<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K AMENDMENT
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Year Ended December 31, 1998
Commission File No. 33-20323
GLOBENET INTERNATIONAL I, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 75-2224643
------------------------ ---------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number)
2301 Crown Court, Irving, Texas 75038
-------------------------------------------------
(Address of Principal Executive Offices-zip code)
(972) 893-4000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
On December 31, 1998, the closing price at which Registrant's common
stock sold was $1.125 per share. At such date, 4,852,605 shares of Registrant's
Common Stock were held by non-affiliates. Based upon the price at such date, the
aggregate market value of Registrant's voting stock held by non-affiliates on
that date was $5,459,181 (4,852,605 shares times $1.125 per share).
As of December 31, 1998, Registrant had outstanding 13,862,205 shares
of Common Stock
<PAGE> 2
GLOBENET INTERNATIONAL I, INC.
FORM 10-K AMENDMENT
YEAR ENDED DECEMBER 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ITEM 1 BUSINESS 3
ITEM 2 PROPERTIES 6
ITEM 3* LEGAL PROCEEDINGS* 6
ITEM 4* SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS* 7
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 8
ITEM 6 SELECTED FINANCIAL DATA 10
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION 11
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 17
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS 18
ITEM 11 EXECUTIVE COMPENSATION 22
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 23
MANAGEMENT
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 24
ITEM 14* EXHIBITS*, Financial Statement Schedules and Reports on 25
Form 8-K
</TABLE>
* AMENDED
SIGNATURES
2
<PAGE> 3
ITEM 3. LEGAL PROCEEDINGS
Neither Registrant nor any of its officers or directors are parties to
any material legal proceedings or litigation other than as set forth below.
Don Whigham, et al., Plaintiffs vs. Clinton H. Howard, Royal BodyCare,
Inc. and GlobeNet International, Inc., Defendants, in County Court at Law No. 3,
Dallas County, Texas, Cause No. 97- 08040-C. On August 28, 1997, Plaintiffs,
former distributors of RBC products, sued Defendants asserting causes of action
for, inter alia, breach of contract and fraud in connection with their dealings
with Defendants as distributors. Plaintiffs have not specified the amount of
actual damages, exemplary damages or other damages sought by them in this
action. Defendants have filed an answer denying all the material allegations of
Plaintiffs' petition and asserting counter-claims for breach of contract,
negligence and tortuous interference with business relations. Defendants' motion
to compel arbitration was denied; and this denial has been appealed. This case
is not currently set for trial.
Naterra International Inc., Plaintiff, vs. Royal BodyCare, Inc.,
Defendant, in the 68th Judicial District Court, Dallas County, Texas, Cause No.
98-5504. On July 17, 1998 Plaintiff, a former manufacturer of RBC products, sued
Defendant asserting a cause of action for an alleged breach of a Sales and
Manufacturing Agreement dated May 22, 1995. Plaintiff is also asserting a claim
for $4,946 based upon a sworn account. Plaintiff has not specified the amount of
damages being sought under the breach of contract claim, but Plaintiff has not
plead exemplary or punitive damages. . Defendant has answered denying all of the
material allegations by Plaintiff, and Defendant has asserted affirmative
defenses, as well as filing a counter-claim against Plaintiff for breach of
contract, negligence and breach of warranties. The case is not yet set for
trial.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Registrant held its Annual Meeting of Shareholders on July 10, 1998, at
which the following matters were voted upon by the shareholders:
Election of Directors. Clinton H. Howard, Andrew V. Howard,
Steven E. Brown, Forrest E. Watson, R. Leon York and Frank E. Franasiak were
elected to serve as Directors until the next Annual Meeting of Shareholders.
1998 Stock Option Plan. An incentive stock option plan for
persons rendering services for Registrant covering 500,000 shares of its Common
Stock was approved as a non-qualified plan under the Internal Revenue Code.
Reincorporation in Nevada. Registrant will reincorporate under
Nevada law with essentially the same Articles of Incorporation as presently in
effect under Delaware law.
Independent Certified Public Accountants. The shareholders
approved the appointment of Osborn, Swalm, Thomas & Associates, P.L.L.C., as
Registrant's independent certified public accountants.
3
<PAGE> 4
ITEM 13 EXHIBITS
<TABLE>
<CAPTION>
Ex. No. Description
- ------- -----------
<S> <C>
3.1 Registrant's Articles of Incorporation (1)
3.2 Registrant's By-Laws (1)
4.1 Specimen copy of Certificate for Registrant's Common Stock (1)
4.2 Specimen copy of Registrant's 10% Convertible Notes issued in 1997
(2)
4.3 Registrant's 1998 Stock Option Plan for its Directors, Employees and
Consultants (2)
4.4 Stock Purchase Agreement dated 10/27/97 with Dr. M. G. Robertson (2)
10.1 10 year Lease Agreement as of 8/1/98 with CIIF Associates L.P. for
office/warehouse (2)
10.2 Exclusive License Agreement with Flanagan Technologies for its
Microclusters (2)
10.3 Form of Registrant's Member Agreement and Policies with its
Distributors (2)
27 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to Registrant's Form 8-K for
Mighty Power Merger 4/1/97
(2) Filed herewith
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
GLOBENET INTERNATIONAL I, INC.,
a Delaware corporation
Date: May 7, 1999. By: /S/ CLINTON H. HOWARD
------------------------------------
Name: Clinton H. Howard
Title: President
<PAGE> 6
Pursuant to the requirements to the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ CLINTON H. HOWARD
--------------------------------- Chairman of the Board of
Clinton H. Howard Directors and President May 7, 1998
/s/ STEVEN E. BROWN
--------------------------------- Director, Vice President &
Steven E. Brown Chief Financial Officer May 7, 1998
/s/ ANDREW V. HOWARD, J.D.
--------------------------------- Director, Vice President &
Andrew V. Howard, J.D. General Counsel May 7, 1998
--------------------------------- Director
Forrest E. Watson, Ph.D. ---------------------
--------------------------------- Director
Frank Franasiak ---------------------
</TABLE>
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Ex. No. Description
- ------- -----------
<S> <C>
3.1 Registrant's Articles of Incorporation (1)
3.2 Registrant's By-Laws (1)
4.1 Specimen copy of Certificate for Registrant's Common Stock (1)
4.2 Specimen copy of Registrant's 10% Convertible Notes issued in 1997
(2)
4.3 Registrant's 1998 Stock Option Plan for its Directors, Employees and
Consultants (2)
4.4 Stock Purchase Agreement dated 10/27/97 with Dr. M. G. Robertson (2)
10.1 10 year Lease Agreement as of 8/1/98 with CIIF Associates L.P. for
office/warehouse (2)
10.2 Exclusive License Agreement with Flanagan Technologies for its
Microclusters (2)
10.3 Form of Registrant's Member Agreement and Policies with its
Distributors (2)
27 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to Registrant's Form 8-K for
Mighty Power Merger 4/1/97
(2) Filed herewith
<PAGE> 1
EXHIBIT 4.2
CONVERTIBLE NOTE
10% INTEREST
CONVERTIBLE TO COMMON SHARES AT $3.00 PER SHARE
UNITS OF $5,000
Date: March 14, 1997
FOR VALUE RECEIVED, GLOBENET INC., PARENT COMPANY OF ROYAL BODYCARE, INC. both
Texas corporations hereinafter collectively called ("Company"), hereby promise
to pay to the order of (the "Payee") at the address set
forth below, the principal amount of $ together with interest at a rate
per annum equal to ten percent (10%) ("Stated Interest"). Stated Interest
payable under this Note shall be computed on the basis of a 365-day year and
actual days elapsed.
Accrued Stated Interest shall be due and payable quarterly commencing
on June 14, 1997 and continuing thereafter on September 14, December 14, March
14, and June 14, hereafter, until the Maturity Date (as defined below).
This Note shall mature and all unpaid principal and accrued but unpaid
interest hereunder shall be due and payable in full on the date two (2) years
from the date of this Note (The "Maturity Date").
Upon written notice to Company, Payee may convert the unpaid principal
and interest accrued due hereunder into common stock of GlobeNet, Inc., (the
"Shares"). The number of Shares issued upon such conversion shall be determined
by dividing the total amount of unpaid principal and accrued interest calculated
to the date of conversion by $3.00, rounded down to the nearest whole number.
The accrued remaining fractional amount, if any, will be paid by Company to
Payee within ten days of the conversion date.
Except as otherwise expressly provided herein, each maker, surety,
endorser, and guarantor of this Note hereby severally waives demand and
presentation for payment notice of non-payment, protest and notice of protest,
and the diligence of bringing suit against any part hereto, and consents that
time of payment may be extended from time to time without notice thereof to it.
All amounts payable hereunder by the Company shall be payable to the
Payee at the address set forth below or at such other place as the Payee or the
holder hereof may, from time to time indicate in writing to the Company, and
shall be made by the Company in lawful money of the United States by check or in
cash at such place of payment.
<PAGE> 2
If any payment required to be made hereunder becomes due and payable on
a nonbusiness day, the maturity thereof shall extend to the next business day.
The term "business day" shall mean a calendar day excluding Saturdays, Sundays
or other days on which banks in the State of Texas are required or authorized to
remain closed.
If this Note is placed in the hands of an attorney for collection, the
Company agrees to pay attorneys' fees and costs and expenses of collection,
including but not limited to court costs.
An Event of default is defined as (i) the failure of prompt and timely
payment when due of any installment of Stated Interest, Additional Interest or
principal under this Note, such failure continuing for thirty (30) calendar days
after notice thereof from Payee to Company, or (ii) the Company is adjudicated a
bankrupt, declared insolvent or shall execute a general assignment for the
benefit of creditors, or the Company shall file a voluntary petition in
bankruptcy or all, or substantially all of its assets shall become subject to
the control of a receiver and such receivership proceedings are not dismissed
within sixty (60) days of the receiver's appointment. Upon an Event of default,
then the Payee, at its option, may declare the entire unpaid balance of
principal, accrued State interest accrued Additional Interest hereunder to be
immediately due and payable.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas and applicable laws of the United States.
In no contingency or event whatsoever shall the amount of interest paid
or agreed to be paid by the Company, received by payee, or requested or demanded
to be paid by the Company exceed the maximum amount permitted by applicable law.
In the event any such sums paid to Payee by the Company would exceed the maximum
amount permitted by applicable law, Payee shall automatically apply such excess
to the unpaid principal amount of this Note. All sums paid or agreed to be paid
by the Company, received by payee, or requested or demanded to be paid by the
Company, which are, or hereafter may be construed to be, or in respect of
compensation, for the use, forbearance or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated spread and allocated
throughout the full term of all indebtedness of the Company to Payee, to the end
that the actual rate of interest hereon shall never exceed the maximum rate of
interest permitted from time to time by applicable law.
GlobeNet Inc., a Texas corporation
By: /s/ STEVEN E. BROWN
------------------------------------
Name: Steven E. Brown
Address for Payment: Title: Vice President
<PAGE> 1
EXHIBIT 4.3
GLOBENET INTERNATIONAL I, INC.
1998 STOCK OPTION PLAN
ARTICLE I
General
Section 1.01. Purpose. It is the purpose of the Plan to promote the
interests of the Company and its shareholders by attracting, retaining and
stimulating the performance of selected Employees, Directors and Consultants by
giving such Employees, Directors and Consultants the opportunity to acquire a
proprietary interest in the Company and an increased personal interest in its
continued success and progress.
Section 1.02. Definition. As used herein the following terms have
the following meanings:
(a) "Affiliate" means any parent or subsidiary corporation of
the Company within the meaning of Section 424(e) and (f) of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Stock Option Committee described in
Article II hereof.
(e) "Common Stock" means the $0.001 par value of Common Stock
of the Company.
(f) "Company" means GlobeNet International I, Inc., a Delaware
corporation.
(g) "Consultant" means any consultant, advisor or independent
distributor of the Company or an Affiliate who is not an Employee or
Director, provided that bona fide services are rendered by the
consultant, advisor or independent distributor and such services are
not in connection with the offer or sale of securities in a
capital-raising transaction.
(h) "Director" means a member of the Board.
(i) "Employee" means any employee of the Company or an
Affiliate.
(j) "Employee-Director" means an Employee who is a Director.
1998 STOCK OPTION PLAN - Page 1
<PAGE> 2
(k) "Fair Market Value" means the fair market value of the
Common Stock as determined by the Committee in good faith based upon
(A) the closing sales price of the Common Stock on the date in question
(or, if there is no reported sale on such date, then on the last
preceding date on which a reported sale occurred), as reported on the
Over-the-Counter Bulletin Board published by the National Quotation
Bureau, Inc. (if the Common Stock is not listed on a national
securities exchange and sales of the Common Stock are regularly on such
market), or as reported on a national securities exchange (if the
Common Stock is listed for trading on such exchange), or (B) the mean
between the bid and ask prices of the Common Stock on the date in
question (or, if there is no report of such prices on such date, then
on the last preceding date on which such prices were reported), as
reported by the Over-the-Counter Bulletin Board published by the
National Quotation Bureau, Inc.
(l) "Option" means any option to purchase shares of Common
Stock granted pursuant to the provisions of the Plan.
(m) "Optionee" means an Employee, Outside Director or
Consultant who has been granted an Option under the Plan.
(n) "Outside Director" means a Director who is not an
Employee.
(o) "Plan" means this GlobeNet International I, Inc. 1998
Stock Option Plan.
Section 1.03. Number of Shares. Options may be granted by the Company
from time to time under the Plan to purchase an aggregate of 500,000 shares of
authorized Common Stock. If any Option expires or terminates for any reason
without having been exercised in full, the unpurchased shares subject to such
expired or terminated Option shall be available for purposes of the Plan.
ARTICLE II
Administration
The Plan shall be administered by a Stock Option Committee which shall
consist of two or more Directors. Each member of the Committee shall be
appointed by and shall serve at the pleasure of the Board. The Board shall have
the sole continuing authority to appoint members of the Committee both in
substitution for members previously appointed and to fill vacancies however
caused. The following provisions shall apply to the administration of the Plan:
(a) The Committee shall designate one of its members as
Chairman and shall hold meetings at such times and places as it may
determine. Each member of the Committee shall be notified in writing of
the time and place of any meeting of the Committee at least two days
prior to such meeting, provided that such notice may be waived by a
Committee member. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority of the members
of the Committee present at any duly called meeting at which a quorum
is present (as well as any action unanimously approved in writing)
shall constitute action by the Committee.
1998 STOCK OPTION PLAN - Page 2
<PAGE> 3
(b) The Committee may appoint a Secretary (who need not be a
member of the Committee) who shall keep minutes of its meetings. The
Committee may make such rules and regulations for the conduct of its
business as it may determine.
(c) The Committee shall have full authority, subject to the
express provisions of the Plan, to interpret the Plan as it relates to
options granted or to be granted to Employees, Directors and
Consultants under the Plan, to provide, modify and rescind rules and
regulations relating thereto, to determine the terms and provisions of
each Option granted to an Employee, Director or Consultant and the form
of each option agreement evidencing an Option granted to an Employee,
Director or Consultant under the Plan and to make all other
determinations and perform such actions as the Committee deems
necessary or advisable to administer the Plan as it relates to Options
granted or to be granted to Employees, Directors and Consultants under
the Plan. In addition, the Committee shall have full authority, subject
to the express provisions of the Plan, to determine the Employees,
Directors and Consultants to whom Options shall be granted, the time or
date of grant of each such Option, the number of shares subject
thereto, and the price at which such shares may be purchased. In making
such determinations, the Committee may take into account the nature of
the services rendered by the Employee, Director or Consultant, his
present and potential contributions to the success of the Company's
business and such other facts as the Committee in its discretion shall
deem appropriate to carry out the purposes of the Plan.
(d) Notwithstanding the authority hereby delegated to the
Committee to grant Options to Employees, Directors and Consultants
under the Plan, the Board shall have full authority, subject to the
express provisions of the Plan, to grant Options to Employees,
Directors and Consultants under the Plan, to interpret the Plan, to
provide, modify and rescind rules and regulations relating to it, to
determine the terms and provisions of Options granted to Employees,
Consultants and Directors under the Plan and to make all other
determinations and perform such actions as the Board deems necessary or
advisable to administer the Plan.
(e) No member of the Committee or the Board shall be liable
for any action taken or determination made in good faith with respect
to the Plan or any Option granted hereunder.
ARTICLE III
Grants of Options to Outside Directors
Section 3.01. Grants of Options. At any time and from time to time
during the term of the Plan and subject to the express provisions hereof,
Options may be granted by the Committee to any Outside Director for such number
of shares of Common Stock as the Committee in its discretion shall deem to be in
the best interest of the Company and which will serve to further the purposes of
the Plan. The Options granted under this Article III shall not be incentive
stock options under Section 422 of the Code.
1998 STOCK OPTION PLAN - Page 3
<PAGE> 4
Section 3.02. Declination. Any Outside Director may decline to accept
any Option granted to him pursuant to this Article III by giving written notice
to the Company of his election to decline to accept such Option or by refusing
to execute a stock option agreement relating to such Option.
Section 3.03. Price. The purchase price per share of Common Stock under
each Option granted under this Article III shall be the Fair Market Value per
share of Common Stock on the date of grant of such Option.
Section 3.04. Option Period and Terms of Exercise of Options. Except
as otherwise provided for herein, each Option granted to an Outside Director
under the Plan shall be exercisable in whole or in part during the four-year
period commencing on the date of grant of such Option. Any Option granted to an
Outside Director shall remain effective during its entire term regardless of
whether the Optionee continues to serve as a Director, provided, however, that
the otherwise unexpired portion of any Option granted hereunder to an Outside
Director shall expire and become null and void immediately upon the termination
of such Outside Director's Board membership if such Outside Director ceases to
serve on the Board by reason of such Outside Director's (a) fraud or
intentional misrepresentation, or (b) embezzlement, misappropriation or
conversion of assets or opportunities of the Company or any Affiliate. Nothing
in the Plan or in any option agreement evidencing an Option granted under the
Plan to an Outside Director shall confer upon such Director any right to
continue as a Director of the Company.
ARTICLE IV
Grants of Options to Employees
Section 4.01. Grants of Options. At any time and from time to time
during the term of the Plan and subject to the express provisions hereof,
Options may be granted by the Committee to any Employee for such number of
shares of Common Stock as the Committee in its discretion shall deem to be in
the best interest of the Company and which will serve to further the purposes
of the Plan. The Committee, in its discretion, may designate any Option granted
to an Employee as an incentive stock option intended to qualify under Section
422 of the Code; provided, however, that the aggregate Fair Market Value of the
Common Stock with respect to which incentive stock options granted to an
Employee under the Plan (including all options qualifying as incentive stock
options pursuant to Section 422 of the Code granted to such Employee under any
other plan of the Company or any Affiliate) are exercisable for the first time
by such Employee during any calendar year shall not exceed $100,000, determined
as of the date the incentive stock option is granted. If an Option that is
intended to be an incentive stock option shall be granted and such Option does
not comply with the proviso of the immediately preceding sentence, such Option
shall not be void but shall be deemed to be an incentive stock option to the
extent it does not exceed the limit established by such proviso and shall be
deemed a nonqualified stock option to the extent it exceeds that limit.
The aggregate number of shares of Common Stock for which any
Employee may be granted Options under the Plan during any one calendar year
shall not exceed 50,000. The aggregate number of shares for which Options are
granted under the Plan to Employee-Directors shall not exceed 40% of the total
number of shares covered by the Plan; provided, however, that if any Option
granted to an Employee-Director terminates without being exercised in full, the
shares as to which
1998 STOCK OPTION PLAN - Page 4
<PAGE> 5
such Option was not exercised shall not be deemed to have been granted to an
Employee-Director for purposes of determining compliance with this restriction.
Section 4.02. Price. The purchase price per share of Common Stock under
each Option granted under this Article IV shall be determined by the Committee
but in no event shall be less than 100% of the Fair Market Value per share of
Common Stock at the time the Option is granted; provided, however, that the
purchase price per share of Common Stock under any incentive stock option
granted to an Optionee who, at the time such incentive stock option is granted,
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Affiliate shall be at least 110% of the
Fair Market Value per share of Common Stock at the date of grant.
Section 4.03. Option Period and Terms of Exercise of Employee Options.
Except as otherwise provided for herein, each Option granted to an Employee
under the Plan shall be exercisable during such period as the Committee shall
determine; provided, however, that the otherwise unexpired portion of any
Option granted to an Employee shall expire and become null and void no later
than upon the first to occur of (i) the expiration of ten years from the date
such Option was granted, (ii) the expiration of 30 days from the date of
termination of the Optionee's employment with the Company or an Affiliate for
any reason other than his retirement, death or disability, (iii) the expiration
of one year from the date of termination of the Optionee's employment with the
Company or an Affiliate by reason of his death or disability, (iv) the
expiration of three years from the date of termination of such Optionee's
employment with the Company or an Affiliate by reason of his retirement, or (v)
the expiration of two years from the date of such Optionee's death following
the termination of his employment with the Company or an Affiliate by reason of
his retirement.
Anything herein to the contrary notwithstanding, the
otherwise unexpired portion of any Option granted to an Employee hereunder
shall expire and become null and void immediately upon the termination of such
Employee's employment with the Company or an Affiliate by reason of such
Employee's fraud, dishonesty or performance of other acts detrimental to the
Company or an Affiliate, or if, following the termination of the Employee's
employment with the Company or an Affiliate, the Company determines that there
is good cause to cancel such Option.
Any incentive stock option granted to an Optionee who, at the
time such incentive stock option is granted, owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
or any Affiliate shall not be exercisable after the expiration of five years
from the date of its grant.
Under the provisions of any option agreement evidencing an
Option granted to an Employee, the Committee may limit the number of shares
purchasable thereunder in any period or periods of time during which the Option
is exercisable and may impose such other terms and conditions upon the exercise
of an Option as are not inconsistent with the terms of the Plan; provided,
however, that the Committee, in its discretion, may accelerate the exercise
date of any such Option.
Section 4.04. Termination of Employment. A transfer of employment among
the Company and any of its Affiliates shall not be considered to be a
termination of employment for the purposes of the Plan. Nothing in the Plan or
in any option agreement evidencing an Option granted under the
1998 STOCK OPTION PLAN - Page 5
<PAGE> 6
Plan to an Employee, including an Employee-Director, shall confer upon any
Optionee any right to continue in the employ of the Company or any Affiliate or
in any way interfere with the right of the Company or any Affiliate to
terminate the employment of the Optionee at any time, with or without cause.
ARTICLE V
Grants of Options to Consultants
Section 5.01. Grant of Options. At any time and from time to time
during the term of the Plan and subject to the express provisions hereof,
Options may be granted by the Committee to any Consultant for such number of
shares of Common Stock as the Committee in its discretion shall deem to be in
the best interest of the Company and which will serve to further the purposes
of the Plan. The Options granted under this Article V shall not be incentive
stock options under Section 422 of the Code.
Section 5.02. Price. The purchase price per share of Common Stock under
each Option granted under this Article V shall be determined by the Committee
but in no event shall be less than 100% of the Fair Market Value per share
Common Stock at the time the Option is granted.
Section 5.03. Option Period and Terms of Exercise of Consultant
Options. Except as otherwise provided for herein, each Option granted to a
Consultant under the Plan shall be exercisable during such period as the
Committee shall determine; provided, however, that the otherwise unexpired
portion of any Option granted to a Consultant shall expire and become null and
void no later than upon the first to occur of (i) the expiration of ten years
from the date such Option was granted or (ii) the expiration of one year from
the date of the Consultant's death. Anything herein to the contrary
notwithstanding, the otherwise unexpired portion of any Option granted to a
Consultant hereunder shall expire and become null and void immediately upon the
termination of the Consultant's services to the Company or an Affiliate by
reason of the Consultant's fraud, dishonesty or performance or other acts of
detrimental to the Company or an Affiliate, or if, at any time during or after
the performance of the Consultant's services to the Company or an Affiliate,
the Company determines that there is good cause to cancel such Option.
Under the provisions of any option agreement evidencing an
Option granted to a Consultant, the Committee may limit the number of shares
purchasable thereunder in any period or periods of time which the Option is
exercisable and may impose such other terms and conditions upon the exercise of
an Option as are not inconsistent with the terms of the Plan; provided,
however, that the Committee, in its discretion, may accelerate the exercise
date of any such Option.
Section 5.04. Termination of Consulting Services. Nothing in the Plan
or in any option agreement evidencing an Option granted under the Plan to a
Consultant shall confer upon any Consultant any right to continue as a
consultant or advisor of the Company or any Affiliate or in any way interfere
with the right of the Company or any Affiliate to terminate the services of the
Consultant at any time, with or without cause.
1998 STOCK OPTION PLAN - Page 6
<PAGE> 7
ARTICLE VI
Miscellaneous
Section 6.01. Adjustments Upon Changes in Common Stock. In the event
the Company shall effect a split of the Common Stock or a dividend payable in
Common Stock, or in the event the outstanding Common Stock shall be combined
into a smaller number of shares, the maximum number of shares as to which
Options may be granted under the Plan shall be decreased or increased
proportionately. In the event that, before delivery by the Company of all of
the shares of Common Stock for which any Option has been granted under the
Plan, the Company shall have effected such a split, dividend or combination,
the shares still subject to such Option shall be increased or decreased
proportionately and the purchase price per share shall be decreased or
increased proportionately so that the aggregate purchase price for all of the
shares then subject to such Option shall remain the same as immediately prior
to such split, dividend or combination.
