03/28/00
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NUMBER 33-21443
GLOBALNET FINANCIAL.COM, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 06-1489574
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7284 W. PALMETTO PARK ROAD, SUITE 210
BOCA RATON, FL 33433
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(Address of Principal Executive Offices) (Zip Code)
(561) 417-8053
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(Issuer's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK $.001 PAR VALUE
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS YES [X] NO [ ]
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM
405 OF REGULATION S-B CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE
CONTAINED, TO THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB
OR ANY AMENDMENT TO THIS FORM 10-KSB. [X]
THE ISSUER'S REVENUES FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 WERE
$3,370,589.
THE AGGREGATE MARKET VALUE OF THE COMMON EQUITY HELD BY NON-AFFILIATES OF
THE REGISTRANT BASED ON THE CLOSING PRICE ON NASDAQ OF THE COMMON STOCK ON MARCH
15, 2000 WAS $588,266,178. DIRECTORS, OFFICERS AND TEN PERCENT OR GREATER
STOCKHOLDERS ARE CONSIDERED AFFILIATES FOR PURPOSES OF THIS CALCULATION BUT
SHOULD NOT NECESSARILY BE DEEMED AFFILIATES FOR ANY OTHER PURPOSE.
THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK AS OF MARCH
15, 2000 WAS 12,779,547 COMMON STOCK AND 34,224,874 CLASS A COMMON STOCK.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES [ ] NO [X]
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<S> <C>
Forward-Looking Statements.......................................................................................... 1
PART I.............................................................................................................. 1
Item 1. Description of Business......................................................................... 1
Item 2. Description of Property......................................................................... 5
Item 3. Legal Proceedings............................................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders............................................. 6
PART II............................................................................................................. 6
Item 5. Market for Common Equity and Related Stockholder Matters........................................ 6
Item 6. Management's Discussion and Analysis............................................................ 8
Item 7. Financial Statements............................................................................ 12
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................................ 12
PART III............................................................................................................ 13
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act........................................... 13
Item 10. Executive Compensation........................................................................... 16
Item 11. Security Ownership of Certain Beneficial Owners and Management................................... 19
Item 12. Certain Relationships and Related Transactions................................................... 20
Item 13. Exhibits and Reports on Form 8-K................................................................. 22
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ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS OF THE COMPANY
GlobalNetFinancial.com is a rapidly expanding international financial portal
providing online financial news, investment tools, and transaction services. The
company is developing a global network of country-centric financial content
websites in local market language as well as a network of transaction execution
platforms, in order to position itself as an international financial services
provider. The Company's business model is to capture traffic for its financial
content sites as a result of partnering with leading internet players and then
to drive visitors from its highly trafficked financial content websites to its
network of transaction execution platforms in which it maintains substantial
ownership interests. In this manner, the company seeks to dramatically reduce
its user and account acquisition costs.
The Company conducts its financial content operations predominantly as the
exclusive provider of financial content and in certain cases exclusive provider
of financial services for leading Internet Service Providers ("ISP's") and
portals. These services are provided by the Company as the "Money Channel" for
the ISP or portal. As a result, when a user clicks on the "Money" button on a
host ISP's or portal's home page, the user is linked to the Company's website.
To this end, the company provides Money Channel services to Freeserve plc, the
United Kingdom's leading ISP, World Online, the largest pan-European ISP and
portal and Scandinavia OnLine, the dominant consumer Internet portal across
Scandinavia. The Company currently operates, directly or through joint ventures,
financial content websites focusing on the financial market of the United
Kingdom, the United States, Italy, Canada, France, Denmark and Holland. The
Company has also entered into an agreement to provide financial news, content
and e-finance commerce platforms including online trading to British
Telecommunication's network of Wireless Application Protocol ("WAP") mobile
phone users.
The Company's websites are designed to generate online trading of securities and
other investment products. GlobalNet is creating an international network of
online transaction businesses in which it maintains substantial equity ownership
interests, including online trading for North American and European stocks,
foreign exchange and other financial services, such as insurance. The Company
has launched www.GlobalNeTrader.com, its platform for the online trading of U.S.
securities, www.Matchbookfx.com for global foreign exchange trading and
www.InsuranceWide.com, offering a full spectrum of insurance service in the UK.
The Company anticipates launching its online trading and clearing platforms for
the United Kingdom and Canada this spring. The Company is currently developing
additional websites and online trading platforms.
The Company seeks to participate in the dramatic growth in the Internet and
Technology industries, to this end, the Company has made several investments in
internet and technology companies as well as internet and technology funds. In
most cases these investments are in conjunction with joint ventures and business
relationships. The Company has recently formed and raised approximately $42
million from outside sources, a digital commerce and knowledge-based industries
investment and operating vehicle, GlobalEuroNet Group, Inc.
The Company's business model consists of generating revenues from its online
trading platform as well as from advertising and E-commerce and participating in
the earnings of the other transaction execution platforms in which it maintains
ownership interests. In addition, the Company is seeking to create shareholder
and balance sheet value as a result of creating joint ventures with and/or
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investments in companies which have the ability to become public or be sold over
the short term. In this manner, the Company seeks to "monetize" its
relationships or investments.
Management believes that the opportunities open to the Company are driven by the
following principal factors:
/bullet/ an anticipated continued rapid growth in usage of the Internet
nationally and internationally;
/bullet/ an increasing acceptance of the Internet as a secure medium through
which to conduct e-commerce.
/bullet/ an increasing world-wide demand for financial news, information and
investment tools; and
/bullet/ the positioning of the company to capitalize upon the anticipated
growth in the number of online financial transactions in the United
Kingdom and continental Europe.
THE INTERNET MARKET
The Internet is a rapidly growing global interactive medium, enabling hundreds
of millions of people all over the world to share information, communicate and
conduct business.
According to Media Metrix, the number of users of the world-wide web
has increased from approximately 100 million users in 1997 to nearly 200 million
users in 1999 and is expected to grow to around 500 million per year by 2003.
Historically, the majority of the users of the Internet have been in the United
States. However, by the end of 1998, there were more users outside of North
America than there were in the United States, Canada and Mexico, combined.
Internet usage in Europe is expected to continue to increase rapidly.
According to the Wall Street Journal, in 1999 there were 44 million total
European users representing 13% of the uropean population. This figure is
anticipated to increase to 121 million users by 2004.
According to Fletcher Research, the number of internet users by European country
are as follows:
(in millions) 1997 2000E 2004E
- ---------------------------------------------------
GERMANY 5.5 12.6 30.0
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UK 6.2 12.3 25.0
- ---------------------------------------------------
FRANCE 7.0 10.1 18.0
- ---------------------------------------------------
ITALY 0.7 3.3 10.0
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SPAIN 0.9 1.8 8.0
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W. EUROPEAN 26.5 54.7 30.0
- ---------------------------------------------------
Internet penetration by European country for 1999, according to ITU YEARBOOK,
was as follows:
1999
----
Greece 1.0%
Portugal 4.0%
France 5.0%
Austria 6.0%
Spain 8.0%
Italy 8.0%
Germany 10.0%
Ireland 14.0%
Netherlands 14.0%
Belgium 16.0%
Switzerland 16.0%
UK 18.0%
Finland 32.0%
Denmark 34.0%
Norway 36.0%
Sweden 41.0%
US 46.0%
While the Internet is rapidly growing in terms of the number of users, it is
still at an early stage of development in terms of e-commerce. It has been
estimated that the Internet generated global revenues of $50 billion in 1998,
and future revenue forecasts vary from between $960 billion and $3,200 billion
by 2003. Currently, the United States market accounts for the majority of
revenues generated. However, increasing revenue generation is anticipated in
markets outside of the United States as the use of the Internet in international
markets develops.
Total E-Commerce spending in Europe, according to IDC, was and is anticipated to
be as follows:
(in millions) 1998 2000E 2002E
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GERMANY 1,696 14,480 62,810
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UK 1,406 11,470 47,610
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FRANCE 381 4,580 28,450
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ITALY 377 3,750 18,090
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SPAIN 178 1,750 8,000
- ---------------------------------------------------
The online share trading market has grown rapidly in the United States. A study
by VR International found that there were 8 million online accounts in the
United States by the end of March 1999 and forecast that the number of accounts
would grow in the United States to over 17 million by 2002.
Assets held in United States online accounts are projected to increase from $300
billion in 1999 to $3 trillion by 2002, while average daily online transactions
are expected to grow from 300,000 in 1998 to over 1.2 million by 2002. Online
brokerages are estimated to have generated $1.3 billion in transaction fees in
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1998 and are forecast to generate revenues of $5.3 billion in 2002. Furthermore,
it is expected that approximately 17 percent of United States Internet users
will be trading online by 2002 and that this group will constitute 30 percent of
all investors.
The management of the Company believes that the European online securities
brokerage market will develop rapidly and experience similar growth to that
experienced in the United States as more consumers execute transactions and
become involved in the securities brokerage market.
The number of online accounts in Europe currently is estimated as follows:
- ---------------------------------------------------
GERMANY 2,000,000
- ---------------------------------------------------
FRANCE 500,000
- ---------------------------------------------------
ITALY 500,000
- ---------------------------------------------------
UK 700,000
- ---------------------------------------------------
SPAIN 300,000
- ---------------------------------------------------
According to the Wall Street Europe, Germany is adding 1,500 online accounts a
day while the United Kingdom is adding a totalof 1,000 day.
Management believes that basedon the low percentage of individuals that own
equity securities as comparied to share ownership in the United States, as
follows, European Internet trading is anticipated to grow dramatically:
- ---------------------------------------------------
UNITED STATES 50%
- ---------------------------------------------------
SCANDINAVIA 35%
- ---------------------------------------------------
UK 25%
- ---------------------------------------------------
FRANCE 10%
- ---------------------------------------------------
GERMANY 7%
- ---------------------------------------------------
SPAIN 6%
- ---------------------------------------------------
ITALY 6%
- ---------------------------------------------------
NETHERLANDS 6%
- ---------------------------------------------------
The management of the Company believes that the Internet has a competitive
advantage over traditional forms of execution at securities brokerage firms
since it offers the advantages of lower commission rates and ease of access.
BUSINESS STRATEGY
The Company's business strategy is to form traffic alliances with leading ISPs,
portals, and other Internet related businesses in order to drive traffic to the
Company's financial content sites and execution platforms. Management of the
Company believes that this strategy will minimize its acquisition costs for both
users for its websites and for its execution platforms.
FINANCIAL CONTENT WEBSITES
The Company is building a network of "country centric" financial information web
sites focusing in local market language that help empower the individual
investor with news, tools, and investment ideas. Giving the visitor information
with which to make the most informed investment/transaction decisions possible
is the mission of the Company's content sites. Toward this end, its journalists
and contributors from the investment community, who are native and expert in
each of the markets the Company enters, provide news that is timely and easy to
decipher; commentary and interviews that are incisive and often sourced by
leading investment professionals; and tools that help users delve deeper into
and track ideas.
The Company's content sites also aim to foster community, giving visitors a
forum in which to learn not only from professional money managers but from each
other, sharing ideas in message board forums, investment clubs, and investment
contests. The aim is to democratize the investment environment, giving investors
a destination online in which to search, learn, analyze, and ultimately make a
money-making or -saving transaction.
The Company owns and operates the following financial content websites:
<TABLE>
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- ------------------------------- --------------------------- -------------------------------- --------------------------
Site ISP Money Channel Launch Date Ownership Percent
- ------------------------------- --------------------------- -------------------------------- --------------------------
<S> <C> <C> <C>
UK-iNvest.com Freeserve April, 1999 100%
Italia-iNvest.com N/A November, 1999 40%
America-iNvest.com N/A October, 1999 100%
Neder-iNvest.com World Onlline February, 2000 100%
FR-iNvest.com World Online February, 2000 100%
Danmark-iNvest.com World Online February, 2000 100%
- ------------------------------- --------------------------- -------------------------------- --------------------------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------- --------------------------- -------------------------------- --------------------------
Canada-iNvest.com N/A February, 2000 50%
SOLBORS Scandinavia Online March, 2000 100%
- ------------------------------- --------------------------- -------------------------------- --------------------------
</TABLE>
The Company's current and planned websites are intended to attract a large and
loyal following of "transaction-hungry" visitors. The financial content focuses
on providing investment ideas and personal finance guidance, as well as
financial information. The sites encourage interaction by users and attempts to
educate its users.
The Company's websites provide unique financial content and investment tools.
The content includes:
/bullet/ share quotes, news and research feeds on public companies in
each market
/bullet/ news and analysis by in-house financial journalists. Areas of
focus include:
/bullet/ sector highlights
/bullet/ new issues
/bullet/ mergers and acquisitions upgrades/ downgrades
/bullet/ stock tips/ picks
/bullet/ global economies
/bullet/ press roundups
/bullet/ emerging markets small capital companies
/bullet/ funds/ unit trusts
/bullet/ fixed income
/bullet/ insurance
/bullet/ savings and borrowings
/bullet/ pensions
/bullet/ financial planning
/bullet/ daily insights from fund managers, analysts, traders, and
chief executives
/bullet/ providing opinions from investment professionals and from
public companies
/bullet/ advice columns on personal finance covering topics such as
selecting funds, allocating assets, planning for retirement,
choosing insurance and mortgage products
/bullet/ the ability for users to interact with both journalists and
financial advisers in respect of their personal finance
matters
/bullet/ original indices, namely the US MicroCap 1000 Index and the
World Internet Index, to promote investment and benchmarking
in subsectors which are not otherwise extensively covered.
The online investment tools include:
/bullet/ portfolio tracking in multiple currencies
/bullet/ dynamic charts
/bullet/ e-mail news alerts
/bullet/ free real-time quotes
/bullet/ personal finance mortgage, insurance, pension calculators and
decision trees
/bullet/ audio broadcasts as well as text displays
/bullet/ an investment education game
/bullet/ search capabilities for researching public companies
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The traffic on the Company's financial content websites for December, 1999,
January, 2000 and February, 2000 was as follows:
PAGE VIEWS
- ------------------------ ---------------- ---------------- -----------------
Site December 1999 January February
2000 2000
- ------------------------ ---------------- ---------------- -----------------
UK-iNvest.com 9,296,841 14,002,488 16,414,213
Italia-iNvest.com 529,958 850,143 1,468,706
America-iNvest.com 795,899 1,109,352 1,230,420
Danmark-iNvest.com 225,968
- ------------------------ ---------------- ---------------- -----------------
UNIQUE VISITORS
- ------------------------ ---------------- ---------------- -----------------
Site December 1999 January February
2000 2000
- ------------------------ ---------------- ---------------- -----------------
UK-iNvest.com 407,934 1,425,690 2,275,077
Italia-iNvest.com 72,223 94,326 173,975
America-iNvest.com 78,191 112,176 126,451
Danmark-iNvest.com 32,331
- ------------------------ ---------------- ---------------- -----------------
TRAFFIC ALLIANCES
The Company conducts its financial content operations predominantly as the
exclusive provider of financial content and in certain cases exclusive provider
of financial services for leading ISP's and portals. These services are provided
by the Company as the "Money Channel" for the ISP or portal. As a result, when a
user clicks on the "Money" button on a host ISP's or portal's home page, the
user is linked to the Company's website. To this end, the company provides Money
Channel services to Freeserve plc, the United Kingdom's leading ISP, World
Online, the largest pan-European ISP and portal and Scandinavia OnLine, the
dominant consumer Internet portal across Scandinavia.
FREESERVE PLC
In April 1999, the Company launched its first international website,
UK-iNvest.com. UK-iNvest.com is the exclusive provider of investment information
within the "Money Channel" of Freeserve plc. Freeserve is the United Kingdom's
largest ISP and receives approximately 162 million page views per month and
currently maintains approximately 1.8 million active accounts.
WORLD ONLINE
In September 1999, the Company entered into a strategic partnership agreement
with WorldOnline International ("WOL"). The Company has the option to be the
exclusive provider of Money and Finance websites within all current and future
WOL internet portals. Currently, the Company has launched sites in Denmark
(www.Danmark-iNvest.com), Holland (www.Neder-iNvest.com) and France
(FR-iNvest.com_. WOL has approximately 1.2 million subscribers.
SCANDINAVIA ONLINE
In February 2000, the Company entered into an online distribution agreement with
Scandinavia Online ("SOL"), the dominant consumer Internet Portal across
Scandinavia. Under the terms of the agreement, the Company will be the owner and
the exclusive provider of Money and Finance websites within the SOL internet
portals in Scandinavia. The Company will also have exclusive rights to money
&finance transaction businesses to be offered within the SOL internet portals.
According to the management of SOL, SOL receives approximately 150 million page
views per months from approximately 4.0 million unique users. The Company also
has acquired distribution rights to SOL's wireless application protocol ("WAP")
when it is launched through WAP, cellular users will be able to access the
Internet, get real time information on the financial markets, and be able to
execute financial transactions.
BRITISH TELECOM
In March 2000, the Company signed a deal with British Telecommunications to
provide financial news, content and e-finance commerce platforms to BT's network
of Wireless Application Protocol ("WAP") mobile phone users. BT currently has
approximately 2 million subscribers with the capability to access this
technology.
THE COMPANY'S EXECUTION PLATFORMS
The Company's business model is to capture traffic for its financial content
sites as a result of partnering with leading internet players and then to drive
visitors from its highly trafficked financial content websites to its network of
transaction execution platforms in which it maintains substantial ownership
interests. In this manner, the company seeks to dramatically reduce its user and
account acquisition costs.
The Company operates its transaction execution businesses through dedicated
websites which are accessible, both directly and via link from the company's
financial content sites and other sites which are compensated for account
referrals. The company promotes its transaction execution business online with
buttons, banners, sponsorships, and educational training content and via e-mail
to its various user lists. In addition, the Company plans to cross market its
transaction execution businesses by offering customers of each such business
accounts with each of the other appropriate businesses.
The Company has entered into joint ventures in which it maintains substantial
ownership interest for online trading of foreign exchange and equity securities,
as well as other financial products as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------ -------------- -------------------- ---------------------------------------
EQUITY % LAUNCH DATE PARTNERS
- ------------------------------------------------ -------------- -------------------- ---------------------------------------
<S> <C> <C> <C>
MATCHBOOKFX 33.3% October, 1999 /bullet/ Valhalla Forex
/bullet/ Nextrade ECN
- ------------------------------------------------ -------------- -------------------- ---------------------------------------
INSURANCEWIDE 26.7% December, 1999 /bullet/ Cox
/bullet/ Freeserve
/bullet/ Harrison Bros.
- ------------------------------------------------ -------------- -------------------- ---------------------------------------
GLOBALNET SECURITIES 66.7% March, 2000 /bullet/ Valhalla Securities Management
- ------------------------------------------------ -------------- -------------------- ---------------------------------------
GLOBALNETDIRECT 33.3% April, 2000 /bullet/ National Bank Financial
/bullet/ Freeserve
- ------------------------------------------------ -------------- -------------------- ---------------------------------------
CANADA-INVEST.COM 50% /bullet/ National Bank Financial
- ------------------------------------------------ -------------- -------------------- ---------------------------------------
</TABLE>
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MATCHBOOKFX.COM
MatchbookFX.com, which was launched in October 1999, offers users 24 hour direct
access, control and execution of foreign currency trades in real-time.
MatchbookFX's trading platform allows users to deal directly on each other's
prices, thereby increasing trade efficiency. MatchbookFX is accompanied by a
real-time display of profit and loss and portfolio tracking, trade blotters,
charting, news and trade analysis 24 hours a day.
MatchbookF/X, LLC is owned equally by the Company, Nextrade Holdings, Inc.
operating as Nextrade, a company offering 24 hour trading through participating
broker/dealers, and Valhalla Forex, Inc., a New York-based trading operation,
concentrating on the spot foreign exchange market and which conducts
MatchbookFX's daily operations. MatchbookFX allows subscribers to trade with no
minimum bid/ask spreads with users paying commissions on one side of the
transaction only. MatchbookFX intends to offer rates substantially lower than
rates charged by conventional foreign exchange brokerages.
GLOBALNETRADER.COM
GlobalNeTrader.com, was initially launched in November 1999 with version 2.0
launched in March 2000 through GlobalNet Securities Corp., an NASD licensed
broker/dealer. The site enables account holders from any part of the world to
trade United States stocks online through a system that matches orders with the
best offer 24 hours a day, including offers posted on the Nasdaq trading system
during the hours the Nasdaq is open. The "Dynamic Order Execution System" used
by GlobalNet Securities Corp. allows investors to attempt to reduce their
trading costs by minimizing bid/ask spreads. The Company, by creating
proprietary front-end software has created a floating application which enables
users to make trades without leaving the website they are on. This software is a
cornerstone of the GlobalNeTrader.com marketing effort and the management of the
Company anticipates that numerous websites will link to GlobalNeTrader.com in
exchange for a referral fee.
INSURANCEWIDE.COM
InsuranceWide.com was launched in the United Kingdom in December, 1999 as a
one-stop-shop for personal insurance in the United Kingdom. InsuranceWide.com is
designed to provide a full spectrum of personal insurance services, including
informative content, quotes for home, automobiles and travel policies,
underwriting services, insurance claims and road assistance services.
GLOBENETDIRECT.COM
In August 1999, the Company entered into a joint venture to develop an online
trading and clearing company in the United Kingdom, initially for United Kingdom
securities. The current members of the joint venture are the Company, National
Bank Financial ("National Bank Financial") and Freeserve, each with a 33.33
percent holding. The new company will operate an online trading website, which
will be linked to Freeserve's "Money Channel" and United Kingdom-iNvest.com,
among other
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websites. The management of the Company anticipates a significant increase in
online trading in the United Kingdom over the next several years, similar to the
growth demonstrated in the United States. GlobeNetDirect.com has applied for
regulatory approval from the Securities and Futures Authority in the United
Kingdom and is expected to be launched in the Spring of 2000.
CANADA-INVEST.COM
In June 1999, the Company entered into an equal joint venture with National Bank
Financial of Canada to develop a financial content website and online trading
business for Canadian securities. The parties intend, through the joint venture,
to develop Canada-iNvest.com as the premier financial information website in
Canada. In addition to offering financial information and exchange transaction,
in Canada, Canada-iNvest.com offers access to GlobalNeTrader.com for United
States securities and to MatchbookFX for foreign exchange transactions. The
online trading business is anticipated to be launched in the Summer 2000.
PRINCIPAL INVESTING
The Company seeks to participate in the dramatic growth in the Internet and
Technology industries. To this end, the Company has made several investments in
internet and technology companies as well as internet and technology funds. In
most cases, these investment are in conjunction with joint ventures and business
relationships.
GLOBALEURONET GROUP, INC.
In March, 2000, the Company created GlobalEuroNet Group, Inc., a digital
commerce investment and operating company ("GEN").
GEN has been initially capitalized with approximately $45 million in equity
capital contributed by successful digital commerce, Internet, industrial and
financial concerns and entrepreneurs from North America, the United Kingdom and
Europe. These include: NewMedia SPARK (Europe's largest publicly traded new
economy incubator), National Bank Financial (one of the largest banks in
Canada), D'Agostini (the Italian publishing group), Park Place Capital, The
Magnum Funds and Value Management Research of Germany.
GEN was established to capitalize on GlobalNetFinancial's network of strategic
partners and global contacts, particularly in the Internet and digital commerce
communities. GEN will invest in early and later stage IT, digital commerce and
Internet companies based in both Europe and the U.S. As part of the business
opportunity, GEN expects to invest in and play a critical role in assisting
constituent companies migrate their technologies and business models from North
America to Europe or Europe to North America. GEN's initial points of presence
will include fully developed offices in Los Angeles and Rome, as well as in
London through its exclusive relationship with New Media SPARK. GEN anticipates
becoming a public Company by the Fall of 2000.
NEW MEDIA SPARK
In October 1999, the Company invested approximately $1.1 million in New Media
Spark ("Spark") as a founding shareholder for one-third of the Company. As a
result of Spark's successful initial public offering and subsequent capital
issuances, the market value of the Company's ownership position in Spark at
March 15, 2000, including warrants the Company has to purchase additional shares
of Spark, was $69.8 million. The Company owned 15.7% of Spark as of December 31,
1999. Spark was founded as UK and Continental European internet and high-tech
investment fund by GlobalNet, Michael Whitaker, former Chief Executive of Colins
Stewart Limited and Luke Johnson, Chairman of Belgo Group plc.
ELECTRONIC OFFERING ("EO")
Electronic Offering ("EO"), formerly 10Invest.com plc, was founded by Michael
Whitaker and others to deliver private equity investment opportunities to
private investors via the Internet. EO has entered into an agreement with Spark
under which it will provide share distribution and other financial services to
Spark's investee companies. In return for this agreement with Spark, EO has
granted the Company options to purchase up to 10% of the issued capital of EO
and to pay the company 20% of the revenues directly derived from investments
made by investors referred to EO by the Company.
THE COMPANY'S STRATEGIC INVESTORS
FREESERVE
In May 1999, following the content supply agreement entered into between the
Company and Freeserve in January 1999, Freeserve subscribed for 1,397,112 shares
of the Company's common stock, for approximately $15 million. The transaction
consisted of the exercise of 333,333 previously issued warrants at $6.00 and the
subscription for 1,063,779 shares of the Company's common stock at $12.00 per
share. Freeserve has also been granted an option, which expires on November 6,
2001, to acquire such number of shares of common stock in the Company at $13.50
per share as would increase its holding to 19.9 percent of the Company's issued
share capital at the date of exercise. Freeserve may also appoint two directors
to the Company's Board of Directors.
Freeserve is the leading United Kingdom Internet service that delivers free
Internet access and, as a portal to the Internet, an integrated offering of
United Kingdom-focused content, e-commerce and financial services. Freeserve
currently has 1.822 million registered users. Freeserve was launched in
September 1998 as a part of Dixons, Europe's leading consumer electronics
retailer.
TELESCAN
In March 1999, the Company entered into various agreements with Telescan, Inc.
("Telescan"). Under the terms of these agreements, Telescan issued 520,000
shares of its common stock to the Company, which at the time of the transaction
were valued at $9.3 million, in exchange for 862,694 shares of the Company's
common stock. In addition, Telescan purchased an option, which expires on March
30, 2000, to exchange for 25,000 shares of Telescan's common stock for common
stock of the Company and to acquire such number of shares of common stock in the
Company at an initial exercise price of $22.50 which exercise price has been
reduced to $12.00 per share as a result of anti-dilution provisions as would
increase its total holding to 19.9 percent of the Company's issued share capital
at the date of exercise. The Company anticipates Telescan will exercise such
option immediately prior to its expiration. Telescan is an industry leader in
providing Internet services, innovative solutions for online technology and data
retrieval tools.
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ITALIAN INVESTMENT CONSORTIUM
In April 1999, an investment consortium consisting of The De Agostini Holding
Group, Banca Commerciale D'Italia and Investitori Associati, subscribed for
416,667 shares of the Company's common stock in exchange for $5 million.
Subsequently, in August 1999, the Company and TwiceTrade, a company owned by the
investment consortium, entered into a joint venture, which formed
Italia-iNvest.com SPA in September 1999. In November 1999, GlobalNet and the
consortium launched Italia-iNvest.com, a website covering the Italian financial
marketplace.
NATIONAL BANK FINANCIAL
In June 1999, National Bank Financial subscribed for 208,334 shares of the
Company's common stock for $2.5 million. In addition, the Company granted to
National Bank Financial an option to invest up to $5.0 million in the Company's
common stock at the lower of the current market price of the Company's common
stock at the date of exercise, or $21.00 per share exercisable up to March 31,
2000 and a warrant to purchase 275,000 shares of the Company's common stock at
an exercise price of $17.25 per share exercisable up to December 15, 2001. If
National Bank Financial exercised the option, the Company will then grant to
National Bank Financial a further warrant to purchase up to 333,333 shares of
the Company's common stock at an exercise price of $30.00 per share exercisable
during the following 30 months.
As described above, National Bank Financial has entered into joint ventures with
the Company, such as GlobalNet Direct.com, to provide its users with online
transactional services.
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COMPETITION
The Company competes with numerous companies in most areas of its Internet
business. Since the Internet market is growing rapidly, has no substantial
barriers to entry, and has low, if any, switching costs, the management of the
Company expects competition to continue to intensify.
The Company's competitors, in the provision of financial content includes, but
is not limited to, FT.com, MoneyWorld, The Street.com and MotleyFool.com and, in
the area of online trading, Charles Schwab, E-Trade and DLJdirect, among many
others.
The United States online trading and financial content industries have grown and
developed significantly over the past several years, with a number of
substantial and well financed entities taking large market shares. Markets
outside the United States are not as developed, however, and the management of
the Company believes that through the strength of the Company's alliances with
major ISPs throughout Europe, the Company is well positioned to become a major
player in the European financial Internet market. However, this market as well
will continue to become more competitive.
HISTORY
The Company or GLBN, formerly Microcap Financial Services.Com, Inc., prior to
that Capital Growth Holdings, Ltd. and prior to that Galt Financial Corporation,
was incorporated in the State of Colorado on June 15, 1987. Between 1987 and
1997, the Company's activities
10
<PAGE>
involved identifying and raising capital for investment opportunities; however,
these activities ultimately proved unsuccessful and by 1997 the Company had
become inactive. On March 14, 1997, GLBN, an inactive company, acquired 100
percent of the outstanding capital stock of International Capital Growth, Ltd.
("ICG") (a company formed in February 1996), a Delaware corporation and member
of the National Association of Securities Dealers, Inc. The acquisition was
consummated through an exchange of shares that resulted in the former ICG
shareholders receiving control of GLBN; the transaction has been treated as a
recapitalization. In connection therewith, ICG's historic capital accounts were
retroactively adjusted to reflect the equivalent number of shares issued by GLBN
in the transaction while ICG's historical accumulated deficit was carried
forward. In 1997, after the recapitalization, the Colorado corporation was
merged into a Delaware corporation. In 1998 the management of the Company
recognized the potential financial benefits of providing financial services
through the Internet and refocused the strategy and resources of the business to
achieve this goal while reducing the Company's other business activities.
EMPLOYEES
As of March 15, 2000, the Company had a total of 103 employees. None of the
Company's employees are represented by a union and the Company has not
experienced any work stoppages. The Company believes its relations with its
employees is good.
ITEM 2. DESCRIPTION OF PROPERTY
The Company and its subsidiaries use the office space described below:
1. Approximately 2,676 square feet at 7284 W. Palmetto Park Road,
Suite 210, Boca Raton, Florida 33433, pursuant to a monthly
tenancy expiring October 31, 2001, for monthly rent of
$6,093.88;
2. Approximately 2,040 square feet at 2425 Olympic Boulevard
#660E, Santa Monica, California 90404, pursuant to a lease
expiring on November 30, 2000, for monthly rent of $5,834.40;
3. Approximately 1,669 square feet at 16150 N. Arrowhead Fountain
Circle Drive, Suite 240, Peoria, Arizona 85382, pursuant to a
monthly tenancy expiring May 31, 2003, for monthly rent of
$6,672.80.
4. Approximately 4,700 square feet of office space at Clarendon
House, 11/2 Clifford Street, Sixth Floor, London, England,
pursuant to a sub-lease expiring in November, 2008, for
monthly rent of $22,000.
11
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ITEM 3. LEGAL PROCEEDINGS
In 1999, the Company and three of its principals, Ronald Koenig, Stanley
Hollander and Jay Matulich, were named as defendants in a lawsuit entitled,
MARTIN S. STOLZOFF, ET AL. V. WASTE SYSTEMS INTERNATIONAL, INC., ET AL., No.
99-01664A Superior Court, Middlesex County, Massachusetts (the "Complaint"). The
Complaint was filed on April 1, 1999 and asserts counts for common law fraud,
negligent misrepresentation and violation of the Massachusetts Blue Sky Laws in
connection with the purchase by plaintiffs of securities of a company called
Waste Systems International, Inc., ("WSI"). The Company acted as a financial
consultant and placement agent in connection with a private offering of WSI
common stock in March 1995. The Complaint alleges that the Defendants made a
series of fraudulent and negligent misrepresentations to Plaintiffs during the
period from January 1995 to February 1997. The Complaint further alleges that
Plaintiffs purchased WSI securities and thereafter declined to sell their
existing WSI securities despite their inclination to do so in reliance on the
alleged misrepresentations. Plaintiffs allege damages of approximately
$1,000,000 plus prejudgment interest and punitive damages. The Company denies
Plaintiffs' allegations and intends to vigorously defend this action.
The Company is not a party to any pending legal proceedings and is not aware of
any contemplated proceeding by any governmental authority.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 1, 1999, the majority of the shareholders of the Company approved
the adoption of an amendment to the Company's Certificate of Incorporation, as
amended, to (i) increase the authorized capital of common stock, par value $.001
per share of the Company from 16,666,667 shares of common stock to 50,000,000
shares of common stock; to (ii) create and authorize 50,000,000 shares of Class
A Common Stock, par value $.001 per share, of the Company; and to (iii) approve
the Company's Amended and Restated 1998 Stock Option Plan.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is currently traded on NASDAQ National Market under
the symbol "GLBN" and on the Alternative Investment Market of the London Stock
Exchange under the symbol "GLFA". Prior to October 1, 1999, the Company's Common
Stock was quoted on the OTC Bulletin Board under the symbol "GLBN". The table
set forth below presents the high and low bid prices of the common stock for the
period indicated; however, the over-the-counter market quotations prior to
October 1, 1999, reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not necessarily represent actual transactions. Prior to
June 6, 1997, there was no trading market for the common stock. All prices
listed below have been adjusted to reflect the reverse stock split on the Common
Stock which occurred on July 2, 1999.
<TABLE>
<CAPTION>
COMMON STOCK
- ------------ -------------- ----------------
-------------- ----------------
High Low
-------------- ----------------
<S> <C> <C>
1998
- ----
Quarter ended March 31, 1998 $6.00 $1.50
Quarter ended June 30, 1998 $6.00 $3.00
Quarter ended September 30, 1998 $1.50 $4.26
Quarter ended December 31, 1998 $2.25 $7.50
1999
- ----
Quarter ended March 31, 1999 $23.76 $6.72
Quarter ended June 30, 1999 $27.38 $12.00
Quarter ended September 30, 1999 $18.06 $9.25
Quarter ended December 31, 1999 $36.56 $9.69
CLASS A COMMON STOCK*
- --------------------
1999
- ----
Quarter ended December 31, 1999 $42.43 $35.08
(commencing December 9, 1999)
</TABLE>
On March 15, 2000, the closing price of the common stock was $41.25 and the
Class A common stock was $40.00.
- ------------
* Listed solely on the Alternative Investment Market of the London Stock
Exchange.
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HOLDERS
As of March 15, 2000, there were approximately 450 holders of record of the
common stock and 3,400 holders of record of the Class A common stock.
DIVIDEND POLICY
As of March 25, 1997, the Board of Directors declared an annual cumulative
dividend of $1.35 per share on the common stock for the calendar years 1997 and
1998. The dividend was due and payable to the holders of record on the day the
Board of Directors of the Company adopted the resolution to pay such dividend
and is subject to (i) the payment of dividends on any class of capital stock
with priority over the common stock, (ii) applicable net capital requirements
and (iii) restrictions under applicable law. The dividend, which began accruing
as of January 1, 1997, was payable on a quarterly basis ending on December 31,
1998. Although the Company made all prior dividend payments in a timely manner,
due to the Company's limited cash resources and losses, the Company was unable
to make the June 30, 1998, September 30, 1998 and December 31, 1998 dividend
payments. Management can not predict when the Company's cash resources will be
sufficient to make such payments. The Company recognizes such dividend payments
as an obligation.
On October 12, 1997, each of our 4,001,334 shares of 5% Cumulative Convertible
Series A Preferred Stock and 1,080,000 shares of 5% Cumulative Convertible
Series B Preferred Stock converted into one share of Class B common stock.
Pursuant to the terms of the Certificates of Designation of such preferred
stock, the holders thereof were entitled to 5% per share annual cumulative
dividends prior to payment of dividends on any other class of capital stock. The
cumulative dividends on such preferred stock were payable on a quarterly basis
from December 31, 1996 and through October 24, 1997, ten business days after the
conversion thereof. The cumulative dividends were not paid and have accrued
unpaid since October 24, 1997. The aggregate amount of such arrearage owed by
the Company to the former holders of such preferred stock is $38,154 as of
December 31, 1999.
We do not anticipate declaring any additional dividends on any of our classes of
capital stock. Any future dividend declarations and payments would be subject to
the restrictions set forth above, approval of our Board of Directors and any
contractual restrictions that may then exist.
RECENT SALES OF UNREGISTERED SECURITIES
On February 10, 1999 the Company completed a private offering (the "1999
Offering") of shares of its Common Stock pursuant to Regulation D to "accredited
investors" as that term is defined in Regulation D. The Company sold 429,234
shares resulting in aggregate gross proceeds of $2,479,400. The shares were
issued and sold to "accredited investors" pursuant to Regulation B. No placement
agent was utilized. The Company did not pay any commissions in connection with
the sale of securities.
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<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 1998
OPERATING REVENUE
Online trading commission income increased by $481,744 or 100% for the year
ended December 31, 1999 from $0 for the comparable period a year earlier. This
source of revenue is from the Company's new broker/dealer subsidiary, GlobalNet
Securities, Corp., which the Company acquired in the fourth quarter of 1999.
Advertising revenue from the Company's websites increased by $390,907 or 100%
for the year ended December 31, 1999 from $0 for the comparable period a year
earlier. Advertising revenue primarily relates to the Company's UK-iNvest.com
website. Investment banking consulting fees decreased by $405,071 or 100% to $0
for the year ended December 31, 1999 from $405,071 for the comparable period a
year earlier. The decrease is the result of the Company's shift away from
investment banking activities. Further, private placement fees decreased by
$793,545 or 62% to $489,482 from $1,283,027 for the comparable period one year
earlier. Despite the Company's lack of focus on investment banking, it closed
two transactions in 1999, the largest of which closed in the second quarter of
1999 for which the work was completed in late 1998.
The Company reported revenue from realized and unrealized gains on marketable
and not readily marketable securities of $1,421,194 for the year ending December
31, 1999, an increase of $1,858,254, or 425%, compared to a loss of $437,060
during the same period in 1998. This increase was primarily related to realized
gains from the sale of the Company's investment in Atlantic Caspian stock and
unrealized gains resulting from the mark to market of the broker/dealer
subsidiary's portfolio of securities during the year ended December 31, 1999.
Interest income increased by $505,272 or 1,667% to $535,581 as compared to
$30,309 during the comparable year-to-date period in 1998, due to an increase in
interest bearing accounts in 1999. Other revenue increased by $51,681 or 100%,
as compared to $0 in the comparable year earlier. Other revenue primarily
relates to fees from the sale of broadcast real time information on the
Company's websites.
OPERATING EXPENSES
Cost of advertising revenue increased by $239,270 or 100% for the year ended
December 31, 1999 from $0 for the comparable period in 1998. Cost of advertising
revenue consists of commissions on the advertising revenue generated by the
Company's website, UK-iNvest.com, payable to the Company's advertising agency,
as well as revenue sharing costs to the Company's partner, Freeserve. Commission
expense on private placement fee revenue decreased by $69,381 or 24% to $217,000
for the year ended December 31, 1999 from $286,381 for the comparable period in
1998.
General and administrative expenses increased by $8,848,932 or 264% to
$12,194,882 for the year ended December 31, 1999 compared to $3,345,950 for the
same period in 1998. The dramatic increase is the result of the shift in the
Company's business focus to internet website publishing, which has included a
significant increase in the number of Company employees, increased rent expense
related to the Company's office space in both the United States and the United
Kingdom, advertising and promotional costs related to launching the Company's
new websites, travel costs and professional fees incurred in setting up the
Company's new websites and joint ventures with various strategic partners in the
United States, United Kingdom and Europe.
Non-cash compensatory and licensing expense increased by $7,361,040 to
$7,814,287 or 1,624% during the year ended December 31, 1999 compared to
$453,247 during the same period in 1998 which was primarily the result the
Company utilizing stock, options and warrants to compensate some of its advisors
and consultants. The largest of these licensing agreements are with Telescan
Inc. and Freeserve, for which the Company issued equity securities and is
amortizing the value of such securities over the terms of the agreements.
Excluding a non-recurring, non-cash compensatory charge for options issued for
investor relations services of $920,746, non-cash compensatory and licensing
expense would have increased by $6,440,294 to $6,893,541 as compared to $453,247
in 1998.
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<PAGE>
Depreciation and amortization increased by $1,256,400 or 881% to $1,398,976
during the year ended December 31, 1999 compared to $142,576 during the
comparable period in 1998. The increase is primarily related to the amortization
of the Company's licensing and promotion agreements.
Equity in earnings of unconsolidated companies and joint ventures increased by
$141,806, or 232% to $80,737 for the year ended December 31, 1999, compared to a
loss of $61,069 for the comparable year in 1998. The loss in 1998 relates to the
write-down of the Company's investment in an unconsolidated affiliate, Capital
Growth Europe (CGE) of $65,000, offset by the gain on sale of CGE of $3,931 in
1998. The earnings in 1999 result from the Company's ownership interest in
NewMedia Spark's unrealized investment income, offset by losses in MatchbookFX,
GlobeNet Direct (formerly UK Online Clearing and Brokerage) and
Italia-iNvest.com, which are allin the start-up stages and incurred losses
during the year ended December 31, 1999.
Minority interest in losses of consolidated subsidiary increased by $53,832 or
100% for the year ended December 31, 1999 compared to $0 in 1998, due to the
losses incurred by the Company's online broker/dealer subsidiary, GlobalNet
Securities.
The Company's total operating expenses, including $7,814,287 in non-cash
compensatory and licensing expense increased by $17,440,623, or 40%, to
$21,729,846 as compared to $4,289,223 during the comparable period in 1998.
NET LOSS
The Company's net loss for the year ended December 31, 1999 increased by
$15,351,381 or 510% from a net loss of $3,007,876 for the year ended December
31, 1998 to a net loss of $18,359,257 for the year ended December 31, 1999. This
increase was due to the shift in business focus and the start-up costs for the
Company's U.S. website (www.america-invest.com), the Company's U.K. website
(www.ukinvest.com) and subsequent website development costs for the Company's
partnerships.
LIQUIDITY AND CAPITAL RESOURCES
The implementation of the business plan is capital intensive as a result of the
costs incurred in launching financial oriented sites in new countries. In order
to reduce these costs, the Company seeks to partner with and receive investments
from strategic investors.
Net cash used in operating activities increased by $12,370,279 to $14,346,912
for the year ended December 31, 1999 from $1,976,633 in the comparable year
ended December 31, 1998, due to lower earnings resulting from increased
expenditures relating to the shift in business focus and the start-up costs for
the Company's internet financial websites. Net cash provided by investing
activities decreased $33,680,794 from $533,409 in 1998 to net cash used of
$33,147,385 for the year ended December 31, 1999. The decrease was largely due
to investments in certificates of deposit of $24,418,038 and investments in
unconsolidated companies and joint ventures totalling $8,793,452. Net cash
provided by financing activities increased by $87,501,274 to $90,075,613 for the
year ended December 31, 1999 from $2,574,339 in the comparable year in 1998.
Capital has been provided by the investments made by the initial stockholder
group, through private placements of the Company's securities and the public
issuance of the Company's Class A common stock in the United Kingdom.
16
<PAGE>
In February 1999, the Company raised net proceeds of approximately $2,479,400 in
a private placement of 429,234 shares. In April 1999, the Company raised net
proceeds of approximately $4,650,000 in a private placement of 416,667 shares of
Common Stock with an Italian Investment Consortium that became partners with the
Company in Italia-iNvest.com. In May 1999, the Company received $14,765,337 from
Freeserve, Ltd. which represented the purchase of 1,063,779 shares of Common
Stock at $12.00 per share and the exercise of a previously issued warrant for
333,333 shares of Common Stock at $6.00 per share. In May 1999, the Company
raised an additional $897,000 in a private placement of 74,750 shares of Common
Stock. In June 1999, the Company raised an additional $500,000 in a private
placement of 41,667 shares of Common Stock. In June 1999, the Company received
$2.5 million from First Marathon which represented the purchase of 208,334
shares of Common Stock. In August 1999, Freeserve purchased an additional 31,250
shares of Common Stock for $375,000. In December 1999, the Company raised net
proceeds of $65,058,227 in the public placement of its Class A Common Stock on
AIM in the U.K. The proceeds are being held for additional investment in the
Company's websites, online financial transaction platforms and for future
working capital.
VARIABILITY OF FUTURE RESULTS
The Company anticipates that its future financial results will vary dramatically
and losses will continue in the year 2000. This is the result of the start-up
and uncertain nature of the Company's financial content websites and online
transaction joint ventures.
17
<PAGE>
FORWARD-LOOKING STATEMENTS
The Company cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements that may be deemed to have been made in this
Memorandum (including the Exhibits thereto) or that are otherwise made by or on
behalf of the Company. For this purpose, any statements contained in this Form
10-KSB (including the Exhibits thereto) that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors that may affect the Company's results
include, but are not limited to, the Company's limited operating history and
prior operating losses and accumulated deficit, the Company's dependence on
advertising revenue and sponsorship, the uncertainty associated with the
Internet both in the United States and abroad, the Company's reliance on
management, and the Company's possible inability to compete in the advertising
and domestic or international Internet industries. The Company is also subject
to other risks detailed herein or detailed from time to time in the Company's
filings with the Securities and Exchange Commission (the "Commission").
MARKET RISK FACTORS
WE HAVE A LIMITED OPERATING HISTORY IN THE AREA OF ONLINE FINANCIAL SERVICES.
We have been engaged in the current Internet business since October 1998. Many
of our investments in international joint ventures are in an early stage of
development. We have little operating history in the Internet business upon
which our performance and prospects can be evaluated. We face the risks
frequently encountered by developing companies. These risks include the
potential inability to compete with more established firms and to retain and
maintain key personnel, as well as uncertainty as to which areas to target for
growth and expansion and as to the source of funding for operations and
expansion.
WE HAVE A LIMITED OPERATING HISTORY IN THE AREA OF ONLINE TRADING.
We anticipate deriving a significant portion of our revenues from online
transaction executions. We have only recently introduced online trading in
foreign exchanges and domestic securities and we plan to offer online trading in
non-US securities. In addition, we plan to offer other investment and financial
products. Lack of international online trading and transaction execution
operating history and the risks inherent in any new business area make it
impossible accurately to predict the extent of revenues to be generated from
these activities.
ADVERTISING REVENUES AND SPONSORSHIPS ARE UNCERTAIN.
We anticipate deriving revenues from the sale of domestic and international
Internet-based advertising. None of our senior management team has any
significant experience in selling advertising on the Internet or any other
medium. If we are unable to attract and retain paying advertising customers or
we are forced to offer lower than anticipated advertising rates in order to
attract and/or retain advertising customers, our anticipated level of
advertising revenue will be adversely affected.
Use of the Internet by overseas consumers is at an early stage of development
and international market acceptance of the Internet as a medium for information,
commerce and advertising is subject to a high level of uncertainty. In order for
us to generate advertising revenues, advertisers and advertising European
agencies must direct a portion of their budgets to the Internet as a whole, and
specifically to our Internet
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sites. Our management believes that most international and specifically,
European advertisers and advertising agencies have limited experience with the
Internet as an advertising medium and international and specifically, European
advertisers have not devoted a significant portion of their advertising budgets
to Internet-related advertising to date. Our management cannot assure investors
that international and specifically, European advertisers or advertising
agencies, will be persuaded, or able, to allocate or continue to allocate
portions of their budgets to Internet-based advertising, that they will find
Internet-based advertising to be more effective than advertising in traditional
media, or that they will decide to advertise on our Internet sites.
THE COMPANY IS DEPENDENT ON CONTINUED GROWTH OF THE INTERNET.
Rapid growth in the use of and interest in the Internet is a recent phenomenon.
Our management cannot assure that acceptance and use of the Internet will
continue to develop or that a sufficient base of users will emerge to support
its business. Revenues from our Internet operations will depend largely on the
widespread acceptance and use of the Internet as a source of information and as
a vehicle for commerce in goods and services, especially online financial and
investment transactions. If use of the Internet does not continue to grow or
grows more slowly than expected, or if the Internet infrastructure does not
effectively support growth that may occur, our business will be adversely
affected.
THE WEB SITES, STATISTICS AND RATINGS FROM EUROPE MAY NOT BE COMPREHENSIVE OR
RELIABLE.
The measurement of Internet traffic and statistics in Europe is not as
sophisticated or developed as it is in the United States. To our knowledge,
European ratings come from a "representative sample" of a small sampling of
European households. To illustrate, Media Matrix, a company used by Merrill
Lynch to track European usage of the Internet, tracks only 1,230 households in
the United Kingdom to determine usage statistics in the United Kingdom. This
information is tracked on software installed in individual households of
Internet users. As a result, the sampling data used to derive Internet use is
compiled from a limited number of actual users. In addition, only those Internet
users who access the Internet from their home computers are tracked while
Internet usage at a business site is not tracked. We believe that if business
usage, in addition to household usage, were tracked, the estimated number of
monthly users, frequency of use per user and average minutes per visit per user
would increase in sampling data. Finally, the statistics used by tracking meters
in Europe use slightly different definitions in interpreting their measurements.
For example, the United States measurements include the estimated number of
people who access a site once a month (defined as "users") in contrast with the
European measurement of a percentage of all online users who access a site or
network of sites at least once during a month (referred to as "reach").
Accordingly, the measurements of Internet use is not as accurate or
comprehensive in Europe. Management believes that the statistics quoted herein
from Europe, while not fully comprehensive or reliable as the tracking
statistics used in the United States, are still useful for valuation and trend
analysis. Our management believes that the statistical estimates of the number
and frequency of Internet users in Europe that are used by advertising agencies,
investors and the online companies themselves will increase as the tracking
capacity in Europe becomes more reliable, tracks larger samplings and tracks
business as well as households.
THE COMPANY IS DEPENDENT ON THIRD PARTIES FOR INTERNET OPERATIONS AND CONTENT
DEVELOPMENT.
Management believes that the ability to advertise our Internet sites and online
transaction capabilities on other Internet sites and the willingness of the
owners and operators of such sites to direct users to our Internet sites through
hypertext links are critical to the success of our Internet operations. Other
Internet sites, particularly search/index guides and other companies with the
strategic ability to direct user traffic, significantly affect traffic to our
domestic and international Internet sites. While the company's management
believes that other sites will direct traffic to the Company's sites, we cannot
assure that the Company will establish or maintain such arrangements in the
future.
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In particular, the Company is dependent on its ongoing relationships with
Freeserve plc, World Online, International and Scandinavia Online, three
international prominent providers of Internet access to consumers.
Our ability to develop original and compelling Internet-based products and
services is also dependent on maintaining relationships with and using content
and products provided by third-party vendors. Developing and maintaining
satisfactory relationships with third parties could become more difficult and
more expensive as competition increases among Internet sites. If we are unable
to develop and maintain satisfactory relationships with such third parties on
terms acceptable to it, or if any competitors are better able to leverage such
relationships, our business will be harmed. Our business is dependent on third
parties for uninterrupted Internet access.
ACQUISITIONS AND JOINT VENTURES MAY DISRUPT OR OTHERWISE HAVE A NEGATIVE IMPACT
ON OUR BUSINESS. We intend to enter into new business opportunities and ventures
as part of our Internet business. Typically, such opportunities require extended
negotiations, the investment of a substantial amount of capital and substantial
burdens on our management personnel and our financial and operational systems.
We cannot assure investors that such ventures would ever achieve profitability.
THE COMPANY IS SUBJECT TO TECHNOLOGICAL CHANGES.
The market for Internet-based products and services is characterized by rapid
technological developments and frequent net product introductions. The emerging
character of these products and services and their rapid evolution will require
that we continually improve the performance, features and reliability of our
Internet-based products and services. We cannot assure investors that we will be
successful in responding quickly, cost effectively and sufficiently to these
developments.
In addition, the widespread adoption of new Internet technologies or standards
could require us to make substantial expenditures and to modify or adapt our
Internet site and services that could harm our business. In addition, new
Internet-based products, services or enhancements offered by us may contain
design flaws or other defects that could require costly modifications or result
in a loss of consumer confidence, either of which could harm our business.
The satisfactory performance, reliability, and availability of our Internet
sites and our computer network infrastructure are critical to attracting
Internet users. System interruptions which result in the unavailability of our
Internet sites or slower response times for users reduce the attractiveness of
our Internet sites to users and could harm our business.
THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS MAY BE CHALLENGED.
We are developing proprietary Internet software and have filed applications for
certain trademarks, trade names, service marks, domain names and other
proprietary rights which we either currently have or may have in the future and
which we believe to be important to our Internet business. Even though we have
registered some domain names, given the uncertain application of existing
copyright and trademark laws to the Internet, we cannot assure investors that
existing laws will provide adequate protection for our technologies, sites or
registered domain names. Policing unauthorized use of our technologies, content
and other intellectual property rights entails significant expenses and could
otherwise be difficult or impossible to do, given, among other things, the
global nature of the Internet. From time to time, we may be subject to legal
proceedings and claims in the ordinary course of business, including claims of
alleged infringement of the trademarks and other intellectual property of third
parties by us or our licenses. Such claims, even if not meritorious, could
result in the expenditure of significant financial and managerial resources.
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THERE ARE RISKS ASSOCIATED WITH THE SECURITIES INDUSTRY.
The securities business is volatile and is directly affected by the following
factors, among others, many of which are beyond our control.
/bullet/ national and international political and economical
conditions;
/bullet/ broad trends in business and finance;
/bullet/ fluctuations in volume and price levels of securities
transactions;
/bullet/ client default on commitments (such as margin obligations);
/bullet/ litigation;
/bullet/ employee's misconduct, errors and omissions;
/bullet/ regulation at federal and state levels;
/bullet/ the emergence of numerous discount brokers;
/bullet/ increased use of technology; and
/bullet/ a steady decrease in the commissions charged to clients of
discount brokerage services.
Losses associated with these risks could harm our business.
THERE ARE SUBSTANTIAL RISKS IN FOREIGN MARKETS.
We have entered into agreements with joint venture partners and strategic
alliances to conduct our Internet business outside of the United States. Our
inability to find additional joint venture partners could slow down our
anticipated overseas growth. If we do not find a suitable joint venture partner
in a given foreign market, we may not enter that market. Conducting business
outside the United States will require us to become familiar with and to comply
with foreign laws, rules, regulations and customs. We cannot be certain that our
failure to comply with foreign laws, rules and regulations of which we are not
aware will not harm our business.
Further risks are inherent in international operations, including the following:
/bullet/ differing levels of Internet use in other countries,
/bullet/ customers agreements may be difficult to enforce and
receivables difficult to collect through a foreign country's
legal system;
/bullet/ foreign countries may impose additional withholding taxes or
otherwise tax the Company's foreign income, impose tariffs or
adopt other restrictions on foreign trade or investment;
/bullet/ intellectual property rights may be more difficult to enforce
in foreign countries;
/bullet/ fluctuations in exchange rates may affect product demand and
may adversely affect the profitability in US dollars of
products and services is made in the local currency;
/bullet/ general economic conditions in the countries in which we
operate could have an adverse effect on our earnings from
operations in those countries;
/bullet/ unexpected changes in foreign laws or regulatory requirements
may occur; and
/bullet/ compliance with a variety of foreign laws and regulations and
the overlap of different tax structures may be costly and time
consuming.
Tax rates in certain foreign countries may exceed those of the United States and
foreign earnings may be subject to withholding requirements or the imposition of
tariffs, exchange controls or other restrictions. There can be no assurance that
any of these factors will not have a material adverse effect on our business and
results of operations.
21
<PAGE>
THE COMPANY IS SUBJECT TO EVOLVING INTERNET REGULATIONS.
New laws, guidelines and regulations may be adopted covering areas such as
access, content, taxation, encryption, communications and pricing and quality of
Internet products, services and online trading. As a provider of Internet
products and services, we may be subject to the provisions of existing and
future laws, guidelines and regulations that could be applied to our operation.
Such laws, guidelines and regulations could limit the growth of the Internet and
harm our business.
THE COMPANY IS SUBJECT TO ONGOING SECURITIES REGULATION IN THE UNITED STATES AND
OVERSEAS.
The securities industry in the United States and other countries is subject to
extensive regulation under both federal and state laws. In the United States,
the Securities and Exchange Commission, National Association of Securities
Dealers, Inc. and other self-regulatory organizations such as the various stock
exchanges and state securities commissions, require strict compliance with their
rules and regulations. Broker-dealers are subject to regulations covering all
aspects of the securities business, including sales methods, trade practices
among broker-dealers, use and safekeeping of clients' funds and securities,
capital structure, recordkeeping and the conduct of directors, officers and
employees and the maintenance of certain levels of capital. We will also be
subject to regulation by foreign governments of any foreign broker-dealers
associated with us and will be subject to the foreign rules and regulations
pertaining to the trading of foreign equity in overseas markets. Failure to
comply with any of these laws, rules or regulations could result in censure,
fine, the issuance of cease-and-desist orders or the suspension or expulsion of
a broker-dealer or any of its officers or employees, any of which could harm our
business.
THE COMPANY IS DEPENDENT ON KEY PERSONNEL.
