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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950129-04-002685.txt : 20040503
<SEC-HEADER>0000950129-04-002685.hdr.sgml : 20040503
<ACCEPTANCE-DATETIME>20040503144855
ACCESSION NUMBER: 0000950129-04-002685
CONFORMED SUBMISSION TYPE: S-2/A
PUBLIC DOCUMENT COUNT: 10
FILED AS OF DATE: 20040503
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: I SECTOR CORP
CENTRAL INDEX KEY: 0001020017
STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045]
IRS NUMBER: 760515249
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-2/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-113575
FILM NUMBER: 04773151
BUSINESS ADDRESS:
STREET 1: 6401 SOUTHWEST FREEWAY
CITY: HOUSTON
STATE: TX
ZIP: 77074
BUSINESS PHONE: 7137952000
MAIL ADDRESS:
STREET 1: 6401 SOUTHWEST FREEWAY
CITY: HOUSTON
STATE: TX
ZIP: 77074
FORMER COMPANY:
FORMER CONFORMED NAME: ALLSTAR SYSTEMS INC
DATE OF NAME CHANGE: 19960730
</SEC-HEADER>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>2
<FILENAME>h13383a2exv1w1.txt
<DESCRIPTION>FORM OF UNDERWRITING AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 1.1
500,000 Units
I-Sector Corporation
UNDERWRITING AGREEMENT
May ___, 2004
Paulson Investment Company, Inc.
As Representative of the
Several Underwriters
811 SW Naito Parkway, Suite 200
Portland, Oregon 97204
Ladies and Gentlemen:
I-Sector Corporation, a Delaware corporation (the "Company"), proposes
to sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as Representative (the "Representative") an
aggregate of 500,000 Units (the "Firm Units"). Each Unit will consist of two
shares (individually, a "Share" and, collectively, the "Shares") of the common
stock, par value $0.01 of the Company ("Common Stock") and one warrant
(individually, a "Warrant" and, collectively, the "Warrants") each to purchase
one share of Common Stock. The Warrants are to be issued under the terms of a
Warrant Agreement (the "Warrant Agreement") by and between the Company and
American Stock Transfer & Trust Company, as warrant agent (the "Warrant Agent"),
in each case substantially in the form most recently filed as an exhibit to the
Registration Statement (hereinafter defined). The respective number of the Firm
Units to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company also proposes to grant to the
Representative an option to purchase in aggregate of up to 75,000 additional
Units, identical to the Firm Units (the "Option Units"), as set forth below. The
Firm Units and the Option Units (to the extent the aforementioned option is
exercised) are herein collectively referred to as the "Units."
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in Schedule I.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
<PAGE>
1. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters as follows:
(a) A registration statement on Form S-2 (File No.
333-113575) with respect to the Units has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements of
the Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (i) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or, if no such
prospectus is filed pursuant to such rule, (ii) the last preliminary prospectus
included in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(a) under the Act that is delivered by
the Company to the Underwriters for delivery to purchasers of the Units,
together with the term sheet or abbreviated term sheet filed with the Commission
pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus included
in the Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus."
(b) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Except as
described in the Registration Statement, the Company does not own a controlling
interest in any other corporation or other business entity that has any material
assets, liabilities or operations. Each entity that the Registration Statement
discloses as being controlled by the Company (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized and is validly
existing under the laws of its jurisdiction of organization and has the
necessary legal power and authority to own or lease its properties and to
conduct its business as described in the Registration Statement. The Company and
each Subsidiary is duly qualified to transact business in all jurisdictions in
which the conduct of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole (a "Material Adverse
Effect").
(c) The outstanding shares of each class or series of
capital stock or other equity interests of the Company and each Subsidiary have
been duly authorized and validly issued and are fully paid and non-assessable
and, except as disclosed in the Registration Statement, have been issued and
sold by the Company or the Subsidiary in compliance in all material respects
with applicable securities laws; the issuance and sale of the Units have been
duly authorized by all necessary corporate action and, when issued and paid for
as contemplated herein, the Units will be validly issued, fully paid and
non-assessable; and no preemptive rights
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<PAGE>
of shareholders exist with respect to any security of the Company or the issue
and sale thereof. Except as set forth in the Registration Statement, neither the
filing of the Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any shares
of Common Stock or other securities of the Company. The Company has duly and
validly reserved, out of its authorized and unissued Common Stock, for issuance
upon exercise of Warrants a number of shares sufficient for such purposes,
including Warrants included in the Option Units and Units obtainable on exercise
of the Representative's Warrants issuable as described in Section 2(d) (the
"Representative's Warrants").
(d) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. The Common Stock
conforms and the Units, the Warrants and the Representative's Warrants will
conform to the description thereof contained in the Registration Statement in
all material respects. The forms of certificates for the Units, the Common
Stock, the Warrants and the Representative's Warrants conform to the
requirements of the General Corporation Law of Delaware in all material
respects.
(e) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Units nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements that are required to be stated therein by the Company
and will conform to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and will
not contain, any untrue statement of a material fact and do not omit, and will
not omit, to state any material fact required to be stated therein or necessary
to make the statements therein not misleading. The Prospectus, including any
amendments and supplements thereto, do not contain, and will not contain, any
untrue statement of material fact; and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representative,
specifically for use in the preparation thereof.
(f) The consolidated financial statements of the Company,
together with related notes and schedules as set forth in the Registration
Statement, present fairly the consolidated financial position and the results of
operations and cash flows of the Company and its consolidated subsidiaries at
the indicated dates and for the indicated periods. The impact of each material
accounting judgment made in the preparation of the financial statements included
in the Registration Statement has been fairly and adequately disclosed in the
notes thereto or elsewhere in the Registration Statement. Such financial
statements and related schedules have been prepared in accordance with generally
accepted principles of accounting, consistently applied throughout the periods
involved, except as disclosed in the Registration Statement, and all adjustments
necessary for a fair presentation of results for such periods have been made.
The summary financial and statistical data of the Company included in the
Registration Statement presents fairly the information shown therein and such
data has been compiled on a basis
3
<PAGE>
consistent with the financial statements presented therein and the books and
records of the Company.
(g) Grant Thornton LLP and Deloitte & Touche LLP, who
have certified certain of the financial statements filed with the Commission as
part of the Registration Statement, are each independent public accountants as
required by the Act and the Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary before any court or administrative agency or otherwise which if
determined adversely to the Company or such Subsidiary might result in a
Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement.
(i) The Company and each Subsidiary either has or has
disposed of in the ordinary course of business since December 31, 2003 good and
marketable title to all of its properties and assets, tangible and intangible,
reflected in the consolidated balance sheet of the Company and its consolidated
Subsidiaries as of that date that is a part of the financial statements included
in the Registration Statement, and has good and marketable title to all other
property described in the Registration Statement as owned by the Company or a
Subsidiary, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except those reflected in such financial statements (or as described in the
Registration Statement) or which are not material. All of the leases and
subleases under which the Company or any Subsidiary holds properties are in full
force and effect (with only such exceptions as are commonly accepted by prudent
companies engaged in the business of the Company or such Subsidiary) and neither
the Company nor any Subsidiary has received notice of any claim that is
materially adverse to rights of the Company or any Subsidiary under any of such
leases or subleases.
(j) The Company, for itself and its Subsidiaries that
have been consolidated for tax purposes, has filed all federal, state, local and
foreign income tax returns which have been required to be filed (or have valid
extensions for filing thereof) and has paid all taxes indicated by said returns
and all assessments received by it to the extent that such taxes have become due
and are not being contested in good faith. All tax liabilities have been
adequately provided for in the financial statements of the Company. Except as
described in the Registration Statement, all of the Subsidiaries are
consolidated with the Company for tax purposes.
(k) Since the respective dates as of which information is
given in the Registration Statement, as it may have been amended or
supplemented, there has not been any change or any development involving a
prospective Material Adverse Effect whether or not occurring in the ordinary
course of business; and there has not been any material transaction entered into
or any material transaction that is probable of being entered into by the
Company or any Subsidiary, other than transactions in the ordinary course of
business and changes and transactions described in the Registration Statement,
as it may be amended or supplemented. Neither the Company nor any Subsidiary has
any material contingent obligations which are not disclosed in the Company's
financial statements included in the Registration Statement or elsewhere in the
Prospectus.
4
<PAGE>
(l) Neither the Company nor any Subsidiary is, nor, with
the giving of notice or lapse of time or both, will any such entity be, in
violation of or in default under its Certificate of Incorporation or Bylaws or
other charter documents or under any agreement, lease, contract, indenture or
other instrument or obligation to which it is a party or by which it, or any of
its properties, is bound and which default would have Material Adverse Effect.
The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which any member of the Company is a party, or of the
Certificate of Incorporation or Bylaws of the Company or any order, rule or
regulation applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(m) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Units for public offering by
the Underwriters under state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.
(n) The Company or a Subsidiary holds all material
patents, patent rights trademarks, trade names, copyrights, trade secrets and
licenses of any of the foregoing (collectively, "Intellectual Property Rights")
that are necessary to the conduct of its businesses; there is no claim pending
or, to the best knowledge of the Company, threatened against the Company or any
Subsidiary or any of their respective officers, directors or employees alleging
any infringement of Intellectual Property Rights, or any violation of the terms
of any license relating to Intellectual Property Rights, nor does the Company
know of any basis for any such claim. The Company knows of no material
infringement by others of Intellectual Property Rights owned by or licensed to
the Company or a Subsidiary. The Company or a Subsidiary has obtained, is in
compliance in all material respect with and maintains in full force and effect
all material licenses, certificates, permits, orders or other, similar
authorizations granted or issued by any governmental agency (collectively
"Government Permits") required to conduct its business as it is presently
conducted. No proceeding to revoke, limit or otherwise materially change any
Government Permit has been commenced or, to the Company's knowledge, is
threatened against the Company or any Subsidiary, and the Company has no reason
to anticipate that any such proceeding will be commenced against the Company or
any Subsidiary. Except as disclosed or contemplated in the Prospectus, the
Company has no reason to believe that any pending application for a Government
Permit will be denied or limited in a manner inconsistent with the Company's
business plan as described in the Prospectus.
(o) The Company and each Subsidiary is in all material
respects in compliance with all applicable Environmental Laws. The Company has
no knowledge of any past, present or, as anticipated by the Company, future
events, conditions, activities, investigation, studies, plans or proposals that
(i) would interfere with or prevent compliance with any Environmental Law by the
Company or any Subsidiary in all material respects, or (ii) could
5
<PAGE>
reasonably be expected to give rise to any common law or other liability, or
otherwise form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving the Company or any Subsidiary and related to Hazardous
Substances or Environmental Laws that could reasonably be expected to have a
Material Adverse Effect. Except for the prudent and safe use and management of
Hazardous Substances in the ordinary course of the Company's business, (i) no
Hazardous Substance is or has been used, treated, stored, generated,
manufactured or otherwise handled on or at any Facility and (ii) to the
Company's best knowledge, no Hazardous Substance has otherwise come to be
located in, on or under any Facility. No Hazardous Substances are stored at any
Facility except in quantities necessary to satisfy the reasonably anticipated
use or consumption by the Company. No litigation, claim, proceeding or
governmental investigation is pending regarding any environmental matter for
which the Company or any Subsidiary has been served or otherwise notified or, to
the knowledge of the Company, threatened or asserted against the Company or any
Subsidiary, or the officers or directors of the Company or any Subsidiary in
their capacities as such, or any Facility or the Company's business. There are
no orders, judgments or decrees of any court or of any governmental agency or
instrumentality under any Environmental Law which specifically apply to the
Company or any Subsidiary, any Facility (to the knowledge of the Company with
respect to any Facility) or any of the Company's or any Subsidiary's operations.
Neither the Company nor any Subsidiary has received from a governmental
authority or other person (i) any notice that it is a potentially responsible
person for any Contaminated site or (ii) any request for information about a
site alleged to be Contaminated or regarding the disposal of Hazardous
Substances. There is no litigation or proceeding against any other person by the
Company or any Subsidiary regarding any environmental matter. The Company has
disclosed in the Prospectus or made available to the Underwriters and their
counsel true, complete and correct copies of any reports, studies,
investigations, audits, analyses, tests or monitoring in the possession of or
initiated by the Company or any Subsidiary pertaining to any environmental
matter relating to the Company, any Subsidiary, their past or present operations
or any Facility.
For the purposes of the foregoing paragraph, "Environmental Laws" means
any applicable federal, state or local statute, regulation, code, rule,
ordinance, order, judgment, decree, injunction or common law pertaining in any
way to the protection of human health or the environment, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Toxic Substances
Control Act, the Clean Air Act, the Federal Water Pollution Control Act and any
similar or comparable state or local law; "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or waste as
defined, listed or regulated under any Environmental Law; "Contaminated" means
the actual existence on or under any real property of Hazardous Substances, if
the existence of such Hazardous Substances triggers a requirement to perform any
investigatory, remedial, removal or other response action under any
Environmental Laws or if such response action legally could be required by any
governmental authority; "Facility" means any property currently owned, leased or
occupied by the Company.
(p) Neither the Company, nor to the Company's knowledge,
any of its affiliates, has taken or intends to take, directly or indirectly, any
action which is designed to cause or result in, or which constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock or the Warrants to facilitate the sale or
resale of the Units.
6
<PAGE>
(q) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has adopted Disclosure Controls and Procedures, as
defined in Section 13a-14(c) of the rules and regulations adopted under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and has
implemented such procedures as adopted and has evaluated the effectiveness of
such Disclosure Controls and Procedures not less than ninety days prior to the
filing date of each report on Form 10-Q or Form 10-K filed by the Company since
August 29, 2002.
(s) The Company and each Subsidiary carries, or is
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
(t) The Company and each Subsidiary is in compliance in
all material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any Subsidiary would have any liability; neither
the Company nor any Subsidiary has incurred and the Company does not expect that
it or any Subsidiary will incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company or any Subsidiary would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such qualification.
(u) The Company and each Subsidiary is in compliance with
all laws, rules, regulations, orders of any court or administrative agency,
operating licenses or other requirements imposed by any governmental body
applicable to it, including, without limitation, all applicable laws, rules,
regulations, licenses or other governmental standards applicable to its business
except for matters of non-compliance that would not have a Material Adverse
Effect; and the conduct of the business of the Company and each Subsidiary, as
described in the Prospectus, will not cause the Company or such Subsidiary to be
in violation of any such presently existing requirements.
7
<PAGE>
(v) Each of the Warrants and the Representative's
Warrants have been authorized for issuance to the purchasers thereof or to the
Representative or its designees, as the case may be, and will, when issued,
possess rights, privileges, and characteristics as represented in the most
recent form of Warrant Agreement or Representative's Warrants, as the case may
be, filed as an exhibit to the Registration Statement; the securities to be
issued upon exercise of the Warrants and the Representative's Warrants, when
issued and delivered against payment therefor in accordance with the terms
thereof, will be duly and validly issued, fully paid, nonassessable and free of
preemptive rights, and all corporate action required to be taken for the
authorization and issuance of the Warrants and the Representative's Warrants,
and the securities to be issued upon their exercise, have been validly and
sufficiently taken. The execution by the Company of the Warrant Agreement and
the Representative's Warrants has been duly authorized by all required action of
the Company and, when so executed and delivered (and assuming due and valid
execution by the Warrant Agent, in the case of the Warrant Agreement) will
constitute the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity and limitations on the remedy of specific performance.
(w) Except as disclosed in the Prospectus, neither the
Company nor any of its officers, directors or affiliates have caused any person,
other than the Underwriters and Gary Cohee, to be entitled to reimbursement of
any kind, including, without limitation, any compensation that would be
includable as underwriter compensation under the NASD's Corporate Financing Rule
with respect to the offering of the Units, as a result of the consummation of
such offering based on any activity of such person as a finder, agent, broker,
investment adviser or other financial service provider.
(x) Except as described in the Prospectus, the Company
does not directly or indirectly control or have a material interest in any other
business entity.
(y) The Common Stock is traded on the American Stock
Exchange ("AMEX"). The Units, the Common Stock and the Warrants have been
approved for listing on the AMEX upon the effectiveness of the Registration
Statement and the Company has satisfied all of the requirements of AMEX for such
listing and for the trading of its Common Stock, Units and Warrants on AMEX.
(z) The Company has adopted organizational structures and
policies sufficient to comply with the requirements of the AMEX corporate
governance rules in effect as of the date hereof (the "AMEX Corporate Governance
Rules"). Without limiting the generality of the foregoing, the Company's Board
of Directors has validly appointed an Audit Committee and a Compensation
Committee whose composition satisfies the requirements of the AMEX Corporate
Governance Rules. The Board of Directors and/or the Audit Committee or
Compensation Committee, as the case may be, has adopted a charter governing the
respective activities of the Audit and Compensation Committees that satisfies
the requirements of the AMEX Corporate Governance Rules. The Audit Committee and
the Compensation Committee have each acted in accordance with the provisions of
their respective charters, as amended from time to time in all material
respects.
8
<PAGE>
(aa) Neither the Board of Directors nor the Audit
Committee has been informed, nor is any director of the Company aware, of (i)
any significant deficiencies in the design or operation of the Company's
internal controls which could adversely affect the Company's ability to record,
process, summarize and report financial data or any material weakness in the
Company's internal controls, except for the internal control deficiencies
disclosed under the heading "Controls and Procedures" in the Registration
Statement; or (ii) any fraud, whether or not material, that involves management
or other employees of the Company who have a significant role in the Company's
internal controls.
(bb) Each of the certifications made by the principal
executive and principal financial officers of the Company pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted
thereunder was correct in all material respects when made.
2. Purchase, Sale and Delivery of the Units.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set forth, the
Company agrees to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $____ per Unit, the number
of Firm Units set forth opposite the name of each Underwriter in Schedule I
hereof, subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Units to be sold hereunder is to
be made in New York Clearing House funds and, at the option of the
Representative, by bank wire to an account specified by the Company, certified
or bank cashier's checks drawn to the order of the Company, against either
uncertificated delivery of Firm Units or of certificates therefor (which
delivery, if certificated, shall take place in such location in New York, New
York as may be specified by the Representative) to the Representative for the
several accounts of the Underwriters. Such payment is to be made at the offices
of the Representative at the address set forth on the first page of this
agreement, at 7:00 a.m., Pacific time, on the third business day after the date
of this Agreement or at such other time and date not later than five business
days thereafter as you and the Company shall agree upon, such time and date
being herein referred to as the "Closing Date." (As used herein, "business day"
means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and not permitted by law or
executive order to be closed.) Except to the extent uncertificated Firm Units
are delivered at closing, the certificates for the Firm Units will be delivered
in such denominations and in such registrations as the Representative requests
in writing not later than the second full business day prior to the Closing
Date, and will be made available for inspection by the Representative at least
one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters to purchase the
Option Units at the price per Unit as set forth in Section 2(a). The option
granted hereby may be exercised in whole or in part by giving written notice (i)
at any time before the Closing Date and (ii) only once thereafter within 45 days
after the date of this Agreement, by the Representative to the Company setting
forth the number of Option Units as to which the Underwriters are exercising the
option, the names and denominations in which the Option Units are to be
registered and the time and date at which
9
<PAGE>
certificates representing such Units are to be delivered. The time and date at
which certificates for Option Units are to be delivered shall be determined by
the Representative but shall not be earlier than three nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The option with respect to the Option Units granted hereunder may
be exercised only to cover over-allotments in the sale of the Firm Units by the
Underwriters. The Representative may cancel such option at any time prior to its
expiration by giving written notice of such cancellation to the Company. To the
extent, if any, that the option is exercised, payment for the Option Units shall
be made on the Option Closing Date in New York Clearing House funds and, at the
option of the Representative, by bank wire to an account specified by the
Company or certified or bank cashier's check drawn to the order of the Company
for the Option Units to be sold by the Company in consideration either of
uncertificated delivery of Option Units or delivery of certificates therefor
(which delivery, if certificated, shall take place in such location in New York,
New York as may be specified by the Representative) to the Representative for
the several accounts of the Underwriters. Except to the extent uncertificated
Option Units are delivered at closing, the certificates for the Option Units
will be delivered in such denominations and in such registrations as the
Representative requests in writing not later than the second full business day
prior to the Option Closing Date, and will be made available for inspection by
the Representative at least one business day prior to the Option Closing Date.
(d) In addition to the sums payable to the Representative
as provided elsewhere herein, the Representative shall be entitled to receive at
the Closing, for itself alone and not as Representative of the Underwriters, as
additional compensation for its services, Representative's Warrants for the
purchase of up to 50,000 Units at a price of $____ per Unit, upon the terms and
subject to adjustment and conversion as described in the form of
Representative's Warrants filed as an exhibit to the Registration Statement.
3. Offering by the Underwriters.
(a) It is understood that the several Underwriters are to
make a public offering of the Firm Units as soon as the Representative deems it
advisable to do so. The Firm Units are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms. To the extent, if at all, that any Option Units are
purchased pursuant to Section 2 hereof, the Representative will offer them to
the public on the foregoing terms.
(b) It is further understood that you will act as the
Representative for the Underwriters in the offering and sale of the Units in
accordance with an Agreement Among Underwriters entered into by you and the
several other Underwriters.
4. Covenants of the Company. The Company covenants and agrees
with the several Underwriters that:
(a) The Company will (i) use its best efforts to cause
the Registration Statement to become effective or, if the procedure in Rule 430A
of the Rules and Regulations is
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followed, to prepare and timely file with the Commission under Rule 424(b) of
the Rules and Regulations a Prospectus in a form approved by the Representative
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and Regulations,
and (ii) not file any amendment to the Registration Statement or supplement to
the Prospectus of which the Representative shall not previously have been
advised and furnished with a copy or to which the Representative shall have
reasonably objected in writing or which is not in compliance with the Rules and
Regulations.
(b) The Company will advise the Representative promptly
(i) when the Registration Statement or any post-effective amendment thereto
shall have become effective, (ii) of receipt of any comments from the
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any additional
information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Units for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representative may reasonably request for distribution of the Units.
(d) The Company will deliver to, or upon the order of,
the Representative, from time to time, as many copies of any Preliminary
Prospectus as the Representative may reasonably request. The Company will
deliver to, or upon the order of, the Representative during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representative may reasonably request. The Company will deliver to the
Representative at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representative such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representative may reasonably request.
(e) The Company will comply with the Act and the Rules
and Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Units as contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of counsel to the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the
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circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances existing at the time
the Prospectus is so delivered, be misleading, or so that the Prospectus will
comply with the law.
(f) The Company will make generally available to its
security holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration Statement, an
earnings statement (which need not be audited) in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so made
available.
(g) The Company will, for a period of five years from the
Closing Date, deliver to the Representative copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act;
provided, however, the Company is not required to deliver documents that have
been filed with the Commission and are generally available to the public in
electronic format. The Company will deliver to the Representative similar
reports with respect to significant subsidiaries, as that term is defined in the
Rules and Regulations, which are not consolidated in the Company's financial
statements.
(h) The Company will make no offering, sale, short sale
or other disposition of any shares of Common Stock of the Company or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock or derivatives of Common Stock (or agreement therefor), directly or
indirectly, for a period of ninety days after the date of this Agreement
otherwise than hereunder, or pursuant to contractual obligations existing on the
date hereof or pursuant to employee benefit plans in effect on the date hereof,
or with the prior written consent of the Representative, which consent will not
be unreasonably withheld, delayed or conditioned.
(i) The Company will use its best efforts to list,
subject to notice of issuance of the Units, the Common Stock and the Warrants on
the AMEX and to cause such listing to remain in effect with respect to each such
security unless and until (i) such security expires; (ii) such security is
listed on another exchange or automated quotation system of at least comparable
reputation; or (iii) the Company is no longer required to file reports under
Section 12 of the Exchange Act.
(j) The Company has caused each officer and director and
each person who owns, beneficially or of record, shares of the Common Stock
constituting 5% or more of the Common Stock outstanding immediately prior to the
date hereof to furnish to you, on or prior to the date of this agreement, a
letter or letters, in form and substance satisfactory to the Underwriters
("Lockup Agreements"), pursuant to which each such person has agreed not to
offer, sell, sell short or otherwise dispose of any shares of Common Stock or
other capital stock
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of the Company, or any other securities convertible, exchangeable or exercisable
for Common Stock or derivatives of Common Stock owned by such person or request
the registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition) for a period of ninety days
after the date of this Agreement, directly or indirectly, except with the prior
written consent of the Representative.
(k) The Company shall apply the net proceeds of its sale
of the Units as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Units and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Units in such a manner as
would require the Company to register as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock, and shall comply with the provisions of the Warrant
Agreement with respect to the appointment and maintenance of a Warrant Agent for
the Warrants.
(n) The Company will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
5. Costs and Expenses.
(a) The Representative shall be entitled to reimbursement
from the Company, for itself alone and not as Representative of the
Underwriters, to a non-accountable expense allowance equal to 2% of the
aggregate initial public offering price of the Firm Units and any Option Units
purchased by the Underwriters. The Representative shall be entitled to withhold
this allowance (less any portion of the allowance prepaid by the Company) on the
Closing Date related to the purchase of the Firm Units or the Option Units, as
the case may be.
(b) In addition to the payment described in Paragraph (a)
of this Section 5, the Company will pay all costs, expenses and fees incident to
the performance of the obligations of the Company under this Agreement,
including, without limitation, the following: accounting fees of the Company;
the fees and disbursements of counsel for the Company; the cost of printing and
delivering to, or as requested by, the Underwriters copies of the Registration
Statement, Preliminary Prospectuses, and the Prospectus; the AMEX additional
listing application; the costs of due diligence investigation of the principals
of the Company; the filing fees of the Commission; the filing fees and expenses
of the underwriting terms and arrangements; any AMEX listing fee; and the
expenses incurred in connection with the qualification of the Units under state
securities or Blue Sky laws. Any transfer taxes imposed on the sale of the Units
to the several Underwriters will be paid by the Company. The Company agrees to
pay all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, incident to the offer and sale of
directed Units by the Underwriters to employees
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and persons having business relationships with the Company. The Company shall
not, however, be required to pay for any of the Underwriters' expenses (other
than as described above) except that, if this Agreement shall not be
consummated, then the Company shall reimburse (less any advances paid to the
Underwriter or its counsel) the several Underwriters for accountable
out-of-pocket expenses up to $100,000, including fees and disbursements of
counsel, reasonably incurred in connection with investigating, marketing and
proposing to market the Units or in contemplation of performing their
obligations hereunder; but the Company shall not in any event be liable to any
of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Units.
6. Conditions of Obligations of the Underwriters. The several
obligations of the Underwriters to purchase the Firm Units on the Closing Date
and the Option Units, if any, on the Option Closing Date are subject to the
accuracy, as of the Closing Date or the Option Closing Date, as the case may be,
of the representations and warranties of the Company contained herein, and to
the performance by the Company of their covenants and obligations hereunder and
to the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representative and complied with to their reasonable satisfaction. No stop order
suspending the effectiveness of the Registration Statement, as amended from time
to time, shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission and no injunction, restraining order, or order of any nature by a
Federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance of the Units.
(b) The Representative shall have received on the Closing
Date or the Option Closing Date, as the case may be, the opinion of Porter &
Hedges, L.L.P., counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement.
(ii) Each Subsidiary has been duly organized and
is validly existing as a business entity in good standing under the laws of its
jurisdiction of formation with all requisite power and authority under the laws
governing such entities to own or lease its properties and conduct its business
as described in the Registration Statement.
(iii) The Company and each Subsidiary is duly
qualified to transact business in all jurisdictions identified to us by the
Company as those in which the conduct of its business requires such
qualification, except where the failure to qualify would not have a
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<PAGE>
Material Adverse Effect upon the business of the Company, and nothing has come
to our attention that causes us to believe that our reliance on the information
provided by the Company regarding the jurisdictions in which it conducts
business is not reasonable under the circumstances.
(iv) The Company has authorized capital stock as
set forth under the caption "Capitalization" in the Prospectus; the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable and conform to the description thereof contained
in the Prospectus in all material respects; the certificates for the Common
Stock, the Units and the Warrants are in due and proper form under the General
Corporation Law of Delaware; no preemptive rights of shareholders exist with
respect to the issuance or sale of Common Stock of the Company pursuant to any
applicable statute or the provisions of the Company's Certificate of
Incorporation or Bylaws or pursuant to any contractual obligation known to such
counsel. The Company's ownership interest of record in each Subsidiary is, in
all material respects, as described in the Registration Statement, and to the
knowledge of such counsel, the Company's ownership interest of record is
accurate.
(v) Except as described in or contemplated by
the Prospectus, to the knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock.
(vi) Except as described in the Prospectus, to
the knowledge of such counsel, no holder of any securities of the Company or any
other person has the contractual right, which has not been satisfied or
effectively waived, to cause the Company to sell or otherwise issue to them, or
to permit them to underwrite the sale of, any of the Units or the contractual
right to have any Common Stock or other securities of the Company included in
the Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.
(vii) The Warrant Agreement and the Warrants have
been duly authorized by the Company. When duly executed, authenticated, issued,
delivered and paid for as contemplated in the Registration Statement and the
Warrant Agreement, the Warrant Agreement and the Warrants will constitute
legally binding obligations of the Company, enforceable against it in accordance
with their terms and, in the case of the Warrants, entitled to the benefits of
the Warrant Agreement subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity and limitations on the
remedy of specific performance.
(viii) The shares of Common Stock initially
issuable upon exercise of the Warrants (including Warrants comprising the Option
Units and Warrants issuable on exercise of the Representative's Warrants) have
been duly authorized and reserved for issuance upon such conversion or exercise,
as the case may be, and, when issued upon such conversion or exercise in
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<PAGE>
accordance with the terms of the Warrant Agreement will be validly issued, fully
paid and nonassessable.
