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FORM 10-KSB
U. S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File No. 33-97770
LEVEL BEST GOLF, INC.
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(Exact name of small business issuer as specified in its charter)
Florida 59-3205644
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14561 58th St. North
Clearwater, Florida 34620
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(Address of principal executive offices) (Zip Code)
(813)535-7770
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(Issuer's telephone number)
Securities registered under Section 12(b) of the Securities Exchange Act
of 1934:
Name of Each Exchange
Title of Each Class on Which Registered
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None None
Securities registered under Section 12(g) of the Securities Exchange Act
of 1934:
None
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $495,681
The aggregate market value of the issuer's Common Stock, $.001 par value per
share, held by non-affiliates on December 23, 1996, based on the last sale
price of the Common Stock as reported by Nasdaq of $3.56 per share, was
$7,824,033.
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As of December 24, 1996, there were 3,246,042 shares of the issuer's
Common Stock, $.001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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None
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LEVEL BEST GOLF, INC.
FORM 10-KSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
<S> <C> <C>
Item 1. Description of Business 1
Item 2. Description of Property 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security-Holders 9
PART II
Item 5. Market for the Common Equity and Related
Stockholder Matters 9
Item 6. Management's Discussion and Analysis or Plan of
Operation 9
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act 12
Item 10. Executive Compensation 14
Item 11. Security Ownership of Certain Beneficial Owners and
Management 15
Item 12. Certain Relationships and Related Transactions 17
Item 13. Exhibits and Reports on Form 8-K 18
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL.
Level Best Golf, Inc. (the "Company"), was incorporated in Florida on
October 1, 1993. The Company markets unique, high quality and effective golf
training aids to domestic and foreign markets. With the cooperation of several
Professional Golfers Association ("PGA") professionals nationwide and support
from a variety of manufacturers of golf equipment, the Company offers a line of
products for the purpose of improving scores and enhancing enjoyment of the
game. The Company's executive offices are located at 14561 - 58th Street
North, in Clearwater, Florida. Its telephone number at that address is (813)
535-7770 and the fax number is (813) 535-0070.
PRODUCTS.
The Company's flagship product is SCRATCH SCORE GOLF(TM). The product
consists of three, 2-hour videos which address almost every facet of the game.
It also comes with 5 training aids designed to work in conjunction with the
practice drills demonstrated on the videos. Tape 1 - "The Clinic: The Full
Fall Swing" - gives easy-to-follow instructions which help the golfer feel the
correct swing motion for driver, fairway woods and long irons. Tape 2 - "The
Clinic: The Short Game: Error Corrections and Misconceptions" - shows
proper techniques for chipping, pitching, sand shots and putting. Tape 2 also
demonstrates correction for hooks, slices and other problem shots. Tape 3 -
"Playing the Course" - shows golfers how to not get bogged down with too many
swing mechanics and also how to manage the golf game on the course. Included
is a 20-minute segment with noted sports psychologist, Dr. David Cook.
Throughout the videos, there are training aids to convey easy-to-understand
practice drills from which to build a solid golf swing.
During the second quarter of 1997 the Company will re-introduce the
product at $59.95 (down from $79.95) via an infomercial featuring Mr. Wally
Armstrong, a PGA member since 1974, and testimonials. The product was first
made available for general retail during the fourth quarter of 1996 and sells
for $39.95 to $49.95. The Company did not participate in any way with the
initial introduction of this product by Mr. Armstrong. American Telecast and
Mr. Armstrong initially introduced the product in 1992 and the infomercial ran
in 1993. This was done as "Wally Armstrong Golf, Inc." which sold over 100,000
units at $149.95 per unit.
The Company acquired exclusive marketing rights to the SCRATCH SCORE GOLF
(TM) system for a term of 18 months commencing on March 15, 1995. It continues
thereafter on a year-to-year basis if annual payments of at least $20,000 are
made to Gator Golf Enterprises, Inc. ("Gator Golf"), a company controlled by
Mr. Armstrong. The Company pays 10% of the gross collected revenue on SCRATCH
SCORE GOLF(TM) to Gator Golf. Gator Golf may terminate the Agreement upon
written notice if timely payments are not made by the Company or in the event
the Company declares bankruptcy or is insolvent. The Company would have ten
days to cure any default.
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From SCRATCH SCORE GOLF(TM), the Company developed three individual
instructional videos, each one packaged with a training aid. THE TEMPO BALL
focuses on the swing lesson, THE RULER focuses on alignments and the short
game, and THE HANGER focuses on the power lesson.
Each of these products has a selling price point of $19.95. This price
point targets not only the inexpensive self-purchase, but also the much larger
gift-buying, audience and allows the products to enter into an expanded
distribution pattern. The promotional series was first made available for
general retail during the fourth quarter of 1996.
The LEVEL BEST GOLF SYSTEM consists of three engineered plastic components
(Hand Positioner, Loft Indicator and Lie Detector), a 20-minute instructional
video featuring Wally Armstrong, a carrying pouch and a bag tag for recording
training information specific to each golfer. The LEVEL BEST GOLF SYSTEM
retails for $49.95, plus $4.95 shipping and handling. The Company introduced
this product in green grass pro shops (a traditional pro shop located at a golf
course or driving range) and concrete golf shops (off-course golf shops which
sell golf clubs and accessories) nationwide in January 1995.
Hand Positioner: The Hand Positioner is a small plastic curved component
which attaches to the golf club just below the grip. The Hand Positioner's
vial and bubble indicate the golfer's hand position when he/she addresses the
ball and actually remain on the club as practice balls are hit. This allows
the golfer to return to the same position before hitting each shot, which in
turn builds consistency into the golfer's set-up and shot making.
Loft Indicator: The Loft Indicator magnetically attaches a curved plastic
and vial component to the club face of the golf club. The Loft Indicator will
actually read the loft of the club face as the golfer addresses the ball and
also indicates whether the face of the club is pointed at the target (square),
which is the desired position, pointed to the right of the target (open) or
pointed to the left of the target (closed). Achieving proper alignment of the
club face to the target is an ongoing challenge for golfers of all skill levels
and the Loft Indicator provides a quick and repeatable method of achieving
proper club face to target alignment.
Lie Detector: The Lie Detector is a smaller plastic component which also
magnetically attaches to the club face and has a small vial just like a
carpenter's level. Proper club lie can vary as much as four degrees from one
player to the next. When the Lie Detector is placed parallel to a groove in
the club face and the bubble is centered between the lines on the vial (which
indicate level), if the hands are not in a comfortable relaxed position an
adjustment to the club lie would be indicated. The adjustment would be either
upright or flat, which would bring a golfer's hands to a comfortable and
relaxed position with the bubble in the level centered.
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The 20 minute video which accompanies the components shows proper use of
each component and how they may be used in combination to improve set-up and
shot-making. It also shows how to record an individual golfer's proper hand
position and loft at address for quick reference and maximum benefit when using
the system to practice.
Mr. Perry Marshall invented and patented the basic components of the LEVEL
BEST GOLF SYSTEM in 1990. He updated and redesigned the components to create
the present form of the system. He filed new patents in January 1994 to
encompass these changes, as well as to tie the components together for use as a
training system. Mr. Marshall still holds these patents.
ONE PUTT PERFECTOR - The ONE PUTT PERFECTOR is a patented training aid
designed to help golfers of any skill level develop a pendulum putting stroke.
The ONE PUTT PERFECTOR is a small plastic component. It attaches to the shaft
of a putter just above the head and has a small vial which assures that the ONE
PUTT PERFECTOR is squared to the club face of the putter in one plane, and is
level with the horizon when the golfer addresses the ball. Inside the body of
the ONE PUTT PERFECTOR, a small white ball sits on the front end of the ONE
PUTT PERFECTOR when the golfer is addressing a putt. When the golfer makes a
putting stroke, the white ball travels toward the rear of the ONE PUTT
PERFECTOR and lands in one of three pockets (similar to a pool table pocket
and ball). The center pocket is located directly behind the point from which
the small white ball sits prior to making the stroke. If a proper straight
back and straight through (pendulum stroke) to the target stroke is made, the
white ball will go into this pocket which is centered between two other
pockets. If the white ball travels into either of the other pockets, it would
indicate the putter stroke was incorrect by taking the putter path inside or
outside of the desired center line path and would indicate that correction is
needed. The 30 minute instructional video shows golfers how to attach and use
the ONE PUTT PERFECTOR and also shows how to make proper strokes and correct
faults in improper strokes.
The ONE PUTT PERFECTOR is planned to retail at $24.95, plus $3.95 shipping
and handling. The Company introduced this product in sporting goods stores as
well as in green grass pro shops and concrete golf shops nationwide in the
first quarter of 1995 following the introduction of the LEVEL BEST GOLF SYSTEM.
The ANGLEIRON(TM) is a multi-purpose training club for all levels of play.
The ANGLEIRON(TM) is a single golf club that adjusts to a 3, 5, 7 or 9 iron or
sand wedge setting that locks into place with a turn of a dial near the foot of
the club's shaft. This product will help any golfer develop a better chipping,
pitching and full swing motion. The ANGLEIRON(TM) will be on infomercial in
the first quarter of 1997.
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The REACH VIDEO is targeted for junior golfers. The one-hour video
highlights the Rules, Etiquette, Appreciation, Conduct and History of the game
of golf. It is a program of the National Association of Junior Golfers,
sponsored by the Company and produced in cooperation with the United States
Golf Association, the PGA, the Ladies Professional Golfers Association, the
National Golf Foundation and the Golf Course Superintendents Association of
America. The product was made available for general retail beginning in the
fourth quarter of 1996.
The Company has negotiated the rights to market and sell the BALL BUTLER.
This patented device hangs on either the inside or outside of a golf bag, holds
up to 12 golf balls at a time and provides easy access to golf balls. The BALL
BUTLER will be distributed directly into the retail market beginning in either
the first or second quarter of 1997 and will be priced at approximately $20.
To capitalize on the market for improving an individual's performance in
golf, the Company will introduce the PERFORMANCE PACK around February 1997.
The PERFORMANCE PACK will consist of two products. One is a unique glove
featuring a reinforced palm, knuckle insert and a new method of stitching, and
the other is a "dry hands" solution that prevents moisture and repels rain.
The combination of these products should help to improve a golfer's
performance. The PERFORMANCE PACK will sell for approximately $19.95.
The LASER TRACKER or PLAIN SIGHT LASER is a product made with high quality
laser technology. It is designed to help any golfer improve his/her game by
allowing the golfer to follow the line of his/her swing. The Company has
initiated negotiations to license the products and anticipates that the product
will be available in the United States by April 1997, although there is no
assurance that it will be available by then.
GOLF 21 is an indoor/outdoor putting game for all ages that not only
entertains, but also can improve putting skills. It is promotionally priced
and was first made available during the fourth quarter of 1996.
The Company has negotiated the rights to market and sell a patented golf
bag cover under the name of the CLUBS HOUSE. This is a high quality, uniquely
designed golf bag cover for use in inclement weather. It is promotionally
priced, has a universal need and can be purchased for personal use or as a
gift.
The GOLFERS FIRST AID CADDY is an assortment of products (aspirin,
bandages, sunscreen, etc.) packaged as a gift for golfers. This product is
promotionally priced and packaged for impulse buying. This product is expected
to be available in the first quarter of 1997, although there is no assurance
that it will be available by then.
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The Company has an exclusive marketing agreement with Marshall Products,
Inc., for the LEVEL BEST GOLF SYSTEM, the ONE PUTT PERFECTOR and other golf
related products currently under review and development by Mr. Marshall, its
principal. The agreement is for a term of five years from the effective date
of January 1, 1994, with an option to renew the agreement for an additional
five years. The Company pays a royalty of 7.5% of net sales. In the event
that net sales of units shall not exceed in the aggregate, for a period of
four years, 60,000 units, Marshall Products, Inc., shall have the right to
give the Company 30 days notice of the termination of the exclusive character
of the agreement, unless the Company can show, to the satisfaction of Marshall
Products, Inc., that its failure was attributable to facts beyond its control,
such as market conditions, failure of supply of needed raw materials, strike,
etc. Marshall Products, Inc., may terminate the Agreement upon written notice
if timely payments of royalties are not made by the Company or in the event the
Company declares bankruptcy or is insolvent. The Company would have 90 days to
cure any default.
Mr. Marshall individually holds the patents relating to these products.
As a result, Mr. Marshall could, in the future, limit the Company's use of the
products. However, Marshall Products, Inc. is controlled by Mr. and Mrs.
Marshall and the Company does not foresee any limitations or possible breach of
contract by Marshall Products, Inc.
The Company also has an exclusive marketing agreement with Automated Golf
Training Aids, Inc., for the ANGLEIRON(TM). The agreement is for a term of five
years that began March 31, 1996. The Company pays a royalty of 8% of
ANGLEIRON(TM) net sales. The Company must make minimum royalty payments of
$50,000 in 1997 and of $100,000 for each of 1998 through 2000.
The Company has an exclusive marketing agreement with Innovative Products,
Inc., for the BALL BUTLER. The agreement is for a term of five years beginning
January 1, 1997. The Company pays a royalty of $3.50 per unit for the first
10,000 units sold and 11% of gross sales for all subsequent units. The Company
is required to maintain minimum unit sales for each calendar year of the
agreement. The minimum for 1997 is 150,000 units; for 1998, 250,000 units;
for 1999, 300,000 units; for 2000, 150,000 units; and for 2001, 100,000 units.
The Company has an exclusive marketing agreement with Donald Cofer for
GOLF 21. The agreement is for a term of five years that began in February
1996. The Company issued Mr. Cofer 2,000 shares of its Common Stock and agreed
to pay a royalty of 7.5% of gross sales. The Company is required to maintain
minimum unit sales for each calendar year of the agreement. The minimum for
the first year is 10,000 units; for the second year, 20,000 units; for the
third year, 30,000 units; for the fourth year, 40,000 units; and for the fifth
year, 50,000 units.
The Company furthermore has an exclusive marketing agreement with B C
Communications for the CLUBS HOUSE (originally known as
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the CLUB PARKA). The agreement is for a term of five years beginning in
January 1997. The Company pays a royalty of 10% of gross sales. The Company
is required to maintain minimum unit sales for each calendar year of the
agreement. The minimum for 1997 is 50,000 units and for each of 1998 through
2002 is 100,000 units.
The Company is reviewing numerous products for market viability. The
Company is also evaluating other golf product companies for potential
acquisition. Currently, the Company has not targeted any specific
acquisitions. The Company plans to finance any future products or acquisitions
by future revenue from operations and/or any proceeds received from subsequent
sales of the Company's debt or equity securities or upon exercise of the
Company's warrants, if any. There is no assurance that any financing for
either of these purposes will be available.
MARKET.
Based on statistics from the National Golf Foundation, there are estimated
to be 24,300,000 golfers in the United States as of 1994. The Japanese market,
based on statistics published in September, 1993 in Golfweek Magazine, is
estimated to be 17,500,000 golfers and 20,000,000 range players who practice
regularly at range facilities with little or no opportunity to get on a golf
course. Europe, Australia and Asia are also experiencing growth in the golf
industry and represent a significant opportunity for expansion of the Company's
sales.
MARKETING STRATEGY.
The Company's marketing strategy employs a multi-tier strategy of direct
response television, direct response print, event marketing and television
supported retail marketing through conventional distribution systems and
outlets. Direct response is when the customer responds to a television
commercial or print ad and places a credit card order with the Company.
A two minute direct response television commercial and a one minute retail
support commercial on the Company have been completed. The commercials feature
pro golfer Wally Armstrong and golf school owner Greg Ortman, and were filmed
at Grenelefe Resort near Orlando, Florida.
The Company intends to employ the development of a golf tips column by
Wally Armstrong and a series of three minute instructional mini-programs to be
inserted into golf programs on the various broadcast and cable sports networks.
With the help of OpenNet Technology, the Company has created an
interactive golf product page featuring all the products, golf clubs and
training and instruction aids. OpenNet Technology has received a fee of $1,000
in connection with the set-up of this interactive web page, which can be found
on the Interenet at http:\\www.levelbestgolf.com.
Editors and writers at both general consumer and specialty publications
have received complete information kits (news release, photos, video and actual
product samples). Articles are planned to
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support the primary marketing thrust provided by direct response television.
The publicity effort is planned to include the use of a newspaper mat service.
Three different articles are planned to be distributed to small daily and
large weekly newspapers in wealthy suburban markets. These types of articles
offer advice and talk about the benefits of the Company's products. A
toll-free number appears in some articles, while others offer a free brochure.
The Company entered into a three year Personal Services Agreement with
Wally Armstrong, a former director of the Company, on January 7, 1994.
Pursuant to the agreement, Mr. Armstrong has received compensation of $25,000
per year. Mr. Armstrong granted a non-exclusive right to utilize his name in
connection with advertisement, promotion and sale of the LEVEL BEST GOLF SYSTEM
until December 31, 1996. As of December 23, 1996, the Company and Mr.
Armstrong were negotiating an extension of the agreement between them, although
there is no assurance that the agreement currently in force will be extended
past the current termination date. Mr. Armstrong has the right of first
refusal to endorse future products.
The Company recently entered into an exclusive national distribution
agreement with The Booklegger of California, a non-affiliate. The Booklegger
of California distributes, among other items, golf books, videos and training
aids, has over twenty years' experience and 7,000 accounts consisting of green
grass and off course shops.
Additionally, the Company's infomercial marketing strategy employs a
product tier approach consisting of primary infomercial products, secondary
infomercial products, mid-range price point products and promotional price
point products. Furthermore, the Company has identified three product
classifications consisting of learning/teaching, performance improvement and
accessories.
Primary infomercials will be "vertically" produced by the Company and run
exclusively on cable and television. The products will range in retail price
points from $69.95 to $149.95, will have gross margins for the Company of 80%
and have an objective of generating revenue and profits exclusively via
infomercial. The ANGLEIRON(TM) would be an example of a primary infomercial
product.
Secondary infomercials will be a "second" generation of a primary
infomercial running at a reduced retail price point. The infomercial will run
in conjunction with retail placement at price points from $59.95 to $99.95 and
gross margins for the Company of 65% and have an objective of "driving" the
product at the retail placement level. SCRATCH SCORE GOLF(TM) is currently an
example of a secondary infomercial product.
Mid-range price products will be non-infomercial products (with
exceptions) with price points between $39.95 and $59.95, gross margins for the
Company of 50% and an objective of being items most likely to appeal to large
specialty and significant sporting goods departments in general retail and
catalog.
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SCRATCH SCORE GOLF(TM) will be an example of a mid-range price product when it
is re-introduced to the retail market after the secondary infomercial stops
airing.
Promotional price point products will be non-infomercial products (with
exceptions) with price points between $14.95 and $29.95, gross margins for the
Company of 50% and an objective of very broad mass market appeal. Any retailer
should purchase these products for resale during seasonal periods. Examples of
promotional price point products would be the ONE PUTT PERFECTOR, SCRATCH SCORE
GOLF(TM) promotional series, GOLF 21, BALL BUTLER, PERFORMANCE PACK, CLUBS
HOUSE, LEVEL BEST GOLF SYSTEM, GOLFERS FIRST AID CADDY and REACH VIDEO.
DISTRIBUTION.
The Company has developed the following to implement the distribution and
marketing plan of its products:
SALES TO NATIONAL CHAINS. The Company has established a relationship on a
national level with Sports & Recreation, Inc., which currently has the
Company's products in all 80 of its stores. The Company is seeking to create
similar relationships with other national chains.
CATALOG SALES. The Company has had its products featured in the
catalogues of both Hammacher Schlemmer and Austad's. This has helped promote
the Company's products on a national level.
SALES TO GOLF SHOPS. The Company is purchasing close-out inventory of
several major golf manufacturers and will be aggressively marketing those
products. This will occur both on a local level, through newspaper
advertisements and contact with local golf shops, and on a national level,
through a relationship as an approved vendor of Play It Again Sports, a
sporting goods chain with over 650 stores. The markup on the products will be
approximately 40%. A portion of the financing of this effort is being provided
by Lorimar Capital Management Corp. located in Columbus, Ohio, which approved a
$100,000 loan for a golf club close-out purchase from Head Sports in Boulder,
Colorado.
OVERSEAS SALES. The Company is working with SNUGZ USA, Inc., to
distribute the Company's products in Japan, beginning with SCRATCH SCORE
GOLF(TM). However, no agreement has yet been reached between the Company and
SNUGZ USA, Inc., and there is no assurance that one will be reached. Any such
agreement should require no outlay of cash on the part of the Company as the
distributor will be responsible for the marketing expense associated with this
project.
NATIONAL INFOMERCIAL. The Company authorized its Canadian distributor to
produce a thirty minute infomercial featuring SCRATCH SCORE GOLF(TM). The
infomercial has aired on both U.S. and Canadian television nationally since
February 1996. This
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infomercial features PGA teacher Wally Armstrong, PGA tour member Andy Bean,
who has won 11 times on tour, and actor McLean Stevenson.
All of the costs for this production are being borne by the Canadian
distributor. The Company will be providing the product on a reduced cost
basis. The Company also has in excess of 100,000 units of this product in
inventory. The Company will only have to provide the video tapes in the
product package. The infomercial also provides advertising support to the
Company's retail sales without the expense associated with conventional retail
support advertising.
MANUFACTURING AND ASSEMBLY.
The Company outsources all component manufacturing to proven reliable
sources and also has alternate sources available at similar costs for all
components of the LEVEL BEST GOLF SYSTEM. All components except for curved
glass vials and custom molded plastic bodies are readily available from a
number of suppliers. Winders Products Company, Port Austin, Michigan, is the
current source for glass curved vials. The Company's alternate source for
glass curved vials is W. A. Moyer and Sons, Emporia, Kansas. The plastic
molded bodies are currently being provided by Dickson Tool and Mold, Inc.,
Brooksville, Florida. The Company owns all tooling used in this process.
UPARC, Inc., St. Petersburg, Florida, does the final assembly of some
components with quality surveillance being conducted by the Company's
personnel. The Company also has in-house capability to support near-term
requirements.
COMPETITION.
The Company's current and future products compete in the recreation,
fitness, and sports training markets, which are highly competitive. Increased
competition generally, and the introduction or promotion of competing products
specifically, could adversely affect the Company's sales and profitability by
exerting pressure to reduce pricing and thereby gross margins, reducing market
share and creating other obstacles. In the golf industry, a distributor's
ability to compete is dependent in part upon its ability to satisfy various
subjective preferences of golfers, including the look and "feel" of a golf
product and the level of acceptance that the product has achieved among
professional and other golfers. The subjective preferences of purchasers of
golf training products may be subject to rapid and unanticipated changes.
The Company will be competing with established companies and other
entities, many of which may possess substantially greater resources than the
Company. Almost all of the companies with which the Company competes are
substantially larger, have more substantial histories, backgrounds, experience
and records of successful operations, greater financial, technical, marketing
and other resources, more employees and more extensive facilities than the
Company now has, or will have in the foreseeable future. It is
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also likely that other competitors will emerge in the near future. There is
no assurance that the Company's products will compete successfully with other
similar products. The Company intends to compete on the basis of quality of its
products in addition to a price basis. Inability to compete successfully might
result in increased costs and reduced yields.
EMPLOYEES.
As of December 23, 1996, the Company has 12 full time employees. None of
the employees is subject to a collective bargaining agreement. The Company
believes that its relationship with its employees is good. The Company will,
as operations demand, sub-contract the balance of its personnel through
independent contractors or hire additional employees.
Item 2. DESCRIPTION OF PROPERTY.
The Company's executive offices are located at 14561 58th Street North,
Clearwater, Florida 34620, and the telephone number at that address is (813)
535-7770. These offices consist of approximately 5,500 square feet of office
space and approximately 60,000 square feet of warehouse space on approximately
2.5 acres leased for 3 years for $6,000 per month, plus applicable sales tax.
Item 3. LEGAL PROCEEDINGS.
The Company currently has no material pending or threatened legal
proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
PART II
Item 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades under the symbol "LBGF" on the OTC
Bulletin Board(R) operated by The Nasdaq Stock Market, Inc. The high and low
bid prices for the Company's Common Stock for the quarter ended September 30,
1996, the first quarter in which the Common Stock was quoted on the OTC
Bulletin Board(R), were $3-7/8 and $3-1/8, respectively. These bid prices are
inter-dealer prices without retail markup, mark-down or commission, and may not
represent actual transactions.
At December 24, 1996 there were approximately 1,068 holders of record of
the Common Stock.
Please see Notes 2 and 12 of the Company's Notes to Financial Statements
included in this report for a description of the sales during fiscal year 1996
by the Company of securities in transactions that were not registered pursuant
to the Securities Act of 1933, as amended (the "Securities Act"). The Company
relied upon the exemption from registration provided by Section 4(2) of the
Securities Act in connection with those sales.
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Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Except for the historical information contained herein, the matters
discussed in this item are forward-looking statements involving risks and
uncertainties which may cause actual results to materially differ. Those risks
and uncertainties include, but are not limited to, economic, competitive,
industry and market factors affecting the Company's operations, markets,
products, and prices, and other factors discussed in the Company's filings with
the Securities and Exchange Commission.
RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND 1995.
The Company experienced a net operating loss of $1,145,195 for the fiscal
year ended September 30, 1996, compared to a net operating loss of $1,473,182
for the fiscal year ended September 30, 1995, a decrease of 22.3%. Net sales
and cost of sales for the fiscal year ended September 30, 1996, were $495,681
and $198,396, respectively, as compared to net sales of $98,474 and cost of
sales of $149,263 for the fiscal year ended September 30, 1995. The sales
increase resulted from a large sale to Best Buy for $265,000 and increasing
sales into retail of SCRATCH SCORE GOLF(TM) and ONE PUTT PERFECTOR. Selling,
general and administrative ("SGA") expenses for fiscal year were $1,399,901 as
compared to $1,391,904 for fiscal year 1995, an increase of only 0.6%.
Included in SGA expenses is stock issued for services related to product
development and marketing of $111,950 for fiscal year 1996 as compared to
$664,726 for fiscal year 1995, a decrease of 83.2%. The decrease was the
result of the Company's ability to pay for services in cash in lieu of stock.
Accrued officers' salaries increased by $287,548 in fiscal year 1996.
Net cash used in operations was $506,505 for fiscal year 1996 as compared to
$636,762 for fiscal year 1995. Notes payable to affiliates increased by
$272,233 for fiscal year 1996. Proceeds from the issuance of common stock were
$455,000 for fiscal year 1996 as compared to $609,177 for fiscal year 1995.
RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND 1994.
The Company experienced a net operating loss of $1,473,182 for the year
ended September 30, 1995 compared to $385,126 for the year ended September
30, 1994. Net sales and cost of sales for the year ended September 30, 1995
were $98,474 and $149,263, respectively, as compared to net sales of $22,339
and cost of sales of $15,791 for the year ended September 30, 1994. This
increase for the year ended September 30, 1995 was due to increased operations.
Selling, general and administrative expenses for the year ended September 30,
1995 were $1,391,904 as compared to selling, general and administrative
expenses of $379,292 for the same period in 1994. This increase for the year
ended September
11
<PAGE> 15
30, 1995 was due to management's attempt to obtain further capitalization and
increase operations. The primary change was stock issued for salaries and to
consultants for services related to product development and marketing of
$665,000. The other material components consisted of increases in salaries and
payroll taxes of $133,000, consulting fees of $50,000 and advertising of
$28,000. Net cash used in operations was $636,762 for the year ended September
30, 1995.
For the year ending September 30, 1995, the Company promoted three
products and sold 140 units of The LEVEL BEST GOLF SYSTEM, 1,832 units of
SCRATCH SCORE GOLF(TM) and 372 units of the ONE PUTT PERFECTOR. For the year
ended September 30, 1994, the Company promoted and sold 894 units of the LEVEL
BEST GOLF SYSTEM.
TRENDS AND UNCERTAINTIES
The Company is seeking to lower its operating expenses while expanding
operations and increasing its customer base and operating revenues. The
Company is focusing on decreasing administrative costs. However, increased
marketing expenses will probably occur in future periods as the Company
attempts to further increase its marketing and sales efforts.
Inasmuch as a major portion of the Company's activities is the development
and marketing of golf training aids, the Company's business operations may be
adversely affected by competitors and prolonged recessionary periods. The sale
of the Company's products is seasonal in that the Christmas season and Father's
Day are two strong buying periods. In addition, the spring season produces
strong orders in the first six months of each calendar year.
