-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WSESDOHUi9mg03lJWVXjljXfGvi5rb6r38F7cdIMIS/9hnmPDedvtPHO7KCEgnSZ EFFI+OE7yd6ShYcVu3heCQ== 0001038838-05-000173.txt : 20050210 0001038838-05-000173.hdr.sgml : 20050210 20050210172827 ACCESSION NUMBER: 0001038838-05-000173 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050206 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050210 DATE AS OF CHANGE: 20050210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOMENET CORP CENTRAL INDEX KEY: 0000910639 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 330565710 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22236 FILM NUMBER: 05594265 BUSINESS ADDRESS: STREET 1: 175 SOUTH MAIN STREET STREET 2: SUITE 1240 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 BUSINESS PHONE: 801-502-6100 MAIL ADDRESS: STREET 1: 175 SOUTH MAIN STREET STREET 2: SUITE 1240 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 FORMER COMPANY: FORMER CONFORMED NAME: FARADAY FINANCIAL INC DATE OF NAME CHANGE: 19930816 8-K 1 form8k020605.txt FORM 8-K DATED FEBRUARY 6, 2005 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) ------------------------------------------------- February 6, 2005 HOMENET CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-22236 33-0565710 - ------------------------------- ------------------------ ------------------- (State or other jurisdiction of (Commission file number) (IRS employer incorporation) identification no.) 5252 North Edgewood Drive, Suite 310 84604 ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) (801) 502-6100 --------------------------------------------------- (Registrant's telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13c-4(c) This document contains a total of 27 pages. Item 1.01 Entry into a Material Definitive Agreement Settlement Agreement and Release HomeNet Communications, Inc. ("HCI"), a subsidiary of the Company, was indebted to certain persons in what HCI management believes to be the aggregate principal amount of $273,000; as evidenced by fourteen (14) separate promissory notes (the "Convertible Notes"). The Convertible Notes were convertible into HCI Series B Preferred Stock prior to the merger in which HCI became a subsidiary of the Company (the "Merger"). The holders of the Convertible Notes also held warrants to purchase an aggregate of 121,565 shares of HCI Series B Preferred Stock at an exercise price of $1.00 per share. The holders of four (4) of the Convertible Notes claim to be entitled to receive shares of HCI Series B Preferred Stock in addition to being paid the principal and accrued interest on their Convertible Notes ("Disputed Notes"). Immediately prior to the close of the Merger, HCI had no shares of Series B Preferred Stock outstanding and the Series B Preferred had not been authorized by the HCI board of directors. The individual who negotiated and signed the Disputed Notes on HCI's behalf was HCI's Interim Chief Financial Officer and was also employed by the firm acting as the placement agent for the Convertible Notes ("Placement Agent"). The Disputed Notes were executed on terms not known to, or authorized by HCI's board of directors. Moreover, certain of the Disputed Notes were held by affiliates of the Placement Agent/Chief Financial Officer. On February 7, 2005, HCI, the Company, the Placement Agent and the holders of the Convertible Notes agreed to settle the matter in full. Under the terms of the Settlement Agreement and Release, the parties released each other from liability in connection with the Convertible Notes and related matters. In consideration for the release, the Company agreed to provide to the holders of the Convertible Notes and the Placement Agent, at the discretion of each recipient, with either (i) cash and Company securities (the "Cash Settlement") or (ii) Company securities (the "Conversion Settlement"). Each holder of Convertible Notes and the Placement Agent can elect to accept either the Cash Settlement or the Conversion Settlement through June 1, 2005. In the event all recipients elect a Cash Settlement, the maximum aggregate principal amount of cash payable by the Company in connection with the arrangement is $273,000 plus accrued interest which accrued interest would exceed $90,000 (the exact number depends on when the elections and repayments are made). In addition, the Company would be required to issue over 207,000 shares of common stock and warrants exercisable for more than 157,000 shares of common stock (the exact number shares and warrants varies depending on the amount of accrued interest at the time when the elections and payments are made). In the event of all recipients elect a Conversion Settlement, no funds will be paid to the recipients. Rather, the Company would be required to issue over 629,506 shares of common stock and warrants exercisable for more than 157,000 shares of common stock (the exact number shares and warrants varies depending on the amount of accrued interest at the time when the elections and payments are made). If the Company engages in an equity funding in an amount in excess of $1,000,000 prior to repayment, then the recipients may elect to receive the securities issued in the equity funding (the "Conversion Securities") instead of the common stock referenced above and warrants exercisable for Conversion Securities instead of exercisable for common stock. In addition, the Company agreed to pay $25,669in costs of the holders of Convertible Notes and the Placement Agent in connection with the settlement agreement. Equipment Financing Arrangements HCI has entered into equipment financing arrangement with Pinnacle Capital, LLC. Under this arrangement that became effective on or about February 7, 2005, Pinnacle provided HCI with $41,127 in financing. This amount is to be 2 repaid over a thirty-six month period and is secured by specified items of Company equipment. The monthly payments under this arrangement are $1,426.55. The Company entered into a Lease Agreement with Summit Leasing, Inc. on or about February 9, 2005. Under this arrangement Summit purchased set top boxes for $125,000 from Tivella, Inc. and is leasing them to HCI over a thirty-six month period for $4,605.01 per month. The payment of the lease obligations was guaranteed by certain officers, directors and stockholders of the Company in consideration for the grant of warrants to the guarantors exercisable for 182,857 shares of common stock. Item 2.01 Completion of Acquisition or Disposition of Assets The Company has acquired a significant amount of assets outside the ordinary course of business under the equipment financing arrangements that are described in Item 1.01. Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement The Company has incurred direct financial obligations in connection with the Settlement Agreement and Release, and equipment financing arrangements. The terms of these arrangements are detailed under Item 1.01. Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year Effective February 6, 2005, the Company's Board of Directors changed the Company's fiscal year end from March 31 to December 31. A transition report on Form 10-KSB for the period ending on December 31, 2004 will be filed covering the transition period. The Company's fiscal year was changed, in part, so that it would have the same fiscal year end as HCI, a wholly owned subsidiary of the Company. Item 8.01 Other Events On February 6, 2005, Mr. Greg Haerr resigned as a director of the Company. The Board appointment Mr. Kelly Ryan, the Company's CEO, to fill the vacancy created by Mr. Haerr's resignation. In addition, Mr. Ryan was elected as Chairman of the Board. In February 2005, the Company issued common stock to holders of convertible promissory notes who converted approximately $255,000 in principal and interest that was owing into common stock at the rate of one share of common stock for every dollar that was converted. Item 9.01 Financial Statements and Exhibits a. Financial statements of businesses acquired Not applicable. b. Pro forma financial information Not applicable. c. Exhibits Number Description ------ ----------- 10.1 Settlement Agreement and Release, dated February 7, 2005. 10.2 Equipment Financing Agreement, by and between the Company and Pinnacle Capital, LLC 10.3 Lease Agreement, by and between the Company and Summit Leasing, Inc. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HOMENET CORPORATION Date: February 8, 2005 By /s/ Frank Gillen ------------------ Frank Gillen President 4 EX-10.1 2 ex101form8k020605.txt SETTLEMENT AGREEMENT AND RELEASE Exhibit 10.1 SETTLEMENT AGREEMENT AND RELEASE This Settlement Agreement and Release (this "Settlement Agreement") is made and entered into to be effective the __ day of February 2005, by and between: "HomeNet Corp" - HomeNet Corporation, a Delaware corporation formerly known as Faraday Financial, Inc. "HomeNet" - HomeNet Communications, Inc., a Washington corporation formerly known as Video Internet Broadcasting Corporation. "Investors" - Those investors, individually and collectively, who are identified in Exhibit A, which investors hold convertible promissory notes of HomeNet in the aggregate original principal amount of $273,000 (the "Notes") that were acquired in private securities offerings (individually and collectively, the "Private Offering"). "Stonebridge" - Stonebridge Securities, LLC, a Washington limited liability company. Stonebridge acted as Placement Agent in connection with the Private Offering. "Sherry" - Michael Sherry, a resident of Washington. RECITALS A. HomeNet has not had the funds to repay the amounts owing on the Notes. B. Certain of the parties have been in a dispute regarding certain amounts that are owing in connection with some of the Notes and the amount of the fees payable to Stonebridge in connection with its activities as placement agent in the Private Offering. C. On or about September 8, 2004, HomeNet became a wholly owned subsidiary of HomeNet Corp as a result of a merger between HomeNet and a subsidiary of HomeNet Corp (the "Merger"). D. The parties desire to enter into this Settlement Agreement in order to provide full and final settlement of all obligations that have or might be made, by reason of any and all dealings by or between the parties, upon the terms and conditions set forth below. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Release and Discharge 1.1 Subject to the terms and provisions of this Settlement Agreement, Investors, Stonebridge and Sherry hereby completely release and forever discharge HomeNet and HomeNet Corp from any and all past or present claims, demands, obligations, actions, causes of action, rights, damages, costs, losses of services, expenses and compensation of any nature whatsoever, whether based on a tort, contract or other theory of recovery, which Investors, Stonebridge and/or Sherry now have, on account of, or relate to the Private Offering and/or any and all other dealings between (i) Video Internet Broadcasting, HomeNet and/or HomeNet Corp and (ii) Investors, Stonebridge and/or Sherry as of and through the date of the most recently dated Note. 1.2 Subject to the terms and provisions of this Settlement Agreement, HomeNet and HomeNet Corp hereby completely release and forever discharge Investors, Stonebridge and Sherry from any and all past or present claims, demands, obligations, actions, causes of action, rights, damages, costs, losses of services, expenses and compensation of any nature whatsoever, whether based on a tort, contract or other theory of recovery, which HomeNet and/or HomeNet Corp now have on account of, or relate to the Private Offering and/or any and all other dealings between (i) Video Internet Broadcasting, HomeNet and/or HomeNet Corp and (ii) Investors, Stonebridge and/or Sherry as of and through the date of the most recently dated Note. 1.3 This release and discharge shall also apply to Stonebridge's, HomeNet's and HomeNet Corp's past, present and future officers, directors, stockholders, attorneys, accountants, agents, servants, representatives, employees, subsidiaries, affiliates, partners, predecessors, successors in interest and assigns and all other persons, firms or corporations with whom any of the former have been, are now, or may hereafter be affiliated. 1.4 This release, on the part of the parties hereto, shall be a fully binding and complete settlement as provided herein among the parties and their heirs, assigns and successors. 1.5 Notwithstanding any other provision of this Settlement Agreement, the releases contained herein shall in no way release any party from any duties or obligations undertaken in this Settlement Agreement. 2. Consideration 2.1 In full satisfaction of the amounts owing on the Notes, each Investor shall elect by delivery of an election in the form attached hereto as Exhibit B to receive either (i) the Cash Payback or (ii) the Conversion Payback, both as defined in Exhibit A hereto. Investors must make an election to receive either the Cash Payback or the Conversion Payback within 10 days of the earlier of (i) June 1, 2005 or (ii) 10 days following written notice by HomeNet Corp to the Investor of the closing of the Next Equity Financing or upon expiration of the Maturity Date, as defined in Exhibit A (the first of such events to occur is hereinafter be referred to as the "Election Date"). If an Investor makes no election within the 10-day period following the Election Date, the Investor will be deemed to have elected to receive the Cash Payback. Further, HomeNet Corp shall deliver a copy of any private placement memorandum that is prepared by HomeNet Corp or prepared on behalf of HomeNet Corp prior to the Election Date to Investor within 10 business days following first availability of such private placement memorandum. HomeNet Corp shall, fifteen days following the Election Date, deliver to each Investor the cash, Conversion Securities and/or Warrants to which each Investor is entitled. Upon delivery to an Investor of the cash, Conversion Securities and/or warrants, as the case may be, such Investor shall deliver to HomeNet the original Note held by such Investor for cancellation. HomeNet Corp's obligation to deliver cash or deliver securities to an Investor shall be contingent upon the Investor tendering for delivery the original Note held by such Investor to HomeNet for cancellation or if such Note has become lost, an affidavit of lost note with customary and reasonable indemnification provisions. . 2.2 In full satisfaction of any amounts owing to Stonebridge, HomeNet Corp shall issue to Stonebridge 109,030 shares of Conversion Securities and issue to Sherry warrants for 10,903 of Conversion Securities with an exercise price of one dollar and a term of 5 years, as defined in Exhibit A hereto. The Conversion Securities shall be dated of even date herewith. The Conversion Securities and Warrants shall be delivered to Stonebridge and Sherry on or before June 1, 2005 to be coincident with the Next Equity Financing. In the event the Next Equity Financing has not occurred on or before June 1, 2005, HomeNet shall then issue to Stonebridge 109,030 shares of HomeNet's common stock and then issue to Sherry warrants for 10,903 shares of HomeNet common stock with an exercise price, term and other conditions as provided for Conversion Securities. In the event HomeNet is recapitalized or issues additional common stock prior to June 1, 2005, the shares of common stock issued to Stonebridge and the shares subject to warrants to be issued to Sherry shall be adjusted to equal the same percentage of HomeNet's common stock as prior to any such event. 2.3 The parties shall execute and deliver to the others any and all instruments and/or documents required to perform such party's obligations hereunder, and each party shall provide continuing assurance, upon reasonable request, of compliance with all of the provisions hereof. The parties agree to cooperate reasonably with each other, in person or through counsel, to carry out all provisions of this Settlement Agreement. 2.4 The parties agree upon delivery of the consideration described in this Section 2 and satisfaction of all of the other terms and provisions of this Settlement Agreement, the terms and provisions of the Notes, the placement agent agreement between the Stonebridge and HomeNet, the personal guarantees of Messrs. W. Kelly Ryan and Michael Devine, dated August 20, 2004,will be deemed null, void and of no further force or effect. 3. Attorney's Fees Each party hereto shall bear all attorney's fees and costs arising from the actions of its own counsel in connection with this Settlement Agreement, the matters and documents referred to herein, and all related matters, except that HomeNet shall, at the time this Agreement is signed, pay the sum of $25,669 to Stonebridge which amount the parties agree represents reasonable out-of-pocket expenses that were incurred by Stonebridge in connection with this Settlement Agreement. 4. Representation of Comprehension of Document In entering into this Settlement Agreement the parties represent that they have relied upon the advise of their attorneys or had an opportunity to consult with an attorney of their choice. 5. Warranty of Capacity to Execute Agreement The parties represent and warrant that no other person or entity has, or has had, any interest in the claims, demands, obligations, or cause of action referred to in this Settlement Agreement, except as otherwise set forth herein; that each party has the sole right and exclusive authority to execute this Settlement Agreement; and that the parties have not sold, assigned, transferred, conveyed or otherwise disposed of any of the claims, demands, obligations or causes of action referred to in this Settlement Agreement. 6. Investor Representations Each Investor hereby individually, and not collectively, represents to HomeNet and HomeNet Corp as follows: 6.1 Investor is able to bear the economic risk of an investment in the securities it may receive from HomeNet Corp in connection with this Settlement Agreement (individually and collectively, the "Securities") can afford the loss of the entire investment in the Securities, and will, after making an investment in the Securities, have sufficient means of providing for Investor's current needs and possible future contingencies. 6.2 The Securities will not be sold by Investor without registration under applicable securities acts or a proper exemption from such registration. 6.3 The Securities are being acquired for Investor's own account and risk, for investment purposes, and not on behalf of any other person or with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933. Investor is aware that there are substantial restrictions on the transferability of the Securities. 6.4 Investor has had access to any and all information concerning the HomeNet Corp and HomeNet that Investor and its financial, tax and legal advisors required or considered necessary to make a proper evaluation of this investment. Specifically, Investor has had the opportunity to review HomeNet Corp's annual report on Form 10-KSB for the fiscal year ended March 31, 2004, HomeNet Corp's quarterly report on Form 10-QSB for the quarterly periods ended June 30, 2004 and September 30, 2004, HomeNet Corp's current reports on Form 8-K that were filed during 2004 and the Proxy Statement and related materials sent to HomeNet voting stockholders in connection with the Merger (the "SEC Materials"). In making the decision to acquire the Securities, Investors and their advisers have relied solely upon the SEC Filings and their own independent investigations, and fully understand that there are no guarantees, assurances or promises in connection with any investment hereunder and understand that the particular tax consequences arising from this investment in HomeNet Corp will depend upon its individual circumstances. Investor further understands that no opinion is being given as to any securities or tax matters involving the transactions described in this Settlement Agreement. 6.5 Investor also understands and agrees that stop transfer instructions relating to the Securities will be placed in HomeNet Corp's transfer ledger, and that the Securities will bear a legend in substantially the following form: THIS SECURITIES REPREENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THESE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A OF SUCH ACT. 6.6 Investor knows that the Securities are offered and sold pursuant to exemptions from registration under the Securities Act of 1933, and state securities law based, in part, on these warranties and representations, which are the very essence of this Settlement Agreement, and constitute a material part of the bargained-for consideration without which this Settlement Agreement would not have been executed. 6.7 Investor has the capacity to protect Investor's own interest in connection with this transaction or has a pre-existing personal or business relationship with HomeNet Corp or one or more of its officers, directors or controlling persons consisting of personal or business contacts of a nature and duration such as would enable a reasonably prudent purchaser to be aware of the character, business acumen and general business and financial circumstances of such person with whom such relationship exists. 6.8 Investor, if Investor is an entity, was not formed or organized for the specific purpose of acquiring the Securities. In the event Investor is an entity, the purchase of the Securities by Investor is a permissible investment in accordance with Investor's Articles of Incorporation or other similar charter document, and has been duly approved by all requisite action by the entity's owners, directors, officers or other authorized managers. The person signing this document and all documents necessary to consummate the purchase of the Securities has all requisite authority to sign such documents on behalf of Investor. 6.9 Investor represents that Investor is a sophisticated and an "accredited investor" as defined under Rule 501 of Regulation D for the reasons set forth in the subscriptions documents and questionnaire that Investor completed in connection with Investor's initial acquisition of the Notes. 7. Miscellaneous 7.1 This Settlement Agreement shall be construed and interpreted in accordance with the laws of the State of Washington. 