As Filed With The Securities And Exchange Commission On August 7, 2000
Commission File No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INTERACTIVE TECHNOLOGIES.COM, LTD.
(Name of small business issuer in its charter)
Delaware 7389 06-1460654
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(State or Jurisdiction of (Primary Standard Industrial (IRS Employer
Organization or Incorporation) Classification Code Number) Identification
Number)
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110 East Atlantic Avenue, Suite 400
Delray Beach, Florida 33444
561-454-3300
(Address and telephone number of principal executive
offices and principal place of business)
William R. Becker, Chief Executive Officer
Interactive Technologies.com, Ltd.
110 East Atlantic Avenue, Suite 400
Delray Beach, Florida 33444
561-454-3300
(Name, address and telephone number of agent for service)
Copy to:
Steven D. Dreyer, Esq.
Hall Dickler Kent Goldstein & Wood, LLP
909 Third Avenue
New York, New York 10022
(212) 339-5400
Fax: (212) 935-3121
Approximate date of proposed sale to the public: AS SOON AS PRACTICAL AFTER THE
EFFECTIVE DATE OF THE 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, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X]
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. [_]
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, check the following box. [_]
CALCULATION OF REGISTRATION FEE
Proposed
Title of Each Class Proposed Maximum Maximum Amount of
of Securities to be Amount Offering Price Aggregate Registration
Registered to be Registered Per Share Offering Price Fee
---------- ---------------- -------------- -------------- ---
Common Stock, par value $.001
per share, for Selling
Stockholder 1,940,570 (1) $1.30 $2,522,741 $666.00 (2)
Common Stock, par value $.001
per share, issuable upon
exercise of Warrants issued to the
Selling Stockholder in connection
with the issuance of Common Stock 329,896 (3) $5.82 $1,919,995 $507.00 (4)
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$4,442,736 $1,173.00
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(2) Fee determined pursuant to Rule 457(c) based upon August 2, 2000 stock pricing.
(3) In accordance with Rules 416 and 457, this Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon exercise of the Warrants to prevent dilution resulting from stock splits or stock dividends.
(4) Fee determined pursuant to Rule 457(g).
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.
Subject to Completion, Dated August __, 2000
Prospectus
_______________ Shares
Interactive Technologies.com, Ltd.
Common Stock
The selling stockholder is offering up to [ ] shares of our common stock. We will not receive any proceeds from the sale ofs this common stock. No shares are being offered for sale us at this time.
The selling stockholder may sell these shares from time to time in the over-the-counter market or otherwise.
Our common stock is quoted in the National Quotation Bureau Pink Sheets under the symbol "INTR." On July 31, 2000, the last reported bid price of the common stock on the Pink Sheets was $1.45 per share.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED ON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________, 2000
You may rely only on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of this prospectus nor sale of shares means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these securities in any circumstances under which the offer or solicitation is unlawful.
TABLE OF CONTENTS
Page
Prospectus summary 1
Risk factors.
Use of proceeds.
Forward-looking statements
Price range of common stock.
Dividend policy.
Capitalization
Selected consolidated financial data
Management's discussion and analysis of financial condition and
results of operations.
Business Management
Certain transactions
Principal stockholders
Selling stockholder
Description of securities.
Shares eligible for future sale.
Plan of distribution
Legal matters.
Experts
Additional information
Until _______________, 2000 (40 days after the date of this prospectus), all dealers effecting transactions in the common stock may be required to deliver a prospectus. This is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters.
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed information regarding our company, the risks of investing in our common stock, and our financial statements and notes to those statements appearing elsewhere in this prospectus.
OUR BUSINESS
We were incorporated in the State of Delaware on March 31, 1993 under the name ADV Acquisition Corp. On February 26, 1999, control of our corporation, which was then called Interfund Resources, Ltd., was transferred to William R. Becker and to entities affiliated with him in a "reverse acquisition" transaction. Upon completion of that transaction,
o we obtained an 80% ownership interest in the four corporations identified below;
o we issued to Mr. Becker, individually and jointly with his wife, Joni, and to a family trust established by Mr. Becker, 18,000,000 shares of our common stock;
o Mr. and Mrs. Becker, together with the family trust, retained the remaining 20% ownership interest in those four corporations; and
o our name was changed to Interactive Technologies.com, Ltd.
Our principal executive offices are located at 110 East Atlantic Avenue, Delray Beach, Florida 33444, and our telephone and fax numbers are 561-454-3300 and 561-454-3360, respectively. Our Web site address is www.intrinfo.com. Information accessed on or through our Web site, or the Web sites of any of our subsidiaries, does NOT constitute a part of this prospectus.
We offer to companies, businesses, fund raising organizations, large associations, affinity groups, their members and customers, directly and through our 80%-owned subsidiary, JoinUsOnline.com, Inc. ("JoinUsOnline"), privileged access to Internet business-to-business and business-to-consumer benefits, products and services. Through the agreements that we and JoinUsOnline have with such organizations, more than 29,000,000 households and 1,500,000 businesses have access to those benefits, products and services. As of the date of this prospectus, approximately 3,500,000 of those households and businesses have obtained one or more of the benefits, products and services that that we provide. We offer such benefits, products and services through web portals that we develop and operate for our own use, and also through "private labeled" web portals that we develop and operate for other businesses and organizations.
We also conduct business through:
o United Interactive Technologies, Inc. ("United Interactive"), an 80%-owned subsidiary which develops and hosts Internet web portals and Web sites, and which provides high speed Internet access services via its direct connection to the Internet at the only Internet network access point located in the state of Florida;
o Integrated Merchant Services, Inc. ("IMS"), an 80%-owned subsidiary which operates a credit card processing business through which merchants may process and obtain payment for their customers' e-commerce and in-store credit and debit card purchase transactions;
o Web Classified.net, Inc. ("Web Classified"), an 80%-owned subsidiary which markets to small businesses the ability to inexpensively construct a customized business-to-business or business-to-consumer three page Web site which the customer can create on-line through a database driven Web site generation application produced by IMS;
o Express Financial Corp. ("Express Financial"), a 100%-owned subsidiary which is a licensed mortgage banker and approved lender for various federal lending programs including FHA, VA and Title II loans. Express Financial conducts its business through traditional "brick and mortar" offices, as well as via a virtual branch located at its Web site on the world wide web; and
o GKB Software, Inc. ("GKB"), an 80%-owned subsidiary that has created a food industry specific internet portal called FattyDaddy.com, which presently covers selected aspects of the food industry on one web site. Fattydaddy.com will be offered to JoinUsOnline member organizations, and it also will be marketed directly to non-JoinUsOnline members. GKB also manufactures a touch-screen point of sale, employee scheduling and payroll and inventory maintenance software application used in the restaurant industry by owners of stand-alone, multi-store and franchised restaurant operations.
THE OFFERING
Shares Offered [ ] shares of common stock
Proceeds to us None. All sales will be for the benefit of
the selling stockholder
Common stock to be outstanding [ ](1)
after the offering
Pink Sheets symbol INTR
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(1) In addition to [ ] shares of common stock outstanding after the offering, we may issue 232,868 shares of common stock on the exercise of outstanding warrants, and 6,707,750 shares of common stock on exercise of outstanding options.
SUMMARY CONSOLIDATED FINANCIAL DATA
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Year Ended Three Months Ended
December 31, March 31,
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1999 1998 2000 1999
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(unaudited)
(in thousands except per share data)
Total revenues $ 3,312 $ 3,824 $ 1,020 $ 917
Cost of sales 338 182 65 113
Selling, general and administrative
expenses 4,198 1,817 2,208 527
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Net Earnings (loss) (1,137) 1,824 (1,425) 277
Basic earnings (loss) per share (.07) .92 (.06) .03
Fully diluted earnings (loss) per share (.07) .36 (.06) .03
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The following table indicates a summary of our balance sheet as of December 31, 1999 and March 31, 2000.
CONSOLIDATED BALANCE SHEET DATA
December 31, 1999 March 31, 2000
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(unaudited)
(in thousands)
Cash and cash equivalents $ 452 $1,076
Total current assets 2,396 4,079
Total assets 4,214 6,185
Total current liabilities 2,488 2,034
Total liabilities 2,531 2,272
Total stockholders' equity 1,683 3,913
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RISK FACTORS
WE REPORTED A LOSS IN 1999. IF WE DO NOT BECOME PROFITABLE, OUR BUSINESS COULD BE ADVERSELY AFFECTED AND THE VALUE OF YOUR INVESTMENT COULD DECLINE.
For the year ended December 31, 1999, we incurred a net loss of $1,136,870 as compared to earnings of $1,824,161 for the year ended December 31, 1998. We also incurred a loss of $1,425,002 for the three months ended March 31, 2000. Our losses in 1999 were primarily due to the costs incurred by United Interactive in developing the JoinUsOnline.com portal system and increased costs for accounting and legal services. There can be no assurance that we will be able to generate sufficient revenues to operate profitably in the future or to pay our debts as they become due.
SOME OF OUR BUSINESSES HAVE LIMITED OPERATING HISTORIES.
JoinUsOnline has been operating as a provider of benefits, goods and services since 1990. However, we have recently shifted the focus of JoinUsOnline's marketing approach away from a paper-based system which relies on the mails to an Internet-based system which functions through web portals. Also, United Interactive and IMS have limited operating histories upon which to base an evaluation of the business that we conduct. Our prospects are subject to the risks, expenses and uncertainties frequently encountered by companies in the new and rapidly evolving markets for Internet and interactive media products and services. In addition, we will be subject to all of the risks, uncertainties, expenses, delays, problems and difficulties typically encountered in the growth of an emerging business and the development and market acceptance of new products and services. There can be no assurance that unanticipated expenses, problems or technical difficulties will not occur which would result in material delays in market acceptance of our products and services or that our efforts will result in such market acceptance.
WE MUST DO BUSINESS IN A DEVELOPING MARKET AND FACE NEW ENTRANTS. FAILURE TO MEET THE CHALLENGES OF NEW PRODUCTS AND COMPETITORS WILL REDUCE OUR MARKET SHARE AND THE VALUE OF YOUR INVESTMENT.
The market for Internet products and services is rapidly evolving and is characterized by an increasing number of market entrants. The diverse segments of the Internet market might not provide opportunities for more than one dominant supplier of products and services similar to ours. If a single supplier other than us dominates one or more market segments, our revenue is likely to decline and we will become a less valuable company.
BECAUSE WE LACK THE NAME RECOGNITION, CUSTOMER BASE AND RESOURCES OF OTHER COMPANIES PROVIDING INTERNET BASED PRODUCTS AND SERVICES, WE MAY BE UNABLE TO COMPETE SUCCESSFULLY WHICH WOULD REDUCE OUR REVENUE AND THE VALUE OF YOUR INVESTMENT.
The membership benefits and service industry serves a market of consumers and businesses nationwide. Benefits companies have traditionally marketed their benefits programs via direct sales, credit card issuers, airline services, oil companies, banking institutions, and most recently Internet web sales. The majority of customers for these programs are considered to be consumers, with a small percentage of small business owners. Individual benefit and service program offerings vary dramatically from Company to Company. JoinUsOnline's principal competitors in the benefits and services industry include The Signature Group and Cendant Corp. They have longer operating histories, larger client bases, longer relationships with clients, greater brand or name recognition and significantly greater financial, technical, marketing and public relations resources than JoinUsOnline possesses.
United Interactive competes with major Internet Web site hosting companies, e-commerce Web site hosting companies, and Internet e-commerce merchant credit card processing companies that market to small, mid-size businesses and corporations. The most significant competitors in these markets are Verio, Inc. and Concentric Network Corporation. Both of these companies have significantly greater operating and marketing experience, name recognition, financial and other resources and customer bases than United Interactive possesses.
The credit, charge and debit card transaction processing services business is highly competitive. The level of competition has increased significantly in recent years, and we expect this trend to continue. Several of our competitors and potential competitors have greater financial, technological, marketing and personnel resources, and we are uncertain whether we will continue to be able to compete successfully with such entities. In addition, our profit margins could decline because of competitive pricing pressures that may have a material adverse effect on our business, financial condition and results of operations. Many of IMS's competitors, such as SPS Transaction Services and Card Service International, have longer operating histories, greater name recognition, larger customer bases and substantially greater resources than IMS has.
Web Classified's competitors are primarily either companies with established positions in software development who sell their software as a third party application for hosting companies to use for entry-level customers, or companies which provide Internet directory listings for businesses. Yahoo Yellow Pages which is a global Internet Media company that offers a branded network of comprehensive information, communication and shopping services to millions of users daily. Alta Vista, and the companies with which it is affiliated, develop and operate Internet and fulfillment services companies. Each of these companies has much greater financial and operational resources than Web Classified.
A large number of mortgage companies transact business through retail offices and other traditional channels. Express Financial's competitors include other mortgage bankers, state and national commercial banks, savings and loan associations, credit unions, insurance companies and other finance companies. A great many of these competitors are substantially larger and have considerably greater financial, technical and marketing resources than Express Financial has.
Mortgage banking on the Internet is highly competitive. A large number of mortgage companies currently transact business over the Internet in one form or another. The sophistication of these companies in the Internet channel varies from simple one-page information Web sites to Web
sites with extensive on-line content and features. Many of these mortgage companies share a business strategy and capability similar to those employed by Express Financial. The competition includes banks such as Chase and Bank of America, as well as mortgage originators such as Prism Financial Corporation, E-Loan and Mortgage.com, all of which are larger and better capitalized than Express Financial. In addition, Express Financial also competes on the Internet with large, national mortgage companies, such as Countrywide Credit Industries, Inc. and HomeSide Lending, which have greater origination volumes and capitalization than Express Financial.
The market in which GKB competes is highly competitive. There are worldwide at least 40 competitors that offer some form of sophisticated point of sale restaurant management system similar to GKB's. Many of those competitors have installed thousands of such systems in table service and quick service restaurants, country clubs, stadiums, arenas, hotels and cafeterias located throughout the World. Virtually all of those competitors have far greater experience, capital and other resources than GKB possesses.
As a result of the foregoing, our and our subsidiaries' principal competitors may respond more quickly than we can to new or changing opportunities and technologies. For all of the reasons stated above, we may be unable to compete successfully against our current and future competitors.
WE DEPEND HEAVILY ON THE INTERNET, AND ANY ADVERSE DEVELOPMENT WITH REGARD TO THE INTERNET COULD MATERIALLY ADVERSELY AFFECT US.
Our future success substantially depends upon continued growth in the use of the Internet and the Web. Such growth seems necessary to support the sale of our products, services and advertising. Rapid growth in the use of the Internet and the Web is a recent phenomenon. There can be no assurance that communication or commerce over the Internet will become more widespread. In addition, if Internet use continues to grow significantly, there can be no assurance that the Internet infrastructure will remain adequate for supporting the increased demands placed upon it. The Internet could lose its viability due to either:
o Delays in the development or adoption of new standards and protocols required to handle increased levels of Internet activity; or
o Increased governmental regulation
Changes in or insufficient availability of telecommunications services to support the Internet also could slow response times and adversely affect usage of the Web and our Web sites. The failure of the Internet use to continue to grow, or failure of the Internet infrastructure to support effectively growth that may occur, could materially adversely affect our business, operating results and financial condition.
WE ARE EXPOSED TO NUMEROUS RISKS DUE TO POTENTIAL FUTURE TECHNOLOGICAL CHANGE.
The Internet and electronic markets involve certain characteristics that expose our existing and future Web sites, technologies, service practices and methodologies to the risk of obsolescence. These characteristics included the following:
o Rapid changes in technology
o Rapid changes in user and customer requirements
o Frequent new service or product introductions embodying new technologies
o The emergence of new industry standards and practices
Our performance will partially depend on our ability to license leading technologies, enhance our existing services, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of Web sites entails significant technical and business risks. There can be no assurance that we will use new technologies effectively or adapt our Web sites to consumer, vendor, advertising or emerging industry standards. Our inability (for technical, legal, financial or other reasons) to adapt in a timely manner to changing market conditions or customer requirements could materially adversely affect our business, results of operations and financial condition.
ELECTRONIC COMMERCE IS A DEVELOPING MARKET AND INVOLVES CONSIDERABLE UNCERTAINTY
The electronic market for products and services has only recently begun to develop and is rapidly changing. As is typical for a new and rapidly evolving market, demand for products, services and advertising over the Internet is considerably uncertain. There exist few proven services and products. Since the market for electronic commerce on the Internet is new and evolving, predictions of the size and future growth (if any) of this market are difficult. Moreover, no standards have yet been widely accepted for the measurement of the effectiveness of Web-based advertising. There can be no assurance that such standards will develop sufficiently to support Web-based advertising as a significant advertising medium. Our business, results of operations and financial condition could be materially adversely affected if any of the following events occur:
o The markets for our electronic commerce fail to develop
o The markets for our electronic commerce develop more slowly than expected
o The markets for our electronic commerce become saturated with competitors
o Our electronic commerce fails to achieve market acceptance
ELECTRONIC COMMERCE INVOLVES A NUMBER OF SECURITY RISKS.
A significant barrier to electronic commerce and communications is the secure transmission of confidential information over public networks. We will rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary for secure transmission of confidential information. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other events or developments will not compromise or breach the algorithms we use to protect customer transaction data. Any such compromise of our security could materially and adversely affect our business, results of operations and financial condition. A party able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may need to expend significant capital and other resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Concerns over the security of Internet transactions and the privacy of users may also inhibit the growth of the Internet generally, and the Web in particular, especially as a means of conducting commercial transactions. To the extent that our activities or the activities of third party contractors involve the storage and transmission of proprietary information (such as credit card numbers), security breaches could expose us to a risk of loss or litigation and possible liability. There can be no assurance that our security measures will prevent security breaches or that failure to prevent such security breaches will not materially and adversely affect our business, results of operations and financial condition.
INCREASES IN CREDIT CARD ASSOCIATION FEES MAY ADVERSELY AFFECT OUR PROFITABILITY
VISA and MasterCard have increased their respective fees, or "interchange rates," each year. Although we have reflected these increases in our pricing to merchants, there can be no assurance that merchants will continue to assume the entire impact of the future increases or that transaction processing volumes and merchant attrition will not be adversely affected by the increases.
OUR SUCCESS DEPENDS TO A GREAT EXTENT ON OUR ABILITY TO PROTECT OUR INTELLECTUAL
PROPERTY.
The development of our brands depends significantly on the protection of our trademarks and trade names. We intend to register the names of each of our subsidiaries, the FattDaddy.com name and logo, the "Changing the Way America Buys" slogan employed by JoinUsOnline, as well as other slogans which our other subsidiaries will use in connection with the operation of their businesses, as trademarks in the United States. We also claim common law trade name rights in these and other names. Nonetheless, there can be no assurance that we will be able to secure significant protection for these trademarks. Our current and future competitors or others may adopt product or service names similar to our trademarks, thereby impeding our ability to build brand identity and possibly leading to customer confusion. Our inability to protect our trademarks and trade names might materially and adversely affect our business, results of operations and financial condition. In addition, in the future third parties may claim certain aspects of our business infringe their intellectual property rights. While we are not currently
subject to any such claim, any future claim (with or without merit) could result in one or more of the following:
o Significant litigation costs
o Diversion of resources, including the attention of management
o Our agreement to certain royalty and licensing arrangements
Any of these developments could materially and adversely affect our business, results of operations and financial condition. In the future, we may also need to file lawsuits to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation, whether successful or unsuccessful, could result in substantial costs and diversion of resources. Such costs and diversion could materially and adversely affect our business, results of operations and financial condition.
WE HAVE NO ASSURANCE OF MARKET ACCEPTANCE OF OUR PRODUCTS AND SERVICES. IF WE ARE UNABLE TO RAISE MARKET AWARENESS OF OUR PRODUCTS AND SERVICES, WE MAY EXPERIENCE DECLINING OPERATING RESULTS WHICH WOULD DIMINISH THE VALUE OF YOUR INVESTMENT.
We are at an early stage of development and our earnings growth depends primarily upon market acceptance of our products and services. There can be no assurance that our product and service development efforts will progress further with respect to any potential new products and services, or that they will be successfully completed. In addition, there can be no assurance that our potential new products or services will achieve customer acceptance.
WE FACE LEGAL UNCERTAINTIES ASSOCIATED WITH THE INTERNET AND ELECTRONIC COMMERCE THAT COULD INCREASE OUR COSTS OR REDUCE DEMANDS FOR OUR SERVICES.
Our operations on the Internet and the operations of our subsidiaries are not currently subject to direct regulation by any government agency in the United States beyond mortgage-related regulations and regulations applicable to businesses generally. However, the adoption of new laws or the application of existing laws may decrease the use of the Internet, which would decrease the demand for our services and might increase our cost of doing business.
A number of legislative and regulatory proposals under consideration by federal, state, local and foreign governmental organizations may lead to laws or regulations concerning various aspects of the Internet, including the following:
o taxation;
o access charges;
o online content;
o user privacy;
o liability for third-party activities; and
o jurisdiction.
The tax treatment of the Internet and electronic commerce is currently unsettled and has been a subject of debate in Congress, which is awaiting the recommendation of The Advisory Commission on Electronic Commerce. A number of proposals have been made that could impose taxes on the sale of goods and services and other Internet activities. In October 1998, the Internet Tax Freedom Act was signed into law placing a three-year moratorium on new state and local taxes on Internet commerce. The moratorium ends October 21, 2001. However, we cannot assure you that future laws imposing taxes or other regulations would not substantially impair the growth of our business and our financial condition.
Some local telephone carriers claim that the increasing popularity of the Internet has burdened the existing telecommunications infrastructure and that many areas with high Internet use are experiencing interruptions in telephone service. These carriers have petitioned the Federal Communications Commission to impose access fees on Internet service providers. If these access fees are imposed, the costs of communicating on the Internet could increase, which could decrease demand for our services and increase our cost of doing business.
THE BANKING AND FINANCE INDUSTRIES ARE SUBJECT TO SUBSTANTIAL REGULATION WHICH MAY INCREASE OUR COST OF DOING BUSINESS; OUR FAILURE TO COMPLY WITH THESE REGULATIONS COULD ADVERSELY AFFECT OUR OPERATIONS.
Express Financial's mortgage banking business is subject to extensive federal and state regulation. Its lending activities are subject to regulation under various federal and state laws including the following:
o the Truth-in-Lending Act;
o the Equal Credit Opportunity Act;
o the Home Mortgage Disclosure Act;
o the Community Reinvestment Act;
o the Electronic Funds Transfer Act;
o the Real Estate Settlement Practices Act; and
o the Fair Credit Reporting Act.
In addition, Express Financial is required to be licensed, and is subject to regulation in various states as mortgage bankers. Failure to comply with these statutory and regulatory requirements can lead to, among other remedies, termination or suspension of licenses, certain rights of rescission for mortgage loans, class action lawsuits and administrative enforcement actions.
We have implemented procedures to comply with these requirements and we believe that we
comply in all material respects with applicable local, state and federal laws, rules and regulations. However, we cannot be certain that more restrictive laws, rules and regulations will not be adopted in the future that could make compliance more difficult or expensive.
OUR PROFITABILITY DEPENDS IN PART ON MARKET CONDITIONS, INCLUDING INTEREST RATES, WHICH WE CANNOT CONTROL.
Our profitability may be affected by fluctuations in interest rates, changes in economic conditions, shifts in consumer behavior and other factors. Any decline in interest rates could reduce the amounts that Express Financial can earn on its newly originated loans. A decline in interest rates could also result in an increase in prepayments which could decrease the size of Express Financial's loan portfolio if it is unsuccessful in originating new loans. Changes in economic conditions and shifts in customer behavior are difficult to predict, and our financial performance generally cannot be insulated from these forces.
PERIODIC DECLINES IN PROPERTY VALUES MAY REDUCE EXPRESS FINANCIAL'S LOAN ORIGINATIONS.
Express Financial's business may be adversely affected by periods of economic slowdown or recession, which may be accompanied by declining property values. Any material decline in property values reduces the ability of borrowers to use equity in the property to support any borrowings and increases the loan-to-value ratios of mortgage loans previously made, thereby weakening collateral coverage and increasing the possibility of a loss in the event of default.
REGULATORY RESTRICTIONS AND LICENSING REQUIREMENTS - EXPRESS FINANCIAL OPERATES IN AN INDUSTRY IN WHICH FEDERAL AND STATE GOVERNMENTAL AUTHORITIES EXTENSIVELY REGULATE, SUPERVISE AND LICENSE THE PARTICIPANTS; CHANGES IN THE REGULATORY ENVIRONMENT, PARTICULARLY CHANGES RELATED TO THE MAXIMUM PERMISSIBLE INTEREST RATES THAT EXPRESS FINANCIAL CHARGES BORROWERS, COULD MATERIALLY HURT ITS BUSINESS AND COULD IMPAIR OUR PROFITABILITY.
Extensive federal and state laws, some of which require licensing and qualification, apply to our business. These laws may regulate, among other things:
o the maximum interest rate that may be charged to our borrowers;
o our rights to repossess and sell collateral.
An adverse change in these laws or the adoption of new laws could have a materially adverse effect on Express Financial's business by limiting the interest and fee income it can generate on existing and additional finance receivables, limiting the states in which we may operate, or restricting its ability to realize the value of collateral securing its finance receivables.
Moreover, a reduction in existing statutory maximum interest rates or the imposition of statutory maximum interest rates below those Express Financial presently charges in unregulated jurisdictions would directly impair our profitability. In addition, due to the consumer-oriented nature of the industry in which Express Financial operates and uncertainties with respect to the application of various laws and regulations in some circumstances, industry participants frequently are named as defendants in litigation involving alleged violations of federal and state consumer lending or other similar laws and regulations. An adverse change in, modification to, or clarification of any of these laws or regulations, or judicial interpretations as to whether and in what manner such laws or regulations apply to our lines of business could result in potential liability that would materially hurt our financial condition and results of operations.
LOSSES FROM MATERIAL INACCURACIES IN THE REPRESENTATIONS AND WARRANTIES PROVIDED BY EXPRESS FINANCIAL COULD ADVERSELY AFFECT ITS BUSINESS AND RESULTS OF OPERATIONS.
When a mortgage loan originator (retail or wholesale) sells a mortgage loan to its investors, it makes certain representations and warranties as to the compliance by the originator with applicable underwriting guidelines. A loan originator generally becomes obligated to the investor with respect to the accuracy of those representations and warranties, and if those representations and warranties are incorrect, the investor may require the servicer or the lender who originated the loan to repurchase the mortgage loan. Consequently, any loss resulting from a material inaccuracy in the representations and warranties would fall on the servicer as the originating seller of the loan. Express Financial attempts to limit its exposure to repurchase risks through quality control requirements imposed on the origination staff.
LOSS OF KEY MEMBERS OF OUR SENIOR MANAGEMENT COULD ADVERSELY AFFECT OUR BUSINESS AND PROSPECTS.
Our success will be dependent largely upon the personal efforts of our Chairman and Chief Executive Officer, William R. Becker, as well as other senior managers. The loss of their services could have a material adverse effect on our business and prospects. We have no life insurance on any of our officers. Mr. Becker's services are governed by an employment agreement.. Our success is also dependent upon our ability to hire and retain additional qualified management, marketing, technical, financial and other personnel. Competition for qualified personnel is intense and there can be no assurance that we will be able to hire or retain qualified personnel. Any inability to attract and retain qualified management and other personnel could have a material adverse effect on us.
IF INTERNET GROWTH SLOWS OR BORROWERS ARE RELUCTANT TO CONDUCT FINANCIAL BUSINESS THROUGH THE WEB, EXPRESS FINANCIAL WILL GENERATE FEWER LOANS ONLINE.
Express Financial's ability to originate mortgage loans on the Internet and provide clients with Internet-based mortgage services is dependent upon continued growth in Internet usage. Web-based mortgage lending is relatively new, and we cannot predict whether there will be growth in mortgage loans generated on the Internet.
INASMUCH AS OUR COMMON STOCK IS SUBJECT TO PENNY STOCK RULES, YOU MAY HAVE GREATER DIFFICULTY SELLING YOUR SHARES
The Securities Enforcement and Penny Stock Reform Act of 1990 applies to stock characterized as "penny stocks," and requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Securities and Exchange Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The exceptions include exchange-listed equity securities and any equity security issued by an issuer that has:
o net tangible assets of at least $2,000,000, if the issuer has been in continuous operation for at least three years;
o net tangible assets of at least $5,000,000, if the issuer has been in continuous operation for less than three years; or
o average annual revenue of at least $6,000,000 for the last three years.
Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks.
Our common stock is presently trading at less than $5.00 per share. Until such time as the market price of our common stock increases to, and stays above $5.00, or we are able to meet the above tests and, trading in our common stock will be covered by Rules 15g-1 through 15g-6 and 15g-9 promulgated under the Securities Exchange Act. Under those rules, broker-dealers who recommend such securities to persons other than their established customers and institutional accredited investors must make a special written suitability determination for the purchaser and must have received the purchaser's written agreement to a transaction prior to sale. These regulations would likely limit the ability of broker-dealers to trade in our common stock and thus would make it more difficult for purchasers of common stock to sell their securities in the secondary market. The market liquidity for the common stock could be severely affected.
YOU COULD SUFFER DILUTION OF YOUR INVESTMENT IF CERTAIN WARRANTS OR STOCK OPTIONS ARE EXERCISED OR IF WE EXERCISE OUR RIGHT TO SELL ADDITIONAL SHARES OF COMMON STOCK TO THE SELLING STOCKHOLDER
As of the date of this prospectus, we have a total of 28,171,548 shares of common stock outstanding. We have issued warrants to purchase 232,868 shares of common stock at a weighted average price of $5.17 per share, as well as options to purchase 6,707,750 shares of common stock at a weighted average price of $1.08 per share. Under an option agreement we entered into with the selling stockholder, we have the right, exercisable during the 18 month period commencing on the date of this prospectus to sell additional shares of our common stock to the
selling stockholder having an aggregate fair market value of $16,000,000 at prices equal to 90% of the two lowest closing bid prices of our common stock (not necessarily consecutive) during the ten trading days prior to each date on which we give notice to the selling stockholder of our intention to sell such stock to it.
ISSUANCE OF OUR AUTHORIZED PREFERRED STOCK COULD DISCOURAGE A CHANGE IN CONTROL, COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK AND COULD RESULT IN THE HOLDERS OF PREFERRED STOCK BEING GRANTED VOTING RIGHTS THAT ARE SUPERIOR TO THOSE OF THE HOLDERS OF COMMON STOCK
We are authorized to issue 10,000,000 shares of preferred stock without obtaining the consent or approval of our stockholders. The issuance of preferred stock could have the effect of delaying, deferring, or preventing a change in control. We may also grant superior voting rights to the holders of preferred stock. Any issuance of preferred stock could materially and adversely affect the market price of the commons stock and the voting rights of the holders of commons stock. The issuance of preferred stock may also result in the loss of the voting control of holders of common stock to the holders of preferred stock.
WE WILL PAY NO DIVIDENDS TO YOU
We have not paid, and do not expect to pay, any dividends on common stock in the foreseeable future.
WE HAVE OUTSTANDING A LARGE NUMBER OF SHARES OF COMMON STOCK THAT ARE ELIGIBLE FOR SALE UNDER CERTAIN CIRCUMSTANCES, AND SALES, OR EVEN THE MERE POSSIBILITY OF SALES, OF THESE SHARES MAY MATERIALLY ADVERSELY THE PRICE OF THE COMMON STOCK.
Approximately 28,171,548 shares of Common Stock are issued and outstanding. We believe that approximately 21,789,724 of these shares are "restricted securities" as that term is defined in Rule 144 promulgated under the Act. Rule 144 provides in general that a person (or persons whose shares are aggregated) who has satisfied a one-year holding period, may sell within any three month period, an amount which does not exceed the greater of 1% of the then outstanding shares of Common Stock or the average weekly trading volume during the four calendar weeks before such sale. The vast majority of the restricted shares have been outstanding for over one year and thus are eligible for sale under Rule 144. Rule 144 also permits the sale of shares, under certain circumstances, without any quantity limitation, by persons who are not affiliates of the Company and who have beneficially owned the shares for a minimum period of two years. Hence, the possible sale of these restricted shares may, in the future dilute an investor's percentage of freely tradable shares and may depress the price of our Common Stock. Also, if substantial, such sales might also adversely affect our ability to raise additional equity capital. However, most of the approximately 21,789,724 shares believed to be "restricted securities" are held by affiliates of the Company and must (by law) be sold subject to the volume limitations of Rule 144 described above, thus restraining the number of shares that can sold in any period of time.
OUR OBLIGATION TO INDEMNIFY OUR OFFICERS AND DIRECTORS COULD PREVENT OUR RECOVERY FOR LOSSES CAUSED BY THEM.
Our Bylaws provide that we must indemnify each director, officer, agent and/or employee to the maximum extent provided for in the General Corporation Law of Delaware. Further, we have purchased and maintain customary officer and director insurance on behalf of certain of these persons. Such insurance may cover certain matters for which we do not have the power to indemnify such persons. Consequently, because of the actions of officers, directors, agents and employees, we could incur substantial losses and be prevented from recovering such losses from such persons. Further, the United States Securities and Exchange Commission maintains that indemnification is against the public policy expressed in the Securities Act of 1933 (the "Securities Act"), and is therefore unenforceable.
USE OF PROCEEDS
All of the shares of common stock offered by this prospectus are being offered by the selling stockholder. We received money from the sale of those shares to the selling stockholder. We also will receive money from the exercise of warrants to purchase common stock which is offered by this prospectus. This money will be used for working capital and general corporate purposes. We will not receive any additional proceeds from the sale of shares by the selling stockholder. For information about the selling stockholder, see "Selling Stockholder."
FORWARD-LOOKING STATEMENTS
YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS.
This prospectus contains forward-looking statements that involve risks and uncertainties. Discussions containing forward-looking statements may be found in the material set forth under "Prospectus summary," "Management's discussion and analysis of financial condition and results of operations," and "Business," as well as within this prospectus generally. In addition, when used in this prospectus, the words "believes," "intends," "plans," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements as a result of the risk factors set forth and the information provided in this prospectus generally. We do not intend to update any forward-looking statements.
PRICE RANGE OF COMMON STOCK
Prior to December 16, 1999, our common stock was admitted to quotation on the NASD's OTC Bulletin Board under the symbols "INTR" and "INTRE." Since that date, our common stock has been traded on the National Quotation Bureau's Pink Sheets under the trading symbol "INTR." The following table sets forth the high and low bid prices for our common stock since the
completion of our reverse acquisition in February 1999. The quotations reflect inter-dealer prices, with no retail mark-up, mark-down or commissions, and may not represent actual transactions. The information presented has been derived from National Quotation Bureau, Inc.
Quarter-End High Low Close ------------------- --------- --------- --------- March 31, 1999 $ 3.87 $ 3.62 $ 3.87 June 30, 1999 12.56 11.62 12.18 Sept. 30, 1999 7.12 6.37 6.75 Dec. 31, 1999 6.50 5.87 6.12 March 31, 2000 5.00 4.50 5.00 June 30, 2000 2.20 2.00 2.00 |
As of July 31, 2000, there were 479 holders of record of our common stock.
DIVIDEND POLICY
We plan to retain all of our earnings, if any, to finance the expansion of our business and for general corporate purposes. We have not declared or paid any cash dividends on our common stock. We do not anticipate paying cash dividends in the foreseeable future except possibly on preferred stock. The terms of our outstanding preferred stock prohibit the payment of dividends on our common stock unless all dividends accrued on the preferred stock have been paid.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999 and our unaudited capitalization as of March 31, 2000.
You should read this table together with "Management's Discussion and Analysis of Financial Condition and Result of Operations," consolidated financial statements and notes to consolidated financial statements appearing elsewhere in this prospectus.
December 31, 1999 March 31, 2000
----------------- --------------
(unaudited)
(in thousands)
Stockholders' equity:
Preferred stock $0.001 par value;
10,000,000 shares authorized;
none issued -- --
Common stock, $0.001 par value;
90,000,000 shares authorized;
24,818,885 shares issued and outstanding at
December 31, 1999 and 25,982,948 at
March 31, 2000 25 26
Additional paid-in capital 10,230 13,884
Accumulated Deficit ( 8,572) ( 9,997)
------- -------
Total capitalization $1,683 $3,913
====== ======
|
The information provided above excludes:
o 232,868 shares of common stock issuable upon exercise of warrants,
o 6,707,750 shares of common stock issuable upon exercise of outstanding options, and
o an indeterminate number of shares issuable on exercise of our right to sell common stock valued at $16,000,000 to the selling stockholder.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is qualified by reference to and should be read in conjunction with the consolidated financial statements and notes to consolidated financial statements and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other financial information included elsewhere in this prospectus. The consolidated statements of operations data for the years ended December 31, 1999 and 1998 and the consolidated balance sheet data at December 31, 1999 and 1998 are derived from and qualified by reference to the audited consolidated financial statements included elsewhere in this prospectus.
The consolidated statements of operations data for the three months ended March 31, 2000 and 1999 and the consolidated balance sheet data at March 31, 2000 have been derived from our unaudited consolidated financial statements but have been prepared on the same basis as our audited consolidated financial statements which are included in this prospectus. In our opinion, these unaudited consolidated financial statements include all adjustments, consisting of normally recurring adjustments, considered necessary for a fair presentation of our consolidated financial position and result of operations for that period.
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Year Ended Three Months Ended
December 31, March 31,
------------------ ----------------
1999 1998 2000 1999
------- ------- ------- -----
(unaudited)
(in thousands except per share data)
Total revenues $ 3,312 $ 3,824 $ 1,020 $ 917
Cost of sales 338 182 65 113
Selling, general and administrative
expenses 4,198 1,817 2,208 527
------- ------- ------- -----
Net Earnings (loss) (1,137) 1,824 (1,425) 277
Basic earnings (loss) per share (.07) .92 (.06) .03
Fully diluted earnings (loss) per share (.07) .36 (.06) .03
|
The following table indicates a summary of our balance sheet as of December 31, 1999 and March 31, 2000.
CONSOLIDATED BALANCE SHEET DATA
December 31, 1999 March 31, 2000
----------------- --------------
(unaudited)
(in thousands)
Cash and cash equivalents $ 452 $1,076
Total current assets 2,396 4,079
Total assets 4,214 6,185
Total current liabilities 2,488 2,034
Total liabilities 2,531 2,272
Total stockholders' equity 1,683 3,913
|
See note B of notes to consolidated financial statements for a discussion regarding the computation and presentation of basic and diluted net loss per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT, AS WELL AS "RISK FACTORS."
Results of Operations
Years Ended December 31, 1999 and 1998
Revenue
Revenue for the year ended December 31, 1999 decreased 13.1% to $3.3 million as compared to $3.8 million for the year ended December 31, 1998. This revenue was generated by the four consolidated subsidiaries that we owned during various portions of 1999, as compared to the three consolidated subsidiaries that we owned during a portion of 1998. Of the 1999 revenue, 60.7% came from the sale of value-added benefits and services, 8.7% came from the sale of our web site services including web hosting, web design and domain name registration. 25% of our consolidated revenue was generated from the origination and primary marketing of mortgage loans, and 10.1% of that revenue resulted from the addition of new merchants to IMS's credit and debit card transaction processing services customer base. The decrease in revenue was primarily due to attrition of JoinUsOnline's membership base during 1999.
Expenses
Cost of Sales. We incurred cost of sales of $338,000 for the year ended December 31, 1999, an 85.5% increase over the $182,000 incurred for the year ended December 31, 1998. This increase was primarily due to additional purchases of credit card terminals by IMS and increased costs of telephony incurred by United Interactive.
Selling. We incurred selling expenses of $503,154 for the year ended December 31, 1999, a 98.7% decrease from the $1.1 million we incurred for the year ended December 31, 1998. This decrease was primarily due to the conversion of the commission-based outside sales force that we utilized during 1998 into a salary-based internal sales group in 1999.
General and administrative. We incurred general and administrative expenses of $3.7 million for the year ended December 31, 1999, a 420.8% increase over the $700,000 of G&A expenses incurred by JoinUsOnline, United Interactive and IMS during the year ended December 31, 1998. The increase in G&A expenses was primarily due to the acquisition of Express Financial, our employment of a larger number of corporate personnel and an increase in professional fees. United Interactive's Internet services operating costs were $900,000 during 1999, a compared to $495,000 during 1998. United Interactive incurred these costs primarily for technology research, portal development and lease lines for local networks.
Depreciation and amortization. Our depreciation and amortization expense was $94,790 for the year ended December 31, 1999, a $59,253 increase over the amount of that expense during 1998. This increase was primarily due to the amortization of goodwill arising from the acquisition of one of our subsidiaries in 1999. That acquisition and the implementation of our internal communications network also increased our depreciation expense for telecommunications equipment, hardware, computers and other fixed assets. For 1999, $24,217, or 26%, of our depreciation and amortization expense was related to the amortization of acquisition goodwill and $70,573, or 65%, was related to the depreciation of fixed assets. For
1998, all of our depreciation and amortization expense was related to the depreciation of fixed assets.
Marketing and advertising. Marketing and advertising expenses consist primarily of the cost of national trade shows to establish and increase the public recognition of our name and the names of our subsidiaries' names. These expenses were also incurred to secure leads generated through marketing and distribution agreements, and through direct advertising and trade publications. Marketing and advertising expenses also include fees paid to other web sites and business partners for lead generation. During 1999, such expenses amounted to $283,136, a 250% increase over the amount of such expenses in 1998. Such increase was primarily due to our attendance at 25 trade shows around the country during 1999.
Three Months Ended March 31, 2000 and 1999
Revenue
Revenue for the three months ended March 31, 2000 increased 11.1% to $1.0 million as compared to $900,000 for the comparable period of 1999. This revenue was generated by the four consolidated subsidiaries that we owned during the first quarter of 2000, as compared to the three consolidated subsidiaries that we owned during a portion of 1999. Of the first quarter 2000 revenue, 31.2% came from the sale of value-added benefits and services, 2.3% came from the sale of our web site services including web hosting, web design and domain name registration. 58.4% of our consolidated revenue was generated from the origination and primary marketing of mortgage loans, and 6.9 % of that revenue resulted from the addition of new merchants to IMS's credit and debit card transaction processing services customer base.
Expenses
Cost of Sales. Our cost of sales for the quarter ended March 31, 2000 was $64,822, a 42.7% decrease from the $113,200 cost of sales we incurred for the quarter ended March 31, 1999. This decrease was primarily due to the increased buying power and decreased acquisition costs of electronic merchant equipment incurred by IMS.
Selling. We incurred selling expenses of $172,003 for the quarter ended March 31, 2000, a 16.6% increase over the $147,521 we incurred for the quarter ended March 31, 1999. This increase was primarily due to the acquisition of Express Financial which occurred subsequent to March 31, 1999.
General and administrative. We incurred general and administrative expenses of $2,208,488 for the quarter ended March 31, 2000, a 482.3% increase over the $379,293 of G&A expenses we incurred during the first quarter of 1999. This increase also was primarily due to the acquisition of Express Financial, increased payroll costs due to our employment of additional corporate personnel and an increase in professional fees. United Interactive's Internet services operating costs were $495,234 for the quarter ended March 31, 2000. It incurred these costs primarily for technology research, portal
development and lease lines for local networks.
Depreciation and amortization. Our depreciation and amortization expense was $60,617 for the quarter ended March 31, 2000, a 56.5% increase over the amount of that expense during 1999. This increase was primarily due to the amortization of goodwill arising from the acquisition of one of our subsidiaries in 1999. That acquisition and the implementation of our internal communications network also increased our depreciation expense for telecommunications equipment, hardware, computers and other fixed assets
Marketing and advertising. During the first three months of 2000, our marketing and advertising expenses amounted to $118,167, a 9.1% increase over the amount of such expenses during the same period in 1999. Such increase was primarily due to the attendance of additional trade shows.
Liquidity and Capital Resources
As of December 31, 1999, we had cash and cash equivalents of $452,084 and an additional $2.3 million in cash available for the purpose of funding loans through Express Financial's warehouse lines of credit. At March 31, 2000 Express Financial had outstanding warehouse finance facility advances from Impac Warehouse Lending Group ("Impac") of $1,586,624 which were collateralized by mortgage loans held for sale having an aggregate carrying value of approximately $1,631,000. Subject to market conditions, we intend to raise additional cash to fund our continuing expansion either through private placements or registered public offerings of our securities.
Net cash used in operating activities for the year ended December 31, 1999 totaled $1.53 million, as compared to $1.7 million of net cash provided by such activities in 1998. The primary factors which resulted in such cash usage in 1999 were our consolidated operating loss of $1.1 million, a $534,000 increase in mortgage loans held for sale and a $357,000 decrease in deferred revenue. The major component of the cash provided from operating activities in 1998 was our net earnings of $1.8 million. Net cash used in operating activities during the three month period which ended on March 31, 2000 amounted to $2,910,000, as compared to $157,000 of net cash provided from such activities during 1999. The primary factors which resulted in such cash usage during the first three months of 2000 were our consolidated operating loss of $1.4 million, $909,000 of advances made to our Chief Executive and other employees, a $52,000 increase in accounts receivable and a $211,000 decrease in deferred revenue. During the first three months of 1999, our operating activities generated approximately $158,000 in cash. The primary factors which resulted in such cash generation were our net earnings of $252,000 and the $166,000 decrease in deferred revenue.
Net cash used in investing activities for the year ended December 31, 1999 totaled $122,513, $302,131 of which was used for the purchase of computers, workstations, servers and other equipment to support our growth in technology support services and costs related to software development. This amount was partially offset by cash from business acquired of $179,618. Net cash used in investing activities during the three months ended March 31, 2000 amounted to
$93,000 which was used for the purchase of computers, workstations, servers and other equipment.
Net cash provided by financing activities for the year ended December 31, 1999 totaled $2.1 million. $2.0 million of that amount represented the proceeds of the private placement transactions discussed in the two paragraphs immediately following this one. During the year ended December 31, 1998, our financing activities consumed $1.7 million. Of that amount, $1.5 million consisted of stockholder distributions. During the three months ended March 31, 2000, we netted $3.6 million from the 970,285 share issuance transaction with the selling stockholder which is more fully discussed below. During the three months ended March 31, 1999, our financing activities resulted in our receipt of $435,000 of the $1,000,000 we derived from the successful completion of the private placement discussed in the next paragraph.
In 1999, we raised $1,000,000 through an offering of 500,000 shares of common stock at $2 per share. The shares were offered pursuant to Regulation D, Rule 504 of the Securities Act of 1933. The proceeds from the offering were used for working capital purposes.
On October 1, 1999, we entered into an agreement to sell 211,640 shares of common stock to an investor for $1,000,000. The Company received proceeds in various increments through December 1999. The proceeds are being used for working capital purposes.
On June 4, 1999, Express Financial entered into a $4,000,000 warehouse finance facility from Impac, which provides warehouse financing on an as offered basis. This facility bears interest of 1.5% over a designated institution's prime rate. Express Financial obtains individual warehouse advances from Impac. At December 31, 1999, Express Financial had outstanding warehouse finance facility advances from Impac of $1,666,092 which were collateralized by mortgage loans held for sale having an aggregate carrying value of approximately $1,686,000. Prior to June 1999, Express Financial had a $2,000,000 warehouse facility from Sun Trust Bank which provided warehouse financing on an as offered basis. At March 31, 2000 Express Financial had outstanding warehouse finance facility advances from Impac of approximately $1,587,0000 which were collateralized by mortgage loans held for sale having an aggregate carrying value of approximately $1,631,000. Express Financial repays warehouse advances upon the sale of warehoused loans to third parties.
On February 3, 2000, we received gross proceeds of $4,000,000 in connection with our issuance of 970,285 shares of common stock pursuant to a common stock purchase agreement that we entered into with the selling stockholder (the number of shares were based on 85% of the average closing bid price for five consecutive business days prior to February 3, 2000, $4.12). Under the terms of the agreement, the shares are subject to repricing during four separate repricing periods. The first repricing period will commence on the effective date of the registration statement of which this prospectus forms a part, and will end 30 days after that date. If during this time the average closing bid price for any five business days (not necessarily consecutive) is not equal to or greater than 117% of the price at which we issued those shares, then the selling stockholder may request that up to one-third of its shares (approximately 323,428 shares) be repriced. If the selling stockholder wishes to reprice, we may elect to issue additional shares according to a formula or elect to pay the investor based on a different formula.
The second and third repricing periods commence immediately following the first and second repricing periods, respectively, and end 30 days thereafter. The repricing percentage and formulas in the first repricing are the same for the second and third repricing period. The final repricing period commences immediately following the third repricing period and ends 180 days thereafter. If during this time the average closing bid for any five consecutive business days after the commencement of the final repricing period is not equal to or greater than 117% of the initial closing price, the investor may request repricing of up to 50% of the initial shares (not previously repriced). We may elect to issue additional shares or pay the investors as determined by applying two separate formulas.
Pursuant to the stock purchase agreement, we issued to the selling stockholder a warrant to purchase 164,548 shares of common stock at an exercise price of $5.82 per share. The warrant expires on February 2, 2004.
We have the right to redeem that portion of the 970,285 shares held by the selling stockholder for which a relevant repricing period, other than the final repricing period, has not commenced, by payment of cash in an amount equal to the "applicable percentage" of $4.12 multiplied by the number of shares being redeemed. The applicable percentage ranges from 115% to 130% depending on the redemption date.
The selling stockholder has committed to purchase up to $16,000,000 of additional shares of our common stock at a price equal to 90% of the two lowest closing bid prices of the common stock (not necessarily consecutive) for the 10 trading days prior to the giving of notice by us of our election to enter into an additional funding transaction with the selling stockholder. The dollar amount of each additional funding transaction can not be greater than $2,000,000. We can not exercise our option to sell any additional shares to the selling stockholder unless our common stock is trading on a Nasdaq market at a price above $2.00 per share, and until a registration statement covering the additional shares to be issued in such additional financing has been declared effective by the SEC. This commitment will expire 18 months after the effective date of the registration statement. Our common stock is not admitted for trading on any Nasdaq market. Although we intend to apply for listing of the common stock on the Nasdaq SmallCap or National Stock Market, we can not give you any assurance that such application will be granted. If our efforts to secure admission of our common stock for trading on one of those markets are unsuccessful, we will seek to have our common stock admitted to quotation on the NASD's OTC Bulletin Board. Inasmuch as we can not give you any assurance that our common stock will be admitted for trading or listed on one of those markets, we also can not give you any assurance that we will be able to obtain any additional financing under the commitment we received from the selling stockholder.
Under the terms of the stock purchase agreement, we were required to file a registration statement with the SEC to register the selling stockholder's shares in March, 2000, but we did not do so. We were also required to have that registration statement declared effective by the SEC on or before May 3, 2000, but that requirement was not satisfied. By reason of the fact that the registration statement was not filed with or declared effective by the SEC within the allotted time periods, we may be required, if the selling stockholder so elects, to pay $80,000, or a pro-
rata part thereof, for each 30 day or shorter period commencing on or about April 3, 2000 and ending on the date when such effectiveness is declared.
We paid the sum of $320,000 and issued a warrant to purchase 67,920 shares of our common stock at an exercise price of $4.53 per share to Ladenburg Thalmann & Co., Inc. in consideration for the services it rendered as our intermediary in connection with the negotiation and consummation of the stock purchase agreement between the selling stockholder and us. We also paid a finder's fee of $200,000 to Boru Enterprises, Inc. in connection with our consummation of that agreement. In June 2000, Boru agreed to cancel its entitlement to receive finder's fees as and when we exercise our right to issue additional shares of common stock to the selling stockholder. In consideration for that cancellation, we issued a five year option to Boru to purchase 400,000 shares of common stock at an exercise price of $.69 per share. See "Description of Securities - Warrants and Options."
On April 26, 2000, we acquired an 80% ownership interest in GKB. We issued to GKB's shareholders in that transaction 2,400,240 shares of our common stock valued at $9,600,000. The agreement by which that transaction was consummated calls for contingent shares to be issued at the one-year anniversary of the closing if our stock price at that time is less than $5.00 per share. The acquisition has been accounted for as a purchase and accordingly, the acquired assets and liabilities have been recorded at their fair values at the date of acquisition. The excess of the consideration paid over the estimated fair value of the net assets acquired of $9,579,913 has been allocated to goodwill and is being amortized on a straight-line basis over 5 years. Keith Becker, one of GKB's shareholders, is the brother of William R. Becker, our Chairman and Chief Executive Officer. See, "Certain Transactions."
Since inception, we have significantly increased our operating costs and we anticipate that we will continue to experience significant increases in our operating costs for the foreseeable future. In addition, we may use cash resources, including cash generated by the sale of securities, to fund acquisitions or investments in joint ventures, businesses, technologies and products or services complementary to our business.
We plan to continue acquiring and investing in operating companies. As a result, we will continue to amortize substantial amounts of goodwill and other acquired intangible assets. As we grow, we expect that the amount of goodwill we will amortize in connection with our investments will represent an increasingly smaller portion of our expenses. Therefore, we expect to continue to incur net losses until that point in time when the goodwill we amortize represents a sufficiently small amount of our expenses that it is exceeded by our net income before amortization. Exactly when that point in time will occur depends on the nature, size and timing of future acquisitions, which we cannot predict.
Recently Issued Accounting Pronouncements
Recent accounting pronouncements issued by the Financial Accounting Standards Board and the Securities and Exchange Commission are not expected to have a material impact on our financial statements.
Year 2000 Compliance
We did not experience any interruptions in our operations when the calendar year changed to the year 2000. We believe that our products and services, and products which we purchase from third party vendors, are designed to operate continuously regardless of date changes.
BUSINESS
OVERVIEW
We offer to companies, businesses, fund raising organizations, large associations, affinity groups, their members and customers, directly and through JoinUsOnline, privileged access to Internet business-to-business and business-to-consumer benefits, products and services. Through the agreements that we and JoinUsOnline have with such organizations, more than 29,000,000 households and 1,500,000 businesses have access to those benefits, products and services. As of the date of this prospectus, approximately 3,500,000 of those households and businesses have obtained one or more of the benefits, products and services that that we provide.
We offer such benefits, products and services through web portals that we develop and operate for our own use, and also through "private labeled" web portals that we develop and operate for other businesses and organizations. An employee or member of any of the companies or organizations with whom JoinUsOnline has agreements can obtain the various benefits, goods and services that offered by that organization through JoinUsOnline either by entering his user name and password at JoinUsOnline's Web site located at www.joinusonline.com, or by clicking on the JoinUsOnline button located at his organization's Web site. In that latter case, the employee or member is connected to a private labeled version of the JoinUsOnline web portal which contains his employer's or organization's logos. Thus, without leaving his employer's or organization's Web site, the employee or member can:
o sign up for any of the free benefits and purchase any of the other benefits, products and services that he employer or organization has agreed to provide to him through JoinUsOnline;
o access all of the data and information contained at a MyWay.com web portal which has been customized by MyWay.com, a subsidiary of CMGI, Inc., to include his employer's or organization's trademarks and logos, and incorporated, i.e., linked, to his employer's or organization's Web site; and
o access various Internet chat rooms maintained by MyWay.com.
Most of our business is currently conducted through six majority- or wholly- owned subsidiary corporations. Each of our subsidiaries performs a function or provides a service which is complementary to the basic business that we conduct directly and through JoinUsOnline. Thus:
o United Interactive
|_| serves as our research and development facility
|_| develops and hosts all of the web portals and Web sites which we and our subsidiaries maintain
|_| offers web portal and Web site development and hosting services to third parties
|_| develops various web-based products that we and our subsidiaries offer, such as the easy-to-construct customizable three page Web site we offer through Web Classified
|_| provides us, our subsidiaries and third parties with high speed Internet access services.
o IMS provides Visa and MasterCard network credit card processing, check and debit card processing as well as credit card gateway services for merchants who sign up for such services either directly at our JoinUsOnline Web site or through the JoinUsOnline Web site maintained by their organization, and also to non-members.
o Web Classified provides to individual and business members of our JoinUsOnline customer organizations who elect to purchase an easy to construct and customize three page Web site
|_| access to Web Classified's database driven Web site generation application, and
|_| the web hosting services required for the maintenance of such Web sites.
o Express Financial provides licensed mortgage banking services to individual and business members of our JoinUsOnline customer organizations, as well as to individuals and businesses who are not JoinUsOnline members. Express Financial represents various lending institutions and is a licensed and approved lender for various federal lending programs including FHA, VA and Title II loans. Express Financial engages in residential and commercial mortgage lending activities through three different channels:
|_| directly with customers who do business with Express Financial's two offices located in South Florida;
|_| through "net branches," maintained on a full time or part time basis by individuals and businesses located in various other states that produce mortgage lending business for Express Financial; and
|_| via a virtual branch office that Express Financial maintains on the Worldwide Web at www.efcol.com through which customers can shop for and obtain mortgage financing by completing an on-line mortgage loan application.
o GKB is developing a restaurant industry specific web portal called FattyDaddy.com which will be offered to JoinUsOnline member organizations. Access to the FattyDaddy.com portal will also be marketed directly to non-JoinUsOnline members. When it is completed, which we estimate will occur around August 1, 2000, the FattyDaddy.com portal will:
|_| enable restaurants who advertise on the FattyDaddy.com portal to complete e-commerce transactions with consumers for takeout/delivery, take reservations on-line, order closeouts and supplies on-line and hire help;
|_| permit supplier of goods and services to restaurants to advertise and provide their supplies and services on-line to restaurants and create e-commerce transactions with those restaurants; and
|_| enable consumers who visit the FattyDaddy.com Web site to find a restaurant, order take out and delivery, make a reservation, print out a coupon, or find employment at a restaurant or restaurant supplier.
The remaining 20% interest in GKB is held by Keith Becker, who is William Becker's brother, and two unrelated parties. See "Certain Relationships and Related Transactions."
In addition to the business that we conduct directly and through our subsidiaries, we have also formed a joint venture called TVI Marketing.com, Inc. ("TVI") with an unaffiliated company. We own 40% of TVI. The TVI joint venture, which has not begun to generate any material revenues, will seek to enroll members and market products to those members via Internet and satellite television marketing programs.
OUR STRATEGY
During the 1990s, we successfully built a business which provided the consumers and merchants who were employees and members of our clients' organizations with access to various benefit and service programs offered by third parties with whom we contracted to make such offerings available. The strategy we have been pursuing since 1999 has been
o to convert our benefits and services business from
|_| a paper-based system which was grounded on the distribution of brochures and leaflets which describe the various benefit and service offerings and the mailing or faxing of coupons and certificates by our client organizations' members in order to activate a benefit or service,
|_| to an internet-based system where members and employees can log-on to a web page that we create for their organization through which they can instantaneously receive information about, and activate any benefit or service offered through their
organization; and
o to leverage our access to the millions of consumer members of our client organizations by creating a one-stop Internet portal system called JoinUsOnline.com
|_| which we private label for our client organizations and
|_| through which their employees and members can instantaneously link to the websites of participating businesses who desire to offer and sell their products and services to those consumers.
In order to implement that strategy we built an infrastructure on the Internet for web hosting and development through United Interactive, we created our own proprietary search engine incorporating web pages through WebClassified and we incorporated the ability to process credit card transactions for products, benefits and services sold by at various websites within the JoinUsOnline.com portal system through IMS's e-commerce credit and debit card transaction operations.
The implementation of that strategy
o has enabled us to significantly lower our costs of delivering our benefit and service programs by minimizing the need to print and distribute brochures and fulfillment documents,
o will enable us, we believe, to generate significant revenues from the sale of JoinUsOnline.com web portals and
o will enable us and our client organizations, we believe, to participate in the revenues derived by the businesses who sell products and services to the consumers who link to them via the private labeled web portals we create for our client organizations.
In order to make our JoinUsOnline.com portal system more attractive to client organizations, potential client organizations and their various members and employees, we have incorporated into our strategy, a growth by acquisition program which is targeted at small so called "dot com" companies - companies that have established, or who desire to establish, a website on the Internet so they can gain access to customers to buy their products and services. The dot coms that we are interested in acquiring are those whose product and service offerings, we believe, would be of interest to the employees and members of our client organizations. The general formula we have adopted for our acquisition program entails our acquisition of 80% of the ownership of a dot com in consideration for our commitment to invest up to $1,000,000 in the company, and our creation of a private labeled JoinUsOnline.com web portal for the company. Through that portal and its linkage to the other portals within the JoinUsOnline.com portal system, the dot com will gain access to the millions of customers who are employees and members of our client organizations. To date, we have employed our acquisition strategy in two cases - our acquisition of Express Financial and GKB.
HISTORICAL SUMMARY OF THE COMPANY
We were incorporated under Delaware law on March 31, 1993 as ADV Acquisition Corp. In June 1993, we changed our name to Empire Capital Corporation. From the time of that change of name until approximately March 1999, we conducted business as a provider of asset-based and real estate based financial services. In July 1996 we changed our name to Interfund Resources, Inc. Upon completion of the reverse acquisition transaction in February 1999, by which we became the parent corporation of JoinUsOnline, United Interactive, IMS and WebClassified, we commenced the business activities described above.
JoinUsOnline's Business
JoinUsOnline offers an ever-expanding portfolio of discounted benefits and services that provide privileged access to goods and services to companies, businesses, fund raising organizations, large associations, affinity groups, their members and customers. JoinUsOnline offers more than 30 different benefit and service programs which include home shopping, travel, automobile, dining, health, discount coupon, investment, and other lifestyle enhancement programs, as well as a variety of business benefits and services. In 1999, JoinUsOnline changed the focus of its business from a paper-based model to an Internet based model. By doing so, JoinUsOnline has been able to substantially reduce its costs of acquiring enrollees in the various benefits and services programs which it offers to the members of JoinUsOnline's client organizations, and its fulfillment costs in providing such benefits and services to those enrollees. Those costs, which ranged as high as $6.00 per member due the high labor costs associated with the use of paper-based enrollment and fulfillment packages, now range as low as $.25 per member due to the ease and efficiency of capturing storing and using membership and program enrollment data transmitted from a client organization member's PC over the Internet.
At the present time, the list of benefits and services offered by JoinUsOnline includes:
o Dial Up Internet Access o Personal Financial Services o New Car Buying o Travel Services o Mortgage Loans o Grocery Coupons o Automobile Rental o Real Estate Services o CDs and Tapes o Moving Services o Telephone Services o Golf Services o Consumer and Health Services o Classified Advertising o Fund Raising o Personal Web Pages o WebClassified.net o Merchant Services o New and Used Car Pricing o Hotel and Motel Services o Vision Plans o Discount Pharmacy Services o Chiropractic Services o Dental Services o Shopping a la Card o Consumer Legal Services o Business Legal Services o Web Hosting Services o Bi-Weekly Mortgage Services o Magazine Subscriptions o Online Business Barter Services |
Prior to 1999,
o all JoinUsOnline benefits information was packaged as booklets, brochures, coupons and other paper-based documents; and
o the only way that an employee of a company or member of an organization which had agreed to offer benefits, products and services through JoinUsOnline could obtain those benefits was by
|_| filling out, and then mailing or faxing a paper coupon, or
|_| by calling a telephone number contained in the descriptive materials and speaking with a person who would enroll the employee or member in the particular program or service.
Commencing in 1999, JoinUsOnline adapted its business to the Internet by creating the JoinUsOnline Internet portal. This Web site, which is customized to display each client organization's logos and trademarks, contains a standard format containing links and buttons which, when clicked, take the user to one or more web pages which
o describe each of the particular benefits, products or services that the JoinUsOnline client organization has agreed to make available to its employees or members through JoinUsOnline; and
o which provide the employee or member with a fill-in-the-blanks registration screen which instantaneously enrolls the him in the particular program of his choice via a secure Internet connection to JoinUsOnline's servers.
The JoinUsOnline Web site of each JoinUsOnline client organization is linked directly to the client's existing Web site, or in some cases, serves as the client's Web site.
Pursuant to an agreement which JoinUsOnline entered into in March 2000 with MyWay.com, a subsidiary of CMGI, Inc., a customized version of the MyWay.com Internet portal containing the logos and trademarks of the client organization is incorporated into the client organization's JoinUsOnline Web site. Thus, any employee or member of a client organization who accesses his employer's or organization's Web site can receive continuous updates of the latest news and pricing information for the securities that he would like to follow, maintain an online address book or calendar, link to various e-commerce shopping sites and link to Web sites grouped by industry, all via the customized MyWay portal provided by JoinUsOnline to his employer or organization, and, at the same time, he can gain access to, sign up for and purchase all of the benefits products and services at his employer's or organization's JoinUsOnline portal just by making a few clicks of his mouse.
JoinUsOnline packages benefits and services which are either provided directly by it or by third party providers into programs and it offers these programs principally to affinity groups (trade group and professional associations), businesses and charitable organizations which in turn make JoinUsOnline's programs available to their members, employees and/or customers. To a lesser degree, JoinUsOnline markets its programs directly to individual consumers and businesses. The key to JoinUsOnline's marketing strategy is that its programs are "value added." This is due to the fact that the members of participating affinity groups or the customers of participating businesses obtain access to JoinUsOnline's programs as part of their membership dues or in
conjunction with a purchased product or service. All fees associated with membership in JoinUsOnline's programs are paid directly by the participating affinity group or business. Through JoinUsOnline's numerous long standing relationships and its bulk purchasing capabilities it is able to provide an ever expanding portfolio of benefits and services that offer privileged access to goods and services with tremendous buying power for JoinUsOnline's members. Since the commencement of JoinUsOnline's business operations in 1990, it has established relationships with over 1,500 affinity groups with combined memberships in excess of 29 million households and 1,500,000 businesses. On average, JoinUsOnline's consumer programs offer participants $2,500 or more in annual savings, and its business programs can save participating companies $4,000 or more annually.
The JoinUsOnline Portal System
In order to leverage our access to the millions of consumer members of our client organizations, JoinUsOnline has created a one-stop Internet portal system called JoinUsOnline.com. JoinUsOnline private labels these portals for our client organizations. As of the date of this prospectus, approximately 65 JoinUsOnline.com client organization portals are in operation. Through those portals, the employees and members of those organizations can instantaneously link to the websites and JoinUsOnline sub-portals (see below) of participating businesses who desire to offer and sell their products and services to those consumers.
There are tens of thousands of dot com companies who are trying to sell their products and services via their websites. We believe that a significant portion of every dot com's operating budget is geared towards customer acquisition. We further believe that the costs of customer acquisition are ranging as high as $800 per transaction with millions of dollars being committed by dot coms in up front access costs just so they can try and get a customer to look at the product or service offerings at their websites. It is our view that each of these dot com companies shares a common goal - the desire to gain access to a base of customers. Dot coms are paying millions dollars in advertising and website-related operating fees for this access. JoinUsOnline is able to offer companies desiring to gain exclusive access to the millions of consumers who are employees and members of our client organizations a very low cost of customer acquisition. The total turnkey cost to a client for a private labeled web sub-portal - a portal within the JoinUsOnline.com portal system which can be directly accessed via a hyperlink button which is prominently displayed on each of our client organizations' JoinUsOnline.com portals - can be as low as $2,400,000. Included within that turnkey cost is exclusivity, either for a particular category within the customer base, or for the entire customer base, for the dot com's particular product or service. For example, a dot com that might be interested in offering discount golf vacation packages to the employees and members of our client organizations could, for the price of its sub-portal, gain such access to the exclusion of all other businesses desiring to make the same type of offering to that potential customer base. As of the date of this prospectus, approximately two JoinUsOnline.com sub-portals are in operation.
In addition to the turnkey fee, JoinUsOnline will receive a portion of the revenues derived by the dot com from the sale of products and services via its sub-portal. JoinUsOnline will share a portion of that dot com revenue with the client organizations whose members purchase the products or services that generate such receipts.
JoinUsOnline derives and will in the further derive its revenues from the up-front enrollment fees that it charges its clients, from the dot com sub-portal turnkey fees that it will be charging, from the revenues that its clients and the dot coms will be deriving from purchases made through the JoinUsOnline.com portal system and from utilization fees paid by many of the program benefits and service providers who provide goods and services to the members of JoinUsOnline's clients who enroll in such programs. The pricing of JoinUsOnline's programs range from free to $4.95 per month per member. The costs to JoinUsOnline's clients are based upon the type of program designed for the client. JoinUsOnline's net sales and its operating earnings during each of the periods described below were, as follows:
Years Ended Three Months Ended
December 31, March 31,
----------------------- -----------------------
1999 1998 2000 1999
---- ---- ---- ----
Net Sales .................. $2,011,257 $3,274,055 $ 918,245 $ 755,511
Operating earnings (loss) .. $ 119,268 $2,178,675 $ 318,992 $ 614,156
|
JoinUsOnline's Target Markets
JoinUsOnline markets a variety of business and consumer based value-added benefit programs and Internet portal programs to and through the telecommunications and affinity marketplaces. Included in the affinity marketplace are large groups, associations and fund raising organizations. JoinUsOnline customizes its programs based upon the demographics of its client organizations' members, customers and/or employees.
Three of JoinUsOnline's customers, RRV Enterprises, Inc., Consumers Buyline, Inc. and Catalyst Communication, Inc., were responsible for 62%, 15% and 9%, respectively, of JoinUsOnline's revenues in 1999. Taken together, such revenues amounted to 52% of our consolidated revenue in 1999. During the three months ended March 31, 2000, one of JoinUsOnline's customers, RRV Enterprises, Inc., was responsible for 19% of JoinUsOnline's revenues. Such revenues amounted to 17% of our consolidated revenues during that period.
JoinUsOnline's Marketing
JoinUsOnline has historically focused its marketing activities almost exclusively through trade shows. However, it has begun adding, as a new marketing channel, a direct sales force of marketing agents drawn from the pool of independent agents that work for several of the telecommunications companies who participate as providers in JoinUsOnline's benefits programs.
JoinUsOnline's Competition
The membership benefits and service industry serves a market of consumers and businesses nationwide. Benefits companies have traditionally marketed their benefits programs via direct sales, credit card issuers, airline services, oil companies, banking institutions, and most recently Internet web sales. The majority of customers for these programs are considered to be
consumers, with a small percentage of small business owners. Individual benefit and service program offerings vary dramatically from Company to Company. JoinUsOnline's major competitors are The Signature Group and Cendant Corp.
The Signature Group commenced operations in 1966 and has estimated annual revenues of more than $900 million. They sell their benefit and service programs exclusively to end-users, i.e., consumers, who pay annual membership fees. These membership fees represent a small segment of the potential annual revenues which The Signature Group can derive from a consumer because additional benefit program offerings, at additional costs over the basic membership fee are available to the consumer. Some examples of these additional programs are health, dental, vision, pharmacy and chiropractic programs. Therefore the annual savings that Signature Group members can receive can vary dramatically depending on the programs in which they enroll. The Signature Group markets its various benefits to a community of banks, oil companies and retailers through telemarketing, as well as to a more general consumer market via the Internet.
Cendant Corp. offers 20 individual membership programs, has annual revenues exceeding $5 billion and claims to have access to over 30 million customers. It derives most of its earnings from the $69.00 annual membership fee that it charges its customers. Cendant has a multi-tiered membership fee that starts at $69.00 and increases depending on the benefits selected. As in the case of The Signature Group, the actual saving to the end-user varies depending on the consumer programs in which the end-user chooses to participate. Like The Signature Group, Cendant's marketing focus consists mainly of telemarketing through credit card companies, oil companies and retailers. Cendant is in the process of establishing a marketing presence on the Internet, but does not currently market via the Internet.
JoinUsOnline's most important competitors have longer operating histories, larger client bases, longer relationships with clients, greater brand or name recognition and significantly greater financial, technical, marketing and public relations resources than we possess. However, JoinUsOnline believes that it provides one of the most comprehensive benefits and service programs that the industry affords, and that one factor which separates JoinUsOnline from its competition and provides it with a significant competitive advantage over them is that the members of JoinUsOnline's client organizations pay no membership fee to JoinUsOnline.
JoinUsOnline's Employees
JoinUsOnline currently has 15 employees. None of its employees is represented by a labor union and JoinUsOnline believes its employee relations are excellent.
United Interactive's Business
United Interactive's primary function is to provide the range of Internet services delivered to the us and to our subsidiaries. This includes the development and hosting of corporate Web sites, e-mail management, secure Inter-company networking, and network design and implementation. United Interactive manages and maintains the physical components comprising our computer network as well as the computer systems employed in connection with the production of the computer-based products and services that we and our subsidiaries provide.
United Interactive is responsible for the development of the back office programming that provides the functionality of sites such as Web Classified's Web site product and the JoinUsOnline portal system.
United Interactive has three departments: Network Operations, Software Development and Interactive Media.
The Network Operations Department is responsible for implementing Internet technologies, monitoring our network on a seven day per week, 24 hour per day basis, and providing customer support, software development and interactive media services.
The Software Development Department consists of a team of web and distributed system developers who design, implement and maintain all of our external e-commerce and internal web applications. Software Development is responsible for:
o Management of development projects
o System architecture and design
o Development using JavaScript, Visual Basic, COM, MTS, T-SQL, and a
variety of web application frameworks including MS Site Server
o Database administration
o Maintenance of e-commerce systems and web applications
The Software Development Department acts primarily as an internal development house, but occasionally accepts select external clients.
The Interactive Media Department's team of graphic artists, multi-media designers, multi-media programmers and Web designers develop, design, and maintain our and our subsidiaries' corporate Web sites. In addition Interactive media is responsible such materials as:
o Marketing materials, broadcast quality VHS productions.
o Internet and local area network streaming video and audio
o Interactive Multi-Media CD presentations for use in corporate
kiosks, presentations, trade shows, education and training.
In addition to acting as our internal media house, the Interactive Media Department accepts select client assignments from third parties.
United Interactive's Interactive Multimedia Department designs and develops interactive presentations and multimedia CDs for internal use and use on client Web sites. United Interactive also designs and produces training and marketing materials that include interactive CD ROMs and live action video presentations for use by our marketing personnel and the sales representatives who market our various benefits and services programs. United Interactive also conducts business as an Internet service and applications service provider to third parties. Such services include dial up and dedicated Internet access (primarily to customers located in the 561 area code), web hosting, and Web site development.
United Interactive's business activities generate revenues in the form of development fees, residual hosting fees and royalty fees. The pricing of United Interactive's various product and service offerings is based upon the time, effort and resources United Interactive utilizes for each project. Most of the projects United Interactive works on will have a long term effect on its revenues, as most the fees it receives consist of a combination of project development fees, coupled with residual royalty fees paid by the users of the products it creates. United Interactive's net sales and its operating losses during each of the periods described below were, as follows:
Years Ended Three Months Ended
December 31, March 31,
--------------------- -----------------------
1999 1998 2000 1999
---- ---- ---- ----
Net sales ................. $ 287,838 $ 84,259 $ 22,862 $ 112,719
Operating earnings (loss) .. $(576,813) $(366,367) $(495,234) $ (84,735)
|
United Interactive's Target Markets and Marketing
Aside from acting as a service provider to us and our companies, United Interactive specializes in creating electronic commerce solutions for small, medium, and large businesses as well as organizations and affinity groups. United Interactive primarily markets these services to our existing clients, which provides a large, qualified customer base without incurring typical customer acquisition costs. The e-commerce solutions provided by United Interactive encompass Web site design activities, custom database programming, web hosting, and secure online transaction processing. United Interactive does not use any traditional advertising or marketing for their services. Third party clients are normally acquired by United Interactive through referrals. United Interactive also participates in several agent programs, and receives business referrals from partners that include Microsoft and IBM.
United Interactive's Competition
The principal competitive factors affecting the market for United Interactive's products include product features, product performance and ease of use, pricing and support. United Interactive's competitors include companies with established positions in Internet hosting, e-commerce, software development, and Internet marketing. As a result, such companies may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products. Competition could increase as new companies enter the market, and as existing competitors intensify growth.
United Interactive competes with major Internet Web site hosting companies, e-commerce Web site hosting companies, and Internet e-commerce merchant credit card processing companies that market to small, mid-size businesses and corporations. As ranked by Cnet, the most significant competitors in these markets are Verio, Inc. and Concentric Network Corporation.