(ix) The Representative's Warrants have been duly
authorized by the Company. When duly executed, issued and delivered as
contemplated in the Registration Statement, the Representative's Warrants will
constitute the legally binding obligation of the Company, enforceable against it
in accordance with its terms subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity and
limitations on the remedy of specific performance and provided, however, that
such counsel need not express an opinion as to the enforceability of the
indemnification provisions contained in section 7 of the Representative's
Warrants to the extent those provisions would require indemnity or contribution
toward the liability of a person for such person's own wrongful or negligent
acts or where indemnification or contribution would be contrary to public policy
or prohibited by law. (For purposes of this opinion, Porter & Hedges, L.L.P. may
assume that Oregon law is the same as Texas law.)
(x) The Registration Statement has become
effective under the Act and, to the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(xi) The Registration Statement, the Prospectus
and each amendment or supplement thereto comply as to form in all material
respects with the requirements of the Act and the applicable rules and
regulations thereunder (except that such counsel need express no opinion as to
the financial statements and related schedules or financial data therein).
(xii) The statements under the captions "Shares
Eligible for Future Sale" and "Description of Securities" in the Prospectus and
in Item 15 of the Registration Statement, insofar as such statements constitute
a summary of documents referred to therein or matters of law, fairly summarize
in all material respects the information called for with respect to such
documents under the published rules and regulations of the Commission.
(xiii) Such counsel does not know of any contracts
or documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are not so filed
or described as required, and such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.
(xiv) Such counsel knows of no legal or
governmental proceedings pending or threatened against the Company or any
Subsidiary, except as (a) described in the Prospectus, (b) described in the
letter from The Law Offices of Michael S. Narsete, P.C. to Grant Thornton LLP of
February 6, 2004, (c) described in the letter from Baird, Holm, McSachen,
Pedersen, Mamann & Strasheim LLP to The Law Offices of Michael S. Narsete, P.C.
of March 9, 2004, (d) described in the letter from Deborah Gambone, General
Counsel of Epixtar Corp., to Grant Thornton LLP of March 9, 2004, (e) described
in the letter from Porter & Hedges, L.L.P. to Grant Thornton LLP of March 11,
2004 or (f) described in the letter from Porter & Hedges, L.L.P. to Stoel Rives
LLP of _______________.
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(xv) The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, (i) the Certificate of Incorporation of the Company,
(ii) the Bylaws of the Company, or (iii) any agreement or instrument known to
such counsel to which the Company is a party or by which the Company may be
bound, except in the case of clause (iii) for conflicts, breaches or defaults
which would not have a Material Adverse Effect.
(xvi) Each of this Agreement and the Warrant
Agreement has been duly authorized, executed and delivered by the Company.
(xvii) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or Blue Sky laws, as to
which such counsel need express no opinion) except such as have been obtained or
made, specifying the same.
(xviii) The Company is not required to register as
an investment company under the 1940 Act.
In rendering such opinion, such counsel may rely as to matters governed
by the laws of states other than Texas, or federal laws on local counsel in such
jurisdictions, provided that in each case such counsel shall state that they
believe that they and the Underwriters are justified in relying on such other
counsel. In addition to the matters set forth above, the opinion of Porter &
Hedges, L.L.P. shall also include a statement to the effect that, based on such
counsels' examination of the registration statement and the Prospectus and their
investigation made in connection with the preparation of the Registration
Statement and Prospectus and conferences with certain officers and employees of
the Company, and without passing on or assuming any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus or any document incorporated by
reference therein (and relying as to materiality to a large extent upon
statements of officers and employees of the Company), nothing has come to the
attention of such counsel that has caused them to believe that (i) the
Registration Statement, at the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, including any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to (1) financial statements, financial data, and
schedules therein or (2) statistical information in the form of market data or
number of employees).
(c) The Representative shall have received from Stoel
Rives LLP, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may
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be, substantially to the effect specified in subparagraphs (ix) and (x) of
Paragraph (b) of this Section 6. In rendering such opinion Stoel Rives LLP may
rely as to all matters governed other than by the laws of the State of Oregon or
Federal laws on the opinion of counsel referred to in Paragraph (b) of this
Section 6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel that has caused them to believe that (i) the Registration Statement, or
any amendment thereto, as of the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need express
no view as to financial statements, schedules and statistical information
therein). With respect to such statement, Stoel Rives LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(d) Unless the offer and sale of the Units are not
subject to qualification in any state as a result of preemption by Section 18 of
the Act, the Representative shall have received at or prior to the Closing Date
from Stoel Rives LLP a memorandum or summary, in form and substance satisfactory
to the Representative, with respect to the qualification for offering and sale
by the Underwriters of the Units under the state securities or Blue Sky laws of
such jurisdictions as the Representative may reasonably have designated to the
Company.
(e) The Representative, on behalf of the several
Underwriters, shall have received, on each of the dates hereof, the Closing Date
and the Option Closing Date, as the case may be, a letter dated the date hereof,
the Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to the Representative, of Grant Thornton LLP confirming
that they are independent public accountants within the meaning of the Act and
the applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material respects
with the applicable accounting requirements of the Act and the related published
Rules and Regulations and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representative shall have received on the Closing
Date or the Option Closing Date, as the case may be, a certificate or
certificates of the Chief Executive Officer and the Chief Financial Officer of
the Company to the effect that, as of the Closing Date or the Option Closing
Date, as the case may be, each of them severally represents as follows:
(i) The Registration Statement has become
effective under the Act and no stop order suspending the effectiveness of the
Registration Statement has been issued,
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and no proceedings for such purpose have been taken or are, to his knowledge,
contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, as the case may be;
(iii) All filings required to have been made
pursuant to Rules 424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and Prospectus
did not omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or otherwise,
of the Company or the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company, whether or not arising in the ordinary course of business.
(g) The Company shall have furnished to the
Representative such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representative may reasonably have requested.
(h) The Units, the Common Stock and the Warrants have
been approved for listing upon notice of issuance of the Units on the AMEX.
(i) The Lockup Agreements described in Section 4(j) are
in full force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representative and to Stoel Rives LLP,
counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
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In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company. The obligations
of the Company to sell and deliver the portion of the Units required to be
delivered as and when specified in this Agreement are subject to the conditions
that at the Closing Date or the Option Closing Date, as the case may be, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act, against any losses, claims, damages or liabilities to
which such Underwriter or any such controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Units, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof; provided, however, that the
foregoing indemnification with respect to the Preliminary Prospectus shall not
inure to the benefit of any Underwriter from which the person asserting any such
loss, claim, damage or liability, action or proceeding purchased Units if (1) a
copy of the Prospectus (as then amended or supplemented) was required by law to
be delivered to such person at or prior to the written confirmation of the sale
of Units to such person, (2) a copy of the Prospectus (as then amended or
supplemented) was not sent or given to such person by or on behalf of such
Underwriter and such failure was not due to the Company's failure to make
available sufficient quantities of the Prospectus to such Underwriters, and (3)
the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage or liability, action or proceeding. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally and not jointly will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act, against any losses, claims,
damages or liabilities to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
20
<PAGE>
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that each Underwriter will
be liable in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission has been
made in the Registration Statement, any Preliminary Prospectus, the Prospectus
or such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a
21
<PAGE>
final judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. In addition, the indemnifying party will not, without
the prior written consent of the indemnified party, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding of which indemnification may be sought hereunder (whether or not
any indemnified party is an actual or potential party to such claim, action or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8(d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Units
purchased by such Underwriter, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this
22
<PAGE>
Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration
Statement, any Preliminary Prospectus, the Prospectus or any supplement or
amendment thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having jurisdiction
over any other contributing party, agrees that process issuing from such court
may be served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 8 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Units and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters. If on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter shall fail to purchase and pay
for the portion of the Units which such Underwriter has agreed to purchase and
pay for on such date (otherwise than by reason of any default on the part of the
Company), you, as Representative of the Underwriters, shall use reasonable
efforts to procure within 36 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Units or Option Units,
as the case may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representative, shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option Units, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of Firm
Units or Option Units, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Units or Option Units, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of Firm Units or Option Units, as the case may be, with respect
to which such default shall occur exceeds 10% of the Firm Units or Option Units,
as the case may be, covered hereby, the Company or you as the Representative of
the Underwriters will have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company except to the extent provided in Section 8 hereof. In the event of a
default by any Underwriter or Underwriters, as set forth in this Section 9, the
Closing Date or Option Closing Date, as the case
23
<PAGE>
may be, may be postponed for such period, not exceeding seven days, as you, as
Representative, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, faxed and confirmed as
follows:
if to the Underwriters, to
Paulson Investment Company, Inc.
811 SW Naito Parkway
Portland, Oregon 97204
Facsimile: (503) 243-6018
Attention: Chester L.F. Paulson
with a copy, which shall not constitute notice, to
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204
Facsimile: (503) 220-2480
Attention: John J. Halle
if to the Company, to
I-Sector Corporation
6401 Southwest Freeway
Houston, Texas 77074
Facsimile: (713) 795-2049
Attention: James H. Long
with copy, which shall not constitute notice, to
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002
Facsimile: (713) 226-0237
Attention: Nick D. Nicholas
11. Termination. This Agreement may be terminated by you by notice
to the Company as follows:
24
<PAGE>
(a) at any time prior to the earlier of (i) the time the
Units are released by you for sale by notice to the Underwriters, or (ii) 11:30
a.m. on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the
following has occurred: (i) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company, the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company, whether or not arising in
the ordinary course of business, (ii) any outbreak or escalation of hostilities
or declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Units or to enforce contracts for
the sale of the Units, (iii) the Dow Jones Industrial Average shall have fallen
by 15 percent or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission, (iv) suspension of trading in securities generally on the New York
Stock Exchange or the AMEX or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities on either such Exchange, (v)
the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects or may materially and adversely
affect the business or operations of the Company, (vi) declaration of a banking
moratorium by United States or New York State authorities, (vii) any downgrading
in the rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act); (viii) the suspension of trading of the Common Stock or the
Warrants by the Commission or AMEX, or (ix) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any right
or obligation hereunder. No purchaser of any of the Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters. The Company and the
Underwriters acknowledge and agree that the only information furnished or to be
furnished by any Underwriter to the Company for inclusion in the Prospectus or
the Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(b) of Regulation S-K under the Act
and the information under the caption "Underwriting" in the Prospectus.
25
<PAGE>
14. Miscellaneous. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or its directors or officers and (c) delivery of and
payment for the Units under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. A facsimile copy or other accurate copy of this
letter or any counterpart of this letter is binding as an original.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Oregon. All disputes relating to this Underwriting
Agreement shall be adjudicated before a court located in Multnomah County,
Oregon to the exclusion of all other courts that might have jurisdiction.
(Remainder of page intentionally left blank; signature page follows)
26
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
I-SECTOR CORPORATION
By: _____________________________________
James H. Long
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
PAULSON INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By: _____________________________________
Name:
Title:
27
<PAGE>
SCHEDULE I
Schedule of Underwriters
<TABLE>
<CAPTION>
Number of Firm Units
Underwriter to Be Purchased
- -------------------------------- --------------------
<S> <C>
Paulson Investment Company, Inc.
S.W. Bach & Company
Pali Capital, Inc.
----------------------------
Total
============================
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>h13383a2exv4w1.txt
<DESCRIPTION>SPECIMEN COMMON STOCK CERTIFICATION
<TEXT>
<PAGE>
EXHIBIT 4.1
NUMBER SHARES
C0 I-SECTOR CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
See Reverse for Certain Definitions
This is to Certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
I-Sector Corporation
(hereinafter called "the Corporation") transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all provisions of the
Certificate of Incorporation and of the By-Laws of the Corporation (copies of
which are on file with the Transfer Agent), to all of which the holder, by
acceptance hereof, assents.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
In Witness Whereof, the Corporation has caused this Certificate to be
signed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Corporation.
Dated:
- ------------------------------------- -----------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER [SEAL] SECRETARY
Countersigned:
By:
-----------------------------
Authorized Officer
- --------------------------------------------------------------------------------
<PAGE>
I-SECTOR CORPORATION
The Corporation is authorized to issue shares of common and preferred
stock. A full statement of all of the designations, preferences, limitations and
relative rights of the shares of such classes is set forth in the Articles of
Incorporation on file in the office of the Secretary of State of Delaware. The
Corporation will furnish a copy of such statement to the record holder of the
Certificate without charge on request to the Corporation as its principal place
of business or registered office.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-as tenants in common UNIF TRANSFERS MIN ACT- Custodian
------ -------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Transfers to Minors
JT TEN - as joint tenants with right of Act
survivorship and not ---------------------------
as tenants in common (State)
Additional abbreviations may also be used though not in the above list
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
================================================================================
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING
POSTAL ZIPCODE OF ASSIGNEE)
__________________________________________________________________Shares of the
capital stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
________________________________________________________________Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated
------------------------------
--------------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
Signature(s) Guaranteed
By
---------------------------------
The signature(s) must be guaranteed by
an eligible guarantor Institution
(banks, stockbrokers, savings and loan
associations and credit unions with
membership in an approved signature
guarantee medallion program), pursuant
to S.E.C. Rule 17Ad-15.
- --------------------------------------------------------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>4
<FILENAME>h13383a2exv4w2.txt
<DESCRIPTION>FORM OF UNIT CERTIFICATE
<TEXT>
<PAGE>
EXHIBIT 4.2
NUMBER U- UNITS
-------------------- -----------
CUSIP No.: 45031W206
---------
I-SECTOR CORPORATION
EACH UNIT CONSISTING OF TWO SHARES OF COMMON STOCK AND
ONE WARRANT TO PURCHASE ONE SHARE OF COMMON STOCK
THIS CERTIFIES THAT ____________________________ or registered assigns (the
"Registered Holder") is the owner of the number of Units specified above.
Each Unit (a "Unit") consists of two (2) shares of common stock, par value
$.01 per share (the "Common Stock"), of I-Sector Corporation, a Delaware
corporation (the "Company"), and one (1) redeemable warrant (the "Warrants").
Each Warrant entitles the holder to purchase one (1) share of Common Stock for
$[____] per share (subject to adjustment). The Warrants will become exercisable
at any time after they become separately tradable and will expire unless
exercised before 5:00 p.m., New York City Time, on ____________, 2009, or
earlier upon redemption (the "Expiration Date"). The Common Stock and Warrants
comprising the Units represented by this certificate are not transferable
separately prior to __________, 2004, subject to earlier separation in the
discretion of Paulson Investment Company, Inc. The Warrants comprising part of
the Units are issued under and pursuant to a certain Warrant Agreement, dated as
of _____________, 2004, between the Company and American Stock Transfer & Trust
Company, as Warrant Agent, and are subject to the terms and provisions contained
therein and on the face of the certificates covered thereby, all of which terms
and provisions the holder of this certificate consents to by acceptance hereof.
The Warrant Agreement provides for adjustment in the number of shares of Common
Stock to be delivered upon the exercise of the Warrant evidenced hereby and to
the exercise price of such Warrant in certain events therein set forth. Copies
of the Warrant Agreement are on file at the office of the Warrant Agent at 59
Maiden Lane, New York, New York 10038, and are available to any Warrant Holder
on written request and without cost.
This certificate is not valid unless countersigned by the Transfer
Agent and Registrar of the Company.
Witness the facsimile seal of the Company and the facsimile signature
of its duly authorized officers.
By:
[SEAL]
- --------------------- -----------------------
Chairman of the Board Secretary
Countersigned:
By:
----------------------------
Authorized Officer
<PAGE>
I-SECTOR CORPORATION
The Registered Holder hereby is entitled, at any time, to exchange the
Units represented by this Unit Certificate for Common Stock Certificate(s)
representing two shares of Common Stock, for each Unit represented by this Unit
Certificate and one Warrant Certificate representing one Unit Warrant, for each
Unit represented by this Unit Certificate, upon surrender of this Unit
Certificate to the Transfer Agent and Registrar together with any documentation
required by such agent.
REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON THE FACE
HEREOF, AND THE PROVISIONS OF SUCH WARRANT AGREEMENT SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FACE OF THIS CERTIFICATE.
COPIES OF THE WARRANT AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE
TRANSFER AGENT AND REGISTRAR, AMERICAN STOCK TRANSFER & TRUST COMPANY.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _______ Custodian _______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors Act _______
survivorship and not as tenants in common (State)
</TABLE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY UPON ASSIGNMENT)
For value received, the undersigned Registered Holder
(__________________________) hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF REGISTERED HOLDER
- -------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS, INCLUDING ZIP CODE)
- -------------------------------
Units represented by the within Certificate, and do hereby irrevocably
constitute and appoint Attorney to transfer the said Units on the books of the
within named Company will full power of substitution in the premises.
Dated:
------------------------- ------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name of the Registered Holder as
specified upon the face of the Unit
Certificate in every particular,
without alteration or any change
whatever.
Signature(s) Guaranteed:
- --------------------------------------------------------------------------------
THE SIGNATURE(s) SHOULD BE GUARANTEED BY AN ELIGIBLE INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17AD-15.
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>5
<FILENAME>h13383a2exv4w3.txt
<DESCRIPTION>FORM OF WARRANT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 4.3
WARRANT AGREEMENT
BETWEEN
I-SECTOR CORPORATION
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
DATED AS OF MAY __, 2004
<PAGE>
WARRANT AGREEMENT
This Agreement, dated as of May __, 2004, is between I-Sector
Corporation, a Delaware corporation (the "Company") and American Stock Transfer
& Trust Company, a New York corporation (the "Warrant Agent").
RECITALS
A. The Company, at or about the time that it is entering into
this Agreement, proposes to issue and sell to public investors up to 575,000
Units (together with the additional units issuable as provided herein, the
"Units"). Each Unit consists of two shares of common stock, $0.01 par value, of
the Company (the "Common Stock") and one warrant (a "Warrant"). Each Warrant is
exercisable to purchase one share of Common Stock upon the terms and conditions
and subject to adjustment in certain circumstances, all as set forth in this
Agreement.
B. The Company proposes to issue to the Representative of the
Underwriters in the public offering of Units referred to above warrants to
purchase up to 50,000 additional Units.
C. The Company wishes to retain the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act, in connection
with the issuance, transfer, exchange and replacement of the certificates
evidencing the Warrants to be issued under this Agreement (the "Warrant
Certificates") and the exercise of the Warrants;
D. The Company and the Warrant Agent wish to enter into this
Agreement to set forth the terms and conditions of the Warrants and the rights
of the holders thereof ("Warrantholders") and to set forth the respective rights
and obligations of the Company and the Warrant Agent. Each Warrantholder is an
intended beneficiary of this Agreement with respect to the rights of
Warrantholders herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions in
this Agreement and the Warrant Agent accepts such appointment.
2. Date, Denomination and Execution of Warrant Certificates.
(a) The Warrant Certificates (and the Form of Election to
Purchase and the Form of Assignment to be printed on the reverse thereof) shall
be in registered form only and shall be substantially of the tenor and purport
recited in Exhibit A hereto, and may have such letters, numbers or other marks
of identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law, or with any rule or regulation made pursuant
thereto, or with any rule or regulation of any stock exchange on which the
Common Stock or the Warrants may be listed or
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any automated quotation system, or to conform to usage. Each Warrant Certificate
shall entitle the registered holder thereof, subject to the provisions of this
Agreement and of the Warrant Certificate, to purchase, on or after ____________,
2004 and on or before the close of business on _________, 2009 (the "Expiration
Date"), one fully paid and non-assessable share of Common Stock for each Warrant
evidenced by such Warrant Certificate for $_____. The exercise price of the
Warrants (the "Exercise Price") is subject to adjustments as provided in Section
6 hereof. Each Warrant Certificate issued as a part of a Unit offered to the
public as described in the recitals, above, shall be dated _____________, 2004;
each other Warrant Certificate shall be dated the date on which the Warrant
Agent receives valid issuance instructions from the Company or a transferring
holder of a Warrant Certificate or, if such instructions specify another date,
such other date.
(b) For purposes of this Agreement, the term "close of
business" on any given date shall mean 5:00 p.m., Eastern time, on such date;
provided, however, that if such date is not a business day, it shall mean 5:00
p.m., Eastern time, on the next succeeding business day. For purposes of this
Agreement, the term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in New York, New York or in the
State in which the Warrant Agent maintains the principal office in which it
conducts business related to the Warrants are authorized or obligated by law to
be closed.
(c) Each Warrant Certificate shall be executed on behalf
of the Company by the Chairman of the Board, is Chief Executive Officer, its
President or a Vice President, either manually or by facsimile signature printed
thereon, and have affixed thereto the Company's seal or a facsimile thereof
which shall be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. Each Warrant Certificate
shall be countersigned (either manually or by facsimile signature printed
thereon) by the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
Warrant Certificate shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issue and delivery thereof by the
Company, such Warrant Certificate, nevertheless, may be countersigned by the
Warrant Agent, issued and delivered with the same force and effect as though the
person who signed such Warrant Certificate had not ceased to be such officer of
the Company.
3. Subsequent Issue of Warrant Certificates. Subsequent to their
original issuance, no Warrant Certificates shall be reissued except (i) Warrant
Certificates issued upon transfer thereof in accordance with Section 4 hereof,
(ii) Warrant Certificates issued upon any combination, split-up or exchange of
Warrant Certificates pursuant to Section 4 hereof, (iii) Warrant Certificates
issued in replacement of mutilated, destroyed, lost or stolen Warrant
Certificates pursuant to Section 5 hereof, (iv) Warrant Certificates issued upon
the partial exercise of Warrant Certificates pursuant to Section 7 hereof, and
(v) Warrant Certificates issued to reflect any adjustment or change in the
Exercise Price or the number or kind of shares purchasable thereunder pursuant
to Section 22 hereof. The Warrant Agent is hereby irrevocably authorized to
countersign and deliver, in accordance with the provisions of said Sections 4,
5, 7 and 22, the new Warrant Certificates required for purposes thereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purposes.
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4. Transfers and Exchanges of Warrant Certificates.
(a) The Warrant Agent will keep or cause to be kept books
for registration of ownership and transfer of the Warrant Certificates issued
hereunder. Such registers shall show the names and addresses of the respective
holders of the Warrant Certificates and the kind and number of Warrants
evidenced by each such Warrant Certificate.
(b) The Warrant Agent shall, from time to time, register
the transfer of any outstanding Warrants upon the books to be maintained by the
Warrant Agent for that purpose, upon surrender of the Warrant Certificate
evidencing such Warrants, with the Form of Assignment duly filled in and
executed with such signature guaranteed by an eligible institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee medallion program pursuant to SEC Rule 17Ad-15)
or NASD member and such supporting documentation as the Warrant Agent or the
Company may reasonably require, to the Warrant Agent at its stock transfer
office in Manhattan, New York, at any time on or before the Expiration Date of
such Warrant, and upon payment to the Warrant Agent for the account of the
Company of an amount equal to any applicable transfer tax. Payment of the amount
of such tax may be made in cash, or by certified or official bank check, payable
in lawful money of the United States of America to the order of the Company.
(c) Upon receipt of a Warrant Certificate, with the Form
of Assignment duly filled in and executed, accompanied by payment of an amount
equal to any applicable transfer tax, the Warrant Agent shall promptly cancel
the surrendered Warrant Certificate and countersign and deliver to the
transferee a new Warrant Certificate for the number of full Warrants transferred
to such transferee; provided, however, that in case the registered holder of any
Warrant Certificate shall elect to transfer fewer than all of the Warrants
evidenced by such Warrant Certificate, the Warrant Agent in addition shall
promptly countersign and deliver to such registered holder a new Warrant
Certificate or Certificates for the number of full Warrants not so transferred.
(d) Any Warrant Certificate or Certificates may be
exchanged at the option of the holder thereof for another Warrant Certificate or
Certificates of different denominations, of like tenor and representing in the
aggregate the same kind and number of Warrants, upon surrender of such Warrant
Certificate or Certificates, with the Form of Assignment duly filled in and
executed, to the Warrant Agent, at any time or from time to time after the close
of business on the date hereof and prior to the close of business on the
Expiration Date relating to such Warrant. The Warrant Agent shall promptly
cancel the surrendered Warrant Certificate and deliver the new Warrant
Certificate pursuant to the provisions of this Section.
5. Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
Upon receipt by the Company and the Warrant Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of any
Warrant Certificate, and in the case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to them of all
reasonable expenses incidental thereto, and, in the case of mutilation, upon
surrender and cancellation of the Warrant Certificate, the Warrant Agent shall
countersign and deliver a new Warrant Certificate of like tenor for the same
kind and number of Warrants.
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6. Adjustments of Number and Kind of Shares Purchasable and
Exercise Price. The number and kind of securities or other property purchasable
upon exercise of a Warrant shall be subject to adjustment from time to time upon
the occurrence, after the date hereof, of any of the following events:
(a) In case the Company shall (1) pay a dividend in, or
make a distribution of, shares of capital stock on its outstanding Common Stock,
(2) subdivide its outstanding shares of Common Stock into a greater number of
such shares or (3) combine its outstanding shares of Common Stock into a smaller
number of such shares, the total number of shares of Common Stock purchasable
upon the exercise of each Warrant outstanding immediately prior thereto shall be
adjusted so that the holder of any Warrant Certificate thereafter surrendered
for exercise shall be entitled to receive at the same aggregate Exercise Price
the number of shares of capital stock (of one or more classes) which such holder
would have owned or have been entitled to receive immediately following the
happening of any of the events described above had such Warrant been exercised
in full immediately prior to the record date with respect to such event. Any
adjustment made pursuant to this Subsection shall, in the case of a stock
dividend or distribution, become effective as of the record date therefor and,
in the case of a subdivision or combination, be made as of the effective date
thereof. If, as a result of an adjustment made pursuant to this Subsection, the
holder of any Warrant Certificate thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive and shall be evidenced by a Board resolution filed with the Warrant
Agent) shall determine the allocation of the adjusted Exercise Price between or
among shares of such classes of capital stock.
(b) In the event of a capital reorganization or a
reclassification of the Common Stock (except as provided in Subsection (a) above
or Subsection (d) below), any Warrantholder, upon exercise of Warrants, shall be
entitled to receive, in substitution for the Common Stock to which he would have
become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of the Company (or cash) that he would have been entitled to receive at
the same aggregate Exercise Price upon such reorganization or reclassification
if such Warrants had been exercised immediately prior to the record date with
respect to such event; and in any such case, appropriate provision (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and shall be evidenced by a certified Board resolution filed with
the Warrant Agent) shall be made for the application of this Section 6 with
respect to the rights and interests thereafter of the Warrantholders (including
but not limited to the allocation of the Exercise Price between or among shares
of classes of capital stock), to the end that this Section 6 (including the
adjustments of the number of shares of Common Stock or other securities
purchasable and the Exercise Price thereof) shall thereafter be reflected, as
nearly as reasonably practicable, in all subsequent exercises of the Warrants
for any shares or securities or other property (or cash) thereafter deliverable
upon the exercise of the Warrants.
(c) Whenever the number of shares of Common Stock or
other securities purchasable upon exercise of a Warrant is adjusted as provided
in this Section 6, the Company will promptly file with the Warrant Agent a
certificate signed by a Chairman or co-Chairman of the Board or the President or
a Vice President of the Company and by the Treasurer or Chief Financial Officer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of the
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Company setting forth the number and kind of securities or other property
purchasable upon exercise of a Warrant, as so adjusted, stating that such
adjustments in the number or kind of shares or other securities or property
conform to the requirements of this Section 6, and setting forth a brief
statement of the facts accounting for such adjustments. Promptly after receipt
of such certificate, the Company, or the Warrant Agent at the Company's request,
will deliver, by first-class, postage prepaid mail, a brief summary thereof (to
be supplied by the Company) to the registered holders of the outstanding Warrant
Certificates; provided, however, that failure to file or to give any notice
required under this Subsection, or any defect therein, shall not affect the
legality or validity of any such adjustments under this Section 6; and provided,
further, that, where appropriate, such notice may be given in advance and
included as part of the notice required to be given pursuant to Section 12
hereof.
(d) In case of any consolidation of the Company with, or
merger of the Company into, another corporation (other than a consolidation or
merger which does not result in any reclassification or change of the
outstanding Common Stock), or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the corporation formed by such consolidation or merger or the
corporation which shall have acquired such assets, as the case may be, shall
execute and deliver to the Warrant Agent a supplemental warrant agreement
providing that the holder of each Warrant then outstanding shall have the right
thereafter (until the expiration of such Warrant) to receive, upon exercise of
such Warrant, solely the kind and amount of shares of stock and other securities
and property (or cash) receivable upon such consolidation, merger, sale or
transfer by a holder of the number of shares of Common Stock of the Company for
which such Warrant might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such supplemental warrant agreement
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided in this Section. The above provision of
this Subsection shall similarly apply to successive consolidations, mergers,
sales or transfers.
The Warrant Agent shall not be under any responsibility to determine
the correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Warrant Certificates upon the
exercise of their Warrants after any such consolidation, merger, sale or
transfer or of any adjustment to be made with respect thereto, but subject to
the provisions of Section 20 hereof, may accept as conclusive evidence of the
correctness of any such provisions, and shall be protected in relying upon, a
certificate of a firm of independent certified public accountants (who may be
the accountants regularly employed by the Company) with respect thereto.
(e) Irrespective of any adjustments in the number or kind
of shares issuable upon exercise of Warrants, Warrant Certificates theretofore
or thereafter issued may continue to express the same price and number and kind
of shares as are stated in the similar Warrant Certificates initially issuable
pursuant to this Warrant Agreement.
(f) The Company may retain a firm of independent public
accountants of recognized standing, which may be the firm regularly retained by
the Company, selected by the Board of Directors of the Company or the Executive
Committee of said Board, and not disapproved by the Warrant Agent, to make any
computation required under this Section, and a
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certificate signed by such firm shall, in the absence of fraud or gross
negligence, be conclusive evidence of the correctness of any computation made
under this Section.
