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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Lighthouse Landings, Inc.
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(Name of small business issuer in its charter)
New Jersey 22-3241823
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
195 Fairfield Avenue, Suite 3C, West Caldwell, New Jersey 07006
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(Address of principal executive offices)
Issuer's telephone number: 973-228-2901
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Securities to be registered under Section 12(b) of the Act: None
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Securities to be registered under Section 12(g) of the Act: Common Stock,
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$.01 Par Value
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS
History of the Company.
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Lighthouse Landings, Inc. (the "Company") is a New Jersey corporation
formed on May 12, 1993 under the name Drydock Cafe, Inc. On September 21, 1994,
the Company changed its name to Lighthouse Landings, Inc.
Through 1997 the Company's principal business was the redevelopment of a
marina facility on a 2 1/2 acre site located on the Shrewsbury River in
Highlands, New Jersey (the "Property"), which it acquired in September 1993. The
Property is a mostly vacant parcel of land with 463 linear feet of waterfront
and has on its premises a 4,000 square foot building on the water's edge and a
small office building. The Property has preliminary zoning approval for a
restaurant facility, retail building, bait and tackle shop, 23 slip marina,
concrete parking area and deep water boat fueling pier.
In September 1993 the Company purchased the Property at a Sheriff's sale
for $1,000,000. Currently, the Property is encumbered by a promissory note with
the remaining principal balance of $60,000, all of which is delinquent. However,
the note holder has afforded the Company additional time to pay the balance.
Relations with the note holder have historically been amenable.
In December 1997, the Company purchased all outstanding shares of a
privately-owned company called The Cigar Box, Inc. ("Cigar Box"), a retail cigar
and accessories store, located in Ramsey, New Jersey. The Cigar Box stockholders
received 75,000 shares of the Company's common stock. The acquisition was
contemplated and consummated at a time when cigars were increasingly popular and
the Cigar Box was to be used to supply retail outlets at ferry locations in New
Jersey. The Company had planned to operate additional Cigar Box retail outlets,
one of which would be included as part of a private club at the Property's
restaurant facility.
In October 1998, the Company acquired 80% of the issued and outstanding
shares of the capital stock of Fast Ferry Holding Corporation, a New York
corporation, and its wholly owned subsidiaries, Fast Ferry I Corporation, Fast
Ferry II Corporation and New York Fast Ferry Services, Inc., all New York
corporations (collectively "NY Fast Ferry"). NY Fast Ferry owns two vessels, the
M/V Finest and the M/V Bravest, and is in the business of operating high-speed
commuter ferry services in the greater New York City harbor area. The Company
issued 454,545 shares of its common stock to the NY Fast Ferry shareholders. Of
the 454,545 shares issued, 70,000 shares are subject to a put under which two of
the three selling shareholders can require the Company to purchase an aggregate
of 70,000 shares at a price of $5.00 per share.
As a result of the acquisition of NY Fast Ferry, the Company's primary
business changed from the redevelopment of the Property to the operation of
existing fast ferry service and the development of new routes. Accordingly, the
Company reevaluated all other business strategies and decided to sell all non-
core business assets and operations so it could focus solely on developing its
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core business of ferry services. In October 1999 the Company listed both the
Cigar Box and the Property for sale.
Current Business; Markets.
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The Company is in the business of operating high-speed, passenger ferries.
At present, it owns two high-speed passenger ferries: the M/V Finest and the M/V
Bravest. These ferries are 38-meter aluminum hull, low wake catamarans that
travel at speeds averaging 35 knots. These vessels each have a capacity of 340
passengers and are equipped with TV monitors and a public announcement and
stereo system. Both vessels also have a refreshment concession area onboard.
The Company's primary passenger is the executive commuter. The Company's
fast ferry service offers the executive commuter a fast, convenient, reliable,
clean and comfortable alternative to the crowded public transportation available
via train or bus, not to mention the congestion and stress faced by those
choosing to commute via automobile. The market being served by NY Fast Ferry
includes the Rumson-Red Bank peninsula immediately south of Highlands, New
Jersey in Monmouth County and has an excellent market potential to support
present and expanded ferry service. According to the New Jersey Department of
Transportation, there are approximately 22,000 Manhattan bound daily commuters
from Monmouth County, New Jersey alone.
The M/V Bravest travels 17 nautical miles across New York Harbor from
Highlands, New Jersey to Pier 11 in downtown Manhattan, New York. Pier 11 is
located about two blocks from Wall Street. This ferry also makes a stop at the
East 34/th/ Street Pier on the eastside of midtown Manhattan. The trip to Pier
11 is approximately 40 minutes long and an additional 10 minutes to the East
34/th/ Street dock. Daily, the ferry makes two peak trips in the morning and two
peak return trips at the end of the business day and one off-peak morning trip
and one off-peak return trip in the evening four days a week. Passengers on
these trips are primarily commuters, the majority of whom purchase 40-trip
tickets at the current cost of $420.
The M/V Finest was under a bareboat charter arrangement until October 31,
1999 to the Massachusetts Steamship Authority, which operates a fast ferry
service in Massachusetts. The M/V Finest recently underwent a scheduled engine
overhaul and is now available for NY Fast Ferry operation. The M/V Finest will
be used to add additional peak runs to and from Manhattan from the Clam Hut site
in the Highlands area which is currently being prepared for operation. This
vessel will make one trip during morning peak hours to Manhattan and two trips
from Manhattan during peak evening hours.
NY Fast Ferry also runs excursions during non-commuter times and on
holidays and weekends when the vessel is not operating scheduled trips. These
excursions include whale watching trips off the coast in the winter, summer
sunset cruises in New York Harbor, and fall foliage tours up the Hudson River
Valley. The ferries also make trips to sporting events including baseball games
at Shea Stadium and football games at West Point and for special events such as
4/th/ of July fireworks. The Company also rents its vessels for charters and
private parties.
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The Property is not in operational condition for fast ferry service because
of the condition of the bulkhead, the surface of the parking area, and the
site's limited parking capacity. Accordingly, NY Fast Ferry operates from a
leased facility known as the Aragon Marina ("Aragon") located on Willow Street,
Highlands, New Jersey. The site is leased by NY Fast Ferry on a passenger trip
basis, with a remaining term of approximately four years, renewable at the same
rates and basis for an additional five years. Under this lease the property
owner provides and maintains all land side facilities, including providing
parking attendants in the morning, snow plowing, lighting, docks, shuttle bus to
offsite lot, etc. It is Aragon's obligation to provide 300 parking spaces, but
only 250 are available, and there are payment reductions for the lost parking
spaces. The monthly lease payment to Aragon has averaged $24,900 over the last
12 months.
The Company believes the Aragon site is better suited to providing first-
class, convenient commuter fast ferry service than the Property it owns.
Accordingly, the Company is in negotiations with the owner of Aragon to purchase
that site and has placed its Property on the market for sale. However, the
Aragon property needs improvements and the parking space needs to be expanded.
The Company is also actively seeking other sites in the New York and New
Jersey areas suitable for providing fast ferry service to commuters to
Manhattan, in order to maximize ferry capacity. If the Company is unsuccessful
in negotiating acceptable terms for the Aragon property, there is sufficient
time remaining on the Aragon lease to permit the Company to explore other
options. The Company recently entered into a 60-day short term agreement to
utilize a dock and parking facility at the Clam Hut located approximately one-
half mile south of the Aragon property. The Clam Hut has parking capacity for
150 vehicles. At the end of the short term agreement, the Company and the owners
of the Clam Hut property have the option of extending the agreement subject to
the approval of the local zoning board.
The Company entered into a five-year lease agreement, renewable for a
further five-year team, with The Connecticut Light and Power Authority (the
"Landlord") for approximately 3.6 acres together with the dock located at
Atlantic Street and Washington Boulevard in Stamford, Connecticut (the "Stamford
Property") for the purpose of operating a high-speed ferry service. The lease
commenced on November 1, 1999 with rent payments commencing on March 1, 2000.
Rent for the first six months (March through August) is based on annual rate of
$100,000, or $8,333.33 per month, and for the seventh through the twenty-fourth
month rent is based on an annual rate of $150,000, or $12,500 per month.
The Company plans to operate high-speed ferry service from the Stamford
Property to LaGuardia airport and to Manhattan, stopping at the pier at East
34/th/ Street and at Pier 11 downtown utilizing two newly-designed aluminum hull
catamarans with a capacity of 275 passengers and a 38 knot service speed.
Operations will be initiated with one temporary vessel that conforms to
operational requirements for this ferry run, until the new vessels are built and
delivered. Completion of the first new vessel is expected to take between eight
and ten months from the time of completion of the design work. The design work
for both new boats was completed in January 2000. The Company is currently
negotiating a lease for a temporary vessel until the first new boat is
completed. The U.S. Coast Guard must issue a certificate off inspection for any
new vessel it
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uses. The Company does not anticipate problems in obtaining the necessary
certificate for the temporary vessel.
Before ferry service can begin, certain site improvements must be completed
on the Stamford Property. The Company expects the refurbishment to be completed
within approximately 120 days from the time construction begins. The Stamford
site has been zoned for parking and the Company has received oral assurances
from the local authorities that it can operate fast ferry service from this
site. The Company will commence operation of fast ferry service as soon as
possible upon completion of the site refurbishment, upon obtaining the necessary
Connecticut state permits and delivery of the temporary vessel. The Company
retained an engineering firm in Stamford to handle all permits and site plans.
The Company plans to begin operations at the Stamford site in Spring 2000 and
will have approximately 600 parking spaces.
The operation of ferry vessels requires U.S. Coast Guard (USCG)
certificates of inspection (See Government Regulations) and permits to dock. New
York City has recently expanded its facilities at Pier 11 located at the South
Street Seaport in the Wall Street area of lower Manhattan. This provides more
times for ferries to dock and disembark passengers. In order to dock the ferry
vessels at any pier under the City's control, the Company must obtain a permit
and will then be given specific docking times around which it can schedule its
trips to and from Manhattan. The Company plans to apply for the docking permit
immediately upon obtaining a vessel to operate from Stamford. The Company
believes it will not take more than 30 days to obtain the permit once the vessel
is acquired.
Currently, the Company is diligently working with the appropriate
officials, consultants and contractors during the initial phases of site
planning and permit approvals. The Landlord is responsible for compliance with
all laws, statutes, ordinances, regulations and other requirements of any
governmental authority related to the environmental condition of this site. As
soon as the necessary site plan approvals and permits have been obtained, the
Company will aggressively schedule the contractors so as to complete the site
refurbishment as soon as possible.
After the requisite site improvements are completed and operations have
commenced, the Company plans to construct a small terminal, consisting of a
totally enclosed waiting room, a ticket office and necessary facilities,
including rest rooms.
Competition.
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The Company currently operates in the Monmouth County, New Jersey area. In
that market its main competitor is Seastreak, a well-capitalized, wholly-owned
subsidiary of Sea Container Corporation, a United Kingdom based corporation.
This ferry service operates from a nearby site on the Shrewsbury River, the
former Connors Hotel property, and from Atlantic Highlands Yacht Harbor
approximately a mile west. Seastreak has undertaken an improvement and expansion
program whereby it will increase parking capacity at its Highlands facility,
expand its off-peak and weekend schedules and construct a new Highlands
terminal. At this time, the Company's
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vessels are faster and more comfortable than Seastreak's vessel. Seastreak has
substantially greater financial resources through its parent corporation, Sea
Container, that could adversely impact the Company.
Monmouth County has indicated it is contemplating an additional high speed
ferry terminal and operation in a town about seven miles northwest of the
Company's site in the Highlands. The Company believes the ferry operator that
will be servicing that facility is New York Waterways. New York Waterways also
provides conventional ferry service for short hauls at various locations in the
New York metropolitan area and has been in business for many years. New York
Waterways has substantially greater financial resources that, if they choose to
compete, could adversely impact the Company.
The Company's competitors, both existing and potential, have longer and
profitable operating histories and substantially greater financial resources
than the Company. The Company's inability to fund the necessary site and
facilities improvements, to purchase additional ferries or to take advantage of
opportunities as they might arise could have significant adverse impact on its
results of operations.
Dependence on Suppliers.
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Parking at docking sites is the Company's biggest issue. The Company
currently is dependent on the lease with Aragon (on which four years remain).
Management is confident it could find other temporary dock space with available
parking on a short term basis until permanent arrangements could be made if
Aragon should breach its lease arrangement with the Company.
Government Regulation.
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The operations of the ferry vessels is under the jurisdiction of the USCG.
The vessels are required to pass an inspection and must have valid certificates
of inspection from the USCG. The USCG conducts an in-water inspection of the
vessel annually and an out-of-water inspection about every 18 months. Should a
violation or other problem be found, the Company is given a period within which
it can correct the problem, during which time the vessels are free to operate.
If the USCG deems it to be a safety hazard, the certificate of inspection is
suspended immediately and the ferry cannot be operated until the necessary
repairs/corrections are made. The vessels' captain and mates must also have
required USCG licenses. To date the Company has an excellent safety record and
maintains the only boats in the Greater New York harbor that are American Bureau
of Shipping (ABS) classified.
The Company also obtains permits from New York' New Jersey Port authority
for docking at city-owned ferry terminals. Obtaining these permits has not been
a problem.
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Employees.
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As of December 1, 1999 the Company had 19 full time employees and no part
time employees. Fast Ferry Holding Corporation employs 17 of the 19 full time
employees. The number of employees will increase as additional ferries become
operational and the Stamford Property service becomes operational.
Fast Ferry Holding Corporation has a collective bargaining agreement with
Local 333, United Marine Division of the International Longshoreman Association,
AFL-CIO, dated September 9, 1997. The contract runs through September 15, 2001.
The contract contains a no-strike clause, specified pay rates, medical benefit
guarantee and union shop provision. Pay increases of 3% are specified in the
year following any year in which a profit is made.
Management believes its relationship with its union and non-union employees
is good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparison of the nine month period ended September 30, 1999 vs. September 30,
1998
Consolidated revenues for the nine month period ended September 30, 1999
totaled $2,550,701 and were comprised of $1,681,100, or 66%, from passenger
tickets from the NY Fast Ferry service operating from the Highlands, $662,100,
or 26%, from the charter of the M/V Finest to the Massachusetts Steamship
Authority, which terminated in October 1999, and about $207,500, or 8%, from
excursion trips and galley sales. During the nine months ended September 30,
1999, the Company ran a total of 888 revenue trips from its Highlands site at a
49% load factor. Since the Company acquired the NY Fast Ferry operation in
October 1998, there are no revenues for the comparable period in 1998. The net
costs of the discontinued businesses for the nine month period ended September
30, 1999 totaled $69,289, compared to $81,155 for the same period ended
September 30, 1998.
Consolidated operating costs of $1,836,922 for the nine months ended
September 30, 1999 are directly attributable to the ferry operations. Of this
amount, 64%, or $1,169,500, are direct operating costs and $667,347, or 36%,
represent depreciation of the ferry vessels and other boat equipment. Payroll
and related costs for the ferry vessel crew represented 29% of the total direct
operating costs for the period or $335,365. Fuel and oil costs accounted for 18%
of the category or about $210,700. Docking fees and fees to the owner of the
parking facility totaled $244,130, or 21% of the direct operating costs. Boat
maintenance and supplies, which included a scheduled engine overhaul, accounted
for almost $174,325, or 15% and insurance costs totaled $65,004, or 6%, of the
total direct operating costs. Direct excursion expenses represented 3%, or about
$39,200, of the operating costs and costs of sales related to galley sales
totaled $68,122 or 6%. Other direct operating costs amounted to $32,654 or 3% of
the category.