Verio, Inc. is a national provider of Internet services to small and medium sized businesses.
Verio provides its customers with the telecommunications circuits that permit Internet access and also hosts their Web sites.
Concentric Network Corporation provides tailored, value-added Internet Protocol based network services for enterprises and consumers. Services include dedicated access facilities, web hosting, remote access services and virtual private networks.
United Interactive's Employees
The Network Operations Department has five employees, the Software Development Department has four employees and the Interactive Media Department has four employees
IMS's Business
IMS conducts business in the transaction processing industry as a marketer of electronic credit card authorization and payment systems to merchants located throughout the United States. The transaction processing industry provides merchants with credit, charge and debit card and other payment processing services, as well as related information services. Each time that a merchant initiates a credit card payment transaction by swiping a customer's credit card through a card reading machine, several distinct business entities become entitled to receive a portion of the amount of the transaction (called the discount rate) which can typically fall between 1.6% to 3.5% of the amount of the charge. For example, the credit card reading machine may have been provided to the merchant by an organization who serves as a registered agent for a particular bank. That agent is called an independent sales organization or "ISO" or it is called a merchant services provider or "MSP". Alternatively, the card reading machine may have been provided by an agent of the ISO or by an independent sales representative who must work through an ISO's agent. Each of those entities will receive some portion of that transaction fee. Upon keying in the amount of the transaction and swiping the customer's credit card through the card reading machine, the data is sent simultaneously to the customer's bank for verification of the status of his account, and to the merchant's bank for crediting to the merchant's account via one of several transaction processing networks (such as the NOVA Network or Concord EFS Network, which are the two processing networks primarily used by IMS). Each of those entities will also receive a portion of the transaction fee. Also, the card association which sponsored the customer's credit card (such as Visa or MasterCard ) will also receive part of that transaction fee.
The transaction processing industry is characterized by a small number of large transaction processors that focus primarily on servicing large merchants and by many smaller transaction processors that provide a limited range of services to small to medium-sized merchants. Large merchants (i.e., those with multiple locations and high volumes of card transactions) typically demand and receive the full range of transaction processing services as well as customized information services at low per-transaction costs. By contrast, transaction processors historically have not offered small to medium-sized merchants the same level of services as large merchants or relatively low per-transaction costs offered to larger merchants. The growth in card transactions and the transition from paper-based to electronic transaction processing, however, have caused small to medium-sized merchants increasingly to demand sophisticated transaction processing and information services similar to those provided to large merchants.
Community and regional banks and ISOs such as IMS are the primary groups that market and sell transaction processing services to small to medium-sized merchants. In the emerging market sectors which include business to business sales, government purchasing cards and the explosive growth of Internet e-commerce, credit card usage is at its all time high. In order to compete with vertical market Internet e-commerce companies, storefront merchants are reinventing themselves by building e-commerce web sites. This phenomenon has created an emerging market for secure real-time transaction processing. Every day, more and more consumers are becoming more comfortable with the concept of using their credit card accounts to purchase products from e-commerce companies over the Internet. A business relationship with a merchant services company such as IMS has become essential to any business's ability to compete in the business to business and business to consumer market places.
Prior to January 2000, IMS conducted business as an agent for other registered agents. In such capacity, IMS marketed and serviced electronic credit card authorization and payment systems to merchants located throughout the United States, and received approximately five to ten basis points (a basis point equals one one-hundredth of one percent of the amount of the charge) on the amount of each transaction processed by a merchant through a card reading machine sold or supplied to the merchant by IMS.
Since January 2000, IMS has conducted business as an ISO for Imperial Bank and for EFS National Bank. As an ISO, IMS offers merchants a cost-effective, reliable, turnkey debit and credit card processing system. We believe that IMS will be able to provide its system on a profitable basis because of its low-cost operational structure, which includes efficient marketing and volume purchasing arrangements with equipment and communications vendors.
IMS derives revenues in a number of different ways. Chief among them are:
o Revenues from the sale of credit card processing equipment and software.
o The balance remaining after the fees which IMS pays to the Nova and Concord EFS Networks, and to the credit card associations for processing the transactions of IMS's merchant-customers are deducted from the per transaction fees which IMS charges its merchant-customers.
o Monthly fees to cover the cost of providing merchant-customers with monthly transaction statements and seven day per week, 24 hour per day customer service.
o Lump sum revenues resulting from the occasional sale of entire portfolios of merchant accounts.
As of March 31, 2000, IMS was providing transaction services to 2,400 merchants who generated a volume of approximately $87,000,000 in transactions during the three month period which ended on that date. We believe that IMS's agreements with Imperial Bank and EFS National Bank will enable IMS to increase substantially its customer base which, in turn, will increase the volume of processed transactions and the revenues generated by IMS with respect
thereto. While we further believe that such activity will permit IMS to generate a profit from its operations during the year 2000, no assurances can be given that such volume increases will occur, or if they due, that IMS will derive sufficient revenues therefrom to achieve profitability.
IMS's net sales and its operating earnings (loss) during each of the periods described below were, as follows:
Years Ended Three Months Ended
December 31, March 31,
---------------------- ----------------------
1999 1998 2000 1999
---- ---- ---- ----
Net sales ................... $ 334,718 $ 465,474 $ 70,015 $ 83,988
Operating earnings (loss) .... $(124,086) $ 11,853 $(248,443) $ (5,259)
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IMS's Target Markets and Marketing
IMS's three primary customer markets are small to mid size companies, Internet merchants and home based businesses. IMS employs special pricing programs which are designed to increase its market share. IMS currently supports a local sales force, and it intends to increase its sales volume by building, in conjunction with us and our other subsidiaries, and supporting a national sales force of 1,000 representatives. IMS plans to increase its market share by taking advantage of the synergies that we and our other subsidiaries can provide by giving IMS access to our various association clients and customers and the members of such associations. However, no assurances can be given that IMS will be successful in regard to any of the foregoing plans.
IMS's Competition
The electronic transaction processing industry is intensely competitive. Increased competition is likely from both existing competitors and new entrants into IMS's existing or future markets. IMS believes there are low barriers to entry in its markets. IMS may not be able to compete successfully as other companies develop new products and services, change prices, improve customer service and hire additional personnel. Competitors may offer new products and services resulting in greater competition and lower market share for IMS. Many of IMS's competitors, such as SPS Transaction Services and Card Service International, have longer operating histories, greater name recognition, larger customer bases and substantially greater resources than IMS has. Competitors may be able to adapt more quickly to new technologies and changes in customer requirements and may also be able to devote greater resources to marketing.
IMS's Employees
IMS currently has three employees. None of its employees is represented by a labor union and IMS believes its employee relations are excellent.
Express Financial's Business
Express Financial is a mortgage banker which represents over 70 direct lenders, and is also a
fully licensed and approved lender for federal programs including FHA, VA loans and Title-1 loans. Express Financial has online underwriting authority from Fannie Mae and Freddie Mac that enables it to issue approval of loan applications within minutes after it submits a completed application file to such organizations. Express Financial offers all types of residential and commercial loans, including first mortgages, second mortgages, commercial and construction loans, bridge loans, numerous specialty-financing programs, and foreign national programs.
Express Financial maintains a virtual branch office on the Worldwide Web at which customers can shop for and obtain mortgage financing by completing an on-line mortgage loan application over the internet by using Express Financial's on-line WEBAPP software. Express Financial has extended its virtual branch concept to the states of West Virginia, Georgia, Pennsylvania, Maryland and Ohio by permitting selected mortgage bankers licensed in those states to use Express Financial's WEB APP software in connection with their respective mortgage lending operations.
Operations - Production of Mortgage Loans
At the initiation of the mortgage banking process is the generation of leads and the completion of loan applications. Express Financial performs this function through three separate channels:
o directly with customers who do business with Express Financial's two offices located in South Florida;
o through "net branches," maintained on a full time or part time basis by individuals and businesses located in various other states that produce mortgage lending business for Express Financial; and
o via a virtual branch office that Express Financial maintains on the Worldwide Web at www.mortgagestogo.com through which customers can shop for and obtain mortgage financing by completing an on-line mortgage loan application.
Express Financial evaluates the loan applications and funds those loans that meet the underwriting criteria established by the lenders and investors who purchase loans from Express Financial. Express Financial then sells the mortgage loans in the secondary market to those lenders and investors.
As part of that underwriting process, Express Financial evaluates credit reports and property appraisals when required, verifies borrowers' income and assets and obtains any additional third party verifications relating to the borrowers and the mortgaged properties.
Express Financial obtains commitments from its lenders and investors for the purchase of every mortgage loan that it funds on the same day that Express Financial locks in a rate for a borrower. This protects Express Financial against changes in interest rates between the date Express Financial issues a loan commitment at a locked-in interest rate to the borrower and the date Express Financial sells the loan to an investor or lender. Express Financial's obligation to sell to an investor or lender is generally on a "best efforts" basis, which means Express Financial is
required to sell the loan to an investor or lender only if the loan closes within an agreed upon time period. However, occasionally a borrower will elect not to lock an interest rate until the closing. In those cases, Express Financial may choose to sell the loan on a short-term "mandatory" basis, which means Express Financial is required to sell the loan to an investor or lender, that pre approved the loan within a specified number of days after the closing.
Express Financial sells, in the aggregate, approximately 70% of all of its loans to Ohio Savings Bank, Wells Fargo Bank and Washington Mutual Bank NA. The following is a list of some of the other investors and lenders who purchase mortgage loans from Express Financial:
o World savings Bank
o Citibank
o Fleet Mortgage
o Bank United
o First Tenn. Bank
o SunTrust Bank
o Bank Of America
o First Union Bank
o Chase Manhattan Bank N.A.
o GE Capital
o Bank One
o Lehman Bros. (Aurora Loans)
o Merrill Lynch
o International Bank Of Miami
o Temple Inland
In most cases when Express Financial sells a mortgage loan to an investor or lender, there is no recourse to it. However, inaccuracies in loan documents, information about the borrower or information about the mortgaged property may require Express Financial to repurchase a mortgage loan from the investor or lender and indemnify them for any damages caused by the inaccuracies. Since Express Financial's inception, mortgage loans that Express Financial has repurchased from lenders and investors have represented an insignificant percentage of its total mortgage loan originations.
- Funding Mortgage Loans
After a mortgage loan has been approved for funding, Express Financial generally borrows from the $4,000,000 warehouse line of credit it maintains with Impac Warehouse Lending Group to fund and close the mortgage loan. This facility bears interest of 1.5% over a designated prime rate of interest. At December 31, 1999 and March 31, 2000, Express Financial had outstanding warehouse finance facility advances from Impac of approximately $1,666,000 and $1,587,000, respectively, which were collateralized by mortgage loans held for sale having aggregate carrying values of approximately $1,686,000 and $1,631,000, respectively. Express Financial repays warehouse advances upon the sale of warehoused loans to third parties.
After Express Financial borrows funds to fund a mortgage loan, Express Financial must pledge
the mortgage loan to the warehouse lender as security for its repayment of the borrowed money. During the time a mortgage loan is pledged to the warehouse lender, it is considered "warehoused." A mortgage loan is warehoused until Express Financial sells it to the investor or lender who agreed to purchase it when Express Financial agreed to fund the loan, at which time Express Financial repays its warehouse lender and the pledge is released. Express Financial's mortgage loans are warehoused for an average of approximately 18 days. Sub-prime mortgage loans are warehoused for an average of approximately 18 days.
Express Financial's net sales and its operating earnings during each of the periods described below were, as follows:
September 30, 1999 (date
of acquisition) - Three Months Ended March
December 31, 1999 March 31, 2000
------------------------- ------------------------
Net sales....................... $829,352 $595,142
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Operating earnings (loss)........ 38,790 $(208,688)
Regulation of Express Financial's Business
Express Financial's mortgage banking business is subject to the rules and regulations of each state where it makes loans, the Department of Housing and Urban Development, Federal Housing Administration, Veteran's Administration, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association and other regulatory agencies in connection with originating, processing, underwriting and selling mortgage loans. Rules and regulations issued by these entities impose licensing and work flow obligations on us, prohibit discrimination and establish underwriting guidelines. Express Financial also are required to comply with each regulatory entity's financial requirements.
Mortgage origination activities are further subject to the provisions of various federal and state statutes including the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Federal Truth-in-Lending Act, the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act. The Equal Credit Opportunity Act and the Fair Housing Act prohibit Express Financial from discriminating against applicants on the basis of race, color, religion, national origin, familial status, sex, age, marital status or other prohibited characteristics. It also requires us to disclose specific information to applicants, such as the reason for any credit denial. The Truth-in-Lending Act requires Express Financial to provide borrowers with uniform, understandable information about the terms and conditions of mortgage loans so that they can compare credit terms. It also guarantees borrowers a three-day right to cancel specified credit transactions. If Express Financial fails to comply with Truth-in-Lending, aggrieved customers could have the right to rescind their loan transaction with it and to demand the return of finance charges paid to us. The Fair Credit Reporting Act requires Express Financial to supply loan applicants with a name and address of the credit reporting agency Express Financial use when the applicant is denied credit or when the rate or charge for a loan increases as a result of information Express Financial obtained from a credit reporting agency.
Some of Express Financial's client relationships are "affiliated business arrangements" that must
comply with complex limitations under the Real Estate Settlement Procedures Act and to regulation by the Department of Housing and Urban Development. Affiliated business arrangements permit companies to refer real estate settlement business to Express Financial without violating the Real Estate Settlement Procedures Act's prohibition on "kickbacks" to the referring company. There are limitations on the types of payments that can be made to the referring company and disclosures that are required to be made to borrowers. Home Mortgage Disclosure Act also requires us to collect applicant information and file an annual report with the Department of Housing and Urban Development. Failure to comply with the Home Mortgage Disclosure Act could result in administrative enforcement actions that could eliminate important revenue sources for us and could lead to demands for indemnification or loan repurchases.
Industry participants are frequently named as defendants in class action and other litigation involving alleged violations of federal and state consumer lending laws and regulations. Some of the practices that have been the subject of lawsuits against other companies include:
o "add on" fees;
o truth in lending calculations and disclosures;
o escrow and adjustable rate mortgage calculations;
o private mortgage insurance calculations and disclosures;
o forced-placed hazard, flood and optional insurance; and
o unfair lending practices.
If a significant judgment were rendered against Express Financial in connection with any litigation, it could have a material adverse effect on its business and results of operations.
Although Express Financial's operations on the Internet are not currently regulated by any government agency in the United States beyond the mortgage-related regulations described above and regulations applicable to businesses generally, it is likely that a number of laws and regulations may be adopted governing the Internet. In addition, existing laws may be interpreted to apply to the Internet. There may be claims that our services violate those laws.
Regulatory and legal requirements are subject to change and may become more restrictive, making Express Financial's compliance more difficult or expensive or otherwise restricting its ability to conduct its business as it is now conducted.
Express Financial's Competition
A large number of mortgage companies transact business through retail offices and other traditional channels. Express Financial's competitors include other mortgage bankers (including those noted above), state and national commercial banks, savings and loan associations, credit unions, insurance companies and other finance companies. A great many of these competitors
are substantially larger and have considerably greater financial, technical and marketing resources than Express Financial has.
Mortgage banking on the Internet is highly competitive. A large number of mortgage companies currently transact business over the Internet in one form or another. The sophistication of these companies in the Internet channel varies from simple one-page information Web sites to Web sites with extensive on-line content and features. Many of these mortgage companies share a business strategy and capability similar to those employed by Express Financial. The competition includes banks such as Chase and Bank of America, as well as mortgage originators such as Prism Financial Corporation, E-Loan and Mortgage.com, all of which are larger and better capitalized than Express Financial. In addition, Express Financial also competes on the Internet with large, national mortgage companies, such as Countrywide Credit Industries, Inc. and HomeSide Lending, which have greater origination volumes and capitalization than Express Financial.
Express Financial's Employees
Express Financial currently has 17 employees. None of its employees is represented by a labor union and United Interactive believes its employee relations are excellent.
GKB's Business
GKB manufactures and sells POS Complete, a software-based restaurant management system. As of the date of this prospectus the POS Complete system has been installed in nine restaurant locations. The POS Complete system:
o allows restaurant operators to capture data at the point of sale, manage all of the restaurant's operations, analyze data, communicate electronically with their sites and interact with vendors;
o features an easy to customize, touch screen interface for recording and transmitting a customer's order;
o runs on the Windows 95/98 platform;
o supports multiple point of sale terminals and an integrated back office system;
o is upgradable so that clients can phase in their investment with additional hardware and software modules; and
o is scalable, so that it can operate a single restaurant, a group of commonly-owned restaurants, or a chain of franchised restaurants.
GKB customizes each POS Complete installation to meet the specific needs of its customer.
Training is provided by GKB at the customer's site.
GKB provides support and maintenance for its installed systems on a 24-hour basis, and can remotely access its clients' systems in order to perform quick diagnostics and provide on-line assistance.
GKB has also developed and intends to launch on or about June 15, 2000, a web portal located at the URL address http://www.fattydaddy.com, which is called FattyDaddy.com. GKB has positioned FattyDaddy.com as both a so called business to business (or "B-to-B") and a business to consumer (or "B-to-C") portal. Thus, businesses within the restaurant industry, such as restaurants, who visit the FattyDaddy.com web portal will be able to engage in transactions with other businesses in the industry, such as restaurant supply companies; and those restaurants also will be able to conduct business with consumers, all via the same web portal.
GKB intends to charge restaurants and other restaurant industry-related businesses an annual membership fee as well as transaction fees in connection with the various categories of business that they will be conducting through the FattyDaddy portal site. Consumers will not be charged any fees for accessing the portal or engaging in any transactions with any of those businesses. For example, it is anticipated that restaurants desiring to conduct B-to-B and B-to-C business as the FattyDaddy portal site will be charged a fee of $29.95 per month, plus, in the case of take-out orders and deliveries of food ordered by consumers through the portal site, a transaction fee equal to 4% of the amount of the sale.
The following products and services will be available to businesses and consumers through the FattyDaddy.com portal site:
o Takeout/Delivery - Restaurants will be able to post their menus and provide other pertinent information at their own web sites constructed with Web Classified's Web Classified.net product and hosted by United Interactive at no additional charge. Consumers will be able to search the FattyDaddy.com database of participating restaurants, place a take-out or delivery order with the restaurant of their choice and pay for their orders via the secure transaction processing systems provided by IMS.
o Restaurant Reservations - Consumers will be able to search the FattyDaddy.com database of participating restaurants and place reservations for tables on-line.
o Catering - Consumers will be able to search the FattyDaddy.com database of participating restaurants and catering facilities, review their respective menu offerings on-line, and transact business with such caterers via the FattyDaddy.com portal site.
o Restaurant Yellow Pages - Consumers will be able to search FattyDaddy.com's database of participating restaurants by choosing one or more of several different categories, such as geographic location, price range and cuisine. The results of each search will be presented with links to each restaurant's web page.
o Inventory Purchasing - Participating restaurants and other food preparation businesses will be able to purchase their food and non-food inventory needs from participating suppliers
through the facility of the FattyDaddy.com portal
o Help Wanted/Job Postings - All participating businesses will be able to place advertisements at the fattyDaddy.com portal site which will be searchable by job seekers on a category-by-category basis.
o Online Coupons/Specials - Participating restaurants will be able to make special offerings, or provide discount coupons to consumers on-line via the FattyDaddy.com portal site.
o New/Used Equipment Sales - Restaurants and other food service related businesses will be able to post offerings to sell equipment at the FattyDaddy.com portal site, and will be able to consummate purchases and sales of such equipment on-line at the portal site.
o Commercial Real Estate Availability - Realtors across the country will be able to post their available food establishment locations for lease and purchase at the FattyDaddy.com portal site. All participating restaurants and other food service related businesses will have access to such postings.
o Insurance Quotations for Food Establishments - Participating restaurants and other food service related businesses will be able to review insurance program offerings posted at the FattyDaddy.com portal site by various insurance brokers and agents located throughout the country.
GKB's Target Markets and Marketing
GKB has targeted the quick service food industry as the primary market for its POS Complete system.
GKB's Competition
The market in which GKB competes is highly competitive. There are worldwide at least 40 competitors that offer some form of sophisticated point of sale transaction processing system similar to GKB's. Competitors in the point of sale systems marketplace include full service providers such as Eltrax (Squirrel POS), Panasonic, Positouch, Infogenesis, Ibertech (Aloha POS), Hospitality Solutions International, GEAC, NCR (Compris POS) and Radiant Systems, each of whom has substantially greater experience, capital and other resources than GKB possesses.
GKB's Employees
GKB currently has three employees. None of its employees is represented by a labor union and GKB believes its employee relations are excellent.
Our Intellectual Property
Our intellectual property includes the proprietary software authored by United Interactive and GKB, such as the Web Classified.net website product and the POS Complete restaurant management system, our FattyDaddy and JoinUsOnline trademarks, and various slogans, such as JoinUsOnline's "Changing the Way America Buys." We believe that our intellectual property is an important factor in maintaining our competitive position in our core businesses. To protect our proprietary rights, we rely generally on copyright, trademark and trade secret laws. Despite these protections, a third party could, without authorization, copy or otherwise obtain and use our products or technology to develop similar products or technology.
We have applied for, or intend to apply for registration of our primary trademarks in the United States, including "JoinUsOnLine" and "FattyDaddy.com." We intend to continue to pursue the registration of these and certain of our other trademarks in the United States and in other countries; however, we cannot be sure that we can prevent all third-party use of our trademarks. We have obtained approximately 32 Internet domain names including: "JoinUsOnLine.com," "JUOL.com," "FattyDaddy.com," "bank-card.com," "efcol.com," "eft.net," "intrinfo.com," "Webclassified.net," "TVI-Marketing.com" and "uworld.net," .
We and our various subsidiaries have developed software for our and their product and service offerings which are protected by copyright law, including Web Classified.net and POS Complete. There is no assurance that the steps we and our subsidiaries take will be adequate to protect these rights or that we or our subsidiaries will be successful in preventing the illegal duplication, distribution or other use of this software. Our failure to adequately limit the unauthorized redistribution of our software could result in litigation or liability, which could harm our business.
The laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States, and effective copyright, trademark and trade secret protection may not be available in these jurisdictions.
Third parties may assert infringement claims against us. From time to time we may be subject to claims in the ordinary course of our business, including claims of alleged infringement of the trademarks, patents and other intellectual property rights of third parties by us or our users. Any such claims, or any resultant litigation, should it occur, could subject us to significant liability for damages and could result in the invalidation of our proprietary rights. In addition, even if we were to win any such litigation, such litigation could be time-consuming and expensive to defend, and could result in the diversion of our time and attention, any of which could materially and adversely affect our business, results of operations and financial condition. Any claims or litigation may also result in limitations on our ability to use such trademarks, patents and other intellectual property unless we enter into arrangement with such third parties, which may be unavailable on commercially reasonable terms.
Research And Development
Although we do not have a specific research and development budget, United Interactive serves as our research and development facility. As such, it develops various web-based products that
we and our subsidiaries offer, such as the JoinUsOnline portal system and Web Classified's easy-to-construct, customizable three page Web site.
Properties
Our headquarters consist of approximately 12,000 square feet of office space in Delray Beach, Florida which are leased from an unaffiliated landlord through 2009. The annual rental under the lease provides is $181,000, including common area maintenance, taxes and other costs. The lease contains rent escalation provisions which will increase the annual rent over a period of ten years to a total of $275,245 (including common area maintenance, taxes and other costs) for the final year.
JoinUsOnLine occupies approximately 8,400 square feet of the Delray Beach office which has been finished as separate, secure offices for its sole use. JoinUsOnline pays 70% of the monthly rental and other charges for such space. We occupy the balance of the space, and pay the remaining 30% of the monthly rental and other charges due under the lease.
IMS leases approximately 2,030 square feet of office space in Coral Springs,
Florida pursuant to a lease with an unaffiliated landlord which expires in 2002.
The lease provides for payment of annual rent in the amount of $26,429,
including common area maintenance, taxes and other costs. It also provides for a
rent escalation to $28,014.74 (including common area maintenance, taxes and
other costs) in the final year.
.
Express Financial presently leases approximately 3,600 square feet of office
space in Boca Raton, Florida. This facility is covered under a five-year lease
expiring on March 31, 2002. The monthly obligation is a gross total of
$6,207.29, including all common area maintenance, taxes and other costs.
GKB is the lessee of approximately 750 square feet of space in Uniondale, New York, pursuant to an office service agreement which provides for the payment of an office charge of $1,050 per month during the one year term which expires on April 14, 2001. That term will be automatically extended at 105% of the prior term's monthly office charge for additional one year terms unless either party gives notice of termination to the other at least 60 days prior to the end of the then current term.
Legal Proceedings
There are no material legal proceedings pending against us or any of our subsidiaries.
MANAGEMENT
The following table sets forth the names, positions with the Company and ages of the executive officers and directors of the Company. Directors will be elected at the Company's annual meeting of shareholders and serve for one year or until their successors are elected and qualify. Officers are elected by the board and their terms of office are, except to the extent governed by employment contracts, at the discretion by the Board.
Name Age Position
---- --- --------
William R. Becker 43 Chief Executive Officer, Director and Chief Operating
Officer
Matthew J. Cohen 41 Director and Chief Financial Officer
Peter Tamayo, Jr. 36 Chief Technical Officer
Lawrence J. Brady 59 Director
Charles R. McCarthy 60 Director
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William R. Becker is the Chief Executive Officer and Chairman of the Board of the Company and each of its subsidiaries. Since June 1992, Mr. Becker has served as the Chief Executive Officer of JoinUsOnline.
Matthew Cohen has served as our Chief Financial Officer since February 1999, and as a Director of the Company since September 1999. Between April 1997 and August, 1999, he served as Chief Financial Officer and as a Director of Legal Club of America Corporation, a provider of the nation's largest legal benefit programs. From 1984 to June 1996, he was Vice President and Chief Financial Officer of Standard Brands of America, Inc., a $100 million publicly held retailer of consumer electronics and appliances.
Peter Tamayo has served as a Senior Vice President and Chief Technical Officer of the Company since February, 1999. Since April 1995, he has served as the Chief Technical Officer of JoinUsOnline. Mr. Tamayo holds several patents in the computer industry, one in the electronics field and several dozen copyrights. He is a graduate of Morgan Technical Institute with majors in Industrial Electronics and Computer Science & Technology.
Lawrence J. Brady has served in senior management positions in government and the private sector, including founder and director of Capitoline International Group, Ltd.; a senior Vice President of Hill and Knowlton Public Affairs Worldwide; and Director of International Marketing for Sanders Associates, a Lockheed Corporation subsidiary. During the Reagan administration Mr. Brady served as Assistant Secretary of Commerce for Trade Administration, administering the government's export and import trade regulatory functions, including the high technology export control program, as well as the U. S. laws designed to prevent unfair sales of foreign products into the United States. He also administered the U.S. Government foreign trade zone program. Mr. Brady served also in senior staff roles in the Executive Office of the President in the Nixon and Ford administrations. He has represented the U.S. in trade negotiations in Europe, Japan and China and has been a frequent witness before Congress on international economic and trade issues.
Charles R. McCarthy has been of counsel to the law firm of O'Connor & Hannon, a Washington, D.C. and Minneapolis, Minnesota-based law firm since 1996. Prior thereto, he was
a member of McCarthy & Burke, a Minneapolis-based law firm. He graduated from the Georgetown Law Center and is a former trial attorney for the U.S. Securities and Exchange Commission. His prior experience includes serving as a Blue Sky securities commissioner for the District of Columbia and teaching at the International School of Law (now George Mason School of Law) as an Assistant Professor of Law. He has over twenty-five years of experience in serving on, advising and chairing various international and domestic corporate boards. Mr. McCarthy recently completed a four-year term as General Counsel to the National Association of Corporate Directors.
Executive Compensation
None of the persons who served as our officers prior to the completion of our reverse acquisition in February 1999 is currently employed by us or any of our subsidiaries. Between the closing of the reverse acquisition and the end of April, 2000, we and JoinUsOnLine paid the salary of our Chief Executive Officer, JoinUsOnLine paid the salary of our Chief Financial Officer and United Interactive paid the salary of our Chief Technical Officer. Since the end of April 2000, we and JoinUsOnline continue to pay our Chief Executive's salary, we pay the salary of our Chief Financial Officer and United Interactive continues to pay the salary of our Chief Technical Officer. Those three officers (collectively, the "Named Executive Officers") are our only executives who receive annual compensation and bonus of $100,000 or more.
The following table sets forth compensation awarded to, earned by or paid to the Named Executive Officers during the year ended December 31, 1999. We have not paid any compensation that would qualify as payouts pursuant to long-term incentive plans ("LTIP Payouts"), or "All Other Compensation" and we did not issue any SARs during such period of time.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
------------------------------------------ --------------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying
Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) Options ($)
------------------ ---- ------------ --------- ---------------- ----------- -------------
William R. Becker, CEO 1999 $ 250,000 -- -- -- 2,500,000 (1)
Matthew Cohen, CFO ... 1999 $ 36,462 (2) -- -- -- 100,000 (3)
Peter Tamayo, CTO .... 1999 $ 104,000 -- -- -- --
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1,000,000 shares pursuant to such options. See, "Employment Contracts, Termination Of Employment And Change In Control Arrangements." Does not include 500,000 shares of common stock issuable pursuant to a ten year non-qualified option at an exercise price of $.69 per share that we awarded to Mr. Becker in June 2000 under our Option Plan. That option vests at the rate of 100,000 shares per year on each of the first five anniversaries of the date on which the option was granted.
(2) Paid between September 13, 1999, the date of commencement of Mr. Cohen's employment, and December 31, 1999.
(3) In February 1999, we awarded to Mr. Cohen, who was then providing CFO services to us, a ten year incentive stock option under our Option Plan to purchase 100,000 shares of Common Stock at an exercise price of $1.50 per share. The option vests at the rate of 50% per annum at the end of each of the first two years during the term thereof. During the quarter ended March 31, 2000, Mr. Cohen purchased 50,000 shares of common stock pursuant to that option. See, "Employment Contracts, Termination Of Employment And Change In Control Arrangements" and "Certain Relationships and Related Transactions." Does not include 200,000 shares of common stock issuable pursuant to a ten year non-qualified option at an exercise price of $.69 per share that we awarded to Mr. Cohen in June 2000 under our Option Plan. That option vests at the rate of 66,666 shares per year on each of the first three anniversaries of the date on which the option was granted.
Option/SAR Grants In Last Fiscal Year
We did not grant SARs to any of the Named Executives during 1999. The following table describes the options granted to the Named Executives in 1999.
Individual Grants
---------------------------------------------------------------------------------------------------------------
Number of
Securities % of Total Options
Underlying Granted to Employees Exercise or Base
Name Options Granted (#) In Fiscal Year Price ($/Sh) Expiration Date
------------------------ ------------------- -------------------- ----------------- ---------------
William R. Becker, CEO 2,170,000 (1) 70.8% $1.50 2/26/2009
William R. Becker, CEO 330,000 (1) 10.8% $1.50 2/26/2009
Matthew Cohen, CFO 100,000 (2) 3.3% $1.50 2/26/2009
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(1) In February, 1999, we awarded to Mr. Becker under our Option Plan a ten year non-qualified option to purchase 2,170,000 shares of common stock at an exercise price of $1.50 per share, and a five year incentive stock option to purchase 330,000 shares of common stock at the same exercise price. Both options vest at the rate of 20% per annum at the commencement of each year during the term thereof. Accordingly, as of the date of this prospectus, Mr. Becker is entitled to purchase a total of 1,000,000 shares pursuant to such options. See, "Employment Contracts, Termination Of Employment And Change In Control Arrangements."
(2) In February 1999, we awarded to Mr. Cohen, who was then providing CFO services to us, a ten year incentive stock option under our Option Plan to purchase 100,000 shares of
Common Stock at an exercise price of $1.50 per share. The option vests at the rate of 50% per annum at the end of each of the first two years during the term thereof. During the quarter ended March 31, 2000, Mr. Cohen purchased 50,000 shares of common stock pursuant to that option. See, "Employment Contracts, Termination Of Employment And Change In Control Arrangements" and "Certain Relationships and Related Transactions."
Aggregated Option/Sar Exercises In Last Fiscal Year And Fiscal Year-End Option/SAR Values
None of the Named Executive Officers exercised any options in 1999.
Compensation Of Directors
The Company has not paid and does not presently propose to pay compensation to any director for acting in such capacity, except for nominal sums for attending Board of Directors meetings and reimbursement for reasonable expenses in attending those meetings.
Employment Contracts, Termination Of Employment And Change In Control Arrangements
At the end of February 1999, we entered into a five-year Employment Agreement with William R. Becker, our Chief Executive Officer, President, and Chairman of the Board of Directors. The terms of this agreement, which is renewable for an additional five-year term at our option, provides for an annual base salary of $250,000. Such amount may be increased by vote of the Board of Directors in the event of a material change in the scope of his duties as a result of a significant expansion of our business and operations; a material diversification of our business activities; one or more acquisitions or other similar long term permanent occurrences.
Under the agreement, Mr. Becker was granted a ten-year non-qualified option (see "Stock Option Plan," below) under our Option Plan to purchase 2,170,000 shares of common stock at $1.50 per share which such options will vest at the rate of 20% per year at the beginning of each of said five years. Also, Mr. Becker was granted 330,000 ten-year incentive stock options (see "Stock Option Plan," below) under the Option Plan to purchase 330,000 shares of common stock at $1.50 per share which such options will vest in the same manner as the non-qualified options.
Under the terms of the agreement, we may terminate the employment of Mr. Becker either with or without cause. If the agreement is terminated by us without good cause (which requires a six month notice provision), we would be obligated to pay Mr. Becker an amount equal to the unpaid salary due an owing during the balance of the term of the agreement. If the agreement is terminated for cause, no severance will be paid.
Effective September 12, 1999, we entered into a five-year Employment Agreement with Matthew J. Cohen, our Chief Financial Officer, Treasurer and a member of the Board of Directors. The agreement, which is renewable for an additional five-year term at our option, provides for an annual base salary of $120,000 which increases $12,000 annually for the duration of the term.
Under this agreement, Mr. Cohen was granted 100,000 ten-year incentive stock options under the Option Plan to purchase shares of common stock at 1.50 per share. These options vest at the rate of 50,000 shares annually at the end of each year.
Under the terms of the agreement, we may terminate the employment of Mr. Cohen with or without cause. If the agreement is terminated by us without good cause (which requires a six month notice provision), we would be obligated to pay Mr. Cohen an amount equal to the unpaid salary due an owing during the balance of the term of the agreement. If the agreement is terminated for cause, no severance will be paid.
Stock Option Plan
In February 1999, we adopted a qualified stock option plan, the Interactive Technologies.com, Ltd. 1999 Stock Option Plan. The purpose of the Option Plan was to increase our employees' and non-employee directors' proprietary interest in the company and to align more closely their interests with the interests of our shareholders, as well as to enable us to attract and retain the services of experienced and highly qualified employees and non-employee directors.
Options granted under the Option Plan may either be options qualifying as incentive stock options ("Incentive Options") under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or options that do not so qualify ("Non-Qualified Options"). Any Incentive Option granted under the Option Plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of such grant, but the exercise price of any Incentive Option granted to an eligible employee owning more than 10% of our common stock must be at least 110% of such fair market value as determined on the date of the grant.
The term of each Plan Option and the manner in which it may be exercised is determined by the Board of the Directors or the Compensation Committee of the Board, provided that no Plan Option may be exercisable more than 10 years after the date of its grant and, in the case of an Incentive Option granted to an eligible employee owning more than 10% of our common stock, no more than five years after the date of the grant. The exercise price of Non-Qualified Options shall be determined by the Board of Directors or the Compensation Committee
The per share exercise price of shares granted under the Option Plan may be adjusted in the event of certain changes in our capitalization, but any such adjustment shall not change the total purchase price payable upon the exercise in full of Plan Options granted under the Option Plan. The persons who serve as our officers, directors, key employees and consultants, or as officers, directors, key employees and consultants of our subsidiaries will be eligible to receive Non-Qualified Options under the Option Plan. Only persons who serve as our, or our subsidiaries' officers, directors and employees are eligible to receive Incentive Options.
We have reserved an aggregate of 18,000,000 shares of common stock for issuance pursuant to options granted under the Option Plan. As of the date of this prospectus, an aggregate of 5,853,900 options have been granted under the Option Plan. The Board of Directors or the Board's Compensation Committee will administer the Option Plan including, without limitation,
the selection of the persons who will be granted Options under the Option Plan, the type of Plan Options to be granted, the number of shares subject to each Plan Option and the Option Plan Option price.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
William R. Becker, our Chairman, Chief Executive and a controlling stockholder, is the owner of a travel service business with which we and our various subsidiaries conduct business. Neither we, nor any of such subsidiaries pay any fees or other compensation to such travel service. All compensation earned by the travel service is paid by the various airlines and other travel service providers at standard industry rates.
Keith Becker and William R. Becker, our Chairman and Chief Executive Officer, are brothers. Prior to April 26, 2000, Keith Becker was a 40% owner, the President and a director of GKB. On that date, we acquired an 80% ownership interest in GKB from each of its shareholders. We issued 960,096 shares of common stock to Keith Becker valued at $3,840,000 in connection with that acquisition. The agreement by which that transaction was consummated calls for contingent shares to be issued at the one-year anniversary of the closing if our stock price at that time is less than $5.00 per share. Keith Becker continues to own an 8% interest in GKB.
In March 2000, William R. Becker borrowed approximately $709,000 from us. His indebtedness to us is evidenced by a promissory note which obligates him to repay the principal on December 31, 2000. The note also requires him to pay interest computed on the unpaid principal at the rate 8% per year. The interest is also due and payable on December 31, 2000. Mr. Becker has the right to prepay all amounts due and payable under the note without premium or penalty. As of the date of this prospectus, $200,000 of the principal amount remains unpaid.
In March 2000, Robert Banner, the President of Express Financial, borrowed $200,000 from us. His indebtedness to us is evidenced by a promissory note which contains the same provisions, including those pertaining to the repayment of principal and the payment of interest, as Mr. Becker's note described in the immediately preceding paragraph. As of the date of this prospectus, the entire principal amount of the loan to Mr. Banner remains unpaid.
In March 2000, Matthew Cohen, our Chief Financial Officer, purchased 50,000 shares of our common stock by exercising an option that we granted to him last year. The $75,000 purchase price due and owing with respect to his exercise of the option is to be paid as follows: Mr. Cohen has paid the sum of $50.00 to us which constitutes the aggregate amount of the capital of those shares. He also has delivered a promissory note to us as evidence of his indebtedness to us in the amount of the $74,950 balance of the purchase price. That note is payable on demand and requires Mr. Cohen to pay interest computed on the unpaid principal at the rate 8% per year. See "Management - Executive Compensation - Summary Compensation Table."
PRINCIPAL STOCKHOLDERS
The following table sets forth the holdings of the Company's Common Stock as of the date of this prospectus by (1) each person or entity known to us to be the beneficial owner of more than
5% of our outstanding shares of common stock; (2) each of our directors and executive officers; and (3) all directors and executive officers as a group. All of the holders of common stock are entitled to one vote per share.
Number of Shares Percent
Name and Address of Beneficial Owner(1) Beneficially Owned(2) Owned(3)
---------------------------------------- ---------------------- ---------
William R. Becker....................... 14,967,200 (4) 51.3%
Matthew Cohen........................... 51,000 *
Peter Tamayo............................ 1,000,000 3.6%
Charles R. McCarthy (5)................. 50,000 *
Lawrence J. Brady (6)................... 50,000 *
All Directors and Executive Officers
As a Group (5 Persons).................. 16,118,200 (7) 55.3%
----------------------
|
* Represents less than 1%.
(1) Except as otherwise noted, the address of each of the persons listed below is 11336 Wiles Road, Coral Springs, Florida 33076.
(2) Includes shares actually and beneficially owned.
(3) Based upon 28,171,548 shares outstanding on the date of this prospectus, increased by the number of shares under options which the holder(s) thereof have the right to acquire within 60 days from that date.
(4) Includes (a) 1,000,000 shares which Mr. Becker may acquire pursuant to
options exercisable within 60 days of the date of this prospectus; (b)
2,967,400 shares which Mr. Becker owns jointly with his wife, Joni; and
(c) 9,000,000 shares held by Joni Becker as Trustee of the William R.
Becker Irrevocable Family Trust. Does not include 1,000,800 shares held by
Mrs. Becker, as to which Mr. Becker disclaims beneficial ownership.
(5) The address of Mr. McCarthy is 1666 K Street, NW Washington, DC 20006-2803.
(6) The address of Mr. Brady is 480 South Orange Grove Blvd #16 Pasadena, Ca 91105.
(7) Includes 1,000,000 shares which all of such persons may acquire pursuant to options exercisable within 60 days of this prospectus. Does not include the shares excluded from the percentage ownership calculations made with respect to Mr. Becker pursuant to note 4 above.
SELLING STOCKHOLDER
All of the [ ] shares offered by this prospectus are being registered for sale for the account of Young, LLC, the selling stockholder. The selling stockholder also holds warrants to purchase common stock, which we issued to it in connection with our issuance of the common stock to the selling stockholder. The table below also includes shares of common stock issuable upon exercise of those warrants.
We will not receive any portion of the proceeds from the sale of shares of common stock by the selling stockholder. However, we will receive the sum of $5.82 per share for each share of common stock purchased by the selling stockholder upon its exercise of those warrants.
Based on the information supplied to us by the selling stockholder, the following table sets forth certain information regarding the approximate number of shares of common stock which the selling stockholder owns or has the right to immediately acquire as of the date hereof, and as adjusted to reflect the sale by the selling stockholder of the shares of common stock offered by this prospectus. The selling stockholder has not held any office or maintained any material relationship with us or any of our predecessors or affiliates, over the past three years.
Shares Beneficially Owned Shares Beneficially Owned After
Before Offering(1) Offering(1)(2)
------------------------- -------------------------------
Name and Address Number Percent(3) Shares Offered Number Percent
---------------- ------- ---------- -------------- ------ -------
Young, LLC
Harbour House, 2nd Floor
Road Town, Tortola
British Virgin Island -0- -0-
|
(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In computing the number of shares beneficially owned by the selling stockholder and its percentage ownership, shares of common stock subject to warrants held by the selling stockholder that are currently exercisable, or become exercisable within 60 days of the date of this prospectus are deemed outstanding. The stock purchase agreement which we executed with the selling stockholder limits the selling stockholder's rights to receive additional shares in the event we are required to reprice the selling stockholder's shares. See the "Liquidity and Capital Resources" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations." In accordance with that limitation, the selling stockholder cannot receive repricing shares or exercise its warrants to the extent that such receipt or exercise would result in the selling stockholder and its affiliates beneficially owning more than 9.99% of our then outstanding common stock. Thus, although some of the shares listed in the table might not be subject to purchase by the selling stockholder during that 60 day period, they are nevertheless included in this table. Except as indicated by this footnote, to our knowledge, the selling stockholder is believed to have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by it. The information regarding the selling stockholder has been furnished by it.
(2) Assumes that all shares of common stock offered in this prospectus will be sold.
(3) Based on approximately 28,171,548 shares of common stock issued and outstanding as of the date of this prospectus.
DESCRIPTION OF SECURITIES
The following summary description of our capital stock is not intended to be complete and is subject to and qualified in its entirety by reference to our Certificate of Incorporation, as amended, copies of each of which are filed as exhibits to the registration statement of which this prospectus forms a part.
General
Our authorized capital stock consists of 90,000,000 shares of common stock, par value $0.001 per share and 10,000,000 shares of preferred stock, par value $0.001 per share.
Common Stock
The shares of common stock:
o have equal rights to dividends from funds legally available therefor, when, as and if declared by the Board of Directors of the Company;
o are entitled to share ratably, subject to the rights of the holders of any securities which are senior to, or which have preferences greater than the common stock, in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs;
o are not subject to preemptive, subscription or conversion rights;
o have no redemption or sinking fund provisions applicable thereto; and
o are entitled to one non-cumulative vote per share on all matters which stockholders may vote on at all meetings of stockholders.
All of the 28,171,548 shares of common stock now outstanding are fully paid and non-assessable.
Inasmuch as our common stock does not have cumulative voting rights, the holders of more than 50% of the outstanding shares can elect all of the directors, if they choose to do so, in which event the holders of the remaining shares cannot elect any directors. Accordingly, inasmuch as our current officers, directors and a control person or persons own more than 50% of the outstanding shares, they will continue to be able to elect all of the directors.
We have paid no cash dividends and it is not anticipated that any cash dividends will be paid in the foreseeable future. In all events, the declaration of cash dividends will depend upon future earnings, if any, our financial needs, and other pertinent factors.
Our Transfer Agent is Olde Monmouth Stock Transfer Company, Inc., 77 Memorial Parkway, Atlantic Highlands, New Jersey 07716
Our common stock is quoted in the National Quotation Bureau Pink Sheets under the symbol "INTR." Before the date when the registration statement of which this prospectus forms a part is declared effective, we intend to apply to the Nasdaq Stock Market, Inc. for admission of our common stock for trading under the symbol "INTR" on the Nasdaq SmallCap Market or, if we determine that we meet the criteria for listing of the common stock on the Nasdaq National Market, we intend to apply for such listing in lieu of applying to the SmallCap Market. In the event that our application is denied, we will seek to have our common stock admitted to quotation under the symbol "INTR" on the NASD's OTC Bulletin Board.
We intend to furnish our stockholders with annual reports of our operations, containing audited financial statements and with additional information concerning our business and affairs whenever deemed appropriate by our Board of Directors.
Preferred Stock
Pursuant to our certificate of incorporation, we are authorized to issue up to 10,000,000 shares of "blank check" preferred stock, which may be issued from time to time in one or more series upon authorization by our Board of Directors. The Board of Directors, without further approval of the stockholders, will be authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights and terms, liquidation preferences, and any other rights, preferences, privileges and restrictions applicable to each series of the preferred stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes could, among other things, adversely affect the voting power of the holders of common stock and, in certain circumstances, make it more difficult for a third party to gain control of us, discourage bids for our common stock at a premium, or otherwise adversely affect the market price of the common stock.
Currently, there are no shares of preferred stock outstanding.
Registration Rights
When we issued our shares of common stock to the selling stockholder, we entered into a registration rights agreement with it. That agreement
o obligates us to register, pursuant to the Securities Act, at our cost and expense:
|_| all of those shares,
|_| the shares of common stock issuable upon exercise of the warrants that we also issued at that time; and
|_| a sufficient quantity of additional shares of common stock that may be issued pursuant to the repricing provisions of our stock purchase agreement with the selling stockholder that we discussed above in the "Liquidity and Capital Resources" section of
"Management's Discussion and Analysis of Financial Condition and Results of Operations."
o provides that,
|_| if we did not file that registration statement by March 3, 2000, or
|_| that registration statement was not declared effective by the SEC on or before May 3, 2000,
we may be required to pay to the selling stockholder, if it so elects, $80,000 for each 30 day period (pro-rated for periods of less than 30 days) commencing on or about March 3, 2000 and ending on the date when such effectiveness is declared. We did not file the registration statement until August [ ], 2000. The selling stockholder has not yet advised us if it will be electing to receive such payment. If it does make such election, we will be required to pay the sum of $[ ] to it for the period which elapsed between April 3, 2000 and the date when the registration statement is declared effective.
Warrants and Options
We issued warrants to the selling stockholder which entitle it to purchase 164,948 shares of common stock at an exercise price of $5.82 per share during the period between February 3, 2000 and February 2, 2004. The number of shares which may be purchased under the warrant, and the purchase price are both subject to adjustment upon the occurrence of various events including, but not limited to, a repricing of the selling stockholder's currently held shares pursuant to the provisions of the stock purchase agreement previously discussed. We are registering all of the shares issuable under to that warrant pursuant to the registration statement of which this prospectus forms a part.
The investment banking firm of Ladenburg Thalmann & Co., Inc. served as our intermediary in connection with the transactions that we consummated with the selling stockholder. In consideration for its services in such capacity,
o we paid the sum of $320,000 to that firm and
o we also issued a four year warrant to the firm which
|_| entitles it to purchase 67,920 shares of our common stock at an exercise price of $4.53 per share, and
|_| is adjustable as to the number of shares which may be purchased, and as to the purchase price upon the occurrence of certain events.
We have issued options to purchase a total of 6,707,750 shares of common stock under our 1999 Stock Option Plan. See, "Management - Employment Contracts, Termination Of Employment
And Change In Control Arrangements" and "- Stock Option Plan" for a description of those options.
We have also issued a five year option to purchase 400,000 shares of common stock at an exercise price of $.69 per share to Boru Enterprises, Inc. See "Management's discussion and analysis of financial condition and results of operations - Liquidity and Capital Resources." That option granted "piggyback" registration rights to Boru which entitle it to cause us to register the shares issuable upon exercise of that option whenever we propose to register shares of common stock under the Securities Act, except
o when we register those shares on SEC Form S-8, or
o when such registration is made in connection with an underwritten offering, and the managing underwriter elects not to include all or a portion of Boru's option shares as part of the offering.
DELAWARE BUSINESS COMBINATION PROVISIONS
We are governed by the provisions of Section 203 of the Delaware General Corporation Law ("DGCL"). In general, this statute prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder unless:
o prior to the date at which the stockholder became an interested stockholder, the Board of Directors approved either the business combination or the transaction in which the person became an interested stockholder;
o the stockholder acquired more than 85% of the outstanding voting stock of the corporation (excluding shares held by directors who are officers and shares held in certain employee stock plans) upon consummation of the transaction in which the stockholder became an interested stockholder; or
o the business combination is approved by the Board of Directors and by at least 66-2/3% of the outstanding voting stock of the corporation (excluding shares held by the interested stockholder) at a meeting of stockholders (and not by written consent) held on or after the date such stockholder became an interested stockholder.
An "interested stockholder" is a person who, together with affiliates and associates, owns (or at any time within the prior three years did own) 15% or more of the corporation's voting stock. Section 203 defines a "business combination" to include, without limitation, mergers, consolidations, stock sales and asset-based transactions and other transactions resulting in a financial benefit to the interested stockholder.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the DGCL enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director to a corporation or its stockholders for violations of the director's fiduciary duty, except:
o for any breach of a director's duty of loyalty to the corporation or its stockholders,
o for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
o pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions), or
o for any transaction from which a director derived an improper personal benefit.
Our Certificate of Incorporation provides in effect for the elimination of the liability of directors to the extent permitted by the DGCL.
Section 145 of the DGCL provides, in summary, that directors and officers of Delaware corporations are entitled, under certain circumstances, to be indemnified against all expenses and liabilities (including attorney's fees) incurred by them as a result of suits brought against them in their capacity as a director or officer, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful; provided, that no indemnification may be made against expenses in respect of any claim, issue or matter as to which they shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, they are fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Any such indemnification may be made by the corporation only as authorized in each specific case upon a determination by the stockholders or disinterested directors that indemnification is proper because the indemnitee has met the applicable standard of conduct. Our By-Laws entitle our officers and directors to indemnification to the fullest extent permitted by the DGCL.
We maintain an insurance policy with respect to potential liabilities of its directors and officers, including potential liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this offering, we have 28,721,548 shares of common stock outstanding. Of the outstanding shares of common stock, 7,331,824 are freely tradable by persons other than executive officers, directors and ten percent shareholders of the company as that term is defined under the Securities Act, without restriction or further registration, and 21,389,724 shares would be deemed "restricted securities" within the meaning of Rule 144 under the Securities Act. If presently unexercised warrants or options were exercised to purchase common stock, we would have an additional 6,940,618 shares of restricted securities outstanding for a total of 35,662,166 shares. Restricted securities may not be sold in the absence of registration unless an exemption from registration is available, including the exemption contained in Rule 144. 17,389,724 of the presently outstanding restricted securities became eligible for resale under Rule 144 on or before April 28, 2000. 970,285 of such securities will become eligible for resale by the selling stockholder upon the effective date of the registration statement of which this prospectus forms a part, and 2,450,240 of such securities will become eligible for resale under Rule 144 on various dates falling between March 7, 2001 and April 25, 2001.
In general, under Rule 144, a stockholder who has beneficially owned shares of common stock for at least one year is entitled to sell, within any three-month period, a number of "restricted" shares that does not exceed the greater of one percent of the then outstanding shares of common stock or the average weekly trading volume during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to sale limitations, notice requirements and the availability of current public information about us. Rule 144(k) provides that a stockholder who is not deemed to be an "affiliate" and who has beneficially owned shares of common stock for at least two years is entitled to sell those shares at any time under Rule 144(k) without regard to the limitations described above. In addition to the shares of common stock that are currently outstanding, a total of 5,853,900 shares of common stock are reserved for issuance upon exercise of options granted to our directors, executive officers and employees and 1,086,718 shares are issuable upon exercise of outstanding options and warrants.
We are unable to estimate the number of shares that may be sold in the future by existing holders of shares of our common stock or holders of options or warrants or convertible securities that are outstanding or the effect, if any, that sales of shares of common stock by these persons will have on the market price of the common stock prevailing from time to time. Sales of substantial amounts of common stock by these persons could adversely affect the then prevailing market prices of the common stock and warrants.
PLAN OF DISTRIBUTION
The shares offered by this prospectus may be sold from time to time by the selling stockholder named under "Selling Stockholders" above. The selling stockholder may sell the shares at market prices or at negotiated prices. It may sell shares by one or a combination of the following:
o a block trade in which a broker or dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by the broker or dealer for its account pursuant to this prospectus;
|_| ordinary brokerage transactions and transactions in which a broker solicits purchasers;
|_| privately negotiated transactions;
|_| short sales;
|_| if such a sale qualifies, in accordance with Rule 144 promulgated under the Securities Act rather than pursuant to this prospectus; and
|_| any other method permitted pursuant to applicable law.
In making sales, brokers or dealers engaged by the selling stockholder may arrange for other brokers or dealers to participate. Brokers or dealers will receive commissions or discounts from selling stockholder in amounts to be negotiated prior to the sale. The selling stockholder and any broker-dealers that participate in the distribution may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933, and any proceeds or commissions received by them, and any profits on the resale of shares sold by broker-dealers, may be deemed to be underwriting discounts and commissions.
If the selling stockholder notifies us that a material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, we will file a prospectus supplement, if required pursuant to Rule 424(c) under the Securities Act of 1933, setting forth:
o the name of each of the participating broker-dealers,
o the number of shares involved,
o the price at which the shares were sold,
o the commissions paid or discounts or concessions allowed to the broker-dealers, where applicable,
o a statement to the effect that the broker-dealers did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and
o any other facts material to the transaction.
We are paying the expenses incurred in connection with preparing and filing this prospectus and the registration statement to which it relates, other than selling commissions. In addition, in the event the selling stockholder sells short shares of common stock, this prospectus may be delivered in connection with such short sales and the shares offered by this prospectus may be
used to cover such short sales. To the extent, if any, that the selling stockholder may be considered to be an "underwriter" within the meaning of the Securities Act, the sale of the shares by it shall be covered by this prospectus.
LEGAL MATTERS
Hall Dickler Kent Goldstein & Wood, LLP, New York, New York, has advised us with respect to the validity of the shares of common stock offered by this prospectus.
EXPERTS
Robert Jarkow, CPA, independent auditor, has audited our consolidated financial statements for the year ended December 31, 1998 as set forth in his report, which is included in this prospectus. Our consolidated financial statements are included in this prospectus in reliance on his report, given his authority as an expert in accounting and auditing.
Grant Thornton LLP, independent auditors, have audited our consolidated financial statements for the year ended December 31, 1999, as set forth in their report, which is included in this prospectus. Our consolidated financial statements are included in this prospectus in reliance on their report, given their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, a registration statement on Form SB-2 under the Securities Act with respect to the securities offered. As permitted by SEC rules, this prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information concerning the company and the securities offered, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement.
Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. In each instance where a copy of that contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement is qualified in all respects by reference to that exhibit. The registration statement, including its exhibits and schedules, may be inspected without charge at the SEC's Public Reference Room, at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional offices at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New York New York 10048. Copies of all or any part of those documents may be obtained from the SEC's office after payment of the SEC's prescribed fees. You may call the SEC at 1-800-SEC-0330 for further information on the operation of the SEC's public reference rooms. The SEC maintains a Web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC.
We intend to provide our stockholders with annual reports containing consolidated financial statements by an independent public accounting firm and will make available to stockholders quarterly reports containing unaudited consolidated financial data for the first three quarters of each year. On the effective date of the registration statement of which this prospectus forms a part, we will be subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and will thereupon be required to file periodic reports, proxy statements and other information with the SEC.
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Interactive Technologies.Com, Ltd. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Interactive Technologies.Com, Ltd. and Subsidiaries (the "Company") as of December 31, 1999, and the related consolidated statements of operations, stockholders' 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 financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 the Company as of December 31, 1999, and the consolidated results of their operations and their consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.
Miami, Florida
March 10, 2000 (except for Note V, as
to which is dated April 26, 2000) Grant Thornton LLP
11 INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Interactive Technologies.Com, Ltd. and Subsidiaries
I have audited the accompanying consolidated balance sheet of Interactive Technologies.Com, Ltd. and Subsidiaries as of December 31, 1998 and the consolidated statements of operations, stockholders' equity and cash flows for the year ended December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these consolidated financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Interactive Technologies.Com, Ltd. and Subsidiaries as of December 31, 1998, and the results of its consolidated operations and cash flows for the year ended December 31, 1998, in conformity with generally accepted accounting principles.
Fort Lauderdale, Florida Robert Jarkow September 10, 1999
Interactive Technologies.Com, LTD. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31, March 31,
1998 1999 2000
------------ ------------ ------------
(Unaudited)
Current assets
Cash and cash equivalents $ 19,440 $ 452,084 $ 1,076,061
Certificate of deposit -- 10,000 10,000
Accounts receivable 8,611 35,836 72,240
Mortgage loans held for sale, net -- 1,686,347 1,630,707
Advances to shareholders -- -- 908,930
Commission receivable -- 38,670 84,688
Marketable Securities -- 91,952 90,090
Prepaid expenses and other current assets -- 81,346 206,619
------------ ------------ ------------
Total current assets 28,051 2,396,235 4,079,335
Property and equipment, net 121,027 369,546 654,586
Goodwill, net -- 1,428,850 1,404,633
Other assets -- 19,367 46,686
------------ ------------ ------------
Total assets $ 149,078 $ 4,213,998 $ 6,185,240
============ ============ ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities
Warehouse finance facility $ -- $ 1,666,092 $ 1,586,624
Accounts payable and accrued expenses 95,376 573,137 365,302
Loans from related parties -- 10,717 25,950
Loan payable, current portion -- 4,004 3,003
Capital lease, current portion -- -- 30,203
Due to shareholder 660,000 -- --
Deferred revenue 507,484 233,768 23,026
------------ ------------ ------------
Total current liabilities 1,262,861 2,487,718 2,034,108
Loan payable, net of current portion -- 43,079 39,705
Capital lease, net of current portion -- -- 198,258
Minority Interest -- -- --
Commitments and contingencies -- -- --
Stockholders' equity (deficit)
Preferred stock, 7% cumulative convertible - $.001 par value 10,000,000
shares authorized, -0- and 2,936,541 shares issued and outstanding in
1999 and 1998, respectively 5,751,191 -- --
Common stock - $0.001 par value, 40,000,000 shares
authorized, 1,987,187 and 24,818,885 and 25,982,948
shares issued and outstanding at December 31, 1998,
1999 and March 31, 2000 1,987 24,819 25,789
Additional paid-in capital 12,112 10,230,257 13,884,257
Accumulated deficit (6,879,073) (8,571,875) (9,996,877)
------------ ------------ ------------
Total stockholders' equity (deficit) (1,113,783) 1,683,201 3,913,169
------------ ------------ ------------
Total liabilities and stockholders' equity $ 149,078 $ 4,213,998 $ 6,185,240
============ ============ ============
|
The accompanying notes are an integral part of these statements.
Interactive Technologies.Com, LTD. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
Year Ended December 31, March 31,
--------------------------- ---------------------------
1998 1999 1999 2000
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Revenues
Sales and services $ 3,823,788 $ 2,482,173 $ 917,348 $ 424,371
Loan fees -- 829,352 -- 595,142
------------ ------------ ------------ ------------
3,823,788 3,311,525 917,348 1,019,513
Costs and expenses
Cost of sales 182,322 338,264 113,200 64,822
Selling expenses 1,107,864 503,154 147,521 172,003
General and administrative costs 709,441 3,694,956 379,293 2,208,488
------------ ------------ ------------ ------------
1,999,627 4,536,374 640,014 2,445,313
Other income(expense)
Unrealized gain(loss) on marketable securities -- 81,952 -- (1,862)
Interest income -- 1,860 -- 232
Other -- 4,167 -- 2,428
------------ ------------ ------------ ------------
-- 87,979 -- 798
------------ ------------ ------------ ------------
(Loss) earnings before provision
for income taxes 1,824,161 (1,136,870) 277,334 (1,425,002)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net (loss) earnings $ 1,824,161 $ (1,136,870) $ 277,334 $ (1,425,002)
============ ============ ============ ============
Earnings (loss) per share - basic $ .92 $ (.07) $ .03 $ (.06)
============ ============ ============ ============
Earnings (loss) per share - diluted $ .36 $ (.07) $ .03 $ (.06)
============ ============ ============ ============
Pro Forma Financial Information (unaudited)
Income before pro forma adjustment for
employment agreement and pro forma
provision for income taxes $ 1,824,161 $ (1,136,870) $ 277,334 $ (1,425,002)
Pro forma adjustment for employment
agreement 250,000 250,000 62,500 --
------------ ------------ ------------ ------------
Pro forma (loss) earnings before provision
for income taxes 1,574,161 (1,386,870) 214,834 (1,425,002)
------------ ------------ ------------ ------------
Pro forma provision for income taxes: 592,357 -- -- --
------------ ------------ ------------ ------------
Pro forma net (loss) earnings $ 981,804 $ (1,386,870) $ 214,834 $ (1,425,002)
============ ============ ============ ============
Basic pro forma (loss) earnings per share $ .49 $ (.08) $ .02 $ (.06)
============ ============ ============ ============
Diluted proforma (loss) earnings per share $ .31 $ (.08) $ .02 $ (.06)
============ ============ ============ ============
Weighted-average common shares outstanding 1,987,187 17,169,856 9,333,278 25,477,354
============ ============ ============ ============
Weighted-average common shares outstanding
diluted 5,118,234 17,169,856 9,333,278 25,477,354
============ ============ ============ ============
|
The accompanying notes are an integral part of these statements.
Interactive Technologies.Com, LTD. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Two Years Ended December 31, 1999 and the Three Months Ended March 31, 2000 (Unaudited)
Preferred Stock Common Stock Additional
---------------------------- --------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------------ ------------ ------------ ------------ ------------ ------------
Balance at
December 31, 1997 2,936,541 $ 5,751,191 1,987,187 $ 1,987 $ 12,112 $ (7,248,564)
Net earnings for the year ended
December 31, 1998 -- -- -- -- -- 1,824,161
Distributions -- -- -- -- -- (1,505,647)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 2,936,541 5,751,191 1,987,187 1,987 12,112 (6,930,050)
Reverse acquisition of
Interactive Technologies
Com Ltd. (80% interest) -- -- 18,000,000 18,000 -- --
Distributions -- -- -- -- -- (504,955)
Acquisition of Express Financial -- -- 246,154 246 1,661,540 --
Common stock issuances -- -- 711,640 712 1,999,288 --
Conversion of preferred stock (2,936,541) (5,751,191) 3,131,047 3,131 5,748,060 --
Capitalization of debt -- -- 642,857 643 659,357 --
Stock issued for services -- -- 100,000 100 149,900 --
Net loss for the year ended
December 31, 1999 -- -- -- -- -- (1,136,870)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 -- -- 24,818,885 24,819 10,230,257 (8,571,875)
Exercise of stock options (unaudited) -- -- 50,000 50 74,950 --
Common stock subscribed
(unaudited) -- -- -- (50) (74,950) --
Common stock issuances (unaudited) -- -- 970,285 970 3,654,000 --
Settlement of litigation (unaudited) -- -- 143,778 -- -- --
Net loss for the three months
ended March 31, 2000
(unaudited) -- -- -- -- -- (1,425,002)
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 2000
(unaudited) -- $ -- 25,982,948 $ 25,789 $ 13,884,257 $ (9,996,877)
============ ============ ============ ============ ============ ============
Total
------------
Balance at
December 31, 1997 $ (1,483,274)
Net earnings for the year ended
December 31, 1998 1,824,161
Distributions (1,505,647)
------------
Balance at December 31, 1998 (1,164,760)
Reverse acquisition of
Interactive Technologies
Com Ltd. (80% interest) 18,000
Distributions (504,955)
Acquisition of Express Financial 1,661,786
Common stock issuances 2,000,000
Conversion of preferred stock --
Capitalization of debt 660,000
Stock issued for services 150,000
Net loss for the year ended
December 31, 1999 (1,136,870)
------------
Balance at December 31, 1999 1,683,201
Exercise of stock options (unaudited) 75,000
Common stock subscribed
(unaudited) (75,000)
Common stock issuances (unaudited) 3,654,970
Settlement of litigation (unaudited) --
Net loss for the three months
ended March 31, 2000
(unaudited) (1,425,002)
------------
Balance at March 31, 2000
(unaudited) $ 3,913,169
============
|
The accompanying notes are an integral part of these statements.
Interactive Technologies.Com, LTD. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
Year Ended December 31, March 31,
-------------------------- --------------------------
1998 1999 1999 2000
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net (loss) earnings $ 1,824,161 $(1,136,870) $ 277,334 $(1,425,002)
Adjustments to reconcile net earnings (loss)
to net cash (used in) provided by operating
activities:
Depreciation 35,537 70,573 38,729 36,500
Stock issued for services -- 150,000 -- --
Amortization -- 24,217 -- 24,217
Unrealized (gains) loss on marketable
securities -- (81,952) -- 1,862
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Certificate of deposit -- (10,000) -- --
Marketable securities -- (10,000) -- --
Accounts receivable (8,611) (20,000) 8,611 (52,240)
Mortgage loans held for sale, net -- (534,134) -- 55,640
Shareholder advances -- -- -- (908,930)
Commission receivable -- (6,633) -- (46,018)
Prepaid expenses and other current
assets -- (85,741) (815) (136,756)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses 84,658 462,319 153 (207,535)
Deferred revenue (195,880) (356,872) (166,087) (210,742)
----------- ----------- ----------- -----------
Net cash (used in) provided by
operating activities 1,739,865 (1,535,093) 157,925 (2,869,304)
Cash from investing activities:
Purchase of furniture, fixtures and equipment (52,049) (302,131) -- (93,079)
Cash from business acquired -- 179,618 -- --
----------- ----------- ----------- -----------
Net cash used in investing activities (52,049) (122,513) -- (93,079)
Cash from financing activities:
Net borrowings(repayment) under warehouse
finance facility -- 519,159 -- (79,468)
Borrowings under loan payable -- 47,083 -- --
Payments under loan payable -- -- -- (4,375)
Increase in related party loans (193,154) 10,717 17,450 15,233
Proceeds from sale of common stock -- 2,018,246 -- 3,654,970
Net contributions(distributions) to shareholder (1,505,647) (504,955) 168,474 --
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities (1,698,801) 2,090,250 185,924 3,586,360
----------- ----------- ----------- -----------
Net change in cash and cash equivalents (10,985) 432,644 343,849 623,977
Cash and cash equivalents - beginning of year 30,425 19,440 19,440 452,084
----------- ----------- ----------- -----------
Cash and cash equivalents - end of year $ 19,440 $ 452,084 $ 363,289 $ 1,076,061
=========== =========== =========== ===========
|
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
Year Ended December 31, March 31,
-------------------------------- ----------------------------
1998 1999 1999 2000
-------------- -------------- -------------- --------
(Unaudited) (Unaudited)
Supplemental disclosures of cash flow information:
Interest paid during the period $ -- $ 5,166 $ -- $ 1,292
============== ============== ============== ========
Taxes paid during the period $ -- $ -- $ -- $ --
============== ============== ============== ========
Noncash financing and investing activities Acquisition:
Fair value of assets acquired $ -- $ 259,424 $ -- $ --
============== ============== ============== ========
Liabilities assumed $ -- $ 50,951 $ -- $ --
============== ============== ============== ========
Cost in excess of net assets acquired $ -- $ 1,453,067 $ -- $ --
============== ============== ============== ========
Other:
Capitalization of debt $ -- $ 660,000 $ 660,000 $ --
============== ============== ============== ========
Conversion of preferred stock $ -- $ 5,751,191 $ 5,751,191 $ --
============== ============== ============== ========
Equipment under capital lease $ -- $ -- $ -- $228,461
============== ============== ============== ========
|
The accompanying notes are an integral part of these statements.
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE A - NATURE OF BUSINESS
Interactive Technologies.Com, Ltd. (the Company) offers Internet business-to-business and business-to-consumer products and services directly through web portals that it and its subsidiaries develop and operate for the Company's own use, and also through "private labeled" web portals that it and its subsidiaries develop and operate for other businesses and organizations. The Company's subsidiaries, and the business which each of them conducts, are, as follows:
A. JoinUsOnline.com, Inc., f/k/a Ubuy.Com, Ltd. ("JUOL"), offers an ever-expanding portfolio of benefits and services that provide privileged access to goods and services to companies, businesses, fund raising organizations, large associations, affinity groups, their members and customers. Benefit and service programs offered include home shopping, travel, automobile, dining, health, discount coupon investment, and other lifestyle enhancement programs. JUOL packages the benefits and services provided principally by third party providers. An employee or member of any of the companies or organizations with whom JoinUsOnline has agreements can obtain the various benefits, goods and services offered by JoinUsOnline either by entering his user name and password at JoinUsOnline's web site located at www.joinusonline.com, or by clicking on the JoinUsOnline button located at his organization's web site.
B. United Interactive Technologies, Inc. ("UIT") provides a wide range of Internet services to the Company's subsidiaries and the companies and organizations with whom it and its subsidiaries enter into agreements. Such services include, web portal creation and customization, web site development and hosting and the provision of Internet access services.
C. Integrated Merchant Services, Inc. ("IMS") provides Visa and MasterCard network credit card processing, check and debit card processing as well as credit card gateway services for "brick and mortar" and internet e-commerce businesses.
D. Web Classified.net, Inc. ("Web Classified") provides to businesses, through its database driven Web site generation application, the ability to quickly and inexpensively generate three-page Web sites which are indexed at a Yellow Pages directory and registered with the top five Internet search engines. Web Classified.net had minimal operating activity in 1999.
E. Express Financial Corp. (Express) which was acquired by the Company on September 30, 1999 (see Note D) is a licensed mortgage banker that represents various lending institutions and is a licensed and approved lender for federal programs including FHA, VA loans and Title II loans. Express offers all types of residential and commercial loans. Express maintains a virtual branch office on the Worldwide Web at which customers can shop for and obtain mortgage financing by completing an on-line mortgage loan application.
The accompanying notes are an integral part of these statements.
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Interactive Technologies.Com, LTD., its 80% owned subsidiaries, JUOL, UIT, IMS and Web Classified; and its wholly owned subsidiary Express. All significant intercompany transactions and balances have been eliminated. Those periods in which losses applicable to the minority interest in a subsidiary exceed the minority interest in the equity capital of the subsidiary, such excess and any further losses applicable to the minority interest is charged against the majority interest. However, when future earnings do materialize, the majority interest is credited to the extent of those losses previously absorbed.
Basis of Presentation
On February 26, 1999, the Company acquired 80% of the outstanding common stock of JUOL, UIT, IMS and Web Classified (acquired companies) which were previously companies under common control. For accounting purposes the acquisition has been treated as a recapitalization of the acquired companies with the acquired companies as the acquirer (reverse acquisition) (see Note D).
Interim Financial Information
The financial statements at March 31, 2000 and for the three months periods ended March 31, 1999 and 2000 are unaudited and prepared on the same basis as the audited financial statements included herein. In the opinion of management, such interim financial statements include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the results for such periods. The results of operations for the three months ended March 31, 1999 and 2000 are not necessarily indicative of the results to be expected for the full year or any other interim period.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, cash on deposit at financial institutions, and all investments with an original maturity of three months or less.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for using the straight-line method over the following estimated useful lives of the respective assets.
Leasehold improvements 10 yrs
Furniture and fixtures 5 yrs
Computer equipment 3 yrs
(continued)
|
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Revenues
The Company generates revenue in different ways through its subsidiaries as follows:
A. JUOL packages a variety of program benefits from various service providers for its clients. The revenue received will generally be based upon the number and types of services which are included in the program. The majority of JUOL's revenue is derived from monthly fees paid by client entities based upon the number of participants. JUOL received payment from its major customer 90 days in advance of services provided through December 31, 1999 at which time the deferral provision of the agreement terminated. The amount received was deferred and recognized over a 90 day period. JUOL also defers payments 30 days in advance of the services provided to other customers which are recognized as services are rendered.
B. UIT generates revenue in the form of development fees, residual hosting fees and site maintenance fees. Revenue is recognized when services are performed.
C. IMS receives fees from Visa, MasterCard and check transactions processed through equipment sold by IMS. These transaction fees are based on a percentage of the value of purchases processed through the equipment and are recorded when cash is wired directly to IMS by a third party processing company. IMS also receives revenue from application fees which is recognized when the application is approved.
D. Express generates revenues through loan origination fees, loan discount points and gain or loss on sale of loans. Loan origination fees, net of related costs, and loan discount points are deferred and recorded as an adjustment of the mortgage loans held for sale portfolio balance and are recognized in the statement of operations when the loans are sold. Gain or loss on loan sales are recognized at the time the sale is consummated.
Mortgage Loans Held for Sale, Net
Mortgage loans held for sale are stated at the lower of aggregate cost or market value. Market value is determined by current investor yield requirements on the aggregate basis. No allowance for loan losses is generally provided for since mortgage loans are not serviced by Express and are sold within 30 days of origination.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Income Taxes
Income taxes on net earnings of certain subsidiaries of the Company were payable personally by the stockholders thereof pursuant to elections under Subchapter S of the Internal Revenue Code. The S Corporation status for these subsidiaries was terminated during 1999, effective with their acquisition of the Company. Accordingly, no provision for taxes has been provided through the date of acquisition (see Note D).
Effective with the termination of the S Corporation status, the Company provides for income taxes under the provisions of SFAS No. 109 "Accounting for Income Taxes". SFAS No. 109 requires an asset and liability based approach in accounting for income taxes. Deferred income taxes assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences of revenue and expense items for financial statement and income tax purposes. Valuation allowances are provided against deferred tax assets which are not more likely than not to be realized.
Fair Value of Financial Instruments
The fair value of cash and cash equivalents is estimated to approximate their carrying values. Cash and cash equivalents include: cash on hand, cash on deposit at financial institutions and overnight repurchase agreements with financial institutions.
The fair value of mortgage loans held for sale is based on the sale price established with the investor prior to the origination of the loan. Express obtains a commitment from the investor to purchase the loan prior to originating the loan.
The fair value of warehouse finance facilities and notes payable are estimated to approximate their carrying values, as their interest-bearing rates and terms are considered to approximate current market interest-bearing rates and terms available to Express for such debt at December 31, 1999.
Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Advertising Costs
Advertising costs are expensed as incurred and are included in selling expenses. Total advertising costs for the years ended December 31, 1999 and 1998 totaled $283,136 and $1,128, respectively.
Earnings (Loss) Per Share
Basic net earnings (loss) per share equals net earnings divided by the weighted average shares outstanding during the year. The computation of diluted net earnings per share includes dilutive common stock equivalents in the weighted average shares outstanding. The reconciliation between the computations is as follows:
Net earnings Basic Basic Diluted Diluted
(Loss) Shares EPS Shares EPS
--------------- -------------- ------------- -------------- ------------
1999 $ (1,136,870) 17,169,856 $ (.07) 17,169,856 $ (.07)
1998 $ 1,824,161 1,987,187 $ .92 5,118,234 $ .36
|
Included in diluted shares in 1998 are common stock equivalents relating to convertible preferred stock of 3,131,047 shares. Common stock equivalents in 1999 and for the three months ended March 31, 2000 are not included in the computation of dilution since their inclusion would be anti-dilutive.