Our business depends upon the services of its executives and certain key
personnel, including Stanley Hollander, President, Chief Executive Officer and
Chairman of the Board of Directors; Alan L. Jacobs, Executive Vice President;
William Hodgson, Chief Operating Officer; Michael S. Jacobs, Chief Financial
Officer; Jay J. Matulich, Senior Vice President and Richard Hefter,
Editor-in-Chief. We cannot be certain that we will be able successfully to
attract and retain key personnel. The loss of the services of any one or more of
such key personnel or the inability to attract such key personnel could harm our
business. Currently we do not maintain key man life insurance on any of our
executives or key personnel. We cannot be certain that such officers and
directors will remain our employees in any particular capacity.
THE COMPANY IS SUBJECT TO CONTINUING CURRENCY EXCHANGE RISKS.
A proportion of our revenues are received in non-US currencies. We anticipate
that an increasing proportion of our revenues will be received in Euros in the
future. This may give rise to an exchange risk against US dollars.
The introduction of the Euro may have a wide range of macro-economic effects,
resulting, among other things, in interest rates, levels of economic activity
and asset values being different from what they would otherwise have been. We
are unable to predict these macro-economic effects or their impact on the demand
for our services or on our revenues or cost.
We may engage from time to time in foreign exchange hedging in respect of the
principal foreign currencies in which its receivables are denominated. There can
be no assurance that such hedging activities will continue or will be effective
to limit the impact of any movements in exchange rates on our results or
operations.
ITEM 7. FINANCIAL STATEMENTS
The financial statements required by this Item, the accompanying notes thereto
and the reports of independent accountants are included as part of this Form
10-KSB immediately following the signature page.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with the Company's independent accountants.
22
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
- ------------------------------------ -------- ------------------------------------------------------
NAME AGE POSITION(s)
- ------------------------------------ -------- ------------------------------------------------------
<S> <C> <C>
Stanley Hollander 62 Chief Executive Officer, President and Chairman of
the Board of Directors
W. Thomas Hodgson 47 Chief Operating Officer
Michael S. Jacobs 35 Chief Financial Officer, Secretary and
Treasurer
Alan L. Jacobs 58 Executive Vice President and Director
Jay J. Matulich 45 Senior Vice President
Ronald B. Koenig 65 Senior Managing Director
N. Bulent Gultekin 52 Director
Christopher D. Jennings 45 Director
G.F. Kym Anthony 44 Director
Michael K. Whitaker 44 Director
- ------------------------------------ -------- ------------------------------------------------------
</TABLE>
STANLEY HOLLANDER. Mr. Hollander is our President, Chief Executive Officer and
Chairman of the Board of Directors since January 10, 2000. In addition, Mr.
Hollander has served as Senior Vice President and a Director of GlobalNet since
March 1997 and President and a Director of International Capital Growth, Ltd.
since March 1996. Mr. Hollander currently serves on the Board of Directors for
GlobeNet Direct, Italia-iNvest.com, UK Wire, NewMedia Spark, plc, UK-iNvest.com
and Insurance City. He has served as President and a Director of Emerging Growth
Acquisition Corporation I, a publicly-held corporation, since July 1996.
W. THOMAS HODGSON. Mr. Hodgson joined GlobalNetFinancial in November, 1999. From
October 1997 to November, 1999, Mr. Hodgson was President and chief executive
officer of Marathon Asset Management Inc., and Marathon Mutual Funds, Inc. in
Toronto, Canada. From June, 1995 to September, 1997, Mr. Hodgson was executive
director United World Colleges (International) Limited. From October 1993 to
June 1995, Mr. Hodgson was a doctoral student in economics at Oxford University.
MICHAEL S. JACOBS. Mr. Jacobs has served as our Senior Vice President, Secretary
and Treasurer since March 1997 and of International Capital Growth, Ltd. since
March 1996. Since August 1998 he has served as Treasurer for America-iNvest.com,
Inc. He serves on the Board of Directors for Italia-iNvest.com, UK-iNvest.com
and GlobalNetSecurities. He has served as Chief Financial Officer and Treasurer
of Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. Since February 1995, Mr. Jacobs has been a Senior Vice President of
U.S. Sachem Financial Consultants, L.P. and, since July 1995, its successor
Capital Growth International, L.L.C.
ALAN L. JACOBS. Mr. Jacobs has served as our Executive Vice President and a
Director since March 1997. Since September 1999, Mr. Jacobs has served as a
Director for Matchbook FX, LLC. Since March 1996, Mr. Jacobs has served as
Senior Managing Director, Executive Vice President and a Director of
23
<PAGE>
International Capital Growth, Ltd. and, since January 1995, of Capital Growth
International, L.L.C. He has served as Chief Operating Officer and a Director of
Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. From February 1995 to October 1997 and from July 1993 to September
1994, Mr. Jacobs served as a Director of Boca Raton Capital Corporation, a
publicly-held Florida corporation ("BRCC").
JAY J. MATULICH. Mr. Matulich has served as our Senior Vice President since
March 1997 and Vice President of International Capital Growth, Ltd. since March
1996. Since August, 1998 he has served as Chairman of America-iNvest.com, Inc.
Since October 1994, Mr. Matulich has been a Senior Vice President of U.S. Sachem
Financial Consultants, L.P. and, since July 1995, of its successor Capital
Growth International, L.L.C. Since April 1995, Mr. Matulich has served as a
Director of Waste Systems International, Inc., a publicly-held company. From
March 1996 to June 1996, Mr. Matulich served as Chairman of BioSafe
International, Inc.
RONALD B. KOENIG. Mr. Koenig is our Chairman of the Board of Directors. In
addition, Mr. Koenig has been Chairman of the Board of Directors, President and
Chief Executive Officer of International Capital Growth, Ltd. since March 1996.
Since August, 1998 he has been a Director of America-iNvest.com, Inc. He has
served as Chairman of the Board, Chief Executive Officer and a Director of
Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. Mr. Koenig has been Chairman, from October 1994 to July 1995, and
co-founder of U.S. Sachem Financial Consultants, L.P. and, since July 1995, of
its successor Capital Growth International, L.L.C. From 1989 to 1993, Mr. Koenig
was a Senior Managing Director and department head of corporate finance at
Gruntal & Co., Incorporated. Mr. Koenig presently serves on The Wharton School
Undergraduate Executive Board and is on the business advisory board to Sterling
National Bank & Trust Company of New York.
N. BULENT GULTEKIN. Mr. Gultekin has been a Director of the Company since March
1997 and of International Capital Growth, Ltd. since March 1996. Since 1981, Mr.
Gultekin has been an Associate Professor of Finance at The Wharton School of the
University of Pennsylvania. From 1993 to 1994, he served as the Governor of the
Central Bank of the Republic of Turkey.
CHRISTOPHER D. JENNINGS. Christopher D. Jennings has served as a director of the
Company since May 1999. Since April, 1998 Mr. Jennings has been a Managing
Director of Investment Banking of Friedman, Billings, Ramsey & Co. From 1995 to
1998 Mr. Jennings served as a Managing Director of Cruttenden Roth Incorporated
("Cruttenden Roth"), an investment banking firm. Mr. Jennings serves as a member
of the Audit and Compensation Committee of the Board of Directors. Mr. Jennings
is also a director of Ugly Duckling Corporation, a public automobile sales and
finance corporation.
KYM ANTHONY. Mr. Anthony has been a Director of the Company since August 1999.
Mr. Anthony is currently Chairman and Chief Operating Officer of First Marathon,
Inc. Before joining First Marathon, Mr. Anthony was Vice Chairman of TD Bank and
the Chairman and CEO of TD Securities. Prior to this, he held a number of senior
positions with CIBC Wood Gundy, including senior positions in investment banking
and heading up Wood Gundy Asia operations global fixed income, global
derivatives, risk management and treasury. Mr. Anthony has been a Director of
the Investment Dealers Association of Canada and a Member of the Board of
Governors of The Toronto Stock Exchange.
MICHAEL WHITAKER. Mr. Whitaker was appointed to the Board on November 18, 1999
and is the chief executive officer and founder of 10Invest.com plc, a company
created to deliver private equity investment opportunities to private investors
via the Internet. Mr. Whitaker was until July 1999 chief executive of
24
<PAGE>
Collins Stewart Limited, a UK institutional stockbroking firm. Mr. Whitaker was
a joint founder of Collins Stewart in 1991, acting in turn as finance director
and chief executive and carrying out various executive roles in corporate
finance and fund management. Prior to founding Collins Stewart, Mr. Whitaker was
a leading technology analyst, corporate financier and partner at the London
stockbroking firm, Simon & Coates, which was sold to The Chase Manhattan Bank in
1986. In his roles at Simon & Coates, The Chase Manhattan Bank and Collins
Stewart, Mr. Whitaker has had extensive experience of evaluating technology
company investments and in advising such companies in relation to fundraising
and flotation. He has been involved in the flotation of over 20 technology
companies on both the Official List and AIM.
SENIOR LEVEL EMPLOYEE
RICHARD HEFTER. Since February 11, 1999, Mr. Hefter has acted as our
Editor-in-Chief. From 1994 to 1998, Mr. Hefter was a faculty member in English
at Northwestern University and associate director of communications in
Northwestern's office of Development. Prior to that he was a public relations
writer for the Office of Health Science Relations at the University of Iowa.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers and persons who own more than ten percent of a class of the company's
equity securities registered pursuant to Section 12 of the Exchange Act to file
with the Commission initial reports of ownership and reports of securities
registered pursuant to Section 12 of the Exchange Act. The Company's records
indicate that all such forms have been timely filed.
25
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table shows information with respect
to the total compensation earned by, or paid to, the Chief Executive Officer and
the four most highly compensated other executive officers, for service rendered
during fiscal year 1999, 1998 and 1997. No other executive officer of the
Company earned total salary and bonus in excess of $100,000 during the fiscal
years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Shares
UnderlyingOptions (#)
<S> <C> <C> <C> <C>
Name and Principal Position Year Salary($) Bonus($)
Stanley Hollander, Chief Executive
Officer and President and Chairman
of the Board of Directors 1999 306,461 37,500 186,668(1)
1998 196,000 236,667(2)
1997 263,000 --
Ronald Koenig, Senior Managing
Director(3) 1999 208,715 10,000 103,334(1)
1998 200,000 236,667(2)
1997 250,000 --
Alan L. Jacobs, Executive Vice
President and Director 1999 181,153 20,000 --
1998 17,306(5) 80,000(2)
1997 225,000 --
Michael Jacobs, Chief Financial
Officer, Secretary and Treasurer 1999 166,043 20,000 108,334(1)
1998 150,000 150,000(2)
1997 150,000 41,667(4)
Jay J. Matulich, Senior Vice
President 1999 144,471 20,000 108,334(1)
1998 131,000 150,000(2)
1997 125,000 41,667(4)
</TABLE>
(1) Represents shares of Common Stock underlying stock options granted under the
1998 Amended and Restated Employee Stock Option Plan.
(2) Represents shares of Common Stock underlying options granted under the 1998
Stock Option Plan.
(3) Effective January 10, 2000, Mr. Koenig resigned as Chairman of the Board of
Directors
(4) Represents shares of Class B Common Stock underlying stock options granted
under the 1997 Stock Option Plan which plan and options were terminated
December 31, 1998.
(5) Covers the period from January 1, 1998 through January 31, 1998 prior to Mr.
Jacobs' temporary leave of absence.
(6) For the period December 15, 1999 through December 31, 1999.
________________________
26
<PAGE>
The Company currently pays annual salaries to Messrs. Hollander, Koenig, A.
Jacobs, M. Jacobs, Hodgson and Matulich of $450,000, $224,000, $240,000,
$225,000, $150,000, $200,000, respectively. Mr. W. Thomas Hodgson was appointed
Chief Operating Officer on November 1, 1999. Other than as set forth above, none
of the company's executive officers or directors received any salary or wages or
other compensation from the Company during the last three complete fiscal years.
Each of the executive directors and the executive officers has entered into a
one-year employment agreement dated November 1, 1999 with the Company. The
agreements are automatically extended for a further year, unless one party
gives 90 days' notice to the other.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of stock
options made during Fiscal 1999 to any of the named Executive Officers:
<TABLE>
<CAPTION>
Percent of Total Exercise
Number of Shares Options Granted in Price Expiration
Name Underlying Options Fiscal Year Per Share Date
<S> <C> <C> <C> <C>
Stanley Hollander 83,334 7.9% $7.08 January 4, 2009
</TABLE>
AGGREGATED OPTION EXERCISE IN FISCAL YEAR
ENDED DECEMBER 31, 1999
AND OPTION VALUES AT DECEMBER 31, 1999
NUMBER OF SHARES OF
COMMON STOCK
UNDERLYING UNEXERCISED OPTIONS
AT DECEMBER 31, 1999
Value of Unexercised
In-The-Money Options at
Name Exercisable Unexercisable December 31, 1999
Stanley Hollander 186,668 0 $4,555,398
Ronald Koenig 103,334 0 $2,744,551
Michael S. Jacobs 108,334 0 $2,877,351
Jay J. Matulich 108,334 0 $2,877,351
THE AMENDED AND RESTATED 1998 STOCK OPTION PLAN
Under the Amended and Restated 1998 Stock Option Plan (the "Stock Option Plan"),
options to purchase an aggregate of not more than 3,000,000 shares of common
stock may be granted from time to time to key employees (including officers),
consultants and members of the Board of Directors of the Company. Options shall
be designated as Incentive Stock Options ("ISOs") or Nonqualified Stock Options
("NQSOs"). The Stock Option Plan is administered by a committee to administer
the Stock Option Plan consisting of Mr. Bulent Gultekin and Mr. Christopher D.
Jennings, both outside directors of the Company (the "Committee"). The Committee
is generally empowered to interpret the Stock Option Plan; to prescribe rules
and regulations relating thereto; to determine the terms of the option
agreements; to amend the option agreements with the consent of the optionee; to
determine the key employees and directors to whom options are to be granted; and
to determine the number of shares subject to each option and the exercise price
thereof. The per share excercise price of options granted under the Stock Option
Plan will be not less than 100% (110% for ISOs if the optionee owns more than
10% of the common stock) of the fair market value per share of common stock on
the date the options are granted.
27
<PAGE>
INDEMNIFICATION
The Company's Certificate of Incorporation provides for indemnification
rights of officers, directors, and others and limits the personal liability of
directors for monetary damages to the extent permitted by Delaware Law. Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted for directors, officers and
controlling persons of the Company, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's capital stock as of March 15, 2000, by (i)
any person who is known to the Company to be the beneficial owner of more than
5% of the capital stock of the Company; (ii) each director of the Company; (iii)
each of the Named Executive Officers; and (iv) all current directors and
officers of the Company as a group. Except as noted below, each person has sole
voting and investment power with respect to all shares of capital stock of the
Company listed as owned by such person.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OUTSTANDING(2)
OFFICERS AND DIRECTORS (COMMON STOCK OUTSTANDING):
<S> <C> <C>
Ronald B. Koenig 769,550(4) 6.2%
Stanley Hollander 1,219,546(5) 9.6%
Alan L. Jacobs 574,271(8) 4.6%
Hollander Family Partnership LP 936,213(3) 7.3%
Michael S. Jacobs 281,649(6) 2.1%
Jay J. Matulich 279,816(7) 2.1%
W. Thomas Hodgson 200,000(9) 1.6%
N. Bulent Gultekin 21,667(10) .17%
Kym Anthony 29,166(11) .23%
Christopher D. Jennings 80,000(12) .64%
Michael Whitaker 150,000(13) 1.2%
All directors and executive
Officers as a group (10
persons) (14) 3,605,665(14) 25.01%
5% OR GREATER HOLDERS of COMMON STOCK OUSTANDING
Telescan, Inc. 862,694(15) 19.9%
5959 Corporate Drive
Suite 2000
Houston, TX 77036
Dion R. Friedland 1,371,337(16) 10.7%
28 Sloane Street
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OUTSTANDING(2)
OFFICERS AND DIRECTORS (COMMON STOCK OUTSTANDING):
<S> <C> <C>
Flat #8
London SW1X9NE
United Kingdom
Freeserve Investments Ltd. 1,397,112(17) 19.9%
Maylands Avenue
Hemel Hempstead HP2 7TG
United Kingdom
5% or GREATER OF CLASS A OUTSTANDING:
Prudential plc 3,753,823 11.0%
Laurence Pountney Hill
London EC2R OHH
</TABLE>
- ------------
(1) Each beneficial owner for which an address is not listed has an address
c/o GlobalNet Financial.com, Inc., 7284 W. Palmetto Park Road, Suite
210, Boca Raton, FL 33433.
(2) Based on a total of 12,779,547 shares of Common Stock outstanding and
34,224,874 shares of Class A outstanding (equivalent to 3,422,487
shares of Common Stock).
(3) Consists of 499,545 shares of Common Stock and options issued to
Stanley Hollander exercisable to purchase 436,668 shares of Common
Stock which are currently vested. Stanley Hollander, Chairman,
President and Chief Executive Officer of the Company, may be deemed to
be the beneficial owner of the shares of the Company held by Hollander
Family Partnership LP.
(4) Consists of 645,378 shares of Common Stock and options exercisable to
purchase 123,334 shares of Common Stock which are currently vested.
(5) Consists of 632,878 shares of Common Stock of which 133,333 are held by
Stanley Hollander and 499,545 are held by Hollander Family Partnership
LP and options exercisable to purchase 436,668 shares of Common Stock
which are currently vested.
(6) Consists of 98,315 shares of Common Stock and options exercisable to
purchase 183,334 shares of Common Stock that are currently vested.
(7) Consists of 96,482 shares of Common Stock and options exercisable to
purchase 183,334 shares of Common Stock that are currently vested.
(8) Consists of 499,271 shares of Common Stock and options exercisable to
purchase 75,000 shares of Common Stock that are currently vested.
(9) Consists of stock options exercisable to purchase 200,000 shares of
Common Stock which vest 100,000 on April 11, 2000, 50,000 on October
11, 2000 and 50,000 on April 11, 2001.
(10) Consists of stock options exercisable to purchase 21,667 shares of
Common Stock that are currently vested.
(11) Consists of stock options exercisable to purchase 29,166 shares of
Common Stock that are currently vested.
(12) Consists of 15,000 shares of Common Stock and options exercisable to
purchase 65,000 shares of Common Stock which 40,000 options are
currently vested and the remaining 25,000 options vest on April 16,
2000.
29
<PAGE>
(13) Consists of stock options exercisable to purchase 150,000 shares of
Common Stock that are currently vested.
(14) Consists of 2,123,162 shares of Common Stock and 1,482,503 stock
options exercisable to purchase shares of Common Stock.
(15) Includes shares issuable upon exercise of an option to purchase such
number of shares equal to 19.9% of the Company's issued and outstanding
stock on the date of exercise.
(16) Represents shares held by investment funds for which Mr. Friedland
makes the investment and voting decisions.
(17) Includes shares issuable upon exercise of an option to purchase such
number of shares equal to 19.9% of the Company's issued and outstanding
stock on the date of the exercise.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company requires that all material transactions with affiliates be made on
terms that are no less favorable to the Company than those that can be obtained
from unaffiliated third parties. Such transactions are approved by a majority of
the Company's independent directors.
In May 1999, following the content supply agreement entered into between the
Company and Freeserve in January 1999, Freeserve subscribed for 1,397,112 shares
of the Company's common stock, for approximately $15 million. The transaction
consisted of the exercise of 333,333 previously issued warrants at $6.00 and the
subscriptio for 1,063,779 shares of the Company's common stock at $12.00 per
share. Freeserve has also been granted an option, which expires on November 6,
2001, to acquire such number of shares of common stock in the Company at $13.50
per share as would inrease its holding to 19.9 percent of the Company's issued
share capital at the date of exercise. Freeserve may also appoint two directors
to the Company's Board of Directors.
In March 1999, the Company entered into various agreements with Telescan, Inc.
("Telescan"). Under the terms of these agreements, Telescan issued 520,000
shares of its common stock to the Company, which at the time of the transaction
were valued at $9.3 million, in exchange for 862,694 shares of the Company's
common stock. In addition, Telescan purchased an option, which expires on March
30, 2000, to exchange for 25,000 shares of Telescan's common stock for common
stock of the Company and to acquire such number of shares of common stock in the
Company at an initial exercise price of $23.50 which exercise price has been
reduced to $12.00 per share as a result of anti-dilution provisions as would
increase its total holding to 19.9 percent of the Company's issued share capital
at the date of exercise. The Company anticipates Telescan will exercise such
option immediately prior to its expiration. Telescan is an industry leader in
providing Internet services, innovative solutions for online technology and data
retrieval tools.
30
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.1 Agreement Concerning the Exchange of Securities of International
Capital Growth, Ltd. for Securities of Galt Financial Corporation
dated January 7, 1997 (1)
2.2 Agreement and Plan of Merger by and between Capital Growth Holdings,
Ltd., a Colorado corporation, and Capital Growth Holdings, Ltd., a
Delaware corporation, dated June 10, 1997 (1)
2.3 Share Purchase Agreement for shares in SOL Bors AS (6)
2.4 Share Purchase Agreement for shares in Cyberwolf Limited (6)
3.1 Certificate of Incorporation of the Company, as amended (2)
3.1(b) Amendment to the Certificate of Incorporation (4)
3.2 By-Laws of the Company (1)
4.1 Form of Common Stock certificate (2)
4.2 Form of Redeemable Common Stock Purchase Warrant (2)
10.1 Stock Option Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc. (3)
10.2 License Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc. (3)
10.3 Services Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc. (3)
10.4 Stock Exchange Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc.(3)
10.5 Content Supply Agreement between Freeserve Limited and GlobalNet
Financial.com, Inc. (3)
10.6 Lease Agreement, as amended, regarding 2425 Olympic Boulevard, Santa
Monica, CA dated October 21, 1997 (2)
10.7 intentionally deleted
10.8 1998 Stock Option Plan (3)
10.9 Amended and Restated 1998 Stock Option Plan (4)
10.10 Stock Purchase and Exchange Agreement between Valhalla Securities,
Inc., GlobalNetFinancial.com, Inc., Daniel Uslander and Ronald
Comerchero (5)
10.11 Financial Website Agreement between Scandinavia Online AS (Norway)
and Scandinavia Online A/S (Denmark) and GlobalNetFinancial.com (6)
10.12 Financial Website Agreement between Scandinavia Online AB (Sweden)
and GlobalNetFinancial.com (6)
10.13 Lease Agreement regarding 7284 W. Palmetto Park Road, Suite 210,
Boca Raton, Florida(6)
10.14 Lease Agreement regarding 16150 N. Arrowhead Fountain Circle Drive,
Peoria, Arizona(6)
21.1 Subsidiaries of the Company (6)
23.1 Consent of Richard A. Eisner & Company, LLP (6)
27.0 Financial Data Schedule (6)
- ----------------
(1) Filed herewith as an exhibit of the same number to the Company's Form
8-K dated March 14, 1997 and incorporated herein by reference.
(2) Filed as an exhibit of the same number to the Company's Registration
Statement on Form SB-2 (SEC File No. 333-37879) and incorporated herein
by reference.
(3) Filed as an exhibit of the same number to the Company's Registration
Statement on Form SB-2 (SEC File No. 333-72385)
(4) Filed as an exhibit to the Company's Schedule 14C dated November 19,
1999 and incorporated herein by reference.
31
<PAGE>
(5) Filed as an exhibit to the Company's Form 8-K dated November 18, 1999
and incorporated herein by reference.
(6) Filed herewith.
(B) REPORTS ON FORM 8-K FILED DURING THE FOURTH QUARTER OF 1999
Form 8-K dated November 18, 1999 and filed December 7, 1999
Item 5. Other Events - Acquisition of Valhalla Securities, Inc.,
reporting the Stock Purchase and Exchange Agreement between Valhalla
Securities, Inc., GlobalNetFinancial.com, Inc., Daniel Uslander and
Ronald Comerchero.
Form 8-K dated December 9, 1999 and filed December 30, 1999
Item 5. Other Events - Sales of Equity Securities Pursuant to
Regulation S, reporting GlobalNetFinancial.com, Inc.'s sale of shares
of the Company's Class A Common Stock on the Alternative Investment
Market of the London Stock Exchange
32
<PAGE>
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GLOBALNET FINANCIAL.COM, INC.
By: /s/ STANLEY HOLLANDER
--------------------------------------------
Stanley Hollander, Chairman of the Board,
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ALAN L. JACOBS Executive Vice President and Director March 30, 2000
- ------------------------------------
Alan L. Jacobs
/s/ W. THOMAS HODGSON Chief Operating Officer March 30, 2000
- ------------------------------------
W. Thomas Hodgson
/s/ MICHAEL C. JACOBS Chief Financial Officer, Secretary and Treasurer March 30, 2000
- ------------------------------------
Michael C. Jacobs
/s/ JAY J. MATULICH Senior Vice President March 30, 2000
- ------------------------------------
Jay J. Matulich
/s/ RONALD B. KOENIG Senior Managing Director March 30, 2000
- ------------------------------------
Ronald B. Koenig
/s/ N. BULENT GULTEKIN Director March 30, 2000
- ------------------------------------
N. Bulent Gultekin
/s/ KYM ANTHONY Director March 30, 2000
- ------------------------------------
Kym Anthony
/s/ CHRISTOPHER JENNINGS Director March 30, 2000
- ------------------------------------
Christopher Jennings
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL WHITAKER Director March 30, 2000
- ------------------------------------
Michael Whitaker
</TABLE>
34
<PAGE>
Contents
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS
Independent auditors' report F-2
Balance sheet as of December 31, 1999 F-3
Statements of operations for the years ended December 31, 1999 and 1998 F-4
Statements of changes in stockholders' equity for the years ended
December 31, 1999 and 1998 F-5
Statements of cash flows for the years ended December 31, 1999 and 1998 F-7
Notes to financial statements F-8
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
GlobalNet Financial.Com, Inc.
We have audited the accompanying consolidated balance sheet of GlobalNet
Financial.com, Inc. and subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 1999 and 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
material respects, the consolidated financial position of GlobalNet
Financial.com, Inc. and subsidiaries as of December 31, 1999, and the
consolidated results of their operations and their consolidated cash flows for
the years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
March 17, 2000
F-2
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets:
Cash and cash equivalents $ 44,523,090
Certificates of deposit and U.S. treasury bills 24,418,038
Restricted cash 106,597
Offering proceeds receivable subsequently collected 8,139,739
Accounts receivable 480,788
Due from affiliates 435,617
Due from broker 276,455
Securities owned at market value 1,211,954
Securities not readily marketable, at fair value 14,559,866
Prepaid expenses and other current assets 227,539
-------------
Total current assets 94,379,683
Equity in unconsolidated companies and joint ventures 21,988,559
Investments 918,580
Licensing and promotion agreements, net of accumulated
amortization of $850,327 1,973,362
Other assets 613,895
Fixed assets, net of accumulated depreciation of $186,047 560,571
Goodwill, net of accumulated amortization of $10,469 258,180
-------------
Total $ 120,692,830
=============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 1,848,439
Due to affiliate 186,300
Dividends payable - preferred stockholders 38,154
-------------
Total current liabilities 2,072,893
-------------
Minority interest in consolidated subsidiary 19,269
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 20,000,000 shares authorized,
none outstanding
Class A common stock - $.001 par value;
50,000,000 shares authorized, 32,725,000 outstanding 32,725
Class B common stock - $.001 par value;
25,000,000 shares authorized, none outstanding
Common stock - $.001 par value;
50,000,000 shares authorized, 11,818,112 shares issued 11,818
Additional paid-in capital 146,640,481
Accumulated deficit (24,657,378)
Unearned compensatory costs (7,898,965)
Accumulated other comprehensive income 4,650,070
Subscription receivable (148,083)
Treasury stock - at cost (2,500 common shares) (30,000)
-------------
Total Stockholders' Equity 118,600,668
-------------
Total $ 120,692,830
=============
SEE NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
Online trading commission income $ 481,744
Advertising 390,907
Consulting fees $ 405,071
Private placement fees 489,482 1,283,027
Net realized and unrealized gains (losses)
on marketable and not readily marketable securities 1,421,194 (437,060)
Interest income 535,581 30,309
Other revenue 51,681
------------ ------------
Total operating revenue 3,370,589 1,281,347
Operating expenses:
Cost of advertising revenue 239,270
Commission expense 217,000 286,381
General and administrative expenses 12,194,882 3,345,950
Non-cash compensatory and licensing expenses 7,814,287 453,247
Depreciation and amortization 1,398,976 142,576
Equity in (earnings) loss of unconsolidated companies
and joint ventures (80,737) 61,069
Minority interest in losses of
consolidated subsidiary (53,832)
------------ ------------
Total operating expenses 21,729,846 4,289,223
------------ ------------
Net loss $(18,359,257) $ (3,007,876)
============ ============
Basic and diluted loss per share $ (1.79) $ (0.72)
============ ============
Weighted average common shares
outstanding - basic and diluted 10,232,538 4,206,000
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL
----------------------- ----------------------- ----------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1997 2,738,500 $ 2,739 566,416 $ 567 $ 5,124,453
Issuance of common stock 3,874,733 3,874 2,900,066
Collection of subscription
Receivable
Shares issued to acquire
Securities 166,667 166 135,834
Value of options issued as
Compensation to consultants 247,000
Value of warrants issued to
Consultant 117,500
Value of stock issued to a former
Employee 16,667 17 124,983
Value of stock issued to
Consultant 26,667 27 239,973
Conversion of Class B common
Stock (2,738,500) (2,739) 2,738,500 2,739
Dividends declared
Comprehensive loss:
Net loss
Unrealized loss on securities
Comprehensive loss
---------- ---------- ---------- ---------- ---------- ---------- -------------
Balance - December 31, 1998 0 0 7,389,650 $ 7,390 $ 8,889,809
Issuance of common stock 2,234,431 2,235 23,614,514
Conversion of common stock to
Class A common stock 6,850,000 6,850 (685,000) (685) (6,165)
Issuance of Class A common
stock 25,875,000 25,875 65,032,352
Issuance of common stock to
settle liability 45,834 46 326,517
Issuance of common stock for
services 1,191,029 1,191 17,628,111
Issuance of common stock for
acquisitions of consolidated
subsidiaries 29,167 29 331,221
Issuance of common stock for
equity investments,
securities
and other investments 309,870 310 4,048,091
Issuance of options and warrants
for services 7,140,822
Amortization of unearned
compensatory costs
Exercise of stock options and
warrants 896,334 897 9,517,203
Non-reciprocal transfer of
marketable securities to
Company 370,932
Simultaneous exercise of options
and purchase of treasury stock 430,000 430 904,570
Retirement of treasury stock (23,203) (25) (904,975)
Gain in equity of investee assets 9,747,479
Comprehensive loss:
Net loss
Other comprehensive income
Unrealized gain on securities
Foreign currency translation
adjustments
Other comprehensive income
Comprehensive loss
---------- ---------- ---------- ---------- ---------- ---------- -------------
Balance - December 31, 1999 32,725,000 $32,725 0 0 11,818,112 $11,818 $146,640,481
========== ========== ========== ========== ========== ========== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
UNEARNED ACCUMULATED
COMPENSATORY OTHER TREASURY STOCK
ACCUMULATED AND LICENSING COMPREHENSIVE SUBSCRIPTION ----------------------
DEFICIT COSTS INCOME (LOSS) RECEIVABLE SHARES AMOUNT TOTAL
----------- ------------- ------------- ------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1997 $(2,525,584) $ (53,600) 2,500 (30,000) $ 2,518,575
Issuance of common stock 2,903,940
Collection of subscription
Receivable 53,600 53,600
Shares issued to acquire
Securities 136,000
Value of options issued as
Compensation to consultants 247,000
Value of warrants issued to
Consultant $ (96,253) 21,247
Value of stock issued to a former
Employee 125,000
Value of stock issued to
Consultant (180,000) 60,000
Conversion of Class B common
Stock
Dividends declared (764,661) (764,661)
Comprehensive loss:
Net loss (3,007,876) (3,007,876)
Unrealized loss on securities $(11,250) (11,250)
-------------
Comprehensive loss (3,019,126)
----------- ----------- ---------- ---------- ---------- ---------- -------------
Balance - December 31, 1998 $(6,298,121) $(276,253) $(11,250) 2,500 $(30,000) $2,281,575
Issuance of common stock 23,616,749
Conversion of common stock to
Class A common stock --
Issuance of Class A common
stock 65,058,227
Issuance of common stock to
Settle liability 326,563
Issuance of common stock for
Services (8,296,177) 9,333,125
Issuance of common stock for
Acquisitions of consolidated
Subsidiaries 331,250
Issuance of common stock for
Equity investments, securities
and other investments 4,048,401
Issuance of options and warrants
for services (7,140,822) --
Amortization of unearned
Compensatory costs 7,814,287 7,814,287
Exercise of stock options and
Warrants (148,083) 9,370,017
Non-reciprocal transfer of
Marketable securities to
Company 370,932
Simultaneous exercise of options
and purchase of treasury stock (23,203) (905,000) --
Retirement of treasury stock 23,203 905,000 --
Gain in equity of investee assets 9,747,479
Comprehensive loss:
Net loss (18,359,257) (18,359,257)
Other comprehensive income:
Unrealized gain on securities 4,684,699 4,684,699
Foreign currency translation
adjustments (23,379) (23,379)
-------------
Other comprehensive income 4,661,320
-------------
Comprehensive loss (13,697,937)
------------ ----------- ---------- ---------- ---------- ---------- -------------
Balance - December 31, 1999 $(24,657,378) $(7,898,965) $4,650,070 $(148,083) 2,500 $(30,000) $118,600,668
============ =========== ========== ========== ========== ========== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-6
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(18,359,257) $ (3,007,876)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,398,976 142,576
Equity in (earnings) loss of unconsolidated affiliate (80,737) 61,069
Minority interest in losses of consolidated subsidiary (53,832)
Compensation to consultants and former employee paid with stock and options 7,814,287 453,247
Change in unrealized (appreciation) depreciation of securities (629,811) 438,261
Realized gains on securities (791,383) (1,201)
Receipt of securities in payment of fees (187,500)
Other items 155,865
Changes in:
Accounts receivable and due from affiliates (916,304)
Due from broker (74,659) 228,201
Prepaid expenses and other current assets (166,101) (61,438)
Licensing and other assets (3,365,975) (401,339)
Accounts payable and accrued expenses 727,019 428,405
Deferred revenue (5,000) (69,038)
------------ ------------
Net cash used in operating activities (14,346,912) (1,976,633)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (607,924) (128,727)
Proceeds from sale of securities 1,286,192 516,015
Proceeds from sale of unconsolidated affiliate 3,931
Repayment of loan from affiliates 209,000
Investment in certificates of deposits and U.S. treasury bills (24,418,038)
Investment in restricted cash (1,933) (2,330)
Investment in securities (180,000) (64,480)
Investment in unconsolidated companies and joint ventures (8,793,452)
Acquisition of other investments (457,000)
Acquisition of UK-iNvest.com Limited, net of $47,723 cash received 6,473
Acquisition of GlobalNet Securities, net of $16,897 cash received 16,897
Other items 1,400
------------ ------------
Net cash provided by (used in) investing activities (33,147,385) 533,409
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 33,729,750 2,903,940
Proceeds from the issuance of Class A common stock 56,918,488
Collection of subscription receivable 53,600
Dividends paid (572,625) (383,201)
------------ ------------
Net cash provided by financing activities 90,075,613 2,574,339
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 42,581,316 1,131,115
Cash and cash equivalents at beginning of period 1,941,774 810,659
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44,523,090 $ 1,941,774
============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS:
Receivable for proceeds on Class A common stock offering $ 8,139,739
Issuance of common stock for the acquisition of GlobalNet Securities 250,000
Common stock issued to settle debt 326,563
Common stock issued to acquire securities 9,333,125 $ 136,000
Common stock issued to acquire equity and other investments 4,048,401
Gains on equity investee capital increases 9,747,479
Dividends declared but not paid 572,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] BASIS OF CONSOLIDATION:
GlobalNet Financial.com, Inc. (the "Company" or "GLBN") is an international
financial internet company involved in providing online financial news,
investment tools and transaction services through its internet and broker/dealer
subsidiaries, as well as through its strategic equity investment partners.
The financial statements include the accounts of the Company and its majority
owned subsidiaries. All material intercompany transactions and account balances
have been eliminated in consolidation.
GlobalNet Securities, Corp. ("GlobalNet Securities"), 66.7% of which was
acquired in 1999 (see Note J), is the only consolidated subsidiary that has a
minority ownership interest. The minority shareholders' interest in the net loss
of this subsidiary has been reflected as a credit amount in the consolidated
statement of operations in the caption "Minority interest in losses of
consolidated subsidiary". The Company's liability to the minority interest
shareholders is included in the caption "Minority Interest in Consolidated
Subsidiary" in the consolidated balance sheet.
Investments in companies in which the Company maintains significant influence
and in which the Company's ownership interest is at least 20% but not more that
50% are accounted for under the equity method. Under this method, the Company
records its share of earnings (losses) as income (expense) in the statement of
operations and increases (decreases) the investment by the equivalent amount.
Dividends received are recorded as a reduction in the investment. Subsequent
increases in an equity investment's capital are recorded as an increase in the
investment and a credit against the Company's additional paid in capital.
The investment caption "Equity in unconsolidated companies and joint ventures"
in the consolidated balance sheet represents the Company's equity in the net
assets of NewMedia Spark, PLC, an investment company seeking high technology and
internet related company investments; Synaptics Systems Limited, a company that
provides sophisticated comparative information on financial products;
MatchbookFX, L.L.C., a foreign currency exchange trading company;
Italia-iNvest.com, S.p.a., a financial services website company in Italy;
GlobeNet Direct.com Limited, an online trading and clearing company in the
United Kingdom, initially trading in United Kingdom securities;
InsuranceWide.com Services Limited, one-stop-shop for personal insurance in the
United Kingdom; and UK-Wire Limited, a company that provides timely financial
news and information on companies in the United Kingdom. The Company's share of
the losses of the unconsolidated companies is included in the caption "Equity in
losses of unconsolidated companies and joint ventures" in the consolidated
statement of operations.
The Company's ownership in each equity investment is as follows as of December
31, 1999:
INVESTMENT OWNERSHIP % HELD BY
- ---------- ----------- -------
NewMedia Spark, PLC 15.7% GLBN
Synaptics Systems, Limited 29.8% GLBN
MatchbookFX, L.L.C. 33.33% GLBN
Italia-iNvest.com, S.p.a. 40% GLBN
GlobeNet Direct.com, Limited 33.33% GLBN
InsuranceWide.com
Services Limited 26.7% GlobalNet UK Holdings Limited(1)
UK-Wire Limited 50% UK-iNvest.com Limited(1)
- ------------
(1) Wholly owned subsidiaries of GLBN.
[2] CASH AND CASH EQUIVALENTS:
The Company considers all liquid short-term investments, including demand
deposits at commercial banks, United States government agency notes and
United States treasury bills with maturities of three months or less to be cash
equivalents.
F-8
<PAGE>
[3] FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of cash and cash equivalents, due from broker, restricted
cash, accounts receivable, accounts payable and accrued expenses approximate
their fair value because of the short maturity of those instruments.
[4] VALUATION OF SECURITIES AND INVESTMENTS:
Investments in companies which GLBN owns less than a 20% interest are reviewed
for appropriate classification at the time of purchase and re-evaluated as of
each balance sheet date.
Investments held by GLBN as available-for-sale securities are carried on the
balance sheet at fair market value, with the unrealized gains and losses
reported as "Accumulated other comprehensive income", a separate component of
stockholders' equity. Investments are classified as "held to maturity" when GLBN
has the positive intent and ability to hold the investment to maturity and are
recorded at cost.
Unrealized gains and losses on securities held by the broker/dealers are
recognized as operating income or loss in the statement of operations.
Securities owned, which are listed on a national securities exchange, are valued
at their last reported sales price. Securities which trade over-the-counter are
valued at the "bid" price. Securities which do not have a readily ascertainable
market value are valued at their estimated fair value as determined by
management. Management considers fair value to be cost unless the value has
deteriorated or where later investments have been concluded by a significant
outside investor, then the investment is valued at the last per share sales
price paid unless circumstances dictate a lower valuation.
Securities not readily marketable include unregistered shares of public
companies (see Note C).
The values of securities owned by the Company can change substantially because
of volatility in the price of each security, changes in the business prospects
of the issuer of the securities, specific events influencing the operations of
the issuer of the securities, and various other circumstances outside the
security issuer's control. Accordingly, the value of the securities could
decline so that a loss would be required to be recognized for the total carrying
amount of such securities.
[5] FIXED ASSETS:
Furniture and fixtures, equipment, software and leasehold improvements are
recorded at cost less accumulated depreciation. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets which
range from three to seven years. Leasehold improvements are amortized over the
lesser of the economic useful life of the improvement or the term of the lease.
In accordance with accounting standards issued in March 1998 and adopted by the
Company, external direct costs of software materials and services subsequent to
completion of the preliminary project stage were capitalized. Such software
costs are being amortized using the straight-line method over an estimated
useful life of two to three years.
[6] LICENSING AND PROMOTION AGREEMENTS:
Licensing and promotion agreements are being amortized on a straight-line basis
over the term of the related agreements which range from one to two years.
[7] REVENUE RECOGNITION:
Commissions earned on online trading securities transactions and related
expenses are reported on a trade date basis.
Advertising revenue is derived from third-party advertising on the Company's web
sites. Advertising revenue is recognized in the period that the advertisement is
displayed, provided that no significant Company obligations remain and
collection of the resulting receivable is probable.
Consulting and private placement fees are recorded when earned. In addition, the
Company earns fees in the form of securities. These securities are valued at
market on the date they are earned. Securities transactions are recorded on a
trade date basis.
The Company earns other revenue by allowing its customers to broadcast real time
information on its web sites. Fees are recognized as revenue at the time of
transmission.
F-9
<PAGE>
[8] NET LOSS PER SHARE:
Net loss per share is based on the weighted average number of shares of Common
Stock and Class A Common Stock outstanding during the year. Common stock
equivalents representing options and warrants have not been included as they
would be antidilutive.
[9] STOCK-BASED COMPENSATION:
In October 1995, the FASB issued Statement of Financial Accounting Standards
"Accounting for Stock-Based Compensation" ("FAS 123"). FAS 123 encourages, but
does not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to continue to account
for its stock-based compensation plans using the intrinsic value method
prescribed by APB 25 whereby compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's common stock at
the date of grant over the amount and employee must pay to acquire the stock.
[10] FOREIGN CURRENCY:
The financial statements for the European operations are translated into U.S.
dollars at period-end exchange rates for assets and liabilities, and weighted
average exchange rates for revenues and expenses. The effects of foreign
currency translation adjustments are included as a component of stockholders'
equity and, gains and losses resulting from foreign currency transactions are
included in net loss. For year ended December 31, 1999, such amounts were not
material.
[11] CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially subject the Company to concentration of
credit risk consist of cash, cash equivalents and securities (see Note C). The
Company primarily holds its cash and cash equivalents at two banks. At December
31, 1999, cash and cash equivalents consists principally of $21.9 million which
is held in fixed deposits and $16.6 million which is held in money market
accounts.
[12] USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
[13] RECLASSIFICATIONS:
Certain amounts reported in 1998 have been reclassified to conform with the 1999
presentation.
NOTE B - BUSINESS SEGMENTS
The Company and its subsidiaries have three reportable segments. The Company
operates internet websites, as broker/dealers, including an online trading
company and has a corporate administration function. The Company's internet
websites provide comprehensive, internet-based electronic publishing of unique
financial content and services. The Company's broker/dealer operations consist
of both an online trading subsidiary, GlobalNet Securities, and International
Capital Growth ("ICG"), which acts as a placement agent in private financings
and as a financial consultant to various companies. Two different sets of
customers accounted for all of the Company's private placement fees earned
during the year ended December 31, 1999 and 1998.
F-10
<PAGE>
Information with respect to reportable segments follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-------------------------------------------------------------------
INTERNET
CORPORATE BROKER/DEALERS OPERATIONS TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from external customers $ 971,226 $ 442,588 $ 1,413,814
Investment income $ 1,048,684 264,183 14,097 1,326,964
Depreciation and amortization 865,684 16,330 516,962 1,398,976
Equity in (earnings) loss of unconsolidated
affiliates, net (116,304) 35,567 (80,737)
Segment loss (11,444,115) 749,948 (7,665,091) (18,359,257)
Significant noncash items:
Unrealized appreciation of securities 4,684,699 629,811 5,314,510
Compensation paid with stock, warrants and
options 7,814,287 7,814,287
Segment assets 115,796,149 2,445,995 2,450,686 120,692,830
Expenditures for long-lived assets 144,285 463,639 607,924
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-------------------------------------------------------------------
INTERNET
CORPORATE BROKER/DEALER OPERATIONS TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from external customers $ 1,683,098 $ 5,000 $ 1,688,098
Investment income $ 13,444 18,066 31,510
Depreciation and amortization 104,117 38,459 142,576
Equity in loss of unconsolidated affiliate, net 61,069 61,069
Segment loss (695,806) (1,453,582) (858,488) (3,007,876)
Significant noncash items:
Unrealized depreciation of securities (11,250) (438,261) (449,511)
Compensation paid with stock, warrants and
options 81,247 372,000 453,247
Segment assets 2,073,139 890,863 541,008 3,505,010
Expenditures for long-lived assets 284 128,443 128,727
</TABLE>
The Company's geographic data for the year ended December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
UNITED STATES EUROPE TOTAL
------------- ----------- ------------
<S> <C> <C> <C>
Revenues from external customers $ 1,014,752 $ 399,062 $ 1,413,814
Segment loss (16,440,615) (1,918,643) (18,359,257)
Segment assets 118,375,634 2,317,196 120,692,830
Fixed assets 373,408 187,163 560,571
</TABLE>
During 1998, the Company only operated in the United States.
NOTE C - SECURITIES
Included in securities not readily marketable at December 31, 1999 is common
stock of one issuer, Telescan, Inc., ("Telescan"), with a value of $13,454,688.
Telescan is subject to the reporting requirements of the U.S. Securities and
Exchange Commission. Securities not readily marketable had a cost of $9,557,125
at December 31, 1999.
Securities owned at market value had a cost of $995,695 at December 31, 1999.
NOTE D - EQUITY IN UNCONSOLIDATED COMPANIES AND JOINT VENTURES
In 1998, the Company had a 50% interest in an unconsolidated affiliate, Capital
Growth (Europe) Limited ("CGE"). On May 19, 1998, the investment was sold for
$3,931.
On August 16, 1999, the Company entered into a joint venture agreement with
Freeserve, Mesirow Financial, Inc. and National Bank to form a corporation,
GlobeNet Direct.com, Limited ("GlobeNet Direct"), which will offer brokering and
clearing services in the United Kingdom. The agreement provides for the Company
to make an initial contribution of 250,000 in British Pounds (approximately
$402,000) to acquire 250,000 shares or 25% interest in the corporation. The
agreement also calls for the Company to develop the corporation's interface,
provide content to the corporation's web site and assist the corporation in
obtaining technology and software. In November 1999, the Company purchased an
additional 8.33% interest in GlobeNet Direct from Mesirow for approximately
$139,000.
F-11
<PAGE>
On August 19, 1999, the Company acquired a 33.33% membership interest in
MatchbookFX, L.L.C. ("Matchbook"), an entity that provides online spot foreign
exchange transactions, for $1,500,000. Matchbook is equally owned by the
Company, NexTrade and Valhalla Forex.
On August 24, 1999, the Company entered into a joint venture agreement with a
consortium that includes DeAgostini Holding Group, Banca Commerciale D'Italia
and Investitori Associati, to form a corporation to create Italia-iNvest.com, a
website covering the Italian financial marketplace. The Company contributed
450.0 million Lire or approximately $246,000 for a 50% interest in the joint
venture. On December 16, 1999, Italia-iNvest.com increased its registered
capital from 900.0 million Lire to 1.125 billion Lires for which AISoftware
S.p.A. ("AIS") subscribed for the increase in shares. AIS, engaged in the
production and marketing of software, became the technology partner to the joint
venture. As a result of this increase in capital to Italia-iNvest, the Company
recorded a gain of approximately $615,000 for 10% of its interest in the joint
venture.
On September 19, 1999, the Company's wholly owned subsidiary, GlobalNet UK
Holdings, entered into a joint venture agreement with Freeserve plc, Harrison
Son Hill & Co. Limited, Cox Insurance Holdings plc to create InsuranceWide.com.
GlobalNet UK Holdings contributed $327,833 for its 26.7% equity interest in this
joint venture.
On October 14, 1999, the Company acquired a 33.3% interest in NewMedia Spark plc
("NMS"), an investment company seeking high technology and internet related
company investments. The Company acquired 26,666,640 ordinary shares at 2.5p (or
$.04) per share for $1,119,334 and issued 330,000 warrants to NMS to purchase
common stock at an exercise price of $20.00 per share for a term of one year.
The Company has one-third of the seats on the Board of Directors of NMS. In
addition, the Company has a warrant to subscribe for 2% of the outstanding share
capital of NMS in issue prior to exercise at a subscription price of 10p per
ordinary share. This warrant of approximately 3.4 million shares as of December
31, 1999 is exercisable at any time between the first and fifth anniversaries of
the warrant instrument date of October 20, 1999.
On October 29, 1999, NMS went public on the Alternative Investment Market
("AIM") of the London Stock Exchange with the placing of 30.0 million ordinary
shares at 10p (or $.16) per share for which the Company recorded a gain of
approximately $884,000 on its investment. On November 26, 1999, NMS raised
additional capital with the placing of 60.0 million new ordinary shares at 60p
(or $.97) per share for which the Company recorded a gain of approximately $8.2
million. As of December 31, 1999, the Company has a 15.7% equity interest in
NMS. As of March 15, 2000, the closing price of NewMedia Spark's common stock
was 1.45 British pounds (or $2.32) per share and as a result, the market value
of the Company's investment, including the warrants, was approximately $69.8
million.
On October 20, 1999, the Company's subsidiary, UK-iNvest.com subscribed for
150,000 shares at 1 British Pound per share in UK-Wire Limited, along with
Financial Express Limited, for a 50% interest each in the company. UK-iNvest's
150,000 British pounds capital contribution is to be made during the first year
of operations to fund working capital. At December 31, 1999, UK-iNvest.com.
still has a liability to fund capital contributions totalling 115,000 British
Pounds to UK-Wire.
On December 23, 1999, the Company acquired a 29.8% interest in Synaptics Systems
Limited ("Synaptics"), a private provider of sophisticated comparative
information on financial products, for 3.1 million British Pounds (approximately
$5.0 million) in cash and 241,870 shares of common stock at a market price of
$13.15, or $3.2 million.
Summary financial information (unaudited) for the Company's unconsolidated
companies and joint ventures that are accounted for under the equity method is
as follows:
1999
----
Current assets $64,664,522
Fixed assets and other assets 11,771,633
Current liabilities 2,584,175
Long-term debt and other noncurrent liabilities --
Net sales 5,932,566
Operating profit 4,109,340
Net income 2,596,525
Company's share of:
Net assets 21,988,559
Net income 80,737
F-12
<PAGE>
NOTE E - INVESTMENTS
On July 28, 1999, the Company entered into a common stock subscription agreement
to acquire 554 shares of GRO Corporation's ("GRO") common stock that would
represent approximately 5.0% of GRO, for $200,000. GRO provides online trading
utilizing sophisticated technology for frequent traders.
On September 29, 1999, the Company entered into an agreement with
TradinGear.com, Inc. wherein the Company paid $257,000 in exchange for 500,000
shares of the common stock of TradinGear. In addition, the Company issued 35,000
shares as of October 29, 1999 valued at approximately $462,000 to TradinGear in
exchange for an additional 838,888 shares of the common stock of TradinGear
that, together with the 500,000 shares previously purchased, results in a
10% ownership in TradinGear by the Company.
NOTE F - FURNITURE, FIXTURES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
At December 31, 1999, fixed assets consist of the following:
Furniture and fixtures $268,267
Equipment 201,588
Software 249,565
Leasehold improvements 27,198
--------
746,618
Less accumulated depreciation 186,047
--------
$560,571
========
NOTE G - STOCKHOLDERS' EQUITY
[1] PREFERRED STOCK:
Preferred stock may be issued in one or more series at the discretion of the
Board of Directors. In establishing a series, the Board of Directors shall fix
the number of shares in such series, and the preferences, rights and
restrictions thereof.
On March 14, 1997, the Board of Directors designated 4,365,000 shares of
preferred stock as 5% cumulative Series A preferred stock and 1,200,000 shares
of preferred stock as 5% cumulative convertible Series B preferred stock.
The holders of Series A and B preferred stock were entitled to a preferential
cumulative dividend which began accruing on October 12, 1996 equal to 5% of the
liquidation preference per annum and share equally with the Class B common stock
in any dividends declared thereon. The Series A and B had a liquidation
preference of $.14 and $.21 per share, respectively.
On October 12, 1997, each share of the Company's 4,001,334 shares of Series A
preferred stock and 1,080,000 shares of Series B preferred stock converted into
shares of Class B common stock on a one-for-one basis, at which time the 5% per
share annual dividend that accrued thereon ceased to accrue and became due and
payable on October 24, 1997, out of funds legally available therefore.
[2] CLASS A COMMON STOCK:
In November 1999, the Board of Directors authorized 50,000,000 shares of Class A
common stock, $.001 par value per share. Each holder of this class is entitled
to vote with respect to all matters upon which holders of the Company's common
stock are entitled to vote. The holder of Class A common stock has one vote for
each ten Class A common shares held. Further, in the event of liquidation, after
payment of the debts and other liabilities of the Company and after making
provision for the holders of preferred stock of the Company, if any, the
remaining assets of the Company will be distributable ratably among the holders
of the common stock and the Class A common stock with the Class A common stock
entitled to one-tenth the liquidation proceeds per share, payable with respect
to the common stock. Each issued and outstanding share of Class A common stock
is entitled to one-tenth the dividend declared and paid by the Company on its
issued and outstanding common stock. Finally, twenty four months from the date
of issuance, each ten shares of Class A common stock will automatically convert
into one share of common stock.
F-13
<PAGE>
On December 9, 1999, the Company completed an offering of its Class A common
stock on the Alternative Investment Market ("AIM") of the London Stock Exchange.
The Class A shares have not been registered under the Securities Act of 1933.
The Company sold 25,525,000 shares of Class A common stock and certain officers,
directors and key employees of the Company exchanged 685,000 shares of common
stock for 6,850,000 shares of Class A common stock. In addition, 350,000 Class A
shares were issued to the underwriter as payment for a portion of their
commission on the sale. After deducting underwriting expenses and other offering
expenses (including legal and accounting fees and other expenses associated with
the offering), the total net proceeds were approximately $65.0 million.
[3] CLASS B COMMON STOCK:
The holders of the Class B common stock were entitled to one vote per share. The
Class B common stock, which was junior in priority with respect to dividends to
the common stock, converted into common stock on a one-for-one basis on December
31, 1998.
[4] COMMON STOCK:
In November 1999, the Board of Directors increased the authorized capital of
common stock, $.001 par value per share, from 16,666,667 shares of common stock
to 50,000,000 shares of common stock.
[5] DIVIDENDS:
In March 1997, the Board of Directors declared an annual dividend as modified of
$1.35 per share of common stock, for the calendar years ended 1998 and 1997,
accruing as of January 1, 1997, payable commencing June 30, 1997, and on a
quarterly basis thereafter, to be paid after payment of any dividends due on all
classes of stock with priority over common stock subject to any operating
restrictions. In addition, the Board of Directors determined that any dividend
declared on Class B common stock will be subject to a $1.20 per share limitation
on annual dividends in 1998. During 1999, no dividends were declared or payable
on the common stock.
[6] STOCK SPLIT:
On June 17, 1999, the Company's Board of Directors authorized a one-for-six
reverse common stock split effective July 2, 1999, for all shareholders of
record as of the close of business on such date. All share and per share amounts
in the accompanying financial statements have been retroactively restated to
give effect to the reverse common stock split.
[7] PRIVATE PLACEMENTS:
On December 7, 1998, the Company completed a private offering of its common
stock at $.75 per share. The Company issued a total of 3,874,733 shares of
common stock, which yielded net proceeds of approximately $2,904,000.
On February 10, 1999, the Company sold 429,234 shares of common stock in a
series of private placements yielding net proceeds of approximately $2,479,400.
On April 30, 1999, the Company raised net proceeds of $4,650,000 in a private
placement of 416,667 common shares and 333,333 warrants to purchase shares of
common stock exercisable for two years at an exercise price of $27.36 per share.
On May 7, 1999, the Company received $14,765,337 from Freeserve, Ltd.
("Freeserve") which represented the purchase of 1,063,779 shares of common stock
at $12.00 per share and the exercise of a previously issued warrant for 333,333
shares of common stock at $6.00 per share (see Note H). In addition, the Company
granted Freeserve an option to increase its ownership to 19.9% of the fully
diluted number of shares of common stock outstanding. The option is exercisable
at $13.50 per share and expires on November 6, 2001. In addition, in the event
of the subsequent issuance of shares or the granting of rights to subscribe for
or purchase shares at exercise prices less than $13.50 per share, the Company
will allow Freeserve to purchase 15% of the number of shares issued or
underlying the convertible securities at the lower price to increase its holding
to 19.9%.
