As filed with the Securities and Exchange Commission on November 28, 2001
Registration No. 333-62236
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
AMENDMENT NO. 7
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Telecom Communications Inc.
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(Name of small business issuer in its charter)
Indiana 4813 35-2089848
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(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
827 S. Broadway, Los Angeles, CA 90014
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(Address and telephone number of principal executive offices)
827 S. Broadway, Los Angeles, CA 90014 (213) 489-3486
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(Address of principal place of business or intended principal place of
business)
Mr. Tak Hiromoto, President, 827 S. Broadway, Los Angeles, CA 90014,
(213) 489-3486
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(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as
practicable
after the effective date of the registration statement and date of the
prospectus.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act of 1933, 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, 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
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Title of Each Class of Amount Proposed Proposed Amount of
Securities Being Being Maximum Maximum Registration
Registered Registered Offering Aggregate Fee
Price Per Offering
Unit (1) Price(1)
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Shares of common stock 3,500,000 $ 1.00 $3,500,000 $ 924.00
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TOTAL $3,500,000 $ 924.00
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(1) Estimated for purposes of computing the registration fee pursuant to
Rule 457.
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, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED November 28, 2001
Telecom Communications Inc.
3,500,000 Shares of common stock
We are registering 2,500,000 shares of our common stock at $1.00 per
share, to be offered by the Company on a "best effort" basis. We are also
registering 1,000,000 shares of our common stock, on behalf of the selling
shareholders. We will not receive any portion of the proceeds from the
resale of the shares registered on behalf of the selling shareholders.
Other than shares sold for the benefit of Telecom Communications Inc.,
the estimated offering price is in the range of 50 cents to $2 dollars per
share effected by the selling shareholders.
Prior to this offering, no public market has existed for shares of our
common stock. The shares will not be quoted on any public market.
Investing in our common stock involves high risks. Investors may lose
their entire investment. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
TABLE OF CONTENTS
PROSPECTUS SUMMARY ............................................... 1
THE OFFERING ..................................................... 2
RISK FACTORS ..................................................... 3
USE OF PROCEEDS .................................................. 10
DIVIDEND POLICY .................................................. 11
CAPITALIZATION ................................................... 11
DETERMINATION OF OFFERING PRICE .................................. 11
DILUTION ......................................................... 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ................ 13
CONDITION AND RESULTS OF OPERATIONS .............................. 13
MANAGEMENT ....................................................... 23
EXECUTIVE COMPENSATION ........................................... 24
INDEMNIFICATION OF DIRECTORS AND OFFICERS ........................ 24
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ......... 24
PRINCIPAL STOCKHOLDERS ........................................... 25
DESCRIPTION OF SECURITIES ........................................ 26
SHARES ELIGIBLE FOR FUTURE SALE .................................. 27
RULE 144 ......................................................... 27
PLAN OF DISTRIBUTION ............................................. 27
SELLING SECURITY HOLDERS ......................................... 28
LEGAL PROCEEDINGS ................................................ 33
LEGAL MATTERS .................................................... 33
EXPERTS .......................................................... 33
ADDITIONAL INFORMATION ........................................... 33
INDEX TO FINANCIAL STATEMENTS .................................... 34
PROSPECTUS SUMMARY
The offering by the company is on a best effort basis. There is no
minimum amount of securities must be sold in this offering and accordingly
no minimum amount of proceeds will be raised. Investors may therefore end up
holding shares in a company that has not raised sufficient proceeds from the
offering to continue operations and has an illiquid smaller market for its
shares.
Our Business
We are a provider of services enabling users to make high-quality, low-
cost telephone calls over the Internet using traditional telephones. These
services are commonly referred to as Internet telephony. Our Internet
telephony services enable our customers to call individuals and businesses
worldwide using traditional telephones at our sole telephone calling center
located in downtown Los Angeles, California or using their traditional
telephones. We began offering Internet telephony services in September 1999.
Long distance calls made using our Internet telephony services are often
substantially less expensive than long distance calls routed over
traditional voice network. We have one computer server at our telephone
calling center to route all telephone calls to a third party servers to
enable telecommunications over the Internet.
Our strategy for expansion includes the following:
* expanding and enhancing our products and services.
* franchise our telephone calling center concept in the west coast
cities with high concentration of Latino population.
* acquire other internet telephone service providers.
As the date of this prospectus, revenues generated by our
telecommunications business only represent a small portion of our revenue.
The majority of our revenues are derived from the sale of Lotto Tickets, Bus
Tokens, Bus Passes, Check Cashing and Money Grams products. Although
telecommunications only represents a fraction of our total revenue, it is
the focus where we are building the foundation of our business. We will
continue to offer these other products as a supplement to our
telecommunications services but we do not intend to increase our efforts in
expanding or promoting them as we do for our telecommunications business.
Our Corporate History
Telecom Communications Inc. was incorporated on January 6, 1997 in the
State of Indiana under the corporate name MAS Acquisition XXI Corp. Prior to
December 21, 2000, we were a blank check company seeking a business
combination with unidentified business. On December 21, 2000, we acquired
Telecom Communications of America which was a sole proprietorship doing
business in Los Angeles, California since August 15, 1995 and changed our
name to Telecom Communications Inc. In connection with this acquisition,
Aaron Tsai, our former sole officer and director was replaced by Telecom
Communications of America's owners and associates. We issued 9,000,000
shares of our common stock or 90% of our total outstanding common shares
after giving effect to the acquisition. MAS Capital Inc. returned 7,272,400
shares of common stock for cancellation without any consideration.
Our principal executive offices are located at 827 S. Broadway, Los
Angeles, CA 90014. Our telephone number is (213) 489-3486.
1
THE OFFERING
Common Stock Offered
by the Company . . . . . . . 2,500,000
by Selling Shareholders . . . 1,000,000
Use of Proceeds . . . . . . . . . We intend to use the proceeds for
general and administrative expenses,
development of the business, working
capital and other general corporate
purposes. See "Use of Proceeds."
We will not receive any proceeds
from the sale of the shares of
common stock by the selling
shareholders.
Risk Factors . . . . . . . . . . . For a discussion of certain factors
you should consider before buying
shares of our common stock, see
"Risk Factors on Page 3"
SUMMARY FINANCIAL DATA
The following table summarizes the historical consolidated financial
and operating information for our business and should be read in conjunction
with the financial statements and the notes to the financial statements.
Year Ended September 30, Nine Month Ended June 30,
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1999 2000 2000 2001
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Statement of Operation: (audited) (audited) (unaudited) (unaudited)
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Income $ 853,448 $ 642,020 $ 569,271 $ 585,250
Cost of Sales:
Cost of Sales 686,676 502,123 478,955 467,407
General and Admin. Expenses 42,078 49,835 44,747 62,854
Income Tax Provision 42,740 27,398 11,073 13,862
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Net Income $ 81,954 $ 62,664 $ 34,496 $ 41,127
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For the Year Ended September 30, Nine Month Ended June 30,
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September 30, 1999 September 30, 2000 2000 2001
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Balance Sheet Data: (audited) (audited) (unaudited) (unaudited)
----------------------------- ------------------ ------------------ ------------ ------------
Current assets $ 17,781 $ 6,443 $ 10,855 7,228
Working Capital (24,959) (20,955) (218) (6,634)
Current liabilities 42,740 27,398 11,073 13,862
Total capital or stockholders' equity (24,959) (20,955) (218) (6,634)
2
RISK FACTORS
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE US.
We commenced our operations on August 15, 1995. We offer services that
enables our customers to make low-cost domestic or international telephone
calls over the Internet using traditional telephones. Accordingly, we have
only a limited operating history upon which you can evaluate our business
and prospects. An investor in our common stock must consider the risks,
expenses and difficulties frequently encountered by early stage companies in
new and rapidly evolving markets. It may be difficult or impossible to
accurately forecast our operating results based on our historical results.
WE DEPEND ON A LIMITED NUMBER OF KEY EXECUTIVES, INCLUDING TAK HIROMOTO AND
ELIZABETH HIROMOTO, WHO WOULD BE DIFFICULT TO REPLACE.
Our success depends significantly on the continued services of our
management personnel, Tak Hiromoto, our President and Chief Executive
Officer and Elizabeth Hiromoto, our Secretary and Treasurer. Losing Tak
Hiromoto or Elizabeth Hiromoto could have a serious impact on our business
operations and result in reduced revenue and disruption of our business. If
we had to replace any of these key executives, we would not be able to
replace the significant amount of knowledge that these key executives have
about our operations. We do not maintain "key man" insurance policies on any
of our executives. We do not have employment contracts with any of our
executives.
WE INTEND TO CONCENTRATE OUR EFFORTS IN THE TELECOMMUNICATIONS BUSINESS,
WHICH WE LACK EXPERIENCE.
Current, the majority of our revenues are derived from the sale of
Lotto Tickets, Bus Tokens, Bus Passes, Check Cashing and Money Grams
products. However, we intend to focus our efforts to grow our
telecommunications services. None of our current officers and directors have
significant amount of experience in the telecommunications business. If we
fail to increase the amount of revenue from our telecommunications services,
we may not be able to increase our current level of revenue and we may incur
losses from operations.
INTENSE COMPETITION FOR CUSTOMERS MAY REDUCE OUR REVENUE OR CAUSE OUR
BUSINESS TO FAIL.
Many of our competitors have substantially greater financial, technical
and marketing resources, larger customer bases, longer operating histories,
greater name recognition and more established relationships in the industry
than we have. As a result, certain of these competitors may be able to
adopt more aggressive pricing policies, which could hinder our ability to
market our Internet telephony services. One of our key competitive advantage
is the ability to route calls through the Internet, which allows us to
realize substantial savings compared to traditional telephone service. Any
change in the regulation of an Internet service provider could force us to
increase prices and offer rates that are comparable to traditional telephone
call providers and that could have a serious impact on our revenue and
profits or cause us to go out of business.
3
OUR DEPENDENCE ON INTER-TEL.NET TO PROVIDE INTERNET BASED TELEPHONE CALL
SERVICES MAY CAUSE DISRUPTIONS TO OUR BUSINESS AND AFFECT OUR REVENUE.
In April, 1999 we entered into an agreement with Inter-Tel.net, which
may be terminated at any time by either party with a 60 days prior written
notice. Inter-Tel.net has established a network which enables
telecommunications over Internet Protocol ("IP") data networks. We connect
our server to Inter-Tel.net's network to provide Internet based telephone
call services. Currently, we route all our Internet based telephone calls
through Inter-Tel.net. We do not know whether Inter-Tel.net will terminate
the agreement or continue to provide services in the future. If Inter-
Tel.net terminate the agreement, we will have to suspend our telephone
calling business until other providers are found. If suspension of our
telephone calling services occur, it will significantly reduce our revenue
and may cause us to have a net loss.
OUR SUCCESS DEPENDS ON OUR ABILITY TO HANDLE A LARGE NUMBER OF SIMULTANEOUS
CALLS, WHICH OUR SYSTEMS MAY NOT BE ABLE TO ACCOMMODATE.
We expect the volume of simultaneous calls to increase significantly as
we expand our operations. Our computer hardware and software and Inter-
Tel.net's computer hardware and software may not be able to accommodate this
additional volume. If we fail to maintain an appropriate level of operating
performance, or if our service is disrupted, our reputation could be hurt
and we could lose customers.
PRICING PRESSURES MAY LESSEN OUR COMPETITIVE PRICING ADVANTAGE.
Our success is based on our ability to provide discounted domestic and
international long distance services by taking advantage of cost savings
achieved by carrying voice traffic over the Internet, as compared to
carrying calls over long distance networks, such as those owned by AT&T,
Sprint and MCI WorldCom. In recent years, the price of long distance calls
has fallen. In response, we have lowered the price of our service offerings.
For example, AT&T, Sprint and MCI WorldCom have adopted recent pricing plans
in which the rates that they charge for U.S. domestic long distance calls
are not always substantially higher than the rates that we charge for our
U.S. domestic service. The price of long distance calls may decline to a
point where we no longer have a price advantage over these traditional long
distance services. Alternatively, other providers of long distance services
may begin to offer unlimited or nearly unlimited use of some of their
services for an attractive monthly rate. We would then have to rely on
factors other than price to differentiate our product and service offerings,
which we may not be able to do.
OUR INDEPENDENT AUDITOR HAS EXPRESSED AN OPINION OVER OUR POSSIBLE INABILITY
TO REMAIN IN BUSINESS.
Our auditor has expressed substantial doubt about our company's ability
to continue as a going concern in the independent auditor's report for the
year ended September 30, 2001 due to capital deficiency. In addition in
footnote 17, our auditor stated that our ability to continue as a going
concern must be considered in light of the problems, expenses, and
complications frequently encountered by entrance into established markets
and the competitive environment in which we operate. He is mainly concerned
about the ownership draws that caused us to have a net capital deficiency
and our ability to compete in the telecommunications market where there are
a large number of well established businesses while we have only a very
limited experience and capital. If our business fails in the future, you
will loss part or all of your investment.
4
OUR CHIEF EXECUTIVE OFFICER, TAK HIROMOTO, IS IN THE POSITION TO CONTROL
OVER CORPORATE TRANSACTIONS AND OTHER MATTERS.
Upon completion of this offering, Tak Hiromoto will beneficially own
approximately 64% of the outstanding common stock, assuming all the shares
registered by the Company are sold. As a result Tak Hiromoto will have the
ability to control substantially all matters submitted to our stockholders
for approval (including the election and removal of directors and any
merger, consolidation or sale of all or substantially all of our assets) and
to control our management and affairs. Accordingly, this concentration of
ownership may have the effect of delaying, deferring or preventing a change
in control of us, impeding a merger, consolidation, takeover or other
business combination involving us or discouraging a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us, which
in turn could affect the market price of the common stock.
WE MAY FAIL IN OUR ATTEMPT TO GROW THROUGH ACQUISITIONS.
We plan to offer our products and services through subsidiaries we
intend to acquire in the future. However, our plan of acquisitions may not
materialize at all. If we are not successful in our plan of acquisition, we
will not be able to expand and our revenue and profits will not increase.
WE MAY FAIL ON WITH OUR PLAN TO GROW THROUGH FRANCHISING OUR OPERATIONS.
We intend to franchise our operations. We have no experience in
franchising, therefore, we do not know whether our plan will succeed. Such
a failure resulting in reduced or no expansion will cause our operations to
be limited to our current level of revenue and income.
GOVERNMENTAL REGULATIONS REGARDING THE INTERNET MAY BE PASSED, WHICH COULD
IMPEDE OUR BUSINESS.
The legal and regulatory environment that pertains to the Internet is
uncertain and is changing rapidly as use of the Internet increases. For
example, in the United States, the Federal Communications Commission is
considering whether to impose surcharges or additional regulations upon
certain providers of Internet telephony. New regulations could increase our
costs of doing business and prevent us from delivering our products and
services over the Internet, which could adversely effect our customer base
and our revenue. In addition to new regulations being adopted, existing laws
may be applied to the Internet. New and existing laws may cover issues that
include: sales and other taxes, access charges, pricing controls, consumer
protection, etc.
5
RISKS RELATED TO THIS OFFERING
OUR OFFERING OF 2.5 MILLION SHARES OF OUR COMMON STOCK MAY NOT RAISE ANY
CASH AND WE MAY NOT SALE ANY SHARES.
We are offering 2.5 million shares of our common stock by Tak Hiromoto,
our Chief Executive Officer on a self-underwritten best efforts basis
without underwriters to perform due diligence review, as is done in an
underwritten offering. Due diligence is a process of reviewing and
investigating a company's management background, financial information,
existing and planned business operations and potential contingent
liabilities, etc. in order to ensure full and accurate disclosure in the
offering documents. Lack of due diligence conducted by an underwriter may
increase the risk of having certain inaccurate or insufficient disclosures
of information in this Prospectus. If we fail in our capital raising
efforts, we may sell little or no shares and may raise little or no
proceeds. If we fail to raise any capital, we will not be able to proceed
with our plans of expansion and you may loose part or all your investments
in our company.
WE MAY NOT BE ABLE TO MEET OUR FUNDING REQUIREMENT OF OUR BUSINESS PLANS.
We may need further funding to proceed with our proposed plan of
business. We do not have a commitment with respect to any additional
capital. We do not have loan commitments from, or lines of credit with
banks or other financial institutions. Therefore, the expansion of our
business will depend on our ability to raise additional funds through equity
and/or debt financing.
EVEN IF OUR STOCK IS QUOTED ON THE NASD OVER-THE-COUNTER-BULLETIN BOARD, OUR
STOCK MAY HAVE LOW TRADING VOLUME, HIGHLY VOLATILE AND NOT FOLLOWED BY
ANALYSTS.
We plan to have our stock apply for quotation by a market maker on the
NASD over-the-counter bulletin board. Stocks traded over this quotation
system are usually thinly traded, highly volatile and not followed by
analysts. Consequently, you may have difficulty reselling shares of our
common stock that you purchase.
MANY CURRENT SHAREHOLDERS' SHARES ARE REGISTERED FOR RESALE IN THIS
OFFERING. ANY RESALE OF SHARES BY THESE CURRENT SHAREHOLDERS MAY CAUSE THE
STOCK PRICE TO DECLINE.
The majority of our shareholders, including one of our largest
shareholder, are registering to sell all of their shares in our company.
After a trading market develop for our stock, any resale of shares by these
current shareholders will have a negative impact on the trading price of our
stock and price of our stock may decline significantly.
6
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT
OUR STOCK PRICE.
After this offering there will be outstanding 12,500,000 shares of our
common stock, assuming all of the 2,500,000 shares registered by the Company
are sold. Of these shares, the shares sold in this offering will be freely
tradable except for any shares purchased by our "affiliates" as defined in
Rule 144 under the Securities Act. The remaining 9,000,000 shares will be
"restricted securities," subject to the volume limitations and other
conditions of Rule 144 under the Securities Act.
WE CANNOT PREDICT IF FUTURE SALES OF OUR COMMON STOCK, OR THE AVAILABILITY
OF OUR COMMON STOCK FOR SALE, WILL AFFECT THE MARKET PRICE FOR OUR COMMON
STOCK OR OUR ABILITY TO RAISE CAPITAL BY OFFERING EQUITY SECURITIES.
To the extent that brokerage firms act as market makers for our shares
on the NASD over-the-counter bulletin board, they may be a dominating
influence in any market that might develop, and the degree of participation
by such firms may significantly affect the price and liquidity of our
shares. These firms may discontinue their market making activities at any
time. The prices at which our shares are traded in the market will be
determined by these firms and by the purchasers and sellers of our shares,
but such prices may not necessarily relate to our assets, book value,
results of operations or other established and quantifiable criteria of
value.
OUR STOCK PRICE MAY BE EXTREMELY VOLATILE AND YOU MAY NOT BE ABLE TO RESELL
SHARES AT OR ABOVE THE OFFERING PRICE.
There was no public market for our shares prior to this offering, and
after the offering, a liquid public market for the shares may not develop.
You may not be able to resell your shares at or above the initial public
offering price due to a number of factors, including:
* actual or anticipated fluctuations in our operating results;
* changes in expectations as to our future financial performance or
changes in financial estimates of securities analysts;
* revenue fluctuations caused by changes in the fair value of the
equity compensation we receive for our services or retain in reverse
merger transactions;
* changes in general economic or market conditions; and
* the operating and stock price performance of other comparable
companies.
The stock market in general, and the securities of telecommunication
industry-related companies in particular, has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect
the trading price of our common stock, regardless of our actual operating
performance.
7
WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS FROM THIS OFFERING, AND
WE MAY NOT USE THESE PROCEEDS EFFECTIVELY.
Our management has broad discretion in how we use the proceeds from
this
offering because a significant amount of the proceeds from this offering has
not been allocated for a specific purpose. Our management could spend the
proceeds from this offering in ways with which our stockholders may not
agree or that do not yield a favorable return. Our primary purpose in
conducting this offering is to create a public market for our common stock.
As of the date of this prospectus, we plan to use the proceeds from this
offering for general corporate purposes, including working capital,
franchise our operations, and the funding of our anticipated operations. We
may also use the proceeds in future acquisitions but do not have any
acquisitions planned.
THE APPLICATION OF THE "PENNY STOCK" RULES COULD ADVERSELY AFFECT THE MARKET
FOR OUR STOCK.
The Securities and Exchange Act of 1934 requires additional disclosure
relating to the market for "penny stocks." A penny stock is generally
defined to be any equity security not listed on NASDAQ or a national
securities exchange that has a market price of less than $5.00 per share,
subject to certain exceptions. Among these exceptions are shares issued by
companies that have:
* net tangible assets of at least $2 million, if the issuer has
been in continuous operation for three years;
* net tangible assets of at least $5 million, if the issuer has
been in continuous operation for less than three years; or
* average annual revenue of at least $6 million for each of the
last three years.
We do not currently meet the requirements of these exceptions and,
therefore, our shares would be deemed penny stocks for purposes of the
Exchange Act if and at any time while our common stock trades below $5.00
per share. In such case, trading in our shares would be regulated pursuant
to Rules 15-g-1 through 15-g-6 and 15-g-9 of the Exchange Act. Under these
rules, brokers or dealers recommending our shares to prospective buyers
would be required, unless an exemption is available, to:
* deliver a lengthy disclosure statement in a form designated by
the SEC relating to the penny stock market to any potential
buyers, and obtain a written acknowledgement from each buyer
that such disclosure statement has been received by the buyer
prior to any transaction involving our shares;
* provide detailed written disclosure to buyers of current price
quotations for our shares, and of any sales commissions or other
compensation payable to any broker or dealer, or any other
related person, involved in the transaction;
* send monthly statements to buyers disclosing updated price
information for any penny stocks held in their accounts, and
these monthly statements must include specified information on
the limited market for penny stocks.
8
In addition, if we are subject to the penny stock rules, all brokers or
dealers involved in a transaction in which our shares are sold to any buyer,
other than an established customer or "accredited investor," must make a
special written determination that our shares would be a suitable investment
for the buyer, and the brokers or dealers must receive the buyer's written
agreement to purchase our shares, as well as the buyer's written
acknowledgement that the suitability determination made by the broker or
dealer accurately reflects the buyer's financial situation, investment
experience and investment objectives, prior to completing any transaction in
our shares.
These Exchange Act rules may limit the ability or willingness of
brokers and other market participants to make a market in our shares and may
limit the ability of our shareholders to sell in the secondary market,
through brokers, dealers or otherwise. We also understand that many
brokerage firms will discourage their customers from trading in shares
falling within the "penny stock" definition due to the added regulatory and
disclosure burdens imposed by these Exchange Act rules.
The SEC from time to time may propose and implement even more stringent
regulatory or disclosure requirements on shares not listed on NASDAQ or on a
national securities exchange. The adoption of the proposed changes that may
be made in the future could have an adverse effect on the trading market for
our shares.
THE PURCHASERS OF SHARES IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION.
The initial public offering price is expected to be substantially
higher than the net tangible book value per share of the outstanding common
stock immediately after the offering. Accordingly, purchasers of shares in
the offering will experience immediate and substantial dilution of
approximately $0.8057 in net tangible book value per share, or approximately
80.6% of the offering price of $1.00 per share. In contrast, existing
stockholders paid an average price of negative $0.0021 per share.
This prospectus contains certain "forward-looking statements" based on
our current expectations, assumptions, estimates and projections about us
and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in such forward-looking statements as a result of certain
factors, as more fully described in this section and elsewhere in this
prospectus. We undertake no obligation to update publicly any forward-
looking statements for any reason, even if new information becomes available
or other events occur in the future. Such factors include those set forth in
this section and elsewhere in this prospectus.
9
We can not assure you that we will be able to obtain additional funding
when it is needed, or that such funding, if available, will be obtainable on
terms favorable to and affordable by us. Our inability to obtain additional
funding, as required, will not cause the cessation of our business but it
would impair severely our plans of expansions. We believe that we need to
raise a minimum of $1,000,000 in order to proceed with our current business
plan for twelve month from the date of this prospectus.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of
common stock by the selling shareholders. Based upon an assumed initial
offering price of $1.00, we estimate that we will receive net proceeds from
the sale of 2,500,000 shares of common stock by the company in the amount
(after deduction estimated $50,000 offering expenses) of up to $2,450,000
assuming all the shares offered are sold. Such proceeds will be used for
general corporate purposes, including working capital, franchise our
operations, and the funding of our anticipated operations. We may also use
the proceeds in future acquisitions but do not have any acquisitions
planned. We plan to use a portion of shares registered in this offering to
pay for services. If any shares registered in this offering are used as
payment for services, it will proportionally reduce the total amount raised
from this offering.
With our existing cash and business operations, we do not need to raise
any funds to stay in business for the next twelve months. If we fail to
raise a minimum of $1,000,000, we may not be able to proceed with our
expansion plan described above. If we raise little or no funds, we will
continue our current telephone calling center operations.
As of the date of this prospectus, we have not allocated any specific
amount of the proceeds for the purposes described above. The amounts to be
expended for the purposes listed above will depend upon a number of factors,
including conditions in the telecommunications market and competitive
developments in the market for Internet based telecommunications. Pending
our use of the net proceeds of this offering, we intend to invest them in
short-term, investment grade, interest bearing securities.
We may not sell any shares in this offering and raise any capital. If
we do not raise sufficient capitals to proceed with our expansion plan in
full force, we plan to continue our current operations and use the proceeds
raised in following priority:
1. General and administrative expenses
2. Promote our telecommunication services
3. Seek franchisees
4. Acquire small local Internet service providers
5. Locate and start branch locations in other metropolitan areas.
10
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock
and do not anticipate paying any cash dividends on our common stock for the
foreseeable future.
CAPITALIZATION
The following table sets forth the capitalization of Telecom
Communications of America as of June 30, 2001, adjusted to give effect to
the sale of 2,500,000 shares of common stock by the company in this offering
at an assumed initial price to the public of $1.00 per share and the
estimated net proceeds of approximately $2,450,000. The following table is
presented as if Telecom Communications of America was a corporation based on
our preferred and common share structure. Telecom Communications of America
was a sole proprietorship until we acquired it by issuing 9,000,000 shares
of common stock. This table should be read in conjunction with our financial
statements and the notes to those statements included elsewhere in this
prospectus.
June 30, 2001
--------------------------
Actual As Adjusted
------------ ------------
Stockholders' equity:
Preferred Stock, $0.001 par value,
20,000,000 shares authorized, none
issued and outstanding....................... $ - $ _
Common Stock, $.001 par value,
80,000,000 shares authorized; 10,000,000
shares issued and outstanding; 12,500,000
shares (as adjusted) issued and outstanding . 10,000 10,000
Additional paid-in capital .................. (57,761) 2,392,239
Retained earnings ............................... 41,127 41,127
----------- -----------
Total stockholders' equity....................... $ (6,634) $2,443,366
=========== ==========
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no trading market for the shares
of common stock offered. Consequently, the initial public offering price of
the shares of common stock was arbitrarily determined. The factors
considered in determining the offering price were our financial condition
and prospects, our limited operating history and the general condition of
the securities market. The offering price is not an indication of and is not
based upon the actual value of our company. The offering price bears no
relationship to the book value, assets or earnings of our company or any
other recognized criteria of value. The offering price should not be
regarded as an indicator of the future market price of the securities.
11
DILUTION
Purchasers of the shares will experience immediate and substantial
dilution in the value of the common stock. Dilution represents the
difference between the price per share paid by the purchasers in the
offering and the net tangible book value per share. Net tangible book value
per share represents our net tangible assets (total assets less total
liabilities), divided by the number of shares of common stock outstanding on
September 30, 2001. As of September 30, 2001, our net tangible book value
was $(20,955), or negative $0.0021 per share. Giving effect to the sale by
the company of shares offered at the public offering price of $1.00,
assuming all of the 2,500,000 shares are sold, the pro forma net tangible
book value would have been $2,429,045 or $0.1943 per share. This represents
an immediate increase in net tangible book value of $0.1964 per share to
existing shareholders and an immediate dilution of $0.8057 to the purchasers
of the shares in this offering. The following table illustrates the pro
forma per share dilution, assuming the sale of all of the 2,500,000 shares
offered by the company:
Offering price per share . . . . . . . . . . . . . $1.0000
Net tangible book value before the offering . . . $(0.0021)
Increase per share attributed to new investors . . $ 0.1964
--------
Pro forma net tangible book value per share after the
Offering . . . . . . . . . . . . . . . . . . . . $0.1943
-------
Dilution in net tangible book value to new investors . . . $0.8057
=======
The following table summarizes as of September 30, 2001, the difference
(based on an assumed initial public offering price of $1.00 per share and
assuming all of the 2,500,000 shares offered by the company are sold)
between the existing shareholders and the new shareholders with respect to
the number of shares of common stock purchased, the total consideration
paid, and the average price per share paid:
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- -------- ----------- -------- --------
Existing shareholders. 10,000,000(1) 80.00% $ (20,955) (0.85%) $(0.0021)
New shareholders...... 2,500,000 20.00% 2,500,000 101.01 % $ 1.0000
---------- ------ ----------- ------
Total................. 12,500,000 100.00% $ 2,479,045 100.00%
========== ====== =========== ======
(1) 10,000,000 shares outstanding including the issuance of 9,000,000 shares
for the purchase of Telecom Communications of America, a sole
proprietorship.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Our main business is to provide low cost telephone calls over the
Internet to individuals and businesses. Our services enable our customers
to make low cost telephone calls over the Internet using the traditional
telephone. In September 1999, we introduced a service that enables
international and domestic calls to be made over the Internet using
traditional telephones. Long distance calls made using our services are
often substantially less expensive than long distance calls routed over
traditional voice network. Following illustrate a typical cost for our
customers. In summary, our cost of 9.5 cents per minute compared with 17
cents per minute using traditional phones taking in considerations for the
monthly basic service charges for the traditional phone services.
Illustration: (based on telephone services in our area)
Our cost per minute = 9.5
Traditional phone services cost per minute = 7 cents (without basic fees)
Assumptions: Residential long distance charge for the month is $10.78
for 154 minutes (domestic call). Customer is using plans
such as MCI 7 Cents anytime residential plan.
Additional costs for Traditional long distance charges:
MCI 7 Cents anytime residential plan $ 6.95
12% Federal Excise Tax 1.32
40% State & Local Taxes 4.36
.004% Federal, State & Local Surcharges 0.04
25% Federal Universal Service Fee 2.61
.23% CA High cost Fund-B Surcharges 0.25
.005% CA Universal Life Tel Service Surcharges 0.05
.003% CA Relay Service and Communication Device Fund 0.03
.006% CA 911 Local 0.07
-----------------------------------------------------------
TOTAL $15.68
To calculate traditional phone cost, we took the traditional long
distance charges for the month of $10.78 plus the monthly fees of $15.68 and
divide the result by 154 minutes which gives 17 cents per minute.
$10.78 + $15.68 = $26.46 divided by 154 minutes = 17 cents.
In this illustration, our customers would save 7.5 cents per minute
using our services. The basic fees may very for different areas and we do
not have those information at this time. For International calls, you have
a higher savings due to higher tariff on traditional phone calls.
We intend to expand our business through acquisitions. Currently, we
have one telephone calling center with one server located in Los Angeles,
California.
13
We have only a limited operating history upon which you can evaluate
our business and prospects. We have achieved limited profitability, and
expect to continue to achieve limited profitability in the year 2001 and
subsequent fiscal periods. We will need to significantly increase our
revenues in order to achieve greater profitability, which may not occur.
Even if we do achieve greater profitability, we may be unable to sustain or
increase profitability on a quarterly or annual basis in the future.
RESULTS OF OPERATIONS
Following table list our revenues derived from telecommunication and a
breakdown of non-telecommunication related services. If we are successful
in raising additional capital, we anticipate our telephone callings service
revenue as a percentage of the total revenue will rise as we will be able to
develop a more aggressive marketing strategies to market this service. If
we are not successful in raising additional capital, we anticipate the
relative revenue contribution from six sources as presented in the table
below will not change significantly.
Year Ended Year Ended
September 30, 1999 September 30,2000
------------------ ------------------
Phone Calls $ 125,452 14.7% $ 116,752 18.2%
Lotto Tickets (Net) 1,989 .2 7,885 1.2
Bus Tokens Sold 590,135 69.1 403,292 62.8
Bus Passes Sold 96,686 11.3 95,789 14.9
Checks Cashed (Net) 25,633 3.0 8,139 1.3
Money Grams (Net) 13,553 1.6 10,163 1.6
------------ ------------
TOTAL INCOME $ 853,448 100.0 $ 642,020 100.0
------------ ------------
Year ended September 30, 1999 compared to year ended September 30, 2000
Total revenue for the year ended September 30, 2000 was $642,020
compared to $853,448 for the same period in year 1999. The net income was
$62,666 for the year ended September 2000 compared to $81,955 for the year
ended September 30, 1999. The decrease in revenue was due to several one
time event that occurred throughout the year. Following listed the events
we encountered that affected our revenue:
1. There was a strike which closed down MTA public transportation for a
period of one month. This shutdown affected our bus token sales for the
month.
2. We had several bad checks totaled $5,000 and we temporarily stopped
check cashing services to improve our check cashing procedures.
3. In September 1999 we converted our telephone service from PSTN (Public
Switch Telephone Network) to ITSP (Internet Telephone Service Provider).
This conversion caused several interruptions to our telephone services for a
period of two months.
14
The cost of sales for the year ended September 30, 1999 and 2000 were
$686,676 and $502,123, respectively. Revenue decrease for year 2000
resulted in decrease in the cost of sales. The decrease in cost of sales
were due to lower revenue for bus tokens sales and check cashing services.
General and administrative expenses were $42,078 for the year ended
September 30, 1999 and $49,835 for the year ended September 30, 2000. The
increased in costs was due to the added expenses of converting our telephone
services from PSTN to ITSP.
Gross profit for the year ended September 30, 1999 and 2000 were
$124,694 or 14.6% of the total revenue and $90,062 or 14.0% of the total
revenue, respectively. Net income for the year ended September 30, 1999 and
2000 were $81,955 and $62,666 respectively. The decrease in net income is a
result of reduction in revenue from bus token sales and check cashing
services.
Our telephone calling operations have remained stable between year 1999
and 2000. There has been a slight decline due to normal fluctuations. The
revenue from our 1999 versus 2000 is $ 125,452 and $ 116,752. We expect for
the next several years, our incomes from our current telephone calling
center would remain at the similar level compared with our incomes generated
in the year 1999 and 2000. This assumption is based on the current market
conditions of long distance telephone calls to remain fairly stable. If
there is a dramatic drop in long distance calling prices from major
telecommunications companies, our revenue may drop considerably or incur a
net loss. If we are successful in our acquisition and expansion plans, we
may incur a net loss due to the expansion. However, we do not know exactly
to what extent the expansion may cost us at this time.
Presently, the percentage of customers using our calling center versus
using services from their resident is approximately 45% versus 55%. We
anticipate that eventually 99% of calls will be made from our customers'
resident due to convenience factor. The other 1% will be customers who have
no phones in their homes.
Nine month ended June 30, 2000 compared to nine month ended June 30, 2001
9 Months Ended 9 Months Ended
June 30, 2000 June 30, 2001
------------------ ------------------
Phone Calls $ 87,156 15.3% $ 127,313 21.8%
Lotto Tickets (Net) 4,038 .7 4,632 .8
Bus Tokens Sold 380,618 66.9 400,048 68.4
Bus Passes Sold 87,264 15.3 38,829 6.6
Checks Cashed (Net) 6,508 1.1 8,000 1.4
Money Grams (Net) 3,687 .6 6,428 1.1
------------ ------------
TOTAL INCOME 569,271 100.0 585,250 100.0
------------ ------------
15
For the nine months ended June 30, 2000 compared to the nine months
ended June 30, 2001, our revenue were $569,271 and $585,250 respectively.
The increase in revenue is a result of increase in revenue from phone calls,
Lotto tickets, bus tokens, check cashing and money gram services offset by
reduction in Bus Passes sales. We believe the factors that were responsible
for the increase in revenues for the nine months ended June 30, 2001 as
compared to the nine months ended June 30, 2000 are increase in our name
recognition by customers in our area and general economic fluctuation.
General & administrative expenses were $62,854 for the nine month ended
June 30, 2001 and $44,747 for the nine month ended June 30, 2000. The
increase in costs was due to the acquisition of Telecom Communications of
America on December 21, 2000 where the owner's draws is no longer applicable
and compensation to the management is now classified under general &
administrative expense.
Gross profit for the nine months ended June 30, 2001 and 2000 were
$117,843 or 20.1% of the total revenue and $90,316 or 15.9% of the total
revenue, respectively. Net income for the nine months ended June 30, 2001
and 2000 were $40,938 and $34,496 respectively. The increase in net income
is a result of increase in revenue from phone call services and Bus Token
sells.
The cost of sales for the nine months ended June 30, 2001 and 2000 were
$467,407 and $478,955. The decrease in total cost of sales was primarily due
to decrease in costs associated with the Bus Pass sales offset by increased
phone call and bus token costs as reflected in the following table:
The percentages on the following table are compared to total income of
respective period:
9 Months Ended 9 Months Ended
June 30, 2000 June 30, 2001
--------------- ------------------
Phone Call Costs 42,962 7.5% 61,178 10.5%
Bus Token Costs 352,007 61.8 368,934 63.0
Bus Pass Costs 83,986 14.8 37,295 6.4
--------------- ------------------
TOTAL COST OF SALES 478,955 84.1 467,407 79.9
--------------- ------------------
16
CAPITAL AND SOURCE OF LIQUIDITY.
As of June 30, 2001, our cash balance was $3,228 and we had a negative
working capital of $13,832.
Total cash flows from operating activities for the twelve months ended
September 30, 1999 aggregated $124,694 as compared to $90,062 for the twelve
months ended September 30, 2000. During the year ended September 30, 2000
and the year ended September 30, 1999 the use consisted principally of Owner
Draws.
Total cash flows from operating activities for the nine months ended
June 30, 2001 aggregated $54,988 as compared to $45,569 for the nine months
ended June 30, 2000. During the nine months ended June 30, 2001 and the nine
month ended March 31, 2000 the use consisted principally of distribution to
shareholder and owner draws, respectively.
Our sources of liquidity is dependent upon our cash flows from
operating activities and success of our planned self-underwritten public
offering. Factors that may reduce our revenue may include continued
reduction in telephone call charges by major telephone companies and
potential strike of MTA public transportation system, etc. In addition if we
fail to raise a minimum of $1,000,000 in additional capital, we may not be
able to expand our existing operations.
We believe that we do not need to any additional capital to continue
our current operations for the next 12 months. Our current business model
should be able to sustain itself as it has in the past two years if the
current revenue and cost structure remain at the similar level. If we do
not raise any capital in the offering, we will continue with our current
operations. We need to raise at least $50,000 to initiate our expansion
plans. If we do not raise sufficient or any capitals in this offering, we
may in the future seek other form of debt or equity financing. We have not
yet made any other plan to obtain additional capital as of the date of this
prospectus. We do not have a line of credit with any individual or
institutions.
The discussions in the "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" should be read in conjunction
with the financial statements and the notes to those statements which appear
elsewhere in this prospectus. The discussions contain forward-looking
statements that reflect our plans, estimates and beliefs. Our actual
results could differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
prospectus, particularly in "Risk Factors".
17
BUSINESS
We are a provider of low cost telephone calls using the Internet to
individuals and businesses. This service is commonly referred to as Internet
telephony. Our Internet telephony services enable our customers to call
individuals and businesses worldwide using their own traditional telephones
or our traditional telephones at our telephone calling center. Long distance
calls made using our services are often substantially less expensive than
long distance calls routed over traditional voice network. We estimated
ninety five percent of our customer base consists of immigrants from Mexico,
Central America and South America who need low cost international telephone
call services to communicate with family and friends in their home country.