Goodwill
Goodwill resulting from the Express acquisition (see Note D), is being amortized on a straight-line basis over a period of 15 years. Goodwill was $1,453,067 and $ -0- at December 31, 1999 and 1998, respectively, and the related accumulated amortization was $24,217 and $-0-, respectively.
On an ongoing basis, management reviews the valuation and amortization of goodwill. As part of this review, the Company estimates the value and future benefits of the net cash flows generated by the related subsidiaries to determine that no impairment has occurred.
NOTE C - MARKETABLE SECURITIES
On January 25, 1999, the Company purchased 30,030 shares of Legal Club of America Corporation, a publicly trading company. The Company records trading securities at fair value, with net unrealized gains or losses included in the determination of net income. Net unrealized gains on trading securities of $81,952 is included in the net loss for 1999.
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE D - ACQUISITIONS
Reverse Acquisition
On February 26, 1999, the Company, which was at that time a public shell, acquired 80% of JUOL, UIT, IMS and Web Classified (the Acquired Companies) for 18,000,000 shares of INTR common stock. For accounting purposes the acquisition has been treated as a capital transaction rather than a business combination. The accounting is identical to that resulting from a reverse acquisition except no goodwill is recorded and the Acquired Companies become the acquirer. The historical financial statements prior to February 26, 1999 are those of the Acquired Companies.
Express Financial Corp.
On September 30, 1999, the Company consummated its acquisition of Express for 246,154 shares of the Company's common stock valued at $1,661,540. The acquisition has been accounted for as a purchase and accordingly, the acquired assets and liabilities have been recorded at their fair values at the date of acquisition. The excess of the consideration paid over the estimated fair value of the net assets acquired of $1,453,067 has been allocated to goodwill and is being amortized on a straight-line basis over 15 years. The results of operations of Express are included in the accompanying consolidated statement of operations from the date of acquisition.
The following unaudited proforma summary presents the consolidated results of operations of the Company as if the acquisition had occurred at the beginning of the 1998 and 1999 periods.
1998 1999
------------ -------------
Net sales $ 5,705,730 $ 5,162,906
Net (loss) earnings (1) 1,927,744 (1,588,656)
Earnings (loss) per share (1) .38 (.09)
|
(1) Includes amortization of goodwill of $96,871 for each year presented.
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE E - INVESTMENT IN JOINT VENTURE
On August 12, 1999 the Company and two other investors entered into a shareholder agreement to conduct a joint venture through TVI Marketing, Inc. (TVI) a nonoperating Company incorporated by one of the investors. The Company obtained a 40% interest in the joint venture. The Company will provide products, services and benefits to be sold and marketed by TVI, and will also provide operational and logistical support of TVI's operations. One of the other investors will provide its expertise in the multi-level marketing of products, services and benefits via television and the internet. The third investor will contribute $1,000,000 payable in installments through July 1, 2000 to be used to facilitate the business plan. The Company accounts for this investment under the equity method. The Company has no cost basis in its investment since no consideration was paid for the Company's 40% interest, and TVI had a loss for the year ended December 31, 1999.
During 1999, the Company advanced TVI $100,000 which is fully reserved for at December 31, 1999.
NOTE F - REGISTRATION OF SECURITIES
The Company is contemplating the filing of a Registration Statement on Form SB-2 in connection with the registration under the Securities Act of 1933 of the common stock it previously issued to an investor. Such Registration Statement will not include any new shares to be sold for the Company's account.
NOTE G - SHAREHOLDER ADVANCES
During the three month ended March 31, 2000, the Company advanced available funds to the majority shareholder of the Company for personal needs net of repayments of $708,930. In addition, the Company advanced another shareholder $200,000 during the three months ended March 31, 2000. All advances are due within one year and are not collateralized.
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE H - PROPERTY AND EQUIPMENT
Property and equipment consist of:
March 31,
1998 1999 2000
-------- -------- --------
(Unaudited)
Leasehold improvements $ -- $ 55,370 $217,727
Furniture and fixtures 12,952 232,118 352,659
Computer equipment 122,691 259,430 297,614
Vehicles -- 44,000 44,000
-------- -------- --------
135,643 590,918 912,002
Less accumulated depreciation 14,616 221,372 257,416
-------- -------- --------
$121,027 $369,546 $654,586
======== ======== ========
|
NOTE I - WAREHOUSE FINANCE FACILITIES
On June 4, 1999, Express entered into a $4,000,000 warehouse finance facility from Impac Warehouse Lending Group ("Impac"). This facility bears interest of 1.5% plus Prime (10% at December 31, 1999). Express obtains advances from Impac on an individual loan basis. At December 31, 1999, Express had outstanding warehouse finance facility advances from Impac of $1,666,092 which was collateralized by mortgage loans held for sale having an aggregate carrying value of approximately $1,703,800. Express repays warehouse advances upon the sale of warehoused loans to third parties.
Additionally, Express had a $2,000,000 revolving warehouse line of credit with a commercial bank which expired in May of 1999 and was not renewed by Express.
NOTE J - INCOME TAXES
The Company accounts for income taxes under the provision of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which requires the Company to recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE J - INCOME TAXES - Continued
At December 31, 1999, the Company did not record any tax provision
(benefit). The tax provision (benefit) is different from that which would
be obtained by applying the statutory federal income tax rate to income
(loss) primarily because of the valuation allowance recorded against
deferred tax assets.
Significant components of the Company's deferred tax assets (liabilities) at December 31, 1999, are as follows:
Net operating loss carryforward $ 296,085
Depreciation (2,829)
Accrued expenses 38,296
-----------
Net deferred tax asset 331,552
Less: valuation allowance (331,552)
-----------
$ -
===========
|
Based on the Company's prior earnings and the amount of income that could be utilized in carryback years, and the uncertainty of future taxable income, a 100% valuation allowance has been established to reduce deferred tax assets.
The federal and state net operating loss carryforward amounted to approximately $787,000, and will expire in the year 2020.
NOTE K - DISTRIBUTIONS TO STOCKHOLDER
All of the payments made to, or on behalf of, the president during 1999 and 1998 are reflected as distributions of retained earnings in the accompanying financial statements. The historical financial statements do not reflect any compensation to the President, a controlling shareholder of the Company (see Notes P and S for proforma information).
NOTE L - DUE TO STOCKHOLDER
Due to stockholder of $660,000 at December 31, 1998 represents amounts owed to a former stockholder for past services of $360,000 and advances of $300,000. In 1999, the $660,000 owed was capitalized into equity (see Note N).
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE M - CAPITAL LEASE
During the first quarter ended March 31, 2000, the Company entered into three five-year lease agreements for office furniture. The lease has been classified as a capital lease since the lease contains a $1 bargain purchase option.
The following is a schedule for the remaining nine months of 2000 and years thereafter of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of March 31, 2000:
Nine months ended December 31, 2000 $ 59,442
Year ended December 31:
2001 67,004
2002 67,004
2003 67,004
2004 67,004
Thereafter 5,584
----------
Total minimum lease payments 333,042
Less: amount representing interest 104,581
----------
Present value of minimum lease payments 228,461
Current portion 30,203
----------
$ 198,258
==========
|
NOTE N - STOCKHOLDERS' EQUITY
Private Placement
In 1999, the Company completed an offering of 500,000 shares of common stock at $2 per share. The shares were offered pursuant to Regulation D, Rule 504 of the Securities Act of 1933. The Company sold all 500,000 shares raising $1,000,000. The proceeds from the offering were used for working capital purposes.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE N - STOCKHOLDERS EQUITY - Continued
Other Issuance
On October 1, 1999, the Company entered into an agreement with an investor to sell the investor 211,640 shares of common stock for $1,000,000. The Company received proceeds in various increments through December 1999. The proceeds are to be used for working capital purposes. At December 31, 1999 and as of March 31, 2000, the shares remain to be issued, but are reflected as issued and outstanding for financial accounting purposes.
Settlement of Litigation
The Company was the subject of various counterclaims interposed in an action in the Superior Court of the State of Connecticut entitled Empire Capital Corporation (previous name of the Company) v. David Winstead, et al. The action involved claims made by the Company against Mr. Winstead and others for, among other things, misappropriation of corporate assets. Mr. Winstead filed various counterclaims against the Company, its former Chief Executive Officer and his spouse, for wrongful cancellation of common stock which according to Mr. Winstead, had been validly and properly issued to him as fully paid and non-assessable shares. In March 2000, the action was settled pursuant to an agreement among all the parties which provided, among other things, for the parties exchange of releases, the re-issuance of 143,778 shares of common stock to Mr. Winstead and the delivery to Mr. Winstead of 4,168 shares of common stock that had been held by the Company's counsel pending the outcome of the proceedings.
Conversion of Preferred Stock
At December 31, 1998, the Company had 2,936,541 shares outstanding (including 661,321 of preferred shares issued in lieu of accumulated dividends) of 7% Cumulative Preferred Stock valued at $5,751,191.
During 1999, the preferred stockholders of the Company's 7% Cumulative Preferred Stock, converted all its Preferred Stock into 3,131,047 shares of the Company's common stock.
Capitalization of Debt
In 1999, the Company capitalized debt due to a former stockholder (see Note L) of $660,000 into 642,857 shares of common stock.
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE O - SIGNIFICANT CONCENTRATION
In 1999, one of the Company's customers was responsible for 40% of the Company's revenues. In 1998, two customers accounted for 67% of the Company's revenues. The Company has a contract with each major customer which if not cancelled, automatically renews.
NOTE P - COMMITMENT AND CONTINGENCIES
Lease
The Company has entered into various noncancellable operating lease agreements for office space and equipment that expire at various dates through January 1, 2009.
Future minimum payments under these noncancellable operating leases are as follows:
2000 $ 392,135
2001 404,105
2002 347,850
2003 337,979
2004 319,833
Thereafter 1,309,768
------------
$ 3,111,670
============
|
Rent expense for the year ended December 31, 1999 and 1998 totaled $115,376 and $40,034, respectively.
Employment Agreement
During 1999, the Company entered into employment agreements with certain employees of the Company with a 5 year term. The agreements call for annual base compensation ranging from $62,400 to $156,000. One of the employees monthly salary will increase by $1,000 for each $100,000 of TVI sales in excess of $500,000 per month. The annual salary, however, is capped at $150,000 per annum. If the employees are terminated for cause or if the employee voluntarily terminates his employment by the Company, the Company is required to pay within 5 days after the date of termination the employees base compensation and unused vacation.
Effective January 1, 2000, the Company entered into an employment agreement with its President for a five year term and an annual base salary of $250,000. If the President is terminated for cause, or if the President voluntarily terminates his employment by the Company, the Company is required to pay within 5 days after the date of termination the employees base compensation and unused vacation.
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE Q - RELATED PARTY TRANSACTIONS
The Company coordinates it travel arrangements through a company owned by the majority stockholder. Total amounts paid to this company for travel expenditures during 1999 and 1998, was $45,618 and $18,805, respectively.
Customer contacts of the consolidated group of companies are used by the Parent and its subsidiaries to offer their services to these customers. No fees are paid among the companies for the use of the customer list.
NOTE R - LONG-TERM INCENTIVE PLAN
In 1999, the Company adopted a Long-Term Incentive Plan for the benefit of employees of the Company and its subsidiaries. Under the plan, the Board of Directors (through a committee) can award a Nonqualified Stock Option, an Incentive Stock Option, a Stock Appreciation Right, or Restricted Stock to key employees and other persons who contribute materially to the success and profitability of the Company. The exercise price of each share subject to an Incentive Stock Option shall not be less than the fair market value of the stock on the Incentive Stock Option's date of grant.
Each Option Agreement shall specify the vesting schedule applicable to the Option. The Committee, in its sole and absolute discretion, may accelerate the vesting of any Option at any time. The aggregate fair market value (determined on grant date) with respect to which any Incentive Stock Options may become exercisable by any individual for the first time in any calendar year shall not exceed $ 100,000. The maximum aggregate number of shares that may be subject to award under the plan is 5,000,000. During 1999 the Company granted 3,065,000 options at an exercise price of $1.50 which equaled the fair market value of the stock at the date of grant. The options expire at various dates through February 26, 2004. There were no options granted or outstanding at December 31, 1998.
Had compensation cost for the options issued to employees been determined based on the fair value of the options at the grant dates consistent with the method of SFAS 123, the Company's net loss and loss per share would have been changed to the pro forma amounts indicated below.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE R - LONG-TERM INCENTIVE PLAN - Continued
Net loss
As reported $ (1,136,870)
Pro forma $ (1,875,462
Basic loss per share
As reported $ (.07)
Pro forma $ (.11)
|
The above pro forma disclosures may not be representative of the effects on reported results of operations for future years as options vest over several years and the Company may continue to grant options to employees.
The fair value of each option grant is estimated on the date of grant using the binomial option-pricing model with the following weighted-average assumptions used for grants in 1999: dividend yield of 0.0 percent; expected volatility of 101.68 percent, risk-free interest rate of 5.33 percent and expected holding period of up to 5 years.
A summary of the status of the Company's stock options as of December 31, 1999 and changes during the year then ended are as follows:
Weighted -
Average
Exercise
Shares Price
----------- ---------
Outstanding at beginning of year $
Granted 3,065,000 1.50
Exercised - -
Forfeited - -
----------- ---------
Outstanding at end of year 3,065,000 1.50
===========
Options exercisable at end of year 724,011
Weighted-average fair value of options
granted during the year $ 1.50
Weighted-average remaining contractual
Life 2.98
|
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE S - PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial information is unaudited and reflects the operations of the Company as if the employment agreement with the President described in Note P had been entered into at the beginning of the periods presented and as if the Company's subsidiaries had not been S Corporations for federal income tax purposes.
Pro forma provision for income taxes differs from the amount of pro forma income tax determined by applying the applicable federal statutory rates primarily because of the effect of state income taxes.
NOTE T - SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," in 1998 which changes the way the Company reports information about its operating segments. The Company is organized into four main business units: On-line Benefit and Services, Website Design and Hosting, Credit Card Processing Services and Mortgage Brokerage (see Note A).
The accounting policies of the reportable segments are the same as those described in Note B to the Company's Consolidated Financial Statements. The Company evaluates the performance of its operating segments based upon income before income taxes and non-recurring and extraordinary items.
Summarized financial information concerning the Company's reportable segments is shown in the following table. Corporate related items, results of insignificant operations and, as it relates to segment profit (loss), and income and expense not allocated to reportable segments are included in the reconciliations to consolidated results.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE T - SEGMENT INFORMATION - Continued
Segment information for the years 1998 and 1999 and for the three months ended March 31, 1999 and 2000 was as follows:
On-line Website Credit Card
Benefits and Design and Processing Mortgage
Services Hosting Services Brokerage Total
------------ ---------- ----------- --------- -----
1998
Net sales $ 3,274,055 $ 84,259 $ 465,474 $ -- $ 3,823,788
Operating (loss) earnings 2,178,675 (366,367) 11,853 -- 1,824,161
Depreciation and
amortization 23,590 9,190 2,757 -- 35,537
Total assets 41,611 106,491 975 -- 149,078
Capital expenditures 10,245 38,947 2,857 -- 52,049
1999
Net sales 2,011,257 287,838 334,718 829,352 3,463,165
Operating (loss) earnings 119,268 (576,813) (124,086) 38,790 (542,841)
Interest expense -- -- -- 5,166 5,166
Depreciation and
amortization 9,397 48,533 -- 10,641 68,571
Total assets 94,408 224,317 92 3,535,475 3,854,292
Capital expenditures 36,460 94,396 -- 21,206 152,062
Three Months ended
March 31, 1999
(unaudited)
Net sales 758,165 112,719 83,988 -- 954,871
Operating (loss) earnings 386,776 (84,735) (5,259) -- 296,782
Total assets 28,043 61,298 1,709 -- 91,050
Three Months ended
March 31, 2000
(unaudited)
Net sales 918,245 22,862 70,015 595,142 1,606,264
Operating (loss) earnings 318,992 (495,234) (248,443) (208,688) (633,373)
Total assets 71,293 238,185 5,459 3,548,068 3,863,005
|
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE T - SEGMENT INFORMATION - Continued
Reconciliation to consolidated amounts:
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1999 1999 2000
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Revenues
Total revenues for reportable segments $ 3,823,788 $ 3,463,165 $ 954,871 $ 1,606,264
Other revenues -- 450 -- 13,249
Eliminations of intersegment revenues -- (152,090) (37,523) (600,000)
----------- ----------- ----------- -----------
Total consolidated revenues $ 3,823,788 $ 3,311,525 $ 917,348 $ 1,019,513
=========== =========== =========== ===========
Operating earnings
Total earnings for reportable segments $ 1,824,161 $ (542,841) $ 296,782 $ (633,373)
Parent company loss -- (594,029) (19,448) (769,737)
Other -- -- -- (21,892)
----------- ----------- ----------- -----------
Consolidated operating (loss) earnings $ 1,824,161 $(1,136,870) $ 277,334 $(1,425,002)
=========== =========== =========== ===========
Assets
Total assets for reportable segments $ 149,078 $ 3,854,292 $ -- $ 3,863,005
Parent company assets -- 209,637 -- 1,913,630
Parent company - fixed assets -- 150,069 -- 399,509
Other -- -- -- 9,096
----------- ----------- ----------- -----------
Total consolidated assets $ 149,078 $ 4,213,998 $ -- $ 6,185,240
=========== =========== =========== ===========
|
NOTE U - SUBSEQUENT EVENTS
Stock Issuance
On February 3, 2000, the Company entered into a common stock purchase agreement with an investor whereby the Company issued 970,285 shares to the investor for $4,000,000 (the number of shares were based on 85% of the average closing bid price for five consecutive business days prior to February 3, 2000, $4.12). Under the terms of the agreement, the shares are subject to repricing during four separate repricing periods. The first repricing takes place 90 days after the closing date (February 3, 2000) or on the effective date (the date the Securities and Exchange Commission (SEC) declares effective the registration statement covering the shares issued under this agreement) and end 30 days after the later date. If during this time the average closing bid price for any five business days (not necessarily consecutive) is not equal to or greater than 117% of the initial Closing Bid Price, then the investor may request that up to one-third of the initial shares (323,428 shares) be repriced. The Company may elect to issue additional shares or pay the investor as determined by applying two separate formulas.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE U - SUBSEQUENT EVENTS - CONTINUED
Stock Issuance - Continued
The second and third repricing periods commence immediately following the first and second repricing periods, respectively and end 30 days thereafter. The repricing percentage and formulas in the first repricing are the same for the second and third repricing period. The final repricing period commences immediately following the third repricing period and ends 180 days thereafter. If during this time the average closing bid for any five consecutive business days after the commencement of the final repricing period is not equal to or greater than 117% of the initial closing price, the investor may request repricing of up to 50% of the initial shares (not previously repriced). The Company may elect to issue additional shares or pay the investors as determined by applying two separate formulas.
The investor has committed to purchase up to $16,000,000 of additional shares of the Company at a price equal to 90% of the two lowest closing bid prices of the common stock (not necessarily consecutive) for the 10 trading days prior to the giving of notice by the Company of its election to enter into an additional funding transaction with the investor. This commitment is for 18 months following the effective date of the registration statement.
The Company under the terms of the agreement has the right to redeem that portion of the initial shares held by the investor for which a relevant repricing period, other than the final repricing period, has not commenced by payment of cash for an amount equal to the "Applicable Percentage" multiplied by the initial closing price ($4.12) of the initial shares being redeemed. The applicable percentages range from 115% to 130% depending on the redemption date through 181 days after the closing date and the conclusion of the final reporting period.
The Company was required to file a Registration Statement with the SEC to register the shares issued under this agreement within 30 days following the initial closing date (February 3, 2000), but did not do so. The Company was also required to have the Registration Statement declared effective by the SEC no later than 90 days from the initial closing date, but that requirement was not satisfied. By reason of the fact that the Registration Statement was not filed with or declared effective by the SEC within the allotted time periods, the Company may be required, if the investor so elects, to pay 2% of the purchase price of the initial shares (2% of $4,000,000) for each 30 day period commencing on or about May 3, 2000 and ending on the respective dates when such filing is made, and such effectiveness is declared.
The Company under the terms of the agreement issued to the investor a warrant to purchase 164,948 shares of common stock at an exercise price of $5.82 per share. The warrant expires on February 2, 2004.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE U - SUBSEQUENT EVENTS - Continued
Authorized Shares
On January 4, 2000, the Board of Directors approved an increase in the Company's authorized shares from 25,000,000 to 50,000,000. The 50,000,000 shares consist of 40,000,000 shares of common stock, par value $.001 and 10,000,000 shares of preferred stock, par value $.001.
NOTE V - SUBSEQUENT EVENT - ACQUISITION
On April 26, 2000, the Company acquired 800,000 shares (80%) of the outstanding stock of GKB Software, Inc. (GKB) for 2,400,240 shares of common stock valued at $9,600,000. In addition, the agreement calls for contingent shares to be issued at the one year anniversary of the closing if the market price of the Company's stock is below $5.00. Under the terms of the agreement the Company will contribute to GKB $1,000,000 in exchange for 100,000 Class A Preferred Shares of GKB. The Class A Preferred Shares consist of 100,000 authorized shares and are non-voting, non-cumulative and non-redeemable, but provide for a liquidation preference equal to the par value of $10.00. The $1,000,000 will be paid in installments of $25,000 by April 30, 2000, $50,000 before May 31, 2000 (which has not been paid) and the balance of $925,000 in equal installments over 10 months. The preferred shares will be issued in proportion to the installments paid. GKB Software, Inc. developed and sells a point-of-sale software for the fast food industry. GKB was 40% owned by the brother of the Chief Executive Officer of the Company. The acquisition will be accounted for as a purchase and accordingly, the acquired assets and liabilities will be recorded at their fair values at the date of acquisition. The excess consideration paid over the estimated fair value of the net assets acquired of $9,579,913 has been allocated to goodwill and is being amortized on a straight-line basis over 5 years.
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE V - SUBSEQUENT EVENT - ACQUISITION - Continued
The following unaudited pro forma summary presents the consolidated balance sheet at December 31, 1999, the consolidated results of operations of the Company for the year end December 31, 1999 as if the acquisition had occurred at the beginning of 1999, and the consolidated results of operations for the three months ended March 31, 2000.
PRO FORMA BALANCE SHEET
December 31, 1999
ASSETS
Interactive
Technologies.com GKB Pro Forma Pro Forma
Ltd. Software Adjustments Sheet
----------- ----------- ----------- -----------
Cash and cash equivalents $ 452,084 $ 255 $ -- $ 452,339
Mortgage loans held for sale, net 1,686,347 -- -- 1,686,347
Accounts and other receivable 74,506 50 -- 74,556
Marketable securities 101,952 -- -- 101,952
Other current assets 81,346 -- -- 81,346
Property and equipment, net 369,546 6,547 -- 376,120
Goodwill, net 1,428,850 -- 7,663,930(1) 9,092,780
Other assets 19,367 -- -- 19,367
----------- ----------- ----------- -----------
Total assets $ 4,213,998 $ 6,879 $ 7,663,930 $11,884,807
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Warehouse finance facility $ 1,666,092 $ -- $ -- $ 1,666,092
Accounts payable and accruals 573,137 6,673 -- 579,810
Loans 57,800 13,311 -- 71,111
Deferred revenue 233,768 -- -- 233,768
----------- ----------- ----------- -----------
Total liabilities 2,530,797 19,984 -- 2,550,781
----------- ----------- ----------- -----------
Stockholders' equity 1,683,201 (13,105) 7,663,930 9,334,026
----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity $ 4,213,998 $ 6,879 $ 7,663,930 $11,884,807
=========== =========== =========== ===========
|
(1) Goodwill net of amortization of $1,915,983
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE V - SUBSEQUENT EVENT - ACQUISITION - Continued
PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
Interactive Pro Forma
Technologies.com GKB Pro Forma Statement of
Ltd. Software Adjustments Operations
----------- ----------- ----------- -----------
Revenues
Sales and service $ 2,482,173 $ 57,068 $ -- $ 2,539,241
Loan fees 829,352 -- -- 829,352
----------- ----------- ----------- -----------
3,311,525 57,068 -- 3,368,593
Cost and expenses
Cost of sales 338,264 47,942 -- 386,206
Selling, general and administrative 4,198,110 14,477 1,915,983(1) 6,128,570
----------- ----------- ----------- -----------
4,536,374 62,419 1,915,983 6,514,776
Other income 87,979 2,198 -- 90,177
Loss before provision for income
taxes (1,136,870) (3,153) (1,915,983) (3,056,006)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $(1,136,870) $ (3,153) $(1,195,983) $(3,056,006)
=========== =========== =========== ===========
|
(1) Amortization of goodwill over five years
(continued)
Interactive Technologies.Com, LTD. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the Three Months Ended March 31, 1999 and 2000 (Information Relating to the Three Months Ended March 31, 1999 and 2000 is Unaudited)
NOTE V - SUBSEQUENT EVENT - ACQUISITION - Continued
PRO FORMA STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2000
Interactive Pro Forma
Technologies.com GKB Pro Forma Statement of
Ltd. Software Adjustments Operations
----------- ----------- ----------- -----------
Revenues
Sales and service $ 424,371 $ 7,341 $ -- $ 431,712
Loan fees 595,142 -- -- 595,142
----------- ----------- ----------- -----------
1,019,513 7,341 -- 1,026,854
Cost and expenses
Cost of sales 64,822 4,551 -- 693,373
Selling, general and
administrative costs 2,380,491 7,445 478,996(1) 2,866,932
----------- ----------- ----------- -----------
2,445,313 11,996 478,996 2,936,305
Other income 798 -- -- 798
Loss before provision for income
taxes (1,425,002) (4,655) (478,996) (1,908,653)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $(1,425,002) $ (4,655) $ (478,996) $(1,908,653)
=========== =========== =========== ===========
|
(1) Amortization of goodwill over five years
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Pursuant to the company's certificate of incorporation, the personal liability of a director or officer of the company to the company or a shareholder for monetary damages for breach of a fiduciary duty is limited to situations in which a director's or officer's acts or omissions involve intentional misconduct, fraud or knowing violations of law.
The company's certificate of incorporation and bylaws provide for the indemnification of directors and officers of the company to the maximum extent permitted by law. The bylaws provide generally for indemnification as to all expenses incurred or imposed upon them as a result of actions, suits or proceedings if they act in good faith and in a manner they reasonably believe to be in or not opposed to the best interests of the company. These documents, among other things, indemnify the company's employees, officers and directors for certain expenses (including attorneys' fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in the right of the company, on account of services as any employee, officer or director of the company or as an employee, officer or director of any affiliate of the company. The company believes that these provisions are necessary to attract and retain qualified persons as directors and officers.
There is no pending litigation or proceeding involving a director, officer, employee or other agent of the company as to which indemnification is being sought, and the company is not aware of any pending or threatened litigation that may result in claims for indemnification by any director, officer, employee or other agent.
The company has purchased directors and officers liability insurance to defend and indemnify directors and officers who are subject to claims made against them for their actions and omissions as directors and officers of the company. the insurance policy provides standard directors and officers liability insurance in the amount of $3,000,000.
Item 25. Other Expenses of Issuance and Distribution
Description Amount
----------- ------
Registration Fee $1,173
NASD Filing Fee NA
Legal Fees and Expenses (including Blue Sky) *
Accounting Fees and Expenses *
Transfer Agent Fees and Expenses *
Printing Expenses *
Miscellaneous *
------
$*.(1)
======
----------
|
* To be included by amendment.
II-1
(1) While all shares registered for sale are being sold by selling stockholder, all expenses of issuance and distribution are being paid by registrant per contractual agreements.
Item 26. Recent Sales of Unregistered Securities
Between February 26, 1999 and the date of filing of this Registration Statement, the Company sold the unregistered securities listed below:
On April 15, 1999, the Company issued 500,000 shares of Common Stock to the investors identified below at a price of $2.00 per share in connection with the closing of a private placement made pursuant to the exemption from registration accorded under Rule 504 of Regulation D.
On April 21, 1999, the Company issued 1,178,572 shares of Common Stock to Alan Brooks, the Chairman of the Board, and a controlling shareholder of the Company prior to the February 26, 1999 Reverse Acquisition. Such shares were issued, pursuant to action taken by the Company's Board of Directors on February 10, 1999, for a total consideration of $1,023,654 owed by the Company to Mr. Brooks, as follows: (a) accrued but unpaid salary in the amount of $476,250; (b) reimbursement for expenses incurred and advances made on behalf of the Company in the aggregate amount of $547,404; and (c) redemption of preferred stock of the Company acquired by Mr. Brooks at an aggregate price of $300,000. The issuance of such Common Stock was made pursuant to the exemption from registration accorded under Section 4(2) of the Securities Act.
On April 28, 1999, the Company issued 18,000,000 shares of Common Stock to
William R. Becker, the Chairman of the Board, Chief Executive Officer and a
controlling shareholder of the Company. Such shares were issued at the closing
of the Reverse Acquisition in consideration for Mr. Becker's contribution of 80%
of the issued and outstanding shares of the common stock of JoinUsOnline, United
Interactive, IMS and Web Classified to the Company. The issuance of such Common
Stock was made pursuant to the exemption from registration accorded under
Section 4(2) of the Securities Act.
Between February 1999 and August 1999, the investors identified below, exchanged 2,120,000 shares of the Company's 7% Cumulative Convertible Preferred Stock which had been issued in or about 1994, and an additional 548,584 shares of such stock issued in lieu of accumulated dividends), for 2,668,584 shares of Common Stock in a transaction for which no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange. The conversion price, which was tied to the market price of the Common Stock on and immediately prior to the conversion date, ranged between $.56 and $12.18 per share. The issuance of such Common Stock was made pursuant to the exemption from registration accorded under Section 3(a)(9) of the Securities Act.
II-2
Number of Shares of Preferred Stock Converted
Original Dividend Number of Shares of
Name of Investor Shares Shares Common Stock Issued
---------------- ------ ------ -------------------
Aircraft Investment
Services, Inc 70,000 66,963 316,963
Asselone, Kimberly 5,000 220 1,042
Brogan, Glenn 20,000 880 4,168
Casatelli, Dr. Bruno 10,000 440 2,084
Collins, Barbara M. 20,000 880 4,168
Collins, Robert E. 10,000 440 2,084
Collins, Gordon & Johnson
PC Pension Trust 90,000 3,523 18,759
Compton, James E. and
Rebecca, JTWROS 5,000 220 1,042
Crink, James W. and
Brenda, JTWROS 5,000 220 1,042
DeCarli, James J. 10,000 440 2,084
Dellin, Edward J. 5,000 220 1,042
DeVico, Angelo 2,500 110 521
Dinkin, Les & Marcy J, JTWROS 10,000 440 2,084
Dubraski, Jr., John M. 20,000 880 4,168
Duffy, L. Robert 10,000 440 2,084
Duffy, L. Robert and Virginia,
JTWROS 10,000 440 2,084
Duffy, L. Robert IRA 10,000 440 2,084
Dzaluk, Joseph Francis Living
Trust Dtd 8/25/93 10,000 440 2,084
Epstein, Jeffrey 5,000 220 1,042
Falcha, James 3,333 146 694
Falcha, Laura 3,333 147 694
Falcha, Robert 3,334 147 694
Fox, James L. IRA Rollover 10,000 440 2.084
Gallagher, William H. & Hyland,
Michael G, Ten in Com 10,000 440 2,084
Gallagher, William H. & Ann
H., JTWROS 15,000 660 3,101
Gallagher, William H. &
Caroline H., JTWROS 5,000 220 1,042
Healy, Esther 10,000 440 2,084
Healy, Thomas B. Family Trust 10,000 440 2,084
Healy, Thomas B. Marital Trust 10,000 440 2,084
Howard, Alexander & Allan,
JTWROS 2,500 110 521
Ignatowicz, Wieslaw B., Dr. Profit
Sharing Plan 10,000 440 2,084
|
II-3
Ignatowicz, Wieslaw B., Dr. 10,000 440 2,084 Lacasse, Jean-Paul 10,000 440 2,084 Larizza, Louis J. Trust 10,000 440 2,084 Larizza, Louis J. 10,000 440 2,084 Levinson, Leonard 5,000 220 1,042 Lyons, Ellen 70,000 3,080 13,175 Macri, Rocco F. & Barbara C., JTWROS 5,000 220 1,042 Mayer, Charles D. Trust Dtd 3/21/95 10,000 440 2,084 McGeory, G. Holmes & William J. Giacomo Ten in Com 5,000 220 1,042 Milbier, Donald J. Custodian for Kyle Milbier UGMA 5,000 220 1,042 Milbier, Donald J. Custodian for Matthew Milbier UGMA 5,000 220 1,042 Milbier, Donald J. Custodian for Kathleen Milbier 5,000 220 1,042 Milbier, Donald J. Custodian for Brenna Milbier 5,000 220 1,042 Milbier, Mary 5,000 220 1,042 Morin, Raymond N. & Bonnie C., JTWROS 10,000 440 2,084 Morrell, John D. 10,000 440 2,084 Mulligan, William O. 10,000 440 2,084 Okon, Joseph J. Retirement Trust 50,000 2,200 10,422 Palumbo, Edward Arthur 20,000 880 4,168 Parry, Catherine King 10,000 440 2,084 Picone, Salvadore & Susan, JTWROS 5,000 220 1,042 Reuben, Mark 10,000 440 2,084 Romanello, Daniel 5,000 220 1,042 Rosenbaum, Henry & Judith, JTWROS 5,000 220 1,042 Rosenbaum, Jesse & Lydia, JTWROS 5,000 220 1,042 Scher, Craig 5,000 220 1,042 Schultz, Kimberly 20,000 880 4,168 Skinner, Mark 10,000 440 2,084 Trager, Michael 5,000 220 1,042 Trager, Michael fbo Kevy Trager Profit Sharing Plan 5,000 220 1,042 Tripodi, Louis 10,000 440 2,084 Ullman, Allan 5,000 220 1,042 Von Arx, Dolph W. Trust Dtd. 8/18/88 30,000 1,320 6,253 |
II-4
Weissenborn, Stanton F. 10,000 440 2,084
Winjum, Scott 20,000 880 4,168
Winstead, David V. 20,000 880 4,168
Yale Asset Management, Inc. 1,250,000 446,418 2,113,083
Zeier, Doris M. Revocable Trust 10,000 440 2,084
--------- ------- ---------
2,120,000 548,584 2,668,584
========= ======= =========
|
On February 3, 2000, the Registrant issued 970,285 shares of common stock to Young, LLC in consideration of that investor's payment of $4,000,000. The transaction was consummated as a private placement with an "accredited investor" which was exempt from registration under the Securities Act pursuant to Rule 506 of Regulation D.
On April 26, 2000, the Registrant issued 960,096 shares of common stock to each of Keith Becker and Gerard Kreischer, and 480,048 shares of common stock to American Capital Ventures, Inc. in connection with Registrant's acquisition of 80% of the issued and outstanding shares of the common stock of GKB Software, Inc. from those individuals. The issuance of such Common Stock was made pursuant to the exemption from registration accorded under Section 4(2) of the Securities Act.
Item 27. Exhibits
Exhibit
Number Description
------ -----------
2.1 Certificate of Incorporation, as Amended
2.2 By-laws
4.1 Specimen stock certificate of common stock
4.2 1999 Stock Option Plan (the "Plan")
4.3 Form of Option issuable under the Plan.
4.4 Common Stock Purchase Agreement dated February 3, 2000 between the
Company and Young LLC
4.5 Letter Agreement dated February 3, 2000 between the Company and
Young LLC
4.6 Registration Rights Agreement dated February 3, 2000 between the
Company and Young LLC
4.7 Warrant dated February 3, 2000 issued by the Company to Young LLC
|
II-5
4.8 Warrant dated February 3, 2000 issued by the Company to Ladenburg
Thalmann & Co., Inc.
4.9 Stock Purchase Option dated June 7, 2000 issued by the Company to
Boru Enterprises, Inc.
10.1 Employment agreement between the Company and William R. Becker
10.2 Employment agreement between the Company and Matthew Cohen
10.3 Delray Lease
10.4 Coral Springs Lease
10.5 Lease dated the 28th day of October 1991 between Mass Mutual Life
Insurance Co. and Express Financial Corporation
10.6 Office Service Agreement made May 27, 2000 between Vantas Long
Island, LLC and GKB Software, Inc.
10.7 Standard Form of JoinUsOnline.com Benefit and Service Portal
Agreement
10.8 Standard Form of JoinUsOnline Benefit and Service Agreement
10.9 ISO Services and marketing Agreement made as of the 29th day of
February 2000 between EFS National Bank and Integrated Merchant
Services, Inc.
10.10 Member Service Provider Credit Card Processing Agreement dated the
28th day of January 2000 among Nova Information Systems, Inc.,
Imperial Bank and Integrated Merchant Services, Inc.
10.11 Agreement dated January 27, 2000 between the Company and Boru
Enterprises, Inc.
10.12 Agreement dated June 7, 2000 between the Company and Boru
Enterprises, Inc.
21 The Company's Subsidiaries
23.1 Consent of Robert Jarkow, CPA
23.2 Consent of Grant Thornton LLP
23.3 Consent of Hall Dickler Kent Goldstein & Wood
24 Power of Attorney (see page II-8)
27.1 Financial Data Schedule
|
II-6
27.2 Financial Data Schedule
Item 28. Undertakings
(a) Rule 415 Offering. Registrant will:
(1) File, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statements to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
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) (Section 230.424(b) of this chapter) 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; and
(iii) Include any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, 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 being registered that remain unsold at the end of the offering.
(e) Request for acceleration of effective date. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer 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 as expressed in the Act and is, therefore, unenforceable.
In the event that 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 small business issuer 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 competent jurisdiction the question whether such indemnification
II-7
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-8
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 for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Delray Beach, State of Florida, on August 7, 2000.
Interactive Technologies.Com, Ltd.
By: /s/ William R. Becker
------------------------------------
William R. Becker, Chief (Principal)
Executive Officer
|
POWER OF ATTORNEY
Each person whose signature appears appoints each of William R. Becker and Matthew J. Cohen, his agent and attorney-in-fact, with full power of substitution to execute for him and in his name, in any and all capacities, all amendments (including post-effective amendments) to the Registration Statement to which this power of attorney is attached.
In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
/s/ William R. Becker Chief (Principal) Executive August 7, 2000
----------------------------- Officer, Director
William R. Becker
/s/ Matthew J. Cohen Chief (Principal) Financial August 7, 2000
----------------------------- Officer, Director
Matthew J. Cohen
/s/ Peter Tamayo Director August 7, 2000
-----------------------------
Peter Tamayo, Jr.
/s/ Lawrence J. Brady Director August 7, 2000
-----------------------------
Lawrence J. Brady
/s/ Charles R. McCarthy Director August 7, 2000
-----------------------------
Charles R. McCarthy, Jr.
|
II-9
EXHIBIT INDEX
Exhibit
Number Description Page
------ ----------- ----
2.1 Certificate of Incorporation, as Amended
2.2 By-laws
4.1 Specimen stock certificate of common stock
4.2 1999 Stock Option Plan (the "Plan")
4.3 Form of Option issuable under the Plan.
4.4 Common Stock Purchase Agreement dated February 3, 2000
between the Company and Young LLC
4.5 Letter Agreement dated February 3, 2000 between the
Company and Young LLC
4.6 Registration Rights Agreement dated February 3, 2000
between the Company and Young LLC
4.7 Warrant dated February 3, 2000 issued by the Company to
Young LLC
4.8 Warrant dated February 3, 2000 issued by the Company to
Ladenburg Thalmann & Co., Inc.
4.9 Stock Purchase Option dated June 7, 2000 issued by the
Company to Boru Enterprises, Inc.
10.1 Employment agreement between the Company and William R.
Becker
10.2 Employment agreement between the Company and Matthew
Cohen
10.3 Delray Lease
10.4 Coral Springs Lease
10.5 Lease dated the 28th day of October 1991 between Mass
Mutual Life Insurance Co. and Express Financial
Corporation
10.6 Office Service Agreement made May 27, 2000 between
Vantas Long Island, LLC and GKB Software, Inc.
|
II-10
10.7 Standard Form of JoinUsOnline.com Benefit and Service
Portal Agreement
10.8 Standard Form of JoinUsOnline Benefit and Service
Agreement
10.9 ISO Services and marketing Agreement made as of the
29th day of February 2000 between EFS National Bank
and Integrated Merchant Services, Inc.
10.10 Member Service Provider Credit Card Processing
Agreement dated the 28th day of January 2000 among
Nova Information Systems, Inc., Imperial Bank and
Integrated Merchant Services, Inc.
10.11 Agreement dated January 27, 2000 between the Company
and Boru Enterprises, Inc.
10.12 Agreement dated June 7, 2000 between the Company and
Boru Enterprises, Inc.
21 The Company's Subsidiaries
23.1 Consent of Robert Jarkow, CPA
23.2 Consent of Grant Thornton LLP
23.3 Consent of Hall Dickler Kent Goldstein & Wood
24 Power of Attorney (see page II-8)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
|
II-11
Exhibit 2.1
CERTIFICATE OF INCORPORATION
OF
ADV ACQUISITION CORP.
FIRST: The name of this corporation is ADV ACQUISITION CORP.
SECOND: Its registered office in the State of Delaware is to be located at Three Christina Centre, 201 N. Walnut Street, Wilmington DE 19801, New Castle County. The registered agent in charge thereof is The Company Corporation, address "same as above".
THIRD: The nature of the business and, the objects and purposes proposed to be transacted, promoted and carried on, are to do any or all the things herein mentioned as fully and to the same extent as natural persons might or could do, and in any part of the world, viz:
The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The amount of the total authorized capital stock of this corporation is divided into 20,000,000 shares of stock at $.001 par value.
FIFTH: The name and mailing address of the incorporator is as follows:
Vanessa Foster
Three Christina Centre
201 N. Walnut St.
Wilmington, DE 19801
SIXTH: The powers of the incorporator are to terminate upon filing of the certificate of incorporation, and the name(s) and mailing address(es) of person who are to serve as director(s) until the first annual meeting of stockholders and their successors are elected and qualified are as follows:
Morris Diamond
Three Christina Centre
201 N. Walnut St.
Wilmington DE 19801
SEVENTH: The Directors shall have power to make and to alter or amend the By-Laws; to fix the amount to be reserved as working capital, and to authorize and cause to be executed, mortgages and liens without limit as to the amount, upon the property and franchise of the Corporation.
With the consent in writing, and pursuant to a vote of the holders of a majority of the capital stock issued and outstanding, the Directors shall have the authority to dispose, in any manner, of the whole property of this corporation.
The By-Laws shall determine whether and to what extent the accounts and books of this corporation, or any of them shall be open to the inspection of the stockholder; and no stockholder shall have any right of inspecting any account, or book or document of this Corporation, except as conferred by the law of the By-Laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings and keep the books, documents and papers of the Corporation 'outside of the State of Delaware, at such places as may be from time to time designated by the By-Laws or by resolution of the stockholders or directors, except as otherwise required by the laws of Delaware.
EIGHTH: Directors of the corporation shall not be liable to either the corporation or its stockholders for monetary damages for a breach of fiduciary duties unless the breach involves: (1) a director's duty of loyalty to the corporation or its stockholders; (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) liability for unlawful payments of dividends or unlawful stock purchase or redemption by the corporation; or (4) a transaction from which the director derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the laws of the State of Delaware, do make, file and record this Certificate and do certify that the facts herein are true; and I have accordingly hereunto set my hand.
DATE: March 30, 1993 /s/
---------------------------------
|
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ADV ACQUISITION CORP.
ADV ACQUISITION CORP., a corporation organized and existing under and by virtue of the general corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly convened and held, adopted the following resolution:
RESOLVED, that the Board of Directors hereby declares it advisable and in the best interest of the Company that Article FIRST of the Certificate of Incorporation be amended to read as follows:
FIRST: The name of this corporation shall be:
EMPIRE CAPITAL CORPORATION
SECOND: That the said amendment has been consented to and authorized by the holders of a majority of the issued and outstanding stock entitled to vote by written consent given in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the general Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, SAID CORPORATION HAS caused this Certificate to be signed by Morris Diamond its President, and attested by Stan Luxenberg its Secretary, this 7th day of June A.D. 1993.
/s/
-----------------------------------------
, President
/s/
-----------------------------------------
Attested by: , Secretary
|
CERTIFICATE OF DETERMINATION
OF
PREFERRED STOCK
OF
EMPIRE CAPITAL CORPORATION
Dated:
May 27, 1994
The corporation shall be authorized to issue up to 4,000,000 shares of non-voting preferred stock at $.001 par value upon the completion of its filing of a Certificate of Amendment to its Certificate of Incorporation.
The By-Laws of the Corporation, Article V, Section 2(A) as amended May 27, 1994 provides that the Board of Directors may, from time to time, establish the rights, privileges, preferences, restriction and terms which will govern and be applicable to each class or series of preferred shares the corporation shall issue. Those terms are to be drawn from a Certificate of Determination which affords the broadest and most flexible variety of choices possible. The following represents the choices and options which the Board believes should be available to it at this time.
Dividends. A preference in respect of earnings shall be accorded to holders of a class or series of preferred stock. The Board may identify any class or series of preferred stock as junior or senior to any other class or series, whether issued before or after the class or series named, in terms of the class' or series' priority in receiving dividends. Dividends may be expressed as a specified dollar amount or percentage of par, stated or liquidation value and must be declared and paid or set aside before any dividends are permitted to be paid on a junior security (such as common stock). This preference will typically be denominated "cumulative," "cumulative if earned" or "non-cumulative."
If the preference is cumulative, no dividends may be paid on the common stock or any other junior equity shares, until all previously accrued but unpaid dividends on preferred shares have been paid or provided for, regardless of whether the preferred dividends could legally have been paid in prior periods. Accordingly, if the preferred dividend is passed in one or more periods, such dividend or dividends must be "made up" before any dividends may be declared and paid on the common stock, i.e. the Board provides that the preferred dividend is to be cumulative if earned, the preferred dividend will accrue for a particular period only if the corporation's earnings for that period equaled or exceeded the amount of the dividend.
If the preferred dividend is non-cumulative, the declaration and payment thereof is within the discretion of the board of directors. Accordingly, when a non-cumulative dividend is passed, the holders of preferred stock have no claim for its subsequent payment prior to the making of any distribution on the common stock.
There shall be no penalty imposed on the corporation for the failure to pay preferred dividends at the stated rate when due. The Board may make provision for an increase in the stated dividend rate for all periods subsequent to the failure to pay the prescribed dividend; the rate may or may not revert to the previous stated rate upon curing of the arrearage.
The preferential claim in respect of the earnings of the corporation is normally limited to the stated preference. The Board may allow for a class or series to participate in respect of the earnings of the corporation in addition to the stated preference. Such preferred series shall be referred to as "participating preferred stock." If it is to be participating, the preferred stock may be given the right to participate share for share in any dividends on the common stock. Alternatively, it may be granted a further participation, either on a per share basis (which may be limited as to amount) or as a class (based upon a stated percentage of any further dividends declared during the applicable period), only after a designated amount has first been paid on the common stock. If the preferred stock is callable or redeemable at the option of the corporation, the Board should, in order to protect the right of participation of the preferred stock, consider making the shares convertible into the common stock. In addition, the Board should consider a provision that, in the event of a stock dividend on, or subdivision or combination of, the common stock with which the preferred stock participates, an appropriate adjustment be made in the rate of participation of the class or series of preferred stock so that the holders of the preferred stock maintain the same relative economic position as they enjoyed prior to the change in capitalization.
Generally, dividends on preferred stock will be payable in cash. However, the Board may consider and issue shares of "pay-in-kind" or "PIK" preferred that require or permit the Corporation to pay dividends in the form of additional shares of the Corporation's equity securities. Alternatively, the Board may also consider and may issue "accreting" preferred stock pursuant to which accrued dividends are added to the liquidation preference and paid upon redemption or maturity. Any variations of these features may be adopted, for example, the PIK or accretion feature may apply only for an initial designated period after issuance of the preferred stock or the Board may elect to adopt such a provision for payment after a designated period has elapsed.
Liquidation Preference. Unless the Board shall otherwise determine with regard to a class or series of stock, preferred stock shall be entitled to a preference (after satisfaction of creditor's claims) in respect of the distribution of the assets of the corporation in the event of its voluntary or involuntary liquidation, dissolution or winding up. This liquidation preference shall be a specified dollar amount per share, which is generally equal to the issue price per share, and which need not bear any relationship to the par or stated value per share. In the absence of such a specification, however, the liquidation preference shall be equal to such par or stated value. If, following satisfaction of the claims of creditors, the assets of the corporation (or the proceeds thereof) are insufficient to satisfy the liquidation preference in full, such assets will be distributed
ratably among the holders of the preferred stock in accordance with their respective interests. In addition, if the preferred stock is cumulative, the holders will receive, in addition to the specified liquidation preference, all accrued and unpaid dividends before any distributions are made to holders of the common stock or any other junior stock.
As in the case of dividends, participation beyond the stated liquidation preference may be provided for by the Board. If the preferred stock is to participate beyond the stated liquidation preference, protection of the right to participate would involve the considerations expressed above with respect to protection of the relative economic position of holders.
Redemption. At the election of the Board, a class or series of preferred stock may be callable or redeemable, in whole or in part, at the option of the Corporation, automatically upon the happening of a specified event or at the option of the holder, at such times, at such prices and upon such other terms and conditions as are provided by the Board of Directors. The Board may choose, whether or not stated at, prior to or after the date of issue, to arrange to make a payment in kind of the Corporation's common stock in payment of the redemption value, or it may choose to allow the holders of shares to elect to take payment in kind as opposed to any other method of payment provided for, as payment of the redemption value.
Upon redemption, the rights of a holder of preferred stock as a shareholder of the corporation cease to exist. Accordingly, the Board will provide for adequate notice of redemption. This is particularly important if the preferred stock is convertible, so that a shareholder will have an adequate opportunity to determine whether to convert or surrender its shares for redemption. Upon payment or irrevocable deposit by the corporation of a sum sufficient to redeem on the redemption date the shares called for redemption, the shares are no longer deemed to be outstanding. Such shares will revert to the status of authorized and unissued stock or treasury stock, and in either case become available for future issuances unless otherwise provided by the Board.
(a) Sinking Fund or Mandatory Redemption. The Board may choose to provide for an obligatory redemption of the preferred stock by a designated future date, and may provide for the redemption of the entire class or series of preferred stock on a particular date, or may provide that the redemption of all or part of the issue is to be spread over a period of years pursuant to a "sinking fund" or mandatory redemption provision. In either event, the redemption price may be the issue price or liquidation preference per share, plus all accrued but unpaid dividends.
The Board will determine when the sinking fund comes into operation after issuance of the preferred stock. The annual sinking fund obligation may be reduced by shares previously purchased or acquired by the Corporation (e.g., pursuant to the exercise of an optional redemption right or a private repurchase or, if the Corporation's shares are publicly traded, in the open market) and, if the class or series of preferred stock is convertible, by shares of the same class or series previously converted into common stock. The selection of shares for redemption pursuant to the sinking fund shall be pro rata among all holders thereof or by lot so as to ensure fair treatment of all shareholders.
(b) Optional Redemption by Corporation. The Board may choose a provision for optional redemption which allows, but does not require, the Corporation to redeem all or a portion of an outstanding class or series of preferred stock during a designated period or periods. The Board may provide for a redemption premium - an amount above the issue price of the preferred stock being redeemed - at which the optional redemption is to be consummated. This redemption premium may be fixed, or may be higher in the early years; in which the redemption right may be exercised and decline to zero over several years, or it may be decided upon by the Board of Directors at the time it decides to call or redeem the shares..
If the class or series which has an option to redeem is convertible preferred stock, then sufficient notice of the intention to redeem to allow the investor to choose whether to convert prior to redemption, will be provided.
The Board may determine that payment under any of the foregoing redemption schemes should be accomplished by delivery to the holders of the class or series to be redeemed, of the Corporation's equity securities, similar to the PIK payment of dividends described above.
Conversion. The Board may provide that a class or series of preferred stock is convertible into another class of stock at the option of the holder or automatically upon the happening of a specified event, such as the effectiveness under the Securities Act of 1933 of a registration statement covering the initial public offering of the corporation's common stock.
A right of conversion may entitle the holder to surrender the preferred stock (generally valued at its issue price or liquidation preference, without accrued dividends) in exchange for shares of common stock at a price, denominated as the conversion price, determined by the Board. The Board will establish mechanics to be followed to exercise the conversion right, to provide written notice to the Corporation of a holder's election to convert and surrender certificates evidencing the shares to be converted together with any required documentation prior to the expiration of the conversion period, and shall specify when conversion is deemed to be effective. The holder of convertible preferred stock will be deemed to be a holder of the common stock as of the date of the surrender of the convertible preferred stock, together with all other necessary documentation.
The Corporation will ensure that a sufficient number of authorized but unissued shares of common stock are reserved for issuance upon conversion.
Protection of the Conversion Right-Anti-Dilution Provisions. Since the terms of a convertible preferred stock class or series, if issued, will provide the holder with the right to acquire a specified number of shares of common stock at a designated price, unless the Board decides to provide to the contrary, certain actions taken by the Corporation (such as a change in capitalization) which affect the number of shares of common stock outstanding or to be outstanding would affect the value of the conversion right-decreasing or "diluting" it if the number of outstanding common shares is increased, and rendering it more valuable if the number of outstanding common shares is decreased. Therefore the Board should include "anti-dilution"
provisions in order to ensure that the value of the conversion right will not be affected by such actions. Briefly stated, the anti-dilution should provide for adjustment in the amount of securities to be issued upon conversion of the convertible security. . . in order to compensate for certain changes affecting the security . . . into which it is convertible. The determination of the changes affecting the security which will trigger an adjustment is a matter to be resolved in each case by the Board.
Typically, anti-dilution provisions call for adjustments in the conversion price (and thus the number of shares of common stock issuable upon conversion) in a number of circumstances. An anti-dilution clause which provides for an adjustment in the conversion price in the event of certain "structural" changes in the underlying common stock, such as stock splits, dividends or combinations of the outstanding shares, should be considered by the Board for inclusion.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMPIRE CAPITAL CORPORATION
EMPIRE CAPITAL CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST, that the Board of Directors of said corporation, at a meeting duly convened and held, adopted the following resolutions:
RESOLVE D, that the Board of Directors hereby declares it advisable and in the best interest of the Corporation that Article First of the Certificate of Incorporation be amended to read as follows:
FIRST: The name of the corporation shall be:
INTERFUND RESOURCES LTD.
and it was further
RESOLVED, that the Board of Directors hereby declares it advisable and in the best interest of the Corporation that Article Fourth of the Certificate of Incorporation be amended to read as follows:
FOURTH: The total number of shares of stock which this corporation is authorized to issue is:
"Twenty-nine Million (29,000,000) shares of which Twenty-five Million (25,000,000) shares with a par value of one mil ($.001) each, are common stock and Four Million (4,000,000) shares with a par value of one mil ($.001) each, are non-voting preferred stock."
and it was further
"Each six shares of common stock, .001 par value, issued and outstanding as of July 15, 1992 ("Old Common Stock") shall be changed and re-classified into one fully paid and non-assumable share of common stock, with .006 par value ("New Common Stock"). The Capital account of the Corporation shall not be increased or decreased by such change and reclassification. To reflect the said change
and reclassification each certificate representing Old Common Stock ("Old Common Stock Certificate") shall represent one-sixth the number of shares of New Common Stock. The holder of record of the Old Common Stock Certificate shall be entitled to receive a new certificate representing the New Common Stock equal to one-sixth the number of shares of the Old Common Stock Certificate."
SECOND, that the said amendment has been consented to and authorized by the holders of a majority of the issued and Outstanding stock entitled to vote by written consent given in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.
THIRD, that the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be signed by Alan P. Brooks, its President and attested to by Cindy Passero, its secretary this 12th day of July, 1998
/s/ Alan P. Brooks --------------------------------------- Alan P. Brooks, President |
Attested to:
/s/ Cindy Passero ------------------------------- Cindy Passero, Secretary |
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INTERFUND RESOURCES LTD.
INTERFUND RESOURCES LTD., a corporation organized and existing under and by virtue of the general corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly convened and held, adopted the following resolution:
RESOLVED, that the Board of Directors hereby declares it advisable and in the best interest of the Company that Article FIRST of the Certificate of Incorporation be amended to read as follows;
FIRST: The name of this corporation shall be:
INTERACTIVE TECHNOLOGIES.COM, LTD.
SECOND, That the said amendment has been consented to and authorized by the holders of a majority of the issued and outstanding stock entitled to vote by written consent given in accordance with the provisions of Section 228 of the General corporation Law of the State of Delaware.
THIRD, That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the general Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, SAID CORPORATION HAS caused this Certificate to be signed by Alan P. Brooks, its President and attested C.A. Passero, its Secretary, this 1st day of March, A.D. 1999.
/s/ Alan P. Brooks Attested by: /s/ Cindy Passero ------------------------------ ------------------------------- President Secretary |
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
INTERACTIVE TECHNOLOGIES.COM, LTD.
Pursuant to Section 242 of the General Corporation Law of the State of Delaware
Interactive Technologies.com, Ltd., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: The name of the corporation is Interactive Technologies.com, Ltd.
SECOND: Pursuant to a written consent dated January 4, 2000 and executed by all of the Corporation's directors, and by the holders of a majority of all of the outstanding shares of the capital stock of the Corporation, the following resolutions providing for amendment of the Corporation's Certificate of Incorporation so as to increase the authorized capital stock of the Corporation were duly adopted by the Board of Directors and Stockholders of the Corporation pursuant to Sections 141(f) and 228(a), respectively, of the General Corporation Law of the State of Delaware:
IT IS RESOLVED that Article FOURTH of the Corporation's Certificate of Incorporation is hereby amended to read, as follows:
"FOURTH: The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is fifty million (50,000,000), forty million (40,000,000) of which shall be Common Stock, par value $.001 per share, and the remaining ten million (10,000,000) of which shall be Preferred Stock, par value $.001 per share, issuable in one or more series.
The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
If upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto."
THIRD: Such amendment was duly adopted in accordance with the provisions of
Section 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been signed on behalf of Interactive Technologies.com, Ltd. by William R. Becker, its President, under penalties of perjury, on this 27th day of January, 2000.
Interactive Technologies.com, Ltd.
By: /s/ William R. Becker
----------------------------------------
William R. Becker, President
|
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
INTERACTIVE TECHNOLOGIES.COM, LTD.
Pursuant to Section 242 of the General Corporation Law of the State of Delaware
Interactive Technologies.com, Ltd., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: The name of the corporation is Interactive Technologies.com, Ltd.
SECOND: Pursuant to resolutions adopted by the Corporation's Board of Directors
at a Special Meeting held on August 1, 2000, and a written consent dated August
1, 2000 and executed by a majority of all of the outstanding shares of the
capital stock of the Corporation, the following resolutions providing for
amendment of the Corporation's Certificate of Incorporation so as to increase
the authorized capital stock of the Corporation were duly adopted by the Board
of Directors and Stockholders of the Corporation pursuant to Sections 141(b) and
228(a), respectively, of the General Corporation Law of the State of Delaware:
IT IS RESOLVED that Article FOURTH of the Corporation's Certificate of Incorporation is hereby amended to read, as follows:
"FOURTH: The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is one hundred million (100,000,000), ninety million (90,000,000) of which shall be Common Stock, par value $.001 per share, and the remaining ten million (10,000,000) of which shall be Preferred Stock, par value $.001 per share, issuable in one or more series.
The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
If upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto."
THIRD: Such amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been signed on behalf of Interactive Technologies.com, Ltd. by William R. Becker, its President, under penalties of perjury, on this 2nd day of August, 2000.
Interactive Technologies.com, Ltd.
By: /s/ William R. Becker
----------------------------------------
William R. Becker, President
|
Exhibit 2.2
BY-LAWS
of
INTERACTIVE TECHNOLOGIES.COM, LTD.
a Delaware Corporation (the "Corporation")
ARTICLE I - OFFICES
Section 1.1. Location. The address of the registered office of the Corporation in the State of Delaware and the name of the registered agent at such address, if any, shall be as specified in the Certificate of Incorporation or, if subsequently changed, as specified in the most recent certificate of change filed pursuant to law. The Corporation may also have other offices at such places within or without the State of Delaware as the Board of Directors may from time to time designate or the business of the Corporation may require.
Section 1.2. Change of Location. In the manner permitted by law, the Board of Directors may change the address of the Corporation's registered office in the State of Delaware and the Board of Directors may make, revoke or change the designation of the registered agent.
ARTICLE II - SHAREHOLDERS
Section 2.1 Place of Meetings. Meeting of shareholders shall be held at the principal office of the Corporation or at such place within or without the State of Delaware as the Board of Directors shall authorize.
Section 2.2 Annual Meeting. The annual meeting of shareholders shall be held each year on a date and at a time to be selected by the President or the Board of Directors at least 30 days before such meeting or, in the event the President or the Board of Directors shall not make such selection at least 30 days prior to the following indicated date, at 10:00 A.M. on the last Friday in September of each year (if not a legal holiday, and if a legal holiday, then on the next business day), at such place within or without the State of Delaware as shall be stated in the notice of meeting. At such meeting, or at any special meeting in lieu of the annual meeting, the shareholders shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting.
The notice of the meeting shall be in writing and signed by the President or a Vice President or the Secretary or an Assistant Secretary. Such notice shall state the purpose or purposes for which the meeting is called and the time when and the place within or without the State where such meeting is to be held, and a copy thereof shall be served, either personally or by mail upon each shareholder of record entitled to vote at such meeting, and upon each shareholder of record, who, by reason of any action proposed at such meeting, would be entitled to have his stock appraised if such action were taken, not less than ten or more than fifty days before the meeting. If mailed, it shall be directed to a shareholder at his address as it appears on the stock book unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request.
Section 2.3 Special Meetings. Special meetings of the shareholders may be called at any time by the Chairman of the Board, by the President and by the President or the Secretary at the request in writing of either (a) a majority of the Board of Directors, or (b) shareholders owning a majority in amount of the shares issued and outstanding. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at a special meeting shall be confined to the purposes stated in the notice.
Section 2.4. List of Shareholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, or cause to be prepared and made, at least ten days before every meeting of shareholders, a complete list, based upon the record date for such meeting determined pursuant to Section 5.8, of the shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if such place shall not be so specified, at the place where said meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present.
The stock ledger shall be the only evidence as to who are the shareholders entitled (i) to examine the stock ledger, the list of shareholders entitled to vote at any meeting, or the books of the Corporation, or (ii) to vote in person or by proxy at any meeting of shareholders.
Section 2.5. Notice of Meetings. Written notice of each annual and special meeting of shareholders, other than any meeting the giving of notice of which is otherwise prescribed by law, stating the place, date and hour of the meeting, and, in the case of a special meeting, indicating the purpose or purposes thereof and that it is being issued by or at the direction of the person or persons calling the meeting, shall be delivered or mailed in writing at least ten but not more than sixty days before such meeting, to each shareholder required or permitted to take any action or entitled to vote thereat. If mailed, such notice shall be deposited in the United States mail, postage prepaid, directed to such shareholder at his address as the same appears on the records of the Corporation. An affidavit of the Secretary, an Assistant Secretary or the transfer agent of the Corporation that notice has been given by mail shall be evidence of the facts stated therein.
Section 2.6. Adjourned Meetings and Notice Thereof. Any meeting of shareholders may be adjourned to another time or place, and the Corporation may transact at any adjourned meeting any business which might have been transacted at the original meeting. Notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless (a) any adjournment or series of adjournments cause the original meeting to be adjourned for more than thirty days after the date originally fixed therefor, or (b) a new record date is fixed for the adjourned meeting. If notice of any adjourned meeting is given, such notice shall be given to each shareholder of record entitled to vote at the adjourned meeting in the manner prescribed in Section 2.5 for giving of notice of meetings.
Section 2.7. Quorum. At any meeting of shareholders, except as otherwise expressly required by law, or by the Certificate of Incorporation, the holders of record of at least a majority of the outstanding Capital Shares entitled to vote or act at such meetings shall be present or represented by proxy in order to constitute a quorum for the transaction of any business, but less than a quorum shall have power to adjourn any meeting unless a quorum shall be present. When a quorum is once present to organize a meeting, the quorum cannot be destroyed by the subsequent withdrawal or revocation of the proxy of any shareholder. Capital shares owned by the Corporation or by another corporation, if a majority of its shares entitled to vote in the election of directors is held by the Corporation, shall not be counted for quorum purposes or entitled to vote.
Section 2.8. Voting. At any meeting of shareholders each shareholder holding, as of the record date, shares entitled to be voted on any matter at such meeting shall have one vote on each such matter submitted to vote at such meeting for each such share held by such shareholder as of the record date as shown by the list of shareholders entitled to vote at the meeting, unless the Certificate of Incorporation provides for more or less than one vote for any share on any matter, in which case every reference to a required
proportion of shares shall refer to the proportion of the votes of such shares.
Each shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, provided that no proxy shall be voted or acted upon after eleven months from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest, whether in the shares themselves or in the Corporation, sufficient in law to support an irrevocable power.
Section 2.9 Waivers of Notice of Meetings. Notice of meeting need not be given to any shareholder who signs a waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him.
Section 2.10. Action by Consent of Shareholders. Unless otherwise provided in the Certificate of Incorporation, whenever any action by the shareholders at a meeting thereof is required or permitted by law, the Certificate of Incorporation, or these By-Laws, such action may be taken without a meeting, without prior notice and without a vote if a consent in writing, setting forth the action so taken, shall be signed by the holders of all the outstanding shares entitled to vote thereon.
ARTICLE III - BOARD OF DIRECTORS
Section 3.1. General Powers. The property, business and affairs of the Corporation shall be managed by the Board of Directors. The Board of Directors may exercise all such powers of the Corporation and have such authority and do all such lawful acts and things as are permitted by law, the Certificate of Incorporation or these By-Laws.
Section 3.2. Number of Directors. The Board of Directors of the Corporation shall consist of at least three and not more than seven members, provided, however, that when all of the issued and outstanding shares of the Corporation's capital stock are owned by less than three shareholders, the number of directors may be less than three but not less than the number of shareholders. Subject to the foregoing limitations, the number of directors constituting the entire Board of Directors, to serve until the next annual meeting of shareholders, shall be such number as shall be designated by resolution of the Board of
Directors adopted prior to the annual meeting of shareholders. In the absence of such resolution, the number of directors to be elected at such annual meeting shall be the number last fixed by the directors.
Section 3.3. Qualification. Directors must be at least eighteen years of age, but need not be shareholders of the Corporation.
Section 3.4. Election. Except as otherwise provided by law, the Certificate of Incorporation, or these By-Laws, after the first meeting of the Corporation at which directors are elected, directors of the Corporation shall be elected in each year at the annual meeting of shareholders, or at a special meeting in lieu of the annual meeting called for such purpose, by a plurality of votes cast at such meeting. The voting on directors at any such meeting need not be written ballot.
Section 3.5. Term. Each director shall hold office until the expiration of the term for which he is elected and until his successor has been elected and qualified, or until his prior resignation or removal.
Section 3.6. Resignation and Removal. Any director may resign at any time upon written notice to the Board of Directors, the President or the Secretary. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any or all of the directors may be removed for cause by vote of the shareholders or by action of the Board of Directors. Directors may be removed without cause only by vote of the shareholders.
Section 3.7. Vacancies. Vacancies in the Board of Directors (unless the vacancy be caused by the removal of a director without cause) and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. A vacancy caused by the removal of a director without cause shall be filled by a vote of the holders of a majority of the shares entitled to vote for the election of directors.
If one or more directors shall resign from the Board of Directors effective at a future date, a majority of the directors then in office, including those who have so resigned at a future date, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect and the vacancy to be filled when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section for the filling of other vacancies.
Each director chosen to fill a vacancy on the Board of Directors shall hold office until the next annual election of directors and until his successor shall be elected and qualified.
Section 3.8. Quorum and Voting. Unless the Certificate of Incorporation provides otherwise, at all meetings of the Board of Directors a majority of the total number of directors (but not less than one-third of the total number of directors) shall be present to constitute a quorum for the transaction of business. A director interested in a contract or transaction may be counted in determining the presence of a quorum at a meeting of the Board of Directors which authorizes the contract or transaction. In the absence of a quorum, a majority of the directors present may adjourn the meeting until a quorum shall be present.
Unless the Certificate of Incorporation provides otherwise, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting for all purposes.
The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Certificate of Incorporation or these By-Laws shall require a vote of a greater number.
Section 3.9. Regulations. The Board of Directors may adopt such rules and regulations for the conduct of the business and management of the Corporation, not inconsistent with law or the Certificate of Incorporation or these By-Laws, as the Board of Directors may deem proper. The Board of Directors may hold its meetings and cause the books and records of the Corporation to be kept at such place or places within or without the State of Delaware as the Board of Directors may from time to time determine. The Corporation shall keep at its registered office in the State of Delaware a record containing the names and addresses of all shareholders of the Corporation, the number and class of shares held by each shareholder, and the dates when they respectively became the owners of record. A member of the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care by the Board of Directors or any committee of the Board of Directors or in relying in good faith upon other records of the Corporation.
Section 3.10. Annual Meeting of Board of Directors. An annual meeting of the Board of Directors shall be called and held for the purpose of organization, election of officers and transaction of any other business. If such meeting is held promptly after and at the place specified for the annual meeting of shareholders, no notice of the annual meeting of the Board of Directors need by given. Otherwise such annual meeting shall be held at such time (not more than thirty days after the annual meeting of shareholders) and place as may be specified in a notice of the meeting.
Section 3.11. Regular Meetings. Regular meetings of the Board of Directors shall be held at the time and place, within or without the State of Delaware, as shall from time to time be determined by the Board of Directors. After there has been such determination and notice thereof has been given to each member of the Board of Directors, no further notice shall be required for any such regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting.
Section 3.12. Special Meetings. Special meetings of the Board of Directors may, unless otherwise prescribed by law, be called from time to time by the Chairman of the Board or the President, and shall be called by the President or Secretary upon the written request of a majority of the whole Board of Directors directed to the President or the Secretary. Except as provided below, notice of any special meeting of the Board of Directors, stating the time when and place where such special meeting shall be held, shall be given to each director.
Section 3.13. Notice of Meetings. Notice of any meeting of the Board
of Directors shall be deemed to be duly given to a director (i) if mailed to
such director, addressed to him at his address as it appears upon the books of
the Corporation, or at the address last made known in writing to the Corporation
by such director as the address to which such notices are to be sent, at least
two days before the day on which such special meeting is to be held, or (ii) if
sent to him at such address by telegram, mailgram, cable, overnight courier,
e.g., Federal Express, radio or wireless not later than the day before the day
on which such meeting is to be held, or (iii) if delivered to him personally or
orally, by telephone or otherwise, not later than the day before the day on
which such special meeting is to be held. Each notice shall state the time and
place of the meeting.
Section 3.14. Committees of Directors. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of three or more of the directors of the Corporation.
Except as herein provided, vacancies in membership of any committee shall be filled by the vote of a majority of the whole Board of Directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Members of a committee shall hold office for such period as may be fixed by a resolution adopted by a majority of the whole Board of Directors, subject, however, to removal at any time, with or without cause, by the vote of a majority of the whole Board of Directors.
Section 3.15. Powers and Duties of Committees. Any committee, to the extent provided in the resolution or resolutions creating such committee, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. No such committee shall have any power or authority with regard to (a) any action that requires shareholder approval, (b) filling of vacancies in the Board of Directors or in any committee, (c) fixing of compensation of the directors for serving on the Board or on any committee, (d) amending or repealing the By-Laws of the Corporation, or adopting new By-Laws, and (e) amending or repealing any resolution, which by its terms is not amendable or repealable. The Board of Directors, by specific resolution, may grant to such committee the power and authority to declare a dividend or authorize the issuance of stock.
Each committee may adopt its own rules of procedure and may meet at stated times or on such notice as such committee may determine. Except as otherwise permitted by these By-Laws, each committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required.
Section 3.16. Compensation of Directors. The Board of Directors may from time to time, in its discretion, fix the amounts which shall be payable to directors and to members of any committee of the Board of Directors for attendance at the meetings of the Board of Directors or of such committee and for services rendered to the Corporation.
Section 3.17. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or such committee.
ARTICLE IV - OFFICERS
Section 4.1 Principal Officers. The principal officers of the Corporation shall be elected by the Board of Directors and shall include a President, a Secretary and a Treasurer and may, at the discretion of the Board of Directors, also include one or more Vice Presidents, and a Controller. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, one person may hold the offices and perform the duties of any two or more of said principal offices except the offices and duties of President and Vice President or of the President and Secretary.
Section 4.1 Election of Principal Officers; Term of Office. The principal officers of the Corporation shall be elected annually by the Board of Directors at each annual meeting of the Board of Directors. Failure to elect any principal officer annually shall not result in or constitute grounds for the dissolution of the Corporation.
If the Board of Directors shall fail to fill any principal office at an annual meeting, or if any vacancy in any principal office shall occur, or if any principal office shall be newly created, such principal office may be filled at any regular or special meeting of the Board of Directors.
Each principal officer shall hold office for the term for which he is elected and until his successor is duly elected or appointed, and qualified, or until his earlier death, resignation or removal.
Section 4.3. Subordinate Officers, Agents and Employees. In addition to the principal officers, the Corporation may have one or more Assistant Treasurers, Assistant Secretaries and such other subordinate officers, agents and employees as the Board of Directors may deem advisable, each of whom shall hold office for such period and have such authority and perform such duties as the Board of Directors, the Chairman of the Board, the President, or any officer designated by the Board of Directors, may from time to time determine. The Board of Directors at any time may appoint and remove, or may delegate to any principal officer the power to appoint and remove, any subordinate officer,
agent or employee of the Corporation.
Section 4.4. Delegation of Duties of Officers. The Board of Directors may delegate the duties and powers of any officer of the Corporation to any other officer or to any director for a specified period of time for any reason that the Board of Directors may deem sufficient.
Section 4.5. Removal of Officers. Any officer of the Corporation may be removed with or without cause by resolution adopted by a majority of the directors then in office at any regular or special meeting of the Board of Directors or by a written consent signed by all of the directors then in office.
Section 4.6. Resignations. Any officer may resign at any time by giving written notice of resignation to the Board of Directors, to the President or to the Secretary. Any such resignation shall take effect upon receipt of such notice or at any later time specified in such notice. Unless otherwise specified in the notice, the acceptance of a resignation shall not be necessary to make the resignation effective.
Section 4.7. President. The President shall be the chief executive of the Corporation and shall be responsible for implementing and executing the plans and policies of the Corporation, as established from time to time by the Board of Directors. In the absence of the Board's appointment of a different person to serve as chief operating officer, the President shall also serve the Corporation in such capacity, and shall be responsible for executing the plans and policies of the Corporation, as established from time to time by the Board of Directors. The President shall have all powers and duties usually incident to the office of the President except as specifically limited by a resolution of the Board of Directors. The President shall have such other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors.
Section 4.8. Vice President. In the absence or disability of the President or if the office of the President be vacant, the Vice Presidents in the order determined by the Board of Directors, or if no such determination has been made in the order of their seniority, shall perform the duties and exercise the powers of the President, subject to the right of the Board of Directors at any time to extend or confine such powers and duties or to assign them to others. Any Vice President may have such additional designation in his title as the Board of Directors may determine. The Vice Presidents shall generally assist the President in such manner as the President shall direct. Each Vice President shall have such other powers and perform such other duties as may be assigned to him from time to time
by the Board of Directors or the President.