F-14
<PAGE>
On May 14, 1999, the Company sold 74,750 shares of common stock in a private
placement resulting in net proceeds of approximately $897,500.
On June 22, 1999, the Company sold 41,667 shares of common stock in private
placement yielding net proceeds of approximately $500,000.
On June 25, 1999, the Company entered into a joint venture agreement with
National Bank Financial, ("National Bank", formerly First Marathon, Inc.). The
agreement provides for the Company to form a holding company through which they
will establish a registered securities dealer to conduct on-line trading of
securities and create and operate a website providing financial news, analysis,
and other financial products in Canada. On June 25, 1999, National Bank
purchased 208,334 shares of the Company's common stock for $2,500,000. In
addition, the Company granted to National Bank an option to invest up to $5.0
million in the Company's common stock at the lower of the current market price
or $21.00 per share through March 31, 2000 and a warrant to purchase 275,000
shares of the Company's common stock at an exercise price of $17.25 per share
exercisable through December 15, 2001. If National Bank exercises the option,
the Company shall also grant to National Bank a 30-month warrant to purchase up
to 333,333 shares of the Company's common stock at an exercise price of $30.00
per share. In connection with this agreement, the Company issued a warrant to
the introducing third party to purchase 31,250 shares of the Company's common
stock at an exercise price of $12.00.
On August 10, 1999, the Company issued 31,250 shares of common stock to
Freeserve at $12.00 per share in connection with its option to purchase shares
of the Company to increase Freeserve's holding in the Company to 19.9 percent.
On November 30, 1999, National Bank exercised their option and acquired 302,588
shares of the Company's common stock at an exercise price of $16.52, for their
$5.0 million investment. In conjunction with this exercise, a 30-month warrant
for 333,333 shares was granted to National Bank at $30.00 per share.
[8] TREASURY STOCK:
In March and May 1997, the Company purchased an aggregate of 2,500 shares of
common stock and 2,084 warrants from the original holders at its approximate
fair value.
[9] NONCASH TRANSACTIONS:
In November 1998, the Company issued 166,667 shares of common stock for
2,500,000 shares of common stock of Atlantic Caspian Resources PLC ("ACR"), a
public company in Great Britain. The Company valued the transaction at the fair
value of the shares received of $.0544 per share on the date of the exchange. In
April 1999, the Company received an additional 3,824,041 shares of common stock
of ACR in connection with the November 1998 transaction. The Company valued the
ACR shares at $0.097 per share and reflected the value as an additional capital
contribution. During 1999, the Company sold its holdings in ACR for proceeds
totalling approximately $964,000, for a net gain of $458,000.
In December 1998, the Company issued 26,667 shares of common stock for
consulting services. The shares were valued at their fair market value of $9.00
on the date the agreement was executed. The unearned portion of the consulting
agreement was recorded as deferred compensatory costs.
In December 1998, the Company issued 16,667 shares of common stock to a former
employee. The shares were valued at their fair market value of $7.50 on the date
the shares were issued.
On January 7, 1999, the Company issued 45,834 shares of common stock in lieu of
payment of $326,563 for services rendered by a consultant during the year ended
December 31, 1998.
On March 23, 1999, the Company entered into an agreement with a consultant to
provide investor and public relation services. In connection therewith, the
Company granted 25,000 shares of common stock which were valued at their fair
value of $7.56 per share, which will be charged to operations over the term of
the
F-15
<PAGE>
agreement.
On March 29, 1999, the Company issued 20,000 shares in lieu of a discount for
certain services provided by a consultant. The transaction was recorded at
$40,000 representing the amount of the discount. In addition, on April 9, 1999,
the Company granted this consultant 17,500 shares as a bonus for services. These
shares were valued at $321,563.
On March 31, 1999, the Company entered into a stock exchange agreement with
Telescan. The agreement provided for the exchange of 862,694 unregistered shares
of the Company's common stock, for 520,000 unregistered shares of Telescan's
common stock. In addition, the Company entered into a stock option agreement
with Telescan in which Telescan was granted a one year option to increase its
ownership in the Company to 19.9% by acquiring additional shares at a purchase
price of $22.50. In consideration thereof, the Company received 25,000 shares of
Telescan common stock. The option is exercisable through March 30, 2000. In the
event that there is a change in control as defined, the Company is required to
redeem the option for cash in an amount equal to the number of unexercised
options multiplied by the difference between the exercise price and
consideration received by the Company's stockholders in connection with the
change in control. The exercise price of the option is subject to adjustment, if
at any time following the issuance of the option to Telescan, the Company
issued common stock or any warrant, option or other right to subscribe for the
Company's common stock for a consideration per share which is less than the
exercise price then in effect. Accordingly, the exercise price of Telescan's
option was reduced to $12.00 per share. As of the date of this filing,
management has the understanding that Telescan plans to exercise its option to
purchase additional shares of the Company by March 30, 2000.
The Company also entered into a service agreement with Telescan on March 31,
1999. Telescan will provide information and design services to the Company's
internet sites for a term of two years. The agreement provides for the issuance
of 262,916 (included in 862,694 above) shares of the Company's common stock to
Telescan for these services. The Company recorded the transaction with Telescan
at $17.125 per share, the fair value of the stock received on the date of the
exchange. The fair value was then allocated to the services to be provided, the
option and securities issued.
In April 1999, the Company granted 75,000 shares of common stock to a consultant
to provide financial and investor services for one year. The Company valued
these shares at $1,113,750 representing the fair value at the date of grant
which will be charged to expense over the term of the agreement.
On June 25, 1999, the Company entered into a license agreement with Nextrade for
the use of electronic trading software. The agreement provides for the payment
of $1.0 million and the issuance of 166,667 shares of the Company's common stock
upon delivery of the software to the Company. On July 21, 1999, the Company
received the software, paid $1.0 million and issued 166,667 shares.
On July 1, 1999, the Company entered into a two-year software license agreement
with Solosearch.com, Inc. for which the Company paid $40,000 and issued 3,334
shares of the unregistered common stock.
On September 10, 1999, the Company entered into a content supply agreement with
World Online, Intl. ("World Online"). The agreement provides for the Company to
develop World Wide Web finance channels in various European countries and
provide content to World Online's channels. In addition, the Company was granted
an exclusive, royalty free eighteen-month license to promote, market, and
advertise the content the Company provides to the finance channels developed
pursuant to this agreement. In exchange for the content used by World Online,
the Company agreed to pay a total of $400,000 on certain dates throughout the
term of the agreement and granted eighteen month warrants to purchase a total of
83,334 shares of the Company's common stock at $11.00 per share, issued and
exercisable in specified amounts, as certain conditions are met throughout the
term of the agreement. As of December 31, 1999, the Company has paid $150,000
and granted 33,333 exercisable warrants to World Online.
On September 17, 1999, the Company entered into a share exchange agreement with
On-Line PLC. As a result of this agreement, the Company issued 33,000 shares of
common stock to On-Line PLC at $12.31 per share and On-Line PLC issued to the
Company 184,673 shares of its common stock. In addition, on October 20, 1999,
the Company issued 2,500 shares of common stock as an introduction fee to an
outside party for the introduction of the Company to On-Line PLC.
On September 24, 1999, the Company entered into an agreement with TwiceTrade.com
SpA to provide investor relations services. In conjunction with this agreement,
the Company issued to TwiceTrade 10,000 shares of the Company's common stock and
250,000 three-year warrants exercisable upon issuance at $10.31 per share.
F-16
<PAGE>
As of October 1, 1999, the Company issued 25,000 shares of common stock valued
at $250,000 as part of the purchase price of 66.7% GlobalNet Securities
(see Note J).
On October 6, 1999, the Company issued 8,334 shares to a consultant valued at
$131,260 as a referral fee for introducing the Company to Nextrade which
resulted in the execution of a license agreement between the Company and
Nextrade in June 1999.
As of October 29, 1999, the Company issued 35,000 shares of common stock valued
at approximately $462,000 in exchange for additional shares of stock in
TradinGear (see Note E).
On December 8, 1999, two employees exercised 24,500 options each for which
non-recourse loan agreements were executed for the purchase price of the shares
totalling $148,083.
On December 8, 1999, five officers of the Company simultaneously exercised
options totalling 430,000 shares for which 23,203 shares of Company common stock
owned by the officers were given in payment for those exercised options. The
Company then retired the 23,203 treasury shares.
On December 23, 1999, the Company issued 241,870 shares of common stock as part
of the purchase price of Synaptics (see Note D).
NOTE H - WARRANTS
In October 1998, the Company issued 41,667 five-year warrants with an exercise
price of $6.00 per warrant for consulting services for a period of two years.
These warrants, which vest immediately, were valued at their fair value of $2.82
per warrant using the Black-Scholes pricing model with the following
assumptions: interest rate of 8.47%, dividend yield of 0%, volatility factor of
.75 and an average expected life of five years. The unearned portion of the
agreement of $96,253 was recorded as deferred compensatory costs.
On January 27, 1999, the Company entered into a two-year content supply
agreement with Freeserve. Upon execution of the agreement, the Company granted
333,333 warrants to purchase common stock at an exercise price of $6.00 per
warrant for a term of three years and paid $207,250. The Company valued these
warrants at approximately $4,007,000, which will be charged to operations over
the term of the agreement. These warrants, which vest immediately, were valued
using the Black-Scholes pricing model with the following assumptions: interest
rate of 4.62%, dividend yield of 0%, volatility factor of .75 and an average
expected life of three years. Freeserve exercised these warrants on May 7, 1999.
On February 8, 1999, the Company issued l4O,0OO three-year warrants with an
exercise price of $14 25 per warrant for consulting services for a period of one
year. These warrants, which vest immediately, were valued at their fair market
value of $6.60 using the Black-Scholes pricing model with the following
assumptions: interest rate of 4.73%, dividend yield of 0%, volatility factor of
.75 and an average expected life of two years. The consulting services were
terminated during l999, and the full valued charged to non-cash compensatory
expense, as a non-recurring charge of $92O,746.
On March 4, 1999, the Company entered into a nonexclusive content supply
agreement and in connection therewith granted 20,834 warrants to purchase common
stock at an exercise price of $10.50 per warrant for a term of two years. The
Company valued these warrants at approximately $95,000, which were charged to
operations. These warrants were valued using the Black-Scholes pricing model
with the following assumptions: interest rate of 5.05%, dividend yield of 0%,
volatility factor of .75 and an average expected life of two years. These
warrants were exercised in August 1999.
On June 16, 1999, the Company issued 41,667 three-year warrants with an exercise
price of $15.75 per warrant for research services for a period of one year.
These warrants, which vest immediately, were valued at their fair market value
of $8.29 using the Black-Scholes pricing model with the following assumptions:
interest rate of 5.52%, dividend yield of 0%, volatility factor of .75 and an
average expected life of three years. The Company is amortizing the value of
$346,253 to no-cash compensatory expense over the term of the agreement.
On July 1, 1999, the Company issued a warrant to one of its directors to
purchase 20,834 shares of the Company's common stock at an exercise price of
$14.76 expiring on June 12, 2002.
On September 10, 1999, the Company issued 33,333 eighteen-month warrants with an
exercise price of $11.00 per warrant in conjunction with the World Online
content supply agreement. These warrants which vest immediately, were valued at
their fair market value of $4.18 using the Black-Scholes pricing model with the
following assumptions: interest rate of 5.29%, dividend yield of 0%, volatility
factor of .75 and an average expected life of 1.5 years. The Company is
amortizing the value of $139,332 to non-cash licensing expense over the term of
the agreement.
On September 24, 1999, the Company issued 250,000 three-year warrants with an
exercise price of $10.31 per warrant in conjunction with the TwiceTrade investor
relations services agreement for a period of six months. These warrants, which
vest immediately, were valued at their fair market value of $5.44 using the
B1ack-Scholes pricing model with the following assumptions: interest rate of
5.71%, dividend yield of 0%, volatility factor of .75 and an average expected
life of three years. The Company is amortizing the value of $1,360,000 to
non-cash compensatory expense over the term of the agreement.
During 1999, 639,583 warrants were issued in connection with certain private
placements (see Note G[7]) and 330,000 warrants were issued in connection with
the purchase of the NewMedia Spark Investment (see Note D).
A summary of the Company's warrants and related information for the years ended
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED WEIGHTED YEAR ENDED WEIGHTED
DECEMBER 31, AVERAGE DECEMBER 31, AVERAGE
1999 EXERCISE PRICE 1998 EXERCISE PRICE
------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of period 323,262 $21.36 281,595 $23.64
Granted or exchanged 2,243,963 17.71 41,667 6.00
Exercised (480,709) 7.85
Expired or exchanged (277,431) 23.85
--------- -------
Outstanding at end of period 1,809,085 20.07 323,262 21.36
========= ======
Exercisable at end of period 1,759,084 20.33 323,262 21.36
========= =======
Weighted average remaining
months of contractual life
at year end 18 13
== ==
</TABLE>
F-17
<PAGE>
NOTE I - STOCK OPTION PLAN
On October 29, 1998, the Company adopted a stock option plan (the "1998 Plan")
subject to stockholder approval for granting options to purchase up to 1,666,667
shares of common stock, pursuant to which employees, consultants, independent
contractors, officers and directors are eligible to receive incentive and/or
nonqualified stock options. Options granted under the 1998 Plan are exercisable
for a period of up to 10 years from date of grant at an exercise price which is
not less than the fair value on date of grant, except that the exercise price of
options granted to a stockholder owing more than 10% of the outstanding capital
stock may not be less than 110% of the fair value of the common stock at date of
grant. Options issued to employees and directors vest typically over either a
two or three year period from the anniversary date of the grant. Options issued
to consultants vest immediately.
On October 29, 1999, the Board of Directors and a majority of the Company's
stockholders adopted the Amended and Restated 1998 stock option plan (the
"Amended 1998 Plan"). Under the Amended 1998 Plan, the authorized shares
available for grant under the plan was increased to 3,000,000 shares. At
December 31, 1999, 543,640 shares of the Company's authorized but unissued
common stock were reserved and available for issuance under the Amended 1998
Plan.
Stock option activity under the Amended 1998 Plan and the 1998 Plan is
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998
-------------------------- -------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 1,130,167 2.22 105,834 $12.00
Granted or exchanged 1,336,158 13.25 1,130,167 2.22
Exercised (511,787) 2.74
Cancelled (9,965) 9.39 (105,834) 12.00
--------- ---------
Options outstanding at end of year 1,944,573 9.64 1,130,167 2.22
========= =========
Options exercisable at end of year 1,132,719 6.91 330,167 2.34
========= =========
</TABLE>
The following table presents information relating to stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ---------------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
RANGE OF AVERAGE REMAINING AVERAGE
EXERCISE EXERCISE LIFE IN EXERCISE
PRICE SHARES PRICE YEARS SHARES PRICE
---------------- ---------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$1.50 - $2.25 623.420 $ 2.20 8.83 623,420 $ 2.20
$3.00 - $6.00 35,999 4.73 4.82 33,916 4.65
$7.08 - $12.00 621,442 9.57 8.30 217,664 9.60
$12.38 - $18.00 532,077 15.16 6.50 248,444 15.97
$21.72 - $31.25 131,635 24,18 5.69 9,274 25.96
--------- ---------
1,944,573 9.64 6.65 1,132,719 6.91
========= =========
</TABLE>
In addition to the stock options granted under the Amended 1998 Plan, options
granted to Freeserve, Telescan and National Bank as of December 31, 1999
totalled 4,940,550. Freeserve exercised 31,250 common shares under their option
in August 1999. National Bank exercised their stock option and acquired 302,588
shares of common stock in November 1999. See Note G[7].
F-18
<PAGE>
As required by FAS 123, pro forma information regarding net loss and loss per
share has been determined as if the Company had accounted for its employee stock
options under the fair value method of that statement. The fair value for these
options was estimated at the date of grant using the Black-Scholes option
pricing model utilizing the following assumptions:
YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
Risk-free interest rates 4.60% to 6.23% 4.01% to 5.24%
Expected option life in years 2 to 5 2 to 5
Expected stock price volatility 105% 75%
Expected dividend yield 0% 0%
The weighted average fair value at date of grant for options granted during 1999
and 1998 was $8.33 and $.17 per option, respectively. The weighted-average fair
value of options granted excludes the March 1999 and May 1999 issuance of
options representing up to a 19.9% interest in the Company by Freeserve and
Telescan, respectively, and the June 1999 option granted to National Bank. Those
grants represent an additional 4,940,550 options that if included above, would
decrease the weighted-average fair value of options granted by $1.53, but do not
have an effect on the pro forma information below.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, the existing models, in
management's opinion, do not necessarily provide a reliable single measure of
the fair value of its stock options.
For purposes of pro forma disclosure, the estimated fair value of the options is
amortized to expense over the options' vesting period. The Company's 1999 and
1998 pro forma information follows:
1999 1998
---- ----
Net loss $ 24,600,000 $ 3,314,000
Basic and diluted
loss per share $ (2.40) $ (.79)
During the year ended December 31, 1999 and 1998, the Company granted options to
various consultants. The Company valued these options at $272,661 and $247,000,
respectively, which will be charged to operations over the terms of the
agreements.
On January 10, 2000, the Board of Directors approved an increased in the
authorized shares under the plan to 5,000,000 shares (see Note Q). In
conjunction with this increase, the Company granted 740,000 stock options at an
exercise price of $24.00 per share to certain officers, directors and key
employees.
NOTE J - ACQUISITIONS
On April 19, 1999, the Company acquired all of the outstanding shares of Capital
Growth (Europe) Limited ("CGE"), a licensed securities dealer in the United
Kingdom, for approximately $57,631 and 4,167 unregistered shares of the
Company's common stock. The acquisition was accounted for as a purchase and the
accompanying financial statements include the operations of CGE from date of
acquisition. Goodwill is being amortized over ten years. On June 17, 1999, the
name of CGE was changed to UK-Invest.com Limited.
On November 18, 1999, the Company executed a Stock Purchase and Exchange
Agreement effective October 1, 1999 for the purchase of a total of 66.67% of
GlobalNet Securities, Corp. (formerly Valhalla Securities, Inc.). Prior to the
execution of the Agreement, GlobalNet Securities had a total of 200 shares of
common stock issued and outstanding, owned equally by its two principals.
Pursuant to the Agreement, GlobalNet Securities issued 100 shares to GLBN for
$90,000. In addition, each of the principals exchanged 50 shares of GlobalNet
Securities for 12,500 shares of the Company's common stock valued at $250,000.
The principals gave the right to put their shares in GlobalNet Securities to
GLBN, if discharged from employment without cause, at a price as defined in the
agreement. The acquisition was accounted for as a purchase and the accompanying
financial statements include the operations of GlobalNet Securities from the
date of acquisition. GlobalNet Securities results of operations were not
material prior to acquisition. Goodwill is being amortized over ten years. In
addition, pursuant to the Agreement, the parties have agreed to contribute
$500,000 to GlobalNet Securities to expand business operations. The Company
contributed $333,333 with the balance to be contributed by the two principals
through future deductions of 50% from their after tax salary, other compensation
and distributions other than commissions.
NOTE K - COMPREHENSIVE INCOME (LOSS)
The following table presents the components of other comprehensive income (loss)
as shown in the statement of stockholders' equity:
F-19
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
Unrealized gains (losses) on securities available
for sale:
Change in unrealized gains (losses) $5,144,492 $(10,049)
Less: reclassification adjustment for gains
realized in net income (459,793) (1,201)
---------- --------
Net unrealized gains (losses) 4,684,699 (11,250)
Foreign currency translation adjustments (23,379)
---------- --------
Other comprehensive income (loss) $4,661,320 $(11,250)
========== ========
</TABLE>
NOTE L - RELATED PARTY TRANSACTIONS
Capital Growth International LLC ("CGI"), a company owned by certain of the
directors of the Company, utilized space at the Company's offices without charge
during 1998. During the year ended December 31, 1998, the Company received net
consulting fees of $23,000 from CGI. CGI was sold by the directors in 1998.
During the year ended December 31, 1998, the Company paid consulting fees of
$234,000 to two stockholders of the Company.
At December 31, 1999, the Company has a payable of $23,000 to CGI as
reimbursement for legal expenses.
At December 31, 1999, a receivable of $52,782 is included in other assets from
the sale of fixed assets to a former shareholder of an affiliate.
At December 31, 1999, the Due from affiliates amount of $435,617 represents a
receivable of $230,000 from Italia-iNvest.com for reimbursement of software
development and license costs paid on their behalf by the Company and $205,617
from MatchbookFX for billed and unbilled reimbursements of marketing and third
party contributing editorial costs.
At December 31, 1999, the Due to affiliates amount of $186,300 represents
additional capital contributions of 115,000 British Pounds payable to UK-Wire by
UK-iNvest.com. See Note D.
NOTE M - NET CAPITAL REQUIREMENTS
The Company's U.S. broker/dealer subsidiaries are subject to the Securities
Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), which requires the
maintenance of minimum net capital.
In addition, subsidiaries of the Company engaged in financial market activities
will normally be subject to compliance and other regulatory restrictions.
NOTE O - COMMITMENTS
[1] LETTER OF CREDIT:
The Company has issued a letter of credit in the amount of $100,000 to
secure future rent payments and leasehold improvements at the London
office of an affiliate. The letter of credit is secured by a money
market account.
F-20
<PAGE>
[2] LICENSING AND PROMOTION AGREEMENTS:
At December 31, 1999, the Company is committed to pay $568,500 for
licenses and content upon delivery. These agreements may also require
additional payments based on activity.
[3] LEASES:
The Company is obligated for annual minimum rentals under lease
commitments as follows:
YEAR ENDING
DECEMBER 31,
2000 $ 954,027
2001 765,077
2002 626,704
2003 593,343
2004 581,155
Thereafter 5,267,193
----------
$8,787,499
==========
Rent expense was approximately $547,363 and $250,000 for the years
ended December 31, 1999 and 1998, respectively.
[4] RETIREMENT PLAN:
Effective January 1, 1997, the Company established a 401(k)
profit-sharing plan covering eligible employees as defined in the Plan.
Contributions are made at the discretion of employees. The Company
contributes 50% of the employee's contribution amount to the plan.
Pension expense for the years ended December 31, 1999 and 1998 was
approximately $11,000 and $15,000, respectively.
[5] LITIGATION:
In 1999, International Capital Growth ("ICG"), a subsidiary of the
Company, was served with a complaint, in which ICG was named as a
co-defendant in a lawsuit alleging damages of approximately $1,000,000
plus interest and punitive damages, with respect to certain investments
made by the plaintiffs in a company called Waste Systems International,
Inc. ("WSI"), for which ICG acted as a financial consultant and
placement agent in connection with a private offering. The plaintiffs
allege that the defendants made numerous fraudulent and negligent
misrepresentations to the plaintiffs, that the plaintiffs invested in
WSI based on those fraudulent and negligent misrepresentations and that
the misrepresentations were the direct and proximate cause of injuries
suffered by the plaintiffs. ICG and its co-defendants have filed a
motion to dismiss the complaint which was heard by the court on October
21, 1999. The court has not issued a decision or ruling on the motion.
Management believes that the claims against ICG are without merit and
is vigorously opposing those claims, however, the outcome is presently
undeterminable. In the opinion of management any potential liability
with respect to this litigation is not presently determinable and no
provision has been made in the accompanying financial statements for
any potential liability.
NOTE P - PROVISION FOR TAXES
At December 31, 1999, the Company and its subsidiary had available for federal
income tax purposes in the United States, net operating loss and capital loss
carryforwards of approximately $12,625,000. The net operating loss carryforwards
expire from 2011 through 2019. In addition, the Company has foreign operating
loss carryforwards of $1,900,000 with no expiration date. The difference between
the net loss for financial reporting purposes and the net operating loss for tax
purposes is primarily due to unrealized loss on marketable securities and value
attributable to warrants/options not currently deductible for tax purposes. The
Company has not recorded a deferred tax liability for the gain on equity of
investee assets (which has been recorded in stockholders equity) since the
Company has available tax net operating loss carryforwards to offset such gain.
The Company has provided a valuation reserve against the net deferred asset
attributable to the net operating loss benefit of $5,626,000, capital loss
benefit of $70,000 and the benefit of $73,000 from temporary differences, since
the likelihood of realization cannot be determined.
The difference between the statutory tax rate of 34% and the Company's effective
tax rate of 0% is due to the increase in a valuation allowance of $3,861,000 and
$1,124,000 for the years ended December 31, 1999 and 1998, respectively.
F-21
<PAGE>
Section 382 of the Internal Revenue Code contains provisions which may limit the
loss carryforwards available if significant changes occur in stockholder
ownership interests. Although the Company has not performed a detailed analysis,
management believes that such limitations will apply as of December 31, 1999 as
a result of changes in stockholder ownership interests during 1999. Accordingly,
the Company would be subject to a significant annual limitation on the
utilization of its net operating losses.
NOTE Q - SUBSEQUENT EVENTS
On January 10, 2000, the Board of Directors approved an increase in the number
of shares under the Company's 1998 Amended and Restated Stock Option Plan from
3,000,000 shares to 5,000,000 shares, subject to the ratification of the
stockholders of the Company. In addition, as part of the Amended 1998 Plan, the
Compensation Committee approved the implementation of a Senior Management Stock
Bonus program whereby a pool of shares will be issued to senior management upon
the Company reaching various market capitalization levels from $600 million to
$1 billion. Pools of 100,000 shares are allotted for the attainment of each
level for a total of 500,000 shares available under the program.
On February 15, 2000, the Company acquired SOL BORS, a company that owns
financial websites in Norway, for $7.5 million in cash and common stock. The
acquisition will be accounted for as a purchase. In addition, on February 25,
2000, the Company entered into an online distribution agreement with Scandinavia
Online ("SOL"). Under the agreement, the Company will be the owner and the
exclusive provider of comprehensive finance channels within the SOL internet
portals in Scandinavia and will have exclusive rights to finance transaction
businesses to be offered within the SOL internet portals. In exchange for such
distribution on SOL, the Company agreed to pay a total of $7.5 million in cash
and common stock to the three telecommunications and media companies that own
Scandinavia Online in Norway, Denmark and Sweden. Common stock was issued at
closing and the cash consideration is to be paid upon certain review dates
related to the launch of websites under the terms of the agreements.
On March 3, 2000, the Company acquired Cyberwolf Limited, a developer of
websites and e-business systems in the United Kingdom. As consideration, the
Company paid cash of 100,000 British Pounds and issued common stock in an amount
equivalent to 1.523 million British Pounds, calculated on the basis of a price
of $34.75 per share of common stock. As a result of the acquisition, Cyberwolf
was dissolved and merged into GlobalNet Financial.com.
In March 2000, the Company created GlobalEuroNet Group, Inc., a digital commerce
investment and operating company ("GEN"). The Company invested $3.2 million for
approximately 2.8 million shares or 24% of GEN, which was initially capitalized
with an additional $42.0 million in equity capital contributed by successful
digital commerce, Internet, industrial and financial concerns and entrepreneurs
from North America, the United Kingdom and Europe.
<PAGE>
EXHIBITS INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.3 Share Purchase Agreement for shares in SOL Bors AS
2.4 Share Purchase Agreement for shares in Cyberwolf Limited
10.11 Financial Website Agreement between Scandinavia Online AS (Norway)
and Scandinavia Online A/S (Denmark) and GlobalNetFinancial.com
10.12 Financial Website Agreement between Scandinavia Online AB (Sweden)
and GlobalNetFinancial.com
10.13 Lease Agreement regarding 7284 W. Palmetto Park Road, Suite 210,
Boca Raton, Florida
10.14 Lease Agreement regarding 16150 N. Arrowhead Fountain Circle Drive,
Peoria, Arizona
21.1 Subsidiaries of the Company
23.1 Consent of Richard A. Eisner & Company, LLP
27.0 Financial Data Schedule
EXHIBIT 2.3
Executed February 15, 2000
SHARE PURCHASE AGREEMENT
for
SHARES IN SOL B0RS AS
between
SCHIBSTED MULTIMEDIA AS, MOMENTO SOL AS, SCANDINAVIA ONLINE AS,
M0LLA HOLDING AS, THORBJ0RN BREVIK, KNUT AUNE JONASSEN, EIVIND TRONDSEN
AS SELLERS
and
GLOBALNETFINANCIAL.COM INC
AS GLBN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS; INTERPRETATION....................................................................................4
1.1 DEFINITIONS...............................................................................................4
1.2 INTERPRETATION............................................................................................5
2. PURCHASE AND SALE OF SALE SHARES...............................................................................5
2.1 PURCHASE AND SALE OF SALE SHARES..........................................................................5
2.2. PURCHASE PRICE............................................................................................5
3. LOCK UP AGREEMENT...........................................................................................6
4. CONDITIONS PRIOR TO CLOSING....................................................................................7
5. CONDITIONS TO CLOSING.....................................................................................7
6. CLOSING...................................................................................................8
6.1. SELLER`S DELIVERIES.......................................................................................8
6.2 GLBN'S DELIVERIES.........................................................................................8
7. DUE DILIGENCE...............................................................................................9
7.1 THE PROCESS...............................................................................................9
7.2 DUE DILIGENCE CO-OPERATION................................................................................9
8. REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................................................................9
9. REPRESENTATIONS AND WARRANTIES OF GLBN........................................................................12
10. INDEMNIFICATION AND LIABILITY.................................................................................12
10.1. INDEMNIFICATION..........................................................................................12
10.2 DURATION OF LIABILITY....................................................................................12
10.3 CLAIMS AND LIMITATIONS...................................................................................12
11. COMPETITION, CONFIDENTIALITY ETC...........................................................................13
11.1 NO SOLICITATION, NO HIRE.................................................................................13
11.2 CONFIDENTIALITY..........................................................................................13
13. NOTICES....................................................................................................13
14. FEES AND EXPENSES..........................................................................................14
15. GOVERNING LAW..............................................................................................14
16. DISPUTE RESOLUTION.........................................................................................14
17. COUNTERPARTS...............................................................................................15
</TABLE>
2
<PAGE>
THIS SHARE PURCHASE AGREEMENT (the "AGREEMENT") is entered into by and between;
Schibsted Multimedia AS , a company organised and existing under the laws of
Norway (commercial trade Reg. 977 049 881) whose registered office is at
Apotekergaten 10, 0107 Oslo , Norway, (hereinafter referred to as "SMM") and,
Momento SOL AS , a company organised and existing under the laws of Norway
(commercial trade Reg. 981 389 107) whose registered office is at Sagveien 19,
0459 Oslo, Norway, (hereinafter referred to as "MOMENTO") and,
Scandinavia Online AS, a company organised and existing under the laws of Norway
(commercial trade Reg.No 974209314 ) whose registered office is at Gjerdrums vei
11, Oslo (hereinafter referred to as "SOL"), and
M0LLA Holding AS, a company organised and existing under the laws of Norway
(commercial trade Reg.No 980 618 684) whose registered office is at Sagveien 19,
0459, Oslo, Norway (hereinafter referred to as "M0LLA"), and
Thorbj0rn Brevik, (hereinafter referred to as "TB") managing director of SOL
B0rs AS ("Company" see Definitions section below), and
Knut Aune Jonassen, (hereinafter referred to as "KJ") employee of the Company ,
and
Eivind Trondsen, (hereinafter referred to as "ET") employee of the Company ,
all of the above collectively referred to as the "SELLERS"
and the Purchaser,
GlobalNetFinancial.com Inc., a company organised and existing under the laws of
the State of Delaware, USA whose registered office is located at 7284 West
Palmetto Park Road, Suite 210, Boca Raton, Florida 33433 (hereinafter referred
to as "GLBN" ).
GLBN and the Sellers, hereinafter, referred to as the "Parties".
WHEREAS:
SMM is a shareholder of the Company, and owns 11.92 % of the shares (1101
sharesr) in the Company;
Momento is a shareholder of the Company, and owns 10.55 % of the shares (974
shares) in the Company;
SOL is a shareholder of the Company, and owns 45% of the shares 4156shares) of
the Company;
M0LLA is a shareholder of the Company, and owns 22.3 % of the shares (2060
shares) of the Company;
3
<PAGE>
TB is a shareholder of the Company, and owns 5.22 % of the shares (482 shares)
of the Company;
KJ is a shareholder of the Company, and owns 2.71 % of the shares (250 shares)
shares of the Company;
ET is a shareholder of the Company, and owns 2.31 % of the shares (213 shares),
of the Company;
On the date of this Agreement the share-capital of the Company is NOK 461,800,
consisting of 9236 shares of NOK 50 each;
The Sellers have agreed to transfer to GLBN, all shares equalling 100% interest
in the Company (as shall be defined below as "Sales Shares"), subject to the
terms and conditions of this Agreement;
NOW, THEREFORE the Parties in consideration of the mutual promises and covenants
herein contained have in good faith agreed as follows:
1. DEFINITIONS; INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless the context otherwise requires, the following
terms shall have the following meanings:
"FINANCIAL WEBSITES" shall mean sites on the Internet where financial
investment information is published;
"CLOSING" shall mean the event that the transactions contemplated in
this Agreement shall be consummated;
"COMPANY" shall mean SOL B0rs AS, a company organised and existing
under the laws of Norway (commercial trade reg.No 979 175 027 ) whose
registered office is at Sagveien 19, 0459 Oslo;
"COMMON SHARES" shall mean the shares in GLBN to be transferred to the
Sellers as consideration for the Sale Shares on Closing, which shall be
the GLBN shares currently trading on the nasdaq NMS under the symbol
"GLBN";
"GROUP" shall have the meaning as in the Norwegian Company Act of
1997ss.1-3;
"LOCK-UP PERIOD" shall mean the period where any transfer, sale or
distribution or pledging as security of the Common Shares is
prohibited;
"PANSOL" shall mean Scandinavia Online AB (Sweden), Scandinavia Online
A/S (Denmark) and Scandinavia Online AS (Norway);
"PURCHASE PRICE" shall have the meaning as set forth in Article 2.2. of
this Agreement;
4
<PAGE>
"SALE SHARES" shall mean all shares of the Company, including but not
limited to: all shares held by the Sellers (as defined below); all
outstanding warrants and/or options; and any other security issued and
outstanding, whether encumbered or unencumbered, or otherwise held in
the Company treasury, that represent 100% of the share interest in the
Company;
"SOL PORTALS" shall mean the websites owned and operated by PANSOLin
Norway, Sweden and Denmark and which are respectively located at:
HTTP://WWW.SOL.NO
HTTP://WWW.PASSAGEN.SE
HTTP://WWW.SOL.DK;
or any other domain addresses, URLs, or such additional websites ,
which may replace or co-exist with the SOL Portals, where the nature
thereof is substantially similar to the SOL Portals or such site that
may be substantially used by the existing SOL user base;
"TRAFFIC" shall mean page views, unique users , and user sessions on
the SOL Portals, measured by branch standards in each country.
1.2 INTERPRETATION
In this Agreement, unless the context otherwise requires;
a) words denoting the singular include the plural and vice versa,
and;
b) a reference to (i) a party to this Agreement or any other
person includes its successors and permitted assigns, and (ii)
a document is a reference to that document as amended, novated
or supplemented.
The headings and the Table of contents are inserted for convenience of
reference only and shall not affect the interpretation of this
Agreement.
2. PURCHASE AND SALE OF SALE SHARES
2.1 PURCHASE AND SALE OF SALE SHARES
Subject to the terms and conditions hereof, the Sellers hereby agree to
transfer the Sale Shares to GLBN. The title and all ownership rights
to the Sale Shares shall be assigned to GLBN upon Closing.
2.2. PURCHASE PRICE
The Purchase Price for the Sale Shares contemplated in this Agreement
shall be equal to US $ 7,500,000.00 ( seven million fivehundred
thousand dollars). The Purchase Price to be paid to the Sellers shall
be allocated between cash and Common Shares in GLBN according to the
following:
a) GLBN shall pay a cash contribution of US $3,000,000.00 (three
million dollars) to the Sellers on Closing. This payment shall
be distributed to the Sellers in pro rata
5
<PAGE>
proportion to their ownership in the Company in accordance
with the following schedule:
The total amount shall be paid to SMM account no. in Den
Norske Bank: 7009.04.41335.
SMM shall distribute the amount between the Sellers as
follows:
Distribution of Cash
SOL USD 1,349,935
M0LLA USD 669,121
Momento USD 316,371
SMM USD 357,622
TB USD 156,561
KJ USD 81,204
ET USD 69,186
Total USD 3,000,000
b) GLBN shall pay on Closing by allocation of Common Shares in
GLBN, currently trading on the nasdaq NMS under the symbol
"GLBN", by issuing new shares to the Sellers in an amount
equal to US $4,500,000.00 (fourandahalfmilliondollars). Such
Common Shares shall be priced at the average closing price of
the five business days immediately prior to the signing of the
Heads of Agreement dated January 19, 2000, that price is US
$28.225 per Common Share. The number of shares allocated is
159,433. The allocation of shares shall be distributed to the
Sellers in pro rata proportion to their ownership in Company
as follows:
Distribution of Shares:
SOL 71,741
M0LLA 35,560
Momento 16,813
SMM 19,006
TB 8,320
KJ 4,316
ET 3,677
Total 159,433
3. LOCK UP AGREEMENT
The Common Shares contributed as payment in accordance with Article
2.2. b), of this Agreement shall be subject to a lock-up period in
accordance with the following conditions;
a) 25% of the Common Shares distributed to each of SOL, Momento
and SMM shall be subject to a Lock-Up period of 9-months
following the Closing of this Agreement; and
b) 25% of the Common Shares distributed to each of SOL, Momento
and SMM shall be subject to a Lock-Up period 1-year following
the Closing of this Agreement; and
6
<PAGE>
c) 25% of the Common Shares distributed to each of SOL, Momento
and SMM shall be subject to a Lock-Up period of 18-months
following the Closing of this Agreement; and
d) 25% of the Common Shares distributed to each of SOL, Momento
and SMM shall be subject to a Lock-Up period of 24-months
following the Closing of this Agreement.
e) The Common Shares distributed to each of M0LLA, TB, KJ and ET
shall not be subject to a Lock-Up period, however the shares
can not be traded until they have been registered for trading,
such registration must be approved by the Security Exchange
Commission . This procedure can take anything from 3-6 months
and is out of control of GLBN.
4. CONDITIONS PRIOR TO CLOSING
Until GLBN has acquired a full and clear title to all Sale Shares
pursuant to this Agreement, the Sellers warrant that the Company shall
not, unless GLBN shall otherwise agree in writing:
a) issue any shares or rights to subscribe shares of any class;
b) increase or decrease its share capital;
c) change the par value or the rights attached to any of its
shares; or
d) take any other action: by amendment of its articles of
association or any other Company document; or through Company
reorganisation, consolidation, sale of Company share capital,
merger or sale of Company assets, or any other action, which
might result in a dilution of the interest that GLBN shall
have in the Sale Shares which shall equal 100% of the share
interest in the Company.
5. CONDITIONS TO CLOSING
The completion of the sale and transfer of the Sale Shares at Closing,
and the obligation of GLBN to make and transfer the consideration for
the Sale Shares in accordance with Clause 2, hereinabove, shall be
subject to the fulfilment of the following contemporaneous conditions:
a) an exclusive Content Supply Agreement between SOL, Scandinavia
Online AB, Scandinavia Online A/S and GLBN concerning
Financial Websites is entered into on terms and conditions
satisfactory to GLBN and SOL;
b) SOL's Board of Directors shall have approved this Agreement no
later than February 16,2000;
c) SMM`s Board of Directors shall have approved this Agreement no
later than February 16, 2000.
7
<PAGE>
d) GLBN Board of Directors shall have approved this Agreement no
later than February 16,2000.
6. CLOSING
The transactions contemplated in this Agreement shall be consummated at
the date of Closing, at the offices of SMM located at Apotekergaten 10,
Oslo, Norway, or on such other date or place that shall be mutually
agreed upon by the Sellers and GLBN. All documents which the Sellers'
and GLBN shall deliver shall be in a form satisfactory to all the
Parties.
6.1. SELLER`S DELIVERIES
At Closing, the Sellers shall deliver and perform the following acts:
a) ensure that GLBN's ownership to the Sale Shares are duly noted
in the Company`s Shareholder Ledger, and any other documents
which are required by Norwegian law or the Company's articles
of association or any other document needed for a valid
transfer of title to the Sale Shares from the Sellers to GLBN.
b) execute and deliver all requisite deeds, bills of sale,
receipts, assignments, instruments and documents deemed
necessary to effectuate the transfer of the Sale Shares to
GLBN and complete the transaction contemplated in this
Agreement, all in such form and substance satisfactory to
GLBN.
c) all members of the Board of Directors ("BOD") of the Company
shall resign from the board, effective from the time of
Closing, with the exception of TB, who shall remain a member
of the new BOD ("New BOD") at GLBN's pleasure. Immediately
after Closing, a General Meeting will be held, under which the
articles of association will be changed, allowing for the New
BOD to consist of three (3) directors, and the New BOD will be
appointed.
6.2 GLBN'S DELIVERIES
At Closing, GLBN shall deliver and perform the following acts;
a) ensure that the Sellers ownership to the Common Shares are
duly noted in GLBN register and any other documents which are
required by law or GLBN's articles of association or any other
document needed for a valid transfer of title to the Common
Shares from GLBN to the Sellers;
b) execute and deliver all requisite deeds, bills of sale,
receipts, assignments, instruments and documents deemed
necessary to effectuate the transfer of the
8
<PAGE>
Common Shares to the Sellers and complete the transaction
contemplated in this Agreement, all in such form and substance
satisfactory to the Sellers;
c) immediately after Closing start the registration process with
the Security Exchange Commission for lifting the trading
restriction in the Common Shares , and to promptly give
response to all Security Exchange Commission enquiries under
the registration process.;
d) wire transfer the cash payment for the Sale Shares in the
Company to the Sellers accounts within twenty-four (24) hours
of the Closing, in accordance with Article 2.2. a) herein this
Agreement above.
7. DUE DILIGENCE
7.1 THE PROCESS
Prior to the Closing, GLBN has executed a due diligence investigation
of the Company comprising legal, technical and financial matters.
7.2 DUE DILIGENCE CO-OPERATION
The Sellers have been given GLBN access to all documents of the
Company, and have assited by answering all questions diligently and
otherwise co-operated to the extent necessary.
8. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to GLBN that as of the date
hereof:
a) specifically, the Company, is a company duly organised and
validly existing under the laws of Norway and is otherwise
fully compliant with the laws governing corporations in
Norway, the articles of association and the by-laws of the
Company, and that all shares of the Company are accounted for
and are duly recorded in the Shareholder Ledger (SEE ATTACHED
EXHIBIT "A").
b) specifically, that all shares in the Company currently owned,
or previously transferred, by Hugin AS, must be fully
accounted for, subscribed, and properly noted in the
Shareholder Ledger.
c) specifically, that those 732 new shares issued to TB and KJ
(in the amounts 482 and 250 respectively) shall be filed with
Norwegian Business Registry by the Company prior to Closing,
and that any tax liability that may arise as a result of
registering said shares late, shall be the sole liability of
the Sellers or of TB and KJ, as may be applicable, and shall
not become the liability of GLBN or the Company. However, the
Company shall be liable for any pay-roll tax up to the
aggregate amount of NOK
9
<PAGE>
100,000, caused by TB and/or KJ's acquisition of shares in the
Company not being caused by the late registration of the above
mentioned shares.
d) specifically, that those options to purchase shares in the
Company, granted to and held by ET, shall have been exercised
by ET and that ET shall have clear title to such shares before
Closing. Such shares shall constitute part of the Sale Shares,
and shall be fully transferable to GLBN at Closing and as a
result of such an exercise of said options by ET, the Company
shall pay whatever payroll tax that shall arise in this
particular instance.
e) specifically, that any and all loans made to the Company; any
and all debts incurred by the Company, and any and all accrued
interest on said loans and/or debts, involving SOL, SMM,
M0LLA, Momento, Hugin AS,and any other shareholder, have been
satisfied in full so that no such outstanding claims can be
brought against the Company.
f) specifically, the Sellers shall ensure that upon signing of
this Agreement, the Company shall relinquish any and all
rights and interests that the Company, may have in
distribution rights for and through the SOL Portals for
Financial Websites, which may have been either formally
written and documented, or oral and not documented.
g) specifically, the Sellers shall ensure that the Company shall,
prior to Closing, take such necessary BOD action, including
but not limited to calling a BOD meeting, in order to formally
adopt the Company's 1999 accounts, that these will not be
materially different from the pro forma accounts presented to
GLBN during the due diligence; and further warrants that
neither the Sellers nor the Company have undertaken , nor
refrained from undertaking, any measure(s) that may have
caused material adverse change(s) to the Company in the period
after the last audited accounts of the Company;
h) specifically, the Sellers shall assume responsibility for any
and all debts incurred by the Company during 1999, that may
not appear on the Company's 1999 account, at the time of Board
of Directors' meeting to adopt the 1999 account, such meeting
shall occur prior to Closing. Additionally, the audited
financial statement of the Company, for the fiscal year ended
1999, has been prepared in accordance with generally accepted
accounting principles of Norway and truly and fairly presents
the financial position of the Company for that period.
i) specifically, any obligations entered into by the Company,, in
either written documented form, or in oral and undocumented
form, which have not been disclosed to GLBN prior to Closing,
shall become the sole responsibility of the Sellers, including
all resulting liabilities that may arise.
j) specifically, the Company is fully licensed to conduct the
types of activities the Company has engaged in including any
necessary licenses pertaining regulatory compliance,
intellectual property (including but not limited to software),
and professional licenses.
10
<PAGE>
k) specifically, the Company has procured registration to the
Uniform Recourse Locators ("URL's") WWW.SOLBORS.NO;
WWW.SOLBORS.COM;, and that following Closing no activity shall
be taken to divert Traffic from any of the URL's listed
herein.
l) specifically, on the date of this Agreement the registered
share capital of the Company is NOK 425,200 and in addition
the Shareholders Meeitng decided in Agust 25,1999 to issue 732
new shares , to be filed for registration prior to Closing, so
that the total sharecapital in the Company is NOK 461,800, and
such share capital, prior to Closing, has been duly subscribed
and fully paid up by the present shareholders of the Company
in accordance with all applicable laws. There are no other
type of shares of capital stock or other securities of the
Company outstanding.
m) specifically, there are no agreements or understandings to
which the Company is a party or by which the Company is bound
relating to any shares or other securities of the Company
(including the Sale Shares), whether or not outstanding;
n) specifically, there is no legal action, suit, proceeding or
investigation pending, and to the best of the Sellers
knowledge, no such action is threatened against the Company.
o) specifically, the Sellers have full power to enter into and
fulfil its obligations under this Agreement; neither the
execution and the delivery of this Agreement, nor the
compliance by the Sellers with the terms and provisions
hereof, will conflict with, or result in a breach or violation
of any of the terms, conditions and provisions of (i)
Company's articles of association or other governing
instruments; (ii) any judgement, order, injunction, decree or
ruling of any court or governmental or local authority, to
which the Sellers or the Company is subject; (iii) any
agreement, contract, license, commitment or permit to which
the Sellers or the Company is a party; or (iv) any applicable
law;
p) specifically, that all shares that represent 100% of the total
interest in the Company and, which are represented as the Sale
Shares , shall be fully transferable to GLBN at Closing and
shall not otherwise be the subject of options or warrants or
any other forms of derivatives or rights to transfer or
acquire any non-issued shares or other securities issued to
third-parties and otherwise shall not be subject to
encumbrances of any kind;
q) specifically, that all Traffic figures presented by the
Company are reasonably accurate (including but not limited to
monthly page views and unique visitors) representations. (SEE
ATTACHED EXHIBIT "B" FOR REPRESENTATIVE COMPANY TRAFFIC
FIGURES)
r) specifically, that TB, KJ, and ET shall not, following Closing
and for a period of twelve (12) months, undertake any
activities that might undermine and adversely affect the
quality of Traffic and the value of services of the Financial
Website and www.solbors.no. Furthermore, TB, KJ, and ET shall
otherwise co-operate fully with GLBN during the business
transition period of the Company following Closing.
11
<PAGE>
9. REPRESENTATIONS AND WARRANTIES OF GLBN
GLBN hereby represents and warrants that as of the date hereof:
a) GLBN is a company duly organised and validly existing under
the laws of the State of Delaware USA;
b) GLBN has full power and title to enter into and fulfil its
obligations under this Agreement; neither the execution and
the delivery of this Agreement, nor the compliance by GLBN
with the terms and provisions hereof, will conflict with, or
result in a breach or violation of any of the terms,
conditions and provisions of (i) GLBN's articles of
association or other governing instruments; (ii) any
judgement, order, injunction, decree or ruling of any court or
governmental or local authority, to which GLBN is subject;
(iii) any agreement, contract, license, commitment or permit
to which GLBN is a party; or (iv) any applicable law; they
have the power and authority to enter into this Agreement.
10. INDEMNIFICATION AND LIABILITY
10.1. INDEMNIFICATION
The Sellers shall indemnify GLBN against any losses, damages or claims
suffered by GLBN as a result of any breach of the representations or
warranties set forth in Article 8 or any breach or violation of any
covenant, undertaking or obligation of the Sellers set forth in this
Agreement.
10.2 DURATION OF LIABILITY
The liability of the Sellers shall remain valid until 9-months after
the Closing. No claim may be brought by GLBN against the Sellers in
respect of any breach of the warranties hereunder unless notice in
writing of such claim with detailed information of the claims are made
and the basis therefore has been given to the Sellers within 9-months
after the Closing.
10.3 CLAIMS AND LIMITATIONS
GLBN shall not be entitled to damages for losses which are related to
matters which are disclosed to GLBN under this Agreement or during the
due diligence process, exempt for those specifically mentioned in
Clause 8, above. For other claims GLBN shall be indemnified if the
aggregate amount of such losses exceeds an amount of US $50,000 ( fifty
thousand dollars), and only for the part of the claim exceeding US $
25,000 (twenty five thousand dollars). Except in the case of fraud or
gross negligence the aggregated amount of all claims against the
Sellers shall not exceed the sum equal to US $ 1 million (one million
dollars).
12
<PAGE>
10.4 THIRD PARTY CLAIMS
GLBN shall notify the Sellers in writing no later than 10 working days
after having received claims from third party against the Company which
may cause a liability for the Sellers.
11. COMPETITION, CONFIDENTIALITY ETC.
11.1 NO SOLICITATION, NO HIRE
All Parties to this agreement shall, and shall procure that no member
of their respective Groups, for a period of two years from Closing not;
a) induce, solicit or endeavour to entice any employee of the
other Group to leave the service or employment of any member
of the other Group, or
b) hire
(i) any of TB, KJ and ET away from GLBN or Company, or
(ii) any person who during the period of twelve months
prior to Closing was an employee of any member of the
other Group occupying a senior or managerial position
likely to be in possession of confidential information
relating to, or able to influence the customer
relationships or connections of any member of the
Group.
In the event of an infringement of this obligation, the parties shall
be liable to pay to the other party liquidated damages of US $25,000
(twenty five thousand dollars)in respect of any person mentioned under
(b)(i) and b (ii).
11.2 CONFIDENTIALITY
GLBN and the Sellers shall treat the content of this Agreement,
information on the other parties businesses and any other information
received or obtained by either party strictly confidential, save as
information already made public, except for regulatory requirements.
13. NOTICES
Any notice to be given under this Agreement shall be in writing and
deemed to have been duly given when it is given at such party's address
specified below its signature to this Agreement or at such other
address as such party has notified to the other party.
Address for notices to SOL:
Address: Gjerdrums vei 11, Oslo, Norway
Telefax: + 47 22090277
Attention: President of SOL
Address for notices to SMM:
Address: Apotekergaten 10, Oslo, Norway
Telefax: + 47 23106601
Attention: Group Controller Stein Yndestad
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<PAGE>
Address for notices to GLBN
Address: 7284 West Palmetto Park Road,
Suite 210, Boca Raton; Florida 33433, USA
Telefax: + 1 561 417 8054
Attention: Peter Wallis.
14. FEES AND EXPENSES
Fees and expenses incurred by each party in connection with, relating
to or arising out of the negotiation, execution, delivery and
performance of this Agreement, including but not limited to auditors,
financial advisors, legal advisors etc, shall be borne by such Party
and not by the Company.
15. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of Norway.
16. DISPUTE RESOLUTION
Disputes between the parties arising out of or in connection with this
Agreement shall primarily be resolved by negotiations. Each party may
however decide to refer the dispute to arbitration in accordance with
the then-current rules of Chapter 32 of the Norwegian Civil Procedures
Act of 13 August 1915, if a settlement has not been reached within 3
weeks of negotiations.
However, neither negotiations nor the arbitration clause shall limit
either party to seek interim, interlocutory or permanent injunctive
relief from any court of competent jurisdiction.
The arbitration proceedings will be conducted in Oslo or, if agreed
between the Parties, any other city acceptable to both parties. The
language of the arbitration proceedings will be in English. The
arbitration will be conducted before a three person panel, consisting
of one arbitrator selected by GLBN, one arbitrator selected by the
Sellers, and one arbitrator selected by the foregoing two arbitrators.
If any of the parties should fail to appoint an arbitrator within 3
weeks after the negotiations period as mentioned above has ended, the
other party will be given the right to appoint the arbitrators. Each
arbitrator will be experienced in conducting international arbitration
in the communications industry. The decision resulting from the
arbitration will be final and binding on the parties. The GLBN and the
Sellers each agree that, except as required by applicable law or
regulation, it will keep confidential the existence and outcome of any
arbitration proceeding, as well as the contents thereof, and will
require the arbitrators to adhere to the same obligation of
confidentiality.
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<PAGE>
17. COUNTERPARTS
This Agreement is made and executed in seven (8) originals in the
English language. One original for each of SOL, SMM, Momento, M0LLA,
TB, KJ, ET and GLBN.
Signed in ....... on ____ 2000 Signed in ....... on ____ 2000
Scandinavia Online AS: GlobalNetFinancial.com Inc.:
- -------------------------------- ----------------------------------
Schibsted Multimedia AS:
- --------------------------------
M0LLA Holding AS:
- --------------------------------
Momento SOL AS:
- --------------------------------
Thorbj0rn Brevik:
- --------------------------------
Knut Aune Jonassen :
- --------------------------------
Eivind Trondsen:
- --------------------------------
EXHIBIT 2.4
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT ("Agreement") is made the 3rd day of March 2000 by
and between:-
(1) GlobalNetFinancial.com, Inc., a Delaware corporation
incorporated on 22 October 1996 ("GLBN"); and
(2) Gavin Whichello, Shakeel Rashid (in his own capacity), Shakeel
Rashid (as trustee) Christopher Thomas Edge and James Hay
Pension Trustees Limited, Ron Posner, and Sarah Gostick
(collectively "the Sellers").
WHEREAS: GLBN owns, operates and develops financial websites and e-commerce
execution platforms; and Cyberwolf Limited, a company incorporated in England
(Registered No 3859614) ("Cyberwolf") develops websites and e-business systems,
this Agreement sets forth the terms, which have been agreed between the parties;
WHEREAS: the Sellers own the issued share capital of Cyberwolf in the
proportions set out in the Schedule hereto; and
WHEREAS: GLBN desires to purchase the whole of the issued share capital of
Cyberwolf upon the terms and conditions hereinafter appearing; and
WHEREAS: the Sellers agree to sell the whole of this issued share capital of
Cyberwolf to GLBN upon the terms and conditions hereinafter appearing.
NOW, THEREFORE, in consideration of the mutual agreements, representations and
warranties contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intend to be legally bound, and hereby agree as follows:
1) As consideration for the purchase of Cyberwolf, GLBN shall pay to the
Sellers aggregate consideration of(pound)2 million, comprised of:
a. cash of(pound)100,000; and
b. by way of the issue by GLBN to the Sellers of shares of Common
Stock (namely Common Stock and not Class `A' Common Stock) in
GLBN (such GLBN Common Stock trade on the NASDAQ NMS under the
symbol "GLBN") in an amount equal to (pound)1.9 million ("the
Consideration Common Stock"). calculated on the basis of a
price of $34.75 per Share of Common Stock, the closing price
on January 14, 2000.
(SEE ATTACHMENT "A" FOR DETAILED PRO RATA DISBURSEMENTS OF CASH
AND SHARES OF COMMON STOCK TO THE SELLERS)
<PAGE>
2) The Consideration Common Stock to be issued by GLBN under Section 1) b.
above, shall vest in the Sellers in pro rata proportion to their
individual ownership of the issued share capital of Cyberwolf as noted
in the Schedule:
a. 1/3 on completion of the sale and purchase of the issued share
capital in Cyberwolf under clause 4) hereof ("Completion")and
shall be subject to a one (1) year lock-up period following
vesting; and
b. 1/3 on the first anniversary of Completion shall be subject to
a one (1) year lock-up period following vesting ; and
c. 1/3 on the second anniversary of Completion and shall be
subject to a one (1) year lock-up period following vesting .
3) If at any time before all the Consideration Common Stock to be issued
to the Sellers hereunder shall have vested and/or whilst subject to a
lock-up period there is a reorganization such as (without limitation) a
subdivision of shares of Common Stock or a dividend payable in Common
Stock (or convertible into it) is declared or paid that reduces the
value of any of the Consideration Common Stock then further
Consideration Common Stock shall be issued to the Sellers to restore
such loss of value.