(g) For the purpose of this Section, the term "Common
Stock" shall mean (i) the Common Stock or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time as a result of an
adjustment made pursuant to this Section, the holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of capital
stock of the Company other than shares of Common Stock, thereafter the number of
such other shares so receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in this
Section, and all other provisions of this Agreement, with respect to the Common
Stock, shall apply on like terms to any such other shares.
(h) The Company may, from time to time and to the extent
permitted by law, reduce the Exercise Price of the Warrants by any amount for a
period of not less than 20 days. If the Company so reduces the Exercise Price of
such Warrants, it will give not less than 15 days' notice of such decrease,
which notice may be in the form of a press release, and shall take such other
steps as may be required under applicable law in connection with any offers or
sales of securities at the reduced price.
7. Exercise and Redemption of Warrants. Unless the Warrants have
been redeemed as provided in this Section 7, the registered holder of any
Warrant Certificate may exercise the Warrants evidenced thereby, in whole at any
time or in part from time to time at or prior to the close of business, on the
Expiration Date relating to such Warrant, subject to the provisions of Section
8, at which time the Warrant Certificates shall be and become wholly void and of
no value. Warrants may be exercised by their holders or redeemed by the Company
as follows:
(a) Exercise of Warrants shall be accomplished upon
surrender of the Warrant Certificate evidencing such Warrants, with the Form of
Election to Purchase on the reverse side thereof duly filled in and executed, to
the Warrant Agent at its stock transfer office in Manhattan, New York, together
with payment to the Company of the Exercise Price (as of the date of such
surrender) of the Warrants then being exercised and an amount equal to any
applicable transfer tax and, if requested by the Company, any other taxes or
governmental charges which the Company may be required by law to collect in
respect of such exercise. Payment of the Exercise Price and other amounts may be
made by wire transfer of good funds, or by certified or bank cashier's check,
payable in lawful money of the United States of America to the order of the
Company. No adjustment shall be made for any cash dividends, whether paid or
declared, on any securities issuable upon exercise of a Warrant.
(b) Upon receipt of a Warrant Certificate, with the Form
of Election to Purchase duly filled in and executed, accompanied by payment of
the Exercise Price of the Warrants being exercised (and of an amount equal to
any applicable taxes or government charges as aforesaid), the Warrant Agent
shall promptly request from the Transfer Agent with respect to the securities to
be issued and deliver to or upon the order of the registered holder of such
Warrant Certificate, in such name or names as such registered holder may
designate, a certificate
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or certificates for the number of full shares of the securities to be purchased,
together with cash made available by the Company pursuant to Section 8 hereof in
respect of any fraction of a share of such securities otherwise issuable upon
such exercise. If the Warrant is then exercisable to purchase property other
than securities, the Warrant Agent shall take appropriate steps to cause such
property to be delivered to or upon the order of the registered holder of such
Warrant Certificate. In addition, if it is required by law and upon instruction
by the Company, the Warrant Agent will deliver to each Warrantholder a
prospectus which complies with the provisions of Section 10 of the Securities
Act of 1933 and the Company agrees to supply Warrant Agent with sufficient
number of prospectuses to effectuate that purpose.
(c) In case the registered holder of any Warrant
Certificate shall exercise fewer than all of the Warrants evidenced by such
Warrant Certificate, the Warrant Agent shall promptly countersign and deliver to
the registered holder of such Warrant Certificate, or to his duly authorized
assigns, a new Warrant Certificate or Certificates evidencing the number of
Warrants that were not so exercised.
(d) Each person in whose name any certificate for
securities is issued upon the exercise of Warrants shall for all purposes be
deemed to have become the holder of record of the securities represented thereby
as of, and such certificate shall be dated, the date upon which the Warrant
Certificate was duly surrendered in proper form and payment of the Exercise
Price (and of any applicable taxes or other governmental charges) was made;
provided, however, that if the date of such surrender and payment is a date on
which the stock transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares as of, and the
certificate for such shares shall be dated, the next succeeding business day on
which the stock transfer books of the Company are open (whether before, on or
after the Expiration Date relating to such Warrant) and the Warrant Agent shall
be under no duty to deliver the certificate for such shares until such date. The
Company covenants and agrees that it shall not cause its stock transfer books to
be closed for a period of more than 20 consecutive business days except upon
consolidation, merger, sale of all or substantially all of its assets,
dissolution or liquidation or as otherwise provided by law.
(e) At any time after the date that is 180 days after the
date of this Warrant Agreement, the Warrants outstanding at the time of a
redemption may be redeemed at the option of the Company, in whole or in part on
a pro-rata basis, by giving not less than 30 days prior notice as provided in
Section 7(f) below, which notice may not be given before, but may be given at
any time after, the last reported sale price of the Common Stock on the
principal exchange on which it is then traded has equaled or exceeded $______
per share on each of five consecutive trading days. The price at which Warrants
may be redeemed (the "Redemption Price") is $0.25 per Warrant. On and after the
redemption date the holders of record of redeemed Warrants shall be entitled to
payment of the Redemption Price upon surrender of such redeemed Warrants to the
Company at the office of the Warrant Agent designated for that purpose.
(f) Notice of redemption of Warrants shall be given at
least 30 days prior to the redemption date by mailing by first class mail,
postage prepaid, a copy of such notice to the Warrant Agent and to all of the
holders of record of Warrants at their respective addresses appearing on the
books or transfer records of the Company or such other address designated in
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writing by the holder of record to the Warrant Agent not less than 40 days prior
to the redemption date.
(g) From and after the redemption date, all rights of the
Warrantholders (except the right to receive the Redemption Price) shall
terminate, but only if (i) no later than one day prior to the redemption date
the Company shall have irrevocably deposited with the Warrant Agent as paying
agent a sufficient amount to pay on the redemption date the Redemption Price for
all Warrants called for redemption and (ii) the notice of redemption shall have
stated the name and address of the Warrant Agent and the intention of the
Company to deposit such amount with the Warrant Agent no later than one day
prior to the redemption date.
(h) On the Redemption Date, the Warrant Agent shall pay
to the holders of record of redeemed Warrants all monies received by the Warrant
Agent for the redemption of Warrants to which the holders of record of such
redeemed Warrants who shall have surrendered their Warrants are entitled. The
Warrant Agent shall have no obligation to pay for the redemption of the warrants
except to the extent that funds for such payment have been provided to it by the
Company.
(i) Any amounts deposited with the Warrant Agent that are
not required for redemption of Warrants may be withdrawn by the Company. Any
amounts deposited with the Warrant Agent that shall be unclaimed after six
months after the redemption date shall be redelivered back to the Company, and
thereafter the holders of the Warrants called for redemption for which such
funds were deposited shall look solely to the Company for payment. The Company
shall be entitled to the interest, if any, on funds deposited with the Warrant
Agent and the holders of redeemed Warrants shall have no right to any such
interest. At the instruction of the Company, the Warrant agent shall deposit or
invest any and all funds deposited with it by the Company in connection with any
redemption in interest bearing accounts with a financial institution or
institutions typically used by the Warrant Agent for such purpose, and the
Warrant Agent shall have no liability with respect to the performance of any
such investments other than, in the case of funds deposited in accounts
maintained by the Warrant Agent, the liability of the Warrant Agent to its
depositors in such accounts, generally.
(j) If the Company fails to make a sufficient deposit
with the Warrant Agent as provided above, the holder of any Warrants called for
redemption may at the option of the holder, and as such holder's exclusive
remedy, either (i) by notice to the Company declare the notice of redemption a
nullity as to such holder, or (ii) maintain an action against the Company for
the Redemption Price. If the holder brings such an action, the Company will pay
reasonable attorneys' fees of the holder. If the holder fails to bring an action
against the Company for the Redemption Price within 60 days after the redemption
date, the holder shall be deemed to have elected to declare the notice of
redemption to be a nullity as to such holder and such notice shall be without
any force or effect as to such holder. Except as otherwise specifically provided
in this Section 7(j), a notice of redemption, once mailed by the Company as
provided in Section 7(f) shall be irrevocable.
8. Fractional Interests. The Company shall not be required to
issue any Warrant Certificate evidencing a fraction of a Warrant or to issue
fractions of shares of securities on the exercise of the Warrants. If any
fraction (calculated to the nearest one-hundredth) of a Warrant
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or a share of securities would, except for the provisions of this Section, be
issuable on the exercise of any Warrant, the Company shall, at its option,
either purchase such fraction for an amount in cash equal to the current value
of such fraction computed on the basis of the closing market price (as quoted on
the principal exchange on which the Common Stock is traded) on the trading day
immediately preceding the day upon which such Warrant Certificate was
surrendered for exercise in accordance with Section 7 hereof or issue the
required fractional Warrant or share. By accepting a Warrant Certificate, the
holder thereof expressly waives any right to receive a Warrant Certificate
evidencing any fraction of a Warrant or to receive any fractional share of
securities upon exercise of a Warrant, except as expressly provided in this
Section 8.
9. Reservation of Equity Securities. The Company covenants that
it will at all times reserve and keep available, free from any pre-emptive
rights, out of its authorized and unissued equity securities, solely for the
purpose of issue upon exercise of the Warrants, such number of shares of equity
securities of the Company as shall then be issuable upon the exercise of all
outstanding Warrants ("Equity Securities"). The Company covenants that all
Equity Securities which shall be so issuable shall, upon such issue, be duly
authorized, validly issued, fully paid and non-assessable.
The Company covenants that if any equity securities, required to be
reserved for the purpose of issue upon exercise of the Warrants hereunder,
require registration with or approval of any governmental authority under any
federal or state law before such shares may be issued upon exercise of Warrants,
the Company will use all commercially reasonable efforts to cause such
securities to be duly registered, or approved, as the case may be, and, to the
extent practicable, take all such action in anticipation of and prior to the
exercise of the Warrants, including, without limitation, filing or maintaining
an appropriate registration statement, necessary to permit a public offering of
the securities underlying the Warrants at any and all times during the term of
this Agreement, provided, however, that in no event shall such securities be
issued, and the Company is authorized to refuse to honor the exercise of any
Warrant, if such exercise would result in the opinion of the Company's Board of
Directors, upon advice of counsel, in the violation of any law; and provided
further that, in the case of a Warrant exercisable solely for securities listed
on a securities exchange or for which there are at least three independent
market makers, in lieu of obtaining such registration or approval, the Company
may elect to redeem Warrants submitted to the Warrant Agent for exercise for a
price equal to the difference between the aggregate low asked price, or closing
price, as the case may be, of the securities for which such Warrant is
exercisable on the date of such submission and the Exercise Price of such
Warrants; in the event of such redemption, the Company will pay to the holder of
such Warrants the above-described redemption price in cash within 10 business
days after receipt of notice from the Warrant Agent that such Warrants have been
submitted for exercise.
10. Reduction of Conversion Price Below Par Value. Before taking
any action that would cause an adjustment pursuant to Section 6 hereof reducing
the portion of the Exercise Price required to purchase one share of capital
stock below the then par value (if any) of a share of such capital stock, the
Company will use its best efforts to take any corporate action which, in the
opinion of its counsel, may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such capital stock.
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11. Payment of Taxes. The Company covenants and agrees that it
will pay when due and payable any and all federal and state documentary stamp
and other original issue taxes which may be payable in respect of the original
issuance of the Warrant Certificates, or any shares of Common Stock or other
securities upon the exercise of Warrants. The Company shall not, however, be
required (a) to pay any tax which may be payable in respect of any transfer
involved in the transfer and delivery of Warrant Certificates or the issuance or
delivery of certificates for Common Stock or other securities in a name other
than that of the registered holder of the Warrant Certificate surrendered for
purchase or (b) to issue or deliver any certificate for shares of Common Stock
or other securities upon the exercise of any Warrant Certificate until any such
tax shall have been paid, all such tax being payable by the holder of such
Warrant Certificate at the time of surrender.
12. Notice of Certain Corporate Action. In case the Company after
the date hereof shall propose (a) to offer to the holders of Common Stock,
generally, rights to subscribe to or purchase any additional shares of any class
of its capital stock, any evidences of its indebtedness or assets, or any other
rights or options or (b) to effect any reclassification of Common Stock (other
than a reclassification involving merely the subdivision or combination of
outstanding shares of Common Stock) or any capital reorganization, or any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company is required, or any sale, transfer or other
disposition of its property and assets substantially as an entirety, or the
liquidation, voluntary or involuntary dissolution or winding-up of the Company,
then, in each such case, the Company shall file with the Warrant Agent and the
Company, or the Warrant Agent on its behalf, shall mail (by first-class, postage
prepaid mail) to all registered holders of the Warrant Certificates notice of
such proposed action, which notice shall specify the date on which the books of
the Company shall close or a record be taken for such offer of rights or
options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up shall take place or commence, as the
case may be, and which shall also specify any record date for determination of
holders of Common Stock entitled to vote thereon or participate therein and
shall set forth such facts with respect thereto as shall be reasonably necessary
to indicate any adjustments in the Exercise Price and the number or kind of
shares or other securities purchasable upon exercise of Warrants which will be
required as a result of such action. Such notice shall be filed and mailed in
the case of any action covered by clause (a) above, at least ten days prior to
the record date for determining holders of the Common Stock for purposes of such
action or, if a record is not to be taken, the date as of which the holders of
shares of Common Stock of record are to be entitled to such offering; and, in
the case of any action covered by clause (b) above, at least 20 days prior to
the earlier of the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up is expected to become effective and the
date on which it is expected that holders of shares of Common Stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up.
Failure to give any such notice or any defect therein shall not affect
the legality or validity of any transaction listed in this Section 12.
10
<PAGE>
13. Disposition of Proceeds on Exercise of Warrant Certificates,
etc. The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all moneys received by
the Warrant Agent for the purchase of securities or other property through the
exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement available for
inspection by Warrantholders during normal business hours at its stock transfer
office. Copies of this Agreement may be obtained upon written request addressed
to the Warrant Agent at its stock transfer office in Manhattan, New York.
14. Warrantholder Not Deemed a Stockholder. No Warrantholder, as
such, shall be entitled to vote, receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Warrants represented thereby for any purpose
whatever, nor shall anything contained herein or in any Warrant Certificate be
construed to confer upon any Warrantholder, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance or otherwise), or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 12 hereof), or to receive dividend or subscription rights,
or otherwise, until such Warrant Certificate shall have been exercised in
accordance with the provisions hereof and the receipt of the Exercise Price and
any other amounts payable upon such exercise by the Warrant Agent.
15. Right of Action. All rights of action in respect to this
Agreement are vested in the respective registered holders of the Warrant
Certificates; and any registered holder of any Warrant Certificate, without the
consent of the Warrant Agent or of any other holder of a Warrant Certificate,
may, in his own behalf for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
or otherwise in respect of, his right to exercise the Warrants evidenced by such
Warrant Certificate, for the purchase of shares of the Common Stock in the
manner provided in the Warrant Certificate and in this Agreement.
16. Agreement of Holders of Warrant Certificates. Every holder of
a Warrant Certificate by accepting the same consents and agrees with the
Company, the Warrant Agent and with every other holder of a Warrant Certificate
that:
(a) the Warrant Certificates are transferable on the
registry books of the Warrant Agent only upon the terms and conditions set forth
in this Agreement; and
(b) the Company and the Warrant Agent may deem and treat
the person in whose name the Warrant Certificate is registered as the absolute
owner of the Warrant (notwithstanding any notation of ownership or other writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes whatever and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
11
<PAGE>
17. Cancellation of Warrant Certificates. In the event that the
Company shall purchase or otherwise acquire any Warrant Certificate or
Certificates after the issuance thereof, such Warrant Certificate or
Certificates shall thereupon be delivered to the Warrant Agent and be canceled
by it and retired. The Warrant Agent shall also cancel any Warrant Certificate
delivered to it for exercise, in whole or in part, or delivered to it for
transfer, split-up, combination or exchange. Warrant Certificates so canceled
shall be retained by the Warrant Agent as required by law.
18. Concerning the Warrant Agent. The Company agrees to pay to the
Warrant Agent from time to time, on demand of the Warrant Agent, reasonable
compensation for all services rendered by it hereunder and also its reasonable
expenses, including counsel fees, and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Warrant Agent
for, and to hold it harmless against, any loss, liability or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Warrant Agent, arising out of or in connection with the acceptance and
administration of this Agreement.
19. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 21 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrant Certificates shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name; and in all such cases such Warrant Certificates shall have the
full force provided in the Warrant Certificates and in this Agreement.
20. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrant Certificates,
by their acceptance thereof, shall be bound:
12
<PAGE>
(a) The Warrant Agent may consult with counsel
satisfactory to it (who may be counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to the Warrant
Agent as to any action taken, suffered or omitted by it in good faith and in
accordance with such opinion; provided, however, that the Warrant Agent shall
have exercised reasonable care in the selection of such counsel. Fees and
expenses of such counsel, to the extent reasonable, shall be paid by the
Company.
(b) Whenever in the performance of its duties under this
Agreement, the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a Chairman or co-Chairman of
the Board, the Chief Executive Officer, the President or a Vice President or the
Secretary of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Warrant Agent shall be liable hereunder only for
its own gross negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Warrant Certificates (except its countersignature on the Warrant
Certificates and such statements or recitals as describe the Warrant Agent or
action taken or to be taken by it) or be required to verify the same, but all
such statements and recitals are and shall be deemed to have been made by the
Company only.
(e) The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Warrant Agent) or in
respect of the validity or execution of any Warrant Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Warrant Certificate; nor shall it be responsible for the making of any change in
the number of shares of Common Stock for which a Warrant is exercisable required
under the provisions of Section 6 or responsible for the manner, method or
amount of any such change or the ascertaining of the existence of facts that
would require any such adjustment or change (except with respect to the exercise
of Warrant Certificates after actual notice of any adjustment of the Exercise
Price); nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of Common Stock
to be issued pursuant to this Agreement or any Warrant Certificate or as to
whether any shares of Common Stock will, when issued, be validly issued, fully
paid and non-assessable.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or take any other action likely
to involve expense unless the Company or one or more registered holders of
Warrant Certificates shall furnish the Warrant Agent with reasonable security
and indemnity for any costs and expenses which may be incurred. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or
13
<PAGE>
other proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the registered
holders of the Warrant Certificates, as their respective rights or interests may
appear.
(g) The Warrant Agent and any stockholder, director,
officer or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties hereunder
from a Chairman or co-Chairman of the Board, the President, the Chief Financial
Officer, a Vice President or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with the Warrant Agent's
duties, and it shall not be liable for any action taken or suffered or omitted
by it in good faith in accordance with instructions of any such officer.
(i) The Warrant Agent will not be responsible for any
failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrant Certificates to be complied with by the Company.
(j) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees and the Warrant Agent shall
not be answerable or accountable for any act, default, neglect or misconduct of
any such attorneys, agents or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, however, that reasonable care shall
have been exercised in the selection and continued employment of such attorneys,
agents and employees.
(k) The Warrant Agent will not incur any liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken, or any failure to take action, in reliance on any notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument reasonably believed by the Warrant Agent to be genuine and to have
been signed, sent or presented by the proper party or parties.
(l) The Warrant Agent will act hereunder solely as agent
of the Company in a ministerial capacity, and its duties will be determined
solely by the provisions hereof. The Warrant Agent will not be liable for
anything which it may do or refrain from doing in connection with this Agreement
except for its own gross negligence, bad faith or willful conduct.
21. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement upon 30 days' prior notice in
writing mailed, by registered or certified mail, to the Company. The Company may
remove the Warrant Agent or any successor warrant agent upon 30 days' prior
notice in writing, mailed to the Warrant Agent or successor warrant agent, as
the case may be, by registered or certified mail. If the Warrant Agent
14
<PAGE>
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent and shall, within 15 days
following such appointment, give notice thereof in writing to each registered
holder of the Warrant Certificates. If the Company shall fail to make such
appointment within a period of 15 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent, then the Company agrees to perform the
duties of the Warrant Agent hereunder until a successor Warrant Agent is
appointed. After appointment and execution of a copy of this Agreement in effect
at that time, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent, within a reasonable time,
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in this Section, however, or any defect therein
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case may
be.
22. Issuance of New Warrant Certificates. Notwithstanding any of
the provisions of this Agreement or the several Warrant Certificates to the
contrary, the Company may, at its option, issue new Warrant Certificates in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price or the number or kind of shares purchasable under
the several Warrant Certificates made in accordance with the provisions of this
Agreement.
23. Notices. Notice or demand pursuant to this Agreement to be
given or made on the Company by the Warrant Agent or by the registered holder of
any Warrant Certificate shall be sufficiently given or made if sent by
first-class or registered mail, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
I-Sector Corporation
6401 Southwest Freeway
Houston, TX 77074
Attention: Chief Financial Officer
Subject to the provisions of Section 21, any notice pursuant to this
Agreement to be given or made by the Company or by the holder of any Warrant
Certificate to or on the Warrant Agent shall be sufficiently given or made if
sent by first-class or registered mail, postage prepaid, addressed (until
another address is filed in writing by the Warrant Agent with the Company) as
follows:
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, NY 10038
Attention: Executive Vice President
Any notice or demand authorized to be given or made to the registered
holder of any Warrant Certificate under this Agreement shall be sufficiently
given or made if sent by first-class
15
<PAGE>
or registered mail, postage prepaid, to the last address of such holder as it
shall appear on the registers maintained by the Warrant Agent.
24. Modification of Agreement. The Warrant Agent may, without the
consent or concurrence of the Warrantholders, by supplemental agreement or
otherwise, concur with the Company in making any changes or corrections in this
Agreement that the Warrant Agent shall have been advised by counsel (who may be
counsel for the Company) are necessary or desirable to cure any ambiguity or to
correct any defective or inconsistent provision or clerical omission or mistake
or manifest error herein contained, or to make any other provisions in regard to
matters or questions arising hereunder and which shall not be inconsistent with
the provisions of the Warrant Certificates and which shall not materially and
adversely affect the interests of the Warrantholders. As of the date hereof,
this Agreement contains the entire and only agreement, understanding,
representation, condition, warranty or covenant between the parties hereto with
respect to the matters herein, supersedes any and all other agreements between
the parties hereto relating to such matters, and may be modified or amended only
by a written agreement signed by both parties hereto pursuant to the authority
granted by the first sentence of this Section.
25. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
26. Delaware Contract. This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be construed in accordance with the
laws of said State.
27. Termination. This Agreement shall terminate as of the close of
business on the Expiration Date, or such earlier date upon which all Warrants
shall have been exercised or redeemed, except that the Warrant Agent shall
account to the Company as to all Warrants outstanding and all cash held by it as
of the close of business on the Expiration Date.
28. Benefits of this Agreement. Nothing in this Agreement or in
the Warrant Certificates shall be construed to give to any person or corporation
other than the Company, the Warrant Agent, and their respective successors and
assigns hereunder and the registered holders of the Warrant Certificates any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent, their respective successors and assigns hereunder and the
registered holders of the Warrant Certificates.
29. Descriptive Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
30. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
I-SECTOR CORPORATION
By: _____________________________________
Name:
Title:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: _____________________________________
Name:
Title:
17
<PAGE>
EXHIBIT A
VOID AFTER 5 P.M. PACIFIC TIME ON _________________, 2009
WARRANTS TO PURCHASE COMMON STOCK
W_____ _________ Warrants
I-SECTOR CORPORATION
(a Delaware corporation)
CUSIP 45031W 11 5
THIS CERTIFIES THAT
or registered assigns, is the registered holder of the number of Warrants
("Warrants") set forth above. Each Warrant, unless and until redeemed by the
Company as provided in the Warrant Agreement, hereinafter more fully described
(the "Warrant Agreement") entitles the holder thereof to purchase from I-Sector
Corporation, a corporation incorporated under the laws of the State of Delaware
("Company"), subject to the terms and conditions set forth hereinafter and in
the Warrant Agreement, at any time on or after ___________, 2004 and before the
close of business on ________, 2009 ("Expiration Date"), one fully paid and
non-assessable share of Common Stock of the Company ("Common Stock") upon
presentation and surrender of this Warrant Certificate, with the instructions
for the registration and delivery of Common Stock filled in, at the stock
transfer office in Manhattan, New York, of American Stock Transfer & Trust
Company, Warrant Agent of the Company ("Warrant Agent") or of its successor
warrant agent or, if there be no successor warrant agent, at the corporate
offices of the Company, and upon payment of the Exercise Price (as defined in
the Warrant Agreement) and any applicable taxes paid either in cash, or by
certified or official bank check, payable in lawful money of the United States
of America to the order of the Company. Each Warrant initially entitles the
holder to purchase one share of Common Stock for $____. The number and kind of
securities or other property for which the Warrants are exercisable are subject
to adjustment in certain events, such as mergers, splits, stock dividends,
splits and the like, to prevent dilution. The Company may redeem any or all
outstanding and unexercised warrants by giving not less than 30 days prior
notice at any time after _____________, _____ and after the closing price of the
Common Stock on the principal exchange on which it is traded has equaled or
exceeded $______ per share on each of five consecutive trading days. The
Redemption Price is $0.25 per Warrant. All Warrants not theretofore exercised
will expire on the Expiration Date.
1
<PAGE>
This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, dated as of ________________, 2004, between
the Company and the Warrant Agent, to all of which terms, provisions and
conditions the registered holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is incorporated herein by reference and
made a part hereof and reference is made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities of the Warrant Agent, the Company and the holders of the Warrant
Certificates. Copies of the Warrant Agreement are available for inspection at
the stock transfer office of the Warrant Agent or may be obtained upon written
request addressed to the Company at I-Sector Corporation, 6401 Southwest
Freeway, Houston, TX 77074, Attention: Chief Financial Officer.
The Company shall not be required upon the exercise of the Warrants
evidenced by this Warrant Certificate to issue fractions of Warrants, Common
Stock or other securities, but shall make adjustment therefor in cash on the
basis of the current market value of any fractional interest as provided in the
Warrant Agreement.
In certain cases, the sale of securities by the Company upon exercise
of Warrants would violate the securities laws of the United States, certain
states thereof or other jurisdictions. The Company has agreed to use all
commercially reasonable efforts to cause a registration statement to continue to
be effective during the term of the Warrants with respect to such sales under
the Securities Act of 1933, and to take such action under the laws of various
states as may be required to cause the sale of securities upon exercise to be
lawful. However, the Company will not be required to honor the exercise of
Warrants if, in the opinion of the Board of Directors, upon advice of counsel,
the sale of securities upon such exercise would be unlawful. In certain cases,
the Company may, but is not required to, purchase Warrants submitted for
exercise for a cash price equal to the difference between the market price of
the securities obtainable upon such exercise and the exercise price of such
Warrants.
This Warrant Certificate, with or without other Certificates, upon
surrender to the Warrant Agent, any successor warrant agent or, in the absence
of any successor warrant agent, at the corporate offices of the Company, may be
exchanged for another Warrant Certificate or Certificates evidencing in the
aggregate the same number of Warrants as the Warrant Certificate or Certificates
so surrendered. If the Warrants evidenced by this Warrant Certificate shall be
exercised in part, the holder hereof shall be entitled to receive upon surrender
hereof another Warrant Certificate or Certificates evidencing the number of
Warrants not so exercised.
No holder of this Warrant Certificate, as such, shall be entitled to
vote, receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose whatever, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder of this Warrant
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof or give or withhold consent to any corporate
action (whether upon any matter submitted to stockholders at any meeting
thereof, or give or withhold consent to any merger, recapitalization, issuance
of stock, reclassification of stock, change of par value or change of stock to
no par value, consolidation, conveyance or otherwise) or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Warrant Agreement) or to receive
2
<PAGE>
dividends or subscription rights or otherwise until the Warrants evidenced by
this Warrant Certificate shall have been exercised and the Common Stock
purchasable upon the exercise thereof shall have become deliverable as provided
in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Company's Common Stock or
other class of stock purchasable upon the exercise of the Warrants evidenced by
this Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:
(a) this Warrant Certificate is transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in the Warrant
Agreement, and
(b) the Company and the Warrant Agent may deem and treat the person in
whose name this Warrant Certificate is registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes whatever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary. The Company shall not be required to issue or deliver any
certificate for shares of Common Stock or other securities upon the exercise of
Warrants evidenced by this Warrant Certificate until any tax which may be
payable in respect thereof by the holder of this Warrant Certificate pursuant to
the Warrant Agreement shall have been paid, such tax being payable by the holder
of this Warrant Certificate at the time of surrender.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
(Remainder of page intentionally left blank; signature page follows)
3
<PAGE>
WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal.
Dated: _______________
I-SECTOR CORPORATION
By: _____________________________________
Name:
Title: Chief Executive Officer
Attest: _________________________________
Secretary
Countersigned:
By: ______________________________________
Authorized Officer
4
<PAGE>
[TO BE PRINTED ON BACK OF CERTIFICATE]
FORM OF ELECTION TO PURCHASE
The undersigned holder hereby exercises the right to purchase _________________
of the shares of common stock (the "Warrant Shares") of I-SECTOR CORPORATION, a
Delaware corporation (the "Company"), evidenced by the attached Warrant (the
"Warrant"). Capitalized terms used herein and not otherwise defined have the
respective meanings set forth in the Warrant.
1. Payment of Warrant Exercise Price. The holder has paid in
connection with this exercise the sum of $______ to the Company in accordance
with the terms of the Warrant.
2. Delivery of Warrant Shares. The Company shall deliver to the
holder __________ Warrant Shares in accordance with the terms of the Warrant.
