UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM__________ TO__________
COMMISSION FILE NUMBER 333-43457
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CUIDAO HOLDING CORP.
(Exact name of small business issuer as specified in its charter)
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Florida 65-0639616
(State or other jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or organization)
2951 Simms Street, Hollywood, Florida 33020-1510
(Address of principal executive offices)
Issuer's telephone number, including area code: (954) 924-0047
Securities Registered under Section 12(b) of the Exchange Act: None
Securities Registered under Section 12(g) of the Exchange Act: None
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 no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is 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]
Issuer's revenues for its 1998 fiscal year were $68,387.
The aggregate market value, at April 12, 1999, of the voting common
equity held by non-affiliates of the registrant was $5,489,225.
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
At April 12, 1999 , the registrant had outstanding 2,356,175 shares of
common stock, par value $0.0001, which is the registrant's only class of common
stock.
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PART I
Item 1. Description of Business.
General
Cuidao Holding Corp. (the "Company") was incorporated in Florida on
February 12, 1996. The Company is a development stage corporation which was
formed to participate in specific niche segments of the United States alcoholic
beverage market by acting as an importer and supplier of a variety of beers,
wines and spirits.
Industry
The alcoholic beverage industry in the United States consists of
suppliers, wholesalers and retailers. Over the past five years there has been
increasing consolidation at the supplier, wholesaler and, in certain markets,
retailer tiers of the alcoholic beverage industry. During the 1990s, the overall
per capita consumption of alcoholic beverage products in the United States
declined slightly; however, consumption of table wine, in particular varietal
table wine, and imported beer has increased during the period.
The following table sets forth the industry unit volume for shipments
of alcoholic beverage products in the three product lines in which the Company
intends to participate in the United States. Data shown is for the five years
ended December 31, 1997:
Product 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
Wine(1)(2) 213.7 208.9 197.5 193.0 188.6
Imported
Beer(3) 194.9 171.8 156.0 144.5 127.4
Distilled
Spirits(2) 138.7 138.8 137.3 140.0 144.2
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(1) Includes domestic and imported table, sparkling and dessert wine, wine
coolers and vermouth.
(2) Units are in millions of 9-liter case equivalents (2.378 gallons per
case).
(3) Units are in millions of 2.25 gallon cases.
Wine. The United States wine industry consists of the domestic and
foreign (most notably French and Italian) production of three basic wine groups.
These groups are table wines (wines consumed with a meal), dessert wines
(usually sweet wines consumed after a meal) and sparkling wines (champagnes).
From 1993 to 1997, shipments of wine in the United States increased at an
average compound annual growth rate of 3%. In 1997, wine shipments increased by
2% when compared to 1996, led by increased shipments of table wine. Table wine
accounted for approximately 88% of the total United States wine market in 1997.
The Company believes that Americans now consume more table wine for a number of
reasons
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including favorable news about the health benefits of red wine, favorable United
States dietary guidelines, new packaging regulations and a strong economy.
Beer. Beer has the largest share of the United States alcoholic
beverage market with a total of 179,600,000 31-gallon barrels being sold in the
United States in 1998. Imported beer sales were up 15.1% in 1998, to 16,316,000
31-gallon barrels. This rise in imported beer sales follows a 14.1% increase in
1997 and a 10.3% climb in 1996.
Spirits. Although shipments of spirits in the United States declined at
an average compound annual growth rate of 1% from 1993 to 1997, certain types of
spirits, such as vodka, rum, tequila, brandy and prepared cocktails have
increased. In 1997, shipments of spirits declined by 0.5% from 1996. The Company
believes shipments of certain types of spirits may have been negatively affected
by concerns in the United States about drinking and driving and a shift in
consumer preference toward lower alcohol or lighter tasting products like
imported beer and varietal table wines.
Business Strategy
The Company's strategy is to become a leading importer, developer,
manager and distributor of a portfolio of brands of beer, wines and spirits
which serve special niche alcoholic beverage markets. Key elements of the
Company's strategy include making selective product acquisitions in the
alcoholic beverage industry to expand its product portfolio; improving market
position and capitalizing on growth trends within the industry; improving
operating efficiencies through reduced product and organizational costs;
capitalizing and improving on strong alliance and wholesaler relationships;
developing brand identification for its portfolio of products; and expanding
distribution into new markets and increasing penetration of existing markets.
Product Portfolio
The Company's current product portfolio encompasses three principal
product lines: imported beer, wine and spirits.
Imported Beer. The Company's imported beer products currently consist of three
crafted beers brewed for the Company by the Tsingtao Brewery No. 3 in the
People's Republic of China. The three beer products are a draft, light and amber
beer which are bottled and sold under the Company's own "Red Dragon" label.
The Tsingtao Brewery No. 3 is located at the foot of the Tin Zhu
Mountains in Shangdong Province. In producing its beer products, the brewery
utilizes a unique patented process which is designed to eliminate all impurities
from the water used in the brewing process, thus creating a beer which taste
pure and is clear. The brewing process utilized by the Tsingtao Brewery No. 3
has earned the brewery a number of national quality awards in China such as the
Medal of Most Popular with Consumers, the Medal of Beer
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Trusted by Consumers (issued in the First Light Industry Fair), the title of
Qingdao High Quality Product, and the title of National Ten Best Stars.
The owner and operator of Tsingtao Brewery No. 3 is Tsingtao, China's
most famous beer producer. Tsingtao's regular beer product, "Tsingtao Beer", is
the number one Chinese Beer imported in the United States and ranks among the
top 25 imported beers (out of over 600 brands) in the United States.
Wine. The Company's wine portfolio consist of a diverse line of popular
premium and super premium varietal wines produced in the Bordeaux region of
France. Presently, the Company's portfolio of wines are procured from four
different wine producers and bear the following labels: Buzet Renaissance, Buzet
Excellance, Buzet Instant Nature, Les Chais Du Prevot Entre Duex Mers, Les Chais
Du Prevot Bordeaux Blanc, Les Chais Du Prevot Bordeaux Rouge, Les Chais Du
Prevot Bordeaux Superieur, Cave du Vignoble Gursonnais Bergerac, Cave du
Vignoble Gursonnais Cotes de Bergerac and Cave du Vignoble Moelleux and Godet
Freres.
The Company sources its wine products through a network of producers
and negotiants. Through its active role in the sourcing decision, the Company
makes its own determination as to the quality and price characteristics of the
wines that the Company adds to its product portfolio, and thereby is assured of
its ability to offer wines of quality and value.
Spirits. During 1998, the Company, due to financial
difficulties experienced by one of its producers, eliminated the La
Belle Sandrine product from its spirits portfolio. Currently, the
Company's spirits portfolio consist of Godet Freres High Mountain
Oolong Tea Liquor, Godet Freres Jules Domet Grand Orange, F.X. De
Beukelaer N.V. Liquer, F.X. De Beukelaer Vodka and F.X. De
Beukelaer Gin.
Marketing and Distribution
Presently, the primary goal of the Company's marketing strategy is to
develop a broad regional distribution network and to develop brand awareness for
its products.
The Company expects to sell its products to independent beverage
distributors and wholesalers for resale to retailers who sell alcoholic
beverages to the consumer. Currently, the Company has contractual relations with
seven independent wholesale distributors covering four states and 10 Caribbean
Islands. Independent wholesale distributors (all of whom may carry other
beverage products that compete with the Company's products) are formally
appointed by the Company in a variety of ways throughout the states in which the
Company does business. There are variations in appointment procedures which are
directly attributable to state alcoholic beverage laws mandating territorial
appointment (some exclusive and some non-exclusive), restricting in various ways
the Company's ability to terminate or not renew the services of wholesale
distributors and providing varying periods and methods of resolving contractual
disputes. Generally, these state laws vary from a requirement that good cause be
shown for the
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action taken to a requirement that compensation be paid to the terminated
distributor for the fair market value of the lost business.
In each of its targeted markets, the Company attempts to select its
distributors based on a number of factors including: (i) market strength
measured in terms of financial resources and number and size of accounts served,
(ii) commitment to expend resources to educate consumers and retailers about the
quality and tastes of the Company's beer, wine and spirits products, (iii)
reputation for customer service, including the ability to frequently service
retail accounts and to merchandise the Company's products aggressively and (iv)
commitment to community involvement.
The Company's marketing and sales program calls for the Company to
pursue promotional strategies that are designed to create strong brand awareness
built on quality products, service to distributors and product imaging. The
Company believes that grass root promotion, word-of-mouth reputation and an
identifiable and favorable price to quality value quotient are the principal
elements of influencing consumer product selection. As a result, the Company
anticipates devoting considerable effort, through tastings and distributor
visits, to educating distributors and consumers as to the distinctive qualities
of its products. The Company will participate in localized promotions designed
to enhance the reputation of the Company and its products. The Company's sales
and marketing staff will focus principally on distributor training and
assistance, local promotions, and programs for on-premises consumer and retailer
education. To build brand recognition in its target markets, the Company
anticipates sponsoring or participating in cultural and community events, music
and other entertainment performances, craft and imported beer festivals and
cuisine events, and sporting events.
The Company believes that an important function of its sales and
marketing staff will be to elevate distributor and retailer awareness of the
distinctive qualities of the Company's beer, wine and spirits products. This
will be accomplished primarily through direct contact with restaurants, pubs,
taverns and grocery chains, and by supplying distributors with distinctive
point-of-sale materials, including neon signs, posters, table tents, coasters,
calendars, glassware and promotional flyers. The Company's sales staff will meet
frequently with distributor sales representatives to jointly visit retail
accounts to educate retailers about the quality of the Company's products. This,
in turn, allows retailers to assist in educating consumers.
The Company will use distinctive graphics in its packaging and
marketing materials designed to set the Company's products apart and promote
strong brand recognition. To differentiate its beer products, the Company plans
to sell and distribute a line of T- Shirts, sweatshirts, jackets, hats and
similar products emblazoned with the Company's Red Dragon logo and graphics.
The Company will also utilize direct mail, distributing a full color
merchandise catalogue to the Company's distributors and retailers.
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Competition
The Company competes in niche segments of the United States alcoholic
beverage industry. The Company believes that presently its beer products compete
with imported Asian beers, its wine products compete with domestic and imported
wines that generally sell in the range of $5.00 to $8.00 per 750 ml bottle, and
its spirits products compete with a wide range of other spirits products such as
vodka, gin and prepared cocktails. The principal competitive factors affecting
the market for the Company's products include product quality and taste,
packaging, price, brand recognition and distribution capabilities. The Company
believes that its products will compete favorably overall with respect to these
factors. However, absolutely no assurance can be given that the Company or its
products will be able to compete successfully against current and future
competitors based on these and other factors.
The Company competes with a variety of importers and suppliers of
alcoholic beverage products, many of whom have significantly greater financial,
management, administrative, distribution and marketing resources and a higher
level of brand recognition than the Company. With respect to its Red Dragon
brand, the Company anticipates competition from Sapporo USA, Inc. and Kirin
Brewery of America, major importers and distributors of alcoholic beverage
products, and the importers and distributors of such Asian beer brands as
Sapporo Draft and Kirin Lager and Kirin Light. With respect to its wine and
spirits products, the Company expects to compete with major importers,
distributors and suppliers of domestic and foreign wines such as Allied Domecq
Spirits and Wine and Canandaigua Brands, Inc. and Brown-Forman Corporation.
The Company anticipates increased competition in all of the product
markets that it serves. Increased competition could result in price reductions,
reduced margins and loss of market share, all of which could have a material
adverse effect on the Company.
Government Regulation
The alcoholic beverage industry is highly regulated by federal, state
and local laws and regulations. Extensive and complex regulation at the federal
and state levels has resulted in what is known as the "three-tier licensing
system". At the first tier are manufacturers and importers who are licensed to
sell to the second tier, wholesalers. Wholesalers in turn supply the third tier,
retailers, who ultimately sell to the public. Each tier is subject to various
restrictions on its activities. The Company currently is in the first tier, with
plans to enter the second tier as soon as reasonably practical.
In addition to the foregoing, federal and state laws and regulations
govern trade and pricing practices, permitted and required labeling,
advertising, promotion and marketing practices, relationships with distributors
and related matters. For example, federal and state regulators require warning
labels and signage on the Company's products.
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The Company has obtained all regulatory permits and licenses necessary
to operate its business in the states where the Company's products are to be
distributed. Failure on the part of the Company to comply with federal, state or
local regulations could result in the loss or revocation or suspension of the
Company's licenses, permits or approvals and accordingly could have a material
adverse effect on the Company's business. The Company does not expect compliance
with such laws and regulations to materially affect the Company's capital
expenditures, earnings or competitive position.
Trademarks and Distribution Agreements
The Company has applied to the United States Patent and Trademark
Office (the "PTO") to register its Red Dragon mark. On February 9, 1998, the
Company received notification from the PTO that a notice of opposition to the
Company's application for registration of its Red Dragon mark had been filed by
Desnoes & Geddes, Ltd., a Jamaican corporation ("Desnoes & Geddes") which
distributes beer products under the brand names of Dragon Stout and Midnight
Dragon. The Desnoes & Geddes notice of opposition claimed that the Company's Red
Dragon mark is confusingly and deceptively similar to the Dragon Stout and
Midnight Dragon names and therefore the purchasing public is likely to be
confused into wrongly believing that the Company's goods originate with, or are
sponsored by, Desnoes & Geddes.
On June 1, 1998, the Company responded to the Desnoes & Geddes notice
of opposition in a manner designed to cause the PTO to determine that the
Desnoes & Geddes notice of opposition is without merit and that the Company's
Red Dragon mark should be registered. As of the date of this report, no
determinations have been made by the PTO with respect to this matter.
Should the Company be unable to register its Red Dragon mark, then the
Company may be required to obtain some form of license or other proprietary
right of third parties from Desnoes & Geddes in connection with the use of the
Company's Red Dragon mark. No assurance can be given that any licenses or
arrangements required for the use of the Red Dragon mark would be made available
on terms acceptable to the Company, if at all.
The inability of the Company to use its Red Dragon mark may adversely
affect the Company's beer distribution business. Further, the inability of the
Company to use its Red Dragon mark in connection with its beer business may
require the Company to develop and implement alternative trademarks for its beer
business, which may require the Company to incur substantial costs related to
such development and implementation.
The Company believes that an important aspect of its business will
relate to the ongoing development of its own house brands. As such, the Company
expects to pursue registration of additional trademarks whenever possible and to
oppose vigorously any infringement of its marks. As a result of the foregoing,
the Company may in the future receive communications from other parties
asserting that the Company is infringing certain trademark rights of others. No
assurance can be given that any such claims will not result in protracted and
costly litigation and that damages for
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infringement will not be assessed. Further, there can be no assurance that any
of the Company's trademarks will not be infringed upon or designed around by
others, or that the Company can adequately prosecute or defend any
infringements.
In addition to products that may be sold under trademarks owned by the
Company, the Company also imports and distributes alcoholic beverage products
under exclusive distribution agreements with suppliers of such products.
Significant agreements currently include (1) a three year import and
distribution agreement with Cave du Vignoble Gursonnais appointing the Company
the exclusive distributor in North America and the Caribbean Islands of all wine
products produced by Cave du Vignoble Gursonnais (which agreement expires in
1999 and automatically renews for additional terms of 10 years each, unless
either party gives the other sufficient written notice of non-renewal); (2) a
three year import and distribution agreement with Les Chais du Prevot appointing
the Company the exclusive distributor in North America and the Caribbean Islands
of all wine products produced by Les Chais du Prevot (which agreement expires in
1999 and automatically renews for additional terms of three years each, unless
either party gives the other sufficient written notice of non-renewal); (3) a 10
year import and distribution agreement with Vignerons De Buzet appointing the
Company the exclusive distributor in the United States (excluding the State of
New York) and the Caribbean Islands of all wine products produced by Vignerons
De Buzet (which agreement expires in 2007 and automatically renews for
additional terms of five years each, unless either party gives the other
sufficient written notice of non-renewal); and (4) a five year import and
distribution agreement with Godet Freres appointing the Company the exclusive
distributor in North America and the Caribbean Islands of all champagne products
produced by Godet Freres (which agreement expires in 2002 and automatically
renews for additional terms of five years each, unless either party gives the
other sufficient written notice of non-renewal).
Prior to their expiration, the foregoing referenced agreements may be
converted into non-exclusive agreements if the Company fails to meet certain
performance criteria. The Company believes that there is a substantial
likelihood that it will fail to meet the performance criteria established in its
agreements with Cave du Vignoble, Les Chais du Prevot and Godet Freres, and that
such agreements will convert to non-exclusive agreements. The Company believes
that given the current development-stage nature of its business, the conversion
of the foregoing referenced agreements into non-exclusive agreements will not
have a materially adverse effect on the Company's business and its prospects.
Employees
As of December 31, 1998, the Company employed three persons other than
its executive officers. One of these three persons is Robert K. Walker, whom the
Company considers to be a key employee.
Robert K. Walker has been General Manager of the Company since
its inception and served as the Company's President from the
Company's inception to March 1997. From December 1991 to January
1996, Mr. Walker was President of Leasing Associates, a Hollywood,
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Florida based company engaged in store site development for Food Lion, Inc.
Also, from 1993 through 1995, Mr. Walker served as President of Never Burn,
Inc., a Hollywood, Florida based suncare products distributor. Mr. Walker holds
a BA degree from Virginia Wesleyan College.
Item 2. Description of Property.
Prior to January 1999, the Company's corporate offices were located in
a 925 square foot facility leased by the Company in Ft. Lauderdale, Florida at a
monthly rental rate of $775.
In January 1999, the Company acquired an approximate 9,600 square foot
office/warehouse facility in an area of Hollywood, Florida known as the South
Florida Industrial Park. The acquired facility is approximately 25 years old and
is considered to be in excellent condition. The facility is adequately covered
by insurance.
The Company acquired the facility from Sebastiano and Nunzia Salemi, a
husband and wife ("Sellers") for a total purchase price of $575,000. For
purposes of financing the purchase of the facility, the Company entered into two
separate promissory notes. The first promissory note was entered into by and
between the Company and Em-Star Mortgage Co., Coral Springs, Florida, in the
principal amount of $350,000 (the "First Note"). The second promissory note was
entered into by and between the Company and the Sellers in the principal amount
of $130,000 (the "Second Note").
The First Note bears interest at a rate of 12.5% per annum for three
years. The First Note provides for interest only monthly payments of $3,645.83,
with the balance of $353,645.84 (assuming no prepayments) due and payable on
February 1, 2002. The First Note is secured by a first mortgage and security
agreement against the facility and in favor of Em-Star Mortgage Co.
The Second Note bears interest at a rate of 12% per annum for two
years. The Second Note provides for principal and interest monthly payments of
$1,300 per month, with all principal and interest due and payable on January 22,
2001. The Second Note is secured by a second mortgage against the facility and
in favor of the Sellers.
Approximately 4,800 square feet of the facility is leased to Laker
Airways, Inc., a Delaware corporation ("Laker"). The lease is scheduled to
terminate on January 31, 2000 unless extended pursuant to the terms of the
lease. The monthly rental payable by Laker to the Company under the lease is
$2,700.
Item 3. Legal Proceedings.
No legal proceedings to which the Company is a party were pending
during the reporting period.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's common stock is traded on the NASD OTC Bulletin Board
under the symbol "CDAO". The Company's common stock commenced trading on the OTC
Bulletin Board on March 5, 1999. The high and low per share sales price for the
common stock for the period commencing March 5, 1999 and ending March 31, 1999,
as reported by the OTC Bulletin Board, was $7.00 and $6.41 respectively. The
foregoing referenced high and low price quotations represent prices between
dealers, without retail mark-up, mark-down or commissions and may not
necessarily represent actual transactions.
As of March 31, 1999, there were approximately 105 holders of record of
the Company's common stock.
The holders of the issued and outstanding shares of common stock are
entitled to receive dividends when, as and if declared by the Company's board of
directors out of any funds lawfully available therefore. The Company has never
declared a cash dividend on its common stock. The Board of Directors intends to
retain future earnings to finance the development and expansion of the Company's
business and does not expect to declare any dividends in the foreseeable future.
On December 30, 1997, the Company filed a Registration Statement on
Form SB-2 with the Securities and Exchange Commission to offer up to 260,000
Units to the general public. Each Unit consisted of one share of common stock
and one common stock purchase warrant ("Warrant"). Each Warrant entitles the
holder thereof to purchase one share of common stock at an exercise price of
$8.00, subject to adjustment, at any time over a three year period commencing on
the effective date of the Registration Statement. The Warrants may be redeemed
by the Company at $.05 per Warrant, at any time prior to their expiration on not
less than 30 days' written notice, if the closing bid price of the common stock
equals or exceeds $10.00 per share for 30 consecutive trading days ending within
10 days of the notice of redemption.
On May 1, 1998, the Company's Registration Statement (File No.
33-43457) was declared effective by the Securities and Exchange Commission.
Effective November 5, 1998, the Company completed its public offering of Units.