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Marketing and administrative expenses for the nine months ended September
30, 1999 totaled $866,766 compared to $277,924 for the same period in the prior
year. Of the 1999 total marketing and administrative expenses $355,977, or 41%,
is attributable to administration of the ferry service and $482,225, or 56%, is
attributable to corporate administration, compared to $0 and $277,924,
respectively for 1998.
Salaries and related benefits account for 61% or $526,184 of the total
marketing and administrative expenses, compared to $133,000 or 48% in 1998. The
Company did not incur occupancy expense for the current period or the same
period in 1998 as it utilized available space in the offices of certain officers
and directors, as well as in the Cigar Box. However, in the nine months ended
September 30, 1999, the Company incurred utility and maintenance expenses
totaling $32,245.
Other marketing and administrative expenses for the current nine month
period amount to approximately $279,800 and include $111,595 for legal and
auditing services, in part due to the audit of the Company's financial
statements. Legal and audit expenses in 1998 totaled only $62,000. Of the
remaining $153,400, approximately $52,400 is primarily attributable to increased
travel expenditures and $101,000 is related to the increased headcount and
corporate activity.
Through September 30, 1999 the Company recorded amortization of goodwill
expense of $45,000 related to its acquisition of NY Fast Ferry. In 1998 the
Company determined that the value of the goodwill arising from the purchase of
the Cigar Box had been impaired and accordingly wrote off the good will booked
from the 1997 acquisition of the Cigar Box.
Interest expense for the nine months ended September was $1,053,027, which
was primarily attributable to meeting the current obligations of the NY Fast
Ferry, including the mortgages on the boats and debt financing of the Company's
current operations and business development. Of the total interest expense,
interest paid in connection with the vessel mortgages and line of credit totaled
$866,816.
Comparison of the Year Ended December 31, 1998 vs. December 31, 1997
The Cigar Box was acquired by the Company on December 2, 1997. Prior to
that, the Company had been a development stage enterprise engaged principally in
the renovation and redevelopment of the Property and generated no revenues. In
October 1999 the Company listed the Cigar Box for sale. Accordingly, the results
of operations of this business division have been reclassified as discontinued
operations on the statement of operations. However, for purposes of comparing
the years ended 1997 and 1998, specific revenue and expense items are discussed
for 1997 as if reflected by line items in the results of operations.
Consolidated revenues in the amount of $34,468 and consolidated total operating
costs in the amount of $105,115 for the twelve months ended December 31, 1997
were generated from operations of the Cigar Box during the year ended December
31, 1997.
Consolidated revenues for the twelve months ended December 31, 1998 totaled
$681,167 and were generated from three months of operations of the Company's
fast ferry service, acquired
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in October 1998. During the first three months of operations at the Highland
site, the ferry service ran 268 revenue trips at a 43% load factor. The ferry
service ran all of its scheduled trips, not missing a single trip due to weather
conditions or the condition of the vessels. Revenue from passenger tickets
represented approximately 63% of total revenues or $438,000 and revenue from the
charter of the M/V Finest totaled $217,500 or 31% in 1998. Additional revenue in
the amount of approximately $35,600, or 6%, was generated from on-board galley
sales and excursion trips.
Consolidated total operating costs for the twelve months ended December 31,
1998, related to the operation of the fast ferry service, totaled $509,742, of
which 57%, or $287,116, was direct operating costs and 43%, or $222,626, was
depreciation of the vessels and equipment. Payroll and related costs for the
ferry vessel crew represented 33% of the total direct operating costs for the
period or approximately $93,600. Fuel and oil costs accounted for 24% of the
category or $68,000. Docking fees and fees to the owner of the parking facility
totaled $65,939, or 23% of the direct operating costs.
Marketing and administrative expenses for the twelve months ended December
31, 1998 increased 61% to $517,589 as compared to $320,911 for the twelve months
ended December 31, 1997. Of the marketing and administrative expenses
approximately $91,000 or 18% are attributable to administration of the ferry
service and about $426,600 or 82% are attributable to corporate administration.
For the comparable period in 1997 all of the expenses in this category are
related to corporate administration. Salaries and related benefits account for
48% or $247,362 of the expenses for 1998 as compared to $150,000, or 46% for the
prior period. This increase was attributable to an increase in personnel as of
October, 1998, primarily a result of the acquisition of the NY Fast Ferry
operations and the Company's change in strategic business plan.
Other significant marketing and administrative expenses for the 1998 period
of approximately $259,700 include $31,643 for marketing and promotional expense,
$129,803 for legal and auditing services and $14,089 paid to consultants for
services related to developing business plans, market strategies and funding of
the Company.
For the same period in 1997, other significant marketing and administrative
expenses of $170,911 include $58,152 for marketing and promotional expense,
$37,258 for legal and auditing services and $31,300 paid to consultants for
services related to developing business plans, market strategies and funding of
the Company.
In 1998 the Company recorded amortization of goodwill expense of $13,000
related to its acquisition of NY Fast Ferry. Also in 1998 the Company determined
that the value of the goodwill arising from the purchase of the Cigar Box had
been impaired and recorded a charge of $212,654 to write off the remaining
balance to earnings. In connection with the decision to focus on its core
business, NY Fast Ferry, the Company decided to discontinue operations at the
Cigar Box and recorded a charge of $109,392 for the net costs of the
discontinued business. In 1998 the Company also recorded a charge in the amount
of $381,161 as a reduction in the carrying value of the Property.
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Interest expense for the twelve months ended December 1998 was $347,340, an
increase of approximately $321,700 as compared to the same period in the prior
year. This increase was primarily attributable to meeting the current
obligations of the NY Fast Ferry and debt financing. Interest paid in connection
with the vessel mortgages and line of credit totaled almost $289,800.
Liquidity and Capital Resources.
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Since inception the Company has funded its operations primarily through
cash generated from private placements of debt and equity securities and
institutional financing. In October 1998, the Company acquired 80% of the stock
of New York Fast Ferry and commenced operating fast ferry service from
Highlands, New Jersey. As part of the transaction, the Company guaranteed
payment and satisfaction of NY Fast Ferry's outstanding liabilities, which
included mortgages on its two ferry vessels and a line of credit. The NY Fast
Ferry operation generates sufficient cash-flow to cover its direct operating
costs and the interest on the boat mortgages. However, the NY Fast Ferry
operation does not yet generate enough cash to make principal payments, carry
its other debt, to fund the capital improvements and capital expenditures
necessary for the Company to expand its operations and to implement its
strategic business objectives.
As of September 30, 1999, two outstanding notes payable and preferred ship
mortgages held by debis Financial Services, Inc., one on the ferry M/V Finest
and one on the ferry M/V Bravest, were $5,206,299 and $5,178,206, respectively,
which bear interest at 9.25% per annum. Both ship mortgages each require monthly
payments of principle and interest in the amount of $56,719 through September
10, 2005, with final payments of $3,626,691 and $3,572,971, respectively, due on
October 10, 2005.
The line of credit assumed by the Company had an outstanding balance at
September 30, 1999 of $1,610,739 with the same financial institution that holds
the preferred ship mortgages. The line of credit, secured by the M/V Finest and
the M/V Bravest, requires monthly payments of $15,000 through April 10, 2000,
plus principle payments of $343,333 on each of October 1, 1999 (which was paid)
and March 1, 2000 and a final payment of $934,319 on December 10, 2000. The note
carries no interest, but has been discounted to a net present value using a
discount rate of 9.25% per annum. These two preferred ship mortgages and the
line of credit are further secured by cross collateralization agreements,
assignment of personal property, a pledge of a potential receivable arising out
of a lawsuit against the City of New York, and a Company guarantee. Moreover,
the financial institution was granted warrants to purchase 200,000 shares of
Company stock at $2.60 per share exercisable through March 16, 2004.
In June 1999, the Company obtained financing in the net amount of $300,000
from an unrelated third party that is secured by a second mortgage on the
Property, subject to a real estate tax lien, and by a personal guarantee of a
major shareholder. The note carries an annual interest rate of 18% and is
payable in monthly installments, applied first to interest, as follows: from
July 10, 1999 through December 10, 1999, $10,000 per month; from January 10,
2000 through May 10, 2000, $15,000 per month; and commencing June 10, 2000,
three monthly installments each equal to one-third of the outstanding balance on
June 10, 2000. As of December 31, 1999 the Company was current in these
obligations. As an inducement to enter into the loan, the Company issued the
lender 25,000 shares of common stock in June 1999 and an additional 25,000
shares in December 1999.
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In the nine months ended September 30, 1999, the Company had raised
proceeds of $330,000 through the private placement of the Company's common stock
and the exercise of certain warrants.
The Company, as of September 30, 1999, had a working capital deficiency of
$2,521,296. Furthermore, in the planned development of its commercial
operations, the Company"s combined losses are expected to continue as the
Company divests its non-core assets and operations and commences ferry service
at other sites and until each of such sites become fully operational. The
Company's ability to meet its obligations in the ordinary course of business is
dependent upon its ability to continue to obtain adequate financing and/or to
successfully expand its ferry operations. Furthermore, capital expenditures to
acquire additional fast ferry vessels and improve and expand its landside ferry
facilities will require significant funding.
The Company has been successful to date in its efforts to raise funds and
believes that proceeds from anticipated interim financing together with
available funds and cash flows expected to be generated by operations will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next twelve months. Furthermore, the Company has
begun to negotiate more favorable payment terms with certain creditors that
require significant principal payments in the next twelve months. In the event
the Company's plans change, its assumptions change or prove to be inaccurate or
if the proceeds of the interim financing or cash flows prove to be insufficient
to fund operations, the Company may find it necessary or desirable to reallocate
funds within the above described business strategies, seek additional financing
or curtail its activities. There can be no assurance that additional financing
will be available on terms favorable to the Company, or at all, or that the
Company will be able to negotiate more favorable payment terms with its existing
creditors. If adequate funds are not available or are not available on
acceptable terms, the Company may not be able to meet its current obligations,
take advantage of unanticipated opportunities, develop new services or otherwise
respond to unanticipated competitive pressures. Such inability could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Subsequent Events.
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In October 1999 the Property and the Cigar Box were listed for sale. The
Property has been listed with a real estate broker for $1.25 million. The
proceeds from the sale of these properties will be used to repay approximately
$600,000 of debts which are secured by the assets being sold. The remaining
proceeds, if any, will be used by the Company to meet its current obligations
and fund its plans for improvements and business development.
In September and October 1999 the Company received $250,000 in satisfaction
of an outstanding subscription receivable from 1996. From September 1999 through
January 2000, the Company raised gross proceeds of $1,250,000 in equity funding
through a private placement of 1,250,000 shares with warrants for the purchase
of an additional 1,250,000 shares of common stock exercisable at $1.25 per share
until October 31, 2002. A finder's fee of 10% cash and warrants to acquire
75,000 shares was paid on this transaction. In the same offering the Company
raised gross proceeds of $240,000 through stock subscriptions of 240,000 shares
of its common stock with warrants to purchase an aggregate of 240,000 shares of
common stock exercisable at a price of $1.25 per share until October 31, 2000.
Aggregate Commissions of $15,000 were paid on this portion of the offering.
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Year 2000 Issues.
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The "Year 2000" issue is the result of the inability of hardware, software
and control systems to correctly identify two-digit references to specific
years, beginning with the Year 2000. The "Year 2000" problem is pervasive and
complex as virtually every computer operation will be affected in some way by
the rollover of the two-digit year value to "00". The failure of computer
systems to properly recognize date-sensitive information when the year changes
to 2000 could result in system failures or miscalculations causing disruptions
of the Company's operations.
The Company uses computer software and hardware in the Cigar Box operations
for inventory and sales, in ferry boat operations and for general corporate
purposes. To date, management believes that the costs of Year 2000 compliance
will not be material and does not anticipate any material adverse effects on its
operations. The Company experienced no material adverse effects on its
operations related to the Year 2000 issue.
Forward-Looking Statements.
- --------------------------
The following cautionary statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 in order for the Company to avail
itself of the "safe harbor" provisions of that Act. Discussions and information
in this document which are not historical facts should be considered forward-
looking statements. With regard to forward-looking statements, including those
regarding the potential revenues from the additional ferry operations from the
Stamford Property, and the business prospects or any other aspect of the
Company, actual results and business performance may differ materially from that
projected or estimated in such forward-looking statements. The Company has
attempted to identify in this document certain of the factors that it currently
believes may cause actual future experience and results to differ from its
current expectations. In addition to the risks cited above specific to the ferry
business, differences may be caused by a variety of factors, including but not
limited to, adverse economic conditions, entry of new and stronger competitors
in the ferry business, insufficient parking space for potential ferry customers,
inadequate capital and the inability to obtain funding from third parties,
unexpected costs, and the inability to obtain or keep qualified personnel.
ITEM 3. DESCRIPTION OF PROPERTY
The Property, located on the Shrewsbury River in Highlands, New Jersey,
which the Company acquired in September 1993, is a mostly vacant parcel of land
with 463 linear feet of waterfront and has on its premises a 4,000 square foot
vacant building on the water's edge and a small office building. The Company has
Preliminary Zoning approval for a restaurant facility, retail building, bait and
tackle shop, a 23 ship marina, a concrete parking area and deep water boat
fueling pier.
The Property is subject to a first mortgage and note with an outstanding
balance of $60,000. The Property is also subject to a second mortgage lien
related to a note payable to Ashley North Fairfield, Inc. ("ANF Note"). The
current outstanding balance of the ANF Note is $215,000 with an annual interest
rate of 18%. The Company makes monthly principal and interest payments in the
-12-
<PAGE>
amount of $10,000 through December 1999 and $15,000 through May 10, 2000. On
June 10, 2000 any outstanding balance will be due in full, provided that if the
Company makes a principal payment equal to one half of the outstanding principal
balance, the due date for the remaining one half will be extended 90 days. The
Company is currently negotiating with ANF to reduce the amount of the monthly
payment and extend the date when the balance of the note will due in full. The
Property is also subject to real estate tax liens due to the non-payment of
property taxes arising from a dispute over property tax valuations. The Company
is currently attempting to resolve the dispute.
Since the Company has been operating its high-speed ferry service in the
Highlands from a another site (Aragon) in close proximity to the Property that
offers more parking, it has determined that it is economically more feasible to
buy rather than lease the other site. Accordingly, the Company plans to sell the
Property and has listed it with a real estate broker at a value of $1.2 million.
The Cigar Box in Ramsey, New Jersey is located in a strip mall complex. The
Company has a 5 year lease for approximately 1,500 square feet at $2,000 per
month. The Company is actively seeking to sublet the space for the remaining
term of the lease.
Corporate Offices.