4) Each of the Sellers shall have the right to demand that their portion
of the Consideration Common Stock be registered and vested whenever
GLBN proposes to register any of its Common Stock under the United
States Securities Act of 1933 (including the right to demand the same
upon the occurrence of a merger or consolidation with another entity or
a change of more than 50% of the controlling shareholders of GLBN) and
that the expenses thereof shall be paid by GLBN.
5) Gavin Whichello ("Whichello") shall be appointed Chief Information
Officer of GLBN, The vesting of Whichello's Common Stock under Clause 3
hereof shall immediately cease if his employment shall be terminated
for cause or if he shall resign otherwise than in circumstances
constituting constructive dismissal. The details of Whichello's
employment with GLBN shall be the subject of a 12 month comprehensive
employment agreement to be agreed between Whichello and GLBN (the
"Employment Agreement") to be entered into on Completion.
6) Completion of the sale and purchase of the whole of the issued share
capital of Cyberwolf shall take place at 33 Glasshouse Street London
W1R 5RG on or before 7 March 2000 when:-
a. Subject to due performance by GLBN of the obligations on its
part contained in sub-clause b. below, the Sellers shall
deliver to GLBN:-
i. share certificates in respect of their shares in
Cyberwolf and duly executed stock transfer forms in
respect thereof in favour of GLBN together with
copies of any powers of attorney under which they
shall have been executed; and
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ii. resignations of the present directors and secretary
with effect from the end of the Board Meeting of
Cyberwolf to be held under sub-clause b. below; and
iii. assignments for nominal consideration in favor of
GLBN of the right to repayment from Cyberwolf of
loans made to Cyberwolf.
b. GLBN shall deliver:-
i. to the Sellers' solicitors, a banker's draft
for(pound)100,000 in respect of the cash
consideration; and a cheque for(pound)5000 as a
contribution towards the Sellers' legal fees; and
ii. to the Sellers, Stock Certificates in respect of so
much of the Consideration Common Stock as vests on
Completion; and
iii. to the Sellers' solicitors, a Secretary's Certificate
in the form attached marked "B" signed by the
Secretary of GLBN together with the documents
referred to therein; and
iv. to Whichello, his Employment Agreement in executable
form and signed by GLBN.
c. Whichello, shall in-turn deliver to GLBN his Employment
Agreement duly executed.
d. Upon completion of all the transactions contemplated clauses
6) a. and b. above, GLBN shall procure the holding of a Board
Meeting at which the Directors shall resolve, subject to
stamping, to register the stock transfers referred to in
clause 6) a. i. above, there shall be appointed such
additional Directors and a new Company Secretary as GLBN may
nominate.
7) Subject to the provisions of clause 11) hereof, the Sellers each
represent and warrant:
a. that they have all requisite power, authority, and capacity to
carry out the transactions contemplated in this Agreement; and
b. that this Agreement constitutes a valid and binding obligation
of each of the Sellers, enforceable against each the Sellers
in accordance with the terms; and
c. that to the best of the Seller's knowledge, execution,
delivery and performance of this Agreement and sale of the
whole of the issued share capital of Cyberwolf by the Sellers
shall not violate any provision of law, statute, rule or
regulation, or decree of court, administrative agency, or
other governmental or self-regulatory body applicable to the
Sellers; and
3
<PAGE>
d. that Cyberwolf and the Sellers each are not in default under
any court order, writ, injunction or decree in any
jurisdiction domestic or foreign relating to Cyberwolf or its
shares.
8) Subject to the provisions of clause 11) hereof, GLBN represents and
warrants:
a. that the Common Stock shall be registered with the Securities
and Exchange Commission prior to the first anniversary of the
signing of this Agreement, and shall be exercisable in
accordance with the schedule in clause 2) above; and
b. that it has all requisite corporate power, authority, and
capacity to carry out the transactions contemplated in this
Agreement; and
c. that execution, delivery and performance of this Agreement has
been duly authorized by all requisite corporate action and
that this Agreement constitutes a valid and binding obligation
on GLBN, enforceable against GLBN in accordance with the
terms; and
d. that execution, delivery and performance of this Agreement and
the issuance and delivery of all consideration ascribed to the
transactions contemplated in this Agreement shall not violate
any provision of law, statute, rule or regulation, or decree
of court,, administrative agency, or other governmental or
self-regulatory body applicable to GLBN; and
e. that GLBN is not in default under any court order, writ,
injunction or decree in any jurisdiction domestic or foreign;
and
f. neither GLBN nor any person acting on its behalf has offered
the Common Stock or any similar securities for sale, or
solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with any persons;
and
g. GLBN has complied and is complying with applicable SEC
requirements.
9) Subject to the provisions of clause 11) hereof, the Sellers each shall
indemnify and hold harmless GLBN and its offices, directors, employees,
agents and counsel, from and against any and all losses, claims,
damages, expenses, or liabilities, joint or several, whatsoever, as
such are incurred, arising from any material breach of any express
representation, warranty, covenant or agreement of the Sellers
contained in this Agreement.
10) Subject to the provisions of clause 11) hereof, GLBN shall indemnify
and hold harmless the Sellers each and its offices, directors,
employees, agents and counsel, from and against any and all losses,
claims, damages, expenses, or liabilities, joint or several,
whatsoever, as such are incurred, arising from any
4
<PAGE>
material breach of any express representation, warranty, covenant or
agreement of GLBN contained in this Agreement.
11) The express representations, warranties, indemnities, covenants and
agreements on the part of the parties, hereto contained in this
Agreement, are in lieu of all other representations, warranties,
indemnities, covenants and agreements on their part, whether express,
implied or statutory; and
a. In no circumstances shall the liability of each of the Sellers
under this Agreement exceed the amount of the Consideration
Common Stock received at the time a claim is made, and any
claim may be satisfied in the form of Consideration Common
Stock.
b. The liability of the Sellers and GLBN under the
representations, warranties and indemnities on their
respective parts contained in this Agreement shall cease on
the second anniversary of the date of Completion save as
regards any alleged specific breach of which notice in writing
(containing reasonable details of the event or circumstance
giving rise to the claim and the basis upon which the claimant
is making a claim against the other party hereto) shall have
been given to the that other party hereto before that
anniversary.
c. Each of the parties hereto acknowledges that in entering into
this Agreement, he, it or they are not relying on any
representation, warranty, indemnity, covenant or agreement not
contained in this Agreement, save that the Sellers shall be
regarded as relying on all publicly available information in
writing filed by or on behalf of GLBN with any governmental or
other regulatory body or stock exchange.
d. None of the provisions of this clause 11) shall apply in the
case of fraudulent misrepresentation on the part of the any
party hereto.
12) Following the execution of this Agreement, Cyberwolf's corporate
identity and name shall be changed to GlobalNetTechnology (Europe)
Ltd., and as such, shall become the European IT division of GLBN.
13) This Agreement shall be governed by and construed in accordance with
the laws of England, and the parties hereto submit to the jurisdiction
of the courts of England.
14) Nothing in this Agreement shall confer any rights upon any person or
entity that is not a party to this Agreement, and in concert with this
paragraph 14), any assignment of any portion of the consideration of
the transaction contemplated in this Agreement, to any person(s) or
entit(y)(ies), as may be detailed in this Agreement or its Attachments,
shall not convey any rights thereto whatsoever.
15) If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under any current or future law, and if the rights and
obligations of any party
5
<PAGE>
hereto under this Agreement shall not be materially and adversely
affected thereby, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such provision had
never comprised a part of this Agreement; and all remaining and valid
provisions shall remain in full force and effect, and shall not be
affected by the severance of such provision.
16) The terms and provisions of this Agreement shall not be modified or
amended or waived, either temporarily or permanently, except pursuant
to written consent of all parties hereto.
17) The terms of this Agreement shall survive completion of the sale and
purchase of the shares in Cyberwolf.
18) This Agreement and the documents referred to herein shall constitute
the entire agreement between the parties hereto with regard to the
transactions provided for herein and shall supersede all prior
negotiations between the parties hereto.
THE SCHEDULE
Shareholdings in Cyberwolf Limited
Gavin Whichello 285 Shares
Shakeel Rashid (beneficially) 245 Shares
Shakeel Rashid (as Trustee) 40 Shares
Christopher Thomas Edge
and James Hay Pension Trustees Limited 285 Shares
Ron Posner 95 Shares
Sarah Gostick 50 Shares
Accepted and agreed:
Signed on behalf of GLBN:
- ----------------------------
WILLIAM THOMAS HODGSON, COO Date: February 25, 2000
6
<PAGE>
Signed by Gavin Whichello:
- ----------------------------
GAVIN WHICHELLO Date: March 3, 2000
Signed by Shakeel Rashid:
- ---------------------------
SHAKEEL RASHID Date: March 1, 2000
Signed by Shakeel Rashid (as Trustee)
- ---------------------------
SHAKEEL RASHID (as Trustee) Date: March 1, 2000
Signed by Christopher Thomas Edge and James Hay Pension Trustees Limited:
- ---------------------------
CHRISTOPHER THOMAS EDGE Date: February 28, 2000
AND JAMES HAY PENSION TRUSTEES LIMITED
Signed by Ron Posner
- ---------------------------
RON POSNER Date:
Signed by Sarah Gostick
- ---------------------------
SARAH GOSTICK Date: February 28, 2000
7
EXHIBIT 10.11
FINANCIAL WEBSITE AGREEMENT
BETWEEN
SCANDINAVIA ONLINE AS (NORWAY)
AND
SCANDINAVIA ONLINE A/S (DENMARK)
AND
GLOBALNETFINANCIAL.COM, INC.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
1. DEFINITIONS..........................................................................................4
2. SUPPLY AND PROMOTION OF CONTENT AND FINANCIAL TRANSACTIONAL SERVICES TO THE SOL PORTALS..............9
3. GRANT OF LICENCES...................................................................................12
4. PAYMENT OF PRICE....................................................................................14
5. SALE AND SPONSORSHIP OF ADVERTISING RIGHTS..........................................................16
6. ADVERTISING REVENUE DISTRIBUTION....................................................................16
7. OWNERSHIP...........................................................................................16
8. EXCLUSIVITY.........................................................................................17
9. WARRANTIES..........................................................................................18
10. GLBN'S RESPONSIBILITY FOR THE CONTENT...............................................................19
11. REVIEW PROCESS......................................................................................20
12. TERM AND TERMINATION................................................................................20
13. EXTENSION OF TERM...................................................................................21
14. CONSEQUENCES OF TERMINATION.........................................................................21
15. LIMITATIONS OF LIABILITY............................................................................22
16. CONFIDENTIALITY.....................................................................................23
17. NOTICES.............................................................................................23
18. ASSIGNMENT AND CHANGE OF CONTROL....................................................................24
19. FORCE MAJEURE.......................................................................................24
20. GENERAL.............................................................................................24
21. DISPUTE RESOLUTION..................................................................................26
22. LAW AND JURISDICTION................................................................................26
23. CONDITIONS TO CLOSING...............................................................................26
</TABLE>
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 2
<PAGE>
LIST OF SCHEDULES
A: CO-BRANDING PROFILE
B: CONTENT
C: EXCLUSIONS LISTS
D: GROUP DEFINITION
E: WORDING ACCORDING TO DATA PROTECTING ACT
F: SOLS TRAFFIC INFORMATION
G: TRADE MARKS, SERVICE MARKS AND LOGOS
H: FINANCIAL TRANSACTIONAL SERVICES
I: ROLL OUT PLAN
J NUMERICAL EXAMPLES
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 3
<PAGE>
THIS FINANCIAL WEBSITE AGREEMENT ("Agreement") is made the ... Day of February
2000.
BETWEEN:
(1) SCANDINAVIA ONLINE AS, Registration no.974 209 314 whose principal
place of business is at Gjerdrums vei 11, 0486 Oslo, Norway ("SOLN");
(2) SCANDINAVIA ONLINE A/S, Registration no. A/S 220723, whose principal
place of business is atVermundsgate 40 A, 2100 Copenhagen, Denmark
("SOLDK");
(hereinafter, SOLN, , and SOLDK together shall be referred to as "SOL")
(3) GLOBALNETFINANCIAL.COM, INC. whose principal place of business is at
7284 West Palmetto Park Road, Suite 210, Boca Raton, Florida. 33433
("GLBN").
WHEREAS:
(A) SOLN owns and operates a portal in Norway (one of the "SOL Portals"
defined below) and wishes to provide, inter alia, Content and Financial
Transactional Services to end-users.
(B) SOLDK owns and operates a portal in Denmark (one of the "SOL Portals"
defined below) and wishes to provide, inter alia, Content and Financial
Transactional Services to end-users.
(C) GLBN owns, has the rights to, and/or may create certain Content and
Financial Transactional Services which SOL wishes to make available to
its end users via the SOL Portals in the respective countries.
(D) GLBN has agreed to develop Finance Channels and provide Content and
Financial Transactional Services to the SOL Portals in accordance with
the terms set forth in this Agreement.
(E) It is within the contemplation of GLBN and SOL that GLBN shall provide
the Content and Financial Transactional Services to the Finance
Channels presented on the SOL Portals consistent with the Co-Branding
Profile, and otherwise in accordance with the terms set forth in this
Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement, including the Schedules, the following words and
phrases shall have the following meanings:
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 4
<PAGE>
"ADVERTISING REVENUE" 25% of the aggregate amounts
arising from the sale or licence of
any Advertising Rights, net of any
applicable Allowed Deductibles;
"ADVERTISING RIGHTS" the advertising,
promotional, sponsorship, investor
relations or similar rights sold or
licensed with respect to Finance
Channel pages in or accessible
through the SOL Portals, but not to
include Financial Transactional
Services;
"AGREEMENT" this Agreement and all Schedules;
"ALLOWED DEDUCTIBLES" Value Added Tax,
advertising agency discounts or
commissions, the direct costs of
delivering any advertising,
promotions, sponsorships or
e-commerce links;
"BANNER ADVERTISEMENT" a graphical element positioned on a
web page, purchased by an
advertiser;
"CHANNEL" the online means to access, via one
click of the mouse, an area or
sub-area of SOL Portals dedicated
to a particular theme or topic,
which is effected by a
click-through icon located on, but
not only limited to, the SOL
Portals' Global Navigation Bar;
"CLOSING DATE" The date when the Agreement
is signed and upon which the
Parties agree that this Agreement
shall be binding on the Parties;
"CO-BRANDING PROFILE" as further described in
Schedule "A", except that the name
of the Finance Channel and the URL
stated in Schedule A are for
illustration purposes only;
"CONTENT" investment information including
delayed share prices of traded
shares, available from the Stock
Exchanges in each country included
in the Agreement (in addition to
investment information from other
countries), delayed portfolio
monitoring, analysts commentary,
research, financial news and views
and share charts, and any
additional information approved by
SOL, to be provided on the Finance
Channels on the SOL Portals by
GLBN, as detailed in Schedule "B";
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 5
<PAGE>
"CPM" the advertising rate per thousand
advertisements shown ;
"EFFECTIVE DATE" the date hereof;
"EXCLUSION LIST" the list set out in Schedule "C",
prepared by GLBN and SOL each
individually for the
non-circumvention of proprietary
relationships;
"EXCLUSIVITY" as fully defined in Clause 8;
"FINANCE CHANNEL" a GLBN developed and owned site
provided to the SOL Portals under
this Agreement, which is accessible
by one click from the SOL Portal
home pages through the SOL Portals'
Global Navigation Bar, as detailed
in Schedule "A", and one or more
clicks from other SOL pages, which
contain a collection of vertically
inter-related web pages all
recognised by having relevance to
the same context of Content and
Financial Transactional Services;
"FINANCIAL TRANSACTIONAL REVENUE" revenue generated through a range
of prospective Financial
Transactional Services contemplated
in this Agreement, but not arising
under Advertising Revenue;
"FINANCIAL TRANSACTIONAL SERVICES" a range of varied financial
services developed by GLBN
(possibly in cooperation with third
parties) contemplated for
development under this Agreement
including, but not limited to,
on-line share trading and online
insurance services in order to
generate Financial Transactional
Revenue, as further defined in
Clause 2.4, see Schedule H;
"GLBN BRAND FEATURES" all trademarks, service marks,
logos and other distinctive brand
features of GLBN, or which are
licensed to GLBN for its use, that
are used in connection with or
relate to the Content and Financial
Transactional Services and the
brand names chosen by GLBN for it's
Finance Channels, including
(without limitation) the
trademarks, service marks and logos
described in Schedule G;
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 6
<PAGE>
"GROUP" shall have the meaning as in the
Norwegian Company Act of 1997 ss.
1-3 (Attached as Schedule "D") as
applied to the Parties from time to
time;
"INTELLECTUAL PROPERTY RIGHTS" all copyright and other
intellectual property rights,
howsoever arising and in whatever
media, whether or not registered,
including (without limitation)
patents, trademarks, service marks,
trade names, registered design and
any applications for the protection
or registration of these rights and
all renewals and extensions thereof
throughout the world, strategies,
business plans and marketing plans;
"INTERNET" the collection of computer networks
commonly known as the Internet;
"LAUNCH DATE" the launch of the Finance Channels
on the SOL Portals, which shall
take place no later than 1st July
2000;
"LAUNCH DATE AVERAGE" For every two days that the launch
of a GLBN finance channel on the
SOL Portal owned and operated by
Scandinavia Online AB (registered
in Sweden) is delayed beyond the
1st of July 2000, the Launch Date
Average will extend from 1st July
2000 with one day.
"LINKS" online means which points directly
to a web page on the internet which
accesses a Channel, an area, or a
sub-area of the Internet;
"LOCK-UP PERIOD" shall mean the period where
any transfer, sale or distribution
or pledging as security of the
Common Shares is prohibited;
"PARTIES" the Parties to this Agreement -
GLBN and SOL;
"PIGGY-BACK AWARENESS CAMPAIGNS" any and all SOL advertising and
marketing programs in relation to
Finance on the SOL Portals, in
which promotion of the Finance
Channels should be included;
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 7
<PAGE>
"PRICE" the sums payable by GLBN in
accordance with Clause 4;
"RECORDS" all books and records maintained by
the Parties relating to revenue
pursuant to Clause 6;
"RENEWAL TERM" the period of two years following
the end of the Term;
"REVIEW DATE 1" the date 14 full calendar months
from the Launch Date Average
"REVIEW DATE 2" the date 20 full calendar months
from the Launch Date Average
"SOL BRAND FEATURES" all trademarks, service marks,
logos and other distinctive brand
features of SOL that are used in
connection with or relate to the
SOL Portals and the Content and
Financial Transactional Services,
including (without limitation) the
trademarks, service marks, and
logos described in Schedule G;
"SOL PORTALS" the website(s) owned and operated
by SOL in Norway and Denmark and
which are respectively located at:
HTTP://WWW.SOL.NO;
HTTP://WWW.SOL.DK;
or any other domain addresses,
URLs, or such additional websites,
which may replace or co-exist with
the SOL Portals, where the nature
thereof is substantially similar to
the SOL Portals or such site that
may be substantially used by the
existing SOL user base;
"TERM" the period of 24 months from the
Launch Date Average;
"TERMINATED/TERMINATION" the unanticipated end of a Term of
any Finance Channel, or of this
Agreement, due to default or
material breach under Clause 12.2,
by SOL or GLBN. Notwithstanding the
foregoing, a Termination cannot be
invoked before Launch Date Average;
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 8
<PAGE>
"TRAFFIC" page views, unique users, user
sessions on the SOL Portals, or any
page views, unique users , user
sessions directed to the Finance
Channels on the SOL Portals,
measured by branch standards in
each country;
"URL" a uniform resource locator;
"WWW" the World Wide Web, a system for
accessing and viewing text,
graphics, sound and other media via
the Internet.
1.2 References to Clauses and Schedules in this Agreement are to Clauses of
and Schedules to this Agreement.
1.3 The headings to the Clauses of this Agreement are for ease of reference
only and shall not affect the interpretation or construction thereof.
1.4 Reference to any statute or statutory provision includes a reference to
that statute or statutory provision as from time to time amended,
extended or re-enacted.
1.5 Words importing the singular shall include the plural and vice versa,
words importing any gender shall include all other genders, words
importing persons shall include bodies corporate, unincorporated
associations and partnerships and vice versa.
1.6 References to the whole shall include the part and vice versa.
2. SUPPLY AND PROMOTION OF CONTENT AND FINANCIAL TRANSACTIONAL SERVICES TO
THE SOL PORTALS
2.1 GLBN shall supply and be responsible for the Content, which shall be
co-branded with SOL in accordance with the Co-Branding Profile. The
Content described in Schedule B shall be supplied by GLBN for use in
the Finance Channels on the SOL Portals in the respective country and
in accordance with this Agreement, with effect from Launch Date. The
Content shall include SOL's Global Navigation Bar and search facilities
as further described in Schedule "A". GLBN shall keep the Content
regularly updated (as described in Schedule "B") so that the Content at
all times during the Term is at a competitive level with other finance
content providers in the respective countries where the Agreement has
effect during the Term and Renewal Term.
2.1.1 It is contemplated in this Agreement that upon introduction of
any or all prospective Finance Channels, as described herein
or which may be developed prospectively, that the supply of
Content and service by GLBN to SOL shall be co-branded in
accordance with the then current Co-Branding Profile, as
described in Schedule "A", with effect from the Launch Date .
In relation to Financial Transactional Services the Parties
will aim to co-brand
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 9
<PAGE>
in accordance with Co-Branding Profile subject to both
regulatory and third party approval.
2.2 GLBN shall be solely responsible for developing the Content, creating
and operating the Finance Channels and for procuring all regulatory
approvals necessary to make the Finance Channels available through the
SOL Portals. GLBN shall advise SOL in advance of any regulatory
approvals, licences or authorisations required by SOL to make the
Content and the Financial Transactional Services available through the
SOL Portals. SOL will assist GLBN to the extent that this is required
by GLBN.
2.3 GLBN will not be entitled to supply it's Content to third parties who
are competitors of the SOL Portals in Norway or Denmark (World Online
Denmark excepting). GLBN will be able to supply up to 30% of it's
Content on a syndicated basis to third parties that are not competitors
to the SOL Portals in Norway and Denmark subject to the joint approval
of the Parties (World Online Denmark excepting).
2.4 This Agreement does not address online share trading, or online
brokering or any revenues generated from Financial Transactional
Services. However, it is contemplated by GLBN that Financial
Transactional Services shall be developed and adapted for the Finance
Channels arising under this Agreement as soon as possible after the
Launch Date of a Finance Channel, subject to regulatory approval. See
Schedule H for a list of Financial Transactional Services which GLBN
shall launch on the Finance Channel within 14 months of the Launch Date
Average , subject to regulatory approval.
2.4.1 In order for the Financial Transactional Services to be
developed and then made available on any Finance Channels on
the SOL Portals contemplated under this Agreement, certain
business relationships shall be necessary, and may take the
form of partnerships or joint ventures with GLBN.
2.4.2 If and when Financial Transactional Services are made
available on the Finance Channels on the SOL Portals, SOL
shall be entitled to Financial Transactional Revenues (in an
amount to be determined) received by the Finance Channels on
the SOL Portals, and generated by Traffic on the SOL Portals ,
but subject to Clause 2.4.3.
2.4.3 SOL shall be extended an opportunity to participate in an
equity position in business relationships in order to develop
Financial Transactional Services which are made available on
the Finance Channels on the SOL Portals, as is contemplated in
Clause 2.4.1, on a pari passu basis, provided that SOL accepts
a proposed agreement between GLBN and third party(ies) within
10 business days of it being presented to SOL. Such
participation shall supersede entitlement under Clause 2.4.2,
in such cases. SOL shall not be extended an opportunity to
participate in the equity of any prior-existing equity
business relationships between GLBN and any third-party
existing prior to the Effective Date, and in such a case, SOL
shall be entitled to Financial Transactional Revenues. For the
avoidance of doubt, GLBN cannot
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 10
<PAGE>
use an existing Financial Transactional Service business which
already exists to bring online share trading and online
insurance services to Norway, Denmark or Sweden.
2.4.4 Any agreement between the Parties addressing Financial
Transactional Services and Financial Transactional Revenues
(if not otherwise specified in Clause 4.2, below), shall be
subject to negotiations subsequent to this Agreement, and any
such agreement may appear as an addendum to this Agreement.
2.4.5 Should GLBN be unable to develop the Financial Transactional
Services outlined in Schedule H within the time period
outlined in Schedule H, and this is not due to delay on the
part of SOL, SOL shall be entitled to develop such Financial
Transactional Services, alone or with a third party, so long
as such Financial Transactional Service is made available to
SOL's customers through the Finance Channels. Web site real
estate adequate for and comparable to the space allocated to
similar Financial Transactional Services shall be available
for such service on the Finance Channel on terms equal to the
going market rate for such web site real estate. SOL will
collect the advertising revenue on such real estate, keep the
Advertising Revenue, the commission agreed upon in Clause 6.1
and pay the balance to GLBN as described in Clause 6.
Alternatively the Parties may agree that GLBN shall receive a
financial transactional service revenue.
2.5 During the Term and any Renewal Term, GLBN will provide such ongoing
assistance to SOL in respect of technical, administrative and
service-oriented issues relating to the use and transmission of the
Content to the SOL Portals, as SOL may reasonably request.
2.6 SOL shall promote the Finance Channels on the SOL Portals by placing
buttons to the Finance Channels on the SOL Portals Global Navigation
Bar above the fold and will promote the Finance Channels, no less
frequently and no less prominently than any other Channel available
through the SOL Portals Global Navigation Bar. Access to Finance
Channels on the SOL Portal from the SOL Portal Global Navigation Bar
shall be navigated directly via oneclick of the mouse from any SOL
Portals home page and via one or more clicks of the mouse from any
other SOL Portals page. For the avoidance of doubt, SOL shall provide a
permanent Link from any dedicated 'money', 'finance', 'investment', or
similarly titled SOL Portals Channel (currently on the SOL Portals, or
if and when developed) to the Finance Channels.
2.7 SOL shall use reasonable endeavours to develop Links from other
ISP/Portals, websites, channels, URL's, other Internet Services,
Wireless Application Protocol and television , or services in order to
generate and direct Traffic to the Finance Channels on the SOL Portals.
SOL shall be responsible for marketing the Finance Channels on the SOL
Portals in order to generate maximum Traffic to the Finance Channels on
the SOL Portals.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 11
<PAGE>
2.8 SOL shall use reasonable endeavours to continue to build its subscriber
base and Traffic to SOL Portals and to drive Traffic to the Finance
Channels on the SOL Portals.
2.9 If provided by the end user, GLBN shall provide SOL on a daily basis
with the following customer information from the Finance Channels on
the SOL Portals (subject to the Data Protection Act):
2.9.1 Name, address, e-mail address, age, sex, whether or not the
customer has a portfolio of shares registered on the Finance
Channels on the SOL Portals, telephone and mobile telephone
numbers.
2.10 GLBN shall, as a minimum, implement the wording, contained in Schedule
"E", on the page(s) where customers are required to register for
certain types of information on the Finance Channels on the SOL Portals
to ensure the transfer of the customer data mentioned in Section 2.9.1
in compliance with the data protection legislation of each country.
2.11 GLBN shall provide SOL with traffic reports related to Traffic on the
Finance Channels on the SOL Portals in the respective countries. The
transmission shall take place via a FTP to the SOL servers, every night
between 2 and 5 am local time. However, Traffic from third-party
sources (for example "Stock Point") shall be provided weekly. GLBN will
use reasonable endeavours to get such third parties to provide such
Traffic more frequently. GLBN shall bear the cost of establishing the
necessary transmission protocols and equipment. SOL shall provide GLBN
with aggregate level traffic reports related to Traffic on the SOL
Portals weekly or quarterly as is received by SOL.
2.12 SOL shall have the right to add the Traffic figures from the Finance
Channels on the SOL Portals to the SOL total Traffic information.
3. GRANT OF LICENCES
3.1 Subject to the terms and conditions of this Agreement, SOL hereby
grants to GLBN:
3.1.1 an exclusive (as defined in clause 8), royalty-free,
fully-paid licence to use, display the Finance Channel on the
SOL Portals homepage and the global navigation bar, and to
promote, cross-promote, market, and advertise the Finance
Channel in other areas within the SOL Portals as agreed from
time to time;
3.1.2 an exclusive (as defined in clause 8), royalty-free,
fully-paid licence to use, reproduce and display the GLBN
Brand Features in the Finance Channels on the SOL Portals and
in other areas within the SOL Portals, which are used to drive
Traffic to the Finance Channels on the SOL Portals, for the
SOL countries in which a Finance Channel for the SOL Portals
is developed pursuant to this Agreement in connection with (i)
the presentation of the
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 12
<PAGE>
Content and Financial Transactional Services within the SOL
Portals, and (ii) the marketing and promotion of the Finance
Channels within the SOL Portals via the WWW, in accordance
with the terms of this Agreement;
3.1.3 to the extent possible, a royalty-free, fully-paid licence to
use, reproduce and display relevant parts of the Finance
Channels (as determined by GLBN) over the SOL Wireless
Application Protocol Portal ("SOL WAP Portal") when developed
and launched. GLBN shall cover its own cost for implementing
and managing the necessary technology for this service.
3.2 The licence contained in Clause 3.1 is subject to:
3.2.1 the GLBN Brand Features being included in the Finance Channels
with proper proprietary notices appearing in the Finance
Channels and in all uses of GLBN Branded Features; and
3.2.2 no changes being made to the Finance Channels design format as
outlined in Schedule A without the prior written approval of
the other Parties. However , the SOL Portals will be
redesigned from time to time, and in the case of such
redesigning a meeting will take place between SOL and GLBN to
agree on the new design for the Finance Channel, and the art
directors from both companies will have the power to approve
such new designs. The new design should reflect the same way
of co-branding as in the previous version, and the SOL Portals
look and feel in the respective countries from time to time.
Further, the brand name of SOL and the brand name which GLBN
chooses for it's Finance Channels shall always take up the
same amount of space as in Schedule A, and shall have similar
relative positions as in Schedule A. The new design will
replace Schedule A effective from the date of such approval.
3.3 GLBN shall have the Finance Channels ready for launch on the SOL
Portals as soon as possible but no later than the three business days
prior to the 1st July 2000. SOL shall launch the Finance Channels on
the SOL Portals no later than three days from GLBN informing them that
it is ready for launch on the SOL Portals. For services on the SOL WAP
Portals, GLBN shall have the option of starting operations at the
latest, 60-days after launch of the SOL WAP Portals, provided that SOL
must give GLBN 60-days notice prior to the Launch of the SOL WAP
Portals.
3.4 Subject to the terms and conditions of this Agreement, SOL hereby
grants to GLBN, a royalty-free, fully-paid licence to use, reproduce
and display the SOL Brand Features in connection with the presentation
of the Finance Channels on the SOL Portals.
3.5 Subject to the terms of this Agreement, all other rights with respect
to the Finance Channels and any reproductions or derivative works of
it, whether now existing or which may come into existence after the
Effective Date which are not expressly granted to SOL under this
Agreement, including but not limited to print publication, electronic
publication in all media and in all formats other than those addressed
in this Agreement, and video, movie and audio rights, are reserved to
GLBN.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 13
<PAGE>
4. PAYMENT OF PRICE
4.1 In consideration for the Exclusivity for the Term granted to GLBN in
providing and operating the Finance Channels on the SOL Portals as
contemplated under this Agreement, GLBN agrees to pay the Price to SOL
as follows:
4.1.1 GLBN shall pay a cash contribution of US $ 1,650,000 (one
million six hundred and fifty thousand dollars) to SOL which
shall be divided by SOL between the SOL Portals at their
discretion;
4.1.2 GLBN shall pay by allocation of Common Shares in GLBN, such
Common Shares currently traded on the nasdaq NMS under the
symbol GLBN. GLBN shall issue new Common Shares to SOL in an
amount equal to $ 2,475,000 (two million four hundred and
seventy five thousand dollars). Such Common Shares shall be
priced at the average of closing price for the five business
days immediately prior to the signing of the Heads of
Agreement dated January 19th 2000, such average closing price
being US $28.225. SOL shall receive 87,688 Common Shares in
GLBN. Such Common Shares shall be distributed between the SOL
Portals at their discretion.
4.1.3 The Price shall be paid according to the following schedule:
At Closing: US $ 2,475,000 by the allocation of
87,688 Common Shares.
At Review Date 1: If the Agreement is continued for
another 6 months (see Clause 11) US
$ 990,000 will be paid as a cash
contribution to an account as
specified by SOL.
At Review Date 2: If the Agreement is continued until
the end of the Term, (see Clause 11) a
cash contribution of US $ 60,000 will
be paid to an account as specified by
SOL.
4.2 In relation to Financial Transactional Services, which shall appear on
the Finance Channels on the SOL Portals subject to regulatory approval,
SOL shall be entitled to invest in Financial Transactional Services on
the following basis:
4.2.1 GLBN shall use reasonable endeavours to develop Financial
Transactional Services for Scandinavia (Norway, Sweden and
Denmark) for all Finance Channels, including the Finance
Channels on the SOL Portals. SOL shall be entitled to
participate pari passu with GLBN to 55% of the 88% awarded the
SOL Group of half of the equity shares not subscribed to by
third parties that are not traffic partners (such as World
Online), see Schedule J for examples.
4.2.2 GLBN shall use reasonable endeavours to develop Financial
Transactional Services for all Finance Channels, which may or
may not include one or more of the Finance Channels on the SOL
Portals. In all these instances, SOL shall
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 14
<PAGE>
be entitled to participate pari passu with GLBN to a portion
of half of the shares not subscribed to by third parties that
are not traffic partners, equal to the proportionate unique
visitor numbers (as measured and/or audited by the same
independent third party) they provide in relation to the total
unique visitor numbers provided by the traffic partners on
whose portals the service is made available.
4.3 In the event that SOL decides not to invest as an equity shareholder in
Financial Transactional Services, SOL shall be entitled to a revenue
share to be agreed at that time. In such an event, SOL's choice is
mutually exclusive as to clause 4.2, above (for the avoidance of doubt,
SOL cannot be an equity investor, and, additionally, receive revenues
from Financial Transactional Services). ?????
4.4 Subject to the joint agreement of the Parties, this Agreement may be
renewed for the Renewal Term on similar terms and conditions as this
Agreement.
4.5 LOCK UP AGREEMENT
The Common Shares contributed as payment in accordance with Clause 4 of
this Agreement shall be subject to a Lock-up period in accordance with
the following conditions;
a) 25% of the Common Shares distributed to each of the SOL
companies, shall be subject to a Lock-up period of 9-months
following the Closing Date of this Agreement; and
b) 25% of the Common Shares distributed to each of the SOL
companies, shall be subject to a Lock-up period 1-year
following the Closing Date of this Agreement; and
c) 25% of the Common Shares distributed to each of the SOL
companies, shall be subject to a Lock-up period of 18-months
following the Closing Date of this Agreement; and
d) 25% of the Common Shares distributed to each of the SOL
companies, shall be subject to a Lock-up period of 24-months
following the Closing Date of this Agreement.
5. SALE AND SPONSORSHIP OF ADVERTISING RIGHTS
5.1 SOL shall have a right for sale and sponsorship of Advertising Rights
for the Finance Channels on the SOL Portals under this Agreement. CPM
for advertisements shall not be under 90 % of the average CPM of the
SOL Portals in the respective countries, or the average CPM of the
advertising agencies.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 15
<PAGE>
5.2 GLBN agrees that SOL may, at no additional cost, place one button (of
no more than 130x20 or 130x50 pixels in size) in the right hand column
on each page of the Content for the promotion of its SOL Portals
subject to GLBN choice of placement.
6. ADVERTISING REVENUE DISTRIBUTION
6.1 For advertisements sold by SOL, the agency commission will be 30% or as
agreed from time to time between the Parties. SOL shall determine the
advertising revenue received each quarter at the end of such quarter
and pay/account for the relevant sums in accordance with this Clause 6.
SOL shall retain the Advertising Revenue, if received by SOL, and the
balance shall be paid to GLBN within seven (7) days of such quarter.
6.2 In the event GLBN, or it's appointed advertising agency, shall generate
certain advertising revenue controlled by this Agreement, then GLBN
shall pay the Advertising Revenue to SOL within 7 days after the end of
the quarter in which such advertising revenue is received by GLBN,
together with a report, signed by an officer of GLBN, confirming the
amount of advertising revenue received.
6.3 Each Party shall at its cost (except as provided below) have the right
during normal working hours and upon 10 working days' written notice to
the other Party to examine or audit the other Party's books or records
relating to the revenue in order to verify the amounts due to that
Party. Each Party shall provide reasonable assistance to the other
Party, in relation to any such audit. If any such audit reveals an
underpayment of the amounts due to that Party, the other Party shall
within 14 working days pay to that Party the amount of such
underpayment and, if the audit reveals an underpayment of more than 15%
of the amounts due to that Party, reimburse that Party the reasonable
costs of such audit.
6.4 All sums payable hereunder are exclusive of any taxes which is (if
applicable) payable in addition at the rate and in the manner
prescribed by law from time to time.
7. OWNERSHIP
7.1 SOL acknowledges and agrees that GLBN owns all Intellectual Property
Rights in the Finance Channels, including the URLs of the Finance
Channels, and the GLBN Brand Features or GLBNs URLs. Nothing in this
Agreement shall confer in SOL any right of ownership in the Content or
the GLBN Brand Features or GLBN's URLs and SOL shall not now or in the
future contest the validity of the GLBN Brand Features or GLBNs URLs,
or GLBN's rights in or to the Finance Channels or GLBN's Brand Features
or GLBNs URLs.
7.2 GLBN acknowledges and agrees that SOL own all Intellectual Property
Rights in the SOL Brand Features or SOL URLs. Nothing in this Agreement
shall confer in GLBN any right of ownership in the SOL Brand Features
or SOL URLs and GLBN shall not now or in the future contest the
validity of the SOL Brand Features or SOL URLs, or SOL rights in the
SOL Brand Features or SOL URLs.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 16
<PAGE>
7.3 At the discontinuation of the Agreement, or an individual Finance
Channnel, either at Review Date 1 or 2, or at Termination or at the end
of the Term or the end of Renewal Term, GLBN will change the colours
and the design on the GLBN finance channel, so as not to keep the look
and feel of the SOL Portal at that time. GLBN acknowledges that SOL may
wish to copy the layout of the Finance Channel in any new arrangement
that is made.
8. EXCLUSIVITY
8.1 SOL shall not, during the Term or any Renewal Term, except as provided
for in Clause 2.4.5 above and/or Clause 8.2 or 8.3 below, provide or
enter into an agreement with any third-party, or otherwise develop
content and/or financial transactional services similar to the Content
and Financial Transactional Services provided by, and intended to be
provided by, GLBN on the Finance Channels on the SOL Portals. The
Exclusivity of GLBN shall be limited to the Finance Channel on the SOL
Portals, and in addition GLBN shall be the only provider of such
Content and or Financial Transactional Services on the SOL Portals, so
long as GLBN complies with Schedule H. For the avoidance of doubt, GLBN
shall be the sole provider of finance channels, or sub finance
channels, and of content similar to Content or financial services
transactions similar to Financial Transactional Services on the SOL
Portals during the Term and any Renewal Term of this Agreement.
8.2 For the avoidance of doubt, the Exclusivity granted to GLBN does not
restrict SOL's right to publish content, news, tools, and features of a
financial nature, so long as the publishing of such information is
presented as a sub-service and/or add-on feature on other Channels
within the SOL Portals, and, so long as the publishing of applications
are presented in a context of substantially non-financial nature. Such
Channels or applications may be: "Breaking News", "Computers and
Science", "Health", "Travel", "Gaming", "My SOL", "My Bank"
(personalised content), the search engines "Kvasir" and "Evreka"
(containing financial directories and URL's). SOL is not restricted
from providing SOL credit card, SOL loyalty card or program, everyday
consumer banking such as day to day payment and looking at account
balances, SOL debit card, SOL current account, or other SOL payment
mechanism on the SOL Portals.
8.3 SOL shall have the right to maintain all existing agreements with all,
pre-Agreement, financial content providers, provided that such
financial content is published and integrated into Financial Channel
under GLBN's guidance. Upon expiration of such agreements, GLBN shall
have sole discretion regarding renewal of such agreements, or may
choose to provide such additional content.
8.4 The SOL Group may at any time develop new digital products, services or
platforms, new web sites, SOL Group Portals or services ("New SOL Group
IT") during the Term of the Agreement. GLBN shall be entitled to a
Penalty to the extent that such New SOL Group IT diverts Traffic from
the SOL Portals based on http protocol, as measured by the reduction
from the unique user Traffic information provided in
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 17
<PAGE>
Schedule F, in as much as this is caused by such New SOL Group IT
according to a separate study performed by an independent source. The
Penalty shall equal a portion of the consideration equal to the
reminder of the prepaid period, in proportion to the traffic lost, plus
10%
8.5 When SOL, or another company in the SOL Group should initiate a
majority owned portal operation in Finland, GLBN shall have the same
rights of Exclusivity to provide a Finance Channel to the SOL Finland
Portal as governed by this Agreement. No additional consideration shall
be due from GLBN, or GLBN Group company, for such rights.
9. WARRANTIES
9.1 Each Party to this Agreement represents and warrants to the other Party
that:
9.1.1 it has the full corporate right, power and authority to enter
into this Agreement and to perform its obligations hereunder;
9.1.2 the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties
hereunder, do not and will not violate any agreement to which
such Party is a Party or by which it is otherwise bound; and
9.1.3 when executed and delivered by such Party, this Agreement will
constitute the legal, valid and binding obligation of such
Party, enforceable against such Party in accordance with its
terms.
9.2 GLBN represents and warrants to SOL that:
9.2.1 it has sufficient rights in the Content to be published on the
Finance Channels in accordance with the terms of this
Agreement; and
9.2.2 it has, and will continue to maintain, all regulatory
licences, registrations and authorities required to deliver
the Content and operate Finance Channels through the SOL
Portals;
9.2.3 to the extent that the information is on the GLBN webserver(s)
under GLBN's control, that the Financial Channels on the SOL
Portals shall be up and accessible 99.5% of the time from the
Launch Date, measured by GLBN over 45 days rolling and
reported to SOL.
9.3 SOL represents and warrants to GLBN that:
9.3.1 they have sufficient rights in the SOL digital service,
products or other platforms and websites or SOL Portals to
grant to GLBN the right to use the same in accordance with the
terms of this Agreement; and
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 18
<PAGE>
9.3.2 they have, and will continue to maintain, all regulatory
licences, registrations and authorities for the SOL digital
service, products or other platforms and websites or SOL
Portals; and
9.3.3 to the extent that the information is on the SOL webserver(s)
under SOL's control, that the SOL Portals, and all Links to
the Finance Channels from the SOL Portals, shall be up and
accessible 99.5% of the time from Launch Date measured by SOL
over 45 days rolling and reported to GLBN; and
9.3.4 SOL shall use its reasonable endeavours to direct an
increasing amount of Traffic to the Finance Channels on the
SOL Portals; and
9.3.5 that the Traffic figures contained in Schedule "F" are current
and accurate; and
9.3.6 that the URLs mentioned in the definition of SOL Portals are
the URLs used by the SOL customer base that generates the
Traffic described in Schedule F.
10. GLBN'S RESPONSIBILITY FOR THE CONTENT
10.1 GLBN will ensure that the Finance Channels and the Financial
Transactional Services comply with all applicable laws and regulations.
10.2 GLBN will use reasonable endeavours to ensure that the Content and/or
Financial Transactional Services on the SOL Portals do not infringe any
Intellectual Property Rights of a third party and that it does not
libel, defame, cause injury to, invade the privacy of or otherwise
violate any other rights of any person.
10.3 If at any time during the Term of this Agreement any part of the
Content and/or the Finance Channels and/or the Financial Transactional
Services on the SOL Portals are in breach of any applicable law or
regulation or infringes the Intellectual Property Rights of any third
party then GLBN shall:
10.3.1 use reasonable endeavours to provide alternative content which
will not be in breach of any applicable law or regulation or
infringe the Intellectual Property Rights of any third party;
or
10.3.2 remove the offending part of the Content and replace it so far
as is reasonably practicable with equivalent content.
11. REVIEW PROCESS
11.1 Within the Review Date 1 and Review Date 2, the Parties will assess
each others fulfilment of the obligations and benefits derived under
this Agreement. To the extent that the performance and the benefits
derived from this Agreement is considered satisfactory, the Agreement
will be continued automatically. A notice of non-
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 19
<PAGE>
continuance must be given to the other Party in writing no later than
thirty days before Review Date 1 or Review Date 2.
12. TERM AND TERMINATION
12.1 This Agreement shall take effect from the Effective Date and shall
continue thereafter for the Term after the Launch Date Average, unless
it is discontinued on Review Date 1 or Review Date 2 as described in
Clause 11 above. This Agreement shall extend through the Renewal Term
as further described in Clause 4.4.
12.2 Either Party shall be entitled to Terminate this Agreement, or to
Terminate an individual Finance Channel under this Agreement, with
written notice in the event that the other:
12.2.1 commits a material breach of the terms of this Agreement and
having received from the Party(ies) not in breach written
notice of such breach stating the intention to Terminate this
Agreement, or to Terminate an individual Finance Channels on
the SOL Portals under this Agreement if not remedied, and the
noticed Party fails to remedy the breach within 30-days; or
12.2.2 shall cease to carry on its business or shall have a
liquidator, receiver or administrative receiver appointed to
it or over any part of its undertaking or assets or shall pass
a resolution for its winding up (otherwise than for the
purpose of a bona fide scheme of solvent amalgamation or
reconstruction where the resulting entity shall assume all of
the liabilities of it) or a court of competent jurisdiction
shall make an order, or shall enter into any voluntary
arrangement with its creditors, or shall be unable to pay its
debts as they fall due, or similar in any other jurisdiction.
12.2.3 Repeated breaches of the warrants given under Clauses 9.2.3
and 9.3.3 shall be considered material to both Parties.
13. EXTENSION OF TERM
13.1 Upon conclusion of the Term under this Agreement, this Agreement shall
be renewed for the Renewal Term if agreed to by the Parties.
14. CONSEQUENCES OF TERMINATION
14.1 In the event of the Terminatio this Agreement and/or a Finance Channel,
the Parties agree to:
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 20
<PAGE>
14.1.1 cease using the other's "Brand Features";
14.1.2 with respect to any payments of Advertising Revenue and/or
Financial Transactional Revenues outstanding, SOL and GLBN
agree to pay to the other Party its percentage of such
revenues in accordance with the provisions of Clause 6 as well
as Financial Transactional Revenue.
14.2 If this Agreement or any individual Finance Channel on the SOL Portal
is Terminated according to clause 12.2 by reason of breach on the side
of SOL, SOL shall reimburse GLBN, notwithstanding Clause 4.5 (for the
avoidance of doubt, the Lock- up agreement does not apply for
reimbursements under this Clause), in accordance with the following
schedule:
14.2.1 US $ 2,475,000 or 87,688 Common Shares, at SOLS discretion as
to cash or shares, plus $ 275,000 (two hundred and seventyfive
thousand dollars) if Termination is before 1 month of the
Launch Date Average;
14.2.2 If Terminated 1 month after Launch Date Average or later, a
pro rata share of the consideration prepaid, either in cash or
the number of shares (at SOLs discretion), corresponding to
the remaining prepaid number of months.
14.3 If this Agreement or any individual Finance Channel on the SOL Portal
is Terminated according to clause 12.2 by reason of breach on the side
of GLBN, SOL shall reimburse GLBN, notwithstanding Clause 4.5 (for the
avoidance of doubt, the Lock- up agreement does not apply for
reimbursements under this Clause), in accordance with the following
schedule:
14.3.1 US $ 2,200,000 or 77,945 Common Shares, at SOLs discretion as
to cash or shares if Terminated between Effective Date and
before 1 month of Launch Date Average;
14.3.2 If Terminated 1 month after Launch Date Average or later, a
pro rata share of the consideration prepaid, either in cash or
the number of shares (at SOLs discretion), corresponding to
the remaining prepaid number of months, less 10%.
14.4 In the event of only one Finance Channel being Terminated, the
reimbursements due under Clause 14.2 and 14.3 shall be reduced
accordingly. 40/55 parts of such reimbursement shall be due for
Termination of SOLN and 15/55 parts of such reimbursement shall be due
for the termination of SOLDK.
14.5 Any Termination or discontinuance of the Agreement or of a Finance
Channel on the SOL Portals arising under this Agreement (howsoever
occasioned), shall not affect any accrued rights or liabilities of
either Party nor shall it affect the coming into force or the
continuance in force of any provision hereof which is expressly or by
implication intended to come into or continue in force on or after such
Termination or discontinuance.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 21
<PAGE>
14.6 Clauses 14, 15, 16, 17, 21 and 22 shall survive Termination or
discontinuation of any Finance Channel that shall mature to Launch Date
as contemplated under this Agreement, or Termination or discontinuation
of this Agreement.
14.7 On any Termination or discontinuation of a Finance Channel arising
under this Agreement (other than a termination by GLBN in accordance
with Clause 12.2) or on Termination or discontinuation of this
Agreement, all on expiration of the Agreement, both GLBN and SOL shall
have the right to use all customer information generated from the
Finance Channels.
15. LIMITATIONS OF LIABILITY
15.1 Subject to Clause 14.2, the liability of either Party in contract,
tort, negligence, pre-contract or other representations or otherwise
arising out of or in connection with this Agreement or the performance
or observance of its obligations under this Agreement, and every
applicable part of it shall be limited in aggregate to US $ 2,475,000,
reduced on a pro rata basis in accordance with the remainder of the
Term.
15.1.1 Not withstanding the foregoing, GLBN shall indemnify SOL for
liability arising out of, or in connection with, the Finance
Channels, subject to a limited aggregate of US $550,000.
15.1.2 Not withstanding the foregoing, SOL shall indemnify GLBN for
liability arising out of, or in connection with, the SOL
Portals, subject to a limited aggregate of US $550,000.
15.2 In any event, neither Party shall be liable to the other under, or in
connection with, this Agreement in contract, tort, negligence,
pre-contract or other representations (other than fraudulent or
negligent misrepresentations) or otherwise for any loss of business,
contracts, profits or anticipated savings or for any indirect or
consequential or economic loss whatsoever, except for in cases of gross
negligence or wilful misconduct.
15.3 Each provision of this Clause 15 excluding or limiting liability shall
be construed separately, applying and surviving even if for any reason
one or other of these provisions is held inapplicable or unenforceable
in any circumstances and shall remain in force notwithstanding the
expiration, Termination of a Finance Channel on the SOL Portal, or
Termination of this Agreement.
16. CONFIDENTIALITY
16.1 During the Term and thereafter, each Party agrees with the other,
except for as otherwise agreed herein, to keep all information that
they obtain about the other concerning the business, finances,
technology, affairs and Intellectual Property Rights of the other, and
in particular but not limited to the Content and Financial
Transactional Services and the SOL Portals and regardless of its nature
("Confidential
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 22
<PAGE>
Information"), strictly confidential, except as needed in connection
with the establishment and operation of Financial Transactional
Services.
16.2 The provisions of this Clause 16 shall cease to apply to:
16.2.1 information that has come into the public domain other than by
breach of this Clause or any other duty of confidence; and
16.2.2 information that is obtained from a third party without breach
of this Clause or any other duty of confidence; and
16.2.3 information that is known by either Party, in connection with
the other Party, and which has been disclosed to either Party
by a third party, other than GLBN or SOL or a contractor of
either of them and not in breach of any duty of confidence;
and
16.2.4 information that is trivial or obvious; and
16.2.5 information that is required to be disclosed by a government
body or court of competent jurisdiction.
17. NOTICES
17.1 Any notices required to be given under this Agreement shall be in
writing and shall be deemed to have been duly served if hand delivered
or sent by facsimile with the original to be forwarded by first class
post or by first class registered post or recorded delivery post within
the United Kingdom and outside the United Kingdom by registered airmail
post correctly addressed in the case of GLBN to the Managing Director
and in the case of SOL to the General Manager at the addresses
specified in this Agreement or at such other address as either Party
may designate from time to time in accordance with this Clause 17.
17.2 Any notice pursuant to Clause 17.1 shall be deemed to have been served:
17.2.1 if hand delivered at the time of delivery by posting through
the letter box of the correct addressee in accordance with
Clause 17.1 above;
17.2.2 if sent by facsimile within one hour of transmission during
business hours at its destination or within 24 hours if not
within business hours but subject to proof by the sender that
it holds an acknowledgement confirming receipt of the
transmitted notice in readable form; and
17.2.3 if sent by post within 48 hours of posting (exclusive of the
hours of Sunday) if posted to an address within the country of
posting and seven days of posting if posted to an address
outside the country of posting.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 23
<PAGE>
18. ASSIGNMENT AND CHANGE OF CONTROL
18.1 GLBN shall be entitled to assign the benefit and/or the burden of this
Agreement in whole or in part to a company within the Group upon notice
to SOL , save in the event that all the shares in GLBN are acquired by
a direct competitor of SOL in Sweden, Norway and/or Denmark in the
Internet general consumer content business (for example AOL) and not an
Internet specialist consumer content business (such as Schwabb or
CNN).In the event of such an assignment GLBN will not be entitled to
Exclusivity defined in Clause 8.
18.2 SOLS shall be entitled to assign the benefit and/or the burden of this
Agreement in whole or in part to a company within the Group upon notice
to GLBN, save in the event that all the shares in SOL are acquired by a
direct competitor of GLBN in Sweden, Norway and/or Denmark in the
Internet specialist consumer content business (such as Schwabb) and not
a general consumer content business (for example AOL). In the event of
such an assignment GLBN will be entitled to distribute its Content,
notwithstanding Clause 2.3.
19. FORCE MAJEURE
19.1 Neither Party shall be liable for failure to perform or delay in
performing any obligation under this Agreement if the failure or delay
is caused by any circumstances beyond its reasonable control, including
but not limited to acts of god, war, civil commotion or industrial
dispute. If such delay or failure continues for at least ninety (90)
days, the Party not subject to the force majeure shall be entitled to
terminate this Agreement by notice in writing to the other. In such an
event a pro rata share of the consideration pre paid, corresponding to
the remaining prepaid number of months, is reimbursed. To the extent
the prepayment was made in shares, the reimbursement shall be made in
the proportionate numbers of shares. To the extent the prepayment was
made in cash, the reimbursement shall be made in cash.
20. GENERAL
20.1 This Agreement (as amended from time to time) together with any
document expressly referred to in any of its terms, contains the entire
agreement between the Parties relating to the subject matter covered
and supersedes any previous Agreements, arrangements, undertakings or
proposals, written or oral, between the Parties in relation to such
matters. No oral explanation or oral information given by any Party
shall alter the interpretation of this Agreement. All Parties confirm
that, in agreeing to enter into this Agreement, they have not relied on
any representation save insofar as the same has expressly been made a
representation in this Agreement and agrees that they shall have no
remedy in respect of any misrepresentation which has not become a term
of this Agreement save that the Agreement of all Parties contained
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 24
<PAGE>
in this Clause shall not apply in respect of any fraudulent or
negligent misrepresentation whether or not such has become a term of
this Agreement.
20.2 No addition to, or modification of, any provision of this Agreement
shall be binding on the Parties unless made by a written instrument and
signed by a duly authorised representative of each of the Parties.
20.3 The failure to exercise or delay in exercising a right or remedy under
this Agreement shall not constitute a waiver of the right or remedy or
a waiver of any other rights or remedies and no single or partial
exercise of any right or remedy under this Agreement shall prevent any
further exercise of the right or remedy or the exercise of any other
right or remedy. The rights and remedies contained in this Agreement
are cumulative and not exclusive of any rights or remedies provided by
law.
20.4 The invalidity, illegality or un-enforceability of any provision of
this Agreement shall not affect or impact the continuation in force of
the remainder of this Agreement.
20.5 Nothing in this Agreement shall be construed as creating a partnership
or joint venture of any kind between the Parties or as constituting
either Party as the agent of the other Party(ies) for any purpose
whatsoever and neither Party(ies) shall have the authority or power to
bind the other Party(ies) or to contract in the name of or create a
liability against the other Party(ies) in any way or for any purpose.
20.6 This Agreement may be executed in any number of counterparts each of
which when executed and delivered shall be an original but all the
counterparts together shall constitute one and the same instrument.
20.7 All Parties undertake with the other to do all things reasonably within
its power, which are necessary or desirable to give effect to the
spirit and intent of this Agreement.
20.8 The Parties hereto shall and, shall use their respective reasonable
endeavours to procure, so far as they are able, that any necessary
third parties shall execute and perform all such further deeds,
documents, assurances, acts and things as any of the Parties hereto may
reasonably require, by notice in writing to the other to carry the
provisions of this Agreement into effect.
20.9 GLBN shall not approach or enter into business arrangements with any
entity that appears on the SOL Exclusion List.
20.10 SOL shall not approach or enter into business arrangements with any
entity that appears on the GLBN Exclusion List.
21. DISPUTE RESOLUTION
21.1 Disputes between the Parties arising out of or in connection with this
Agreement shall primarily be resolved by negotiations. Each Party may
however decide to refer the
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 25
<PAGE>
dispute to arbitration in accordance with the then-current rules of
Chapter 32 of the Norwegian Civil Procedures Act of 13 August 1915, if
a settlement has not been reached within 3 weeks of negotiations.