Section 4.9. Secretary. The Secretary shall act as Secretary of all meetings of shareholders and of the Board of Directors at which he is present, shall record all the proceedings of all such meetings in a book to be kept for that purpose, shall have supervision over the giving and service of notices of the Corporation, and shall have supervision over the care and custody of the corporate records and the corporate seal of the Corporation. The Secretary shall be empowered to affix the corporate seal to documents, the execution of which on behalf of the Corporation under its seal, is duly authorized, and when so affixed may attest the same. The Secretary shall have all powers and duties usually incident to the office of Secretary, except as specifically limited by a resolution of the Board of Directors or the President.
Section 4.10. Treasurer. The Treasurer shall have general supervision over the care and custody of the funds and over the receipts and disbursements of the Corporation and shall cause the funds of the Corporation to be deposited in the name of the Corporation in such banks or other depositories as the Board of Directors may designate. The Treasurer shall have supervision over the care and safekeeping of the securities of the Corporation. The Treasurer shall have all powers and duties usually incident to the office of the Treasurer except as specifically limited by a resolution of the Board of Directors. The Treasurer shall have other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors or the President.
Section 4.11. Controller. The Controller shall be the chief accounting officer of the Corporation and shall have supervision over the maintenance and custody of the accounting operations of the Corporation, including the keeping of accurate accounts of all receipts and disbursements and all other financial transactions. The Controller shall have all powers and duties usually incident to the office of the Controller except as specifically limited by a resolution of the Board of Directors. The Controller shall have other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors or the President.
Section 4.12. Bond. The Board of Directors shall have power, to the extent permitted by law, to require any officer, agent or employee of the Corporation to give bond for the faithful discharge of his duties in such form and with such surety or sureties as the Board of Directors may determine.
ARTICLE V - CAPITAL SHARES
Section 5.1. Issuance of Certificates for Shares. Each shareholder of the Corporation shall be entitled to a certificate or certificates in such form as is prescribed by law and as shall be approved by the Board of Directors, certifying the number of capital shares of the Corporation owned by such shareholder.
Section 5.2. Signatures on Share Certificates. Certificates for capital shares of the Corporation shall be signed by, or in the name of the Corporation by, the Chairman of the Board, the President or a Vice President and by the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer and shall bear the corporate seal of the Corporation or a printed or engraved facsimile thereof.
If any such certificates are countersigned by a transfer agent other than the Corporation or its employee, or by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such signer were such officer, transfer agent or registrar at the date of issue.
Section 5.3. Stock Ledger. A record of all certificates for capital shares issued by the Corporation shall be kept by the Secretary or any other officer, employee or agent designated by the Board of Directors. Such record shall show the name and address of the person, firm or corporation in which certificates for capital shares are registered, the number of shares represented by each such certificate, the date of each such certificate, and in case of certificates which have been cancelled, the date of cancellation thereof.
The Corporation shall be entitled to treat the holder of record of capital shares as shown on the stock ledger as the owner thereof and as the person entitled to receive dividends thereon, to vote such shares and to receive notice of meetings, and for all other purposes. The Corporation shall not be bound to recognize any equitable or other claim to or interest in any capital share on the part of any other person whether or not the Corporation shall have express or other notice thereof.
Section 5.4. Regulations Relating to Transfer. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with law, the Certificate of Incorporation or these By-Laws, concerning issuance, transfer and registration of certificates for capital shares of the Corporation. The Board of Directors may appoint, or authorize any principal officer to appoint, one or more transfer clerks or one or more
transfer agents and one or more registrars and may require all certificates for capital shares to bear the signature or signatures of any of them.
Section 5.5. Transfers. Transfer of capital shares shall be made on the books of the Corporation only upon delivery to the Corporation or its transfer agent of (i) a written direction of the registered holder named in the certificate or such holder's attorney lawfully constituted in writing, (ii) the certificate for the capital shares being transferred, and (iii) a written assignment of the capital shares evidenced thereby.
Section 5.6. Cancellation. Each certificate for capital shares surrendered to the Corporation for exchange or transfer shall be cancelled and no new certificate or certificates shall be issued in exchange for any existing certificate (other than pursuant to Section 5.7) until such existing certificate shall have been cancelled.
Section 5.7. Lost, Destroyed, Stolen, and Mutilated Certificates. In the event that any certificate for capital shares of the Corporation shall be mutilated the Corporation shall issue a new certificate in place of such mutilated certificate. In case any such certificate shall be lost, stolen, or destroyed the Corporation may, in the discretion of the Board of Directors or a committee designated thereby with power so to act, issue a new certificate for capital shares in the place of any such lost, stolen or destroyed certificate. The applicant for any substituted certificate or certificates shall surrender any mutilated certificate or, in the case of any lost, stolen or destroyed certificate, furnish satisfactory proof of such loss, theft or destruction of such certificate and of the ownership thereof. The Board of Directors or such committee may, in its discretion, require the owner of a lost, stolen or destroyed certificate, or his representatives, to furnish to the Corporation a bond with an acceptable surety or sureties and in such sum as will be sufficient to indemnify the Corporation against any claim that may be made against it on account of the lost, stolen or destroyed certificate or the issuance of such new certificate. A new certificate may be issued without requiring a bond when, in the judgment of the Board of Directors, it is proper to do so.
Section 5.8. Fixing of Record Dates. (a) The Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of any meeting of shareholders, nor more than sixty days prior to any other action, for the purpose of determining shareholders entitled to notice of or to vote at such meeting of shareholders or any adjournment thereof, or to express consent or dissent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of shares or for the purpose of any other lawful action.
(b) If no record date is fixed by the Board of Directors:
(i) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the date next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;
(ii) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution or consents to the action relating thereto.
(c) A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to the provisions of the certificate of incorporation and to applicable law, dividends on the outstanding shares of the Corporation may be declared in such amounts and at such time or times as the Board of Directors may determine.Before payment of any dividend, there may be set aside out of the net profits of the Corporation available for dividends such sum or sums as the Board of Directors from time to time in its absolute discretion deems proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation, and the Board of Directors may modify or abolish any such reserve.
ARTICLE VII - INDEMNIFICATION
Section 7.1. Indemnification of Directors, Officers and Employees. The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. For purposes of this By-law, the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the
request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifyable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation.
Section 7.2 Advance Payments. Expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of such director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article VII. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 7.3 Non-Exclusivity. The indemnification provided by this Article VII shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under any By-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person.
Section 7.4 Reliance on Provisions. Each person who shall act as a director, officer, employee or agent of the Corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided by this Article VII.
ARTICLE VIII - MISCELLANEOUS PROVISIONS
Section 8.1. Corporate Seal. The Corporation's seal shall be inscribed with the name of the Corporation, the year of its incorporation, and the words "Delaware." The seal may be used by causing it or a facsimile to be impressed or reproduced on a document or instrument, or affixed to a document or instrument.
Section 8.2. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January of each year.
Section 8.3. Waiver of Notice. Whenever any notice is required to be given under any provision of law, the Certificate of Incorporation, or these By-Laws, a written waiver thereof, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation.
Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
Section 8.4. Execution of Instruments, Contracts, etc. All checks, drafts, bills of exchange, notes or other obligations or orders for the payment of money shall be signed in the name of the Corporation by such officer or officers or person or persons, as the Board of Directors may from time to time designate.
Except as otherwise provided by law, the Board of Directors, any committee given specific authority in the premises by the Board of Directors, or any committee given authority to exercise generally the powers of the Board of Directors during the intervals between meetings of the Board of Directors, may authorize any officer, employee or agent, in the name of and on behalf of the Corporation, to enter into or execute and deliver deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.
All applications, written instruments and papers required by any department of the United States Government or by any state, county, municipal or other governmental authority, may be executed in the name of the Corporation by any principal officer or subordinate officer of the Corporation, or, to the extent designated for such purpose from time to time by the Board of Directors, by an employee or agent of the Corporation. Such designation may contain the power to substitute, in the discretion of the person named, one or more other persons.
ARTICLE IX - AMENDMENTS
Section 9.1. By Shareholders. These By-Laws may be altered, amended, repealed or added to, or new By-Laws may be adopted by the affirmative vote of the
holders of not less than a majority of the outstanding shares entitled to vote for the election of any director at an annual meeting or at a special meeting called for that purpose, provided, however, that a written notice shall have been sent to each shareholder of record entitled to vote at such meeting, in conformity with the requisites of Section 2.5 hereof, which notice shall state the alterations, amendments, additions or changes which are proposed to be made in such By-Laws.
Section 9.2. By Directors. To the extent permitted by the Certificate of Incorporation, these By-Laws may be amended, added to, altered or repealed, or new By-laws may be adopted at any regular or special meeting of the Board of Directors by a resolution adopted by affirmative vote of a majority of the whole Board of Directors; provided, however, that:
(a) any By-law adopted by the Board of Directors may be altered, amended or repealed by majority vote of the shareholders entitled to vote for the election of directors; and
(b) if any By-law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the by-law so adopted, amended or repealed, together with a concise statement of the changes made.
Exhibit 4.1
NUMBER SHARES
INTERACTIVE TECHNOLOGIES.COM, LTD.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
C O M M O N S T O C K
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 45837D 10 5
THIS CERTIFIES THAT:
is owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE EACH OF
INTERACTIVE TECHNOLOGIES.COM LTD.
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 Delaware, and to the Certificate of Incorporation and By-laws 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: COUNTERSIGNED:
OLDE MONMOUTH STOCK TRANSFER CO., INC.
77 MEMORIAL PARKWAY, ATLANTIC HIGHLANDS, NJ 07716
TRANSFER AGENT
BY:
AUTHORIZED SIGNATURE
(Seal)
SECRETARY CHAIRMAN
|
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 UNIF GIFT MIN ACT -______Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common 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
_________________________________________________________________________ Shares of the stock represented by the within Certificate, and do hereby irrevocably 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_____________
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF ANY, OF THE BOARD TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE AND CHANGE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR SERIES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT NAMED ON THIS CERTIFICATE.
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE 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.
Exhibit 4.2
INTERACTIVE TECHNOLOGIES.COM, LTD.
LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is to further the interests of Interactive Technologies.com, Ltd., a Delaware corporation (the "Company"), its subsidiaries and its shareholders by providing incentives in the form of grants of stock options, stock appreciation rights and restricted stock to key employees and other persons who contribute materially to the success and profitability of the Company. The grants will recognize and reward outstanding individual performances and contributions and will give such persons a proprietary interest in the Company, thus enhancing their personal interest in the Company's continued success and progress. This program will also assist the Company and its subsidiaries in attracting and retaining key persons.
2. Definitions. The following definitions shall apply to this Plan:
(a) "Award" means, individually or collectively, a grant under the Plan of a Nonqualified Stock Option, an Incentive Stock Option, a Stock Appreciation Right, or Restricted Stock.
(b) "Board" means the board of directors of the Company.
(c) "Change of Control" occurs when (i) any person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, who is not currently a ten percent shareholder of the Company, becomes the beneficial owner of forty percent or more of the total number of shares entitled to vote in the election of directors of the Board, (ii) the Company is merged into any other company or substantially all of its assets are acquired by any other company, or (iii) three or more directors nominated by the Board to serve as a director, each having agreed to serve in such capacity, fail to be elected in a contested election of directors.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Stock Incentive Committee appointed by the Board, consisting solely of not less than two non-employee directors who have been appointed to administer the Plan.
(f) "Common Stock" means the Common Stock, par value $.001 per share of the Company, or such other class of shares or securities as to which the Plan may be applicable pursuant to Section 10 herein.
(g) "Company" means Interactive Technologies.com, Ltd.
(h) "Date of Grant" means the date on which the Option, Restricted Stock or SAR, whichever is applicable, is granted.
(i) "Eligible Person" means any person who performs or has in the past performed services for the Company or any direct or indirect partially or wholly owned subsidiary thereof, whether as a director, officer, employee, consultant or other independent contractor, and any person who performs services relating to the Company in his or her capacity as an employee or independent contractor of a corporation or other entity that provides services for the Company.
(j) "Employee" means any person employed on an hourly or salaried basis by the Company or any parent or Subsidiary of the Company that now exists or hereafter is organized or acquired by or acquires the Company.
(k) "Fair Market Value" means the fair market value of the Common Stock. If the Common Stock is not publicly traded on the date as of which fair market value is being determined, the Board shall determine the fair market value of the Shares, using such factors as the Board considers relevant, such as the price at which recent sales have been made, the book value of the Common Stock, and the Company's current and projected earnings. If the Common Stock is publicly traded on the date as of which fair market value is being determined, the fair market value is the mean between the high and low sales prices of the Common Stock as reported by The NASDAQ Stock Market on that date or, if the Common Stock is listed on a stock exchange, the mean between the high and low sales prices of the stock on that date, as reported in The Wall Street Journal. If trading in the stock or a price quotation does not occur on the date as of which fair market value is being determined, the next preceding date on which the stock was traded or a price was quoted will determine the fair market value.
(l) "Incentive Stock Option" means a stock option granted pursuant to either this Plan or any other plan of the Company that satisfies the requirements of Section 422 of the Code and that entitles the Recipient to purchase stock of the Company or in a corporation that at the time of grant of the option was a parent or subsidiary of the Company or a predecessor corporation of any such corporation.
(m) "Non-Employee Director" means a director who:
(i) is not currently an officer of the Company or a parent or subsidiary of the Company, or otherwise currently employed by the Company or a parent or subsidiary of the Company;
(ii) does not receive compensation, either directly or indirectly, for services rendered as a consultant or in any capacity other than as a director, except for an amount which does not exceed the dollar amount for which disclosure would be required pursuant to any provision of Regulations S-K promulgated by the Commission;
(iii) does not possess an interest in any other transaction for which disclosure would be required by any provision of said Regulation S-K; and
(iv) is not engaged in a business relationship for which disclosure would be required by any provision of said Regulation S-K.
(n) "Nonqualified Stock Option" means a stock option granted pursuant to the Plan that is not an Incentive Stock Option and that entitles the Recipient to purchase stock of the Company or in a corporation that at the time of grant of the option was a parent or subsidiary of the Company or a predecessor corporation of any such corporation.
(o) "Option" means an Incentive Stock Option or a Nonqualified Stock Option granted pursuant to the Plan.
(p) "Option Agreement" means a written agreement entered into between the Company and a Recipient which sets out the terms and restrictions of an Option Award granted to the Recipient.
(q) "Option Shareholder" shall mean an Employee who has exercised his or her Option.
(r) "Option Shares" means Shares issued upon exercise of an Option.
(s) "Period of Restriction" means the period beginning on the Date of Grant of a Restricted Stock Award and ending on the date on which the Restricted Stock Shares subject to such Award are released from all restrictions imposed upon such Shares.
(t) "Plan" means this Long-Term Incentive Plan.
(u) "Recipient" means an individual who receives an Award.
(v) "Restricted Stock" means an Award granted to a Recipient pursuant to
Section 8 hereof.
(w) "Restricted Stock Agreement" means a written agreement entered into between the Company and a Recipient which sets out the terms and restrictions of a Restricted Stock Award granted to the Recipient.
(x) "SAR Agreement" means a written agreement entered into between the Company and a Recipient which sets out the terms and restrictions of a SAR Award granted to the Recipient.
(y) "Share" means a share of the Common Stock, as adjusted in accordance with Section 10 of the Plan.
(z) "Stock Appreciation Right" or "SAR" means an Award, designated as a SAR, granted to a Recipient pursuant to Section 7 hereof.
(aa) "Subsidiary" means any corporation 40 percent or more of the voting securities of which are owned directly or indirectly by the Company at any time during the existence of this Plan.
3. Administration. This Plan will be administered by the Committee. The Committee has the exclusive power to select the Recipients of Awards pursuant to this Plan, to establish the terms of the Awards granted to each Recipient, and to make all other determinations necessary or advisable under the Plan. The Committee has the sole and absolute discretion to determine whether the performance of an Eligible Person warrants an Award under this Plan, and to determine the size and type of the Award. The Committee has full and exclusive power to construe and interpret this Plan, to prescribe, amend, and rescind rules and regulations relating to this Plan, and to take all actions necessary or advisable for the Plan's administration. The Committee, in the exercise of its powers, may correct any defect or supply any omission, or reconcile any inconsistency in the Plan, or in any Agreement, in the manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. In exercising this power, the Committee may retain counsel at the expense of the Company. The Committee shall also have the power to determine the duration and purposes of leaves of absence which may be granted to a Recipient without constituting a termination of the Recipient's employment for purposes of the Plan. Any determinations made by the Committee will be final and binding on all persons. A member of the Committee will not be liable for performing any act or making any determination in good faith.
The Committee, in its discretion, may delegate to one or more officers of
the Company all or part of the Committee's authority and duties with respect to
Eligible Persons who are not subject to the reporting and other provisions of
Section 16 of the Securities Exchange Act of 1934, as in effect from time to
time (the "Exchange Act"). In the event of such delegation, and as to matters
encompassed by the delegation, references in the Plan to the Committee shall be
interpreted as a reference to the Committee's delegate or delegates. The
Committee may revoke or amend the terms of a delegation at any time, but such
action shall not invalidate any prior actions of the Committee's delegate or
delegates that were consistent with the terms of the Plan.
In addition to, and not in substitution or replacement of, the powers and authority conferred upon the Committee pursuant to this Plan, the Board shall also be entitled to make Awards to any Eligible Person, and when it makes such awards, all of the provisions of this Plan which pertain to the Committee shall be construed as though the word "Board" appeared in place of the word "Committee," and the Board shall have, and shall be entitled to exercise, all of the powers and authority conferred upon the Committee when making, amending, modifying canceling, settling or rescinding any of such Awards.
4. Shares Subject to Plan. Subject to the provisions of Section 10 of the Plan, the maximum aggregate number of Shares that may be subject to Awards under the Plan shall be 18000,000. If an Award should expire or become unexercisable for any reason without having been exercised, the unpurchased Shares that were subject to such Award shall, unless the Plan has then terminated, be available for other Awards under the Plan.
5. Eligibility. Any Eligible Person that the Committee in its sole discretion designates is eligible to receive an Award under this Plan. The Committee's grant of an Award to a Recipient in any year does not require the Committee to grant an Award to such Recipient in any other year. Furthermore, the Committee may grant different Awards to different Recipients and has full discretion to choose whether to grant Awards to any Eligible Person. The Committee may
consider such factors as it deems pertinent in selecting Recipients and in
determining the types and sizes of their Awards, including, without limitation,
(i) the financial condition of the Company or its Subsidiaries; (ii) expected
profits for the current or future years; (iii) the contributions of a
prospective Recipient to the profitability and success of the Company or its
Subsidiaries; and (iv) the adequacy of the prospective Recipient's other
compensation. Recipients may include persons to whom stock, stock options, stock
appreciation rights, or other benefits previously were granted under this or
another plan of the Company or any Subsidiary, whether or not the previously
granted benefits have been fully exercised or vested. A Recipient's right, if
any, to continue to serve the Company and its Subsidiaries as an officer,
Employee, or otherwise will not be enlarged or otherwise affected by his
designation as a Recipient under this Plan, and such designation will not in any
way restrict the right of the Company or any Subsidiary, as the case may be, to
terminate at any time the employment or affiliation of any participant.
6. Options. Each Option granted to a Recipient under the Plan shall contain such provisions as the Committee at the Date of Grant shall deem appropriate. Each Option granted to a Recipient will satisfy the following requirements:
(a) Written Agreement. Each Option granted to a Recipient will be evidenced by an Option Agreement. The terms of the Option Agreement need not be identical for different Recipients. The Option Agreement shall include a description of the substance of each of the requirements in this Section 6 with respect to that particular Option.
(b) Number of Shares. Each Option Agreement shall specify the number of Shares that may be purchased by exercise of the Option.
(c) Exercise Price. Except as provided in Section 6(l), the exercise price of each Share subject to an Incentive Stock Option shall equal the exercise price designated by the Committee on the Date of Grant, but shall not be less than the Fair Market Value of the Share on the Incentive Stock Option's Date of Grant. The exercise price of each Share subject to a Nonqualified Stock Option shall equal the exercise price designated by the Committee on the Date of Grant.
(d) Duration of Option. Except as provided in Section 6(l), an Incentive Stock Option granted to an Employee shall expire on the tenth anniversary of its Date of Grant or, at such earlier date as is set by the Committee in establishing the terms of the Incentive Stock Option at grant. Except as provided in Section 6(l), a Nonqualified Stock Option granted to an Employee shall expire on the tenth anniversary of its Date of Grant or, at such earlier or later date as is set by the Committee in establishing the terms of the Nonqualified Stock Option at grant. If the Recipient's employment with the Company terminates before the expiration date of an Option granted to the Recipient, the Option shall expire on the earlier of the date stated in this subsection or the date stated in following subsections of this Section. Furthermore, expiration of an Option may be accelerated under subsection (j) below.
(e) Vesting of Option. Each Option Agreement shall specify the vesting schedule applicable to the Option. The Committee, in its sole and absolute discretion, may accelerate the vesting of any Option at any time.
(f) Death. In the case of the death of a Recipient, an Incentive Stock Option granted to the Recipient shall expire on the one-year anniversary of the Recipient's death, or if earlier, the date specified in subsection (d) above. During the one-year period following the Recipient's death, the Incentive Stock Option may be exercised to the extent it could have been exercised at the time the Recipient died, subject to any adjustment under Section 10 herein. In the case of the death of a Recipient, a Nonqualified Stock Option granted to the Recipient shall expire on the one-year anniversary of the Recipient's death, or if earlier, the date specified in subsection (d) above, unless the Committee sets an earlier or later expiration date in establishing the terms of the Nonqualified Stock Option at grant or a later expiration date subsequent to the Date of Grant but prior to the one-year anniversary of the Recipient's death. During the period beginning on the date of the Recipient's death and ending on the date the Nonqualified Stock Option expires, the Nonqualified Stock Option may be exercised to the extent it could have been exercised at the time the Recipient died, subject to any adjustment under Section 10 herein.
(g) Disability. In the case of the total and permanent disability of a Recipient and a resulting termination of employment or affiliation with the Company, an Incentive Stock Option granted to the Recipient shall expire on the one-year anniversary of the Recipient's last day of employment, or, if earlier, the date specified in subsection (d) above. During the one-year period following the Recipient's termination of employment or affiliation by reason of disability, the Incentive Stock Option may be exercised as to the number of Shares for which it could have been exercised at the time the Recipient became disabled, subject to any adjustments under Section 10 herein. In the case of the total and permanent disability of a Recipient and a resulting termination of employment or affiliation with the Company, a Nonqualified Stock Option granted to the Recipient shall expire on the one-year anniversary of the Recipient's last day of employment, or, if earlier, the date specified in subsection (d) above, unless the Committee sets an earlier or later expiration date in establishing the terms of the Nonqualified Stock Option at grant or a later expiration date subsequent to the Date of Grant but prior to the one-year anniversary of the Recipient's last day of employment or affiliation with the Company. During the period beginning on the date of the Recipient's termination of employment or affiliation by reason of disability and ending on the date the Nonqualified Stock Option expires, the Nonqualified Stock Option may be exercised as to the number of Shares for which it could have been exercised at the time the Recipient became disabled, subject to any adjustments under Section 10 herein.
(h) Retirement. If the Recipient's employment with the Company terminates by reason of normal retirement under the Company's normal retirement policies, an Incentive Stock Option granted to the Recipient will expire 90 days after the last day of employment, or, if earlier, on the date specified in subsection (d) above. During the 90-day period following the Recipient's normal retirement, the Incentive Stock Option may be exercised as to the number of Shares for which it could have been exercised on the retirement date, subject to any adjustment under Section 10 herein. If the Recipient's employment with the Company terminates by reason of normal retirement under the Company's normal retirement policies, a Nonqualified Stock Option granted to the Recipient will expire 90 days after the last day of employment, or, if earlier, on the date specified in subsection (d) above, unless the Committee sets an earlier or later expiration date in establishing the terms of the Nonqualified Stock Option at grant or a later expiration date subsequent to the Date of Grant but prior to the end of the 90-day period following the
Recipient's normal retirement. During the period beginning on the date of the Recipient's normal retirement and ending on the date the Nonqualified Stock Option expires, the Nonqualified Stock Option may be exercised as to the number of Shares for which it could have been exercised on the retirement date, subject to any adjustment under Section 10 herein.
(i) Termination of Service. If the Recipient ceases employment or affiliation with the Company for any reason other than death, disability, or retirement (as described above), an Option granted to the Recipient shall lapse immediately following the last day that the Recipient is employed by or affiliated with the Company. However, the Committee may, in its sole discretion, either at grant of the Option or at the time the Recipient terminates employment, delay the expiration date of the Option to a date after termination of employment; provided, however, that the expiration date of an Incentive Stock Option may not be delayed more than 90 days following the termination of the Recipient's employment or affiliation with the Company. During any such delay of the expiration date, the Option may be exercised only for the number of Shares for which it could have been exercised on such termination date, subject to any adjustment under Section 10 herein. Notwithstanding any provisions set forth herein or in the Plan, if the Recipient shall (i) commit any act of malfeasance or wrongdoing affecting the Company or any parent or subsidiary, (ii) breach any covenant not to compete or employment agreement with the Company or any parent or Subsidiary, or (iii) engage in conduct that would warrant the Recipient's discharge for cause, any unexercised part of the Option shall lapse immediately upon the earlier of the occurrence of such event or the last day the Recipient is employed by the Company.
(j) Change of Control. If a Change of Control occurs, the Board may vote to immediately terminate all Options outstanding under the Plan as of the date of the Change of Control or may vote to accelerate the expiration of the Options to the tenth day after the effective date of the Change of Control. If the Board votes to immediately terminate the Options, it shall make a cash payment to the Recipient equal to the difference between the Exercise Price and the Fair Market Value of the Shares that would have been subject to the terminated Option on the date of the Change of Control.
(k) Conditions Required for Exercise. Options granted to Recipients under the Plan shall be exercisable only to the extent they are vested according to the terms of the Option Agreement. Furthermore, Options granted to Employees under the Plan shall be exercisable only if the issuance of Shares pursuant to the exercise would be in compliance with applicable securities laws, as contemplated by Section 9 of the Plan. Each Agreement shall specify any additional conditions required for the exercise of the Option.
(l) Ten Percent Shareholders. An Incentive Stock Option granted to an individual who, on the Date of Grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of either the Company or any parent or Subsidiary, shall be granted at an exercise price of 110 percent of Fair Market Value on the Date of Grant and shall be exercisable only during the five-year period immediately following the Date of Grant. In calculating stock ownership of any person, the attribution rules of Code Section 424(d) will apply. Furthermore, in calculating stock ownership, any stock that the individual may purchase under outstanding options will not be considered.
(m) Maximum Option Grants. The aggregate Fair Market Value, determined on the Date of Grant, of stock in the Company with respect to which any Incentive Stock Options under the Plan and all other plans of the Company or its Subsidiaries (within the meaning of Section 422(b) of the Code) may become exercisable by any individual for the first time in any calendar year shall not exceed $100,000.
(n) Method of Exercise. An Option granted under this Plan shall be deemed
exercised when the person entitled to exercise the Option (i) delivers written
notice to the President of the Company (or his delegate, in his absence) of the
decision to exercise, (ii) concurrently tenders to the Company full payment for
the Shares to be purchased pursuant to the exercise, and (iii) complies with
such other reasonable requirements as the Committee establishes pursuant to
Section 9 of the Plan. Payment for Shares with respect to which an Option is
exercised may be made in cash, or by certified check or wholly or partially in
the form of Common Stock having a Fair Market Value equal to the exercise price.
No person will have the rights of a shareholder with respect to Shares subject
to an Option granted under this Plan until a certificate or certificates for the
Shares have been delivered to him. A partial exercise of an Option will not
affect the holder's right to exercise the Option from time to time in accordance
with this Plan as to the remaining Shares subject to the Option.
(o) Loan from Company to Exercise Option. The Committee may, in its discretion and subject to the requirements of applicable law, recommend to the Company that it lend the Recipient the funds needed by the Recipient to exercise an Option. The Recipient shall make application to the Company for the loan, completing the forms and providing the information required by the Company. The loan shall be secured by such collateral as the Company may require, subject to its underwriting requirements and the requirements of applicable law. The Recipient shall execute a Promissory Note and any other documents deemed necessary by the Committee.
(p) Designation of Beneficiary. Each Recipient shall designate, in the Option Agreement he executes, a beneficiary to receive Options awarded hereunder in the event of his death prior to full exercise of such Options; provided, that if no such beneficiary is designated or if the beneficiary so designated does not survive the Recipient, the estate of such Recipient shall be deemed to be his beneficiary. Recipients may, by written notice to the Committee, change the beneficiary designated in any outstanding Option Agreements.
(q) Nontransferability of Option. An Option granted under this Plan is not transferable except by will or the laws of descent and distribution. During the lifetime of the Recipient, all rights of the Option are exercisable only by the Recipient.
7. Stock Appreciation Rights. Subject to the provisions of the Plan, the Committee may award SARs in tandem with an Option (at or after the grant of the Option), or alone and unrelated to an Option. Each SAR granted to an Employee under the Plan shall contain such provisions as the Committee at the Date of Grant shall deem appropriate. Each SAR granted to an Employee will satisfy the following requirements:
(a) Written Agreement. Each SAR granted to an Employee will be evidenced by a SAR Agreement. The terms of the SAR Agreement need not be identical for different
Recipients. The SAR Agreement shall include a description of the substance of each of the requirements in this Section with respect to that particular SAR.
(b) Number of SARs. Each SAR Agreement shall specify the number of SARs granted to the Recipient.
(c) Exercise Price. The exercise price of the SAR shall equal the exercise price designated by the Committee on the Date of Grant. A SAR granted alone and unrelated to an Option may be granted at such exercise price as the Committee may determine in its sole and absolute discretion. A SAR granted in tandem with an Option shall have an exercise price not less than the exercise price of the Option.
(d) Duration of Option. Each SAR granted to a Recipient shall expire on the tenth anniversary of its Date of Grant or, at such earlier or later date as is set by the Committee in establishing the terms of the SAR at grant. If the Recipient's employment with the Company terminates before the expiration date of a SAR, the SARs owned by the Recipient shall expire on the earlier of the date stated in this subsection (d) or the date stated in following subsections of this Section 7. Furthermore, expiration of a SAR may be accelerated under subsection (j) below.
(e) Vesting of SAR. Each SAR Agreement shall specify the vesting schedule applicable to the SAR. The Committee, in its sole and absolute discretion, may accelerate the vesting of any SAR at any time.
(f) Death. In the case of the death of a Recipient, the SAR shall expire on the one-year anniversary of the Recipient's death, or if earlier, the date specified in subsection (d) above, unless the Committee sets an earlier or later expiration date in establishing the terms of the SAR at grant or a later expiration date subsequent to the Date of Grant but prior to the one-year anniversary of the Recipient's death. During the period beginning on the date of the Recipient's death and ending on the date the SAR expires, the SAR may be exercised to the extent it could have been exercised at the time the Recipient died, subject to any adjustment under Section 10 herein.
(g) Disability. In the case of the total and permanent disability of a Recipient and a resulting termination of employment with the Company, the SAR shall expire on the one-year anniversary date of the Recipient's last day of employment, or, if earlier, the date specified in subsection (d) above, unless the Committee sets an earlier or later expiration date in establishing the terms of the SAR at grant or a later expiration date subsequent to the Date of Grant but prior to the one-year anniversary of the Recipient's last day of employment or affiliation with the Company. During the period beginning on the date of the Recipient's termination of employment or affiliation by reason of disability and ending on the date the SAR expires, the SAR may be exercised as to the number of Shares for which it could have been exercised at the time the Recipient became disabled, subject to any adjustments under Section 10 herein.
(h) Retirement. If the Recipient's employment terminates by reason of normal retirement under the Company's normal retirement policies, the SAR will expire 90 days after the last day of employment, or, if earlier, on the date specified in subsection (d) above, unless the Committee sets an earlier or later expiration date in establishing the terms of the SAR at grant or
a later expiration date subsequent to the Date of Grant but prior to the end of the 90-day period following the Recipient's normal retirement. During the period beginning on the date of the Recipient's normal retirement and ending on the date the SAR expires, the SAR may be exercised as to the number of Shares for which it could have been exercised on the retirement date, subject to any adjustment under Section 10 herein.
(i) Termination of Service. If the Recipient ceases employment for any reason other than death, disability, or retirement (as described above), all SARs held by the Recipient shall lapse immediately following the last day that the Recipient is employed by the Company. However, the Committee may, in its sole discretion, either at grant of the SAR or at the time the Recipient terminates employment, delay the expiration date of the SAR to a date after termination of employment. During any such delay of the expiration date, the SAR may be exercised only for the number of Shares for which it could have been exercised on such termination date, subject to any adjustment under Section 10 herein. Notwithstanding any provisions set forth herein or in the Plan, if the Recipient shall (i) commit any act of malfeasance or wrongdoing affecting the Company or any parent or subsidiary, (ii) breach any covenant not to compete or employment agreement with the Company or any parent or Subsidiary, or (iii) engage in conduct that would warrant the Recipient's discharge for cause, any unexercised part of the SAR shall lapse immediately upon the earlier of the occurrence of such event or the last day the Recipient is employed by the Company.
(j) Change of Control. If a Change of Control occurs, the Board may vote to accelerate the expiration of the SARs to the 10th day after the effective date of the Change of Control.
(k) Conditions Required for Exercise. SARs granted to Recipients under the Plan shall be exercisable only to the extent they are vested according to the terms of the SAR Agreement. Each SAR Agreement shall specify any additional conditions required for the exercise of the SAR.
(l) Method of Exercise. A SAR granted under this Plan shall be deemed exercised when the person entitled to exercise the SAR delivers written notice to the President of the Company (or his delegate, in his absence) of the decision to exercise, and complies with such other reasonable requirements as the Committee establishes pursuant to Section 9 of the Plan. A partial exercise of a SAR will not affect the holder's right to exercise the Option from time to time in accordance with this Plan as to the remaining Shares subject to the Option.
(m) Designation of Beneficiary. Each Recipient shall designate in the SAR Agreement he executes, a beneficiary to receive SARs awarded hereunder in the event of his death prior to full exercise of such SARs; provided, that if no such beneficiary is designated or if the beneficiary so designated does not survive the Recipient, the estate of such Recipient shall be deemed to be his beneficiary. Recipients may, by written notice to the Committee, change the beneficiary designated in any outstanding SAR Agreements.
(n) Nontransferability of SARs. No SAR granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all SARs granted to a Recipient under this Plan shall be exercisable during his or her lifetime only by such Recipient.
8. Restricted Stock. Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to Recipients in such amounts as the Committee shall determined in its sole and absolute discretion. Each Restricted Stock Award granted to an Employee under the Plan shall contain such provisions as the Committee at the Date of Grant shall deem appropriate. Each Restricted Stock Award granted to a Recipient will satisfy the following requirements:
(a) Written Agreement. Each Restricted Stock Award granted to a Recipient will be evidenced by a Restricted Stock Agreement. The terms of the Restricted Stock Agreement need not be identical for different Recipients. The Restricted Stock Agreement shall specify the Period of Restriction, or Periods. In addition, the Restricted Stock Agreement shall include a description of the substance of each of the requirements in this Section with respect to that particular Restricted Stock Award.
(b) Number of Shares. Each Agreement shall specify the number of Restricted Stock Shares awarded to the Recipient.
(c) Transferability. Except as provided in this subsection (c), the Restricted Stock Shares granted under this Plan may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee at grant and specified in the Restricted Stock Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee at grant and specified in the Restricted Stock Agreement.
(d) Other Restrictions. The Committee shall impose such other restrictions on any Restricted Stock Shares granted pursuant to this Plan as it may deem advisable including, without limitation, vesting restrictions, restrictions based upon the achievement of specific Company-wide, Subsidiary, and/or individual performance goals, and/or restrictions under applicable federal or state securities laws, and may legend the certificate representing Restricted Stock to give appropriate notice of such restrictions. The Committee may also require that Recipients make cash payments at the time of grant or upon lapsing of restrictions. Such cash payments, if imposed, will be in an amount not less than the par value of the Restricted Stock Shares.
(e) Certificate Legend. In addition to any legends placed on certificates pursuant to subsection (c) above, each certificate representing Restricted Stock Shares granted pursuant to this Plan shall bear the following legend:
"The sale or other transfer of the Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Interactive Technologies.com, Ltd. Long-Term Incentive Plan and in a Restricted Stock Agreement dated ______________. A copy of the Plan and the Restricted Stock Agreement may be obtained from the Chief Financial Officer of Interactive Technologies.com, Ltd."
(f) Removal of Restrictions. Except as otherwise provided in this Section 8, Restricted Stock Shares shall become freely transferable by the Recipient after the last day of the Period of Restriction. Once the Restricted Stock Shares are released from the restrictions, the Recipient shall be entitled to have the legend required by subsection (e) above removed from his Share certificate.
(g) Voting Rights. During the Period of Restriction, Recipients holding Restricted Stock Shares may exercise full voting rights with respect to such Shares.
(h) Dividends and Other Distributions. During the Period of Restriction, Recipients holding Restricted Stock Shares shall be entitled to receive all dividends and other distributions paid with respect to such Shares while they are so held. If any such dividends or distributions are paid in Shares, such Shares shall be subject to the same restrictions on transferability and forfeitability as the Restricted Stock Shares with respect to which they were paid.
(i) Death. In the case of the death of a Recipient, the restrictions on the Recipient's Restricted Stock Shares shall expire on the date of the Recipient's death.
(j) Disability. In the case of the total and permanent disability of a Recipient and a resulting termination of employment with the Company, the restrictions on the Recipient's Restricted Stock Shares shall expire on the Recipient's last day of employment.
(k) Retirement. If the Recipient's employment terminates by reason of normal retirement under the Company's normal retirement policies, the restrictions on the Recipient's Restricted Stock Shares shall expire on the Recipient's last day of employment.
(l) Termination of Service. If the Recipient ceases employment for any reason other than death, disability, or retirement (as described above), all nonvested Restricted Stock Shares held by the Recipient shall be forfeited immediately and returned to the Company; provided, however, that the Committee, in its sole and absolute discretion, shall have the right to provide for expiration of the restrictions on Restricted Stock Shares following termination of employment, upon such terms and provisions as it deems proper.
(m) Change of Control. If a Change of Control occurs, the Board may vote to remove immediately all restrictions on Restricted Stock Shares as of the date of the Change of Control.
(n) Designation of Beneficiary. Each Recipient shall designate, in the Restricted Stock Agreement he executes, a beneficiary to receive Restricted Stock Shares awarded hereunder in the event of his death prior to removal of all restrictions on such Shares; provided, that if no such beneficiary is designated or if the beneficiary so designated does not survive the Recipient, the estate of such Recipient shall be deemed to be his beneficiary. Recipients may, by written notice to the Committee, change the beneficiary designated in any outstanding Restricted Stock Agreements.
9. Taxes; Compliance with Law; Approval of Regulatory Bodies; Legends. The Company shall have the right to withhold from payments otherwise due and owing to the Recipient (or his
beneficiary) or to require the Recipient (or his beneficiary) to remit to the Company in cash upon demand an amount sufficient to satisfy any federal (including FICA and FUTA amounts), state, and/or local withholding tax requirements at the time the Recipient (or his beneficiary) recognizes income for federal, state, and/or local tax purposes with respect to any Award under this Plan.
Awards can be granted, and Shares can be delivered under this Plan, only in compliance with all applicable federal and state laws and regulations and the rules of all stock exchanges on which the Company's stock is listed at any time. An Option is exercisable only if either (a) a registration statement pertaining to the Shares to be issued upon exercise of the Option has been filed with and declared effective by the Securities and Exchange Commission and remains effective on the date of exercise, or (b) an exemption from the registration requirements of applicable securities laws is available. This Plan does not require the Company, however, to file such a registration statement or to assure the availability of such exemptions. Any certificate issued to evidence Shares issued under the Plan may bear such legends and statements, and shall be subject to such transfer restrictions, as the Committee deems advisable to assure compliance with federal and state laws and regulations and with the requirements of this Section. No Option may be exercised, and Shares may not be issued under this Plan, until the Company has obtained the consent or approval of every regulatory body, federal or state, having jurisdiction over such matters as the Committee deems advisable.
Each person who acquires the right to exercise an Option or a SAR or to ownership of Shares by bequest or inheritance may be required by the Committee to furnish reasonable evidence of ownership of the Option or SAR as a condition to his exercise of the Option or SAR. In addition, the Committee may require such consents and releases of taxing authorities as the Committee deems advisable.
With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time, or its successor under the Exchange Act. To the extent any provision of the Plan or action by the Plan administrators fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Plan administrators.
10. Adjustment Upon Change of Shares. If a reorganization, merger, consolidation, reclassification, recapitalization, combination or exchange of shares, stock split, stock dividend, rights offering, or other expansion or contraction of the Common Stock of the Company occurs, the number and class of Shares for which Awards are authorized to be granted under this Plan, the number and class of Shares then subject to Awards previously granted to Employees under this Plan, and the price per Share payable upon exercise of each Award outstanding under this Plan shall be equitably adjusted by the Committee to reflect such changes. To the extent deemed equitable and appropriate by the Board, subject to any required action by shareholders, in any merger, consolidation, reorganization, liquidation or dissolution, any Award granted under the Plan shall pertain to the securities and other property to which a holder of the number of Shares of stock covered by the Award would have been entitled to receive in connection with such event.
11. Liability of the Company. The Company, its parent and any Subsidiary that is in existence or hereafter comes into existence shall not be liable to any person for any tax consequences incurred by a Recipient or other person with respect to an Award.
12. Amendment and Termination of Plan. The Board may alter, amend, or terminate this Plan from time to time without approval of the shareholders of the Company. The Board may, however, condition any amendment on the approval of the shareholders of the Company if such approval is necessary or advisable with respect to tax, securities or other applicable laws to which the Company, the Plan, Recipients or Eligible Persons are subject. Any amendment, whether with or without the approval of shareholders of the Company, that alters the terms or provisions of an Award granted before the amendment (unless the alteration is expressly permitted under this Plan) will be effective only with the consent of the Recipient to whom the Award was granted or the holder currently entitled to exercise it.
13. Expenses of Plan. The Company shall bear the expenses of administering the Plan.
14. Duration of Plan. Awards may be granted under this Plan only during the 10 years immediately following the original effective date of this Plan.
15. Applicable Law. The validity, interpretation, and enforcement of this Plan are governed in all respects by the laws of Florida and the United States of America.
16. Effective Date. The effective date of this Plan, shall be the earlier of (i) the date on which the Board adopts the Plan or (ii) the date on which the Shareholders approve the Plan.
Exhibit 4.3
NONQUALIFIED STOCK OPTION AGREEMENT
Interactive Technologies.com, Ltd.
This Nonqualified Stock Option Agreement (the "Agreement"), effective as of
[ ] [ ], [ ] (the "Date of Grant"), is made by and between Interactive
Technologies.com, Ltd., a Delaware corporation (the "Company"), and [ ] (the
"Participant").
Background
The Company has established the Interactive Technologies.com, Ltd. Long-Term Incentive Plan (the "Plan"). The Company wishes to grant to the Participant a Nonqualified Stock Option pursuant to the terms of the Plan.
Therefore, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the Company and the Participant agree as follows:
1. Grant of Option. In consideration of service to the Company and for other good and valuable consideration, the Company grants to the Participant a Nonqualified Stock Option (the "Option") to purchase [ ] shares of the Company's common stock (the "Common Stock"). The Company grants the Option in accordance with the terms and conditions of the Plan and this Agreement.
2. Option Price. The purchase price of each share of stock covered by the Option shall be $[ ].
3. Adjustments in Option. If the outstanding shares of stock subject to the Option are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of merger, consolidation, recapitalization, reclassification, stock split, stock dividend or combination of shares, the shares subject to the Option and the price per share shall be equitably adjusted to reflect such changes. Such adjustment in the Option shall be made without change in the total price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the Option price per share. Any such adjustment made by the Committee shall be final and binding upon the Participant, the Company and all other interested persons.
4. Person Eligible to Exercise Option. During the lifetime of the Participant, only the Participant may exercise the Option or any portion of the Option. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under the terms of the Plan, be exercised by the Participant's personal representative or by any other person empowered to do so under the Participant's will, trust or under then applicable laws of descent and distribution.
5. Manner of Exercise. The Option, or any portion of the Option, shall be exercised only in accordance with the provisions of the Plan and this Agreement. The person exercising the Option shall give to the Company a written notice that shall: (i) state the number of Shares with respect to which the Option is being exercised; and (ii) specify a date (other than a Saturday, Sunday or legal holiday) not less than five nor more than ten days after the date of such written notice, as the date on which the Shares will be purchased. Such tender and conveyance shall take place at the principal office of the Company during ordinary business hours, or at such other hour and place agreed upon by the Company and the person or persons exercising the Option. On the date specified in such written notice, the Company shall accept payment for the Option Shares in cash, by bank or certified check, by wire transfer, or by such other means as may be approved by the Committee and shall deliver to the person or persons exercising the Option in exchange therefor an appropriate certificate or certificates for fully paid nonassessable Shares or undertake to deliver certificates within a reasonable period of time. In the event of any failure to take up and pay for the number of Shares specified in such written notice on the date set forth therein (or on the extended date as above provided), the right to exercise the Option shall terminate with respect to such number of Shares, but shall continue with respect to the remaining Shares covered by the Option and not yet acquired pursuant thereto.
The person who exercises the Option shall warrant to the Company that, at the time of such exercise, such person is acquiring his or her Option Shares for investment and not with a view to, or for or in connection with, the distribution of any such Shares, and shall make such other representations, warranties, acknowledgments, and affirmations, if any, as the Committee may require. In such event, the person acquiring such Shares shall be bound by the provisions of an appropriate legend which shall be endorsed upon the certificate(s) evidencing his or her Option Shares issued pursuant to such exercise. The Company may delay issuance of the Shares until completion of any action or obtaining any consent that the Company deem necessary under any applicable law (including without limitation state securities or "blue sky" laws).
6. Conditions to Issuance of Stock Certificates. The shares of stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have been reacquired by the Company. Such shares shall be fully paid and nonassessable.
7. Rights of Shareholders. The Participant shall not be, nor have any of the rights or privileges of, a shareholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to the Participant.
8. Vesting and Exercisability. A Participant's interest in the Option shall vest according to the provisions of this Section 8 and shall be exercisable as to not more than the vested percentage of the shares subject to the Option at any point in time. To the extent the Option is either unexercisable or unexercised, the unexercised portion shall accumulate
until the Option both becomes exercisable and is exercised, subject to the provisions of Section 9 of the Agreement. The Option shall become vested as follows:
The Committee, in its sole and absolute discretion, may accelerate the vesting of the Option at any time.
9. Duration of Option. Except as specified below, the Option shall expire on
[ ], [ ]. Notwithstanding the foregoing, the Option may expire
prior to [ ], [ ], in the following circumstances:
a. In the case of the Participant's death, the Option shall expire on the one-year anniversary of the Participant's death.
b. If the Participant's employment or affiliation with the Company terminates as a result of his total and permanent disability, the Option will expire on the one-year anniversary of the Participant's last day of employment.
c. If the Participant ceases employment or affiliation with the Company for any reason other than death or disability, the Option shall expire 90 days following the last day that the Participant is employed by the Company.
d. Notwithstanding any provisions set forth above in this Section 9, if the Participant shall (i) commit any act of malfeasance or wrongdoing affecting the Company or its affiliates, (ii) breach any covenant not to compete or employment agreement with the Company or any affiliate, or (iii) engage in conduct that would warrant the Participant's discharge for cause, any unexercised part of the Option shall expire immediately upon the earlier of the occurrence of such event or the last day the Participant is employed by the Company.
10. Administration. The Committee shall have the power to interpret this Agreement and to adopt such rules for the administration, interpretation and application of the Agreement as are consistent herewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to this Agreement or any similar agreement to which the Company is a party.
11. Transfer of Option. Unless otherwise permitted by applicable laws and approved in advance by the Committee, the Option shall not be transferable by the Participant and shall be exercisable, during the Participant's lifetime, only by such Participant or, in the event of the Participant's incapacity, his guardian or legal representative. Except as
permitted herein, the Option shall not be assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise) and
shall not be subject to execution, attachment, or similar process and any
attempted transfer, assignment, pledge, hypothecation or other disposition
of the Option or of any rights granted thereunder contrary to the
provisions of this Section 11, or the levy of any attachment or similar
process upon an option or such rights, shall be null and void. This
Section 11 shall not prevent transfers by will or by the applicable laws
of descent and distribution.
12. Shares to be Reserved. The Company shall at all times during the term of the Option reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement.
13. Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary and any notice to be given to the Participant shall be addressed to him at the address given beneath his signature below. By a notice given pursuant to this Section 13, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the Participant's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 13. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope addressed as aforesaid, deposited (with postage prepaid) in a United States postal receptacle.
14. Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
15. Incorporation of Plan by Reference. The Option is granted in accordance with the terms and conditions of the Plan, the terms of which are incorporated herein by reference, and the Agreement shall in all respects be interpreted in accordance with the Plan. Any term used in the Agreement that is not otherwise defined in the Agreement shall have the meaning assigned to it by the Plan.
The Company and the Participant have executed this Agreement effective as of the date first written above.
INTERACTIVE TECHNOLOGIES.COM, LTD.
Exhibit 4.4
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT, dated as of February 3, 2000 (this "Agreement"), by and among INTERACTIVE TECHNOLOGIES.COM, LTD., a Delaware corporation (the "Company"), and YOUNG LLC, a Cayman Island limited liability company ("Purchasers").
Recitals
A. Purchaser desires to purchase, and the Company desires to issue and sell, shares ("Shares") of the Company's Common Stock, $.001 par value per share ("Common Stock"), on the terms and conditions set forth below. For purposes of this Agreement, the Shares shall mean the Initial Shares (as defined below) and the Repriced Shares (as defined below).
B. The parties hereto intend that the issuance of the Shares as anticipated by this Agreement shall be accomplished without registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and without registration or qualification under the securities laws of any state or other jurisdiction, in reliance on exemptions from the registration requirements of the Securities Act, including, without limitation, Regulation D under the Securities Act and Section 4(2) of the Securities Act; provided, however, that nothing in this Agreement shall act or be construed as a limitation on Purchaser's right to sell any of the Shares to be acquired pursuant to this Agreement pursuant to the Registration Statement (the "Registration Statement") contemplated by the Registration Rights Agreement (as defined below), or other provisions of the Registration Rights Agreement or in accordance with applicable laws.
THEREFORE, in consideration of the mutual promises and covenants set forth below and for other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge by their signatures below, the parties hereto hereby agree as follows:
AGREEMENT
1. Purchase of Common Stock. Subject to the terms and conditions of this Agreement, the Company agrees to issue and sell, and Purchaser agrees to acquire, nine hundred seventy thousand two hundred eighty-five (970,285) fully paid and non-assessable shares (the "Initial Shares") at 85% of the Initial Closing Price as hereinafter defined, in exchange for Purchaser's payment to the Company of aggregate consideration of Four Million Dollars ($4,000,000) (the "Purchase Price").
1.1 Form of Payment. Purchaser shall pay the Purchase Price for the Initial Shares by delivering immediately available good funds in United States Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow Instructions attached hereto as Exhibit E (the "Joint Escrow Instructions"). No later than the Closing Date (as defined below), the Company shall deliver one or more certificates representing the Initial Shares duly executed on behalf of the
Company (collectively, each the "Certificates") to the Escrow Agent. By signing this Agreement, each Purchaser and the Company, and subject to acceptance by the Escrow Agent, each agrees to all of the terms and conditions of, and becomes a party to, the Joint Escrow Instructions, all of the provisions of which are incorporated herein by this reference as if set forth in full.
1.2 Method of Payment. Purchasers shall pay into escrow the Purchase Price for the Initial Shares by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, LLP Account No.:
Purchaser shall deliver payment of the Purchase Price at or before 1:00 p.m., New York time, on the date which is one (1) Business Day after the Company executes and delivers this Agreement and returns a signed counterpart of this Agreement to the Escrow Agent by facsimile. Purchaser shall deposit the Purchase Price for the Initial Shares with the Escrow Agent in immediately available funds. Time is of the essence with respect to such payment, and failure by Purchaser to make such payment shall allow the Company to cancel this Agreement. For purposes of this Agreement, "Business Day" shall mean a day on which the New York Stock Exchange is open for business.
1.3 Escrow Property. The Purchase Price and the Certificate delivered to the Escrow Agent as contemplated by Section 1.1 hereof are referred to as the "Escrow Property."
2. Closing.
2.1 Initial Closing. Upon execution of this Agreement (the "Initial Closing"), and on the date set forth above (the "Initial Closing Date") Purchaser and all other Purchasers hereunder shall pay Four Million Dollars ($4,000,000). At the Initial Closing the parties hereto shall execute and deliver the following documents (incorporated herein by this reference, collectively with this Agreement, the "Transaction Documents"): (i) the Registration Rights Agreement (the "Registration Rights Agreement") in the form attached hereto as Exhibit A; (ii) the Escrow Agreement in the form attached hereto as Exhibit B; (iii) the Warrant (the "Warrant") in the form attached hereto as Exhibit C; and (iv) the additional agreements (the "Additional Agreements") in the form attached hereto as Exhibit D. On the Closing Date (as defined below), the Escrow Agent shall deliver (i) the Purchase Price to the Company and (ii) the Certificate to the Purchaser.
2.2 Repriced Shares. Definitions:
(a) As used herein, "Closing Bid Price" shall mean the closing bid price
of the Common Stock as reported, at the option of Purchaser, by Bloomberg, LP or the National Association of Securities Dealers ("NASD").
(b) "Effective Date" shall mean date on which the Securities and Exchange Commission (the "SEC") declares effective the registration statement covering the Registrable Shares (as defined in the Registration Rights Agreement).
(c) "Initial Closing Price" shall mean the average Closing Bid Price for the five (5) consecutive Business Days immediately prior to the date of the Initial Closing.
(d) "Repricing Period" shall mean each of the First Repricing Period, the Second Repricing Period, the Third Repricing Period and the Final Repricing Period, each as defined below.
(e) "Repriced Shares" shall mean the First Repriced Shares, the Second Repriced Shares, the Third Repriced Shares and the Final Repriced Shares, each as defined below.
2.3 First Repricing Period. (a) The "First Repricing Period" shall commence on the later of (a) the day that is ninety (90) days after the Closing Date or (b) the Effective Date, and end thirty (30) days after such later date. If the average Closing Bid Price for any five (5) Business Days (not necessarily consecutive) during the First Repricing Period (the "First Repricing Price"), is not equal to or greater than 117% of the Initial Closing Price, then Purchaser may request that up to one-third (1/3) of the Initial Shares be repriced (the "First Repriced Shares"). Purchaser shall provide facsimile notice to the Company substantially in the form of Exhibit 2 hereto, within three (3) Business Days of the end of the First Repricing Period concerning the number of the First Repriced Shares, if any, that Purchaser wishes to reprice. Upon receipt of facsimile notice that Purchaser wishes to reprice some or all of the First Repriced Shares, the Company may elect to issue to Purchaser the number of additional Shares as determined according to the following formula:
((1.17 x Initial Closing Price) - First Repricing Price) x (# of the First Repriced Shares) / First Repricing Price.
(b) Alternatively, if the Company does not elect to issue such additional Shares to Purchaser, then the Company shall pay to Purchaser the amount as determined according to the following formula:
((1.17 x Initial Closing Price) - First Repricing Price) x (# of the First Repriced Shares).
2.4 Second Repricing Period. The "Second Repricing Period" shall commence on the day immediately following the First Repricing Period and end thirty (30) days thereafter. If the average Closing Bid Price for any five (5) Business Days (not necessarily consecutive) during the Second Repricing Period (the "Second Repricing Price"), is not equal to or greater than 117% of the Initial Closing Price, then Purchaser may request that up to one-third (1/3) of the Initial Shares be repriced (the "Second Repriced Shares"). Purchaser shall provide facsimile notice to the
Company within three (3) Business Days of the end of the Second Repricing Period concerning the number of the Second Repriced Shares, if any, that Purchaser wishes to reprice. Upon receipt of facsimile notice that Purchaser wishes to reprice some or all of the Second Repriced Shares, the Company may elect to issue to Purchaser the number of additional Shares as determined according to the following formula:
((1.17 x Initial Closing Price) - Second Repricing Price) x (# of the Second Repriced Shares) / Second Repricing Price.
Alternatively, if the Company does not elect to issue such additional Shares to Purchaser, then the Company shall pay to Purchaser the amount as determined according to the following formula:
((1.17 x Initial Closing Price) - Second Repricing Price) x (# of the Second Repriced Shares).
2.5 Third Repricing Period. (a) The "Third Repricing Period" shall commence on the day immediately following the Second Repricing Period and end thirty (30) days thereafter. If the average Closing Bid Price for any five (5) Business Days (not necessarily consecutive) during the Third Repricing Period (the "Third Repricing Price"), is not equal to or greater than 117% of the Initial Closing Price, then Purchaser may request that up to one-third (1/3) of the Initial Shares be repriced (the "Third Repriced Shares"). Purchaser shall provide facsimile notice to the Company within three (3) Business Days of the end of the Third Repricing Period of the number of the Third Repriced Shares, if any, that Purchaser wishes to reprice. Upon receipt of facsimile notice that Purchaser wishes reprice some or all of the Third Repriced Shares, the Company may elect to issue to Purchaser the number of additional Shares as determined according to the following formula:
((1.17 x Initial Closing Price) - Third Repricing Price) x (# of the Third Repriced Shares) / Third Repricing Price.
(b) Alternatively, if the Company does not elect to issue such additional Shares to Purchaser, then the Company shall pay to Purchaser the amount as determined according to the following formula:
((1.17 x Initial Closing Price - Third Repricing Price) x (# of the Third Repriced Shares).
2.6 Final Repricing Period. (a) The "Final Repricing Period" shall
commence on the day immediately following the Third Repricing Period and end one
hundred eighty (180) days thereafter. If the average Closing Bid for any five
(5) consecutive Business Days after the commencement of the Final Repricing
Period is not equal to or greater than 117% of the Initial Closing Price, then
Purchaser may request that up to 50 % of the Initial Shares (not previously
repriced pursuant to Sections 2.3, 2.4 and 2.5 and this Section 2.6) be repriced
(the "Final Repriced Shares"). The Final Repricing Price shall be the average
Closing Bid Price for the five (5) consecutive Business Days immediately prior
to the date on which Purchaser provides facsimile notice that it wishes to
reprice the Final Repriced Shares. Upon receipt of facsimile notice that
Purchaser wishes to reprice some or all of the Final Repriced Shares, the
Company may elect to
issue to Purchaser the number of additional Shares determined according to the following formula:
((1.17% x Initial Closing Price) - Final Repricing Price) x (# of the Final Repriced Shares) / Final Repricing Price.
(b) If the Company does not elect to issue such additional Shares to Purchaser, then the Company shall pay to Purchaser the amount (the "Final Repricing Equivalent Payment"), determined according to the following formula:
((1.17 x Initial Closing Price) - Final Repricing Price) x (# of the Final Repriced Shares).
Notwithstanding the foregoing, no more than fifty (50%) percent of the Initial Shares can be repriced during any thirty (30) calendar day period during the Final Repricing Period.
3. Representations and Warranties of Purchaser. To induce the Company's acceptance of this Agreement, each of Purchasers hereby severally certifies, represents and warrants to the Company and its agents and attorneys as follows, which representations and warranties are solely for the benefit of the Company and may be waived in whole or in part at any time prior to the Initial Closing by the Company:
3.1 Intent. Purchaser will be acquiring the Shares for its own account, and Purchaser has no present arrangement (whether or not legally binding) to sell any of the Shares to or through any person or entity; provided, however, that by making the representations herein, Purchaser does not agree to hold any of the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with U.S. federal and state securities laws applicable to such disposition and any restrictions imposed on such transfer by the Transaction Documents. Purchaser understands that the Shares must be held indefinitely unless the Shares are subsequently registered under the Securities Act or an exemption from registration is available. Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act.
3.2 Sophisticated Investor. Purchaser is a "sophisticated investor" (as described in Rule 506(b)(2)(ii) of Regulation D) and an "accredited investor" (as defined in Rule 501(a) of Regulation D), and Purchaser has such knowledge and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Company.
3.3 Ability of Purchaser to Bear Risk of Investment. Purchaser acknowledges that the Shares are speculative investments and involve a high degree of risk and Purchaser is able to bear the economic risk of an investment in the Shares, and, at the present time, is able to afford a complete loss of such investment.
3.4 Authority. Each of the Transaction Documents (except for the Warrant) has been duly authorized and validly executed and delivered by Purchaser and (assuming due authorization and valid execution by the Company) is a legal, valid and binding agreement of
Purchaser enforceable against Purchaser in accordance with its terms, subject to general principles of equity and to bankruptcy, insolvency or similar laws relating to, or affecting generally the enforcement of creditors' rights and remedies or by other equitable principles of general application. The person or persons executing the Transaction Documents (except for the Warrant) have all requisite authority to do so on behalf of Purchaser.
3.5 Brokers, Finders. Except with respect to Ladenburg Thalmann & Co., Inc., Purchaser has taken no action which would give rise to any claim by any person for brokerage commission, finder's fees or similar payments by the Company relating to this Agreement or the transactions contemplated hereby. The Company shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this section that may be due in connection with the transactions contemplated hereby. Purchaser shall indemnify and hold harmless the Company, its employees, officers, directors, agents and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys' fees) and expenses suffered in respect of any such claimed or existing fees, as and when incurred.
3.6 Organization; Authority. Purchaser is an entity organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and to carry out its obligations thereunder. The acquisition of the Shares and the payment of the Purchase Price therefor by such Purchaser have been duly authorized by all necessary action on the part of Purchaser.
3.7 Absence of Conflicts. The execution and delivery of each of the Transaction Documents (except for the Warrant), and the consummation of the transactions contemplated by this Agreement and such other documents and instruments, and compliance with the requirements thereof, will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Purchaser, or the provision of any indenture, instrument or agreement to which Purchaser is a party or is subject, or by which Purchaser or any of its assets is bound, or conflict with or constitute a material default thereunder, or require the approval of any third-party pursuant to any material contract, agreement, instrument, relationship or legal obligation to which Purchaser is subject or to which any of its assets, operations or management may be subject.
3.8 Disclosure; Access to Information. Purchaser has received copies of or has had access to all documents, records, books and other information pertaining to Purchaser's investment in the Company and the Shares that have been requested by Purchaser. Purchaser or its representative has been afforded the opportunity to ask questions of the Company and its management. Purchaser further acknowledges that it understands that the Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Purchaser has reviewed or received copies of any such reports that it has requested.
3.9 Manner of Sale. At no time was Purchaser presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of
general solicitation or advertising with respect to the Shares.
3.10 Accuracy of Other Materials. To the extent Purchaser has received from the Company documents or other materials, which constitute summaries, projections, forecasts or estimates, Purchaser acknowledges the following with respect to such documents or other materials. Such documents or other materials are intended to illustrate projected financial and other results based upon a set of assumptions (in some cases based on information obtained by the Company from outside sources) that the Company views as reasonable and obtainable. All such summaries, projections, forecasts or estimates pertaining to revenue growth, profitability and other similar financial or market data are forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. No representations or warranties of future performance by or market trends for the Company are intended, and such are expressly disclaimed.
3.11 Accuracy of Representations and Information. All representations made by Purchaser in the Transaction Documents, and all information provided by Purchaser to the Company concerning Purchaser are correct and complete in all material respects as of the date hereof.
3.12 Notwithstanding any other provision hereof, of the Warrants or
of any of the other Transaction Agreements, in no event (except (i) as
specifically provided in this Agreement as an exception to this provision, or
(ii) while there is outstanding a tender offer for any or all of the shares of
the Company's Common Stock) shall the Purchaser be entitled to exercise
Repricing Rights or shall the Company have the obligation, to deliver Repricing
Shares to the extent that, after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by the Purchaser and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership Repricing Shares not yet issued or unexercised portion of
the Warrants), and (2) the number of shares of Common Stock issuable upon the
exercise of Repricing Rights or exercise of the Warrants with respect to which
the determination of this proviso is being made, would result in beneficial
ownership by the Purchaser and its affiliates of more than 9.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Purchaser upon such exercise). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
The Purchaser, further agrees that if the Purchaser transfers or assigns any of
the Shares to a party who or which would not be considered such an affiliate,
such assignment shall be made subject to the transferee's or assignee's specific
agreement to be bound by the provisions of this Paragraph 3.12 as if such
transferee or assignee were the original Purchaser hereof.
4. Representations and Warranties of the Company. The Company hereby represents and warrants to Purchaser as follows, which representations and warranties are solely for the benefit of Purchaser and may be waived in whole or in part by Purchaser at any time prior to the Initial Closing:
4.1 Company Status. On December 23, 1999, the Company filed a Registration Statement on Form 10-SB in connection with its proposed registration of the Common Stock pursuant to Section 12(g) of the Exchange Act. As of the date first above written, such Registration Statement has not become effective. The Common Stock is not currently listed or traded on any securities exchange or market other than the NQB Electronic Pink Sheets. The Company intends to apply to the Nasdaq Stock Market, Inc. for admission of the Common Stock to trading on the National Market System or the SmallCap Market.
4.2 Current Public Information. The Company has furnished or made available to Purchaser true and correct copies of its registration statement on From 10-SB, as filed with the SEC, pursuant to the Exchange Act ( the "SEC Document"). The SEC Document is the only filing made by or with respect to the Company since December 31, 1998 pursuant to the Exchange Act or pursuant to the Securities Act. The Company has not been required to file, and has not heretofore filed, any reports, schedules, forms, statements and other documents under Sections 13(a), 14 and 15(d) of the Exchange Act.
4.3 No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Shares.
4.4 Valid Issuance of Common Stock. The authorized capital stock of the Company consists of 50,000,000 shares of Capital Stock, $.001 par value per share, of which 40,000,000 shares are Common Stock and 10,000,000 are Preferred Stock. There are 24,261,091 shares of Common Stock issued and outstanding and no shares of preferred stock are issued and outstanding as of January 31, 2000 . All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable. Except as set forth above or as disclosed in Schedule 4.4, as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem or issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, (ii) there are no outstanding debt securities and (iii) there are no agreements or arrangements under which the Company is obligated to register the sale of any of their securities under the Securities Act. Except as disclosed in Schedule 4.4, there are no securities or instruments containing any anti-dilution, right of first refusal, preemptive rights or similar provisions that will be triggered by the issuance of the Shares as described in this Agreement. Upon issuance of the Shares, such securities will be duly and validly issued, fully paid and non-assessable.
4.5 Organization and Qualification. The Company is a corporation duly incorporated and existing in good standing under the laws of the State of Delaware and has the requisite corporate power to own its properties and to carry on its business as now being conducted.
The Company does not have any subsidiaries. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect. "Material Adverse Effect" means any effect on the business, operations, properties, prospects, or financial condition of the entity or entities with respect to which such term is used and which is material and adverse to such entity or to other entities controlling or controlled by such entity, and/or any condition or situation which would prohibit or otherwise interfere with the ability of the entity or entities with respect to which said term is used to enter into and perform its obligations under the Transaction Documents.
4.6 Authorization: Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform under the Transaction
Documents and to issue the Shares and the Warrant in accordance with the terms
of the Transaction Documents, (ii) the execution, issuance and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated by the Transaction Documents have been duly authorized
by all necessary corporate action, and no further consent or authorization of
the Company or its board of directors or shareholders is required, (iii) the
Transaction Documents have been duly executed and delivered by the Company, and
(iv) the Transaction Documents (assuming due authorization and valid and legal
execution by Purchaser) constitute legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
4.7 [Intentionally Omitted]
4.8 No Conflicts. Except as set forth in Schedule 4.8, the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby,
including, without limitation, the issuance of the Shares, do not and will not
(i) result in a violation of the Company's Articles of Incorporation or Bylaws,
(ii) conflict with, or result in a breach of or forfeiture of any rights (or
result in an event which with notice or lapse of time or both would become a
breach of or forfeiture of any rights) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company is a party or (iii) result in a
violation of any federal or state law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). To the best of its knowledge, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations which either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Shares and the Warrant in accordance with the terms of this Agreement (other than any SEC, NASD or state securities filings which may be required to be made by the Company subsequent to any Closing, and any registration statement which may be filed in furtherance of this Agreement); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Purchaser herein. The Company is not in violation of any material term of or in material default under its Articles of Incorporation, of any outstanding series of preferred stock or Bylaws or their organizational charter or Bylaws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree of order or any statute, rule or regulation applicable to the Company, which has not been duly waived as of the date of this Agreement.
4.9 SEC Documents. The Company has not provided to Purchaser any information which according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company but which has not been so disclosed. As of their respective dates, the SEC Documents complied, and all similar documents filed with the SEC prior to the Closing Date will comply, in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and rules and regulations of the SEC promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained, nor will any similar document filed with the SEC prior to the Closing Date contain, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents, as of the dates thereof, complied, and all similar documents filed with the SEC prior to the Closing Date will comply, as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC and other applicable rules and regulations with respect thereto. Such financial statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements as permitted by Form 10-Q of the SEC) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).
4.10 No Undisclosed Liabilities. Except as set forth in Schedule 4.10, the Company has no liabilities or obligations of a financial nature (whether accrued, absolute, contingent or otherwise), which are material, individually or in the aggregate, and are not disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company's business consistent with past practice since September 30, 1999, and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company.
4.11 Litigation and Other Proceedings. Except as may be set forth in the SEC Documents or set forth in Schedule 4.11, there are no lawsuits or proceedings pending or, to the best
knowledge of the Company, threatened, against the Company, nor has the Company received any written or oral notice of any such action, suit, proceeding or investigation, which might have a Material Adverse Effect on the Company or which likely would have a Material Adverse Effect on the transactions contemplated by this Agreement. Except as set forth in the SEC Documents, no judgment, order, writ, injunction or decree or award has been issued by or, to the best knowledge of the Company, requested of any court, arbitrator or governmental agency which likely would have a Material Adverse Effect on the transactions contemplated by this Agreement.
4.12 Other Documents or Materials. With respect to any document or other materials received by Purchaser from the Company or its representatives other than the Transaction Documents and the SEC Documents, (i) the Company has no reason to believe any of such documents and materials or any projections contained therein, as of the date of such other documents or materials, contained errors or misstatements or do not adequately describe the status of the development of the Company's technologies or its business as of such date, and (ii) such documents, materials and projections were prepared by the Company and its management in good faith.
4.13 Nature of Company. The Company is not an open-ended investment company or a unit investment trust, registered or required to be registered, or a closed end investment company required to be registered, but not registered, under the Investment Company Act of 1940.
4.14 Brokers, Finders. Except for the payment of consulting fees to Ladenburg Thalmann & Co., Inc., payment of which is the sole responsibility of the Company, the Company has taken no action which would give rise to any claim by any person for brokerage commission, finder's fees or similar payments by Purchaser relating to this Agreement or the transactions contemplated hereby. Purchaser shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this Section 4.14 that may be due in connection with the transactions contemplated hereby. The Company shall indemnify and hold harmless each of Purchaser and its employees, officers, directors, agents, partners and affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as and when incurred.
4.15 Absence of Certain Changes. Except as set forth in Schedule 4.15, since September 30, 1999, no Material Adverse Effect has been suffered by, and no material adverse development has occurred in the business, properties, operations, financial condition or results of operations of the Company. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law, nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings.
4.16 Intellectual Property Rights. To its knowledge without conducting any special investigation and except as set forth on Schedule 4.16, the Company owns or possesses adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct its businesses as now conducted. None of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights has expired or terminated, or is expected to expire or terminate in the near future. Except as set forth on Schedule 4.16, the Company does not have any knowledge of any infringement by the Company of trademarks, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secrets or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, there is no claim, action or proceeding being made or brought against, or to the best knowledge of the Company, being threatened against, the Company regarding trademark, trade name, patent, patent rights, invention, copyright, license, service name, service mark, service mark registration, trade secret or other infringement; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties.
4.17 Internal Accounting Controls. The Company is not aware that its system of internal accounting controls is not sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
4.18 Tax Status. Except as set forth in Schedule 4.18, 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 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, declarations, except those being contested in good faith and has set aside on its books provisions 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.
4.19 Certain Transactions. Except as set forth in the SEC Documents and except for arm's length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from third parties and other than the grant of stock options, none of the officers, directors or employees of the Company (or any spouse or relative of any such person) 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.
4.20 Dilution. The number of shares of Common Stock issuable as Repriced Shares may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Final Repricing Period. The Company's executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the Repriced Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.
4.21 Market Quotes. The Company's Common Stock is presently quoted on the Pink Sheets under the symbol "INTR". Except as set forth on Schedule 4.21, the Company is not in receipt of any written notice from any stock exchange, market or trading facility on which the Common Stock is or has been listed or traded (or on which it is or has been quoted) to the effect that the Company is not in compliance with the listing or maintenance requirements of such stock exchange, market or trading facility or that the Common Stock will be delisted from such stock exchange, market or trading facility.
4.22 No Integrated Offering. Neither the Company nor any of its affiliates nor any person acting on its or their behalf has, directly or indirectly, at any time since June 1, 1999, made any offer or sales of any security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D in connection with the offer and sale of the Shares as contemplated hereby.
5. Use and Disposition of Proceeds. The Company will use the proceeds from the sale of the Initial Shares (excluding amounts paid by the Company for legal fees, finder's fees and escrow agent fees in connection with the sale of the Initial Shares) for general capital purposes and acquisition, but shall not, directly or indirectly, use such proceeds for investment in any other affiliate or to repay debt to affiliates.
6. Company Reliance on Purchaser's Representations. Purchaser understands that the
Company is relying on the truth and accuracy of the representations and warranties made herein by Purchaser in offering the Shares for sale and in relying upon applicable exemptions available under the Act and applicable state securities laws.
7. Restricted Shares. Purchaser understands and acknowledges that the Shares have not been, and will not as of the time issued, be registered under the Securities Act and that they will be issued in reliance upon exemptions from the registration requirements of the Securities Act, and thus cannot be resold unless they are included in an effective registration statement filed under the Securities Act or unless an exemption from registration is available for such resale. With regard to the restrictions on resales of the Shares, Purchaser is aware: (a) that the Company will issue stop transfer orders to its stock transfer agent in the event of attempts to improperly transfer any such Shares, and (b) that a restrictive legend will be placed on certificates representing the Shares, which legend will read substantially as follows:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
The legend set forth above shall be promptly removed, and the Company shall issue a certificate without such legend to the holder of any such Unlegended Shares (as defined below) upon which such legend is stamped, if, unless otherwise required by state securities laws, (i) such Shares are registered for resale under the Securities Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of such Shares may be made without registration under the Securities Act, or (iii) such holder provides the Company with reasonable assurances that such Shares can be sold pursuant to Rule 144 promulgated under the Securities Act without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. Notwithstanding the removal of the legend set forth above in the event the Shares are registered for resale on an effective registration statement, the Company reserves the right to affix a legend on certificates representing such Shares that any selling shareholder must comply with the prospectus delivery requirements of the Securities Act in connection with any resale. The Company shall bear the cost of the removal of any legend as anticipated by this Section 7.
8. Other Covenants of the Company.
8.1 Furnishing of Information. As long as Purchaser owns Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. If at any time prior to the date on which Purchaser may resell all of its Shares without volume restrictions pursuant to Rule 144(k) promulgated under the
Securities Act (as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent for the benefit of and enforceable by Purchaser) the Company is not required to file reports pursuant to such sections, it will prepare and furnish to Purchaser and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as Purchaser may reasonably request, all to the extent required from time to time to enable Purchaser to sell its Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act.
8.2 Listing of Shares. The Company shall, if required by any applicable listing agreement, (a) not later than the Effective Date, prepare and file with any national securities exchange, market or trading facility on which the Common Stock is then listed an additional shares listing application covering the Shares, (b) take all steps necessary to cause such shares to be approved for listing on any other national securities exchange, market or trading facility on which the Common Stock is then listed as soon as possible thereafter and (c) provide to Purchaser evidence of such listing, and the Company shall maintain the listing of its Common Stock on such exchange or market.