- -----------------
The Company's corporate offices are located at 195 Fairfield Avenue, Suite
3C, West Caldwell, New Jersey 07006, phone number 973-228-2901 at a cost of
$2,750 per month commencing January 31, 2000 under an oral sublease agreement
with Anthony Colasanti, a director of the Company. For the previous six months
the Company leased office space at a cost of $1,700 per month in Summit, New
Jersey.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 1999, the number of
shares of the Company's outstanding $0.01 par value common stock beneficially
owned by each of the Company's current directors and the Company's executive
officers, the number of shares beneficially owned by all of the Company's
current directors and named executive officers as a group, and the number of
shares owned by each person who owned of record, or was known to own
beneficially, more than 5% of the Company's outstanding shares of common stock:
-13-
<PAGE>
Percent
Amount and of
Name of Nature of Beneficial Common
Beneficial Owner Ownership Stock
---------------- --------- -----
Anthony Cappaze 1,189,850/(1)(2)/ 21.8%
195 Fairfield Avenue, Suite 3C
West Caldwell, NJ 07006
Anthony Colasanti 155,000/(3)/ 2.7%
195 Fairfield Avenue, Suite 3C
West Caldwell, NJ 07006
Francis P. Matusek 1,020,400/(4)/ 19.4%
186 Highway 34
Matawan, New Jersey 07747
Raymond F. Wright 50,000 *
One Springfield Avenue
Summit, NJ 07901
All directors and executive 2,415,250/(5)/ 46.0%
Officers as a group
(four persons)
______________________
*Less than one percent.
(1) Includes options to acquire 200,000 shares at $0.50 per share until
6/1/2002.
(2) Does not include 300,000 shares being tendered by Mr. Cappaze to the
Company as part of the Company's recission of option exercise using accrued
salary as payment.
(3) Includes options to acquire 100,000 shares at $1.00 per share until
10/1/2002.
(4) Does not include 300,000 shares being tendered by Mr. Matusek to the
Company as part of the Company's recission of option exercise using accrued
salary as payment.
(5) Includes footnotes 1 through 4.
There are no current arrangements or agreements pledging securities which
could in the future result in a change of control of the Company.
-14-
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth as of September 24, 1999, the names and ages
of the current directors and executive officers of the Company, and the
principal offices and positions with the Company held by each person and the
date such person became a director or executive officer of the Company. The
executive officers of the Company are elected annually by the board of
directors. Executive officers serve terms of one year or until their death,
resignation or removal by the board of directors. The present term of office of
each director will expire at the next annual meeting of shareholders. Each
executive officer will hold office until his successor duly is elected and
qualified, until his resignation or until he is removed in the manner provided
by the Company's bylaws.
<TABLE>
<CAPTION>
Name of Director or Director
Officer Since Age Position
-------- ----- --- --------
<S> <C> <C> <C>
Anthony Cappaze Inception 55 Chairman of the Board and Chief Executive Officer
Anthony Colasanti Inception 57 Director, Vice President and Secretary
Frank Matusek Inception 48 Director
Ray Wright N/A 61 Treasurer (until 3/15/2000)
</TABLE>
Ray Wright has tendered his resignation as Treasurer, effective March 15,
2000. The Board of Directors is currently searching for a new Treasurer who
would also serve as Chief Financial Officer. The directors of the Company are
elected to hold office until the next annual meeting of shareholders and until
their respective successors have been elected and qualified. Officers of the
Company are elected by the Board of Directors and hold office until their
successors are elected and qualified. No family relationship exists among the
Company's officers, directors and significant employees.
Anthony Cappaze has served as Chairman of the Board and Chief Executive
---------------
Officer of the Company since its inception. He has served as president of
Trinity Group, an investment advisory company, since 1998. From 1983 to 1998, he
was Regional Manager, New York and New Jersey, for Northern Telecom. Prior to
that, from 1975 to 1983, he served as Eastern U.S. Regional Vice President,
Computer Marketing and Sales, at United Telecom. He attended Minnesota State
University from 1963 to 1964.
Anthony Colasanti has served as Vice President, Secretary and Director of
-----------------
the Company. He has served as Director of the company and corporate counsel
since 1996. He was elected by the Board to serve as Corporate Secretary
beginning January 1, 1999. He assists the Company as an independent contractor
in areas of planning, organizing, leading and controlling, as well as raising
-15-
<PAGE>
substantial capital. Mr. Colasanti is a partner in the law firm of Colasanti
and Scott and licensed to practice law in New Jersey and Florida. He has
engaged in the general practice of law in New Jersey since 1967, with an
emphasis on commercial transactional matters and commercial litigation. From
1987 to 1991, he served as a director for Newton Savings Bank, a New Jersey
savings and loan institution. He received his B.S. in Economics from St.
Peter's College in 1964 and his LLB (Law) from Seton Hall University in 1967.
Francis P. Matusek has served as Director of the Company since its
------------------
inception and as an officer of the Company from inception to January 1999.
Since 1974, Mr. Matusek, a Certified Public Accountant, has been engaged in
independent accounting and tax consulting through his company Matusek & Company.
He received his B.S. in Accounting from the University of South Carolina in
1972.
Raymond F. Wright joined the Company in March 1999 as a Chief Financial
-----------------
Officer and Treasurer and in June 1999 became a director. He resigned from his
position as Director and Chief Financial Officer in January 2000 and resigned
as Treasurer to be effective March 15, 2000. From 1996 to present, Mr. Wright
has been employed as Director, CEO & CFO for Cinegram Media Inc. From 1995 to
1997 he provided consulting services to various businesses. From 1989 to 1995 he
was employed as CFO and CIO by Tambrands, Inc. Mr. Wright became a chartered
accountant (Canada) in 1963 through Queens University Kingston, Ontario.
ITEM 6. EXECUTIVE COMPENSATION
The Company had employment agreements with Messrs. Cappaze and Matusek that
provide for annual salaries of $75,000 each through April 30, 1998 and $100,000
each, thereafter. Mr. Cappaze's employment agreement is still in place, but Mr.
Matusek's agreement ended March 31, 1999. These two individuals have deferred a
significant portion of their compensation under these agreements. This deferred
compensation carries an interest rate of 4% per annum. As of December 31, 1999,
the total deferred compensation, including interest due, was $515,205.
The Company intends to enter into a new employment agreement with Mr.
Cappaze and with Anthony Colasanti as officers of the company, the terms of
which have not yet been agreed upon.
Directors of the Company are paid $500 per meeting for their services as
such. Furthermore, the directors are reimbursed for all expenses incurred by
them in attending board meetings.
The Company currently has no retirement, pension, profit-sharing or
insurance or medical reimbursement plans covering its officers and directors,
but does contemplate implementing group health, term life insurance and 401(k)
plans once additional full-time management employees are hired. The NY Fast
Ferry group has a group medical health plan and a 401(k) plan for its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1999 Anthony Cappaze, an officer and director, was granted options
to purchase 300,000 shares of common stock exercisable at $0.50 per share for
three years. On September 9, 1999 he exercised options to acquire 100,000
shares.
Anthony Colasanti, an officer and director, also serves as general legal
counsel for the Company. Mr. Colasanti's law firm, Colasanti & Scott, LLP, was
paid approximately $5,000 in
-16-
<PAGE>
1997, approximately $10,000 in 1998 and approximately $30,000 in 1999 by the
Company for legal services rendered by his firm to the Company.
Mr. Colasanti also received as an annual retainer for consulting services,
10,000 shares of common stock in May 1997 and 10,000 shares in May 1998. He
received 25,000 shares in May 1999 for legal services in negotiating and closing
a loan for the Company.
Other than the transactions stated herein, none of the directors or
executive officers of the Company, nor any 5% owner of the Company, has been
involved in any transaction with the Company exceeding $60,000 that has occurred
in the last two years.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock.
- ------------
The Company has 10,000,000 shares of Common Stock authorized, $.01 par
value per share. The Company currently has no preferred stock authorized. Each
share of Common Stock is entitled to share pro rata in dividends and
distributions, if any, with respect to the Common Stock, when, as and if
declared by the Board of Directors from funds legally available therefor. No
holder of any shares of Common Stock has any preemptive rights to subscribe for
any securities of the Company. Upon liquidation, dissolution or winding up of
the company, each share of the Common Stock is entitled to share ratably in the
amount available for distribution to holders of Common Stock. All shares of
Common Stock presently outstanding are fully paid and nonassessable.
Each shareholder is entitled to one vote for each share of Common Stock
held. There is no right to cumulate votes for the election of directors.
Options and Warrants.
- --------------------
The Company has issued warrants and/or options to purchase stock to certain
officers, investors and suppliers. The warrants/options are exercisable at any
time within one to five years of their issue. The total number warrants/options
outstanding at December 31, 1999 is 2,075,000.
PART II
-------
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information.
- ------------------
The Company's Common Stock is currently traded on the NASD Over-the-Counter
Bulletin Board under the symbol LGHT. The following table sets forth the high
and low bid prices of the Company's common stock during the periods indicated.
-17-
<PAGE>
<TABLE>
<CAPTION>
OTC Market
Calendar High Bid Price Low Bid Price
-------- -------------- -------------
<S> <C> <C> <C>
1999 4/th/ Quarter $ 3.50 $ 1.50
3/rd/ Quarter 5.3125 1.625
2/nd/ Quarter 4.00 1.50
1/st/ Quarter 4.75 2.00
1998 4/th/ Quarter $ 2.875 $ 1.25
3/rd/ Quarter 4.50 2.00
2/nd/ Quarter 5.375 2.25
1/st/ Quarter 5.25 3.50
1997 4/th/ Quarter $ 6.625 $ 2.75
3/rd/ Quarter 6.50 3.125
2/nd/ Quarter 6.00 2.00
1/st/ Quarter * *
</TABLE>
* Trading did not commence until 2nd Quarter.
The closing bid price of the Common Stock on the OTC Bulletin Board on
December 31, 1999, was $2.00 per share.
Holders.
- -------
As of December 31, 1999, there were approximately 61 holders of the
Company's Common Stock, who collectively held 5,550,795 issued and outstanding
shares.
Dividends.
- ---------
The Company did not declare or pay cash or other dividends on its Common
Stock during the last two fiscal years. The Company does not expect to pay any
dividends in the near future.
ITEM 2. LEGAL PROCEEDINGS
On November 25, 1997 New York Fast Ferry Services, Inc. filed suit against
the City of New York alleging, among other things, breach of agreement by the
City of New York for a lease of a ferry franchise agreement. New York Fast
Ferry Services, Inc. is seeking $4,000,000 in compensatory damages or,
alternatively, recission of the agreement. The proceeds, if any, of such suit
are pledged 50% to the original shareholders of NY Fast Ferry and 50% to debis
Financial Services, Inc. as a pledge of collateral against amounts owing to them
pursuant to a note payable.
-18-
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In September 1997 the Company granted options to acquire 56,250 shares
exercisable at $4.00 per share to a consultant. In October 1997 the consultant
exercised options to acquire 8,750 shares of common stock at $4.00 per share.
Both the grant and the exercise were exempt under Section 4(2) of the Securities
Act of 1933 (the "Act"). The options to purchase the remaining 47,500 shares
expired in 1998. No commissions or finder's fees were paid on the transaction.
In October 1997 the Company issued 2,500 shares of its common stock to a
consultant (at a value of $1.00 per share) in lieu of interest owed to the
consultant. The transaction was exempt under Section 4(2) of the Act. No
commissions or finder's fees were paid on the transaction.
In October 1997 the Company issued 25,000 shares of its common stock to an
investor for $3.75 per share in a transaction exempt under Section 4(2) of the
Act. No commissions or finder's fees were paid on the transaction.
In December 1997 the Company issued 75,000 shares of its common stock to one
person in exchange for all of the outstanding shares of the Cigar Box, Inc. in a
transaction exempt under Section 4(2) of the Act. No commissions or finder's
fees were paid on the transaction.
In April 1998 the Company issued 30,000 shares of its common stock to an
investor for $3.25 per share in a transaction exempt under section 4(2) of the
act. No commissions or finder's fees were paid on the transaction.
In October 1998 the Company issued an aggregate of 454,545 shares of its
common stock to the three shareholders of Fast Ferry Holding Corp. in exchange
for 80% of the outstanding shares of Fast Ferry Holding Corp. in a transaction
exempt under Section 4(2) of the Act. No commissions or finder's fees were paid
on the transaction.
In October 1998 the Company granted one of its noteholders, as part of
refinancing negotiations, warrants to purchase 200,000 shares of its common
stock exercisable at $2.60 per share until March 16, 2004. The transaction was
exempt under Section 4(2) of the Act. No commissions or finder's fees were paid
on the transaction.
In October 1998 the Company granted an option to purchase 10,000 shares of
common stock to John Koenig, a shareholder of the Company, as part of his
employment agreement. The option is exercisable at $1.88 per share until October
4, 2000. The transaction was exempt under Section 4(2) of the Act. No
commissions or finder's fees were paid on the transaction.
-19-
<PAGE>
In June 1999 the Company entered into a loan agreement, and in connection
therewith, issued a promissory note and 25,000 shares of its common stock in
June 1999 and an additional 25,000 shares in December 1999. The transaction was
exempt under Section 4(2) of the Act. No commissions or finder's fees were paid
on the transaction.
In July 1999 the Company issued a $200,000 promissory note for an investment
by an accredited investor of that amount. The note is convertible to common
stock at the option of the holder. The transaction was exempt under Section 4(2)
of the Act. No commissions or finder's fees were paid on the transaction.
In September 1999 a consultant purchased 50,000 shares of common stock at a
price of $0.10 per share in a transaction exempt under Section 4(2) of the Act.
No commissions or finder's fees were paid on the transaction.
From September 1999 to January 2000 the Company issued an aggregate of
1,250,000 shares to accredited investors for gross proceeds of $1,250,000 or
$1.00 per share. The purchasers also received warrants to purchase an aggregate
of 1,250,000 shares of common stock exercisable at $1.25 per share until October
31, 2002. A finder's fee was paid on this portion of the offering in the amount
of 10% cash and warrants to acquire 75,000 shares of common stock. In the same
offering, the Company issued 240,000 shares of Common Stock for gross proceeds
of $240,000. The investors also received warrants to purchase an aggregate of
240,000 shares of common stock, exercisable at $1.25 per share until October 31,
2000. Aggregate commissions of $15,000 were paid on this portion of the
offering. The offering was conducted in reliance on Section 4(2) of the Act and
Rule 506 promulgated thereunder.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles provide that the Company shall indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company), by reason of the fact that he is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, provided he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful; and provided that no indemnification shall be made to or on behalf of
any individual if a judgment or adjudication establishes that his or her acts or
omissions (i) were in breach of his or her fiduciary duty of loyalty to the
Company and its shareholders, (ii) were for acts or omissions not in good faith
or which involve a knowing violation of law, or (iii) were for any transaction
from which the director derived any improper personal benefit. The Company's
Articles also provide that reasonable expenses incurred by a director, officer,
employee or agent of the Company in defending any civil, criminal, suit or
proceeding described above shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding to the full extent permitted
under New Jersey Law.
-20-
<PAGE>
The termination of any such action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea nolo contendere or its equivalent, shall
not of itself create a presumption that the person did not act in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
PART F/S
--------
Financial Statements.
