As filed with the Securities and Exchange Commission on September 27, 1999
Registration No. 333________
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
QUIKBIZ INTERNET GROUP, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 7371 88-0320364
- ---------------------------- -------------------------- ----------------
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) Number)
6801 Powerline Road
Ft. Lauderdale, Florida 33309
(954) 970-3553
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
Andrew D. Smith, President
QuikBiz Internet Group, Inc.
6801 Powerline Road
Ft. Lauderdale, Florida 33309
(954) 970-3553
(Name, Address and Telephone Number of Agent for Service)
Copies to:
David Alan Miller, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
(212) 818-8800
(212) 818-8881 - Facsimile
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| _________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
===================================================================================================================
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
Proposed
Maximumd Proposed
Offering Maximum Amount of
Title of Each Class of Amount to be Price Per Aggregate Registration
Securities to be Registered Registered Unit Offering Price Fee
- ----------------------------------------- ------------- ---------- -------------------- --------------
<S> <C> <C> <C> <C>
Common stock 30,240,923 $0.75(1) $22,680,692.25(1) $6,305.23
- ----------------------------------------- ------------- ---------- -------------------- --------------
Common stock(2) 3,000,000 $0.75(2) $ 2,250,000.00(1) $ 625.50
- ----------------------------------------- ------------- ---------- -------------------- --------------
Common stock(3) 500,000 $1.4625 $ 731,250.00 $ 203.29
- ----------------------------------------- ------------- ---------- -------------------- --------------
Common Stock(4) 600,000 $ .075(1) $ 450,000.00(1) $ 125.10
- ----------------------------------------- ------------- ---------- -------------------- --------------
Total......................................................................................... $7,259.12
===================================================================================================================
</TABLE>
(1) Based upon the average of the bid and asked prices of QuikBiz Internet
Group, Inc. common stock as reported on the OTC Bulletin Board on September
24, 1999, pursuant to Rules 457(c) and (g) of the Securities Act of 1933.
(2) Issuable upon the exercise of common stock purchase warrants issuable to
Swartz Private Equity, LLC. The warrants are issuable to Swartz from time
to time when QuikBIZ exercises its put right to sell shares of common stock
to Swartz. The exercise price of a warrant will be equal to 110% of the
market price on the date that QuikBIZ exercises its put right to sell
shares of its common stock to Swartz.
(3) Issuable upon the exercise of common stock purchase warrants issued to
Swartz Private Equity, LLC, on May 25, 1999. The exercise price of the
warrants is initially $1.4625, but is subject to downward adjustment under
certain circumstances. On each six month anniversary of the date of
issuance, QuikBIZ will calculate a reset exercise price that will be equal
to 100% of the lowest closing bid price of the common stock for the five
trading days ending on the six month anniversary date. The exercise price
will be equal to the lowest reset exercise price determined on any six
month anniversary of the date of issuance preceding the date on which the
warrant is exercised, subject to anti-dilution adjustments.
(4) Issuable upon the exercise of common stock purchase warrants issued to
M.H. Meyerson & Co., Inc. on July 14, 1998. The exercise price of the
warrants is $.25 per share.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
QuikBIZ Internet Group, Inc.
6801 Powerline Road
Ft. Lauderdale, Florida 33309
(954) 970-3553
The Resale of 34,340,923 Shares of Common Stock
The selling price of the shares will be determined by market factors at
the time of their resale.
--------------------------------
This prospectus relates to the resale by the selling shareholders of up
to 33,740,923 shares of common stock. The selling shareholders may sell the
stock from time to time in the over-the-counter market at the prevailing market
price or in negotiated transactions. Of the shares offered,
o 240,923 shares are presently outstanding,
o up to 30,000,000 shares are issuable to Swartz Private Equity,
LLC based on an amended and restated Investment Agreement dated
as of July 9, 1999,
o up to 3,500,000 shares are issuable upon the exercise of warrants
issued or issuable to Swartz under the amended and restated
Investment Agreement, and
o up to 600,000 shares are issuable upon the exercise of warrants
issued to M.H. Meyerson & Co., Inc.
We will receive no proceeds from the sale of the shares by the selling
shareholders. However, we have received proceeds from the sale of shares that
are presently outstanding and may receive up to $20 million of proceeds from the
sale of shares to Swartz, and we may receive additional proceeds from the sale
to Swartz of shares issuable upon the exercise of any warrants that may be
exercised by Swartz and M.H. Meyerson & Co., Inc.
Our common stock is quoted on the over-the-counter Electronic Bulletin
Board under the symbol QBIZ. On September 24, 1999, the average of the bid and
asked prices of the common stock on the Bulletin Board was $.75 per share.
Investing in the common stock involves a high degree of risk. You
should invest in the common stock only if you can afford to lose your entire
investment. See "Risk Factors" beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commiss
ion nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _________, 1999
<PAGE>
Please read this prospectus carefully. It describes our company, finances,
products and services. Federal and state securities laws require that we include
in this prospectus all the important information that you will need to make an
investment decision.
You should rely only on the information contained or incorporated by
reference in this prospectus to make your investment decision. We have not
authorized anyone to provide you with different information. The selling
shareholders are not offering these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front page of this
prospectus.
The following table of contents has been designed to help you find
important information contained in this prospectus. We encourage you to read the
entire prospectus.
Table of Contents
Page Page
---- ----
Prospectus Summary................... 3 Plan of Distribution...... 26
Summary Financial Data............... 6 Management................ 26
Risk Factors......................... 7 Executive Compensation.... 28
Use of Proceeds...................... 11 Principal Shareholders.... 30
Price Range of Common Stock.......... 12 Certain Transactions...... 31
Dividend Policy...................... 12 Description of Securities. 32
Management's Discussion Legal Matters............. 33
and Analysis of Financial Experts................... 34
Condition and Results of Operation. 13 Where You Can Find More
Business............................ 19 Information............. 34
Selling Shareholders................ 22 Index to Financial
Statements................ F-1
QuikBIZ Internet Group, Inc. is a Nevada corporation. We were originally
incorporated in 1984 in Utah under the name Sunwest Industries, Inc. In 1994 we
merged with International Training & Education Corp., changed our name to
International Trading & Education Corp. and became a Nevada corporation. In 1996
we changed our name to DigiMedia USA, Inc. In May 1997, we merged with Nitros
Franchise Corporation and changed our name to Nitros Franchise Corporation. In
July 1997, we changed our name to Algorhythm Technologies Corporation. In July
1998 we changed our name to QuikBIZ Internet Group, Inc.
Our principal executive offices are located at 6801 Powerline Road, Ft.
Lauderdale, Florida 33309 and our telephone number is (954) 970-3553.
Some of the statements contained in this prospectus, including statements
under "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operation" and "Business," are
forward-looking and may involve a number of risks and uncertainties. Actual
results and future events may differ significantly based upon a number of
factors, including:
o our significant historical losses and the expectation of continuing
losses;
o rapid technological change in the Internet industry;
o our reliance on key strategic relationships and accounts;
o the impact of competitive products and services and pricing; and
o uncertain protection of our intellectual property.
In this prospectus, we refer to QuikBIZ Internet Group, Inc. as we or
QuikBIZ. We refer to our subsidiary QuikLAB Multimedia Centers, Inc. as QuikLAB,
our subsidiary SmithAgency.com, Inc. as SmithAgency.com, and to Swartz Private
Equity, LLC as Swartz.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in the common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section.
Our Business
Through our QuikBIZ Mall division and our principal subsidiaries, QuikLAB
and SmithAgency.com, we are developing several complimentary Internet-oriented
businesses.
We are currently developing the QuikBIZ Mall (www.quickbiz.com), a virtual
mall on the Internet that will offer corporate communications products, services
and supplies on-line. We expect that the QuikBIZ Mall will also offer product
comparison data, discount pricing, one-stop shopping, easy ordering and quick
delivery. We expect that we will own and maintain most of the merchant stores in
the QuikBIZ Mall. We expect to create each merchant store and purchase the
products directly through "drop-ship" vendors. The vendors will bill us for
products or services purchased at our merchant stores on the mall and we will
bill the purchasers. Each store is expected to have its own separate URL and is
expected to be marketed independently of the mall.
QuikLAB is a retail, business-oriented, multimedia production facility.
QuikLAB offers a wide variety of audio, video, multimedia and Internet services
and products to business entities, government agencies, non-profit
organizations, schools, universities, religious organizations and consumers.
QuikLAB produces and assists companies in creative content for all types of
corporate communication including sales, training, public relations and
promotion.
QuikLAB operates Quoteit.com, an Internet "bidding" website where
purchasers of media duplication services can "name their own price" for audio,
video, CD and digital video disk (DVD) media duplication. Quoteit.com provides
businesses, non-profit corporations, government agencies, schools, universities,
and religious organizations with a "one-stop" site for shopping for media
duplication services on-line. QuikLAB provides the duplication services through
its own facilities and through major duplication/replication companies
throughout the United States.
SmithAgency.com is a full service advertising and marketing agency.
SmithAgency.com provides its clients with a broad range of services, including
Internet site design, television commercial and radio commercial development and
production, print advertisement development and production and promotions.
Recent Events
On August 31, 1999, we completed the acquisition of substantially all of
the assets of Gallaspy & Lobel, Inc., an advertising firm based in south Florida
doing business under the name G&L Group. We acquired all of G&L Group's
contracts and pending orders with its existing active clients, and all of G&L
Group's accounts receivable relating to its existing active clients. In
connection with the acquisition, G&L Group's president, James Lobel, has become
the president of SmithAgency.com.
Our Investment Agreement
We have entered into an amended and restated Investment Agreement with
Swartz to raise up to $20 million through a series of sales of our common stock
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to Swartz. The dollar amount of each sale is limited by our common stock's
trading volume. A minimum period of time must occur between sales. In turn,
Swartz will either sell our stock in the open market, sell our stock to other
investors through negotiated transactions or hold our stock in its own
portfolio. This prospectus covers the resale of our stock by Swartz either in
the open market or to other investors.
Additional Shares We Are Registering
In July 1998, we issued warrants to M.H. Meyerson & Co., Inc. to purchase
600,000 shares of common stock at a price of $.25 per share. The resale of the
common stock issuable to M.H. Meyerson & Co., Inc. upon exercise of the warrants
is included in this registration statement.
Recently, we sold an aggregate of 164,000 shares of common stock to certain
private investors. The resale of the common stock by these private investors is
included in this registration statement.
Key Facts
Total shares outstanding prior to
the offering 14,002,494(1) as of September 24, 1999
Shares being offered for resale
to the public 34,340,000(2) (Maximum)
Total shares outstanding after the
offering 44,002,494(1)(3)
Price per share to the public Market price at time of resale
Total proceeds raised by offering None; however, we have received proceeds
from the sale of shares that are
presently outstanding, we may receive up
to $20 million from the sale of shares
to Swartz, and we may receive additional
amounts from the sale to Swartz of
shares issuable upon the exercise of any
warrants issued to Swartz pursuant to
the Investment Agreement.
Use of proceeds from the sale of We plan to use the proceeds for working
the shares to Swartz capital and general corporate purposes.
OTC Bulletin Board Symbol QBIZ
(1) Does not include (i) 600,000 shares of common stock underlying warrants
issued to M.H. Meyerson & Co., Inc. in July 1998 to purchase common stock
at $.25 per share, expiring on July 14, 2003; (ii) 200,000 shares of common
stock underlying options to purchase common stock at $.002 per share,
expiring on November 1, 1999; (iii) 100,000 shares of common stock
underlying options to purchase common stock at $.15 per share, expiring on
May 14, 2000; (iv) 200,000 shares of common stock underlying options to
purchase common stock at $.15 per share, expiring on May 14, 2000; (v)
200,000 shares of common stock underlying options to purchase common stock
at $.002 per share expiring on June 25, 2000; (vi) 60,000 shares of common
stock underlying options to purchase common stock at $.002 per share, with
no stated expiration date; and (vii) 18,643 shares of common stock issuable
upon conversion of 261 shares of preferred stock.
(2) Includes (i) 240,923 shares that are presently outstanding, (ii) up to
30,000,000 shares that may be issued to Swartz pursuant to the Investment
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Agreement, (iii) up to 3,500,000 shares underlying warrants issued and
issuable to Swartz in connection with the Investment Agreement, and (iv) up
to 600,000 shares underlying warrants issued to M.H. Meyerson & Co., Inc.
in July 1998.
(3) Includes up to 30,000,000 shares that may be issued to Swartz pursuant to
the Investment Agreement. Does not include (i) up to 3,500,000 shares
underlying warrants issued and issuable to Swartz in connection with the
Investment Agreement and (ii) up to 600,000 shares underlying warrants
issued to M.H. Meyerson & Co., Inc. in July 1998.
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<PAGE>
Summary Financial Data
The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------- ---------
1997 1998 1998 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues......................... 140,355 2,142,414 708,136 1,790,645
Operating Expenses............... 329,025 2,899,298 892,698 1,964,824
Net Loss......................... 190,278 783,364 189,973 182,797
Loss per share................... 0.028 0.060 0.015 0.014
Weighted average number of
common shares outstanding........ 6,841,017 13,067,857 12,820,561 13,350,767
</TABLE>
June 30, 1999
-------------
(Unaudited)
Balance Sheet Data:
Working capital............................... (317,246)
Total assets.................................. 999,838
Total liabilities............................. 851,493
Shareholders' equity.......................... 148,345
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<PAGE>
Risk Factors
An investment in the common stock being offered for resale by the selling
shareholders is very risky. You should be able to bear a complete loss of your
investment. Before purchasing any of the common stock, you should carefully
consider the following risk factors, among others.
We have incurred significant losses and expect to continue to do so.
To date, we have incurred significant losses. At June 30, 1999, our
accumulated deficit was $2,575,520 and our working capital deficit was $317,246.
For the year ended December 31, 1998, we incurred a net loss of $783,364 and for
the year ended December 31, 1997, we incurred a net loss of $190,278. For the
six months ended June 30, 1999, we incurred a net loss of $182,797. These losses
have resulted primarily from:
o significant costs associated with the acquisition of Nitros Franchise
Corporation and SmithAgency.com in 1997 and the acquisition of QuikLab
in 1998.
o significant costs associated with the development of the QuikBiz Mall
and Quoteit.com.
We expect to continue to incur operating losses in the future. There is no
assurance that sales of our products and services will ever generate sufficient
revenues to fund our continuing operations, that we will generate positive cash
flow or that we will attain or sustain profitability.
We have a limited operating history.
Although QuikBIZ was incorporated in 1984, it had no significant business
operations until May 1997. David Bawarsky, our Chief Executive Officer, has been
with us only since May 1997, and Andrew Smith, our President, has been with us
only since November 1997. Because of our limited operating history, you have
limited information on which to assess our ability to realize operating revenues
or profits in the future.
We will require additional financing.
Lack of sufficient funding could force us to curtail substantially or cease
our operations, which would have a material adverse effect on our business.
Based on our potential rate of cash operating expenditures and our current
plans, we anticipate our cash requirements for the next 12 months may need to
come primarily from the proceeds of the Investment Agreement. However, our
ability to raise funds under the Investment Agreement is subject to certain
conditions. These conditions include the continuing effectiveness of a
registration statement covering the resale of the shares sold under the
Investment Agreement and a limitation on the number of shares we may issue based
on the volume of trading in the common stock. We anticipate that our future cash
requirements may be fulfilled by improved sales of products and services, the
sale of additional equity securities, debt financing and/or the sale or
licensing of certain of our technologies. However, there can be no assurance
that any future funds required in excess of the proceeds of the Investment
Agreement will be generated from operations or from the aforementioned or other
potential sources. There can also be no assurance that the required funds, if
available, will be available on attractive terms or that the terms under which
they are raised will not significantly dilute the interests of our existing
shareholders.
7
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The market for online commerce is still developing and is subject to a high
degree of uncertainty.
The market for online commerce is rapidly evolving and is subject to a high
level of uncertainty. Our success will depend to a substantial extent on the
willingness of the public to use online services as a method to purchase
corporate communications products and media duplication services. Although
members of management have considerable business experience, this is a new
venture and members of management have limited experience in the operation and
management of an Internet-based business.
The market in which we compete is subject to rapid technological change.
Technology in the Internet industry changes rapidly, and our products and
services, as well as the skills of our employees, could become obsolete quickly.
Our success will depend, in part, on our ability to improve our existing
services, develop new services and solutions that address the increasingly
sophisticated and varied needs of our current and prospective clients, and
respond to technological advances, emerging industry standards and practices and
competitive service offerings.
We could lose money on projects for which we set a fixed price.
We currently bill for most of our services on a "time and materials" basis.
However, we intend to increase the percentage of our work that is billed at a
fixed price and the percentage of revenues from these fixed-price engagements.
If we fail to estimate accurately the resources and time required for a project,
to meet client expectations about the services to be performed, or to complete
projects within budget, we will have cost overruns and, in some cases,
penalties, which could have a material adverse effect on our business, financial
condition and results of operations.
We rely upon key strategic relationships.
We have established a number of strategic relationships with leading
hardware and software companies, some of which can be terminated on short notice
by the parties. These relationships are not supported by written agreements. The
loss of any one of these strategic relationships could deprive us of the
opportunity to gain early access to leading-edge technology, market products
cooperatively with the hardware or software company, cross-sell additional
services and gain enhanced access to vendor training and support, which could
have a material adverse effect on our business, financial condition and results
of operations.
SmithAgency.com depends on key accounts.
SmithAgency.com was dependent on its two largest clients, St Joseph Candler
Health Systems and Enmark Stations, for approximately 56% of its revenues during
its fiscal year ended December 31, 1998 and approximately 40% of its revenues
for the first six months of 1999. If either of these clients does not remain a
significant customer of SmithAgency.com, there could be an immediate material
adverse effect on our business, financial condition and results of operations.
Intense competition from existing and new entities may adversely affect our
revenues and profitability.
The Internet industry is rapidly evolving and intensely competitive. We
expect competition to continue and intensify in the future. Many of our
competitors have significantly greater financial, technical, marketing and other
resources than we do. Some of our competitors also offer a wider range of
services than we offer and have greater name recognition and a larger customer
base. These competitors may be able to respond more quickly to new or changing
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opportunities, technologies and customer requirements and may be able to
undertake more extensive promotional activities, offer more attractive terms to
customers, and adopt more aggressive pricing policies. We cannot assure you that
we will be able to compete effectively with current or future competitors or
that the competitive pressures faced by us will not harm our business.
Protection of our intellectual property is limited and there is a risk of claims
for infringement.
We regard our copyrights, trademarks, trade secrets (including our
methodologies, practices and tools), as important to our success. If others
infringe or misappropriate our copyrights, trademarks or similar proprietary
rights, our business could be hurt. In addition, although we do not believe that
we are infringing the intellectual property rights of others, other parties
might assert infringement claims against us. Such claims, even if not true,
could result in significant legal and other costs and be a distraction to
management. Protection of intellectual property rights in many foreign countries
is weaker and less reliable than in the United States, so if our business
expands into foreign countries, risks associated with intellectual property will
increase.
We depend on David Bawarsky and Andrew Smith and the loss of either of their
services could harm our business.
We place substantial reliance upon the efforts and abilities of our two key
executive officers -- David Bawarsky, our Chief Executive Officer, and Andrew
Smith, our President. The loss of the services of either of them could have a
material adverse effect on our business, operations, revenues or prospects. We
presently have employment agreements with each of them. Mr. Bawarsky's
employment agreement expires on June 15, 2003. Mr. Smith's employment agreement
expires on October 30, 2002. We have no assurance, however, that upon the
expiration of their respective employment agreements, they will remain in our
employ. We do not maintain and we do not intend to obtain key man insurance on
the lives of Messrs. Bawarsky and Smith.
We may be subject to government regulation in the future that could adversely
affect our business.
Our Internet-related business, and the Internet industry generally, is
presently not subject to extensive government regulation. However, because the
Internet is still evolving, new laws or regulations may be implemented that
specifically impact our business. New laws or regulations may address issues
such as user privacy, freedom of expression, pricing of products and services,
taxation, advertising, intellectual property rights, information security and
the convergence of traditional communications services with Internet
communications. There can be no assurance that in the future, as the Internet
market develops, regulation of certain activities on the Internet will not be
implemented and that such regulation will not adversely impact our business and
operations.
Despite our efforts, our computer systems as well as those of others on whom we
depend may not be Year 2000 compliant, which could significantly disrupt our
business.
Many currently installed computer systems and software products are coded
to accept only two- digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, throughout 1999, computer systems and software
used by many companies, including customers and potential customers of QuikBIZ
Internet Group, may need to be upgraded to comply with such "Year 2000"
requirements. Although we believe that our principal internal systems are Year
2000 compliant, some of our systems are not yet certified, and failure to
provide Year 2000 compliant business solutions to our customers could materially
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harm our business. Furthermore, we believe that the purchasing patterns of
customers and potential customers may be affected by Year 2000 issues as
companies expend significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may reduce funds
available to purchase our products and services.
Our stock price is volatile.
The market price of our common stock has been and is likely to continue to
be volatile and could be subject to wide fluctuations in response to quarterly
variations in operating results, announcements of technological innovations or
new products by us or our competitors, changes in financial estimates by
securities analysts, overall equity market conditions or other events or
factors. Because our stock is more volatile than the market as a whole, our
stock is likely to be disproportionately harmed by factors that significantly
harm the market, such as economic turmoil and military or political conflict,
even if those factors do not relate to our business. In the past, securities
class action litigation has often been brought against companies following
periods of volatility in the market price of their securities. If securities
class action litigation is brought against us it could result in substantial
costs and a diversion of management's attention and resources, which would hurt
our business.
Trading in our common stock on the OTC Bulletin Board may be limited.
Our common stock trades on the OTC Bulletin Board. The OTC Bulletin Board
is not an exchange and, because trading of securities on the OTC Bulletin Board
is often more sporadic than the trading of securities listed on an exchange or
Nasdaq, you may have difficulty reselling any of the shares that you purchase
from the selling shareholders.
Our common stock is subject to penny stock regulation.
Our common stock is subject to regulations of the Securities and Exchange
Commission relating to the market for penny stocks. These regulations generally
require that a disclosure schedule explaining the penny stock market and the
risks associated therewith be delivered to purchasers of penny stocks and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors. The
regulations applicable to penny stocks may severely affect the market liquidity
for our securities and could limit your ability to sell your securities in the
secondary market.
A significant percentage of our common stock is held by our directors and
executive officers, who can significantly influence all actions that require a
vote of our shareholders.
Our directors and executive officers own approximately 66.9% of our
outstanding common stock. Accordingly, management is in a position to
significantly influence the election of our directors and all other matters that
are put to a vote of our shareholders.
The exercise of options and warrants may adversely affect our stock price and
your percentage of ownership.
If all of the warrants that may be issued to Swartz under the Investment
Agreement are issued, there will be outstanding options and warrants to purchase
4,860,000 shares of common stock and preferred stock convertible into 18,643
shares of common stock. In the future, we may grant more warrants or options
under stock option plans or otherwise. The exercise or conversion of stock
options, warrants or other convertible securities that are presently outstanding
or that may be granted in the future will dilute the
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percentage ownership of our other shareholders. The "Description of Securities"
section of this prospectus provides you with more information about options and
warrants to purchase our common stock and convertible preferred stock that will
be outstanding after this offering.
Forward-looking statements
This prospectus includes "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995,
and we desire to take advantage of the "safe harbor" provisions in those laws.
Therefore, we are including this statement for the express purpose of availing
ourselves of the protections of these safe harbor provisions with respect to all
of the forward-looking statements we make. The forward-looking statements in
this prospectus reflect our current views with respect to possible future events
and financial performance. They are subject to certain risks and uncertainties,
including specifically the absence of significant revenues, financial resources,
a history of losses, significant competition, the uncertainty of patent and
proprietary rights, trading risks of low-priced stocks and those other risks and
uncertainties discussed herein that could cause our actual results to differ
materially from our historical results or those we hope to achieve. In this
prospectus, the words "anticipates," "believes," "expects," "intends," "future"
and similar expressions identify certain forward-looking statements. You are
cautioned to consider the specific risk factors described in "Risk Factors" and
elsewhere in this prospectus and not to place undue reliance on the
forward-looking statements contained in this prospectus. We undertake no
obligation to announce publicly revisions we make to these forward-looking
statements to reflect the effect of events or circumstances that may arise after
the date of this prospectus. All written and oral forward-looking statements
made subsequent to the date of this prospectus and attributable to us or persons
acting on our behalf are expressly qualified in their entirety by this section.
Use of Proceeds
We will not receive any proceeds from the sale of the shares by the selling
securityholders. However, we have received proceeds from the sale of shares that
are presently outstanding, we will receive up to $20 million from Swartz upon
Swartz's purchase of the shares from us and we may receive additional proceeds
from the sale to Swartz of shares issuable upon the exercise of warrants issued
or to be issued to Swartz pursuant to the Investment Agreement and from the sale
of shares to M.H. Meyerson & Co., Inc. upon the exercise of warrants issued to
M.H. Meyerson & Co., Inc. We intend to use the proceeds from the sale of the
shares to Swartz and the exercise of warrants by Swartz and M.H. Meyerson & Co.,
Inc. for working capital and general corporate purposes, including acquisitions.
To the extent we deem appropriate, we may acquire fully developed products or
businesses that, in our opinion, facilitate our growth and/or enhance the market
penetration or reputation of our products and services. To the extent that we
identify any such opportunities, an acquisition may involve the expenditure of
significant cash and/or the issuance of our capital stock. We currently have no
commitments, understandings or arrangements with respect to any such
acquisition.
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Price Range of Common Stock
Our common stock is traded on the OTC Electronic Bulletin Board. The
following table sets forth the high and low bid prices of our common stock for
each quarter for the years 1997 and 1998 and the first, second and third
quarters of 1999 through September 24, 1999. As of September 10, 1999, there
were approximately 411 holders of record of our common stock. We have never paid
any dividends.
The quotations set forth below reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
Common stock:
Year High Bid Low Bid
- ------- ---------- ---------
1997
First Quarter .32 .15
Second Quarter (April 1 through May 13) .14 .13
Second Quarter (May 14 through June 30) 1.69 .88
(after a 1 for 7 reverse split)
Third Quarter .88 .25
Fourth Quarter .31 .13
1998
First Quarter .40 .10
Second Quarter .38 .11
Third Quarter .40 .22
Fourth Quarter .69 .38
1999
First Quarter 1.57 .44
Second Quarter 2.00 1.06
Third Quarter (through September 24) 1.81 .63
Dividend Policy
We have not paid any dividends on our common stock during the past two
years. We expect to continue to retain all earnings generated by our operations
for the development and growth of our business, and do not anticipate paying any
cash dividends to our shareholders in the foreseeable future. The payment of
future dividends on the common stock and the rate of such dividends, if any,
will be determined by our Board of Directors in light of our earnings, financial
condition, capital requirements and other factors.
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Management's Discussion and Analysis of Financial Condition
and Results of Operation
Overview
We provide businesses with communications services and products, including
Internet, Intranet, Extranet, Web site and electronic media solutions,
advertising, marketing and branding services, and related services. We offer a
comprehensive range of communications solutions designed to improve clients'
business processes. We provide professional services including strategic
consulting, analysis and design, technology development, systems implementation
and integration and audio and visual materials, including audio, video, CD and
DVD-Rom. We also provide advertising, marketing and consulting services in the
areas of strategic corporate and product positioning, corporate identity and
product branding, new media, packaging, collateral systems, direct marketing,
consumer and trade promotions and media placement services.
QuikBIZ is a Nevada corporation. It was originally incorporated in 1984 in
Utah under the name Sunwest Industries Inc. In 1994 it merged with International
Training & Education Corp., changed its name to International Training &
Education Corp. and became a Nevada corporation. In 1996 it changed its name to
DigiMedia USA, Inc. In May 1997 it merged with Nitros Franchise Corporation and
changed its name to Nitros Franchise Corporation. In July 1997 QuikBIZ changed
its name to Algorhythm Technologies Corporation. In July 1998 its name was
changed to QuikBIZ Internet Group, Inc.
As a result of QuikBIZ's merger with Nitros Franchise Corporation in May
1997 and the change in management that accompanied the merger, QuikBIZ changed
the focus of its business to the acquisition and development of Internet-related
businesses. QuikBIZ phased out its prior business, which consisted of developing
computer based training courses for the law enforcement industry. In November
1997, QuikBIZ acquired A.D.S. Advertising Corp., doing business as The Smith
Agency (now SmithAgency.com), and in July 1998 QuikBIZ acquired QuikLAB
Multimedia Centers, Inc.
On July 1, 1998, we completed the acquisition of QuikLAB. Accordingly, our
financial statements have been presented to combine the consolidated financial
statements of QuikLAB and SmithAgency.com for the periods presented.
Since the reverse merger with Nitros Franchise Corporation in May 1997, our
operations have related primarily to recruiting personnel, raising capital, and
completing the acquisitions of SmithAgency.com (November 1998), QuikLAB
Multimedia Centers (July 1998) and G & L Group (September 1999). Through
December 31, 1998, we have derived our revenues from two of our wholly-owned
subsidiaries: SmithAgency.com and QuikLAB. Revenues from wholly-owned
subsidiaries represented 100% of our revenues for the year ended December 31,
1998.
QuikBIZ's consolidated financial statements included SmithAgency.com for
the twelve months ended December 31, 1998, and the six-months ended December 31,
1998.
Results of Operations
Our revenues have grown from $140,355 in 1997 to $2.1 million in 1998 on an
actual basis, and to $2.9 million in 1998 on a pro forma basis giving effect to
our acquisitions. We achieved this growth through acquisitions of established
companies.
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The consolidated December 31, 1998 financial statements included a net loss
of $783,364, of which $410,970, or 52.5%, was non-cash and mainly attributable
to acquisition costs, including goodwill, amortization expense and employee
stock options. For the six months ending June 30, 1999, we had a net cash loss
of $119,159, before depreciation, amortization and interest expenses.
Sources of Revenues and Revenue Recognition
QuikBIZ consolidates the financial statements of acquired entities
beginning on the date QuikBIZ assumes effective control of those entities.
Revenues primarily consist of advertising and multimedia productions. We derive
our revenues from services performed under one of three pricing arrangements:
retainer, time-and-materials and fixed-price.
We bill and recognize revenues from retainer agreements on a monthly basis
while the agreements are in effect. Retainer agreements are generally one year
in length and include a renewal clause. Typically, retainer relationships with
clients result in additional fixed-price and time-and-materials projects.
Retainer fees currently represent a small percentage of our overall revenues,
although revenues from clients with whom we have retainer relationships
represent a substantial portion of our overall revenues. Consistent with our
focus on long-term relationships, our goal is to increase our number of
retainer-based arrangements.
We bill and recognize revenues from time-and-materials projects on the
basis of costs incurred in the period. We use a standardized estimation and work
plan development process to determine the requirements and estimated price for
each project. This process takes into account the type and overall complexity of
the project, the anticipated number of personnel of various skill sets needed
and their associated billing rates, and the estimated duration of and risks
associated with the project. Management personnel familiar with the production
process evaluate and price all project proposals.
We recognize revenues from fixed-price projects using the
percentage-of-completion method based on the ratio of costs incurred to the
total estimated project costs. Fees are billed to the client over the course of
the project. We estimate the price for fixed-price projects using the same
methodology as time-and-materials projects. All fixed-price proposals must first
be approved by a member of our senior management team.
We report revenue net of reimbursable expenses. Our revenues and earnings
are affected by a number of factors, including:
- - the amount of business developed from existing relationships;
- - our ability to meet the changing needs of the marketplace;
- - employee retention;
- - billing rates;
- - our ability to deliver complex projects on time; and
- - efficient utilization of our employees.
Many of our business initiatives, including our acquisition strategy, are
aimed at enhancing these factors.
Our expenses include direct costs, sales and marketing, general and
administrative, depreciation and amortization of tangible assets, and
amortization of goodwill. Direct costs includes salaries, benefits and incentive
compensation of billable employees and other direct costs associated with
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<PAGE>
revenue generation. Selling, general and administrative expenses include the
salaries and benefits costs of management and other non-billable employees,
sales and marketing expenses rent, accounting, legal and operational costs.
Depreciation and amortization expenses primarily include depreciation of
technology equipment, furniture and fixtures and leasehold improvements.
Amortization of goodwill expenses include charges for the excess of purchase
price over net tangible book value of acquired companies. Personnel compensation
and facilities costs represent a high percentage of our operating expenses and
are relatively fixed in advance of each quarter.
Acquisition of Internet-Related Professional Services Firms
In addition to organic growth, a key component of our overall growth
strategy is the acquisition of, or investment in, complementary businesses,
technologies, services and products. We have acquired three companies since 1997
and intend to continue acquiring similar businesses.
From July 1, 1997, to June 30, 1999, our staff increased from approximately
2 to approximately 33 employees.
We evaluate acquisitions based on numerous quantitative and qualitative
factors. Quantitative factors include historical and projected revenues and
profitability, geographic coverage and backlog of projects under contract.
Qualitative factors include strategic and cultural fit, management skills,
customer relationships and technical proficiency. We used our common stock as
the primary consideration. We anticipate that we will use common stock and cash
as the primary form of consideration for future acquisitions.
We fully integrate all acquired companies into our operating organization.
This integration includes business development, delivery of services, managerial
and administrative support, benefits, purchasing and all other areas.
All of our acquisitions have been accounted for using the purchase method.
Under the purchase method, the financial data of the acquired entities are
consolidated with our financial results from the effective dates of their
acquisition. For each acquisition, a portion of the purchase price is allocated
to the tangible and identifiable intangible assets acquired and liabilities
assumed based on their respective fair market values on the acquisition date.
The remaining unallocated portion of the purchase price is allocated to
intangible assets, primarily goodwill, and amortized on a straight-line basis
over the estimated period of benefit, which is currently 10 years. We evaluate
the period of benefit on a company-by-company basis. For the year ended December
31, 1998 and the six months ended June 30, 1999, amortization of goodwill
expense was $67,375 and $33,687, respectively. We expect to incur additional
acquisition-related amortization expenses as a result of our acquisition
program.
Comparison of the Fiscal Years 1997 and 1998
The following discussion relates to our actual operating results for the
periods noted. The operating results discussed include the operations of
acquired companies from the effective dates of their acquisitions. Given that
each year includes revenues and expenses from new acquisitions, we believe that
the operating results for 1998 are not directly comparable to the operating
results for 1997.
Revenues. Revenues were $140,355 in 1997 and grew to $2.1 million in 1998,
an increase of 1,426%. The increase in revenues reflected the acquisitions of
SmithAgency.com and QuikLAB.
Direct Costs. Direct salaries and costs were $126,703 in 1997 and grew to
$1.7 million in 1998, an increase of 1,284%. Direct costs represented 81% and
90% of revenues in 1998 and 1997, respectively. The increase in direct costs as
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<PAGE>
a percentage of revenues in 1998 compared to 1997 was primarily due to
acquisitions.
Selling, General and Administrative Expenses. General and administrative
expenses were $127,635 in 1997 and grew to $1.0 million in 1998, an increase of
702%. Selling, general and administrative expenses represented 48% of revenues
in 1998 and 90% in 1997. The increase in selling, general and administrative
expenses in absolute dollar terms and as a percentage of revenues in 1998
compared to 1997 was the result of our acquisitions and increases in expenses in
anticipation of future growth, including rent and other expenses incurred in
additional offices acquired through our acquisitions of SmithAgency.com and
QuikLAB and the hiring of additional employees.
Amortization of Goodwill. Amortization of goodwill was $11,062 in 1997 and
$67,373 in 1998. The increase in amortization of goodwill was the result of
there being only two months of amortization in 1997 and 12 months of
amortization in 1998.
Depreciation and Amortization. Depreciation and amortization expenses were
$74,687 in 1997 and grew to $121,590 in 1998, an increase of 62%. Depreciation
and amortization expenses represented 6% of revenues in 1998 and 51% of revenues
in 1997. The increases from year to year were related to the investment in, and
related depreciation of, technology equipment, furniture and fixtures, and
leasehold improvements, and the depreciation of the assets of the companies we
acquired.
Comparison of the Six Months Ended June 30, 1998 and June 30, 1999
Revenues. Revenues were $708,136 for the six months ended June 30, 1998 and
grew to $1.8 million for the six months ended June 30, 1999, an increase of
153%. The increase in revenues reflected our acquisitions over the period,
growing demand for Internet professional services and the introduction of new
strategy, creative and technology services to the marketplace.
Direct Costs. Direct costs were $430,871 for the six months ended June 30,
1998 and grew to $1.1 million for the six months ended June 30, 1999, an
increase of 151%. As a percentage of revenues, direct costs did not increase and
were 60% for the six months ended June 30, 1998 as compared to 60% for the six
months ended June 30, 1999.
Selling General and Administrative Expenses. Selling, general and
administrative expenses were $387,165 for the six months ended June 30, 1998 and
grew to $829,203 for the six months ended June 30, 1999, an increase of 106%. As
a percentage of revenues, general and administrative expenses decreased from 55%
for the six months ended June 30, 1998 to 46% for the six months ended June 30,
1999. The decrease in percentage terms was primarily attributable to improved
economies of scale. The increase in selling, general and administrative expenses
in absolute dollar terms was the result of the expansion of our infrastructure.
Depreciation and Amortization. Depreciation and amortization expenses were
$74,662 for the six months ended June 30, 1998 and decreased to $55,000 for the
six months ended June 30, 1999, an decrease of 25%. As a percentage of revenues,
depreciation and amortization represented 10% of revenues in the six months
ended June 30, 1998 and 3% of revenues in the six months ended June 30, 1999.
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<PAGE>
Liquidity and Capital Resources
Since inception, we have funded our operations and investments in property
and equipment through cash from operations, equity financings, borrowings from
commercial banks and capital leases.
Our cash and cash equivalents were $2,310 at December 31, 1997 and $18,059
at December 31, 1998, and our cash balance was $35,758 at June 30, 1999. Cash
used in operating activities of, $78,747 in 1997, $191,403 in 1998 and $136,001
in the six months ended June 30, 1999 was augmented by net proceeds from
financing activities of $41,916 in 1997, $132,837 in 1998 and $161,372 in the
six months ended June 30, 1999.
On July 9, 1999 we entered into an investment agreement with Swartz to
raise up to $20 million through a series of sales of common stock. The dollar
amount of each sale is limited by the trading volume and a minimum period of
time must occur between sales. In order to sell shares to Swartz, there must be
an effective registration statement on file with the SEC covering the resale of
the shares by Swartz and we must meet certain other conditions. The agreement
is for a three-year period ending July 9, 2002.
We have incurred recurring operating losses and negative cash flows from
operating activities and have negative working capital. We believe that our
available equity financing arrangement with Swartz will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
two years. However, there can be no assurance that we will receive financing
from Swartz, that we will not require additional financing within this time
frame or that such additional financing, if needed, will be available on terms
acceptable to us, if at all.
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded
to accept or recognize only two-digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, it is necessary to update the computer systems and/or
software used by many companies and governmental agencies to comply with Year
2000 requirements or risk system failure or miscalculations causing disruptions
of normal business activities.
We are exposed to the risk that the systems on which we depend to conduct
our operations are not Year 2000 compliant.
We have completed an assessment of our Year 2000 readiness. Our assessment
and testing has focused on three areas as follows:
Mission Critical Systems. Our mission critical systems are used for
timekeeping, accounting and the production of financial statements. Final
testing of these systems was completed in June 1999. We have received a Year
2000 warranty from the vendor who licenses the mission critical systems to us,
however monetary liability may be limited.
Critical Systems. Our critical systems consist of DNS services, e-mail,
routers and switches, telephone, voice mail systems, and desktop computers.
External Agents. Our external agents include vendors and licensors of other
hardware and software utilized by us. We are in the process of contacting these
vendors and licensors to request the status of Year 2000 readiness for those
products. We will continue to attempt to obtain verification from all remaining
distributors, suppliers, and vendors that their systems are Year 2000 compliant.
If we do not receive verification that the systems are compliant, we will
upgrade to compliant products.
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We have completed our testing and believe that we are 2000 compliant.
We do not intend to incur any additional costs for 2000 compliance and testing
issues.
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Business
QuikBIZ Internet Group, Inc. is a Nevada corporation. It was originally
incorporated in 1984 in Utah under the name Sunwest Industries Inc. In 1994 it
merged with International Training & Education Corp., changed its name to
International Training & Education Corp. and became a Nevada corporation. In
1996 it changed its name to DigiMedia USA, Inc. In May 1997, it merged with
Nitros Franchise Corporation and changed its name to Nitros Franchise
Corporation. In July 1997, QuikBIZ changed its name to Algorhythm Technologies
Corporation. In July 1998, its name was changed to QuikBIZ Internet Group, Inc.
As a result of QuikBIZ's merger with Nitros Franchise Corporation in May
1997 and the change in management that accompanied the merger, QuikBIZ changed
the focus of its business to the acquisition and development of Internet-related
businesses. QuikBIZ phased out its prior business, which consisted of developing
computer-based training courses for the law enforcement industry. In November
1997, QuikBIZ acquired A.D.S. Advertising Corp., doing business as The Smith
Agency (now SmithAgency.com, Inc.), and in July 1998, QuikBIZ acquired QuikLAB
Multimedia Centers, Inc.
Through its QuikBIZ Mall division and its principal subsidiaries, QuikLAB
and SmithAgency.com, QuikBIZ is developing several complimentary
Internet-oriented businesses.
The QuikBIZ Mall. The QuikBIZ Mall is intended to be a virtual mall for
"business to business" corporate communications. We expect that the QuikBIZ Mall
will enable businesses to browse virtual, service-oriented specialty stores and
order services on-line. We expect that the services offered through the QuikBIZ
Mall will include Internet television and radio services, Internet consulting,
duplication services, animation services, advertising services and presentation
services. It is anticipated that all of our subsidiaries and business units, as
well as certain strategic partners, will be "tenants" in the QuikBIZ Mall. We
expect to create each merchant store and to purchase products directly through
"drop-ship" vendors. The vendors will bill us for products or services purchased
at the Mall and we will bill the purchasers. Each store is expected to have its
own separate URL and is expected to be marketed independently of the mall.
Today, the majority of corporate communication products and services are
offered through traditional marketing channels, including audio/video dealers
and catalog/mail order houses. The QuikBIZ Mall will provide much more than the
traditional marketing channels of selling products and service. The site will
offer businesses greater product selection, product comparison, discount
pricing, one-stop shopping, easy ordering and fast shipping.
QuikLAB Multimedia Centers, Inc. QuikLAB is a retail, business-oriented,
multimedia pro duction facility. It offers a wide variety of audio, video,
multimedia and Internet services and products to businesses, government
agencies, non-profit organizations, schools, universities, religious
organizations and consumers. QuikLAB produces and assists companies in creative
content for all types of corporate communications including sales, training,
public relations and promotion. QuikLAB provides services in the development of
Internet and Intranet sites, interactive media, video and audio production,
video and audio digital encoding, animation, video/audio/CD duplication and
media package design and collateral materials. Most of the services offered
through QuikLAB are done in-house. We offer free pick-up, free delivery and same
day service. More than 70% of QuikLAB's clientele are businesses using
electronic media for sales, training, public relations, promotion and corporate
communications. QuikLAB also acts as a service bureau, providing services for
all formats of audio/visual and interactive media.
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QuikLAB has been operating a multimedia center in Fort Lauderdale, Florida
since 1991. It has developed and tested proprietary systems for operating retail
multimedia centers and plans to open retail multimedia centers in major cities
in the United States during the next three years. QuikLAB served over 9,000
clients within the last four years. QuikLAB was founded by its President, David
Bawarsky, who is the Chief Executive Officer and Chairman of QuikBIZ.
Quoteit.com. Quoteit.com is an Internet site created and managed by QuikLAB
that enables businesses, non-profit corporations, and government agencies to
shop for media duplication services on-line. Visitors to the site can name their
own price for any quantity of audio, video, CD-Rom, digital video disc (DVD) and
diskette duplication services. QuikLAB provides the duplication services through
its own facilities and through major duplication/replication companies
throughout the United States. Potential vendors are approved through an
application process. If a vendor is approved, it becomes part of a pool of
vendors that we approach with the consumer's bid price.
SmithAgency.com. SmithAgency.com is a full service agency specializing in
advertising and public relations services. SmithAgency.com has been in business
since 1983 and was founded by Andrew Smith, the President of QuikBIZ.
SmithAgency.com offers a broad range of services to its clients, including
television and radio commercial development and production, print advertisement
development and production, direct marketing, promotions, general image
advertising, design services and Internet site design. The traditional marketing
services offered by SmithAgency.com include the development and planning of the
advertising, including creative design and production of the advertisements,
media research, planning and buying of space and time, and market research.
Direct marketing and promotions offered by SmithAgency.com include direct
mail, direct response and 800 number services, as well as on-line marketing. The
development and the design of interactive campaigns are part of the promotion
aspect of the agency's business.
General image advertising focuses on the company or organization as a whole
and not on a specific product. This "branding" effort is an important element in
building consumer confidence.
SmithAgency.com represents clients in a wide variety of industries,
including healthcare, automotive, consumer packaged goods, entertainment and the
food industry. Among its clients are a number of well-known organizations,
including Papa John's Pizza, Enmark Stations, Hollywood Video and St. Joseph's
Candler Health Systems.
Recent Events
On August 31, 1999, we completed the acquisition of substantially all of
the assets of Gallaspy & Lobel, Inc., an advertising firm based in south Florida
doing business under the name G&L Group. We acquired all of G&L Group's
contracts and pending orders with its existing active clients, as well as all of
G&L Group's accounts receivable relating to its existing active clients. The
accounts receivable we acquired totaled approximately $500,000. In consideration
for G&L Group's assets, we agreed to pay G&L Group $610,000, payable in shares
of our common stock, and we assumed approximately $750,000 of G&L Group's
liabilities. We issued 366,000 shares of common stock to G&L Group on September
1, 1999, valued for purposes of the transaction at $1.25 per share, and we are
obligated to issue another 122,000 shares within one year. In connection with
the acquisition, James Lobel, the president of G&L Group, entered into a three
year employment agreement with us and agreed to become the president of
SmithAgency.com.
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Competition
The QuikBIZ Mall. There are presently a limited number of Internet sites
focusing specifically on corporate communication products and services. These
Internet sites fall under three types: manufac turers' websites, dealers'
websites, and business portal websites.
Manufacturers of communication products who have websites generally do not
offer their products directly to the end user through the websites. These
manufacturers use traditional marketing channels such as local audio/visual
dealers, wholesalers and catalog houses to sell their products. Manufacturers
generally use their websites only to disseminate product and dealer information.
Most dealers and vendors of communication products market to production
companies, schools and government agencies. Very few dealers market directly to
businesses, and many of these dealers presently do not offer on-line ordering.
Local retail outlets for these products and services are extremely rare.
Nevertheless the opportunity exists, since businesses spend billions each year
using electronic media equipment and supplies for sales, marketing, training,
communication and other uses.
Business portals that provide business information generally have limited
offerings of communications products and services. Business portals that offer
some e-commerce products usually just redirect purchasers through hot links to
third-party merchant websites.
Other virtual shopping malls group products and/or virtual stores together
but send consumers to individual merchants' websites to complete the purchase.
The problem with this is that once consumers are redirected to other sites, they
start to go direct, bypassing the original referring site.
The QuikBIZ Mall will receive a gross profit percentage from each sale
ranging from 5% to 40%, after discounting. QuikBIZ deals directly with its
suppliers, buying at greatly discounted prices, providing higher profit
percentages than most other virtual malls. Most other virtual malls are
middlemen, collecting commissions from banner ads and click-through and
re-direct referrals. These types of commissions are generally low, ranging from
3% to 15% of the sale.
QuikLAB Multimedia Centers. Many businesses compete with QuikLAB in some
aspects of the video, multimedia and the Internet industries. This competition
includes traditional video production facilities, cable companies, television
stations, duplication facilities, ISP companies, web development companies, ad
agencies and service bureaus. Most of QuikLAB's competitors operate from office
buildings or warehouses. Some limit their services to commercial or trade
clients only; others are even more specialized.
QuikLAB is different from most of its competition because it operates in a
convenient retail setting, with retail walk-in hours, and caters to businesses,
schools, universities, government agencies, non-profit organizations, religious
organizations and consumers. As a full service, retail multimedia showroom,
QuikLAB's retail shops provide an alternative to visiting several different,
unrelated facilities to complete a multimedia project.
SmithAgency.com.
The marketing and communications industry is very competitive and is
expected to remain so. SmithAgency.com's primary competitors are the advertising
firms in south Florida, but SmithAgency.com also faces competition from small-
to mid-size firms in cities around the country. Competition in the advertising
industry is based upon creativity, knowledge of media, ability to service a
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client, financial controls and "chemistry" with the client. Firms that have
focused primarily in public relations are beginning to accept assignments for
non-public relations work. The Internet appears to be giving rise to an influx
of competitors who are not necessarily trained in the traditional aspects of the
advertising industry.
Government Regulation
Our Internet-related businesses, including the QuikBiz Mall, are presently
not subject to extensive government regulation. However, because the Internet is
still evolving, new laws or regulations may be implemented in the future that
specifically impact our Internet-related businesses. New laws or regulations may
address issues such as user privacy, freedom of expression, pricing of products
and services, taxation, advertising, intellectual property rights, information,
security and the convergence of traditional communications services with
Internet communications.
The advertising services produced by SmithAgency.com are subject to the
Federal Trade Commission Act and the regulations of the Federal Trade
Commission. The FTC Act proscribes false advertising, misleading and unfair
advertising and similar practices.
Employees
QuikBIZ has two employees, QuikLAB has 16 employees and SmithAgency.com has
15 employees. None of our employees is represented by a labor union. We consider
our relations with our employees to be good.
Litigation
QuikLAB is a defendant in a lawsuit filed in June 1999 in the Circuit Court
of the Seventeenth Judicial Circuit, in Broward County, Florida. The plaintiff,
Lynda V. McGlawn, is seeking to collect a debt resulting from the assignment to
her by Telephonetics International, Inc. of a debenture of QuikLAB the amount of
$110,000. QuikLAB previously filed a separate action in the Circuit Court
against Telephonetics International, Inc. alleging, among other things, that
QuikLAB was fraudulently induced to execute the debenture, and QuikLAB is
currently seeking to have the two lawsuits consolidated.
Properties
Our subsidiaries lease the following properties:
<TABLE>
Subsidiary Location Area Yearly Rent Termination Date
---------- -------- ---- ----------- ----------------
<S> <C> <C> <C> <C> <C>
SmithAgency.com 6801 Powerline Road 10,000 square $6,500 8/31/2004*
Ft. Lauderdale, FL feet
33309
SmithAgency.com 5310 N.W. 33rd 2,746 square $3,098 1/31/2001
Ave., Ste. 212 feet
Ft. Lauderdale, FL
33309
</TABLE>
- --------
* SmithAgency.com has an option to renew this lease for an additional
three-year term.
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<TABLE>
Subsidiary Location Area Yearly Rent Termination Date
---------- -------- ---- ----------- ----------------
<S> <C> <C> <C> <C> <C>
QuikLAB 2121 W. Oakland 6,700 square $7,575 2/01/2006
Park Blvd., Suite 8 feet
Ft. Lauderdale, FL
33311
</TABLE>
We are consolidating the operations of SmithAgency.com at 6801 Powerline
Road in Ft. Lauderdale and expect to sublet the offices at 5310 N.W. 33rd Avenue
in Ft. Lauderdale in the near future.
Selling Shareholders
The following table provides certain information with respect to the
selling shareholders' beneficial ownership of our common stock as of September
24, 1999, and as adjusted to give effect to the sale of all of the shares
offered hereby. None of the selling shareholders currently is an affiliate of
ours, and none of them has had a material relationship with us during the past
three years. None of the selling shareholders are or were affiliated with
registered broker-dealers. See "Plan of Distribution." The selling shareholders
possess sole voting and investment power with respect to the securities shown.
<TABLE>
Shares Beneficially
Owned
Number of Shares After Offering(2)
Beneficially --------------------
Owned Number of Number
Name Before Offering Shares Offered of Shares Percentage
----- ----------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Swartz Private Equity, 33,500,000 33,500,000 0 0
LLC
M.H. Meyerson & Co., Inc. 600,000 600,000 0 0
Peter Kertes 76,923 76,923 0 0
Renee Kertesz 100,000 100,000 0 0
Gyorgy Katz 64,000 64,000 0 0
</TABLE>
(1) Represents the maximum number of shares of common stock that we may sell to
Swartz pursuant to the Investment Agreement and upon the exercise by Swartz
of options issued or issuable in connection with the Investment Agreement.
It is expected that Swartz will not own beneficially more than 9.9% of our
outstanding common stock at any time.
(2) Assumes that all shares will be resold by the selling shareholders and none
will be held by the selling shareholders for their own accounts.
Amended and Restated Investment Agreement
On July 9, 1999, we entered into an Investment Agreement with Swartz, which
was subsequently amended and restated as of July 9, 1999. The amended and
restated Investment Agreement entitles us to issue and sell our common stock to
Swartz for up to an aggregate of $20 million from time to time during the
three-year period ending on July 9, 2002. Each election by us to sell stock to
Swartz is referred to as a put right.
23
<PAGE>
Put rights. In order to invoke a put right, we must have an effective
registration statement on file with the SEC registering the resale of the shares
of common stock that may be issued as a consequence of the exercise of that put
right. We must also give at least 10 but not more than 20 business days' advance
notice to Swartz of the date on which we intend to exercise a particular put
right and we must indicate the maximum number of shares of common stock that we
intend to sell to Swartz. At our option, we may also designate a maximum dollar
amount of common stock (not to exceed $3 million) that we will sell under the
put and/or a minimum purchase price per common share at which Swartz may
purchase shares under the put. The minimum purchase price may not exceed 82.5%
of the closing bid price of our common stock on the date on which we give Swartz
advance notice of our exercise of a put right. The number of common shares sold
to Swartz may not exceed the lesser of 15% of the aggregate daily reported
trading volume during a period that begins on the business day immediately
following the day we exercise the put right and ends on and includes the day
that is 20 business days after the date we exercise the put right, or 9.9% of
the total number of shares of common stock that would be outstanding upon
completion of the put.
For each share of common stock, Swartz will pay us the lesser of:
o the market price for such share, minus $.10, or
o 91% of the market price for the share;
provided, however, that Swartz may not pay us less than the designated minimum
per share price, if any, that we indicate in our notice.
Market price is defined as the lowest closing bid price for the common
stock on its principal market during the pricing period. The pricing period is
defined as the 20 business days immediately following the day we exercise the
put right.
Warrants. Within five business days after the end of each pricing period,
we are required to issue and deliver to Swartz a warrant to purchase a number of
shares of common stock equal to 10% of the common shares issued to Swartz in the
applicable put. Each warrant will be exercisable at a price that will initially
equal 110% of the market price on the date on which we exercised the put right.
Each warrant will be immediately exercisable and have a term beginning on the
date of issuance and ending five years thereafter.
Limitations and conditions precedent to our put rights. Swartz is not
required to acquire and pay for any shares of common stock with respect to any
particular put for which, between the date we give advance notice of an intended
put and the date the particular put closes:
o we have announced or implemented a stock split or combination of our
common stock;
o we have paid a common stock dividend;
o we have made a distribution of all or any portion of our assets or
evidences of indebtedness to the holders of our common stock; or
o we have consummated a major transaction, such as a sale of all or
substantially all of our assets or a merger or tender or exchange
offer that results in a change of control of QuikBIZ.
Short sales. Swartz and its affiliates are prohibited from engaging in
short sales of our common stock unless Swartz has received a put notice under
which shares have not yet been issued and the amount of shares involved in the
short sale does not exceed the number of shares specified in the put notice.
24
<PAGE>
Cancellation of puts. We must cancel a particular put between the date of
the advance put notice and the last day of the pricing period if:
o we discover an undisclosed material fact relevant to Swartz's
investment decision;
o the registration statement registering resales of the common shares
becomes ineffective; or
o our shares are delisted from the then primary exchange.
If a put is canceled, it will continue to be effective, but the pricing
period for the put will terminate on the date notice of cancellation of the put
is given to Swartz. Because the pricing period will be shortened, the number of
shares Swartz will be required to purchase in the canceled put will be smaller
than it would have been had the put not been canceled.
Shareholder approval. Under the Investment Agreement, we may sell Swartz a
number of shares that is more than 20% of our shares outstanding on the date of
this prospectus. If we become listed on The Nasdaq Small Cap Market or Nasdaq
National Market, we may be required to obtain shareholder approval to issue some
or all of the shares to Swartz. As we are currently a Bulletin Board company, we
do not need shareholder approval.
Termination of Investment Agreement. We may terminate our right to initiate
further puts or terminate the Investment Agreement at any time by providing
Swartz with notice of such intention to terminate; however, any such termination
will not affect any other rights or obligations we have concerning the
Investment Agreement or any related agreement.
Restrictive covenants. During the term of the Investment Agreement and for
a period of 90 days after the Investment Agreement is terminated, we are
prohibited from engaging in certain transactions. These include the issuance of
any equity securities, or debt securities convertible into equity securities,
for cash in a private transaction without obtaining the prior written approval
of Swartz. We are also prohibited from entering into any private equity line
type agreements similar to the Investment Agreement without obtaining Swartz's
prior written approval.
Right of first refusal. Swartz has a right of first refusal, subject to
another first refusal obligation for which we are contractually obligated, to
participate in any private capital raising transaction of equity securities that
closes from the date of the Investment Agreement (July 9, 1999) through 90 days
after the Investment Agreement is terminated.
Swartz's right of indemnification. We have agreed to indemnify Swartz
(including its stockholders, officers, directors, employees, investors and
agents) from all liability and losses resulting from any misrepresentations or
breaches we make in connection with the Investment Agreement, our registration
rights agreement, other related agreements, or the registration statement.
Additional Securities Being Registered
On July 14, 1999, we issued warrants to purchase 600,000 shares of common
stock to M.H. Meyerson & Co., Inc. in connection with our entry into an
agreement with M.H. Meyerson & Co., Inc. pursuant to which M.H. Meyerson & Co.,
Inc. agreed to provide certain investment banking services to us for five years
beginning on July 14, 1998. The warrants expire on July 14, 2003.
On February 17, 1999, we sold 76,923 shares of common stock to Peter Kertes
at a price of $.78 per share. On August 20, 1999, we sold 100,000 shares of
common stock to Renee Kertesz at a price of $.50 per share and 64,000 shares of
common stock to Gyorgy Katz at a price of $.50 per share.
25
<PAGE>
Plan of Distribution
Each selling shareholder is free to offer and sell his or her common shares
at such times, in such manner and at such prices as he or she may determine. The
types of transactions in which the common shares are sold may include
transactions in the over-the-counter market (including block transactions),
negotiated transactions, the settlement of short sales of common shares or a
combination of such methods of sale. The sales will be at market prices
prevailing at the time of sale or at negotiated prices. Such transactions may or
may not involve brokers or dealers. The selling shareholders have advised us
that they have not entered into agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their shares. The
selling shareholders do not have an underwriter or coordinating broker acting in
connection with the proposed sale of the common shares.
The selling shareholders may sell their shares directly to purchasers or to
or through broker-dealers, which may act as agents or principals. These
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling shareholders. They may also receive compensation
from the purchasers of common shares for whom such broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). Swartz
is, and each remaining selling shareholder and any broker-dealer that assists in
the sale of the common stock may be deemed to be, an underwriter within the
meaning of Section 2(a)(11) of the Securities Act. Any commissions received by
such broker-dealers and any profit on the resale of the common shares sold by
them while acting as principals might be deemed to be underwriting discounts or
commissions. The selling shareholders may agree to indemnify broker-dealers for
transactions involving sales of the common stock against certain liabilities,
including liabilities arising under the Securities Act.
Because Swartz is and the remaining selling shareholders may be deemed to
be "underwriters" within the meaning of Section 2(a)(11) of the Securities Act,
the selling shareholders will be subject to prospectus delivery requirements.
We have informed the selling shareholders that the anti-manipulation rules
of the SEC, including Regulation M promulgated under the Securities and Exchange
Act, may apply to their sales in the market and has provided the selling
shareholders with a copy of such rules and regulations.
Selling shareholders also may resell all or a portion of the common shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
We are responsible for all costs, expenses and fees incurred in registering
the shares offered hereby. The selling shareholders are responsible for
brokerage commissions, if any, attributable to the sale of such securities.
Management
The following persons are our current directors, executive officers and
significant employees:
26
<PAGE>
Name Age Position
Andrew D. Smith 41 President and Director
David Bawarsky 44 Chief Executive Officer and
Director
Kirk J. Girrbach 41 Treasurer and Director
Dr. Bohdan Moroz 61 Director
James Lobel 55 President of
SmithAgency.com
Andrew D. Smith has been President and a director since November 1997. Mr.
Smith was the President of our wholly-owned subsidiary, SmithAgency.com, from
1983, when he founded SmithAgency.com, until August 1999. From 1991 to 1996, Mr.
Smith was President of Videotape Supply Company, Inc., a company engaged in the
business of manufacturing videotapes.
David Bawarsky has served as our Chief Executive Officer since May 1997 and
as a director since March 1997. He served as President from May 1997 to November
1997. Mr. Bawarsky served as President of our wholly-owned subsidiary, QuikLAB,
since 1991, when he founded QuikLAB. From July 1997 to March 1998, Mr. Bawarsky
served as President and a director of Telephonetics International, Inc., a
company engaged in the business of telephone advertising. Mr. Bawarsky was a
consultant to QuikBIZ from 1995 to May 1997. From 1991 to 1997 Mr. Bawarsky was
Vice President of Videotape Supply Company, Inc., a company engaged in the
business of manufacturing video tapes. He was also an independent video
consultant from 1990 to 1997.
Kirk J. Girrbach has served as a director and Treasurer since April 1998.
Mr. Girrbach is a lawyer and since 1990 has conducted a law practice in Ft.
Lauderdale, Florida, concentrating in the areas of securities, construction,
contracts and real estate law. From November 1991 to May 1997, Mr. Girrbach
served as President and director of QuikBIZ. From December 1985 to November 1994
he was a police officer and detective with the Ft. Lauderdale Police Department.
Dr. Bohdan Moroz has served as a director since November 1997. Since 1982,
he has been a licensed and practicing psychiatrist at Holy Cross Hospital in Ft.
Lauderdale, Florida. He is a member of the American Medical Association,
Canadian Royal College of Physical Medicine & Rehabilitation, American Congress
of Physical Medicine & Rehabilitation, and the Broward County Medical
Association.
James Lobel has served as President of SmithAgency.com since September 1,
1999. He was the President of G&L Group from 1989, when he founded G&L Group, to
August 31, 1999. He was the Treasurer of Harvey Studios, inc., an advertising
design firm, from 1983 to 1989. He was selected as a Business Leader in
Advertising & Public Relations by The Daily Business Review in 1994 and was
named "Adman of the Year" in 1998 by the Ft. Lauderdale Ad Club.
27
<PAGE>
Executive Compensation
The following table lists the cash remuneration paid or accrued during
1998, 1997 and 1996 to Messrs. Bawarsky and Smith. Except for Messrs. Bawarsky
and Smith, none of our executive officers received compensation of $100,000 or
more from us in 1998.
Summary Compensation Table
<TABLE>
Name and Principal Other Annual Securities Underlying
Position Year Salary($) Bonus($) Compensation($) Options(#)
---------- ---- --------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
David Bawarsky 1998 87,501(1) 0 11,000(2) 200,000
Chief Executive Officer
1997 0 0 0 300,000
Andrew Smith 1998 100,000 0 0 0
President
1997 16,500 0 1,500(3) 200,000
</TABLE>
- ----------------
(1) $34,617 of this amount has been deferred and will be paid in the form of
shares of common stock, valued at market price on the date of issue.
(2) Consists of $5,200 life insurance premiums and $5,800 of automobile lease
and insurance payments.
(3) Consists of $1,500 of automobile lease and insurance payments.
The following table shows options to purchase common stock granted to
Messrs. Bawarsky and Smith during 1998.
Option Grants in 1998
<TABLE>
Number of
Securities % of Total Options
Underlying Options Granted To Employees
Name Granted(#) In Fiscal Year Exercise Price Expiration Date
---- ----------------- --------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
David Bawarsky 200,000 100% $.002 6/16/2000
Andrew Smith -0- -0- N/A N/A
</TABLE>
The following table shows the aggregate number of options to purchase
common stock held by Messrs. Bawarsky and Smith, and the value of such options
at December 31, 1998. Neither Mr. Bawarsky nor Mr. Smith exercised any options
in 1998.
28
<PAGE>
1998 Year-End Option Values
<TABLE>
<CAPTION>
Value of securities underlying
Number of securities underlying unexercised in-the-money options at
Name unexercised options at December 31, 1998 December 31, 1998(1)
---- ---------------------------------------- ------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
David Bawarsky 500,000 0 $219,600 $0
Andrew Smith 200,000 0 $105,600 $0
</TABLE>
- -------------
(1) Represents the total gain that would be realized if all in-the-money
options held at December 31, 1998 were exercised, determined by multiplying
the number of shares underlying the options by the difference between the
per share option exercise price and $.53, the average of the high and low
bid prices of the common stock on December 31, 1998.