In the event of a reclassification of Common Stock not
covered by the foregoing, or in the event of a liquidation or reorganization
(including a merger, consolidation or sale of assets) of the Company, the Board
shall make such adjustments, if any, as it may deem appropriate in the number,
purchase price and kind of shares covered by the unexercised portions of
Options theretofore granted under the Plan. The provisions of this Section
shall only be applicable if, and only to the extent that, the application
thereof does not conflict with any valid governmental statute, regulation or
rule.
Subject to Article VI, Section 6.02 of the Plan, and
notwithstanding any indication to the contrary in the preceding paragraphs of
this Section 6.01, upon the occurrence of a "Change in Control" (as hereinafter
defined) of the Company, the maturity of all Options then outstanding under the
Plan (other than Options granted under Article V hereof) shall be accelerated
automatically, so that all such Options shall become exercisable in full with
respect to all shares as to which they shall not have previously been exercised
or become exercisable; provided, however, that no such acceleration shall occur
with respect to Options held by Optionees whose employment with the Company or
an Affiliate shall have terminated prior to the occurrence of such Change in
Control.
For purposes of the Plan, a "Change in Control" of the Company
shall be deemed to have occurred if:
(a) the shareholders of the Company shall approve:
(i) any merger, consolidation or reorganization of the
Company (a "Transaction") in which the shareholders of the
Company immediately prior to the Transaction would not,
immediately after the Transaction, beneficially own, directly
or indirectly, shares representing in the aggregate more than
50% of all votes to which all shareholders of the corporation
issuing cash or securities in the Transaction (or of its
ultimate parent corporation, if any) would be entitled under
ordinary circumstances in the election of directors, or in
which the members of the Company's Board immediately prior to
the Transaction would not, immediately after the Transaction,
constitute a majority of the board of directors of the
corporation issuing cash or securities in the Transaction (or
of its ultimate parent corporation, if any),
1998 STOCK OPTION PLAN - Page 7
<PAGE> 8
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions contemplated
or arranged by any party as a single plan) of all or
substantially all the Company's assets, or
(iii) any plan or proposal for the liquidation or
dissolution of the Company;
(b) individuals who constitute the Company's Board as of July
1, 1998 (the "Incumbent Directors") cease for any reason to constitute
at least a majority of the Board; provided, however, that for purposes
of this subparagraph (b), any individual who becomes a Director of the
Company subsequent to July 1, 1998 and whose election, or nomination
for election by the Company's shareholders, is approved by a vote of at
least a majority of the Incumbent Directors who are Directors at the
time of such vote, shall be considered an Incumbent Director; or
(c) any "person", as that term is defined in Section 3 (a)(9)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its subsidiaries, or any entity
organized, appointed or established by the Company for or pursuant to
the terms of such plan), together with all "affiliates" and
"associates" (as such terms are defined in Rule l2b-2 under the
Exchange Act) of such person, shall become the "beneficial owners" (as
defined in Rules l3d-3 and l3d-5 under the Exchange Act), directly or
indirectly, of securities of the Company representing in the aggregate
20% or more of either (i) the then outstanding shares of Common Stock
or (ii) the combined voting power of all then outstanding securities
of the Company having the right under ordinary circumstances to vote
in an election of the Company's Board ("Voting Securities"), in either
such case other than as a result of acquisitions of such securities
directly from the Company. This subparagraph (c) shall not apply to
any person who as of July 1, 1998, is the beneficial owner of 20% of
more of the outstanding shares of Common Stock or Voting Securities.
Notwithstanding the foregoing, a "Change in Control" of the
Company shall not be deemed to have occurred for purposes of subparagraph (c)
of this Section 6.01 solely as the result of an acquisition of securities by
the Company which, by reducing the number of shares of Common Stock or other
Voting Securities outstanding, increases (i) the proportionate number of shares
of Common Stock beneficially owned by any person to 20% or more of the shares
of Common Stock then outstanding or (ii) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to 20% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in clause (i) or (ii) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Common Stock or other Voting Securities (other than as a result of a stock
split, stock dividend or similar transaction), then a "Change in Control" of
the Company shall be deemed to have occurred for purposes of subparagraph (c)
of this Section 6.01.
Section 6.02. Amendment and Termination of the Plan. Subject to the
right of the Board to terminate the Plan prior thereto, the Plan shall
terminate at the expiration of ten years from July 1, 1998. No Options may be
granted after termination of the Plan. The Board may alter or amend the Plan
but may not, without the approval of the shareholders of the Company, make any
alteration or
1998 STOCK OPTION PLAN - Page 8
<PAGE> 9
amendment thereof which operates to (i) abolish the Committee, change the
qualifications of its members or withdraw the administration of the Plan from
its supervision, (ii) increase the total number of shares of Common Stock which
may be granted under the Plan (other than as provided in Section 6.01 of this
Article VI), (iii) extend the term of the Plan or the maximum exercise periods
provided in Section 3.04 of Article III, Section 4.03 of Article IV and Section
5.03 of Article V hereof, (iv) decrease the minimum purchase price for Common
Stock under the Plan, (v) materially increase the benefits accruing to
participants under the Plan, or (vi) materially modify the requirements as to
eligibility for participation in the Plan.
No termination or amendment of the Plan shall adversely
affect the rights of an Optionee under an Option, except with the consent of
such Optionee.
Section 6.03. Payment of Purchase Price; Application of Funds. Upon
exercise of an Option, the purchase price shall be paid in full in cash or by
check; provided, however, that at the request of an Optionee and to the extent
permitted by applicable law, the Company shall approve reasonable arrangements
with Optionees who are Outside Directors and may, in its sole and absolute
discretion, approve reasonable arrangements with one or more Optionees who are
Employees or Consultants and their respective brokerage firms, under which such
an Optionee may exercise his Option by delivering to the Company an irrevocable
notice of exercise, together with such other documents as the Company shall
require, and the Company shall, upon receipt of full payment in cash or by
check of the purchase price and any other amounts due in respect of such
exercise, deliver to such Optionee's brokerage firm one or more certificates
representing the shares of Common Stock issued in respect of such exercise. The
proceeds of any sale of Common Stock covered by Options shall constitute
general funds of the Company. Upon exercise of an Option, the Optionee will be
required to pay to the Company the amount of any federal, state or local taxes
required by law to be withheld in connection with such exercise.
Section 6.04. Requirements of Law. The granting of Options and the
issuance of Common Stock upon the exercise of an Option shall be subject to all
applicable laws, rules and regulations and to such approval by governmental
agencies as may be required.
Section 6.05. Nontransferability of Options. An Option granted under
the Plan shall not be transferable by the Optionee except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Optionee only by the Optionee.
Section 6.06. Investment Letter. The Company's obligation to deliver
Common Stock with respect to an Option shall be conditioned upon its receipt
from the Optionee to whom such Common Stock is to be delivered of an executed
investment letter containing such representations and agreements as the
Committee may determine to be necessary or advisable in order to enable the
Company to issue and deliver such Common Stock to such Optionee in compliance
with the Securities Act of 1933 and other applicable federal, state or local
securities laws or regulations, and an option agreement containing such terms
and agreements as the Committee may determine to be necessary or advisable in
accordance with the Plan.
Section 6.07. Date of Adoption and Effective Date of the Plan. The Plan
shall be deemed adopted by the Board on July 1, 1998. The Plan shall be deemed
effective as of the date of its
1998 STOCK OPTION PLAN - Page 9
<PAGE> 10
adoption by the Board, provided it is duly approved by the holders of a
majority of the shares of Common Stock present or represented and entitled to
vote at a meeting of shareholders of the Company duly held in accordance with
applicable law within 12 months after the date of adoption of the Plan by the
Board. If the Plan is not so approved, the Plan shall terminate and, any Option
granted hereunder shall be null and void.
Section 6.08. Gender. Words of any gender used in the Plan shall be
construed to include any other gender, unless the context requires otherwise.
1998 STOCK OPTION PLAN - Page 10
<PAGE> 1
EXHIBIT 4.4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is executed effective as of
October 27, 1997, by and among PAT ROBERTSON ("Purchaser") and GLOBENET
INTERNATIONAL I, INC., a Delaware corporation (the "Corporation").
W I T N E S S E T H.
WHEREAS, the Corporation desires to sell and Purchaser desires to
purchase (a) One Million (1,000,000) shares (the "Shares") of the $.001 par
value common stock ("Common Stock") of the Corporation pursuant to the terms and
conditions set forth in this Agreement; and
WHEREAS, the Corporation desires to sell and Purchaser desires to
purchase warrants in the form attached hereto as Exhibit "A" and incorporated
herein by reference (the "Warrants") to purchase One Million (1,000,000) shares
of the Common Stock of the Corporation pursuant to the terms and conditions set
forth in this Agreement.
NOW THEREFORE, in consideration of the premises, the mutual covenants
and agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties covenant
and agree as follows:
1. Sale and Purchase of the Shares and the Warrants. The Corporation
hereby agrees to sell and issue to Purchaser the Shares and the Warrants, and
Purchaser agrees to purchase such Shares and Warrants on the terms and
conditions set forth herein.
2. Purchase Price and Payment. The purchase price (the "Purchase
Price") which Purchaser agrees to pay to the Corporation for the Shares and
Warrants is an aggregate purchase price of One Million Two Hundred and Fifty
Thousand Dollars ($1,250,000.00) at the Closing (as defined below). The Purchase
Price shall be paid as follows:
(a) The payment of One Million Dollars ($1,000,000.00) by cashiers's
check, wire transfer or other readily available funds to the Corporation at the
Closing; and
(b) Effective as of the Closing, the cancellation of that certain
promissory note in original principal amount of Two Hundred Fifty Thousand
Dollars ($250,000.00) payable by Royal Bodycare, Inc., a subsidiary of the
Corporation, to the order of Purchaser dated November 18, 1994 (the "Note").
3. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on such date on or before October 29,
1997, as determined by Purchaser upon notice to the Corporation. At the Closing
the Corporation shall deliver to Purchaser a certificate representing the Shares
(or if the Certificate is not available at Closing, then the Certificate shall
be delivered as soon as practicable after Closing) and the Warrants in the form
attached hereto as Exhibit "A", and Purchaser shall deliver to the Corporation
the cash portion of the Purchase Price, and Purchaser shall surrender the
original Note to the Corporation for cancellation.
STOCK PURCHASE AGREEMENT - Page 1
<PAGE> 2
4. Representations and Warranties of the Corporation. The Corporation
represents, warrants, and covenants to purchaser as follows:
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware,
and has all requisite corporate power and authority to execute and
deliver this Agreement and to carry out the provisions of this
Agreement.
(b) All corporate action on the part of the Corporation
necessary for the authorization, execution and delivery of this
Agreement, the performance of the all obligations of the Corporation
hereunder and the authorization, issuance of delivery of the Shares have
been taken, and this Agreement, when executed and delivered, will
constitute valid and legally binding obligation of the Corporation,
enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting creditor's rights generally, and
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
(c) The Shares when sold and issued in accordance with the
terms of this Agreement will be duly and validly issued, fully paid and
nonassessable.
(d) As of the date hereof, the Corporation has 50,000,000
shares of Common Stock authorized, of which 12,261,627 are issued and
outstanding.
5. Representations and Warranties of Purchaser. Purchaser represents,
warrants and covenants to the Corporation as follows:
(a) Purchaser has the full power and authority to make and
enter into this Agreement.
(b) There is no agreement or understanding of any sort which
prohibits Purchaser from entering into or carrying out this Agreement.
(c) Purchaser (i) is acquiring the Shares and Warrants for his
own account for investment, not as nominee or agent, and not with a
view to or for sale in connection with any distribution or any part
thereof and (ii) has no present intention of selling, granting
participation in, or otherwise distributing the same. Purchaser
understands that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") by reason of
the reliance by the Corporation on exemptions from the registration
requirement of the Securities Act pursuant to Section 4(2) thereof or
under any "Blue Sky" law of any state by reason of the reliance by the
Corporation on exemptions thereunder, and that the Corporation's
reliance is predicated in part on Purchaser's
STOCK PURCHASE AGREEMENT - Page 2
<PAGE> 3
representations set forth herein. By reason of his business and
financial experience, purchaser has the capacity to protect his own
interests in connection with the transactions contemplated hereby and
is able to bear the economic risk thereof.
(d) Purchaser is an accredited investor as such term is
defined in Regulation D.
(e) Purchaser acknowledges that he has been given an
opportunity to examine such instruments, documents and other
information relating to the Corporation as he has deemed necessary or
advisable in order to make an informed decision relating to his
purchase of the Shares and the Warrants, that he has been afforded an
opportunity to ask questions and to obtain any additional information
necessary in order to verify the accuracy of the information furnished
and that he has in fact, asked all such questions and reviewed all such
instruments, documents and other information as he deems necessary
under the circumstances.
(f) Purchaser understands that the Shares and Warrants (and
any Common Stock issued on exercise thereof) may not be sold,
transferred, or otherwise disposed of without registration under
applicable securities laws or an exemption therefrom, and that in the
absence of an effective registration statement covering the Shares and
the Warrants (or the Common Stock issued on exercise thereof) or an
available exemption from registration under applicable securities laws,
the Shares and Warrants (and any Common Stock issued on exercise
thereof) must be held indefinitely.
(g) To the extent applicable, each certificate or other
document evidencing any of the Shares and the Warrants or any Common
Stock issued upon exercise thereof shall be endorsed with the legend
set forth below:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD.
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
(h) The Corporation shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the
holder shall have obtained an opinion of counsel at such holder's
expense (which counsel may be counsel for the Corporation) reasonably
acceptable to the Corporation to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
6. The corporation's conditions Precedent. The obligations of the
Corporation hereunder are subject to the representations and warranties of
Purchaser contained herein being true and correct as of Closing.
STOCK PURCHASE AGREEMENT - Page 3
<PAGE> 4
7. Purchaser's Conditions Precedent. The obligations of Purchaser
hereunder are subject to the representations and warranties of the Corporation
contained herein being true and correct as of Closing.
8. Registration Rights.
(a) Certain Definitions. As used in this Paragraph 8, the following
terms shall have the meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange
commission or any other federal agency at the time administering the
Securities Act.
(ii) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the
rules and regulations thereunder, all as the same shall be in effect
from time to time.
(iii) "Holder" shall mean the Purchaser and any holder of
Registrable Securities to whom the registration rights conferred by
this Agreement have been transferred in compliance with Paragraph
8(h) hereof.
(iv) "Initiating Holders" shall mean any Holder or Holders who
in the aggregate hold not less than fifty percent (50%) of the
outstanding Registrable Securities.
(v) "Other Stockholders" shall mean persons other than Holders
who, by virtue of agreements with the Corporation, are entitled to
include their securities in certain registrations hereunder.
(vi) "Registrable Securities" shall mean (A) the Shares, (B)
shares of Common Stock issued or issuable pursuant to the exercise
of the Warrants and (C) any Common Stock issued as a dividend or
other distribution with respect to or in exchange for or in
replacement of the shares referenced in (A) or (B) above, provided,
however, that Registrable Securities shall not include any shares of
Common Stock which have previously been registered or which have
been sold to the public either pursuant to a registration statement
or Rule 144, or which have been sold in a private transaction in
which the transferor's rights under this Agreement are not assigned.
(vii) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration or
ordering of the effectiveness of such registration statement.
(viii) "Registration Expenses" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including,
without limitation,
STOCK PURCHASE AGREEMENT - Page 4
<PAGE> 5
all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Corporation,
blue sky fees and expenses, and expenses of any regular or special
audits incident to or required by any such registration, but shall
not include Selling Expenses, fees and disbursements of counsel for
the Holders or the compensation of regular employees of the
Corporation, which compensation shall be paid in any event by the
Corporation.
(ix) "Restricted Securities" shall mean any Registrable
Securities required to bear the legend set forth in Paragraph 5(g)
hereof.
(x) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended
from time to time, or any similar successor rule that may be
promulgated by the Commission.
(xi) "Rule 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule nay be amended
from time to time, or any similar successor rule that may be
promulgated by the commission.
(xii) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time
to time.
(xii) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale
of Registrable Securities.
(b) Requested Registration.
(i) Request for Registration. If the Corporation shall receive
from Initiating Holders at any time or times not later than five
(5) years after the date of this Agreement a written request that
the Corporation effect any registration with respect to all or a
part of the Registrable Securities having an aggregate offering
price, net of underwriting discounts and expenses, equal to or
exceeding $4.00 per share of Common Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and
the aggregate proceeds of which (after deduction for underwriter's
discounts and expenses related to the issuance) exceed $7,500,000,
the Corporation will:
(A) promptly give written notice of the proposed
registration to all other Holders; and
(B) as soon as practicable, use its best efforts to
effect such registration (including, without limitation,
filing post-effective amendments, appropriate qualifications
under applicable blue sky or other state securities laws, and
appropriate compliance with the
STOCK PURCHASE AGREEMENT - Page 5
<PAGE> 6
Securities Act) and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written
request received by the Corporation within twenty (20) days
after such written notice from the Corporation is mailed or
delivered.
The Corporation shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to this
Paragraph 8(B):
(I) In any particular jurisdiction in which
the Corporation would be required to execute a
general consent to service of process in effecting
such registration, qualification, or compliance,
unless the Corporation is already subject to service
in such jurisdiction and except as may be required by
the Securities Act;
(II) After the Corporation has initiated two
such registrations pursuant to this Paragraph 8(b);
(III) During the period starting with the
date sixty (60) days prior to the Corporation's good
faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the
effective date of, a Corporation-initiated
registration; provided that the Corporation is
actively employing in good faith all reasonable
efforts to cause such registration statement to
become effective;
(IV) If the Initiating Holders propose to
dispose of shares of Registrable Securities which may
be immediately registered on Form S-3 pursuant to a
request made under Paragraph 8(c) hereof;
(V) If the Initiating Holders do not request
that such offering be firmly underwritten by
underwriters selected by the Initiating Holders
(subject to the consent of the Corporation, which
consent will not be unreasonably withheld); or
(VI) If the Corporation and the Initiating
Holders are unable to obtain the commitment of the
underwriter described in clause (V) above to firmly
underwrite the offer.
STOCK PURCHASE AGREEMENT - Page 6
<PAGE> 7
(ii) Subject to the foregoing clauses (I) through (VI), the
Corporation shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as
practicable after receipt of the request or requests of the
Initiating Holders; provided, however, that if (A) in the good faith
judgment of the Board of Directors of the Corporation, such
registration would be seriously detrimental to the Corporation and
the Board of Directors of the Corporation concludes, as a result,
that it is essential to defer the filing of such registration
statement at such time, and (B) the Corporation shall furnish to
such Holders a certificate signed by the President of the
Corporation stating that in the good faith judgment of the Board of
Directors of the Corporation, it would be seriously detrimental to
the Corporation for such registration statement to be filed in the
near future and that it is, therefore, essential to defer the filing
of such registration statement, then the Corporation shall have the
right to defer such filing (except as provided in clause (III)
above) for a period of not more than one hundred eighty (180) days
after receipt of the request of the Initiating Holders, and,
provided further, that the Corporation shall not defer its
obligation in this manner more than twice in any twelve-month
period.
(iii) Underwriting. The right of any Holder to registration
pursuant to Paragraph 8(b) shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder with respect to such
participation and inclusion) to the extent provided herein. A Holder
may elect to include in such underwriting all or a part of the
Registrable Securities he holds.
(c) Registration on Form S-3.
(i) The Corporation shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or
forms. After the Corporation has qualified for the use of the Form
S-3, in addition to the rights contained in the foregoing provisions
of this Paragraph 8, the Holders of Registrable Securities shall
have the right to request registrations on Form S-3 (such requests
shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders), provided,
however, that the Corporation shall not be obligated to effect any
such registration if (A) the Holders, together with the holders of
any other securities of the Corporation entitled to inclusion in
such registration, propose to sell Registrable Securities and such
other securities (if any) on Form S-3 at an aggregate price to the
public of less than $1,000,000, or (B) in the event that the
Corporation shall furnish the certification described in Paragraph
8(b)(i)(B) (but subject to the limitations set forth therein) or (C)
in a given twelve-month period, the Corporation has effected one (1)
such registration in such period or (D) it is to be effected more
than five (5) years after the date of this Agreement.
STOCK PURCHASE AGREEMENT - Page 7
<PAGE> 8
(ii) If a request complying with the requirements of Paragraph
8(c) hereof is delivered to the Corporation, the provisions of
Paragraphs 8(b)(i)(A) and (B) and 8(b)(ii) hereof shall apply to
such registration. If the registration is for an underwritten
offering, the provisions of Paragraph 8(b)(iii) hereof shall apply
to such registration.
(d) Registration Procedures. In the case of each registration
effected by the Corporation pursuant to this Paragraph 8, the
Corporation will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof. At
its expense, the Corporation will use its best efforts to:
(i) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating
thereto, whichever first occurs; provided, however, that such
120-day period shall be extended for a period of time equal to the
period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock
(or other securities) of the Corporation;
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary
to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration
statement;
(iii) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(iv) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Corporation are then listed;
(v) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not
later than the effective date of such registration;
(vi) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Paragraph 8(b) hereof, the
Corporation will enter into an underwriting agreement in form
reasonably necessary to effect the offer and sale of Common Stock,
provided such underwriting agreement contains customary underwriting
provisions and provided further that if the underwriter so requests
the underwriting agreement will contain customary contribution
provisions.
STOCK PURCHASE AGREEMENT - Page 8
<PAGE> 9
(e) Indemnification.
(i) The Corporation will indemnify each Holder, each of its
officers, directors and partners, legal counsel, and accountants and
each person controlling such Holder within the meaning of Section 15
of the Securities Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this
Paragraph 8, and each underwriter, if any, and each person who
controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and
liabilities (or actions, proceedings, or settlements in respect
thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus,
offering circular, or other documents (including any related
registration statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Corporation of the
Securities Act or any rule or regulations thereunder applicable to
the Corporation and relating to action or inaction required of the
Corporation in connection with any such registration, qualification,
or compliance and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and accountants and
each person controlling such Holder, each such underwriter, and each
person who controls any such underwriter, for any legal and any
other expenses reasonably incurred in connection with investigating
and defending or settling any such claim, loss, damage, liability,
or action, provided that the Corporation will not be liable in any
such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to
the Corporation by such Holder or underwriter and stated to be
specifically for use therein. It is agreed that the indemnity
agreement contained in this Paragraph 8(e)(i) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the
consent of the Corporation (which consent has not been unreasonably
withheld).
(ii) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the
Corporation, each of its directors, officers, partners, legal
counsel, and accountants and each underwriter, if any, of the
Corporation's securities covered by such a registration statement,
each person who controls the Corporation or such underwriter within
the meaning of Section 15 of the Securities Act, each other such
Holder and Other Stockholder, and each of their officers, directors,
and partners, and each person controlling such Holder or Other
Stockholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular,
or other document, or any omission (or alleged
STOCK PURCHASE AGREEMENT - Page 9
<PAGE> 10
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse the Corporation and such Holders, Other Stockholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written information
furnished to the Corporation by such Holder and stated to be
specifically for use therein; provided, however, that the obligations
of such Holder hereunder shall not apply to amounts paid in settlement
of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of
such Holder (which consent shall not be unreasonably withheld); and
provided that in no event shall an indemnity under this Paragraph 8(e)
exceed the gross proceeds from the offering received by such Holder.
(iii) Each party entitled to indemnification under this
Paragraph 8(e) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party
to assume the defense of such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Paragraph 8, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(iv) If the indemnification provided for in this Paragraph
8(e) 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 therein, 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 the relative fault of the Indemnifying Party
on the one hand
STOCK PURCHASE AGREEMENT - Page 10
<PAGE> 11
and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable
considerations. 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
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.
(v) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
(f) Information by Holder. Each Holder of Registrable Securities shall
furnish to the Corporation such information regarding such Holder and the
distribution proposed by such Holder as the Corporation may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Paragraph 8.
(g) Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Corporation agrees
to use its best efforts to:
(i) Make and keep public information regarding the Corporation
available as those terms are understood and defined in Rule 144 under
the Securities Act;
(ii) File with the Commission in a timely manner all reports
and other documents required of the Corporation under the Securities
Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
(iii) So long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request a written
statement by the Corporation as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the
Corporation, and such other reports and documents so filed as a Holder
may reasonably request in availing itself of any rule or regulation of
the Commission allowing a Holder to sell any such securities without
registration.
(h) Transfer or Assignment of Registration Rights. The rights to cause
the Corporation to register securities granted to a Holder by the Corporation
under this Paragraph 8 may be transferred or assigned by a Holder only to a
transferee or assignee
STOCK PURCHASE AGREEMENT - Page 11
<PAGE> 12
of not less than 250,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like), provided that the Corporation is
given written notice at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and, provided further, that the
transferee or assignee of such rights assumes in writing the obligations of such
Holder under this Paragraph 8.
(i) "Market Stand-Off" Agreement. If requested by the Corporation and
an underwriter of Common Stock (or other securities) of the Corporation, a
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Corporation held by such Holder (other than those
included in the registration) during the one hundred eighty (180) day period
following the effective date of a registration statement of the Corporation
filed under the Securities Act, provided that:
(i) such agreement shall only apply to the first such
registration statement of the Corporation, including securities to be
sold on its behalf to the public in an underwritten offering; and
(ii) all officers and directors of the Corporation and holders
of at least one percent (1%) of the Corporation's voting securities are
bound by and have entered into similar agreements.
The obligations described in this Paragraph 8(i) shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar form
that may be promulgated in the future. The Corporation may impose stop-transfer
instructions with respect to the shares of Common Stock (or other securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day period.