- --------------------
The Company's balance sheets as of December 31, 1997 and 1998 and the
statements of operations and statements of cash flows for the years then ended
are attached following the signature page of this Form 10-SB, together with the
audit report by the Company's independent accountants. The Company's unaudited
balance sheet as of September 30, 1999 and unaudited statement of operations for
the nine months ended September 30, 1999, are also attached following the
signature page of this Form 10-SB.
PART III
--------
ITEM 1. EXHIBITS
3.1 Certificate of Incorporation, as amended.
3.2 Bylaws.
10.1 Stock Purchase Agreement dated 9/9/98 for acquisition of Fast Ferry
Holding Corp.
10.2 Lease Agreement dated 3/30/98 for Aragon Marina.
10.3 Lease Agreement dated October 1999 for Stamford Property Marina.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
LIGHTHOUSE LANDINGS, INC.
Date: January 26, 2000 By:/s/ Anthony Cappaze
----------------------------------
Anthony Cappaze, President, Chief
Executive Officer and Director
Date: January 26, 2000 By: /s/ Anthony Colasanti
----------------------------------
Anthony Colasanti, Secretary and
Director
-22-
<PAGE>
Lighthouse Landings, Inc.
September 30, 1999
Unaudited Financial Statements
Index
Consolidated Balance Sheet 24
Consolidated Statement of Operations 25
Consolidated Statement of Cash Flow 26
23
<PAGE>
Lighthouse Landings, Inc
and Subsidiary Companies
Consolidated Balance Sheets
As of:
<TABLE>
<CAPTION>
--------------------------------------------------------------
SEPTEMBER 30, September 30,
1999 1998
--------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
- ---------------------
Current Assets
-----------------------------------
Cash in Banks $ 274,957 $ 8,245
Accounts Receivable 17,409 -
Assets held for Sale 964,267 1,309,339
Inventories 5,608 -
Prepaid Expenses and Deposits 66,601 12,097
------------ ------------
Total Current Assets $ 1,328,842 $ 1,329,681
Fixed Assets
-----------------------------------
Fast Ferries 13,300,000
Computers & Office Equipment 33,008 -
Other Equipment 60,183 -
Leasehold Improvements 3,445 -
Accumulated Depreciation (928,003) -
------------ ------------
$ 12,468,633 $ -
Other Assets
-----------------------------------
Goodwill Arising from Acquisitions 1,174,226 212,656
------------- ------------
TOTAL ASSETS $ 14,971,701 $ 1,542,337
============= ============
LIABILITIES & EQUITY
- ---------------------------------------
Current Liabilities
-----------------------------------
Accounts Payable $ 480,920 114,072
Government Withholdings 12,107 -
Real Estate Taxes Liens 329,660 254,184
Accrued Secured Debt Interest 68,242
Other Accrued Expenses 293,110 192,327
Deferred Revenue 55,536
Short Term Loans 611,769 -
Due re Puts Exercised 316,939
Current Portion of Long Term Debt 1,681,856 -
------------ ------------
Total Current Liabilities $ 3,850,138 $ 560,583
Long Term Liabilities
-----------------------------------
Mortgages on Ferries 10,384,506
Secured Note Payable 1,610,739
Other Secured Loans 477,707 -
Deferred Officer Expense 515,205 282,271
less: Current Portion of LTD (1,681,856) -
------------ ------------
Total Long Term Liabilities $ 11,306,301 $ 282,271
Shareholders' Equity
-----------------------------------
Capital Stock
Common Shares @ $.01 par value 35,208 27,663
Additional Paid In Capital 3,783,638 2,398,284
------------ ------------
Total Capital Stock 3,818,846 2,425,947
Retained Earnings/(Deficit) (2,692,664) (1,334,473)
Current Year Profit/(Loss) (1,310,921) (391,991)
------------ ------------
Total Shareholders Equity $ (184,738) $ 699,483
------------- ------------
TOTAL LIABILITIES & EQUITY $ 14,971,701 $ 1,542,337
============= ============
--------------------------------------------------------------
</TABLE>
-24-
<PAGE>
Lighthouse Landings, Inc
Consolidated Statement of Operations
<TABLE>
<CAPTION>
For the Quarter Ended: For the Year to: For the Quarter Ended: For the Year to:
September 30 September 30 September 30 September 30
1999 1999 1998 1998
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
- --------
Ferry Operations $949,636 $2,550,701 $ -
Other 0 0 -
----------------------------------------------------------------------------------------------
Total Revenues $ 949,636 $ 2,550,701 $ - $ $ -
Operating Costs
- ---------------
Ferry Operations $443,725 $1,169,576 $ -
Ferry Depreciation 221,666 665,914 -
Other Depreciation 1,433 1,433 -
----------------------------------------------------------------------------------------------
Total Operating Costs 666,825 1,836,923 - -
Marketing and Adminstrative Expenses
- ------------------------------------
Marketing Expenses $ 8,431 $ 19,323 $ -
Ferry Administration 149,991 355,977 -
General Administration 181,206 482,225 86,948 277,924
Depreciation 2,644 9,242 -
----------------------------------------------------------------------------------------------
Total Operating Costs 342,272 866,767 86,948 277,924
--------- ----------- --------- ---------
Net Operating Profit/(Loss) $ (59,461) $ (152,989) $ (86,948) $(277,924)
- ---------------------------
Financing & Other Expenses
- --------------------------
Interest & Financing Costs 333,609 1,053,027 11,000 32,912
Amortization of Goodwill 15,000 45,000 -
State Taxes - 1,687 -
Net Costs of Discontinued Businesses 21,564 69,289 25,971 81,155
Minority Interest - (11,071)
----------------------------------------------------------------------------------------------
Total Financing & Other 370,173 1,157,931 36,971 114,067
--------- ----------- --------- ---------
NET PROFIT/(LOSS) $(429,635) $(1,310,920) $(123,919) $(391,991)
========= =========== ========= =========
</TABLE>
-25-
<PAGE>
Lighthouse Landings, Inc
Consolidated Statement of Cash Flow
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
For The Quarter Ended: For the Year to: Quarter Ended: For the Year to:
September 30 September 30 September 30 September 30
1999 1999 1998 1998
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Profit/(Loss) per Statement of Operations $ (429,635) $ (1,310,920) (123,918) $ (391,991)
Add back:
Minority Interest Offset - (11,071) -
Depreciation 227,293 681,899 -
Amortization of Goodwill from Acquisitions 15,000 45,000 -
Interest Discount 37,678 124,402 -
Deferred Compensation 14,960 31,063 (200) (63,494)
Changes in Working Capital
--------------------------
Accounts Receivable (16,989) (17,409) - -
Inventory (271) (2,551) - -
Prepaid Expenses etc (5,293) 7,158 - (12,097)
Payables & Accruals 119,292 221,034 110,915 272,729
Assets held for Resale 5,504 (12,740) 13,561 57,708
Stock issued in lieu of cash - 90,000 -
---------- ------------ ----------- -----------------
Net Working Capital Changes 102,243 285,492 124,476 318,340
----------- ------------ ------------ -----------------
Cash Flow from Operations $ (32,461) $ (154,136) $ 358 $ (137,145)
Investment Activities - Existing Businesses
- -------------------------------------------
Additions to Property and Equipment 22,546 41,191 - -
------------------------------------------------------------------------------------
Cash Flow from Investing Activities 22,546 41,191 - -
Investment Activities - Additional Businesses
- ---------------------------------------------
Acquisition of Subsidiary Companies 25,028 - (43,711)
------------------------------------------------------------------------------------
Cash Flow from New Business acquisitions - 25,028 - (43,711)
Financing Activities
- --------------------
Mortgage Principal (96,718) (198,958) -
Line Credit Payments (45,000) (508,333) -
Short Term Loans 170,000 860,000 - -
NYFF Puts (50,000) (50,000) -
Share Capital issued for Cash 330,000 330,000 - 97,500
------------------------------------------------------------------------------------
Total Financing Activities $ 308,282 $ 432,709 $ - $ 97,500
---------- ----------- ---------------- -----------------
Net Cash Flow $ 253,275 $ 212,354 $ 358 $ 4,066
========== =========== ================ =================
------------------------------------------------------------------------------------
Cash Balances - beginning 21,684 62,605 7,887 4,179
Cash Balances - ending 274,958 274,958 8,245 8,245
</TABLE>
-26-
<PAGE>
LIGHTHOUSING LANDINGS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1998
I N D E X
---------
Page No.
--------
FINANCIAL STATEMENTS:
Independent Accountants' Report....................... F-1
Consolidated Balance Sheets
As at December 31, 1998 and 1997.................... F-2
Consolidated Statements of Operations
For the Years Ended December 31, 1998 and 1997...... F-3
Consolidated Statements of Changes in
Redeemable Common Stock and Stockholders' Equity
For the Years Ended December 31, 1998 and 1997...... F-4
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998 and 1997...... F-5 - F-6
Notes to Consolidated Financial Statements.......... F-7 - F 18
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
To the Board of Directors and Stockholders
Lighthouse Landings, Inc.
We have audited the accompanying consolidated balance sheets of Lighthouse
Landings, Inc. and Subsidiaries as at December 31, 1998 and 1997, and the
related consolidated statements of operations, cash flows and changes in
redeemable common stock and stockholder's equity for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lighthouse Landings,
Inc. and Subsidiaries as at December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has sustained substantial losses
for the years ended December 31, 1998 and 1997. In addition at December 31, 1998
the Company has negative working capital of $1,935,991. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Weinick Sanders Leventhal & Co., LLP
New York, N. Y.
October 18, 1999
(Except as to Notes 1 and 12 for
which the date is October 30, 1999
and Note 3 for which the date is
October 28, 1999)
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
A S S E T S
-----------
December 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Current assets:
Cash $ 62,606 4,179
Inventories 1,057 74,800
Assets held for resale 908,900 -
Prepaid expenses and other current assets 68,757 100
--------------- ---------------
Total current assets 1,041,320 79,079
Property and equipment - at cost, less
accumulated depreciation 13,103,525 1,292,147
Goodwill net of accumulated amortization 1,201,174 256,367
--------------- ---------------
$ 15,346,019 $ 1,627,593
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 1,282,822 -
Notes and mortgage payable 207,067 -
Accounts payable and accrued expenses 730,520 86,530
Real estate taxes payable 272,760 200,184
Due to officers/stockholders 484,142 346,906
--------------- ---------------
Total current liabilities 2,977,311 633,620
Long-term debt - net of current maturities 11,301,455 -
--------------- ---------------
Total liabilities 14,278,766 633,620
--------------- ---------------
Minority interest 11,071 -
--------------- ---------------
Redeemable common stock 350,000 -
--------------- ---------------
Stockholders' equity:
Common stock - $.01 par value
Authorized - 10,000,000 shares
Issued and outstanding - 3,220,795 shares
in 1998 and 2,736,250 shares in 1997 31,508 27,363
Additional paid-in capital 3,367,338 2,301,083
Accumulated deficit (2,692,664) (1,334,473)
--------------- ---------------
706,182 993,973
--------------- ---------------
Total stockholders' equity, redeemable
common stock and minority interest 1,067,253 993,973
--------------- ---------------
$ 15,346,019 $ 1,627,593
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------------
1998 1997
------------- ---------------
<S> <C> <C>
Revenues $ 681,167 $ -
------------ ---------------
Operating costs:
Ferry operations 287,116 -
Depreciation 222,626 -
------------ ---------------
Total operating costs 509,742 -
------------ ---------------
171,425 -
Marketing and administrative expenses 517,589 -
------------ ---------------
Loss from operations (346,164) -
------------ ---------------
Other expenses:
Interest (net) 347,340 -
Amortization of goodwill 13,000 -
Provision for state income taxes 1,014 -
------------ ---------------
Total other expenses 361,354 -
------------ ---------------
Loss from continuing operations (707,518) -
------------ ---------------
Discontinued operations:
Loss from discontinued operations (99,392) ( 419,948)
Estimated loss on disposal (593,815) -
------------ ---------------
Loss from discontinued operations (693,207) ( 419,948)
------------ ---------------
Loss before minority share in loss of subsidiary (1,400,725) ( 419,948)
Minority share in loss of subsidiary 42,534 -
------------ ---------------
Net loss ($1,358,191) ($419,948)
============ ===============
Per share data:
Loss from continuing operations ($.25) $ -
Loss from discontinued operations ( .03) .16
Estimated loss on disposal ( .21) -
------------ ---------------
Net loss ($.48) $ .16
============ ===============
Weighted average number of shares:
Primary and fully diluted 2,850,100 2,592,757
============ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE COMMON STOCK AND STOCKHOLDERS'
EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Stockholders' Equity
-----------------------------------------------------
Redeemable Additional
Common Stock Common Stock Paid-In Accumulated
-------------------- ---------------------
Number Amount Number Amount Capital Deficit
------- -------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 - $ - 2,567,500 $25,675 $1,814,021 ($ 914,525)
Issuance of shares in lieu
of services - - 60,000 600 59,400 -
Issuance of shares upon the
exercise of 8,750 stock
options at $4.00 per share - - 8,750 88 34,912 -
Issuance of shares upon
the acquisition of the
Cigar Box, Inc. - - 75,000 750 299,250 -
Sale of shares for cash - - 25,000 250 93,500 -
Net loss for 1997 - - - - - ( 419,948)
------- -------- --------- -------- ---------- -----------
Balance at December 31, 1997 - - 2,736,250 27,363 2,301,083 ( 1,334,473)
Equity issued for
Fast Ferries Holdings Corp. 70,000 350,000 384,545 3,845 969,055 -
Sale of shares for cash - - 30,000 300 97,200 -
Net loss for 1998 - - - - - ( 1,358,191)
------- -------- --------- -------- ---------- -----------
Balance at December 31, 1998 70,000 $350,000 3,150,795 $31,508 $3,367,338 ($2,692,664)
======= ======== ========= ======= ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss continuing operations ($ 707,518) $ -
---------- ----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interests ( 42,534) -
Depreciation 258,065 -
Amortization of goodwill 13,000 -
Amortization of imputed interest 42,440 -
Deferred compensation 137,236 -
Increase (decrease) in cash flows as a result of
changes in asset and liability account balances
net of assets and liabilities acquired
in a combination:
Accounts receivable 9,826 -
Inventories ( 1,057) -
Prepaid expenses and other current assets ( 68,757) -
Accounts payable and accrued expenses 356,612 -
Assets held for resale ( 20,346) -
---------- ----------
Total adjustments 684,485 -
---------- ----------
Net cash used in operating activities
of continuing operations ( 23,033) -
---------- ----------
Cash flows from investing activities:
Cash paid for acquisition ( 6,288) -
---------- ----------
Net cash used in investing activities
of continuing operations ( 6,288) -
---------- ----------
Cash flows from financing activities:
Proceeds from notes and mortgages 157,288 -
Repayments of long-term obligations ( 197,448) -
Proceeds from issuance of common stock 97,500 128,750
---------- ----------
Net cash provided by financing activities
of continuing operations 57,340 128,750
---------- ----------
Net cash used in discontinued operations ( 106,858) ( 260,190)
---------- ----------
Net decrease in cash ( 78,839) ( 131,440)
Cash at beginning of year 4,179 135,619
Add: Cash acquired from acquisition 137,266 -
---------- ----------
Cash at end of year $ 62,606 $ 4,179
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended
December 31,
-------------------
1998 1997
-------- --------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year:
Interest $224,406 $ 25,606
======== ========
Income taxes $ 1,014 $ -
======== ========
Supplemental Schedules of Noncash Activities:
Stock issued for business acquisition:
Common stock $972,900 $300,000
======== ========
Redeemable common stock $300,000 $ -
======== ========
Stock issued in lieu of cash for service rendered $ - $ 60,000
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - REALIZATION OF ASSETS - GOING CONCERN.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going concern. The
Company has sustained substantial losses from continuing any
discontinued operations for the years ended December 31, 1998 and 1997.
