "STOCK OPTIONS") to purchase 500,000 shares of
Common Stock of the Company. Subject to ratification by the Board, the
Stock Options shall, if requested by Executive, to the maximum extent
permitted by the Internal Revenue Code, be classified as Incentive
Stock Options pursuant to the terms of the Stock Option Plan. Such
Stock Options shall be granted pursuant to the Company's Stock Option
Plan substantially in the form attached hereto as Exhibit "B", together
with the form of Stock Option Grants attached hereto as Exhibit "C".
The exercise price for such Stock Options shall be as follows:
(i) $2.50 per share for 166,666 shares;
(ii) $5.00 per share for 166,667 shares; and
(iii) $7.50 per share for 166,667 shares.
The Stock Options granted hereunder shall vest as follows: (xx) the
166,666 shares specified in clause (i) above shall vest on September
21, 2000, (yy) the 166,667 shares specified in clause (ii) above shall
vest on September 21, 2001; and (zz) the 166,667 shares specified in
clause (iii) above shall vest on September 21, 2002; provided, as
contemplated by the Stock Option Grants, the Stock Options shall fully
vest upon the occurrence of any (x) termination of Executive's
employment by Executive for Good Reason or by the Company without Cause
or (y) a Change of Control of the Company (as defined in Exhibit A).
Further, notwithstanding anything in the Stock Option Plan or Stock
Option Grants to the contrary, to the extent any provisions contained
therein are inconsistent with or differ from the explicit terms and
conditions of this Agreement, the terms and conditions of this
Agreement shall control. To the extent this Agreement does not
specifically address an issue or term set forth in the Stock Option
Plan or the Stock Option Grants, then the provisions and terms of the
Stock Option Plan or the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option
Plan, the number of stock options will be subject to adjustment for any
stock split, reclassification or combination of the Company's capital
stock.
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EMPLOYMENT AGREEMENT - Page 3
<PAGE> 4
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit
plans and arrangements and fringe benefits and perquisites generally
maintained by the Company from time to time for the benefit of senior
executive officers of the Company of a comparable level, in each case
in accordance with their respective terms as in effect from time to
time (other than any special arrangement entered into by contract with
an executive or that applies on a grandfathered basis). Without
limiting the foregoing, the Company shall pay all premiums for
Executive and his dependent family members under health,
hospitalization, disability, dental, life and other employee benefit
plans that the Company may have in effect from time to time. Executive
acknowledges that the Company does not currently provide a profit
sharing plan, and has no current intention of providing profit sharing
benefits to its employees. Notwithstanding the foregoing, the Company
shall not be required to provide such benefits to Executive until such
time as Executive no longer receives the benefits to which Executive is
entitled pursuant to the HW Partners Agreement (such coverage being
herein referred to as the "HW Partners Benefits Coverage"). To the
extent Executive chooses the HW Partners Benefits Coverage and the
Company maintains benefits (such as life insurance) for which Executive
is entitled to pay all applicable premiums and obtain coverage, then
nothing contained in this Section 5(a) shall prevent Executive from
paying such premiums and securing such life insurance (or related)
coverage. Furthermore, nothing contained in this Section 5(a) shall
prevent Executive from participating in the 401(k) plans of both the
Company and HW Partners, L.P. in accordance with the provisions of
Section 5(d) below.
(b) During the Employment Term, Executive shall be entitled to
at least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect from time to time. Executive shall also be
entitled to such periods of sick leave as is customarily provided by
the Company to its senior executive employees.
(c) Executive understands that he may be requested by the
Board to relocate from his present residence in order to more
efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In the event that Executive is requested to relocate
and agrees to do so, the Company will pay all reasonable relocation
costs to move Executive, his immediate family and their personal
property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; and temporary lodging and
living costs prior to moving into a new permanent residence.
(d) At such time as the HW Partners Benefits Coverage
terminates, the Company shall provide Executive with other executive
perquisites as may be available to or deemed appropriate for Executive
by the Board and participation in all other Company-wide employee
benefits as available from time to time. Executive shall, at his
discretion, be entitled to accept the HW Partners Benefits Coverage in
lieu of the benefits provided to Executive hereunder. Executive
understands and agrees, however, that Executive will be
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EMPLOYMENT AGREEMENT - Page 4
<PAGE> 5
entitled to the HW Partners Benefits Coverage or the benefits provided
by the Company hereunder, but not both, and Executive shall not be able
to select individual features of the HW Partners Benefits Coverage and
the benefits provided by the Company hereunder; provided, however,
nothing herein shall prohibit Executive from participating, to the
extent allowable by law, in the 401(k) plans of both the Company and HW
Partners, L.P. contemplated under the HW Partners Agreement; provided,
further, however, Executive will be entitled to receive the employer's
matching portion of any 401(k) plan (including any profit sharing
component thereof) from either the Company or HW Partners, L.P., at
Executive's choice, but not both. Further, Executive acknowledges and
agrees that all vacation days, sick days, personal leave days, days
applicable to the definition of "Disability" set forth herein and
related items shall be calculated such that any day counts as a day of
Executive under both this Agreement and the HW Partners Agreement.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive in accordance with the Company's policies as in effect from time to
time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the
earliest to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by
the Company due to Executive's Disability
(as defined in Exhibit "A") pursuant to
Section 7(b) hereof;
(iii) the termination of Executive's employment by
Executive for Good Reason (as defined in
Exhibit "A") pursuant to Section 7(c)
hereof,
(iv) the termination of Executive's employment by
the Company without Cause (as defined in
Exhibit "A") pursuant to Section 7(e)
hereof;
(v) the termination of employment by Executive
without Good Reason upon thirty (30) days
prior written notice pursuant to Section
7(e) hereof; or
(vi) the termination of Executive's employment by
the Company for Cause pursuant to Section
7(d) hereof.
(b) Disability. If Executive is unable to perform his material
duties hereunder due to a physical or mental condition and the Company
desires to terminate Executive's employment for Disability (as defined
in Exhibit "A"), the Company shall deliver to
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EMPLOYMENT AGREEMENT - Page 5
<PAGE> 6
Executive a written Notice of Disability Termination (herein so
called), effective upon the date (the "Disability Termination Date")
which is the later of (i) the date such condition becomes a Disability
or (ii) thirty (30) days following the delivery of the Notice of
Disability Termination; provided that the Disability Termination Date
shall be suspended so long as Executive returns to the full performance
of his duties by and following such date.
(c) Termination for Good Reason. A Termination for Good Reason
(herein so called) means a termination by Executive by written notice
given within thirty (30) days after the occurrence of the Good Reason
event, unless such circumstances are corrected prior to the date of
termination specified in the Notice of Termination for Good Reason. A
Notice of Termination for Good Reason shall mean a notice that shall
indicate the specific Good Reason event relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a
basis for Termination for Good Reason. The failure by Executive to set
forth in the Notice of Termination for Good Reason any facts or
circumstances which contribute to the showing of Good Reason shall not
waive any right of Executive hereunder or preclude Executive from
asserting such fact or circumstance in enforcing his rights hereunder.
The Notice of Termination for Good Reason shall provide for a date of
termination not less than ten (10) nor more than thirty (30) days after
the date such Notice of Termination for Good Reason is given.
(d) Cause. Subject to the notification provisions of this
Section 7(d), Executive's employment hereunder may be terminated by the
Company for Cause. A Notice of Termination for Cause (herein so called)
shall mean a notice that shall indicate the specific termination
provision in Section (a) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances which provide for a
basis for Termination for Cause. The effective date of termination for
a Termination for Cause shall be the date indicated in the Notice of
Termination. Any purported Termination for Cause which is held by a
court by a non-appealable final judgment not to have been based on the
grounds set forth in this Agreement or not to have followed the
procedures set forth in this Agreement shall be deemed a termination by
the Company without Cause.
(e) Termination without Cause. Executive's employment by the
Company shall be at will. Accordingly, the Company may terminate
Executive at any time for reasons other than Cause at any time upon
thirty (30) days prior written notice.
(f) Voluntary Resignation. Executive may terminate his
employment with the Company at any time upon thirty (30) days prior
written notice.
8. Consequences of Termination of Employment. Executive shall be
entitled to the following compensation from the Company (in lieu of all other
sums owed or payable to Executive) upon the termination of employment as
described below:
(a) Death, Disability, Voluntary Resignation without Good
Reason or Cause.
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EMPLOYMENT AGREEMENT - Page 6
<PAGE> 7
If Executive's employment and the Employment Term are terminated by
reason of (i) Executive's death or Disability, (ii) by Executive
without Good Reason or (iii) by the Company for Cause, the employment
period under this Agreement shall terminate without further obligations
to Executive or Executive's legal representatives under this Agreement
except for: (i) any Base Salary earned but unpaid, any accrued but
unused vacation pay payable pursuant to the Company's policies and any
unreimbursed business expenses payable pursuant to Section 6 (which
amounts, in the case of the death of Executive, shall be promptly paid
in a lump sum to Executive's estate), and (ii) except in the case of a
termination with Cause, any other amounts or benefits earned, accrued
and owing to Executive under the then applicable employee benefit
plans, long term incentive plans or equity plans and programs of the
Company which shall be paid in accordance with such plans and programs,
and any unpaid reimburseable business expenses (collectively, the
"Accrued Amounts").