A total of 96,175 Units were sold at a price of $5.75 per Unit. After payment of
underwriting commissions totalling $7,850 and other expenses of the offering
totalling $28,244, the Company received net proceeds from the offering of
approximately $519,080. Of the $28,244 in offering expenses paid by the Company,
$10,000 was paid to the Law Office of John W. Martin for certain legal services
performed by the Law Office of John W. Martin in connection with the offering of
the Units. John W. Martin, the sole proprietor of the Law Office of John W.
Martin, is a director and principal stockholder of the Company.
The following table sets forth the use and application by the
Company of the net proceeds from the offering of the Units as of
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the period commencing with the effective date of the Company's Registration
Statement and ending on December 31, 1998. Unless otherwise indicated, all
amounts reflect the actual amount (as opposed to reasonable estimates) of the
net proceeds used.
Use/Application Amount Percentage of
of Proceeds Used Proceeds Used
Purchases of Inventory $11,240 2%
Building and Facilities 15,000 3%
Officers Salaries 7,000 1%
Repayment of Indebtedness 43,265 8%
Advertising and Marketing 3,051 *
Legal and Accounting 10,376 2%
Travel 9,862 2%
General & Administrative 24,152 5%
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Total $123,946 23%
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(1) Of the $43,265 of net proceeds used by the Company to repay
certain indebtedness, $30,000 was paid to C. Michael Fisher, the
Company's Chairman of the Board and President.
As of December 31, 1998, the Company used $15,000 of the proceeds from
the offering of the Units towards the purchase of an approximate 9,600 square
foot office/warehouse facility in an area of Hollywood, Florida known as the
South Florida Industrial Park. The Company considers the use of the proceeds
towards the purchase of the office/warehouse facility to be a material, but
necessary, change in the use of proceeds as described in the Company's
prospectus relating to the offer and sale of the Units. The Company believes
that acquisition of the office/warehouse facility will assist the Company in its
stated objectives of developing a distribution network (the Company's ability to
inventory and warehouse its products will allow it to more timely meet the
delivery requirements of its distributors) and realizing certain operating
efficiencies and product cost reductions.
As of December 31, 1998, the Company used $43,265 of the proceeds from
the offering of the Units toward the repayment of certain indebtedness. The
Company considers the use of the proceeds for the repayment of certain
indebtedness to be a material change in the use of proceeds described in the
Company's prospectus relating to the offer and sale of the Units. The
indebtedness repaid by the Company was incurred during the then pending offering
of Units. The funds that were borrowed were used by the Company for general
working capital purposes.
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Item 6. Management's Discussion and Analysis of Financial
Condition and Plan of Operations.
General
The Company was organized in February 1996 under the laws of the State
of Florida. The Company is a development stage enterprise established for the
purpose of importing, developing, managing and distributing a portfolio of
international and regional brands of beer, wine and spirits. The Company was
formed to participate in specific niche segments of the approximate $100 billion
United States alcoholic beverage market by acting as a supplier of a variety of
beers, wines and spirits.
Results of Operations
Since its inception, the Company's principal operating activities have
consisted of developing the Company's business concept and alcoholic beverage
product portfolio, recruiting employees, raising capital and engaging in
marketing activities. As such, the Company has not generated any significant
revenues. For the year ended December 31, 1998, the Company had a loss of
$170,591. Since its inception, the Company has had losses from operations of
$335,581. The Company's losses are attributable to expenditures by the Company
in its development stage, which expenditures include, among other items, legal,
accounting, licensing and permit fees, employee salaries, travel and
entertainment expenses, deposits, office rent and office expenses.
The Company expects to continue to incur losses until such time as it
obtains market acceptance of its initial products at selling prices and volume
which provide adequate gross profit to cover operating costs. The Company
believes that once its concept and alcoholic beverage portfolio are fully
developed, it will generate its revenues from the sale of its alcoholic beverage
products to independent beverage distributors and wholesalers, as well as from
the sale of its alcoholic beverage products directly to restaurants, bars and
specialty stores.
While management of the Company believes that revenues anticipated to
be generated from the sale of its alcoholic beverage products will allow the
Company to operate profitably, there can be no assurance that once the Company
fully develops its business concept and alcoholic beverage product portfolio,
that it will operate in a profitable manner.
Liquidity and Capital Resources
Since its inception, the Company has financed its development
activities through a combination of private transactions involving the issuance
of common stock and preferred stock for cash, and loans from officers and
shareholders of the Company.
In July 1998, the Company obtained a $50,000 revolving line of credit
from a bank. This bank line of credit accrues interest at the rate of 10.50%.
Outstanding borrowings against this line of credit totalled $50,000 as of
December 31, 1998.
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In November 1998, the Company completed its public offering of Units,
each Unit consisting of one share of the Company's common stock and one common
stock purchase warrant. A total of 96,175 Units were sold at a price of $5.75
per Unit. After payment of underwriting commissions and other expenses of the
offering, the Company received proceeds from the offering of approximately
$519,080.
Management currently intends that the proceeds of the offering will
provide liquidity for the following endeavors, which will ultimately utilize the
following amounts of capital:
Increase Product Purchases. Approximately $150,000 will be
used to increase the amount of alcoholic beverage products purchased by the
Company so as to support increased sales activity expected, and to reduce the
cost of products through volume purchasing.
Sales and Marketing Expansion. Approximately $100,000 will be
used to expand the Company's sales force, increase trade show participation,
increase face-to-face sales calls with customers and develop new marketing
materials.
Facilities Expansion. Approximately $100,000 will be used to
provide adequate facilities for the anticipated increase in product inventory
and sales and to provide adequate office and administrative space for increased
staff requirements. The Company believes that the use of the proceeds for the
expansion and/or purchase of Company facilities is a material, but necessary,
change in the planned use of proceeds received by the Company from the offer and
sale of the Units. The Company believes that the expansion and/or purchase of
Company facilities will assist the Company in its stated objectives of
developing a distribution network and realizing certain operating efficiencies
and product cost reductions.
Working Capital. Approximately $169,080 will be used to
provide liquidity for general business contingencies, including the possible
expansion of the Company's alcoholic beverage product line and distribution
channels through the acquisition of other importers and/or distributors of
alcoholic beverage products.
Management believes that the proceeds received from the sale of its
Units as described above will provide the Company with sufficient liquidity to
meet the requirements described above for the balance of the 1998 and 1999 year.
However, absolutely no assurance can be given that the proceeds received by the
Company from the offering of Units will be sufficient to meet the Company's
working capital requirements for the balance of the 1998 and 1999 year.
Plan of Operation
General
During the next 12 months, the Company intends to carry out three
principal objectives:
12
<PAGE>
(1) Aggressively manage, market and advertise its current
portfolio of beers, wines and spirits in specific niche markets of the overall
alcoholic beverage industry;
(2) Build distribution for its portfolio of beers, wines
and spirits; and
(3) Expand its wine and spirits product line.
Marketing of Products
The Company's current portfolio of beers consist of the following line
of beers produced in the People's Republic of China by Tsingtao Brewery No. 3, a
brewery owned and operated by Tsingtao Brewery Co., Ltd.: Red Dragon Draft, Red
Dragon Light and Red Dragon Amber. The Company's marketing strategy for its line
of Chinese beer is to initially introduce its Red Dragon product line to
Asian-theme restaurants (primarily Chinese restaurants), stressing the fact that
the Company's line of Chinese beer products will provide the restauranteur with
a product that he or she currently does not have, which is a diversified (light,
amber, draft) Chinese beer line. Thereafter, the Company will seek to introduce
its Red Dragon beer products to Asian-related specialty markets. Eventually, the
Company plans to introduce its Red Dragon beer brands to retailers who
specialize in marketing and selling imported beers. These vendors will primarily
consist of ale houses and specialty liquor stores that sell a variety of
imported beers.
To market its Red Dragon beer products, the Company has developed and
will continue to institute, a variety of advertising and marketing programs
designed to create consumer awareness for its beer products and to establish
brand identification. The Company plans to conduct on-premise promotions, which
will include the use of posters and wall and daily scheduling calendars which
prominently display the Company's Red Dragon beer products at the site of retail
sale of the Company's beer products. Where legal, the Company will conduct
product tasting seminars with restaurant staff and consumers. As the Company's
Red Dragon products are gradually introduced into the mainstream retail market,
the Company will integrate a give merchandise program with T-Shirts and baseball
caps featuring the Company's Red Dragon logo. The Company's merchandise program
will be specifically designed to develop brand identification.
With its wine and spirits products, the Company's objective is to
successfully introduce profitable lines of imported wines and spirits into the
United States retail market. The Company's marketing and sales strategy with
respect to its wine and spirits products is to provide the off-premise
merchandise market with quality products at a reasonable cost to the retailer
and the consumer.
The Company will distribute its wine and spirits products through
agents that deal directly with high volume off-premise accounts. Although the
Company believes that the high volume off- premise account market does not
engage in substantial advertising
13
<PAGE>
as a form of marketing, it is the Company's plan to participate in at least
three major restaurant/hotel trade shows over the next 12 months for the purpose
of marketing its wine products.
Build Distribution Network
Over the next 12 months, the Company expects to continue to build and
establish a broad regional distribution network for its alcoholic beverage
products. With respect to its Red Dragon beer products, the Company will
continue to establish a distribution network in the states of California,
Illinois, New York, Virginia, Florida, Maryland, Georgia and Colorado. These are
the states that the Company believes will account for the greatest percentage of
its Red Dragon beer sales in the near future.
With respect to its wine and spirits products, the Company continues to
enter into contractual relations with regional distributors along the East
Coast.
In each of its targeted markets, the Company will continue to select
its distributors based primarily on a distributors market strength measured in
terms of financial resources and number and size of accounts served, commitment
to expend resources to educate consumers and retailers about the quality and
tastes of the Company's beer, wine and spirits products, reputation for customer
service, including the ability to frequently service retail accounts and to
merchandise the Company's products aggressively and commitment to community
involvement.
Expand Wine and Spirits Product Portfolio
During the next 12 months, the Company will attempt to expand the
number of wine and spirits products under its management. The Company expects to
continue to source its wine and spirits products through a network of producers
and negotiants throughout Europe.
Factors That May Affect Future Results
This report contains certain forward-looking statements that involve
risks and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The Company's actual results could differ
materially from those projected in the forward-looking statements as a result of
certain factors, including but not limited to those set forth below, other
one-time events and other important factors disclosed previously and from time
to time in the Company's other filings with the Securities and Exchange
Commission.
Government Regulation. The federal government and individual states
impose excise taxes on alcoholic beverage products in varying amounts which are
subject to change. Increases in excise taxes on alcoholic beverage products, if
enacted, could materially and adversely affect the Company's financial condition
or results of operations. In addition, the alcoholic beverage industry is
subject to extensive regulation by state and federal agencies. The federal
Bureau of Alcohol, Tobacco and Firearms and the various state liquor authorities
regulate such matters as licensing requirements, trade and pricing practices,
permitted and required
14
<PAGE>
labeling, advertising and relations with wholesalers and retailers. New or
revised regulations or increased licensing fees and requirements could have a
material adverse effect on the Company's financial condition or results of
operations.
Limited Operating History; Management of Growth. The Company is a
development stage company with essentially no operating history. The Company has
had no significant product sales or operating revenues, has incurred cumulative
losses from its inception and as of December 31, 1998 had an accumulated deficit
of $335,581. Further, the Company has only limited management, operational and
financial resources to accommodate any growth, should it occur. The Company's
ability to manage growth effectively will require it to implement and improve
its operational, financial and management information systems, procedures and
controls on a timely basis and to expand, train, motivate and manage its work
force. There can be no assurance that the Company's personnel, systems,
procedures and controls will be adequate to support the Company's existing and
future operations. Any failure to implement and improve the Company's
operational, financial and management systems or to expand, train, motivate or
manage employees could have a material adverse effect on the Company's business,
operating results and financial condition.
Dependence on Independent Distributors and Wholesalers. The Company
expects to sell most of its alcoholic beverage products to unrelated
distributors and wholesalers for resale to restaurants, bars and retail outlets.
Accordingly, the Company is dependent upon these distributors and wholesalers to
sell the Company's products and to assist the Company in promoting market
acceptance of, and creating demand for, the Company's products. There can be no
assurance that the Company's distributors will devote the resources necessary to
provide effective sales and promotion support to the Company. In addition, there
is always a risk that the Company's distributors will give higher priority to
the products of other beverage companies, including products directly
competitive with the Company's products, thus reducing their efforts to sell the
Company's products. Further, if any of the Company's distributors were to
experience financial difficulties, or otherwise become unable or unwilling to
promote or sell the Company's products, the Company's results of operations
would be adversely affected.
Competition. The Company is in a highly competitive industry. The
Company encounters and is likely to continue to encounter substantial
competition from a number of competitors some of which possess greater resources
than the Company. The principal competitive factors affecting the market for the
Company's alcoholic beverage products include product quality and taste,
packaging, brand recognition, price and distribution capabilities. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors based on these and other factors. The Company
competes with a variety of domestic and international suppliers of alcoholic
beverage products, many of whom have substantially greater financial,
distribution and marketing resources and have achieved a higher level of brand
recognition than the Company. The Company anticipates increased competition from
major importers, distributors and suppliers of
15
<PAGE>
alcoholic beverages such as Brown-Forman Company, Canandaigua Brands, Inc.,
Kobrand Corporation and Allied Domecq Spirits and Wines. These large importers,
distributors and suppliers dominate the overall importation and/or distribution
of alcoholic beverages in the United States and the Company expects that certain
of these companies, with their superior financial resources and established
distribution networks, will seek further participation in niche areas of the
alcoholic beverage industry through the increased acquisition of alcoholic
beverage products to distribute, or the formation of distribution alliances with
the producers of alcoholic beverage products which serve specific niche areas of
the alcoholic beverage industry. Increased competition could result in price
reductions, reduced profit margins and loss of market share, all of which would
have a material adverse effect on the Company's business, financial condition
and results of operations.
Uncertainty of Demand. Although the Company believes that a demand
exists for its portfolio of alcoholic beverage products, the Company has not yet
marketed its alcoholic beverage products to any significant extent. As such, the
demand for the Company's products are not yet known. Although management has
conducted what it believes is market research into the alcoholic beverage
industry, absolutely no assurance can be given that sufficient demand for the
Company's products exist such that the Company will be successful in its
business endeavor.
Dependence on Wine and Spirits Selection and Sourcing. To a significant
extent, the Company's success depends upon its wine and spirits selection and
sourcing capabilities. There can be no assurance that the Company will be able
to consistently develop a selection of wines and spirits that will enable the
Company to maintain or expand its customer base. In the event that a wine or
spirit proves to be unpopular for any reason, or the Company orders an excessive
quantity of one or more wines, it may encounter liquidity problems under these
circumstances which may have a material adverse effect on the Company and its
results of operations.
Dependence on Consumer Acceptance; Strength of Economy. The success of
the Company depends upon a number of factors related to the level of consumer
spending, including the general state of the economy, federal and state tax
rates and consumer confidence. Changes in consumer spending in both the national
and regional economies can affect both the quantity and the price of alcoholic
beverages that consumers are willing to purchase. No prediction can be made
about the stability of the economy. Any prolonged downturn in the economy,
whether real or perceived, could adversely affect the Company.
Capital Requirements. The Company anticipates that, if it fails to
achieve significant revenues or profitable operations from its initial marketing
efforts, it will require additional funding for further marketing and product
development. There can be no assurance that additional capital from any source
will be available when needed by the Company, or that such capital will be
available
16
<PAGE>
on terms acceptable to the Company. If adequate funds are not available, the
Company may be required to curtail significantly its business activities or
cease operations entirely.
Foreign Production. Currently, all of the alcoholic beverage products
to be managed, marketed and distributed by the Company are produced outside of
the United States, and include production in China. The foreign production of
goods is subject to a number of risks, including transportation delays and
interruptions, political and economic disruptions, the imposition of tariffs and
import and export controls and changes in governmental policies. China currently
enjoys most favored nation trading status with the United States. While the
Company has not to date experienced any material adverse effects due to such
risks, there can be no assurance that such events will not occur in the future
with the result of possible increases in costs and delays of, or interferences
with, product deliveries resulting in losses of revenues and goodwill.
Foreign Currency and Foreign Exchange Regulation. As part of the
Company's ordinary business operations, the Company is, and will be, required to
purchase alcoholic beverage products from certain European and Asian countries.
The Company may be required to accomplish such purchases through the use of
foreign currencies. As a result, fluctuations in exchange rates of the United
States dollar against foreign currencies could adversely affect the Company's
results of operations. The Company may attempt to limit its exposure to the risk
of currency fluctuations by purchasing forward exchange contracts which could
expose the Company to substantial risk of loss. Changes in exchange rates or
currency fluctuations that disfavor the U.S. dollar could have a material
adverse effect on the Company's business and results of operations.
Control by Existing Management. As of March 31, 1999, the officers,
directors and key employees of the Company, including C. Michael Fisher, Robert
K. Walker and John W. Martin, beneficially owned approximately 67% of the
outstanding shares of Common Stock. On all matters, including the election of
directors, Messrs. Fisher, Walker and Martin, voting as a single group, have the
ability to vote approximately 67% of the votes entitled to be cast by holders of
the Company's capital stock. Consequently, the Company is essentially controlled
by Messrs. Fisher, Walker and Martin and they would generally have sufficient
voting power to determine the outcome of any corporate transaction or other
matter submitted to the Company's stockholders for approval.
Year 2000 Issue
The Year 2000 issue is the result of computer logic that was written
using two digits rather than four to define the applicable year. Any computer
logic that processes date-sensitive information may recognize the date using
"00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
Since it is in its development stage, the Company is presently not
materially dependent on information technology systems which could fail to
operate properly in the year 2000 if some or all of the software utilized by
such information technology systems were
17
<PAGE>
not reprogrammed or replaced. As the Company further realizes its plan of
operation and business strategy, it is expected that information technology
systems will become a more important and material aspect of the Company's
operations. In this regard, as the Company adds information technology systems
to its operations, it intends to procure and integrate systems which are Year
2000 compliant.
Notwithstanding the foregoing, the Company believes that its suppliers
may have Year 2000 problems which could affect the Company. The Company intends
to communicate with its suppliers to assess the potential impact on the
Company's planned operations if such suppliers fail to become Year 2000
compliant in a timely manner. It is not possible at present to quantify the cost
to the Company of pursuing compliance by its suppliers, nor the financial effect
of the Year 2000 problem if it is not timely resolved. The Company presently
believes, however, that the cost of mitigating or preventing the adverse effects
of the Year 2000 problem will not have a material adverse effect on the
Company's financial position, liquidity or results from operations.
Item 7. Financial Statements.
The information called for by this item is indexed on page F-1 of this
Report and is contained on the pages following said page F- 1.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
18
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons.
The directors and executive officers of the Company and their ages are
set forth below:
Name Age Position(s) Held
---- --- ----------------
C. Michael Fisher 44 Chairman of the Board,
President, Chief Financial
Officer and Director
David A. Kohl(1) 42 Subsidiary President
Francis J. Hornik, Jr. 57 Director
John W. Martin 40 Director
- ------------
(1) Mr. Kohl is not an executive officer of the Company, but is listed by
reason of his status as President of R&R (Bordeaux) Imports, Inc., a
wholly-owned subsidiary of the Company.
C. Michael Fisher has been Chairman of the Board, President and a
Director of the Company since March 31, 1997. Mr. Fisher became Chief Financial
Officer of the Company on March 30, 1998. Mr. Fisher became Secretary of the
Company on July 27, 1998. Mr. Fisher is also President of Fisher and Associates
Realty and Princessboro Development Co., Inc., which are real estate development
firms located in Virginia Beach, Virginia; positions which he has held since
1980 and 1984 respectively. In his capacity as President of Fisher and
Associates Realty and Princessboro Development Co., Inc., Mr. Fisher has been
responsible for locating sites, obtaining anchor tenants and performing leasing
duties for approximately 15 food and drug retail shopping centers throughout the
Mid-Atlantic region of the United States. Mr. Fisher holds a BA degree from
Virginia Wesleyan College.
David A. Kohl has been the President of R&R (Bordeaux) Import
Co., Inc. since February 1, 1999. Prior to joining R&R (Bordeaux)
Imports, Inc., Mr. Kohl was the General Sales Manager and Wine
Buyer for Vinos Don Pablo Fine Wines Inc., a Bronx, New York-based
wine importer and distributor. While at Vinos Don Pablo Fines
Wines Inc., Mr. Kohl was responsible for establishing the
importation and distribution of selected wines from France and
Spain to retail customers throughout Manhattan and Queens, New
York. Mr. Kohl was also responsible for all cost analysis and
pricing of wines, as well as the handling of all federal and state
regulatory matters relating to labeling. From February 1985 to
November 1997, Mr. Kohl was President of Kohl International Inc.,
a Florida-based importer and distributor of beer, wine, spirits,
and gourmet foods. Mr. Kohl holds a BA degree from Florida
International University.