21.2 However, neither negotiations nor the arbitration clause shall limit
either Party to seek interim, interlocutory or permanent injunctive
relief from any court of competent jurisdiction.
21.3 The arbitration proceedings will be conducted in Oslo or any other city
acceptable to all Parties. The language of the arbitration proceedings
will be in English. All arbitration will be conducted before a three
person panel, consisting of one arbitrator selected by the GLBN, one
arbitrator selected by SOL, and one arbitrator selected by the
foregoing two arbitrators. If any of the Parties should fail to appoint
an arbitrator within 3 weeks after the negotiations period as mentioned
above has ended, the other Party will be given the right to appoint the
arbitrators. Each arbitrator will be experienced in conducting
international arbitration in the communications industry. The decision
resulting from the arbitration will be final and binding on the
Parties. The Parties each agree that, except as required by applicable
law or regulation, it will keep confidential the existence and outcome
of any arbitration proceeding, as well as the contents thereof, and
will require the arbitrators to adhere to the same obligation of
confidentiality.
22. LAW AND JURISDICTION
This Agreement shall be governed by, and construed in accordance with,
the laws of Norway.
23. CONDITIONS TO CLOSING
23.1 This Agreement does not become binding upon the Parties unless a
Financial Website Agreement is entered into between GLBN and
Scandinavia Online AB and also that a Share Purchase Agreement is
entered into between the shareholders of SOL B0rs AS and GLBN.
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 26
<PAGE>
IN WITNESS the duly authorised representatives of the Parties have executed this
Agreement the day and year first above written.
SCANDINAVIA ONLINE AS: GLOBALNETFINANCIAL.COM INC
By: By:
--------------------------------- ---------------------------------
Sverre Munch Dr. Katrina Tarizzo
By:
---------------------------------
Birger Steen
SCANDINAVIA ONLINE A/S:
By:
---------------------------------
Sverre Munch
By:
---------------------------------
Birger Steen
FINANCIAL WEBSITE AGREEMENT NORWAY - DENMARK 27
EXHIBIT 10.12
Executed Sweden February 25, 2000
FINANCIAL WEBSITE AGREEMENT
BETWEEN
SCANDINAVIA ONLINE AB
AND
GLOBALNETFINANCIAL.COM, INC.
FINANCIAL WEBSITE AGREEMENT SWEDEN
<PAGE>
Executed Sweden February 25, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
1. DEFINITIONS..........................................................................................4
2. SUPPLY AND PROMOTION OF CONTENT AND FINANCIAL TRANSACTIONAL SERVICES TO THE SOLS PORTAL..............9
3. GRANT OF LICENCES...................................................................................12
4. PAYMENT OF PRICE....................................................................................13
5. SALE AND SPONSORSHIP OF ADVERTISING RIGHTS..........................................................15
6. ADVERTISING REVENUE DISTRIBUTION....................................................................15
7. OWNERSHIP...........................................................................................16
8. EXCLUSIVITY.........................................................................................16
9. WARRANTIES..........................................................................................18
10. GLBN'S RESPONSIBILITY FOR THE CONTENT...............................................................19
11. REVIEW PROCESS......................................................................................19
12. TERM AND TERMINATION................................................................................19
13. EXTENSION OF TERM...................................................................................20
14. CONSEQUENCES OF TERMINATION.........................................................................20
15. LIMITATIONS OF LIABILITY............................................................................21
16. CONFIDENTIALITY.....................................................................................22
17. NOTICES.............................................................................................24
18. ASSIGNMENT AND CHANGE OF CONTROL....................................................................24
19. FORCE MAJEURE.......................................................................................24
20. GENERAL.............................................................................................25
21. DISPUTE RESOLUTION..................................................................................26
22. LAW AND JURISDICTION................................................................................26
23. CONDITIONS TO CLOSING...............................................................................27
</TABLE>
FINANCIAL WEBSITE AGREEMENT - SWEDEN 2
<PAGE>
Executed Sweden February 25, 2000
LIST OF SCHEDULES
A: CO-BRANDING PROFILE
B: CONTENT
C: EXCLUSIONS LISTS
D: GROUP DEFINITION
E: WORDING ACCORDING TO DATA PROTECTING ACT
F: SOLS TRAFFIC INFORMATION
G: TRADE MARKS, SERVICE MARKS AND LOGOS
H: FINANCIAL TRANSACTIONAL SERVICES
I: ROLL OUT PLAN
J: NUMERICAL EXAMPLES
FINANCIAL WEBSITE AGREEMENT - SWEDEN 3
<PAGE>
Executed Sweden February 25, 2000
THIS FINANCIAL WEBSITE AGREEMENT ("Agreement") is made the ... Day of February
2000.
BETWEEN:
(1) SCANDINAVIA ONLINE AB, Registration no. 556551-9989,whose principal
place of business is at 01 Stockholms lan, 80 Stockholm, Sweden
("SOLS");
(2) GLOBALNETFINANCIAL.COM, INC. whose principal place of business is at
7284 West Palmetto Park Road, Suite 210, Boca Raton, Florida. 33433
("GLBN").
WHEREAS:
(A) SOLS owns and operates a portal in Sweden and wishes to provide, inter
alia, Content and Financial Transactional Services to end-users.
(B) GLBN owns, has the rights to, and/or may create certain Content and
Financial Transactional Services which SOLS wishes to make available to
its end users via the SOLS Portal in the respective countries.
(C) GLBN has agreed to develop Finance Channels and provide Content and
Financial Transactional Services to the SOLS Portal in accordance with
the terms set forth in this Agreement.
(D) It is within the contemplation of GLBN and SOLS that GLBN shall provide
the Content and Financial Transactional Services to the Finance Channel
presented on the SOLS Portal consistent with the Co-Branding Profile,
and otherwise in accordance with the terms set forth in this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement, including the Schedules, the following words and
phrases shall have the following meanings:
"ADVERTISING REVENUE" 25% of the aggregate amounts arising from
the sale or licence of any Advertising
Rights, net of any applicable Allowed
Deductibles;
"ADVERTISING RIGHTS" the advertising, promotional,
sponsorship, investor relations or similar
rights sold or licensed with respect to
Finance Channel pages in or accessible
through the SOLS Portal, but not to include
Financial Transactional Services;
"AGREEMENT" this Agreement and all Schedules;
FINANCIAL WEBSITE AGREEMENT - SWEDEN 4
<PAGE>
Executed Sweden February 25, 2000
"ALLOWED DEDUCTIBLES" Value Added Tax, advertising
agency discounts or commissions, the direct
costs of delivering any advertising,
promotions, sponsorships or e-commerce
links;
"BANNER ADVERTISEMENT" a graphical element positioned on a web
page, purchased by an advertiser;
"CHANNEL" the online means to access, via one click of
the mouse, an area or sub-area of SOLS
Portal dedicated to a particular theme or
topic, which is effected by a click-through
icon located on, but not only limited to,
the SOLS Portal' Global Navigation Bar;
"CLOSING DATE" The date when the Agreement is signed
and upon which the Parties agree that this
Agreement shall be binding on the Parties
"CO-BRANDING PROFILE" as further described in Schedule
"A", except that the name of the Finance
Channel and the URL stated in Schedule A are
for illustration purposes only;
"CONTENT" investment information including delayed
share prices of traded shares, available
from the Stock Exchanges in each country
included in the Agreement (in addition to
investment information from other
countries), delayed portfolio monitoring,
analysts commentary, research, financial
news and views and share charts, and any
additional information approved by SOLS, to
be provided on the Finance Channel on the
SOLS Portals by GLBN, as detailed in
Schedule "B";
"CPM" the advertising rate per thousand
advertisements shown ;
"EFFECTIVE DATE" the date hereof;
"EXCLUSION LIST" the list set out in Schedule "C", prepared
by GLBN and SOLS each individually for the
non-circumvention of proprietary
relationships;
"EXCLUSIVITY" as fully defined in Clause 8;
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"FINANCE CHANNEL" a GLBN developed and owned site provided to
the SOLS Portal under this Agreement, which
is accessible by one click from the SOLS
Portal home pages through the SOLS Portal
Global Navigation Bar, as detailed in
Schedule "A", and one or more clicks from
other SOLS pages, which contain a collection
of vertically inter-related web pages all
recognised by having relevance to the same
context of Content and Financial
Transactional Services;
"FINANCIAL TRANSACTIONAL revenue generated through a range of
REVENUE" prospective Financial Transactional Services
contemplated in this Agreement, but not
arising under Advertising Revenue;
"FINANCIAL TRANSACTIONAL a range of varied financial services
SERVICES" developed by GLBN (possibly in cooperation
with third parties) contemplated for
development under this Agreement including,
but not limited to, on-line share trading
and online insurance services in order to
generate Financial Transactional Revenue as
further defined in Clause 2.4, see Schedule
H;
"GLBN BRAND FEATURES" all trademarks, service marks, logos and
other distinctive brand features of GLBN, or
which are licensed to GLBN for its use, that
are used in connection with or relate to the
Content and Financial Transactional Services
and the brand names chosen by GLBN for it's
Finance Channels, including (without
limitation) the trademarks, service marks
and logos described in Schedule G;
"GROUP" shall have the meaning as in the Norwegian
Company Act of 1997 ss. 1-3 (Attached as
Schedule "D") as applied to the Parties from
time to time;
"INTELLECTUAL PROPERTY all copyright and other intellectual
RIGHTS" property rights, howsoever arising and in
whatever media, whether or not registered,
including (without limitation) patents,
trademarks, service marks, trade names,
registered design and any applications for
the protection or
FINANCIAL WEBSITE AGREEMENT - SWEDEN 6
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registration of these rights and all
renewals and extensions thereof throughout
the world, strategies, business plans and
marketing plans;
"INTERNET" the collection of computer networks commonly
known as the Internet;
"LAUNCH DATE" The launch of the Finance Channel on
the SOLS Portal, which will take place on
the 1st July 2000, unless the Agreement
between SOLS and Avanza delays the launch,
see Clause 8.4. The launch will in no case
be later than 1st October 2000.
"LAUNCH DATE AVERAGE" For every two days that the
Launch Date is delayed beyond the 1st of
July 2000, the Launch Date Average will
extend from 1st July 2000 with one day.
"LINKS" online means which points directly to a web
page on the internet which accesses a
Channel, an area, or a sub-area of the
Internet;
"LOCK-UP PERIOD" shall mean the period where any transfer,
sale or distribution or pledging as security
of the Common Shares is prohibited;
"PARTIES" the Parties to this Agreement - GLBN and
SOLS;
"PIGGY-BACK AWARENESS any and all SOLS
CAMPAIGNS" advertising and marketing programs in
relation to Finance on the SOLS Portal, in
which promotion of the Finance Channels
should be included;
"PRICE" the sums payable by GLBN in accordance with
Clause 4;
"RECORDS" all books and records maintained by the
Parties relating to revenue pursuant to
Clause 6;
"RENEWAL TERM" the period of two years following the end of
the Term;
"REVIEW DATE 1" the date 14 full calendar months from the
Launch Date Average
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"REVIEW DATE 2" the date 20 full calendar months from the
Launch Date Average
"SOLS BRAND FEATURES" all trademarks, service marks, logos and
other distinctive brand features of SOLS
that are used in connection with or relate
to the SOLS Portal and the Content and
Financial Transactional Services, including
(without limitation) the trademarks, service
marks, and logos described in Schedule G;
"SOLS PORTALS" the website(s) owned and operated by SOLS in
Sweden which is located at:
HTTP://WWW.PASSAGEN.SE;
or any other domain addresses, URLs, or such
additional websites, which may replace or
co-exist with the SOLS Portals, where the
nature thereof is substantially similar to
the SOLS Portals or such site that may be
substantially used by the existing SOLS user
base;
"TERM" the period of 24 months from the Launch Date
Average.
"TERMINATED/TERMINATION" the unanticipated end of the Agreement , due
to default or material breach under Clause
12.2, by SOLS or GLBN. Notwithstanding the
foregoing, a Termination cannot be invoked
Launch Date under any circumstances;
"TRAFFIC" page views, unique users, user sessions on
the SOLS Portal, or any page views, unique
users , user sessions directed to the
Finance Channel on the SOLS Portal, measured
by branch standards in Sweden;
"URL" a uniform resource locator;
"WWW" the World Wide Web, a system for accessing
and viewing text, graphics, sound and other
media via the Internet.
1.2 References to Clauses and Schedules in this Agreement are to Clauses of
and Schedules to this Agreement.
FINANCIAL WEBSITE AGREEMENT - SWEDEN 8
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1.3 The headings to the Clauses of this Agreement are for ease of reference
only and shall not affect the interpretation or construction thereof.
1.4 Reference to any statute or statutory provision includes a reference to
that statute or statutory provision as from time to time amended,
extended or re-enacted.
1.5 Words importing the singular shall include the plural and vice versa,
words importing any gender shall include all other genders, words
importing persons shall include bodies corporate, unincorporated
associations and partnerships and vice versa.
1.6 References to the whole shall include the part and vice versa.
2. SUPPLY AND PROMOTION OF CONTENT AND FINANCIAL TRANSACTIONAL SERVICES TO
THE SOLS PORTAL
2.1 GLBN shall supply and be responsible for the Content, which shall be
co-branded with SOLS in accordance with the Co-Branding Profile. The
Content described in Schedule B shall be supplied by GLBN for use in
the Finance Channel on the SOLS Portal in accordance with this
Agreement, with effect from Launch Date. The Content shall include
SOLS's Global Navigation Bar and search facilities as further described
in Schedule "A". GLBN shall keep the Content regularly updated (as
described in Schedule "B") so that the Content at all times during the
Term and the Renewal Term is at a competitive level with other finance
content providers in Sweden.
2.1.1 It is contemplated in this Agreement that upon introduction of
the prospective Finance Channel, as described herein or which
may be developed prospectively, that the supply of Content and
service by GLBN to SOLS shall be co-branded in accordance with
the then current Co-Branding Profile, as described in Schedule
"A", with effect from the Launch Date. In relation to
Financial Transactional Services the Parties will aim to
co-brand in accordance with Co-Branding Profile subject to
both regulatory and third party approval.
2.2 GLBN shall be solely responsible for developing the Content, creating
and operating the Finance Channel and for procuring all regulatory
approvals necessary to make the Finance Channel available through the
SOLS Portal. GLBN shall advise SOLS in advance of any regulatory
approvals, licences or authorisations required by SOLS to make the
Content and Financial Transactional Services available through the SOLS
Portal. SOLS will assist GLBN to the extent that this is required by
GLBN.
2.3 GLBN will not be entitled to supply it's Content to third parties who
are competitors of the SOLS Portal in Sweden. GLBN will be able to
supply up to 30% of it's Content on a syndicated basis to third parties
that are not competitors to the SOLS Portal in Sweden subject to the
joint approval of the Parties.
2.4 This Agreement does not address online share trading, or online
brokering or any revenues generated from Financial Transactional
Services. However, it is
FINANCIAL WEBSITE AGREEMENT - SWEDEN 9
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contemplated by GLBN that Financial Transactional Services shall be
developed and adapted for the Finance Channel arising under this
Agreement as soon as possible after the Launch Date, subject to
regulatory approval. See Schedule H for a list of Financial
Transactional Services which GLBN shall launch on the Finance Channel
within 14 months of the Launch Date Average, subject to regulatory
approval.
2.4.1 In order for the Financial Transactional Services to be
developed and then made available on any Finance Channel on
the SOLS Portal contemplated under this Agreement, certain
business relationships shall be necessary, and may take the
form of partnerships or joint ventures with GLBN.
2.4.2 If and when Financial Transactional Services are made
available on the Finance Channel on the SOLS Portal, SOLS
shall be entitled to Financial Transactional Revenues (in an
amount to be determined) received by the Finance Channel on
the SOLS Portal, and generated by Traffic on the SOLS Portal ,
but subject to Clause 2.4.3.
2.4.3 SOLS shall be extended an opportunity to participate in an
equity position in business relationships in order to develop
Financial Transactional Services which are made available on
the Finance Channel on the SOLS Portals, as is contemplated in
Clause 2.4.1, on a pari passu basis, provided that SOLS
accepts a proposed agreement between GLBN and third party(ies)
within 10 business days of it being presented to SOLS. Such
participation shall supersede entitlement under Clause 2.4.2,
in such cases. SOLS shall not be extended an opportunity to
participate in the equity of any equity business relationships
between GLBN and any third-party existing prior to the
Effective Date, and in such a case, SOLS shall be entitled to
Financial Transactional Revenues. For the avoidance of doubt,
GLBN cannot use an existing Financial Transactional Service
business which already exists to bring online share trading
and online insurance services to Norway, Denmark or Sweden.
2.4.4 Any agreement between the Parties addressing Financial
Transactional Services and Financial Transactional Revenues
(if not otherwise specified in Clause 4.2, below), shall be
subject to negotiations subsequent to this Agreement, and any
such agreement may appear as an addendum to this Agreement.
2.4.5 Should GLBN be unable to develop the Financial Transactional
Services outlined in Schedule H within the time period
outlined in Schedule H, and this is not due to delay on the
part of SOLS nor regulatory approval, SOLS shall be entitled
to develop such the Financial Transactional Services, alone or
with a third party, so long as such Financial Transactional
Service is made available to SOLS' customers through the
Finance Channel. Web site real estate adequate for and
comparable to the space allocated to similar Financial
Transactional Services shall be available for such service on
the Finance Channel on terms equal to the going market rate
for such web site real estate.
FINANCIAL WEBSITE AGREEMENT - SWEDEN 10
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SOLS will collect the advertising revenue on such real estate,
keep the Advertising Revenue, the agency commission agreed in
Clause 6.1, and pay the balance to GLBN as described in Clause
6. Alternatively the Parties may agree that GLBN shall receive
a financial transactional service revenue.
2.5 During the Term and any Renewal Term, GLBN will provide such ongoing
assistance to SOLS in respect of technical, administrative and
service-oriented issues relating to the use and transmission of the
Content to the SOLS Portal, as SOLS may reasonably request..
2.6 SOLS shall promote the Finance Channel on the SOLS Portal by placing
buttons to the Finance Channel on the SOLS Portal Global Navigation Bar
above the fold and will promote the Finance Channel, no less frequently
and no less prominently than any other Channel available through the
SOLS Portal Global Navigation Bar. Access to the Finance Channel on the
SOLS Portal from the SOLS Portal Global Navigation Bar shall be
navigated directly via one click of the mouse from the SOLS Portal home
page and via one or more clicks of the mouse from any other SOLS Portal
page. For the avoidance of doubt, SOLS shall provide a permanent Link
from any dedicated 'money', 'finance', 'investment', or similarly
titled SOLS Portal Channel (currently on the SOLS Portal, or if and
when developed) to the Finance Channel.
2.7 SOLS shall use reasonable endeavours to develop Links from other
ISP/Portals, web sites, channels, URL's, other Internet Services,
Wireless Application Protocol and television , or services in order to
generate and direct Traffic to the Finance Channel on the SOLS Portal.
SOLS shall be responsible for marketing the Finance Channel on the SOLS
Portal in order to generate maximum Traffic to the Finance Channel on
the SOLS Portal.
2.8 SOLS shall use reasonable endeavours to continue to build its
subscriber base and Traffic to SOLS Portal and to drive Traffic to the
Finance Channel on the SOLS Portal.
2.9 If provided by the end user, GLBN shall provide SOLS on a daily basis
with the following customer information from the Finance Channel on the
SOLS Portal (subject to the Data Protection Act):
2.9.1 Name, address, e-mail address, age, sex, whether or not the
customer has a portfolio of shares registered on the Finance
Channels on the SOLS Portals, telephone and mobile telephone
numbers.
2.10 GLBN shall, as a minimum, implement the wording, contained in Schedule
"E", on the page(s) where customers are required to register for
certain types of information on the Finance Channel on the SOLS Portal
to ensure the transfer of the customer data mentioned in Section 2.9.1
in compliance with the data protection legislation of Sweden.
2.11 GLBN shall provide SOLS with traffic reports related to Traffic on the
Finance Channel on the SOLS Portal. The transmission shall take place
via a FTP to the
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SOLS servers, every night between 2 and 5 am local time. However,
Traffic from third-party sources (for example "Stock Point") shall be
provided weekly. GLBN will use reasonable endeavours to get such third
parties to provide such Traffic more frequently. GLBN shall bear the
cost of establishing the necessary transmission protocols and
equipment. SOLS shall provide GLBN with aggregate level traffic reports
related to Traffic on the SOLS Portal weekly or quarterly as is
received by SOLS.
2.12 SOLS shall have the right to add the Traffic figures from the Finance
Channel on the SOLS Portal to the SOLS total Traffic information.
3. GRANT OF LICENCES
3.1 Subject to the terms and conditions of this Agreement, SOLS hereby
grants to GLBN:
3.1.1 an exclusive (as defined in clause 8), royalty-free,
fully-paid licence to use, display the Finance Channel on the
SOLS Portal homepage and the global navigation bar, and to
promote, cross-promote, market, and advertise the Finance
Channel in other areas within the SOLS Portal as agreed from
time to time;
3.1.2 an exclusive (as defined in clause 8), royalty-free,
fully-paid licence to use, reproduce and display the GLBN
Brand Features on the Finance Channel on SOLS Portal and in
other areas within the SOLS Portal, which are used to drive
Traffic to the Finance Channel on the SOLS Portal, in
connection with (i) the presentation of the Content and
Financial Transactional Services within the SOLS Portal, and
(ii) the marketing and promotion of the Finance Channel within
the SOLS Portal via the WWW, in accordance with the terms of
this Agreement;
3.1.3 to the extent possible, a royalty-free, fully-paid licence to
use, reproduce and display relevant parts of the Finance
Channel (as determined by GLBN) over the SOLS Wireless
Application Protocol Portal ("SOLS WAP Portal") when developed
and launched. GLBN shall cover its own cost for implementing
and managing the necessary technology for this service.
3.2 The licence contained in Clause 3.1 is subject to:
3.2.1 the GLBN Brand Features being included in the Finance Channel
with proper proprietary notices appearing in the Finance
Channel and in all uses of GLBN Branded Features; and
3.2.2 no changes being made to the Finance Channel design format as
outlined in Schedule A without the prior written approval of
both Parties. However , the SOLS Portal will be redesigned
from time to time, and in the case of such redesigning a
meeting will take place between SOLS and GLBN to agree on the
new design for the Finance Channel, and the art directors from
both companies will have the power to approve such new
designs. The new design
FINANCIAL WEBSITE AGREEMENT - SWEDEN 12
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should reflect the same way of co-branding as in the previous
version, and SOLS Portals look and feel from time to time.
Further, the brand name of "Passagen Ekonomi" and the brand
name which GLBN chooses for the Finance Channel shall always
take up the same amount of space as in Schedule A, and shall
have similar relative positions as in Schedule A. The new
design will replace Schedule A effective from the date of such
approval.
3.3 GLBN shall have the Finance Channel ready for launch on the SOLS Portal
as soon as possible, but no later than 3 business days prior to the 1st
July 2000, unless the Launch Date is delayed due to the Avanza
agreement, see Clause 8.4, in which case the Finance Channel shall be
ready to launch no later than 3 business days prior to the termination
of the Avanza agreement, which shall be no later than 1st October
2000.. SOLS shall launch the Finance Channel on the SOLS Portal no
later than three days from GLBN informing them that it is ready for
launch on the SOLS Portal. For services on the SOLS WAP Portal, GLBN
shall have the option of starting operations at the latest, 60-days
after launch of the SOLS WAP Portal, provided that SOLS must give GLBN
60-days notice prior to the launch of the SOLS WAP Portal.
3.4 Subject to the terms and conditions of this Agreement, SOLS hereby
grants to GLBN, a royalty-free, fully-paid licence to use, reproduce
and display the SOLS Brand Features in connection with the presentation
of the Finance Channel on the SOLS Portal.
3.5 Subject to the terms of this Agreement, all other rights with respect
to the Finance Channel and any reproductions or derivative works of it,
whether now existing or which may come into existence after the
Effective Date which are not expressly granted to SOLS under this
Agreement, including but not limited to print publication, electronic
publication in all media and in all formats other than those addressed
in this Agreement, and video, movie and audio rights, are reserved to
GLBN.
4. PAYMENT OF PRICE
4.1 In consideration for the Exclusivity for the Term granted to GLBN in
providing and operating the Finance Channels on the SOLS Portal as
contemplated under this Agreement, GLBN agrees to pay the Price to SOLS
as follows:
4.1.1 GLBN shall pay a cash contribution of US $ 1,350,000 (one
million three hundred and fifty thousand dollars) to SOLS;
4.1.2 GLBN shall pay by allocation of Common Shares in GLBN, such
Common Shares currently traded on the nasdaq NMS under the
symbol GLBN. GLBN shall issue new Common Shares to SOLS in an
amount equal to US $ 2,025,000 (two million and twenty five
thousand dollars). Such Common Shares shall be priced at the
average of closing price for the five business days
immediately prior to the signing of the Heads of Agreement
dated January 19th
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2000, such average closing price being US $28.225. SOLS shall
receive 71,745 Common Shares in GLBN.
4.1.3 The Price shall be paid according to the following schedule:
At Closing: US $ 2,025,000by allocation of 71,745 Common
Shares
At Review Date 1: If the Agreement is continued for
another 6 months (see Clause 11) US $ 810,000 will be
paid in cash to an account as specified by SOLS.
At Review Date 2: If the Agreement is continued until
the end of the Term, (see Clause 11) a cash
contribution of US $ 540,000 will be paid to an
account as specified by SOLS.
4.2 In relation to Financial Transactional Services, which shall appear on
the Finance Channel on the SOLS Portal subject to regulatory approval,
SOLS shall be entitled to invest in Financial Transactional Services on
the following basis:
4.2.1 GLBN shall use reasonable endeavours to develop Financial
Transactional Services for Scandinavia (Norway, Sweden and
Denmark) for all Finance Channels, including the Finance
Channel on the SOLS Portal. SOLS shall be entitled to
participate pari passu with GLBN to 45% of the 88% awarded the
SOL Group of half of the equity shares not subscribed to by
third parties that are not traffic partners (such as World
Online), see Schedule J for examples.
4.2.2 GLBN shall use reasonable endeavours to develop Financial
Transactional Services for all Finance Channels, which may or
may not include one or more of the Finance Channels on the
SOLS Portals. In all these instances, SOLS shall be entitled
to participate pari passu with GLBN to a portion of half of
the shares not subscribed to by third parties that are not
traffic partners, equal to the proportionate unique visitor
numbers they provide in relation to the total unique visitor
numbers (as measured and/or audited by the same independent
third party) provided by the traffic partners on whose portals
the service is made available.
4.3 In the event that SOLS decides not to invest as an equity shareholder
in Financial Transactional Services, SOLS shall be entitled to a
revenue share to be agreed at that time. In such an event, SOLS's
choice is mutually exclusive as to clause 4.2, above (for the avoidance
of doubt, SOLS cannot be an equity investor, and, additionally, receive
revenues from Financial Transactional Services).
4.4 Subject to the joint agreement of the Parties, this Agreement may be
renewed for the Renewal Term on similar terms and conditions as under
this Agreement.
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4.5 LOCK UP AGREEMENT
The Common Shares contributed as payment in accordance with Clause 4 of
this Agreement shall be subject to a Lock-up period in accordance with
the following conditions;
a) 25% of the Common Shares distributed to SOLS, shall be subject
to a Lock-up period of 9-months following the Closing Date of
this Agreement; and
b) 25% of the Common Shares distributed to each of SOLS, shall be
subject to a Lock-up period 1-year following the Closing Date
of this Agreement; and
c) 25% of the Common Shares distributed to each of SOLS, shall be
subject to a Lock-up period of 18-months following the Closing
Date of this Agreement; and
d) 25% of the Common Shares distributed to each of SOLS, shall be
subject to a Lock-up period of 24-months following the Closing
Date of this Agreement.
5. SALE AND SPONSORSHIP OF ADVERTISING RIGHTS
5.1 SOLS shall have a right for sale and sponsorship of Advertising Rights
for the Finance Channel on the SOLS Portal under this Agreement. CPM
for advertisements shall not be under 90 % of the average CPM of the
SOLS Portal in the respective countries, or the average CPM of the
advertising agencies.
5.2 GLBN agrees that SOLS may, at no additional cost, place one button (of
no more than 130x20 or 130x50 pixels in size) in the right hand column
on each page of the Content for the promotion of its SOLS Portal
subject to GLBN choice of placement.
6. ADVERTISING REVENUE DISTRIBUTION
6.1 For advertisements sold by SOLS, the agency commission will be 30% or
as agreed from time to time between the Parties. SOLS shall determine
the advertising revenue received each quarter at the end of such
quarter and pay/account for the relevant sums in accordance with this
Clause 6. SOLS shall retain the Advertising Revenue, if received by
SOLS, and the balance shall be paid to GLBN within seven (7) days of
such quarter.
6.2 In the event GLBN, or it's appointed advertising agency, shall generate
certain advertising revenue controlled by this Agreement, then GLBN
shall pay the Advertising Revenue to SOLS within 7 days after the end
of the quarter in which such advertising revenue is received by GLBN,
together with a report, signed by an officer of GLBN, confirming the
amount of advertising revenue received.
6.3 Each Party shall at its cost (except as provided below) have the right
during normal working hours and upon 10 working days' written notice to
the other Party to examine or audit the other Party's books or records
relating to the revenue in order to verify the amounts due to that
Party. Each Party shall provide reasonable assistance to the other
FINANCIAL WEBSITE AGREEMENT - SWEDEN 15
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Party, in relation to any such audit. If any such audit reveals an
underpayment of the amounts due to that Party, the other Party shall
within 14 working days pay to that Party the amount of such
underpayment and, if the audit reveals an underpayment of more than 15%
of the amounts due to that Party, reimburse that Party the reasonable
costs of such audit.
6.4 All sums payable hereunder are exclusive of any taxes which is (if
applicable) payable in addition at the rate and in the manner
prescribed by law from time to time.
7. OWNERSHIP
7.1 SOLS acknowledges and agrees that GLBN owns all Intellectual Property
Rights in the Finance Channels, including the URLs of the Finance
Channels, and the GLBN Brand Features or GLBNs URLs. Nothing in this
Agreement shall confer in SOLS any right of ownership in the Content or
the GLBN Brand Features or GLBN's URLs and SOLS shall not now or in the
future contest the validity of the GLBN Brand Features or GLBNs URLs,
or GLBN's rights in or to the Finance Channels or GLBN's Brand Features
or GLBNs URLs.
7.2 GLBN acknowledges and agrees that SOLS own all Intellectual Property
Rights in the SOLS Brand Features or SOLS URLs. Nothing in this
Agreement shall confer in GLBN any right of ownership in the SOLS Brand
Features or SOLS URLs and GLBN shall not now or in the future contest
the validity of the SOLS Brand Features or SOLS URLs, or SOLS rights in
the SOLS Brand Features or SOLS URLs.
7.3 At the discontinuation of the Agreement, either at Review Date 1 or 2,
or at Termination or at the end of the Term or the end of Renewal Term,
GLBN will change the colours and the design on the GLBN finance
channel, so as not to keep the look and feel of the SOLS Portal at that
time. GLBN acknowledges that SOLS may wish to copy the layout of the
Finance Channel in any new arrangement that is made.
8. EXCLUSIVITY
8.1 SOLS shall not, during the Term or any Renewal Term, except as provided
for in Clause 2.4.5 above and/or in Clauses 8.2 or 8.3 below, provide
or enter into an agreement with any third-party, or otherwise develop
content and/or financial transactional services similar to the Content
and Financial Transactional Services provided by, and intended to be
provided by, GLBN on the Finance Channel on the SOLS Portal. The
Exclusivity of GLBN shall be limited to the Finance Channel on the SOLS
Portal, and in addition GLBN shall be the only provider of such Content
and or Financial Transactional Services on the SOLS Portal, so long as
GLBN complies with Schedule H. For the avoidance of doubt, GLBN shall
be the sole provider of finance channels, or sub finance channels, and
of content similar to Content or financial services transactions
similar to Financial Transactional Services on the SOLS Portal during
the Term and any Renewal Term of this Agreement.
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8.2 For the avoidance of doubt, the Exclusivity granted to GLBN does not
restrict SOLS's right to publish content, news, tools and features of a
financial nature, so long as the publishing of such information is
presented as a sub-service and/or add-on feature on other Channels
within the SOLS Portals, and, so long as the publishing of applications
are presented in a context of substantially non-financial nature. Such
Channels or applications may be: "Breaking News", "Computers and
Science", "Health", "Travel", "Gaming", "My SOLS" "My Bank"
(personalised content), the search engines "Kvasir" and "Evreka"
(containing financial directories and URL's). SOLS is not restricted
from providing SOLS credit card, SOL loyalty card or program, everyday
consumer banking such as day to day payment and looking at account
balances, SOLS debit card, SOLS current account, or other SOLS payment
mechanism on the SOLS Portal.
8.3 Subject to Clause 8.4 below, SOLS shall have the right to maintain all
existing agreements with all, pre-Agreement, financial content
providers, provided that such financial content is published and
integrated into Financial Channel under GLBN's guidance. Upon
expiration of such agreements, GLBN shall have sole discretion
regarding renewal of such agreements, or may choose to provide such
additional content.
8.4 GLBN acknowledges that SOLS has an existing agreement with the stock
broker Avanza. The agreement expires the 30th September 2000, and
unless the Parties reaches an agreement with Avanza, GLBN will not be
able to launch the Finance Channel before this expiration date. GLBN,
SOLS and Avanza will negotiate in order to reach an agreement under
which Avanza customers may continue for a period of time to access
their Avanza share portfolios through the Finance Channel. If no
agreement is reached, SOLS may request that GLBN allow Avanza customers
to access their share portfolio through the Finance Channel for a
period of time, provided that Avanza pay for the advertising space on
market terms.
8.5 The SOL Group may at any time develop new digital products, services or
platforms, new websites, SOL Group Portals or services ("New SOL Group
IT") during the Term of the Agreement. GLBN shall be entitled to a
Penalty to the extent that such New SOL Group IT diverts Traffic from
the SOLS Portal based on http protocol, as measured by the reduction
from the unique user Traffic information provided in Schedule F, in as
much as this is caused by such New SOL Group IT according to a separate
study performed by an independent source. The Penalty shall equal a
portion of the consideration equal to the remainder of the prepaid
period in proportion to the traffic lost, plus 10%.
8.6 When SOLS, or another company in the SOL Group, should initiate a
majority owned portal operation in Finland, GLBN shall have the same
rights of Exclusivity to provide a Finance Channel to the SOL Finland
Portal as governed by this Agreement. No additional consideration shall
be due from GLBN, or GLBN Group company, for such rights.
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Executed Sweden February 25, 2000
9. WARRANTIES
9.1 Each Party to this Agreement represents and warrants to the other Party
that:
9.1.1 it has the full corporate right, power and authority to enter
into this Agreement and to perform its obligations hereunder;
9.1.2 the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties
hereunder, do not and will not violate any agreement to which
such Party is a Party or by which it is otherwise bound; and
9.1.3 when executed and delivered by such Party, this Agreement will
constitute the legal, valid and binding obligation of such
Party, enforceable against such Party in accordance with its
terms.
9.2 GLBN represents and warrants to SOLS that:
9.2.1 it has sufficient rights in the Content to be published on the
Finance Channel in accordance with the terms of this
Agreement; and
9.2.2 it has, and will continue to maintain, all regulatory
licences, registrations and authorities required to deliver
the Content and operate the Finance Channel through the SOLS
Portal;
9.2.3 to the extent that the information is on the GLBN webserver(s)
under GLBN's control, that the Financial Channel on the SOLS
Portal shall be up and accessible 99.5% of the time from the
Launch Date, measured by GLBN over 45 days rolling and
reported to SOLS.
9.3 SOLS represents and warrants to GLBN that:
9.3.1 they have sufficient rights in the SOLS digital service,
products or other platforms and websites or SOLS Portal to
grant to GLBN the right to use the same in accordance with the
terms of this Agreement; and
9.3.2 they have, and will continue to maintain, all regulatory
licences, registrations and authorities for the SOLS digital
service, products or other platforms and websites or SOLS
Portal; and
9.3.3 to the extent that the information is on the SOLS webserver(s)
under SOLS's control, that the SOLS Portal, and all Links to
the Finance Channels from the SOLS Portal, shall be up and
accessible 99.5% of the time from Launch Date measured by SOLS
over 45 days rolling and reported to GLBN; and
9.3.4 SOLS shall use its reasonable endeavours to direct an
increasing amount of Traffic to the Finance Channel on the
SOLS Portal; and
FINANCIAL WEBSITE AGREEMENT - SWEDEN 18
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Executed Sweden February 25, 2000
9.3.5 that the Traffic figures contained in Schedule "F" are current
and accurate;and
9.3.6 the URLs mentioned in the definition of SOLS Portal are the
URLs used by the SOLS customer base that generates the Traffic
described in Schedule F; and
9.3.7 that the agreement between SOLS and Avanza shall not delay the
launch of the Finance Channel on the SOLS Portal after the 1st
October 2000.
10. GLBN'S RESPONSIBILITY FOR THE CONTENT
10.1 GLBN will ensure that the Finance Channel and the Financial
Transactional Services complies with all applicable laws and
regulations.
10.2 GLBN will use reasonable endeavours to ensure that the Content and/or
Financial Transactional Services on the SOLS Portal do not infringe any
Intellectual Property Rights of a third party and that it does not
libel, defame, cause injury to, invade the privacy of or otherwise
violate any other rights of any person.
10.3 If at any time during the Term of this Agreement any part of the
Content and/or the Finance Channels and/or the Financial Transactional
Services on the SOLS Portal are in breach of any applicable law or
regulation or infringes the Intellectual Property Rights of any third
party then GLBN shall:
10.3.1 use reasonable endeavours to provide alternative content which
will not be in breach of any applicable law or regulation or
infringe the Intellectual Property Rights of any third party;
or
10.3.2 remove the offending part of the Content and replace it so far
as is reasonably practicable with equivalent content.
11. REVIEW PROCESS
11.1 Within the Review Date 1 and Review Date 2, the Parties will assess
each others fulfilment of the obligations and benefits derived under
this Agreement. To the extent that the performance and the benefits
derived from this Agreement is considered satisfactory, the Agreement
will be continued automatically. A notice of non-continuance must be
given to the other Party in writing no later than thirty days before
Review Date 1 or Review Date 2.
12. TERM AND TERMINATION
12.1 This Agreement shall take effect from the Effective Date and shall
continue thereafter for the Term, after the Launch Date Average, unless
it is discontinued on Review Date
FINANCIAL WEBSITE AGREEMENT - SWEDEN 19
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Executed Sweden February 25, 2000
1 or Review Date 2 as described in Clause 11 above. This Agreement
shall extend through the Renewal Term as further described in Clause
4.4.
12.2 Either Party shall be entitled to Terminate this Agreement, with
written notice in the event that the other:
12.2.1 commits a material breach of the terms of this Agreement and
having received from the Party not in breach written notice of
such breach stating the intention to Terminate this Agreement
if not remedied, and the noticed Party fails to remedy the
breach within 30-days; or
12.2.2 shall cease to carry on its business or shall have a
liquidator, receiver or administrative receiver appointed to
it or over any part of its undertaking or assets or shall pass
a resolution for its winding up (otherwise than for the
purpose of a bona fide scheme of solvent amalgamation or
reconstruction where the resulting entity shall assume all of
the liabilities of it) or a court of competent jurisdiction
shall make an order, or shall enter into any voluntary
arrangement with its creditors, or shall be unable to pay its
debts as they fall due, or similar in any other jurisdiction.
12.2.3 Repeated breaches of the warrants given under Clauses 9.2.3
and 9.3.3 shall be considered material to both Parties.
13. EXTENSION OF TERM
13.1 Upon conclusion of the Term under this Agreement, this Agreement shall
be renewed for the Renewal Term if agreed to by the Parties.
14. CONSEQUENCES OF TERMINATION
14.1 In the event of Termination of the Agreement , the Parties agree to:
14.1.1 cease using the other's "Brand Features";
14.1.2 with respect to any payments of Advertising Revenue and/or
Financial Transactional Revenues outstanding, SOLS and GLBN
agree to pay to the other Party its percentage of such
revenues in accordance with the provisions of Clause 6 as well
as Financial Transactional Revenue.
14.2 If this Agreement is Terminated according to clause 12.2 by reason of
breach on the side of SOLS, SOLS shall reimburse GLBN, notwithstanding
Clause 4.5 (for the avoidance of doubt, the Lock-up agreement does not
apply for reimbursements under this Clause), in accordance with the
following schedule:
FINANCIAL WEBSITE AGREEMENT - SWEDEN 20
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Executed Sweden February 25, 2000
14.2.1 US $ 2,025,000 or 71,745 Common Shares, at SOLS discretion as
to cash or shares, plus US $ 225,000 (two hundred and
twentyfive thousand dollars) if Termination isbefore 1 month
of the Launch Date Average;
14.2.2 If Terminated 1 month after Launch Date Average or later, a
pro rata share of the consideration prepaid, either in cash or
the number of shares (at SOLS discretion), corresponding to
the remaining prepaid number of months.
14.3 If this Agreement or any individual Finance Channel on the SOLS Portal
is Terminated according to clause 12.2 by reason of breach on the side
of GLBN, SOLS shall reimburse GLBN, notwithstanding Clause 4.5 (for the
avoidance of doubt, the Lock-up agreement does not apply for
reimbursements under this Clause), in accordance with the following
schedule:
14.3.1 US $ 1,800,000 or 63,773 Common Shares, at SOLS discretion as
to cash or shares, if Terminated between Effective Date and
before 1 month of Launch Date Average;
14.3.2 If Terminated 1 month after Launch Date Average or later, a
pro rata share of the consideration prepaid, either in cash or
the number of shares (at SOLS discretion), corresponding to
the remaining prepaid number of months, less 10%.
14.4 Any Termination or discontinuance of the Agreement (howsoever
occasioned), shall not affect any accrued rights or liabilities of
either Party nor shall it affect the coming into force or the
continuance in force of any provision hereof which is expressly or by
implication intended to come into or continue in force on or after such
Termination or discontinuance.
14.5 Clauses 14,15,16,17,21 and 22 shall survive Termination or
discontinuance of this Agreement.
14.6 On any Termination or discontinuance of this Agreement (other than a
termination by GLBN in accordance with Clause 12.2), or on expiration
of the Agreement, both GLBN and SOLS shall have the right to use all
customer information generated from the Finance Channel.
15. LIMITATIONS OF LIABILITY
15.1 Subject to Clause 14.2, the liability of either Party in contract,
tort, negligence, pre-contract or other representations or otherwise
arising out of or in connection with this Agreement or the performance
or observance of its obligations under this Agreement, and every
applicable part of it shall be limited in aggregate to US $2,025,000
reduced on a pro rata basis in accordance with the remainder of the
Term.
FINANCIAL WEBSITE AGREEMENT - SWEDEN 21
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Executed Sweden February 25, 2000
15.1.1 Not withstanding the foregoing, GLBN shall indemnify SOLS for
liability arising out of, or in connection with, the Finance
Channels, subject to a limited aggregate of US $ 450,000.
15.1.2 Not withstanding the foregoing, SOLS shall indemnify GLBN for
liability arising out of, or in connection with, the SOLS
Portals, subject to a limited aggregate of US $ 450,000.
15.2 In any event, neither Party shall be liable to the other under, or in
connection with, this Agreement in contract, tort, negligence,
pre-contract or other representations (other than fraudulent or
negligent misrepresentations) or otherwise for any loss of business,
contracts, profits or anticipated savings or for any indirect or
consequential or economic loss whatsoever, except for in cases of gross
negligence or wilful misconduct.
15.3 Each provision of this Clause 15 excluding or limiting liability shall
be construed separately, applying and surviving even if for any reason
one or other of these provisions is held inapplicable or unenforceable
in any circumstances and shall remain in force notwithstanding the
expiration, or Termination of this Agreement.
16. CONFIDENTIALITY
16.1 During the Term and thereafter, each Party agrees with the other,
except for as otherwise agreed herein, to keep all information that
they obtain about the other concerning the business, finances,
technology, affairs and Intellectual Property Rights of the other, and
in particular but not limited to, the Content and Financial
Transactional Services and the SOLS Portal and regardless of its nature
("Confidential Information"), strictly confidential, except as needed
in connection with the establishment and operation of Financial
Transactional Services.
16.2 The provisions of this Clause 16 shall cease to apply to:
16.2.1 information that has come into the public domain other than by
breach of this Clause or any other duty of confidence; and
16.2.2 information that is obtained from a third party without breach
of this Clause or any other duty of confidence; and
16.2.3 information that is known by either Party, in connection with
the other Party, and which has been disclosed to either Party
by a third party, other than GLBN or SOLS or a contractor of
either of them and not in breach of any duty of confidence;
and
16.2.4 information that is trivial or obvious; and
FINANCIAL WEBSITE AGREEMENT - SWEDEN 22
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Executed Sweden February 25, 2000
16.2.5 information that is required to be disclosed by a government
body or court of competent jurisdiction.
17. NOTICES
17.1 Any notices required to be given under this Agreement shall be in
writing and shall be deemed to have been duly served if hand delivered
or sent by facsimile with the original to be forwarded by first class
post or by first class registered post or recorded delivery post within
the United Kingdom and outside the United Kingdom by registered airmail
post correctly addressed in the case of GLBN to the Managing Director
and in the case of SOLS to the General Manager at the addresses
specified in this Agreement or at such other address as either Party
may designate from time to time in accordance with this Clause.
17.2 Any notice pursuant to Clause 17.1 shall be deemed to have been served:
17.2.1 if hand delivered at the time of delivery by posting through
the letter box of the correct addressee in accordance with
Clause 17.1 above;
17.2.2 if sent by facsimile within one hour of transmission during
business hours at its destination or within 24 hours if not
within business hours but subject to proof by the sender that
it holds an acknowledgement confirming receipt of the
transmitted notice in readable form; and
17.2.3 if sent by post within 48 hours of posting (exclusive of the
hours of Sunday) if posted to an address within the country of
posting and seven days of posting if posted to an address
outside the country of posting.
18. ASSIGNMENT AND CHANGE OF CONTROL
18.1 GLBN shall be entitled to assign the benefit and/or the burden of this
Agreement in whole or in part to a company within the Group upon notice
to SOLS , save in the event that all the shares in GLBN are acquired by
a direct competitor of SOLS in Sweden, Norway and/or Denmark in the
Internet general consumer content business (for example AOL) and not an
Internet specialist consumer content business (such as Schwabb or
CNN).In the event of such an assignment GLBN will not be entitled to
Exclusivity defined in Clause 8.
18.2 SOLS shall be entitled to assign the benefit and/or the burden of this
Agreement in whole or in part to a company within the Group upon notice
to GLBN, save in the event that all the shares in SOLS are acquired by
a direct competitor of GLBN in Sweden, Norway and/or Denmark in the
Internet specialist consumer content business (such as Schwabb) and not
a general consumer content business (for example AOL). In the event of
such an assignment GLBN will be entitled to distribute its Content,
notwithstanding Clause 2.3.
FINANCIAL WEBSITE AGREEMENT - SWEDEN 23
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Executed Sweden February 25, 2000
19. FORCE MAJEURE
19.1 Neither party shall be liable for failure to perform or delay in
performing any obligation under this agreement if the failure or delay
is caused by any circumstances beyond its reasonable control, including
but not limited to acts of god, war, civil commotion or industrial
dispute. If such delay or failure continues for at least ninety (90)
days, the party not subject to the force majeure shall be entitled to
terminate this agreement by notice in writing to the other. In such an
event a pro rata share of the consideration pre paid , corresponding to
the remaining prepaid number of months, is reimbursed. To the extent
the prepayment was made in shares, the reimbursement shall be made in
the proportionate numbers of shares. To the extent the prepayment was
made in cash, the reimbursement shall be made in cash.
20. GENERAL
20.1 This Agreement (as amended from time to time) together with any
document expressly referred to in any of its terms, contains the entire
agreement between the Parties relating to the subject matter covered
and supersedes any previous Agreements, arrangements, undertakings or
proposals, written or oral, between the Parties in relation to such
matters. No oral explanation or oral information given by any Party
shall alter the interpretation of this Agreement. All Parties confirm
that, in agreeing to enter into this Agreement, they have not relied on
any representation save insofar as the same has expressly been made a
representation in this Agreement and agrees that they shall have no
remedy in respect of any misrepresentation which has not become a term
of this Agreement save that the Agreement of all Parties contained in
this Clause shall not apply in respect of any fraudulent or negligent
misrepresentation whether or not such has become a term of this
Agreement.
20.2 No addition to, or modification of, any provision of this Agreement
shall be binding on the Parties unless made by a written instrument and
signed by a duly authorised representative of each of the Parties.
20.3 The failure to exercise or delay in exercising a right or remedy under
this Agreement shall not constitute a waiver of the right or remedy or
a waiver of any other rights or remedies and no single or partial
exercise of any right or remedy under this Agreement shall prevent any
further exercise of the right or remedy or the exercise of any other
right or remedy. The rights and remedies contained in this Agreement
are cumulative and not exclusive of any rights or remedies provided by
law.
20.4 The invalidity, illegality or un-enforceability of any provision of
this Agreement shall not affect or impact the continuation in force of
the remainder of this Agreement.
20.5 Nothing in this Agreement shall be construed as creating a partnership
or joint venture of any kind between the Parties or as constituting
either Party as the agent of the other Party(ies) for any purpose
whatsoever and neither Party(ies) shall have the authority or power to
bind the other Party(ies) or to contract in the name of or create a
liability against the other Party(ies) in any way or for any purpose.
FINANCIAL WEBSITE AGREEMENT - SWEDEN 24
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Executed Sweden February 25, 2000
20.6 This Agreement may be executed in any number of counterparts each of
which when executed and delivered shall be an original but all the
counterparts together shall constitute one and the same instrument.
20.7 All Parties undertake with the other to do all things reasonably within
its power, which are necessary or desirable to give effect to the
spirit and intent of this Agreement.
20.8 The Parties hereto shall and, shall use their respective reasonable
endeavours to procure, so far as they are able, that any necessary
third parties shall execute and perform all such further deeds,
documents, assurances, acts and things as any of the Parties hereto may
reasonably require, by notice in writing to the other to carry the
provisions of this Agreement into effect.
20.9 GLBN shall not approach or enter into business arrangements with any
entity that appears on the SOLS Exclusion List.
20.10 SOLS shall not approach or enter into business arrangements with any
entity that appears on the GLBN Exclusion List.
21. DISPUTE RESOLUTION
21.1 Disputes between the Parties arising out of or in connection with this
Agreement shall primarily be resolved by negotiations. Each Party may
however decide to refer the dispute to arbitration in accordance with
the then-current rules of Chapter 32 of the Norwegian Civil Procedures
Act of 13 August 1915, if a settlement has not been reached within 3
weeks of negotiations.
21.2 However, neither negotiations nor the arbitration clause shall limit
either Party to seek interim, interlocutory or permanent injunctive
relief from any court of competent jurisdiction.
21.3 The arbitration proceedings will be conducted in Oslo or any other city
acceptable to all Parties. The language of the arbitration proceedings
will be in English. All arbitration will be conducted before a three
person panel, consisting of one arbitrator selected by the GLBN, one
arbitrator selected by SOLS, and one arbitrator selected by the
foregoing two arbitrators. If any of the Parties should fail to appoint
an arbitrator within 3 weeks after the negotiations period as mentioned
above has ended, the other Party will be given the right to appoint the
arbitrators. Each arbitrator will be experienced in conducting
international arbitration in the communications industry. The decision
resulting from the arbitration will be final and binding on the
Parties. The Parties each agree that, except as required by applicable
law or regulation, it will keep confidential the existence and outcome
of any arbitration proceeding, as well as the contents thereof, and
will require the arbitrators to adhere to the same obligation of
confidentiality.
FINANCIAL WEBSITE AGREEMENT - SWEDEN 25
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Executed Sweden February 25, 2000
22. LAW AND JURISDICTION
This Agreement shall be governed by, and construed in accordance with,
the laws of Norway.
23. CONDITIONS TO CLOSING
23.1 This Agreement does not become binding upon the Parties unless a
Financial Website Agreement is entered into between GLBN and
Scandinavia Online AS (Norway), Scandinavia Online A/S (Denmark) and
also that a Share Purchase Agreement is entered into between the
shareholders of SOL B0rs AS and GLBN.
FINANCIAL WEBSITE AGREEMENT - SWEDEN 26
<PAGE>
Executed Sweden February 25, 2000
IN WITNESS the duly authorised representatives of the Parties have executed this
Agreement the day and year first above written.
SCANDINAVIA ONLINE AB: GLOBALNETFINANCIAL.COM INC
- ------------------------------ ------------------------------
Sverre Munch Dr. Katrina Tarizzo
- ------------------------------
Birger Steen
FINANCIAL WEBSITE AGREEMENT - SWEDEN 27
EXHIBIT 10.13
[GRAPHIC OMITTED]
LEASE AGREEMENT
SCHEVER INTERNATIONAL PLAZA, INC.
<PAGE>
INDEX PAGE
----- ----
ARTICLE I Description of Property .................................. 1
ARTICLE II Rent ..................................................... 1
ARTICLE III Landlord's Services ...................................... 4
ARTICLE IV Preparation of Premises .................................. 5
ARTICLE V Repair and Maintenance ................................... 6
ARTICLE VI Tenant Care and Repair ................................... 6
ARTICLE VII Late Payments ............................................ 7
ARTICLE VIII Holding Over ............................................. 7
ARTICLE IX Alterations, Additions and Improvements .................. 7
ARTICLE X Assignment and Subletting ................................ 9
ARTICLE XI Rules and Regulations .................................... 10
ARTICLE XII Relocation ............................................... 11
ARTICLE XIII Floor Loads, Noise and Vibrations ........................ 11
ARTICLE XIV Tenant's Insurance ....................................... 11
ARTICLE XV Non-Liability and Indemnification ........................ 12
ARTICLE XVI Destruction or Damage by Fire or Other Casualty .......... 13
ARTICLE XVII Eminent Domain ........................................... 13
ARTICLE XVIII Signs .................................................... 14
ARTICLE XIX Default .................................................. 14
ARTICLE XX Subordination ............................................ 16
ARTICLE XXI Access by Landlord........................................ 17
ARTICLE XXII Lawful Use of Premises.................................... 17
ARTICLE XXIII Quiet Enjoyment .......................................... 17
ARTICLE XXIV Tenant Forbidden to Encumber Landlord's Interest ......... 17
ARTICLE XXV Applicable Law............................................ 17
ARTICLE XXVI Representations and Agreements............................ 18
ARTICLE XXVII Force Majeur ............................................. 18
ARTICLE XXVIII Relationship of the Parties .............................. 18
ARTICLE XXIX Plate Glass .............................................. 18
ARTICLE XXX Provisions Relating to Interpretation .................... 18
ARTICLE XXXI Brokerage ................................................ 18
ARTICLE XXXII Recovery of Litigation Expense ........................... 19
ARTICLE XXXIII Notices .................................................. 19
ARTICLE XXXIV Miscellaneous ............................................ 19
RULES AND REGULATIONS ..................................................... 1-5
GUARANTY .................................................................. 1-2
EXHIBIT "A" Demised Premises Floor Plan
EXHIBIT "B" Option to Extend
EXHIBIT "B-1" Disclosure and Acknowledgement
EXHIBIT "C" Work Agreement
<PAGE>
LEASE
FACE PAGE
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1. LANDLORD: Schever International Plaza, Inc.
2. LANDLORD'S ADDRESS: 7280 W. Palmetto Park Road, Suite 201
Boca Raton, FL 33433
3. TENANT: Globalnet Financial.Com, Inc.
4. TENANT'S ADDRESS: 7280 W. Palmetto Park Road- Suite 202 - N
Boca Raton, FL 33433
5. LEASE COMMENCEMENT
DATE (IF PREMISES
ARE COMPLETE): Upon completion of tenant improvements in
accordance with mutually approved plans and
specifications and receipt by Landlord of a
Certificate of Occupancy for the Leased Premises.
6. RENTAL COMMENCEMENT
DATE: Upon the Lease Commencement Date
7. EXPIRATION DATE: Five {5} years following the Lease Commencement
Date
8. LEASE TERM
(AND OPTIONS,
IF ANY): Five {5} years with one, five {5} year option to
extend {See Exhibit B}
9. LEASED PREMISES: Schever International Plaza - Suite 210-S
7284 W. Palmetto Park Road
Boca Raton, FL 33433
10. GARAGE SPACES
ALLOCATED: Four {4}
11. GROSS DIMENSIONS
(APPROXIMATION): 2,287 usable square feet/2,676 rentable square
feet
12. RENT PER SQUARE FOOT: $17.50 per rentable square foot per annum
13. PERCENTAGE OF BUILDING: 5.5%
14. TENANT USE: General Office Use
15. RESTRICTIONS
(IF ANY):
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16. TENANT'S TRADE
NAME: Globalnet Financial.Com, Inc.