(j) Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Corporation (including shares of Common Stock issued or issuable upon exercise
of the Warrants) with registration rights (the "Other Shares") requested to be
included in a registration on behalf of the Holders or other selling
stockholders cannot be so included as a result of limitations of the aggregate
number of shares of Registrable Securities and Other Shares that may be so
included, the number of shares of Registrable Securities and Other Shares that
may be so included shall be allocated among the Holders and other selling
stockholders requesting inclusion of shares pro rata on the basis of the number
of shares of Registrable Securities and Other Shares that would be held by such
Holders and other selling stockholders, assuming conversion; provided, however,
that such allocation shall not operate to reduce the aggregate number of
Registrable Securities and Other Shares to be included in such registration, if
any Holder or other selling stockholder does not request inclusion of the
STOCK PURCHASE AGREEMENT - Page 12
<PAGE> 13
maximum number of shares of Registrable Securities and Other Shares allocated to
him pursuant to the above-described procedure, the remaining portion of his
allocation shall be reallocated among those requesting Holders and other selling
stockholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares which
would be held by such Holders and other selling stockholders, assuming
conversion, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and other selling stockholders have been
so allocated. The Corporation shall not limit the number of Registrable
Securities to be included in a registration pursuant to this Agreement in order
to include shares held by stockholders with no registration rights.
(k) Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Paragraph 8.
(l) Termination of Registration Rights.
(i) Except as set forth in subparagraph (ii) below, the right of
any Holder to request registration or inclusion in any registration
pursuant to Paragraph 8(b), 8(c) or 8(d) shall terminate on such date
as all shares of Registrable Securities held or entitled to be held
upon exercise by such Holder may immediately be sold under Rule 144
during any 90-day period.
(ii) The provisions of subparagraph (i) above shall not apply
to any Holder who owns more than one percent (1%) of the Corporation's
outstanding stock until the earlier of (x) such time as such Holder
owns less than one percent (1%) of the outstanding stock of the
Corporation, or (y) the expiration of five (5) years after the date of
this Agreement.
(iii) The right of any Holder to request registration or inclusion
in any registration pursuant to Paragraph 8(b), 8(c) or 8(d) shall not
apply if the Holders propose to dispose of Shares that may be disposed
of under Rule 144.
9. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed by certified mail, postage prepaid, return receipt requested
and addressed as follows:
If to Purchaser: Pat Robertson
977 Centerville Turnpike
Virginia Beach, VA 23463
If to the Corporation: 10575 Newkirk
Suite 780
Dallas, TX 75220
Attn: Clinton Howard, President
STOCK PURCHASE AGREEMENT - Page 13
<PAGE> 14
Any party may change his respective address by written notice thereof
to the other parties pursuant to this Paragraph.
10. Counterparts. This Agreement may be executed in two or more
identical counterparts. Each such counterpart shall be deemed an original, but
together all such counterparts shall constitute one in the same instrument.
11. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED UNDER AND IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
12. Amendment. This Agreement contains the entire agreement between the
parties hereto and cannot be amended or altered except in writing executed by
the parties hereto.
13. Entire Agreement. This Agreement constitutes the sole, complete and
only agreement between the parties hereto as to the subject matter hereof, and
supersedes any prior understandings or written or oral agreements between the
parties respecting the within subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day first written above.
GLOBENET INTERNATIONAL, INC.
/s/ PAT ROBERTSON By: /s/ CLINTON H. HOWARD
- ------------------------------- ---------------------------------------
PAT ROBERTSON Name: Clinton H. Howard
-------------------------------------
Title: President
------------------------------------
STOCK PURCHASE AGREEMENT - Page 14
<PAGE> 1
STANDARD INDUSTRIAL LEASE AGREEMENT 2301 Chovanetz Court
--------------------------
COMMERCIAL -AEW- CIIF II - 97 Irving, Texas
--------------------------
P:\LEASENEG\CIIF2LSE.DOC 0507-0853-1301
--------------------------
THIS LEASE AGREEMENT, made and entered into by and between CIIF ASSOCIATES II
LIMITED PARTNERSHIP BY: AEW ADVISORS (FORMERLY KNOWN AS COPLEY ADVISORS, INC).
hereinafter referred to as "Landlord", and GLOBENET INTERNATIONAL I, INC., A
DELAWARE CORPORATION hereinafter referred to as "Tenant";
WITNESSETH:
1. PREMISES AND TERM.
A. In consideration of the mutual obligations of Landlord and Tenant set
forth herein, Landlord leases to Tenant, and Tenant takes from Landlord the
approximately 119,192 square feet more particularly outlined on the floor plan,
attached as Exhibit "A-1" (the "Premises"), which Premises are part of that
approximately 119,192 square foot building (the "Building") located on the real
property situated within the County of DALLAS, State of Texas, which real
property is more particularly described on EXHIBIT "A" attached hereto and
incorporated herein by reference (the "Land"), together with all rights,
privileges, easements, appurtenances, and amenities belonging to or in any way
pertaining to the Premises, to have and to hold, subject to the terms, covenants
and conditions in this Lease. If more than one building is located on the Land,
then all referenced herein to "Building" shall be deemed to refer to all such
buildings collectively unless the context otherwise requires.
B. The term of this Lease shall commence upon the later of: (i) AUGUST 1,
1998, or (ii) if Landlord is required to construct improvements in the Premises
pursuant to Paragraph 1.C. below, on the third day following the date of
substantial completion of any such alterations or improvements to the Premises
described in Paragraph 1.C. below (the "Commencement Date"). The term of this
Lease shall end on the last day of the calendar month that is 123 full calendar
months after the Commencement Date.
C. If an Exhibit "B" is attached hereto, then Landlord shall construct and
install in the Premises those improvements and alterations to be constructed and
installed by Landlord pursuant to the plans and specifications described on such
Exhibit "B" attached hereto and incorporated herein by reference (the "Plans").
Landlord will entertain Tenant's suggestion of a general contractor to complete
construction of the Plans if such contractor meets with Landlord's approval and
Landlord's standard requirements for a contractor. As used herein, the term
"substantial completion" or "substantially completed" shall mean that, in the
opinion of the architect or space planner that prepared the Plans, such
improvements have been completed in accordance with the Plans and the Premises
are in good and satisfactory condition, subject only to completion of minor
punch list items. As soon as such improvements have been substantially
completed, Landlord shall notify Tenant in writing that the Commencement Date
has occurred. Within ten (10) days thereafter, Tenant shall submit to Landlord
in writing a punch list of items needing completion or correction. Landlord
shall use its best efforts to complete such items within thirty (30) days after
the receipt of such notice. In the event Tenant, its employees, agents or
contractors cause construction of such improvements to be delayed, the
Commencement Date shall be deemed to be the date that, in the reasonable opinion
of Landlord, substantial completion would have occurred if such delays had not
taken place.
2. BASE RENT, SECURITY DEPOSIT AND ESCROW PAYMENTS.
A. Tenant agrees to pay to Landlord Base Rent (herein so called) for the
Premises, in advance, without demand, deduction or set off, at the rate, as set
forth in the Base Rent Schedule attached as Exhibit "C" attached hereto, per
month during the term hereof. One such monthly installment, plus the other
monthly charges set forth in Paragraph 2.C.(b) below, shall be due and payable
on the date hereof and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the Commencement Date;
provided, however, that should this Lease commence on a day other than the first
day of a calendar month or terminate on a day other than the last day of a
calendar month, the rental for such partial month shall be prorated.
See Paragraph 27.
B. In addition, Tenant shall deposit with Landlord on the date hereof the
sum of Fifty-Four Thousand Six Hundred Thirty and 00/100 Dollars ($ 54,630.00
(the "Security Deposit"), which shall be held by Landlord as security for the
performance of Tenant's obligations under this Lease, it being expressly
understood and agreed that the Security Deposit is not an advance rental deposit
or a measure of Landlord's damages in case of an event of default. Upon each
occurrence of an event of default, Landlord may use all or part of the Security
deposit to pay past due rent or other payments due Landlord under this Lease,
and the cost of any other damage, injury, expense or liability, chargeable to
Tenant hereunder, without prejudice to any other remedy provided herein or
provided by law. On demand, Tenant shall pay Landlord the amount that will
restore the Security Deposit to its original amount. The Security Deposit shall
be deemed the property of Landlord, but any remaining balance of the Security
Deposit shall be returned by Landlord to Tenant when Tenant's obligations under
this Lease have been fulfilled. The amount of the Security Deposit will be
decreased to the sum of Twenty Seven Thousand Three Hundred Fifteen and 00/100
Dollars ($ 27,315.00) if Tenant performs all of the following obligations: (1)
Tenant meets all of its annual revenue projections through December 1999 as set
forth on Exhibit "D" attached hereto, and (2) Tenant's annual revenue
projections through December 1999 as set forth on Exhibit D are verified in the
annual 10-K filed with the Security Exchange Commission. At no time shall the
minimum balance of the Security Deposit be less than the sum of Fifty Four
Thousand Six Hundred Thirty and 00/100 Dollars ($ 54,630.00) unless Tenant meets
the requirements set forth in the preceding sentence and Landlord provides
written notice of such reduction of the Security Deposit, which notice shall not
be unreasonably withheld.
See Paragraph 29.
C. Tenant agrees to pay, as additional rent, its Proportionate Share (as
defined in Paragraph 22.B. below) of (1) Taxes (hereinafter defined) payable to
Landlord pursuant to Paragraph 3.A. below, (2) the cost of any utilities used in
the Building which are not otherwise paid for by Tenant pursuant to Paragraph 8,
below or billed separately to another tenant of the Building, (3) the cost of
any insurance maintained by Landlord on the Building or operating expenses
required by this Lease, including, without limitation, those
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 2
expenses referred to in Paragraph 5.D. hereof (but excluding those expenses
otherwise specifically paid for by Tenant pursuant to the terms hereof or
expenses billed separately to other tenants of the Building). During each month
of the term of this Lease, on the same day that Base Rent is due hereunder,
Tenant shall escrow with Landlord an amount equal to 1/12 of Landlord's
estimate of annual cost of its Proportionate Share of such items. Tenant
authorizes Landlord to use the funds deposited with Landlord under this
Paragraph 2.C. to pay such costs. The initial monthly escrow payments are based
upon Landlord's estimate of amounts for the year in question, and shall be
increased or decreased annually to reflect the projected actual cost of all such
items. If Tenant's total escrow payments are less than Tenant's actual
Proportionate Share of all such items, Tenant shall pay the difference to
Landlord within ten (10) days after demand. If the total escrow payments of
Tenant are more than Tenant's actual Proportionate Share of all such items,
Landlord shall retain such excess and credit it against Tenant's next annual
escrow payments. The amount of the monthly rental and the initial monthly escrow
payments are as follows:
<TABLE>
<S> <C>
(a) Base Rent as set forth In Paragraph 2.A $ 27,315.00
(b) Taxes as set forth in Paragraph 2.C.(1) $ 5,760.00
(c) Utilities, Insurance and other Operating Expenses as set forth in
Paragraphs 2.C.(2). and (3) $ 2,186.00
-----------
$ 35,261.00
===========
</TABLE>
D. In calculating the annual cost of the items described in subparagraph C
above, if during any period during the relevant year the Building is less than,
one hundred percent (100%) occupied, then in computing the amount of Tenant's
obligations Landlord shall "gross-up" the amount of any of Landlord's expenses
which fluctuate with Building occupancy to the amount which, in Landlord's
reasonable estimation, such fluctuating expenses would have been if the Building
had been one hundred percent (100%) occupied for the entire year. Tenant will
then pay Tenant's Proportionate Share of such grossed-up amount so that the
actual amount paid by Tenant in respect of such fluctuating expenses is not
affected by occupancy or non-occupancy of the remainder of the Building.
3. TAXES
A. Landlord agrees to pay all taxes, assessments and/or governmental
charges of any kind and nature (collectively referred to herein as "Taxes") that
accrue against the Premises, the Land and/or the Building. If at any time during
the term of this Lease, there shall be levied, assessed or imposed on Landlord a
capital levy or other tax directly on the rents received hereunder and/or a
franchise tax, assessment, levy or charge measured by or based, in whole or in
part upon such rents from the Premises, the Land and/or the Building, then all
such taxes, assessments, levies or charges, or the part thereof so measured or
based, shall be deemed to be included within the term "Taxes" for the purposes
hereof. The Landlord shall have the right to, or upon Tenant's demand Landlord
shall, employ a tax consulting firm to attempt to assure a fair tax burden on
the Building and the Land within the applicable taxing jurisdiction. Tenant
agrees to pay its Proportionate Share of the cost of such consultant. In
addition, if the Building is a multiple occupancy Building and the cost of any
improvements constructed on the Premises is disproportionately higher than the
cost of improvements constructed on the premises of other tenant's of the
Building, then the Landlord, at its option, may require that Tenant pay the
amount of Taxes attributable to such disproportionately more expensive
improvements in addition to its Proportionate Share of Taxes.
B. Prior to delinquency, Tenant shall (i) pay all taxes levied or assessed
against any personal property or fixtures placed in the Premises, and (ii) upon
the request of Landlord, deliver to Landlord receipts from the applicable taxing
authority or other evidence acceptable to Landlord to verify that such taxes
upon personal property and fixtures have been paid by Tenant. If any such taxes
are levied or assessed against Landlord or Landlord's property and (i) Landlord
pays the same or (ii) the assessed value of Landlord's property is increased by
inclusion of such personal property and fixtures and Landlord pays the increased
taxes, then, upon demand Tenant shall pay to Landlord such taxes.
4. LANDLORD'S REPAIRS
A. Tenant understands and agrees that this Lease is intended to be a "net"
lease, and as such, Landlord's maintenance, repair and replacement obligations
am limited to those set forth in this Paragraph 4.A. Landlord, at its own cost
and expense, shall be responsible for repair and replacement of only the roof,
the foundation and the structural members of the exterior walls of the Building.
The terms "roof" and "walls" as used herein shall not include skylights,
windows, glass or plate glass, doors, special store fronts or office entries.
Tenant shall immediately give Landlord written notice of defect or need for
repairs, after which Landlord shall have reasonable opportunity to repair same
or cure such defect. Landlord's liability with respect to any defects, repairs,
replacement or maintenance for which Landlord is responsible hereunder shall be
limited to the cost of such repairs or maintenance or the curing of such defect.
B. Landlord reserves the right to perform Tenant's maintenance, repair and
replacement obligations and any other items that are otherwise Tenant's
obligations under Paragraph 5.B, in which event, Tenant shall pay to Landlord
any cost or expense incurred by Landlord in making such repairs within ten (10)
days after demand.
5. TENANT'S MAINTENANCE AND REPAIR OBLIGATIONS.
A. Tenant, at its own cost and expense, shall maintain all parts of the
Premises (except those for which Landlord is expressly responsible hereunder) in
good condition, ordinary wear and tear excepted, and promptly make all necessary
repairs and replacements to the Premises.
B. In addition to Tenant's obligations under the preceding subparagraph A.,
if Tenant is the only tenant of the Building, Tenant shall be responsible for
causing the parking areas, driveways, alleys and grounds surrounding the
Premises to be maintained in a good, neat, clean and sanitary condition,
consistent with the operation of a first class office/warehouse building, which
includes, without limitation, prompt maintenance, repairs and replacements (1)
of any drill or spur track servicing the Premises, (2) of the parking area
associated with the Building, (3) of all grass, shrubbery and other landscape
treatments surrounding the Building, (4) of the exterior of the Building
(including painting), (5) of sprinkler systems and sewage lines, and (6) of any
other maintenance, repair or replacement items
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 3
normally associated with the foregoing. In addition, Tenant shall repair and pay
for any damage caused by the negligence of Tenant or Tenant's employees, agents
or invitees, or caused by Tenant's default hereunder.
C. In the event that the Tenant is not the sole tenant of the Building,
then subject to payment by Tenant, Landlord shall perform the maintenance,
repair, and replacement obligations set forth in the foregoing subparagraph B.
Tenant shall pay its Proportionate Share of the cost and expense of such repair,
replacement, replacement reserve, maintenance and other such items as additional
rent, pursuant to Paragraph 2.C. above. The amount of Tenant's rental obligation
set forth in Paragraph 2.A. above does not include the cost of such items, and
Landlord's performance or repair, replacement, maintenance and other items, is
not a condition to payment of such rental obligation.
D. Tenant agrees to pay as additional rent (pursuant to Paragraph 2.C.
above) its Proportionate Share of the cost of (1) operation, maintenance and/or
landscaping of any property or facility that is operated, maintained or
landscaped by any property owner or community owner association that is named in
any restrictive covenants or deed restrictions to which the Premises are subject
and which are actually billed to the Building, and (2) operating and maintaining
any property, facilities or services provided for the common use of Tenant and
other Tenants of the Building, which costs shall include, without limitation,
management fees, maintenance and repair costs, sewer, landscaping trash and
security (if furnished by Landlord), wages and employee benefits payable to
employees of Landlord whose duties are connected with the operation and
maintenance of the Building, amounts paid to contractors or subcontractors for
work or services performed in connection with the operation and maintenance of
the Building, all service, supplies, repairs, replacements or other expenses for
maintaining and operating the Building, and any other facilities or services
provided for the common use of Tenant and other Tenants of the Building.
E. Within ten days after the Commencement Date and continuing for the
entire term of this Lease, Tenant shall enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor reasonably
acceptable to Landlord for servicing hot water, heating, air conditioning,
and/or other systems and equipment within the Premises with a contractor, and
Tenant shall be responsible for all costs and expenses required thereunder. At
least 14 days before the end of the Term, Tenant shall deliver to Landlord a
certificate from an engineer or licensed mechanical contractor reasonably
acceptable to Landlord certifying that the hot water equipment and the HVAC
System are then in good repair and working order.
F. Tenant agrees to sign a joint maintenance agreement with the railroad
company, if any, servicing the Premises if requested by the railroad company.
Landlord shall have the right to coordinate all repairs and maintenance of any
rail tracks serving or intended to serve the Premises and, if Tenant uses
such-rail tracks, Tenant shall reimburse Landlord from time to time, upon
demand, for its Proportionate Share of the costs of such repairs and maintenance
and any other sums specified in any agreement respecting such tracks to which
Landlord is a party.
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvement to the Premises without the prior written consent of Landlord,
Tenant, at its own cost and expense, may erect such shelves, bins, machinery and
trade fixtures as it desires provided that (a) such items do not alter the basic
character of the Premises or the Building; (b) such items do not overload or
damage the same; (c) such items may be removed without injury to the Premises;
and (d) the construction, erection or installation thereof complies with all
applicable governmental laws, ordinances, regulations and with Landlord's
specifications and requirements. All installations, removals and restoration
shall be performed a good and workmanlike manner so as not to damage or alter
the primary Structure or structural qualities of the Building or the Premises.
7. SIGNS. Tenant shall not place, install or attach any signage,
decorations, advertising media, blinds, draperies, window treatments, bars or
security installations to the Premises or the Building without Landlord's prior
written approval. Tenant shall repair, paint, and/or replace any portion of the
Premises or the Building damaged or altered as a result of its signage, upon the
earlier of vacation of the Premises by Tenant or the removal or alteration of
its signage, all of which shall be accomplished at Tenant's sole cost and
expense. Tenant shall not, (i) make any changes to the exterior of the Premises
or the Building, (ii) install any exterior lights, decorations, balloons, flags,
pennants, banners or painting, or (iii) erect or install any signs, windows or
door lettering, decals, window and storefront stickers, placards, decorations or
advertising media of any type that can be viewed from the exterior of the
Premises, without Landlord's prior written consent.
8. UTILITIES. Tenant shall obtain and pay for all water, gas, heat, light,
power, telephone, sewer, sprinkler charges and other utilities and services used
on or at the Premises, together with any taxes, penalties, surcharges or the
like pertaining to the Tenant's use of the Premises, and any maintenance charges
for utilities. Landlord shall have the right to cause any of said services to be
separately metered to Tenant, at Tenant's expense. If any such services are not
separately metered to Tenant, Tenant shall pay on demand to Landlord a
reasonable proportion, to be determined by Landlord, of all charges jointly
metered with other premises in the Building. Landlord shall not be liable for
any interruption or failure of utility service on the Premises.
9. INSURANCE.
A. Landlord shall maintain insurance covering the Building and the Premises
in an amount not less than eighty percent (80%) of the "replacement cost"
thereof insuring against the perils and costs of Fire, Lightning, Extended
Coverage, Vandalism and Malicious Mischief, Liability and Rental Interruption
and such other insurance as Landlord shall deem necessary.
B. Tenant, at its own expense, shall maintain during the term of this Lease
(1) a policy or policies of worker's compensation and comprehensive general
liability insurance (with contractual liability endorsement), including personal
injury and property damage in the amount of Five Hundred Thousand Dollars
($500,000.00) per occurrence for property damage and One Million Dollars
($1,000,000.00) per occurrence for personal injuries or deaths of persons
occurring in or about the Premises and (2) fire and extended coverage insurance
covering the replacement cost of (a) all alterations, additions, partitions and
improvements installed or placed on the Premises, (b) all of Tenant's personal
property contained within the Premises, and (c) business interruption insurance
insuring loss of profits in the event of an insured peril damaging the Premises,
and if requested in writing by Landlord based upon its reasonable assessment of
the risk of liability arising out of Tenant's activities or proposed activities
on or about the Premises. Said policies shall (i) name Landlord, as well as such
entities or firms as Landlord may engage from, time to time as property managers
and/or asset or investment managers, as additional insured (until further
notice, it is expressly agreed that The Industrial Group, The Industrial Group
Management Services, Inc., AEW Advisors, Inc., CIIF Associates II Limited
Partnership, Copley Advisors, Inc. and Copley Real Estate
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 4
Advisors, Inc. shall be named as additional insureds), (ii) be issued by an
insurance company which is acceptable to Landlord, (iii) provided that such
insurance shall not be canceled unless thirty (30) days prior written notice
shall have been given to Landlord, (iv) shall be delivered to Landlord by Tenant
prior to the Commencement Date and at least fifteen (15) days prior to each
renewal of said insurance, and (v) shall provide primary coverage to Landlord
when any policy issued to Landlord is similar or duplicate in coverage, in which
case Landlord's policy shall be excess over Tenant's policies.
C. Tenant will not permit the Premises to be used for any purpose or in any
manner that would (1) void the insurance thereon, (2) increase the insurance
risk, or (3) cause the disallowance of any sprinkler credits. Tenant shall pay
to Landlord on demand any increase in the cost of any insurance on the Premises
or the Building incurred by Landlord, which is caused by Tenant's use of the
premises or because Tenant vacates the Premises.
10. FIRE AND CASUALTY DAMAGE.
A. Tenant immediately shall give written notice to Landlord if the Premises
or the Building are damaged or destroyed. If the Premises or the Building should
be totally destroyed by an insured peril, or so damaged by an insured peril
that, in Landlord's estimation, rebuilding or repairs cannot be completed within
one hundred eighty (180) days after the date of Landlord's actual knowledge of
such damage, then in either case this Lease shall terminate and the rent shall
be abated during the unexpired portion of this Lease, effective upon the date of
the occurrence of such damage.
B. If the Building or the Premises should be damaged but not totally
destroyed by any insured peril, and in Landlord's estimation, rebuilding or
repairs can be substantially completed within one hundred eighty (180) days
after the date of Landlord's actual knowledge of such damage, this Lease shall
not terminate, and Landlord shall restore the Premises to substantially its
previous condition, except that Landlord shall not be required to rebuild,
repair or replace any part of the partitions, fixtures, additions and other
improvements or personal property required to be covered by Tenant's insurance
pursuant to Paragraph 9.B. above. Effective upon the date of the occurrence of
such damage and ending upon the date of substantial completion (as defined in
Paragraph 1.C. above) of Landlord's repair or restoration work, if the Premises
are untenantable in whole or part during such period, then the rent shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances. If such repairs and rebuilding have not been substantially
completed within one hundred eighty (180) days after the date of such damage,
Tenant, as Tenant's exclusive remedy, may terminate this Lease by delivering
written notice of termination to Landlord, in which event the rights and
obligations hereunder shall cease and terminate, provided, however, that any
liabilities of Tenant which accrued prior to termination of this Lease shall
survive such termination.
C. In connection with any repair or reconstruction to the Premises arising
from or necessitated by fire or the casualty which is covered by the insurance
provided pursuant to Paragraph 9.A. above, Tenant shall pay Landlord upon demand
its Proportionate Share of the amount of any deductible of such insurance.
D. Notwithstanding anything herein to the contrary, in the event the
Premises are destroyed or substantially damaged by any peril not covered by the
insurance required to be carried by Landlord pursuant to Paragraph 9.A. above,
or if the holder of any indebtedness secured by a mortgage or deed of trust
covering the Premises requires that insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made known by any such holder, whereupon all rights
and obligations hereunder shall cease and terminate, provided, however, that any
liabilities of Tenant which accrued prior to termination of this Lease shall
survive such termination.