19
<PAGE>
Francis J. Hornik has been a Director of the Company since April 21,
1997. Since 1980, Mr. Hornik has been the sole proprietor of his own public
accounting firm located in Chesapeake, Virginia.
John W. Martin has been a Director of the Company since July 27, 1998.
From 1988 to 1990, Mr. Martin was an associate attorney with the Chicago-based
law firm of Baker & McKenzie where he specialized in corporate and securities
law. From June 1990 to the present, Mr. Martin has been the sole proprietor of
the Law Office of John W. Martin, specializing in corporate and securities law,
and in international business transactions. Mr. Martin holds a BA degree from
Lake Forest College and a JD degree from the University of California at Davis.
Item 10. Executive Compensation.
The following table provides certain summary information concerning the
compensation paid or accrued by the Company to or on behalf of its Chief
Executive Officer and the other named executive officers of the Company for
services rendered in all capacities to the Company and its subsidiaries for the
years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Compensation
-------------------
Securities All Other
Bonus Other Annual Underlying Comp.
Name and Principal Position Salary ($) Compensation Options(#) ($)
- --------------------------- ------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
C. Michael Fisher $0 $0 $0 $0 $0
Chairman of the
Board and
President
Edward L. Magdycz(1) $ 7,200 $0 $0 $0 $0
Robert K. Walker
General Manager $36,800 $0 $0 $0 $0
</TABLE>
- --------------------
(1) From March 31, 1997 to July 27, 1998, Mr. Magdycz was Secretary of the
Company.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth certain information as of March 31, 1999
regarding ownership of the Company's common stock (i) by each person known by
the Company to be the beneficial owner of more than 5% of the Company's
outstanding common stock, (ii) by each director of the Company, (iii) by certain
related stockholders and (iv) by all executive officers and directors of the
Company as a group. All persons named have sole voting and investment power
20
<PAGE>
with respect to such shares, subject to community property laws, and except as
otherwise noted.
Name and
Address of Percent
Beneficial Number of Beneficially
Owner Shares Owned Owned
----- ------------ -----
C. Michael Fisher(1) 392,800 17%
1717 Jermyn Lane
Virginia Beach, VA 23454
Robert K. Walker (2) 779,200 33%
3835 S.W. 56th Street
Ft. Lauderdale, FL 33312
John W. Martin(3) 400,000 17%
5777 West Century Boulevard
Suite 1540
Los Angeles, California 90045
All officers and directors
as a group (3 persons) 792,800 34%
- --------------------
(1) Includes 148,000 shares held by Euro Imperial Group, Ltd., a
corporation in which Mr. Fisher is the beneficial owner of all of the
shares of common stock. Also includes 220,000 shares held by Paris
International Holding, Ltd., a corporation in which Mr. Fisher is the
beneficial owner of one-half (1/2) of the shares of common stock of
such corporation and 800 shares owned by Katie Fisher and Lauren
Fisher, the children of Mr. Fisher.
(2) Includes 220,000 shares held by Paris International Holding,
Ltd., a corporation in which Mr. Walker is the beneficial
owner of one-half (1/2) of the shares of common stock of such
corporation. Also includes 10,800 shares held by Kristopher
Walker and Kendall Walker, Mr. Walker's minor children. Also
includes 60,000 shares held by Mr. Robert H. Walker, Mr.
Walker's father. Mr. Walker disclaims any beneficial
ownership of all shares held by Mr. Robert H. Walker.
(3) Mr. Martin received such 400,000 shares in consideration for
legal services rendered to the Company, which legal services
included the rendering of general corporate advice, and
preparing various corporate documents and plans, in connection
with the formation and organization of the Company, the
negotiation and preparation of various Company agreements,
including but not limited to the Company's agreements with its
producers and distributors, and the rendering of advice, and
the preparation of documents, in connection with the private
and public offering of the Company's securities in accordance
with applicable federal and state securities laws.
21
<PAGE>
Item 12. Certain Relationships and Related Transactions.
From approximately June 14, 1996 to March 31, 1997, the Company issued
443,600 shares of its common stock to 47 persons for an aggregate cash purchase
price of $110,900. Purchasers of the 443,600 shares included Kristopher Walker,
the minor child of Robert K. Walker, who acquired 800 shares of common stock for
an aggregate purchase price of $200, Katie and Lauren Fisher, the minor children
of C. Michael Fisher, who acquired 800 shares of common stock for an aggregate
purchase price of $200 and Robert H. Walker, the father of Robert K. Walker, who
acquired 60,000 shares of common stock for an aggregate purchase price of
$15,000.
On March 31, 1997, the Company acquired R&R (Bordeaux) Imports, Inc., a
Florida corporation and wholly owned subsidiary of the Company. In the
acquisition of R&R (Bordeaux) Imports, Inc., the Company issued 60,000 shares of
its common stock having an aggregate value of $15,000 to three persons. One of
the recipients of the 60,000 shares was Robert K. Walker, who received 10,000
shares of common stock.
From July 30, 1997 to October 1997, the Company issued 38,000 shares of
its Series A Preferred Stock to five persons for an aggregate purchase price of
$95,000. Purchasers of the 38,000 shares of Series A Preferred Stock included C.
Michael Fisher, who purchased 16,000 shares for an aggregate purchase price of
$40,000 and Euro Imperial Group, Ltd., which purchased 8,000 shares for an
aggregate purchase price of $20,000. On November 5, 1998, each outstanding share
of Series A Preferred Stock was converted into one share of common stock.
On April 29, 1996, the Company issued 400,000 shares of its common
stock to the Law Office of John W. Martin in consideration for legal services
rendered to the Company by the Law Offices of John W. Martin. John W. Martin,
the sole proprietor of the Law Office of John W. Martin is a director of the
Company. The legal services rendered to the Company by the Law Office of John W.
Martin included the rendering of general corporate advice, and preparing various
corporate documents and plans, in connection with the formation and organization
of the Company, the negotiation and preparation of various Company agreements,
including but not limited to the Company's agreements with its producers and
distributors, and the rendering of advice, and the preparation of documents, in
connection with the private and public offering of the Company's securities in
accordance with applicable federal and state securities laws.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits. Listed below are all exhibits filed as part of this
Report. Certain exhibits are incorporated herein by reference to (i) the
Company's Registration Statement on Form SB-2 originally filed on December 30,
1997 (File No. 33-43457), and (ii) documents previously filed by the Company
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended and the Securities Exchange Act of 1934, as amended.
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.0 Amended and Restated Articles of Incorporation
of Cuidao Holding Corp.*
3.1 Bylaws of Cuidao Holding Corp.*
4.0 Specimen Stock Certificate*
10.0 Cuidao Holding Corp. 1999 Equity Incentive Plan
10.1 Cuidao Holding Corp. 1997 Directors' Stock
Option Plan*
10.2 Import and Distribution Agreement by and
between Cuidao Holding Corp. and the People's
Republic of China, Tsingtao Brewery No. 3 Co.,
Ltd.*
10.3 Import and Distribution Agreement by and
between Cuidao Holding Corp. and Cave du
Vignoble Gursonnais*
10.4 Import and Distribution Agreement by and
between Cuidao Holding Corp. and Les Chais du
Prevot*
10.5 Import and Distribution Agreement by and
between Cuidao Holding Corp. and Vignerons De
Buzet*
10.6 Import and Distribution Agreement by and
between Cuidao Holding Corp. and Godet Freres*
10.7 Form of Lock-Up Agreement by and between Cuidao
Holding Corp., West America Securities
Corp. and certain shareholders of Cuidao
Holding Corp.*
10.8 Form of Promotional Share Lock-In Agreement by
and between Cuidao Holding Corp. and
certain shareholders of Cuidao Holding Corp.*
10.9 Promissory Note and Mortgage and Security
Agreement dated January 22, 1999 by and between
Cuidao Holding Corp. and Em-Star Mortgage Co.
10.10 Promissory Note dated January 22, 1999 by
and between Cuidao Holding Corp. and
Sebastiano Salemi and Nunzia Salemi, as
husband and wife.
10.11 Lease Agreement by and between Sebastiano and
Nunzia Salemi and Laker Airways, Inc.
23
<PAGE>
10.12 Assignment of Lease Agreement dated January
22, 1999 by and between Sebastiano Salemi
and Nunzia Salemi, as husband and wife, and
Cuidao Holding Corp.
21.0 Subsidiaries of Cuidao Holding Corp.
27.0 Financial Data Schedule
</TABLE>
- -----------------------
* Filed as an exhibit to the Company's Registration
Statement on Form SB-2 filed on December 30, 1997 (File
No. 33-43457) and incorporated by reference herein.
(b) Reports on Form 8-K. No current reports on Form 8-K were filed by
the Company during the fourth quarter of 1998.
24
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
<S> <C>
Independent Auditor's Report............................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998............................................................................ F-3
Consolidated Statements of Operations for the two years ended December 31, 1997
and 1998 and cumulative totals for development stage operations from
February 12, 1996 (date
of inception) to December 31, 1998.............................................. F-4
Consolidated Statements of Stockholders' Equity for the two years ended December
31, 1997 and 1998 and cumulative totals for development stage
operations from February 12,
1996 (date of inception) to December 31, 1998................................... F-5
Consolidated Statements of Cash Flows for the two years ended December 31, 1997
and 1998 and cumulative totals for development stage operations from
February 12, 1996 (date
of inception) to December 31, 1998.............................................. F-6
Notes to Consolidated Financial Statements............................................... F-7
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Cuidao Holding Corp.
We have audited the accompanying consolidated balance sheets of Cuidao
Holding Corp. and its subsidiaries (a development stage company) as of December
31, 1997 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended, and cumulative
totals for development stage operations from February 12, 1996 (date of
inception) through December 31, 1998. These consolidated financial statements
are the responsibility of 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 accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cuidao
Holding Corp. and subsidiaries (a development stage company) as of December 31,
1997 and 1998, and the results of its operations and its cash flows for the
years then ended and cumulative totals for development stage operations from
February 12, 1996 (date of inception) through December 31, 1998, in conformity
with generally accepted accounting principles.
BAUM & COMPANY, P.A.
March 14, 1999
Coral Springs, Florida
F-2
<PAGE>
CUIDAO HOLDING CORP.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1998
<TABLE>
<CAPTION>
ASSETS
1997 1998
-------- -------
Current Assets
<S> <C> <C>
Cash and Cash Equivalents ......................... $ 5,840 $353,281
Accounts Receivable ............................... 19,633 24,226
Inventory ......................................... 3,220 0
Prepaid Expenses .................................. 1,534 32,444
-------- --------
Total Current Assets ........................... 30,227 409,951
Equipment
(Net of $2,161 and $6,220 of accumulated
depreciation at December 31, 1997
and 1998) ....................................... 10,007 18,782
-------- --------
Other Assets
Goodwill (Net of $3,750 and $8,333 of
accumulated amortization at December 31, 1997
and 1998) ......................................... 11,250 6,667
Organizational Costs
(Net of $432 and $740 of accumulated
amortization at December 31, 1997 and 1998) ..... 1,108 800
Deferred Offering Costs .............................. 35,162 0
Prepayments and Deposits ............................. 1,658 18,157
-------- --------
Total Other Assets ............................. 49,178 25,624
-------- --------
Total Assets ............................. $ 89,412 $454,357
-------- --------
Current Liabilities
Accounts Payable and Accrued Expenses ............. $ 5,377 $ 78,714
Loan Payable ...................................... 2,500 50,070
-------- --------
Total Current Liabilities ...................... 7,877 128,784
-------- --------
Stockholders' Equity
Common Stock, $.0001 par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 2,222,000
at December 31, 1997 and 2,356,175 at
December 31, 1998 ............................... 223 236
Preferred Stock, $.0001 par value:
Authorized shares -- 10,000,000
Issued and outstanding shares -- 38,000
at December 31, 1997 and 0 at
December 31, 1998 ............................... 4 0
Additional Paid-In Capital ........................... 246,299 660,918
Deficit Accumulated during Development Stage ......... (164,991) (335,581)
--------- ---------
Total Stockholders' Equity ..................... 81,535 325,573
--------- ---------
Total Liabilities and Stockholders' Equity . $ 89,412 $ 454,357
--------- ---------
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-3
<PAGE>
CUIDAO HOLDING CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND
CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS
FROM FEBRUARY 12, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Year Year
Ended Ended Development Stage
December 31, December 31, February 12, 1996 to
1997 1998 December 31, 1998
------------ ------------- ---------------------
<S> <C> <C> <C>
Revenues ..................... $ 27,071 $ 68,387 $ 95,458
Cost of Revenues ............. 27,450 40,359 67,809
----------- ----------- -----------
Gross Profit ................. (379) 28,028 27,649
Operating Expenses:
General and Administrative 120,783 197,365 362,349
----------- ----------- -----------
Income (Loss) Before Interest
Income ..................... (121,162) (169,337) (334,700)
Interest Income .............. 180 ( 1,254) ( 881)
----------- ----------- -----------
Net Income (Loss) During
Development Stage .......... $ (120,982) $ (170,591) $ (335,581)
Income (Loss) Per Common
Share ...................... $ (.099) (.076) $ (.137)
----------- ----------- -----------
Weighted Average Common
Shares Outstanding ......... 1,221,520 2,244,363 2,451,755
----------- ----------- -----------
Comprehensive Income Items ... 0 0 0
Net Comprehensive Income ..... $ (120,982) $ (170,591) $ (335,581)
----------- ----------- -----------
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-4
<PAGE>
CUIDAO HOLDING CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND
CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS
From February 12, 1996 (Date of Inception) to December 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
During The
Common Stock Preferred Stock Paid-In Development
# Shares Amount # Shares Amount Capital Stage
<S> <C> <C> <C> <C> <C> <C>
Balance December 31,
1996 ................. 4,154,400 $ 415 $ 78,810 $ (44,009)
Cancellation of original
shares ............... (2,221,600) (221) 221
Additional shares
issued in subscription
offering ............. 229,200 23 38,000 4 152,274
Shares issued for
acquisition of
subsidiary ........... 60,000 6 14,994
Net Loss for the year
ended December 31,
1997 .................. (120,982)
---------- ---------- --------- --------- ---------- ----------
Balance December 31,
1997 .................. 2,222,000 $ 223 38,000 $ 4 $ 246,299 $ (164,991)
Exchange of preferred
stock for common
stock ................. 38,000 4 (38,000) (4) 0
Issuance of common
stock (Net of offering
expenses of $132,706) 96,175 9 0 0 414,619
Net Loss for the year
ended December 31,
1998 .................. (170,590)
---------- ---------- ---------- ---------- ----------- ----------
Balance December 31,
1998 .................. 2,356,175 $ 236 0 $ 0 $ 660,918 $ (335,581)
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-5
<PAGE>
CUIDAO HOLDING CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND
CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS FROM
February 12, 1996 (Date of Inception) to December 31, 1998
<TABLE>
<CAPTION>
Year Ended Year Ended Development Stage
December 31, December 31, February 12, 1996 to
1997 1998 To December 31, 1998
---- ----- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss .............................. $(120,982) $(170,591) $(335,582)
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating
Activities:
Depreciation ..................... 1,914 4,059 6,220
Amortization ..................... 4,043 4,892 9,074
Issuance of Common Stock for
Legal Services ................ 0 0 21,085
(Increase) Decrease in Accounts
Receivable .................... (19,633) (4,593) (24,226)
(Increase) Decrease in Inventory (3,220) 3,220 0
(Increase) Decrease in
Organizational Costs .......... (475) 0 (1,540)
(Increase) Decrease in Deferred
Offering Costs ................ (14,662) 35,162 0
(Increase) Decrease in Prepayments
and Deposits .................. (1,384) (47,409) (50,601)
Increase in Accounts Payable and
Accruals ...................... 4,190 73,337 78,714
--------- --------- ---------
Net Cash Used in Operating
Activities ............... (150,209) (101,923) (296,856)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Equipment .............. (10,444) (12,834) (25,001)
--------- --------- ---------
Net Cash Used in Investing
Activities .................. (10,444) (12,838) (25,001)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in Loans Payable ............. 2,500 47,570 50,070
Proceeds from Issuing Common Stock .... 57,300 414,628 530,068
Proceeds from Issuing Preferred Stock . 95,000 0 95,000
--------- --------- ---------
Net Cash Provided by
Financing Activities ........ 154,800 462,198 675,138
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ........... (5,853) 347,441 353,281
CASH AND CASH EQUIVALENTS --
BEGINNING OF PERIOD ................. 11,693 5,840 0
--------- --------- ---------
CASH AND CASH EQUIVALENTS --
END OF PERIOD ........................ $ 5,840 $ 353,281 $ 353,281
--------- --------- ---------
CASH PAID FOR INTEREST
EXPENSE ............................. $ 2,336 $ 0 $ 2,336
CASH PAID FOR INCOME TAXES .............. 0 0 0
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-6
<PAGE>
CUIDAO HOLDING CORP.
( A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Organization and Operations
Cuidao Holding Corp. (the "Company") was organized under the laws of
the State of Florida on February 12, 1996. On June 27, 1996, the Company formed
Cuidao (USA) Import Co., Inc., a wholly owned subsidiary incorporated under the
laws of the State of Florida.
On March 31, 1997, the Company acquired all of the issued and
outstanding common stock of R & R (Bordeaux) Imports, Inc., a Florida
corporation, making R& R (Bordeaux) Imports, Inc. a wholly owned subsidiary of
the Company. At the time of the acquisition, Robert K. Walker, a major
beneficial owner of Cuidao Holding Corp, was also a beneficial owner of R & R
(Bordeaux) Imports, Inc. The purchase method of accounting was used for the
acquisition of R&R (Bordeaux) Imports, Inc. In acquiring R&R (Bordeaux) Imports,
Inc., the Company issued 60,000 shares of its common stock, which common stock
was valued at $15,000. The results of operations of R&R (Bordeaux) Imports, Inc.
as presented in these financial statements are for the period March 31, 1997
(date of inception) to December 31, 1998. The acquisition of R&R (Bordeaux)
Imports, Inc. by the Company resulted in acquired goodwill valued at $15,000.
The goodwill is being amortized by the Company over a three year life using the
straight-line method.
The Company is a development stage company which imports, develops,
manages and distributes a portfolio of international and regional brands of
beer, wine and spirits.
Note 2 -- Significant Accounting Policies
Basis of Accounting
The Company's policy is to use the accrual method of accounting and to
prepare and present financial statements which conform to generally accepted
accounting principles.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
F-7
<PAGE>
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and any
highly liquid investments with a maturity of three months or less at the time of
purchase.
The Company maintains cash and cash equivalent balances at a financial
institution which is insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1997 and 1998 there is no concentration of credit risk
from uninsured bank balances.
Equipment
Equipment is stated at cost and depreciated over its estimated
allowable useful life (7 years), using the double declining balance method.
Expenditures for major renewals and betterments that extend the useful lives of
fixed assets are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred.
Organizational Costs
The Company has incurred certain federal and state filing and
registration fees, legal and promotional fees in its formation and
capitalization, which will benefit the Company in future periods. These costs
are being amortized over a five year life using the straight-line method.
Deferred Offering Costs
Deferred offering costs include the costs associated with the initial
public offering (effective in November 1998). The costs related to the initial
public offering will be capitalized and netted against the amount received from
the public offering.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued
Statement on Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Under SFAS No. 109, deferred assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective basis.
Deferred assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Net Loss per Common Share
Net loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period.
F-8
<PAGE>
Note 3 -- Equipment
Equipment at December 31, 1997 and 1998 are summarized as follows:
1997 1998
-------- --------
Vehicle ........................................ $ 0 $12,834
Machinery and Equipment ........................ $12,168 12,168
Less: Accumulated Depreciation ............... 2,161 6,220
------- -------
Net Equipment ................................ $10,007 $18,782
======= =======
Depreciation expense amounted to $1,914 and $4,059, respectively, for
the years ended December 31, 1997 and 1998.
Note 4 -- Commitments
Operating Lease
Effective July 1, 1996, the Company has assumed all obligations under a
14 month lease ending September, 1997.
On September 30, 1997 the Company extended the lease for an additional
two year period. The lease calls for monthly rent payments of $740.
Rent expense amounted to $8,263 and $9,863, respectively, for the years
ended December 31, 1997 and 1998.
Remaining future minimum lease payments under this operating lease, net
of deposit and prepayment, was $15,540 for the year ended December 31, 1997. The
operating lease was terminated in February 1999, and there are no remaining
lease payments due.
Bank Line of Credit
In July 1998, the Company obtained a $50,000 revolving line of credit
from a bank. This bank line of credit accrues interest at 10.50% per annum. At
December 31, 1998, $50,000 was borrowed under this facility.
Note 5 -- Stock Options and Incentive Plans
In October 1997, the Board of Directors and stockholders of the Company
approved two stock option plans; an incentive stock option plan ("Incentive
Plan") and a directors' stock option plan ("Directors' Plan"). The Incentive
Plan covers employees of the Company (including officers and employee
directors), and the Directors' Plan covers nonemployee directors of the Company.