INDUSTRY BACKGROUND
The Internet is experiencing unprecedented growth as a global medium
for communications and commerce. Internet telephony has emerged as a low
cost alternative to traditional long distance calls. Internet telephone
calls are less expensive than traditional domestic and international long
distance calls primarily because these calls are carried over the Internet
and therefore bypass a significant portion of local and international long
distance tariffs. The fees and tariffs that are eliminated for our services
can be itemized as follows:
* Calling Plans Charge
* Carrier Access Charge
* Federal Excise Tax
* State and local Tax
* Federal, State and local surcharge
* Federal Universal Service fee
* California High Cost Fund-B surcharge
* California Universal Lifeline Telephone Service surcharge
* California Relay Service and Common Device fund
* California 911 Local charge
The technology by which Internet phone calls are made is also more
cost-effective than the technology by which traditional long distance calls
are made. The growth of Internet telephony has been limited to date due to
poor sound quality attributable to technological issues such as delays in
packet transmission and network capacity limitations. However, recent
improvements in packet-switching technology, new software algorithms and
improved hardware have substantially reduced delays in packet transmissions.
PRODUCTS AND SERVICES
Presently, we have one telephone calling center located in Los Angeles,
California. This center has 6 phone booths each with its own traditional
telephone set, table and chair. Phone calls made from these booths are
routed through our computer server and Internet connection to a third party
servers which provide the interconnection to their established network which
enables telecommunications over Internet Protocol (IP) data networks using
their software, hardware and related components. The third party providing
this service is Inter-Tel.net, Inc. with whom Telecom has a contractual
agreement.
We do not rely solely on customers visiting our telephone calling
center. We also have 24 phone lines attached to our server which enables
customers accessing our services using telephones away from our location by
calling in
18
to our telephone calling center to be re-routed to our Internet connections.
In addition, the following products and services are also offered at our
telephone calling center:
* Money wiring service
* Check cashing
* Sales of Lotto tickets
* Automatic Telling Machine (ATM)
* Faxing services
* Sales of telephone cards
BUSINESS STRATEGIES
We hope to grow rapidly through franchising our existing operations and
through acquisitions. We have not made any specific business plan for
franchising our existing operations and we have no prior experience in
franchising. Currently, we do not have prospective franchisees or
acquisition targets that are targeted for acquisitions.
Key elements of the company's business strategy are:
* Acquiring and consolidating geographically disparate and usually smaller
independent Internet Telephone Service Providers.
* Developing and offering additional value-added products and services to
customers. For example, offering long distance international calls over the
Internet using cellular phones.
* Selling franchises of our telephone calling center concept throughout the
West Coast and in other areas of high concentration of immigrants.
* Building customer loyalty and gaining market share through brand
recognition.
* Expansion of our sales and marketing operation.
MARKETING STRATEGY
We currently market our products in several areas. Our marketing
efforts include newspaper advertisements and advertisements in publications
that potential customers from Latin American countries are likely to see.
Other advertising such as flyers targeting a particular market segment are
developed to compliment and expand the impact of our marketing program.
Our marketing strategy for the future will consist of using medias
designed to reach mass audiences such as audio spot ads., video clips and
banner advertising on the Internet as well as advertising targeted toward
specific markets using radio, television and other publications.
COMPETITION
We have nearly two years of experience building and fine tuning
Internet based telephone call services using traditional telephones at a
calling center environment. We believe we have the ability to deploy
information technology at a faster rate and with fewer errors than new
entrants into this field. We have basic billing capabilities to accommodate
the more complex commercial
19
transactions in which we intend to engage in the future. We already have in
place network management tools and a secure web site capable of taking new
account orders in real-time. With our billing package, we can bill
customers for their telephone calls at any interval that they desire. We
can send out bills on a weekly, bi-weekly or monthly basis. Many Commercial
transactions need to be billed differently. We use an internal billing
system that was designed for our telephony system. The transactions that we
intend to bill for are charges that would normally appear on the telephone
bill. We will be offering long distance telephone service to our commercial
as well as our retail customers. We can bill for transactions by time of
day, date, even charge a surcharge on holidays.
We believe our competitive strength is the ability to build a bridge
for a segment of the urban population to access Internet based telephone
communication services. We also believe we can move faster than larger
telephone companies in identifying and taking advantage of market
opportunities as Internet based telephone communication services continues
to evolve at a rapid pace.
Long Distance Market
The long distance telephony market and, in particular, the Internet
telephony market, is highly competitive. There are several large and
numerous small competitors, and we expect to face continuing competition
based on price and service offerings from existing competitors and new
market entrants in the future. The principal competitive factors in the
market include price, quality of service, breadth of geographic presence,
customer service, reliability, network capacity and the availability of
enhanced communications services. Our competitors include AT&T, MCI
WorldCom, Sprint, Net2Phone and other telecommunications carriers.
Many of our competitors have substantially greater financial, technical
and marketing resources, larger customer bases, longer operating histories,
greater name recognition and more established relationships in the industry
than we have. As a result, certain of these competitors may be able to
adopt more aggressive pricing policies, which could hinder our ability to
market our Internet telephony services.
Web-Based Internet Telephony Services
As consumers and telecommunications companies have grown to understand
the benefits that may be obtained from transmitting voice over the Internet,
a substantial number of companies have emerged to provide voice over the
Internet. In addition, companies currently in related markets have begun to
provide voice over the Internet services or adapt their products to enable
voice over the Internet services. These related companies may potentially
migrate into the Internet telephony market as direct competitors or could
become competitors if we move towards their current markets through our
stated intention to grow by acquisition.
Internet Telephony Service Providers. During the past several years, a
number of companies have introduced services that make Internet telephony
services available to businesses and consumers. AT&T Jens (a Japanese
affiliate of AT&T), deltathree.com (a subsidiary of RSL Communications), I-
Link, iBasis (formerly known as VIP Calling), ICG Communications,
IPVoice.com, ITXC and OzEmail (which was acquired by MCI WorldCom) provide a
range of voice over the Internet services. These companies offer PC-to-phone
or phone-to-phone services which could be adapted to provide a similar
service to the services we offer. Some, such as AT&T Jens and OzEmail, offer
these services within limited geographic areas.
20
INTELLECTUAL PROPERTY
We do not currently own or hold any patents, trademarks, licenses,
franchises concessions, royalty agreements or labor contracts.
GOVERNMENT REGULATION
Regulation of Internet Access Service
We provide Internet access, in part, by using telecommunications
services provided by carriers. Terms, conditions and prices for
telecommunications service are subject to economic regulation by State and
Federal agencies. We, as an Internet Access Provider, are not currently
subject to direct economic regulation by the Federal Communications
Commission (FCC) or any State regulatory body other than the type and scope
of regulation that is applicable to businesses generally.
In April 1998 the FCC reaffirmed that Internet Access Providers should
be classified as unregulated "Information Service Providers" rather than
regulated "Telecommunication Providers" under the terms of the Federal
Telecommunication Act of 1996. As a result, we are not subject to Federal
regulations that apply to telephone companies and similar carriers simply
because we provide our services using telecommunications service provided by
a third party carrier. To date, no State has attempted to exercise economic
regulations over Internet Access Providers.
Governmental regulatory approaches and policies to Internet Access
Providers and others that use the Internet to facilitate Data and
Communication Transmissions are continuing to develop and in the future we
could be exposed to regulation by the FCC or other Federal agencies or by
State regulatory agencies or bodies. For example, the FCC has expressed an
intention to consider whether to regulate providers of voice and fax service
that employ the Internet or Internet Packet Switching as "Telecommunications
Providers" even though Internet access itself would not be regulated. The
FCC is also considering whether providers of Internet based telephone
services should be required to contribute towards the Universal Service
Fund, which subsidizes telephone service for rural and low income consumers,
or should pay carrier access charges on the same basis as applicable to
regulated telecommunications providers. To the extent that we engage in the
provision of Internet or Internet Protocol base telephone or fax service, we
may become subject to regulations promulgated by the FCC or State with
respect to such activities. We cannot assure potential investors that such
regulations would not adversely affect our ability to offer certain enhanced
business services in the future.
Regulation of Internet Content
Due to the increase in popularity and use of the Internet by broad
segments of the population it is possible that laws and regulations may be
adopted with respect to web site content, privacy pricing, encryption
standards, consumer protection, electronic commerce, taxation, copyright
infringement and other intellectual property issues. We cannot predict the
effect, if any, that any future regulatory changes or developments may have
on the demand for our access or enhanced business service.
21
EMPLOYEES
We believe that the success of our business will depend, in part, on
our ability to attract, retain and motivate highly qualified sales,
technical and management personnel, and upon the continued service of our
senior management personnel. As of the date of this registration statement,
we have two full- time and three-part time employees. Two full-time
employees are responsible for management and marketing, one part-time
employee is responsible for book keeping and sales, two other part-time
employees are responsible for sales and other day to day operations. The
three part-time employees are sons and daughter of Mr. Tak Hiromoto and Mrs.
Elizabeth Hiromoto. We consider our employee relations to be good and we
have never experienced any work stoppages. We can not assure you that we
will be able to successfully attract, retain and motivate a sufficient
number of qualified personnel to conduct our business in the future.
DESCRIPTION OF PROPERTY
Our present telephone calling center consists of an approximately 900
square feet facility located on the first floor at 827 South Broadway, Los
Angeles, California. This facility not only hosts the telephone booths but
also all computer equipment, support staff and management employed by the
company. The initial lease was signed in August 1995 for six months with a
rent of $1,200.00 per month. This lease has been subsequently extended and
is due to expire February 28, 2004 with the following rent payment schedule.
March 1, 2000 to February 28, 2001 $1,700.00 per month
March 1, 2001 to February 28, 2002 $1,800.00 per month
March 1, 2002 to February 28, 2003 $1,900.00 per month
March 1, 2003 to February 28, 2004 $2,000.00 per month
22
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The board of directors shall consist of not less than one member nor
more than five members. Each Director elected shall hold office until his
successor is elected and qualified at annual meeting of the shareholders.
The following persons are the Directors and Executive Officers of our
Company.
Name Age Position(s)
--------------------- --- ------------------------------------------
Tak Hiromoto . . . . . 61 President, CEO and Director
Elizabeth Hiromoto . . 50 Secretary, Treasurer and Director
Robert K. Yasui . . . 39 Director
Mervyn M. Dymally . . 74 Director
Masato Saiki 74 Marketing Director
Mr. Tak Hiromoto has served as our President, Chief Executive Officer
and Director since December 2000 and has been a manager of Telecom
Communications of America from September 1995 to present. From March 1990
to December 1995, Mr. Hiromoto served as President of Apro Inc., a Real
Estate Management Company. From 1982 to Present, Mr. Hiromoto served as
Director of Alternative Energy Resource Inc.
Mrs. Elizabeth Hiromoto has served as our Secretary, Treasurer and
Director since December 2000 and has been a manager of Telecom
Communications of America since from September 1995 to present. From March
1990 to December 1995, Mrs. Hiromoto served as Secretary, Treasurer and
Director of Apro Inc., a Real Estate Management Company. Mrs. Hiromoto is a
licensed Real Estate Broker. Mrs. Hiromoto is the wife of Mr. Tak Hiromoto.
Mr. Robert K. Yasui has served as our Director since December 2000. Mr.
Yahui leads a group of seven attorneys with international experience in
handling a variety of business transaction and litigation matters from 1995
to present. Mr. Yahui specializes in corporate transactions including Real
Estate - Secured Financing, commercial and large-scale residential
acquisition and development, land use, leasing and brokerage matters,
electronic entertainment licensing and publishing, film and media
transactions as well as foreign investment in U.S. Real Estate and operating
businesses. Mr. Yahui is serving as an outside counsel to a number of
California corporations including corporations controlled by non-U.S.
company and individuals.
Mr. Mervyn M. Dymally has served as our Director since December 2000.
Mr. Dymally retired as a U.S. Congressman in 1992. He was an Assemblyman,
Senator, and Lieutenant Governor of the state of California. From 1992 to
present, Mr. Dymally is the President of Dymally International Group, Inc.,
a consulting and financial advisory firm in the United States. Mr. Dynally
has
23
skills in the areas of dispute resolutions and has successfully negotiated
many peace agreements. He serves as a honorary consul for the Republic of
Benin in California and is International Lobbyist for a number of countries
including many African states.
Mr. Masato Saiki has served as our Marketing Director since March 2001
on a part time basis. From March 1985 to January 1998, Mr. Saiki was the
president and CEO of Rino Inc., an advertising Agency. From February 1998
to present, Mr. Saiki worked as an independent marketing consultant.
EXECUTIVE COMPENSATION
We may award stock options and cash bonus to key employees, directors,
officers and consultants under a stock option plan not yet adopted as bonus
based on service and performance. The annual salaries of executive officers
are listed as follows:
Year 2000
Name Position Annual
Salary
------------------------- --------------------------------- --------------
Tak Hiromoto . . . . . President, CEO and Director $ 75,000
Elizabeth Hiromoto . . Secretary, Treasurer and Director 20,000
Robert K. Yasui . . . Director -
Mervyn M. Dymally . . Director -
Masato Saiki . . . . . Marketing Director -
------------------------- --------------------------------- --------------
We intend to pay each of our current officers the same in annual
salary for the year 2001.
We currently do not have written employment agreements with any of our
officers and directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
We indemnify to the fullest extent permitted by, and in the manner
permissible under the laws of the State of Indiana, any person made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he/she is
or was a director or officer of our Company, or served any other enterprise
as director, officer or employee at our request. Our board of directors, in
its discretion, shall have the power on behalf of the Company to indemnify
any person, other than a director or officer, made a party to any action,
suit or proceeding by reason of the fact that he/she is or was our employee.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No public trading market currently exists for our common stock. We plan
to apply to have our common stock traded on the NASD over-the-counter
bulletin board. We can not assure you that our stock will be traded on the
NASD over-the-counter bulletin board, a trading market will ever develop or,
if such a market does develop, that it will continue.
As of the date of this prospectus, the number of holders of the our
common stock was approximately 153.
24
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of our common stock, by (i) each stockholder known by
us to be the beneficial owner of more than 5% of our common stock, (ii) by
each of our executive officer and director and (iii) by all of our executive
officers and directors as a group. Each of the persons named in the table
has sole voting and investment power with respect to common stock
beneficially owned. The shares represented are shares owned as of June 30,
2001.
Number of Shares
Name and Address Beneficially Percent of
of Beneficial Owner Owned Class
-------------------------- -------------------- --------------
Tak Hiromoto (1) 8,000,000 80.00%
President, CEO and
Director
Mark H. Rhynes (2) 1,000,000 10.00%
Aaron Tsai (3) 977,950 9.78%
All Officers and Directors 8,000,000 80.00%
-------------------------- -------------------- --------------
(1) The address for Tak Hiromoto is c/o Telecom Communications Inc., 827 S.
Broadway, Los Angeles, CA 90014
(2) The shares are held by Herman, Alexis & Co., Inc. Herman, Alexis & Co.,
Inc. is controlled by Mark H. Rhynes. The address for Herman, Alexis & Co.,
Inc. and Mark H. Rhynes is 555 West 5th Street, Floor 31, Los Angeles, CA
90013. Herman, Alexis & Co., Inc. verbally agreed to lock-up its shares for
a period of one year from the date of this prospectus.
(3) Includes a) 977,600 shares held by MAS Capital Inc. and b) 350 shares
held by John Tsai. John Tsai is Aaron Tsai's brother. Aaron Tsai is the
President and control person of MAS Capital Inc. The address for MAS Capital
Inc. and Aaron Tsai is 17 N. Governor St., Evansville, IN 47711. MAS
Capital Inc. verbally agreed to lock-up its shares for a period of six
months from the date of this prospectus.
25
DESCRIPTION OF SECURITIES
Common Stock
Our articles of incorporation currently authorizes us to issue eighty
million (80,000,000) shares of common stock at $.001 par value. Each holder
of our common stock is entitled to one vote for each share of common stock
held. As of the date of this prospectus, there are 10,000,000 shares of our
common stock outstanding.
Preferred Stock
Our articles of incorporation currently authorizes us to issue Twenty
Million (20,000,000) shares of preferred stock at $.001 par value. The
preferred stock may be divided into Series or Classes, with special voting
rights and preferences, to be established by our management upon the
approval of a majority vote of our Directors. As of the date of this
prospectus, there are no shares of our preferred stock outstanding.
If our board of directors authorized the issuance of shares of
preferred stock with conversion rights, the number of shares of our common
stock outstanding could potentially be increased by up to the authorized
amount. Issuance of our preferred stock could, under certain circumstances,
have the effect of delaying or preventing a change in control of our Company
and may adversely affect the rights of holders of our other classes of
preferred stock or holders of our common stock. Also, our preferred stock
could have preferences over our common stock and other series of our
preferred stock with respect to dividends and liquidation rights.
Upon liquidation of our Company, each shareholder is entitled to
receive a proportionate share of our assets available for distribution to
shareholders after the payment of liabilities and after distribution in full
of preferential amounts, if any. Holders of our common stock are entitled
to share pro rata in dividends and distributions with respect to our common
stock, as may be declared by our board of directors out of funds legally
available therefore.
Transfer Agent
Registrar and Transfer Company is our transfer agent for our common
stock. Their address is 10 Commerce Drive, Cranford, NJ 07016-3572, and
their phone number at this location is (800) 456-0596.
26
SHARES ELIGIBLE FOR FUTURE SALE
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:
* 1% of the number of shares of common stock then outstanding, which will
equal approximately 125,000 shares assuming all the 2,500,000 shares offered
by the Company are sold; or
* the average weekly trading volume of the common stock on the NASD over-
the-counter bulletin board during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about us. 9,000,000 shares of common stock will be eligible for
resale under Rule 144 in December, 2001.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
Affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an Affiliate, is
entitled to sell such shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
PLAN OF DISTRIBUTION
The Company hereby offers up to 2,500,000 shares of its common stock on
an "as -sold, best efforts" basis at a price of $1.00 per share. All funds
raised during this offering will be available to the Company immediately
upon receipt. Tak Hiromoto will be the only officer/director involved in the
self-underwritten offering. The Company may enter into arrangements with
registered broker-dealers to help sell these Shares in which case the
Company will be required to pay commissions or other compensation to these
agents. The Company currently has no understandings or arrangements with
anybody to act as selling agent. The Company also plans to use a portion of
the 2,500,000 common shares to pay for services. Depending on the number of
shares used for payment of services, it will proportionally reduce the
amount of proceeds raised. We plan to distribute the shares for up to nine
months from the date of this prospectus.
It is anticipated that the selling security holders will offer the
shares in direct sales to private persons and in open market transactions.
The selling security holders may offer the shares to or through registered
broker-dealers who will be paid standard commissions or discounts by the
selling security holders. We believe that no selling security holders have
any arrangements or agreements with any underwriters or broker/dealers to
sell the shares, and they may contact various broker/dealers to identify
prospective purchasers. Additionally, agents, brokers or dealers may
acquire shares or interests in shares and may, from time to time, effect
distributions of the shares or interests in such capacity.
27
The selling stockholders and any broker-dealers who act in connection
with the sale of the shares hereunder may be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act, and any
commissions received by them and any profit on any sale of the shares as
principal might be deemed to be underwriting discounts and commissions under
the Securities Act.
SELLING SECURITY HOLDERS
This prospectus concerns the transfer by the selling security holders
of an aggregate of 1,000,000 shares of common stock. The selling security
holders may transfer the common stock at those prices that they are able to
obtain in the market or as otherwise negotiated. In addition, the selling
stockholders may transfer the shares in exchange for consideration other
than cash, or for no consideration, as determined by the selling
stockholders in their sole discretion. This prospectus may be used by the
selling stockholders to transfer shares of the common stock to affiliates of
the selling stockholders. We will receive no proceeds from the sale of
common stock by the selling security holders.
The following table sets forth the name of the selling security
holders, the number of shares of common stock owned by the selling security
holders before this offering, the number of shares of common stock being
registered, and the number and percentage of shares of common stock owned
after this offering. None of the selling security holders has held any
position or office, or had any marital relationship with our officers or
directors in the past three years except as noted below.
-----------------------------------------------------------------------------------------------
Beneficial Ownership Beneficial Ownership
Beneficial Owner Prior to the After the
Offering Number of Offering (1)
--------------------- Shares -----------------------
Number Percent Registered Number Percent
-----------------------------------------------------------------------------------------------
MAS Capital Inc. (2) 977,600 9.78% 977,600 0 0
-----------------------------------------------------------------------------------------------
Stanislav Nikolaevich Gemes 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Sergei Konstantinovich Afon 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Pavel Alexandrovich Sidorkin 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Stepan Alexandrovich Dybov 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Ilona Yanochevna Nerba 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Larisa Nikolaevna Timoshina 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Natalya Petrovna Timoshilova 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Anatoly Ivanovich Kim 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Nina Nikolaevna Kern 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Alexei Dmitrievich Basuk 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Vadim Alexandrovich Yuchno 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Maxim Vladimirovitch Golodnitsky 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Ludmila Viktorovna Sandaluk 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Vladimir Viktorovich Knyshov 250 * 250 0 0
-----------------------------------------------------------------------------------------------
28
Michael Dmitrievich Nerba 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Irina Vladimirovna Kern 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Sergei Michaelovich Nerba 750 * 750 0 0
-----------------------------------------------------------------------------------------------
Vitaly Alexandrovich Boyarkin 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Victoria Vitalyevna Boyarkina 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Natalya Alexandrovna Boyarkina 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Evgeni Nikolaevich Kern 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Elena Viktorovna Dobrynina 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Alexander Nilolaevich Dobrynin 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Denis Michaelovich Nevzorov 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Tatyana Alexandrovna Nevzorova 250 * 250 0 0
---------------------------------------------------------------------------------------------
Michael Nikolaevich Nevzorov 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Olga Nikolaevna Nerba 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Tatyana Tichonovna Rumina 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Nikolai Petrovich Rumin 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Vladimir Yrevich Dobrov 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Natalya Vladimirovna Prishkolnik 250 * 250 0 0
-----------------------------------------------------------------------------------------------
Charles S. Roberson 100 * 100 0 0
-----------------------------------------------------------------------------------------------
David E. Carra 100 * 100 0 0
-----------------------------------------------------------------------------------------------
April K. Carlisle 600 * 600 0 0
-----------------------------------------------------------------------------------------------
Rich Hemmer 600 * 600 0 0
-----------------------------------------------------------------------------------------------
Stephen Lee 600 * 600 0 0
-----------------------------------------------------------------------------------------------
Susan Elizabeth Cormell 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Julie Caroline Avery 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Pamela Avery 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Robert George William Avery 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Roger Thomas Sant 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Victor Charles Bowmer 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Robert Charles Bowmer 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Barbara Jean Ellson 100 * 100 0 0
-----------------------------------------------------------------------------------------------
John Peter Debney 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Emma Weight 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jean Weight 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jose Luis Guevara Diaz 100 * 100 0 0
-----------------------------------------------------------------------------------------------
David Guevara Diaz 600 * 600 0 0
-----------------------------------------------------------------------------------------------
Mevert Aurelio Serrano Selazco 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Pablo Hernandez Gallon 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Juan Dario Hernandez Cano 100 * 100 0 0
-----------------------------------------------------------------------------------------------
29
Mario J. Lemoine Iragorri 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Frank Enrique Ladera Ladera 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Felipe Enrique Betancourt Garcia 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Fernandez Quintero Reinaldo Alberto 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Mena Matute Mayerling Daliath 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Guevara Diaz Monica 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Carlos Jesus Guevara Diaz 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Eduardo Jose Banco 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jose Luis Loreto Gutierrez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Alexander Luis Barretto 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Leonardo Pedrin Vargas 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jeans Carlos Herrera 100 * 100 0 0
-----------------------------------------------------------------------------------------------
David Curbenos Garcia 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Pedro Pablo Gutierrez Moreno 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Julio Cesar Rodriguez Revette 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Neil Alberto Alcala Bello 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Victor Jose Monillo 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Angel Jose Oneca 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Leonel Antonio Borreso Herrera 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Carlos Alberto Armas 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Hector Jose Alvarez Mejias 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jose Luis Vegas 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Daisy Oviedo De Lara 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Mitzy Capriles De Ledezma 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Rosalia Romero 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jesus Amoyo Gomez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Amadeo Leyba 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Mercedes Vargas 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Daniela Schadendorf De Esparis 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Leonardo Velazquez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Susana Prada De Allulli 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jose Pimentel Latvaa 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Esdgan Mujica 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jose Feliz Oletta 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Dulce Delgado 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Maria Cristina Parra 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Nelson Jose Lara 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Nancy Montero 100 * 100 0 0
-----------------------------------------------------------------------------------------------
30
Luis Enrique Oberto 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Mariztza Matiozzi 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jorge Carvajal Morales 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Fernando Pereira 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Wilmer Jose De Abrev Vazquez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jacqueline Carrasco Gamez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Iraida De La Corteza Carrasco De John 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Victor Jovanny Suarez Valdes Pino 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Abranham Giraud L. 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Pablo Rafael Barretto 100 * 100 0 0
----------------------------------------------------------------------------------------------
Jhonny Emiliano Diaz Pacheco 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jorge A. Briones Torrealba 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Omar Antonio Morales Mancano 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Williams Montes 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Pedro Pacheco 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Manuel Antonio Gonzalez Gonzalez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Rafael Chenubini Ocando 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Pedro Miguel Cardozo Azuaje 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jose Luis Ferreira 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Brieda Aular Perez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Henry Rossenschein 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Ernesto Fernandez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Dumas Roberto Gomez Gonzalez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Guillermo Paredes 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jose Dominguez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Hugo Cesar Bastidas 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Richard Tovar 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Feliz Morales Marcano 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Mario Olivares Marcano 100 * 100 0 0
-----------------------------------------------------------------------------------------------
George Dao Dao 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Alejandro Andres H. 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Francis Carolina Maldonado Gonzalez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Leonardo George Bastardo 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Elba Elena Diaz Acero 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Roberto Carlos Diaz 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Silio Antonio Manzanero Lariva 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Eduardo Jose Crespo 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Josueismael Gomez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
31
Eduardo Palomar Lopez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Miguel Enrique Ravelo Vouteris 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Ibain Gregorio Lopez Artiaga 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Gabriel Antonio Caraballo Soto 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Edgar Jose Maldonado Garcia 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Maria Particia Pichardo 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Rafael Angel Chavez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Eric David Domingo Azaujo 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Maikel Lopez Lopez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Gustavo Heiten Aguylar 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Carlos Alfredo Ferreira Moron 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Maria Josefa Cheda Saavedra 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Hermogenes Francisco Gil Suarez 100 * 100 0 0
-----------------------------------------------------------------------------------------------
William Rommel Montes Rojas 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Miguel Antonio Flores Vargas 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Ruben Silva Boico 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Ersel Susar 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Jeriah D. Civlei 100 * 100 0 0
-----------------------------------------------------------------------------------------------
John Tsai 350 * 350 0 0
-----------------------------------------------------------------------------------------------
Guillermo Guevara 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Elizabeth Hudson 100 * 100 0 0
-----------------------------------------------------------------------------------------------
Graham Bowmer 100 * 100 0 0
-----------------------------------------------------------------------------------------------
* Less than 1%.
(1) Assuming all shares registered are sold.
(2) MAS Capital Inc. is controlled by Aaron Tsai. Aaron Tsai is officer,
director and control person of MAS Capital Inc. MAS Capital Inc. is a
selling security holder. Aaron Tsai personally is not a selling security
holder.
Following selling stockholders have served as our Directors in the
past:
Aaron Tsai, Charles S. Roberson, David E. Carra, April K. Carlisle, Rich
Hemmer, Stephen Lee, Ersel Susar, Jeriah D. Civlei, John Tsai, Guillermo
Guevara and Elizabeth Hudson.
32
LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
LEGAL MATTERS
Daniel H. Luciano, Attorney-At-Law, has acted as our counsel in
connection with a legal opinion relating to the validity of the shares under
this prospectus that have been issued to the selling shareholders and that
are to be issued by the Company. No other matters have been passed upon by
such counsel.
EXPERTS
The financial statements of Telecom Communications of America as of and
for the years ended September 30, 2000 and September 30, 1999 appearing in
this Prospectus and Registration Statement have been audited by Robert G.
Ercek, independent certified public accountant, as stated in report
appearing elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We filed a registration statement with the SEC on Form SB-2 relating to
the shares offered in this prospectus. This prospectus does not contain all
of the information included in the registration statement. For further
information about us and the shares we are offering in this prospectus,
refer to the registration statement and its exhibits. The statements we make
in this prospectus regarding the content of any contract or other document
are necessarily not complete, and you may examine the copy of the contract
or other document that we filed as an exhibit to the registration statement.
All our statements about those contracts or other documents are qualified in
their entirety by referring you to the exhibits to the registration
statement.
As of the effective date of the registration statement, we will be a
reporting company and will be subject to the reporting requirements of the
Securities Exchange Act. Our filings may be inspected and copied without
charge at the public reference facility of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices located at Seven World Trade Center, Suite 1300, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials can be obtained by mail from the Public
Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C.20549, at prescribed rates. In addition, we
are required to file electronic versions of these documents with the SEC
through the SEC's Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. The SEC maintains a Web site at http://www.sec.gov that
contains reports, proxy statements and other information regarding
registrants that file electronically with the SEC.
33
INDEX TO FINANCIAL STATEMENTS
Content Page
--------------------------------------------------------------------- ----
Independent Auditor's Report F-2
Balance Sheet at September 30, 1999 & 2000 F-3
Income Statement for the Year Ended September 30, 1999 & 2000 F-4
Statements of Cash Flows for the Year Ended September 30, 1999 & 2000 F-5
Statement of Changes in Owner's Equity for the Year Ended
September 30, 1999 & 2000 F-6
Notes to The Financial Statements for the Year Ended September 30,
1999 & 2000 F-7
Accountant's Review Report F-13
Balance Sheet at June 30, 2000 & 2001 F-14
Income Statement for the Year Ended June 30, 2000 & 2001 F-15
Statements of Cash Flows for the Year Ended June 30, 2000 & 2001 F-16
Notes to The Financial Statements for the Year Ended June 30,
1999 & 2000 F-17
F-1
ROBERT G. ERCEK, CPA
1756 West Ave. J-12 #107
Lancaster, CA 93534 (661)-726-9448
INDEPENDENT AUDITOR'S REPORT
November 14, 2001
Telecom Communications of America
827 South Broadway
Los Angeles, CA 90014-3201
I have audited the Balance Sheet of Telecom Communications of America as of
September 30, 1999 and 2000 and the related Statements of income, cash
flows, and changes in owner's equity for the respective twelve months then
ended. These financial statements are the responsibility of the management
of the company. My responsibility is to express an opinion on them based on
my audit.
I conducted the audit in accordance with Generally Accepted Auditing
Standards as set forth by the America Institute of Certified Public
Accountants. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from 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. I believe that my audit provides a
reasonable basis for my opinion.
Based on the results of my audit, I believe the financial statements
referred to above presents fairly in all material respects, the financial
position of Telecom Communications of America as of September 30, 1999 and
2000, the results of its operations, cash flows, and changes in owner's
equity for the respective twelve months then ended in conformity with
generally accepted accounting principles.
These financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 17, ownership draws have
produced a capital deficiency that raise substantial doubt about the
Company's ability to continue as a going concern as well as other factors.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Very truly yours,
/s/ Robert G. Ercek
Robert G. Ercek, CPA
F-2
TELECOM COMMUNICATIONS OF AMERICA
BALANCE SHEET
SEPTEMBER 30, 1999 & 2000
ASSETS 1999 2000
CURRENT ASSETS
Cash in Bank (Note 4) $ 13,781 $ 2,443
Inventory (Note 5) 4,000 4,000
----------- -----------
TOTAL CURRENT ASSETS $ 17,781 6,443
PROPERTY & EQUIPMENT
Equipment (Note 7) 7,450 7,450
Less: Accumulated Depr. (7,450) (7,450)
----------- -----------
NET PROPERTY & EQUIPMENT 0 0
OTHER ASSETS 0 0
----------- -----------
TOTAL OTHER ASSETS 0 0
TOTAL ASSETS $ 17,781 $ 6,443
=========== ===========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES
Inc. Tx. Payable (Note 14) $ 42,740 $ 27,398
----------- -----------
TOTAL CURRENT LIABILITIES 42,740 27,398
LONG TERM LIABILITIES 0 0
TOTAL LONG TERM LIABILITIES 0 0
TOTAL LIABILITIES 42,740 27,398
----------- -----------
CAPITAL
Begining Capital 12,334 17,781
Less: Withdrawls (119,247) (101,400)
Net Income 81,954 62,664
----------- -----------
TOTAL CAPITAL (24,959) (20,955)
TOTAL LIAB. & CAPITAL $ 17,781 $ 6,443
=========== ===========
SEE INDEPENDENT AUDITOR'S REPORT
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-3
TELECOM COMMUNICATIONS OF AMERICA
INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999 & 2000
1999 2000
INCOME (Note 2)
Phone Calls $ 125,452 14.7% $ 116,752 18.2%
Lotto Tickets (Net) 1,989 .2 7,885 1.2
Bus Tokens Sold 590,135 69.1 403,292 62.8
Bus Passes Sold 96,686 11.3 95,789 14.9
Checks Cashed (Net) 25,633 3.0 8,139 1.3
Money Grams (Net) 13,553 1.6 10,163 1.6
------------ ------------
TOTAL INCOME 853,448 100.0 642,020 100.0
------------ ------------
COST OF GOODS SOLD
Phone Call Costs 48,722 5.7 44,426 6.9
Bus Token Costs 544,628 63.8 365,230 56.9
Bus Pass Costs 93,326 10.9 92,467 14,4
------------ ------------
TOTAL COST OF SALES 686,676 80.4 502,123 78.2
------------ ------------
GROSS PROFIT 166,772 19.6 139,897 21.8
------------ ------------
EXPENSES
Gen. & Admn. Expenses 42,078 4.9 49,835 7.8
------------ ------------
TOTAL G. & A. EXPENSES 42,078 4.9 49,835 7.8
------------ ------------
OTHER INCOME (EXPENSES) 0 0
PRE-TAX INCOME 124,694 14.7 90,062 14.0
------------ ------------
INCOME TAX PROVISION
Fed. Inc. Tx Provision 31,143 3.6 19,020 3.0
St. Inc. Tx Provision 11,597 1.4 8,376 1.3
------------ ------------
TOTAL INC. TX. PROV. 42,740 5.0 27,398 4.3
------------ ------------
NET INCOME (LOSS) $ 81,954 9.7% $ 62,664 9.7%
============ ============
EPS (10,000,000 SHRS) $ .01 $ .01
============ ============
SEE INDEPENDENT AUDITOR'S REPORT
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-4
TELECOM COMMUNICATIONS OF AMERICA
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30,1999 & 2000
1999 2000
NET INCOME (LOSS) $ 81,954 $ 62,664
Adjustments to reconcile Net Income
to net cash used in operating Activities:
Depreciation: 0 0
Increase in Other Current Assets 0 0
Increase in Other Assets 0 0
Increase in Accounts Receivable 0 0
Increase in Accounts Payable 42,740 27,398
--------- ---------
NET CASH FROM OPERATIONS 124,694 90,062
Cash Flows from Investing Activities 0 0
Owner Draws (119,247) (101,400)
Cash Flows from Financing Activities: 0 0
--------- ---------
NET INCREASE (DECREASE) IN CASH 5,447 (11,338)
BEGINNING CASH BALANCE 10/01/98 & 99 8,334 13,781
--------- ---------
CASH AT SEPTEMBER 30, 1999 & 2000 $ 13,781 $ 2,443
========= =========
SEE INDEPENDENT AUDITOR'S REPORT
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-5
TELECOM COMMUNICATIONS OF AMERICA
STATEMENT OF CHANGES IN OWNER'S EQUITY
SEPTEMBER 30, 1999 & 2000
1999 2000
Beginning Balance ........................ $ 12,334 ($ 24,959)
Income (Loss) For the Period ............ 81,954 62,664
Reverse Prior Yr. Tax Accrual ............ 0 42,740
Less: Owner Draws ....................... ( 119,247) ( 101,400)
----------- -----------
Balance at Year End ...................... ($ 24,959) ($ 20,955)
=========== ==========
F-6
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999 & 2000
NOTE 1. ABOUT THE COMPANY
Telecom Communications of America was founded as a sole proprietorship in
1995 by Michelle Hiromoto with the assistants and management of her father
Tak Hiromoto. The purpose of the company was to provide low cost access to
long distance carriers for individuals needing to call Latin and South
America. The company operates on the internet as opposed to using
conventional long distance carriers to facilitate lower costs that are
passed on to the customers. Many of the extra fees that are found in
conventional long distance systems are avoided this way. In addition the
Company also provides various services such as check cashing, money wiring,
the sale of bus tokens and passes, and tickets from the California Lottery
known as Lotto.
NOTE 2. REVENUE RECOGNITION
SAB 101 identifies basic criteria that must be met for revenue recognition.
There must the following items:
A. Persuasive evidence of an arrangement exists;
B. Delivery has occurred or service has been rendered;
C. The seller's price to the buyer is fixed or determinable;
D. Collectability is reasonably assured.
Except for check cashing, all transaction are done on a cash basis with
fixed prices made clear to the buyer prior to the transaction. All products
are paid for immediately upon receipt or completion of phone calls. All
monies received are not refundable. EITF 99-19 requires that sales
recognized on a gross basis be for an item or service where the merchant
takes total risk for the product or service as opposed to an agent
relationship wherein earnings are simply a commission received as a
representative who bearing no risk. Phone calls, Bus Passes, and Tokens,
are reported at gross while Lotto Tickets Money Grams and Check Cashing are
reported at net. Checks cashed are limited to local individuals known by
the owners as local employees with two types of I.D. required. On one
occasion $5,000 worth of checks did bounce which were later determined to be
counterfeit.
F-7
This incident was isolated and has not been repeated because of the controls
being used. For this reason bad checks are minimal. All cashed checks are
deposited the same evening and clear the next day so there are no material
receivables. There is a fee of 1.7% of the amount cashed.
NOTE 3. ACCOUNTING METHOD
The company uses the accrual method of accounting.
NOTE 4. BANKING POLICY
Funds are kept in two banks so no more than $100,000 is in any one account.
NOTE 5. INVENTORY VALUATION
The average Inventories on any given day are as follows:
Bus Passes $ 500
Bus Tokens 2,000
Lotto Scratcher 1,500
-------
Total $ 4,000
=======
NOTE 6. RECEIVABLES
There are no receivables as all business is done for cash. See Note 2.
NOTE 7. ASSETS
All capitalized assets are fully depreciated while new ones are currently
being leased.
NOTE 8. LIABILITIES
There are no loans outstanding and no material payables other than income
taxes accrued. See note 14.
F-8
NOTE 9. LOANS AND LEASES
Although no loans are outstanding, the Company does have a computer lease
requiring a monthly payment of $911.00. This lease is good thrue July 1,
2003. Although there is a purchase option at the end of the lease for
$3,600 this is not small enough to be considered a bargain purchase option
which would require lease capitalization under Statement No. 13 which
requires capitalization and depreciation of certain leases. No
capitalization of the lease will be done. The Company is also leasing its
occupancy thrue December 31, 2003. Both obligations are broken down as
follows:
Computer Lease
Bal. On 07/01/2001 thrue 09/30/2001 $ 2,733
Bal. On 10/01/2001 thrue 09/30/2002 $ 10,932
Bal. On 10/01/2002 thrue 07/01/2003 $ 8,199
---------
Total $ 21,864
=========
Occupancy Lease:
Bal. On 07/01/2001 thrue 09/30/2001 $ 5,400
Bal. On 10/01/2001 thrue 09/30/2002 $ 22,300
Bal. On 10/01/2002 thrue 09/30/2003 $ 23,500
Bal. On 10/01/2003 thrue 12/31/2003 $ 6,000
---------
Total $ 57,200
=========
NOTE 10. RELATED PARTY TRANSACTIONS
There have been no related party transactions.
NOTE 11. LITIGATION
There is no litigation at this time either threatened or pending.
NOTE 12. PRE-PAID ITEMS AND DEPOSITS
There are no large deposits on any assets or prepaid insurance.