8.3 First Right. The Company shall not, directly or indirectly,
without the prior written consent of Purchaser, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its Common Stock or securities
convertible into Common Stock at a price that is less than the market price of
the Common Stock at the time of issuance of such security or investment (a
"Subsequent Financing") for a period of three hundred sixty (360) days after the
Effective Date, or the redemption of all the Shares, except (i) the granting of
options or warrants to employees, officers, directors and consultants, and the
issuance of shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares issued upon
exercise of any currently outstanding warrants or options and upon conversion of
any currently outstanding convertible debenture, in each case disclosed in
Section 4.4 or Schedule 4.4, (iii) securities issued in connection with the
capitalization or creation of a joint venture with a strategic partner, (iv)
shares issued to pay part or all of the purchase price for the acquisition by
the Company of a person (which, for purposes of this clause (iv), shall not
include an individual or group of individuals), and (v) shares issued in a bona
fide public offering by the Company of its securities, unless (A) the Company
delivers to Purchaser a written notice (the "Subsequent Financing Notice") of
its intention to effect such Subsequent Financing, which Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the person
with whom such Subsequent Financing shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) Purchaser
shall not have notified the Company by 5:00 p.m. (New York time) on the tenth
(10th) Business Day after its receipt of the Subsequent Financing Notice of its
willingness to provide, subject to completion
of mutually acceptable documentation, financing to the Company on substantially the terms set forth in the Subsequent Financing Notice. If Purchaser shall fail to notify the Company of its intention to enter into such negotiations within such time period, then the Company may effect the Subsequent Financing substantially upon the terms and to the persons (or affiliates of such persons) set forth in the Subsequent Financing Notice; provided that the Company shall provide Purchaser with a second Subsequent Financing Notice, and Purchaser shall again have the right of first refusal set forth above in this Section 8.3, if the Subsequent Financing subject to the initial Subsequent Financing Notice shall not have been consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Business Days after the date of the initial Subsequent Financing Notice with the person (or an affiliate of such person) identified in the Subsequent Financing Notice. The rights granted to Purchaser in this Section 8.3 are not subject to any prior right of first refusal given to any other person except as disclosed on Schedule 4.4.
8.4 Certain Agreements. (a) The Company covenants and agrees that it will not, without the prior written consent of Purchaser, enter into any subsequent or further offer or sale of Common Stock or securities convertible into Common Stock with any third party until the date which is one hundred eighty (180) days after the Effective Date, unless all of the Initial Shares and Additional Shares held by the Investor have been redeemed by the Company pursuant to Section 8.9 within ten (10) calendar days of the closing of such subsequent offer or sale.
(b) The provisions of Section 8.4(a) will not apply to: (w) Common Stock issued pursuant to Rule 144, provided the holder thereof is required to hold such Common Stock for at least one year from the date of issuance; (x) a secondary public offering of shares of Common Stock at market; (y) an offering of convertible debentures or preferred stock at market or above; or (z) the issuance of securities (other than for cash) in connection with a merger, consolidation, sale of assets, disposition or the exchange of the capital stock for assets, stock or other joint venture interests; and provided further, that such securities would not be included in the Registration Statement relating to the Initial Shares and a registration statement in respect of such stock shall not be filed prior to sixty (60) days after the Effective Date.
8.5 Limitation on Issuance of Common Stock. If required by the Principal Market on which the stock is listed, the Company shall not issue an aggregate number of (i) Shares under this Agreement and (ii) shares of Common Stock pursuant to the Warrant, that exceeds 19.9% of the shares of Common Stock issued and outstanding on the date of the Initial Closing (the "Share Limitation"). If, pursuant to this Agreement and the Warrant the Company otherwise would be required to issue a number of shares of Common Stock that exceeds the Share Limitation, then Purchaser shall have the right to require the Company to redeem each Repriced Share for the Redemption Amount (as defined below).
(i) the Company will take all steps reasonably necessary to be in a position to issue Shares upon exercise of the Warrants without violating the Share Limitation and (ii) if, despite taking such steps, the Company still cannot issue such Shares without violating the Cap Regulations, the holder of Initial Shares and Warrants shall have the option, excercisable in such holders' sole and absolute discretion, to elect either of the following remedies:
(x) require the Company to issue Repricing Shares at a price equal to the average of the closing bid price per share of Common Stock for the last five (5) consecutive trading days during a Repricing Period (subject to certain equitable adjustments for certain events occurring during such period); or
(y) require the Company to redeem each Repriced Share for the amount set forth in Paragraphs 2.3(d), 2.4(b), 2.5(b) or 2.6(b) as may be then applicable.
8.6 Available Shares. The Company shall have at all times authorized and reserved for issuance, free from preemptive rights, shares of Common Stock sufficient to yield the number of shares of Common Stock issuable as may be required to issue the Repriced Shares.
8.7 Warrant. The Company agrees to issue to Purchaser at the Closing, the Warrant for the number of shares of Common Stock equal to 20% of the Purchase Price divided by the Initial Closing Price. The Warrant shall (i) bear an exercise price per share of Common Stock equal to 120% of the Closing Bid Price for the Business Day immediately prior to the Closing Date, and (ii) be exercisable immediately upon issuance, and for a period of four (4) years thereafter, with cashless exercise and registration rights.
8.8 Reimbursement. If (i) Purchaser, other than by reason of its gross negligence or willful misconduct, becomes involved in any capacity in any action, proceeding or investigation brought by any shareholderr of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if Purchaser is impleaded in any such action, proceeding or investigation by any person, or (ii) Purchaser, other than by reason of its gross negligence or willful misconduct or by reason of its trading of the Common Stock in a manner that is illegal under the federal securities laws, becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if Purchaser is impleaded in any such action, proceeding or investigation by any person, then in any such case, the Company will reimburse Purchaser for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which Purchaser is a named party, the Company will pay to Purchaser the charges, as reasonably determined by Purchaser, for the time of any officers or employees of Purchaser devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this Section 8.8 shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of Purchaser that are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of Purchaser and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, Purchaser and any such affiliate and any such person.
8.9 (i) Notwithstanding any other provision hereof to the contrary, the Company shall have the right to redeem that portion of the Initial Shares then held by Purchaser for which a relevant Repricing Period, other than the Final Repricing Period, has not commenced by payment of cash for an amount (the "Redemption Amount") equal to the Applicable Percentage (as defined below) multiplied by the Initial Closing Price of the Initial Shares being redeemed.
(ii) The Company shall give ten (10) days' written notice of such redemption to Purchaser (the "Notice of Redemption"). Anything in the preceding provisions of this Section 8 to the contrary notwithstanding, the Redemption Amount or any amount due under Paragraph 8.5 shall, unless otherwise agreed to in writing by Purchaser after receiving the Notice of Redemption, be paid to Purchaser in good funds on or before the tenth day from the date of the Notice of Redemption.
(iii) Applicable Percentage ("Applicable Percentage") shall be determined in accordance with the following schedule:
If the Redemption Payment Date is the Applicable Percentage is --------------------------------- ---------------------------- between 1-60 days after the Closing Date 115% between 61-120 days after the Closing Date 120% between 121-180 days after the Closing Date 125% between 181days after the Closing Date 130% and the conclusion of the Final Repricing Period |
9. Transfer Agent Instructions.
9.1 Irrevocable Instructions. The Company will irrevocably instruct its transfer agent to issue Repriced Shares from time to time in such amounts as shall be specified from time to time by the Company to the transfer agent, bearing the restrictive legend specified in Section 7 of this Agreement prior to registration of the Shares under the Securities Act, registered in the name of Purchaser or its nominee and in such denominations to be specified by Purchaser in connection with each Closing. The Company warrants that no instruction other than such instructions referred to in this Section 9 and stop transfer instructions to give effect to Section 7 hereof prior to registration and sale of the Shares under the Securities Act will be given by the Company to the transfer agent and that the securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement, the Registration Rights Agreement, and applicable law. Nothing in this Section 9 shall affect in any way Purchaser's obligations and agreement to comply with all applicable securities laws upon resale of the Shares.
9.2 [Intentionally Omitted]
9.3 Transmission of Certificates. The Company will transmit the certificates representing the unlegended securities ("Unlegended Shares") to be issued to Purchaser via express
courier, by electronic transfer or otherwise, within three (3) Business Days after receipt by the Company of the certificate representing the legended Common Stock, and a representation by Purchaser that such shares have been sold in accordance with the provisions of the Securities Act (the "Delivery Date").
9.4 Delay. The Company understands that a delay in the issuance of the Unlegended Shares beyond the Delivery Date could result in economic loss to Purchaser. On and after the Effective Date as compensation to Purchaser for such loss, the Company agrees to pay late payments to Purchaser for late issuance of Unlegended Shares in accordance with the following schedule (where "No. of Days Late" is defined as the number of days beyond five (5) Business Days from Delivery Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
---------------- -----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
|
The Company shall pay any payments incurred under this Section 9.4 in immediately available funds upon demand. Nothing herein shall limit Purchaser's right to pursue actual damages for the Company's failure to issue and deliver the Unlegended Shares to Purchaser, except to the extent that such late payments shall constitute payment for and offset any such actual damages alleged by Purchaser, and any Buy In Adjustment Amount (as defined below).
9.5 Cover. If the Company fails for any reason to deliver the Unlegended Shares after such Delivery Date and the holder of the Initial Shares (a "Holder") purchases, in an open market transaction or otherwise, shares of Common Stock (the "Covering Shares") in order to make delivery in satisfaction of a sale of Common Stock by such Holder (the "Sold Shares"), which delivery such Holder anticipated to make using the Unlegended Shares (a "Buy-In"), then the Company shall pay to such Holder, in addition to all other amounts contemplated in other provisions of the Transaction Documents, and not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the amount equal to the excess, if any, of (x) such Holder's total purchase price (including brokerage commissions, if any) for the Covering Shares over (y) the net proceeds (after brokerage commissions, if any) received by such Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to such Holder in immediately available funds immediately upon demand by such Holder. By way of illustration and not in limitation of the foregoing, if such Holder purchases Covering Shares having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock that it sold for net proceeds of $10,000, the Buy-In Adjustment Amount that the Company will be required to pay to such Holder will be $1,000.
9.6 Electronic Transfer. In lieu of delivering physical certificates representing the Unlegended Shares issuable upon conversion, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, upon request of Purchaser and its compliance with the provisions contained in this paragraph, so long as the certificates therefor do not bear a legend and Purchaser thereof is not obligated to return such certificate for the placement of a legend thereon, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock to Purchaser by crediting the account of Purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
9.7 The Company will authorize its transfer agent to give information relating to the Company directly to the Purchaser or the Purchaser's representatives upon the request of the Purchaser or any such representative, to the extent such information relates to (i) the status of shares of Common Stock issued or claimed to be issued to the Purchaser, or (ii) the number of outstanding shares of Common Stock of all stockholders as of a current or other specified date. The Company will provide the Purchaser with a copy of the authorization so given to the transfer agent.
10. Closing Date.
10.1 The closing of the issuance and sale of the Initial Shares shall occur on the date (the "Closing Date"), which is the first Business Day after the fulfillment or waiver of all closing conditions pursuant to Sections 11 and 12 hereof or such other date and time as is mutually agreed upon by the Company and Purchaser.
10.2 Notwithstanding anything to the contrary contained herein, the Escrow Agent will be authorized to release the Escrow Property only upon satisfaction of the conditions set forth in Sections 11 and 12 hereof.
11. Conditions To The Company's Obligation To Sell.
Purchaser understands that the Company's obligation to sell the Initial Shares on the Closing Date to Purchaser pursuant to this Agreement is conditioned upon:
11.1 The receipt and acceptance by Purchaser of this Agreement as evidenced by Purchaser's execution and delivery of this Agreement.
11.2 Delivery by Purchaser to the Escrow Agent of good funds as payment in full of an amount equal to the Purchase Price for the Initial Shares in accordance with Section 1.2 hereof;
11.3 The accuracy on the Closing Date of the representations and warranties of Purchaser contained in this Agreement as if made on the Closing Date, and the performance by Purchaser on or before the Closing Date of all covenants and agreements of Purchaser required to be performed on or before the Closing Date;
11.4 There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.
12. Conditions to Purchaser's Obligation to Purchase.
The Company understands that Purchaser's obligation to purchase the Initial Shares on the Closing Date is conditioned upon:
12.1 Acceptance by the Company of this Agreement for the sale of the Initial Shares, as indicated by the Company's execution and delivery of this Agreement;
12.2 Delivery by the Company to the Escrow Agent of the Certificate in accordance with this Agreement;
12.3 The accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement as if made on the Closing Date and the performance by the Company on or before the Closing Date of all covenants and agreements of the Company required to be performed on or before the Closing Date; and
12.4 On the Closing Date, Purchaser having received an opinion of counsel for the Company, dated the Closing Date, in form, scope and substance reasonably satisfactory to Purchaser, to the effect set forth hereto, the Registration Rights Agreement, the Warrant and the Additional Agreements.
12.5 No statute, rule, regulation, executive order, decree, ruling or injunction shall be enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits or adversely effects any of the transactions contemplated by the Transaction Documents, and no proceeding or investigation shall have been commenced or threatened which may have the effect of prohibiting or adversely effecting any of the transactions contemplated by the Transaction Documents.
12.6 From and after the date hereof to and including the Closing Date, the trading of the Common Stock shall not have been suspended by the SEC, or the NASD and trading in securities generally on the New York Stock Exchange or NASDAQ shall not have been suspended or limited, nor shall minimum prices have been established for securities traded on NASDAQ, nor
shall there be any outbreak or escalation of hostilities involving the United States or any material adverse change in any financial market that in either case in the reasonable judgment of Purchaser makes it impracticable or inadvisable to purchase the Initial Shares, as the case may be.
13. General Provisions.
13.1 Assignment. Neither this Agreement nor any rights of Purchaser hereunder may be assigned by either party to any other person without the prior written consent of the Company.
13.2 Attorneys' Fees. In the event any dispute arises under this Agreement or the documents or instruments executed and delivered in connection with this Agreement, and the parties hereto resort to litigation to resolve such dispute, the prevailing party in any such litigation, in addition to all other remedies at law or in equity, shall be entitled to an award of costs and fees from the other party, which costs and fees shall include, without limitation, reasonable attorneys' fees and legal costs.
13.3 Choice of Law; Venue. This Agreement will be construed and enforced in accordance with and governed by the laws of the State of Delaware and the federal law of the United States without reference to principles of conflicts of law. The parties agree that, in the event of any dispute arising out this Agreement or the transactions contemplated thereby, venue for such dispute shall be in the state or federal courts located in Wilmington, and that each party hereto waives any objection to such venue based on forum non conveniens.
13.4 Costs and Expenses. The parties shall be responsible for and shall pay their own costs and expenses, including without limitation attorneys' fees and accountants' fees and expenses, in connection with the conduct of the due diligence inquiry, negotiation, execution and delivery of this Agreement and the instruments, documents and agreements executed in connection with this Agreement, except that the Company shall pay the legal and escrow fees of the Purchaser in connection herewith.
13.5 Counterparts/Facsimile Signatures. This Agreement may be executed in one or more counterparts, each of which when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument. In lieu of the original, a facsimile transmission or copy of the original shall be as effective and enforceable as the original.
13.6 Entire Agreement: Amendment. This Agreement, together with the exhibits to this Agreement and the other instruments and documents delivered in connection with this Agreement 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 in this Agreement or therein. Except as expressly provided in this Agreement, 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.
13.7 Headings. The headings of the sections and paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement.
13.8 Notices. All notices or other communications provided for under this Agreement shall be in writing, and mailed, telecopied or delivered by hand delivery or by overnight courier service, as follows:
All notices and communications shall be effective as follows: when mailed, upon three (3) Business Days after deposit in the mail (postage prepaid); when telecopied, upon confirmed transmission of the telecopied notice; when hand delivered, upon delivery; and when sent by overnight courier, the next Business Day after deposit of the notice with the overnight courier.
13.9 Publicity. The Company and Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other parties with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of Purchaser without the prior written consent of such Purchaser, except to the extent required by law. Purchaser acknowledges that this Agreement and all or part of the
Transaction Documents may be deemed to be "material contracts" as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. Purchaser further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.
13.10 Severability. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby.
13.11 Survival of Representations And Warranties. The Company's representations and warranties herein shall survive the execution and delivery of this Agreement for one (1) year, and shall inure to the benefit of Purchaser and its successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties named below have caused this Agreement to be executed, as of the date first above written.
PURCHASER:
YOUNG LLC
By:_________________________________________
Its:________________________________________
INTERACTIVE TECHNOLOGIES.COM, LTD.
By:__________________________________________
William R. Becker, Chief Executive Officer
Exhibit 4.5
YOUNG LLC
Harbour House
2nd Floor
P.O. Box 972
Road Town
British Virgin Island, Tortola
February 3, 2000
Interactive Technologies.Com, Ltd.
110 East Atlantic Avenue
Suite 400
Delray Beach, Florida 33444
Attention: President
Re: Interactive Technologies.Com, Ltd., (the "Company")
Gentlemen:
Reference is made to the Common Stock Purchase Agreement (the "Purchase Agreement"), of even date hereof, between the Company and the undersigned (the "Purchasers").
During the eighteen (18) month period following the Effective Date, the Purchasers additionally commit, subject to and upon the terms and conditions hereof, to purchase from the Company, and the Company shall sell to the Purchasers shares of Common Stock (the "Additional Shares") for an aggregate purchase price of up to $16,000,000 at a price equal to 90% of the two (2) lowest closing bid prices of the Common Stock (not necessarily consecutive) for the ten (10) trading days prior to each Additional Financing Notice.
The commitment of the Purchasers set forth in this letter is subject to the terms, conditions and qualifications set forth below:
1. Additional Documentation. In order to effectuate a purchase and sale of the Additional Shares, prior to their issuance, the Company and the Purchasers shall enter into the following agreements: (a) a securities purchase agreement (the "Additional Purchase Agreement") setting forth the terms and conditions of the purchase and sale, and (b) a registration rights agreement identical to the Registration Rights Agreement (the "Additional Registration Rights Agreement", and together with the Additional Purchase Agreement, collectively the "Additional Transaction Documents"). The Purchasers shall prepare the Additional Transaction Documents, which shall be in form mutatis mutandis to the initial Transaction Documents.
2. The Additional Closing. (i) The Company shall have the right to deliver
one or more written notices to the Purchasers (the "Additional Financing Notice") requiring such parties to buy the Additional Shares for an aggregate purchase price of $16,000,000 (the "Additional Purchase Price"), but not to exceed $2,000,000 per Additional Financing Notice. The Company agrees to deliver one or more Additional Financing Notices for a minimum of $4,000,000. An Additional Financing Notice may be delivered no earlier than fifteen (15) Trading Days following the Effective Date or the prior Additional Financing Notice. The closing of the purchase and sale of the Additional Securities (the "Additional Closing") shall take place at the offices of Krieger & Prager, LLP, Suite 1440, 39 Broadway, New York, New York 10006 on the fifth (5th) Business Day after the Additional Financing Notice is received by the Purchasers or the Company, as the case may be, or on such other date as otherwise agreed to by the parties hereto; provided, however, that in no case shall the Additional Closing take place unless and until all of the conditions listed in Section 3 of this letter and the Additional Purchase Agreement shall have been satisfied by the Company or waived by the Purchasers. The date of each Additional Closing is hereinafter referred to as the "Additional Closing Date." Notwithstanding anything to the contrary contained in this letter, each Purchaser may designate an Affiliate thereof to acquire all or any portion of the Additional Securities.
(ii) At the Additional Closing, the parties shall deliver or shall cause to be delivered the following: (a) the Company shall deliver to (x) each Purchaser or its designated Affiliate, (1) the number of Additional Shares registered in the name of such Purchaser or its designated Affiliate, representing the shares of Common Stock to be issued and sold to such Purchaser at the Additional Closing; (2) a legal opinion in form and substance acceptable to the Purchasers, and (3) executed Additional Transaction Documents and the Transfer Agent Instructions relating to the Additional Securities, and (4) a four (4) year transferable divisible warrant in the form of the Transaction Documents to purchase shares equal to 20% of the Additional Financing Notice with an exercise price equal to 120% of the average of the closing bid prices for the five day trading period immediately preceding the Additional Closing Date with provisions for cashless exercise at the Purchaser's option and with "piggy back" registration rights, (y) to Krieger & Prager, LLP, $15,000 at the First Additional Closing and $3,500 at each Additional Closing thereof, as payment of the legal fees and expenses incurred by the Purchasers to prepare the Additional Transaction Documents, which amount shall be deducted by the Purchasers from the amount due to the Company for the Additional Securities and shall be paid directly to Krieger & Prager, LLP., (z) the fees of Ladenburg Thalmann Co., Inc.; and (b) each Purchaser shall deliver to the Company (1) its pro rata portion of the Additional Purchase Price, in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose prior to the Additional Closing Date and (2) the executed Additional Transaction Documents.
3. Conditions precedent to the Additional Closing. Notwithstanding anything to the contrary contained in this letter, the commitment of a Purchaser to purchase the Additional Securities is subject to the satisfaction or waiver by the Purchasers of each of the following conditions:
(a) Closing of Initial Shares and Initial Warrants. The Initial Closing shall have occurred;
(b) Performance by the Company. The Company shall have performed, satisfied and complied with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company between the Closing Date and the Additional Closing Date and no Potential Material Event (as defined in the Registration Rights Agreement ) shall have occurred;
(c) Underlying Shares Registration Statement. The Additional Shares Registration Statement shall have been declared effective under the Securities Act by the Commission and shall have remained effective at all times, not subject to any actual or threatened stop order or subject to any actual or threatened suspension at any time prior to the Additional Closing Date;
(d) Shares of Common Stock. The Company shall have duly reserved the number of shares of Common Stock as required by the Additional Transaction Documents;
(e) Closing Threshold. For the twenty (20) Trading Days immediately preceding both the Additional Financing Notice and the Additional Closing Date, the average daily weighted dollar trading volume of the Common Stock on the NASDAQ, based on the Closing Bid Price, shall be at least 50 % of the amount of the Additional Financing Notice and the average of the Per Share Market Value for such twenty (20) Trading Day period shall be greater than $2.00.
(f) Deliveries pursuant to Additional Transaction Documents. At the Additional Closing, the Company shall deliver the Additional Securities and executed Additional Transaction Documents relating to the Additional Securities in the forms contemplated by this letter.
(g) Restriction on Future Financing. (i) The Company covenants and agrees that it will not, without the prior written consent of the Purchasers, enter into any subsequent or further offer or sale of Common Stock or securities convertible into Common Stock (collectively, New Common Stock ) with any third party on any date which is thirty (30) trading days prior or subsequent to any Additional Closing Date.
(ii) The provisions of subparagraph (g)(I) will not apply to
(w) Common Stock issued pursuant to an exemption from registration under the
Securities Act of 1933; (x) an underwritten public offering of shares of Common
Stock or Preferred Stock; (y) an offering of convertible Preferred Stock or
Debentures at market or above; or (z) the issuance of securities (other than for
cash) in connection with an acquisition, merger, consolidation, sale of assets,
disposition or the exchange of the capital stock for assets, stock or other
joint venture interests.
4. Governing Law. This letter shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof.
5. Execution. This letter may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof.
Please indicate your agreement with the foregoing by executing a countersigned copy of this letter and returning the same to our attention, whereupon effective immediately thereafter this letter shall become a legally valid and binding agreement between the Purchasers and the Company.
We look forward to our continuing relationship.
Sincerely,
Young LLC
By:__________________________________________
Name:________________________________________
Title:_______________________________________
Agreed and accepted
February 3, 2000
INTERACTIVE TECHNOLOGIES.COM, LTD.
By:__________________________________________ William R. Becker, Chief Executive Officer
Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of February 3, 2000 (this "Agreement"), is made by and between INTERACTIVE TECHNOLOGIES.COM, LTD., a Delaware corporation, with headquarters located at 110 East Atlantic Avenue, Suite 400, Delray Beach, Florida 33444 (the "Company"), and each entity named on the signature page hereto (each, an "Initial Investor") (each agreement with an initial Investor being deemed a separate and independent agreement between the Company and such Initial Investor, except that each Initial Investor acknowledges and consents to the rights granted to each other Initial Investor under such agreement)
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Common Stock Purchase Agreement, dated as of February 3, 2000, between Investor and the Company (the "Common Stock Purchase Agreement;" terms not otherwise defined herein shall have the meanings ascribed to them in the Common Stock Purchase Agreement), the Company has agreed to issue and sell to Investor the Initial Shares, together with the Repriced Shares (collectively, the "Shares");
WHEREAS, the Company has agreed to issue the Warrant to Investor in connection with the issuance of the Shares; and
WHEREAS, to induce Investor to execute and deliver the Common Stock Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Securities Act"), with respect to the Shares and the Warrant Shares (as defined below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the following meanings:
(a) "Potential Material Event" means any of the following: (i) the possession by the Company of material information not ripe for disclosure in a Registration Statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the Registration Statement would be detrimental to the business and affairs of the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in a Registration Statement at such time, which determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the Registration Statement would be materially misleading absent the inclusion of such information;
(b) "Register," "Registered," and "Registration" refer to a Registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis, and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the "SEC");
(c) "Registrable Securities" mean the Shares and the Warrant Shares; and
(d) "Registration Statement" means a registration statement of the Company under the Securities Act, or an amendment to an existing registration statement.
2. Registration.
(a) Mandatory Registration.
(i) The Company shall prepare and file with the SEC, as soon as possible after the Initial Closing and no later than a date (the "Required Filing Date"), which is thirty (30) days following the Initial Closing, either a Registration Statement on Form S-1 (or other applicable registration statement form), or an amendment to an existing Registration Statement, in either event Registering for resale by Investor a sufficient number of shares of Common Stock for Investor to sell the Registrable Securities (or such lesser number as may be required by the SEC, but in no event less than two hundred percent (200%) of the aggregate number of Initial Shares and the number of shares of Common Stock that would be issued upon exercise of the Warrant (the "Warrant Shares") at the time of filing of the Registration Statement (assuming for such purposes that the Warrant had been eligible to be exercised and had been exercised in accordance with its terms, whether or not such eligibility or exercise had in fact occurred as of such date). The Registration Statement (W) shall include only the Registrable Securities, and (X) shall state that, in accordance with Rule 416 and 457 under the Securities Act, it covers such indeterminate number of additional shares of Common Stock as may become issuable upon repricing of the Initial Shares and the exercise of the Warrant to prevent dilution resulting from stock splits or stock dividends. The Company will use its reasonable best efforts to cause such Registration Statement to be declared effective on a date (a "Required Effective Date"), which is no later than the earlier of (y) five (5) Business Days after notice by the SEC that it may be declared effective or (z) ninety (90) days after the date of the Initial Closing.
(ii) If at any time (an "Increased Registered Shares Date"), the number of shares of Common Stock represented by the Registrable Securities, issued or to be issued as contemplated
by the Transaction Documents, exceeds the aggregate number of shares of Common
Stock then Registered, the Company shall, within ten (10) Business Days after
receipt of a written notice from Investor, either: (x) amend the Registration
Statement filed by the Company pursuant to the preceding provisions of this
Section 2, if such Registration Statement has not been declared effective by the
SEC at that time, to Register two hundred percent (200%) of such Registrable
Shares, computed as contemplated by the immediately preceding subparagraph (i);
or (y) if such Registration Statement has been declared effective by the SEC at
that time, file with the SEC an additional Registration Statement (an
"Additional Registration Statement") to Register two hundred percent (200%) of
the shares of Common Stock represented by the Registrable Shares, computed as
contemplated by the immediately preceding subparagraph (i), that exceed the
aggregate number of shares of Common Stock already Registered. The Company will
use its reasonable best efforts to cause such Registration Statement to be
declared effective on a date (a "Required Effective Date") which is no later
than (q) with respect to a Registration Statement under clause (x) of this
subparagraph (ii), the Required Effective Date contemplated by the immediately
preceding subparagraph (i) and (r) with respect to an Additional Registration
Statement, the earlier of (i) five (5) Business Days after notice by the SEC
that it may be declared effective or (ii) sixty (60) days after the Increased
Registered Shares Date.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities is not filed in proper form with the SEC by the Required Filing Date, the Company will make payment to Investor in such amounts and at such times as shall be determined pursuant to this Section 2(b);
(ii) If the Registration Statement covering the Registrable Securities is not effective by the relevant Required Effective Date or if Investor is restricted from making sales of Registrable Securities covered by a previously effective Registration Statement at any time (the date such restriction commences, a "Restricted Sale Date") after the Effective Date other than during a Suspension Period (as defined below), then the Company will make payments to Investor in such amounts and at such times as shall be determined pursuant to this Section 2(b);
(iii) The amount (each a "Periodic Amount") to be paid by the Company to Investor shall be determined as of each Computation Date (as defined below) and the Periodic Amount shall be equal to the Periodic Amount Percentage (as defined below) of the Purchase Price for all of the Initial Shares for the period from the date following the relevant Required Filing Date, Required Effective Date or Restricted Sale Date, as the case may be, to the first relevant Computation Date, and thereafter to each subsequent Computation Date. The "Periodic Amount Percentage" means (A) two percent (2%) of the Purchase Price for the period from the date following the relevant Required Filing Date, Required Effective Date or Restricted Sale Date, as the case may be, to the first relevant Computation Date (prorated on a daily basis if such period is less than thirty (30) days), and (B) two percent (2%) of the Purchase Price to each Computation Date thereafter (prorated on a daily basis if such period is less than thirty (30) days). By way of
illustration and not in limitation of the foregoing, if the Registration Statement for the Registrable Securities relating to the Common Stock and Warrants issued on the Initial Closing Date is timely filed but is not declared effective until one hundred sixty-five (165) days after the date of the Initial Closing, the Periodic Amount will aggregate five percent (5%) of the Purchase Price (2% for days 90-120, plus 2% for days 121-150, and 1% for days 151-165);
(iv) Each Periodic Amount will be payable by the Company in cash or other immediately available funds to Investor at the end of each Computation Period, without requiring demand therefor by Investor;
(v) The parties acknowledge that the damages which may be incurred by Investor if the Registration Statement is not filed by the Required Filing Date or if the Registration Statement has not been declared effective by a Required Effective Date, including if the right to sell Registrable Securities under a previously effective Registration Statement is suspended, may be difficult to ascertain. The parties agree that the Periodic Amount represents a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of such damages;
(vi) Notwithstanding the foregoing, the amounts payable by the Company pursuant to this Section 2(b) shall not be payable to the extent any delay in the effectiveness of the Registration Statement occurs because of an act of, or a failure to act or to act timely by Investor or its counsel, or in the event all of the Registrable Securities may be sold pursuant to Rule 144 or another available exemption under the Securities Act; and
(vii) "Computation Date" means (A) the date which is the earlier of
(1) thirty (30) days after the Required Filing Date, any relevant Required
Effective Date or a Restricted Sale Date, as the case may be, or (2) the date
after the Required Filing Date, such Required Effective Date or Restricted Sale
Date on which the Registration Statement is filed (with respect to payments due
as contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of
(1) thirty (30) days after the previous Computation Date or (2) the date after
the previous Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or is
declared effective or has its restrictions removed (with respect to payments due
as contemplated by Section 2(b)(ii) hereof), as the case may be.
3. Obligations of the Company. In connection with the Registration of the Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing Date, a Registration Statement with respect to not less than the number of Registrable Securities provided in Section 2(a) above, and thereafter use its reasonable best efforts to cause such Registration Statement relating to Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times during the period (the "Registration Period") continuing until the earliest of: (i) the date that is two (2) years after the last day of the calendar month following the month in which the Final Repricing Period ends; (ii) the date when Investor may sell all Registrable Securities under Rule 144; or (iii) the date when Investor no longer owns any of the Registrable Securities, which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state 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;
(b) Prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during the Registration Period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated by all of the Investors (which, until further notice, shall be deemed to be Krieger & Prager, LLP ATTN: Samuel Krieger, Esq.; "Investor's Counsel") to review the Registration Statement and all amendments and supplements thereto a reasonable period of time (but not less than three (3) Business Days) prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects;
(d) Notify Investor and Investor's legal counsel identified to the Company
(which, until further notice, shall be deemed to be Krieger & Prager, ATTN:
Samuel Krieger, Esq.; "Investor's Counsel") (and, in the case of (i)(A) below,
not less than five (5) Business Days prior to such filing) and (if requested by
any such person) confirm such notice in writing no later than one (1) Business
Day following the day (i): (A) when a prospectus or any prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to Investor); and (D) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, prospectus or other
documents so that, in the case of the Registration Statement or the prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any 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. In addition, the Company shall furnish Investor with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) Business Day in advance of the
filing of such responses with the SEC so that Investor shall have the
opportunity to comment thereon;
(e) Furnish to Investor and Investor's Counsel: (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, two (2) copies of the Registration Statement, each preliminary prospectus and prospectus, and each amendment or supplement thereto; and (ii) such number of copies of a prospectus, and all amendments and supplements thereto and such other documents, as Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by Investor;
(f) As promptly as practicable after becoming aware thereof, notify Investor 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, and use its best efforts promptly to prepare a supplement or amendment to the Registration Statement or other appropriate filing with the SEC to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to Investor as Investor may reasonably request;
(g) As promptly as reasonably practicable after becoming aware thereof, notify Investor of the issuance by the SEC any notice of effectiveness or any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time after the date of effectiveness of the Registration Statement, the Company notifies Investor in writing of the existence of a Potential Material Event, Investor shall not offer or sell any Registrable Securities, or engage in any other transaction involving or relating to the Registrable Securities, from the time of the giving of notice with respect to a Potential Material Event until Investor receives written notice from the Company that such Potential Material Event either has been disclosed to the public
or no longer constitutes a Potential Material Event; provided, however, that the Company may not so suspend the right to such holders of Registrable Securities for more than two twenty (20) day periods in the aggregate during any 12-month period ("Suspension Period") with at least a ten (10) Business Day interval between such periods, during the periods the Registration Statement is required to be in effect;
(i) Use its reasonable efforts to secure and maintain the designation of all the Registrable Securities covered by the Registration Statement on the "OTC Bulletin Board" or National Market or Small Cap Market of the National Association of Securities Dealers, and the quotation of the Registrable Securities on the OTC Bulletin Board;
(j) Provide a transfer agent for the Registrable Securities not later than the effective date of the Registration Statement;
(k) Cooperate with Investor to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts as the case may be, as Investor may reasonably request, and, within three (3) Business Days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to Investor) an appropriate instruction and opinion of such counsel substantially in the form of Exhibit 3(k) annexed; and
(l) Take all other reasonable actions necessary to expedite and facilitate disposition by Investor of the Registrable Securities pursuant to the Registration Statement.
4. Obligations of Investor. In connection with the Registration of the Registrable Securities, Investor shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to complete the Registration pursuant to this Agreement with respect to the Registrable Securities of Investor, that Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the Registration of such Registrable Securities and shall execute such documents in connection with such Registration as the Company may reasonably request. At least ten (10) days prior to the first anticipated filing date of the Registration Statement, the Company shall notify Investor of the information the Company requires from Investor (the "Requested Information") if Investor elects to have any of the Registrable Securities included in the Registration Statement. If at least two (2) Business Days prior to the filing date the Company has not received the Requested Information from Investor, then the Company need not file the Registration Statement until receiving the response of Investor;
(b) Investor, by accepting the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement hereunder, unless Investor has notified the Company in writing of its election to exclude all of the Registrable Securities from the Registration Statement; and
(c) Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or 3(g), above, Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until Investor receives the copies of the supplemented or amended prospectus contemplated by Section 3(f) or 3(g).
5. Expenses of Registration. (a) All reasonable expenses incurred in connection with Registrations, filings or qualifications pursuant to Section 3, including, without limitation, all Registration, listing, and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for the Company and a fee for a single counsel for Investor, not exceeding $3,500 for the Registration Statement covering the Registrable Securities shall be borne by the Company; and
(b) Except as otherwise provided for in Schedule 5(b) attached hereto, neither the Company nor any of its subsidiaries has, as of the date hereof, and the Company shall not on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to Investor in this Agreement or otherwise conflicts with the provisions hereof. Except as otherwise provided for in Schedule 5(b), the Company has not previously entered into any agreement granting any registration rights with respect to any of its securities to any person. Except as otherwise provided for in this Section 5, and without limiting the generality of the foregoing, without the written consent of Investor, the Company shall not grant to any person the right to request the Company to Register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of Investor set forth herein, and are not otherwise in conflict or inconsistent with the provisions of this Agreement and the other Transaction Documents.
6. Indemnification. In the event any Registrable Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold harmless Investor, the directors, if any, of Investor, the officers, if any, of Investor, each person, if any, who controls Investor within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act") (each, an "Indemnified Party"), against any losses, claims, damages, liabilities or expenses (joint or several) incurred (collectively, "Claims") to which any Investor may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any material violation or alleged material violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to Section 6(b), the Company shall reimburse Investor,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not: (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Party
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a failure of
Investor to deliver or cause to be delivered the prospectus made available by
the Company; or (III) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Investor will indemnify the Company
and its officers, directors and agents (each, an "Indemnified Party") against
any claims arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company, by
or on behalf of Investor, expressly for use in connection with the preparation
of the Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party.
(b) Promptly after receipt by an Indemnified Party under this Section 6 of notice of the commencement of any action (including any governmental action), such Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to 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 control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Party, as the case may be. In case any such action is brought against any Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such Indemnified
Party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such Indemnified Party under this Section 6 for any legal
or other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action of its final conclusion. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and reasonable out-of-pocket expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the Indemnified Party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Party under
this Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (a) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6; (b) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation; and (c) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under Securities Act and Exchange Act. With a view to making available to Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit Investor to sell securities of the Company to the public without Registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to Investor so long as Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to permit Investor to sell such securities pursuant to Rule 144 without Registration.
(d) The Company will, at the request of any Holder of Registrable Securities, upon receipt from such Holder of a certificate certifying (i) that if the securities had been held for at least two (2) years, such Holder has not been an affiliate (as defined in Rule 144) of the company for more than the ninety (90) preceding days, and (ii) as to such other matters as may be appropriate in accordance with such Rule, remove from the stock certificate representing such Registrable Securities that portion of any restrictive legend which relates to the registration provisions of the Securities Act, provided, however, the Company will advise the Transfer Agent that counsel to Investor may provide such instructions and opinion to the transfer agent regarding the removal of the restrictive legend.
9. Assignment of the Registration Rights. The rights to have the Company register Registrable Securities pursuant to this Agreement shall be automatically assigned by the Investors to any permitted transferee of the Registrable Securities pursuant to the Common Stock Purchase Agreement.
10. 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 Investor. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon Investor and the Company.
11. Miscellaneous.
(a) Notices required or permitted to be given hereunder shall be given in the manner contemplated by the Common Stock Purchase Agreement, if to the Company or to Investor, to their respective addresses contemplated by this Agreement, or at such other address as each such party furnishes by notice given in accordance with this Section 11(a).
(b) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
(c) This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of Wilmington or the state courts of the State of Delaware sitting in the County of Wilmington in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions. In the event of any dispute, the prevailing party shall be entitled to recover its reasonable attorneys' fees.
(d) If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.
(e) This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.
(f) All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.
(g) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof.
(h) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by telephone line facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
(i) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3(a) hereof, or any delay in such performance,
could result in loss to Investor, and the Company agrees that, in addition to
any other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, offset by any Periodic Amount paid to Investor pursuant to Sections
2(b)(i)- (ii), unless the same is the result of force majeure. Neither party
shall be liable for consequential damages.
(j) This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
COMPANY:
INTERACTIVE TECHNOLOGIES.COM, LTD.
By:______________________________________________________
William R. Becker, Chief Executive Officer
INVESTOR:
YOUNG LLC
By:______________________________________________________
Name:
Title:
SCHEDULE 5(b)
OTHER REGISTRABLE SECURITIES
Exhibit 4.7
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
INTERACTIVE TECHNOLOGIES.COM, LTD.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration,
the receipt of which is hereby acknowledged by INTERACTIVE TECHNOLOGIES.COM,
LTD., a Delaware corporation (the "Company"), YOUNG LLC, or registered assigns
(the "Holder") is hereby granted the right to purchase at any time commencing
February 3, 2000 until 5:00 P.M., New York City time, on February 2, 2004 (the
"Expiration Date"), one hundred sixty four thousand nine hundred forty eight
(164,948) fully paid and nonassessable shares of the Company's Common Stock, par
value $.001 per share (the "Common Stock") at an initial exercise price of $5.82
per share (the "Exercise Price"), subject to further adjustment as set forth in
Section 6 hereof.
2. Exercise of Warrants. (a) This Warrant is exercisable in whole or
in part at the Exercise Price per share of Common Stock payable hereunder,
payable in cash or by certified or official bank check, or by "cashless
exercise", by means of tendering this Warrant Certificate to the Company to
receive a number of shares of Common Stock equal in Market Value to the
difference between the Market Value of the shares of Common Stock issuable upon
exercise of this Warrant and the total cash exercise price thereof divided by
the Market Value. Upon surrender of this Warrant Certificate with the annexed
Notice of Exercise Form duly executed, together with payment of the Exercise
Price for the shares of Common Stock purchased, the Holder shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased. For the purposes of this Section 2, "Market Value" shall be an amount
equal to the average closing bid price of a share of Common Stock for the ten
(10) days preceding the Company's receipt of the Notice of Exercise Form duly
executed multiplied by the number of shares of Common Stock to be issued upon
surrender of this Warrant Certificate.
(b) For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder and the holding period for the Warrant Shares shall be deemed to have been commenced, on the issue date.
3. Reservation of Shares. The Company hereby agrees that at all times during the term of this Warrant there shall be reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 Adjustment Mechanism. If an adjustment of the Exercise Price is required pursuant to this Section 6, the Holder shall be entitled to purchase such number of additional shares of Common Stock as will cause (i) the total number of shares of Common Stock Holder is entitled to purchase pursuant to this Warrant, multiplied by (ii) the adjusted purchase price per share, to equal (iii) the dollar amount of the total number of shares of Common Stock Holder is entitled to purchase before adjustment multiplied by the total purchase price before adjustment.
6.2 Capital Adjustments. In case of any stock split or reverse stock split, stock dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, or like capital adjustment affecting the Common Stock of the Company, the provisions of this Section 6 shall be applied as if such capital adjustment event had occurred immediately prior to the date of this Warrant and the original purchase price had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof. A rights offering to stockholders shall be deemed a stock dividend to the extent of the bargain purchase element of the rights.
7. Transfer to Comply with the Securities Act; Registration Rights.
(a) This Warrant has not been registered under the Securities Act of 1933, as amended, (the "Act") and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of an effective registration statement under the Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section.
(b) The Company agrees to file a registration statement, which shall include the Warrant Shares, on Form S-3 or another available form (the "Registration Statement"), pursuant to the Registration Rights Agreement between the Company and Holder dated February 3, 2000.
8. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage pre-paid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission, or, if mailed, two days after the date of deposit in the United States mails, as follows:
(i) if the to Company, to:
Interactive Technologies.Com, Ltd.
110 East Atlantic Avenue
Suite 400
Delray Beach, Florida 33444
Tel No.: (561) 454-3300
Fax No.: (561) 454-3330
with a copy to:
Hall Dickler Kent Friedman & Wood, LLP
909 Third Avenue
New York, New York 10022
ATT: Steven D. Dreyer, Esq.
Tel No.: (212) 339-5400
Fax No.: (212) 935-3121
(ii) if to the Holder, to:
Young LLC Harbour House 2nd Floor P.O. Box 972 Road Town British Virgin Island, Tortola Tel No.:
Fax No.:
with a copy to:
Krieger & Prager LLP
Suite 1440
39 Broadway
New York, New York 10006
Tel No.: (212) 363-2900
Fax No.: (212) 363-2999
Any party may designate another address or person for receipt of notices hereunder by notice given to the other parties in accordance with this Section.
9. If the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares by the third (3rd) Trading Day
after the date of exercise, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $1,000 for each day after such fifth
(5th)Trading Day until such certificates are delivered. Nothing herein shall
limit the Holder's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon exercise within
the period specified herein and the Holder shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.
10. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant of even date herewith contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein.
11. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.
12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
13. Descriptive Headings. Descriptive headings of the several Sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the 3rd day of February, 2000.
INTERACTIVE TECHNOLOGIES.COM, LTD.
By:____________________________________________
William R. Becker, Chief Executive Officer
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant Certificate dated as of _____, to purchase _____ shares of the Common Stock, par value $.001 per share, of Interactive Technologies.com, Ltd. and tenders herewith payment in accordance with Section 1 of said Common Stock Purchase Warrant.
Please deliver the stock certificate to:
Dated:____________________________________
By:_______________________________________
|_| CASH: $______________________________________
Exhibit 4.8
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 67,920 Shares of Common Stock of
INTERACTIVE TECHNOLOGIES.COM, LTD.
THIS CERTIFIES that, for value received, Ladenburg Thalmann & Co. Inc. (the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after February 7, 2000 (the "Initial Exercise Date") and on or prior to the close of business on February 7, 2004 (the "Termination Date") but not thereafter, to subscribe for and purchase from Interactive Technologies.com, Ltd., a corporation incorporated in Delaware (the "Company"), up to sixty seven thousand nine hundred twenty (67,920) shares (the "Warrant Shares") of Common Stock, $.001 par value, of the Company (the "Common Stock"). The purchase price of one share of Common Stock (the "Exercise Price") under this Warrant shall be $4.53. The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date, and before the close of business on the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier's check drawn on a United States bank, the holder of this Warrant shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered to the holder hereof within three (3) business days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. If no registration statement is effective to permit the resale of the Warrant Shares from and after one year after the Initial Exercise Date, then the Holder shall also have the right to a "cashless exercise" in which the Holder shall be entitled to receive a certificate for the number of shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the closing price (if so reported, or else the closing bid price) per share of Common Stock on the business day preceding the date of such election;
(B) = the Exercise Price of the Warrant; and
(X) = the number of shares issuable upon exercise of the Warrant in accordance with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the holder hereof; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with any applicable securities laws, transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of shares of Common Stock without having a new Warrant issued. The Company acknowledges that this Warrant may be divided among affiliates and employees of Holder.
(b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant certificate or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the holder of this Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the holder of this Warrant shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then Holder shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event.
In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of Common Stock for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 11. For purposes of this Section 11, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 11 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.
12. Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the holder of this Warrant notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16(d).
15. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the principal market upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period this Warrant is outstanding acknowledge in writing, in form reasonably satisfactory to Holder, the continuing validity of this Warrant and the obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing the current Exercise Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Warrants, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted Exercise Price.
Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
16. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws of New York without regard to its conflict of law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company fails to comply with any provision of this Warrant, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof by the Company shall be delivered by fax or by registered mail to the publicly listed headquarters address of the Company, attention Chief Financial Officer, or to Holder at 590 Madison Avenue, New York, NY 10022, Attention: Director of Corporate Finance.
(e) Limitation of Liability. No provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold harmless Holder from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against Holder in any manner relating to or arising out of any failure by the Company to perform or observe in any material respect any of its covenants, agreements, undertakings or obligations set forth in this Warrant; provided, however, that the Company will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are found in a final non-appealable judgment by a court to have resulted from Holder's negligence, bad faith or willful misconduct in its capacity as a stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: February 3, 2000
INTERACTIVE TECHNOLOGIES.COM, LTD.
By:_____________________________________________
William R. Becker, Chief Executive Officer
NOTICE OF EXERCISE
To: INTERACTIVE TECHNOLOGIES.COM, LTD.
(1) The undersigned hereby elects to purchase ________ shares of Common Stock, $.001 par value (the "Common Stock"), of Interactive Technologies.com, Ltd. pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:
Dated:
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information. Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
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Signature Guaranteed: _________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.
Exhibit 4.9
THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF, AND, EXCEPT AS STATED IN AN AGREEMENT BETWEEN THE HOLDER OF THIS INSTRUMENT AND INTERACTIVE TECHNOLOGIES.COM, LTD., SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR UNITED BUYERS ADVANTAGE, INC. RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR SUCH CORPORATION) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
STOCK PURCHASE OPTION
To Purchase 400,000 Shares of Common Stock of
INTERACTIVE TECHNOLOGIES.COM, LTD.
THIS CERTIFIES that, for value received, Boru Enterprises. Inc. (the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after June 7, 2000 (the "Initial Exercise Date") and on or prior to the close of business on June 7, 2005 (the "Termination Date") but not thereafter, to subscribe for and purchase from Interactive Technologies.com, Ltd., a corporation incorporated in Delaware (the "Company"), up to 400,000 shares (the "Option Shares") of Common Stock, $.001 par value, of the Company (the "Common Stock"). The purchase price of one share of Common Stock (the "Exercise Price") under this Option shall be $.69. The Exercise Price and the number of shares for which the Option is exercisable shall be subject to adjustment as provided herein.
1. Title to Option. Prior to the Termination Date, this Option and all rights hereunder shall not be transferable, in whole or in part.
2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Option will, upon exercise of the rights represented by this Option, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Option. (a) Exercise for Cash. Except as provided in
Section 4 herein, exercise of the purchase rights represented by this Option may
be made at any time or times on or after the Initial Exercise Date, and before
the close of business on the Termination Date by the surrender of this Option
and the Notice of Exercise Form annexed hereto duly executed, at the office of
the Company (or such other office or agency of the Company as it may designate
by notice in writing to the registered holder hereof at the address of such
holder appearing on the books of the Company) and upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or cashier's check drawn
on a United States bank, the holder
of this Option shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered to the holder hereof within three (3) business days after the date on which this Option shall have been exercised as aforesaid. This Option shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Option has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. If this Option shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Option Shares, deliver to Holder a new Option evidencing the rights of Holder to purchase the unpurchased shares of Common Stock called for by this Option, which new Option shall in all other respects be identical with this Option.
(b) Cashless Exercise. If, from and after one year after the Initial Exercise Date, (i) the Company's Common Stock shall have been registered pursuant to Section 12(b) or (g) of the Securities and Exchange Act of 1934, as amended; and (ii) the Holder's right to sell the Option Shares shall not then be subject to any restrictions or limitations imposed by any lock-up or similar agreement which the Holder shall have executed, then the Holder shall also have the right to a "cashless exercise" in which the Holder shall be entitled to receive a certificate for the number of shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the closing price (if so reported, or else the closing bid price) per share of Common Stock on the business day preceding the date of such election;
(B) = the Exercise Price of the Option; and
(X) = the number of shares issuable upon exercise of the Option in accordance with the terms of this Option.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Option. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Option shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Option or in such name or names as may be directed by the holder of this Option; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Option, this Option when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Option.
7. Transfer, Division and Combination. (a) Subject to compliance with any applicable securities laws, transfer of this Option and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Option at the principal office of the Company, together with a written assignment of this Option substantially in the form attached hereto duly executed by Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Option or Options in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Option evidencing the portion of this Option not so assigned, and this Option shall promptly be cancelled. A Option, if properly assigned, may be exercised by a new holder for the purchase of shares of Common Stock without having a new Option issued. The Company acknowledges that this Option may be divided among affiliates and employees of Holder.
(b) This Option may be divided or combined with other Options upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Options are to be issued, signed by Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Option or Options in exchange for the Option or Options to be divided or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Option or Options under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Options.
8. No Rights as Stockholder until Exercise. This Option does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Option and the payment of the aggregate Exercise Price, the Option Shares so purchased shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Option. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Option certificate or any stock certificate relating to the Option Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which shall not include the posting of any bond), and upon surrender and cancellation of such Option or stock certificate, if mutilated, the Company will make and deliver a new Option or stock certificate of like tenor and dated as of such cancellation, in lieu of such Option or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Option Shares. (a) Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Option and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Option Shares purchasable upon exercise of this Option immediately prior thereto shall be adjusted so that the holder of this Option shall be entitled to receive the kind and number of Option Shares or other securities of the Company which he would have owned or have been entitled to receive had such Option been exercised in advance thereof. Upon each such adjustment of the kind and number of Option Shares or other securities of the Company which are purchasable hereunder, the holder of this Option shall thereafter be entitled to purchase the number of Option Shares or other securities resulting from such adjustment at an Exercise Price per Option Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Option Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Option Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including options or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then Holder shall have the right thereafter to receive, upon exercise of this Option, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Option is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Option to be performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of Common Stock for which this Option is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 11. For purposes of this Section 11, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any options or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 11 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.
12. Voluntary Adjustment by the Company. The Company may at any time during the term of this Option, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
13. Notice of Adjustment. Whenever the number of Option Shares or number or kind of securities or other property purchasable upon the exercise of this Option or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the holder of this Option notice of such adjustment or adjustments setting forth the number of Option Shares (and other securities or property) purchasable upon the exercise of this Option and the Exercise Price of such Option Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and
(ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 16(d).
15. Authorized Shares. The Company covenants that during the period the Option is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Option Shares upon the exercise of any purchase rights under this Option. The Company further covenants that its issuance of this Option shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Option Shares upon the exercise of the purchase rights under this Option. The Company will take all such reasonable action as may be necessary to assure that such Option Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the principal market upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Option, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of this Option above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Option, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Option.
Upon the request of Holder, the Company will at any time during the period this Option is outstanding acknowledge in writing, in form reasonably satisfactory to Holder, the continuing validity of this Option and the obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing the current Exercise Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Options, the Company shall take any corporate action which may be
necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted Exercise Price.
Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Option is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
16. Piggyback Registration
(a) Whenever the Company proposes to register any of its common stock under the Securities Exchange Act of 1933, as amended (the "Securities Act") (other than a registration statement on Form S-8), the Company will give prompt written notice to the Holder of its intention to effect such a registration and, except as provided in (c) or (d) of this paragraph, will include in such registration all shares held by the Holder or that may be issueable to the Holder under any then outstanding options (the "Shares") with respect to which the Company has received a written request for inclusion therein from the Holder within 30 days after the delivery of the Company's notice (a "Piggyback Registration").
(b) All expenses incurred by the Holder in connection with the preparation for registration and the registration and sale of Shares will be paid by the Company in any Piggyback Registration.
(c) If a Piggyback Registration is an underwritten primary registration on
behalf of the Company, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering, the
Company will include in such registration in the following order of priority:
(i) first, the securities the Company proposes to sell, (ii) second, the Shares
requested to be included in such registration, and (iii) third, other securities
of the Company requested to be included in such registration.
(d) If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities other than holders of the Shares, and the underwriters managing the registered public offering advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering, the Company will include in such registration in the following order of priority: (i) first, the securities requested to be included therein by the holders requesting such registration and the Shares requested to be included in such registration, pro rata on the basis of the number of shares requested to be included in such registration by each holder and (ii) second, other securities of the Company requested to be included in such registration.
(e) If the Company has previously filed a registration statement with respect to Shares and if such previous registration has not been withdrawn or abandoned, the Company will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the
request of any holder or holders of such securities, until a period of at least three months has elapsed from the effective date of such previous registration.
(f) Whenever the Holder has requested that any Shares be registered pursuant to this paragraph 16, the Company will use its best efforts to effect the registration and the sale of such Shares as expeditiously as possible in accordance with the intended method of disposition thereof, and pursuant thereto the Company will as expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission a registration statement with respect to such Shares and use its best efforts to cause such registration statement to become effective;
(ii) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than six months and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;
(iii) use its best efforts to register or qualify the Shares under such other securities or blue sky laws of such jurisdictions as the Holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable the Holder to consummate the disposition in such jurisdictions of the Shares (provided that the Company will not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction);
(iv) cause all such Shares to be listed on each securities exchange on which similar securities issued by the Company are then listed; and
(v) provide a transfer agent and registrar for all Shares not later than the effective date of such registration statement.
(g) In the event any of the Shares are to be registered pursuant to this paragraph 16, the Company, the Holder and any other holders of registrable securities of the Company shall enter into a cross-indemnification agreement customary for such purposes.
17. Miscellaneous.
(a) Jurisdiction. This Option shall be binding upon any successors or assigns of the Company. This Option shall constitute a contract under the laws of Delaware .without regard to its conflict of law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the Option Shares acquired upon the exercise of this Option, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company fails to comply with any provision of this Option, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof by the Company shall be delivered by fax or by registered mail to the publicly listed headquarters address of the Company, attention Chief Financial Officer, or to Holder at 72 S.E. 6th Avenue, Delray Beach, Florida 33483.
(e) Limitation of Liability. No provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Option. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Option and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this Option and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Option are intended to be for the benefit of all Holders from time to time of this Option and shall be enforceable by any such Holder or holder of Option Shares.
(h) Indemnification. The Company agrees to indemnify and hold harmless Holder from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against Holder in any manner relating to or arising out of any failure by the Company to perform or observe in any material respect any of its covenants, agreements, undertakings or obligations set forth in this Option; provided, however, that the Company will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are found in a final non-appealable judgment by a court to have resulted from Holder's negligence, bad faith or willful misconduct in its capacity as a stockholder or optionholder of the Company.
(i) Amendment. This Option may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Option shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Option shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Option.
(k) Headings. The headings used in this Option are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Option.
IN WITNESS WHEREOF, the Company has caused this Option to be executed by its officer thereunto duly authorized.
Dated: June 7, 2000 Interactive Technologies.com, Ltd.
By:___________________________________________
William R. Becker, Chief Executive Officer
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NOTICE OF EXERCISE
To: Interactive Technologies.com, Ltd.
(1) The undersigned hereby elects to purchase _______ shares of Common Stock, $.001 par value (the "Common Stock"), of Interactive Technologies.com, Ltd. pursuant to the terms of the attached Option, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:
Dated:_________________________
ASSIGNMENT FORM
(To assign the foregoing option, execute
this form and supply required information. Do not use this form to exercise the option.)
FOR VALUE RECEIVED, the foregoing Option and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is:
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
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Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Option, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Option.
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of February 26,1999, is entered into between Interactive Technologies.Com, Ltd., a Delaware corporation (the "Company"), and William R. Becker (the "Executive").
Recitals
Executive is currently employed by the Company as a senior executive officer and is an integral part of its management. The Board of Directors of the Company recognizes the Executive as a key founding officer of the Company's operating business, and consequently has approved the terms and conditions of the continued employment of Executive as set forth herein and has authorized the execution and delivery of this Agreement.
Agreement
For and in consideration of the foregoing and of the mutual covenants of the parties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive to serve in the capacities described herein and Executive hereby accepts such employment and agrees to perform the services described herein upon the terms and conditions hereinafter set forth.
2. TERM. The term of Executive's employment pursuant to this Agreement shall commence as of the date hereof and shall terminate at the close of business on January 01, 2005, subject to earlier termination in accordance with Section 9 hereof and the other terms, provisions, and conditions set forth herein.
3. DUTIES. Executive shall serve as and have the title of President and Chief Executive Officer of the Company and shall be the chairman of the Company's Board of Directors. Executive agrees to devote substantially all of his business time, energy, and skills to such employment while so employed.
4. COMPENSATION.
(a) Base Compensation. The Company shall pay Executive, and
Executive agrees to accept, base compensation at the rate of not less than
$250,000 per year in equal, weekly installments commencing as of January 01,
2000, through the term of this Agreement ("Base Compensation"). The Base
Compensation specified in this Section 4(a) may be increased at any time during
the term of this Agreement in the discretion of the Board of Directors and will
be reviewed no less frequently than during the first quarter of each calendar
year beginning in 2000. No increase in the Base Compensation pursuant to this
Section 4(a) shall at any time operate as a cancellation of this Agreement; any
such increase shall operate merely as an amendment hereof, without any further
action by Executive or the Company. If any such increase or increases shall be
so authorized, all of the terms, provisions and conditions of this Agreement
shall remain in effect as herein provided, except that the Base Compensation set
forth
in this Section 4(a) shall be deemed amended to set forth the higher amount of such Base Compensation to Executive.
(b) Bonus Compensation. The Company shall pay Executive an annual bonus ("Bonus Compensation") within 90 days following the end of each fiscal year of the Company during the term of Executive's employment under this Agreement. The amount of Executive's Bonus Compensation shall be determined by the Board of Directors of the Company, after consideration of any recommendations made by the Compensation Committee of the Board of Directors, based upon Executive's performance and the performance of the Company during such year. See attached bonus plan.
(c) Annual Stock Options. Employee shall be eligible to receive an annual stock option award (the "Annual Stock Options") following each fiscal year of the Company in amounts, at such exercise prices, and on such terms as the Board of Directors determines, based upon the performance of the Employee and the Company during such fiscal year. See attached option schedule.
5. FRINGE BENEFITS.
(a) Generally. Executive shall be eligible for fringe benefits pursuant to any insurance, pension or other employee fringe benefit plan approved by the Board of Directors that now or hereafter may be made available to employees of the Company and for which Executive will qualify according to his eligibility under the provisions thereof; provided, however, that such eligibility specifically does not apply to matters relating to Executive's vacation, disability benefits, automobile allowance and compensation, which matters shall be governed exclusively by the terms hereof.
(b) Vacation. During the term of this Agreement, Executive shall be entitled to five (5) weeks paid vacation per calendar year and any vacation time not taken during any calendar year shall be carried over into subsequent calendar years.
(c) Automobile. The Company shall provide Executive with full use of an automobile, appropriate for Executive's position and title, for Executive's business and personal use, which automobile shall be replaced at least every three years. The Company agrees to provide adequate insurance for the automobile and occupants and to pay all maintenance and operating costs appropriate or necessary to maintain such automobile in prime operating condition.
6. EXPENSES. During the period of his employment, Executive shall be reimbursed for his business-related expenses incurred on behalf of the Company in accordance with the travel and entertainment expense policy of the Company as adopted by the Board of Directors from time to time and in effect at the time the expense was incurred, but Executive shall be entitled to not less than first-class for air travel. Executive agrees to maintain such records and documentation of all such expenses to be reimbursed by the Company hereunder as the Company shall require and in such detail as the Company may reasonably request.
7. TERMINATION. The term of Executive's employment under this Agreement may be terminated prior to expiration of the term provided in Section 2 hereof in accordance with the
following paragraphs. Any termination of the Executive's employment by the Company for Cause or otherwise shall be communicated by Notice of Termination to the Executive given in accordance with Section 14 hereof. A "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date, which date shall not be more than sixty (60) calendar days after the giving of such notice. The death or disability of Executive shall in no event be deemed a termination of employment by Executive.
(a) Mutual. Executive's employment under this Agreement may be terminated upon the mutual written agreement (which may include, if so agreed to by the Board of Directors and Executive, severance payments and/or benefits) of the Company and Executive.
(b) Death. In the event of the death of Executive, the Company may terminate Executive's employment under this Agreement.
(c) Disability. If, during Executive's employment under this
Agreement, Executive shall become disabled and unable to perform his duties as
required herein ("Disability") for a consecutive period of one hundred eighty
(180) days, then the Company may, upon sixty (60) days' written notice to
Executive, terminate Executive's employment under this Agreement.
(d) Cause. Executive's employment under this Agreement may be terminated by the Company, with Cause as herein defined upon giving Executive sixty (60) days written notice. For purposes of this Agreement, the term "Cause" shall mean the termination of the Executive by the Board of Directors of the Company as a result of the existence or occurrence of one or more of the following conditions or events:
(i) An act or acts of fraud, misappropriation, or embezzlement on the Executive's part that result in or are intended to result in his personal enrichment at the expense of the Company or its subsidiaries or affiliates.
(ii) Conviction of a felony that (a) arises in connection with the Company's business and (b) has a material adverse effect on the Company's business.
(iii) The Executive's willful or intentional failure to perform his duties as required under this Agreement; provided, that the Company shall provide Executive with written notice of such failure and Executive shall have thirty (30) days from the date Executive receives such notice to remedy such failure to perform.
(e) Change of Control. In the event of a "Change in Control" (as defined in this Section 7(e)), Executive may elect, at any time during the 180-day period immediately following such Change in Control, to deliver 60 days' written notice to the Company of his termination of employment hereunder. Termination of Executive's employment under this
Agreement pursuant to the provisions of the preceding sentence shall be deemed a termination without Cause for purposes of Section 9 hereof and shall not be deemed to be a voluntary resignation or termination by Executive. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when:
(i) any person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, who owns less than 20% of the Company's capital stock on the date hereof, becomes the beneficial owner of twenty-five percent or more of the capital stock of the Company;
(ii) the Company is merged with or into any other company where members of the board of directors of the Company immediately prior to such transaction do not constitute a majority of the board of directors of the Company of the surviving entity immediately following such transaction, or substantially all of the Company's assets are acquired by any other company; or
(iv) three or more directors nominated by the Board of Directors to serve as a director, each having agreed to serve in such capacity, fail to be elected in a contested election of directors.
8. DEATH AND DISABILITY. In the event of the termination of Executive's employment under this Agreement by reason of the Executive's death or Disability, the Company shall pay Executive (or his heirs and/or personal representatives): (i) Executive's Base Compensation, unused vacation entitlement, and other benefits until termination date of contract, and (ii) Executive's Bonus Compensation payable under Section 4 and Executive's Annual Stock Options for the fiscal year in which Executive's termination occurred, as if Executive had been employed by the Company for the full fiscal year.
9. SEVERANCE. In the event of the termination of Executive's employment under this Agreement for any reason other than Executive's death or disability, the Company shall provide the payments and benefits to Executive as indicated below:
(a) With Cause or Voluntary Resignation. If Executive is terminated for Cause (as defined in Section 7(d) of this Agreement), or if Executive voluntarily terminates his employment by the Company, the Company shall pay Executive, within five (5) business days after the date of termination, Executive's Base Compensation, unused vacation entitlement and all expenses in connection with Executive's use of the automobile under Section 5(c) hereof through such date of termination, and the Company shall have no further obligation to provide compensation or benefits to Executive under this Agreement; except that, to the extent that the Company's insurance, stock option and other benefit plans provide certain rights and benefits after an employee's termination, Executive may continue to receive such rights and benefits in accordance with the terms of such plans.
(b) Without Cause or Due to Change of Control. If terminated by the Company without Cause or by the Executive as a result of a Change of Control, Executive shall
receive the Base Compensation, Bonus Compensation, Annual Stock Options, and the other benefits under this Agreement until the later to occur of (x) the date thirty-six (36) months from the date of such termination and (y) January 01, 2005.
10. CONFIDENTIAL INFORMATION. Executive recognizes and acknowledges that he will have access to certain confidential information of the Company and of corporations with whom the Company does business, and that such information constitutes valuable, special and unique property of the Company and such other corporations. During the term of this Agreement and for a period of five (5) years immediately following the date of termination of this Agreement, Executive agrees not to disclose or use any confidential information, including without limitation, information regarding research, developments, "know-how," prices, suppliers, customers, costs or any knowledge or information with respect to confidential or trade secrets of the Company, it being understood that such confidential information does not include information that is publicly available unless such information became publicly available as a result of a breach of this Agreement. Executive acknowledges and agrees that all notes, records, reports, sketches, plans, unpublished memoranda or other documents belonging to the Company, but held by Executive, concerning any information relating to the Company's business, whether confidential or not, are the property of the Company and will be promptly delivered to it upon Executive's leaving the employ of the Company. Executive also agrees to execute such confidentiality agreements that the Board may adopt, and may modify from time to time, as a standard form to be executed by all employees of the Company, to the extent such standard forms are not materially more restrictive than the provisions of this Agreement.
11. INTELLECTUAL PROPERTY. Executive acknowledges and agrees that all discoveries, inventions, designs, improvements, ideas, writings, copyrights, publications, study protocols, study results, computer data or programs, or other intellectual property, whether or not subject to patent or copyright laws, which Executive shall conceive solely or jointly with others, in the course or scope of his employment with the Company or in any way related to the Company's business, whether during or after working hours, or with the use of the Company's equipment, materials or facilities (collectively referred to herein as "Intellectual Property"), shall be the sole and exclusive property of the Company without further compensation to Executive. As used in this Section 11 and the following Section 12, it is understood that the Company's principal "business" is marketing internet related products such as benefits, mortgages, and web sites. Executive shall take such steps as are deemed necessary to maintain complete and current records of the Intellectual Property conceived by the Executive, and Executive shall assign to the Company or its designees, the entire right, title and interest in said Intellectual Property.
12. NON-COMPETITION. Executive acknowledges that his services to be rendered hereunder are of a special and unusual character that have a unique value to the Company and the conduct of its business, the loss of which cannot adequately be compensated by damages in an action at law. In view of the unique value to the Company of the services of Executive for which the Company has contracted hereunder, and because of the confidential information to be obtained by or disclosed to Executive as herein above set forth, and as a material inducement to the Company to enter into this Agreement and to pay and make available to Executive the compensation and other benefits referred to herein, Executive covenants and agrees that
Executive will not, directly or indirectly, whether as principal, agent, trustee or through the agency of any corporation, partnership, association or agent (other than as the holder of not more than 10% of the total outstanding stock of any company the securities of which are traded on a regular basis on recognized securities exchanges):
(a) while employed under this Agreement and for any period during which Executive is receiving payments from the Company (pursuant to Section 8 hereof) following a termination as a result of Employee's Disability, (i) work for (in any capacity, including without limitation director, officer or employee) any other business or company that competes with the Company and is located in the United States or within 50 miles of any branch office of the Company, or (ii) recruit, or otherwise influence or attempt to induce employees of the Company to leave the employment of the Company; and
(b) for the one-year period immediately following the termination of this Agreement due to the expiration of the term of this Agreement, termination of Executive for Cause, or Executive's voluntary resignation; and for the one-year period immediately following the last date on which Employee shall receive payments from the Company pursuant to Section 8 hereof following a termination of employment as a result of Employee's Disability, work for a company or business (in any capacity, including without limitation as director, officer, or employee) that is in the business of marketing internet related products such as benefits, mortgages, and web sites , that competes with the Company and is located in the United States or within 50 miles of any branch office of the Company.
Executive has carefully read and considered the provisions of Sections 10, 11, and 12 hereof and agrees that the restrictions set forth in such sections are fair and reasonable and are reasonably required for the protection of the interests of the Company, its officers, directors, shareholders, and other employees, for the protection of the business of the Company, and to ensure that Executive devotes his full-time and efforts to the business of the Company. Executive acknowledges that he is qualified to engage in businesses other than those that are subject to this Section 12. It is the belief of the parties, therefore, that the best protection that can be given to the Company that does not in any way infringe upon the rights of Executive to engage in any unrelated businesses is to provide for the restrictions described above. In view of the substantial harm which would result from a breach by Executive of Sections 10, 11 and 12, the parties agree that the restrictions contained therein shall be enforced to the maximum extent permitted by law. In the event that any of said restrictions shall be held unenforceable by any court of competent jurisdiction, the parties hereto agree that it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of any limitation deemed unenforceable and that as so modified, the covenant shall be as fully enforceable as if it had been set forth herein by the parties.
13. REMEDIES. The provisions of sections 10, 11 and 12 of this Agreement shall survive the termination of this Agreement as set forth therein, regardless of the circumstances or reasons for such termination, and inure to the benefit of the Company. The restrictions set forth in Sections 10, 11 and 12 are considered to be reasonable for the purposes of protecting the business of the Company. The Company and Executive acknowledge that the Company would
be irreparably harmed and that monetary damages would not provide an adequate remedy to the Company if the covenants contained in Sections 10, 11 and 12 were not complied with in accordance with their terms. Accordingly, Executive agrees that the Company shall be entitled to injunctive and other equitable relief to secure the enforcement of these provisions, in addition to any other remedy which may be available to the Company, and that the Company shall be entitled to receive from Executive reimbursement for reasonable attorneys' fees and expenses incurred by the Company in enforcing these provisions.
14. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by registered mail to the addresses below or to such other address as either party shall designate by written notice to the other:
If to the Executive: To the address set forth below his signature on the signature page hereof.
If to the Company:
15. ENTIRE AGREEMENT; MODIFICATION.
(a) This Agreement contains the entire agreement of the Company and Executive, and the Company and Executive hereby acknowledge and agree that this Agreement supersedes any prior statements, writings, promises, understandings or commitments.
(b) No future oral statements, promises or commitments with respect to the subject matter hereof, or other purported modification hereof, shall be binding upon the parties hereto unless the same is reduced to writing and signed by each party hereto.
16. ASSIGNMENT. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. The Executive may not assign his rights and obligations under this Agreement.
17. FULL SETTLEMENT. The Executive shall not be obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The amounts payable to Executive under this Agreement shall not be reduced by any compensation payable to Executive from employment by another employer after the date of Executive's termination provided such employment does not violate the terms of Section 12 hereof. The Company agrees to pay all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Executive or the Company or others of the validity or enforceability of, or liability under any provision of this Agreement or any guarantee of performance thereof, in each case plus interest, provided that the Executive is the prevailing party in any such contest. If the Executive is not the prevailing party each party shall pay its own legal fees and expenses except that if such contest is the result of a claimed breach of Section 10, 11 or 12, and the Company shall be the prevailing
party, the Executive shall pay the reasonable legal fees and expenses of the Company. The determination of the prevailing party in any contest shall be made by the tribunal which shall resolve such contest, or by the parties if such contest is settled without resort to any such tribunal.
18. MISCELLANEOUS.
(a) This agreement shall be subject to and governed by the laws of the State of Florida, without regard to the conflicts of laws principles thereof.
(b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or the interpretation of this Agreement.
(c) The failure of any party to enforce any provision of this Agreement shall in no manner affect the right to enforce the same, and the waiver by any party of any breach of any provision of this Agreement shall not be construed to be a waiver by such party of any succeeding breach of such provision or a waiver by such party of any breach of any other provision.
(d) All written notices required in this Agreement shall be sent postage prepaid by certified or registered mail, return receipt requested.
(e) In the event any one or more of the provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, and enforceable provision which comes closest to the intent of the parties.
(f) This Agreement may be executed in any number of counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written.
Interactive Technologies.com, Ltd., a Delaware corporation
By:___________________________________________________________ Its:
Exhibit 10.3
Commercial Office Lease (Triple Net)
THIS COMMERCIAL OFFICE LEASE ("Lease") is entered into as of the ____ day of April, 1999 ("Lease Date") by and between Landlord and Tenant as described in the following Lease Summary on the Lease Date. Landlord leases to Tenant and Tenant rents from Landlord the Premises upon the terms and conditions hereinafter set forth:
1 LEASE SUMMARY
1.1 Summary of Basic Lease Information. The following terms are a summary of the basic provisions of this Lease:
1.1.1 Landlord: Grip Development, Inc.
1.1.2 Landlord's Address: 110 East Atlantic Avenue, Suite 325
Delray Beach, Florida 33444
1.1.3 Tenant: Interactive Technologies.com, Ltd.,
United Interactive Technologies,
Inc., Integrated Merchant Services,
Inc., Web Classified.net, Inc.,
Soc Sec/Fed Tax Id # 65-0484771
1.1.4 Tenant's Address: 110 East Atlantic Avenue, Suite 400
Delray Beach, Florida 33444
1.1.5 Guarantor(s): None
1.1.6 Guarantor(s) Address: N/A
1.1.7 Guarantor(s) SS#:
1.1.8 Bldg. Name and Address: The Grip Building
110 East Atlantic Avenue
Delray Beach, Florida 33444
1.1.9 Premises: Suite 400
as shown on the "Floor Plan" attached
hereto as Exhibit "A".
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1.1.10 Gross Rentable Area Approximately 12044.77 square feet.
of the Premises:
1.1.11 Term: One Hundred and twenty
(120) months, beginning on
the Commencement Date and
ending on the Expiration
Date, unless sooner
terminated as hereinafter
provided.
1.1.12 Commencement Date: August 1, 1999
1.1.13 Expiration Date: July 31, 2009.
1.1.14 Security Deposit: First, last and one month's
additional security plus operating
expenses for first and last months.