Director Compensation
We granted options to purchase 30,000 shares of common stock at a price of
$.002 per share to each of Kirk J. Girrbach and Dr. Bohdan Moroz in June 1998 as
compensation for their services as directors during 1998. The options were fully
vested upon grant. Directors who were also employees did not receive any
compensation for their services as directors in 1998. We have not yet determined
how our non-employee directors will be compensated in 1999.
Employment Agreements
QuikLAB has an employment agreement with David Bawarsky, dated June 16,
1998 and expiring June 15, 2003, pursuant to which Mr. Bawarsky serves as
Chairman, President and Chief Executive Officer of QuikLAB. QuikBIZ assumed
QuikLAB's obligations under the employment agreement when QuikBIZ acquired
QuikLAB in July 1998. Mr. Bawarsky's employment agreement provides for a present
base annual salary of $210,000 and a non-accountable expense allowance of
$25,000 per year. The employment agreement also provides a customary benefits
package, including two automobiles and term life insurance, payable to Mr.
Bawarsky's beneficiaries, in the amount of $2,000,000, and term life insurance
on the life of Mr. Bawarsky's wife in the amount of $500,000 payable to Mr.
Bawarsky. Mr. Bawarsky's employment agreement prohibits him from competing with
QuikLAB during the term of the agreement or disclosing confidential information
or trade secrets of QuikBIZ in any unauthorized manner at any time. If QuikBIZ
terminates Mr. Bawarsky's employment or changes his duties without his consent,
QuikBIZ will be obligated to pay Mr. Bawarsky severance pay of $2,000,000. Under
his employment agreement, Mr. Bawarsky is entitled to receive an annual
performance incentive bonus based upon the net profits of QuikLAB, as follows:
Percentage of Net Profits
Net Profits of QuikLAB Payable to Executive
---------------------- ------------------------
$0 to $149,000 10%
$150,000 to $299,000 15%
$300,000 or greater 20%
SmithAgency.com has an employment agreement with Andrew Smith, dated
October 30, 1997 and expiring October 30, 2002, pursuant to which Mr. Smith
serves as President of QuikBIZ and pursuant to which he served as President of
29
<PAGE>
SmithAgency.com until August 1999. Mr. Smith's employment agreement provides for
a present base annual salary of $110,000, with a customary benefits package,
including an automobile. Mr. Smith's employment agreement prohibits him from
competing with SmithAgency.com during the term of the agreement or disclosing
confidential information or trade secrets of QuikBIZ in any unauthorized manner
at any time. Mr. Smith is entitled to receive performance incentive bonuses for
1999 and 2000 as determined by SmithAgency.com in its discretion, provided that
the bonus paid for 2000 may not be less than the bonus paid for 1999.
SmithAgency.com has an employment agreement with James Lobel, dated August
31, 1999 and expiring August 31, 2002, pursuant to which Mr. Lobel serves as
President of SmithAgency.com. Mr. Lobel's employment agreement provides for a
present base annual salary of $120,000 per year, a non-accountable expense
allowance of $10,000 for the first year of the agreement, $40,000 worth of
common stock of QuikBIZ, and a customary benefits package, including an
automobile. Pursuant to a separate Noncompete/Nondisclosure agreement, Mr. Lobel
is prohibited from competing with SmithAgency.com during the term of the
agreement and for three years after termination of the agreement and from
disclosing confidential information or trade secrets of SmithAgency.com in any
unauthorized manner during such time. Mr. Lobel is entitled to receive a
performance bonus equal to 10% of SmithAgency.com's net profits, subject to a
maximum of $250,000 per year, payable at his option in cash or common stock of
QuikBIZ.
Principal Shareholders
The following table sets forth certain information regarding beneficial
ownership of our common stock as of September 24, 1999 by (i) each shareholder
known by us to be the beneficial owner of 5% or more of the outstanding common
stock, (ii) each of our directors and (iii) all directors and executive officers
as a group. Except as otherwise indicated, we believe that the beneficial owners
of the common stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws where applicable. Shares of common stock issuable upon
exercise of options and warrants that are currently exercisable or exercisable
within 60 days of September 24, 1999 have been included in the table.
<TABLE>
Percent of Class
Name and Address of Amount and Nature of Beneficial ----------------------------------
Beneficial Owner Ownership Before Offering After Offering
-------------------- ------------------------------- --------------- --------------
<S> <C> <C> <C>
David Bawarsky 5,625,237(1) 38.8% 12.6%
6184 Vista Linda Lane
Boca Raton, Florida 33433
Andrew D. Smith 2,512,550(2) 17.7% 5.7%
20955 Vieto Terrace
Boca Raton, Florida 33433
Kirk J. Girrbach 1,303,547(3) 9.2% 3.0%
6550 N. Federal Highway
Ft. Lauderdale, Florida 33308
Dr. Bohdan Moroz 497,857(4) 3.6% 1.1%
250 Compass Drive
Ft. Lauderdale, Florida 33308
</TABLE>
30
<PAGE>
<TABLE>
Percent of Class
Name and Address of Amount and Nature of Beneficial ----------------------------------
Beneficial Owner Ownership Before Offering After Offering
-------------------- ------------------------------- --------------- --------------
<S> <C> <C> <C>
Anthony J. Ard 1,000,000(5) 7.1% 2.3%
240 S.E. 28th Avenue
Pompano Beach, Florida 33062
Officers and directors as a group 9,939,191(1)(2)(3)(4) 66.9% 22.2%
(4 persons)
</TABLE>
- --------------------------
(1) Includes 500,000 shares of common stock issuable upon exercise of
outstanding options. Does not include 25,000 shares of common stock owned
by Mr. Bawarsky's father, Henry Bawarsky. David Bawarsky disclaims
beneficial ownership of the shares held by Henry Bawarsky.
(2) Includes 200,000 shares of common stock issuable upon exercise of
outstanding options. Does not include 400,000 shares of common stock owned
by Mr. Smith's parents, Howard and Elaine Smith. Andrew Smith disclaims
beneficial ownership of the shares held by Howard and Elaine Smith.
(3) Includes 130,000 shares of common stock issuable upon exercise of
outstanding options. Does not include an aggregate of 218,000 shares of
common stock held by several adult members of Mr. Girrbach's family. Mr.
Girrbach disclaims beneficial ownership of the shares held by such persons.
(4) Includes 30,000 shares of common stock issuable upon exercise of
outstanding options, 25,000 shares held by Dr. Moroz' wife and 11,428
shares held by Dr. Moroz' son.
(5) Does not include 20,000 shares held by Mr. Ard's brother, Michael Ard.
Anthony J. Ard disclaims beneficial ownership of the shares held by Michael
Ard.
Certain Transactions
We entered into an agreement with Kirk J. Girrbach, dated July 15, 1998,
pursuant to which we retained Mr. Girrbach as corporate counsel. Mr. Girrbach is
no longer our counsel. We agreed with Mr. Girrbach that Mr. Girrbach's
compensation (at the rate of $200 per hour) and reimbursement for costs would be
payable in shares of QuikBIZ common stock valued at market price on the date of
grant. As of the date of this prospectus, no such shares have been issued and a
total of $8,100 in fees and costs have been accrued and are payable to Mr.
Girrbach under the agreement.
On July 9, 1998, we acquired QuikLAB from David Bawarsky, our present Chief
Executive Officer and the then sole shareholder of QuikLAB. Pursuant to the
acquisition agreement, the outstanding shares of QuikLAB were canceled and
500,000 shares of common stock of QuikLAB were issued to us. In consideration
for such shares, we assumed QuikLAB's obligations to Mr. Bawarsky under his
employment agreement with QuikLAB and agreed that if by July 9, 2001 QuikLAB
doubles its $100,000 net profit for 1996, we will issue options to Mr. Bawarsky
to purchase a total of 2,800,000 shares of common stock, exercisable for five
years at a price of $.002 per share. In connection with our assumption of Mr.
Bawarsky's employment agreement, we issued options to Mr. Bawarsky to purchase
200,000 shares of QuikBIZ common stock, exercisable for two years from the date
31
<PAGE>
of issue at a price of $.002 per share. The acquisition agreement also provided
that Mr. Bawarsky would be entitled to elect to have his annual performance
incentive bonus paid in shares of QuikBIZ common stock. The acquisition
agreement also required that our board of directors consist of two persons, Mr.
Bawarsky and Andrew Smith, and contained our agreement that Mr. Bawarsky will
serve as our Chairman and Chief Executive Officer. Mr. Bawarsky has waived the
provision of the acquisition agreement limiting the board of directors to two
persons.
On June 25, 1998, we borrowed $50,000 from Cella Reyes, the wife of Dr.
Bohdan Moroz, pursuant to a promissory note due June 25, 1999 and bearing
interest at 12% per annum. In consideration for the loan, on June 26, 1999 we
issued warrants to purchase 25,000 shares of common stock at a price of $.17 per
share to Ms. Reyes. The warrants were exercised on June 25, 1999. We repaid the
note in full prior to the maturity date and applied $4,250 of the accrued
interest on the note to the exercise price of the warrants.
On November 7, 1997, we acquired SmithAgency.com from Andrew Smith.
Pursuant to the acquisition agreement, all of the outstanding shares of
SmithAgency.com were canceled, SmithAgency.com issued 6,500 shares of its common
stock to us and we issued 2,300,000 shares of our common stock to Andrew Smith.
Pursuant to the acquisition agreement, we caused SmithAgency.com to enter into
an employment agreement with Mr. Smith and, in connection with such employment
agreement, we issued options to Mr. Smith to purchase 200,000 shares of our
common stock, exercisable for two years at a price of $.002 per share. The
acquisition agreement also provided that Mr. Smith shall serve as President and
a director of QuikBIZ.
In July 1997, in exchange for 1,000,000 shares of common stock, we acquired
the rights to the name "Algorythm Technologies International Inc." from
Telephonetics International, Inc. David Bawarsky, who was our President and one
of our directors at the time of the transaction, and Alan J. Kvares, who was one
of our directors at the time of the transaction, were the controlling
shareholders and principal officers of Telephonetics International, Inc. We
returned the rights to the name "Algorythm Technologies International, Inc." to
Telephonetics International, Inc. in 1998 and the 1,000,000 shares issued to
Telephonetics International, Inc. were returned to us at that time.
In June 1997 we issued 144,077 shares of common stock to Kirk J. Girrbach
and 144,076 shares of common stock to Gene Farmer for consulting services. Prior
to the merger with Nitros Franchise Corporation, which is referred to in the
next paragraph, Mr. Girrbach was the President and a director of QuikBIZ and Mr.
Farmer was the Executive Vice President and a Director of QuikBIZ. Mr. Girrbach
is currently the Treasurer and a director of QuikBIZ.
In May 1997 QuikBIZ merged with Nitros Franchise Corporation. David
Bawarsky, who was then a director of QuikBIZ, was the president, a director and
the principal shareholder of Nitros Franchise Corporation. Mr. Bawarsky received
2,400,889 shares of common stock in the merger and options to purchase 300,000
shares of common stock at $.15 per share. Kirk J. Girrbach and Gene Farmer each
received options to purchase 100,000 shares of common stock at $.15 per share.
Description of Securities
Common Stock
Our certificate of incorporation authorizes us to issue up to 25,000,000
shares of common stock, par value $.002 per share. Of the 25,000,000 shares of
common stock authorized, 14,002,494 shares are issued and outstanding as of the
32
<PAGE>
date of this prospectus. We intend to seek shareholder approval to increase the
number of shares of common stock we are authorized to issue to 50,000,000.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors from funds legally available for such
dividends. We may not pay any dividends on the common stock until cumulative
dividends on the preferred stock have been paid in full. Upon liquidation,
holders of shares of common stock are entitled to a pro rata share in any
distribution available to holders of common stock. The holders of common stock
have one vote per share on each matter to be voted on by stockholders, but are
not entitled to vote cumulatively. Holders of common stock have no preemptive
rights. All of the outstanding shares of common stock are, and all of the shares
of common stock offered for resale in connection with this prospectus will be,
validly issued, fully paid and non-assessable.
Preferred Stock
There are 261 shares of preferred stock, par value $.001 per share, of
QuikBIZ outstanding. The holders of the preferred stock are entitled to receive
cumulative dividends of $120 per share per year, when and as declared by the
board of directors, payable quarterly. Each share of preferred stock is
convertible into 71.43 shares of common stock at the option of the holder. We
may redeem the preferred stock at our option upon payment of a redemption price
of $1,100 per share. In the event of liquidation of QuikBIZ the holders of the
preferred stock are entitled to receive $1,000 per share prior to any
distribution to the holders of common stock. Except as otherwise provided by
law, the holders of the preferred stock are not entitled to vote.
Warrants
There are outstanding warrants to purchase 600,000 shares of our common
stock at a price of $.25 per share. These warrants were issued to M.H. Meyerson
& Co., Inc. on July 14, 1998 in connection with our entry into an agreement with
M.H. Meyerson & Co., Inc. pursuant to which M.H. Meyerson & Co., Inc. agreed to
provide certain investment banking services to us for five years beginning on
July 14, 1998. The warrants expire on July 14, 2003. The holders of at least 51%
of the warrants have the right to require, on one occasion, that we register the
shares of common stock underlying the warrants for resale under the Securities
Act. The holders of at least 51% of the warrants also have the right to be
included on any other registration statement we file during the period beginning
on July 14, 1998 and ending on July 14, 2003.
There are outstanding warrants to purchase 500,000 shares of our common
stock at a price of $1.4625 per share. These warrants were issued to Swartz on
May 25, 1999 in consideration of Swartz's commitment to enter into the
Investment Agreement. The warrants expire on May 25, 2004. The holders of the
warrants have the right to have the common stock issuable upon exercise of the
warrants included on any registration statement we file, other than a
registration statement covering an employee stock plan or a registration
statement filed in connection with a business combination or reclassification of
our securities.
Legal Matters
The legality of the securities offered hereby has been passed upon by
Graubard Mollen & Miller, New York, New York.
33
<PAGE>
Experts
The balance sheet as of December 31, 1997 and the statements of operations,
shareholders' equity and cash flows for the year ended December 31, 1997,
included in this prospectus, have been included herein in reliance on the report
of Want & Ender CPA, P.C., independent accountants, given on the authority of
that firm as experts in accounting and auditing. The balance sheet as of
December 31, 1998 and the statements of operations, shareholders' equity and
cash flows for the year ended December 31, 1998, included in this prospectus,
have been included herein in reliance on the report, which includes an
explanatory paragraph on our ability to continue as a going concern, of Gerson,
Preston & Company, P.A., certified public accountants, given on the authority of
that firm as experts in accounting and auditing.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.
We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the securities offered under this prospectus.
This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement,
certain items of which are omitted in accordance with the rules and regulations
of the SEC. Statements contained in this prospectus as to the contents of any
contract or other documents are not necessarily complete and in each instance
reference is made to the copy of such contract or documents filed as an exhibit
to the registration statement, each such statement being qualified in all
respects by such reference and the exhibits and schedules thereto. For further
information regarding QuikBIZ and the securities offered under this prospectus,
we refer you to the registration statement and such exhibits and schedules which
may be obtained from the SEC at its principal office in Washington, D.C. upon
payment of the fees prescribed by the SEC.
34
<PAGE>
Index to Financial Statements
Report of Gerson, Preston & Company, P.A.............................. F-2
Report of Want & Ender CPA, P.C....................................... F-3
Consolidated Balance Sheets, December 31, 1997 and 1998 and
June 30, 1999...................................................... F-4
Consolidated Statements of Operations, Years Ended December 31, 1997
and 1998 and the Six Months Ended June 30, 1998 and 1999........... F-5
Consolidated Statements of Shareholders' Equity, Years Ended
December 31, 1997 and 1998 and the Six Months ended June 30, 1999.. F-6
Consolidated Statements of Cash Flows, Years Ended December 31, 1997
and 1998 and the Six Months Ended June 30, 1998 and 1999............ F-8
Notes to the Financial Statements..................................... F-10
F-1
<PAGE>
Board of Directors
QuikBIZ Internet Group, Inc. and Subsidiaries
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of QuikBIZ
Internet Group, Inc. and Subsidiaries at December 31, 1998 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of QuikBIZ
Internet Group, Inc. and Subsidiaries at December 31, 1998 and the consolidated
results of their operations and cash flows for the year then ended in conformity
with generally accepted accounting principles.
The financial statements referred to above have been prepared assuming
that QuikBIZ Internet Group, Inc. and Subsidiaries will continue as a going
concern. As more fully described in Note 3, the Company has incurred recurring
operating losses, negative cash flows from operating activities, and has
negative working capital. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to these
matters are also described in Note 3. The accompanying financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that might result from the outcome of this uncertainty.
/s/ GERSON, PRESTON & COMPANY, P.A.
September 17, 1999
F-2
<PAGE>
Want & Ender CPA, P.C.
Certified Public Accountants
Martin Ender CPA
Stanley Z. Want CPA, CFP
Independent Auditor's Report
To the Shareholders and Board of Directors
QuikBiz Internet Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of QuikBIZ Internet
Group, Inc. and Subsidiaries at December 31, 1997 and related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of QuikBIZ
Internet Group, Inc. and Subsidiaries at December 31, 1997 and the consolidated
results of operations and cash flows of QuikBIZ Internet Group, Inc. and
Subsidiaries for the year ended, in conformity with generally accepted
accounting principles.
/s/ Want & Ender CPA, P.C.
Want & Ender CPA, P.C.
Certified Public Accountants
New York, NY
September 7, 1999
F-3
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Balance Sheets
Assets
December 31,
------------------- June 30,
1997 1998 1999
----- ----- ----------
Current assets (Unaudited)
Cash $ 2,310 $ 18,059 $ 35,758
Accounts receivable 85,857 136,340 303,260
Other 37,827 38,969 34,345
--------- ---------- ----------
Total current assets 125,994 193,368 373,363
Property and equipment
Furniture and equipment 45,847 68,647 76,772
Leasehold improvements - 44,862 44,862
----------- ---------- ----------
45,847 113,509 121,634
Less accumulated depreciation 4,819 40,706 56,773
----------- ---------- ----------
Depreciated cost 41,028 72,803 64,861
Intangible assets 1,296,515 595,300 561,614
----------- ---------- ----------
Total assets $ 1,463,537 $ 861,471 $ 999,838
=========== =========== ===========
Liabilities and Shareholders' Equity
December 31,
------------------- June 30,
1997 1998 1999
----- ----- ----------
(Unaudited)
Current liabilities
Accounts payable and accrued expenses $ 545,165 $ 483,291 $ 566,289
Current maturities of long-term debt 95,845 59,397 124,320
----------- ---------- ----------
Total current liabilities 641,010 542,688 690,609
Long-term debt - 242,685 160,884
----------- ---------- ----------
Total liabilities 641,010 785,373 851,493
Shareholders' equity
Preferred stock; $.001 par value,
3,000 shares authorized; 261
shares issued and outstanding 10,208 10,208 10,208
Common stock; $.002 par value;
25,000,000 shares authorized;
12,784,372; 13,090,571; and
13,472,494 shares issued and
outstanding; respectively 25,569 26,179 26,943
Additional paid-in capital 2,547,276 2,692,419 2,868,905
Accumulated deficit (1,609,359) (2,392,723) (2,575,520)
Unearned compensation on restricted
stock - (259,985) (182,191)
Subscription receivable (151,167) - -
----------- ---------- ----------
Total shareholders' equity 822,527 76,098 148,345
----------- ---------- ----------
Total liabilities and share-
holders' equity $ 1,463,537 $ 861,471 $ 999,838
=========== =========== ===========
See accompanying notes.
F-4
<PAGE>
QuikBIZ Internet Group, Inc. And Subsidiaries
Consolidated Statements Of Operations
<TABLE>
Six Months Ended
Years Ended December 31, June 30,
--------- ------------ --------- ----------
1997 1998 1998 1999
--------- ------------ --------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue
Advertising $ 140,355 $ 1,541,454 $ 708,136 $1,094,197
Multimedia services and products - 600,960 - 696,448
--------- ------------ --------- ----------
Total revenue 140,355 2,142,414 708,136 1,790,645
--------- ------------ --------- ----------
Operating expenses
Direct costs 126,703 1,753,877 430,871 1,080,601
Selling, general and administrative 127,635 1,023,831 387,165 829,203
Depreciation and amortization 74,687 121,590 74,662 55,020
--------- ------------ --------- ----------
Total operating expenses 329,025 2,899,298 892,698 1,964,824
--------- ------------ --------- ----------
Loss from operations (188,670) (756,884) (184,562) (174,179)
Interest expense 1,608 26,480 5,411 8,618
--------- ------------ --------- ----------
Net loss $ (190,278) $ (783,364) $ (189,973) $ (182,797)
--------- ------------ --------- ----------
Weighted average number of common
shares outstanding 6,841,017 13,067,857 12,820,561 13,350,676
Basic (loss) per common share $ (0.028) $ (0.060) $ (0.015) $ (0.014)
</TABLE>
See accompanying notes.
F-5
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
Unearned
Additional Compensation
Preferred Stock Common Stock Paid-in Accumulated on Common Subscription
Shares Amount Shares Amount Capital Deficit Stock Receivable Total
-------- ------- ---------- --------- ----------- ------------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996 441 $ 17,248 12,056,225 $ 8,077 $ 1,492,044 $ (1,419,081) $ - $ (21,428) $ 76,860
Effect of 1997 7-for-1
reverse stock split - - (10,333,903) (4,632) 4,632 - - - -
Conversion of preferred
stock (180) (7,040) 9,000 18 7,022 - - - -
Acquisitions - - 10,002,667 20,005 894,650 - - - 914,655
Issuance of common stock - - 531,428 1,063 20,227 - - - 21,290
Subscription receivable
issued in exchange
for common stock - - 518,955 1,038 128,701 - - (129,739) -
Net loss - - - - - (190,278) - - (190,278)
-------- ------- ---------- --------- ----------- ------------- ---------- ---------- ---------
Balance, December 31,
1997 261 10,208 12,784,372 25,569 2,547,276 (1,609,359) - (151,167) 822,527
Acquisition - - - - 42,000 - - - 42,000
Issuance of common
stock for
compensation - - 2,394,868 4,787 544,578 - (549,365) - -
Tradename returned
in exchange for
common stock - - (2,300,000) 4,600 (396,445) - - - (401,045)
Amortization of unearned
compensation on
common stock - - - - - - 289,380 - 289,380
Issuance of common stock - - 816,000 1,632 104,968 - - - 106,600
Subscription receivable
rescinded in exchange
for return of common
stock - - (604,669) (1,209) (149,958) - - 151,167 -
Net loss - - - - - (783,364) - - (783,364)
-------- ------- ---------- --------- ----------- ------------- ---------- ---------- ---------
Balance, December 31,
1998 261 10,208 13,090,571 26,179 2,692,419 (2,392,723) (259,985) - 76,098
</TABLE>
continued
F-6
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
continued
<TABLE>
Unearned
Additional Compensation
Preferred Stock Common Stock Paid-in Accumulated on Common Subscription
Shares Amount Shares Amount Capital Deficit Stock Receivable Total
-------- ------- ---------- --------- ----------- ------------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unaudited:
Issuance of common
stock - $ - 381,923 $ 764 $ 176,486 $ - $ - $ - $ 177,250
Amortization of
unearned compen-
sation on common
stock - - - - - - 77,794 - 77,794
Net loss - - - - - (182,797) - - (182,797)
-------- ------- ---------- --------- ----------- ------------- ---------- --------- ---------
Balance, June 30, 1999 261 $ 10,208 13,472,494 $ 26,943 $ 2,868,905 $ (2,575,520) $ (182,191) $ - $ 148,345
See accompanying notes.
</TABLE>
F-7
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
Six Months Ended
Years Ended December 31, June 30,
--------- ------------ --------- ----------
1997 1998 1998 1999
--------- ------------ --------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net (loss) $ (190,278) $ (783,364) $ (189,973) $ (182,797)
Adjustments to reconcile net (loss)
to net cash used in operating
activities:
Depreciation and amortization 74,687 121,590 74,662 55,020
Amortization of unearned compensation - 289,380 39,188 77,794
Changes in operating assets and
liabilities, net of effects of
acquisition:
Decrease (increase) in accounts
receivable 33,005 63,240 (112,160) (166,920)
Decrease (increase) in other
current assets 10,103 8,526 128,075 (1,097)
(Decrease) increase in accounts
payable and accrued expenses (6,264) 109,225 128,075 81,999
--------- ------------ --------- ----------
Net cash (used in) operating
activities (78,747) (191,403) (60,208) (136,001)
--------- ------------ --------- ----------
Investing activities
Purchases of property and equipment - (1,997) - (7,672)
Cash received from acquisition 7,062 76,312 - -
--------- ------------ --------- ----------
Net cash (used in) provided by
investing activities 7,062 74,315 - (7,672)
--------- ------------ --------- ----------
Financing activities
Proceeds from notes payable, including
$15,900 from a director in 1998 - 68,446 93,868 -
Payment on notes payable (3,084) (2,209) - (11,628)
Issuance of common stock 45,000 66,600 16,600 173,000
--------- ------------ --------- ---------
Net cash provided by financing
activities 41,916 132,837 110,468 161,372
--------- ------------ --------- ---------
Net increase (decrease) in cash (29,769) 15,749 50,260 17,699
Cash, beginning of period 32,079 2,310 2,310 18,059
--------- ------------ ---------- ---------
Cash, end of period $ 2,310 $ 18,059 $ 52,570 $ 35,758
========= =========== ========== =========
</TABLE>
continued
F-8
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
continued
<TABLE>
Six Months Ended
Years Ended December 31, June 30,
--------- ------------ --------- ----------
1997 1998 1998 1999
--------- ------------ --------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 1,608 $ 23,480 $ 5,410 $ 8,618
Supplemental schedule of noncash
investing and financing activities:
Common stock issued in connection
with compensation, net of
amortization $ - $ 259,985 $ - $ -
Issuance of common stock and options
related to acquisitions $ 914,655 $ 42,000 $ - $ -
Subscription receivable issued
in exchange for common stock $ 129,739 $ - $ - $ -
Subscription receivable rescinded in
exchange for return of common stock $ - $ 151,167 $ - $ -
Tradename returned in exchange for
common stock $ - $ 401,045 $ 401,045 $ -
Note payable paid with the issuance
of common stock $ - $ 40,000 $ - $ -
Issuance of common stock related to
exercise of warrants, cash not yet
received $ - $ - $ - $ 4,250
</TABLE>
See accompanying notes.
F-9
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
1. Nature of Operations
The Company has two reportable segments, both of which sell their products
and services in the Southeastern United States.
One segment provides its clients with internet site design, television
commercial and radio commercial development and production, print
advertisement development and production, public relations and promotions.
The other segment offers audio, video, multimedia and internet services and
products. It also produces and assists companies in creative content for
corporate communications including sales, training, public relations and
promotion.
During 1998, the Company changed its name from Algorhythm Technologies
Corporation.
During 1999, the Company commenced development of the QuikBiz Mall, a
virtual mall on the Internet that offers corporate communications products,
services and supplies on-line. Start-up costs with regards to this were
expensed as incurred.
2. Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances have been eliminated in consolidation.
Property and Equipment. Property and equipment are stated at cost and
depreciated, using the straight-line method, over the estimated useful
lives of the assets as follows: three to seven years for furniture and
equipment and the lease term for leasehold improvements.
Intangible Assets. Intangible assets are being amortized on the
straight-line basis over ten years.
Long-Lived Assets. The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.
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 amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reported period. Actual results could differ from those estimates.
Fair Value of Financial Instruments. The carrying amount of cash, accounts
receivable, accounts payable and accrued expenses approximate fair value
because of their short duration. The carrying amount of short and long-term
debt approximates fair value because the interest rates are similar to the
interest rates currently available to the Company.
F-10
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
Income Taxes. The Company accounts for income taxes under Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". Under SFAS 109, deferred income tax assets and liabilities are
determined based upon differences between financial reporting and tax bases
of assets and liabilities and are measured using currently enacted tax
rates.
Revenue Recognition. Revenue is recognized from sales when a product is
delivered and from services when performed. Revenue is reduced for
estimated customer returns and allowances.
Earnings Per Share. In 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings Per Share". SFAS No. 128 requires two
presentations of earnings per share - basic and diluted. Basic earnings per
share is computed by dividing income available to common stockholders by
the weighted-average number of common shares for the period. The
computation of diluted earnings per share is similar to basic earnings per
share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the
potentially dilutive common shares, such as options, had been issued.
Diluted earnings per share are not presented because the effects would be
anti-dilutive. The restated loss per share to be reported under SFAS No.
128 does not differ from amounts reported under existing accounting rules
for all periods reported by the Company through June 30, 1999.
Reclassification. Certain prior period amounts have been reclassified to
conform to the current year presentation.
Year 2000. The Company developed and implemented a plan to deal with the
Year 2000 problem and converted its computer systems to be Year 2000
compliant. The conversion efforts were completed by mid 1999. The Year 2000
problem is the result of computer programs being written using two digits
rather than four to define the applicable year. In addition, the Company is
working with its suppliers and customers to ensure their compliance with
Year 2000 issues in order to avoid any interruptions in its business.
Unaudited Interim Financial Information. The unaudited balance sheet as of
June 30, 1999 and the unaudited statements of operations and cash flows for
the six months ended June 30, 1998 and 1999, and the unaudited statement of
shareholders' deficit for the six months ended June 30, 1999 include, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the Company's financial position,
results of operations and cash flows. Operating results for the six months
ended June 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999. The footnotes related to
such periods are also unaudited.
3. Going Concern - Uncertainty
As shown in the accompanying financial statements, the Company has incurred
recurring operating losses, negative cash flows from operating activities
and has negative working capital. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
F-11
<PAGE>
The Company has initiated several actions to generate working capital and
improve operating performance, including private issuances of stock (Notes
7 and 13), generation of additional revenue and entering into an investment
agreement to raise up to $20,000,000 through a series of sales of common
stock (Note 13).
There can be no assurance that the Company will be able to successfully
implement its plans, or if such plans are successfully implemented, that
the Company will achieve its goals.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments
to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities
that might result from the outcome of this uncertainty.
4. Intangible Assets
December 31,
------------------- June 30,
1997 1998 1999
----- ----- ----------
(Unaudited)
Intangible assets
Goodwill, net of accumulated
amortization of $11,062, $78,435
and $112,121, respectively $ 662,672 $ 595,300 $ 561,614
Tradename, net of accumulated
amortization of $21,875 415,625 - -
Franchise rights, net of accumulated
amortization of $15,587 218,218 - -
----------- ---------- ----------
Total $ 1,296,515 $ 595,300 $ 561,614
============ =========== ===========
F-12
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
5. Long-Term Debt
December 31,
------------------- June 30,
1997 1998 1999
----- ----- ----------
(Unaudited)
Unsecured note payable; interest at
prime plus one percent (9.25% at
December 31, 1998); Matures
October 13, 2000 $ - $110,000 $110,000
$150,000 line-of-credit; interest
at prime plus one percent (9.25%
at December 31, 1998); collateralized
by accounts receivable, inventory
and property and equipment;
guaranteed by a director/shareholder;
matures in March 2000 95,845 98,345 66,517
Unsecured note payable to shareholder;
interest at 12%; matured and was paid
in July 1999 - 50,000 50,000
Note payable; interest at 9%; collater-
alized by accounts receivable,
inventory and property and equipment;
guaranteed by a director/shareholder;
matures September 5, 2001 - 27,837 44,287
Unsecured demand note payable to a
director/shareholder; interest variable
(8.75% at December 31, 1998);
shareholder has indicated he will not
request payment within the next twelve
months - 15,900 14,400
-------- -------- --------
Total $ 95,845 $302,082 $285,204
-------- -------- --------
The aggregate maturities of long-term debt for the years ended December 31 are
as follows:
Year Amount
-------- ----------
1999 $ 59,397
2000 234,472
2001 8,213
----------
$ 302,082
==========
F-13
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
6. Preferred Stock
The preferred stock calls for the payment of dividends of $120 per share
per annum, when and as declared by the Board of Directors, payable
quarterly. The Board of Directors has not declared any dividends as of June
30, 1999. Each share of preferred stock is convertible into 71.43 shares of
common stock, at the option of the holder. In the event of liquidation of
the Company, the holders of the preferred stock are entitled to receive
$1,000 per share prior to any distribution to the holders of common stock.
The preferred is also callable, at the option of the Company, at $1,100 per
share plus unpaid dividends.
7. Common Stock
In May 1997, the Company's Board of Directors, authorized a seven-for-one
reverse stock split. Outstanding shares and per share data contained in
these financial statements have been restated to reflect the impact of the
split.
On July 18, 1997, the Company issued 1,000,000 shares of common stock to
acquire the rights to the name "Algorythm Technologies International, Inc."
During 1998, the Company returned the rights to the use of the name and
2,300,000 shares of common stock were returned to the Company. This
transaction resulted in a reduction to shareholder's equity of $401,045 in
1998.
During 1998, the Company issued 2,394,868 shares of common stock as
compensation to certain key salaried employees. Sale of these shares is
restricted prior to the date of vesting, which ranges from one to two years
from the date of issuance. Shares issued were recorded at their fair market
value on the date of the issuance, with a corresponding charge to
shareholders' equity. The unearned portion is being amortized as
compensation expense on a straight-line basis over the related vesting
period. By December 31, 1998, three officers of one of the Company's
subsidiaries entered into an agreement in principal to terminate their
employment agreements with the Company.
During June 1998, the Company issued options to purchase an aggregate of
60,000 shares at par value to two of its directors as compensation for
their services as directors during 1998. These options were valued at
$10,000 and this expense has been included in selling, general and
administrative expense.
On September 29, 1998, the Company entered into an agreement with two of
its shareholders to return 604,669 shares of common stock issued by the
Company in December 1996 and September 1997. In exchange, the Company
rescinded the debt owed by the two shareholders, in the amount of $151,167.
During the six months ended June 30, 1999, the Company issued 256,923
shares of common stock for $158,000. The Company also received $15,000 when
one shareholder exercised options for 100,000 shares of common stock.
F-14
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
In addition to options issued in connection with acquisitions (Note 8) and
those issued to directors, the Company issued warrants and options to
purchase the Company's common stock as follows:
During June 1998, the Company issued a warrant to purchase 25,000 shares of
common stock at an exercise price of $0.17 per share. The warrant was
exercised in June 1999.
During July 1998, the Company issued 600,000 options for investment banking
services. The options expire in five years and have an exercise price of
$0.25 per share.
During May 1999, the Company issued a warrant to purchase 500,000 shares of
common stock at an initial exercise price of $1.4625 per share. The warrant
expires in May 2004.
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company has determined that, other than the options issued in connection
with acquisitions and to directors, there was only minimal value to the
warrants and options described above at the date of issuance.
8. Acquisitions
On May 14, 1997, the Company entered into an agreement with Nitros
Franchise Corporation ("Nitros") for a tax-free merger. In connection with
this transaction, the Company issued 6,702,667 shares of common stock and
options to purchase 300,000 shares of common stock at $0.15 per share to
the shareholders of Nitros in return for all of their shares. The Company
also issued options to purchase 300,000 shares of common stock at $0.15 per
share to officers of the Company. Of the options so issued, options for
400,000 shares remain exercisable until May 2000, options for 100,000
shares expired in 1998 and options for 100,000 shares were exercised in
February 1999. This transaction was accounted for in a manner similar to a
pooling of interests, accordingly, the Company's consolidated financial
statements have been restated for all periods to the business combination
to include the combined financial results of Nitros. Nitros had no revenues
or expenses prior to the merger.
On July 1, 1998, the Company acquired the outstanding stock of QuikLAB
Multimedia Centers, Inc. ("QuikLAB"), a company owned by a
director/shareholder of the Company. The acquisition was accounted for as a
purchase and the results of QuikLAB's operations were included in the
Company's 1998 consolidated statements of operations from the date of
acquisition. Consideration was the issuance of 200,000 stock options, at
par, exercisable over a period of two years, valued at $42,000. The Company
will issue an additional 2,800,000 stock options, at par, exercisable over
a period of five years from the date of acquisition if QuikLAB achieves an
annual net profit of $200,000 by July, 2001. Franchise rights were
eliminated as part of the combination.
The fair value of the net assets acquired exceeded the purchase price by
$87,000 which has been recorded as a reduction to property and equipment.
On November 7, 1997, the Company acquired the outstanding stock of The
Smith Agency. The Company issued 2,300,000 shares of common stock and
200,000 options, at par, exercisable over a period of two years to the
former shareholder of The Smith Agency, for an aggregate purchase price of
$468,000. The acquisition was accounted for by the purchase method of
F-15
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
accounting and accordingly the results of operations of The Smith Agency
for the period from November 7, 1997 are included in the accompanying
consolidated financial statements. Assets acquired and liabilities assumed
have been recorded at their estimated fair values. The excess of the
purchase price over the fair value of the net assets acquired (goodwill)
was approximately $674,000.
The following unaudited proforma consolidated results of operations are
presented as if the business combinations of QuikLAB and The Smith Agency
had been made at the beginning of the periods presented:
Years Ended December 31, 1998 1999
------------------------ ----- -----
Sales $ 2,952,000 $ 2,990,000
Net loss $ (741,000) $ (136,000)
Net loss per share:
Basic and diluted $ (0.067) $ (0.020)
The unaudited proforma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
would have actually resulted had the combination been in effect on January
1, 1997, or of future results of operations.
9. Leases
The Company has entered into several long-term leases for offices, retail
locations and equipment. At December 31, 1998, future minimum rental
payments required under noncancellable lease obligations during the years
ended December 31 are approximately as follows:
Year Amount
--------- ---------
1999 $ 124,000
2000 $ 123,000
2001 $ 106,000
2002 $ 98,000
2003 $ 98,000
Thereafter $ 210,000
---------
$ 759,000
=========
Rent expense was $83,000 and $36,000 for the years ended December 31, 1998
and 1997, respectively, and $70,000 and $21,000 for the six months ended
June 30, 1999 and 1998, respectively.
F-16
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
10. Deferred Income Taxes
At December 31, 1998, the Company has available net operating loss
carryforwards of $2,393,000, which will expire through 2013.
SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be
realized. After consideration of all the evidence, both positive and
negative, management has determined that a valuation allowance at is
necessary to reduce the deferred tax assets to the amount that will more
likely than not be realized.
Significant components of the Company's net deferred income taxes are as
follows:
December 31,
----------------- June 30,
1997 1998 1999
----- ----- ----------
(Unaudited)
Deferred tax assets:
Net operating loss carryforwards $ 628,000 $ 933,000 $ 1,004,000
Valuation allowance for deferred
tax asset (628,000) (933,000) (1,004,000)
--------- --------- -----------
Total $ - $ - $ -
========= ========= ===========
11. Employment Agreements
The Company has employment agreements with its executive officers and
certain other key employees. The agreements are for periods ranging from
two to five years, provide for performance incentive bonuses and severance
payments under certain circumstances, and provide for minimum annual base
compensation of $396,000 in 1999, $448,000 in 2000, $410,000 in 2001,
$455,000 in 2002 and $350,000 in 2003. If the employment contract with the
Chief Executive Officer were to be cancelled or should the employer change
the employee's position without employee's consent, the Company's liability
would be $2,000,000.
12. Segment Information
QuikBIZ Internet Group, Inc. and Subsidiaries organizes its business into
two reportable segments. The reportable segments are strategic business
units that offer different products and services. They are managed
separately because each business requires different technology and
marketing strategies. The accounting policies of the segments are the same
as those described in the significant accounting policies. The Company
evaluates the performance of its operating segments based on operating
earnings of the respective business units.
F-17
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the Six Months
Ended June 30, 1998 and 1999 is Unaudited)
Two customers accounted for approximately 32% and 24%, respectively, of the
Company's net sales for the year ended December 31, 1998. These same two
customers represented approximately 25% and 7%, respectively, of the
Company's accounts receivable balance at December 31, 1998.
Summarized financial information concerning the Company's reportable
segments, for 1998, is shown in the following table:
Year Ended Advertising Multimedia
December 31, 1998 Segment Segment Corporate
- ------------------------- ----------- ---------- ---------
Revenues $1,541,454 $ 600,960 $ - $2,142,414
Segment loss $ (116,982) $(126,064) $(540,318) $ (783,364)
Depreciation and
amortization $ 18,876 $ 17,010 $ 85,704 $ 121,590
Total assets $ 100,048 $ 261,880 $ 499,543 $ 861,471
Six Months Ended Advertising Multimedia
June 30, 1999 Segment Segment Corporate
- ------------------------- ----------- ---------- ---------
(Unaudited)
Revenues $1,094,197 $ 696,448 $ - $1,790,645
Segment income (loss) $ 55,590 $ (1,506) $(236,881) $ (182,797)
Depreciation and
amortization $ 4,800 $ 11,267 $ 38,953 $ 55,020
Total assets $ 256,272 $ 205,397 $ 538,169 $ 999,838
For 1997, the Company operated only the advertising business segment for
approximately two months.
13. Subsequent Events
Subsequent to June 30, 1999, the Company issued 164,000 shares of common
stock for $82,000.
On July 9, 1999 the Company entered into an investment agreement to raise
up to $20 million through a series of sales of common stock. The dollar
amount of each sale is limited by the trading volume and a minimum period
of time must occur between sales. The agreement is for a three-year period
ending July 9, 2002.
F-18
<PAGE>
On September 1, 1999, the Company acquired the assets and assumed certain
of the liabilities of an advertising agency for $610,000 payable in the
form of approximately 488,000 shares of common stock, of which 366,000
shares were issued and approximately 122,000 shares are to be issued. In
connection with this transaction, the Company entered into a three-year
employment agreement with the acquiree's president. The acquisition will be
accounted for as a purchase in 1999. The unaudited sales of the acquired
company during 1998 were approximately $4,700,000.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
Section 78.7502 through 78.752 of the Nevada General Corporation Law
("NGCL") provides that a corporation may indemnify directors, officers,
employees or agents of the corporation against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement in connection with
threatened, pending or completed actions, suits or proceedings brought against
them by reason of their service in such capacity, including, under certain
circumstances, actions brought by or in the right of the corporation, and may
purchase insurance or make other financial arrangements on behalf of any such
persons for any such liability.
Article V of the Company's By-laws provides that the Company shall
indemnify any and all of its directors and officers, and its former directors
and officers, or any person who may have served at the Company's request as a
director or officer of another corporation in which the Company owns shares of
capital stock or of which it is a creditor, against expenses actually and
necessarily incurred by them in connection with the defense of any action, suit
or proceeding in which they, or any of them, are made parties, or a party, by
reason of being or having been director(s) or officer(s) of the Company, or of
such other corporation, except in relation to matters as to which any such
director or officer or former director or officer or person shall be adjudged in
such action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty.
Article Twelfth of the Company's Articles of Incorporation, as amended,
provides for limitation of the personal liability of a director or officer to
the Company or its stockholders for damages for breach of fiduciary duty as a
director or officer, other than for acts or omissions that involve intentional
misconduct, fraud or a knowing violation of law, or the payment of dividends in
violation of Section 78.300 of the NGCL, which generally states that dividends
may be paid to stockholders from a corporation's excess of its assets over its
liabilities.
ITEM 25. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of all
expenses payable by the registrant in connection with the registration of the
common stock offered hereby:
SEC filing fee................................................ $ 7,134
Blue sky fees and expenses.................................... 5,000
Legal fees.................................................... 50,000
Accounting fees and expenses.................................. 50,000
Miscellaneous................................................. 12,866
---------
Total................................................ $ 125,000
=========
ITEM 26. Recent Sales of Unregistered Securities
In May 1997 the Company issued 57,142 shares to a consulting firm in
consideration for consulting services rendered to the Company. The Company
relied on Section 4(2) of the Securities Act as the basis for an exemption from
registration, because the transaction did not involve any public offering.
In May 1997 the Company issued and aggregate of 6,702,667 shares of common
stock to David Bawarsky, Jason Sherman and Alan Kvares in consideration for all
II-1
<PAGE>
of the outstanding shares of capital stock of Nitros Franchise Corporation. The
Company relied on Section 4(2) of the Securities Act as the basis for an
exemption from registration, because the transaction did not involve any public
offering.
In May 1997, in connection with the acquisition of Nitros Franchise
Corporation, the Company issued options to purchase 100,000 shares of common
stock at $.15 per share to each of Kirk J. Girrbach, Gene Farmer and Douglas
Stepelton and options to purchase 300,000 shares of common stock at $.15 per
share to David Bawarsky. The Company relied on Section 4(2) of the Securities
Act of 1933 as the basis for an exemption from registration, because the
transactions did not involve any public offering.
In June 1997 the Company issued 144,077 shares of common stock to Kirk J.
Girrbach and 144,076 shares of common stock to Gene Farmer in consideration for
consulting services rendered to the Company. The Company relied on Section 4(2)
of the Securities Act as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In June 1997 the Company also issued 80,162 shares of common stock to Kirk
J. Girrbach, 38,858 shares of common stock to Gene Farmer and 24,783 shares of
common stock to Douglas Stepelton in consideration for consulting services
rendered to the Company. The Company relied on Section 4(2) of the Securities
Act of 1933 as the basis for an exemption from registration, because the
transactions did not involve any public offering.
In July 1997 the Company issued 1,000,000 shares of common stock to
Telephonetics International, Inc. in consideration for the rights to use the
name "Algorythm Technologies International, Inc." The Company relied on Section
4(2) of the Securities Act as the basis for an exemption from registration,
because the transaction did not involve any public offering. These shares were
subsequently returned to the Company and canceled and the rights to use the name
"Algorythm Technologies International, Inc." were returned to Telephonetics
International, Inc.
In October 1997 the Company issued 20,000 shares of common stock to one
individual in consideration of such individual waiving any rights to the return
of $5,000 paid to the Company for services to be performed by the Company. The
Company relied on Section 4(2) of the Securities Act of 1933 as the basis for an
exemption from registration, because the transaction did not involve any public
offering.
In November 1997 the Company issued 2,300,000 shares of common stock to
Andrew D. Smith in exchange for 6,500 shares of common stock of SmithAgency.com,
Inc. Also in November 1997 the Company issued options to purchase 200,000 shares
of common stock, exercisable for two years at a price of $.002 per share, to
Andrew D. Smith. The Company relied on Section 4(2) of the Securities Act of
1933 as the basis for an exemption from registration, because the transactions
did not involve any public offering.
In November and December 1997 the Company sold an aggregate of 400,000
shares of common stock at $.10 per share to four persons, all of whom were
accredited investors. The Company relied on Rule 506 of Regulation D and Section
4(2) of the Securities Act of 1933 as the basis for an exemption from
registration, because the transactions did not involve any public offering.
In February 1998 the Company sold an aggregate of 46,000 shares of common
stock at a price of $.10 per shares to two individuals. The Company relied on
Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration, because the transaction did not involve any public offering.
In March 1998 the Company sold 50,000 shares of common stock at a price of
$.10 per share to one individual. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In March 1998 the Company issued 400,000 shares of common stock in payment
of an outstanding loan of $40,000 to the Company's subsidiary SmithAgency.com,
II-2
<PAGE>
Inc. The Company relied on Section 4(2) of the Securities Act of 1933 as the
basis for an exemption from registration, because the transaction did not
involve any public offering.
In April 1998 the Company sold 20,000 shares of common stock at a price of
$.10 per share to one individual. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In April 1998 the Company issued an aggregate of 1,525,000 shares of common
stock to three individuals in consideration for services to be rendered pursuant
to employment agreements between its subsidiary QBIZ Business Centers, Inc.,
f/k/a Capital Network of America, Corp., and such individuals. The Company
relied on Section 4(2) of the Securities Act of 1933 as the basis for an
exemption from registration, because the transaction did not involve any public
offering.
In June 1998 the Company sold 100,000 shares of common stock at a price of
$.10 per share to one individual. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In June 1998 the Company issued options to purchase an aggregate of 60,000
shares at a price of $.002 per share to two of its directors as compensation for
their services as directors during 1998. The Company relied on Section 4(2) of
the Securities Act of 1933 as the basis for an exemption from registration,
because the transaction did not involve any public offering.
In July 1998 the Company issued an aggregate of 1,300,000 shares of common
stock to three individuals in consideration for services to be rendered pursuant
to employment agreements between its subsidiary QBIZ Business Centers, Inc.,
f/k/a Capital Networks of America, Corp., and such individuals. The Company
relied on Section 4(2) of the Securities Act of 1933 as the basis for an
exemption from registration, because the transaction did not involve any public
offering. 1,000,000 of these shares were subsequently returned to the Company.
In July 1998 the Company issued options to purchase 200,000 shares of
common stock to David Bawarsky, exercisable for five years at a price of $.002
per share, in connection with the Company's acquisition of QuikLAB Multimedia
Centers, Inc.
In July 1998 the Company issued warrants to purchase 600,000 shares of
common stock at a price of $.25 per share to M.H. Meyerson & Co., Inc. in
consideration for services to be rendered by Meyerson pursuant to an investment
banking agreement entered into between the Company and Meyerson as of July 14,
1998. The warrants have a term of five years. The Company relied on Section 4(2)
of the Securities Act of 1933 as the basis for an exemption from registration,
because the transaction did not involve any public offering.
In August 1998 the Company issued an aggregate of 240,000 shares of common
stock to two individuals in consideration for services rendered. The Company
relied on Section 4(2) of the Securities Act of 1933 as the basis for an
exemption from registration, because the transaction did not involve any public
offering.
In August 1998 the Company sold 200,000 shares of common stock at a price
of $.25 per share to one individual. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In September 1998 the Company issued 9,868 shares of common stock to Kirk
J. Girrbach pursuant to an agreement under which Mr. Girrbach provided legal
services to the Company. The Company relied on Section 4(2) of the Securities
Act of 1933 as the basis for an exemption from registration, because the
transaction did not involve any public offering.
In October 1998 the Company issued 120,000 shares to one individual in
consideration for services rendered and to be rendered pursuant to an employment
agreement between the Company and such individual.
II-3
<PAGE>
In November 1998 the Company issued 200,000 shares to one individual in
consideration for services rendered and to be rendered pursuant to an employment
agreement between SmithAgency.com and such individual. The Company relied on
Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration, because the transaction did not involve any public offering.
In January 1999 the Company sold 100,000 shares of common stock at a price
of $.30 per share to one individual. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In February 1999 the Company sold 76,923 shares of common stock at a price
of $.78 per share to one individual. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In February 1999 the Company issued 100,000 shares to an individual upon
the exercise of outstanding options at an exercise price of $.15 per share.
In March 1999 the Company sold 40,000 shares of common stock at a price of
$.80 per share to two individuals. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In April 1999 the Company sold 40,000 shares of common stock at a price of
$.90 per share to two individuals. The Company relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration, because
the transaction did not involve any public offering.
In May 1999 the Company issued warrants to purchase 500,000 shares of
common stock at a price of $1.4625 per share to Swartz Private Equity, LLC in
consideration for Swartz's commitment to enter into an investment agreement for
the purchase of $20,000,000 of common stock of the Company.
In June 1999, the Company sold 25,000 shares at a price of $.17 per share
to Cella Reyes upon the exercise of a warrant issued to Ms. Reyes in connection
with a promissory note issued to Ms. Reyes in June 1998. The Company relied on
Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration, because the transaction did not involve any public offering.
In August 1999 the Company sold an aggregate of 164,000 shares of common
stock at a price of $.50 per share to two individuals. The Company relied on
Section 4(2) of the Securities Act of 1933 as the basis for an exemption from
registration, because the transactions did not involve any public offering.
In September 1999 the Company issued 366,000 shares of common stock to
Gallaspy & Lobel, Inc. in consideration for substantially all of the assets of
Gallaspy & Lobel, Inc. The Company relied on Section 4(2) of the Securities Act
of 1933 as the basis for an exemption from registration, because the transaction
did not involve any public offering.
II-4
<PAGE>
ITEM 27. Exhibits
2.1 Acquisition Agreement between the Registrant and QuikLAB
Multimedia Centers, Inc. (incorporated by reference from the
Registrant's Current Report on Form 8-K filed on July 24,
1998).
2.2 Asset Purchase Agreement, dated as of August 20, 1999, by
and between Gallaspy & Lobel, Inc., the Registrant, and
James Lobel and Diane C.
Harvey.
3.1 Registrant's Articles of Incorporation, as amended
(incorporated by reference from the Registrant's Quarterly
Report on Form 10-QSB for the period ended March 31, 1998,
except for the July 1998 amendment, which is incorporated by
reference from the Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1997).
3.2 Registrant's Bylaws (incorporated by reference from the
Registrant's Quarterly Report on Form 10-QSB for the period
ended March 31, 1998).
4.1 Specimen common stock certificate.
4.2 Form of warrant to purchase common stock issued to Swartz
Private Equity, LLC on May 25, 1999, exercisable to purchase
an aggregate of 500,000 shares of common stock at $1.4625
per share until May 24, 2004, granted to Swartz in
connection with the offering of securities described in
Exhibit 4.3.
4.3 Amended and restated Investment Agreement, dated as of July
9, 1999, by and between the Registrant and Swartz Private
Equity, LLC.
4.4 Registration Rights Agreement, dated as of July 9, 1999, by
and between the Registrant and Swartz Private Equity, LLC,
related to the registration of the common stock to be sold
pursuant to Exhibit 4.3.
4.5 Form of warrant to purchase common stock to be issued from
time to time in connection with the offering of securities
described in Exhibit 4.3.
4.6 Promissory note, dated June 25, 1998, and warrant, issued
June 26, 1999, issued by the Registrant to Cella Reyes.
5.1 Legal opinion of Graubard Mollen & Miller.*
10.1 Employment Agreement between QuikLAB Multimedia Centers,
Inc. and David Bawarsky (incorporated by reference from the
Registrant's Current Report on Form 8-K filed on July 24,
1998).
10.2 Employment Agreement between SmithAgency.com, Inc. (formerly
A.D.S. Advertising Corp.) and Andrew Smith, dated October
30, 1997 (incorporated by reference from the Registrant's
Quarterly Report on Form 10-QSB for the period ended
September 30, 1997).
II-5
<PAGE>
Exhibit
Number Description
- ----------- ------------
10.3 Retainer Agreement between the Registrant and Kirk J.
Girrbach, dated July 15, 1998 (incorporated by reference
from Registrant's Quarterly Report on Form 10-QSB for the
period ended September 30, 1998).
10.4 Investment Banking Agreement between the Registrant and M.H.
Meyerson & Co., Inc. dated as of July 14, 1999 (incorporated
by reference from Registrant's Quarterly Report on Form
10-QSB for the period ended September 30, 1998).
10.5 Employment Contract for James Lobel, dated August 31, 1999,
between the Registrant and James Lobel.
10.6 Agreement to Sublease, dated August 31, 1999, by and between
James Lobel, Diane Harvey, Gallaspy & Lobel, Inc., Harvey
Studios, Inc. and the Registrant.
10.7 Mortgage Deed and Security Agreement, dated August 31, 1999,
by James S. Lobel and Diane C. Harvey to the Registrant.
10.8 Office Lease, dated as of January 9, 1996, by and between
Massachusetts Mutual Life Insurance Company and A.D.S.
Advertising Corporation.
10.9 Leasing Agreement, dated as of October 1, 1995, by and
between Palasan Properties, Inc. and Video QuickLAB of South
Florida, Inc.
21 Subsidiaries of the Registrant.
23.1 Consent of Graubard Mollen & Miller (contained in Exhibit
5.1).
23.2 Consent of Gerson, Preston & Company, P.A.
23.3 Consent of Want & Ender CPA, P.C.
24.1 Powers of Attorney (included on the signature page to this
registration statement).
27 Financial Data Schedule.
__________________________
* To be filed by amendment.
ITEM 28. Undertakings.
(a) The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
II-6
<PAGE>
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any additional or changed material information on the
plan of distribution;
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497 (h)
under the Securities Act as part of this registration statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in the City of Ft.
Lauderdale, Florida on September 22, 1999.
QUIKBIZ INTERNET GROUP, INC.
By: /s/ Andrew D. Smith
---------------------------
Andrew D. Smith, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Andrew D. Smith and David Bawarsky and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign any or all amendments to this registration
statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and hereby ratifies and confirms all
that said attorney-in-fact and agent or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated.
Signature Title Date
- --------- ----- ------
/s/ David B. Bawarsky Director and Chief September 22, 1999
- ----------------------- Executive Officer
David B. Bawarsky (Principal Executive Officer)
/s/ Andrew D. Smith Director September 22, 1999
- -----------------------
Andrew D. Smith
/s/ Kirk J. Girrbach Director and Treasurer September 23, 1999
- ----------------------- (Principal Financial and
Kirk J. Girrbach Accounting Officer)
/s/ Dr. Bohdan Moroz Director September 23, 1999
- ----------------------
Dr. Bohdan Moroz
II-8
ASSET PURCHASE AGREEMENT
THIS AGREEMENT has been made and entered into as of this 20th day of
August, 1999, by and between GALLASPY & LOBEL, INC., a Florida corporation doing
business as G&L GROUP (the "Seller" or "G&L"), QUIKBIZ INTERNET GROUP, INC., a
Nevada corporation, publically authorized to trade and do business in Florida
and/or assigns (the "Buyer" or "QBIZ"), and JAMES LOBEL and DIANE C. HARVEY
(collectively the "R/E Owner").
W I T N E S S E T H:
WHEREAS, Seller is a privately held Florida corporation in good
standing with the Secretary of State providing advertising and marketing
services to businesses located throughout the Continental United States, (the
"Business"); and
WHEREAS, Buyer, is a Nevada corporation in good standing with the
Secretary of State and is a public company trading under the symbol "QBIZ" and
is a reporting corporation with the United States Securities and Exchange
Commission (SEC); and
WHEREAS, the Board of Directors of each of the constituent corporations
deems it advisable that the equipment, accounts receivable and clients held by
Seller be acquired by Buyer; and
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer certain assets which represent many, but not all, of the assets
used in connection with the Business, on the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, Buyer may designate A.D.S. Advertising Corp. d/b/a "The
Smith Agency", its wholly owned Florida corporation to receive and/or assume any
of its QBIZ rights and liabilities hereunder, and
WHEREAS, James Lobel and Diane C. Harvey (collectively "R/E Owner")
are the sole owners of the Real Estate upon which Seller conducts its Business;
and
WHEREAS, as part of the same transaction, the R/E Owner agrees to give
to Buyer or its designee a $190,000 Mortgage upon the real estate described
below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties, intending to be legally bound, agree as follows:
1. ASSETS TO BE CONVEYED. On the Closing Date, Seller agrees to sell,
assign, transfer, convey and deliver to Buyer and Buyer agrees to purchase and
acquire all of Seller's right, title and interest in and to all of the assets
owned by Seller in connection with the Business, other than those assets
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specifically excluded pursuant to this Agreement (the "Assets"), including, the
following assets:
a. All of Seller's existing active clients, contracts with and
pending orders with said clients (the "Clients"), including those described in
Schedule 1A attached hereto;
b. All of Seller's accounts receivable relative to the Clients
("Receivables") including those described in Schedule 1B attached hereto, Seller
warrants that the Receivables are and will be 100% collectible;
c. The equipment, office furniture and fixtures ("Equipment")
described in Schedule 1C, which Seller warrants that the Equipment will be in
working order at the time of Closing;
d. All of Seller's work in progress ("Existing Orders"),
including proposals generated by Seller which are described on Schedule 1D
attached hereto, together with all revenue or business resulting from Seller's
Existing Orders;
e. Certain of Seller's rights and interest under Seller's
existing leases and service contracts ("Leases and Service Contracts") including
Seller's lease with the R/E Owner. Schedule 1E attached hereto lists all of
Seller's Leases or Service Contracts, and which ones Buyer will be assuming;
f. The "Other Business Assets" that are listed in Schedule N/A
attached hereto;
g. Certain tangible and intangible personal property, rights
and interests of Seller including, its goodwill, the names, customer records,
trademarks, trade names, service marks, logos, copyrights, fictitious names,
patents and patent applications, trade secrets, processes, know-how, royalties,
as well as the following: (1) Rights of set-off against Clients and creditors,
any claims causes of action, judgments, claims, and demands of any nature,
except if the foregoing relate to excluded assets under this Agreement or to
liabilities not assumed by Buyer; and (2) books, files, papers and records
relating to the operation of the Business and not relating solely to the
corporate affairs of Seller (the "Business Records") and the aforesaid property
and assets, except for those assets specifically excluded under this Agreement.
For five (5) years after the Closing Date, Buyer will afford Seller such access
to the Business Records in Buyer's possession as is reasonably necessary. In the
event Buyer sells the business prior to the expiration of the five-year period,
it will use its best efforts to provide for continuation of such rights of
inspection.
1.5 REAL ESTATE TO BE CONVEYED. On the Closing Date, the R/E Owner
will, by Mortgage Deed (the "R/E Mortgage"), convey a third mortgage and
security interest in the real estate described in Schedule 1.5 attached hereto,
together with all buildings and other improvements as well as the rents and
profits, located at 6801 N.W. 9th Avenue, Ft. Lauderdale, Florida with property
identification number 494209170020 (the "Real Estate"). The R/E Mortgage will
secure a $190,000 Promissory Note from the Seller and the R/E Owner to the Buyer
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("Promissory Note"). If the total liabilities paid by Buyer in paragraph 3 of
this Asset Purchase Agreement ultimately exceed the Receivables by an amount
less than $150,000 amount inclusive of all principle, interest, penalties, costs
or attorneys' fees (the "Savings"), than the principle balance of the Promissory
Note shall be reduced by the amount of the Savings. The parties will calculate
any Savings when all the assumed liabilities have been paid or settled or 2
years from the execution of the Promissory Note, whichever first occurs. Absent
default, no payments shall be due and no interest shall be due for three (3)
years following the execution of the Promissory Note. At the beginning of the
fourth year, the Promissory Note shall be amortized (at the prime rate then
existing) and paid over five (5) years in equal monthly payments. Payments may
be made in U.S. currency or in QBIZ stock (based upon the value of the QBIZ
stock at the time of payment). By this Asset Purchase Agreement, the Buyer will
permit the R/E Owner to substitute collateral (i.e. transfer the mortgage lien
from the Real Estate to other real or personal property) provided: (i) the
existing first or second mortgage lenders have given the R/E Owner written
notice of default, triggered primarily by the recording of the R/E Mortgage;
(ii) the R/E Owner tenders collateral of equal or greater value, which is
acceptable to the Buyer; and (iii) the Real Estate Owner pays for any costs,
taxes or fees incident to the transfer.
2. EXCLUDED ASSETS. The following are not included in the Assets and
shall not be conveyed to Buyer:
a. Seller's corporate documents, corporate seal, minute book,
charter documents, corporate stock record book, ledgers, bank statements and
such other books and records as pertain to the organization, existence and
capitalization of Seller; and
b. The items listed on Schedule 2B attached hereto.
3. ENCUMBRANCES & ASSUMPTION OF LIABILITIES.
(a) Liabilities Assumed. Buyer shall not assume, nor in any
way be responsible for, any liabilities, commissions, compensation, debts,
obligations, trade payables or other expenses of the Seller other than those
described in Schedule 3A attached hereto which shall not exceed the individual
amounts described in Schedule 3A and not to exceed the Receivables by more than
$150,000.00 in total. That schedule describes the name, address, account number,
telephone and facsimile numbers, contact person, as well as the status, amount
due, nature of the indebtedness, whether the debt is secured or unsecured, and
the status of any collection efforts. Additionally, that schedule reflects which
of Seller's assets or the Real Estate are encumbered (if any) by such creditors.
All of Seller's Assets to be sold or transferred hereunder shall be free and
clear of all claims, liens and encumbrances, except for those items specifically
disclosed in Schedule 3A or elsewhere in this Agreement. Except as otherwise
provided in this paragraph or elsewhere in this Agreement and attachments
hereto, the Buyer is not assuming Seller's accounts payable or the obligations
or duties of the Seller.
(b) Cash Flow Measures. If at any time during the first 2
years following Closing, the assumed payables due and owing ("A/P") exceed
assigned Receivables received ("A/R"), the Seller and/or the R/E Owner, at
Buyer's request, shall immediately loan Buyer cash equal to 50% of the existing
shortfall (the "Shortfall Loans"). Buyer shall repay any Shortfall Loans within
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thirty (30) days of receipt, with repayment being in cash or the equivalent
amount of QBIZ stock. The total amount of all Shortfall Loans given will not
exceed $75,000.00.
4. CONSIDERATION. The purchase price for the sale and purchase of
Assets shall be Six Hundred Ten Thousand Dollars ($610,000.00), together with
the assumption of certain liabilities by the Buyer as further set forth in this
Agreement. The purchase price shall be paid as follows:
a. The purchase price shall be paid in QBIZ restrictive stock
(the "Shares"), valued at $1.25 for each share of common stock for a total of
488,000 shares (subject to the adjustments described below). 366,000 of the
Shares will be issued to Seller within three (3) business days of closing (the
"Closing Shares"). The balance of the restrictive stock and/or a cash equivalent
("Remaining Shares") to be paid shall be distributed to the Seller within one
year from the Closing. While the parties presently fix the number of Remaining
Shares at 122,000, that number and the number of Closing Shares shall be
adjusted up and/or down at the time of distribution (i.e. 1 year from Closing)
by virtue of the following:
(i) Up. Buyer will provide Seller with a one-year
floor price of QBIZ restrictive common stock of $1.10 ("Floor Price"). In the
event the stock price falls below the Floor Price, Seller will issue additional
restrictive common shares to make up the difference between the Floor Price and
actual price of the Closing Shares and the Remaining Shares. Only in the event
the stock price of the Closing Shares and the Remaining Shares, one year from
date of purchase, is below the Floor Price, will the shares get adjusted. Seller
shall use the average closing price, of five trading days, preceding the
one-year anniversary of the closing of the purchase, as a basis to determine the
price of common stock.