F-9
NOTE 13. PAYROLL
Prior to incorporation there were no payrolls as ownership took draws as any
sole proprietorship does. after incorporation the officers will be paid as
professional, independent contractors. Therefore there are no payroll tax
issues to be concerned about at this time.
NOTE 14. INCOME TAX PROVISION
Provision for income taxes is based on corporate rates for both state and
federal taxes. Corporate rates are used for the statements prior to
incorporation for consistency.
The rates are calculated as follows:
Federal rates;
The first $50,000 @ 15% percent.
The next $25,000 @ 25% percent.
The balance @ 35% percent.
State rates;
California rate of 9.3%..
NOTE 15. INCORPORATION
On December 21, 2000, the Company was acquired by MAS Acquisition XXI Corp.
Following APB No. 16, this type of acquisition is commonly called a "reverse
merger" wherein the smaller private operating Company, Telecom
Communications of America, merges into a non-operating shell corporation,
MAS Acquisition XXI Corp., which had no assets, resulting in the
owner's/manager's, Tak Hiromoto continuing to have effective operating
control of the new combined company, Telecom Communications, Inc. The
shareholders of the former shell only continue as passive investors. The
accounting was accomplished by adjusting the balance sheet into a corporate
style as opposed to a sole proprietorship with simple recognition of the
assets and liabilities as they were in the former financial statements of
the sole proprietorship. The equity section is adjusted by taking all
owner's capital and reclassifying it as Additional Paid in Capital. The
Common stock issued is recognized at its par value of .001 as per the
offering. Ten million shares were issued totaling $10,000 but no cash was
received. The offsetting entry is to reduce Additional Paid in Capital by
the $10,000. The financial statements presented here represent the
activities of the smaller operating company.
F-10
As mentioned, ten million shares have been issued at a par value of .001. A
total of 100 Million shares are authorized with 80 million as common shares
and 20 million as preferred. The preferred stock will not be convertible so
once issued no dilution of Earnings Per Share will be needed. The Company
intends to raise additional capital through the issuance of stock to enable
it to expand. Management estimates that $50,000 is needed to move forward
the first year. Of the ten million shares issued, nine million were issued
to Tak Hiromoto. He then transferred one million shares to Herman Alexis &
Co., Inc. for assisting the Company. The remaining one million shares is
broken down with 977,600 owned by MAS Capital, inc. and the remaining 22,400
owned by a large number of small investors.
NOTE 16. FACILITATION OF MERGER
The joining of the Companies was accomplished by an introduction to MAS
Acquisition XXI Corp. by Herman Alexis & Co., Inc. to the Hiromotos.
Neither party knew each other before this introduction.
NOTE 17. GOING CONCERN
As mentioned in Note 15, management estimates that $50,000 is needed to
effectively expand and operate the company for the first year. Although the
Company has operated successfully for seven years, ownership draws have
produced a capital deficiency that raise substantial doubt about the
Company's ability to continue as a going concern. The future is
unpredictable. The financial statements are presented on the going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company's ability to
continue as a going concern must be considered in light of the problems,
expenses, and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates. The financial statements prepared here have not been adjusted to
reflect possible future events and their effect on the recoverability and
classification of assets or the amounts and classification of assets or the
amount and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
F-11
NOTE 18. EARNING PER SHARE
The Company calculates net income or Earning per Share as required by SFAS
No. 128. Earnings per share are calculated by dividing net income by the
average number of outstanding shares. No shares are convertible so dilution
is not an issue.
NOTE 19. DEFERRED TAXES
According to SFAS 109, the objectives of accounting for income taxes are to
recognize (a) the amount of taxes payable or refundable for a current year
and (b) deferred tax liabilities and assets for the future tax consequences
of events that have been recognized in an enterprise's financial statements
or tax returns. A deferred tax liability or asset is recognized for the
estimated future tax effects attributable to temporary differences and
carryforwards. Measurements of current and deferred tax liabilities and
assets are based on provisions of the enacted tax law. The effects of
future changes in tax laws or rates are not anticipated. If a tax deferral
occurs, the measurement of deferred tax assets is reduced, if necessary, by
the amount of any tax benefits that, based on available evidence, are not
expected to be realized. At this time, there are no such deferrals. See
Note 14 for calculations of current tax year liabilities based on existing
rates.
NOTE 20. SEGMENT REPORTING
Currently the Company reports only one segment on the financial statements
as there is only one central location of business and not multiple locations
or departments. SFAS 131 defines an operating segment, in part, as a
component of an enterprise whose operating results are regularly reviewed by
the chief operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance. The chief operating
decision maker is not necessarily a single person, but is a function that
may be performed by several persons.
F-12
ROBERT G. ERCEK, CPA
1756 West Ave, J-12
Lancaster, CA 93534
(661)-726-9448
ACCOUNTANT'S REVIEW REPORT
November 14, 2001
Telecom Communications of America
Telecom Communications, Inc.
827 South Broadway Ste C
Los Angeles, CA 90014-3201
I have reviewed the Balance Sheet of Telecom Communications of America and
Telecom Communications, Inc. as of June 30, 2000 and 2001 respectively and
the related Statements of Income and Cash Flows for the nine months then
ended respectively in accordance with standards established by the Statement
on Accounting Standards as issued by the American Institute of Certified
Public Accountants.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less
in scope than an audit conducted in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, I do not
express such an opinion.
Based on my review, I am not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
These statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 17, ownership draws have produced
a capital deficiency that raise substantial doubt about the Company's
ability to continue as a going concern as well as other factors. The
financial statements do not include any adjustments that might result from
this uncertainty.
Very truly yours,
/s/ Robert G. Ercek
Robert G. Ercek, CPA
F-13
TELECOM COMMUNICATIONS OF AMERICA &
TELECOM COMMUNICATIONS, INC.
BALANCE SHEET
JUNE 30, 2000 & 2001
ASSETS 2000 2001
CURRENT ASSETS
Cash in Bank (Note 4) $ 6,855 $ 3,228
Inventory (Note 5) 4,000 4,000
----------- -----------
TOTAL CURRENT ASSETS $ 10,855 $ 7,228
PROPERTY & EQUIPMENT
Equipment (Note 7) 7,450 7,450
Less: Accumulated Depr. (7,450) (7,450)
----------- -----------
NET PROPERTY & EQUIPMENT 0 0
OTHER ASSETS 0 0
----------- -----------
TOTAL OTHER ASSETS 0 0
TOTAL ASSETS $ 10,855 $ 7,228
=========== ===========
LIABILITIES AND CAPITAL
CURRENT LIABS. (Note 14)
Inc. Tax Payable (Note 14) $ 11,073 $ 13,862
----------- -----------
TOTAL CURRENT LIABILITIES 11,073 13,862
LONG TERM LIABILITIES 0 0
TOTAL LONG TERM LIABILITIES 0 0
TOTAL LIABILITIES 11,073 13,862
----------- -----------
CAPITAL/EQUITY (NOTE 15)
Begining Capital 17,781
Less: Withdrawls (52,495)
Net Income 34,496
CAPITAL STOCK
10M Shrs Issued Par .001 10,000
70M More Shrs Common Auth. 0
20M Shrs Preferred Auth. 0
Additional Paid in Capital (57,761)
Retained Earnings 41,127
----------- -----------
TOTAL CAPITAL/EQUITY (218) ( 6,634)
TOTAL LIAB. & CAPITAL/EQU. $ 10,855 $ 7,228
=========== ===========
SEE ACCOUNTANT'S REVIEW REPORT
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-14
TELECOM COMMUNICATIONS OF AMERICA &
TELECOM COMMUNICATIONS, INC.
INCOME STATEMENT
FOR THE RESPECTIVE NINE MONTHS ENDED JUNE 30, 2000 & 2001
2000 2001
INCOME (Note 2)
Phone Calls $ 87,156 15.3% $ 127,313 21.8%
Lotto Tickets (Net) 4,038 .7 4,632 .8
Bus Tokens Sold 380,618 66.9 400,048 68.4
Bus Passes Sold 87,264 15.3 38,829 6.6
Checks Cashed (Net) 6,508 1.1 8,000 1.4
Money Grams (Net) 3,687 .6 6,428 1.1
------------ ------------
TOTAL INCOME 569,271 100.0 585,250 100.0
------------ ------------
COST OF GOODS SOLD
Phone Call Costs 42,962 7.5 61,178 10.5
Bus Token Costs 352,007 61.8 368,934 63.0
Bus Pass Costs 83,986 14.8 37,295 6.4
------------ ------------
TOTAL COST OF SALES 478,955 84.1 467,407 79.9
------------ ------------
GROSS PROFIT 90,316 15.9 117,843 20.1
------------ ------------
EXPENSES
Gen. & Admn. Expenses 44,747 7.9 62,854 10.7
------------ ------------
TOTAL G. & A. EXPENSES 44,747 7.9 62,854 10.7
------------ ------------
OTHER INCOME (EXPENSES) 0 0
PRE-TAX INCOME 45,569 8.0 54,989 9.4
------------ ------------
INCOME TAX PROVISION
Fed. Inc. Tx Provision 6,835 1.3 8,748 1.5
St. Inc. Tx Provision 4,238 .8 5,114 .9
------------ ------------
TOTAL INC. TX. PROV. 11,073 1.9 13,862 2.4
------------ ------------
NET INCOME (LOSS) $ 34,496 6.1% $ 41,127 7.0%
============ ============
EPS (10,000,000 SHRS) $ .00 $ .00
============ ============
SEE ACCOUNTANT'S REVIEW REPORT
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-15
TELECOM COMMUNICATIONS OF AMERICA &
TELECOM COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30,2000 & 2001
2000 2001
NET INCOME (LOSS) $ 34,496 $ 41,127
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 0 0
Common Shares issued for services 0 0
Increase in Other Current Assets 0 0
Increase in Other Assets 0 0
Increase in Accounts Receivable 0 0
Increase in Accounts Payable 11,073 13,862
--------- ---------
NET CASH FROM OPERATIONS 45,569 54,989
Cash Flows from Investing Activities
Owner Draws (52,495) (54,204)
Cash Flows from Financing Activities 0 0
--------- ---------
NET INCREASE IN CASH (6,926) 785
BEGINNING CASH BALANCE 09/30/99/2000 13,782 2,443
--------- ---------
ENDING CASH BALANCE $ 6,855 $ 3,228
========= =========
SEE ACCOUNTANT'S REVIEW REPORT
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-16
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 2000 & 2001
NOTE 1. ABOUT THE COMPANY
Telecom Communications of America was founded as a sole proprietorship in
1995 by Michelle Hiromoto with the assistants and management of her father
Tak Hiromoto. The purpose of the company was to provide low cost access to
long distance carriers for individuals needing to call Latin and South
America. The company operates on the internet as opposed to using
conventional long distance carriers to facilitate lower costs that are
passed on to the customers. Many of the extra fees that are found in
conventional long distance systems are avoided this way. In addition the
Company also provides various services such as check cashing, money wiring,
the sale of bus tokens and passes, and tickets from the California Lottery
known as Lotto.
NOTE 2. REVENUE RECOGNITION
SAB 101 identifies basic criteria that must be met for revenue recognition.
There must the following items:
A. Persuasive evidence of an arrangement exists;
B. Delivery has occurred or service has been rendered;
C. The seller's price to the buyer is fixed or determinable;
D. Collectability is reasonably assured.
Except for check cashing, all transaction are done on a cash basis with
fixed prices made clear to the buyer prior to the transaction. All products
are paid for immediately upon receipt or completion of phone calls. All
monies received are not refundable. EITF 99-19 requires that sales
recognized on a gross basis be for an item or service where the merchant
takes total risk for the product or service as opposed to an agent
relationship wherein earnings are simply a commission received as a
representative who bearing no risk. Phone calls, Bus Passes, and Tokens,
are reported at gross while Lotto Tickets Money Grams and Check Cashing are
reported at net. Checks cashed are limited to local individuals known by
the owners as local employees with two types of I.D. required. On one
occasion $5,000 worth of checks did bounce which were later determined to be
counterfeit.
F-17
This incident was isolated and has not been repeated because of the controls
being used. For this reason bad checks are minimal. All cashed checks are
deposited the same evening and clear the next day so there are no material
receivables. There is a fee of 1.7% of the amount cashed.
NOTE 3. ACCOUNTING METHOD
The company uses the accrual method of accounting.
NOTE 4. BANKING POLICY
Funds are kept in two banks so no more than $100,000 is in any one account.
NOTE 5. INVENTORY VALUATION
The average Inventories on any given day are as follows:
Bus Passes $ 500
Bus Tokens 2,000
Lotto Scratcher 1,500
-------
Total $ 4,000
=======
NOTE 6. RECEIVABLES
There are no receivables as all business is done for cash. See Note 2.
NOTE 7. ASSETS
All capitalized assets are fully depreciated while new ones are currently
being leased.
NOTE 8. LIABILITIES
There are no loans outstanding and no material payables other than income
taxes accrued. See note 14.
NOTE 9. LOANS AND LEASES
F-18
Although no loans are outstanding, the Company does have a computer lease
requiring a monthly payment of $911.00. This lease is good thrue July 1,
2003. Although there is a purchase option at the end of the lease for
$3,600 this is not small enough to be considered a bargain purchase option
which would require lease capitalization under Statement No. 13 which
requires capitalization and depreciation of certain leases. No
capitalization of the lease will be done. The Company is also leasing its
occupancy thrue December 31, 2003. Both obligations are broken down as
follows:
Computer Lease
Bal. On 07/01/2001 thrue 09/30/2001 $ 2,733
Bal. On 10/01/2001 thrue 09/30/2002 $ 10,932
Bal. On 10/01/2002 thrue 07/01/2003 $ 8,199
---------
Total $ 21,864
=========
Occupancy Lease:
Bal. On 07/01/2001 thrue 09/30/2001 $ 5,400
Bal. On 10/01/2001 thrue 09/30/2002 $ 22,300
Bal. On 10/01/2002 thrue 09/30/2003 $ 23,500
Bal. On 10/01/2003 thrue 12/31/2003 $ 6,000
---------
Total $ 57,200
=========
NOTE 10. RELATED PARTY TRANSACTIONS
There have been no related party transactions.
NOTE 11. LITIGATION
There is no litigation at this time either threatened or pending.
NOTE 12. PRE-PAID ITEMS AND DEPOSITS
There are no large deposits on any assets or prepaid insurance.
F-19
NOTE 13. PAYROLL
Prior to incorporation there were no payrolls as ownership took draws as any
sole proprietorship does. after incorporation the officers will be paid as
professional, independent contractors. Therefore there are no payroll tax
issues to be concerned about at this time.
NOTE 14. INCOME TAX PROVISION
Provision for income taxes is based on corporate rates for both state and
federal taxes. Corporate rates are used for the statements prior to
incorporation for consistency.
The rates are calculated as follows:
Federal rates;
The first $50,000 @ 15% percent.
The next $25,000 @ 25% percent.
The balance @ 35% percent.
State rates;
California rate of 9.3%..
NOTE 15. INCORPORATION
On December 21, 2000, the Company was acquired by MAS Acquisition XXI Corp.
Following APB No. 16, this type of acquisition is commonly called a "reverse
merger" wherein the smaller private operating Company, Telecom
Communications of America, merges into a non-operating shell corporation,
MAS Acquisition XXI Corp., which had no assets, resulting in the
owner's/manager's, Tak Hiromoto continuing to have effective operating
control of the new combined company, Telecom Communications, Inc. The
shareholders of the former shell only continue as passive investors. The
accounting was accomplished by adjusting the balance sheet into a corporate
style as opposed to a sole proprietorship with simple recognition of the
assets and liabilities as they were in the former financial statements of
the sole proprietorship. The equity section is adjusted by taking all
owner's capital and reclassifying it as Additional Paid in Capital. The
Common stock issued is recognized at its par value of .001 as per the
offering. Ten million shares were issued totaling $10,000 but no cash was
received. The offsetting entry is to reduce Additional Paid in Capital by
the $10,000. The financial statements presented here represent the
activities of the smaller operating company.
F-20
As mentioned, ten million shares have been issued at a par value of .001. A
total of 100 Million shares are authorized with 80 million as common shares
and 20 million as preferred. The preferred stock will not be convertible so
once issued no dilution of Earnings Per Share will be needed. The Company
intends to raise additional capital through the issuance of stock to enable
it to expand. Management estimates that $50,000 is needed to move forward
the first year. Of the ten million shares issued, nine million were issued
to Tak Hiromoto. He then transferred one million shares to Herman Alexis &
Co., Inc. for assisting the Company. The remaining one million shares is
broken down with 977,600 owned by MAS Capital, inc. and the remaining 22,400
owned by a large number of small investors.
NOTE 16. FACILITATION OF MERGER
The joining of the Companies was accomplished by an introduction to MAS
Acquisition XXI Corp. by Herman Alexis & Co., Inc. to the Hiromotos.
Neither party knew each other before this introduction.
NOTE 17. GOING CONCERN
As mentioned in Note 15, management estimates that $50,000 is needed to
effectively expand and operate the company for the first year. Although the
Company has operated successfully for seven years, ownership draws have
produced a capital deficiency that raise substantial doubt about the
Company's ability to continue as a going concern. The future is
unpredictable. The financial statements are presented on the going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company's ability to
continue as a going concern must be considered in light of the problems,
expenses, and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates. The financial statements prepared here have not been adjusted to
reflect possible future events and their effect on the recoverability and
classification of assets or the amounts and classification of assets or the
amount and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
F-21
NOTE 18. EARNING PER SHARE
The Company calculates net income or Earning per Share as required by SFAS
No. 128. Earnings per share are calculated by dividing net income by the
average number of outstanding shares. No shares are convertible so dilution
is not an issue.
NOTE 19. DEFERRED TAXES
According to SFAS 109, the objectives of accounting for income taxes are to
recognize (a) the amount of taxes payable or refundable for a current year
and (b) deferred tax liabilities and assets for the future tax consequences
of events that have been recognized in an enterprise's financial statements
or tax returns. A deferred tax liability or asset is recognized for the
estimated future tax effects attributable to temporary differences and
carryforwards. Measurements of current and deferred tax liabilities and
assets are based on provisions of the enacted tax law. The effects of
future changes in tax laws or rates are not anticipated. If a tax deferral
occurs, the measurement of deferred tax assets is reduced, if necessary, by
the amount of any tax benefits that, based on available evidence, are not
expected to be realized. At this time, there are no such deferrals. See
Note 14 for calculations of current tax year liabilities based on existing
rates.
NOTE 20. SEGMENT REPORTING
Currently the Company reports only one segment on the financial statements
as there is only one central location of business and not multiple locations
or departments. SFAS 131 defines an operating segment, in part, as a
component of an enterprise whose operating results are regularly reviewed by
the chief operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance. The chief operating
decision maker is not necessarily a single person, but is a function that
may be performed by several persons.
F-22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons
of the registrant pursuant to provisions described in Item 14, or otherwise,
the registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification by the registrant against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in
the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against pubic policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of our expenses in
connection with the registration of our common stock. All the expenses are
estimated, except for the SEC registration fee.
SEC Registration Fee ..................................... $ 924.00
Printing and engraving expenses .......................... $ 2,000.00
Legal fees and expenses .................................. $ 1,000.00
Auditors' fees and expenses .............................. $ 3,000.00
Transfer Agent and Registrar fees ........................ $ 5,000.00
----------
TOTAL $11,924.00
==========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On January 6, 1997, we issued 8,500,000 shares of common stock to Aaron
Tsai, our former President for $90, which was below the par value at $.001
per common share. We relied on exemption provided by Section 4(2) of the
Securities Act of 1933, as amended.
On January 6, 1997, we issued 500 shares of common stock and on September
30, 1998 we issued 750 shares of common stock to our former directors as
compensation for their consulting services valued at $1 and $1,
respectively. We relied on exemption provided by Section 4(2) of the
Securities Act of 1933, as amended.
On October 1, 1999, we issued 100 shares of common stock to an individual as
compensation for consulting service valued at $0. We relied on exemption
provided by Section 4(2) of the Securities Act of 1933, as amended.
On January 6, 1997, Aaron Tsai gifted 50,000 shares of common stock each to
three of our former directors for a total of 150,000 shares of common stock.
Aaron Tsai relied on exemption provided by Section 4(2) of the Securities
Act of 1933, as amended, for the transfer of the 150,000 shares. On January
6, 1997 and on January 31, 1998, Aaron Tsai gifted 50,000 shares of common
stock each to two non-U.S. persons for a total of 100,000 shares of common
stock as
gift. Aaron Tsai relied on exemption provided by Regulation S of the
Securities Act of 1933, as amended, for the transfer of 100,000 shares of
common stock to these two non-U.S. persons.
On March 31, 1997, we completed a distribution of 7,750 shares of common
stock to the following 31 non-U.S. persons as gift. We relied on exemption
provided by Regulation S of the Securities Act of 1933, as amended.
-----------------------------------------------------------------------------------------------
Shares
-----------------------------------------------------------------------------------------------
Stanislav Nikolaevich Gemes 250
-----------------------------------------------------------------------------------------------
Sergei Konstantinovich Afon 250
-----------------------------------------------------------------------------------------------
Pavel Alexandrovich Sidorkin 250
-----------------------------------------------------------------------------------------------
Stepan Alexandrovich Dybov 250
-----------------------------------------------------------------------------------------------
Ilona Yanochevna Nerba 250
-----------------------------------------------------------------------------------------------
Larisa Nikolaevna Timoshina 250
-----------------------------------------------------------------------------------------------
Natalya Petrovna Timoshilova 250
-----------------------------------------------------------------------------------------------
Anatoly Ivanovich Kim 250
-----------------------------------------------------------------------------------------------
Nina Nikolaevna Kern 250
-----------------------------------------------------------------------------------------------
Alexei Dmitrievich Basuk 250
-----------------------------------------------------------------------------------------------
Vadim Alexandrovich Yuchno 250
-----------------------------------------------------------------------------------------------
Maxim Vladimirovitch Golodnitsky 250
-----------------------------------------------------------------------------------------------
Ludmila Viktorovna Sandaluk 250
-----------------------------------------------------------------------------------------------
Vladimir Viktorovich Knyshov 250
-----------------------------------------------------------------------------------------------
Michael Dmitrievich Nerba 250
-----------------------------------------------------------------------------------------------
Irina Vladimirovna Kern 250
-----------------------------------------------------------------------------------------------
Sergei Michaelovich Nerba 250
-----------------------------------------------------------------------------------------------
Vitaly Alexandrovich Boyarkin 250
-----------------------------------------------------------------------------------------------
Victoria Vitalyevna Boyarkina 250
-----------------------------------------------------------------------------------------------
Natalya Alexandrovna Boyarkina 250
-----------------------------------------------------------------------------------------------
Evgeni Nikolaevich Kern 250
-----------------------------------------------------------------------------------------------
Elena Viktorovna Dobrynina 250
-----------------------------------------------------------------------------------------------
Alexander Nilolaevich Dobrynin 250
-----------------------------------------------------------------------------------------------
Denis Michaelovich Nevzorov 250
-----------------------------------------------------------------------------------------------
Tatyana Alexandrovna Nevzorova 250
-----------------------------------------------------------------------------------------------
Michael Nikolaevich Nevzorov 250
-----------------------------------------------------------------------------------------------
Olga Nikolaevna Nerba 250
-----------------------------------------------------------------------------------------------
Tatyana Tichonovna Rumina 250
-----------------------------------------------------------------------------------------------
Nikolai Petrovich Rumin 250
-----------------------------------------------------------------------------------------------
Vladimir Yrevich Dobrov 250
-----------------------------------------------------------------------------------------------
Natalya Vladimirovna Prishkolnik 250
-----------------------------------------------------------------------------------------------
On September 30, 1998 we completed a distribution of 10,800 shares of common
stock to the following 108 non-U.S. persons as gift. We relied on exemption
provided by Regulation S of the Securities Act of 1933, as amended.
-----------------------------------------------------------------------------------------------
Shares
-----------------------------------------------------------------------------------------------
Susan Elizabeth Cormell 100
-----------------------------------------------------------------------------------------------
Julie Caroline Avery 100
-----------------------------------------------------------------------------------------------
Pamela Avery 100
-----------------------------------------------------------------------------------------------
Robert George William Avery 100
-----------------------------------------------------------------------------------------------
Roger Thomas Sant 100
-----------------------------------------------------------------------------------------------
Victor Charles Bowmer 100
-----------------------------------------------------------------------------------------------
Robert Charles Bowmer 100
-----------------------------------------------------------------------------------------------
Barbara Jean Ellson 100
-----------------------------------------------------------------------------------------------
John Peter Debney 100
-----------------------------------------------------------------------------------------------
Emma Weight 100
-----------------------------------------------------------------------------------------------
Jean Weight 100
-----------------------------------------------------------------------------------------------
Jose Luis Guevara Diaz 100
-----------------------------------------------------------------------------------------------
David Guevara Diaz 100
-----------------------------------------------------------------------------------------------
Mevert Aurelio Serrano Selazco 100
-----------------------------------------------------------------------------------------------
Pablo Hernandez Gallon 100
-----------------------------------------------------------------------------------------------
Juan Dario Hernandez Cano 100
-----------------------------------------------------------------------------------------------
Mario J. Lemoine Iragorri 100
-----------------------------------------------------------------------------------------------
Frank Enrique Ladera Ladera 100
-----------------------------------------------------------------------------------------------
Felipe Enrique Betancourt Garcia 100
-----------------------------------------------------------------------------------------------
Fernandez Quintero Reinaldo Alberto 100
-----------------------------------------------------------------------------------------------
Mena Matute Mayerling Daliath 100
-----------------------------------------------------------------------------------------------
Guevara Diaz Monica 100
-----------------------------------------------------------------------------------------------
Carlos Jesus Guevara Diaz 100
-----------------------------------------------------------------------------------------------
Eduardo Jose Banco 100
-----------------------------------------------------------------------------------------------
Jose Luis Loreto Gutierrez 100
-----------------------------------------------------------------------------------------------
Alexander Luis Barretto 100
-----------------------------------------------------------------------------------------------
Leonardo Pedrin Vargas 100
-----------------------------------------------------------------------------------------------
Jeans Carlos Herrera 100
-----------------------------------------------------------------------------------------------
David Curbenos Garcia 100
-----------------------------------------------------------------------------------------------
Pedro Pablo Gutierrez Moreno 100
-----------------------------------------------------------------------------------------------
Julio Cesar Rodriguez Revette 100
-----------------------------------------------------------------------------------------------
Neil Alberto Alcala Bello 100
-----------------------------------------------------------------------------------------------
Victor Jose Monillo 100
-----------------------------------------------------------------------------------------------
Angel Jose Oneca 100
-----------------------------------------------------------------------------------------------
Leonel Antonio Borreso Herrera 100
-----------------------------------------------------------------------------------------------
Carlos Alberto Armas 100
-----------------------------------------------------------------------------------------------
Hector Jose Alvarez Mejias 100
-----------------------------------------------------------------------------------------------
Jose Luis Vegas 100
-----------------------------------------------------------------------------------------------
Daisy Oviedo De Lara 100
-----------------------------------------------------------------------------------------------
Mitzy Capriles De Ledezma 100
-----------------------------------------------------------------------------------------------
Rosalia Romero 100
-----------------------------------------------------------------------------------------------
Jesus Amoyo Gomez 100
-----------------------------------------------------------------------------------------------
Amadeo Leyba 100
-----------------------------------------------------------------------------------------------
Mercedes Vargas 100
-----------------------------------------------------------------------------------------------
Daniela Schadendorf De Esparis 100
-----------------------------------------------------------------------------------------------
Leonardo Velazquez 100
-----------------------------------------------------------------------------------------------
Susana Prada De Allulli 100
-----------------------------------------------------------------------------------------------
Jose Pimentel Latvaa 100
-----------------------------------------------------------------------------------------------
Esdgan Mujica 100
-----------------------------------------------------------------------------------------------
Jose Feliz Oletta 100
-----------------------------------------------------------------------------------------------
Dulce Delgado 100
-----------------------------------------------------------------------------------------------
Maria Cristina Parra 100
-----------------------------------------------------------------------------------------------
Nelson Jose Lara 100
-----------------------------------------------------------------------------------------------
Nancy Montero 100
-----------------------------------------------------------------------------------------------
Luis Enrique Oberto 100
-----------------------------------------------------------------------------------------------
Mariztza Matiozzi 100
-----------------------------------------------------------------------------------------------
Jorge Carvajal Morales 100
-----------------------------------------------------------------------------------------------
Fernando Pereira 100
-----------------------------------------------------------------------------------------------
Wilmer Jose De Abrev Vazquez 100
-----------------------------------------------------------------------------------------------
Jacqueline Carrasco Gamez 100
-----------------------------------------------------------------------------------------------
Iraida De La Corteza Carrasco De John 100
-----------------------------------------------------------------------------------------------
Victor Jovanny Suarez Valdes Pino 100
-----------------------------------------------------------------------------------------------
Abranham Giraud L. 100
-----------------------------------------------------------------------------------------------
Pablo Rafael Barretto 100
-----------------------------------------------------------------------------------------------
Jhonny Emiliano Diaz Pacheco 100
-----------------------------------------------------------------------------------------------
Jorge A. Briones Torrealba 100
-----------------------------------------------------------------------------------------------
Omar Antonio Morales Mancano 100
-----------------------------------------------------------------------------------------------
Williams Montes 100
-----------------------------------------------------------------------------------------------
Pedro Pacheco 100
-----------------------------------------------------------------------------------------------
Manuel Antonio Gonzalez Gonzalez 100
-----------------------------------------------------------------------------------------------
Rafael Chenubini Ocando 100
-----------------------------------------------------------------------------------------------
Pedro Miguel Cardozo Azuaje 100
-----------------------------------------------------------------------------------------------
Jose Luis Ferreira 100
-----------------------------------------------------------------------------------------------
Brieda Aular Perez 100
-----------------------------------------------------------------------------------------------
Henry Rossenschein 100
-----------------------------------------------------------------------------------------------
Ernesto Fernandez 100
-----------------------------------------------------------------------------------------------
Dumas Roberto Gomez Gonzalez 100
-----------------------------------------------------------------------------------------------
Guillermo Paredes 100
-----------------------------------------------------------------------------------------------
Jose Dominguez 100
-----------------------------------------------------------------------------------------------
Hugo Cesar Bastidas 100
-----------------------------------------------------------------------------------------------
Richard Tovar 100
-----------------------------------------------------------------------------------------------
Feliz Morales Marcano 100
-----------------------------------------------------------------------------------------------
Mario Olivares Marcano 100
-----------------------------------------------------------------------------------------------
George Dao Dao 100
-----------------------------------------------------------------------------------------------
Alejandro Andres H. 100
-----------------------------------------------------------------------------------------------
Francis Carolina Maldonado Gonzalez 100
-----------------------------------------------------------------------------------------------
Leonardo George Bastardo 100
-----------------------------------------------------------------------------------------------
Elba Elena Diaz Acero 100
-----------------------------------------------------------------------------------------------
Roberto Carlos Diaz 100
-----------------------------------------------------------------------------------------------
Silio Antonio Manzanero Lariva 100
-----------------------------------------------------------------------------------------------
Eduardo Jose Crespo 100
-----------------------------------------------------------------------------------------------
Josueismael Gomez 100
-----------------------------------------------------------------------------------------------
Eduardo Palomar Lopez 100
-----------------------------------------------------------------------------------------------
Miguel Enrique Ravelo Vouteris 100
-----------------------------------------------------------------------------------------------
Ibain Gregorio Lopez Artiaga 100
-----------------------------------------------------------------------------------------------
Gabriel Antonio Caraballo Soto 100
-----------------------------------------------------------------------------------------------
Edgar Jose Maldonado Garcia 100
-----------------------------------------------------------------------------------------------
Maria Particia Pichardo 100
-----------------------------------------------------------------------------------------------
Rafael Angel Chavez 100
-----------------------------------------------------------------------------------------------
Eric David Domingo Azaujo 100
-----------------------------------------------------------------------------------------------
Maikel Lopez Lopez 100
-----------------------------------------------------------------------------------------------
Gustavo Heiten Aguylar 100
-----------------------------------------------------------------------------------------------
Carlos Alfredo Ferreira Moron 100
-----------------------------------------------------------------------------------------------
Maria Josefa Cheda Saavedra 100
-----------------------------------------------------------------------------------------------
Hermogenes Francisco Gil Suarez 100
-----------------------------------------------------------------------------------------------
William Rommel Montes Rojas 100
-----------------------------------------------------------------------------------------------
Miguel Antonio Flores Vargas 100
-----------------------------------------------------------------------------------------------
Ruben Silva Boico 100
-----------------------------------------------------------------------------------------------
On December 21, 2000 we issued 9,000,000 shares of common stock to Tak
Hiromoto, owner of Telecom Communications of America, in accordance with
Plan and Agreement of Reorganization dated December 21, 2000. We relied on
exemption provided by Section 4(2) of the Securities Act of 1933, as
amended.
On December 21, 2000 Tak Hiromoto transferred 1,000,000 shares of common
stock to Herman, Alexis & Co., Inc. for services provided to the company.
Tak Hiromoto relied on exemption provided by Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 27. EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
------- --------------------------------------------------------
2.1 Plan and Agreement of Reorganization
3.1 Articles of Incorporation - MAS Acquisition XXI Corp.
3.11 Certificate of Incorporation of MAS Acquisition XXI Corp.
3.2 Articles of Amendment of the Article of Incorporation -
MAS Acquisition XXI Corp.
3.5 By-laws
5.1 Opinion of Counsel
10.1 Standard Office Lease Gross
10.2 Standard Industrial/Commercial Multi-Tenant Lease
10.3 Amendment to Lease
10.4 Consulting Agreement
10.5 Inter-Tel.net Network Agreement
10.6 Memorandum of Understanding
23.1 (Included in Exhibit 5.1)
23.2 Consent of Robert G. Ercek, Certified Public Accountants
------------------------------------------------------------------------
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement 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; and 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 and of the estimated maximum offering
range may be reflected in the form of prospectus filed with Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(iv) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Arcadia, California.
Telecom Communications Inc.
Date: November 28, 2001 By: /s/ Tak Hiromoto
----------------------------
Tak Hiromoto
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, the
registration statement was signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------------------- ------------------------------------ ---------
/s/ Tak Hiromoto Chairman of the Board, President,
---------------------- Chief Executive Officer, Director, Nov 28, 2001
Tak Hiromoto Principal Accounting Officer
/s/ Elizabeth Hiromoto Treasurer and Director Nov 28, 2001
----------------------
Elizabeth Hiromoto
/s/ Robert K. Yasui Director Nov 28, 2001
----------------------
Robert K. Yasui
/s/ Mervyn M. Dymally Director Nov 28, 2001
----------------------
Mervyn M. Dymally
/s/ Masato Saiki Marketing Director Nov 28, 2001
----------------------
Masato Saiki
EXHIBIT 2.1 Merger Agreement
PLAN AND AGREEMENT OF REORGANIZATION
BETWEEN
MAS Acquisition XXI Corp.
(an Indiana corporation)
AND
Ms. Michele Hiromoto dba Telecom Communications of America
This Plan and Agreement of Reorganization is entered into this 21th day of
December, 2000, by and between MAS Acquisition XXI Corp., an Indiana
corporation, with offices at 17 N. Governor Street, Evansville, Indiana
47711, hereafter referred to as "MAS" and Ms. Michele Hiromoto dba Telecom
Communications of America, a Sole Proprietorship in the state of California,
with offices at 827 S. Broadway, Los Angeles, CA 90014 hereinafter referred
to as "TELCOM".
This Plan of Reorganization is within the meaning of Section 368 (a)(1)(B)
of the Internal Revenue Code of 1986, as amended, MAS will acquire 100% of
TELCOM in exchange for 90% of the authorized but unissued shares of MAS.
TELCOM's business, assets, liabilities, intellectual properties will then
become the properties of MAS.
AGREEMENT
In order to consummate such plan of reorganization, the parties hereto, in
consideration of the mutual agreements and on the basis of the
representations and warranties hereafter set forth, do hereby agree, as
follows:
ARTICLE I
1.01. Transfer of TELCOM properties including and not limited to its assets,
liabilities, and intellectual properties and consideration for transfer:
Subject to the terms and conditions of this Agreement, Owner of TELCOM,
prior to the closing date, who shall, at such closing, deliver ownership of
TELCOM's assets, liabilities, and intellectual properties to MAS in exchange
for the stated number of shares of MAS (subject to the provisions of Section
3(a)(9) of the Securities Act of 1933, as amended) as set forth in 1.02
below.
1.02. Consideration for transfer to MAS: On the closing date, subject to the
terms and conditions of this Agreement, and in full consideration for the
transfer and delivery of TELECOM properties to MAS. MAS shall cause to be
delivered, 90% shares of the authorized but unissued capital stock of MAS.
Said MAS shares when issued will be fully paid and nonassessable. Such
shares shall not be free trading as they are not at this time registered or
covered by any exemption. Said shares will be restricted in nature and said
restriction shall be reflected on the face of all certificates included in
the MAS shares.
ARTICLE II
2.01. Closing: The time of delivery by TELCOM owner of their respective
properties as provided in Paragraph 1.01 of this Agreement having already
taken place, said properties being held by Ms. Michele Hiromoto, as
authorized agent, and the certificate(s) for MAS shares as authorized by the
board of directors of MAS being in hand for delivery to Aaron Tsai, as
authorized agent, closing shall be effective with the signing of this
Agreement. For purposes of record, closing shall be effective as of the 21th
day of December, 2000, 5 p.m. Central Time.
ARTICLE III
3.01. Representations and Warranties by TELCOM:
(1) TELCOM is a sole proprietor duly organized and validly existing and in
good standing under the laws of the State of California. It has all
requisite sole proprietor power and authority to carry on its business as
now being conducted, to enter into this Agreement and to carry out and
perform the terms and provisions of this Agreement. TELCOM is duly
qualified, licensed, or domesticated and in good standing as a foreign
entity authorized to do business in each jurisdiction wherein the nature of
its activities conducted or the character of its properties make such
qualification, licensing, or domestication necessary.
(2)(a) TELCOM is not presently liable on account of any indebtedness for
borrowed monies, except as reflected on the Balance Sheet described in
Subparagraph (4), below.
(b) There are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities, or other agreements
or arrangements of any character or nature whatsoever under which TELCOM is
or may be obligated to issue or purchase shares of its business.
(3) Each TELCOM's owner severally and for himself at the time of the Closing
on the Closing Date will be the lawful owner of the properties of TELCOM
held in his name, free and clear of all liens, claims and encumbrances of
every kind. Each owner has full legal right, power, and authority to sell,
assign, and transfer his shares of properties of TELCOM; and the delivery of
such properties to any person pursuant to the provisions of this Agreement
will transfer valid title thereto, free and clear of all liens, encumbrances
and claims of every kind.
(4) TELCOM has furnished MAS with an unaudited Balance Sheet of TELCOM as of
September 30, 2000, hereinafter referred to as the Balance Sheet. Such
financial statement presents fairly the financial condition of TELCOM at
such date. Specifically, but not by way of limitation, the Balance Sheet
discloses all of the debts, liabilities, and obligations of any nature
(whether absolute, accrued, contingent, or otherwise, and whether due or to
become due) of TELCOM at the date thereof.
(5) TELCOM has not, since September 31, 2000:
(a) Incurred any obligations or liabilities, absolute, accrued, contingent,
or otherwise and whether due or to become due, except current liabilities
incurred in the ordinary course of business, none of which adversely affects
the business or prospects of TELCOM.
(b) Discharged or satisfied any liens or encumbrances, or paid any
obligation or liability, absolute, accrued, contingent or otherwise and
whether due or to become due, other than current liabilities shown on the
Balance Sheet and current liabilities incurred since the closing of business
on the date of the Balance Sheet, in each case, in the ordinary course of
business;
(c) Declared or made any payment or distribution to its owners or purchased
or redeemed, or obligated itself to purchase or redeem, any of its
properties;
(d) Mortgaged, pledged, or subjected to lien, or other encumbrances or
charges, of its assets, tangible or intangible;
(e) Sold or transferred any of its assets except for inventory sold in the
ordinary course of business or canceled debt or claim;
(f) Suffered any damage, destruction, or loss (whether or not covered by
insurance) affecting the properties, business, or prospects of TELCOM, or
waived any rights of substantial value;
(g) Entered into any transaction other than in the ordinary course of
business.