E. ANYTHING IN THIS LEASE TO THE CONTRARY NOTWITHSTANDING, TO THE EXTENT OF
A RECOVERY OF LOSS PROCEEDS UNDER THE POLICIES OF INSURANCE DESCRIBED IN THIS
LEASE, LANDLORD AND TENANT HEREBY WAIVE AND RELEASE EACH OTHER AND ANY OF THEIR
RESPECTIVE RELATED PARTIES AND AFFILIATES OF AND FROM ANY AND ALL RIGHTS OF
RECOVERY, CLAIM, ACTION OR CAUSE OF ACTION, AGAINST EACH OTHER, THEIR AGENTS,
OFFICERS AND EMPLOYEES, FOR ANY LOSS OR DAMAGE THAT MAY OCCUR TO THE PREMISES,
THE BUILDING, OR PERSONAL PROPERTY WITHIN THE BUILDING AND/OR PREMISES ARISING
FROM OR CAUSED BY FIRE OR OTHER CASUALTY OR HAZARD COVERED OR REQUIRED TO BE
COVERED BY HAZARD INSURANCE UNDER THIS LEASE. UPON EXECUTION OF THIS LEASE,
LANDLORD AND TENANT SHALL NOTIFY THEIR RESPECTIVE INSURANCE COMPANIES OF THE
MUTUAL WAIVERS CONTAINED HEREIN AND, IF AVAILABLE, SHALL CAUSE EACH POLICY
DESCRIBED IN THIS LEASE TO BE SO ENDORSED.
11. LIABILITY AND INDEMNIFICATION.
A. TENANT AGREES THAT IT WILL INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS
LANDLORD, ITS SUCCESSORS, ASSIGNS, AGENTS, EMPLOYEES, CONTRACTORS, PARTNERS,
DIRECTORS, OFFICERS AND AFFILIATES (AS THAT TERM IS DEFINED IN THE SECURITIES
ACT OF 1933) (COLLECTIVELY, THE "INDEMNIFIED PARTIES") FROM AND AGAINST ALL
FINES, SUITS, LOSSES, COSTS, LIABILITIES, CLAIMS, DEMANDS, ACTIONS AND JUDGMENTS
OF EVERY KIND OR CHARACTER (A) ARISING FROM ANY BREACH, VIOLATION OR
NON-PERFORMANCE OF ANY TERM, PROVISION, COVENANT, AGREEMENT OR CONDITION ON THE
PART OF TENANT HEREUNDER, (B) RECOVERED FROM OR ASSERTED AGAINST ANY OF THE
INDEMNIFIED PARTIES ON ACCOUNT OF INJURY OR DAMAGE TO PERSON OR PROPERTY TO THE
EXTENT THAT ANY SUCH DAMAGE OR INJURY MAY BE INCIDENT TO, ARISE OUT OF, OR BE
CAUSED, EITHER APPROXIMATELY OR REMOTELY, WHOLLY OR IN PART, BY ANY ACT,
OMISSION, NEGLIGENCE OR MISCONDUCT ON THE PART OF TENANT OR ANY OF ITS AGENTS,
SERVANTS, EMPLOYEES, CONTRACTORS, OR INVITEES OR OF ANY OTHER PERSON ENTERING
UPON THE PREMISES UNDER OR WITH THE EXPRESS OR IMPLIED INVITATION OR PERMISSION
OF TENANT, (C) ARISING FROM OR RELATING TO ANY ORDER, DIRECTIVE, REQUEST,
REQUIREMENT OR OTHER COMMUNICATION ISSUED BY A REGULATORY AGENCY WITH
JURISDICTION PERTAINING TO THE INVESTIGATION OR REMEDIATION OF HAZARDOUS
SUBSTANCES PRESENT OR SUSPECTED TO BE PRESENT IN THE SOIL OR GROUNDWATER ON,
UNDER, OR ABOUT THE BUILDING OR THE PREMISES CAUSED BY OR RELATING TO TENANT'S
USE, MANAGEMENT, STORAGE, GENERATION, TRANSPORTATION, DISPOSAL OR RELEASE OF
HAZARDOUS SUBSTANCES THEREUPON OR THEREUNDER (D) ARISING FROM OR OUT OF THE
OCCUPANCY OR USE BY TENANT, ITS AGENTS, SERVANTS, EMPLOYEES, CONTRACTORS, OR
INVITEES
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 5
OF THE PREMISES OR ARISING FROM OR OUT OF ANY EVENT, CIRCUMSTANCE, OR OCCURRENCE
WITHIN THE PREMISES, HOWSOEVER CAUSED, AND/OR (E) SUFFERED BY, RECOVERED FROM OR
ASSERTED AGAINST ANY OF THE INDEMNIFIED PARTIES BY TENANT'S EMPLOYEES, AGENTS,
SERVANTS, CONTRACTORS, OR INVITEES. SUCH INDEMNIFICATION OF THE INDEMNIFIED
PARTIES BY TENANT SHALL BE EFFECTIVE (i) UNLESS SUCH DAMAGE TO PROPERTY RESULTS
WHOLLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY OF ITS
DULY AUTHORIZED AGENTS OR EMPLOYEES, OR (ii) UNLESS SUCH INJURY TO PERSON
RESULTS WHOLLY FROM THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY OF
ITS DULY AUTHORIZED AGENTS OR EMPLOYEES. TENANT'S OBLIGATION TO INDEMNIFY
LANDLORD, ITS AGENTS AND EMPLOYEES UNDER THIS PARAGRAPH SHALL BE REDUCED BY THE
PERCENTAGE AMOUNT ATTRIBUTABLE TO THE NEGLIGENCE OF LANDLORD, ITS AGENTS OR
EMPLOYEES.
B. Tenant covenants and agrees that in case any of the Indemnified Parties
shall be made a party to any litigation commenced by or against Tenant with
respect to which Tenant has agreed to indemnify the Indemnified Parties
hereunder or relating to this Lease or to the Premises, then Tenant shall and
will pay all costs and expenses, including reasonable attorneys' fees and court
costs, incurred by or imposed upon any of the Indemnified Parties by virtue of
any such litigation and the amount of all such costs and expenses, including
attorneys' fees and court costs, shall be a demand obligation owing by Tenant to
the Indemnified Parties.
C. The provisions of this Paragraph shall survive the expiration or
termination of this Lease with respect to any claims or liability occurring
prior to or stemming from events or conditions occurring or existing prior to
such expiration or termination. The indemnification provided by this Paragraph
11. is subject to Landlord's waiver of recovery in the preceding Paragraph 10.,
to the extent of Landlord's recovery of loss proceeds under policies of
insurance described in Paragraph 10.
12. USE.
A. The Premises shall be used only for the purpose of receiving, storing,
shipping and selling (other than retail) products, materials and merchandise
made and/or distributed by Tenant and for such other lawful purposes as may be
incidental thereto. Tenant shall not use the Premises for the receipt, storage
or handling of any Hazardous Substance, unless such use is approved in writing
by Landlord and is in conformance in all respects with paragraph 24 of this
Lease. Outside storage, including without limitation, storage of trucks and
other vehicles, is prohibited without Landlord's prior written consent. Tenant
shall comply with all federal, state, and local governmental laws, ordinances
and regulations applicable to the use of the Premises including, without limit,
all licensing and permitting requirements and Environmental Laws, and promptly
shall comply with all governmental orders and directives for the correction,
prevention and abatement of nuisances and Environmental Conditions in or upon,
or connected with, the Premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, light, noise or
vibrations to emanate from the Premises, nor take any other action that would
constitute a nuisance or create an Environmental Condition, or would disturb,
unreasonably interfere with, or endanger Landlord or any other Tenants of the
Building.
B. Tenant and its employees, customers and licensees shall have the
non-exclusive right to use, in common with others, any parking areas associated
with the Premises which Landlord has designated for such use, subject to (1) all
reasonable rules and regulations promulgated by Landlord and (2) rights of
ingress and egress of other Tenants and their employees, customers, agents and
invitees. Landlord shall not be responsible for enforcing Tenant's parking
rights against any third parties.
13. INSPECTION. Landlord and Landlord's agents and representatives shall
have the right to enter the Premises at any reasonable time during business
hours after prior notice to Tenant to inspect the Premises and to make such
repairs as may be required or permitted pursuant to this Lease. During the
period that is twelve (12) months prior to the end of the Lease term, Landlord
and Landlord's representatives may enter the Premises during business hours for
the purpose of showing the Premises. In addition, during the same twelve (12)
month period Landlord shall have the right to erect a suitable sign on the
Premises indicating that the Premises are available. Tenant shall notify
Landlord in writing at least thirty (30) days prior to vacating the Premises and
shall arrange to meet with Landlord for a joint inspection, then Landlord's
inspection of the Premises shall be deemed correct for the purposes of
determining Tenant's responsibility for repairs and restoration of the Premises.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not have the right to sublet all or part of the Premises or
to assign, transfer or encumber this Lease, or any interest therein, without the
prior written consent of Landlord. Any attempted assignment, subletting,
transfer or encumbrance by Tenant in violation of the terms and covenants of
this Paragraph shall be void. No assignment, subletting or other transfer,
whether consented to by Landlord or not, or permitted hereunder, shall relieve
Tenant of its liability hereunder. If an event of default occurs while the
Premises or any part thereof are assigned or sublet, then Landlord, in addition
to any other remedies herein provided, or provided by law, may collect directly
from such assignee, subtenant or transferee all rents payable to the Tenant and
apply such rent against any sums due Landlord hereunder. No such collection
shall be construed to constitute a novation or a release of Tenant from the
further performance of Tenant's obligations hereunder.
B. If Tenant is a corporation, partnership, or other entity, for purposes
of subparagraph A. above, any transfer or series of related transfers of equity
ownership interests in Tenant (or any direct or indirect owners of Tenant) that
results in the change of the ultimate ownership of more than fifty percent (50%)
of the equity ownership of Tenant shall constitute an assignment of this Lease.
The foregoing provision shall not apply, however, if at the time of execution of
this Lease Tenant is a corporation the shares of which are listed on a
recognized security exchange or in the over-the-counter market.
C. Upon the occurrence of an assignment or subletting, whether consented to
by Landlord, or mandated by judicial intervention, Tenant hereby assigns,
transfers and conveys all rents or other sums received by Tenant under any such
assignment or sublease, which are in excess of the rents and other sums payable
by Tenant under this Lease, and Tenant agrees to pay to Landlord such amounts
within ten (10) days after receipt.
D. If this Lease is assigned to any person or entity pursuant to the
provision of the Bankruptcy Code, 11 USC Section 101 et. seq. (the "Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 6
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or of
the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other considerations constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and be promptly paid or delivered to Landlord.
E. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed, without further act or deed,
to have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall upon demand execute and deliver
to Landlord an instrument confirming such assumption.
F. Notwithstanding anything to the contrary contained in Paragraph 14 of
this Lease, if the proposed subtenant and assignee is any corporation which
controls, is controlled by or is under common control with Tenant, or is any
corporation resulting from the merger of consolidation of Tenant, or is any
person or entity which acquires all of the assets of Tenant as a going concern
of the business that is being conducted on the Premises (an "Affiliate"), then
Tenant may assign or sublet the Premises or any portion thereof to an Affiliate
with the prior written consent of Landlord which shall not be unreasonably
withheld and subject to Landlord's ability to reasonably inquire into (1) the
financial soundness of the proposed subtenant or assignee and (2) whether the
assignment will constitute a violation of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). At least thirty (30) days prior to any
proposed subtenancy or assignment of the Lease Agreement, Tenant agrees to
furnish Landlord in writing with the name of the proposed subtenant or assignee,
provided that said sublessee or assignee assumes in full the obligations of
Tenant under this Lease and that, in the reasonable opinion of Landlord, such
sublessee's or assignee's use of the Premises is consistent with the use allowed
under the Lease, and not environmentally harmful as agreed to in Paragraph 24 of
the Lease. Any such sublease or assignment shall not in any way affect or limit
the liability of Tenant under the terms of this Lease. "Control" shall be deemed
to mean ownership of not less than a majority of all of the voting stock of
Tenant or such corporation, as the case may be.
15. CONDEMNATION. If more than fifty percent (50%) of the Premises are
taken for any public or quasipublic use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking prevents or materially interferes with the use of the
remainder of the Premises for the purpose for which they were leased to Tenant,
this Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective on the date of such taking. If (i) less than
fifty percent (50%) of the Premises are taken for any a public or quasi-public
use under any governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof; or (ii) more than fifty percent
(50%) of the Premises are taken for any public or quasipublic use under
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof, but the taking does not prevent or materially
interfere with the use of the remainder of the Premises for the purpose for
which they were leased to Tenant, this Lease shall not terminate, but the rent
payable hereunder during the unexpired portion of this Lease shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. All
compensation awarded in connection with or as a result of any of the foregoing
proceedings shall be the property of Landlord and Tenant hereby assigns any
interest in any such award to Landlord; provided, however, Landlord shall have
no interest in any award made to Tenant for loss of business or goodwill or for
the taking of Tenant's fixtures and improvements, if a separate award for such
items is made to Tenant.
16. SURRENDER OF PREMISES; HOLDING OVER
A. At the termination of this Lease, whether caused by lapse of time or
otherwise, Tenant shall at once surrender possession of the Premises and deliver
them to Landlord in as good repair and condition as existed at the Commencement
Date, reasonable wear and tear excepted, and shall deliver to Landlord all keys
(or other access control devices) the Premises, and, if such possession is not
immediately surrendered, Landlord may forthwith enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may be
occupying them, or any part thereof, without having any civil or criminal
liability therefor.
B. All alterations, additions or improvements (whether temporary or
permanent in character) made to or fixtures installed in or upon the Premises,
either by Landlord or Tenant, shall be Landlord's property on termination of
this Lease and shall remain on the Premises. Notwithstanding the foregoing, upon
the termination of this Lease Landlord may direct Tenant, at Tenant's expense,
to remove all alterations, improvements, and additions installed by Tenant and
return the Premises to the condition that existed at the Commencement Date.
Subject to Paragraph 25 hereof and provided that all sums owed by Tenant
hereunder have been paid, all movable office furniture and equipment not
attached to the Building may be removed by Tenant at the termination of this
Lease. All such removals shall be accomplished in a good workmanlike manner so
as not to damage the Premises or the structural components of the Building or
the plumbing, electrical lines or other utilities, and any damage resulting from
such removals shall be repaired at Tenant's expense.
C. All alterations, additions, and improvements directed by Landlord to be
removed and all movable office furniture and equipment not attached to the
Building not promptly removed after such termination shall thereupon be
conclusively presumed to have been abandoned by Tenant, and Landlord may, at its
option, take over possession of such property and either (a) declare same to be
the property of Landlord by written notice thereof to Tenant or (b) at the sole
costs and expense of Tenant remove and store the same or any part thereof in any
manner that Landlord shall choose without incurring liability to Tenant or any
other person (any such removal and storage costs and expenses being payable by
Tenant upon demand).
D. Should Tenant continue to hold the Premises after the termination of
this Lease, whether the termination occurs by lapse of time or otherwise, such
holding over shall, unless otherwise agreed by Landlord in writing, constitute
and be construed as a tenancy at will at a daily rental equal to one-thirtieth
of an amount equal to one hundred fifty percent (150%) of the amount of the
monthly rental payable during the last month prior to the termination of this
Lease, and upon and subject to all of the other terms, provisions, covenants and
agreements set forth herein except any right to renew this Lease. No payments of
money by Tenant to Landlord after the termination of this Lease shall reinstate,
continue or extend the term of this Lease and no extension of this Lease after
the termination hereof shall be valid unless and until the same shall be reduced
to writing and signed by both Landlord and Tenant. Tenant shall be liable to
Landlord for all damage which Landlord shall suffer by reason of any holding
over by Tenant and Tenant shall indemnify Landlord against all claims made by
any other tenant or prospective tenant against Landlord resulting from delay by
Landlord in delivering possession of the Premises to such other tenant or
prospective tenant.
17. QUIET ENJOYMENT. Landlord covenants that on or before the Commencement
Date it will have good title to the Premises, free and clear of all liens and
encumbrances, excepting only the lien for current taxes not yet due, such
mortgage or mortgages as are permitted by the terms of this Lease, zoning
ordinances and other building anti fire ordinances and governmental regulations
relating
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 7
to the use of such property, and easements, restrictions and other conditions of
record. Landlord represents that it has the authority to enter into this Lease
and that so long as Tenant pays all amounts due hereunder and performs all other
covenants and agreements herein set forth, Tenant shall peaceably and quietly
have, hold and enjoy the Premises for the term hereof without hindrance or
molestation from Landlord, subject to the terms and provisions of this Lease.
18. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "event of default" on the part of Tenant under this
Lease;
A. Tenant shall fail to pay any rental or other payment or reimbursement
payable by Tenant hereunder when due, or Tenant shall fail to pay any payment or
reimbursement required under any other lease with Landlord when due, and in
either case such failure shall continue for a period of five (5) days from the
date such payment was due, provided however, that Landlord shall give five (5)
days written notice of such default to Tenant, with opportunity to cure within
such five (5) day period provided Landlord shall not be obligated to furnish
Tenant with more than one (1) written notice of default and opportunity to cure
each calendar year during the term of this Lease.
B. Tenant shall fail to pay any amounts owed to contractors or
subcontractors for work or services performed in connection with the operation,
construction, management or maintenance of the Building as provided herein, and
such failure shall continue for a period of five (5) days after written notice
of such failure from Landlord to Tenant.
C. Tenant or any guarantor of the Tenant's obligations hereunder shall (i)
become insolvent; (ii) admit in writing its inability to pay its debts; (iii)
make a general assignment for the benefit of creditors; (iv) commence any
case, proceeding or other action seeking to have an order for relief entered on
its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganizations, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking appointment of a receive,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or (v) take any action to authorize or in
contemplation of any of the actions set forth above in this subparagraph C.
D. Any case, proceeding or other action against the Tenant or any guarantor
of Tenant's obligations hereunder shall be commenced seeking (i) to have an
order for relief entered against it as debtor or to adjudicate it a bankrupt or
insolvent; (ii) reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors (iii) appointment of
a receiver, trustee, custodian or other similar official for it or for all or
any substantial part of its property, and such case, proceeding or other action
(a) results in the entry of an order for relief against it which it is not fully
stayed within seven (7) business days after the entry thereof or (b) shall
remain undismissed for a period of forty-five (45) days.
E. Tenant shall (i) vacate all or a substantial portion of the Premises or
(ii) fail to continuously operate its business at the Premises for the permitted
use set forth herein, whether or not Tenant is in default of the rental payments
due under this Lease. Tenant's vacating of the Premises shall not constitute an
Event of Default if, prior to vacating the Premises, Tenant has made
arrangements reasonably acceptable to Landlord to (i) insure that Tenant's
insurance for the Premises will not be voided or cancelled with respect to the
Premises as a result of such vacancy, (ii) insure that the Premises are secured
and not subject to vandalism, (iii) insure that the Premises will be properly
maintained after such vacation, and (iv) Tenant continues to pay all rent and
other sums due under this lease to Landlord. Tenant shall inspect the Premises
at least once each month and report monthly in writing to Landlord on the
condition of the Premises.
F. Tenant shall fail to discharge or bond around any lien placed upon the
Premises in violation of Paragraph 21. hereof within twenty (20) days after any
such lien or encumbrance is filed against the Premises.
G. Tenant shall fail to comply with any term, provision or covenant of this
Lease (other than those listed in this Paragraph 18.), and shall not cure such
failure within twenty (20) days after written notice thereof to Tenant.
19. REMEDIES.
A. Upon each occurrence of an event of default, and in addition to and not
in limitation of any other remedy permitted by law or equity or by this Lease,
Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand:
(1) Terminate this Lease, and/or
(2) Enter upon and take possession of the Premises without terminating
this Lease; and/or
(3) Alter all locks and other security devices at the Premises with or
without terminating this Lease, deny access to Tenant, and pursue, at Landlord's
option, one or more remedies pursuant to this Lease, Tenant hereby specifically
waiving any state or federal law to the contrary. This provision shall control
over any conflicting provisions of the Texas Property Code or any successor
statute governing the right of landlords to change the door locks of commercial
tenants to the extent permitted by applicable law.
B. Upon the occurrence of any event of default Tenant immediately shall
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord,
without waiving any other remedy it may have, may enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may be
occupying such Premises or any part thereof, without being liable for
prosecution or any claim of damages therefor.
C. If Landlord repossesses the Premises with or without terminating the
Lease, Tenant, at Landlord's option, shall be liable for and shall pay Landlord
on demand all rental and other payments owed to Landlord hereunder accrued to
the date of such repossession, plus all amounts required to be paid by Tenant to
Landlord until the date of expiration of the term as stated in Paragraph 1.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 8
occasions, without the necessity of Landlord's waiting until expiration of the
Lease term. Landlord may relet the whole or any portion of the Premises for any
period, to any tenant and for any use and purpose.
D. Upon an event of default, in addition to any sum provided to be paid
herein, Tenant also shall be liable for and shall pay to Landlord (1) any
brokerage fees incurred by Landlord in connection with the execution of this
Lease; (2) brokers' fees incurred by Landlord in connection with any reletting
of the whole or any part of the Premises; (3) the costs of removing and storing
Tenant's or other occupant's property; (4) the costs of repairing, altering,
remodeling or otherwise putting the Premises into condition acceptable to a new
tenant or tenants; and (5) all reasonable expenses incurred by Landlord in
enforcing or defending Landlord's rights and/or remedies. If either party hereto
institutes any action or proceeding to enforce any provision hereof by reason of
any alleged breach of any provision of this Lease, the prevailing party shall be
entitled to receive from the losing party all reasonable attorneys' fees and all
court costs in connection with such proceeding.
E. Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available, including without limitation, the institution by Landlord,
its agents or attorneys of a forcible detainer or ejectment action to re-enter
the Premises shall not be construed to be an election to terminate this Lease or
relieve Tenant of its obligation to pay rent hereunder and shall not be deemed
to be an acceptance of surrender of the Premises by Landlord, whether by
agreement or by operation of law, it being understood that such surrender can be
effected only by the written agreement of Landlord and Tenant. Tenant and
Landlord further agree that forbearance by Landlord to enforce its rights
pursuant to the Lease at law or in equity shall not be a waiver of Landlord's
right to enforce one or more of its rights in connection with any subsequent
default.
F. In the event Tenant fails to make any payment due hereunder, taking into
account the notice provisions of Paragraph 18 herein, when payment is due, to
help defray the additional cost to Landlord for processing such late payments,
Tenant shall pay to Landlord on demand a late charge in an amount equal to five
percent (5%) of such installment; and the failure to pay such amount within ten
(10) days after demand therefore shall be an additional event of default
hereunder. The provision for such late charge shall be in addition to all of
Landlord's other rights and remedies hereunder or at law and shall not be
construed as liquidated damages or as limiting Landlord's remedies in any
manner.
G. If Landlord repossesses the Premises pursuant to the authority herein
granted, then Landlord shall have the right to (i) keep in place and use or (ii)
remove and store, at Tenant's expense, all of the furniture, fixtures and
equipment at the Premises, including that which is owned by or leased to Tenant
at all times prior to any foreclosure thereon by Landlord or repossession
thereof by any Landlord thereof or third party having a lien thereon. Landlord
also shall have the right to relinquish possession of all or any portion of such
furniture, fixtures, equipment and other property to any person ("Claimant") who
presents to Landlord a copy of any instrument represented by Claimant to have
been executed by Tenant (or any predecessor of Tenant) granting Claimant the
right under various circumstances to take possession of such furniture,
fixtures, equipment or other property, without the necessity on the part of
Landlord to inquire into the authenticity or legality of said instrument.
Landlord may at its sole option and without prejudice to, or waiver of any
rights it may have i) escort Tenant to the Premises to retrieve any personal
belongings of Tenant and/or its employees not covered by the Landlord's lien and
security interest described in Paragraph 25. hereof, or ii) obtain a list from
Tenant of the personal property of Tenant and/or its employees that is not
covered by the Landlord's lien and security interest described in Paragraph 25.
hereof, and make such property available to Tenant and or Tenant's employees;
provided, however, Tenant first shall pay in cash all costs and estimated
expenses to be incurred in connection with the removal of such property and
making it available. Any such property not removed by Tenant within five (5)
days after demand therefor by Landlord shall thereupon be conclusively presumed
to have been abandoned by Tenant to Landlord, and Landlord may, at its option,
take over possession of such property and declare same to be the property of
Landlord by written notice thereof to Tenant. The rights of Landlord herein
stated shall be in addition to any and all other rights that Landlord has or may
hereafter have at law or in equity, and Tenant stipulates and agrees that the
rights herein granted Landlord are commercially reasonable.
H. If Landlord fails to commence to perform any of its obligations
hereunder within thirty (30) days after written notice from Tenant specifying
such failure, Tenant's exclusive remedy shall be an action for damages or any
other legal remedy available at law. Unless and until Landlord fails to so cure
said default after such notice, Tenant shall not have any remedy or cause of
action by reason thereof. All obligations of Landlord hereunder will be binding
upon Landlord only during the period of its possession of the Premises and not
thereafter. The term "Landlord" shall mean only the owner, for the time being,
of the Premises and not thereafter. The term "Landlord" shall mean only the
owner, for the time being, of the Premises, and in the event of the transfer by
such owner of its interest in the Premises, such owner shall thereupon be
released and discharged from all covenants and obligations of the Landlord
thereafter accruing, but such covenants and obligations shall be binding during
the Lease term upon each new owner for the duration of such owner's ownership.
Notwithstanding any other provision hereof, Landlord shall not have any personal
liability hereunder. In the event of any breach or default by Landlord in any
term or provision of this Lease, and, as a consequence, if Tenant shall recover
a money judgment against Landlord, such judgment shall be satisfied only out of
the proceeds received at a judicial sale upon execution and levy against the
right, title and interest of Landlord in the Building, and neither Landlord nor
Landlord's owners, partners or venturers shall have any personal, partnership,
corporate or other liability hereunder.
20. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises, the improvements situated thereon, the Building or
the Land, and to any and all increases, renewals, modifications, consolidations,
replacements and extensions of such mortgages and deeds of trust; provided,
however, that if the mortgagee, trustee, or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this Lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this Lease shall be deemed superior to such lien whether this Lease was executed
before or after said mortgage or deed of trust. The provisions of this Paragraph
20. shall be self-operative, and no further instrument shall be required to
effect such subordination of this Lease. Tenant shall however, at any time
hereafter, within ten (10) days after demand, execute any instruments, releases
or other documents that may be required by any mortgagee for the purpose of
subjecting and subordinating this Lease to the lien of any such mortgage. If
Tenant fails to execute the same within such ten (10) day period, Landlord is
hereby authorized to execute the same as attorney-in-fact for Tenant. Tenant
agrees to attorn upon demand to any mortgagee, trustee under a deed of trust or
purchaser at a foreclosure sale or trustee's sale as Landlord under this Lease.
The agreement of Tenant to attorn upon demand contained in the immediately
preceding sentence shall survive any such foreclosure sale or trustee's sale.
Tenant shall upon demand at any time or times, before or after any such
foreclosure sale or trustee's sale, execute, acknowledge and deliver to any
mortgagee, trustee under a deed of trust or purchaser at a foreclosure sale or
Landlord
[INITIALS]
---------------
Tenant
[INITIALS]
---------------
<PAGE> 9
trustee's sale any and all instruments and certificates that in the judgment of
such party may be necessary or proper to confirm or evidence such attornment,
and Tenant hereby irrevocably appoints any such mortgagee, trustee under a deed
of trust or purchaser at a foreclosure sale or trustee's sale as Tenant's agent
and attorney-in-fact for the purpose of executing, acknowledging and delivering
any such instruments and certificates. Landlord shall use reasonable efforts
upon request of Tenant to obtain a non-disturbance agreement from Landlord's
lender on Landlord's lender's standard form.
21. MECHANIC'S LIENS. Tenant has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interest of Landlord or Tenant in the Premises or
to charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant, including those who may furnish materials or perform labor
for any construction or repairs. Tenant covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from any and all loss,
cost or expense based on or arising out of asserted claims or liens against the
leasehold estate or against the right, title and interest of the Landlord in the
Premises or under the terms of this Lease. Tenant agrees to give Landlord
immediate written notice of the placing of any lien or encumbrance against the
Premises.
22. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed to
include any other gender, and works in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
B. In the event the Premises constitute a portion of a multiple occupancy
building, Tenant's "Proportionate Share," as used in this Lease, shall mean a
fraction, the numerator of which is the space contained in the Premises and the
denominator of which is the entire rentable space contained in the Building.
C. The terms, provisions and covenants and conditions contained in this
Lease shall run with the land and shall apply to, inure to the benefit of, and
be binding upon, the parties hereto and upon their respective heirs, executors,
personal representatives, legal representatives, successors and assigns, except
as otherwise herein expressly provided. Landlord shall have the right to
transfer and assign, in whole or in part, its rights and obligations in the
Building and property that are the subject of this Lease. Each party agrees to
furnish to the other, promptly upon demand, a corporate resolution, proof of due
authorization by partners, or other appropriate documentation evidencing the due
authorization of such party to enter into this Lease.
D. Landlord shall not be held responsible for delays in the performance of
its obligations hereunder when caused by strikes, riots, acts of God, shortages
of labor or materials, war, governmental laws, regulations or restrictions or
any other cause of any kind whatsoever which are beyond the control of Landlord.
E. Tenant agrees, from time to time, within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, a Certificate of
Occupancy for the Premises, financial statements for itself and any guarantor of
its obligations hereunder, and an estoppel certificate stating that this Lease
is in full force and effect, the date to which rent has been paid, the unexpired
term of this lease and such other factual matters pertaining to this Lease as
may be requested by Landlord. It is understood and agreed that Tenant's
obligation to furnish the above-described items in a timely fashion is a
material inducement for Landlord's execution of this Lease. If Tenant fails to
execute any such estoppel certificate within such ten (10) day period, Landlord
is hereby authorized to execute the same as attorney-in-fact for Tenant.
F. This Lease constitutes the entire understanding and agreement of the
Landlord and Tenant with respect to the subject matter of this Lease, and
contains all of the covenants and agreement of Landlord and Tenant with respect
thereto. Landlord and Tenant each acknowledge that no representations,
inducements, promises or agreements, oral or written, have been made by Landlord
or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not
contained herein, and any prior agreements, promises, negotiations, or
representations not expressly set forth in this Lease are of no force or effect.
This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition and repair of the Premises. Upon the
expiration or earlier termination of the term hereof, and prior to Tenant
vacating the Premises, Tenant shall pay to Landlord any amount reasonably
estimated by Landlord as necessary to put the Premises, including without
limitation, all heating and air conditioning systems and equipment therein, in
good condition and repair, reasonable wear and tear excluded. Tenant shall also,
prior to vacating the Premises, pay to Landlord the amount, as estimated by
Landlord, of Tenant's obligation hereunder for real estate taxes and insurance
premiums for the year in which the Lease expires or terminates. All such amounts
shall be used and held by Landlord for payment of such obligations of Tenant
hereunder, with Tenant being liable for any additional costs therefor upon
demand by Landlord, or with any excess to be returned to Tenant after all such
obligations have been determined and satisfied as the case may be. Any security
deposit held by Landlord shall be credited against the amount due by Tenant
under this Paragraph 22.G.
H. Intentionally Deleted.
I. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added, as a
part of this Lease, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.
J. All references in this Lease to "the date hereof" or similar references
shall be deemed to refer to the last date, in point of time, on which all
parties hereto have executed this Lease.
---------------
Landlord
/s/ [ILLEGIBLE]
---------------
Tenant
---------------
<PAGE> 10
K. Tenant represents and warrants that it has dealt with no broker, agent
or other person in connection with this transaction or that no broker, agent or
other person brought about this transaction, other than as may be referenced in
a separate written agreement executed by Tenant, and delivered to Landlord prior
to execution of this Lease, and Tenant agrees to indemnify and hold Landlord
harmless from and against any claims by and other by any other broker, agent or
other persons claiming a commission or other form of compensation by virtue of
having dealt with Tenant with regard to this leasing transaction.
L. If and when included within the term "Landlord," as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address for the receipt of notices
and payments to Landlord. If and when included within the term "Tenant," as used
in this instrument, there is more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant," respectively, shall be bound
by notices given in accordance with the provisions of Paragraph 23. hereof to
the same effect as if each had received such notice.
M. TENANT ACKNOWLEDGES THAT (1) IT HAS INSPECTED AND ACCEPTS THE PREMISES
IN AN "AS IS, WHERE IS" CONDITION, (2) THE BUILDING AND IMPROVEMENTS COMPRISING
THE SAME ARE SUITABLE FOR THE PURPOSE FOR WHICH THE PREMISES ARE LEASED AND
LANDLORD HAS MADE NO WARRANTY, REPRESENTATION, COVENANT, OR AGREEMENT WITH
RESPECT TO THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE
PREMISES, (3) THE PREMISES ARE IN GOOD AND SATISFACTORY CONDITION, (4) NO
REPRESENTATIONS AS TO THE REPAIR OF THE PREMISES, NOR PROMISES TO ALTER, REMODEL
OR IMPROVE THE PREMISES HAVE BEEN MADE BY LANDLORD (UNLESS AND EXCEPT AS MAY BE
SET FORTH IN EXHIBIT B ATTACHED TO THIS LEASE, IF ONE SHALL BE ATTACHED, OR AS
IS OTHERWISE EXPRESSLY SET FORTH IN THIS LEASE), AND (5) THERE ARE NO
REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, THAT EXTEND
BEYOND THE DESCRIPTION OF THE PREMISES.
N. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this Lease, whether or not
expressly denominated as rent, shall constitute rent.
O. This is a contract under which applicable law excuses Landlord from
accepting performance from (or rendering performance to) any person or entity
other than Tenant.
P. If there is more than one Tenant, then the obligations hereunder imposed
upon Tenant shall be joint and several. If there is a guarantor of Tenant's
obligations hereunder, then the obligations hereunder imposed upon Tenant shall
be the joint and several obligations of Tenant and such guarantor, and Landlord
need not first proceed against Tenant before proceeding against such guarantor
nor shall any such guarantor be released from its guaranty for any reason
whatsoever.
23. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or making of any payment by
Landlord to Tenant or with reference to the sending mailing or delivering of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address for Landlord set forth
below or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay rent
and any other amounts to Landlord under the terms of this Lease shall not be
deemed satisfied until such rent and other amounts have been actually received
by Landlord.
B. All payments required to be made by Landlord to Tenant hereunder shall
be payable to Tenant at the address set forth below, or at such other address
within the continental United States as Tenant may specify from time to time by
written notice delivered in accordance herewith.
C. Any written notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered upon the earlier to occur of (1)
tender of delivery (in the case of a hand-delivered notice) or (2) deposit in
the United States Mail, postage prepaid, Certified or Registered Mail, addressed
to the parties hereto at the respective addresses set out below, or at such
other address as they have theretofore specified by written notice delivered in
accordance herewith.
24. HAZARDOUS SUBSTANCES.
A. The term "Hazardous Substances" shall mean any chemical, substance,
product, merchandise, material, controlled substance, object, condition, waste,
living organism or combination thereof that is or may be hazardous to human
health or safety or to the environment due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity,
phytotoxicity, infectiousness or other harmful or potentially harmful properties
or effects, including, without limitation, petroleum and petroleum products,
asbestos, polychlorinated biphenyls (PCBs) and all of those chemicals,
substances, products, merchandise, materials, controlled substances, objects,
conditions, wastes, living organisms or combinations thereof that are now or
hereafter become listed, defined or regulated in any manner by any Environmental
Law. The term "Environmental Law" shall mean any applicable federal, state or
local law, rule, regulation, ordinance, court decision, decree, order,
directive, guideline, permit or permit condition relating to pollution or
protection of the environment or other health and safety concern and whether now
in existence or hereafter enacted. The term "Environmental Condition" shall mean
any condition, circumstance, situation, or obligation created by or related to
the violation or suspected violation of any Environmental Law or the presence or
suspected presence of Hazardous Substances on, about, or under the Building or
Premises.
B. Tenant hereby agrees that (i) no activity will be conducted on the
premises that will generate any Hazardous Substance, except for activities that
are part of the ordinary course of Tenant's business activities and specifically
described in Exhibit D (the "Permitted Activities"); provided said Permitted
Activities are conducted in strict compliance with all Environmental Laws and
have been approved in advance in writing by Landlord; (ii) the premises will not
be used in any manner for the storage of any Hazardous Substances
---------------
Landlord
/s/ [INITIALS]
---------------
Tenant
[INITIALS]
---------------
<PAGE> 11
except for the temporary storage in strict compliance with all Environmental
Laws of such materials as are used in the ordinary course of Tenant's business
and described in and stored in the quantities described in Exhibit___ (the
"Permitted Materials"), provided such Permitted Materials are properly managed,
used, transported, disposed of, released, and stored in a manner and location
complying with all Environmental Laws and approved in advance in writing by
Landlord; (iii) no portion of the premises will be used as or for a landfill,
clump or any other on-site disposal of solid waste or Hazardous Substances; (iv)
Tenant will not install any underground tanks of any type on or under the
premises unless such installation is approved in writing in advance by Landlord
and Tenant enters into a written agreement with Landlord assuming all
responsibility and liability relating thereto; (v) Tenant will not allow any
surface or subsurface conditions to exist or come into existence that
constitute, or with the passage of time may constitute, a public or private
nuisance or a violation of Environmental Law; (vi) tenant will not permit any
Hazardous Substances to be brought onto the premises, except for the Permitted
Materials, and if so brought or found located thereon, the same shall be
immediately removed, with proper packaging, labeling, transportation, and
disposal, and all required cleanup and remediation procedures shall be
diligently undertaken, by Tenant and at Tenant's sole expense pursuant to all
Environmental Laws. If Tenant fails to comply with any of the covenants in this
provision, or fails to comply with any Environmental Law, Landlord, at Tenant's
sole expense, immediately may commence remedial action to restore the property
to an environmentally sound position. Tenant agrees to notify Landlord
immediately of (i) any significant release of Hazardous Substances, or other
chemicals or substances (including without limitation, any release required to
be reported to a governmental authority pursuant to any Environmental Law) and
(ii) the receipt of any pertinent notices or communications from any
governmental authority. Tenant agrees to provide Landlord with a letter of
certification, one year from the date of execution hereof and annually
thereafter, certifying that Tenant has complied with (i) the provisions of this
subparagraph, (ii) all applicable Environmental Laws and (iii) the requirements
of all applicable governmental agencies and further certifying that no soil or
groundwater contamination has occurred at, under, about or from the premises.
Landlord reserves the right, but not the obligation, and without in any way
limiting the obligations of the Tenant, to enter and inspect the premises and
conduct any testing, sampling, borings, and analyses as Landlord, in its sole
discretion and at Tenant's sole cost, may deem necessary or desirable. If such
inspection or testing discloses the presence of Hazardous Materials or other
environmental conditions on the premises in violation of this subparagraph,
Tenant shall reimburse Landlord for the cost of conducting the inspection and
testing. Tenant agrees to cooperate fully with Landlord during the course of
Landlord's inspection and testing activities. Tenant agrees to indemnify, defend
(by counsel acceptable to Landlord) and hold Landlord and its partners,
directors, officers, employees, shareholders, lenders, agents, contractors and
each of their respective successors and assigns harmless from and against any
and all claim demands, actions, liabilities, costs, expenses, damages, penalties
and obligations of any nature arising from or as a result, either direct or
indirect, of (x) the breach of any of the covenants contained in this
subparagraph, (y) the presence of Hazardous Substances on, under or about the
premises or other properties as the direct or indirect result of Tenant's
occupancy of the premises, or (z) the use of the premises or surrounding area by
Tenant, Tenant's agents, or Tenant's assigns. The foregoing indemnification
shall survive the termination or expiration of this Lease. Any costs or expenses
incurred by Landlord for which Tenant is responsible under this provision shall
be deemed Additional Rent that is due and payable on notice from Landlord to
Tenant.
Unless expressly identified on an addendum to this Lease, as of the
date hereof there are no "Permitted Activities" and/or "Permitted Materials" for
purposes of the foregoing provision and none shall exist unless and until
approved in writing by Landlord.
25. LANDLORD'S LIEN. To secure the payment of all rent and other sums
of money due or to become due hereunder from Tenant, Tenant hereby grants to
Landlord, in addition to any statutory lien for rent in Landlord's favor, a
continuing security interest in all goods, wares, equipment, fixtures,
furniture, inventory, and other personal property of Tenant now or hereafter
situated at 2301 Chovanetz Court, Irving, Texas, and all proceeds or product-
thereof, of whatever kind or type, including equipment, inventory, instruments,
accounts, chattel paper or general intangibles, and the security interest shall
continue in such property and all proceeds and products regardless of location.
Such property shall not be removed therefrom without the consent of Landlord,
unless at the time of removal all arrearages in rent as well as any and all
other sums of money then due to Landlord hereunder shall first have been paid
and discharged in full. Upon an event of default, in addition to all other
rights and remedies, Landlord shall have all rights and remedies under the
Uniform Commercial Code, including without limitation, the right to sell the
property described in this Paragraph at public or private sale upon five (5)
days notice by Landlord to Tenant at the Premises. Tenant hereby agrees to
execute such other instruments as may be necessary or desirable under applicable
law to perfect the security interest hereby created. Landlord and Tenant agree
that pages 11 & 12 of this Lease and security agreement may serve as a
financing statement and that a copy, photographic or other reproduction of this
portion of this Lease may be filed of record by Landlord and have the same force
and effect as the original. This Lease and security agreement and financing
statement also covers those fixtures located at the Premises described on
Exhibit "A-1", attached hereto and incorporated herein by reference, (if an
Exhibit A-1 is attached). This page, together with said Exhibit A, (if one is
attached) may be filed for record in the appropriate real estate records. The
record owner of this property is Landlord.
[Remainder of Page Intentionally Left Blank]
<PAGE> 12
EXECUTED BY LANDLORD, this 19th day of June, 1998.
CIIF ASSOCIATES II LIMITED PARTNERSHIP
a Delaware limited partnership
BY: AEW ADVISORS, INC., a Massachusetts corporation
(formerly known as COPLEY ADVISORS, INC.),
Its: Managing General Partner
BY: /s/ MARK A. ALBERTSON
----------------------------------------
PRINTED NAME: Mark A. Albertson
----------------------------------------
TITLE: Vice President
----------------------------------------
BY:
----------------------------------------
PRINTED NAME:
----------------------------------------
TITLE:
----------------------------------------
ADDRESS: C/O THE INDUSTRIAL GROUP
P.0. Box 802047
DALLAS, TX 75380-2047
TELEPHONE: 972-661-0232
FAX: 972-661-0235
EXECUTED BY TENANT, this 12th day of June, 1998.
TENANT GLOBENET INTERNATIONAL I, INC.
A DELAWARE CORPORATION
BY: /s/ CLINTON H. HOWARD
----------------------------------------
PRINTED NAME: Clinton H. Howard
----------------------------------------
TITLE: President
----------------------------------------
BY:
----------------------------------------
PRINTED NAME:
----------------------------------------
TITLE:
----------------------------------------
ADDRESS:
----------------------------------------
----------------------------------------
----------------------------------------
TELEPHONE: (972) 401-0052
----------------------------------------
FAX: (972) 869-1974
----------------------------------------
<PAGE> 13
ADDITIONAL PROVISIONS
GLOBENET INTERNATIONAL I, INC.
26. THIS RIDER CONTROLS. The provisions set forth in this Rider control
to the extent they conflict with any provision or provisions set forth in the
body of this Lease Agreement.
27. FREE RENT. Notwithstanding anything contained in this lease to the
contrary, Tenant's obligations to pay Taxes and the cost of any insurance
maintained by the Landlord on the Building shall not commence until the date
Base Rent commences after the free rent period as provided in Exhibit "C" (the
"Rent Commencement Date"), and all such costs shall be prorated between Landlord
and Tenant as of the Rent Commencement Date for the year in which this Lease
commences. If any event of default by Tenant occurs, then Tenant agrees that the
free rent shall be revoked and Tenant further agrees to immediately pay Landlord
rent for such period.
28. CONSTRUCTION ALLOWANCE. In accordance with the terms and provisions
of Exhibit B attached hereto and made part hereof for all purposes, Landlord
will provide up to $238,384.00 (the "Construction Allowance" as hereinafter
defined in Exhibit B) to Tenant for the construction of improvements to the
Premises (the "Work" as hereinafter defined as Exhibit B), inclusive of all
architecture, engineering, space planning costs and construction management
fees. Such amounts shall be paid upon receipt by Landlord of bona fide invoices
for such costs from Tenant. Landlord will advance additional amounts up to
$137,071.00 for such costs, which advances shall bear interest at eleven percent
(11%) per annum and shall be repaid in equal monthly installments of principal
and interest over the remaining term of this Lease commencing with the Rent
Commencement Date.
29. LETTER OF CREDIT.
A. On or before the Commencement Date, Tenant shall deliver to Landlord
an executed original irrevocable standby letter of credit ("L.C.") in the amount
of $125,000 in favor of Landlord, such L.C. to have a term of one hundred
twenty-three (123) months from the Commencement Date of the Lease. The L.C. may
be drawn upon and used upon each occurrence of an event of default; Landlord may
use all or part of the L.C. to pay past due rent or other payments due Landlord
under this Lease, and the cost of any other damage, injury, expense or liability
caused by such event of default without prejudice to any other remedy provided
herein or provided by law. Such L.C. shall be issued in a form and by a National
Banking Association (located within the continental United States of America)
(hereinafter the "Issuer"), acceptable to Landlord. With respect to any default
occurring during the term of the Lease, Landlord shall have the right to proceed
against the total L.C. at the sole discretion of Landlord regarding items and
the amounts to be drawn upon relating to any default by Tenant. If Tenant
exercises either its extension option under Paragraph 31 herein, then Tenant
agrees that the L.C. will be extended in the same amount and under the same
terms for any additional term of this Lease.
B. Such L.C. shall contain the following terms and conditions:
(1) The L.C. shall be deemed to be automatically extended without
amendment from year to year, with renewal occurring annually, from the date of
its issuance or any future expiration date unless at least 30 days prior to any
future expiration date the bank notifies Landlord, in writing, by certified
mail, return receipt requested, that the issuer intends not to renew the L.C.
for an additional year.
(2) In the event the L.C. will not be extended and has or will
expire by its terms and the Lease Agreement, by and between Tenant and Landlord,
including any or all extensions or renewals, has not expired, then Landlord
shall be allowed to draft upon Issuer for the full amount of the L.C.
(3) The L.C. shall be subject to the "Uniform Customs and Practices
for Documentary Credits (1994 Revision), International Chamber of Commerce
Publication No. 400."
(4) The amount of the L.C. shall be payable at sight to Landlord
within three (3) days of presentation of the sight draft, in whole or partial
drawings, upon presentation to the Issuer of the following documents:
a. Landlord's written demand for payment making reference to the
date and number of the L.C.;
b. Landlord's signed certificate that the amount drawn is to meet
any event of default as set forth in the Lease Agreement by and
between Tenant and Landlord; and
c. The original L.C. for endorsement of the amount paid and if the
draft is for the full amount the L.C. is to be surrendered to
the Issuer.
(5) The Issuer shall not have the right to assign the L.C. to any
other person, entity, National Banking Association, or financial institution
without Landlord's consent which shall not be unreasonably withheld.
(6) Any presentment by Landlord of the L.C. for the payment shall be
made at a national banking association located within the continental United
States of America.
(7) The Issuer shall not modify the L.C. without the prior written
consent of Landlord.
(8) Landlord shall have the right to assign and transfer its right
and interests in the L.C. to any other beneficiary/party acceptable to Landlord.
C. The Landlord will return the L.C. to the Tenant if Tenant performs
all of the following obligations: (1) Tenant meets all of its annual revenue
projections through December 1999 as set forth on Exhibit "D" attached hereto,
and (2) Tenant's annual revenue projections through December 1999 as set forth
on Exhibit D are verified in the annual 10-K filed with the Security Exchange
Commission. At no time shall the L.C. be returned to Tenant unless Tenant meets
the requirements set forth in the preceding sentence.
Landlord
[INITIALS]
-----------------
Tenant
[INITIALS
<PAGE> 14
30. LEASE CONTINGENCY. Landlord and Tenant hereby agree that Landlord's
obligations hereunder are subject to and conditioned upon Landlord's review and
approval of Mr. Clinton Howard's personal financial statements in a form that
are acceptable to Landlord. In the event Landlord has not received such
financial statements in a form that are acceptable to Landlord and does not
execute this Lease, Landlord shall have no obligations under this Lease.
31. HVAC MAINTENANCE. As of the Commencement Date, Landlord shall
deliver, at Landlord's cost, to Tenant the heating and air conditioning system
(the "HVAC System") in good repair and working order. As of the Commencement
Date, Landlord shall deliver, at Landlord's cost, the HVAC System so that it
provides temperature, in Landlord's reasonable judgement, for the comfortable
occupancy and use of the Premises during ordinary business hours. Thereafter,
Tenant shall, pursuant to Paragraph 5.E. of the Lease, enter into a regularly
scheduled preventive maintenance/service contract for servicing the HVAC System
and be responsible for all costs and expenses regarding the HVAC System.
[Remainder of Page Intentionally Left Blank]
Landlord
[INITIALS]
-----------------
Tenant
[INITIALS
<PAGE> 15
EXHIBIT "A"
LEGAL DESCRIPTION
Being an approximate 119,192 square foot lease space located at 2301 Chovanetz
Court, Irving, Dallas County, Texas, in an approximate 119,192 square foot
building known as 2301 Chovanetz Court and located on, a tract being further
described as:
Metes and bounds description
BEING a 4.355 acre tract out of TRACT "K" in the Walnut Hill Distribution Center
North in the City of Irving, Texas as originally recorded in Volume 76081, page
296, Deed Records of Dallas County and corrected by Certificate of Correction in
Volume 77247, Page 0005, Deed Records of Dallas County, and being more
particularly described as follows:
BEGINNING at the intersection of the North line of Tract "K-1" (a 50 foot
private R.O.W. easement) and the East right-of-way line of Hurd Drive;
THENCE leaving Hurd Drive South 73 degrees 07' 00" East 22.28 feet along the
North line of said Tract "K-1" to a point for a corner; said point being the
point of curvature of a curve to the left with a central angle of 17 degrees 09'
40" and a radius of 739.65 feet;
THENCE with said curve to the left 221.54 feet to the point of tangency of said
curve;
THENCE continuing along the North line of Tract "K-1" North 89 degrees 43' 20"
East 360.24 feet to a point for a corner; said point being the southwest corner
of an 8.019 acre tract conveyed by Las Colinas Corporation to E.I. DuPont
DeNemours and Company, Inc., as recorded in Volume 78012, Page 0685, Dallas
County Deed Records, January 17, 1978;
THENCE leaving the North line of Tract "K-1" North 00 degrees 16' 40" West
303.43 feet along the western boundary line of said 8.019 acre tract to a point
for a corner;
THENCE continuing along the western boundary line of said 8.019 acre tract,
North 44 degrees 46' 50" West 266.16 feet to a point for a corner; said point
being in the East right-of-way line of Hurd Drive; said point also being the
Northwest corner of said 8.019 acre tract;
THENCE along Hurd Drive South 45 degrees 13' 10" West 439.00 feet to a point for
a corner; said point being the point of curvature of a curve to the left with a
central angle of 28 degrees 20' 45" and a radius of 461.14 feet;
THENCE Southwesterly along Hurd Drive with said curve to the left through a
central angle of 22 degrees 08' 10" a distance of 178.16 feet to the POINT OF
BEGINNING.