(ii) Down. Seller guarantees that Buyer will receive
a minimum of $700,000.00 in gross profits from the Clients or new clients,
excluding existing or past clients of the Smith Agency or its subsidiaries or
affiliates ("Smith Clients"). A list of existing Smith Clients is attached
hereto as Schedule 4. In the event, after one-year from closing of this
Agreement, if the guarantee of gross profits is not achieved, $.80 of every
dollar below $700,000.00 will be deducted from the 122,000 shares at price of
$1.25 per share, up to a maximum of the 122,000 shares as adjusted by the (above
described) "Floor Price" adjustment. This provision does not apply to the
Closing Shares.
(iii) The Buyer shall have the sole option of either
remitting these shares or paying their cash equivalent or a combination of both.
In the event, the Buyer shall elect the cash option, the cash value of said
stock shall be determined on the date remittance is due.
b. While the Buyer reserves the right to re-adjust same within
2 weeks with a letter from Buyer's CPA to both parties, the purchase price shall
initially be allocated in the following manner:
Equipment $ 80,000
Good Will $ 0
Real Estate $190,000
Clients $340,000
Total $610,000
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5. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of Russell D. Kaplan,
P.A., at 750 Southeast 3 Avenue, Suite 100, Fort Lauderdale, Florida, at a date
and time mutually agreed upon by the parties but no later than 45 days following
the execution of this Agreement.
6. SELLER'S DOCUMENTS. The Seller (and the R/E Owner, where applicable)
shall deliver at Closing (unless otherwise indicated), the following:
a. Bills of sale, assignments, vehicle titles, mortgage deeds
(from R/E Owner), and other good and sufficient instruments of conveyance and
transfer, in form and substance satisfactory to Buyer and its counsel, together
with all required consents as shall be effective to vest in Buyer all of
Seller's right, title and interest in the Assets and the proper R/E Mortgage
upon the Real Estate; and
b. Updated list of Clients, together with all Client files,
all contracts, all work in progress.
c. Updated list of Receivables; and
d. Documentation acceptable to Buyer which confirm the
approximate principle balance of the first and second mortgages on the Real
Estate; and
e. All the Leases and Service Contracts together with all
addendums or modifications thereto, to be delivered to Buyer within 2 days
before Closing; and
f. Corporate resolutions authorizing the transaction; and
g. Satisfactions, releases and/or terminations of any lien or
encumbrance upon the Assets in favor of Gateway, Heller Financial, any
governmental entity or any other party. Said satisfactions shall be properly
executed and in recordable form. Alternatively, Seller may provide the
appropriate estoppel letters from these creditors within 20 days of the
execution of this Agreement with the satisfactions to follow within 30 days
after closing; and
h. Closing statement; and
i. A payroll ledger and attached letter attesting to the
amount of regular compensation paid to Seller's employees, to be signed or
initialed by each employee. Seller's most recently filed monthly sales tax
return and proof of payment. These documents are to be delivered to Buyer within
three (3) business days prior to closing, whichever first occurs; and
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j. Copies of all non-compete agreements signed by any of the
Seller's employees; and
k. Written consents from any creditors, or other personal or
entities, whose consent is required for the transfer and assignment of the
Assets other than mortgage holders; and
l. All records and other documents in control or possession of
Seller relating to the Business other than Seller's accounting books which will
be retained by Seller but made available to Buyer or its agents or accountants
for inspection from time to time hereafter upon reasonable notice to Seller; and
m. Current state and county lien search (to be paid by Buyer)
showing no liens or encumbrances against the Assets or Real Estate except for
those Seller will be satisfying at Closing or those that Buyer has explicitly
agreed to assume in this Agreement; and
n. A written Employment Contract, Non-Compete and
Confidentiality Agreement from James Lobel expanding upon the terms outlined in
his August 2, 1999 "Letter of Understanding for Employment" attached hereto as
Schedule 6N. The territory of such Agreement will be the Continental United
States. It will also require James Lobel to devote his full-time efforts to
Seller and not to engage in other business endeavors not specifically and
previously approved in writing by Buyer. It will also impose a duty of
confidentiality and non-disparagement in favor of the Buyer. As President, James
Lobel's duties will include managing The Smith Agency on a full-time daily
basis. The Agreement shall also specify his responsibility, authority, standards
concerning his performance, and where he will be performing his work. The term
of the Agreement shall be three (3) years from Closing. His employment may be
terminated early by either party, for cause (to be spelled out in the Employment
Non-Compete Agreement), without affecting the covenant not-to-compete and the
duty of confidentiality. In the event James Lobel's employment is terminated by
Buyer without cause, James Lobel's covenant not-to-compete will be relaxed to
permit him to compete so long as he observes his duty of confidentiality and
keeps "hands off" of QBIZ's and The Smith Agency's clients, officers, agents,
independent contractors and employees. James Lobel may direct that his
compensation be paid through Harvey Studios, Inc., a Florida corporation, in
which event that company (together with its officers, directors, and
shareholders) would have to join in the execution of a Non-Compete and
Confidentiality Agreement.
o. Regarding the Real Estate, a Lease and Assignment of Lease
(or Sublease) acceptable to the Buyer.
p. Written estoppel information from any other (other than
Seller) tenants, subtenants, assignees in the Real Estate (other than Seller)
confirming that rent is current, that no advanced rent and security deposits
have been paid, that there are no setoffs or claims and that the term is
month-to-month.
q. A right of first refusal agreement relative to the sale of
the Real Estate.
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r. A mortgagee title insurance commitment (with a policy to
follow at Buyer's election and expense) showing title to the Real Estate vested
in the R/E Owner subject only to the first and second mortgages described in
this Asset Purchase Agreement. Buyer will pay the cost of the Commitment.
s. Such other documents, instruments or certificates as shall
be reasonably requested by Buyer or its counsel or contemplated by or attached
to this Agreement; and
t. A recitation from the R/E Owner and Harvey Studios, Inc.
disclaiming any interest in the Assets.
7. BUYER'S DOCUMENTS. Buyer shall cause to be delivered to Seller at
Closing (unless otherwise indicated) the following:
a. The Closing Shares (within 3 business days after Closing);
and
b. The Remaining Shares (1 year after Closing); and
c. Corporate resolutions authorizing the transaction; and
d. Such other documents, instruments or certificates as shall
be reasonably requested by Seller or its counsel or contemplated by or attached
to this Agreement.
8. COOPERATION. Seller, R/E Owner and Buyer shall, on request, on or
after the Closing Date, cooperate with each other by furnishing any additional
information, executing and delivering any additional documents and/or
instruments and doing any and all such other things as may be reasonably
required by the parties or their counsel to consummate or otherwise implement
the transactions contemplated by this Agreement.
9. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller and the
R/E Owner hereby make the following representations, warranties and covenants,
each of which shall be deemed to be a separate representation, warranty and
covenant, all of which have been made for the purpose of inducing Buyer to join
in and execute this Agreement, and in reliance on which Buyer has entered into
this Agreement, all of which shall survive the Closing of this transaction:
a. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida, with full power
under its Articles of Incorporation and By-Laws to carry on its business as now
being conducted and to enter into and to perform this Agreement; and
b. The execution and delivery of this Agreement has been duly
authorized by Seller's directors and shareholders, and this Agreement has been
duly executed and delivered to Buyer and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms; and
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c. On the Closing Date, Seller will convey good and marketable
title to all of the Assets, free and clear of all liens, pledges and
encumbrances whatsoever, except as set forth on Schedule 3A. Seller represents
that all liens and encumbrances reflected on that Schedule are fully assumable
by the Buyer; and
d. Except for restrictions in the R/E Owner's first and second
mortgage on obtaining secondary financing, the execution and performance of this
Agreement will not violate any order, rule, judgment or decree to which Seller
and R/E Owner are subject or breach any contract, agreement or other commitment
to which Seller and/or RE Owner is a party or by which Seller and/or R/E Owner
are bound; and
e. There is no litigation, action, suit, investigation or
other proceeding pending or threatened which may give rise to any claim against
any of the Assets, the Real Estate or adversely affect Seller's or the R/E
Owner's ability to perform in accordance with the terms of this Agreement, and
Seller and R/E Owner are not aware of any facts which could reasonably result in
any such proceeding; and
f. Between the date hereof and the Closing Date, the Business
shall be conducted in the ordinary course and in accordance with the Preclosing
Guidelines attached hereto as Schedule 9F. Executive compensation and
reimbursements shall be maintained at the levels existing at the time this
Agreement is executed; and
g. On the date of Closing, Seller and R/E Owner have or will
have complete and unrestricted power to sell, transfer and deliver to the Buyer
the Assets and Real Estate Mortgage provided for under the terms of this
Agreement, and the instruments executed or to be executed and delivered to the
Buyer hereunder are or will thereupon be valid in accordance with their terms,
and will effectively vest in the Buyer good and marketable title to such Assets
and a valid third mortgage lien upon the Real Estate, free and clear of any and
all liabilities, obligations, and encumbrances, except as otherwise provided
herein; and
h. There are no judgments, liens, actions or proceedings
pending against Seller or R/E Owner in any court or agency which would impair
the value of the Assets being sold hereunder or restrict their right and
authority to convey said Assets and Real Estate Mortgage to Buyer, free and
clear of all liens, encumbrances or claims of any kind, except as otherwise
described herein; and
i. The Business of Seller is presently conducted and will be
conducted until the date of Closing in accordance with generally accepted
accounting principals and, except as otherwise disclosed herein, in compliance
with all laws, rules and regulations of the local, state and federal governments
in effect and pertaining to said business and its operations. Except for
restrictions in the R/E Owner's first and second mortgage on obtaining secondary
financing, the transfer of the Assets and Real Estate Mortgage will in no way
violate any laws or regulations, or constitute any breach of any agreement that
Seller or R/E Owner may be a party to. Seller and R/E Owner will do nothing to
adversely affect the continuous operation of the Business or cause waste to the
Real Estate; and
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j. There are no outstanding taxes or accounts payable prior to
the date of Closing for which Buyer or the R/E Owner will be obligated to pay,
or which might result in a lien or levy upon the Assets or Real Estate, except
as otherwise provided herein.
k. Seller and R/E Owner are aware of no occurrence, event,
action, omission, governmental plan or regulation that has, or is likely to
have, a substantial and negative impact on the Real Estate or any goodwill
associated with the Seller, the name "The G&L Group", the operation of the
Business, or the validity of the Existing Orders, Seller's contracts with its
Clients, employees, vendors; and
l. Other than those disclosed herein or attached to this
Agreement there are no service contracts, employment agreements, license
agreements, independent contractor agreements, executory contracts, supplier
contracts, leases, equipment leases, maintenance agreements or other agreements
relative to the Real Estate, operation of the Business or the Assets; and
m. Buyer has been provided access to all financial business,
banking, employment and other records relative to the operation of the Business
and the Assets (the "Records"). R/E Owner and Seller have maintained the Records
in the ordinary course of business and have not kept them or altered them in
such a manner to be deceptive or misleading; and
n. Pending Closing (on this Agreement) Seller and R/E Owner
shall not cause or permit sale or dissipation of any of the Assets or waste of
the Real Estate, except in the ordinary course of business; and
o. Neither R/E Owner nor Seller are not a party to, subject to
or bound by, any agreement with any lender or otherwise, or by any judgment,
order, writ, injunction or decree of any court or governmental body which could
prevent or would be violated by the carrying out of this Agreement except for
restrictions in the R/E Owner's first and second mortgage on obtaining secondary
financing; and
p. Seller and James Lobel hereby agree that they shall not,
whether directly or indirectly, alone or together, either as an individual or as
a partner, joint venturer, employee or agent of any other person or entity, for
a period of three (3) years from the date of Closing, engage in the business of
advertising or marketing, in any capacity. Seller and James Lobel further agree
that concurrent with closing, they shall execute and deliver to the Buyer, in a
form satisfactory to the Buyer, a Non-compete and Confidentiality Agreement
according to the terms of this section. The territory to which this Non-compete
Agreement extends shall encompass the Continental United States. This being the
territory serviced or contemplated to be serviced by the Seller. James Lobel
shall be bound by this warranty of non-competition and shall execute the
Non-compete Agreement in his individual capacity at the time of Closing. Should
James Lobel direct his executive compensation be paid through Harvey Studios,
Inc., that company (together with its officers, directors and shareholders) will
join in the execution of the Non-Compete and Confidentiality Agreement.
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q. R/E Owner and Seller represent and warrant that, as of the
date hereof, they have no knowledge of any hazardous substances as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CIRCLA"), 42 USC 9601(14), pollutants or contaminants as defined by the
Resource Conservation and Recovery Act ("RCRA"), 42 USC Section 6903 (5), or
other similar applicable federal or state laws and regulations; and that no
asbestos, PCBs or urea formaldehyde have been generated, released, stored, or
deposited over, beneath, or on the premises or on or in any structures located
on the premises from any source whatsoever by Seller or R/E Owner, their
predecessors in interest in the premises, or any other person. Seller and R/E
Owner covenant that they will indemnify, hold harmless, and defend Buyer from
any and all claims, loss, damage, response costs, and expenses arising out of or
in any way relating to a breach of these environmental representations (but only
to the extent that they would otherwise have liability under CIRCLA, RCRA or
other similar applicable federal or state laws or regulations), including but
not limited to: (a) claims of third parties (including governmental agencies),
for damages, penalties, response costs, injunctive or other relief; (b)
expenses, including fees of attorneys and experts, of reporting the existence of
hazardous substances or hazardous wastes to any governmental agency; (c) any and
all expenses or obligations, including attorneys' fees, incurred at, before, or
after any trial or appeal therefrom or administrative proceeding or appeal
therefrom, whether or not taxable as costs, including, without limitation,
attorneys' fees, paralegal's fees, witness fees (expert and otherwise),
deposition costs, copying and telephone charges and other expenses, all of which
shall be paid by Seller and R/E Owner when accrued.
r. Seller shall not affect any significant modifications of
the Receivables, Existing Orders, in contracts with Clients, employees, vendors
or independent contractors without the prior written consent of the Buyer.
Seller may obtain additional Clients, Receivables and Existing Orders during the
period subsequent to this Agreement and prior to Closing, which may be assumed
by Buyer, at Buyer's election.
s. All Contracts, service agreements, leases and other similar
executory agreements assigned herein are fully assignable by Buyer.
t. All of the Assets are presently located at the Real Estate
and will be located there at the time of the Closing, except only as diminished
in the ordinary course of business; and
u. Seller has, to the best of its knowledge, filed all
required federal, state and local tax returns or reports relating to its
business. Seller has no knowledge of a default under or a violation of any
applicable statute, law, ordinance, decree, order, rule, regulation, or license
of any governmental body, which had or may have a material adverse effect upon
the Business or the Assets; and
v. R/E Owner warrants and represents that it will remain
current on all obligations which are secured by a lien or mortgage on the Real
Estate. Further, the R/E Owner warrants that the Real Estate is presently
encumbered by a first mortgage in favor of Gateway in the approximate principal
balance of $296,000 and a second mortgage in favor of SBA's designee in the
approximate principal balance of $260,000 and no other liens exist.
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w. Seller and R/E Owner are aware of no litigation, action,
suit, investigation, claims, or facts likely to give rise to claims held or
asserted by Seller's present or former employees, vendors, any other Buyers (who
may have negotiated with Seller for purchase of any of the Assets or Real
Estate), and real estate broker or independent contractors, other than those
detailed below ____________________________N/A_______________ .
x. Seller warrants that the scheduled Receivables are and will
be 100% collectible within 6 months after Closing, that the Equipment will be in
working order at the time of Closing, and that the Schedule of Clients
accurately reflects Seller's Clients and their relationship with the Seller.
10. BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Buyer hereby
makes the following representations, warranties and covenants to the best of
Buyer's knowledge, each of which shall be deemed to be a separate
representation, warranty and covenant, all of which have been made for the
purpose of inducing Seller to join in and execute this Agreement, and in
reliance on which Buyer has entered into this Agreement, all of which shall
survive the Closing of this transaction:
a. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and authorized to do
business in Florida, with full power under Articles of Incorporation and By-Laws
to enter into and perform under this Agreement or will be within five (5)
business days after execution of this Agreement; and
b. The execution and delivery of this Agreement by Buyer has
been duly authorized by Buyer's directors and shareholders, and this Agreement
will have been duly ratified and constitute a legal, valid and binding
agreement, enforceable in accordance with its terms; and
c. The execution and performance of this Agreement will not
violate any order, rule, judgment or decree to which Buyer is subject or breach
any contract, agreement or other commitment to which Buyer is a party or by
which Buyer is bound; and
d. There is no litigation, action, suit, investigation or
other proceeding pending or threatened which may adversely affect Buyer's
ability to perform in accordance with the terms of this Agreement, and Buyer is
not aware of any facts which could reasonably result in any such proceeding.
11. CONDITIONS TO BUYER'S OBLIGATION. The failure of this condition
does not relieve Seller and/or R/E Owner of liability for their default. The
obligation of Buyer to consummate this Agreement is subject to the satisfaction
of each of the following conditions which may be waived, in writing, by Buyer:
a. The written representations and warranties of Seller and
R/E Owner to Buyer are true, complete and correct in all material respects as of
the Closing Date, with the same force and effect as if then made; and
11
<PAGE>
b. The Seller and R/E Owner execute, along with the other
documents called for under this Agreement, a covenant not to compete; and
c. Buyer is satisfied with the Receivables and the Payables to
be assumed as of the time of Closing and satisfied with Seller's books and
records (access, condition and content); and
d. All of the terms, covenants and conditions to be complied
with or performed by Seller and/or R/E Owner on or before the Closing Date are
duly complied with and performed in all material respects.
12. CONDITIONS TO SELLER'S OBLIGATION. The failure of these conditions
does not relieve Buyer from liability for a Buyer default. The obligation of
Seller and/or R/E Owner to consummate this Agreement is subject to the
satisfaction of each of the following conditions, any of which, may be waived,
in writing, by Seller and R/E Owner:
a. The representations and warranties of Buyer to Seller are
true, complete and correct in all material respects as of the Closing Date, with
the same force and effect as if then made;
b. All of the terms, covenants and conditions to be complied
with or performed by Buyer on or before the Closing Date are duly complied with
and performed in all material respects.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The several
representations and warranties of the parties contained herein shall survive the
Closing without limitation.
14. SELLER'S REMEDIES. Buyer agrees that the future value of the stock
offered by the Buyer as well as other covenants of the Buyer herein contained
cannot be readily ascertained on the open market and that Seller and R/E Owner
will be irreparably harmed if this Agreement is not specifically enforced.
Therefore, in the event that Seller and/or R/E Owner shall institute any action
specifically to enforce Buyer and/or Buyer's performance under this Agreement,
Buyer hereby agrees to waive the defense that Seller has an adequate remedy at
law and to interpose no opposition, legal, or otherwise, as to the proprietary
of specific performance as a remedy. Nothing herein shall preclude the Seller
and R/E Owner from bringing an action for damages or pursuing any other remedy
available at law or in equity.
15. BUYER'S REMEDIES. Seller and R/E Owner agree that the Assets and
authorizations contracted to be conveyed hereunder cannot be readily obtained on
the open market and that Buyer will be irreparably injured if this Agreement is
not specifically enforced. Therefore, in the event that Buyer shall institute
any action specifically to enforce R/E Owner and/or Seller's performance under
this Agreement, Seller and R/E Owner agree to waive the defense that Buyer has
an adequate remedy at law and to interpose no opposition, legal or otherwise, as
to the propriety of specific performance as a remedy. In the event Buyer elects
to terminate this Agreement as a result of Seller's and/or R/E Owner's breach
instead of seeking specific performance, Buyer shall be entitled to return of
the Escrow Deposit. Nothing herein shall preclude the Buyer from bringing an
action for damages or pursuing any other remedy available in law or equity.
12
<PAGE>
16. DAMAGE. The risk of loss or damage to the Assets and Real Estate to
be sold to Buyer hereunder shall be upon Seller and R/E Owner at all times prior
to Closing. In the event of such loss or damage, Seller and R/E Owner shall
promptly notify Buyer thereof and repair, replace or restore any such Assets and
Real Estate to their former condition as soon as possible after its loss and
prior to the Closing Date. If damage has occurred and such repair or restoration
of any such damage has not been completed prior to the Closing Date, Buyer may,
at its option:
a. Elect to consummate the Closing, in which event Seller and
R/E Owner shall pay to Buyer the costs of such repair, replacement or
restoration as is required to restore the Asset and/or Real Estate to its former
condition and against such obligation shall assign to Buyer all of Seller's and
R/E Owner's rights under any applicable insurance policies. Buyer shall, in such
event, submit to Seller and R/E Owner an itemized list of the cost of such
repair, replacement or restoration. If the parties are unable to agree upon such
costs, the matter shall be referred to a qualified architect mutually acceptable
to Seller and R/E Owner and Buyer whose decision as to the costs shall be final
and whose fees and expenses shall be paid one-half by R/E Owner/Seller and
one-half by Buyer; or
b. Elect to postpone the Closing Date for a period of up to
ninety (90) days to permit Seller to make such repairs, replacement or
restoration as is required to restore the Asset and/or Real Estate to its former
condition. If, after the expiration of the extension period granted by Buyer,
the Asset and/or Real Estate has not been adequately repaired, replaced or
restored, Buyer may terminate this Agreement. If the parties disagree as to
whether the Asset has been adequately repaired, replaced or restored, the matter
shall be referred to a mutually acceptable qualified expert whose decision shall
be final, and whose fees and expenses shall be paid one-half by R/E Owner/Seller
and one-half by Buyer.
17. EXPENSES. Except as otherwise provided herein, the parties shall
bear their own attorney's fees. All recording costs for deeds, bills of sale,
assignments, and other instruments of transfer, all costs incident to complying
with any bulk sales laws or clearing title to the Assets, and all applicable
sales, transfer, use, stamp or other taxes shall be paid equally by Seller and
R/E Owner at or before Closing. The Buyer agrees to the pro-ration of real
property taxes due for the fiscal tax year of 1999 based upon its occupancy of
the premises located at 6801 North Powerline Road, Fort Lauderdale, Florida.
18. ASSIGNABILITY. Neither party may assign its rights hereunder
without the prior written consent of the other party. Before or after Closing,
Buyer at its election may assign all or some of its rights and liabilities
hereunder to its wholly owned subsidiary, A.D.S. Advertising Corp., a Florida
corporation d/b/a The Smith Agency (The Smith Agency).
19. NOTICES. All necessary notices, demands and requests required or
permitted to be given under the provisions of this Agreement shall be in writing
and shall be deemed duly given if mailed by certified mail, postage prepaid,
addressed as follows:
a. If to Seller: With copies to:
Gallaspy & Lobel, Inc. John E. Aurelius, P.A.
6801 Powerline Road 4367 N. Federal Highway, Suite 101
Ft. Lauderdale, Florida 33309 Ft. Lauderdale, Florida 33308
13
<PAGE>
b. If to R/E Owner: With copies to:
James Lobel and Diane C. Harvey John E. Aurelius, P.A.
1103 N.E. 4th Drive 4367 N. Federal Highway, Suite 101
Deerfield Beach, Florida 33441 Ft. Lauderdale, Florida 33308
c. If to Buyer: With copies to:
Quikbiz Internet Group, Inc. Russell D. Kaplan, Esquire
C/O Dave Bawarsky Russell D. Kaplan, P.A.
5310 N.W. 33rd Avenue, Suite 212 750 SE 3 Avenue, Suite 100
Ft. Lauderdale, Florida 33309 Ft. Lauderdale, FL 33316
20. NO BROKERS OR FINDERS. Seller/R/E Owner and Buyer hereby warrant
and represent to each other that this Agreement was not induced or procured
through any person, firm or corporation acting as a broker or finder. Each of
the parties herewith agree to indemnify and hold each other harmless from any
liability, loss, damage, costs or expense, including reasonable attorneys' fees
and expenses, suffered or incurred as a result of a breach of the foregoing
warranty and representation.
21. ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits attached supersedes any prior agreements between the parties and
contains all of the terms agreed upon with respect to the subject matter hereof.
This Agreement may not be altered or amended, except by an instrument in writing
signed by the party against whom enforcement of any such change is sought.
22. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were on the same instrument, provided any changes or interlineations appear in
all counterparts and are initiated on all counterparts.
23. HEADINGS. The headings of the paragraphs of this Agreement are for
convenience only and in no way modify, interpret or construe the meaning of
specific provisions of the Agreement.
24. SCHEDULES. The Schedules to this Agreement are a material part
hereof.
25. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
26. CHOICE OF LAW AND VENUE. This Agreement is to be construed and
governed by the laws of the State of Florida. Any action to enforce this
Agreement shall be brought in Broward County, Florida, unless, in Buyer's
determination, action in another jurisdiction is necessary to insure
enforcement.
14
<PAGE>
27. CONFIDENTIALITY. Seller and James Lobel agree to keep confidential
(i.e. not revealing to third parties) the finances, business knowhow, trade
secrets, customer lists, and methods of practice of Buyer, Seller and/or their
affiliates.
28. CREDITOR'S CLAIMS. Within five (5) days of first notice of any of
R/E Owner's or Seller's creditors claiming amounts due or rights not disclosed
by Seller and/or R/E Owner in this Agreement, Buyer shall give Seller and R/E
Owner written notice specifying the creditor's name, address and nature of
claim. Thereafter, it shall be Seller's and/or R/E Owner's responsibility to
resolve, settle or defend said claim. Should Seller and/or R/E Owner fail to
promptly respond to the claim or should the claim ultimately result in a
judgment or decree against the Buyer, Buyer may defend or satisfy same and
setoff the any amounts due Seller and/or R/E Owner by that amount, provided
Seller and/or R/E Owner had received the above specified notice of the pending
claim. Similarly, any costs, losses or attorney's fees realized by Buyer as the
result of Seller's and/or R/E Owner's non-payment of Seller's liabilities shall
be deducted from any amounts due Seller and/or R/E Owner.
29. INDEMNITIES.
a. Except provided by the remedies provisions of this
Agreement, Seller and R/E Owner hereby indemnify and hold Buyer harmless from
and against any liability, loss, damage, cost or expense, including reasonable
attorney's fees and expenses, suffered by Buyer as a result of:
(1) Any breach of this Agreement by Seller and/or R/E Owner;
(2) Any inaccuracy in or breach of any of the
representations, warranties or covenants
made by Seller and/or R/E Owner herein; and
b. Except as otherwise provided by the remedy provisions of
this Agreement, Buyer hereby indemnifies and holds Seller and/or R/E Owner
harmless from and against any liability, loss, damage, cost or expense,
including reasonable attorney's fees and expenses, suffered by Seller and/or R/E
Owner as a result of:
(1) Any breach of this Agreement by Buyer; and
(2) Any inaccuracy in or breach of any
representations, warranties or covenants
made by Buyer herein.
(3) Any liability resulting from Buyer's failure
to perform under a service contract, lease,
franchise agreement, or other obligation
assumed herein.
c. Each party shall promptly notify the other party of any
claim or demand for payment of any debt, liability or other claim by it for
misrepresentation, breach of warranty, breach of covenant, or right of
indemnification under this Agreement. Seller and/or R/E Owner and Buyer shall
15
<PAGE>
also promptly notify each other of any claim or demand for the payment of any
debt or liability asserted against the other party under this Agreement. Seller
and/or R/E Owner and Buyer shall have the right to contest any claim or demand
asserted against them and shall cooperate in the defense of any claim against
them. Either party shall make available to the other party or its
representatives all records and other materials required by them for their use
in contesting any such liability.
30. LITIGATION/ATTORNEY'S FEES. In connection with any litigation
arising out of the enforcement of this Agreement, or for its interpretation, the
prevailing party shall be entitled to recover its costs, including reasonable
attorney's fees, from the other party hereto if such party was an adverse party
to such litigation.
IN WITNESS WHEREOF, the parties have executed or have caused this
Agreement to be executed by a duly authorized officer as of the date first
written above.
WITNESSES: SELLER: GALLASPY & LOBEL, INC.,
a Florida corporation d/b/a The G&L
Group
/s/ James Lobel 8/20/99
_____________________________ By __________________________________
James Lobel, ________________ Date
_____________________________
BUYER: QUIKBIZ INTERNET GROUP, INC.,
a Nevada corporation, authorized to
transact business in Florida
/s/ David Bawarsky 8/20/99
_____________________________ By __________________________________
Dave Bawarsky, CEO Date
_____________________________
R/E OWNER: JAMES LOBEL AND DIANE
C. HARVEY
/s/ James Lobel 8/20/99
_____________________________ By __________________________________
James Lobel, Date
_____________________________
_____________________________ By __________________________________
Diane C. Harvey, Date
_____________________________
16
<PAGE>
ADDENDUM TO ASSET PURCHASE AGREEMENT
THIS ADDENDUM dated August 31, 1999 modifies that certain Asset
Purchase Agreement dated August 20th , 1999 (the "APA"), by and between
GALLASPY & LOBEL, INC., a Florida corporation doing business as G&L GROUP (the
"Seller" or "G&L"), QUIKBIZ INTERNET GROUP, INC., a Nevada corporation,
publically authorized to trade and do business in Florida and/or assigns (the
"Buyer" or "QBIZ"), and JAMES LOBEL and DIANE C. HARVEY (collectively the "R/E
Owner").
1. Paragraph 4(a)ii Is Amended to: Delete the word "affiliates" from
the first sentence.
2. Paragraph 4(a) Is Amended to: Add the following sub-paragraphs.
(iv) B's delivery of the Remaining Shares to Seller shall be
conditioned upon the following: (a) B's receipt of properly
executed and recorded (State and County) lien releases from
Gateway and Heller for UCC document numbers 980000006039,
930000094100, and 930000062964 and any amendments thereto.
(v) The term "restricted stock" or "restricted shares" shall
be as defined in rule 144 promulgated under the Securities Act of 1933, as
amended.
3. Paragraph 6 Is Amended to: Reflect the current status of the
documentation Seller was to bring to Closing. See table below.
<TABLE>
ITEM DESCRIPTION PARTIES AGREE TO STATUS
- ------------ ---------------------------------------------------------- ----------------------------- --------------
<S> <C> <C> <C>
a. Bill of sale, assignments, mortgage deed and promissory Seller to provide at closing
note
- ------------ ---------------------------------------------------------- ----------------------------- --------------
b. Updated list of Clients Seller to provide at Same as one
closing and attach to attached to
Assignment APA
- ------------ ---------------------------------------------------------- ----------------------------- --------------
c. Updated list of Receivables Seller to provide at
closing and attach to
Assignment
- ------------ ---------------------------------------------------------- ----------------------------- --------------
d. Documentation acceptable to Buyer which confirm the Seller to provide at closing Exh. "d"
approximate principle balance of the first and second
mortgages on the Real Estate
- ------------ ---------------------------------------------------------- ----------------------------- --------------
</TABLE>
Page 1 of 4
<PAGE>
<TABLE>
ITEM DESCRIPTION PARTIES AGREE TO STATUS
- ------------ ---------------------------------------------------------- ----------------------------- --------------
<S> <C> <C> <C>
e. All the Leases and Service Contracts together with all Provided before APA
addendums or modifications thereto, to be signed on 8/20/99
delivered to Buyer within 2 days before Closing
- ------------ ---------------------------------------------------------- ----------------------------- --------------
f. Corporate resolutions Seller to provide at closing
- ------------ ---------------------------------------------------------- ----------------------------- --------------
g. Satisfactions, releases and/or terminations of any lien Gateway and Heller
or encumbrance upon the Assets in favor of Gateway, Financial satisfactions
Heller Financial, any governmental entity or any to follow within 30 days
other party after closing -
Seller's responsibility
- ------------ ---------------------------------------------------------- ----------------------------- --------------
h. Closing statement Seller to provide at closing
- ------------ ---------------------------------------------------------- ----------------------------- --------------
i. A payroll ledger and attached letter attesting to the Seller to provide at closing Exh. "i"
amount of regular compensation paid to Seller's
employees, to be signed or initialed by each employee.
Seller's most recently filed monthly sales tax return
and proof of payment.
- ------------ ---------------------------------------------------------- ----------------------------- --------------
j. Copies of all non-compete agreements signed by any of None exist
the Seller's employees
- ------------ ---------------------------------------------------------- ----------------------------- --------------
k. Written consents from any creditors, or other personal None required.
or entities, whose consent is required for the transfer
and assignment of the Assets other than mortgage holders
- ------------ ---------------------------------------------------------- ----------------------------- --------------
l. All records and other documents in control or possession Seller to leave all such
of Seller relating to the Business other than Seller's records on the Leased
accounting books which will be retained by Seller but premises for Buyer's access
made available to Buyer or its agents or accountants for for at least 2 yrs
inspection from time to time hereafter upon reasonable following Closing
notice to Seller
- ------------ ---------------------------------------------------------- ----------------------------- --------------
m. Current state and county lien search (to be paid by State search provided
Buyer) showing no liens or encumbrances against the before closing, County
Assets or Real Estate except for those Seller will be search will be provided in
satisfying at Closing or those that Buyer has explicitly opinion letter from
agreed to assume in this Agreement Seller's attorney at closing
- ------------ ---------------------------------------------------------- ----------------------------- --------------
</TABLE>
Page 2 of 4
<PAGE>
<TABLE>
ITEM DESCRIPTION PARTIES AGREE TO STATUS
- ------------ ---------------------------------------------------------- ----------------------------- --------------
<S> <C> <C> <C>
n. A written Employment Contract, Non-Compete and Seller to provide at
Confidentiality Agreement from James Lobel closing
- ------------ ---------------------------------------------------------- ----------------------------- --------------
o. Sublease with attachments: A)Lease and B)Modification of Seller to provide at closing
Lease.
- ------------ ---------------------------------------------------------- ----------------------------- --------------
p. Written estoppel information from any other (other than Seller to provide at closing Exh. "p"
Seller) tenants, subtenants, assignees in the Real
Estate (other than Seller) confirming that rent is
current, that no advanced rent and security deposits
have been paid, that there are no set-offs or claims and
that the term is month-to-month
- ------------ ---------------------------------------------------------- ----------------------------- --------------
q. A right of first refusal agreement relative to the sale Seller to provide at closing
of the Real Estate
- ------------ ---------------------------------------------------------- ----------------------------- --------------
r. A mortgagee title insurance commitment (with a policy to An opinion letter from Both Exh. "r"
follow at Buyer's election and expense) showing title to Seller's attorney will be
the Real Estate vested in the R/E Owner subject only to acceptable instead and will
the first and second mortgages described in this Asset be provided at closing.
Purchase Agreement. Buyer will pay the cost of the Eric to record Satisfaction
Commitment of Mortgage on O.R. 27517,
Page 57.
- ------------ ---------------------------------------------------------- ----------------------------- --------------
s. Such other documents, instruments or certificates
as shall be reasonably requested by Buyer or its counsel
- ------------ ---------------------------------------------------------- ----------------------------- --------------
t. A recitation from the R/E Owner and Harvey Studios, Inc. Provide at closing
disclaiming any interest in the Assets
- ------------ ---------------------------------------------------------- ----------------------------- --------------
u. Updated list of Payables Provided at closing Exh. "u"
- ------------ ---------------------------------------------------------- ----------------------------- --------------
</TABLE>
4. Paragraph 9 is amended to: Add the following subparagraph:
y. Seller has not assigned a certain receivable to Buyer, a
receivable that will be used exclusively to pay Seller's
payables (out-of-pocket expenses). This receivable is Papa
John's Media for the June TV flight (Tampa).
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, the parties have executed or have caused this
Agreement to be executed by a duly authorized officer as of the date first
written above.
WITNESSES: SELLER: GALLASPY & LOBEL, INC.,
a Florida corporation d/b/a The G&L
Group
/s/ James Lobel 8/31/99
_____________________________ By __________________________________
James Lobel, President Date
_____________________________
BUYER: QUIKBIZ INTERNET GROUP, INC.,
a Nevada corporation, authorized to
transact business in Florida
/s/ David Bawarsky 8/31/99
_____________________________ By __________________________________
Dave Bawarsky, CEO Date
_____________________________
R/E OWNER: JAMES LOBEL AND DIANE
C. HARVEY
/s/ James Lobel 8/31/99
_____________________________ By __________________________________
James Lobel, Date
_____________________________
/s/ Diane C. Harvey 8/31/99
_____________________________ By __________________________________
Diane C. Harvey, Date
_____________________________
Page 4 of 4
As-QuikBiz Internet Group, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
COMMON STOCK
SEE REVERSE SIDE
FOR CERTAIN DEFINITIONS
CUSIP 74838a 10 0
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.002 PAR VALUE EACH OF
QUIKBIZ INTERNET GROUP, INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Nevada,
and to the Articles of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SECRETARY
PRESIDENT
COUNTERSIGNED:
BY:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY
AUTHORIZED SIGNATURE
QUIKBIZ INTERNET GROUP, INC.
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenents with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT ..............Custodian .....................
(Cust) (Minor
under Uniform Gifts to Minors
Act .....................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE
OF ASSIGNEE)
Shares
of the stock represented by the within Certificate, and do hereby irrevocable
constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated ______________________
NOTICE: THE SIGNATURE TO THIS ASSIGINMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE PAGE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE
FACT OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST
COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER RECOGNIZED STOCK
EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE MEDALLION PROGRAM.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
Warrant to Purchase
500,000 shares
Warrant to Purchase Common Stock
of
QUIKBIZ INTERNET GROUP, INC.
THIS CERTIFIES that Swartz Private Equity, LLC or any subsequent holder
hereof ("Holder"), has the right to purchase from QUIKBIZ INTERNET GROUP, INC. a
Nevada corporation (the "Company"), up to 500,000 fully paid and nonassessable
shares of the Company's common stock, $.001 par value per share ("Common
Stock"), subject to adjustment as provided herein, at a price equal to the
Exercise Price as defined in Section 3 below, at any time beginning on the Date
of Issuance (defined below) and ending at 5:00 p.m., New York, New York time the
date that is five (5) years after the Date of Issuance (the "Exercise Period"),
and subject in all respects to Paragraphs 12 and 13 hereof.
Holder agrees with the Company that this Warrant to Purchase Common
Stock of QUIKBIZ INTERNET GROUP, INC. (this "Warrant") is issued and all rights
hereunder shall be held subject to all of the conditions, limitations and
provisions set forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on May 25, 1999 ("Date of
Issuance"). The term of this Warrant is five (5) years from the Date of
Issuance.
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number (but not less than the lesser of (i)
50,000 shares, or (ii) in the event that this Warrant is assigned in whole or in
part, 50% of the initial number of shares in the Warrant initially issued or
assigned to a Holder) of full shares of Common Stock covered hereby (the
"Warrant Shares") upon surrender of this Warrant, with the Exercise Form
attached hereto as Exhibit A (the "Exercise Form") duly completed and executed,
<PAGE>
together with the full Exercise Price (as defined below) for each share of
Common Stock as to which this Warrant is exercised, at the office of the
Company, Attention: Andrew D. Smith, President, QuikBIZ Internet Group, Inc.,
5310 NW 33rd Ave., Suite 212, Ft. Lauderdale, FL 33309; Telephone (954)
739-7005, Facsimile: (954) 739-0708, or at such other office or agency as the
Company may designate in writing, by overnight mail, with an advance copy of the
Exercise Form sent to the Company and its Transfer Agent by facsimile (such
surrender and payment of the Exercise Price hereinafter called the "Exercise of
this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price shall initially equal $1.4625 per share ("Exercise
Price") or, if the Date of Exercise is more than six (6) months after the Date
of Issuance, the lesser of (i) the Initial Exercise Price or (ii) the "Lowest
Reset Price," as that term is defined below. The Company shall calculate a
"Reset Price" on each six-month anniversary date of the Date of Issuance which
shall equal one hundred percent (100%) of the lowest Closing Bid Price of the
Company's Common Stock for the five (5) trading days ending on such six-month
anniversary date of the Date of Issuance. The "Lowest Reset Price" shall equal
the lowest Reset Price determined on any six-month anniversary date of the Date
of Issuance preceding the Date of Exercise, taking into account, as appropriate,
any adjustments made pursuant to Section 5 hereof.
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer;
or
(ii) Cashless Exercise: subject to the last sentence of this
Section 3, surrender of this Warrant at the principal office of the Company
together with
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notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average Closing Bid Price of the Common Stock
for the five (5) trading days prior to the Date of Exercise of
this Warrant (the "Average Closing Price"), as reported by the
O.T.C. Bulletin Board, National Association of Securities
Dealers Automated Quotation System ("Nasdaq") Small Cap
Market, or if the Common Stock is not traded on the Nasdaq
Small Cap Market, the Average Closing Price in any other
over-the-counter market; provided, however, that if the Common
Stock is listed on a stock exchange, the Market Price shall be
the Average Closing Price on such exchange for the five (5)
trading days prior to the date of exercise of the Warrants. If
the Common Stock is/was not traded during the five (5) trading
days prior to the Date of Exercise, then the closing price for
the last publicly traded day shall be deemed to be the closing
price for any and all (if applicable) days during such five
(5) trading day period.
B = the Exercise Price.
For purposes hereof, the term "Closing Bid Price" shall mean the
closing bid price on the O.T.C. Bulletin Board, the National Market System
("NMS"), the New York Stock Exchange, the Nasdaq Small Cap Market, or if no
longer traded on the O.T.C. Bulletin Board, the NMS, the New York Stock
Exchange, the Nasdaq Small Cap Market, the "Closing Bid Price" shall equal the
closing price on the principal national securities exchange or the
over-the-counter system on which the Common Stock is so traded and, if not
available, the mean of the high and low prices on the principal national
securities exchange on which the Common Stock is so traded.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is
intended, understood and acknowledged that, pursuant to applicable law, as it
now stands, the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction shall be deemed to have been acquired at the time
this Warrant was issued. Moreover, it is intended, understood and acknowledged
that the holding period for the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have commenced on
the date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant
may not be exercised in a cashless exercise transaction if, on the Date of
Exercise, the shares of Common Stock to be issued upon exercise of this Warrant
would upon such issuance be then registered pursuant to an effective and current
registration statement.
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4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) Registrable Securities. If the Company proposes to register
(including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its Common Stock under the Act
(other than a registration relating solely for the sale of securities to
participants in a Company stock plan or a registration on Form S-4 promulgated
under the Act or any successor or similar form registering stock issuable upon a
reclassification, upon a business combination involving an exchange of
securities or upon an exchange offer for securities of the issuer or another
entity)(a "Piggyback Registration Statement"), the Company shall cause to be
included in such Piggyback Registration Statement all of the Common Stock
issuable upon the exercise of this Warrant ("Registrable Securities")
("Piggyback Registration") to the extent such inclusion does not violate the
registration rights of any other securityholder of the Company granted prior to
the date hereof. Nothing herein shall prevent the Company from withdrawing or
abandoning the Piggyback Registration Statement prior to its effectiveness. In
the event that the Piggyback Registration is for a primary underwritten
offering, the managing underwriter thereof shall be entitled to effect customary
underwriter cutbacks, but only if inclusion of the full amount of the
Registrable Securities would have a materially adverse effect on such
underwriting, provided that the Holder's cutback is no more, on a pro rata
basis, than any other cutback.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock of the Company or securities of another
company, then Holder, upon Exercise of this Warrant after the record date for
the determination of holders of Common Stock entitled to receive such dividend,
shall be entitled to receive upon Exercise of this Warrant, in addition to the
number of shares of Common Stock as to which this Warrant is exercised, such
additional shares of Common Stock as such Holder would have received had this
Warrant been exercised immediately prior to such record date and the Exercise
Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which Holder shall be
entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
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case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give Holder the same notice it provides to holders of Common Stock
of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for no
consideration to holders of Common Stock evidences of indebtedness or other
securities or assets (other than cash dividends or distributions payable out of
earned surplus or net profits for the current or preceding years) that were
received by the Company in exchange for assets or securities of the Company,
then, in any such case, Holder shall be entitled to receive, upon Exercise of
this Warrant, with respect to each share of Common Stock issuable upon such
exercise, the amount of cash or evidences of indebtedness or other securities or
assets which Holder would have been entitled to receive with respect to each
such share of Common Stock as a result of the happening of such event had this
Warrant been exercised immediately prior to the record date or other date fixing
shareholders to be affected by such event (the "Determination Date") or, in lieu
thereof, if the Board of Directors of the Company should so determine at the
time of such distribution, a reduced Exercise Price determined by multiplying
the Exercise Price on the Determination Date by a fraction, the numerator of
which is the result of such Exercise Price reduced by the value of such
distribution applicable to one share of Common Stock (such value to be
determined by the Board of Directors of the Company in its discretion) and the
denominator of which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exerciseable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) days notice to Holder hereof of any Corporate Change. In the event
that the Company enters into a definitive agreement to be acquired in a
transaction after which the common shareholders of the Company will no longer
hold publicly traded shares of common stock, the Company may force the Holder(s)
to exercise this Warrant by giving at least thirty (30) days advance notice of
such transaction and of the Company's intent to force exercise of the Warrants,
provided that exercise of the Warrants may be forced only if the price of the
Company's Common Stock is at least two times the Exercise Price for each of the
ten (10) trading days immediately preceding and immediately following the date
of such notice. The Holder shall have 20 trading days to exercise this Warrant
after the date of receipt of such notice.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a) or
(c) of this Section 5, and thereafter shall mean said price as adjusted from
time to time in accordance with the provisions of said subsection. No such
adjustment under this Section 5 shall be made unless such adjustment would
change the Exercise Price at the time by $.05 or more; provided, however, that
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all adjustments not so made shall be deferred and made when the aggregate
thereof would change the Exercise Price at the time by $.05 or more. The number
of shares of Common Stock subject hereto shall increase proportionately with
each decrease in the Exercise Price, except for a decrease in exercise price
pursuant to Paragraph 3 where the number of shares shall not increase.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock. If,
on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be rounded to the nearest whole number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant and payment of the
Exercise Price (either in cash or in a cashless exercise), all shares of Common
Stock issuable upon such exercise shall be duly and validly issued, fully paid,
nonassessable and not subject to preemptive rights, rights of first refusal or
similar rights of any person or entity.
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8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act by
virtue of Regulation D and exempt from state registration under applicable state
laws. The Warrant and the Common Stock issuable upon the Exercise of this
Warrant may not be pledged, transferred, sold or assigned except pursuant to an
effective registration statement or an exemption to the registration
requirements of the Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall deliver a written notice to Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or persons to
whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within ten
(10) days, and shall deliver to the assignee(s) designated by Holder a Warrant
or Warrants of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy or
claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Nevada,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
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12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the Attention:
Andrew D. Smith, President, QuikBIZ Internet Group, Inc., 5310 NW 33rd Ave.,
Suite 212, Ft. Lauderdale, FL 33309; Telephone (954) 739-7005, Facsimile: (954)
739-0708,Notices or demands pursuant to this Warrant to be given or made by the
Company to or on Holder shall be sufficiently given or made if sent by certified
or registered mail, return receipt requested, postage prepaid, and addressed, to
the address of Holder set forth in the Company's records, until another address
is designated in writing by Holder.
12. Return of Warrant. In the event that Holder is required to return
this Warrant to Company under the terms of that certain Letter of Agreement (the
"Letter of Agreement") between Swartz Private Equity, LLC and the Company, dated
on or about May 25, 1999, then (i) this Warrant shall become null and void; and
(ii) the Holder shall return this Warrant to Company. No transfers of this
Warrant will be permitted until this Warrant becomes exerciseable under the
terms of the Letter of Agreement.
13. Forced Exercise. Anytime after the date that is 24 months after the
date hereof, the Company may force the Holder to exercise this Warrant by giving
written notice to the Holder, provided that the closing bid price of the
Company's Common Stock is greater than three times the Exercise Price for each
of the ten (10) trading days immediately preceding and the ten (10) trading days
immediately following the date of such forced exercise notice. The Holder shall
have 20 trading days to exercise this Warrant after the date of receipt of such
notice.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
25th day of May, 1999.
QUIKBIZ INTERNET GROUP, INC.
/s/ Andrew D. Smith
By: ________________________________
Andrew D. Smith, President
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EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: QUIKBIZ INTERNET GROUP, INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of QUIKBIZ
INTERNET GROUP, INC., a Nevada corporation (the "Company"), evidenced by the
attached warrant (the "Warrant"), and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, assuming that Holder or Holder's broker
certifies that the shares are being sold under a current and effective
prospectus, and a warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the undersigned and delivered to the
undersigned at the address set forth below:
Dated:
- ------------------------------------------------------------------------
Signature
- -----------------------------------------------------------------------
Print Name
- ------------------------------------------------------------------------
Address
- -----------------------------------------------------------------------
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- ------------------------------------------------------------------------
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EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of QUIKBIZ
INTERNET GROUP, INC., evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint _______________________ attorney to transfer
the said Warrant on the books of the Company, with full power of substitution in
the premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
-----------------------------------
Name
- -----------------------------------
Address
- -----------------------------------
Please print name and address of assignee
(including zip code number)
- -----------------------------------------------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
- ------------------------------------------------------------------------
QUIKBIZ INTERNET GROUP, INC.
AMENDED AND RESTATED INVESTMENT AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES
AUTHORITIES. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS.
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE
SUCH AUTHORITIES CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT
OF THE RISKS INVOLVED.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.
THIS AMENDED AND RESTATED INVESTMENT AGREEMENT (this
"Agreement" or "Investment Agreement") is dated as of the 9th day of July, 1999,
by and between QuikBIZ Internet Group, Inc., a corporation duly organized and
existing under the laws of the State of Nevada (the "Company"), and the
undersigned Investor executing this Agreement ("Investor"), and amends and
restates that certain Investment Agreement between the Company and the Investor
dated July 9, 1999.
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Investor, and the
Investor shall purchase from the Company, from time to time as provided herein,
shares of the Company's Common Stock, as part of an offering of Common Stock by
the Company to Investor, for a maximum aggregate offering amount of Twenty
Million Dollars ($20,000,000) (the "Maximum Offering Amount"); and
WHEREAS, the solicitation of this Investment Agreement and, if accepted
by the Company, the offer and sale of the Common Stock are being made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated under
the Act, Section 4(2) of the Act, and/or upon such other exemption from the
registration requirements of the Act as may be available with respect to any or
all of the purchases of Common Stock to be made hereunder.
<PAGE>
TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the
recitals above), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"20% Approval" shall have the meaning set forth in Section 5.26.
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in Section
2.3.1(a), the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
"Affiliate" shall have the meaning as set forth Section 6.5.
"Aggregate Issued Shares" equals the aggregate number of shares of
Common Stock issued to Investor pursuant to the terms of this Agreement or the
Registration Rights Agreement as of a given date, including Put Shares and
Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set forth in
Section 2.6.3(b).
"Agreement" shall mean this Investment Agreement.
"Automatic Termination" shall have the meaning set forth in Section
2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal Market is
open for trading.
"Calendar Month" shall mean the period of time beginning on the numeric
day in question in a calendar month and for Calendar Months thereafter,
beginning on the earlier of (i) the same numeric day of the next calendar month
or (ii) the last day of the next calendar month. Each Calendar Month shall end
on the day immediately preceding the beginning of the next succeeding Calendar
Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.11.
"Capital Raising Limitations" shall have the meaning set forth in
Section 6.6.1.
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"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.
"Closing" shall mean one of (i) the Investment Commitment Closing and
(ii) each closing of a purchase and sale of Common Stock pursuant to Section 2.
"Closing Bid Price" means, for any security as of any date, the closing
bid price for such security on the O.T.C. Bulletin Board, or, if the O.T.C.
Bulletin Board is not the principal securities exchange or trading market for
such security, the closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by such principal securities exchange or trading market, or, if no
closing bid price is reported for such security, the average of the bid prices
at the close of the market of any market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as mutually determined by the Company and the Investor in
this Offering. If the Company and the Investor in this Offering are unable to
agree upon the fair market value of the Common Stock, then such dispute shall be
resolved by an investment banking firm mutually acceptable to the Company and
the Investor in this offering and any fees and costs associated therewith shall
be paid equally by the Company and the Investor.
"Commitment Evaluation Period" shall have the meaning set forth in
Section 2.7.
"Commitment Warrants" shall have the meaning set forth in Section 2.7.
"Commitment Warrant Exercise Price" shall have the meaning set forth in
Section 2.7.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean QuikBIZ Internet Group, Inc. a corporation
duly organized and existing under the laws of the State of Nevada.
"Company Designated Maximum Put Dollar Amount" shall have the meaning
set forth in Section 2.3.1(a).
"Company Designated Minimum Put Share Price" shall have the meaning set
forth in Section 2.3.1(a).
"Company Termination" shall have the meaning set forth in Section
2.3.14.
"Conditions to Investor's Obligations" shall have the meaning as set
forth in Section 2.2.4.
"Delisting Event" shall mean, any time during the term of this
Investment Agreement, that the Company's Common Stock is not listed for trading
on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National
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Market, the American Stock Exchange, or the New York Stock Exchange or is
suspended or delisted with respect to the trading of the shares of Common Stock
on such market or exchange.
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Due Diligence Review" shall have the meaning as set forth in Section
2.6
"Effective Date" shall have the meaning set forth in Section 2.3.1.
"Equity Securities" shall have the meaning set forth in Section 6.6.1.
"Evaluation Day" shall mean each Business Day during a Pricing Period
where the lowest intra-day trading price of the Common Stock is greater than or
equal to the Trigger Price.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Extended Put Period" shall mean the period of time between the Advance
Put Notice Date until the Pricing Period End Date.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth in Section
9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in Section
2.3.1 (b).
"Ineffective Period" shall mean any period of time that the
Registration Statement or any Supplemental Registration Statement (each as
defined in the Registration Rights Agreement) becomes ineffective or unavailable
for use for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any reason (or
in the event the prospectus under either of the above is not current and
deliverable) during any time period required under the Registration Rights
Agreement.
"Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).
"Investment Commitment Closing" shall have the meaning set forth in
Section 2.2.3.
"Investment Agreement" shall mean this Investment Agreement.
"Investment Commitment Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as Exhibit B,
or such other form as agreed upon by the parties, as to the Investment
Commitment Closing.
"Investment Date" shall mean the date of the Investment Commitment
Closing.
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"Investor" shall have the meaning set forth in the preamble hereto.
"Key Employee" shall have the meaning set forth in Section 5.18, as set
forth in Exhibit N. "Late Payment Amount" shall have the meaning set
forth in Section 2.3.8.
"Legend" shall have the meaning set forth in Section 4.7.
"Major Transaction" shall mean and shall be deemed to have occurred at
such time upon any of the following events:
(i) a consolidation, merger or other business combination or
event or transaction following which the holders of Common Stock of the Company
immediately preceding such consolidation, merger, combination or event either
(a) no longer hold a majority of the shares of Common Stock of the Company or
(b) no longer have at least 50% of the voting power as is required to elect the
board of directors of the Company (a "Change of Control"); provided, however,
that if the other entity involved in such consolidation, merger, combination or
event is a publicly traded company with "Substantially Similar Trading
Characteristics" (as defined below) as the Company and the holders of Common
Stock are to receive solely Common Stock or no consideration (if the Company is
the surviving entity) or solely common stock of such other entity (if such other
entity is the surviving entity), such transaction shall not be deemed to be a
Major Transaction (provided the surviving entity, if other than the Company,
shall have agreed to assume all obligations of the Company under this Agreement
and the Registration Rights Agreement). For purposes hereof, an entity shall
have Substantially Similar Trading Characteristics as the Company if the average
daily dollar trading volume of the common stock of such entity is equal to or in
excess of $200,000 for the 90th through the 31st day prior to the public
announcement of such transaction;
(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to the holders
of outstanding shares of Common Stock, such that following such purchase, tender
or exchange offer a Change of Control shall have occurred.
"Market Price" shall equal the lowest Closing Bid Price for the Common
Stock on the Principal Market during the Pricing Period for the applicable Put.
"Material Facts" shall have the meaning set forth in Section 2.3.6(a).
"Maximum Put Dollar Amount" shall mean the lesser of (i) the Company
Designated Maximum Put Dollar Amount, if any, specified by the Company in a Put
Notice, and (ii) $3 million.
"Maximum Offering Amount" shall mean Twenty Million Dollars
($20,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.11.
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"NASD" shall have the meaning set forth in Section 6.10.
"Non-Usage Fee" shall have the meaning set forth in Section 2.7.
"NYSE" shall have the meaning set forth in Section 6.10.
"Numeric Day" shall mean the numerical day of the month of the
Investment Date or the last day of the calendar month in question, whichever is
less.
"Offering" shall mean the Company's offering of Common Stock and
Warrants issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by an officer
of the Company, to the effect that the representations and warranties of the
Company in this Agreement required to be true for the applicable Closing are
true and correct in all material respects and all of the conditions and
limitations set forth in this Agreement for the applicable Closing are
satisfied.
"Opinion of Counsel" shall mean, as applicable, the Investment
Commitment Opinion of Counsel, the Put Opinion of Counsel, and the Registration
Opinion.
"Payment Due Date" shall have the meaning set forth in Section 2.3.8.
"Pricing Period" shall have the meaning set forth in Section 2.3.7 (b).
"Pricing Period End Date" shall mean the last Business Day of any
Pricing Period.
"Principal Market" shall mean the O.T.C. Bulletin Board, the Nasdaq
Small Cap Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.
"Proceeding" shall have the meaning as set forth Section 5.1.
"Purchase" shall have the meaning set forth in Section 2.3.7(a).
"Purchase Warrants" shall have the meaning set forth in Section 2.4.2.
"Purchase Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.2.
"Put" shall have the meaning set forth in Section 2.3.1(d).
"Put Cancellation" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Date" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.13(a), the form of which is attached hereto as Exhibit Q.
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"Put Cancellation Notice Confirmation" shall have the meaning set forth
in Section 2.3.13(c), the form of which is attached hereto as Exhibit S.
"Put Closing" shall have the meaning set forth in Section 2.3.8.
"Put Closing Date" shall have the meaning set forth in Section 2.3.8.
"Put Date" shall mean the date that is specified by the Company in any
Put Notice for which the Company intends to exercise a Put under Section 2.3.1,
unless the Put Date is postponed pursuant to the terms hereof, in which case the
"Put Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the Put Share
Amount by the Put Share Price with respect to such Put Date, subject to the
limitations herein.
"Put Notice" shall have the meaning set forth in Section 2.3.1(d), the
form of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from Company's
independent counsel, in the form attached as Exhibit I, or such other form as
agreed upon by the parties, as to any Put Closing.
"Put Share Amount" shall have the meaning as set forth Section
2.3.1(b).
"Put Share Price" shall have the meaning set forth in Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by
the Investor pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth in the
Registration Rights Agreement.
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a).
"Registration Opinion Deadline" shall have the meaning set forth in
Section 2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration
rights agreement entered into by the Company and Investor on even date herewith,
in the form attached hereto as Exhibit A, or such other form as agreed upon by
the parties.
"Registration Statement" shall have the meaning as set forth in the
Registration Rights Agreement.
"Regulation D" shall mean Regulation D promulgated under the Act.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
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"Required Put Documents" shall have the meaning set forth in Section
2.3.5.
"Schedule of Exceptions" shall have the meaning set forth in Section 5,
and is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together with the
Common Stock of the Company, the Warrants and the Warrant Shares issuable
pursuant to this Investment Agreement.
"Share Authorization Increase Approval" shall have the meaning set
forth in Section 5.26.
"Six Month Anniversary" shall mean the date that is the same Numeric
Day of the sixth (6th) calendar month after the Investment Date, and the date
that is the same Numeric Day of each sixth (6th) calendar month thereafter,
provided that if such date is not a Business Day, the next Business Day
thereafter.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.12.
"Supplemental Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be a period
of time beginning on the date of this Agreement and ending on the Termination
Date.
"Termination Date" shall mean the earlier of (i) the date that is three
(3) years after the Effective Date, or (ii) the date that is thirty (30)
Business Days after the later of (a) the Put Closing Date on which the sum of
the aggregate Put Share Price for all Put Shares equal the Maximum Offering
Amount, (b) the date that the Company has delivered a Termination Notice to the
Investor, (c) the date of an Automatic Termination, and (d) the date that all of
the Warrants have been exercised.
"Termination Fee" shall have the meaning as set forth in Section 2.7.
"Termination Notice" shall have the meaning as set forth in Section
2.3.14.
"Third Party Report" shall have the meaning set forth in Section 3.2.4.
"Transfer Agent Instructions" shall mean the Company's instructions to
its transfer agent, substantially in the form attached as Exhibit T, or such
other form as agreed upon by the parties.
"Transaction Documents" shall have the meaning set forth in Section 9.
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"Trigger Price," for any Pricing Period, shall mean the greater of (i)
the Company Designated Minimum Put Share Price, plus $.10, or (ii) the Company
Designated Minimum Put Share Price divided by .91.
"Truncated Pricing Period" shall have the meaning set forth in Section
2.3.7(b).
"Truncated Put Share Amount" shall have the meaning set forth in
Section 2.3.13(b).
"Unlegended Share Certificates" shall mean a certificate or
certificates (or electronically delivered shares, as appropriate) (in
denominations as instructed by Investor) representing the shares of Common Stock
to which the Investor is then entitled to receive, registered in the name of
Investor or its nominee (as instructed by Investor) and not containing a
restrictive legend or stop transfer order, including but not limited to the Put
Shares for the applicable Put and Warrant Shares.
"Warrant Shares" shall mean the Common Stock issuable upon exercise of
the Warrants.
"Warrants" shall mean Purchase Warrants and Commitment Warrants.
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the
satisfaction of the conditions to closing set forth in Sections 2.2 and 2.3
below, Investor hereby agrees to purchase such amounts of Common Stock and
accompanying Warrants as the Company may, in its sole and absolute discretion,
from time to time elect to issue and sell to Investor according to one or more
Puts pursuant to Section 2.3 below.
2.2 Investment Commitment.
2.2.1 [Intentionally Left Blank].
2.2.2 [Intentionally Left Blank].
2.2.3 Investment Commitment Closing. The closing
of this Agreement (the "Investment Commitment Closing") shall be deemed to occur
when this Agreement and the Registration Rights Agreement have been executed and
delivered by both Investor and the Company, the Transfer Agent Instructions have
been executed and delivered by both the Company and the Transfer Agent, and the
other Conditions to Investor's Obligations set forth in Section 2.2.4 below have
been met.
2.2.4 Conditions to Investor's Obligations. As a
prerequisite to the Investment Commitment Closing and the Investor's obligations
hereunder, in addition to the requirements of Section 2.2.3 above, all of the
following (the "Conditions to Investor's Obligations") shall have been satisfied
concurrently with the Company's execution and delivery of this Agreement:
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<PAGE>
(a) the following documents shall have been delivered to
the Investor: (i) the Investment Commitment Opinion
of Counsel (signed by the Company's counsel), (ii)
the Transfer Agent Instructions (executed by the
Company and the Transfer Agent), and (iii) a
Secretary's Certificate as to (A) the resolutions of
the Company's board of directors authorizing this
transaction, (B) the Company's Certificate of
Incorporation, and (C) the Company's Bylaws;
(b) this Investment Agreement, accepted by the Company,
shall have been received by the Investor;
(c) [Intentionally Left Blank];
(d) the Company's Common Stock shall be listed for
trading and actually trading on the O.T.C. Bulletin
Board, the Nasdaq Small Cap Market, the Nasdaq
National Market, the American Stock Exchange or the
New York Stock Exchange;
(e) other than normal operating losses incurred since the
date of the Company's last balance sheet in the
Disclosure Documents (provided for in Section 3.2.4),
as of the Closing there have been no material adverse
changes in the Company's business or financial
condition since that date, including but not limited
to incurring material liabilities; and
(f) the representations and warranties of the Company in
this Agreement shall be true and correct in all
material respects and the conditions to Investor's
obligations set forth in this Section 2.2.4 shall
have been satisfied as of such Closing; and the
Company shall deliver an Officer's Certificate,
signed by an officer of the Company, to such effect
to the Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to the
Individual Put Limit, the Maximum Offering Amount and the Cap Amount (if
applicable), and the other conditions and limitations set forth in this
Agreement, at any time beginning on the date on which the Registration Statement
is declared effective by the SEC (the "Effective Date"), the Company may, in its
sole and absolute discretion, elect to exercise one or more Puts according to
the following procedure, provided that each subsequent Put Date after the first
Put Date shall be no sooner than twenty (20) Business Days following the
preceding Put Date:
(a) Delivery of Advance Put Notice.At least
ten (10) Business Days but not more than twenty (20) Business Days prior to any
intended Put Date (unless otherwise agreed in writing by the Investor), the
Company shall deliver advance written notice (the "Advance Put Notice," the form
of which is attached hereto as Exhibit E, the date of such Advance Put Notice
being the "Advance Put Notice Date") to Investor stating the Put Date for which
the Company shall, subject to the limitations and restrictions contained herein,
exercise a Put and stating the number of shares of Common Stock (subject to the
Individual Put Limit and the Maximum Put Dollar Amount) which the Company
intends to sell to the Investor for the Put (the "Intended Put Share Amount").