In addition, the accompanying consolidated financial statements as at
and for the year ended December 31, 1998 reflect negative working
capital of $1,935,991 and tangible net capital deficiency of $494,992.
Management is of the opinion that its ferry business purchased in
October 1998 will operate self sufficiently by the end of 1999.
Regardless, it will still require additional sources of funds to meet
the mortgage payments on its ferries which were refinanced in October
1998 (see Note 6).
To meet its obligations, including the aforementioned mortgage
payments, the Company must raise working capital through additional
equity and debt offerings. To this end, during the period from
September 27, 1999 to October 30, 1999 $1,600,000 was raised pursuant
to private sales of 1,405,000 shares of common stock.
Pursuant to a meeting of the Company's Board of Directors on
October 28, 1999, it was resolved that the real estate and retail cigar
store owned by the Company would be put up for sale. The Proceeds would
be used to repay approximately $600,000 of debts which are secured by
the assets being sold.
It is management's opinion that the funds raised by the
aforementioned stock sales and borrowings plus the funds anticipated to
be raised through the sale of the real estate will be sufficient to
meet the Company's obligations as they become due.
The conditions previously mentioned raise substantial doubt about
the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Description of Business:
Lighthouse Landings, Inc. (the "Company") was incorporated in New
Jersey in 1993 and is in the commuter ferry business. The Company
currently operates a commuter ferry service from Highlands, New Jersey
to and from Manhattan, and is pursuing the establishment of other
routes in the Greater New York City metropolitan area.
(b) Principles of Consolidation:
The consolidated financial statements include the accounts of
Lighthouse Landings, Inc. and its subsidiaries. Inclusion of the
results of subsidiary companies' operations is on the "Purchase"
method, from the dates of their respective acquisition. All significant
intercompany balances and transactions have been eliminated.
Recognition of the interest of minority stockholders in a subsidiary is
provided for in the accounts. As discussed more thoroughly in Note 3,
the Cigar Box, Inc. subsidiary is presented as a discontinued
operation.
(c) Change of Accounting Period:
The Company has changed its April 30 fiscal year end to December
31st. Accordingly, the accompanying consolidated financial statements
reflect balance sheets as of December 31, 1998 and 1997 and the results
of operations cash flows and stockholders equity for the years then
ended.
(d) Inventories:
Inventories which consist entirely of finished goods, are stated
at the lower of cost or market on the first-in, first-out method.
(e) Property and Equipment:
Property and equipment is recorded at cost. The cost of the
ferries obtained through the Fast Ferries Holding Corp. acquisition in
December 1998 has been determined as an allocation of the purchase
price of the business acquired based upon an appraisal. Depreciation is
computed using the straight-line method. Depreciation on equipment,
including the ferries, is calculated principally over fifteen years.
Buildings and improvements are depreciated over 31-1/2 years.
Expenditures which substantially increase estimated useful lives
are capitalized. Maintenance, repairs and minor renewals are expensed
as incurred. When assets are sold or otherwise disposed of, their costs
and accumulated depreciation are removed from the accounts and any
resulting gain or loss is recorded in the operations statement.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(f) Goodwill:
Goodwill arising from acquisitions initially represents the
excess of the purchase cost over the fair value of identifiable assets
less identifiable liabilities. Goodwill is reviewed on an ongoing basis
to determine that the value has not been impaired; in 1998 it was
determined that the value of the goodwill arising from the purchase of
The Cigar Box, Inc. has been impaired and accordingly the remaining
unamortized goodwill of $212,654 has been written off to discontinued
operations. The goodwill arising from the acquisition of Fast Ferries
Holding Corp. and its wholly owned subsidiaries aggregating $1,214,174
is being amortized over 20 years. Amortization of goodwill charged to
operations was $13,000 in 1998 and $-0- in 1997.
(g) Revenue Recognition:
Revenue is recognized when earned. The Company's ferry business
sells the majority of commuter tickets in advance of use. Accordingly,
the Company determines the unused portion of ticket sales and defers
that value to future periods.
(h) Income Taxes:
The Company has incurred losses for income taxes purposes
aggregating approximately $7,146,000 through December 31, 1998 and,
accordingly, has not recorded any income tax expense. As there is not
sufficient certainty of future taxable income, the deferred tax asset
arising from the potential carry forward of tax losses has been offset
by a reserve in a like amount and consequently no deferred tax asset is
reflected in the accompanying financial statements.
The net operating loss carryforwards at December 31, 1998 expire
as follows:
2009 $ 62,000
2010 107,000
2011 93,000
2012 3,650,000
2013 2,448,000
2018 786,000
----------
$7,146,000
==========
The Tax Reform Act of 1986 enacted a complex set of rules
limiting the utilization of net operating loss carryforwards to offset
future taxable income following a corporate ownership change. The NY
Fast Ferry Group's ability to utilize its operating loss carryforwards
is limited following a change in ownership in excess of fifty
percentage points in any three year period. The effects, if any, of the
change in ownership are not reflected in the foregoing table.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(h) Income Taxes: (Continued)
A reconciliation of the statutory income tax effect rate is as
follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C> <C> <C>
Federal statutory rate ($462,000) (34.0%) ($143,000) (34.0%)
Non-deductible portion of:
Goodwill 92,000 6.8 - -
Minority share in loss of subsidiary (14,000) (1.1) - -
Reserve for net operating loss
carryforward tax asset 384,000 28.3 143,000 34.0
---------- ------ ---------- ------
$ - - $ - -
========== ====== ========== ======
</TABLE>
(i) Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
(j) Concentrations of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash. The Company
places its cash with high credit quality financial institutions which
at times may be in excess of the FDIC insurance limit.
(k) Per Share Data:
Net loss per common share for 1998 and 1987 has been computed
based upon the weighted average number of common shares outstanding.
The assumed exercise of options and warrants were not considered in the
computation in either year due to their anti-dilutive effect. Fully
dilutive per share data is not included because the assumed exercise of
the common stock equivalents in both years is anti-dilutive.
<PAGE>
NOTE 3 - DISCONTINUED OPERATIONS.
On October 28, 1999, the Company adopted a plan to sell its real
estate and retail/wholesale segments. Accordingly both segments have
been accounted for as discontinued operations in the accompanying
consolidated financial statements for both 1998 and 1997. The net
assets to be disposed of as of December 31, 1998 aggregating $908,900
consist primarily of real estate and are recorded as current assets in
the accompanying consolidated balance sheet under the caption "Assets
held for resale".
The estimated loss on disposal of the discontinued operations of
$593,815 represents: a write-off of goodwill of $212,654 on the retail
segment; an estimated loss on the sale of real estate of $331,161; and
a provision of $50,000 for expected losses during the phase out period.
Net sales of the retail segment for 1998 and 1997 were $184,840 and
$34,468, respectively. There were no revenues from the real estate
segment during 1998 and 1997.
NOTE 4 - PROPERTY AND EQUIPMENT.
Property and equipment is summarized as follows:
December 31,
---------------------------
1998 1997 (b)
----------- -----------
Ferries (a) $13,300,000 $ -
Land and buildings - 1,272,098
Computers and office equipment 29,502 -
Furniture and fixtures 25,437 61,156
----------- -----------
13,354,939 1,333,254
Less: Accumulated depreciation 251,414 41,107
----------- -----------
$13,103,525 $ 1,292,147
=========== ===========
(a) Based upon independent appraisal (see Note (2)).
(b) Reference is made to Note 3 regarding reclassification of land and
buildings to assets held for resale from discontinued operations.
<PAGE>
NOTE 5 - ACQUISITIONS.
(i) The Cigar Box, Inc.:
On December 2, 1997, the Company acquired all of the outstanding
stock of The Cigar Box, Inc., a cigar and accessories store. The
Company purchased The Cigar Box, Inc. by the issuance of 75,000 shares
of Company stock at a value of $4.00 per share. Upon acquisition, the
Company commenced a plan to curtail its wholesale activity and
concentrate on retail activities. As the segment incurred significant
losses, management discontinued the segment.
Reference is made to Note 3 regarding discontinence of this
subsidiary.
Pro forma information for the eleven months ended November 30,
1997 is immaterial and is therefore not presented for this segment.
(ii) Fast Ferry Holdings Corp.:
On October 6, 1998, the Company acquired 80% of the outstanding
stock of Fast Ferry Holding Corp. and its wholly owned subsidiaries,
New York Fast Ferry Services, Inc. Fast Ferry I, Inc. and Fast Ferry
II, Inc. (the NY Fast Ferry group). The NY Fast Ferry group owns two
vessels the M/V "Finest", and the M/V "Bravest" and is in the business
of operating high speed commuter ferry services in the greater New York
City harbor area. The NY Fast Ferry Group was acquired by the issuance
of 454,545 shares of the Company's stock at a value of $2.53 per share.
Of the 454,545 shares issued, 70,000 shares were subject to a put
option. Such agreement allowed 2 of the 3 selling shareholders to sell
back to the Company an aggregate of 70,000 shares at a price of $5.00
per share.
The puts were exercised in March 1999 and has been retroactively
reflected as a liability in the accompanying balance sheet under the
caption "Redeemable Common Stock" in the amount of $350,000.
The acquisition has been accounted for as a purchase.
The assets acquired and the liabilities assumed in connection
with the aforementioned acquisition of the NY Fast Ferry group is as
follows:
Fair value of identifiable assets acquired $13,475,700
Fair value of liabilities assumed $13,261,280
Purchase cost $ 1,428,594
Excess over net identifiable assets $ 1,214,174
<PAGE>
NOTE 5 - ACQUISITIONS. (Continued)
(ii) Fast Ferry Holdings Corp.: (Continued)
The unaudited consolidated results of operations, on a pro forma
basis, as if the NY Fast Ferry Group had been acquired at the
beginning of the periods presented are as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
(Unaudited)
Net sales $ 1,498,750 $ 1,474,616
Costs and expenses - net 3,181,269 4,666,940
------------ ------------
Loss from continuing operations ( 1,682,519) ( 3,192,324)
Loss from discontinued operations ( 703,207) ( 419,948)
Minority interest in loss of subsidiary 239,534 638,463
------------ ------------
Net loss ($2,146,192) ($2,973,809)
============ ============
Per share data:
Loss from continuing operations ($.59) ($1.23)
============ ============
Loss from discontinuing operations ($.25) ($ .16)
============ ============
Net loss ($.75) ($1.15)
============ ============
</TABLE>
NOTE 6 - REAL ESTATE TAXES PAYABLE.
Real estate taxes liens have been recorded by local governmental
authorities because of non-payment of said property taxes arising from
a dispute over property tax valuations. The Company is currently
attempting to resolve the dispute.
NOTE 7 - NOTES PAYABLE.
At December 31, 1998 the note and mortgage payable are summarized
as follows:
<TABLE>
<CAPTION>
<S> <C>
Mortgage on real property of discontinued
real estate segment which is being held for
resale. The note is secured by a first mortgage
(subject to the tax lien referred to in Note 8)
on the property and is payable in full in
October 1999, plus interest at 20%. $ 157,288
Insurance finance agreement due in monthly
installments of $8,274 including interest 49,779
---------
$ 207,067
=========
</TABLE>
<PAGE>
NOTE 8 - LONG-TERM DEBT.
Long-term debt as of December 31, 1998 is as follows:
Preferred ship mortgage note payable, secured
by the vessel "Finest" due in monthly
installments of $61,875 through March 10,
1999 and $56,719 through September 10, 2005,
including interest at 9.25% per annum, with a
final payment of $3,626,691 due October 10, 2005. (a) $ 5,308,158
Preferred ship mortgage note payable, secured by
the vessel "Bravest" due in monthly install-
ments of $59,063 through March 10, 1999 and
$56,719 through September 10, 2005, including
interest at 9.25% per annum, with a final
payment of $3,572,971 due October 10, 2005. (a) 5,276,094
Note payable, secured by the vessel "Finest"
and "Bravest", payable in fifteen monthly
installments of $15,000 commencing in February
1999, plus a $45,000 payment in January, 1999,
payments of $343,333 on each of May 1, 1999,
October 1, 1999 and March 1, 2000 and a final
payment of $934,319 on December 10, 2000.
The note carries no interest. The payments
have been discounted to net present value
at December 31, 1998 using a discount rate
of 9.25% (a) 1,994,670
Equipment note payable - installment obligations
secured by certain equipment, payable in
monthly installments of $157, including interest
at 16.9%, maturing April 2003. 5,355
------------
$ 12,584,277
============
(a) The two first mortgages on the ships and
Note Payable are secured through:
(i) cross collateralization agreements, (ii)
assignments of charter agreements and other personal property,
(iii) a pledge of a potential receivable arising
from a lawsuit against the City of New York and (iv) a
Company guarantee.
Reference is made to Note 9(c)(ii) regarding Warrants
issued to the noteholder
The secured debt obligations mature as follows:
1999 $ 1,282,822
2000 1,766,660
2001 470,236
2002 515,443
2003 563,630
Thereafter 7,985,486
-----------
$12,584,277
===========
<PAGE>
NOTE 9 - CAPITAL STOCK.
(a) Stock Issued for Consideration Other Than Cash:
In October 1997, options to purchase 8,750 shares of the
Company's common stock were exercised at $4.00 per share (the market
value at time of grant) aggregating $35,000.
In October 1997, the Company issued to a consultant 2,500 shares
of its common stock in lieu of interest and 57,500 shares of its
common stock for consulting services rendered. The fair value of the
common stock at the time of issuance was $1 par value.
On October 5, 1998, the Company issued 454,545 common shares
valued at $2.53 per share (the market value at time of sale) for 80%
of the outstanding stock of Fast Ferry Holding Corp. Concurrently
therewith, the Company issued put options to two of the selling
shareholders for 70,000 shares at $5.00 per share. Such puts were
exercised in March 1999 and is classified as a liability in the
accompanying balance sheet under the caption "Redeemable Common Stock"
(see Note 5 ii).
(b) Stock Issued for Cash:
On October 7, 1997 the Company sold 25,000 shares of its common
stock to the public at $3.75 per share. On April 6, 1998 the Company
sold 30,000 shares of its common stock to the public at a price of
$3.25 per share.