CONTAINING 4.355 acres of land, more of less.
<PAGE> 16
EXHIBIT B
TENANT FINISH-WORK: ALLOWANCE
1. If the Premises have heretofore been occupied by any prior tenant,
then except as set forth in this Exhibit, Tenant accepts the Premises in their
"as is" condition on the date that this Lease is entered into.
2. On or before June 15, 1998, Tenant shall provide to Landlord for its
approval final working drawings, prepared by an architect that has been approved
by Landlord (which approval shall not be unreasonably withheld), of all
improvements that Tenant proposes to install in the Premises; such working
drawings shall include the partition layout, ceiling plan, electrical outlets
and switches, telephone outlets, drawings for any modifications to the
mechanical and plumbing systems of the Building, and detailed plans and
specifications for the construction of the improvements called for under this
Exhibit in accordance with all applicable governmental laws, codes, rules, and
regulations. Further, if any of Tenant's proposed construction work will affect
the Building's HVAC, electrical, mechanical, or plumbing systems, then the
working drawings pertaining thereto shall be prepared by the Building's engineer
of record, whom Tenant shall at its cost engage for such purpose. Landlord's
approval of such working drawings shall not be unreasonably withheld, provided
that (a) they comply with all applicable governmental laws, codes, rules, and
regulations, (b) such working drawings are sufficiently detailed to allow
construction of the improvements in a good and workmanlike manner, and (c) the
improvements depicted thereon conform to the rules and regulations promulgated
from time to time by the Landlord for the construction of tenant improvements (a
copy of which has been delivered to Tenant). As used herein, "WORKING DRAWINGS"
shall mean the final working drawings approved by Landlord, as amended from time
to time by any approved changes thereto, and "WORK" shall mean all improvements
to be constructed in accordance with and as indicated on the Working Drawings.
Approval by Landlord of the Working Drawings "shall not be a representation or
warranty of Landlord that such drawings are adequate for any use, purpose, or
condition, or that such drawings comply with any applicable law or code, but
shall merely be the consent of Landlord to the performance of the Work. Tenant
shall, at Landlord's request, sign the Working Drawings to evidence its review
and approval thereof. All changes in the Work must receive the prior written
approval of Landlord, and in the event of any such approved change Tenant shall,
upon completion of the Work, furnish Landlord with an accurate, reproducible
"as-built" plan (e.g., sepia) of the improvements as constructed, which plan
shall be incorporated into this Lease by this reference for all purposes.
3. The Work shall be performed only by contractors and subcontractors
approved in writing by Landlord, which approval shall not be unreasonably
withheld. All contractors and subcontractors shall be required to procure and
maintain (a) insurance against such risks, in such amounts, and with such
companies as Landlord may reasonably require and (b) payment and performance
bonds, if Landlord requires, covering the cost of the Work and otherwise
reasonably satisfactory to Landlord. Certificates of such insurance, with paid
receipts therefor, and copies of such bonds must be received by Landlord before
the Work is commenced. The Work shall be performed in a good and workmanlike
manner that is free of defects and is in strict conformance with the Working
Drawings, and shall be performed in such a manner and at such times as to
maintain harmonious labor relations and not to interfere with or delay
Landlord's other contractors, the operation of the Building, and the occupancy
thereof by other tenants. All contractors and subcontractors shall contact
Landlord and schedule time periods during which they may use Building facilities
in connection with the Work (e.g., elevators, excess electricity, etc.).
4. If a delay in the performance of the Work occurs (a) because of any
change by Tenant to the space plans or the Working Drawings, (b) because of any
specification by Tenant of materials or installations in addition to or other
than Landlord's standard finish-out materials, or (c) if Tenant, any contractor
or subcontractor, or Tenant's employees or agents otherwise delays completion of
the Work, then, notwithstanding any provision to the contrary in this Lease, the
Commencement Date shall be deemed to be the date that, in the reasonable opinion
of Landlord, substantial completion would have occurred if such delays had not
taken place. If the Premises are not ready for occupancy and the Work is not
substantially completed (as reasonably determined by Landlord) on the scheduled
Commencement Date for any reason other than the reasons specified in the
immediately preceding sentence, then the obligations of Landlord and Tenant
shall continue in full force and Base Rent shall be abated until the date the
Work is substantially completed, which date shall be the Commencement Date.
5. Tenant shall bear the entire cost of performing the Work (including,
without limitation, design of the Work and preparation of the Working Drawings,
costs of construction labor and materials, electrical usage during construction,
additional janitorial services, general tenant signage, related taxes and
insurance costs, all of which costs are herein collectively called the "TOTAL
CONSTRUCTION COSTS") in excess of the Construction Allowance (hereinafter
defined). Upon approval of the Working Drawings and selection of a contractor,
Tenant shall promptly (a) execute a work order agreement prepared by Landlord
which identifies such drawings, itemizes the Total Construction Costs and sets
forth the Construction Allowance, and (b) pay to Landlord 50% of the sum of:
the amount by which the estimated Total Construction Costs exceed the
Construction Allowance plus the amount, if any, up to the maximum amount of
$137,071.00, to be advanced by Landlord to Tenant pursuant to Paragraph 28 of
the Lease. If the Work will not be substantially completed before the expiration
of the first full calendar month after the approval of the Working Drawings and
selection of a contractor, the remaining portion of such excess shall be payable
in equal monthly installments on the first day of each month, beginning the
first day of the second full calendar month after approval of the Working
Drawings and selection of a contractor, and on the substantial completion date.
The monthly installments due on the first day of each month shall equal the
portion of such remaining excess divided by the number of scheduled monthly
installment payment dates (including the substantial completion date) from the
date hereof through the estimated substantial completion date for the Work.
Upon substantial completion of the Work and before Tenant occupies the Premises
to conduct business therein, Tenant shall pay to Landlord an amount equal to the
Total Construction Costs (as adjusted for any approved changes to the Work),
less (1) the amount of the payments already made by Tenant, and (2) the amount
of the Construction Allowance.
6. Landlord shall provide to Tenant a construction allowance (the
"CONSTRUCTION ALLOWANCE") up to $238,384.00 for the Work, inclusive of all
architecture, engineering, space planning costs, and construction management
fees, as set forth in Paragraph 28 of the Lease.
7. Landlord or its affiliate shall supervise the Work, make
disbursements required to be made to the contractor, and act as a liaison
between the contractor and Tenant and coordinate the relationship between the
Work, the Building, and the Building's systems.
<PAGE> 17
EXHIBIT C
BASE RENT SCHEDULE
2301 Chovanetz Court
Net Costs - Not Including Expenses
<TABLE>
<CAPTION>
$ per year $ per month Cumulative Total
-------------- ------------ ----------------
<S> <C> <C> <C> <C>
Months 1 thru 2 Free $ -0-
Months 3 thru 14 119,192 x $2.75 = $ 327,778 $ 27,315 $ 327,778
Months 15 thru 18 119,192 x $3.00 = $ 357,576 $ 29,798 $ 446,970
Month 19 Free $ -0- $ 446,970
Months 20-27 119,192 x $3.00 = $ 357,576 $ 29,798 $ 685,354
Months 28 thru 39 119,192 x $3.00 = $ 357,576 $ 29,798 $ 1,042,930
Months 40 thru 51 119,192 x $3.25 = $ 387,374 $ 32,281 $ 1,430,304
Months 52 thru 63 119,192 x $3.25 = $ 387,374 $ 32,281 $ 1,817,678
Months 64 thru 75 119,192 x $3.25 = $ 387,374 $ 32,281 $ 2,205,052
Months 76 thru 87 119,192 x $3.50 = $ 417,172 $ 34,764 $ 2,622,224
Months 88 thru 99 119,192 x $3.50 = $ 417,172 $ 34,764 $ 3,039,396
Months 100 thru 111 119,192 x $3.50 = $ 417,172 $ 34,764 $ 3,456,568
Months 112 thru 123 119,192 x $3.50 = $ 417,172 $ 34,764 $ 3,873,740
-----------
$ 3,873,740
</TABLE>
<PAGE> 18
EXHIBIT D
GLOBENET INTERNATIONAL I, INC.
PRO-FORMA FINANCIALS
<TABLE>
<CAPTION>
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Revenues $ 25,167 $ 59,400 $ 144,900
Growth Rate 79% 136% 144%
Gross Margin 72.5% 71.6% 69.0%
Operating Margin 4.0% 9.5% 14.1%
EBITDA Margin 4.7% 10.3% 14.8%
EBITDA 1,191 6,124 21,462
Capital Expenditures (230) (600) (1,000)
Free Cash Flow 961 2,524 20,462
Cash 199 430 8,787
Net Worth 4,204 8,951 24,207
</TABLE>
<PAGE> 19
EXHIBIT E
GUARANTY
As a material inducement to Landlord to enter into the Lease, dated
June ____, 1998 (the "LEASE"), between GLOBENET INTERNATIONAL I, INC., A
DELAWARE CORPORATION, as Tenant, and CIIF ASSOCIATES II LIMITED PARTNERSHIP BY:
AEW ADVISORS (FORMERLY KNOWN AS COPLEY ADVISORS, INC.), as Landlord, the
undersigned ("GUARANTOR ") hereby unconditionally and irrevocably guarantees
the complete and timely performance of each obligation of Tenant under the
Lease and any extensions or renewals of and amendments to the Lease to the same
extent as if Guarantor were executing the Lease. This Guaranty is an absolute,
primary, continuing, and general guaranty of payment and performance and is
independent of Tenant's obligations under the Lease. Guarantor waives any right
to require Landlord to (a) join Tenant with Guarantor in any suit arising under
this Guaranty, (b) proceed against or exhaust any security given to secure
Tenant's obligations under the Lease, or (c) pursue or exhaust any other remedy
in Landlord's power. Landlord may, without notice or demand and without
affecting Guarantor's liability hereunder, from time to time, compromise,
extend or otherwise modify any or all of the terms of the Lease. The
undersigned further covenants and agrees that this Guaranty shall remain in
full force and effect as to any renewal, modification or extension, or any
holdover by Tenant thereunder, and as to any assignee of Tenant's interest or
interests under the Lease, whether or not known to or approved by the
undersigned and that no subletting, assignment, or other transfer of the Lease,
or any interest therein, shall operate to extinguish or diminish the liability
of the undersigned hereunder.
Whatever reference is made to the liability of Tenant in the Lease,
such reference shall be deemed likewise to refer to the undersigned, jointly and
severally, with Tenant. The liability of the undersigned for all obligations of
the Lease shall be primary; in any right of action which shall accrue to
Landlord under the Lease, Landlord may, at Landlord's option, proceed against
the undersigned and/or Tenant, jointly or severally, and may proceed against the
undersigned without having demanded performance of, commenced any action
against, exhausted any remedy against or obtained any judgment against Tenant.
This is a guaranty of payment and not of collection, and the undersigned hereby
waives any obligation on the part of Landlord to enforce the terms of the Lease
against Tenant as a condition to Landlord's right to proceed against the
undersigned hereunder.
The undersigned hereby waives, to the maximum extent permitted by law,
all defenses available to a surety, whether the waiver is specifically herein
enumerated or not.
It is further agreed that all of the terms and provisions hereof shall
inure to the benefit of the successors and assigns of the Landlord, and shall be
binding upon the respective heirs, executors, administrators, successors and
assigns of the undersigned.
Guarantor hereby waives all demands for performance, notices of
performance, and notices of acceptance of this Guaranty. The liability of
Guarantor under this Guaranty will not be affected by (1) the release or
discharge of Tenant from, or impairment, limitation or modification of, Tenant's
obligations under the Lease in any bankruptcy, receivership, or other debtor
relief proceeding, whether state or federal and whether voluntary or
involuntary; (2) the rejection or disaffirmance of the Lease in any such
proceeding; or (3) the cessation from any cause whatsoever of the liability of
Tenant under the Lease. Guarantor shall pay to Landlord all costs incurred by
Landlord in enforcing this Guaranty (including, without limitation, reasonable
attorneys' fees and expenses).
The Landlord and Tenant agree that this Guaranty will be of no further
effect, void, and returned by the Landlord to the Tenant if Tenant performs all
of the following obligations: (1) Tenant meets all of its annual revenue
projections through December 1999 as set forth on Exhibit "D" attached to the
Lease, and (2) Tenant's annual revenue projections through December 1999 as set
forth on Exhibit D are verified in the annual 10-K filed with the Security
Exchange Commission. At no time shall this Guaranty be returned to Tenant, and
the parties agree that the Guaranty shall remain in full force and effect,
unless Tenant meets the requirements set forth in the preceding sentence and
Tenant receives written notice of same from Landlord.
By: /s/ CLINTON H. HOWARD
------------------------------------------
Clinton H. Howard
Home Address: 3917 Fox Glen Dr.
-------------------------------
-------------------------------
Irving, TX 75062
-------------------------------
Social Security No.: ###-##-####
-------------------------
Texas Driver's License No.: 028 98 715
------------------
<PAGE> 20
ADDENDUM TO STANDARD INDUSTRIAL LEASE AGREEMENT
THIS ADDENDUM TO STANDARD INDUSTRIAL LEASE AGREEMENT (this "Option
Agreement") is to be attached to and shall form a part of that certain Standard
Industrial Lease Agreement (the "Lease") dated June 19, 1998, between CIIF
ASSOCIATES II LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord")
and GLOBENET INTERNATIONAL I, INC., a Delaware corporation ("Tenant"),
concerning the demised premises as defined in the Lease and more particularly
described on Exhibit "A" attached hereto, together with all improvements thereon
and all rights and appurtenances pertaining thereto, including any right, title
and interest of Landlord in and to adjacent streets, alleys and rights-of-way
(collectively the "Property").
1. Landlord hereby grants to Tenant an option (the "Option") to
purchase the Property on the terms and conditions set forth in this Option
Agreement.
2. The Option shall commence on the date hereof and may be exercised
until and shall terminate on the date two (2) years thereafter (the "Expiration
Date") unless sooner terminated in accordance with the provisions hereof,
Provided that Tenant is not in default of any of the terms, covenants and
conditions of the Lease, and the Lease has not been assigned or the Premises (or
a part thereof) sublet, except as provided by Paragraph 14 of the Lease, Tenant
may exercise the Option by delivering written notice to Landlord that Tenant has
elected to purchase the Property pursuant to the provisions hereof. The notice
must be delivered to Landlord at Landlord's address for notices set forth in the
Lease. The notice must set forth the date on which Tenant desires to close the
acquisition of the Property (the "Closing Date") which date shall not be later
than the Expiration Date, as defined in this Paragraph. In the event that the
Option is not exercised prior to the Expiration Date, the Option shall
terminate.
3. In consideration of the Option set forth herein, Tenant shall pay to
Landlord, in addition to any rent and other sums payable by Tenant to Landlord
under the Lease, a non-refundable option payment in the amount of $100.00, the
receipt and sufficiency of which is hereby acknowledged.
4. The purchase price ("Purchase Price") for the Property shall be
Three Million Five Hundred Thousand Dollars ($3,500,000).
5. Prior to the Closing Date, Landlord shall, (i) at Tenant's expense,
deliver to Tenant a copy of a current survey of the Property prepared by a
Registered Professional Land Surveyor, and (ii) at Landlord's expense deliver to
Tenant a title commitment ("Title Commitment") covering the Property binding the
issuing title company to issue a Texas Owner Policy of Title Insurance on the
standard form prescribed by the Texas State Board of Insurance at the Closing,
in the full amount of the Purchase Price, insuring Tenant's fee simple title to
the Property to be good and indefeasible, subject only to the Permitted
Exceptions (as hereinafter defined), together with copies of all recorded
instruments affecting the Property and recited as exceptions in the Title
Commitment (the "Title Documents"), and a current tax certificate. Tenant shall
have ten (10) days after the receipt of the
ADDENDUM TO STANDARD
INDUSTRIAL LEASE AGREEMENT Page - 1
<PAGE> 21
latter of the survey, the Title Commitment or the Title Documents, to review
same and to deliver in writing to Landlord such objections as Tenant may have to
anything contained in them. Any such item to which Tenant shall not object shall
be deemed a "Permitted Exception". If there are objections by Tenant, or a third
party lender, Landlord shall, in good faith, attempt to satisfy such objections
prior to Closing, but Landlord shall not be required to incur any cost to do so.
If Landlord delivers written notice to Tenant on or before the Closing Date that
Landlord is unable to satisfy such objections, Tenant may either waive such
objections and accept such title as Landlord is able to convey or terminate
Tenant's election to exercise the Option by written notice to Landlord.
6. The closing of the sale (the "Closing") shall take place on the
Closing Date at a location and at a time mutually acceptable to Landlord and
Tenant. At the Closing: (i) Landlord shall deliver to Tenant a general warranty
deed and bill of sale conveying good and indefeasible title in fee simple to the
Property; subject, however, only to the lien for taxes for the year of Closing
not yet due and payable, and the Permitted Exceptions; and (ii) Tenant shall
deliver to Landlord in readily available funds the full amount of the Purchase
Price. Each party shall pay its share of all other closing costs which are
customarily paid by a seller or purchaser in a transaction of this character in
Dallas County, Texas. Each party shall pay its own attorneys' fees in connection
with the closing of Tenant's acquisition. In the event that the Closing does not
occur prior to the Expiration Date, then the Option shall terminate, be void,
and Tenant's rights under this Option Agreement shall be null and void.
7. The provisions of this Option Agreement and the Option shall
terminate, without notice, demand or any other action being taken by Landlord,
all of which are hereby expressly waived by Tenant, upon the earlier to occur of
the following: (i) the termination of the Lease; or (ii) the Expiration Date.
8. Tenant, at its election, may file this Option Agreement of record.
Executed effective this 12 day of June, 1998.
TENANT: LANDLORD;
GLOBENET INTERNATIONAL I, INC., CIIF ASSOCIATES II LIMITED PARTNERSHIP,
a Delaware corporation a Delaware limited partnership
By: /s/ CLINTON H. HOWARD By: AEW Advisors, Inc.,
------------------------------- a Massachusetts corporation,
Name: Clinton H. Howard Managing General Partner
-----------------------------
Title: President
---------------------------- By: /s/ MARK A. ALBERTSON
----------------------------------
Name: Mark A. Albertson
--------------------------------
Title: Vice President
-------------------------------
ADDENDUM TO STANDARD
INDUSTRIAL LEASE AGREEMENT - Page 2
<PAGE> 22
THE STATE OF TEXAS )
)
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public in and for the
State of Texas, on this day personally appeared Howard Clinton of GlobeNet
International I, Inc., a Delaware corporation, [known to me] or [proved to me
through his Texas Drivers License or other document] to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same as a duly authorized officer of such
corporation, for the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 12th day of June, 1998.
/s/ CHARLOTTE BURROWS
---------------------------------------------
Notary Public, State of Texas
CHARLOTTE BURROWS, NOTARY PUBLIC
State of Texas
Comm. Exp. 04-03-2001
THE STATE OF MASSACHUSETTS )
)
COUNTY OF SUFFOLK )
BEFORE ME, the undersigned authority, a Notary Public in and for the
State of Massachusetts, on this day personally appeared Mark A. Albertson of AEW
Advisors Inc., a Massachusetts corporation, general partner of CIIF Associates
II Limited Partnership, a Delaware limited partnership, [known to me] or [proved
to me through his Texas Drivers License or other document] to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same as a duly authorized officer of such
corporation, for the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 19th day of June, 1998.
/s/ GAIL M. TRAMONTOZZI
----------------------------------------------
Notary Public, State of Massachusetts
ADD
- ---
Gail M. Tramontozzi, NOTARY PUBLIC
My Commission Expires Mar. 30, 2001
ADDENDUM TO STANDARD
INDUSTRIAL LEASE AGREEMENT - Page 3
<PAGE> 23
EXHIBIT "A"
LEGAL DESCRIPTION
Being an approximate 119,192 square foot lease space located at 2301 Chovanetz
Court, Irving, Dallas County, Texas, in an approximate 119,192 square foot
building known as 2301 Chovanetz Court and located on a tract being further
described as:
Metes and bounds description
BEING a 4.355 acre tract out of TRACT "K" in the Walnut Hill Distribution
center North in the City of Irving, Texas as originally recorded in Volume
76081, page 296, Deed Records of Dallas County and corrected by Certificate of
Correction in Volume 77247, Page 0005, Deed Records of Dallas County, and being
more particularly described as follows:
BEGINNING at the intersection of the North line of Tract "K-1" (a 50 foot
private R.O.W. easement) and the East right-of-way line of Hurd Drive;
THENCE leaving Hurd Drive South 73 degrees 07' 00" East 22.28 feet along the
North line of said Tract "K-1" to a point for a corner; said point being the
point of curvature of a curve to the left with a central angle of 17 degrees 09'
40" and a radius of 739.65 feet;
THENCE with said curve to the left 221.54 feet to the point of tangency of said
curve;
THENCE continuing along the North line of Tract "K-1" North 89 degrees 43' 20"
East 360.24 feet to a point for a corner; said point being the Southwest corner
of an 8.019 acre tract conveyed by Las Colinas Corporation to E.I. DuPont
DeNemours and Company, Inc., as recorded in Volume 78012, Page 0685, Dallas
County Deed Records, January 17, 1978;
THENCE leaving the North line of Tract "K-1" North 00 degrees 16' 40" West
303.43 feet along the western boundary line of said 8.019 acre tract to a point
for a corner;
THENCE continuing along the western boundary line of said 8.019 acre tract,
North 44 degrees 46' 50" West 266.16 feet to a point for a corner; said point
being in the East right-of-way line of Hurd Drive; said point also being the
Northwest corner of said 8.019 acre tract;
THENCE along Hurd Drive South 45 degrees 13' 10" West 439.00 feet to a point for
a corner; said point being the point of curvature of a curve to the left with a
central angle of 28 degrees 20' 45" and a radius of 461.14 feet;
THENCE southwesterly along Hurd Drive with said curve to the left through a
central angle of 22 degrees 08' 10" a distance of 178.16 feet to the POINT OF
BEGINNING.
CONTAINING 4.355 acres of land, more of less.
<PAGE> 1
[ROYAL BODYCARE LETTERHEAD]
AGREEMENT
GlobeNet International I, Inc. (GlobeNet) and its subsidiary Royal Bodycare,
Inc. desires to license the marketing of Flanagan Microclusters(R) including,
the silica hydride form, exclusively in the fields of personal care products.
Flanagan Technologies, Inc. (Flantech) agrees to license the marketing of
Flanagan Microclusters(R). This license will be for an initial period of two
years from the date of this agreement, and will be renewed automatically for
successive two-year periods providing payments to Flanagan Technologies for its
products and royalties meet the following minimums.
<TABLE>
<CAPTION>
<S> <C>
Jan. 1 to Mar. 31, 1999 $ 750,000
Apr. 1, 1999 to Jun 30, 1999 $ 800,000
Jul. 1, 1999 to Sept. 30, 1999 $ 850,000
Oct. 1, 1999 to Dec. 31, 1999 $ 900,000
------------
For Year 1999 $ 3,300,000
Jan. 1, 2000 to Mar. 31, 2000 $ 950,000
Apr. 1, 2000 to Jun. 30, 2000 $ 1,000,000
Jul. 1, 2000 to Sep. 30, 2000 $ 1,050,000
Oct. 1, 2000 to Dec. 31, 2000 $ 1,200,000
------------
For Year 2000 $ 4,200,000
</TABLE>
Minimum payments on renewals of this agreement will increase by $50,000 per
quarter up to $2,500,000 per quarter or an annual amount of $10,000,000 per
year, after which the annual minimum will remain constant.
1. RBC will conduct research in recognized outside laboratories to further
support the safety, efficacy, and function of microclusters investing
at least $100,000 per year.
2. RBC will continue to make Microclusters(R) a lead products and to train
distributors to use the exciting Microcluster(R) story as an
introductory presentation in approaching prospective customers.
3. This promotion will be continued in countries throughout the world.
4. RBC will continue to place the approved Microcluster(R) story in various
media, including radio, TV, and the Internet.
<PAGE> 2
5. Globenet will continue to publish high quality catalogues, brochures,
mailers and other pieces of literature to promote Microclusters(R) and
any other products made available to us by Flantech.
6. RBC will hold conferences, rallies, leadership meetings, cruises and
training seminars, emphasizing Microclusters(R) to make our growing
numbers of distributors more effective and productive.
7. RBC will establish target sales goals anticipating rapid growth and
provide adequate budget to allow for the above activities.
In the event RBC fails to meet the minimum purchase requirements for any
quarterly period, Flantech will allow RBC a thirty (30) day "catch up" period in
which any shortfall in purchasing for that quarter can be made up. Failure to
maintain these minimum purchases could, at the sole option of Flantech, cause a
reduction of RBC's exclusivity license to be reduced to a non-exclusive license
status.
RBC accepts the policies and restrictions agreed to previously regarding the use
of Flantech trade names. Flantech written approval on all labels, literature,
news releases, and articles as stated in a previous agreement written by
Flantech and signed by Royal Bodycare previously.
RBC also accepts the terms Flantech has stated regarding payment for products
ordered from Flantech.