A total of 750,000 shares of common stock of the Company are reserved
for issuance under the Incentive Plan. The Incentive Plan provides for the
granting of "statutory incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, and for the granting of employees and
consultants of nonstatutory stock options.
F-9
<PAGE>
A total of 250,000 shares of common stock are reserved for issuance
under the Directors' Plan. The Directors' Plan provides only for the grant of
nonstatutory stock options.
At December 31, 1998, there were no stock options outstanding under
either the Incentive Plan or the Directors' Plan.
In February 1999, the Company amended the 1997 Incentive Stock Option
Plan, with the Equity Incentive Plan. This revision provides for, at the
discretion of the Board of Directors, stock options, stock appreciation rights,
restricted stock awards, performance shares and performance units to directors,
officers, key employees and consultants of the Company. An aggregate of
3,750,000 shares of common stock has been reserved for issuance under these
plans.
Note 6 -- Stockholders' Equity
On December 30, 997, the Company filed a Registration Statement on Form
SB-2 with the Securities and Exchange Commission to offer up to 260,000 Units to
the general public. Each Unit consisted of one share of the Company's common
stock and one common stock purchase warrant ("Warrant"). Each Warrant entitles
the holder thereof to purchase one share of common stock at an exercise price of
$8.00, subject to adjustment, at any time over a three year period commencing on
the effective date of the Registration Statement. The Warrants may be redeemed
by the Company at $.05 per Warrant, at any time prior to their expiration on not
less than 30 days' written notice, if the closing bid price of the common stock
equals or exceeds $10.00 per share for 30 consecutive trading days ending within
10 days of the notice of redemption.
On May 1, 1998, the Company's Registration Statement was declared
effective by the Securities and Exchange Commission, and in November 1998, the
Company completed its public offering of Units. A total of 96,175 Units were
sold at a price of $5.75 per Unit. After payment of commissions and other
expenses of the offering, the Company received net proceeds from the offering of
approximately $519,000.
As part of the offering of the Units, the 38,000 shares of the
Company's outstanding preferred stock was converted into 38,000 shares of common
stock.
Note 7 -- Concentration of Risk
The Company's Red Dragon beer product is brewed and bottled by Tsingtao
Brewery No. 3, located in the People's Republic of China. The foreign production
of goods is subject to a number of risks, including transportation delays and
interruptions, political and economic disruptions, the imposition of tariffs,
quotas and other import or export controls, and changes in governmental
policies. China currently enjoys most favored nation trading status with the
United States. No assurance can be given that China will continue to enjoy most
favored nation status in the future. The Company believes that if Tsingtao
Brewery No. 3 was no longer able
F-10
<PAGE>
to brew and bottle the Company's beer products, it would be able to obtain its
beer products from other producers located in the People's Republic of China.
The Company believes this would not have a near-term severe impact on its
financial position or results of operations.
Note 8 -- Subsequent Events
In January 1999, the Company purchased an office/warehouse facility for
$575,000 pursuant to mortgage and note financing of $465,000.
F-11
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CUIDAO HOLDING CORP., a Florida
corporation
By: /s/ C. Michael Fisher
--------------------------------------
C. Michael Fisher, Chairman of
the Board, President and Chief
Financial Officer and Chief
Accounting Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date: April 12, 1999 /s/ C. Michael Fisher
-----------------------------------
C. Michael Fisher, Director
Date: April 12, 1999 /s/ Francis J. Hornik, Jr.
----------------------------------
Francis J. Hornik, Jr., Director
Date: April 12, 1999 /s/ John W. Martin
-----------------------------------
John W. Martin, Director
CUIDAO HOLDING CORP.
1999 EQUITY INCENTIVE PLAN
Originally adopted by the Board of Directors in October 1997 as
the Cuidao Holding Corp. 1997 Incentive Stock Option Plan and
Amended as the Cuidao Holding Corp. 1999 Equity Incentive Plan
by the Board of Directors in February 1999
SECTION 1
INTRODUCTION
1.1 Establishment. Cuidao Holding Corp., a Florida corporation
(hereinafter referred to as the "Company"), hereby establishes the Cuidao
Holding Corp. 1999 Equity Incentive Plan (the "Plan") for certain key Employees
and Consultants of the
Company.
1.2 Purposes. The purposes of the Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to Employees and Consultants of the Company and its
Subsidiaries and to create in such Employees and Consultants a more direct
interest in the future success of the operations of the Company by relating
incentive compensation to increases in stockholder value, so that the income of
such Employees and Consultants is more closely aligned with the income of the
Company's stockholders. The Plan is also designed to attract Employees and
Consultants and to retain and motivate participating Employees and Consultants
by providing an opportunity for investment in the Company.
SECTION 2
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 3 of the Plan.
(b) "Award" means a grant made under this Plan in the form of
Options, Restricted Stock, Performance Shares, or
Performance Units.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
1
<PAGE>
(e) "Committee" means a Committee appointed by the Board of
Directors in accordance with Section 3 of the Plan.
(f) "Common Stock" or "Stock" means the common stock of
the Company.
(g) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not; provided that the term Consultant shall
not include directors who are not compensated for their services or are paid
only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute; or (ii) transfers between locations of the Company
or between the Company, its Parent, its Subsidiaries or its successors.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall
be the closing sales price for such stock(or the closing bid, if no sales were
reported, as quoted on such exchange or system for the last market trading day
prior to the time of determination) as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
2
<PAGE>
(ii) If the Common Stock is quoted on the
NASDAQ System (but not on the National Market System thereof) or regularly
quoted by a recognized securities dealer but selling prices are not reported,
its Fair Market Value shall be the mean between the high bid and low asked
prices for the Common Stock or;
(iii) In the absence of an established market
for the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator after such consultation with outside legal,
accounting and other experts as the Administrator may deem advisable, and the
Committee shall maintain a written record of its method of determining such
value.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable option agreement.
(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option, as designated in the applicable option
agreement.
(n) "Option" means a stock option granted pursuant to
the Plan.
(o) "Option Price" means the price at which shares of Stock
subject to an Option may be purchased, determined in accordance with Section
7.5.
(p) "Optioned Stock" means the Common Stock subject to
an Option.
(q) "Optionee" means an Employee or Consultant who
receives an Option.
(r) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(s) "Participant" means an Employee or Consultant to the
Company designated by the Administrator from time to time during the term of the
Plan to receive one or more Awards under the Plan.
(t) "Performance Cycle" means the period of time as specified
by the Administrator over which Performance Shares or Performance Units are to
be earned.
(u) "Performance Shares" means an Award made pursuant to
Section 10 which entitles a Participant to receive Shares, their cash equivalent
or a combination thereof based on the achievement of performance targets during
a Performance Cycle.
(v) "Performance Units" means an Award made pursuant to
Section 10 which entitles a Participant to receive cash, Stock or a combination
thereof based on the achievement of performance targets during a Performance
Cycle.
(w) "Plan Year" means each 12-month period beginning January 1
and ending December 31, except that for the first year of the Plan it shall
begin on the effective date of the Plan.
3
<PAGE>
(x) "Restricted Stock" means Stock granted under Section 9
that is subject to restrictions imposed pursuant to said Section.
(y) "Share" means a share of Common Stock.
(z) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
2.2 Gender and Number. Except when otherwise indicated by the context,
the masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
SECTION 3
PLAN ADMINISTRATION
3.1 Administration of the Plan.
(a) Composition of Administrator.
(i) If permitted by Rule 16b-3, and by the
legal requirements relating to the administration of equity incentive plans such
as the Plan, if any, of applicable securities laws and the Code (collectively,
the "Applicable Laws"), the Plan may (but need not) be administered by different
administrative bodies with respect to directors of the Company, officers of the
Company who are not directors and Employees who are neither directors nor
officers of the Company.
(ii) With respect to grants of Options to
Employees or Consultants who are also officers or directors of the Company, the
Plan shall be administered by (A) the Board, if the Board may administer the
Plan in compliance with Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary plan and Section 162(m) of the Code as it applies
so as to qualify grants of Options to named executives as performance-based
compensation, or (B) a Committee designated by the Board to administer the Plan,
which Committee shall be constituted in such a manner as to permit the Plan to
comply with Rule 16b-3 as it applies to a plan intended to qualify thereunder as
a discretionary plan, to qualify grants of Options to named executives as
performance-based compensation under Section 162(m) of the Code and otherwise so
as to satisfy the Applicable Laws.
(iii) With respect to grants of Options to
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which Committee shall be constituted in such a manner as to satisfy
the Applicable Laws.
(iv) If a Committee has been appointed pursuant
to clause (ii) or (iii) of this subsection 3.1(a), such Committee shall continue
to serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of any Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in
4
<PAGE>
substitution therefor, fill vacancies (however caused) and remove all members of
a committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee appointed under
clause (ii), to the extent permitted by Rule 16b-3 as it applies to a plan
intended to qualify thereunder as a discretionary plan, and to the extent
required under Section 162(m) of the Code to qualify grants of Awards to named
executives as performance-based compensation.
3.2 Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any stock exchange upon
which the Common Stock is listed, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with subsection 2.1(k) of the Plan;
(ii) to select the Consultants and Employees to
whom Awards may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Awards are granted hereunder;
(iv) to determine the number of shares of
Common Stock to be covered by each such Award granted hereunder;
(v) to approve forms of agreement for use
under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted
hereunder;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under Section 8
instead of Common Stock; and
(viii) to reduce the exercise price of any Option
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option shall have declined since the date the Option was
granted.
3.3 Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Participants.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. The maximum aggregate number of Shares which may
be authorized for issuance under the Plan in accordance with the provisions of
the Plan and subject to such restrictions or other provisions as the
Administrator may from time to time deem necessary is three million (3,000,000).
The Shares may be divided among the various Plan components as the
5
<PAGE>
Administrator shall determine. Shares which may be issued upon the exercise of
Options or the vesting of other Awards shall be applied to reduce the maximum
number of Shares remaining available for use under the Plan. The Company shall
at all times during the term of the Plan and while any Awards are outstanding
retain as authorized and unissued Stock, or as treasury Stock, at least the
number of Shares from time to time required under the provisions of the Plan, or
otherwise assure itself of its ability to perform its obligations hereunder.
4.2 Unused and Forfeited Stock. Any Shares that are subject to an Award
under this Plan which are not used because the terms and conditions of the Award
are not met, including any Shares that are subject to an Option which expires or
is terminated for any reason, any Shares which are used for full or partial
payment of the purchase price of Shares with respect to which an Option is
exercised and any Shares retained by the Company pursuant to Section 16.2 shall
automatically become available for use under the Plan.
4.3 Adjustments for Stock Splits, Stock Dividends, Etc. If the Company
shall at any time increase or decrease the number of its outstanding shares of
Common Stock or change in any way the rights and privileges of such shares of
Common Stock by means of the payment of a stock dividend or any other
distribution upon such shares payable in Common Stock, or through a stock split,
subdivision, consolidation, combination, reclassification or recapitalization
involving the Stock, then in relation to the Stock that is affected by one or
more of the above events, the numbers, rights and privileges of the following
shall be increased, decreased or changed in like manner as if they had been
issued and outstanding, fully paid and nonassessable at the time of such
occurrence: (i) the shares of Stock as to which Awards may be granted under the
Plan; and (ii) the Shares of Stock then included in each outstanding Option,
Performance Share or Performance Unit granted hereunder.
4.4 Dividends Payable in Stock of Another Corporation, Etc. If the Company
shall at any time pay or make any dividend or other distribution upon the Stock
payable in securities of another corporation or other property (except money or
Stock), a proportionate part of such securities or other property shall be set
aside and delivered to any Participant then holding an Award for the particular
type of Stock for which the dividend or other distribution was made, upon
exercise thereof in the case of Options, and the vesting thereof in the case of
other Awards. Prior to the time that any such securities or other property are
delivered to a Participant in accordance with the foregoing, the Company shall
be the owner of such securities or other property and shall have the right to
vote the securities, receive any dividends payable on such securities, and in
all other respects shall be treated as the owner. If securities or other
property which have been set aside by the Company in accordance with this
Section are not delivered to a Participant because an Award is not exercised or
otherwise vested, then such securities or other property shall remain the
property of the Company and shall be dealt with by the Company as it shall
determine in its sole discretion.
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4.5 Other Changes in Stock. In the event there shall be any change, other
than as specified in Sections 4.3 and 4.4, in the number or kind of outstanding
shares of Stock or of any stock or other securities into which the Stock shall
be changed or for which it shall have been exchanged, and if the Administrator
shall in its discretion determine that such change equitably requires an
adjustment in the number or kind of Shares subject to outstanding Awards or
which have been reserved for issuance pursuant to the Plan but are not then
subject to an Award, then such adjustments shall be made by the Administrator
and shall be effective for all purposes of the Plan and on each outstanding
Award that involves the particular type of stock for which a change was
effected.
4.6 Rights to Subscribe. If the Company shall at any time grant to the
holders of its Stock rights to subscribe pro rata for additional shares thereof
or for any other securities of the Company or of any other corporation, there
shall be reserved with respect to the Shares then subject to an Award held by
any Participant of the particular class of Stock involved, the Stock or other
securities which the Participant would have been entitled to subscribe for if
immediately prior to such grant the Participant had exercised his entire Option,
or otherwise vested in his entire Award. If, upon exercise of any such Option or
the vesting of any other Award, the Participant subscribes for the additional
Stock or other securities, the Participant shall pay to the Company the price
that is payable by the Participant for such Stock or other securities.
4.7 General Adjustment Rules. If any adjustment or substitution provided
for in this Section 4 shall result in the creation of a fractional Share under
any Award, the Company shall, in lieu of selling or otherwise issuing such
fractional Share, pay to the Participant a cash sum in an amount equal to the
product of such fraction multiplied by the Fair Market Value of a Share on the
date the fractional Share would otherwise have been issued. In the case of any
such substitution or adjustment affecting an Option, the total Option Price for
the shares of Stock then subject to an Option shall remain unchanged but the
Option Price per share under each such Option shall be equitably adjusted by the
Administrator to reflect the greater or lesser number of shares of Stock or
other securities into which the Stock subject to the Option may have been
changed.
4.8 Determination by Administrator, Etc. Adjustments under this Section 4
shall be made by the Administrator, whose determinations with regard thereto
shall be final and binding upon all parties thereto.
SECTION 5
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated with another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding Shares), or if all or substantially all of the assets or
more than 50% of the outstanding voting stock of the Company is acquired by any
other
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corporation, business entity or person (other than a sale or conveyance in which
the Company continues as a holding company of an entity or entities that conduct
the business or businesses formerly conducted by the Company), or in case of a
reorganization (other than a reorganization under the United States Bankruptcy
Code) or liquidation of the Company, and if the provisions of Section 11 do not
apply, the Administrator, or the board of directors of any corporation assuming
the obligations of the Company, shall have the power and discretion to prescribe
the terms and conditions for the exercise of, or modification of, any
outstanding Awards granted hereunder. By way of illustration, and not by way of
limitation, the Administrator may provide for the complete or partial
acceleration of the dates of exercise of the Options, or may provide that such
Options will be exchanged or converted into options to acquire securities of the
surviving or acquiring corporation, or may provide for a payment or distribution
in respect of outstanding Options (or the portion thereof that is currently
exercisable) in cancellation thereof. The Administrator may remove restrictions
on Restricted Stock and may modify the performance requirements for any other
Awards. The Administrator may provide that Stock or other Awards granted
hereunder must be exercised in connection with the closing of such transaction,
and that if not so exercised such Awards will expire. Any such determinations by
the Administrator may be made generally with respect to all Participants, or may
be made on a case-by-case basis with respect to particular Participants. The
provisions of this Section 5 shall not apply to any transaction undertaken for
the purpose of reincorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the beneficial
ownership of the Company's capital stock.
SECTION 6
PARTICIPATION
Participants in the Plan shall be those eligible Employees or Consultants
who, in the judgment of the Administrator, are performing, or during the term of
their incentive arrangement will perform, important services in the management,
operation and development of the Company, and significantly contribute, or are
expected to significantly contribute, to the achievement of long-term corporate
economic objectives. Participants may be granted from time to time one or more
Awards; provided, however, that the grant of each such Award shall be separately
approved by the Administrator, and receipt of one such Award shall not result in
automatic receipt of any other Award, and written notice shall be given to such
person, specifying the terms, conditions, rights and duties related thereto; and
further provided that Incentive Stock Options shall not be granted to
Consultants or to Employees who are not permitted to receive Incentive Stock
Options under the Internal Revenue Code. Each Participant shall enter into an
agreement with the Company, in such form as the Administrator shall determine
and which is consistent with the provisions of the Plan, specifying such terms,
conditions, rights and duties. Awards shall be deemed to be granted as of the
date specified in the grant resolution of the Administrator, which date shall be
the date of any related agreement with the Participant. In the event of any
inconsistency between the provisions of the Plan and any such
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agreement entered into hereunder, the provisions of the Plan shall
govern.
SECTION 7
STOCK OPTIONS
7.1 Grant of Options. Nonstatutory Stock Options may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if
otherwise eligible, be granted additional Options. Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted. The Plan shall not confer upon any Optionee
any right with respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
7.2 Option Agreements. Each Option shall be designated in a written
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
7.3 Term of Option. The term of each Option shall be the term stated in
the option agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the option agreement.
7.4 Limitation on Grant to Employees. Subject to adjustment as provided
in this Plan, the maximum number of Shares which may be subject to Options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 500,000.
7.5 Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be such price as is
determined by the Board, but shall be subject to the following:
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(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at
the time of the grant of such Incentive Stock Option, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee,
the per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the
time of the grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to a person who, at the
time of grant of such Option, is a named executive of the Company, the per share
Exercise Price shall be no less than 100% of the Fair Market Value on the date
of grant; and
(C) granted to any person other than
a named executive, the per Share exercise price shall be no less than 85% of the
Fair Market Value per Share on the date of grant.
(b) Permissible Consideration. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash,(2) check, (3) promissory note, (4) other Shares
which (x) in the case of Shares acquired upon exercise of an Option either have
been owned by the Optionee for more than six months on the date of surrender or
were not acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised (5) delivery of a properly
executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price, or (6) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Board shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company.
7.6 Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the
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Optionee, and as shall be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under subsection 7.5(b) of
the Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificates promptly upon exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Sections 4.3, 4.4 and 4.5 of the Plan.
Exercise of an Option in any manner shall result in
a decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Continuous Status as an Employee or
Consultant. In the event of termination of an Optionee's Continuous Status as an
Employee or Consultant with the Company, such Optionee may, but only within such
period of time as is determined by the Administrator, of at least thirty (30)
days, with such determination in the case of an Incentive Stock Option not
exceeding three (3) months after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
option agreement), exercise his or her Option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of
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such termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
subsection 7.6(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
option agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of the
death of an Optionee, the Option may be exercised, at any time within twelve
(12) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the option
agreement), by the Optionees' estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to exercise the Option at the date of death. To the extent
that Optionee was not entitled to exercise the Option at the date of death, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
7.7 Withholding Taxes. As a condition to the exercise of Options
granted hereunder, the Optionee shall make such arrangements as the
Administrator may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise, receipt or vesting of such Option. The Company shall not be required
to issue any Shares under the Plan until such obligations are satisfied.
7.8 Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
7.9 Stockholder Privileges. No Optionee shall have any rights as a
stockholder with respect to any Shares covered by an Option until the Optionee
becomes the holder of record of such Stock, and no adjustments shall be made for
dividends or other distributions or other rights as to which there is a record
date preceding the date such Optionee becomes the holder of record of
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such Stock, except as provided in Section 4.
SECTION 8
STOCK APPRECIATION RIGHTS
If an agreement evidencing an Option so provides, an Option granted
under this Plan (herein sometimes referred to as the "corresponding option") may
include the right (a "Stock Appreciation Right") to receive an amount equal to
some or all of the excess of the Fair Market Value of the Shares subject to
unexercised portions of the corresponding option over the aggregate exercise
price for such Shares under the corresponding option as of the date the Stock
Appreciation Right is exercised. The amount payable upon exercise of a Stock
Appreciation Right may be paid in cash or in shares of the class then subject to
the corresponding option (valued on the basis of their Fair Market Value), or in
a combination of cash and such shares so valued. No Stock Appreciation Right may
be exercised in whole or in part (a) other than in connection with the
contemporaneous surrender without exercise of such corresponding option, or the
portion thereof that corresponds to the portion of the Stock Appreciation Right
being exercised, or (b) except to the extent that the corresponding option or
such portion thereof is exercisable on the date of exercise of the Stock
Appreciation Right by the person exercising the Stock Appreciation Right, or (c)
unless the class of stock then subject to the corresponding option is then
"publicly traded". For this purpose, a class of stock is "publicly traded" if it
is listed or admitted to unlisted trading privileges on a national securities
exchange or if sales or bid and offer quotations therefor are reported on the
Nasdaq Stock Market or on any then operative successor to the Nasdaq Stock
Market.