The Company has been adding new accounts, representative groups, expanding
into new markets and channels of distribution in recent months. See "Item 1
- - Marketing Strategy". The continuation of obtaining additional types of new
business and markets is uncertain and the continued success of any of the
Company's new marketing strategies for generating revenue is uncertain.
The purchasers in a private placement of shares of the Company's Common
Stock during September through November 1996 may have certain rescission rights
pursuant to federal and state securities laws. Accordingly, the Company may
have a contingent liability for rescission of up to $524,000, plus interest at
12% per annum. The exercise of such rescission rights by a sufficient number
of the purchasers may have a materially adverse effect upon the Company.
12
<PAGE> 16
CAPITAL AND SOURCE OF LIQUIDITY.
The Company was in the developmental stage through the fiscal year ended
September 30, 1995. The Company will begin airing infomercials in the first
half of calendar year 1997. The infomercials will emphasize the Company's
premier products, ANGLEIRON (TM) and SCRATCH SCORE GOLF, and provide brand
identification for the "Level Best Golf" product line.
In June 1996, the Company entered into a 3 year lease for its current
facility at a monthly rental rate of $6,000. Other than this lease, the
Company has no material commitments for capital expenditures. The Company has
an option to buy its current facility at a price of $600,000. The Company
intends to purchase its new facility when it can obtain acceptable mortgage
financing for not less than 80% of the purchase price. The Company may elect
to pay all or part of the purchase price with proceeds realized, if any, from
the sale of Common Stock pursuant to exercise of outstanding Warrants, although
there is no assurance that sufficient proceeds will be received from such
exercise for such purpose.
The Company has incurred operating losses of $1,145,195, $1,473,182 and
$385,126, respectively, for the fiscal years ended September 30, 1996, 1995 and
1994. Through the end of fiscal year 1996, the Company has not generated
positive cash flow from operations. At September 30, 1996, the Company had
negative working capital of $1,004,043. The Company's independent auditiors
have qualified their opinion on the Company's financial statements for the
fiscal year ended September 30, 1996, to the effect that there is substantial
doubt about the ability of the Company to continue as a going concern.
The Company believes that it will have a positive cash flow from
operations during fiscal year 1997, although there is no assurance that it will
occur. The Company is planning to seek additional capital during fiscal year
1997 through equity financing, but there is no assurance that such financing
will be available on terms acceptable to the Company or at all.
Item 7. FINANCIAL STATEMENTS.
Please see "Index to Consolidated Financial Statements" on Page F-1.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
13
<PAGE> 17
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
OFFICERS AND DIRECTORS.
Pursuant to the Articles of Incorporation, each Director serves until the
annual meeting of the stockholders, or until his successor is elected and
qualified. Directors may be removed with or without "cause". The term of
office of each officer of the Company is at the pleasure of the Company's Board.
The directors and principal executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
Director
Name Age Current Company Positions Since
- ---- --- ------------------------- -----
<S> <C> <C> <C>
William E. Foley 49 Director 1996
Patricia A. Sanders 48 Director and Secretary 1993
Fred L. Solomon 52 Director and President 1993
James G.("Greg") Solomon 43 Director and Vice President 1993
Donald E. Thompson 46 Director 1996
Curt L. Rodgers 48 Chief Financial Officer ----
</TABLE>
WILLIAM E. FOLEY - Mr. Foley has been a Director of the Company since
December 4, 1996. From 1987 to 1996, Mr. Foley was with Vi - Tel Electronics,
Inc., a consumer electronics distributor, which filed a Chapter 11 proceeding on
January 16, 1996, in the Bankruptcy Court of the Federal District Court for New
Jersey, Case No. 96-20222. From 1990 to 1996, including at the date of filing
the Chapter 11 proceeding, Mr. Foley was Executive Vice President and Chief
Operating Officer. From 1994 to 1996, Mr. Foley was also President of
Selectronics, a consumer electronic manufacturer and subsidiary of Vi - Tel.
Mr. Foley was responsible for all facets of the business of Selectronics, with
specific emphasis on marketing and sales to the retail community. As President
of Selectronics, Mr. Foley was responsible for the start up, organization and
expansion of this business segment with a product line for direct sale to
retailers. From 1981 to 1987, Mr. Foley was owner and president of two
separate companies: G & S Advertising, a full service advertising agency
specializing in retail, and Flick's N Fones, a six store retail operation.
Prior to 1981, Mr. Foley held positions as Senior Vice President of Marketing
and Advertising for Korvettes, Inc., a 50 store $600 million discount retailer;
Vice President Advertising for Vornado and Merchandise Manager for Mangurians
Home Furnishings. Mr. Foley's professional career started with the JC Penney
Company. Mr. Foley received a Bachelor of Science degree in Business
Administration from Fairleigh University in 1969.
PATRICIA A. SANDERS - Ms. Sanders has been a Director and the Secretary of
the Company since its October 1993 inception. From January 1989 to April 1993,
Ms. Sanders worked as an executive assistant/corporate officer to Paul L.
Simmons in the following companies; (i) Viral Control Technology, Inc. a
public company located in Tampa, Florida, which marketed a line of
environmentally safe disinfectants; (ii) Fam-Pak, St. Petersburg, Florida, a
private company manufacturing Viral On-Guard, a
14
<PAGE> 18
disinfectant spray; (iii) R.O.S.T., Inc., a Tampa research and development
company of environmental products and (iv) SanDesign, Inc., an environmental
product design company. From January 1979 to January 1989, Ms. Sanders was
administrative assistant at Nu-Room Company. Her responsibilities included
marketing strategy, negotiating contracts, processing mortgages, payroll,
inventory and overseeing staff and the production team.
FRED L. SOLOMON - Mr. Solomon has been a Director of the Company since its
October 1993 inception, its President since November 1994 and its Controller
since January 1996. From inception to November 1994, he was a Vice President
of the Company. From January 1993 to January 1994, Mr. Solomon was Vice
President of Power Generation for Nab Construction Company. He was responsible
for all aspects of the operation of power generation and mechanical contracting
for all projects. From October 1989 to November 1990, Mr. Solomon was
President of Southern Energy & Aerospace, Inc., a family-owned business which
fabricated and installed mechanical systems for the electric utility power
generation industry and which was acquired by JWP-Zack. Mr. Solomon's
responsibilities included total management of the Gary, Evansville and Tampa
Divisions which included sales, estimating, procurement and construction of the
mechanical systems. From April 1978 to August 1989 Mr. Solomon was President
of Specialty Maintenance & Construction, Inc., a general contractor with over
200 employees. Mr. Solomon performed a variety of sales, estimating,
accounting, purchasing, human resources, contract negotiations and executive
management services. Mr. Solomon received an Associates of Arts degree at
Daytona Community College in 1964 and a Bachelor of Arts degree at the
University of Florida in 1966.
JAMES G. ("GREG") SOLOMON - Mr. Solomon has been a Director of the Company
since its October 1993 inception and Vice President of the Company since
November 1994. He had served as President of the Company from inception to
November 1994. From October 1981 to July 1993, Mr. Solomon was Vice President
of Southern Energy & Aerospace, Inc., a family-owned business which fabricated
and installed mechanical systems for the electric utility power generation
industry. He was responsible for operations and achieving the goals of the
board of directors. He was also responsible for ensuring that critical
schedules and project budgets were achieved through proper utilization of
corporate resources. From November 1979 to September 1989, Mr. Solomon also
acted as Vice President of Specialty Maintenance & Construction, Inc., a
general contractor with over 200 employees. Mr. Solomon performed a variety of
sales, estimating, accounting, purchasing, human resources, contract
negotiations and executive management services.
DONALD E. THOMPSON - Mr. Thompson has served as a Director of the Company
since December 4, 1996. He provides consulting services to the Company in the
area of news media relations, as well as marketing and public relations. From
1986 to the present, Mr. Thompson has been the President of Thompson
Communications, a
15
<PAGE> 19
marketing and public relations firm, with clients in the insurance, financial
services, legal and accounting professions.
CURT L. RODGERS - Mr. Rodgers has been the Chief Financial Officer of the
Company since November 1996. From 1994 to November 1996, Mr. Rodgers was
Executive Vice President and General Manager of Florida Directory Publishing,
Inc., located in St. Petersburg, Florida. Mr. Rodgers managed operations,
finance, systems, sales and human resources of this directory publisher owned
by the St. Petersburg Times. From 1988 to 1994, Mr. Rodgers was with Advo,
Inc., located in Tampa, Florida. Mr. Rodgers served in the capacity of Vice
President of Finance and Division Controller for Advo, Inc. from 1991 to 1994.
During that time, Mr. Rodgers managed financial reporting and analysis and
systems development for a $200 million division within this $1 billion
direct-mail advertising company and directed the activities of a financial
staff of 66 associates located in five regional offices.
KEY EMPLOYEES.
JOSEPH RALPH ("BUTCH") PAUL JR. - Mr. Paul, age 46, has over 20 years
experience in corporate and golf sales. Mr. Paul is the owner of Rutland
Travel Company, a $2 million in sales travel agency in Rutland, Vermont, which
he founded in 1986. He has been a featured speaker to corporate and golf
organizations and associations across the United States. He is a competitive
golfer with a USGA 3 handicap. In 1992, Mr. Paul was retained by the E. J.
Manely Company as a consultant to management and sales. His responsibilities
included training, organization, and motivation, as well as dealing with
service and attitude. Since 1992, Mr. Paul has worked as a consultant to golf
companies that have included Active Sports, Copely, Inc., TEE Sports, and the
B. C. Open. In 1988, Mr. Paul helped found Mindset, Inc. As Mindset's
President, his responsibilities included daily operations and sales of
Mindset's Golf Workshops, which dealt successfully with the mental side of golf
and its relationship to business and life. Mr. Paul also directed all sales
of Mindset Golf Apparel, which grew to $2.3 million in sales in two years.
Until 1988, he was employed by the Prudential Insurance Company, with both
sales and management responsibilities. In his tenure with Prudential, Mr. Paul
was the recipient of many national sales awards including: Prudential Academy
of Honor, the PRESTIGIOUS President Citation Award, the National Quality Award,
and the National Sales Achievement Award.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company is required to file periodic reports on Forms 10-KSB,
10-QSB or 8-K pursuant to Section 15(d), not Section 13, of the Exchange Act.
As a result, Section 16(a) of the Exchange Act is not applicable to the
Company, its Directors or its executive officers at the current time.
Item 10. EXECUTIVE COMPENSATION.
The following table provides information with respect to the compensation
paid or accrued by the Company and its subsidiaries to the Company's Chief
Executive Officer in all capacities and all other executive officers of the
Company who received combined salary and bonus compensation in fiscal year 1996
in excess of $100,000.
16
<PAGE> 20
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
- -----------------------------------------------------------------------------
OTHER SECURITIES
ANNUAL UNDERLYING
COMPENSATION(1) OPTIONS/SARS
Name and Principal Position Year Salary Bonus
($) ($) ($) (#)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fred L. Solomon, 1996 125,000(2) -0- -0- 200,000
Director and President 1995 80,000(2) -0- -0- -0-
1994 80,000(2) -0- -0- -0-
- -----------------------------------------------------------------------------
</TABLE>
(1) The table does not include amounts for personal benefits extended to Mr.
Solomon by the Company, such as health or life insurance. The Company
believes that the incremental cost of those benefits to Mr. Solomon during
any of fiscal 1994-1996 did not exceed the lesser of $50,000 or 10% of his
total annual salary and bonus.
(2) The figures in the table are the stated annual salary rates for the fiscal
years presented. Mr. Solomon received actual compensation of only $14,423
in fiscal 1996, $17,300 in fiscal 1995 and $14,400 in fiscal 1994. The
Company accrued, but did not pay to Mr. Solomon, the balance of his stated
annual salary in each of those years ($110,577 in fiscal 1996, $62,700 in
fiscal 1995 and $65,600 in fiscal 1994).
OPTIONS GRANTED DURING LAST FISCAL YEAR
The following table sets forth information concerning option grants
during the fiscal year ended September 30, 1996, to the named officer.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------
Shares % of Total
Underlying Options
Options Granted to Exercise
Granted Employees in Price Expiration
Name (#) Fiscal Year ($/Share) Date
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred L. Solomon 200,000(1) 18.64% 2.25 6/3/2001
</TABLE>
_________________________
(1) Amounts shown represent the number of non-qualified stock options, without
tandem stock appreciation rights ("SAR's"), granted in fiscal year 1996.
Payment must be made in full upon exercise in cash or Common Stock. The
option holder may elect to have shares of Common Stock issuable upon
exercise withheld by the Company to pay withholding taxes due.
AGGREGATED OPTIONS EXERCISED DURING LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information concerning the value of
unexercised stock options at the end of the fiscal year for the named officer.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year In-The-Money Options at
Shares Acquired Value Realized End(1) Fiscal Year End ($)(2)
Name on Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable*
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred L. Solomon 0 0 200,000/0 175,000/0
</TABLE>
_________________________
(1) No SAR's were outstanding at September 30, 1996.
(2) The value shown equals the difference between the exercise price of
unexercised in-the-money options and the closing market price of the
underlying Common Stock at September 30, 1996.
The Company has not entered into employment agreements with its officers.
The Company does have in place medical insurance for its employees
(insurance cost of approximately $1,066 every three months), however, it
does not have any retirement benefit programs or Section 401(k) benefit
plans.
DIRECTOR COMPENSATION.
Members of the Board of Directors may receive an amount yet to be
determined annually for their participation and will be required to attend a
minimum of four meetings per fiscal year. All expenses for meeting attendance
or out-of-pocket expenses connected directly with their Board participation
will be reimbursed by the Company. Director liability insurance may be
provided to all members of the Board of Directors. No differentiation is made
in the compensation of "outside directors" and directors who are also officers
of the Company.
17
<PAGE> 21
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 24, 1996, certain
information regarding the Company's Common Stock owned of record or
beneficially by (i) each person who owns beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's Directors and
executive officers; and (iii) all Directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
- ------------------- ----------------------- -------------------
<S> <C> <C>
William E. Foley 50,000(2) 1.5%
170 Berkshire Road
Hasbrouck Heights, NJ 07604
Curt L. Rodgers 5,000(3) 0.2%
15624 Indian Queen Drive
Odessa, FL 33556
Patricia A. Sanders(4) 231,450(5) 6.7%
11680 Shipwatch Drive
Villa 1452
Largo, FL 34644
Fred L. Solomon(4) 693,343(6) 20.1%
285 - 107th Ave., #801
Treasure Island, FL 33706
James G. ("Greg") Solomon(4) 691,178(7) 20.1%
4101 Kipling Avenue
Plant City, FL 33567
Donald E. Thompson 42,309(8) 1.3%
3580 Lakemont Drive
Bonita Springs, Florida 34134
All Directors and Officers 1,713,280(9) 43.8%
as a group (consisting
of 6 persons)
</TABLE>
- -----------------------------
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them.
(2) Represents five-year options to purchase 50,000 shares of Common Stock at
an exercise price of $2.25 per share that were granted to Mr. Foley in
June 1996.
18
<PAGE> 22
(3) Represents five-year options to purchase 5,000 shares of Common Stock at
an exercise price of $3.50 per share that were granted to Mr. Rodgers in
November 1996.
(4) Pursuant to a Lock-up Agreement dated October 1, 1995, Fred L. Solomon,
James G. Solomon and Patricia A. Sanders have agreed that, in the event
any of them exercises any warrants, the stock issued pursuant to the
exercise will be restricted from trading for a period of two years. They
also agreed not to sell or otherwise transfer their interest in the
warrants except to an underwriter or other market makers in the stock once
a market is established. They further agreed that the total value, in
cash, or other consideration, paid by the buyer to the seller in such
circumstances will not exceed $.001 per warrant.
(5) Includes five-year options to purchase 200,000 shares of Common Stock at
an exercise price of $2.25 per share that were granted to Ms. Sanders in
June 1996. Excludes 18,000 shares of Common Stock owned by the adult
children of Ms. Sanders, as to which she disclaims any beneficial
interest, and 20,047, 20,047 and 20,047 shares of Common Stock subject to
Class A Warrants, Class B Warrants and Class C Warrants, respectively,
held by Ms. Sanders and exercisable immediately on issuance and for a
period of 48 months, subject to redemption, because all of the outstanding
warrants are currently out-of-the-money.
(6) Includes five-year options to purchase 200,000 shares of Common Stock at
an exercise price of $2.25 per share that were granted to Mr. Fred Solomon
in June 1996. Excludes 109,367, 109,367 and 109,367 shares of Common
Stock subject to Class A Warrants, Class B Warrants and Class C Warrants,
respectively, held by Mr. Fred Solomon and exercisable immediately on
issuance and for a period of 48 months, subject to redemption, because all
of the outstanding warrants are currently out-of-the-money.
(7) Includes 30,000 shares of Common Stock owned by Mr. Greg Solomon's wife
and minor children and five-year options to purchase 200,000 shares of
Common Stock at an exercise price of $2.25 per share that were granted to
Mr. Greg Solomon in June 1996. Excludes 109,367, 109,367 and 109,367
shares of Common Stock subject to Class A Warrants, Class B Warrants and
Class C Warrants, respectively, held by Mr. Greg Solomon and exercisable
immediately on issuance and for a period of 48 months, subject to
redemption, because all of the outstanding warrants are currently
out-of-the-money.
(8) Includes 21,795 shares of Common Stock jointly owned by Mr. Thompson and
his wife and five-year options to purchase 10,000 shares of Common Stock
at an exercise price of $2.25 per share that were granted to Mr. Thompson
in June 1996.
(9) Includes 665,000 shares of Common Stock subject to options.
19
<PAGE> 23
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During December 1993, the Company borrowed $177,000 from Southern Energy &
Aerospace, Inc. ("Southern Energy"), a corporation controlled by Fred Solomon
and Greg Solomon, two of the Company's Directors, executive officers and
largest shareholders. This loan had a balance of $162,805 during fiscal year
1995. During fiscal year 1996, the Company borrowed an additional net amount
of $272,233, leaving a balance owed of $435,038 at September 30, 1996. The
note bears interest, which is accrued, at prime plus 1.5% and is payable on
demand.
On October 26, 1994, the Board of Directors authorized the distribution of
275,000 each of Class A, B, and C Warrants to purchase shares of Common Stock
exercisable as follows:
$4.75 to exercise each Class A warrant for one share of Common Stock;
$7.50 to exercise each Class B warrant for one share of Common Stock; and
$12.50 to exercise each Class C warrant for one share of Common Stock.
The warrants are exercisable for a period of 48 months from the date of
issue and are callable with 30 days notice at a price of $.001 per warrant.
These distributions were made to the owners of record of common stock on the
books of the Company as of January 2, 1995. The Class A and Class B Warrants
and the common stock underlying said Class A and Class B Warrants are currently
registered pursuant to the Securities Act on Form S-1, File No. 33-97770.
During the fiscal year ended September 30, 1996, the Company accrued
$266,732 in unpaid salary due to Mr. Fred Solomon ($110,577), Mr. Greg Solomon
($88,462) and Ms. Sanders ($67,693). During the fiscal year ended September
30, 1995, the Company accrued $178,940 in unpaid salary due Mr. Fred Solomon
($74,900), Mr. Greg Solomon ($70,200) and Ms. Sanders ($33,840).
20
<PAGE> 24
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Please see the Exhibit Index on Page 23.
(B) REPORTS ON FORM 8-K
The Company did not file any Current Reports on Form 8-K for the
fiscal quarter ended September 30, 1996.
21
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LEVEL BEST GOLF, INC.
December 30, 1996 By: /s/ Fred L. Solomon
--------------------------
Fred L. Solomon, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Fred L. Solomon Director, President December 30, 1996
- -------------------------------
Fred L. Solomon
/s/ James G. Solomon Director, Executive Vice December 30, 1996
- ------------------------------- President
James G. Solomon
/s/ Patricia A. Sanders Director, Secretary December 30, 1996
- -------------------------------
Patricia A. Sanders
Director, Chief Operating December __, 1996
- ------------------------------- Officer
William E. Foley
Director December __, 1996
- -------------------------------
Donald E. Thompson
/s/ Curt L. Rodgers Chief Financial Officer December 30, 1996
- ------------------------------- (Also Chief Accounting
Curt L. Rodgers Officer)
</TABLE>
22
<PAGE> 26
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS
The Company has not sent an annual report or proxy material to its
security holders. If an annual report or proxy material is furnished to the
Company's security holders subsequent to the filing of this Form 10-KSB, the
Company shall furnish copies of such material to the Securities and Exchange
Commission when such material is sent to the Company's security holders.
<PAGE> 27
LEVEL BEST GOLF
INDEX TO FINANCIAL STSTEMENTS
<TABLE>
<S> <C>
Independent auditors report F-2
Balance sheets F-3
Statements of operations F-4
Statement of stockholders' equity F-5
Statements of cash flows F-7
Notes to financial statements F-8
</TABLE>
F-1
<PAGE> 28
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Level Best Golf, Inc.
We have audited the accompanying balance sheets of Level Best Golf, Inc. as of
September 30, 1996 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Level Best Golf, Inc. as of
September 30, 1996 and 1995, and the results of its operations, and its cash
flows for each of the three years then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, substantial doubt exists about the Company's continued
existence should it be unable to complete its proposed financing and market its
products. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
December 4, 1996
F-2
<PAGE> 29
Level Best Golf, Inc.
Balance Sheets
September 30,
<TABLE>
<CAPTION>
1996 1995
---------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 46,923 $ 8,061
Accounts receivable 13,138 202
Prepaid expenses 9,000 -
Inventory 156,356 156,657
---------- ---------
Total current assets 225,417 164,920
Property, plant and equipment,
at cost:
Office and production equipment 66,008 17,090
Less: accumulated depreciation 9,953 4,019
---------- ---------
56,055 13,071
Other assets:
Deposits 9,077 -
Product design and video production,
net of accumulated amortization
of $39,915 and $4,994 163,966 10,223
---------- ---------
173,043 10,223
---------- ---------
$ 454,515 $ 188,214
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 5) $ 71,302 -
Accounts payable 223,108 $ 108,072
Notes payable - affiliate (Note 5) 435,038 149,840
Accrued expenses - affiliates (Note 7) 468,683 181,135
Accrued expenses 10,281 -
Current portion of long-term debt (Note 6) 21,048 21,048
---------- ---------
Total current liabilities 1,229,460 460,095
Note payable - affiliate (Note 5) - 12,965
Long-term debt (Note 6) 47,380 63,166
Commitments and contingencies (Notes 7, 8 9 and 10)
Stockholders' equity: (Notes 2 and 3)
Preferred stock, $1,000 par value,
convertible, 300 shares authorized - -
Common stock, $.001 par value,
50,000,000 shares authorized,
3,051,174 and 2,612,218 shares
issued and outstanding 3,051 2,612
Paid in capital 1,113,415 542,972
Common stock subscriptions 100,000 -
Accumulated deficit (2,038,791) (893,596)
---------- ---------
(822,325) (348,012)
---------- ---------
$ 454,515 $ 188,214
========== =========
</TABLE>
See the accompanying notes to the financial statements.
F-3
<PAGE> 30
Level Best Golf, Inc.
Statements of Operations
For the Years Ended September 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ -----------
<S> <C> <C> <C>
Revenue $ 495,681 $ 98,474 $ 22,339
Costs and expenses:
Cost of sales 198,396 149,263 15,791
Common shares issued for services 111,950 664,726 21,500
General and administrative 1,287,951 727,178 357,792
----------- ------------ -----------
1,598,297 1,541,167 395,083
Net loss from operations (1,102,616) (1,442,693) (372,744)
Other income and (expense):
Interest expense (7,087) (10,175) -
Interest expense - related party (35,492) (20,314) (12,382)
----------- ------------ -----------
Net loss $(1,145,195) $(1,473,182)$ (385,126)
=========== =========== ===========
Per share information:
Weighted average number of common
shares outstanding 2,698,060 1,991,640 1,624,703
=========== =========== ===========
Net loss per share $ (.42) $ (.74)$ (.24)
=========== =========== ===========
</TABLE>
See the accompanying notes to the financial statements.
F-4
<PAGE> 31
Level Best Golf, Inc.
Statement of Stockholders' Equity
For the Three Years Ended September 30, 1996
<TABLE>
<CAPTION>
Paid in Accumulated Stock
Common Stock Preferred Stock Capital Deficit Subscriptions
-------------------- ---------------- ---------- ---------- -------------
Shares Amount Shares Amount
------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for cash to
affiliates at $.003
per share 1,418,162 $ 1,418 - $ - $ 2,676 $ - $ -
Shares issued for cash to
affiliates at $.08
per share 129,900 130 - - 9,871 - -
Shares issued for cash at
$.46 per share 97,338 98 - - 44,901 - -
Shares issued for cash at
$.58 per share 43,300 43 - - 24,957 - -
Shares issued for services
at $.50 per share 43,300 43 - - 21,457 - -
Contribution of officers
salaries to capital - - - - 121,800 - -
Net loss for the year - - - - (385,126) -
--------- -------- --- ----- ---------- --------- -------
Balance September 30, 1994 1,732,000 1,732 - - 225,662 (385,126) -
Shares issued for cash at
$1.00 per share 51,000 51 - - 51,949 - -
Shares issued for the
conversion of debt to
affiliate at $1.00 per
share 9,000 9 - - 8,991 - -
Shares issued pursuant to
a private placement at
$1.50 per share 377,067 377 - - 565,221 - -
Cost of private placement - - - - (8,422) - -
Shares issued for services and
inventory at $1.50 per
share 8,334 8 - - 12,492 - -
Shares issued for services
at $1.50 per share 275,000 275 - - 412,225 - -
Shares issued for services
at $1.50 per share 159,817 160 - - 239,566 - -
Reclassification of
S Corporation deficit to
paid in capital - - - - (964,712) 964,712 -
Net loss for the year - - - (1,473,182) -
--------- -------- --- ----- --------- --------- -------
Balance September 30, 1995 2,612,218 2,612 - - 542,972 (893,596) -
</TABLE>
F-5
<PAGE> 32
Level Best Golf, Inc.
Statement of Stockholders' Equity
For the Three Years Ended September 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for cash
at $1,000 per share - - 300 300,000 - - -
Shares issued for services
at $1.50 per share 70,668 71 - - 105,929 - -
Shares issued for services
at $1.63 per share 1,000 1 - - 1,629 - -
Shares issued for services
at $1.44 per share 3,000 3 - - 4,317 - -
Shares issued for inventory
at $1.50 per share 14,288 14 - - 21,418 - -
Shares issued for inventory
at $2.75 per share 30,000 30 - - 82,470 - -
Shares issued for cash
at $2.75 per share 20,000 20 - - 54,980 - -
Common stock subscriptions
at $2.75 per share - - - - - - 100,000
Conversion of preferred
shares to common shares 300,000 300 (300) (300,000) 299,700 - -
Net loss for the year - - - (1,145,195) -
--------- ------- ---- --------- ---------- ----------- ---------
Balance September 30, 1996 3,051,174 $ 3,051 - $ - $1,113,415 $(2,038,791) $ 100,000
========= ======= ==== ========= ========== =========== =========
</TABLE>
See the accompanying notes to the financial statements.
F-6
<PAGE> 33
Level Best Golf, Inc.