(6) There are no legal actions, suits, arbitration, or other legal or
administrative proceedings pending against TELCOM which would affect it, its
properties, assets, or business. TELCOM is not in default with respect to
any judgment, order or decree of any government agency or instrumentality.
(7) TELCOM has good and marketable title to all of its properties and
assets, including without limitation those reflected in the Balance Sheet
and those used or located on property controlled by TELCOM in its business
on the date of the Balance Sheet and acquired thereafter (except assets sold
in the ordinary course of business), subject to no mortgage, pledge, lien,
charge, security interest, encumbrance, or restriction except those which
(a) are disclosed on the Balance Sheet as securing specified liabilities; or
(b) do not materially adversely affect the use thereof. The building and
equipment of TELCOM are in good condition and repair, reasonable wear and
tear excepted. TELCOM has not been, to the knowledge of any officer of
TELCOM, threatened with any action or proceeding under any building or
zoning ordinance, regulation or law.
(8) Prior to Closing Date, TELCOM will have delivered to MAS a separate
Schedule of Assets, specifically referring to this paragraph, containing:
(a) A true and complete aged list of accounts receivable (if any) as of a
date no earlier than the Closing Date.
(b) A true and complete list of all capitalized machinery, tools, equipment,
and rolling stock owned by TELCOM, setting forth all liens, claims,
encumbrances, charges, restrictions, covenants, and conditions.
(c) A complete schedule of all fire and other casualty and liability
policies of TELCOM in effect at the time of delivery of said schedule.
(9) TELCOM is not a party to, or otherwise bound by, any written or oral:
(a) Contract or agreement not made in the ordinary course of business;
(b) Lease with respect to any property, real or personal, whether as lessor
or lessee, except as reflected in the Balance Sheet.
(c) Contract or other commitment continuing for a period of more than thirty
days and which is not terminable without cost or other liability to TELCOM
or its successor except as shown on the Balance Sheet.
TELCOM has in all respects performed all obligations required to be
performed by it to date and is not in material default under any of the
contracts, agreements, leases, documents, or other arrangement to which it
is a party or by which it is otherwise bound.
(10) The books of account and ledgers of TELCOM are complete at Closing and
also correct, and there have been no transactions involving the business of
TELCOM which properly should have been set forth in said respective books,
other then those set forth therein.
(11) Since the Balance Sheet there has not been any material adverse change
in, or event or condition materially and adversely affecting the condition
(financial or otherwise) of the properties, assets or liabilities of TELCOM.
3.02 MAS represents and warrants to TELCOM and its owners as follows:
(1) MAS is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Indiana.
(2) MAS is considered a non-reporting company by the SEC.
(3) MAS's authorized capital stock consists of 80,000,000 shares of common
stock and 20,000,000 shares of preferred stock, par value $.001. Immediately
prior to the completion of this Agreement there are 8,272,400 shares of
common stock validly issued and outstanding.
(4) The execution, delivery, and performance of this Agreement has been duly
authorized by all requisite corporate action. This Agreement constitutes a
valid and binding obligation of MAS in accordance with its terms. No
provision of the Articles of Incorporation and the amendments thereto, by-
laws and any amendments thereto, or of any contract to which MAS is a party
or otherwise bound, which prevents MAS from delivering good title to its
shares of such capital stock in the manner contemplated hereunder.
(5) MAS has furnished TELCOM and its owners with a statement of management,
and previous management, that there are little or no assets and no
liabilities, and that the corporation, and its predecessor have had no
activities in which it could have incurred any liabilities since the
September 30, 2000 financials.
(6) All of the MAS common shares to be issued to TELCOM owners will, when so
issued, be validly issued and outstanding, fully paid and non-assessable.
(7) Since the financial condition statement, there has not been any material
or adverse change in, or event or condition materially and adversely
affecting the condition of MAS.
ARTICLE IV
4.01 TELCOM covenants that all statements made herein and hereto are true
and correct and may be relied upon by MAS.
4.02. TELCOM covenants and warrants that all books, records and financial
statements employed or used in connection with this Agreement are true and
correct and that the right to examine same has been extended to MAS and its
representatives.
4.03. Federal Securities Act-Unregistered Stock:
(1) Each TELCOM owners acknowledges that the shares of MAS common stock to
be delivered to him pursuant to this Agreement have not and are not
registered under the 1933 Act, as amended, and that accordingly such stock
is not fully transferable except as permitted under various exemptions
contained in the 1933 Act, and the rules of the Securities and Exchange
Commission interpreting said Act. The provisions contained in this paragraph
are intended to ensure compliance with the 1933 Act, as amended.
(2) Each TELCOM owners agrees that the certificates evidencing the shares he
will receive shall contain substantially the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THE SAME ARE REGISTERED
UNDER THE SECURITY ACT OF 1933, OR THE COMPANY RECEIVES AN OPINION FROM
COUNSEL SATISFACTORY TO IT THAT SUCH REGISTRATION IS NOT REQUIRED FOR SALE
OR TRANSFER OR THAT THE SHARES HAVE BEEN LEGALLY SOLD IN BROKER TRANSACTIONS
PURSUANT TO RULE 144 OF THE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION PROMULGATED UNDER SECURITY ACT OF 1933."
ARTICLE V
5.01 Conditions Precedent:
(1) The properties including assets, liabilities, and intellectual
properties to transfer by the TELCOM owners at the closing shall constitute
100 percent of all of the properties including but not limited to assets,
liabilities, and intellectual properties of TELCOM.
ARTICLE VI
6.01 Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.02. This Agreement shall be construed under and in accordance with the
laws of the State of Indiana.
6.03. This Agreement shall be binding on and inure to the benefit of and be
enforceable by the TELCOM owners and MAS, their respective heirs, executors,
administrators, legal representatives, successors, and assigns except as
otherwise expressly provided herein.
6.04. Should there be any litigation arising from this transaction, the
prevailing party shall be entitled to recover reasonable attorney's fees
from the other party, which fees may be set by the court in the trial of
such action or may be enforced in a separate action brought for that
purpose. These fees shall be in addition to any other relief which may be
awarded.
6.05. TELECOM and MAS represent that each have taken the necessary due
diligence on
the other party and is not relying on any representation made by a third
party.
6.06. Indemnification - The offer and sale of securities of MAS is made a
registered broker-dealer. TELCOM agrees to indemnify and hold harmless the
broker-dealer for any claims, liabilities, damages or causes of action,
known or unknown, as result of any misrepresentation made by MAS to TELCOM
in connection with this Plan and Agreement of Reorganization.
IN WITNESS WHEREOF, the parties hereto have executed this Plan and Agreement
of Reorganization on the date first set forth, at 827 S. Broadway, Los
Angeles, CA 90014
FOR MAS ACQUISITION XXI CORP.,
an Indiana Corporation
by: /s/ Aaron Tsai
----------------------
Aaron Tsai, President
FOR Ms. Michele Hiromoto dba Telecom Communications of America
by: /s/ Michele Hiromoto
-----------------------------------------
Michele Hiromoto - Owner and Proprietor
EXHIBIT 3.1 Articles of Incorporation - MAS Acquisition XXI Corp.
[SEAL]
ARTICLES OF INCORPORATION SUE ANNIE GILROY
State form 4159 (R10 / 8-95) SECRETARY OF STATE
Approved by State Board of Accounts 1995 CORPORATIONS DIVISION
302 W. Washington St., Rm.E018
Indianapolis, IN 46204
Telephone: (317) 232-6576
INSTRUCTIONS: Use 8 1/2" x 11" white paper Indiana Code 23-1-21-2
for inserts.
Present original and two (2) Filing Fee: $90.00
copies to address in upper right
hand corner of this form.
Please TYPE of PRINT
Upon completion of filing, the Secretary of State will issue
a receipt
ARTICLES OF INCORPORATION
The undersigned, desiring to form a corporation (hereinafter referred to as
"Corporation") pursuant to the provision of:
X Indiana Business Corporation Law Indiana Professional Corporation
Act 1983, Indiana Code 23-1.5-1-
As amended, executes the following 1, et seq. (Professional
Articles of Incorporation: corporations must include
Certificate of Registration.)
ARTICLE I - NAME AND PRINCIPAL OFFICE
Name of Corporation (the name must include the word "Corporation",
"Incorporated", "Limited", "Company" or an abbreviation thereof.)
MAS Acquisition XXI Corp.
Principal Office: The address of the principal office of the Corporation
is:
Post office address City State ZIP Code
1922 North Bedford Ave. Evansville IN 47711
ARTICLE II - REGISTERED OFFICE AND AGENT
Registered Agent: The name and street address of the Corporation's
Registered Agent and Registered Office for service of process are:
Name of Registered Agent
Aaron Tsai
Address of Registered Office (street or building) City ZIP Code
1922 North Bedford Ave. Evansville Indiana 47711
ARTICLE III - AUTHORIZED SHARES
Number of shares of the
Corporation is authorized to 20 million Preferred shares par value $0.001
issue: 80 million Common shares par value $0.001
If there is more than one class of shares, shares with rights and
preferences, list such information as "Exhibit A."
ARTICLE IV - INCORPORATIONS
[the name(s) and address(es) of the incorporators of the corporation]
NUMBER AND STREET
NAME OR BUILDING CITY STATE ZIP CODE
Aaron Tsai 1922 North Bedford Evansville IN 47711
Ave.
In Witness Whereof, the undersigned being all the incorporators of said
Corporation execute these Article of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true,
this 28th day of December , 1996.
Signature /s/ Aaron Tsai Printed name Aaron Tsai
Signature Printed name
Signature Printed name
The instrument was prepared by: (name)
Aaron Tsai
Address (number, street, city and state) ZIP code
1922 North Bedford Ave., Evansville IN 47711
EXHIBIT 3.11 Certificate of Incorporation of MAS Acquisition XXI Corp.
Articles of Incorporation - MAS Acquisition XXI Corp.
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
MAS ACQUISITION XXI CORP.
I, SUE ANN GILROY, Secretary of State of Indiana, hereby certify that
Articles of Incorporation of the above corporation have been presented to me
at my office accompanied by the fees prescribed by law; that I have found
such Articles conform to law; all as prescribed by the provisions of the
Indiana Business Corporation Law, as amended.
NOW, THEREFORE, I hereby issue to such corporation this Certificate of
Incorporation, and further certify that its corporate existence will begin
January 06, 1997.
[SEAL] In Witness Whereof, I have hereunto set my
hand and affixed the seal of the State of
Indiana, at the City of Indianapolis, this
Sixth day of January, 1997.
/s/ Sue Anne Gilroy
SUE ANNE GILROY, Secretary of State
EXHIBIT 3.2 Articles of Amendment of the Article of Incorporation -
MAS Acquisition XXI Corp.
ARTICLES OF AMENDMENT OF THE SUE ANNE GILROY
ARTICLES OF INCORPORATION SECRETARY OF STATE
State Form 38333 (R8 /12-96) CORPORATIONS DIVISION
Approved by State Board of Accounts 1996 302W. Washington St.,Rm. E018
Indianapolis, IN 46204
Telephone: (317) 232-6676
INSTRUCTIONS: Use 8 1/2" x 11" white paper Indiana Code 23-1-38-1
et seq.
for inserts Present original and two copies Filing Fee: $30.00
to address in upper right hand corner of this
Please TYPE or PRINT
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
Name of Corporation Date of incorporation
MAS Acquisition XXI Corp. January 6, 1997
The undersigned officers of the above referenced Corporation
(hereinafter referred to as the 'Corporation) existing pursuant to the
provisions of: (indicate appropriate act)
X Indiana Business Corporation Law
Indiana Professional Corporation Act of 1983
as amended (hereinafter referred to as the "Act'), desiring to give
notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the following
facts:
ARTICLE I Amendment(s)
The exact text of Article(s) I of the
Articles
(NOTE: If amending the name of corporation, write Article "I"
in space above and write "The name of the Corporation is below.)
The name of the Corporation is Telecom Communications Inc.
ARTICLE II
Date of each amendment's adoption:
December15, 2000
(Continued on the reverse side)
ARTICLE III Manner of Adoption and Vote
Mark applicable section: NOTE - Only in limited situations does
Indiana law permit an Amendment without shareholder approval. Because
a name change requires shareholder approval, Section 2 must be marked
and either A or B completed.
SECTION 1 This amendment was adopted by the Board of Directors or
incorporators and shareholder action was not required.
X SECTION 2 The shareholders of the Corporation entitled to vote in
respect
to the amendment adopted the proposed amendment. The
amendment
was adopted by: (Shareholder approval maybe by either A or
B.)
A. Vote of such shareholders during a meeting called by the
Board of Directors. The result of such vote is as follows:
8,272,400 Shares entitled to vote.
8,250,000 Number of shares represented at the meeting.
8,250,000 Shares voted in favor.
0 Shares voted against.
B. Unanimous written consent executed on December 13th, 2000
and signed by all shareholders entitled to vote.
ARTICLE IV Compliance with Legal Requirements
The manner of the adoption of the Articles of Amendment and the vote
by which they were adopted constitute full legal compliance with the
provisions of the Act, the Articles of Incorporation, and the By-Laws
of the Corporation.
I hereby verify, subject to the penalties of perjury, that the statements
contained herein are true this 13th day of December 2000.
Signature of current officer or Printed name of officer or
chairman
chairman of the board of the board
/s/ Aaron Tsai Aaron Tsai
Signature's title
President
EXHIBIT 3.5 By-laws
Telecom Communications Inc.
(An Indiana Corporation)
BYLAWS
ARTICLE ONE: NAME AND OFFICES
1.01 Name. The name of the Corporation is Telecom Communications Inc.,
hereinafter referred to as the "Corporation"
1.02 Registered Office and Agent. The Corporation shall establish,
designate and maintain a registered office and agent in the State of
Indiana. The registered office of the Corporation shall be at 827 S.
Broadway, Los Angeles, CA 90014.
1.03 Change of Registered Office or Agent. The Corporation may change
its registered office or change its registered agent, or both, as the Board
of Directors may from time to time determine.
1.04 Other Offices. The Corporation may have offices at such places both
within and without the State of Indiana, or within or without the United
States and in any foreign countries as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE TWO: SHAREHOLDERS
2.01 Place of Meetings. All meetings of the Shareholders for the
election of Directors and for any other purpose may be held at such time and
place, within or without the State of Indiana, as stated in the notice of
the meeting or in a duly executed waiver of notice thereof.
2.02 Annual Meeting. An annual meeting of the Shareholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the first Monday
in January, beginning in 1997, or such other date as may be selected by the
Board of Directors from time to time. At the meeting, the Shareholders
shall elect Directors and transact such other business as may properly be
brought before the meeting.
2.03 Special Meeting. Special meetings of the Shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, or by these Bylaws, may be called by the
President, the Secretary, the Board of Directors, or the holders of not less
than one tenth of all the shares entitled to vote at the meeting. Business
transacted at a special meeting shall be confined to the subjects stated in
the notice of the meeting.
2.04 Notice. Written or printed notice stating the place, day and hour
of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten nor
more than sixty days before the date of the meeting, either personally or by
mail, by or at the direction of the person calling the meeting, to each
Shareholder of record entitled to vote at the meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail addressed to the Shareholder at his address as it appears on the stock
transfer books of the Corporation, with postage thereon prepaid.
2.05 Voting List. At least ten days before each meeting of Shareholders
a complete list of the Shareholders entitled to vote at such meeting,
arranged in alphabetical order and setting forth the address of each and the
number of voting shares held by each, shall be prepared by the Officer or
agent having charge of the stock transfer books. Such list, for a period of
ten days prior to such meeting, shall be kept on file at the registered
office of the Corporation and shall be subject to inspection by any
Shareholder during the whole time of the meeting.
2.06 Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or represented
by proxy, shall be requisite and shall constitute a quorum at all meetings
of the Shareholders for the transaction of business except as otherwise
provided by statute, by the Articles of Incorporation or by these Bylaws.
If a quorum is not present or represented at a meeting of the Shareholders,
the Shareholders entitled to vote thereat, present in person or by proxy,
shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified.
2.07 Majority Vote: Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of a majority of the shares having
voting power, present in person or represented by proxy, shall decide any
question brought before such meeting, unless the question is one upon which,
by express provision of the statutes or of the Articles of Incorporation or
of these Bylaws, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
2.08 Method of Voting. Each outstanding share, regardless of class,
shall be entitled to one vote on each matter subject to a vote at a meeting
of Shareholders, except to the extent that the voting rights of the shares
of any class or classes are limited or denied by the Articles of
Incorporation. The Board of Directors may, in the future, at their
discretion, direct that voting be cumulative, according to any plan adopted
by the Board. At any meeting of the Shareholders, every Shareholder having
the right to vote may vote either in person or by proxy executed in writing
by the Shareholder or by his duly authorized attorney-in-fact.
No proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy. Each proxy shall be revocable
unless expressly provided therein to be irrevocable or unless otherwise made
irrevocable by law. Each proxy shall be filed with the Secretary of the
Corporation prior to, or at the time of, the meeting. Voting for Directors
shall be in accordance with Section 3.06 of these Bylaws. Any vote may be
taken via voice or by show of hands unless someone entitled to vote objects,
in which case written ballots shall be used. Cumulative voting is not
prohibited.
2.09 Record Date: Closing Transfer Books. The Board of Directors may
fix in advance a record date for the purpose of determining Shareholders
entitled to notice of, or to vote at, a meeting of Shareholders, such record
date to be not less than ten nor more than sixty days prior to such meeting;
or the Board of Directors may close the stock transfer books for such
purpose for a period of not less than ten nor more than sixty days prior to
such meeting. In the absence of any action by the Board of Directors, the
date upon which the notice of the meeting is mailed shall be the record
date.
2.10 Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual
or special meeting of Shareholders or any action which may be taken at any
annual or special meeting of Shareholders, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, is signed by the holder or
holders of shares having not less than the minimum number of votes that
would be necessary to take such action at a meeting at which the holders of
all shares entitled to vote on the action were present and voted.
Such consent or consents shall have the same force and effect as the
requisite vote of the Shareholders at a meeting. The signed consent or
consents, or a copy or copies thereof, shall be placed in the minute book of
the Corporation. Such consents may be signed in multiple counterparts, each
of which shall constitute an original for all purposes, and all of which
together shall constitute the requisite written consent or consents of the
Shareholders, if applicable. A telegram, telex, cablegram, or similar
transaction by a Shareholder, or a photographic, photostatic, facsimile or
similar reproduction of a writing signed by a Shareholder, shall be regarded
as signed by the Shareholder for purposes of this Section 2.10.
2.11 Order of Business at Meetings. The order of business at annual
meetings, and so far as practicable at other meetings of Shareholders, shall
be as follows unless changed by the Board of Directors:
(a) Call to order
(b) Proof of due notice of meeting
(c) Determination of quorum and, if necessary, examination of
proxies
(d) Announcement of availability of voting list (See Bylaw 2.05)
(e) Announcement of distribution of annual reports (See Bylaw 8.03)
(f) Reading and disposing of minutes of last meeting of
Shareholders
(g) Reports of Officers and committees, if deemed necessary
(h) Appointment of voting inspectors
(I) Unfinished business
(j) New business
(k) Nomination of Directors
(l) Opening of polls for voting
(m) Recess
(n) Reconvening; closing of polls
(o) Report of voting inspectors
(p) Other business
(q) Adjournment
ARTICLE THREE: DIRECTORS
3.01 Management. The business and affairs of the Corporation shall be
managed by the Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not, by statute or
by the Articles of Incorporation or by these Bylaws, directed or required to
be exercised or done by the Shareholders.
3.02 Number; Qualification; Election; Term. The Board of Directors shall
consist of not less than one member nor more than five members; provided
however, the Board of Directors in effect as of the date of effectiveness of
these Bylaws consists of three members. A Director need not be a
Shareholder or resident of any particular state or country. The Directors
shall be elected at the annual meeting of the Shareholders, except as
provided in Bylaw
3.03 and 3.05. Each Director elected shall hold office until his successor
is elected and qualified. Each person elected as a Director shall be deemed
to have qualified unless he states his refusal to serve shortly after being
notified of his election.
3.03 Change in Number. The number of Directors may be increased or
decreased from time to time by amendment to the Bylaws, but no decrease
shall have the effect of shortening the term of any incumbent Director. Any
directorship to be filled by reason of an increase in the number of
Directors shall be filled by the Board of Directors for a term of office
continuing only until the next election of one or more Directors by the
Shareholders; provided that the Board of Directors may not fill more than
two such directorships during the period between any two successive annual
meetings of Shareholders.
3.04 Removal. Any Director may be removed either for or without cause at
any special or annual meeting of Shareholders by the affirmative vote of a
majority, in number of shares, of the Shareholders present in person or by
proxy at such meeting and entitled to vote for the election of such Director
if notice of intention to act upon such matter is given in the notice
calling such meeting.
3.05 Vacancies. Any unfilled directorship position, or any vacancy
occurring in the Board of Directors (by death, resignation, removal or
otherwise), shall be filled by an affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board of Directors.
A Director elected to fill a vacancy shall be elected for the unexpired term
of his predecessor in office, except that a vacancy occurring due to an
increase in the number of Directors shall be filled in accordance with
Section 3.03 of these Bylaws.
3.06 Election of Directors. Directors shall be elected by majority vote.
3.07 Place of Meeting. Meetings of the Board of Directors, regular or
special, may be held either within or without the State of Indiana.
3.08 First Meeting. The first meeting of each newly elected Board of
Directors shall be held without further notice immediately following the
annual meeting of Shareholders, and at the same place, unless the Directors
change such time or place by unanimous vote.
3.09 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place as determined by the Board of
Directors.
3.10 Special Meetings. Special meetings of the Board of Directors may be
called by the President or by any Director on three days notice to each
Director, given either personally or by mail or by telegram. Except as
otherwise expressly provided by statute, or by the Articles of
Incorporation, or by these Bylaws, neither the business to be transacted at,
nor the purpose of, any special meeting of the Board of Directors need be
specified in a notice or waiver of notice.
3.11 Majority Vote. At all meetings of the Board of Directors, a
majority of the number of Directors then elected and qualified shall
constitute a quorum for the transaction of business. The act of a majority
of the Directors present at any meeting at which a quorum is present shall
be the act of the Board of Directors, except as otherwise specifically
provided by statute or by the Articles of Incorporation or by these Bylaws.
If a quorum is not present at a meeting of the Board of Directors, the
Directors present thereat my adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
Each Director who is present at a meeting will be deemed to have assented to
any action taken at such meeting unless his dissent to the action is entered
in the minutes of the meeting, or unless he files his written dissent
thereto with the Secretary of the meeting or forwards such dissent by
registered mail to the Secretary of the Corporation immediately after such
meeting.
3.12 Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance of each
meeting of the Board of Directors, or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of any
executive, special or standing committees established by the Board of
Director, may, by resolution of the Board of Directors, be allowed like
compensation and expenses for attending committee meetings.
3.13 Procedure. The Board of Directors shall keep regular minutes of its
proceedings. The minutes shall be placed in the minute book of the
Corporation.
3.14 Interested Directors, Officers and Shareholders.
(a) If Paragraph (b) is satisfied, no contract or other transaction
between the Corporation and any of its Directors, Officers or Shareholders
(or any corporation or firm in which any of them are directly or indirectly
interested) shall be invalid solely because of such relationship or because
of the presence of such Director, Officer or Shareholder at the meeting
authorizing such contract or transaction, or his participation in such
meeting or authorization.
(b) Paragraph (a) shall apply only if:
(1) The material facts of the relationship or interest of each such
Director, Officer or Shareholder are known or disclosed:
(A) To the Board of Directors and it nevertheless authorizes
or
ratifies the contract or transaction by a majority of the
Directors present, each such interested Director to be
counted in determining whether a quorum is present but not
in calculating the majority necessary to carry the vote;
or
(B) To the Shareholders and they nevertheless authorize or
ratify the contract or transaction by a majority of the
shares present, each such interested person to be counted
for a quorum and voting purposes; or
(2) The contract or transaction is fair to the Corporation as of
the time it is authorized or ratified by the Board of
Directors, a committee of the Board or the Shareholders.
(c) This provision shall not be construed to invalidate a contract
or transaction which would be valid in the absence of this
provision.
3.15 Certain Officers. The President shall be elected from among the
members of the Board of Directors.
3.16 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors may be taken without a meeting
if a consent in writing, setting forth the action so taken, is signed by all
members of the Board of Directors. Such consent shall have the same force
and effect as unanimous vote of the Board of Directors at a meeting. The
signed consent, or a signed copy thereof, shall be placed in the minute book
of the Corporation. Such consents may be signed in multiple counterparts,
each of which shall constitute an original for all purposes, and all of
which together shall constitute the unanimous written consent of the
Directors.
ARTICLE FOUR: EXECUTIVE COMMITTEE
4.01 Designation. The Board of Directors may, by resolution adopted by a
majority of the whole Board, designate an Executive Committee from among its
members.
4.02 Number; Qualification; Term. The Executive Committee shall consist
of one or more Directors. The Executive Committee shall serve at the
pleasure of the Board of Directors.
4.03 Authority. The Executive Committee shall have and may exercise the
authority of the Board of Directors in the management of the business and
affairs of the Corporation except where action of the full Board of
Directors is required by statute or by the Articles of Incorporation, and
shall have power to authorize the seal of the Corporation to be affixed to
all papers which may require it; except that the Executive Committee shall
not have authority to amend the Articles of Incorporation; approve a plan of
merger or consolidation; recommend to the Shareholders the sale, lease, or
exchange of all or substantially all of the property and assets of the
Corporation other than in the usual and regular course of its business;
recommend to the Shareholders the voluntary dissolution of the Corporation;
amend, alter, or repeal the Bylaws of the Corporation or adopt new Bylaws
for the Corporation; fill any vacancy in the Board of Directors or any other
corporate committee; fix the compensation of any member of any corporate
committee; alter or repeal any resolution of the Board of Directors; declare
a dividend; or authorized the issuance of shares of the Corporation. Each
Director shall be deemed to have assented to any action of the Executive
Committee unless, within seven days after receiving actual or constructive
notice of such action, he delivers his written dissent thereto to the
Secretary of the Corporation.
4.04 Change in Number. The number of Executive Committee members may be
increased or decreased (but not below one) from time to time by resolution
adopted by a majority of the Board of Directors.
4.05 Removal. Any member of the Executive Committee may be removed by
the Board of Directors by the affirmative vote of a majority of the Board of
Directors whenever in its judgment the best interests of the Corporation
will be served thereby.
4.06 Vacancies. A vacancy occurring in the Executive Committee (by
death, resignation, removal or otherwise) shall be filled by the Board of
Directors in the manner provided for original designation in Section 4.01
above.
4.07 Meetings. Time, place and notice, if any, of Executive Committee
meetings shall be as determined by the Executive Committee.
4.08 Quorum: Majority Vote. At meetings of the Executive Committee, a
majority of the members shall constitute a quorum for the transaction of
business. The act of a majority of the members present at any meeting at
which a quorum is present shall be the act of he Executive Committee, except
as otherwise specifically provided by statute or by the Articles of
Incorporation or by these Bylaws. If a quorum is not present at a meeting
of the Executive Committee, the members present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
4.09 Compensation. By resolution of the Board of Directors, the members
of the Executive Committee may be paid their expenses, if any, of attendance
at each meeting of the Executive Committee and may be paid a fixed sum for
attendance at each meeting of the Executive Committee or a stated salary as
a member thereof. No such payment shall preclude any member from serving
the Corporation in any other capacity and receiving compensation therefor.
4.10 Procedure. The Executive Committee shall keep regular minutes of
its proceedings and report the same to the Board of Directors when required.
The minutes of the proceedings of the Executive Committee shall be placed in
the minute book of the Corporation.
4.11 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Executive Committee may be taken without a meeting
if a consent in writing, setting forth the action so taken, is signed by all
the members of the Executive Committee. Such consent shall have the same
force and effect as a unanimous vote at a meeting. The signed consent, or a
signed copy thereof, shall be placed in the minute book. Such consents may
be signed in multiple counterparts, each of which shall constitute an
original for all purposes, and all of which together shall constitute the
unanimous written consent of the Directors.
4.12 Responsibility. The designation of an Executive Committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
ARTICLE FIVE: NOTICE
5.01 Method. Whenever by statute or the Articles of Incorporation or
these Bylaws notice is required to be given to any Director or Shareholder
and no provision is made as to how such notice shall be given, it shall not
be construed to mean personal notice, but any such notice may be given:
(a) in writing, by mail, postage prepaid, addressed to such Director
or Shareholder at such address as appears on the books of the
Corporation; or
(b) by any other method permitted by law.
Any notice required or permitted to be given by mail shall be deemed to be
given at the time it is deposited in the United States mail.
5.02 Waiver. Whenever, by statute or the Articles of Incorporation or
these Bylaws, notice is required to be given to a Shareholder or Director, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be
equivalent to the giving of such notice. Attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting except where a
Director attends for the express purpose of objecting to the transaction of
any business on the grounds that the meeting is not lawfully called or
convened.
5.03 Telephone Meetings. Shareholders, Directors, or members of any
committee, may hold any meeting of such Shareholders, Directors, or
committee by means of conference telephone or similar communications
equipment which permits all persons participating in the meeting to hear
each other. Actions taken at such meeting shall have the same force and
effect as a vote at a meeting in person. The Secretary shall prepare a
memorandum of the actions taken at conference telephone meetings.
ARTICLE SIX: OFFICERS AND AGENTS
6.01 Number: Qualification: Election: Term.
(a) The Corporation shall have:
(1) A Chairman of the Board (should the Board of Directors
so choose to select), a President, a Vice-President, a
Secretary and a Treasurer, and
(2) Such other Officers (including one or more Vice-
Presidents, and assistant Officers and agents) as the
Board of Directors authorizes from time to time.
(b) No Officer or agent need be a Shareholder, a Director or a
resident of Indiana except as provided in Sections 3.15 and
4.02 of these Bylaws.
(c) Officers named in Section 6.01(a)(1) above shall be elected by
the Board of Directors on the expiration of an Officer's term
or whenever a vacancy exists. Officers and agents named in
Section 6.01 (a)(2) may be elected by the Board of Directors at
any meeting.
(d) Unless otherwise specified by the Board at the time of election
or appointment, or in an employment contract approved by the
Board, each Officer's and agent's term shall end at the first
meeting of Directors after the next annual meeting of
Shareholders. He shall serve until the end of his term or, if
earlier, his death, resignation or removal.
(e) Any two or more offices may be held by the same person.
6.02 Removal and Resignation. Any Officer or agent elected or appointed
by the Board of Directors may be removed with or without cause by a majority
of the Directors at any regular or special meeting of the Board of
Directors. Any Officer may resign at any time by giving written notice to
the Board of Directors or to the President or Secretary.
Any such resignation shall take effect upon receipt of such notice
if no date is specified in the notice, or, if a later date is specified in
the notice, upon such later date; and unless otherwise specified in the
notice, the acceptance of such resignation shall not be necessary to make it
effective. The removal of any Officer or agent shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointment of an Officer or agent shall not of itself create contract
rights.
6.03 Vacancies. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal or otherwise) may be filled by the Board of
Directors.
6.04 Authority. Officers shall have full authority to perform all duties
in the management of the Corporation as are provided in these Bylaws or as
may be determined by resolution of the Board of Directors from time to time
not inconsistent with these Bylaws.
6.05 Compensation. The compensation of Officers and agents shall be
fixed from time to time by the Board of Directors.
6.06 Chairman of the Board. The Chairman of the Board, if any, shall
preside at all meetings of the Board of Directors and shall exercise and
perform such other powers and duties as may be assigned to him by the Board
of Directors or prescribed by the Bylaws.
6.07 Executive Powers. The Chairman of the Board, if any, and the
President of the Corporation respectively, shall, in the order of their
seniority, unless otherwise determined by the Board of Directors or
otherwise are positions held by the same person, have general and active
management of the business and affairs of the Corporation and shall see that
all orders and resolutions of the Board are carried into effect.
They shall perform such other duties and have such other authority
and powers as the Board of Directors may from time to time prescribe.
Within this authority and in the course of their respective duties the
Chairman of the Board, if any, and the President of the Corporation,
respectively, shall have the general authority to:
(a) Conduct Meetings. Preside at all meetings of the Shareholders
and at all meetings of the Board of Directors, and shall be ex
official members of all the standing committees, including the
Executive Committee, if any.
(b) Sign Share Certificates. Sign all certificates of stock of the
Corporation, in conjunction with the Secretary or Assistant
Secretary, unless otherwise ordered by the Board of Directors.
(c) Execute Instruments. When authorized by the Board of Directors
or required by law, execute, in the name of the Corporation,
deeds, conveyances, notices, leases, checks, drafts, bills of
exchange, warrants, promissory notes, bonds, debentures,
contracts, and other papers and instruments in writing, and
unless the Board of Directors orders otherwise by resolution,
make such contracts as the ordinary conduct of the
Corporation's business requires.
(d) Hire and Discharge Employees. Subject to the approval of the
Board of Directors, appoint and remove, employ and discharge,
and prescribe the duties and fix the compensation of all
agents, employees and clerks of the Corporation other than the
duly appointed Officers, and, subject to the direction of the
Board of Directors, control all of the Officers, agents and
employees of the Corporation.
6.08 Vice-Presidents. The Vice-Presidents, if any, in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in
the absence or disability of the President, perform the duties and have the
authority and exercise the powers of the President. They shall perform such
other duties and have such other authority and powers as the Board of
Directors may from time to time prescribe or as the senior Officers of the
Corporation may from time to time delegate.
6.09 Secretary. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the Shareholders and record all votes and
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for the Executive Committee when required. He shall:
(a) give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Board of Directors;
(b) keep in safe custody the Seal of the Corporation and, when
authorized by the Board of Directors or the Executive
Committee, affix the same to any instrument requiring it, and
when so affixed, it shall be attested by his signature or by
the signature of the Treasurer or an Assistant Secretary. He
shall be under the supervision of the senior Officers of the
Corporation;
(c) perform such other duties and have such other authority and
powers as the Board of Directors may from time to time
prescribe or as the senior Officers of the Corporation may from
time to time delegate.
6.10 Assistant Secretaries. The Assistant Secretaries, if any, in the
order of their seniority, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the Secretary, perform the
duties and have the authority and exercise the powers of the Secretary.
They shall perform such other duties and have such other powers as the Board
of Directors may from time to time prescribe or as the senior Officers of
the Corporation may from time to time delegate.
6.11 Treasurer. The Treasurer shall:
(a) have the custody of the corporate funds and securities and
shall keep full and accurate accounts of all income, expense,
receipts and disbursement of the Corporation and shall deposit
all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be
designated by the Board of Directors.
(b) disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such
disbursements, and
(c) render to the senior Officers of the Corporation and Directors,
at the regular meeting of the Board, or whenever they may
request it, accounts of all his transactions as Treasurer and
of the financial condition of the Corporation.
If required by the Board of Directors, he shall:
(a) give the Corporation a bond in such form, in such sum, and with
such surety or sureties as satisfactory the Board, for the
faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books,
paper, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the
Corporation.
(b) perform such other duties and have such other authority and
powers as the Board of Directors may from time to time
prescribe or as the senior Officers of the Corporation may from
time to time delegate.
6.12 Assistant Treasurers. The Assistant Treasurers, if any, in the
order of their seniority, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer. They shall perform such
other duties and have such other powers as the Board of Directors may from
time to time prescribe or as the senior Officers of the Corporation may from
time to time delegate.
ARTICLE SEVEN: CERTIFICATE AND TRANSFER REGULATIONS
7.01 Certificates. Certificates in such form as may be determined by the
Board of Directors shall be delivered, representing all shares to which
Shareholders are entitled. Certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued. Each
certificate shall state on the face thereof that the Corporation is
organized under the laws of the State of Indiana, the holder's name, the
number and class of shares, the par value of such shares or a statement that
such shares are without par value, and such other matters as may be required
by law.
They shall be signed by the President or a vice-president and either
the Secretary or Assistant Secretary or such other Officer or Officers as
the Board of Directors designates, and may be sealed with the Seal of the
Corporation or a facsimile thereof. If any certificate is countersigned by
a transfer agent, or an assistant transfer agent, or registered by a
registrar (either of which is other than the Corporation or an employee of
the Corporation), the signature of any such Officer may be a facsimile
thereof. If any certificate is countersigned by a transfer agent, or an
assistant transfer agent, or registered by a registrar (either of which is
other than the Corporation or an employee of the Corporation), the signature
of any such Officer may be a facsimile thereof.
7.02 Issuance of Certificates. Shares both treasury and authorized but
unissued may be issued for such consideration (not less than par value) and
to such persons as the Board of Directors determines from time to time.
Shares may not be issued until the full amount of the consideration, fixed
as provided by law, has been paid. In addition, Shares shall not be issued
or transferred until such additional conditions and documentation as the
Corporation (or its transfer agent, as the case may be) shall reasonably
require, including without limitation, the surrender of such stock
certificate or certificates of proper evidence of succession, assignment or
other authority to obtain transfer thereof, as the circumstances may
require, and such legal opinions with reference to the requested transfer as
shall be required by the Corporation (or its transfer agent) pursuant to the
provisions of these Bylaws and applicable law, shall have been satisfied.
7.03 Legends on Certificates.
(a) Shares in Classes or Series. If the Corporation is authorized
to issue shares of more than one class, the certificates shall
set forth, either on the face or back of the certificate, a
full or summary statement of all of the designations,
preferences, limitations relative rights of the shares of such
class and, if the Corporation is authorized to issue any
preferred or special class in series, the variations in the
relative rights and preferences of the shares of each such
series so far as the same
have been fixed and determined, and the authority of the Board
of Directors to fix and determine the relative rights and
preferences of subsequent series. In lieu of providing such a
statement in full on the certificate, a statement on the face
or back of the certificate may provide that the Corporation
will furnish such information to any shareholder without charge
upon written request to the Corporation at its principal place
of business or registered office and that copies of the
information are on file in the office of the Secretary of
State.
(b) Restriction on Transfer. Any restrictions imposed by the
Corporation on the sale or other disposition of its shares and
on the transfer thereof may be copied at length or in summary
form on the face, or so copied on the back and referred to on
the face, of each certificate representing shares to which the
restriction applies. The certificate may, however, state on the
face or back that such a restriction exists pursuant to a
specified document and that the Corporation will furnish a copy
of the document to the holder of the certificate without charge
upon written request to the Corporation at its principal place
of business, or refer to such restriction in any other manner
permitted by law.
(c) Preemptive Rights. Any preemptive rights of a Shareholder to
acquire unissued or treasury shares of the Corporation which
are or may at any time be limited or denied by the Articles of
Incorporation may be set forth at length on the face or back of
the certificate representing shares subject thereto. In lieu
of providing such a statement in full on the certificate, a
statement on the face or back of the certificate may provide
that the Corporation will furnish such information to any
Shareholder without charge upon written request to the
Corporation at its principal place of business and that a copy
of such information is on file in the office of the Secretary
of State, or refer to such denial of preemptive rights in any
other manner permitted by law.
(d) Unregistered Securities. Any security of the Corporation,
including, among others, any certificate evidencing shares of
the Common Stock or warrants to purchase Common Stock of the
Corporation, which is issued to any person without registration
under the Securities Act of 1933, as amended, or the securities
laws of any state, shall not be transferable until the
Corporation has been furnished with a legal opinion of counsel
with reference thereto, satisfactory in form and content to the
Corporation and its counsel, if required by the Corporation, to
the effect that such sale, transfer or pledge does not involve
a violation of the Securities Act of 1933, as amended, or the
securities laws of any state having jurisdiction. The
certificate representing the security shall bear substantially
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED
UNLESS SUCH OFFER, SALE OR TRANSFER WILL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE BLUE SKY LAWS. ANY
OFFER, SALE OR TRANSFER OF THESE SECURITIES MAY NOT BE MADE WITHOUT THE
PRIOR WRITTEN APPROVAL OF THE CORPORATION".