(b) Termination by Executive for Good Reason or Termination by
Company without Cause. If Executive's employment and the Employment
Term are terminated (i) by Executive for Good Reason, or (ii) by the
Company without Cause (and other than for Disability or as a result of
expiration of the Employment Term following rejection by Executive of a
Qualifying Employment Offer, as such term is hereafter defined),
Executive shall be entitled to receive the Accrued Amounts and shall,
subject to Sections 9(b), 9(c) and 10 hereof, be entitled to receive
equal monthly payments of an amount equal to his then monthly rate of
Base Salary, payable at such times as such payments would have been
made had Executive's employment not terminated, for a period equal to
(i) if the termination occurs at any time after September 21, 2001, six
(6) months following the date of termination, or (ii) if the
termination occurs on or prior to September 21, 2001, the greater of
six (6) months or the remaining period of time from the date of
termination through September 22, 2001 (i.e., the second anniversary of
the initial Term of this Agreement).
(c) Termination as a Result of Nonextension of Employment
Term. If at least thirty (30) days prior to the expiration of the
Employment Term the Company fails to offer to extend the Employment
Term for a period of at least one (1) year on substantially identical
terms as set forth herein at an annual Base Salary equal to the greater
of (I) $214,151 and (II) the product of 108% and the annual Base Salary
applicable at the time of expiration of the Employment Term, but
without a requirement for the issuance of any additional Stock Options
to Executive (a "Qualifying Employment Offer"), then such failure to
make such Qualifying Employment Offer to Executive shall be deemed to
be a termination of Executive's employment as of the expiration of the
Employment Term by the Company without Cause, and, upon such
occurrence, Executive shall be entitled to receive the Accrued Amount
and shall, subject to Sections 9(b), 9(c) and 10 hereof, be entitled to
receive payments of an amount equal to his then monthly rate of Base
Salary, but off the employee payroll, for a period of six (6) months
following the date of his termination. In the event the Company makes a
Qualifying Employment Offer and Executive declines to accept the same
within fifteen (15) days of the receipt thereof, then
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EMPLOYMENT AGREEMENT - Page 7
<PAGE> 8
nonextension of the Employment Term shall be considered a mutual
termination of the Employment Term by the Company and Executive, and
Executive shall be entitled solely to receive the Accrued Amounts.
9. No Mitigation: No Set-Off.
(a) In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.
Any amounts due under Section 8 are in the nature of severance payments
and are not in the nature of a penalty. Such amounts are inclusive, and
in lieu of any amounts payable under any other salary continuation or
cash severance arrangement of the Company (unless specifically excluded
thereunder) and to the extent paid or provided under any other such
arrangement shall be offset from the amount due hereunder.
(b) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) hereunder he will
execute, deliver and not revoke (within the time period permitted by
applicable law) a release of all claims of any kind whatsoever against
the Company, its affiliates, officers, directors, employees, agents and
shareholders in the then standard form being used by the Company for
senior executives (but without release of the right of indemnification
hereunder or under the Company's By-laws or rights under benefit or
equity plans that by their terms are intended to survive termination of
his employment).
(c) Upon any termination of employment, Executive hereby
resigns as an officer and director of the Company, any subsidiary and
any affiliate and as a fiduciary of any benefit plan of any of the
foregoing. Executive shall promptly execute any further documentation
thereof as reasonably requested by the Company and, if Executive is to
receive any payments from the Company, execution of such further
documentation shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a) (i) Executive acknowledges that as a result of his
employment by the Company, Executive will obtain secret and
confidential information as to the Company and its affiliates and
create relationships with customers, suppliers and other persons
dealing with the Company and its affiliates and the Company and its
affiliates will suffer substantial damage, which would be difficult to
ascertain, if Executive should use such confidential information or
take advantage of such relationship and that because of the nature of
the information that will be known to Executive and the relationships
created it is necessary for the Company and its affiliates to be
protected by the prohibition against Competition as set forth herein,
as well as the confidentiality restrictions set forth herein.
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EMPLOYMENT AGREEMENT - Page 8
<PAGE> 9
(ii) Executive acknowledges that the retention of
nonclerical employees employed by the Company and its
affiliates in which the Company and its affiliates have
invested training and depends on for the operation of their
businesses is important to the businesses of the Company and
its affiliates, that Executive will obtain unique information
as to such employees as an executive of the Company and will
develop a unique relationship with such persons as a result of
being an executive of the Company and, therefore, it is
necessary for the Company and its affiliates to be protected
from Executive's Solicitation (defined below) of such
employees as set forth below.
(iii) Executive acknowledges that the provisions of
this Agreement are reasonable and necessary for the protection
of the businesses of the Company and its affiliates and that
part of the compensation paid under this Agreement and the
agreement to pay severance in certain instances is in
consideration for the agreements in this Section 10.
(b) COMPETITION shall mean: participating, directly or
indirectly, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, consultant or in
any capacity whatsoever (within the United States of America, or in any
country where the Company or its affiliates do business) in a Competing
Business; provided, however, that such participation shall not include
(i) the mere ownership of not more than ten percent (10%) of the total
outstanding stock of a publicly held company; (ii) the Allowed
Activities; or (iii) any activity engaged in with the prior written
approval of the Board. As used herein, "Competing Business" means any
business engaged in by the Company and/or its subsidiaries and/or any
entity in which the Company and/or its subsidiaries holds securities
(other than entities in which the Company or its subsidiaries make a
nominal investment) (I) from time to time (while Executive is employed
by the Company) or (II) at the time of termination (upon termination of
Executive's employment) (consisting, as of the date hereof, principally
of the services described in the Company's Disclosure Letter dated on
or about the date hereof, a copy of which is attached hereto as Exhibit
"D").
(c) SOLICITATION shall mean: recruiting, soliciting or
inducing, of any nonclerical employee or employees of the Company or
its affiliates to terminate their employment with, or otherwise cease
their relationship with, the Company or its affiliates or hiring or
assisting another person or entity to hire any nonclerical employee of
the Company or its affiliates or any person who within twelve (12)
months before had been a nonclerical employee of the Company or its
affiliates and were recruited or solicited for such employment or other
retention while an employee of the Company, provided, however, that
solicitation shall not include any of the foregoing activities engaged
in with the prior written approval of the Chief Executive Officer.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in
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EMPLOYMENT AGREEMENT - Page 9
<PAGE> 10
too broad a geographic area, it shall be interpreted to extend over the
maximum period of time, range of activities or geographic area as to
which it may be enforceable. If any provision of this Section 10 shall
be declared to be invalid or unenforceable, in whole or in part, as a
result of the foregoing, as a result of public policy or for any other
reason, such invalidity shall not affect the remaining provisions of
this Section which shall remain in full force and effect.
(e) During and after the Employment Term, Executive shall hold
in a fiduciary capacity for the benefit of the Company and its
affiliates all secret or confidential information, knowledge or data
relating to the Company and its affiliates, and their respective
businesses, including any confidential information as to customers of
the Company and its affiliates, (i) obtained by Executive during his
employment by the Company and its affiliates and (ii) not otherwise
public knowledge or known within the applicable industry. Executive
shall not, without prior written consent of the Company, unless
compelled pursuant to the order of a court or other governmental or
legal body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the
Company and those designated by it. In the event Executive is compelled
by order of a court or other governmental or legal body to communicate
or divulge any such information, knowledge or data to anyone other than
the foregoing, he shall promptly notify the Company of any such order
and he shall cooperate fully with the Company in protecting such
information to the extent possible under applicable law.
(f) Upon termination of his employment with the Company and
its affiliates, or at any time as the Company may request, Executive
will promptly deliver to the Company, as requested, all documents
(whether prepared by the Company, an affiliate, Executive or a third
party) relating to the Company, an affiliate or any of their businesses
or property which he may possess or have under his direction or control
other than documents provided to Executive in his capacity as a
participant in any employee benefit plan, policy or program of the
Company or any agreement by and between Executive and the Company with
regard to Executive's employment or severance.
(g) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive will not
engage in Solicitation.
(h) During the Employment Term and for the Restricted Period
(as hereafter defined) following a termination of Executive's
employment, Executive will not enter into Competition with the Company.
The Restricted Period shall be (i) for a termination for Cause, two (2)
years following the date of termination, (ii) for termination without
Cause by the Company, or for Good Reason by Executive, the period in
which the Company is making payments to Executive as specified in
Section 8(b) above, (iii) for termination as a result of the voluntary
resignation of Executive without Good Reason or the failure of
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EMPLOYMENT AGREEMENT - Page 10
<PAGE> 11
Executive to accept a Qualifying Employment Offer, one (1) year from
the date of termination, and (iv) for termination as a result of the
failure of the Company to make a Qualifying Employment Offer, six (6)
months following the date of termination.
(i) In the event of a breach or potential breach of this
Section 10, Executive acknowledges that the Company and its affiliates
will be caused irreparable injury and that money damages may not be an
adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at
law) to have the provisions of this Section 10 enforced. It is hereby
acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such
entity may enforce the provisions of this Section 10 and only the
applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of
breach of this Section 10 by Executive, while he is receiving amounts
under Section 8(b) or (c) hereof, Executive shall not be entitled to
receive any future amounts pursuant to Section 8(b) or (c) hereof and
shall reimburse the Company for any amounts previously paid to
Executive pursuant to Section 8(b) or (c) hereof.