(c) Stock Options:
A Summary of activity related to non-qualifying stock options
granted by the Company is as follows:
<TABLE>
<CAPTION>
Warrants Exercise Price
--------------------
Options Warrants Per Share
------- -------- --------------
<S> <C> <C> <C>
Outstanding at December 31, 1996 - - N/A
Granted during 1997 56,250 - $4.00
Exercised during 1997 8,750 - $4.00
------ --------
Outstanding at December 31, 1997 47,500 - $4.00
Granted during 1998 10,000 200,000 $1.88 to $2.60
Expired in 1998 47,500 - $4.00
------ --------
10,000 200,000 $1.88 to $2.60
====== ========
</TABLE>
<PAGE>
NOTE 9 - CAPITAL STOCK. (Continued)
(c) Stock Options: (Continued)
(i) Options Granted in 1997:
Pursuant to a consulting agreement entered into on September 1,
1997, the Company agreed to issue options to purchase up to an
aggregate of 56,250 shares of its common stock at $4.00 per share
8,750 options were exercised in 1997 and the remaining 47,500 expired
in 1998.
(ii) Options and Warrants Granted in 1998:
In connection with the Company's loan agreements (Note 6), on
October 5, 1998 the Company granted the noteholder warrants to
purchase 200,000 shares of its common stock at $2.60 per share, the
market value at time of grant. Such warrants were granted pursuant to
the refinancing of the two ferries owned by The NY Fast Ferry Group.
The warrants are exercisable through March 16, 2004. There have been
no exercises of these warrants.
The Company granted an option to a shareholder to purchase
10,000 shares at a price of $1.88 per share. Such option is
exercisable through October 4, 2000.
(ii) Options and Warrants Granted in 1998: (Continued)
Assuming the fair market value of the stock at the date of grant
to be equal to option exercise price, the life of the options to be
from 1.3 year to 2 years the expected volatility at 200%, expected
dividends are none, and the risk-free interest rate of 10%, the
Company would have recorded compensation expense of $2,013 and $36,220
for the years ended December 31, 1998 and 1997, respectively, as
calculated by the Black-Scholes option pricing model. As such, pro-
forma net loss and loss per share would be as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net loss as reported ($1,358,191) ($419,948)
============= ============
Additional compensation $ 2,013 $ 36,220
============= ============
Adjusted net loss ($1,360,204) ($456,168)
============= ============
Loss per share as reported ($.48) ($.16)
============= ============
Adjusted loss per share ($.48) ($.18)
============= ============
</TABLE>
<PAGE>
NOTE 10 - RELATED PARTY TRANSACTION:
In October 1977, 57,500 shares valued at $1.00 per share were
issued to director for legal services rendered.
During June 1999, the Company issued 25,000 shares to a director
valued at $.40 per share for legal services rendered in closing a
loan.
NOTE 11 - COMMITMENTS AND CONTINGENCIES.
(a) Leases:
The Company leases retail space and office equipment under leases
which expire through December 2, 2001. Minimum annual rental are
$25,000 per annum.
(b) Employment Contracts:
The Company has entered into employment agreements with each of
its executive officers Anthony Cappaze and Frank Matusek. The
agreements provide for a salary of $75,000 each year, through April
30, 1998 and $100,000 each year thereafter.
The NY Fast Ferry Group has entered into an employment contract
with its President which provides for a salary of $90,000 each year
through October 4, 2003. Pursuant to the contract, the President was
also granted an option to purchase 10,000 shares of the Company's
common stock.
(c) Litigation:
The NY Fast Ferry Group had initiated a suit alleging breach of
contract against the City of New York. Fifty percent (50%) of the
proceeds, if any, is pledged to the original stockholders of The NY
Fast Ferry Group and the remaining (50%) to the first mortgage holder
as a pledge of collateral against amounts owing to them pursuant to
notes payable referred to in Note 6.
NOTE 12 - SUBSEQUENT EVENTS.
Pursuant to a letter of intent the Company on July 7, 1999
received $400,000 from a potential investor as an interest bearing
advance deposit on a future equity investment. The investor
subsequently decided not to make the investment and has issued, in
accordance with the letter of intent, a demand for repayment. As the
Company was not able to repay the deposit at that time, management and
the investor entered into repayment negotiations.
<PAGE>
NOTE 12 - SUBSEQUENT EVENTS. (Continued)
On June 10, 1999, the Company borrowed $315,000 which bears
interest at 18% per annum. The obligation is due in six (6) monthly
installments of $10,000, the first of which is due on July 10, 1999
followed by six (6) monthly payments of $15,000. On June 10, 2000, one
half of the outstanding principal balance is due. The remaining
balance is due in three (3) monthly installments through September
2000. The loan is secured by a mortgage on real property owned by the
Company. The President has personally guaranteed the loan and has
further secured the loan with 100,000 shares of his common stock. The
President was issued options to acquire 300,000 shares of the
Company's common stock for $0.50 per share as consideration of his
personal guarantee and pledge of stock. In addition, the lender
received 25,000 shares of common stock as additional interest at the
loan closing and is eligible to receive an additional 25,000 shares if
the loan is not prepaid by December 10, 1999.
On July 26, 1999, the Company received $200,000 from an investor
as an advance against a future investment in the Company. The loan
bears interest at 6% and matures on July 16, 2000.
On August 6, 1999, a consultant purchased 50,000 shares of common
stock at a price of $.10 per share.
On September 9, 1999, the Company's President exercised 100,000
of the 300,000 options he received in guaranteeing and securing the
$315,000 note mentioned above. The options were exercised at a price
of $.50 per share for aggregate consideration of $50,000.
During the period from September 27, 1999 to October 30, 1999,
the Company sold 1,430,000 shares of its common stock for net
consideration of $1,475,000. As an inducement to sell these shares,
the Company issued warrants to purchase an aggregate of 935,000 shares
of its common stock at $1.25 per share. Of these warrants, 825,000
expire in three (3) years and 110,000 expire in one (1) year. Such
warrants are immediately exercisable. In addition, as consideration
for his efforts in selling the aforementioned shares, a director
received 3-year warrants to purchase up to 100,000 shares of the
Company's common stock at $1.00 per share. Such warrants are
immediately exercisable.
<PAGE>
EXHIBIT 3.1
FILED
Certificate of Incorporation
of MAY 12 1993
Drydock Cafe, Inc. DANIEL J. DALTON
Secretary of State
THIS IS TO CERTIFY THAT there is hereby organized a corporation under and by
virtue of N.J.S. 14A:1-1 et seq., the "New Jersey Business Corporation Act."
FIRST: The name of the corporation is Drydock Cafe, Inc.
- -----
SECOND: The address of the corporation's initial registered office is 186
- ------
Highway 34, Suite 2, Matawan, NJ 07747. The name of the registered agent at
such address is Frank Matusek.
THIRD: The purpose for which this corporation is organized is to engage in any
- -----
activity within the purposes for which corporations may be organized under the
"New Jersey Business Corporation Act," N.J.S. 14A:1-1 et seq.
FOURTH: The aggregate number of shares which the corporation shall have
- ------
authority to issue is 1000 shares without par value.
FIFTH: The number of directors constituting the initial Board of Directors of
- -----
this corporation is one (1). The name and address of each person who is to serve
as such Director is:
Frank Matusek, 186 Highway 34, Suite 2, Matawan, NJ 07747.
SIXTH: The name and address of the incorporator is Capitol Information Service,
- -----
Inc., 172 West State Street, Trenton, NJ 08608.
In Witness Whereof, each individual incorporator, being over eighteen years of
age has signed this certificate; or if the incorporator be a corporation has
caused this certificate to be signed by its duly authorized officer this 11th
day of May, 1993.
/s/ Ruth Schneider
----------------------------------------------
Ruth Schneider, Executive Vice President
Capitol Information Service, Inc.
172 West State Street
Trenton, NJ 08608
FILED FOR: Paul Wermuth, Esq.
186 Highway 34
Suite 2
Matawan, NJ 07747
<PAGE>
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
OF DRYDOCK CAFE, INC.
-----------------------------------------------------
(FOR USE BY DOMESTIC CORPORATORS ONLY - MUST BE FILED IN DUPLICATE)
"Federal Employer Identification No." 22-3241823
Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(3),
Corporations, General, of the New Jersey Statutes, the undersigned corporation
executes the following Certificate of Amendment to its Certificate of
Incorporation:
1. The name of the corporation is: DRYDOCK CAFE, INC.
--------------------------------------------
2. The following amendment to the Certificate of Incorporation was approved by
the directors and thereafter duly adopted by the shareholders of the
corporation on the 14/th/ day of September, 1999:
Resolved, that Article One of the Certificate of Incorporation be amended
to read as follows:
LIGHTHOUSE LANDINGS, INC.
3. The number of shares outstanding at the time of the adoption of the
amendment was 1,000 shares. The total number of shares entitled to vote
thereon was 1,000 shares.
If the shares of any class or series of shares are entitled to vote thereon
as a class, set forth below the designation and number of outstanding
shares entitled to vote thereon of each such class or series. (Omit if not
applicable).
4. The number of shares voting for and against such amendment is as follows:
(If the shares of any class or series are entitled to vote as a class, set
forth the number of shares of each such class and series voting for and
against the amendment, respectively).
Number of Shares Voting for Amendment Number of Shares Voting Against
------------------------------------- -------------------------------
Amendment
---------
1,000 shares -0- shares
5. If the amendment provides for an exchange, reclassification or cancellation
of issued shares, set forth a statement of the manner in which the same
shall be effected. (Omit if not applicable).
(Use the following only if an effective date, not later than 90 days
subsequent to the date of filing is desired).
6. The effective date of this Amendment to the Certificate of Incorporation
shall be September 21, 1994.
Dated this 14/th/ day of September, 1994.
DRYDOCK CAFE, INC.
LIGHTHOUSE LANDINGS, INC.
By: /s/Frank Matusek
----------------------
Frank Matusek
Chairman of the Board
May be executed by the Chairman of the Board, or the President, or a Vice
-- --
President of the Corporation.
<PAGE>
liability (i) for any breach of the director's duty of loyalty to the
corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve a knowing violation of law, or (iii) for any transaction from
which the director derived any improper personal benefit. If the New Jersey
Corporation Act is amended after approval of this Article by the shareholders to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the New Jersey
Corporation Act, as so amended. Any repeal or modification of the foregoing
paragraph by the shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.
(b) Each director and officer of the corporation shall be indemnified by
the corporation as follows:
(1) The corporation shall indemnify any director or officer who was or is
a party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that the person did not act in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) The corporation shall indemnify any director or officer who was or is
a party, or is threatened to be made a party, to any threatened, pending or
completed action or suit by or in the right of the corporation, to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation, unless, and only to the extent
that, the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
<PAGE>
(3) To the extent that a director or officer of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections (a) and (b) of this Article, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(4) Any indemnification under Sections (a) or (b) of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director or
officer is proper in the circumstances, because he has met the applicable
standard of conduct set forth in Sections (a) or (b) of this Article. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the shareholders.
(5) The corporation may, but is not required to, indemnify any employee or
agent of the corporation to the same extent that indemnification of directors
and officers is permitted by this Article, and shall do so upon the affirmative
vote of a majority of the corporation's directors.
(6) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount, if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this Article. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(7) The indemnification and advancement of expenses provided by or granted
pursuant to the other subsections of this Article shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any Bylaw, agreement, vote of the stockholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
(8) The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this Article.
(9) For the purposes of this Article references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent
<PAGE>
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this Article with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(10) For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
Article.
(11) The indemnification and advancement of expenses provided by or granted
pursuant to this Article, shall unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
3. The number of shares outstanding at the time of the adoption of the
amendment was 1,000 shares of Common Stock. The total number of shares
entitled to vote thereon was 1,000 shares of Common Stock.
4. The number of shares voting for and against such amendment is as follows:
<TABLE>
<CAPTION>
Number of Shares Voting for Amendment Number of Shares Voting Against Amendment
------------------------------------- -----------------------------------------
<S> <C>
1,000 shares 0 shares
</TABLE>
5. If amendment provides for an exchange, reclassification or cancellation of
issued shares, set forth a statement of the manner in which the same shall
be affected.
On the effective date of this Certificate of Amendment, each outstanding
share of the corporation's no par value Common Stock shall be automatically
cancelled and exchanged for 1500 shares of newly authorized $.01 par value
Common Stock.
<PAGE>
Dated this 8/th/ day of March, 1995.
-----
Lighthouse Landings, Inc.
By: /s/ Francis P. Matusek
------------------------------
Francis P. Matusek, President
<PAGE>
FILED
OCT 9 1997
CERTIFICATE OF AMENDMENT
LONNA R. NOOKS
SECRETARY OF STATE
The undersigned corporation, organized under the laws of the State of New
Jersey, certifies the following to amend its Certificate of Incorporation in
accordance with Sections 14A:9-2 and 14A:9-4 of New Jersey Statutes Annotated:
FIRST: The name of the corporation is LIGHTHOUSE LANDINGS, INC. (The
corporation was originally organized under the name Drydock Cafe, Inc. and is
being changed to Lighthouse Landings, Inc.)
SECOND: The Certificate of Incorporation is amended as follows: the
aggregate number of shares that the corporation shall have authority to issue is
ten million (10,000,000) shares of common stock.
THIRD: The Board of Directors, by Resolution adopted October 15, 1996,
approved the amendment to increase the number of authorized common stock from
3,000,000 to 10,000,000 and submitted it to a vote of the shareholders.
FOURTH: The amendment to the Certificate of Incorporation to increase the
number of authorized common stock from 3,000,000 to 10,000,000 was adopted by
all shareholders voting at the shareholders meeting held on December 16, 1996.
FIFTH: The number of shares entitled to vote on the amendment was
1,711,666.
SIXTH: The number of shares that voted for the amendment was 1,496,333
shares. No shares voted in opposition to the amendment.
IN WITNESS WHEREOF, LIGHTHOUSE LANDINGS, INC. has caused its duly authorized
officer to execute this Certificate on December 16, 1996.
Witness/Attest LIGHTHOUSE LANDINGS, INC.
/s/ Anthony T. Colasanti By: /s/ Anthony Cappaze
---------------------------------- -------------------------------
ANTHONY T. COLASANTI, Secretary ANTHONY CAPPAZE, President
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
LIGHTHOUSE LANDINGS, INC.
(A New Jersey Corporation)
(as amended March 9, 1995)
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders shall be held
-----------------
at such place, either within or without the State of New Jersey, as shall be
designated from time to time by the Board of Directors.
Section 2. Notice of Meetings. Written notice of the time, place and
------------------
purpose of each meeting of shareholders shall be given personally, or by mail,
to each shareholder of record entitled to vote at the meeting, at his address as
it appears on the books of the corporation, at least 10, but not more than 60,
days before the date of each meeting.
Section 3. Annual Meeting. Annual meetings of shareholders shall be
--------------
held at such time and place during the month of June of each year, or at such
other time and place as shall be designated from time to time by the Board of
Directors.
Section 4. Special Meetings. Special meetings of shareholders may be
----------------
called for any purpose, and at any time, by the President or any member of the
Board Of directors and must be called by the President upon, the written request
of shareholders holding 10% or more of the outstanding shares of capital stock
of any class eligible to vote at a shareholders' meeting.