7.04 Payment of Shares.
(a) Kind. The consideration for the issuance of shares shall
consist of money paid, labor done (including services actually
performed for the Corporation) or property (tangible or
intangible) actually received. Neither promissory notes nor the
promise of future services shall constitute payment for shares.
(b) Valuation. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of
consideration received shall be conclusive.
(c) Effect. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall
be considered fully paid and nonassessable.
(d) Allocation of Consideration. The consideration received for
shares shall be allocated by the Board of Directors, in
accordance with law, between Stated Capital and Capital Surplus
accounts.
7.05 Subscriptions. Unless otherwise provided in the subscription
agreement, subscriptions for shares shall be paid in full at such time or in
such installments and at such times as determined by the Board of Directors.
Any call made by the Board of Directors for payment on subscriptions shall
be uniform as to all shares of the same series. In case of default in the
payment on any installment or call when payment is due, the Corporation may
proceed to collect the amount due in the same manner as any debt due to the
Corporation.
7.06 Lien. For any indebtedness of a Shareholder to the Corporation, the
Corporation shall have a first and prior lien on all shares of its stock
owned by him and on all dividends or other distributions declared thereon.
7.07 Lost, Stolen or Destroyed Certificates. The Corporation shall issue
a new certificate in place of any certificate for shares previously issued
if the registered owner of the certificate.
(a) Claim. Submits proof in affidavit form that it has been lost,
destroyed or wrongfully taken; and
(b) Timely Request. Requests the issuance of a new certificate
before the Corporation has notice that the certificate has been
acquired by a purchaser for value in good faith and without
notice of an adverse claim; and
(c) Bond. Gives a bond in such form, and with such surety or
sureties, with fixed or open penalty, if the Corporation so
requires, to indemnify the Corporation (and its transfer agent
and registrar, if any) against any claim that may be made on
account of the alleged loss, destruction, or theft of the
certificate; and
(d) Other Requirements. Satisfies any other reasonable
requirements imposed by the Corporation.
When a certificate has been lost, apparently destroyed or wrongfully
taken, and the holder of record fails to notify the Corporation within a
reasonable time after he has notice of it, and the Corporation registers a
transfer of the shares represented by the certificate before receiving such
notification, the holder of record shall be precluded from making any claim
against the Corporation for the transfer or for a new certificate.
7.08 Registration of Transfer. The Corporation shall register the
transfer of a certificate for shares presented to it for transfer if:
(a) Endorsement. The certificate is properly endorsed by the
registered owner or by his duly authorized attorney; and
(b) Guaranty and Effectiveness of Signature. If required by the
Corporation, the signature of such person has been guaranteed
by a national banking association or member of the New York
Stock Exchange, and reasonable assurance is given that such
endorsements are effective; and
(c) Adverse Claims. The Corporation has no notice of an adverse
claim or has discharged any duty to inquire into such a claim;
and
(d) Collection of Taxes. Any applicable law relating to the
collection of taxes has been complied with.
7.09 Registered Owner. Prior to due presentment for registration of
transfer of a certificate for shares, the Corporation may treat the
registered owner or holder of a written proxy from such registered owner as
the person exclusively entitled to vote, to receive notices and otherwise
exercise all the rights and powers of a Shareholder.
7.10 Preemptive Rights. No Shareholder or other person shall have any
preemptive rights of any kind to acquire additional, unissued or treasury
shares of the Corporation, or securities of the Corporation convertible
into, or carrying rights to subscribe to or acquire, shares of any class or
series of the Corporation's capital stock, unless, and to the extent that,
such rights may be expressly granted by appropriate action.
ARTICLE EIGHT: GENERAL PROVISIONS
8.01 Dividends and Reserves.
(a) Declaration and Payment. Subject to statute and the Articles
of Incorporation, dividends may be declared by the Board of
Directors at any regular or special meeting and may be paid in
cash, in property or in shares of the Corporation. The
declaration and payment shall be at the discretion of the Board
of Directors.
(b) Record Date. The Board of Directors may fix in advance a
record date for the purpose of determining Shareholders
entitled to receive payment of any dividend, such record date
to be not more than sixty days prior to the payment date of
such dividend, or the Board of Directors may close the stock
transfer books for such purpose for a period of not more than
sixty days prior to the payment date of such dividend. In the
absence of any action by the Board of Directors, the date upon
which the Board of Directors adopts the resolution declaring
such dividend shall be the record date.
(c) Reserves. By resolution, the Board of Directors may create
such reserve or reserves out of the Earned Surplus of the
Corporation as the Directors from time to time, in their
discretion, think proper to provide for contingencies, or to
equalize dividends, or to repair or maintain any property of
the Corporation, or for any other purpose they think beneficial
to the Corporation. The Directors may modify or abolish any
such reserve in the manner in which it was created.
8.02 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of
its Shareholders and Board of Directors, and shall keep at its registered
office or principal place of business, or at the office of its transfer
agent or registrar, a record of its Shareholders, giving the names and
addresses of all Shareholders and the number and class of the shares held by
each.
8.03 Annual Reports. The Board of Directors shall cause such reports to
be mailed to Shareholders as the Board of Directors deems to be necessary or
desirable from time to time.
8.04 Checks and Notes. All checks or demands for money and notes of the
Corporation shall be signed by such Officer or Officers or such other person
or persons as the Board of Directors designates from time to time.
8.05 Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
8.06 Seal. The Corporation Seal (of which there may be one or more
examples)may contain the name of the Corporation and the name of the state
of incorporation. The Seal may be used by impressing it or reproducing a
facsimile of it, or otherwise. Absence of the Corporation Seal shall not
affect the validity or enforceability or any document or instrument.
8.07 Indemnification.
(a) The Corporation shall have the right to indemnify, to purchase
indemnity insurance for, and to pay and advance expenses to,
Directors, Officers and other persons who are eligible for, or
entitled to, such indemnification, payments or advances, in
accordance with and subject to the provisions of Indiana law,
to the extent such indemnification, payments or advances are
either expressly required by such provisions or are expressly
authorized by the Board of Directors within the scope of such
provisions. The right of the Corporation to indemnify such
persons shall include, but not limited to, the authority of the
Corporation to enter into written agreements for
indemnification with such persons.
(b) To the fullest extent permitted by, and in the manner
permissible under the laws of the State of Indiana, any person
made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a
director or officer of the Corporation, or served any other
enterprise as director, officer or employee at the request of
the Corporation. The Board of Directors, in its discretion,
shall have the power on behalf of the Corporation to indemnify
any person, other than a director or officer, made a party to
any action, suit, or proceeding by reason of the fact that
he/she is or was an employee of the Corporation. A Director of
the Corporation shall not be liable to
the Corporation or its shareholders for monetary damages for an
act or omission in the Director's capacity as a Director,
except that this provision does not eliminate or limit the
liability of a Director to the extent the Director is found
liable for:
(1) a breach of the Director's duty of loyalty to the
Corporation or its shareholders;
(2) an act or omission not in good faith that constitutes a
breach of duty of the Director to the Corporation or an
act or omission that involves intentional misconduct or a
knowing violation of the law;
(3) a transaction from which the Director received an improper
benefit, whether or not the benefit resulted from an
action taken within the scope of the Director's office; or
(4) an act or omission for which the liability of a Director
is expressly provided by an applicable statute.
8.08 Amendment of Bylaws. These Bylaws may be altered, amended or
repealed at any meeting of the Board of Directors at which a quorum is
present, by the affirmative vote of a majority of the Directors present
thereat, provided notice of the proposed alteration, amendment, or repeal is
contained in the notice of such meeting.
8.09 Construction. Whenever the context so requires, the masculine shall
include the feminine and neuter, and the singular shall include the plural,
and conversely. If any portion of these Bylaws are ever finally determined
to be invalid or inoperative, then, so far as is reasonable and possible:
(a) The remainder of these Bylaws shall be valid and operative; and
(b) Effect shall be given to the intent manifested by the portion
held invalid or inoperative.
8.10 Table of Contents; Headings. The table of contents and headings are
for organization, convenience and clarity. In interpreting these Bylaws,
they shall be subordinated in importance to the other written material.
Signed for Identification,
Telecom Communications Inc.
An Indiana Corporation
BY: /s/ Tak Hiromoto
-------------------------------------------
Its: Chairperson of the Board of Directors
EXHIBIT 5.1 Opinion of Counsel
DANIEL H. LUCIANO
-----------------
ATTORNEY AT LAW
242 A WEST VALLEY BROOK ROAD
CALIFON, NEW JERSEY 07830
MEMBER TEXAS AND TELEPHONE 908-832-5546
NEW JERSEY BARS FACSIMILE 908-832-9601
September 6, 2001
Telcom Communications Inc.
827 S. Broadway
Los Angeles, California 90014
Re Opinion Of Counsel
Ladies and Gentlemen:
The undersigned has acted as counsel for Telcom Communications Inc.
(formerly MAS Acquisition XXI Corp.), an Indiana corporation (the "Company")
limited to certain matters as described herein.
In rendering this opinion, we have examined the Articles of Incorporation of
the Company as filed with the Secretary of State of the State of Indiana on
January 6, 1997, the Articles of Amendment of the Articles of Incorporation
of the Company filed with the Secretary of State of the State of Indiana on
December 18, 2000, the By-Laws of the Company, and such other documents as
deemed necessary or appropriate for the opinion expressed herein. All the
foregoing documents shall be herein referred to as the "Reviewed Documents."
We also refer to the Form SB-2 of the Company to be filed with the
Securities and Exchange Commission ("Form SB-2"). The Form SB-2 relates to
2,500,000 shares of common stock of the Company ("Company Shares") and
1,000,000 shares of common stock of the Selling Shareholders (as referenced
therein) ("Selling Shareholder Shares").
We have not reviewed any documents other than the Reviewed Documents for
purposes of rendering the opinions expressed herein. We have conducted no
independent factual investigation other than our review of the Reviewed
Documents. In rendering this opinion, we have relied, as to factual matters,
solely upon the Reviewed Documents, and the factual representations,
warranties, statements and information set forth therein, all of which we
assume to be true, complete and accurate in all material respects.
With respect to the Reviewed Documents, we have assumed and relied upon the
authenticity of all documents submitted to us as originals, the conformity
with the originals of all documents submitted to us as copies or forms, the
genuineness of all signatures, the legal capacity
Page 2.
Telecom Communications Inc.
September 6, 2001
of natural persons and that the Reviewed Documents, in the forms submitted
to us for our review, have not been and will not be altered or amended in
any respect material to this opinion.
This opinion is limited, we express no opinion with respect to state
securities, blue sky or tax laws.
This opinion is given only with respect to laws and regulations presently in
effect in the State of Indiana. We assume no obligation to advise you of any
changes in law or regulation which may hereafter occur, whether the same or
retroactively or prospectively applied, or to update or supplement this
letter in any fashion to reflect any facts or circumstances which hereafter
come to our attention.
For the purpose of rendering the opinions hereinafter expressed, we have
made the following additional assumptions that the Articles of
Incorporation, as amended, and By-laws constitute the articles of
incorporation and by-laws of the Company are presently in effect.
Based upon the foregoing, and subject to and in reliance on the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. The Company Shares when issued pursuant to the Form SB-2 will
be legally and validly issued, duly authorized, fully paid and non-
assessable shares of capital stock of the Company in accordance with the
laws of the State of Indiana.
2. The Selling Shareholders Shares are legally and validly
issued, fully paid and non-assessable shares of capital stock of the
Company.
We hereby consent to the filing of the opinion as Exhibit 5.1 to the
Company's Registration Statement and the reference to our firm in the
Prospectus, if applicable or required.
This opinion is rendered solely for your benefit in connection with the
matters addressed herein. Except as stated in the immediately preceding
sentence, without our prior written consent, this opinion may not be relied
upon by you for any other purpose or be furnished or quoted to, or relied
upon by, any person or entity for any purpose.
Very truly yours,
/s/ Daniel H. Luciano
---------------------
Daniel H. Luciano
EXHIBIT 10.1 Standard Shopping Center Lease
STANDARD OFFICE LEASE GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Lease Provisions ("Basic Lease Provisions")
1.1 Parties: This Lease, dated, for reference purposes only JULY 10, 1995 is
made by and between ROBERT CRANE RECEIVER UNDER COURT ORDER NO. BC 106992
SUPERIOR COURT OF LOS ANGELES COUNTY (herein called "Lessor") and BAILEY
ASSOCIATES INC. A DELAWARE CORPORATION, doing business under the name of TO
BE DETERMINED (herein called "Lessee").
1.2 Premises: Suite Number(s) C ON THE FIRST floor, cosisting of
approximately 900 SQUARE FEET more or less, as defined in paragraph 2 and as
shown on Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located at 827 SOUTH BROADWAY PART
OF BUILDING KNOWN AS 801 SOUTH
BROADWAY
in the City of LOS ANGELES
County of LOS ANGELES
State of CALIFORNIA as, more particularly described in Exhibit N/A
hereto, and as defined in paragraph 6.
1.4:Use DISCOUNT TELEPHONE PHONE SERVICES, WESTERN UNION SERVICES, RETAIL
SALES AND ACTIVATION OF PAGERS AND CELLULAR TELEPHONES. subject to paragraph
6
1.5 Term: SIX AND 1/2 MONTHS commencing AUGUST 15,1995 (commencement Date)
and ending FEBRUARY 29, 1996 as defined in paragraph 3.
1.6 Base Rent: $1,200.00 per month, payable on the FIRST day, of each month
per
paragraph 4.1 PRORATED RENT FOR THE MONTH OF AUGUST 15
THROUGH
AUGUST 31 IN THE SUM OF SIX-HUNDRED DOLLARS AND NO/CENTS
($600.00) PAYABLE ON SEPTEMBER 1. 1995.
1.7 Base Rent Increase: MARCH 1, 1996 SUBJECT TO THE PROVISIONS OF ARTICLE
NUMBER 52
1.8 Rent Paid Upon Execution: $1,200.00 RENT FOR THE MONTH OF SEPTEMBER,
1995.
1.9 Security Deposit: ONE THOUSAND TWO HUNDRED DOLLARS AND NO/CENTS
($1,200.00)
1.10 Lessee's Share of Operating Expense Increase: N/A
2. Premises, Parking and Common Areas.
2.1 Premises: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. The Premises, the Building, the Common Areas, The land upon
which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project" Lessor hereb leases to Lessee and Lessee leases from
Lessor for the term, at the rental, and upon all of the conditions set forth
herein, the real property referred to in the Basic Lease Provisions,
paragraph 1.2. as the "Premises:' including rights to the Common Areas as
hereinafter specified.
2.2 N/A
2.3 Common-Areas-Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary
line of the Office Building Project that are provided and designated by the
Lessor from time to time for the general non-exclusive use of Lessor Lessee
and of other lessees of the Office Building Project and their respective
employees, suppliers, shippers, customers and invitees, including but not
limited to common entrances, lobbies, corridors, stairways and stairwells,
public restrooms, elevators, escalators, parking areas to the extent not
otherwise prohibited by this Lease, loading and unloading areas, trash
areas, roadways, sidewalks, walkways, parkways, ramps, driveways, land-
scaped areas and decorative walls.
2.4 Common Areas-Rules and Regulations. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with
respect to the Office Building Project and Common Areas, and to cause its
employees, suppliers, shippers, customers, and invitees to so abide and
conform. Lessor or such other person(s) as Lessor may appoint shall have the
exclusive control and management of the Common Areas and shall have the
right, from time to time to modify, amend and enforce said rules and
regulations. Lessor shall not be responsible to Lessee for the
non-compliance with said rules and regulations by other lessees, their
agents, employees and invitees of the Office Building Project,
2.5 Common Areas-Changes. Lessor shall have the right, in Lessors sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation changes in the location, size, shape
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways
entrances, parking spaces, parking areas, loading and unloading areas,
ingress, egress, direction of traffic, decorative walls, landscaped areas
and walkways; provided, however, Lessor shall at all times provide the
parking facilities required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries
of the Office Building Project to be a part of the Common Areas, provided
that such other land and improvements have a reasonable and functional
relationship to the Office Building Project;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Office Building Project as
Lessor may, in the exercise of sound business judgment deem to be
appropriate.
3.TERM.
3.1 Term. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease.
1
3.2 Delay in Possession. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on
said date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease
or the obligations of Lessee hereunder or extend the term hereof, but, in
such case, Lessee shall not be obligated to pay rent or perform any other
obli- gation of Lessee under the terms of this Lease, except as may be
otherwise provided in this Lease. until possession of the Premises is
tendered to Lessee, as hereinafter defined, provided, however, that if
Lessor shall not have delivered possession of the Premises within sixty (60)
days following said Commencement Date, as the same may be extended under the
terms of a Work Letter executed by Lessor and Lessee, Lessee may, at
Lessee's option, by notice in writing to Lessor within ten (10) days
thereafter, cancel this Lease, in which event the parties shall be
discharged from all obligations hereunder, provided, however, that, as to
Lessee's obligations, Lessee first reimburses Lessor for all costs incurred
for Non-Standard Improvements and, as to Lessor's obligations, Lessor shall
return any money previously deposited by Lessee (less any offsets due Lessor
for Non-Standard Improvements); and provided further, that if such written
notice by Lessee is not received by Lessor within said ten (10) day period,
Lessee's right to cancel this Lease hereunder shall terminate and be of no
further force or effect.
3.2.1 Possession Tendered-Defined. Possession of the Premises shall be
deemed tendered to Lessee ("Tender of Possession") when (1) the improvements
to be provided by Lessor under this Lease are substantially completed, (2)
the Building utilities are ready for use in the Premises (3) Lessee has
reasonable access to the Premises.
3.2.2 Delays Caused by Lessee. There shall be no abatement of rent, and
the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be
deemed extended to the extent of any delays caused by acts or omissions of
Lessee, Lessee's agents, employees and contractors.
3.3 Early Possession. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee
shall pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the Lease term
is defined as the completion of the improvements, Lessee and Lessor shall
execute an amendment to this Lease establishing the date of Tender of
Possession (as defined in paragraph 3.2.1) or the actual taking of
possession by Lessee, whichever first occurs, as the Commencement Date.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided in paragraph
4.3, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in paragraph
1.6 of the Basic Lease Provisions, without offset or deduction. Lessee shall
pay Lessor upon execution hereof the advance Base Rent described in
paragraph 1.8 of the Basic Lease Provisions. Rent for any period during the
term hereof which is for less than one month shall be prorated based upon
the actual number of days of the calendar month involved. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may
designate in writing.
2
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease
Provisions as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or
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other charges due hereunder, or otherwise defaults with respect to any
provision of this Lease, Lessor may use, apply or retain all or any portion
of said deposit for the payment of any rent or other charge in default for
the payment of any other sum to which Lessor may become obligated by reason
of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any portion
of said deposit, Lessee shall within ten (10) days after written demand
therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount then required of Lessee. If the monthly Base Rent
shall, from time to time, increase during the term of this Lease, Lessee
shall, at the time of such increase, deposit with Lessor additional money as
a security deposit so that the total amount of the security deposit held by
Lessor shall at all times bear the same proportion to the then current base
Rent as the initial security deposit bears to the initial Base Rent set
forth in paragraph 1.6 of the Basic Lease Provisions. Lessor shall not be
required to keep said security deposit separate from its general accounts.
If Lessee performs all of Lessee's obligations hereunder, said deposit, or
so much thereof as has not heretofore been applied by Lessor, shall be
returned without payment of interest or other increment for its use, to
Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunderj at the expiration of the term hereof, and after Lessee
has vacated the Premises. No trust relationship is created herein between
Lessor and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the purpose set
forth in paragraph 1.4 of the Basic Lease Provisions or any other use which
is reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
(aJ Lessor warrants to Lessee that the Premises, in the state existing on
the date that the Lease term commences, but without regard to alterations or
improvements made by Lessee or the use for which Lessee will occupy the
Premises, does not violate any covenants or restrictions of record, or any
applicable building code, regulation or ordinance in effect on such Lease
term Commencement Date. In the event it is determined that this warranty has
been violated, then it shall be the obligation of the Lessor, after written
notice from Lessee, to promptly, at Lessors sole cost and expense, rectify
any such violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements
of any fire insurance underwriters or rating bureaus, now in effect or which
may hereafter come into effect, whether or not they reflect a change in
policy from that now existing, during the term or any part of the term
hereof, relating in any manner to the Premises and the occupation and use by
Lessee of the Premises. Lessee shall conduct its business in a lawful manner
and shall not use or permit the use of the Premises or the Common Areas in
any manner that will tend to create waste or a nuisance or shall tend to
disturb other occupants of the Office Building Project.
6.3 Condition of Premises
(a) Lessor shall deliver the Premises to Lessee in a clean condition on
the Lease Commencement Date (unless Lessee is already in possession)
and Lessor warrants to Lessee that the "HVAC," lighting, system in the
Premises shall be in good operating condition. In the event that it is
determined that this warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting
forth with specificity the nature of the violation, to promptly, at Lessor's
sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the
Premises and the Office Building Project in their condition existing as of
the Lease Commencement Date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating
the use of the Premises, and any easements, covenants or restrictions of
record, and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Lessee acknowledges that it has
satisfied itself by its own independent investigation that the Premises are
suitable for its intended use, and that neither Lessor nor Lasso's agent or
agents has made any representation or warranty as to the present or future
suitability of the Promises, Common Areas, or Office Building Project for
the conduct of Lessee's business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas,
and the equipment whether used exclusively for the Premises or in common
with other premises, in good condition and repair, provided, however
Lessor shall not be obligated to paint, repair or replace wall coverings, or
to repair or replace any improvements that are not ordinarily a part of the
Building or are above then Building standards. Except as provided in
paragraph 9.5, there shall be no abatement of rent or liability of Lessee on
account of any injury or interference with Lesse's business with respect to
any improvements, alterations or repairs made by Lessor to the Office
Building Project or any part thereof. Lessee expressly waives the benefits
of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Premises in good order,
condition and repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located)
that serves only Lessee or the Premises, to the extent such cost is
attributable to causes beyond normal wear and tear. Lessee shall be
responsible for the cost of painting, repairing or replacing wall coverings,
and to repair or replace any Premises improvements that are not ordinarily a
part of the Building or that are above then Building standards. Lessor may,
at its option, upon reasonable notice, elect to have Lessee perform any
particular such maintenance or repairs the cost of which is otherwise
Lessee's responsibility hereunder.
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(b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as
received, ordinary wear and tear excepted, clean and free of debris. Any
damage or deterioration of the Premises shall not be deemed ordinary wear
and tear if the same could have been prevented by good maintenance practices
by Lessee. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of Lessee's trade fixtures, alterations, furnishings
and equipment. Except as otherwise stated in this Lease, Lessee shall leave
the air lines, power panels, electrical distribution systems, lighting
fixtures, air conditioning, window coverings, wall coverings, carpets, wall
panelling, ceilings and plumbing on the Premises and in good operating
condition
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or repairs in,
on or about the Premises, or the Office Building Project. As used in this
paragraph 7.3 the term "Utility Installation" shall mean carpeting, window
and wall coverings, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and telecommunication
wiring and equipment. At the expiration of the term, Lessor may require the
removal of any or all of said alterations, impprovements additions or
Utility Installations, and the restoration of the Premises and the Office
Building Project to their prior condition, at Lessee's expense. Should
Lessor permit Lessee to make its own alterations, improvements, additions or
Utility Installations, Lessee shall use only such contractor as has been
expressly approved by Lessor, and Lessor may require Lessee to provide
Lessor, at Lessee's sole cost and expense, a lien and completion bond in an
amount equal to one and one half times the estimated cost of such
improvements, to insure Lessor against any liability for mechanic's and
materialmen's
liens and to insure completion of the work. Should Lessee make any
alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, or use a contractor not expressly approved by
Lessor, Lessor may, at any time during the term of this Lease, require that
Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility Installations in
or about the Premises or the Office Building Project that Lessee shall
desire to make shall be presented to Lessor in written form, with proposed
detailed plans. If Lessor shall give its consent to Lessee's making such
alteration, improvement, addition or Utility Installation, the consent shall
be deemed conditioned upon Lessee acquiring a permit to do so from the
applicable governmental agencies, furnishing a copy thereof to Lessor prior
to the commencement of the work, and compliance by Lessee with all
conditions of said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use
in the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice prior to
the commencement of any work in the Premises by Lessee, and Lessor shall
have the right to post notices of non-responsibility in or on the Premises
or the Building as provided by law. If Lessee shall, in good faith, contest
the validity of any such lien, claim or demand, then Lessee shall, at its
sole expense defend itself and Lessor against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises, the Building or the
Office Building Project, upon the condition that if Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an
amount equal to such contested lien claim or demand indemnifying Lessor
against liability for the same and holding the Premises, the Building and
the Office Building Project free from the effect of such lien or claim. In
addition. Lessor may require Lessee to pay Lessor's reasonable
attorneys'fees and costs in participating in such action if Lessor shall
decide it is to Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of
Lessee)
which may be made to the Premises by Lessee, including but not limited to,
floor coverings, panelings, doors, drapes, built-ins, moldings, sound
attenuation, and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner
and of good and sufficient quality and materials and shall be the property
of Lessor and remain upon and be surrendered with the Premises at the
expiration of the Lease term, unless Lessor requires their removal pursuant
to paragraph 7.3(a). Provided Lessee is not in default, notwithstanding the
provisions of this paragraph 7.3(e), Lessee's personal property and
equipment, other than that which is affixed to the Premises so that it
cannot be removed without material damage to the Premises or the Building,
and other than Utility Installations, shall remain the property of Lessee
and may be removed by Lessee subject to the provisions of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and specifications
for any alterations, improvements, additions or Utility Installations.
7.4 Utility Additions. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building
Project, including, but not by way of limitation, such utilities as
plumbing, electrical systems, communication systems, and fire protection and
detection systems, so long as such installations do not unreasonably
interfere with Lessee's use of the Premises.
8. Insurance; Indemnity.
8.1 Liability Insurance-Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard
form with Broad Form General Liability Endorsement (GL0404) or equivalent,
in an amount of not less than $1,000,000 per occurrence of bodily injury and
property damage combined or in a greater amount as reasonably determined by
Lessor and shall insure Lessee with Lessor as an additional insured against
liability arising out of the use, occupancy or maintenance of the Premises.
Compliance with the above requirement shall not, however, limit the
liability of Lessee hereunder.
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8.2 Liability Insurance-Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Broad Form Property Damage Insurance, plus coverage against such
other risks Lessor deems advisable from time to time, insuring Lessor, but
not Lessee, against liability arising out of the ownership, use, occupancy
or maintenance of the Office Building Project in an amount not less than
$5,000,000.00 per occurrence.
8.3 Property Insurance-Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease for the benefit of Lessee
replacement cost fire and extended coverage insurance, with vandalism and
malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the
full replacement cost, as the same may exist from time to time, of all of
Lessee's personal property, fixtures. equipment and tenant improvements.
8.4 Property Insurance-Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering
loss or damage to the Office Building Project improvements, but not Lessee's
personal property, fixtures, equipment or tenant improvements, in the amount
of the full replacement cost thereof, as the same may exist from time to
time, utilizing Insurance Services Office standard form or equivalent
providing protection against all perils included within the classification
of fire, extended coverage, vandalism, malicious mischief, piate glass, and
such other perils as Lessor deems advisable or may be required by a lender
having a lien on the Office Building Project. In addition, Lessor shall
obtain and keep in force, during the term of this Lease, a policy of rental
value insurance covering a period of one year, with loss payable to Lessor
which insurance shall also cover all Operating Expenses for said period.
Lessee will not be named in any such policies carried by Lessor and shall
have no right to any proceeds therefrom. The policies required by these
paragraphs 8.2 and 8.4 shall contain such deductibles as Lessor or the
aforesaid lender may determine. In the event that the Premises shall suffer
an insured loss as defined in paragraph 9.1 (fl hereof, the deductible
amounts under the applicable insurance policies shall be deemed an Operating
Expense. Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies carried by Lessor. Lessee shall pay the
entirety of any increase in the property insurance premium for the Office
Building Project over what it was immediately prior to the commencement of
the term of this Lease if the increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessees occupancy or any act or
omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be
cancellable or subject to reduction of coverage or other modification except
after thirty (30) days prior written notice to Lessor. Lessee shall, at
least thirty (30) days prior to the expiration of such policies, furnish
Lessor with renewals thereof.
8.6 Waiver of Subrogation, Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the
other for direct or consequential loss or damage arising out of or incident
to the perils covered by property insurance carried by such party, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. If necessary all property insurance policies
required under this Lease shall be endorsed to so provide.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and
against any and all claims for damage to the person or property of anyone or
any entity arising from Lessee's use of the Office Building Project, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or else-where and
shall further indemnify and hold harmless Lessor from and against any and
all claims, costs and expenses arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any act or omission of Lessee, or any
of Lessee's agents, contractors, employees, or invitees, and from and
against all costs, attoney's fees, expenses and liabilities incurred by
Lessor as the result of any such use, conduct, activity, work, things done,
permitted or suffered, breach, default or negligence, and in dealing
reasonably therewith, including but not limited to the defense or pursuit of
any claim or any action or proceeding involved therein; and in case any
action or proceeding be brought against Lessor by reason of any such matter,
Lessee upon notice from Lessor shall defend the same at Lessee's expense by
counsel reasonably satisfactory to Lessor and Lessor shall cooperate With
Lessee in such defense. Lessor need not have first paid any such claim in
order to be so indemnified. Lessee, as a material part of the consideration
to Lessor, hereby assumes all risk of damage to property of Lessee or injury
to persons, in, upon or about the Office Building Project arising from any
cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises or the Office Building Project, nor shall
Lessor be liable for injury to the person of Lessee, Lessee's employees,
agents or contractors, whether such damage or injury is caused by or results
from theft, fire, steam, electricity, gas, water or rain, or from the
breakage
leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause whether said damage or injury results from conditions arising
upon the Premises or upon other portions of the Office Building Project, or
from other sources or places, or from new construction or the repair,
alteration or improvement of any part of the Office Building Project, or of
the equipment fixtures or appurtenances applicable thereto, and regardless
of whether the cause of such damage or injury or the means of repairing the
same is inaccessible, Lessor shall not be liable for any damages arising
from any act or neglect of any other lessee, occupant or user of the Office
Building Project, nor from the failure of Lessor to enforce the provisions
of any other lease of any other lessee of the Office Building Project.
8.9 No Representation of Adequate Coverage, Lessor makes no
representation that the limits or forms of coverage of insurance specified
in this paragraph 8 are adequate to cover Lessee's property or obligations
under this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
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(b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent (50%) of the then Replacement Cost
of the building.
(c) "Premises Building Tatal Destruction" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that
the cost to repair is fifty percent (50%) or more of the then Replacement
Cost of the Building.
(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the
extent that the cost of repair is fifty percent (50%) or more of the then
Replacement Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph
8. The fact that an Insured Loss has a deductible amount shall not make the
loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all
improvements made by lessees, other than those Installed by Lessor at
Lessee's expence.
9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and 9.5,
if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises
Damage or Premises Building Partial Damage, then Lessor shall, as soon as
reasonably possible and to the extent the required materials and labor are
readily available through usual commercial channels, at Lessor's expense
repair such damage (but not Lessee's fixtures, equipment or tenant
improvements originally paid for by Lessee) to its condition existing at the
time of the damage, and this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is
not an Insured Loss and which falls within the classification of Premises
Damage or Premises Building Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense), which damage prevents Lessee from making any substantial
use of the Promises, Lessor may at Lessor's option either (i) repair such
damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after the date of the occurrence of
such damage of Lessor's intention to cancel and terminate this Lease as of
the date of the occurrence of such damage, in which event this Lease shall
terminate as of the date of the occurrence of such damage.
9.3 Premises Building Total Destruction; Office Building Project Total
Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, which falls into into the classifications of either (i)
Premises Building Total Destruction, or (ii) Office building Project Total
Destruction, then Lessor may at Lessor's option either (i) repair such
damage or destruction as soon as reasonably possible at Lessor's expense (to
the extent the required materials are readily available through usual
commercial channels) to its condition existing at the time of the damage,
but not Lessee's fixtures, equipment or tenant improvements, and this Lease
shall continue in full force and effect, or (it) give written notice to
Lessee within thirty (30) days after the date of occurrence of such damage
of Lessor's intention to cancel and terminate this Lease, in which case this
Lease shall terminate as of the date of the occurrence of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during the last twelve
(12) months of the term of this Lease there is substantial damage to the
Premises, Lessor may at Lessors option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of
such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option
may be exercised has not yet expired, Lessee shall exercise such option, if
it is to be exercised at all, no later than twenty (20) days after the
occurrence of an Insured Loss failing within the classification of Premises
Damage during the last twelve (12) months of the term of this Lease. If
Lessee duty exercises such option during said twenty (20) day period, Lessor
shall, at Lessor's expense, repair such damage, but not Lessee's fixtures,
equipment or tenant improvements, as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise
such - option during said twenty (20) day period, then Lessor may at
Lessor's option terminate and cancel this Lease as of the expiration of said
twenty (20) day period by giving written notice to Lessee of Lessor's
election to do so within ten (10) days after the expiration of said twenty
(20) day period, notwithstanding any term or provision in the grant of
option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises
are not usable (including loss of use due to loss of access or essential
services), the rent payable hereunder (including Lessee's Share of Operating
Expense Increase) for the period during which such damage, repair or
restoration continues shall be abated, provided (1) the damage was not the
result of the negligence of Lessee, and (2) such abatement shall only be to
the extent the operation and profitability of Lessee's business as operated
from the Premises is adversely affected. Except for said abatement of rent,
if any, Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair or restoration.
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(b) If Lessor shall be obligated to repair or restore the Premises or the
Building under the provisions of this Paragraph 9 and shall not commence
such repair or restoration within ninety (9o) days after such occurrence, or
if Lessor shall not complete the restoration and repair within six (6)
months after such occurrence, Lessee may at Lesse's option cancel and
terminate this Lease by giving Lessor written notice of Lessee's election to
do so at any time prior to the commencement or completion, respectively, of
such repair or restoration. In such event this Lease shall terminate as of
the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any such
restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 Termination-Advance Payments. Upon termination of this Lease pursuant
to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor
shall, in addition, return to Lessee so much of Lessee's security deposit as
has not theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10. 1 Payment of Taxes. Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project.
10.2 Additional Improvements. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records
and work sheets as being caused by additional improvements placed upon the
Office Building Project by other lessees or by Lessor for the exclusive
enjoyment of any other lessee. Lessee shall, however, pay to Lessor at the
time that Operating Expenses are payable under paragraph 4.2(c) the entirety
of any increase in real property tax if assessed solely by reason of
additional improvements placed upon the Premises by Lessee or at Lessee's
request.
10.3 Definiffon of "Real Property Tax" As used herein, the term "real
property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Office Building Project or
any portion thereof by any authority having the direct or indirect power to
tax, including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof as against any legal or equitable interest of Lessor in the Office
Building Project or in any portion thereof, as against Lessor's right to
rent or other income therefrom, and as against Lessor's business of leasing
the Office Building Project. The term "real property tax" shall also include
any tax, fee, levy, assessment or charge (i) in substitution of, partially
or totally, any tax, fee levy, assessment or charge hereinabove included
within the definition of "real property tax" or (ii) the nature of which was
hereinbefore included within the definition "real property tax" or (iii)
which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1,1978, or (iv)
which is imposed as a result of a change in ownership, as defined by
applicable local statutes for property tax purposes, of the Office Building
Project or which is added to a tax or charge hereinbefore included within
the definition of real property tax by reason of such change of ownership,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.4 Joint Assessment If the improvements or property, the taxes for which
are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably
determined by Lessor from the respective valuations assigned in the
assessor's work sheets or such other information (which may include the cost
of construction) as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.5 Personal Property Taxes
(a) Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Lessee's property.
11.Utilities.
11.2 Services Exclusive to Lessee. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to
Lessee, together with any taxes thereon. If any such services are not
separately metered to the Premises, Lessee shall pay at Lessor's option,
either Lessee's Share or a reasonable proportion to be determined by Lessor
of all charges jointly metered with other premises in the Building.
11.3 Hours of Service. Said services and utilities shall be provided during
generally accepted business days and hours or such other days or hours as
may hereafter be set forth. Utilities and services required at other times
shall be subject to advance request and reimbursement by Lessee to Lessor of
the cost thereof.
11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water,
lighting or power, or suffer or permit any act that causes extra burden upon
the utilities or services, including but not limited to security services,
over standard office usage for the
8
Office Building Project. Lessor shall require Lessee to reimburse Lessor for
any excess expenses or costs that may arise out of a breach of this
subparagraph by Lessee. Lessor may, in its sole discretion, install at
Lessee's expense supplemental equipment and/or separate metering applicable
to Lessee's excess usage or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot,
strike, labor dispute, breakdown, accident, repair or other cause beyond
Lessor's reasonable control or in cooperation with governmental request or
directions.
12. Assignment and Subletiting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the
Premises, without Lessor's prio;written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to Lessee's request for consent
hereunder in a timely manner and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a material default and breach of this Lease without the
need for notice to Lessee under paragraph 131 "Transfer" within the meaning
of this paragraph 12 shall include the transfer or transfers aggregating:
(a) if Lessee is a corporation more than twenty-five percent (25%) of the
voting stock of such corporation, or (b) if Lessee is a partnership, more
than twenty-five percent (250%) of the profit and loss participation in such
partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof
without Lessor's consent, to any corporation which controls, is controlled
by or is under common control with Lessee, or to any corporation resulting
from the merger or consolidation with Lessee, or to any person or entity
which acquires all the assets of Lessee as a going concern of the business
that is being conducted on the Premises, all of which are referred to as
"Lessee Affiliate"; provided that before such assignment shall be effective
(a) said assignee shall assume, in full, the obligations of Lessee under
this Lease and (b) Lessor shall be given written notice of such assignment
and assumption. Any such assignment shall not, in any way, affect or limit
the liability of Lessee under the terms of this Lease even if after such
assignment or subletting the terms of this Lease are materially changed or
altered without the consent of Lessee, the consent of whom shall not be
necessary.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, no assignment or subletting shall
release Lessee of Lessee's obligations hereunder or alter the primary
liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense Increase, and to perform all
other obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such assignment or
subletting, nor the acceptance of rent, shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent
thereto,shall not be effective unless said guarantors give their written
consent to such sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee
or anyone else liable on the Lease or sublease and without obtaining their
consent and such action shall not relieve such persons from liability under
this Lease or said sublease, however such persons shall not be responsible
to the extent any such amendment or modification enlarges or increases the
obligations of the Lessee or su61 essee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgement that no default
then exists under this Lease of the obligations to be performed by Lessee
nor shall such consent be deemed a waiver of any then existing default,
except as may be otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied Upon
by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent
null and void.
12.4 Additional Terms and Conditions Applicable to Subletlting. Regardless
of Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly
incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessees
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease, provided however,
that until a default shall occur in the performance of Lessee's obligations
under this Lease, Lessee may receive, collect and enjoy the rents accruing
under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such sublease. Lessee hereby irrevocably authorizes, and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a
9
default exists in the performance of Lessee's obligations under this Lease,
to pay to Lessor the rents due and to become due under the sublease. Lessee
agrees that such sublessee shall have the right to rely upon any such
statement and request from Lessor, and that such sublessee shall pay such
rents to Lessor without any obligation or right to inquire as to whether
such default exists and 33notwithstanding any notice from or claim from
Lessee to the contrary. Lessee shall have no right or claim against said
sublessee or Lessor for any such rents so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any
sublease Lessee shall use only such form of sublessee as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublease shall, by
reason of entering into a sublease under this Lease, be deemed, for the
benefit of Lessor to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than such
obligations as are contrary to or inconsistent with provisions contained in
a sublease to which Lessor has expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease
from the time of the exercise of said option to the termination of such
sublease, provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to Lessee or for any other
prior defaults of Lessee under such sublease.