SECTION 9
RESTRICTED STOCK AWARDS
9.1 Awards Granted by Administrator. Coincident with or following
designation for participation in the Plan, a Participant may be granted one or
more Restricted Stock Awards consisting of Shares. The number of Shares granted
as a Restricted Stock Award shall be determined by the Administrator.
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9.2 Restrictions. A Participant's right to retain a Restricted Stock Award
granted to him under Section 9.1 shall be subject to such restrictions,
including but not limited to his Continuous Status as an Employee or Consultant
of the Company for a restriction period specified by the Administrator, or the
attainment of specified performance goals and objectives, as may be established
by the Administrator with respect to such award. The Administrator may in its
sole discretion require different periods of employment, consulting
relationships or different performance goals and objectives with respect to
different Participants, to different Restricted Stock Awards or to separate,
designated portions of the Shares constituting a Restricted Stock Award.
9.3 Privileges of a Stockholder, Transferability. A Participant shall
have all voting, dividend, liquidation and other rights with respect to Stock in
accordance with its terms received by him as a Restricted Stock Award under this
Section 9 upon his becoming the holder of record of such Stock; provided,
however, that the Participant's right to sell, encumber or otherwise transfer
such Stock shall be subject to the limitations of Section 12.2 hereof.
9.4 Enforcement of Restrictions. The Administrator may in its sole
discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 9.2 and 9.3:
(a) Placing a legend on the stock certificates referring
to the restrictions;
(b) Requiring the Participant to keep the stock certificates,
duly endorsed, in the custody of the Company while the restrictions remain in
effect; or
(c) Requiring that the stock certificates, duly endorsed, be
held in the custody of a third party while the restrictions remain in effect.
9.5 Termination of Continuous Status as an Employee or Consultant,
Death, Disability, Etc. In the event of termination of a Participant's Status as
an Employee or Consultant, or in the event of a Participant's death or
disability (within the meaning of Section 22(e) of the Internal Revenue Code),
all employment period, consulting period, and other restrictions applicable to
Restricted Stock Awards then held by him shall lapse, and such Awards shall
become fully nonforfeitable. Subject to Sections 5 and 11, in the event of a
Participant's termination of his Continuous Status as an Employee or Consultant
for any other reason, any Restricted Stock Awards as to which the employment or
consulting period or other restrictions have not been satisfied shall be
forfeited.
SECTION 10
PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1 Awards Granted by Administrator. Coincident with or following
designation for participation in the Plan, a Participant may be granted
Performance Shares or Performance Units.
10.2 Amount of Award. The Administrator shall establish a
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maximum amount of a Participant's Award, which amount shall be denominated in
Shares in the case of Performance Shares or in dollars in the case of
Performance Units.
10.3 Communication of Award. Written notice of the maximum amount of a
Participant's Award and the Performance Cycle determined by the Administrator
shall be given to a Participant as soon as practicable after approval of the
Award by the Administrator.
10.4 Amount of Award Payable. The Administrator shall establish maximum
and minimum performance targets to be achieved during the applicable Performance
Cycle. Performance targets established by the Administrator shall relate to
corporate, group, unit or individual performance and may be established in terms
of earnings, growth in earnings, ratios of earnings to equity or assets, or such
other measures or standards determined by the Administrator. Multiple
performance targets may be used and the components of multiple performance
targets may be given the same or different weighing in determining the amount of
an Award earned, and may relate to absolute performance or relative performance
measured against other groups, units, individuals or entities. Achievement of
the maximum performance target shall entitle the Participant to payment (subject
to Section 10.6) at the full or maximum amount specified with respect to the
Award; provided, however, that notwithstanding any other provisions of this
Plan, in the case of an Award of Performance Shares the Administrator in its
discretion may establish an upper limit on the amount payable (whether in cash
or Stock) as a result of the achievement of the maximum performance target. The
Administrator may also establish that a portion of a full or maximum amount of a
Participant's Award will be paid (subject to Section 10.6) for performance which
exceeds the minimum performance target but falls below the maximum performance
target applicable to such Award.
10.5 Adjustments. At any time prior to payment of a Performance Share
or Performance Unit Award, the Administrator may adjust previously established
performance targets or other terms and conditions to reflect events such as
changes in laws, regulations, or accounting practice, or mergers, acquisitions
or divestitures.
10.6 Payments of Awards. Following the conclusion of each Performance
Cycle, the Administrator shall determine the extent to which performance targets
have been attained, and the satisfaction of any other terms and conditions with
respect to an Award relating to such Performance Cycle. The Administrator shall
determine what, if any, payment is due with respect to an Award and whether such
payment shall be made in cash, Stock or some combination thereof. Payment shall
be made in a lump sum or installments, as determined by the Administrator,
commencing as promptly as practicable following the end of the applicable
Performance Cycle, subject to such terms and conditions and in such form as may
be prescribed by the Administrator.
10.7 Termination of Continuous Status as an Employee, Death,
Disability, etc. If a Participant ceases to be an eligible
Employee or Consultant before the end of a Performance Cycle by
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reason of his death or permanent disability, the Performance Cycle for such
Participant for the purpose of determining the amount of the Award payable shall
end at the end of the calendar quarter immediately preceding the date on which
such Participant's status as an eligible Employee or Consultant ceased. The
amount of an Award payable to a Participant to whom the preceding sentence is
applicable shall be paid at the end of the Performance Cycle and shall be that
fraction of the Award computed pursuant to the preceding sentence the numerator
of which is the number of calendar quarters during the Performance Cycle during
all of which said Participant was an Employee or Consultant and the denominator
of which is the number of full calendar quarters in the Performance Cycle. Upon
any other termination of a Participant's Continuous Status as an Employee or
Consultant during a Performance Cycle, participation in the Plan shall cease and
all outstanding Awards of Performance Shares or Performance Units to such
Participant shall be canceled.
SECTION 11
CHANGE IN CONTROL
11.1 Options, Restricted Stock. In the event of a change in control of
the Company as defined in Section 11.3, then the Administrator may, in its sole
discretion, without obtaining stockholder approval, to the extent permitted in
Section 15, take any or all of the following actions: (a) accelerate the
exercise dates of any outstanding Options or make all such Options fully vested
and exercisable; (b) grant a cash bonus award to any Optionee in an amount
necessary to pay the Option Price of all or any portion of the Options then held
by such Optionee; (c) pay cash to any or all Optionees in exchange for the
cancellation of their outstanding Options in an amount equal to the difference
between the Option Price of such Options and the greater of the tender offer
price for the underlying Stock or the Fair Market Value of the Stock on the date
of the cancellation of the Options; (d) make any other adjustments or amendments
to the outstanding Options and (e) eliminate all restrictions with respect to
Restricted Stock and deliver Shares free of restrictive legends to any
Participant.
11.2 Performance Shares and Performance Units. Under the circumstances
described in Section 11.1, the Administrator may, in its sole discretion, and
without obtaining stockholder approval, to the extent permitted in Section 15,
provide for payment of outstanding Performance Shares and Performance Units at
the maximum award level or any percentage thereof.
11.3 Definition. For purposes of the Plan, a "change in control" shall
be deemed to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the 1934 Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of more than 33-1/3 percent of the outstanding voting
stock of the Company after the date of the Plan; or (b) at any time during any
period of three consecutive years (not including any period prior to the
Effective Date), individuals who at the beginning of such period constitute the
Board (and any
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new director whose election by the Board or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof; or (c) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
SECTION 12
RIGHTS OF EMPLOYEES; PARTICIPANTS
12.1 Employment. Nothing contained in the Plan or in any Award granted
under the Plan shall confer upon any Participant any right with respect to the
continuation of his or her employment by the Company, or interfere in any way
with the right of the Company, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of an Award. Whether an authorized leave of
absence, or absence in military or government service, shall constitute a
termination of employment shall be determined by the Administrator at the time.
12.2 Nontransferability. No right or interest of any Participant in an
Award granted pursuant to the Plan shall be assignable or transferable during
the lifetime of the Participant, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of a Participant's death, a Participant's rights and
interests in Options shall, to the extent provided in Section 7, be transferable
by testamentary will or the laws of descent and distribution, and payment of any
amounts due under the Plan shall be made to, and exercise of any Options may be
made by, the Participant's legal representatives, heirs or legatees. If in the
opinion of the Administrator a person entitled to payments or to exercise rights
with respect to the Plan is disabled from caring for his affairs because of
mental condition, physical condition or age, payment due such person may be made
to, and such rights shall be exercised by, such person's guardian, conservator
or other legal personal representative upon furnishing the Administrator with
evidence satisfactory to the Administrator of such status.
SECTION 13
GENERAL RESTRICTIONS
13.1 Investment Representations. The Company may require any
person to whom an Award is granted, as a condition of exercising an
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Option or receiving Stock under the Award, to give written assurances in
substance and form satisfactory to the Company and its counsel to the effect
that such person is acquiring the Stock subject to the Option or the Award for
his own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws. Legends evidencing such restrictions may be placed on the
certificates evidencing the Stock.
13.2 Compliance with Securities Laws. Each Award shall be subject to
the requirement that, if at any time counsel to the Company shall determine that
the listing, registration or qualification of the Shares subject to such Award
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of Shares thereunder, such
Award may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Administrator. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
13.3 Stock Restriction Agreement. The Administrator may provide that
Shares issuable upon the exercise of an Option shall, under certain conditions,
be subject to restrictions whereby the Company has a right of first refusal with
respect to such Shares or a right or obligation to repurchase all or a portion
of such Shares, which restrictions may survive a Participant's term of
employment or consulting relationship with the Company. The acceleration of time
or times at which an Option becomes exercisable may be conditioned upon the
Participant's agreement to such restrictions.
SECTION 14
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant
as a result of the exercise of an Option or the grant or vesting of any other
Award shall not constitute "earnings" with respect to which any other employee
benefits of such employee are determined, including without limitation benefits
under any pension, profit sharing, life insurance or salary continuation plan.
SECTION 15
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time-to-time may amend or
modify, the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the stockholders
if stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise
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necessary or desirable.
No amendment, modification or termination of the Plan shall in any
manner adversely affect any Awards theretofore granted under the Plan, without
the consent of the Participant holding such Awards.
SECTION 16
WITHHOLDING
16.1 Withholding Requirement. The Company's obligations to deliver
Shares upon the exercise of an Option, or upon the vesting of any other Award,
shall be subject to the Participant's satisfaction of all applicable federal,
state and local income and other tax withholding requirements.
16.2 Withholding With Stock. At the time the Administrator grants an
Award, it may, in its sole discretion, grant the Participant an election to pay
all such amounts of tax withholding, or any part thereof, by electing to
transfer to the Company, or to have the Company withhold from Shares otherwise
issuable to the Participant, Shares having a value equal to the amount required
to be withheld or such lesser amount as may be elected by the Participant. All
elections shall be subject to the approval or disapproval of the Administrator.
The value of Shares to be withheld shall be based on the Fair Market Value of
the Stock on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). Any such elections by Participants to have Shares withheld for
this purpose will be subject to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of the
Company within the meaning of Section 16 of the Exchange Act ("Section 16"), the
Participant must satisfy the requirements of such Section 16 and any applicable
rules thereunder with respect to the use of Stock to satisfy such tax
withholding obligation.
SECTION 17
BROKERAGE ARRANGEMENTS
The Administrator, in its discretion, may enter into arrangements with
one or more banks, brokers or other financial institutions to facilitate the
disposition of shares acquired upon exercise of Options or the vesting of any
other Awards, including, without limitation, arrangements for the simultaneous
exercise of Options and vesting of other Awards, and sale of the Shares acquired
upon such exercise or vesting.
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SECTION 18
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to Employees or Consultants generally, or to any class or group
of Employees or Consultants, which the Company now has lawfully put into effect,
including, without limitation, any retirement, pension, savings and stock
purchase plan, insurance, death and disability benefits and executive short-term
incentive plans.
SECTION 19
REQUIREMENTS OF LAW
19.1 Requirements of Law. The issuance of stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
19.2 Federal Securities Law Requirements. If a Participant is an
officer or director of the Company within the meaning of Section 16, Awards
granted hereunder shall be subject to all conditions required under Rule 16b-3,
or any successor rule promulgated under the Exchange Act, to qualify the Award
for any exception from the provisions of Section 16(b) of the Exchange Act
available under that Rule. Such conditions are hereby incorporated herein by
reference and shall be set forth in the agreement with the Participant which
describes the Award.
19.3 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Florida.
SECTION 20
DURATION OF THE PLAN
The Plan shall terminate at such time as may be determined by the Board
of Directors, and no Award shall be granted after such termination. If not
sooner terminated under the preceding sentence, the Plan shall fully cease and
expire at midnight on February 1, 2009. Awards outstanding at the time of the
Plan termination may continue to be exercised or earned in accordance with their
terms.
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SECTION 21
INFORMATION TO PARTICIPANTS
21. Information to Participants. The Company shall provide to each
Participant, during the period for which such Participant has one or more Awards
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company.
21
PROMISSORY NOTE
---------------
$350,000.00 Coral Springs, Florida
January 22, 1999
For value received, the undersigned, CUIDAO HOLDING CORP., a Florida
corporation ("Borrower"), promises to pay to the order of EM-STAR MORTGAGE CO.,
a Florida corporation ("Lender"), located at 10175 West Sample Road, Coral
Springs Florida 33065, or such other place as designated by Lender in writing,
the principal sum of THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000.00) together
with interest thereon at the rate of TWELVE AND ONE-HALF PERCENT (12.5%) per
annum from the date hereof to be paid in lawful money of the United States of
America. The first installment of $3,645.83 shall be due and payable on March 1,
1999, and on the first day of each and every month thereafter until February 1,
2002, at which time the entire remaining principal balance together with
interest accrued thereon shall be due and payable in full.
This Note may be prepaid only upon payment of a prepayment charge of
four percent (4%) of the amount of principal prepaid before February 1, 2001,
and a prepayment charge of two (2%) percent before November 1, 2001. Thereafter,
this note may be prepaid without premium, penalty or notice. This prepayment
premium shall apply regardless of whether the prepayment is voluntary and
regardless of whether Lender has exercised Lender's right to accelerate this
Note in the event of a default. All payments shall be applied first to accrued
interest and then to escrows for reserves, if any, and then to a reduction of
the principal indebtedness. No prepayment shall relieve Borrower from making the
next payment due hereunder.
Upon ten (10) days default in the payment of any sums due hereunder or
in the performance of any covenant of the Mortgage securing this Note, the terms
of which are incorporated herein by reference, the entire principal amount and
all accrued interest thereon shall at once become due and payable at the option
of the Lender. Failure to exercise this option shall not constitute a waiver of
the right to exercise such option in the event of subsequent default. While in
default such sums shall bear interest at the highest rate allowable under the
laws of the State of Florida. This default interest rate, rather then the
statutory rate, shall also be applicable to any judgment or decree resulting
from a default under this Note. Borrower and all sureties, guarantors and
endorsers hereof hereby waive presentment, notice of dishonor and protest and,
upon default, agree to pay all costs of collection including reasonable
attorney's fees and collection costs, which shall be charged to Borrower at one
and one-half times the cost incurred by Lender, and a default fee to Lender
equal t three (3%) percent of the unpaid principal balance. The maturity date of
this Note, or any payment hereunder, may be extended from time to time, at the
Lender's sole option, without in any way affecting the liability of Borrower or
endorsers, or guarantors of this Note.
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Provided the Lender has not exercised Lender's right to accelerate this
Note as provided herein, in the event any required payment on this Note is not
received by Lender within five (5) days after the payment is due, Borrower shall
pay Lender a late charge of ten (10%) percent of the late payment. If Lender has
exercised Lender's right to accelerate this Note and if Lender, at Lender's sole
option, agrees to allow the Note and Mortgage to be reinstated, Borrower shall
pay Lender a reinstatement fee equal to three (3%) percent of the outstanding
principal balance. The parties agree that these charges are fair and reasonable
charges for the late payment and shall not be deemed a penalty.
Borrower does not intend or expect to pay nor does the Lender intend or
except or collect any interest greater than the highest legal rate of interest
which may be charged under applicable law. Should the acceleration hereof or any
charges made hereunder result in the computation or earning of interest in
excess of such legal rate, any and all excess shall be and the same is hereby
waived by the Lender, and nay such excess shall be credited by the Lender t the
balance hereof.
CUIDAO HOLDING CORP., a
Florida corporation
By:/s/ C. Michael Fisher
-----------------
C. MICHAEL FISHER,
President
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W/C TRI-COUNTY for:
This Instrument Prepared By:
Henry W. Johnson, Esq.
Hume & Johnson, P.A.
Hume & Johnson, P.A.
1401 University Drive, #301
Coral Springs, Florida 33071
MORTGAGE AND SECURITY AGREEMENT
-------------------------------
This Mortgage and Security Agreement is made this 22nd day of January
1999, between the mortgagor, CUIDAO HOLDING CORP., a Florida corporation
("Borrower"), whose post office address is 3201 West Griffin Road, Suite 204,
Fort Lauderdale, Florida 33312, and the mortgagee, EM-STAR MORTGAGE CO.
("Lender"), whose post office address is 10175 West Sample Road, Coral Springs,
Florida 33065.
Borrower for good and valuable considerations and also in consideration
of the aggregate sum named in the Mortgage Note (the "Note"), a copy of which is
attached hereto as Exhibit "A" and made a part hereof, does hereby mortgage,
grant and convey to Lender the real property described as follows:
The South 174 feet, less the East 150 feet thereof, of
that portion of Parcel b lying between N. 29th Court and
N. 30th Avenue, as shown on the Plat of SOUTH FLORIDA
INDUSTRIAL PARK, according to the Plat thereof, as recorded in
Plat Book 63, Page 38, of the Public Records of Broward
County, Florida.
Together with all the improvements now or hereafter erected on the
property, all fixtures, equipment and machinery now or hereafter located on the
property, all landscaping now or hereafter growing or planted on the property,
and all replacements and additions hereto; together with all easements,
rights-of-way, mineral, oil and gas rights, riparian and littoral rights, and
all hereditaments, tenements and appurtenances now or hereafter attaching to the
property; together with all rents, royalties, issues, income and profits from
the property and the abstract of title to the property, which are hereby
specifically assigned and pledged to Lender as additional security for the
payment of the Note; all of which, together with the above-described real
property, are hereinafter referred to as the "Property".
Borrower covenants that Borrower is lawfully seized of the Property,
that Borrower has the right to mortgage, grant and convey the Property, that
Borrower shall warrant and defend the title to the Property and that the
Property is free and clear of all encumbrances.
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Provided always that if Borrower shall promptly pay the Note to Lender,
and all other indebtedness or liability that may become due or owing hereunder
and secured hereby, and shall faithfully and promptly comply with and perform
each and every other covenant and provision herein to be complied with and
performed by the Borrower, than this Mortgage and the estate hereby created
shall cease and be null and void.
The Borrower further covenants and agrees as follows.
1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when
due the principal and interest on the indebtedness evidenced by the Note, and
the principal and interest on any future advances secured by this Mortgage.
2. TAXES AND ASSESSMENTS. Borrower shall pay all taxes and assessments
levied or assessed against the Property before they become delinquent, and in
not event permit the Property, or any part thereof, to be sold for nonpayment of
taxes or assessments. Borrower shall promptly furnish to Lender receipts
evidencing such payments.
3. HAZARD INSURANCE. Borrower shall keep the improvements now existing
or hereafter erected on the Property insured against loss and damage by fire,
hazards included within the term extended coverage," and flood, as well as
personal liability coverage, in an amount not less then the full insurable value
thereof, with an insurer having an A rating or better in the A.M. Best Rating
Guide. Borrower shall promptly pay all premiums for such insurance when due. All
insurance policies and renewals thereof shall be in a form acceptable to Lender
and shall include a standard mortgages clause in favor of and in a form
acceptable to Lender. Lender shall have the right to hod the policies and the
renewals thereof, and Borrower shall promptly furnish to Lender all renewal
notices and all receipts of paid premiums. In the event of loss, Borrower shall
give prompt notice to the insurance carrier and to Lender. Lender may make proof
of loss if not made promptly by Borrower. Unless Lender and Borrower otherwise
agree in writing, insurance proceeds shall be applied to restoration or repair
of the Property, provided such restoration or repair is economically feasible
and the security of this Mortgage is not thereby impaired. If such restoration
or repair is not economically feasible or if the security of this Mortgage would
be impaired, the insurance proceeds shall be applied to the sums secured by this
Mortgage, which the excess, if any paid to Borrower. If the Property is
abandoned by Borrower, or if Borrower fails to respond to Lender within 30 days
from the date notice is mailed by Lender to Borrower that the insurance carrier
offers to settle a claim for insurance benefits, Lender is authorized to collect
and apply the insurance proceeds at Lender's option either to restoration or
repair of the Property or to the sums secured by this Mortgage.