1.1.15 Monthly Base Rent:
--------------------------------------------------------------------------------
Amount Per Month Commencing On Ending On
(plus applicable sales tax)
---------------------------------------------------------------
$9,755.28 August 1, 1999 July 31, 2000
---------------------------------------------------------------
$14,163.64 August 1, 2000 July 31, 2001
---------------------------------------------------------------
$14,584.55 August 1, 2001 July 31, 2002
---------------------------------------------------------------
$15,022.09 August 1, 2002 July 31, 2003
---------------------------------------------------------------
$15,472.75 August 1, 2003 July 31, 2004
---------------------------------------------------------------
$15,936.93 August 1, 2004 July 31, 2005
---------------------------------------------------------------
$16,415.04 August 1, 2005 July 31, 2006
---------------------------------------------------------------
$16,907.49 August 1, 2006 July 31, 2007
---------------------------------------------------------------
$17,414.71 August 1, 2007 July 31, 2008
---------------------------------------------------------------
$17,937.15 August 1, 2008 July 31, 2009
---------------------------------------------------------------
1.1.16 Operating Expense: This is a triple net lease. The
Operating Expenses are not included
in Monthly
================================================================================
Commercial Office Lease. The Grip Building
page 2 of 28 pages
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Base Rent described above.
(Operating Expenses for 1998
are estimated to be $4.50 per
square foot).
1.1.17 Tenant's Share: 29.089 percent (determined by dividing
the Gross Rentable Area of the Premises
by the Gross Rentable Area of the
Building, multiplying the resulting
quotient by 100, and rounding to the 3rd
decimal place).
1.1.18 Parking Spaces: 23 spaces 4 covered
1.1.19 Parking Charge: Included in Tenant's Share of Operating
Expenses. See, P.1.1.17
1.1.20 Broker: Jack Lupo
1.1.21 Electric: Included in Tenant's Share of Operating
Expenses. See, P.1.1.17
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1.1.22 Tenant Improvements: See, EXHIBIT "D"
1.1.23 Prepaid Rent: First month's Minimum Rent prepaid
with the execution of this Lease.
1.1.24 Permitted Use Internet company.
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of Premises:
2 EXHIBITS. The following exhibits and addenda which are attached to this Lease are incorporated into and made a part of this Lease as though fully set forth herein:
EXHIBIT A - Floor Plan showing the Premises
EXHIBIT B - Legal Description of the Building
EXHIBIT C - Rules and Regulations
EXHIBIT D - Tenant Improvements
EXHIBIT F - Guaranty of Lease
3 TERM.
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3.1 Grant; Term. In consideration of the performance by the Tenant of its obligations under this Lease, the Landlord leases to the Tenant and Tenant
leases from the Landlord, for the Term, the "Premises," which Premises are shown outlined on the floor plan attached hereto and made a part hereof as Exhibit "A." The Premises, are located in that certain office building, called The Grip Building (the "Building"), located in Palm Beach, Florida, as more particularly described in Exhibit "B", attached hereto and made a part hereof. The Gross Rentable Area of the Premises, as described in the Lease Summary, is equal to the sum of the net useable area of the Premises plus a proportionate share of the Common Areas (according to B.O.M.A. standards).
The 'Term" of the Lease is the period from the Commencement Date as specified in the Lease Summary, through the Expiration Date, as specified in the Lease Summary. If the Premises are ready for occupancy prior to the Commencement Date, then Tenant shall take occupancy on such date and Tenant's obligations to pay Minimum Rent and all other charges shall commence on such date. If Landlord cannot deliver possession of the Premises to Tenant on the Commencement Date, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom; but, in that event, this Lease shall in all ways remain in full force and effect except that Minimum Rent and other charges shall be waived for the period between the Commencement Date and the time when Landlord can deliver possession; provided, however, if delivery of possession is delayed more than ninety (90) days past the scheduled Commencement Date, Tenant may terminate this Lease upon fifteen (15) days' written notice to Landlord, whereupon both parties shall be relieved of all further obligations hereunder.
Notwithstanding the foregoing, if delivery of possession is delayed due to any act or omission of Tenant, then the Commencement Date shall be the date Landlord would have delivered possession, but for Tenant's delay.
The Landlord shall have no construction or improvement obligation with respect to the Premises unless expressly provided for in a work letter agreement, which, if executed by Landlord and Tenant, shall be incorporated as Exhibit "D" to this Lease. Upon the expiration of five (5) business days following the Commencement Date, the Premises shall conclusively be assumed to be accepted by Tenant unless Tenant shall have given Landlord written notice of any contended defects in the Premises.
4 RENT.
4.1 Covenant to Pay. The Tenant shall pay to Landlord all sums due
hereunder from time to time from the Commencement Date, without
prior demand, together with all applicable Florida sales tax
thereon; however, unless otherwise provided in this Lease, payments,
other than Tenant's regular monthly payments of Minimum Rent and
Operating Costs shall be payable by Tenant to Landlord within five
(5) days following demand. All rent and other charges that are
required to be paid by Tenant to Landlord shall be payable at
Landlord's address indicated on the Lease Summary. Monthly Rent,
Operating Costs and any other charges for any "Lease Year"
consisting of less than twelve (12) months shall be prorated on a
per diem basis, based upon a period of 365 days. "Lease Year" means
the twelve (12) full calendar months commencing on the Commencement
Date. However, the final Lease Year may contain less than twelve
(12) months due to expiration or sooner termination of the Term. The
Tenant agrees that its covenant to pay rent, Operating Costs and all
other sums due under this Lease is an independent covenant and that
all such amounts are payable without counterclaim, set-off,
deduction, abatement, or reduction whatsoever, except as expressly
provided for in this Lease.
4.2 Minimum Rent. Subject to any escalation which may be provided for in this Lease, the Tenant shall pay Minimum Rent for the Term in the initial amount specified in the Lease Summary, which, except for the first installment, shall be payable throughout the Term in equal monthly installments on the first day of each calendar month of each year of the Term. Such monthly installments shall be in the amounts (subject to escalation, if any) specified in the Lease Summary. The first monthly installment of Minimum Rent shall be due upon execution of this Lease. The Minimum Rent described above shall be adjusted at the beginning of the second and each succeeding Lease Year during the Term of this Lease as provided in the Lease Summary.
4.3 Operating Costs. The Tenant shall pay to the Landlord the Tenant's proportionate share of the annual Operating Costs, as hereinafter defined, for each month of the Term. The amount of Operating Costs payable to the Landlord may be estimated by the Landlord for such period as the Landlord determines from time to time (not to exceed twelve (12) months), and the Tenant agrees to pay to the Landlord the amounts so estimated in equal installments, in advance, on the first day of each month during such period. Notwithstanding the foregoing, when bills for all or any portion of Operating Costs so estimated are actually received by Landlord, the Landlord may bill the Tenant for the Tenant's proportionate share thereof, less any amount
previously paid by Tenant to Landlord on account of such item(s) by way of estimated Operating Costs payments.
Within a reasonable period of time after the end of the period for which estimated payments have been made, the Landlord shall submit to the Tenant a statement from the Landlord setting forth the actual amounts payable by the Tenant based on actual costs. If the amount the Tenant has paid based on estimates is less than the amount due based on actual costs, the Tenant shall pay such deficiency within five (5) days after submission of such statement. If the amount paid by the Tenant is greater than the amount actually due, the excess may be retained by the Landlord to be credited and applied by the Landlord to the next due installments of the Tenant's proportionate share of Operating Costs, or as to the final Lease Year, provided Tenant is not in default, Landlord will refund such excess to Tenant. The Tenant's proportionate share of Operating Costs for the final estimated period of the Term of this Lease shall be due and payable even though it may not be finally calculated until after the expiration of the Term. Accordingly, Landlord shall have the right to continue to hold Tenant's security deposit following expiration of the Term until Tenant's share of actual Operating Costs has been paid.
For purposes of this Lease, Tenants proportionate share shall be a fraction, the numerator of which is the Gross Rentable Area of the Premises and the denominator of which is the Gross Rentable Area of the Building. Tenant's proportionate share is as set forth in the Lease Summary. The term "Operating Costs" shall mean any amounts paid or payable whether by the Landlord or by others on behalf of the Landlord, arising out of Landlord's maintenance, operation, repair, replacement (if such replacement increases operating efficiency) and administration of the Building and Common Areas, including, without limitation:
4.3.1 the cost of all real estate, personal property and other ad valorem taxes, and any other levies, charges, local improvement rates, and assessments whatsoever assessed or charged against the Building and Common Areas, the equipment and improvements therein contained, and including any amount assessed or charged in substitution for or in lieu of any such taxes, excluding only income or capital gains taxes imposed upon Landlord, and including all costs associated with the appeal of any assessment on taxes;
4.3.2 the cost of insurance which the Landlord is obligated or permitted to obtain under this Lease and any deductible amount applicable to any
claim made by the Landlord under such insurance;
4.3.3 the cost of security, janitorial, landscaping, garbage removal, and trash removal services,
4.3.4 the cost of heating, ventilating, and air conditioning, to the extent incurred with respect to Common Areas or with respect to any shared systems;
4.3.5 the cost of all fuel, water, electricity, telephone, and any other utilities used in the maintenance, operation, or administration of the Building and Common Areas;
4.3.6 salaries, wages, and any other amounts paid or payable for the personnel involved in the repair, maintenance, operation, security, supervision, or cleaning of the Building and Common Areas; and
4.3.7 a reasonable management fee.
4.4 Payment of Personal Property Taxes. Tenant shall pay, when due, all taxes attributable to the personal property, trade fixtures, business, occupancy, or sales of Tenant or any other occupant of the Premises and to the use of the Building by Tenant or such other occupant.
4.5 Rent Past Due. If any Payment due from Tenant shall be overdue, a late charge of five (5%) percent of the delinquent sum may be charged by Landlord. If any payment due from Tenant shall remain overdue for more than fifteen (15) days, an additional late charge in an amount equal to the lesser of the highest rate permitted by law or one and one-half (1.5% percent per month or eighteen (18%) percent per annum) of the delinquent amount may be charged by Landlord, such charge to be computed for the entire period for which the amount is overdue and which shall be in addition to and not in lieu of the five (5%) percent late charge or any other remedy available to Landlord.
4.6 Security Deposit. The Landlord acknowledges receipt of a security deposit in the amount specified on the Lease Summary to be held by the Landlord, without any liability for interest thereon, as security for the performance by the Tenant of all its obligations under this Lease. Landlord shall be entitled to commingle the security deposit with Landlord's other funds. If Tenant should default in any of its obligations under this Lease, the Landlord may at its option, but without prejudice to any other rights which the Landlord
may have, apply all or part of the security deposit to compensate
the Landlord for any loss, damage, or expense sustained by the
Landlord as a result of such default. If all or any part of the
security deposit should be so applied, then the Tenant shall restore
the security deposit to its original amount on demand of the
Landlord. Subject to the provisions of section 4.3, within thirty
(30) days following termination of this Lease, if the Tenant is not
then in default, the security deposit will be returned by the
Landlord to the Tenant.
4.7 Landlord's Lien. To secure the payment of all rent and other sums of money due and to become due hereunder and the faithful performance of this Lease by Tenant, Tenant hereby gives to Landlord an express first and prior contract lien and security interest on all property now or hereafter acquired (including fixtures, equipment, chattels, and merchandise which may be placed in the Premises) and also upon all proceeds of any insurance which may accrue to Tenant by reason of destruction of or damage to any such property. Such property shall not be removed therefrom without the written consent of Landlord until all arrearages in rental and other sums of money then due to Landlord hereunder shall first have been paid. All exemption laws are hereby waived in favor of said lien and security interest. This lien and security interest is given in addition to Landlord's statutory lien and shall be cumulative thereto. Landlord shall, in addition to all of its rights hereunder, have all of the rights and remedies of a secured party under the Florida Uniform Commercial Code. To the extent permitted by law, this Lease shall constitute a security agreement under Article 9 of the Florida Uniform Commercial Code.
5 USE OF PREMISES.
5.1 Permitted Use. The Premises shall be used and occupied only for the use specified in the Lease Summary. Tenant shall carry on its business on the Premises in a reputable manner and shall not do, omit to do, permit, or suffer to be done or exist upon the Premises anything which shall result in a nuisance, hazard, or bring about a breach of any provision of this Lease or any applicable municipal or other governmental law or regulation. Tenant shall observe all reasonable rules and regulations established by Landlord from time to time for the Building. The rules and regulations in effect as of the date hereof are attached to and made a part of this Lease as Exhibit "C." The names for the Building, which the Landlord may from time to time adopt, and every name or mark adopted by the Landlord in connection with the Building shall be used by the Tenant only in association with the business carried on in the Premises during the Term and the Tenant's use thereof shall
be subject to such regulation as the Landlord may, from time to time, impose.
5.2 Compliance with Laws. The Premises shall be used and occupied in a safe, careful, and proper manner so as not to contravene any governmental or quasi-governmental laws, regulations, or orders, or the requirements of the Landlord's or Tenant's insurers which may be in effect from time to time throughout the Term of the Lease. If, due to the Tenant's use of the Premises, repairs, improvements, or alterations should become necessary to comply with any of the foregoing, then the Tenant shall pay the entire cost thereof.
5.3 Signs. Except with the prior written consent of the Landlord, the Tenant shall not erect, install, display, inscribe, paint, or affix any signs, lettering, or advertising medium upon or above any exterior portion of the Premises. Landlord, at its expense, will provide one building standard identification sign outside the principal entry to the Premises and will provide space on a directory in the Building lobby.
5.4 Environmental Provisions. Tenant warrants and represents that it will not use or employ the Landlord's and/or the Building property's facilities, equipment, or services to handle, transport, store, treat, or dispose of any hazardous waste or hazardous substance, whether or not it has generated or produced same on the Premises. Tenant further warrants and represents that any activity on or relating to the Premises shall be conducted in full compliance with all applicable laws. Tenant agrees to defend, indemnify, and hold harmless Landlord against any and all claims, costs, expenses, damages, liability, and the like, which Landlord may hereafter be liable for, suffer, incur, or pay arising under any applicable laws which may result from or arise out of any breach of the warranties and representations by Tenant contained in this section 5.4, or out of any act, activity, violation of any applicable laws by Tenant, its agents, employees, or assigns. Tenant's liability under this section 5.4 shall survive the expiration of any termination of this Lease.
6 ACCESS AND ENTRY.
6.1 Right of Examination. The Landlord shall be entitled at all reasonable times, and upon reasonable notice (but no notice shall be required in emergencies) to enter the Premises to examine them; to make such repairs, alterations, or improvements thereto as the Landlord considers necessary or reasonably desirable; to have access to underfloor facilities and access panels to mechanical shafts and to check, calibrate, adjust and balance controls and other parts of the heating, air conditioning, ventilating, and meter control
systems. The Landlord reserves to itself the right to install, maintain, use, and repair pipes, ducts, conduits, vents, wires, and other installations leading in, through, over, or under the Premises and for this purpose, the Landlord may take all material into and upon the Premises which is required therefore. The Tenant shall not unduly obstruct any pipes, conduits, or mechanical or other electrical equipment so as to prevent reasonable access thereto. The Landlord reserves the right to use all exterior walls and roof area. The Landlord shall exercise its rights under this section, to the extent possible in the circumstances, in such manner so as to minimize interference with the Tenant' s use and enjoyment of the Premises.
6.2 Right to Show Premises. The Landlord and its agents have the right to enter the Premises at all reasonable times and upon reasonable notice to show them to prospective purchasers, lenders, or anyone else having a prospective interest in the Building, and, during the last six (6) months of the Term (or the last six (6) months of any renewal term if this Lease is renewed) to show them to prospective tenants.
7 MAINTENANCE, REPAIRS, AND ALTERATIONS.
7.1 Maintenance and Repairs by Landlord. The Landlord covenants to keep the following in good repair as a prudent owner:
7.1.1 the structure of the Building including exterior walls and roof;
7.1.2 the mechanical, electrical, HVAC and other base building systems (except such as may be installed by or be the property of the Tenant or as may be serving only the Premises), and
7.1.3 the entrances, sidewalks, corridors, parking areas and other facilities that, from time to time, may comprise the Common Areas. So long as the Landlord is acting in good faith, the Landlord shall not be responsible for any damages caused to the Tenant by reason of failure of any equipment or facilities serving the Building or delays in the performance of any work for which the Landlord is responsible pursuant to this Lease. Notwithstanding any other provisions of this Lease, if any part of the Building is damaged or destroyed or requires repair, replacement, or alteration as a result of the act or omission of the Tenant, its employees, agents, invitees, licensees, or contractors, the Landlord shall have the right to perform same, and the cost of such repairs, replacement or alterations shall be paid by the Tenant to the Landlord upon demand. In addition, if, in an emergency, it shall
become necessary to make promptly any repairs or replacements required to made by Tenant, Landlord may enter the Premises and proceed forthwith to have such repairs or replacements made and pay the costs thereof. Upon demand, Tenant shall reimburse Landlord for the cost of making such repairs or replacements.
7.2 Maintenance and Repairs by Tenant. The Tenant shall, at its sole cost, repair or maintain the Premises (including, without limitation, floor and wall coverings, electric light bulbs and tubes and tube casings) exclusive of base building mechanical and electrical systems, all to a standard of a first class office building, with the exception only of those repairs which are the obligation of the Landlord pursuant to this Lease. All repairs and maintenance performed by the Tenant in the Premises shall be performed by contractors or workmen designated or approved by the Landlord. At the expiration or earlier termination of the Term, the Tenant shall surrender the Premises to the Landlord in as good condition and repair as the Tenant is required to maintain the Premises throughout the Term.
7.3 Approval of Tenant's Alterations. No alterations (including, without limitation, repairs, replacements, additions, or modifications to the Premises by Tenant) other than cosmetic alterations which are interior and nonstructural, shall be made to the Premises without the Landlord's written approval, which, as to exterior or structural alterations may be withheld in the Landlord's sole discretion. Any alterations by Tenant shall be performed at the sole cost of the Tenant, by contractors and workmen approved by Landlord in a good and workmanlike manner, and in accordance with all applicable laws and regulations.
7.4 Removal of Improvements and Fixtures. All Leasehold improvements and fixtures (other than those which can be removed without damage to the Premises), at the expiration of the Term or upon earlier termination of this Lease, shall become the Landlord's property. During the Term, in the usual course of its business, the Tenant may remove its trade fixtures, provided the Tenant is not in default under this Lease. Tenant shall, at the expiration or earlier termination of the Term, at its sole cost, remove such of the leasehold improvements (except for improvements installed by Landlord prior to the Commencement Date) and trade fixtures in the Premises as the Landlord shall require to be removed and restore the Premises to the condition that existed prior to Tenants installation of such fixtures. The Tenant shall, at its own expense, repair any damage caused to the Building or the Premises by such removal. If the Tenant does not remove its trade fixtures at the expiration or earlier termination of the Term, the trade fixtures shall, at the
option of the Landlord, either be removed by Landlord at the expense of the Tenant or become the property of the Landlord and may be removed from the Premises and sold or disposed of by the Landlord in such manner as it deems advisable without any accounting to Tenant.
7.5 Liens. The Tenant shall promptly pay for all materials supplied and work done in respect of the Premises so as to ensure that no lien is recorded against any portion of the Building or against the Landlord's or Tenant's interest therein. If a lien should be so recorded, the Tenant shall discharge it promptly by payment or bonding. If any such lien against the Building or Landlord's interest therein is recorded and not discharged by Tenant as above required within fifteen (15) days following recording, the Landlord shall have the right to remove such lien by bonding or payment and the cost thereof shall be paid immediately by Tenant to Landlord. Landlord and Tenant expressly agree and acknowledge that no interest of Landlord in the Premises or the Building shall be subject to any lien for improvements made by Tenant in or for the Premises, and the Landlord shall not be liable for any lien for any improvements made by Tenant. Such liability is expressly prohibited by the terms of this Lease. In accordance with applicable laws of the State of Florida, Landlord has filed in the public records of Palm Beach County, Florida, a public notice containing a true and correct copy of this paragraph; and, Tenant hereby agrees to inform all contractors and materialmen performing work in or for or supplying materials to the Premises of the existence of said notice.
7.6 Services; Utilities. Landlord shall, as part of Operating Costs, furnish the Premises with the following services in the manner that such services are provided to comparable office buildings in the area:
7.6.1 electricity for lighting and for the operation of office machines;
7.6.2 heating, ventilation and air conditioning ("HVAC") to the extent reasonably required for the comfortable occupancy by the Tenant in its use of the Premises during the period on weekdays, Monday through Friday, from 8:00 a.m. to 6:00 P.M., except for holidays declared by the federal government or such shorter periods as may be prescribed by any applicable policies or regulations adopted by any utility or governmental agency;
7.6.3 elevator service;
7.6.4 rest room supplies;
7.6.5 window washing with reasonable frequency;, and
7.6.6 daily janitor service Monday through Friday
HVAC service for common areas at times other than 8:00 a.m. to 6:00
p.m., Monday through Friday shall be provided by Landlord, at
Tenant's expense, upon written request by Tenant delivered to
Landlord prior to 1:00 p.m. at least one (1) business day in advance
of the date for which such service is needed. In addition, Landlord
shall provide security to the Building in the manner required by
this Lease. The Tenant shall pay to the Landlord, or as the Landlord
directs, all gas, electricity, water, and other utility charges
applicable to the Premises as separately metered or, if not so
metered, as part of Tenant's proportionate share of Operating Costs.
8 INSURANCE AND INDEMNITY.
8.1 Tenant's Insurance. The Tenant shall, throughout the Term (and any other period when Tenant is in possession of the Premises), maintain at its sole cost the following insurance:
8.1.1 All risks property insurance. Such policy shall name the Tenant and the Landlord as insured parties, containing a waiver of subrogation rights which the Tenant's insurers may have against the Landlord and against those for whom the Landlord is in law responsible including, without limitation, its directors, officers, agents, and employees, and (except with respect to the Tenant's chattels) incorporating a standard New York mortgagee endorsement (without contribution). Such insurance shall insure property of every kind owned by the Tenant in an amount not less than the full replacement cost thereof (new), with such cost to be adjusted not less than annually.
8.1.2 Comprehensive general liability insurance. Such policy shall contain inclusive limits per occurrence of not less than the amount specified in the Lease Summary; provide for cross-liability; and include the Landlord and any mortgagee of Landlord as additional insureds.
8.1.3 Worker's compensation and employer's liability insurance. Such policy(ies) shall be in compliance with applicable legal requirements.
Any other form of insurance which the Tenant or the Landlord, acting reasonably, should require, from time to time, in such form and amount, and
for risks against which a prudent tenant would insure. All policies referred to above shall be
8.1.4 taken out with insurers licensed to do business in Florida and reasonably acceptable to the Landlord;
8.1.5 be in a form reasonably satisfactory to the Landlord;
8.1.6 be non-contributing with, and shall apply only as primary and not as excess to any other insurance available to the Landlord or any mortgagee of Landlord;
8.1.7 contain an undertaking by the insurers to notify the Landlord by certified mail not less than thirty (30) days prior to any material change, cancellation, or termination, and
8.1.8 with respect to subsection 8.1., contain replacement cost, demolition cost and increased cost of construction, and endorsements.
Certificates of insurance on the Landlord's standard form (if provided by Landlord), or, if required by a mortgagee, copies of such insurance policies certified by an authorized officer of Tenant's insurer as being complete and current shall be delivered to the Landlord promptly upon request. If the Tenant has to take out or keep in force any insurance referred to in this section 8.1 or should any such insurance not be approved by either the Landlord or any mortgagee, and the Tenant does not commence and continue diligently to cure such default within forty-eight (48) hours after written notice by the Landlord to the Tenant specifying the nature of such default, then the Landlord shall have the right, without assuming any obligation in connection therewith, to effect such insurance at the sole cost of the Tenant and all outlays by the Landlord shall be paid by the Tenant to the Landlord without prejudice to any other rights or remedies of the Landlord under this Lease. The Tenant shall not keep or use in the Premises any article which may be prohibited by any fire or casualty insurance policy in force from time to time covering the Premises or the Building.
8.2 Loss or Damage. The Landlord shall not be liable for any death or injury arising from or out of
8.2.1 any occurrence in, upon, at, or relating to the Building or damage to property of the Tenant or of others located on the Premises or elsewhere in the building, or
8.2.2 any loss of or damage to any property of the Tenant or others,
from any cause whatsoever, including those caused by Landlord's negligence, UNLESS SUCH DEATH, INJURY, LOSS, OR DAMAGE SHOULD BE PROXIMATELY CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LANDLORD. Without limiting the generality of the foregoing, the Landlord shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, falling ceiling tile, falling fixtures, steam, gas, electricity, water, rain, flood, or leaks from any part of the Premises or from the pipe sprinklers, appliances, plumbing works, roof, windows, or subsurface of any floor or ceiling of the Building or from the street or any other place or by dampness, or by any other cause whatsoever.
The Tenant agrees to indemnify the Landlord and hold it harmless from and against any and all loss including loss of Minimum Rent and Operating Costs payable in respect to the Premises, claims, actions, damages, liability, and expense of any kind whatsoever (including attorneys' fees and costs at all tribunal levels), arising from any occurrence in, upon, or at the Premises, or the occupancy, use, or improvement by the Tenant or its agents or invitees of the Premises or any part thereof, or occasioned wholly or in part by any act or omission of the Tenant, its agents, employees and invitees or by anyone permitted to be on the Premises by the Tenant, or resulting from any cause whatsoever including, but not limited to, the negligence of Landlord UNLESS SUCH LOSS SHOULD BE PROXIMATELY CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD.
8.3 Landlord's Insurance. Throughout the Term, the Landlord shall carry:
8.3.1 "all risks" insurance on the Building and the machinery and equipment contained therein or servicing the Building and owned by the Landlord (excluding any property with respect to which the Tenant and other tenants are obliged to insure pursuant to section 8.1 or similar sections of their respective leases);
8.3.2 public liability and property damage insurance, with respect to the Landlord's operations in the Building; and
8.3.3 such other forms of insurance as the Landlord or its mortgagee reasonably considers advisable. Such insurance shall be in such reasonable amounts and in such reasonable deductions as would be
carried by a prudent owner of a similar building, having regard to size, age, and location.
9 DAMAGE AND DESTRUCTION
9.1 Damage to Premises. If the Premises are partially destroyed due to fire or other casualty, the Landlord shall diligently repair the Premises, to the extent of its obligations under section 7.1, and Minimum Rent shall abate proportionately to the portion of the Premises, if any, rendered untenantable from the date of the destruction or damage until the Landlord's repairs have been substantially completed. If the Premises are totally destroyed due to fire or other casualty, the Landlord shall diligently repair the Premises only to the extent of its obligations pursuant to section 7.1; and, Minimum Rent shall abate entirely from the date of destruction or damage to such date which is the earlier of the date tenantable, or thirty (30) days after Landlord's repairs have been substantially completed. Upon being notified by the Landlord that the Landlord's repairs have been substantially completed, the Tenant shall diligently perform all other work required to fully restore the Premises for use in the Tenants business, in every case at the Tenant' s cost and without any contribution to such cost by the Landlord, whether or not the Landlord has at any time made any contribution to the cost of supply, installation, or construction of leasehold improvements in the Premises. Tenant agrees that during any period of reconstruction or repair of the Premises, it will continue the operation of its business, within the Premises to the extent practicable. If all or any part of the Premises shall be damaged by fire or other casualty and the fire or other casualty is caused by the fault of neglect of Tenant or Tenant's agents, guests, or invitees, then Minimum Rent and all other charges shall not abate.
9.2 Termination for Damage. Notwithstanding section 9.1, if damage or destruction that should occur to the Premises or the Building is such that in the reasonable opinion of the Landlord such reconstruction or repair cannot be completed within one hundred twenty (120) days of the happening of the damage or destruction, then the Landlord may, at its option, terminate this Lease on notice to the Tenant given within thirty (30) days after such damage or destruction; and, the Tenant shall immediately deliver vacant possession of the Premises in accordance with the terms of this Lease.
10 ASSIGNMENT, SUBLEASES, AND TRANSFERS.
10.1 Transfer by Tenant. The Tenant shall not enter into, consent to, or otherwise permit any Transfer, as hereinafter defined, without the prior written consent
of the Landlord in each instance, which consent shall not be unreasonably withheld. For purposes of this Lease, "Transfer" means an assignment of this Lease in whole or in part, a sublease of all or any part of the Premises, any transaction whereby the rights of the Tenant under this Lease or to the Premises are transferred to another, any mortgage or encumbrance of this Lease or the Premises or any part thereof or other arrangement under which either this Lease or the Premises become security for any indebtedness or other obligations; and, if Tenant is a corporation or a partnership, then "Transfer" shall include the transfer of a controlling interest in the stock of the corporation or partnership interests, as applicable. If there is a permitted Transfer, the Landlord may collect Minimum Rent, Operating Costs and other payments from the transferee and apply the net amount collected to the rent or other payments required to be paid pursuant to this Lease; but, in no event shall acceptance by the Landlord of any payments by a transferee be deemed a waiver of any provisions hereof regarding Tenant. Notwithstanding any Transfer, the Tenant shall not be released from any of its obligations under this Lease. The Landlord's consent to any Transfer shall be subject to the further condition that if the sum paid by such transferee to Tenant pursuant to such Transfer exceeds the Minimum Rent, Operating Costs and other charges (if any) payable under this Lease, the amount of such excess shall be paid to the Landlord. If, pursuant to a permitted Transfer, the Tenant should receive for such Transfer from the transferee, either directly or indirectly, any consideration other than Minimum Rent, Operating Costs and other charges payable pursuant to this Lease, either in the form of cash, goods, or services, then the Tenant shall, upon receipt thereof, pay to the Landlord an amount equivalent to such consideration.
10.2 Assent by Landlord. The Landlord shall have the unrestricted right to sell, lease, convey, or otherwise dispose of the Building or any part thereof and this Lease or any interest of the Landlord in this Lease. To the extent that the purchaser or assignee from the Landlord assumes the obligations of the Landlord under this Lease, the Landlord shall thereupon and without further agreement be released of all further liability under this Lease. If the Landlord sells its interest in the Premises, it shall deliver the security deposit to the purchaser, and the Landlord will thereupon be released from any further liability with respect to the security deposit and its return to the Tenant and the purchaser shall become directly responsible to Tenant.
11 DEFAULT.
11.1 Defaults. A default by Tenant shall be deemed to have occurred hereunder, if and whenever:
11.1.1 any Minimum Rent or Tenant's proportionate share of Operating Costs is not paid when due whether or not any notice or demand for payment has been made by the Landlord;
11.1.2 any other charge which is the obligation of the Tenant under this Lease is in arrears and is not paid within five (5) days after written demand by the Landlord;
11.1.3 the Tenant should breach any of its obligations in this Lease (other than the payment of Minimum Rent or Operating Costs) and the Tenant should fail to remedy such breach within fifteen (15) days (or such shorter period ds may be provided in this Lease);
11.1.4 if such breach cannot reasonably be remedied within fifteen (15) days (or such shorter period), then if the Tenant should fail to immediately commence to remedy and thereafter diligently proceed to remedy such breach, in each case after written notice from the Landlord;
11.1.5 the Tenant should become bankrupt or insolvent;
11.1.6 any of the Landlord's policies of insurance with respect to the Building should be canceled or adversely changed as a result of Tenant' s use or occupancy of the Premises; or
11.1.7 the business operated by Tenant in the Premises should be closed by governmental or court order for any reason.
11.2 Remedies. In the event of any default hereunder by Tenant, then without prejudice to any other rights which it has pursuant to this Lease or at law or in equity, the Landlord shall have the following rights and remedies, which shall be cumulative ind not alternative:
11.2.1 Landlord may cancel this Lease by notice to the Tenant and retake possession of the Premises for Landlord's account. Tenant shall then quit and surrender the Premises to Landlord. Tenant's liability under this section 11.2 of this Lease shall continue notwithstanding any expiration and surrender by Tenant, or any re-entry, repossession, or disposition hereunder by Landlord.
11.2.2 Landlord may enter the Premises as agent of the Tenant to take possession of any and all property of the Tenant on the Premises, to
store such property at the expense and risk of the Tenant or to sell or otherwise dispose of such property in such manner as the Landlord may see fit without notice to the Tenant. Re-entry and removal may be effectuated by summary dispossession proceedings, by any suitable action or proceeding, or otherwise. Landlord shall not be liable in any way in connection with its actions pursuant to this section, to the extent that its actions are in accordance with law.
11.2.3 If this Lease should be canceled pursuant to subsection 11.2.1 above, then Tenant shall remain liable (in addition to accrued liabilities) to the fullest extent legally permissible for all rent and all of the charges Tenant would have been required to pay until the date this Lease would have expired had such cancellation not occurred. Tenant's liability for rent shall continue notwithstanding re-entry or repossession of the Premises by Landlord. In addition to the foregoing, Tenant shall pay to Landlord such sums as the court which has jurisdiction thereover may adjudge as reasonable attorneys' fees with respect to any successful lawsuit or action instituted by Landlord to enforce the provisions of this Lease.
11.2.4 Landlord may relet all or any part of the Premises for all or any part of the unexpired portion of the Term of this Lease or for any longer period, and may accept any rent then attainable. Landlord may grant any concessions of Rent, and agree to paint or make any special repairs, alterations, and decorations for any new Tenant as it may deem advisable in its sole and absolute discretion. Landlord shall not be under any obligation either to relet or to attempt to relet the Premises.
11.2.5 If this Lease should be canceled in accordance with subsection 11.2.1 above, and Landlord should so elect, the Minimum Rent and Operating Costs hereunder shall be accelerated, and Tenant shall pay Landlord damages in the amount any and all sums which would have been due for the remainder of the Term.
11.2.6 Landlord may remedy or attempt to remedy any default of the Tenant under this Lease for the account of the Tenant and to enter upon the Premises for such purposes. Landlord need not provide Tenant with any notice of its intention to perform such covenants unless expressly required by this Lease. The Landlord shall not be liable to the Tenant for any loss or damage caused by acts of the Landlord in remedying or attempting to remedy such default, and the Tenant shall pay to the
Landlord all expenses incurred by the Landlord in connection with remedying or attempting to remedy such default. Any expenses incurred by Landlord shall accrue interest from the date of payment by Landlord until the date of repayment by Tenant at the highest rate permitted by law.
11.3 Costs. The Tenant shall pay to the Landlord on demand the costs incurred by the Landlord, including attorneys' fees and costs at all tribunal levels, incurred by the Landlord in enforcing any of the obligations of the Tenant under this Lease. In addition, upon any default by Tenant, Tenant shall also be liable to Landlord for the expenses to which Landlord may be put in re-entering the Premises, repossessing the Premises, painting, altering, or dividing the Premises, combining the Premises with an adjacent space for any new tenant, putting the Premises in proper repair, protecting and preserving the Premises by placing watchmen and caretakers therein, reletting the Premises (including attorneys' fees and disbursements, marshal's and brokerage fees, in so doing); and any other expenses reasonably incurred by Landlord.
11.4 Additional Remedies; Waiver. The rights and remedies of Landlord set forth herein shall be in addition to any other right and remedy now and hereinafter provided by law. All rights and remedies shall be cumulative and non-exclusive of each other. Any delay or omission by Landlord in exercising a right or remedy shall not be deemed to exhaust or impair the Landlord's rights, constitute a waiver of its rights, or be considered acquiescence by Landlord to a default by Tenant.
11.5 Default by Landlord. In the event of any default by Landlord, Tenant's exclusive remedy shall be an action for damages, but prior to any such action Tenant shall give Landlord written notice specifying such default with particularity; whereupon, Landlord shall have a period of thirty (30) days following its actual receipt of such notice within which to commence an appropriate cure of such default. Unless and until Landlord should fail to commence and diligently pursue the appropriate cure of such default after such notice or complete same within a reasonable period of time, Tenant shall not have any remedy or cause of action by reason thereof. Notwithstanding any provision of this Lease, Landlord shall not have any personal liability, at any time, under this Lease. In the event of any breach or default by Landlord of any term or provision of this Lease, Tenant agrees to look solely to the equity or interest then-owned by Landlord in the Building; and, in no event shall any deficiency judgment or any money judgment of any kind be sought or obtained against Landlord.
12 ESTOPPEL CERTIFICATE; SUBORDINATION
12.1 Estoppel Certificate. Within ten (10) days after written request by the Landlord, the Tenant shall deliver in a form supplied by the Landlord, an estoppel certificate to the Landlord as to
12.1.1 the status of this Lease, including whether this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified and identifying the modification agreements),
12.1.2 the amount of Minimum Rent and Operating Costs then being paid and the dates to which same have been paid,
12.1.3 whether or not there is any existing or alleged default by either party with respect to which a notice of default has been served, or any facts existing which, with the passing of time or giving of notice, would constitute a default and, if there is any such default or fact, specifying the nature and extent thereof, and
12.1.4 any other matters pertaining to this Lease as to which the Landlord shall request in such certificate.
The Landlord and any prospective purchaser, lender, or ground lessor shall have the right to rely on such certificate.
12.2 Subordination; Attornment. This Lease and all rights of the Tenant shall be subject and subordinate to any and all mortgages, security agreements, or like instruments resulting from any financing, refinancing of collateral financing (including renewals or extensions thereof), and to any and all ground leases, made or arranged by Landlord of its interests in all or any part of the Building), from time to time in existence against the Building, whether now existing or hereafter created. Such subordination shall not require any further instrument to evidence such subordination. However, on request, the Tenant shall further evidence its agreement to subordinate this Lease and its rights under this Lease to any and all documents and to all advances made under such documents. The form of such subordination shall be made as required by the Landlord, its lender, or ground lessor. The Tenant shall promptly on request attorn to any mortgagee, or to the future owner(s) of the Building, or the purchaser at any foreclosure or sale under proceedings taken under any mortgage, security agreement, like instrument
or ground lease, and shall recognize such mortgagee, owner, or purchaser as the Landlord under this Lease.
13 USE AND MAINTENANCE OF COMMON AREAS.
13.1 Use and Maintenance of Common Areas. The Tenant and those doing business with Tenant for purposes associated with the Tenant's business on the Premises, shall have a nonexclusive license to use the Common Areas for their intended purposes during normal business hours in common with others entitled thereto and subject to any rules and regulations imposed by the Landlord. The Landlord shall keep the Common Areas in good repair and condition and shall clean the Common Areas when necessary. Subject to all of the terms, provisions, covenants, and conditions contained herein, Tenant shall have the right to use the number of parking spaces indicated in the Lease Summary in the parking lot which Landlord shall provide for the use of Tenants of the Building. Landlord shall not be liable for any damage to automobiles of any nature whatsoever to, or any theft of automobiles or other vehicles or the contents thereof, while in or about the parking lots. The Tenant acknowledges that its non-exclusive right to use any parking facilities forming part of the Building may be subject to such rules and regulations as reasonably imposed by the Landlord from time to time. The Tenant acknowledges that all Common Areas shall at all times be under the exclusive control and management of the Landlord. For purposes of this Lease, "Common Areas" shall mean those areas, facilities, utilities, improvements, equipment and, installations of the Building which serve or are for the benefit of the tenants of more than one component of the Building and which are not designated or intended by the Landlord to be leased, from time to time, or which are provided or designated from time to time by the Landlord for the benefit or use of all tenants in the Building, their employees, customers, and invitees, in common with others entitled to the use or benefit of same.
13.2 Alterations by Landlord. The Landlord may
13.2.1 alter, add to, subtract from, construct improvements on, re-arrange, and construct additional facilities in, adjoining, or proximate to the Building;
13.2.2 relocate the facilities and improvements in or comprising the Building or erected on the land;
13.2.3 do such things on or in the Building as required to comply with any laws, by-laws, regulations, orders, or directives affecting the land or any part of the Building; and
13.2.4 do such other things on or in the Building as the Landlord, in the use of good business judgment determines to be advisable, provided that notwithstanding anything contained in this section 13.2, access to the Premises shall be available at all times. The Landlord shall not be in breach of its covenants for quiet enjoyment or liable for any loss, costs, or damages, whether direct or indirect, incurred by the Tenant due to any of the foregoing.
13.3 Tenant Relocation. Landlord shall have the right, at any time upon sixty (60) days written notice to Tenant, to relocate Tenant into other space within the Building comparable to the Premises. Upon such relocation, such new space shall be deemed the Premises and the prior space originally demised shall in all respects be released from the effect of this Lease. If the Landlord elects to relocate Tenant as above described.
13.3.1 the new space shall contain approximately the same as, or greater usable area than the original space,
13.3.2 the Landlord shall improve the new space, at Landlord's sole cost, to at least the standards of the original space,
13.3.3 the Landlord shall pay the reasonable costs of moving Tenant's trade fixtures and furnishings from the original space to the new space,
13.3.4 as total compensation for all other costs, expenses, and damages which Tenant may suffer in connection with the relocation, including but not limited to, lost profit or business interruption, no Minimum Rent or Operating Costs shall be due or payable for the first full calendar month of Tenant's occupancy of the new space, and Landlord shall not be liable for any further indirect or special expenses of Tenant resulting from the relocation,
13.3.5 Minimum Rent, Tenant's proportionate share of Operating Costs, and all other charges hereunder shall be the same for the new space as for the original space, notwithstanding that the new space may be larger than the original space, and
13.3.6 all other terms of this Lease shall apply to the new space as the Premises, except as otherwise provided in this paragraph.
14 CONDEMNATION.
14.1 Total or Partial Taking. If the whole of the Premises, or such portion thereof as will make the Premises unusable for the purposes leased hereunder, shall be taken by any public authority under the power of eminent domain or sold to a public authority under threat or in lieu of such taking, the Term shall cease as of the day possession or title shall be taken by such public authority, whichever is earlier ("Taking Date"), whereupon the rent and all other charges shall be paid up to the Taking Date with a proportionate refund by Landlord of any rent and all other charges paid for a period subsequent to the Taking Date. If less than the whole of the Premises, or less than such portion thereof as will make the Premises unusable for the purposes leased hereunder, the Term shall cease only as to the part so taken as of the Taking Date, and Tenant shall pay rent and other charges up to the Taking Date, with appropriate credit by Landlord (toward the next installment of rent due from Tenant) of any rent or charges paid for a period subsequent to the Taking Date. Minimum Rent, Operating Costs and other charges payable to Landlord shall be reduced in proportion to the amount of the Premises taken.
14.2 Taking For Temporary Use. If there is a taking of the Premises for temporary use, this Lease shall continue in full force and effect and Tenant shall continue to comply with Tenant's obligations under this Lease, except to the extent compliance shall be rendered impossible or impracticable by reason of the taking. Minimum Rent and other charges payable to Landlord shall be reduced in proportion to the amount of the Premises taken for the period of such temporary use.
14.3 Award. All compensation awarded or paid upon a total or partial taking of the Premises or Building including the value of the leasehold estate created hereby shall belong to and be the property of Landlord without any participation by Tenant. Tenant shall not have any claim to any such award based on Tenant's leasehold interest. However, nothing contained herein shall be construed to preclude Tenant, at its cost, from independently prosecuting any claim directly against the condemning authority in such condemnation proceeding for damage to, or cost of removal of, stock, trade fixtures, furniture, and other personal property belonging to Tenant; provided, however, that no such claim shall diminish or otherwise adversely affect Landlord's award or the award of any mortgagee.
15 GENERAL PROVISIONS.
15.1 Delay. Except as expressly provided in this Lease, whenever the Landlord or Tenant is delayed in the fulfillment of any obligation under this Lease, other than the payment of Minimum Rent, Operating Costs, or other charges, by an unavoidable occurrence which is not the fault of the party delayed in performing such obligation, then the time for fulfillment of such obligation shall be extended during the period in which such circumstances operate to delay the fulfillment of such obligation.
15.2 Holdover tenancy. If the Tenant should remain in possession of the Premises after the end of the Term without having executed and delivered a new lease or an agreement extending the Term, there shall not exist any tacit renewal of this Lease or the Term; and, the Tenant shall be deemed to be occupying the Premises as a Tenant from month-to-month at a monthly Minim um Rent payable in advance on the first day of each month equal to twice the monthly amount of both Minimum Rent and Operating Costs payable during the last month of the Term, and otherwise upon the same terms as are set forth in this Lease, so far as they are applicable to a monthly tenancy.
15.3 Waiver, Partial Invalidity. If either the Landlord or Tenant should excuse or condone any default by the other of any obligation under this Lease, this shall not constitute a waiver of such obligation in respect of any continuing or subsequent default; and in no event shall any waiver be implied. All of the provisions of this Lease are to be construed as covenants even though not expressed as such. If any such provision is held or rendered illegal or unenforceable, then it shall be considered separate and severable from this Lease and the remaining provisions of this Lease shall remain in force and effect to bind the parties as though the illegal or unenforceable provision had never been included in this Lease.
15.4 Recording. Neither the Tenant nor anyone claiming under the Tenant shall record this Lease or any memorandum hereof in any public records without the prior written consent of the Landlord.
15.5 Notices. In every case where, under the provisions of this Lease, it shall be necessary or desirable for Landlord to give to or serve upon Tenant any notice or demand, it shall be sufficient for Landlord
15.5.1 to deliver or cause to be delivered to Tenant at the Premises a written or printed copy of such notice or demand, or
15.5.2 to send a written or printed copy of such notice or demand by certified mail, return receipt requested postage prepaid, addressed to Tenant at the Premises, or
15.5.3 to leave a written or printed copy of said notice or demand upon the Premises, or to post the same upon the door leading into the Premises.
15.6 Attorney's Fees. Tenant agrees to pay all attorney's fees and expenses of Landlord incurred in enforcing any of the obligations of Tenant under this Lease or in any negotiation in which Landlord shall, without his fault, become involved through or on account of this Lease. If either party or the broker named herein (if any) brings an action to enforce the terms hereby or declare rights hereunder, the party awarded the net judgment in any such action on trial or appeal shall be entitled to reasonable attorney's fees to be paid by the losing party as fixed by the court.
15.7 Locks; Keys. No additional locks shall be placed upon any doors of the Premises or of the Building; and, Tenant will not permit any duplicate keys to be made. All necessary keys will be furnished by Landlord, but if more than two keys for any door lock shall be desired, the additional number must be paid for by Tenant. Upon the termination of this Lease, Tenant shall surrender to Landlord all keys to the premises.
15.8 Authority. If Tenant is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duty authorized to
execute and deliver this Lease on behalf of said entity. If Tenant
is a corporation, trust, or partnership, Tenant shall, within thirty
(30) days after execution of this Lease, deliver to Landlord
evidence of such authority satisfactory to Landlord.
15.9 Conflict. Any conflict between the printed provisions of this Lease and typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions provided such is signed by the party against whom enforcement is sought.
15.10 Brokerage. Tenant and Landlord acknowledge that they have not dealt, consulted or negotiated with any real estate broker, sales person or agent other than the Broker, if any, set forth in Section 1.1.21 of the Lease and each party hereby agrees to indemnify and hold harmless the other from and against any and all loss and liability resulting from or arising out of any claim that the indemnifying party has dealt or negotiated with any other real estate broker, sales person or agent in connection with this Lease.
15.11 Entire Agreement. Tenant agrees that Landlord has not made any statement, promise or agreement, or taken upon itself any engagement whatsoever, verbally or in writing, in conflict with the terms of this Lease, or which in any way modifies, varies, alters, enlarges or invalidates any of its provisions. This Lease sets forth the entire understanding between Landlord and Tenant, and shall not be changed, modified or amended except by an instrument in writing signed by the party against whom the enforcement of any such change, modification or amendment is sought. The covenants and agreements herein contained shall bind, and the benefit and advantages herein shall inure to the respective heirs, legal representatives, successors and assigns of Landlord and Tenant. Whenever use, the singular number shall include the plural and the plural shall include the singular and the use of any gender shall include all genders. The headings set forth in this Lease are for ease of reference only and shall not be interpreted to modify or limit the provisions hereof.
15.12 Governing law; time of essence. This Lease shall be construed in accordance with the laws of the State of Florida. Time is of the essence in the performance of all obligations under this Lease.
15.13 RADON GAS. 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 one's county public health unit.
15.14 Successors; joint and several liability. The rights and liabilities created by this Lease extend to and bind the successors and assigns of the Landlord and the heirs, executors, administrators, and permitted successors and assigns of the Tenant. No rights, however, shall inure to the benefit of any transferee unless such Transfer complies with the provisions of Section 10 above. If there is at any time more than one Tenant or more than one person constituting the Tenant, their covenants shall be considered to be joint and several and shall apply to each and every one of them.
15.15 Captions and Section Numbers. The captions, section numbers, article numbers and table of contents appearing in this Lease are inserted only as a matter of convenience and in no way affect the substance of this Lease.
15.16 Extended meanings. The words "hereof," "hereto," "hereunder," and similar expressions used in this Lease relate to the whole of this Lease and not only to the provisions in which such expressions appear. This Lease shall be read with all changes in number and gender as may be appropriate or required by the context. Any references to the Tenant includes, when the context allows, the employees, agents, invitees, and licensees of the Tenant and all others over whom the Tenant might reasonably be expected to exercise control. This Lease has been fully reviewed and negotiated by each party and its counsel and shall not be more strictly construed against either party.
15.17 No Partnership. Nothing in this Lease shall create any relationship between the parties other than that of lessor and lessee; and, nothing in this Lease shall be deemed to imply or infer that the Landlord is a partner of, joint venturer with or member of a common enterprise with the Tenant.
15.18 Quiet Enjoyment. If the Tenant pays rent and other charges and fully observes and performs all of its obligations under this Lease, the Tenant shall be entitled to peaceful and quiet enjoyment of the Premises for the Term without interruption or interference by the Landlord or any person claiming through the Landlord.
15.19 Waiver of Trial by Jury. LANDLORD AND TENANT HEREBY KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM BASED ON THIS LEASE OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS LEASE OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN
CONNECTION WITH THIS LEASE, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY
PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LANDLORD
AND TENANT TO ENTER INTO THIS LEASE.
15.20 [End of Lease terms; signature Page follows]
page 28 of 28 pages
Exhibit 10.4
STANDARD LEASE
This Lease ("Lease") is made and entered into as of the 6th day of July 1999, by and between Wiles Road Business Center, Ltd. ("Landlord"), having an office at 2240 Woolbright Road, Suite 300, Boynton Beach, Florida 33426 and Integrated Merchant Service, Inc. ("Tenant"). (If more than one person and/or entity shall be named herein as Tenant, their liability under this Lease shall be joint and several).
For and in consideration of the mutual covenants herein contained, Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, certain premises which are situated within the Wiles Road Business Center ("Building"), and which are more particularly described as follows 1133 Wiles Road, Coral Springs, Broward County, Florida 33065 ("Premises"). The Premises are accepted by Tenant for all purposes. As Is, Where Is. Tenant and Landlord hereby stipulate and agree for all purposes that the Premises consist of approximately 2,033 Rentable Square Feet including a portion of the Common Areas of the Building as reasonably determined by Landlord.
The use and occupancy by Tenant of the Premises shall include the use in common with other Building Tenants of the "Common Areas", which shall include but not be limited to, Building lobbies, hallways, bathroom facilities, stairwells, elevators, loading facilities, sidewalks, landscaped and vacant areas, and such other areas as reasonably determined by Landlord.
1. TERM. The term of this Lease shall be 24 Months , commencing on the 1st day of December, 1999 or upon notice by Landlord to Tenant that the Premises are substantially ready for occupancy ("Commencement Date") and ending 24 Months after Commencement Date ("Term").
Landlord shall use its best efforts to tender possession of the Premises to Tenant at the commencement of the Lease Term. Landlord shall not be subject to any liability for any failure to tender possession of the Premises to Tenant, provided that such failure occurred as a consequence of any circumstance or cause beyond Landlord's reasonable control, including but not limited to any Act of God or the failure of a prior tenant to vacate all or any portion of the Premises.
2. GROSS RENT. For the first year of the Term (12 months' occupancy), Tenant shall pay to Landlord Twenty Six Thousand Four Hundred Twenty Nine and 00/100 Dollars ($26,429.00) as gross rent ($13.00 per rentable square foot) for the Premises (the "Annual Gross Rent"), due and payable on the first day of each calendar month (first month's Rent and Security Deposit due upon Tenants' execution of this Lease) during the first year of the Term at Two Thousand Two Hundred Two and 42/100 Dollars ($2,202.42 ) per month ("Monthly Rent") together with any and all applicable sales and other taxes
now or later enacted. Tenant covenants to pay without notice, deduction, set-off or abatement to Landlord the Gross Rent. All sums due and payable by Tenant to Landlord under the terms and provisions of this Lease shall constitute "Additional Rent" under this Lease. All checks or negotiable drafts for Monthly Rent and any Additional Rent are to be made payable to the order of Landlord and mailed or hand delivered to Landlord's office or to any other office so designated by Landlord. If the Commencement Date is not on the first day of a calendar month, the first payment due and payable shall include a per diem proration payment for such partial calendar month together with Monthly Rent for the month next following the Commencement Date.
Commencing in the second (2nd) Lease Year (after 12 months of occupancy), and each Lease Year thereafter, the Annual Gross Rent shall escalate on the basis of five percent (5%) over the previous Lease Year's Annual Gross Rent plus applicable sales and other taxes thereon, now existing or later enacted. However, if the amount of Real Estate Taxes, Utilities (total of electricity, water, garbage removal) or Insurance increase in excess of 5% during any calendar year of this Lease over the previous calendar year, Tenant will be charged its proportionate share of such increase over 5%. Tenant's share of such increased costs shall be determined by multiplying the increase over 5% by a fraction, the numerator of which shall be the square footage of the Tenant's Premises and the denominator of which shall be the total leased space of the Building as reasonably determined by Landlord. For years where occupancy is less than a calendar year, Tenant's proportionate share, if any, will be prorated accordingly.
3. SECURITY DEPOSIT. Tenant shall deposit with Landlord the sum of Two Thousand Four Fifty One and 29/100 Dollars ($2,451.29) ("Security Deposit") upon execution of this Lease. This sum shall be retained by Landlord as security for the payment by Tenant of the Annual Gross Rent and other sums payable by Tenant under this Lease ("Additional Rent") and for the faithful performance by Tenant of all the other terms, covenants and conditions of this Lease. Tenant has $2,148.20 security deposit on file with Landlord. Balance of $303.09 due upon execution of this Lease Agreement.
It is understood that the Security Deposit is not to be considered as the last month's rent. However, Landlord, at Landlord's option may, at any time, apply the Security Deposit or any part thereof toward the payment of the Annual Gross Rent and/or Additional Rent toward the performance of Tenant's obligations under this Lease. Landlord may, but is not obligated to, apply a portion of the Deposit to cure any default hereunder, and Tenant shall pay on demand the amount necessary to restore the Deposit in full. The Security Deposit shall not constitute liquidated damages. Landlord shall return the unused portion of the Security Deposit to Tenant within thirty (30) days after the expiration of the Term if Tenant is not breach of this Lease, but not otherwise. If the Security Deposit is insufficient to cover Landlord's actual damages, Tenant shall pay on demand to Landlord an amount sufficient to fully compensate Landlord for Tenant's breach. Landlord may (but is not obligated to)
exhaust any and all rights and remedies against Tenant before resorting to the Security Deposit. Landlord shall not be required to pay Tenant any interest on the Security Deposit nor hold same in a separate account. If Landlord sells the Building, Landlord shall deliver the Security Deposit or the unapplied portion thereof to the new owner. Tenant agrees that if Landlord turns over the Security Deposit or the unapplied portion thereof to the new owner, Tenant shall look to the new owner only and not to Landlord for its return upon expiration of the Term. If Tenant assigns this Lease, the Security Deposit shall remain with Landlord for the benefit of the Tenant and shall be returned to such Tenant upon the same conditions as would have entitled Tenant to its return. No mortgagee of the Building will be liable for the return of any portion of the Security Deposit, except to the extent actually received by such mortgagee.
4. CONDITION OF PREMISES. Tenant shall accept the Premises "AS IS", in the condition the Premises are in at the commencement of the Term. Tenant acknowledges that Tenant has inspected and knows the condition of the Premises and acknowledges to Landlord that the Premises are in good order and repair as of the date the Term commences. No promise of Landlord to alter, remodel or improve the Premises or the Building and no representation respecting the condition of the Premises of the Building has been made by Landlord to Tenant other than as may be specifically contained in this Lease.
5. LATE CHARGES. If Monthly Rent or any Additional Rent is not received by Landlord within 10 days of the due date, including any prior amounts remaining unpaid (without in any way implying Landlord's consent to such late payment), Tenant shall, in addition, pay a late charge equal to five percent (5%) of the total amount not timely paid. Non receipt of monthly rent statement by Tenant shall not be an acceptable reason for late rent payments since monthly rent statements may be sent to Tenant merely as a reminder of Monthly Rent and Additional Rent due. If Tenant shall pay Monthly Rent or any Additional Rent with a check or bank draft which is returned unpaid or uncollected, Tenant shall pay to Landlord, in addition to the total amount due and to a 5% late charge, a Fifty Dollar ($50.00) processing fee for each such check or bank draft. In the event that two or more of Tenant's checks or bank drafts are returned unpaid or uncollected during the Term, Landlord may require, as a condition of Tenant continuing its tenancy hereunder, that all subsequent payments of Monthly Rent and Additional Rent be in the form of cash, cashier's checks or money orders. In addition, Tenant shall reimburse Landlord upon demand for all reasonable costs incurred by Landlord in the enforcement of any of the provisions of this Lease and/or the collection of any sums due to Landlord under this Lease including, without limitation, collection agency fees and attorneys' fees through all appellate actions and proceedings, if any.
6. HOLDING OVER. If Tenant retains possession of the Premises, or any part thereof, beyond the end of the Term, Tenant shall pay to Landlord an amount equal to double the Monthly Rent plus double any Additional Rent for the time Tenant thus
remains in possession. In addition thereto, Tenant shall pay Landlord for all damages, consequential as well as direct, sustained by reason by Tenant's retention of possession. If Tenant remains in possession of the Premises, or any part thereof, after the end of the Term, such holding over, at the election of Landlord, shall constitute a renewal of this Lease for another Term at double the Annual Gross Rent for the last calendar year of the Term. The provisions of this Paragraph shall not limit or in any way impair or waive Landlord's right to possession, right of re-entry or any other right or remedy given hereunder or pursuant to State or federal law.
7. LANDLORD'S LIEN. Tenant hereby pledges and conveys to Landlord a security interest ("Landlord's Lien") in all of Tenant's furniture, furnishings, goods, chattels and fixtures of every nature, kind and description whatsoever situated upon the Premises as collateral security for tile full all and prompt payment of Monthly Rent and any Additional Rent as and when due and the full and faithful performance of Tenant's covenants herein contained. Tenant also agrees that this Landlord's Lien may be enforced by distress sale, foreclosure, or by any other method, and that any and all costs incurred by Landlord by enforcement of this Landlord's Lien shall be payable to Landlord by Tenant.
8. MAINTENANCE AND REPAIR. Tenant shall at all times, and at Tenant's
expense, maintain the Premises in a clean, orderly, tenantable and sanitary
condition, including Building areas of common usage. Tenant shall return the
Premises at the end of the Term in good order and repair, and shall be obligated
to keep repaired and maintained during the Term (i) any glass windows, doors and
door hardware, (ii) interior walls, floor coverings, columns and partitions,
(iii) fixtures, (iv) heating, ventilating and air conditioning appliances, (v)
plumbing, electrical and sewage facilities, and (vi) any and all other
appurtenances of the Premises. In the event Tenant fails to maintain the
Premises as provided for herein Landlord shall have the right , but not the
obligation, to perform such maintenance as is required of Tenant in which event
Tenant shall reimburse Landlord for its costs in providing such maintenance or
repairs together with a ten (10%) percent charge for Landlord's overhead and
Tenant shall promptly reimburse Landlord for the amount so billed to Tenant by
Landlord. At the end of the Term, Tenant shall pay Landlord for damages to any
of the foregoing, whether or not such damages were caused by the act or neglect
of Tenant or any person invited or employed by, or under the control of Tenant.
Landlord shall not be responsible to make any improvements or repairs to the
Premises, and Landlord's sole obligation shall be to keep the Building's roof,
walls and foundation structurally sound, except that Landlord shall not be
responsible to make any such repairs made necessary by any act or neglect of
Tenant or any person invited or employed by, or under the contract of Tenant.
Tenant will obtain at its own expense a preventative maintenance contract on its
air conditioning system for the term of the Lease, and shall provide a copy of
the maintenance agreement to the Landlord.
9. ACCESS TO PREMISES. Tenant shall permit Landlord, and Landlord's agents and independent contractors, during customary business hours or, if Landlord reasonably deems an emergency situation to exist, at any time, to enter the Premises for (i) the purpose of making inspections and repairs, (ii) removing fixtures, alterations, additions, signs or placards not in conformity with those rules and regulations prescribed by Landlord from time to time, or (iii) exhibiting the Premises for lease, appraisal, sale or mortgage, which right of Landlord shall include, within one hundred eighty (180) days prior to the end of the Term, the posting of any sign to such effect. If Landlord makes repairs or causes repairs to be made to the Premises, Tenant shall immediately pay to Landlord the costs of same after notice from Landlord.
10. BUILDING ADDITIONS & ALTERNATIONS. Landlord shall have the absolute right to make changes in and about the Building, including, without limitation, employing electrical submetering or direct metering for the Premises, and build additions to or otherwise alter the Building, without liability to Tenant, provided such alterations do not constitute a constructive eviction of Tenant from the Premises.
11. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not voluntarily or involuntarily transfer or assign this Lease or any right under it nor sublet the Premises or any part of the Premises, nor convey, mortgage, pledge, encumber or otherwise grant any interest, privilege or license whatsoever in connection with this Lease or the Premises, except with the prior written consent of Landlord, which consent will not be unreasonably withheld. Consent by Landlord to one or more assignments, sublettings or encumbrances shall not operate as a consent to any subsequent assignment, subletting or encumbrance (Tenant will be charged a $500 administrative fee for each such assignment or sublet), each of which shall require Landlord's separate consent. Any and all other costs incurred in connection with the permitted assignment or subletting of this Lease or the permitted grant of any encumbrance or other interest in connection with this Lease or the Premises shall be paid by the Tenant, which sums shall be added to and become a part of the Additional Rent.
(b) In the event of a permitted assignment of this Lease, or subletting of the Premises, Tenant shall remain fully liable and shall not be released from Tenant's obligations hereunder should any assignee or subtenant fail to fully and faithfully perform each and every of Tenant's covenants herein contained, including without limitation, the payment of Monthly Rent and any Additional Rent as and when due.
(c) Any sale or other transfer, or any series of sales or transfers, including by consolidation, merger or reorganization, of a majority of the voting stock of Tenant, if Tenant is a corporation, or any sale or other transfer, or any series of sales or transfers, of a majority of the partnership interests of Tenant, if Tenant is a partnership, shall be an
assignment for purposes of this Section 12. As used in this paragraph 12(c), the term "Tenant" shall also mean any entity which has guaranteed Tenant's obligations under this Lease, and the prohibition hereof shall be applicable to any sales or transfers of the stock or partnership interests of said guarantor.
(d) If Landlord consents to a Transfer, Tenant shall pay Landlord fifty percent (50%) of any Transfer Premium derived by Tenant from such Transfer. "Transfer Premium" shall mean all rent, Monthly Rent, Additional Rent or other consideration paid by such Transferee in excess of the Rent payable by Tenant under this Lease (on a monthly basis during the Term). If part of the consideration for such Transfer shall be payable other than in cash, Landlord's share of such non-cash consideration shall be in such form as is reasonably satisfactory to Landlord. The percentage of the Transfer Premium due Landlord hereunder shall be paid within the (10) days after Tenant receives any Transfer Premium from the Transferee.
(e) Notwithstanding any other provision contained in this paragraph concerning Assignment and Subletting of the Premises, Landlord shall have a Right of First Refusal within ten (10) days of it's receipt of executed sublease documents, to cancel Tenant's Lease and take back the Premises, in lieu of agreeing to a sublet or assignment.
(f) In the event Landlord consents to any assignment of this Lease, or subletting of the Premises, or any renewal of this Lease, or the exercise of any right of first refusal options granted Tenant by Landlord pursuant to this Lease or any amendments thereof, Tenant, assignee or subtenant will he requited to execute the Landlord's then current Standard Lease format.
12. LIENS BY TENANT. Tenant shall keep the Premises and the real estate of which the Premises forms a part free from any liens arising out of any work performed, materials furnished, or obligations incurred by Tenant. In the event that Tenant shall not, within five (5) days following the imposition of any such lien, cause the same to be released of record by payment or bonding over said Lien, Landlord shall have in addition to all other remedies provided herein and by law, the right but not the obligation to cause the same to be released by such means as it shall deem proper. All sums paid by Landlord and all expenses incurred by it in connection therewith shall automatically create an obligation of Tenant to pay, on demand, an equivalent amount times two to Landlord.
No work which Landlord permits Tenant to perform shall be deemed to be for the immediate use and benefit of Landlord, and no mechanic's or other lien shall be allowed against the estate of Landlord by reason of its consent to such work.
13. RULES AND REGULATIONS. Tenant shall abide by and comply with all rules and regulations now or hereinafter prescribed by Landlord for the Building and the
Premises which shall be deemed part of this Lease and shall abide by and comply with all laws, ordinances and regulations enacted by those governmental entities, whether federal, state or municipal, having jurisdiction over the Building or the Premises. Tenant shall neither permit nor commit any immoral or unlawful practice or act in or upon the Building or the Premises. Tenant shall not permit any noxious, foul or disturbing odors to emanate from the Premises nor use loudspeakers, sound systems, stereos, cassette players, CD players, phonographs, radio broadcasts or the like in a manner so as to be heard outside of the Premises. Landlord shall have no duty to enforce any rules and regulations, or the covenants contained in any other Building lease, as against any other Tenant or occupant of the Building, and Landlord shall not be liable to Tenant for violation of the same or fur any act or omission by any other tenant or occupant of the Building.
14. USE.
(a) Tenant will use and occupy the Premises for General Office and for no other use or purpose. Tenant shall not suffer or permit the Premises or any part thereof to be used in any other manner, or suffer or permit anything to be done or brought into or kept in the Premises, which would in any way: (i) violate any law or requirement of public authorities; (ii) cause injury to the Building or any part thereof, (iii) interfere with the normal operations of air conditioning, ventilating, plumbing or other mechanical or electrical systems of the Building; (iv) constitute a public or private nuisance; (v) alter the appearance of the exterior of the Building or any portion of the interior other than the Premises pursuant to the provisions of this Lease; or (vi) commit such actions or inactions that generate a direct increase in Landlord's expenses to operate the Building in which the Premises are located, which cannot be fairly allocated amongst other tenants in the Building.
(b) Tenant shall not make any alterations or additions to the Premises, or install any high voltage or amperage electrical equipment or plumbing apparatus in the Premises, without the prior written consent of Landlord. If Tenant shall require special electrical, plumbing, maintenance or other special services or equipment during the Term, and Landlord consents thereto, Tenant agrees to pay for all installation costs and all expenses incurred in connection with Tenant's use of such special services and equipment.
(c) At the termination of this Lease, Tenant shall, at Landlord's option, restore the Premises to its "as is" original condition within ten (10) days from Lease Termination. If Tenant fails to do so, Landlord shall charge Tenant for such work and Tenant shall immediately pay such charge upon demand by Landlord.
15. INDEMNITY AND INSURANCE
(a) Tenant agrees to indemnity, defend and save and hold Landlord, and
Landlord's agents, managing agent, independent contractors, successors and assigns, harmless against any and all liabilities, losses, costs and expenses (including, without limitation, any and all attorneys' fees and court costs through trial and on appeal) or any death, personal injury or property damage occurring in, on or about the Premises or the Building arising from or in any way connected with any acts, omissions, neglect or fault of Tenant, or any of Tenant's employees, agents, invitees, licensees, representative, successors or assigns, including but not limited to, any Default (hereinafter defined).
(b) Tenant shall during the Term, at Tenant's sole cost and expense, keep in full force and effect a policy of public liability insurance, including workers compensation coverage, and property damage insurance, with respect to all matters which arise in connection with Tenant's operation of the Premises. The limits of public liability coverage shall not be less than $1,000,000.00 per person and $1,000,00.00 per occurrence, and the property damage liability shall not be less than $250,000.00. The insurance policy or policies shall name Landlord, Landlord's managing agent and Tenant as additional insureds, and shall contain a clause that the insurer will not cancel or change insurance coverage without first giving Landlord twenty (20) days' prior written notice of same. The insurance shall be underwritten by a company or companies approved by Landlord, and a copy of the policy or policies and of the certificate(s) of such insurance and all endorsements or replacements thereof, shall be delivered to Landlord prior to or immediately upon Commencement Date.
(c) Tenant shall comply, at Tenant's cost and expense, with any and all requirements of the Southern Underwriters' Board and of any federal, State, and municipal government applicable to the Premises for the correction, prevention and abatement of nuisances, unsafe or hazardous conditions, or other grievances arising from Tenant's occupancy of the Premises. Tenant shall also comply in a timely manner with all occupational, professional and licensing requirements applicable to Tenant's use of the Premises.
Tenant shall promptly comply with any and all fire, emergency and evacuation procedures ordered by safety and regulatory officials having jurisdiction over the Building or the Premises.
(d) Tenant shall comply with any and all requests made by Landlord's fire or liability insurers with respect to the Building or the Premises, or both, at Tenant's cost and expense. Tenant agrees to pay any increase(s) in Landlord's fire and/or liability insurance premiums over and above the rate in effect immediately prior to the date the Term commences caused by Tenant's use or occupancy of the Premises.
(e) In no event shall Tenant engage in any business or activity or permit on the Premises any hazardous wastes or any inflammables such us gasoline, turpentine,
kerosene, naphtha and benzine, or explosives or any other article of intrinsically dangerous nature, and in no event shall Tenant, its agents, employees or invitees bring any such hazardous wastes, flammables or other articles onto the Premises. If by reason of the failure of Tenant to comply with the provisions of this paragraph, any insurance coverage is jeopardized or insurance premiums or other costs are increased, Landlord shall have the option either to terminate this lease or to require Tenant to make immediate payment of the increased costs or insurance premium, as the case may be, and the same shall be deemed Additional Rent due hereunder.
16. DIRECT CHARGES. Electricity to the Premises shall be individually metered in Tenant's name and Tenant shall pay utility company directly for monthly electricity charges to the Premises. Tenant shall also pay for any special or excessive use of building services (including, but not limited to, utilities, maintenance, cleaning, heating, cooling, and repair services provided by Landlord for the benefit of the Premises or the Building where the Premises are located), including but not limited to, excessive trash removal or water usage, and unusual sewage disposal needs. Landlord shall have the sole and exclusive right to determine if any use of the building services by Tenant is special or excessive.
17. DAMAGES TO PREMISES. If the Premises, the Building/s or any part thereof is damaged by fire or other casualty, cause or condition whatsoever and Landlord shall determine not to restore said Premises or Building/s, Landlord may, by written notice to Tenant given within sixty (60) days after such damage, terminate this Lease. Such termination shall become effective as of the date of the damage. If this Lease is not terminated as above provided and if the Premises are made partially or wholly untenantable, Landlord, at its expense, shall restore the same with reasonable promptness to the condition in which Landlord furnished the Premises to Tenant at the commencement of the Lease Term as to those items that were provided to the Premises at Landlord's expense without any reimbursement by Tenant. Landlord shall be under no obligation to restore any alteration, improvements or additions to the Premises made by Tenant or paid for by Tenant, including, but not limited to, any of the initial tenant finish done or paid for by Tenant or any subsequent changes, alterations or additions made by Tenant or reimbursed by Tenant.
If as a result of fire or other casualty, cause or condition whatsoever the Premises are made partially or wholly untenantable and, if Landlord has not given the sixty (60) days notice above provided for and fails within one hundred twenty (120) days after such damage occurs to eliminate substantial interference with Tenant's use of said Premises or substantially to restore said Premises, Tenant may terminate this Lease as of the end of said one hundred twenty (120) days by notice to Landlord given not later than five (5) days after expiration of said one hundred twenty (120) day period. If the Premises are rendered totally untenantable but this Lease is not terminated, all rent shall abate from the date of
the fire or other relevant cause or condition until the Premises are ready for occupancy and reasonably accessible to Tenant. If a portion of the Premises is untenantable, rent shall be prorated on a per diem basis and apportioned in accordance wit the portion of the Premises which is usable by the Tenant until the damaged part is ready for the Tenant's occupancy. In all cases, due allowance shall be made for reasonable delay caused by adjustment of insurance loss, strikes, labor difficulties or any cause beyond Landlord's reasonable control. For the purposes of this Lease, said Premises shall be considered tenantable so long as and to the extent that the Premises are occupied. In any event, Tenant shall he responsible for the removal, or restoration, when applicable, of all its damaged property and debris from the Premises, upon request by Landlord or else Tenant must reimburse Landlord for the cost of removal.
18. PERSONAL PROPERTY. Tenant will be solely responsible for security of the Premises and the contents thereof. All of Tenant's personal property placed upon, or moved into the Premises shall be at the sole risk of Tenant, and Landlord shall not be liable (i) for any damage or loss to any such personal property, or to Tenant or any third party, arising from the bursting or leaking of water pipes or theft or misappropriation or from any other act whether by Landlord or by a third person, or (ii) for the negligence of any co- tenant or other occupant(s) of the Premises or of the Building, or of any person whomever, including without limitation, Landlord and Landlord's agents, independent contractors, representatives, successors and assigns.
19. CONDEMNATION. If all or any portion of the Premises shall be taken, except temporarily, by any condemnation or eminent domain proceedings, this Lease shall terminate on the effective date of the final judicial order of taking. Landlord shall be entitled to all awards for such taking, except that Tenant shall be entitled to make a separate claim at the expense of Tenant against the condemning authority for moving expenses and for damages to permitted fixtures installed in the Premises; provided, however, that any award made to Tenant shall be in addition to, and shall not reduce, any award which Landlord may claim in connection with such taking, and further provided that in no event shall Tenant have any claim for the value of any remaining portion of the Term. If only a part of the Premises shall be condemned, Monthly Rent and Additional Rent shall be apportioned for the remaining tenantable area as determined by Landlord, in Landlord's sole discretion.
20. LANDLORD'S INABILITY TO PERFORM. If, by reason of inability to obtain and utilize labor, materials or supplies; circumstances directly or indirectly the results of a state of war or national or local emergency; any laws, rules, orders, regulations or requirements of any governmental authority now or hereafter in force; strikes or riots, accident in, damage to or the making of repairs, replacements or improvement to the Premises or any of the equipment thereof; or by reason of any other cause beyond the reasonable control of the Landlord including "Acts of God," Landlord shall be unable to
perform or shall be delayed in the performance of any covenant to supply any service, such nonperformance or delay in performance shall not render Landlord liable in any respect for damages to either person or property, constitute a total or partial eviction, constructive or otherwise, work an abatement of rent or relieve Tenant from the fulfillment of any covenant or agreement contained in this Lease.
21. QUIET ENJOYMENT. Upon payment by Tenant of the Monthly Rent and any Additional Rent as and when due, and upon the faithful observance and performance of all of Tenant's covenants herein contained, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term without hindrance or interruption by Landlord, or by any other person or persons lawfully or equitably claiming by, through or under Landlord, subject, nevertheless, to all of the provisions and conditions of this Lease.
22. SIGNAGE. Tenant at its own expense may provide signage on its doors and on the structure, only in conformity with prescribed building specifications and with the prior written consent of the Landlord. Tenant shall maintain such signage in good condition at all times. No other signs, banners, placards or other advertising shall be permitted. All required regulatory permits must be obtained at Tenant's expense. Landlord reserves the right to change the name or street address of the Property.
23. CONVEYANCES AND ENCUMBRANCES. Landlord shall have the unrestricted right to convey, transfer, mortgage or otherwise encumber the Premises. This Lease is and at all times shall be automatically by its terms subject and subordinate to all present and future mortgages to which Landlord is a party and which in any way affect the Premises or any interest therein, and to all recastings, renewals, modifications, consolidations, replacements or extensions of any such mortgage(s). Tenant agrees, within seven (7) days of any such request, to execute any and all documents or instruments requested by Landlord or by any mortgagee(s) to evidence the said subordinate condition of this Lease, as the same may have been amended, to any such financing, and certify, when requested by Landlord or by any mortgagee(s), that this Lease is in full force and effect. This statement, commonly referred to as an "estoppel certificate", shall be for the benefit of Landlord, and any purchaser or mortgagee of Landlord. Landlord shall be released from all liability and obligation under this Lease upon the conveyance, assignment or other transfer of this Lease or the Premises.