Statements of Cash Flows
For the Years Ended September 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- ----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss $(1,145,195) $(1,473,182) $(385,126)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Amortization 34,721 3,084 1,910
Depreciation 5,934 2,794 1,225
Officers salary contributed to capital - - 121,800
Common stock issued for services and
other non-cash items 111,950 664,726 21,500
(Increase) in receivables (12,936) (202) -
(Increase) in prepaid expenses (9,000) - -
(Increase) decrease in inventory 104,233 (95,220) (61,437)
(Increase) decrease in other assets (9,077) 3,926 (3,926)
Increase in due to affiliates 287,548 178,940 -
Increase in accounts payable and accruals 125,317 78,372 29,699
--------- ----------- ---------
Total adjustments 638,690 836,420 110,771
Net cash provided by (used in)
operations (506,505) (636,762) (274,355)
--------- ----------- ---------
Cash flows from investing activities:
Acquisition of designs and video production (188,464) - (15,217)
Acquisition of property and equipment (48,918) (3,831) (13,259)
--------- ----------- ---------
Net cash provided by (used in)
investing activities (237,382) (3,831) (28,476)
--------- ----------- ---------
Cash Flows from financing activities:
Increase (decrease) in due to affiliates - (30,942) 42,137
Increase (decrease) in notes payable -
affiliates 272,233 (13,795) 176,600
Proceeds from notes and long-term debt 71,302 100,000 -
Repayment of long-term debt (15,786) (15,786) -
Proceeds from the issuance of stock 455,000 609,177 84,094
--------- ----------- ---------
Net cash provided by (used in)
financing activities 782,749 648,654 302,831
--------- ----------- ---------
Net increase (decrease) in cash and
cash equivalents 38,862 8,061 -
Beginning cash and cash equivalents 8,061 - -
--------- ----------- ---------
Ending cash and cash equivalents $ 46,923 $ 8,061 $ -
========= =========== =========
Supplemental cash flow information:
Cash paid for: Income taxes $ - $ - $ -
Interest $ 7,087 $ 28,735 $ 12,382
Non-cash investing and financing activities:
Conversion of note payable - affiliate to
common stock $ - $ 9,000 $ -
Issuance of common stock for inventory $ 103,932 $ - $ -
</TABLE>
See the accompanying notes to the financial statements.
F-7
<PAGE> 34
Level Best Golf, Inc.
Notes to Financial Statements
September 30, 1996
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on October 1, 1993, in the State of Florida. The
Company is in the business of developing and marketing golf training aids and
related products. The Company has chosen September 30, as a year end and prior
to the current fiscal year had been in the development stage.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventory consists principally
of work in process and finished goods.
Fixed assets: The company depreciates its office and production equipment
utilizing the straight line method over periods of five to seven years.
Net loss per share: The net loss per share is computed by dividing the net loss
for the period by the weighted average number of common shares outstanding for
the period. Common stock equivalents are excluded from the computation as their
effect would be anti-dilutive.
Product design and video production: The company amortizes its product designs
and video production over a period of 3 years using the straight line method.
Amortization charged to operations was $34,721, $3,084 and $1,910 during 1996,
1995 and 1994.
Cash and cash equivalents: Cash and cash equivalents consist of cash and other
highly liquid debt instruments with original maturities of less than three
months.
Revenue recognition: The company recognizes revenue from the sale of its
products upon shipment.
Advertising costs: Advertising costs, except for costs associated with direct
response advertising are charged to operations when incurred. The costs of
direct response advertising will be capitalized and amortized over the period
which future benefits are expected to be received if the Company has determined
that there are historical patterns of the results of direct advertising upon
which it can base its decision to capitalize these costs, otherwise these costs
will be charged to expense as incurred. Costs associated with product
endorsements are charged to expense when incurred. Advertising costs charged to
operations were $167,783, $42,719 and $15,465 during 1996, 1995 and 1994.
Estimates: The preparation of the Company's financial statements requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from these estimates.
F-8
<PAGE> 35
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
During December, 1994 the Company began offering shares of its common stock at
$1.50 per share pursuant to a private placement. Pursuant to this private
placement the Company issued 377,067 shares of common stock for cash
aggregating $565,598.
During November, 1994 the Company issued 51,000 shares of its common stock for
cash aggregating $52,000.
During January, 1995 the Company entered into an agreement to acquire certain
inventory and assume certain liabilities related to the operation of a golf
school which had been formed in December, 1994. Pursuant to the agreement the
Company agreed to pay the owner of the inventory cash aggregating $12,500 and
to issue 8,334 shares of its common stock valued at $12,500 to him. During
November, 1995 the Company rescinded the transaction. The operation of the golf
school was not material to the Company's operations during the period which it
was operated. The Company has accounted for its investment in the golf school
as a temporary investment and has charged the acquisition costs aggregating
$25,000 to operations during the year ended September 30, 1995.
During September, 1995 the Company issued 159,817 shares of its common stock to
certain employees for salaries and consultants for services related to product
development and marketing valued at $239,726.
During November, 1994 an affiliate of the Company converted a loan in the
amount of $9,000 into 9,000 shares of the Company's $.001 par value common
stock (see Note 7).
During October, 1995 the Company filed a registration statement with the
Securities and Exchange Commission on Form S-1 whereby it registered 275,000
Class A warrants, 275,000 Class B warrants and 2,066,967 shares of common
stock (including the 550,000 shares of common stock underlying the Class A
and Class B warrants).
During the year ended September 30, 1996 the Company issued 74,668 shares of
its $.001 par value common stock for services valued at $111,950 ($1.44 to
$1.63 per share).
During January, 1996 and September, 1996 the Company issued 44,288 shares of
its $.001 par value common stock for inventory valued at $103,932 ($1.50 per
share and $2.75 per share).
During September, 1996 the Company issued 20,000 shares of its $.001 par value
common stock for cash aggregating $55,000 and accepted subscriptions for 36,364
shares of its $.001 par value common stock for cash aggregating $100,000.
F-9
<PAGE> 36
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Fair value of financial instruments: The Company's short term financial
instruments consist of cash and cash equivalents, receivables and accounts and
notes payable. The carrying amounts of such financial instruments approximates
fair market value because of the short term maturity of these instruments. The
carrying amount of long term debt also approximates fair market value based
upon the similarity of rates at which the Company could borrow funds with
similar maturities.
Note 2. STOCKHOLDERS EQUITY
Common stock:
At inception, the Company issued 1,418,162 shares of its $.001 par value common
stock to two of its officers and directors in exchange for cash of $4,094 and
129,900 shares of its $.001 common stock to an officer and director in exchange
for cash of $10,000.
During the year ended September 30, 1994 the Company issued shares of its $.001
par value common stock to non-affiliates as follows:
97,338 shares for cash of $45,000
43,300 shares for cash of $25,000
43,300 shares for services related to product development and
marketing valued at $21,500
During October, 1994 the Company declared a 346.4 to 1 stock split. All shares
included in these financial statements have been adjusted to reflect this
split.
During October, 1994 the Company entered into a one year consulting agreement
with an entity whereby the entity would provide to the Company financial
consulting services. Pursuant to the agreement the entity agreed to assist the
Company in preparing a private placement memorandum to obtain equity or debt
financing in the amount of $525,000 and to assist the Company in completing the
offering. In exchange for these services the Company agreed to pay $17,500 in
cash and to issue 275,000 shares of its $.001 par value common stock valued at
$412,500.
During October, 1994, the Company authorized the issuance of 275,000 each of A,
B, and C stock purchase warrants exercisable as follows:
$ 4.75 to exercise each A warrant for one share of Common Stock
$ 7.50 to exercise each B warrant for one share of Common Stock
$12.50 to exercise each C warrant for one share of Common Stock
The warrants are exercisable for a period of 48 months from the date of issue
and are callable with 30 days notice at a price of $.001 per warrant.
F-10
<PAGE> 37
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Preferred stock:
During October, 1995 the Company authorized the issuance of 300 shares of
$1,000 par value preferred stock. The preferred stock is convertible into 1,000
shares of common stock for each preferred share at any time after 4 months from
the date of issue at the option of the holder. The preferred stock shall not
have any vote on matters submitted to shareholders and shall not be entitled to
the payment of dividends and shall be deemed for the purpose of distribution of
assets in liquidation to be converted into common stock as described above.
During the period from January to March, 1996 the Company issued 300 shares of
its $.001 par value preferred stock for cash aggregating $300,000. Subsequently
these preferred shares were converted into 300,000 shares of $.001 par value
common stock.
During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales if
such exemptions were found not to apply.
Note 3. CONTRIBUTION TO PAID IN CAPITAL
During September, 1994, certain officers agreed to contribute $121,800 in
unpaid salaries to the capital of the Company.
Note 4. INCOME TAXES
The Company had elected to be an "S" corporation under the provisions of the
Internal Revenue Code and state statutes. Under these provisions, no income tax
is normally incurred at the corporate level. Instead the shareholder includes
his pro rata share of the corporation's income or loss on his personal tax
returns. During March, 1995 the number of shareholders in the Company exceeded
the maximum number of shareholders allowed for an "S" corporation and the
election was terminated. In addition, the Company had used December 31, as its
year end for income tax purposes. Effective April 1, 1995 the Company adopted
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes. Of the loss for the year ended September 30, 1995 approximately $893,596
will be available as an operating loss carryforward for the Company expiring
during 2010, and the balance was allocated to the shareholders. The accumulated
loss through the termination of the "S" election of $964,712 has been
reclassified to paid in capital in the accompanying financial statements. In
addition, the Company has a net operating loss carryforward for the year ended
September 30, 1996 of approximately $1,145,195 expiring in 2011.
F-11
<PAGE> 38
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classifications of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related
to an asset or liability are classified as current or non-current depending on
the periods in which the temporary differences are expected to reverse.
The Company is unable to predict future taxable income that would enable it to
utilize the deferred tax asset and therefore the deferred tax asset related to
its operating loss carryforward which expires in 2010 and 2011 is fully
reserved.
Note 5. NOTES PAYABLE
Bank:
During August, 1996 the Company arranged for a $75,000 bank line of credit due
on August 20, 1997 bearing interest at prime plus 2% (10.25% at September 30,
1996). At September 30, 1996 $71,302 was outstanding on the line and $3,698
remained unused.
Related parties:
During December, 1993 the Company borrowed $177,000 from an entity controlled
by its two largest shareholders. During 1994 and 1995 $14,195 had been repaid.
This note had a balance of $162,805 at September 30, 1995. During 1996 this
entity advanced an additional $272,233 bringing the balance to $435,038 at
September 30, 1996. The note bears interest at prime plus 1.5% (9.75% at
September 30, 1996)and is due on demand.
Note 6. LONG-TERM DEBT
During October, 1994 the Company obtained a U.S. Small Business Administration
loan in the amount of $100,000. This note is payable in installments of $1,754
plus interest at 11% per annum and is due on or before October 1, 1999. The
balance of this note was $68,428 and $84,214 at September 30, 1996 and 1995.
Maturity of long-term debt is as follows:
Year ended September 30, 1997: $21,048
1998: $21,048
1999: $26,332
F-12
<PAGE> 39
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Note 7. RELATED PARTY TRANSACTIONS
During the year ended September 30, 1994 certain officers and directors of the
Company and parties related to these individuals made advances to the Company
aggregating $42,137. During the year ended September 30, 1995 $9,000 of this
debt was converted into common stock (see Note 2) and $30,942 was repaid. In
addition, the Company accrued $178,940 in unpaid salary due these individuals
bringing the balance due to $181,145 at September 30, 1995. During 1996 the
Company accrued an additional $287,548 in salary due to these individuals
bringing the balance due to $468,683 at September 30, 1996.
Note 8. COMMITMENTS
In the normal course of its business operations the Company has entered into
several license agreements whereby its acquires licenses to market certain
products developed or owned by third parties. In exchange for these marketing
rights the Company agrees to make certain royalty payments and guarantee
certain minimum sales. In most cases should the minimum sales not be made and
the corresponding minimum license fee not be paid the licenser has the right to
cancel the agreement with no further payments due from the Company. In some
cases the Company guarantees minimum license payments which are payable
regardless of whether the Company makes sales of the licensed product or not.
Guaranteed minimum license payments are as follows:
1997: $50,000 1998: $100,000 1999: $100,000 2000: $100,000
Note 9. OPERATING LEASES
During June, 1996 the Company entered into a lease for its office facilities
expiring during June, 1999. The lease calls for monthly rental payments of
$6,000 to be adjusted annually for increases in the Consumer Price Index. In
addition the Company has the option to purchase the building for $600,000
adjusted for the increases in the Consumer Price Index described above.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of 1 year are as follows:
Year ended September 30, 1997: $ 72,000
1998: 72,000
1999: 54,000
--------
$198,000
========
Rent expense was $64,344, $18,181 and $8,922 for 1996, 1995 and 1994.
F-13
<PAGE> 40
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Note 10. STOCK OPTIONS
At September 30, 1996 the Company has stock options outstanding as follows:
<TABLE>
<CAPTION>
Number of options Exercise price Expiration date
----------------- -------------- ---------------
<S> <C> <C>
868,000 $2.25 June 3, 2001
200,000 $3.00 July 1, 2001
</TABLE>
Note 11. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a "going concern"
basis which contemplates the realization of assets and the liquidation of
liabilities in the ordinary course of business.
The Company has incurred an operating losses during the years ended September
30, 1996, 1995 and 1994 aggregating $1,145,195, $1,473,182 and $385,126 and has
negative working capital of $1,004,043 at September 30, 1996.
During the periods presented the Company has not generated positive cash flow
from operations and there can be no assurance that the trend will not continue.
Profitable operations are dependent upon, among other factors, the Company's
ability to obtain equity or debt financing and its ability to successfully
market its products.
In this regard the Company has undertaken the raising of additional equity
capital (see Note 2). In addition, the Company is seeking to expand its
customer base and attempting to lower its operating expenses. The Company's
continued operations are dependent upon obtaining financing and its ability to
market its products.
NOTE 12. SUBSEQUENT EVENT
During October and November 1996, the Company issued 134,182 shares of its
$.001 par value common stock for cash aggregating $369,000. In addition, the
Company issued the common shares which were included as stock subscriptions at
September 30, 1996.
F-14
<PAGE> 41
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
3. Articles of Incorporation, Amendments and ByLaws (Exhibit 3 as filed on
the Company's Registration Statement on Form S-1, File Number 33-97770
is hereby incorporated by reference [the "Form S-1"])
4.1 Specimen Certificate for Class A Warrants
4.2 Specimen Certificate for Class B Warrants
10.1 License and Technical Assistance Agreement dated January 1, 1994, between
the Company and Marshall Products, Inc. (Exhibit 10.1 to the Form S-1 is
hereby incorporated by reference)
10.2 Agreement dated September 8, 1994, between the Company and the Booklegger,
Inc. (Exhibit 10.2 to the Form S-1 is hereby incorporated by reference)
10.3 Personal Services Agreement dated October 1, 1994, between the Company and
Wally Armstrong (Exhibit 99.1 to the Form S-1 is hereby incorporated by
reference)
10.4 Real Property Lease dated June 28, 1996, between the Company and Douglas
J. Ebbers and Laura G. Ebbers
10.5 Consulting Agreement dated October 24, 1994, between the Company and
Pratt, Wylce and Lords, Ltd. (Exhibit 99.3 to the Form S-1 is hereby
incorporated by reference)
10.6 Licensing Agreement dated September 5, 1996, between the Company and
Innovative Products, Inc.
10.7 Agreement dated March 17, 1995, between the Company and Gator Golf
Enterprises, Inc.
10.8 Licensing Agreement dated March 31, 1996, between the Company and
Automated Golf Training Aids, Inc.
10.9 Marketing Agreement dated February 9, 1996, between the Company and Golf 21
10.10 Exclusive Marketing Agreement dated September 5, 1996, between the
Company and Bill Coward and Nikki Coward.
27. Financial Data Schedule (For SEC Use Only)
</TABLE>
23
<PAGE> 1
EXHIBIT 4.1
NUMBER WARRANTS
LEVEL BEST GOLF, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
REDEEMABLE A WARRANTS TO PURCHASE SHARES OF COMMON STOCK
VOID (UNLESS EXTENDED) AFTER 4:00 P.M.
EASTERN STANDARD TIME, OCTOBER 26, 1998
This Certifies That:
Is To the Record Holder Of:
This certifies that, for value received or registered assigns, is entitled to
purchase from LEVEL BEST GOLF, INC., a Florida corporation (the "Corporation"),
at any time on or after December 26 1994, and on or before the close of
business on October 26, 1998 (the Expiration Date), the number shown above of
fully paid and non-assessable shares of the Corporations Common Stock, par
value $.001 per share (the Common stock), by surrendering this Warrant
Certificate with the purchase form on the back duly executed at the principal
office of the Corporation, and by paying to the order of the Corporation in
full, in lawful money of the United States of America, the purchase price for
shares as to which this Warrant Certificate is exercised. Each Warrant is
equal to one (1) share of Common Stock. One (1) Warrant is necessary to
acquire one (1) share of common Stock at a price of $7.50 (the "Exercise
Price") This certificate may be exercised in whole or part for no less than
one (1) full share of Common Stock, and upon any partial exercise there shall
be issued to the holder, a new Warrant Certificate in respect of the shares as
to which this Warrant certificate was not exercised. No fractional shares
will be issued upon the exercise of rights to purchase hereunder.
Notwithstanding anything herein to the contrary, the Corporation has the right
to repurchase this Warrant Certificate at the price of $0.01 for each share of
the Corporation's Common stock which would otherwise be purchased upon the
exercise hereof, upon not less than thirty (30) days notice to the registered
owner hereof. Such notice shall be deemed given when sent by first class mail
to the registered owner at the most recent address thereof on the records of
the Corporation. The Corporation agrees at all times to reserve or hold
available a sufficient number of Common Shares to cover the number of shares
issuable upon exercise of this and all other Warrants of like tenor then
outstanding. All rights represented by this Warrant Certificate to purchase
shares of Common Stock shall cease at the close of business on the Expiration
Date. This Warrant Certificate is transferable on the books of the Corporation
by record holder hereof in person or by duly authorized attorney upon surrender
hereof, properly endorsed, at the office of the Corporation, or at such other
place designated by the Corporation. Subject to the foregoing limitations,
every taker and holder of this Warrant by taking and holding the same, consents
and agrees that to this Warrant Certificate (together with all rights
represented hereby) is transferable with the same effect as title in the case
of a negotiable instrument endorsed to a specified person and if delivery made
to such person, and that if endorsed in blank the holder hereof may be treated
by the Corporation and all other persons dealing with this Warrant Certificate
as the absolute owner hereof for any purpose, and as the person entitled to
exercise this Warrant Certificate or to the transfer hereof on said books, any
notice to the contrary, notwithstanding, but until such transfer on such books,
the Corporation may treat the record holder as the owner hereof for the purpose
of determining the person entitled to any rights or any notice pursuant to the
terms hereof or for any other purpose. This Warrant Certificate shall not
entitle the holder hereof to any of the rights of a stockholder in the
Corporation, including without limitation, the right to vote, to receive
dividends and other distribution, to exercise any preemptive right, or to
receive any notice of or attend meetings of stockholders or any other
proceedings of the Corporation. This Warrant Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned by the
Corporation.
/s/ Fred Solomon /s/ Patricia A. Sanders
- ----------------------- ----------------------------
PRESIDENT SECRETARY
<PAGE> 2
SUBSCRIPTION FORM
To be Executed by the Registered Holder in order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably
elects to exercise _______ Warrants represented by this Warrant Certificate,
and to purchase the shares of Common Stock issuable upon the exercise of such
warrants, and requests that certificates for such shares shall be issued in the
name of:
- --------------------------------------
Please print or type name and address,
and Social Security Number
- --------------------------------------
- --------------------------------------
- --------------------------------------
and to be delivered to:
- --------------------------------------
Please print or type name and address
- --------------------------------------
- --------------------------------------
and, if such number of Warrants shall not be all the warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the unexercised
Warrants be registered in the name of, and delivered to, the Registered holder
at the address stated below.
Date
-------------
X
---------------------
Signature
Taxpayer Identification number:
-------------------
Address:
-----------------------
- -------------------------------
- -------------------------------
<PAGE> 3
ASSIGNMENT
To be exercised by the Registered Holder in Order to transfer Warrants
FOR VALUE RECEIVED,
- -------------------------------------
hereby sells, assigns and transfers
unto:
- -------------------------------------
Please print or type name and address
and social security number
- -------------------------------------
- -------------------------------------
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints:
- -------------------------------------
- ------------------------------------- Attorney to transfer this Warrant
Certificate on the books of the Company, with full power of the substitution
in the premises.
Date: X
-------------- -----------------------
<PAGE> 1
EXHIBIT 4.2
NUMBER WARRANTS
LEVEL BEST GOLF, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
REDEEMABLE B WARRANTS TO PURCHASE SHARES OF COMMON STOCK
VOID (UNLESS EXTENDED) AFTER 4:00 P.M.
EASTERN STANDARD TIME, OCTOBER 26, 1998
This Certifies That:
Is To the Record Holder Of:
This certifies that, for value received or registered assigns, is entitled to
purchase from LEVEL BEST GOLF, INC., a Florida corporation (the "Corporation"),
at any time on or after December 26 1994, and on or before the close of
business on October 26, 1998 (the Expiration Date), the number shown above
of fully paid and non-assessable shares of the Corporations Common Stock, par
value $.001 per share (the Common stock), by surrendering this Warrant
Certificate with the purchase form on the back duly executed at the principal
office of the Corporation, and by paying to the order of the Corporation in
full, in lawful money of the United States of America, the purchase price for
shares as to which this Warrant Certificate is exercised. Each Warrant is
equal to one (1) share of Common Stock. One (1) Warrant is necessary to
acquire one (1) share of common Stock at a price of $4.75 (the "Exercise
Price") This certificate may be exercised in whole or part for no less than
one (1) full share of Common Stock, and upon any partial exercise there shall
be issued to the holder, a new Warrant Certificate in respect of the shares as
to which this Warrant certificate was not exercised. No fractional shares
will be issued upon the exercise of rights to purchase hereunder.
Notwithstanding anything herein to the contrary, the Corporation has the right
to repurchase this Warrant Certificate at the price of $0.01 for each share of
the Corporation=s Common stock which would otherwise be purchased upon the
exercise hereof, upon not less than thirty (30) days notice to the registered
owner hereof. Such notice shall be deemed given when sent by first class mail
to the registered owner at the most recent address thereof on the records of
the Corporation. The Corporation agrees at all times to reserve or hold
available a sufficient number of Common Shares to cover the number of shares
issuable upon exercise of this and all other Warrants of like tenor then
outstanding. All rights represented by this Warrant Certificate to purchase
shares of Common Stock shall cease at the close of business on the Expiration
Date. This Warrant Certificate is transferable on the books of the Corporation
by record holder hereof in person or by duly authorized attorney upon surrender
hereof, properly endorsed, at the office of the Corporation, or at such other
place designated by the Corporation. Subject to the foregoing limitations,
every taker and holder of this Warrant by taking and holding the same, consents
and agrees that to this Warrant Certificate (together with all rights
represented hereby) is transferable with the same effect as title in the case
of a negotiable instrument endorsed to a specified person and if delivery made
to such person, and that if endorsed in blank the holder hereof may be treated
by the Corporation and all other persons dealing with this Warrant Certificate
as the absolute owner hereof for any purpose, and as the person entitled to
exercise this Warrant Certificate or to the transfer hereof on said books, any
notice to the contrary, notwithstanding, but until such transfer on such books,
the Corporation may treat the record holder as the owner hereof for the purpose
of determining the person entitled to any rights or any notice pursuant to the
terms hereof or for any other purpose. This Warrant Certificate shall not
entitle the holder hereof to any of the rights of a stockholder in the
Corporation, including without limitation, the right to vote, to receive
dividends and other distribution, to exercise any preemptive right, or to
receive any notice of or attend meetings of stockholders or any other
proceedings of the Corporation. This Warrant Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned by the
Corporation.
/s/ Fred Solomon /s/ Patricia A. Sanders
- ------------------------- ---------------------------
PRESIDENT SECRETARY
<PAGE> 2
SUBSCRIPTION FORM
To be Executed by the Registered Holder in order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably
elects to exercise _______ Warrants represented by this Warrant Certificate,
and to purchase the shares of Common Stock issuable upon the exercise of such
warrants, and requests that certificates for such shares shall be issued in the
name of:
- -----------------------------------
Please print or type name and
address, and Social Security Number
- -----------------------------------
- -----------------------------------
- -----------------------------------
and to be delivered to:
- -----------------------------------
Please print or type name and
address
- -----------------------------------
- -----------------------------------
and, if such number of Warrants shall not be all the warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the unexercised
Warrants be registered in the name of, and delivered to, the Registered holder
at the address stated below.
Date
-----------
X
------------------------------
Signature
Taxpayer Identification number:
----------------------
Address:
----------------------------
- ------------------------------------
- ------------------------------------
<PAGE> 3
ASSIGNMENT
To be exercised by the Registered Holder in Order to transfer Warrants
FOR VALUE RECEIVED,
- -------------------------------------
hereby sells, assigns and transfers
unto:
- -------------------------------------
Please print or type name and address
and social security number
- -------------------------------------
- -------------------------------------
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints:
- -------------------------------------
- ------------------------------------- Attorney to transfer this Warrant
Certificate on the books of the Company, with full power of the substitution
in the premises.
Date: X
------------- -------------------------
<PAGE> 1
EXHIBIT 10.4
GUARANTY OF PERFORMANCE OF COMMERCIAL LEASE AGREEMENT
THIS GUARANTY is made this ____ day of _________, 1996, by FRED SOLOMON,
JAMES G. SOLOMON and PATRICIA A. SANDERS ("Guarantors") to DOUGLAS J. EBBERS and
LAURA G. EBBERS ("Landlord").
R E C I T A L S:
A. Landlord, on June 28, 1996, entered into a Commercial Lease and Option
to Purchase ("Agreement") with LEVEL BEST GOLF, a Florida corporation, a
("Tenant") for the purpose of leasing certain commercial real property as
described in the Agreement. A copy of the Agreement is attached as Exhibit "A"
and is incorporated herein by reference.
B. Guarantors are willing to guarantee Tenant's performance of the
Agreement under the terms set forth below.
For value received, the sufficiency of which is hereby acknowledged,
Guarantors agree as follows:
1. Recitals. The above recitals are true and correct and are incorporated
herein by reference.
2. Statement of Guaranty. Guarantors unconditionally guarantee the
faithful, prompt and complete compliance by Tenant with all the terms,
obligations, and conditions of the Agreement, including all extensions or
modifications thereof. If Tenant fails to perform its covenants, agreements and
undertakings as provided in the Agreement, the Guarantors shall immediately, and
with due diligence, do and perform for the benefit of the Tenant, all such
covenants, agreements, and undertakings as if they constituted a direct and
primary obligation of the Guarantors. In no event shall the liability or
obligations of the Guarantors hereunder exceed that of the Tenant under the
Agreement.
The obligations of the Guarantors hereunder are independent of the
obligations of the Tenant, and a separate action or actions for payment,
damages, or performance may be brought and prosecuted against the Guarantors, or
any one of them, whether or not an action is brought against the Tenant, and
whether or not Tenant be joined in any such action or actions, and whether or
not notice be given or demand be made upon Tenant.
3. Release, Modification, or Extension of Agreement. Landlord may, from
time to time, with notice to the Guarantors (or any of them) and without
affecting, diminishing, or releasing the liability of the Guarantors (or any of
them): (a) retain or obtain the primary or secondary liability of any party or
parties, in addition to the Guarantors hereunder, with respect to any of the
terms, obligations and conditions of the Agreement, (b) extend or renew for any
period (whether or not longer than the original period), alter, exchange, or
modify any of the terms, obligations and conditions of the Agreement, (c)
release or compromise any liability of any of the Guarantors hereunder or any
liability of any other party or parties primarily or secondarily liable on any
of the terms, obligations and conditions of the Agreement, (d) release its
security interest, if any, in all or any property securing any obligation
hereunder and permit any substitution or exchange of such property, (e) resort
to the Guarantors (or any of them) for payment of any or all portion of
liabilities arising from the guarantee herein, whether or not Landlord shall
have resorted to any property securing any obligation hereunder or shall have
proceeded against any other of the Guarantors or any other party primarily or
secondarily liable on any of the terms, obligations and conditions of the
Agreement, and (f) alter, extend, change, modify, release, or cancel any
covenant agreement, or provision contained in the Agreement or modifications or
amendments thereof, provided however that Landlord shall not modify the terms of
the Agreement in
<PAGE> 2
a manner which unreasonably increases the liability or potential liability of
the Guarantors without first obtaining their written consent.
4. Notice. The Guarantors hereby waive (a) notice of the acceptance of
this Guaranty, and (b) all diligence on the part of Landlord in collection or
protection of, or realization upon, any security for any of the terms,
obligations and conditions of the Agreement or in enforcing any remedy available
to the Landlord.
5. Wavier. No delay or failure on the part of Landlord in exercise of any
right or remedy shall operate as a waiver, release, or modification of same.