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended and
as applicable, for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any other subsidiary or affiliate of the Company or as a
fiduciary of any benefit plan. The Company shall cover Executive under directors
and officers liability insurance both during and, while potential liability
exists, after the Employment Term in the same amount and to the same extent as
the Company covers its other officers and directors.
12. Inventions and Trade Secrets.
(a) Executive shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and
valuable discoveries, whether patentable or not, which are conceived or
made by Executive, solely or jointly with another, during the period of
employment or within one (1) year thereafter, and which are
substantially related to the business or activities of the Company or
its subsidiaries which Executive conceived as a result of his
employment by the Company or any of its subsidiaries. Executive hereby
assigns and agrees to assign all of his interest therein to the Company
or its nominee. Whenever requested to do so by the Company, Executive
shall execute any and all applications, assignments or other
instruments that the Company shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company's interest therein.
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EMPLOYMENT AGREEMENT - Page 11
<PAGE> 12
(b) Executive agrees that he will not, during or after the
Employment Term, disclose the specific terms of the Company's
relationships or agreements with its significant vendors or customers
or any other significant material trade secrets of the Company, whether
in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever, except as is
disclosed in the ordinary course of business, unless compelled by a
court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the non-prevailing party
shall pay all reasonable attorney, accountant and other professional fees and
reasonable expenses incurred by the prevailing party associated with such claim.
14. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey
without reference to principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of
the parties with respect to the employment of Executive by the Company
from and after the Commencement Date and supersedes any prior
agreements between the Company and Executive with respect thereto.
There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein and therein. This
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. Any failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any such waiver must be in writing and
signed by Executive or an authorized officer of the Company, as the
case may be.
(d) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an
entity which is owned, directly or indirectly, in whole or in part by
the Company or by any successor to the Company or an acquirer of all or
substantially all of the assets of the Company or all or substantially
all of the assets of a group of subsidiaries and divisions of the
Company, provided such entity or acquirer promptly assumes all of the
obligations hereunder of the Company in a writing delivered to
Executive and otherwise complies with the provisions hereof with regard
to such assumption. Upon such assignment and assumption, all references
to the Company herein shall be to such assignee.
(e) Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the beneficiaries and permitted assignees
of the parties hereto. In
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EMPLOYMENT AGREEMENT - Page 12
<PAGE> 13
the event of Executive's death while receiving amounts payable pursuant
to Section 8(b) hereof, any remaining amounts shall be paid to
Executive's estate.
(f) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when faxed or
delivered, or (ii) two (2) business days after being mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the initial
page of this Agreement, provided that all notices to the Company shall
be directed to the attention of the General Counsel and Secretary of
the Company, or to such other address as any party may have furnished
to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.
(g) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
(h) Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 11 hereof,
shall survive any termination of Executive's employment to the extent
necessary to the agreed preservation of such rights and obligations.
(i) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
(j) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control
or affect the meaning or construction of any provision of this
Agreement.
(k) Executive's Representation. Executive represents and
warrants to the Company that there is no legal impediment to him
entering into, or performing his obligations under this Agreement and
neither entering into this Agreement nor performing his contemplated
service hereunder will violate any agreement to which he is a party or
any other legal restrictions Executive further represents and warrants
that in performing his duties hereunder he will not use or disclose any
confidential information of any prior employer or other person or
entity.
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EMPLOYMENT AGREEMENT - Page 13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMPANY:
eVENTURES GROUP, INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
EXECUTIVE:
STUART J. CHASANOFF
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EMPLOYMENT AGREEMENT - Page 14
<PAGE> 15
EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
STUART J. CHASANOFF
(a) Cause. For purposes of this Agreement, the term "CAUSE"
shall be limited to the following:
(i) Executive's willful misconduct or gross
negligence with regard to the Company or its
affiliates or their business, assets or
employees (including, without limitation,
Executive's fraud, embezzlement or other act
of dishonesty with regard to the Company or
its affiliates) or Executive's willful
misconduct other than the foregoing which
has a material adverse impact on the Company
or its affiliates, whether economic, or
reputationwise or otherwise, as determined
by the Board;
(ii) Executive's conviction of, or pleading nolo
contendere to, a felony or other crime
involving fraud, dishonesty or moral
turpitude or which carries a minimum prison
sentence upon conviction of one (1) year or
longer;
(iii) Executive's refusal or willful failure to
follow the lawful written direction of the
Board, the Chief Executive Officer or his
designee which is not remedied within ten
(10) business days after receipt by
Executive of a written notice specifying the
details thereto;
(iv) Executive's breach of a fiduciary duty owed
to the Company or its affiliates, including,
but not limited to Section 10 hereof;
(v) the representations or warranties in Section
14(k) hereof prove false; or
(vi) any other breach by Executive of this
Agreement that remains uncured for thirty
(30) days after written notice is given to
Executive.
(b) Change in Control. For purposes of this Agreement, the
term "CHANGE IN CONTROL" shall mean the occurrence of any of the following:
(i) any "person" as such term is used in
Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 ("Act") (other than (a)
Permitted Assignees, (b) the Company, (c)
any trustee or other fiduciary holding
securities under any employee benefit plan
of the Company,
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EMPLOYMENT AGREEMENT - Page A-1
<PAGE> 16
(d) any company owned, directly or
indirectly, by the stockholders of the
Company in substantially the same
proportions as their ownership of Common
Stock of the Company, or (e) any entity
holding non-participating shares of an
entity which is a stockholder of the Company
or which owns or controls, directly or
indirectly, a stockholder of the Company) is
or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the
Company representing fifty percent (50%) or
more of the combined voting power of the
Company's then outstanding securities.
Permitted Assignees shall mean the holders
of the equity securities (whether or not
voting) of any shareholder of the Company
owning more than fifteen percent (15%) of
the Company on the date after the date of
execution of this Agreement;
(ii) during any period of two (2) consecutive
years, individuals who at the beginning of
such period constitute the Board, and any
new director (other than a director
designated by a person who has entered into
an agreement with the Company to effect a
transaction described in clause (i), (iii),
or (iv) of this paragraph) whose election by
the Board or nomination for election by the
Company's stockholders was approved by a
vote of at least two-thirds of the directors
then still in office who either were
directors at the beginning of the two-year
period or whose election or nomination for
election was previously so approved, cease
for any reason to constitute at least a
majority of the Board;
(iii) a merger or consolidation of the Company
with any other corporation, other than a
merger or consolidation which would result
in the voting securities of the Company
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into
voting securities of the surviving entity)
more than fifty percent (50%) of the
combined voting power of the voting
securities of the Company or such surviving
entity outstanding immediately after such
merger or consolidation; provided, however,
that a merger or consolidation effected to
implement a recapitalization of the Company
(or similar transaction) in which no person
acquires more than fifty percent (50%) of
the combined voting power of the Company's
then outstanding securities shall not
constitute a Change in Control of the
Company; and provided, further, a merger or
consolidation in which the Company is the
surviving entity (other than as a wholly
owned subsidiary or another entity) and in
which the Board of the Company after giving
effect to the merger or consolidation is
comprised of a majority of members who are
either (x) directors of the Company
immediately preceding the merger or
consolidation,
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EMPLOYMENT AGREEMENT - Page A-2
<PAGE> 17
or (y) appointed to the Board of the Company
by the Company (or its Board) as an integral
part of such merger or consolidation, shall
not constitute a Change in Control of the
Company; or
(iv) the stockholders of the Company approve a
plan of complete liquidation of the Company
or the sale or disposition by the Company of
all or substantially all of the Company's
assets other than (x) the sale or
disposition of all or substantially all of
the assets of the Company to a person or
persons who beneficially own, directly or
indirectly, at least fifty percent (50%) or
more of the combined voting power of the
outstanding voting securities of the Company
at the time of the sale or (y) pursuant to a
dividend in kind or spinoff type
transactions, directly or indirectly, of
such assets to the stockholders of the
Company.
(c) Disability. For purposes of this Agreement, "DISABILITY"
shall mean if Executive is unable to perform his material duties pursuant to
this Agreement because of mental or physical incapacity, including, without
limitation, alcoholism or drug abuse, which requires a leave of absence in
excess of ninety (90) consecutive days in any twelve (12) month period.
(d) Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean the occurrence, without Executive's express written consent, in the
case of (i), (ii) or (iii) of any of the following circumstances:
(i) (a) any material demotion of Executive from
his position as Vice President of Business
Development or (b) any assignment of duties
to Executive materially and adversely
inconsistent with Executive's positions as
Vice President of Business Development,
General Counsel and Secretary (except in
connection with the termination of
Executive's employment for Cause or due to
Disability or as a result of Executive's
death, or temporarily as a result of
Executive's illness or other absence). For
purposes hereof, Executive agrees that the
contemplated activities of the Company
specified in Section 2(b) of this Agreement
shall not constitute either a material
demotion of Executive or an assignment of
duties to Executive materially and adversely
inconsistent with Executive's positions as
Vice President of Business Development,
General Counsel and Secretary;
(ii) a failure by the Company to pay to Executive
any amounts due under this Agreement in
accordance with the terms hereof, which
failure is not cured within fifteen (15)
days following receipt by the Company of
notice from Executive of such failure;
(iii) any other material breach by the
Company of this Agreement that remains
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EMPLOYMENT AGREEMENT - Page A-3
<PAGE> 18
uncured for fifteen (15) days after written
notice thereof by Executive to the Company;
or
(iv) following a Change of Control, the Board
requires Executive to relocate to an area
other than (x) the New York, New York
greater metropolitan area, (y) the Dallas,
Texas greater metropolitan area, or (z) if
the Company's corporate headquarters are
located in an area other than the New York,
New York or Dallas, Texas greater
metropolitan areas, to an area more than
fifty (50) miles from the Company's
corporate headquarters, and Executive
declines to so relocate.