7.2 All parties agree to cooperate fully and execute any and all supplementary documents and to take all additional actions, which may be necessary or appropriate to give full force and effect to the basic terms and intent of this Settlement Agreement. 7.3 This Settlement Agreement contains the entire agreement between the parties with regard to the matters set forth in it and shall be binding upon and inure to the benefit of the executors, administrators, personal representatives, heirs, successors and assigns of each. This Settlement Agreement may not be modified by an instrument in writing signed by the parties hereto. 7.4 This Settlement Agreement shall become effective immediately following execution by each of the parties and payment by HomeNet of the amounts described in Section 3. 7.5 This Settlement Agreement may be executed in two or more counterparts and each when executed shall be deemed an original. The signature in counterpart on a facsimile transmission copy of this Settlement Agreement shall be valid and binding. 7.6 In the event any action, suit or proceeding is commenced by any party against another party under this Settlement Agreement, the prevailing party in any such action, suit or proceeding shall be entitled to recover reasonable attorneys' fees, costs related to the discovery process, expert costs and court costs, in such amounts as the court may adjudge reasonable, including, but not limited to, those fees and costs incident to any appeal and to any action or participation in (or in connection with) a case or a proceeding involving a party under the applicable chapter of the Federal Bankruptcy Code (11 U.S.C. ss.ss. 101, et seq.), or any successor statute thereto. Venue of any such action, suit or proceeding shall be in King County, Washington. 7.7 This Settlement Agreement shall not be effective until and unless (i) it is executed by HomeNet Corp, HomeNet, Stonebridge, Sherry and each of the Investors, (ii) fully executed copies of this Settlement Agreement have been delivered to HomeNet no later than February __, 2005 and (iii) payment by HomeNet of the amount described in Section 3. 7.8 Except as otherwise required in this Subscription Agreement, any notice required or permitted under this Settlement Agreement shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid, addressed as follows: To HomeNet Corp or Homenet: 5252 North Edgewood Drive, Suite 310 Provo, UT 84604 To Stonebridge: ____________________________________ To Sherry: ____________________________________ To an Investor: At the address set forth beneath the Investor's signature IN WITNESS WHEREOF, the parties have executed this Settlement Agreement to be effective as of the date first written above. HOMENET CORPORATION HOMENET COMMUNICATIONS, INC. By /s/Mike Devine By /s/Mike Devine Its: Its: STONEBRIDGE SECURITIES, LLC By /s/ Michael Hendrickson /s/ Michael Sherry Its: Michael Sherry, individually Counterpart Signature Page to the Settlement Agreement The undersigned hereby agrees to become a party as an Investor to the Settlement Agreement, effective as of the ___ day of December 2004, by and among the parties identified therein, and hereby authorizes the other parties to attach this Counterpart Signature Page to the Settlement Agreement. Date: 1/21/2005 /s/ Michael Handvickson ------------------------------- (signature) Date: 1/21/2005 /s/ Martin S. Rood ------------------------------- (signature) Date: 1/21/2005 /s/ George D. Holland ------------------------------- (signature) Date: 1/25/2005 /s/ Joseph S. Carr ------------------------------- (signature) Date: 1/20/2005 /s/ Kevin L. Kaldestad ------------------------------- (signature) Date: 1/24/2005 /s/ Lance E. Farr ------------------------------- (signature)
EXHIBIT "A" Conversion Payback Cash Payback ---------------------------------------------- Principal Amount Principal and Conversion Conversion Investor of Note Date of Note Interest Securities (1) Warrants (2) Securities (1) Warrants (2) -------- ------- ----------- -------- -------------- ------------- -------------- ------------ Lance Farr $ 25,000.00 1/29/2004 $ 32,264 28,399 14,181 56,725 14181 Joe Carr $ 50,000.00 12/4/2003 $ 65,141 57,395 28,697 114,789 28697 Eastside $ 25,000.00 1/23/2004 $ 32,297 28,399 14,199 56,797 14199 George Holland $ 50,000.00 9/8/2003 $ 66,095 0 29,217 116,868 29217 George Holland $ 25,000.00 10/25/2004 $ 32,790 28,936 14,468 57,873 14468 Martin Rood $ 35,000.00 9/8/2003 $ 46,266 0 20,452 81,808 20452 Martin Rood $ 25,000.00 10/25/2003 $ 32,790 28,936 14,468 57,873 14468 Kevin Kaldestad $ 25,000.00 1/23/2004 $ 32,297 28,399 14,199 56,797 14199 Stonebridge $ 1,250.00 1/29/2004 $ 1,613 0 709 2,836 709 Stonebridge $ 1,250.00 1/23/2004 $ 1,615 0 710 2,840 710 Stonebridge $ 1,250.00 1/23/2004 $ 1,615 1,420 710 2,840 710 Stonebridge $ 2,500.00 12/4/2003 $ 3,257 2,870 1,435 5,739 1435 Stonebridge $ 2,500.00 10/25/2003 $ 3,279 2,894 1,447 5,787 1447 Stonebridge $ 4,250.00 9/8/2003 $ 5,618 0 2,483 9,934 2483
- -------------------- (1) The term "Conversion Securities " shall mean (i) if HomeNet Corp has issued any of its convertible notes, or capital stock (the "Capital Stock") in a Next Equity Financing subject to a binding commitment signed on or before the Maturity Date, then the notes or shares of such series of Capital Stock or (ii) shares of HomeNet Corp's common stock if there is not a Next Equity Financing prior to the Maturity Date. The "Next Equity Financing" means any convertible note or stock equity financing or other financings which closes after the date of the effective date of the Settlement Agreement pursuant to a binding commitment signed on or prior to the Maturity Date in which the gross proceeds received by HomeNet Corp meet or exceed $1,000,000, or in the case of a series of financings, aggregates $1,000,000 or more. The term "Next Equity Financing" does not include the issuance of HomeNet Corp common stock or other HomeNet Corp securities where the issuance was primarily for compensatory purposes (e.g., under HomeNet Corp Stock Option Plans) or where the issuance of such securities is primarily for payment of services (e.g., payment of HomeNet Corp lease obligations) provided such aggregate issuance for services does not exceed $100,000. The "Maturity Date" means June 1, 2005. Any Conversion Securities issued under clause (i) above shall be on the same terms and conditions and subject to all ancillary agreements and understandings as are applicable to the other investors in the Next Equity Financing, except that (a) the number of Conversion Securities to be received shall be equal to the number of Conversion Securities that the Investor would have received had the Investor invested the principal and interest which shall continue to accrue until the Maturity Date at the rate set forth in the Note , (as shown in the above table for the period from date of issue to the date the table was prepared) directly in the Next Equity Financing and (b) the investor shall be entitled to receive and HomeNet Corp shall issue the Warrants identified in the above table in addition to the Conversion Securities. In the event there is no Next Equity Financing prior to the Maturity Date, then the Investor shall be entitled to and HomeNet Corp shall issue the number of shares of HomeNet Corp common stock as are identified in the Conversion Securities column of the above table and Warrants exercisable for the identified number of shares of HomeNet Corp common stock. (2) The "Warrants" identified in the table shall be exercisable at a $1 strike price and shall be exercisable for the number of shares of Conversion Securities identified in the above table. The form of the warrant shall be substantially similar to that attached hereto as Annex A. Note: these are for Conversion Securities, not Common Stock ANNEX A THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT, UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF THE ACT. STOCK PURCHASE WARRANTS HOMENET CORPORATION Incorporated Under the Laws of the State of Delaware No. - ___ ___________ Stock Purchase Warrants CERTIFICATE FOR _______ STOCK PURCHASE WARRANTS HOMENET CORPORATION, a Delaware corporation (the "Company"), for value received, hereby certifies that ________, or registered assigns (the "Holder"), is the registered owner of the above indicated number of Warrants. One (1) Warrant entitles the Holder to purchase one (1) share of the Company's _____ stock (the "______ Stock"). The _______ Stock issuable upon an exercise of this Warrant is sometimes herein referred to as the "Warrant Stock." 1. Purchase Price. The purchase price (the "Exercise Price") per share for the Warrant Stock shall be $1.00 per share tendered to the Company in good United States funds. 2. Rights to Exercise. The Holder shall have the right (but not the obligation) to exercise the Warrant to receive the Warrant Stock (subject to adjustment as hereinafter provided) at any time on or before the five year anniversary date of this Note (?). 3. Manner of Exercise. In order to exercise this Warrant, the Holder shall surrender this Warrant certificate at the office of the Company, as set forth below, or at such other address within the State of Utah as the Company shall designate in writing, together with a duly executed exercise form in the form attached hereto and simultaneous payment in full (in cash or by certified or official bank or bank cashier's check payable to the order of the Company or by offset of obligations then owed by the Company to the Holder) of the purchase price for the Warrant Stock. In lieu of payment of the Exercise Price in cash, the Holder shall have the right at any time and from time to time to exercise the Warrants by surrendering the Warrant in the manner specified herein in exchange for the number of shares of ______ Stock computed using the following formula: X = Y (A-B) ----- A Where X = the number of shares of _______ Stock to be issued to the Holder. Y = the number of Warrant Shares subject to this Warrant or, if only a portion of this Warrant is being exercised, the portion of the Warrant being exercised. A = the Market Price (as defined below) of one Warrant Share (as of the date of such calculation). B = the Exercise Price per Warrant Share (as adjusted to the date of such calculation). As used herein, the term "Market Price" of one Warrant Share shall be deemed to be the average of the last reported sale prices per Warrant Share as officially reported by the principal securities exchange on which the Company's Common Stock is listed or admitted to trading during said period, or, if the Company's Common Stock is not listed or admitted to trading on any national securities exchange during said period, the average closing bid and asked price of the Common Stock on the Nasdaq Stock Market System or reported on the NASD's OTC Bulletin Board, in any such case as published in the Eastern Edition of the Wall Street Journal for the last ten (10) trading days immediately prior to the date of calculation. If the Company's Common Stock is not quoted on Nasdaq or the OTC Bulletin Board, the Market Price per Warrant Share shall be agreed upon by the parties hereto. If the parties cannot agree within five (5) business days of delivery of the notice of exercise, the Market Price per Warrant Share shall be as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it. For purposes hereof, the "date of calculation" shall be the day on which the Holder either mails the notice of exercise to the Company by first class certified mail or delivers the notice of exercise to a nationally-recognized courier for next business day delivery to the Company. Upon surrender of this Warrant in conformity with the foregoing provisions, the Company shall promptly deliver to or upon the written order of the Holder a stock certificate or certificates representing the number of Warrant Shares so purchased. Certificates for shares purchased shall be delivered within ten (10) business days after the date on which this Warrant shall have been exercised. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 7.6 prior to the issuance of such shares, have been paid. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Stock, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. 4. Adjustments upon Certain Events. 4.1 Stock Splits, Stock Combinations and Certain Stock Dividends. If the Company shall at any time subdivide or combine its outstanding Common Stock, or declare a dividend in Common Stock or other securities of the Company convertible into or exchangeable for Common Stock, a Warrant shall, after such subdivision or combination or after the record date for such dividend, be exercisable for that number of shares of Common Stock and other securities of the Company that the Holder would have owned immediately after such event with respect to the Common Stock and other securities for which a Warrant may have been exercised immediately before such event had the Warrant been exercised immediately before such event. Any adjustment under this Section 4.1 shall become effective at the close of business on the date the subdivision, combination or dividend becomes effective. 4.2 Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or any other corporation the stock or other securities of which are at the time receivable upon exercise of a Warrant) or in case the Company (or any such other corporation) shall merge into or with or consolidate with another corporation or convey all or substantially all of its assets to another corporation or enter into a business combination of any form as a result of which the Common Stock or other securities receivable upon exercise of a Warrant are converted into other stock or securities of the same or another corporation, then and in each such case, the Holder of a Warrant, upon exercise of the purchase right at any time after the consummation of such reorganization, consolidation, merger, conveyance or combination, shall be entitled to receive, in lieu of the shares of Common Stock or other securities to which such Holder would have been entitled had he exercised the purchase right immediately prior thereto, such stock and securities which such Holder would have owned immediately after such event with respect to the shares Common Stock and other securities for which a Warrant may have been exercised immediately before such event had the Warrant been exercised immediately prior to such event. 4.3 Notice. In each case of an adjustment in the Common Stock or other securities receivable upon the exercise of a Warrant, the Company shall promptly notify the Holder of such adjustment. Such notice shall set forth the facts upon which such adjustment is based. 5. Loss, Theft, Destruction, or Mutilation. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft, or destruction) of indemnity satisfactory to it (in the exercise of its reasonable discretion), and (in the case of mutilation) upon surrender and cancellation thereof, the Company will execute and deliver, in lieu thereof, a new Warrant in the same form and tenor. 6. Reservation of Shares Issuable on Exercise of Warrant. The Company will at all times reserve and keep available out of its authorized shares, solely for issuance upon the exercise of the Warrant, such shares of its Common Stock and other securities as from time to time shall be issuable upon the exercise of the Warrant. 7. Miscellaneous. 7.1 Governing Law. This Warrant shall be construed in accordance with, and governed by the substantive laws of, the State of Delaware. 7.2 Assignment. The benefit of this Warrant and of the Warrant Stock represented hereby may be assigned and transferred by the Holder and its assigns in accordance with any applicable securities laws and regulations; however, the obligations of the Company and its successors may not be delegated without the prior written consent of the Holder hereof. Subject to the foregoing, this Warrant shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors, agents, heirs and assigns. 7.3 Enforcement. In the event of a dispute between the parties arising under this Warrant, the party prevailing in such dispute shall be entitled to collect such party's costs and expenses from the other party, including without limitation court costs and reasonable attorneys' fees. 7.4 Notices. Any notice or demand which is required or provided to be given under this Agreement shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy, e-mail or other method of electronic transmission (provided such transmission generates evidence of delivery), or five days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested, or two days after being sent by overnight delivery providing receipt of delivery, to the following addresses: if to the Company : HomeNet Corporation 5252 North Edgewood Drive, Suite 310 Provo, UT 84604 if to the Holder : ------------------------- ------------------------- Fax: ___________________ E-mail: _________________ 7.5 Restrictive Legend. Each Warrant Certificate and each certificate representing Common Stock issued upon exercise of a Warrant, unless such Common Stock is then registered under the Securities Act of 1933, as amended (the "Act"), shall bear a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE. 7.6 Payment of Taxes. The Holder shall pay all documentary, stamp or similar taxes and other government charges that may be imposed with respect to the issuance, transfer or delivery of any Warrant Stock on exercise of the Warrants. In the event the Warrant Stock are to be delivered in a name other than the name of the Holder of the Warrant Certificate, no such delivery shall be made unless the person requesting the same has paid the amount of any such taxes or charges incident thereto. 7.7 Reduction in Exercise Price at Company's Option. The Company's Board of Directors may, at its sole discretion, reduce the Exercise Price of the Warrants in effect at any time either for the life of the Warrants or any shorter period of time determined by the Company's Board of Directors. The Company shall promptly notify the Registered Holders of any such reduction in the Exercise Price. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of the ____ day of ________________, 2004. HOMENET CORPORATION, a Delaware corporation By: __________________________________ Its: President HOMENET CORPORATION The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JR TEN - as joint tenants with right of survivorship and not as tenants in common UNIF TRANS MIN ACT - ____________ (Custodian for Minor) as custodian for __________ (name of minor) under the Uniform Transfers to Minors Act Additional abbreviations may also be used though not in the above list. FORM OF ASSIGNMENT (To be Executed by the Registered Holder if He or She Desires to Assign Warrants Evidenced by the Within Warrant Certificate) FOR VALUE RECEIVED ___________________________ hereby sells, assigns and transfers unto _____________________________ _________________________ (_______) Warrants, evidenced by the within Warrant Certificate, and does hereby irrevocably constitute and appoint _______________________________________ Attorney to transfer the said Warrants evidenced by the within Warrant Certificates on the books of the Company, with full power of substitution. Dated:____________________ _____________________________ Signature Notice: The above signature must correspond with the name as written upon the face of the Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Signature Guaranteed: __________________________________________ SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE. FORM OF ELECTION TO PURCHASE (To be Executed by the Holder if Holder Desires to Exercise Warrants Evidenced by the Warrant Certificate) To HOMENET CORPORATION The undersigned hereby irrevocably elects to exercise ___________________________ (______) Warrants, evidenced by the within Warrant Certificate for, and to purchase thereunder, ____________________________ (______) full shares of ______ Stock issuable upon exercise of said Warrants and delivery of $_________ and any applicable taxes. The undersigned requests that certificates for such shares be issued in the name of: PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER - ------------------------------------------------------------------------------ (Please print name and address) - ------------------------------------------------------------------------------ If said number of Warrants shall not be all the Warrants evidenced by the within Warrant Certificate, the undersigned requests that a new Warrant Certificate evidencing the Warrants not so exercised be issued in the name of and delivered to: - ------------------------------------------------------------------------------ (Please print name and address) - ------------------------------------------------------------------------------ Dated: _____________________ Signature:__________________________ NOTICE: The above signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, or if signed by any other person the Form of Assignment hereon must be duly executed and if the certificate representing the shares or any Warrant Certificate representing Warrants not exercised is to be registered in a name other than that in which the within Warrant Certificate is registered, the signature of the holder hereof must be guaranteed. Signature Guaranteed: ___________________________________________ SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE. EXHIBIT B ELECTION (To be Executed by Each Investor) To HomeNet Corporation: The undersigned hereby irrevocably elects to receive the following (check appropriate box): [ ] The Cash Payback [ ] The Conversion Payback The undersigned is surrendering the original promissory note to the Company herewith for cancellation in connection with this Election. The undersigned requests that certificates for any securities to be issued be issued in the name of the undersigned and delivered to the undersigned at the following address: ------------------------------------- (Please print name and address) Dated: _____________________ Signature:__________________________ NOTICE: The above signature must correspond with the name on the Promissory Note in every particular. EX-10.2 3 ex102form8k020605.txt EQUIPMENT FINANCING AGREEMENT