This agreement will void and replace the previous agreement of March 28, 1997.
Nothing in this agreement will restrict Flantech from marketing or licensing
others to market Microcluster technologies for application such as engineering,
other than as described above.
<TABLE>
<CAPTION>
Agreed:
<S> <C>
/s/ DR. PATRICK FLANAGAN /s/ CLINTON H. HOWARD
- ---------------------------------------- ------------------------------------------
Dr. Patrick Flanagan Clinton H. Howard
President - Flanagan Technologies, Inc. President - GlobeNet International I, Inc.
Date 98/12/16 Date Dec. 16, 1998
------------------------------------ ---------------------------------------
</TABLE>
<PAGE> 1
ROYAL BODYCARE MEMBER AGREEMENT
AGREEMENT between the above-named Applicant (hereafter APPLICANT) and the ROYAL
BODYCARE, INC. (thereafter COMPANY) effective under the terms and conditions
below:
1. APPLICANT hereby applies for authorization as a Member in COMPANY'S
independent Member program and certifies that Applicant is of legal age in
the state in which Applicant resides. For a period of 30 days from the
mailing of this Application, or until such time as COMPANY notifies
APPLICANT of this Application's acceptance or rejection. APPLICANT is
provisionally authorized as a Member and granted the rights to sell company
products. COMPANY reserves the right to accept or reject any application
for any reason.
2. Upon acceptance as a Member by COMPANY, APPLICANT is authorized as a Member
for a period of 12 months. There is no annual renewal fee, however, if you
do not order product from COMPANY for a period of 12 months, you will be
automatically removed from active Member status and you must reapply if you
wish to rejoin COMPANY.
3. APPLICANT has read, understands, and agrees to be bound by the terms of
this Agreement which includes all rules, policies, procedures and
compensation programs of COMPANY as set forth in official COMPANY
literature, which are hereby incorporated and made part of this Agreement
in their current form and as they may be amended through COMPANY'S official
amendment process.
4. APPLICANT is an independent contractor under the terms of this Agreement,
and not an agent, employee or legal representative of his/her sponsor or
COMPANY, and will in no way represent him/herself as such. APPLICANT
will not be treated as an employee in regard to any laws covering
employees, including but not limited to the Federal Insurance
Contributions Act, the Social Security Act, the Federal Unemployment Tax
Act, income tax withholding at source, or for any federal or state tax
laws.
5. Applicant will not produce, promote, or use materials of any kind
describing COMPANY's names, programs, products, and trademarked,
copyrighted or otherwise protected materials if such materials are not
obtained from or approved of in writing by COMPANY.
6. APPLICANT will explain COMPANY's programs honestly and completely when
presenting them to others. APPLICANT understands and will make clear in any
presentation the following: that no amount of earnings are guaranteed by
COMPANY or its programs; no Member will earn money solely for sponsoring;
no specific amount of product must be purchased at any level; retail
selling is a requirement and that there are no exclusive territories for
Members in the program, and Applicant certifies that none of the preceding
claims or representations have been made to Applicant. Neither the
execution nor acceptance of this Agreement constitutes the sale of a
security or a franchise.
7. APPLICANT is responsible for all of his/her own income, sales, social
security, unemployment, and any other taxes, licenses, and fees of any
kind.
8. APPLICANT must offer all of its retail customers a full money-back
guarantee of all products. As a Member, APPLICANT has the responsibility to
refund the purchase price of any product that fails to fully satisfy any of
your own retail customers within 30 days of purchase. If this happens the
COMPANY will promptly replace any products returned to APPLICANT upon
receipt by COMPANY of the completed Consumer Product Return Form and the
returned product.
9. Any sale of assignment of this Member Agreement must be approved of in
writing by COMPANY. Successors in interest of assigns must comply with all
program requirements.
10. APPLICANT certifies purchase of COMPANY's official Member kit as evidenced
by the proof of purchase seal affixed hereto, or the current cost of kit
which is included with this application. (kit to be sent to APPLICANT by
COMPANY).
11. The signature(s) on this Agreement agree(s) that he/she/they is/are
authorized to bind APPLICANT.
12. Venue and jurisdiction for any action pertaining to this Agreement of any
disagreement or claim between the parties hereto shall be in the State of
Texas. This Agreement shall be governed by the laws of the State of Texas.
Applicant understands and agrees that except as set forth in the Policies
and Procedures, all claims and disputes relating to this Agreement, the
rights and obligations of the parties or any other claims or causes of
actions relating to the performance of either party under this Agreement
and/or Applicant's purchase of products shall be settled totally and
finally by arbitration in the City of Dallas, State of Texas in accordance
with the Federal Arbitration Act and the Commercial Rules of the American
Arbitration Association. This Agreement is performable in Dallas County,
Texas.
13. Any and all costs, including attorney's fees, incurred by COMPANY as a
result of any violation of this Agreement of any other dispute between the
parties hereto shall be borne by APPLICANT. In the event that this
Agreement at any time, for any reason is determined to be voided or
superceded, the provisions of this paragraph shall survive.
14. THE APPLICANT SHALL BE ENTITLED TO CANCEL PARTICIPATION IN THE MARKETING
PROGRAM AT ANY TIME AND FOR ANY REASON UPON NOTICE TO THE COMPANY. UPON
NOTIFICATION OF CANCELLATION OR TERMINATION, THE COMPANY WILL REPURCHASE
INVENTORY IN ACCORDANCE WITH ITS POLICIES AS STATED IN THE COMPANY'S
POLICIES AND PROCEDURES.
15. The COMPANY reserves the right to terminate any Membership for cause.
16. No purchase or investment is necessary to become a COMPANY Member other
than the purchase of the Member kit which is sold "at COMPANY cost". The
Member kit is mandatory except in those states where prohibited by law.
17. This Agreement constitutes the entire agreement between the APPLICANT and
the COMPANY and no other additional promises, representations, guarantees
or agreements of any kind shall be valid unless in writing. APPLICANT
agrees to indemnify and hold the COMPANY harmless against any claim, costs,
damages, losses, liabilities and expenses (including attorney's fees)
arising from or connected with, directly, any breach of this Agreement, the
Policies and Procedures or other conduct by APPLICANT, APPLICANT's agent or
employee.
- -------------------------------------------------------------------------------
BY RETURNING THIS SIGNED FORM (REVERSE) TO ROYAL BODYCARE, I INDICATE THAT I
HAVE READ, UNDERSTOOD AND WILLINGLY ACCEPT THE TERMS AND CONDITIONS OF THIS
AGREEMENT.
<PAGE> 2
MEMBER POLICIES
Royal BodyCare has established the following policies and procedures to
help guide the efficient and ethical operation of an RBC home based business.
CODE OF ETHICS
Royal BodyCare Members agree to conduct their business in an ethical and
professional manner at all times. They will encourage all members in their
sales organizations to abide by the letter and spirit of this code.
BECOMING A MEMBER
An applicant accepted into the Royal BodyCare (also referred to as RBC or the
Company) business is called a "Member." Any person having reached the legal age
in the state in which he or she resides is eligible to become an RBC Member.
Certain requirements must first be met:
1. The applicant's completed original Member Application and Agreement Form
has been received and approved by the RBC Home Office. Faxes or photocopies
will be accepted. A signed Member Application and Agreement Form must be
received at the RBC Home Office within seven days of becoming a Member. If
a signed Member Application and Agreement Form is not received within seven
days, RBC reserves the right to terminate the membership. It is the
responsibility of the sponsoring Member to cause delivery to the Company of
a completed and signed Member Application and Agreement Form if the sponsor
is to expect recognition as the official sponsoring Member.
2. The Application must be accompanied by the purchase of a new Member's
Kit. The purchase price is not a service or franchise fee; it is for the
purpose of providing educational and business materials required for an
independent Member of RBC. No product purchase by the Member is required.
RBC reserves the right to refuse any Member Application and Agreement Form
and to accept or reject anyone as a Member.
MEMBER AS INDEPENDENT CONTRACTOR
The Member is an independent contractor and is not an agent of, or authorized
in any way to represent, the Company. All expenses incurred by the Member
including taxes and insurance are the Member's sole responsibility.
MEMBER RIGHTS
Members are authorized to sell RBC products and services, participate in the
Compensation Plan, and sponsor new Members into the RBC business anywhere
within the United States and the other countries in which the Company does
business.
INTERNATIONAL SPONSORING
One of the benefits of becoming an RBC Member is the ability to sponsor Members
in foreign countries and earn bonuses based on the activity of the Directors in
the designated foreign countries. To be eligible for Downline bonuses, you must
be a Director in your home country and have signed an International Member
Sponsoring Agreement and have paid the applicable fee. Once you are eligible
to earn Director Override bonuses on your Downline in a foreign country, your
earnings will be based on the Compensation Plan in the foreign country as long
as you have qualified your membership in your personal home country. Please
note that foreign countries have their own rules on taxation, including
withholding requirements. You will need to inquire about how this is handled
for each country in which you are registered.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 3
SOCIAL SECURITY NUMBER
All Members are required by federal law to obtain a social security number or a
federal business ID number. All Members must also have one on file at the RBC
Home Office.
SALES AND USE TAXES
RBC products, promotional materials, and shipping charges are subject to various
sales and use taxes by local, county and state government agencies in the
locations in which the Member does business. RBC will collect and pay these
taxes where applicable for each Member if the Member does not have a resale tax
certificate or equivalent certificate showing tax exempt status on file at the
RBC Home Office. This service will be provided free of charge to the Member.
When a copy of the tax exempt certificate is on file at RBC, the Member will no
longer be charged sales tax on product ordered from RBC, however the Member will
be solely liable for payment of all applicable sales taxes to the respective
government agencies. Each Member is responsible for knowing the laws and
regulations of conducting business in his or her state and is liable for failure
to comply.
INCOME TAXES
All Members are responsible for paying local, state and federal taxes due on
earnings from commissions or any other earnings generated as a seller of RBC
products. At the end of each calendar year, RBC will issue IRS Form 1099 as
required by federal statutes governing the United States. RBC is not required
to issue 1099s to corporations.
LEGAL COMPLIANCE
Every Member shall comply with all federal, state and local statutes and
regulations relating to the operation of his or her business. Failure to do so
could result in the termination of the membership.
ANNUAL RENEWAL OF MEMBERSHIP
You may enjoy your membership status for a period of 12 months from the month
your Member Application and Agreement Form was accepted by us. There is no
annual renewal fee, however, if you do not order products from RBC for a period
of 12 months, then you will automatically be removed from active status in the
computer, and you must reapply if you desire to rejoin RBC.
Within the first six months of termination, any Member removed from the
Company for failure to renew their annual membership, may sign up again as an
RBC Member by signing under their original Sponsor or with the first upline
Member in their organization--in the event that their sponsor is no longer an
RBC Member. By re-signing, they start anew as a Member with no downline
organization.
Six months after your Membership has been terminated, you have the option
of sponsoring under anyone as a new Member.
SINGLE MEMBERSHIP
You may have only one membership in RBC. You may neither own any other RBC
membership, either individually or jointly, nor may you participate as a
partner, owner, stockholder, trustee, director or association member in another
RBC membership without written consent from RBC. However, a membership may be
owned by more than one individual.
Only one membership is allowed for married couples and their dependent
children.
If two RBC Members have been independently operating their RBC businesses
and decide to marry each other, then they have several options:
A. If their memberships are in separate downline organizations, they have the
option of:
1) resigning one membership and merging it into the other, or
2) operating their businesses separately.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 4
B. If their memberships are in the same downline organization they have the
option of:
1) merging their two memberships into the higher Membership in the
sponsorship chain, or
2) operating their businesses separately. In order to operate their
business separately, they must get the written approval of their three upline
Directors.
When a couple sharing a membership divorces or separates, RBC will continue
to pay bonus checks as before the divorce or separation until it receives
written notice signed and notarized by both parties, specifying how future bonus
checks are to be paid.
CORPORATIONS AND PARTNERSHIPS
Corporations and partnerships may become RBC Members by submitting a Member
Application and Agreement Form which contains their federal business ID number
and is signed by its president or managing partner. RBC will recognize up to
two members of the corporation or partnerships as its representatives.
RBC will not recognize limited partnerships or corporations where private
or undisclosed investors are involved. When writing the company name, please
limit the number of characters to 21 (including letters, slashes and spaces).
RBC will recognize the dissolution of a partnership or corporation upon the
receipt of a signed, notarized agreement by all interested parties or upon the
receipt of a court order.
PAYMENT OF COMMISSIONS, REBATES, AND BONUSES
A. Monthly Bonuses are typically mailed out on the 14th of the following month
or on the first business day thereafter.
B. You must report any discrepancies within fifteen (15) days.
C. Account Maintenance Fee. Only Members with earnings will be assessed a fee,
and that fee will never be more than 10% of the check amount. The rate
chart is as follows:
<TABLE>
<CAPTION>
RANK AT BEGINNING OF THE MONTH FEE
<S> <C>
DIRECTOR & BELOW $ 1
SILVER DIRECTOR $ 2
GOLD DIRECTOR $ 4
EMERALD DIRECTOR $ 6
DIAMOND DIRECTOR $ 8
CROWN DIRECTOR $10
</TABLE>
CONFIDENTIAL INFORMATION
During the term of the Agreement, RBC may supply confidential information to
you, including, but not limited to, customer or Member lists, business reports,
financial, manufacturing or supplier information, product formulas, commissions
or sales reports or other information which RBC may designate as confidential.
You have acknowledged that upon receipt of such information that the
information is proprietary and confidential to RBC and was transmitted to you
in strictest confidence. You will keep the information confidential and shall
not disclose, publish, sell or license such information to any third party,
directly or indirectly, nor will you use the information to compete with RBC
directly or indirectly. Upon expiration, non renewal or termination of the
Agreement, you will promptly return to RBC all such confidential information.
This covenant shall survive expiration or termination of the Agreement.
RBC's business relationships with its manufacturers and suppliers are
confidential. You shall not contact, directly or indirectly, or communicate with
any representative of any RBC supplier or manufacturer except at an
RBC-sponsored event at which the representative is present at the request of
RBC.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 5
ENFORCEMENT OF RULES
Members aware of the other members violating any of the Policies and Procedures
should inform the members of the violation and the reason for the rule. Most
violations are due to a lack of information. If the Member continues to violate
the rule, then the Home Office should be notified. Any disciplinary decision
by the Home Office will be final.
AMENDMENTS TO POLICIES & PROCEDURES
The Company reserves the right to amend or modify these Policies & Procedures,
the Compensation Plan and the Member Application and Agreement from time to
time, upon notice to the member, and the member agrees to abide by all such
amendments or modifications may appear in the Winner's Word or in other
publications of the Company.
- --------------------------------------------------------------------------------
A WELL-TRAINED AND WELL-SERVICED DOWNLINE IS THE FOUNDATION OF YOUR BUSINESS.
IT IS THE DIFFERENCE BETWEEN REALIZING YOUR GOALS AND WONDERING WHY YOU ARE NOT
ACHIEVING WHAT YOU HAD HOPED FOR.
- --------------------------------------------------------------------------------
RESPONSIBILITIES OF SPONSORS
Becoming an RBC member entitles you to sponsor other Members. Sponsors are
responsible for:
A. Providing leadership to their members. It is important to introduce your
members to the RBC products, Compensation Plan, and Policies & Procedures.
Concentrate on what they need to know to complete a sale and to properly
fill out order forms. Take your new Members on a few calls so they can see
how you handle prospects and deal with customers. Stay in close contact
with all your new Members to make sure that your training is effective.
B. Conducting periodic product and sales meetings to train and motivate your
Members. You should give the meetings yourself or have another active
Member conduct the meetings. Members that are not located in as area where
there are enough Members to warrant holding a meeting should be trained by
frequent mail and telephone contact.
C. Training, motivating and supplying product to your Members.
D. Keeping accurate sponsorship and business records.
E. Understanding Company policies. Sponsors must stay informed of any new
Company policies and review these with their Members to make sure they
understand them. A well-trained and well-serviced downline organization is
the foundation of your business. It is the difference between realizing
your goals and wondering why you are not achieving what you had hoped for.
Training and servicing your downline Members are such vital
responsibilities that not meeting these obligations, either personally or
by making adequate alternative arrangements, can result in the loss of a
membership.
If you are unable to train your members, you should make arrangements
with your upline Sponsor or some other active Member to do the training and
support work in consideration for a portion of your monthly bonus check.
SPONSORING OTHER MEMBERS
If several Members contact the same person, the Member who the prospective
Member first chooses to sponsor under will be deemed the Sponsor. The company
reserves the right to settle all disputes and its decision will be final.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 6
TRANSFERRING SPONSORS
RBC does not encourage the policy of Member transfers because it can lead
to a weakening of the network marketing structure.
Transfers will generally be approved in three circumstances only:
1) In the case of unethical sponsoring by the original sponsor. In such
cases, the Company will be the final authority.
2) With the written approval of upline sponsors and the Home Office:
NEW MEMBERS (1ST 60 DAYS)
Sponsors may transfer a new Member to any Member in his or her downline
organization as long as the Member being transferred has been an RBC Member for
60 days or less.
MEMBER RANKS
The transfer of a Member who has not yet achieved Director rank and has been an
RBC Member for more than 60 days requires the written approval of all sponsors
who are directly upline of the transferring Member up to and including the 1st
upline Director.
DIRECTOR RANKS
The transfer of a Member who has attained the rank of Director requires the
written approval of the six upline Directors. If the Member or Director is also
requesting the transfer of his or her downline, then they must list the names
of the Members they wish to transfer.
3) Resigning from the Company entirely and waiting six months to reapply
under a new sponsor.
All transfers are subject to the approval of the Home Office. To complete a
transfer, a copy of a signed transfer agreement, including requisite
approvals must be sent to the Home Office together with a $25.00 processing
fee.
VOLUNTARY TERMINATION
The Independent Member Application and Agreement may be canceled at any time and
for any reason by a Member who notifies the Company in writing of the
election to cancel.
If the independent Member purchased products for inventory purposes or mandatory
sales aids while his or her Member Application and Agreement was in effect,
all products in his or her possession in a resalable condition purchased
within 12 months of cancellation is eligible to be repurchased. The
repurchase will be at a price not less than ninety percent of the original
net cost to the participant returning such goods, taking into account any
sales made by or through the Member prior to notification to the Company
of the election to cancel. Also see "Commission Adjustments."
INVOLUNTARY TERMINATION AND APPEAL PROCEDURES
RBC may, at its sole discretion, terminate one's membership at any time upon
the occurance of any of the following events:
1) If a Member breaches any term or condition of this Agreement or
performs any illegal or unethical act.
2) Any conduct by a Member which, in the sole opinion of RBC, is
determined to damage the business or reputation of RBC, its Members,
its products or its programs.
3) If a Member solicits or attempts to sponsor RBC Members into another
network marketing, MLM, or direct sales program.
In the event of a membership termination, the following procedures will be
followed:
A. In the event that good cause exists for termination, the Home Office will
inform the Member by Registered Mail that the membership is immediately
terminated.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 7
B. The Member will have ten days from the mailing date of the letter to appeal
the termination in writing. Unless the Member replies to the Home Office
within this time period, the termination will be deemed final.
C. Upon timely appeal of the termination, the Home Office will review the
matter and determine the appropriate action, and the decision of the Home
Office will be final.
D. In the event of termination, the Member's downline will automatically close
up. The new Sponsor will then be notified by the Home Office to contact all
of his or her new first level Members. In the event that a Member resigns or
is terminated, they will not be entitled to any compensation from the
Company. In cases where a termination is disputed, the Company may, at its
option, hold all past, current and future monies in a reserve fund until the
dispute is settled.
SALE OF A MEMBERSHIP
RBC Members in good standing are eligible to purchase another RBC membership.
Potential buyers must be at the same or higher rank as the seller. Any such
sales are subject to the written approval of the Sponsor, the three upline
Directors, and the Home Office. The membership must first be offered, in
writing, to the three Directors upline starting with the Sponsor Director.
If each of these persons declines the offer, then the Member may offer the
membership for sale to the other RBC Members under the identical terms and
conditions. The selling Member shall not be eligible to sign up again as a
Member until six months after the date of the sale.
PURCHASE AND SALE OF PRODUCTS
RETAIL SALES
One of the keys to success in your business is retail sales. With every purchase
you will be asked to certify that you have sold or consumed at least 70% of all
products previously purchased. To qualify to receive Commissions and Bonuses on
the sale of products, you must make at least four different, verifiable retail
customer sales each calendar month. It is vital that every Member continue to
make retail sales to insure the health of their business.
STOCKING MERCHANDISE
Members should maintain an adequate stock of product with which to supply
customers. We recommend that you only stock the amount of merchandise you could
easily sell within 60 days.
No Sponsor shall engage in the practice of "inventory loading" or "closet
filling" that is, inducing or requiring any Member to purchase more product than
they can easily sell in two months.
INVENTORY REQUIREMENTS
Independent Members have no inventory requirements.
SELLING NON-RBC PRODUCTS
No Member may solicit any RBC Member whom he has not personally sponsored to
buy products which are not RBC products.
RBC PRODUCT PURITY & QUALITY GUARANTEE
RBC is dedicated to providing you the highest quality products available. We
test our products for purity and quality in our in-house Quality Control
laboratory at our World Headquarters in Irving, Texas. We offer a 100%
guarantee on the quality and purity of our products. However, since the
performance of a product may vary from person to person, RBC cannot guarantee
results.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 8
This guarantee applies only to products that have not been damaged due to
misuse, discontinued or outdated. This guarantee does not apply to any product,
which carries its own product warranty.
HANDLING CUSTOMER PRODUCT PROBLEMS
If a customer is unhappy with a product and would like to return it, please
follow the procedure below.
1. Determine that the product was used for a reasonable amount of time.
2. Ask enough questions to determine why the customer feels dissatisfied with
the product. Example: How much did you take? When did you take the product?
Have you taken the product consistently? etc.
3. Attempt to re-educate the customer on the correct use of the product as
determined by your questioning.
4. If you fail to reeducate the customer, you should then offer to give them
credit for the full amount paid toward another product that may suit them
better. Offer suggestions.
5. If you have been unable to convince them to try another product, you should
then refund their money promptly.
6. If you have been successful in reselling your customer on this product or
another product, then be sure to follow up with them and show you care.
MONEY BACK GUARANTEE FOR RETAIL AND PREFERRED CUSTOMERS
If a retail customer or RBC Preferred Customer is dissatisfied with any RBC
product for any reason, he or she may return that product to the Member from
whom it was purchased within 60 days for a replacement, an exchange or a full
refund on the purchase price, excluding shipping charges. Every RBC Member is
required to offer a 100% unconditional money-back product guarantee to all
retail customers and RBC Preferred Customers. All RBC Members are responsible
to honor this guarantee. RBC will replace the returned product if Customer
Service receives the following items from the Member within fifteen (15) days
of the return:
a) A pre-approved return authorization number obtained from Customer Service.
Any item that is returned without authorization will be returned to sender.
b) A signed statement from the retail customer, including name, address and
telephone number; and explanation of the return; and the receipt showing that
the customer received a full refund from the RBC Member.
c) A copy of the original retail sales receipt, canceled check or credit card
statement.
d) The unused portion of the product in its original container.
Failure by a Member to honor a legitimate refund request by a retail customer
or Preferred Customer could result in termination of his or her membership.
BUYER'S RIGHT TO CANCEL
Federal law gives a buyer the right to cancel customer sales of $25 or more
without penalty prior to midnight on the third business day after the
transaction. If the consumer wishes to cancel, he or she must mail or deliver
to the Member prior to midnight on the third business day after the transaction:
1. A valid notice of cancellation after ordering or purchasing product.
2. The product in the same substantially good and unused condition as received.
The consumer is then entitled to a full refund from the Member without penalty.
When delivering product to customers, the Member is responsible for informing
the consumer of the "Buyer's Right to Cancel". The Member must present the
consumer with a complete legal notice in writing and obtain the buyer's
signature thereon. (Copies of this notice are available from Customer Service.)
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 9
MEMBER'S RETURNS PROCEDURES
To return or exchange product for any reason, Members must follow the following
steps:
a. Obtain a return authorization number from Customer Service within sixty (60)
days of receipt of the product. Any product returned without prior authorization
will be returned to the sender.
b. Print the return authorization number clearly on the outside of the package.
c. Enclose a letter stating the reason for the return.
d. Return the unused portion of the product to the Company. Exchange or refund
will be given only on returned product, not on empty bottles or bottles that
are not returned to the Company.
e. In the event of a Company error, Customer Service will issue a call tag to
pick up the package at the Member's location at no expense to the Member.
MEMBER RETURNS FOR REFUND
If a new RBC Member is dissatisfied with any RBC product for any
reason, he or she may return that product to the Home Office for a refund on the
purchase price, excluding shipping charges, as long as they do so within sixty
(60) days of signing up as a Member. Any rebates paid on the sale of this
product to the purchasing Member will be deducted from the refund.
A Member who has been an RBC Member for more than sixty (60) days
cannot return his or her purchase for refund without potential termination of
his or her Membership. See "Voluntary Termination".
MEMBER RETURNS FOR EXCHANGE
A Member may exchange product for other product within sixty (60) days
of the original purchase. The product being exchanged must be unopened and in
reusable and resalable condition. RBC will not ship the exchange product until
the returned product is received and inspected at the Home Office. The Member
returning the product is responsible for the shipping charges to return the
product to the Home Office. The Member will be charged a ten percent (10%)
restocking fee on the returned product and a shipping and handling fee on the
exchange product.