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT - Page A-4
<PAGE> 1
AMENDED AND RESTATED
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (this
"Agreement") is made and entered into this 21st day of September, 1999, by and
between AXISTEL COMMUNICATIONS, INC., a Delaware corporation ("Employer") and
SAMUEL L. LITWIN ("Employee").
RECITALS:
WHEREAS, Employer and Employee entered into that certain Employment and
Noncompetition Agreement dated as of October 28, 1998 (the "Prior Agreement");
and
WHEREAS, of even date herewith, Employer has merged with a wholly owned
subsidiary of eVentures Group, Inc., a Delaware corporation ("Parent), pursuant
to which Employer is the surviving entity and a wholly owned subsidiary of
Parent (the "Merger"); and
WHEREAS, in connection with the consummation of the Merger, Employer
and Employee have agreed to amend and restate in its entirety the Prior
Agreement, which is hereby superseded in its entirety by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT; DUTIES. Employer hereby employs Employee, and Employee
hereby accepts such employment. Employee's principal duties will consist of
serving as the Chief Executive Officer of Employer and providing services
consistent with such position. In addition, Employee shall perform such other
duties and services for and on behalf of Employer generally consistent with the
foregoing as may from time to time be determined by the Board of Directors of
Parent (the "Board"). Employee shall also be designated as a Managing Director
of Communications Holdings of Parent. Employee shall devote his full and
undivided business time, attention and efforts to Employer's business and to the
performance of Employee's duties under this Agreement. Employee shall faithfully
perform all duties assigned to him under this Agreement to the best of
Employee's abilities. In the performance of Employee's duties hereunder,
Employee agrees to report to the Board. The Board's current plan is that upon
consummation of the Merger, the telecommunications business activities of
Parent, currently conducted by Employer and e.Volve Technologies Group, Inc.
(f/k/a Orix Global Communications, Inc.), will be operated by Employee and the
other officers and employees of Employer from Employer's current offices located
in the State of New Jersey, but subject to the supervision and authority of the
Board. Employer covenants and agrees that, during the Term (as hereinafter
defined) hereof, Employer shall not relocate the principal office of Employer to
a
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 1
<PAGE> 2
geographical location outside of a 50 mile radius from the current office of
Employer and that Employee shall be allowed to perform his services under this
Agreement at such principal office of Employer.
2. COMPENSATION. Employee acknowledges and agrees that as of the date
of this Agreement, the Company does not owe him any compensation (other than
accrued and unpaid base salary through the date hereof under the Prior
Agreement) and that he is only entitled to the compensation set forth below for
his services rendered hereunder after the date hereof.
(a) Employee shall be entitled to receive an annual salary
("Base Salary") of $180,000 as full compensation for all the services
rendered by Employee during each fiscal year of the Term (as hereafter
defined) of Employee's employment and paid in accordance with the
customary payroll practices of Employer.
(b) For each fiscal year or portion thereof during the Term,
Employee shall be eligible for discretionary bonuses payable by
Employer on such terms and conditions, subject to such standards, as
shall be determined, in good faith, from time to time in the discretion
of the Board.
(c) Employee's compensation shall be reviewed at least
annually by the Board and any appropriate increases may be made to the
Base Salary in the sole discretion of the Board.
(d) The Employee shall be entitled to receive prompt
reimbursement for all reasonable business and entertainment expenses
incurred by him in performing services hereunder, provided that the
Employee properly accounts therefor to the Board. The Employee shall
obtain the approval of the Board prior to incurring any single
expenditure in excess of $5,000.
(e) The Employee shall receive only such standard employment
benefits as are available to general employees of Employer, such as
life, health, dental, and short term and long term disability plans,
and a policy for vacation, personal time off, and sick leave
(collectively, the "Standard Benefit Plans").
(f) The Employee shall be entitled to reasonable vacation
consistent with his position.
(g) Any payments or benefits to which the Employee may be
entitled under this Section 2 in respect of any fiscal year during
which the Employee is employed by Employer for less than the entire
such fiscal year shall, unless otherwise provided herein or in the
applicable plan or arrangement, be prorated in accordance with the
number of days in such fiscal year during which he is so employed.
3. STOCK OPTIONS. Employer hereby grants to Employee non-qualified
stock options (the "Stock Options") to purchase 425,000 shares of Common Stock
of Parent. Such Stock Options shall be granted pursuant to Parent's customary
Stock Option Plan substantially in the form attached hereto as Exhibit A,
together with the form of Stock Option Grant attached hereto as
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 2
<PAGE> 3
Exhibit B. Subject to ratification by the Board, the Stock Options shall, to the
maximum extent permitted by the Internal Revenue Code, be classified as
Incentive Stock Options pursuant to the terms of the Stock Option Plan. The
exercise price for such Stock Options shall be $10.00 per share of Common Stock.
The Stock Options granted hereunder shall vest as follows: (x) 141,166 shares
(1/3) shall vest on September __, 2000; (y) 141,67 shares (1/3) shall vest on
September __, 2001; and (z) 141,667 shares (1/3) shall vest on September __,
2002; provided, however, such Stock Options shall vest in full upon the
occurrence of (A) any Change of Control of Parent (as such term is defined in
the Stock Option Plan), (B) any termination of Employee's employment hereunder
without Cause pursuant to Section 5(d) below or (C) the failure of Employer to
make a Qualifying Extension Offer (as hereafter defined) upon the expiration of
the Term. Notwithstanding any provision of the Stock Option Plan or Stock Option
Grant to the contrary, to the extent provisions contained therein are
inconsistent or conflict with the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall control. To the extent this
Agreement does not specifically address an issue or term raised in the Stock
Option Plan or Stock Option Grant, then the provisions and terms of the Stock
Option Plan or Stock Option Grant will apply.
4. EMPLOYMENT TERM. The term of Employee's employment hereunder shall
commence on September __, 1999, and shall continue for twenty-four (24) months
thereafter (for a Term ending September __, 2001), unless earlier terminated in
accordance with the terms of this Agreement (the "Term"). This Agreement may be
renewed by mutual agreement of Employer and Employee at the end of the Term for
additional one (1) year periods. Upon the expiration of the initial Term,
Employer agrees to offer to extend the Term for one (1) additional year (for a
Term ending September __, 2002) on substantially identical terms as set forth
herein at the Base Salary applicable at the time of expiration of the initial
Term, but without a requirement for the issuance of any additional Stock Options
to Employee (a "Qualifying Extension Offer").
5. REASON FOR EMPLOYMENT TERMINATION. The Employee's employment
hereunder may be terminated under the following circumstances:
(a) MUTUAL AGREEMENT. Termination by mutual agreement between
the Employee and Employer.
(b) DEATH OR DISABILITY. Employment shall terminate upon the
death or permanent disability of the Employee. For purposes of this
Agreement, "Disability" occurs if the Employee is unable to perform
duties on a full-time basis because of mental or physical incapacity,
including, without limitation, alcoholism or drug abuse, which requires
a leave of absence in excess of 90 days during any calendar year. In
the event the Employee is a Qualified Individual with a Disability, as
defined in the Americans with Disabilities Act, Employer shall not
terminate the Employee's employment hereunder if the Employee is able
to perform the essential functions of the Employee's job with
reasonable accommodation from Employer.
(c) CAUSE. For purposes of this Agreement, Employer shall have
"Cause" to terminate the Employee's employment hereunder only upon:
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 3
<PAGE> 4
(i) The willful and continued failure by the Employee
to substantially perform his duties as outlined hereunder
after written demand for substantial performance is delivered
by the Board;
(ii) The engaging by the Employee in criminal conduct
or conduct constituting moral turpitude that is materially
injurious to Employer, monetarily or otherwise;
(iii) The continued willful insubordination of the
Employee after written demand by the Board is delivered to the
Employee specifically identifying the insubordination;
(iv) The embezzlement or misappropriation by the
Employee of the funds of Employer;
(v) Acts of dishonesty or other intentional acts
(including any breach of the Employee's covenants contained in
this Agreement or the Stockholders Agreement dated the date
hereof to which Employee and Employer are each parties) that
cause material adverse harm to Employer (other than as a
consequence of good faith decisions made by the Employee in
the normal performance of the Employee's duties hereunder);
and/or
(vi) Employee is convicted of a felony which carries
a minimum prison sentence upon conviction of one (1) year or
longer.
(d) TERMINATION WITHOUT CAUSE. Notwithstanding any provisions
of this Agreement to the contrary, Employer may terminate the
Employee's employment for any reason, or for no reason, other than
those specified in the foregoing paragraphs (a), (b) or (c) at any time
during the Term effective upon delivery of two (2) day's notice by
Employer.
(e) TERMINATION BY THE EMPLOYEE WITH NOTICE. The Employee may
terminate this Agreement (voluntary resignation) at any time during the
Term effective upon thirty (30) days written notice to the Board.
(f) TERMINATION UPON EXPIRATION OF TERM. Employment shall
terminate upon expiration of the Term.