17. ANNUAL BASE RENT
(SUBJECT TO ADJUST-
MENT OR ADDENDUM): {$46,830} - Forty-Six Thousand Eight Hundred
Thirty and No/100 Dollars per year {$3,902.50} -
Three Thousand Nine Hundred Two and 50/100
Dollars per month
18. ADDITIONAL RENTAL: Estimated pursuant to Paragraph 2.3.F.)
A. Maintenance/Operating Expenses, Real Estate Taxes and
Insurance:
$ 8.28 Per Square Foot
----------
$ 1,846.44 Per Month
----------
$22,157.28 Per Year
----------
B. 6% Florida Sales Tax: (Subject to Adjustment)
$ 344.94
----------
19. TOTAL MONTHLY RENTAL OBLIGATION: $6,093.88
20. SECURITY DEPOSIT: $11,497.88
21. PARTICIPATING BROKERS (IF ANY):
Arvida Realty Sales, Ltd.
22. OTHER:
THIS IS A LEGALLY BINDING DOCUMENT. IT IS PART OF YOUR LEASE. PLEASE READ IT
THOROUGHLY BEFORE YOU SIGN. THE ITEMS CONTAINED ON THIS FACE PAGE REFER TO
VARIOUS PROVISIONS IN THE LEASE. THERE ARE NO AGREEMENTS BETWEEN THE PARTIES
UNLESS CONTAINED IN WRITING IN THIS LEASE.
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SCHEVER INTERNATIONAL PLAZA
STANDARD LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into this 16th day of June 1999
by and between SCHEVER INTERNATIONAL PLAZA, INC., hereinafter referred to as
"Landlord" or "Lessor", and GLOBALNET FINANCIAL.COM, INC. a Delaware
corporation, hereinafter referred to as "Tenant".
W I T N E S S E T H:
In consideration of the rents, covenants and agreements herein,
Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord upon
terms, provisions and conditions herein, the red property hereinafter described.
ARTICLE I - DESCRIPTION OF PROPERTY
1.1. Description of Property: Landlord leases to Tenant a portion of
the real property in the development known as Schever International Plaza, Boca
Raton, Florida (hereinafter referred to as the "Leased Premises") reflected on
the floor plan attached hereto as Exhibit "A" and made a part hereof.
1.2. Rentable Area: The Leased Premises consists of approximately (see
Face Page) square feet and constitutes (see Face Page) percentage of the square
footage of the building. Notwithstanding the foregoing, any deviation between
actual square footage and the foregoing estimate shall not serve as grounds for
any claim of breach or rescission, although same may result in a modification of
sums due as set forth hereinafter.
1.3. Term: This Lease shall be for a term of (see Face Page) years,
hereinafter sometimes referred to as the "Term" or "Initial Term"), commencing
on (see Face Page). If the Leased Premises are not ready for occupancy by the
commencement date for any reason, Landlord shad not be liable for any claims,
damages, liabilities in connection therewith or by reason thereof, and the term
shall commence on the date the Leased Premises are ready for occupancy. In the
event of the necessity of a Certificate of Occupancy prior to commencement, then
the Standard Addendum Agreement shall be deemed incorporated herein and shall
control.
1.4. Use: The Leased Premises shall be used and occupied by Tenant
solely for the purpose of (see Face Page) and for no other purpose without
Landlord's prior written consent.
ARTICLE II - RENT
2.1. Rental: Subject to paragraph 2.2 hereof, Tenant covenants and
agrees with Landlord to pay rentals as set forth on the Face Page. All rental
payments are due on the first of any month during the lease term. If the renew
commencement date is other than the first day, then the first month's rental
shall be prorated accordingly.
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2.1. (a) Security Deposit: Concurrently with the execution hereof,
Tenant shall pay to Landlord the amount set forth on the Face Page to be held as
a deposit to secure performance of Tenant's obligations hereunder. Upon the
occurrence of any event of default, or upon the failure by Tenant to timely pay
any sum, it is obligated to pay hereunder, Landlord may without prior notice to
Tenant, apply all or part of the security deposit to the curing of any default.
Upon notice of application of security deposit, Tenant shall immediately tender
sufficient sums to reinstate the original security deposit within three (3) days
of notice thereof. Upon termination or expiration of this Lease, the security
deposit shall be returned to Tenant, to the extent the same is not then applied
to either the curing of any event of default or setoff for damages beyond
reasonable wear and tear.
2.2. Adjustment in Rental. The rental obligation during each successive
year after the first year of the term, or any renewal thereof, shall be
increased by five percent (5%) over the previous year's Base Rent.
No adjustment shall ever result in a reduction of the rent below the
rental of the preceding year.
Nothing contained in this Section shall negate Tenant's obligation for
additional rent as defined herein.
2.3. Tenant's Share of Basic Operating Expenses:
A. The term "COMMON AREA" shall mean all real or personal property
owned by the Landlord for the common, non-exclusive use of the Landlord, the
Tenant, its employees, guests and invitees, including, but not limited to
sidewalks, landscaped areas, lighting, delivery areas, parking area, entrance
and lobby areas, security, elevators, stairways, hallways shared by more than
one tenant, and all lavatories shared by more than one tenant, or any portions
thereof.
B. The term "OPERATING EXPENSES" shall mean the operating expenses of
the building and all expenditures by Landlord to maintain the building, parking
and related facilities, and such additional facilities in subsequent years as
may be determined by Landlord to be necessary in accordance with sound and
reasonable practices for facilities of a like kind and character. Operating
expenses shall include all expenses, costs and
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<PAGE>
disbursement of any nature in connection with the ownership, operation and
maintenance of the building, including, but not limited to, the following:
1. All supplies and materials used in the operation and maintenance of
the building;
2. Cost of all utilities for the COMMON AREAS of the building,
utilities shall include, but not be limited to water, electric, air-conditioning
and ventilation; and utilities supplied to Tenant's leased premises. In the
absence of any specific meter reading on the leased premises, Tenant's
obligation shall be a pro rata share of the utility expense for the building.
3. Cost of all maintenance and service agreements for the building, the
equipment therein and grounds, including but not limited to janitorial, window
cleaning, elevator maintenance, trash removal, plumbing, security, fire alarm
system, security alarm system, guard service, painting, gardening, landscaping,
plant rotation and replacement, sprinklers, glass replacement and any costs and
expenses associated with maintenance of the parking garage.
4. All insurance relating to the building, including casualty,
liability, Landlord's personal property used in connection therewith and rent
insurance;
5. All real estate and other taxes and assessments and governmental
charges, whether federal, state, county or municipal and whether they be by
taxing districts or authorities presently taxing the Leased Premises or by
others, subsequently created or otherwise, and any other taxes and assessments
attributable to the building or its operation excluding, however, federal and
state taxes on income and ad valorem taxes on Tenant's personal peroperty and on
the value of tenant leasehold improvements to the extent that the same exceeds
standard building allowances;
6. Cost of unreimbursed repairs and general maintenance;
7. Wages and salaries of all employees engaged in direct operation and
maintenance of the building, employer's social security taxes, unemployment
taxes or insurance, and any other taxes which may be levied on such wages and
salaries, the cost of disability and hospitalization insurance, pension or
retirement benefits or any other fringe benefits for such employees;
8. Legal expenses, accounting expenses and management fees incurred
with respect to the buildings.
9. Costs incurred in compliance with new or revised federal or state
laws or municipal ordinances or codes or regulations promulgated under any of
the same;
10. Amortization of the cost of installation of capital investment
items which are primarily for the purpose of reducing (or avoiding increases in)
operating costs of which may be required by governmental authority. All such
costs shall be amortized over
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the reasonable life of the capital investment items with the reasonable life and
amortization schedule being determined in accordance with generally accepted
accounting principles, and in no event to extend beyond the reasonable life of
the building. In the case of installations for the purpose of reducing (or
avoiding increases in) operating costs, Landlord shall, upon request, provide
Tenant a cost justification therefor.
C. Basic Operating Costs shall not include: (i) costs for which
Landlord is entitled to specific reimbursement by Tenant, any other tenant of
the building, or any other third party; (ii) costs of initial construction of
the building; (iii) cost of renovating or modifying space in the building for
lease to other tenants; (iv) leasing commissions; and (v) debt service on any
indebtedness secured by the building.
D. The Tenant's proportionate share of Basic Operating costs shall be a
percentage of the total operating expenses for a given year or prorated portion
thereof and shall be deemed "ADDITIONAL RENT" hereinunder, and shall be paid to
Landlord on the first day of each month in an amount equal to one-twelfth (1/12)
of the Landlord's estimate of Tenant's proportionate share of same.
E. Landlord may, at As option, furnish Tenant a budget for taxes and
operating expenses setting forth Landlord's estimates of such amounts for the
coming year. Said budget, if provided, may be submitted to Tenant on or about
January 31st of each year.
F. Within 120 days after the end of each calendar year, or as soon
thereafter as possible, Landlord shall furnish to Tenant an operating statement
for the preceding years and an appropriate cash adjustment shall be made between
Landlord and Tenant to reflect any differences between payments made based upon
the estimated costs and actual costs. Provided, further, however, that if within
a calendar year there shall be collective increases in the taxes or operating
expenses which exceeds ten (1096) percent of the estimated budget, the Landlord
may, at its option, adjust the budget for the remaining portion of the year to
reflect such change so as to more accurately reflect costs and prevent a large
variance between the estimated budget and actual expenses paid.
G. Review of Records. Tenant, at his expense, shall have the right,
during reasonable business hours, upon giving reasonable notice, to review
Landlord's books and records relating to any increased or additional costs
payable hereunder for the preceding year or Landlord may, at his option, provide
a report prepared by a certified public accountant, which report shall be
conclusive.
H. Tenant shall be responsible for all government sales or use taxes or
other charges which may be imposed on the privilege of leasing the Leased
Premises to Tenant.
ARTICLE III - LANDLORD'S SERVICES
3.1. Landlord shall furnish Tenant, subject to the terms and
obligations of this Lease, and Tenant's performance of its obligations
hereunder, the following services:
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A. Maintenance of the ventilation and air-conditioning system serving
the COMMON AREAS of Premises. Tenant is responsible for the cost and expenses of
ventilation air-conditioning system and other electric usage in Leased
Premises.
B. Running water at those COMMON AREAS points of supply, if any,
provided for lavatory and drinking purposes only.
C. Janitorial service in and about the building and the Leased Premises
five (5) days per week.
D. Elevators for ingress and egress from the Leased Premises and
authorized entry to the building twenty-four (24) hours a day, seven (7) days a
week.
E. Electricity for all COMMON AREAS and to the leased premises.
F. Replacement of fluorescent lamps in building, standard light
fixtures installed by Landlord and incandescent bulb replacement in all COMMON
AREAS.
3.2. Failure by Landlord to any extent to furnish such services or any
cessation thereof shall not render Landlord liable in any respect for damages of
any nature. Should any such services be interrupted, Landlord shall use
reasonable diligence to restore same promptly, but Tenant shall have no claim
for rebate of rent or damages, or constructive eviction, or breach of lease, on
account thereof.*
3.3. Tenant shall pay Landlord for any electric services utilized by
Tenant. Tenant understands that all utilities supplied to the Leased Premises
are billed to the Landlord and Tenant's estimated share thereof has been
included in the CAM estimate on the Face Sheet.
ARTICLE IV - PREPARATION OF PREMISES
4.1. In the event renovations and/or alterations are to be made to the
Leased Premises to suit Tenant's needs, Landlord shall make those improvements
for Tenant's occupancy in accordance with agreed upon plans and specifications
between Landlord and Tenant. All facilities, material and work, if any, shall be
furnished by Landlord at Tenant's expense by or for the account of Tenant unless
otherwise agreed to. No construction, whether or not to be paid for by Landlord
or Tenant, shall commence without Landlord's specific written advance approval
nor shall Tenant contract with any other party for improvements, alterations or
modifications of the Leased Premises without such approval by Landlord.
4.2. In the event any such construction or renovations shall have been
substantially completed, notwithstanding the fact the minor or insubstantial
details of construction remain to be performed, by the non-compliance of which
does not materially interfere with Tenant's use of the premises, it is expressly
understood that the correction, completion or adjustment of said construction,
whether or not to be performed by Landlord, do not constitute a valid reason for
withholding any rent and shall not constitute a breach of
*Notwithstanding anything contained herein to the contrary, in the event the
services are interrupted as a result of Landlord's negligence, and such
interruption shall continue for more than forty-eight (48) consecutive hours,
then Tenant's rent shall thereafter be abated until such time as such services
or utilities are restored or Tenant begins using the Premises again, whichever
shall first occur.
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lease or otherwise give rise to any cause of action or defense for non-payment
of any obligations hereunder.
4.3. If the substantial completion of the work required by Landlord
shall be delayed due to any act or omission of or attributable to Tenant, then
the Leased Premises shall be deemed ready for occupancy on the date they would
have been ready but for such delay, and all rental and other payments due by
Tenant hereunder shall commence as of such date that substantial completion
would have occurred but for such action or inaction on the part of or
attributable to Tenant.
4.4. The Tenant acknowledges that the fact that minor or insubstantial
details of construction, mechanical adjustment or decoration may remain to be
performed, the non-completion of said details does not materially interfere
with Tenant's use of the Leased Premises. -
4.5. Tenant acknowledges that Landlord has not made any representations
or warranties with respect to the condition of the Leased Premises and neither
Landlord nor any assignee of Landlord shall be liable for any latent or patent
defect therein. Landlord hereby assigns to Tenant all warranties made by others
to Landlord with respect to improvements on the Leased Premises and any other
rights it may have against contractors, suppliers or others with respect to
negligence or faulty performance in connection with the construction or repair
of such improvements. The taking of possession of the Leased Premises by Tenant
shall be conclusive evidence that the Leased Premises were in good and
satisfactory condition at the time such possession was taken, except for the
minor or insubstantial details referred to in Section 4.4. of which Tenant shall
give Landlord notice within thirty (30) days after the commencement date,
specifying such details with reasonable particularity.
ARTICLE V - REPAIR AND MAINTENANCE
5.1.* Once the Leased Premises have been accepted by Tenant which
acceptance shall be deemed conclusive upon the earlier of (a) Tenant's
substantial taking of occupancy; (b) Tenant's payment of any lease obligation;
or (c) the accrual of any lease obligations of Tenant, Landlord shall not be
required to make any improvements or repairs or alterations whatsoever to the
Leased Premises, nor shall Landlord bear liability whether to Tenant or any
invites, guest, solicitor, or other third party for any defects, including
latent defects with respect to the Leased Premises.
5.2. Tenant shall promptly give Landlord written notice of any damage
which has occurred in the Leased Premises. This Section shall not apply in the
case of damage or destruction by fire or other casualty, which event is covered
elsewhere in this Lease.
ARTICLE VI - TENANT CARE AND REPAIR
6.1. Tenant shall maintain the Leased Premises in a clean, attractive
condition and shall be responsible for all repairs, both to the interior and
exterior, structural or non-structural, ordinary or extraordinary which may be
necessary or proper within the Leased Premises for the lease term.
*Except for (i) Landlord's obligations set forth in the Work Letter attached to
this Lease as Exhibit "C", which are to be performed prior to Tenant's
occupancy and (ii) Landlord's service and maintenance obligations under Article
III,
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ARTICLE VII - LATE PAYMENT
7.1. Payments by Tenant. Tenant agrees to timely pay all obligations
hereunder at the times and in the manner herein provided and to occupy at all
times the Leased Premises. Any rent or other payment due hereunder which is not
paid within five (5) days of the due date shall cause the automatic imposition
of a late charge equal to either the maximum interest avowed by the laws of the
State of Florida on any principal balance, or Ten and 00/100 ($10.00) Dollars
per day, whichever is greater, said late charge shall be deemed additional rent
and shall be paid with the late payment.
ARTICLE: VIII - HOLDING OVER
8.1. Subject to any other provisions of this Lease, if Tenant should
remain in possession of the Leased Premises after the termination or expiration
of the term and/or any renewal hereof and without the execution by Landlord and
Tenant of a New Lease, then Tenant shall be deemed to be occupying the Leased
Premises as a tenant at sufferance, subject to all the covenants and Obligations
of this Lease and at a daily rental of twice the per day rental in effect
immediately prior to such expiration or termination, computed on the basis of a
thirty ( 30) day month, but such holding over shall not be deemed an extension
or the lease term.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.1. All of Tenant's fixtures and non-movable office furniture and
equipment attached to the bull ding shall remain the property of the Landlord at
the expiration of the lease term, and Tenant shall promptly repair all damage
caused by removal of any property by Tenant. All property on the Leased Premises
in the nature of trade fixtures and any alteration or addition to the Leased
Premises (including but not limited to wall-to-wall carpeting, drywall
partitions, paneling or other wall covering) and any other article attached or
affixed to the floor, wall or ceiling of the Leased Premises shall become the
property of Landlord and shall be surrendered with the Leased Premises as part
thereof at the termination of this Lease, without payment or compensation
therefor. If, however, Landlord so requests in writing, Tenant will, prior to
vacating the premises upon the termination or expiration of this Lease, remove
any or all alterations, additions, fixtures, equipment and property placed or
installed by it in the Leased Premises and will repair any damage caused by such
removal. Any property of Tenant not removed within five (5) days after
expiration or other termination of this Lease shall be deemed the property of
Landlord and Landlord shall have no duty of any nature to Tenant with respect to
any such property remaining on the Leased Premises regardless of the value, use,
importance, type, quality or quantity of the property and/or its importance to
Tenant or anyone else.
9.2. Tenant shall not have the right to make any alterations or
improvements to the Leased Premises or any part thereof. However, Landlord shall
agree to alterations if each of the following conditions are met:
(a) All plans and specifications for the proposed alteration or
improvement must be submitted to the Landlord for his prior written approval.
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(b) All such alterations or improvements shall be performed by Landlord
at Tenant's expense in accordance with a separate agreement or at Landlord's
discretion any such improvements or alterations by Tenant shall be done at
Tenant's expense, by a licensed contractor approved by Landlord. If requested by
Landlord, Tenant will post a bond or other security reasonably satisfactory to
Landlord to protect Landlord against liens arising from work performed by
Tenant.
(c) No alteration or improvement shall be undertaken until Tenant shall
have procured all permits, licenses and other authorizations, if any, required
for the lawful and proper undertaking thereof. Landlord agrees to join in the
application for such permission or authorization whenever such action is
necessary.
(d) Landlord will complete the Leased Premises substantially in
accordance with the plans and specifications to be approved by both Tenant and
Landlord. In the event the cost of improvements or finishing Leased Premises
exceeds the Landlord's allowance for same, the cost in excess of such allowance
will be paid in advance by the Tenant, the amount of such advance payment to be
determined on the basis of Landlord's estimate of the total cost of finishing
the Leased Premises, such estimates to be based on the aforementioned plans and
specifications. Cost will include but not be limited to direct and indirect
construction cost, permit fees, architectural fees, applicable insurance
premiums, and any other cost directly attributable to finishing the Leased
Premises. Any advance payment received by Landlord from Tenant in excess of
Tenant's portion of the cost of finishing the Leased Premises will be refunded
to Tenant by Landlord after a final accounting of the total cost of said Leased
Premises is completed by Landlord, but in any event, not later than ninety (90)
days after occupancy of the Leased Premises by Tenant.
(e) Landlord makes no representations or warranties as to the
sufficiency of the plans and specifications to meet the requirements of Tenant's
business. Prior to or during Landlord's construction activities, the parties may
agree upon changes in the plans and specifications. If any change in the plans
or specifications increases the cost of work or materials or the time required
for completion of construction, Tenant shall reimburse Landlord for such
increase in cost at the time the increased cost is incurred and shall reimburse
Landlord for any loss in rent at the time the rent would have become due.
(f) Landlord shall not be responsible for any loss for Tenant
improvements at any time.
(g) Tenant, its employees, contractors, agent and invitees shall not
have any claim against Landlord for any bodily injury or property damage arising
during or from construction activities.
(h) All alterations and improvements when completed shall be of such a
nature as not to reduce or otherwise adversely affect the value of the Leased
Premises, nor to diminish the general utility or change the general character
thereof.
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ARTICLE X - ASSIGNMENT AND SUBLETTING
10.1. Tenant shall not, whether voluntarily, involuntarily, or by
operation of law, or otherwise: (a) assign or otherwise transfer this Lease or
the terms and estate hereby granted, or offer or advertise to do so; or (b)
mortgage, encumber, or otherwise hypothecate this Lease or the Leased Premises
or any part thereof in any manner whatsoever, without in each instance obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed.
10.2. In addition to any other reasonable basis, Landlord shall be
deemed to be reasonably withholding its consent to any such assignments, letting
or subletting, if such assignment, letting or subletting would result in the
assignment, leasing or subleasing of,
(a) the Leased Premises to any party, business or tenant who proposed
to conduct a business therein which is not in conformance with the provisions of
paragraph 2 hereof; or
(b) less than the whole of the Leased Premises, or for a term less than
the whole of the term which remains hereunder; or
(c) the Leased Premises to any party, business or tenant who is then a
tenant of the project if the Landlord has or will have during the ensuing six
(6) months suitable space for rent in the building; or
(d) the Leased Premises at a rental rate less than the then current
market rate for comparable premises in the building; and
(e) the Leased Premises to a party whose financial condition and credit
rating in Landlord's sole judgment is not equal to or better than that of
Tenant's; or
(f ) the Leased Premises to a party whose business is of a character
which does not, in Landlord's sole opinion, conform with the character of the
Building.
10.3. The provisions of this Section shall apply to a transfer of a
majority of the stock of Tenant as if such transfer were an assignment of this
Lease; but said provisions shall not apply to transactions with a corporation
into or with which Tenant is merged or consolidated or to which substantially
all of Tenant's assets are transferred or to any corporation which controls or
which is controlled by Tenant, or is under common control of Tenant, provided in
any of such events: (a) the successor to Tenant has a net worth computed in
accordance with generally accepted accounting principles at least equal to the
greater of (i) the net worth of Tenant immediately prior to such merger,
consolidated or transfer of (ii) the net worth of Tenant herein named on the
date of this Lease; and (b) proof satisfactory to Landlord of such net worth
shall have been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction.
10.4. Further, the Landlord may consent to the sublease of all or any
part of the Leased Premises provided the Tenant enters into a sublease
containing the same terms and
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conditions contained herein (exclusive of rent) and the Landlord shall receive
one-half (1/2) of the difference between any higher rent paid by a subtenant and
the rent paid by Tenant.
10.5. Any assignment agreed to by Landlord shall be evidenced by a
validly executed assignment and assumption of lease. Any attempted transfer,
assignment, subletting, mortgaging or encumbering of this Lease in violation of
this Section shall be void and confer no rights upon any third person. Such
attempt shall constitute a material breach of this Lease and entitle Landlord to
the remedies provided for default.
10.6. If without such prior written consent, this Lease is transferred
or assigned by Tenant, or if the Leased Premises, or any part thereof, are
sublet or occupied by anybody other than Tenant, whether as a result of any act
or omission by Tenant, or by operation of law or otherwise, Landlord, whether
before or after the occurrence of an event of default may, in addition to, and
not in diminution of or substitution for, any other rights and remedies under
this Lease or pursuant to law to which Landlord may be entitled as a result
thereof, collect rent from the transferred, assignee, subtenant or occupant and
apply the net amount collected to the rent herein, reserved.
10.7. Tenant shall always, and notwithstanding any such assignment or
subleasing, and notwithstanding the acceptance of rent by Landlord from any
such assignee or subtenant, remain liable for the payment of rent hereunder and
for the performance of all of the agreements, conditions, covenants and terms
herein contained, on the part of Tenant herein to be kept, observed, or
performed, his liability to always be that of principal and not of surety, nor
shall the giving of such consent to an assignment or sublease, be deemed a
complete performance of the said covenants contained in this Article so as to
permit any subsequent assignment or subleasing without the like written consent.
10.8. Notwithstanding the foregoing, where Tenant desires to assign or
sublease, the Landlord shall have the right, but not the obligation, to cancel
and terminate the Lease and deal with Tenant's prospective assignees or
subtenant directly without any obligation to Tenant.
10.9. The Landlord shall have the right to sell, mortgage or otherwise
encumber or dispose of Landlord's interest in the building and Leased Premises
and this Lease without Tenant's prior consent, but subject to non-disturbance of
Tenant's possession, and all other Tenant's rights hereunder.
ARTICLE XI - RULES AND REGULATIONS
11.1. Tenant, its agents, employees, guests and invitees, shall comply
with all Rules and Regulations promulgated by Landlord from time to time with
respect to use of both the Leased Premises and the Common Areas. Tenant
acknowledges receipt of the existing Rules and Regulations which are
incorporated into this Lease as if set forth herein as additional obligations of
Tenant.
11.2. Without notice and without liability to Tenant, Landlord shall
have the right to:
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A. Change the name or street address of the building
B. Install and maintain signs on the exterior of the building.
C. Make reasonable rules and regulations as, in the judgment of
Landlord, may from time to time be needed for the safety of the tenants, the
care and cleanliness of the building and the preservation of good order therein.
Tenant shall be notified in writing when each such rule and regulation is
promulgated.
D. Grant utility easements or other easements to such parties, or
replat, subdivide or make such other changes in the legal status of the land
underlying the building, as Landlord shall deem necessary, provided such grant
or changes do not substantially interfere with Tenant's use of the Leased
Premises as intended under this Lease.
E. Sell the building and assign this Lease and the deposit to the
purchaser (and upon such assignment to be released from all of its obligations
under this Lease). Tenant agrees both to attorn to such purchaser, or any other
successor or assign of Landlord through foreclosure, deed in lieu of
foreclosure, or otherwise, and to recognize such person as the Landlord under
this Lease' provided Tenant's possession pursuant to this Lease shall remain
non-disturbed.
ARTICLE XII- RELOCATION
12.1. If Landlord determines to utilize the Leased Premises for other
purposes during the term, Tenant agrees to relocate to other space in the
building designated by Landlord, provided such other space is of equal or larger
size than the Leased Premises, and with no increase in Base Rent or Additional
Rent. Landlord shall pay all out-of-pocket expenses of any such relocation,
including the expenses of moving and reconstruction of all Tenant furnished and
Landlord furnished improvements. In the event of such relocation, this Lease
shall continue in full force and effect without any change in the terms or other
conditions, but with the new locations substituted for the old location.
ARTICLE XIII - FLOOR LOADS, NOISE AND VIBRATION
13.1. Tenant shall not place a load upon any floor of the Leased
Premises which exceeds the load per square foot which such floor was designed to
carry or which is allowed by law. Business machines and mechanical equipment
belonging to Tenant, which cause noise or vibrations that may be transmitted to
the structure of the building or to the Leased Premises to such a degree as to
be objectionable by Landlord shall, at the Tenant's expense, be placed and
maintained by Tenant in settings of cork, rubber or spring-type vibration
eliminators sufficient to eliminate such noise or vibration.
ARTICLE XIV - TENANtS INSURANCE
14.1. Tenant shall, at its sole cost and expense, provide and maintain
during the entire term of this Lease or any extension or renewal thereof,
liability insurance in the single limit of One Million and no/100
($1,000,000.00) Dollars for individual injury and Three Million and no/100
($3,000,000.00) Dollars if injury or death to more than one person, hazard
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insurance with similar coverages to liability insurance, workmen's compensation
insurance in sufficient statutory amounts, and plate glass insurance with
respect to any windows located in the Leased Premises. The original of each such
policy of insurance or certified duplicate thereof issued by the insurance or
insuring organization shall be delivered by Tenant to Landlord on or before ten
(10) days prior to occupancy of the Leased Premises by Tenant and shall list the
Landlord as co-insured for notice purposes. Tenant shall have no interest of any
nature in any insurance policy obtained by Landlord with respect to the Leased
Premises.
ARTICLE XV - NON-LIABILITY AND INDEMNIFICATION
l5.1. Neither Landlord nor any beneficiary, agent, servant, or employee
of Landlord, nor any superior lessor nor any superior mortgagee, shall be liable
to Tenant for any loss, injury, or damage to Tenant or to any other person, or
to its or their property, irrespective of the cause of such injury, damage or
loss, unless caused by or resulting from the negligence of Landlord, his agents,
servants or employees in the operation or maintenance of the Leased Premises or
the building, subject to the doctrine of comparative negligence in the event of
contributory negligence on the part of Tenant or any of its subtenants or
licensees or its or their employees, agents or contractors. Tenant recognizes
that any superior mortgagee will not be liable to Tenant for injury, damage, or
loss either caused by, or resulting from the negligence of the Landlord.
Further, neither Landlord, any superior lessor or superior mortgagee, nor any
partner, director, officer, agent, servant, or employee of Landlord shall be
liable: (a) for any such damage caused by other tenants or persons in, upon or
about the building, or caused by operations in constrution of any private,
public or quasi-public work; or (b) even if negligent, for consequential damages
arising out of any loss of use of the Leased Premises or any equipment or
facilities therein by Tenant or any person claiming through or under Tenant.
15.2. The obligations of Landlord under this Lease do not constitute
personal obligations of the individual partners, directors, officers or
shareholders of Landlord, and Tenant shall look solely to the real estate that
is the subject of this Lease and to no other assets of the Landlord for
satisfaction of any liability in respect of this Lease and will not seek
recourse against the individual partners, directors, officers or shareholders of
Landlord or any of their personal assets for such satisfaction.
15.3. The obligations of Tenant hereunder shall not be affected,
impaired or excused, nor shall Landlord have any liability whatsoever to Tenant,
because: (a) Landlord is unable to fulfill, or is delayed in fulfilling any of
his obligations under this Lease by reason of strike, other labor trouble,
governmental pre-emption of priorities or other controls in connection with a
national or other public emergency or shortages of fuel, supplies, labor or
materials, Act of God or any other cause whether similar or dissimilar.
15.4. The Tenant covenants and agrees with Landlord that during the
entire term of this Lease the Tenant will indemnify and save harmless the
Landlord against any and all claims, debts, demands or obligations which may be
made against the Landlord or against the Landlord's title in the premises
arising by reason of any negligent acts or omissions of the Tenant, its
officers, agents or employees in occupying the premises-, and if it becomes
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necessary for the Landlord to defend any action seeking to impose any such
liability, the Tenant will pay the Landlord all costs of court and reasonable
attorneys' fees, including appellate fees and costs to defend any claim even in
the absence of litigation, in addition to any other sums which said Landlord may
be called upon to pay by reason of a judgment or decree against the Landlord in
the litigation or other form of claim presentation in which such claim is
asserted.
15.5. Landlord shall not be liable for any damage to Tenant's property
caused by water from bursting or leaking pipes, waste water about the rented
property, or otherwise; or from an intentional or negligent act of any co-tenant
or occupant of the property surrounding the rented property, or other person, or
by fire, hurricane or other Acts of God; or by riots or vandals; or from any
other cause; all such risks shall be assumed by the Tenant.
ARTICLE XVI- DESTRUCTION OR DAMAGE BY FIRE OR OTHER CASUALTY
16.1. (a) In the event of a fire or other casualty in the Leased
Premises, Tenant shall immediately give notice thereof to Landlord. If the
Leased Premises shall be partially destroyed by fire, eminent domain, or other
casualty so as to render the Leased Premises untenantable in whole or in part,
the rental provided for herein shall abate as to the portion of the Leased
Premises rendered untenantable until such times as the Leased Premises are made
tenantable as determined by Landlord, and Landlord agrees to commence and
complete such repair work promptly and with reasonable diligence. In the event
of total or substantial damage or destruction of the building where Landlord
decides not to rebuild, then all rent owed up to the date of such damage or
destruction shall be paid by Tenant and this Lease shall terminate upon notice
thereof to Tenant. Landlord shall give Tenant written notice of its decisions,
estimates or elections under this Article within sixty (60) days after any such
damage or destruction is reported.* Substantial damage or destruction shall be
deemed to exist if the cost of restoration exceeds thirty-five (35%) percent of
the replacement value. The foregoing shall not apply to any casualty damage
caused in whole or in part by the negligence of Tenant, its agents, employees or
invitees.
16.1. (b) Should Landlord elect to effect any repairs under this Lease,
Landlord shall only be obligated to restore or rebuild the Leased Premises to a
building standard condition, and then only to the extent that insurance proceeds
are available to Landlord therefor. In the event that the insurance proceeds
available to Landlord are insufficient to re-construct the Leased Premises to a
condition substantially comparable to that which existed prior to the casualty,
then the Tenant shall have the right to terminate this Lease upon written notice
to Landlord.
ARTICLE XVII - EMINENT DOMAIN
17.1. If the Leased Premises, building, or any part thereof, other than
parking, shall be taken by eminent domain so as to render the Leased Premises
untenantable, then this Lease shall terminate, and all proceeds from any taking
or condemnation, including leasehold value, shall belong to and be paid to
Landlord, Tenant specifically waiving any rights to any eminent domain proceeds.
*In the event Landlord elects not to rebuild or notice of Landlord's decision is
not given to Tenant within the sixty (60) day period, then Tenant shall have
the option to terminate this Lease.
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ARTICLE XVIII - SIGNS
18.1. No signs, symbols, awnings, canopies, advertising or identifying
marks of any kind shall be placed by or on behalf of Tenant anywhere on the
Leased Premises or Common Areas without written approval of Landlord. Landlord
agrees to provide and install, at Tenant's cost, all letters or numerals on the
doors in the Leased Premises. `All such letters and numerals shall be in the
building standard graphics.
ARTICLE XIX - DEFAULT
19.1. Each of the following shall be deemed a default by the Tenant and
a breach of this Lease: creditors.
(a) The filing of a petition by or against the Tenant for adjudication
as a bankrupt under the Bankruptcy Code, as now or hereinafter amended or
supplemented or for reorganization or arrangement within the meaning of any
chapter of said Bankruptcy Code; the dissolution of or the commencement of any
action or proceeding for the dissolution or liquidation of the Tenant, whether
voluntary or involuntary; the appointment of a receiver or trustee of the
property of the Tenant.
(b) The taking of possession of the premises or property of the Tenant
upon the premises by any governmental officer or agency pursuant to any
statutory authority for any purpose.
(c) The making by the Tenant of any assignment for the benefit of
(d) A failure by Tenant to pay any sums due under this Lease after
three (3) days written notice to Tenant.
(e) The failure of Tenant at any time and from time to time to execute
and deliver to the Landlord a statement certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
are in full force and effect as modified and stating the modifications),
certifying the dates to which the rent has been paid, stating whether or not,
the other party is in default in performance of any of its obligations under
this Lease and, if so, specifying each such default and stating whether or not,
any event has occurred which with the giving of notice or passage of time or
both, would constitute such a default, and, if so, specifying each such event.
Any such statement delivered pursuant hereto shall be deemed a representation
and warranty to be relied upon by the party requesting the certificate and by
others with whom such party may be dealing, regardless of independent
investigation. Tenant also shall include in any such statements such other
information concerning this Lease as Landlord may reasonably request.
(f) Failure of the Tenant to execute any document required by Landlord
in connection with the sale or transfer thereof of Landlord's interest in filing
estoppel letters, consents, subordinations, agreements or other stock documents
provided same will not alter or interfere with Tenant's use of the premises.
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(g) Tenant's failure to perform any other covenant or condition of this
Lease for a period of ten (10) days after written notice to perform.
(i) No failure on the part of the Tenant in the performance of
contractual work required to be performed or acts to be done on conditions to be
modified shall be deemed to exist if steps shall have, in good faith, been
commenced properly by the Tenant to rectify the same and shall be prosecuted to
completion with diligence and continuity.
(ii) In the event of any default of the Tenant, Landlord may
serve written notice on Tenant that the Landlord elects to terminate this Lease
upon a specified date not less than ten (10) days after the date of service,
except in the case of a default for non-payment of monies due and owing for
which a three (3) day notice is appropriate.
(iii) In the event this Lease shall suffer early termination
as hereinbefore provided, or in the event the Leased Premises or any part
thereof shall be abandoned by the Tenant, the Landlord may, at its option,
re-enter and resume possession of said premises or such part hereof, for the
account of the Tenant, and remove all persons and property therefrom by a
suitable action or proceeding at law, without being liable for any damages
therefor. Moving out of the premises or leaving the premises vacant shall not be
deemed an abandonment of the premises, provided that Tenant continues to comply
with its Lease obligations. No re-entry by the Landlord shall be deemed an
acceptance of the premises for Landlord's benefit or a surrender of this Lease,
nor shall any such re-entry interfere with Landlord's right to accelerate all
unpaid rentals as set forth in this Lease.
(h) The allowance of any lien for services and/or labor and/or
equipment and/or property of any kind to be filed by any party against the
building or Leased Premises, and Tenant's failure within ten (10) days following
actual knowledge of same to cure, satisfy or adequately bond such lien so as to
free Landlord and the building or any part thereof from any liability or
potential liability in connection therewith.
19.2. In the event this Lease is terminated by the default or
abandonment or any fault thereof of the Tenant, the entire amount of the unpaid
balance of rent for the term shall be deemed accelerated and shall be due and
payable immediately. Tenant grants Landlord a security interest in all property
on the Leased Premises as security for the payment of all obligations under this
Lease.
19.3. Notwithstanding any language herein or any other agreements
between Landlord and Tenant in the event of default by Tenant of any obligation
hereunder, any changes, obligation or rentals waived by Landlord as and for a
rental concession shall be deemed immediately due and payable as if no such
concession had ever existed. Tenant's maintenance of all obligations of any
nature hereunder shall be deemed a condition subsequent to Landlord's obligation
to honor any rental concessions.
19.4. If Landlord, at his option, shall relet the Leased Premises
during said period, Landlord shall credit Tenant with the net rents received by
Landlord from such reletting, such net rents to be determined by first deducting
from the gross rents, as and when
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received by Landlord, the expenses incurred or paid by Landlord in terminating
this lease and/or re-entering the Leased Premises and in securing possession
thereof, as well as the expenses of reletting, including, without limitation,
the alteration and preparation of the Leased Premises for new Tenants, brokers'
commissions, attorneys' fees, and all other expenses properly chargeable against
the Leased Premises and the rental therefrom. It is hereby understood that any
such reletting may be for a period shorter or longer than the remaining term of
this Lease but in no event shall Tenant be entitled to receive any excess of
such net rents over the sum payable by Tenant to Landlord hereunder, nor shall
Tenant be entitled in any suit for the collection of damages pursuant hereto to
a credit in respect of any net rents from a reletting, except to the extent that
such net rents are actually received by Landlord.
19.5. All of Landlord's remedies of any nature shall be deemed
cumulative, and Landlord shall have such other and further remedies available to
him as provided by law.
19.6. Landlord shall not be liable to Tenant for breach of this Lease
for any sums in excess of Tenant's leasehold interest.
19.7. Tenant shall not record this Lease in the Public Records of any
County wherein the Leased Premises are located.
19.8. No receipt and retention by Landlord of any payment tendered by
Tenant in connection with this Lease will give rise to or support or constitute
an accord and satisfaction, notwithstanding any accompanying statement,
instruction or other assertion to the contrary (whether by notation on a check
or in a transmittal letter or otherwise), unless Landlord expressly agrees to an
accord and satisfaction in a separate writing duly executed by the appropriate
persons. Landlord may receive and retain absolutely and for itself, any and all
payments so tendered notwithstanding any accompanying instructions by Tenant to
the contrary. Landlord will be entitled to treat any such payments being
received on account of any item or items of rent interest, expense or damage due
in connection herewith, in such amounts and in such order as Landlord may
determine at its sole option.
19.9. No assent or consent to change in or waiver of any part of this
Agreement shall be deemed or taken as made, unless the same be done in writing
and attached hereon and endorsed by the Landlord. No covenant or term of this
Lease stipulated in favor of the Landlord shall be waived, except by express
written consent of the Landlord, whose forebearance or indulgence in any regard
whatsoever shall not constitute a waiver of the convenant, term or condition to
be performed by the Tenant; and until complete performance by the Tenant of the
said covenant, term or condition, the Landlord shall be entitled to invoke any
remedies available under this Lease or by law despite such forebearance or
indulgence.
ARTICLE XX - SUBORDINATION
20.1. This Lease, its terms, conditions and all leasehold interests and
rights hereunder are expressly made, given and granted subject and subordinate
to the lien of any bona fide first mortgage which the Landlord may secure, and
Tenant agrees to execute any instruments required by the mortgagee to effect any
subordination.
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ARTICLE XXI - ACCESS BY LANDLORD
21.1. Tenant shall permit Landlord or its agents or representatives to
enter into and upon any part of the Leased Premises at all reasonable hours to
inspect same; to clean; to make repairs, alterations or additions thereto as
Landlord may deem necessary or desireable, and to accomplish any of the
foregoing at any time in the event of emergency; to show the Leased Premises to
perspective purchasers or tenants, or for any other purpose deemed reasonable by
Landlord.
ARTICLE XXII - LAWFUL USE OF PREMISES
22.1. Tenant further covenants and agrees that said Leased Premises and
all improvements thereon during the term of this Lease shall be used only and
exclusively for lawful purposes; and that said Tenant will not knowingly use or
offer anyone to use said premises or building for any purpose in violation of
the laws of the United States, the State of Florida, the County of Palm Beach,
or any other governmental unit wherein the premises may be located.
ARTICLE XIII - QUIET ENJOYMENT
23.1. Landlord covenants that so long as Tenant maintains all
obligations under this Lease, Tenant shall have the right to quietly enjoy and
use the Leased Premises for the term hereof, subject only to the provisions of
this Lease.
ARTICLE XXIV - TENANT FORBIDDEN TO ENCUMBER LANDLORD'S INTEREST
24.1. It is expressly agreed and understood between the parties hereto,
that nothing in this Lease contained shall be construed as empowering the Tenant
to encumber or cause to be encumbered the title or interest of Landlord in the
Leased Premises in any manner whatsoever. In the event that anyone claiming by,
through or under the Tenant shall file a lien against Landlord's interest, the
Tenant within ten (10) days after being notified thereof, shall effect a
discharge of the property from the encumbrances of said lien by the posting of a
bond or other security as prescribed by law or by either payment of the lien or
an order of court having jurisdiction discharging such lien. If Landlord must
take the necessary steps to discharge or render same unenforceable, whether by
litigation or notice to lienor of the lien invalidity, Tenant shall pay all
costs in connection therewith including reasonable attorneys' fees.
ARTICLE XXV - APPLICABLE LAW
25.1. This Lease shall be construed under the laws of the State of
Florida, and venue for any action in connection with the enforcement or
interpretation of this Lease shall be Palm Beach County, Florida. Tenant waves
the right to a trial by jury on any issue so triable.
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ARTICLE XXVI- REPRESENTATIONS AND AGREEMENTS
26.1. Tenant expressly acknowledges and agrees that Landlord has not
made any warranties, representations, promises or statements, except to the
extent that the same are expressly set forth in the Lease and that this Lease
alone fully and completely expresses the parties' agreement.
ARTICLE XXVII- FORCE MAJEUR
27.1. Anything in this Lease to the contrary notwithstanding, Landlord
shall not be deemed in default with respect to the performance of any of the
terms, covenants and conditions of this Lease if same shall be due to any other
cause of any nature beyond Landlord's control, including, but not limited to:
strike, lockout, civil commotion, war-like operations invasion, rebellion,
hostilities, military or usurped power, sabotage, government regulations or
controls, inability to obtain any material, service or financing, or through an
Act of God.
ARTICLE XXVIII - RELATIONSHIP OF THE PARTIES: TENANT'S OBLIGATION RE: LICENSE
28.1. Nothing contained in this Lease shall be deemed or construed to
create any relationship between the parties other than that of Landlord and
Tenant.
28.2. Tenant shall be solely and exclusively obligated to obtain and
maintain any and all occupational licenses, professional license and other
licenses, if any, and related certificates of authority to lawfully conduct its
business.
ARTICLE XXIX - PLATE GLASS
29.1. The replacement of any glass and/or plate glass damaged or broken
from any cause whatsoever in the Leased Premises shall be Tenant's
responsibility.
ARTICLE XXX - PROVISIONS RELATING TO INTERPRETATION
30.1. Article, paragraph and section titles to this Lease are intended
only for convenience and for ease of reference, and in no way do such titles
define, limit or in any way affect this Lease or the meaning or contents of any
material contained herein.
ARTICLE XXXI - BROKERAGE
31.1. Tenant covenants, warrants and represents to Landlord that Tenant
has not dealt with any real estate brokers or salesmen in the finding,
negotiation or execution of this Lease unless specifically set forth in writing
on the Face Page of this Lease. Tenant hereby indemnifies Landlord for any
claims, costs or damages arising from any breach of the foregoing covenant,
warranty and representations.
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ARTICLE XXXII - RECOVERY OF LITIGATION EXPENSE
32.1. In the event of any litigation or other dispute arising out of
the terms of this Lease of Tenant's use of the leasehold property or Common
Areas between the Landlord and Tenant, the prevailing party shall recover from
the other costs and expenses including' but not limited to, reasonable
attorneys' fees, including any appellate fees, whether or not litigation is
instituted.
ARTICLE XXXIII - NOTICES
33.1. Any notices required by the law and this Lease shall be in
writing, and the same shall be served by certified mail, return receipt
requested, in postage prepaid envelopes addressed to the following addressees or
such other addressees as may be designated in writing:
AS TO LANDLORD:
Schever International Plaza, Inc.
7280 W. Palmetto Park Road -- Suite 201-N
Boca Raton, FL 33433
with a copy to:
Tikal & Associates
178 St. George Street
Toronto, Canada M5R2~2
AS TO TENANT:
Mr. Michael Jabobs
Mr. Alan Jacobs
GLOBALNET FINANCIAL.COM, INC.
7284 W. Palmetto Park Road
Suite 210-S
Boca Raton, FL 33433
ARTICLE XXXIV - MISCELLANEOUS ENTIRE AGREEMENT BINDING EFFECT AND SEVERABILITY
34.1. This Lease shall constitute the entire agreement between Landlord
and Tenant; any and all prior written or prior to contemporaneous oral promises
or
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representations shall be deemed merged herein and superseded by the terms
hereof. This Lease shall not be amended, changed or extended except by written
instrument signed by both parties. The provisions of this Lease shall be binding
upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of the parties, but this provision shall in no way alter
the restrictions on assignment and subletting applicable to Tenant hereunder.
This Lease shall not be deemed terminated in the event of Tenant's demise. If
any provision of this Lease shall be held invalid or unenforceable, the
remainder of this Lease shall not be affected thereby. Whenever the contract so
requires the use of any gender, it shall be deemed to include all genders and
the use of the plural shall include the singular and the use of the singular
shall include the plural.
IN WITNESS WHEREOF the parties have executed this Lease the day and
year first above written.
WITNESS: SCHEVER, INTERNATIONAL PLAZA, INC.
[ILLEGIBLE] By: [ILLEGIBLE]
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[ILLEGIBLE]
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WITNESS: GLOBALNET FINANCIAL.COM, INC.
[ILLEGIBLE] By: [ILLEGIBLE]
- ----------------------------------- -----------------------------------
[ILLEGIBLE]
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RULES AND REGULATIONS
OF
SCHEVER INTERNATIONAL PLAZA
"TENANT" shall refer to the TENANT, its agents, employees, invitees,
licensees or guests.
1. OBSTRUCTION OF COMMON AREAS: The COMMON AREAS, as defined in the
TENANT'S Lease, shall not be obstructed in any manner by the TENANT or used for
any purpose other than ingress and egress to and from the demised premises. Any
walls, partitions, skylights, windows, doors or transoms that reflect or admit
light into the passageways or into any other part of the COMMON AREAS, shall not
be covered or obstructed by any TENANT. No garbage cans, garbage, items for
disposal, supplies, or other articles shall be placed in the COMMON AREAS. All
garbage or other items for disposal shall be placed in the proper receptacles
and never placed in the COMMON AREAS except where specifically designated by
LANDLORD such as in a dumpster or other specifically designated site.
2. SIGNS AND ADVERTISING: No projections, signs or advertising shall be
attached to either the outside walls of the building or any windows, walls or
doorways without the express prior written consent of the LANDLORD. The TENANT
shall not mar, damage, destroy, deface, drill into, paint, string wire across or
engrave any part of the building, common areas' or appurtenances thereto without
the prior written consent of the LANDLORD. LANDLORD shall provide a directory in
the lobby and, upon request, will provide signage to be placed near the entrance
to the leased premises. It is the intention of the LANDLORD to have uniformity
in the signage placed in, on or around the building and/or the COMMON AREAS.
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3. KEYS: The LANDLORD shall retain a pass key to TENANT'S premises. No
TENANT shall alter any lock or install a new lock or a knocker on any door of
the demised premises without the express prior written consent of the LANDLORD.
In the event consent is given, the TENANT shall provide the LANDLORD with
additional keys to any new locks. All keys to both the leased premises and other
COMMON AREAS, including but not limited to the bathroom pass keys, storage pass
keys, etc., shall be returned to the LANDLORD at the termination of the Lease.
There shall be a Ten and no/100 ($10.00) Dollar charge per key for each key not
returned to the LANDLORD, which sums may be deducted from TENANT'S security
deposit.
4. LOITERING: The TENANT shall not allow neither littering nor
loitering in the COMMON AREAS by its agents, employees, or invitees.
5. NOISES: TENANT shall not make or allow any of its agents, employees
or invitees to make or permit any disturbing noises in the building nor permit
anything that will interfere with the rights, comforts or convenience of other
tenants. This prohibition shall include but not be limited to musical
instruments, radios, talking machines or any other mechanical or human sounds
which can be heard beyond the leased premises.
6. PETS AND ODORS: No pets or animals of any kind shall be brought
into, kept or harbored in the leased premises or any part of the COMMON AREAS at
any time. No TENANT shall cause or permit any unusual or objectionable odors to
be produced upon or permeate from the leased premises.
7. EQUIPMENT INSTALLATION AND REMOVAL: TENANT shall be liable for all
damages which may be caused by the taking in, moving or removing of furniture or
other equipment to and from the building. All installations or removal of
equipment or furniture or other bulky matter of any description must take place
during the hours which the
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LANDLORD or its agent may determine from time to time. The manager must be
notified of installations or removals prior to the time of its performance.
8. ROOF: At no time is the TENANT allowed on the roof or allowed to use
the roof for any purpose whatsoever.
9. BATHROOMS AND FIXTURES: The bathrooms and other water apparatus
shall not be used for any other purpose than those for which they are
constructed. Damages for misuse shall be borne by the TENANT who, or whose
agents, employees, or invitees shall have caused the damages.
10. SOLICITATION: There shall be no solicitation, canvassing or
peddling in the buying of the leased premises or any other COMMON AREAS or other
part of the building at any time, and each tenant shall cooperate in preventing
same by any other persons
11. HOURS OF OPERATION: LANDLORD reserves the right to close the
building after 6:00 PM subject, however, to admittance under regulations
prescribed by the LANDLORD. After normal business hours, persons entering the
building may be required to identify themselves and/or establish their right to
ingress or egress by use of identification card, building entry card or some
such other electronic or mechanical device. In the case of invasion, riot,
public excitement, or other commotion, LANDLORD reserves the right to prevent
any access to the building during the continuance of same. At no time shall
LANDLORD be liable for damages which may arise from either the admission or
exclusion of any person to or from the building.
12. PARKING: TENANT and all other occupants of the building shall have
access to the parking area through common driveways. The common parking areas
EXCLUSIVE OF RESERVED PARKING are non-exclusive and available to all tenants and
their employees, licensees and guests. LANDLORD may at any time, designate for
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TENANT'S use reasonable parking space in the COMMON AREAS, provided that the
total number of parking spaces is not reduced. No commercial or recreational
vehicles shall be parked on the premises except those vehicles parked on a
temporary basis while delivering, repairing or servicing the building and/or the
TENANTS.
13. DANGEROUS SUBSTANCES AND MACHINERY: No TENANT nor any of TENANT'S
agents, employees or invitees shall, at any time, bring or keep upon the leased
premises or other COMMON AREAS any inflammable, combustible or explosive fluid,
chemical or substance. No article deemed as extra hazardous on account of fire
or explosion shall be brought upon the premises. TENANT shall not operate or
permit to be operated any steam engines, boilers, mechanical machinery or
electric or gas stoves without LANDLORD'S prior written consent. TENANT shall
not use any combustible fluids for any reason within the premises without the
express written consent of LANDLORD.
14. VERMIN INFESTATION: If the leased premises become infested with
vermin, bugs or other infestation, TENANT, at its sole cost and expense, shall
cause the leased premises to be exterminated which may be continued from time to
time to the satisfaction of LANDLORD. Any extermination services utilized shall
be approved in writing by the LANDLORD prior to commencement of extermination
services.
15. FOOD PREPARATION: TENANT shall not allow the preparation of food
for general consumption on the premises nor use the facilities for the
preparation of food without prior written consent of LANDLORD. TENANT shall not
use the premises for houseing, lodging, sleeping nor any other immoral or
illegal purpose. The foregoing shall not be deemed to cover the use of a
refrigerator, or a microwave oven by TENANT for the benefit of TENANT, its
agents and/or employees.
16. CLEANING SERVICES: TENANT shall permit LANDLORD'S employees (or
LANDLORD'S agent's employees) entry into the leased premises for purposes of the
care and
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cleaning of same after 5:30 PM without hindrance, and TENANT shall not employ
any persons other than LANDLORD'S employees, agent' etc., for such purpose
without the prior written consent of LANDLORD. No TENANT shall cause any
unnecessary labor by reason of such TENANT'S carelessness or indifference with
respect to the preservation of good order and cleanliness in the leased
premises. Any outside services employed by TENANT with consent of LANDLORD for
purposes of cleaning shall be at TENANT'S sole cost and expense.
17. MODIFICATIONS TO RULES: These Rules and Regulations may be changed
from time to time by LANDLORD without prior notice being given to TENANT as
LANDLORD may, in its absolute discretion, determine as necessary and
appropriate. LANDLORD will endeavor to notify TENANT of amendments or changes in
the Rules and Regulations as expeditiously as possible. Violation or breach of
these Rules and Regulations shall constitute a breach of the lease agreement and
TENANT shall be liable for any damage caused thereby.
18. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of LANDLORD. No drapes,
blinds, shades or screens shall be attached to or hung in or used in connection
with, any window or door of the Premises, without the prior consent of LANDLORD.
Such awnings, projections, curtains, blinds, screens or other fixtures must be
of a quality, type, design and color and attached in the manner approved by
LANDLORD. Notwithstanding the foregoing, and notwithstanding any provision of
this Lease to the contrary, TENANT, from time to time, will be permitted to
install floor to ceiling drapes on the exterior windows of the Premises; said
drapes shall be submitted to LANDLORD for LANDLORD's approval
TENANT HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE FOREGOING RULES AND
REGULATIONS AT THE TIME OF EXECUTING THE LEASE AGREEMENT.
GLOBALNET FINANCIAL.COM, INC.
[ILLEGIBLE]
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TENANT
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AMENDMENT TO RULES AND REGULATIONS
OF SCHEVER INTERNATIONAL PLAZA, INC.
The following is an amendment to the Rules and Regulations of SCHEVER
INTERNATIONAL PLAZA, INC. pursuant to the rule making authority of SCHEVER
INTERNATIONAL PLAZA, INC. {SCHEVER INTERNATIONAL PLAZA, INC. is hereinafter
referred to US the "LANDLORD"}.
The term "TENANT" shall have the meaning already assigned to said term
pursuant to the existing Rules and Regulations of LANDLORD and any and all
existing Lease Agreements in effect.
1. ACCESS CARDS: Access Cards {the term "Access Cards" shall be defined
to mean Access Cards issued in accordance with a Lease and also Revocable
Temporary Access Cards} may be issued by the LANDLORD for the benefit of the
TENANT with reference to parking areas. The TENANT is responsible for such
Access Cards. There shall be a $35.00 charge to replace any Access Card. The
number of Access Cards issued by LANDLORD to the TENANT shall be determined by
the LANDLORD and the TENANT in the Lease. Revocable Temporary Access Cards may
be issued by the LANDLORD to the TENANT on a temporary basis at the discretion
of the LANDLORD. Revocable Temporary Access Cards issued by the LANDLORD to the
TENANT may be revoked by the LANDLORD at any time, and from time to time, with
or without cause. Upon written notice of such revocation, the TENANT shall
immediately {within three days} surrender to the LANDLORD any such Revocable
Temporary Access Cards. LANDLORD shall charge $35.00 per month {plus applicable
taxes} for each Revocable Temporary Access Card. Such charge shall be deemed to
be additional rent and shall be the responsibility of the TENANT. Non-payment
of such charge shall be the same as non-payment of rent. LANDLORD shall have the
right to increase the charge for Revocable Temporary Access Cards from time to
time and as appropriate. In the event the TENANT does not wish to pay any such
increased amount for such Revocable Temporary Access Cards, TENANT may surrender
same to LANDLORD together with written notice that TENANT has elected not to
utilize same. Any monthly charge prior to the surrender of a Revocable Temporary
Access Card shall be prorated and paid as additional rent. LANDLORD shall also
have the right to require that TENANT furnish in writing upon request:
{a} The number of parking spaces that the TENANT is presently
utilizing.
{b} The number of Access Cards that the TENANT presently possesses.
{c} The names of any and all employees of TENANT that utilize Access
Cards.
The failure of the TENANT to furnish such information within seven {7} days from
the date of receipt of such written request by Landlord shall constitute a
violation of the Rules and Regulations of LANDLORD. In the event of any such
violation, the LANDLORD shall have the remedies prescribed pursuant to the
existing Rules and Regulations; the Lease; and, the laws of the State of
Florida.