Dated: _____________ __, ______
_________________________________________
(Name of Registered Holder)
By: ________________________________
Name:
Title:
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the common stock of I-SECTOR CORPORATION, a Delaware
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: _____________ __, ______
_________________________________________
(Name of Registered Holder)
By: ________________________________
Name:
Title:
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>6
<FILENAME>h13383a2exv4w4.txt
<DESCRIPTION>FORM OF REPRESENTATIVE'S WARRANT
<TEXT>
<PAGE>
EXHIBIT 4.4
THIS WARRANT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
AND IS NOT TRANSFERABLE
EXCEPT AS PROVIDED HEREIN
I-SECTOR CORPORATION
PURCHASE WARRANT
Issued to:
PAULSON INVESTMENT COMPANY, INC.
Exercisable to Purchase
50,000 Units
of
I-SECTOR CORPORATION
Void after ____________, 2009
1
<PAGE>
This is to certify that, for value received and subject to the terms
and conditions set forth below, the Warrantholder (hereinafter defined) is
entitled to purchase, and the Company promises and agrees to sell and issue to
the Warrantholder, at any time on or after ______________, 2005 and on or before
_____________, 2009, up to ____ Units (hereinafter defined) at the Exercise
Price (hereinafter defined).
This Warrant Certificate is issued subject to the following terms and
conditions:
1. Definitions of Certain Terms. Except as may be otherwise
clearly required by the context, the following terms have the following
meanings:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Cashless Exercise" means an exercise of Warrants in
which, in lieu of payment of the Exercise Price, the Holder elects to receive a
lesser number of Securities such that the value of the Securities that such
Holder would otherwise have been entitled to receive but has agreed not to
receive, as determined by the closing price of such Securities on the date of
exercise or, if such date is not a trading day, on the next prior trading day,
is equal to the Exercise Price with respect to such exercise. A Holder may only
elect a Cashless Exercise if Securities issuable by the Company on such exercise
are publicly traded securities.
(c) "Closing Date" means the date on which the Offering
is closed.
(d) "Commission" means the Securities and Exchange
Commission.
(e) "Common Stock" means the common stock, par value
$0.01, of the Company.
(f) "Company" means I-Sector Corporation, a Delaware
corporation.
(g) "Company's Expenses" means any and all expenses
payable by the Company or the Warrantholder in connection with an offering
described in Section 6 hereof, except Warrantholder's Expenses.
(h) "Effective Date" means the date on which the
Registration Statement is declared effective by the Commission.
(i) "Exercise Price" means the price at which the
Warrantholder may purchase one Unit upon exercise of Warrants as determined from
time to time pursuant to the provisions hereof. The initial Exercise Price is
$________ per Unit.
(j) "Offering" means the public offering of Units made
pursuant to the Registration Statement.
(k) "Participating Underwriter" means any underwriter
participating in the sale of the Securities pursuant to a registration under
Section 6 of this Warrant Certificate.
1
<PAGE>
(l) "Registration Statement" means the Company's
registration statement (File No. 333 -113575) as amended on the Closing Date.
(m) "Rules and Regulations" means the rules and
regulations of the Commission adopted under the Act.
(n) "Securities" means the securities obtained or
obtainable upon exercise of the Warrant or securities obtained or obtainable
upon exercise, exchange, or conversion of such securities.
(o) "Unit" means two shares of Common Stock and one Unit
Warrant.
(p) "Unit Warrant" means a warrant to purchase one share
of Common Stock issued pursuant to the Warrant Agreement.
(q) "Warrant Agreement" means that certain Warrant
Agreement, dated as of ______________, 2004, by and between the Company and
American Stock Transfer & Trust Company relating to the issuance of Unit
Warrants.
(r) "Warrant Certificate" means a certificate evidencing
the Warrant.
(s) "Warrantholder" means a record holder of the Warrant
or Securities. The initial Warrantholder is Paulson Investment Company, Inc.
(t) "Warrantholder's Expenses" means the sum of (i) the
aggregate amount of cash payments made to an underwriter, underwriting
syndicate, or agent in connection with an offering described in Section 6 hereof
multiplied by a fraction the numerator of which is the aggregate sales price of
the Securities sold by such underwriter, underwriting syndicate, or agent in
such offering and the denominator of which is the aggregate sales price of all
of the securities sold by such underwriter, underwriting syndicate, or agent in
such offering and (ii) all out-of-pocket expenses of the Warrantholder, except
for the fees and disbursements of one firm retained as legal counsel for the
Warrantholder that will be paid by the Company.
(u) "Warrant" means the warrant evidenced by this
certificate, any similar certificate issued in connection with the Offering, or
any certificate obtained upon transfer or partial exercise of the Warrant
evidenced by any such certificate.
2. Exercise of Warrant. All or any part of the Warrant
represented by this Warrant Certificate may be exercised commencing on the first
anniversary of the Effective Date and ending at 5 p.m. Pacific Time on the fifth
anniversary of the Effective Date by surrendering this Warrant Certificate,
together with appropriate instructions, duly executed by the Warrantholder or by
its duly authorized attorney, at the office of the Company, 6401 Southwest
Freeway, Houston, Texas 77074; or at such other office or agency as the Company
may designate. The date on which such instructions are received by the Company
shall be the date of exercise. If the Holder has elected a Cashless Exercise,
such instructions shall so state. Upon receipt of notice of exercise, the
Company shall promptly instruct its transfer agent to prepare certificates for
the Securities to be received by the Warrantholder upon completion of the
Warrant exercise. When such certificates are prepared, the Company shall notify
the Warrantholder and deliver such
2
<PAGE>
certificates to the Warrantholder or as per the Warrantholder's instructions
promptly upon payment in full by the Warrantholder, in lawful money of the
United States, of the Exercise Price payable with respect to the Securities
being purchased, if any. If the Warrantholder shall represent and warrant that
all applicable registration and prospectus delivery requirements for their sale
have been complied with upon the prior sale of the Securities received upon
exercise of the Warrant, such certificates shall not bear a legend with respect
to the Securities Act of 1933.
If fewer than all the Securities purchasable under the Warrant are
purchased, the Company will, upon such partial exercise, execute and deliver to
the Warrantholder a new Warrant Certificate (dated the date hereof), in form and
tenor similar to this Warrant Certificate, evidencing that portion of the
Warrant not exercised. The Securities to be obtained on exercise of the Warrant
will be deemed to have been issued, and any person exercising the Warrants will
be deemed to have become a holder of record of those Securities, as of the date
of the payment of the Exercise Price.
3. Adjustments in Certain Events. The number, class, and price of
Securities for which this Warrant Certificate may be exercised are subject to
adjustment from time to time upon the happening of certain events as follows:
(a) If the outstanding shares of the Company's Common
Stock are divided into a greater number of shares or a dividend in stock is paid
on the Common Stock, the number of shares of Common Stock for which the Warrant
is then exercisable will be proportionately increased and the Exercise Price
will be proportionately reduced; and, conversely, if the outstanding shares of
Common Stock are combined into a smaller number of shares of Common Stock, the
number of shares of Common Stock for which the Warrant is then exercisable will
be proportionately reduced and the Exercise Price will be proportionately
increased. The increases and reductions provided for in this Section 3(a) will
be made with the intent and, as nearly as practicable, the effect that neither
the percentage of the total equity of the Company obtainable on exercise of the
Warrants nor the price payable for such percentage upon such exercise will be
affected by any event described in this Section 3(a).
(b) In case of any change in the Common Stock through
merger, consolidation, reclassification, reorganization, partial or complete
liquidation, purchase of substantially all the assets of the Company, or other
change in the capital structure of the Company, then, as a condition of such
change, lawful and adequate provision will be made so that the holder of this
Warrant Certificate will have the right thereafter to receive upon the exercise
of the Warrant the kind and amount of shares of stock or other securities or
property to which he would have been entitled if, immediately prior to such
event, he had held the number of shares of Common Stock obtainable upon the
exercise of the Warrant. In any such case, appropriate adjustment will be made
in the application of the provisions set forth herein with respect to the rights
and interest thereafter of the Warrantholder, to the end that the provisions set
forth herein will thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the exercise of the Warrant. The Company will not permit any change in its
capital structure to occur unless the issuer of the shares of stock or other
securities to be received by the holder of this Warrant Certificate, if not the
Company, agrees to be bound by and comply with the provisions of this Warrant
Certificate.
3
<PAGE>
(c) When any adjustment is required to be made in the
number of shares of Common Stock, other securities, or the property purchasable
upon exercise of the Warrant, the Company will promptly determine the new number
of such shares or other securities or property purchasable upon exercise of the
Warrant and (i) prepare and retain on file a statement describing in reasonable
detail the method used in arriving at the new number of such shares or other
securities or property purchasable upon exercise of the Warrant and (ii) cause a
copy of such statement to be mailed to the Warrantholder within thirty (30) days
after the date of the event giving rise to the adjustment.
(d) No fractional shares of Common Stock or other
securities will be issued in connection with the exercise of the Warrant, but
the Company will pay, in lieu of fractional shares, a cash payment therefor on
the basis of the mean between the bid and asked prices of the Common Stock in
the over-the-counter market or the last sale price of the Common Stock on the
principal exchange or other trading facility on which the Common Stock is traded
on the day immediately prior to exercise.
(e) If securities of the Company or securities of any
subsidiary of the Company are distributed pro rata to holders of Common Stock,
such number of securities will be distributed to the Warrantholder or its
assignee upon exercise of its rights hereunder as such Warrantholder or assignee
would have been entitled to if this Warrant Certificate had been exercised prior
to the record date for such distribution. The provisions with respect to
adjustment of the Common Stock provided in this Section 3 will also apply to the
securities to which the Warrantholder or its assignee is entitled under this
Section 3(e).
(f) Notwithstanding anything herein to the contrary,
there will be no adjustment made hereunder on account of (i) the sale by the
Company of the Common Stock or other Securities purchasable upon exercise of the
Warrant and (ii) any adjustment to the Unit Warrants pursuant to the Warrant
Agreement.
(g) If, immediately prior to any exercise of Warrants,
there are no outstanding Unit Warrants, or other securities for which the
Warrants are then exercisable and that are convertible into or exercisable to
purchase Common Stock ("Other Securities"), then upon such exercise of Warrants,
the Company shall issue to the Warrantholder, in lieu of Unit Warrants, or such
Other Securities, and in addition to any other Common Stock issuable upon such
exercise of Warrants, the number of shares of Common Stock that would have been
issuable upon exercise of the Unit Warrants, or exercise or conversion of such
Other Securities underlying the exercised Warrants, reduced by a number of
shares of Common Stock equal in value to the exercise price (if any) of such
Unit Warrants or Other Securities.
4. Reservation of Securities. The Company agrees that the number
of shares of Common Stock or other Securities sufficient to provide for the
exercise of the Warrant upon the basis set forth above will at all times during
the term of the Warrant be reserved for exercise.
5. Validity of Securities. All Securities delivered upon the
exercise of the Warrant will be duly and validly issued in accordance with their
terms, and the Company will pay all documentary and transfer taxes, if any, in
respect of the original issuance thereof upon exercise of the Warrant.
4
<PAGE>
6. Registration of Securities Issuable on Exercise of Warrant
Certificate.
(a) The Company will register the Securities with the
Commission pursuant to the Act so as to allow the unrestricted sale of the
Securities to the public from time to time commencing on the first anniversary
of the Effective Date and ending at 5:00 p.m. Pacific Time on the fifth
anniversary of the Effective Date (the "Registration Period"). The Company will
also file such applications and other documents necessary to permit the sale of
the Securities to the public during the Registration Period in those states in
which the Units were qualified for sale in the Offering or such other states as
the Company and the Warrantholder agree to. In order to comply with the
provisions of this Section 6(a), the Company is not required to file more than
one registration statement. No registration right of any kind, "piggyback" or
otherwise, will last longer than five years from the Effective Date.
(b) The Company will pay all of the Company's Expenses
and each Warrantholder will pay its pro rata share of the Warrantholder's
Expenses relating to the registration, offer, and sale of the Securities.
(c) Except as specifically provided herein, the manner
and conduct of the registration, including the contents of the registration,
will be entirely in the control and at the discretion of the Company. The
Company will file such post-effective amendments and supplements as may be
necessary to maintain the currency of the registration statement during the
period of its use. In addition, if the Warrantholder participating in the
registration is advised by counsel for Paulson Investment Company, Inc. (or if
Paulson Investment Company, Inc. is not a Warrantholder, counsel representing
more than 50% of the then outstanding warrants) that the registration statement,
in that counsel's opinion, is deficient in any material respect, the Company
will use its best efforts to cause the registration statement to be amended to
eliminate the concerns raised.
(d) The Company will furnish to the Warrantholder the
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as it may
reasonably request in order to facilitate the disposition of Securities owned by
it.
(e) The Company will, at the request of Warrantholders
holding at least 50 percent of the then outstanding Warrants, (i) furnish an
opinion of the counsel representing the Company for the purposes of the
registration pursuant to this Section 6, addressed to the Warrantholders and any
Participating Underwriter, (ii) furnish an appropriate letter from the
independent public accountants of the Company, addressed to the Warrantholders
and any Participating Underwriter, and (iii) make representations and warranties
to the Warrantholders and any Participating Underwriter. A request pursuant to
this subsection (e) may be made on three occasions. The documents required to be
delivered pursuant to this subsection (e) will be dated within ten days of the
request and will be, in form and substance, equivalent to similar documents
furnished to the underwriters in connection with the Offering, with such changes
as may be appropriate in light of changed circumstances.
7. Indemnification in Connection with Registration.
5
<PAGE>
(a) If any of the Securities are registered, the Company
will indemnify and hold harmless each selling Warrantholder, any person who
controls any selling Warrantholder within the meaning of the Act, and any
Participating Underwriter against any losses, claims, damages, or liabilities,
joint or several, to which any Warrantholder, controlling person, or
Participating Underwriter may be subject under the Act or otherwise; and it will
reimburse each Warrantholder, each controlling person, and each Participating
Underwriter for any legal or other expenses reasonably incurred by the
Warrantholder, controlling person, or Participating Underwriter in connection
with investigating or defending any such loss, claim, damage, liability, or
action, insofar as such losses, claims, damages, or liabilities, joint or
several (or actions in respect thereof), arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any such registration statement or any
preliminary prospectus or final prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any case to the extent that any loss, claim, damage, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any registration statement,
preliminary prospectus, final prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
by a Warrantholder for use in the preparation thereof; provided, however, that
the foregoing indemnification with respect to the preliminary prospectus shall
not insure to the benefit of any Participating Underwriter from which the person
asserting any such loss, claim, damage or liability, action or proceeding
purchased Units if (1) a copy of the final prospectus (as then amended or
supplemented) was required by law to be delivered to such person at or prior to
the written confirmation of the sale of Units to such person, (2) a copy of the
final prospectus (as then amended or supplemented) was not sent or given to such
person by or on behalf of such Participating Underwriter and such failure was
not due to the Company's failure to make available sufficient quantities of the
final prospectus to those Underwriters, and (3) the final prospectus (as so
amended or supplemented) would have cured the defect giving rise to such loss,
claim, damage or liability, action or proceeding. The indemnity agreement
contained in this subparagraph (a) will not apply to amounts paid to any
claimant in settlement of any suit or claim unless such payment is first
approved by the Company, such approval not to be unreasonably withheld.
(b) Each selling Warrantholder, as a condition of the
Company's registration obligation, will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed any registration
statement or other filing or any amendment or supplement thereto, and any person
who controls the Company within the meaning of the Act, against any losses,
claims, damages, or liabilities to which the Company or any such director,
officer, or controlling person may become subject under the Act or otherwise,
and will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or action,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in said registration statement, any preliminary
or final prospectus, or other filing, or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged
6
<PAGE>
untrue statement or omission or alleged omission was made in said registration
statement, preliminary or final prospectus, or other filing, or amendment or
supplement, in reliance upon and in conformity with written information
furnished by such Warrantholder for use in the preparation thereof; provided,
however, that the indemnity agreement contained in this subparagraph (b) will
not apply to amounts paid to any claimant in settlement of any suit or claim
unless such payment is first approved by the Warrantholder, such approval not to
be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under
subparagraphs (a) or (b) above of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, notify the indemnifying party of the commencement thereof;
but the omission to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party otherwise than under
subparagraphs (a) and (b).
(d) If any such action is brought against any indemnified
party and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified party;
and after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
8. Restrictions on Transfer. This Warrant Certificate and the
Warrant may not be sold, transferred, assigned or hypothecated for a one-year
period after the Effective Date except to underwriters of the Offering or to
individuals who are either a partner or an officer of such an underwriter or by
will or by operation of law. The Warrant may be divided or combined, upon
request to the Company by the Warrantholder, into a certificate or certificates
evidencing the same aggregate number of Warrants.
9. No Rights as a Shareholder. Except as otherwise provided
herein, the Warrantholder will not, by virtue of ownership of the Warrant, be
entitled to any rights of a shareholder of the Company but will, upon written
request to the Company, be entitled to receive such quarterly or annual reports
as the Company distributes to its shareholders.
10. Notice. Any notices required or permitted to be given
hereunder will be in writing and may be served personally or by mail; and if
served by mail will be addressed as follows:
If to the Company:
I-Sector Corporation
6401 Southwest Freeway
Houston, TX 77074
Attention: Chief Financial Officer;
7
<PAGE>
If to the Warrantholder:
at the address furnished
by the Warrantholder to the
Company for the purpose of
notice.
Any notice so given by mail will be deemed effectively given 48 hours
after mailing when deposited in the United States mail, registered or certified
mail, return receipt requested, postage prepaid and addressed as specified
above. Any party may by written notice to the other specify a different address
for notice purposes.
11. Applicable Law. This Warrant Certificate will be governed by
and construed in accordance with the laws of the State of Oregon, without
reference to conflict of laws principles thereunder. All disputes relating to
this Warrant Certificate shall be tried before the courts of Oregon located in
Multnomah County, Oregon to the exclusion of all other courts that might have
jurisdiction.
Dated as of ______________, 2004
I-SECTOR CORPORATION
By: _____________________________________
Name:
Title:
8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>7
<FILENAME>h13383a2exv10w15.txt
<DESCRIPTION>FIRST REFUSAL AND TRANSFER RESTRICTION AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.15
FIRST REFUSAL AND TRANSFER RESTRICTION AGREEMENT
This First Refusal and Transfer Restriction Agreement (the "Agreement")
is entered into as of the 3rd day of April, 2003, by and among InterNetwork
Experts, Inc., a Delaware corporation (the "Company"), I-Sector Corporation, a
Delaware corporation ("I-Sector"), Digital Precision, Inc., a Texas corporation
("DPI"), and David Peoples, Don Smith, David DeYoung, John C'de Baca, Andrew
Cantrell, Joey Johnson, Joel Hutton, Steve Bergstrom, Grant Hartline, Dave
Plank, Veronica Marriott, Brian Cochran Leigh McGregor, Bud Lowry, and Gordon
Jackson (each a "Potential Shareholder" and collectively, the "Potential
Shareholders").
The following recitals are true and constitute the basis for this
Agreement:
A. The Company and DPI are parties to that certain Asset Purchase
Agreement of even date herewith (the "Purchase Agreement"), pursuant
to which the Company is purchasing certain assets of DPI (all
capitalized terms used but not otherwise defined herein shall have
the meaning given to them in the Purchase Agreement);
B. As partial consideration for DPI's sale of the Purchased Assets to
the Company, the Company will issue to DPI 1,800,000 shares of the
Company's common stock, $0.001 par value per share, which shares are
subject to forfeiture pursuant to the terms of the Purchase
Agreement;
C. Prior to the consummation of the transactions described in the
Purchase Agreement, I-Sector owned all of the outstanding Equity
Securities (as defined below) of the Company and following the
consummation of the transactions described in the Purchase Agreement
will own approximately 90% of the Equity Securities of the Company;
D. In connection with accepting an offer of employment with the
Company, each Potential Shareholder will be eligible to receive
performance options to acquire shares of the Company's common stock;
and
E. DPI and the Potential Shareholders wish to provide further
inducement to the Company to enter into the Purchase Agreement and
acquire the Purchased Assets, as well as to employ the Potential
Shareholders and potentially grant performance options to the
Potential Shareholders pursuant to the terms of each Potential
Shareholder's offer of employment and, accordingly, are willing to
allow certain restrictions and obligations to be placed on the
Equity Securities.
NOW, THEREFORE, in consideration of the foregoing premises and certain
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
<PAGE>
1. Definitions.
(a) Affiliate. For purposes of this Agreement, the term "Affiliate"
shall mean with respect to any Person, any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person, and with respect to any individual, shall mean his or her spouse,
sibling, child, step child, grandchild, niece, nephew or parent of such Person,
or the spouse thereof ("Immediate Family"), or a trust or family limited
partnership for the benefit of any such Person or any member of such Person's
Immediate Family. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that beneficial
ownership of 20% or more of the voting securities of a Person shall be deemed to
be control.
(b) Delivery. For purposes of this Agreement, the term "Delivery"
shall have the meaning set forth in Section 6 below.
(c) Equity Securities. For purposes of this Agreement, the term
"Equity Securities" shall mean any securities now or hereafter owned or held by
I-Sector, DPI or any Potential Shareholder (or a transferee in accordance with
Section 2.3 herein), having voting rights in the election of the Board of
Directors of the Company, or any securities evidencing an ownership interest in
the Company, or any securities convertible into or exercisable for any shares of
the foregoing.
(d) Holders. For purposes of this Agreement, the term "Holders"
shall mean DPI, the Potential Shareholders or persons who have acquired Equity
Securities from either DPI or any Potential Shareholder or their transferees or
assignees in accordance with the provisions of this Agreement.
(e) Person. For purposes of this Agreement, the term "Person" shall
mean any individual, firm, partnership, corporation, trust, joint venture,
association, joint stock company, limited liability company, unincorporated
organization or any other entity or organization, including a government or
agency or political subdivision thereof, and shall include any successor (by
merger or otherwise) of such entity.
(f) Transfer. For purposes of this Agreement, the term "Transfer"
shall include any sale, assignment, encumbrance, hypothecation, pledge,
conveyance in trust, gift, transfer by bequest, devise or descent, or other
transfer or disposition of any kind, including, but not limited to, transfers
pursuant to divorce or legal separation, transfers to receivers, levying
creditors, trustees or receivers in bankruptcy proceedings or general assignees
for the benefit of creditors, whether voluntary, involuntarily or by operation
of law, directly or indirectly, of any of the Equity Securities.
2
<PAGE>
2. Agreements Among the Company, I-Sector, and the Holders.
2.1 Rights of Refusal.
(a) Transfer Notice. If at any time a Holder proposes to Transfer
Equity Securities (a "Selling Holder"), then the Selling Holder shall promptly
give the Company written notice of the Selling Holder's intention to make the
Transfer (the "Transfer Notice"). The Transfer Notice shall include (i) a
description of the Equity Securities to be transferred ("Offered Shares"), (ii)
the name(s) and address(es) of the prospective transferee(s), (iii) the
consideration and (iv) the material terms and conditions upon which the proposed
Transfer is to be made. The Transfer Notice shall certify that the Selling
Holder has received a firm offer from the prospective transferee(s) and in good
faith believes a binding agreement for the Transfer is obtainable on the terms
set forth in the Transfer Notice. The Transfer Notice shall also include a copy
of any written proposal, term sheet or letter of intent or other agreement
relating to the proposed Transfer. In the event that the transfer is being made
pursuant to the provisions of Section 2.3, the Transfer Notice shall state under
which specific subsection the Transfer is being made.
(b) Company's Right of First Refusal. The Company shall have an
option for a period of 20 days from Delivery of the Transfer Notice to elect to
purchase all or any portion of the Offered Shares at the same price and subject
to the same material terms and conditions as described in the Transfer Notice.
The Company may exercise such purchase option and, thereby, purchase all or any
portion of the Offered Shares by notifying the Selling Holder in writing before
expiration of such 20 day period as to the number of such shares that it wishes
to purchase. If the Company gives the Selling Holder notice that it desires to
purchase such shares, then payment for the Offered Shares shall be by check or
wire transfer, against delivery of the Offered Shares to be purchased at a place
agreed upon between the parties and at the time of the scheduled closing
therefor, which shall be no later than 45 days after Delivery to the Company of
the Transfer Notice, unless the value of the purchase price has not yet been
established pursuant to Section 2.1(c), in which case the closing shall occur no
later than 45 days after the value of the purchase price has been determined.
(c) Should the purchase price specified in the Transfer Notice be
payable in property other than cash or evidences of indebtedness, the Company
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If the Selling Holder and the Company
cannot agree on such cash value within 20 days after Delivery to the Company of
the Transfer Notice, the valuation shall be made by an appraiser of recognized
standing selected by the Selling Holder and the Company or, if they cannot agree
on an appraiser within 25 days after Delivery to the Company of the Transfer
Notice, each shall select an appraiser of recognized standing and the two
appraisers shall designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value. The cost of such appraisal shall
be shared equally by the Selling Holder and the Company. If the time for the
closing of the Company's purchase has expired but for the determination of the
value of the purchase price offered by the prospective transferee(s), then such
closing shall be held on or prior to the 5th business day after such valuation
shall have been made pursuant to this subsection.
3
<PAGE>
2.2 Non-Exercise of Rights. To the extent that the Company has not
exercised its rights to purchase the Offered Shares within the time periods
specified in Section 2.1, the Selling Holder shall have a period of 60 days from
the expiration of such rights in which to sell the Offered Shares, as the case
may be, upon terms and conditions (including the purchase price) no more
favorable than those specified in the Transfer Notice to the third-party
transferee(s) identified in the Transfer Notice. The third-party transferee(s)
shall acquire the Offered Shares subject to the rights of first refusal under
this Agreement. In the event the Selling Holder does not consummate the sale or
disposition of the Offered Shares within the 60 day period from the expiration
of these rights, the Company's first refusal rights shall continue to be
applicable to any subsequent disposition of the Offered Shares by the Selling
Holder until such right lapses in accordance with the terms of this Agreement.
Furthermore, the exercise or non-exercise of the rights of the Company under
this Section 2 to purchase the Equity Securities from a Selling Holder shall not
adversely affect its rights to make subsequent purchases from the Selling Holder
of Equity Securities.
2.3 Limitations to Rights of Refusal. Notwithstanding the provisions of
Section 2.1 of this Agreement, the first refusal rights of the Company shall not
apply to any of the following Transfers so long as no such Transfer occurs prior
to the first anniversary of this Agreement: (a) the Transfer of any Equity
Securities by DPI to its shareholders after the first anniversary of the date
hereof; (b) the Transfer of Equity Securities to any spouse or member of a
Holder's immediate family, or to a custodian, trustee (including a trustee of a
voting trust), executor, or other fiduciary for the account of the Holder's
spouse or members of the Holder's immediate family, or to a trust for the
Holder's own self, or a charitable remainder trust; or (c) any sale of Equity
Securities to the public pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange Commission under the
Securities Act of 1933, as amended, provided, however, that in the event of any
Transfer made pursuant to the exemption provided by clauses (a) and (b), (i) the
Holder shall inform the Company of such Transfer prior to effecting it and (ii)
in the case of clause (b), each such transferee or assignee, prior to the
completion of the Transfer, shall have executed documents assuming the
obligations of the Holder under this Agreement with respect to the transferred
Equity Securities. Such transferred Equity Securities shall remain "Equity
Securities" hereunder, and such pledgee, transferee or donee shall be treated as
a "Holder" for purposes of this Agreement and shall become a party to this
Agreement.
2.4 Prohibited Transfers. Except as otherwise provided in this
Agreement, each Holder will not Transfer or otherwise encumber or dispose of in
any way, all of any part of or any interest in any Equity Securities. Further,
no Holder shall voluntarily sell, assign or transfer any interest in any equity
Securities to any competitor of the Company (as determined by the sole
discretion of the Board of Directors), or propose to do so in any Transfer
Notice, without the prior written consent of the Board of Directors of the
Company. Any Transfer or other encumbrance or disposition of Equity Securities
not made in conformance with this Agreement shall be null and void, shall not be
recorded on the books of the Company and shall not be recognized by the Company.
2.5 Drag-Along Right. If I-Sector proposes to Transfer for cash or
marketable equity securities traded or quoted on a national exchange or
quotation system all of the Equity Securities held by I-Sector to a third party
that is not an Affiliate of I-Sector (a "Transferee"),
4
<PAGE>
I-Sector or such Transferee, to the extent authorized by I-Sector, may require
the Holders to participate in such Transfer and sell or transfer all the Equity
Securities held by such Holders in the manner and on the same terms and
conditions as I-Sector (the "Drag-Along Right"). No later than 20 days prior to
the consummation of the Transfer, I-Sector shall deliver a written notice to the
Holders specifying the names and address of the proposed parties to such
Transfer and the terms and conditions thereof. In the event such written notice
is given, any warrants and options held by each Holder which are then presently
exercisable (or become exercisable as a result of the transaction that is the
subject of the notice), shall be exercised by the Holders for shares of the
common stock of the Company, which common stock shall also be subject to the
Drag-Along Right, and such options and warrants to the extent not then
exercisable (or to the extent such options and warrants would not become
exercisable as a result of such transaction) shall automatically be cancelled.
The closing of the Transfer shall be held at such time and place as I-Sector or
the Transferee shall reasonably specify. Prior to or at such closing, each
Holder shall deliver stock certificates representing its Equity Securities, duly
endorsed for transfer, and each such Holder shall represent and warrant that (i)
such Holder is the record and beneficial owner of such Equity Securities and
(ii) such Equity Securities are being transferred free and clear of any liens,
charges, claims or encumbrances (other than restrictions imposed pursuant to
applicable Federal and state securities laws and this Agreement). Each Holder
agrees to take all actions necessary and desirable in connection with the
consummation of the Transfer, including without limitation, voting in favor of
the Transfer, to the extent required, and waiving all appraisal rights available
to any such Holder under applicable law, and shall make such additional
representations and warranties as shall be customary in transactions of a
similar nature.