6. COMPENSATION UPON TERMINATION. The Employee shall be entitled to the
following compensation from Employer (in lieu of all other sums owed or payable
to the Employee hereunder) upon the termination of employment during the Term of
this Agreement.
(a) TERMINATION FOR CAUSE. In the event Employer terminates
Employee's employment hereunder for Cause during the Term of this
Agreement, then Employee's employment hereunder shall immediately
terminate, and Employee shall only receive the
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 4
<PAGE> 5
Base Salary prorated through the effective date of termination of
Employee's employment.
(b) VOLUNTARY RESIGNATION. Notwithstanding anything contained
in this Agreement to the contrary, Employee may resign and terminate
Employee's employment hereunder subject only to the requirement that
Employee shall provide Employer with a minimum of thirty (30) days
prior written notice. In such event, Employee shall only receive the
unpaid Base Salary prorated through the effective date of Employee's
resignation.
(c) DEATH. In the event of the death of Employee during the
Term of this Agreement, this Agreement and Employee's employment
hereunder shall terminate as of the date of the death of Employee, and
his estate or personal representative shall be entitled to receive the
unpaid Base Salary, prorated for the period of Employee's employment to
the date of his death and a one time payment of $10,000.
(d) DISABILITY. If the Employee's employment is terminated as
a result of Disability (as defined in Section 5 above), the Employee
will continue to be provided long term disability benefits (if any) in
accordance with Employer's then existing Standard Benefit Plan. In
addition, Employer will pay to the Employee the remaining unpaid pro
rata portion of the Base Salary through the date of Disability.
(e) PAYMENT UPON TERMINATION WITHOUT CAUSE OR BY FAILURE TO
MAKE A QUALIFYING EXTENSION OFFER. In the event Employee's employment
hereunder is terminated for reasons other than (x) for Cause, (y) as a
result of the voluntary resignation of Employee or (z) as a result of
Employee's death or Disability (i.e., termination without Cause), then,
in such event, Employee shall be entitled to receive the Base Salary
then in effect for the remainder of the Term hereunder. In addition,
if, upon expiration of the Term on September __, 2001, Employer fails
to make a Qualifying Extension Offer to Employee, then, in such event,
Employee shall be entitled to receive the Base Salary then in effect
for a period of six (6) months. In each instance, such payments shall
be made at such times as if Employee's employment hereunder had not
terminated. In addition, in the event of a termination of employment
without Cause, the contractual restriction on Employee's ability to
sell any shares of Parent common stock set forth in the Registration
Rights Agreement executed contemporaneously herewith among Parent and
certain of its stockholders shall terminate and cease to apply to
Employee.
(f) SUSPENSION. Employer shall have the right to suspend
Employee with full pay and benefits for any period of time the Board of
Directors of Employer deems necessary or appropriate to investigate
Employee's conduct.
7. COVENANT NOT TO COMPETE. During the Restricted Period (as defined
below) (or such lesser period to the maximum extent permitted by applicable
law), Employee agrees that Employee will not, directly or indirectly (including,
without limitation, as a partner, shareholder, director, officer or employee of,
or lender or consultant to, any other person, firm or other entity), in any
capacity, within, into or from the Restricted Territory (as defined below)
engage or cause
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 5
<PAGE> 6
others to engage in the business that Parent, Employer and/or its subsidiaries
or affiliates is engaged in at the time of termination, or any aspect thereof of
(consisting, as of the date hereof, principally of the services described in
Parent's Disclosure Letter dated on or about the date hereof) (the "Business"),
unless first authorized in writing by Parent, which authorization may be
withheld in the sole and absolute discretion of Parent. For purposes of this
Agreement, "Restricted Period" means the period of Employee's employment
hereunder and the following applicable period after the date of termination of
Employee's employment for the following reasons: (i) if Employee voluntarily
resigns, a period equal to two (2) years after the date of such resignation;
(ii) for any termination without Cause, the remaining Term of this Agreement
(i.e., the time period in which Employee is making payments under Section 6(e)
above); (iii) as a result of Employer failing to make a Qualifying Extension
Offer, six (6) months after the date of termination (i.e., the time period in
which Employer is making payments under Section 6(e) above); provided, at
Employer's option, Employer may extend such payments for an additional six (6)
month period in which event the Restricted Period shall be extended for such six
(6) month additional period; (iv) for any termination with Cause, a period equal
to three (3) years after the date of such termination; and (v) for any other
termination, including Employee's failure to accept a Qualifying Extension Offer
at the end of the Term, a period of two (2) years after the date of termination
or non-renewal. For purposes of this Agreement, the term "Restricted Territory"
shall mean that the Business of Employer has been initiated in any area of the
world (or such lesser territory to the maximum extent permitted by applicable
law). If Employee violates any obligations under this Section 7, then the time
periods hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminate. Any efforts made by
Employee to consummate sales of services or goods for and on behalf of the
Employer to any competitors of Employer during the term of this Agreement shall
not violate the provisions of this Section 7.
8. NONSOLICITATION. During the Employee's employment hereunder, and for
a period of twenty-four (24) months from and after the date of termination of
Employee's employment for any reason, except as set forth below (or such lesser
period to the maximum extent permitted by applicable law), Employee agrees that
Employee shall not, directly or indirectly, for himself or on behalf of, or in
connection with, any person, firm or other entity other than Employer, solicit
or cause others to solicit (i) the business or patronage of any person, firm or
other entity with whom Employer has or had a business relationship (as a
customer, supplier or otherwise) or with whom Employer has proposed entering
into a business relationship (as a customer, supplier or otherwise), or (ii) any
person who, on the date hereof and on the date of termination of Employee's
employment hereunder, was an employee or consultant of Employer, or any of its
subsidiaries or their affiliates, for employment or as an independent contractor
with any person or entity, unless first authorized in writing by Employer, which
authorization may be withheld in Employer's sole and absolute discretion;
provided, however, that in the event Employee is terminated without Cause or he
does not receive a Qualifying Extension Offer, the provisions of this Section 8
shall only apply for so long as Employer continues to pay Employee the
applicable amounts specified in Section 6(e) above.
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 6
<PAGE> 7
9. CONFIDENTIALITY. In addition to Employee's obligations as a
stockholder of Employer pursuant to that certain Stockholders Agreement, dated
the date hereof, by and Employer and the stockholders of Employer, from and
after the date hereof, Employee shall not communicate or divulge to, or use for
the benefit of, any person, firm or other entity other than Employer, any of the
trade secrets, business and/or marketing plans, or any proprietary or
confidential information with respect to Employer, its subsidiaries or their
affiliates, and their business, financial condition, business operations or
methods or business prospects. The preceding sentence shall not apply to
information which (i) is, was or becomes generally known or available to the
public or the industry other than as a result of a disclosure by Employee in
violation of this Agreement, or (ii) is required to be disclosed by law.
Employee shall advise Employer, in writing, of any request, including a subpoena
or similar legal inquiry, to disclose any such confidential information, so that
Employer may, at its option, seek appropriate legal relief. Employee is aware of
no obligations, legal or otherwise, inconsistent with the terms of this
Agreement or with his undertaking employment with Employer. Employee will not
disclose to Employer, or use to induce Employer to use, any proprietary
information or trade secrets of others. Employee represents that he has returned
all property and confidential information belonging to all prior employers.
10. RETURN OF EMPLOYER PROPERTY. Immediately upon the expiration or
earlier termination of this Agreement, Employee shall return to Employer any and
all property of Employer, including, but not limited to, all documents,
agreements, schedules, statements, customer lists, supplier lists, plans,
designs, parts and equipment, that is in the possession or control (direct or
indirect) of Employee.
11. SURVIVAL: REMEDIES; SEVERABILITY. Employee specifically
acknowledges that (a) Employer itself or through one or more of Employer's
subsidiaries currently operates, or will operate following the date hereof, in
the Restricted Territory; (b) Employer itself or through one or more of
Employer's subsidiaries or affiliates receives a significant amount of business
from and throughout the Restricted Territory; (c) Employer itself or through one
or more of Employer's subsidiaries or affiliates, plans to expand operations
within and throughout the Restricted Territory; and (d) the geographic
restrictions contained in Section 7 hereof, and the length of time restrictions
in Sections 7, 8 and 9 hereof are each necessary and reasonable and were
negotiated between Employer and Employee. The restrictions and obligations set
forth in Sections 7, 8, 9 and 10 hereof shall survive the expiration or
termination of this Agreement. The parties hereto hereby acknowledge and agree
that the restrictions and obligations set forth in Sections 7, 8, 9 and 10
hereof are reasonable and necessary, and that any violation thereof would result
in substantial and irreparable injury to Employer, and that Employer may not
have an adequate remedy at law with respect to any such violation. Accordingly,
Employee agrees that, in the event of any actual or threatened violation
thereof, Employer shall have the right and privilege to (x) obtain, without the
necessity of posting bond therefor, and in addition to any other remedies that
may be available, equitable relief, including temporary and permanent injunctive
relief, to cease or prevent any actual or threatened violation of any provision
hereof and (y) cease paying Employee any amounts pursuant to the terms hereof,
including, without limitation, the payments provided in Section 6(e) above;
provided, however, that in the event a final determination is made that either
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 7
<PAGE> 8
(x) Employee has not violated any of the terms hereof or (y) such violation has
not resulted in damages to Employer in excess of the withheld payments provided
in Section 6(e) above ("Damages"), then Employer shall promptly pay to Employee
such amounts that it withheld in excess of the aggregate of such Damages. Each
and every provision set forth in Sections 7, 8, 9 and 10 hereof is independent
and severable from the others, and no restriction will be rendered unenforceable
by virtue of the fact that, for any reason, any other or others of them may be
unenforceable in whole or in part. If any provision in this Agreement,
including, without limitation, those in Sections 7, 8, 9 and 10 hereof is
unenforceable for any reason whatsoever, that provision will be appropriately
limited and reformed to the maximum extent provided by applicable law. If the
scope of any restriction contained herein is too broad to permit enforcement to
its full extent, then such restriction shall be enforced to the maximum extent
permitted by law so as to be judged reasonable and enforceable, and the parties
agree that such scope may be modified by an arbitrator or judge in any
proceeding to enforce this Agreement. This includes, without limitation,
altering or enforcing only portions of the limits on activity restrictions, the
geographic scope, and/or the duration of the restrictions unless to do so would
be contrary to law or public policy.