4. ESCROW FOR TAXES AND INSURANCE. Lender may, at Lender's option,
require Borrower to deposit with Lender, on the date of each regular payment as
required by the Note, until the Note is fully paid, an amount equal to one
twelfth or such proportionate share of the annual premiums for insurance and
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annual real and personal property taxes and assessments as estimated by the
Lender to be sufficient to enable the Lender to Pay such charges at least 30
days before they become due. Such deposit shall be placed by Lender in an
account segregated from Lender's operating account(s) in a financial institution
whose accounts are insured by the Federal Government. No interest shall be
payable on such funds. Upon Lender's demand, Borrower agrees to deliver to
Lender such additional monies as are necessary to enable Lender to pay such
insurance premiums, taxes and assessments when due. In the event of default in
the Note or this Mortgage, Lender may apply any deposits so held, as well as any
return premium received from the cancellation of any insurance policy by Lender
upon the foreclosure of this Mortgage, to the indebtedness secured by this
Mortgage.
5. MAINTENANCE AND PROTECTION OF PROPERTY. Borrower shall keep the
Property in good repair and shall not commit waste or permit impairment or
deterioration of the Property and shall comply with all laws and governmental
regulations and rules affecting the Property or its operation. If this Mortgage
encumbers a unit in a condominium or in a planned unit development, Borrower
shall abide by and perform all of Borrower's obligations under the documents
creating or governing the condominium or the planned unit development, including
the payment of assessments or charges, if any. Borrower warrants and represents
to Lender that: (a) the past and current use of the Property complies with all
Federal, State and Local environmental laws; (b) Borrower has no notice
whatsoever of any violations or of the commencement or threat of any action or
investigations by any governmental authority in connection with environmental
matters; (c) Borrower shall comply with all present and future environmental
laws and orders of any governmental authority and will take remedial action upon
the discovery of any violation of environmental laws or regulations.
6. ADVANCES BY LENDER. Lender may at Lender's option, advance money
that should have been paid by Borrower in order to protect the lien or security
of this Mortgage. Borrower shall repay such monies immediately upon notice from
Lender to Borrower requesting payment thereof and such funds advanced by Lender
shall bear interest at the maximum rate allowed by law and shall be considered
additional indebtedness of Borrower secured by this Mortgage. In no event shall
such advances by Lender be deemed a waiver of Lender's right to declare this
Mortgage in default.
7. RIGHT OF ENTRY AND INSPECTION. Lender may make or cause to be made
reasonable entries upon and inspections of the Property, provided that Lender
shall give Borrower notice prior to any such inspections specifying reasonable
cause for the inspection as relates to Lender's interest in the
Property.
8. EXTENSION. Extension of time for payment or modification of
amortization of the sums secured by this Mortgage or taking other additional
security for payment thereof, shall not affect this Mortgage or the rights of
Lender hereunder or operate to release, in any manner, the liability of the
original Borrower in Borrower's successors in interest.
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9. ATTORNEY'S FEES AND COSTS. In the event this Mortgage or the Note or
any renewal or extension thereof shall be placed in the hand of an attorney for
collection by reason of a default of Borrower, Borrower shall pay all costs and
expenses out of court, in foreclosure or otherwise, including reasonable
attorney's fees incurred in any appeal or appeals or incurred in any proceeding
under bankruptcy or insolvency laws. If any action or proceeding shall be
commenced by any person other than the holder of this Mortgage, (except an
action to foreclose this mortgage or to collect the debts secured hereby), to
which action or proceeding the holder of this Mortgage is made a party, or in
which it shall be necessary for Lender to defend or uphold the lien of this
Mortgage, all sums paid by the holder of this Mortgage for the expense of any
such litigation, including reasonable attorney's fees, shall be paid by the
Borrower, together with interest thereon at the maximum rate allowed by law and
such sums shall become additional indebtedness of Borrower secured by this
Mortgage.
10. CONDEMNATION. The proceeds of any award or claim for damages,
direct or consequential, in connection with any condemnation or other taking of
the Property, or any portion of the Property, or for conveyance in lieu of
condemnation, are hereby assigned and shall be paid to Lender. Such proceeds
shall be applied to the sums secured by this Mortgage, with the excess, if any,
paid to Borrower.
11. DEFAULT. If Borrower shall fail to comply with all of the terms,
provisions and conditions of the Prior Mortgage so as to result in default of
the Prior Mortgage, such default shall constitute a default under this Mortgage.
If Borrower shall: (a) consent to the appointment of a receiver, trustee or
liquidator of all or a substantial part of the Property, or (b) be adjudicated a
bankrupt or insolvent, or file a voluntary petition in bankruptcy, or admit in
writing Borrower's inability to any Borrower's debts as they become due; or (c)
make a general assignment for the benefit of creditors; or (d) file a petition
or answer seeking reorganization or arrangement with creditors, or to take
advantage of any insolvency law; or (e) file an answer admitting the material
allegations of a petition filed against the Borrower in any bankruptcy,
allegations of a petition filed against the Borrower in any bankruptcy,
reorganization or insolvency proceeding or (f) allow the entry of any order,
judgement or decree upon an application of a creditor or Borrower by a court of
competent jurisdiction approving a petition seeking appointment of a receiver or
trustee of all or a substantial part of the Borrower's assets and such order,
judgement or decree shall continue unstayed and effect for a period of thirty
(30) consecutive days, such action shall constitute a default under this
Mortgage. If any sum of money required to be paid by this mortgage or the Note
shall not be paid within ten (10) days after such sum becomes due or upon
Borrower's breach of any other covenant or agreement of Borrower in this
Mortgage or the Note such action shall constitute a default under this Mortgage.
In the event of such a default, Lender may, at Lender's option, declare all of
the sums secured by this Mortgage to be immediately due and payable without
further demand. In such event Lender may proceed to collect such sum by
foreclosure or
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other proceedings upon Lender may proceed to collect such sum by foreclosure or
other proceedings upon this Mortgage or by any other proper legal action.
Notwithstanding any other provision of this Mortgage or the Note, all sums
secured by this Mortgage shall bear interest at the maximum rate allowed by law
while this Mortgage is in default.
12. WAIVER BY LENDER. The failure to insist upon strict performance of
any of the provisions of this Mortgage shall not be construed as a waiver of any
subsequent default of the same or similar nature. The procurement of insurance
or the payment of taxes or other assessments, liens or charges by Lender shall
not be a waiver of Lender's right to declare al the sums secured by this
Mortgage to be immediately due and payable without further demand.
13. RECEIVER. In the event of a default Lender shall be entitled to
have a receiver appointed by a court to enter upon, take possession and manage
the Property and to collect the rents of the Property including those past due.
All rents collected by the receiver shall be applied first to payment of cost of
management of the Property and collection of rents, including but not limited to
receiver's fees, premiums on receiver's bonds and reasonable attorney's fees,
then to the sum secured by this Mortgage. The receiver shall be liable to
account only for those rents actually received.
14. CUMULATIVE REMEDIES. All remedies provided in this Mortgage are
distinct and cumulative and may be exercised concurrently, independently or
successively.
15. SECURITY AGREEMENT. If any portion of the Property is of a nature
so that a security interest therein can be perfected under the Uniform
Commercial Code ("personalty"), this Mortgage shall also constitute a Security
Agreement and Borrower agrees t join with Lender in the execution of any
financing statements that may be required for the perfection or renewal of such
security interest under the Uniform Commercial Code. The Personalty shall be
kept in its present locations and will not be removed from the Property without
the written consent of Lender, and in addition to the other remedies in the
event of default provided for herein, Lender shall have, and may exercise from
time to time, any and all rights and remedies of a secured party under the
Uniform Commercial Code and any and all rights and remedies available to Lender
under any other applicable law and, upon request or demand of Lender, Borrower
shall, at Borrower's expense assemble the Personalty and make it available t
Lender at the convenient place acceptable to Lender. Lender will give Borrower
reasonable notice of the time and place of any public sale of the Personalty or
of the time on which any private sale and any other intended deposition is to be
made. The requirements of reasonable notice shall be met if notice is mailed,
postage prepaid, to the Borrower at the address of the Property, at least five
(5) days before the time of the sale or disposition. Expenses of retaking,
holding, preparing for sale, selling or the like, shall include, whether in
judicial proceedings, including Bankruptcy court and appellate proceedings, or
whether out of court, a reasonable attorney's
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fees and all other legal expenses incurred by Lender. Personalty shall exclude
clothing, furniture, appliances, linens, china, crockery, kitchenware and
personal effects of Borrower and Borrower's dependents ("Household Goods")
unless the Household Goods are purchased with the proceeds of the loan evidenced
by
the Note.
16. FUTURE ADVANCES. Borrower agrees to accept no future advances under
the Prior Mortgage or any other modification or extension under the Prior
Mortgage and any such future advance, extension or modification of the Prior
Mortgage shall constitute a default under this Mortgage. This shall secure any
additional sum or sums advanced by Lender to or for the benefit of Borrower
whether such advances are obligatory or are made at the option of Lender or
otherwise at any time within twenty years from the date of this Mortgage with
interest thereon at the rate agreed upon at the time of the additional loan or
advance. Such future advances and any and all renewal indebtedness shall be
equally secured with and have the same priority as the original indebtedness and
shall be subject to all the terms and provisions of this mortgage, whether or
not such renewal or additional loan or advance is evidenced by a promissory note
of the Borrower and whether or not identified by a recital that it is secured by
this Mortgage. At no time shall the principal amount of the indebtedness secured
by this Mortgage, not including sums advanced in accordance with this Mortgage
to protect the security of the Mortgage, exceed one-hundred twenty-five percent
(125%) of the original amount of the Note. This provision shall not be construed
to obligate Lender to make any such additional loans or advances.
17. PRIOR LIENS AND ENCUMBRANCES. With regard to any mortgage to which
this Mortgage is or shall be made subordinate, Borrower shall: (a) promptly pay
when due and payable, the interest, installments of principal, and all other
sums and charges mentioned in and made payable by any mortgage to which this
Mortgage is or shall be made subordinate (a "Prior Mortgage"); (b) promptly
perform and observe all of the terms, covenants and conditions required to be
performed and observed by Borrower under any Prior Mortgage, within the periods
(exclusive of grace periods) provided in a Prior Mortgage, or such lesser
periods (exclusive to preserve and keep a Prior Mortgage free from default; (c)
promptly notify Lender in writing of any default by Borrower in the performance
or observance of any of the terms, covenants or conditions on the part of
Borrower to be performed under a Prior Mortgage; (d) promptly notify Lender in
writing of the receipt by Borrower of any notice (other than notices customarily
sent out on a regular or periodic basis) from the mortgagee under a Prior
Mortgage and of any notice noting or claiming any default by Borrower in the
performance or observance of any of the terms, covenants or conditions on the
part of Borrower to be performed or observed under a Prior Mortgage and to
promptly cause a copy of each such notice received by Borrower from the
mortgagee under a Prior Mortgage to be delivered to Lender; (e) not accept or
enter into any agreement whereby the holder of a Prior Mortgage waives,
postpones, extends, reduces or modifies the payment of any installment of
principal and interest or any other item or amount required t be paid under the
terms of
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the Prior Mortgage, or that modifies any provision of a Prior Mortgage; (f)
within ten (10) days after written demand form Lender, use Borrower's best
efforts to obtain from the mortgagee of a Prior Mortgage and deliver to Lender a
certificate starting that a Prior Mortgage is in full force and effect, is
unmodified, and that no notice of default of Lender has been served on Borrower;
(g) promptly furnish to Lender upon demand proof of payment of all items which
are required to be paid by Borrower pursuant to a Prior Mortgage, and proof of
payment of which is required to be given to Lender under a Prior Mortgage; (h)
execute and deliver, upon demand, such instruments as Lender may deem useful or
required to permit Lender to cure any default under a Prior Mortgage or to
permit Lender to take such other action as Lender considers desirable to cure or
remedy the matter in default and preserve the interest of Lender in the
Property. The generality of the provisions of this section relating to mortgages
to which this Mortgage is or shall be made subordinate shall not be limited by
other provisions of this Mortgage setting forth particular obligations of
Borrower which are required of Borrower under the Prior Mortgage. Should any
agreement he hereafter entered into modifying or changing the terms of this
Mortgage or the Note secured hereby in any particular, the rights of the parties
to such agreement shall be superior to the rights of the holder of any
intervening lien, except liens to which this Mortgage is subordinated.
18. SITUS. This Mortgage shall be construed in accordance
with and governed by the laws of the State of Florida.
19. PARTIAL INVALIDITY. If any provision of this Mortgage
is held to be invalid or unenforceable, all of the other
provisions shall nevertheless continue in full force and effect.
20. NOTICES. Services of all notices under this Mortgage on Borrower
shall be sufficient if given personally or mailed to Borrower, postage prepaid,
at the address of the Property or at such other address as Borrower may furnish
to Lender in writing.
21. CAPTIONS. Captions contained in this Mortgage are inserted only as
a matter of convenience or for reference and in no way define, limit, extend ,
or describe the scope of this Mortgage or the intent of any provision hereof.
22. DUE ON SALE. This Mortgage and the Note secured hereby shall be
immediately due and payable upon the conveyance or sale of any interest in the
Property.
23. WAIVER OF JURY TRIAL. Borrower waives all rights to trial by jury
in any action, proceeding or counterclaim brought by anyone arising out of or
connected with this Mortgage or the Note.
24. SALE OF NOTE. The note together with the Mortgage may be sold one
or more times without prior notice to Borrower. A sale may result in a change in
the entity (known as "Loan Servicer") that collects monthly payments due under
the Note and Mortgage. If there is a change of the Loan Servicer, Borrower will
be given written notice of the change in accordance with
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applicable law. The notice will state the name and address of the new Loan
Servicer and the address to which payments should be made. The notice will also
contain any other information required by applicable law.
25. HAZARDOUS SUBSTANCES. Borrower shall not cause or permit the
presence, use disposal, storage, or release of any Hazardous Substances on or in
the Property. Borrower shall not do, nor allow anyone else to do, anything
affecting the Property that is in violation of any Environmental Law. The
preceding two sentences shall not apply to the presence, use or storage on the
property of small quantities of Hazardous Substances that are generally
recognized to be appropriate to normal uses and to maintenance of the Property.
Borrower shall promptly give Lender written notice of any investigation, claim,
demand, lawsuit or other action by any governmental or regulatory agency or
private party involving the Property and any Hazardous Substance or
Environmental Law of which Borrower has actual knowledge. If Borrower learns, or
is notified by any governmental or regulatory authority, that any removal or
other remediation of any Hazardous Substance affecting the Property is
necessary, Borrower shall promptly take all necessary remedial actions in
accordance with Environmental Law. As used in this paragraph, "Hazardous
Substances" are those substances defined as toxic or hazardous substances by
Environmental Law and the following substances: gasoline, kerosene, other
flammable or toxic petroleum products, toxic pesticides and herbicides, volatile
solvents, materials containing asbestos or formaldehyde, and radioactive
materials. As used in this paragraph, "Environmental Law" means federal and
Florida law that relate to health, safety or environmental protection. Borrower
indemnifies Lender against any and all liabilities, losses, damages, injuries
and expenses of any kind, including, without limitation, engineer's and
professional fees, soil tests and chemical analysis, and attorney fees and
costs, incurred by Lender in any way relating to the use, handling, storage,
transportation or disposal of Hazardous Substances on the Property.
26. RIGHT OF FIRST REFUSAL. If all or any part of the Property is sold
or transferred, Lender shall, at Lender's option, have a right of first refusal
to acquire the property of the identical terms. Borrower shall provide Lender
with written notice of the transfer or sale together with a copy of any
applicable documentation. Lender shall have ten (10) days after receipt of such
notice to exercise the option.
27. BANKRUPTCY. In the event the Property becomes property of an estate
in a Federal bankruptcy proceeding, the parties agree that Lender, as adequate
protection is entitled to the timely performance of all covenants and terms of
this Mortgage and the Note referred to herein, and in the event of the failure
of the Lender to receive full and complete performance of there terms then
Lender shall be entitled to relief from the automatic stay under 11 U.S.C. 362
without notice or hearing to the Borrower.
28. ASSIGNMENT OF RENTS. As additional security hereunder,
Borrower hereby assigns to Lender the rents of the Property,
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provided that Borrower shall, prior to acceleration, or abandonment of the
Property, have the right to collect and retain such rents as they become due and
payable. Upon acceleration hereof or abandonment of the Property, Borrower shall
be entitled to have a receiver appointed by a court to enter upon, take
possession of and manage the Property and to collect the rents of the Property,
including those past due. All rents collected by the receiver shall be applied
first to the payment of the costs of management of the property and collection
of rents, including , but not limited to, receiver's fees, premiums on
receiver's bonds and reasonable attorney's fees, and then to the sums secured by
this Mortgage. The receiver shall be liable to account only for those rents
actually receive.
IN WITNESS WHEREOF, Borrower has executed the Mortgage the day and year
first written above.
Signed, sealed and delivered BORROWER:
in the presence of:
/s/ Joe Tomaini CUIDAO HOLDING
- ---------------
CORP., a Florida corporation
Printed: Joe Tomaini
By: /s/ C. Michael Fisher
----------------------
C. MICHAEL FISHER,
President
/s/ Henry W. Johnson
- --------------------
Printed: Henry W. Johnson
STATE OF FLORIDA
COUNTY OF BROWARD
The foregoing instrument was acknowledged before me this 22nd day of
January, 1999, by C. Michael Fisher, as President of CUIDAO HOLDING CORP., a
Florida corporation, on behalf of this corporation. He is personally know to me
or produced a driver's license as identification.
My commission Expires:
-----------------------------------
Notary Public
9
PROMISSORY NOTE
$130,000.00 HOLLYWOOD, FLORIDA
January 22nd, 1999
FOR VALUE RECEIVED, the undersigned Borrower jointly and severally
promise to pay in lawful money of the United States of America to the order of
SEBASTIANO SALEMI and NUNZIA SALEMI, husband and wife, at such address as is
indicated below or at such other place as the Holder of this Note shall in
writing designate, the principal sum of $130,000.00.
The outstanding principal balance of this Note existing from time to
time shall bear interest at the rate of 12% per cent per annum from January
22nd, 1999.
Principal and Interest shall be payable as follows:
Equal monthly installments of interest in the sum of $1,300.00 shall be
payable commencing February 22nd, 1999 and continue in like fashion through
January 22nd, 2000. Additionally the maker shall pay a principal payment of
@20,000.00 on January 22nd, 2000. Commencing on February 22nd, 2000, monthly
payments of interest shall be payable in the sum of $1,100.00 and shall continue
monthly thereafter in like fashion until January 22nd, 2001, when the principal
balance together will all accrued interest shall be paid in full.
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Any payment received more than ten (10) days after the due date shall
contain a late charge of five (5%) per cent of the payment due.
This note is secured by a Purchase Money Second Mortgage of even date
herewith: (all of such agreements, mortgage(s) and other documents executed in
connection with this Note securing the obligations of this Note are hereinafter
referred to as the "SECURITY DOCUMENTS").
The following events shall be events of default ("EVENTS OF DEFAULT')
hereunder:
(i) failure to pay any part of principal or interest falling sue under
this Note which non-payment continues for a periods in excess of ten (10) days;
or
(ii) the occurrence of a default of any terms, agreements, covenants or
conditions of this Note or the SECURITY DOCUMENTS which are not timely cured
pursuant to the terms thereof.
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The occurrence of an EVENT OF DEFAULT shall authorize the Holder of
this Note to declare the entire outstanding principal balance immediately due
and payable in full and to exercise any and all other rights or remedies as
provided by the SECURITY DOCUMENTS and applicable by law. Furthermore, at such
time, all such amounts due but unpaid shall thereafter bear interest from the
date of such nonpayment or exercise, until payment in full, at the maximum
interest rate allowed by law. This Note is to be construed and enforced
according to the laws of the State of Florida.
If this Note is not paid when due or if it becomes necessary in the
opinion of Note Holder to employ counsel to collect or enforce this Note or to
protect the security for the same, Borrower and all parties liable for the
payment hereunder shall pay to Note Holder, to the extent permitted by
applicable law, all costs, charges, disbursements and reasonable attorney's fees
incurred by Note Holder in collecting or enforcing payment hereof or in
protecting the same, whether incurred in or out of court, including without
limitation probate proceedings, bankruptcy proceedings, and appeals.
Each Maker, Guarantor and Endorser severally waives presentment,
demand, protest or notice of protest and all requirements necessary t hod each
of them liable as Makers, Guarantors and Endorsers including without limitation,
all homestead exemptions, all appraisement and stay law, and all rights of
redemption, to the full extent permitted by law. Failure of the Holder to
exercise any right hereunder shall not be construed as a Waiver of the right to
exercise the same or any other right at any time and form time to time
thereafter.
Each Maker, Guarantor and Endorser further agrees, jointly and
severally, to pay all principal and interest due hereunder, costs of collection,
including reasonable attorney's fees and costs of appeal, in case the principal
of this Note or interest thereon is not paid when due, or in case it becomes
necessary to protect the security hereof, whether suit be brought or not.