(d) No sublessee shall further assign or sublet all or any part of the
Promises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sub-lessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 Lessor's Expenses. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or
if Lessee shall request the consent of Lessor for any act Lessee proposes to
do then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys, architects: engineers' or other
consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the
proposed assignee or sublessee shall conduct a business on the Premises of a
quality substantially equal to that of Lessee and consistent with the
general character of the other occupants of the Office Building Project and
not in violation of any exclusives or rights then held by other tenants, and
(b) the proposed assignee or sublessee be at least as financially
responsible as Lessee was expected to be at the time of the execution of
this Lease or of such assignment or subletting, whichever is greater.
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation Gf
the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is
paid.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment
or subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency),
13.1(f) (false statement), 16(a) (estoppel certificate), 30(b)
(subordination), 33 (auctions), or 41.1 (easements), all of which are hereby
deemed to be material, non-curable defaults without the necessity of any
notice by Lessor to Lessee thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(d) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by
Lessee other than those referenced in subparagraphs (b) and (c), above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee, provided, however, that if the
nature of Lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion.; To the extent
permitted by law, such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Lessee under applicable Unlawful
Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors, (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. 101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty
(60) days; (iii) the appointment of a trustee or receiver to take possession
of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee s assets located at the Premises or
of Lessee's interest in this Lease, where such seizure is not discharged
within thirty (30) days. In the event that any provision of this paragraph
13.1 (e) is contrary to any applicable law, such provision shall be of no
force or effect.
(fl The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of
Lessee's obligation hereunder, was materially false.
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13.2 Remedies. In the event of any material default or breach of this Lease
by Lessee. Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Promises to Lessor.
In such event Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default including, but not limited
to, the cost of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and any real estate commission actually paid,
the worth at the time of award by the court having jurisdiction thereof of
the amount by which the unpaid rent for the balance of the term after the
time of such award exceeds the amount of such rental loss for the same
period that Lessee proves could be reasonably avoided; that portion of the
leasing commission paid by Lessor pursuant to paragraph 15 applicable to the
unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or
aban-doned the Premises. In such event Lessor shall be entitled to enforce
all of Lessor's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date
due at the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to
Lessee in writing, specifying wherein Lessor has failed to perform such
obligation; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days are required for performance then
Lessor shall not be in default if Lessor commences performance within such
30-day period and thereafter diligently pursues the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, or other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will
be extremely difficult to ascertain. Such costs include, but are not limited
to, processing and accounting charges, and late charges which may be imposed
on Lessor by the terms of any mortgage or trust deed covering the Office
Building Project. Accordingly, if any installment of Base Rent, Operating
Expense Increase, or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a late charge equal to 6% of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14.Condemnation. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under
the threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of
the date the condemning authority takes title or possession, whichever first
occurs; provided that if so much of the Premises or the Office Building
Project are taken by such condemnation as would substantially and adversely
affect the operation and profitability of Lessee's business conducted from
the Premises, Lessee shall have the option, to be exercised only in writing
within thirty (30) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within thirty (30) days
after the condemning authority shall have taken possession), to terminate
this Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the
Premises remaining, except that the rent and Lessee's Share of Operating
Expense Increase shall be reduced in the proportion that the floor area of
the Premises taken bears to the total floor area of the Premises. Common
Areas taken shall be excluded from the Common Areas usable by Lessee and no
reduction of rent shall occur with respect thereto or by reason thereof.
Lessor shall have the option in its sole discretion to terminate this Lease
as of the taking of possession by the condemning authority, by giving
written notice to Lessee of such election within thirty (30) days after
receipt of notice of a taking by condemnation of any part of the Premises or
the Office Building Project. Any award for the taking of all or any part of
the Premises or the Office Building Project under the power of eminent
domain or any payment made under threat of the exercise of such power shall
be the property of Lessor, whether such award shall be made as compensation
for diminution in value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
separate award for loss of or damage to Lessees trade fixtures, removable
personal property and unamortized tenant improvements that have been paid
for by Lessee. For that purpose the cost of such improvements shall be
amortized over the original term of this Lease excluding any options. In the
event that this Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of severance damages received by Lessor in
connection with such condemnation, repair any damage to the Premises caused
by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess
of such severance damages required to complete such repair.
15. N/A
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not less than
ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a
statement in writing (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in tull
force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii)
11
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Office Building
Project or of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such statement
within such time shall be a material default of this Lease by the party who
is to respond, without any further notice to such party, or it shall be
conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party,
(ii) there are no uncured defaults in the requesting party's performance,
and (iii) if Lessor is the requesting party, not more than one month's rent
has been paid in advance.
(c) If Lessor desires to finance refinance, or sell the Office Building
Project, or any part thereof, Lessee hereby agrees to deliver to any lender
or purchaser designated by Lesso; such financial statements of Lessee as may
be reasonably required by such lender or purchaser. Such statements shall
include the past three (3) years' financial statements of Lessee. All such
financial statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes herein set
forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such
title or interest, Lessor herein named (and in case of any subsequent
transfers then the grantor) shall be relieved from and after the date of
such transfer of all liability as respects Lessor's obligations thereafter
to be performed, provided that any funds in the hands of Lessor or the then
grantor at the time of such transfer, in which Lessee has an interest, shall
be delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.
18. Severabiliity. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the
maximum rate then allowable by law or judgments from the date due. Payment
of such interest shall not excuse or cure any default by Lessee under this
Lease; provided, however, that interest shall not be payable on late charges
incurred by Lessee nor on any amounts upon which late charges are paid by
Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations
to be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of
Operating Expense Increase and any other expenses payable by Lessee
hereunder shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Lessee hereby acknowledges that neither the
real estate broker listed in paragraph 15 hereof nor any cooperating broker
on this transaction nor the Lessor or any employee or agents of any of said
persons has made any oral or written warranties or representations to Lessee
relative to the condition or use by Lessee of the Premises or the Office
Building Project and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use
and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease.
23.Notices. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or
registered mail, and shall be deemed sufficiently given if delivered or
addressed to Lessee or to Lessor at the address noted below or adjacent to
the signature of the respective parties, as the case may be. Mailed notices
shall be deemed given upon actual receipt at the address required, or
forty-eight hours following deposit in the mail, postage prepaid, whichever
first occurs. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee's taking possession of
the Premises, the Premises shall constitute Lessee's address for notice
purposes. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
24.Waivers. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee
of the same or any other provision. Lessor's consent to, or approval of, any
act shall not be deemed to render unnecessary the obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance of
rent hereunder by Lessor shall not be a waiver of any preceding breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
25.Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of
this Lease for recording purposes.
26.Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of Lessee, except
that the rent payable shall be two hundred percent (200%) of the rent
payable immediately preceding the termination date of this Lease, and all
Options, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
12
28.Covenants and Conditions. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29.Binding Effect, Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions
of paragraph 17, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State where the Office Building Project is located and any
litigation concerning this Lease between the parties hereto shall be
initiated in the county in which the Office Building Project is located.
30. Subordination.
(a) This Lease, and any Option or right of first refusal granted hereby,
at Lessor's option, shall be subordinate to any ground lease, mortgage, deed
of trust, or any other hypothecation or security now or hereafter placed
upon the Office Building Project and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lesseehas right to quiet possession of the Promises shall not be disturbed
if Lessee is not in default and so long as Lessee shall pay the rent and
observe and perform all of the provisions of this Lease, unless this Lease
is otherwise terminated pursuant to its terms. If any mortgagee, trustee or
ground lessor shall elect to have this Lease and any Options granted hereby
prior to the lien of its mortgage, deed of trust or ground lease, and shall
give written notice thereof to Lessee, this Lease and such Options shall be
deemed prior to such mortgage, deed of trust or ground lease, whether this
Lease or such Options are dated prior or subsequent to the date of said
mortgage, deed of trust or ground lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted
herein prior to the lien of any mortgage, deed of trust or ground lease; as
the case may be. Lessees failure to execute such documents within ten (10)
days after written demand shall constitute a material default by Lessee
hereunder without further notice to Lessee or, at Lessor's option, Lessor
shall execute such documents on behalf of Lessee as Lessee's
attorney-in-fact. Lessee does hereby make, constitute and irrevocably
appoint Lessor as Lessee's attorney-in-fact and in Lessee's name, place and
stead, to execute such documents in accordance with this paragraph 30(b).
31. Attorneys' Fees.
31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party
in any such action, trial or appeal thereon, shall be entitled to his
reasonable attorneys' fees to be paid by the losing party as fixed by the
court in the same or a separate suit, and whether or not such action is
pursued to decision or judgment. The provisions of this paragraph shall
inure to the benefit of the broker named herein who seeks to enforce a right
hereunder.
31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys'
fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorney's fees and all other
costs and expenses incurred in the preparation and service of notice of
detault and consultations in connection therewith, whether or not a legal
transaction is subsequently commenced in connection with such default.
32.Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding
or other necessary structures, making such alterations, repairs,
improvements or additions to the Premises or to the Office Building Project
as Lessor may reasonably deem necessary or desirable and the erecting, using
and maintaining of utilities, services, pipes and conduits through the
Premises and/or other premises as long as there is no material adverse
effect to Lessee's use of the Premises. Lessor may at any time place on or
about the Premises or the Buildingany ordinary "For Sale" signs and Lessor
may at any time during the last 120 days of the term hereof place on or
about the Premises any ordinary "For Lease" signs.
32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the
same.
32.3 Lessor shall have the right to retain keys to the Promises and to
unlock all doors in or upon the Premises other than to files, vaults and
safes and in the case of emergency to enter the Premises by any reasonably
appropriate means, and any such entry shall not be deemed a forceable, or
unlawful entry or detainer of the Premises or an eviction. Lessee waives any
charges for damages or injuries or interference with Lessees property or
business in connection therewith.
33.Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common
Areas without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether
to grant such consent. The holding of any auction on the Premises or Common
Areas in violation of this paragraph shall constitute a material default of
this Lease.
34.Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Office Building
Project.
35.Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36.Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
13
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38.Quiet Possession. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have
quiet possession of the Premises for the entire term hereof subject to all
of the provisions of this Lease. The individuals executing this Lease on
behalf of Lessor represent and warrant to Lessee that they are fully
authorized and legally capable of executing this Lease on behalf of Lessor
and that such execution is binding upon all parties holding an ownership
interest in the Office Building Project.
39.Options.
39.1 Definition. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease
or to renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (2) the option of right of first refusal to lease
the Premises or the right of first offer to lease the Premises or the right
of first refusal to lease other space within the Office Building Project or
other property of Lessor or the right of first offer to lease other space
within the Office Building Project or other property of Lessor, (3) the
right or option to purchase the Premises or the Office Building Project, or
the right of first refusal to purchase the Premises or the Office Building
Project or the right of first offer to purchase the Premises or the Office
Building Project, or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor
or the right of first offer to purchase other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original
Lessee while occupying the Premises who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, that an Option may be exercised by or assigned to any Lessee
Affiliate as defined in paragraph 12.2 of this Lease. The Options, if any,
herein granted to Lessee are not assignable separate and apart from this
Lease, nor may any Option be separated from this Lease in any manner, either
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during the
timecommencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1 (c) or 13.1 (d) and continuing until the
noncompliance alleged in said notice of default is cured, or (ii) during the
period of time commencing on the day after a monetary obligation to Lessor
is due from Lessee and unpaid (without any necessity for notice thereof to
Lessee) and continuing until the obligation is paid, or (iii) in the event
that Lessor has given to Lessee three or more notices of default under
paragraph 13.1 (c), or paragraph 13.1 (d), whether or not the defaults are
cured, during the 12 month period of time immediately prior to the time that
'essee attempts to exercise the subject Option. (iv) if Lessee has committed
any non-curable breach, including without limitation those described in
paragraph 13.1 (b), or is otherwise in default of any of the terms,
covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due
and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation
of Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1 (d)
within thirty (30) days after the date that Lessor gives notice to Lessee of
such default and/or Lessee fails thereafter to diligently prosecute said
cure to completion, or (iii) Lessor gives to Lessee three or more notices of
default under paragraph 13.1(c), or paragraph 13.1(d), whether or not the
defaults are cured, or (iv) if Lessee has committed any non-curable breach
including without limitation those described in paragraph 13.1 (b), or is
otherwise in default of any of the terms, covenants and conditions of this
Lease.
40.Security Measures-Lessor's Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the
benefit of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and
the property of Lessee and of Lessee's agents and invitees from acts of
third parties. Nothing herein contained shall prevent Lessor, at Lessor's
sole option, from providing security protection for the Office Building
Project or any part thereof, in which event the cost thereof shall be
included within the definition of Operating Expenses, as set forth in
paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building Project
or building in which the Premises are located upon not less than 90 days
prior written notice;
(b) To, at Lessees expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas
as Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business as
long as such exclusive does not conflict with any rights expressly given
herein;
14
(d) To place such signs, notices or displays as Lessor reasonably deems
necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas;
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building or
the Office Building Project or their name(s) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the roof
of the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of Parcel Maps and restrictions, so long as
such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure
to do so shall constitute a material default of this Lease by Lessee without
the need for further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42.Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment, and there shall
survive the right on the part of said party to institute suit for recovery
of such sum. If it shall be adjudged that there was no legal obligation an
the part of said party to pay such sum or any part thereof, said party shall
be entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
43.Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of
such entity represent and warrant that such individual is duly authorized to
execute and deliver this Lease on behalt of said entity. If Lessee is a
corporation trust or partnership, Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.
44.Conflict. Any conflict between the printed provisions, Exhibits or
Addenda of this Lease and the typewritten or handwritten provisions, if any,
shall be controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to
lease. This Lease shall become binding upon Lessor and Lessee only when
fully executed by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications
to this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the
Office Building Project.
47. Multitiple parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee, respectively.
48.N/A
49.Attachments. Attached hereto are the following documents which constitute
a part of this Lease:.N/A
50. LESSOR SHALL BE RESPONSIBLE FOR REMOVING EXISTING CARPETING AND APPLY
$500.00 (FIVE HUNDRED DOLLARS AND NO/CENTS) TOWARDS THE COST OF REPLACING
AND INSTALLING NEW CARPETING IN THE PREMISES, UPON RECEIPT OF PAID BILL BY
LESSEE.
51. LESSEE HAS THE RIGHT TO PLACE BANNER ON THE SPACE IMMEDIATELY ADJACENT
TO THE NORTH OF THE PREMISES' SIGN CAN SPACE. THE DIMENSIONS OF THE BANNER
SHALL NOT EXCEED 3 FEET IN HEIGHT NOR 15 FEET IN WIDTH.
52. LESSEE SHALL HAVE THE OPTION TO EXTEND THE ORIGINAL LEASE TERM FOR AN
ADDITIONAL SIX (6) MONTHS COMMENCING MARCH 1, 1996 SUBJECT TO PARAGRAPH 39.
OPTIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY, SHOULD LESSEE CHOSE TO
EXERCISE OPTION, LESSEE MUST NOTIFY LESSOR IN WRITING, THIRTY (30) DAYS
PRIOR TO TERMINATION OF ORIGINAL LEASE TERM. THE RENT DURING THE SIX(6)
MONTH OPTION PERIOD SHALL BE $1,350.00 (ONE THOUSAND THREE HUNDRED FIFTY
DOLLARS AND NO/CENTS) PER MONTH.
52.A) SHOULD TENANT CHOOSE TO EXERCISE OPTION, LESSOR WILL PAY 50.00% OF
COST FOR NEW SIGN CAN AND INSTALLATION NOT TO EXCEED ONE THOUSAND DOLLARS
AND NO/CENTS ($1,000.00)
53. LESSOR AGREES TO GRANT TENANT AN EXCLUSIVE RIGHT TO DISCOUNT TELEPHONE
PHONE SERVICES,WESTERN UNION SERVICES, RETAIL SALES AND ACTIVATION OF PAGERS
AND CELLULAR TELEPHONES FOR THE ENTIRE DURAION OF THIS LEASE.
15
54. ADDITIONAL ADDRESS FOR LESSEE
2300 CRENSHAW BLVD. SUITE 108, TORRANCE, CALIFORNIA 91207
PHONE (310) 544-1657
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE. SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT
THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY
THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER
OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL
AND TAX CONSEQUENCES OF THIS LEASE.
LESSEE: LESSOR:
BAILEY ASSOCIATES INC.
FOR SPACE #C Broadway Trade Center
By: /s/ Elizabeth Hiromoto By: /s/ Robert Crane
------------------------- --------------------
Elizabeth Hiromoto Robert Crane
President By Robert Crane, Receiver
Date 12 July 95 Date July 21, 1995
EXHIBIT "A"
Exhibit "A" is a drawing of the location of the leased building (building C)
in relation to adjacent buildings.
AGREEMENT OF GUARANTOR
I, the undersigned, acknowledge I have executed a written Guaranty ("the
Guaranty") of the Lease dated July 10, 1995 between Robert Crane, Receiver
and Bailey Associates Inc, and that I am the guarantor of such Lease; that
the Guaranty remains in full force and effect; that I have read the
foregoing Lease and understand its content; that I agree that each and every
term of the Guaranty which I have signed shall be applicable to the
obligations of the Lessee under this Lease; and I acknowledge that my
agreement to be bound to the obligations of the Lessee under the terms of
this Lease is a material inducement to the Lessor's execution of this Lease.
Guarantor
By
------------------
Guarantor
By: /s/ Elizabeth Hiromoto
--------------------------
Elizabeth Hiromoto
Date 12, July 95
---------------
EXHIBIT 10.2 Standard Industrial/Commercial Multi-Tenant Lease
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference
purposes only, November 1 - 1997 is made by and between Robert Crane,
Receiver undercourt order #BC106992 Superior court of Los Angeles Co.
("Lessor") and Bailey & Associates., a Delaware Corporation ("Lessee"),
(collectively the "Parties," or individually a "Party").
1.2(a) Promises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this
Lease, commonly known by the street address of 827 S. Broadway, Suite C,
located in the City of Los Angeles, County of Los Angeles, state of
California, with zip code 90014, as outlined on Exhibit B attached
hereto ("Premises"). The "Building" is that certain building containing the
Premises and generally described as (describe briefly the nature of the
Building): ground floor portion of a larger commercial building at 801 S.
Broadway
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have
any rights to the roof, exterior walls or utility raceways of the Building
or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with
all other buildings and improvements thereon, are herein collectively
referred to as the "Industrial Central." (Also see Paragraph 2.)
1.2(b) Parking: N one unreserved vehicle parking spaces
("Unreserved Parking Spaces"); and None reserved vehicle parking spaces
("Reserved Parking Spaces"). (Also see Paragraph 2.6.)
1.3 Term: One (1) years and 0 months ("Original Term")
commending December 1, 1997 ("Commencement Date") and ending
November 30, 1998 ("Expiration Date"). (Also see Paragraph 3.)
1.4 Early Possession: N/A ("Early Possession
Date"). (Also see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $ 1,250.00 per month ("Base Rent"), payable on
the First (1st) day of each month commencing December 1, 1997 (Also
see Paragraph 4.)
[ ] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum N/A attached hereto.
1.6(a) Base Rent Paid Upon Execution: $ 0 as Base Rent for a period.
1.6(b) Lessee's Share of Common Area Operating Expenses: N/A
percent ( %)("Lessee's Share") as determined by
[ ] prorata square footage of the Premises as compared to the total square
footage of the Building or [ ] other criteria as described in Addendum .
1.7 Security Deposit: $ 1,200.00* ("Security Deposit"). (Also see
Paragraph 5.) See also Paragraph 49.
1.8 Permitted Use: Exclusive discount telephone services, Western
Union services, and non-exclusive sales and activation of pagers and
cellular telephones. ("Permitted Use")(Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see
Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[ ] represents Lessor exclusively ("Lessor's Broker");
[ ] represents Lessee exclusively
(Lessee's Broker"); or
[ ] Grubb & Ellis Co. represents both Lessor and Lessee ("Dual Agency").
(Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate
shares as they may mutually designate in writing, a fee as set forth in a
separate written agreement between Lessor and said Broker(s) (or in the
event there is no separate written agreement between Lessor and said
Broker(s), the sum of $ see invoice ) for brokerage services rendered by
said Broker(s) in connection with this transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease
are to be guaranteed by Michele Hiromoto ("Guarantor"). (Also see
Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs --- through ---, and Exhibits A through C, all of
which constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is
reasonable and the rental and Lessee's Share (as defined in Paragraph
1.6(b)) based thereon is not subject to revision whether or not the actual
square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition
on the Commencement Date. If a non-compliance with said warranty exists as
of the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify same
at Lessor's expense. If Lessee does not give Lessor written notice of a non-
compliance with this warranty within thirty (30) days after the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code.
Lessor warrants that any improvements (other than those constructed by
Lessee or at Lessee's direction) on or in the Premises which have been
constructed or installed by Lessor or with Lessor's consent or at Lessor's
direction shall comply with all applicable covenants or restrictions of
record and applicable building codes, regulations and ordinances in effect
on the Commencement Date. Lessor further warrants to Lessee that Lessor has
no knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, or
ordinances exist with regard to the Premises as of the Commencement Date.
Said warranties shall not apply to any Alterations or Utility Installations
(defined in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises
do not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
given within six (6) months following the Commencement Date and setting
forth with specificity the nature and extent of such non-compliance, take
such action, at Lessor's expense, as may be reasonable or appropriate to
rectify the non-compliance. Lessor makes no warranty that the Permitted Use
in Paragraph 1.8 is permitted for the Premises under Applicable Laws (as
defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it
has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and
fire sprinkler systems, security, environmental aspects, seismic and
earthquake requirements, and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county, state and federal laws,
ordinances and regulations and any covenants or restrictions of record
(collectively, "Applicable Laws") and the present and future suitability of
the Premises for Lessee's intended use; (b) that Lessee has made such
investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore
as the same relate to Lessee's occupancy of the Premises and/or the terms of
this Lease; and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to said
matters other than as set forth in this Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor
in this Paragraph 2 Shall be of no force or effect if immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.
*1,200.00, already on deposit per lease dated July 10, 1995 between
Lessee and Lessor.
Initials: /s/
R.C.
/s/
M.H.
American Industrial Real Estate Association 1993 MULTI-TENANT - GROSS
2.7 Common Area - Definition. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center and Interior utility raceways within
the Premises that are provided and designated by the Lessor from time to
time for the general non-exclusive use of Lessor, Lessee and other lessees
of the Industrial Center and their respective employees, suppliers,
shippers, customers, contractors and invitees, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways and landscaped areas.
2.8 Common Areas - Lessees Rights. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers,
contractors, customers and invitees, during the term of this Lease, the non-
exclusive right to use, in common with others entitled to such use, the
Common Areas as they exist from time to time, subject to any rights, powers,
and privileges reserved by Lessor under the terms hereof or under the terms
Of any rules and regulations or restrictions governing the use of the
industrial Center. Under no circumstances shall the right herein granted to
use the Common Areas be deemed to include the right to store any property,
temporarily or permanently, in the Common Areas. Any Such storage shall be
permitted only by the prior written consent of Lessor or Lessor's designated
agent, which consent may be revoked at any time. in the event that any
unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be
Immediately payable upon demand by Lessor.
2.9 Common Areas-Rules and Regulations. Lessor or Such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time,
to establish, modify, amend and enforce reasonable Rules and Regulations
with respect thereto in accordance with Paragraph 40. Lessee agrees to abide
by and conform to all such Rules and Regulations, and to cause its
employees, suppliers, shippers, customers, contractors and invitees to so
abide and conform. Lessor shall not be responsible to Lessee for the non-
compliance with said rules and regulations by other lessees of the
Industrial Center.
2.10 Common Areas-Changes. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas,
ingress, egress, direction of traffic, landscaped areas, walkways and
utility raceways;
(b) To close temporarily any of the Common Area for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land outside the boundaries of the
industrial Center to be a part of the Common Areas;
(d) Tb add additional buildings and improvements to the Common
Areas;
(e) To use the Common Area while engaged in making additional
improvements, repairs or alterations to the industrial Center, or any
portion Thereof;
and
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial Center as
Lessor may, in the exercise of sound business judgment, deem to be
appropriate.
3. Term.
3. Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after
the Early Possession Date but prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early occupancy. All
other terms of this Lease, however, (including but not limited to the
obligations to pay Lessee's Share of Common Area Operating Expenses and to
carry the insurance required by Paragraph 8) shall be in effect during such
period. Any such early possession shall not affect nor advance the
Expiration Date of the Original Term.
3.3 Delay In Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by
the Commencement Date, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease, or the
obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to
pay rent or perform any other obligation of Lessee under the terms of this
Lease until Lessor delivers possession of the Premises to Lessee. If
possession of the Premises is not delivered to Lessee within sixty (60) days
after the Commencement Date, Lessee may, at its option, by notice In writing
to Lessor within ten (10) days after the end of said sixty (60) day period,
cancel this Lease, in which event the parties shall be discharged from all
obligations hereunder; provided further, however, that if such written
notice of Lessee is not received by Lessor within said ten (10) day period,
Lessee's right to cancel this Lease hereunder shall terminate and be of no
further force or effect. Except as may be otherwise provided, and regardless
of when the Original Term actually commences, if possession is not tendered
to Lessee when required by this Lease and Lessee does not terminate this
Lease, as aforesaid, the period free of the obligation to pay Base Rent, if
any, that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to the period during
which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it
is due under the terms of this Lease. Base Rent and all other rent and
charges for any period during the term hereof which is for less than one
full month shall be prorated based upon the actual number of days of the
month involved. Payment of Base Rent and other charges shall be made to
Lessor at its address stated herein or to such other persons or at such
other addresses as Lessor may from time to time designate in writing to
Lessee.
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5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security
for Lessee's faithful performance of Lessee's obligations under this Lease.
If Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1). Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for
any Liability, cost, expense, loss or damage (including attorneys' fees)
which Lessor may suffer or incur by reason thereof. If Lessor uses or
applies all or any portion of said Security Deposit, Lessee shall within ten
(10) days after written request therefore deposit monies with Lessor
sufficient to restore said Security Deposit to the full amount required by
this Lease. Any time the Base Rent increases during the term of this Lease,
Lessee shall, upon written request from Lessor, deposit additional monies
with Lessor as an addition to the Security Deposit so that the total amount
of the Security Deposit shall at all times bear the same proportion to the
then current Base Rent as the initial Security Deposit bears to the Initial
Base Rent set forth in Paragraph 1.5. Lessor shall not be required to keep
all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof
and after Lessee has vacated the Premises, return to Lessee (or, at Lessor's
option, to the last assignee, if any, of Lessee's interest herein), that
portion of the Security Deposit not used or applied by Lessor. Unless
otherwise expressly agreed in writing by Lessor, no part of the Security
Deposit shall be considered to be held in trust, to bear interest or other
increment for its use, or to be prepayment for any monies to be paid by
Lessee under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to
the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants,
and by prospective assignees and subtenants of Lessee, its assignees and
subtenants, for a modification of said Permitted Use, so long as the same
will not impair the structural integrity of the improvements on the Premises
or in the Building or the mechanical or electrical systems therein, does not
conflict with uses by other lessees, is not significantly more burdensome to
the Premises or the Building and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days after such request give
a written notification of same, which notice shall include an explanation of
Lessor's reasonable objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material
or waste whose presence, nature, quantity and/or intensity of existence,
use, manufacture, disposal, transportation, spill, release or effect, either
by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety
or welfare, the environment, or the Premises; (ii) regulated or monitored by
any governmental authority; or (iii) a basis for potential liability of
Lessor governmental agency or third party under any applicable statute or
common law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Lessee shall not engage in any activity in or about the Premises
which constitutes a Reportable Use (as hereinafter defined) of Hazardous
Substances without the express prior written consent of Lessor and
compliance in a timely manner (at Lessee's sole cost and expense) with all
Applicable Requirements (as defined in Paragraph 6.3). "Reportable Use"
shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or
disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filed with, any governmental authority, and (iii) the presence in, on
or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary
and customary materials reasonably required to be used by Lessee in the
normal course of the Permitted Use, so long as such use is not a Reportable
Use and does not expose the Premises or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any liability
therefor. In addition, Lessor may (but without any obligation to do so)
condition its consent to any Reportable Use of any Hazardous Substance by
Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in
its reasonable discretion, deems necessary to protect itself, the public,
the Premises and the environment against damage, contamination or injury
and/or liability therefor, including but not limited to the installation
(and, at Lessor's option, removal on or before Lease expiration or earlier
termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under
or about the Premises or the Building, other than as previously consented to
by Lessor, Lessee shall immediately give Lessor written notice thereof,
together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding
given to, or received from, any governmental authority or private party
concerning the presence, spill, release, discharge of, or exposure to, such
Hazardous Substance including but not limited to all such documents as may
be involved in any Reportable Use involving the Premises. Lessee shall not
cause or permit any Hazardous Substance to be spilled or released in, on,
under or about the Premises (including, without limitation, through the
plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and
the Premises, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under
Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury
to person, property or the environment created or suffered by Lessee, and
the cost of investigation (including consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at
Lessee's sole cost and expense, fully, diligently and in a timely manner,
comply with all "Applicable Requirements," which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, the requirements of any
applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any
manner to the Premises (including but not limited to matters pertaining to
(i) industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance), now
in effect or which may hereafter come into effect. Lessee shall, within five
(5) days after receipt of Lessor's written request, provide Lessor with
copies of all documents and information, including but not limited to
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving failure by
Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mort-
gages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an
emergency, and otherwise at reasonable times, for the purpose of inspecting
the condition of the Premises and for verifying compliance by Lessee with
this Lease and all Applicable Requirements (as defined in Paragraph 6.3),
and Lessor shall be entitled to employ experts and/or consultants in
connection therewith to advise Lessor with respect to Lessee's activities,
including but not limited to Lessee's installation, operation, use,
monitoring, maintenance, or removal of any Hazardous Substance on or from
the Premises. The costs and expenses of any such inspections shall be paid
by the party requesting same, unless a Default or Breach of this Lease by
Lessee or a violation of Applicable Requirements or a contamination, caused
or materially contributed to by Lessee, is found to exist or to be imminent,
or unless the inspection is requested or ordered by a governmental authority
as the result of any such existing or imminent violation or contamination.
In such case, Lessee shall upon request reimburse Lessor or Lessor's Lender,
as the case may be, for the costs and expenses of such inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee
shall, at Lessee's sole cost and expense and at all times, keep the Premises
and every part thereof in good order, condition and repair (whether or not
such portion of the Premises requiring repair, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of such portion of the Premises), including, without
limiting the generality of the foregoing, all equipment or facilities
specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired
or unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate glass, and skylights, but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair, including replacing light bulbs, and common
cleaning of the Premises.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case
no notice shall be required), perform such obligations on Lessee's behalf,
and put the Premises in good order, condition and repair, in accordance with
Paragraph 13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor,
subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler and/or
standpipe and hose (if located In the Common Areas) or other automatic fire
extinguishing system including fire alarm and/or smoke detection
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systems and equipment, fire hydrants. parking lots, walkways, parkways,
driveways, landscaping, fences, signs and utility systems serving the Common
Areas and all parts thereof, as well as providing the services for which
there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor
shall not be obligated to paint the exterior or interior surfaces of
exterior walls nor shall Lessor be obligated to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessee expressly waives the
benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate
this Lease because of Lessor's failure to keep the Building, Industrial
Center or Common Areas in good order, condition and repair.
7,3 Utility installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "'Trade
Fixtures" shall mean Lessee's machinery and equipment which can be removed
without doing material damage to the Premises. The term "Alterations" shall
mean any modification of the improvements on the Premises which are provided
by Lessor under the terms of this Lease, other than Utility Installations or
Trade Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are
defined as Alterations and/or Utility installations made by Lessee that are
not yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make
nor cause to be made any Alterations or Utility Installations in, on, under
or about the Premises without Lessor's prior written consent. Lessee may,
however, make non-structural Utility Installations to the interior of the
Premises (excluding the roof) without Lessor's consent but upon notice to
Lessor, so long as they are not visible from the outside of the Premises, do
not involve puncturing, relocating or removing the roof or any existing
walls, or changing or interfering with the fire sprinkler or fire detection
systems and the cumulative cost thereof during the term of this Lease as
extended does not exceed $2500.00.
(b) Consent. Any Alterations or Utility installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given
by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all
applicable permits required by governmental authorities: (ii) the furnishing
of copies of such permits together with a copy of the plans and
specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon; and (iii) the compliance by Lessee with
all conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and be in compliance with all Applicable Requirements. Lessee
shall promptly upon completion thereof furnish Lessor with as-built plans
and specifications therefor. Lessor may, (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation
that costs $2,500.00 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at
or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on, or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense, defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises.
If Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorneys' fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in
this
Paragraph 7.4, all Alterations and Utility Installations made to the
Premises by Lessee shall be the property of and owned by Lessee, but
considered a part of the Premises. Lessor may, at any time and at its
option, elect in writing to Lessee to be the owner of all or any specified
part of the Lessee-Owned Alterations and Utility installations. Unless
otherwise instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned
Alterations and Utility installations shall, at the expiration or earlier
termination of this Lease, become the property of Lessor and remain upon the
Premises and be surrendered with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease,
notwithstanding that their Installation may have been consented to by
Lessor. Lessor may require the removal at any time of all or any part of any
Alterations or Utility Installations made without the required consent of
Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date,
clean and free of debris and in good operating order, condition and state of
repair, ordinary wear and tear excepted. Ordinary wear and tear shall not
include any damage or deterioration that would have been prevented by good
maintenance practice or by Lessee performing all of its obligations under
this Lease. Except as otherwise agreed or specified herein, the Premises, as
surrendered, shall include the Alterations and Utility Installations. The
obligation of Lessee shall include the repair of any damage occasioned by
the installation, maintenance or removal of Lessee's Trade Fixtures,
furnishings, equipment, and Lessee-Owned Alterations and Utility
Installations, as well as the removal of any storage tank installed by or
for Lessee, and the removal, replacement, or remediation of any soil,
material or ground water contaminated by Lessee, all as may then be required
by Applicable Requirements and/or good practice. Lessee's Trade Fixtures
shall remain the property of Lessee and shall be removed by Lessee subject
to its obligation to repair and restore the Premises per this Lease.
8. Insurance; Indemnity.
8.1 Payment of Premium Increases.
(a) As used herein, the term "Insurance Cost increase" is defined
as any increase in the actual cost of the insurance applicable to the
Building and required to be carried by Lessor pursuant to Paragraphs 8.2(b),
8.3(a) and 8.3(b), ("Required Insurance"), over and above the Base Premium,
as hereinafter defined, calculated on an annual basis. "Insurance Cost
Increase" shall include, but not be limited to, requirements of the holder
of a mortgage or deed of trust covering the Premises, increased valuation of
the Premises, and/or a general premium rate increase. The Term "Insurance
Cost Increase" shall not, however, include any premium increases resulting
from the nature of the occupancy of any other lessee of the Building. If the
parties insert a dollar amount in Paragraph 1.9, such amount shall be
considered the "Base Premium." If a dollar amount has not been inserted in
Paragraph 1.9 and if the Building has been previously occupied during the
twelve (12) month period immediately preceding the Commencement Date, the
"Base Premium" shall be the annual premium applicable to Such twelve (12)
month period. If the Building was not fully occupied during such twelve (12)
month period, the "Base Premium" shall be the lowest annual premium
reasonably obtainable for the Required Insurance as of the Commencement
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000
procured under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant
to Paragraph 4.2. Premiums for policy periods commencing prior to, or
extending beyond, the term of this Lease shall be prorated to coincide with
the corresponding Commencement Date or Expiration Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided
to Lessee in writing (as additional insureds) against claims for bodily
injury, personal injury and property damage based upon, involving or arising
out of the ownership, use, occupancy or maintenance of the Premises and all
areas appurtenant thereto. Such insurance shall be on occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an Additional insured-Managers or Lessors of Prenes"
endorsement and contain the "Amendment of the Pollution Exclusion"
endorsement for damage caused by heat, smoke or fumes from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an "Insured contract" for the performance of Lessee's
Indemnity obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Lessee shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contributory
with any similar insurance carried by Lessor, whose insurance shall be
considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in
lieu of, the insurance required to be maintained by Lessee. Lessee shall not
be named as an additional insured therein.
8.3 Property Insurance-Building, improvements and Rental Value.
(a) Building and improvements. Lessor shall obtain and keep in
force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to any Lender(s), insuring against
loss or damage to the Premises. Such insurance shall be for full replacement
cost, as the same shall exist from time to time, or the amount required by
any Lender(s), but in no event more than the commercially reasonable and
available insurable value thereof if, by reason of the unique nature or age
of the improvements involved, such latter amount is less than full
replacement cast. Lessee-Owned Alterations and Utility Installations. Trade
Fixtures and Lessee's personal property shall be insured by Lessee pursuant
to Paragraph 8.4. If the coverage is available and commercially appropriate,
Lessor's policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender or included in the Base Premium), including coverage
for any additional costs resulting from debris removal and reasonable
amounts of coverage for the enforcement of any ordinance or law regulating
the reconstruction or replacement of any undamaged sections of the Building
required to be demolished or removed by reason of the enforcement of any
building, zoning, safety or land use laws as the result of a covered loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause,
waiver of subrogation, and inflation guard protection causing an increase in
the annual property insurance coverage amount by a factor of not less than
the adjusted U.S. Department of Labor Consumer Price Index for All Urban
Consumers for the city nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental
and other charges payable by all lessees of the Building to Lessor for one
year (including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases). Said insurance may
provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide
for one full year's loss of rental revenues from the date of any such loss.
Said insurance shall contain an agreed valuation provision in lieu of any
co-insurance clause, and the amount of coverage shall be adjusted annually
to reflect the projected rental income, Real Property Taxes, insurance
premium costs and other expenses, if any, otherwise payable, for the next
12-month period. Common Area Operating Expenses shall include any deductible
amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas
or other buildings in the Industrial Center if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.
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(d) Lessee's improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's
option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures and Lessee-
Owned Alterations and Utility installations in, on, or about the Premises
similar in coverage to that carried by Lessor as the insuring Party under
Paragraph 8.3(a). Such insurance shall be full replacement cost coverage
with a deductible not to exceed $1,000 per occurrence. The proceeds from any
such insurance shall be used by Lessee for the replacement of personal
property and the restoration of Trade Fixtures and Lessee-Owned Alterations
and Utility Installations. Upon request from Lessor, Lessee shall provide
Lessor with written evidence that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or such other rating as may be required by a
Lender, as set forth in the most current issue of "Best's Insurance Guide."