12. MISCELLANEOUS.
(a) NOTICES. All notices or demands for performance required or
permitted to be given hereunder shall be in writing and shall be deemed given
when delivered in person, or three (3) business days after being placed in the
hands of a courier service (e.g., DHL or Federal Express) prepaid or faxed
provided that a confirming copy is delivered forthwith as herein provided,
addressed as follows:
If to Employer:
AxisTel Communications, Inc.
One Evertrust Plaza, 8th Floor
Jersey City, NJ 07302
Attn: President
If to Employee:
Samuel L. Litwin
3088 State Highway 27, Suite 200
Kendall Park, NY 08824
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, successors and permitted assigns. Except as set forth
herein, the provisions of this Agreement supersede any and all other agreements
or
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 8
<PAGE> 9
understandings, whether oral or written, with respect to Employee's employment
by Employer, including without limitation, the Prior Agreement. Any amendments,
or alternative or supplementary provisions to this Agreement must be made in
writing and duly executed by the authorized representative or agent of each of
the parties hereto.
(c) NON-WAIVER. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege conferred in this Agreement or the
waiver by said party of any breach of any of the terms, covenants or conditions
of this Agreement, shall not be construed as a subsequent waiver of any such
terms, covenants, conditions, rights or privileges, but the same shall continue
and remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
(d) COUNTERPARTS. This Agreement may be executed by facsimile signature
and in multiple counterparts, each of which shall be deemed to be an original,
and all such counterparts shall constitute but one instrument.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONTROLLED AS
TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION, EFFECT AND IN ALL OTHER
RESPECTS BY THE INTERNAL LAWS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS
MADE IN THAT STATE.
(f) CONSTRUCTION. The parties hereto acknowledge and agree that each
party has participated in the drafting of this Agreement and that the respective
legal counsel for the parties hereto have had the opportunity to review this
document and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be applied
to the interpretation of this Agreement. No inference in favor of, or against,
any party shall be drawn from the fact that one party has drafted any portion
hereof.
BOTH PARTIES HERETO HAVE READ THIS ENTIRE AGREEMENT CAREFULLY AND FULLY
UNDERSTAND THE LIMITATIONS THAT THIS AGREEMENT IMPOSES UPON THEM AND ACKNOWLEDGE
AND AGREE THAT THOSE LIMITATIONS ARE REASONABLE.
[SIGNATURE PAGE FOLLOWS]
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
EMPLOYER:
AXISTEL COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ MITCHELL ARTHUR
------------------------------------
Mitchell Arthur, President and Chief
Operating Officer
EMPLOYEE:
/s/ Samuel L. Litwin
-----------------------------------
SAMUEL L. LITWIN
eVentures Group, Inc. hereby joins in this Agreement for the sole purpose of
agreeing to the grant of Stock Options pursuant to Section 3 above.
eVENTURES GROUP, INC.
By: /s/ BARRETT WISSMAN
Name: Barrett Wissman
Title: President & CEO
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 10
<PAGE> 1
AMENDED AND RESTATED
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (this
"Agreement") is made and entered into this 22nd day of September, 1999, by and
between AXISTEL COMMUNICATIONS, INC., a Delaware corporation ("Employer") and
MITCHELL ARTHUR ("Employee").
R E C I T A L S:
WHEREAS, Employer and Employee entered into that certain Employment and
Noncompetition Agreement dated as of October 28, 1998 (the "Prior Agreement");
and
WHEREAS, of even date herewith, Employer has merged with a wholly owned
subsidiary of eVentures Group, Inc., a Delaware corporation ("Parent), pursuant
to which Employer is the surviving entity and a wholly owned subsidiary of
Parent (the "Merger"); and
WHEREAS, in connection with the consummation of the Merger, Employer
and Employee have agreed to amend and restate in its entirety the Prior
Agreement, which is hereby superseded in its entirety by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT; DUTIES. Employer hereby employs Employee, and Employee
hereby accepts such employment. Employee's principal duties will consist of
serving as the President and Chief Operating Officer of Employer and providing
services consistent with such position. In addition, Employee shall perform such
other duties and services for and on behalf of Employer generally consistent
with the foregoing as may from time to time be determined by the Board of
Directors of Parent (the "Board"). Employee shall also be designated as a
Managing Director of Communications Holdings of Parent. Employee shall devote
his full and undivided business time, attention and efforts to Employer's
business and to the performance of Employee's duties under this Agreement.
Employee shall faithfully perform all duties assigned to him under this
Agreement to the best of Employee's abilities. In the performance of Employee's
duties hereunder, Employee agrees to report to the Board. The Board's current
plan is that upon consummation of the Merger, the telecommunications business
activities of Parent, currently conducted by Employer and e.Volve Technologies
Group, Inc. (f/k/a Orix Global Communications, Inc.), will be operated by
Employee and the other officers and employees of Employer from Employer's
current offices located in the State of New Jersey, but subject to the
supervision and authority of the Board. Employer covenants and agrees that,
during the Term (as hereinafter defined) hereof, Employer shall not relocate the
principal office of Employer to a
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 1
<PAGE> 2
geographical location outside of a 50 mile radius from the current office of
Employer and that Employee shall be allowed to perform his services under this
Agreement at such principal office of Employer.
2. COMPENSATION. Employee acknowledges and agrees that as of the date
of this Agreement, the Company does not owe him any compensation (other than
accrued and unpaid base salary through the date hereof under the Prior
Agreement) and that he is only entitled to the compensation set forth below for
his services rendered hereunder after the date hereof.
(a) Employee shall be entitled to receive an annual salary ("Base
Salary") of $180,000 as full compensation for all the services rendered
by Employee during each fiscal year of the Term (as hereafter defined)
of Employee's employment and paid in accordance with the customary
payroll practices of Employer.
(b) For each fiscal year or portion thereof during the Term,
Employee shall be eligible for discretionary bonuses payable by
Employer on such terms and conditions, subject to such standards, as
shall be determined, in good faith, from time to time in the discretion
of the Board.
(c) Employee's compensation shall be reviewed at least annually by
the Board and any appropriate increases may be made to the Base Salary
in the sole discretion of the Board.
(d) The Employee shall be entitled to receive prompt reimbursement
for all reasonable business and entertainment expenses incurred by him
in performing services hereunder, provided that the Employee properly
accounts therefor to the Board. The Employee shall obtain the approval
of the Board prior to incurring any single expenditure in excess of
$5,000.
(e) The Employee shall receive only such standard employment
benefits as are available to general employees of Employer, such as
life, health, dental, and short term and long term disability plans,
and a policy for vacation, personal time off, and sick leave
(collectively, the "Standard Benefit Plans").
(f) The Employee shall be entitled to reasonable vacation consistent
with his position.
(g) Any payments or benefits to which the Employee may be entitled
under this Section 2 in respect of any fiscal year during which the
Employee is employed by Employer for less than the entire such fiscal
year shall, unless otherwise provided herein or in the applicable plan
or arrangement, be prorated in accordance with the number of days in
such fiscal year during which he is so employed.
3. STOCK OPTIONS. Employer hereby grants to Employee non-qualified
stock options (the "Stock Options") to purchase 425,000 shares of Common Stock
of Parent. Such Stock Options shall be granted pursuant to Parent's customary
Stock Option Plan substantially in the form attached hereto as Exhibit A,
together with the form of Stock Option Grant attached hereto as
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 2
<PAGE> 3
Exhibit B. Subject to ratification by the Board, the Stock Options shall, to the
maximum extent permitted by the Internal Revenue Code, be classified as
Incentive Stock Options pursuant to the terms of the Stock Option Plan. The
exercise price for such Stock Options shall be $10.00 per share of Common Stock.
The Stock Options granted hereunder shall vest as follows: (x) 141,166 shares
(1/3) shall vest on September __, 2000; (y) 141,67 shares (1/3) shall vest on
September __, 2001; and (z) 141,667 shares (1/3) shall vest on September __,
2002; provided, however, such Stock Options shall vest in full upon the
occurrence of (A) any Change of Control of Parent (as such term is defined in
the Stock Option Plan), (B) any termination of Employee's employment hereunder
without Cause pursuant to Section 5(d) below or (C) the failure of Employer to
make a Qualifying Extension Offer (as hereafter defined) upon the expiration of
the Term. Notwithstanding any provision of the Stock Option Plan or Stock Option
Grant to the contrary, to the extent provisions contained therein are
inconsistent or conflict with the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall control. To the extent this
Agreement does not specifically address an issue or term raised in the Stock
Option Plan or Stock Option Grant, then the provisions and terms of the Stock
Option Plan or Stock Option Grant will apply.