24. POSSESSION OR OWNERSHIP BY MORTGAGEE' AND TENANT'S ATTORNMENT.
(a) If any mortgagee comes into possession or ownership of the Premises or of the Building, or acquires Landlord's interest by foreclosure of a mortgage or otherwise, Tenant will attorn to such mortgagee. Tenant will not be entitled to a credit for Monthly Rent or any Additional Rent paid in advance in such event.
(b) If any mortgagee(s) shall request reasonable modifications to this Lease as a condition to disbursing any monies to be secured by a mortgage encumbering the Premises, Tenant agrees that within seven (7) days after such a request from Landlord, Tenant shall execute and deliver to Landlord an agreement, in form and substance satisfactory to Landlord and to said mortgagee(s), evidencing such modifications; provided, however, that such modifications do not increase Tenant's monetary obligations under this Lease or materially adversely affect Tenant's leasehold interest created by this Lease.
25. NOTICES. Whenever this Lease requires that notice or demand shall be given or served on either party to this Lease, such notice or demand may be given orally or in writing if given by the Landlord, but must be in writing by Tenant and shall be delivered personally or forwarded by certified or registered mail, return receipt required, addressed as follows:
Landlord: Wiles Road Business Center, Ltd.
2240 Woolbright Road, Suite 300
Boynton Beach, Florida 33426
Tenant: Integrated Merchant Services,
11336 Wiles Road
Coral Springs, FL 33076
Attn: Bill Becker
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Copy:
Attn:
26. ENTIRE AGREEMENT. This Lease contains the complete and entire agreement between Landlord and Tenant regarding use of the Building and lease of the Premises, and supersedes any and all prior oral and written agreements between Landlord and Tenant regarding such matters. This Lease may be modified only by an agreement in writing signed by both Landlord and Tenant, and no offer of surrender of the Premises by Tenant shall be binding unless accepted by Landlord in a writing signed by Landlord.
27. BENEFITS; BINDING EFFECT. This Lease shall be binding upon and inure to the benefit of the heirs, legal representatives and successors of Landlord and Tenant, and the assigns of Landlord and permitted assigns of Tenant, and shall be construed and enforced in accordance with the laws of the State of Florida. Venue for any litigation which may arise in connection with this Lease, the Building or the Premises shall be in the county
wherein the Premises is located.
28. SEVERABILITY. If any covenant or provision of this Lease, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Lease or the application of such covenant provision to persons or circumstances (other than those as to which it is held invalid or unenforceable) shall not be affected thereby, and each and every other such covenant and provision of this Lease or portion thereof shall be valid and be enforced to the fullest extent permitted by law.
29. EVENTS OF DEFAULT. If Tenant shall (i) fail to pay to Landlord as and
when due Monthly Rent or any Additional Rent, including but not limited to, late
charges, processing fees or other monetary obligations as herein set forth, or
(ii) file a voluntary petition in bankruptcy or reorganization, or make any
assignment for the benefit of creditors, or seek any similar relief under any
present or future statute, law or regulation relating to relief of debtors, or
(iii) be adjudicated a bankrupt or have any involuntary petition in bankruptcy
filed against it, or (iv) abandon or vacate the premises during the Term, or (v)
fail to keep and perform any one or more of the covenants and conditions herein
contained, then and in any of such events, Tenant will be deemed to be in
default under this Lease ("Tenant's Default" or"Default"). If Tenant shall be in
Default, Landlord will have any and all rights and remedies which the law of
Florida confers upon a Landlord against a Tenant in breach or default of a Lease
including, without limitation, thee right to (i) terminate this Lease and bring
a lawsuit for Monthly Rent and any Additional Rent then past due, (ii) elect to
accelerate the entire unpaid balance of the rent for the Term and bring a
lawsuit for the collection of Monthly Rent and any Additional Rent, (iii) take
possession of and lease the Premises for the account of Tenant, and (iv) seek
all available equitable remedies, including without limitation, injunction. If
Landlord elects to terminate this Lease for Tenant's Default and if at such time
there remains any unapplied Security Deposit, then Landlord may (without waiver
or impairment of Landlord's other remedies for Tenant's Default) retain the
Security Deposit as liquidated and agreed upon damages, and Landlord shall also
have the further right in such instance to immediate possession of the Premises.
Tenant waives, on both a present and prospective basis, any and all defenses to
eviction except payment of the full amount of all monies due to Landlord (with
acknowledging that it may solely bring a separate action for money damages as
redress for liability of Landlord, if any, to the extent provided for by the
Lease). All Monthly Rent, Additional Rent or monies due of any nature under a
work-out agreement and/or this Lease will not be subject to any set-off, claim
or credit by the Tenant, and any claim by Tenant is only separately assertable
against Landlord, if assertable at all, with no claim by Tenant being any basis
for withholding or delaying payment of any Rent. Landlord's acceptance of any
Rent following an event of default hereunder shall not be construed as
Landlord's waiver of such event of default. No forbearance or delay by Landlord
in asserting its right under this agreement or the Lease
will be the waiver of Landlord's right to enforce when Landlord determines to do so.
30. REMEDIES CUMULATIVE. Landlord's remedies under this Lease are cumulative, and the election of any right or remedy by Landlord shall not be deemed a waiver of any other right or remedy of Landlord under this Lease or otherwise.
31. ATTORNEYS' FEES AND JURY TRIAL. In the event that it shall become necessary for Landlord or Tenant to employ the services of an attorney to enforce of its rights under this Lease or to collect any sums due to it under this Lease or to remedy the breach of any covenant of this Lease on the part of the other party Tenant regardless of whether suit be brought, Tenant shall pay to Landlord such reasonable fee as shall be charged by Landlord's attorney including court and other costs associated with such services the prevailing party in any such action shall be entitled to recover all reasonable attorney's fees and costs which it may have incurred or expended in connection therewith. The Landlord and Tenant hereby expressly waive trial by jury in any action, proceeding or counterclaim brought by either against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, and Tenant's use or occupancy of the Premises, including, without limitation, any claim of injury or damage. Tenant shall not interpose any counterclaim of any kind in any action or proceeding commenced by Landlord to recover possession of the Premises.
32. NO WAIVER. The failure of Landlord to insist on the performance or observance by Tenant of any one or more conditions or covenants of this Lease shall not be construed as a waiver or relinquishment of the future performance of any such covenant or condition, and Tenant's obligation with respect to such future performance shall continue in full force and effect.
33. LANDLORD'S PROPERTY. Tenant shall look solely to Landlord's ownership interest in the Building for the satisfaction of any judgment or decree requiring the payment of money by Landlord, or by Landlord's agents, representatives, successors or assigns, to Tenant, or to any person claiming by or through Tenant, in connection with this Lease, and no other property or asset of Landlord real or personal, tangible or intangible, shall be subject to levy, execution or other enforcement procedure for the satisfaction of any such judgment or decree.
34. GENDER. The terms Landlord and Tenant as herein contained shall include the singular and/or the plural, the masculine, the feminine, and/or the neuter, the heirs, successors, executors, administrators, personal representatives and/or assigns, wherever and whenever the context so requires or admits.
35. CAPTIONS. The captions of the various paragraphs of this Lease have been inserted for the purpose of convenience only. Such captions are not a part of this Lease and
shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions contained in this Lease.
36. COUNTERPARTS. This Lease may be executed in several counterparts, all of which shall constitute one and the same Lease between Landlord and Tenant.
37. FORCE MAJEURE. Landlord does not warrant that any of the services which Landlord may supply, will be free from interruption. Tenant acknowledges that any one or more of such services may be suspended by reason of accident or repair, alterations or improvements necessary to be made, or by strikes or lockouts, or by reason of operation of law, or other causes beyond the reasonable control of Landlord. No such interruption or discontinuance of service shall ever be deemed an eviction or a disturbance of Tenant's use, enjoyment and possession of the Premises or any part thereof, or render Landlord liable to Tenant for damages by abatement or reduction of Annual Gross Rent or any Additional Rent or relieve Tenant from the performance of any of Tenant's obligations under this Lease.
38. BROKERS. Each party represents to the other that they have dealt with no real estate or leasing brokers in conjunction with this Lease except the following broker which broker shall be entitled to a commission from Landlord:
N/A
Each party agrees and warrants to indemnify and hold harmless the other from any claims of other brokers for payment of fees or charges of any kind including attorneys' fees, in conjunction with this transaction. The foregoing shall survive the end of the Term.
39. TIME OF THE ESSENCE. Each of Tenant's covenants herein is a condition and time is of the essence with respect to the performance of every provision of this Lease and the strict performance of each shall be a condition precedent Tenant's rights to remain in possession of the Premises or to have this Lease continue in effect.
40. HAZARDOUS WASTE. Tenant warrants and represents that it will, during the period of its occupancy of the Premises under this Lease, comply with all federal, State and Local laws, regulations and ordinances with respect to the use, storage, treatment, disposal or transportation of Hazardous Substances. Tenant shall indemnify and hold Landlord harmless from and against any claims, fines, judgments, penalties, costs to detect and rectify such condition, liabilities or losses (including, without limitation, reasonable attorneys' fees and costs at trial and on appeal) arising from the breach of the preceding warranty and representation.
For the purposes of this Paragraph, the term "Hazardous Substances" shall be
interpreted broadly to include but not be limited to, substances designated as hazardous under the Resource Conservation and Recover Act, 42 U.S.C. ss.9601, et seg., the Federal Water Pollution Control Act, 33 U.S.C. ss.1257, et seg., the Clean Air Act, 42 U.S.C. ss.200 1, et seg., or the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. ss.9601, et seg., any applicable State Law or regulation. The term shall also be interpreted to include but not be limited to any substance which after release into the environment and upon exposure, ingestion, inhalation or assimilation, either directly from the environment or directly by ingestion through food chains, will or may reasonably be anticipated to cause death, disease, behavior abnormalities, cancer and/or genetic abnormalities, and oil and petroleum based derivatives.
The provisions of this Paragraph shall be in addition to any other obligations or liabilities Tenant may have to Landlord at law and equity and shall survive termination of this Lease.
Tenant shall not store or dispose of any hazardous material or waste in or
about the Premises. Tenant shall indemnify and hold Landlord harmless from and
against any claims, damages, costs, expenses or actions which arise out of any
breach of this provision and such indemnity shall survive the termination of the
Lease, except those specifically used in Tenant's business, which use has been
disclosed to and approved in writing by Landlord. In such event, Tenant shall
(a) properly dispose of same and shall provide Landlord with a written plan
detailing such disposal and (b) during the Term, at Tenant's cost and expense,
keep in full force and effect a Hazardous Material Facility License. Tenant
shall provide to Landlord a copy of the Hazardous Material Facility License.
41. RADON GAS. 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.
42. NO PARTNERSHIP. Nothing contained in this Lease shall constitute or be construed to be or create a partnership, joint venture or any other relationship between Landlord and Tenant other than the relationship of Landlord and Tenant.
43. RECORDING. Tenant shall not record this Lease or any portion hereof or any reference hereto. If Tenant shall record this Lease, or shall permit or cause this Lease, or any portion hereof or reference hereto be recorded, this Lease shall terminate at Landlord's option or Landlord may declare default hereunder and pursue any and all of its remedies provided in this Lease.
Executed as of the date above first-written.
Signed and delivered in presence of:
(Two witnesses required)
LANDLORD:
_________________________________ By:_____________________________________
Wiles Road Business Center, Ltd.
_________________________________
(As to Landlord)
CORPORATE TENANT:
_________________________________ By:_____________________________________
_________________________________ ________________________________________
(As To Tenant) Print Name
NON CORPORATE TENANT:
_________________________________ By:_____________________________________
_________________________________ ________________________________________
(As To Tenant) Print Name
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WILES ROAD BUSINESS CENTER
EXHIBIT"A"
Addendum No. One to Lease Agreement
THIS ADDENDUM TO LEASE AGREEMENT is made and entered into as of the 6th day of July 1999 by and between Wiles Road Business Center, Ltd. ("Landlord") and Integrated Merchant Services. Inc. ("Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant are entering into a certain Lease agreement (the "Lease"), simultaneously with the execution of this Addendum, under which Landlord leases to Tenant and Tenant leases from Landlord approximately 2,033 rentable square feet at the Wiles Road Business Center, 11336 Wiles Road, Coral Springs, FL 33065.
Landlord and Tenant desire this Addendum to form a part of the Lease. Except as modified below, all other terms, provisions, and conditions of the Lease shall remain unchanged.
1) Landlord will allow Integrated Merchant Services, Inc. to lease 11340 & 11342 Wiles Road, located within the Wiles Road Business Center, which consists of 2,725 rentable square feet, in "AS IS" condition, for a term of ninety (90) days, commencing on July 1, 1999, at a flat rate of $600.00 per mouth plus sales tax. This agreement is cancelable by Landlord with thirty (30) days written notice to Tenant.
2) Tenant shall be responsible to maintain insurance coverage on 11340 & 11342 Wiles Road in accordance with paragraph 15(b) of the Lease Agreement.
3) Tenant shall be responsible for all telephone and electricity charges in connection with conducting business in 11340 & 11342 Wiles Road.
IN WITNESS WHEREOF, Landlord and Tenant having duly executed this Addendum No. 1 to Lease Agreement as of the day and year first above written, each acknowledges receipt of an executed original hereof.
Witnesses: LANDLORD:
Wiles Road Business Center, Ltd.
_________________________________ By:_____________________________________
_________________________________
(As to Landlord)
Witnesses: TENANT:
_________________________________ By:_____________________________________
_________________________________ ________________________________________
(As to Tenant) Print Name
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Exhibit 10.5
ATRIUM FINANCIAL CENTER
LEASE AGREEMENT
THIS LEASE, made and entered into this 28 day of October, 1991, by and between MASS MUTUAL LIFE INSURANCE CO. (the "Lessor") , whose address is 3475 Lenox Road, Suite 600, Atlanta, Ga. 30326, and EXPRESS FINANCIAL CORPORATION (the "Lessee") whose address is 1515 N. Federal Highway, Suite 107, Boca Raton, Florida 33432.
WITNESSETH THAT:
In consideration of the mutual promises, covenants and conditions herein contained, and the rent reserved by Lessor, to be paid by Lessee to Lessor, Lessor hereby leases to Lessee and Lessee hereby rents from Lessor, that certain real property situated in Palm Beach County, Florida, hereinafter described, for the term and at the rentals and upon the terms and conditions hereinafter set forth.
1. PREMISES. The real property (the "Premises") hereby leased, let and demised by Lessor unto Lessee, is Suite #107 (formerly known as Suite 100) located on the 1st floor of a four (4) story office building (the "Building") at 1515 North Federal Highway, Boca Raton, Florida 33432, known as Atrium Financial Center, and located as shown on Exhibit 1 hereto. The rentable square footage of the Premises is 3,503 square feet, which is the sum of the actual square footage plus fifteen percent (15%) of such square footage which is deemed to be allotted for hallways, elevators, stairways, toilets, electrical, janitorial and other such common areas. The location of the Premises within the Building is more particularly depicted in Exhibit 2 attached hereto.
2. TERM. The term of this Lease, and the accrual of rents hereunder shall commence on the date (the "Commencement Date") hereinafter defined and shall extend to the 5th anniversary (the "Expiration Date") at 12:00 P.M. (midnight). The Commencement Date shall be April 1, 1992 as verified by an executed document which is a part of this Lease Agreement (Exhibit 3) attached hereto.
3. RENT. Lessee agrees to pay Lessor, without demand, set off or
deduction, a fixed annual minimum rent (the "Base Rent"), net for the first year
of this Lease the total amount of $28,024.00 payable in equal monthly
installments of $2,335.33 subject to upward adjustment commencing in the third
(3rd) Lease Year, for increases on an annual basis of CPI, maximum five percent
(5%) per annum, plus one-twelfth (1/12) of the prorata share of the Building
operating costs as it relates to the Premises in square foot cost annually over
the life of this Lease. The total square footage of the leased area is
approximately 3,503 square feet, which equals 3.85 percent of the leasable area
in the Building (91,000 square feet). The Base Rent will not begin to accrue
until the Commencement Date.
Each monthly installment of Base Rent shall be payable in advance on the first (1st) day of each calendar month of the term to Lessor c/o Peterson Management Company, Inc., P.O. Box 102228, Atlanta, Georgia 30368-0228, or at such other place Lessor may from time to time designate in writing. If the Commencement Date, as hereinabove defined, is not on the first (1st) day of a calendar month, Base Rent for the period beginning with and between the Commencement Date and the first (1st) day of the following month shall be apportioned on a per diem basis at the monthly rental rate hereinabove provided and shall be payable on the Commencement Date.
In addition to the Rent hereinabove reserved, Lessee shall also pay the amount of any use or sales tax on rent imposed by the State of Florida and any Federal or local government, which taxes and other assessments shall be paid at the same time and in the same manner as each payment of rent. There shall be due with any payment of rent received after the fifth (5th) day of the month a late payment service charge equal to ten (10%) percent of the payment of rent.
Lessee agrees that commencing at the beginning of the third (3rd) Lease Year, the Base Rent shall be adjusted for increases in the Consumer Price Index (CPI), however, any increase shall not exceed five percent (5%) per annum. Lessor and Lessee intend that the Base Rent, as adjusted from time to time as hereinabove provided, shall be paid to Lessor absolutely net, without notice or demand.
4. ASSIGNMENT. Lessee shall not assign this Lease nor any rights hereunder, nor let or sublet all or any part of the Premises, nor suffer or permit any person or corporation to use any part of the Premises, without first obtaining the express written consent of Lessor which shall not be unreasonably withheld. Should Lessor consent to such assignment of this Lease, or to a sublease of all or any part of the Premises, Lessee does hereby guarantee payment of all rent herein reserved until the expiration of the term hereof and no failure of Lessor to promptly collect from any assignee or sublessee, or any extension of the time for payment of such rents, shall release or relive Lessee from its guaranty of obligation of payment of such rents.
5. QUIET ENJOYMENT. Lessor covenants that so long as Lessee pays the rent reserved in this Lease and performs its agreements hereunder, Lessee shall have the right quietly to enjoy and use the Premises for the term hereof, subject only to the provisions of this Lease.
6. USE. Lessee, its successors and assigns, shall use the Premises exclusively for the purpose of general office use and related activities and for no other use or purpose whatsoever. Lessee shall comply with all laws, ordinances, rules and regulations of applicable governmental authorities respecting the use, operation and activities of the Premise (including sidewalks, streets, approaches, drives, entrances and other Common
Areas serving the Premises), and Lessee shall not make suffer or permit any unlawful, improper or offensive use of the Premises, or such other areas, or any part thereof, or permit any nuisance thereon. Lessee shall not make use of the Premises in any way which would make void or voidable any policy of fire or extended coverage insurance covering the Premises. Lessee shall maintain all interior windows, if any, in a neat and clean condition and Lessee shall not permit rubbish, refuse or garbage to accumulate or any fire or health hazard to exist upon or about the Premises. Lessee shall use the Premises only for the purpose stated in this Lease. Lessee agrees the abide by any rules or regulations promulgated by Lessor which shall not discriminate against Lessee.
7. SIGNS. Lessee shall not place or suffer to be placed or maintained upon any exterior door, roof, wall or window of the Premises any sign, awning, canopy or advertising matter or other thing of any kind, and will not place or maintain any decoration, lettering or advertising matter on the glass of any window or door of the Premises and will not place or maintain any freestanding standard within or upon the Common Area of the Premises or immediately adjacent thereto, without first obtaining Lessor's expressed prior written consent. Lessor agrees to grant approval of any sign located within the Premises or entry to the Premises on glass or in conformity with the sign criteria attached hereto as Exhibit 4. No exterior sign visible from the exterior of the Building shall be permitted. Lessee further agrees to maintain such sign, lettering or other thing as may be approved by Lessor in good condition and repair at all times and to remove the same at the end of the term of this Lease as and if requested by Lessor. Upon removal thereof, Lessee agrees to repair any damage to the Premises caused by such installation and/or removal.
8. PARKING, COMMON AREAS AND BUILDING SECURITY. In addition to Premises, Lessee shall have the right to non-exclusive use, in common with Lessor, other Lessees, and the guests, employees and invitees of same of (a) automobile parking areas, driveways and footways, and (b) such loading facilities, freight elevators and other facilities as may be designated from time to time by Lessor, subject to the terms and conditions of this Lease and to reasonable rules and regulations for the use thereof as prescribed from time to time by Lessor. The parking area shall be provided with adequate lighting and shall be maintained in good condition by Lessor; provided that Lessor shall have the right at any time and from time to time to change or modify the design and layout of the parking area(s).
The Common Areas shall be subject to the exclusive control and management of Lessor and Lessor shall have the right to establish, modify and change and enforce from time to time rules and regulations with respect to the Common Areas so long as such rules are not discriminatory against Lessee; and Lessee agrees to abide by and conform with such rules and regulations.
Lessee agrees that it and its officers and employees will park their automobiles only in such areas as Lessor may from time to time designate. Lessee agrees that it will, within five (5) days after written request therefore by Lessor, furnish to Lessor the state automobile license numbers assigned to its cars and the cars of all of its employees. Lessee shall not park any truck or delivery vehicle in the parking areas, nor permit deliveries at any place other than as designated by Lessor.
Neither the parking area nor any Common Area in the Building shall be used by Lessee, its successors and assigns, or any agent, employee, invitee, licensee, or customer of Lessee, for any advertising, political campaigning or other similar use, including without limitation, the dissemination of advertising or campaign leaflets or flyers.
Lessor expressly reserves the right at any time during the term of this Lease to impose a charge for parking and/or a validation system for the parking of cars in the areas reserved for Bank parking. Lessor further reserves the right to charge for covered parking which may be available in the garage of the Building. Notwithstanding anything contained herein to the contrary, Lessee shall be granted the use of four (4) covered reserved parking spaces during the term of this Lease at no charge.
In the event Lessor deems it necessary to prevent the acquisition of public rights in and to the Building, Lessor may from time to time temporarily close portions of the Common Areas, and may erect private boundary markers or take such steps as deemed appropriate for that purpose. Such action shall not constitute or be considered an eviction or disturbance of Lessee's quiet possession of the Premises.
9. REPAIRS, MAINTENANCE, SURRENDER AND OPERATIONAL COSTS. Lessor shall not be called upon and shall have no obligation to make any repairs, improvements or alterations whatsoever to the Premises except as hereinafter specified. During the term of this Lease, Lessor shall maintain the exterior walls in good repair, and shall keep the roof the Building water tight, and Lessor shall provide maintenance, a tenant directory located on the first (1st) floor of the Building, trash removal and daily custodial services to the Common Areas within the Building and site as needed to keep the Building in a "clean and neat" condition. Lessor shall not be liable for or required to make any repairs, or perform any maintenance, to or upon the Premises which are required by, related to or which arise out of negligence, fault, misfeasance of and by Lessee, its employees, agents, invitees, licensees or customers, in which event Lessee shall be responsible thereof.
Lessee agrees to pay Lessor Lessee's proportionate share of the Building operating costs and expenses (the "Operating Costs") including, but not limited to the following:
A. Utilities which are not separately metered;
B. Trash removal;
C. Pest Control;
D. Casualty and general comprehensive insurance;
E. Landscaping and landscaping maintenance;
F. Water and sewer charges;
G. Elevator service and maintenance;
H. Common Area maintenance;
I. Janitorial service applicable to the Premises and Common
Areas;
J. Electrical and telecommunication systems benefitting the
Common Areas or for the Common benefit of the Building;
K. Real estate taxes and assessments;
L. Security Guard service;
M. Any other reasonable cost whatsoever which Lessor may incur
for maintenance or operation of the Building;
N. Management fee,
and such proportionate share shall be in the same ratio that the total square footage of the Premises bears to the total square footage of all gross leasable area within the Building. Notwithstanding anything contained herein to the contrary, Lessee's proportionate share of Operating Costs shall not exceed $5.25 per rentable square foot during the first year of the Lease. Thereafter, with the exception of Taxes, Insurance and Utilities, Lessee's prorata share of Operating Costs shall not aggregately increase yearly, as a percentage, more than five percent (5%) over the actual costs in the previous year.
Lessor shall furnish to Lessee on or before January 1st of each year an annual budget itemizing all estimated Operating Costs for such year including a statement of Lessee's prorata share of such costs and expenses. Thereafter Lessee shall pay to Lessor with each monthly installment of Base Rent (as it may be adjusted) additional rent equal to one-twelfth (1/12) of Lessee's annual prorata share of the estimated Operating Costs based upon the budget for that year. Lessee's prorata share of the actual annual Operating Costs shall be adjusted upward or downward, on an annual basis within ninety (90) days following January 1st of each year, or as soon as practical thereafter, said adjustment, if any, to be paid by Lessee to Lessor, or credited by Lessor to Lessee, as the case may be, with the next payment of Base Rent due (as it may be adjusted).
Except as provided above for Lessor to maintain, Lessee shall service, keep and maintain the interior of the Premises, including all exposed plumbing and fixtures and equipment on the interior of the Premises as well as the air conditioner, in good and substantial repair during the entire term of this Lease, but such agreement of Lessee shall not apply to any damage caused by fire or other casualty which is covered by standard fire and extended coverage insurance. Lessee agrees to make repairs promptly as they may be
needed at its own expense, and at the end of the term or upon termination of this Lease, Lessee shall deliver the Premises in good condition and repair, reasonable wear and tear excepted, and in a broom-clean condition with all glass, keys, hardware, and all windows and doors intact except for damage to such glass by fire or other casualty beyond the control of Lessee. At all times during this Lease, Lessee shall have a maintenance contract for the care and repair of air conditioning equipment with a contractor approved by Lessor and Lessee shall provide Lessor with a current copy of aforesaid maintenance contract. Such contract will provide for preventive maintenance to be performed at least quarterly. Provided the Lessee keeps aforementioned air conditioning contract in effect, Lessee shall not be responsible for repairs to air conditioning units within the demised premises unless caused by negligence of Lessee. Lessee agrees to provide chair pads to be placed under all appropriate furniture and to steam clean the carpeting on an annual basis and upon move out or termination of the lease.
Lessor shall not be liable for any loss or damage to Lessee's personal property in the Premises even though caused by the negligence of the Lessor, or its agents, employees or persons under Lessor's control or direction as and to the extent that such loss is covered by an insurance policy carried by and for the benefit of the Lessee, and the Lessee shall not be liable for any loss or damage to the Demised Premises or Building in which the same is located even though caused by the negligence of the Lessee, its agents, employees or persons under its control or direction as and to the extent that such loss is covered by insurance carried by or for the benefit of the Lessor; provided that the right of either party to collect under their insurance policies is not affected hereby.
10. UTILITIES. Lessee shall pay all costs and expenses for electricity, heating and cooling, and any and all other utilities separately metered or as apportioned as provided in the above Article ("Repairs, Maintenance ...") herein, furnished to or used in connection with the Premises for any purpose whatsoever during the term of this Lease, promptly as each cost or expense shall become due and payable. Lessee shall be responsible, at its own expense, for the replacement of all electric light bulbs, tubes or ballasts serving the Premises.
11. ALTERATION TO THE PREMISES AND REMOVAL OF EQUIPMENT. Lessee shall not make any alteration or addition to the Premises without first obtaining the expressed prior written consent of Lessor. Upon expiration and termination of this Lease, all installations, fixtures, improvements and alterations made or installed by Lessee, including electric lighting fixtures made by Lessee, and all repairs, improvements, replacements and alterations to the Premises made by Lessee, shall remain a part of the Premises as the property of Lessor, except for trade fixtures.
12. LIENS. Lessee agrees that it will make full and prompt payment of all sums necessary to pay for the cost of repairs, alterations, improvements, changes or other work
done by Lessee to the Premises and further agrees to indemnify and hold harmless Lessor from and against any and all such costs and liabilities incurred by Lessee, and against any and all mechanic's, materialmen's or laborer's liens arising out of or from such work or the cost thereof which may be asserted, claimed or charged against the Premises or the Building or site on which it is located.
Notwithstanding anything to the contrary in this Lease, the interest of Lessor in the Premises shall not be subject to liens for improvements made by or for Lessee, whether or not the same shall be made or done in accordance with an agreement between Lessor and Lessee, and it is specifically understood and agreed that in no event shall Lessor or the interest of Lessor in the Premises be liable for or subjected to any mechanic's, materialmen's or laborer's liens for improvements or work made by or for Lessee; and this Lease specifically prohibits the subjecting of Lessor's interest in the Premises to any mechanic's, materialmen's or laborer's liens for improvements made by Lessee or for which Lessee is responsible for payment under the terms of this Agreement. All persons dealing with Lessee are hereby placed upon notice of this provision. In the event any notice or claim of lien shall be asserted of record against the interest of Lessor in the Premises or Building or the site on which it is located on account of or growing out of any improvement or work done by or for Lessee, or any person claiming by, through or under Lessee, or for improvements or work the cost of which is the responsibility of Lessee, Lessee agrees to have such notice of lien cancelled and discharged of record as a claim against the interest of Lessor in the Premises or the Building or the site on which it is located (either by payment or bond as permitted by Law) within ten (10) days after notice to Lessee by Lessor, and in the event Lessee shall fail to do so, Lessee shall be considered in default under this Lease.
13. CASUALTY. In the event the Premises are rendered untenantable by fire or other casualty, Lessor shall have the option of terminating this Lease or rebuilding the Premises and in such event written notice of the election by Lessor shall be given to Lessee within 30 days (30) days after the occurrence of such casualty. In the event that Lessor elects to rebuild the Premises, the Premises shall be restored to its former condition prior to tenant improvement work whether or not such improvement work may have been performed by Lessor within two hundred seventy (270) days of the date of election of Lessor to rebuild Premises. In the event that Lessor elects to terminate this Lease, the rent shall be paid to and adjusted as of the date of such casualty, and the term of this Lease shall then expire and this Lease shall be of no further force or effect and Lessor shall be entitled to sole possession of the Premises.
14. CONDUCT OF BUSINESS. Lessee agrees to open the Premises for business on the Commencement Date and thereafter, throughout the term of this Lease, continuously to use all of the Premises for the purpose or purposes stated in this Lease, diligently carrying on therein Lessee's business undertaking. Lessee shall keep all of the
Premises opened and available for business activity during normal business hours except when prevented by strike, fire, casualty or other causes beyond Lessee's reasonable control.
15. INSPECTION AND REPAIR. Lessor or its representatives shall have the right at any reasonable time, except in the case of emergency, to enter upon the Premises for the purpose of inspection or for the purpose of making or causing to be made any repairs or otherwise to protect its interest, but the right of Lessor to enter, repair or do anything else to protect its interest, or the exercise or failure to exercise said right shall in no way diminish Lessee's obligations or enlarge Lessor's obligations under this Lease, or affect any right of Lessor, or create any duty or liability by Lessor to Lessee or any third party. Lessor shall have the right to show the Premises to a prospective tenant at any time subsequent to the one hundred eightieth (180th) day before the expiration or termination of this Lease.
16. INSURANCE. Lessor shall not be liable for injury caused to any person
or property by reason of the failure of Lessee to perform any of its covenants
or agreements hereunder, nor for such damages or injury caused by reason of any
defect in the Premises now or in the future existing, or for any damages or
injury caused by reason of any present or future defect in the plumbing, wiring
or piping of the Premises or plumbing leaks or other consequences of such
defects or system failure. Lessee agrees to indemnify and hold harmless Lessor
from and against any and all loss, damage, claim, demand, liability or expense
by reason of any damages or injury to persons (including loss of life) or
property which may arise or be claimed to have arisen as a result of or in
connection with the occupancy or use of the Premises by Lessee. Lessee shall, at
its expense, provide and maintain in force during the entire term of this Lease,
and any extension or renewal hereof, public liability insurance with limits of
coverage not less than One Million and No/100 Dollars ($1,000,000.00) for any
property damage or loss from any one (1) accident, and not less than One Million
and No/100 Dollars ($1,000,000.00) for injury to any one (1) person from any one
(1) accident, applicable to the Premises. Each policy of insurance shall name as
the insured thereunder Lessor and Lessee. Each such liability insurance policy
shall be of the type commonly known as owner's, landlord's and tenant's
insurance and shall be obtained from a company satisfactory to Lessor. The
original of each such policy of insurance or certified duplicates thereof issued
by the insurance or insuring organization shall be delivered by Lessee to Lessor
on or before ten (10) days prior to occupancy of the Premises by Lessee,
providing for thirty (30) days notice of cancellation to Lessor.
Lessor shall maintain throughout the term of this Lease, casualty insurance and general comprehensive insurance for the Building and Common Areas. Lessee shall maintain at its sole cost and expense any and all insurance covering contents, trade fixtures and tenant improvement, work which may have been performed by Lessee.
17. WAIVER. The failure of Lessor to insist, in any one or more instances, upon
strict performance of any covenants or agreements of this Lease, or exercise any option of Lessor herein contained, shall not be construed as a waiver or relinquishment for the future enforcement of such covenant, agreement or option, but the same shall continue and remain in full force and effect. Receipt of rent by Lessor, with knowledge of the breach of any covenant, or agreement hereof, shall not be deemed a waiver of such breach, and no waiver by Lessor of any provision hereof shall be deemed to have been made unless expressed in writing and signed by Lessor.
18. CONDEMNATION. Lessor reserves unto itself, and Lessee assigns to Lessor, all right to damages accruing on account of any taking or condemnation of any part of the Premises, or by reasons of any act of any public or quasi-public authority for which damages are payable. Lessee agrees to execute such instruments of assignment as may be required by Lessor, to join with Lessor in any petition for the recovery of damages, if requested by Lessor, and to turn over to Lessor any such damages that may be recovered in any such proceeding. Lessor does not reserve to itself, and Lessee does not assign to Lessor, any damages payable for trade fixtures installed by Lessee at its cost and expense and which are not part of the realty.
19. DEFAULT. In the event Lessee shall fail (a) to make any rental or other payment due hereunder within five (5) days after the same shall become due, or (b) abandons the Premises during the term hereof, or (c) breaches or fails to perform any of the agreements herein, and shall fail to cure such agreements within ten (10) days after written notice from Lessor, then Lessor, in any such event(s), shall have the option to:
1. Sue for rents as they may become due;
2. Terminate this Lease, resume possession of the Premises for its own account and recover immediately from Lessee 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 any other damage occasioned by or resulting from the abandonment or a breach or default other than a default in the payment of rent; or
3. Resume possession and re-lease and re-rent the Premises for the remainder of the lease term for the account of Lessee and recover from Lessee, at the end of the lease term or at the time each payment of rent becomes due under this Lease, as the Lessor may elect, the difference between the rent for which provisions are made in this Lease and the rent received on the re-leasing or re-renting, together with all costs and expenses of Lessor in connection with such re- leasing or re-renting and the collection of rent and the cost of all repairs or renovations reasonably necessary in connection with the re-
leasing or re-renting, and if this option is exercised, Lessor shall, in addition, be entitled to recover from Lessee immediately any other damages occasioned by or resulting from the abandonment or a breach or default other than a default in the payment of rent.
4. Upon the happening of any one or more of the aforementioned defaults, Landlord may elect to declare the entire rent for the balance of the term of the Lease, or any part thereof, due and payable forthwith without regard to whether or not possession shall have been surrendered to or taken by Landlord, and to bring an action for the recovery thereof.
The remedies for which provision is made in this Article shall not be exclusive and in addition thereto Lessor may pursue such other remedies as are provided by law in the event of any breach, default or abandonment by Lessee. In any event, and irrespective of any option exercised by Lessor, Lessee agrees to pay and the Lessor shall be entitled to recover all costs and expenses incurred by Lessor, including reasonable attorneys' fees and appellate attorney's fees, in connection with collection of rent or damages or enforcing other rights of Lessor in the event of a breach or default or abandonment by Lessee, irrespective of whether or not Lessor elects to terminate this Lease by reason of such a breach, default or abandonment. Lessee waives any right to trial by jury on any issue which may be litigated herein.
Any and all sums due under this Lease from Lessee to Lessor and not paid on the due date shall bear interest from the due date at the maximum rate allowed by law until fully paid.
20. SUBORDINATION. This Lease is subject and subordinate to any mortgages, deeds of trust, deeds to secure debt, ground rents and to all renewals, modifications, consolidations, replacements and extensions of any of the foregoing or of substitutions therefor or any other forms or methods of financing or refinancing which may now or hereafter affect the real property or leasehold estates of which the demised Premises form a part whether now in use or not and any instruments executed for said purposes or hereafter executed by the owners of the fee or leasehold, if Lessor is not the owner of the fee. Lessee agrees upon demand to execute, acknowledge and deliver to the owners of the fee or leasehold estate, without expense to them, any instruments that may be necessary or proper to confirm this subordination of this Lease and of all of the rights herein contained to the lien or liens created by any such instruments. If the Lessee shall fail at any time to execute and deliver any such subordination instruments upon request, the mortgagors in any such new mortgage or mortgages or the obligators in any form of refinancing as provided above, in addition to any other remedies available to them in consequences of said default may execute, acknowledge and deliver such subordination
instruments as the attorney-in-fact of the Lessee and in the Lessee's name, place and stead; said Lessee hereby makes, constitutes and irrevocably appoints said mortgagors or obligators as attorney-in-fact for that purpose.
21. PROOF OF LEASE. Lessee agrees that at any time and from time to time upon ten (10) days prior written request by Lessor, it will execute, acknowledge and deliver to the Lessor a statement in writing stating that this Lease is unmodified and in full force and effect (or, if there have been modifications, stating the modifications, and that the Lease as so modified is in full force and effect), and the dates to which the rent and other charges have been paid, it being intended that any such statements delivered pursuant to this Article may be relied upon by any prospective purchaser of or any prospective holder of a mortgage or a deed of trust upon or any interest in the fee or any leasehold or by the mortgagee, beneficiary or grantee of any security or interest, or any assignee of any thereof or under any mortgage, deed of trust or conveyance for security purposes now or hereafter done or made with respect to the fee of or any leasehold interest in the demised premises.
It is hereby understood and agreed that if Lessee shall fail to furnish the statement required to be furnished, as hereinabove provided, within ten (10) days after request therefor by Lessor, then such failure on the part of the Lessee shall constitute an acknowledgement by Lessee that the Lease (as modified, if same has been modified) Is in full force and effect and that there have been no prepayments of rent by Lessee. Should Lessor so elect, it shall be deemed to be Lessee's attorney-in-fact for the purpose of executing any such statement if same has not been furnished by Lessee within said ten (10) day period.
22. DEPOSIT AND ADVANCES. Any funds paid by Lessee to Lessor as a deposit or advance pursuant to the terms of this Lease, or any exhibit, addendum or modification hereto, may be commingled with other funds of Lessor and need not be placed in trust, deposited in escrow or otherwise held in a segregated account. In addition, if any sum or sums of money shall become payable by Lessee to Lessor pursuant to the terms of this Lease, or any exhibit, addendum or modification hereto, or by any law, ordinance or regulation affecting this Lease, Lessor shall have the right to apply any deposits or advances theretofore made by Lessee against such sums due by Lessee to Lessor. Deposits shall not accrue interest.
23. SECURITY DEPOSIT. Lessee has deposited with Lessor and Lessor hereby acknowledges receipt of the sum of $ 2.112.16 which shall be held by Lessor as security for the faithful performance by Lessee of all the terms of this Lease by Lessee to be observed and performed. Said deposit shall not be mortgaged, assigned, transferred or encumbered by Lessee without the express prior written consent of Lessor and any such act on the part of Lessee shall be without force and effect and shall not be binding upon Lessor. Said
security deposit shall not accrue interest. If any of the rents herein reserved or any other sum payable by Lessee to Lessor hereunder shall be overdue or unpaid, or should Lessor make payments on behalf of Lessee, or if Lessee shall fail to perform any of the terms of this Lease, the Lessor, at its option and without prejudice to any other remedy which Lessor may have on account thereof, may appropriate and apply said entire deposit, or so much thereof as may be necessary to compensate Lessor, toward the payment of any rent or additional sum due hereunder or to any loss or damage sustained by Lessor due to such breach on the part of Lessee; and Lessee shall forthwith upon demand restore said security deposit to the original sum deposited. Should Lessee comply with all of the terms and promptly pay all of the rentals and all other sums payable by Lessee to Lessor as they become due, said deposit shall be returned in full to Lessee at the end of the lease term. In the event of bankruptcy or other creditor debt proceedings against Lessee, the security deposit shall be deemed to be first applied to the payment of rent and other charges due Lessor for all periods prior to the filing of such proceedings.
24. PREPAID RENTS. Lessee has deposited with Lessor and Lessor acknowledges receipt of the sum of $N/A which shall be held by Lessor, without accrual of interest, as prepaid rent on account of N/A of this Lease. If any of the rents herein reserved or any other sum payable from Lessee to Lessor hereunder shall be overdue or unpaid, or should Lessor make payments on behalf of Lessee, or if Lessee shall fail to perform any of the terms of this Lease, then Lessor, at its option and without prejudice to any other remedy which Lessor may have on account thereof, may appropriate and apply said entire amount, or so much thereof as may be necessary to compensate Lessor, toward the payment of any rent or additional sum due hereunder or to any loss or damage sustained by Lessor due to such breach on the part of Lessee; and Lessee shall forthwith upon demand restore said rents to the original sum deposited.
25. NOTICES. All notices required or contemplated by this Lease shall be in writing and shall be delivered in person or by United States Certified Mail, Return Receipt Requested, addressed to the party to whom such notice is directed at the addresses set forth in the first paragraph of this Lease. By giving at least two (2) days prior written notice to the other party, either party may change its address for notices hereunder.
26. BUILDING HOURS. The Building shall be open for regular business from 7:00 A.M. to 8:00 P.M., Monday through Friday, and from 10:00 A.M. to 2:00 P.M. on Saturdays. Individual Lessee access shall be accommodated by the Building security system at all other times. Individually metered electrical controls and air conditioning will provide Lessee with utilization when the Building is not open for regular business as specified elsewhere in this Lease.
27. BROKERAGE. Lessee acknowledges that it has not dealt, consulted or negotiated with any real estate broker, sales person or agent other than Arvida Realty Sales,
Inc. and Lessee hereby agrees to indemnify and hold harmless Lessor from and against any and all loss and liability resulting from or arising out of any claim that Lessee has dealt or negotiated with any real estate broker, sales person or agent other than said Arvida Realty Sales, Inc. in connection with the transaction which is the subject of this Lease.
28. ENERGY CRITERIA. Lessee acknowledges that the Building is constructed as an energy efficient structure; therefore, all tenant improvements must meet minimum standards of ASHRA-0975, effective as of the date of this Lease, as adopted by Palm Beach County, Florida, and as may from time to time be amended. All energy consumption must meet the following criteria:
A. Lighting fixtures, including ballast losses, at two hundred sixty five (265) volts may not exceed three (3) watts per square foot; and
B. Total demand watts at one hundred twenty (120) volts, including receptacles, incandescent and other lighting and other equipment shall not exceed one (1) watt per square foot (office building requirement per National Electrical Code).
29. RADON GAS. 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 gas 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.
30. ENTIRE AGREEMENT. Lessee agrees that Lessor has not made any statement, promise, or agreement or taken upon itself any engagement whatsoever, verbally or in writing, in conflict with the terms of this Lease, or in which any way modifies, varies, alters, enlarges or invalidates any of its provisions. This Lease sets forth the entire understanding between Lessor and Lessee, and shall not be changed, modified or amended except by an instrument in writing signed by the party against whom the enforcement of any such change, modification or amendment is sought. The covenants and agreements herein contained shall bind, and the benefit and advantages hereof shall inure to the respective heirs, legal representatives, successors and assigns of Lessor and Lessee, Whenever used, the singular number shall include the plural and the plural shall include the singular and the use of any gender shall include all genders. The headings set forth in
this Lease are for ease of reference only shall not be interpreted to modify or limit the provisions hereof. This Lease shall be construed in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be executed as required by law on this 28 day of October, 1991.
Witnesses: MASS MUTUAL LIFE INSURANCE CO.
___________________________ By:______________________________________
___________________________ Date:____________________________________
EXPRESS FINANCIAL CORPORATION
___________________________ By:______________________________________
___________________________ Date:____________________________________
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Exhibit 10.6
OFFICE SERVICE AGREEMENT
This Agreement is made March 27, 2000 by and between Vantas Long Island, LLC ("Center") having offices known and numbered as Suite 400 (the "Facility") in the building located at 50 Charles Lindbergh Blvd., Uniondale, NY 11553 (the "Building") and GKB Software, Inc. ("Client") a(n) (corporation, partnership, individual) with an address of 57 Magnolia Avenue, Garden City, NY 11530 for a term of 12 months, commencing on April 15, 2000 (the "Commencement Date") and ending on April 14, 2001 (the "Initial Term") unless renewed in accordance with Paragraph 3.
In consideration of the foregoing, the parties for themselves, their heirs, legal representatives, successors and assigns, agree as follows:
1. Center's Obligations.
a. Subject to the terms and conditions of this Agreement, Center hereby agrees to provide Client for the Term (as defined below in Paragraph 3): (a) the exclusive use of Furnished Private Office(s) number(s) 316 located in the Facility (the "Premises"); and (b) non-exclusive use of the following services:
o Furnished, Decorated Reception Room with Professional Receptionist
o Personalized Telephone Answering During Office Hours
o 24 Hour Voicemail
o 8 hours of Conference Room per month subject to prior scheduling and use
by other Clients
o Corporate Identity on Lobby Directory where Available
o Receipt of Mail and Packages
o Complete Kitchen Facilities with Coffee Service
o Utilities and Maintenance
o HVAC During Normal Business Hours
o Janitorial Services
o 8 hours per month courtesy use of other VANTAS affiliated facilities.
Locations subject to current affiliation and availability.
b. If, for any reason, Center cannot deliver possession of the Premises to Client on the Commencement Date, this Agreement will remain in full force and effect; however, there will be an abatement of the Monthly Office Charge for the period between the Commencement Date and the date that the Premises are delivered to Client.
2. Use.
The Premises will be used by Client solely for General Business Office and such other normally incident uses and for no other purpose, in strict accordance with the Operation Standards, which are annexed hereto as Schedule A. Client will not offer at the Premises any services which Center provides to its Clients, including, but not limited to those services described in Paragraph 1. Client will not make nor permit to be made any use of the Premises, Facility or Building which would violate any of the terms of this Agreement or which, directly or indirectly, is forbidden by law, rule or regulation, which may be dangerous to life, limb or property or which could in any way impair, interfere or tend to impair or interfere with the high quality character, reputation or appearance of the Building or the Facility or with any services performed by Center for Client or for others. The foregoing provisions will also apply to Client's Users (as defined in Paragraph 9).
3. Renewal.
Upon expiration of the Initial Term and on any subsequent renewal term (each, a "Renewal Term" and together with the Initial Term, the "Term") of this Agreement, the Agreement automatically will be extended for the same period of time as the Initial Term and upon the same terms and conditions as herein contained except for the amount of the Monthly Office Charge (as defined in Paragraph 4) then in effect, which will each be increased by five percent (5%), unless either party notifies the other in writing within the period hereinafter specified that the Agreement will not be extended. If Client has less than three offices, such notice will be given at least sixty (60) days prior to the expiration of the Initial Term or the Renewal Term, as the case may be. If Client has three or more offices, such notice will be given at least ninety (90) days prior to the expiration of the Initial Term or the Renewal Term, as the case may be.
1 ______Initials ______Initials
4. Monthly Office Charge.
a. For and during the Term of this Agreement, Client will pay to Center, on or before the first day of each month after the Commencement Date, the sum of $1,050.00 as Monthly Office Charge (subject to increase in accordance with Paragraph 3 above) for the Premises. If any payment of Monthly Office Charge or other charge due under this Agreement is not received within five (5) calendar days after its due date, the Client will also pay, in addition to Monthly Office Charge, a late payment charge which will be an amount equal to ten percent (10%) of any amount owed to Center or fifty dollars ($50.00) whichever is greater. The financial terms of this Agreement are strictly confidental and Client agrees not to knowingly or willfully divulge this information to any other Client or potential Client of Center.
b. The Monthly Office Charge payable during the Term of this Agreement is subject to increase following notification of any increase in the rent, operating expenses or taxes which the Center might receive under the Main Lease (as defined in Paragraph 20), including any increase in respect of past periods under the Term. Center will promptly notify Client in writing of any such increase, and will bill Client for its pro rata share thereof.
c. The Monthly Office Charge is based on the value of the use of the Premises and services to be used by person(s) only. If more than said number of person(s) regularly use the Premises or services, the Monthly Office Charge will be increased in an amount equal to $0.00 for each such additional person.
d. If a Client check is returned for any reason, Client will pay an additional charge of One Hundred Dollars ($100.00) per returned check and, for the purpose of considering default and/or late charges, it will be as if the payment represented by the returned check had never been made.
5. Refundable Retainer.
a. Client will deposit with Center $2,100.00, in good or certified funds, as a non-interest bearing refundable retainer. Center may use the refundable retainer to cure any default of Client under this Agreement, to restore the Premises, including any and all furniture, fixtures and equipment, provided by Center to its original condition and configuration, reasonable wear and tear excepted, to pay for repairs to any damage to the Premises, Facility and/or Building, caused by Client or Client's guests, or to pay any Monthly Office Charge or other charges that Client owes Center at or prior to the expiration of the Term of this Agreement.
b. The refundable retainer (less any sums used by Center in accordance
with the terms and conditions of this Agreement) will be returned within sixty
(60) days after the termination of any services rendered or expiration of the
Term. Client may not direct or request that the refundable retainer be applied
in lieu of the final payment(s) of Monthly Office Charge or service charges
under this Agreement.
c. In the event that Center applies any of the refundable retainer deposited pursuant to this Agreement, Center will have the right to charge the Client, and Client will pay, in addition to any Monthly Office Charge, such sums as are necessary to cause the refundable retainer to be returned to its entire original amount.
6. Services.
a. Provided Client is not in default of this Agreement, Center will make
available certain services to Client as more particularly described in Paragraph
1. Charges for such services will be included as part of the Monthly Office
Charge.
b. In addition to the Monthly Service Package, upon request, Center will make available to Client additional services as Center may make generally available, the charges for which will be established as per Center's then scheduled rates as determined by Center. Payment for these services will be subject to the same terms and conditions as those governing the payment of the Monthly Office Charge. Center will have no obligation to provide such services if Client is in default of this Agreement or if the anticipated charges exceed the amount of the refundable retainer. When providing services to Client that involve third parties, Center will have the right to require Client to pay, or to reimburse Center for, the fees and expenses of such third party in advance.
7. Telephone Services.
a. Provided Client is not in default of this Agreement, Center will make available to Client a telecommunications package, the charges for which will be established as per Center's then scheduled rates as determined by Center. Payment for these services will be subject to the same terms and conditions as those governing the payment of the Monthly Office Charge. All telephone numbers used by Client will remain at all times the property of Center and Client will acquire no rights in the components of the telecommunications package whatsoever.
b. Client hereby agrees to indemnify, hold harmless and to reimburse Center for all charges associated with (1) any toll fraud traceable to telecommunications services provided by Center to
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Client including, but not limited to, unauthorized use of calling cards or telephone lines, and (2) any advertising costs of Client involving the telephone number assigned to it, including, without limitation, yellow pages advertising (it being understood that Center is under no obligation to procure such advertising and that any such advertising by Client is subject to the Operations Standards).
c. It is expressly acknowledged and agreed that Center will be the sole and exclusive provider of telecommunication services to Client. Client hereby agrees and covenants that it will not use any other telephone service or telephone carrier to provide it service in the Premises.
d. Center shall not be liable for any interruption or error in the performance of its services to Client under this Paragraph "7". Client waives any recourse against Center arising from the provision of such services, including, without limitation, any claim of business interruption or for any indirect, incidental, special, consequential or punitive damages, except for claims arising out of willful misconduct by Center.
8. Indemnity/Limitation of Liability/Insurance.
a. Client will indemnify and hold harmless Center from and against any loss, damage, injury, liability or expense to or of person or property occasioned by or resulting from any willful misconduct or grossly negligent act on the part of Client or Client's Users. Center will not be liable to Client or to any other person on account of loss, damage or theft to any business or personal property of Client. Center will not be liable for any loss, damage, injury, liability or expense to or of person or property except as may result from Center's willful misconduct or grossly negligent acts. Center will indemnify and hold harmless Client from and against any loss, damage, injury, liability or expense to or of person or property occasioned by or resulting from any willful misconduct or grossly negligent act on the part of the Center, its agents, employees, or invitees, or persons permitted on the Premises by Center.
b. Center will not be liable for any claim of business interruption or for any indirect, incidental, special, consequential exemplary or punitive damages arising out of any failure to furnish any service or facility, any error or omission with respect thereto, or any delay or interruption of same. Neither Center nor any of its agents, employees, officers or directors will be deemed to be making any representations or warranties, whether express or implied, as to the ability of any systems, including, without limitation, computer and electronic based equipment, relating to the Building, Facility or Premises or to any services to be provided hereunder to process date fields relating to the Year 2000 nor will any of them be liable for the failure of such systems to process such date fields. Center's liability under this Agreement will in no event exceed the amount paid by Client for the services for which the claim arose. The parties agree to the allocation of risk contained herein.
c. Client will, prior to the Commencement Date of this Agreement provide Center with a certificate of insurance evidencing General/Public Liability coverage with liability limits of not less than One Million Dollars ($1,000,000.00) per occurrence for Bodily Injury and/or Property Damage Liability and One Hundred Thousand Dollars ($100,000.00) per occurrence for Fire/Legal Liability. Said insurance coverage will remain in force during the Term of this Agreement. VANTAS International Incorporated and Vantas Long Island, LLC will be named as an additional named insured on each of these policies. Client's failure to provide or maintain such insurance will not reduce or otherwise alter Client's liability or responsibility to pay any judgment rendered against Client for any liability or damages. All insurance required to be maintained by Client include a waiver of subrogation in favor of Center and the landlord under the Main Lease. Center will not have any obligation to maintain insurance for Client's benefit.
d. The provisions of this Paragraph 8 will survive the expiration or earlier termination of the term of this Agreement.
9. Operating Standards.
The Operating Standards attached to this Agreement as Schedule A are hereby made an integral part of this Agreement. Client, its employees, agents, guests, invitees, visitors and/or any other persons caused to be present in and around the Premises by the Client ("Client's Users") will perform and abide by the Operating Standards then in effect.
10. Employment of Center's Employees.
Client agrees that it will not, during the Term of this Agreement and for a period of one year thereafter, directly or indirectly, employ or offer to employ any person who is or has been an employee of Center without prior consent from Center. If Client hires either an employee of Center or any person who has been an employee of Center within six months prior to the time such person is hired by Client, Client will be liable to Center for liquidated damages equal to six months wages of the employee, at the rate last paid that employee by Center. The provisions of this paragraph will survive the Term of this Agreement.
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11. Access.
Center and its agents will have the right of access to the Premises at any time for the purpose of (i) making any repairs, alterations and/or inspections which it deems necessary in its sole discretion for the preservation, safety or improvements of the Premises, or (ii) to show the Premises to prospective Clients, without in any way being deemed or held to have committed an eviction (constructive or otherwise) of or trespass against Client.
12. Relocation.
Client agrees that the Center may, in its sole discretion, relocate the Client from its present Premises to a like or similar office space within the same Facility upon ten (10) days notice to the Client. In the event that the Center requires the Client to relocate, the Center will bear the reasonable moving costs of any such relocation. All of terms and conditions of this Agreement, other than the designation of the Premises provided herein, will remain unaffected and in full force and effect.
13. Assignment and Subletting.
No assignment or subletting of the Premises, this Agreement or any part thereof will be made by Client without Center's prior written consent, which consent may be withheld in Center's sole discretion. Center may assign its rights and its obligations under Agreement in whole or in part without Client's consent.
14. Termination.
a. On expiration or earlier termination of the Term, Client will, without demand, promptly surrender and deliver the Premises, including any furniture, fixtures and equipment provided by Center, to Center in its original condition and configuration, reasonable wear and tear excepted. If Client fails to so surrender and deliver the Premises, Client agrees to pay Center, as liquidated damages, a sum equal to twice the Monthly Office Charge for each month or portion thereof that the Client retains possession of the Premises.
b. If Client vacates the Premises and leaves behind any property, whatsoever, such property will be deemed abandoned by Client and may be disposed of by Center at Client's expense and without liability to Center.
c. In the event the Premises, the Facility or the Building is damaged, destroyed or taken by eminent domain either party may terminate this Agreement without liability on (30) days written notice to the other party.
d. Upon early termination of the Main Lease, this Agreement will terminate without liability to any party unless the Landlord under such Main Lease elects to have this Agreement assigned to such Landlord or another entity as provided in such Main Lease.
15. Default and Remedies.
a. Client will be deemed to be in default of this Agreement if Client fails to fulfill any of its terms, conditions, covenants or provisions of this Agreement, including but not limited to (1) payment of Monthly Office Charge and/or any other charges hereunder within ten days of the date such charges become due; or the abandonment and/or vacatur of the Premises by the Client prior to expiration of the Term, or (2) if Client becomes insolvent, makes an assignment for the benefit of creditors or files a voluntary petition, or has an involuntary petition filed against it, under any bankruptcy or insolvency law.
b. In case of such default, the Center may, at its sole discretion, terminate this Agreement upon five days notice to the Client. Upon the expiration the five day period, Client will vacate the Premises. Should Client fail to vacate the Premises, the Center may:
i. re-enter and take possession of the Premises and remove all persons and property therefrom; and
ii. disconnect any telephone lines installed for the benefit of Client; and
iii. cease supplying Client with the services described in Paragraph 1 hereof.
If Client defaults and Center takes any of the foregoing action, or changes the locks, removes Client's property, or otherwise denies access to Client, Center will not be liable for any damages to the Client.
c. In addition to the foregoing, Center may elect to accelerate all of Client's obligations hereunder, including without limitation, Monthly Office Charge and other monthly recurring charges, for all or part of the term. Center is under no obligation, implied or otherwise, to mitigate its damage(s) under a default by Client.
d. Should Center be unable to enter into another office service agreement relating to the Premises, or should Center enter into another office service agreement relating to the Premises for less than the Monthly Office Charge which Client is obligated to pay under this Agreement, Client will pay the amount of such deficiency, plus the expenses of entering into such other service agreement relating to the Premises, immediately in one lump sum, to Center upon demand
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and/or at Center's option as such obligations accrue hereunder.
e. In connection with any default by Client under this Agreement, if Center incurs attorney's fees and/or costs of collection or of ensuring performance, Client will pay all such sums with interest, and such sums will be deemed to be owed by Client in addition to the Monthly Office Charge hereunder, and if the Term has expired at the time of incurring such sums, such sums will be recoverable by Center as damages.
16. Mail & Telephone Forwarding.
Upon expiration of the Term, Center will, unless otherwise instructed by Client in writing no later than 30 days prior to the expiration of the Term, forward mail to Client at its new address and give out Client's new telephone number via a voice mail message for a period of three months at the rate of One Hundred and Fifty Dollars ($150.00) per month, which sums will be deducted from any amounts deposited with the Center from the refundable retainer deposited hereunder or will otherwise be paid to the Center in advance. Unless the Client pays the Charge set forth herein to the Center in advance, Center will have no obligation to provide the services set forth herein. Except as expressly provided herein, Center will have no obligation to notify any person or entity of Client's new telephone number and address.
17. Notices.
Any notice under this Agreement will be in writing and will be either delivered by hand, first class mail or by overnight courier to the party at the address set forth below. Center hereby designates its address as:
Vantas Long Island, LLC
50 Charles Lindbergh Blvd.
Uniondale NY 11553
Attn: Management
Client hereby designates its address (which address must be an address within the United States), as
GKB Software, Inc.
Attn: Keith Becker
57 Magnolia Avenue
Garden City, NY 11530
Phone: (516) 248-6159
Fax:
If such mail is properly addressed and mailed as above, it will be deemed notice for all purposes, given when sent or delivered, even if returned as undelivered.
18. Severability.
The invalidity of any one or more of the sections, subsections, sentences, clauses or words contained in this Agreement or the application thereof to any particular set of circumstances, will not affect the validity of the remaining portions of this Agreement or of their valid application to any other set of circumstances. Regardless of whether or not either party has elected to consult with legal counsel in reviewing this Agreement, it is the intent of the parties that in no event will the terms, conditions or provisions of this Agreement be construed against either party as the drafter of this Agreement.
19. Execution by Client.
The party or parties executing this Agreement on behalf of the Client warrant(s) and represent(s): (i) that such executing party (or parties) has (or have) complete and full authority to execute this Agreement on behalf of Client; and (ii) that Client will fully perform its obligations hereunder.
20. Miscellaneous.
a. Failure of the Center to insist upon the strict performance of any term or condition of this Agreement or to exercise any right or remedy available for a breach thereof, or acceptance of full or partial payment during the continuance of any such breach, will not constitute a waiver of any such breach or any such term or condition. No term or condition of this Agreement required to be performed by Client and no breach thereof, will be waived, altered or modified, except by a written instrument executed by Center.
b. Time is of the essence as to the performance by Client of all covenants, terms and provisions of this Agreement.
c. This Agreement embodies the entire understanding between the parties relative to its subject matter, and will not be modified, changed or altered in any respect except in writing signed by all parties.
d. This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument.
e. This Agreement is subject and subordinate to the Building lease governing the Facility, under which Center is bound as tenant (the "Main Lease") and the provisions of the Main Lease, other than as to the payment of Monthly Office Charge or other monies, are incorporated into this Agreement as if completely herein rewritten. Client will comply with and be bound by all provisions of the Main Lease except that the payment of
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Monthly Office Charge will be governed by the provisions of this Agreement, and Client will indemnify and hold Center harmless from and against any claim or liability under the Main Lease arising from Client's breach of the Main Lease or this Agreement.
IN WITNESS WHEREOF, Center and Client have executed this Agreement as of the date first above written.
CENTER: VANTAS LONG ISLAND, LLC UNIONDALE
By:_______________________________________ Lorraine Doyle, General Manager
CLIENT: GKB SOFTWARE, INC.
(If a corporation)
By:_______________________________________ Keith Becker, President.
Name:_____________________________________
Title:____________________________________
[Corporate Seal]
CLIENT: GKB SOFTWARE, INC.
(If an individual or partnership)
By:_______________________________________ Keith Becker, President.
By:_______________________________________
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SCHEDULE A OPERATING STANDARDS
1. Clients and their guests will conduct themselves in a businesslike manner; proper attire will be worn at all times; and the noise level will be kept to a level so as not to interfere with or annoy other Clients.
2. Client will not provide or offer to provide any services to Center's customers if such services are available from Center.
3. Client will not prop open any corridor doors, exit doors or doors connecting corridors during or after business hours.
4. Clients using public areas may only do so with the consent of the Center, and those areas must be kept neat and attractive at all times.
5. Client will not conduct any activity within the Premises, Facility or Building which in the sole judgment of the Center will create excessive traffic or is inappropriate to a shared office environment.
6. Client may not conduct business in the corridors or any other areas except in its designated offices or conference rooms without the written consent of Center.
7. All corridors, halls, elevators and stairways will not be obstructed by Client or used for any purpose other than normal egress and ingress.
8. No advertisement, identifying signs or other notices will be inscribed, painted or affixed on any part of the corridors, doors, windows or public areas.
9. Without Center's prior written consent, Client is not permitted to place "mass market", direct mail or advertising (i.e. newspaper, classified advertisements, yellow pages, billboards) using Center's assigned telephone number or take any such action that would generate an excessive number of incoming calls.
10. Client will not solicit clients of Center or their employees in the Building without first obtaining Center's prior written consent.
11. Immediately following Client's use of conference room space and/or audio/visual equipment, Client will clean up and return the space and equipment to the state and condition it was in prior to Client's use. If not, Center may charge Client for any other expenses required to restore the conference space and/or equipment to its original condition.
12. Center must be notified in writing if Client desires to utilize the conference room or other common areas of the Facility during evening or weekend hours. Center may deny the Client access if the desired usage is inappropriate and may disrupt normal operations.
13. Client will not, without Center's prior written consent, store or operate any computer (except a desktop/laptop computer or fax machine) or any other large business machines, copier and postage equipment, heating equipment, stove, speaker phones, radios, stereo equipment or other mechanical amplification equipment, refrigerator or coffee equipment, or conduct a mechanical business, do any cooking, or use or allow to be used on the Premises oil, burning fluids, gasoline, kerosene for heating, warming or lighting. No article deemed extra hazardous on account of fire or any explosives will be brought into said Premises or Facility. No offensive gases, odors or liquids will be permitted.
14. Client will bring no animals into the Premises or Facility except for those assisting disabled individuals.
15. Client will not remove furniture fixtures or decorative material from offices or common areas without the prior written consent of Center.
16. Client will not make any additional copies of any Center issued keys. All keys and security cards are the property of Center and must be returned upon request or by the close of the business on the expiration or sooner termination of
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the Agreement term. Any lost or unreturned keys or cards will incur a Twenty Five Dollar ($25.00) per item charge and the cost to re-key the office.
17. Client will not smoke nor allow smoking in any area of the Facility, including the Premises, and will comply with all governmental regulations and ordinances concerning smoking.
18. Client will not allow more than three visitors in the reception lobby of the Premises at any one time.
19. Client's parking rights (if any) are defined by the Main Lease. Landlord reserves the right to modify parking arrangements if required to do so by Building management.
20. Any alterations to the Premises requested by Client, including affixing anything to the walls of the Premises, will be done only (i) with the written permission of Center, which permission may be withheld by the Center for any reason whatsoever, and (ii) by an agent of the Center's choosing at the Client's sole cost and expense.
21. Any equipment desired to be used and or installed by the Client, other than those machines ordinarily used for regular office purposes (i.e. personal computers, personal printers, calculators, adding machines, etc.) will be subject to the Center's prior written consent to any such use or installation.
22. Client will cooperate and be courteous with all other occupants of the Facility and Center's staff and personnel.
23. Upon request, Client will use a chair mat.
24. Center reserves the right, without prior notice, to modify any of the foregoing and to make such other reasonable rules and regulations as in its sole discretion may from time to time be needed for the safety, care, appropriate operation and cleanliness of the Facility.
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OFFICE SERVICE AGREEMENT
OFFICE RIDER
RE: Lease and Service Agreement between Vantas Long Island, LLC VANTAS and GKB Software, Inc ("Agreement").
DATE: 4/20/2000
CENTER: 50 Charles Lindbergh Blvd., Uniondale, NY 11553
Paragraph "1b" of the Agreement is hereby modified as follows:
In addition to office space number, Lessee shall now occupy facility office space number 317. In modifying Paragraph "4" of the Agreement, Lessee shall pay Lessor as rent for the Premises a total rental of $23,250.00, payable in equal monthly installments of $1,850.00.
WHEREAS The agreement in Paragraph "4" provides that the Lessee shall pay, as rent for the premises, a total rent of $24,450.00 payable in equal monthly installments of $1,850.00, and
WHEREAS the parties agree and understand that the said sum reflects the market rent for the Premises, and
WHEREAS the parties have agreed, in consideration of entering into the Agreement, that the Lessor shall accept instead and in place of the rent described in Paragraph "4" the total sum of $22,200.00, payable in monthly installments of $1,850.00.
It is hereby agreed as follows:
All other terms and conditions of the Agreement shall remain in full force and effect.
ACCEPTED BY LESSOR: ACCEPTED BY LESSEE VANTAS LONG ISLAND, LLC UNIONDALE GKB SOFTWARE, INC By:__________________________________ By:___________________________________ Lorraine Doyle, General Manager. Keith Becker, President. Title:_______________________________ Title:________________________________ Date:________________________________ Date:_________________________________ |
Exhibit 10.7
JoinUsOnline Portal Agreement
This AGREEMENT, entered into this _______ day of ___________________, 2000 by and between JoinUsOnline.com, Inc. (hereinafter referred to as "JUOL") and __________________________________ ("CLIENT").
WHEREAS, JUOL has developed a Portal program ("JUOL Program") which contains industry specific portals and sub-portals. The Portals and sub-portals included in the JUOL Program are listed in Schedule A of this Agreement.
WHEREAS, CLIENT wishes to offer the JUOL Program as a Value-Added Program to CLIENT's customers ("Customers").
NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, it is agreed as follows:
1. DUTIES OF CLIENT JUOL Hereby authorizes CLIENT to provide the JUOL Program as a Value-Added Program to its Customers (No cost to the Customer), and CLIENT hereby accepts such authorization, for the purpose of providing the JUOL Program to its Customers subject to the following conditions, representations and warranties, each of which is material:
a. CLIENT covenants and agrees that it shall not use written materials or scripts, other than those authorized by JUOL, in connection with the JUOL Program.
b. CLIENT shall purchase a JUOL Program Membership from JUOL. Each Membership entitles the recipient ("Member") to unlimited free access to the JUOL Program for a twelve - (12) month period. The fees for the JUOL Program are outlined in Schedule A of this Agreement. Furthermore, CLIENT MAY NOT charge its Customers a fee for enrollment in the JUOL Program.
2. DUTIES OF JUOL
a. JUOL will provide a JUOL Home Page for CLIENT's Customers to enroll and register in the JUOL Program on-line.
b. JUOL will pay CLIENT a fee calculated in accordance with the terms and conditions outlined in Schedule A of this Agreement.
3. CONFIDENTIALITY AND PROPRIETARY INTERESTS
a. JUOL agrees that during the term of this Agreement and thereafter, CLIENT's customer list shall remain the sole property of CLIENT and cannot be utilized for any other JUOL or JUOL successor's internal promotions, list enhancements or other list promotions by other companies without written permission from CLIENT.
b. CLIENT agrees that CLIENT MAY NOT gain any proprietary interest or right in any JUOL benefit or service provider in the JUOL Portal Program. CLIENT further grants JUOL the exclusive right to provide CLIENT with benefits and services in the JUOL Portal during the term of this agreement. Furthermore if CLIENT attempts to contact any benefit or service provider, including and not limited to individual local providers, in the JUOL Portal Program without receiving express written permission from JUOL, JUOL may terminate this agreement and CLIENT will be liable for all consequential damages.
JUOL________ CLIENT________
1.
4. WARRANTIES
a. The portals and sub-portals offered through the JUOL Program are provided directly by independent providers and JUOL does not warrant or guarantee any of the portals and/or sub-portals provided in the JUOL Program. Any warranties or, guarantees or representations provided are those of the individual portal and/or sub-portal providers and not JUOL.
5. TERM AND TERMINATION
a. The term of this Agreement is for three (3) years and shall automatically renew on a yearly basis, unless CLIENT or JUOL provides the other party with written notice within ninety (90) days of the annual anniversary of this Agreement.
b. Either party shall have the right to terminate this Agreement if the other party is in material breach of this Agreement and fails after thirty (30) days written notice to cure any such breach.
c. If termination of this Agreement occurs, pursuant to the terms set forth in paragraph 4(a) of this Agreement, the termination shall not affect the obligation of JUOL to service the balance of the CLIENT's Customers enrolled in the JUOL Program pursuant to paragraph 2, as long as CLIENT is not offering a competitive program to the Customers enrolled in the JUOL Program by CLIENT. If CLIENT does offer a competitive program to the Customers enrolled in the JUOL Program CLIENT, all fees and services due and owing CLIENT will cease immediately.
d. If CLIENT is in material breach of this Agreement, all services and fees due and owing CLIENT will cease immediately.
e. In the event either party wishes to exercise its right to terminate this agreement pursuant to this paragraph, notice to terminate must be made pursuant to section 6 of this Agreement.
5. ENTIRE AGREEMENT This Agreement together with Schedule A attached, represents the entire understanding of the parties with respect to its subject matter and supersedes all previous discussion and correspondence with respect thereto, and no representations, warranties or Agreement, express or implied, of any kind with respect to such subject matter have been made by either party to the other.
6. NOTICES Any notice to be given to JUOL and CLIENT shall be in writing and shall be deemed to have been given on the same day as mailed by certified mail, postage pre-paid, return receipt requested, addressed to the respective parties as follows, unless and until either party notifies the other in writing of a different address:
IF TO JUOL: JoinUsOnline.com, Inc.
110 E. Atlantic Ave., Suite 400
Delray Beach, FL 33344
IF TO CLIENT: ______________________________________
______________________________________
______________________________________
|
JUOL________ CLIENT________
2.
7. GOVERNING LAW Disagreement and all questions as to interpretations, performance and enforcement and the rights and remedies of the parties hereunder shall be determined in accordance with the laws of the State of Florida. Should any provision contained in this Agreement violate the laws of any State in which this Agreement is to be performed, that provision shall be deemed void to the extent it is so violated without invalidation any other provision contained herein. Parties mutually and knowingly agree that any suit arising out of or relating to this Agreement shall be filed and adjudicated by a court in Broward County, in the State of Florida.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement the day and year first written.
Witness JoinUsOnline.com, Inc.
______________________________ By_____________________________________
_______________________________________
Name & Title (Print)
Witness CLIENT
______________________________ By_____________________________________
_______________________________________
Name & Title (Print)
|
3.
SCHEDULE A
1. Pursuant to the following terms and conditions, CLIENT shall enroll and pay the following fees per Member enrolled in the JUOL Program by CLIENT.
A. CLIENT shall pay $[ ].00 upon execution of this Agreement. The $[ ].00 shall be used towards the fees described in this Agreement, which are $[ ] per Member for enrollment into the JUOL Program for a twelve (12) month period.
B. In order to enroll its Customers, CLIENT must follow one of the following procedures:
(i) JUOL Certificate Program: CLIENT shall provide the JUOL certificates to its Customers, at no charge. CLIENT's Customers will enroll into the JUOL Program on-line. Each certificate is valid for 12 months of FREE Unlimited access to the JUOL Program, subject to certain restrictions. These restrictions are listed on the certificates. CLIENT shall purchase numbered JUOL Program certificates in lots of 1,000 for $[ ].00, which includes shipping and handling. The price for printing, shipping and handling is currently $[ ] per thousand, but could vary on future orders.
(ii) JUOL Non-Certificate Program: CLIENT shall provide JUOL with the information listed below on each New Member being enrolled in the JUOL Program. The frequency of New Member enrollment shall be determined by CLIENT and JUOL, based upon volume. CLIENT shall also at the same time, wire to JUOL [ ] ($[ ]) per New Member enrolled in the JUOL Program. All New Customers enrolled prior to the 15th of the month shall have access to the JUOL Program for the following twelve- (12) month period, commencing on the 1st of the month following enrollment of the new Member by CLIENT.
Required Enrollment Information
- Member Name
- Unique Membership #
(a) GROUP ASSIGNMENT: All New Customers enrolled in the JUOL Program will be assigned to a group, according to the date JUOL receives the New Member enrollment information, as outlined above. The group assignments are outlined in the schedule below. The group that a New Member is assigned to shall determine the date when a Member's Renewal fees are due. An example of the group assignments is outlined in the schedule below.
Enrollment Date Group --------------- ----- 04/16/98-05/15/98 06/98 05/16/98-06/15/98 07/98 06/16/98-07/15/98 08/98 07/16/98-08/15/98 09/98 08/16/98-09/15/98 10/98 09/16/98-10/15/98 11/98 10/16/98-11/15/98 12/98 11/16/98-12/15/98 01/99 JUOL________ CLIENT________ |
4.