<PAGE>
Section 5. Action by Shareholders without a Meeting. Except as
----------------------------------------
otherwise provided by law, any action required or permitted, by statute or by
the Certificate of Incorporation, to be taken at a meeting of shareholders may
be taken without a meeting:
(a) if a consent in writing, setting forth the action so taken, shall be
signed in person or by proxy by all shareholders entitled to vote thereon; or
(b) if a consent in writing, setting forth the action so taken, shall be
signed in person or by proxy by shareholders who would have been entitled to
cast the minimum number of votes which would be necessary to authorize such
action at a meeting at which all shareholders entitled to vote thereon were
present and voting, provided, however, that nonconsenting shareholders entitled
to vote thereon shall be entitled to the rights provided by law. Notwithstanding
the above, the consents of all shareholders entitled to vote thereon shall be
required with respect to the annual election of directors.
Section 6. Adjournment of Meetings. A meeting may be adjourned to
-----------------------
another time or place. It shall not be necessary to give notice of the adjourned
meeting if the time and piece of the adjourned meeting are announced at the
meeting for which notice was provided and only such business is transacted at
the adjourned meeting as might have been transacted at the meeting for which
notice was provided.
Section 7. Waiver of Notice and Lapse of Time. Notice of a meeting
----------------------------------
need not be given to any shareholder who signs a waiver of such notice, in
person or by proxy, whether before or after the meeting. The attendance of any
shareholder at a meeting, in person or by proxy, without protesting the lack of
notice of such meeting prior to the conclusion of the meeting shall constitute a
waiver of notice by such shareholder.
-2-
<PAGE>
Any action which shareholders are authorized to take after the lapse
of a prescribed period of time may be taken without such lapse if such
requirement is waived in writing, in person or by proxy, before or after the
taking of such action, by every shareholder entitled to vote thereon as at the
date of the taking of such action,
Section 8. Quorum and Voting. The holder of each outstanding share
-----------------
of capital stock eligible to vote shall have one vote on each matter submitted
to a vote of shareholders. The holders of a majority of the shares entitled to
be voted at a meeting shall constitute a quorum. Whenever any action, other
than the election of Directors, is to be taken by vote of shareholders, it shall
be authorized by a majority of the votes cast at a meeting of shareholders.
The shareholders present in person or by proxy at a meeting of
shareholders may continue to conduct business until adjournment, notwithstanding
the loss of a quorum. A meeting of shareholders may be adjourned by less than a
quorum.
Every shareholder entitled to vote at a meeting of shareholders or to
consent to action taken without a meeting may authorize another person or
persons to act for him by proxy. Every proxy shall be is writing and signed by
the shareholder or his agent, except that no signature shall be required where a
proxy is given by a shareholder or his agent by telegram, cable or an equivalent
form of communication.
No proxy shall be valid for more than 11 months unless a longer time
is expressly provided therein.
Section 9. Record Date. The Board of Directors may fix, in advance,
-----------
a record date for determining those shareholders entitled to:
-3-
<PAGE>
(a) receive notice of or to vote at any meeting of shareholders or any
adjournment thereof;
(b) give a written consent to any action without a meeting; or
(c) receive payment of any dividend or allotment of any right.
The record date may in no case be less than 10 nor more than 60 days
prior to the shareholders' meeting or other corporate action or event to which
it relates. The record date for the purpose of determining those shareholders
entitled to give a written consent may not be more than 60 days before the date
fixed for tabulation of the consents or, if no date has been fixed for
tabulation, more than 60 days before the last day on which consents received may
be counted.
If no record date is fixed:
(a) the record date for determining those shareholders entitled to
vote at a meeting of shareholders shall be the close of business on the day next
preceding the day on which notice is given, or, if no notice is given, the day
next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders for any purpose other
than that specified in Paragraph (a) shall be the close of business on the day
on which a resolution of the board of directors relating thereto is adopted.
Section 10. Voting List. The officer having charge of the stock
-----------
transfer books for shares of the corporation shall make and certify a complete
list of the shareholders entitled to vote at a meeting of shareholders or any
adjournment thereof. Such list:
(a) shall be arranged alphabetically within each class, series or
group of shareholders maintained by the corporation for convenience of reference
and shall contain the address of, and the number of shares held by, each
shareholder;
-4-
<PAGE>
(b) shall be produced at the time and place of the meeting;
(c) shall be subject to inspection at any time during the meeting by
any shareholder entitled to vote at the meeting; and
(d) shall be prima facie evidence of the names of those shareholders
who are entitled to examine such list or to vote at any meeting of shareholders.
Section 11. Chairman of Meetings. The President shall preside at all
--------------------
meetings of shareholders. In the absence of the President, a majority of the
members of the Board of Directors present in person at such meeting may appoint
any other officer or director to act as Chairman of the meeting.
Section 12. Secretary of Meetings. The Secretary of the corporation
---------------------
shall act as secretary of all meetings of shareholders. In the absence of the
Secretary, the chairman of the meeting shall appoint any other person to act as
secretary of the meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number. The property, affairs and business of the
------
corporation shall be managed by its Board o(Pounds) Directors. The Board of
Directors shall consist of no fewer than one (1) nor more than twenty-one (21)
members, the actual number to be determined from time to time by the Board of
Directors.
Section 2. Term of Office. Directors shall be elected annually by a
--------------
plurality of the votes cast at the annual meeting of shareholders. Every
shareholder entitled to vote at such election shall have the right to vote the
number of shares owned for as many persons as there are directors to be elected
and for whose election he has a right to vote. Each Director shall hold
-5-
<PAGE>
office for the term for which elected and until a successor shall have been
elected and qualified. Election of Directors need not be by ballot unless a
shareholder demands election by ballot at the election and before the voting
begins.
Section 3. Vacancies. Whenever any vacancy shall occur in the Board
---------
of Directors, it may be filled by vote of a majority of the Directors then in
office, although less than a quorum, or by the sole remaining Director,
provided, however, that a Director who resigns from the Board effective at a
future date shall not vote to fill the vacancy caused by said resignation. If
the Board or Directors has not filled such vacancy within 30 days after a
request by shareholders, it may be filled by the shareholders. A Director so
elected by the Board shall hold office until the next succeeding annual meeting
of shareholders and until his successor shall have been elected and qualified.
Section 4. Removal of Directors. Any Director may be removed with or
--------------------
without cause by a majority of the votes cast by shareholders entitled to vote
for the election of Directors or for cause by a majority vote of the Board.
Section 5. Place of Meetings. The Board of Directors may hold its
-----------------
meetings at such place or places within or without the State of New Jersey as
the Board of Directors may designate from time to time.
Section 6. Organization. The President shall preside at every
------------
meeting of the Board of Directors. In the absence of the President, a presiding
officer shall be chosen by a majority of the Directors present. The Secretary of
the corporation shall act as secretary of the meeting, but, in his absence, the
presiding officer may appoint any person to act as secretary of the meeting.
-6-
<PAGE>
Section 7. Executive Committee; Other Committees. The Board of
-------------------------------------
Directors, by resolution adopted by a majority of the entire Board, may appoint
from among its members an executive committee and one or more other committees,
each of which shall have one or more members. To the extent provided in such
resolution or by statute, each such committee shall have and may exercise all
the authority of the Board.
Section 8. Quorum of Board of Directors and Committees. A majority
-------------------------------------------
of the entire Board of Directors, or of any committee thereof, shall constitute
a quorum for the transaction of business. The act of the majority present at a
meeting at which a quorum is present shall be the act of the Board or of the
committee, unless the act of a greater number is required by statute or the
Certificate of Incorporation.
Section 9. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be hole without notice and at such time and place as the Board or
Directors may designate from time to time.
Section 10. Special Meetings. Special meetings o(Pounds) the Board
----------------
of Directors may be called by order of the President or any Director. Notice of
the time and place of each special meeting shall be given by or at the direction
of the person or persons calling the meeting by mailing the same at least three
days before the meeting to each Director at his residence or usual place of
business or by telephoning, telegraphing or delivering the same to each Director
at least twenty-four hours before the meeting. Except as otherwise specified in
the said notice, or as required by statute, any business may be transacted at
any special meeting.
Section 11. Conference Call Meeting. Any or all Directors may
-----------------------
participate in a meeting of the Board of Directors, or of a committee, by means
of conference telephone or any other means of communication by which all persons
participating in the meeting are able to
-7-
<PAGE>
communicate with one another. Any meeting at which one or more of the members of
the Board of Directors or of a committee shall participate by means of
conference telephone or other means of communication shall be deemed to have
been held at the place designated for such meeting, provided that at least one
member is at such place while participating in the meeting.
Section 12. Action of Directors Without a Meeting. Any action
-------------------------------------
required or permitted to be taken by Directors at a meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if, prior
or subsequent to such action, all members of the Board or of such committee, as
the case may be, consent thereto in writing and such written consents are filed
with the minutes of the proceedings. Such consents shall have the same effect
as a unanimous vote of the Board or committee for all purposes.
ARTICLE III
OFFICERS
--------
Section 1. Designation. The Board of Directors shall elect the officers
-----------
of the Corporation, who shall include a President, one or more Vice Presidents,
a Secretary, a Treasurer and such other or additional officers as the Board of
Directors may elect.
Section 2. Term of Office. Each officer shall hold office for the term
--------------
for which he is elected and until a successor is elected and has qualified.
Section 3. Powers and Duties. Unless otherwise ordered by the Board of
-----------------
Directors, each officer shall have such powers and duties as generally pertain
to the office held, as well as such powers and duties as may be conferred upon
him by the Board of Directors. Unless otherwise ordered by the Board of
Directors, the President shall be the chief executive officer of the
corporation.
-8-
<PAGE>
Section 4. Removal and Resignation of Officers. Any officer or agent
-----------------------------------
elected by the Board may be removed at any time, with or without cause, by the
Board of Directors. An officer may resign by written notice to the corporation.
The resignation shall be effective upon receipt thereof by the corporation, or
at such subsequent time as shall be specified in the notice of resignation.
Section 6. Vacancies. Vacancies in any office, however caused, shall be
---------
filled by voce of the Board of Directors.
ARTICLE IV
SHARES AND THEIR TRANSFER
-------------------------
Section 1. Certificates. The certificates representing shares of capital
------------
stock of the corporation shall be in such form as may be required by the New
Jersey Business Corporation Act.
Section 2. Regulations. The Board of Directors may make such rules
-----------
concerning the issue, transfer and registration of certificates for capital
stock of the corporation as it may deem desirable. The person in whose name
shares of capital stock are registered in the stock ledger of the corporation
shall be deemed the owner thereof for all corporate purposes.
Section 3. Lost, Stolen and Destroyed Certificates. In the event of the
---------------------------------------
loss or destruction of certificates, new certificates shall be issued upon
receipt by the corporation of such bond of indemnity or under such regulations
as shall be prescribed by the Board of Directors.
-9-
<PAGE>
ARTICLE V
CORPORATE SEAL
--------------
Section 1. Form and Use. The corporate seal shall have inscribed thereon
------------
the name of the corporation, the year of its incorporation and the words
"Incorporated New Jersey." The seal may be used by causing it or a facsimile
thereof to be impressed or reproduced on or affixed to a document to be sealed.
ARTICLE VI
FISCAL YEAR
-----------
Section l. Time. The fiscal year of the corporation shall be the period
----
designated from time to time by the Board of Directors as the fiscal year of the
corporation.
ARTICLE VII
AMENDMENTS
----------
Section 1. Authorization. The Board of Directors shall have the power to
-------------
make, alter or repeal the By-Laws of the corporation, subject to the power of
the shareholders to alter or repeal the By-Laws or to adopt new By-Laws.
ARTICLE VIII
INDEMNIFICATION
Section 1. Authorization. The corporation, by a majority vote of a quorum
-------------
of its Board of Directors, whether or not said Directors are interested or
disinterested in a proceeding involving a corporate agent (as these terms are
defined in the new Jersey Business Corporation
-10-
<PAGE>
Act) may authorize the indemnification of any corporate agent for any liability
or expense incurred by the corporate agent in connection with such proceeding,
provided that no indemnification shall be made if a judgment or other final
adjudication establishes that the corporate agent's act or omission (1) was in
breach of his duty of loyalty, (2) was not in good faith or involved a knowing
violation of law, or (3) resulted in receipt by the corporate agent of an
improper personal benefit. The corporation, by majority vote of a quorum of its
Board of Directors, whether or not said Directors are interested or
disinterested in a proceeding, may out authorize the corporation to advance any
expenses incurred by a corporate agent in connection with a proceeding, provided
that, the corporate agent has delivered to the corporation an appropriate
undertaking to repay any amounts so advanced in the event that it shall
u1timately be determined by the Board of Directors that he is not entitled to be
indemnified.
-11-
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made this 9th day of September, 1998 by and among JACK
DAVIS, JOHN KOENIG and PAUL DERECKTOR, (collectively, "Sellers"), and LIGHTHOUSE
LANDINGS, INC., a New Jersey corporation, having its principal place of business
at 186 Highway 34, Suite 3, Matawan, New Jersey 07747 ("Purchaser").
WHEREAS, Sellers are the owners of all of the issued and outstanding
shares of capital stock of Fast Ferry Holding Corp., a New York corporation (the
"Company");
WHEREAS, the Company is the sole owner of all of the issued and
outstanding shares of capital of Fast Ferry I Corp., a New York corporation
("Ferry I");
WHEREAS, the Company is the sole owner of all of the issued and
outstanding shares of capital stock of Fast Ferry II Corp., a New York
corporation ("Ferry II");
WHEREAS, the Company is the sole owner of all of the issued and
outstanding shares of capital stock of New York Fast Ferry Services, Inc., a New
York corporation ("Ferry Services"); and
WHEREAS, in accordance with the terms and conditions of this
Agreement, Sellers desire to sell such shares of the Company's Stock which will,
on the Closing Date, be equal to 80% of the issued and outstanding shares of the
Company's capital stock, and Purchaser desires to purchase said shares from
Sellers;
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale of Purchased Stock; Consideration.
---------------------------------------------------
Subject to the terms and conditions of this Agreement, Sellers hereby
agree to sell, transfer and convey One Hundred Twelve (112) of the Company's
common stock, without par value (the "Purchased Stock") to Purchaser, and
Purchaser hereby agrees to purchase the Purchased Stock from Sellers, at
Closing. Purchaser shall pay to Sellers as consideration for the Purchased
Stock the sum of $1,150,000 (the "Purchase Price") payable in the form of shares
of common stock of Purchaser, $.01 par value (the "Consideration Stock"), to be
allocated to the Sellers as set forth on Schedule 1.1 hereto. The aggregate
------------
number of Lighthouse Shares to be issued at Closing to the Sellers as the
Purchase Price shall be determined by dividing the Purchase Price by the number
resulting from the following formula (the "Valuation Formula"): the sum of the
closing ask and bid prices for each of
<PAGE>
the ten (10) trading days prior to the Closing Date divided by twenty. For
example: if the closing ask price was $4.00 and the closing bid price was $6.00
for each of the ten (10) previous trading days the number of shares to be issued
would be 230,000
(i.e. 230,000 = 1,150,000
---------
(4x10+5x10/20))
Notwithstanding the foregoing formula or anything to the contrary
herein, the number of shares of Consideration Stock to be issued to Sellers
pursuant to this Section 1.1 shall not be less than 300,000.
The Consideration Stock shall carry with them the "piggy-back"
registration rights described in the Registration Rights Agreement attached
hereto as Exhibit A.