Any waiver, release, or modification granted shall be effective only through a
written document executed by Landlord, and then only to the extent specifically
recited therein. No single or partial exercise by Landlord of any right or
remedy herein shall preclude other or further exercise thereof or the exercise
of any other right or remedy whether contained herein or in the Agreement. No
action of Landlord permitted hereunder shall in any way impair or affect this
Guaranty. No right or power of the Tenant or any one else to assert any claim
or defense as to the invalidity or enforceability of the Agreement shall impair
or affect the obligations of the undersigned hereunder.
6. Duration. It is fully understood that until each and every one of the
covenants and agreements of this Guaranty are fully performed, the Guarantors'
obligations hereunder shall not be released, in whole or in part, by any action
or thing which might, but for this provision of this instrument, be deemed a
legal or equitable discharge of a surety or guarantor, or by reason of any
waiver, extension, modification, forbearance, or delay or other act or omission
of Landlord or its failure to proceed, promptly or otherwise, or by reason of
any action taken or omitted by Landlord, whether or not such action or failure
to act varies or increases the risk of or affects the rights or remedies of the
Guarantors, or by reason of any further dealings between Tenant, Landlord, or
any other guarantor, and the Guarantors hereby expressly waive and surrender any
defense to its liability hereunder based upon any of the foregoing acts,
omissions, things, agreement, or waivers of any of them; it being the purpose
and intent of the parties hereto that the covenants, agreements, and all
obligations hereunder are absolute, unconditional, and irrevocable under any and
all circumstances.
7. Notice. Any notice, demand, or request by Landlord, its successors or
assigns, to the Guarantors shall be in writing, and shall be deemed to have been
duly given or made if either delivered personally to the undersigned or mailed
by certified or registered mail addressed to the Guarantors at the address for
such guarantor specified below:
Fred Solomon Patricia A. Sanders
14561 - 58th Street North 14561 - 58th Street North
Clearwater, FL 34620 Clearwater, FL 34620
James G. Solomon
14561 - 58th Street North
Clearwater, FL 34620
or at such other address as any one or more of the Guarantors shall designate
from time to time in writing.
8. Assignment. Landlord shall be entitled to assign this Guaranty and all
of its rights, privileges, interests, and remedies hereunder to any other
persons, firm, entity, bank, or corporation whatsoever without notice to or
consent by the Guarantors, and such assignee shall be entitled to the benefits
of this Guaranty and to exercise all such rights, interests, and remedies as
fully as Guarantors.
9. Termination. Provided that no default then exists under the Agreement,
this Guaranty shall terminate when, and only when, the Tenant shall have
completely complied with all the terms and conditions of the Agreement,
including all extensions,
-2-
<PAGE> 3
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this ____ day of
__________, 1996, by JAMES G. SOLOMON, who [is personally known to me] [has
produced a Florida driver's license as identification].
___________________________________
Notary Public
Print name: _______________________
My commission expires:
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this ____ day of
__________, 1996, by PATRICIA A. SANDERS, who [is personally known to me] [has
produced a Florida driver's license as identification].
___________________________________
Notary Public
Print name: _______________________
My commission expires:
-4-
<PAGE> 4
renewals and modifications thereof. When such condition has been met, Landlord
will, upon request, furnish written cancellation of this Guaranty.
10. Binding Effect. This Guaranty shall inure to the benefit of Landlord,
its successors and assigns, and shall bind each of the Guarantors jointly and
severally, together with their heirs, legal representatives, successors, and
assigns. If more than two parties execute this Guaranty, the terms "undersigned"
and "Guarantors" shall mean all parties executing this Guaranty, and all such
parties shall be jointly and severally obligated hereunder. The use of the
singular form herein shall include the plural, as applicable, and vice versa,
and the use of any gender or the neuter form shall include all genders and the
neuter form.
11. Applicable Law. This Guaranty shall be construed in accordance with
the laws of the State of Florida, and such laws shall govern the interpretation,
construction, and enforcement hereof. Whenever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SIGNED, SEALED, AND DELIVERED AT ____________________________, Florida,
as of the ________ day of _______________________, 1996.
WITNESSES:
(As witnesses only and not
as co-guarantors)
/s/ Patricia A. Sanders /s/ Fred Solomon
- -------------------------------- --------------------------------
Fred Solomon
/s/ Heather M. Butts
- --------------------------------
- -------------------------------- --------------------------------
James G. Solomon
- --------------------------------
- -------------------------------- --------------------------------
Patricia A. Sanders
- --------------------------------
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 26th day of
August, 1996, by FRED SOLOMON, who [is personally known to me] [has produced a
Florida driver's license as identification].
/s/ Patricia A. Sanders
--------------------------------
Notary Public
Print name: Patricia A. Sanders
My commission expires:
(SEAL) OFFICIAL NOTARY SEAL
PATRICIA A. SANDERS
COMMISSION NUMBER
CC323909
MY COMMISSION EXP.
OCT. 17, 1997
-3-
<PAGE> 5
COMMERCIAL LEASE AND OPTION TO PURCHASE
1. PARTIES. This Lease and Option to Purchase is made this 28th day of
June, 1996, by and between DOUGLAS J. EBBERS and LAURA G. EBBERS, whose address
is 2452 Manning Circle, Clearwater, Florida 34624-6522 (herein called
"Landlord") and LEVEL BEST GOLF, a Florida corporation, whose address is
14561-58th Street North, Clearwater, Florida 34620 (herein called "Tenant").
2. PREMISES. Landlord hereby leases to Tenant and Tenant leases from
Landlord, upon all of the conditions set forth herein, that certain real
property and building thereon approximately 2.5 acres in size, in Pinellas
County, Florida, located at 14561 58th Street North, Clearwater, Florida 34620.
Said real property, more particularly described on Exhibit "A" attached hereto
and made a part hereof, including the land and all improvements thereon, is
herein called the "Property."
3. TERM AND POSSESSION. The term of this Lease shall commence on July 1,
1996 ("Commencement Date") and end on June 30, 1999, unless sooner terminated
pursuant to any provision hereof. If for any reason Landlord cannot deliver
possession of the Property to Tenant on or before the Commencement Date,
Landlord shall not be subject to any liability therefor, nor shall such failure
affect the validity hereof or the obligations of Tenant hereunder or extend the
term hereof, but in such case, Tenant shall not be obligated to pay rent until
possession of the Property is tendered to Tenant.
4. RENT.
4.1 Rent Payment, Proration and Sales Taxes. All rental payments due
hereunder shall be paid without notice or demand, and without abatement,
deduction or setoff for any reason unless specifically provided herein. Rent
for any period during the term hereof which is for less than one month shall be
a pro rata portion of the monthly rent installment based on the number of days
in such period and the number of days in the month in question. Rent shall be
payable in lawful money of the United States to Landlord at the address stated
herein or to such other persons or at such other places as Landlord may
designate in writing. In addition, Tenant shall pay to Landlord all sales and
use taxes imposed by the State of Florida or any other governmental authority
form time to time, upon said rent and any other charges hereunder upon which
sales and use taxes are imposed.
4.2 No Waiver. The acceptance by the Landlord of monies from the
Tenant as rent or other sums due shall not be an admission of the accuracy or
the sufficiency of the amount of such rent or other sums due nor shall it be
deemed a waiver by Landlord of any right or claim to additional or further rent
or other sums due.
4.3 Monthly Rent Amounts. Tenant shall pay to Landlord as rent for
the Property during the first year of the term hereof monthly payments of
minimum rent, in advance, on or before the first (1st) day of each month, in
the amount of Six Thousand and no/100 Dollars ($6,000.00), plus applicable
sales tax.
4.4 Advance Rent. Tenant shall pay Landlord upon execution hereof Six
Thousand and no/100 Dollars ($6,000.00) as rent for the month of July.
4.5 Rent Adjustments. Commencing on July 1, 1997, and continuing on
the first (1st) day of July of each year thereafter, the monthly minimum rent
payable under Section 4.3 above shall be adjusted annually by the increase, if
any, from the Commencement Date, in the Consumer Price Index published by the
Bureau of Labor Statistics of the U.S. Department of Labor Statistics for All
Urban Consumers, U.S. City Average (1982-84 = 100), All Items, herein referred
to as "C.P.I." The adjusted monthly minimum rent shall be calculated as
follows: the minimum rent payable for the first month of the term hereof, as set
forth in Section 4.3 above, shall be multiplied by a fraction, the numerator of
which shall be the C.P.I. for the month immediately preceding the effective date
of the subject rent adjustment, and the
<PAGE> 6
denominator of which shall be the C.P.I. for the first month of the lease term.
The sum so calculated shall constitute the new monthly minimum rent hereunder
until the subsequent adjustment, but in no event shall any adjustment reduce the
minimum rent to an amount lower than the minimum rent payable for the month
immediately preceding the date of adjustment. No delay in establishing the rent
adjustment shall be a waiver of Landlord's right to later collect the difference
between the rental at the rate prior to adjustment, which shall continue to be
paid until the adjustment is established, and the rental rate after adjustment.
In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the C.P.I. shall be used to
make such calculation. In the event that Landlord and Tenant cannot agree on an
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said arbitration shall be paid equally by Landlord and
Tenant.
4.6 Security Deposit. Upon execution of this Lease, Tenant shall
deposit with Landlord Nine Thousand and no/100 Dollars ($9,000.00) as security
for Tenant's faithful performance of Tenant's obligations hereunder. If Tenant
fails to pay rent or other charges due hereunder, or otherwise defaults with
respect to any provision hereof, Landlord may (but shall not be required to do
so before enforcing other rights and remedies) use, apply or retain all or any
portion of said deposit for the payment of any rent or other charge in default
or for the payment of any other sum to which Landlord may become obligated by
reason of Tenant's default, or to compensate Landlord for any loss or damage
which Landlord may suffer thereby, but Tenant's liability under this Lease shall
only be discharged pro tanto, and Tenant shall remain liable for any amounts not
actually paid from said deposit. If Landlord so uses or applies all or any
portion of said deposit, Tenant shall, within ten (10) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore said
deposit to the full amount hereinabove stated, and Tenant's failure to do so
shall be a material breach hereof. Landlord shall not be required to keep said
deposit separate from its general accounts and such deposit shall not bear
interest. If Tenant performs all of Tenant's obligations hereunder, said
deposit, or so much thereof as has not theretofore been applied by Landlord,
shall be returned, without payment of interest or other increment for its use,
to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's
interest hereunder) within thirty (30) days after the expiration of the term
hereof, and after Tenant has vacated the Property. No trust relationship is
created herein between Landlord and Tenant with respect to said security
deposit.
In the event Tenant exercises its option to purchase the Property under
Section 41 of this Lease, Tenant shall receive a credit at closing against the
Purchase Price in the amount of any unreturned portion of the security deposit.
5. USE.
5.1 Use. The Property shall be used and occupied only for a golf
related business involving the sale of golf auxiliary aids and for no other
purpose, without the prior consent of Landlord, which shall not be unreasonably
withheld. Without limiting the foregoing, Tenant shall not use nor permit the
use of the Property in any manner that will tend to create waste or a nuisance.
5.2 Compliance with Law and Restrictions. Tenant shall, at Tenant's
expense, execute and comply with all statutes, ordinances, rules, orders,
regulations and requirements of the federal, state, county and city government,
and of any and all of their departments and bureaus, applicable to the Property,
as well as all covenants and restrictions of record, and other requirements in
effect during the term or any part thereof, which regulate the use by Tenant of
the Property.
5.3 Condition of Property; Letter of Acceptance. By taking
possession of the Property, Tenant shall be deemed to have accepted the
Property, subject to all applicable zoning, municipal, county and state laws;
ordinances and
-2-
<PAGE> 7
regulations governing and regulating the use of the Property, and any covenants
or restrictions of record, as suitable for Tenant's intended purposes, and in
compliance with all terms and provisions hereof. Tenant acknowledges that it is
taking the Property in an "AS IS" condition. As of the date hereof, Landlord
represents to the best of its knowledge that all mechanical equipment located on
the Property is in working order and that the roof is in good condition. Tenant
acknowledges that neither Landlord nor Landlord's agent has made any
representation or warranty as to the present or future suitability of the
Property for the conduct of Tenant's business nor the condition of the Property.
By execution hereof, Tenant agrees that he has accepted delivery of the Property
and the condition of the Property complies with Landlord's covenants and
obligations hereunder.
6. MAINTENANCE, REPAIRS AND ALTERATIONS.
6.1 Casualty and Condemnation. The specific provisions hereof
relating to repairs after casualty or condemnation shall take precedence over
the terms of this Section 6, but only to the extent in conflict herewith.
6.2 Maintenance. Tenant shall, at Tenant's sole cost and expense,
maintain the Property and all components thereof throughout the Lease term, in
good, safe and clean order, condition and repair, including without limitation
all plumbing, heating, air conditioning, ventilating, and electrical facilities
and all components thereof, within and exclusively serving the Property,
provided, however, that Landlord shall maintain the exterior of the building. If
Tenant fails to perform Tenant's obligations under this Section 6 or under any
other section hereof, Landlord may at Landlord's option enter upon the Property
after ten (10) days' prior written notice to Tenant (except in the case of
emergency, in which case no notice shall be required), perform such obligations
on Tenant's behalf, and put the Property in good, safe and clean order,
condition and repair, and the cost thereof together with interest thereon at the
Default Rate, shall be due and payable as additional rent to Landlord together
with Tenant's next rental installment. Tenant expressly waives the benefits of
any statute now or hereafter in effect which would otherwise afford Tenant the
right to make repairs at Landlord's expense or to terminate this Lease because
of Landlord's failure to keep the Property in good order, condition and repair.
6.3 Plate Glass. Tenant shall maintain all plate glass, if any,
within or on the perimeter of the Property.
6.4 Grounds; Parking Areas. Tenant, at Tenant's expense, shall
maintain all landscaping, driveways, parking areas and sidewalks serving the
Property.
6.5 Termination of Lease. On the last day of the term hereof, or on
any sooner termination, Tenant shall surrender the Property to Landlord in the
same condition as received, ordinary wear and tear excepted, clean and free of
debris. Tenant's moveable machinery, furniture, fixtures and equipment, other
than that which is affixed to the Property so that it cannot be removed without
damage to the Property and which Landlord does not require Tenant to remove, may
be removed by Tenant upon expiration of the lease term. Tenant shall repair any
damage to the Property occasioned by the installation or removal of its trade
fixtures, furnishings and equipment. Upon termination of this Lease for any
cause whatsoever, if Tenant fails to remove its effects, they shall be deemed
abandoned, and Landlord may, at its option, remove the same in any manner that
the Landlord shall choose, store them without liability to the Tenant for loss
thereof, and the Tenant agrees to pay the Landlord on demand any and all
expenses incurred in such removal, including court costs, attorney's fees and
storage charges for any length of time the same shall be in the Landlord's
possession, or the Landlord may, at its option, without notice, sell said
effects or any part of the same at a private sale and without legal process for
such price as the Landlord may obtain, and apply the proceeds of such sale upon
the amounts due under this Lease from the Tenant to Landlord and upon the
expenses incident to the removal and sale of said effects. Tenant shall
deliver all keys and combinations to locks within the Property to Landlord upon
termination of this Lease for any reason.
-3-
<PAGE> 8
Tenant's obligations to perform under this provision shall survive the end of
the lease term.
6.6 Alterations and Additions.
(a) Except for non-structural interior improvements, Tenant shall
not, without Landlord's prior written consent, make any alterations,
improvements, or additions in, on, or to the Property. Further, any
contractor or person making any alterations, improvements, or additions,
except for non-structural interior improvements, in, on, or to the Property
must first be approved in writing by Landlord. Should Tenant make any such
alterations, improvements, or additions without the prior approval of Landlord,
in addition to all other remedies of Landlord for Tenant's breach, Landlord may
require that Tenant remove any or all of the same.
(b) Tenant shall pay, when due, and hereby agrees to indemnify
and hold harmless Landlord for and from, all claims for labor or materials
furnished or alleged to have been furnished to or for Tenant, at or for use in
the Property, which claims are or may be secured by any construction lien
against the Property or any interest therein. Tenant shall give Landlord not
less than ten (10) days' notice prior to the commencement of any work on the
Property which might give rise to any such lien or claim of lien, and Landlord
shall have the right to post notices of non-responsibility in or on the Property
as provided by law. If Tenant shall in good faith, contest the validity of any
such lien, claim or demand, then Tenant shall, at its sole expense, defend
itself and Landlord against the same and shall pay and satisfy any adverse
judgment that may be rendered thereon before the enforcement thereof against the
Landlord or the Property, upon the condition that if Landlord shall require,
Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an
amount equal to such contested lien, claim or demand indemnifying Landlord
against liability for the same and holding the Property free from the effect of
such lien, claim or demand. In addition, Landlord may require Tenant to pay
Landlord's reasonable attorney's fees and costs in participating in such action
if Landlord reasonably decides it is in its best interests to do so.
(c) Unless Landlord requires their removal, all alterations,
improvements, and additions made on the Property shall become the property of
Landlord and remain upon and be surrendered with the Property at the expiration
of the Lease term without compensation to Tenant.
6.7 Landlord's Interest Not Subject to Liens. As provided in Section
713.10, Florida Statutes, the interest of Landlord shall not be subject to liens
for improvements made by Tenant, and Tenant shall notify any contractor making
such improvements of this provision. An appropriate notice of this provision
may be recorded by Landlord in the Public Records of Pinellas County, Florida,
in accordance with said statute, without Tenant's joinder or consent.
7. INSURANCE; INDEMNITY.
7.1 Property Insurance - Landlord. Landlord shall at all times
during the term hereof, at its expense, maintain a policy or policies insuring
the Property against loss or damage by fire, explosion, and other hazards and
contingencies ("all risk," as such term is used in the insurance industry), in
an amount of not less than full insurable value. Tenant shall maintain plate
glass insurance as required in the reasonable discretion of Landlord.
7.2 Liability Insurance - Tenant. Tenant shall, at Tenant's sole
expense, obtain and keep in force during the term hereof a policy of bodily
injury and property damage insurance, insuring Tenant and Landlord against any
liability arising out of the use, occupancy or maintenance of the Property and
the parking areas, walkways, driveways, landscaped areas and other areas
exterior to the Property and appurtenant thereto. Such insurance shall be in
an amount not less than Two Million and 00/100 Dollars ($2,000,000.00) combined
single limit. The policy shall insure
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performance by Tenant of the indemnity provisions of this Section 7. The limits
of said insurance shall not, however, limit the liability of Tenant hereunder.
Upon demand, Tenant shall provide Landlord, at Landlord's expense, with such
increased amounts of insurance as Landlord may reasonably require to afford
Landlord adequate protection for risks insured under this Section 7. Tenant, as
a material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons, in, upon or about the Property arising
from any cause and Tenant hereby waives all claims in respect thereof against
Landlord.
7.3 Employees Compensation - Tenant. Tenant shall maintain and keep
in force all employees' compensation insurance required under the laws of the
State of Florida, and such other insurance as may be necessary to protect
Landlord against any other liability to person or property arising hereunder
by operation of law, whether such law is now in force or is adopted subsequent
to the execution hereof.
7.4 Tenant's Default. Should Tenant fail to keep in effect and pay
for such insurance as it is in this section required to maintain, Landlord may
do so, in which event, the insurance premiums paid by Landlord, together with
interest thereon at the Default Rate from the date paid by Landlord, shall
become due and payable forthwith and failure of Tenant to pay same on demand
shall constitute a breach hereof.
7.5 Tenant's Compliance. Tenant shall properly and promptly comply
with and execute all rules, orders and regulations of the Southeastern
Underwriter's Association for fire and other casualties, at Tenant's own cost
and expense. Tenant shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Section 7. Tenant
agrees to pay any increase in the amount of insurance premiums over and above
the rate now in force that may be caused by Tenant's use or occupancy of the
Property. In the event any increase in premiums is caused by the act or
omission of Tenant in violation of the terms hereof, payment by Tenant of such
increase shall not release Tenant from liability for such violation.
7.6 Insurance Policies. Insurance required hereunder shall be with
good and solvent insurance companies satisfactory to Landlord; in the absence of
other specific directions, such companies shall hold a "General Policyholders
Rating" of at least B plus, or such other rating as may be required by a lender
having a lien on the Property, as set forth in the most current issue of "Best's
Insurance Guide". Tenant shall deliver to Landlord copies of policies of
insurance required to be provided by Tenant under this Section 7 or certificates
evidencing the existence and amounts of such insurance and its compliance with
the conditions set forth in this Section 7. No such policy shall be cancelable
or subject to reduction of coverage or other modification except after thirty
(30) days' prior written notice to Landlord, and the interest of Landlord under
such policies shall not be affected by any default by Tenant under the
provisions of such policies. Tenant shall, at least thirty (30) days prior to
the expiration of such policies, furnish Landlord with renewals or "binders"
thereof, or Landlord may order such insurance and charge the cost thereof to
Tenant, which amount shall be payable by Tenant upon demand. If required by any
mortgage encumbering the Property, the mortgagee shall also be a named or
additional insured and the terms of all insurance policies shall comply with all
other requirements of such mortgage.
7.7 Waiver of Subrogation. Tenant and Landlord each hereby release
and relieve the other, and waive their entire right of recovery against the
other, for loss or damage arising out of, or incident to the perils actually
insured against under this Section 7, which perils occur in, on, or about the
Property, whether due to the negligence of Landlord or Tenant or their agents,
employees, contractors and/or invitees. Tenant and Landlord shall, upon
obtaining the policies of insurance required hereunder, give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation
is contained in this Lease. The waiver provisions of this paragraph are
reciprocal and run in favor of any guarantors as well.
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7.8 Indemnity. Tenant shall indemnify and hold harmless Landlord
from and against any and all injury, expense, damages and claims arising from
Tenant's use of the Property, whether due to damage to the Property, claims for
injury to the person or property of any other tenant of the building (if
applicable) or any other person rightfully in or about the Property, from the
conduct of Tenant's business or from any activity, work or things done,
permitted or suffered by Tenant or its agents, servants, employees, licensees,
customers, or invitees in or about the Property or elsewhere or consequent upon
or arising from Tenant's failure to comply with applicable laws, statutes,
ordinances or regulations, and Tenant shall further indemnify and hold harmless
Landlord from and against any and all such claims and from and against all
costs, attorney's fees, expenses and liabilities incurred in the investigation,
handling or defense of any such claim or any action or proceeding brought in
connection therewith by a third person or any governmental authority; and in
case any action or proceeding is brought against Landlord by reason of any such
claim, Tenant upon notice from Landlord shall defend the same at Tenant's
expense by counsel satisfactory to Landlord. This indemnity shall not require
payment as a condition precedent to recovery.
7.9 Exemption of Landlord from Liability. Tenant hereby agrees
that Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers, or any other
person in or about the Property, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from latent defects or other
conditions arising upon the Property or upon other portions of the building(s)
of which the Property is a part, or from other sources or places and regardless
of whether the cause of such damage or injury or the means of repairing the
same is inaccessible to Tenant.
8. DAMAGE OR DESTRUCTION. In the event that the Property should be
totally destroyed by fire, tornado or other casualty or in the event the
Property should be so damaged that rebuilding or repairs cannot be completed
within ninety (90) days after the date of such damage, either Landlord or
Tenant may, at its option, by written notice to the other, given not more than
thirty (30) days after the date of such fire or other casualty, terminate this
Lease; in such event, the rent shall be abated during the unexpired portion
hereof effective with the date of such fire or other casualty. In the event
the Property should be damaged by fire, tornado or other casualty covered by
Landlord's insurance, but only to such extent that rebuilding or repairs can be
completed within ninety (90) days after the date of such damage, or if the
damage should be more serious, but neither Landlord or Tenant elects to
terminate this Lease, then Landlord shall, within forty-five (45) days after
the date of such damage, commence to rebuild or repair the Property and shall
proceed with reasonable diligence to restore the Property to substantially the
same condition in which it was immediately prior to the happening of the
casualty, except that Landlord shall not be required to rebuild, repair or
replace any part of the furniture, equipment, fixtures and other improvements
which may have been placed by Tenant or others within the Property, and in any
event Landlord's obligation to repair shall be limited to the extent proceeds
of insurance are available for such purpose. Landlord shall, unless such
damage is the result of any negligence or willful misconduct of Tenant or
Tenant's employees or invitees, allow Tenant a fair diminution of rent during
the time that the Property is unfit for occupancy. Notwithstanding any of the
foregoing, in the event any mortgagee, under a deed of trust, security
agreement or mortgage on the Property, should require that the insurance
proceeds of insurance policies carried by Landlord be used to retire the
mortgage debt, Landlord shall have no obligation to rebuild and this Lease
shall terminate upon notice to Tenant. Any insurance which is required to be
carried by Landlord or Tenant under the terms of this Lease against loss or
damage to the Property shall be for the sole benefit of the Landlord and under
its sole control. Notwithstanding anything to the contrary contained herein,
in the event the Landlord
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elects to terminate this Lease due to destruction or damage as provided
hereinabove, Tenant shall have the right to exercise the option to purchase
contained in Section 41 of this Lease within thirty (30) days following receipt
of notice from Landlord.
9. PROPERTY TAXES.
9.1 Definition of "Real Property Taxes". As used herein, the term
"real property taxes" shall include any form of tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Property by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, against any legal or equitable interest of Landlord in the
Property or in the real property of which the Property is a part, or against
Landlord's right to rent or other income therefrom, or against Landlord's
business of leasing the Property. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax" or (ii) the nature of
which was hereinbefore included within the definition of "real property tax,"
or (iii) which is imposed as a result of a transfer, either partial or total,
of Landlord's possessory interest in the Property, or which is added to a tax
or charge hereinbefore included within the definition of real property tax by
reason of such transfer, or (iv) which is imposed by reason of this
transaction, any modifications or changes hereto, or any transfers hereof. The
term "real property tax" shall not include any income, estate or inheritance
tax assessed against Landlord, documentary stamp tax imposed as a result of
Landlord's transfer of the fee interest in the Property, or any sales tax on
rent or other payments due from Tenant hereunder.
9.2 Payment of Taxes. Landlord shall pay the real property taxes, as
defined in Section 9.1, applicable to the Property throughout the lease term. If
the term hereof shall not expire concurrently with the expiration of the tax
year, Landlord's liability for real property taxes for the last partial lease
year shall be prorated on an annual basis.
9.3 Personal Property Taxes. Tenant shall pay prior to delinquency
all taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Tenant contained on the Property
or elsewhere or on any leasehold improvements made to the Property by Tenant,
regardless of the validity thereof or whether title to such improvements shall
be in the name of Tenant or Landlord. When possible, Tenant shall cause said
trade fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of Landlord. If any of
Tenant's personal property shall be assessed with Landlord's real property,
Tenant shall pay Landlord the taxes attributable to Tenant's personal property
within ten (10) days after receipt of a written statement from Landlord setting
forth the taxes applicable to Tenant's property.
10. UTILITIES.
(a) Tenant shall punctually pay for all water and sewer charges,
and for all gas, heat, electricity, telephone, garbage collection and all other
utilities and services consumed in connection with the Property, together with
any taxes thereon. If any such services are not separately metered as to the
Property, Tenant shall pay a reasonable proportion to be determined by Landlord
of all charges jointly metered with other premises.
(b) If charges to be paid by Tenant hereunder are not paid when
due and Landlord elects to pay same, interest shall accrue thereon from the
date paid by Landlord at the Default Rate, and such charges and interest shall
be added to the subsequent month's rent and shall be collectible from Tenant in
the same manner as rent. Landlord shall not be liable for damage to Tenant's
business and/or
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inventory or for any other claim by Tenant resulting from an interruption in
utility services.
11. ASSIGNMENT AND SUBLETTING.
11.1 Landlord's Consent Required. Tenant shall not voluntarily or by
operation of law assign, mortgage, sublet, or otherwise transfer or encumber all
or any part of Tenant's interest in this Lease or in the Property or Tenant's
possession thereof without Landlord's prior written consent, which consent may
not be unreasonably withheld by Landlord. Any attempted assignment, transfer,
mortgage, encumbrance or subletting without Landlord's consent shall be void,
and shall constitute a breach hereof. If Tenant desires to assign this Lease or
to sublet the Property or any portion thereof, it shall first notify Landlord of
its desire to do so and shall submit in writing to Landlord; (i) the name of the
proposed assignee or subtenant; (ii) the nature of the proposed assignee's or
subtenant's business to be conducted on the Property; (iii) the terms of the
proposed assignment or sublease; and (iv) such financial institution as Landlord
may reasonably request concerning the proposed assignee or subtenant.