3. Assignments and Transfers; No Third Party Beneficiaries. This
Agreement and the rights and obligations of the parties hereunder shall inure to
the benefit of, and be binding upon, their respective successors, assigns and
legal representatives, but shall not otherwise be for the benefit of any third
party.
4. Legend. Each existing or replacement certificate for shares now
owned or hereafter acquired by a Holder shall bear the following legend upon its
face:
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN FIRST REFUSAL AND TRANSFER RESTRICTION
AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE COMPANY AND CERTAIN
HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
5. Effect of Change in Company's Capital Structure. Appropriate
adjustments shall be made in the number and class of Equity Securities in the
event of a stock dividend, stock split, reverse stock split, combination,
reclassification or like change in the capital structure of the Company.
5
<PAGE>
6. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed effectively given 5 days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and shall constitute "Delivery" of notice. All communications
shall be sent to the respective parties at the addresses set forth on the
signature pages attached hereto (or at such other addresses as shall be
specified by notice given in accordance with this Section 6).
7. Further Instruments and Actions. The parties agree to execute such
further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Agreement. Each Holder agrees to
cooperate affirmatively with the Company to enforce rights and obligations
pursuant hereto.
8. Term. This Agreement shall terminate and be of no further force or
effect upon (a) the consummation of the Company's sale of its common stock or
other securities pursuant to a registration statement under the Securities Act
of 1933, as amended, (other than a registration statement relating either to
sale of securities to employees of the Company pursuant to any stock option,
stock purchase or similar plan or a SEC Rule 145 transaction), or (b) the
liquidation and dissolution of the Company pursuant to Delaware corporate law.
9. Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter hereof, supersedes all
other agreements between or among any of the parties with respect to the subject
matter hereof. This Agreement shall be interpreted under the laws of the State
of Delaware without reference to Delaware conflicts of law provisions.
10. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
the written consent of the Company. Any amendment or waiver affected in
accordance with this paragraph shall be binding upon the Holders and their
respective successors and assigns.
11. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
12. Attorney's Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In addition, the parties
agree that the counterparts of this Agreement so signed may be evidenced by
Delivery of a telecopy or other electronic
6
<PAGE>
transmission of the signature page image to this Agreement to the other parties
and that such telecopied signature pages shall be treated for all purposes as
original signature pages to this Agreement.
***REMAINDER OF PAGE INTENTIONALLY LEFT BLANK***
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
INTERNETWORK EXPERTS, INC.
By: /s/ Mark Hilz
----------------------------------------
Mark Hilz, Chief Executive Officer
Address: 15960 Midway Road
Suite 101
Addison, Texas 75001
I-SECTOR CORPORATION
By: /s James H. Long
----------------------------------------
James H. Long, Chief Executive Officer
Address: 6401 Southwest Freeway
Houston, TX 770774
DIGITAL PRECISION, INC.
By: /s/ David Peoples
----------------------------------------
David Peoples, Chief Executive Officer
Address: 13700 Bullick Hollow Road
Austin, Texas 78726
-------------------------------------------
DAVID PEOPLES
Address: N/A
<PAGE>
/s/ Joel Hutton
-------------------------------------------
JOEL HUTTON
Address: 2688 Hillside Drive
Highland Village, TX 75077
/s/ Leigh McGregor
-------------------------------------------
LEIGH MCGREGOR
Address: 3405 Kelsey Court
Flower Mound, TX 75028
/s/ Bryan Cochran
-------------------------------------------
BRYAN COCHRAN
Address: 603 Strettford Lane
Allen, TX 75002
/s/ Dave Plank
-------------------------------------------
DAVE PLANK
Address: 1704 Newton Drive
Flower Mound, TX 75028
/s/ Veronica Marriott
-------------------------------------------
VERONICA MARRIOTT
Address: 1316 Adair St.
Dallas, TX 75204
<PAGE>
/s/ Don Smith
-------------------------------------------
DON SMITH
Address: 608 Furlong Drive
Austin, TX 78766
/s/ David De Young
-------------------------------------------
DAVID DEYOUNG
Address: 825 Glen Garry Drive
Flower Mound, TX 75022
/s/ John C'de Baca
-------------------------------------------
JOHN C'DE BACA
Address: 2929 Woodway
Flower Mound, TX 75028
/s/ Andrew Cantrell
-------------------------------------------
ANDREW CANTRELL
Address: 2818 Bluejay
Cedar Park, TX 78613
/s/ Joey Johnson
-------------------------------------------
JOEY JOHNSON
Address: 1330 Barrington Drive
Coppell, TX 75019
<PAGE>
/s/ Steve Bergstrom
-------------------------------------------
STEVE BERGSTROM
Address: 5736 Junabyrd Lane
Austin, TX 78749
/s/ Grant Hartline
-------------------------------------------
GRANT HARTLINE
Address: 5529 Herd Drive
Austin, TX 78735
/s/ A.L. Lowry
-------------------------------------------
A.L. LOWRY
Address: 2504 Waterford Drive
Irving, TX 25063
/s/ Gordon Jackson
-------------------------------------------
GORDON JACKSON
Address: 17021 Poncho Lane
Austin, TX 78717
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>8
<FILENAME>h13383a2exv10w24.txt
<DESCRIPTION>LEASE AGREEMENTBY AND BETWEEN VANTAGE DEV. #21
<TEXT>
<PAGE>
EXHIBIT 10.24
STANDARD COMMERCIAL LEASE
ARTICLE 1.00 BASIC LEASE TERMS
1.01 PARTIES. This lease agreement ("Lease") is entered into by and
between the following Landlord and Tenant:
Vantage Development #21, Inc., a Texas corporation ("Landlord").
I-Sector, a Delaware corporation ("Tenant").
1.02 LEASED PREMISES. In consideration of the rents, terms, provisions
and covenants of this Lease, Landlord hereby leases, lets and demises to the
Tenant the following described premises ("Leased Premises") as shown on Exhibit
A attached hereto, located within the Building or Project referenced below and
located on the Land as described on Exhibit B attached hereto (the "Land");
"BUILDING" OR "PROJECT": Waters Ridge Tech Center I
Building or Project Square Footage: 227,495
"LEASED PREMISES": 1955 Lakeway Drive, Suite 220
Leased Premises Square Footage: 24,081
City, State, Zip Code: Lewisville, Texas 75057,
together with the right to use, in common with others the Common Areas (as
defined in Section 2.06), for the Term specified herein, all upon and subject to
the terms and conditions set forth herein.
Landlord and Tenant acknowledge that the square footage of the Leased
Premises and Building are as set forth above.
1.03 TERM. The term (the "Term") of this Lease shall commence on the
date Landlord delivers the Leased Premises to Tenant with the Landlord
Improvements (as defined in Section 6.01) complete in accordance with the Plans
(as defined in Section 6.01) (the "Commencement Date") and terminate seventy two
(72) months thereafter (the "Termination Date"). For purposes of this Section
1.03, complete means a condition that allows Tenant to occupy the Leased
Premises and conduct its business therein. Tenant agrees that Landlord will not
be liable to Tenant if Landlord does not deliver possession of the Leased
Premises to Tenant on the Commencement Date and Landlord's non-delivery of the
Leased Premises to Tenant on the Commencement Date will not change the terms of
this Lease or the obligations of Tenant hereunder. If delivery of the Leased
Premises is delayed, Landlord and Tenant agree that the Commencement Date will
be delayed until possession of the Leased Premises is delivered to Tenant, in
which event the Term will be automatically extended for a period of time equal
to the delay in delivery of possession of the Leased Premises to Tenant. If
delivery of possession of the Leased Premises is delayed, Landlord and Tenant
shall, upon such delivery, execute an amendment to this Lease setting forth the
actual Commencement Date and Termination Date. Any occupancy of the Leased
Premises by Tenant prior to the Commencement Date shall be subject to all
obligations of Tenant under this Lease. If the Termination Date falls on a day
other than the last day of a month, the parties agree that the Term shall be
automatically extended by the number of days necessary to cause the Term to end
on the last day of a month.
Notwithstanding the foregoing, if Landlord fails to deliver the Leased
Premises to Tenant on or before July 1, 2004, and such failure does not result
from an event of force majeure, act of God or any act or omission of Tenant,
Tenant may terminate the Lease upon written notice to Landlord.
1.04 BASE RENT AND SECURITY DEPOSIT.
a) Base Rent for the Leased Premises shall be:
Months 1-7: Abated
Months 8-24: $13,048
Months 25-48: $20,068
Months 49-72: $22,074
b) The Security Deposit to be deposited by Tenant shall
be: $14,786.00
Page -1-
<PAGE>
1.05 ADDRESSES.
Landlord's Address: Tenant's Address:
Vantage Companies Prior to Commencement Date:
2911 Turtle Creek Blvd. 15960 Midway Road, Suite 101
Suite 500 Addison, Texas 75001
Dallas, Texas 75219 Attn.: Mr. Paul Klotz
After Commencement Date:
@ The Leased Premises
Mr. Paul Klotz
1.06 PERMITTED USE. Tenant shall use the Leased Premises for general
office, laboratory and research and development uses, warehousing, equipment
configuration, staging, shipping, receiving, remote network monitoring services,
help desk services and other matters related or incident to Tenant's primary
business and for no other purpose.
ARTICLE 2.00 RENT
2.01 BASE RENT. Tenant agrees to pay monthly as Base Rent during the
Term without notice, demand, deduction, counter-claim, set-off or abatement, the
sum of money set forth in Section 1.04 of this Lease. Tenant shall pay one
monthly installment of Base Rent on the date of execution of this Lease by
Tenant for the eighth month's Base Rent and a like monthly installment shall be
due and must be paid on or before the first day of the ninth calendar month and
each month thereafter during the Term; provided, if the Commencement Date is a
date other than the first day of a calendar month, the Base Rent set forth above
will be prorated to the end of that calendar month, and all succeeding
installments of Base Rent shall be payable on or before the first day of each
succeeding calendar month during the Term. No payment by Tenant or receipt by
Landlord of a lesser amount than the amount of Base Rent due will be deemed to
be other than on account of the earliest past due installment of Base Rent
required to be paid hereunder. Tenant agrees that no endorsement or statement on
any check or in any letter accompanying any check or payment of Base Rent
constitutes an accord and satisfaction and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of Base
Rent then due or to pursue any remedy available under this Lease, at law or in
equity.
2.02 SECURITY DEPOSIT. Tenant shall deliver the Security Deposit to
Landlord on the date of execution of the Lease by Tenant. The Security Deposit
will be held by Landlord without liability for interest and as security for the
performance of Tenant's covenants and obligations under this Lease, it being
expressly understood that it is not an advance payment of Base Rent, Taxes and
Insurance (as defined in Section 2.04), Operating Expenses (as defined in
Section 2.06) or a measure of Landlord's damage upon an Event of Default (as
defined in Section 11.01). Landlord may commingle the Security Deposit with its
other funds. During the continuance of an Event of Default (as defined in
Section 11.01), Landlord may, from time to time, without prejudice to any other
remedy, use the Security Deposit, to the extent necessary, to make good any
arrears of Base Rent, Taxes and Insurance, Operating Expenses, or pay any
expense or liability incurred by Landlord as a result of the Event of Default.
Provided Tenant delivers the Leased Premises to Landlord as required herein upon
expiration or earlier termination of this Lease, Landlord shall return any
remaining balance of the Security Deposit to Tenant within sixty (60) days
following such expiration or termination of this Lease. If any portion of the
Security Deposit is so used or applied, Tenant shall upon ten (10) days written
notice from Landlord, deposit with Landlord by cash or cashier's check an amount
sufficient to restore the Security Deposit to its original amount. If Landlord
transfers its interest in the Leased Premises during the Term, Landlord shall
assign the Security Deposit to the transferee and, upon delivery to Tenant of a
copy of an assumption of Landlord's obligations hereunder, have no further
liability for the return of, or any matter relating to, such Security Deposit.
2.03 DEFINITIONS. For purposes of this Lease, (i) Tenant's Pro Rata
Share shall be a fraction, the numerator of which is the number of square feet
of floor area in the Leased Premises set forth in Section 1.02 and the
denominator of which is the number of square feet of floor area in the Building
or Project set forth in Section 1.02, provided, if the Project contains multiple
buildings, and expenses (i.e. Taxes, Insurance and Operating Expenses)
associated with operating such buildings can be directly attributed to a
building, Landlord may utilize the square feet of floor area in such building as
the denominator. Tenant's
Page -2-
<PAGE>
Pro Rata Share may be adjusted by Landlord in the future for changes in the
physical size of the Leased Premises, Building or Project, and (ii) Additional
Rent shall include (x) Taxes and Insurance, (y) Operating Expenses, and (z) all
other amounts due Landlord from Tenant pursuant to the terms of this Lease.
2.04 TAXES AND INSURANCE. Tenant agrees to pay without notice, demand,
counter-claim, deduction, set-off or abatement of any kind Tenant's Pro Rata
Share of all real property taxes and installments of special assessments
(including dues and assessments by means of deed restrictions and/or owner's
associations) lawfully levied or assessed against the Building and/or Project,
and any and all insurance required herein or as Landlord deems reasonably
necessary (specifically including fire and casualty, commercial general
liability and rent loss [a/k/a business income] insurance) (collectively "Taxes
and Insurance"). Landlord shall invoice Tenant monthly (in advance) for Tenant's
Pro Rata Share of Taxes and Insurance commencing on the Commencement Date.
Tenant's Pro Rata Share will be based upon Landlord's estimate of Taxes and
Insurance for the current calendar year, provided, that in the event Landlord is
required under a mortgage, deed of trust, underlying lease or loan agreement
covering the Building or Project to escrow Taxes and Insurance, Landlord may but
will not be obligated, to use the amount required to be escrowed as a basis for
its estimate. To the extent the Commencement Date or Termination Date of the
Lease is not on the first day of the calendar year or last day of the calendar
year respectively, Tenant's liability for Taxes and Insurance is subject to a
pro rata adjustment based on the number of days of any such year during which
the Term is in effect. Tenant is not entitled to contest or appeal any value
assessment rendered by applicable taxing authorities and waives all rights to
receive notices of reappraisals. In no event shall Tenant be liable for any
income or franchise taxes imposed upon Landlord unless such taxes are in
substitution of the taxes set forth above.
2.05 OPERATING EXPENSES. Tenant agrees to pay without notice, demand,
deduction, counterclaim, set-off or abatement of any kind, Tenant's Pro Rata
Share of Landlord's operating expenses for the Building and/or Project as set
forth in Section 2.06 ("Operating Expenses"). Landlord shall invoice Tenant
monthly for Tenant's Pro Rata Share of the estimated Operating Expenses for each
calendar year commencing on the Commencement Date and may adjust such share each
subsequent year based upon anticipated Operating Expenses. Twice yearly Landlord
is entitled to adjust the estimated Operating Expenses to reflect current or
anticipated Operating Expenses.
Notwithstanding anything to the contrary set forth in this Section
2.05, when determining Tenant's Pro Rata Share of Operating Expenses for
calendar years subsequent to the first full calendar year of the Term, Tenant's
Pro Rata Share of Operating Expenses for such calendar years shall not increase
more than five percent (5%) from the immediately preceding calendar year.
Calculation of increases in Tenant's Pro Rata Share of Operating Expenses
subsequent to the first full calendar year of the Term shall be on a cumulative
basis, i.e. if Tenant's Pro Rata Share of Operating Expenses increases three
percent (3%) from the immediately preceding calendar year, then Tenant's Pro
Rata Share of Operating Expenses may increase seven percent (7%) for the
immediately following calendar year. Provided, the foregoing cap on Tenant's Pro
Rata Share of Operating Expenses shall not apply to utilities (water, sewer,
gas, electricity and telephone) for the Common Areas and trash removal. Tenant's
Pro Rata Share of such Operating Expenses (water, sewer, gas, electricity and
telephone) shall always be based upon the actual amount of such expenses.
Provided further, if the Building or Project is not fully leased, with respect
to calculating the foregoing cap, Landlord will be entitled to gross-up
management fees as if the Building or Project had been fully leased and fully
assessed by all taxing authorities for the previous calendar year.
Provided no Event of Default exists, Tenant may, at its own expense
(except as set forth below), audit Landlord's books relevant to the Operating
Expenses. With respect to such audit, Tenant 1) may review Landlord's books
during office hours, 2) must perform such audit at the location of Landlord's
books, 3) must request such audit within sixty (60) days of receipt of its
annual reconciliation of Operating Expenses, 4) must deliver to Landlord a copy
of the results of such audit within fifteen (15) days of its completion, and 5)
may not audit the same calendar year more than one time. Assignees of Tenant may
only audit periods for which they occupy the Leased Premises and subtenants of
Tenant are not entitled to any audit rights.
If an audit reveals that Landlord has over charged Tenant for its Pro
Rata Share of Operating Expenses by 3% or more Landlord shall reimburse Tenant
its reasonable documented out-of-pocket expenses associated with such audit
along with the amount by which Tenant overpaid.
2.06 DEFINITION OF OPERATING EXPENSES. The term "Operating Expenses"
includes all
Page -3-
<PAGE>
commercially reasonable expenses incurred by Landlord with respect to the
operation, maintenance, repair and replacement of the Common Areas (as defined
below), including, but not limited to maintenance, repair and replacement costs
necessary for upkeep (including materials and supplies necessary therefore);
charges for water, sewer, gas, electricity and telephone; cleaning, including
janitorial services and supplies; landscape maintenance; painting (within the
Common Areas and the exterior of the Building); trash collection; pest control;
security; licenses, permits and inspection fees; contractor's fees; professional
service and management fees; the cost of equipping and maintaining a management
office; wages and benefits payable to employees of Landlord whose duties are
directly connected with the operation of the Building or Project; personal
property taxes for Landlord's personal property within the Common Areas; fees
payable to tax consultants and/or attorneys for contesting taxes; the cost,
including interest, amortized over its useful life, of any capital improvement
made to the Common Areas by Landlord (i) pursuant to its obligations hereunder,
or (ii) after the date of this Lease which is required by any Legal Requirement
(as defined in Section 3.03) that was not applicable at the time the Building or
Project was constructed; the cost including interest, amortized over the period
of time necessary for such device or equipment to pay for itself, of
installation of any device or other equipment which improves the operating
efficiency of any system within the Common Areas and thereby reduces Operating
Expenses.
The term Operating Expenses does not include the following: Taxes and
Insurance, repairs, restoration or other work occasioned by fire, wind, the
elements or other casualty; expenses incurred in leasing to or procuring of
tenants, leasing commissions, advertising expenses and expenses for the
renovating of space for new tenants; interest or principal payments on any
mortgage or other indebtedness of Landlord; ground rent; compensation paid to
any employee of Landlord other than maintenance and property management
personnel directly associated with the operation and maintenance of the Building
or Project; any depreciation allowance or expense (except for depreciation of
capital improvements and equipment specifically included within the definition
of Operating Expenses); operating expenses which are the responsibility of
Tenant or any other tenant of the Building or Project; or expenses which are for
the benefit of a specific tenant and not all tenants of the Building or Project.
For purposes of this Lease "Common Areas" mean those areas within the
Building or Project provided for the common use or benefit of all tenants
generally and/or the public, such as parking areas, interior roads, sidewalks,
landscaped areas, detention or retention ponds, common office facilities or
meeting rooms, common equipment rooms, common satellite or antenna facilities,
common mail rooms, corridors, restrooms, vending areas, lobby areas, and other
Common Areas not included in or as shown as being part of the Leased Premises on
Exhibit A.
2.07 RECONCILIATION. Within four (4) months following the close of each
calendar year, Landlord shall provide Tenant an accounting showing in reasonable
detail all computations of Taxes and Insurance and Operating Expenses due under
Sections 2.04 and 2.05. If the accounting shows that the total of the monthly
payments made by Tenant exceeds the amount of Taxes and Insurance and Operating
Expenses due by Tenant, such amount will be credited against the next required
payment of Taxes and Insurance and Operating Expenses. If the accounting shows
that the total of the monthly payments made by Tenant is less than the amount
due by Tenant, such accounting will be accompanied by an invoice for the
additional amount. Notwithstanding any other provision in this Lease, during the
year in which the Lease terminates, Landlord, prior to the Termination Date, is
entitled to invoice Tenant for Tenant's Pro Rata Share of the excess Operating
Expenses based upon the previous year's Operating Expenses. If this Lease
terminates on a day other than the last day of a calendar year, the amount of
any Taxes and Insurance and Operating Expenses payable by Tenant applicable to
the year in which such termination occurs will be prorated on the ratio that the
number of days from the commencement of the calendar year to and including the
Termination Date bears to 365.
2.08 LATE PAYMENT CHARGE. Other remedies for nonpayment of Base Rent
notwithstanding, if the monthly Base Rent payment is not in Landlord's
possession on or before the tenth (10th) day of the month for which the Base
Rent is due, or if any payment of Additional Rent due Landlord by Tenant is not
received by Landlord on or before the tenth (10th) day of the month next
following the month in which Tenant was invoiced, such amount shall bear
interest at the lesser of (i) the highest lawful rate per annum or (ii) the rate
of one percent (1%) per month until paid for each late payment that occurs more
than once in any twelve (12) month period during the Term. In addition, Landlord
is entitled to charge one hundred dollars ($100.00) for each check or payment,
which is not honored by Tenant's bank. Said charge to be in addition to any
other amounts owed under this Lease.
2.09 HOLDING OVER. If Tenant does not vacate the Leased Premises upon
the expiration or
Page -4-
<PAGE>
termination of this Lease, such holding over shall constitute, and be construed
as, a tenancy at will at a daily rental equal to one-thirtieth (1/30th) of an
amount equal to, in addition to Additional Rent, one and one-half (1 1/2 ) times
the Base Rent being paid by Tenant immediately prior to the expiration or
termination of the Lease, and all other terms and provisions of this Lease shall
apply during such holdover period (with the exclusion of any expansion or
renewal options). During such holdover period, Tenant agrees to vacate and
deliver the Leased Premises to Landlord within ten (10) days of Tenant's receipt
of notice from Landlord to vacate. Landlord may give such notice pursuant to the
notice provisions of Section 14.07 herein or by facsimile transmission. Tenant
agrees to pay the rental payable during the holdover period to Landlord on
demand. No holding over by Tenant, whether with or without the consent of
Landlord and notwithstanding receipt by Tenant of an invoice from Landlord for
holdover rent, will operate to extend the Term. Additionally, Tenant shall pay
to Landlord all damages sustained by Landlord as a result of such holding over
by Tenant.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 USE. The Leased Premises shall be used and occupied only for the
purpose set forth in Section 1.06 and for no other purpose without the consent
of Landlord, such consent not to be unreasonably withheld, conditioned or
delayed. Tenant shall occupy the Leased Premises, conduct its business and
control its agents, employees, invitees and visitors in such a manner as is
lawful, reputable, will not create a nuisance, interfere with Building and/or
Project operations, or affect the structural integrity or design capabilities of
the Building. Tenant shall not conduct any auction, liquidation or going out of
business sale. Outside storage including storage of trucks and other vehicles is
prohibited unless approved by Landlord. Tenant shall neither permit any waste on
the Leased Premises nor allow the Leased Premises to be used in any way which
would, in the opinion of Landlord, be extra hazardous on account of fire or
which would in any way increase or render void the fire insurance on the
Building. If at any time during the Term the State Board of Insurance or other
insurance authority disallows any of Landlord's sprinkler credits or imposes an
additional penalty or surcharge in Landlord's insurance premiums because of
Tenant's original or subsequent placement or use of storage racks or bins,
method of storage or nature of Tenant's inventory or any other act of Tenant,
Tenant agrees to pay as additional rent the increase in Landlord's insurance
premiums directly attributable to the acts of Tenant. Notwithstanding anything
set forth in this Section 3.01, in no way does Landlord warrant or represent,
either expressly or impliedly, that Tenant's use of the Leased Premises is in
accordance with applicable codes or ordinances of the municipality within which
the Building is located.
3.02 SIGNS. No sign (which shall include balloons, flags, pennants,
banners, etc.) of any type or description visible from outside the Leased
Premises may be erected, placed or painted on or about the Leased Premises or
Building by Tenant, except those signs submitted to Landlord in writing and
approved by Landlord in writing (such approval not to be unreasonably withheld,
conditioned or delayed), and which signs are in conformance with (i) Landlord's
sign criteria established for the Project and (ii) all Legal Requirements. Such
permitted signs shall be installed at Tenant's sole cost and expense by a
contractor reasonably approved by Landlord and must be removed by Tenant in
accordance with the conditions allowing their erection upon expiration or
termination of the Lease. Any damage from such removal shall be repaired at
Tenant's sole cost and expense.
3.03 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Tenant, at Tenant's
sole cost and expense, shall comply with all laws, ordinances, orders, rules and
regulations now in effect or enacted subsequent to the date hereof ("Legal
Requirements") of state, federal, municipal or other agencies or bodies having
jurisdiction over Tenant or the use, condition and occupancy of the Leased
Premises. Tenant shall comply with the rules and regulations of the Building and
Project adopted by Landlord which are set forth on Schedule I attached to this
Lease ("Rules and Regulations"). Landlord is entitled, at all times, to change
and amend the Rules and Regulations in any reasonable manner as Landlord deems
advisable for the safety, care, cleanliness, preservation of good order and
operation or use of the Leased Premises, Building or Project. All such changes
and amendments to the Rules and Regulations must be in writing and sent to
Tenant at the Leased Premises and must thereafter be carried out and observed by
Tenant.
Landlord, as its sole cost and expense, shall comply with all Legal
Requirements of state, federal, municipal or other agencies or bodies having
jurisdiction over Landlord with respect to operation of the Project. Landlord
represents and warrants that on the Commencement Date, the Leased Premises will
be in compliance with applicable Legal Requirements.
3.04 WARRANTY OF POSSESSION. Landlord warrants that it has the right
and authority to execute this
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Lease, and Tenant, upon compliance with the terms, conditions, covenants and
agreements contained in this Lease, will be entitled to possession of the Leased
Premises during the Term as well as any extension or renewal thereof. Tenant
agrees that Landlord is not responsible for the acts or omissions of any other
tenant or third party that may interfere with Tenant's use and enjoyment of the
Leased Premises.
3.05 INSPECTION. Landlord or its authorized agents may, at any and all
reasonable times upon twenty four (24) hour prior notice to Tenant, except in
the event of an emergency, when notice is not required, enter the Leased
Premises to inspect the same, conduct tests, environmental audits or other
procedures to determine Tenant's compliance with the terms hereof; to supply any
other service to be provided by Landlord; to show the Leased Premises to
prospective purchasers, tenants or mortgagees; to alter, improve or repair the
Leased Premises or any other portion of the Building or for any other purpose
Landlord deems necessary. Tenant shall not change Landlord's lock system or in
any other manner prohibit Landlord from entering the Leased Premises. Landlord
is entitled to use any and all means which Landlord may deem proper to open any
door in an emergency without liability therefor. During the final one hundred
eighty (180) days of the Term, Landlord or its authorized agents have the right
to erect or maintain on or about the Leased Premises or the Building customary
signs advertising the Leased Premises for lease.
3.06 HAZARDOUS WASTE. The term "Hazardous Substances," as used in this
Lease means pollutants, contaminants, toxic or hazardous wastes, or any other
substances, the presence or use of which is regulated, restricted or prohibited
by any "Environmental Law," which term means any federal, state or local law,
ordinance or other statute of a governmental or quasi-governmental authority
relating to pollution or protection of the environment. Tenant hereby agrees
that (i) no activity will be conducted on the Leased Premises that will produce
any Hazardous Substance, except for such activities that are part of the
ordinary course of Tenant's business activities and of which Landlord has been
notified in writing (the "Permitted Activities"), provided said Permitted
Activities are conducted in accordance with all Environmental Laws; Tenant shall
obtain all required permits and pay all fees and provide any testing required by
any governmental agency; (ii) the Leased Premises will not be used in any manner
for the storage of any Hazardous Substances except for the temporary storage of
such materials that are used in the ordinary course of Tenant's business and of
which Landlord has been notified in writing (the "Permitted Materials"),
provided such Permitted Materials are properly stored in a manner and location
meeting all Environmental Laws; Tenant shall obtain any required permits and pay
any fees and provide any testing required by any governmental agency; (iii) no
portion of the Leased Premises will be used as a landfill or a dump; (iv) Tenant
will not install any underground or above ground tanks of any type; (v) Tenant
will not allow any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute a public
or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be
brought onto the Leased Premises, except for the Permitted Materials, and if so
brought or found located thereon, the same must be immediately removed, with
proper disposal, and all required cleanup procedures must be diligently
undertaken pursuant to all Environmental Laws.
Landlord or Landlord's representative have the right but not the
obligation to enter the Leased Premises in accordance with Section 3.05 for the
purpose of inspection to ensure compliance with all Environmental Laws. Should
Landlord determine, in Landlord's commercially reasonable opinion, that any
Hazardous Substances, including Permitted Materials, are being improperly
stored, used, or disposed of, or any Hazardous Activities are being improperly
conducted, then Tenant shall immediately take such corrective action as required
by Landlord. Should Tenant fail to take such corrective action within ten (10)
days, or such shorter period as may be necessary to avoid or prevent damage to
the Leased Premises, Landlord is entitled to perform such work and Tenant shall
promptly reimburse Landlord for any and all commercially reasonable costs
associated with said work. If at any time during or after the Term, the Leased
Premises are found to be so contaminated or subject to said conditions, due to
the existence of Hazardous Substances within the Leased Premises, Tenant shall
diligently institute proper and thorough cleanup procedures at Tenant's sole
cost. Before taking any action to comply with Environmental Laws or to clean up
Hazardous Substances contaminating the Leased Premises, Tenant shall submit to
Landlord a plan of action, including all plans and documents required by any
Environmental Law to be submitted to a governmental authority (collectively a
"plan of action"). Such plan of action must be implemented by a licensed
environmental contractor. Before Tenant begins the actions necessary to comply
with Environmental Laws or to clean up contamination from Hazardous Substances,
Landlord must (1) approve the nature, scope and timing of the plan of action,
and (2) approve any and all covenants and agreements to affect the plan of
action.