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The Company may, at its option, also designate in any Advance Put
Notice (i) a maximum dollar amount of Common Stock, not to exceed $3,000,000,
which it shall sell to Investor during the Put (the "Company Designated Maximum
Put Dollar Amount") and/or (ii) a minimum purchase price per Put Share at which
the Investor may purchase Shares pursuant to such Put Notice (a "Company
Designated Minimum Put Share Price"). The Company Designated Minimum Put Share
Price, if applicable, shall be no greater than 82.5% of the Closing Bid Price of
the Company's common stock on the Advance Put Notice Date.
Notwithstanding the above, if, at the time of delivery of an Advance
Put Notice, more than two (2) Calendar Months have passed since the previous Put
Date, such Advance Put Notice shall provide at least twenty (20) Business Days
notice of the intended Put Date, unless waived in writing by the Investor. In
order to effect delivery of the Advance Put Notice, the Company shall (i) send
the Advance Put Notice by facsimile on such date so that such notice is received
by the Investor by 6:00 p.m., New York, NY time, and (ii) surrender such notice
on such date to a courier for overnight delivery to the Investor (or two (2) day
delivery in the case of an Investor residing outside of the U.S.). Upon receipt
by the Investor of a facsimile copy of the Advance Put Notice, the Investor
shall, within two (2) Business Days, send, via facsimile, a confirmation of
receipt (the "Advance Put Notice Confirmation," the form of which is attached
hereto as Exhibit F) of the Advance Put Notice to the Company specifying that
the Advance Put Notice has been received and affirming the intended Put Date and
the Intended Put Share Amount.
(b) Put Share Amount. The "Put Share Amount"
is the number of shares of Common Stock that the Investor shall be obligated to
purchase in a given Put, and shall equal the lesser of (i) the Intended Put
Share Amount, and (ii) the Individual Put Limit. The "Individual Put Limit"
shall equal the lesser of (i) 15% of the sum of the aggregate daily reported
trading volumes in the outstanding Common Stock on the Company's Principal
Market, excluding any block trades of 20,000 or more shares of Common Stock, for
all Evaluation Days in the Pricing Period, (ii) the number of Put Shares which,
when multiplied by their respective Put Share Prices, equals the Maximum Put
Dollar Amount, and (iii) 9.9% of the total amount of the Company's Common Stock
that would be outstanding upon completion of the Put, but in no event shall the
Individual Put Limit exceed 15% of the sum of the aggregate daily reported
trading volumes in the outstanding Common Stock on the Company's Principal
Market, excluding any block trades of 20,000 or more shares of Common Stock, for
the twenty (20) Trading Days immediately preceding the Put Date (this
limitation, together with the limitation in (i) immediately above, are
collectively referred to herein as the "Volume Limitations").
(c) Put Share Price. The purchase price for
the Put Shares (the "Put Share Price") shall equal the lesser of (i) the Market
Price for such Put, minus $.10, or (ii) 91% of the Market Price for such Put,
but shall in no event be less than the Company Designated Minimum Put Share
Price.
(d) Delivery of Put Notice. After delivery
of an Advance Put Notice, on the Put Date specified in the Advance Put Notice
the Company shall deliver written notice (the "Put Notice," the form of which is
attached hereto as Exhibit G) to Investor stating (i) the Put Date, (ii) the
Intended Put Share Amount as specified in the Advance Put Notice (such exercise
a "Put"), (iii) the Company Designated Maximum Put Dollar Amount (if
applicable), and (iv) the Company Designated Minimum Put Share Price (if
applicable). In order to effect delivery of the Put Notice, the Company shall
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(i) send the Put Notice by facsimile on the Put Date so that such notice is
received by the Investor by 6:00 p.m., New York, NY time, and (ii) surrender
such notice on the Put Date to a courier for overnight delivery to the Investor
(or two (2) day delivery in the case of an Investor residing outside of the
U.S.). Upon receipt by the Investor of a facsimile copy of the Put Notice, the
Investor shall, within two (2) Business Days, send, via facsimile, a
confirmation of receipt (the "Put Notice Confirmation," the form of which is
attached hereto as Exhibit H) of the Put Notice to Company specifying that the
Put Notice has been received and affirming the Put Date and the Intended Put
Share Amount.
(e) Delivery of Required Put Documents.
On or before the Put Date for such Put, the Company shall deliver the Required
Put Documents (as defined in Section 2.3.5 below) to the Investor (or to an
agent of Investor, if Investor so directs). Unless otherwise specified by the
Investor, the Put Shares of Common Stock shall be transmitted electronically, if
possible, pursuant to such electronic delivery system as the Investor shall
request; otherwise delivery shall be by physical certificates. If the Company
has not delivered all of the Required Put Documents to the Investor on or before
the Put Date, the Put shall be automatically canceled, unless the Investor
agrees to delay the Put Date by up to three (3) Business Days, in which case the
Pricing Period begins on the Business Day following such new Put Date. If the
Company has not delivered all of the Required Put Documents to the Investor on
or before the Put Date (or new Put Date, if applicable), and the Investor has
not agreed in writing to delay the Put Date, the Put is automatically canceled
(an "Impermissible Put Cancellation") and, unless the Put was otherwise canceled
in accordance with the terms of Section 2.3.13, the Company shall pay the
Investor $5,000 for its reasonable due diligence expenses incurred in
preparation for the canceled Put and the Company may deliver an Advance Put
Notice for the subsequent Put no sooner than ten (10) Business Days after the
date that such Put was canceled, unless otherwise agreed by the Investor.
2.3.2 Termination of Right to Put. The Company's
right to require the Investor to purchase any subsequent Put Shares shall
terminate permanently (each, an "Automatic Termination"), unless waived in
writing by the Investor, upon the occurrence of any of the following:
(a) the Company shall not exercise a Put
or any Put thereafter if, at any time, either the Company or any director or
executive officer of the Company has engaged in a transaction or conduct related
to the Company that gives rise to (i) a Securities and Exchange Commission
enforcement action, or (ii) a civil judgment or criminal conviction for fraud or
misrepresentation, or for any other offense that, if prosecuted criminally,
would constitute a felony under applicable law;
(b) the Company shall not exercise a Put or
any Put thereafter, on any date after a cumulative time period or series of time
periods, including both Ineffective Periods and Delisting Events, that lasts for
an aggregate of four (4) months;
(c) the Company shall not exercise a Put or
any Put thereafter if at any time the Company has filed for and/or is subject to
any bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors instituted by or against the Company or any subsidiary of the Company,
provided that in the event that an involuntary bankruptcy petition is filed
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against the Company, the Company shall have sixty (60) days to obtain dismissal
of such petition before such Put prohibition shall initiate, during which period
the Company shall not be entitled to initiate any Puts;
(d) the Company shall not exercise a Put
after the sooner of (i) the date that is three (3) years after the Effective
Date, or (ii) the Put Closing Date on which the aggregate of the Put Dollar
Amounts for all Puts equal the Maximum Offering Amount; and
(e) the Company shall not exercise a Put
after the Company has breached any covenant in Section 2.7, Section 6, or
Section 9 hereof, provided that if such breach is curable, no Automatic
Termination shall occur if the Company has cured such breach within thirty (30)
days of the first date the Company becomes aware of such breach, provided that
the Company shall not be entitled to initiate any Puts prior to such cure.
2.3.3 Put Limitations. The Company's right to
exercise a Put shall be limited as follows, unless waived in writing by the
Investor:
(a) [Intentionally Left Blank].
(b) notwithstanding the amount of any Put,
the Investor shall not be obligated to purchase any additional Put Shares once
the aggregate Put Dollar Amount paid by Investor equals the Maximum Offering
Amount;
(c) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for which the Company
has announced a subdivision or combination, including a reverse split, of its
Common Stock or has subdivided or combined its Common Stock during the Extended
Put Period;
(d) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for which the Company
has paid a dividend of its Common Stock or has made any other distribution of
its Common Stock during the Extended Put Period;
(e) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for which the Company
has made, during the Extended Put Period, a distribution of all or any portion
of its assets or evidences of indebtedness to the holders of its Common Stock;
(f) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for which a Major
Transaction has occurred during the Extended Put Period;
2.3.4 Conditions Precedent to the Right of the
Company to Deliver an Advance Put Notice or a Put Notice and the Obligation of
the Investor to Purchase Put Shares. The right of the Company to deliver an
Advance Put Notice or a Put Notice and the obligation of the Investor hereunder
to acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on (i) the date of delivery of such Advance Put Notice or Put
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Notice and (ii) the applicable Put Closing Date, of each of the following
conditions, unless waived in writing by the Investor:
(a) the Company's Common Stock shall be listed for and
actively trading on the O.T.C. Bulletin Board, the
Nasdaq Small Cap Market, the Nasdaq National Market
or the New York Stock Exchange and the Put Shares
shall be so listed, and to the Company's knowledge
there is no notice of any suspension or delisting
with respect to the trading of the shares of Common
Stock on such market or exchange;
(b) the Company shall have satisfied any and all
obligations pursuant to the Registration Rights
Agreement, including, but not limited to, the filing
of the Registration Statement with the SEC with
respect to the resale of all Registrable Securities
and the requirement that the Registration Statement
shall have been declared effective by the SEC for the
resale of all Registrable Securities and the Company
shall have satisfied and shall be in compliance with
any and all obligations pursuant to this Agreement
and the Warrants;
(c) [Intentionally Left Blank].
(d) the representations and warranties of the Company are
true and correct in all material respects as if made
on such date and the conditions to Investor's
obligations set forth in this Section 2.3.4 are
satisfied as of such Closing, and the Company shall
deliver a certificate, signed by an officer of the
Company, to such effect to the Investor;
(e) the Company shall have reserved for issuance a
sufficient number of Common Shares for the purpose of
enabling the Company to satisfy any obligation to
issue Common Shares pursuant to any Put and to effect
exercise of the Warrants;
(f) the Registration Statement is not subject to an
Ineffective Period as defined in the Registration
Rights Agreement, the prospectus included therein is
current and deliverable, and to the Company's
knowledge there is no notice of any investigation or
inquiry concerning any stop order with respect to the
Registration Statement; and
(g) if the Aggregate Issued Shares after the Closing of
the Put would exceed the Cap Amount, the Company
shall have obtained the Stockholder 20% Approval as
specified in Section 6.12.
2.3.5 Documents Required to be Delivered on the
Put Date as Conditions to Closing of any Put. The Closing of any Put and
Investor's obligations hereunder shall additionally be conditioned upon the
delivery to the Investor of each of the following (the "Required Put Documents")
on or before the applicable Put Date, unless waived or extended in writing by
the Investor:
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(a) a number of Unlegended Share
Certificates (or freely tradeable electronically delivered shares, as
appropriate) equal to the Intended Put Share Amount, in denominations of not
more than 50,000 shares per certificate;
(b) the following documents: Put Opinion
of Counsel, Officer's Certificate, Put Notice, any required Registration
Opinion, and any report or disclosure required under Section 2.3.6 or Section
2.6; and
(c) all documents, instruments and other
writings required to be delivered on or before the Put Date pursuant to any
provision of this Agreement in order to implement and effect the transactions
contemplated herein.
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2.3.6 Accountant's Letter and Registration Opinion.
(a) The Company shall have caused to be
delivered to the Investor, (i) whenever required by Section 2.3.6(b) or by
Section 2.6.3, and (ii) on the date that is three (3) Business Days prior to
each Put Date (the "Registration Opinion Deadline"), an opinion of the Company's
independent counsel, in substantially the form of Exhibit R (the "Registration
Opinion"), addressed to the Investor stating, inter alia, that no facts
("Material Facts") have come to such counsel's attention that have caused it to
believe that the Registration Statement is subject to an Ineffective Period or
to believe that the Registration Statement, any Supplemental Registration
Statement (as each may be amended, if applicable), and any related prospectuses,
contain an untrue statement of material fact or omits a material fact required
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. If a Registration Opinion cannot be
delivered by the Company's independent counsel to the Investor on the
Registration Opinion Deadline due to the existence of Material Facts or an
Ineffective Period, the Company shall promptly notify the Investor and as
promptly as possible amend each of the Registration Statement and any
Supplemental Registration Statements, as applicable, and any related prospectus
or cause such Ineffective Period to terminate, as the case may be, and deliver
such Registration Opinion and updated prospectus as soon as possible thereafter.
If at any time after a Put Notice shall have been delivered to Investor but
before the related Pricing Period End Date, the Company acquires knowledge of
such Material Facts or any Ineffective Period occurs, the Company shall promptly
notify the Investor and shall deliver a Put Cancellation Notice to the Investor
pursuant to Section 2.3.13 by facsimile and overnight courier by the end of that
Business Day.
(b) (i) the Company shall engage its
independent auditors to perform the procedures in accordance with the provisions
of Statement on Auditing Standards No. 71, as amended, as agreed to by the
parties hereto, and reports thereon (the "Bring Down Cold Comfort Letters") as
shall have been reasonably requested by the Investor with respect to certain
financial information contained in the Registration Statement and shall have
delivered to the Investor such a report addressed to the Investor, on the date
that is three (3) Business Days prior to each Put Date, provided that the
Company is not required to cause Bring Down Cold Comfort Letters to be provided
for a Put if the Company has already provided a Bring Down Cold Comfort Letter
with respect to financial statements as of a date for which a Bring Down Cold
Comfort Letter was previously given under this Section 2.3.6(b).
(ii) in the event that the Investor
shall have requested delivery of an "Agreed Upon Procedures Report" pursuant to
Section 2.6.3, the Company shall engage its independent auditors to perform
certain agreed upon procedures and report thereon as shall have been reasonably
requested by the Investor with respect to certain financial information of the
Company and the Company shall deliver to the Investor a copy of such report
addressed to the Investor. In the event that the report required by this Section
2.3.6(b) cannot be delivered by the Company's independent auditors, the Company
shall, if necessary, promptly revise the Registration Statement and the Company
shall not deliver a Put Notice until such report is delivered.
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2.3.7 Mechanics of Purchase of Put Shares.
(a) Investor's Obligation and Right to
Purchase Shares. Subject to the conditions set forth in this Agreement,
following the Investor's receipt of a validly delivered Put Notice, the Investor
shall be required to purchase (each a "Purchase") from the Company a number of
Put Shares equal to the Put Share Amount, in the manner described below.
(b) Pricing Period. For purposes hereof,
the "Pricing Period" shall mean, unless otherwise shortened under the terms of
this Agreement, the period beginning on the Business Day immediately following
the Put Date and ending on and including the date which is 20 Business Days
after such Put Date; provided that, if a Put Cancellation Notice has been
delivered to the Investor after the Put Date, the Pricing Period for such Put
shall end at the close of trading on the last full trading day on the Principal
Market that ends prior to the moment of initial delivery of the Put Cancellation
Notice (a "Truncated Pricing Period") to the Investor.
2.3.8 Mechanics of Put Closing. Each of the
Company and the Investor shall deliver all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement at or
prior to each Closing. Subject to such delivery and the satisfaction of the
conditions set forth in Sections 2.3.4 and 2.3.5, the closing of the purchase by
the Investor of Shares shall occur by 5:00 PM, New York City Time, on the date
which is five (5) Business Days following the applicable Pricing Period End Date
(or such other time or later date as is mutually agreed to by the Company and
the Investor) (the "Payment Due Date") at the offices of Investor. On each or
before each Payment Due Date, the Investor shall deliver to the Company, in the
manner specified in Section 8 below, the Put Dollar Amount to be paid for such
Put Shares, determined as aforesaid. The closing (each a "Put Closing") for each
Put shall occur on the date that both (i) the Company has delivered to the
Investor all Required Put Documents, and (ii) the Investor has delivered to the
Company such Put Dollar Amount and any Late Payment Amount, if applicable (each
a "Put Closing Date").
If the Investor does not deliver to the Company the Put Dollar Amount
for such Put Closing on or before the Payment Due Date, then the Investor shall
pay to the Company, in addition to the Put Dollar Amount, an amount (the "Late
Payment Amount") at a rate of X% per month, accruing daily, multiplied by such
Put Dollar Amount, where "X" equals one percent (1%) for the first month
following the date in question, and increases by an additional one percent (1%)
for each month that passes after the date in question, up to a maximum of five
percent (5%) per month; provided, however, that in no event shall the amount of
interest that shall become due and payable hereunder exceed the maximum amount
permissible under applicable law.
2.3.9 [Intentionally Left Blank].
2.3.10 Limitation on Short Sales. The Investor
and its Affiliates shall not engage in short sales of the Company's Common
Stock; provided, however, that the Investor may enter into any short sale or
other hedging or similar arrangement it deems appropriate with respect to Put
Shares after it receives a Put Notice with respect to such Put Shares so long as
such sales or arrangements do not involve more than the number of such Put
Shares specified in the Put Notice.
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2.3.11 Cap Amount. If the Company becomes listed
on the Nasdaq Small Cap Market or the Nasdaq National Market, then, unless the
Company has obtained Stockholder 20% Approval as set forth in Section 6.12 or
unless otherwise permitted by Nasdaq, in no event shall the Aggregate Issued
Shares exceed the maximum number of shares of Common Stock (the "Cap Amount")
that the Company can, without stockholder approval, so issue pursuant to Nasdaq
Rule 4460(i)(1)(d)(ii) (or any other applicable Nasdaq Rules or any successor
rule) (the "Nasdaq 20% Rule").
2.3.12 [Intentionally Left Blank]
2.3.13 Put Cancellation.
(a) Mechanics of Put Cancellation.
If at any time during a Pricing Period the Company discovers the existence of
Material Facts or any Ineffective Period or Delisting Event occurs, the Company
shall cancel the Put (a "Put Cancellation"), by delivering written notice to the
Investor (the "Put Cancellation Notice"), attached as Exhibit Q, by facsimile
and overnight courier. The "Put Cancellation Date" shall be the date that the
Put Cancellation Notice is first received by the Investor, if such notice is
received by the Investor by 6:00 p.m., New York, NY time, and shall be the
following date, if such notice is received by the Investor after 6:00 p.m., New
York, NY time.
(b) Effect of Put Cancellation.
Anytime a Put Cancellation Notice is delivered to Investor after the Put Date,
the Put shall remain effective with respect to a number of Put Shares (the
"Truncated Put Share Amount") equal to the Put Share Amount for the Truncated
Pricing Period.
(c) Put Cancellation Notice
Confirmation. Upon receipt by the Investor of a facsimile copy of the Put
Cancellation Notice, the Investor shall promptly send, via facsimile, a
confirmation of receipt (the "Put Cancellation Notice Confirmation," a form of
which is attached as Exhibit S) of the Put Cancellation Notice to the Company
specifying that the Put Cancellation Notice has been received and affirming the
Put Cancellation Date.
2.3.14 Investment Agreement Cancellation. The
Company may terminate (a "Company Termination") its right to initiate future
Puts by providing written notice ("Termination Notice") to the Investor, by
facsimile and overnight courier, at any time other than during an Extended Put
Period, provided that such termination shall have no effect on the parties'
other rights and obligations under this Agreement, the Registration Rights
Agreement or the Warrants. Notwithstanding the above, any cancellation occurring
during an Extended Put Period is governed by Section 2.3.13.
2.3.15 Return of Excess Common Shares. In the
event that the number of Shares purchased by the Investor pursuant to its
obligations hereunder is less than the Intended Put Share Amount, the Investor
shall promptly return to the Company any shares of Common Stock in the
Investor's possession or control that are not being purchased by the Investor.
2.4 Warrants.
2.4.1 [Intentionally Omitted].
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2.4.2 Purchase Warrants. Within five (5)
Business Days of the end of each Pricing Period, the Company shall issue and
deliver to the Investor a warrant ("Purchase Warrant"), in the form attached
hereto as Exhibit D, or such other form as agreed upon by the parties, to
purchase a number of shares of Common Stock equal to 10% of the number of Put
Shares issued to Investor in that Put. Each Purchase Warrant shall be
exerciseable at a price (the "Purchase Warrant Exercise Price") which shall
initially equal 110% of the Market Price on the Put Date. Each Purchase Warrant
shall be immediately exercisable at the Purchase Warrant Exercise Price, and
shall have a term beginning on the date of issuance and ending on the date that
is five (5) years thereafter. The Warrant Shares shall be registered for resale
pursuant to the Registration Rights Agreement.
2.5 [Intentionally Left Blank].
2.6 Due Diligence Review. The Company shall make available for
inspection and review by the Investor (the "Due Diligence Review"), advisors to
and representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the Investor
pursuant to the Registration Statement, any Supplemental Registration Statement,
or amendments or supplements thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information reasonably
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
2.6.1 Treatment of Nonpublic Information. The
Company shall not disclose nonpublic information to the Investor or to its
advisors or representatives unless prior to disclosure of such information the
Company identifies such information as being nonpublic information and provides
the Investor and such advisors and representatives with the opportunity to
accept or refuse to accept such nonpublic information for review. The Company
may, as a condition to disclosing any nonpublic information hereunder, require
the Investor and its advisors and representatives to enter into a
confidentiality agreement (including an agreement with such advisors and
representatives prohibiting them from trading in Common Stock during such period
of time as they are in possession of nonpublic information) in form reasonably
satisfactory to the Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate nonpublic information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
18
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event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
nonpublic information (whether or not requested of the Company specifically or
generally during the course of due diligence by and such persons or entities),
which, if not disclosed in the Prospectus included in the Registration
Statement, would cause such Prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 2.6 shall be construed to mean
that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain
nonpublic information in the course of conducting due diligence in accordance
with the terms of this Agreement; provided, however, that in no event shall the
Investor's advisors or representatives disclose to the Investor the nature of
the specific event or circumstances constituting any nonpublic information
discovered by such advisors or representatives in the course of their due
diligence without the written consent of the Investor prior to disclosure of
such information.
2.6.2 Disclosure of Misstatements and Omissions.
The Investor's advisors or representatives shall make complete disclosure to the
Investor's counsel of all events or circumstances constituting nonpublic
information discovered by such advisors or representatives in the course of
their due diligence upon which such advisors or representatives form the opinion
that the Registration Statement contains an untrue statement of a material fact
or omits a material fact required to be stated in the Registration Statement or
necessary to make the statements contained therein, in the light of the
circumstances in which they were made, not misleading. Upon receipt of such
disclosure, the Investor's counsel shall consult with the Company's independent
counsel in order to address the concern raised as to the existence of a material
misstatement or omission and to discuss appropriate disclosure with respect
thereto; provided, however, that such consultation shall not constitute the
advice of the Company's independent counsel to the Investor as to the accuracy
of the Registration Statement and related Prospectus.
2.6.3 Procedure if Material Facts are Reasonably
Believed to be Untrue or are Omitted. In the event after such consultation the
Investor or the Investor's counsel reasonably believes that the Registration
Statement contains an untrue statement or a material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make
the statements contained therein, in light of the circumstances in which they
were made, not misleading,
(a) the Company shall file with
the SEC an amendment to the Registration Statement responsive to such alleged
untrue statement or omission and provide the Investor, as promptly as
practicable, with copies of the Registration Statement and related Prospectus,
as so amended, or
(b) if the Company disputes the
existence of any such material misstatement or omission, (i) the Company's
independent counsel shall provide the Investor's counsel with a Registration
Opinion and (ii) in the event the dispute relates to the adequacy of financial
disclosure and the Investor shall reasonably request, the Company's independent
auditors shall provide to the Company a letter ("Agreed Upon Procedures Report")
outlining the performance of such "agreed upon procedures" as shall be
reasonably requested by the Investor and the Company shall provide the Investor
with a copy of such letter.
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<PAGE>
2.7 Commitment Payments. In partial consideration hereof, following the
execution of the Letter of Agreement dated on or about May 25, 1999 between the
Company and the Investor, the Company issued and delivered to Investor or its
designated assignees, warrants (the "Commitment Warrants") in the form attached
hereto as Exhibit U, or such other form as agreed upon by the parties, to
purchase 500,000 shares of Common Stock. The Commitment Warrants shall be
exerciseable at a price (the "Commitment Warrant Exercise Price") which shall
initially equal the average closing bid price for the five (5) trading days
immediately preceding May 25, 1999 ("Initial Exercise Price"), and shall have
reset provisions. Each Commitment Warrant shall be immediately exercisable at
the Commitment Warrant Exercise Price, and shall have a term beginning on the
date of issuance and ending on date that is five (5) years thereafter. The
Warrant Shares shall be registered for resale pursuant to the Registration
Rights Agreement. Concurrently with the execution of this Agreement, the Company
shall deliver to the Investor an Investment Commitment Opinion of Counsel
(signed by the Company's independent counsel).
On the last Business Day of each eighteen (18) Calendar Month period
following the date of this Agreement (each such period a "Commitment Evaluation
Period"), if the Company has not Put at least $1,000,000 in aggregate Put Dollar
Amount during that Commitment Evaluation Period (when combined with amounts in
excess of $1,000,000 from the immediately preceding Commitment Evaluation
Period), the Company, in consideration of Investor's commitment costs,
including, but not limited to, due diligence expenses, shall pay to the Investor
an amount (the "Non-Usage Fee ") equal to the difference of (i) $100,000, minus
(ii) 10% of the sum of (x) the aggregate Put Dollar Amount of the Put Shares put
to Investor during that Commitment Evaluation Period plus (y) any amounts in
excess of $1,000,000 Put in the immediately preceding Put. In the event that the
Company delivers a Termination Notice to the Investor or an Automatic
Termination occurs, the Company shall pay to the Investor (the "Termination
Fee") the greater of (i) the Non-Usage Fee for the applicable Commitment
Evaluation Period, or (ii) the difference of (x) $200,000, minus (y) 10% of the
aggregate Put Dollar Amount of the Put Shares put to Investor during all Puts to
date, and the Company shall not be required to pay the Non-Usage Fee thereafter.
Each Non-Usage Fee or Termination Fee is payable within five (5)
business days of the date it accrued, in cash or in registered, unlegended,
freely tradable Common Stock of the Company. Where such payment is made in
shares of Common Stock, each share of Common Stock shall be valued at the lesser
of (i) the average Closing Bid Price for the five (5) Business Days preceding
the date that such Non-Usage Fee is due, or (ii) the average Closing Bid Price
for the five (5) Business Days preceding the date that such shares are delivered
to Investor. The Company shall not be required to deliver any payments to
Investor under this subsection until Investor has paid all Put Dollar Amounts
that are then due.
3. Representations, Warranties and Covenants of Investor. Investor
hereby represents and warrants to and agrees with the Company as follows:
3.1 Accredited Investor. Investor is an accredited investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and has checked
the applicable box set forth in Section 10 of this Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
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3.2.1 Access to Information. Investor or Investor's
professional advisor has been granted the opportunity to ask questions of and
receive answers from representatives of the Company, its officers, directors,
employees and agents concerning the terms and conditions of this Offering, the
Company and its business and prospects, and to obtain any additional information
which Investor or Investor's professional advisor deems necessary to verify the
accuracy and completeness of the information received.
3.2.2 Reliance on Own Advisors. Investor has relied
completely on the advice of, or has consulted with, Investor's own personal tax,
investment, legal or other advisors and has not relied on the Company or any of
its affiliates, officers, directors, attorneys, accountants or any affiliates of
any thereof and each other person, if any, who controls any of the foregoing,
within the meaning of Section 15 of the Act for any tax or legal advice (other
than reliance on information in the Disclosure Documents as defined in Section
3.2.4 below and on the Opinion of Counsel). The foregoing, however, does not
limit or modify Investor's right to rely upon covenants, representations and
warranties of the Company in this Agreement.
3.2.3 Capability to Evaluate. Investor has such
knowledge and experience in financial and business matters so as to enable such
Investor to utilize the information made available to it in connection with the
Offering in order to evaluate the merits and risks of the prospective
investment, which are substantial, including without limitation those set forth
in the Disclosure Documents (as defined in Section 3.2.4 below).
3.2.4 Disclosure Documents Investor, in making
Investor's investment decision to subscribe for the Investment Agreement
hereunder, represents that (a) Investor has received and had an opportunity to
review (i) the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997, (ii) the Company's quarterly report on Form 10-QSB for the
quarters ended March 31, 1998, June 30, 1998, and September 30, 1998 and (iii)
the Capitalization Schedule, attached as Exhibit K, (the "Capitalization
Schedule"); (b) Investor has read, reviewed, and relied solely on the documents
described in (a) above, the Company's representations and warranties and other
information in this Agreement, including the exhibits, documents prepared by the
Company which have been specifically provided to Investor in connection with
this Offering (the documents described in this Section 3.2.4 (a) and (b) are
collectively referred to as the "Disclosure Documents"), and an independent
investigation made by Investor and Investor's representatives, if any; (c)
Investor has, prior to the date of this Agreement, been given an opportunity to
review material contracts and documents of the Company which have been filed as
exhibits to the Company's filings under the Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and has had an opportunity to ask
questions of and receive answers from the Company's officers and directors; and
(d) is not relying on any oral representation of the Company or any other
person, nor any written representation or assurance from the Company other than
those contained in the Disclosure Documents or incorporated herein or therein.
The foregoing, however, does not limit or modify Investor's right to rely upon
covenants, representations and warranties of the Company in Sections 5 and 6 of
this Agreement. Investor acknowledges and agrees that the Company has no
responsibility for, does not ratify, and is under no responsibility whatsoever
to comment upon or correct any reports, analyses or other comments made about
the Company by any third parties, including, but not limited to, analysts'
research reports or comments (collectively, "Third Party Reports"), and Investor
has not relied upon any Third Party Reports in making the decision to invest.
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<PAGE>
3.2.5 Investment Experience; Fend for Self.
Investor has substantial experience in investing in securities and it has made
investments in securities other than those of the Company. Investor acknowledges
that Investor is able to fend for Investor's self in the transaction
contemplated by this Agreement, that Investor has the ability to bear the
economic risk of Investor's investment pursuant to this Agreement and that
Investor is an "Accredited Investor" by virtue of the fact that Investor meets
the investor qualification standards set forth in Section 3.1 above. Investor
has not been organized for the purpose of investing in securities of the
Company, although such investment is consistent with Investor's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 [Intentionally Left Blank].
3.3.2 No General Solicitation. The Investment
Agreement was not offered to Investor through, and Investor is not aware of, any
form of general solicitation or general advertising, including, without
limitation, (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, and (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
3.3.3 Restricted Securities. Investor understands
that the Investment Agreement is, the Common Stock and Warrants issued at each
Put Closing will be, and the Warrant Shares will be, characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction exempt from the registration
requirements of the federal securities laws and that under such laws and
applicable regulations such securities may not be transferred or resold without
registration under the Act or pursuant to an exemption therefrom. In this
connection, Investor represents that Investor is familiar with Rule 144 under
the Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
3.3.4 Disposition. Without in any way limiting the
representations set forth above, Investor agrees that until the Securities are
sold pursuant to an effective Registration Statement or an exemption from
registration, they will remain in the name of Investor and will not be
transferred to or assigned to any broker, dealer or depositary. Investor further
agrees not to sell, transfer, assign, or pledge the Securities (except for any
bona fide pledge arrangement to the extent that such pledge does not require
registration under the Act or unless an exemption from such registration is
available and provided further that if such pledge is realized upon, any
transfer to the pledgee shall comply with the requirements set forth herein), or
to otherwise dispose of all or any portion of the Securities unless and until:
(a) There is then in effect a
registration statement under the Act and any applicable state securities laws
covering such proposed disposition and such disposition is made in accordance
with such registration statement and in compliance with applicable prospectus
delivery requirements; or
(b) (i) Investor shall have notified
the Company of the proposed disposition and shall have furnished the Company
22
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with a statement of the circumstances surrounding the proposed disposition to
the extent relevant for determination of the availability of an exemption from
registration, and (ii) if reasonably requested by the Company, Investor shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of the
Securities under the Act or state securities laws. It is agreed that the Company
will not require the Investor to provide opinions of counsel for transactions
made pursuant to Rule 144, except with respect to the affiliate status of the
Investor, provided that Investor and Investor's broker, if necessary, provide
the Company with the necessary representations for counsel to the Company to
issue an opinion with respect to such transaction.
Concurrently with the delivery of each Purchase Notice, the
Investor shall represent to the Company that all sales, if any, of Put Shares
made by the Investor to date were made in compliance with applicable prospectus
delivery requirements. The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
3.4 Due Authorization.
3.4.1 Authority. The person executing this
Investment Agreement, if executing this Agreement in a representative or
fiduciary capacity, has full power and authority to execute and deliver this
Agreement and each other document included herein for which a signature is
required in such capacity and on behalf of the subscribing individual,
partnership, trust, estate, corporation or other entity for whom or which
Investor is executing this Agreement. Investor has reached the age of majority
(if an individual) according to the laws of the state in which he or she
resides.
3.4.2 Due Authorization. If Investor is a
corporation, Investor is duly and validly organized, validly existing and in
good tax and corporate standing as a corporation under the laws of the
jurisdiction of its incorporation with full power and authority to purchase the
Securities to be purchased by Investor and to execute and deliver this
Agreement.
3.4.3 Partnerships. If Investor is a partnership,
the representations, warranties, agreements and understandings set forth above
are true with respect to all partners of Investor (and if any such partner is
itself a partnership, all persons holding an interest in such partnership,
directly or indirectly, including through one or more partnerships), and the
person executing this Agreement has made due inquiry to determine the
truthfulness of the representations and warranties made hereby.
3.4.4 Representatives. If Investor is purchasing
in a representative or fiduciary capacity, the representations and warranties
shall be deemed to have been made on behalf of the person or persons for whom
Investor is so purchasing.
3.5 Enforceability. This Agreement constitutes a valid and
legally binding obligation of the Investor, enforceable in accordance with its
terms, except insofar as the enforceability may be limited by applicable
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bankruptcy, insolvency, reorganization, or other similar laws affecting
creditors' rights generally or by principles governing the availability of
equitable remedies. The Investor has obtained all consents and approvals
required for it to execute, deliver and perform each agreement referenced in the
previous sentence.
4. Acknowledgments Investor is aware that:
4.1 Risks of Investment. Investor recognizes that an
investment in the Company involves substantial risks, including the potential
loss of Investor's entire investment herein. Investor recognizes that the
Disclosure Documents, this Agreement and the exhibits hereto do not purport to
contain all the information, which would be contained in a registration
statement under the Act;
4.2 No Government Approval. No federal or state agency
has passed upon the Securities, recommended or endorsed the Offering, or made
any finding or determination as to the fairness of this transaction;
4.3 No Registration, Restrictions on Transfer. As of the date
of this Agreement, the Securities and any component thereof have not been
registered under the Act or any applicable state securities laws by reason of
exemptions from the registration requirements of the Act and such laws, and may
not be sold, pledged (except for any limited pledge in connection with a margin
account of Investor to the extent that such pledge does not require registration
under the Act or unless an exemption from such registration is available and
provided further that if such pledge is realized upon, any transfer to the
pledgee shall comply with the requirements set forth herein), assigned or
otherwise disposed of in the absence of an effective registration of the
Securities and any component thereof under the Act or unless an exemption from
such registration is available;
4.4 Restrictions on Transfer. Investor may not attempt to
sell, transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities or any component thereof in the absence of either an effective
registration statement or an exemption from the registration requirements of the
Act and applicable state securities laws;
4.5 No Assurances of Registration. There can be no assurance
that any registration statement will become effective at the scheduled time, or
ever, or remain effective when required, and Investor acknowledges that it may
be required to bear the economic risk of Investor's investment for an indefinite
period of time;
4.6 Exempt Transaction. Investor understands that the
Securities are being offered and sold in reliance on specific exemptions from
the registration requirements of federal and state law and that the
representations, warranties, agreements, acknowledgments and understandings set
forth herein are being relied upon by the Company in determining the
applicability of such exemptions and the suitability of Investor to acquire such
Securities.
4.7 Legends. The certificates representing the Put Shares
shall not bear a Restrictive Legend. The certificates representing the Warrant
Shares shall not bear a Restrictive Legend unless they are issued at a time when
the Registration Statement is not effective for resale. It is understood that
the certificates evidencing any Warrant Shares issued at a time when the
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Registration Statement is not effective for resale, subject to legend removal
under the terms of Section 6.9 below, shall bear the following legend (the
"Legend"):
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities
laws, nor the securities laws of any other jurisdiction. They may not
be sold or transferred in the absence of an effective registration
statement under those securities laws or pursuant to an exemption
therefrom."
5. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to Investor (which shall be
true at the signing of this Agreement, and as of any such later date as
contemplated hereunder, except for events which the Company reasonably believes
do not or will not have, individually or in the aggregate, a material adverse
effect upon the Company's business) and agrees with Investor that, except as set
forth in the Schedule of Exceptions attached hereto as Exhibit C:
5.1 Organization, Good Standing, and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, USA and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company is not the subject of any pending,
threatened or, to its knowledge, contemplated investigation or administrative or
legal proceeding (a "Proceeding") by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the Securities and Exchange
Commission, The National Association of Securities Dealer, Inc., The Nasdaq
Stock Market, Inc. or any state securities commission, or any other governmental
entity, which have not been disclosed in the Disclosure Documents. None of the
disclosed Proceedings, if any, will have a material adverse effect upon the
Company or the market for the Common Stock. The Company has the following
subsidiaries:
5.2 Corporate Condition. The Company's business, financial
condition and prospects are, in all material respects, as described in the
Disclosure Documents (as further set forth in any subsequently filed Disclosure
Documents, if applicable), except for changes in the ordinary course of business
and normal year-end adjustments that are not, in the aggregate, materially
adverse to the Company. Except for continuing losses, there have been no
material adverse changes to the Company's business, financial condition, or
prospects since the dates of such Disclosure Documents. The financial statements
as contained in the Company's Forms 10-KSB and 10-QSB have been prepared in
accordance with generally accepted accounting principles, consistently applied
(except as otherwise permitted by Regulation S-X of the Exchange Act), subject,
in the case of unaudited interim financial statements, to customary year end
adjustments and the absence of certain footnotes, and fairly present the
financial condition of the Company as of the dates of the balance sheets
included therein and the consolidated results of its operations and cash flows
for the periods then ended,. Without limiting the foregoing, there are no
material liabilities, contingent or actual, that are not disclosed in the
Disclosure Documents (other than liabilities incurred by the Company in the
ordinary course of its business, consistent with its past practice, after the
period covered by the Disclosure Documents). To the best of the Company's
knowledge, the Company has paid all material taxes that are due, except for
taxes that it reasonably disputes. There is no material claim, litigation, or
25
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administrative proceeding pending or, to the best of the Company's knowledge,
threatened against the Company, except as disclosed in the Disclosure Documents.
This Agreement and the Disclosure Documents do not contain any untrue statement
of a material fact and do not omit to state any material fact required to be
stated therein or herein necessary to make the statements contained therein or
herein not misleading in the light of the circumstances under which they were
made. No event or circumstance exists relating to the Company which, under
applicable law, requires public disclosure but which has not been so publicly
announced or disclosed.
5.3 Authorization. All corporate action on the part of the
Company by its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance and
delivery of the Common Stock being sold hereunder and the issuance (and/or the
reservation for issuance) of the Warrants and the Warrant Shares have been
taken, and this Agreement and the Registration Rights Agreement constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their terms, except insofar as the enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws affecting
creditors' rights generally or by principles governing the availability of
equitable remedies. The Company has obtained all consents and approvals required
for it to execute, deliver and perform each agreement referenced in the previous
sentence.
5.4 Valid Issuance of Common Stock. The Common Stock and the
Warrants, when issued, sold and delivered in accordance with the terms hereof,
for the consideration expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the representations of Investor in this
Agreement, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Warrant Shares, when issued in accordance with the
terms of the Warrants, shall be duly and validly issued and outstanding, fully
paid and nonassessable, and based in part on the representations and warranties
of Investor, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Put Shares, the Warrants and the Warrant Shares will
be issued free of any preemptive rights.
5.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, each as amended and in effect on and as of the date of the Agreement, or
of any material provision of any material instrument or material contract to
which it is a party or by which it is bound or of any provision of any federal
or state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement or the Registration Rights Agreement. The execution, delivery and
performance of this Agreement and the other agreements entered into in
conjunction with the Offering and the consummation of the transactions
contemplated hereby and thereby will not (a) result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument or contract or
an event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement, the Registration Rights Agreement, (b) violate the Company's
Certificate of Incorporation or By-Laws or (c) violate any statute, rule or
governmental regulation applicable to the Company which violation would have a
material adverse effect on the Company's business or prospects.
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5.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act, has a class of securities registered under
Section 12 of the Exchange Act, and has filed all reports required by the
Exchange Act since the date the Company first became subject to such reporting
obligations. The Company undertakes to furnish Investor with copies of such
reports as may be reasonably requested by Investor prior to consummation of this
Offering and thereafter, to make such reports available, for the full term of
this Agreement, including any extensions thereof, and for as long as Investor
holds the Securities. The Common Stock is duly listed on the O.T.C. Bulletin
Board. The Company is not in violation of the listing requirements of the O.T.C.
Bulletin Board and does not reasonably anticipate that the Common Stock will be
delisted by the O.T.C. Bulletin Board for the foreseeable future. The Company
has filed all reports required under the Exchange Act. The Company has not
furnished to the Investor any material nonpublic information concerning the
Company.
5.7 Capitalization. The capitalization of the Company as of
July __, 1999, is, and the capitalization as of the Closing, subject to exercise
of any outstanding warrants and/or exercise of any outstanding stock options,
after taking into account the offering of the Securities contemplated by this
Agreement and all other share issuances occurring prior to this Offering, will
be, as set forth in the Capitalization Schedule as set forth in Exhibit K. There
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities. Except as disclosed in
the Capitalization Schedule, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the Act
(except the Registration Rights Agreement).
5.8 Intellectual Property. The Company has valid, unrestricted
and exclusive ownership of or rights to use the patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. Exhibit M lists
all patents, trademarks, trademark registrations, trade names and copyrights of
the Company. The Company has granted such licenses or has assigned or otherwise
transferred a portion of (or all of) such valid, unrestricted and exclusive
patents, trademarks, trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the conduct of its
business as set forth in Exhibit M. The Company has been granted licenses,
know-how, technology and/or other intellectual property necessary to the conduct
of its business as set forth in Exhibit M. To the best of the Company's
knowledge after due inquiry, the Company is not infringing on the intellectual
property rights of any third party, nor is any third party infringing on the
Company's intellectual property rights. There are no restrictions in any
agreements, licenses, franchises, or other instruments that preclude the Company
from engaging in its business as presently conducted.
5.9 [Intentionally Left Blank].
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5.10 No Rights of Participation. No person or entity,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the financing contemplated by this Agreement which has not been
waived.
5.11 Company Acknowledgment. The Company hereby acknowledges
that Investor may elect to hold the Securities for various periods of time, as
permitted by the terms of this Agreement, the Warrants, and other agreements
contemplated hereby, and the Company further acknowledges that Investor has made
no representations or warranties, either written or oral, as to how long the
Securities will be held by Investor or regarding Investor's trading history or
investment strategies.
5.12 No Advance Regulatory Approval. The Company acknowledges
that this Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby have not been approved by the SEC, or
any other regulatory body and there is no guarantee that this Investment
Agreement, the transaction contemplated hereby and the Registration Statement
contemplated hereby will ever be approved by the SEC or any other regulatory
body. The Company is relying on its own analysis and is not relying on any
representation by Investor that either this Investment Agreement, the
transaction contemplated hereby or the Registration Statement contemplated
hereby has been or will be approved by the SEC or other appropriate regulatory
body.
5.13 Underwriter's Fees and Rights of First Refusal. The
Company is not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any underwriter, broker, agent or other
representative other than the Investor in connection with this Offering.
5.14 Availability of Suitable Form for Registration. The
Company is currently eligible and agrees to maintain its eligibility to register
the resale of its Common Stock on a registration statement on a suitable form
under the Act.
5.15 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any of the Company's securities or
solicited any offers to buy any security under circumstances that would prevent
the parties hereto from consummating the transactions contemplated hereby
pursuant to an exemption from registration under Regulation D of the Act or
would require the issuance of any other securities to be integrated with this
Offering under the Rules of Nasdaq. The Company has not engaged in any form of
general solicitation or advertising in connection with the offering of the
Common Stock or the Warrants.
5.16 [Intentionally Left Blank].
5.17 Foreign Corrupt Practices. Neither the Company, nor any
of its subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
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foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
5.18 Key Employees. Each "Key Employee" (as defined in Exhibit
N) is currently serving the Company in the capacity disclosed in Exhibit N. No
Key Employee, to the best knowledge of the Company and its subsidiaries, is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the Company and
its subsidiaries, any intention to terminate his employment with, or services
to, the Company or any of its subsidiaries.
5.19 Representations Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all material
respects, and shall survive any Put Closing and the issuance of the shares of
Common Stock thereby.
5.20 Tax Status. The Company has made or filed all federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and as set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
5.21 Transactions With Affiliates. Except as set forth in the
Disclosure Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
5.22 Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under Nevada law which is or could become
applicable to the Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the issuance of the Common Stock, any
exercise of the Warrants and ownership of the Common Shares and Warrant Shares.
The Company has not adopted and will not adopt any "poison pill" provision that
will be applicable to Investor as a result of transactions contemplated by this
Agreement.
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5.23 Other Agreements. The Company has not, directly or
indirectly, made any agreements with the Investor under a subscription in the
form of this Agreement for the purchase of Common Stock, relating to the terms
or conditions of the transactions contemplated hereby or thereby except as
expressly set forth herein, respectively, or in exhibits hereto or thereto.
5.24 Major Transactions. There are no other Major
Transactions currently pending or contemplated by the Company.
5.25 Financings. There are no other financings currently
pending or contemplated by the Company.
5.26 Shareholder Authorization. The Company shall, at its next
annual shareholder meeting following its listing on either the Nasdaq Small Cap
Market or the Nasdaq National Market, or at a special meeting to be held as soon
as practicable thereafter, use its best efforts to obtain approval of its
shareholders to (i) authorize the issuance of the full number of shares of
Common Stock which would be issuable under this Agreement and eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities with respect to the
Company's ability to issue shares of Common Stock in excess of the Cap Amount
(such approvals being the "20% Approval") and (ii) the increase in the number of
authorized shares of Common Stock of the Company (the "Share Authorization
Increase Approval") such that at least 15,000,000 shares can be reserved for
this Offering. In connection with such shareholder vote, the Company shall use
its best efforts to cause all officers and directors of the Company to promptly
enter into irrevocable agreements to vote all of their shares in favor of
eliminating such prohibitions. As soon as practicable after the 20% Approval and
the Share Authorization Increase Approval, the Company agrees to use its best
efforts to reserve 15,000,000 shares of Common Stock for issuance under this
Agreement.
5.27 Acknowledgment of Limitations on Put Amounts. The Company
understands and acknowledges that the amounts available under this Investment
Agreement are limited, among other things, based upon the liquidity of the
Company's Common Stock traded on its Principal Market.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at least
the Termination Date, maintain as its independent auditors an accounting firm
authorized to practice before the SEC.
6.2 Corporate Existence and Taxes. The Company shall, until at
least the Termination Date, maintain its corporate existence in good standing
and, once it becomes a "Reporting Issuer" (defined as a Company which files
periodic reports under the Exchange Act), remain a Reporting Issuer (provided,
however, that the foregoing covenant shall not prevent the Company from entering
into any merger or corporate reorganization as long as the surviving entity in
such transaction, if not the Company, assumes the Company's obligations with
respect to the Common Stock and has Common Stock listed for trading on a stock
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exchange or on Nasdaq and is a Reporting Issuer) and shall pay all its taxes
when due except for taxes which the Company disputes.
6.3 Registration Rights. The Company will enter into a
registration rights agreement covering the resale of the Common Shares and the
Warrant Shares substantially in the form of the Registration Rights Agreement
attached as Exhibit A.
6.4 [Intentionally Omitted].
6.5 Asset Transfers. The Company shall not (i) transfer, sell,
convey or otherwise dispose of any of its material assets to any Subsidiary
except for a proper business purpose or (ii) transfer, sell, convey or otherwise
dispose of any of its material assets to any Affiliate, as defined below, except
for fair value, during the Term of this Agreement. For purposes hereof,
"Affiliate" shall mean any officer of the Company, director of the Company or
owner of twenty percent (20%) or more of the Common Stock or other securities of
the Company.
6.6 Capital Raising Limitations/Rights of First Offer.
6.6.1 Capital Raising Limitations. During the
period from the date of this Agreement until the date that is ninety (90) days
after the Termination Date, the Company shall not issue or sell, or agree to
issue or sell Equity Securities (as defined below), for cash in private capital
raising transactions without obtaining the prior written approval of the
Investor of the Offering, which approval will not be unreasonably withheld (the
limitations referred to in this subsection 6.6.1 are collectively referred to as
the "Capital Raising Limitations"). For purposes hereof, the following shall be
collectively referred to herein as, the "Equity Securities": (i) Common Stock or
any other equity securities, (ii) any debt or equity securities which are
convertible into, exercisable or exchangeable for, or carry the right to receive
additional shares of Common Stock or other equity securities, or (iii) any
securities of the Company pursuant to an equity line structure or format similar
in nature to this Offering.
6.6.2 Investor's Right of First Offer. For any
private capital raising transactions of Equity Securities which close after the
date hereof and on or prior to the date that is ninety (90) days after the
Termination Date of this Agreement, not including any warrants issued in
conjunction with this Investment Agreement, the Company agrees to, prior to
negotiating with other potential financing sources, provide the Investor with
written notice that the Company desires to raise a specified amount of capital
and specifying the types of investment instruments and investment terms that the
Company would consider. The Company agrees to negotiate in good faith with the
Investor for at least ten (10) Business Days immediately following the date of
such notice to attempt to reach an agreement for a private offering to the
Investor on terms that are mutually satisfactory to the Company and the
Investor. If the Company and the Investor have failed to reach a mutual
agreement during such 10 Business Day period, the Company is free to negotiate
with and enter into financing arrangements with other potential financing
sources, subject to the requirements of Section 6.6.1 above. The provisions of
this Subsection 6.6.2 are subject to any rights of first refusal that the
Company is contractually obligated to with M.H. Meyerson and Co., Inc. as of the
date of this Agreement.
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6.6.3 Exceptions to Rights of First Offer.
Notwithstanding the above, the Rights of First Offer shall not apply to any
transaction involving issuances of securities in connection with a merger,
consolidation, acquisition or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company or exercise of options by employees,
consultants or directors.
6.7 Financial 10-KSB Statements, Etc. and Current Reports on
Form 8-K. The Company shall deliver to the Investor copies of its annual reports
on Form 10-KSB, and quarterly reports on Form 10-QSB and shall deliver to the
Investor current reports on Form 8-K within two (2) days of filing for the Term
of this Agreement.
6.8 Opinion of Counsel. Investor shall, concurrent with the
Investment Commitment Closing, receive an opinion letter from the Company's
legal counsel, in the form attached as Exhibit B, or in such form as agreed upon
by the parties, and shall, shall, concurrent with the each Put Date, receive an
opinion letter from the Company's legal counsel, in the form attached as Exhibit
I or in such form as agreed upon by the parties.
6.9 Removal of Legend. If the certificates representing any
Securities are issued with a restrictive Legend in accordance with the terms of
this Agreement, the Legend shall be removed and the Company shall issue a
certificate without such Legend to the holder of any Security upon which it is
stamped, and a certificate for a security shall be originally issued without the
Legend, if (a) the sale of such Security is registered under the Act, or (b)
such holder provides the Company with an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions (the
reasonable cost of which shall be borne by the Investor), to the effect that a
public sale or transfer of such Security may be made without registration under
the Act, or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144. Each Investor agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.
6.10 Listing. Subject to the remainder of this Section 6.10,
the Company shall ensure that its shares of Common Stock (including all Warrant
Shares and Put Shares) are listed and available for trading on the O.T.C.
Bulletin Board. Thereafter, the Company shall (i) use its best efforts to
continue the listing and trading of its Common Stock on the O.T.C. Bulletin
Board or to become eligible for and listed and available for trading on the
Nasdaq Small Cap Market, the NMS, the American Stock Exchange or the New York
Stock Exchange ("NYSE"); and (ii) comply in all material respects with the
Company's reporting, filing and other obligations under the By-Laws or rules of
the National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.11 The Company's Instructions to Transfer Agent. The Company
will instruct the Transfer Agent of the Common Stock, by delivering instructions
in the form of Exhibit T hereto, to issue certificates, registered in the name
of each Investor or its nominee, for the Put Shares and Warrant Shares in such
amounts as specified from time to time by the Company upon any exercise by the
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Company of a Put and/or exercise of the Warrants by the holder thereof. Such
certificates shall not bear a Legend unless issuance with a Legend is permitted
by the terms of this Agreement and Legend removal is not permitted by Section
6.9 hereof and the Company shall cause the Transfer Agent to issue such
certificates without a Legend. Nothing in this Section shall affect in any way
Investor's obligations and agreement set forth in Sections 3.3.3 or 3.3.4 hereof
to resell the Securities pursuant to an effective registration statement and to
deliver a prospectus in connection with such sale or in compliance with an
exemption from the registration requirements of applicable securities laws. If
(a) an Investor provides the Company with an opinion of counsel, which opinion
of counsel shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from
registration or (b) an Investor transfers Securities, pursuant to Rule 144, to
an affiliate which is an accredited investor, the Company shall permit the
transfer, and, in the case of Put Shares and Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates in such name and in such
denomination as specified by such Investor. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to an
Investor by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 6.11 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 6.11, that an Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6.12 Stockholder 20% Approval. Prior to the closing of any Put
that would cause the Aggregate Issued Shares to exceed the Cap Amount, the
Company shall obtain approval of its stockholders to authorize (i) the issuance
of the full number of shares of Common Stock which would be issuable pursuant to
this Agreement but for the Cap Amount and eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Company or any of its securities with respect to the Company's ability to
issue shares of Common Stock in excess of the Cap Amount (such approvals being
the "Stockholder 20% Approval").
6.13 Press Release. The Company agrees that the Investor shall
have at least one Business Day to review and comment upon any press release
issued by the Company in connection with the Offering which approval shall not
be unreasonably withheld by Investor.
6.14 Change in Law or Policy. In the event of a change in law,
or policy of the SEC, as evidenced by a No-Action letter or other written
statements of the SEC or the NASD which causes the Investor to be unable to
perform its obligations hereunder, this Agreement shall be automatically
terminated and no further Commitment Fees shall be due.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the Closing;
Severability. Investor's and the Company's representations and warranties shall
survive the Investment Date and any Put Closing contemplated by this Agreement
for a period of one (1) year after the Termination Date, notwithstanding any due
diligence investigation made by or on behalf of the party seeking to rely
thereon. In the event that any provision of this Agreement becomes or is
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declared by a court of competent jurisdiction to be illegal, unenforceable or
void, or is altered by a term required by the Securities Exchange Commission to
be included in the Registration Statement, this Agreement shall continue in full
force and effect without said provision; provided that if the removal of such
provision materially changes the economic benefit of this Agreement to the
Investor, the Investor, at its option, may terminate this Agreement or require
that other terms of the Agreement be amended to compensate for such material
economic changes.
7.2 Successors and Assigns. This Agreement shall not be
assignable without the Company's written consent, If assigned, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. Investor may assign Investor's rights
hereunder, in connection with any private sale of the Common Stock of such
Investor, so long as, as a condition precedent to such transfer, the transferee
executes an acknowledgment agreeing to be bound by the applicable provisions of
this Agreement in a form acceptable to the Company and provides an original copy
of such acknowledgment to the Company.
7.3 Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
7.4 Titles and Subtitles; Gender. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. The use in this
Agreement of a masculine, feminine or neither pronoun shall be deemed to include
a reference to the others.
7.5 Written Notices, Etc. Any notice, demand or request
required or permitted to be given by the Company or Investor pursuant to the
terms of this Agreement shall be in writing and shall be deemed given when
delivered personally, or by facsimile or upon receipt if by overnight or two (2)
day courier, addressed to the parties at the addresses and/or facsimile
telephone number of the parties set forth at the end of this Agreement or such
other address as a party may request by notifying the other in writing;
provided, however, that in order for any notice to be effective as to the
Investor such notice shall be delivered and sent, as specified herein, to all
the addresses and facsimile telephone numbers of the Investor set forth at the
end of this Agreement or such other address and/or facsimile telephone number as
Investor may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights
Agreement, each of the Company and Investor shall pay all costs and expenses
that it respectively incurs, with respect to the negotiation, execution,
delivery and performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This
Agreement, including the Exhibits attached hereto, the Common Stock
certificates, the Warrants, the Registration Rights Agreement, and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any other party in any manner
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by any warranties, representations or covenants, whether oral, written, or
otherwise except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
7.8 Actions at Law or Equity; Jurisdiction and Venue. The
parties acknowledge that any and all actions, whether at law or at equity, and
whether or not said actions are based upon this Agreement between the parties
hereto, shall be filed in any state or federal court sitting in Atlanta,
Georgia. Georgia law shall govern both the proceeding as well as the
interpretation and construction of the Transaction Documents and the transaction
as a whole. In any litigation between the parties hereto, the prevailing party,
as found by the court, shall be entitled to an award of all attorney's fees and
costs of court. Should the court refuse to find a prevailing party, each party
shall bear its own legal fees and costs.
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
(a) Wire transfer of Subscription Funds. Investor shall
deliver Put Dollar Amounts (as payment towards any
Put Share Price) by wire transfer, to the Company
pursuant to a wire instruction letter to be provided
by the Company, and signed by the Company.
(b) Irrevocable Subscription. Investor hereby
acknowledges and agrees, subject to the provisions of
any applicable laws providing for the refund of
subscription amounts submitted by Investor, that this
Agreement is irrevocable and that Investor is not
entitled to cancel, terminate or revoke this
Agreement or any other agreements executed by such
Investor and delivered pursuant hereto, and that this
Agreement and such other agreements shall survive
the death or disability of such Investor and shall be
binding upon and inure to the benefit of the parties
and their heirs, executors, administrators,
successors, legal representatives and assigns. If the
Securities subscribed for are to be owned by more
than one person, the obligations of all such owners
under this Agreement shall be joint and several, and
the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to
be made by and be binding upon each such person and
his heirs, executors, administrators, successors,
legal representatives and assigns.
8.2 Acceptance of Subscription. Ownership of the number of
securities purchased hereby will pass to Investor upon the Warrant Closing or
any Put Closing.
9. Indemnification.
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In consideration of the Investor's execution and delivery of the
Investment Agreement, the Registration Rights Agreement and the Warrants (the
"Transaction Documents") and acquiring the Securities thereunder and in addition
to all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless Investor and all of
its stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents, members, partners or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action and suits,
and claims, losses, costs, penalties, fees, liabilities and damages arising
therefrom, and expenses in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorney's fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or documents contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim,
derivative or otherwise, by any stockholder of the Company based on a breach or
alleged breach by the Company or any of its officers or directors of their
fiduciary or other obligations to the stockholders of the Company.
Notwithstanding the above, any indemnification for any Indemnified Liabilities
that are covered under Section 9 of the Registration Rights Agreement shall be
governed by the terms of the Registration Rights Agreement and not by the terms
of this Section.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which it
would be required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified Party will, if a claim in respect thereof is to be made against the
other party (hereinafter "Indemnitor") under this Section 9, deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense thereof with counsel
reasonably selected by the Indemnitor, provided, however, that an Indemnified
Party shall have the right to retain its own counsel, with the reasonably
incurred fees and expenses of such counsel to be paid by the Indemnitor, if
representation of such Indemnified Party by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential conflicts of
interest between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnitor within a reasonable time of the commencement of any such action, if
prejudicial to the Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the Indemnified Party under this Section 9, but
the omission to so deliver written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under this
Section 9 to the extent it is prejudicial.
36
<PAGE>
[INTENTIONALLY LEFT BLANK]
37
<PAGE>
10. Accredited Investor. Investor is an "accredited investor" because
(check all applicable boxes):
(a) [ ] it is an organization described in Section
501(c)(3) of the Internal Revenue Code, or a
corporation, limited duration company, limited
liability company, business trust, or partnership not
formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000.
(b) [ ] any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a sophisticated person who has such
knowledge and experience in financial and business
matters that he is capable of evaluating the merits
and risks of the prospective investment.
(c) [ ] a natural person, who
[ ] is a director, executive officer or general partner
of the issuer of the securities being offered or sold
or a director, executive officer or general partner
of a general partner of that issuer.
[ ] has an individual net worth, or joint net worth
with that person's spouse, at the time of his
purchase exceeding $1,000,000.
[ ] had an individual income in excess of $200,000 in
each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation
of reaching the same income level in the current
year.
(d) [ x ] an entity each equity owner of which is an entity
described in a - b above or is an individual who
could check one (1) of the last three (3) boxes under
subparagraph (c) above.
(e) [ ] other [specify] ________________________________.
38
<PAGE>
The undersigned hereby subscribes the Maximum Offering Amount and
acknowledges that this Agreement and the subscription represented hereby shall
not be effective unless accepted by the Company as indicated below.
IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that Investor by the following signature(s) executed this Agreement.
Dated this 9th day of July, 1999.
/s/ Eric S. Swartz SWARTZ PRIVATE EQUITY,LLC
- ---------------------------- -------------------------------------------
Your Signature PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
/s/ Eric S. Swartz
_______________________________ SECURITY DELIVERY INSTRUCTIONS:
Name: Please Print Please type or print address where your
security is to be delivered
Manager Eric S. Swartz
______________________________ ATTN: ______________________________________
Title/Representative Capacity 200 Roswell Summit, Suite 285
(if applicable) 180 Holcomb Bridge Road
______________________________ ___________________________________________
Name of Company You Represent Street Address
(if applicable)
Roswell, Georgia, U.S.A. Roswell, Georgia 30076, U.S.A.
______________________________ ___________________________________________
Place of Execution of this City, State or Province, Country, Offshore
Agreement Postal Code
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
Please print address where any Please print address where Copy is to be
Notice is to be delivered delivered
ATTN: _______________________ ATTN: ___________________________________
______________________________ ___________________________________________
Street Address Street Address
______________________________
______________________________
City, State or Province, Country, City, State or Country, Offshore Postal Code
Offshore Postal Code
Telephone: ____________________ Telephone: _________________________________
Facsimile: ____________________ Facsimile: _________________________________
Facsimile: ____________________ Facsimile: _________________________________
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM OFFERING
AMOUNT ON THE 9th DAY OF JULY, 1999.
QUIKBIZ INTERNET GROUP, INC.
/s/ David B. Bawarsky
By:______________________________________
David B. Bawarsky, CEO
Address:
Attn: David B. Bawarsky, CEO
QUIKBIZ INTERNET GROUP, INC.
5310 NW 33RD Avenue
Suite 212
Ft. Lauderdale, FL 33309
Telephone (954) 739-7005
Facsimile (954) 739-0708
39
<PAGE>
ADVANCE PUT NOTICE
QUIKBIZ INTERNET GROUP, INC. (the "Company") hereby intends, subject to the
Individual Put Limit (as defined in the Investment Agreement), to elect to
exercise a Put to sell the number of shares of Common Stock of the Company
specified below, to _____________________________, the Investor, as of the
Intended Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and Swartz
Private Equity, LLC dated on or about July ___, 1999.
Date of Advance Put Notice: ___________________
Intended Put Date :___________________________
Intended Put Share Amount: __________________
Company Designation Maximum Put Dollar Amount (Optional):
_________________________________________________________
Company Designation Minimum Put Share Price (Optional):
_________________________________________________________
QUIKBIZ INTERNET GROUP, INC.
By:______________________________________
David B. Bawarsky, CEO
Address:
Attn: David B. Bawarsky, CEO
QUIKBIZ INTERNET GROUP, INC.
5310 NW 33RD Avenue
Suite 212
Ft. Lauderdale, FL 33309
Telephone (954) 739-7005
Facsimile (954) 739-0708
40
<PAGE>
EXHIBIT E
CONFIRMATION of ADVANCE PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
QUIKBIZ INTERNET GROUP, INC.'s (the "Company") Advance Put Notice on the Advance
Put Date written below, and its intention to elect to exercise a Put to sell
shares of common stock ("Intended Put Share Amount") of the Company to the
Investor, as of the intended Put Date written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Swartz Private Equity, LLC dated on or about July___, 1999.
Date of Confirmation: ____________________
Date of Advance Put Notice: ___________________
Intended Put Date :___________________________
Intended Put Share Amount: __________________
Company Designation Maximum Put Dollar Amount (Optional):
_________________________________________________________
Company Designation Minimum Put Share Price (Optional):
_________________________________________________________
INVESTOR(S)
___________________________________
Investor's Name
By: ________________________________
(Signature)
Address:____________________________________
___________________________________
___________________________________
Telephone No.: _____________________
Facsimile No.: ____________________
41
<PAGE>
EXHIBIT F
PUT NOTICE
QUIKBIZ INTERNET GROUP, INC. (the "Company") hereby elects to exercise a Put to
sell shares of common stock ("Common Stock") of the Company to
_____________________________, the Investor, as of the Put Date, at the Put
Share Price and for the number of Put Shares written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Swartz Private Equity, LLC dated on or about July___, 1999.