11.2 No Release or Waiver. Regardless of Landlord's consent, no
subletting or assignment shall release Tenant from Tenant's obligation or alter
the primary liability of Tenant to pay the rent and to perform all other
obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignee of Tenant or any successor of Tenant in the performance
of any of the terms hereof, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against said assignee. Landlord may
consent to subsequent assignments or subletting hereof or amendments or
modifications to this Lease with assignees of Tenant, without notifying Tenant,
or any successor of Tenant, and without obtaining its or their consent thereto
and such action shall not relieve Tenant of liability hereunder.
11.3 Effect of Transfer. The voluntary or other surrender hereof by
Tenant or a mutual cancellation hereof shall not work a merger of the interests
of the parties hereunder, and shall at the option of Landlord terminate any or
all subleases or subtenancies or shall operate as an assignment to Landlord of
such subleases or subtenancies.
11.4 Attorney's Fees. In the event Tenant shall assign or sublet the
Property or request the consent of Landlord to any assignment or subletting or
if Tenant shall request the consent of Landlord for any act Tenant proposes to
do, then Tenant shall pay Landlord's reasonable attorney's fees and costs
incurred in connection with each such request.
12. DEFAULTS; REMEDIES.
12.1 Defaults. The occurrence of any one or more of the following
events shall constitute a material default and breach hereof by Tenant:
(a) The vacating or abandonment of the Property by Tenant;
(b) The failure by Tenant to make any payment of rent or any
other payment required to be made by Tenant hereunder, as and when due, where
such failure shall continue for a period of three (3) days after written notice
thereof from Landlord to Tenant. In the event that Landlord serves Tenant with a
notice to pay rent or vacate pursuant to applicable unlawful detainer or other
statutes, such notice shall also constitute the notice required by this
subsection;
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(c) The failure by Tenant to observe or perform any of the
covenants, conditions or provisions hereof to be observed or performed by
Tenant, other than described in Subsection (b) above, where such failure shall
continue for a period of thirty (30) days after written notice thereof from
Landlord to Tenant; provided, however, that if the nature of Tenant's default
is such that more than 30 days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure
within said 30-day period and thereafter diligently prosecutes such cure to
completion;
(d) (i) The making by Tenant of any general arrangement or
assignment for the benefit of creditors; (ii) Tenant becomes a "debtor" as
defined under the Federal Bankruptcy Code or any successor statute thereto or
any other statute affording debtor relief, whether state or federal, (unless,
in the case of a petition filed against Tenant, the same is dismissed within
thirty (30) days), or admits in writing its present or prospective insolvency
or inability to pay its debts as they mature, or is unable to or does not pay
a material portion (in numbers or dollar amount) of its debts as they mature;
(iii) the appointment of a trustee or receiver to take possession of all or a
substantial portion of Tenant's assets located at the Property or of Tenant's
interest in this Lease; (iv) the attachment, execution or other judicial
seizure of all or a substantial portion of Tenant's assets located at the
Property or of Tenant's interest in this Lease; or (v) the entry of a judgment
against Tenant which affects Tenant's ability to conduct its business in the or
dinary course; provided, however, to the extent that any provision of this
Subsection 12.1(d) is contrary to any applicable law, such provision shall be
of no force or effect to such extent only; and/or
(e) The discovery by Landlord that any financial statement,
warranty, representation or other information given to Landlord by Tenant, any
assignee of Tenant, any subtenant of Tenant, any successor in interest of
Tenant or any guarantor of Tenant's obligation hereunder, in connection with
this Lease, was materially false or misleading when made or furnished.
12.2 Remedies. In the event of any default or breach hereof by
Tenant, Landlord may (but shall not be obligated) at any time thereafter, with
or without notice or demand and without limiting Landlord in the exercise of any
right or remedy which Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Property by
any lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including accrued rent, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation and alteration of the Property, reasonable attorney's
fees, and any real estate commission actually paid;
(b) Reenter and take possession of the Property and relet or
attempt to relet same for Tenant's account, holding Tenant liable in damages
for all expenses incurred by Landlord in any such reletting and for any
difference between the amount of rents received from such reletting and those
due and payable under the terms hereof. In the event Landlord relets the
Property, Landlord shall have the right to lease the Property or portions
thereof for such periods of time and such rentals and for such use and upon
such covenants and conditions as Landlord, in its sole discretion, may elect,
and Landlord may make such repairs and improvements to the Property as Landlord
may deem necessary. Landlord shall be entitled to bring such actions or
proceedings for the recovery of any deficits due to Landlord as it may deem
advisable, without being obliged to wait until the end of the term, and
commencement or maintenance of any one or more actions shall not bar Landlord
from bringing other or subsequent actions for further accruals, nor shall
anything done by Landlord pursuant to this Subsection 12.2(b) limit or prohibit
Landlord's right at any time to pursue other remedies of Landlord hereunder.
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(c) Declare all rents and charges due hereunder immediately due
and payable, and thereupon all such rents and fixed charges to the end of the
term shall thereupon be accelerated, and Landlord may, at once, take action to
collect the same by distress or otherwise. In the event of acceleration of
rents and other charges due hereunder which cannot be exactly determined as of
the date of acceleration and/or judgment, the amount of said rent and charges
shall be as determined by Landlord in a reasonable manner based on information
such as previous fluctuations in the C.P.I. and the like;
(d) Perform any of Tenant's obligations on behalf of Tenant in
such manner as Landlord shall deem reasonable, including payment of any moneys
necessary to perform such obligation or obtain legal advice, and all expenses
incurred by Landlord in connection with the foregoing, as well as any other
amounts necessary to compensate Landlord for all detriment caused by Tenant's
failure to perform which in the ordinary course would be likely to result
therefrom, shall be immediately due and payable from Tenant to Landlord, with
interest at the Default Rate; such performance by Landlord shall not cure the
default of Tenant hereunder and Landlord may proceed to pursue any or all
remedies available to Landlord on account of Tenant's default; if necessary
Landlord may enter upon the Property after ten (10) days' prior written notice
to Tenant (except in the case of emergency, in which case no notice shall be
required), perform any of Tenant's obligations of which Tenant is in default;
and/or
(e) Pursue any other remedy now or hereafter available to
Landlord under state or federal laws or judicial decisions. Unpaid installments
of rent and other unpaid monetary obligations of Tenant under the terms hereof
shall bear interest from the date due at the Default Rate.
12.3 No Waiver. No reentry or taking possession of the Property by
Landlord shall be construed as an election on its part to terminate this Lease,
accept a surrender of the Property or release Tenant from any obligations
hereunder, unless a written notice of such intention be given to Tenant.
Notwithstanding any such reletting or reentry or taking possession, Landlord may
at any time thereafter elect to terminate this Lease for a previous default.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and covenants herein
contained. Landlord's acceptance of rent or additional rent following any event
of default hereunder shall not be construed as Landlord's waiver of such event
of default. No waiver by Landlord of any violation or breach of any of the
terms, provisions, and covenants herein contained shall be deemed or construed
to constitute a waiver of any other or subsequent violation or breach of any of
the terms, provisions, and covenants herein contained. Forbearance by Landlord
to enforce one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of any other or
subsequent violation or default. The loss or damage that Landlord may suffer by
reason of termination of this Lease or the deficiency from any reletting as
provided for above shall include the expense of repossession and any repairs or
remodeling undertaken by Landlord following possession. Should Landlord at any
time terminate this Lease for any default, in addition to any other remedy
Landlord may have, Landlord may recover from Tenant all damages Landlord may
incur by reason of such default, including the cost of recovering the Property
and the loss of rent for the remainder of the Lease term. Landlord's consent to
or approval of any act shall not be deemed to render unnecessary the obtaining
of Landlord's consent to or approval of any subsequent act by Tenant. The
delivery of keys to any employee or agent of Landlord shall not operate as a
termination hereof or a surrender of the Property.
12.4 Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will
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be extremely difficult to ascertain. Such costs include, but are not limited
to, processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Property.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within ten (10) days after
such amount shall be due, then, without any requirement for notice to Tenant,
Tenant shall pay to Landlord a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of rent, then rent shall
automatically become due and payable quarterly in advance, rather than monthly,
notwithstanding any other provision hereof to the contrary. The parties agree
that the payment of late charges and the payment of interest as provided
elsewhere herein are distinct and separate from one another in that the payment
of interest is to compensate Landlord for the use of Landlord's money by Tenant
and the payment of late charges is to compensate Landlord for administrative and
other expenses incurred by Landlord.
12.5 Interest on Past-Due Obligations. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
the maximum rate then allowed by law (the "Default Rate") from the date due.
Payment of such interest shall not excuse or cure any default by Tenant under
this Lease, provided, however, that interest shall not be payable on late
charges incurred by Tenant. Notwithstanding any other term or provision hereof,
in no event shall the total of all amounts paid hereunder by Tenant and deemed
to be interest exceed the amount permitted by applicable usury laws, and in the
event of payment by Tenant of interest in excess of such permitted amount, the
excess shall be applied towards damages incurred by Landlord or returned to
Tenant, at Landlord's option.
12.6 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or other monetary
obligation which Tenant is late in paying, Tenant shall pay to Landlord, if
Landlord shall so request, in addition to any other payments required under this
Lease, monthly advance installments, payable at the same time as the rent is
paid for the month to which it applies, in amounts required as estimated by
Landlord to establish a fund for insurance expenses on the Property which are
payable by Tenant under the terms hereof. Such fund shall be established to
insure payment when due, before delinquency, of any or all such insurance
premiums. If the amounts paid to Landlord by Tenant under the provisions of
this Section 12.6 are insufficient to discharge the obligations of Tenant to pay
such insurance premiums as the same become due, Tenant shall pay to Landlord,
upon Landlord's demand, additional sums necessary to pay such obligations. All
moneys paid to Landlord under this Section 12.6 may be intermingled with other
monies of Landlord and shall not bear interest. In the event of a default in
the obligations of Tenant to perform under this Lease, then any balance
remaining from funds paid to Landlord under the provisions of this Section 12.6
may, at the option of Landlord, be applied to the payment of any monetary
default of Tenant in lieu of being applied to the payment of insurance premiums.
In the event Tenant exercises its option to purchase the Property under Section
41 of this Lease, Tenant shall receive a credit at closing against the Purchase
Price in the amount of any unreturned and unused funds paid by Tenant under this
Section 12.6.
12.7 Default by Landlord. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after written notice by Tenant
to Landlord and to the holder of any first mortgage or deed of trust covering
the Property whose name and address shall have theretofore been furnished to
Tenant in writing, specifying the obligation that Landlord has failed to
perform; provided, however, that if the nature of Landlord's obligation is such
that more than thirty (30) days are required for
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performance, then Landlord shall not be in default if Landlord commences
performance within such 30-day period and thereafter diligently prosecutes the
same to completion. Notwithstanding any other provision hereof, Landlord shall
not be in default hereunder for failure to perform any act required of Landlord
where such failure is due to inability to perform on account of strike, laws,
regulations or requirements of any governmental authority, or any other cause
whatsoever beyond Landlord's control, nor shall Tenant's rent be abated by
reason of such inability to perform.
13. CONDEMNATION. If the Property or any portion thereof is taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (either of which is herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than twenty percent (20%)
of the Property or such portion thereof as will make the Property unusable for
the purposes herein leased is taken by condemnation, either party may terminate
this Lease by notice to the other, in writing, only within ten (10) days after
Landlord shall have given Tenant written notice of such condemnation or pending
condemnation (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession), such termination to take
effect as of the date the condemning authority takes possession. If neither
party terminates this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Property remaining,
except that the rent shall be reduced in the proportion that the floor area
taken bears to the total floor area of the Property. Any award or payment made
in connection with a condemnation shall be the property of Landlord, whether
such award shall be made in settlement of contemplated condemnation proceedings
or as compensation for diminution in value of the leasehold or for the taking of
the fee, or as severance or other damages; provided, however, that Tenant shall
be entitled to any separate award made to Tenant which does not diminish
Landlord's award, such as for loss of or damage to Tenant's trade fixtures and
removable personal property and Tenant's moving expenses, Tenant's option rights
and any Tenant Improvements made by Tenant. In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall, to the extent of
severance damages received by Landlord in connection with such condemnation,
repair any damage to the Property caused by such condemnation except to the
extent that Tenant has been reimbursed therefor by the condemning authority.
Tenant shall pay any amount in excess of such severance damages required to
complete such repair. Landlord shall in no event be obligated to repair or
replace any items other than those installed by or at the expense of Landlord.
14. ESTOPPEL CERTIFICATE.
14.1 Certificate. Tenant shall at any time upon not less than ten
(10) days' prior written notice from Landlord execute, acknowledge and deliver
to Landlord and/or any lender or purchaser designated by Landlord a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if applicable, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any purchaser or
encumbrancer of the Property.
14.2 Failure to Deliver Certificate. At Landlord's option, Tenant's
failure to deliver such statement within such time shall be a material breach by
Tenant under this Lease or shall be conclusive upon Tenant (i) that this Lease
is in full force and effect, without modification except as may be represented
by Landlord, (ii) that there are no uncured defaults in Landlord's performance,
and (iii) that no rent has been paid in advance.
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15. SUBORDINATION.
(a) Tenant accepts this Lease subject to any deeds of trust, master
leases, security interests or mortgages which might now constitute a lien upon
the Property and all renewals, extensions, modifications and replacements
thereof, and to recorded covenants and zoning ordinances and other building and
fire ordinances and governmental regulations relating to the use of the
Property. Tenant, shall at any time hereafter, on demand, execute any
instrument, releases or other documents that may be required by any mortgagee
for the purpose of subjecting and subordinating this Lease to the lien of any
such deed of trust, master lease, security interest or mortgage hereafter
constituting a lien on the Property only if the holder of the lien to be created
agrees in writing that the Property will be released from the lien at closing if
Tenant exercises its option to purchase and that said holder will attorn to
Tenant. Tenant's failure to execute such documents within ten (10) days after
written demand shall constitute material default by Tenant hereunder. Landlord,
at its sole option, shall have the right to waive the applicability of this
Section 15 so that this Lease will not be subject and subordinate to any
specific deed of trust, master lease, security interest or mortgage.
(b) In order to further secure the indebtedness secured by any
presently existing mortgage, Landlord and Tenant hereby covenant for themselves
and for the benefit of any such mortgagee that this Lease shall be subject and
subordinate to any mortgage now or hereafter affecting the Property and all
advances made or to be made thereunder and all renewals, extensions,
modifications, consolidations or replacements thereof, including future advances
thereunder or supplements thereto, provided, however, that without limiting any
of the foregoing, in the event that by reason of any default on the part of
Landlord the mortgagee succeeds to the interest of the Landlord, then, at the
sole option of the mortgagee, this Lease may nevertheless continue in full force
and effect and Tenant shall and does hereby agree to attorn to such mortgagee
and to recognize such mortgagee as the Landlord in such event. It is further
covenanted that (i) the provisions of said mortgage shall govern with respect to
the disposition of proceeds of insurance or condemnation or eminent domain
awards, and (ii) in the absence of the prior written consent of the mortgagee,
Tenant shall not prepay rent more than three (3) months in advance, or enter
into any agreement with Landlord to amend or modify this Lease, or voluntarily
surrender the Property or terminate the Lease without cause, or surrender the
Lease, or allow the release of the approved Tenant from the obligations
hereunder on assigning or subletting of the Property or any part thereof. In
the event of any act or omission by Landlord which would give Tenant the right
to terminate this Lease, Tenant shall not exercise any such right until it shall
have given thirty (30) days' written notice thereof to the mortgagee at the
address previously furnished to Tenant.
Notwithstanding any contrary provision of this Lease, Landlord covenants
and agrees that Landlord shall not encumber the Property during the term hereof
in an amount which exceeds $500,000 in the aggregate.
16. LANDLORD'S LIEN. In addition to the statutory landlord's lien,
Landlord shall have, at all times, a valid security interest to secure payments
of all rent, additional rent and other sums of money becoming due hereunder from
Tenant, and to secure payment of any damages or loss which Landlord may suffer
by reason of the breach by Tenant of any covenant, agreement or condition
contained herein, upon all goods, wares, equipment, fixtures, furniture,
improvements and other personal property of Tenant presently or which may
hereafter be situated in the Property, but not upon inventory held for sale by
Tenant in the course of its business, and all proceeds therefrom, and such
property shall not be removed therefrom without the consent of Landlord until
all arrearages in rent as well as any and all other sums of money then due to
Landlord hereunder shall first have been paid and discharged and all the
covenants, agreements and conditions hereof have been fully complied with and
performed by Tenant. Upon the occurrence of an event of default by Tenant,
Landlord may, in addition to any other remedies provided herein, enter upon the
Property and take possession of any and all goods, wares, equipment, fixtures,
furniture,
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improvements, and other personal property of Tenant situated in the Property,
but not upon inventory held for sale by Tenant in the course of its business,
without liability for trespass or conversion, and sell the same at public or
private sale, with or without having such property at the sale, after giving
Tenant reasonable notice of the time and place of any public sale or of the time
after which any private sale is to be made, at which sale the Landlord or its
assigns may purchase unless otherwise prohibited by law. Unless otherwise
provided by law, and without intending to exclude any other manner of giving
Tenant reasonable notice, the requirement of reasonable notice shall be met if
such notice is given in the manner prescribed in this Lease at least five (5)
days before the time of sale. The proceeds from any such disposition, less any
and all expenses connected with the taking of possession, holding and selling of
the Property (including reasonable attorney's fees and other expenses), shall be
applied as a credit against the indebtedness secured by the security interest
granted in this Section 16. Any surplus shall be paid to Tenant or as otherwise
required by law; and Tenant shall pay any deficiencies forthwith. Upon request
of the Landlord, Tenant agrees to execute and deliver to Tenant a financing
statement in form sufficient to perfect the security interest of Landlord in the
aforementioned property and proceeds thereof under the provisions of the Uniform
Commercial Code in force in the State of Florida. The statutory lien for rent is
not hereby waived, the security interest herein granted being in addition and
supplementary thereto.
Landlord waives any statutory liens for rent, and any lien created
hereunder, as to Tenant's inventory and agrees to provide written waivers within
ten (10) days of written demand by Tenant. Further, Landlord agrees to
subordinate all aforesaid liens in favor of any purchase money financing
obtained by Tenant to acquire personal property and/or fixtures of any kind
which are acquired for use at or on the Property. Landlord will provide written
subordination agreements to Tenant for such financing within ten (10) days of
written demand by Tenant.
17. SIGNS. Tenant shall not place any sign on or about the Property which
is not in compliance with local sign codes.
18. NOTICES.
(a) Except as provided in subsection (b) below, any notice,
demand, request or other communication ("Notice") required or permitted to be
given hereunder shall be in writing and shall be deemed given when actually
delivered and received. Either party may by notice to the other specify a
different address for Notice purposes, which shall only be effective upon
receipt, except that upon Tenant's taking possession of the Property, the
Property shall constitute Tenant's address for Notice purposes. A copy of all
Notices required or permitted to be given to Landlord hereunder shall be
concurrently transmitted to such party or parties at such addresses as Landlord
may from time to time hereafter designate by notice to Tenant.
(b) The Tenant hereby appoints as its agent to receive the
service of all dispossessory or distrant proceedings and legal notices the
person in charge of the Property at the time, or occupying the Property, and if
there is no person in charge or occupying the Property, then such service or
notice may be made by attaching the same on the main entrance of the Property.
19. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification. Except as otherwise stated in this
Lease, Tenant hereby acknowledges that neither the Landlord nor any of its
employees or agents has made any oral or written warranties or representations
to Tenant relative to the condition or use by Tenant of said Property, and
Tenant acknowledges that Tenant assumes all responsibility regarding the
Occupational Safety Health Act, the legal use and adaptability of the Property,
and the compliance thereof with all applicable laws and
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<PAGE> 19
regulations in effect during the term hereof, except as otherwise specifically
stated in this Lease.
20. ATTORNEY'S FEES. If either party brings an action to enforce the
terms hereof or declare rights hereunder, the prevailing party in any such
action shall be entitled to recover reasonable attorney's and legal assistant's
fees and costs incurred in connection therewith, on appeal or otherwise,
including those incurred in arbitration, mediation, administrative or bankruptcy
proceedings and in enforcing any right to indemnity herein.
21. [INTENTIONALLY DELETED.] 22. FORCE MAJEURE. Whenever a period of
time is herein prescribed for action to be taken by a party, that party shall
not be liable or responsible for, and there shall be excluded from the
computation for any such period of time, any delays due to strikes, riots, acts
of God, shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
control of that party.
23. HOLDING OVER. If Tenant, with Landlord's consent, remains in
possession of the Property or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
provisions hereof pertaining to the obligations of Tenant, but all options and
rights of first refusal, if any, granted under the terms hereof shall be deemed
terminated and be of no further effect during said month to month tenancy. If
Tenant shall hold over without Landlord's express written consent, Tenant shall
become a tenant at sufferance and rental shall be due at the higher of (1) the
then prevailing market rate as determined by Landlord in its absolute
discretion, or (2) twice the rent payable immediately prior to the expiration of
the term. The foregoing provisions shall not limit Landlord's rights hereunder
or provided by law in the event of Tenant's default.
Notwithstanding any contrary provisions of this Lease, Tenant shall not be
obligated to pay any higher rent during a holdover period between termination of
this Lease and closing under the option to purchase contained in Section 41 of
this Lease and Tenant may continue to occupy the Property during any such
period.
24. LANDLORD'S ACCESS. Landlord and Landlord's agents shall have the
right to enter the Property at reasonable times for the purpose of inspecting
the same, posting notices of non-responsibility, showing the same to prospective
purchasers, lenders, or tenants, performing any obligation of Tenant hereunder
of which Tenant is in default, and making such alterations, repairs,
improvements or additions to the Property or to the building of which it is a
part as Landlord may deem necessary or desirable, all without being deemed
guilty of an eviction of Tenant and without abatement of rent, and Landlord may
erect scaffolding and other necessary structures where reasonably required by
the character of any work performed, provided that the business of Tenant shall
be interfered with as little as reasonably practicable. Tenant hereby waives any
claims for damages for any injury to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Property, and any other loss
occasioned thereby. For each of the aforesaid purposes, Landlord shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Property, excluding Tenant's vaults and safes, if any, and Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in an emergency in order to obtain entry to the Property, and
any entry to the Property obtained by Landlord by any of said means shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Property, or an eviction of Tenant from the
Property or any portion thereof. No provision hereof shall be construed as
obligating Landlord to perform any repairs, alterations or to take any action
not otherwise expressly agreed to be performed or taken by Landlord. Landlord
may at any time place on or about the Property any ordinary "For Sale" signs and
Landlord may at any time during the last 120 days of the term hereof place on or
about the Property any ordinary "For Lease" signs, all without rebate of rent or
liability to Tenant.
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25. QUIET ENJOYMENT. Upon Tenant paying the rent for the Property and
observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Property for the entire term hereof subject to all of the
provisions hereof.
26. LANDLORD'S LIABILITY. The term "Landlord" as used herein shall mean
Douglas J. Ebbers and Laura G. Ebbers, as well as the owner or owners at the
time in question of the fee title or a tenant's interest in a ground lease of
the Property. The obligations contained in this Lease to be performed by
Landlord shall, subject to transfer of funds as aforesaid, be binding on
Landlord's successors and assigns. Provided that Douglas J. Ebbers and Laura G.
Ebbers do nothing to diminish their equity in the Property beyond the level
described in Section 15 hereof, as respects any remedies of Tenant against
Douglas J. Ebbers and Laura G. Ebbers, Tenant shall look solely to the equity in
the Property for the satisfaction of any remedies of Tenant in the event of a
breach by the Landlord of any of its obligations. Such exculpation of liability
as to Douglas J. Ebbers and Laura G. Ebbers shall be absolute and without any
other exception whatsoever.
27. BINDING EFFECT: CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Tenant and subject to the provisions of
the foregoing Section 26, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of Florida.
28. SEVERABILITY. The invalidity of any provision hereof under applicable
law shall in no way affect the validity of any other provision hereof.
29. TIME OF ESSENCE. Time is of the essence hereof.
30. ADDITIONAL RENT; SURVIVAL. Any and all monetary obligations of Tenant
under the terms hereof shall be deemed to be rent, shall be secured by any
available lien for rent, and to the extent accrued shall survive expiration or
termination of the term hereof.
31. COVENANTS AND CONDITIONS. Each provision hereof performable by Tenant
shall be deemed both a covenant and a condition.
32. MERGER. The voluntary or other surrender hereof by Tenant, or a
mutual cancellation thereof, or a termination by Landlord, shall not work a
merger, and shall, at the option of Landlord, terminate all or any existing
subtenancies or may, at the option of Landlord, operate as an assignment to
Landlord of any or all of such subtenancies.
33. SECURITY MEASURES. Tenant hereby acknowledges that the rental payable
to Landlord hereunder does not include the cost of guard service or other
security measures, and that Landlord shall have no obligation whatsoever to
provide same. Tenant assumes all responsibility for the protection of Tenant,
its agents and invitees from acts of third parties.
34. CONSTRUCTION. Any conflict between the printed provisions hereof and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions. Headings used herein shall not affect the
interpretation hereof, being merely for convenience. The terms "Landlord" and
"Tenant" shall include the plural and the singular and all grammar shall be
deemed to conform thereto. If more than one person executes this Lease, their
obligations shall be joint and several. The use of the words "include,"
"includes" and "including" shall be without limitation to the items which may
follow.
35. AUCTIONS. Tenant shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Property without first
having obtained Landlord's prior written consent.
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36. CAPTIONS. The parties mutually agree that the headings and captions
contained in this Lease are inserted for convenience or reference only, and are
not to be deemed part of or used in construing this Lease.
37. ARBITRATION. In the event of any dispute between the Landlord and
Tenant with respect to any issue specifically mentioned in this Lease as a
matter to be decided by arbitration, such dispute shall be determined by
arbitration in accordance with the laws of the State of Florida dealing with
arbitration, or in the absence of such laws, the rules of the American
Arbitration Association. The decision resulting from the arbitration shall be
binding, final and conclusive on the parties, and a decision thereon may be
entered by a court having jurisdiction.
38. RADON GAS DISCLOSURE. The following language is required by law in
any contract involving the sale or lease of any building within the State of
Florida:
"RADON GAS: Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit."
39. ENVIRONMENTAL COMPLIANCE.
(a) To the best of Landlord's knowledge, the Property is
presently in all material respects in compliance with all state, federal and
local laws and regulations governing or in any way relating to the generation,
handling, manufacturing, treatment, storage, use, transportation, spillage,
leakage, dumping, discharge or disposal (whether legal or illegal, accidental or
intentional) of any Hazardous Substances.
(b) Tenant shall not use, generate, manufacture, produce,
store, release, discharge or dispose of, on, under or about the Property, or
transport to or from the Property, any Hazardous Substance (as defined below),
or allow any other person or entity to do so. Except as to any presently
existing contamination and contamination resulting from the existing fuel tanks
on the Property, Tenant shall keep and maintain the Property in compliance with,
and shall not cause or permit the Property to be in violation of, any
Environmental Laws (as defined below).
(c) Tenant shall give prompt notice to Landlord of (i) any
proceeding or inquiry by any governmental authority (including without
limitation the Florida Environmental Protection Agency or Florida Department of
Health and Rehabilitative Services) with respect to the presence of any
Hazardous Substance on the Property or the migration thereof from or to other
property; (ii) all claims made or threatened by any third party against Tenant,
Landlord or the Property relating to any loss or injury resulting from any
Hazardous Substance; and (iii) Tenant's discovery of any occurrence or condition
on any real property adjoining or in the vicinity of the Property that could
cause the Property or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of the Property under any
Environmental Law or any regulation adopted in accordance therewith.
(d) Tenant shall protect, indemnify and hold harmless Landlord,
its directors, officers, employees, agents, successors and assigns from and
against any and all loss, damage, cost, expense or liability (including
attorneys' fees and costs) directly or indirectly arising out of or attributable
to the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal, transport or presence of a Hazardous Substance on,
under, about, to or from the Property, in any way arising from the acts of
Tenant, including without limitation all foreseeable
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consequential damages and the costs of any necessary repair, cleanup or
detoxification of the Property.