RBC will not authorize replacement of any product previously certified
as sold under the 70 percent rule, except as a customer return.
COMMISSION ADJUSTMENTS
RBC pays commissions on all products sold. However, RBC cannot pay commissions
on products that are sold and subsequently returned for refund. Therefore, when
a product return is approved for refund, RBC will charge back all commissions
that were paid on the returned product to the upline Members who received the
commissions on the original purchase.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 10
ADVERTISING
ADVERTISING REGULATIONS
Only RBC supplied or approved advertising and literature can be used to promote
the products and business plan. Any use of unauthorized advertising or
literature may result in the termination of a membership.
MEDICAL CLAIMS
Members may not make any medical or therapeutic claims regarding RBC products,
or display any reading materials discussing the medical effects of the products.
Share your personal experience and emphasize the nutritional benefits of the
products. When sharing testimonials, it is important not to make claims that
the product had a medical effect. If a customer has a medical problem, advise
them to consult their physician before changing their diet.
RELABELING OR REPACKAGING OF PRODUCT
The relabeling or repackaging of any Company product is expressly prohibited.
TRADEMARKS
The names Royal BodyCare, GlobeNet, Pure Life, Kala Vita, Light Force and the
name of all RBC products are the trademarks of Royal BodyCare, Inc. Only RBC is
authorized to produce and market products and literature under these
trademarks. Use of the RBC name on any item not produced by Royal BodyCare is
prohibited.
The company name, trademarks, or the name of corporate executives,
Board of Directors, employees, or any other professionals who endorse RBC may
not be used in any form, without prior written approval from the Company.
LITERATURE
Company literature may not be duplicated or reprinted without prior written
permission from RBC. Members may order Company authorized business cards,
letterhead, and stationary bearing the RBC name and logo. Samples of
Company-approved business card listings are:
APPROVED:
Royal BodyCare
Independent Member
Joe Smith
NOT APPROVED:
Royal BodyCare-Dallas, or
Royal BodyCare-area office, or
Royal BodyCare-Distribution Company, or
Royal BodyCare-Service Center
ELECTRONIC MEDIA
Members are prohibited from using radio, television, or cable television
advertising or public appearances to publicize RBC or its products except with
the express written approval of RBC.
Members may not produce for sale at any recorded Company events or
speeches without express, prior written permission from RBC, nor may Members
reproduce for sale or for personal use any recording of Company-produced audio
or video tape presentations.
BLIND ADS
As independent contractors, Members are allowed to promote their business in
any legal manner and may advertise without Company approval if they do not use
the RBC name or trademark or make any medical or therapeutic claims regarding
Company products.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 11
RETAIL OUTLETS
RBC's products and promotional materials may not be sold or displayed for public
(casual foot traffic) view in retail outlets. There are two exceptions to this
rule:
1. Private clubs, such as health spas and figure salons.
2. "Appointment only" businesses, such as professional offices, beauty and nail
salons.
However, in both of the above circumstances, the products may not be displayed
in public view, such as in a window display, but only in a manner that is
visible exclusively to clientele inside the place of business.
For clarity, here are examples of retail outlets that definitely may not
sell RBC products or display promotional materials: supermarket, drug stores,
pharmacies, department stores, swap meets, flea markets or shopping mall
booths. This policy, however, does not prevent a retail store owner from being
an RBC Member.
RBC is a person-to-person marketing company. Our business is not oriented
to retail outlets. Any questions regarding the interpretation of this policy
should be directed to Customer Service.
FAIRS AND TRADE SHOWS
Members may promote their business at fairs and trade shows. However, RBC
products may not be shown or displayed with any other products. The Company
reserves the right to approve any use of its name or trademarks, such as on
signs and banners. Such approval should be secured before opening a show.
TELEPHONE ANSWERING
Members may not answer their telephone in any manner that would lead the caller
to believe that he or she has reached the office of RBC.
INCOME REPRESENTATION
No Member will make any false or misleading statements regarding income
potentials.
EXTRANEOUS MATERIALS AND PRODUCTS
Only RBC products and authorized promotional material may be sold or displayed
at any RBC scheduled opportunity meeting, seminar or home demonstration.
MEDIA INQUIRIES
With increasing public interest in RBC, Members may be contacted by the media.
When this happens, contact the RBC Marketing Department immediately. No Member
is authorized to make any statements or comments to the media with reference to
any or all of the Company's officers, products or procedures beyond what is
approved by RBC or provided in press releases supplied by the Company. This
policy is to assure accuracy and a consistent public image. Any variation of
this policy or violation is grounds for immediate termination. No media
advertising is authorized without prior written approval from the Company.
LIABILITY
Violation of any of the rules explained in this section, as with all other
sections of these Policies and Procedures, is grounds for termination of the
individual's Member status. The violator may also be liable for damages
resulting from unauthorized use of RBC copyrights, trademarks and materials.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 12
ORDERING PROCEDURES
ORDERING METHODS
BY MAIL
Use the "Member Purchase Order Form" (#8020) and Member price list to calculate
your order. Fill out the form completely, adding the proper amounts for
shipping/handling and sales tax. Mail your order to RBC with full payment
included. Retain a copy for your records.
BY FAX
Fill out the purchase order form, adding the proper amount for
shipping/handling and applicable sales tax. Include your credit card number
and its expiration date in the payment block. You may send your order by fax to
RBC, toll free, at fax number 800-835-2563.
BY TELEPHONE
You may order by phone "toll free" by calling 800-722-0444, Mon-Fri, 7:00 am to
7:00 pm, Sat., 9:00 am to 4:00 pm, CST. Please have your order ready and give ID
number, proper shipping address, volume month and call the product by product
number and quantity. Have your credit card number with its expiration date
ready.
ORDER PAYMENTS
A. RBC will accept the following forms of payment for an order: Cash, Personal
Check, Phone Check, Money Order, Visa, Mastercard or Discover.
B. Checks and Money Orders must be made payable to Royal BodyCare, Inc. in the
full amount of the order, including applicable sales tax [unless you have
submitted the "Sales Tax License Agreement Form" (#8073) with a copy of your
current sales tax license] on the suggested retail price and applicable
shipping/handling.
1. Personal checks must be drawn on Member's account and neither be stale nor
post-dated, and they must be pre-printed with the Member's name and
address. If the personal check does not meet these requirements, the order
will not be processed and Personal Volume will not be counted until
payment is received.
2. If a check is returned unpaid, RBC may immediately suspend payment
privileges to use personal checks. A $15 Return Check Charge will
automatically be debited from Member's account.
3. Failure to promptly resolve a returned check is considered a breach of
the Agreement. Any uncollected amount may be deducted from future
Commissions, Rebates, and Bonuses.
4. RBC authorizes your personal checks through a Check Guarantee Service. In
the event an authorization is attempted and denied, the order cannot be
accepted unless another acceptable form of payment is received.
C. Phone Check is a system which allows RBC to make a bank draft drawn
against your checking account. The draft is treated like a check once RBC
deposits it. Application forms for the Phone Check system can be ordered. The
application must be signed by you and an officer of your bank, then returned
to RBC with a voided check attached. RBC will notify you when your
application has been approved. Phone Check orders take one additional day for
processing. There is a $1.00 processing fee for Phone Check orders.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 13
D. All Credit Card payments will be submitted to the credit card company for
approval prior to processing the order. In the event that the credit card
company refuses to authorize the full payment, RBC will notify the credit
card holder. If the credit card payment cannot be resolved promptly, the
order will not be processed and Personal Volume will not be counted until
payment is received.
E. Credit Card charge-backs of payment(s) for RBC orders by you are not
permitted and constitute a breach of the Member Application and Agreement and
may result in termination of your membership.
F. C.O.D. orders will not be accepted.
SHIPPING AND HANDLING
Our goal is to process your orders as quickly and efficiently as possible.
A. Your orders will be shipped via Fed Ex 3-day service. Other carriers may be
used from time to time. You may request expedited shipping. The extra cost is
easy to calculate-simply review the shipping calculation section on your
purchase order form.
B. Your complete street address with a current phone number is required. RBC
cannot ship to a P.O. Box.
C. The minimum shipping and handling charge for orders to be shipped from RBC
directly is $5.
D. Orders are generally shipped within twenty four (24) hours of the time
received, excluding holidays and weekends. RBC is not responsible for
shipping delays, but we will do our best to ship your products quickly and
accurately.
BACK ORDERS
A. We will expeditiously ship all products currently in stock. Any out-of-stock
items (unless discontinued) will be placed on back order and shipped as soon
as available. Personal Volume will be counted on back-ordered items unless
you are notified on the invoice of the discontinuance of such a product.
B. Upon receipt of an invoice noting a back-ordered item, you may notify RBC to
cancel the back order. This action will reduce your Personal Volume for the
current Volume Month and credit your account. You may use this credit in
ordering other products or request a refund.
CHECKING YOUR ORDER
A. When you receive your order, be sure to check the boxes thoroughly. Smaller
items often shift to the bottom of the box which makes them difficult to see
at first. Please do not discard the packing materials until they have been
thoroughly searched. You must confirm that the product received matches the
product listed on the shipping invoice. In the unlikely event that you cannot
find an item that is listed on the invoice, you must notify us of the missing
item within 10 days from date of shipment.
B. If you have such a claim, then follow the procedure for correcting a shipping
discrepancy as outlined on the "Shipping Discrepancy/Damage Claim Form"
(#8070 or #8071).
C. If you receive a notice that delivery has been attempted, please be sure to
contact the carrier as soon as possible to arrange for delivery. If you do
not claim the package, it will be shipped back to us.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 14
ORDER VARIANCES AND ADJUSTMENTS
ORDERING ERRORS
Orders received which contain errors in pricing or addition and do not match
the money remitted, will automatically be adjusted by the Home Office as
follows:
1. When the order is underpaid, we will delete product until it more closely
matches the amount remitted.
2. When the order is overpaid, you will receive a credit for the amount of the
over payment. Any credit that is not used at the end of the month will be
paid to you by the 14th of the following month.
To avoid unnecessary problems, please double-check your order before mailing or
phoning it in.
DAMAGED SHIPMENTS
RBC uses the finest packing materials available and every effort is made to
prevent damage. In the event damaged merchandise is received, you should follow
these steps:
1. Accept the delivery.
2. Document on the delivery receipt the number of damaged boxes and a
description of them.
3. Save the damaged products or boxes for inspection by the shipping agent.
4. Contact the Customer Service department at the Home Office and alert them
to the problem. They will file a claim with the shipping company and tell
you how to proceed.
5. If the damage is not immediately apparent and the carrier has already left,
follow the same action described in the steps above.
LOST PRODUCTS
If you do not receive your order, our Customer Service department will trace
your order for you. Products lost in shipment will be replaced. Upon
notification from the carrier of non-delivery or from you that the delivery was
not made, RBC will file a claim. The products will either be replaced, a credit
applied or a refund check will be issued to you.
SHORT SHIPMENTS
If there is a discrepancy between the number of boxes received and the number
listed on the invoice, allow three working days for the boxes to arrive. If you
still have not received your complete order, you should notify the RBC Home
Office.
GENERAL PROVISIONS
SELL OR ASSIGN
A. Members may sell or assign their membership only with the written consent
of RBC, which will not unreasonably be withheld.
B. The fee paid to RBC will be a minimum of $100.
WAIVER
The failure of RBC to exercise any rights stated in the Policies &
Procedures, Compensation Plan, or Member Application and Agreement (or to
require strict compliance with any provision thereunder) will not constitute a
waiver of RBC's right to demand compliance. Waiver by RBC can only be affected
in writing by an officer of RBC.
JURISDICTION AND VENUE
All disputes and claims relating to RBC, its Compensation Plan or its
products, the rights and obligations of a Member and RBC, or any other claims or
causes or action relating to the performance of either a Member or RBC, under
the Agreement, or a Member's purchase of products shall be settled totally and
finally by arbitration in Dallas, Texas or such other location as RBC
prescribes, in accordance
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 15
with the Federal Arbitration Act and the Commercial Arbitration Rules of the
American Arbitration Association. There shall be one arbitrator, an attorney at
law, who shall have expertise in business law transactions with preference
being an attorney knowledgable in the direct sales industry, selected from the
panel which the American Arbitration Association provides. Each party to the
arbitration shall be responsible for its own costs and expenses of arbitration,
including legal and filing fees. If a Member files a claim or counter-claim
against RBC, a Member shall do so on an individual basis and not with any other
Member or as part of a class action. The decision of the arbitrator shall be
final and binding on the parties and may, if need be, be reduced to a judgment
in any court of competent jurisdiction. This agreement of arbitration shall
survive any termination or expiration of the Agreement.
Notwithstanding the foregoing, the arbitrator shall have no jurisdiction
over disputes relating to the ownership, validity or registration of any mark or
other intellectual property or confidential information of RBC without RBC's
prior written consent. RBC may seek any applicable remedy in any applicable
forum with respect to these disputes and with respect to money owing to RBC. In
addition to monetary damages, RBC may obtain injunctive relief against a Member
for any violation of the Agreement, and for any violation or misuse of RBC's
trademark, copyright or confidential information.
Nothing in this policy shall prohibit RBC from applying to and obtaining
from any court having jurisdiction a writ of attachment, a temporary injunction,
preliminary injunction and/or other injunction or emergency relief available to
safeguard and protect RBC's interest prior to the filing of or during or
following any arbitration or other proceeding or pending the handing down of a
decision or award in connection with any arbitration or other proceeding.
The existence of any claim or cause or action of a Member against RBC,
whether predicated on the Agreement or otherwise, shall not constitute a defense
to RBC's enforcement of a Member's covenants and agreements contained in the
Agreement of those separate agreements.
EXCLUSIVE RULES
A. The Policies & Procedures, Compensation Plan, RBC Member Application and
Agreement, and the instruments and documents referred to herein, constitute
the entire understanding of the parties with respect to the subject matter.
B. RBC may amend the Agreement, the Policies and Procedures, prices, company
literature or the details of the Compensation Plan, without prior written
notice, effective upon publication or transmittal of such amendment in
official RBC publications, literature or other written or oral
communication, as applicable.
C. If under any applicable and binding law or rule of any applicable
jurisdiction, any provision of the Agreement, including these Policies and
Procedures, or any specification, standard or operating procedures which
RBC has prescribed is held to be invalid or unenforceable, RBC shall have
the right to modify the invalid or unenforceable provision, specification,
standard or operating procedure or any portion thereof to the extent
required to be valid and enforceable. Member shall be bound by any such
modification. The modification will be effective only in the jurisdiction
in which it is required.
D. The obligations of a Member as to confidentially survive the termination of
the Agreement.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 16
DEFINITION OF TERMS
ACTIVE MEMBER
To be considered Active for the month, a Member must have Personal Volume (PV)
of 70 or greater. Note that Preferred Customers are not considered Active
Members under the Compensation Plan.
BONUS VOLUME (BV)
The value applied to each product on which we pay bonuses.
BONUS
Commissions paid to Members by the Company calculated as a percent of purchases
by them and their Downline, plus commissions paid under the Car Bonus Program
and Leadership Pool.
BREAK AWAY
A Member who qualifies to become a Director. The promotion to Director is
effective the 1st day of the month following the Director Qualifying Month. At
that time, the new Director and his/her personal group breaks away from the
Personal Group of Upline Director, who then is eligible to receive a 5% bonus on
the Group Bonus Volume of the new Director each month.
CAR BONUS:
The Car Bonus is based on the following table and is paid automatically in the
third consecutive month a Member who is participating in the AutoShip program
achieves a bonus check greater than $2,500 (based on U.S. dollars).
To receive the Car Bonus, the Member must have participated in the AutoShip
program for at least three consecutive months. No contract or purchase is
necessary.
<TABLE>
<CAPTION>
Bonus Check Car Bonus
<S> <C>
over $ 2,500 $ 250.00
over $ 5,000 $ 500.00
over $ 7,500 $ 750.00
over $ 10,000 $ 1,000.00
</TABLE>
Once a Member qualifies for the Car Bonus by achieving a bonus check greater
than $2500 for three consecutive months he/she will be paid each and every month
that his/her bonus check exceeds the values in the table above.
COMPANY
The term Company as it is used throughout these policies and the literature
means: Royal Bodycare, Inc., also referred to as RBC.
COMPRESSION
The entire Company Director Network is compressed into its most compact form.
This unique feature assures that unqualified Directors in your Downline do not
occupy Generations that would eliminate or reduce your Director Override
Bonuses. This means that as the computer is paying you down Director Legs, it
pays you on unqualified Directors but does not count them when determining
depth.
This compression technique means that you will be paid for up to Six Qualified
Generations deep (depending on your Position) no matter how many actual Levels
deep it takes to get that number of Qualified Directors.
DIRECTOR DOWNLINE
Those Members in a Director's Downline who have attained the position of
Director or above. Also referred to as Leadership Downline.
DIRECTOR EFFECTIVE MONTH
The month following the Director Qualifying Month is the Director Effective
Month. He/She will begin earning as a Director from the first day of the
Director Effective Month.
DIRECTOR LEG
A first level Director and his/her downline organization.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 17
DIRECTOR OVERRIDE BONUS
The commission earned by a Director on the Group Bonus Volume of his/her
Downline Directors.
DIRECTOR QUALIFYING MONTH
The month in which a Member achieves the required Group and Personal Volume
and Sponsorship needed to become a Director.
MEMBER
A person or legal entity currently authorized to sell the Company's products
and to participate in the Compensation Plan. Member is a general term referring
to all authorized members as a group and individual members as well (regardless
of position attained in the program).
DOWNLINE
All Members sponsored directly by a particular Member as well as those
sponsored by other Members below that particular Member. For example: A
sponsors B, who sponsors C, who sponsors D, who sponsors E, then B, C, D and E
are all Downline from A.
GENERATIONS
Each generation is a separate Level of Qualified Directors in the Director
Downline. The First Level of Qualified Directors in a Director Downline is the
first generation.
GROUP OVERRIDE BONUS
The commission earned by you on purchases by Members in your Personal Group.
GROUP VOLUME (GV OR GROUP QUALIFICATION VOLUME)
The Volume amount of products purchased by a Member and his/her Personal Group
within a given Volume Month. Group Volume excludes the Group Volume of Active
Breakaway Directors.
INACTIVE MEMBER BYPASS (ROLL UP)
If Members do not Qualify for Rebates or Group Override Bonuses because their
Personal Volume is below $70, their Personal Volume is assigned to the first
Upline Member who has achieved $70 in Personal Volume.
If you have first-level Directors who are inactive and who have Volume under
them who have sales, you will receive the Group Override Bonus on those Active
Members and their Volume will count in your Group Volume.
LEVEL
The depth of a Member in a Downline, i.e. first level, second level, etc.
PAY LINE
All Directors contained in your Director Downline on which you are entitled to
Director Override Bonuses that month.
PERFORMANCE QUALIFICATION
Performance Bonus Qualified Diamonds and Crown Directors are held to the
highest level of loyalty to their Downline and to RBC. Performance
qualification indicates more than attaining certain numbers of qualified
Directors in one's Downline. Performance Qualification indicates a high level
of leadership that is observable. It represents the best of the Royal BodyCare
leaders. These special Directors continually provide service to the Downline
group as well as loyalty to the Royal BodyCare way of life. This high rank
carries with it the highest earnings potential because those who qualify have
diligently worked to be their best, and they deserve the best from us in
return.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 18
PERSONAL GROUP
Members in a Downline excluding those Members and their Personal Groups who have
reached the position of Director.
PERSONAL VOLUME (PV)
The Volume amount of products purchased personally by a Member within a given
Volume Month.
POSITION
The status or rank in the Compensation Plan that a Member has achieved.
QUALIFIED DIRECTOR
A Director is considered qualified in a month if he/she has Group Volume (GV)
of $500 of which at least $100 is Personal Volume (PV). In addition, for
purposes of Upline qualification and promotion, a Member in his/her Director
Qualifying Month is considered a Qualified Director.
QUALIFICATION POINTS
See "Volume".
REBATES
The commissions returned to you on your own purchases which are based on your
Position and the activity requirements you have achieved.
RETAIL PROFIT
The difference between the Wholesale Price you paid for products and the retail
price you receive for the products when you sell at retail.
[PICTURE]
SPONSOR
A Member who officially enrolls another Member in the Company's program and is
responsible for ensuring that the new Member gets a "good start" toward success
in the program. The act of enrolling others is called sponsoring.
SUGGESTED RETAIL PRICE (SRP)
The recommended price for selling a particular product to retail customers. RBC
recommends this price to provide consistent pricing by Members and as the basis
for sals tax calculation.
UNENCUMBERED VOLUME
The Group Volume of a Member who is promoting to the position of either 3 Star
or Director, that is not being used by another Downline Member who is also
qualifying for promotion to the same Position in that month.
UPLINE
All Members above a Member in a sponsorship line going up to the Company.
VOLUME (OR QUALIFICATION VOLUME)
The value place on each commissionable product used for promotion and
qualification. This equals wholesale volume in the U.S. (Sales aids are not
commissionable unless so indicated in official RBC publications).
VOLUME MONTH
The month to which a purchase order is assigned for purposes of computing
Commissions/Bonuses.
WHOLESALE PRICE (WHOLESALE)
The price of the products that is paid to the Company by Members.
- --------------------------------------------------------------------------------
(C)1999 Royal BodyCare, Inc.
POLICIES & PROCEDURES
<PAGE> 19
<TABLE>
<S> <C>
[ROYAL BODYCARE LOGO] MEMBER AGREEMENT
Royal BodyCare, Inc. o P.O. Box 167008 INSTRUCTIONS: Fill out this form completely
o Irving, Texas 75016-7008 and return original to the home office
MAIN PHONE: 972/401-0052 o MAIN FAX: 972/869-1974 within 7 days.
ORDER PHONE: 1-800-722-0444 o ORDER FAX: 1-800-835-2563
MEMBER SERVICES: 1-800-350-9497 o GLOBENET: 1-877-445-6236 [ ] Please send FREE! information about
ROYAL EXPRESS (Automated Sign-up & Ordering): 1-800-870-5233 how I can SAVE time and money with
FAX ON DEMAND: 415/273-3930 o INTERNET: www.rbcglobenet.com GlobeNet services!
8.9 cents Long Distance o Internet
Access o Personal Web Pages
APPLICANT INFORMATION To expedite your order, please print neatly. Illegible orders cannot be processed.
- ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------ -------------------------------------------
APPLICANT NAME (Last, First, Middle Initial) SS. NO. OR TAX ID NO.
------------------------------------------------------------------------ -------------------------------------------
CO-APPLICANT NAME (Last, First, Middle Initial) SOCIAL SECURITY NO.
--------------------------------------------------------------------------------------------------------------------------
ADDRESS
-
--------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
--------------------------------- --------------------------------- ---------------------------------
DAY TELEPHONE NO. EVENING TELEPHONE NO. FAX NO.
- ------------------------------------------------------------------------------------------------------------------------------------
SPONSOR INFORMATION To expedite your order, please print neatly. Illegible orders cannot be processed.
- ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------ ---------------------------------
SPONSOR NAME (Last, First, Middle Initial) SPONSOR ID NO.
--------------------------------------------------------------------------------------------------------------------------
ADDRESS
-
--------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
--------------------------------- --------------------------------- ---------------------------------
DAY TELEPHONE NO. EVENING TELEPHONE NO. FAX NO.
- ------------------------------------------------------------------------------------------------------------------------------------
CHECK ALL THAT APPLY MEMBER AGREEMENT
- ----------------------------------------------------------------------- ---------------------------------------------------
[ ] This agreement has already been submitted by: I have read, understood and willingly accept the
Fax Telephone Internet terms and conditions of this agreement. (see
--- --- --- reverse)
[ ] I have purchased a Kit from my Sponsor. ---------------------------------------------------
Proof of purchase is attached. Signature Date
[ ] I prefer a __ Member Kit ($15) OR __ Director Kit ($49)
(Price includes shipping, handling and tax. Kit is necessary ---------------------------------------------------
for membership) Signature Date
- ----------------------------------------------------------------------- ---------------------------------------------------
METHOD OF PAYMENT
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] Visa [ ] Mastercard [ ] Discover [ ] Check (check number: _______)
Card Number: Expiration Date:
----------------------------------------------------------------------------------- ---------------------
Cardholder Name:
--------------------------------------------------------------------------------------------------------------------
Cardholder Signature:
---------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RBC OFFICE USE ONLY
- ------------------------------------------------------------------------------------------------------------------------------------
Processed by: [ ] Member Kit Purchase - $15 (shipping & tax included)
-------------------------------------------------
[ ] Director Kit Purchase - $49 (shipping & tax included)
New Member ID: Order # Ship Date:
------------------------------------------------ ------------------------ ----------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 382,409
<SECURITIES> 0
<RECEIVABLES> 439,501
<ALLOWANCES> 0
<INVENTORY> 2,668,407
<CURRENT-ASSETS> 3,749,687
<PP&E> 2,113,634
<DEPRECIATION> 838,126
<TOTAL-ASSETS> 7,923,897
<CURRENT-LIABILITIES> 3,166,566
<BONDS> 510,782
0
0
<COMMON> 13,862
<OTHER-SE> 4,232,687
<TOTAL-LIABILITY-AND-EQUITY> 7,923,897
<SALES> 27,188,800
<TOTAL-REVENUES> 27,188,800
<CGS> 7,099,770
<TOTAL-COSTS> 7,099,770
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,992
<INCOME-PRETAX> 507,216
<INCOME-TAX> (12,331)
<INCOME-CONTINUING> 519,547
<DISCONTINUED> (84,673)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 434,874
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