2. Pursuant to the following terms and conditions, JUOL shall pay CLIENT the following percentages of the gross fees paid to JUOL, less shipping, handling, and taxes, for each Member, enrolled in the JUOL Program by CLIENT, who purchases and/or enrolls in the following JUOL on-line products, benefits and/or services:
Product, Benefit or Service Percentage of Sale Due CLIENT --------------------------- ----------------------------- Discount Shopping Network [ ]% Grocery Coupon Program [ ]% Hotel/Motel Program [ ]% Golf Program [ ]% Vision Program [ ]% Pharmacy Program [ ]% Chiropractic Program [ ]% Dental Program [ ]% Consumer Plus [ ]% of up front fee plus [ ]% of monthly fees Health Plus [ ]% of up front fee plus [ ]% of monthly fees Business Plus [ ]% of up front fee plus [ ]% of monthly fees Legal Program (Business) [ ]% of up front fee plus [ ]% of monthly fees Legal Program (Consumer) [ ]% of up front fee plus [ ]% of monthly fees Web Classified (3 Page) [ ]% of up front fee plus [ ]% of monthly fees Personal Web Pages [ ]% of up front fee plus [ ]% of monthly fees Web Hosting [ ]% of development and hosting fees Internet Dial-Up [ ]% of dial-up fees |
JUOL will pay the following fees for each qualified lead generated for the following services:
Product, Benefit, or Service Lead Fee ---------------------------- -------- Mortgage $[ ]00 BiWeekly Mortgage Program $[ ]00 Real Estate $[ ]00 Moving $[ ]00 Merchant Services $[ ]00 |
3. As new products, benefits, and/or services are added, an addendum to this Agreement will be added.
4 All CLIENT's fees shall be considered earned and payable on the 15th of the month following receipt of the compensation from the JUOL product, benefit and/or service providers.
JUOL________ CLIENT________
Exhibit 10.8
Benefit and Service Agreement
This AGREEMENT, entered into this___ day of _____ 2000 by and between JoinUsOnline.com, LTD. Inc.(hereinafter referred to as "JUOL") and ________________________________________ (hereinafter referred to as "CLIENT").
WHEREAS, JUOL has developed a variety of Programs (JUOL Programs) which include a variety of money saving benefits and services. The Benefits and Services included in the JUOL Programs are listed in Schedule A of this Agreement.
WHEREAS, CLIENT wishes to provide one or more of the JUOL Programs to CLIENT's Customers and members (collectively "Members") under the control and direction of JUOL.
NOW,THEREFORE, for and in consideration of the mutual covenants contained herein, it is agreed as follows:
1. DUTIES OF CLIENT. JUOL hereby authorizes CLIENT to provide the JUOL Programs to its Members using such methods and in such geographic areas as approved by JUOL and CLIENT hereby accepts such authorization, for the purpose of providing the JUOL Programs to its Members subject to the following conditions, representations and warranties, each of which is material:
a. CLIENT covenants and agrees that it shall not use written materials or scripts, other than those authorized by JUOL, in connection with the JUOL Programs, nor will CLIENT make any representations or warranties not specifically authorized by JUOL or its designee.
b. CLIENT will pay the appropriate fees, for each enrolled Member, as stated in Schedule B of this Agreement.
c. CLIENT covenants and agrees that during the term of this agreement, neither it, nor any affiliate or related entity, shall represent or market to any person or entity which provides any similar benefits or services as outlined in the JUOL Programs. That applies to any individual benefit or service that JUOL provides. The only exception is with JUOL approval, which must be communicated in writing.
2. DUTIES OF JUOL
a. JUOL will provide Customer Service lines for CLIENT's Members to utilize for additional information on the JUOL Programs, enrollment in the JUOL Programs or implementation of one or more of the benefits or services included in the JUOL Programs.
b. JUOL will pay CLIENT a fee calculated in accordance with terms and conditions outlined in Schedule A of this Agreement.
3. WARRANTIES AND GUARANTEES
a. The benefits and services offered through the JUOL Programs are provided directly by independent benefit and service providers and JUOL does not warrant or guarantee any of the benefits or services provided in the JUOL Programs. Any warranties or, guarantees or representations provided are those of the individual benefit and\or service providers and not JUOL.
JUOL________ CLIENT________ 1 |
b. It is understood by CLIENT that the benefits and services
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included in the JUOL Programs are based upon agreements made between JUOL and certain benefit and service providers ("Provider Agreements"). During the term of this Agreement, certain Provider Agreements may be terminated or altered. JUOL shall give CLIENT written notice of any benefit or service being eliminated or altered, not less than thirty (30) days prior to the effective date of these changes. If a benefit or service is terminated or altered, JUOL shall, on a best effort basis, replace the altered or terminated benefit or service with a comparable benefit or service.
4. TERM AND TERMINATION
a. The term of this Agreement is for three (3) years and shall automatically renew on a yearly basis, unless CLIENT or JUOL provides the other party with written notice within ninety (90) days of the annual anniversary of this Agreement.
b. Either party shall have the right to terminate this Agreement if
the other party is in material breach of this Agreement and fails after thirty
(30) days written notice to cure any such breach.
c. If termination of this Agreement occurs, pursuant to the terms set forth in paragraph 4(a) of this Agreement, the termination shall not affect the obligation of JUOL to service the balance of the Members enrolled in the JUOL Programs pursuant to paragraph 2, as long as all appropriate enrollment fees are paid up to date and CLIENT is not representing or offering any similar benefits or services in the JUOL Programs. That applies to any individual benefit or service that JUOL provides, except as permitted herein. If CLIENT is representing or offering any similar benefit or service in the JUOL Programs, except as permitted herein, all services due and owing CLIENT will cease immediately.
d. If CLIENT is in material breach of this Agreement or if CLIENT representing or offering any similar benefit or service in the JUOL Programs during the term of this Agreement, except as permitted herein, all services due and owing CLIENT will cease immediately and CLIENT will be liable for all consequential damages. That applies to any individual benefit or service that JUOL provides, except as permitted herein.
e. In the event either party wishes to exercise its right to terminate this agreement pursuant to this paragraph, notice to terminate must be made pursuant to paragraph 8 of this Agreement.
5. ASSIGNMENT.
a. Either party may assign this Agreement;
i. To an affiliate so long as such affiliate assumes the obligations hereunder, or;
ii. In connection with a merger or consolidation involving either party or a sale of all or substantially all of either party's assets to the surviving company or purchaser as the case may be, so long as such assignee assumes the obligations of the appropriate party hereunder.
6. CONFIDENTIALITY AND PROPRIETARY INTERESTS
a. JUOL agrees that during the term of this Agreement and any time thereafter, CLIENT's customer lists shall remain the sole property of CLIENT and cannot be utilized for any other JUOL or JUOL successor's internal promotions, list enhancements or other list promotions by other companies without the written permission of CLIENT.
b. CLIENT agrees that all sales materials provided to CLIENT or modified for CLIENT by
JUOL________ CLIENT________
JUOL are and remain the property of JUOL and may not be used by CLIENT without express written authorization of JUOL. CLIENT further agrees to return or destroy all such materials at the request of JUOL or upon termination of this Agreement.
c. CLIENT agrees that CLIENT MAY NOT gain any proprietary interest or right in any JUOL benefit or service provider in the JUOL Programs. CLIENT further grants JUOL the exclusive right to provide CLIENT with the benefits and services in the JUOL Programs during the term of this Agreement. Furthermore if CLIENT attempts to contact any benefit or service provider, including but not limited to the individual local providers, in the JUOL Programs, without receiving express written permission from JUOL, JUOL may terminate this Agreement and CLIENT will be liable for all consequential damages.
7. ENTIRE AGREEMENT. This Agreement together with Schedule A and Schedule B attached, represents the entire understanding of the parties with respect to its subject matter and supersedes all previous discussion and correspondence with respect thereto, and no representations, warranties or Agreement, express or implied, of any kind with respect to such subject matter have been made by either party to the other.
8. NOTICES. Any notice to be given to JUOL and CLIENT shall be in writing and shall be deemed to have been given on the same day as mailed by certified mail, postage pre-paid, return receipt requested, addressed to the respective parties as follows, unless and until either party notifies the other in writing of a different address:
IF TO JUOL: JUOL.com LTD.
110 East Atlantic Blvd.
Delray Beach, FL 33444
IF TO CLIENT: _______________________
_______________________
_______________________
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9. GOVERNING LAW. Disagreement and all questions as to interpretations, performance and enforcement and the rights and remedies of the parties hereunder shall be determined in accordance with the laws of the State of Florida. Should any provision contained in this Agreement violate the laws of any State in which this Agreement is to be performed, that provision shall be deemed void to the extent it is so violated without invalidating any other provision contained herein. Parties mutually and knowingly agree that any suit arising out of or relating this Agreement shall be filed and adjudicated by a court in Palm Beach County, in the State of Florida.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement the day and year first above written.
Witness JUOL.com, LTD
____________________________ By_______________________________________
_________________________________________
Name & Title (Print)
Witness CLIENT
____________________________ By_______________________________________
_________________________________________
Name & Title (Print)
3
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SCHEDULE A
1. The following benefits and services are included in the JUOL Value Added Program.
Discount Shopping Network
Web Classified.net (Multi Page Business Web Site)
Discount Travel Service*
Discounted Grocery Service**
JoinUsOnline Portal Program
Discount Car Rentals
FREE New Car Pricing
FREE Used Car Pricing
Discount New Car Buying Service
Discount Real Estate Service
Discount Moving Service
Discount Mortgage Service
FREE Mortgage Acceleration Printout
Investment and Retirement Services
FREE Financial Needs Analysis
* Includes $[ ] in Travel Cash Back Coupons
** Includes Discounted Admissions to Theme Parks and Discounted Movie Tickets
(This offer is subject to change and is total dependant on provider)
2. Pursuant to the following terms and conditions, JUOL shall pay CLIENT the following percentages of the gross fees paid to JUOL, less shipping, handling, and taxes, for each Member, enrolled in the JUOL/JUOL Program by CLIENT, who purchases and/or enrolls in the following JUOL on-line products, benefits and/or services:
Product, Benefit or Service Percentage of Sale Due CLIENT --------------------------- ----------------------------- Discount Shopping Network [ ]% Hotel/Motel Program [ ]% Golf Program [ ]% Vision Program [ ]% Pharmacy Program [ ]% Chiropractic Program [ ]% Dental Program [ ]% Consumer Plus [ ]% of up front fee plus [ ]% of monthly fees Health Plus [ ]% of up front fee plus [ ]% of monthly fees Business Plus [ ]% of up front fee plus [ ]% of monthly fees Legal Program (Business) [ ]% of up front fee plus [ ]% of monthly fees Legal Program (Consumer) [ ]% of up front fee plus [ ]% of monthly fees Personal Web Pages [ ]% of up front fee plus [ ]% of monthly fees Web Hosting [ ]% of development and hosting fees Internet Dial-Up [ ]% of dial-up fees Long Distance Telephone [ ]% Long Distance Fees JUOL________ CLIENT________ 4 |
SCHEDULE A (cont'd)
JUOL will pay the following fees for each qualified lead generated for the following services:
Product, Benefit, or Service Lead Fee ---------------------------- -------- Mortgage $[ ].00 BiWeekly Mortgage Program $[ ].00 Real Estate $[ ].00 Moving $[ ].00 |
3. As new products, benefits, and/or services are added, an addendum to this Agreement will be added.
4 All CLIENT's fees shall be considered earned and payable on the 15th of the month following receipt of the compensation from the JUOL product, benefit and/or service providers
JUOL________ CLIENT________
SCHEDULE B
VALUE-ADDED PROGRAM PRICING
1. Pricing: Pursuant to the following terms and conditions, CLIENT will pay the following fees per member enrolled in the JUOL Programs on a monthly basis.
Amount of
Members Benefits & Services Cost Per Member
--------- ------------------- ---------------
1000 + Listed in Schedule A $[ ] per month/member
$[ ] per active member
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a. The above mentioned fees represents Member enrollment in the JUOL Programs and computer system according to JUOL computer specifications. THIS DOES NOT INCLUDE printing, shipping, postage or handling charges.
2. Initial payment Terms: CLIENT shall pay for and enroll its Members in the following manner:
a. CLIENT shall pay $[ ].00 upon execution of this Agreement. The $[ ].00 shall be applied towards the fees described in section (1) of this agreement.
3. Membership Enrollment and Payments: In order to enroll its Members, CLIENT must follow the following procedures:
a. MONTHLY NEW MEMBERS and PAYMENT: CLIENT shall provide JUOL with the information listed below on each New Member being enrolled in the JUOL Programs. The frequency of New Member enrollment shall be determined by CLIENT and JUOL, based upon volume. CLIENT shall also at the same time, wire to JUOL the fees outlined in paragraph 1 above ($[ ]) per New Monthly Member enrolled in the JUOL Programs. These Members will have access to the JUOL Programs for one (1) month.
- Member Name
- Address
- Phone Number
- Social security # or Unique Membership #
JUOL________ CLIENT________
SCHEDULE B (cont'd)
b. GROUP ASSIGNMENT: All New Members enrolled in the JUOL Programs will be assigned to a group, according to the date JUOL receives the New Member enrollment information, as outlined above. The group assignments are outlined in the schedule below. The group that a New Member is assigned to shall determine the future monthly billings of that New Member:
Date Group ---- ----- 1st - 7th A 8th - 14th B 15th- 21st C 22nd- 31st D c. GROUP BILLING: Each week CLIENT shall also provide JUOL with a list of |
Members that WILL NOT have access to the JUOL Programs the following month (Terminated Members). JUOL shall determine which group the Terminated Members are in and delete the Terminated Members from the file. The balance of the Membership remaining are considered Active Members. JUOL shall bill CLIENT, via fax, the fees outlined in paragraph 1 above for each Active Member, according to the following schedule below. Within 48 hours of receiving the bill via fax, CLIENT shall wire the Active Member fees to JUOL. This will entitle the Active Members to have access to the JUOL Programs for an additional month.
Dates Group Group Billing Date
----- ----- ------------------
1st - 7th A 8th
8th - 14th B 15th
15th- 21st C 22nd
22nd- 31st D 1st
JUOL________ CLIENT________
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Exhibit 10.9
ISO
SERVICES AND MARKETING AGREEMENT
- Credit Review by EFS -
This Agreement ("Agreement") is made as of the 29th day of February, 2000 by and between EFS NATIONAL BANK, a national banking association organized under the laws of the United States with its principal offices located at 2525 Horizon Lake Drive, Suite 120, Memphis, TN 38133 ("EFS") and Integrated Merchant Services, Inc. ("the Company").
RECITALS
WHEREAS, EFS is a member in good standing of VISA USA, Inc. ("VISA"), and MasterCard International, Inc. ("MasterCard"), together known herein as the "Associations" and provides processing and other services involved with and relating to MasterCard and VISA credit card sales transactions ("Sales").
WHEREAS, the Company (i) markets electronic benefit transfer ("EBT"), credit card and debit card services to businesses; (ii) provides point-of-sale equipment to support EBT, credit and debit card services.
WHEREAS, as a bank and member of MasterCard and VISA, EFS wishes to assist in having Company registered as a merchant service provider for MasterCard and as an independent sales organization for VISA (collectively herein "MSP") and to provide the authorization and settlement services of EFS to compliment the marketing skills of Company, as more fully described herein, all without limiting the right of EFS to continue to develop its own marketing relationships and service systems in the future as well as the right to market and sell its own systems and equipment and the systems of third parties at any time.
WHEREAS, MasterCard, VISA and EFS have adopted rules and regulations relating to all aspects of Sales and Sales processing (such rules and regulations. as amended from time to time, are herein called the "Rules").
WHEREAS, the Company and EFS desire to enter into this Agreement to set forth the terms and conditions upon which the Company will market, and provide certain support services in connection with EFS's bank card transaction processing services and EFS will process transactions of such customers for authorization and settlement, all in accordance with the Rules.
WHEREAS, the Company shall still maintain direct relationships with other third parties directly to provide check guarantee services, private label card services (i.e., American Express).
NOW THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and EFS hereby agree as follows:
1. General.
1. Company Obligations.
i. The Company will use its best efforts to market all available processing services of EFS to merchants and solicit completed applications from merchants, on the form attached hereto as Schedule A and as modified from time to time by EFS (the "Merchant Agreement"), for processing by EFS of sales of goods and services of the applying merchants ("Sales"'). Any such merchant accepted by EFS is herein called a "Merchant". The Company shall market such services utilizing its own employees and agrees not to enter into any agreement with its affiliates, other ISOS, sub-ISOs or agents to solicit EFS services without the express written consent of EFS.
ii. The Company will provide the following support services to the Merchants:
1. Installing and programming the equipment used by Merchants to submit Sales;
2. Training Merchants' employees to operate Electronic Draft Capture hardware, software, documentation and equipment in accordance with EFS quality standards, and
3. Training Merchants on Rules.
iii. The Company will be responsible for payment and/or reimbursement of all fees. expenses, penalties and charges from VISA and MasterCard incurred in connection with the registering and maintaining the ISO/MSP registration of Company initially and throughout the term of this Agreement.
iv. The Company shall provide EFS with any information the Company obtains which indicates the reasonable likelihood of material credit problem(s) of a Merchant based upon the underwriting standards mutually established by the Company and EFS.
v. The Company will be authorized to activate new merchants after approval by EFS.
vi. Company will conduct a credit review of all merchant applications at applying mutually agreed upon credit review standards and processes for prospective Merchants, and will forward Merchant Agreements to EFS for those prospects that satisfy the criteria.
vii. The Company will provide Merchant with supplies necessary to process transactions. In the event Merchants obtain supplies from EFS, EFS will charge Company for such supplies at the rate EFS normally charges.
viii. Company will take all necessary and appropriate action to remain in good standing as an MSP/ISO.
2. EFS Obligation.
i. EFS will conduct its own credit review of merchants forwarded by Company and make final credit decision.
ii. EFS and the Merchants will enter into Merchant Agreements in accordance with the Rules. Clearance of Sales and payments to Merchants will be made directly from EFS to such Merchants in accordance with the Merchant Agreements, or as permitted otherwise by Rules. The Company shall have, at its option, the right to cure and resubmit the declined application for reconsideration by EFS, but nothing in this Agreement shall prevent EFS from rejecting any prospective Merchant or canceling an existing Merchant at any time.
iii. EFS will operate as the Association member and contracting party for the Merchant Agreements.
iv. EFS will electronically transfer to the bank designated by Merchant the proceeds of Sales transactions, less deduction for fees and charges in accordance with the terms of the Merchant Agreement.
v. EFS will provide the same level of service to support the Merchants established by Company that EFS provides to direct EFS merchant accounts.
vi. Company will do its own fraud monitoring. However, if requested, EFS will provide merchant fraud monitoring for Company's merchants at the same level of support that it employs for direct merchants of EFS. Notwithstanding this level of support EFS will not be liable for any losses due to chargebacks, fraud, or any other reason resulting from undertaking this service on behalf of Company.
vii. EFS will provide an accurate monthly statement to each Merchant summarizing transactions for all Merchant locations by the 15th of the month for the previous month's transactions for the fee specified on Schedule C.
viii. EFS will pay the Company by the 15th of the month for the previous month's transactions as set forth in this Agreement.
ix. EFS will perform all clearing and settlement services for Sales by Merchants for the fees set forth on Schedule C.
3. Merchant Agreements.
A. EFS retains the right, in its sole and absolute discretion to reject any proposed Merchant Agreement or, upon thirty (30) days notice to the Merchant and the
Company, to terminate any existing Merchant Agreement. Provided, however, that EFS may terminate a Merchant Agreement immediately at any time without notice if, in the judgment of EFS, financial or other harm to EFS or the Company is reasonably likely to occur unless it is terminated. The Company may request that EFS terminate a Merchant Agreement at any time, if in the judgment of the Company, financial or other harm to EFS or the Company is reasonably likely to occur unless it is terminated. Such approval to the Company shall not be unreasonably withheld, delayed or denied.
B. The Company acknowledges and agrees that Merchants will be parties to Merchant Agreements with EFS and that EFS as a member of VISA and MasterCard will have a direct contractual relationship with Merchants as required by the Rules. While those merchant agreements are solely between EFS and its Merchants, EFS and Company acknowledge and agree that Company enjoys a special business relationship. With those Merchants to which Company markets, and that this relationship permits Company to influence the Merchants in their choice of transaction processor. The parties further acknowledge that Company will continue to enjoy that relationship even after prospective Merchants sign an EFS Merchant Agreement. The loyalty of these Merchants to Company is a valuable asset which Company can sell to another entity, as provided herein, and shall be referred to herein as the "Merchant Relationships."
C. Subject to the following conditions, and conditions elsewhere in this Agreement, EFS agrees that Company may sell its Merchant Relationships by EFS conveying, assigning and transferring to a third party the portfolio of Merchant Agreements-
(1) The Company agrees that in the event the Company receives a bona fide offer to purchase some or all of the Company's then existing Merchant portfolio on the EF S platform which the Company desires to accept, EFS will be notified of the terms of such offer in writing. EFS is hereby granted the right of first refusal to purchase such portfolio being offered at a price and on such terms equal to the offer. EFS may exercise its right of first refusal hereunder by giving written notice of such election to the Company within fourteen (14) days of EFS receiving notice of the offer. EFS may pay in cash or in unrestricted Concord EFS stock at the market value, provided that such stock on the date of acceptance is (I) then publicly traded on any of the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market lists; and (ii) is freely transferable on such market on the date issued by the Company without violation of any securities laws or any inordinate delay or expense. In the event that EFS does not exercise its option within such period, the right of first refusal provided herein shall terminate with respect to that specific offer. Any materially different proposal must be offered first to EFS.
(2) Regardless of whether EFS shall choose to exercise its right of first refusal, EFS shall be entitled to continue processing for all Merchants for the balance of the term of this Agreement, and any agreement to sell Merchants must so stipulate,
(3) EFS shall be named as a party to any such agreement to sell the Merchant Relationship,
(4) Company and purchaser must agree that Company and purchaser shall be liable to EFS for all chargebacks and other losses incurred in processing for assigned merchants,
(5) If this Agreement has not expired, purchaser must agree to enter into an agreement containing substantially the same terms as provided herein with respect to the Merchant Agreements sold and assigned by the Company to such purchaser including a provision releasing EFS from liability for chargebacks as herein provided and
(6) In the event of such sale, the terms of this Agreement shall continue between the Company and EFS as to any remaining or future Merchant accounts. Company shall not be relieved of any obligations under this Agreement until its expiration.
If I he foregoing conditions have been satisfied, EFS will agree to assign Company's portfolio of EFS Merchant Agreements to purchaser.
C. In the event of any change of control, sale, or transfer of EFSNB or its parent, whether such change of control, sale or transfer occurs by merger, stock or asset purchase or otherwise, this Agreement and all of its terms will continue in full force and effect for the remaining term of the Agreement and any renewal term.
4. Exclusivity.
i. Company acknowledges that EFS is its exclusive processor and the Company will not market the sales processing service of entities other than EFS to retail Merchants during the initial term or any extended term of this Agreement and EFS will be Company's exclusive provider in selling or attempting to sell these services to Merchants; provided, however, that in the event EFS rejects a prospective merchant because of the merchant's credit worthiness, the nature of the business, or for any reason, the merchant will be submitted to EFS' alternate provider of processing services. Should the merchant also be rejected by the alternate provider, the Company can offer merchant services under another MSP relationship.
ii. Nothing in this Agreement shall obligate EFS to deal with the Company on an exclusive basis and EFS can offer and contract with other providers of the same or similar services and/or develop similar products of its own and compete directly with Company for Merchants without giving priority to the Company.
5. Independent Contractors. The relationship created hereunder between EFS and the Company shall be solely that of independent contracts entering into an Agreement. No representations or assertions shall be made or actions taken by either party which could imply or establish any agency, joint venture, partnership, employment or trust relationship between the parties with respect to the subject matter of this Agreement. Neither EFS nor Company shall have any authority or power whatsoever to enter into any Agreement, contract, or commitment on
behalf of the other, or create any liability or obligation whatsoever on behalf of the other, to any person or entity.
6. System Modification. The parties will use commercially reasonable efforts to ensure that modifications or upgrades of each party's services or products are consistent with industry standards and compatible with the other party's system. The parties will provide a reasonable notice of not less than sixty (60) days for those modifications that affect communication with the other party.
7. ISO/MSP Rules. The Company acknowledges that it has been provided a copy of the Member Services Provider rules of MasterCard International and the Independent Sales Organization Rules of VISA, U.S.A. and that it has read and understands those Rules and agrees to abide by and be bound by them in all material respects.
8. Restrictions On Marketing To Existing EFS Customers.
i. The Company acknowledges that EFS is currently providing debit, credit, check authorization and other services to a number of accounts at various locations throughout the United States. The Company further recognizes and acknowledges that as a part of the overall marketing effort to EFS to sell its products and services, EFS will continue to solicit accounts directly with its own employees, through independent outside sales representatives and pursuant to marketing agreements with independent entities similar to this Agreement with Company.
ii. In entering this Agreement and permitting the Company to market the same products and services being sold by other marketing arms of EFS, EFS does not intend for Company to solicit existing accounts of EFS, but only intends for Company to solicit new accounts. In consideration for being permitted to market the products of EFS, Company covenants that during the term of this Agreement, including any renewal terms, it will not solicit the sale Interruption In Services. Prior to and upon termination of this Agreement, including any renewal terms, it will not solicit the sale of and will not sell any products or services of EFS to existing accounts of EFS.
2. Term
1. Initial Term.
i. Subject to the provisions of early termination pursuant to
Section 8 hereof, the initial term of this Agreement shall be for five (5) years
beginning on the date first written above (the "Initial Period"), and after the
Initial Period, this Agreement shall automatically renew for periods of one year
until terminated by either party upon providing the other party written notice
of termination not less than 180 days prior to the end of the then existing
term.
2. Interruption In Services. Prior to and upon termination of this Agreement (for any reason), the parties agree to use commercially reasonable best efforts to ensure such termination does not result in a substantial interruption of the business of any Merchant.
3. Registration and Compliance.
a. Registration. During the term of this Agreement, the Company shall maintain its registration with the Associations in a manner to permit operations conducted by it pursuant to this Agreement. The Company shall comply with any reasonably necessary requirements, including payment of registration or other fees required by the Associations, to maintain such registration, which have been made on its behalf by EFS to satisfy said registration requirements.
b. Registration Packages. Attached hereto as Schedule B are the registration packages filed with the Associations on behalf of EFS and the Company. The Company and EFS warrant, as to the respective information of each, that such information is correct and accurate and that either will inform the other forthwith of any change of facts which cause such information to be inaccurate.
c. Rules. The Company and EFS agree to abide by all Rules as they may change from time to time.
d. Prior Review of Marketing Materials. The Company agrees that EFS has the right to review and approve sales and marketing materials relating to the service provided by the Company hereunder solely with respect to compliance with the Rules and the use of UK; name and "logos" prior to any use of the same, and the Company agrees to notify EFS prior to any material changes to such sales and marketing and materials, so that EFS may review such changes to ensure that they are in compliance with applicable Rules and that use of the EFS name and logo are satisfactory to EFS. In the event that EFS does not respond to a written request for approval within ten (10) business days of submission of proposed materials, the approval of EFS shall be deemed given, and the Company may proceed with publication and use of such materials. The Company and EFS agree that the Associations have the right to perform procedural reviews of the Company and Merchants, and agree to cooperate to assure that, in the event of such a review, VISA and MasterCard receive the program data and related materials as required.
4. Financial Information.
a. Annual Information. Within one hundred and twenty (120) days after the close of the Company's fiscal year, the Company, at its sole expense, shall furnish EFS a balance sheet, income statement and statement of cash flow of the Company on a consolidated basis for such year, prepared in accordance with generally accepted accounting principles consistently applied and reviewed by an independent accounting firm, and certified by the company to fairly present the financial condition of the Company.
b. Quarterly Information. Within ninety (90) days after the end of each fiscal quarter (except for the fourth quarter), the Company, at its sole expense, shall furnish to EFS a balance sheet, income statement and statement of cash flow of the Company, for such quarter on an unconsolidated basis, certified as correct by the Chief Financial Officer of the Company. Such financial statement shall not be required to include notes necessary to be in accordance with generally accepted accounting principles, and may be subject to normal year-end audit adjustments.
c. Inspection. Upon at least five (5) days written notice to the President of the Company, EFS and/or the Associations, VISA USA and MasterCard International, may visit and inspect the corporate office of the Company at any time during normal business hours, and at a place mutually agreed upon, to examine the books, accounts, records and to take extracts therefrom and discuss the affairs, finances or accounts of, and to be advised as to the same by the officers of the Company, in such detail and through such agents and representatives as they may reasonably desire so far as such properties and details are involved with the business conducted under this Agreement.
d. EFS Payments. EFS will supply to Company on request, electronically, and in hard copy, documentation and evidence supporting the calculation of payments due hereunder after transactions are processed. EFS shall maintain such information and make available to the Company, upon request, such information during the term of this Agreement (including all renewal terms) and for a period of two (2) years following the termination of EFS's obligation to pay Residuals hereunder.
5. Indemnification and Warranties.
a. Company Indemnification. Company shall indemnify EFS, VISA and MasterCard, and hold them harmless from and against any and all claims, demands, losses, costs, liabilities, damages, judgments or expenses (including attorneys' fees) arising out of or relating to (i) any material breach by Company of its representations, warranties or agreements under this Agreement, (ii) any act or omission by Company which violates any applicable federal, state or local law, rules or regulations, or which violates any operating rules or regulations of VISA or MasterCard, (iii) any negligent act or negligent omission or intentionally wrongful conduct of the Company or of its agents, employees or other persons or entities acting on its behalf under this Agreement, or (iv) any obligation(s) Company has to any party in connection with merchants under this Agreement or any obligation Company has in operating its company.
b. EFS Indemnification. EFS shall indemnify the Company, VISA and MasterCard and hold them harmless from and against any and all claims, demands, losses, costs, liabilities, damages, judgments or expenses (including attorneys' fees) arising out of or relating to (i) any material breach by EFS of its representations, warranties or agreements under this Agreement, (ii) any act or omission by EFS which violates any applicable federal, state or local laws, rules or regulations, or which violates any operating rules or regulations of VISA or MasterCard, or (iii) any negligent act or negligent omission or intentionally wrongful conduct of EFS or of its agents,
employees or other persons or entities acting on its behalf under this Agreement, or (iv) any obligation(s) EFS has to any party in connection with Merchants or any obligation EFS has in operating its business.
c. the failure or delay in performance caused by acts of God, strikes, flood, fire, war, public enemy, electrical or equipment failure, failures by third parties or other events beyond its control.
d. Limitation. EXCEPT WHERE SUCH LIABILITY ARISES FROM AND IS DIRECTLY RELATED TO A THIRD PARTY CLAIM, IN NO EVENT SHALL EITHER PARTY'S LIABILITY OF ANY KIND TO THE OTHER HEREUNDER INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, EVEN IF SUCH PARTY SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE. THE INDEMNITY FOR CLAIMS BY THIRD PARTIES WILL BE GOVERNED BY SECTIONS 5(a) AND 5(b) AND WILL NOT BE LIMITED OR AFFECTED BY THIS PARAGRAPH.
e. Warranties. The Company and EFS each warrants and represents to the other that it is not a party to, or subject to, or bound by, any agreement or judgment which would prevent the execution of this Agreement by such party, nor will the execution and delivery of this Agreement or the consummation of the transaction contemplated hereby, and the fulfillment of the terms hereof result in a violation or breach of any of the terms or provisions of, or constitute a default under, or conflict with any obligation under any covenant, agreement, or other instrument to which entity is a party or by which such entity is bound. The Company further warrants that there are no contractual or other restrictions upon its right to solicit merchants on behalf of EFS and that soliciting merchants on behalf of EFS to provide the services contemplated by this Agreement will not constitute a breach of the inducement of a breach of any contract between the Company and any other party.
f. Survival. The terms of this Section 5 shall survive termination of this Agreement.
6. Payments
a. Payments. EFS shall be entitled to receive all amounts paid by the Merchants under the terms of the Merchant Agreement between EFS and the Merchant, which amounts shall be distributed in accordance with the terms of this Agreement.
b. Payments To The Company. EFS shall pay to the Company a monthly Residual for all Company's Merchants for whom merchant processing is provide EFS. The term Residual shall mean the difference between the discount fees and other merchant charges paid by the merchants and those fees and charges to the Company described within this Agreement and in Schedule C-1. Following termination of this Agreement, the Company shall continue to receive
its Residuals following such termination for as long as the Merchant account continues its Merchant Relationship with EFS provided that Residuals shall not be due following any termination resulting from breach of this Agreement by Company, except for Residuals already accrued and owing to the Company and not yet paid by EFS. The provisions of this paragraph and all other provisions of the Agreement necessary to give effect to this paragraph shall survive the termination of the Agreement. In consideration of this continued Residual payment, Company agrees not to solicit or try to convert such Merchants from EFS for as long as EFS is making payments hereunder to the Company with respect to such Merchants.
c. Chargebacks & Reserve Account
(1) Merchants signed pursuant to this Agreement shall be responsible for all chargebacks and losses in any way arising under or related to the Merchant Agreements (collectively "Chargebacks"). If Merchant is unable or unwilling to pay, Company shall immediately be obligated for and shall immediately pay to EFS the full amount of any Chargeback loss.
(2) EFS will establish a reserve fund to be used as a source of payment for potential chargebacks from Merchants who use EFS services as a result of Company's efforts pursuant to this Agreement. The Company acknowledges and agrees that the reserve fund and related reserve account as described in this Section 6(c) is and shall be the property of EFS. EFS agrees to use and administer the account according to the terms of this Agreement, particularly this Section 6(c). The Company agrees To pay EFS, by check or wire transfer, the amount of $10,000 on the date this Agreement is executed. EFS will deposit this amount into a reserve account at its affiliate, EFS Federal Savings Bank, to fund potential obligations of the Company under this Section 61 c) (the "Reserve Fund"). In addition, each month EFS will reserve 2 basis points (.0002) of the gross merchant volume of the preceding month, to be withheld from the current month's residual payment for all charge volumes and added to the Reserve Fund. This procedure will be followed until the Reserve Fund reaches $200,000 (the "Balance Cap"). As long as the Balance Cap is maintained there will be no further withholdings from the residual payments to the Company for the Reserve Fund. The Reserve Fund will be maintained at this level for so long as EFS pays Residuals to the Company under this Agreement.
(3) Inn consideration for the Company's agreement for EFS to establish and own the Reserve Fund, EFS agrees that Company shall receive interest on all amounts held in the Reserve Fund at a fixed rate equal to the EFS Federal Savings Bank savings account rate in effect on the date of this Agreement, or 4.5 percent, whichever is higher. If the Reserve Fund account balance is below the Balance Cap, interest earned will be credited to the Reserve Fund account until the Balance Cap is reached. EFS will transfer interest earned in excess of any amount needed to maintain the Balance Cap to the Company as part of the monthly Residual Payment.
(4) EFS agrees to assign all rights, title, and interest, and to transfer the balance in the Reserve Fund account to the Company, by check or wire transfer, when EFS is no longer paying Residuals to the Company pursuant to this Agreement. Company agrees that this
payment of the Reserve Fund account balance will not be made earlier than 60 days following the date of the last Residual payment to the Company.
(5) The balance of the Reserve Account shall be paid to the Company not less than 60 days after EFS is no longer paying Residuals to the Company pursuant to this Agreement.
(6) EFS agrees that in the event the Company pays for any Chargebacks, EFS shall assign to the Company all of its rights, and shall provide such information and documents which it has in its possession, to enable the Company to prosecute claims to recover such Chargebacks.
d. Additional Collateral. Should the liability of Company to EFS exceed the amount of the Reverse Account and the Residuals at any time, and should the liability remain unsatisfied for a period of 5 days following demand, EFS shall be entitled to satisfy the obligation through the Company's portfolio of EFS Merchants. Company agrees that if its obligations are not satisfied as otherwise provided herein, EFS shall be permitted to retain, and shall be relieved and discharged of its obligation to assign, Merchant Agreements to the extent necessary to satisfy obligations of Company.
e. Security Interest. To secure all obligations of the Company to EFS arising from this Agreement, Company hereby grants EFS a security interest in the Residuals, all proceeds of the Residuals, and any and all Company funds deposited with EFS or held in deposit accounts with any EFS affiliates. This security interest may be offset or otherwise exercised by EFS without notice or demand and stands as continuing collateral security for the timely performance by Company of any and all obligations to EFS, now existing or hereafter arising. EFS shall have the benefits of all remedies afforded pursuant to this Agreement or the Uniform commercial Code as in effect in the state of Tennessee. To the extent permitted by law the Company hereby irrevocably appoints EFS or its authorized agent as true and lawful attorney in fact to execute and file any financing statements or related documents in order to fully perfect this security interest.
f. Other Rights. In the event the Reserve Fund and the Residuals owed to Company are insufficient to cover Chargebacks owed by Company, EFS may exercise any other legal rights EFS has against Company under the indemnity or otherwise. In no event shall the Reserve Fund provisions of this paragraph or other rights provided hereunder limit the liability of Company or limit the legal remedies available to EFS.
g. Increases in Fees. During the term of this Agreement (including any renewal terms), EFS shall not increase the fees and charges provided in Schedule C, except that EFS shall be entitled to increase fees and charges to offset direct increases to EFS in the costs of providing the services hereunder including but not limited to the following: (i) increased interchange, (ii) changes in the Rules or operation procedures of either VISA or MasterCard resulting in cost increases, (iii) increases by any other card issuer or card network, or (iv) assessments by federal, state or local governmental authority resulting in such cost increases. Any such increase shall
become effective thirty (30) days from the date EFS notifies Company of such increase. EFS agrees to provide the Company satisfactory proof the increase was received by EFS.
7. Confidentiality.
EFS and Company shall keep confidential and disclose to no other person, firm or entity, other than VISA or MasterCard, names, addresses and identities of Merchants, the schedule of Fees, the Properties (as defined herein), and the methods of doing business of the other party hereto and the financial and other information disclosed pursuant to Section 4 above. The foregoing restriction on disclosures shall not apply, however, to disclosure or use by a party of information or knowledge which (a) such party can demonstrate was already lawfully in its possession prior to disclosure thereof by the other party, (b) is or becomes generally known to the public through no fault of such party, (c) is lawfully acquired by such party from other sources not reasonably known to be under a similar nondisclosure obligation with respect to such information or knowledge, (d) is required by law or in connection with litigation, arbitration or other proceedings to be disclosed, or (e) is required to be provided to governmental auditors or regulators,
8. Termination.
a. Breach. Either party may terminate the Agreement by providing written notice of termination to the other party upon (i) the breach by the other party of any material term, covenant, obligation, restriction or condition contained in this Agreement, and (ii) the continuation of such breath for a period of thirty (30) days following receipt by the breaching party of notice of such breach by the non-breaching party.
b. Bankruptcy. Either party may terminate this Agreement immediately in the event of insolvency, receivership or voluntary or involuntary bankruptcy of the other party, or an assignment for the benefit of the party's creditors, or in the event that a substantial part of the other party's property is or becomes subject to any levy, seizure, assignment or sale for or by any creditor or governmental agency without being released or satisfied within thirty (30) days thereafter.
c. Loss Of Association License. This Agreement shall be deemed terminated automatically in the event of a termination of EFS's applicable Association(s) license and/or its membership in either Association, or if the regulations of Associations are mended in any way that the continued existence of this Agreement would cause EFS or Company to be in material breach of such regulations.
9. Miscellaneous.
a. Amendment. This Agreement shall not be amended or modified in any respect except by a writing duly executed by both parties.
b. Assignment. EFS may from time to time, delegate duties under Agreement to subsidiaries or affiliates without notice to the Company, provided, however, that EFS shall remain liable to the Company for any such duties and obligations. The Company may not subcontract, sublicense, assign, license, franchise or in any other manner attempt to transfer to any third party any right, duty, or obligation of the Company.
c. Severability. If any one or more of the covenants, agreements or provisions of this Agreement shall be determined by a court of competent jurisdiction to be invalid, the invalidity of such covenants, agreements or provisions shall in no way affect the validity or effectiveness of the remainder of this Agreement, and this Agreement shall continue in force to the fullest extent permitted by law.
e. Complete Agreement. This Agreement, together with the Exhibits attached hereto, comprise the full and final statement of the agreement of the parties relating to the subject matter hereof. All prior discussion, negotiations, agreements, representations, warranties and statements are fully merged herein and superseded hereby.
d. Notices. All notices required or permitted by any provision of this Agreement shall be in writing and shall be deemed give when personally delivered to an officer of the addressee, or when deposited in the certified United Sates mail, return receipt requested, postage paid, properly addressed to the parties at the address set forth in the first paragraph hereof.
f. Ownership. The programs, processes, equipment, software, technology, trademarks, service marks, devices and other intellectual and physical properties (the "Properties") used in connection with the performance of this Agreement will continue to be proprietary to and owned by the respective party providing them, and nothing contained in this Agreement resulting from its performance will give the other party any right, title, license or interest of any kind in said Properties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be properly executed as of the day and year first above written.
EFS NATIONAL BANK
By_______________________________________
Integrated Merchant Services, Inc.
By_______________________________________
Pricing - ISO Processing
ISO receives 75% of all revenue above the listed fees
Authorizations 0 - 100,000 per month [ ]
100,001 to [ ]
250,000 to [ ]
500,000 to [ ]
1,000,001 per month [ ]
2,000,000 per month [ ]
surcharge for EBT & Debit [ ]
Voice [ ]
per item or
Processing & Settlement batch header 0 - 250,000 per month [ ]
250,001 to 499,000 [ ]
500,000 to 999,999 [ ]
1,000,000 to 1,999,999 [ ]
over 2,000,000 per month [ ]
Sponsorship per item debit & EBT - optional [ ]
Interchange pass through
MOTO / Internet Transactions Interchange + 10 basis
points & [ ]
Dues/Assessments pass through
Card Association Charges pass through
Communications 15% markup
Base 1 Access pass through
Postage pass through
Merchants on file per merchant/month [ ]
Customer Service & Help Desk per active merchant/month [ ]
ACH per item [ ]
File Transmissions monthly per transmission site [ ]
Merchant Supplies optional not included in quote
Chargeback Processing per item [ ]
Fraud Monitoring per item optional service [ ]
EBT Setup per account $30.000
Dedicated Line for Support monthly optional service [ ]
Conversion of Existing Merchants [ ]
Equipment [ ]
|
Reserve [ ]
Exhibit 10.10
MEMBER SERVICE PROVIDER SALES AND SERVICE
CREDIT CARD PROCESSING AGREEMENT
THIS MEMBER SERVICE PROVIDER CREDIT CARD PROCESSING AGREEMENT (this "Agreement") is made and entered into this 28th day of January, 2000, by and among NOVA Information Systems, Inc., a Georgia corporation with its principal place of business at One Concourse Parkway, Suite 300, Atlanta, GA 30328 ("NOVA"), IMPERIAL BANK, a principal member of VISA U.S.A. Inc. and MasterCard International Incorporated and a bank chartered under the laws of the State of California with its business at 2015 Manhattan Beach Boulevard, Redondo Beach, CA 90278 ("Member"), and Integrated Merchant Services, Inc. with its principal place of business at 110 East Atlantic Avenue, 4th Floor, Delray Beach, Florida 33444 ("MSP").
PURPOSE OF AGREEMENT: The purpose of this agreement is to set forth the terms and conditions under which MSP shall refer to NOVA and Member prospective merchants meeting the qualifications of NOVA and Member for the purpose of providing to such merchants credit card and debit card processing services, and to set forth the referral fees NOVA and Member shall, from time to time, pay to MSP for such referrals and other services, as described herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged and intending to be legally bound hereby, MSP, NOVA and Member agree as follows:
1. DEFINITIONS. As used in this Agreement, 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):
A. "Acceptable Merchant" shall mean a merchant who does not perform the services or sales described in the Prohibited Merchants section of Schedule A, and who is acceptable to NOVA and Member, as determined in their sole discretion, based upon a credit review of the merchant.
B. "Assessment Fee" shall mean the fee that is collected from a Referred Merchant on behalf of the Credit Card issuer for a Transaction.
C. "Cardholder" shall mean (i) the person in whose name a Credit Card has been issued, and shall also mean (ii) any person who possesses and uses a Credit Card and who purports to be the person in whose name the Credit Card was issued or whose signature appears on the Credit Card as an authorized user.
D. "Cause" shall mean the occurrence of any one or more of the
following: (i) any failure by MSP to comply in all material
respects with the provisions of this Agreement; (ii) any
material failure by MSP to follow the credit policies and
procedures established by NOVA and Member from time to time,
(iii) any failure by MSP to comply with the Rules and all
applicable laws and regulatory requirements, whether Federal
or state, (iv) any intentional misrepresentation by an
employee, officer or director of MSP in connection with the
referral of a prospective merchant or an application by a
prospective merchant for services
hereunder; (v) any failure by MSP to advise NOVA and Member of
adverse or material changes in any Merchant's financial
condition of which MSP becomes aware during the Merchant's
association with NOVA and Member; (vi) the financial
insolvency or bankruptcy of MSP; (vii) the occurrence of any
event or any action by MSP which NOVA or Member determine in
good faith to constitute unsound business practices or which
might impose a risk of financial loss to NOVA or Member; and
(viii) any failure by MSP to provide appropriate sales agent
support (including without limitation merchant application
review, site inspection, monthly reporting, terminal support,
commission payment, etc.).
E. "Chargeback" shall mean a Transaction charged back by a Cardholder pursuant to the Rules.
F. "Credit-Card" shall mean a (i) VISA card or other card bearing the symbol(s) of VISA U.S.A. Inc. or VISA International Inc. (including VISA Gold cards) or (ii) a MasterCard(R) card or other card bearing the symbol(s) of MasterCard International Incorporated (including MasterCard Gold cards).
G. "Credit Card Associations" shall mean VISA U.S.A. Inc., VISA International Inc., MasterCard International Incorporated and any successor organization or association.
H. "Interchange Fee" shall mean the charge levied and collected in accordance with the Rules with respect to Credit Card transactions.
I. "MasterCard" shall mean MasterCard International Incorporated (a Delaware corporation).
J. "Member" shall mean Imperial Bank (or a successor financial institution and principal member of VISA and MasterCard to whom the rights and obligations of Member hereunder may be assigned by Imperial Bank).
K. "Merchant Agreement" shall mean a written contractual agreement (in a form approved by NOVA and Member and unaltered) executed among NOVA, Member and a Referred Merchant, as referenced in Section 2.D hereof, for services related to Credit Cards and Transactions. The form of Merchant Agreement may be changed by NOVA and Member in their sole discretion.
L. "Merchant Services" shall mean the credit card and debit card processing services offered or provided by NOVA and Member (or their designees) pursuant to Merchant Agreements.
M. "Merchant Operating Account" shall mean a deposit account maintained by a Referred Merchant at a FDIC-insured financial institution which is acceptable to NOVA and Member and is a member of Automated Clearing House ("ACH").
N. "Referred Merchant" shall mean any seller of goods, services, or both, referred to NOVA and Member by MSP, and which is a party to a Merchant Agreement. During the term and subject to the provisions of this Agreement, MSP shall provide to all Referred Merchants the services described in Section 2. H below.
O. "Rules" shall mean the bylaws, rules, regulations and procedures issued by a Credit Card Association or other card issuer/licensor similar to MasterCard or VISA, as such bylaws, rules, regulations and procedures may be amended or supplemented from time to time.
P. "Sales Draft" shall mean a charge form or draft evidencing the purchase by a Cardholder of goods or services at a Referred Merchant location, by use of a Credit Card.
Q. "Transaction" shall mean the purchase or credit by a Cardholder of goods or services at a Referred Merchant's location, by use of a Credit Card.
R. "VISA" shall mean VISA U.S.A. Inc. (a Delaware corporation).
2. MERCHANTS AND MERCHANT AGREEMENTS.
A. Recruitment of Merchants. In accordance with the policies and procedures set forth on Schedule A hereto, MSP shall use its best efforts to locate, investigate and refer merchants MSP believes to be likely candidates for Credit Card processing relationships with NOVA and Member. MSP will market the Merchant Services offered by NOVA and Member at its own expense, in accordance with all Rules relating to third party service providers and in accordance with all policies and procedures of Member and NOVA (including without limitation the pricing terms for Referred Merchants) as such policies and procedures may be amended from time to time. Merchants referred to NOVA and Member by MSP which enter into a Merchant Agreement will have a direct business relationship with NOVA and Member, and will be subject to the terms of the applicable Merchant Agreement entered into by and among NOVA, Member and Merchant. MSP shall not be a party to any Merchant Agreement and MSP shall have no additional obligations imposed upon it by any Merchant Agreement.
B. Trademarks and Logos. MSP will not use the name, trademarks, service marks or logos of NOVA or Member without the express prior written consent of such party. MSP acknowledges and agrees that MasterCard and VISA are the sole and exclusive owners of these respective trademarks and service marks, and that MSP will not contest the ownership of such marks. Additionally, MSP will use the VISA and MasterCard trademarks and service marks only in accordance with the Rules and after prior written approval of NOVA and Member (and the Credit Card Associations, if required). MSP acknowledges and agrees that the Credit Card Associations may at any time immediately and without advance notice prohibit MSP from using the marks of the Credit Card Association for any reason. Member must be prominently identified by name and city on any program materials describing the Merchant Services. MSP shall have no authority to permit use of the VISA or MasterCard program marks by any third party. Any solicitation material used by MSP must clearly disclose that the merchant agreement is by and among NOVA, Member and the individual merchant.
C. Approval of Merchants. Member, or NOVA acting as its agent, shall review all applications submitted by prospective merchants referred by MSP. Member and NOVA each reserve the right in their sole discretion to refuse to sign a Merchant Agreement with any merchant referred by MSP.
D. Merchant Agreements. Merchant Agreements shall be on forms provided by NOVA and Member and shall define the terms upon which NOVA and Member will provide Merchant Services to Merchant.
E. Merchant Reserves. Upon request MSP will assist NOVA and Member in coordinating the implementation of such safeguards as NOVA or Member determine is prudent or necessary to create or require, with respect to any Referred Merchant, reserves, holdbacks, deposits or other safeguards against merchant losses. Without limitation as to additional or different safeguards, NOVA or Member may require a Referred Merchant to pay up to 100% of the funds deposited by a Referred Merchant for up to six months or more.
F. Services Provided by NOVA. NOVA shall provide the following services on behalf of Member, to MSP and the Referred Merchants:
i. Network Authorization 24 x 7 x 365 toll-free Network Help Desk;
ii. Merchant Enrollment Service, including new merchant set-up and administration of credit policy;
iii. Chargeback and Retrieval Processing;
iv. Collections and Fraud Monitoring Service, and
v. Merchant Settlement Service, including Referred Merchant statement processing and ACH file preparation (provided, however, Member shall be responsible for effecting all settlements of Transactions).
G. Optional Services Provided by NOVA. Upon the written election of MSP, NOVA shall also provide and charge for (in accordance with Schedule B) any one or more of the following services to the Referred Merchants:
i. Referred Merchant Set-Up Service, including new merchant set-up kit, telephone training and re-programming assistance;
ii. Equipment Repair Service, including emergency swap-outs and deployment and repair service;
iii. Merchant Supply Fulfillment Service and equipment fulfillment service;
iv. 24 x 7 x 365 Customer Support including full Point of Sale ("POS") Help Desk and Settlement Support;
v. Training Support, including MSP sales representative training, product and service overviews and competitive selling tips; and
vi. Collateral and Marketing Materials, including merchant user guides, newsletters, product brochures and equipment templates.
H. Services Provided by MSP. In addition to the duties of MSP described elsewhere in this Agreement, MSP shall provide the following services on behalf of NOVA and Member to the Referred Merchants:
i. Training. MSP shall provide to each Referred Merchant necessary training in the procedures and Rules applicable to the acceptance of Credit Cards, the operation of terminal equipment and the use of NOVA products and services. MSP shall initially train the Referred Merchants, including, when appropriate, distribution of a merchant set-up kit. MSP shall also train new employees of the Referred Merchant as necessary, at the discretion of the MSP, including method of training; provided, however, that regardless of the method of training employed by MSP, such training shall comply with the provisions of this Agreement.
ii. Merchant Support. MSP shall provide reasonable ongoing support to ensure Referred Merchants are continually apprised of their customer service requirements and to remedy any customer service problems encountered by such Referred Merchants. MSP shall supervise such personnel it may engage as employees or agents in activities hereunder. The responsibility for all such personnel shall be that of MSP only, including the responsibility of assuring full compliance by all such personnel with the terms and provisions of this Agreement.
I. Excluded Types of Merchants. MSP agrees that neither MSP nor any of its affiliates, subsidiaries, or agents will actively solicit any NOVA or Member merchant, or any merchant of a NOVA subsidiary, affiliate, agent or customer for the purpose, directly or indirectly, of providing or receiving Merchant Services. MSP also agrees to follow the guidelines set forth on Schedule A with respect to soliciting and referring merchants. If MSP has any uncertainty as to whether a particular merchant is covered by these restrictions or by Schedule A, MSP will discuss the matter in good faith with NOVA prior to proposing that such merchant enter into a Merchant Agreement with NOVA and Member.
J. Adverse Information. During the term of this Agreement MSP agrees to notify NOVA and Member promptly in writing if MSP becomes aware of any information about the insolvency or bankruptcy (voluntary or involuntary) or change in ownership or business of any Referred Merchant, or if MSP becomes aware of any other significant adverse information about noncompliance with the Rules by a Referred Merchant, or any information indicating that any Referred Merchant's acceptance of Credit Cards is other than the bona fide sale of products or services by such Referred Merchant.
K. Advertising/Sales Materials. All advertising and/or sales materials used by MSP shall be in compliance with the Rules. NOVA and Member shall give MSP notice of any noncompliance that comes to the attention of such party.
L. Information. MSP shall distribute to its sales representatives, in a timely fashion, changes in operating mode, and Rules received from NOVA or Member, that would affect the manner in which the Merchant Services are marketed by such representatives. MSP shall keep accurate records with respect to Referred Merchants' inquiries, orders, transactions and contacts which MSP makes pursuant to this Agreement. On behalf of NOVA and Member, MSP will request and use reasonable efforts to obtain and provide latest fiscal year business balance sheet and profit and loss statement on Referred Merchants and personal financial statements on principals, if requested by NOVA or Member.
3. COMPLIANCE WITH RULES.
A. Registration. In connection with the services provided by MSP under this Agreement, MSP has registered and executed all applicable documents and agreements with VISA and MasterCard and is in full compliance with the Rules. MSP further agrees to the following:
i. maintain its registration with VISA and MasterCard and fully comply with the terms of any documents and agreements executed therewith;
ii. comply with all reporting requirements of MasterCard and VISA;
iii. promptly give written notice to NOVA and Member of the identity and location of all sales locations of MSP. MSP acknowledges and agrees it may not delegate any of its rights or obligations hereunder to any other person or entity, except pursuant to a valid assignment complying with the requirements set forth in section 9 below; and
iv. provide NOVA and Member with annual financial statements (i.e., balance sheet and income statements), endorsed by a duly authorized individual or principal owner of MSP certifying the accuracy of the data contained therein, by May 1 of each year.
B. Compliance with MasterCard Rules. In accordance with the MasterCard Rules regarding member service providers, MSP acknowledges and agrees as follows:
i. MSP understands and agrees to comply in all respects with the MasterCard Rules (including without limitation the Rules regarding member service providers);
ii. MSP acknowledges and agrees that MasterCard has the right to enforce any provision of the MasterCard Rules and to prohibit any conduct by MSP that creates a risk of injury to MasterCard or that may adversely affect the integrity of MasterCard's systems, information or both. MSP agrees to refrain from taking any action that would have the effect of interfering with or preventing an exercise of such right by MasterCard; and
iii. in the event of any inconsistency between any provision of this Agreement and the MasterCard Rules, the MasterCard Rules will be afforded precedence and shall apply.
4. COMPENSATION TO MSP.
A. Processing Rates and Fees. NOVA, acting on its own behalf and as Member's agent, shall pay to MSP as full consideration and compensation for the performance of all MSP's duties and obligations under this Agreement, any Referred Merchant discount revenues and/or fees collected in excess of NOVA's fees and other charges as set forth on Schedule B (hereinafter, "Compensation"). Such Compensation shall be made within thirty (30) days following the end of each month; provided, however, NOVA shall use its best efforts to make such payments within fifteen (15) days following the end of each month. (For example, Compensation payable to MSP for Referred Merchant revenues collected for March Transactions shall be paid to MSP by April 30, but NOVA will attempt to pay such revenues by April 15).
B. Pass-Through of Certain Fees. NOVA and Member reserve the right to pass through to MSP certain fees or penalties imposed by any Credit Card Association as a result of the activities, acts or omissions of MSP. Additionally, MSP agrees to pay promptly any fees or penalties imposed by the Credit Card Associations with respect to MSP's registration as a service provider for Member. MSP acknowledges that NOVA and Member, in their discretion and in accordance with the terms of the Merchant Agreements, may pass through to Referred Merchants any fees or expenses related to implementing changes to software/hardware requirements deemed necessary by the Credit Card Associations or other service providers.
C. Period of Compensation. Payment of Compensation to MSP with respect to a Referred Merchant shall terminate immediately upon the termination of the respective Merchant Agreement. In the event that this Agreement is terminated prior to the termination of any Merchant Agreement, NOVA shall continue to pay Compensation to MSP with respect to such Referred Merchants for so long as the respective Merchant Agreement continues in effect, except as otherwise set forth under this Agreement.
D. Termination of Compensation. MSP's right to receive Compensation under this Agreement shall terminate immediately in the event that NOVA or Member terminates this Agreement in accordance with Section 8(A). In addition, MSP's right to receive Compensation under this Agreement shall terminate immediately in the event that, during the term of this Agreement (including any extensions or renewals hereof), following the termination of this Agreement or during the term of any Service Agreement (as defined herein) between NOVA and MSP entered into pursuant to Section 9(A) of this Agreement, MSP or any of its subsidiaries, affiliates, or agents, directly or indirectly, solicits or contacts any Referred Merchant, for the purpose, directly or indirectly, of providing or receiving Merchant Services, or otherwise encourages a Referred Merchant to terminate a Merchant Agreement with NOVA and Member.
5. DUE CARE AND LIABILITY.
MSP hereby agrees to indemnify and hold NOVA, Member, the Credit Card Associations, the Referred Merchants and the members of the Credit Card Associations harmless from and against any claim, demand, loss, financial or otherwise, damage, liability or cost (including reasonable legal fees and expenses), caused by or in any way arising from: (i) any failure by MSP to fully comply with the Rules and all other rules, regulations, policies and procedures of NOVA, Member, MasterCard, VISA and any other similar Credit Card licensor; (ii) any breach or default by MSP of this Agreement or any other agreement between MSP and (a) NOVA, (b) Member or (c) any Referred merchant; (iii) any negligent or wrongful act of MSP in performing or failing to perform the obligations hereunder; or (iv) any termination of this Agreement pursuant to Section 8 hereunder. The obligations of MSP hereunder are not intended to cover typical credit losses (including chargebacks) incurred by NOVA or Member as a result of Referred Merchants' refusal or inability to pay, unless such credit losses are incurred by NOVA or Member as a result of any act or omission of MSP described in (i) - (iv) above. NOVA hereby agrees to indemnify and hold MSP harmless from and against any claim, demand, loss, financial or otherwise, damage, liability or cost (including reasonable legal fees and expenses), resulting primarily from the gross negligence or willful misconduct of NOVA in performing its obligations hereunder.
6. GENERAL.
A. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.
B. Entire Agreement. All Schedules and Exhibits attached to this Agreement and the Rules are hereby made a part of this Agreement for all purposes. This Agreement represents the entire understanding among NOVA, MSP and Member with respect to the matters contained herein and, except as otherwise provided in this Agreement, it may be amended only by an instrument in writing signed by each of the parties hereto.
C. No Partnership or Agency. Nothing in this Agreement shall be deemed to constitute a partnership or joint venture between the parties hereto or be deemed to constitute MSP as an agent for NOVA or Member for any purpose whatsoever. MSP is an independent contractor and not an employee of NOVA or Member.
D. Third Party Rights. This Agreement is solely for the benefit of the parties hereto and nothing herein, express or implied. shall be deemed to be for the benefit of any third party or create any third party rights or standing to sue.
E. Notices. Any notice required or permitted under this Agreement shall be in writing and may be delivered by personal service or by U.S. certified mail, return receipt requested and postage prepaid. to the addresses of the parties set forth below, or such other addresses as may be provided by written notice to the other parties in accordance with the terms of this notice provisions. Any such notice shall be effective upon the earlier of (i) five days after deposit in the mail properly addressed and postage prepaid or (ii) actual receipt.
If to NOVA: NOVA Information Systems, Inc
One Concourse Parkway, Suite 300
Atlanta, Georgia 30328
Attention: President & Chief Operating Officer
Facsimile No.: (770) 698-1046
With a copy to: General Counsel
(which shall not at same address
constitute notice)
If to Member: Imperial Bank
2015 Manhattan Beach Boulevard
Redondo Beach, CA 90278
Attention: Joseph Jorling
Facsimile No.: (310) 725-4463
With a copy to: _________________________________
_________________________________
_________________________________
Attention:_______________________
If to MSP: Integrated Merchant Services, Inc.
110 East Atlantic Avenue 4th Floor
Delray Beach, FL 33444
Attention: Robert E. Cochran
With a copy to: INTR
110 East Atlantic Avenue 4th Floor
Delray Beach, FL 33444
Attention: Matthew Cohen
F. Dispute Resolution. Any controversy, dispute or claim arising
out of, or in connection with this Agreement must be settled
by final and binding arbitration to be held in Atlanta,
Georgia in accordance with the rules of the American
Arbitration Association ("AAA"), as may be amended from time
to time (the "AAA Rules"). Judgment upon award rendered by the
arbitrators may be entered in any court: (i) having
jurisdiction thereof, (ii) having jurisdiction over the party
against whom enforcement thereof is sought, or (iii) having
jurisdiction over any such party's assets. The procedures and
law applicable during the arbitration of any controversy,
dispute or claim will be both the AAA Rules and the internal
substantive laws of the State of Georgia (excluding, and
without regard to, its or any other jurisdiction's rules
concerning any conflict of laws). In any arbitration pursuant
to this Agreement, the award of decision must be rendered by
at least a majority of the members of an arbitration panel
consisting of three (3) members, one of whom will be appointed
by each of the parties hereto. All arbitrators must be persons
who are not employees, agents or former employees or agents of
any party. In the event that any of the parties hereto fails
to appoint an arbitrator
|
within thirty (30) days after submission of the dispute to arbitration, such arbitrator will be appointed by the AAA in accordance with the AAA Rules.
G. Force Majeure. Neither party shall be liable to the other for any failure or delay in its performance of this Agreement in accordance with its terms if such failure or delay arises out of causes beyond the control and without the fault or negligence of such party.
H. Waiver. Any waiver or delay by any party hereto in asserting or exercising any right, shall not constitute a waiver of any further or other rights of said party. If any part of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of the Agreement shall not in any way be affected or impaired thereby.
I. Attorney's Fees. In the event any party hereto is determined,
in connection with a final and binding arbitration pursuant to
Section 6.F above, to have breached this Agreement, then the
non-defaulting party shall be entitled to recover expenses
incurred in enforcing the provisions of this Agreement,
including reasonable attorneys' fees and costs.
J. Severability. If any provision of this Agreement is found illegal, invalid or unenforceable, such finding will not affect any other provision hereunder. This Agreement shall be deemed modified to the extent necessary to render enforceable the provisions hereunder, and to comply with the Rules.
7. TERM OF AGREEMENT. The term of this Agreement shall be for a period of three (3) years commencing from the date of this Agreement. Thereafter, this Agreement shall renew automatically for additional successive one-year terms, unless any party hereto provides the other parties written notice of intent not to renew this Agreement at least ninety (90) days prior to the expiration of the then current term. The terms of this Agreement shall remain in force with respect to all Transactions processed hereunder and all Chargebacks, fees and liabilities relative thereto.
8. TERMINATION.
A. Termination for Cause. Any party hereto may terminate this
Agreement upon a material breach or default hereunder by
another party if such default is not cured within (30) days of
receipt of written notice thereof from the non-breaching
party. NOVA or Member may also terminate this Agreement at any
time for Cause. This Agreement shall terminate automatically
upon the occurrence of either of the following: (i) the
termination of Member's MasterCard and VISA licenses and
membership; (ii) the termination of the NOVA/Member Agreement
(provided, NOVA will attempt to give MSP at least sixty (60)
days notice prior to termination), or (iii) the termination by
MasterCard or VISA of MSP's registration as a third party
service provider for Member.
B. Other Termination. NOVA or Member may, at its option, terminate this Agreement immediately without notice to MSP in the event of any one of the following events:
i. the filing of a bankruptcy petition, insolvency, inability to meet its debts (in the ordinary course of business) or dissolution of MSP;
ii. MSP making an assignment by MSP for the benefit of its creditors or an offer of settlement or extension to its creditors generally;
iii. the appointment of a trustee, conservator, receiver or similar fiduciary for MSP or for substantially all of MSP's assets; or
iv. the occurrence of any material adverse change in the nature or conduct of the business of MSP as carried on at the date hereof.
C. Certain Post-Termination Rights. In the event of termination of this Agreement, NOVA and Member shall have the right, in addition to the other rights and remedies under this Agreement and at law and in equity, to exercise a right of set-off against Compensation or any other monies otherwise due to MSP under this Agreement, for any amounts due to NOVA or Member under this Agreement, and, in the event of termination of this Agreement for cause, any damages suffered by NOVA or Member hereunder and at law, then owing or which may thereafter become owing. No termination of this Agreement shall affect any Merchant Agreement that is in effect as of the time of termination. After termination, MSP agrees to cooperate in all reasonable respects with NOVA and Member throughout the remaining term of each Merchant Agreement. MSP agrees that neither MSP nor its affiliates, subsidiaries, or agents will, directly or indirectly, solicit or contact any Referred Merchant, for the purpose, directly or indirectly, of providing or receiving Merchant Services, or otherwise encourage any Referred Merchant to terminate a Merchant Agreement in force with NOVA or Member for any reason after the termination of this Agreement. Sections 4, 5, 6, 8.C, 10, 11, and 12 shall survive termination of this Agreement.
9. OPTION.
A. Service Agreement. NOVA shall have the option, in its sole discretion, to offer to enter into a servicing only agreement ("Service Agreement") with MSP following termination of this Agreement in order to enable MSP to continue servicing the Referred Merchants and receive fees for such servicing responsibilities. MSP shall have the right to decline any such offer by NOVA to enter into a Service Agreement. Should NOVA elect to exercise such option, NOVA and MSP shall negotiate in good faith as to the terms and conditions of said Service Agreement.
B. Compensation Buy-Out. NOVA shall have the option, in its sole discretion, to offer to make a one-time payment to MSP to buy out MSP's rights to receive Compensation for a Referred Merchant or group of Referred Merchants under this Agreement (the "Residual Buy-Out Payment"). NOVA may exercise such option at any time during the term of this Agreement or following termination of this Agreement. MSP shall have the right to decline any such offer by NOVA to make a Residual Buy-Out Payment.
In the event that NOVA exercises such option, NOVA shall, in its sole discretion, determine the amount of the Residual Buy-Out Payment. Generally the Residual Buy-Out Payment will fall within the range of twelve (12) to twenty-four (24) times the average monthly Compensation based upon NOVA's review of a number of factors including, but not limited to, the number and type of Referred Merchants, the number of Transactions and the average ticket amount for each Referred Merchant for the preceding twelve (12) month period, the volume for each Referred Merchant for the preceding twelve (12) month period; the number of years the Referred Merchant(s) has processed with NOVA; and any periods of inactivity the Referred Merchant(s) has experienced during certain months of the year. MSP acknowledges and agrees that this list of factors is not exclusive and that the determination to buy out MSP's rights to receive Compensation for a Referred Merchant or group of Referred Merchants, as well as the determination of the Residual Buy-Out Payment, are within NOVA's sole discretion.
C. Non-Solicitation Agreement. NOVA's entering into a Service Agreement or making a Residual Buy-Out Payment to MSP pursuant to this Section are contingent upon MSP entering into a non-solicitation agreement ("Non-Solicitation Agreement") with NOVA that shall provide that, for a period of five (5) years from the date of execution of the Non-Solicitation Agreement neither MSP nor any of its affiliates, subsidiaries, or agents shall, directly or indirectly, solicit or contact any Referred Merchant, for the purpose, directly or indirectly, of providing or receiving Merchant Services.
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns. Notwithstanding the foregoing sentence, however, this Agreement may not be assigned by MSP without the prior written consent of NOVA and Member, and the receipt of all required consents from the Credit Card Associations.
11. CONFIDENTIALITY. MSP, NOVA and Member each agree that it will retain in strictest confidence all information and data belonging to or relating to the business of the other parties to this Agreement, which is designated confidential by the party to which such information or data belongs or relates (including without limitation the terms of this Agreement and information related to Referred Merchants), and that each party will safeguard such information and data by using the same degree of care and discretion that it uses with its own data that such party regards as confidential.
12. NON-SOLICITATION.
A. Referred Merchants. During the term of this Agreement (including any extensions or renewals hereof), following the termination of this Agreement, and during the term of any Service Agreement between NOVA and MSP entered into pursuant to Section 9(A) of this Agreement, neither MSP nor its affiliates, subsidiaries, or agents shall, directly or indirectly, solicit or contact any Referred Merchant, for the purpose, directly or indirectly, of providing or receiving Merchant Services, or otherwise encourage a Referred Merchant to terminate a Merchant Agreement with NOVA and Member.
B. Employees. During the term of this Agreement (including any extensions or renewals hereof), and during the term of any Service Agreement between NOVA and MSP entered into pursuant to Section 9(A) of this Agreement, MSP shall not solicit or make any offer of employment at MSP to any employee of NOVA without the prior written consent of NOVA.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers.
Accepted this 28 day of January, 2000 MSP: Integrated Merchant Services, Inc.
By: /s/
------------------------------
Title: President
Date: 1/28/00
Accepted this __ day of _______, 2000 NOVA INFORMATION SYSTEMS, INC.
By: /s/
------------------------------
Title:
Date: 2/22/00
Accepted this __ day of _______, 2000 IMPERIAL BANK
By: /s/
------------------------------
Title: VP
Date: 3/3/00
|
Exhibit 10.11
[Letterhead of Interactive Technologies.com, Ltd.]
January 27, 2000
Boru Enterprises, Inc.
301 Palm Trail
Delray Beach, Florida 33483
Re: Interactive Technologies.com, Ltd. ("INTR") - Proposed PIPE Funding
Gentlemen:
I am writing to confirm the terms of the finders fee agreement between INTR and Boru Enterprises, Inc. ("Boru") with respect to a proposed PIPE financing which INTR has been negotiating, as a result of your introduction, with potential investors brought to INTR by Ladenburg Thalmann & Co., Inc. (collectively, the "Ladenburg Investors").
As and when INTR receives payment for its issuance of shares of INTR common stock pursuant to any PIPE financing agreement which INTR shall enter into with any of the Ladenburg Investors, INTR shall pay you a finder's fee in cash equal to 5% of the gross proceeds derived from each such share issuance.
Please signify your acceptance of the foregoing agreement by signing the enclosed copy of this letter at the foot thereof, and returning such signed copy to the undersigned.
Thank you very much for the assistance you have provided to us in this matter.
Very truly yours,
William R. Becker, Chief Executive
Accepted:
Boru Enterprises, Inc.
By:__________________________________
John T. Moran, President
Exhibit 10.12
Interactive Technologies.com, Ltd.
110 East Atlantic Ave Suite 400
Delray Beach, Florida 33444
June 7, 2000
Mr. John T. Moran
Boru Enterprises, Inc.
72 S.E. 6th Avenue
Delray Beach, Florida 33483
Dear Mr. Moran:
In consideration for our issuance to you of the enclosed option to purchase 400,000 shares of our common stock, you hereby agree to cancel the attached agreement, dated January 27, 2000, pertaining to our obligation to pay compensation to you in our PIPE transaction.
Please acknowledge your agreement to the foregoing, and your receipt of the enclosed option, by executing and returning the enclosed copy of this letter,
Very truly yours,
Interactive Technologies.com, Ltd.
By:_______________________________
William R. Becker, CEO
Agreed:
Boru Enterprises, Inc.
By:_______________________________
John T. Moran, President
Exhibit 21
Subsidiaries
The following corporations are 80% owned subsidiaries of Interactive Technologies.com, Ltd.:
Ubuy.Com, Ltd., a Delaware corporation
United Interactive Technologies, Inc., a Delaware corporation
Integrated Merchant Services, Inc., a Delaware corporation
Web Classified.net, Inc., a Delaware corporation
GKB Software, Inc., a New York corporation
The following corporation is a 100% owned subsidiary of Interactive Technologies.com, Ltd.:
Express Financial Corp., a Florida corporation
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITOR
Interactive Technologies.com, Ltd.
I consent to the reference to me under the caption "Experts" and to the use of my report dated September 10, 1999 with respect to the consolidated financial statements of Interactive Technologies.com, Ltd. and subsidiaries included in the Registration Statement on Form SB-2 and related prospectus of Interactive Technologies.com, Ltd. dated August , 2000.
Robert Jarkow, CPA
Fort Lauderdale, Florida
August , 2000
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
Interactive Technologies.com, Ltd.
We have issued our Report dated March 10, 2000 (except for Note V, as to which is dated April 26, 2000) accompanying the consolidated financial statements of Interactive Technologies.com, Ltd. contained in the Registration Statement on Form SB-2 and Prospectus. We consent to the use of the aforementioned report in the Registration Statement on Form SB-2 and prospectus, and to the use of our name as it appears under the caption "Experts."
Grant Thornton LLP
Miami, Florida
August , 2000
Exhibit 23.3
Consent of Hall Dickler Kent Goldstein & Wood, LLP
We consent to the use of our firm's name and to the statements made with respect to our firm, as the appear under the heading "Legal Matters" in the prospectus which is included in Part I of this Registration Statement.
Hall Dickler Kent Goldstein & Wood, LLP
New York, New York
August , 2000
| ARTICLE 5 |
| This schedule contains summary financial information extracted from the Balance Sheet at December 31, 1999 and the Statement of Operations for the year ended December 31, 1999 and is qualified in its entirety by reference to such financial statements. |
| MULTIPLIER: 1 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD START | JAN 01 1999 |
| PERIOD END | DEC 31 1999 |
| CASH | 462,084 |
| SECURITIES | 91,952 |
| RECEIVABLES | 35,836 |
| ALLOWANCES | 0 |
| INVENTORY | 0 |
| CURRENT ASSETS | 2,396,235 |
| PP&E | 590,918 |
| DEPRECIATION | 221,372 |
| TOTAL ASSETS | 4,213,998 |
| CURRENT LIABILITIES | 2,487,718 |
| BONDS | 1,709,171 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 24,819 |
| OTHER SE | 1,658,382 |
| TOTAL LIABILITY AND EQUITY | 4,213,998 |
| SALES | 0 |
| TOTAL REVENUES | 3,311,525 |
| CGS | 0 |
| TOTAL COSTS | 4,536,374 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 5,166 |
| INCOME PRETAX | (1,136,870) |
| INCOME TAX | 0 |
| INCOME CONTINUING | (1,136,870) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (1,136,870) |
| EPS BASIC | (0.07) |
| EPS DILUTED | (0.07) |
| ARTICLE 5 |
| This schedule contains summary financial information extracted from the Balance Sheet at March 31, 2000 and the Statement of Operations for the three months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. |
| MULTIPLIER: 1 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | DEC 31 2000 |
| PERIOD START | JAN 01 2000 |
| PERIOD END | DEC 31 2000 |
| CASH | 1,086,061 |
| SECURITIES | 90,090 |
| RECEIVABLES | 72,240 |
| ALLOWANCES | 0 |
| INVENTORY | 0 |
| CURRENT ASSETS | 4,079,335 |
| PP&E | 912,002 |
| DEPRECIATION | 257,416 |
| TOTAL ASSETS | 6,185,240 |
| CURRENT LIABILITIES | 2,034,108 |
| BONDS | 1,626,325 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 25,789 |
| OTHER SE | 3,887,380 |
| TOTAL LIABILITY AND EQUITY | 6,185,240 |
| SALES | 0 |
| TOTAL REVENUES | 1,019,513 |
| CGS | 0 |
| TOTAL COSTS | 2,445,313 |
| OTHER EXPENSES | 1,862 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 1,292 |
| INCOME PRETAX | (1,425,002) |
| INCOME TAX | 0 |
| INCOME CONTINUING | (1,425,002) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (1,425,002) |
| EPS BASIC | (0.06) |
| EPS DILUTED | (0.06) |