(e) "Environmental Laws" shall mean any federal, state or
local law, statute, ordinance or regulation pertaining to health, industrial
hygiene, or the environmental conditions on, under or about the Property,
including without limitation the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended from time to time
("CERCLA"), 42 U.S.C. Sections 9601 et seq., and the Resource Conservation and
Recovery Act of 1976, as amended from time to time ("RCRA"), 42 U.S.C. Sections
6901 et seq. The term "Hazardous Substance" shall include without limitation:
(i) those substances included within the definition of "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in CERCLA, RCRA,
and the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et
seq., and in the regulations promulgated pursuant to said laws; (ii) those
substances defined as "hazardous wastes" in any Florida Statute and in the
regulations promulgated pursuant to any Florida Statute; (iii) those substances
listed in the United States Department of Transportation Table (49 CFR 172.101
and amendments thereto) or by the Environmental Protection Agency (or any
successor agency) as hazardous substances (40 CFR Part 302 and amendments
thereto); (iv) such other substances, materials and wastes which are or become
regulated under applicable local, state or federal law, or which are classified
as hazardous or toxic under federal, state or local laws or regulations; and
(v) and material, waste or substance which is (1) petroleum, (2) asbestos, (3)
polychlorinated biphenyls, (4) designated as a "hazardous substance" pursuant
to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251 et seq., or
listed pursuant to Section 307 of the Clean Water Act, (5) flammable explosive,
or (6) radioactive materials.
(f) Landlord shall have the right to inspect the Property and
audit Tenant's operations thereon to ascertain Tenant's compliance with the
provisions of this Lease at any reasonable time, and Tenant shall provide
periodic certifications to Landlord, upon request, that Tenant is in compliance
with the environmental restrictions contained herein. Landlord shall have the
right, but not the obligation, to enter upon the Property and perform any
obligation of Tenant hereunder of which Tenant is in default, including without
limitation any remediation necessary due to environmental impact of Tenant's
operations on the Property, without waiving or reducing Tenant's liability for
Tenant's default hereunder.
(g) All of the terms and provisions of this Section 39 shall
survive expiration or termination of this Lease for any reason whatsoever.
40. GUARANTIES. The principals of Tenant hereby agree to execute
individual guaranties for Tenant's full and faithful performance of this Lease
simultaneously with the execution of this Lease.
41. OPTION TO PURCHASE PROPERTY.
41.1 Grant of Option. Landlord hereby grants to Tenant the option to
purchase the Property ("Option"). This Option shall be exercisable only if
either at the time of exercise there shall be then existing no event of material
default by Tenant under this Lease, or if a default exists it is subsequently
cured, or Tenant exercises the option as provided herein prior to or during the
curative period with respect to the default.
41.2 Exercise of Option. The Option granted herein shall be
exercised, if at all, by Tenant giving written notice to Landlord of such
exercise on or before thirty (30) days prior to termination of this Lease.
Closing of such purchase shall occur within thirty (30) days of such notice to
Landlord, in accordance with the terms and conditions hereinafter set forth
("Closing").
41.3 Expiration of Option. The Option granted herein shall expire
upon the occurrence of either of the following events:
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(a) Uncured default by Tenant under this Lease unless Tenant
exercises the option prior to expiration of any curative period; or
(b) Failure of Tenant to exercise the Option within the time
prescribed herein.
41.4 Purchase Price. If Tenant exercises the Option during the first
year of the term of this Lease, the purchase price to be paid for the Property
shall be Six Hundred Thousand and 00/100 Dollars ($600,000.00). If Tenant
exercises the Option during the second or third year of the term of this Lease,
the purchase price to be paid for the Property shall be Six Hundred Thousand and
00/100 Dollars ($600,000.00) plus the annual increase in the C.P.I. for the
applicable year. Tenant shall receive as credits against the Purchase Price any
credits provided elsewhere in this Lease.
The purchase price shall be paid in cash at closing by wired funds or local
cashier's check plus or minus prorations and closing costs as hereinafter set
forth.
42. SURVEY AND TITLE COMMITMENT; PERMITTED EXCEPTIONS.
42.1 Preliminary Title Report. Within twenty-one (21) days after
execution of this Lease by Landlord and Tenant, Landlord, at Landlord's expense,
shall cause a title insurance company mutually acceptable to the parties through
JOHNSON, BLAKELY, POPE, BOKOR, RUPPEL & BURNS, P.A., its agent ("Title Company")
to issue and deliver to Tenant and A.L.T.A. Form B owner's title commitment
("Title Commitment") accompanied by one copy of all documents affecting the
Property, and which constitute exceptions to the Title Commitment. Tenant shall
give Landlord written notice on or before the expiration of the later of (i)
fifteen (15) days after Tenant's receipt of the Title Commitment or (ii) fifteen
(15) days after Tenant's receipt of the survey provided for below, that the
condition of title as set forth in the Title Commitment and survey is or is not
satisfactory, in Tenant's reasonable judgment. Any condition, defect or other
circumstance which renders title unmarketable of record shall be sufficient
grounds for Tenant to reasonably object to the condition of title. In the event
that the condition of title is not acceptable, Tenant shall state which
exceptions to the Title Commitment are unacceptable and Landlord shall undertake
to eliminate such exceptions as set forth below; provided, however, that at
Closing, mortgages may be satisfied or the liens thereof partially released as
the case may be, as to the Property. Landlord shall, at his sole cost and
expense not to exceed $1,000.00, promptly undertake and use due diligence to
eliminate or modify all unacceptable matters to the reasonable satisfaction of
Tenant, but in no event shall Landlord be required to file suit. In the event
Landlord is unable with the exercise of due diligence to satisfy the objections
within ninety (90) days after the notice, Tenant may, at its option, (i) accept
title subject to the objections raised by Tenant, without an adjustment in the
Lease rent or Purchase Price, in which event the objections shall be deemed to
be waived for all purposes, or (ii) terminate this Lease and rescind this Option
and this Agreement shall be of no further force and effect. Notwithstanding any
of the provisions of this Section 42.1 to the contrary, if Tenant fails timely
to notify Landlord that the condition of title as set forth in the Title
Commitment and survey is or is not acceptable, the parties agree that the
condition of title shall be deemed acceptable.
42.2 Current Survey. Within thirty (30) days after execution of this
Lease, Tenant, at Tenant's expense, may obtain a current survey of the Property
prepared by a duly licensed land surveyor ("Survey"). In the event the Survey,
or any rectification thereof, shows any encroachments of any improvements upon,
from, or onto the Property, any building set-back line or easement, or shows any
evidence of use which indicates that an unrecorded easement may exist, except as
may be acceptable to Tenant, in Tenant's reasonable judgment, the matter shall
be treated in the same manner as a title defect under the procedure set forth
above.
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42.3 Continuation of Title Commitment and Permitted Exceptions. Once
Landlord has satisfied any exceptions Tenant takes to the Title Commitment,
Landlord shall keep the Title Commitment continuously in full force and effect
throughout the term of this Lease and until the Closing under any exercise of
the option to purchase. The Property shall be conveyed to Tenant at Closing if
the option to purchase is exercised by Tenant subject to no liens, charges,
encumbrances, exceptions or reservations of any kind or character other than
those acceptable to Tenant under Section 42.1 hereof ("Permitted Exceptions").
43. PROVISIONS WITH RESPECT TO CLOSING.
43.1 Landlord's Obligations at Closing. At Closing, Landlord shall
do the following:
(a) Execute, acknowledge and deliver to Tenant a statutory
warranty deed conveying marketable record title to the Property to Tenant
subject to all matters of record, including the Permitted Exceptions, which deed
shall be in form for recording with all required documentary stamps in the
proper amount affixed thereto, or provided for by Landlord at Landlord's
expense. The legal description of the Property contained in the deed shall be
identical to the legal descriptions of the Property contained in the Survey and
the Title Commitment.
(b) Execute and deliver to Title Company and Tenant duplicate
original copies of an affidavit of no liens satisfactory to Title Company so as
to cause Title Company to remove the "gap," mechanics' lien, parties in
possession and unrecorded easements standard exceptions from the Title
Commitment.
(c) Execute and deliver to Title Company and Tenant a
"non-foreign person" affidavit in compliance with regulations issued by the
Internal Revenue Service.
43.2 Tenant's Obligations at Closing. Subject to the terms,
conditions and provisions hereof, and contemporaneously with the performance by
Landlord of its obligations set forth in Section 43.1 above, Tenant shall
deliver to Landlord the purchase price to be paid at Closing, plus or minus
prorations and closing costs as set forth herein.
43.3 Closing Costs.
(a) Landlord shall pay the following costs and expenses in
connection with the Closing:
(i) All documentary stamps which are required to be
affixed to the statutory warranty deed;
(ii) The escrow fees of the Title Company, if any, and
the cost of the preparation of the statutory warranty deed; and
(iii) The premium payable for the Title Commitment and
Title Policy issued pursuant thereto.
(b) Tenant shall pay the following costs and expenses in
connection with the Closing:
(i) The cost of recording the statutory warranty deed;
and
(ii) Any and all costs in connection with any third party
financing which Tenant may obtain.
-20-
<PAGE> 25
44. PROVISIONS WITH RESPECT TO FAILURE OF TITLE; DEFAULT.
44.1 Failure of Title. If Landlord shall be unable to convey title
to the Property or any portion thereof on the Closing in accordance with the
provisions hereof, Landlord shall, on or prior to Closing, give notice of such
inability and the nature thereof) to Tenant, and Tenant may either (i) accept
such title as Landlord can convey, without abatement of the Purchase Price, or
(ii) terminate this Option.
44.2 Default by Landlord. After exercise of the Option, in the event
Landlord should fail to perform hereunder for any reason, except Tenant's
default or the failure of title as set forth in Section 44.1 hereof, Tenant may
(i) enforce specific performance of this Option, or (ii) terminate this Option.
Tenant may not seek damages from Landlord. No delay or omission in the exercise
of any right or remedy accruing to Tenant upon any breach by Landlord under this
Option shall impair such right or remedy or be construed as a waiver of any such
breach theretofore or thereafter occurring. The waiver by Tenant of any
condition or of any subsequent breach of the same or any other term, covenant or
condition herein contained shall not be deemed to be a waiver of any other
condition or of any subsequent breach of the same or any other term, covenant,
or condition herein contained.
44.3 Default by Tenant. After exercise of the Option, in the event
Tenant should fail to perform hereunder for any reason, except default by
Landlord, Landlord may proceed in equity to enforce its rights hereunder. No
delay or omission in the exercise of any right or remedy accruing to Landlord
upon any breach by Tenant hereunder shall impair such right or remedy or be
construed as a waiver of any breach theretofore or thereafter occurring. The
waiver by Landlord of any condition or the breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any other
condition or of any subsequent breach of the same or any other term, covenant or
condition herein contained.
45. BROKERAGE COMMISSIONS. Each party represents to the other that no
brokers have been involved in this transaction except Colliers Arnold and
Passmore and Associates, Inc., whose commissions are the responsibility of
Landlord. The parties hereby agree that if any claims for brokerage commissions
or fees are ever made against either party in connection with this transaction,
each such claim shall be handled and paid by the party whose actions form the
basis of such claim. Each party agrees to indemnify and hold harmless the other
from and against any and all such claims asserted by any person, firm or
corporation in connection herewith or the transaction contemplated hereby,
including attorneys' fees (as defined in Section 20), and arising from the acts
of the indemnifying party.
46. REPRESENTATIONS AND WARRANTIES. Landlord makes no representations
or warranties concerning the present or future suitability of the Property
for the conduct of Tenant's business or the condition of the Property, and
Tenant acknowledges that if it exercises the Option, it is purchasing the
Property "AS IS"; provided, however, Landlord, at its sole cost and expense,
shall remove the existing fuel tanks on the Property prior to Closing. Further
Landlord shall empty the existing fuel tanks of all fuel within three (3)
business days of execution of this Lease and shall maintain the fuel tanks (and
all required registrations thereof) during the term of this Lease, provided
however that Landlord shall not be responsible for damage to the fuel tanks
caused by Tenant.
47. MEMORANDUM OF LEASE TO BE RECORDED. Landlord and Tenant shall cause
to be recorded in the Public Records of Pinellas County, Florida a memorandum
sufficient to give notice to all subsequent takers and/or would be takers of the
existence of this leasehold estate and option to purchased conveyed and created
in Tenant by this Lease. In the event Landlord fails to execute an appropriate
instrument and deliver it to Tenant within ten (10) days of execution of this
Lease then Tenant may unilaterally execute and record such an instrument.
-21-
<PAGE> 26
LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH
RESPECT TO THE PROPERTY.
WITNESSES: LANDLORD:
/s/ Kathy E. Otting /s/ Douglas J. Ebbers
- ------------------------------- -------------------------------
Signature Douglas J. Ebbers
Kathy E. Otting Date: 6/28/96
- ------------------------------- -------------------------------
Print name
/s/ Shirlan S. Whitener
- -------------------------------
Signature
Shirlan S. Whitener
- -------------------------------
Print name
/s/ Kathy E. Otting /s/ Laura G. Ebbers
- ------------------------------- -------------------------------
Signature Laura G. Ebbers
Kathy E. Otting Date: 6/28/96
- ------------------------------- -------------------------------
Print name
/s/ Shirlan S. Whitener
- -------------------------------
Signature
Shirlan S. Whitener
- -------------------------------
Print name
TENANT:
LEVEL BEST GOLF,
a Florida corporation
/s/ Michael J. Crabb By: /s/ Fred Solomon
- ------------------------------- ----------------------------
Signature Fred Solomon
President
Michael J. Crabb Date: 6/28/96
- ------------------------------- --------------------------
Print name
/s/ Marie J. Magers
- -------------------------------
Signature
Marie J. Magers
- -------------------------------
Print name
<PAGE> 27
LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH
RESPECT TO THE PROPERTY.
WITNESSES: LANDLORD:
/s/ Kathy E. Otting /s/ Douglas J. Ebbers
- ------------------------------- -------------------------------
Signature Douglas J. Ebbers
Kathy E. Otting Date: 6/28/96
- ------------------------------- -------------------------------
Print name
/s/ Shirlan S. Whitener
- -------------------------------
Signature
Shirlan S. Whitener
- -------------------------------
Print name
/s/ Kathy E. Otting /s/ Laura G. Ebbers
- ------------------------------- -------------------------------
Signature Laura G. Ebbers
Kathy E. Otting Date: 6/28/96
- ------------------------------- -------------------------------
Print name
/s/ Shirlan S. Whitener
- -------------------------------
Signature
Shirlan S. Whitener
- -------------------------------
Print name
TENANT:
LEVEL BEST GOLF,
a Florida corporation
By: /s/ Fred Solomon
- ------------------------------- ----------------------------
Signature Fred Solomon
President
Date: 6/28/96
- ------------------------------- --------------------------
Print name
- -------------------------------
Signature
- -------------------------------
Print name
<PAGE> 28
LEGAL DESCRIPTION
The North 1/4 of the Northwest 1/4 of the Southwest 1/4 of the Northwest 1/4 of
Section 4, township 30 south, Range 16 East, Pinellas County, Florida, LESS the
West 30 feet described thereof taken as road right-of-way per O.R. 7150, Pages
2280 and 2281, Public Records of Pinellas County, Florida.
EXHIBIT "A"
<PAGE> 29
THIS INSTRUMENT PREPARED BY (& RET
JOHNSON, BLAKELY, POPE, BOKOR, RUPPEL & BU. P.A.
JOAN M. VECCHIOLI Esquire
911 CHESTNUT STREET, CLEARWATER, FL 34616
INST # 96-188530
JLY 10, 1996 5:16 PM
RECORDING
REC 19:50 PINELLAS COUNTY FLA.
DS _____ OFF. REC. BK 9399 PG 1208
INT _____
FEES _____
MTF _____
P/C _____
REV _____
____ _____
TOTAL 19:50
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE is made on this 28th day of June, 1996, between
DOUGLAS J. EBBERS AND LAURA G. EBBERS, whose mailing address is 2452 Manning
Circle, Clearwater, Florida 34624-6522 (collectively, "Landlord"), and LEVEL
BEST GOLF, a Florida corporation, whose mailing address is 14561 58th Street N.,
Clearwater, FL 34620 ("Tenant").
1. Landlord has entered into a Commercial Lease and Option to
Purchase, dated June 28, 1996 ("Lease"), with Tenant for space located on the
real property more particularly described in Exhibit "A," attached hereto and
made a part hereof (the "Property"), in accordance with the terms, conditions
and provisions set out in the Lease.
2. The term of the Lease for the Property commences on July 1, 1996,
and ends on June 30, 1999, subject to earlier termination upon default as
provided in the Lease.
3. All persons are put on notice of the fact that pursuant to the
Lease, Tenant does not have the power to subject the interest of Landlord in
the Property to any mechanic's liens or other liens of any kind. Specifically,
the Lease provides the interest of Landlord shall not be subject to liens for
improvements made by Tenant, and Tenant shall notify any contractor making such
improvements of this provision.
All persons who hereafter, during the term of the Lease, furnish work,
services or materials to the Property upon the request of Tenant or any other
person claiming under, by or through Tenant, must look only to the interest of
Tenant and not to that of Landlord.
4. All persons are put on notice of the fact that pursuant to the
Lease, Tenant has an option to purchase the Property at any time prior to
thirty (30) days before the expiration of the term of the Lease.
5. The rights granted to the parties as aforesaid are all subject to
the terms and conditions contained in the Lease and any and all Exhibits
attached and referred to in the Lease. In the event of a conflict between the
terms of the Lease and its Exhibits and this Memorandum, the terms of the Lease
and its Exhibits shall be controlling.
6. This Memorandum shall expire on June 30, 1999.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this
instrument the day and year aforesaid.
WITNESSES: LANDLORD:
/s/ KATHY E. OTTING /s/ DOUGLAS J. EBBERS
- ------------------------------- -------------------------------
Signature Douglas J. Ebbers
Kathy E. Otting
- -------------------------------
Print name
/s/ SHIRLAN S. WHITENER
- -------------------------------
Signature
Shirlan S. Whitener
- -------------------------------
Print name
<PAGE> 30
PINELLAS COUNTY FLA.
OFF. REC. BK 9399 PG 1209
/s/ KATHY E. OTTING /s/ LAURA G. EBBERS
- ------------------------------- -------------------------------
Signature Laura G. Ebbers
Kathy E. Otting
- -------------------------------
Print name
/s/ SHIRLAN S. WHITENER
- -------------------------------
Signature
Shirlan S. Whitener
- -------------------------------
Print name
TENANT:
LEVEL BEST GOLF,
a Florida corporation
By: /s/ FRED SOLOMON
--------------------------
Fred Solomon
President
(Corporate Seal)
STATE OF FLORIDA)
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 28th day of June,
1996, by DOUGLAS J. EBBERS and LAURA G. EBBERS, who [have produced Florida
drivers licenses as identification].
/s/ SHIRLAN S. WHITENER
------------------------------
Shirlan S. Whitener
Notary Public
Print name: Shirlan S. Whitener
My commission expires:
SHIRLAN S. WHITENER
(Seal) MY COMMISSION # CC349891 EXPIRES
February 23, 1998
BONDED THRU TROY FAIN INSURANCE, INC.
-2-
<PAGE> 31
TENANT:
LEVEL BEST GOLF,
a Florida corporation
/s/ MICHAEL J. CRABB By: /s/ FRED SOLOMON
- ------------------------------- --------------------------
Signature Fred Solomon
President
Michael J. Crabb
- ------------------------------- (Corporate Seal)
Print name
/s/ MARIE J. MAGERS
- -------------------------------
Signature
Marie J. Magers
- -------------------------------
Print name
STATE OF WASHINGTON)
COUNTY OF SPOKANE )
The foregoing instrument was acknowledged before me this 28th day of June,
1996, by FRED SOLOMON, as President of LEVEL BEST GOLF, a Florida corporation,
on behalf of the corporation. He [has produced a Florida drivers license as
identification].
/s/ C. ANNETTE HANSON
------------------------------
C. Annette Hanson
Notary Public
Print name: C. Annette Hanson
My commission expires: 6-30-99
(Seal)
-2-
<PAGE> 32
PINELLAS COUNTY FLA.
OFF. REC. BK 9399 PG 1211
LEGAL DESCRIPTION
The North 1/4 of the Northwest 1/4 of the Southwest 1/4 of the Northwest 1/4 of
Section 4, township 30 south, Range 16 East, Pinellas County, Florida, LESS the
West 30 feet described thereof taken as road right-of-way per O.R. 7150, Pages
2280 and 2281, Public Records of Pinellas County, Florida.
EXHIBIT "A"
<PAGE> 33
GUARANTY OF PERFORMANCE OF COMMERCIAL LEASE AGREEMENT
THIS GUARANTY is made this 28th day of June, 1996, by FRED SOLOMON, JAMES
G. SOLOMON and PATRICIA A. SANDERS ("Guarantors") to DOUGLAS J. EBBERS and LAURA
G. EBBERS ("Landlord").
R E C I T A L S:
A. Landlord, on June 28, 1996, entered into a Commercial Lease and Option
to Purchase ("Agreement") with LEVEL BEST GOLF, a Florida corporation, a
("Tenant") for the purpose of leasing certain commercial real property as
described in the Agreement. A copy of the Agreement is attached as Exhibit "A"
and is incorporated herein by reference.
B. Guarantors are willing to guarantee Tenant's performance of the
Agreement under the terms set forth below.
For value received, the sufficiency of which is hereby acknowledged,
Guarantors agree as follows:
1. Recitals. The above recitals are true and correct and are incorporated
herein by reference.
2. Statement of Guaranty. Guarantors unconditionally guarantee the
faithful, prompt and complete compliance by Tenant with all the terms,
obligations, and conditions of the Agreement, including all extensions or
modifications thereof. If Tenant fails to perform its covenants, agreements and
undertakings as provided in the Agreement, the Guarantors shall immediately, and
with due diligence, do and perform for the benefit of the Tenant, all such
covenants, agreements, and undertakings as if they constituted a direct and
primary obligation of the Guarantors. In no event shall the liability or
obligations of the Guarantors hereunder exceed that of the Tenant under the
Agreement.
The obligations of the Guarantors hereunder are independent of the
obligations of the Tenant, and a separate action or actions for payment,
damages, or performance may be brought and prosecuted against the Guarantors, or
any one of them, whether or not an action is brought against the Tenant, and
whether or not Tenant be joined in any such action or actions, and whether or
not notice be given or demand be made upon Tenant.
3. Release, Modification, or Extension of Agreement. Landlord may, from
time to time, with notice to the Guarantors (or any of them) and without
affecting, diminishing, or releasing the liability of the Guarantors (or any of
them): (a) retain or obtain the primary or secondary liability of any party or
parties, in addition to the Guarantors hereunder, with respect to any of the
terms, obligations and conditions of the Agreement, (b) extend or renew for any
period (whether or not longer than the original period), alter, exchange, or
modify any of the terms, obligations and conditions of the Agreement, (c)
release or compromise any liability of any of the Guarantors hereunder or any
liability of any other party or parties primarily or secondarily liable on any
of the terms, obligations and conditions of the Agreement, (d) release its
security interest, if any, in all or any property securing any obligation
hereunder and permit any substitution or exchange of such property, (e) resort
to the Guarantors (or any of them) for payment of any or all portion of
liabilities arising from the guarantee herein, whether or not Landlord shall
have resorted to any property securing any obligation hereunder or shall have
proceeded against any other of the Guarantors or any other party primarily or
secondarily liable on any of the terms, obligations and conditions of the
Agreement, and (f) alter, extend, change, modify, release, or cancel any
covenant, agreement, or provision contained in the Agreement or modifications or
amendments thereof; provided however that Landlord shall not modify the terms of
the Agreement in
<PAGE> 34
a manner which unreasonably increases the liability or potential liability of
the Guarantors without first obtaining their written consent.
4. Notice. The Guarantors hereby waive (a) notice of the acceptance of
this Guaranty, and (b) all diligence on the part of Landlord in collection or
protection of, or realization upon, any security for any of the terms,
obligations and conditions of the Agreement or in enforcing any remedy available
to the Landlord.
5. Waiver. No delay or failure on the part of Landlord in exercise of any
right or remedy shall operate as a waiver, release, or modification of same.
Any waiver, release, or modification granted shall be effective only through a
written document executed by Landlord, and then only to the extent specifically
recited therein. No single or partial exercise by Landlord of any right or
remedy herein shall preclude other or further exercise thereof or the exercise
of any other right or remedy whether contained herein or in the Agreement. No
action of Landlord permitted hereunder shall in any way impair or affect this
Guaranty. No right or power of the Tenant or any one else to assert any claim
or defense as to the invalidity or enforceability of the Agreement shall impair
or affect the obligations of the undersigned hereunder.
6. Duration. It is fully understood that until each and every one of the
covenants and agreements of this Guaranty are fully performed, the Guarantors'
obligations hereunder shall not be released, in whole or in part, by any action
or thing which might, but for this provision of this instrument, be deemed a
legal or equitable discharge of a surety or guarantor, or by reason of any
waiver, extension, modification, forbearance, or delay or other act or omission
of Landlord or its failure to proceed, promptly or otherwise, or by reason of
any action taken or omitted by Landlord, whether or not such action or failure
to act varies or increases the risk of or affects the rights or remedies of the
Guarantors, or by reason of any further dealings between Tenant, Landlord, or
any other guarantor, and the Guarantors hereby expressly waive and surrender any
defense to its liability hereunder based upon any of the foregoing acts,
omissions, things, agreement, or waivers of any of them; it being the purpose
and intent of the parties hereto that the covenants, agreements, and all
obligations hereunder are absolute, unconditional, and irrevocable under any and
all circumstances.
7. Notice. Any notice, demand, or request by Landlord, its successors or
assigns, to the Guarantors shall be in writing, and shall be deemed to have been
duly given or made if either delivered personally to the undersigned or mailed
by certified or registered mail addressed to the Guarantors at the address for
such guarantor specified below:
Fred Solomon Patricia A. Sanders
14561-58th Street North 14561-58th Street North
Clearwater, FL 34620 Clearwater, FL 34620
James G. Solomon
14561-58th Street North
Clearwater, FL 34620
or at such other address as any one or more of the Guarantors shall designate
from time to time in writing.
8. Assignment. Landlord shall be entitled to assign this Guaranty and all
of its rights, privileges, interests, and remedies hereunder to any other
persons, firm, entity, bank, or corporation whatsoever without notice to or
consent by the Guarantors, and such assignee shall be entitled to the benefits
of this Guaranty and to exercise all such rights, interests, and remedies as
fully as Guarantors.
9. Termination. Provided that no default then exists under the Agreement,
this Guaranty shall terminate when, and only when, the Tenant shall have
completely complied with all the terms and conditions of the Agreement,
including all extensions,
-2-
<PAGE> 35
renewals and modifications thereof. When such condition has been met, Landlord
will, upon request, furnish written cancellation of this Guaranty.
10. Binding Effect. This Guaranty shall inure to the benefit of Landlord,
its successors and assigns, and shall bind each of the Guarantors jointly and
severally, together with their heirs, legal representatives, successors, and
assigns. If more than two parties execute this Guaranty, the terms
"undersigned" and "Guarantors" shall mean all parties executing this Guaranty,
and all such parties shall be jointly and severally obligated hereunder. The
use of the singular form herein shall include the plural, as applicable, and
vice versa, and the use of any gender or the neuter form shall include all
genders and the neuter form.
11. Applicable Law. This Guaranty shall be construed in accordance with
the laws of the State of Florida, and such laws shall govern the interpretation,
construction, and enforcement hereof. Whenever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SIGNED, SEALED, AND DELIVERED AT Clearwater, Florida, as of the 28th day of
June, 1996.
WITNESSES:
(As witnesses only and not
as co-guarantors)
/s/ MICHAEL J. CRABB /s/ FRED SOLOMON
- ------------------------------- ------------------------------
Michael J. Crabb Fred Solomon
/s/ MARIE J. MAGERS
- -------------------------------
Marie J. Magers
/s/ KATHY E. OTTING /s/ JAMES G. SOLOMON
- ------------------------------- ------------------------------
Kathy E. Otting James G. Solomon
/s/ SHIRLAN S. WHITENER
- -------------------------------
Shirlan S. Whitener
/s/ KATHY E. OTTING /s/ PATRICIA A. SANDERS
- ------------------------------- ------------------------------
Kathy E. Otting Patricia A. Sanders
/s/ SHIRLAN S. WHITENER
- -------------------------------
Shirlan S. Whitener
STATE OF FLORIDA )
<PAGE> 36
renewals and modifications thereof. When such condition has been met, Landlord
will, upon request, furnish written cancellation of this Guaranty.