2. The effective date for this Rule shall be June 15, 1997.
GLOBALNET FINANCIAL.COM, INC. SCHEVER INTERNATIONAL PLAZA, INC.
By: [ILLEGIBLE] By: /s/ Ingrid Franke
-------------------------------- --------------------------------
Name: Name: Ingrid Franke
--------------------------- ---------------------------
Title: Title: General Manager
-------------------------- --------------------------
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT B
OPTION TO EXTEND
Tenant is hereby granted option to extend the Term for a single
additional period of five {5} consecutive Lease Years {"Extension Period"}, on
the same terms and conditions in effect under the Lease immediately prior to the
Extension Period, except that Tenant shall have no further right to extend, and
Monthly Base Rent shall be increased to the Prevailing Rental Rate. The option
to extend may be exercised only by giving Landlord irrevocable and unconditional
written notice thereof no earlier than one year and no later than six months
prior to the commencement of each Extension Period. Said exercise shall, at
Landlords election, be null and void if Tenant is in default under the Lease at
the date of said notice or at anytime thereafter and prior to commencement of
the Extension Period. The term "Incise Year" herein means each twelve month
annual period, commencing with the first day of the Extension Period, without
regard to calendar years.
If Tenant shall fail to exercise the option herein provided, said
option shall terminate, and shad be null and void and of no further force and
effect. Tenant's exercise of said option shall not operate to cure any default
try tenant of any of the terms or provisions in the Lease, nor to extinguish or
impair any rights or remedies of Landlord arising by virtue of such default If
the Lease or Tenant's right to possession of the Premises shall terminate in any
manner whatsoever before Tenant shall exercise the option herein provided, or if
Tenant shall have subleased or assigned all or any portion of the Premises, then
immediately upon such termination, sublease or assignment, the option herein
granted to extend the Term, shall simultaneously terminate and become null and
void. Such option is personal to Tenant Under no circumstances whatsoever shall
the assignee under a complete or partial assignment of the lease, or a subtenant
under a sublease of the Premises, have any right to exercise the option to
extend granted herein. Time is of the essence of this provision.
LANDLORD: SCHEVER INTERNATIONAL
PLAZA, INC.
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------------------ ------------------------------------
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------------------ ------------------------------------
- ------------------------------------ TENANT: GLOBALNET FINANCIAL.COM, INC.
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------------------ ------------------------------------
[ILLEGIBLE] By:
- ------------------------------------ ------------------------------------
<PAGE>
EXHIBIT "B-1"
DISCLOSURE AND ACKNOWLEDGEMENT
The undersigned GLOBALNET FINANCIAL.COM, INC. (hereinafter referred to
as the "TENANT" has executed a Lease Agreement with SCHEVER INTERNATIONAL PLAZA,
INC. (thereinafter referred to as "LANDLORD") with reference to a portion of the
real property in the Development known as SCHEVER INTERNATIONAL PLAZA, Boca
Baton, Florida More fully described In the Standard Lease Agreement). TENANT
acknowledge" that the Lease Agreement and the Rules prohibit the TENANT from
having pet (s) on or about the development. The TENANT further ac3cnowledgas and
agrees that the Agent for the LANDLORD has a pet and that said pet is on and
about the property on a daily basis with the Agent. TENANT agrees that such
active ties by the Agent are acceptable to the TENANT. The PENAL further agrees
that the TENANT -hall not attempt, or implement, any procedure to impose
liability of any type or character against the LANDLORD, or the Agent for the
LANDLORD, because the Agent for the LANDLORD has a pot on the property.
LANDLORD
WITNESSES SCHEVER INTERNATIONAL PLAZA, INC.
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------------------ ------------------------------------
Name Name: [ILLEGIBLE]
Print name: [ILLEGIBLE] -------------------------------
------------------------- Title: [ILLEGIBLE]
------------------------------
[ILLEGIBLE]
- ------------------------------------
Name
Print name: [ILLEGIBLE]
-------------------------
TENANT
WITNESSES GLOBALNET FINANCIAL.COM, INC.
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------------------ ------------------------------------
Name Name:
Print name: [ILLEGIBLE] -------------------------------
------------------------- Title:
------------------------------
[ILLEGIBLE]
- ------------------------------------
Name
Print name: [ILLEGIBLE]
-------------------------
<PAGE>
EXHIBIT "C"
JMB 105R (2J89)
Work Agreement
Landlord Performance
Improvement Allowance
WORK AGREEMENT
THIS AGREEMENT made as of the 16th day of June, 1999 between Schever
International Plaza, Inc. ("Landlord") and GLOBALNET FINANCIAL.COM, INC.
('Tenant').
Reference is made to the lease or tenant expansion agreement dated
___________, 19____ (the "Lease") for premises known as Suite(s) 210-S (the
"Premises"), located in the property known as Schever International Plaza (the
"Property").
The terms "Plans", "Work", "Space Plan", 'Working Drawings", "Finish
Selections" and "Landlord's Space Planner" are defined in Section XIV, below.
I. Basic Terms.
A. Space Planner: Mummaw & Associates
B. Date To Complete Planning: July 1, 1999 (including any Space Plan,
Working Drawings and Finish Selections)
C. Date To Substantially Complete Work: Commencement Date under the
Lease.
D. Improvement Allowance Provided by Landlord: $ 25.00 per usable sq.
ft. of the Premises (i.e.-2,287 usable sq fit X $25.00 per sq ft = $57,175). The
Improvement Allowance includes the cost of any space planning fees or working
drawing fees expended by Landlord on behalf of Tenant.
II. Basic Agreement. On or before the "Date To Complete Planning"
described above, Tenant shall: (a) provide Space Planner with all information
concerning Tenant's requirements in order for Space Planner to prepare the
Plans, and (b) arrange for Space Planner to prepare the Plans, and obtain
Landlord's written approval thereof. However, Tenant shall not be responsible
for delays caused by Landlord or Landlord's Space Planner, as further described
in Section 111. below.
On or before the Commencement Date under the Lease, Landlord shall
substantially complete the Work shown on the final approved Plans. However,
Landlord shall not be responsible for delays caused by Tenant or Tenant's
contractors, agents or employees and as further described in Section IV, below
and in Article 4 of the Lease.
Landlord shall bear the cost of the Work (including the cost of
building permits and sales tax) up to the Improvement Allowance described above
(if any), and Tenant shall bear any costs over such amounts.
III. Delays In Planning. The Commencement Date under the Lease shall be
postponed for each day that final Plans are not prepared and approved by the
"Date to Complete Planning" described above, including any revisions reasonably
required by Landlord pursuant to Section V and revisions by Tenant to reduce
Tenant's Cost pursuant to Section IX (collectively called "Delays in Planning").
However, the commencement of Rent shall be postponed only to the extent that
substantial completion of the Work is delayed beyond me Commencement Date as a
result of one or more of the following events (collectively called "Landlord
Delays"):
(a) Landlord takes more than seven (7) working days to approve or
disapprove the Plans or revisions thereof after receiving the same (or such
longer time as may be reasonably required in order to obtain any engineering or
HVAC report or due to other special or unusual features of the Work or Plans),
(b) Landlord's Space Planner takes more than seven (7) working days to
meet with Tenant after receiving a written request for a meeting, or takes more
than seven (7) working days to prepare or revise the Plans after meeting with
Tenant and receiving all information born Tenant required in order to do so
(provided this provision shall apply only if Tenant uses "Landlord's Space
Planner" as described in Section XIV below to prepare the Plans), or
(c) Landlord takes more than thirty (30) working days to provide Tenant
with cost estimates after receiving Plans sufficiently detailed for such
purposes (provided this provision (c) shall only apply if Landlord elects to
provide cost estimates under Section IX below).
<PAGE>
IV. Delays In Construction. The Commencement Date under the Lease shall
be postponed for each day that Landlord fails to substantially complete the Work
thereby as a result of strikes, acts of God, shortages of materials or labor,
governmental approvals or requirements, the various causes set forth below, or
any other causes beyond Landlord's reasonable control. In such case, the
commencement of Rent shall be similarly postponed, except to the extent that
delays occur as a result of one or more of the following (collectively called
"Tenant Delays"):
(a) Delays in Planning as described above (except for Landlord Delays),
or
(b) Tenant's requests for changes to the Work or Change Orders under
Section VII, or otherwise,
(c) Tenant's failure to furnish an amount equal to Landlord's
reasonable estimate of Tenant's Cost (if any) within 10 days, as described in
Section IX (which shall give Landlord the absolute right to postpone the Work
until such amount is furnished to Landlord),
(d) any upgrades, special work or other non-building standard items, or
items not customarily provided by Landlord to office tenants, to the extent that
the same involve longer lead times, installation times, delays or difficulties
in obtaining building permits, requirements for any governmental approval,
permit or action beyond the issuance of normal building permits (as described in
Section VI), or other delays not typically encountered in connection with
Landlord's standard office improvements,
(e) the performance by Tenant or Tenant's contractors, agents or
employees of any work at or about the Premises or Property, or
(f) any act or omission of Tenant or Tenant's contractors, agents or
employees, or any breach by the Tenant of any provisions contained in this
Agreement or in the Lease, or any failure of Tenant to cooperate with Landlord
or otherwise act in good faith in order to cause the Work to be designed and
performed in a timely manner.
V. Landlord's Approval of Plans. Landlord shall either approve any
Plans or revisions submitted pursuant to this Agreement or disapprove the same
with suggestions for making the same acceptable within the time required under
Section 111. Landlord shall not unreasonably Withhold approval, if the Plans
provide for a customary office layout, with finishes and materials generally
conforming to building standard finishes and materials currently being used by
Landlord at the Property, are compatible with the Property's shell and core
construction, and if no modifications will be required for the Property
electrical, heating, preconditioning, ventilation, plumbing, fire protection,
life safety, or other systems or equipment, and will not require any structural
modifications to the Property, whether required by heavy loads or otherwise.
Landlord may request that Tenant approve Landlord's suggested changes in writing
(such approval not be unreasonably withheld), or Landlord may arrange directly
with Space Planner for revised Plans to be prepared incorporating such
suggestions (in which case, Tenant shall sign or initial the revised Plans
and/or Landlord's notice concerning the suggested changes, if requested by
Landlord). Landlord's approval of the Plans shall not be deemed a warranty as to
the adequacy or legality of the design, and Landlord hereby disclaims any
responsibility or liability for the same.
VI. Governmental Approval of Plans. Landlord shall apply for any normal
building permits required for the Work which are issued pursuant to a local
building code as a ministerial matter. If the Plans must be revised in order to
obtain such building permits, Landlord shall promptly notify Tenant. In such
case, Tenant shall promptly arrange for the Plans to be revised to satisfy the
building permit requirements and shall submit the revised Plans to Landlord for
approval as a Change Order under Section VII. Landlord shall have no obligation
to apply for any zoning, parking or sign code amendments, approvals, permits or
variances, or any other governmental approval, permit or action (except normal
building permits as described above). If any such other matters are required,
Tenant shall promptly seek to satisfy such requirements or revise the Plans to
eliminate such requirements. Delays in substantially completing the Work by the
Commencement Date as a result of requirements for building permits or other
governmental approvals, permits or actions shall affect the Commencement Date
and commencement of Rent to the extent provided in Section IV (except that any
delays in obtaining normal building permits as a result of errors or omissions
of Landlord's Space Planner in preparing the Plans shall postpone the
commencement of Rent to the extent that substantial completion of the Work is
delayed thereby beyond the Commencement Date, and Tenant shaft not be obligated
to bear the cost of Plan revisions to correct the same, notwithstanding anything
to the contrary contained in this Agreement).
VII. Changes After Plans Are Approved. If Tenant shall desire any
changes, alterations, or additions to the final Plans after they have been
approved by Landlord, Tenant shall submit a detailed written request or revised
Plans (the "Change Order") to Landlord for approval. If treasonable and
practicable and generally consistent with the Plans theretofor approved,
Landlord shall not unreasonably withhold approval, but all costs in connection
therewith, including without limitation construction costs, permit fees, and any
additional plans, drawings and engineering reports or other studies or tests, or
revisions of such existing items, shall be paid for by Tenant as a Tenant's Cost
under Section IX.
VIII. Unused Improvement Allowance. 11 all or any portion of any
Improvement Allowance shall not be used, Landlord shall be entitled to the
savings and Tenant shall receive no credit therefor.
IX. Tenant's Cost; Estimates (If Applicable). Any amounts that Tenant
is required to pay under this Agreement shall be referred to as "Tenant's Cost"
herein. Tenant's Cost shall be deemed additional "Rent" under the Lease.
Landlord may at any time reasonably estimate Tenant's Cost In advance, in which
case, Tenant shad deposit such estimated amount with Landlord within 10 days
after requested by Landlord. If such estimated amount exceeds the actual amount
of Tenant's Cost, Tenant shall receive a refund of the difference, and if the
actual amount shall exceed the estimated amount, Tenant shall pay the difference
to Landlord within 10 days after requested by Landlord.
2
<PAGE>
In connection with submitting any Plans to Landlord for approval,
Tenant may request that Landlord obtain a written estimate from Landlord's
contractor concerning Tenant's Cost. Landlord shall not have an obligation to
obtain such estimates. However, if Landlord elects to obtain such estimates, and
if any such estimates are unacceptable to Tenant, Tenant may eliminate or
substitute Items in order to reduce the estimated Tenant's Cost in connection
with preparing a revised version of the Plans.
In connection with submitting any cost estimates to Tenant under this
Section, Landlord may request Tenant's written approval of such estimates.
Tenant shall not unreasonably withhold such approval, and shall approve or
disapprove the same in writing within five (5) days after requested by Landlord.
If Tenant reasonably disapproves any such estimate, Tenant shall meet with the
Space Planner and eliminate or substitute items in order to reduce Tenant's Cost
as described in the proceeding paragraph.
Any cost estimates based on a Space Plan or so-called "pricing plan"
will be preliminary in nature, and may not be relied on by Tenant. However,
Landlord agrees that any written estimate of Tenant's Cost based on the approved
Working Drawings will not be exceeded by more than twenty percent (20%), except
to the extent that: (a) Tenant thereafter makes changes in the Working Drawings
or the Work, (b) overtime labor is required in order to substantially complete
the Work by the Work Completion Date, (c) concealed conditions are encountered
on the job site, (d) new legal requirements become effective following
preparation of the estimate, or (e) there are strikes, acts of god, shortages of
materials or labor, or other causes beyond Landlord's reasonable control.
X. Completion.
A. Landlord shall be deemed to have "substantially completed" the Work
for purposes hereof if Landlord has caused all of the Work to be completed
substantially except for so called "punchlist items," e.g. minor details of
construction or decoration or mechanical adjustments which do not substantially
interfere with Tenant's occupancy of the Premises, or Tenant's ability to
complete any improvements to the Premises to be made by Tenant, If there is any
dispute as to whether Landlord has substantially completed the Work, the good
faith decision of Landlord's Space Planner shall be final and binding on the
parties.
B. If Landlord notifies Tenant in writing that the Work is
substantially completed, and Tenant fails to object thereto in writing within
seven (7) days thereafter specifying in reasonable detail the items of work
needed to be performed in order for substantial completion, Tenant shall be
deemed conclusively to have agreed that the Work is substantially completed. for
purposes of commencing the Commencement Date and Rent under the Lease.
C. Substantial completion shall not prejudice Tenant's rights to
require full completion of tiny remaining items or Work. However, if Landlord
notifies Tenant in writing that the Work is fully completed, and Tenant fails to
object thereto in writing within fifteen (15) days thereafter specifying in
reasonable detail the items of work needed to be completed and the nature of
work needed to complete said items, Tenant shall be deemed conclusively to have
accepted the Work as fully completed (or such portions thereof as to which
Tenant has not so objected).
D. Landlord reserves the right to substitute comparable or better
materials and items for those shown in the Plans, so long as they do not
materially and adversely affect the appearance of the Premises.
XI. Work Performed by Tenant. Landlord, at Landlord's discretion, may
permit Tenant and Tenant's agents and contractors to enter the Premises prior to
completion of the Work in order to make the Premises ready for Tenant's use and
occupancy. If Landlord permits such entry prior to completion of the Work, then
such permission is conditioned upon Tenant and Tenant's agents, contractors,
workmen, mechanics, suppliers and invitees working in harmony and not
interfering with Landlord and Landlord's contractors In doing the Work or with
other tenants and occupants of the Building. If at any time such entry shall
cause or threaten to cause such disharmony or interference, Landlord shall have
the right to withdraw such permission upon twenty-four (24) hours oral or
written notice to Tenant. Tenant agrees that any such entry into the Premises
shall be deemed to be under all of the terms, covenants, conditions and
provisions of the Lease (including, without limitation, all insurance
requirements), except as to the covenant to pay Rent thereunder, and further
agrees that Landlord shall not be liable In any way for any injury, loss or
damage which may occur to any Items of work constructed by Tenant or to other
property of Tenant that may be placed in the Premises prior to completion of the
Work, the same being at Tenant's sole risk.
XII. Signage. Landlord shall cause signage of building standard
material and design to be placed on or adjacent to the door of the Premises and
Tenant shall pay the cost thereof to Landlord upon demand. The amount due from
Tenant therefor shall be deemed "Rent" under the Lease. Tenant shall promptly
advise Landlord in writing of the name or names Tenant wishes for said signage.
The content of all signage shall be subject to Landlord's prior approval.
XIII. Liability. The parties acknowledge that Landlord is not an
architect or engineer, and that the Work will be designed and performed by
independent architects, engineers and contractors. Accordingly, Landlord does
not guarantee or warrant that the Plans will be free from errors or omissions,
nor that the Work will be free from defects, and Landlord shall have no
liability therefor, provided that such architects, engineers and contractors are
licensed and reputable (except as provided in Section VI). In the event of such
errors. omissions, or defects, Landlord shall cooperate in any action Tenant
desires to bring against such parties.
XIV. Certain Definitions.
A. "Work" herein means the construction of the improvements shown on
the final approved Plans, and any demolition. preparation or other work required
in connection therewith, including without limitation, any work required to be
performed outside the Premises in order to obtain building permits for the work
to be performed within the Premises (if Landlord elects to perform such work
outside the Premises).
B. "Landlord's Space Planner" herein means the space planner (if any)
regularly used by Landlord and with whom Landlord has a written contractual
arrangement for space planning services at the Property.
C. "Finish Selections ' herein means the type and color of floor and
wall-coverings, wall paint and any other finishes.
3
<PAGE>
D. "Plans" herein means, collectively, any Space Plan, Working
Drawings, or other plans, drawings or specifications, am Finisl1 Selections (and
in the event of any inconsistency between any of the same, or revisions thereto,
the latest dated item approved by Landlord shall control). The Plans shall be
signed or Initialled by Tenant, if requested by Landlords and any Working
Drawings shall include at least three (3) mylar sepias (or such other quantity
as Landlord may reasonably require).
E. "Space Plan" herein means a preliminary floor plan, generally
showing demising walls corridor doors, interior partition walls and Interior
doors. The term "Space Plan" for purposes of this Agreement shall also refer to
any so-called "pricing plan", i.e. a more detailed Space Plan, drawn to scale,
showing: t1) any special walls; glass partitions or corridor doors, (2) any
restrooms, hitchers, computer rooms, file rooms and other special purpose rooms,
and any sinks or other plumbing facilities, or other special facilities or
equipment (3) communications system, indicating telephone and computer outlet
locations, and (4) any other details or features reasonably required in order to
obtain a preliminary cost estimate as described in Section IX, above, or
otherwise reasonably requested by Landlord or Landlord's Space Planner.
F. "Working Drawings" hercir1 means fully dimensioned architectural
construction drawings and specifications, and any required engineering drawings
(including mechanical, electrical, plumbing, air-conditioning, ventilation and
heating), and shall include any applicable items described above for the Space
Plan, and If applicable: (1) electrical outlet locations, circuits and
anticipated usage therefor, (2) reflected ceiling plan, including lighting,
switching, and any special ceiling specifications, (3) duct locations for
heating, ventilating and air-conditioning equipment, (4) details of all
millwork, (5) dimensions of all equipment and cabinets to be built in, (6)
furniture plan showing details of space occupancy, (7) keying schedule, (8)
lighting arrangement, (9) location of print machines, equipment in lunch rooms,
concentrated file and library loadings and any other equipment or systems (with
brand names wherever possible) which require special consideration relative to
air-conditioning, ventilation, electrical, plumbing, structural, fire
protection, life--fire-safety system, or mechanical systems, (10) special
heating, ventilating End air conditioning equipment and requirements, (11)
weight and location of heavy equipment, and anticipated loads for special usage
rooms, (12) demolition plan, (13) partition construction plan, (14) Finish
Selections, and any other details or features reasonably required in order to
obtain a more firm cost estimate as described in Section IX, above, or otherwise
reasonably requested by Landlord or Landlord's Space Planner:
XV. Taxes. Tenant shall pay prior to delinquency all taxes, charges or
other governmental impositions (including without limitation, any real estate
taxes or assessments, sales tax or Value added tax) assessed against or levied
upon Tenant's fixtures, furnishings, equipment and personal property located in
the Premises and the Work lo the Premises under this Agreement. Whenever
possible, Tenant shall cause all such items to be assessed and billed separately
from the property of Landlord. in the event any such items shall be assessed and
billed with the property of Landlord, Tenant shall pay its share of such taxes,
charges or other governmental impositions to Landlord within thirty (30) days
alter Landlord delivers a statement and a copy of the assessment or other
documentation showing the amount of such impositions applicable to Tenant.
XVI. Incorporation Into Lease: Default. THE PARTIES AGREE THAT THE
PROVISIONS OF THIS WORK AGREEMENT ARE HEREBY INCORPORATED BY THIS REFERENCE
INTO THE LEASE FULLY AS THOUGH SET FORTH THEREIN. In the event of any express
inconsistencies between the Lease and this Work Agreement, the latter shall
govern and control. Any default by a party hereunder shall constitute a default
by that party under the Lease and said party shall be subject to the remedies
and other provisions applicable thereto under the Lease.
LANDLORD: Schever International, Inc.
-------------------------------------
By:
By:
-------------------------------
TENANT: GLOBALNET FINANCIAL.COM, INC.
----------------------------------------
By: [ILLEGIBLE]
----------------------------------
4
<PAGE>
ARVIDA REALTY SALES, Ltd.
COMMERCIAL DIVISION
7900 GLADES ROAD
P.O. BOX 100
BOCA BATON, FLORIDA 33429
TELEPHONE: (407) 479-1225
LICENSED REAL ESTATE BROKERS
REAL ESTATE AGENCY DISCLOSURE
SELLER/LESSOR: SCHEVER INTERNATIONAL PLAZA INC.
------------------------------------------------------------------
BUYER(S)/LESSEE: GLOBALNET FINANCIAL.COM, INC.
----------------------------------------------------------------
PROPERTY: 7284 W. Palmetto Park Road, Boca Raton. FL 33433 -- Suite 210-S
-----------------------------------------------------------------------
SALESPERSON: Ingrid A. Fulmer/Andrea Raskin-Lapis
--------------------------------------------------------------------
ARVIDA REALTY SALES, LTD. and the Salesperson (together "ARSL") hereby disclose
to the Buyer/Lessee that ARSL is acting as the real estate broker,
broker-salesperson with respect to the purchase or lease (as applicable) of the
Property solely on behalf of Seller/Lessor as an (check one) XX agent __
employee __ independent contractor. Accordingly, ARSL undertakes no duty of
disclosure, representation or otherwise to Buyer/Lessee in this transaction.
This Disclosure is given in accordance with Rule 2IV-10, 033, Florida
Administrative Code.
The undersigned acknowledges receipt of
this Disclosure prior to the under-
signed's execution of the contract or
lease (as applicable) for the subject
transaction.
[ILLEGIBLE]
- -----------------------------------------
Buyer/Lessee
- -----------------------------------------
Buyer/Lessee
Date:
------------------------------------
EXHIBIT 10.14
LEASE AGREEMENT
ARROWHEAD FOUNTAIN CENTER
SEC BELL ROAD AND LOOP 101
PEORIA, ARIZONA
<PAGE>
LEASE AGREEMENT
ARROWHEAD FOUNTAIN CENTER
SEC BELL ROAD AND LOOP 101
PEORIA, ARIZONA
Table of Contents
ARTICLE 1: PREMISES 1
ARTICLE 2: TERM 3
ARTICLE 3: RENT 5
ARTICLE 4: ADDITIONAL RENT/EXPENSE STOP 6
ARTICLE 5: PARKING 8
ARTICLE 6: RENT TAX AND PERSONAL PROPERTY TAXES 9
ARTICLE 7: PAYMENT OF RENT/LATE CHARGES 9
ARTICLE 8: SECURITY DEPOSIT 9
ARTICLE 9: CONSTRUCTION OF THE PREMISES 10
ARTICLE 10: ALTERATIONS 10
ARTICLE 11: FIXTURES/PERSONAL PROPERTY 11
ARTICLE 12: LIENS 11
ARTICLE 13: USE OF PREMISES/RULES AND REGULATIONS 11
ARTICLE 14: RIGHTS RESERVED BY LANDLORD 13
ARTICLE 15: QUIET ENJOYMENT 14
ARTICLE 16: MAINTENANCE AND SANITATION 14
ARTICLE 17: UTILITIES AND JANITORIAL SERVICEs 15
ARTICLE 18: ENTRY AND I NSPECTION 16
ARTICLE 19: ACCEPTANCE OF THE PREMISES, LIABILITY INSURANCE AND
INDEMNIFICATION OF LANDLORD 16
<PAGE>
ARTICLE 20: CASUALTY INSURANCE 17
ARTICLE 21: DAMAGE AND DESTRUCTION OF PREMISES 19
ARTICLE 22: EMINENT DOMAIN 20
ARTICLE 23: ASSIGNMENT AND SUBLETTING 20
ARTICLE 24: SALE OF PREMISES OR ASSIGNMENT BY LANDLORD 21
ARTICLE 25: SUBORDINATION/ATTORNMENT/MODIFICATION/ASSIGNMENT 21
ARTICLE 26: RIGHT TO CURE 22
ARTICLE 27: ESTOPPEL CERTIFICATES 22
ARTICLE 28: DEFAULT AND CONDITIONAL LIMITATIONS 23
ARTICLE 29: TENANT'S RECOURSE 25
ARTICLE 30: FORCE MAJEURE 26
ARTICLE 31: SURRENDER OF PREMISES 26
ARTICLE 32: HOLDING OVER 26
ARTICLE 33: GENERAL PROVISIONS 26
ARTICLE 34: NOTICES 28
ARTICLE 35: BROKERAGE COMMISSIONS 28
ii
<PAGE>
This LEASE AGREEMENT ("Lease") is made and entered into as of May 10,
1999, by and between:
ARROWHEAD FOUNTAINS PARTNERS LLC, c/o Koll Development Company, 2777
East Camelback Road, Suite 375, Phoenix, Arizona 85016, hereinafter
referred to as "Landlord", and MicroCap1000.com, Ltd., a Delaware
corporation, 7280 Palmetto Park Road, Suite 202, Boca Raton, Florida
33433, hereinafter referred to as "Tenant",
WITNESSETH: In consideration of the rents, covenants and agreements given and
exchanged herein, Landlord leases to Tenant, and Tenant leases and accepts from
Landlord, the office space described in Section 1.1, hereinafter referred to as
the "Premises".
All covenants, agreements, terms and conditions between Landlord and Tenant with
respect to the Premises are contained in this Lease and the following two (2)
exhibits attached hereto and incorporated into the Lease by this reference:
Exhibit A - Floor plan of the Office Building, known as Arrowhead Fountain
Office Building, Peoria, Arizona, referred to herein as the "Building".
Exhibit B- Building Standard Work Letter.
ARTICLE 1: PREMISES
1.1 The Premises are located on the second floor of the Building as shown on
Exhibit A in the project known as Arrowhead Fountain Office Building (the
"Project"). The Rentable Area of the Premises has been estimated to be One
Thousand Six Hundred Sixty Nine (1,669) square feet based on a Load Factor (as
defined in Section 1.2(c)) of Twelve and Four Tenths percent (12.4%), and a
Usable Area of One Thousand Four Hundred Eighty Five (1,485) square feet;
provided, however, if the Usable Area or the Load Factor should be greater or
less, as a result of design or construction of the Building, the Premises, other
premises or Interior Common Facilities (as defined in Section 1.2(a), the
Rentable Area of the Premises set forth in this Section 1.1 shall be adjusted
accordingly.
1.2 As used in this Lease:
(a) Rentable Area means:
(i) With respect to the Building, the sum of the total area of
all floors in the Building computed by measuring to the outside finished surface
of the dominant portion of permanent outside building walls. Rentable Area
includes Interior Common Facilities but excludes major vertical penetrations
(for example, stairwells, elevator shafts and vertical ducts) and their
enclosing walls, underground parking areas and exterior balconies.
(ii) With respect to the Premises, the Usable Area of the
Premises multiplied by the sum of a) one hundred percent (100%) and b) the Load
Factor.
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No deductions from Rentable Area shall be made for columns or projections
necessary to the Building.
(b) Usable Area means:
(i) With respect to the Building, the aggregate of the area of
all of the premises or space of the Building occupiabie by tenants of the
Building whether or not actually occupied with each such area of the premises or
space being computed by the same method used for computing the Usable Area of
the Premises.
(ii) With respect to the Premises, the Usable Area means the area
of the Premises (occupiable by Tenant whether or not actually occupied) computed
by measuring to the finished surface of the office side of corridor walls, to
the midpoint of demising walls and to the outside surface of the dominant
portion of permanent outside walls (other than corridor walls). No deductions
from Usable Area shall be made for columns or projections within the Premises.
(c) Load Factor means a percentage equal to the Rentable Area of the
Building divided by the aggregate Usable Area of all premises and occupiable
space in the Building, less one hundred (100).
(d) Interior Common Facilities means lobbies, corridors, hallways,
elevator foyers, restrooms, mail rooms, mechanical and electrical rooms, janitor
closets and other similar facilities used by tenants or for the benefit of
tenants on a nonexclusive basis. interior Common Facilities excludes major
vertical penetrations and their enclosing walls, underground parking areas and
exterior balconies.
(e) The ficor area of mechanical penthouses shall not be used in the
calculation of Rentable or Usable Area under this Lease.
1.3 Landlord reserves the right to change the Building, the number of floors,
the arrangement and location of the Interior Common Facilities in the Building
and the shape, location, levels, arrangement and dimensions of the Common Areas
as defined in Section 4.1 (d), including space reservations in the Automobile
Parking Area (as defined herein), and to construct other buildings or
improvements within the Project. Landlord further reserves the right to change
the shape, dimensions and size of the Premises, provided, however, that no
material changes shall be made to the Premises without the prior written
approval of the Tenant. If the Tenant does not approve of any such material
change, Tenant's sole remedy shall be to cancel this Lease by written notice
thereof within ten (10) days after receipt of Landlord's notification of such
proposed change, and to surrender Tenant's right to possession of the Premises
to Landlord within thirty (30) days after Tenant's written notice of election,
pursuant to Article 31 of this Lease. Upon such surrender, any security deposit
and prepaid rent, if any, paid by Tenant shall be refunded to the Tenant
(provided Tenant is not in default under this Lease), and the Landlord shall
thereupon be released from any further obligations and liabilities to Tenant
under this Lease. Landlord further reserves the right to relocate the Premises
to another location of substantially equivalent size and location in the
Building provided such relocation does not increase the Minimum Monthly Rent or
other costs payable by Tenant under this Lease. If Landlord elects to move
Tenant, Landlord shall build out or renovate the new location with leasehold
improvements at the new location substantially equal to leasehold improvements
constructed or to be constructed on the original Premises
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pursuant to Exhibit B hereof ("Leasehold Improvements") and Landlord will pay
Tenant's reasonable costs of moving to the new location, including incidental
costs such as reprinting stationery and new signage.
1.4 Landlord reserves and excepts from the Premises the right of access in,
over, under and upon the Premises as may be reasonably necessary or advisable
for maintenance, repair or construction of the Building or other portions of the
Building, including the right to install, maintain, use and replace pipes, duct
work, conduits, utility lines and wires through ceiling plenum areas, column
space, partitions and in or beneath floor slabs.
ARTICLE 2: TERM
2.1 The term of this Lease ("Lease Term") shall be for a period of Thirty Six
(36) months, plus the remainder of any partial calendar month in which the Lease
Term commences.
2.2 Subject to any adjustments under Article V of Exhibit B. the Lease Term
shall commence on that date upon which Landlord notifies Tenant (or the date
Tenant has actual notice) that Landlord's construction obligations under this
Lease have been substantially completed and that the Premises are ready for
occupancy, with or without actual entry by Tenant (the "Commencement Date").
2.3 Within thirty (30) days after Tenant takes possession of the Premises, both
parties agree to execute a written memorandum setting forth the Commencement
Date, the Minimum Monthly Rent, the date on which this Lease expires
("Expiration Date"), and the stipulated Rentable Area as adjusted under Section
1.2. By executing such memorandum, Tenant accepts the terms therein as binding
and conclusive. If Tenant fails to execute such memorandum within such thirty
(30) day period, then Tenant hereby appoints Landlord as its attorney-in-fact to
execute the memorandum on Tenant's behalf, and the terms therein shall be
binding and conclusive.
2.4 Notwithstanding the above definition of Lease Term, which is used to define
the period following construction of improvements during which Tenant shall pay
Rent (as hereinafter defined), this Lease shall be deemed a lease of real
property effective upon the date, of this Lease, regardless of the date of entry
onto the Premises by Tenant.
2.5 If for any reason Landlord cannot deliver possession of the Premises to
Tenant on the Commencement Date, Landlord shall not be subject to any liability
therefor, rotor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder or extend the Lease Term hereof, but in such
case Tenant shall not be obligated to pay Rent Until possession of the Premises
is tendered to Tenant; provided, however, that if Landlord shall not have
delivered possession of the Premises within thirty (30) days from the
Commencement Date, Tenant may, at Tenant's option, by notice in writing to
Landlord within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder. If Tenant occupies
the Premises prior to the Commencement Date, such occupancy shall be subject to
all provisions hereof, such occupancy shall not change the Expiration Date, and
Tenant shall pay Rent for such period as provided herein. Notwithstanding the
foregoing, Tenant may not cancel this Lease if failure to deliver possession
within thirty (30) days from the Commencement Date is caused
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by the Tenant's delays or failure to cooperate with the contractor, space
planner, leasing agent or Landlord, or caused by any reason outside of
Landlord's control.
ARTICLE 3: RENT
3.1 Tenant covenants and agrees to pay to Landlord, without deduction, setoff,
prior notice or demand, for the use and occupancy of the Premises the "Minimum
Monthly Rent" set forth below, the Additional Rent set forth in Article 4
hereof, all sums due under Articles 5, 6 and 17 hereof and all other amounts due
the Landlord under this Lease (collectively the Rent). The Minimum Monthly Rent
shall be payable in advance on the first day of each and every calendar month
during the Lease Term. If the Commencement Date occurs on a date other than the
first day of a calendar month, the Minimum Monthly Rent for that month shall be
prorated on a per diem basis and shall be paid to Landlord on the Commencement
Date.
(a) For each month during a time period set forth in column I below,
the Minimum Monthly Rent shall be an amount equal to the mathematical product
obtained by multiplying one twelfth (1/12) of the amount set forth in column 11
below opposite such time period by the Rentable Area of the Premises.
I II III
Time Period Annual amount of Minimum Monthly amount of
Monthly Rent per square foot Minimum Monthly Rent
of Rentable Area of the based on 1,669 square
Premises feet of Rentable Area of
Commencement Date $22.75 $3,164.14
through the 36th full
month of the Lease Term
ARTICLE 4: ADDITIONAL RENT/EXPENSE STOP
4.1 As used in this Lease:
(a) The "Expense Stops shall be Six and 25/100 Dollars ($6.25) per
square foot of Rentable Area.
(b) "Direct Costs" means and includes:
(1) Those expenses paid or incurred by Landlord (whether directly
or through independent contractors) for managing, maintaining, operating and
repairing the Project, Building, the Common Areas and the personal property used
in conjunction therewith, and the land upon which the Project, Building and
Common Areas are located, including, but not limited to, the cost of utilities,
supplies, insurance, amortization (over the reasonable life of the item) of the
cost of installation of capital investment items which are installed primarily
for the purpose of reducing Direct Costs or which may be required by any
governmental authority; janitorial services; compensation (including employment
taxes, similar government
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charges and fringe benefits) of all persons who perform duties in connection
with the operation, maintenance and repair of the Project, Building, Common
Areas and the land upon which the Project, Building and Common Areas are
situated; management fees, legal and accounting expenses; security expenses,
landscaping services, window cleaning, trash removal, elevator and escalator
maintenance, equipment and tools used in the maintenance and operation of the
Building, the rental value of any office space in the Building used as an office
for the property manager of the Project, Building and the Common Areas, and any
other expense or charges whether or not hereinabove described which, in
accordance with consistently applied generally accepted accounting and
management principles would be considered an expense of managing, maintaining,
operating or repairing the Project, Building and Common Areas and the land upon
which they are located; and
(2) All assessments of any kind, including but not limited to,
assessments pursuant to any agreements affecting the Building or the Project,
impositions, taxes, fees, including license fees, and other governmental or
quasi-governmental levies and charges of any and every kind, ordinary or
extraordinary, foreseen or unforeseen, assessed or imposed upon or with respect
to the ownership of, or other taxable interest attributable to, the Project,
Building, Common Areas and land upon which they are located and any
improvements, fixtures, equipment and other property of Landlord, real or
personal, located in or used in connection with the operation of the Project,
Building, the Common Areas and the land upon which they are located and any tax
which shall be imposed on any interest therein or excise in substitution for
taxes commonly known as real estate taxes.
(c) Direct Costs shall not include:
(1) Income, estate and inheritance taxes levied against Landlord.
(2) Taxes paid by any tenant as described in Section 6.2 hereof.
(3) Depreciation, capital investment items (except as provided in
Section 4.1 (b)(1)) and debt service.
(4) Costs of leasing space in the Building, including leasing
commissions and leasehold improvement costs.
(5) The cost of utilities separately metered to any tenant or
resulting from Excess Consumption under Article 17 and billed directly to that
tenant.
(6) The cost of special services provided to any tenant and
billed directly to that tenant.
(7) Repairs and maintenance paid by proceeds of insurance or from
tenants.
(d) "Common Areas" means all areas both interior and exterior provided
by Landlord for the common or joint use and benefit of the occupants of the
Project, and the Building, their employees, agents, customers, and other
invitees including but not limited to the Automobile Parking Area (whether
spaces are assigned, reserved or not) as defined in Article 5 of this Lease,
public restroom facilities, landscaped areas, plaza decks, driveways, walkways,
exterior lighting, ramps, drainage facilities, traffic controls, sidewalks,
building entrances, lobbies and hallways, mechanical rooms, elevator shafts and
stairways accessways, loading docks,
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ramps, drives, platforms, common pipes, conduits, wires and appurtenant
equipment serving the Building.
(e) "Operating Year" means the year beginning January 1 and ending
December 31 . The first Operating Year shall be the Operating Year in which the
Commencement Date occurs.
(f) "Tenant's Pro Rata Share" means a fraction, the numerator of which
is the Rentable Area of the Premises and the denominator of which is the
Rentable Area of the Building.
(g) "Excess Costs" means Direct Costs in excess of the Expense Stop.
4.2 Commencing on the Commencement Date and thereafter with respect to each full
or partial Operating Year during the Lease Term, Tenant shall pay Landlord an
amount equal to Tenant's Pro Rata Share of Excess Costs. As soon as possible
after the Commencement Date, Landlord shall provide Tenant with a written
statement setting forth the Landlord's estimate of Direct Costs for the
remainder of the current Operating Year and for the second Operating Year.
Within one hundred twenty (120) days after the end of each Operating Year after
the second Operating Year, Landlord shall provide Tenant with a written
statement of Landlord's estimate of Direct Costs for the next succeeding
Operating Year. If Landlord's estimate of Direct Costs for any Operating Year
(including any partial Operating Year) exceeds the Expense Stop, Tenant agrees
to pay Landlord, in addition to and concurrently with each payment of the
Minimum Monthly Rent for such Operating Year (or with respect to the remainder
of the Operating Year, concurrently with each payment of Minimum Monthly Rent),
an amount equal to one-twelfth (1/12th) of Tenant's Pro Rata Share of Excess
Costs. Notwithstanding the foregoing, during any Operating Year Landlord may
provide Tenant with a revised estimate of the Excess Costs for the Operating
Year. If the revised estimate of Excess Costs exceeds Landlord's original
estimate of Excess Costs for that Operating Year, Tenant agrees to pay Landlord,
for the remainder of the Operating Year, in addition to and concurrently with
the Minimum Monthly Rent and in addition to the amounts payable under the
preceding sentence, Tenant's Pro Rata Share of the excess divided by the number
of remaining months in the Operating Year.
4.3 Within approximately one hundred twenty (120) days after the end of each
Operating Year after the first Operating Year, Landlord shall provide Tenant
with a statement showing the actual Direct Costs for the preceding Operating
Year and any adjustments to be made as a result thereof. If Tenant's Pro Rata
Share of the actual Excess Costs paid or incurred by Landlord during such
Operating Year exceeds the estimates of Excess Costs paid by Tenant during the
same Operating Year, Tenant shall pay Landlord the excess at the time the next
succeeding payment of Minimum Monthly Rent is payable. If Tenant's estimated
payments of Excess Costs for the Operating Year have exceeded Tenant's Pro Rata
Share of Excess Costs during such Operating Year, Landlord shall apply the
excess against the next installments of Tenant's Pro Rata Share of Excess Costs.
4.4 The determination and statement of Direct Costs shall be made by Landlord
and a copy of such statements shall be made available to Tenant upon demand.
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4.5 Notwithstanding anything in this Lease to the contrary, no failure by
Landlord to give notices or statements of Direct Costs within the time specified
shall waive Landlord's right to require payment by Tenant of Direct Costs in
excess of the Expense Stop.
ARTICLE 5: PARKING
5.1 Landlord agrees to operate and maintain or cause to be maintained and
operated an "Automobile Parking Area" during the Lease Term for the benefit and
use of tenants, customers, patrons and employees of tenants of the Building. The
cost of maintenance, operation, repair and management of the Automobile Parking
Area whether paid by or allocated to Landlord shall be included in the Direct
Costs set forth in Article 4 above. Nothing contained herein shall be deemed to
create liability upon Landlord for any damage to motor vehicles of tenants,
customers, patrons or employees or from loss of property from within such motor
vehicles.
5.2 Tenant covenants and agrees at all times during the Lease Term to lease one
(1) covered reserved parking space in the Automobile Parking Area. Subject to
availability, Tenant may from time to time convert unreserved spaces to reserved
spaces. Landlord shall have the right to reserve and assign parking spaces for
other tenants of the Building or to designate parking rights on an unreserved,
non-exclusive basis. Tenant covenants and agrees to pay for each space in
addition to and concurrently with the Minimum Monthly Rent the parking fees
being charged by Landlord, as adjusted by Landlord from time to time and in
Landlord's sole discretion. During the first year of the Lease Term following
the Rent Commencement Date, the parking space fees shall be Thirty Five and
No/100 Dollars ($35.00) per space per month for covered reserved spaces and Zero
and No/100 Dollars ($0.00) per space per month for unreserved parking spaces.
5.3 Landlord shall have the right to establish and from time to time change,
alter and amend, and to enforce against all users of the Automobile Parking
Area, reasonable rules and regulations (including the exclusion of parking from
designated areas and the assignment of spaces to tenants) as may be deemed
necessary and advisable for the proper and efficient operation and maintenance
of said Automobile Parking Area including, without limitation, the hours during
which the Automobile Parking Area shall be open for use.
5.4 Landlord may establish such reasonable charges as Landlord deems appropriate
for the use of the Automobile Parking Area by persons who have not leased space
in the Building. Landlord may establish a system whereby these persons may
present validations issued by tenants in lieu of payment of the parking charges.
If Tenant wishes to provide Tenant's customers, patrons and invitees with
validations as part of the validation system, Tenant agrees to pay Landlord, as
additional rent, those charges established by Landlord for use of the validation
system and to comply with such system and all rules and regulations established
by Landlord for Tenant's use and the use of Tenant's customers, patrons and
invitees of the validation.
ARTICLE 6: RENT TAX AND PERSONAL PROPERTY TAXES
6.1 Tenant covenants and agrees to pay to Landlord, in addition to, and
simultaneously with, any other amounts payable to Landlord under this Lease, a
sum equal to the aggregate
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of any municipal, county, state or federal excise, sales, use or transaction
privilege taxes now or hereafter legally levied or imposed against or on account
of any or all amounts payable under this Lease by Tenant or the receipts thereof
by Landlord (except taxes which are commonly referred to as income, estate, or
inheritance taxes).
6.2 Tenant shall pay, prior to delinquency, all taxes and assessments levied
upon fixtures, furnishings, equipment and personal property placed on the
Premises by Tenant. If any or all of Tenant's fixtures, furnishings, equipment
or personal property shall be assessed and taxed with the Landlord's property or
if the assessed value of the Premises is increased by the inclusion therein of a
value placed upon such personal property of the Tenant, Tenant shall reimburse
Landlord for such assessment and taxes within ten (10) days after delivery to
Tenant by Landlord of a statement in writing setting forth the amount of such
assessment and taxes applicable to the Tenant's property.
ARTICLE 7: PAYMENT OF RENT/LATE CHARGES
7.1 Tenant shall pay the Rent and all other charges herein specified to Landlord
at the address set forth on page one of this Lease, or to another person or at
another address as Landlord shall from time to time designate in writing.
7.2 Any payment of Rent, due and payable from Tenant to Landlord under the terms
of this Lease not received within five (5) days after the due date (the
"Delinquency Date") thereof shall be subject to a one-time late charge of five
percent (5%) of the delinquent amount.
7.3 Any payment of Rent, due and payable from Tenant to Landlord not received by
the Delinquency Date shall bear interest from the date due at the rate equal to
the greater of: (a) eighteen percent (18%) per annum or, (b) a variable per
annum rate equal to the Prime Rate (base rate on corporate loans at large U.S.
money center commercial banks) announced daily in the Wall Street Journal plus
four percent (4%).
ARTICLE 8: SECURITY DEPOSIT
8.1 Tenant shall, upon delivery of this Lease, deposit with Landlord the sum of
Three Thousand, One Hundred Sixty-Four and 14/100 ($3,164.14)'as security for
the full and faithful performance of each and every term, provision, covenant
and condition of this Lease.
8.2 If Tenant defaults in any of the terms, provisions, covenants and conditions
of this Lease, Landlord may, but need not, use, apply, or retain the whole or
any part of this security deposit not as liquidated damages but to cure the
default or to compensate the Landlord for any and all damages sustained by
Landlord and a result of said default or for any other sum which Landlord may
spend or be required to spend by reason of Tenant's default. If any portion of
said security deposit is so used or applied, Tenant shall, within five (5) days
after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the security deposit to its original amount. Should Tenant
fully and faithfully comply with all of the terms, provisions, covenants, and
conditions of this Lease, the security deposit or any balance thereof shall be
returned to Tenant or, at the option of Landlord, to the 'ast assignee of
Tenant's interest in this Lease within ten (10) days after the Expiration Date
and surrender of the Premises by Tenant. Landlord's rights with reference to the
security deposit shall be
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in addition to and shall not preclude any other rights, remedies, or recoveries
available to Landlord by law or under the terms of this Lease.
8.3 Tenant agrees that in case the Landlord shall sell or exchange Landlord's
interest in the Premises during the Lease Term, Landlord may pay the deposit to
any subsequent owner and in that event, Tenant hereby releases Landlord from all
liability for the return of such deposit. Landlord shall not be required to
maintain such funds in a segregated account, but may deposit such funds in any
general account of Landlord, provided that such commingling shall in no way
affect Landlord's obligations to Tenant regarding such funds under this
paragraph. Tenant shall not be entitled to any interest on the security deposit.
ARTICLE 9: CONSTRUCTION OF THE PREMISES
9.1 Landlord shall construct Tenant's Leasehold Improvements, as defined in
Exhibit B. in accordance with plans and specifications prepared by Landlord's
Architect. The respective obligations, covenants and agreements of Landlord and
Tenant to construct the Premises including the division of responsibilities and
procedures for design and construction and for payment of costs and expenses are
more specifically set forth in Exhibit B.
9.2 Prior to the Commencement Date, any work performed by Tenant or its agents
("Tenant's Work"), or any fixtures or personal property moved onto the Premises,
shall be at Tenant's own risk and neither Landlord nor Landlord's agents or
contractors shall be responsible to Tenant for damage or destruction of Tenant's
Work or Tenant's property including damage or destruction occasioned by
Landlord's own negligence. Tenant agrees to indemnify, defend and hold Landlord
harmless against any and all claims or arising from Tenant's use of the
Premises, or the conduct of its business or from any activity work done,
permitted or suffered by the Tenant on or about the Premises, the Building, the
Project or the Commons Areas. This indemnification shall survive the termination
of this Lease.
ARTICLE 10: ALTERATIONS
After completion of Landlord's construction obligations under Article
9, Tenant shall not make, or cause to be made any further additions to, or
alterations of the Premises, or any part thereof, without the prior written
consent of Landlord. As a condition to Landlord giving such consent, Tenant must
provide Landlord with detailed plans and specifications of the proposed
improvements prior to commencement of any such work. As a further condition to
giving such consent, Landlord may require Tenant to provide Landlord, at
Tenant's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half (1 'Liz) times the estimated cost (as determined by Landlord)
of such improvements to insure Landlord against any liability for mechanics' end
materialmen's ilens and to insure completion of the work.
ARTICLE 11: FIXTURES/PERSONAL PROPERTY
All trade fixtures, signs, merchandise or other personal property not
permanently affixed to the Premises shall remain the property of Tenant and may
be removed by Tenant not later than the Expiration Date, provided that Tenant is
not then in default under this Lease.
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Tenant shall promptly repair, at its own expense, any damages occasioned by such
removal. All millwork, built-in appliances, wall covering, floor covering,
window coverings, electrical and plumbing fixtures and conduits, lighting and
other special fixtures that may be placed upon, installed in or attached to the
Premises by Tenant shall, at the Expiration Date or earlier termination of this
Lease for any reason, be the property of Landlord and remain upon and be
surrendered with the Premises, without disturbance, molestation or injury unless
designated by Landlord to be removed.
ARTICLE 12: LIENS
Tenant shall keep the Premises, the Building, the Project and the
property on which they are situated free from any liens arising out of work
performed, material furnished or obligations incurred due to Tenant's actions or
the failure of Tenant to comply with any law excluding, however, security
interests in Tenant's personal property. If any such lien does attach against
the Premises, the Building or the Project and Tenant does not discharge the lien
or post bond (which under law would prevent foreclosure or execution under the
lien) within ten (10) days after demand by Landlord, Landlord may, without
waiving its rights and remedies based upon such breach of Tenant and without
releasing Tenant of any of its obligations hereunder, take any action necessary
to discharge the lien. Tenant shall pay Landlord upon demand for or on account
of any cost or expense (including reasonable attorney's fees) incurred by
Landlord by reason of attachment or discharge of such lien and shall indemnify
Landlord against any liability arising out of attachment of such lien.
ARTICLE 13: USE OF PREMISES/RULES AND REGULATIONS
13.1 Tenant shall use the Premises solely for general office use and shall not
use or permit the Premises to be used for any other purpose or purposes except
with the prior written consent of Landlord.
13.2 Tenant shall comply with all statutes, ordinances, rules, regulations and
orders of all municipal, state and federal authorities now in force or which may
hereafter be in force pertaining to the use of the Premises, including such laws
governing the storage or disposal of hazardous wastes and protection of the
environment. Tenant shall not use or permit the Premises to be used in whole or
in part for any purpose or use in violation of any of the laws, ordinances,
regulations or rules of any public authority at any time applicable thereto.
13.3 Tenant shall not:
(a) commit, or suffer to be committed, any waste upon the Premises;
(b) engage in any activity which will increase the existing premium
rate of insurance on the Premises or cause a cancellation of any insurance
policy or permit to remain in or about the Premises any article that may be
prohibited by standard form fire insurance policies:
(c) use the Premises for or carry on or permit any offensive, unlawful,
noisy, or dangerous trade, business, manufacture or occupation, or any nuisance
or anything against public policy, or interfere with the business of or disturb
the quiet enjoyment of any other tenant in the Building
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(d) use the exterior of the roof or walls of the Premises or Building
for any purpose.
(e) without Landlord's prior written consent, cause or permit any
Hazardous Material to be generated, produced, brought upon, used, stored,
treated or disposed of in or about the Premises or the Building, whether by
Tenant, its invitees, agents, employees, contractors or sublessees. "Hazardous
Material" means any flammable items, explosives, radioactive materials,
hazardous or toxic substances, material or waste or related materials, including
any substances defined as or included in the definition of "hazardous
substances", "hazardous wastes", "infectious wastes", hazardous materials" or
"toxic substances" now or subsequently regulated under any applicable federal,
state or local laws or regulations including, without limitation, oil,
petroleum-based products, paints, solvents, lead, cyanide, DOT, printing inks,
acids, pesticides, ammonia compounds, and other chemical products, asbestos,
PCBs and similar compounds, and including any different products and materials
which are subsequently found to have adverse effects on the environment or the
health and safety of persons. Landlord shall be entitled to take into account
such factors or facts as Landlord may in its good faith business judgment
determine to be relevant in determining whether to grant, condition or withhold
consent to Tenant's proposed activity with respect to Hazardous Material. Tenant
shall indemnify, defend and hold Landlord harmless from any and all actions
(including without limitation, remedial or enforcement actions of any kind,
administrative or judicial proceedings, and orders or judgments arising out of
or resulting therefrom, costs, claims, damages (including, without limitation,
punitive damages), expenses (including, without limitation, attorneys',
consultants' and experts' fees, court costs and amounts paid in settlement of
any claims or actions), fines, forfeitures or other civil, administrative or
criminal penalties, injunctive or other relief (whether or not based upon
personal injury, property damage, contamination of, or adverse effects upon, the
environment, water tables or natural resources), liabilities or losses (economic
or other) arising from the storage, use, treatment or disposition of permitted
Hazardous Material by Tenant, its agents, employees, contractors, sublessees or
invitees. This Indemnification shall survive the termination of the Lease. In no
event shall Landlord be required to consent to the installation or use of any
storage tanks in, on or under the Premises or the Building. With respect to the
generation, production, use, storage, treatment or disposal of permitted
Hazardous Material in or about the Premises by Tenant, its agents, employees,
contractors, sublessees or invitees, then, in addition to any other requirements
or conditions that Landlord may impose in connection with such consent (1)
Tenant promptly shall deliver to Landlord copies of all permits, approvals,
filings, reports and other information reasonably required by Landlord
reflecting the legal and proper generation production, use, storage, treatment
or disposal of all permitted Hazardous Materials generated, used, stored,
treated or removed from the Premises and, upon Landlord's request, copies of all
hazardous waste manifests relating thereto, and (2) upon expiration or earlier
termination of this Lease, Tenant shall cause all Hazardous Materials arising
out of or related to the use or occupancy of the Premises by Tenant or its
agents, affiliates, customers, employees, business associates or assigns to be
removed from the Premises and the Building and transported for use, storage or
disposal in accordance with all applicable laws, regulations and ordinances and
Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord
of the same.
13.4 Tenant shall faithfully observe and comply with Landlord's rules and
regulations, all parking regulations established in accordance with Article 5,
and all modifications of and additions thereto from time to time put into effect
by Landlord. Landlord shall not be responsible to Tenant for the non-performance
of any other tenant or occupant of the Building.
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ARTICLE 14: RIGHTS RESERVED BY LANDLORD
Landlord shall have the following rights, exercisable without notice and
without liability to Tenant for damage or injury to property, persons or
business and without effecting an eviction, constructive or actual, or
disturbance of Tenant's use or possession of the Premises and without giving
rise to any claim for setoff or abatement of rent:
(a) To change the Buiiding's name or street address.
(b) To install, affix and maintain any and all signs on the exterior
and interior of the Building.
(c) To designate and approve, prior to installation, all types of
window shades, blinds, drapes, awnings, window ventilators and other similar
equipment, and to control all internal lighting that may be visible from the
exterior of the Building.
(d) To control all sources from which Tenant may obtain ice, drinking
water, towels, toilet supplies, shoe shining, catering, food and beverages
(including vending machines), or the like or other services on the Premises and
in general, to reserve to Landlord the right to control any business and any
services in or to the Building and its tenants.
(e) To retain at all times, and to use in appropriate instances, keys
to all doors within and into the Premises. No locks shall be changed or added
without the prior written consent of Landlord.
(f) To decorate and to make repairs, alterations, additions, changes or
improvements, whether structural or otherwise, in and about the Building, or any
part thereof, and for such purposes to enter upon the Premises and during the
continuance of any of said work to temporarily close doors, entryways, public
space and corridors in the Building, to interrupt or temporarily suspend
Building services and facilities and to change the arrangement and location of
entrances or passageways, doors and doorways, corridors, elevators, stairs,
toilets, or other Interior Common Facilities, all without abatement of rent or
affecting any of Tenant's obligations under this Lease, so long as the Premises
are reasonably accessible.
(g) To have and retain a paramount title to the Premises free and clear
of any act of Tenant.