Put Date :_________________
Intended Put Share Amount (from Advance Put
Notice):_________________ Common Shares
Company Designation Maximum Put Dollar Amount (Optional):
_________________________________________________________
Company Designation Minimum Put Share Price (Optional):
_________________________________________________________
Note: Capitalized terms shall have the meanings ascribed to them in this
Investment Agreement.
QUIKBIZ INTERNET GROUP, INC.
By:______________________________________
David B. Bawarsky, CEO
Address:
Attn: David B. Bawarsky, CEO
QUIKBIZ INTERNET GROUP, INC.
5310 NW 33RD Avenue
Suite 212
Ft. Lauderdale, FL 33309
Telephone (954) 739-7005
Facsimile (954) 739-0708
42
<PAGE>
EXHIBIT G
CONFIRMATION of PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
QUIKBIZ INTERNET GROUP, Inc. (the "Company") Put Notice and election to exercise
a Put to sell ___________________________ shares of common stock ("Common
Stock") of the Company to Investor, as of the Put Date, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Swartz Private Equity, LLC dated on or about July___, 1999.
Date of this Confirmation: ________________
Put Date :_________________
Number of Put Shares of
Common Stock to be Issued: _____________
Volume Evaluation Period: _____ Business Days
Pricing Period: _____ Business Days
INVESTOR(S)
___________________________________
Investor's Name
By: ________________________________
(Signature)
Address:____________________________________
___________________________________
___________________________________
Telephone No.: _____________________
Facsimile No.: ____________________
43
<PAGE>
EXHIBIT H
PUT CANCELLATION NOTICE
QUIKBIZ INTERNET GROUP, INC. (the "Company") hereby cancels the Put specified
below, pursuant to that certain Investment Agreement (the "Investment
Agreement") by and between the Company and Swartz Private Equity, LLC dated on
or about July ___, 1999, as of the close of trading on the date specified below
(the "Cancellation Date," which date must be on or after the date that this
notice is delivered to the Investor), provided that such cancellation shall not
apply to the number of shares of Common Stock equal to the Truncated Put Share
Amount (as defined in the Investment Agreement).
Cancellation Date: _____________________
Put Date of Put Being Canceled: __________
Number of Shares Put on Put Date: _________
Reason for Cancellation (check one):
[ ] Material Facts, Ineffective Registration
Period.
[ ] Delisting Event
The Company understands that, by canceling this Put, it must give twenty (20)
Business Days advance written notice to the Investor before effecting the next
Put.
QUIKBIZ INTERNET GROUP, INC.
By:______________________________________
David B. Bawarsky, CEO
Address:
Attn: David B. Bawarsky, CEO
QUIKBIZ INTERNET GROUP, INC.
5310 NW 33RD Avenue
Suite 212
Ft. Lauderdale, FL 33309
Telephone (954) 739-7005
Facsimile (954) 739-0708
44
<PAGE>
EXHIBIT Q
PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement (the "Investment
Agreement") by and between the Company, and Swartz Private Equity, LLC dated on
or about July___, 1999 hereby confirms receipt of QUIKBIZ INTERNET GROUP, INC.
(the "Company") Put Cancellation Notice, and confirms the following:
Date of this Confirmation: ________________
Put Cancellation Date: ___________________
INVESTOR(S)
___________________________________
Investor's Name
By: ________________________________
(Signature)
Address:____________________________________
___________________________________
___________________________________
Telephone No.: _____________________
Facsimile No.: ____________________
45
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of July 9, 1999, by and among QuikBIZ Internet Group, Inc., a corporation duly
incorporated and existing under the laws of the State of Nevada (the "Company"),
and the subscriber as named on the signature page hereto (hereinafter referred
to as "Subscriber").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Offering") of up to
Twenty Million Dollars ($20,000,000), excluding any funds paid upon exercise of
the Warrants, of Common Stock of the Company pursuant to that certain Investment
Agreement of even date herewith (the "Investment Agreement") between the Company
and the Subscriber, the Company has agreed to sell and the Subscriber has agreed
to purchase, from time to time as provided in the Investment Agreement, shares
of the Company's Common Stock for a maximum aggregate offering amount of Twenty
Million Dollars ($20,000,000);
WHEREAS, pursuant to the terms of the Investment Agreement, the Company
has issued Commitment Warrants to the Subscriber and has agreed to issue to the
Subscriber, from time to time, Purchase Warrants, each as defined in the
Investment Agreement, to purchase a number of shares of Common Stock,
exercisable for five (5) years from their respective dates of issuance
(collectively, the "Subscriber Warrants" or the "Warrants"); and
WHEREAS, pursuant to the terms of the Investment Agreement, the Company
has agreed to provide the Subscriber with certain registration rights with
respect to the Common Stock to be issued in the Offering and the Common Stock
issuable upon exercise of the Subscriber Warrants as set forth in this
Registration Rights Agreement.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Certain Definitions. As used in this Agreement (including the
Recitals above), the following terms shall have the following meanings (such
meanings to be equally applicable to both singular and plural forms of the terms
defined):
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Additional Registration Statement" shall have the meaning set forth
in Section 3(b).
"Amended Registration Statement" shall have the meaning set forth in
Section 3(b).
<PAGE>
"Business Day" shall have the meaning set forth in the Investment
Agreement.
"Closing Bid Price" shall have the meaning set forth in the
Investment Agreement.
"Common Stock" shall mean the common stock, par value $0.01, of the
Company.
"Due Date" shall mean the date that is one hundred eighty (180)
days after the date of this Agreement.
"Effective Date" shall have the meaning set forth in Section 2.4.
"Filing Date" shall mean the date that is sixty (60) days after the
date execution of the Investment Agreement.
"Holder" shall mean Subscriber, and any other person or entity
owning or having the right to acquire Registrable Securities or any permitted
assignee thereof;
"Piggyback Registration" and "Piggyback Registration Statement"
shall have the meaning set forth in Section 4.
"Put" shall have the meaning as set forth in the Investment
Agreement.
"Register," "Registered," and "Registration" shall mean and
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "Act"), and pursuant to Rule 415 under the Act or any successor
rule, and the declaration or ordering of effectiveness of such registration
statement or document.
"Registrable Securities" shall have the meaning set forth in Section
2.1.
"Registration Statement" shall have the meaning set forth in Section
2.2.
"Rule 144" shall mean Rule 144, as amended, promulgated under the
Act.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Subscriber" shall have the meaning set forth in the preamble to
this Agreement.
"Subscriber Warrants" shall have the meaning set forth in the above
Recitals.
"Investment Agreement" shall have the meaning set forth in the
Recitals hereto.
"Supplemental Registration Statement" shall have the meaning set
forth in Section 3(b).
2
<PAGE>
"Warrants" shall have the meaning set forth in the above Recitals.
"Warrant Shares" shall mean shares of Common Stock issuable
upon exercise of any Warrant.
2. Required Registration.
2.1 Registrable Securities. "Registrable Securities" shall
mean those shares of Common Stock, together with any capital stock issued in
replacement of, in exchange for or otherwise in respect of such Common Stock,
that are: (i) issuable or issued to the Subscriber pursuant to the Investment
Agreement or this Agreement, and (ii) issuable or issued upon exercise of the
Subscriber Warrants; provided, however, that notwithstanding the above, the
following shall not be considered Registrable Securities:
(a) any Common Stock which would otherwise be deemed
to be Registrable Securities, if and to the extent that those shares of Common
Stock may be resold in a public transaction without volume limitations or other
material restrictions without registration under the Act, including, without
limitation, pursuant to Rule 144 under the Act; and
(b) any shares of Common Stock which have been sold
in a private transaction in which the transferor's rights under this Agreement
are not assigned.
2.2 Filing of Initial Registration Statement. The Company
shall use its best efforts to file, by the Filing Date, file a registration
statement ("Registration Statement") on Form S-1 (or other suitable form, at the
Company's discretion, but subject to the reasonable approval of Subscriber),
covering the resale of a number of shares of Common Stock as Registrable
Securities equal to at least Fifteen Million (15,000,000) shares of Common Stock
and shall cover, to the extent allowed by applicable law, such indeterminate
number of additional shares of Common Stock that may be issued or become
issuable as Registrable Securities by the Company pursuant to Rule 416 of the
Act.
2.3 [Intentionally Left Blank].
2.4 Registration Effective Date. The Company shall use its
best efforts to have the Registration Statement declared effective by the SEC
(the date of such effectiveness is referred to herein as the "Effective Date")
as soon as practicable after the date it is filed, but in any event by the Due
Date.
2.5 [Intentionally Left Blank].
2.6 [Intentionally Left Blank].
2.7 Shelf Registration. The Registration Statement shall be
prepared as a "shelf" registration statement under Rule 415, and shall be
maintained effective until all Registrable Securities are resold pursuant to
such Registration Statement.
3
<PAGE>
2.8 Supplemental Registration Statement. Any time the
Registration Statement does not cover a sufficient number of shares of Common
Stock to cover all outstanding Registrable Securities, the Company shall
promptly prepare and file with the SEC such Supplemental Registration Statement
and a prospectus to be used in connection with such Supplemental Registration
Statement as may be necessary to comply with the provisions of the Act with
respect to the disposition of all such Registrable Securities and shall use its
best efforts to cause such Supplemental Registration Statement to be declared
effective as soon as possible.
3. Obligations of the Company. Whenever required under this Agreement
to permit the continued public resale of any Registrable Securities, the Company
shall, as expeditiously and reasonably possible:
(a) Use its best efforts to cause the Registration Statement
or any required Supplemental Registration Statement, as the case may be, to
remain effective until all Registrable Securities are resold pursuant to such
Registration Statement, subject to Section 2.1(a) and Section 13 hereof.
(b) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
with such Registration Statement ("Amended Registration Statement") or prepare
and file any additional registration statement ("Additional Registration
Statement," together with the Amended Registration Statement, "Supplemental
Registration Statements") as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
Supplemental Registration Statements or such prior registration statement and to
cover the resale of all Registrable Securities.
(c) Furnish to the Holders such numbers of copies of a
prospectus in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
Blue Sky laws of the jurisdictions in which the Holders are located, of such
other jurisdictions as shall be reasonably requested by the Holders of the
Registrable Securities covered by such Registration Statement and of all other
jurisdictions where legally required, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) [Intentionally Omitted].
(f) As promptly as practicable after becoming aware of such
event, notify each Holder of Registrable Securities of the happening of any
event of which the Company has knowledge, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, use its best efforts
promptly to prepare a supplement or amendment to the Registration Statement to
4
<PAGE>
correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Holder as such Holder may reasonably
request. During the period before such supplement or amendment that is being
filed to correct such untrue statement or ommission is declared effective by the
SEC, the Holders will not make any resales pursuant to the Registration
Statement.
(g) Provide Holders with notice of the date that a
Registration Statement or any Supplemental Registration Statement registering
the resale of the Registrable Securities is declared effective by the SEC, and
the date or dates when the Registration Statement is no longer effective.
(h) Provide Holders and their representatives the opportunity
and a reasonable amount of time, based upon reasonable notice delivered by the
Company, to conduct a reasonable due diligence inquiry of Company's pertinent
financial and other records and make available its officers and directors for
questions regarding such information as it relates to information contained in
the Registration Statement. All such inquiries shall be addressed to and
conducted through counsel to the Company.
(i) Provide Holders and their representatives the opportunity
to review the Registration Statement and all amendments or supplements thereto
prior to their filing with the SEC by giving the Holder at least ten (10)
business days advance written notice prior to such filing.
(j) Provide each Holder with prompt notice of the issuance by
the SEC or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceeding for such purpose. The Company shall use its best efforts to
prevent the issuance of any stop order the Company reasonably believes is likely
to be issued and, if any is issued, to obtain the removal thereof at the
earliest possible date.
(k) Use its best efforts to list the Registrable Securities
covered by the Registration Statement with all securities exchanges or markets
on which the Common Stock is then listed and prepare and file any required
filing with the NASD, American Stock Exchange, NYSE and any other exchange or
market on which the Common Stock is listed.
4. Piggyback Registration. If anytime prior to the date that the
Registration Statement is declared effective or during any Ineffective Period
(as defined in the Investment Agreement) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its Common Stock under the Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely for the sale of securities to participants
in a Company stock plan or a registration on Form S-4 promulgated under the Act
or any successor or similar form registering stock issuable upon a
reclassification, upon a business combination involving an exchange of
securities or upon an exchange offer for securities of the issuer or another
entity), the Company shall, at such time, promptly give each Holder written
notice of such registration (a "Piggyback Registration Statement"). Upon the
written request of each Holder given by fax within ten (10) days after mailing
of such notice by the Company, the Company shall cause to be included in such
registration statement under the Act all of the Registrable Securities that each
such Holder has requested to be registered ("Piggyback Registration") to the
5
<PAGE>
extent such inclusion does not violate the registration rights of any other
security holder of the company granted prior to the date hereof; provided,
however, that nothing herein shall prevent the Company from withdrawing or
abandoning such registration statement prior to its effectiveness.
5. Limitation on Obligations to Register under a Piggyback
Registration. In the case of a Piggyback Registration pursuant to an
underwritten public offering by the Company, if the managing underwriter
determines and advises in writing that the inclusion in the registration
statement of all Registrable Securities proposed to be included would interfere
with the successful marketing of the securities proposed to be registered by the
Company, then the number of Registrable Securities to be included in the
Piggyback Registration Statement, to the extent that the managing underwriter
determines that any Registrable Securities may be included in such Piggyback
Registration Statement, shall be allocated among all Holders who had requested
Piggyback Registration pursuant to the terms hereof, in the proportion that the
number of Registrable Securities which each such Holder seeks to register bears
to the total number of Registrable Securities sought to be included by all
Holders. If required by the managing underwriter of such an underwritten public
offering, the Holders shall enter into a reasonable agreement limiting the
number of Registrable Securities to be included in such Piggyback Registration
Statement and the terms, if any, regarding the future sale of such Registrable
Securities. Notwithstanding the above, the Company shall not be required to take
any action pursuant to paragraphs 4 or 5 hereof that would constitutute or
result in a breach of its obligations pursuant to any other registration rights
granted by the Company prior to the date of this Agreement.
6. Dispute as to Registrable Securities. Except as provided in Section
2.1(b), in the event the Company believes that shares sought to be registered
under Section 2 or Section 4 by Holders do not constitute "Registrable
Securities" by virtue of Section 2.1 of this Agreement, and the status of those
shares as Registrable Securities is disputed, the Company shall provide, at its
expense, an Opinion of Counsel, reasonably acceptable to the Holders of the
Securities at issue (and satisfactory to the Company's transfer agent to permit
the sale and transfer), that those securities may be sold immediately, without
volume limitation or other material restrictions, without registration under the
Act, by virtue of Rule 144 or similar provisions.
7. Furnish Information. At the Company's request, each Holder shall
furnish to the Company such information regarding Holder, the Registrable
Securities held by it, and the intended method of disposition of such securities
to the extent required to effect the registration of its Registrable Securities
or to determine that registration is not required pursuant to Rule 144 or other
applicable provision of the Act.
8. Expenses. All expenses, other than commissions and fees and expenses
of counsel to the selling Holders, incurred in connection with registrations,
filings or qualifications pursuant hereto, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, shall be borne by the Company.
9. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
6
<PAGE>
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the officers, directors, partners, legal counsel,
and accountants of each Holder, any underwriter (as defined in the Act, or as
deemed by the Securities Exchange Commission, or as indicated in a registration
statement) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of Section 15 of the Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements or omissions: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any final prospectus contained therein or
any amendments or supplements thereto, or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, and the Company will reimburse each such Holder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person; provided however, that the above shall not relieve the
Company from any other liabilities which it might otherwise have.
To the extent permitted by law, each Holder will indemnify and hold
harmless the Company and the officers and directors of the Company, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements or
omissions: any untrue statement or alleged untrue statement of a material fact
that is provided, in writing to the Company by the Investor or any Holder and is
contained in such registration statement, including any final prospectus
contained therein or any amendments or supplements thereto, and the Investor
will reimburse the Company, officer or director for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Investor (which consent shall
not be unreasonably withheld). Notwithstanding the above, a Holder shall not be
required to provide the indemnification described above unless the losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact that is provided, in writing, to the Company by such Holder.
(b) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9, deliver to
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<PAGE>
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume, the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses of one such counsel to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflicting
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 9.
(c) In the event that the indemnity provided in paragraph (a)
of this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and each Holder agree to
contribute to the aggregate claims, losses, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the Holders may be subject in such proportion as is appropriate to reflect the
relative fault of the Company and the Holders in connection with the statements
or omissions which resulted in such Losses. Relative fault shall be determined
by reference to whether any alleged untrue statement or omission relates to
information provided by the Company or by the Holders. The Company and the
Holders agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation that does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 9,
each person who controls a Holder of Registrable Securities within the meaning
of either the Securities Act or the Exchange Act and each director, officer,
partner, employee and agent of a Holder shall have the same rights to
contribution as such holder, and each person who controls the Company within the
meaning of either the Act or the Exchange Act and each director and officer of
the Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph (c).
(d) The obligations of the Company and Holders under this
Section 9 shall survive the resale, if any, of the Common Stock, the completion
of any offering of Registrable Securities in a Registration Statement under this
Agreement, and otherwise.
10. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
8
<PAGE>
(a) make and keep public information available, as those terms
are understood and defined in Rule 144; and
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the Act and
the 1934 Act.
11. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the written consent of a majority in interest
(measured by the number of Registrable Securities) of the Holders affected
thereby. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder, each future Holder, and the Company.
12. Notices. All notices required or permitted under this Agreement
shall be made in writing signed by the party making the same, shall specify the
section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: Attention: Andrew D. Smith, President,
QuikBIZ Internet Group, Inc., 5310 NW 33rd Ave., Suite 212, Ft. Lauderdale, FL
33309; Telephone: (954) 739-7005, Facsimile: (954) 739-0708(or at such other
location as directed by the Company in writing) and (ii) the Holders at their
respective last address as the party as shown on the records of the Company. Any
notice, except as otherwise provided in this Agreement, shall be made by fax and
shall be deemed given at the time of transmission of the fax.
13. Termination. This Agreement shall terminate on the date all
Registrable Securities are resold pursuant to a Registration Statement or
Supplemntal Registration Statement, or become eligible for resale, without
registration, under Rule 144 of the Securities Act or otherwise, without volume
limitations; but without prejudice to (i) the parties' rights and obligations
arising from breaches of this Agreement occurring prior to such termination (ii)
other indemnification obligations under this Agreement.
14. Assignment. No assignment, transfer or delegation, whether by
operation of law or otherwise, of any rights or obligations under this Agreement
by the Company or any Holder, respectively, shall be made without the prior
written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, together with or prior to such
transferee's request to have such Registrable Securities included in a
Registration, a writing executed by such transferee agreeing to be bound as a
Holder by the terms of this Agreement), and the Company hereby agrees to file an
amended registration statement including such transferee as a selling security
holder thereunder; and provided further that the Company may transfer its rights
and obligations under this Agreement to a purchaser of all or a substantial
portion of its business without such consent if the obligations of the Company
under this Agreement are assumed in connection with such transfer, either by
merger or other operation of law (which may include without limitation a
transaction whereby the Registrable Securities are converted into securities of
the successor in interest) or by specific assumption executed by the transferee.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia applicable to agreements made
in and wholly to be performed in that jurisdiction, except for matters arising
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<PAGE>
under the Act or the Securities Exchange Act of 1934, which matters shall be
construed and interpreted in accordance with such laws.
16. Execution in Counterparts Permitted. This Agreement may be executed
in any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one (1) instrument.
17. Specific Performance. The Holder shall be entitled to the remedy of
specific performance in the event of the Company's breach of this Agreement, the
parties agreeing that a remedy at law would be inadequate.
18. Indemnity. Each party shall indemnify each other party against any
and all claims, damages (including reasonable attorney's fees), and expenses
arising out of the first party's breach of any of the terms of this Agreement.
19. Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Investment Agreement, the Common
Stock certificates, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 9th day of July, 1999.
QUIKBIZ INTERNET GROUP, INC.
/s/ David B. Bawarsky
By: ________________________________
David B. Bawarsky, CEO
Address: Attention David B. Bawarsky, CEO
QuikBIZ Internet Group, Inc.
5310 NW 33rd Ave., Suite 212
Ft. Lauderdale, FL 33309
Telephone: (954) 739-7005
Facsimile: (954) 739-0708
SUBSCRIBER:
SWARTZ PRIVATE EQUITY, LLC.
/s/ Eric S. Swartz
By: ________________________________
Eric S. Swartz, Manager
Address: 1080 Holcomb Bridge Road
Bldg. 200, Suite 285
Roswell, GA 30076
Telephone: (770) 640-8130
Facsimile: (770) 640-7150
11
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER THAT CERTAIN INVESTMENT AGREEMENT
BY AND BETWEEN THE COMPANY AND HOLDER REFERENCED THEREIN AS EXHIBIT J.
Warrant to Purchase
________ shares Warrant Number ____
Warrant to Purchase Common Stock
of
QUIKBIZ INTERNET GROUP, INC.
THIS CERTIFIES that Swartz Private Equity, LLC or any subsequent holder
hereof ("Holder"), has the right to purchase from QuikBIZ Internet Group, Inc.,
a Nevada corporation (the "Company"), up to "N" fully paid and nonassessable
shares, wherein "N" is defined below, of the Company's common stock, $.002 par
value per share ("Common Stock"), subject to adjustment as provided herein, at a
price equal to the Exercise Price as defined in Section 3 below, at any time
beginning on the Date of Issuance (defined below) and ending at 5:00 p.m., New
York, New York, time the date that is five (5) years after the Date of Issuance
(the "Exercise Period"); provided, that, with respect to each "Put," as that
term is defined in that certain Investment Agreement (the "Investment
Agreement") by and between the initial Holder and Company, dated on or about
July 8, 1999, "N" shall equal ten percent (10%) of the number of shares of
Common Stock purchased by the Holder in that Put.
Holder agrees with the Company that this Warrant to Purchase Common
Stock of the Company (this "Warrant") is issued and all rights hereunder shall
be held subject to all of the conditions, limitations and provisions set forth
herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on _____________, ______
("Date of Issuance"). The term of this Warrant is five (5) years from the Date
of Issuance.
<PAGE>
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number of full shares of Common Stock covered
hereby
Exhibit D
(the "Warrant Shares") upon surrender of this Warrant, with the Exercise Form
attached hereto as Exhibit A (the "Exercise Form") duly completed and executed,
together with the full Exercise Price (as defined below) for each share of
Common Stock as to which this Warrant is exercised, at the office of the
Company, Attention: Andrew D. Smith, President, 5310 NW 33rd Ave., Suite 212,
Ft. Lauderdale, FL 33309; Telephone: (954) 739-7005, Facsimile: (954) 739-0708,
or at such other office or agency as the Company may designate in writing, by
overnight mail, with an advance copy of the Exercise Form sent to the Company
and its Transfer Agent by facsimile (such surrender and payment of the Exercise
Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile. The Company shall not be required to deliver the shares of Common
Stock to the Holder until the requirements of Section 2(a) above are satisfied.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price"), shall equal $Y per share
("Exercise Price"), where "Y" shall equal 110% of the Market Price on the Put
Date (as both are defined in the Investment Agreement) for the applicable Put
(as defined in the Investment Agreement).
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
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<PAGE>
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Price of one (1) share of Common Stock (for purposes
of this Section 3(ii), the " Price" shall be defined as the
average Closing Bid Price of the Common Stock for the five (5)
trading days prior to the Date of Exercise of this Warrant
(the "Average Closing Price"), as reported by the O.T.C.
Bulletin Board, National Association of Securities Dealers
Automated Quotation System ("Nasdaq") Small Cap Market, or if
the Common Stock is not traded on the Nasdaq Small Cap Market,
the Average Closing Price in any other over-the-counter
market; provided, however, that if the Common Stock is listed
on a stock exchange, the Price shall be the Average Closing
Price on such exchange for the five (5) trading days prior to
the date of exercise of the Warrants. If the Common Stock
is/was not traded during the five (5) trading days prior to
the Date of Exercise, then the closing price for the last
publicly traded day shall be deemed to be the closing price
for any and all (if applicable) days during such five (5)
trading day period.
B = the Exercise Price.
For purposes hereof, the term "Closing Bid Price" shall mean the
closing bid price on the O.T.C. Bulletin Board, the National Market System
("NMS"), the New York Stock Exchange, the Nasdaq Small Cap Market, or if no
longer traded on the O.T.C. Bulletin Board, the NMS, the New York Stock
Exchange, the Nasdaq Small Cap Market, the "Closing Bid Price" shall equal the
closing price on the principal national securities exchange or the
over-the-counter system on which the Common Stock is so traded and, if not
available, the mean of the high and low prices on the principal national
securities exchange on which the Common Stock is so traded.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is
intended, understood and acknowledged that the Common Stock issuable upon
exercise of this Warrant in a cashless exercise transaction shall be deemed to
have been acquired at the time this Warrant was issued. Moreover, it is
intended, understood and acknowledged that the holding period for the Common
Stock issuable upon exercise of this Warrant in a cashless exercise transaction
shall be deemed to have commenced on the date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant
may not be exercised in a cashless exercise transaction if, on the Date of
Exercise, the shares of Common Stock to be issued upon exercise of this Warrant
would upon such issuance be then registered pursuant to an effective
registration statement filed pursuant to that certain Registration Rights
Agreement dated on or about July 8, 1999 by and among the Company and certain
investors, or otherwise be registered under the Securities Act of 1933, as
amended.
3
<PAGE>
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the exercise
of this Warrant constitutes "Registrable Securities" under that certain
Registration Rights Agreement dated on or about July 8, 1999 between the Company
and certain investors and, accordingly, has the benefit of the registration
rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted as necessary
to reflect the increase in the number of shares as to which this Warrant is
being exercised.
(b) Recapitalization or Reclassification. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which Holder shall be
entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give Holder the same notice it provides to holders of Common Stock
of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for no
consideration to holders of Common Stock cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or preceding years) then,
in any such case, Holder shall be entitled to receive, upon Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which Holder would have been entitled to receive with respect to each such share
4
<PAGE>
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board of Directors of the Company in its discretion) and the denominator of
which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exerciseable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) days notice to Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a), (b)
or (c) of this Section 5, and thereafter shall mean said price as adjusted from
time to time in accordance with the provisions of said subsection. No such
adjustment under this Section 5 shall be made unless such adjustment would
change the Exercise Price at the time by $.01 or more; provided, however, that
all adjustments not so made shall be deferred and made when the aggregate
thereof would change the Exercise Price at the time by $.01 or more. No
adjustment made pursuant to any provision of this Section 5 shall have the net
effect of increasing the Exercise Price in relation to the split adjusted and
distribution adjusted price of the Common Stock. The number of shares of Common
Stock subject hereto shall increase proportionately with each decrease in the
Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock. If,
5
<PAGE>
on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued, fully
paid, nonassessable and not subject to preemptive rights, rights of first
refusal or similar rights of any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act by
virtue of Regulation D and exempt from state registration under applicable state
laws. The Warrant and the Common Stock issuable upon the Exercise of this
Warrant may not be pledged, transferred, sold or assigned except pursuant to an
effective registration statement or an exemption to the registration
requirements of the Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall deliver a written notice to Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or persons to
whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within ten
(10) days, and shall deliver to the assignee(s) designated by Holder a Warrant
or Warrants of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy or
claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Nevada,
without giving effect to conflict of law provisions thereof.
6
<PAGE>
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the Attention:
Andrew D. Smith, President, 5310 NW 33rd Ave., Suite 212, Ft. Lauderdale, FL
33309; Telephone: (954) 739-7005, Facsimile: (954) 739-0708. Notices or demands
pursuant to this Warrant to be given or made by the Company to or on Holder
shall be sufficiently given or made if sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed, to the address of
Holder set forth in the Company's records, until another address is designated
in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
the ______ day of ________________, _______.
QUIKBIZ INTERNET GROUP, INC.
By: ________________________________
Andrew D. Smith, President
7
<PAGE>
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: QUIKBIZ INTERNET GROUP, INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of QUIKBIZ
INTERNET GROUP, INC., a Nevada corporation (the "Company"), evidenced by the
attached warrant (the "Warrant"), and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated:
- ------------------------------------------------------------------------
Signature
- -----------------------------------------------------------------------
Print Name
- ------------------------------------------------------------------------
Address
- -----------------------------------------------------------------------
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- ------------------------------------------------------------------------
8
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of QUIKBIZ
INTERNET GROUP, INC., evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint _______________________ attorney to transfer
the said Warrant on the books of the Company, with full power of substitution in
the premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
-----------------------------------
Name
- -----------------------------------
Address
- -----------------------------------
Please print name and address of assignee
(including zip code number)
- -----------------------------------------------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
- ------------------------------------------------------------------------
10
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSED ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"0 SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii)
RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN
EXCHANGE FOR THIS NOTE.
QUIKBIZ INTERNET GROUP, INC.
SUBORDINATED NOTE
No. 1 June 25, 1998 $50,000.00
QUIKBIZ INTERNET GROUP, INC., a Nevada Corporation f/k/a Algorhythm
Technologies, Corp. (the "Company"), for value received, hereby promises to pay
to Cella Reyee or registered assigns (the "Payee") on June 25, 1999 (the
"Maturity Date") at the offices of the Company, at 5310 N.W. 33rd Avenue, Suite
212, Fort Lauderdale, Florida 33309, the principal amount of Fifty Thousand
Dollars ($50,000.00), including interest at the rate of twelve percent 912%) per
annum accrued through the Maturity Date, in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
THERE SHALL BE NO PREPAYMENT PENALTY
This Note has been issued by the Company pursuant to authorization of
the Board of Directors of the Company which provides for an aggregate of
$50,000.00 in face amount Note to be issued.
Payment of principal interest shall be made to the registered owner of
this Note upon presentation of this Note upon or after maturity.
This Note shall be construed and enforced in accordance with the laws
of the State of Florida.
No recourse shall be had for the payment of the principal or interest
of this Note against any incorporator or any past, present or future
stockholder, officer, director or agent of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, under any statute or by the enforcement of any assessment or
otherwise, all such liability of the incorporations, stockholders, officers,
directors and agents being waived, released and surrendered by the holder hereof
by the acceptance of this note.
IN WITNESS WHEREOF, QUIKBIZ INTERNET GROUP, INC. has caused this Note to
be signed in its name by its President.
QUIKBIZ INTERNET GROUP, INC.
/s/ Andrew D. Smith
BY: _____________________________
Andrew D. Smith, President
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QUIKBIZ INTERNET GROUP, INC.
(A Nevada Corporation)
"A" WARRANTS
This Warrant will be exercisable for a period
of one year from the date of this Warrant
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED the registered owner of
Stock Purchase "A" Warrants ("A" Warrants") set forth below, or registered
assign ("Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from QUIKBIZ INTERNET GROUP, INC., a Nevada corporation ("Company"),
for each Warrant held, one Share of Common Stock, at a purchase price per share
of $.17 per share of $4,250 for all 25,000 Shares. The number of shares of
Common Stock to be received upon the exercise of this Warrant and the price to
be paid for each share may be adjusted from time to time as hereinafter set
forth. The exercise price for a share of Common Stock is hereinafter sometimes
referred to as the "Exercise Price."
(a) Exercise of Warrant. Prior to the expiration date, subject to the
provisions set forth below, this Warrant may be exercised in whole or
in part by presentation and surrender thereof to the Company with the
Purchase Form annexed hereto duly executed and accompanied by payment
of the Exercise Price for the number of shares specified in such form,
together with all federal and state taxes applicable upon such
exercise. If this Warrant should be exercised in part only, the
Company shall upon surrender of this Warrant for cancellation, execute
and deliver a new warrant evidencing the right of the Holder to
purchase the balance of the shares purchasable hereunder. Upon receipt
by the Company of this Warrant at the office of the Company, in proper
form for exercise, the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company then be
closed or that certificates representing such Common Stock shall not
then be actually delivered to the Holder.
(b) Reservation of Shares. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of
this Warrant such number of its shares of Common Stock as shall be
required for issuance or delivery upon exercise of this Warrant.
(c) Fractional Shares. No fractional shares or scrip representing
factional shares shall be issued upon exercise of this Warrant. With
respect to any faction of a share called for upon any exercise hereof,
the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of such fractional
share.
(d) Exchange, Assignment, or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company for other Warrants of
different denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock purchasable
hereunder.
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(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed
in the Warrant and are not enforceable against the Company except to
the extent set forth herein.
(f) Anti-Dilution Provisions.
(1) Adjustment of Number of Shares. In case the Company shall at any
time issue shares of Common Stock or Convertible Securities by
way of dividend or other distribution on any stock of the
Company, or subdivide or combine (by way of reverse stock split
or otherwise), the outstanding shares of Common Stock, the
Exercise Price shall be proportionately increased or decreased in
the case of such issuance (on the day following the date fixed
for determining shareholders entitled to receive such dividend or
other distribution, or decreased in the case of such subdivision
or increased in the case of such combination).
(2) No Adjustment for Small Amounts. Anything in this Section (O to
the contrary notwithstanding, the Company shall not be required
to give effect to any adjustment in the Exercise Price unless and
until the net effect of one or more adjustments, determined as
above provided, shall have required a change of the Exercise
Price by at least one cent, but when the cumulative net effect of
more than one adjustment so determined shall be to change the
actual Exercise Price by at least one cent, such change in the
Exercise Price shall thereupon be given effect.
(3) Number of Shares Adjusted. Upon any adjustment of the Exercise
Price, the holder of this Warrant shall thereafter (until another
such adjustment) be entitled to purchase, at the new Exercise
Price, the number of shares, calculated to the nearest full
share, obtained by multiplying the number of shares of Common
Stock initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the
product so obtained by the new Exercise Price.
(g) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company (other than a change
in par value, or from par value to no par value, or from no par value
to par value, or as a result of an issuance of shares of common Stock
by way of dividend or other distribution or of a subdivision or
combination), or in case of any consolidation or merger of the
Company, with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation
and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock
of the class issuable upon exercise of this Warrant) or in case of any
sale or conveyance to another corporation of the property of the
Company as en entirety or substantially as a entirety, the Company
shall cause effective provision to be made so that the holder shall
have the right hereafter, by exercising this Warrant, to purchase the
kind and amount of shares of stock and other securities and property
<PAGE>
receivable by the Common Stockholders upon such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustment provided for in this Warrant. The foregoing provisions of
this Section (i) shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or
conveyances.
(h) Transfer to Comply with the Securities Act of 1933.
(1) This warrant or any other security issued or issuable upon
exercise of this warrant may not be sold, transferred or
otherwise disposed of except to a person who, in the opinion of
counsel for the Company, is a person to whom this warrant may
legally be transferred pursuant to Section (d) hereof without
registration and without the delivery of a current prospectus
under the Securities Act with respect thereto and then only
against receipt of an agreement of such person to comply with the
provision of this Section (k) with respect any resale or other
disposition of such securities.
(2) The Company may cause the following legend to be set forth on
each certificate representing Warrants or any other security
issued or issuable upon exercise of this Warrant not theretofore
distributed to the public or sold to underwriters for
distribution to the public pursuant to Section (j) hereof, unless
counsel for the Company is of the opinion as to any such
certificate that such legend is unnecessary:
"The securities represented by this certificate may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement made under
the Securities Act of 1933 (the "Act"), or pursuant to an
exemption from registration under the Act, the availability
of which is to be established to the satisfaction of the
Company."
(i) Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Florida.
Date: June 26, 1998 QUIKBIZ INTERNET GROUP, INC.,
a Nevada corporation
/s/ Andrew D. Smith
Name of Registered Holder: Cella Reves By: ________________________
Andrew D. Smith, President
Number of Warrants: 25,000
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THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY
THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
No. 1 $25,000 Warrants
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
QUIKBIZ INTERNET GROUP, INC.
This certifies that FOR VALUE RECEIVED Cella Reves is the owner of the
number of Warrants ("Warrants") specified above. Each Warrant entitles the
Registered holder to purchase one fully paid and non-assessable share of Common
Stock, $0.00467 par value ("Common Stock") of QuikBIZ Internet group, Inc., a
Nevada Corporation f/k/a Algorhythm Technologies, Corp., (the "Company") at any
time commencing June 26, 1998 and prior to the Expiration Date (as hereinafter
defined), upon presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly exercised, at the corporate office
of the Company, at 5310 N.W. 33rd Avenue, Suite 212, Fort Lauderdale, Florida
33309, accompanied by payment of an amount equal to $0.17 per share.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder. In the case of the exercise of less than all the Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. Eastern time on June
26, 1999. If such date shall in the State of Florida be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall mean
5:00 P.M. Eastern time the next following day which in the State of Florida is
not a holiday or a day on which banks are authorized to close. The Company may,
at its election, extend the Expiration Date.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, QUIKBIZ INTERNET GROUP, INC. has caused this
Warrant to be executed by its President.
QUIKBIZ INTERNET GROUP, INC.
a Nevada Corporation
/s/ Andrew D. Smith
BY: ____________________________
Andrew D. Smith, President
EMPLOYMENT CONTRACT FOR JAMES LOBEL
THIS AGREEMENT is made at the City of Fort Lauderdale, County of Broward, State
of Florida, between A.D.S. Advertising Corp., a Florida Corporation d/b/a The
Smith Agency (wholly_owned subsidiary of QUIKBIZ INTERNET GROUP, INC., a
publicly traded Nevada Corporation) hereinafter "The Smith Agency" or
"Employer," and JAMES LOBEL, hereinafter "Employee" or "James Lobel";
WHEREAS, Employer is engaged in the advertising services industry and maintains
a business in the City of Fort Lauderdale, County of Broward, State of Florida;
and
WHEREAS, Employee is willing to be employed by Employer, and Employer is willing
to employ Employee, on the terms, covenants, and conditions set forth in this
agreement; and
WHEREAS, it is the intent of Employer to obtain an Employee with integrity and
requisite qualifications to act in an executive management function with the
company, and it is the intent of Employee to fulfill the intent of Employer and
be compensated for such employment;
THEREFORE, in consideration of the mutual covenants and promises of the parties,
Employer and Employee covenant and agree as follows:
SECTION ONE: Employer does hire and employ Employee as President of The Smith
Agency, and Employee does accept and agree to such hiring and employment.
Subject to the supervision and pursuant to the orders, advice, and directions of
Employer, Employee shall direct all phases of said company, subject only to the
final direction of Employer, and shall perform such other duties as are
customarily performed by one holding such position in other similar businesses
or enterprises as that engaged in by Employer, and shall also additionally
render such other and unrelated services and duties as may be assigned to
Employee from time to time by Employer.
SECTION TWO: Employee agrees to perform, at all times faithfully, industriously,
and to the best of his ability, experience, and talent, all of the duties that
may be required of and from him pursuant to the express and implicit terms of
this agreement and Exhibit "A" attached hereto, to the reasonable satisfaction
of Employer. Such duties shall be rendered at Employer's Fort Lauderdale place
of business. Employer reserves the right to designate such other place or
places, adjust the Employee's duties and/or title as Employer shall in good
faith require or as the interests, needs, business and opportunities of Employer
shall require or make advisable.
SECTION THREE: Except as otherwise provided in this Agreement, the term of
employment shall commence upon the full execution of this Agreement and
terminate precisely three (3) years later.
SECTION FOUR: Employer shall pay Employee and Employee agrees to accept from
Employer, for Employee's services under this agreement, compensation at a gross
rate of ONE HUNDRED AND TWENTY THOUSAND DOLLARS ($120,000) per year for
performing the services called for under this Agreement ("Salary"). Said Salary
shall be paid on an every other week basis. . The Employer shall provide an
<PAGE>
additional $10,000 for non_accountable expenses, payable bi_monthly for the
first year of this agreement. This non_accountable expense allowance shall cease
one_year from date of this agreement.
The Employer shall issue Employee $40,000 of S-8 stock 30 days from the full
execution of this agreement and in conjunction with the filing of a "Form S-8
Disclosure Statement". Stock price shall be the average "Closing" price of QBIZ
common stock, five days prior to the issuance of S-8 stock. This stock is
considered an inducement for employment.
SECTION FIVE: Employer shall provide individual health insurance to Employee
with no contribution required from Employee.
SECTION SIX: Employer shall provide a company vehicle 1999 BMW 325, or the
financial equivalent at Employee's option, to Employee and provide all
maintenance, insurance, repair and fuel to said vehicle. Employer shall provide
a company cell phone during term of employment.
SECTION SEVEN: Employer shall provide three (3) weeks annual paid vacation and
one (1) week annual paid sick leave to Employee. In addition to vacation and
sick days, the Employee shall have the following designated holidays: New Year's
Day, Birthday of Martin Luther King, Jr., Lincoln's Birthday, Washington's
Birthday, Good Friday, Memorial Day, July 4th, Labor Day and the following
Friday, and Christmas Day (Note: Should any of the above dates fall on Saturday
or Sunday, the following Monday shall be deemed as a holiday). Employee shall
not take more than two (2) weeks of vacation and/or sick leave within any two
(2) month period. Unused Sick time or vacation time will not accrue from year to
year.
SECTION EIGHT: Employer shall compensate Employee with a "Performance Incentive
Bonus" equal to 10% of the "net profits" of The Smith Agency as reported by the
company's CPA on the company's "audited financial statement" at the end of each
fiscal year. Excluded from "net profits" for the purpose of calculating the 10%,
will be any charges imposed by QBIZ upon Employer which are not incurred
expenses in the ordinary course of business or supported by sound business
judgment. The Employee may receive this bonus in cash and/or S_8 stock in
conjunction with the filing of a "Form S-8 Disclosure Statement". The bonus will
be given upon the filing of the year_end 10K unless otherwise approved by the
Employer. There shall be a cap on the total amount of Performance Incentive
Bonus paid to the Employee. In no event, shall the Employee receive more than
$250,000 for the Performance Incentive Bonus during any fiscal year (prorated if
Employee is only employed for part of that fiscal year).
SECTION NINE: Notwithstanding anything in this agreement to the contrary,
Employer has the option to terminate this agreement in the event that during its
term Employee shall become permanently disable as the term permanently disabled
is defined below. Such option shall be exercised by Employer giving notice to
Employee by registered mail. Upon, the giving of such notice, Employee's
employment come to an end on the last day of the month in which the notice is
mailed, with the same force and effect as is that day were originally set forth
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as the termination date. For the purposes of the agreement, Employee shall be
deemed to have become permanently disabled if, during any year of the term of
this agreement, because of ill health, physical or mental disability, or for
other causes beyond his control, he shall have been continuously unable or
unwilling or have failed to perform his duties under this contract for thirty
(30) consecutive days, or if, during any year of the term of this agreement, he
shall have been unable or unwilling or have failed to perform his duties for a
total period of sixty (60) days, either consecutive or not. For the purposes of
this agreement, the term "any year of the term of this agreement" is defined to
mean any period of twelve (12) consecutive calendar months.
SECTION TEN: As a condition of his employment and continued, the Employee must
sign a Non_Compete/Non_Disclosure Agreement (the "Non_Compete") in a form
acceptable to Employer, which Employer may modify from time to time. Employee's
failure to execute the Non_Compete or abide by its terms shall constitute a
breach of this Employment Contract. A breach of this Employment Contract by
Employer shall not affect Employee's obligations under the Non_Compete, unless
so provided in the Non-Compete.
SECTION ELEVEN: Employee shall devote his full time, attention, knowledge, and
skill to the business and interest of Employer, and Employer shall be entitled
to all of the benefits, emoluments, profits, intellectual property rights or
other issues or product arising from or incident to any and all work, services,
and advice of Employee, and Employee expressly agrees that during the term of
this agreement he will not be interested, directly or indirectly, in any form,
fashion, or manner, as partner, officer, director, stockholder, advisor,
Employee, or in any other form or capacity, in any other business similar to
Employer's business or any allied trade; provided however, that nothing shall be
deemed to prevent or limit the right of Employee to invest any of his funds in
the capital stock or other securities of any corporation whose stock or
securities are publicly owned or are regularly traded on any public exchange,
nor shall anything be deemed to prevent Employee from investing or limit
Employee's right to invest his funds in real estate. Employer expressly
acknowledges that Employee is a involved with Profiles & Opportunity Concept
Program, and that Employee will not function in any day_to_day activities and/or
be involved in any of its business during Employees normal working hours for
Employer ("Permitted Activities"). Employee shall not cause or allow those
Permitted Activities to: (i) materially interfere with the diligent performance
of Employee's duties hereunder; (ii) deprive Employer or divert from Employer,
of any corporate or economic opportunity; (iii) cause third parties to believe
that the Permitted Activities are being performed by, in conjunction with or
sanctioned by Employer; or (iv) expose Employer to any civil or criminal
liability or to increase the likelihood of such exposure. The Employee shall
devote his full time and attention to the Employer's business. During the term
of this agreement except as otherwise provided herein, the Employee shall not
engage in any other business activity, regardless of whether it is pursued for
gain or profit which in the reasonable judgment of the Board, materially
interferes with the performance of the Employee's responsibilities hereunder.
SECTION TWELVE: Employee further specifically agrees that he will not, without
Employer's prior written consent, at any time, in any manner, either directly or
indirectly, communicate to any person, firm, entity or corporation any
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information of any kind concerning any matters affecting or relating to the
business of Employer, including, without limiting the generality of the
foregoing, the names of any of its customers, the prices it obtains or has
obtained or at which it sells or has sold its products, or any other information
of, about, or concerning the business of Employer, its manner of operation, its
plans, processes, or other data of any kind, nature, or description without
regard to whether any or all of the foregoing matters would be deemed
confidential, material, or important. The parties stipulate that as between
them, all such matters are important, material, and confidential and gravely
affect the effective and successful conduct of the business of the Employer, and
its goodwill, and that any breach of the terms of this paragraph is a material
breach of this agreement.
SECTION THIRTEEN: Anything contained in this agreement to the contrary
notwithstanding, it is understood and agreed that Employee shall not have the
right to make any contract or commitments for or on behalf of Employer without
the written consent of Employer. The Employee will take direction from and
reported to any of the following persons who have the authority to speak for and
on behalf of the Employer: (i) any of the executive officers of Quikbiz Internet
Group, Inc., including without limitation, David Bawarsky and Andrew Smith;
and/or (ii) the directors of Quikbiz Internet Group, Inc. and/or A.D.S.
Advertising Corp. d/b/a The Smith Agency.
SECTION FOURTEEN:
(a) The Employee may be terminated for cause. For the purpose of this
Section, "cause" shall mean (i) material breach of any agreement, covenant,
representation or warranty of the Employee or Seller set forth in this
Employment Contract, the Non-Compete/Non-Disclosure Agreement (of even date
herewith) or the August 20, 1999 Asset Purchase Agreement (or any instruments
executed in connection therewith) provided Employee is first given ten (10) days
notice and an opportunity to cure said breach; (ii) the commission or
participation by the Employee in an injurious act of fraud or dishonesty against
the Employer, (iii) the commission or participation by the Employee in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Employer, (iv) Employee's engaging in a
criminal enterprise involving moral turpitude, (v) Employee's engaging through
act or omission, in conduct amounting to personal dishonesty, incompetence,
breach of fiduciary duty or willful violation of any law, rule, regulation or
order of court or direction of the Employer that has an adverse effect on
Employer's business; or (vi) Employee failing or refusing to comply with the
reasonable policies, standards or regulations of the Employer from time to time
established.
(b) Notwithstanding anything to the contrary contained in this
agreement, the Employer may terminate Employee's employment if Employee dies,
whereupon, all further Employee compensation under this agreement shall cease.
(c) Upon termination of employment (for whatever reason), Employee
shall be entitled to his accrued salary and commissions earned through the date
of termination, less any prepaid sums or other rights of setoff belonging to
Employer at the date of termination. any company owned vehicle, cell phone and
other company property, also Employer shall be released from further liability
to Employee for Salary, bonus, non_accountable expense allowance, insurance or
any other compensation or benefits provided for in this agreement, unless
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Employer improperly terminates Employee's employment, in which event Employee
shall be entitled to continued periodic payment of his Salary through the end of
the then pending term of this agreement.
(d) The Employee may terminate his employment hereunder if: (i)
Employer shall fail to pay any amount due to Employee when such amount becomes
due provided that Employer shall be entitled to thirty (30) days written notice
and an opportunity to cure such default; or (ii) Employer shall breach any
material agreement, covenant, representation or warranty made by the Employer in
this Employment Contract or the Asset Purchase Agreement, provided that Employer
shall be entitled to thirty (30) days written notice and an opportunity to cure
such default.
SECTION FIFTEEN: This written agreement and any other specifically referenced
herein (E.g. the Non_Compete and the Asset Purchase Agreement) contain the sole
and entire agreement between the parties and shall supersede any and all other
agreements between the parties. The parties acknowledge and agree that neither
of them has made any representation with respect to the subject matter of this
agreement or any representations inducing its execution and delivery except such
representations as are specifically set forth in this writing (or those
referenced herein) and the parties acknowledge that they have had the
opportunity to have legal counsel of their choice review this agreement prior to
entering into the same. Both parties hereto shall execute and deliver such other
instruments and do such other acts as may be necessary to carry out the intent
and purposes of this agreement.
SECTION SIXTEEN: It is agreed that no waiver or modification of this agreement
or of any covenant, condition, or limitation contained in it shall be valid
unless it is in writing and duly executed by the party to be charged with it,
and that no evidence of any waiver or modification shall be offered or received
in evidence in any proceeding, arbitration, or litigation between the parties
arising out of or affecting this agreement, or the rights or obligations of any
party under it, unless such waiver or modification is in writing, duly executed
as above. The parties agree that the provisions of this paragraph may not be
waived except by a duly executed writing.
SECTION SEVENTEEN: The parties agree that it is their intention and covenant
that this agreement and performance under it and all suits relating to it be
construed in accordance with and under and pursuant to the laws of the State of
Florida, with venue for any lawsuit situate in Broward County. In the event of
any dispute between the parties in any way related to this Agreement, the
prevailing party shall be awarded its reasonable attorneys' fees and costs
through all trial and appellate levels.
SECTION EIGHTEEN: This agreement shall be binding on and inure to the benefit of
the respective parties and their executors, administrators, heirs, personal
representatives, successors and assigns. The Employee acknowledges that his
services are unique and personal. Accordingly, the Employee may not assign his
rights or delegate his duties or obligations under this Agreement. The
Employer's rights and obligations under this employment agreement shall inure to
the benefit of and shall be binding upon the Employer's successors and assigns.
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SECTION NINETEEN: Severability. Should any portion of this agreement be found to
be unenforceable at law or in equity, the remaining provisions of this agreement
are to remain in full force and effect.
SECTION TWENTY: Unless otherwise specifically provided herein, all notices to be
given hereunder shall be in writing and sent to the parties by certified mail,
return receipt requested, which shall be addressed to each party's respective
address set forth herein or to such other address as such party shall give to
the other party hereto by notice given in accordance with this Section and
except as otherwise provided in this agreement, shall be effective when
deposited in the United States mail, properly addressed and postage prepaid. If
such notice is sent other than by the United States mail, such notice shall be
effective when actually received by the party being noticed.
SECTION TWENTY-ONE: Employee will disclose promptly to Employer and does assign
and agrees to assign to Employer, without additional compensation to Employee,
all of Employee's right, title, and interest in and to any and all inventions,
discoveries, improvements, modifications, extensions or advancements made,
conceived, devised, developed or perfected by Employee during the term of
Employee's employment, whether on duty or off, and in and to all proprietary
rights therein or based thereon, which (i) uses equipment, supplies, facilities
or trade secrets of Employer, or (ii) uses the time for which Employee was
compensated by Employer, or (iii) which relates to the business of Employer or
to its actual or demonstrable anticipated research and development, or (iv) that
results, in whole or in part, from work performed by Employee for Employer and
its assigns. The Employee agrees to sign all instruments necessary for filing
and prosecution of any application for patent, trademark or copyright of the
United States or any foreign country or the renewing of any of the aforesaid
rights or applications, and to sign all instruments necessary for the filing and
prosecution of any continued, divisional and reissue applications which may be
necessary to render the aforesaid intellectual property effective and in full
force.
SECTION TWENTY-TWO: Fearing the Employee to be in violation of this Agreement,
Employer may request, in writing, that Employee provide Employer with an
affidavit specifically denying each and every feared violation alleged in
Employer's written request and do so within ten (10) days of the date of
Employer's written request ("Adequate Assurances"). Employee's failure to
appropriately respond to or deny any such allegation within the ten (10) day
period shall be deemed an admission of that allegation.
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EMPLOYER: EMPLOYEE: James Lobel _
A.D.S. ADVERTISING CORP., a Florida 1103 N.E. 4 Drive
corporation, d/b/a THE SMITH AGENCY Deerfield Beach, Florida
5310 N.W. 33rd Avenue, Suite 212 33441
Ft. Lauderdale, Florida 33309
/s/ Andrew D. Smith 8/31/99 /s/ James Lobel 8/31/99
BY:___________________________ ___________________________________
Dated Dated
WITNESSES:
___________________________________ ___________________________________
GUARANTY OF QUIKBIZ
QUIKBIZ INTERNET GROUP, INC., a publicly traded Nevada Corporation
hereby guaranties The Smith Agency's obligations under this Employment Contract
for James Lobel.
GUARANTOR: Quikbiz Internet Group, Inc.,
a Nevada Corporation authorized to transact
business in Florida
/s/ David Bawarsky 8/31/99
By: ________________________________________
David Bawarsky, CEO, ____________ Date
AGREEMENT TO SUBLEASE
This agreement is made on August 31st, 1999 by and between JAMES S.
LOBEL & DIANE HARVEY of Broward County, Florida, (referred to as the
"Landlord"), GALLASPY & LOBEL, INC. d/b/a G& L Group, and HARVEY STUDIOS, INC.,
both Florida Corporations located at 6801 N. Powerline Road, Fort Lauderdale, FL
33309 (collectively referred to as the "sublessor") and QUIKBIZ INTERNET GROUP,
INC., a Nevada corporation (referred to as the "sublessee")
RECITALS
The parties recite and declare:
A. Sublessor entered into a Business lease agreement (referred herein as
the Master Agreement) dated February 1st, 1998, with the Landlord for
certain real estate located at 6801 N. Powerline Road, Fort
Lauderdale, FL 33309; a copy of the Master Agreement is attached to
and made part of this sublease agreement as Exhibit "A".
B. Sublessor desires to sublease to Sublessee and Sublessee desires to
sublease from Sublessor the property located at 6801 N. Powerline
Road, Fort Lauderdale, FL 33309. (referred to in this agreement as the
"premises").
C. All parties agree to those certain modifications of the Master
Agreement contained on Exhibit "B".
IN CONSIDERATION OF THE ABOVE RECITALS, the terms and covenants of this sublease
agreement, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
Page 1 of 7
<PAGE>
SECTION ONE
GRANT
Sublessor subleases the premises to sublessee subject to the terms and
conditions of this agreement.
SECTION TWO
PROVISIONS CONSTITUTING SUBLEASE
A. This sublease agreement is subject to all of the terms and conditions
of the Master Agreement, except as set forth herein (A copy of the
Master Agreement is attached hereto and labeled Exhibit "A").
B. Sublessee shall assume and perform all monetary and nonmonetary
obligations of the sublessor, as lessee in the Master Agreement; to
the extent the terms and conditions are applicable to the premises,
and to pay rent as set forth in Section Four of this sublease
agreement. Sublessee specifically acknowledges that the Master
Agreement is a triple net lease and therefore the monetary obligations
it is assuming include, but are not limited to, the following, all
property taxes on the premises, applicable insurance, sales tax,
utilities, assessments and maintenance of the premises. Sublessee
acknowledges it has reviewed the terms of the Master Agreement and
agrees to pay these monetary obligations.
C. Neither sublessor nor sublessee shall commit or permit to be committed
on the premises any act or omission that shall violate any term or
condition of the Master Agreement or breach the terms of the Master
Agreement or cause the Master Agreement to be terminated.
SECTION THREE
TERM AND POSSESSION
A. The term of this sublease shall commence on September 1st, 1999 and
shall terminate on August 31st, ------------------- -------------
2004, subject to any rights of renewal of the sublessee. ----
B. Sublessee shall be given exclusive possession of the premises within 1
day(s) after the execution of this sublease agreement, subject to
Power Partners, Inc. month-to-month tenancy.
Page 2 of 7
<PAGE>
SECTION FOUR
RENT
A. Sublessee shall pay to the Landlord the rent due under the Master
Agreement (in lawful money of the United States) in advance on the 1st
day of each calendar month during the term of this sublease agreement.
B. The parties hereto acknowledge that, POWER PARTNERS, INC. currently
occupies a fixed portion of the demised premises and shall continue to
occupy said fixed portion for an as yet undetermined amount of time.
In the event POWER PARTNERS, INC., vacates the premises, then the
sublessee agrees to pay an additional rental amount of $1200.00 per
month for the sole use of that portion of the premises.
Notwithstanding the foregoing, the sublessee shall have the option of
not occupying this portion for a period of three months following
POWERNET PARTNERS, INC. vacating of the same, and the $1200.00 per
month will be abated during that period. In the event, the sublessee
does choose to occupy POWERNET PARTNERS, INC.'S portion of the
premises within the 3 month time period, then it will be required to
pay the aforesaid rent.
Page 3 of 7
<PAGE>
SECTION FIVE
OPTIONS
A. The Sublessee is given the option to extend the term on all the
provisions contained in this sublease agreement, except for minimum
monthly rent, for a 3 year period following the expiration of the
initial term by giving notice of intent to exercise the option to the
Landlord at least 3 months, but not more than 1 year before the
expiration of the term. If the sublessee is in material default under
the terms of this sublease agreement or the Asset Purchase Agreement
dated August 20th, 1999, on the date of giving the option notice, the
option notice shall be ineffective. If the sublessee is in default on
the date the extended term is to begin, the extended term shall not
begin, and this lease shall expire at the end of the initial term. The
rental rate for the option terms shall be equal to the fair rental
value of property as determined by appraisal of similar situated
properties. This appraisal shall be accomplished in the following
manner:
1. The sublessee and the Landlord shall each appoint one appraiser.
2. The appraisal shall be made within 45 days prior to the end of
the original term of this agreement. In the event that such
appraisers are unable to agree on the appraised fair market
rental value of the property, then they shall appoint a third
appraiser and the agreement of any two of the above-mentioned
three appraisers shall be binding on all parties. The parties are
to bear the costs of their own appraisers and shall split the
cost of the third appraiser, if needed. . SECTION SIX USE The
premises shall be used for general office use and for no other
purpose without the prior express and written consent of the
Landlord.
SECTION SIX
USE
The premises shall be used for general office use and for no other purpose
without the prior express and written consent of the Landlord.
Page 4 of 7
<PAGE>
SECTION SEVEN
CONDITION OF THE PREMISES
Sublessee accepts the premises in its condition as of the date
of execution of this agreement, and shall deliver them to sublessor
and Landlord in the same condition, normal wear and tear excepted, at
the expiration of this sublease agreement.
SECTION EIGHT
INDEMNIFICATION
A. Sublessee agrees to defend, indemnify, and hold sublessor and
Landlord harmless from and against any and all claims arising or
alleged to arise as a result of the negligent or wrongful
occupancy or use of the premises, including common area and other
areas appurtenant to the premises, by sublessee, its employees,
agents, contractors, or subcontractors.
B. Sublessor and Landlord agree to defend, indemnify, and hold
sublessee harmless from and against any and all claims arising or
alleged to arise from any act or omission of the Landlord and
sublessor, their employees, agents, contractors, or
subcontractors.
SECTION NINE
EFFECT OF PARTIAL INVALIDITY
The invalidity of any part of this sublease agreement will not and
shall not be deemed to affect the validity of any other part. In the event that
any provisions of this sublease agreement are held invalid, the parties agree
that the remaining provisions shall be deemed to be in full force and effect as
if they had been executed by both parties subsequent to the expungement of the
invalid provisions.
SECTION TEN
PARAGRAPH HEADINGS
The titles to the paragraphs of this sublease agreement are solely for
the convenience of the parties and shall not be used to explain, modify, or
simplify, or aid in the interpretation of the provisions herein.
5 of 7
<PAGE>
SECTION ELEVEN
NOTICES
A. All notices, demands, or other writings in this sublease
agreement shall be sent in writing via United States Mail,
registered and postage prepaid, and addressed as follows:
TO SUBLESSOR:
GALLASPY & LOBEL, INC. with copies furnished to:
C/O Jim Lobel JOHN E. AURELIUS
6801 N. Powerline Road 4367 N. FEDERAL HIGHWAY
Fort Lauderdale, FL 33309 FT. LAUDERDALE, FL 33308
TO SUBLESSEE:
QUIKBIZ INTERNET GROUP, INC. with copies furnished to:
C/O Dave Bawarsky RUSSEL KAPLAN
6801 N. Powerline Road 750 SE 3RD AVENUE, #100
Fort Lauderdale, FL 33309 Fort Lauderdale, FL 33316
TO LANDLORD:
JAMES LOBEL AND DIANE HARVEY
6801 N. POWERLINE ROAD
FORT LAUDERDALE, FL 33309
SECTION TWELVE
INSOLVENCY OR BANKRUPTCY
If sublessee becomes insolvent, voluntarily or involuntarily
bankrupt, or if a receiver, assignee, or other liquidating officer
is appointed for the business of sublessee, then the sublessor and
Landlord may terminate this agreement at their option.
SECTION THIRTEEN
ADVERTISEMENTS
All signs or symbol placed in the windows or doors of the demised
premises, or any exterior part of the building by sublessee shall
be subject to the approval of Landlord, which approval shall not
be unreasonably withheld.
SECTION FOURTEEN
CONSENT OF LANDLORD
The Landlord hereby consents to this sublease agreement,
including all the terms and conditions contained herein and the
modifications to the Master Agreement contained in Exhibit "B"
attached hereto.
Page 6 of 7
<PAGE>
SECTION FIFTEEN
CROSS DEFAULT
A material breach of the Asset Purchase Agreement or documents
executed in connection therewith, shall constitute a material
breach of this Agreement to sublease.
SECTION SIXTEEN
ASSIGMENT OF SUBLEASE
Sublessee may assign or sublease all or part of this sublease,
subject to the Landlord's prior approval, which shall not be
unreasonably withheld.
In witness, each party to this agreement has caused it to be
executed at Ft. Lauderdale 8/31/99 on the date first written
above.
LANDLORD:
/s/ Ross Kaplan /s/ James S. Lobel 8/31/99
__________________________________ __________________________
Printed Name: Ross Kaplan JAMES LOBEL (DATED)
/s/ Eric J. Arelius /s/ Diane C. Harvey 8/31/99
__________________________________ __________________________
Printed Name: Eric J. Arelius DIANE HARVEY (DATED)
SUBLESSOR (TENANT):
/s/ Rose Kaplan /s/ James Lobel 8/31/99
__________________________________ By:________________________
Printed Name: Ross Kaplan JAMES LOBEL, as President
of Gallaspy and Lobel, Inc.
d/b/a G&L Group (DATED)
/s/ Ross Kaplan /s/ Diane Harvey 8/31/99
__________________________________ By:________________________
Printed Name:_____________________ DIANE HARVEY, as President
of Harvey Studios, Inc.
d/b/a G&L Group (DATED)
SUBLESSEE
Ross Kaplan /s/ David Bawarsky, CEO
8/31/99
__________________________________ By:_______________________
Printed Name:Ross Kaplan DAVE BAWARSKY, CEO QUIKBIZ
INTERNET GROUP, INC.(DATED)
Page 7 of 7
This Instrument Prepared By:
RUSSELL D. KAPLAN, P.A.
750 S.E. 3rd Avenue, Suite 100
Ft. Lauderdale, Florida 33316
MORTGAGE DEED AND SECURITY AGREEMENT
THIS MORTGAGE is effective August 31, 1999, by JAMES S. LOBEL and
DIANE C. HARVEY ("Mortgagor") to QUIKBIZ INTERNET GROUP, INC., a public Nevada
corporation authorized to do business in Florida ("Mortgagee"). The terms
"Mortgagor" and "Mortgagee" include all parties to this instrument and their
heirs, legal representatives, successors and assigns, and the term "Note" means
the Mortgage Note or Notes secured by this Mortgage.
WITNESSETH, that for divers good and valuable consideration and also in
consideration of the aggregate sum named in the Note hereinafter described, the
Mortgagor does hereby grant, bargain, sell, alien, remise, release, convey and
confirm unto the Mortgagee in fee simple, all that certain land of which the
Mortgagor is now seized and possessed, and in actual possession, situate in
Broward County, State of Florida, described as follows:
THE SOUTH 100 FEET (S. 100.00') OF PARCEL AA@, WOOFERS PLAT,
ACCORDING TO THE PLAT THEREOF, AS RECORDED IN PLAT BOOK 97,
PAGE 17, OF THE PUBLIC RECORDS OF BROWARD COUNTY, FLORIDA
TOGETHER with all buildings and improvements thereon situate or which
may hereafter be erected or placed thereon, all and singular the tenements,
hereditaments, appurtenances and easements thereunto belonging or in anywise
appertaining, the rents, issues and profits thereof, and all heating,
ventilating and air conditioning equipment, all plumbing apparatus, fixtures,
hot water heaters, water and sprinkler systems and pumps, lighting fixtures,
screens, awnings, venetian blinds, built-in equipment, household appliances, and
built-in furniture (whether or not affixed to the land or building) all of which
shall be deemed to be fixtures and a part of the land and a portion of the
security for the indebtedness secured by this Third Mortgage, now or hereafter
located in or on the land, including all renewals, replacements and additions
thereto.