10. Binding Effect. This Guaranty shall inure to the benefit of Landlord,
its successors and assigns, and shall bind each of the Guarantors jointly and
severally, together with their heirs, legal representatives, successors, and
assigns. If more than two parties execute this Guaranty, the terms
"undersigned" and "Guarantors" shall mean all parties executing this Guaranty,
and all such parties shall be jointly and severally obligated hereunder. The
use of the singular form herein shall include the plural, as applicable, and
vice versa, and the use of any gender or the neuter form shall include all
genders and the neuter form.
11. Applicable Law. This Guaranty shall be construed in accordance with
the laws of the State of Florida, and such laws shall govern the interpretation,
construction, and enforcement hereof. Whenever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SIGNED, SEALED, AND DELIVERED AT Clearwater, Florida, as of the 28th day of
June, 1996.
WITNESSES:
(As witnesses only and not
as co-guarantors)
/s/ FRED SOLOMON
- ------------------------------- ------------------------------
Fred Solomon
- -------------------------------
/s/ KATHY E. OTTING /s/ JAMES G. SOLOMON
- ------------------------------- ------------------------------
Kathy E. Otting James G. Solomon
/s/ SHIRLAN S. WHITENER
- -------------------------------
Shirlan S. Whitener
/s/ KATHY E. OTTING /s/ PATRICIA A. SANDERS
- ------------------------------- ------------------------------
Kathy E. Otting Patricia A. Sanders
/s/ SHIRLAN S. WHITENER
- -------------------------------
Shirlan S. Whitener
STATE OF FLORIDA )
COUNTY OF ______________)
The foregoing instrument was acknowledged before me this ____ day of
_____________, 1996, by FRED SOLOMON, who [is personally known to me] [has
produced a Florida driver's license as identification].
------------------------------
Notary Public
Print name:___________________
My commission expires:
-3-
<PAGE> 37
STATE OF FLORIDA )
COUNTY OF ______________)
The foregoing instrument was acknowledged before me this 28th day of June,
1996, by JAMES G. SOLOMON, who [has produced a Florida driver's license as
identification].
/s/ SHIRLAN S. WHITENER
------------------------------
Shirlan S. Whitener
Notary Public
Print name: Shirlan S. Whitener
My commission expires:
SHIRLAN S. WHITENER
(Seal) MY COMMISSION # CC349891 EXPIRES
February 23, 1998
BONDED THRU TROY FAIN INSURANCE, INC.
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 28th day of June,
1996, by PAT SANDERS, who [has produced a Florida driver's license as
identification].
/s/ SHIRLAN S. WHITENER
------------------------------
Shirlan S. Whitener
Notary Public
Print name: Shirlan S. Whitener
My commission expires:
SHIRLAN S. WHITENER
(Seal) MY COMMISSION # CC349891 EXPIRES
February 23, 1998
BONDED THRU TROY FAIN INSURANCE, INC.
-4-
<PAGE> 1
EXHIBIT 10.6
LICENSING AGREEMENT
This Licensing Agreement ("Agreement") dated September 5, 1996, is
made and entered into by and between Innovative Products, Inc. ("Licensor"), a
corporation organized and existing under the laws of the State of Virginia and
having its principal place of business at 11582 Overleigh Drive, Woodbridge,
Virginia 22192, and Level Best Golf, a corporation organized and existing under
the laws of the State of Florida and having its principal place of business at
14561 - 58th Street North, Clearwater, Florida 34620 ("Licensee").
W I T N E S S E T H
WHEREAS the Licensor has certain right, title and interest in and to
the Product (as hereinafter defined); and
WHEREAS the Licensor desires to offer the Licensee the opportunity to
commercialize the Product in the United States of America ("U.S.A."); and
<PAGE> 2
WHEREAS the Licensee desires to obtain an exclusive license to make,
sell, and market the Product throughout the United States of America without
rights to sublicense.
WHEREAS the Licensor is willing to provide such license to Licensee as
a means of facilitating the manufacture, marketing and sale of the Product in
exchange for the payment of royalties;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Definitions. As used herein, the terms "Agreement," "Licensor," and
"Licensee" shall have the meanings indicated above. As used herein,
the following terms shall have the following meanings:
1.1 "Effective Date" shall mean the date first written above.
2
<PAGE> 3
1.2 "Patent Rights" shall mean (1) United States Provisional Patent
Application Serial No. 60/018,245 filed May 24, 1996 and any patents
which issue therefrom and any and all divisions, reissues,
re-examinations, renewals, continuations, continuations-in-part,
extensions and patents thereof, and any and all other counterpart
applications in any other countries and patents and inventors'
certificates, utility models and the like issuing therefrom.
1.3 "Product" shall mean the BDS 2000 as claimed and disclosed in the
Patent Rights, including any approved design modifications.
1.4 "Date of First Royalty Payments" shall mean the end of the first
calendar quarter following the first date of Product shipment.
1.5 "Gross Collected Sales" shall mean all gross receipts collected by
Licensee from buyers of Product and all other value received by
Licensee, all with no deductions for sales, marketing, or
administrative expenses.
3
<PAGE> 4
2. Term and Grant of License
2.1 Grant of License. Subject to the terms and conditions hereof,
effective as of the Effective Date, Licensor hereby grants Licensee an
exclusive right and license under the Patent Rights to make, sell and
market the Product in the United States of America, and furthermore
hereby grants Licensee a non-exclusive right and license to make, sell
and market the Product outside the United States of America. The
exclusive license granted hereunder with respect to Product is
strictly limited to the manufacture, sale and marketing of Products in
the United States of America. Nothing in this Agreement shall give
Licensee the right to sublicense the Product without the written
approval of Licensor under separate agreement. Upon Licensor's
request, Licensee agrees to sell Product to Licensor at twenty percent
(20%) above Licensee's manufacturing cost. Licensor shall have the
non-exclusive right to market and sell the Product outside the U.S.A.
2.2 Term of License. The Term of the license shall be for five years from
the first date of Product shipment provided that
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<PAGE> 5
Licensee maintain sales of the following minimum quantities from the
first date of Product shipment:
First twelve months 150,000 units
Second twelve months 250,000 units
Third twelve months 300,000 units
Fourth twelve months 150,000 units
Fifth twelve months 100,000 units
Should Licensee fail to maintain the above minimum sales quantities for any
twelve month period, this license shall terminate unless the parties hereto
agree otherwise. Furthermore, should Licensee fail to ship product to a buying
customer by June 1, 1997, this license shall terminate unless the parties
hereto agree otherwise.
2.3 Manufacturing and Marketing Costs. Licensee agrees to incur all
manufacturing and marketing costs associated with the Product.
2.4 Design Modifications. Licensee agrees to submit to Licensor samples
of Product including any proposed design changes for
5
<PAGE> 6
approval by Licensor. Such approval shall not be unreasonably
withheld.
3. Royalties and Reimbursements.
3.1 Royalties Resulting from Income.
Royalty Income: Licensor shall receive from Licensee $3.50 (three
dollars and fifty cents) per unit on the first 10,000 units sold and
will pay Licensee an ongoing royalty of 11% (eleven percent) of the
Gross Collected Sales on all subsequent units sold. Excluded from
this are any units sold from Licensee to Licensor.
3.2 Due Dates. Payments of all Royalties by Licensee shall be due within
thirty (30) days of the end of each calendar quarter after the first
date of Product shipment has occurred. Any such payments shall be
made by check drawn in U.S. funds on a U.S. bank and paid to Licensor
substantially concurrently with the reports as defined in Section
3.3(2) of this Agreement.
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<PAGE> 7
3.3 Reports. (1) From the Effective Date to the first date of Product
shipment, Licensee shall provide a bi-monthly report to Licensor
indicating progress toward commercialization and sale of the Product.
(2) After the first date of Product shipment, Licensee shall
provide a detailed summary of sales for each calendar quarter which
will include a statement of the amount of quarterly Gross Collected
Sales realized by Licensee, the amount of any royalty due to Licensor,
and the total payment due from Licensee to Licensor.
3.4 Patent Procurement. Licensor shall be responsible for procurement of
all Patent Rights and for all reasonable costs incurred during the
Term of this Agreement in prosecuting and maintaining all U.S. patent
applications of Patent Rights and obtaining and maintaining all
patents of Patent Rights. Licensor shall be responsible for filing
for patent protection for approved design changes. Licensee agrees
that all approved design changes are the property of Licensor.
Licensee agrees to obtain all requisite documentation assigning any
patent rights in such approved design changes
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<PAGE> 8
to Licensor. Licensor shall keep Licensee fully informed regarding
all such U.S. patents and patent applications.
3.5 Audit Rights. Licensee shall maintain the usual books of account and
records showing the Gross Collected Sales of Products by Licensee.
Such books and records shall be open to inspection by Licensor at its
expense during usual business hours, by an independent certified
public accountant to whom Licensee has no reasonable objection, for
two (2) years after the calendar year to which they pertain, for the
purpose of verifying the accuracy of the payments made to Licensor by
Licensee pursuant to this Agreement. Inspection shall be reasonably
limited to those matters related to Licensee's payment obligations
under this Agreement.
4. Representations and Warranties.
4.1 Licensor. Licensor hereby represents and warrants that:
(a) it is a corporation validly existing and in good standing
under the laws of the state of Virginia;
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<PAGE> 9
(b) the execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of
Licensor;
(c) it has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement;
(d) Licensor has not encumbered, restricted, transferred, or
otherwise burdened the application of the Product within the
United States of America;
(e) to the best of Licensor's knowledge, there is no infringement
or suspected infringement of the Patent Rights or misuse,
misappropriation, theft, or breach of confidence of other
proprietary rights in the Product by a third party;
(f) to the best of Licensor's knowledge, it has all rights to the
Product and the authority to transfer such rights to the
Licensee without violating the rights (whether primary,
residual, vested, or nonvested) of any other person; and
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<PAGE> 10
Licensor specifically disclaims all warranties including, but not
limited to, warranties of merchantability or fitness for a particular
purpose.
4.2 Licensee. The Licensee represents and warrants that:
(a) it is a corporation validly existing and in good standing
under the laws of the State of Florida;
(b) the execution, delivery, and performance of this Agreement
have been duly authorized by all necessary corporate action on
the part of the Licensee;
(c) it has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations under
this Agreement.
5. Protection of Property Rights.
5.1 Confidentiality. Except as provided below, each of the parties
hereto agrees to use all reasonable efforts to keep confidential all
information related to the Product received from the other party and
designated as confidential during the term of this Agreement, together
with any and all
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<PAGE> 11
documentation and other physical manifestations or embodiments
thereof. Without limiting the foregoing, each party shall use the
same degree of care, effort and procedures in protecting such
confidential information as such party utilizes in connection with
protecting its own information of similar character.
5.2 Exceptions. The foregoing provisions of Section 5.1 shall not apply
to information which:
(a) at the time of its disclosure hereunder was generally known to
the public or subsequently becomes known to the public through
no fault of the parties;
(b) was in possession of the receiving party prior to disclosure
by the disclosing party hereunder and was not acquired
directly or indirectly from any third party under obligation
of confidentiality to the disclosing party;
(c) subsequent to its disclosure hereunder, is obtained from a
third party not subject to a contractual or fiduciary
obligation for confidentiality to the disclosing party;
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<PAGE> 12
6. Infringement.
6.1 Notification, Expenses, and Recovery. Subject to the consent of
Licensor, which consent shall not be unreasonably withheld, Licensee
shall have the right, in its sole discretion and at its sole expense,
to initiate, respond to, prosecute and conclude legal proceedings in
Licensor's name or its own name against any infringer of the Patent
Rights in the U.S.A. Any settlement or recovery received by or
awarded to Licensee (or to Licensor, if Licensee brings suit in the
name of Licensor) in any such proceeding shall be divided seventy
percent (70%) to Licensee and thirty percent (30%) to Licensor after
Licensee deducts from any such settlement or recovery its counsel fees
and out-of-pocket expenses relative to any such legal proceeding. If
Licensee decides not to initiate legal proceedings against any such
infringer, or in the event that Licensee decides not to pursue legal
proceedings which have been initiated, then Licensor shall have the
right in its sole discretion, to initiate or continue such legal
proceedings. Any Settlement or recovery received from any such
proceeding shall be divided thirty percent (30%) to Licensee and
seventy percent (70%) to
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<PAGE> 13
Licensor after Licensor deducts from any such settlement or recovery
its reasonable counsel fees and out-of-pocket expenses relative to any
such legal proceeding. In the event that either party initiates or
carries on legal proceedings to enforce any Patent Rights against an
alleged infringer, the other party shall fully cooperate with and
supply all assistance reasonably requested. Further, the other party
at its expense, shall have the right to be represented by counsel of
its choice in any such proceeding, provided that the party who
initiates or carries on the legal proceedings shall have the sole
right to conduct such proceedings.
6.2 Consent of Other Party. Neither party to this Agreement shall settle
any action in which both parties are plaintiffs without first
obtaining the consent of the other party, which consent will not be
unreasonably withheld.
7. Independent Contractor.
7.1 Relationship of Licensor and Licensee. It is agreed that the
relationship of Licensee to Licensor in the performance of this
Agreement is as an independent contractor and that the
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<PAGE> 14
Licensee is not an agent of Licensor. Licensee agrees to refrain from
representing itself as being the agent of Licensor in performing or
acting pursuant to this Agreement. Neither party shall have the power
or authority to bind or otherwise commit the other party nor shall
either party attempt to do so. No joint venture or partnership shall
arise from or be imputed under this Agreement.
8. Indemnification And Insurance
8.1 Indemnification. Licensee hereby agrees to indemnify and hold
Licensor harmless from liability arising from any claims, costs,
damages, or other liabilities, suits or judgments resulting from
Licensee's use, application, or marketing of the Products so long as
such claims, costs, damages or other liabilities, suits, or judgments
are not attributable to grossly negligent or intentionally wrongful
acts or omissions by Licensor, its trustees, employees and/or agents.
This indemnity is conditioned upon Licensor's obligation to: (i)
advise Licensee of any claim or lawsuit, in writing promptly after
Licensor has received notice of said claim or lawsuit and (ii) assist
Licensee and its
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<PAGE> 15
representatives in the investigation and defense of any lawsuit and/or
claim for which indemnification is provided.
8.2 Insurance. Prior to marketing or otherwise making the Product
commercially available, Licensee shall purchase Commercial General
Liability Insurance, including Product Liability Insurance, for all
Products developed, manufactured, or marketed as a result of this
Agreement. Coverage for Bodily Injury/Property Damage shall be for
one million dollars ($1,000,000) combined single limit per occurrence
with an annual aggregate of at least three million dollars
($3,000,000). If permitted, all policies shall name Licensor as an
additional insured as respects the subject matter of this Agreement.
The Product Liability Insurance shall provide territorial coverage
commensurate in scope with sales of the Product by Licensee and shall
be on an "occurrence" basis. Evidence of all required insurance
coverage shall be delivered to Licensor within ten (10) days of the
policy effective date. Each policy shall contain a provision that the
Insurer will not terminate the policy or materially reduce its
coverage without forty-five (45) days advance written notice to
Licensor.
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<PAGE> 16
9. Breach, Excuse of Performance, and Termination.
9.1 Term. As stated in Article 2.2 above, this Agreement shall have a
Term of five years from the first date of Product shipment.
9.2 Breach. If either party at any time commits any material breach of
this Agreement, and fails to remedy it within 90 (ninety) days after
receiving written notice from the other party of such breach, then in
such case the non-breaching party may cancel this Agreement by
notifying the breaching party in writing. The remedies in this
Section 9.2 are in addition to any other remedies to which the parties
hereunder may be entitled. Any failure to cancel this Agreement for
any breach will not constitute a waiver by the aggrieved party of its
right to cancel this Agreement for any other breach whether similar or
dissimilar in nature.
9.3 Effect of Breach upon License. Any license granted hereunder shall
terminate automatically upon any permitted unilateral termination or
unremedied breach, including, but not limited to, the non-shipment of
Product by June 1, 1997, and the
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<PAGE> 17
non-payment of royalties as specified in Article 3 herein, of this
Agreement by the Licensee unless, in the case of Licensee's
termination of this Agreement, such termination is for an unremedied
material breach by Licensor, in which event the license grant shall
not terminate.
10. Miscellaneous.
10.1 Assignment. This Agreement shall inure to the benefit of and shall be
binding upon each of the parties and their respective successors and
assigns; however, it may not be assigned, in whole or in part, by
either party without the prior written consent of the other party.
Assignment will not be reasonably withheld.
10.2 Amendment of Agreement. No amendment, modification, or addition to
this Agreement shall be binding upon either party unless reduced to
writing and duly executed by each of the parties in the same manner as
the execution of this Agreement.
10.3 Notice. Any notice or other communication to either party to this
Agreement required or persisted under this Agreement
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<PAGE> 18
shall be in writing and shall be deemed to have been served upon such
party five days after having been dispatched, to such party by
overnight carrier to the address set below; provided, however, that
any notices of termination or alleging a breach of this Agreement
shall also be sent by certified mail:
If to the Licensor:
Innovative Products, Inc.
11582 Overleigh Drive
Woodbridge, Virginia 22192
Attention: Donna Swanson
If to the Licensee:
Level Best Golf, Inc.
14561 - 58th Street North
Clearwater, Florida 34620
Attention: Bill Foley
Chief Operating Officer
10.4 Additional Documents. Each party agrees to execute any documents or
instruments reasonably necessary to permit such
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<PAGE> 19
other party to enjoy the full benefit of the rights granted to such
other party under this Agreement.
10.5 Invalidity of Separable Provisions. If any term or provision of this
Agreement is for any reason held invalid, such invalidity shall not
affect any other term or provision, and this Agreement shall
thereafter be construed as if such invalid term or provision had never
been contained in this Agreement.
10.6 Entirety. This Agreement contains the entire understanding and
agreement between the parties relative to its subject matter, and
there are no understandings, agreements, conditions, or
representations, oral or written, express or implied, with reference
to such subject matter that are not merged or superseded by this
Agreement.
10.7 Effect of Headings. The headings to sections of this Agreement are
for convenience of reference only and do not form a part of this
Agreement, and shall not in any way affect the interpretation of this
Agreement.
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<PAGE> 20
10.8 Choice of Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of Virginia. Any lawsuits
between Licensor and Licensee which pertain to this Agreement shall be
brought in the appropriate State or Federal Court of competent
jurisdiction within the State of Virginia.
10.9 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed and delivered as of the day and year first above written.
INNOVATIVE PRODUCTS, INC. LEVEL BEST GOLF, INC.
By: /s/ Donna Swanson By: /s/ Bill Foley
--------------------------------- -------------------------------------
Its: CEO Its: COO
-------------------------------- ------------------------------------
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<PAGE> 1
EXHIBIT 10.7
AGREEMENT
This Agreement is made and entered into this 17th day of March, 1995,
by and between Gator Golf Enterprises, Inc. (hereinafter "Gator Golf") and
Level Best Golf, Inc. (hereinafter "Level Best").
The purpose of this Agreement is to set forth the terms and conditions
pursuant to which Gator Golf shall assign and license to Level Best all rights
of manufacturing, marketing, and distribution with regard to the Product
described below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
as set forth below, the parties agree as follows:
1. PRODUCT.
The Product which is the subject of this Agreement is known as the
"MaxPack." The MaxPack is made up of various training aids and instructional
golf videotapes. It is understood and agreed by the parties to this Agreement
that Gator Golf is the owner of all training aids and videotapes which are made
a part of the MaxPack, as well as videotape raw footage which was taped by
American Telecast but not made a part of the MaxPack. A full itemization of
the Product is attached hereto as Exhibit A.
2. OWNERSHIP AND LICENSE.
A. Ownership of the Product design, content, and name
specifically developed hereunder shall remain
exclusively with Gator Golf.
B. Gator Golf hereby grants to Level Best, and Level
Best hereby accepts, for the term of this Agreement
only, the exclusive license, right and privilege to
<PAGE> 2
manufacture, market and sell the Product pursuant to
the terms and conditions set forth in this Agreement.
C. Upon termination of this Agreement, Level Best shall
deliver to Gator Golf all of the existing inventory,
molds, raw footage, photography, slides, and artwork
for packaging at no charge to Gator Golf or Wally
Armstrong.
3. TERM.
The term of this Agreement shall be for 18 months and shall continue
on a year-to-year basis assuming annual royalties or payments to Gator Golf are
at least $20,000. The Agreement shall commence as of March 15, 1995 and
continue for 18 months.
4. PRODUCT INVENTORY.
It is understood by the parties that all MaxPack inventory is
presently being warehoused by American Telecast in Pennsylvania and California.
Level Best has agreed to incur the expense of transferring all MaxPack
inventory from American Telecast (both California and Pennsylvania) and will
warehouse the Product at its expense. Level Best has agreed to make sure all
MaxPack inventory is delivered and will use best efforts in taking possession
of all molds with regard to MaxPack product, raw footage of video production,
and artwork related to packaging and artwork related to the instructional
booklet contained within the MaxPack.
5. FEES.
It is understood Gator Golf will enter into a termination agreement
with American Telecast which provides that Gator Golf
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<PAGE> 3
shall pay American Telecast a fee of $25,000 which will entitle Gator Golf to
take possession of the existing MaxPack inventory. Level Best agrees to
deliver to Gator Golf a money order in the sum of $25,000 upon execution of
this Agreement which Gator Golf will use to consummate the termination
agreement with American Telecast. It is understood that Gator Golf does not
intend to enter into the termination agreement until Level Best has delivered a
money order in the amount of $25,000 made payable to Gator Golf.
Additionally, Level Best will pay a royalty to Gator Golf in the
amount of 10% of gross collected revenue. Level Best has the right to
automatically renew the Agreement on a year-to-year basis with the same royalty
of 10% of gross collected revenue assuming annual royalties or payments to
Gator Golf are at least $20,000.
Upon execution of this Agreement, Level Best shall deliver a check to
Gator Golf in the amount of $5,000 which will be a credit against royalty
payments. It is understood royalty payments will be made every three months.
Level Best understands time is of the essence with regard to payment of
royalties.
Gross collected revenue shall be defined as the total of all revenue
from sales of the MaxPack or any of its individual components without deduction
for any expenses for production, manufacturing, marketing, general overhead or
the like.
6. INDEMNITY/INSURANCE.
Level Best acknowledges that Bob Mann and Russell Brown have pending
lawsuits against Wally Armstrong, Gator Golf, and American Telecast, but there
is no duty by Level Best to defend or indemnify
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<PAGE> 4
Wally Armstrong, Gator Golf, or American Telecast with regard to those existing
lawsuits.
Despite the above, Level Best will purchase general liability insurance
coverage with additional coverages for product liability and advertising
liability, and will name Wally Armstrong, Gator Golf Enterprises, Inc., and
American Telecast Corporation as additional named insureds on the policy during
the term of this Agreement. Additionally, Level Best will defend and indemnify
Wally Armstrong, Gator Golf Enterprises, Inc., and American Telecast Corporation
in the event of any claims, demands, suits or actions brought of any kind or
nature, including suits brought by Bob Mann and Russell Brown which would be in
addition to the existing lawsuits or new lawsuits brought by those parties.
Further, Level Best understands that Wally Armstrong will enter into
an agreement with American Telecast with regard to its termination of the
agreement, and Level Best agrees to indemnify Wally Armstrong and Gator Golf
Enterprises, Inc. with regard to all of their obligations contained therein.
Level Best will provide Gator Golf with a copy of the declaration page on an
annual basis.
In addition to the above, Level Best agrees to defend, indemnify and
hold Gator Golf and Wally Armstrong harmless for any claims, damages,
liabilities, costs and expenses, including, but not limited to, reasonable
attorney's fees, resulting from any and all liability, claims, proceedings,
demands, damages or actions, whether or not adjudicated, arising out of:
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A. Level Best's breach of any terms or representations in this
Agreement, as well as any claims of breach of contract,
warranty claims, misrepresentation, strict liability, with
regard to Level Best's vendors, sales, customer claims and the
like.
B. Any injury to any person or damage to any property caused by
Level Best's performance of its obligations under this
Agreement.
C. Any injury to any person or damage to any property caused by
the Product or use of the Product by Level Best or any
customers of Level Best with regard to the purchase of the
MaxPack.
D. Any claim of misrepresentation or false advertising or the
like with regard to the marketing of the MaxPack.
E. Level Best shall discharge all obligations imposed by federal,
state or local law, including, but not limited to, the filing
of all returns and reports and the payments of assessments,
taxes, contributions and other sums required, and agreed to
indemnify and hold Gator Golf and Wally Armstrong harmless
against all claims and demands resulting from Level Best's
failure to comply with those lawful obligations.
7. PRIOR CONTRACT.
This Agreement will not in any way affect the agreement between Gator
Golf, Wally Armstrong, and Level Best already in place and dated January 7,
1994.
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8. CD-ROM.
Level Best understands that Gator Golf intends to utilize MaxPack
videotape footage, both used and unused, for purposes of producing a CD-Rom
package in the future. Level Best will not object to the use of such footage
in that fashion. Otherwise, the parties understand that all of the videotape
which is part of the MaxPack product is available exclusively for Level Best's
use and purposes during the term of this Agreement. However, Level Best
understands and agrees that all individual components and videotape cannot be
used by Level Best for any other purposes other than for sale as part of the
MaxPack unless Wally Armstrong agrees in writing and appropriate financial
arrangements have been reached between the parties.
9. TERMINATION.
Gator Golf may terminate this Agreement upon the following
occurrences:
A. Failure by Level Best to make timely payments to
Gator Golf.
B. In the event Level Best declares bankruptcy or is
insolvent.
Under those circumstances, Gator Golf may terminate the Agreement upon
written notice to Level Best. Thereafter, Level Best shall have 10 days to
cure any defect.
10. ARBITRATION AND ATTORNEY FEES.
Any controversy or claim arising out of this Agreement shall be
settled by an expedited arbitration in Florida in accordance
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with the Commercial Arbitration Rules of the American Arbitration Association
and judgment upon the award, which shall be prompt and timely, may be entered
in any court having jurisdiction thereof. The prevailing party in any legal
proceeding shall be entitled to an award of reasonable attorney fees and actual
costs incurred.
Upon termination of the Agreement, Level Best shall deliver at its
expense to Gator Golf all inventory, molds, raw footage, and other Product and
other component parts which are made a part of the MaxPack and identified on
Exhibit A.
11. TERRITORY.
The exclusive right of manufacturing, promotion and sale shall relate
only to North America.
12. ADVERTISING.
Gator Golf understands that Level Best will use Wally Armstrong's
name, picture, signature, likeness, voice, and the like with regard to
packaging, production of video, commercials, infomercials and other means in
order to promote and sell the Product during the term of this Agreement. The
right to use Wally Armstrong's name, picture, signature, likeness, voice, and
the like ceases upon termination of this Agreement.
Level Best agrees to provide Gator Golf, through its designated
manager, with copies of all advertising and packaging at least 14 days before
release. Gator Golf has the right to reject all proposed advertising, but
Level Best's rights may not be unreasonably withheld.
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<PAGE> 8
13. APPEARANCES.
Wally Armstrong agrees to make two one-day appearances on behalf of
Level Best for production of commercials, photography, or the like during the
term of this Agreement. Level Best will pay all reasonable expenses related
thereto. All other appearances will be negotiated on a case-by-case basis.
14. ACCOUNTING.
Level Best agrees to keep up-to-date records and books consistent with
well-recognized principles of accounting,and will provide Gator Golf with a
quarterly report regarding sales, expenses, and gross receipts. Level Best
will allow Gator Golf to review the books and records as it relates to sales of
the MaxPack at Gator Golf's expense.
15. NOTICES.
All notices, payments, and other correspondence shall be sent to the
parties at the following designated addresses:
For Gator Golf Enterprises, Inc.:
Gator Golf Enterprises, Inc.
c/o SIGNATURE SPORTS GROUP, LTD.