(h) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building, provided such exclusive right shall
not operate to exclude Tenant from the use expressly permitted herein.
(i) To approve the weight, size and location of safes and other heavy
equipment and articles in and about the Premises and the Building, and to
require all such items and furniture and similar items to be moved into and out
of the Building and Premises only at such times and in such manner as Landlord
shall direct in writing. Movement of Tenant's property into or out of the
Building and within the Building is entirely at the risk and responsibility of
Tenant and shall be conducted pursuant to Building rules and regulations.
(j) To have access for tenants of the Building to any mail chutes
located on the Premises according to rules of the United States Postal Service.
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(k) To take all such reasonable measures and use best efforts as
Landlord may deem advisable for the security of the Building and its occupants,
including without limitation the evacuation of the Building for cause, suspected
cause, or for drill purposes, the temporary denial of access to the Building,
and the restriction of access to the Building at times other than normal
business hours. Landlord assumes no liability for criminal acts.
Reservation of the rights set forth in this Article shall impose no obligation
or duty upon Landlord to exercise said rights.
ARTICLE 15: QUIET ENJOYMENT
Landlord covenants that upon Tenant's paying the Rent and keeping and
performing all of the terms, covenants~and conditions of this Lease, Landlord
will do nothing that will prevent Tenant from peaceably and quietly enjoying,
holding and occupying the Premises during the Lease Term. This covenant shall
not extend to any disturbance, act or condition brought about by any other
tenant in the Building and shall be subject to the rights of Landlord set forth
in this Lease. Tenant agrees this Lease shall be subordinate to any Easements,
Covenants, Conditions and Restrictions or any amendments thereto hereafter
imposed upon the property upon which the Building is located. This subordination
provision shall be self- operative, however, Tenant agrees to execute and
deliver such further instruments necessary to subordinate this Lease to the lien
of Easements, Covenants, Conditions and Restrictions or amendments hereafter
imposed by Landlord.
ARTICLE 16: MAINTENANCE AND SANITATION
16.1 Subject to Articles 21 and 22 and Tenant's obligations under Sections 16.2
and 16.3, Landlord covenants to maintain the Building in good and tenantable
condition and repair. Tenant hereby waives all rights to make repairs at the
expense of Landlord. Landlord's maintenance and repair costs under this Section
16.1 will be deemed a Direct Cost. The foregoing notwithstanding, Landlord shall
not be liable to Tenant for failure to make repairs as required herein unless
Tenant has previously notified Landlord, in writing, of the need for such
repairs and Landlord has failed to commence said repairs within fifteen (15)
days following receipt of Tenant's written notification. Landlord shall have no
obligation to alter, remodel, improve, renovate, decorate or paint the Premises
except as set forth in Exhibit B.
16.2 If Landlord would be required to perform any maintenance or make any
repairs under Section 16.1 because of: (a) modifications to the roof, walls,
foundation and floor of the Building from that set forth in Landlord's plans and
specifications which are required by Tenant's design for improvements,
alterations and additions; (b) installation of Tenant's improvements, fixtures
or equipment; (c) Tenant's or Tenant's employees' or customers' negligence or
wrongful act; or, (d) Tenant's failure to perform any agreements contained in
this Lease, Landlord may perform the maintenance or repairs and Tenant shall pay
Landlord the cost thereof plus a reasonable amount for Landlord's overhead upon
receipt of a statement from Landlord. Landlord's costs under this Section shall
not be a Direct Cost for purposes of Article 4.
16.3 Tenant covenants and agrees to:
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(a) pay Landlord, Landlord's cost of maintenance and repair, including
additional janitorial costs, of any Non-Building Standard Improvements and
Non-Building Standard materials and finishes, as defined in Exhibit B. and
special leasehold improvements in excess of or in addition to Building Standard,
as defined in Exhibit B.
(b) pay Landlord, Landlord's cost of repair or replacement of all
ceiling and wall finishes (including painting) and floor or window coverings
which require repair or replacement during the Lease Term.
Landlord's costs under this Section 16.3 will not be deemed a Direct Cost.
ARTICLE 17: UTILITIES AND JANITORIAL SERVICES
17.1 Landlord agrees to furnish to the Premises during normal business hours,
and subject to the rules and regulations of the Building, electricity suitable
for the intended use of the Premises, heat and air conditioning required in
Landlord's judgment for normal use and occupation of the Premises, and
janitorial services for the Premises and Common Facilities. "Normal business
hours" shall be Monday through Friday, 7:00 AM to 6:00 PM, and Saturday, 8:00 AM
to 12:00 Noon. Landlord further agrees to furnish hot and cold water to those
areas provided for general use of all tenants in the Building. Subject to
Tenant's payment for Excess Consumption, Landlord agrees to make electricity,
heat, air conditioning and elevator service available to the Premises on a
twenty-four (24) hour a day, seven (7) day a week basis. Subject to Landlord's
maintenance and repair obligations, Tenant may have access to the Premises
twenty-four (24) hours a day during each day of the year.
17.2 As used in this Article 17, "Excess Consumption" means (i) the consumption
of electrical current in excess of five (5) watts per square foot of Usable Area
of the Premises (excluding electricity used for heating, ventilation and air
conditioning) including water, and compressed air (if compressed air is
furnished by Landlord) in excess of that which would be provided to the Premises
were the Premises to be built out with Building Standard Improvements only and
used as general office space; and (ii) heating, ventilation and air conditioning
during times other than Monday through Friday, 7:00 AM to 6:00 PM, and Saturday,
8:00 AM to 1:00 PM. Tenant will not, without the written consent of Landlord,
use any apparatus, device or equipment in the Premises, or use heating,
ventilation or air conditioning which will in any way result in Excess
Consumption or connect, except through existing electrical outlets, water pipes,
ducts or airpipes (if any) in the Premises, any apparatus, or device, for the
purposes of using electric current, water, heating, cooling or air. If Tenant
shall require water, heating, cooling, air or electric current which will result
in Excess Consumption, Tenant shall first procure the consent of Landlord to the
use thereof, and Landlord may cause separate meters to be installed to measure
Excess Consumption or establish another basis for determining the amount of
Excess Consumption. Landlord's installation of after hours air conditioning
override controls and cost monitoring equipment in or for the Premises will be
deemed to be Landlord's consent to the use of after hours heating, ventilation
and air conditioning. Landlord may disable such controls upon Tenant's default
in payment for such Excess Consumption. Tenant covenants and agrees to pay for
the cost of the Excess Consumption based on Landlord's cost, plus any additional
expense incurred in installing meters or keeping account of the Excess
Consumption, at the same time as payment of the Minimum Monthly Rent is made.
Tenant further agrees to pay Landlord the cost, if any, to upgrade existing
mechanical, electrical, plumbing and air facilities, if required to provide
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Excess Consumption, upon receipt of a statement therefor. Excess Consumption
costs will not be a Direct Cost for purposes of Article 4.
17.3 Landlord shall not be liable in damages or otherwise in the event of any
failure or interruption of any utility or service supplied to the Premises or
Building by a regulated utility or municipality and no such failure shall
entitle Tenant to terminate this Lease.
ARTICLE 18: ENTRY AND INSPECTION
18.1 Landlord and Landlord's agents shall have the right to enter into and upon
the Premises at all reasonable times for the purpose of inspecting the Premises;
performing Landlord's maintenance and repair obligations under this Lease;
maintaining or making repairs, alterations, or additions to any other portion of
the Building, including the erection and maintenance of such scaffolding,
canopy, fences and props as may be required; posting notices of nonliability for
alterations, additions or repairs, or of the availability of the Premises for
lease or sale; or exhibiting the Premises to potential tenants, lenders or
purchasers. Tenant shall permit Landlord, at any time within one hundred fifty
(150) days prior to the expiration of the Lease Term, to place upon the Premises
any usual or ordinary "For Lease" signs.
18.2 If Tenant shall not be personally present to open and permit an entry into
said Premises, at any time, when for any reason an entry therein shall be
necessary, Landlord or Landlord's agents and contractors may use a master key to
enter, without rendering Landlord or such agents liable therefor, and without in
any manner affecting the obligations and covenants of this Lease. Landlord shall
be permitted to take any action under this Article without any abatement of rent
and without any liability to Tenant for any loss of occupancy or quiet enjoyment
of the Premises thereby occasioned, nor shall such action by Landlord be deemed
an actual or constructive eviction.
18.3 Landlord or its agents shall not be liable for (i) any damage to any
property entrusted to employees of the Building or Project; (ii) loss or damage
to any property by theft or otherwise; (iii) any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances, or plumbing work therein or from the roof, street, or
subsurface or from any other place or resulting from dampness or any other cause
whatsoever. Landlord or its agents shall not be liable for interference with
light or other incorporeal hereditaments, nor shall Landlord be liable for any
latent defect in the Premises or in the Building. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Premises or in the
Building or of defects therein or in fixtures or equipment.
ARTICLE 19: ACCEPTANCE OF THE PREMISES, LIABILITY INSURANCE AND
INDEMNIFICATION OF LANDLORD
19.1 All merchandise, furniture, floor and wall covering and all personal
property and fixtures belonging to Tenant and all persons claiming by or through
Tenant which may be on the Premises shall be at Tenant's sole risk. Tenant
hereby waives all claims against Landlord for loss, injury or damage to all
persons and property in the Building or on the Premises or the Common Areas from
theft, fire, water, gas or otherwise, including sprinkler leakage or
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bursting pipes. Subject to completion of Landlord's construction obligations
under Exhibit B and the correction of "punch list" items resulting from such
construction, Tenant accepts the Premises "as is" and Landlord makes no warranty
as to the condition of the Premises.
19.2 Tenant shall indemnify, defend and hold Landlord and Landlord may agree
harmless from all claims arising from Tenant's use of the Premises or the
conduct of its business or from any activity, work or thing done, permitted or
suffered by Tenant in or about the Premises, the Building, the Project, or the
Common Area. Tenant shall further indemnify, defend and hold Landlord and
Landlord's may agree harmless from all claims arising from any breach or default
in the performance of any obligation to be performed by Tenant under the terms
of this Lease, or arising from any act, neglect, fault or omission of Tenant or
of its agents or employees, and from and against all costs, attorneys' fees,
expenses and liabilities incurred in or about such claim or any action or
proceeding brought thereon. In case any action or proceeding shall be brought
against Landlord and Landlord may agree by reason of any such claim, Tenant,
upon notice from Landlord, shall defend the same at Tenant's expense by counsel
approved in writing by Landlord. Tenant, as a material part of the consideration
to Landlord, hereby assumes all risk of damage to property or injury to person
in, upon or about the Premises from any cause whatsoever except that which is
caused solely by the gross negligence or willful misconduct of Landlord or its
employees in the operation and maintenance of the Premises, the Building or the
Project. Tenant hereby waives all its claims in respect thereof against
Landlord. This indemnification shall survive the termination of the Lease.
Neither Landlord nor any partner, director, officer, agent or employee of
Landlord shall be liable to Tenant or its partners, directors, officers,
contractors, agents, employees, invitees, sublessees or licensees, for any loss,
injury or damage to Tenant or to any other person, or to its or their property,
irrespective of the cause of such injury, damage or loss, unless solely caused
by or solely resulting from the gross negligence or willful misconduct of
Landlord or its employees in the operation or maintenance of the Premises, the
Building, or the Project without contributory negligence on the part of Tenant
or any of its sublessees or licensees or its or their employees, agents or
contractors, or any other lessees or occupants of the Building or Project.
Further, neither Landlord nor any partner, director, officer, agent, or employee
of Landlord shall be liable (i) for any such damage caused by other lessees or
persons in or about the Building or Project, or caused by quasi-public work; or
(ii) for consequential damages arising out of any loss of the use of the
Premises of any equipment of facilities therein by Tenant or any person claiming
through or under Tenant.
19.3 Unless the Claim (as defined below) is subject to the waiver set forth in
Section 20.3, Tenant agrees to indemnify, defend and hold Landlord and
Landlord's Mortgagee harmless against all Claims against Landlord or the
Mortgagee arising from: Tenant's possession, use, maintenance or repair of the
Premises; any act or omission of Tenant or Tenant's invitees, contractors,
subtenants, agents or employees including acts occurring on the Premises or the
Common Areas, irrespective of the insurance carried by Landlord under Section
19.5; or any default of Tenant under this Lease.
19.4 Upon taking possession of the Premises and thereafter during the Lease
Term, Tenant shall, at Tenant's sole cost and expense, maintain comprehensive
liability insurance, including, without limitation, premises/operations
liability, products-completed operations, contractual liability and automobile
(including non-owned and hired automobile) coverage, against Claims for personal
injury, death, or property damage occurring in, upon, or about the Premises. The
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limits of liability of such insurance shall not be less than Two Million Dollars
($2,000,000) combined single limit and $5,000,000 of umbrella coverage or in
such higher amounts as Landlord may require. All such policies of insurance
shall endorse L andlord (including Landlord's property manager and partners and
affiliated business entities comprising Landlord) and the Mortgagee as
additional insureds or loss payees with respect to legal liability or Claims
caused by, arising out of, or resulting directly or indirectly from Tenant's
occupancy of the Premises and operations on or related to the Premises, Building
or Common Areas. Tenant's liability insurance shall be primary with respect to
any liability or Claim arising out of occupancy of the Premises by Tenant or
Tenant's business, and any insurance carried by Landlord under Section 19.5
shall be noncontributory, unless the Claim arises from Landlord's gross
negligence and willful conduct and then only to the extent of Landiord's
proportionate fault.
19.5 Tenant's insurance shall be maintained with an insurance company qualified
to do business in the state in which the Premises are located and having a
current A.M. Best manual rating of at least A-XII or better. Tenant's insurance
policies will contain endorsements stating that the insurance will not be
cancelled nor will the carrier fail to renew or materially change the policy
without first giving Landlord thirty (30) days written notice. Before entry into
the Premises and before expiration of any policy, Tenant shall provide Landlord
with evidence that Tenant maintains workman's compensation insurance and that
the other requirements of this article have been met and that the applicable
premiums or renewal premiums have been paid.
19.6 During the entire Lease Term, Landlord agrees to maintain public liability
insurance against Claims for personal injury, death, or property damage
occurring on the Common Areas. The limits of liability of such insurance shall
be in such amounts as Landlord shall determine but shall be at least equal to
the limits required to be maintained by Tenant. The cost of the public liability
and property damage insurance on the Common Areas shall be a Direct Cost under
Article 4.
19.7 Landlord shall not be responsible or liable to Tenant for any Claim for
loss or damage caused by the acts or omissions of any persons occupying any
space adjacent to or adjoining the Premises.
19.8 As used in this Article, "Claim" means any claim (including a claim based
upon imputed negligence), suit, proceeding, action, cause of action,
responsibility, liability, demand, judgment and execution.
ARTICLE 20: CASUALTY INSURANCE
20.1 Tenant shall maintain fire and extended coverage insurance `, a,,
replacement value, One Thousand Dollars ($1,000.00) maximum deductible) for
loss, injury or damage from then, vandalism, malicious mischief, fire, water,
gas or otherwise, including sprinkler leakage or bursting pipes with a business
interruption endorsement, on merchandise, personal property, equipment and trade
fixtures owned or used by Tenant and other property which Tenant may remove on
the Expiration Date. Tenant shall not maintain insurance on any structural
portion of the Premises, roof, demising or interior walls or floors. In event of
violation of this obligation, Tenant agrees all proceeds of Tenant's insurance
policies, except proceeds related
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to Tenant's personal property or improvements supplied by Tenant, will be held
in trust for the benefit of Landlord.
20.2 Landlord shall maintain fire and full extended coverage insurance ("all
risk") including vandalism and malicious mischief, sprinkler leakage damage and
flood and boiler explosion endorsements throughout the Lease Term on the
Building (excluding Tenant's trade fixtures and personal property) and may name
the holder of a mortgage or deed of trust and any ground lessor as additional
insured. Landlord may elect to self-insure any component comprising the Common
Areas. At Landlord's option, the policy of insurance may include a business
interruption insurance endorsement for loss of rents. The cost of the insurance
obtained under this Section shall be a Direct Cost under Article 4 of this
Lease. If, however, during the Lease Term premiums for fire and extended
coverage insurance are or may be calculated by rating the premises of individual
tenants within the Building and it is determined that the rate for the Premises,
due to Tenant's special fixtures, Non-Building Standard Improvements, business
or otherwise, is in excess of the rate attributable to the premises having the
lowest rate, Tenant agrees to pay Landlord the difference between the premium
attributable to the Premises and that premium which would be attributable to the
Premises were the Premises rated at the lowest rate. If the Building is rated as
a whole and it is determined that the premium, due to Tenant's special fixtures,
Non-Building Standard Improvements or business, is in excess of the premium
which would have been charged, but for Tenant's fixtures, improvements or
business, Tenant agrees to pay Landlord such excess. Tenant shall have no rights
in said policy procured by Landlord under this Section and shall not be entitled
to be named as insured thereunder.
20.3 Tenant hereby waives any right of recovery from Landlord, and Landlord's
agents, officers and employees, and Landlord hereby waives any right of recovery
from Tenant and Tenant's agents, officers or employees, for any loss or damage
(including consequential loss) resulting from any of the perils insured against
by either's fire and extended coverage insurance policy. Neither Landlord nor
Tenant shall be liable to the other or to any insurance company insuring the
other party (by way of subrogation or otherwise) for any loss or damage to any
building, structure or other tangible property; or any resulting loss of income,
or losses under worker's compensation laws and benefits, even though such loss
or damage might have been occasioned by the negligence of such party, its agents
or employees, if any such loss or damage is covered by insurance benefitting the
party suffering such loss or damage or was required to be covered by insurance
pursuant to this Lease. Each party agrees to obtain from its respective
insurance carrier an endorsement or other coverage such that the waiver
contained in this Section 20.3 shall not void any insurance policy.
ARTICLE 21: DAMAGE AND DESTRUCTION OF PREMISES
21.1 In the event of (a) fire or other casualty damage to the Premises or the
Building during the Lease Term which requires repairs to either the Premises or
the Building, or (b) the Premises or Building being declared unsafe or unfit for
occupancy by any authorized public authority for any reason other than Tenant's
act, use or occupation, which declaration requires repairs to either the
Premises or the Building, Landlord shall commence to make said repairs within
sixty (60) days of written notice by Tenant of the necessity therefor. The
Minimum Monthly Rent shall be proportionately reduced from the date of such
damage or declaration, based upon the extent to which such damage or declaration
and the making of such repairs shall interfere with the business carried on by
Tenant in the Premises.
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21.2 Landlord's obligation to repair the Premises shall, however, be subject to
the following. If:
(a) during the last year of the Lease Term any portion of the Premises
or the Building is damaged as a result of fire or any other insured casualty;
or,
(b) at any time the Premises is damaged to the extent of twenty-five
percent (25%) or more of replacement value; or,
(c) the Premises or the Building are damaged or destroyed as a result
of a casualty not insured against; or,
(d) the Building shall be damaged or destroyed by fire or other cause
to the extent of twenty percent of more of the Building's replacement value,
Landlord shall have the right, to be exercised by notice in writing to Tenant
given within ninety (90) days from said occurrence, to cancel and terminate this
Lease. Upon notice to Tenant, the Lease Term shall expire automatically upon the
third (3rd) day after such notice is given, and Tenant shall vacate the Premises
and surrender the same to Landlord. If Landlord elects to terminate this Lease
under this Section, all rents shall be prorated as of the date of damage or
destruction and Landlord shall be released from liability or obligation to
Tenant. If Landlord, however, elects to make said repairs, and provided Landlord
uses due diligence in making said repairs, this Lease shall continue in full
force and effect and the Minimum Monthly Rent shall be proportionately reduced
as provided in Section 21.1.
21.3 With respect to any destruction (including any destruction necessary in
order to make repairs) which Landlord is obligated to repair or may elect to
repair under the terms of this Article, Tenant waives any statutory or other
right Tenant may have to terminate this Lease as a result of such destruction
and no such destruction shall annul or void this Lease.
21.4 The provisions of this Article shall supersede the obligations of Landlord
to make repairs under Section 16.1 of the Lease. Landlord shall not be obligated
to make repairs to the extent that the cost thereof exceeds the insurance
proceeds or to the extent such repairs would exceed Building Standard as defined
in Exhibit B.
21.5 Unless the Lease is terminated under this Article, upon substantial
completion of Landlord's restoration obligations, the Minimum Monthly Rent shall
be restored to the amount which would have been in effect but for the damage or
destruction.
ARTICLE 22: EMINENT DOMAIN
22.1 As used in this Article, "Taking" means a taking of or damage to the
Premises or Building or any part thereof by exercise of the power of eminent
domain, condemnation or sale under the threat of or in lieu of eminent domain or
condemnation.
22.2 If the whole of the Building or the whole of the Premises shall be acquired
by a Taking, or if the whole of the Automobile Parking Area is acquired by a
Taking then this Lease shall terminate as of the date of taking of possession by
the Taking authority.
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22.3 If more than ten percent (10%) of the value of the Building is acquired by
a Taking, whether or not any portion of the Premises is so taken, Landlord shall
have the right to terminate this Lease as of the date of such Taking by giving
Tenant ninety (90) days written notice of Landlord's intent to terminate this
Lease.
22.4 If more than twenty-five percent (25%) of the Premises is acquired in a
Taking, either Landlord or Tenant may terminate this Lease upon notice to the
other within ninety (90) days prior to taking of possession. If less than
twenty-five percent (25%) of the Premises is acquired in a Taking and the award
received is sufficient to restore the Premises, subject to Section 22.3,
Landlord shall promptly restore the Premises to a condition comparable to its
condition at the time of such condemnation less the portion acquired in the
Taking, this Lease shall continue in full force and effect with respect to that
part not acquired, and the Minimum Monthly Rent shall be reduced in the
proportion that the rental value of the Premises after the taking bears to the
rental value before the Taking.
22.5 Notwithstanding Section 22.2, if any part of the Automobile Parking Area
shall be acquired by a Taking, Landlord shall have the right to provide
substitute parking facilities and this Lease shall continue in full force and
effect unless a governmental entity forces the closing of the Building. If a
closing is required, this Lease shall terminate on the date of closing.
22.6 In the event of a Taking as hereinbefore provided, whether whole or
partial, the Tenant shall not be entitled to any part of the award, as damages
or otherwise for diminution in value of the leasehold, reversion or fee, and
Landlord is to receive the full amount of such award. Tenant hereby expressly
waives any right or claim to any part thereof. Tenant shall have no claim
against Landlord for the value of the unexpired Lease Term if the Lease is
terminated under this Article. Although all damages in the event of any
condemnation are to belong to the Landlord, Tenant shall have the right to claim
and recover from the condemning authority, but not from Landlord, such
compensation as may be separately awarded or recoverable by Tenant in Tenant's
own right on account of any damage to Tenant's business by reason of the
condemnation and for or on account of any cost or loss to which Tenant might be
put in removing Tenant's merchandise, furniture, trade fixtures and equipment.
22.7 If this Lease is terminated partially or in total under this Article, all
rents shall be prorated as of the date of Taking including refunds for amounts
paid in advance by Tenant.
ARTICLE 23: ASSIGNMENT AND SUBSLETTING
23.1 Tenant shall not transfer or assign this Lease, or any interest therein,
and shall not sublet or allow any other person to occupy or use of the Premises
or any part thereof, or any right or privilege appurtenant thereto, including
spaces in the Automobile Parking Area, without Landlord's prior written consent
which will not be unreasonably withheld. Consent by Landlord to one assignment,
subletting, occupation or use by another person shall not be deemed to be a
consent to any subsequent assignment, subletting, occupation or use by another
person. Neither this Lease nor any interest therein shall be assignable, as to
the interest of Tenant, by operation of law, without prior written consent of
Landlord. Any attempted transfer, assignment or subletting without the prior
written consent of Landlord shall be void at Landlord's option and shall
constitute a default under this Lease. All sums and consideration received by
Tenant from its subtenants
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or assignees in excess of the Minimum Monthly Rental rent payable to Landlord
under this Lease shall be paid to Landlord.
If Tenant is a corporation, an unincorporated association, a partnership, or a
limited liability company, unless listed an a national stock exchange, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association, partnership, or limited liability company in the
aggregate in excess of fifty percent (50%) shall be deemed an assignment of this
Lease.
23.2 If Tenant, with Landlord's prior written approval, assigns this Lease or
sublets the Premises, and the assignee or sublessee maintains the liability
insurance coverage required by Section 19.3, Tenant shall be relieved of such
obligation but no other obligation under this Lease. Tenant agrees to pay
Landlord reasonable legal fees incurred in connection with the processing of any
documents necessary to give consent. In the event of default by any assignee of
Tenant or any successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of exhausting
or pursuing any remedies against said assignee or successor.
23.3 The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies, or may, at
the option of Landlord, operate as an assignment to Landlord of any or all such
subleases or subtenancies.
ARTICLE 24: SALE OF PREMISES BY LANDLORD
In the event of any sale of the Building or the property upon which the
Building is located or assignment of this Lease by Landlord, Landlord shall be
and is hereby entirely freed and relieved of all liability under any and all of
Landlord's covenants and obligations contained in or derived from this Lease or
arising out of any act, occurrence or omission occurring after such sale or
assignment; and the assignee or purchaser, at such sale or any subsequent sale
of the Premises or assignment of this Lease, shall be deemed, without any
further agreement between the parties and only such assignee or purchaser, to
have assumed and agreed to carry out any and all of the covenants and
obligations of Landlord under this Lease.
ARTICLE 25: SUBORDINATION/ATTORNMENT/MODIFICATION/ASSIGNMENT
Tenant's interest under this Lease shall be subordinate to all terms of
the lien of any ground lease, deed of trust, mortgage or security agreement
(hereinafter collectively referred to as "Mortgage") now or hereafter placed on
the Landlord's interest in the Premises, the Building or on the land upon which
the Building is located and any amendments thereto. If Landlord has not obtained
permanent financing for the Building having a term of at least fifteen (15)
years at the time of execution of this Lease, Tenant agrees to reasonable
amendments to this Lease as may be requested by a lender who proposes to fund
permanent financing provided the amendment does not increase Tenant's monetary
obligations under this Lease. Tenant further consents to an assignment of
Landlord's interest in this Lease to Landlord's lender as required under such
financing. If the Premises or the Building is sold pursuant to default on the
Mortgage, or pursuant to a transfer in lieu of foreclosure, Tenant shall, at the
Mortgage holder's or purchaser's election, not disaffirm this Lease but shall
attorn
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to the Mortgage holder or purchaser, and if so requested, enter into a new lease
for the remainder of the Lease Term. This Article shall be self-operative,
however, Tenant agrees to execute and deliver, within ten (10) days after
request by Landlord, such further instruments necessary to subordinate this
Lease to a lien of any Mortgage, to acknowledge the consent to assignment and to
affirm the attornment provisions set forth herein.
ARTICLE 26: RIGHT TO CURE
In the event of breach, default, or noncompliance under this Lease by
Landlord, Tenant shall, before exercising any right or remedy available to it,
give Landlord written notice of the claimed breach, default, or noncompliance.
If prior to its giving such notice Tenant has been notified in writing (by way
of Notice of Assignment of Rents and Leases, or otherwise) of the address of a
lender which has furnished financing secured by a Mortgage, as defined in
Article 25, on the Premises or the Building, concurrently with giving the
aforesaid notice to Landlord, Tenant shall also give notice by certified mail to
such lender. For the thirty (30) days following such notice (or such longer
period of time as may be reasonably required to cure a matter which, due to its
nature, cannot reasonably be remedied within thirty (30) days), Landlord shall
have the right to cure the breach, default, or noncompliance involved. If
Landlord has failed to cure a default within said period, any such lender shall
have an additional thirty (30) days within which to cure the same or, if such
default cannot be cured within that period, such additional time as may be
necessary if within such thirty (30) day period said lender has commenced and is
diligently pursuing the actions or remedies necessary to cure the breach,
default, or noncompliance involved (including, but not limited to, commencement
and prosecution of proceedings to foreclose or otherwise exercise its rights
under its mortgage or other security instrument, if necessary to effect such
cure), in which event this Lease shall not be terminated by Tenant so long as
such actions or remedies are being diligently pursued by said lender.
ARTICLE 27: ESTOPPEL CERTIFICATES
Tenant agrees at any time and from time to time upon request by the
Landlord, to execute, acknowledge and deliver to Landlord a statement within ten
(10) business days of demand in writing certifying (a) that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating such
modifications), (b) the dates to which the Minimum Monthly Rent and other
charges have been paid in advance, if any, (c) Tenant's acceptance and
possession of the Premises, (d) the commencement of the Lease Term, (e) the rent
provided under the Lease, and (f) that Landlord is not in default under this
Lease (or if Tenant claims such default, the nature thereof), (9) that Tenant
claims no offsets against the Rent, and (h) such other information as shall be
reasonably necessary to establish the status of the tenancy created by this
Lease. It is intended that any such statement delivered pursuant to this Article
may be relied upon by any prospective purchaser, Mortgage holder or assignee of
any Mortgage holder of the Premises or the Building. Tenant's failure to deliver
such statement within such time shall be conclusive upon Tenant (i) that this
Lease is in full force and effect, without modification except as may be
represented by Landlord, (ii) that there are no uncured defaults in Landlord's
performance, (iii) that not more than one month's Minimum Monthly Rent has been
paid in advance, and (iv) that Landlord is irrevocably constituted as Tenant's
attorney in fact to issue such statement.
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ARTICLE 28: DEFAULT AND CONDITIONAL LIMITATIONS
28.1 Any of the following shall constitute a default under this Lease:
(a) if Tenant fails to pay any installment of the Rent herein provided
or any other sum required by this Lease to be paid to Landlord, or any part
thereof as and when due; or
(b) if Tenant fails to observe or perform any of the covenants or
conditions as set forth in Articles 12, 19, or 20 hereof on its part agreed to
be performed;
(c) if Tenant fails to perform any other covenants or conditions on its
part agreed to be performed and such failure to perform continues for ten (10)
days after notice of such failure from Landlord to Tenant; or
(d) if a petition or proceeding under the federal Bankruptcy Act or any
amendment thereto is filed or commenced by or against Tenant or any guarantor of
this Lease, and if against Tenant, said proceedings shall not be dismissed
within sixty (60) days following commencement thereof; or
(e) if Tenant is adjudged insolvent, makes an assignment for the
benefit of its creditors or enters into an arrangement with its creditors; or
(f) if a writ of attachment or execution is levied on the leasehold
estate hereby created and is not released or satisfied within sixty (60) days
thereafter, or
(g) if a receiver is appointed in any proceeding or action to which
Tenant is a party with authority to take possession or control of the Premises
or the business conducted thereon by Tenant or the property of any guarantor of
this Lease and such receiver is not discharged within a period of thirty (30)
days after his appointment; or
(h) Tenant abandons or vacates the Premises. Abandonment shall be
presumed if the Premises are not occupied by at least two (2) employees of
Tenant four (4) days a week, six (6) hours a day.
28.2 Upon a default by Tenant as defined in Section 28.1 Landlord, or Landlord's
agents and employees shall have the right and option to:
(a) prosecute and maintain an action or actions, as often as Landlord
deems advisable, for collection of rent, other charges and damages as the same
accrue, without entering into possession and without terminating this Lease. No
judgment obtained shall constitute a merger or otherwise bar prosecution of
subsequent actions for rent and other charges and damages as they accrue. Tenant
agrees to pay Landlord all costs of collection of past due rent, including court
costs and attorney's fees.
(b) immediately or at any time thereafter reenter and take possession
of the Premises and remove Tenant, Tenant's agents, any subtenants, licensees,
concessionaires, or invitees and any or all of their property from the Premises.
Reentry and removal may be effected by summary proceedings or any other action
or proceedings at law, by force or otherwise. Landlord shall not be liable in
any way in connection with any action taken under
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this paragraph. No action taken, commenced or prosecuted by Landlord, no
execution on any judgment and no act or forbearance on the part of Landlord in
taking or accepting possession of the Premises shall be construed as an election
to terminate this Lease unless Landlord expressly exercises this option under
Section 28.2(c).
Upon taking possession of the Premises Landlord may from time to time, without
termination of this Lease relet the Premises or any part thereof as agent for
Tenant for such rental terms and conditions (which may be for a term extending
beyond the Lease Term) as Landlord, in its sole discretion, may deem advisable,
with the right to make alterations and repairs to said Premises required for
reletting. The rents received by Landlord from such reletting shall be applied
first to the payment of any costs of reletting and second to the payment of rent
or other costs due and unpaid under this Lease. The residue, if any, shall be
held by Landlord and applied in payment of future rent as the same may become
due and payable under this Lease. If the rents received from such reletting
during any month are insufficient to reimburse Landlord for any costs of
reletting or rent due and payable, Tenant shall pay any deficiency to Landlord.
Such deficiency shall be calculated and paid monthly. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter, elect to
terminate this Lease for such previous breach.
(c) elect to terminate this Lease by written notice to Tenant. Upon
such termination, Tenant agrees to immediately surrender possession of the
Premises. If Tenant fails or refuses to surrender the Premises, Landlord may
take possession in accordance with Section (b) above. If Landlord terminates
this Lease, Tenant shall have no further interest in this Lease or in the
Premises, however, Tenant shall remain liable to Landlord for all damages
Landlord may sustain by reason of Tenant's default, including without limitation
(1) the cost of reletting the Premises, and (2) either (i) an amount equal to
the rent which, but for termination of this Lease, would have been payable by
Tenant during the remainder of the Lease Term, less any proceeds from reletting
the Premises; or (ii) an amount equal to the present worth (immediately prior to
termination) of the rent which, but for termination of this Lease, would have
been payable during the remainder of the Lease Term, less the then reasonable
rental value of the Premises, which amount shall be payable to Landlord upon
demand. Rent which would have been payable for the remainder of the Lease Term,
shall be calculated on the basis of the Minimum Monthly Rent and additional rent
payable by Tenant at the time of default plus any future increases which are
determinable at the time of calculation.
(d) obtain the appointment of a receiver in any court of competent
jurisdiction, and the receiver may take possession of any personal property
belonging to the Tenant and used in the conduct of the business of the Tenant
being carried on in the Premises. Tenant agrees that the entry upon the Premises
or possession of said personal property by said receiver shall not constitute an
eviction of the Tenant from the Premises or any portion thereof, and the Tenant
hereby agrees to hold the Landlord safe and harmless from any claim of any
character by any person arising out of or in any way connected with the entry by
said receiver in taking possession of the Premises and/or said personal
property.
28.3 As used in this Article "costs of reletting" means any reasonable costs
necessary to collect past due rent, take possession of the Premises and lease
the Premises to another tenant, including, but not limited to:
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(a) legal costs and expenses of collecting past due rent and recovery
of the Premises including court costs and attorney's fees,
(b) brokerage and advertising costs for leasing,
(c) costs and expenses of alterations, repairs and improvements, Lease,
(d) indebtedness other than minimum rent due from Tenant to Landlord
under this
(e) costs of protecting the Premises, and
(f) removal and storage of Tenant's property.
28.4 No act or conduct of the Landlord, whether consisting of reentry, taking
possession or reletting the Premises or obtaining appointment of a receiver or
accepting the keys to the Premises, or otherwise, prior to the expiration of the
Lease Term shall be deemed to be or constitute an acceptance of the surrender of
the Premises by the Landlord or an election to terminate this Lease unless
Landlord exercises its election under Section 28.2(c) of this Lease. Such
acceptance or election by Landlord shall only be effected, and must be
evidenced, by written acknowledgment of acceptance of surrender or notice of
election to terminate signed by Landlord.
28.5 In addition to any statutory lien for rent in Landlord's favor, Landlord
shall have, and Tenant hereby grants to Landlord, a continuing security interest
for all rent and other sums of money becoming due under this Lease from Tenant,
and for the performance of all other obligations of Tenant under this Lease, in
all personal property of Tenant located on the Premises. In the event of a
default under this Lease, Landlord shall have, in addition to any other remedies
provided in this Lease or by law, all rights and remedies of a creditor under
the Arizona Uniform Commercial Code. Any statutory lien for rent is not hereby
waived, the express contractual lien herein granted being in addition and
supplementary thereto.
ARTICLE 29: TENANT'S RECOURSE
Anything in this Lease to the contrary notwithstanding, Tenant agrees
that it shall look solely to the estate and property of Landlord in the land and
buildings comprising the Building, subject to prior rights of any mortgagee of
the Building or any part thereof, for the collection of any judgment (or other
judicial process) requiring the payment of money by Landlord in the event of any
default or breach by Landlord under this Lease, and no other procedures for the
satisfaction of Tenant's remedies. Neither Landlord, nor any partner thereof or
therein nor any of their respective heirs, successors or assigns, shall have any
personal liability of any kind or nature, directly or indirectly under or in
connection with this Lease.
ARTICLE 30: FORCE MAJEURE
Landlord shall have no liability whatsoever to Tenant on account of (1)
the inability of Landlord to fulfill, or delay in fulfilling, any of Landlord's
obligations under this Lease by reason of acts of God, civil disorder, strike,
other labor trouble, governmental preemption of priorities
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or other controls in connection with a national or other public emergency, or
shortages of fuel, supplies or labor resulting therefrom or any other cause,
whether similar or dissimilar to the above beyond Landlord's reasonable control;
or (2) any failure or defect in the supply, quantity or character of electricity
or water furnished to the Premises, by reason of any requirement, act or
omission of the public utility or others furnishing the Project with electricity
or water, or for any other reason, whether similar of dissimilar to the above,
beyond Landlord's reasonable control. If this Lease specifies a time period for
performance of an obligation of Landlord, that time period shall be extended by
the periods of any delay in Landlord's performance caused by any of the events
of force majeure described above.
ARTICLE 31: SURRENDER OF PREMISES
At the Expiration Date or earlier termination date, Tenant shall
surrender the Premises in good order and condition, reasonable wear and tear and
casualty damage excepted, and shall deliver all keys to Landlord. Before
surrendering the Premises, Tenant shall remove all of its personal property and
trade fixtures and such alterations or additions to the Premises made by Tenant
as may be specified for removal by Landlord, and shall repair any damage caused
by such property or the removal thereof. If Tenant fails to remove its personal
property and fixtures upon the Expiration Date, the same shall, at Landlord's
election, be deemed abandoned and shall become the property of Landlord. Tenant
shall further surrender to Landlord any Automobile Parking Area cards issued
under Article 5. The delivery of keys to any employee of Landlord or to
Landlord's agent or any employee thereof shall not be sufficient to constitute a
termination of this Lease or a surrender of the Premises.
ARTICLE 32: HOLDING OVER
If Tenant, with Landlord's consent, shall hold over after the Expiration
Date, or any extension thereof, Tenant shall become a tenant on a week-to-week
basis at a minimum weekly rent of fifty percent (50%) of the Minimum Monthly
Rent payable during the last year of the Lease Term, which rental shall be
payable in advance on the first day of such holdover period and on the first day
of each week thereafter, upon all the terms, covenants and conditions herein
specified.
ARTICLE 33: GENERAL PROVISIONS
33.1 This Lease shall be construed in accordance with the laws of the State of
Arizona. Venue for resolution of any dispute arising under this Lease shall be
Maricopa County, Arizona.
33.2 If Tenant is composed of more than one person or entity, then the
obligations of such entities or parties shall be joint and several.
33.3 If any term, covenant, condition or provision of this Lease is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions hereof shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
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33.4 The various headings and numbers herein and the grouping of the provisions
of this Lease into separate articles and sections are for the purpose of
convenience only and shall not be considered a part hereof.
33.5 Time is of the essence of this Lease.
33.6 If either party initiates legal proceedings to enforce any right or
obligation under this Lease or to obtain relief for the breach of any covenant
hereof, the party ultimately prevailing in such proceedings shall be entitled to
recover from the other party the costs of such proceedings, including reasonable
attorneys' fees as determined by the court and not by a jury. If Landlord is
involuntarily made a party defendant to any litigation concerning this Lease or
the Premises by reason of any act or omission of Tenant, Tenant shall indemnify
and hold Landlord harmless from all liability by reason thereof, including
Landlord's reasonable costs and attorneys' fees.
33.7 This Lease, and all Exhibits attached hereto, set forth all the covenants,
promises, agreements, conditions or undertakings, either oral or written,
between the Landlord and Tenant. No subsequent alteration, amendment, change or
addition to this Lease shall be binding upon Landlord or Tenant unless reduced
to writing and signed by both parties.
33.8 Subject to Article 23, the covenants herein contained shall apply to and
bind the heirs, successors, executors, administrators and assigns of all the
parties hereto.
33.9 No covenant, term or condition of this Lease shall be waived except by
written waiver of Landlord, and the forbearance or indulgence by Landlord in any
regard whatsoever shall not constitute a waiver of the covenant, term or
condition to be performed by Tenant to which the same shall apply, and until
complete performance by Tenant of such covenant, term or condition, Landlord
shall be entitled to invoke any remedy available under this Lease or by law
despite such forbearance or indulgence. The waiver by Landlord of any breach or
term, covenant or condition hereof shall apply to and be limited to the specific
instance involved and shall not be deemed to apply to any other instance or to
any subsequent breach of the same or any other term, covenant or condition
hereof. Acceptance of rent by Landlord during a period in which Tenant is in
default in any respect other then payment of rent shall not be deemed a waiver
of the other default. Any payment made in arrears shall be credited to the
oldest amount outstanding and no contrary application will waive this right.
33.10 The use of a singular term in this Lease shall include the plural and the
use of the masculine, feminine or neuter genders shall include all others.
33.11 Except as provided in Exhibit B. Section 2.3, Tenant shall not place any
signs upon the Premises, Building or Common Areas without Landlord's prior
written consent.
33.12 Tenant shall not record this Lease without Landlord's prior written
consent and such recordation shall, at the option of Landlord, constitute a
non-curable default of Tenant hereunder. Tenant shall, upon request of Landlord,
execute, acknowledge, and deliver to Landlord a "short form" memorandum of this
Lease for recording purposes.
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ARTICLE 34: NOTICES
Wherever in this Lease it is required or permitted that notice or
demand be given or served by either party to or on the other, such notice or
demand shall be given or served and shall not be deemed to have been duly given
or served unless in writing and delivered personally or forwarded by certified
mail, return receipt requested, if to Landlord, at the address set forth on page
one of this Lease; and if to Tenant, (a) until the Commencement Date, at the
address on page one; and (b) following the Commencement Date, at the Premises.
Either party may change such address by written notice by certified mail to the
other. Service of any notice or demand shall be deemed completed forty~eight
(48) hours after deposit thereof in the United States Postal Service or, if
delivered in person, upon receipt thereof.
ARTICLE 35: BROKER'S COMMISSIONS
Tenant represents and warrants that there are no claims for brokerage
commissions or finder's fees in connection with this Lease (excepting
commissions or fees approved or authorized in writing by Landlord). Tenant
agrees to indemnify Landlord against and hold it harmless from all liabilities
arising from such claim, including any attorneys' fees connected therewith.
IN WITNESS WHEREOF, the parties have duly executed this Lease as of the
day and year first above written.
ARROWHEAD FOUNTAINS PARTNERS LLC, A
DELAWARE LIMITED LIABILITY COMPANY
By: [ILLEGIBLE]
---------------------------------
Its: EVP
--------------------------------
LANDLORD
MICROPAC 1000.COM, LTD.
A DELAWARE CORPORATION
By: MICHAEL S. JACOBS
---------------------------------
Its: Chief Operating Officer
---------------------------------
TENANT
28
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STATE OF ARIZONA )
: SS
County of Maricopa )
: ss
The foregoing instrument was acknowledged before me this 18th day of
May, 1999, by Dominic J. Petrucci, Executive President of Arrowhead Fountains
Partners LLC, a Delaware limited liability company, on behalf of the company.
My Commission Expires: /s/ LYNN K. THORPE
---------------------------------------
April 24, 2001 [STATE LOGO] Notary Public
LYNN K. THORPE
Notary Public - State of Arizona
MARICOPA COUNTY
My Comm. Expires April 24, 2001
29
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STATE OF FLORIDA )
: SS
County of Palm Beach )
The foregoing instrument was acknowledged before me this 28th day of
April, 1999, Michael Jacobs, C.O.O. of Microcap Financial Services, a Delaware
corporation, on behalf of the corporation.
/s/ JOHN L. DELISA
---------------------------------------
Notary Public
[NOTARY PUBLIC JOHN L. DELISA
LOGO] My Commission CC600806
Expires November 11 2000
30
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EXHIBIT B
BUILDING STANDARD WORKLETTER
BUILDING STANDARD SHELL AND ALLOWANCE
This Exhibit B sets forth the respective obligations of, and the procedures to
be followed by, Landlord and Tenant in the design and construction of those
improvements which will prepare the Premises for Tenant's use and occupancy
("Leasehold Improvements"), including the payment of design and construction
costs.
I. DEFINITIONS
1.0 As used in the Lease and this Exhibit B:
1.0.1 The term "Building Standard Improvements" refers to those
improvements set forth in Section 3.4 of this Exhibit.
1.0.2 The term "Building Standard" refers to those brands,
designs, finishes or techniques selected by Landlord for construction of the
Building Standard Improvements.
1.0.3 The term "non-Building Standard" means brands, designs,
finishes and techniques other than those selected by Landlord.
1.0.4 The term "non-Building Standard Improvements" means
improvements to the Premises in addition to those improvements set forth in
Section 3.4 of this Exhibit
1.0.5 "Usable Area" is defined in Section 1.2(b) of the Lease.
1.0.6 "Load Factor" is defined in Section 1.2(c) of the Lease.
1.0.7 "Rentable Area" is defined in Section 1.2(a) of the Lease.
II. GENERAL PROCEDURES FOR PREPARING PLANS AND SPECIFICATIONS
2.0 Landlord's Space Planner has prepared a "Space Plan" for the
Premises, which Space Plan has been approved by the Tenant. The Space Plan
includes:
2.0.1 Approximate location of all partitions, doors, electrical
and telephone outlets and switches, and special requirements for electrical and
telephone circuits.
2.0.2 Type and color of wall and floor covering.
2.0.3 Details of all millwork, corridor entrances, water and
drain supply requirements and non-Building Standard electrical outlets.
2.0.4 Information on non-Building Standard Improvement HVAC
requirements (special heat generating equipment).
<PAGE>
2.0.5 Weight and location of exceptionally heavy equipment.
2.0.6 Dimensions of all equipment to be built in.
2.0.7 Keying schedule.
2.0.8 Lighting arrangement.
2.1 All non-Building Standard Improvements or work desired by Tenant
shall in Landlord's opinion, equal or exceed the quality established by the
Building Standard Improvements as listed herein.
2.2 Any changes, modifications or alterations of or to the Space Plan,
drawings and specifications requested by Tenant shall be subject to Landlord's
written approval. Any additional charges, expenses or costs, including
Landlord's architect's fees, incurred by Landlord in approving said changes,
modifications or alterations shall be paid by Tenant.
2.3 One entrance door to the Premises will bear the Tenant's designated
name and suite number; the Tenant will also be listed in the building directory.
The door signs and directory entries shall be in Landlord's Building Standard
format and purchased by the Landlord from a graphics fabricator designated by
Landlord.
III. LANDLORD'S OBLIGATIONS TO CONSTRUCT AND PAY FOR IMPROVEMENTS
3.0 Section 3.3 contains a general description of the Building
construction, and limitations of same, which will be provided by Landlord at
Landlord's expense. Selection of structural systems, materials and finishes will
be by Landlord. A detailed description of Landlord's construction is set forth
in Landlord's plans and specifications for the Building which are available for
review by Tenant and Tenant's architect or engineer.
3.1 [Intentionally omitted.]
3.2 Landlord's construction and standard finishes are designed for
normal office use. Any reference to construction by Landlord to Code
requirements shall be deemed to mean applicable building Code requirements for
normal office use.
3.3 Landlord shall provide a Shell Office Building to contain the
Premises as hereinafter set forth:
3.3.1 All structural wall, floor and roof support systems to
support office floor live loads including partitions, ceilings, etc., of seventy
(70) pounds per square foot.
3.3.2 All exterior glass, wall finishes and weather protection
systems.
3.3.3 Common toilet facilities, per Code, common lobbies, foyers,
stairs and
3.3.4 Automobile parking facilities including paving, lighting
and mechanical ventilation of parking structure.
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3.3.5 Central plant heating and air conditioning with main supply
to tenant suites, including heat pumps at tenant suites. Low pressure air
handling (distribution duct work, diffusers and vents and associated controls
and devices) is not included.
3.3.6 Main electrical service to Building and distribution of
electrical power from main service to main electrical room on each floor.
3.3.7 Main fire sprinkler piping with heads established on a
predetermined
3.3.8 Window Covering: Building Standard architectural miniblinds
on all exterior windows.
3.3.9 Public Corridor Partitions: Building Standard, 5/8" thick,
gypsum board and base molding attached to corridor side of 2-1/2" metal studs on
24" centers with acoustic insulation built from floor to deck above. Tenant side
gypsum board, base and finish is not included.
3.4 The Building Standard Improvements set forth in Sections 3.4.1
through 3.4.14 are those leasehold improvements normally necessary to allow
tenants to take occupancy of premises for general office purposes. Landlord's
Building Standard Improvements are set forth below for the purpose of
establishing the leasehold improvements which would ordinarily be supplied by
Landlord.
3.4.1 Public Corridor Partitions: Building Standard, 5/8" thick,
gypsum board attached to Tenant side of corridors, finish and base molding in
the amount of one linear foot per sixty (60) square feet of Usable Area
contained within the Premises. Stud wall and corridor side finish is included in
the Building Shell.
3.4.2 Non-Public Partitions: Building Standard, 5/8" thick
ceiling high gypsum board attached to each side of 2-1/2" metal studs on 24"
centers, in the amount of one linear foot per ten (10) square feet of Usable
Area contained within the Premises. Non-public partitions will be furnished with
Building Standard base molding on both sides.
3.4.3 Entry Door, Frame and Hardware: Building Standard, 8'-4"
solid core UL 20 minute wood door and UL 20 minute aluminum door frames with
self-closer, stainless steel lever handle passage set, deadlock, ball bearing
hinges and door stop. Entry doors shall be located where shown on the plans
described in Section 2.1 of this Exhibit B in the amount of one door per tenant
suite.
3.4.4 Interior Doors, Frames and Hardware: Building Standard,
8'-4" aluminum frames, solid core wood doors and hardware, in the amount of one
door per three hundred (300) square feet of Usable Area contained within the
Premises. Hardware shall include lever handle passage sets, hinges and door
stops for openings on all interior doors.
3.4.5 Painting: All wall surfaces, covered with one eggshell
enamel latex finish coat in colors selected by Tenant from Building Standard
paint selection, limited to one color in each suite.
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3.4.6 Ceiling: Building Standard, 2'x 2' acoustical tile on
mechanically suspended exposed grid system, as required throughout Premises.
3.4.7 Lighting: Building Standard, 2'x 4', recessed fluorescent
deep cell parabolic lighting fixture, in the amount of one per eighty (80)
square feet of Usable Area contained within the Premises, and including single
pole switches in the amount of one per three hundred (300) net square feet.
3.4.8 Electrical Services: Building Standard, electrical
facilities sufficient for a connected load of 5 watts general use and lighting
overhead fluorescent lighting per square foot of Usable Area within the Premises
plus facilities sufficient to operate heating, ventilating and air conditioning
equipment.
3.4.9 Duplex Electrical Outlets: Building Standard, wall mounted
duplex electrical outlets (120 volts) in the amount of one per one hundred
twenty-five (125) square feet of Usable Area contained within the Premises.
3.4.10 Telephone Outlets: Building Standard, roughed-in
electrical provisions for wall mounted telephone outlets in the amount of one
per two hundred (200) square feet of Usable Area contained within the Premises.
3.4.1 1 Finished Floors (Tenant's Spaces): Building Standard
carpeting in colors selected by Tenant from Landlord's Building Standard
selection and limited to one color.
3.4.12 Heating, Ventilating and Air Conditioning: Building
Standard, including electrical supply and low pressure air handling
(distribution duct work, diffusers and vents). Air diffusers in the amount of
one linear foot of diffuser per two hundred (200) square feet of Usable Area
contained within the Premises.
3.4.13 Interior Wall Finish: Install gypsum wallboard finish on
interior side of exterior walls.
3.4.14 Sprinkler System: Standard grid system per Code and
Landlord's plans. Modifications (additions, relocations, raising or lowering) of
standard system to accommodate Tenant's requirements are to be done by
Landlord's fire sprinkler contractor at Tenant's expense and in accordance with
underwriters requirements.
IV. CONSTRUCTION OF TENANT'S LEASEHOLD IMPROVEMENTS
4.1 So long as Tenant is not in default under the Lease, Landlord
agrees to construct Tenant's Leasehold Improvements in accordance with the Space
Plan agreed to by Landlord and Tenant under Article II, to Building Standard and
using all Building Standard materials.
4.2 All mechanical, structural, electrical or plumbing modifications to
the Building required by Tenant shall be performed by Landlord's contractor or
contractors approved by Landlord at Tenant's cost.
4
<PAGE>
V. COMPLETION OF LEASEHOLD IMPROVEMENTS
5.1 Landlord agrees to obtain any Certificate of Occupancy required by
the local building department or other governmental agency.
5.2 The term "Substantial Completion" or "Substantially Complete" as
used in this Exhibit B or in the Lease means that state of completion of the
Premises which will allow Tenant to begin Tenant's occupation of the Premises
without material interference from Landlord's contractor or material delay
caused by Landlord's failure to have completed Landlord's work under Section 3.4
of this Exhibit.
5.3 Notwithstanding any time period established herein for the
submission and approval of Tenant's plans or for the construction of
improvements, the Lease Term and Tenant's obligation to pay rent shall commence
as set forth in Section 2.2 of the Lease; provided, however, if the Commencement
Date is determined under Section 2.2 of the Lease by the date of Substantial
Completion, the Commencement Date will be accelerated so as to be one (1) day
earlier than the date of completion for each day Substantial Completion is
delayed by reason of:
5.3.1 Tenant's request for non-Building Standard materials,
finishes or installations or non-Building Standard Improvements, including
planning, procurement and construction delays.
5.3.2 Tenant's changes in Space Plan or drawings, plans and
specifications.
5.3.3 Delays to Landlord's contractor caused by Tenant's
contractor, including the performance (or nonperformance) of any construction
work by a person, firm or corporation employed by Tenant and the completion of
said work by said person, firm or corporation.
***
5
<PAGE>
MEMORANDUM OF LEASE
ARROWHEAD FOUNTAINS OFFICE BUILDING
16150 N. ARROWHEAD FOUNTAINS CENTER DRIVE. PEORIA, AZ 85382
AS OF JUNE 15,1999
Arrowhead Fountains Partners, LLC, and Arizona Limited Liability Corporation,
(Owner); and Microcap Financial Service, a Delaware Professional Liability
Company, ("Tenant").
Lease Dated May 10, 1999.
This Memorandum of the above-referenced Lease is made and entered into by and
between Landlord and Tenant as of the date first set forth above for the purpose
of establishing the dates and rents set forth below. By executing this
Memorandum, Landlord and Tenant agree that these dates and rents shall be
incorporated in the Lease as if actually set forth therein and that the Premises
has been substantially completed in accordance with the Lease.
1. The date of substantial completion of the Premises is: May 10, 1999.
2. The Commencement Date of the Lease Term is: May 10, 1999.
3. The Expiration of the primary term is: May 31, 2002.
4. The Rentable Area of the Premises as adjusted in accordance with Section 1.1
is: 1,669 square feet.
5. The Minimum Monthly Rent as adjusted under Section 3.1 of the Lease is:
$3,164.14, plus applicable taxes.
LANDLORD:
ARROWHEAD FOUNTAINS PARTNERS, LLC, AND ARIZONA LIMITED LIABILITY CORPORATION
By: [ILLEGIBLE]
---------------------------
Its: EVP
--------------------------
Date: 7/1/99
-------------------------
TENANT:
MICROCAP FINANCIAL SERVICE, A DELAWARE PROFESSIONAL LIABILITY COMPANY
By: [ILLEGIBLE]
---------------------------
Its: SECRETARY
--------------------------
Date: 6/30/99
-------------------------
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
STATE/COUNTRY
COMPANY NAME OF INCORPORATION
- ------------ ----------------
GlobalNet Financial.com Delaware
America-iNvest.com, Inc. Delaware
International Capital Growth, Ltd. Delaware
UK-iNvest.com, Ltd. United Kingdom
GlobalNet UK Holdings Limited United Kingdom
GlobalNet Securities Corp. (66.6%) New York
EXHIBIT 23.1
TO COME
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 69,047,725
<SECURITIES> 15,771,820
<RECEIVABLES> 9,332,599
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 94,379,683
<PP&E> 746,618
<DEPRECIATION> 186,047
<TOTAL-ASSETS> 120,692,830
<CURRENT-LIABILITIES> 2,072,892
<BONDS> 0
0
0
<COMMON> 44,543
<OTHER-SE> 118,556,125
<TOTAL-LIABILITY-AND-EQUITY> 120,692,830
<SALES> 1,413,814
<TOTAL-REVENUES> 3,370,589
<CGS> 239,270
<TOTAL-COSTS> 21,729,846
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,359,257)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,359,257)
<EPS-BASIC> (1.79)
<EPS-DILUTED> (1.79)
</TABLE>