TO HAVE AND TO HOLD the same, together with tenements, hereditaments
and appurtenances unto the Mortgagee, its successors, and assigns, in fee
simple.
AND the Mortgagor does covenant with the Mortgagee that the Mortgagor
is indefeasibly seized of the land in fee simple, that the Mortgagor has full
power and lawful right to convey the land in fee simple as aforesaid, that it
shall be lawful for the Mortgagee at all times peaceably and quietly to enter
<PAGE>
upon, hold, occupy and enjoy the land, that the land is free from all
encumbrances, except as provided herein, that the Mortgagor will take such
further action as is necessary to perfect the fee simple title to the land in
the Mortgagee as may reasonably be required, and that the Mortgagor does hereby
fully warrant the title to the land and will defend the same against the lawful
claims of all persons whomsoever. Mortgagee acknowledges that the property is
presently encumbered by a First and Second Mortgage.
PROVIDED ALWAYS that if the Mortgagor shall pay to the Mortgagee, that
certain $190,000.00 Note of even date herewith executed by Mortgagor and
GALLASPY & LOBEL, INC. as "Makers" in favor of Mortgagee as "Payee" (a copy of
which is attached hereto as Exhibit A), and shall perform and comply with
every stipulation, provision and condition of the Note and of this Mortgage and
shall pay all taxes which may accrue on the land and all costs and expenses
which the Mortgagee may incur in collecting the Note in foreclosure of this
Mortgage or otherwise, including reasonable attorneys' fees in trial and
appellate courts, this Mortgage and the estate created by it shall cease and be
null and void.
And the Mortgagor hereby jointly and severally covenants and agrees to
and with the Mortgagee as follows:
1. To pay all and singular the principal and interest and other sums of
money payable by virtue of the Note and this Mortgage, or either, promptly on
the days the same become due and payable.
2. To pay all and singular the taxes, assessments, levies, liabilities,
obligations and encumbrances of every nature and kind now on the land, and/or
that hereafter may be imposed, suffered, placed, levied or assessed thereupon,
and/or that hereafter may be levied or assessed upon this Mortgage and/or the
indebtedness secured hereby, each and every, as and when due and payable, and
insofar as any thereof is of record the same shall be promptly satisfied and
discharged of record and the original official document (e.g., the tax receipt
or the satisfaction paper officially endorsed or certified) shall be delivered
to the Mortgagee within ten (10) days next after payment. To the extent that
Mortgagee shall be liable for the payment of said taxes, assessments, levies,
liabilities, obligations and other encumbrances required to be paid under this
subsection, and the Mortgagee fails to pay the same, then the failure of the
Mortgagor to pay these items shall not constitute a default under this
paragraph. The failure of the Mortgagee to pay these sums shall constitute an
absolute defense to enforcement of this provision. Mortgagee may at any time pay
the same without waiving or affecting the option to foreclose or any right
hereunder, and such payments shall be added to the principal balance of the
Note.
3. To pay all and singular the costs, charges and expenses, including
attorneys' fees, whether or not suit is brought, reasonably incurred or paid at
any time by the Mortgagee, including attorneys' fees in the event of an appeal
by either party, because of the failure on the part of the Mortgagor to perform,
comply with and abide by each and every of the stipulations, agreements,
conditions and covenants of the Note and this Mortgage, or either.
4. To keep the buildings now or hereafter situate on the land and all
personal property located thereon continuously insured against loss by fire and
such other hazards as may from time to time be requested by the Mortgagee for a
sum not less than the highest insurable value, in a company or companies to be
2
<PAGE>
approved by and acceptable to the Mortgagee. All insurance policies shall
contain the standard mortgagee clause making the loss under said policies
payable, without contribution, to the Mortgagee as its interest may appear, and
a copy of each and every such policy shall be promptly delivered to and held by
the Mortgagee, together with a certificate of insurance as to the existence of
such policy. Not less than ten (10) days in advance of the expiration of each
policy, the Mortgagor shall deliver to the Mortgagee a renewal thereof, together
with a receipt for the premium for such renewal, and no such policy may be
terminated without ten (10) days prior written notice to the Mortgagee. In the
event that the Mortgagor fails to obtain and pay for the insurance policy or
policies required hereunder, the Mortgagee may place and pay for such insurance
or any part thereof without waiving or affecting the option to foreclose or any
right hereunder. In the event any sum of money becomes payable under such policy
or policies, the Mortgagee shall have the option to receive and apply the same
on account of the indebtedness hereby secured or to permit the Mortgagor to
receive and use it or any part thereof for other purposes, without thereby
waiving or impairing any equity, lien or right under or by virtue of this
Mortgage. All payments so made by the Mortgagee shall be added to the principal
balance of the Note, shall be due and payable with interest at the maximum rate
permitted by law and shall be secured by the lien of this Mortgage. In the event
that Mortgagee shall be liable for the payment of the obligations set forth in
this paragraph under the terms of this or any other written agreement between
the parties hereto, and said Mortgagee does not pay these obligations when
required to do so, then the failure of the Mortgagor to pay these items shall
not constitute a default under this paragraph.
5. To keep the Land, buildings and improvements now or hereafter
situate thereon in good order and repair. and to permit, commit or suffer no
waste, impairment or deterioration of the land or any part thereof. If the
Mortgagor permits said waste, impairment or deterioration, the Mortgagee is
authorized to make such repairs that it deems necessary so as to protect the
security in the land and buildings and improvements thereon, and the full amount
of each and every such payment shall be added to the principal balance of the
Note, shall be due and payable with interest at the maximum rate permitted by
law, together with any expenses incurred by the Mortgagee, and the total amount
of such payments and expenses shall be secured by the lien of this Mortgage.
That in the event that such waste, impairment, and deterioration of the land is
the result of the Mortgagee=s wrongful acts while in possession of the premises,
then the Mortgagor will have the right of Aoffset@ against the Mortgagee for
such damage sustained to the property.
6. To perform, comply with, and abide by each and every the
stipulations, agreements, conditions and covenants in the Note and in this
Mortgage.
7. To comply, as far as they affect the land, with all statutes, laws,
ordinances, decrees and orders of the United States, the State of Florida and
any political subdivision thereof.
8. If the Mortgagor shall fail to promptly discharge any obligation or
covenant as provided herein, the Mortgagee shall have the option, but no
obligation, to perform on behalf of the Mortgagor any act to be performed by
Mortgagor in discharging such obligation or covenant, and any amount which
Mortgagee may expend in performing such act, or in connection therewith. with
interest thereon at the maximum legal rate and together with all expenses,
including reasonable attorneys' fees, whether or not suit is brought, including
in the event of appeal by either party, incurred by Mortgagee shall be added to
3
<PAGE>
the principal balance of the Note, shall be immediately payable by Mortgagor,
shall be secured by this Mortgage and Mortgagee shall be subrogated to any
rights, equities and liens so discharged.
9. Mortgagor hereby pledges, assigns and transfers to the Mortgagee all
rents, leases and profits from the property encumbered hereby as additional
security for the payment of this Mortgage and the Note. Mortgagor hereby
covenants and promises to collect said rents, leases and profits and to apply
them to the payments due hereunder as they become due. Permission is hereby
given to the Mortgagor so long as no default has occurred hereunder, to collect,
receive, and use such benefits from the property as they become due and payable,
but not in advance thereof.
10. The Mortgagor agrees to keep all superior mortgages current and in
good standing. In the event any mortgage payment under a mortgage superior to
this Mortgage is delinquent, in arrears or otherwise in default, the Mortgagee
may, at its option, make all superior mortgage payments and/or cure the default
and whether or not it makes such payments or cures such defaults may immediately
declare due the unpaid principal balance of the Note and this Mortgage to be
payable on demand. Any payments made by the Mortgagee under this paragraph shall
be added to the principal balance of the Note, shall bear interest at the Note
rate and shall be secured by the lien of this Mortgage.
11. If any mortgage superior to this Mortgage is increased or amended,
or any additional or future advances are made thereunder, then this Mortgage and
the indebtedness which it secures shall be immediately due and payable.
12. If the principal of or interest on the Note or any part of the
indebtedness secured by this Mortgage or interest thereon is not paid when due,
or if default be made in the full and prompt performance of any covenant or
agreement herein contained, or if any proceeding be instituted to abate any
nuisance on the land, or if any proceeding be instituted which might result to
the detriment of the use and enjoyment of the land or upon the rendering by any
court of a decision that any undertaking by the Mortgagor as herein provided to
pay any tax, assessment, levy. liability, obligation or encumbrance is legally
inoperative or cannot be enforced, or in the event of the passage of any law
changing in any way or respect the laws now in force for the taxation of
mortgages or debts secured thereby for any purpose, or the manner of collection
of any such tax so as to affect this Mortgage or the debt secured hereby, or if
the Mortgagor files a petition in bankruptcy, or is adjudicated a bankrupt or
files any petition or institutes any proceedings under the National Bankruptcy
Act, or any comparable proceeding under the laws of any state, governing
debtor-creditor relations, then on the happening of any one or more of these
events, this conveyance shall become absolute and the whole indebtedness secured
hereby shall immediately become due and payable. Thereupon, at the option of the
Mortgagee, this Mortgage may be foreclosed for the whole of said money, interest
and costs, or Mortgagee may foreclose only as to the sum past due, without
injury to this Mortgage or the displacement or impairment of the remainder of
the lien thereof, and at such foreclosure sale the land shall be sold subject to
all remaining items of indebtedness, and Mortgagee may again foreclose, in the
same manner, as often as there may be any sum past due.
13. At a later date and provided Mortgagee is not obligated to pay for
insurance upon the property by virtue of another written agreement, the
Mortgagee may require that the Mortgagor will pay to the Mortgagee on the first
day of each month throughout the existence of this Mortgage, a sum equal to the
4
<PAGE>
premiums next payable on or for policies of fire and other hazard insurance
thereon, less any sums already paid the Mortgagee with respect thereto, divided
by the number of months to elapse one month prior to the date when such taxes,
assessments and premiums become due and payable, such sums to be held by
Mortgagee, without interest, to pay such items. If at any time the estimated sum
is insufficient to pay an item when due, the Mortgagor shall forthwith upon
demand pay the deficiency to the Mortgagee. The arrangement provided for in this
paragraph is solely for the added protection of the Mortgagee and entails no
responsibility on the Mortgagee's part beyond the allowing of due credit,
without interest, for sums actually received by it. Upon the occurrence of a
default under this Mortgage, the Mortgagee may apply all or any part of the
accumulated funds then held upon any obligation secured hereby. Upon assignment
of this Mortgage, any funds on hand shall be turned over to the assignee and any
responsibility of the assignor with respect thereto shall terminate.
14. In the event of a default or the happening of any event which would
enable the Mortgagee to declare the whole indebtedness secured hereby
immediately due and payable, the Mortgagee shall be entitled to the appointment
of a receiver of all the rents, issues and profits, regardless of the value of
the land and the solvency or insolvency of the Mortgagor and other persons
liable to pay said indebtedness, if any.
15. The words "Mortgagor" and "Mortgagee" when used herein shall
include the singular and plural number and masculine, feminine or neuter gender,
as the case may be. Each and all of the terms and provisions hereof shall extend
to and be a part of any renewal or extension of this Mortgage.
16. This Mortgage and the Note shall be construed according to the laws
of the State of Florida.
17. To the extent that the land, or any part thereof, shall be deemed
to be personal property, this Mortgage shall serve as a "Security Agreement"
within the meaning of the Uniform Commercial Code as adopted in the State of
Florida. Mortgagor hereby grants to Mortgagee a security interest in and to all
of those portions of the land and the improvements which may ultimately be held
to be personal property. With respect to such personal property, Mortgagee shall
have all rights afforded secured parties by the Uniform Commercial Code, as
adopted in the State of Florida, and as may hereafter be modified or amended, in
addition to, but not in limitation of, the other rights afforded the Mortgagee
hereunder. Mortgagor agrees to make, execute and deliver to the Mortgagee, in
form satisfactory to the Mortgagee, such financing statements and further
assurances as Mortgagee may from time to time consider reasonably necessary to
create, protect and preserve the Mortgagee's security interest.
18. It is the intention of the parties to comply strictly with all
applicable usury laws and, accordingly, in no event shall the Mortgagee be
entitled to receive, collect, or apply as interest, any interest, fees, charges
or other payments equivalent to interest in excess of the maximum amount which
may be charged from time to time under applicable law. In the event the
Mortgagee ever receives, collects, or applies as interest any such excess, such
amount which would constitute excessive interest shall be applied to the
reduction of the principal amount of the indebtedness evidenced and secured
hereby, and if the principal amount of the indebtedness evidenced hereby and all
interest thereon is paid in full, any remaining excess shall forthwith be paid
to the Mortgagor or other party lawfully entitled thereto. In determining
5
<PAGE>
whether or not the interest paid or payable, under any specific contingency,
exceeds the maximum which may be lawfully charged, the parties shall, to the
maximum extent permitted under applicable law, characterize any non-principal
payment as expense, fee or other premium rather than as interest. Any provision
hereof or of any other agreement between the parties hereto that operates to
bind, obligate, or compel the Mortgagor to pay interest in excess of such
maximum rate, shall be construed to require the payment of the maximum rate
only.
IN WITNESS WHEREOF, the said Mortgagor has hereunto set his hand and
seal the day and year first above written.
Signed, sealed and delivered in the presence of us:
/s/ Andrew D. Smith /s/ James S. Lobel
_________________________________ By: ______________________________
Print Name Andrew D. Smith JAMES S. LOBEL
__________________________________
/s/ Eric J. Aurelius __________________________________
_________________________________
Print Name Eric J. Aurelius
/s/ Andrew D. Smith /s/ Diane C. Harvey
_________________________________ By: ______________________________
Print Name Andrew D. Smith DIANE C. HARVEY
__________________________________
/s/ Eric J. Aurelius __________________________________
_________________________________
Print Name Eric J. Arelius
STATE OF FLORIDA )
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day before me, an officer duly qualified
to take acknowledgments, personally appeared, JAMES S. LOBEL, and DIANE C.
HARVEY, to me known to be the persons described herein, who presented
_______________________, ___________________________, respectively, as
identification, and who executed the foregoing instrument and acknowledged
before me that they executed the same.
WITNESS my hand and seal in the County and State last aforesaid this
31st day of August, 1999.
/s/ Rossel D. Kaplan
______________________________________
Print Name: Rossel D. Kaplan Notary Public
My Commission Expires:
7
- -------------------------------
MassMutual
Office Lease
by and between
MassMutual and
A.D.S. Advertising Corporation, a Florida Corporation
For: Trafalgar Plaza
5310 N.W. 33rd Avenue
Ft. Lauderdale, FL 33309
A "MassMutual" Property
<PAGE>
MassMutual
Equity File
No. ______
OFFICE LEASE
THIS LEASE, made as of this 9th day of January, 1996 by and between
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation having
its principal office at 1295 State Street, Springfield, Massachusetts 01111
("Landlord") and A. D. S. Advertising Corporation a Florida Corporation having
its principal office at 5310 N. W. 33rd Avenue, Ft. Lauderdale. FL 33309
("Tenant").
INDEX
Article Title Page
1 Basic Provisions 2
2 Premises, Term and Commencement Date 3
3 Rent 3
4 Operating Expenses 4
5 Landlord's Work, Tenant's Work, Alterations and Additions 5
6 Use 6
7 Services 7
8 Insurance 8
9 Indemnification 9
10 Casualty Damage 10
11 Condemnation 10
12 Repair and Maintenance 11
13 Inspection of Premises and Repairs by Landlord 11
14 Surrender of Premises 12
15 Holding Over 12
16 Subletting and Assignment 13
17 Subordination, Attornment and Mortgagee Protection 13
18 Estoppel Certificate 14
19 Defaults 14
20 Remedies of Landlord 15
21 Quiet Enjoyment 16
22 Accord and Satisfaction 16
23 Security Deposit 16
24 Brokerage Commission 17
25 Force Majeure 17
26 Parking 18
27 Hazardous Materials 18
28 Additional Rights Reserved by Landlord 20
29 Defined Terms 20
30 Miscellaneous Provisions 23
EXHIBITS
Exhibit A Plan Showing Property and Premises
Exhibit B Landlord's Work Letter
Exhibit C Tenant's Work
Exhibit D Building's Rules and Regulations
Exhibit E Commencement Date Confirmation
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ARTICLE 1.
BASIC PROVISIONS
A. Tenant's Tradename: A. D.S. Advertising Corporation, a Florida
Corporation
B. Tenant's Address: 5310 N. W. 33rd Avenue
Ft. Lauderdale, Florida 33309
C. Office Building Name: Trafalgar Plaza
Address 5310 N. W. 33rd Avenue
Ft. Lauderdale, Florida 33309
D. Premises: Suite/Unit No.: Suite 212
Square feet (Gross/Net): 2,476
E. Landlord: Massachusetts Mutual Life Insurance Company
F. Landlord's Address: 5810 - H Cypress Street
Tampa, Florida 33607
G. Building Manager/Address: Florida Real Estate Advisors, Inc.
2101 West Commercial Blvd., Suite 2600
Fort Lauderdale, Florida 33309
H. Commencement Date: February 1, 1996
I. Expiration Date: March 31, 2001
J. Options to Extend: See Exhibit "F"
K. Security Deposit: $ 2,733.92
L. Monthly Rent: $ 1,702.25 plus applicable sales tax
M. Operating Expenses Base: $ 1,031.67 plus applicable sales tax
N. Tenant's Pro Rata Share: 2.56%. Tenant's Pro Rata Share shall be determined
by and adjusted by Landlord from time to time (but shall not be readjusted
sooner than the commencement of the second Lease year), by dividing the Tenant's
Gross Square Feet of the Premises (as identified in Article ID.) by the rentable
area of the Building and multiplying the resulting quotient, to the second
decimal place, by one hundred.
0. Normal Business Hours of Building:
Monday through Friday: N/A a.m. to N/A p.m.
Saturday: N/A a.m. to N/A p.m.
Sunday: N/A a.m. to N/A p.m.
P. Prepaid Rent: $2,733.92 as Security Deposit and $2,897.95
as first months rental payment.
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Q. Parking Spaces: l0 unassigned, uncovered parking spaces
Fee (parking spaces x rate/per month): no charge
R. Brokers:
Florida Real Estate Advisors and D & C
Property Investments, Inc.
The foregoing provisions shall be interpreted and applied in accordance with the
other provisions of this Lease set forth below. The capitalized terms, and the
terms defined in Article 29, shall have the meanings set forth herein or therein
(unless otherwise modified in the Lease) when used as capitalized terms in other
provisions of the Lease.
ARTICLE 2.
PREMISES, TERM AND COMMENCEMENT DATE
Landlord hereby leases and demises to the Tenant and Tenant hereby takes and
leases from Landlord that certain space identified in Article 1 and shown on a
plan attached hereto as Exhibit A ("Premises") for a term ("Term") commencing on
the Commencement Date and ending on the Expiration Date set forth in Article 1,
unless sooner terminated as provided herein, subject to the provisions herein
contained. The Commencement Date set forth in Article 1 shall be advanced to
such earlier date as Tenant commences occupancy of the Premises for the conduct
of its business. Such date shall be confirmed by execution of the Commencement
Date Confirmation in the form as set forth in Exhibit E. If Landlord delays
delivering possession of the Premises or substantial completion of any
Landlord's Work under Exhibit B, this Lease shall not be void or voidable,
except as provided in Article 5, and Landlord shall have no liability for loss
or damage resulting therefrom.
ARTICLE 3.
RENT
A. Monthly Rent. Tenant shall pay Monthly Rent in advance on or before the first
day of each month of the Term. If the Term shall commence and end on a day other
than the first day of a month, the Monthly Rent for the first and last partial
month shall be prorated on a per diem basis. Upon the execution of this Lease,
Tenant shall pay one installment of Monthly Rent for the first full month of the
Term and a prorated Monthly Rent for any partial month which may precede it.
B. Additional Rent. All costs and expenses which Tenant assumes or agrees to pay
and any other sum payable by Tenant pursuant to this Lease, including, without
limitation, its share of Operating Expenses, shall be deemed Additional Rent.
C. Rent. Monthly Rent, Additional Rent and Operating Expenses and any other
amounts which Tenant is or becomes obligated to pay Landlord under this Lease
are herein referred to collectively as "Rent", and all remedies applicable to
the nonpayment of Rent shall be applicable thereto. Landlord may apply payments
received from Tenant to any obligations of Tenant then accrued, without regard
to such obligations as may be designated by Tenant.
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D. Place of Payment, Late Charge. Rent and other charges required to be paid
under this Lease, no matter how described, shall be paid by Tenant to Landlord
at the Building Manager's address listed in Article 1, or to such other person
and/or address as Landlord may designate in writing, without any prior notice or
demand therefor and without deduction or set-off or counterclaim and without
relief from any valuation or appraisement laws. In the event Tenant fails to pay
Rent due under this Lease within ten (10) days of due date of said Rent, Tenant
shall pay to Landlord a late charge of ten percent (10%) on the amount overdue.
ARTICLE 4.
OPERATING EXPENSES
A. Payment of Operating Expenses. It is agreed that during each Lease Year
beginning with the first month of the second Lease Year and each month
thereafter during the original Lease Term, or any extension thereof, Tenant
shall pay to Landlord as Additional Rent, at the same time as the Monthly Rent
is paid, an amount equal to one-twelfth (1/12) of Landlord's estimate (as
determined by Landlord in its sole discretion) of Tenant's Pro Rata Share of any
projected increase in the Operating Expenses for the particular Lease Year in
excess of the Operating Expenses Base (the "Estimated Escalation Increase"). A
final adjustment (the "Escalation Reconciliation") to be made between the
parties as soon as practicable following the end of each Lease Year, but in no
event later than ninety (90) days after the end of each Lease Year. In computing
the Estimated Escalation Increase for any particular Lease Year, Landlord shall
take into account any prior increases in Tenant's Pro Rata Share of Operating
Expenses. If during any Lease Year the Estimated Escalation Increase is less
than the Estimated Escalation Increase for the previous Lease Year on which
Tenant's share of Operating Expenses were based for said year, such Additional
Rent payments, attributable to Estimated Escalation Increase, to be paid by
Tenant for the new Lease Year shall be decreased accordingly; provided, however,
in no event will the Rent paid by Tenant hereunder ever be less than the Monthly
Rent, its Pro Rata Share of the Operating Expenses Base, plus all other amounts
of Additional Rent.
As soon as practicable following the end of each Lease Year during the initial
Lease Term, or any extension thereof, including the first Lease Year, Landlord
shall submit to Tenant a statement prepared by Landlord, in the first year
setting forth the Estimated Escalation Increase, if any. Beginning with said
statement for the second Lease Year, it shall also set forth the Escalation
Reconciliation for the Lease Year just completed. To the extent that the
Operating Expense Escalation is different from the Estimated Escalation Increase
upon which Tenant paid Rent during the Lease Year just completed, Tenant shall
pay Landlord the difference in cash within thirty (30) days following receipt by
Tenant of such statement from Landlord, or receive a credit on future Rent owing
hereunder as the case may be. Until Tenant receives such statement, Tenant's
Rent for the new Lease Year shall continue to be paid at the rate being paid for
the particular Lease Year just completed, but Tenant shall commence payment to
Landlord of the monthly installment of Additional Rent on the basis of said
statement beginning on the first day of the month following the month in which
Tenant receives such statement. In addition to the above, if, during any
particular Lease Year, there is a change in the information on which Landlord
based the estimate upon which Tenant is then making its estimated payment of
Operating Expenses so that such Estimated Escalation Increase furnished to
Tenant is no longer accurate, Landlord shall be permitted to revise such
Estimated Escalation Increase by notifying Tenant, and there shall be such
adjustments made in the Additional Rent on the first day of the month following
the serving of such statement on Tenant as shall be necessary by either
increasing or decreasing, as the case may be, the amount of Additional Rent then
being paid by Tenant for the balance of the Lease Year (but in no event shall
any such decrease result in a reduction of the rent below the Monthly Rent,
Tenant's Pro Rata Share of the Operating Expenses Base, plus all other amounts
of Additional Rent), as well as a payment by Tenant or credit to the Tenant as
appropriate based upon the amount theretofore paid by Tenant during such
particular Lease Year pursuant to the prior estimate.
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Landlord's and Tenant's responsibilities with respect to the Operating Expense
adjustment described herein shall survive the expiration or early termination of
this Lease.
If the Building is not fully occupied during any particular Lease Year, Landlord
shall adjust those Operating Expenses which are affected by Building occupancy
for the particular Lease Year, or portion thereof, as the case may be, to
reflect an occupancy of not less than ninety-five percent (95%) of all such
rentable area of the Building.
B. Disputes Over Operating Expenses. If Tenant disputes the amount of an
adjustment or the proposed estimated increase or decrease in Operating Expenses,
Tenant shall give Landlord written notice of such dispute within thirty (30)
days after Landlord advises Tenant of such adjustment or proposed increase or
decrease. Tenant's failure, to give such notice shall waive its right to dispute
the amounts so determined. If Tenant timely objects, Tenant shall have the right
to engage its own accountants ("Tenant's Accountants") for the purpose of
verifying the accuracy of the statement in dispute, or the reasonableness of the
adjustment or estimated increase or decrease. If Tenant's Accountants determine
that an error has been made, Landlord and Tenant's Accountants shall endeavor to
agree upon the matter, failing which Landlord and Tenant's Accountants shall
jointly select an independent certified public accounting firm (the "Independent
Accountant") which firm shall conclusively determine whether the adjustment or
estimated increase or decrease is reasonable, and if not, what amount is
reasonable. Both parties shall be bound by such determination. If Tenant's
Accountants do not participate in choosing the Independent Accountant within 20
days notice by Landlord, then Landlord's determination of the adjustment or
estimated increase or decrease shall be conclusively determined to be reasonable
and Tenant shall be bound thereby. All costs incurred by Tenant in obtaining
Tenant's Accountants and the cost of the Independent Accountant shall be paid by
Tenant unless Tenant's Accountants disclose an error, acknowledged by Landlord
(or found to have conclusively occurred by the Independent Accountant), of more
than ten percent (10%) in the computation of the total amount of Operating
Expenses as set forth in the statement submitted by Landlord with respect to the
matter in dispute; in which event Landlord shall pay the reasonable costs
incurred by Tenant in obtaining such audits. Tenant shall continue to timely pay
Landlord the amount of the prior year's adjustment and adjusted Additional Rent
determined to be incorrect as aforesaid until the parties have concurred as to
the appropriate adjustment or have deemed to be bound by the determination of
the Independent Accountant in accordance with the preceding terms. Landlord's
delay in submitting any statement contemplated herein for any Lease Year shall
not affect the provisions of this Paragraph, nor constitute a waiver of
Landlord's rights as set forth herein for said Lease Year or any subsequent
Lease Years during the Lease Term or any extensions thereof.
ARTICLE 5.
LANDLORD'S WORK, TENANT'S WORK,
ALTERATIONS AND ADDITIONS
A. Landlord's Work. Landlord shall construct the Premises in accordance with
Landlord's obligations as set forth in the work letter attached hereto as
Exhibit B, and hereinafter referred to as "Landlord's Work." Landlord will
deliver the Premises to Tenant with all of Landlord's Work completed (except for
minor and non-material punch list items which in Landlord's reasonable judgment
will not delay completion of Tenant's Work, as defined in subparagraph B of this
Article) on or before the number of days specified in Exhibit B and Tenant
agrees thereupon to commence and complete Tenant's Work on or before the
Commencement Date. If Landlord is delayed in completing Landlord's Work by
strike, shortages of labor or materials, delivery delays or other matters beyond
the reasonable control of Landlord, then Landlord shall give notice thereof to
Tenant and the date on which Landlord is to turn the Premises over to Tenant for
Tenant's Work and the Commencement Date shall be postponed for an equal number
of days as the delay as set forth in the notice. Providing, however, if such
delays exceed ninety (90) days, then either
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Landlord or Tenant upon notice to the other shall have the right to terminate
this Lease without liability to either party. If the Commencement Date is
postponed as aforesaid, Tenant agrees upon request of Landlord to execute a
writing confirming the Commencement Date on such form as set forth in Exhibit E
attached hereto.
B. Tenant's Work. On and after the date specified in the immediately preceding
subparagraph A for delivery of the Premises to Tenant for Tenant's Work, Tenant,
at its sole cost and expense, shall perform and complete all other improvements
to the Premises (herein called "Tenant's Work") including, but not limited to,
all improvements, work and requirements required of Tenant under the foregoing
work letter. Tenant shall complete all of Tenant's Work in good and workmanlike
manner, fully paid for and free from liens, in accordance with the plans and
specifications approved by Landlord and Tenant as provided in Exhibit C, on or
prior to the scheduled Commencement Date. Tenant shall also have the right
during this period to come onto the Premises to install its fixtures and prepare
the Premises for the operation of Tenant's business. Notwithstanding the fact
that foregoing activities by Tenant will occur prior to the scheduled
Commencement Date, Tenant agrees that all of Tenant's obligations provided for
in this Lease shall apply during such period with the exception of any
obligation to pay Rent.
C. Alterations. Except as provided in the immediately preceding subparagraph,
Tenant shall make no alterations or additions to the Premises without the prior
written consent of the Landlord, which consent Landlord may grant or withhold in
its sole discretion.
D. Liens. Tenant shall give Landlord at least ten (10) days prior written notice
(or such additional time as may be necessary under applicable laws) of the
commencement of any Tenant's Work, to afford Landlord the opportunity of posting
and recording notices of nonresponsibility. Tenant will not cause or permit any
mechanic's, materialman's or similar liens or encumbrances to be filed or exist
against the Premises or the Building or Tenant's interest in this Lease in
connection with work done under this Article or in connection with any other
work. Tenant shall remove any such lien or encumbrance by bond or otherwise
within twenty (20) days from the date of their existence. If Tenant fails to do
so, Landlord may pay the amount or take such other action as Landlord deems
necessary to remove any such lien or encumbrance, without being responsible to
investigate the validity thereof. The amounts so paid and costs incurred by
Landlord shall be deemed Additional Rent under this Lease and payable in full
upon demand.
ARTICLE 6.
USE
A. Use. Tenant shall use the Premises for general office purposes, and for no
other purpose whatsoever, subject to and in compliance with all other provisions
of this Lease, including without limitation the Building's Rules and Regulations
attached as Exhibit D hereto. Tenant and its invitees shall also have the
non-exclusive right along with other tenants of the Building and others entitled
to use the same and subject to such rules and regulations as Landlord in its
discretion may impose from time to time to use the Common Areas.
B. Restrictions. Tenant shall not at any time use or occupy, or suffer or permit
anyone to use or occupy, the Premises or do or permit anything to be done in the
Premises which: (a) causes or is liable to cause injury to persons, to the
Building or its equipment, facilities or systems; (b) impairs or tends to impair
the character, reputation or appearance of the Building as a first class office
building; (c) impairs or tends to impair the proper and economic maintenance,
operation and repair of the Building or its equipment, facilities or systems;
or, (d) annoys or inconveniences or tends to annoy or inconvenience other
tenants or occupants of the Building.
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C. Compliance with Laws. Tenant shall keep and maintain the Premises, its use
thereof and its business in compliance with all governmental laws, ordinances,
rules and regulations. Tenant shall comply with all Laws relating to the
Premises and Tenant's use thereof, including without limitation, Laws requiring
the Premises to be closed on Sundays or any other days or hours and Laws in
connection with the health, safety and building codes, and any permit or license
requirements. Landlord makes no representation that the Premises are suitable
for Tenant's purposes.
ARTICLE 7.
SERVICES
A. Climate Control. Landlord shall provide climate control to the Premises
during Normal Business Hours of Building as set forth in Article 1 as required
in Landlord's reasonable judgment for the comfortable use and occupation of the
Premises. If Tenant requires climate control at any other time, Landlord shall
use reasonable efforts to furnish such service upon reasonable notice from
Tenant, and Tenant shall pay all of Landlord's charges therefor on demand.
The performance by Landlord of its obligations under this Article is subject to
Tenant's compliance with the conditions of occupancy and connected electrical
load established by Landlord. Use of the Premises or any part thereof in a
manner exceeding the heating, ventilating or air-conditioning ("HVAC") design
conditions (including occupancy and connected electrical load), including
rearrangement of partitioning which interferes with normal operation of the HVAC
in the Premises, or the use of computer or data processing machines or other
machines or equipment, may require changes in the HVAC or plumbing systems or
controls servicing the Premises or portions thereof, in order to provide
comfortable occupancy. Any such required change shall be made by Landlord at
Tenant's expense as alterations in accordance with the provisions of Article 5,
but only to the extent permitted and upon the conditions set forth in that
Article.
B. Elevator Service. If the Building is equipped with elevators, Landlord,
during Normal Business Hours of Building, shall furnish elevator service to
Tenant to be used in common with others. At least one elevator shall remain in
service during all other hours. Landlord may designate a specific elevator for
use as a service elevator.
C. Janitorial Services. Landlord shall make janitorial and cleaning services
available to the Premises. Tenant shall pay to Landlord on demand the costs
incurred by Landlord for (i) extra cleaning in the Premises required because of
(A) misuse or neglect on the part of Tenant or Tenant's agents, contractors,
invitees, employees and customers, (B) the use of portion of the Premises for
special purposes requiring greater or more difficult cleaning work than office
areas, (C) interior glass partitions or unusual quantities of interior glass
surfaces, and (D) non-building standard materials or finishes installed by
Tenant or at its request; and (ii) removal from the Premises of any refuse and
rubbish of Tenant in excess of that ordinarily accumulated in general office
occupancy or at times other than Landlord's standard cleaning times.
D. Water and Electricity. Landlord shall make available domestic water in
reasonable quantities to the common areas (and to the Premises if so designated
in Exhibit B) and cause electric service equivalent to the watt load to be
supplied for lighting the Premises and for the operation of Ordinary Office
Equipment. "Ordinary Office Equipment" shall mean office equipment wired for 120
volt electric service and rated and using less than 6 amperes or 750 watts of
electric current. Landlord shall have the exclusive right to make any
replacement of lamps, fluorescent tubes and lamp ballasts in the Premises.
Landlord may adopt a system of relamping and ballast replacement periodically on
a group basis in accordance with good management practice. Tenant's use of
electric energy in the Premises shall not at any time exceed the capacity of any
of the risers, piping, electrical conductors and other equipment in or serving
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the Premises. In order to insure that such capacity is not exceeded and to avert
any possible adverse effect upon the Building's electric system, Tenant shall
not, without Landlord's prior written consent in each instance, connect
appliances or heavy duty equipment, other than ordinary office equipment, to the
Building's electric system or make any alteration or addition to the Building's
electric system. Should Landlord grant its consent in writing, all additional
risers, piping and electrical conductors or other equipment therefor shall be
provided by Landlord and the cost thereof shall be paid by Tenant within 10 days
of Landlord's demand therefor. As a condition to granting such consent, Landlord
may require Tenant to agree to an increase in Monthly Rent by the expected cost
to Landlord of such additional service, that is, the cost of the additional
electric energy to be made available to Tenant based upon the estimated
additional capacity of such additional risers, piping and electrical conductors
or other equipment. If Landlord and Tenant cannot agree thereon, such cost shall
be determined by an independent electrical engineer, to be selected by Landlord
and paid equally by both parties.
E. Separate Meters. Landlord may install separate meters for the Premises to
register the usage of all or any one of the utilities and in such event Tenant
shall pay for the cost of electricity usage as metered which is in excess of the
watt load (as established by the Landlord), or in the case of other utilities,
the metered usage in excess of that usage reasonably anticipated by Landlord.
Tenant shall reimburse Landlord for the cost of installation of meters if such
usage exceeds the watt load (or such anticipated usage, as the case may be) by
more than 10 percent. In any event, Landlord may require Tenant to reduce its
consumption to the watt load or such anticipated usage.
F. Interruptions. Landlord does not warrant that any of the services referred to
above, or any other services which Landlord may supply, will be free from
interruption and Tenant acknowledges that any one or more of such services may
be suspended by reason of accident, repairs, inspections, alterations or
improvements necessary to be made, or by strikes or lockouts, or by reason of
operation of law, or causes beyond the reasonable control of Landlord. Any
interruption or discontinuance of service shall not be deemed an eviction or
disturbance of Tenant's use and possession of the Premises, or any part thereof,
nor render Landlord liable to Tenant for damages by abatement of the Rent or
otherwise, nor relieve Tenant from performance of Tenant's obligations under
this Lease. Landlord shall however, exercise reasonable diligence to restore any
service so interrupted.
G. Utilities Provided by Tenant. Tenant shall make application in Tenant's own
name for all utilities not provided by Landlord and shall: (i) comply with all
utility company regulations for such utilities, including requirements for the
installation of meters, and (ii) obtain such utilities directly from, and pay
for the same when due directly to, the applicable utility company. The term
"utilities" for purposes hereof shall include but not be limited to electricity,
gas, water, sewer, steam, fire protection, telephone and other communication and
alarm services, as well as HVAC, and all taxes or other charges thereon. Tenant
shall install and connect all equipment and lines required to supply such
utilities to the extent not already available at or serving the Premises, or at
Landlord's option shall repair, alter or replace any such existing items. Tenant
shall maintain, repair and replace all such items, operate the same, and keep
the same in good working order and condition. Tenant shall not install any
equipment or fixtures, or use the same, so as to exceed the safe and lawful
capacity of any utility equipment or lines serving the same. The installation,
alteration, replacement or connection of any utility equipment and lines shall
be subject to the requirements for alterations of the Premises set forth in
Article 5. Tenant shall ensure that all HVAC equipment is installed and operated
at all times in a manner to prevent roof leaks, damage, or noise due to
vibrations or improper installation, maintenance or operation.
ARTICLE 8.
INSURANCE
A. Required Insurance. Tenant shall maintain insurance policies, with
responsible companies licensed to do business in the state where the Building
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is located and satisfactory to Landlord, naming Landlord, Landlord's Building
Manager or agent, Tenant and any Mortgagee of Landlord, as their respective
interests may appear, at its own cost and expense including (i) "all risk"
property insurance which shall be primary on the lease improvements referenced
in Article 5 and Tenant's property, including its goods, equipment and
inventory, in an amount adequate to cover their replacement cost; (ii) income
loss coverage, (iii) comprehensive general liability insurance on an occurrence
basis with limits of liability in an amount not less than S1,000,000 (One
Million Dollars) combined single limit for each occurrence. The comprehensive
general liability policy shall include contractual liability which includes the
provisions of Article 9 herein.
On or before the Commencement Date of the Lease, Tenant shall furnish to
Landlord and its Building Manager, certificates of insurance evidencing the
aforesaid insurance coverage, including naming Landlord and Landlord s Building
Manager or agent as additional insureds. Renewal certificates shall be furnished
at least thirty (30) days prior to the expiration date of such insurance
policies showing the above coverage to be in full force and effect.
All such insurance shall provide that it cannot be canceled except upon thirty
(30) days prior written notice to Landlord or designated property manager or
agent. Tenant shall comply with all rules and directives of any insurance board,
company or agency determining rates of hazard coverage for the Premises,
including but not limited to the installation of any equipment and/or the
correction of any condition necessary to prevent any increase in such rates.
B. Subrogation. The parties mutually waive all rights and claims against each
other for all losses covered by their respective insurance policies, and waive
all rights of subrogation of their respective insurers.
C. Waiver of Claims. Except for claims arising from Landlord's intentional or
grossly negligent acts that are not covered by Tenant's insurance hereunder,
Tenant waives all claims against Landlord for injury or death to persons, damage
to property or to any other interest of Tenant sustained by Tenant or any party
claiming, through Tenant resulting from: (i) any occurrence in or upon the
Premises, (ii) leaking of roofs, bursting, stoppage or leaking of water, gas,
sewer or steam pipes or equipment, including sprinklers, (iii) wind, rain, snow,
ice, flooding, freezing, fire, explosion, earthquake, excessive heat or cold, or
other casualty, (iv) the Building, Premises, or the operating and mechanical
systems or equipment of the Building, being defective, out of repair, or
failing, and (v) vandalism, malicious mischief, theft or other acts or omissions
of any other parties including without limitation, other tenants, contractors
and invitees at the Building. Tenant agrees that Tenant's property loss risks
shall be borne by its insurance, and Tenant agrees to look solely to and seek
recovery only from its insurance carriers in the event of such losses. For
purposes hereof, any deductible amount shall be treated as though it were
recoverable under such policies.
ARTICLE 9.
INDEMNIFICATION
Tenant shall indemnify and hold harmless Landlord and its agents, successors and
assigns, including its Building Manager, from and against all injury, loss,
costs, expenses, claims or damage (including attorney's fees and disbursements)
to any person or property arising from, related to, or in connection with any
use or occupancy of the Premises by or any act or omission (including, without
limitation, construction and repair of the Premises arising out of Tenant's Work
or subsequent work) of Tenant, its agents, contractors, employees, customers,
and invitees, which indemnity extends to any and all claims arising from any
breach or default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease. This indemnification shall survive the
expiration or termination of the Lease Term.
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Landlord shall not be liable to Tenant for any damage by or from any act or
negligence of any co-tenant or other occupant of the Building, or by any owner
or occupants of adjoining or contiguous property. Landlord shall not be liable
for any injury or damage to persons or property resulting in whole or in part
from the criminal activities of others. To the extent not covered by all risk
property insurance, Tenant agrees to pay for all damage to the Building, as well
as all damage to persons or property of other tenants or occupants thereof,
caused by the negligence, fraud or willful misconduct of Tenant or any of its
agents, contractors, employees, customers and invitees. Nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its gross negligence, fraud or willful misconduct.
ARTICLE 10.
CASUALTY DAMAGE
Tenant shall promptly notify Landlord or the Building Manager of any fire or
other casualty to the Premises or to the extent it knows of damage, to the
Building. In the event the Premises or any substantial part of the Building is
wholly or partially damaged or destroyed by fire or other casualty, the Landlord
will proceed to restore the same to substantially the same condition existing
immediately prior to such damage or destruction unless such damage or
destruction is incapable of repair or restoration within one hundred twenty
(120) days, in which event Landlord may, at Landlord's option and by written
notice given to Tenant within thirty (30) days of such damage or destruction,
declare this Lease terminated as of the happening of such damage or destruction.
To the extent after fire or other casualty that Tenant shall be deprived of the
use and occupancy of the Premises or any portion thereof as a result of any such
damage, destruction or the repair thereof, providing Tenant did not cause the
fire or other casualty, Tenant shall be relieved of the same ratable portion of
the fixed rental hereunder as the amount of damaged or useless space in the
Premises bears to the gross square footage of the Premises. Landlord, in its
sole discretion, shall reasonably determine the amount of damaged or useless
space and the gross square footage of the Premises referenced in the prior
sentence.
ARTICLE 11.
CONDEMNATION
In the event of a condemnation or taking of the entire Premises by a public or
quasi-public authority, this Lease shall terminate as of the date title vests in
the public or quasi-public authority. In the event of a taking or condemnation
of fifteen percent (15%) or more (but less than the whole) of the Building and
without regard to whether the Premises are part of such taking or condemnation,
Landlord may elect to terminate this Lease by giving notice to Tenant within
sixty (60) days of Landlord receiving notice of such condemnation. All
compensation awarded for any condemnation shall be the property of Landlord,
whether such damages shall be awarded as a compensation for diminution in the
value of the leasehold or to the fee of the Premises, and Tenant hereby assigns
to Landlord all of Tenant's right, title and interest in and to any and all such
compensation. Providing, however that in the event this Lease is terminated,
Tenant shall be entitled to a separate claim available to Tenant for loss of
leasehold improvements (including fixtures paid for by Tenant), the taking of
Tenant's personal property and for costs of moving. Notwithstanding the
foregoing to the contrary, any condemnation award to Tenant shall be available
only to the extent such award is payable separately to Tenant and does not
diminish the award available to Landlord or any Lender of Landlord and such
award shall be limited to the amount of Rent actually paid by Tenant to Landlord
for the period of time for which the award is given. Any additional portion of
such award shall belong to Landlord.
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ARTICLE 12.
REPAIR AND MAINTENANCE
A. Tenants Obligations. Tenant shall keep the Premises in good working order,
repair (which repair shall include necessary replacements and capital
expenditures and in compliance with all Laws now or hereafter adopted) and
condition (which condition shall be clean, sanitary, sightly and free of pest
and rodents). Tenant's obligations hereunder shall include but not be limited to
Tenant's trade fixtures and equipment, security gates, ceilings, walls,
entrances, signs, interior decorations, floor-coverings, wall-coverings, entry
and interior doors, exterior and interior glass, plumbing fixtures, light
fixtures and bulbs, keys and locks, fire extinguishers and fire protection
systems, and equipment and lines for water, sewer (including free flow up to
common sewer line), HVAC, electrical, gas, steam, sprinkler and mechanical
facilities and alterations to the Premises whether installed by Tenant or
Landlord. Tenant shall further engage competent contractors approved by Landlord
to perform periodic scheduled maintenance (including inspecting, testing,
cleaning and repairs) for any HVAC units, hot water heaters and any fire
protection systems, including any sprinkler system, or any other mechanical
systems in or exclusively serving the Premises. Such periodic scheduled
maintenance work shall further include all other work required by a
manufacturer's warranty, service manual or technical bulletins or by Landlord's
or Tenant's insurance carrier. If one or more HVAC units or hot water heaters
also serve one or more other tenants, Tenant shall make arrangements directly
with such other tenant or tenants to reasonably and equitably share
responsibility and expenses for the obligations required to be performed
hereunder.
B. Signs and Obstructions. Tenant shall not obstruct or permit the obstruction
of light, halls, Common Areas, roofs, parapets, stairways or entrances to the
Building or the Premises and will not affix, paint, erect or inscribe any sign,
projection, awning, signal or advertisement of any kind to any part of the
Building or the Premises, including the inside or outside of the windows or
doors, without the written consent of Landlord. Landlord shall have the right to
withdraw such consent at any time and to require Tenant to remove any sign,
projection, awning, signal or advertisement to be affixed to the Building or the
Premises. If such work is done by Tenant through any person, firm or corporation
not designated by Landlord, or without the express written consent of Landlord,
Landlord shall have the right to remove such signs, projections, awnings,
signals or advertisements without being liable to the Tenant by reason thereof
and to charge the cost of such removal to Tenant as Additional Rent, payable
within ten (10) days of Landlord's demand therefor.
C. Outside Services. Tenant shall not permit, except by a person or company
reasonably satisfactory to and approved by Landlord: (i) the extermination of
vermin in, on or about the Premises; (ii) the servicing of heating, ventilating
and air conditioning equipment; (iii) the collection of rubbish and trash other
than in compliance with local government health requirements and in accordance
with the rules and regulations established by Landlord, which shall minimally
provide that Tenant's rubbish and trash shall be kept in containers located so
as not to be visible to members of the public and in a sanitary and neat
condition; or (iv) the window cleaning, janitorial services or similar work in
the Premises.
ARTICLE 13.
INSPECTION OF PREMISES AND REPAIRS BY LANDLORD
Landlord shall not be required to make any repairs or improvements to the
Building's Common Areas or the Premises except to keep the roof above,
foundation, exterior walls, other than common utility lines to the point of
connection for Tenant, and structural portions of the Premises in good working
order and repair (the cost of which shall be included in Operating Expenses
under Article 4); provided, however, that any damage
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to such areas shall not have been caused by any act or omission of, or violation
of this Lease by Tenant or any of Tenant's agents, contractors, employees,
invitees or customers, in which event Landlord may perform or require the Tenant
to perform such repairs as provided above (without limiting Landlord's other
remedies herein).
Tenant shall permit the Landlord, the Building Manager and its authorized
representatives to enter the Premises to show the Premises during Normal
Business Hours of Building and at other reasonable times to inspect the Premises
and to make such repairs, improvements or additions in the Premises or in the
Building of which they are a part as may be necessary or appropriate. Landlord
shall make every effort to perform all such repairs, improvements and additions
in such a manner (in its judgment) so as to cause minimum interference with
Tenant and the Premises but Landlord shall not be liable to Tenant for any
interruption or loss of business pertaining to such activities.
ARTICLE 14.
SURRENDER OF PREMISES
Upon the expiration of the Term, or sooner termination of the Lease, Tenant
shall quit and surrender to Landlord the Premises, broom clean, in good order
and condition, normal wear and tear and damage by fire and other casualty
excepted. All leasehold improvements and other fixtures, such as light fixtures
and HVAC equipment, wall coverings, carpeting and drapes, in or serving the
Premises, whether installed by Tenant or Landlord, shall be Landlord's property
and shall remain, all without compensation, allowance or credit to Tenant. Any
property not removed shall be deemed to have been abandoned by Tenant and may be
retained or disposed of by Landlord at Tenant's expense free of any and all
claims of Tenant, as Landlord shall desire. All property not removed from the
Premises by Tenant may be handled or stored by Landlord at Tenant's expense and
Landlord shall not be liable for the value, preservation or safekeeping thereof.
At Landlord's option all or part of such property may be conclusively deemed to
have been conveyed by Tenant to Landlord as if by bill of sale without payment
by Landlord. The Tenant hereby waives to the maximum extent allowable the
benefit of all laws now or hereafter in force in this state or elsewhere
exempting property from liability for rent or for debt.
ARTICLE 15.
HOLDING OVER
Tenant shall pay Landlord 200% of the amount of Rent then applicable prorated on
a per diem basis for each day Tenant shall retain possession of the Premises or
any part thereof after expiration or earlier termination of this Lease, together
with all damages sustained by Landlord on account thereof. The foregoing
provisions shall not serve as permission for Tenant to hold-over, nor serve to
extend the Term (although Tenant shall remain bound to comply with all
provisions of this Lease until Tenant vacates the Premises) and Landlord shall
have the right at any time thereafter to enter and possess the Premises and
remove all property and persons therefrom.
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ARTICLE 16.
SUBLETTING AND ASSIGNMENT
Tenant shall not, without the prior written consent of Landlord endorsed
thereon, list the Premises or any part thereof as available for assignment or
sublease with any broker or agent or otherwise advertise, post, communicate or
solicit prospective assignees or subtenants through any direct or indirect
means, nor assign this Lease or any interest thereunder, or sublet Premises or
any part thereof, or permit the use of Premises by any party other than Tenant.
In the event that during the term of this Lease, Tenant desires to sublease and
introduces Landlord to a proposed replacement tenant for Tenant, which
replacement tenant is of financial strength at least equal to that of Tenant (as
determined by Landlord in its sole discretion) and has a use for Premises and a
number of employees reasonably consistent with that of Tenant's operation, the
Landlord may consider such replacement tenant and notify Tenant with reasonable
promptness as to Landlord's choice, at Landlord's sole discretion, of the
following:
(1) That Landlord consents to a subleasing of Premises to such replacement
tenant provided that Tenant shall remain fully liable for all of its
obligations and liabilities under this Lease and provided further that
Landlord shall be entitled to any profit obtained by Tenant from such
subletting or assignment; or;
(2) That upon such replacement tenant's entering into a mutually
satisfactory new Lease for the Premises with Landlord, then Tenant
shall be released from all further obligations and liabilities under
this Lease (excepting only any unpaid rentals or any unperformed
covenants then past due under this Lease or any guarantee by Tenant of
replacement tenant's obligations); or
(3) That Landlord declines to consent to such sublease due to insufficient
or unsatisfactory documentation furnished to Landlord to establish
Tenant's financial strength and proposed use of and operations upon
Premises.
In no case may Tenant assign any options to sublessee(s) or assignee(s)
hereunder, all such options being deemed personal to Tenant only. Consent by
Landlord hereunder shall in no way operate as a waiver by Landlord of, or to
release or discharge Tenant from, any liability under this Lease or be construed
to relieve Tenant from obtaining Landlord's consent to any subsequent
assignment, subletting, transfer use or occupancy.
ARTICLE 17.
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages now or hereafter placed
upon the Building, and all other encumbrances and matters of public record
applicable to the Building, including without limitation, any reciprocal
easement or operating agreements, covenants, conditions and restrictions and
Tenant shall not act or permit the Premises to be operated in violation thereof.
If any foreclosure or power of sale proceedings are initiated by any Lender or a
deed in lieu is granted (or if any ground lease is terminated), Tenant agrees,
upon written request of any such Lender or any purchaser at such foreclosure
sale, to attorn and pay Rent to such party and to execute and deliver any
instruments necessary or appropriate to evidence or effectuate such attornment.
In the event of attornment, no Lender shall be: (i) liable for any act or
omission of Landlord, or subject to any offsets or defenses which Tenant might
have against Landlord (prior to such Lender becoming Landlord under such
attornment), (ii) liable for any security deposit or bound by any prepaid Rent
not actually received by such Lender, or (iii) bound by any future modification
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of this Lease not consented to by such Lender. Any Lender may elect to make this
Lease prior to the lien of its Mortgage, and if the Lender under any prior
Mortgage shall require, this Lease shall be prior to any subordinate Mortgage;
such elections shall be effective upon written notice to Tenant. Tenant agrees
to give any Lender by certified mail, return receipt requested, a copy of any
notice of default served by Tenant upon Landlord, provided that prior to such
notice Tenant has been notified in writing (by way of service on Tenant of a
copy of an assignment of leases, or otherwise) of the name and address of such
Lender. Tenant further agrees that if Landlord shall have failed to cure such
default within the time permitted Landlord for cure under this Lease, any such
Lender whose address has been so provided to Tenant shall have an additional
period of thirty (30) days in which to cure (or such additional time as may be
required due to causes beyond such Lender's control, including time to obtain
possession of the Building by power of sale or judicial action or deed in lieu
of foreclosure). The provisions of this Article shall be self-operative;
however, Tenant shall execute such documentation as Landlord or any Lender may
request from time to time in order to confirm the matters set forth in this
Article in recordable form. To the extent not expressly prohibited by Law,
Tenant waives the provisions of any Law now or hereafter adopted which may give
or purport to give Tenant any right or election to terminate or otherwise
adversely affect this Lease or Tenant's obligations hereunder if such
foreclosure or power of sale proceedings are initiated, prosecuted or completed.
ARTICLE 18.
ESTOPPEL CERTIFICATE
Tenant shall from time to time, upon written request by Landlord or Lender,
deliver to Landlord or Lender, within ten (10) days after from receipt of such
request, a statement in writing certifying: (i) that this Lease is unmodified
and in full force and effect (or if there have been modifications, identifying
such modifications and certifying that the Lease, as modified, is in full force
and effect); (ii) the dates to which the Rent has been paid; (iii) that Landlord
is not in default under any provision of this Lease (or if Landlord is in
default, specifying each such default); and, (iv) the address to which notices
to Tenant shall be sent; it being understood that any such statement so
delivered may be relied upon in connection with any lease, mortgage or transfer.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that: (i) this Lease is in full force and effect and not modified
except as Landlord may represent; (ii) not more than one month's Rent has been
paid in advance; (iii) there are no defaults by Landlord; and, (iv) notices to
Tenant shall be sent to Tenant's Address as set forth in Article 1 of this
Lease. Notwithstanding the presumptions of this Article, Tenant shall not be
relieved of its obligation to deliver said statement.
ARTICLE 19.
DEFAULTS
If Tenant: (i) fails to pay when due any installment or other payment of Rent,
or to keep in effect any insurance required to be maintained; or (ii) vacates or
abandons the Premises, or (iii) becomes insolvent, makes an assignment for the
benefit of creditors, files a voluntary bankruptcy or an involuntary petition in
bankruptcy is filed against Tenant which petition is not dismissed within sixty
(60) days of its filing, or (iv) fails to perform or observe any of the other
covenants, conditions or agreements contained herein on Tenant's part to be kept
or performed and such failure shall continue for thirty (30) days after notice
thereof given by or on behalf of Landlord, or (v) if the interest of Tenant
shall be offered for sale or sold under execution or other legal process if
Tenant makes any transfer, assignment, conveyance, sale, pledge, disposition of
all or a substantial portion of Tenant's property, then any such event or
conduct shall constitute a "default" hereunder.
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If Tenant shall file a voluntary petition pursuant to the United States
Bankruptcy Reform Act of 1978, as the same may be from time to time be amended
(the "Bankruptcy Code"), or take the benefit of any insolvency act or be
dissolved, or if an involuntary petition be filed against Tenant pursuant to the
Bankruptcy Code and said petition is not dismissed within thirty (30) days after
such filing, or if a receiver shall be appointed for its business or its assets
and the appointment of such receiver is not vacated within thirty (30) days
after such appointment, or if it shall make an assignment for the benefit of its
creditors, then Landlord shall have all of the rights provided for in the event
of nonpayment of the Rent.
ARTICLE 20.
REMEDIES OF LANDLORD
The remedies provided Landlord under this Lease are cumulative.
(a) Upon the occurrence of any default, Landlord may serve notice on Tenant that
the Term and the estate hereby vested in Tenant and any and all other rights of
Tenant hereunder shall cease on the date specified in such notice and on the
specified date this Lease shall cease and expire as fully and with the effect as
if the Term had expired for passage of time.
(b) Without terminating this Lease in case of a default or if this Lease shall
be terminated for default as provided herein, Landlord may re-enter the
Premises, remove Tenant, or cause Tenant to be removed from the Premises in such
manner as Landlord may deem advisable, with or without legal process, and using
such reasonable force as may be necessary. In the event of re-entry without
terminating this Lease, Tenant shall continue to be liable for all Rents and
other charges accruing or coming due under this Lease.
(c) If Landlord, without terminating this Lease, shall re-enter the Premises or
if this Lease shall be terminated as provided in paragraph (a) above:
(i) All Rent due from Tenant to Landlord shall thereupon become due and
shall be paid up to the time of re-entry, dispossession or expiration,
together with reasonable costs and expenses (including, without limitation,
attorney's fees) of Landlord;
(ii) Landlord, without any obligation to do so, may relet the Premises or
any part thereof for a term or terms which may at Landlord's option be less
than or exceed the period which would otherwise have constituted the balance
of the Term and may grant such concessions in reletting as Landlord, in the
exercise of its reasonable business judgment, deems desirable. In connection
with such reletting, Tenant shall be liable for all costs of the reletting
including, without limitation, free rent, leasing commissions, legal fees
and alteration and remodeling costs;
(iii) If Landlord shall have terminated this Lease, Tenant shall also be
liable to Landlord for all damages provided for in law and under this Lease
resulting from Tenant's breach including, without limitation, the difference
between the aggregate rentals reserved under the terms of this Lease for the
balance of the Term together with all other sums payable hereunder as Rent
for the balance of the Term, less the fair rental value of the Premises for
that period determined as of the date of such termination. For purposes of
this paragraph, Tenant shall be deemed to include any guarantor or surety of
the Lease.
(d) Tenant hereby waives all right to trial by jury in any claim, action
proceeding or counterclaim by either Landlord or Tenant against each other or
any matter arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and/or Tenant's use or occupancy or the
Premises.
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(e) In addition to the above, Landlord shall have any and all other rights
provided a Landlord under law or equity for breach of a lease or tenancy by a
Tenant.
ARTICLE 21.
QUIET ENJOYMENT
Landlord covenants that subject to the conditions and limitations set forth in
this Lease, Tenant, upon paying the Rent and performing all of Its other
obligations under this Lease, shall peacefully and quietly have, hold and enjoy
the Premises throughout the Term or until this Lease is otherwise terminated as
herein provided.
ARTICLE 22.
ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of an amount less than full payment
of Rent then due and payable shall be deemed to be other than on account of the
Rent then due and payable, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue any other remedy
provided for in this Lease or available at law or in equity.
ARTICLE 23.
SECURITY DEPOSIT
To secure the faithful performance by Tenant of all of the covenants, conditions
and agreements set forth in this Lease to be performed by it, including, without
limitation, foregoing such covenants, conditions and agreements in this Lease
which become applicable upon its termination by re-entry or otherwise, Tenant
has deposited with Landlord the sum shown in Article 1 as a "Security Deposit"
on the understanding:
(a) that the Security Deposit or any portion thereof may be applied to
the curing of any default that may exist, without prejudice to any other remedy
or remedies which the Landlord may have on account thereof, and upon such
application Tenant shall pay Landlord on demand the amount so applied which
shall be added to the Security Deposit so the same will be restored to its
original amount;
(b) that should the Premises be conveyed by Landlord, the Security
Deposit or any balance thereof may be turned over to the Landlord's grantee, and
if the same be turned over as aforesaid, Tenant hereby releases Landlord from
any and all liability with respect to the Security Deposit and its application
or return, and Tenant agrees to look solely to such grantee for such application
or return; and,
(c) that Landlord may commingle the Security Deposit with other funds
and not be obligated to pay Tenant any interest;
(d) that the Security Deposit shall not be considered as advance
payment of Rent or a measure of damages for any default by Tenant, nor shall it
be a bar or defense to any actions by Landlord against Tenant;
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(d) that if Tenant shall faithfully perform all of the covenants and
agreements contained in this Lease on the part of the Tenant to be performed,
the Security Deposit or any then remaining balance thereof, shall be returned to
Tenant, without interest, within thirty (30) days after the expiration of the
Term. Tenant further covenants that it will not assign or encumber the money
deposited herein as a Security Deposit and that neither Landlord nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
ARTICLE 24.
BROKERAGE COMMISSION
Landlord and Tenant represent and warrant to each other that neither has dealt
with any broker, finder or agent except for the Broker(s) identified in Article
1. Tenant represents and warrants to Landlord that (except with respect to the
Broker identified in Article 1 and with whom Landlord has entered into a
separate brokerage agreement) no broker, agent, commission salesperson, or other
person has represented Tenant in the negotiations for and procurement of this
Lease and of the Premises and that no commissions, fees, or compensation of any
kind are due and payable in connection herewith to any broker, agent commission
salesperson, or other person. Tenant agrees to indemnify Landlord and hold
Landlord harmless from any and all claims, suits, or judgments (including,
without limitation, reasonable attorneys' fees and court costs incurred in
connection with any such claims, suits, or judgments, or in connection with the
enforcement. of this indemnity) for any fees, commissions, or compensation of
any kind which arise out of or are in any way connected with any claimed agency
relationship not referenced in Article 1.
ARTICLE 25.
FORCE MAJEURE
Landlord shall be excused for the period of any delay in the performance of any
obligation hereunder when prevented from so doing by a cause or causes beyond
its control, including all labor disputes, civil commotion, war, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any material, services or financing, or through acts of God.
Tenant shall similarly be excused for delay in the performance of any obligation
hereunder, provided:
(a) nothing contained in this Section or elsewhere in this Lease shall
be deemed to excuse or permit any delay in the payment of the Rent, or
any delay in the cure of any default which may be cured by the payment
of money;
(b) no reliance by Tenant upon this Section shall limit or restrict in
any way Landlord's right of self-help as provided in this Lease; and
(c) Tenant shall not be entitled to rely upon this Section unless it
shall first have given Landlord notice of the existence of any force
majeure preventing the performance of an obligation of Tenant within
five days after the commencement of the force majeure.
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ARTICLE 26.
PARKING
(a) Landlord hereby grants to Tenant the right to use the Parking
Spaces as identified in Article 1 and shown on Exhibit A. Landlord, at its sole
election, may designate the types and locations of said Parking Spaces and
Landlord shall have the right, at Landlord's sole election, to change said types
and locations from time to time; provided, however, such designation shall be
uniformly applied and shall not unfairly favor any tenant in the Building.
(b) Commencing on the Commencement Date, Tenant shall pay Landlord a
Parking Fee, if any, as Additional Rent, payable monthly in advance with the
Monthly Rent. Thereafter, and throughout the Term, the parking rate for each
type of parking space provided to Tenant hereunder shall be the prevailing
parking rate, as Landlord may designate from time to time, at Landlord's sole
election, for each such type of parking space. In addition to the right reserved
hereunder by Landlord to designate the parking rate from time to time, Landlord
shall have the right to change the parking rate at any time to include therein
any amounts levied, assessed, imposed or required to be paid to any governmental
authority on account of the parking of motor vehicles, including all sums
required to be paid pursuant to transportation controls imposed by the
Environmental Protection Agency under the Clean Air Act of 1970, as amended, or
otherwise required to be paid by any governmental authority with respect to the
parking, use, or transportation of motor vehicles, or the reduction or control
of motor vehicle traffic, or motor vehicle pollution.
(c) If requested by Landlord, Tenant shall notify Landlord of the
license plate number, year, make and model of the automobiles entitled to use
the Parking Spaces and if requested by Landlord, such automobiles shall be
identified by automobile window stickers provided by Landlord, and only such
designated automobiles shall be permitted to use the Parking Spaces. If Landlord
institutes such an identification procedure, Landlord may provide additional
parking spaces for use by customers and invitees of Tenant on a daily. basis at
prevailing parking rates, if any. At Landlord's sole election, Landlord may make
validation stickers available to Tenant for any such additional parking spaces,
provided, however, if Landlord makes validation stickers available to any other
tenant in the Building, Landlord shall make such validation stickers available
to Tenant.