During the period of any Default under the terms of this Note, the
interest rate on the entire indebtedness then outstanding shall be at the
highest rate presently allowed t be charged under applicable law or any greater
interest which may be charged under any amendments to applicable law computed
from the date of default and continuing until such Default is cured.
No provision of this Note shall be construed to mean that Borrower has
paid or agreed to pay, directly or indirectly, under any circumstances
whatsoever, any interest in excess of that which lawfully may be charged under
any applicable law relating to interest. If for any reason interest in excess of
the highest lawful rate shall at any time be paid hereunder, or in the event
that any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower is interpreted so that any effective
rate of interest or other charges provided for in any loan document or this
Note, whether considered separately or together with other charges levied in
connection with any loan document and this Note, exceed the maximum rate of
interest or
2
<PAGE>
charges allowed by such law, and Borrower is entitled to the benefit of such
law, such interest or charges are reduced automatically to the extent necessary
to prevent that effective rate of interest from exceeding the maximum rate
allowable under applicable law and to the extent that the Note Holder shall
receive any sum which would constitute excessive interest, such sum shall be
applied to the reduction of the unpaid principal balance due hereunder (however,
no prepayment premium shall be due in connection therewith) and not to the
payment of interest or if such excessive interest exceeds the unpaid balance of
principal, the excess shall be refunded to Borrower. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
indebtedness which is secured by any Loan Document or evidenced by this Note and
which constitutes interest, as well as all other charges levied in connection
with such indebtedness which constitute interest, shall be deemed to be
allocated and spread over the stated term (including any renewal or extension)
of this Note to the fullest extent permitted by applicable law. Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest computed thereby is uniform throughout
the stated term (including any renewal or extension) of this Note. This
provision shall control every other provision of all agreements between Borrower
and Lender.
WAIVER OF TRIAL BY JURY, BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY
JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY TO THE FULL EXTENT THAT ANY TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY
AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT
THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE
PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF BORROWER'S HEREIN
CONTAINED WAIVER OF THE RIGHT TO TRIAL BY JURY. FURTHER, BORROWER HEREBY
CERTIFIES THAT NO DIRECTOR, OFFICER, EMPLOYEE REPRESENTATIVE OR AGENT OF LENDER
(INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF TRIAL BY JURY
PROVISION.
Any notice that must be given to the Note Holder under this Note will
be given by mailing it by first class mail t the Note Holder at the property
address or at a different address if the Note Holder is given written notice of
that different address.
If more than one person signs this Note, each person is fully and
personally obligated to keep all of the promises made in this Note, including
the promise to pay the full amount owed. Any person who is a guarantor, surety
or endorser of this Note is also obligated to do these things. Any person who
takes over these obligations, including the obligations of a guarantor, surety
or endorser of this Note, is also obligated to keep all of
3
<PAGE>
the promises made in this Note. The note Holder may enforce its rights under
this Note against each person individually or collectively.
CUIDAO HOLDING CORPORATION,
a Florida Corporation
(By) /s/ C. Michael Fisher
----------------------------
C. MICHAEL FISHER, President
(SEAL)
Payable At:
- -----------
4617 Garfield Street
Hollywood, Florida 33021
4
LEASE
-----
Landlord: SEBASTIANO SALEMI and NUNZIA, husband and
wife, 4617 Garfield Street, Hollywood,
Florida 33021
Tenant: LAKER AIRWAYS, INC., a Delaware Corporation,
2953 Simms Street, Hollywood, Florida 33020
Premises: Four Thousand Eight Hundred (4,800)
square feet of office/storage space
located at 2953 Simms Street,
Hollywood, Broward County, Florida,
Contained in a building located upon
the following described land:
The South 174 feet, less the East 150 feet
thereof, of that portion of Parcel B lying
between N. 29th and N. 30th Avenue, as
showed on the Plat of SOUTH FLORIDA
INDUSTRIAL PARK, according to the Plat
thereof, recorded in Plat Book 63, Page 38
of the Public Records of Broward County,
Florida.
1. DEMISE - Landlord, for and in consideration of the rents hereinafter
reserved, and the terms, conditions, covenants and provisions contained in this
Lease, hereby leases to Tenant, and the Tenant hereby takes and hires from the
Landlord, subject to the terms and conditions contained in this Lease, the
Premises, together wit any and all rights, privileges, and easements
benefitting, belonging or pertaining thereto. The building which contains the
Premises, and the surrounding land, but which is not a part of the Premises,
shall be defined as the "Property."
2. TERM - The term of this Lease shall be three (3) years commencing February 1,
1997 (the"Commencement Date") and ending January 31, 2000, unless sooner
terminated or extended as
provided in this Lease.
3. BASE MINIMUM RENT - Tenant agrees to pay to the Landlord as Base Minimum Rent
for the Premises, without offset or deductions, and without previous demand
therefor, an Initial Annual Rental of THIRTY-TWO THOUSAND FOUR HUNDRED DOLLARS
AND 00/100 ($32,400.00), plus applicable sales tax, payable in equal monthly
installments of TWO THOUSAND SEVEN HUNDRED DOLLARS AND 00/100 ($2,700.00), plus
applicable sales tax, on the first day of each and every month for the term of
the lease.
All rent required under this Lease shall be payable to the Landlord at the
address set forth in this Lease for notices t the Landlord. If any payment of
rent is not received by the Landlord within ten (10) days of its due date,
Tenant shall pay to Landlord a late fee equal to Five (5%) Percent of the amount
of the payment.
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<PAGE>
All rent shall be payable plus applicable sales tax, on the first day of each
and every month.
On the first anniversary of the Commencement Date, the Base Minimum Rent shall
be increased in accordance with changes in the Consumer Price Index (CPI) as
defined below. The Base Minimum Rent for the second year of this Lease shall be
computed by multiplying the Initial Annual Rental by a fraction, the numerator
shall be the CPI for the third month prior to the first anniversary of the
Commencement Date and the denominator shall be the CPI for the third month prior
to the Commencement Date.
For each subsequent year of this Lease, Base Minimum Rent shall be increased by
multiplying the rent for the immediately preceding year by a fraction, the
numerator of which shall be the CPI for the third month prior to the anniversary
of the Commencement Date and the denominator of which shall be the CPI for the
third month prior to the anniversary of the Commencement Date of the previous
lease year.
For purposes of this paragraph the Consumer Price Index is defined as follows:
The index number to be used is the "Consumer Price Index for all Urban Consumers
(1982-84=100) - All Items," Published in the monthly Labor Review of the Bureau
of Labor Statistics of the United Sates Department of Labor. If the
aforementioned index becomes unavailable, the index to be used is the "Consumer
Price Index" issued by the United States Department of Labor. If the
aforementioned index becomes unavailable, the index to be used is the "Consumer
Price Index" issued by the United States Department of Labor for the South
Atlantic Group of States. If the last mentioned index becomes unavailable, the
index to be used is the "Index of the General Price Level," issued by the
Federal Reserve Bank of Atlanta, Georgia. If the last mentioned index also
becomes unavailable, the index to be used is the "Index of the General Price
Level," issued by the Federal Reserve Bank of New York. In the event that the
index number series being used becomes subsequently unavailable, and another
series has to be used, then the amount of the rent payable and set from such
date of unavailability of the former series shall be determined by the new
series according to the relationship between the indexes in such new series and
the index therein as the previous adjustment date, but no retroactive adjustment
for excess or deficiency of rent paid up to the time of use of the new series
shall be made. Any revisions in the index number series used are to be effective
in determining the amount of said rent except that no retroactive adjustment for
excess or deficiency of rent paid up to the time of issuance of the revised
index is to be made. The index number as of such adjustment date is to be
ascertained approximately by means of interpolation based on the indexes nearest
to that date in the index series used.
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<PAGE>
In no event, however, shall the Base Minimum Rent for any year of the Lease term
be less than the Base Minimum Rent for any preceding year of the Lease term.
4. RULES AND REGULATIONS - Tenant, at its own cost and expense shall properly
observe and comply with all present and future laws, ordinances, requirements,
orders, directives, rules and regulations of all governmental authorities
affecting the Tenant's use of the Premises.
5. SECURITY - Landlord acknowledges receipt of $2,700.00, that Landlord is to
retain as security for the faithful performance of all the terms and conditions
of this Lease. Landlord shall not be obligated to apply the security deposit on
rents or other charges in arrears, or in damages for failure to perform the
terms and conditions of this Lease. Application of the security deposit to the
arrears of rental payments or damages shall be at the sole option of the
Landlord, and the right to possession of the Premises by the Landlord for
non-payment of rent for any other reason shall not in any event be affected by
the security deposit. The security deposit is to be returned to Tenant when this
Lease is terminated, according t the terms of this Lease, If not otherwise
applied by reason of any breach of the terms and conditions of this Lease by
Tenant. Tenant expressly acknowledges that Tenant shall not have the right to
apply the security deposit to rent. In no event is the security deposit to be
returned until Tenant has vacated the Premises and delivered possession to the
Landlord. In the event the Landlord repossesses the Premises because of the
default of the Tenant or because of the failure by the Tenant to carry out the
terms and conditions of this Lease, Landlord may apply the security deposit on
all damages suffered to the day of repossession and may retain the balance of
the security deposit to apply on damages that may accrue or be suffered
thereafter by reason of a default or breach of the Tenant. Landlord shall not be
obligated to hold the security deposit in a separate fund, but may mix the
security deposit wit other funds of the Landlord, and Landlord shall not be
obligated to pay interest to Tenant on the security deposit.
As security for the faithful performance of the terms and conditions of this
Lease, Tenant hereby pledges and assigns to Landlord all of the furniture,
fixtures, goods and chattels of Tenant, which shall or may be brought or put on
said Premises, and the Tenant agrees that said lien may be enforced by distress,
foreclosure or other process of law at the election of Landlord, and Tenant
agrees to pay reasonable attorney' fees, together with all costs and charges
incurred or paid by the Landlord by reason of Tenant's failure to perform any of
the terms and conditions of this Lease, which sums shall bear interest at the
highest rate permitted by law.
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<PAGE>
6. RISK OF LOSS - All Personal property placed or moved in the Premises shall be
at risk of Tenant or of the owner of such property, and Landlord shall not be
liable for any damage to said personal property, or to Tenant, arising from the
bursting or leaking of water pipes, or from any act of negligence of any
co-tenant or occupants of the building, or of any other person whomsoever. It is
further agreed that Landlord shall not be liable for any damage or injury by
water which may be sustained by the Tenant or other person, or for any other
damage or injury resulting from the carelessness, negligence or improper conduct
on the part of any person whomsoever, or by reason of the breakage, leakage or
obstruction of the water, sewer or soil pipes, other leakage in or about said
building.
7. TENANT'S TAXES, INSURANCE AND UTILITY EXPENSES -
a. During the term of this Lease, Tenant shall pay, before the same
shall become delinquent, all personal property taxes, sales taxes, and such
other taxes as may be payable by reason of operation of Tenant's business.
b. During the term of this Lease, Tenant shall pay, before the same
shall become delinquent, all charges for services furnished to the Premises for
the occupants thereof.
c. Tenant shall pay one-half of any increase in the real estate taxes
over the base year 1996. The real estate taxes for 1996 were $9,387.71 The
Tenant's share will be prorated from February 1, 1997, should there be any
increase in the taxes. Tenant shall also pay any increase in the insurance on
the property over and above the insurance paid in 1996, which premium was
$4,249.15 which shall also be prorated as of February 1, should there be an
increase in the insurance.
8. USE OF PREMISES - The Premises may be used for storage and an office and for
no other purposes whatsoever. The Tenant acknowledges that the burglar alarm
system in the premises belongs to Landlord. The Tenant will pay for the
monitoring system charges for the burglar alarm system.
Tenant shall not use or occupy, nor permit or suffer the Premises, the Property,
or any part thereof to be used or occupied for any unlawful or illegal business,
use of purpose, nor in any way in violation of any present or future
governmental laws, ordinances, requirements, orders, directives, rules or
regulations.
9. ACCESS TO THE PREMISES - During all reasonable hours, Landlord or Landlord's
agents shall have the right, but not the obligation, to enter upon the Premises
to examine same, to exhibit the Premises to prospective purchasers and during
the last 180 days of the term of this lease or any renewal and
4
<PAGE>
thereof, to exhibit the Premises to prospective tenants, and to make such
repairs as may be required of the Landlord under the terms of this Lease.
Landlord agrees not to unreasonably interfere with the operation of Tenant's
business.
10. REPAIRS - Landlord shall have no liability or responsibility for repairs or
maintenance whatsoever, except that Landlord shall paint the floor, remove the
wall between the second and the third room, patch and clean the right wall and
professionally clean and fix the office area. Tenant will have the right to
inspect the work by a certified inspector, to be done at Tenant's cost. Any
air-conditioning plumbing, electrical or telephone line repairs needed before
the Lease begins will be done at landlord's expense.
Landlord shall keep the roof and exterior walls of the building leak free and
make all structural repairs necessary to the roof or exterior walls of the
building. "Structural repairs" means repairs necessary to keep the building from
collapsing or sagging, or to prevent the Premises from being condemned because
of structural insufficiency.
Tenant acknowledges that the Premises are in good condition and that all
fixtures, equipment and appurtenances are in good working order, and agrees to
maintain the Premises in the same condition, order and repair as they are at the
commencement of this Lease, and agrees to make all repairs and replacements in
and about the Premises necessary to preserve them in good order and condition,
which repairs and replacement made by Tenant shall be in equal quality and class
to the original work. Tenant shall promptly pay the expense of any such repairs.
All additions, fixtures or improvements which may be made or installed by
Tenant, except movable furniture, shall become the property of the Landlord and
remain upon the Premises as a part thereof, and be surrendered with the Premises
at the termination of this Lease, at the option of the Landlord. If Landlord
elects to allow Tenant to remove such fixtures or additions, Tenant shall repair
any damage caused by such removal. Tenant shall not demolish, replace or
materially alter the building containing the demised Premises, or any part
thereof, whether voluntary or in connection with any repair or restoration
required by this Lease.
11. INSURANCE - During the term of this Lease, the Tenant shall carry and pay
for liability insurance issued or endorsed to insure the Landlord and any
mortgagees from and against any and all claims, suits, actions, damages and/or
causes of action arising during the term of this Lease for any personal injury,
loss of life and/or damage to property sustained in and about the Premises, by
reason of or as a result of Tenant's occupancy of, and from and against any
order, judgments and/or decrees which may be entered thereon, and from and
against all costs,
5
<PAGE>
attorneys' fees, expenses and liabilities incurred in and about the defense of
any such claim and the investigation thereof, for an amount not less than One
Million Dollars ($1,000,000.00) combined single limit.
In addition, Tenant shall carry and pay for replacement cost fire, extended
coverage, and flood insurance, to cover the cost of repair or replacement of
Tenant's leasehold improvements.
Such insurance shall name the Landlord and any mortgagees as additional insured
as the Landlord's and may mortgagee's interests may appear. The insurance policy
shall be issued by an insurance company satisfactory to the Landlord.
The Tenant shall deliver to the Landlord these insurance policies or copies or
certificates thereof immediately upon commencement of the Lease and thereafter
from time to time as required to assure the Landlord and any mortgagees that the
coverage afforded by the policies is being maintained continuously by the Tenant
and that the premiums therefor had been paid by the Tenant.
12. SUBORDINATION - This Lease shall be subject and subordinate to any mortgage
that now encumbers or affects the Property or that the Landlord or any
subsequent owners of the Premises may hereafter at any time elect to place on
the Property, including but not limited to a purchase money mortgage which may
be held by Landlord as a seller, and to all advances, extensions, or
modification already made or that may be hereafter made on account of any such
mortgage, to the full extent of the principal sum secured thereby and issued
thereon. Furthermore, Tenant shall, upon request, execute any paper or papers
that Landlord's counsel may deem necessary to accomplish such subordination of
Tenant's interest in this Lease, in default of which Landlord is hereby
appointed as Tenant's attorney-in-fact to execute such papers in the name of
Tenant and as the act and deed of Tenant, and this authority is hereby declared
to be coupled with an interest and irrevocable.
13. ASSIGNMENT AND SUBLEASING - Tenant shall not assign this Lease, sublet the
entire Premises or otherwise transfer any interest in this Lease, without the
prior written consent of the Landlord, which consent will not be unreasonably
withheld. Landlord's consent may be conditioned upon the proposed assignee being
of equal or greater financial strength as Tenant or Tenant's guarantor (if any).
No consent to an assignment or sublease shall release Tenant or Tenant's
guarantor (if any) from any obligations under this lease. If Tenant is a
corporation, a transfer of more than 25% of the stock of said Tenant corporation
shall be deemed an assignment for purposes of this Lease.
Tenant shall not sublet portions of the Premises without Landlord's prior
written consent, which shall be in Landlord's
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<PAGE>
sole and absolute discretion. In the event of any sublease hereunder, Landlord
shall be entitled to receive, in addition to any and all rent otherwise required
under this Lease, one hundred (100%) percent of any amount paid to Tenant, by a
sub-tenant, above the rent payable by Tenant to Landlord pursuant to this Lease.
If a sublease is permitted by Landlord, Tenant agrees to furnish Landlord with a
photostatic copy of each sublease made for space in the Premises.
Tenant shall not hypothecate, transfer, pledge or otherwise encumber this Lease
or Tenant's right hereunder nor shall Tenant permit any such encumbrance. Any
attempt at assignment, sublease, pledge, transfer or encumbrance of this Lease
without the prior written consent of Landlord shall be null and void, and a
default under this Lease.
Tenant shall and does hereby indemnify and agree to hod Landlord harmless from
any and all liabilities, claims and causes of action arising under any terms and
conditions of every sublease, license or concession agreement, unless such
liabilities, claims and causes of action arise by reason of a default or breach
by Landlord, or the negligent conduct or activity of Landlord, its agents or
employees, under this Lease.
If all or any part of the Premises be sublet or occupied by anyone other than
Tenant, Landlord may, after default by Tenant, collect sub rent from any and all
subtenants or occupants, and apply the net amount collected to the net annual
rent reserved herein, but no such collection shall be, or be deemed to be, a
waiver of any agreement, term, covenant or condition of this Lease or the
acceptance by Landlord of any subtenant or occupant as Tenant, or a release of
Tenant form performance by Tenant of its obligations under this Lease.
To secure the prompt and full payment by Tenant of the rental in this Lease
reserved and the faithful performance by Tenant of al the other terms and
conditions herein contained on its part to be kept and performed, Tenant hereby
assigns, transfers and sets over unto Landlord, subject to the conditions
hereinafter set forth, all of Tenant's right, title and interest in and to all
subleases that may hereafter be made and in and to all concession agreements
hereafter made affecting any part of the Premises.
14. INDEMNIFICATION OF LANDLORD - In addition to any other indemnities to
Landlord specifically provided in this Lease, Tenant shall indemnify and save
harmless Landlord against and from all liabilities, liens, suits, obligations,
fines damages, penalties, claims, costs, charges and expenses, including
reasonable architects' and attorneys' fees by or on behalf of any person which
may be imposed upon or incurred by or asserted against Landlord by reason of the
use and/or occupancy of the Premises or any part thereof, or any surrounding
areas, by Tenant
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<PAGE>
or Tenant's agents, contractors, servants, employees, licensees or invitees
during the term of this Lease. This indemnification shall specifically extend to
but shall not be limited to loss or damage arising out of environmental hazards
or contamination.
The provisions of this Article and the provisions of all other indemnity
provisions elsewhere contained in this Lease shall survive the expiration or
earlier termination of this Lease for events occurring prior to such expiration
or termination.
Landlord shall not in any event whatsoever be liable for any injury or damage to
any personal property or to any person happening on, in or about the building be
leased, whether belonging to Tenant or any other person, caused by any fire,
breakage, leakage, defect or bad condition in any part or portion of the
Premises, howsoever caused unless such injury or damage is caused by the active
negligence of the Landlord, its agents or employees, or a breach or default by
Landlord of its obligations under this Lease.
Tenant shall, at its own cost and expense, defend any and all suits or actions
(just or unjust) which may be brought against Landlord or in which Landlord may
be impleaded with others upon any such above-mention matters, claim or claims.
In such event, Landlord agrees to cooperate and
assist Tenant and Tenant's counsel in providing documentation, plans,
specifications and any other agreements or documents which may be reasonably
required by Tenant and/or Tenant's in order to defend such suit or actions.
Tenant shall pay to the Landlord all costs and expenses, including reasonable
attorneys' fees (including costs, expenses and attorneys' fees in any appellate
proceedings), incurred by Landlord in any action or proceeding to which Landlord
may be made a party by reason of any act or omission of the Tenant.
Notwithstanding the provisions of this Article, Tenant shall not be liable for
any of the acts, actions or negligent acts or omission of the Landlord, its
agents or employees.