Tenant represents and warrants to its actual knowledge that it has not
been previously cited for any environmental violations by any applicable
governmental agency.
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3.07 PARKING AND ROAD USE. Tenant is granted the license and right to
use, for the benefit of Tenant, its employees, customers, invitees and
licensees, 1) the parking areas adjacent to the Building of which the Leased
Premises are a part on an unassigned, unreserved and non-exclusive basis as
available on a first come, first serve basis, and 2) the roadways within the
Project, in each case subject to reasonable regulation by Landlord. Landlord
reserves the right in its sole discretion to designate specific areas within the
parking areas for the exclusive use of Tenant, its visitors and invitees to the
Building. In no event shall Tenant use more parking spaces than the minimum
number of parking spaces required by all Legal Requirements for office/warehouse
projects in the municipality in which the Project is located. No parking is
permitted on any common drive areas by Tenant or any of Tenant's employees,
customers, invitees or licensees. No driving or parking of any vehicles on
non-paved areas adjoining the Building or within the Project is permitted.
LANDLORD WILL HAVE NO LIABILITY TO TENANT, ITS EMPLOYEES, AGENTS OR INVITEES FOR
ANY CLAIMS OR LIABILITIES ARISING FROM SUCH PARTIES' USE OF THE PARKING AREAS
AND TENANT WILL INDEMNIFY AND HOLD LANDLORD HARMLESS AGAINST ALL SUCH CLAIMS AND
LIABILITIES UNLESS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
LANDLORD.
3.08 PERMITS. Tenant shall, at its sole cost, be responsible for all
permits with respect to the operation of its business and use and occupancy of
the Leased Premises and will provide copies of such permits from time to time
upon the written request of Landlord.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 BUILDING SERVICES. Landlord shall provide water, sewer,
electricity and gas service connections to the Leased Premises. Tenant shall
arrange for connection to such services and pay directly to the appropriate
supplier all cost of utility services to the Leased Premises, including, but not
limited to, security deposits, initial connection charges, taxes, penalties,
surcharges or the like, all charges for gas, electricity, telephone, water,
sprinkler monitoring devices, sanitary and storm sewer service, and security
systems. If any services are jointly metered with other premises or property,
Landlord shall make a reasonable determination of Tenant's proportionate share
of the cost of such services and Tenant shall pay such share to Landlord within
ten (10) days of receipt of any invoice thereof. Landlord may cause, at Tenant's
expense, any utility services which are jointly metered to be separately
metered. Tenant shall pay all costs caused by Tenant introducing excessive
pollutants or solids other than ordinary human waste into the sanitary sewer
system, including permits, fees and charges levied by any governmental
subdivision for any such pollutants or solids. Tenant shall be responsible for
the installation and maintenance of any dilution tanks, holding tanks, settling
tanks, sewer sampling devices, sand traps, grease traps or similar devices as
may be required by any governmental subdivision for Tenant's use of the sanitary
sewer system. If the Leased Premises are in a multi-occupancy Building, Tenant
shall pay all surcharges levied due to Tenant's use of sanitary sewer or waste
removal services insofar as such surcharges affect Landlord or other tenants in
the Building. Except as set forth herein, Landlord shall not be required to pay
for any utility services, supplies or upkeep in connection with the Leased
Premises. Utility services for the Common Areas shall be part of Operating
Expenses.
Tenant agrees that Landlord shall not be liable to Tenant in any
respect for damages to either person, property or business on account of any
interruption or failure of utility services unless resulting from the gross
negligence or willful misconduct of Landlord. No such interruption or failure
may be construed as an eviction of Tenant or entitle Tenant to (i) any abatement
of rent, (ii) terminate the Lease, or (iii) be relieved from fulfilling any
covenant or agreement contained herein, provided, if any interruption or failure
of utilities is the result of the gross negligence or willful misconduct of
Landlord and such condition continues in excess of five (5) business days from
the date Tenant notifies Landlord, Base Rent shall abate until the affected
utilities are restored to the Leased Premises. Should any malfunction of the
improvements or facilities to the Leased Premises or Building (which by
definition do not include any improvements or facilities of Tenant above
Building standard improvements) occur for any reason, Landlord shall use
reasonable diligence to see that such malfunction is corrected promptly, but
Tenant will not be entitled to any claim for rebate or abatement of rent or
damages (except as set forth above) on account of such malfunction or of any
interruptions in service occasioned thereby or resulting therefrom.
4.02 TELECOMMUNICATIONS. Tenant, at its sole cost, may order and use
telephone and other wired telecommunications services in accordance with rules
and regulations adopted by Landlord from time to time, but Tenant must obtain
Landlord's prior written consent to Tenant's use of services of a telephone or
telecommunications service provider who is not then providing service to the
Building such consent not to
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be unreasonably withheld, conditioned or delayed. Unless Landlord otherwise
requests or consents in writing, Tenant's telecommunications equipment must be
located in the Leased Premises. Landlord has no obligation to maintain Tenant's
telecommunications equipment, wiring, or other infrastructure, and if any such
service is interrupted, curtailed, or discontinued, Landlord will have no
obligation or liability to Tenant, unless such interruption, curtailment or
discontinuance results from the gross negligence or willful misconduct of
Landlord.
(a) Upon expiration or termination of this Lease, Tenant, at its sole
cost, will remove all telecommunications equipment and other facilities for
telecommunications transmittal (except wiring) installed in the Leased Premises
or in the Building for Tenant's use.
(b) Tenant will not use any wireless communications equipment (other
than cellular telephones and Tenant's wireless network), antennae, or satellite
receiver dishes within the Leased Premises nor within the Building or Project
without Landlord's prior written consent, such consent not to be unreasonably
withheld, conditioned or delayed.
(c) If Tenant's telecommunications service, transmitters, or receivers
unreasonably interfere with Landlord's or another occupant's telecommunications
services or equipment, Tenant will promptly eliminate any such interference or,
if Tenant cannot eliminate it, stop using the equipment or service causing such
interference. Tenant assumes liability for all claims and liabilities related to
such interference.
4.03 SECURITY SERVICE. Tenant acknowledges and agrees that, while
Landlord may patrol the Project, Landlord is not providing any security services
with respect to the Leased Premises and that Landlord shall not be liable to
Tenant for, and Tenant waives any claim against Landlord with respect to, any
loss by theft or any other damage suffered or incurred by Tenant in connection
with any unauthorized entry into the Leased Premises or any other breach of
security with respect to the Leased Premises.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 EXISTING CONDITIONS. Tenant accepts the Leased Premises as of the
date hereof, subject to all recorded matters, laws, ordinances, and governmental
rules, regulations and orders. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any warranty or representation of any kind, either
express or implied as to the condition of the Leased Premises or the suitability
of the Leased Premises for Tenant's intended use. The taking of the possession
of the Leased Premises by Tenant will be conclusive evidence that Tenant accepts
the Leased Premises, that the Leased Premises have been completed in accordance
with Section 6.01 and were in good and satisfactory condition at the time such
possession was so taken, subject to latent defects and punch-list items that do
not interfere with the operation of Tenant's business within the Leased
Premises. Prior to taking occupancy of the Leased Premises, Tenant shall sign a
copy of the space plan of the Leased Premises acknowledging its condition on the
date thereof (unless Landlord waives such requirement) and execute Landlord's
Standard Tenant Acceptance of Premises form accepting such condition.
5.02 LANDLORD REPAIRS AND MAINTENANCE. Landlord is not required to
maintain or make any repairs or replacements of any kind or character to the
Leased Premises or the Building during the Term except as are set forth in this
Section 5.02. Landlord shall maintain in good repair and condition, except for
reasonable wear and tear, only the roof, foundation, surfaces and structural
soundness of exterior walls and the Common Areas. Landlord shall not be
responsible for windows, window glass, plate glass, doors, store fronts,
uninsured losses and damages caused by Tenant or any third party, provided,
Landlord shall be responsible for any damage to windows, window glass or plate
glass resulting from improper or defective construction of the Building.
Landlord's costs of maintaining the items set forth in this section are subject
to the Additional Rent provisions in Section 2.03. Tenant is not entitled to any
abatement or reduction of rent by reason of any maintenance, repairs or
replacements made by Landlord under this Lease. Nothing contained herein
entitles Tenant to perform any maintenance or make any repairs or replacements
to the Leased Premises at Landlord's expense or to terminate the Lease based on
the physical condition of the Leased Premises.
5.03 TENANT REPAIRS AND MAINTENANCE. Tenant shall, at its sole cost and
expense, maintain, repair and replace all other parts of the Leased Premises in
good repair and condition (reasonable wear and tear and damages caused by
casualty or condemnation excepted), including, but not limited to windows,
window glass, plate glass, doors, store fronts, floor covering, interior walls,
partitions and finish work,
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interior side of structural walls, water closets, kitchens, interior plumbing,
electrical systems, heating, ventilating and air-conditioning systems, down
spouts, fire sprinkler system, dock bumpers, levelers, lights, truck and rail
doors, pest control and extermination and trash pick-up and removal. Tenant
shall repair and pay for any damage caused by any act or omission of Tenant or
Tenant's agents, employees, invitees, licensees or visitors to the Leased
Premises, the Building, or the Project. Repairs and replacements shall be done
in a good and workmanlike manner and in accordance with all Legal Requirements.
If Tenant fails to maintain, repair or replace promptly as required herein,
Landlord may, at its option, perform on Tenant's behalf and charge the cost of
such performance to Tenant as Additional Rent which is due and payable by Tenant
within ten (10) days from receipt of Landlord's invoice. Costs under this
section are the total responsibility of Tenant and do not constitute Operating
Expenses under Section 2.03.
Landlord agrees that Tenant may receive the benefit of all guaranties
and warranties owned by Landlord on items for which it is responsible for repair
and maintenance, provided it complies with all conditions established in any
such guaranty or warranty.
5.04 REQUEST FOR REPAIRS. All requests for repairs or maintenance that
are the responsibility of Landlord pursuant to any provision of this Lease must
be made in writing to Landlord at the address in Section 1.05 and delivered
pursuant to Section 14.07. Notices sent by facsimile transmission are not
considered proper notice for purposes hereof. After receipt of written notice,
Landlord is entitled to a reasonable time within which to perform such repairs
or maintenance.
5.05 TENANT DAMAGES. Tenant shall not allow any damage to be committed
to any portion of the Leased Premises or Building, and at the termination of
this Lease Tenant shall deliver the Leased Premises to Landlord in as good
condition as existed at the Commencement Date of this Lease, ordinary wear and
tear excepted. Tenant shall notify Landlord in writing prior to vacating the
Leased Premises and arrange to meet with Landlord for a joint inspection
immediately prior to evacuation. The cost and expense of any repairs necessary
to restore the condition of the Leased Premises shall be borne by Tenant. Should
Landlord be required to expend any sums to ensure compliance with this Section
5.05, Tenant shall reimburse Landlord within ten (10) days of receipt of notice
from Landlord.
5.06 MAINTENANCE CONTRACT. Tenant shall, at its sole cost and expense,
during the Term maintain a regularly scheduled preventative maintenance/service
contract on an annual basis with a maintenance contractor for the servicing of
all heating, ventilation and air conditioning systems and equipment within or
servicing the Leased Premises. The maintenance contractor and contract must be
approved by Landlord and must include all services suggested by the equipment
manufacturer. A copy of the service contract shall be provided to Landlord
within sixty (60) days following the Commencement Date. In the event the service
contract is not provided, then Landlord shall have the right, but not the
obligation to have the work done and the cost therefor shall be charged to
Tenant as Additional Rent and shall become payable by Tenant with the payment of
the rent next due hereunder.
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01 LANDLORD IMPROVEMENTS. Landlord will complete the construction of
the improvements to the Leased Premises, including installation of any covered
carports as shown in the Plans (the "Landlord Improvements"), in accordance with
the plans and specifications attached hereto as Exhibit "C", subject to approval
by local regulatory authorities (the "Plans"). Any changes or modifications to
the Plans must be made and accepted by written change order or agreement signed
by Landlord and Tenant and will constitute an amendment to this Lease. Any
Landlord Improvements made by Landlord are the property of Landlord and must be
surrendered to Landlord upon the termination of this Lease without credit to
Tenant. Upon completion of any Landlord Improvements, Landlord shall provide and
Tenant shall acknowledge receipt and acceptance of "as-built plans" of all work
done in accordance with this Section 6.01. Tenant acknowledges that the cost of
any Landlord Improvements shall include the reasonable cost of preparation of
the Plans and a construction management fee payable to Landlord of five percent
(5%) of the total cost of construction of the Landlord Improvements.
6.02 TENANT IMPROVEMENTS. Tenant shall not make or allow to be made any
alterations or physical additions in or to the Leased Premises ("Tenant
Alterations") without complying with all Legal Requirements and without first
obtaining the written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed Consent may be conditioned upon
review and approval of plans and specifications and monitoring of construction
by Landlord. Landlord's review of Tenant's plans and specifications and
monitoring of construction shall be solely for Landlord's benefit and shall
impose no
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duty or obligation on Landlord to confirm that the plans and specifications
and/or construction comply with any Legal Requirements. Any Tenant Alterations
shall be made or performed at Tenant's sole cost and expense by a contractor or
contractors acceptable to Landlord and in a good, workmanlike and lien free
manner. All Tenant Alterations are the property of Landlord and must be
surrendered to Landlord upon the termination of this Lease without credit to
Tenant; provided, however, Landlord, at its option, may require Tenant to remove
any Tenant Alterations in order to restore the Leased Premises to the condition
existing at the time Tenant took possession, all costs of removal to be borne by
Tenant, provided notice of such requirement is delivered to Tenant at the time
consent for the Tenant Alterations is given. This clause does not apply to
moveable equipment or furniture owned by Tenant, which may be removed by Tenant
at the end of the Term if no Event of Default then exists and if such equipment
and furniture are not then subject to any other rights, liens and interest of
Landlord and such removal can be accomplished without material damage to the
Leased Premises. Upon completion of any Tenant Alterations, Tenant shall provide
Landlord with "as built plans" (on CADD form), copies of all construction
contracts and proof of payment for all labor and materials (including lien
waivers). To defer the cost to Landlord associated with Tenant Alterations and
confirming that such improvements are in accordance with the terms of this Lease
and comply with all Legal Requirements, Tenant shall reimburse Landlord upon
demand, as Additional Rent, any sums expended by Landlord for third party
examination of the architectural, mechanical, electrical and plumbing plans for
any Tenant Alterations.
Tenant, at its own cost and expense and without Landlord's prior
approval, may erect such shelves, bins, machinery and trade fixtures
(collectively "Trade Fixtures") in the ordinary course of its business provided
that such items do not alter the basic character of the Leased Premises, do not
overload or damage the Leased Premises, may be removed without injury to the
Leased Premises, and the construction, erection, and installation thereof
complies with all Legal Requirements and with Landlord's requirements set forth
above. Upon expiration or earlier termination or this Lease, Tenant shall remove
its Trade Fixtures and shall repair any damage caused by such removal.
ARTICLE 7.00 CASUALTY AND INSURANCE
7.01 SUBSTANTIAL DESTRUCTION. (a) If the Leased Premises or any part
thereof are damaged by fire or other casualty, Tenant shall give prompt written
notice thereof to Landlord. 1) If the Leased Premises are totally destroyed by
fire or other casualty, 2) if the Leased Premises are damaged so that rebuilding
cannot reasonably be completed within one hundred eighty (180) days after the
date of written notification by Tenant to Landlord of the destruction, 3) if the
Leased Premises are part of a Building which is substantially destroyed (even
though the Leased Premises are not totally or substantially destroyed), 4) if
the Leased Premises or Building is damaged by fire or other casualty and
applicable law would prevent rebuilding to substantially the condition prior to
such fire or casualty, 5) if any mortgagee requires the insurance proceeds
payable as a result of such casualty to be applied to the payment of the
mortgage debt, 6) the Leased Premises are materially damaged and less than two
(2) years remain on the Term on the date of such casualty, or 7) the insurance
proceeds are insufficient to reconstruct the Leased Premises or Building to
substantially the same condition prior to such fire or casualty, Landlord may at
its option terminate this Lease by providing Tenant written notice thereof
within sixty (60) days of such casualty and abate Base Rent and Additional Rent
for the unexpired portion of the Term effective as of the date of the written
notification.
(b) If the Leased Premises or any part thereof are damaged by fire or
other casualty, Tenant shall give prompt written notice thereof to Landlord. (1)
If the Leased Premises are totally destroyed by fire or other casualty, (2) if
the Leased Premises are damaged so that rebuilding cannot reasonably be
completed within one hundred eighty (180) days after the date of written
notification by Tenant to Landlord of the destruction, (3) if the Leased
Premises are damaged by fire or other casualty and applicable law would prevent
rebuilding to substantially the condition prior to such fire or casualty, (4) if
the Leased Premises are materially damaged and less than two (2) years remain on
the Term on the date of such casualty, and in any of the foregoing situations,
the damage is not the result of any act or omission of Tenant, Tenant may at its
option terminate this Lease by providing Landlord written notice thereof within
thirty (30) days of such casualty and Base Rent and Additional Rent shall abate
for the unexpired portion of the Term effective as of the date of the written
notification.
7.02 PARTIAL DESTRUCTION. If this Lease is not terminated under Section
7.01, Landlord shall proceed with reasonable diligence to rebuild or repair the
Building and Landlord Improvements, if applicable, to substantially the same
condition in which they existed prior to the damage, provided, Tenant agrees
that Landlord has no obligation to repair or rebuild any Tenant Alterations or
Tenant's furniture,
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fixtures or personal property. If the Leased Premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, Landlord
and Tenant agree to adjust the Base Rent and Additional Rent payable under this
Lease during the period for which the Leased Premises are untenantable to such
an extent as may be fair and reasonable under the circumstances. Landlord and
Tenant hereby waive the provisions of any law from time to time in effect during
the Term relating to the effect upon leases of partial or total destruction of
leased property and agree that their respective rights in the event of damage or
destruction are those specifically set forth herein. In no event shall Landlord
be required to spend more than the insurance proceeds received by Landlord.
7.03 PROPERTY INSURANCE. Landlord shall at all times during the Term of
this Lease maintain a Fire and Extended Coverage, Vandalism and Malicious
Mischief policy of insurance with the premiums paid in advance, issued by and
binding upon some solvent insurance company, insuring the Building and Landlord
Improvements, if applicable, in an amount equal to the full replacement cost of
the Building and Landlord Improvements, if applicable, as of the date of the
loss (exclusive of excavation and foundation costs, costs of underground items
and costs of parking lot paving and landscaping); provided, Landlord shall not
be obligated in any way or manner to insure any Tenant Alterations or any
personal property (including, but not limited to, any furniture, machinery,
goods or supplies) of Tenant upon or within the Leased Premises, or any fixtures
installed or paid for by Tenant upon or within the Leased Premises. Tenant shall
have no right in or claim to the proceeds of any policy of insurance maintained
by Landlord even if the cost of such insurance is borne by Tenant as set forth
in Article 2.00. Notwithstanding the foregoing, in the event Landlord has a net
worth in excess of $50,000,000, it shall be entitled to self insure against all
risk provided for in this paragraph in lieu of obtaining the insurance set forth
herein.
7.04 WAIVER OF SUBROGATION. ANYTHING IN THIS LEASE TO THE CONTRARY NOT
WITHSTANDING, LANDLORD AND TENANT HEREBY WAIVE AND RELEASE EACH OTHER OF AND
FROM ANY AND ALL RIGHT OF RECOVERY, CLAIM, ACTION OR CAUSE OF ACTION, AGAINST
EACH OTHER, THEIR AGENTS, OFFICERS, EMPLOYEES OR ANY PARTY CLAIMING BY, THROUGH
OR UNDER LANDLORD OR TENANT, FOR ANY LOSS OR DAMAGE THAT MAY OCCUR TO THE LEASED
PREMISES, IMPROVEMENTS TO THE BUILDING OF WHICH THE LEASED PREMISES ARE A PART,
OR PERSONAL PROPERTY WITHIN THE BUILDING, BY REASON OF FIRE, EXPLOSION, OR ANY
OTHER OCCURRENCE, REGARDLESS OF CAUSE OR ORIGIN, INCLUDING NEGLIGENCE OF
LANDLORD OR TENANT AND THEIR AGENTS, OFFICERS AND EMPLOYEES WHICH LOSS OR DAMAGE
IS (OR WOULD HAVE BEEN, HAD THE INSURANCE REQUIRED BY THIS LEASE BEEN
MAINTAINED) COVERED BY INSURANCE. LANDLORD AND TENANT AGREE IMMEDIATELY TO GIVE
THEIR RESPECTIVE INSURANCE COMPANIES WHICH HAVE ISSUED POLICIES OF INSURANCE
COVERING ALL RISK OF DIRECT PHYSICAL LOSS, WRITTEN NOTICE OF THE TERMS OF THE
MUTUAL WAIVERS CONTAINED IN THIS SECTION AND TO HAVE THE INSURANCE POLICIES
PROPERLY ENDORSED, IF NECESSARY, TO PREVENT THE INVALIDATION OF THE INSURANCE
COVERAGES BY REASON OF THE MUTUAL WAIVERS.
7.05 HOLD HARMLESS. (a) TENANT AGREES THAT LANDLORD IS NOT, AND DURING
THE TERM HEREOF WILL NOT BE, LIABLE TO TENANT OR TENANT'S EMPLOYEES, AGENTS,
INVITEES, LICENSEES OR VISITORS, OR TO ANY OTHER PERSON, CLAIMING BY, THROUGH OR
UNDER TENANT FOR AN INJURY TO PERSON OR DAMAGE TO PROPERTY ON OR ABOUT THE
LEASED PREMISES OR FOR LOSS OF OR DAMAGE TO TENANT'S BUSINESS CAUSED BY ANY ACT
OR OMISSION OF TENANT OR LANDLORD, THEIR RESPECTIVE AGENTS, SERVANTS OR
EMPLOYEES, ANY TENANT IN THE BUILDING AND/OR PROJECT OF WHICH THE LEASED
PREMISES ARE A PART, OR OF ANY OTHER PERSON ENTERING UPON THE LEASED PREMISES
UNDER EXPRESS OR IMPLIED INVITATION BY TENANT, OR CAUSED BY THE IMPROVEMENTS
LOCATED ON THE LEASED PREMISES BECOMING OUT OF REPAIR, THE FAILURE OR CESSATION
OF ANY SERVICE PROVIDED BY LANDLORD (INCLUDING HEATING, VENTILATING AND AIR
CONDITIONING SYSTEMS, SECURITY SERVICE AND DEVICES) UNLESS CAUSED BY THE GROSSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD. TENANT AGREES TO INDEMNIFY AND
HOLD HARMLESS LANDLORD OF AND FROM ANY LOSS, ATTORNEY'S FEES, EXPENSES OR CLAIMS
ARISING OUT OF ANY SUCH DAMAGE OR INJURY.
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(b) LANDLORD AGREES THAT TENANT IS NOT, AND DURING THE TERM HEREOF WILL
NOT BE, LIABLE TO LANDLORD OR LANDLORD'S EMPLOYEES, AGENTS, INVITEES, LICENSEES
OR VISITORS, OR TO ANY OTHER PERSON, CLAIMING BY, THROUGH OR UNDER LANDLORD FOR
AN INJURY TO PERSON OR DAMAGE TO PROPERTY ON OR ABOUT THE PROJECT (EXCLUDING THE
LEASED PREMISES) OR FOR LOSS OF OR DAMAGE TO LANDLORD'S BUSINESS CAUSED BY ANY
ACT OR OMISSION OF LANDLORD OR TENANT, THEIR RESPECTIVE AGENTS, SERVANTS OR
EMPLOYEES, OR OF ANY OTHER PERSON ENTERING UPON THE PROJECT (EXCLUDING THE
LEASED PREMISES) BY EXPRESS OR IMPLIED INVITATION OF LANDLORD, OR CAUSED BY THE
IMPROVEMENTS LOCATED ON THE PROJECT (EXCLUDING THE LEASED PREMISES) BECOMING OUT
OF REPAIR UNLESS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR TENANT.
LANDLORD AGREES TO INDEMNIFY AND HOLD HARMLESS TENANT OF AND FROM ANY LOSS,
ATTORNEY'S FEES, EXPENSES OR CLAIMS ARISING OUT OF ANY SUCH DAMAGE OR INJURY.
7.06 TENANT'S INSURANCE.
A. At all times commencing on and after the earlier of the Commencement
Date and the date Tenant or its agents, employees or contractors enters the
Leased Premises for any purpose, Tenant shall carry and maintain, at its sole
cost and expense:
1. Commercial General Liability Insurance applicable to the
Leased Premises, its appurtenances and Tenant's actions within the
Building and Common Areas, providing, on an occurrence basis, a minimum
combined single limit of Two Million Dollars ($2,000,000.00), with a
contractual liability endorsement covering Tenant's indemnity
obligations under this Lease;
2. All Risks of Physical Loss Insurance written at full
replacement cost value and with a replacement cost endorsement covering
all of Tenant's personal property and Tenant Alterations in the Leased
Premises; and
3. Workers' Compensation Insurance as required by the state in
which the Leased Premises is located and in amounts as may be required
by applicable statute.
B. Before any repairs, alterations, additions, improvements, or
construction are undertaken by or on behalf of Tenant, Tenant shall carry and
maintain, at its expense, or Tenant shall require any contractor performing work
on the Leased Premises to carry and maintain, at no expense to Landlord, in
addition to Workers' Compensation Insurance, All Risk Builder's Risk Insurance
in the amount of the full replacement cost of any alterations, additions or
improvements and Commercial General Liability Insurance (including, without
limitation, Contractor's Liability coverage, Contractual Liability coverage and
Completed Operations coverage,) written on an occurrence basis with a minimum
combined single limit of Two Million Dollars ($2,000,000.00) and adding "the
named Landlord hereunder (or any successor thereto), and its respective members,
principals, beneficiaries, partners, officers, directors, employees, agents and
any Mortgagee(s)", and other designees of Landlord as the interest of such
designees appear, as additional insureds (collectively referred to as the
"Additional Insureds").
C. Any company writing any insurance which Tenant is required to
maintain or cause to be maintained pursuant to the terms of this Lease (all such
insurance as well as any other insurance pertaining to the Leased Premises or
the operation of Tenant's business therein being referred to as "Tenant's
Insurance"), as well as the form of such insurance, are at all times subject to
Landlord's reasonable approval, and each such insurance company must have an
A.M. Best rating of "A-" or better and be licensed and qualified to do business
in the state in which the Leased Premises are located. All policies evidencing
Tenant's Insurance (except for Workers' Compensation Insurance) must specify
Tenant as named insured and the Additional Insureds as additional insureds.
Provided that the coverage afforded Landlord and any designees of Landlord is
not reduced or otherwise adversely affected, all of Tenant's Insurance may be
carried under a blanket policy covering the Leased Premises and any other of
Tenant's locations. All policies of Tenant's Insurance must contain endorsements
requiring that the insurer(s) give Landlord and its designees at least thirty
(30) days' advance written notice of any change, cancellation, termination or
lapse of said insurance. Tenant shall be solely responsible for payment of
premiums for all
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of Tenant's Insurance. Tenant shall deliver to Landlord at least fifteen (15)
days prior to the time Tenant's Insurance is first required to be carried by
Tenant, and upon renewals at least fifteen (15) days prior to the expiration of
any such insurance coverage, certificates evidencing all policies procured by
Tenant in compliance with its obligations under this Lease. The limits of
Tenant's Insurance do not in any manner limit Tenant's liability under this
Lease.
D. Tenant shall not do or fail to do anything in, upon or about the
Leased Premises which will (1) violate the terms of any of Landlord's insurance
policies; (2) prevent Landlord from obtaining policies of insurance acceptable
to Landlord or any Mortgagees; or (3) result in an increase in the rate of any
insurance on the Leased Premises, the Building, any other property of Landlord
or of others within the Building. In the event of the occurrence of any of the
events set forth in this Section, Tenant shall pay Landlord upon demand, as
Additional Rent, the cost of the amount of any increase in any such insurance
premium, provided that the acceptance by Landlord of such payment may not be
construed to be a waiver of any rights by Landlord in connection with a default
by Tenant under the Lease. If Tenant fails to obtain the insurance coverage
required by this Lease, Landlord may, at its option, obtain such insurance for
Tenant, and Tenant shall pay, as Additional Rent, the cost of all premiums
thereon and all of Landlord's costs associated therewith.
ARTICLE 8.00 CONDEMNATION
8.01 SUBSTANTIAL TAKING. (a) If all or a substantial portion of the
Leased Premises or a substantial portion of the Building (even though the Leased
Premises are not taken) are taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain or by
purchase in lieu thereof, and the taking would prevent or materially interfere
with the use of the Leased Premises or the Building for the purpose for which it
is then being used, then Landlord may, but is not required to, terminate this
Lease and abate Base Rent and Additional Rent during the unexpired portion of
this Lease effective on the date title or physical possession is taken by the
condemning authority, whichever occurs first.
(b) If all or a substantial portion of the Leased Premises are taken
for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right or eminent domain or by purchase in lieu thereof, and
the taking would prevent or materially interfere with the use of the Leased
Premises for the purpose for which it is then being used, then Tenant may, but
is not required to, terminate this Lease and Base Rent and Additional Rent shall
abate during the unexpired portion of this Lease effective on the date title or
physical possession is taken by the condemning authority, whichever occurs
first.