4. EMPLOYMENT TERM. The term of Employee's employment hereunder shall
commence on September __, 1999, and shall continue for twenty-four (24) months
thereafter (for a Term ending September __, 2001), unless earlier terminated in
accordance with the terms of this Agreement (the "Term"). This Agreement may be
renewed by mutual agreement of Employer and Employee at the end of the Term for
additional one (1) year periods. Upon the expiration of the initial Term,
Employer agrees to offer to extend the Term for one (1) additional year (for a
Term ending September __, 2002) on substantially identical terms as set forth
herein at the Base Salary applicable at the time of expiration of the initial
Term, but without a requirement for the issuance of any additional Stock Options
to Employee (a "Qualifying Extension Offer").
5. REASON FOR EMPLOYMENT TERMINATION. The Employee's employment
hereunder may be terminated under the following circumstances:
(a) MUTUAL AGREEMENT. Termination by mutual agreement between the
Employee and Employer.
(b) DEATH OR DISABILITY. Employment shall terminate upon the death
or permanent disability of the Employee. For purposes of this
Agreement, "Disability" occurs if the Employee is unable to perform
duties on a full-time basis because of mental or physical incapacity,
including, without limitation, alcoholism or drug abuse, which requires
a leave of absence in excess of 90 days during any calendar year. In
the event the Employee is a Qualified Individual with a Disability, as
defined in the Americans with Disabilities Act, Employer shall not
terminate the Employee's employment hereunder if the Employee is able
to perform the essential functions of the Employee's job with
reasonable accommodation from Employer.
(c) CAUSE. For purposes of this Agreement, Employer shall have
"Cause" to terminate the Employee's employment hereunder only upon:
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 3
<PAGE> 4
(i) The willful and continued failure by the Employee to
substantially perform his duties as outlined hereunder after written
demand for substantial performance is delivered by the Board;
(ii) The engaging by the Employee in criminal conduct or conduct
constituting moral turpitude that is materially injurious to
Employer, monetarily or otherwise;
(iii) The continued willful insubordination of the Employee after
written demand by the Board is delivered to the Employee
specifically identifying the insubordination;
(iv) The embezzlement or misappropriation by the Employee of the
funds of Employer;
(v) Acts of dishonesty or other intentional acts (including any
breach of the Employee's covenants contained in this Agreement or
the Stockholders Agreement dated the date hereof to which Employee
and Employer are each parties) that cause material adverse harm to
Employer (other than as a consequence of good faith decisions made
by the Employee in the normal performance of the Employee's duties
hereunder); and/or
(vi) Employee is convicted of a felony which carries a minimum
prison sentence upon conviction of one (1) year or longer.
(d) TERMINATION WITHOUT CAUSE. Notwithstanding any provisions of
this Agreement to the contrary, Employer may terminate the Employee's
employment for any reason, or for no reason, other than those specified
in the foregoing paragraphs (a), (b) or (c) at any time during the Term
effective upon delivery of two (2) day's notice by Employer.
(e) TERMINATION BY THE EMPLOYEE WITH NOTICE. The Employee may
terminate this Agreement (voluntary resignation) at any time during the
Term effective upon thirty (30) days written notice to the Board.
(f) TERMINATION UPON EXPIRATION OF TERM. Employment shall terminate
upon expiration of the Term.
6. COMPENSATION UPON TERMINATION. The Employee shall be entitled to the
following compensation from Employer (in lieu of all other sums owed or payable
to the Employee hereunder) upon the termination of employment during the Term of
this Agreement.
(a) TERMINATION FOR CAUSE. In the event Employer terminates
Employee's employment hereunder for Cause during the Term of this
Agreement, then Employee's employment hereunder shall immediately
terminate, and Employee shall only receive the
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 4
<PAGE> 5
Base Salary prorated through the effective date of termination of
Employee's employment.
(b) VOLUNTARY RESIGNATION. Notwithstanding anything contained in
this Agreement to the contrary, Employee may resign and terminate
Employee's employment hereunder subject only to the requirement that
Employee shall provide Employer with a minimum of thirty (30) days
prior written notice. In such event, Employee shall only receive the
unpaid Base Salary prorated through the effective date of Employee's
resignation.
(c) DEATH. In the event of the death of Employee during the Term of
this Agreement, this Agreement and Employee's employment hereunder
shall terminate as of the date of the death of Employee, and his estate
or personal representative shall be entitled to receive the unpaid Base
Salary, prorated for the period of Employee's employment to the date of
his death and a one time payment of $10,000.
(d) DISABILITY. If the Employee's employment is terminated as a
result of Disability (as defined in Section 5 above), the Employee will
continue to be provided long term disability benefits (if any) in
accordance with Employer's then existing Standard Benefit Plan. In
addition, Employer will pay to the Employee the remaining unpaid pro
rata portion of the Base Salary through the date of Disability.
(e) PAYMENT UPON TERMINATION WITHOUT CAUSE OR BY FAILURE TO MAKE A
QUALIFYING EXTENSION OFFER. In the event Employee's employment
hereunder is terminated for reasons other than (x) for Cause, (y) as a
result of the voluntary resignation of Employee or (z) as a result of
Employee's death or Disability (i.e., termination without Cause), then,
in such event, Employee shall be entitled to receive the Base Salary
then in effect for the remainder of the Term hereunder. In addition,
if, upon expiration of the Term on September __, 2001, Employer fails
to make a Qualifying Extension Offer to Employee, then, in such event,
Employee shall be entitled to receive the Base Salary then in effect
for a period of six (6) months. In each instance, such payments shall
be made at such times as if Employee's employment hereunder had not
terminated. In addition, in the event of a termination of employment
without Cause, the contractual restriction on Employee's ability to
sell any shares of Parent common stock set forth in the Registration
Rights Agreement executed contemporaneously herewith among Parent and
certain of its stockholders shall terminate and cease to apply to
Employee.
(f) SUSPENSION. Employer shall have the right to suspend Employee
with full pay and benefits for any period of time the Board of
Directors of Employer deems necessary or appropriate to investigate
Employee's conduct.
7. COVENANT NOT TO COMPETE. During the Restricted Period (as defined
below) (or such lesser period to the maximum extent permitted by applicable
law), Employee agrees that Employee will not, directly or indirectly (including,
without limitation, as a partner, shareholder, director, officer or employee of,
or lender or consultant to, any other person, firm or other entity), in any
capacity, within, into or from the Restricted Territory (as defined below)
engage or cause
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 5
<PAGE> 6
others to engage in the business that Parent, Employer and/or its subsidiaries
or affiliates is engaged in at the time of termination, or any aspect thereof of
(consisting, as of the date hereof, principally of the services described in
Parent's Disclosure Letter dated on or about the date hereof) (the "Business"),
unless first authorized in writing by Parent, which authorization may be
withheld in the sole and absolute discretion of Parent. For purposes of this
Agreement, "Restricted Period" means the period of Employee's employment
hereunder and the following applicable period after the date of termination of
Employee's employment for the following reasons: (i) if Employee voluntarily
resigns, a period equal to two (2) years after the date of such resignation;
(ii) for any termination without Cause, the remaining Term of this Agreement
(i.e., the time period in which Employee is making payments under Section 6(e)
above); (iii) as a result of Employer failing to make a Qualifying Extension
Offer, six (6) months after the date of termination (i.e., the time period in
which Employer is making payments under Section 6(e) above); provided, at
Employer's option, Employer may extend such payments for an additional six (6)
month period in which event the Restricted Period shall be extended for such six
(6) month additional period; (iv) for any termination with Cause, a period equal
to three (3) years after the date of such termination; and (v) for any other
termination, including Employee's failure to accept a Qualifying Extension Offer
at the end of the Term, a period of two (2) years after the date of termination
or non-renewal. For purposes of this Agreement, the term "Restricted Territory"
shall mean that the Business of Employer has been initiated in any area of the
world (or such lesser territory to the maximum extent permitted by applicable
law). If Employee violates any obligations under this Section 7, then the time
periods hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminate. Any efforts made by
Employee to consummate sales of services or goods for and on behalf of the
Employer to any competitors of Employer during the term of this Agreement shall
not violate the provisions of this Section 7.
8. NONSOLICITATION. During the Employee's employment hereunder, and for
a period of twenty-four (24) months from and after the date of termination of
Employee's employment for any reason, except as set forth below (or such lesser
period to the maximum extent permitted by applicable law), Employee agrees that
Employee shall not, directly or indirectly, for himself or on behalf of, or in
connection with, any person, firm or other entity other than Employer, solicit
or cause others to solicit (i) the business or patronage of any person, firm or
other entity with whom Employer has or had a business relationship (as a
customer, supplier or otherwise) or with whom Employer has proposed entering
into a business relationship (as a customer, supplier or otherwise), or (ii) any
person who, on the date hereof and on the date of termination of Employee's
employment hereunder, was an employee or consultant of Employer, or any of its
subsidiaries or their affiliates, for employment or as an independent contractor
with any person or entity, unless first authorized in writing by Employer, which
authorization may be withheld in Employer's sole and absolute discretion;
provided, however, that in the event Employee is terminated without Cause or he
does not receive a Qualifying Extension Offer, the provisions of this Section 8
shall only apply for so long as Employer continues to pay Employee the
applicable amounts specified in Section 6(e) above.