(d) The Parking Spaces and additional parking spaces provided for
herein are provided solely for the accommodation of Tenant and Landlord assumes
no responsibility or liability of any kind whatsoever from whatever cause with
respect to the automobile parking areas, including adjoining streets, sidewalks,
driveways, property and passageways, or the use thereof by Tenant or tenant's
employees, customers, agents, contractors or invitees.
ARTICLE 27.
HAZARDOUS MATERIALS
A. Definition of Hazardous Materials. The term "Hazardous Materials" for
purposes hereof shall mean any chemical, substance, materials or waste or
component thereof which is now or hereafter listed, defined or regulated as a
hazardous or toxic chemical, substance, materials or waste or component thereof
by any federal, state or local governing or regulatory body having jurisdiction,
or which would trigger any employee or community "right-to- know" requirements
adopted by any such body, or for which any such body has adopted any
requirements for the preparation or distribution of a materials safety data
sheet ("MSDS").
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B. No Hazardous Materials. Tenant shall not transport, use, store, maintain,
generate, manufacture, handle, dispose, release or discharge any Hazardous
Materials. However, the foregoing provisions shall not prohibit the
transportation to and from, and use, storage, maintenance and handling within
the Premises of Hazardous Materials customarily used in the business or activity
expressly permitted to be undertaken in the Premises under Article 6, provided:
(a) such Hazardous Materials shall be used and maintained only in such
quantities as are reasonably necessary for such permitted use of the Premises
and the ordinary course of Tenant's business therein, strictly in accordance
with applicable Law, highest prevailing standards, and the manufacturers'
instructions therefor, (b) such Hazardous Materials shall not be disposed of,
released or discharged in the Building, and shall be transported to and from the
Premises in compliance with all applicable Laws, and as Landlord shall
reasonably require, (c) if any applicable Law or Landlord's trash removal
contractor requires that any such Hazardous Materials be disposed of separately
from ordinary trash, Tenant shall make arrangements at Tenant's expense for such
disposal directly with a qualified and licensed disposal company at a lawful
disposal site (subject to scheduling and approval by Landlord), and (d) any
remaining such Hazardous Materials shall be completely, properly and lawfully
removed from the Building upon expiration or earlier termination of this Lease.
C. Notices To Landlord. Tenant shall promptly notify Landlord of: (i) any
enforcement, cleanup or other regulatory action taken or threatened by any
governmental or regulatory authority with respect to the presence of any
Hazardous Materials on the Premises or the migration thereof from or to other
property, (ii) any demands or claims made or threatened by any party relating to
any loss or injury resulting from any Hazardous Materials on the Premises, (iii)
any release, discharge or nonroutine, improper or unlawful disposal or
transportation of any Hazardous Materials on or from the Premises or in
violation of this Article, and (iv) any matters where Tenant is required by Law
to give a notice to any governmental or regulatory authority respecting any
Hazardous Materials on the Premises. Landlord shall have the right (but not the
obligation) to join and participate, as a party, in any legal proceedings or
actions affecting the Premises initiated in connection with any environmental,
health or safety law. At such times as Landlord may reasonably request, Tenant
shall provide Landlord with a written list, certified to be true and complete,
identifying any Hazardous Materials then used, stored, or maintained upon the
Premises, the use and approximate quantity of each such materials, a copy of any
MSDS issued by the manufacturer therefor, and such other information as Landlord
may reasonably require or as may be required by Law.
D. Indemnification of Landlord. If any Hazardous Materials are released,
discharged or disposed of by Tenant or any other occupant of the Premises, or
their employees, agents, invitees or contractors, on or about the Building in
violation of the foregoing provisions, Tenant shall immediately, properly and in
compliance with applicable Laws clean up, remediate and remove the Hazardous
Materials from the Building and any other affected property and clean or replace
any affected personal property (whether or not owned by Landlord), at Tenant's
expense (without limiting Landlord's other remedies therefor). Tenant shall
further be required to indemnify and hold Landlord, Landlord's directors,
officers, employees and agents harmless from and against any and all claims,
demands, liabilities, losses, damages, penalties and judgments directly or
indirectly arising out of or attributable to a violation of the provisions of
this Article by Tenant, Tenant's occupants, employees, contractors or agents.
Any clean up, remediation and removal work shall be subject to Landlord's prior
written approval (except in emergencies), and shall include, without limitation,
any testing, investigation, and the preparation and implementation of any
remedial action plan required by any governmental body having jurisdiction or
reasonably required by Landlord. If Landlord or any Lender or governmental body
arranges for any tests or studies showing that this Article has been violated,
Tenant shall pay for the costs of such tests. The provisions of this Article
shall survive the expiration or earlier termination of this Lease.
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ARTICLE 28.
ADDITIONAL RIGHTS RESERVED BY LANDLORD
In addition to any other rights provided for herein, Landlord reserves the
following rights, exercisable without liability to Tenant for damage or injury
to property, person or business and without effecting an eviction, constructive
or actual, or disturbance of Tenant's use or possession or giving rise to any
claim:
(a) To name the Building and to change the name or street address of
the Building;
(b) To install and maintain all signs on the exterior and interior of
the Building;
(c) To designate all sources furnishing sign painting and lettering:
(d) During the last ninety (90) days of the Term, if Tenant has vacated
the Premises, to decorate, remodel, repair, alter or otherwise prepare the
Premises for reoccupancy, without affecting Tenant's obligation to pay Rent for
the Premises;
(e) To have pass keys to the Premises and all doors therein, excluding
Tenant's vaults and safes;
(f) On reasonable prior notice to Tenant, to exhibit the Premises to
any prospective purchaser, Lender, mortgagee, or assignee of any mortgage on the
Building or Land and to others having an interest therein at any time during the
Term, and to prospective tenants during the last six months of the Term;
(g) To take any and all measures, including entering the Premises for
the purpose of making inspections, repairs, alterations, additions and
improvements to the Premises or to the Building (including for the purpose of
checking, calibrating, adjusting and balancing controls and other parts of the
Building Systems), as may be necessary or desirable for the operation,
improvement, safety, protection or preservation of the Premises or the Building,
or in order to comply with all Laws, orders and requirements of governmental or
other authority, or as may otherwise be permitted or required by this Lease;
provided, however, that Landlord shall use its best efforts (except in an
emergency) to minimize interference with Tenant's business in the Premises;
(h) To relocate various facilities within the Building and on the land
of which the Building is a part if Landlord shall determine such relocation to
be in the best interest of the development of the Building and Property,
provided that such relocation shall not materially restrict access to the
Premises; and
(i) To install vending machines of all kinds in the Premises and the
Building and to receive all of the revenue derived therefrom, provided, however,
that no vending machines shall be installed by Landlord in the Premises unless
Tenant so requests.
ARTICLE 29.
DEFINED TERMS
A. "Building" shall refer to the Building named in Article 1 of which the leased
Premises are a part (including all modifications, additions and alterations made
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to the Building during the term of this Lease), the real property on which the
same is located, all plazas, common areas and any other areas located on said
real property and designated by Landlord for use by all tenants in the Building.
A plan showing the Building is attached hereto as Exhibit A and made a part
hereof and the Premises is defined in Article 2 and shown on said Exhibit A by
cross- hatched lines.
B. "Common Areas" shall mean and include all areas, facilities, equipment,
directories and signs of the Building (exclusive of the Premises and areas
leased to other Tenants) made available and designated by Landlord for the
common and joint use and benefit of Landlord, Tenant and other tenants and
occupants of the Building including, but not limited to, lobbies, public wash
rooms, hallways, sidewalks, parking areas, landscaped areas and service
entrances. Common Areas may further include such areas in adjoining properties
under reciprocal easement agreements, operating agreements or other such
agreements now or hereafter in effect and which are available to Landlord,
Tenant and Tenant's employees and invitees. Landlord reserves the right in its
sole discretion and from time to time, to construct, maintain, operate, repair,
close, limit, take out of service, alter, change, and modify all or any part of
the Common Areas.
C. "Default Rate" shall mean eighteen percent (18%) per annum, or the highest
rate permitted by applicable law, whichever shall be less.
D. "Hazardous Materials" shall have the meaning set forth in Article 27.
E. "Landlord" and "Tenant" shall be applicable to one or more parties as the
case may be, and the singular shall include the plural, and the neuter shall
include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, agents, affiliates,
successors and assigns.
F. "Law" or "Laws" shall mean all federal, state, county and local governmental
and municipal laws, statutes, ordinances, rules, regulations, codes, decrees,
orders and other such requirements, applicable equitable remedies and decisions
by courts in cases where such decisions are binding precedents in the state in
which the Building is located, and decisions of federal courts applying the Laws
of such state.
G. "Lease" shall mean this lease executed between Tenant and Landlord, including
any extensions, amendments or modifications and any Exhibits attached hereto.
H. "Lease Year" shall mean each calendar year or portion thereof during the
Term, and any initial or final partial calendar years shall be "Partial Lease
Years". Notwithstanding the foregoing, at Landlord's option by notice to Tenant,
the term "Lease Year' shall mean each twelve (12) month period commencing on the
Commencement Date as adjusted pursuant to Article 2 (or at Landlord's option),
the first day of the first full calendar month following the Commencement Date.
I. "Lender" shall mean the holder of a Mortgage at the time in question, and
where such Mortgage is a ground lease, such term shall refer to the ground
lessee.
J. "Mortgage" shall mean all mortgages, deeds of trust, ground leases and other
such encumbrances now or hereafter placed upon the Building or any part thereof
with the written consent of Landlord, and all renewals, modifications,
consolidations, replacements or extensions thereof, and all indebtedness now or
hereafter secured thereby and all interest thereon.
K. "Operating Expenses" shall mean all operating expenses of any kind or nature
which are necessary, ordinary or customarily incurred in connection with the
operation, maintenance or repair of the Building as determined by Landlord.
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Operating Expenses shall include, but not be limited to:
1.1 all real property taxes and assessments levied against the Building
by any governmental or quasi-governmental authority. The foregoing shall include
all federal, state, county, or local governmental, special district, improvement
district, municipal or other political subdivision taxes, fees, levies,
assessments, charges or other impositions of every kind and nature, whether
general, special, ordinary or extraordinary, respecting the Building, including
without limitation, real estate taxes, general and special assessments, interest
on any special assessments paid in installments, transit taxes, water and sewer
rents, taxes based upon the receipt of rent, personal property taxes imposed
upon the fixtures, machinery, equipment, apparatus, appurtenances, furniture and
other personal property used in connection with the Building which Landlord
shall pay during any calendar year, any portion of which occurs during the Term
(without regard to any different fiscal year used by such government or
municipal authority except as provided below). Provided, however, any taxes
which shall be levied on the rentals of the Building shall be determined as if
the Building were Landlord's only property, and provided further that in no
event shall the term "taxes or assessment," as used herein, include any net
federal or state income taxes levied or assessed on Landlord, unless such taxes
are a specific substitute for real property taxes. Such term shall, however,
include gross taxes on rentals. Expenses incurred by Landlord for tax
consultants and in contesting the amount or validity of any such taxes or
assessments shall be included in such computations. All of the preceding clause
K (1.1) is collectively referred to as the "Tax" or "Taxes".
1.2 all "assessments", including so-called special assessments, license
tax, business license fee, business license tax, levy, charge, penalty or tax
imposed by any authority having the direct power to tax, including any city,
county, state or federal government, or any school, agricultural, lighting,
water, drainage, or other improvement or special district thereof, against the
Premises of the Building or any legal or equitable interest of Landlord therein.
For the purposes of this lease, any special assessments shall be deemed payable
in such number of installments as is permitted by law, whether or not actually
so paid. If as of the Commencement Date the Building has not been fully assessed
as a completed project, for the purpose of computing the Operating Expenses for
any adjustment required herein or under Article 4, the Tax shall be adjusted by
Landlord, as of the date on which the adjustment is to be made, to reflect full
completion of the Building including all standard Tenant finish work if the
method of taxation of real estate prevailing to the time of execution hereof
shall be, or has been altered, so as to cause the whole or any part of the taxes
now, hereafter or theretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital levy
or otherwise, or on or measured by the rents received therefrom, then such new
or altered taxes attributable to the Building shall be included within the term
real estate taxes, except that the same shall not include any enhancement of
said tax attributable to other income of Landlord.
1.3 costs of supplies, including, but not limited to, the cost of
relamping all Building standard lighting as the same may be required from time
to time;
1.4 costs incurred in connection with obtaining and providing energy
for the Building, including, but not limited to, costs of propane, butane,
natural gas, steam, electricity, solar energy and fuel oils, coal or any other
energy sources;
1.5 costs of water and sanitary and storm drainage services;
1.6 costs of janitorial and security services;
1.7 costs of general maintenance and repairs, including costs under
HVAC and other mechanical maintenance contracts and maintenance, repairs and
replacement of equipment and tools used in connection with operating the
Building;
1.8 costs of maintenance and replacement of landscaping;
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1.9 insurance premiums, including fire and all-risk coverage, together
with loss of rent endorsements, the part of any claim required to be paid under
the deductible portion of any insurance policies carried by Landlord in
connection with the Building (where Landlord is unable to obtain insurance
without such deductible from a major insurance carrier at reasonable rates),
public liability insurance and any other insurance carried by Landlord on the
Building, or any component parts thereof (all such insurance shall be in such
amounts as may be required by any holder of a Mortgage or as Landlord may
reasonably determine);
1.10 labor costs, including wages and other payments, costs to Landlord
of worker's compensation and disability insurance, payroll taxes, welfare fringe
benefits, and all legal fees and other costs or expenses incurred in resolving
any labor dispute;
1.11 professional building management fees required for management of
the Building;
1.12 legal, accounting, inspection, and other consultation fees
(including, without limitation, fees charged by consultants retained by Landlord
for services that are designed to produce a reduction in Operating Expenses or
to reasonably improve the operation, maintenance or state of repair of the
Building) incurred in the ordinary course of operating the Building or in
connection with making the computations required hereunder or in any audit of
operations of the Building;
1.13 the costs of capital improvements or structural repairs or
replacements made in or to the Building in order to conform to changes,
subsequent to the date of this Lease, in any applicable laws, ordinances, rules,
regulations or orders of any governmental or quasi-governmental authority having
jurisdiction over the Building (herein "Required Capital Improvements") or the
costs incurred by Landlord to install a new or replacement capital item for the
purpose of reducing Operating Expenses (herein "Cost Savings Improvements"), and
a reasonable reserve for all other capital improvements and structural repairs
and replacements reasonably necessary to permit Landlord to maintain the
Building in its current class. The expenditures for Required Capital
Improvements and Cost Savings Improvements shall be amortized over the useful
life of such capital improvement or structural repair or replacement (as
determined by Landlord). All costs so amortized shall bear interest on the
amortized balance at the rate of twelve percent (12%) per annum or such higher
rate as may have been paid by Landlord on funds borrowed for the purpose of
constructing these capital improvements.
In making any computations contemplated hereby, Landlord shall also be permitted
to make such adjustments and modifications to the provisions of this paragraph
and Article 4 as shall be reasonable and necessary to achieve the intention of
the parties hereto.
L. "Rent" shall have the meaning specified therefor in Article 3.
M. "Tax" or "Taxes" shall meaning set forth in Article 29(K)(1.1).
All other capitalized terms shall have the definition set forth in the Lease.
ARTICLE 30.
MISCELLANEOUS PROVISIONS
A. RULES AND REGULATIONS.
Tenant shall comply with all of the rules and regulations promulgated by
Landlord from time to time for the Building. A copy of the current rule and
regulations is attached hereto as Exhibit D.
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B. EXECUTION OF LEASE
If more than one person or entity executes this Lease as Tenant, each such
person or entity shall be jointly and severally liable for observing and
performing each of the terms, covenants, conditions and provisions to be
observed or performed by Tenant.
C. NOTICES.
All notices under this Lease shall be in writing and will be deemed sufficiently
given for all purposes if, to Tenant, by delivery to Tenant at the Premises
during the hours the Building is open for business or by certified mail, return
receipt requested or by overnight delivery service (with one acknowledged
receipt), to Tenant at the address set forth below, and if to Landlord, by
certified mail, return receipt requested or by overnight delivery service (with
one acknowledged receipt), at the addresses set forth below.
Landlord: at address shown in Article 1.
with copy to: Vice President, Equities Portfolio Department,
Real Estate Investment Division
Massachusetts Mutual Life Insurance Company
1295 State Street, Springfield, MA 01111-1111
with an additional copy to: Building Manager at address shown in
Article 1.
Tenant: at address shown in Article 1.
with copy to: 20955 Visto Terrace, Boca Raton, FL 33433
If any alleged default on the part of the Landlord hereunder occurs, Tenant
shall give written notice to Landlord in the manner herein set forth and shall
afford Landlord a reasonable opportunity to cure any such default. In addition,
Tenant shall send notice of such default by certified or registered mail,
postage prepaid, to the holder of any Mortgage whose address Tenant has been
notified in writing, and shall afford such Mortgage holder a reasonable
opportunity to cure any alleged default on Landlord's behalf. In no event will
Landlord be responsible for any damages incurred by Tenant, including but not
limited to, lost profits or interruption of business as a result of any alleged
default by Landlord hereunder.
D. TRANSFERS.
The term "Landlord" appearing herein shall mean only the owner of the Building
from time to time and, upon a sale or transfer of its interest in the Building,
the then Landlord and transferring party shall have no further obligations or
liabilities for matters accruing after the date of transfer of that interest and
Tenant, upon such sale or transfer, shall look solely to the successor owner and
transferee of the Building for performance of Landlord's obligations hereunder.
E. RELOCATION.
Landlord shall be entitled during the Lease Term to cause Tenant to relocate
from the Premises to a comparable space within the Building (a "Relocation
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Space") at any time after reasonable notice, which notice shall give Tenant no
less than sixty (60) days advance notice. Landlord or the third party tenant
replacing Tenant shall pay the expense of moving Tenant to a space within the
Building comparable to the Premises and providing comparable leasehold
improvements. Such a relocation shall not terminate, modify or otherwise affect
the Lease, except with respect to the location of the Premises from and after
the date of such relocation. "Premises", shall, thereafter, refer to the
Relocation Space into which Tenant has been moved, rather than the original
Premises as herein defined.
F. SHORING.
If any excavation or construction is made adjacent to, upon or within the
Building, or any part thereof, Tenant shall afford to any and all persons
causing or authorized to cause such excavation or construction license to enter
upon the Premises for the purpose of doing such work as such persons shall deem
necessary to preserve the Building or any portion thereof from injury or damage
and to support the same by proper foundations, braces and supports, without any
claim for damages or indemnity or abatement of the Rent, or of a constructive or
actual eviction of Tenant.
G. RELATIONSHIP OF THE PARTIES.
Nothing contained in this Lease shall be construed by the parties hereto, or by
any third party, as constituting the parties as principal and agent, partners or
joint venturers, nor shall anything herein render either party (other than a
guarantor) liable for the debts and obligations of any other party, it being
understood and agreed that the only relationship between Landlord and Tenant is
that of Landlord and Tenant.
H. ENTIRE AGREEMENT: MERGER.
This Lease embodies the entire agreement and understanding between the parties
respecting the Lease and the Premises and supersedes all prior negotiations,
agreements and understandings between the parties, all of which are merged
herein. No provision of this Lease may be modified, waived or discharged except
by an instrument in writing signed by the party against which enforcement of
such modification, waiver or discharge is sought.
I. NO REPRESENTATION BY LANDLORD.
Neither Landlord nor any agent of Landlord has made any representations,
warranties, or promises with respect to the Premises or the Building except as
expressly set forth herein.
J. LIMITATION OF LIABILITY.
Notwithstanding any provision in this Lease to the contrary, under no
circumstances shall Landlord's liability or that of its directors, officers,
employees and agents for failure to perform any obligations arising out of or in
connection with the Lease or for any breach of the terms or conditions of this
Lease (whether written or implied) exceed Landlord's equity interest in the
Building. Any judgments rendered against Landlord shall be satisfied solely out
of proceeds of sale of Landlord's interest in the Building. No personal judgment
shall lie against Landlord upon extinguishment of its rights in the Building and
any judgments so rendered shall not give rise to any right of execution or levy
against Landlord's assets. The provisions hereof shall inure to Landlord's
successors and assigns including any Lender. The foregoing provisions are not
intended to relieve Landlord from the performance of any of Landlord's
obligations under this Lease, but only to limit the personal liability of
Landlord in case of recovery of a judgment against Landlord; nor shall the
foregoing be deemed to limit Tenant's rights to obtain injunctive relief or
specific performance or other remedy which may be accorded Tenant by law or
under this Lease. If Tenant claims or asserts that Landlord has violated or
failed to perform a covenant under the Lease, Tenant's sole remedy shall be an
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action for specific performance, declaratory judgment or injunction and in no
event shall Tenant be entitled to any money damages in any action or by way of
set off, defense or counterclaim and Tenant hereby specifically waives the right
to any money damages or other remedies.
K. MEMORANDUM OF LEASE.
At the request of either party, the other will execute a memorandum of lease in
recordable form setting forth such provisions of this Lease as Landlord deems
desirable and as may be required by law in order to permit the recording of the
form in the appropriate public office. The party recording the memorandum of
Lease shall pay for the cost of recordation.
L. NO WAIVERS: AMENDMENTS.
Failure of Landlord to insist upon strict compliance by Tenant of any condition
or provision of this Lease shall not be deemed a waiver by Landlord of that
condition. No waiver shall be effective against Landlord unless in writing and
signed by Landlord. Similarly, this Lease cannot be amended except by a writing
signed by Landlord and Tenant.
M. SUCCESSORS AND ASSIGNS.
The conditions, covenants and agreements contained herein shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
N. GOVERNING LAW.
This Lease shall be governed by the law of the State where the Building is
located.
O. EXHIBITS.
All exhibits attached to this Lease are a part hereof and are incorporated
herein by reference and all provisions of such exhibits shall constitute
agreements, promises and covenants of this Lease.
P. CAPTIONS.
The captions and headings used in this Lease are for convenience only and in no
way define or limit the scope, interpretation or content of this Lease.
Q. COUNTERPARTS.
This Lease may be executed in one (1) or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have duly executed this Lease with the Exhibits attached hereto, this
9th day of January, 1996.
Attest or Witness: LANDLORD:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: CORNERSTONE REAL ESTATE ADVISERS, INC.
ITS AUTHORIZED AGENT
Gayle D. Harbeke By: /s/ William F. Runge
Name typed: William F. Runge
Title: Vice president
Date: 1/9/96
Attest or Witness: TENANT: A.D.S. Advertising Corporation,
a Florida Corporation
Linda Altieri By: /s/ Andrew D. Smith, President
Name Typed: Andrew D. Smith
Title: President
Date: 12/12/95
Candice Sullivan
Certificate of Tenant
(If A Corporation or Partnership)
I, Andrew D. Smith, Secretary or General Partner of A.D.S. Advertising
,Tenant, hereby certify that the officers executing the foregoing Lease on
behalf of Tenant is/are duly authorized to act on behalf of and bind the Tenant.
(Corporate Seal) ____________________ Andrew D. Smith
Secretary or General Partner
Date: 12/12/95
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EXHIBIT A
Approximately 2476 RSF on the second floor at Trafalgar Plaza at 5310 N.W. 31St
Street, Fort Lauderdale, Florida, as depicted by the floor plan below.
<PAGE>
EXHIBIT B
Landlord's Work
Landlord shall recarpet and repaint the Premises using building standard
materials, brace upper cabinets in the work room, patch and repair holes in
wall, and provide a furniture plan for Tenant's use; all at no charge to Tenant.
Landlord shall improve the appearance of the air conditioning vent which is
located directly outside the Tenant's front entry door.
Subject to the provisions of the Lease and provided that Tenant has provided all
necessary improvement prior to the execution of the Lease and provided that
Tenant has not delayed Landlord's work; Landlord shall have the above mentioned
work completed within 30 days after the return of a fully executed Lease to
Tenant.
<PAGE>
EXHIBIT C
Tenant's Work
Notwithstanding any language to the contrary contained herein, Tenant shall be
responsible for the maintenance of its own telephone wiring and telephone system
as well the maintenance of its own computer wiring and computer system.
<PAGE>
EXHIBIT D
Building's Rules and Regulations
1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways,
corridors or halls of the Building shall not be obstructed or encumbered or used
for any purpose other than ingress and egress to and from the premises demised
to any tenant or occupant.
2. No awnings or other projection shall be attached to the outside walls or
windows of the Building without the prior consent of Landlord. No curtains,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with, any window or door of the premises demised to any tenant or
occupant, without the prior consent of Landlord. Such awnings, projections,
curtains, blinds, shades, screens or other fixtures must be of a quality, type,
design and color, and attached in a manner, approved by Landlord.
3. No sign, advertisement, object, notice or other lettering shall be exhibited,
inscribed, painted or affixed on any part of the outside or inside of the
premises demised to any tenant or occupant of the Building without the prior
consent of Landlord. Interior signs on doors and directory tables, if any, shall
be of a size, color and style approved by Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the Building
shall not be covered or obstructed, nor shall any bottles, parcels, or other
articles be placed on any window sills.
5. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors,
vestibules or other public parts of the Building.
6. The water and wash closets and other plumbing fixtures shall not be used for
any purposes other than those for which they were constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. No tenant shall
bring or keep, or permit to be brought or kept, any inflammable, combustible,
explosive or hazardous fluid, materials, chemical or substance in or about the
premises demised to such tenant.
7. No tenant or occupant shall mark, paint, drill into, or in any way deface any
part of the Building or the premises demised to such tenant or occupant. No
boring, cutting or stringing of wires shall be permitted, except with the prior
consent of Landlord, and as Landlord may direct. No tenant or occupant shall
install any resilient tile or similar floor covering in the premises demised to
such tenant or occupant except in a manner approved by Landlord.
8. No bicycles, vehicles or animals of any kind shall be brought into or kept in
or about the premises demised to any tenant. No cooking shall be done or
permitted in the Building by any tenant without the approval of the Landlord. No
tenant shall cause or permit any unusual or objectionable odors to emanate from
the premises demised to such tenant.
9. No space in the Building shall be used for manufacturing, for the storage of
merchandise, or for the sale of merchandise, goods, or property of any kind at
auction, without the prior consent of Landlord.
10. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with other tenants or occupants of the Building
or neighboring buildings or premises whether by the use of any musical
instrument, radio, television set or other audio device, unmusical noise,
whistling, singing, or in any other way.
Nothing shall be thrown out of any doors or window.
<PAGE>
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows, nor shall any changes be made in locks or the mechanism
thereof. Each tenant must, upon the termination of its tenancy, restore to
Landlord all keys of stores, offices and toilet rooms, either furnished to, or
otherwise procured by, such tenant.
12. All removals from the Building, or the carrying in or out of the Building or
the premises demised to any tenant, of any safes, freight, furniture or bulky
matter of any description must take place at such time and in such manner as
Landlord or its agents may determine, from time to time. Landlord reserves the
right to inspect all freight to be brought into the Building and to exclude from
the Building all freight which violates any of the Rules and Regulations or the
provisions of such tenant's lease.
13. No tenant shall use or occupy, or permit any portion of the premises demised
to such tenant to be used or occupied, as an office for a public stenographer or
typist, or to a barber or manicure shop, or as an employment bureau. No tenant
or occupant shall engage or pay any employees in the Building, except those
actually working for such tenant or occupant in the Building, nor advertise for
laborers giving an address at the Building.
14. No tenant or occupant shall purchase spring water, ice, food, beverage,
lighting maintenance, cleaning towels or other like service, from any company or
person not approved by Landlord. No vending machines of any description shall be
installed, maintained or operated upon the premises demised to any tenant
without the prior consent of Landlord.
15. Landlord shall have the right to prohibit any advertising by any tenant or
occupant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon notice from
Landlord, such tenant or occupant shall refrain from or discontinue such
advertising.
16. Landlord reserves the right to exclude from the Building, between the hours
of 6:00 P.M. and 8:00 AM. on business days and at all hours on Saturdays,
Sundays and holidays, all persons who do not present a pass to the Building
signed by Landlord. Landlord will furnish passes to persons for whom any tenant
requests such passes. Each tenant shall be responsible for all persons for whom
it requests such passes and shall be liable to Landlord for all acts of such
persons.
17. Each tenant, before closing and leaving the premises demised to such tenant
at any time, shall see that all entrance doors are locked and all windows
closed. Corridor doors, when not in use, shall be kept closed.
18. Each tenant shall, at its expense, provide artificial light in the premises
demised to such tenant for Landlord's agents, contractors and employees while
performing janitorial or other cleaning services and making repairs or
alterations in said premises.
19. No premises shall be used, or permitted to be used for lodging or sleeping,
or for any immoral or illegal purposes.
20. The requirements of tenants will be attended to only upon application at the
office of Landlord. Building employees shall not be required to perform, and
shall not be requested by any tenant or occupant to perform, and work outside of
their regular duties, unless under specific instructions from the office of
Landlord.
21. Canvassing, soliciting and peddling in the Building are prohibited and each
tenant and occupant shall cooperate in seeking their prevention.
<PAGE>
22. There shall not be used in the Building, either by any tenant or occupant or
by their agents or contractors, in the delivery or receipt of merchandise,
freight, or other matter, any hand trucks or other means of conveyance except
those equipped with rubber tires, rubber side guards and such other safeguards
as Landlord may require.
23. If the Premises demised to any tenant become infested with vermin, such
tenant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
24. No premises shall be used, or permitted to be used, at any time, without the
prior approval of Landlord, as a store for the sale or display of goods, wares
or merchandise of any kind, or as a restaurant, shop, booth, bootblack or other
stand, or for the conduct of any business or occupation which predominantly
involves direct patronage of the general public in the premises demised to such
tenant, or for manufacturing or for other similar purposes.
25. No tenant shall clean any window in the Building from the outside.
26. No tenant shall move, or permit to be moved, into or out of the Building or
the premises demised to such tenant, any heavy or bulky matter, without the
specific approval of Landlord. If any such matter requires special handling,
only a qualified person shall be employed to perform such special handling. No
tenant shall place, or permit to be placed, on any part of the floor or floors
of the premises demised to such tenant, a load exceeding the floor load per
square foot which such floor was designed to carry and which is allowed by law.
Landlord reserves the right to prescribe the weight and position of safes and
other heavy matter, which must be placed so as to distribute the weight.
27. Landlord shall provide and maintain an alphabetical directory board in the
first floor (main lobby) of the Building and no other directory shall be
permitted without the prior consent of Landlord. Each tenant shall be allowed
one line on such board unless otherwise agreed to in writing.
28. With respect to work being performed by a tenant in its premises with the
approval of Landlord, the tenant shall refer all contractors, contractors'
representatives and installation technicians to Landlord for its supervision,
approval and control prior to the performance of any work or services. This
provision shall apply to all work performed in the Building including
installation of telephones, telegraph equipment, electrical devices and
attachments, and installations of every nature affecting floors, walls,
woodwork, trim, ceilings, equipment and any other physical portion of the
Building.
29. Landlord shall not be responsible for lost or stolen personal property,
equipment, money, or jewelry from the premises of tenants or public rooms
whether or not such loss occurs when the Building or the premises are locked
against entry.
30. Landlord shall not permit entrance to the premises of tenants by use of pass
keys controlled by Landlord, to any person at any time without written
permission from such tenant, except employees, contractors, or service personnel
directly supervised by Landlord and employees of the United States Postal
Service.
31. Each tenant and all of tenant's employees and invitees shall observe and
comply with the driving and parking signs and markers on the Land surrounding
the Building, and Landlord shall not be responsible for any damage to any
vehicle towed because of noncompliance with parking regulations.
32. Without Landlord's prior approval, no tenant shall install any radio or
television antenna, loudspeaker, music system or other device on the roof or
exterior walls of the Building or on common walls with adjacent tenants.
<PAGE>
33. Each tenant shall store all trash and garbage within its premises or in such
other areas specifically designated by Landlord. No materials shall be placed in
the trash boxes or receptacles in the Building unless such materials may be
disposed of In the ordinary and customary manner of removing and disposing of
trash and garbage and will not result in a violation of any law or ordinance
governing such disposal. All garbage and refuse disposal shall be only through
entryways and elevators provided for such purposes and at such times as Landlord
shall designate.
34. No tenant shall employ any persons other than the janitor or Landlord for
the purpose of cleaning its premises without the prior consent of Landlord. No
tenant shall cause any unnecessary labor by reason of Its carelessness or
indifference In the preservation of good order and cleanliness. Janitor service
shall include ordinary dusting and cleaning by the janitor assigned to such work
and shall not include beating of carpets or rugs or moving of furniture or other
special services. Janitor service shall be furnished Mondays through Fridays,
legal holidays excepted; janitor service will not be furnished to areas which
are occupied after 9:30 P.M. Window cleaning shall be done only by Landlord, and
only between 6:00 A.M. and 5:00 P.M.
<PAGE>
EXHIBIT E
Commencement Date Confirmation
DECLARATION BY LANDLORD AND TENANT AS TO DATE OF DELIVERY AND
ACCEPTANCE OF POSSESSION OF PREMISES
Attached to and made a part of the Lease dated the ___day of
______________________ 199__, entered into and by MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY as LANDLORD, and _______________________________________ as
TENANT.
LANDLORD AND TENANT do hereby declare that possession of the Premises was
accepted by TENANT on the ____ day of _______________________ 199__. The
Premises required to be constructed and finished by LANDLORD in accordance with
the provisions of the Lease have been satisfactorily completed by LANDLORD and
accepted by TENANT, the Lease is now in full force and effect, and as of the
date hereof, LANDLORD has fulfilled all of its obligations under the Lease. The
Lease Commencement Date is hereby established as _______________________, 199__.
The Term of this Lease shall terminate on ____________________ 19__.
LANDLORD:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: _________________________________
Name Typed:
Title:
Date:
TENANT:
_____________________________________
By: __________________________________
Name Typed:
Title:
Date:
<PAGE>
EXHIBIT F
1. Reference Article 2, Premises. Term. ....
Add to the end of the Paragraph, 'If Landlord is delayed in delivering
the Premises after the Anticipated Commencement Date and provided that
Tenant has not caused such delay, then rent shall commence upon the day
that the Premises is ready for occupancy.'
2. Reference Article 3, Rent, Paragraph A.
Monthly Rent Schedule
Year 1 $1,702.25 per month, plus applicable sales tax.
Year 2 $1,770.34 per month, plus applicable sales tax.
Year 3 $1,841.15 per month, plus applicable sales tax.
Year 4 $1,914.80 per month, plus applicable sales tax.
Year 5 $1,991.39 per month, plus applicable sales tax.
Notwithstanding any language to the contrary contained herein, Tenant
shall have the first two (2) months of the Lease free of Monthly Rent,
Additional Rent, and Operating Expenses
3. Reference Article 4, Operating Expenses, Paragraph A.
Notwithstanding any language to the contrary contained herein, the
increase in controllable Operating Expenses for the second year through
fifth year of the lease term shall not be more than four percent (4%)
greater than those of the previous years controllable operating
expenses. Controllable operating expenses are defined as Operating
Expenses excluding real estate taxes, insurance, utilities, and waste
removal.
4. Reference Article 7, Services.
Notwithstanding any language to the contrary contained herein, Tenant
is required to pay for its own electricity charges for the Premises.
5. Reference Article 7, Services. Paragraph A.
The first paragraph of Paragraph A is hereby deleted.
6. Reference Article 7, Services. Paragraph B.
On the first and second line of the paragraph, delete the words ',
during Normal Business Hours of Building,' and delete 'other' on the
third line of the paragraph.
<PAGE>
7. Reference Article 7, Services, Paragraph C.
Add to the end of the paragraph 'Landlord recognizes that there is
interior glass in the Premises and represents that there will be no
extra charge for the janitorial services for the Premises.'
8. Reference Article 7, Services, Paragraph F.
At the end of the paragraph insert 'Landlord shall remed any
interruptions caused by Landlord's gross negligence or willful
misconduct.
9. Reference Article 7, Services, Paragraph G.
Notwithstanding any language to the contrary contained herein, Landlord
shall maintain the air conditioning equipment of the Premises and the
Building. Tenant shall reimburse Landlord for such maintenance through
the payment of its pro-rata share of Operating Expenses.
10. Reference Article 12, Repair and Maintenance, Paragraph C.
Landlord represents that the services described in this paragraph
are included in Operating Expenses.
11. Reference Article 13, Inspection of Premises.
Add to the beginning of the last paragraph, 'After providing reasonable
notice to Tenant, except in the case of an emergency,'.
12. Reference Article 16, Subletting and Assignment.
Insert 'which consent shall not be unreasonably withheld after 'thereon'
on line one of the first paragraph.
Change '(as determined by Landlord in its sole discretion)' on the
seventh line of the paragraph to '(as determined by Landlord's
reasonable discretion)'
13. Reference Article 19, Defaults.
After the word 'Landlord' on line seven of paragraph one, insert
'unless the nature of such default is such that it cannot be cured
within thirty days and Tenant has begun to take action to cure such
default and is using best efforts to cure such default'.
14. Reference Article 20, Remedies of Landlord.
Delete 'or without' on the third line of paragraph (b).
15. Reference Article 23, Security Deposit.
Change the word 'may' to 'shall' on the first line of paragraph (b).
<PAGE>
16. Reference Article 26, Parking.
Delete 'and shown on Exhibit A' on the first and second line of paragraph
(a).
Delete paragraph (b) in its entirety.
Delete 'prevailing parking rates, if any' on the sixth line of paragraph
(c).
17. Reference Article 29, Defined Terms.
Change the word 'Building' to 'Premises' on line four of
Paragraph A and delete 'by cross hatched lines' on line six.
Insert 'reasonably' before 'required' in Paragraph K, subparagraph 1.11.
Insert 'excluding legal fees for the collection of rent and the
procurement of leases.' at the end of the paragraph.
18. Reference Article 30, Miscellaneous Provisions.
Insert at the end of Paragraph E 'In the event of relocation, Landlord
shall pay for Tenant's reasonable relocation expenses including but
not limited to stationary, telephone and computer relocation, and
furniture relocation.
19. Reference EXHIBIT D, Building Rules and Regulations.
Add to the beginning of number 7 'Except for normal wear & tear'.
Add ',except microwaves,' after 'No cooking' on the second line of the
paragraph number 8.
Delete the first sentence of number 14.
20. Option to Extend.
Tenant shall have one (1) option to extend this Lease in accordance
with the provisions of this paragraph, as long as Tenant has not been
and is not then in default under the terms of the lease, for an
additional term of five (5) years upon the same terms and conditions
with the exception of Base Rental payable under Section 4 of the Lease
which shall be Landlord's then prevailing Base Rental being charged by
Landlord for space in the Building reasonably comparable to the
Premises. If Tenant elects to exercise the foregoing option to extend,
it shall give Landlord written notice of its election to do so on or
before August 1, 2000 but not prior to May 1, 2000, time being of the
essence, which notice shall also request that Landlord furnish Tenant
with the Base Rental for the extended term which shall be derived using
Landlord's then prevailing rate for space actually leased in the
Building comparable to the Premises. Landlord shall furnish Tenant, in
writing, within fifteen (15) days of receipt of Tenant's notice of
exercise with the Base Rental figure for the term extension.
In the event that Landlord's Base Rental figure is unacceptable to
Tenant, for any reason whatsoever, then Tenant shall have the right to
void its previous notice to extend its Lease by providing written
notice to Landlord, such notice to be given within fifteen (15) days,
time being of the essence, of receipt of Landlord's written notice
stipulating the Base Rental figure. Upon Tenant giving such notice, the
extension of the Lease shall be deemed null and void and this Lease
shall expire on its initial expiration date as if the above extension
option had not been exercised. If Tenant fails to notify Landlord
within the stipulated time that the Base Rental figure is unacceptable
then Tenant shall be deemed to have accepted the Base Rental figure.
Tenant has no option(s) to extend this Lease except as set forth in
this paragraph.
<PAGE>
PROPERTY NAME: Trafalgar Plaza
AGENCY DISCLOSURE
Florida real estate licensees are required by law to disclose which
party they represent in a transaction and to allow a party the right to choose
or refuse among the various agency relationships.
The purpose of the AGENCY DISCLOSURE is to acknowledge that the
disclosure occurred and that the consumer has been informed of the various
agency relationships which are available in a real estate transaction. The
following descriptions of terms, agency relationships and the respective duties
and obligations are based upon Florida Law (Chapter 475, Florida Statutes).
Lessor's Agent
A licensee who Is engaged by and acts as the agent of the Lessor only is known
as a Lessor's agent. A Lessor's agent has the following duties and obligations:
To the Lessor:
(a) The fiduciary duties of loyalty, confidentiality, obedience,
full disclosure, accounting and the duly to use skill, care
and diligence.
To the Lessee and Lessor:
(a) A duty of honesty and fair dealing.
(b) A duty to disclose all facts known to the Lessor's agent
materially affecting the value of the property which are not
known to, or readily observable by the parties in a
residential transaction.
Lessee's Agent
A licensee who is engaged by and act as the agent of the Lessee only is
known as the Lessee's agent. A Lessee's agent has the following duties and
obligations:
To the Lessee:
(a) The fiduciary duties or loyalty, confidentiality, obedience, full
disclosure, accounting and the duty to use skill, care and
diligence.
To the Lessor and Lessee:
(a) A duty of honesty and fair dealing.
Disclosed Dual Agent
A disclosed dual agent is a licensee who, with the informed written
consent of Lessor and Lessee, is engaged as an agent for both Lessor and Lessee.
As a disclosed dual agent, the licensee shall not represent the
interests of one party to the exclusion or detriment of the interests of the
other party. A disclosed dual agent has all the fiduciary duties to the Lessor
and Lessee that a Lessor's or Lessee's agent has except the duties of full
disclosure and undivided loyalty.
A disclosed dual agent may not disclose:
(a) To the Lessee that the Lessor will accept less than the asking or
listed price, unless otherwise instructed in writing by the
Lessor,
(b) To the Lessor that the Lessee will pay a price greater than the
price submitted in a written offer to the Lessor, unless otherwise
instructed in writing by the Lessee:
(c) The motivation of any party for selling, buying, or leasing a
property, unless otherwise instructed in writing by the respective
party; or
(d) That a Lessor or Lessee will agree to financing terms other than
those offered, unless otherwise instructed in writing by the
respective party.
AGENCY DISCLOSURE
A.D.S. Advertising is a x Lessee ________ Lessor and is hereby informed that
Name
Florida Real Estate Advisors and Steven F. O'Hara
Name of Brokerage Name(s) of Licensee(s)
are acting as x Lessor's Agent ______ Lessee's Agent
<PAGE>
You have the explicit right to choose or refuse among these relationships. Other
brokerage firms may offer you other brokerage relationships. You are free to
seek any brokerage firm offering the type of relationship you desire.
1/ /96 William F. Runge - Vice President
- --------------- ----------------------------------
Date Lessor
CORNERSTONE REAL ESTATE ADVISERS, INC.
ITS AUTHORIZED AGENT
By: William F. Runge
-----------------------
Lessor (print name)
12/12/95 Andrew D. Smith President
- --------------- ----------------------------
Date Lessee
Andrew D. Smith President
<PAGE>
SCHEDULE "F"
HOLD HARMLESS AGREEMENT for A. D. S. Advertising
This HOLD HARMLESS AGREEMENT made as of this ______ day of __________________,19
____ by and between Florida Real Estate Advisors, Inc. (hereinafter called
'FREA") and A. D. S. Advertising (hereinafter call'Tenant') and
________________________ (OMITTED)
WITNESSETH:
WHEREAS, FREA is the property manager and leasing agent for (1) Trafalgar Plaza
(hereinafter called 'Property') pursuant to a Management and Leasing Agreement
(hereinafter called "Management Agreement") dated (2) _____________________by
and between FREA and (3) Massachusetts Mutual Life Insurance (hereinafter called
"Owner" or "Landlord"); and
WHEREAS, Landlord and Tenant, have executed or are about to execute a lease
agreement (hereinafter called 'Lease'), whereby Tenant will lease space In the
Property from Landlord; and
(Omitted)
NOW, THEREFORE, in consideration of the premises and the mutual promises and
covenants herein contained, FREA, Tenant and Guarantor hereby agree as follows:
1. Tenant (omitted) acknowledge (a) that FREA is an agent for Owner acting
solely within the scope of and pursuant to the terms of the Management
Agreement, and (b) that FREA is not affiliated with the Owner nor does
FREA have any ownership rights with respect to the Property.
2. FREA, Tenant (omitted) acknowledge that no representations by FREA,
understandings or agreements have been made or relied upon in the
making of the Lease other than those set forth in the Lease, and the
Lease contains all representations, understandings and agreements made
with Tenant by FREA on behalf of Owner. No course of prior dealings
between Tenant and FREA or their officers, employees, agents or
affiliates shall be relevant or admissible to supplement, explain or
vary any of the terms of the Lease.
3. Tenant (Omitted) agree to look solely to Landlord for the satisfaction
of any Judgment obtained by Tenant or (Omitted) against Landlord or the
Property and shall hold and save FREA free and harmless from all
expenses, claims, liabilities, losses, judgements or damages, including
reasonable attorneys' fees, arising therefrom or directly or indirectly
related thereto.
4. Tenant acknowledges that Owner is not a signatory to this agreement,
but agrees that Owner can rely on the provisions of Section 2
hereinabove.
IN WITNESS WHEREOF, this Agreement has been executed as of the first day and
year first above written.
FREA
Florida Real Estate Advisors, inc.
<PAGE>
(hereinafter called 'Property') pursuant to a Management and Leasing Agreement
(hereinafter called 'Management Agreement') dated (2) _____________________by
and between FREA and (3) Massachusetts Mutual Life Insurance (hereinafter called
'Owner' or 'Landlord'); and
WHEREAS, Landlord and Tenant, have executed or are about to execute a lease
agreement (hereinafter called 'Lease'), whereby Tenant will lease space in the
Property from Landlord; and
(Omitted)
NOW, THEREFORE, in consideration of the premises and the mutual promises and
covenants herein contained, FREA, Tenant and Guarantor hereby agree as follows:
1. Tenant and-Guarantor acknowledge (a) that FREA is an
agent for Owner acting solely within the scope of
and pursuant to the terms of the Management Agreement, and (b) that FREA
is not affiliated with the Owner nor does FREA have any ownership rights
with respect to the Property.
2. FREA, Tenant (Omitted) acknowledge that no representations by FREA,
understandings or agreements have been made or relied upon in the making
of the Lease other than those set forth in the Lease, and the Lease
contains all representations, understandings and agreements made with
Tenant by FREA on behalf of Owner. No course of prior dealings between
Tenant and FREA or their officers, employees, agents or affiliates
shall be relevant or admissible to supplement, explain or vary any of
the terms of the Lease.
3. Tenant (Omitted) agree to look solely to Landlord for the
satisfaction of any judgment obtained by Tenant (Omitted) against
Landlord or the Property and shall hold and save FREA free and harmless
from all expenses, claims, liabilities, losses, judgements or damages,
including reasonable attorneys' fees, arising therefrom or directly or
indirectly related thereto.
4. Tenant acknowledges that Owner is not a signatory to this agreement, but
agrees that Owner can rely on the provisions of Section 2 hereinabove.
IN WITNESS WHEREOF, this Agreement has been executed as of the first day and
year first above written.
Florida Real Estate Advisors, Inc.
By: ________________________
(Title)
TENANT
(Name) A. D. S. Advertising
By: Andrew D. Smith President
----------------------------------
(Title)
GUARANTOR:
------------------------------
LEASING AGREEMENT
THIS AGREEMENT ("Lease"), made as of this 1st day of October, 1995, by
and between PALASAN PROPERTIES, INC., a Florida corporation, ("Landlord"), with
an address of which is in care of Lancore Management, Inc., 399 W. Palmetto Park
Road, Suite 102, Boca Raton, Florida 33432, and VIDEO QUICKLAB OF SOUTH FLORIDA,
INC., a Florida corporation ("Tenant"), with an address of 2l21 West Oakland
Park Boulevard, Suite(s) C-I, C2, C3, Oakland Park, Florida 33311.
WITNESSETH:
THIS LEASE pertain to those certain premises (the "Premises") in the
shopping center known as Oakland Lakes Square in which Tenant is currently
occupied and proposes to occupy as set forth in this agreement, in consideration
of the terms, conditions and covenants hereinafter set forth, the parties hereto
do hereby mutually agree, as follows:
ARTICLE I
GRANT AND TERM
1.1 Premises. Landlord, in consideration of the rent to be paid
and the covenants to be performed by Tenant, does hereby demise and lease unto
Tenant, and Tenant hereby rents from Landlord, those certain premises (the
"Premises") in the shopping center known as Oakland Lakes Square (hereinafter
referred to as "Shopping Center"), which retail development is shown on the site
plan depicted on Exhibit "A", attached hereto and made a part hereof, with the
Premises being highlighted on Exhibit "A", subject to easements, restrictions
and other matters of record. the legal description of the Shopping Center, which
is located in the City of Oakland Park, State of Florida, is more particularly
described on Exhibit "B", attached hereto and made a part hereof. The Premises
are more particularly described as follows:
An area in the Shopping Center which Landlord and Tenant conclusively presume to
agree for purposes of this Lease to contain collectively a total of 6,519 square
feet ("Square Footage") as highlighted on Exhibit "A" as spaces C-1, C-2 and
C-3.
The exterior walls and roof of the Premises and the area
beneath the Premises are not demised hereunder, and the use thereof together
with the right to install, maintain, use, repair, and replace pipes, ducts,
conduits, wires and structural elements leading through the Premises in
locations which will not materially interfere with Tenant's use thereof and
serving other parts of the Shopping Center are hereby reserved unto Landlord.
1.2 Lease Commencement and Ending Day of Term. The term of this Lease
for the space known as C-1 (2,533 s. f. ("Lease Term") shall commence ("Lease
Commencement Date") one-hundred-twenty (120) days after Tenant completes its
build-out or on February 1, 1996, whichever the sooner to occur. The Lease Term
shall end ten (10) years after the Lease Commencement Date, unless sooner
terminated or extended as hereinafter provided. Tenant shall have the right to
enter the Premises on the "Execution Date". The Execution Date is defined herein
as the date that the Lease has been fully executed by both Landlord and Tenant.
From the Execution Date, Tenant shall have all the duties, obligations and
responsibilities under the Lease, except those set for the payment of Rent. The
term of this Lease shall not affect the lease terms for the space(s) known as
C-2 (2,604 s.f.) and C-3 (1,382 s.f.) which are currently under executed leases
and occupied by Tenant, until said leases and option periods have expired. At
that time, the Lease Commencement for space(s) C-2 and C-3 shall be the first
day, following the last day as set in their lease agreement. The Ending Day of
Term then, for space(s) C-2 and C-3, will be the same as that for space C-1.
1.3 Rent Commencement. Payment of base rent for the space known as C-1
(2,533 s.f.) shall commence on June 1, 1996. Payment of base rent for the space
known as C-2 (2,604 s.f.) which is current set forth in the Lease Agreement
dated August 8, 1991, and base rent for the space known as C-3 (1,382 s.f.)
currently set forth in the Lease Agreement dated October 1, 1992, shall remain
as same until all initial terms and lease options expire, at which time the rent
payment for C-2 and C-3 will be continued as set forth in Article 1 Section 1.2
at a three percent (3%) increase annually.
1.4 Option to Renew. Provided that Tenant is not in default under any
of the terms, conditions or provisions of this Lease, Tenant shall have the
option to extend or renew this Lease for one (1) additional period of four (4)
years (hereinafter the "Renewal Term(s)"). The Renewal Term shall be exercisable
by Tenant giving written notice of the exercise of such renewal option to
Landlord at least ninety (90) days prior to the expiration of the original Lease
Term. In the event that Tenant exercises the option to renew this Lease, then
the Lease Term shall be extended accordingly upon the same terms, covenants and
conditions as set forth in this Lease with respect to the original Lease
Term(s).
<PAGE>
1.5 INTENTIONALLY DELETED.
1.6 Surrender of Premises. At the expiration of the Lease Term, Tenant
shall (a) surrender the Premises in the same condition as existed upon the
Commencement Date, ordinary wear and tear excepted, and (b) deliver all keys
from old all combinations on locks, safes and vaults in the Premises to
Landlord.
1.7 Title of Landlord. The Landlord covenants and warrants it has full
right and lawful authority to enter into this lease for the full term herein
granted and for all extensions herein provided.
ARTICLE II
RENT
2.l Rent
(a) Fixed Minimum Rent and Minimum Installment Payments.
Tenant agrees to pay to Landlord during the Lease Term, and any Renewal Term, if
applicable, total rent per annum, which is shown in Exhibit "C", hereto
attached, which shall be payable in equal monthly installments, in advance on or
before the first day of each month, without demand, notice, deduction or setoff
of any kind ("Minimum Installment Payments"). Fixed Minimum Rent and Minimum
Installment Payments space(s) C-2 and C-3 are set out in their original leases
and said amounts shall remain in place until said leases and options have been
completed; at which time rates will be figured at a three percent (3%) annual
increase and will run concurrently with this lease until the full ten (10) year
term is completed.
(b) Shared Expenses. In addition to Fixed Minimum Rent, Tenant
agrees to pay Landlord, during the Lease Term and all Renewal Terms, Tenant's
proportionate share of real estate taxes, insurance and common area maintenance,
expenses and repairs, and any and all other costs and disbursements of every
kind and nature that Landlord shall pay or be obligated to pay because of or in
connection with the operation and maintenance of the Shopping Center ("Shared
Expenses") all as hereinafter described [see, for example, Sections 2.4, 8.2,
and 11.2].
(c) Tenant's proportionate share of the Shared Expenses shall
be equal to the percentage which the Square Footage of the Premises bears to the
square footage of all gross leasable space in the Shopping Center [presently
30,056 square feet)] ("Total Square Footage"), as the same may from time to time
increase or decrease. Tenant agrees to pay Landlord, in advance on the first day
of each month, along with the Minimum Installment Payment, an amount equal to
one-twelfth (1/12) of Tenant's estimated share of Shared Expenses ("Shared
Expense Installment Payment"). Tenant's proportionate share of the Shared
Expenses shall be calculated annually or semi-annually by Landlord and Tenant
shall be obligated and agrees to remit to Landlord, within ten (10) days of
receipt of notice, the amount of Tenant's share of Shared Expenses. The
semi-annual or annual billing from Landlord to Tenant shall set forth the total
amount of Tenant's share of Shared Expenses and credit all Shared Expense
Installment Payments received by Landlord. The Shared Expenses are currently
estimated at Two and 91/100) ($2.91) Dollars per square foot. For the first
twelve (12) months of the Lease Term, however, the Shared Expenses for space C-1
(2,533 s.f.) shall be limited to Two and 00/100 ($2.00) Dollars per square foot.
Thereafter Tenant shall then pay Tenant's proportionate Shared Expenses as
indicated above. All terms and conditions for space(s) C-2 and C-3 as set out in
their original leases for Shared Expenses shall remain in place.
(d) Fixed Minimum Rent may be subject to adjustment as set
forth in Section 2.1(d) below. Minimum Installment Payments and Shared Expense
Installment Payments are hereafter collectively referred to as "Required
Installment Payments", which are set forth in Exhibit "C".
<PAGE>
(e) Fixed Minimum Rent and Minimum Installment Payments for
space C-1 (2,533 s.f.) as set forth in Section 2.1(a) above are based upon a
rental rate of $5.00 per square foot per annum ("Original Base Rent" or "OBR")
or $1,055.42 per month, and shall be applicable for month 5 through month 12 of
the Lease Term; it being understood that Tenant shall not be obligated to pay
Minimum Installment Payments or the Shared Expenses for the first 4 months of
the Lease Term. Commencing with month 13 and ending with month 24 of the Lease
Term the OBR shall increase to $6.00 per square foot per annum or $1,266.50 per
month. Commencing with month 25 and ending with month 36 of the Lease Term, the
OBR shall increase to $7.00 per square foot per annum or $1,477.58 per month.
Commencing with month 37 and ending with month 48 of the Lease Term the OBR
shall increase to $7.21 per square foot per annum or $1,521.91 per month.
Commencing with month 49 and ending with month 60 of the Lease Term the OBR
shall increase to $7.43 per square foot per annum or $1,568.35 per month.
Commencing with month 61 and ending with month 72 of the Lease Term the OBR
shall increase to $7.65 per square foot per annum or $1,614.79 per month.
Commencing with month 73 and ending with month 84 of the Lease Term, the OBR
shall increase to $7.88 per square foot per annum or $1, 663.34 per month.
Commencing with month 85 and ending with month 96 of the Lease Term, the OBR
shall increase to $8.12 per square foot per annum or $1,714.00 per month.
Commencing with month 97 and ending with month 108 of the Lease Term, the OBR
shall increase to $8.36 per square foot per annum or $1,764.66 per month.
Commencing with month 109 and ending with month 120 of the Lease Term, the OBR
shall increase to $8.61 per square foot per annum or $1,817.43 per month.
Rent for the Renewal Term(s) shall be determined by Landlord upon
written request by Tenant prior to the time required by Tenant to exercise its
option to renew in accordance with this Lease. Should the Lease Renewal Term
commence on a day other than the first day of a calendar month.
2.2 INTENTIONALLY DELETED.
2.3 Tenant's Tax Obligation. Tenant agrees to pay, as part of the
Shared Expenses, Tenant's proportionate share of all taxes and assessments which
have been or may be levied or assessed by any lawful authority, for any calendar
year during the Lease Term, against the land and buildings presently and/or at
any time during the term of this Lease comprising the Shopping Center. Tenant's
proportionate share shall be equal to the product obtained by multiplying such
taxes and assessments by a fraction, the numerator of which shall be the Square
Footage and the denominator of which shall be the Total Square Footage. Any tax
and/or assessment of any kind or nature presently or hereafter imposed by the
State of Florida or any political subdivision thereof or any governmental
authority having jurisdiction thereover, upon, against or with respect to the
rentals payable by tenants in the Shopping Center to Landlord or on the income
of Landlord derived from the Shopping Center or with respect to Landlord, or the
individuals or entities comprising Landlord, ownership of the land and buildings
presently and/or at any time during the Lease Term comprising the Shopping
Center, either by way of substitution for all or any part of the taxes and
assessments levied or assessed against such land and such buildings, or in
addition thereto, shall be deemed to constitute a tax and/or assessment against
such land and such buildings for the purpose of this Section and Tenant shall be
obligated to pay its proportionate share thereof as provided herein. In
addition, should any governmental authority having jurisdiction thereover impose
a tax or surcharge of any kind or nature upon, against or with respect to the
parking areas or the number of parking spaces in the Shopping Center, such tax
or surcharge shall likewise be deemed to constitute a tax and/or assessment
against such land and such buildings for the purpose of this Section and Tenant
shall be obligated to pay its proportionate share thereof as provided herein.
Tenant shall not be obligated to pay Landlord's income taxes.
Tenant's proportionate share of all of the aforesaid taxes and
assessments levied or assessed for or during the term hereof, as determined by
Landlord, shall be paid in monthly installments, as part of the Shared Expense
Installment Payment portion of the Required Installment Payment; provided, that
in the event Landlord is required under any mortgage covering the Shopping
Center to escrow real estate taxes, Landlord may, but shall not be obligated to,
use the amount required to be so escrowed as a basis for its estimate of the
monthly installments due from Tenant hereunder. Upon receipt of all tax bills
and assessment bills attributable to any calendar year during the Lease Term,
Landlord shall furnish Tenant with a written statement of the actual amount of
Tenant's proportionate share of the taxes and assessments for such year. In the
event no tax bill is available, Landlord will compute the amount of such tax. If
the total amount paid by Tenant under this Section for any calendar year during
the Lease Term shall be less than the actual amount due from Tenant for such
year, as shown on such statement, Tenant shall pay to Landlord the difference
between the amount paid by Tenant and the actual amount due, such deficiency to
be paid within ten (10) days after receipt of notice from Landlord. If the
amount actually paid by Tenant exceeds such actual amount due from Tenant for
such calendar year, such excess shall be credited against the next installment
of taxes and assessments due from Tenant to Landlord hereunder. A copy of a tax
bill or assessment bill submitted by Landlord to Tenant shall at all times be
sufficient evidence of the amount of taxes and/or assessments assessed or levied
against the property to which such bill relates.
<PAGE>
Prior to or on the Commencement Date and from time to time
throughout the Lease Term, Landlord shall notify Tenant in writing of Landlord's
estimate of Tenant's monthly installments due hereunder. Landlord and Tenant's
obligations under this Section shall survive the expiration or earlier
termination of this Lease.
2.4 Additional Rent. Rent shall be defined in this Lease as the
Required Installment Payment and Percentage Rent only, which sums shall be
payable in the manner provided in this Lease. Any and all other sums of money or
charges required to be paid by Tenant pursuant to the provisions of this Lease
or in the Exhibits attached hereto, whether or not the same be so designated,
shall be considered "Additional Rent" and shall be due and payable and
recoverable in the same manner as Rent.
2.5 Late Payment Penalty. If Tenant shall fail to pay within ten (10)
days from when due any Rent or other charges designated as Additional Rent,
Tenant shall pay to Landlord, on demand, a late charge of five percent (5%) of
the late amount. In the event Tenant fails to pay such late charge, such unpaid
amounts shall thereafter bear interest from the due date thereof to the date of
payment at the highest rate chargeable by applicable law ("Applicable Law").
2.6 Expenditures by Landlord. If Landlord shall make any expenditure
for which Tenant is liable under this Lease, the amount thereof shall be deemed
Additional Rent due and payable by Tenant with the succeeding installment of
Rent (unless some other date is expressly provided herein for payment of such
amount) together with interest thereon at the Applicable Rate.
2.7 Sales, Use and Excise Taxes. Tenant shall pay all sales, use and
other taxes imposed by any governmental authorities upon the manufacture, sale,
use, transmission, distribution or other process necessary or incidental to the
furnishing of sewer, water, electricity, and domestic water or other services to
the Premises. Tenant shall pay, before delinquency, all personal property taxes
and assessments on the furniture, fixtures, equipment, and other property of
Tenant located in the Premises and on additions and improvements in the Premises
belonging to Tenant. Tenant shall also pay, as Additional Rent, all sales tax
assessed against the Rent by governmental authority, even though taxing statute
or ordinance may purport to impose such sales tax against Landlord. The payment
of sales tax shall be made by Tenant on a monthly basis, concurrently with
payment of the Rent.
2.8 Net Lease. It is the intent of the parties hereto that Rent payable
under this Lease is absolutely net to Landlord, except as expressly provided for
in the Lease. Any amount and any obligation which is not expressly declared
herein to be that of Landlord pertaining to the Premises shall be deemed to be
the obligation of Tenant to be performed by and at the expense of Tenant.
ARTICLE 3
INTENTIONALLY DELETED
ARTICLE 4
INTENTIONALLY DELETED
ARTICLE 5
LANDLORD'S WORK, TENANT'S
POSSESSION DATE AND CANCELLATION
<PAGE>
5.1 INTENTIONALLY DELETED.
5.2 Delivery of Possession Ready for Occupancy. Landlord intends that
actual possession of the Premises shall be delivered to Tenant ready for
Tenant's occupancy on the date that Landlord executes this Lease. It is agreed
that by taking possession of the Premises, Tenant accepts the Premises in its
then existing "AS-IS" "WHERE-IS" condition without representation or warranty by
Landlord of any kind or nature whatsoever.
5.3 INTENTIONALLY DELETED.
5.4 Changes and Additions. Landlord hereby reserves the right at any
time, and from time to time, to make alterations or additions to, and to build
additional stories on the building in which the Premises is located and to build
adjoining the same. Landlord also reserves the right at any time, and from time
to time, to construct other buildings and improvements in the Shopping Center,
and to enlarge the building or buildings within the Shopping Center, and to
build adjoining thereto and to construct decks or elevated parking facilities
and free-standing, single story buildings within the parking lot areas of the
Shopping Center. Landlord reserves the right at any time to relocate the various
buildings, other than the Premises.
ARTICLE 6
CONSTRUCTION OF PREMISES
6.1 Construction. Tenant hereby agrees, at Tenant's sole cost and
expense, to (a) build-out the Premises, prepare its office layout, store front
design arid mechanical and electrical requirements and deliver the plans for the
same to Landlord's architect within ten (10) days after the execution of this
Lease; (b) furnish and install trade fixtures as required by Tenant's office
layout, which fixtures shall be new, unless otherwise approved in writing by
Landlord; and (c) furnish and install its office layout, store front design and
mechanical and electrical requirements. All contractors and bids are to be
approved by Landlord in writing. Notwithstanding the foregoing to the contrary,
and provided that Tenant is not otherwise in default hereunder, Landlord agrees
to reimburse Tenant for Tenant's approved build-out of the Premises in
accordance with the plans approved by Landlord writing in amount not to exceed
Sixty Thousand and No/100 Dollars ($60,000), which shall be payable to Tenant
ten (10) days after Landlord has received from Tenant paid invoices and all
other evidence reasonably requested by Landlord evidencing Tenant's payment of
the same; but in no event sooner that Tenant's commencement of payment of
Required Installment Payments.
6.2 Settlement of Disputes. It is understood and agreed that any
disagreement or dispute which may arise between Landlord and Tenant with
reference to the work to be performed with respect to the Premises pursuant to
the Plans shall be submitted to Landlord's registered architect, whose decision
shall be final and binding on both Landlord and Tenant.