Pinnacle Capital, LLC 5407 12th St. E. Ste. A 159 S. Worthen St. Ste. 300 11180 Sun Center Drive Suite 101 Tacoma, WA 98424 Wenatchee, WA 98801 Rancho Cordova, CA 95670 (800) 566-1993 (888) 223-2600 (888) 858-4818 Agreement No. 3001647 Date: February __, 2005 EQUIPMENT FINANCING AGREEMENT - ---------------------------------------------- ---------------------------- -------------------------------------------------------- COMPLETE LEGAL NAME AND ADDRESS OF DEBTOR Billing Address: NAME AND ADDRESS OF EQUIPMENT SUPPLIER ("Debtor") ("Supplier") HomeNet Communications, Inc. PO Box 1907 5252 North Edgewood Drive Provo, UT, 84603 Provo, UT 84604 See Exhibit "A" attached hereto and made a part CONTACT: Walter Kelly Ryan hereof TELEPHONE: (801) 932-4663 - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT DESCRIPTION (including quantity, make, model, year, serial numbers) See Exhibit "A" attached hereto and made a part hereof - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT LOCATION (if differs from legal address) 5252 North Edgewood Drive, Provo, UT 84604 - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PAYMENT TIMING AMOUNT (plus tax INITIAL PAYMENT BALLOON ADVANCE PAYMENTS X Monthly if X First PAYMENT Equipment: $41,127.00 (Includes any balloon) applicable) $1,426.55 Lien Search Fee: $ ? ____________ X Last $1,426.55 Pre-Fund Fee: $ 36 Months $1,426.55 ? Deposit $.00 Site Inspection Fee:$ ? See Exhibit C X Doc Fee $250.00 $____________ Titling Fee: $ ? See Exhibit C ? Other Sales Tax: $ Total Advance $41,127.00 - ------------------------------------------------------------------------------------------------------------------------------------ Under this Equipment Financing Agreement ("agreement") Creditor will finance the above-described personal property (collectively and including replacements the "Equipment" and individually an "Item") for Debtor under the terms set forth below and on the reverse side. 1. SECURITY INTEREST. Debtor hereby grants Creditor a security interest under the Uniform Commercial Code in the Equipment. The security interest secures Debtor's performance of Debtor's obligations hereunder and under any other agreement under which Debtor now or hereafter has obligations to Creditor. Debtor shall insure that such security interest is and remains a sole first lien security interest. 2. PAYMENTS. The payment amount shown above is based on the Total Advance. Actual payments to repay Creditor's advance will be adjusted based on the actual advance by Creditor as to the Equipment. If this transaction is not consummated, any initial payment may be retained by Creditor as partial compensation for Creditor's costs and expenses incurred. Any excess or deficiency between the first payment and the payment amount as finally determined will be payable with or credited to the second payment. The initial payment together with an interim prorata payment for the number of days between Creditor's advance respecting the Equipment and the due date of the initial payment will be due on a date selected by Creditor following Debtor's execution of the Certificate of Acceptance for the Equipment. Subsequent payments will be due on the same day of each period set forth above thereafter, whether or not an invoice is rendered or received. Any balloon payment will be due one payment period after the last level payment. Other amounts due hereunder are payable upon Debtor's receipt of an invoice therefor. Debtor will pay Creditor amounts due under this agreement at Creditor's address shown above or as Creditor may otherwise notify Debtor. Amounts to be applied to the last payment(s) will be applied in inverse order until exhausted provided there has been no default under the agreement. If there is a default, payments may be applied to Debtor's obligations as Creditor chooses. 3. COMMITMENT PERIOD. If the Certificate of Acceptance has not been executed and delivered to Creditor, Creditor may terminate its obligations to finance the Equipment on notice to Debtor, (a) subsequent to 90 days from the agreement date, (b) upon a material adverse change in Debtor's financial condition, (c) if the actual advance would exceed the Total Advance by more than 10% or (d) if the agreement is in default or upon occurrence of an event which with the giving of notice and/or lapse of time would be a default. 4. FINANCING; NO OFFSET. THIS IS A FINANCING AGREEMENT ONLY. DEBTOR'S OBLIGATION TO MAKE ALL PAYMENTS UNDER THIS AGREEMENT IS ABSOLUTE AND WILL NOT BE SUBJECT TO ANY RIGHT OF PREPAYMENT, ABATEMENT, COUNTERCLAIM, RECOUPMENT, OFFSET OR DEFENSE. DEBTOR'S OBLIGATIONS UNDER THIS AGREEMENT SURVIVE THE MAKING OF ALL PAYMENTS. 5. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO SUPPLIER NOR ANY FINANCIAL INTERMEDIARY NOR ANY AGENT OF EITHER IS AN AGENT OF CREDITOR, THAT NONE OF SUCH PARTIES IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS AGREEMENT AND THAT NO REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY ANY SUCH PARTY IS BINDING UPON CREDITOR 6. NO WARRANTIES. BECAUSE THIS AGREEMENT IS A FINANCING, CREDITOR MAKES NO EXPRESS OR IMPLIED WARRANTIES AS TO THE EQUIPMENT. Debtor requests Creditor to finance the Equipment for Debtor hereunder. Creditor's execution hereof by an authorized officer indicates Creditor's acceptance of such offer. Debtor authorizes Creditor to insert identification data as to the Equipment above. Debtor warrants that Debtor will use the Equipment solely for commercial or business purposes. PINNACLE CAPITAL, LLC Creditor HomeNet Communications, Inc. LEGAL NAME OF DEBTOR By: /s/ Andrea Pfeiffer-Baker By: /s/ Walter Kelly Ryan Date: February 2005 - ----------------------------- ---------------------- ----------------- Title: CEO Walter Kelly Ryan, CEO GUARANTY Each of us unconditionally guarantees and promises to make all of the payments and perform all Debtor's obligations as specified in the above agreement. Each of our liabilities is primary and joint and several and will not be affected by any settlement, extension, renewal or modification of the agreement, by the discharge or release of the Debtor's obligations or by the taking or release of additional guarantors or security for the performance of the agreement. Each of us waives any rights we may have to (a) presentment, demand, protest, notice of protest, notice of dishonor, notice of default under the agreement and any other notices related to this guaranty or the agreement and (b) the right to require Creditor to proceed against Debtor or to pursue any other remedy in Creditor's power. Each of us also waives any other rights and defenses available to a guarantor by reason of applicable case or statutory law. Each of us agrees that we are liable for Creditor's attorney's fees and costs in enforcing this guaranty, whether or not suit is filed, and that the venue provided in the agreement applies to this guaranty. Each of us acknowledges that this guaranty inures to the benefit of Creditor's assigns. /s/ Walter Kelly Ryan Date: February 2005 - ------------------------------ Walter Kelly Ryan (NO TITLE) TERMS CONTINUED ON REVERSE SIDE 7. LOCATION; INSPECTION; USE. Debtor will keep, or permanently garage and not remove from such location for more than 30 days or from the United States for any period, each Item in Debtor's possession and control at the Equipment Location or such other location to which Creditor may consent in writing. Upon request, Debtor will advise Creditor as to the exact location of an Item. Creditor may inspect an Item during normal business hours, and Debtor will ensure Creditor's access for such purpose. Each Item will be operated carefully and properly in compliance with all applicable governmental, insurance and manufacturer's warranty requirements and all manufacturers' instructions. 8. MAINTENANCE; ALTERATIONS. Debtor will maintain each Item in good condition and repair and as specified in such requirements. Debtor will cause each Item of a type generally covered by a service contract to be covered under a contract providing sufficient coverage issued by a competent servicing entity. Debtor will not make any alterations or additions to an Item which detracts from its economic value or functional utility except as stated in the second preceding sentence. Alterations or additions not readily removable or made to comply with governmental requirements will be deemed accessions and will remain with the Item. 9. LOSS AND DAMAGE;STIPULATED VALUE. In the event of loss, theft, destruction or requisition of or damage to an Item ("Casualty Occurrence") Debtor will give Creditor prompt notice thereof and will then repair the Item; provided, if the Item is deemed by Creditor to be lost, stolen, destroyed or damaged beyond repair or is requisitioned or suffers a constructive loss under an insurance policy carried hereunder, Debtor will pay Creditor the "Stipulated Value" equal to (a) any amounts due Creditor from Debtor at the time of the payment and (b) the remaining payments as to the Item, including any balloon payment, with each discounted to present value at 6% per annum from the date due to the date of payment. Upon such payment, Creditor's security interest as to the Item shall terminate. For these purposes capitalized amounts unrelated to the Equipment will be allocated to each Item on a prorata cost basis. 10. TITLING; REGISTRATION. Debtor shall cause each Item subject to title registration laws at all times to be titled and/or registered in such a manner and jurisdiction as Creditor directs. Debtor will promptly notify Creditor of and effect any necessary or advisable retitling and/or re-registration of an Item in a different jurisdiction. 11. TAXES. Debtor will make all filings and pay all taxes and other governmental assessments relative to the Equipment as required by law. Debtor will pay or reimburse Creditor for any other taxes and other governmental assessments other than Creditor's net income taxes related to the payments due under or otherwise related to this agreement. Returns in connection with these latter matters will be filed by Creditor or Debtor as Creditor specifies. 12. INSURANCE. Debtor will maintain all risk insurance on the Equipment for not less than its full replacement value naming Creditor as Loss Payee. This insurance must be in a form and with companies approved by Creditor, must name Debtor as a named insured, must provide at least 10 days advance written notice to Creditor of change or cancellation, must provide breach of warranty protection, where relevant, and must provide that the coverage is "primary." Insurance proceeds, at Creditor's option, will be applied to (a) the repair of applicable Items, (b) payment of the Stipulated Value and/or (c) payment of other obligations to Creditor. Any excess will belong to Debtor. Debtor appoints Creditor as Debtor's attorney-in-fact to do all things necessary or advisable to secure payments under any policy contemplated hereby on account of a Casualty Occurrence. Debtor will cause Creditor to receive evidence reasonably requested by Creditor of this insurance. If required by Creditor, Debtor will procure liability insurance covering the Equipment protecting Creditor as an additional insured with liability limits reasonably specified by Creditor. 