Lessee Shall not do or permit to be done anything which shall invalidate the
insurance policies referred to in this Paragraph 8. Lessee shall cause to be
delivered to Lessor, within seven (7) days after the earlier of the Early
Possession Date or the Commencement Date, certified copies of, or
certificates evidencing the existence and amounts of, the insurance required
under Paragraph 8.2(a) and 8.4. No such policy shall be cancelable or
subject to modification except after thirty (30) days' prior written notice
to Lessor. Lessee shall at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with evidence of renewals or "Insurance
binders" evidencing renewal thereof, or Lessor may order such insurance and
charge the cost thereof to Lessee, which amount shall be payable by Lessee
to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their property arising out of or
incident to the perils required to be insured against under Paragraph 8. The
effect of such releases and waivers of the right to recover damages shall
not be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto. Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold
harmless the Premises, Lessor and its agents, Lessor's master or ground
lessor, partners and Lenders, from and against any and all claims, loss of
rents and/or damages, costs, liens, judgments, penalties, loss of permits,
attorneys' and consultants' fees, expenses and/or liabilities arising out
of, involving, or in connection with, the occupancy of the Premises by
Lessee, the conduct of Lessee's business, any act, omission or neglect of
Lessee, its agents, contractors, employees or invitees, and out of any
Default or Breach by Lessee in the performance in a timely manner of any
obligation on Lessee's part to be performed under this Lease. The foregoing
shall include, but not be limited to, the defense or pursuit of any claim or
any action or proceeding involved therein, and whether or not (in the case
of claims made against Lessor) litigated and/or reduced to judgment. In case
any action or proceeding be brought against Lessor by reason of any of the
foregoing matters, Lessee upon notice from Lessor shall defend the same at
Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid
any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or
any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or
from the breakage, leakage, obstruction or other defects of pipes, fire
sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said injury or damage results
from conditions arising upon the Premises or upon other portions of the
Building of which the Premises are a part, from other sources or places, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is accessible or not. Lessor shall not be liable for any
damages arising from any act or neglect of any other lessee of Lessor nor
from the failure by Lessor to enforce the provisions of any other lease in
the Industrial Center. Notwithstanding Lessor's negligence or breach of this
Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility installations,
the repair cost of which damage or destruction is less than fifty percent
(50%) of the then Replacement Cost (as defined in Paragraph 9.1(d)) of the
Premises (excluding Lessee-Owned Alterations and Utility installations and
Trade Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction
to the Premises, other than Lessee-Owned Alterations and Utility
installations the repair cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost of the Premises
(excluding Lessee-Owned Alterations and Utility installations and Trade
Fixtures) immediately prior to such damage or destruction. In addition,
damage or destruction to the Building, other than Lessee-Owned Alterations
and Utility Installations and Trade Fixtures of any lessees of the Building,
the cost of which damage or destruction is fifty percent (50%) or more of
the then Replacement Cost (excluding Lessee-Owned Alterations and Utility
installations and Trade Fixtures of any lessees of the Building) of the
Building shall, at the option of Lessor, be deemed to be Premises Total
Destruction.
(c) "insured Loss" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible
amounts or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damage-Insured Loss. If Premises Partial
Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's
expense, repair such damage (but not Lessee's Trade Fixtures or Lessee-Owned
Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect. In the event, however,
that there is a shortage of insurance proceeds and such shortage is due to
the fact that, by reason of the unique nature of the improvements in the
Premises, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or
adequate assurance thereof, within ten (10) days following receipt of
written notice of such shortage and request therefor. If Lessor receives
said funds or adequate assurance thereof within said ten (10) day period.
Lessor shall complete them as soon as reasonably possible and this Lease
shall remain in full force and effect. If Lessor does not receive such funds
or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration
and repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within such ten (10) day
period, and if Lessor does not so elect to restore and repair, then this
Lease shall terminate sixty (60) days following the occurrence of the damage
or destruction. Unless otherwise agreed, Lessee shall in no event have any
right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood
or earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net
proceeds of any such insurance shall be made available for the repairs if
made by either Party.
9.3 Partial Damage-Uninsured Loss. If Premises Partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful act
of Lessee (In which event Lessee shall make the repairs at Lessee's expense
and this Lease shall continue in full force and effect), Lessor may at
Lessor's option, either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in
full force and effect, or (ii) give written notice to Lessee within thirty
(30) days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60)
days following the date of such notice. In the event Lessor elects to give
such notice of Lessor's intention to terminate this Lease, Lessee shall have
the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from
Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following such commitment from
Lessee. In such event this Lease shall continue in full force and effect,
and Lessor shall proceed to make such repairs as soon as reasonably possible
after the required funds are available. If Lessee does not give such notice
and provide the funds or assurance thereof within the times specified above,
this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 Total Destruction. Notwithstanding any other provision hereof,
if Premises Total Destruction occurs (including any destruction required by
any authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have the right to recover Lessor's
damages from Lessee except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to
repair exceeds one month's Base Rent, whether or not an Insured Loss, Lessor
may, at Lessor's option, terminate this Lease effective sixty (60) days
following the date of occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within thirty (30) days after the date
of occurrence of such damage. Provided, however, if Lessee at that time has
an exercisable option to extend this Lease or to purchase the Premises, then
Lessee may preserve this Lease by (a) exercising such option, and (b)
providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of
(i) the date which is ten (10) days after Lessee's receipt of Lessor's
written notice purporting to terminate this Lease, or (ii) the day prior to
the date upon which such option expires. If Lessee duly exercises such
option during such period and provides Lessor with funds (or adequate
assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option and provide such funds or assurance during such period,
then this Lease shall terminate as of the date set forth in the first
sentence of this Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base
Rent, Common Area Operating Expenses and other charges, if any, payable by
Lessee hereunder for the period during which such damage or condition, its
repair, remediation or restoration continues, shall be abated in proportion
to the degree to which Lessee's use of the Premises is impaired, but not in
excess of proceeds from insurance required to be carried under Paragraph
8.3(b). Except for abatement of Base Rent, Common Area Operating Expenses
and other charges, if any, as aforesaid, all other obligations of Lessee
hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, repair, remediation or restoration.
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(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual
notice of Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such
notice to Lessor and such Lenders and such repair or restoration is not
commenced within thirty (30) days after receipt of such notice, this Lease
shall terminate as of the date specified in said notice. If Lessor or a
Lender commences the repair or restoration of the Premises within thirty
(30) days after the receipt of such notice, this Lease shall continue in
full force and effect.
"Commence" as used in this Paragraph 9.6 shall mean either the unconditional
authorization of the preparation of the required plans, or the beginning of
the actual work on the Premises, whichever occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required by
Applicable Requirements and this Lease shall continue in full force and
effect, but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph
13), Lessor may at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible
at Lessor's expense, in which event this Lease shall continue in full force
and effect, or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly Base Rent or $100,000
whichever is greater, give written notice to Lessee within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the date of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for
the excess costs of (a) investigation and remediation of such Hazardous
Substance Condition to the extent required by Applicable Requirements, over
(b) an amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue
in full force and effect, and Lessor shall proceed to make such
investigation and remediation as soon as reasonably possible after the
required funds are available, if Lessee does not give such notice and
provide the required funds or assurance thereof within the time period
specified above, this Lease shall terminate as of the date specified in
Lessor's notice termination.
9.8 Termination-Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and so much of Lessee's Security Deposit as
has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent
it is inconsistent herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2(a), applicable to the Industrial Center, and
except as otherwise provided in Paragraph 10.3, any increases in such
amounts over the Base Real Property Taxes shall be included in the
calculation of Common Area Operating Expenses in accordance with the
provisions of Paragraph 4.2.
10.2 Real Property Tax Definitions.
(a) As used herein, the term "Real Property Taxes" shall include
any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement bond
or bonds, levy or tax (other than inheritance, personal income or estate
taxes) imposed upon the Industrial Center by any authority having the direct
or indirect power to tax, including any city, state or federal government,
or any school, agricultural, sanitary, fire, street, drainage, or other
improvement district thereof, levied against any legal or equitable interest
of Lessor in the Industrial Center or any portion thereof. Lessor's right to
rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes" shall also include any tax, fee,
levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the
term of this Lease, including but not limited to a change in the ownership
of the Industrial Center or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether
or not contemplated by the Parties.
(b) As used herein, the term "Base Real Property Taxes" shall be
the amount of Real Property Taxes, which are assessed against the Premises,
Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the
calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating Expenses shall
not include Real Property Taxes specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the
industrial Center by other lessees or by Lessor for the exclusive enjoyment
of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall,
however, pay to Lessor at the time Common Area Operating Expenses are
payable under Paragraph 4.2, the entirety of any increase in Real Property
Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable
proportion of the Real Property Taxes for all of the land and improvements
included within the tax parcel assessed, such proportion to be determined by
Lessor from the respective valuations assigned in the assessor's work sheets
or such other information as may be reasonably available. Lessor's
reasonable determination thereof, in good faith, shall be conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises or stored within the
industrial Center. When possible, Lessee shall cause its Lessee-Owned
Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and billed
separately from the real property of Lessor. If any of Lessee's said
property shall be assessed with Lessor's real property, Lessee shall pay
Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property.
11. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity,
telephone, security, gas and cleaning of the Premises, together with any
taxes thereon.
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assign") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject
to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis,
of twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee's assets occurs,
which results or will result in a reduction of the Net Worth of Lessee, as
hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was represented to Lessor at
the time of full execution and delivery of this Lease or at the time of the
most recent assignment to which Lessor has consented, or as it exists
immediately prior to said transaction or transactions constituting such
reduction at whichever time said Net Worth of Lessee was or is greater,
shall be considered an assignment of this Lease by Lessee to which Lessor
may reasonably withhold its consent. "Net Worth of Lessee" for purposes of
this Lease shall be the net worth of Lessee (excluding any Guarantors)
established under generally accepted accounting principles consistently
applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1, or a non-curable
Breach without the necessity of any notice and grace period. If Lessor
elects to treat such unconsented to assignment or subletting as a non-
curable Breach, Lessor shall have the right to either: (i) terminate this
Lease, or (ii) upon thirty (30) days' written notice ("Lessor's Notice"),
increase the monthly Base Rent for the Premises to the greater of the then
fair market rental value of the Premises, as reasonably determined by
Lessor, or one hundred ten percent (110%) of the Base Rent then in effect.
Pending determination of the new fair market rental value, if disputed by
Lessee, Lessee shall pay the amount set forth in Lessor's Notice, with any
overpayment credited against the next installment(s) of Base Rent coming
due, and any underpayment for the period retroactively to the effective date
of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall
be subject to similar adjustment to the then fair ,market value as
reasonably determined by Lessor (without the Lease being considered an
encumbrance or any deduction for depreciation or obsolescence, and
considering the Premises at its highest and best use and in good condition)
or one hundred ten percent (110%) of the price previously in effect, (ii)
any index-oriented rental or price adjustment formulas contained in this
Lease shall be adjusted to require that the base Index be determined with,
reference to the index applicable to the time of such adjustment, and (iii)
any fixed rental adjustments scheduled during the remainder of the Lease
term shall be increased in the same ratio as the new rental bears to the
Base Rent in effect immediately prior to the adjustment specified in
Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease. (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or
disapproval of an assignment. Neither a delay in the approval or disapproval
of such assignment nor the acceptance of any rent for performance shall
constitute a waiver or estoppel of Lessor's right to exercise its remedies
for the Default or Breach by Lessee of any of the terms, covenants or
conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee
or to any subsequent or successive assignment or subletting by the assignee
or sublessee. However, Lessor may consent to subsequent sublettings and
assignment of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable under this Lease or the
sublease and without obtaining their consent, and such action shall not
relieve such persons from liability under this Lease or the sublease.
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(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors
or any-one else responsible for the performance of the Lessee's obligations
under this Lease, including any sublessee, without first exhausting Lessor's
remedies against any other person or entity responsible therefor to Lessor,
or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor determination
as to the financial and operational responsibility and appropriateness of
the proposed assignee or sublessee, including but not limited to the
intended use and/or required modification of the Premises, if any, together
with a non-refundable deposit of $1,000 or ten percent (10%) of the monthly
Base Rent applicable to the portion of the Premises which is the subject of
the proposed assignment or sublease, whichever is greater, as reasonable
consideration for Lessor's considering and processing the request for
consent. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be
deemed, for the benefit of Lessor, to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation herein
to be observed or performed by Lessee during the term of said assignment or
sublease, other than such obligations as are contrary to or inconsistent
with provisions of an assignment or sublease to which Lessor has
specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(o)
shall give Leasor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such
transaction.
(h) Lessor, as a condition to give its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then
constituted, as determined by Lessor.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of
all or any pert of the Premises and shall be deemed included in all
subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a
portion of the Premises heretofore or hereafter made by Lessee, and Lessor
may collect such rent and income and apply same toward Lessee's obligations
under this Lease; provided, however, that until a Breach (as defined in
Paragraph 13.1) shall occur in the performance of Lessee's obligations under
this Lease, Lessee may, except as otherwise provided in this Lease, receive,
collect and enjoy the rents accruing under such sublease. Lessor shall not,
by reason of the foregoing provision or any other assignment of such
sublease to Lessor, nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublease for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under
such Sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a
Breach exists in the performance of Lessee's obligations under this Lease,
to pay to Lessor the rents and other charges due and to become due under the
sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach
has been cured, against Lessor, for any such rents and other charges so paid
by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sub-lessee to such sublessor or for
any other prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior
written consent
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such
occurrence for legal services and costs in the preparation and service of a
notice of Default, and that Lessor may include the cost of such services and
costs in said notice as rent due and payable to cure said default. A
"Default" by Lessee is defined as a failure by Lessee to observe, comply
with or perform any of the terms, covenants, conditions or rules applicable
to Lessee under this Lease. A "Breach" by Lessee is defined as the
occurrence of any one or more of the following Defaults, and, where a grace
period for cure after notice is specified herein, the failure by Lessee to
cure such Default prior to the expiration of the applicable grace period,
and shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made
by Lessee hereunder as and when due, the failure by Lessee to provide Lessor
with reasonable evidence of insurance or surety bond required under this
Lease, or the failure of Lessee to fulfill any obligation under this Lease
which endangers or threatens life or property, where such failure continues
for a period of three (3) days following written notice thereof by or on
behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with
Applicable Requirements per Paragraph 6.3, (ii) the inspection, maintenance
and service contracts required under Paragraph 7.1(b), (iii) the rescission
of an unauthorized assignment or subletting per Paragraph 12.1, (iv) a
Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or non-
subordination of this Lease per Paragraph 30, (vi) the guaranty of the
performance of Lessee's obligations under this Lease if required under
Paragraphs 1.11 and 37, (vii) the execution of any document requested under
Paragraph 42 (easements), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this lease,
where any such failure continues for a period of ten (10) days following
written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof
that are to be observed, complied with or performed by Lessee, other than
those described in Subparagraphs 13.1(a), (b) or (c), above, where such
Default continues for a period of thirty (30) days after written notice
thereof by or on behalf of Lessor to Lessee; provided, however, that if the
nature of Lessee's Default is such that more than thirty (30) days are
reasonably required for its cure, then it shall not be deemed to be a Breach
of this Lease by Lessee if Lessee commences such cure within said thirty
(30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (i) the making
by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code
Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60)
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within
thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where such seizure is not discharged
within thirty (30) days; provided, however, in the event that any provision
of this Subparagraph 13.1(e) is contrary to any applicable law, such
provision shall be of no force or effect, and shall not affect the validity
of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee
or of any Guarantor, given to Lessor by Lessee or any Guarantor, was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurances of security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 Remedies. If Lessee falls to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at
its option (but without obligation to do so), perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses,
permits or approvals. The costs and expanses of any such performance by
Lessor shall be due and payable by Lessee to Lessor upon invoice therefor.
If any check given to Lessor by Lessee shall not be honored by the bank upon
which it is drawn, Lessor, at its own option, may require all future
payments to be made under this Lease by Lessee to be made only by cashier's
check. In the event of a Breach of this Lease by Lessee (as defined in
Paragraph 13.1), with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have
by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor.
In such event Lessor shall be entitled to recover from Lessee: (i) the worth
at the time of the award of the unpaid rent which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that the Lessee
proves could have been reasonably avoided; (III) the worth at the time of
award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course' of things would be likely to result therefrom,
including but not limited to the cost of recovering possession of the
Premises, expenses of reletting, including necessary renovation and
alteration of the Premises, reasonable attorneys' fees, and that portion of
any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of
award of the amount referred to In provision (iii) of the immediately
preceding sentence shall be computed by discounting such amount at the dis-
count rate of the Federal Reserve Bank of San Francisco or the Federal
Reserve Bank District in which the Premises are located at the time of award
plus the percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph 13.2. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall
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ceeding the unpaid rent and damages as are recoverable therein, or Lessor
may reserve the right to recover all or any part thereof in a separate suit
for such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (C) or (d) was not previously given, a notice to pay
rent or quit, or to perform or quit, as the case may be, given to Lessee
under any statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period purposes
required by Subparagraph 1 3.1(b), (c) or (d). In such case, the applicable
grace period under the unlawful detainer statue shall run concurrently after
the one such statutory notice, and the failure of Lessee to cure the Default
within the greater of the two (2) such grace periods shall constitute both
an unlawful detainer and a Breach of this Lease entitling Lessor to the
remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's
Breach and recover the rent as it becomes due, provided Lessee has the right
to sublet or assign, subject only to reasonable limitations. Lessor and
Lessee agree that the limitations on assignment and subletting in this Lease
are reasonable. Acts of maintenance or preservation, efforts to relet the
Premises, or the appointment of a receiver to protect the Lessor's interest
under this Lease, shall not constitute a termination of the Lessee's right
to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters
occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 Inducement Recapture In Event of Breach. Any agreement by
Lessor for free or abates rent or other charges applicable to the Premises,
or for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement
Provisions" shall be deemed conditioned upon Lessee's full and faithful
performance of all of the terms, covenants and conditions of this Lease to
be performed or observed by Lessee during the term hereof as the same may be
extended. Upon the occurrence of a Breach (as defined in Paragraph 13.1) of
this Lease by Lessee, any such Inducement Provision shall automatically be
deemed deleted from this Lease and of no further force or effect, and any
rent, other charge, bonus, inducement or consideration theretofore abated,
given or paid by Lessor under such an inducement Provision shall be
immediately due and payable by Lessee to Lessor, and recoverable by Lessor,
as additional rent due under this Lease, notwithstanding any subsequent cure
of said Breach by Lessee. The acceptance by Lessor of rent or the cure of
the Breach which initiated the operation of this Paragraph 13.3 shall not be
deemed a waiver by Lessor of the provisions of this Paragraph 13.3 unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will
be extremely difficult to ascertain. Such costs include, but are not limited
to, processing and accounting charges, and late charges which may be imposed
upon Lessor by the terms of any ground lease, mortgage or deed of trust
covering the Premises. Accordingly, if any installment of rent or other sum
due from Lessee shall not be received by Lessor or Lessor's designee within
ten (10) days after such amount shall be due, then, without any requirement
for notice to Lessee, Lessee shall pay to Lessor a late charge equal to six
percent (6%) of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Lessor will
incur by reason of late payment by Lessee. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee's Default or Breach
with respect to such overdue amount, nor prevent Lessor from exercising any
of the other rights and remedies granted hereunder. In the event that a late
charge is payable hereunder, whether or not collected, for three (3)
consecutive installments of Base Rent, then notwithstanding Paragraph 4.1 or
any other provision of this Lease to the contrary, Base Rent shall, at
Lessor's option, become due and payable quarterly in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes at this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after
receipt by Lessor, and by any Lender(s) whose name and address shall have
been furnished to Lessee in writing for such purpose, of written notice
specifying wherein such obligation of Lessor has not been performed;
provided, however, that if the nature of Lessor's obligation is such that
more than thirty (30) days after such notice are reasonably required for its
performance, then Lessor shall not be in breach of this Lease if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession, whichever first occurs. If more than ten percent
(10%) of the floor area of the Premises, or more than twenty-five percent
(25%) of the portion of the Common Areas designated for Lessee's parking, is
taken by condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (10)
days after the condemning authority shall have taken possession) terminate
this Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease In accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the
Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the
total rentable floor area of the Premises. No reduction of Base Rent shall
occur if the condemnation does not apply to any portion of the Premises. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of
the fee, or as severance damages; provided, however, that Lessee shall be
entitled to any compensation, separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event
that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of its net severance damages received, over and above
Lessee's Share of the legal and other expenses incurred by Lessor in the
condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such
repair.
15. Brokers' Fees.
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) If Lessee exercises any Option
(as defined in Paragraph 39.1) granted under this Lease or any Option
subsequently granted, or (b) if Lessee acquires any rights to the Premises
or other premises in which Lessor has an interest, or (c) if Lessee remains
in possession of the Premises with the consent of Lessor after the
expiration of the term of this Lease after having failed to exercise an
Option, or (d) if said Brokers are the procuring cause of any other lease or
sale entered into between the Parties pertaining to the Premises and/or any
adjacent property in which Lessor has an interest, or (e) it Base Rent is
increased, whether by agreement or operation of an escalation clause herein,
then as to any of said transactions, Lessor shall pay said Broker(s) a fee
in accordance with the schedule of said Broker(s) in effect at the time of
the execution of this Lease.
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by
operation of law, shall be deemed to have assumed Lessor's obligation under
this Paragraph 15. Each Broker shall be an intended third party beneficiary
of the provisions of Paragraph 1.10 and of this Paragraph 15 to the extent
of its interest in any commission arising from this Lease and may enforce
that right directly against Lessor and its successors.
15.4 Representations and Warranties. Lessee and Lessor each
represent and warrant to the other that it has had no dealings with any
person, firm, broker or finder other than as named in Paragraph 1.10(a) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity other than said named Broker(s) is entitled to any commission or
finder's fee in connection with said transaction. Lessee and Lessor do each
hereby agree to indemnify, protect, defend and hold the other harmless from
and against liability for compensation or charges which may be claimed by
any such unnamed broker, finder or other similar party by reason of any
dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall
within ten (10) days after written notice from the other Party (the
"Requesting Party") execute, acknowledge and deliver to the Requesting Party
a statement in writing in a form similar to the then most current "Tenancy
Statement" form published by the American Industrial Real Estate
Association, plus such additional information, confirmation and/or
statements as may be reasonably requested by the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance,
or sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited
to Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes herein set
forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In
the event of a transfer of Lessor's title or interest in the Premises or in
this Lease, Lessor shall deliver to the transferee or assignee (in cash or
by credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10)
days following the date on which it was due, shall bear interest from the
date due at the prime rate charged by the largest state chartered bank in
the state in which the Premises are located plus four percent (4%) per
annum, but not exceeding the maximum rate allowed by law, in addition to the
potential late charge provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this
Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. No Prior or other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding
shall be effective. Lessor and Lessee each represents and warrants to the
Brokers that it has made, and is relying solely upon, its own investigation
as to the nature, quality, character and financial responsibility of the
other Party to this Lease and as to the nature, quality and character of the
Premises. Brokers have no responsibility with respect thereto or with
respect to any default or breach hereof by either Party. Each Broker shall
be an intended third party beneficiary of the provisions of this Paragraph
22.
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23. Notices.
23.1 Notice Requirements. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or
registered mall or U.S. Postal Service Express Mail, with postage prepaid,
or by facsimile transmission during normal business hours, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph
23. The addresses noted adjacent to a Party's signature on this Lease shall
be that Party's address for delivery or mailing of notice purposes. Either
Party may by written notice to the other specify a different address for
notice purposes, except that upon Lessee's taking possession of the
Premises, the Premises shall constitute Lessee's address for the purpose of
mailing or delivering notices to Lessee. A copy of all notices required or
permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time, to time
hereafter designate by written notice, to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of
delivery shown on the receipt card, or if no delivery date is shown, the
postmark thereon. If sent by regular mail, the notice shall be deemed given
forty-eight (48) hours after the same is addressed as required herein and
mailed with postage prepaid. Notices delivered by United States Express Mail
or overnight courier that guarantees next day delivery shall be deemed given
twenty-four (24) hours after delivery of the same to the United States
Postal Service or courier. If any notice is transmitted by facsimile
transmission or similar means, the same shall be deemed served or delivered
upon telephone or facsimile confirmation of receipt of the transmission
thereof, provided a copy is also delivered via delivery or mail. If notice
is received on a Saturday or a Sunday or a legal holiday, it shall be deemed
received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default or
Breach by Lessee of the same or any other term, covenant or condition
hereof. Lessor's consent to, or approval of, any such act shall not be
deemed to render unnecessary the obtaining of Lessor's consent to, or
approval of, any subsequent or similar act by Lessee, or be construed as the
basis of an estoppel to enforce the provision or provisions of this Lease
requiring such consent. Regardless of Lessor's knowledge of a Default or
Breach at the time of accepting rent, the acceptance of rent by Lessor shall
not be a waiver of any Default or Breach by Lessee of any provision hereof.
Any payment given Lessor by Lessee may be accepted by Lessor on account of
moneys or damages due Lessor, notwithstanding any qualifying statements or
conditions made by Lessee in connection therewith, which such statements
and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to In writing by Lessor at or before the time of deposit
of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of
this Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this
Paragraph 26 then the Base Rent payable from and after the time of the
expiration or earlier termination of this Lease shall be increased to two
hundred percent (200%) of the Base Rent applicable during the month
immediately preceding such expiration or earlier termination. Nothing
contained herein shall be construed as a consent by Lessor to any holding
over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed at trust, or
other hypothecation or security device (collectively " Security Device"),
now or hereafter placed by Lessor upon the real property of which the
Premises are a part, to any and all advances made on the security thereof,
and to all renewals, modifications, consolidations, replacements and
extensions thereof. Lessee agrees that the Lenders holding any such Security
Device shall have no duty, liability or obligation to perform any of the
obligations of Lessor under this Lease, but that in the event of Lessor's
default with respect to any such obligation, Lessee will give any Lender
whose name and address have been furnished Lessee in writing for such
purpose notice of Lessor's default pursuant to Paragraph 13.5. If any Lender
shall elect to have this Lease and/or any Option granted hereby superior to
the lien of its Security Device and shall give written notice thereat to
Lessee, this Lease and such Options shall be deemed prior to such Security
Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not:
(i) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership, (ii) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or
(iii) be bound by prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into
by Lessor after the execution of this lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance
agreement") from the Lender that Lessee's possession and this Lease,
including any options to extend the term hereof, will not be disturbed so
long as Lessee is not in Breach hereof and attains to the record owner of
the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection
with a sale, financing or refinancing of Premises, Lessee and Lessor shall
execute such further writings as may be reasonably required to separately
document any such subordination or non-subordination, attainment and/or non-
disturbance agreement as is provided for herein.
31. Attorneys' Fees. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing
Party (as hereafter defined) in any such proceeding, action, or appeal
thereon, shall be entitled to reasonable attorneys' fees. Such fees may be
awarded in the same suit or recovered in a separate suit, whether or not
such action or proceeding is pursued to decision or judgment. The term
"Prevailing Party" shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be,
whether by compromise, settlement, judgment, or the abandonment by the other
Party or Broker of its claim or defense. The attorneys' fee award shall not
be computed in accordance with any court fee schedule, but shall be such as
to fully reimburse all attorneys' fees reasonably incurred. Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in preparation and
service of notices of Default and consultations in connection therewith,
whether or not a legal action is subsequently commenced in connection with
such Default or resulting Breach. Broker(s) shall be intended third party
beneficiaries of this Paragraph 31.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the
same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
Building, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or Building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred eighty (180) days of the
term hereof place on or about the Premises any ordinary "For Lease" signs.
All such activities of Lessor shall be without abatement of rent or
liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to
the contrary in this Lease, Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written
consent, install (but not on the roof) such signs as are reasonably required
to advertise Lessee's own business so long as such signs are in a location
designated by Lessor and comply with Applicable Requirements and the signage
criteria established for the Industrial Center by Lessor. The installation
of any sign on the Premises by or for Lessee shall be subject to the
provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof of the Building, and the
right to install advertising signs on the Building, including the roof,
which do not unreasonably interfere with the conduct of Lessee's business:
Lessor shall be entitled to all revenues from such advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser
estate in the Premises; provided, however, Lessor shall, in the event of any
such surrender, termination or cancellation, have the option to continue any
one or all of any existing subtenancies. Lessor's failure within ten (10)
days following any such event to make a written election to the contrary by
written notice to the holder of any such lesser interest, shall constitute
Lessor's election to have such event constitute the termination of such
Interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required
to an act by or for the other Party, such consent shall not be unreasonably
withheld or delayed. Lessor's actual reasonable costs and expenses
(including but not limited to architects', attorneys', engineers' and other
consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent pertaining to this Lease or the
Premises, including but not limited to consents to an assignment a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. In addition to the deposit described in Paragraph 12.2(e), Lessor
may, as a condition to considering any such request by Lessee, require that
Lessee deposit with Lessor an amount of money (in addition to the Security
Deposit held under Paragraph 5) reasonably calculated by Lessor to represent
the cost Lessor will incur in considering and responding to Lessee's
request. Any unused portion of said deposit shall be refunded to Lessee
without interest. Lessor's consent to any act, assignment of this Lease or
subletting of the Premises by Lessee shall not constitute an acknowledgment
that no Default or Breach by Lessee of this Lease exists, nor shall such
consent be deemed a waiver of any then existing Default or Breach, except as
may be otherwise specifically stated in writing by Lessor at the time of
such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the
impositions by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter
for which consent is being given.
37. Guarantor.
37.1 Form of Guaranty. If there are to be any Guarantor's of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the
same obligations as Lessee under this lease, including but not limited to
the obligation to provide the Tenancy Statement and information required in
Paragraph 16.
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American Industrial Real Estate Association 1993 - 9 -
37.2 Additional Obligations of Guarantor. It shall constitute a
Default of the Lessee under this Lease if any such Guarantor fails or
refuses, upon reasonable request by Lessor to give: (a) evidence of the due
execution of the guaranty called for by this Lease, including the authority
of the Guarantor (and of the party signing on Guarantor's behalf) to
obligate such Guarantor on said guaranty, and resolution of its board of
directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized
to sign on its behalf, (b) current financial statements of Guarantor as may
from time to time be requested by Lessor, (c) a Tenancy Statement, or (d)
written confirmation that the guaranty is still in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises
and the performance of all of the covenants, conditional and provisions on
Lessee's part to be observed and performed under this Lease, Lessee shall
have quiet possession of the Premises for the entire term hereof subject to
all of the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to
renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal to lease the Premises or
the right of first offer to lease the Premises or the right of first refusal
to lease other property of Lessor or the right of first offer to lease other
property of Lessor; (c) the right to purchase the Premises, or the right of
first refusal to purchase the Premises, or the right of first offer to
purchase the Premises, or the right to purchase other property of Lessor, or
the right of first refusal to purchase other property of Lessor, or the
right of first offer to purchase other property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to
Lessee in this Lease is personal to the original Lessee named In Paragraph
1.1 hereof, and cannot be voluntarily or involuntarily assigned or exercised
by any person or entity other than said original Lessee while the original
Lessee is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting. The Options, if any, herein
granted to Lessee are not assignable, either as a part of an assignment of
this Lease or separately or apart therefrom, and no Option may be separated
from this Lease in any manner, by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised
unless the prior Options to extend or renew this Lease have been validly
exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i)
during the period commencing with the giving of any notice of Default under
Paragraph 13.1 and continuing until the noticed Default is cured, or (ii)
during the period of time any monetary obligation due Lessor from Lessee is
unpaid (without regard to whether notice thereof is given Lessee), or (iii)
during the time Lessee is in Breach of this Lease, or (iv) in the event that
Lessor has given to Lessee three (3) or more notices of separate Defaults
under Paragraph 13.1 during the twelve (12) month period immediately
preceding the exercise of the Option, whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a)
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due
and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation
of Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessor gives to Lessee three (3) or more notices of separate Defaults under
Paragraph 13.1 during any twelve (12) month period, whether or not the
Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other
occupants or tenants of the Building and the Industrial Center and their
invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of the
Premises, Lessee, its agents and invitees and their property from the acts
of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights of way, utility race-ways, dedications, maps and restrictions do not
reasonably interfere with the use of the Premises by Lessee. Lessee agrees
to sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said Party to pay such sum or any part thereof, said Party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
44. Authority. If either Party hereto 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 duly authorized to execute
and deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or
Lessor's agent or Lessee's agent and submission of same to Lessee or Lessor
shall not be deemed an offer to lease. This Lease is not intended to be
binding until executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
48. Multiple parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee,
the obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
49. Security Deposit. Notwithstanding anything to the contrary contained
herein, any security deposit or other deposit not paid to Robert Crane,
Receiver, and over which Robert Crane, Receiver has no control shall not be
the obligation of Robert Crane, Receiver.
50. Tenant's acceptance of Premises. Lessee is presently in possession of
the Premises and accepts same for said extended term in present condition as
of the date hereof.
51. Landlord's Right to Relocate. Lessor shall have the right to relocate
the Premises to another part of the Building in accordance with the
following:
1) The physical relocation of the Premises shall be accomplished by the
Lessor at Lessor's cost. All incidental costs incurred by Lessee as a result
of the relocation shall be paid by Lessor in a sum not to exceed Five
Hundred Dollars ($500.00).
2) Lessor shall give Lessee at least Thirty (30) days notice of
Lessor's intention to relocate the Premises. Minimum Base Rent payable under
this Lease shall be abated during the period Lessee is forced to close for
business to accommodate such relocation, for a period not to exceed fifteen
(15) days.
3) The new Premises shall be substantially the same in nature as
the Premises described, although the square footage need not be identical as
long as the same services can reasonable be provided from the new Premises.
The Minimum Base Rent for the relocated Premises shall be at the market rate
for that space, but not to exceed the rent then being paid for the original
leased Premises.
Initials: /s/
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American Industrial Real Estate Association 1993 - 10 -
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT,
AT THE TIME THIS LEASE IS EXECUTED. THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL, FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND
STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION
IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE
ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Irvine, CA Executed at: Los Angeles, CA
on: 12.2.97 on: 5 Nov 97
By LESSOR: Robert Crane, Receiver By LESSEE: Bailey Associates, Inc.
under court order#BC106992 Superior a Delaware Corporation
Court of Los Angeles County
By: /s/ Robert Crane By: /s/ Michelle Hiromoto
Name Printed: Robert Crane Name Printed: Michele Hiromoto
Title: Receiver Title:
By: By:
Name Printed: Name Printed:
Title: Title:
Address: 2201 DuPont Dr., Suite 850 Address: 827 S. Broadway
Irving, Ca 92715 Los Angeles, CA 90014
Telephone:(714) 261-7007 Telephone: (213) 489-2123
Facsimile:(714) 261-8703 Facsimile: (213) 489-9931
BROKER: Grubb & Ellis Co. BROKER: Grubb & Ellis Co.
Executed at: Los Angeles, CA Executed at: Los Angeles, CA
On: on:
By: By:
Name Printed: Kurt Strassman Name Printed: Kurt Strassman
Title: Senior Vice President/District Title: Senior Vice
President/District
Mgr. Mgr.
Address: 1000 Wilshire Blvd., Address: 1000 Wilshire Blvd.,
Suite 200 Suite 200
Los Angeles, CA 90017 Los Angeles, CA 90017
Telephone:(213) 622-9595 Telephone:(213) 622-9595
Facsimile:(213) 488-0819 Facsimile:(213) 488-0819
NOTE: These forms are often modified to meet changing requirements of law
and needs of the industry. Always write or call to make sure you are
utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION, 700 South Flower Street, Suite 600, Los Angeles, CA 90017.
(213) 687-8777.
Initials: /s/
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M.H.
American Industrial Real Estate Association 1993 - 11 -
EXHIBIT 'B'
SITE PLAN
PREMISES SUITE "C"
BROADWAY TRADE CENTER
EXHIBIT 'A'
RULES AND REGULATIONS
General Rules
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor
in good faith judges to be a threat to the safety, reputation, or property
of the Premises Project And Its Occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Premises.
4. Lessee shall not keep animals or birds within the Premises, and shall
not bring bicycles, motorcycles or other vehicles into areas not designated
as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to
be inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of
the Premises.
9. Lessee shall not suffer or permit any thing in or around the Premises
or building that causes excessive vibration or floor loading in any part of
the Premises.
10. Furniture, significant freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and
subject to such reasonable limitations, techniques and timing, as may be
designated by Lessor, Lessee shall be responsible for any damage to the
Premises and the building arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work
to be performed in the building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the building on Saturdays,
Sundays and legal holidays, and on other days between the hours of 7:00 P.M.
and 7:00 A.M. of the following day. If Lessee uses the Premises during such
periods, Lessee shall be responsible for securely locking any doors it may
have opened for entry.
13. Lessee shall return all keys at the termination's of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the building.
16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by
applicable governmental agencies as no-smoking areas.
17. Lessee shall not use any method of heating or air conditioning
other than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking
or food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall
not constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants.
Lessee agrees to abide by these and such rules and regulations.
By: LESSEE
/s/ Michelle Hiromoto
---------------------
Date: 11/5/98
-------
\btc\g&erule.doc
Grubb & Ellis
CALIFORNIA SALE/LEASE AMERICANS WITH DISABILITIES ACT
AND HAZARDOUS MATERIALS DISCLOSURE
PROPERTY: 830 S. HILL STREET, SUIITE C, LOS ANGELES, CA 90014
The Americans With Disabilities Act is intended to make many business
establishments equally accessible to persons with a variety of disabilities;
modifications to real property may be required. State and local laws also
may mandate changes. The real estate brokers in this transaction are not
qualified to advise you as to what, if any, changes may be required now, or
in the future. Owners and tenants should consult the attorneys and qualified
design professionals of their choice for information regarding these
matters. Real estate brokers cannot determine which attorneys or design
professionals have the appropriate expertise in this area.
Various construction materials may contain items that have been or may in
the future be determined to be hazardous (toxic) or undesirable and may need
to be specifically treated/handled or removed. For example, some
transformers and other electrical components contain PCBs and asbestos has
been used in components such as fire-proofing, heating and cooling systems,
air duct insulation, spray-on and tile acoustical materials, linoleum, floor
tiles, roofing, dry wall and plaster. Due to prior or current uses of the
Property or in the area, the Property may have hazardous or undesirable
metals (including lead-based paint), minerals, chemicals, hydrocarbons, or
biological or radioactive items (including electric and magnetic fields) in
soils, water, building components, above or below-ground containers or
elsewhere in areas that may or may not be accessible or noticeable. Such
items may leak or otherwise be released. Real estate agents have no
expertise in the detection or correction of hazardous or undesirable items.
Expert inspections are necessary. Current or future laws may require clean
up by past, present and/or future owners and/or operators. It is the
responsibility of the Seller/Lessor and Buyer/Tenant to retain qualified
experts to detect and correct such matters and to consult with legal counsel
of their choice to determine what provisions, if any, they may include in
transaction documents regarding the Property.
Sellers/Lessors are required under California Health and Safety Code Section
25915 et seq. to disclose reports and surveys regarding asbestos to certain
persons, including their employees, contractors, co-owners, purchasers and
tenants. Buyers/Tenants have similar disclosure obligations. Sellers/Lessors
and Buyers/Tenants have additional hazardous materials disclosure
responsibilities to each other under California Health and Safety Code
Section 25359.7 and other California laws. Consult your attorney regarding
this matter, and make proper disclosures. Grubb & Ellis Company is not
qualified to assist you in this matter or provide you with other legal or
tax advice.
Sale, lease, and other transactions can have local, state and federal tax
consequences for the Seller/Lessor and/or Buyer/Tenant. In the event of a
sale, Internal Revenue Code Section 1445 requires that all Buyers of an
interest in any real property located in the United States must withhold and
pay over to the Internal Revenue Service (IRS) an amount equal to ten
percent (10%) of the gross sales price within ten (10) days of the date of
the sale unless the Buyer can adequately establish that the Seller was not a
foreigner, generally by having the Seller sign a Non-Foreign Seller
Certificate. Note that depending upon the structure of the transaction, the
tax withholding liability could exceed the net cash proceeds to be paid to
the Seller at closing. California poses an additional withholding
requirement equal to three and one-third percent (3 1/3%) of the gross sales
price not only on foreign Sellers but also out-of-state Sellers and Sellers
leaving the state if the sale price exceeds $100,000. Generally, withholding
is required if the sales proceeds are disbursed outside of California, if
the last known address of the Seller is outside of California or if a
financial intermediary is used. Consult your tax and legal advisor. Real
estate brokers are not qualified to give legal or tax advice or to determine
whether any person is properly qualified to provide legal or tax advice.
LESSOR: Robert Crane, Receiver under LESSEE: Bailey & Associates, Inc.
Court order #B106992 Superior A Delaware Corp.
Of Los Angeles Co.
By: /s/ Robert Crane By: /s/ Michele Hiromoto
Robert Crane Michele Hiromoto
Co.: Co.: Bailey & Associates, Inc.