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 6
<PAGE> 7
9. CONFIDENTIALITY. In addition to Employee's obligations as a
stockholder of Employer pursuant to that certain Stockholders Agreement, dated
the date hereof, by and Employer and the stockholders of Employer, from and
after the date hereof, Employee shall not communicate or divulge to, or use for
the benefit of, any person, firm or other entity other than Employer, any of the
trade secrets, business and/or marketing plans, or any proprietary or
confidential information with respect to Employer, its subsidiaries or their
affiliates, and their business, financial condition, business operations or
methods or business prospects. The preceding sentence shall not apply to
information which (i) is, was or becomes generally known or available to the
public or the industry other than as a result of a disclosure by Employee in
violation of this Agreement, or (ii) is required to be disclosed by law.
Employee shall advise Employer, in writing, of any request, including a subpoena
or similar legal inquiry, to disclose any such confidential information, so that
Employer may, at its option, seek appropriate legal relief. Employee is aware of
no obligations, legal or otherwise, inconsistent with the terms of this
Agreement or with his undertaking employment with Employer. Employee will not
disclose to Employer, or use to induce Employer to use, any proprietary
information or trade secrets of others. Employee represents that he has returned
all property and confidential information belonging to all prior employers.
10. RETURN OF EMPLOYER PROPERTY. Immediately upon the expiration or
earlier termination of this Agreement, Employee shall return to Employer any and
all property of Employer, including, but not limited to, all documents,
agreements, schedules, statements, customer lists, supplier lists, plans,
designs, parts and equipment, that is in the possession or control (direct or
indirect) of Employee.
11. SURVIVAL: REMEDIES; SEVERABILITY. Employee specifically
acknowledges that (a) Employer itself or through one or more of Employer's
subsidiaries currently operates, or will operate following the date hereof, in
the Restricted Territory; (b) Employer itself or through one or more of
Employer's subsidiaries or affiliates receives a significant amount of business
from and throughout the Restricted Territory; (c) Employer itself or through one
or more of Employer's subsidiaries or affiliates, plans to expand operations
within and throughout the Restricted Territory; and (d) the geographic
restrictions contained in Section 7 hereof, and the length of time restrictions
in Sections 7, 8 and 9 hereof are each necessary and reasonable and were
negotiated between Employer and Employee. The restrictions and obligations set
forth in Sections 7, 8, 9 and 10 hereof shall survive the expiration or
termination of this Agreement. The parties hereto hereby acknowledge and agree
that the restrictions and obligations set forth in Sections 7, 8, 9 and 10
hereof are reasonable and necessary, and that any violation thereof would result
in substantial and irreparable injury to Employer, and that Employer may not
have an adequate remedy at law with respect to any such violation. Accordingly,
Employee agrees that, in the event of any actual or threatened violation
thereof, Employer shall have the right and privilege to (x) obtain, without the
necessity of posting bond therefor, and in addition to any other remedies that
may be available, equitable relief, including temporary and permanent injunctive
relief, to cease or prevent any actual or threatened violation of any provision
hereof and (y) cease paying Employee any amounts pursuant to the terms hereof,
including, without limitation, the payments provided in Section 6(e) above;
provided, however, that in the event a final determination is made that either
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 7
<PAGE> 8
(x) Employee has not violated any of the terms hereof or (y) such violation has
not resulted in damages to Employer in excess of the withheld payments provided
in Section 6(e) above ("Damages"), then Employer shall promptly pay to Employee
such amounts that it withheld in excess of the aggregate of such Damages. Each
and every provision set forth in Sections 7, 8, 9 and 10 hereof is independent
and severable from the others, and no restriction will be rendered unenforceable
by virtue of the fact that, for any reason, any other or others of them may be
unenforceable in whole or in part. If any provision in this Agreement,
including, without limitation, those in Sections 7, 8, 9 and 10 hereof is
unenforceable for any reason whatsoever, that provision will be appropriately
limited and reformed to the maximum extent provided by applicable law. If the
scope of any restriction contained herein is too broad to permit enforcement to
its full extent, then such restriction shall be enforced to the maximum extent
permitted by law so as to be judged reasonable and enforceable, and the parties
agree that such scope may be modified by an arbitrator or judge in any
proceeding to enforce this Agreement. This includes, without limitation,
altering or enforcing only portions of the limits on activity restrictions, the
geographic scope, and/or the duration of the restrictions unless to do so would
be contrary to law or public policy.
12. MISCELLANEOUS.
(a) NOTICES. All notices or demands for performance required or
permitted to be given hereunder shall be in writing and shall be deemed given
when delivered in person, or three (3) business days after being placed in the
hands of a courier service (e.g., DHL or Federal Express) prepaid or faxed
provided that a confirming copy is delivered forthwith as herein provided,
addressed as follows:
If to Employer:
AxisTel Communications, Inc.
One Evertrust Plaza, 8th Floor
Jersey City, NJ 07302
Attn: President
If to Employee:
Mitchell Arthur
3088 State Highway 27, Suite 200
Kendall Park, New Jersey 08824
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, successors and permitted assigns. Except
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 8
<PAGE> 9
as set forth herein, the provisions of this Agreement supersede any and all
other agreements or understandings, whether oral or written, with respect to
Employee's employment by Employer, including without limitation, the Prior
Agreement. Any amendments, or alternative or supplementary provisions to this
Agreement must be made in writing and duly executed by the authorized
representative or agent of each of the parties hereto.
(c) NON-WAIVER. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege conferred in this Agreement or the
waiver by said party of any breach of any of the terms, covenants or conditions
of this Agreement, shall not be construed as a subsequent waiver of any such
terms, covenants, conditions, rights or privileges, but the same shall continue
and remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
(d) COUNTERPARTS. This Agreement may be executed by facsimile signature
and in multiple counterparts, each of which shall be deemed to be an original,
and all such counterparts shall constitute but one instrument.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONTROLLED AS
TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION, EFFECT AND IN ALL OTHER
RESPECTS BY THE INTERNAL LAWS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS
MADE IN THAT STATE.
(f) CONSTRUCTION. The parties hereto acknowledge and agree that each
party has participated in the drafting of this Agreement and that the respective
legal counsel for the parties hereto have had the opportunity to review this
document and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be applied
to the interpretation of this Agreement. No inference in favor of, or against,
any party shall be drawn from the fact that one party has drafted any portion
hereof.
BOTH PARTIES HERETO HAVE READ THIS ENTIRE AGREEMENT CAREFULLY AND FULLY
UNDERSTAND THE LIMITATIONS THAT THIS AGREEMENT IMPOSES UPON THEM AND ACKNOWLEDGE
AND AGREE THAT THOSE LIMITATIONS ARE REASONABLE.
[SIGNATURE PAGE FOLLOWS]
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
EMPLOYER:
AXISTEL COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ SAMUEL LITWIN
--------------------------------------
Samuel Litwin, Chief Executive Officer
EMPLOYEE:
/s/ MITCHELL ARTHUR
------------------------------------------
MITCHELL ARTHUR
eVentures Group, Inc. hereby joins in this Agreement for the sole purpose of
agreeing to the grant of Stock Options pursuant to Section 3 above.
eVENTURES GROUP, INC.
By: /s/ BARRETT WISSMAN
Name: Barrett Wissman
Title: President, CEO
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 10
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of eVentures Group, Inc.
<TABLE>
<CAPTION>
State of Names Under Which
Incorporation or Subsidiary Does Percentage Ownership
Name of Subsidiary Organization Business in Subsidiary
- ----------------------------------- -------------------- -------------------------- -------------------------------
<S> <C> <C> <C>
e.Volve Technology Group, Inc. Nevada e.Volve Technology 100%
Group, Inc.
AxisTel Communications, Inc. Delaware AxisTel 100%
Communications, Inc.
i2v2.com, Inc. Delaware i2v2.com, Inc. 16%
Innovative Calling Technologies LLC Nevada Innovative Calling 50%
Technologies LLC
FonBox, Inc. Delaware FonBox, Inc. 8%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1999 AND SEPTEMBER
30, 1999 AND THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 AND
THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-2000
<PERIOD-START> JUL-01-1998 JUL-01-1999
<PERIOD-END> JUN-30-1999 SEP-30-1999
<CASH> 39,379 6,346,023
<SECURITIES> 0 0
<RECEIVABLES> 17,293 1,230,209
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,069,600 10,501,504
<PP&E> 6,219,874 7,429,945
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 15,661,317 41,663,441
<CURRENT-LIABILITIES> 9,660,169 13,913,621
<BONDS> 0 0
0 0
0 0
<COMMON> 36 757
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 15,661,317 41,663,441
<SALES> 27,248,273 8,675,719
<TOTAL-REVENUES> 27,248,273 8,675,719
<CGS> 23,311,584 8,729,520
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 7,551,131 1,816,032
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,759,876 532,572
<INCOME-PRETAX> (5,462,322) (3,312,319)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,462,322) (3,312,319)
<EPS-BASIC> (.34) (.17)
<EPS-DILUTED> (.34) (.17)
</TABLE>