13. CREDITOR'S PAYMENT. If Debtor fails to perform any obligation hereunder, Creditor may, at Creditor's sole option, perform the obligation, and Debtor will reimburse Creditor's related costs. Before Creditor purchases insurance because Debtor has failed to comply with paragraph 12, Creditor will give Debtor notice and an opportunity to obtain the required coverage. If Debtor does not do so and Creditor places coverage, the charge for the replacement insurance Creditor obtains, which will be billed with the installment payments, will include a fee Creditor retains plus interest on Creditor's premium as well as the allocable premium. Also, any insurance Creditor obtains will not provide any liability coverage whatsoever, will insure Creditor only, would typically be more expensive than coverage a business might obtain on its own and will not relieve Debtor from Debtor's liability for the difference between the insurance proceeds and Debtor's responsibility for the amount set forth in paragraph 9 if the agreement must be paid off as to any Equipment after a casualty loss or cover any equity Debtor may have. No further insurance charges will be imposed once and for so long as Debtor complies with paragraph 12. 14. INDEMNITY. Debtor will indemnify, defend and hold harmless Creditor against any liabilities, losses, claims, actions and expenses, including court costs and legal expenses, incurred by Creditor relating to this agreement or the Equipment, including claims of latent or other defects, strict liability claims, environmental remediation claims and claims for patent, trademark or copyright infringement. Each party will give the other notice of any covered event promptly after learning thereof. 15. DEFAULT. This agreement will be in default if (a) Debtor fails to pay any amount hereunder when due; (b) Debtor fails to perform any other obligation hereunder or under any other agreement between Creditor and Debtor; (c) Debtor dies or is declared legally incompetent, if an individual; (d) a petition is filed by or against Debtor under the Bankruptcy Act or under any other law providing relief for debtors; (e) Debtor makes an assignment for the benefit of creditors, a receiver or trustee is appointed for Debtor, a proceeding contemplating winding up of Debtor's affairs is instituted, Debtor ceases business affairs or Debtor makes an abnormal transfer of a material portion of Debtor's assets; (f) an event described in (c), (d) or (e) occurs as to a guarantor of Debtor's obligations hereunder, or (g) there is a material misrepresentation to Creditor by Debtor or a guarantor in connection with this Agreement. 16. REMEDIES. If the agreement is in default, Creditor may, at its option, do any one of more of the following: (a) declare due the Stipulated Value or such lesser amount as is set by law; (b) use self-help and other lawful remedies to take possession of any Items; (c) sell or otherwise dispose of any Items in a manner which is commercially reasonable; (d) recover from Debtor all amounts then due and owing hereunder less the net sales price (net of all Creditor's costs and expenses of sale) of any Items Creditor has repossessed and sold; or (3) utilize any other remedy available to Creditor under the Uniform Commercial Code or otherwise at law or in equity. All remedies are cumulative and may be exercised concurrently or separately from time to time. Debtor will also pay Creditor all costs and expenses not offset against the proceeds of sale of any Equipment incurred by Creditor in enforcing the agreement, including court costs and attorneys' fees, including those incurred by using Creditor's salaried employees and those prior to filing of an action, in connection with a dismissed action or in connection with a bankruptcy proceeding. Any waiver by Creditor of a provision of this lease must be in writing, and forbearance by Creditor will not constitute a waiver. Post-default amounts will bear interest at 18% per annum or at such lesser default rate as is set by law until paid. 17. ASSIGNMENT. Without the prior written consent of Creditor, Debtor will not lease, transfer an interest in or allow a lien against any Item, except a lien in an Item created by Creditor, or transfer any obligation under this agreement. Debtor's obligations are not assignable by operation of law. All Creditor's rights under this agreement and interest in the Equipment may be disposed of without notice to Debtor. Debtor will acknowledge receipt of any notice of assignment in writing and will pay any assigned amounts as directed in the notice. If Creditor assigns this agreement or any interest herein, Debtor will not assert against the assignee any claim or defense it may have against Creditor, and Debtor will pursue any rights on account thereof solely against Creditor personally. No assigneee will be obligated to perform any obligation of Creditor under this agreement unless assumed by the assignee. Subject to the foregoing, this agreement is for the benefit of, and binds, the heirs, legatees, personal representatives, successors and assigns of the parties. 18. ADDITIONAL DOCUMENTS; DEBTOR REPRESENTATIONS. Debtor will obtain and deliver to Creditor such documents, including real property waivers in form satisfactory to Creditor from all persons claiming an interest in the real property on which an Item is or is to be located as Creditor requests to protect its interest in this agreement and the Equipment. Debtor authorizes Creditor to file financing statements and appropriate related Uniform Commercial Code forms respecting the Equipment and ratifies Creditor's authority to make any such filings previously made. Debtor will reimburse Creditor for all Creditors' search, filing and appraisal fees and other costs paid third parties in connection with this agreement. Debtor will furnish Creditor such financial data or information relative to this agreement or the Equipment as Creditor may from time to time reasonably request. Debtor warrants that Debtor has title to the Equipment. Debtor represents that this agreement has been duly authorized, executed and delivered by Debtor and constitutes Debtor's valid and binding obligation enforceable in accordance with its terms. Debtor also represents that this agreement does not violate Debtor's organizational documents, any agreement by which Debtor is bound or any law or obligation binding on Debtor, that Debtor's name, state of formation, if an organization, and principal office location set forth above are correct and that all financial and other information previously or later provided to Creditor in connection with this agreement fairly represents or will represent the matters covered. Debtor will give Creditor not less than 30 days prior notice of a change in Debtor's name, state of formation, principal office address or, if an individual, residence address. 19. LATE PAYMENT. If Debtor fails to pay an amount hereunder within 5 days of when due, Debtor will pay Creditor (a) a 10% late charge, (b) amounts Creditor pays others in connection with collection of the amount and (c) Creditor's standard returned check charge, if relevant. 20. DEPOSIT. Any deposit Debtor furnishes in connection with this agreement will not bear interest and may be applied by Creditor to any obligations of Debtor to Creditor which are in default. When Debtor has satisfied all Debtor's obligations hereunder, Creditor will return any remaining balance of the deposit to Debtor. 21. GOVERNING LAW;VENUE. This agreement will be governed by the laws of Washington. Venue for any related actions will be in an appropriate court in a county where Creditor or its assignee has its principal office to which Debtor consents or in another court selected by that party having jurisdiction. THE PARTIES WAIVE ANY RIGHT TO A JURY TRIAL. 22. GENERAL. This agreement contains the entire agreement between Creditor and Debtor concerning the financing of the Equipment and may be amended only by a written agreement signed by the party to be charged. Notices hereunder must be in writing and mailed with appropriate U.S. First Class Mail postage prepaid, personally delivered or transmitted by facsimile to the party involved at its respective address set forth above or at such other address or number as such party may provide the other on notice. Notices to Debtor will be effective upon deposit, delivery or transmittal and to Creditor upon receipt. Each party will promptly notify the other of any change in address or facsimile number. Debtor will give Creditor 30 days prior notice of a reorganization, name change or change of principal office location. The singular includes the plural and the words "Creditor" and "Debtor" includes their assignees. The liability of co-Debtors is joint and several. Paragraph titles are not an aid in interpretation. /s/ WKR (initial here) Pinnacle Capital, LLC Exhibit "A" Debtor: HomeNet Communications, Inc. Agreement #3001647 5252 North Edgewood Drive Provo, UT 84604 Quantity:_________Equipment Description: Dynavar Networking Corp. 600 University Street Suite 2323 Seattle, WA 98101 1 NAT/FW ON ASP-INTEGRATED-MULTI 1 PWR-M101-M71-AC-R SIN: QJ10131 1 FEB-M71-SVCS-BB S/N: CF0327 1 M7i AND M10i ROURING ENGINE-256M S/N:1000538496 1 PROMOTIONAL BUNDLE CONSISTING OF M7i SIN: CE5883 1 JUNOS US DOMESTIC VERSION-BASE B SIN:P010641-01 1 PE-4FE-TX SIN: CC9878 2 CBL-PWR-IOAC-STR-US It is expressly understood that this Exhibit "A" is an exhibit of, attached to and made a part here of the above numbered agreement. Creditor and Debtor have executed this Exhibit "A" to the above agreement as of the date of the agreement. By:/s/ Walter Kelly Ryan ------------------------ Walter Kelly Ryan, CEO