8.02 PARTIAL TAKING. If a portion of the Leased Premises or a portion
of the Building are taken as set forth in Section 8.01 above and this Lease is
not terminated as provided above, Landlord shall, at Landlord's sole risk and
expense, restore and reconstruct the Leased Premises and Landlord Improvements,
if applicable, to the extent necessary to make it reasonably tenantable,
provided, if the damages received by Landlord are insufficient to cover the
costs of restoration, Landlord may terminate this Lease. Landlord shall have no
obligation to restore any Tenant Alterations. The Base Rent and Additional Rent
payable under this Lease during the unexpired portion of the Term will be
adjusted to such an extent as is fair and reasonable under the circumstances.
8.03 In the event of any taking as set forth above, Tenant may seek a
separate award for any loss of improvements made or paid for by Tenant, its
personal property, and its moving expenses (so long as no such claim diminishes
Landlord's claim or award), but all other claims of any nature shall belong to
Landlord. In the event Tenant does not receive such a separate award, Landlord
shall be entitled to receive any and all sums awarded for the taking.
8.04 Notwithstanding anything herein to the contrary, if the holder of
any indebtedness secured by a mortgage or deed of trust covering the Building
and/or Project requires that the condemnation proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is imposed.
ARTICLE 9.00 ASSIGNMENT OR SUBLEASE
9.01 LANDLORD ASSIGNMENT. Landlord is entitled to sell, transfer or
assign, in whole or in part, its
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rights and obligations under this Lease and in the Leased Premises. Any such
sale, transfer or assignment shall, upon delivery to Tenant of a written
assumption by the transferee of Landlord's obligations hereunder, release
Landlord from all liabilities under this Lease arising after the date of such
sale, assignment or transfer, and Tenant agrees to look solely to the successor
in interest of Landlord for the performance of such obligation.
9.02 TENANT ASSIGNMENT. Tenant shall not assign, in whole or in part,
this Lease, or allow it to be assigned, in whole or in part, by operation of law
or otherwise (including without limitation, if Tenant's voting securities are
not traded on any national securities exchange, by transfer of more than a fifty
percent (50%) interest in Tenant in a single transaction or in a series of
transactions, which transfer will be deemed an assignment) or mortgage or pledge
the same or sublet the Leased Premises, in whole or in part, without the prior
written consent of Landlord which consent shall not be unreasonably withheld,
conditioned or delayed. In no event will any such assignment or sublease ever
release Tenant or any guarantor from any obligation or liability hereunder.
9.03 CONDITIONS OF ASSIGNMENT. If Tenant desires to assign or sublet
all or any part of the Leased Premises it must so notify Landlord at least
thirty (30) days in advance of the date on which Tenant desires to make such
assignment or sublease. Tenant shall provide Landlord with a copy of the
proposed assignment or sublease and such information as Landlord might request
concerning the proposed subtenant or assignee to allow Landlord to make informed
judgments as to the financial condition, reputation, operations and general
desirability of the proposed subtenant or assignee. Within fifteen (15) days
after Landlord's receipt of Tenant's proposed assignment or sublease and all
required information concerning the proposed subtenant or assignee, Landlord is
entitled to exercise any of the following options: (1) consent to the proposed
assignment or sublease, pursuant to a Consent Agreement on a form approved by
Landlord in its reasonable discretion, and, if the rent due and payable by any
assignee or subtenant under any such permitted assignment or sublease (or a
combination of the rent payable under such assignment or sublease plus any bonus
or any other consideration or any payment incident thereto) exceeds the rent
payable under this Lease for such space, Tenant shall pay to Landlord fifty
percent (50%) of such excess rent and other excess consideration immediately
upon receipt thereof by Tenant, after deducting therefrom all costs and expenses
incurred by Tenant in connection with such assignment or sublease, or (2)
refuse, in its reasonable discretion and judgment, to consent to the proposed
assignment or sublease. If Landlord exercises option (1) above, and thereafter
an Event of Default occurs, Landlord, in addition to any other remedies provided
by this Lease or provided by law, may, at its option, collect directly from the
assignee or subtenant all rents becoming due to Tenant by reason of the
assignment or sublease, and Landlord will be entitled to a security interest in
all property located on the Leased Premises to secure payment of such sums.
Tenant agrees that any collection directly by Landlord from the assignee or
subtenant may not be construed as, or constitute, a novation or a release of
Tenant or any guarantor from the further performance of its obligations under
this Lease. As a condition to a request for Landlord's review of any assignment
or sublease, Tenant must pay Landlord all reasonable out-of-pocket legal fees
and expenses incurred by Landlord in connection with the review by Landlord of
Tenant's requested assignment or sublease together with any reasonable
out-of-pocket legal fees and disbursements incurred in the preparation and/or
review of any documentation required by the requested assignment or sublease
within five (5) days of demand for payment thereof, provided Tenant's
responsibilities for such amounts shall not exceed $1,000.
9.04 SUBORDINATION. Tenant accepts this Lease subject and subordinate
to any recorded mortgage or deed of trust lien or assignment of leases and rents
presently existing or hereafter created upon the Building or Project (provided,
however, that any such mortgagee may, at any time, subordinate such mortgage,
deed of trust or other lien or assignment of leases and rents to this Lease) and
to any renewals thereof. Tenant agrees that this clause is self-operative and no
further instrument of subordination is required to effect such subordination.
Tenant also agrees upon demand to execute additional instruments subordinating
this Lease as Landlord may require. If the interests of Landlord under this
Lease are transferred by reason of foreclosure or other proceedings for
enforcement of any first mortgage or deed of trust lien or assignment of leases
and rents on the Leased Premises, Tenant agrees to be bound to the transferee
(sometimes called the "Purchaser"), under the terms, covenants and conditions of
this Lease for the balance of the term remaining, including any extensions or
renewals, with the same force and effect as if the Purchaser were Landlord under
this Lease, and, if requested by the Purchaser, Tenant agrees to attorn to the
Purchaser, including the first mortgagee under any such mortgage if it be the
Purchaser, as its landlord, provided, in either event such Purchaser agrees to
recognize the rights of Tenant hereunder as long as no Event of Default exists.
Upon transfer of Landlord's interest to Purchaser, Purchaser shall not be 1)
subject to any credit, demand, claim, counterclaim, offset or defense which
theretofore accrued to Tenant against Landlord; 2) liable for any previous act
or omission of Landlord, 3) unless consented to by
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Landlord's lender, bound by any previous modification of the Lease or prepayment
of more than one month's Base Rent or Additional Rent in advance; 4) required to
account for any Security Deposit unless actually delivered to Landlord's lender
by Landlord; 5) bound by any obligation to make any payment or grant any credit
except as specifically provided for in this Lease; and 6) responsible for any
monies owing to Tenant by Landlord.
9.05 ESTOPPEL CERTIFICATES. Tenant agrees to furnish, from time to
time, within five (5) days after receipt of a request from Landlord, Landlord's
mortgagee or any potential purchaser of the Building or Project, a statement
certifying, if applicable, the following (noting any variances): Tenant is in
possession of the Leased Premises; the Leased Premises are acceptable; the Lease
is in full force and effect; the Lease is unmodified; Tenant claims no present
charge, lien, or claim of offset against Base Rent; the Base Rent is paid for
the current month, but is not prepaid for more than one month and will not be
prepaid for more than one month in advance; to Tenant's knowledge, there is no
existing default by reason of some act or omission by Landlord; and such other
matters as may be reasonably required by Landlord, Landlord's mortgagee or any
potential purchaser. Any notice and cure provisions set forth in any other part
of this Lease do not apply to a default of this section 9.05.
ARTICLE 10.00 LIENS
10.01 LANDLORD'S LIEN. As security for payment of Base Rent, Additional
Rent and damages, Tenant hereby grants to Landlord a lien upon all property of
Tenant now or subsequently located upon the Leased Premises and Tenant agrees
not remove such property from the Leased Premises except in the ordinary course
of business, provided at the time of such removal no Event of Default exists. If
an Event of Default exists, Landlord may enter upon the Leased Premises, by
picking or changing locks if necessary, and take possession of all or any part
of the personal property, and may sell all or any part of the personal property
at a public or private sale, in one or successive sales, with or without notice,
to the highest bidder for cash, on behalf of Tenant and convey all of Tenant's
title and interest in the personal property sold. The proceeds of the sale of
the personal property shall be applied by Landlord toward the reasonable costs
and expenses of the sale, including attorney's fees, and then toward the payment
of all sums then due by Tenant to Landlord under the terms of this Lease. Any
excess remaining will be paid to Tenant or any other person entitled thereto by
law.
10.02 UNIFORM COMMERCIAL CODE. This Lease is intended as and
constitutes a security agreement within the meaning of the Uniform Commercial
Code of the state in which the Leased Premises are situated. Landlord, in
addition to the rights prescribed in this Lease, is entitled to all of the
rights, titles, liens and interests in and to Tenant's property, now or
hereafter located upon the Leased Premises, which may be granted a secured
party, as that term is defined, under the Uniform Commercial Code to secure to
Landlord payment of all sums due and the full performance of all Tenant's
covenants under this Lease. Tenant shall on request execute and deliver to
Landlord a financing statement for the purpose of perfecting Landlord's security
interest under this Lease or Landlord may file this Lease or a copy thereof as a
financing statement. Unless otherwise provided by law and for the purpose of
exercising any right pursuant to this section, Landlord and Tenant agree that
any applicable requirement of reasonable notice is met if such notice is given
by ten (10) days advance written notice, sent by certified mail, return receipt
requested, to Landlord or Tenant at the addresses specified herein.
ARTICLE 11.00 DEFAULT AND REMEDIES
11.01 DEFAULT BY TENANT. The following events constitute an Event of
Default by Tenant under this Lease:
(a) Tenant fails to pay when due any installment of Base Rent, Taxes
and Insurance, Operating Expenses or Additional Rent within ten (10) days of
delivery of notice of such failure by Landlord;
(b) Tenant fails to comply with any term, provision or covenant of this
Lease, other than the payment of Base Rent or Additional Rent and such failure
continues in excess of thirty (30) days after delivery of notice of failure by
Landlord, or such additional time as may be reasonably necessary provided Tenant
commences and diligently prosecutes cure of such failure, but in no event in
excess of ninety (90) days;
(c) Tenant or any guarantor of Tenant's obligations hereunder files,
causes to be filed or has filed
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against it a petition in bankruptcy or is adjudged bankrupt or insolvent under
any applicable federal or state bankruptcy or insolvency law, or admits that it
cannot meet its financial obligations as they become due; or a receiver or
trustee is appointed for all or substantially all of the assets of Tenant or
such guarantor; or Tenant or any guarantor of Tenant's obligations hereunder
makes a transfer in fraud of creditors or makes an assignment for the benefit of
creditors; or
(d) Tenant does or permits to be done any act which results in a lien
(of any nature) being filed against the Leased Premises, the Building or
Project, and does not cause such lien to be bonded around or discharged or
recode within thirty (30) days following such filing.
11.02 REMEDIES FOR TENANT'S DEFAULT. During the continuation of any
Event of Default, Landlord is entitled to pursue any one or more of the remedies
set forth herein without any notice or demand.
(1) Without declaring the Lease terminated, Landlord may enter upon and
take possession of the Leased Premises, by picking or changing locks if
necessary, and lock out, expel or remove Tenant and any other person who may be
occupying all or any part of the Leased Premises without being liable for any
claim for damages, and relet the Leased Premises on behalf of Tenant and receive
the rent directly by reason of the reletting. Tenant agrees to pay Landlord on
demand any deficiency that may arise by reason of any reletting of the Leased
Premises as such deficiencies occur from time to time; further, Tenant agrees to
reimburse Landlord for any expenditures made by it in order to relet the Leased
Premises, including, but not limited to, leasing commissions, lease incentives,
remodeling and repair costs and reasonable attorney's fees.
(2) Without declaring the Lease terminated, Landlord may enter upon the
Leased Premises, by picking or changing locks if necessary, without being liable
for any claim for damages, and do whatever Tenant is obligated to do under the
terms of this Lease. Tenant agrees to reimburse Landlord on demand for any
expenses which Landlord may incur in effecting compliance with Tenant's
obligations under this Lease including reasonable attorney's fees.
(3) Landlord may terminate this Lease, in which event Tenant shall
immediately surrender the Leased Premises to Landlord, and if Tenant fails to
surrender the Leased Premises, Landlord may, without prejudice to any other
remedy which it may have for possession or arrearage in rent, enter upon and
take possession of the Leased Premises, by picking or changing locks if
necessary, and lock out, expel or remove Tenant and any other person who may be
occupying all or any part of the Leased Premises without being liable for any
claim for damages. Tenant agrees to pay on demand the amount of all loss and
damage which Landlord may suffer by reason of the termination of this Lease
under this section, including without limitation, loss and damage due to the
failure of Tenant to maintain and or repair the Leased Premises as required
hereunder and/or due to the inability to relet the Leased Premises on terms
satisfactory to Landlord or otherwise, and any expenditures made by Landlord in
order to relet the Leased Premises, including, but not limited to, leasing
commissions, lease incentives, and remodeling and repair costs. In addition,
upon termination Landlord may collect from Tenant the value of all future
rentals required to be paid under this Lease from the date Landlord terminates
the Lease until the original Termination Date in accordance with applicable law.
Notwithstanding anything contained in this Lease to the contrary, this Lease may
be terminated by Landlord only by mailing or delivering written notice of such
termination to Tenant, and no other act or omission of Landlord constitutes a
termination of this Lease.
(4) If Landlord exercises its remedy to lock out Tenant in accordance
with any provision of this Lease, Tenant agrees that no notice is required to be
posted by Landlord on any door to the Leased Premises (or elsewhere) disclosing
the reason for such action or any other information, and that Landlord is not
obligated to provide a key to the changed lock to Tenant unless Tenant has
first:
(I) brought current all payments due to Landlord under this
Lease (unless Landlord has permanently repossessed the Leased Premises
or terminated this Lease, in which event payment of all past due
amounts will not obligate Landlord to provide a key);
(II) fully cured and remedied to Landlord's satisfaction all
other Events of Default; and
(III) provided Landlord with additional security deposit and
assurances satisfactory to Landlord that Tenant intends to and is able
to meet and comply with its future obligations under this Lease, both
monetary and non-monetary.
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Upon compliance with the foregoing, Landlord shall, upon written
request by Tenant, at Landlord's convenience, upon receipt by Landlord of an
amount necessary to reimburse itself for time and expense in providing such
service, and upon Tenant's execution and delivery of such waivers and
indemnifications as Landlord may require at Landlord's option either:
(i) escort Tenant or its specifically authorized employees or
agents to the Leased Premises to retrieve personal belongings of
Tenant's employees and property of Tenant that is not subject to a
Security Interest provided in this Lease, or
(ii) obtain from Tenant a list of such property and arrange
for such items to be removed from the Leased Premises and made
available to Tenant at such place at such time as Landlord may
designate, provided however, that if Landlord elects option (ii), then
Tenant must pay in cash in advance to Landlord the estimated costs that
Landlord may incur upon moving and storage charges theretofore incurred
by Landlord with respect to such property.
(5) THE PROVISIONS OF THIS ARTICLE ARE INTENDED TO OVERRIDE AND
SUPERSEDE ANY CONFLICTING PROVISIONS OF THE TEXAS PROPERTY CODE AND ANY
AMENDMENTS OR SUCCESSOR STATUTES THERETO, AND OF ANY OTHER LAW, TO THE MAXIMUM
EXTENT PERMITTED BY THE LAW.
(6) Notwithstanding any other remedy set forth in this Lease, if
Landlord has provided any tenant improvement allowance, and Tenant fails to take
possession of the Leased Premises on the Commencement Date or otherwise allows
an Event of Default to exist at any time during the Term, any unamortized tenant
improvement allowance, will be due and payable immediately.
(7) Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the Leased Premises by reason of the violation by Tenant of any of
the covenants and conditions of this Lease or otherwise.
(8) All of Landlord's rights and remedies set forth herein are
cumulative and pursuit of any remedy specified in this Lease will not constitute
an election to pursue that remedy only, nor preclude Landlord from pursuing any
other remedy available at law or in equity, nor constitute a forfeiture or
waiver of any rent or other amount due to Landlord as described herein.
(9) If Tenant or any guarantor of Tenant's obligations hereunder is the
subject of any insolvency, bankruptcy, receivership, dissolution, reorganization
or similar proceeding, federal or state, voluntary or involuntary, under any
present or future law or act, Landlord is entitled to the automatic and absolute
lifting of any automatic stay as to the enforcement of its remedies under this
Lease, including specifically the stay imposed by Section 362 of the United
States Federal Bankruptcy Code, as amended. Tenant hereby consents to the
immediate lifting of any such automatic stay, and may not contest any motion by
Landlord to lift such stay. Tenant expressly acknowledges that the Leased
Premises is not now and will never be necessary to any plan or reorganization of
any type.
(10) LANDLORD WILL NOT BE LIABLE FOR ANY CLAIMS OR LIABILITIES ARISING
FROM LANDLORD'S EXERCISE OF ITS REMEDIES SET FORTH HEREIN UPON THE OCCURRENCE OF
AN EVENT OF DEFAULT, INCLUDING, WITHOUT LIMITATION, CLAIMS OR LIABILITIES
ARISING FROM LANDLORD'S OWN NEGLIGENCE.
11.03 LANDLORD'S DEFAULT. Landlord shall not be in default of this
Lease unless Landlord fails to perform any of its obligations hereunder within
thirty (30) days after receipt of written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of thirty (30) days, then after such period
of time as is reasonably necessary), with notice to Landlord's mortgagee as
provided in Section 14.12. All obligations of Landlord hereunder shall be
construed as covenants, not conditions and, except as may be otherwise expressly
provided in this Lease, Tenant may not terminate this Lease for breach of
Landlord's obligations hereunder. Any liability of Landlord under this Lease
shall be limited solely to its interest in the Building or Project, and in no
event shall any personal liability be asserted against Landlord in connection
with this Lease nor shall any recourse be had to any other property or assets of
Landlord, its affiliates or any officer, director or employee of the foregoing.
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ARTICLE 12.00 INDEMNITIES
12.01 TENANT'S INDEMNITIES. TO THE FULL EXTENT PERMITTED BY LAW AND
THIS LEASE, TENANT WILL INDEMNIFY AND DEFEND LANDLORD AGAINST ALL LIABILITIES
AND CLAIMS AND THE COSTS AND EXPENSES THEREOF, ARISING OUT OF (i) ANY ACT OR
OMISSION OF TENANT, INCLUDING WITHOUT LIMITATION TENANT'S CONDUCT OF BUSINESS IN
THE LEASED PREMISES OR THE PROJECT, (II) ANY ALLEGED OR ACTUAL VIOLATION OR
FAILURE TO COMPLY WITH ANY LEGAL REQUIREMENT, (III) ANY BREACH, VIOLATION OR
NON-PERFORMANCE OF ANY OBLIGATION OF TENANT UNDER THIS LEASE, OR (IV) ANY
MISREPRESENTATION CONNECTED WITH THE LEASE MADE BY TENANT OR ANY GUARANTOR.
12.02 LANDLORD'S INDEMNITIES. To the full extent permitted by law and
this Lease (AND EXCEPT TO THE EXTENT WAIVED AND RELEASED BY SECTION 7.04 AND
7.05), LANDLORD will indemnify and defend TENANT against all liabilities and
claims and the costs and expenses thereof, arising out of (i) any act or
omission of LANDLORD, including without limitation LANDLORD'S conduct of
business in the BUILDING or the Project, (ii) any actual violation or failure to
comply with any Legal Requirement BY LANDLORD, (iii) any breach, violation or
non-performance of any obligation of LANDLORD under this Lease, or (iv) any
misrepresentation connected with the Lease made by LANDLORD.
ARTICLE 13.00
RESERVED
ARTICLE 14.00 MISCELLANEOUS
14.01 WAIVER. Failure of Landlord to declare an Event of Default
immediately upon its occurrence, or delay in taking any action (including
enforcement of remedies) in connection with an Event of Default, does not
constitute and shall not be deemed a waiver of the Event of Default, and
Landlord is entitled to declare the Event of Default at any time and take such
action as is lawful or authorized under this Lease.
No act or thing done by Landlord or its agents during the Term may be
deemed an acceptance of an attempted surrender of the Leased Premises, and no
agreement to accept a surrender of the Leased Premises will be valid unless made
in writing and signed by Landlord. No reentry or taking possession of the
Premises by Landlord may be construed as an election on its part to terminate
this Lease, unless a written notice of such intention, signed by Landlord, is
given by Landlord to Tenant. Notwithstanding any such reletting or reentry or
taking possession, Landlord may at any time thereafter elect to terminate this
Lease for a continuing previous Event of Default. Tenant and Landlord agree that
Landlord's acceptance of rent following an Event of Default hereunder will not
constitute Landlord's waiver of such Event of Default. The failure of Landlord
to enforce any of the Rules and Regulations against Tenant or any other tenant
in the Building will not constitute a waiver of any such Rules and Regulations.
No waiver of any provision of this Lease is effective unless such waiver is in
writing and signed by Landlord.
14.02 ACT OF GOD OR FORCE MAJEURE. An "act of God" or "force majeure"
is defined for purposes of this Lease as strikes, lockouts, sitdowns, material
or labor restrictions by any governmental authority, unusual transportation
delays, riots, floods, washouts, explosions, earthquakes, fire, storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of the public enemy, wars, insurrections and any other cause not reasonably
within the control of a party and which by the exercise of due diligence a party
is unable, wholly or in part, to prevent or overcome. Neither Landlord or Tenant
is required to perform any non-financial covenant or obligation in this Lease,
or be liable in damages to the other party, so long as the performance or
non-performance of the covenant or obligation is delayed, caused or prevented by
an act of God, force majeure or by the other party.
14.03 ATTORNEY'S FEES. The prevailing party in any litigation between
the parties with respect to the terms, covenants, agreements or conditions of
this Lease, shall be entitled to recover as part of its judgment, reasonable
attorney's fees and costs and expenses incurred therein.
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14.04 SUCCESSORS. This Lease applies to, is binding upon and inures to
the benefit of Landlord and Tenant and their respective heirs, personal
representatives, successors and assigns.
14.05 RENT TAX. If applicable in the jurisdiction where the Leased
Premises are situated, Tenant shall pay and be liable for all rental, sales and
use taxes or other similar taxes, if any, levied or imposed by any city, state,
county or other governmental body having authority, such payments to be in
addition to all other payments required to be paid to Landlord by Tenant under
the terms of this Lease. Any such payment must be paid concurrently with the
payment of the Base Rent, Taxes and Insurance, Operating Expenses or other
charge upon which the tax is based as set forth above.
14.06 CAPTIONS. The captions appearing in this Lease are inserted only
as a matter of convenience and in no way define, limit, construe or describe the
scope or intent of any section.
14.07 NOTICE. All rent and other payments required to be made by Tenant
shall be paid to Landlord at the address set forth in Section 1.05 or at such
other address as Landlord may specify from time to time by written notice. All
payments required to be made by Landlord to Tenant are payable to Tenant at the
address set forth in Section 1.05 or at any other address within the continental
United States as Tenant may specify from time to time by written notice. For
purposes hereof, any notice or document required or permitted to be delivered by
the terms of this Lease (other than delivery of rental payments) will be deemed
to be delivered upon the earlier of actual receipt or (whether or not actually
received) when deposited in the United States Mail, postage prepaid, certified
mail, return receipt requested, addressed to the parties at the respective
addresses set forth in Section 1.05. Rental payments are deemed received only
upon actual receipt. Unless specifically authorized herein, any notice delivered
via facsimile transmission will not satisfy a requirement to give notice under
the terms of this Lease.
14.08 SUBMISSION OF LEASE. Submission of this Lease to Tenant for
signature does not constitute a reservation of space or an option or offer to
lease. This Lease is not deemed effective until execution by and delivery to
both Landlord and Tenant.
14.09 REPRESENTATIONS, WARRANTIES AND COVENANTS OF TENANT. (a) Tenant
represents, warrants and covenants that it is now in a solvent condition; that
no bankruptcy or insolvency proceedings are pending or contemplated by or
against Tenant or any guarantor of Tenant's obligations under this Lease; that
all reports, statements and other data furnished by Tenant to Landlord in
connection with this Lease are true and correct in all material respects; that
the execution and delivery of this Lease by Tenant does not contravene, result
in a breach of, or constitute a default under any contract or agreement to which
Tenant is a party or by which Tenant may be bound and does not violate or
contravene any law, order, decree, rule or regulation to which Tenant is
subject; and that there are no judicial or administrative actions, suits, or
proceedings pending or threatened against or affecting Tenant or any guarantor
of Tenant's obligations under this lease. If Tenant is a corporation, limited
liability company or partnership, each of the persons executing this lease on
behalf of Tenant represents and warrants that Tenant is duly organized and
existing, is qualified to do business in the state in which the Leased Premises
are located, has full right and authority to enter into this Lease, that the
persons signing on behalf of Tenant are authorized to do so by appropriate
corporate, company or partnership action and that the terms, conditions and
covenants in this Lease are enforceable against Tenant. If Tenant is a
corporation, limited liability company or partnership, Tenant, upon Landlord's
request, will deliver evidence satisfactory to Landlord that the execution and
delivery of this Lease has been duly authorized and properly executed.
(b) Representations, Warranties and Covenants of Landlord. Landlord
represents, warrants and covenants that it is now in a solvent condition; that
no bankruptcy or insolvency proceedings are pending or contemplated by or
against Landlord that all reports, statements and other data furnished by
Landlord to Tenant in connection with this Lease are true and correct in all
material respects; that the execution and delivery of this Lease by Landlord
does not contravene, result in a breach of, or constitute a default under any
contract or agreement to which Landlord is a party or by which Landlord may be
bound and does not violate or contravene any law, order, decree, rule or
regulation to which Landlord is subject; and that there are no judicial or
administrative actions, suits, or proceedings pending or threatened against or
affecting Landlord. Landlord represents and warrants that it is duly organized
and existing, is qualified to do business in the state in which the Leased
Premises are located, has full right and authority to enter into this Lease,
that the persons signing on behalf of Landlord are authorized to do so by
appropriate corporate, company or partnership action and that the terms,
conditions and covenants in this Lease are enforceable against Landlord.
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14.10 SEVERABILITY. If any provision of this Lease or the application
thereof to any person or circumstance is rendered invalid or unenforceable to
any extent, the remainder of this Lease and the application of such provisions
to other persons or circumstances remains unaffected thereby and continues to be
enforced to the greatest extent permitted by law.
14.11 SURVIVAL. All obligations of Tenant hereunder not fully performed
as of the expiration or earlier termination of the Term shall survive the
expiration or earlier termination of the Term, including, without limitation,
all payment obligations and all obligations concerning the condition of the
Leased Premises.
14.12 NOTICE TO MORTGAGEES. Tenant shall serve written notice of any
claimed default or breach by Landlord under this Lease upon any such mortgagee,
and no notice to Landlord will be effective unless such notice is served upon
said mortgagee; notwithstanding anything to the contrary contained herein,
Tenant agrees to allow such mortgagee the same period following receipt of such
notice to cure such default or breach as is afforded Landlord; provided, in the
event it is necessary for said such mortgagee to foreclose on the property of
which the Leased Premises are a part in order to cure such default, such
mortgagee will be entitled to such additional time as is necessary to cure such
default provided such default is cured within sixty (60) days of the last day
for cure originally set forth in this Lease.
14.13 NO RECORDATION. Neither Landlord nor Tenant shall record this
Lease without the prior written consent of the other party.
14.14 COUNTERPARTS. This Lease may be executed in two or more
counterparts, and it is not necessary that any one of the counterparts be
executed by all of the parties hereto. Each fully or partially executed
counterpart constitutes an original, but all such counterparts taken together
constitute but one and the same instrument.
14.15 GOVERNING LAW/VENUE. THIS LEASE MUST BE CONSTRUED UNDER AND IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES
OF AMERICA AS APPLICABLE TO TRANSACTIONS WITHIN THE STATE OF TEXAS. TENANT
HEREBY SUBMITS TO THE JURISDICTION OF ANY COURT OF COMPETENT JURISDICTION
SITTING IN DALLAS COUNTY, TEXAS.
14.16 BROKER. Tenant represents and warrants that Tenant has dealt with
no broker except Swearingen Realty Group ("Broker"), and that, insofar as Tenant
knows, no other broker negotiated this Lease or is entitled to any commission in
connection herewith. Landlord agrees to indemnify and hold Tenant harmless from
and against any liabilities or claims arising with respect to Broker or any
other broker or similar parties whose claim arises by, through or on behalf of
Landlord. Tenant agrees to indemnify and hold Landlord harmless from and against
any liabilities or claims (and costs of defending against and investigating such
claims) of any other broker or similar parties whose claim arises by, through or
on behalf of Tenant.
14.17 PUBLICATION. Tenant hereby agrees that Landlord may, but is not
required, at no cost to Tenant, to publicize and/or advertise the execution of
this Lease and the related transaction. Tenant will not disclose the terms of
this Lease to any other tenants in the Building or Project.
14.18 DTPA WAIVER. TENANT WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF TENANT'S OWN SELECTION, TENANT VOLUNTARILY
CONSENTS TO THIS WAIVER WITH RESPECT TO THIS LEASE AND THE PROPERTY LEASED UNDER
THIS LEASE. TENANT IS VOLUNTARILY AGREEING TO THE WAIVER OF CONSUMER RIGHTS
PROVISION AND CONSIDERS IT BINDING AND ENFORCEABLE; NO STATEMENT OR
REPRESENTATION BY LANDLORD, OR ANY ATTORNEY OR OTHER REPRESENTATIVE ACTING ON
ITS BEHALF, HAS INFLUENCED OR INDUCED TENANT TO AGREE TO THE WAIVER OF CONSUMER
RIGHTS PROVISION.