ARTICLE 7
CONDUCT OF BUSINESS BY TENANT
7.1 Use of Premises. Tenant shall use and occupy the Premises during
the Lease Term solely for the purpose of conducting business as a franchise
sales office for the Video QuikLab franchise and sales and operating offices in
connection therewith. Tenant shall not use, permit or suffer the use of the
Premises for any other business or purpose. Tenant shall not sell, display or
advertise any merchandise not specifically permitted by this paragraph. Tenant
further agrees to conduct its business in the Premises under the name of or
trade name VIDEO QUIKLAB as and under no other name or trade name. If any
governmental license or permit shall be required for the proper and lawful
conduct of Tenant's business or other activity carried out in the Premises or if
a failure to procure such a license or permit might or would, in any way, affect
the Landlord or the Shopping Center, then Tenant, at Tenant's expense, shall
duly procure and thereafter maintain such license or permit and submit the same
to inspection by Landlord. Tenant, at Tenant's expense, shall, at all times,
comply with the requirements of each such license or permit.
<PAGE>
7.2 Use Restriction Language. Tenant covenants and agrees not to
violate any of the "Use Restrictions" set forth on Exhibit D attached hereto and
made a part hereof. Tenant understands and acknowledges that any violation by
Tenant of such Use Restrictions could cause Landlord to be in default under its
obligations to other tenants at the Shopping Center which could subject the
Landlord to liability to such other tenants.
7.3 Operation of Business. Tenant covenants and agrees to operate one
hundred percent (100%) of the Premises with due diligence and efficiency during
the entire Lease Term, continuously, and to conduct its business at all times in
a high class and reputable manner, maintaining at all times a full staff of
employees and a full and complete stock of merchandise. Tenant shall install and
maintain at all times a professionally prepared display at . . . Center business
______ and at lease one hour thereafter. Tenant shall, at Tenant's sole cost and
expense, promptly comply with all laws, statutes, ordinances, rules and
regulations (including orders concerning environmental protection) of all
federal, state, county, municipal and other applicable governmental authorities,
now in force, or which may hereafter be in force, pertaining to Tenant or its
use of the Premises. Tenant agrees that it will conduct its business in the
Premises during at least eight (8) hours per day Monday through Saturday and
will conduct such business in a lawful manner and in good faith, and will not do
any act tending to injure the reputation of the Shopping Center. Tenant shall
not permit noise or odors in the Premises which are objected to by any tenant or
occupant of the Shopping Center and upon written notice from Landlord, Tenant
shall immediately cease and desist from causing such noise or odor, and failing
of which Landlord may deem the same a material breach of the Lease. Tenant shall
not permit the operation of any vending machines or pay telephones on the
Premises. Tenant shall not use the areas adjacent to the premises for business
purpose. Tenant agrees that all receiving and delivery of goods and merchandise
and all removal of merchandise, supplies, equipment, trash and garbage shall be
made only by way of the areas provided therefor by Landlord. Tenant shall not
use or permit the use of any portion of said premises as sleeping apartments,
lodging rooms, or for any unlawful purposes. No radio or television or other
similar device shall be installed exterior to the Premises and no aerial shall
be erected on the roof or exterior walls of the building in which the Premises
are located. No merchandise or other obstruction shall be placed or permitted on
the walks immediately adjoining the Premises. Landlord may direct the use of all
pest extermination and scavenger contractors at such intervals as Landlord may
require. Failure of Tenant to strictly adhere to the provisions of this Section
will result in damages to Landlord, including, without limitation, diminished
salability, mortgage ability and economic value.
7.4 INTENTIONALLY DELETED.
7.5 Storage, Office Space. Tenant shall warehouse, store and/or stock
in the Premises only such goods, wares and merchandise as Tenant intends to
offer for sale at, in, from or upon the leased premises. This shall not preclude
occasional emergency transfers of merchandise from the other stores of Tenant,
if any, not located in the Shopping Center. Tenant shall use for office,
clerical or other non-selling purposes only such space in the Premises as is
from time to time reasonably required for Tenant's business in the Premises.
7.6 Care of Premises. Tenant shall keep the Premises, including the
service areas adjacent to the Premises, show windows and signs orderly, neat,
safe arid clean and free from rubbish and dirt at all times and shall store all
trash and garbage within the Premises and arrange for the regular pickup of such
trash and garbage at Tenant's expense. Tenant shall not burn any trash or
garbage at any time in or about the building. If Landlord shall provide any
services or facilities for such pickup, then Tenant shall be obligated to use
the same and shall pay a proportionate share of the actual cost thereof within
ten (10) days after being billed therefor. In the event Tenant fails to keep the
Premises in the condition called for above, Landlord may enter upon the Premises
and have all rubbish, dirt, trash and garbage removed and the sidewalks cleaned,
in which event Tenant agrees to pay all charges incurred by Landlord therefor.
ARTICLE 8
OPERATION AND MAINTENANCE OF COMMON AREAS
8.1 Operation of Common Areas. Landlord agrees to cause to be operated,
managed and maintained during the term of this Lease all parking areas, roads,
sidewalks, landscaping, drainage, common area lighting facilities in the
Shopping Center property and all other common areas and facilities in the
Shopping Center. The manner in which such areas and facilities shall be
maintained and operated and the expenditures therefor shall be at the sole
discretion of the Landlord, and the use of such areas and facilities shall be
subject to such reasonable regulations as Landlord shall make from time to time.
<PAGE>
8.2 Tenant's Prorata Share of Expenses. Tenant agrees to pay Landlord
as part of the Shared Expenses, Tenant's proportionate share of all costs and
expenses of every kind and nature paid or incurred by Landlord in operating,
equipping, policing and protecting, lighting, heating, insuring, repairing and
maintaining the common areas of the Shopping Center including the cost of
insuring all property provided by Landlord which may at any time comprise the
Shopping Center. Such costs and expenses shall include, but not be limited to,
illumination and maintenance of Shopping Center signs, whether located on or off
the Shopping Center site; cleaning, lighting, striping and landscaping; premiums
for liability and property insurance; personal property taxes; supplies, holiday
decorations; pre-opening costs; the cost of maintenance and replacement of
equipment supplying music to the common areas; the reasonable depreciation of
maintenance equipment used in the operation and maintenance of the common areas
and project areas; contribution for amortization of the cost of all capital
investment items which are primarily for the purposes of increasing the
operating efficiency of any portion of the Premises, reducing the Shared
Expenses or attempting to satisfy what may be required by any governmental
authority; total compensation and benefits (including premiums for workmen's
compensation and other insurance) paid to or on behalf of employees involved in
the performance of the work specified in this Section. Included in the costs of
such common area maintenance shall be a management fee paid by or to Landlord,
provided such fee does not exceed the market rates for such services. For the
purpose hereof, any charges for utilities contained in the foregoing costs and
expenses shall be at the same rates as the rates for comparable service from the
applicable utility company serving the area in which the Shopping Center is
located.
Within ninety (90) days after the end of each Lease Year or
partial Lease Year, Landlord shall furnish tenant with a statement of the actual
amount of Tenant's proportionate share of such costs and expenses for such
period. If the actual amount paid by tenant under this Section for any calendar
year shall be less than the actual amount due from Tenant for such year as shown
on such statement, Tenant shall pay to Landlord the difference between the
amount paid by Tenant and the actual amount due, such deficiency to be paid
within thirty (30) days after the furnishing of each statement, and if the total
amount paid by Tenant hereunder for any such calendar year shall exceed such
actual amount due from Tenant for such calendar year, such excess shall be
credited against the next installment due from Tenant to Landlord under this
Section. The foregoing notwithstanding, Landlord's operating expenses shall be
reasonable; that is, the charges for the cost of operating the building, the
cost of equipment salaries, the cost of common area maintenance and related
operating expenses shall be comparable on a square foot basis to those costs and
expenses incurred by similar shopping centers in the subject market area. With
respect to each calendar month falling wholly within the term of this Lease,
Tenant shall pay in advance, on the first of the month, one-twelfth (1/12) of
Tenant's estimated annual pro-rata share of such costs and expenses, which costs
and expenses, as aforesaid, comprise a portion of the Shared Expenses.
8.3 Use of Common Areas. The term "common areas", as used in this
Lease, shall mean the parking areas, roadways, pedestrian sidewalks, truckways,
loading dock, delivery areas, landscaped areas, public bathrooms and comfort
stations, flashings, gutters and downspouts, and all other areas or improvements
which may be provided by the Landlord for the convenience and use of the tenants
of the Shopping Center and their respective subtenants, agents, employees,
customers, invitees, and any other licensees of Landlord. The use and occupancy
by the Tenant of the Premises shall include the use, in common with all others
to whom Landlord has granted or may hereafter grant rights to use the same of
the common areas located within the Shopping Center, and of such other
facilities as may be designated from time to time, subject, however, to rules
and Regulations for the use thereof as prescribed from time to time by the
Landlord. Tenant and its employees shall park their cars only in areas
specifically designated from time to time by Landlord for that purpose.
Automobile license numbers of employees' cars shall be furnished to Landlord
upon Landlord's request. Landlord may at any time close temporarily any common
area to make repairs or changes, to prevent the acquisition of public rights in
such area or to discourage non-customer parking; and may do such other acts in
and to the common areas as in its judgment may be desirable to improve the
convenience thereof. Tenant shall have the right within one (1) year after the
end of each Lease Year upon written request to Landlord to audit all the books
of account, documents, records and files of Landlord regarding the common area
expenses. Should Tenant's audit of Landlords "Shared Expenses" indicate that an
error was made in billing Tenant for the Shared Expenses or in the events common
cost is not reasonably substantiated, then Tenant's pro rata share of the Shared
Expenses shall be recalculated and Tenant shall receive a credit for the same
against Tenant's future Shared Expense payments. In the alternative, Landlord
shall have the right to make such p
ayment by check.
<PAGE>
ARTICLE 9
ALTERATIONS AND SIGNS
9.1 Alterations by Tenant. Tenant will not make any alterations,
renovations, improvements or other installations in or to any part of the
Premises (including, without limitation, any alterations of the storefront,
signs, structural alterations, or any cutting or drilling into any part of the
Premises or any securing of any fixture, apparatus or equipment of any kind to
any part of the Premises), unless and until Tenant shall have caused plans and
specifications therefor to have been prepared, at Tenant's expense, by an
architect or other duly qualified person and shall obtain Landlord's written
approval thereof. If such approval is granted, Tenant shall cause the work
described in such plans ad specifications to be performed, at its expense,
promptly, efficiently, competently and in a good and workmanlike manner by duly
qualified or licensed persons or entities, All such work shall comply with all
rules and regulations front time to time adopted by Landlord. Tenant shall have
the right to install a satellite dish on the roof of the Premises, subject to
Landlord's prior written approval as more particularly set forth in this
paragraph. Tenant may, from time to time, at Tenant's sole cost and expense,
paint and decorate the Premises and make such non-structural changes,
alterations, additions and improvements as will, in the reasonable judgment of
Tenant, better adapt the Premises for the conduct of Tenant's business.
9.2 Fixtures and Personal Property. Any trade fixtures, signs and other
personal property of Tenant not permanently affixed to the Premises shall remain
the property of Tenant. Notwithstanding the foregoing to the contrary, the sign
on the canopy shall become the property of Landlord. All improvements to the
Premises by Tenant including, but not limited to, light fixtures, floor
coverings and partitions, but excluding trade fixtures and signs, shall become
the property of Landlord upon the expiration or earlier termination of this
Lease.
9.3 Signs. Tenant will not place or cause to be placed or maintained
any sign or advertising matter of any kind anywhere within the Shopping Center,
except in the interior of the Premises, without Landlord's prior written
approval. No symbol, design, name, mark or insignia adopted by the Landlord for
the Shopping Center shall be used without the prior written consent of Landlord.
No illuminated signs located in the interior of any store and which are visible
from the outside shall advertise any product. All signs located in the interior
of any store shall be in good taste so as not to detract from the general
appearance of the store and the Shopping Center. Tenant further agrees to
maintain in good condition and repair at all times any such sign or advertising
matter of any kind which has been approved by Landlord for use by Tenant. At
such time as Landlord's sign criteria and specifications are completed, they
will be attached to and become part of this Lease as Exhibit E.
9.4 INTENTIONALLY DELETED.
ARTICLE 10
MAINTENANCE OF PREMISES
10.1 Landlord's Obligations for Maintenance. Landlord shall keep and
maintain the foundation, exterior walls and roof of the building in which the
Premises is located and the structural portions of the Premises which were
originally installed by Landlord; exclusive of doors, door frames, door checks,
windows, and exclusive of window frames located in exterior building walls, in
good repair, to the extent that Landlord is reimbursed therefor under any policy
of insurance permitting waiver of subrogation in advance of loss; except,
however, that Landlord shall not be called upon to make any such repairs
occasioned by the act or negligence of Tenant, its agents, employees, licensees
or contractors. Landlord shall not be called upon to make any other improvements
or repairs of any kind upon the Premises and appurtenances, except as may be
specifically be required hereunder.
<PAGE>
10.2 Tenant's Obligations for Maintenance.
(a) Except as provided in Section 10.1 above, Tenant shall keep and
maintain in good order, condition and repair (including replacement parts and
equipment if necessary) the Premises and every part thereof and any and all
appurtenances thereto wherever located, including, but without limitation, the
exterior and interior portion of all doors, door checks, windows, plate glass
store front, all electrical plumbing and sewage facilities within the Premises,
including free flow up to the main sewer line, fixtures, heating and air
conditioning and electrical systems (whether or not located in the Premises),
sprinkler system, walls, floors and ceilings. The plumbing and sewage facilities
shall not be used for any other purpose than for which they are constructed, and
no foreign substance of any kind shall be introduced therein. Tenant hereby
agrees to be responsible for any expenses incurred in connection with any
breakage, stoppage or damage resulting from a violation of this provision by
Tenant, its agents, employees, invitees, licensees or contractors.
(b) Tenant shall keep and maintain the Premises in a clean, sanitary
and safe condition in accordance with the laws of the State of Florida and in
accordance with all directions, rules and regulations of the health officer,
fire marshall, building inspector, or other proper officials of the governmental
agencies having jurisdiction, at the sole cost and expense of Tenant, and Tenant
shall comply with all requirements of law, ordinance and otherwise, affecting
the Premises. If Tenant refuses or neglects to commence or complete repairs
required by subparagraphs (a) and (b) hereof promptly and adequately, Landlord
may, without notice and without having any obligation to do so, make all or any
part of said repairs and Tenant shall pay the cost thereof to Landlord upon
demand, as Additional Rent. Tenant covenants to give Landlord prompt written
notice of any accident, fire or damage occurring on or to the Premises or to any
defects therein or in any fixtures or equipment. Neither Landlord nor Landlord's
agents or servants shall be liable for any damages caused by or growing out of
any breakage, leakage, or defective condition of the electric wiring, air
conditioning or heating pipes and equipment, closets, plumbing, appliances,
sprinklers, other equipment, or other facilities, serving the Premises. Neither
Landlord nor Landlord's agents or servants shall be liable for any damages
caused by, or growing out of any defect in the Premises or any part thereof for
fire, rain, wind or other cause.
(c) Tenant, at its own expense, shall install and maintain
fire extinguishers and other fire protection devices as may be required from
time to time by any agency having jurisdiction thereof and the insurance
underwriters insuring the building in which the Premises are located.
(d) Landlord, at its option, may obtain, an air conditioning
maintenance agreement servicing all or part of the Shopping Center, and in such
event, the cost of said agreement shall be borne proportionately among the
tenants of the Shopping Center, as part of the Shared Expenses.
10.3 Liens. Tenant hereby acknowledges that the interest of Landlord in
the Premises shall not be subject to liens for improvements made by Tenant. In
confirmation of the foregoing, nothing contained in this Lease shall be
construed as a consent on the part of Landlord to subject the estate of landlord
to liability under the construction lien law of the State of Florida, it being
expressly understood that Landlord's estate shall not be subject to such
liability. Tenant shall strictly comply with the construction lien law of the
State of Florida. In the event that a claim of lien is filed against the
Premises or all or any portion of the Shopping Center in connection with any
work performed by or on behalf of Tenant, Tenant shall satisfy such claim, or
<PAGE>
shall transfer same to security, within ten (10) days from the date of filing.
In the event that Tenant fails to satisfy or transfer such claim within said ten
(10) day period, Landlord may do so and thereafter charge Tenant, as Additional
Rent, all costs incurred by Landlord in connection with satisfaction or transfer
of such claim, including attorneys' fees. Further, Tenant agrees to indemnify,
defend and save Landlord harmless from and against any damage or loss incurred
by Landlord as a result of any such claims of lien. If so requested by Landlord,
Tenant shall execute a short form or memorandum of this Lease, which may, in
Landlord's discretion be recorded in the Public Records for the purpose of
protecting Landlord's estate from claims of liens, as provided in Florida
statutes. In the event such short form or memorandum of lease is executed,
Tenant shall simultaneously execute and deliver to Landlord an instrument
terminating Tenant's interest in the real property upon which the Premises is
located which instrument may be recorded by Landlord at the expiration of the
Lease Term, or such earlier termination hereof. This paragraph shall survive the
expiration of the Lease Term or the earlier termination of this Lease.
ARTICLE 11
INSURANCE AND INDEMNITY
11.1 Insurance Coverage by Tenant. Tenant agrees to carry and keep in
full force and effect, during the Lease Term: (a) bodily injury, public
liability insurance on and adjacent to the Premises against the liability of
Premises, with limits of coverage of not less than One Million and No/100
Dollars ($1,000,000.00) per accident and injury or death; property damage
insurance in an amount not less than Five Hundred Thousand and No/100 Dollars
($500,000.00); (b) workers compensation insurance in the maximum amount
permitted under Florida law; (c) insurance against fire, flood and such other
risks as are, from time to time, included in standard extended coverage
insurance, including insurance against sprinkler damage, vandalism and malicious
mischief; and (d) plate glass insurance covering all the plate glass of the
Premises, in amounts satisfactory to Landlord. Landlord may require Tenant to
increase the foregoing limits of liability insurance from time to time to new
levels reasonably required by Landlord. The proceeds of such insurance, so long
as this Lease remains in effect, shall be to repair or replace the fixture and
equipment so insured for the full replacement value (without provision for
coinsurance) of all of Tenant's merchandise, trade fixtures, furnishings, wall
coverings, carpeting, drapes, equipment and all other items of personal property
of Tenant located on or within the Premises. The replacement of any plate glass
damaged or broken from any cause whatsoever in and about the Premises shall be
Tenant's responsibility. All policies shall name Landlord, any person, firms, or
corporations designated by Landlord, as additional insured(s), and shall contain
a clause that the insurer will not cancel or change the insurance without first
giving Landlord ten (10) days prior written notice. The insurance carrier
providing the insurance as required hereunder shall be satisfactory to Landlord
in Landlord's sole discretion and licensed in the State of Florida. Tenant shall
provide Landlord with copies of the policies or certificates evidencing that
such insurance is in full force and effect and stating the terms thereof. The
limits of such insurance shall not, under any circumstances, limit the liability
of Tenant hereunder. In the event Tenant fails to procure, maintain and/or pay
for the insurance required by this Lease, at the times and for the durations
specified in this Lease, Landlord shall have the right, but not the obligation,
at any time and from time to time, and without notice to Tenant, to procure such
insurance and/or pay for the premiums for such insurance, in which event Tenant
shall repay Landlord immediately upon demand by Landlord as Additional Rent
hereunder, all sums so paid by Landlord together with the interest at the
Applicable Rate, together with any costs of expenses incurred by Landlord in
connection therewith, without prejudice to any other rights and remedies of the
Landlord under this Lease. Each policy evidencing the insurance to be carried by
Tenant pursuant to this Lease shall contain a clause that such policy and the
coverage evidenced thereby shall be primary with respect to any policies by
Landlord and that any coverage carried by Landlord shall be excess insurance.
<PAGE>
11.2 Insurance Coverage by Landlord. Landlord shall maintain during the
Lease Term (and the cost thereof shall be included in the Shared Expenses),
insurance for fire, extended coverage, flood, windstorm, vandalism and malicious
mischief, insuring the improvements located on the Premises and all
appurtenances thereto (excluding wall covering, floor covering and drapes).
Landlord may also maintain (a) rent or rent value insurance including an
extended coverage endorsement with respect to the Premises in an amount equal to
the annual Rent for tie Premises; and (b) such other insurance as Landlord deems
reasonably necessary or desirable to protect the Premises against loss.
Payments for losses under any such insurance policies shall be
made solely to Landlord. Notwithstanding the foregoing, if any loss sustained by
Landlord is caused by the negligence of Tenant, its agents, servants, employees,
licensees, invitees or guests, then Tenant shall be liable to Landlord for the
amount of the deductible under Landlord's insurance. Further, Landlord shall not
be responsible for loss or damage to items for which Tenant is responsible, as
is more fully set forth above.
11.3 Waiver of Subrogation. Landlord and Tenant waive, unless said
waiver should invalidate any such insurance, their right to recover damages
against each other for any reason whatsoever to the extent the damaged property
owner recovers indemnity from its insurance carrier. All public liability and
property damage policies shall contain an endorsement that Landlord, although
named as an additional insured, shall nevertheless be entitled to recover the
damages caused by the negligence of Tenant.
11.4 Tenant's Contractor's Insurance. Tenant shall require any
contractor of Tenant performing work on the Premises to carry out and maintain,
at no expense to Landlord:
(a) Comprehensive general liability insurance, including
contractor's liability coverage, contractual liability coverage, completed
operations coverage, broad form property damage endorsement and contractor's
protective liability coverage to afford protection, with limits for each
occurrence of not less than Three Million and No/l00 Dollars ($3,000,000.00)
with respect to personal injury or death, and One Million and No/100 Dollars
($1,000,000.00) with respect to personal injury or death, and One Million and
No/100 Dollars ($1,000,000.00) with respect to property damage; and
(b) Workers' compensation or similar insurance in form and
amounts required by law.
11.5 Increase in Fire Insurance Premium. Tenant agrees that it will not
keep, use, sell or offer for sale in or upon the Premises any article which may
be prohibited by the standard form of fire and extended risk insurance policy.
Tenant agrees to pay any increase in premiums for fire and extended coverage
insurance that may be charged during the Lease Term on the amount of such
insurance which may be carried by Landlord on the Premises or the building of
which they are a part, resulting from the type of merchandise sold by Tenant in
the Premises or resulting from Tenant's use of the Premises, whether or not
Landlord has consented to the same. In determining whether increased premiums
are the result of Tenant's use of the Premises, a schedule issued by the
___________ making the insurance rate _____ Premises, showing the various
components of such rate, shall be conclusive evidence of the several items and
charges which make up the fire insurance rate on the Premises. Tenant agrees to
promptly make, at Tenant's cost, any repairs, alterations, changes and/or
improvements to equipment in the Premises required by the company issuing
Landlord's fire insurance so as to avoid the cancellation of or the increase in
premiums on said insurance.
ARTICLE 12
UTILITY CHARGES
12.1 Utility Charges. Tenant shall be solely responsible for and
promptly and timely pay all charges for the use or consumption of all utility
services used or consumed within the Premises, including, without limitation,
water, gas, heat, electricity and sewer. If Landlord shall elect to supply any
of the foregoing utilities used upon or furnished to the Premises, Tenant agrees
to purchase and pay for same as Additional Rent, at the applicable rates filed
by the utility company serving the area with the proper regulating authority and
in effect from time to time covering such services. Further, Tenant hereby
agrees to pay its proportionate share of any cost incurred by Landlord in
connection with the maintenance and operation of any such utility system
installed by Landlord for the exclusive use of the Shopping Center. The
obligation of the Tenant to pay for such utilities shall commence on the
Commencement Date, without regard to any free rental period or formal
commencement date of this Lease.
<PAGE>
ARTICLE 13
OFF-SET STATEMENT, ATTORNMENT AND SUBORDINATION
13.1 Off-Set Statement. Tenant agrees within ten (10) days after
request by Landlord to execute in recordable form and deliver to Landlord a
statement, supplied by Landlord, certifying (a) that this Lease is in full force
and effect, (b) the Commencement Date, (c) that rent is paid currently without
any off-set or defense thereto, (d) the amount of Rent, if any, paid in advance,
(e) that there are no uncured defaults by Landlord or stating those claimed by
Tenant, provided that, in fact, such facts are accurate and ascertainable; and
(f) any and all other information requested by Landlord.
13.2 Attornment. Tenant shall, in the event of a sale or assignment of
Landlord's interest in whole or in part in the Premises, or if the Premises or
the building in which they are located comes into the hands of a mortgagee,
ground lessor or any other person, whether because of a mortgage foreclosure,
exercise of a power of sale under a mortgage, termination of the ground lease or
otherwise, attorn to the purchaser or such mortgagee or other person and
recognize the same as Landlord hereunder. Tenant shall execute, at Landlord's
request, any attornment agreement required by any mortgagee, ground lessor or
other such person to be executed, containing such provisions as such mortgagee,
ground lessor or other person requires.
13.3 Subordination. Tenant hereby subordinates its rights hereunder to
the lien of any mortgage or mortgages or the lien resulting from any other
method of financing or refinancing, now or hereafter in force against the
Premises and to all advances made or hereafter to be made upon the security
thereof. This shall be self-operative and no further instrument of subordination
shall be required by any mortgagee. However, Tenant, upon request of any party
in interest, shall execute promptly such instrument or certificates to carry out
the intent hereof as shall be required by Landlord. Tenant hereby irrevocably
appoints Landlord as Attorney in Fact for Tenant, with full power and authority
to execute and deliver, in the name of Tenant, any such instrument or
certificates.
13.4 Financing Agreements. Tenant shall not enter into, execute or
deliver any financing agreement that can be considered as a priority to any
mortgage or deed of trust that landlord may have placed upon the Premises.
ARTICLE 14
ASSIGNMENT AND SUBLETTING
14.1 Consent Required. Tenant shall not sell, transfer, assign,
sublet, enter into any license, management or concession agreements, change
ownership, pledge, mortgage or hypothecate this Lease or Tenant's interest in
and to the Premises (hereafter "Disposition") without the prior written consent
of Landlord. Any Disposition without Landlord's written consent shall be void
and confer no rights upon any third person. Without in any way limiting
Landlord's right to refuse to give such consent for any other reason or reasons,
Landlord reserves the right to refuse to give such consent if Tenant is in
default hereunder or if in Landlord's business judgment the quality of
merchandising operation on the Premises is or may be in any way adversely
affected during the Lease Term or the financial worth of the proposed new tenant
is less than that of Tenant or of Tenant's guarantor, as the case may be.
Nothing in this paragraph shall relieve or release Tenant and any guarantor from
its covenants and obligations for the Lease Term. Tenant agrees to reimburse
Landlord for Landlord's reasonable attorneys' fees incurred in conjunction with
the processing and documentation of any requested Disposition. No interest in
this Lease shall pass to any trustee or receiver in bankruptcy, to any estate of
Tenant, to any assignee of Tenant for the benefit of creditors or to any other
party by operation of law or otherwise without Landlord's written consent. If
this Lease is assigned, or if the Premises or any part thereof is underlet or
<PAGE>
occupied by any party other than Tenant, Landlord may collect rent from the
assignee, subtenant or occupant, and apply the net amount collected to the rent
herein reserved, but not such assignment, underletting, occupancy, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, subtenant or occupant as Tenant, or a releasal of Tenant from ____
other performance by Tenant of _______ on the part of Tenant herein contained.
This prohibition against __ position shall be construed to include a prohibition
against any assignment or subleasing by operation of law, legal process,
receivership, bankruptcy or otherwise, whether voluntary or involuntary and a
prohibition against any encumbrance of all and any part of Tenant's leasehold
interest in the Premises. Notwithstanding the foregoing to the contrary,
Landlord shall not unreasonably withhold its consent to an assignment or
subletting if the assignee or sublessee, as the case may be, (i) operates the
Premises pursuant to a use which does not violate any of the use restrictions
granted to any of the tenants in the Shopping Center; (ii) operate the Premises
pursuant to a use which does not conflict with any existing use in the Shopping
Center; (iii) operates the Premises pursuant to a use which is consistent with
the quality and character of the Shopping Center; and (iv) has a net worth that
is equal to or greater than Tenant's.
14.1 Change in Ownership. Without limiting the foregoing, if Tenant is
a corporation, an unincorporated association or partnership, the transfer,
assignment or hypothecation of any stock or interest in such corporation,
association or partnership in the aggregate in excess of twenty-five (25%) shall
be deemed a Disposition.
ARTICLE 15
WASTE, ENVIRONMENTAL, GOVERNMENTAL REGULATIONS
15.1 Waste or Nuisance. Tenant shall not commit or suffer to be
committed any waste upon the Premises or any nuisance or other act or thing
which may disturb the quiet enjoyment of any other tenant in the building in
which the Premises may be located, or in the Shopping Center. Tenant shall not
use or permit to be used, any medium that might constitute a nuisance, such as
loud speakers, sound amplifiers, phonographs, radios, televisions, or any other
sound producing device which will carry sound outside the Premises.
15.2 Environmental Provisions. Tenant agrees to comply strictly and in
all respects with the requirements of any and all federal, state and local
statutes, rules and regulations now or hereafter existing relating to the
discharge, spillage, storage, uncontrolled loss, seepage, filtration,
disposition, removal or use of hazardous materials, including but not limited to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act, the Resource
Conversation and Recovery Act, the Hazardous Materials Transportation Act and
the Florida Hazardous Substances Law (collectively the "Hazardous Waste Law")
and with all similar applicable laws and regulations. Tenant shall notify
Landlord promptly in the event of any discharge, spillage, uncontrolled loss,
seepage or filtration of oil, petroleum, chemical liquids or solids, liquid or
gaseous products or any other hazardous materials (a "Spill") or the presence of
any substance or material presently or hereafter identified to be toxic or
hazardous according to any Hazardous Waste Law, including without limitation,
any asbestos, PCBs, radioactive substance, methane, volatile hydrocarbons,
acids, pesticides, paints, petroleum based products, lead, cyanide, DDT,
printing inks, industrial solvents or any other material or substance which has
in the past or could presently or at any time in the future cause or constitute
a health, safety or other environmental hazard to any person or property
(collectively "Hazardous Materials") upon the Premises. Tenant shall promptly
forward to Landlord copies of all orders, notices, permits, applications or
other communications and reports, notices, permits, applications or other
communications and reports in connection with any such Spill or Hazardous
Materials. Tenant shall not handle, use, generate, manufacture, store or dispose
of Hazardous Materials in, upon, under or about the Premises. Tenant shall
indemnify Landlord and hold Landlord harmless from and against all loss,
penalty, liability, damage and expense suffered or incurred by Landlord related
to or arising out of the presence of Hazardous Materials on the Premises: which
loss, damage, penalty, liability, damage and expense shall include, but not be
limited to (a) court costs, attorneys' and paraprofessional fees and expenses
through and including any appellate proceedings; (b) all foreseeable and
<PAGE>
unforeseeable consequential damages, directly or indirectly, arising out of the
use, generation, storage or disposal of Hazardous Materials by Tenant; (c) the
cost of any required or necessary repair; clean-up or detoxification of the
Premises; and (d) the costs or preparation of any closure or other plans
required under the Hazardous Waste Law, necessary to sell or lease the Premises.
ARTICLE 16
ADVERTISING
16.1 Change of Name. Tenant agrees (a) to operate its business in the
premises under the name of VIDEO QUIKLAB so long as the same shall not be held
to be in violation of any applicable law, and (b) not to change the advertised
name or character of the business operated in the Premises without the prior
written approval of Landlord.
ARTICLE 17
DESTRUCTION OF PREMISES
17.1 Reconstruction of Damaged Premises. In the event the Premises
shall be partially or totally destroyed by fire or other casualty insured under
the insurance carried by Landlord pursuant to this Lease, as to become partially
or totally untenantable, subject to the requirements of any first mortgagee and
to the terms of any first mortgage encumbering the Shopping Center, the damage
to the Premises shall be promptly repaired by Landlord to the extent, however,
of the proceeds received from such insurance, unless Landlord shall elect not to
rebuild as hereinafter provided, and a just and proportionate part of Rent and
Additional Rent shall be abated, and the minimum Gross Sales above which annual
Percentage Rent is computed shall be reduced by the same proportion, until so
repaired. The obligation of Landlord hereunder shall be limited to
reconstructing the Premises in accordance with the initial plans and
specifications for the construction of the Premises. In no event shall Landlord
be required to repair or replace Tenant's merchandise, trade fixtures,
furnishings or equipment. If more than thirty-five (35%) percent of the Premises
or of the floor area of the building in which the Premises is located shall be
damaged or destroyed by fire or other casualty, then Landlord may elect either
to repair or rebuild the Premises or the building of which the Premises is a
part, as the case may be, or to terminate this Lease by giving written notice to
Tenant of its election to so terminate, such notice to be given within one
hundred twenty (120) days after the occurrence of such damage or destruction. If
Landlord is required or elects to repair or rebuild the premises as herein
provided, Tenant shall repair or replace its merchandise, trade fixtures,
furnishings and equipment in a manner and to at least a condition equal to that
prior to its damage or destruction.
ARTICLE 18
EMINENT DOMAIN
18.1 Total Condemnation of Premises. If the whole of the Premises shall
be taken by any public authority under the power of eminent domain, then the
Lease Term shall cease as of the day possession shall be taken by such public
authority and the Rent shall be paid up to that day with a proportionate refund
by Landlord of such Rent as may have been paid in advance for a period
subsequent to the date of the taking.
<PAGE>
18.2 Partial Condemnation.
(a) If any part of the Premises shall be taken under eminent
domain, or if less than the whole but more than thirty (30%) percent of the
building in which the Premises is located shall be taken under eminent domain,
then Landlord and Tenant shall each have the right to terminate this lease and
declare the same null and void, by written notice of such intention to the other
party with ten (10) days after such taking. In the event neither party exercises
said right of termination the lease Term shall cease only on the part so taken
as of the day possession shall be taken as of the day possession shall be taken
by such public authority and Tenant shall pay rent up to that day, with
appropriate refund by Landlord of such rent as may have been paid in advance for
a period subsequent to the date of the taking, and thereafter all the terms
herein provided shall continue in effect, except that Rent shall be reduced in
proportion to the amount of the Premises taken and the minimum Gross Sales above
which annual Percentage Rent is computed and payable shall likewise be
proportionately reduced and Landlord shall, at its own cost and expense, make
all the necessary repairs or alterations to the building that the remaining
Premises will again become a complete architectural unit.
(b) If more than thirty (30%) percent of the common areas
shall be taken under the power of eminent domain, Landlord may by written notice
to Tenant within ten (10) days after such taking, terminate this Lease and
declare the same null and void.
18.3 Landlord's and Tenant's Damages. All damages awarded for such
taking under the power of eminent domain, whether for the whole or a part of the
Premises, shall be long to and be the property of Landlord whether such damages
shall be awarded as compensation for diminution in value to the leasehold or to
the fee of the premises; provided, however, that Landlord shall not be entitled
to the award made for depreciation to, and cost of removal of Tenant's stock and
fixtures.
ARTICLE 19
DEFAULT OF THE TENANT
19.1 Events of Default. The occurrence of any one (1) or more of the
following events shall constitute an "Event of Default" and breach of this Lease
by Tenant:
(a) If Tenant fails to pay Rent, Additional Rent or any other
additional rent or other charge required to be paid by Tenant under this Lease
and such failure continues for ten (10) days; or
(b) If Tenant fails to promptly and fully perform any other
covenant, condition, rule, regulation or agreement contained in this Lease or
perform within the time periods set forth in this lease and such failure
continues for fifteen (15) days; or
(c) If a writ of attachment or execution is levied on this
Lease or on any of Tenant's property or any property of any Guarantor of this
Lease (herein "Guarantor"); or
(d) If Tenant or any guarantor makes a general assignment for
the benefit of creditors, or provides for an arrangement, composition, extension
or adjustment with its creditors or is generally insolvent or unable to pay its
obligations as they come due; or
(e) If Tenant or any Guarantor files a voluntary petition for
relief or if a petition against Tenant or any Guarantor in a proceeding under
the federal bankruptcy laws or other insolvency laws in filed and not withdrawn
or dismissed within forty-five (45) days thereafter, or if under the provisions
of any law providing for reorganization or winding up of corporations, any court
of competent jurisdiction assumes jurisdiction, custody or control remains in
force unrelinquished, unstayed or unterminated for a period of forty-five (45)
days or if Tenant or any Guarantor is adjudged a bankrupt; or
(f) If in any proceeding or action in which Tenant or any
Guarantor is a party, a trustee, receiver, agent or custodian is appointed to
take charge of the Premises, or Tenant's or any Guarantor's property (or has the
authority to do so) for the purpose of enforcing a lien against the Premises or
Tenants's ________ Guarantor's property; or
<PAGE>
(g) If Landlord discovers that any financial statement
delivered to landlord by Tenant or any Guarantor is false; or
(h) In the event Tenant removes, attempts to remove, or
permits to be removed from the Premises, except in the usual course of trade,
the goods, furniture, effects or other property of Tenant brought thereon; or
(i) In the event Tenant, before the expiration of said lease
Term, and without the written consent of Landlord, vacates said premises or
abandons the possession thereof, or uses the same for purposes other than the
purposes for which the same are hereby leased, or ceases to use the premises for
the purposes herein expressed; or
(j) In the event an execution or other legal process is levied
upon the goods, furniture, effects or other property of Tenant brought on said
Premises, or upon the interest of Tenant in this Lease, and the same is not
satisfied within ten (10) days from such levy.
19.2 Landlord's Remedies. If any Event of Default occurs, then,
landlord shall have the following options, without further notice or demand of
any kind:
(a) Option 1. Sue for Rents as they become due; or
(b) Option 2. (i) terminate this Lease; (ii) resume possession
of the Premises (together with all additions, alterations, fixtures and
improvements thereto) for its own account; and (iii) recover immediately from
Tenant any and all sums and damages for violation of Tenant's obligations
hereunder in existence or due at the time of termination and damages for
tenant's default in an amount equal to the difference between the Rent for which
provision is made in this Lease and fair rental value of the Premises for the
remainder of the Lease Term, together with all other charges, rental payments,
costs and expenses herein agreed to be paid by Tenant which include, but are not
limited to, all costs and expenses of Landlord in connection with any attempts
to release or relet the Premises (including, but not limited to, broker's fees,
advertising costs and cleaning expenses), the costs of recovering the premises,
and the costs of repairs and renovations reasonably necessary in connection with
any re-leasing or reletting;
(c) Option 3. Accelerate the whole or any part of Rent,
Additional Rent and Shared Expenses for the entire unexpired balance of the
Lease Term, as well as all other charges, payments, costs and expenses to be
paid by Tenant hereunder, including but not limited to damages for violation of
Tenant's obligations hereunder in existence at the time of acceleration, so that
all sums due and payable under this Lease will be treated as payable in advance
on the date of acceleration and this Lease will remain in effect. For the
purposes of determining the amounts due upon acceleration, the total amount so
accelerated will be reduced to present value (using an assumed interest rate of
8%); or
(d) Option 4. (i) resume possession; (ii) re-lease or re-rent
the Premises for the remainder of the Lease Term for the account of Tenant;
(iii) recover from Tenant at the end of the Lease Term or at the time each
payment of Rent becomes due under this Lease (adjusted to present value using an
assumed interest rate of 8%), as Landlord may elect, the difference between the
rent for which provision is made in this Lease and the rent received on the
re-leasing or re-renting, together with all costs and expenses of Landlord in
connection with such re-leasing or re-rental, the collection of rent and the
cost of all repairs or renovations reasonably necessary in connection with the
re-leasing or re-rental for the purpose of such reletting, Landlord is
authorized to decorate, to make any repairs to the Premises and/or to subdivide
or restructure the Premises as Landlord sees fit ("Tenancy Repairs and
Modifications"). Further, Landlord is authorized to enter into new leases in
which the Lease Term or other terms and conditions are different from this Lease
("Lease Modifications"). Concerning any Tenancy Repairs and Modifications and
any Lease Modifications, Tenant agrees that such Tenancy Repairs and
Modifications and Lease Modifications are being performed for the purpose or
reletting and mitigating Tenant's damages, and, as such are done for the benefit
of the Tenant and are valid costs or reletting; and (iv) Recover from Tenant
immediately any other damages occasioned by or resulting from the abandonment or
a breach or default other than a default in the payment or rent; or
(e) Option 5. Without terminating this Lease, enter upon the
Premises, without being liable for prosecution or any claim for damages therefor
whether caused by the negligence of landlord or otherwise), and do whatever
Tenant is obligated to do under the terms of this Lease, in which event Tenant
shall reimburse landlord on demand for any expenses which Landlord may incur in
thus effecting compliance with the terms of this Lease.
<PAGE>
Notwithstanding the foregoing, with respect to re-leasing or
re-renting the Premises, Landlord and Tenant agree that Landlord shall only be
required to use the same efforts Landlord then uses to lease other properties
Landlord owns or manages; provided, however, that Landlord shall not be required
to give any preference or priority to the showing _________ of the Premises over
any other space that Landlord may be leasing ________ available and may place a
________ prospective tenant in any such available space regardless of when such
________ space becomes available; provided, further, that Landlord shall not be
required to observe any instruction given by tenant about such re-letting or
accept any tenant unless such offered tenant has a creditworthiness acceptable
to landlord, leases the entire Premises, agrees to use the Premises in a manner
consistent with the Lease, and leases the Premises at the same or greater rent,
for no more than the current Lease Term, on the same terms and conditions of
this Lease, and does not require an expenditure by Landlord for tenant
improvements or broker's commissions.
19.3 Remedies Non-Cumulative. The remedies given to Landlord in this
Article shall be in addition and supplemental to all other rights of remedies
which landlord may have under law or in equity.
19.4 Non-Waiver. The waiver by Landlord of any breach of any term,
covenant or condition of this Lease shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition. The
subsequent acceptance of Rent by landlord shall not be deemed to be a waiver of
any preceding breach by Tenant of any term, covenant or condition of this Lease
other than the failure of Tenant to pay the Rent so accepted, regardless of
landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No covenants, term or condition of this Lease shall be deemed to have been
waived by Landlord unless such waiver is in writing signed by Landlord.
19.5 Rent Payments Under Default. In the event of a default of any Rent
payment or any other payment due under this Lease, Landlord may in Landlord's
notice to Tenant of such default require Tenant's payment to cure the default be
in cash, cashier's check, and/or certified check. Landlord and Tenant agree that
should Landlord so elect to require payment by cash, cashier's check or
certified check in Landlord's notice to Tenant, a tender of money to cure the
default which is not in the form requested by Landlord shall be deemed a failure
to cure the default. Nothing contained in this Section shall in any way diminish
or be construed as waiving any of Landlord's other remedies as provided
elsewhere in this Lease, or by law or in equity.
19.6 Expenses of Enforcement. In the event any payment due Landlord
under this Lease shall not be paid on the due date, said payment shall bear
interest at the Applicable Rate from the due date until paid unless otherwise
specifically provided herein, but the payment of such interest shall not excuse
or cure any default by Tenant under this Lease. In the event that it shall be
necessary for Landlord to give more than one (1) written notice to Tenant of any
violation of this Lease, Landlord shall be entitled to make an administrative
charge to Tenant of Twenty-Five and No/100 Dollars ($25.00) for each such
notice. Tenant recognized and agrees that the charge which Landlord is entitled
to make upon the conditions stated in this Section represent, at the time this
Lease is made, a fair and reasonable estimate and liquidation of the costs of
Landlord in the administration of the Premises resulting from the events
described, which costs are not contemplated or included in any other rental or
charges provided to be paid by Tenant to Landlord in this Lease. Any charges
becoming due under this paragraph of this Lease shall be added and become due
with the next ensuing monthly payment of Rent and shall be collectible as a part
thereof.
19.7 Lien for Rent. In order to secure Tenant's payment of all rental
and other sums due hereunder, Tenant hereby grants to Landlord an express
contractual lien upon all property of Tenant now or hereafter placed in or upon
<PAGE>
the Premises, except such part of such property as may be exchanged, replaced or
sold from time to time in the ordinary course of Tenant's operations. All such
property will be and remain subject to such lien of Landlord and, subject to
foreclosure in accordance with the applicable laws of the State of Florida. Such
express lien will be in addition to and cumulative of any landlord's lien
provided by the laws of the State of Florida.
ARTICLE 20
LIABILITY AND INDEMNITY
20.1 Limitations of Landlord's Liability; Indemnity. Landlord shall not
be liable in any way responsible to Tenant or any other person for any loss,
injury or damage suffered by Tenant or others in respect of (a) property of
Tenant or others that is stolen or damaged, (b) injury or damage to persons or
property resulting from fire, explosion, falling plaster, escaping liquid or
gas, electricity, water, rain or leaks from any part of the Premises or from any
pipes, appliances or plumbing work therein, or from dampness, (c) damage caused
by other tenants, occupants or persons in the Premises, or the public, or caused
by operations in the construction of any private or public work, (d) loss or
damage, however caused, other than loss or damage directly caused by fault of
Landlord and which is not otherwise excluded by the provisions of this Section.
Tenant shall look solely to the estate and property of Landlord in the land and
building comprising the Premises for the collection of any judgment, or in
connection with any other judicial process, requiring the payment of money by
Landlord in the event of any default or breach by Landlord with respect to any
of the terms, covenants and conditions of this Lease to be observed and
performed by Landlord and no other property or estates of landlord shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of Tenant's remedies and rights under this Lease.
ARTICLE 21
ACCESS BY LANDLORD
21.1 Right of Entry. Landlord or Landlord's agent shall have the right
to enter the Premises at all reasonable times upon reasonable notice to examine
the same, and to show them to prospective purchasers or mortgagees of the
building, and to make such repairs, alterations, improvements or additions as
Landlord may deem necessary or desirable, and Landlord shall be allowed to take
all material into and upon the Premises that may be required therein without the
same constituting an eviction of Tenant in whole or in part, ________ reserved
shall in no way abate while said repairs, alterations, improvements, or
additions are being made by reason of loss or interruption of business of
Tenant, or otherwise. During the six (6) months prior to the expiration of the
Lease Term or any Renewal Term, Landlord may exhibit the Premises to prospective
tenants and place upon the Premises the usual notices "To Let" or "For Rent"
which notices Tenant shall permit to remain thereon without molestation.
Landlord shall have the right, in any event, to constantly have keys to the
Premises. Nothing herein contained, however, shall be deemed and construed to
impose upon landlord any obligations, responsibility or liability whatsoever,
for the care, maintenance or repair of the building or any part thereof, except
as otherwise herein specifically provided.
ARTICLE 22
TENANT'S PROPERTY
22.1 Taxes on Tenant's Property. Tenant shall be responsible for and
shall pay before delinquency all municipal, county, state and federal taxes
assessed during the term of this Lease against any leasehold interest or
personal property of any kind, owned by or placed in, upon or about the Premises
by the Tenant.
22.2 Loss and Damage. Landlord shall not be responsible or liable to
the Tenant for any loss or damage that may be occasioned by or through the acts
or omissions of persons occupying adjoining premises, or any part of the
premises adjacent to or connected with the Premises, or any part of the building
of which the Premises are a part, or for any loss or damage resulting to Tenant
or its property from bursting, stoppage or leaking of water, gas, sewer or steam
pipes, or for any damage or loss of property within the Premises from any cause
whatsoever.
22.3 Notice by Tenant. Tenant shall give immediate notice to Landlord
in case of fire or accidents in the Premises or in the building of which the
Premises are a part or of defects therein or in any fixtures or equipment.
<PAGE>
ARTICLE 23
HOLDING OVER
23.1 Holding Over. Any holding over by Tenant after the expiration or
earlier termination of the Lease Term or any Renewal Term with the consent of
Landlord, shall be construed to be a tenancy from month to month (at the monthly
minimum fixed rent herein specified plus one-twelfth (1/12) of the average
annual Percentage Rent payable hereunder for the three lease years
immediately preceding, or the entire portion of the Lease Term, if less than
three (3) Lease Years plus one-twelfth (1/12th of Tenant's portion of the Shared
Expenses), and shall otherwise be on the same terms and conditions herein
specified so far as applicable. If Tenant holds over or occupies the Premises
after expiration of the Lease Term, or the earlier termination of this Lease,
without Landlord's prior written consent, Tenant shall pay Landlord, as
liquidated damages, for each day of such holding over a sum equal to the greater
of (a) twice the monthly Rent prorated for the number of days of such holding
over, or (b) a pro rata portion of all Additional Rent which Tenant would have
been required to pay hereunder had this Lease been in effect. In the event of
any unauthorized holding over, Tenant shall also indemnify Landlord against all
claims for damages by any other tenant to whom Landlord may have leased all or
any part of the Premises effective after the termination of this Lease. No
payments of money by Tenant after expiration of the Lease Term or the earlier
termination of this Lease will reinstate, continue or extend the Lease Term;
reduce the liability of Tenant to Landlord for damages; or affect any
termination notice given by Landlord to Tenant. No extension of the Lease Term
will be valid unless and until the same will be reduced to writing and signed by
both Landlord and Tenant.
23.2 Successors. All rights and liabilities herein given to, or imposed
upon, the respective parties hereto shall extend to and bind the several
respective heirs, legal representatives, executors, administrators, successors,
and assigns of the said parties. If two or more individuals, corporations,
partnerships or other business associations or any combination thereof shall
sign this Lease as Tenant or as Guarantors, the liability of each such
individual, corporation, partnership or other business association to pay rent
and perform all other obligations under this Lease shall be deemed to be joint
and several, and all notices, payments, and agreements given or made by, with or
to any one of such individuals, corporations, partnerships or other business
associations shall be deemed to have been given or made by, with or to all of
them. If Tenant is a partnership or other business association the members of
which are by virtue of statute of federal law subject to personal liability, the
liability of each such member shall be joint and several.
ARTICLE 24
RULES AND REGULATIONS
24.1 Rules and Regulations. Tenant agrees to comply with and observe
all rules and regulations established by Landlord from time to time, provided
the same shall apply uniformly to all tenants of the Shopping Center and do not
discriminate specifically against Tenant's use. Tenant's failure to keep and
observe said rules and regulations shall constitute a breach of the terms of
this Lease in the manner as if the same were contained herein as covenants. The
rules and regulations in effect on the date hereof are attached hereto as
Exhibit F and made a part hereof.
ARTICLE 25
QUIET ENJOYMENT
25.1 Landlord's Covenant. Upon payment by Tenant of the rents herein
provided, and upon the observance and performance of all the covenants, terms
and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Lease Term without
hindrance or interruption by Landlord or any other person or persons lawfully or
equitably claiming by, through or under landlord, subject, nevertheless, to the
terms and conditions of this Lease, and any mortgages to which this Lease is
subordinate.
<PAGE>
ARTICLE 26
MISCELLANEOUS
26.1 Entire Agreement. This Lease and the Exhibits, and Rider, if any,
attached hereto and forming a part hereof, set forth all the covenants,
promises, agreements, conditions and understandings between Landlord and Tenant
concerning the Premises and there are no covenants, promises, agreements,
conditions or understandings, either oral or written, between them other than
are herein set forth. This Lease supersedes all prior agreements, written or
verbal, with respect to the Premises, including without limitation, any letter
of intent. No alternation, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by each
party.
26.2 Interpretation and Use of Pronouns. Nothing contained herein shall
be deemed or construed by the parties hereto, nor by any third party, as
creating the relationship of principal and agent or of partnership or of joint
venture between the parties hereto, it being understood and agreed that neither
the method of computation of rent, nor any other provision contained herein, nor
any acts of the parties herein, shall be deemed to create any relationship
between the parties hereto other than the relationship of landlord and tenant.
Whenever herein the singular number is used, the same shall include the plural,
and the masculine gender shall include the feminine and neuter genders.
26.3 Delays. In the event that either party hereto shall be delayed or
hindered in or prevented from the performance of any act required hereunder by
reason of strikes, lockouts, labor troubles, inability to procure materials,
failure of power, restrictive governmental laws or regulations, riots,
insurrection, war or other reason of a like nature not the fault of the party
delayed in performing work or doing acts required under the terms of this Lease,
then performance of such act shall be excused for the period of the delay and
the period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. The party entitled to such extension
hereunder shall give written notice as soon as possible to the other party
hereto of its claim of right to such extension and the reason(s) therefor. The
provisions of this Section shall not operate to excuse Tenant from prompt
payment of Rent, Percentage Rent or Additional Rent required by the terms of
this Lease.
26.4 Notices. Any notice, demand, request, or other instrument which
may be or its required to be given under this Lease shall be sent by United
States registered or certified mail, return receipt requested, postage prepaid,
hand delivery or by national overnight courier and shall be addressed (a) if to
Landlord, at the address first hereinabove given or at such other address as
Landlord may designate by written notice, and (b) if to Tenant, at the Premises
or at such other address as Tenant shall designate by written notice. Notice
given as described above shall be sufficient service and shall be deemed given
as of the date received as evidenced by the return receipt of the registered or
certified mail or the refusal of acceptance of such notice or after one (1)
business day if by hand delivery or overnight courier service.
26.5 Captions and Section Numbers. The captions, section numbers, and
article numbers appearing in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe, or describe the scope or
intent of such sections or articles of this Lease nor in any way affect this
Lease.
<PAGE>
26.6 Broker's Commission. Tenant represents and warrants unto the
Landlord that, except for the claim of MCAVA Real Estate, Inc. and Lancore
Realty, Inc., there are no claims for brokerage commissions or finder's fees in
connection with this Lease, and Tenant agrees to indemnify Landlord and hold it
harmless from all liabilities arising from any such claim arising from an
alleged agreement or act by the indemnifying party (including, without
limitation, the cost of counsel fees in connection therewith); such agreement to
survive the termination of this Lease.
26.7 Recording. Tenant shall not record this Lease or any memorandum or
short form thereof and any such recordation shall constitute a default
hereunder.
26.8 INTENTIONALLY DELETED.
26.9 Landlord's Use of Common Areas. Landlord reserves the right, from
time to time, to utilize portions of the common areas for carnival type shows,
rides and entertainment, outdoor shows, displays, automobile and other product
shows, the leasing of kiosks, or such other uses which in Landlord's judgment
tend to attract the public. Further, Landlord reserves the right to utilize the
lighting standards and other areas in the parking lot for advertising purposes.
26.10 Transfer of Landlord's Interest. In the event of any transfer or
transfers of Landlord's interest in the premises including a so-called
sale-leaseback, the transferor shall be automatically relieved of any and all
obligations on the part of Landlord accruing from and after the date of such
transfer, provided that (a) the interest of the transferor, as Landlord, in any
funds then in the hands of Landlord in which Tenant has an interest shall be
turned over, ________ such interest, to the then transferee; and (b) notice of
such sale, transfer or Lease shall be delivered to Tenant as required by law.
Upon the termination of any such lease by a sale-Lease transaction prior to
termination of this Lease, the former lessee thereunder shall become and remain
liable as Landlord hereunder until a further transfer. No holder of a mortgage
to which this Lease is or may be subordinate shall be responsible in connection
with the security deposited hereunder, unless such mortgagee or holder of such
deed of trust or lessor shall have actually received the security deposited
hereunder.
26.11 Floor Area. "Floor Area" as used in this Lease means, with
respect to the Premises and with respect to each store area separately leased,
the number of square feet of floor space on all floor levels in the Premises,
including any mezzanine space, measured from the exterior faces of exterior
walls, store fronts, corridors and service areas, and the center line of party
walls. For the purpose of this Lease, in determining the gross leasable floor
area or the gross leased and occupied floor area of the Shopping Center, there
shall be excluded therefrom the floor area of any premises leased for the
operation of a United States Government Post Office facility or other
Governmental facility. No deduction or exclusion from floor area shall be made
by reason of columns, stairs, shafts, or other interior construction or
equipment.
26.12 Liability of Landlord. If Landlord shall fail to perform any
covenant, term or condition of this Lease upon Landlord's part to be performed,
and if as a consequence of such default Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the proceeds of
sale received upon execution of such judgment and levied thereon against the
right, title and interest of Landlord in the Shopping Center and out of rents or
other income from such property receivable by Landlord, or out of the
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord's right, title and interest in the Shopping Center, and
Landlord shall not be liable for any deficiency.
<PAGE>
26.13 Accord and Satisfaction. Landlord is entitled to accept, receive
and cash or deposit any payment made by Tenant for any reason or purpose or in
any amount whatsoever and apply such payment at Landlord's option to any
obligation of Tenant; any such payment shall not constitute payment of any
amount owed except that to which Landlord has applied it. No endorsement
or statement on any check or letter of Tenant shall be deemed an accord and
satisfaction or otherwise recognized for any purpose whatsoever. The acceptance
of any such check or payment shall be without prejudice to Landlord's right to
recover any and all amounts owed by Tenant and landlord's right to pursue any
other available remedy.
26.14 Execution of Lease. The submission of this Lease for examination
does not constitute a reservation of or option for the Premises, and this Lease
shall become effective as a lease only upon execution and delivery thereof by
Landlord and Tenant.
26.15 Laws of the State of Florida. This Lease shall be governed by,
and construed in accordance with, the laws of the State of Florida. The venue
for any action shall be Broward County, State of Florida. If any provision of
this Lease or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this Lease shall not
be affected thereby and each provision of the Lease shall be valid and
enforceable to the fullest extent permitted by law.
26.16 Mortgage Protection. Tenant agrees to give any mortgagee(s), by
certified mail, return receipt requested, a copy of any notice of default served
upon Landlord, provided that prior to such notice Tenant has been notified, in
writing (by way of Notice of Assignment of Rents and leases, or otherwise), of
the address of such mortgagee(s). Tenant further agrees that if Landlord shall
have failed to cure such default within the time provided for in this Lease,
then the mortgagee(s) shall have an additional thirty (30) days within which to
cure such default or if such default cannot be cured within that time, then such
additional time as may be necessary to cure such default (including, but not
limited to commencement of foreclosure proceedings, if necessary to effect such
cure), in which event this Lease shall not be terminated while such remedies are
being so diligently pursued.
26.17 Radon Gas. Pursuant to F.S. 404.056 (8), Tenant is hereby
notified that radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
26.18 Riders. Any Rider(s) attached to this Lease are hereby made a
part hereof.
26.19 Condition of Premises at Delivery. Tenant is liable for all
improvements and alterations and it is expressly agreed the Premises is being
leased "as is."
26.20 INTENTIONALLY DELETED.
26.21 Confidentiality. TENANT AGREES THAT THE TERMS OF THIS LEASE SHALL
BE REGARDED AS CONFIDENTIAL, AND SHALL, NOT BE DIVULGED OR PUBLISHED BY TENANT
IN ANY MANNER WITHOUT FIRST OBTAINING WRITTEN PERMISSION FROM LANDLORD WHICH
PERMISSION MAY BE GIVEN OR REFUSED IN LANDLORD'S SOLE JUDGMENT. IN THE EVENT
TENANT VIOLATES THIS CLAUSE SUCH VIOLATION SHALL CONSTITUTE A BREACH OF THIS
LEASE BY TENANT AND LANDLORD SHALL BE ENTITLED TO EXERCISE ANY AND ALL REMEDIES
PERMITTED BY LAW OR UNDER THIS LEASE, INCLUDING BUT NOT LIMITED TO, TERMINATION
OF THIS LEASE.
26.22 Acknowledgment. TENANT ACKNOWLEDGES THAT IT WAS REPRESENTED, OR
HAD THE OPPORTUNITY TO BE REPRESENTED, IN CONNECTION WITH THIS LEASE (INCLUDING
SECTION 26.27) BY INDEPENDENT LEGAL COUNSEL OF TENANT'S CHOICE.
26.23 Time of Essence. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.
<PAGE>
26.24 Attorneys' Fees. In the event that it shall become necessary for
Landlord to collect any sums due to it under this Lease or to employ the
services of an attorney to enforce any of its rights under this Lease or to
remedy the breach of any covenant of this Lease on the part of Tenant to be kept
or performed, regardless of whether suit be brought, Tenant shall pay to
Landlord such reasonable fees and expenses as shall be charged by Landlord's
attorney or collection agency for such services, and any and all other costs
incurred by Landlord in connection with the foregoing. Should suit be brought
for the recovery of possession of the Premises, or for rent or any other sum due
Landlord under this Lease, or because of the breach of any of Tenant's covenants
under this Lease, Tenant shall pay to Landlord all expenses of such suit and any
appeal thereof, including any reasonable attorneys' and paraprofessional fees
and costs, through and including all trial and appellate levels and postjudgment
proceedings including any bankruptcy proceedings.
26.25 Corporate Tenant. If Tenant is a corporation, the parties
executing this Lease or any other documents related to this Lease on behalf of
Tenant hereby covenant and warrant that Tenant is a duly qualified corporation
in good standing and all steps have been taken prior to execution to qualify
Tenant to do business in Florida; that the undersigned are authorized to
executed this Lease on Tenant's behalf, as evidenced by Exhibit G, attached
hereto and made a part hereof; all franchise and corporate taxes have been paid
to date; and all future forms, reports, fees and other documents necessary to
comply with applicable laws will be filed when due.
26.26 INTENTIONALLY DELETED.
26.27 Waiver of Trial by Jury. EXCEPT AS PROHIBITED BY LAW, LANDLORD
AND TENANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS LEASE, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF LANDLORD, TENANT OR
ANY GUARANTOR; THIS WAIVER BEING A MATERIAL INDUCEMENT FOR LANDLORD TO ENTER
INTO THE LEASE. IF THE SUBJECT MATTER OF ANY LITIGATION IS ONE IN WHICH THE
WAIVER OF JURY TRIAL IS PROHIBITED, NEITHER LANDLORD NOR TENANT SHALL PRESENT AS
A NON-COMPULSORY COUNTERCLAIM IN SUCH LITIGATION ANY CLAIM ARISING OUT OF THIS
LEASE. FURTHERMORE, NEITHER LANDLORD NOR TENANT SHALL SEEK TO CONSOLIDATE ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY LITIGATION IN WHICH A JURY
TRIAL CANNOT BE WAIVED.
IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed
this Lease as of the day and year first above written.
WITNESSES: [LANDLORD]
PALASAN PROPERTIES, INC.
/s/ Connie Kingry
- -----------------------------------
Print name: Connie Kingry
------------------------
/s/ Gary Marks By: /s/ Marilyn Francis
- ----------------------------------- -------------------
Print name: Gary Marks Title: President
----------------------
[TENANT]
VIDEO QUIKLAB OF SOUTH FLORIDA, INC.
/s/ Max Busing
- -----------------------------------
Print name: Max Busing
/s/ Ed Hauber By: /s/ David B. Bawarsky
- ----------------------------------- ---------------------------
Print name: Ed Hauber Title: President
------------------------
Exhibit 21.
The following are the subsidiaries of the Company. All of the subsidiaries are
wholly owned by the Company.
1. A.D.S. Advertising Corp. d/b/a Smith Agency.com, Inc., a Florida corporation.
2. QuikLAB Multimedia Centers, Inc., a Florida corporation.
4. QBIZ Business Centers, Inc., a Nevada corporation.
QuikBiz Internet Group, Inc. and Subsidiaries
Ft. Lauderdale, FL
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated September 17, 1999, relating to the
consolidated financial statements of QuikBIZ Internet Group, Inc. and
Subsidiaries which is contained in that Prospectus. Our report contains an
explanatory paragraph regarding the Company's ability to continue as a going
concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus
GERSON, PRESTON & COMPANY, P.A.
Miami Beach, FL
September 17, 1999
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Dear Sirs:
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated September 7, 1999 relating to the
consolidated financial statements of QuikBIZ Internet Group, Inc. and
Subsidiaries which is contained in that Prospectus.
/s/ Martin Ender
Martin Ender, C.P.A.
Want & Ender C.P.A., P.C.
September 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of QuikBIZ Internet Group, Inc. and subsidiaries as
of December 31, 1997, December 31, 1998 and June 30, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 JUN-30-1999
<CASH> 2,310 18,059 35,758
<SECURITIES> 0 0 0
<RECEIVABLES> 85,857 136,340 303,260
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 125,994 193,368 373,363
<PP&E> 45,847 113,509 121,634
<DEPRECIATION> 4,819 40,706 56,773
<TOTAL-ASSETS> 1,463,537 861,471 999,838
<CURRENT-LIABILITIES> 641,010 641,688 690,609
<BONDS> 0 242,685 160,884
<COMMON> 0 0 0
10,208 10,208 10,208
25,569 26,179 26,943
<OTHER-SE> 786,750 39,711 111,194
<TOTAL-LIABILITY-AND-EQUITY> 1,463,537 861,471 999,838
<SALES> 140,355 2,142,414 1,790,645
<TOTAL-REVENUES> 140,355 2,142,414 1,790,645
<CGS> 126,703 1,753,877 1,080,601
<TOTAL-COSTS> 127,635 1,023,831 829,203
<OTHER-EXPENSES> 74,687 121,590 55,020
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,608 26,480 8,618
<INCOME-PRETAX> (190,278) (783,364) (182,797)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (190,278) (783,364) (182,797)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (190,278) (783,364) (182,797)
<EPS-BASIC> (0.028) (0.060) (0.014)
<EPS-DILUTED> (0.028) (0.060) (0.014)
</TABLE>