EX-10.3 4 ex103form8k020605.txt LEASE AGREEMENT SUMMIT LEASING, INC. 3901 Fairbanks Ave., Yakima, WA 98902 Mail: P.O. Box 7, Yakima, WA 98907-0007 (509) 575-4425 (800) 736-1530 Fax: (509) 453-3798 www.summitleasing.com - ------------------------------------------------------------------------------ LEASE AGREEMENT LEASE NO. 11333 EFFECTIVE DATE: 2/1/2005 LESSOR: SUMMIT LEASING INC. LESSEE(S): HOMENET COMMUNICATIONS, INC. Walter K. Ryan, Kevin Doherty, Michael W. Devine, Brian Potter, Frank J. Gillen, Leroy W. Jackson, Shauna Badger, Rodney S. Badger, Robert B. Jones, Carol Jones 5252 North Edgewood Dr. Provo, UT 84604 (801) 377-1360 1.0 LEASED PROPERTY: Subject to the terms and conditions of this Lease Agreement, Lessor hereby leases to Lessee(s) the following described personal property hereinafter referred to as "leased property": 500 Set Top Boxes 500 Set Top Boxes with 32M RAM 2.0 TERM: The term of this lease shall be for a period of 36 months and 0 days commencing 2/1/2005 and terminating at 12:00 noon on 2/1/2008. 3.0 LOCATION OF LEASED PROPERTY: The leased property shall be located and based at the following location: 5252 North Edgewood Dr. Provo, UT 84604 4.0 RENTAL: The rental for the leased property, not including applicable sales tax or use tax (or comparable tax), hereinafter "tax", shall be payable as follows: Due 2/1/2005 First month's rental: $4,605.01 Final 1 month(s) rental: $4,605.01 Due 3/1/2005 and upon or before the first day of each month thereafter: $4,605.01 THIS LEASE IS SUBJECT TO THE TERMS AND CONDITIONS PRINTED HEREON AND ON THE ACCOMPANYING PAGES, ALL OF WHICH ARE MADE A PART HEREOF AND WHICH LESSEE ACKNOWLEDGES HAVING READ. THIS LEASE IS NOT BINDING UNTIL ACCEPTED BY LESSOR. Page 1 of 4 Initial /s/ WKR Lease Agreement No. 11333:MS/jj 4.1 LATE CHARGE: If rental payments are not received within five (5) days of the due date, a late charge shall be imposed, such amount being five percent (5%) per month, or $5.00, whichever is greater. Late charges shall be payable by Lessee upon demand and failure to pay the same shall constitute an event of default under this Lease. The right of Lessor to impose a late charge shall not be considered as a waiver of Lessor of the right to insist upon strict performance of the terms of this Lease. 5.0 TITLE - LESSEE'S INTEREST- PROTECTION OF THE LESSOR'S INTEREST: Title to the leased property is now and shall remain at all times during the term of this Lease in the Lessor. It is understood that this agreement creates a lease only of Leased Property and not a sale thereof, Lessee's rights hereunder being only for the possession and use of the leased property in accordance with the terms of this Lease agreement. If requested by Lessor, Lessee shall execute any and all documents deemed necessary to protect all of Lessor's rights under this Lease agreement and Lessor's ownership of the leased property. Without limiting the generality of the foregoing, Lessee agrees at Lessee's cost to mark, sign, tag or otherwise cause the leased property to be identified as property of the Lessor. The marking, identification, or signing shall be in such manner as reasonably required by Lessor. Lessor reserves the right and is hereby granted authority to enter Lessee's property for the purpose of marking, signing, tagging, or otherwise identifying the leased property as being owned by Lessor. Notwithstanding the foregoing, in the event this Lease is or shall be construed as a "Lease intended as security," the Lessee hereby grants to Lessor a security interesting and to the leased property and all proceeds thereof (including insurance proceeds) as security for all of Lessee's obligations to Lessor of every kind and nature. Lessee authorizes Lessor or its designee to file a Uniform Commercial Code financing statement, in form and content and from time to time as Lessor deems proper, listing Lessee as Lessee or Debtor. 6.0 SELECTION AND INSPECTION: It is understood that Lessee has requested and selected the leased property and the supplier and/or vendor thereof; that Lessee has either inspected the leased property or has had an opportunity to inspect the leased property and accepts the same in its present condition. It is further agreed and understood that Lessor makes and has made no representations, warranties or guarantees, except as contained in this Lease, and specifically, that Lessor makes no express nor implied warranties as to any matter whatsoever, including, without limitation, the condition of the leased property, it's merchantability, or it's fitness for any particular purpose. Lessee agrees and acknowledges that it is the intent of both parties to this Lease that it qualify as a statutory finance lease under article 2A of the Uniform Commercial Code. Lessee acknowledges and agrees that Lessee has selected both (1) the Leased Property; and (2) the supplier from whom the Lessor is to purchase the Leased Property. Lessee acknowledges that Lessor has not participated in any way in the Lessee's selection of the Leased Property or of the supplier, and that Lessor has not selected, manufactured or supplied the Leased Property. Lessee is advised that it may have rights under the contract evidencing to the Lessor's purchase of the Leased Property from the supplier chosen by the Lessee and that the Lessee should contact the supplier of the Leased Property for a description of any such rights. 7.0 NO WARRANTY: Lessor, not being the manufacturer or the manufacturer's agent, MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS FOR A PARTICULAR USE OR OTHERWISE QUALITY, DESIGN, CONDITION, CAPACITY, SUITABILITY, MERCHANTABILITY OR PERFORMANCE OF THE LEASED PROPERTY OR OF THE MATERIAL OR WORKMANSHIP THEREOF, IT BEING AGREED THAT THE LEASED PROPERTY IS LEASED "AS IS" AND THAT AL SUCH RISKS, AS BETWEEN THE LESSOR AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE AT ITS SOLE RISK AND EXPENSE. Lessee accordingly agrees not to assert any claim whatsoever against the Lessor based thereon. In addition, Lessee waives any and all rights and remedies conferred by UCC 2A-508 through 2A-522, including, but not limited to, the Lessee's right to (a) cancel or repudiate the lease; (b) reject or revoke acceptance of the Leased Property; (c) deduct from rental payments all or any part of any claimed damages resulting from the Lessor's default under the Lease; (d) recover from the Lessor any general, special, incidental, or consequential damages, for any reason whatsoever. 8.0 NON-ASSIGNABILITY BY LESSEE: Neither this Lease nor Lessee's rights hereunder, including, but not limited to, the possession and use of the leased property, shall be assignable by Lessee without the written consent of Lessor. Further, Lessee shall not sublease nor transfer in whole or in part the possession of the leased property without the written consent of Lessor. It is understood that Lessee has no property rights in the leased property, other than the right to use the same in accordance with the terms of this agreement, and that Lessee shall not encumber the Leased Property by either voluntary or involuntary lien. Page 2 of 4 Initial /s/ WKR Lease Agreement No. 11333:MS/jj 9.0 MAINTENANCE, USE AND RETURN OF LEASED PROPERTY: 9.1 MAINTENANCE AND USE: Lessee shall maintain the leased property in a good and safe operating condition and working order, using as a guide the maintenance program prescribed in the owner's manual, if any, for each item of leased property, and shall perform, all preventive maintenance reasonably required, including but not limited to, such preventive maintenance required to insure full validation of a manufacturer's warranty, if any, on the leased property. In addition, Lessee shall repair and provide replacement parts necessary to keep the leased property in a good and safe operating condition and working order. All replacement parts, as required hereunder, shall immediately become the property of Lessor. It is understood that this is a net lease and Lessor assumes no obligation whatsoever for the maintenance, repair or replacement of the leased property or any portion thereof. The Leased Property shall be used solely in the conduct of Lessee's business and Lessee warrants that Leased Property is leased for commercial or business purposes and not for consumer, personal, home or family purposes. 9.2 RETURN OF LEASED PROPERTY: When the leased property is returned to Lessor, at the expiration of the term of this Lease, or as otherwise provided for under the terms hereof, then the same shall be returned in the same condition as when the leased property was delivered to Lessee under the terms of this Lease, ordinary depreciation for normal use excepted. Unless otherwise agreed in writing, Lessee shall be responsible for returning, at Lessee's expense, the leased property to such location in Yakima County, State of Washington, or at such other location as may be designated by Lessor. In the event the leased property is not returned in such condition and state of repair, the costs incurred in replacing the same in such condition and repair shall be paid by Lessee to Lessor, upon demand. WARNING: FAILURE TO PROMPTLY RETURN THE LEASED PROPERTY MAY RESULT IN CRIMINAL PROSECUTION. 10.0 RISK OF LOSS-INSURANCE-INDEMNITY-LIABILITY INSURANCE: 10.1 RISK OF LOSS: Lessee hereby assumes and shall bear the entire risk of loss and damage to the leased property from any cause whatsoever, regardless of whether the loss is insured. 10.2 PROPERTY INSURANCE: During the term of this Lease, Lessee shall cause the leased property to be insured against all perils normally and customarily insured against with an insurer acceptable to Lessor, the Leased Property to be scheduled on Lessee's policy in the amount of the full insurable value of the leased property. Lessor shall be named as an Insured and/or Loss Payee under the said policy or policies to the extent of Lessor's interest. A certificate of insurance providing for thirty 30 days' notice of cancellation to Lessor shall be furnished by the Insurer or Insurers. The proceeds of such insurance payable as a result of loss or damage to any or all of the leased property shall be applied at the option of Lessor as follows: (A) toward the replacement, restoration or repair of the leased property which may be lost, stolen, destroyed or damaged: or, (B) toward the payment of any obligations of Lessee hereunder or arising out of Lessee's use and possession of the leased property. Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact to make claim for, receive payment of and execute and endorse all documents, checks or drafts received in payment for such loss or damage under such insurance policy or policies. 10.3 INDEMNITY-LIABILITY INSURANCE: Lessee covenants and agrees to indemnify and hold harmless Lessor against liability of any kind of nature, including, but not limited to, the liability arising under any statute, ordinance or regulation in connection with the use of the leased property, and against liability from any claim for personal injury, death, or property damage to any person or party whatsoever, including Lessee, by reason of the transportation, installation, use or operation of the leased property, or the condition of the leased property. To insure such indemnification and hold harmless agreement, Lessee shall obtain and maintain in good standing at all times during the term of this Lease Liability Insurance in the amount of $500,000.00 ($1,000,000.00 for rolling stock), or more, with Lessor named as an Additional Insured under such policy or policies. For the purpose of this paragraph, "Rolling stock" shall mean any leased property licensed for operation on public roads. Lessee should provide Lessor with a certificate showing such insurance in effect during the term hereof, and thirty (30) days' notice of cancellation shall be required to be given to Lessor. Such policy shall be issued by an insurance company acceptable to Lessor. 10.4 FAILURE TO INSURE OR PAY FOR INSURANCE: In addition to any other remedies available hereunder, in the event Lessee fails to provide or maintain any insurance required by this agreement, Lessor may obtain the same at Lessee's expense and Lessee shall reimburse Lessor for all of Lessor's costs so incurred. 11.0 USE-OPERATION ACCORDING TO LAW: Lessee shall comply with all applicable statutes, ordinances and regulations with respect to the use, operation and/or condition of the leased property. No Leased Property shall be used contrary to the provisions of any applicable insurance policy covering said leased property, and the Lessee shall immediately indemnify and hold Lessor harmless from any and all fines, forfeitures, damages or penalties resulting from the violation of any laws, ordinances, rules or regulations. 