14.19 CONSTRUCTION OF LEASE. Tenant declares that Tenant has read and
understands all parts of this Lease, including all printed parts hereof. It is
agreed that, in the construction and interpretation of the terms of this Lease,
the rule of construction that a document is to be construed most strictly
against the
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party who prepared the same will not be applied, it being agreed that both
parties hereto have participated in the preparation of the final form of this
Lease. Wherever in this Lease provision is made for liquidated damages, it is
because the parties hereto acknowledge and agree that the determination of
actual damages (of which such liquidated damages are in lieu) is speculative and
difficult to determine; the parties agree that liquidated damages herein are not
a penalty.
14.20 FINANCIAL STATEMENTS. Tenant acknowledges that it has provided
Landlord with its financial statement(s) as a primary inducement to Landlord's
agreement to lease the Leased Premises to Tenant, and that Landlord has relied
on the accuracy of said financial statement(s) in entering into this Lease.
Tenant represents and warrants that the information contained in said financial
statement(s) is true, complete and correct in all material aspects, and agrees
that the foregoing representations are conditions to all of Landlord's
obligations under this Lease.
At the request of Landlord (only upon the sale or refinancing of the
Building or Project, upon any extension or renewal hereof, or upon any Event of
Default), Tenant shall, not later than thirty (30) days following such request,
furnish to Landlord a financial statement of Tenant as of the end of the prior
fiscal quarter and year accompanied by a statement of income and expense for
such quarter and year then ended, together with a certificate of the chief
financial officer, owner or partner of Tenant to the effect that the financial
statements have been prepared in conformity with accounting principles
consistently applied and fairly present the financial condition and results of
operations of Tenant as of and for the periods covered.
14.21 TIME OF ESSENCE. With respect to all required acts of Landlord
and Tenant, time is of the essence of this Lease.
14.22 JOINT AND SEVERAL LIABILITY. If there is more than one Tenant,
the obligations hereunder imposed upon Tenant are joint and several. If there is
a guarantor(s) of Tenant's obligations hereunder, the obligations of Tenant are
joint and several obligations of Tenant and each such guarantor, and Landlord
need not first proceed against Tenant hereunder before proceeding against each
such guarantor, nor will any such guarantor be released from its guarantee for
any reason whatsoever, including, without limitation, any amendment of this
Lease, any forbearance by Landlord or waiver of any of Landlord's rights, the
failure to give Tenant or any such guarantor any notices, or the release of any
party liable for the payment or performance of any of Tenant's obligations
hereunder.
14.23 BUILDING NAME AND ADDRESS. Landlord reserves the right at any
time to change the name by which the Building is designated and its address, and
Landlord has no obligation or liability whatsoever for costs or expenses
incurred by Tenant as a result of such name change or address change of the
Building.
14.24 TAXES AND TENANT'S PROPERTY. Tenant is solely liable for all
taxes levied or assessed against personal property, furniture or fixtures placed
by Tenant in the Premises. If any such taxes for which Tenant is liable are
levied or assessed against Landlord or Landlord's property and if Landlord
elects to pay the same or if the assessed value of Landlord's property is
increased by inclusion of personal property, furniture or fixtures placed by
Tenant in the Premises, and Landlord elects to pay the taxes based on such
increase, Tenant shall pay Landlord upon demand that part of such taxes for
which Tenant is primarily liable hereunder.
14.25 CONSTRUCTIVE EVICTION. Tenant is not entitled to claim a
constructive eviction from the Leased Premises unless Tenant has first notified
Landlord in writing of the condition giving rise thereto, and, if the complaints
are justified, unless Landlord has failed to remedy such conditions within
reasonable time after receipt of said notice.
14.26 EXHIBITS. All exhibits, attachments, riders and addenda referred
to in this Lease are incorporated herein and made a part hereof for all intents
and purposes.
ARTICLE 15.00 AMENDMENT AND LIMITATION OF WARRANTIES
15.01 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY TENANT, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR
TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN
WRITING IN THIS LEASE.
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15.02 AMENDMENT. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR
EXTENDED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LANDLORD AND TENANT AND BY
ANY MORTGAGEE AS TO THE ITEMS DESCRIBED IN SECTION 14.12.
15.03 LIMITATION OF WARRANTIES. LANDLORD AND TENANT EXPRESSLY AGREE
THAT THERE ARE NO IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE, AND
THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN THIS
LEASE.
15.04 WAIVER OF JURY TRIAL. LANDLORD AND TENANT HEREBY AGREE NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT NOW OR HEREAFTER
EXISTS WITH REGARD TO THIS LEASE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY LANDLORD AND TENANT, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LANDLORD OR TENANT IS HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
ARTICLE 16.00 OTHER PROVISIONS
16.01 TENANT FINISH ALLOWANCE FOR LANDLORD CONSTRUCTION OF LANDLORD
IMPROVEMENTS. Landlord shall provide Tenant an interior finish allowance (the
"Tenant Finish Allowance") of $$5.00 per square foot of the Leased Premises for
the Landlord Improvements. Upon, completion and approval by Landlord and Tenant
of the Plans in accordance with Section 6.01 hereof, Landlord shall price the
Plans at the best competitive prices available for projects of similar size,
location and timing. In the event the cost of the Landlord Improvements called
for by the Plans (including the reasonable cost associated with the preparation
of the Plans and Landlord's construction management fee) exceeds $$5.00 per
square foot of the Leased Premises, Landlord shall notify Tenant in writing, at
which point Tenant shall deposit the excess amount with Landlord, who in turn
shall deposit such amount into an interest bearing account with a national
financial association, selected by Landlord. All interest earned on such account
shall be for Tenant's benefit. Funds from this account shall be disbursed
exclusively for the Landlord Improvements, such disbursement to be commenced
once the cost of the Landlord Improvements as constructed have exceeded $$5.00
per square foot of the Leased Premises. Disbursements shall be made from time to
time but at least every two (2) weeks, based on the progress of the work as
certified by Landlord's architect, such certification to be in a form as may be
reasonably required by Landlord. To the extent that all funds in excess of
$$5.00 per square foot of the Leased Premises (including accrued interest
thereon) are not used for the Landlord Improvements, they shall be returned to
Tenant within thirty (30) days following completion of Landlord Improvements.
16.02 RENEWAL OPTION. Provided no Event of Default exists either on the
date Tenant gives Landlord the renewal notice required below or at the end of
the Term of this Lease, Tenant, but not any assignee or subtenant of Tenant,
shall have the right to renew this Lease for one (1) additional term of sixty
(60) months, upon the same terms and conditions contained in this Lease except:
(i) the renewal term will contain no further renewal options unless expressly
granted by Landlord in writing; and (ii) the Base Rent for the Leased Premises
shall be equal to the Base Rent for the last month of the Term times 1.15 (i.e.
115%).
If Tenant desires to renew this Lease, Tenant will notify Landlord by
written notice of its intention to renew not less than six (6) months prior to
the expiration date of the Term, time being of the essence. Once given, Tenant's
notice to renew shall be irrevocable. If Tenant fails to timely give said
notice, Tenant shall be deemed to have waived Tenant's option to renew. Upon the
valid exercise by Tenant of such option to renew, at the request of either party
hereto and within thirty (30) days after such request, Tenant and Landlord shall
enter into a written supplement to this Lease incorporating the terms,
conditions and provisions applicable to the renewal Term determined in
accordance with the provisions of this Section 16.02.
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16.03 RIGHT OF FIRST REFUSAL ("ADJACENT SPACE"). Provided no Event of
Default exists on the date Landlord receives a third party offer, Landlord
hereby grants to Tenant, but not any assignee or subtenant of Tenant, a right of
first refusal during the initial Term (but not any renewal Term) to lease all or
any part (but in no event less than 6,000 square feet) of the 39,305 square feet
of vacant space in the Building immediately contiguous to the Leased Premises
and as shown on Exhibit "A" as the "Adjacent Space" (the "Adjacent Space"). If
Landlord receives an offer to lease any portion of the Adjacent Space from a
third party, Landlord shall notify Tenant in writing of its intention to accept
the Offer (the "Offer"). Tenant shall have five (5) business days from receipt
of such notice to notify Landlord in writing, of Tenant's intent to exercise its
right of first refusal with respect to the Adjacent Space which is the subject
of the Offer. If the terms of the Offer include space in addition to the
Adjacent Space, Tenant shall be required to lease all of such space if it
desires to lease the Adjacent Space. If Tenant does not exercise its right of
first refusal, then Landlord may lease such space to the third party, provided.
if the third party does not execute a lease or following execution of a lease
vacates the space subject to the Right of First Refusal, Tenant's Right of First
Refusal with respect thereto shall be reinstated.
If Tenant elects to exercise its Right of First Refusal to lease the
Adjacent Space which is the subject of the Offer, the terms for the lease of
such space shall be the same as the terms for the Leased Premises, with the
following exceptions: (i) there shall be no abated Base Rent; and (ii) if
Tenant's unencumbered cash and marketable securities are equal to two (2) times
the sum of (a) the tenant finish allowance that Tenant will receive as set forth
below, plus (b) the amount of commission Landlord will be obligated to pay for
Tenant's expansion into the Adjacent Space and Tenant has positive net income
for the six (6) month period immediately preceding Tenant's exercise, Tenant
shall be entitled to a tenant finish allowance as follows:
1. if the Right of First Refusal is exercised within the first twelve
(12) months of the Term, Tenant shall receive a tenant finish allowance equal to
$10.00 psf of the Adjacent Space, the improvements to, and use of such allowance
for the Adjacent Space to be in accordance with Sections 6.01 and 16.01; and
2. if the Right of First Refusal is exercised after the first twelve
(12) months of the Term, Tenant shall have the following options: (aa) receive a
tenant finish allowance equal to $10.00 psf multiplied by a fraction, the
numerator of which is the number of months remaining in the Term and the
denominator of which is 72, or (bb) receive a tenant finish allowance equal to
$10.00 psf and extend the Term for the entire Leased Premises for a period of
sixty (60) months, during which extended time Base Rent shall be equal to Base
Rent for the seventy second (72nd) month of the Term. In either event, the
improvements to, and use of the allowance for the Adjacent Space shall be in
accordance with Sections 6.01 and 16.01.
Within thirty (30) days from the date of Tenant's election to exercise
its right of first refusal, Tenant and Landlord will enter into a written
supplement to this Lease to add the Adjacent Space to the Leased Premises and to
modify Tenant's Pro Rata Share of Taxes and Insurance and Operating Expenses as
set forth in Section 2.04 and 2.05 hereof, otherwise Tenant's right of first
refusal shall terminate and Landlord may lease such space to any third party.
16.04 EXPANSION OPTION. Provided no Event of Default exists on the date
of exercise of such option, Landlord hereby grants to Tenant, but not any
assignee or subtenant of Tenant, an ongoing right to expand the Leased Premises
during the initial Term (but not any renewal Term) to include all or any part
(but in no event less than 6,000 square feet) of the 39,305 square feet of
vacant space in the Building immediately contiguous to the Leased Premises and
as shown on Exhibit "A" as the "Adjacent Space" (the "Expansion Space"). Tenant
shall notify Landlord in writing of Tenant's intent to exercise its expansion
option with respect to the portion of the Expansion Space specified therein.
If Tenant elects to exercise its expansion option to lease any such
applicable portion of the Expansion Space, the terms for the lease of such space
shall be the same as the terms for the Leased Premises, with the following
exceptions: (i) there shall be no abated Base Rent, and (ii) if Tenant's
unencumbered cash and marketable securities are equal to two (2) times the sum
of (a) the tenant finish allowance that Tenant will receive as set forth below,
plus (b) the amount of commission Landlord will be obligated to pay for Tenant's
expansion into the Adjacent Space, and (iii) that Tenant has positive net income
for the six (6) month period immediately preceding Tenant's exercise, Tenant
shall be entitled to a tenant finish allowance as follows:
1. if the expansion option is exercised within the first twelve (12)
months of the Term, Tenant shall receive a tenant finish allowance equal to
$10.00 psf of the applicable portion of the Expansion
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Space, the improvements to, and use of such allowance for, the applicable
portion of the Expansion Space to be in accordance with Sections 6.01 and 16.01;
and
2. if the expansion option is exercised after the first twelve (12)
months of the Term, Tenant shall have the following options: (a) receive a
tenant finish allowance equal to $10.00 psf multiplied by a fraction, the
numerator of which is the number of months remaining in the Term and the
denominator of which is 72, or (bb) receive a tenant finish allowance equal to
$10.00 psf and extend the Term for the entire Leased Premises for a period of
sixty (60) months during which extended time Base Rent shall be equal to the
Base Rent for such seventy-second (72nd) month of the Term. In either event, the
improvements to, and use of the allowance for the Expansion Space shall be in
accordance with Sections 6.01 and 16.01.
Within thirty (30) days from the date of Tenant's election to exercise
its expansion option, Tenant and Landlord will use good faith efforts to enter
into a written supplement to this Lease to add the applicable portion of the
Expansion Space to the Leased Premises and to modify Tenant's Pro Rata Share of
Taxes and Insurance and Operating Expenses as set forth in Section 2.04 and 2.05
hereof.
16.05 EXISTING FURNITURE. Tenant may use the existing furniture listed
on Exhibit D attached hereto (the "Furniture") during the Term at no additional
cost. Tenant shall maintain the furniture in good condition and repair during
the Term. Provided no Event of Default exists at the end of the Term, Landlord
shall convey the Furniture to Tenant, without warranty.
Tenant shall be responsible for coordination of and all costs
associated with relocating any of the Furniture to allow contractors access to
complete the Landlord Improvements. Tenant shall also be responsible for
coordination of and all costs associated with setting up the Furniture after
construction is completed.
16.06 GENERATOR, UNINTERRUPTED POWER SUPPLY ("UPS"). Tenant
acknowledges that there is a Generator and UPS system serving the Leased
Premises and Adjacent Space (collectively the "Served Space") the Served Space
is connected to such Generator and UPS system. Tenant shall have the
non-exclusive right to the use of the Generator and UPS system, but acknowledges
that other tenants leasing space within the Adjacent Space will also have access
to use of the Generator and UPS system. Tenant shall, at its sole cost and
expense during the Term, maintain a regularly scheduled preventative
maintenance/service contract on the Generator and UPS system on an annual basis
with a maintenance contractor acceptable to Landlord, such contract to include
all services suggested by the equipment manufacturer. A copy of the service
contract shall be provided to Landlord within sixty (60) days following the
Commencement Date. In the event the service contract is not provided, then
Landlord shall have the right, but not the obligation to have the work done and
the cost therefor shall be charged to Tenant as Additional Rent and shall become
payable by Tenant with the payment of the rent next due hereunder. In the event
another tenant occupies space within the Adjacent Space, such tenant shall be
responsible for reimbursing Tenant for its pro rata share of the costs paid by
Tenant for maintaining the Generator and UPS system. Such pro rata share shall
be determined by multiplying Tenant's costs by a fraction, the numerator of
which is the number of square feet contained within such tenant's space and the
denominator of which is the number of square feet contained in the Served Space.
Tenant agrees to provide documentation to such tenant detailing its costs
associated with such maintenance. LANDLORD AGREES TO INCLUDE LANGUAGE IN ANY
LEASE FOR ANY OF THE ADJACENT SPACE OBLIGATING SUCH TENANT FOR ITS PRO RATA
SHARE OF THE COSTS ASSOCIATED WITH TENANT'S MAINTENANCE OF THE GENERATOR AND UPS
SYSTEM.
[Signature page follows]
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ARTICLE 17.00 SIGNATURES / DATE OF EXECUTION
SIGNED this 9th day of April, 2004.
Landlord: Tenant:
VANTAGE DEVELOPMENT #21, INC. I-SECTOR CORPORATION
By: /s/ Fredrick L. Albrecht By: /s/ Mark T. Hilz
------------------------------------- --------------------------------
Name: Fredrick L. Albrecht Name: Mark T. Hilz
----------------------------------- ------------------------------
Title: President Title: President
---------------------------------- -----------------------------
Tenant Federal Employer
Identification Number:
76-0650041
-----------------------------------
Schedule I - Rules and Regulations
Exhibit A - Leased Premises
Exhibit B - Land
Exhibit C - Plans
Exhibit D - Furniture
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<PAGE>
Schedule I
RULES AND REGULATIONS
1. Landlord agrees to furnish Tenant all necessary initial keys and locks
without charge. Additional keys will be furnished at a nominal charge.
Tenant shall not change locks or install additional locks on doors
without prior written consent of Landlord. Tenant shall not make or
cause to be made duplicates of keys procured from Landlord without
prior approval of Landlord. All keys to Leased Premises shall be
surrendered to Landlord upon the expiration or earlier termination of
this Lease.
2. Tenant will refer all contractors, contractor's representatives and
installation technicians rendering any service on or to the Leased
Premises for Tenant to Landlord for Landlord's approval before
performance of any contractual service. Tenant's contractors and
installation technicians shall comply with Landlord's rules and
regulations pertaining to construction and installation. This provision
shall apply to all work performed on or about the Leased Premises or
Project, including installation of telephones, satellite equipment,
telegraph equipment, electrical devices and attachments and
installations of any nature affecting roofs, floors, walls, woodwork,
trim, windows, ceilings and equipment or any other physical portion of
the Leased Premises or Project.
3. Tenant shall not at any time occupy any part of the Leased Premises or
Project as sleeping or lodging quarters.
4. Tenant shall not place, install or operate on the Leased Premises or in
any part of the Building any engine, stove or machinery, or conduct
mechanical operations or cook thereon or therein (with the exception of
microwave ovens for preparation of meals during work hours), or place
or use in or about the Leased Premises or Project any explosives,
gasoline, kerosene, oil, acids, caustics, or any flammable, explosive
or hazardous material without written consent of Landlord.
5. Landlord will not be responsible for lost, stolen or damaged personal
property, equipment, money or jewelry from the Leased Premises or the
Project regardless of whether such loss occurs when the area is locked
against entry or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in
or about the Leased Premises or Project.
7. Employees of Landlord shall not receive or carry messages for or to any
Tenant or other person or contract with or render free or paid services
to any Tenant or to any of Tenant's agents, employees or invitees.
8. None of the parking, truck courts or truck loading areas, recreation or
lawn areas, entries, exits, passages, doors, sidewalks, stairways or
landings shall be blocked or obstructed or any rubbish, litter, trash,
pallets, or material of any nature placed, emptied or thrown into these
areas or such area used by Tenant's agents, employees or invitees at
any time for purposes inconsistent with their designation by Landlord.
Unless provided by Landlord to the Project and as an operating expense
of the Project, it shall be the responsibility of Tenant, at its sole
cost and expense, to provide trash removal or dumpster service. All
dumpsters shall be placed in areas designated by Landlord.
9. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any
damage resulting to them from misuse, including improper disposal of
any materials, or by the defacing or injury of any part of the Building
shall be borne by the person who shall occasion it. No person shall
waste water by interfering with the faucets or otherwise.
10. No person shall disturb occupants of the Building by the use of any
radios, record players, tape recorders, musical instruments, the making
of unseemly noises, the making of unnatural vibrations or any other
unreasonable use.
11. Tenant and its employees, agents and invitees shall park their vehicles
only in those parking areas designated by Landlord. Tenant shall not
leave any vehicle in a state of disrepair (including without
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<PAGE>
limitation, flat tires, out of date inspection stickers or license
plates) on the Leased Premises or Project. If Tenant or its employees,
agents or invitees park their vehicles in areas other than the
designated parking areas or leave any vehicle in a state of disrepair,
Landlord, (i) after giving written notice to Tenant of such violation
or (ii) placing notice of such violation on such vehicle, shall have
the right to remove such vehicles at Tenant's expense.
12. Parking in a parking area shall be in compliance with all parking rules
and regulations established by Landlord from time to time, including
any sticker or other identification system established by Landlord.
Failure to observe the rules and regulations shall subject the vehicle
in violation of the parking rules and regulations to removal. Removal
of a vehicle shall not create any liability on Landlord or be deemed to
interfere with Tenant's right to possession of its Leased Premises.
Vehicles must be parked entirely within the stall lines and all
directional signs, arrows and posted speed limits must be observed.
Parking is prohibited in areas not striped for parking, in aisles,
where "No Parking" signs are posted, on ramps, in cross hatched areas,
and in other areas as may be designated by Landlord. Every person is
required to park and lock his vehicle. All responsibility for damage to
vehicles or persons is assumed by the owner of the vehicle or its
driver. Servicing, repairing or washing vehicles in parking areas of
the Building or Project is prohibited.
13. Movement in or out of the Building of furniture or office supplies and
equipment, or dispatch or receipt by Tenant of any merchandise or
materials shall be done in such a manner as to not block or hinder the
flow of vehicular traffic throughout the Project or block or hinder the
access of any tenant into or out of the Building. Tenant assumes, and
shall indemnify Landlord against, all risks and claims of damage to
persons and properties arising in connection with any said movement.
14. Tenant shall not lay floor covering within the Leased Premises without
written approval of the Landlord. The use of cement or other similar
adhesive materials not easily removed with water is expressly
prohibited.
15. Tenant agrees to cooperate and assist Landlord in the prevention of
canvassing, soliciting and peddling within the Building or Project.
16. It is Landlord's desire to maintain in the Building or Project the
highest standard of dignity and good taste consistent with comfort and
convenience for Tenants. Any action or condition not meeting this high
standard should be reported directly to Landlord. Your cooperation will
be mutually beneficial and sincerely appreciated. Landlord reserves the
right to make such other and further reasonable rules and regulations
as in its judgment may from time to time be necessary, for the safety,
care and cleanliness of the Building or Project and for the
preservation of good order therein.
IN THE EVENT ANY OF THE TERMS OF THE RULES AND REGULATION CONFLICT WITH ANY OF
THE TERMS OF THE LEASE, THE TERMS OF THE LEASE SHALL CONTROL.
Page -27-
<PAGE>
EXHIBIT "A"
LEASED PREMISES
(LEASED PREMISES FLOOR PLAN)
Page -28-
<PAGE>
EXHIBIT "B"
LAND
BEING a 15.61 acre tract of land situated in the Juan Armendaris
Survey, Abstract No. 28 and the Charles Demay Survey. Abstract No. 335, Denton
County, Texas, said tract being all of Lot 1 R-A, Block B, Waters' Ridge, Phase
II, an addition to the City of Lewisville, Texas as recorded in Cabinet R, Page
374, Plat Records. Denton County. Texas (P.R.D.C.T.), said tract being more
particularly described as follows:
BEGINNING at a found "X" cut at the northwesterly end of a corner clip
located at the intersection of the east right-of-way line of Lakeway Drive (60
feet wide) and the north right-of-way line of Lakepointe Drive (variable width);
THENCE North 02 degrees 31 minutes 51 seconds East, along said east
right-of-way line, a distance of 247.28 feet to a set "X" cut for corner:
THENCE North 36 degrees 33 minutes 00 seconds East, continuing along
said east right-of-way line, a distance of 24.13 feet to a ser. "X" cut for
corner;
THENCE North 02 degrees 31 minutes 51 seconds East, continuing along
said east right-of-way line, a distance of 45.00 feet to a set P.K. nail for
corner;
THENCE North 31 degrees 29 minutes 19 seconds West, continuing along
said east right-of-way line, a distance of 24.13 feet to a 1 /2-inch set iron
rod with a yellow plastic cap stamped "HALFF ASSOC. INC." (hereafter referred to
as "with cap") for corner;
THENCE North 02 degrees 31 minutes 51 seconds East. continuing along
said east right-of-way line, a distance of 327.23 feet to a 1/2-inch set iron
rod with cap for the point of curvature of a circular curve to the left having a
radius of 460.00 feet and whose chord bears North 03 degrees 08 minutes 13
seconds West, a distance of 90.86 feet:
THENCE Northerly, continuing along said east right-of-way line and
along said curve to the left, through a central angle of 1 I degrees 20 minutes
06 seconds, an arc distance of 91.00 feet to a 1 /2-inch set iron rod with cap
for corner;
THENCE North 81 degrees 49 minutes 13 seconds East, departing said east
right-of-way line, a distance of 50.84 feet to a 1,/2-inch found iron rod with
cap for the point of curvature of a circular curve to the left having a radius
of 385.00 feet and whose chord bears North 69 degrees 26 minutes 14 seconds
East, a distance of 165.12 feet:
THENCE Northeasterly, along said curve to the left, through a central
angle of 24 degrees 45 minutes 57 seconds, an arc distance of 166.42 feet to a
1/2-inch found iron rod with cap for the point of tangency;
THENCE North 57 degrees 03 minutes 15 seconds East. a distance of
375.38 feet to a 1/2-inch set iron rod with cap for corner on the west line of
Lot 2, Block B. Waters' Ridge Phase 11, an addition to the City of Lewisville,
Texas recorded in Cabinet N, Pages 298-303, P.R.D.C.T.;
THENCE South 35 degrees 07 minutes 20 seconds East, along the common
line between said Lots 1R-A and 2, a distance of 384. 36 feet to a 1/2-inch
found iron rod with cap for the point of curvature of a circular curve to the
left having a radius of 609.86 feet whose chord bears South 47 degrees 09
minutes 33 seconds East, a distance of 254.36 feet;
THENCE Southeasterly. continuing along said common line and along said
curve to the left, through a central angle of 24 degrees 04 minutes 26 seconds,
an arc distance of 256.24 feet to a 1/2-inch set iron rod with cap for corner;
Page -29-
<PAGE>
THENCE South 37 degrees 36 minutes 28 seconds West, departing said
common line, a distance of 208.19 feet to a 1/2-inch found iron rod with cap for
the point of curvature of a circular curve to the left having a radius of 427.75
feet whose chord bears South 18 degrees 54 minutes 50 seconds West, a distance
of 274.20 feet;
THENCE Southwesterly, along said curve to the left, through a central
angle of 37 degrees 23 minutes 16 seconds, an arc distance. of 279.12 feet to a
1/2-inch found iron rod with cap for the point of tangency;
THENCE South 00 degrees 13 minutes 12 seconds West, a distance of
102.70 feet to a found "X" cut for corner on the north right-of-way line of the
aforementioned Lakepointe Drive;
THENCE South 89 degrees 31 minutes 42 seconds West, along said north
right-of-way line, a distance of 29.51 feet to a set "X" cut for the point of
curvature of a circular curve to the left having a radius of 1157.00 feet whose
chord bears South 89 degrees 57 minutes 22 seconds West, a distance of 23.30
feet;
THENCE Southwesterly, along said curve to the left, through a central
angle of 01 degree 09 minutes 14 seconds, an arc distance of 23.30 feet to a set
60-D nail for the point of tangency;
THENCE South 89 degrees 16 minutes 48 seconds West, continuing along
said north right-of-way line, a distance of 67.10 feet to a 1/2-inch found iron
rod with cap for corner;
THENCE South 44 degrees 33 minutes 01 second West, continuing along
said north right-of-way line, a distance of 17.03 feet to a 1/2-inch found iron
rod with cap for corner;
THENCE South 89 degrees 23 minutes 06 seconds West, continuing along
said north right-of-way line. a distance of 589.24 feet to a found "X" cut for
the southeasterly end of a corner clip located at the intersection of the east
right-of-way line of said Lakeway Drive and the north right-of-way line of said
Lakepointe Drive;
THENCE North 43 degrees 48 minutes 57 seconds West, departing said
north right-of-way line and along said corner clip a distance of 20.73 feet to
the POINT OF BEGINNING AND CONTAINING 680,177 square feet or 15.61 acres of
land, more or less.
Page -30-
<PAGE>
Exhibit "C"
PLANS
(CEILING PROPOSED FLOOR PLAN)
Page -31-
<PAGE>
(DEMO CEILING FLOOR PLAN)
Page -32-
<PAGE>
(DEMO FLOOR PLAN)
Page -33-
<PAGE>
(WALLS DEMO FLOOR PLAN)
Page -34-
<PAGE>
(CEILING PROPOSED FLOOR PLAN)
Page -35-
<PAGE>
EXHIBIT "D"
FURNITURE INVENTORY
<Table>
<Caption>
QTY DESCRIPTION
--- -----------
<S> <C>
45 Herman Miller workstations (cubes) - one from south end of vacancy
43 High-back leather conference/desk chairs (black)
142 File cabinets for cubes (black)
3 High-back leather chairs with round base (black)
5 Low-back leather chairs - secretary type (black)
21 Low-back fabric chairs - secretary type (black); 4 non-rolling, 17 on wheels
50 Fabric chairs on wheels (green)
14 File cabinet (5-drawer)
1 Conference table (13 foot)
1 Conference table (8 foot)
1 Conference table (10 foot)
1 Ice maker
3 Lamps
2 Leather club chairs
1 Leather couch
2 Coffee tables - glass
1 Tall table - glass
</Table>
Page -36-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>h13383a2exv23w1.txt
<DESCRIPTION>CONSENT OF GRANT THORNTON LLP
<TEXT>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 6, 2004 accompanying the consolidated
financial statements of I-Sector Corporation and subsidiaries appearing in the
2003 Annual Report of the Company to its shareholders and accompanying the
schedule included in the Annual Report on Form 10-K for the year ended December
31, 2003 which are incorporated by reference or contained in this Registration
Statement and Prospectus. We consent to the incorporation by reference and the
use of the aforementioned reports in the Registration Statement and Prospectus,
and to the use of our name as it appears under the caption "Experts."
GRANT THORNTON LLP
Houston, Texas
April 29, 2004
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>10
<FILENAME>h13383a2exv23w2.txt
<DESCRIPTION>CONSENT OF DELOITTE & TOUCHE LLP
<TEXT>
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 2 Registration
Statement No. 333-113575 of I-Sector Corporation ("I-Sector") on Form S-2 of our
reports dated March 21, 2003, on the consolidated financial statements and
financial statement schedule of I-Sector as of December 31, 2002, and for each
of the two years in the period ended December 31, 2002, included in the Annual
Report on Form 10-K of I-Sector for the year ended December 31, 2003, and to the
use of our report dated March 21, 2003 appearing in the Prospectus, which is
part of this Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
May 3, 2004
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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