15. RESTRICTION AGAINST CONSTRUCTION LIEN - Neither Tenant nor anyone claiming
by, through or under Tenant, shall have any right to file or place any
construction lien of any kind or character whatsoever on the property and notice
is hereby given that no contractor subcontractor, or anyone else that may
furnish any material, service or labor to the property at any time shall be or
become entitled to any lien thereon whatsoever. For the further security of
Landlord, Tenant shall give actual notice of this restriction in advance to any
and all contractors, subcontractors, or other persons, firms, or corporations
that may furnish any such material, service, or labor.
8
<PAGE>
Landlord shall have the right to record a notice of this provision in the Public
Records of the County in which Premises is located.
If such lien is filed against Landlord's interest on the Property, Tenant shall
cause such lien to be released of record or bonded within thirty (30) days of
Tenant's knowledge of such lien.
16. CONDEMNATION -
a. If at any time during the term of this Lease, the whole or
materially all of the Premises shall be taken for any public or quasi-public
purpose by any lawful power or authority by the exercise of the right of
condemnation or eminent domain or by agreement between Landlord, Tenant and
those authorized to exercise such right, this Lease, the term hereby granted,
any rights of renewal hereof and any renewal terms hereof, shall terminate and
expire on the date of such taking and the rent and other sum or sums of money
and other charges herein reserved and provided to be paid by the Tenant shall be
apportioned and paid to the date of such taking.
b. The term "materially all of the Premises "shall be deemed to mean
such portion of the Premises, as when so taken, would leave remaining a balance
of the Premises which, due either to the area so taken or the location of the
part so taken in relation to the part not so taken, would not allow the Tenant
to continue its business operations, or would not under economic conditions,
zoning laws or building regulations then existing or prevailing, readily
accommodate a new building or buildings of a nature similar to the build or
buildings existing upon the Land at the date of such taking and of floor area
sufficient, together with buildings not taken in the condemnation, to operate
Tenant's business, taking into account all reasonable parking requirements.
c. For the purpose of this Article, the Premises or a part thereof, as
the case may be, shall be deemed to have been taken or condemned on the date on
which actual possession of the Premises or a part thereof, as case may be is
acquired by any lawful power or authority or the date on which title vests
therein, whichever is earlier.
d. It is further understood and agreed that if any time during the term
of this Lease the Premises or the Property or the improvements or buildings
located thereon, or any portion thereof, be taken or appreciated. Or condemned
by reason of eminent domain, the entire award shall be the property of the
Landlord and in no event shall tenant receive any portion of any award made to
Landlord. Tenant shall have the right to make a separate claim for its own
damages.
9
<PAGE>
In the event less than materially all of the Premises shall be taken by
governmental authority, then:
i. If the portion so taken does not affect the operation of
Tenant's business, then this Lease shall continue in full force and effect.
ii. In the event the portion of the Premises are taken so that
Tenant's is able to continue to operate its business, but the operation of such
business is reduced by reason of such taking, then the Base Minimum Rent shall
be reduced proportionately by the same percentage as the square footage of the
Premises which have been taken by governmental authority bears to the total
square footage of the Premises prior to such taking.
17. DESTRUCTION OF PREMISES -
a. In the event the entire Premises or materially all of the Premises
are destroyed by fire or other casualty, Landlord shall have the option of
terminating this Lease or of rebuilding the Premises and shall give written
notice of such election to the Tenant within thirty (30) days after the date of
such casualty. In the event Landlord elects to rebuild the Premises, the
Premises shall be restored to its former condition within a reasonable time,
during which the rent due from Tenant to Landlord hereunder shall abate. In the
event Landlord elects to terminate this Lease, rent shall be paid only to the
date of such casualty, and the term of this Lease shall expire as of the date of
such casualty and shall be of no further force and effect and Landlord shall be
entitled to sole possession of the Premises.
b. The term "materially all of the Premises" shall be deemed to mean
such portion of the Premises, as when so destroyed, would leave remaining a
balance of the Premises which due to the amount of area destroyed or the
location of the part so destroyed in relation to the part left undamaged would
not allow the Tenant to continue its business operations.
c. In the event of a partial destruction which is not materially all of
the Premises, the Base Minimum Rent shall proportionately abate based upon the
square footage of the Premises remaining undamaged and Landlord shall repair the
damage.
d. Notwithstanding the foregoing, if the damage or destruction is as a
result of the action or inaction of Tenant or Tenant's employees, or agents,
invitees, or as a result of Tenant not fulfilling all of its obligations under
this Lease, no rent shall abate and Tenant shall make all necessary repairs.
10
<PAGE>
18. QUIET ENJOYMENT - Tenant, upon paying the rent and all other sums and
charges to be paid by it as herein provided, and observing and keeping all
covenants, warranties, agreements and conditions of this Lease on its part to be
kept, shall quietly have and enjoy the Premises during the term of this Lease,
without hindrance or molestation by anyone.
19. DEFAULTS - Each of the following events shall be an "Event of Default"
hereunder:
a. Failure of Tenant to pay any installment of Rental or any part
thereof, or any other payments of money, costs or expenses herein agreed to be
paid by Tenant, when due.
b. Failure to observe or perform on one or more of the other terms,
conditions, covenants or agreements of this Lease and the continuance of such
failure for a period of fifteen (15) days after written notice by Landlord
specifying such failure (unless such failure requires work to be performed, acts
to be done or conditions to be improved, as the case may be, within such fifteen
(15) day period, in which case no default shall be deemed to exist so long as
Tenant shall have commenced curing the same within such 15 day period, and shall
diligently and continuously prosecute the same to completion).
c. If this Lease of the estate of Tenant hereunder shall be transferred
to or assigned to or subleased to or shall pass to any person or party, except
in a manner herein permitted.
d. If a levy under execution or attachment shall be made against Tenant
or its property and such execution or attachment shall not be vacated or removed
by court order, bonding or otherwise within a period of thirty (30) days.
e. A rejection of the Lease by a trustee in bankruptcy appointed in
connection with the bankruptcy of the Tenant.
f. A failure to vacate the Premises upon termination of
this Lease.
No payment by Tenant or receipt by Landlord of an amount less than the required
payment set forth in the Lease, shall be considered as anything other than a
partial payment of the amount due. No endorsement or statement to the contrary
on any check shall be deemed an accord and satisfaction. Landlord may accept a
partial payment without prejudicing Landlord's right to recover the balance of
such payment which is still due, and without affecting any other remedies
available to Landlord.
20. REMEDIES - Upon an "Event of Default" as defined above, Landlord at it
Option shall have the following non-exclusive remedies in addition to those
provided by law:
11
<PAGE>
a. Landlord may treat the Lease as terminated whereupon the right of
Tenant to the possession of the Premises shall immediately terminate, and the
mere retention or possession thereafter by Tenant shall constitute a forcible
detainer.
b. Landlord may terminate Tenant's right of possession, without the
termination of this Lease, in which event Landlord shall have the right to relet
the Premises as the agent for the Tenant and to hold the Tenant responsible for
any deficiency between the amount of rent realized from such reletting, less any
and all expenses incurred by the Landlord in connection with such reletting,
including but not limited to renovation and repair expenses, and the amount
which would have been payable by Tenant under the terms of this Lease. No
re-entry or repossession by the Landlord shall serve to terminate this Lease,
unless the Landlord so elects in writing, nor shall it release Tenant from any
liability for the payment of any rent stipulated to be paid pursuant to this
Lease or for the performance or fulfillment of any other term or condition
provided herein.
c. Landlord may declare all the installments of rent for the whole term
of this Lease to be immediately due and payable at once without further demand,
in which event all sums payable to the Landlord shall bear interest from the
date of default at the highest rate permitted by law.
d. Landlord shall have the right to take no immediate action and to hod
the Tenant responsible for the rent as it becomes due.
e. Any Base Minimum Rent which was abated or waived by Landlord shall
also be immediately due and payable by Tenant to Landlord.
f. In the event of a holdover by Tenant after the termination of this
Lease Landlord shall have the right to collect double the amount of Base Minimum
Rent. In addition, Tenant shall be responsible for any cost or expenses incurred
by Landlord as a result of such holdover, including but not limited to any
damage incurred by Landlord as a result of Landlord's inability to make the
premises available to a new Tenant.
21. ATTORNEY'S FEES - In the event of any litigation arising out of this lease,
the Losing Party shall pay to the Prevailing Party all costs and expenses,
including reasonable attorneys' fees (including appellate proceedings) which the
Prevailing Party may incur.
22. CERTIFICATES - Either party shall, without charge, at any time and from time
to time hereafter as may be commercially reasonable, within fifteen (15) days
after written request of the other, certify by written instrument duly executed
and
12
<PAGE>
acknowledged to any mortgagee or purchaser, or proposed mortgagee or proposed
purchaser, or any other person, firm or corporation specified in such request:
a. As to whether this Lease has been supplemented or
amended, and if so the substance and manner of such supplement or
amendment;
b. As to the validity and force and effect of this Lease,
in accordance with its tenor as then constituted; and
c. As to any other matters as may reasonably be so
requested.
Any such certificate may re relied upon by the party requesting it and any other
person, firm or corporation to whom the same may be exhibited or delivered, and
the contents of such certificate shall be binding on the party executing same.
Should any banking institution, savings and loan association or other
institutional lender to whom Landlord is applying for a loan which, if granted,
would make such lender a Landlord's mortgagee, request reasonable modification
in this Lease, the effect of which would not make a change in the rental or
other economic terms of this Lease or increase Tenant's expenses or the risk to
which Tenant is exposed, Tenant agrees that it shall not unreasonably withhold
its agreement to such modification.
23. INITIAL CONDITION OF PREMISES - Tenant acknowledges that it has made a
complete inspection of the Premises prior to the commencement of this Lease, and
the Premises are satisfactory to Tenant.
24. 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 building in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
25. STORMS - Tenant agrees to exercise reasonable care to protect the Property
in the event a public warning should be issued that the Premises are threatened
by a hurricane, tornado or storm of similar magnitude.
26. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS - If Tenant shall at any time
fail to make any payments in accordance with the provisions hereof, or to take
out. Pay for, maintain or deliver any of the insurance policies provided for
herein, or shall fail to make any other payment or perform any other act o its
part to be made or performed, then Landlord, after fifteen
13
<PAGE>
(15) days notice to Tenant (without notice in case of an emergency) and without
waiving or releasing Tenant from any obligation of Tenant contained in this
Lease, may (but shall be under no obligation to):
a. Pay any amount payable by Tenant pursuant to the
provisions hereof, or
b. Make any other payment or perform any other act on Tenant's part to
be made or performed as in this Lease provided, and may enter upon the Premises
for the purpose and take all such action thereon as may be necessary therefor.
All sums so paid by Landlord and all costs and expenses incurred by Landlord in
connection with the performance of any such act, shall bear interest at the
highest rate allowed by law.
27. NOTICE - Any notice designation, consent, approval or other communication
required or permitted to be given pursuant to the provisions of this Agreement
shall be given in writing and shall be sent by registered or certified mail,
postage prepaid, return receipt requested, addressed to the addresses set forth
on the first page of this Lease.
Either party may, by notice given in accordance with the provisions in this
section, designate any further or different address to which subsequent notices,
designations, consents, approvals or other communications pursuant to the
provisions of this Agreement shall be sent. Any notice, designation, consent,
approval or other communication shall be deemed given 3 days after such notice,
designation, consent, approval or other communication shall be deposited in any
post office or official depository of the United States Postal Service in the
State of Florida.
28. HAZARDOUS MATERIALS - Tenant shall not knowingly cause or permit any
hazardous material to be brought upon, kept, or used in or about the Premises by
Tenant, its agents, employees, contractors or invitees. If the Premises are,
through Tenant's fault, contaminated by hazardous materials, then Tenant shall
indemnify, defend and hold Landlord harmless from any and all claims, judgments,
damages, penalties, fines, costs, liabilities or losses (including without
limitation, diminution in value or useable space or of any amenity of the
Premises), damages arising from any adverse impact on marketing of space, and
sums paid in settlement of claims, attorney's fees', consultant's fees and
expert fees (including any appeals) which arise during the lease term as a
result of any such contamination.
This indemnification by Tenant includes, without limitation, costs incurred in
connection with any investigation of site conditions or any clean up,
remediation, removal or restoration
14
<PAGE>
work required by any federal, state or local government agency or political
subdivision because of hazardous material present in the soil or ground water on
or under the Premises. Without limiting the foregoing, if the presence of any
hazardous material on the Premises is detected, Tenant shall promptly take all
actions at its sole expense as are necessary to return the Premises to the
condition existing prior to the contamination or introduction of such hazardous
material to the Premises; provided, however, that Landlord's approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld, so long as such actions would not potentially have any material
adverse effect on the Premises.
As used herein, the term hazardous material means any hazardous or toxic
substance, material or waste, which is or becomes regulated by any local
government authority, the State of Florida or the United States government. Then
term "hazardous material" includes, without limitation, any material or
substance that is (1) defined as a "hazardous substance" under appropriate state
law provisions, (2) petroleum, (3) asbestos, (4) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act
(33 USC 1321), (5) defined as a hazardous waste pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, (42 USC 690), (6) defined as a
hazardous substance pursuant to Section 10 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 USC 9601), or (7) defined as a
regulated substance pursuant to Sub- Chapter VIII, Solid Waste Disposal Act (the
regulation of underground storage tanks), (42 USC 4991).
29. MISCELLANEOUS - The parties further agree as follows:
a. The covenants, conditions and agreements contained in this Lease
shall bind and insure to the benefit of Landlord and Tenant and their respective
heirs, successors, administrators, representatives and assigns.
b. This Lease and the performance thereof shall be governed,
interpreted, construed and regulated by the laws of the State of Florida.
c. The rights of the Landlord under the terms of this Lease shall be
cumulative, and failure on the part of Landlord to exercise promptly any rights
given under the terms of this Lease shall not operate to forfeit any of said
rights nor shall the same be deemed a waiver of such rights.
d. The parties acknowledge that each has had the opportunity to have
this Agreement reviewed by counsel and notwithstanding the fact that this
Agreement was initially drafted by Abrams, Anton, Robbins, Resnick & Schneider,
P.A. and is on its stationery, all parties have participated equally in
15
<PAGE>
the final wording of this Agreement and in the event of any dispute regarding
the meaning of any of the terms herein, such terms shall not be construed
against the client of Abrams, Anton, Robbins, Resnick & Schneider, P.A.
e. This Lease shall not be recorded in the Public Records.
f. This Agreement represents the entire understanding between the
parties, and supersedes all prior agreements, oral or written, and this Lease
agreement may not be amended except by an instrument in writing signed by the
parties hereto.
g. The submission of this document for examination does not constitute
an option of offer to lease space at the Property. This document shall have no
binding effect on the parties unless executed by the Landlord and the Tenant and
a fully executed copy is delivered to the Tenant.
30. BROKERAGE - The parties acknowledge that the real estate brokers that are
involved in the transaction giving rise to this Lease are Sara David Realty,
Inc., and Century 21, Gerry Sullivan and Associates. The total brokerage fee is
SIX PERCENT (6%) of the yearly rental, which first year's commission shall be
paid at the beginning of this Lease and every year thereafter that the Tenant is
in possession of the premises.
31. OPTIONS TO RENEW - The Tenant shall have the right to renew the Lease for a
term of five additional years and on the terms and conditions set forth below:
During the option term, the Base Minimum Rent shall be increased in accordance
with changes in the Consumer Price Index (CPI) as defined below. The Base
Minimum Rental shall be increased by multiplying the rent for the immediately
preceding year by a fraction, the numerator of which shall be the CPI for the
third month prior to the expiration of the term and the denominator of which
shall be the CPI for the third month prior to the anniversary of the
Commencement Date of the Lease.
For purposes of this paragraph the Consumer Price Index is defined as follows:
The index number to be used is the "Consumer Price Index for all Urban Consumers
(1982-84=100) - All items," published in the monthly Labor Review of the Bureau
of Labor Statistics of the United States Department of Labor. If the
aforementioned index becomes unavailable, the index to be used is the "Consumer
Price Index" issued by the United States Department of Labor. If the
aforementioned index becomes unavailable, the index to be used is the "Consumer
Price Index" issued by the United States Department of Labor for the South
Atlantic Group of States. If the last mentioned index becomes unavailable, the
index to be used is the
16
<PAGE>
"Index of the General Price Level," issued by the Federal Reserve Bank of
Atlanta, Georgia. If the last mentioned index also becomes unavailable, the
index to be used is the "Index of the General Price Level," issued by the
Federal Reserve Bank of New York. In the event that the index number series
being used becomes subsequently unavailable, and another series has to be used,
then the amount of the rent payable and set from such date of unavailability of
the former series shall be determined b the new series according to the
relationship between the indexes in such new series and the index therein as of
the previous adjustment date, but no retroactive adjustment for excess or
deficiency of rent paid up to the time of use of the new series shall be made.
Any revisions in the index number series used are to be effective in determining
the amount of said rent except that not retroactive adjustment for excess or
deficiency of rent paid up to the time of issuance of the revised index is to be
made. The index number as of such adjustment date is to be ascertained
approximately by means of interpolation based on the indexes nearest to that
date in the index series used.
In no event, however, shall the Base Minimum Rental for any year of the Lease
term be less than the Base Minimum Rental for any preceding year of the Lease
term.
a. The terms and conditions of the Option to Renew are:
i. The option to renew may be exercised only if no default
exists under any of the terms of this Lease when the option becomes exercisable.
In addition, if Tenant has been in default by reason of a failure to pay money
when due more than twice in any calendar year during the term of this Lease, no
option to renew may be exercised.
b. Tenant shall exercise its right to renew in the
following manner:
i. At least sixty (60) days prior to the expiration of the
initial term, Tenant shall notify Landlord in writing of its election to
exercise the right to renew the term of this Lease for the renewal term;
ii. Upon the giving of the notice of exercise of this renewal
option, this Lease shall be deemed to be renewed and the term thereof renewed
for the period and upon the terms provided above without the execution of any
further lease or instrument.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease.
Signed, sealed and delivered in the presence of :
(Two Witnesses are required LANDLORD:
for each signature)
__________________________ /s/ Sebastiano Salemi
---------------------
SEBASTIANO SALEMI
__________________________ Date: 1/27/97
__________________________ /s/ Nunzia Salemi
-----------------
NUNZIA SALEMI
___________________________ Date: 1/27/97
TENANT:
LAKER AIRWAYS, INC., a
Delaware Corporation
____________________________ By: /s/ James B. Kenney
-------------------
JAMES B. KENNEY,
President
____________________________ Date: 1/27/97
18
ASSIGNMENT OF LEASE
That we,
SEBASTIANO SALEMI AND NUNZIA SALEMI, husband and wife, parties of the first
part, in consideration of the sum of TEN and 00/100 ($10.00) Dollars, and other
valuable considerations, received from or on behalf of CUIDAO HOLDING CROP., a
Florida corporation, party of the second part, at or before the unsealing and
delivery of these presents the receipt whereof is hereby acknowledged, do hereby
grant, bargain, sell assign, transfer and set over unto the said party of the
second part a certain lease bearing date the 27th day of January A.D., 1997,
between SEBASTIANO SALEMI and NUNZIA SALEMI, husband and wife as Lessor, and
LAKER AIRWAYS, INC., a Delaware Corporation as Lessee with regard to that
certain property located at 2953 Simms Street, Hollywood, Florida
IN WITNESS WHEREOF, we have hereunto set our hands and seals, this 22nd
day of January, A.D., 1999.
_____________________________ /s/ Sebastiano Salemi
----------------------
SEBASTIANO SALEMI
_____________________________ /s/ Nunzia Salemi
----------------------
NUNZIA SALEMI
STATE OF FLORIDA
COUNTY OF BROWARD
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid, to take
acknowledgments, personally appeared SEBASTIANO SALEMI and NUNZIA SALEMI,
husband and wife, who are personally known to me and who executed the foregoing
instrument and they acknowledged before me that they executed the same.
WITNESS my hand and official seal this 22nd day of January, 1999.
- ----------------------------
Notary Public
Printed name:
1
SUBSIDIARIES
Cuidao (USA) Import Co., Inc.
R&R (Bordeaux) Imports, Inc.
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE AUDITED FINANCIAL STATEMENTS OF CUIDAO HOLDING CORP. FOR
THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 353,281
<SECURITIES> 0
<RECEIVABLES> 24,226
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 409,951
<PP&E> 18,782
<DEPRECIATION> 6,220
<TOTAL-ASSETS> 454,357
<CURRENT-LIABILITIES> 128,784
<BONDS> 0
0
0
<COMMON> 236
<OTHER-SE> 660,918
<TOTAL-LIABILITY-AND-EQUITY> 454,357
<SALES> 68,387
<TOTAL-REVENUES> 68,387
<CGS> 40,359
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 197,365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,254
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (170,591)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (170,591)
<EPS-PRIMARY> (.076)
<EPS-DILUTED> (.076)
</TABLE>