12.0 ABATEMENT: This Lease is irrevocable for the full term hereof and for the aggregate lease payments herein reserved, and the Lease payments shall not abate by reason of termination of Lessee's right of possession and/or the taking of possession by Lessor or for any other reason. 13.0 PERMITS, BONDS, LICENSE AND TAXES: If required, because of Lessee's use and/or possession of the leased property, Lessee shall obtain and provide all necessary permits, bonds, and licenses required or necessary for the installation, use, operation and/or transportation of the leased property. Lessee shall pay, as the same shall become due and payable, all taxes, fees, or other governmental charges levied against the leased property by reason of its use or ownership by any governmental entity or agency. In addition, within thirty (30) days following the date on which such tax, fee or other charges becomes due and payable, Lessee shall deliver to Lessor written proof of payment thereof, upon request by Lessor. In the event Lessee shall fail or refuse to pay any such tax, fee or other governmental charge, Lessor shall have the right to pay the same and Lessee shall reimburse Lessor on demand for all sums so paid by Lessor. Personal property taxes shall be paid by Lessor; Lessee shall upon demand by Lessor, reimburse Lessor in full for annual personal property taxes. Reimbursement in full of said annual personal property taxes to Lessor shall be due not later than April 30th of each year. In the event of Lessee's failure to pay when due any such reimbursement for permits, bonds, licenses, or taxes paid by Lessor, Lessor shall have the right to apply any monies received from Lessee to said reimbursement. 14.0 EVENTS OF DEFAULT: An event of default shall occur if: (A) Lessee fails to pay when due any lease rental payment and such failure continues for a period of ten (10) days. (B) Lessee fails to perform as required any covenant, condition, provision or agreement herein set forth and such failure continues for a period of fifteen (15) days. (C) Lessee becomes insolvent or is the subject of a petition in bankruptcy, either voluntary or involuntary, or makes an assignment for the benefit of creditors, or is named in, or the leased property is subjected to, a suit for the appointment of a receiver, or any action is taken for the dissolution of Lessee, if Lessee be a corporation. (D) By reason of any act or omission of Lessee, the leased property is threatened with or subjected to any unreasonable depreciation in value, waste or loss. (E) Lessee attempts to remove, sell, transfer, encumber, part with possession or sublet the leased property or any item thereof. (F) Lessee defaults in the performance of any obligation owed to Lessor, under the provisions of any other agreement now or hereafter entered into between the parties. 15.0 REMEDIES: In the event of default by Lessee, Lessor shall have all remedies as allowed by law, including, but without limitation, the right to exercise any or all of the following remedies: (A) To declare the entire amount of the rental for the full term hereof and all other obligations the Lessee for the full term of this Lease, reasonably discounted for present value, immediately due and payable without court order or other process; (B) To cause Lessee, at Lessee's expense, promptly to return any or all of the Leased Property to Lessor, all without demand or legal process, and to allow Lessor to enter into the premises whereon the leased property is located, and recover the leased property whereupon all rights of the lessee shall terminate absolutely; for such entry or recovery Lessee grants an irrevocable license to Lessor; and (1) Retain the Leased Property and all lease payments made hereunder, or Page 3 of 4 Initial /s/ WKR Lease Agreement No. 11333:MS/jj (2) Retain all prior lease payments and sell the Leased Property at public or private sale, with or without notice to Lessee. The sale price, less 10% for selling costs, will be credited against the remaining unpaid lease payments, unpaid late charges, estimated value of Leased Property at the expiration of the lease, charges for retaking, storage, repairing and reselling the Leased Property, reasonable attorney's fees incurred by the Lessor and other amounts due under the Lease. The Lessee shall remain liable for the deficiency and any surplus remaining after such application of proceeds of sale shall be paid to the Lessee, or to whosoever may be lawfully entitled to received the same, or (3) Retain the Leased Property and all prior lease payments, with the Lessee remaining liable for the unpaid lease payments, unpaid late charges, charges for retaking and restoring Leased Property to proper order and working condition, reasonable attorney's fees incurred by Lessor, together with other amounts due under the Lease, or (4) Lease the Leased Property, or any portion thereof, for such period, rental, and to such persons as Lessor shall elect, and credit Lessee with an amount equal to Lessor's capital cost of this new lease, less ten percent (10%), after deducting all costs and expenses incurred in connection with the recovery, repair, storage and leasing of the Leased Property in payment of the Lease and other obligations due from Lessee to Lessor hereunder, Lessee remaining responsible for any deficiency. (5) To pursue any other remedy available at law, by statute or equity. No right or remedy herein conferred upon or reserved to Lessor is exclusive of any other right or remedy herein, or by law or by equity provided or permitted, but shall be cumulative of every other right or remedy given herein or now or hereafter existing by law or equity or by statute or otherwise, and may be enforced concurrently therewith or form time to time. No single or partial exercise by Lessor of any right or remedy hereunder shall preclude any other or further exercise of any other right of remedy. (C) It is agreed that the amounts to be retained by the Lessor and the balance to be paid by the Lessee under this paragraph shall not be a penalty but shall be as and for liquidated damages for the breach of this Lease and as reasonable return. (D) If Lessor is required by law to discount any unpaid lease payment or other sums payable by Lessee hereunder, then the parties hereto agree that the discount rate used shall be five percent (5%) annually. 16.0 COSTS IN THE EVENT OF DEFAULT - VENUE: All costs incurred by Lessor in protecting the leased property or any costs incurred by Lessor in the event of a default by Lessee shall be paid by Lessee to Lessor upon demand. Such costs shall include, but not be limited to, all Lessor's attorney's fees incurred, costs of taking possession and transporting the leased property to Lessor's place of business or such other place as designated by Lessor, and costs for restoring the leased property to a good and safe condition and working order for the purpose of sale or lease of the said property. In the event of any suit or action arising by virtue of this Lease, venue of such action shall be laid at the option of Lessor in Yakima County, State of Washington. 17.0 GOVERNING LAW: This Lease and the rights and obligations of the parties hereto shall be governed by and construed at all times by the laws of the state of Washington. 18.0 NOTICES: With reference to any notices given under this agreement, the same shall be delivered personally or deposited in the United States Mail, post prepaid, addressed to the respective parties at the addresses appearing on Page 1 of this Lease. Each of the parties shall be responsible for notifying the other party or parties in writing of any change of address. 19.0 ENTIRE AGREEMENT: This Lease agreement contains the entire agreement between the parties and shall be binding upon their respective heirs, executors, administrators, legal representatives, successors and assigns, personal representatives, successors and assigns; subject, however, to any other supplemental or other agreements in writing by and between the parties. This agreement may not be altered or amended, except in writing and signed by both parties. Page 4 of 4 Initial /s/ WKR Lease Agreement No. 11333:MS/jj 20.0 WAIVER: The forbearance on the part of Lessor to exercise any right or remedy available hereunder in the event of Lessee's default, or Lessor's failure to demand punctual performance or any obligation of Lessee shall not be deemed a waiver (A) of any such right or remedy, or (B) the requirement of punctual performance, or (C) of any subsequent breach or default on the part of Lessee. 21.0 POWER OF ATTORNEY: Lessee hereby duly appoints Lessor true and lawful attorney in fact to sign in the name, place, and stead of Lessee any UCC Financing Statement or Fixture Filing pertaining to that property described or referenced in paragraph 1.0 above. 22.0 CHANGE OF LOCATION: Lessee shall not cause the location of the leased property to be changed from that location described in Paragraph 3.0 above without first notifying Lessor in writing of the change of location and obtaining Lessor's written consent to a change of location. Failure to obtain Lessor's consent shall constitute an event of default under the terms of this Lease. 23.0 SEVERABILITY: If any provision of this Lease is contrary to, prohibited by, or held invalid under applicable laws or regulations or any jurisdiction in which it is sought to be enforced, then such provision shall be considered severable and inapplicable, but shall not invalidate the remaining provisions of this Lease agreement. 24.0 OPTION TO PURCHASE: In the event Lessee(s) has fully performed all covenants, conditions, provisions and agreements herein required of Lessee(s), and provided Lessee(s) is not in default in the performance of any other obligation of Lessor, the Lessee(s) is granted the option of purchasing the leased property at the expiration of the term of this Lease for the sum of $1.00. LESSOR: SUMMIT LEASING, INC. /s/ WKR By /s/ Mike Schlosser Date: February 2005 LESSEE: HOMENET COMMUNICATIONS, INC. By _/s/ Walter Kelly Ryan Date: February 2005 (Signature of Corporate Officer) /s/ Walter K. Ryan /s/ Kevin Doherty - -------------------------------------- ------------------------------- Walter K. Ryan, individually Kevin Doherty, individually /s/ Michael W. Devine /s/ Frank J. Gillen - -------------------------------------- ------------------------------- Michael W. Devine, individually Frank J. Gillen, individually /s/ Brian Potter /s/ Leroy W. Jackson - -------------------------------------- ------------------------------- Brian Potter, individually Leroy W. Jackson, individually /s/ Shauna Badger /s/ Rodney S. Badger - -------------------------------------- ------------------------------- Shauna Badger, individually Rodney S. Badger, individually /s/ Robert B. Jones /s/ Carol Jones - -------------------------------------- ------------------------------- Robert B. Jones, individually Carol Jones, individually Page 5 of 5 Initial /s/ WKR Lease Agreement No. 11333:MS/jj -----END PRIVACY-ENHANCED MESSAGE-----