801 Park Avenue
Minneapolis, Minnesota 55404-1189
For Level Best Golf, Inc.:
Level Best Golf, Inc.
12114 Seminole Boulevard
Largo, Florida 34648
16. RETENTION OF RIGHTS TO ENDORSE OTHER PRODUCTS.
Subject to the terms and conditions contained herein, Gator Golf and
Wally Armstrong shall retain all other rights to the use
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<PAGE> 9
of his name, likeness, voice, signature, initials and photograph and shall not
be prevented by this Agreement from endorsing any products other than the
Product contained herein.
17. PARTIES ARE INDEPENDENT CONTRACTORS.
In their performance under this Agreement, the parties shall be acting
solely as independent contractors and nothing in this Agreement or in the
parties' performance of their obligations under this Agreement shall be
construed to make Gator Golf or Wally Armstrong or Level Best an employee,
partner, joint venturer, or agent of the other. The parties agree that they
will not make any representations to other parties that are not consistent with
this provision.
18. NON-ASSIGNMENT.
Except as otherwise provided in this Agreement, neither Wally
Armstrong nor Level Best shall assign, sell, transfer, give away, alienate,
encumber, or otherwise transfer any rights or obligations arising under this
Agreement without the express written consent of the other party to this
Agreement.
19. ENTIRE AGREEMENT OF PARTIES.
This Agreement, plus any exhibits attached hereto, constitutes the
entire agreement between the parties and cannot be altered or modified except
by an agreement in writing signed by both parties or their representatives.
This Agreement, upon its execution, supersedes all prior negotiations,
understandings, and agreements, whether oral or written, and such prior
agreements shall be null
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<PAGE> 10
and void, except the original contract between the parties entered into on or
about January 1, 1994.
GATOR GOLF ENTERPRISES, INC.
DATED: 3-17-95 By: /s/ Wally Armstrong
--------------------------- -----------------------------------
Wally Armstrong
Its: President
LEVEL BEST GOLF, INC.
DATED: 3-17-95 By: /s/ Fred Solomon
--------------------------- -----------------------------------
Its: President
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<PAGE> 11
EXHIBIT A
MaxPack "The Product"
1. Ruler
2. Hanger
3. Sponge
4. Stickers
5. Tempo ball
6. Shaft bar
7. All raw footage, including the three tape series, the re-edited series
of tapes and all other raw footage
8. Booklet on training aid usage
9. Index cards which are included within each tape
10. All artwork for packaging, booklet, and index cards, including the
sleeve for the videos; all transparencies of photos; all raw footage,
edited footage, and re-edited six tape footage
11. All molds and patents.
<PAGE> 1
EXHIBIT 10.8
LICENSE AGREEMENT
AGREEMENT, made this 31st day of March, 1996, between AUTOMATED GOLF
TRAINING AIDS, INC., a Florida corporation, hereinafter referred to as
"LICENSOR," and LEVEL BEST GOLF, INC., a Florida corporation, hereinafter
referred to as "LICENSEE."
W I T N E S S E T H:
WHEREAS, letters patent on United States Application Serial No.
60/004,073 for an ANGLE IRON AUTOMATED GOLF TRAINER, has been filed in the
United States Patent and Trademark Office on September 21, 1995;
WHEREAS, LICENSOR is the owner of a trademark "Angle Iron" used in
connection with the product of the invention embodied in U.S. Serial No.
60/004,073;
WHEREAS, the LICENSEE desires to manufacture, use, and sell structures
containing such patented improvement, hereinafter referred to as "The Product";
and,
WHEREAS, LICENSEE desires to obtain an exclusive license to
manufacture, use, and sell The Product, as hereinabove defined, and to use the
trademark "Angle Iron" and to have imparted to it the necessary technical
information to enable it to manufacture, use and sell The Product, as
hereinafter defined.
IT IS THEREFORE AGREED:
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<PAGE> 2
1. The terms defined in Schedule A annexed hereto shall, for all
purposes of this Agreement, have the meanings in said Schedule A specified.
2. LICENSOR warrants that it is the owner of certain patent
rights and trademark rights relating to an ANGLE IRON AUTOMATED GOLF TRAINER
embodied in U.S. Patent Application No. 60/004,073, and that it has the right
to grant to LICENSEE the within license under the patent rights of LICENSOR.
3. (a) The LICENSOR hereby grants to the LICENSEE a
world-wide exclusive non-transferable right and license to manufacture, use,
and sell The Product, under the patent rights of LICENSOR including those
patent rights covered by U.S. Letters Patent Application No. 60/004,073 and
LICENSEE shall enjoy the use and application throughout the world of the
trademark Angle Iron."
(b) LICENSEE shall apply to The Product manufactured by
it under this license such notice of any licensed patent or patent application
as may be required by the laws of the United States or as may be required by
LICENSOR.
4. LICENSEE hereby grants to LICENSOR, a royalty-free, world-wide
exclusive license under the patent rights of LICENSEE to manufacture, use, and
sell The Product throughout the world subsequent to the termination of this
Agreement; such exclusive license includes the right by LICENSOR to grant,
either directly or through others, non-exclusive licenses under LICENSEE'S
patent rights to manufacture, use, and sell The Product.
2
<PAGE> 3
5. (a) The technical information of LICENSOR shall be
available to LICENSEE for the use of LICENSEE hereunder. LICENSEE will use its
best efforts to prevent duplication or disclosure of all such technical
information furnished directly or indirectly, in writing or otherwise, to
LICENSEE by LICENSOR, provided, however, that LICENSEE may furnish such
portions of such technical information, to the extent necessary for the
operations of LICENSEE hereunder, to others who have entered into an
appropriate agreement with LICENSOR for the protection of such technical
information. LICENSOR shall not be unreasonable with respect to the terms and
conditions of any such appropriate agreement or with respect to the approval or
selection of any party to said agreement.
(b) LICENSOR shall make periodic visits to LICENSEE's facilities
for the purpose of general consultation with LICENSEE and its staff and
employees for such problems as may arise in connection with the manufacture,
use and sale of The Product. More particularly, LICENSOR shall consult with
and provide such technical information and assistance with respect to any
warranty problems, manufacturing problems, quality control matters and with
respect to methods and processes of manufacture, marketing, distribution, and
sale of The Product.
(c) The technical information of LICENSEE shall be available to
LICENSOR. LICENSOR will use its best efforts to prevent duplication or
disclosure of all such technical information furnished directly or indirectly
in writing or
3
<PAGE> 4
otherwise, to LICENSOR by LICENSEE, except to the extent necessary in the
performance of LICENSOR's business.
(d) With respect to the obligations of the parties pertaining to
the protection and use of technical information furnished pursuant to this
paragraph 5, no obligation shall be imposed upon the recipient party with
respect to any portion of said information (i) which corresponds in substance
to that developed by and in the recipient party's possession prior to such
party's receipt of the same, (ii) which at the time of disclosure is, or
thereafter becomes, through no act or failure to act on the part of the
recipient party, part of the public domain by publication or otherwise, or
(iii) which corresponds in substance to information furnished to the recipient
party by others as a matter of right without restriction on disclosure;
provided, however, that the occurrence of (i), (ii), or (iii) above shall not
be construed as granting any rights, express or implied, under LICENSOR's
patents which relate to said information furnished to LICENSEE by LICENSOR,
except as otherwise specifically provided in paragraph 3 of this Agreement or
in any other license agreement between LICENSEE and LICENSOR. Technical
information disclosed under this Agreement shall not be deemed to be within the
foregoing exceptions merely because such information is embraced by more
general information in the public domain or in the recipient party's
possession. In addition, any combination of features shall not be deemed to be
within the foregoing exceptions merely because individual features are in
4
<PAGE> 5
the public domain or in the recipient party's possession, but only if the
combination itself and its principle of operation are in public domain or in
the recipient party's possession.
6. (a) LICENSOR shall use its best efforts to verify the
accuracy of the technical information furnished by it hereunder, but LICENSOR
shall not be liable for damages arising out of or resulting from anything made
available hereunder or the use thereof nor be liable to LICENSEE for any type
of damages, consequential or otherwise under any circumstances.
(b) The sole obligation of LICENSOR with respect to
technical information shall be to furnish it to LICENSEE. LICENSOR shall have
no responsibility for the ability of LICENSEE to use such technical information,
the quality or performance of The Product produced therefrom by LICENSEE, or the
claims of third parties arising from the use of such material or technical
information.
(c) LICENSEE agrees to assume all financial and service
obligations for The Product manufactured, used and sold by it hereunder, and
LICENSOR shall be absolved of all liability or responsibility to LICENSEE or
others for any failure in production, design, operation, or otherwise of The
Product manufactured, used and sold by LICENSEE, except as may have heretofore
been approved by LICENSOR.
(d) LICENSOR does not warrant and shall not be
responsible for any design, specification, drawing, blueprint, Van Dyke, sepia,
or other reproducible tracing, or other data or
5
<PAGE> 6
information furnished by it to LICENSEE but shall furnish such in good faith to
the best of LICENSOR's knowledge and ability.
7. LICENSEE shall maintain high manufacturing standards for The
Product in order to ensure consumer acceptance and to ensure complete
interchangeability of parts for The Product and any proposed change involving
material alterations in the structure, quality, or design of The Product shall
be submitted to LICENSOR and shall be subject to its written approval prior to
making such alteration, which approval shall not be unreasonably withheld.
8. LICENSEE will pay royalties and render statements to LICENSOR
as set forth in Schedule B annexed hereto.
9. LICENSEE, in accordance with generally accepted accounting
practices, will keep such detailed records and books of account as shall be
necessary for the determination of royalties payable hereunder, and will
furnish copies thereof to LICENSOR at LICENSOR's request. LICENSOR or his
nominee may, at any time during business hours, make such examinations as it
may deem necessary to verify such records and books of account.
10. (a) LICENSEE will promptly advise LICENSOR in writing of
any notice or claim of infringement and of the commencement against it of any
suit or action for infringement of patents made or brought against LICENSEE and
based upon the use hereunder by LICENSEE of the rights granted to LICENSEE
hereunder with respect to The Product. If such use and The Product is in
accordance with designs and specifications approved by LICENSOR in writing,
6
<PAGE> 7
which approval will not be unreasonably withheld, LICENSOR will upon receipt of
such notice undertake the defense of any such suit or action to the extent that
the alleged infringement is based upon such use hereunder, but LICENSOR shall
have sole charge and direction of the defense of such suit or action. LICENSOR
and LICENSEE share equally in the cost of the defense of any such suit.
LICENSEE shall have the right to be represented therein by advisory counsel of
its own selection at its own expense.
(b) Except as otherwise may be provided herein, LICENSOR
will hold LICENSEE free and harmless from any damages or other sums that may be
assessed in or become payable under any final decree or final judgment by any
court for infringement to the extent based upon the use hereunder, during the
term of this agreement by LICENSEE of the LICENSOR technical information and
The Product in accordance with designs and specifications approved by LICENSOR
in writing, provided that the aggregate amount that may become payable by
LICENSOR under the provisions of this paragraph shall not in any event exceed
one-half (1/2) of the aggregate of the net royalty payments theretofore
received under this agreement by LICENSOR from LICENSEE in respect of The
Product in which such infringement shall have occurred. Except to the extent
expressly provided in this Article 8, LICENSOR shall not be obligated to pay
any losses, damages, claims or demands resulting from any such suit or action
or the conduct thereof or from any decree or judgment.
7
<PAGE> 8
(c) Neither LICENSOR nor LICENSEE shall settle or
compromise any such suit or action without the consent of the other if the
settlement or compromise obliges the other to make any payment or par with any
property or assume any obligation or grant any licenses or other rights or be
subject to any injunction by reason of such settlement or compromise.
11. (a) LICENSEE agrees to use its best efforts to promote
the sale of The Product throughout the world. As used in this Agreement, the
term "Best Efforts" refers to that level of efforts which the LICENSEE shall
exert which, in the LICENSEE's sole judgment, shall be best suited to
commercialize the licenses granted under this Agreement, taking into account
such factors as difficulties, time and expense encountered in development of
the market for The Product, cost factors derived at the completion of
development of each market segment, competitive and other market conditions.
Best efforts, as that term is contemplated in this Agreement, shall be assumed
to have been exerted in the event that the LICENSEE shall achieve the minimum
royalty levels contemplated in Schedule B hereof.
(b) LICENSEE shall as soon as possible after receiving
technical information as herein provided begin the manufacture and sale of The
Product herein licensed and shall throughout the life of this Agreement exert
its best efforts to create, supply and service throughout the world as
extensive a market for The Product as possible.
8
<PAGE> 9
12. (a) If LICENSEE shall delay, fail or refuse to make
payment of royalties or render statements to LICENSOR as provided in Paragraph
8 hereof, or if LICENSEE shall be in default for thirty (30) days in any other
obligation hereunder, LICENSOR may give written notice to LICENSEE specifying
the claimed particulars of such delay or default and, in the event LICENSEE
shall not remedy such delay or default within thirty (30) days after such
notice, LICENSOR may at its option take all of the following actions: terminate
this Agreement by giving ten (10) days' prior written notice to LICENSEE to
that effect, impose a finance charge of eighteen percent (18%) per annum for
the period of such delay, and/or proceed to enforce the defaulted obligation of
LICENSEE by any available means. Any indulgence on the part of LICENSOR in
respect to a delay or default by LICENSEE shall not be construed as a waiver of
LICENSOR's right to proceed under this paragraph either with respect to such
delay or default or to similar subsequent delays or defaults, nor shall this
Agreement be modified in any respect by any action of the parties or by
anything else other than the written concurrence of the parties hereto.
(b) Unless sooner terminated as herein provided, this
Agreement shall continue in full force and effect for five (5) years from the
date of this Agreement (hereinafter referred to as "Commencement Date"), and so
long as LICENSEE has achieved the minimum royalty levels contemplated in
Schedule B hereof, shall continue from year to year thereafter.
9
<PAGE> 10
(c) Upon termination of this Agreement, by expiration or
otherwise, all licenses, rights, privileges, and obligations hereunder shall
cease and terminate except that the licenses and rights granted under paragraph
3 hereof shall continue as to all specific units of The Product manufactured
during the term of this Agreement, or actually in manufacture upon the date of
termination of this Agreement, by LICENSEE or any of its subsidiaries, for the
full term of the patents under which The Product is licensed hereunder to be
made and/or used, sold, leased, or otherwise disposed of, and except that no
termination of this Agreement by expiration or otherwise shall release LICENSEE
from any of its obligations accrued hereunder (including its obligations to
furnish statements and to pay compensation with respect to The Product
manufactured during the term of this Agreement, or actually in manufacture upon
such date of termination by LICENSEE or any of its subsidiaries) or rescind or
give rise to any rights to rescind anything done or any payment made or other
consideration given to either party hereunder prior to the time such
termination becomes effective. In case of any such termination, LICENSOR shall
have the right to give public notice thereof in such manner and at such time
and places as it may deem advisable.
(d) On the termination of this Agreement, for any reason
whatsoever, LICENSEE shall deliver to LICENSOR all books, notes, drawings,
writings, and other documents, samples, and models relating to any improvements
or inventions which are the
10
<PAGE> 11
subject matter of this Agreement; and LICENSEE shall also cease to exploit any
patent right for which a license has been granted under this Agreement.
(e) In the event of the termination by LICENSOR pursuant
to the provisions of this Paragraph 12: (1) all unpaid sums on sales made prior
to the effective termination date shall become due and payable immediately; (2)
LICENSOR shall, if it so elects, have the right to purchase any or all of The
Product manufactured by LICENSEE which are unsold at the time of LICENSEE's
receipt of such notice of termination. The price to LICENSOR shall be the
LICENSEE's cost without any profit to LICENSEE. LICENSOR may also in such
event buy at depreciated costs, and without profit to the LICENSEE all special
dies, jigs, molds, tools, fixtures, and patterns applicable to The Product.
(f) From and after the effective date of any termination
of this Agreement, LICENSOR shall have no further rights hereunder except that
such termination shall not affect in any way the rights granted by LICENSEE
under paragraph 4 hereof, but LICENSEE shall not be relieved of any obligation
or liability accrued hereunder prior to the effective date of such termination.
(g) Termination of this Agreement shall not relieve
LICENSEE or LICENSOR of their respective obligations to prevent duplication or
disclosure of technical information furnished as provided in paragraph 5 hereof.
13. The addresses of the parties hereto are as follows:
11
<PAGE> 12
LICENSOR: AUTOMATED GOLF TRAINING AIDS, INC.
18911 Edinborough Way
Tampa, FL 33647
LICENSEE: LEVEL BEST GOLF, INC.
11800 28th Street North
St. Petersburg, FL 33716
Notices and written statements required hereunder shall be deemed to have been
duly given upon the mailing thereof, postpaid, to the party entitled thereto at
its above address or at such other address as may from time to time be
designated in writing to the other party.
14. "Angle Iron" is a proprietary name, and LICENSEE shall not
claim any rights or interests in the words "Angle Iron." LICENSEE shall make
no commercial use of the words "Angle Iron" except as otherwise provided
herein, as a trademark or otherwise, unless such commercial use and the manner
thereof has first been approved in writing by LICENSOR.
15. (a) This Agreement shall not be assignable by either
party without the prior written consent of the other party hereto, except that
it may be assigned without such consent to the successor of either party or to
a person, firm or corporation acquiring all of substantially all of the
business and assets of such party. No assignment of this Agreement shall be
valid until and unless this Agreement shall have been assumed by the assignee.
When duly assigned in accordance with the foregoing,
12
<PAGE> 13
this Agreement shall be binding upon and shall inure to the benefit of the
assignee.
(b) Any assignment of this Agreement shall provide that
neither LICENSEE nor LICENSOR shall be relieved of their respective obligations
with respect to the use, duplication or disclosure of technical information
furnished as provided in paragraph 5 hereof.
16. This Agreement is executed and delivered with the
understanding that it embodies the entire agreement between the parties and
that there are no prior representations, warranties or agreements relating
thereto.
17. This Agreement shall be construed and the legal relations
between the parties determined in accordance with the laws of the State of
Florida. In connection with any litigation including appellate proceedings
arising out of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys fees and costs.
18. This Agreement shall not become effective until executed by
LICENSOR at its principal office designated in paragraph 13 hereof. No change
in, addition to, or waiver of the terms and provisions hereof shall be binding
upon LICENSOR unless approved in writing by its authorized representative and
no modification shall be effected by the acknowledgment or acceptance of
purchase order forms containing other or different terms or conditions.
13
<PAGE> 14
19. Nothing contained herein shall be construed as granting any
rights, express or implied, under the patent rights or technical information of
LICENSOR, or as estopping LICENSOR from claiming infringement of the patent
rights or technical information of LICENSOR, in connection with any
manufacture, use, and sale by LICENSEE of The Product not conducted pursuant to
this license.
IN WITNESS WHEREOF, the parties hereto have caused their respective
corporate names to be hereto subscribed and their respective corporate seals to
be hereunto affixed and attested by their respective officers and agents
thereunto duly authorized.
Attest: /s/ ? LICENSOR:
AUTOMATED GOLF TRAINING AIDS, INC.
By: /s/ Richard L. Bradshaw
- ---------------------------------- ------------------------------------
(SEAL) its president
LICENSEE:
Attest: /s/ J.G. Solomon LEVEL BEST GOLF, INC.
By: /s/ Fred Solomon
- ---------------------------------- ------------------------------------
(SEAL) its president
14
<PAGE> 15
SCHEDULE A
DEFINITIONS
1. The term "patent rights" shall mean patents and patent
applications of all countries to the extent and only to the extent that they or
the claims thereof cover The Product (including, without limitation, apparatus
and equipment for carrying out manufacture and use of The Product), and
transferable interests in or rights with respect thereto, (i) acquired by the
party in question prior to the termination of this Agreement, or (ii) based on
inventions conceived and under the control of said party prior to the
termination of this Agreement; in each case to the extent that, and subject to
the conditions under which, said party now has or hereafter shall have the
right to grant licenses, immunities or licensing rights thereunder.
2. The term "technical information" shall mean detailed design
information relating to, improvements and developments relating to, and
operating technique necessary for the manufacture and use of The Product, or
any improvement thereof, made or acquired by the party in question prior to the
termination of this Agreement, to the extent that, and subject to the terms and
conditions (including the obligation to account to and/or make payments to
others) under which, said party has the right to disclose such information to
others. Such technical information may include drawings, manuals, blueprints,
design sheets, bills of materials, material specifications, photographs,
1
<PAGE> 16
package designs, photostats and similar data, and designs and specifications
relating to manufacturing equipment, tools, dies, molds, jigs, and fixtures,
and shall include the technical information in all current and future patent
applications relating to The Product.
3. The term "The Product" shall mean the devices, auxiliaries,
machinery, apparatus or replacement parts therefor, for structures containing
the improvements under LICENSOR's patent rights, including those embodied in
U.S. Patent Application No. 60/004,073 and commonly referred to as an ANGLE
IRON AUTOMATED GOLF TRAINING AID.
4. The term "United States" shall mean all territory to which
patents of the United States apply.
2
<PAGE> 17
SCHEDULE B
ROYALTIES
1. LICENSEE hereby accepts the license herein granted, subject to
all the conditions expressed elsewhere in this Agreement and in consideration
therefor agrees to pay LICENSOR in lawful money of the United States a royalty
of eight percent (8%) of LICENSEE's net sales actually received for The Product
sold by or for LICENSEE. Payments due LICENSOR hereunder shall be paid within
thirty (30) days after any quarterly period of each calendar year.
2. In consideration of the rights granted LICENSEE to said
trademarks, LICENSEE shall pay LICENSOR a royalty of one percent (1%) of
LICENSEE's net sales, as defined hereinbelow, of The Product and parts thereof
sold by or for LICENSEE and/or any sub-licensee.
3. For the calendar year ending December 31, 1996, there shall be
no minimum royalty. For the calendar year 1997, there shall be a minimum
royalty of $50,0000.00. The minimum royalty for the calendar year 1998 and
each year thereafter shall be $100,000.00.
4. LICENSEE will on or before the thirtieth day of each calendar
quarter, deliver to LICENSOR a written statement accounting for royalties so
payable or showing that no royalties are due, other than applicable minimum
royalty because no sales were made.
1
<PAGE> 18
5. Products in respect of which royalty is payable under
Paragraph 1 and 2 above shall be considered sold directly or indirectly, by
LICENSEE: (a) if sold on open account when delivered to a bona fide purchaser
for value or to a common carrier and consigned to such purchaser; (b) when paid
for, if paid in advance of delivery; and (c) if sold on consignment, when paid
for or when released from consignment, whichever shall first occur.
6. (a) The term "Net Sales" shall mean the proceeds actually
received by the LICENSEE during each calendar month during the term of this
Agreement, subject to payment or royalty under Paragraph 8 less the following:
(1) actual cost of freight charges or of freight
absorption, if any, separately stated in such invoice;
(2) actual cost of packaging and transit
insurance;
(3) trade, quantity or standard trade cash
discounts, if any, allowed;
(4) any tax, duties, imports or other government
charge on the sale, transportation, or delivery which is separately stated on
the invoice (unless in the nature of a value added tax, which need not be
separately stated);
(5) credit and cash refunds for returned goods;
and
(6) allowances for damaged, obsolete or defective
goods.
2
<PAGE> 19
(b) For purposes of computing royalty, as used in this
Agreement, the term "Units" shall mean that number of Units manufactured in the
license granted in paragraph 3(a) which Units have been theretofore sold in any
period and payment therefor actually received by the LICENSEE in the royalty
reporting period.
7. All royalty rates hereinabove specified refer to lawful money
of the United States of America. All royalty payments shall be made to
LICENSOR, at the office of LICENSOR designated in Article 13 hereof, in lawful
money of the United States of America and shall be made in an amount to be
calculated and established at the time payment is due so that, after deduction
for any taxes, assessments and charges levied, assessed or imposed, other than
by the Government of the United States of America, which LICENSEE or LICENSOR,
or any other party shall be required to pay or withhold in respect to this
Agreement or with respect to such royalty payments, the remainder actually
receivable by, and due and payable to, LICENSOR shall be in the amounts as
herein specified.
3
<PAGE> 1
EXHIBIT 10.9
LEVEL BEST GOLF, INC.
AND
GOLF 21 AGREEMENT
Level Best Golf, Inc. (LBG) will pay to Golf 21 a direct payment of seven and
one-half percent (7 1/2%) of gross collected sales for the rights to
exclusively market Golf 21 worldwide for a period of five (5) years, with
renewal options for an additional five (5) years. In order to maintain this
exclusivity, LBG must sell a minimum of:
10,000 Units, Year One
20,000 Units, Year Two
30,000 Units, Year Three
40,000 Units, Year Four
50,000 Units, Year Five
LBG will have complete worldwide marketing rights to include the right to
change graphics, create new logo (if deemed necessary), and create all TV and
direct response advertising, etc.
LBG estimates a pricing of seven (7) to ten (10) dollars per unit wholesale.
LBG will also issue to Donald G. Cofer, President, Golf 21, two thousand shares
of Level Best Golf restricted stock to cover his expenses prior to this
agreement.
/s/ James G. Solomon 2/8/96 /s/ Donald G. Cofer 2/9/96
- ---------------------------------- ----------------------------------
James G. Solomon Date Donald G. Cofer Date
Executive Vice President President
<PAGE> 1
EXHIBIT 10.10
EXCLUSIVE MARKETING AGREEMENT
This agreement between Bill and Nikki Coward (BNC) and Level Best Golf
(LBG) grants exclusive worldwide marketing rights to LBG for the Club Parka,
and the Parka Pouch under the following conditions.
- - BNC will be allowed to continue marketing the Club Parka, and the
Parka Pouch to green grass pro shops and off course golf shops.
However, LBG will be allowed to pursue these markets on a
non-exclusive basis provided their efforts are co-ordinated with BNC.
If LBG can establish a substantial rep. network to service this
market, BNC would give consideration to granting LBG exclusive rights
to these markets.
- - BNC would retain all rights to direct response television commercials
and specifically Q.V.C. and H.S.N.
- - LBG is responsible for all manufacturing, packaging and marketing
costs associated with their efforts.
- - LBG agrees that all samples will be submitted to BNC to assure that
product quality is maintained. Written approval will be provided by
BNC and shall not be unreasonably withheld.
- - LBG agrees to sell product to BNC at landed cost plus 20%.
Verification of cost will be provided by LBG.
- - LBG agrees to pay BNC 10% of gross collected sales on a quarterly
basis. Gross collected sales being defined as the amount received
from customer invoices, with no deductions for sales, marketing,
administrative, and any other expenses. Payments are to be made
within 30 days of the close of each calendar quarter. BNC will be
provided with a complete statement of sales on a quarterly basis, and
will have the rights at their own expense to audit sales records and
receipts on an annual basis.
- - BNC is responsible for any and all payments to any partners or agents
of BNC who may be involved with the Club Parka.
- - BNC is responsible for any cost associated with maintaining any trade
marks, copyrights or patents.
<PAGE> 2
- - The term of this agreement is five years provided the conditions set
forth in this agreement are met and the following minimum quantities
of product sales are maintained:
1997 - 50,000
1998 - 100,000
1999 - 100,000
2000 - 100,000
2001 - 100,000
/s/ Bill Coward 9-3-96 /s/ Greg Solomon 9-5-96
- -------------------------------- ----------------------------------------
Bill Coward Date Greg Solomon Level Best Golf Date
/s/ Nikki Coward 9-3-96
- --------------------------------
Nikki Coward Date
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LEVEL BEST GOLF, INC. FOR THE YEAR ENDED SEPTEMER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 46,923
<SECURITIES> 0
<RECEIVABLES> 12,138
<ALLOWANCES> 0
<INVENTORY> 156,356
<CURRENT-ASSETS> 225,417
<PP&E> 66,008
<DEPRECIATION> 9,953
<TOTAL-ASSETS> 454,515
<CURRENT-LIABILITIES> 1,229,460
<BONDS> 47,380
0
0
<COMMON> 3,051
<OTHER-SE> (825,376)
<TOTAL-LIABILITY-AND-EQUITY> 454,515
<SALES> 495,681
<TOTAL-REVENUES> 495,681
<CGS> 198,396
<TOTAL-COSTS> 1,399,901
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,579
<INCOME-PRETAX> (1,145,195)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,145,195)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,145,195)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> 0
</TABLE>