Title: Receiver Title: President
Date: 12-2-97 Date: 11/5/97
4elforms/42.doc (11/15/96)
mk\btc\hazard.doc
EXHIBIT 10.3 Amendment to Lease
AMENDMENT TO LEASE
------------------
This Amendment to Lease dated February 23, 1999 shall amend the Lease
dated November 1, 1997, for space number C located at 827 S. Broadway, by
and between Broadway Trade Center as successor to interest of lessor Robert
Crane, Receiver under court order #BC106992, as Lessor, and Bailey &
Associates, Inc., a Delaware Corporation as Lessee, concerning the Premises
knows as Space C, consisting of 887 square feet, in the building located at
830 South Hill Street, Los Angeles, California 90014 is hereby amended as
follows:
It is mutually agreed by the Lessor and Lessee that effective March 1,
1999:
1. Term: The Term of Lease shall be amended to expire on February 28,
2004.
2. Rent: The Rent as described in paragraph 1.5 of the Lease shall be as
follows:
March 1, 1999 to February 28, 2000 $1,600.00 per month
March 1, 2000 to February 28, 2001 $1,700.00 per month
March 1, 2001 to February 28, 2002 $1,800.00 per month
March 1, 2002 to February 28, 2003 $1,900.00 per month
March 1, 2003 to February 28, 2004 $2,000.00 per month
3. Permitted Use: The Permitted Use as described in paragraph 1.8 of the
Lease shall be deleted in its entirety and the following shall be inserted
in its place:
"Permitted Use: Non-exclusive discount telephone service, non-
exclusive Western Union Service, and non-exclusive sales and activation of
pagers and cellular phones."
4. Guarantor: The guarantee by Michelle Hiromoto is hereby reaffirmed.
Except as modified hereby, said Lease shall remain in full force and
effect, and is hereby ratified and confirmed.
The parties have duly executed this Amendment to Lease the date set
forth under their respective signatures.
Lessor: Lessee:
Broadway Trade Center Bailey Associated, Inc.
By: /s/ Michelle Hiromoto 24 FEB 99
------------------------------- ---------------------------------
Shahram Afshani Date Michelle Hiromoto, President Date
Property Manager
Guarantor:
/s/ Michelle Hiromoto 24 FEB 99
---------------------------------
Michelle Hiromoto Date
EXHIBIT 10.4 Consulting Agreement
MAS Financial Corp.
17 N. Governor St. St. Tel: (812) 425-1050
Evansville, IN 47711 Fax: (812) 425-1051
Consulting Agreement
This agreement is entered into on this 11th day of December, 2000 by and
between MAS Financial Corp. (hereinafter referred to as "MAS"), and Ms.
Michele Hiromoto dba Telecom Communications of America, their heirs,
designees or assignees, (hereinafter referred to as "Client"), and is made
with reference to the following recitations:
Whereas, MAS has skills and expertise in the fields of business consulting,
due diligence, mergers and acquisitions, and public and private offering
structuring and transactions, and,
Whereas, for the purpose of advancing the business plans of Client, Client
wishes to contract for the control stock of an acquisition company from MAS,
and,
Whereas MAS owns or controls the control stock of a public shell corporation
(hereinafter referred to as "Acquisition" company, a corporation organized
under the laws of the State of Indiana, having those classes and numbers of
shares as more fully set forth on the company information sheet attached
hereto and made a part hereof by reference. MAS has control of Acquisition
company and is prepared to transfer the control block. Now, therefore, the
parties hereto hereby agree and covenant as follows:
(1) MAS agrees to take certain actions, and undertake certain obligations for
the orderly transfer of the control block of stock of Acquisition company
(90% of the total shares outstanding):
? Name Change and New Stock Certificates
? Unaudited financial statements brought forward to most recent period.
? Change of officers and directors and resignation of present board.
? Assist Client in the preparation of SB-2 registration statement.
? 15C211 prepared and filed with NASD.
? Deliver control block shares.
? Obtain CUSIP number.
? Obtain a stock symbol for trading on the OTC Bulletin Board.
? Furnish Market Maker.
? Any other document or act needed to make an orderly transfer of control.
All expenses incurred by the Acquisition company, after the transfer of
control by MAS to the Client, shall be the responsibility of the Acquisition
company.
(2) Any offer or sale of securities in connection with this Agreement is made
by each broker-dealer respectively.
(3) At closing, which shall take place at a time and place mutually agreeable
to the parties hereto, MAS shall deliver to Client or its designee the
following:
(a) Certificates representing the shares being sold hereunder; containing the
following legend:
"The securities represented by this Certificate have not been registered
under the Securities Act of 1933 (the "Act") and are "Restricted Securities"
as the term is defined in Rule 144 under the Act. The Common Shares may not
be offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act or exemption, the availability
of which is to be established to the satisfaction of the Corporation."
(b) Necessary consents, if any, from the state of domicile of the Acquisition
company;
(c) All corporate books, records, and documents, stock books, ledgers, minute
books, articles and by-laws of the Acquisition company;
(d) Shareholder list of the Acquisition company;
(e) Resignations of all present officers and directors, effective as of the
closing date;
(4) MAS represents and warrants the following:
(a) that the Acquisition company is a corporation duly organized and existing
under the laws of the State of Indiana, unless otherwise noted;
(b) that the Acquisition company will use its best efforts to preserve its
business organization intact.
(c) that the Acquisition company will not enter into any contract, commitment
or transaction, or declare, set aside or pay any dividend, or make any
distribution in respect of its capital stock, or waive any obligation or
liability, or compromise any claim, or cancel any note, loan or other
obligation owed to it, without the consent of Client.
(5) MAS represents and warrants the following prior to closing:
(a) That MAS will not cause any amendment to be made in the Articles of
Incorporation or By-Laws of the Acquisition company, nor issue or cause to be
issued any additional shares of capital stock; nor issue or cause to be
issued any warrants, obligations, subscriptions, options, convertible
securities, or other commitments under which any additional shares of its
capital stock may be directly or indirectly authorized, issued or transferred
nor will either agree to do any of the acts listed above.
(6) Client represents and warrants the following prior to closing:
(a) That Client is solely responsibly for the decision to by acquired by the
Acquisition company,
(b) That the Client to be acquired by the Acquisition company which is the
subject of this agreement shall be suitable in all respects for such merger,
(7) The parties shall at all times keep each other's information, sources,
trade secrets, processes, and confidential information strictly confidential.
(8) MAS is not rendering legal advise to Client. Each party is responsible
for all of it's own professional, legal, accounting, Broker-Dealer, and
consulting fees as they may apply to each party.
(9) Should Client terminate this transaction for any reason other than the
malfeasance or nonperformance of MAS prior to the acquisition of the
Acquisition company, all monies paid to MAS up until that point shall be
retained by MAS as liquidated damages. The parties agree to the
reasonableness of these liquidated damages. All documents and work product
prepared for or on behalf of Client by MAS up until that point shall become
the property of Client.
(10) MAS warrants that the Acquisition company being transferred shall be
transferred with no liabilities and little or no assets, and shall defend and
hold Client and the Acquisition company harmless against any action by any
third party against either of them arising out of, or as a consequence of,
any act or omission of MAS or the Acquisition company prior to, or during the
closing contemplated by this contract of sale. MAS reserves the right, if
necessary, to substitute another Acquisition company acceptable to Client of
like worth.
(11) All of the representations and warranties contained within this contract
of sale, whether made by Client, MAS, or MAS on behalf of the Acquisition
company, will be true and correct on the closing date as if made on that
date.
(12) At any time prior to the closing, Client and their counsel, accountants
and other agents shall have full access during normal business hours to all
properties, books, accounts, records, contracts and documents relating to the
Acquisition company.
(13) This agreement shall be governed by the laws of the State of Indiana.
The parties agree to the jurisdiction of the Courts of the State of Indiana
and the United States District Court for the Southern District of Indiana as
the forums for the resolution of any legal disputes between the parties.
Client agrees to pay court costs, attorney fees in a reasonable amount, and
interest on any unpaid balances at the judgment rate then in effect in the
State of Indiana should it become necessary for MAS to engage in legal action
to recover any portion of the purchase price or any other fees from Client.
(14) If any bona fide action or proceeding shall be pending against any party
on the closing date that could result in an unfavorable judgment, decree or
order that would prevent or make unlawful the performance of this agreement,
or if any agency of the federal or of any state government shall have
objected to it on or before the closing date to this transaction, or if any
prospectus contemplated with respect to the issuance and sale of shares by
Buyers shall have been disapproved by any federal or state regulatory agency,
either party may cancel and terminate this agreement without liability to the
other. All representations and warranties of the parties shall expire and
terminate and be extinguished by the closing, and consummation of the closing
shall be conclusive proof that each party is fully satisfied with the facts
constituting the basis of the representations and warranties of the other
party and with the performance of their obligations hereunder. This
paragraph shall not affect any obligation of any party under this contract
that is permitted to be performed in whole or in part after the closing.
(15) Neither party may assign this agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
However, MAS may requires up to 180 days to perform due diligence on any
assignee of Client, and may reject any assignee not qualified by MAS.
(16) This documents contains the entire agreement between the parties hereto.
No oral or other representation or warranty has been given to Client by MAS,
and this agreement controls over any and all oral representations made by any
party to this transaction. This agreement may only be modified by a writing,
signed by the parties.
(17) Each party agrees to execute all of the documents and do all of the
things necessary to effectuate the purpose of this agreement, without delay
or limitations.
Accepted and Agreed: Accepted and Agreed:
/s/ Aaron Tsai /s/ Michele Hiromoto
------------------------------ -----------------------------------------
MAS Financial Corp. By: Ms. Michele Hiromoto, Sole Proprietor
By: Mr. Aaron Tsai, President dba Telecom Communications of America
Mailing Address:
MAS Financial Corp. Ms. Michele Hiromoto, Sole Proprietor
17 N. Governor St. dba Telecom Communications of America
Evansville, IN 47711 827 S. Broadway
Los Angeles, CA 90014
EXHIBIT 10.5 Inter-Tel.net Network Agreement
INTER-TEL.NET NETWORK AGREEMENT
This Agreement is made and entered into this --- day of ---, --- between:
-------------------- ------------------------
(hereinafter referred to as "Customer") and Inter-Tel.net, Inc., a Nevada
corporation with offices at 120 N. 44th Street, Suite 200, Phoenix, Arizona,
85034-1822, U.S.A. ("Inter-Tel").
Whereas, Inter-Tel has established a network which enables
telecommunications over Internet Protocol ("IP") data networks,
("Inter-Tel.net") with Inter-Tel.net software, hardware and related
components, and
Whereas Customer desires to interconnect into Inter-Tel.net with its own
network for the provision of services to the general public; and
Whereas, both parties desire to reduce to writing their agreement for the
interconnection of each party's Servers into the Network.
Now, therefore, in consideration of the mutual covenants hereunder, the
parties hereto agree as follows:
1.0 APPOINTMENT AS INTER-TEL.NET PROVIDER
Inter-Tel hereby authorizes the Customer to interconnect with the
Inter-Tel.net network enabling the customer to transmit IP data network
traffic; subject to the terms and provisions of this Agreement.
1.2 DEFINITIONS
1.2.1 Agreement - "Agreement" shall mean this Network Agreement,
including the attached Schedules.
1.2.2 Confidential Information - "Confidential Information" shall mean
information belonging to either party and delivered to the other Party which
is deemed proprietary and confidential and belonging to the Party delivering
the Confidential Information. In the event confidential information is
required to be disclosed pursuant to a court order is required by any
governmental authority or agency, prompt written notice of such order or
requirement shall be given to the disclosing party and the receiving party
shall fully cooperate with the disclosing party, using its best efforts to
maintain the confidentiality of the information, including but not limited
to, seeking protective orders from the court or governmental authority.
1.2.3 Customer Network - "Customer Network" shall mean the IP data
network constructed, owned and/or operated by Customer.
1.2.4 Inter-Tel.net - "Inter-Tel.net" shall mean the Internet Protocol
(IP) data network constructed, owned, and operated by Inter-Tel.net, Inc.
1.2.5 Local Exchange Carrier - Company certified to provide public
switched telephone network (PSTN) services. Both incumbent and the emerging
competitive LECs are included.
1.2.6 NPA/NXX NPA refers to the area code and NPA/NXX refers to the
area code and prefix (the first six (6) digits) in the long distance dialing
sequence.
1.2.7 Planned Service Outage - "Planned Service Outage" shall mean any
Service Outage caused by scheduled maintenance or planned enhancements or
upgrades to the Network.
1.2.8 Point-Of-Presence - (POP), - The physical location where the
Inter-Tel.net Network interfaces with the customer or a local access vendor.
1.2.9 Public Switched Telephone Network - The public network operated
by common carriers for switched telephone services.
1.2.10 Regional He - I Operative Companies (RBOCs) - The regional
operating companies formed at divestiture from AT&T, to provide local access
to the public,
1.2.11 Service Interconnection Date The later of the date requested in
the Service request by Customer or the date that Service has been installed
and tested by Customer use.
1.2.12 Service Outage - Shall mean a degradation in Service well below
the industry standards, occurring in Inter-Tel.net's network, excluding: (i)
Planned Service Outages; or, (ii) periods of degradation due to causes
beyond the reasonable control of Inter-Tel.net.
1.2.13 Service Re-quest - Shall mean an order for Service transmitted
to Inter-Tel.net via facsimile, online, or mail. Service requests will be
remitted in accordance with Inter-Tel,net order format.
2.0 FEES
Both parties acknowledge and agree for the payment of fees by the party
incurring same including origination, termination, settlement and other
provider fees as set forth on Schedule A attached hereto and made, a part
hereof for all purposes. Customer agrees that Inter-Tel shall have the right
to amend the fees set forth on Schedule A with thirty (30) day's notice.
3.0 SERVICE
3.1 Network Coverage - Inter-Tel.net shall add to or delete from
network coverage, NPA's or NPAs/NXXs and/or other usage designations, at its
sole discretion. Data may be passed by Inter-Tel.net for termination through
Inter-Tel.net, or through the network of the Local Exchange Carrier
("LEC(s)") serving the area in which the data is to be terminated, or
through long distance carriers.
2
3.2 Prices, Volume and Term Discounts, Service Availability - Usage,
recurring charges, volume discounts, installation and change order charges,
minimum. use commitments, and service availability for such Services are
listed oil Schedule A.
3.3 Operations Support - Customer agrees to provide seven (7) day,
twenty-four (24) hours a day support for their network.
4.0 FORMAT
All data passed between the parties shall be 'in format compatible with
and approved in advance by Inter-Tel.
5.0 UPDATED USAGE ESTIMATES
Customer shall provide monthly updates, 30 days in advance in the
format which will include usage estimates or information which may impact
established trends in usage patterns. Customer acknowledges and agrees that
any significant increases in usage not forecasted by the Customer may
jeopardize the ability of Inter-Tel.net to meet the demand.
6.0 NETWORK BLOCKING CAPABILITY
Based on the Customer submitted estimates of monthly minutes of use and
busy hour minutes of capacity measurements for each terminating location,
Inter-Tel shall have reasonable blocking ability for excess usage above
maximums, or at its discretion. switch out the excess minutes over the PSTN
at the agreed prices in Schedule A. Customer shall have responsibility to
provide an updated usage. forecast with each Service Request.
7.0 NETWORK MANAGEMENT CONTROLS
When call volumes increase substantially and facility augments cannot
be accommodated in a timely manner, Inter-Tel.net may invoke network
management controls to reduce the probability of excessive network
congestion. Substantial call volume increases are changes which exceed the
recorded busy day, busy hour minutes of capacity for the preceding 60 day,
seasonally adjusted period. For new Service Requests, the estimated busy
day, busy hour minutes will be the basis for identifying substantial call
volumes.
8.0 NETWORK CONNECTION
8.1 All connections to Inter-Tel.net are made through dedicated data
connections between the Customer POP and Inter-Tel.net with sufficient
bandwidth to insure call quality. All facilities will be designed using
standard usage engineering principles.
8.2 in order to insure call quality, the end to end turnaround time as
measured by the industry standard ping should not exceed 100 milliseconds.
8.3 Customer agrees that all Vocal'Net servers shall be covered under
"a software maintenance agreement with Inter-Tel to insure that all updates,
upgrades and maintenance are consistent with Inter-Tel.net standards.
3
9.0 INSTALLATION, SUPPORT AND MAINTENANCE OF SERVERS
Unless otherwise contracted with Inter-Tel, Customer agrees that it
shall be responsible for the installation, support and maintenance of all
customer owned Servers and related products including, but not limited to,
the fees and rental charges for collocation space and provision of dedicated
lines and circuits necessary for the interconnection of the Customer network
and related equipment and services into Inter-Tel.net up to and including
the interface interconnection point. Customer further acknowledges
appointment of Inter-Tel as agent as set forth on Schedule B, to obtain for
Customer any dedicated line services as are agreed by the parties to be
necessary for the installation. support and maintenance of the Customer's
Servers with the Network,
9.1 Service Outage - In the event a service outage occurs within
Inter-Tel.net. Inter-Tel shall act promptly to repair the outage. Customer
shall be relieved of minimum purchase requirements in a pro-rata fashion
determined by the length of the service outage. In the event a service
outage occurs within the Customer Network, customer shall act promptly to
repair the outage.
9.2 Planned Service Outage - Customer shall, when practical, be
notified at least five (5) days in advance of any Planned Service Outage.
10.0 USAGE MEASUREMENT
10.1 Start of Usage Measurement -For all originating usage, measurement
will commence when Inter-Tel.net sends the first supervisory signal, and
answer supervision is received by Inter-Tel.net from the terminating end
user, indicating that the termination end user has answered.
10.2 Termination Of Usage Measurement - For all terminating usage,
measurement will end when Inter-Tel.net receives disconnect supervision from
the terminating end LEC switch and when the appropriate IP call control
release messages is received or sent by Inter-Tel.net.
11.0 TERM AND TERMINATION
This agreement shall be in effect for a period of one (1) year from the
date hereof, and shall continue automatically for one year periods
thereafter unless and until terminated by either party giving the other not
less than sixty (60) days written notice before the expiration date, In the
event of a breach of contract, this agreement shall be terminated by ten
(10) days written notice by one party to the other and failure to cure a
breach of any provision of this Agreement by such party: or in the event
either party ceases to function as a going business, becomes insolvent,
commits an act of bankruptcy, is adjudged a bankrupt, makes a general
assignment for the benefit of creditors, or if a receiver is appointed for
all or substantially all of its property. At the termination of any service
or of this Agreement, the Parties will, within five (5) business days,
disconnect the interconnection circuit(s) provided between the parties.
4
12.0 PAYMENT AND REVIEW PROCESS
12.1 Payment Due Date - Customer agrees to pay all charges as set forth
on Schedule A.
12.2 Disputes - Customer shall have 60 days from invoice date to
dispute any Charges in writing. Written disputes should be addressed to the
Vice President, Finance and sent by registered mail or courier (such as
Federal Express or United Parcel Service). All charges, whether or not
disputed in writing, and received by the due date, are considered payable.
The Parties shall provide one another with reasonably requested information
for invoice validation including, but not limited to, the number of minutes
of use.
12.3 Review Process - Inter-Tel.net will review any amounts disputed in
writing within (30) business days after receipt of the written dispute. If
Inter-Tel.net determines that the Customer was billed in error, a credit for
the amount billed incorrectly will appear or the next invoice, If the
Customer does not agree with Inter-Tel.net's assessment, both -parties agree
to resolution through binding arbitration within thirty (30) days of
Inter-Tel.net's determination that the bill was issued properly
12.4 Arbitration - Notwithstanding anything to the contrary herein, any
dispute arising pursuant to or in any way related to this Agreement or the
transactions contemplated hereby shall be settled by arbitration a' a
mutually agreed upon location in Phoenix, Arizona; provided, however. that
nothing in this Section shall restrict the right of either party to apply to
a court of competent jurisdiction for emergency relief pending final
determination of a claim by arbitration in accordance with this Section. All
arbitration shall be conducted in accordance with the rules and regulations
of the American Arbitration Association, in force at the time of any such
dispute, by a panel of three (3) arbitrators, one (1) selected by
Inter-Tel.net, one (1) selected by Customer, and the third (3rd) selected by
the other two (2) arbitrators. Each party shall pay its own expenses
associated with such arbitration, including the expenses of any arbitrator
selected by such party and 50% of the expenses of the third arbitrator. The
decision of the arbitrators, based upon written findings of fact and
conclusions of law, shall be binding upon the parties; and judgment in
accordance with that decision may be entered in any court having
jurisdiction thereof. In no event shall the arbitrators be authorized to
grant any punitive, incidental or consequential damages of any nature or
kind whatsoever.
12.5 Suspension of Service - If customer does not make payment,
Inter-Tel.net may suspend or cancel Service and terminate this Agreement
after Inter-Tel.net has given Customer written notice and ten (10) days to
cure the nonpayment.
12.6 Monthly Purchase Minimums - Customer agrees to pay the greater of
actual usage, or minimum usage which is computed by multiplying the total
estimated usage times the billing rate for such usage on Schedule A.
5
12.7 Billing Increments - Billing increments will be as set forth on
Schedule A.
13.0 EQUIPMENT AND INSTALLATION
13.1 Intel-Tel.net shall provide, maintain, repair, operate and control
the. Inter-Tel.net owned facilities necessary for service up to the
interconnection point where the Customer network interfaces with
Inter-Tel.net,
13.2 'Neither Party shall adjust, align, or attempt to repair, the
other Party's equipment except as expressly agreed to in advance in writing
by the other Party. 'Neither Party's equipment shall be removed or relocated
by the other Party.
14.0 WARRANTIES AND NETWORK STANDARDS
14.1 Each party represents and warrants to the other Party that it has
the right to provide the service specified herein, and that it is an entity,
duly organized, validly existing and in good standing under the laws of its
origin, with all requisite power to enter into and perform its obligations
under this Agreement in accordance with its terms.
14.2 Inter-Tel.net represents and warrants to Customer that all service
rendered by it hereunder shall be designed, produced, installed, furnished
and in all aspects provided and maintained in conformance and compliance
with applicable federal, state and local laws, administrative and regulatory
requirements and any other authorities having jurisdiction over the subject
matter of this Agreement that were in effect at the time of such design.
14.3 Inter-Tel represents and warrants to Customer that it shall at all
times, comply with then current industry standards. The parties agree that
if any party, in its sole reasonable discretion, determines that an
emergency action is necessary to protect its own Network, the party may
block any signals being transmitted over its Network by the other party
whose signals do not meet the specifications included herein. The parties
further agree that none of their respective obligations to one another under
this Agreement shall be affected by any such blockage except that the party
affected by such blockage shall be relieved of all obligations to make
payments for charges relating to such service only during the period of time
of such blockage and that no party shall have any obligation to the other
party for any claim, judgment or liability resulting from such blockage.
14.4 THERE ARE NO AGREEMENTS, WARRANTIES OR REPRESENTATIONS, EXPRESSED
OR IMPLIED EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE OR USE, EXCEPT THOSE EXPRESSLY SET FORTH HEREIN.
6
15.0 WARRANTY AND INDEMNIFICATION BY CUSTOMER.
Customer warrants and agrees that all equipment owned and operated by
Customer and interconnected with Inter-Tel.net shall be compatible with
Inter-tel.net and in compliance with any specific standards that may be
additionally set forth on Schedule A. Customer further agrees to be
responsible for any upgrades or enhancements necessary For its network to
remain compatible with the Inter-Tel.net Network. Customer further warrants
and agrees, that if Inter-Tel terminates usage over the network- of
Customer, that Customer will install and maintain all I of Customer's
network in accordance with industry standards for IP network usage in order
to insure the quality of transmission usage equal to that of Inter-Tel.net.
16.0 CONFIDENTIAL OBLIGATION
16.1 Neither party hereto shall disclose any confidential information
("Confidential Information") received from the other party nor use such
information for purposes other than performance of this Agreement without
getting prior written consent from the other party. The Confidential
Information shall be the information (i) disclosed in writing and marked
"Confidential", and (ii) if disclosed verbally, shall be confirmed in
writing within seven (7) days following such disclosure, and (iii) any
information contained in this Agreement and Schedules.
16.2 The following information shall not be regarded as the
Confidential
Information:
(i) information which, at the time of disclosure hereunder. was or
thereafter becomes in the public domain through no willfulness or
misconduct of the recipient;
(ii) information which, prior to disclosure hereunder, was already in
the recipient's possession either without limitation on
disclosure
to others or subsequently becoming free of such limitation-,
(iii) information obtained by the recipient from a third party having
an
independent right to disclose this information; or
(iv) information which is independently developed by the recipient.
16.3 Information shall not be deemed confidential in the following
cases: the information was previously known to the receiving party free of
any obligation to keep it confidential at the time of its disclosures by the
disclosing party; the information is or became publicly known through no
wrongful act of the disclosing party; the information is rightfully received
by the receiving party from a third party having no direct or indirect
and/or confidential obligation to the disclosing party with respect to such
information; the information is disclosed by the disclosing party to the
public, or the information is independently developed by an employee, agent
or contractor of the receiving party.
7
17.0 INDEMNITIES
Each Party agrees to indemnify, defend and hold harmless the other
Party from and against; (i) claims for libel, slander, infringement of
copyright or unauthorized use of trademark, trade name-, or service mark
arising out of the indemnifying Party's use or provision of Service; (ii)
claims for patent infringement arising from the use of the facilities or
equipment supplied by the indemnifying Party's combining or connecting
facilities to use Inter-Tel.net; (iii) claims of third parties for damages
and/or personal injuries arising out of the negligence or willful act or
omission of the indemnifying Party or its agents, servants, employees,
contractors representatives; and (iv) claims of third parties. including
patrons or Customers of the indemnifying Party, arising out of, resulting
from, or related to the indemnifying Party's resale or attempted resale of
the Service(s) under this Agreement.
18.0 SURVIVAL CLAUSES
The provisions of Paragraph 15, 16, and 17 shall -survive the
termination or expiration of this Agreement.
19.0 DEFAULT
19.1 A Party shall be deemed in default of this Agreement upon the
occurrence of any one or more of the following events: (i) the filing of
bankruptcy or making a general assignment for the benefit of creditors which
is not dismissed or set aside within sixty (60) days of filing, (ii) a Party
violates any applicable laws, statutes, ordinances, codes or other legal
requirements with respect to the Service and such violation(s) are not
remedied within ten (10) business days after written notice thereof, or
(iii) a Party fails to perform its obligations under this Agreement and such
nonperformance is not remedied within ten (10) days in the case of payment
obligations and otherwise within thirty (30) days after notice thereof.
19.2 Inter-Tel shall grant customer thirty (30) days after any written
notice of default herein required other than payment obligations, to cure
any default. Should Customer fail to cure the default within the time,
Inter-Tel shall be entitled to suspend Service and/or terminate this
Agreement. Should Inter-Tel terminate this Agreement due to default by
Customer, all amounts owned Inter-Tel shall become immediately due and
payable.
19.3 A party shall be deemed to be in default if, without thirty (30)
days written notice, any act or failure to act by the party with respect to
its network causes or allows to be caused a cessation of operations of that
network in such a manner that the other Party can-not terminate usage over
the defaulting party's network for a period in excess of twelve (12) hours.
In such event, the defaulting party ,shall be responsible for the non
defaulting party's losses to the extent necessary to terminate such usage
over any other viable transmission means for said thirty day period.
8
20.0 AMENDMENT
No amendment of this Agreement shall bind either party hereto unless
reduced to writing and signed by authorized representatives of the
respective parties.
21.0 LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY, OR TO ANY OTHER
ENTITY OR INDIVIDUAL, FOR INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTIAL OR
PUNITIVE DAMAGES OF ANY KIND OR NATURE, INCLUDING, WITHOUT LIMITATION, ANY
LOST PROFITS OR REVENUES, REGARDLESS 01, THE FORESEEABILITY THEREOF.
Customer acknowledges and agrees that any product; hardware or software
may or may not have been approved for sale or use in foreign countries. The
Customer agrees that any use or resale of the product into a foreign country
could require regulatory approval of such country. Customer accepts full
responsibility for complying with any and all of such requirements or
regulations for such product(s) prior to distribution or use. Customer
further agrees to indemnify and hold harmless Inter-Tel from and against all
claims, liability, damages and expenses arising from any failure of Customer
to obtain required approvals and/or to comply with any and all such
regulations prior to distribution or use in a foreign country,
22.0 ENTIRE AGREEMENT
This Agreement embodies the entire agreement and understanding between
the parties hereto relative to the subject matter hereof and there are no
understandings, agreements, conditions or representations, oral or written,
expressed or implied, with reference to the subject matter hereof that are
not merged herein or superseded hereby.
23.0 JURISDICTION AND VENUE
This Agreement shall be construed and enforced in accordance with the
laws of the State of Arizona. Should a dispute occur between the parties
hereto arising out of or in relation to implementation of this Agreement,
the parties hereto agree that venue of the dispute shall be in Maricopa
County, Arizona and that substantive and personal jurisdiction shall exist
over the
parties by virtue of the fact that payments are due in Phoenix, Arizona.
9
24.0 FORCE MAJEURE
Except as to the payment of monies pursuant to this Agreement, each
party to this Agreement shall be excused from performance hereunder for any
Period of time and to tile extent that it is prevented from performing any
of its obligations pursuant hereto, in whole or in part, as a result of
delays caused by the other party or by an act of God, fire, explosion.
transportation contingencies, unusually severe weather, quarantine,
restriction, epidemic, natural catastrophe, war, civil disturbance, acts of
the government of the United States or of any State or governmental agency
or official thereof, court order, labor dispute or shortage, third-party
nonperformance, or other cause, events or circumstances beyond its
reasonable control, and such nonperformance shall not be a default under
this Agreement nor a ground for termination of this Agreement as long as the
excused party makes reasonable efforts to remedy, if and to the extent
reasonably possible, the cause for such nonperformance.
25.0 TAXES
Each Party shall be fully responsible for the payment of any and all ad
valorem, property franchise, gross receipts, excise, access, bypass, sales
or other local, state or federal taxes or charges applicable to property
owned by it and for taxes on its net income. Customer agrees to any sales,
use, gross receipts. excise, access, bypass or other local, state and
federal taxes or charges applicable to the provisioning or sale of the.
Service provided by Inter-Tel,net. Any taxes to be paid by Customer shall be
separately stated on the invoice. Prices shall not include any taxes for
which Customer has furnished a valid exemption certificate
26.0 REGULATIONS
Each Party represents that it is not aware of any facts that would
justify a complaint to the Federal Communications Commission or any state
regulatory authority concerning the prices, terms or conditions of the
transactions contemplated by this Agreement. The Parties also agree that in
the event a decision by a telecommunications regulatory authority A the
federal, state, or local level necessitates modifications in this Agreement,
the Parties will negotiate in good faith to modify this Agreement in light
of such decision.
27.0 MISCELLANEOUS
27.1 This Agreement does not appoint either Party as the agent or legal
representative of the other Party and does not create a partnership or joint
venture between Customer and Inter-Tel.net. Neither Party shall have any
authority to make any agreement for or bind the other Party in any manner
Whatsoever except as set forth on Schedule B. This Agreement confers no
rights of any kind upon any third party.
27.2 The failure of either Party to give notice of default or to
enforce or insist upon compliance with any of the terms of conditions of
this Agreement shall not be considered the waiver of any other term or
condition, or of future compliance of the terms of this Agreement,
10
27.3 If any part of any provision of this Agreement or any other
agreement, document or writing given pursuant to or in connection with this
Agreement shall be invalid or unenforceable under applicable law, such part
shall be ineffective to the extent of such invalidity only, without in any
way affecting the remaining parts or provisions of this Agreement.
27.4 Inter-Tel.net may terminate this Agreement without liability if;
(i) the facilities used to provide Service are taken by exercise of
condemnation or eminent domain; or (ii) the Inter-Tel.net facilities shall,
in Inter-Tel. net's reasonable judgment, be made inoperable and beyond
economically or technologically feasible repair.
27.5 Acceptance of this Agreement is contingent upon signature by a
representative of Inter-Tel duly authorized to execute this Agreement.
27.6 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and when taken together shall
constitute one document.
27.7 In the event that suit is brought and an attorney is retained by
either Party to enforce the terms of this Agreement or to collect any money
as due. hereunder or to collect any money damages for breach hereof, the
prevailing party shall be entitled to recover, in addition to any other
remedy, the reimbursement for reasonable attorney's fees, court costs, costs
of investigations and other related expenses incurred in connection
therewith.
27.8 The parties agree not to disclose any of the items and conditions
of this Agreement without the express written consent of the other party,
except as may be required by law or governmental rule or regulations. or to
establish either party's rights under this Agreement, provided, however,
that if one party seeks to disclose for reasons not requiring the other
party's consent, that party will limit the disclosure to the extent
required, will allow the other party to review the information disclosed and
will apply where available, for confidentiality, protective orders and the
like. Any review under this paragraph will not be construed to make the
reviewing party responsible for the content of any disclosure,
28.0 ASSIGNMENT
The Customer may not assign this Agreement without the prior written
consent of Inter- which shall not be reasonably withheld. Any such
assignment of this Agreement by Customer without consent shall be null and
void.
29.0 NOTICES
Notices under this Agreement shall be in writing and delivered by
certified mail, return receipt requested, to the persons whose names and
business addresses appear below and such notice shall be effective on the
date of receipt, or refusal of delivery, by the receiving Party.
11
If so Inter-Tel.net (except billing disputes)
Attention: President
INTER-TEL.NET
120 North 44th Street
Suite #200
Phoenix, AZ 85034-1822
Billing Disputes:
Attention: Vice President, Finance
INTER-TEL.NET
120 N. 44th Street
Suite #200
Phoenix, AZ 85034-1822
If to Customer:
----------------------
----------------------
----------------------
Service Request or Modifications or Cancellations:
Attention: Director, Customer Service
INTER-TEL.NET
120 N. 44th Street
Suite #200
Phoenix, AZ 85034-1822
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30.0 FINAL AGREEMENT
This Agreement sets forth the entire understanding of the parties and
supersedes any and all prior agreements, arrangements or understanding
related to the Services described herein, and no representation, promise,
inducement or statement of intention has been made by either party, which is
not. embodied herein. Inter-Tel shall not be bound by any agent's or
employee's representations, promises or inducements not set forth herein,
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duty authorized representatives on the day and year first
above written
INTER-TEL.NET, INC. TELECOM COMMUNICATIONS OF AMERICA
---------------------------------
Customer
By: Craig Steen or Ross McAlpine By: Michele Hiromoto
---------------------------- -------------------------
Signed: Signed: /s/ Michele Hiromoto
Its: VP of Sales or President Its:
---------------------------- -------------------------
Date: Date: 4/27/99
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13
EXHIBIT 10.6 Memorandum of Understanding
Memorandum of Understanding for the Interconnection and Settlement between
Welltel Network, Inc. and Inter-Tel.net, Inc.
November 18, 1998
This Memorandum of Understanding (MOU) contains the plans, terms and
conditions under which Telecom Communications of America (CUSTOMER) and
Inter-Tel.net, Inc. (ITN) will provide for the testing of the
interconnection of their IP Telephony Networks.
1. Interconnection
By DEC 1998, CUSTOMER's servers in --- (xx servers), --- (xx servers) and --
- (xx servers) will be programmed to route calls to ITN's servers in
Phoenix, Los Angeles, San Jose, Reno, Chicago and New York and Washington
DC. ITN's servers may be programmed to route calls to CUSTOMER's servers,
provided voice quality is at an acceptable level.The necessary information
for interconnection will be provided to each party on a data sheet that
schedules the POP (Point of Presence), server number, IP address, server
name, Vocoder, dialing rule, destination priority, test call number and
termination rate. The datasheets will be provided in a timely manner prior
to testing. The Service Provider ID numbers for CUSTOMER and ITN will be
entered into each other CAS (Call Accounting System).
Beginning on about DEC 4, 98, test calls will be made on each network to the
numbers set forth on the data sheets. The test period will be from DEC to
JAN 1999.
Provided testing between CUSTOMER's and ITN's networks is acceptable to both
parties, commercial traffic will begin, once a full network agreement has
been executed by both parties. Such Network Agreement will be provided by
ITN prior to the end of the test period.
2. Termination Rates
Calls from CUSTOMER to Inter-Tel.net
Calls terminating on established IT.net POPs (see USD $0.045 per
minute
Exhibit -- For Listing of area codes -
Calls terminating on additional continental US area USD $0.045 per
minute
Codes -
Area codes where ITN will not terminate calls (800,
877, 900, 888) * potentially other pay service area
codes
Alaska and Hawaii $0.080 per minute
Canada $0.130 per minute
Other int'l destinations Per Schedule
Billing increments - one minute, such that on a per call basis, a call
duration of 15 seconds = 1 billing minute, a call duration of 1 minute 15
seconds = 2 billing minutes
Calls from ITN to CUSTOMER
Calls terminating on established CUSTOMER POP's (see $ -- per minute
Exhibit - for listing of destinations)
Calls terminating on additional locations To be determined
Billing increments - one minute, such that on a per call basis, a call
duration of 15 seconds = 1 billing minute, a call duration of 1 minute 15
seconds = 2 billing minutes
3. Exchange of Call Detail Records
ITN will allow CUSTOMER to have access to its account information via ITN's
web page on a continuous basis. Access is through www.inter-tel.net and
CUSTOMER's SPID (Service Provider Identification) account number. This
access can be limited by password a CUSTOMER's discretion. In addition to
viewing call detail on the web site, ITN will provide to CUSTOMER a listing
of all call detail records for the test period via e-mail in an ascii format
file no later than 10 days after the end of each calendar month period.
Within 10 days from the end of the test period, ITN will provide to CUSTOMER
a final test file for review. CUSTOMER shall provide to ITN the appropriate
e-mail address for the call detail information prior to the beginning of the
test. The contact for this test file information is Tak Hiromoto.
4. Billing and Payment for inter-network calls
Invoicing
ITN will setup a test account for CUSTOMER prior to --. This test account
will be credited for the amount of $200.00 (USD) by ITN. Usage originating
on the CUSTOMER's servers and terminating on ITN's network will be
subtracted from CUSTOMER's test account using the pricing information listed
in section 4 of this document. Testing between CUSTOMER's and ITN's networks
will cease on --. Or when the CUSTOMER's test account is at $0.00, which
ever comes first. At that point, a full network agreement will need to be
executed by both parties before additional traffic can be exchanged between
networks. Additional billing questions can be directed towards:
ITN Invoicing contact - Inter-Tel.net
9475 Double R Blved.
Suite 15
Reno, NV 89511
Attn: John Abbott
John_abbott@inter-tel.com
CUSTOMER Invoicing contact - Tak Hiromoto
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Payments
Since CUSTOMER's test account will be setup as a prepaid account and paid
for by ITN, no payment will be required under this MOU.
----------------------------------------------------------------------------
Agreed and Accepted:
Inter-Tel.net, Incorporated
/s/ Michele Hiromoto
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President Ross McAlpine, President
EXHIBIT 23.2 Consent of Independent Certified Public Accountants
ROBERT G. ERCEK, CPA
1756 West Ave. J-12 #107
Lancaster, CA 93534 (661)-726-9448
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the use of this Registration Statement on Form SB-2 of my
report dated November 14, 2001 relating to the comparative financial
statements of Telecom Communications of America as of September 30, 1999 &
2000.
Date: November 28, 2001 /s/ Robert G. Ercek
Lancaster, California --------------------
Robert G. Ercek
Certified Public Accountant
ROBERT G. ERCEK, CPA
1756 West Ave. J-12 Ste 107
Lancaster, CA 93534 (661)-726-9448
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the use of this Registration Statement on Form SB-2 of my
Review Report dated November 14, 2001 relating to the comparative financial
statements of Telecom Communications of America and Telecom Communications,
Inc., as of June 30, 2000 & 2001 respectively. A review consists principally
of inquiries of Company personnel and analytical review procedures applied to
the financial data. It is substantially less in scope than an audit
performed in accordance with Generally Accepted Auditing Standards, the
objective of which, is to express an opinion regarding the financial
statements taken as a whole.
Date: November 28, 2001 /s/ Robert G. Ercek
Lancaster, California --------------------
Robert G. Ercek
Certified Public Accountant