---------
1.2 The Closing.
-----------
(a) The closing of the transactions contemplated hereby (the
"Closing") shall take place at 10:00 a.m. five (5) business days immediately
following the satisfaction or waiver of the parties' obligations and conditions
under Sections 5.1 and 5.2 hereof, but in no event later than the thirtieth
(30/th/) day following the date of this Agreement, unless mutually agreed to
otherwise by the parties, at the offices of Purchaser's attorneys. The time and
date of the Closing is referred to in this Agreement as the "Closing Date".
(b) At the Closing, (i) Purchaser shall tender to Sellers the stock
certificates representing the Consideration Stock; (ii) Sellers shall deliver to
Purchaser the stock certificate or certificates representing the Purchased
Stock, in each case with appropriate stock powers, separate from the
certificates, duly executed; and (iii) each of the Sellers shall (subject to the
Employment Agreement referred to in Section 4.16 hereof), resign as directors,
officers and employees of the Company and its subsidiaries and from any and all
other positions which they may hold in the Company and its subsidiaries, by each
of them executing and delivering a letter of resignation.
1.3 Stock Escrow Deposit.
--------------------
(a) Simultaneously with the execution of this Agreement, Purchaser
shall deposit with Shanley & Fisher, P.C. (the "Escrow Agent") 20% of the
Consideration Stock (the "Escrow Shares") to be held in escrow (the "Stock
Escrow") by the Escrow Agent pursuant to the terms and conditions of an Escrow
Agreement substantially in the form annexed hereto as Exhibit B (the "Stock
---------
2
<PAGE>
Escrow Agreement") as security for Sellers' indemnity obligations.
(b) In the event Purchaser is entitled to indemnification under
Section 4.11(a) of this Agreement, Purchaser shall make a written demand to the
Escrow Agent (a "Purchaser's Demand") and the Sellers in accordance with the
notice provisions set forth in Section 6.9 of this Agreement. If Sellers object
in writing within thirty (30) business days to Purchaser's Demand, the parties
shall resolve the dispute by arbitration in accordance with the provisions of
Section 1.3(f). If the Sellers do not object to Purchaser's Demand within such
30-day period the Escrow Agent shall immediately release the demanded shares to
Purchaser.
(d) In the event that the Purchaser has a claim for indemnification for a
Third Party Claim (as hereinafter defined in Section 4.11(c)) under Section
4.11(c) of this Agreement, the Purchaser shall, simultaneously with the notice
regarding such Third Party Claim to the Sellers required under Section 4.11(c)
of this Agreement or promptly thereafter notify the Escrow Agent in writing
regarding such Third Party Claim in accordance with the notice provisions set
forth in Section 6.9 of this Agreement (a "Noticed Third Party Claim"). While
any Noticed Third Party Claim for indemnification is outstanding, the Escrow
Agent shall reserve in the Escrow Account sufficient shares of the Escrow Shares
to satisfy the Noticed Third Party Claim (the "Third Party Claim Reserve"). In
the event the Noticed Third Party Claim is not liquidated as to amount, and
Sellers and Purchaser cannot agree on the amount which the Escrow Agent shall
reserve in the Escrow Account with respect to such Noticed Third Party Claim,
either Sellers or Purchaser may within twenty (20) days of the date on which the
Escrow Agent receives the Noticed Third Party Claim invoke arbitration in
accordance with the provisions of Section 1.3(f) for determination of the amount
to be reserved. The parties shall use all reasonable efforts to obtain an
arbitration ruling as soon as possible, but in no event shall the Escrow Agent
release any Escrowed Shares without the prior written consent of both parties
until the amount of the Noticed Third Party Claim becomes liquidated in
accordance with the above provisions.
(e) Subject to the provisions of the next sentence, all Escrow Shares in
the Escrow shall be immediately released by the Escrow Agent to the Sellers on
the 24/th/ month anniversary of the Closing Date. Notwithstanding the provisions
of the foregoing sentence, in the event that a Noticed Third Party Claim is
outstanding under Section 4.11(c) as of any Escrow Release Date,
3
<PAGE>
the Escrow Agent shall not release to the Sellers the Third Party Claim Reserve
provided, however, that the Third Party Claim Reserve shall be promptly released
to the Sellers upon the resolution of the Noticed Third Party Claim under
Section 4.11(c). Any Escrow Shares in excess of the Third Party Claim Reserve
shall be released on the 24/th/ month anniversary of the Closing Date.
(f) Arbitration shall be held in New York, New York, by a panel of
three arbitrators in accordance with the procedural rules of the American
Arbitration Association and the substantive laws of the State of New York. The
arbitrators shall base their decision with respect to the dispute on applicable
law and judicial precedent and, unless both parties agree otherwise, shall
include in such decision the findings of fact and conclusions of law upon which
the award is based. Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
1.4 Section 338(h)(10) Election; Filing of Returns; Refunds.
-------------------------------------------------------
(a) Sellers and Purchaser shall jointly make the election
provided for by Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended ("Code") and Section 1.338(h)(10)-1 of the Treasury Regulations and any
comparable election under state or local tax law (collectively, the "Election").
Purchaser and Sellers shall cooperate with each other to take all actions
necessary and appropriate (including filing such forms, returns, elections,
schedules and other documents as may be required to effect and preserve a timely
Election in accordance with the provisions of Section 1.338(h)(10)-1 of the
Treasury Regulations (or any comparable provisions of state or local tax law) or
any successor provisions. Sellers and Purchaser shall report the purchase by
Purchaser of the Purchased Stock pursuant to this Agreement consistent with the
Election and shall take no position inconsistent therewith in any tax return,
any proceeding before any taxing authority or otherwise.
(b) In connection with the Election, Purchaser and Sellers shall
in good faith (i) determine the "Modified Aggregate Deemed Sale Price" of the
Company's assets (within the meaning of, and in accordance with, Section
1.338(h)(10)-l(f) of the Treasury Regulations) and (ii) determine the proper
allocations (the "Allocations") of the "Modified Aggregate Deemed Sale Price"
among the assets of the Company (in accordance with Section 338(b)(5) of the
Code and the Treasury Regulations promulgated
4
<PAGE>
thereunder). Sellers and Purchaser shall (i) be bound by such determination and
such allocation for purposes of determining any Taxes, (ii) prepare and file
their Tax Returns on a basis consistent with such determination of the "Modified
Aggregate Deemed Sale Price" and such Allocations and (iii) take no position
inconsistent with such determination and Allocations on any applicable Tax
Return, in any proceeding before any taxing authority or otherwise. In the event
that any of the Allocations is disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other party hereto
concerning resolution of the dispute.
(c) The Sellers shall timely prepare and file and deliver to the
appropriate authorities or other persons all tax returns, reports and forms with
respect to the Company required to be filed and delivered and shall pay all
taxes (including interest and penalties thereon) due with respect to such tax
returns, reports and forms for any taxable period ending on or before Closing
Date. For any period not ending prior to or on the Closing Date, the Purchaser
shall timely prepare and file with or deliver to the appropriate authorities or
other persons all tax returns, reports and forms required to be filed or
delivered and shall pay all taxes (including interest and penalties thereon) due
with respect to such tax returns, reports and forms. The Purchaser and the
Sellers agree that the final federal and state income tax return filed by the
Sellers with respect to the Company shall be for the period ending as of the
Closing Date, except as otherwise required under Section 338(h)(10) and that
Sellers shall pay all taxes (including interest and penalties thereon) due with
respect to such tax return, including any taxes occasioned by the election).
(d) Any refunds or credits of taxes of the Company for any taxable
period ending on or before the Closing Date shall be for the account of the
Sellers. Any refunds or credit of taxes of the Company for any taxable period
commencing on or after the Closing Date shall be for the account of the Company.
Any refunds or credit of taxes of the Company for any period commencing prior to
the Closing Date and not ending on or before the Closing Date shall be equitably
apportioned between the Sellers and Purchaser. Any refund received by a party
but to which the other party is entitled shall be paid over to such other party
within thirty (30) business days after such receipt.
1.5 City of New York Litigation. (a) Purchaser acknowledges that Ferry
---------------------------
Services is currently in litigation in New York State Supreme Court with the
City of New York, Index
5
<PAGE>
Number 122205/97 ("City of New York Litigation"). Purchaser agrees that it will
cause Ferry Services to diligently pursue the City of New York Litigation and
agrees to pay, or cause Ferry Services to pay, all fees and expenses
("Litigation Expenses") incurred in connection with the prosecution of the City
of New York Litigation, provided that in no event will Purchaser, the Company,
Ferry Services or any of its subsidiaries be liable for any Litigation Expenses
(which shall include any Litigation Expenses incurred prior to the Closing Date)
in excess of $600,000; provided, further, however, that any expenditures in
-------- ------- -------
excess of $250,000 shall require Purchaser's prior written consent, which
consent will not be unreasonably withheld.
(b) The Sellers shall have the right to continue and direct the City
of New York Litigation at their sole discretion and shall be authorized on
behalf of the Company, to make any and all decisions with respect to such
litigation, including without limitation, decisions concerning strategy,
settlement negotiations, choice of counsel and experts, except Major Decisions
(as defined in the next sentence) which shall require the prior written consent
of the Purchaser which will not be unreasonably withheld, conditioned or
delayed. Major Decisions regarding the City of New York Litigation, shall
include, but not be limited to, change of venue, settlement with and release of
any party, change of counsel and joinder of new parties.
(c) The net proceeds (after payment of all Litigation Expenses)
payable to Ferry Services or the Sellers pursuant to any judgment award or
settlement arising out of the City of New York Litigation shall be payable 50%
to Ferry Services and 50% to the Sellers.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Sellers, jointly and severally, represent and warrant to Purchaser,
knowing and intending that the Purchaser is relying hereon in entering into the
transactions contemplated hereby, as follows as of the date hereof:
2.1 Binding Effect. This Agreement is a valid and legally binding
--------------
obligation of each of the Sellers, enforceable in accordance with its terms,
subject to bankruptcy, fraudulent conveyance, insolvency, moratorium or similar
laws affecting the rights of creditors generally or general equitable
principles, and each agreement, document and instrument contemplated by this
6
<PAGE>
Agreement to be executed and delivered by the Sellers, when executed and
delivered by the Sellers in accordance with the provisions of this Agreement,
will be duly executed and delivered by the Sellers and will be valid and legally
binding obligations of Sellers, enforceable in accordance with their respective
terms, subject to bankruptcy, fraudulent conveyance, insolvency, moratorium or
similar laws affecting the rights of creditors generally or general equitable
principles.
2.2 Due Organization; Good Standing; Qualification. The Company and
-----------------------------------------------
each of its subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York, and has all requisite
corporate power and authority to carry on it Business as it is now being
conducted and to own and operate the properties and assets now owned and
operated by it. Sellers have delivered to Purchaser complete and correct copies
of the organizational documents of the Company and each of its subsidiaries.
The Company and each of its subsidiaries is duly qualified to do business and
in good standing in each jurisdiction where the conduct of its Business or the
ownership or operation of its assets requires such qualification, all of which
are listed on Schedule 2.2-1. Sellers have provided the Purchaser with all
--------------
minute books, records of meetings and consents of the Boards of Directors and
stockholders and all stock transfer ledgers of the Company and each of its
subsidiaries, each of which is correct and complete in all material respects.
The Company and each of the subsidiaries do not own any equity interest in any
other entity except as set forth in Schedule 2.2-2.
--------------
2.3 Capitalization; Ownership of Stock. The authorized capital stock
----------------------------------
of the Company and its subsidiaries on the date hereof is set forth on Schedule
--------
2.3 hereof. All of the issued and outstanding shares of capital stock of the
- ---
Company and its subsidiaries, and the owners and amounts thereof, are also set
forth on Schedule 2.3 hereof. There are no outstanding rights of subscriptions,
------------
warrants, calls, options, contracts or other similar agreements, issued or
granted by the Company or any of its subsidiaries. All dividends and other
distributions paid by the Company or any of its subsidiaries were duly and
lawfully declared and paid in full and neither the Company or any of its
subsidiaries has any unpaid note or other obligation with respect to any such
dividend or other distribution. Neither the Company nor any subsidiary has
guaranteed, assumed or otherwise become responsible for any liability or other
obligation of the Company, its subsidiaries or any of their Affiliates.
7
<PAGE>
2.4 Title to Purchased Stock.
------------------------
(a) As of the date hereof, Sellers have good, valid and marketable
title to the Purchased Stock, all of which stock is free and clear of all liens,
claims, options, charges, encumbrances, equities, proxies or voting or other
agreements or transfer restrictions whatsoever. Upon the transfer and delivery
of the Purchased Stock in accordance with this Agreement, Purchaser will
acquire, good, valid and marketable title to all of the issued and outstanding
shares of the Purchased Stock, free and clear of all liens, claims, options,
charges, encumbrances, equities, proxies or voting or other agreements
whatsoever.
2.5 Absence of Default; Non-Contravention; No Liens
-----------------------------------------------
(a) Except as set forth in Schedule 2.5(a), and subject to obtaining
---------------
the Required Consents, neither the execution nor delivery of this Agreement or
any other agreement, document or instrument to be executed and delivered by the
Sellers pursuant hereto or in connection herewith, nor the fulfillment of nor
the compliance with the terms and provisions hereof or thereof by the Sellers,
nor the consummation by the Sellers of the transactions contemplated hereby or
thereby, will (i) result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in a violation or termination of, or
conflict with or give any third party the right to accelerate the performance
provided by the terms of, (A) the Certificate of Incorporation or Bylaws of the
Company, or (B) any contracts, agreements, equipment leases, warranties and
commitments of either the Sellers, the Company or its subsidiaries (the
"Contracts"), (ii) violate any provision of any law, rule, regulation, order,
judgment or decree to which either the Sellers, the Company or any of its
subsidiaries is subject or bound, or (iii) result in the creation or imposition
of any lien, charge, restriction, security interest or encumbrance of any nature
whatsoever on the Company or any of its subsidiaries;
(b) All material Contracts are listed on Schedule 2.5(b) ("Material
---------------
Contracts"). Except as set forth in Schedule 2.5(b), to Seller's knowledge, no
---------------
party to any Material Contract is in default thereunder or in breach of any
provision thereof. There exists no condition or event which, after notice or
lapse of time or both, would constitute a default by the Company, any of its
subsidiaries or, to Sellers' knowledge, any other party to any Material
Contract. Copies of all written Material Contracts listed or described in
Schedule 2.5(b) have been provided to Purchaser prior to the execution and
- ---------------
delivery of this Agreement. Access to all Contracts at the offices of the
Company has been
8
<PAGE>
provided to Purchaser prior to the execution and delivery of this Agreement.
Summaries of all oral Material Contracts are included in Schedule 2.5(b). Copies
---------------
of all written Material Contracts entered into after the date hereof to and
including the Closing Date shall be promptly provided to Purchaser after the
execution thereof and access to all Contracts entered into after the date hereof
to and including the Closing shall be promptly provided to Purchaser at the
offices of the Company.
2.6 Financial Statements. Sellers have furnished to Purchaser true
--------------------
and correct copies of internally prepared and unaudited balance sheets of the
Company and its subsidiaries as of December 31, 1997 (the "Balance Sheet") and
the related internally prepared and unaudited statements of income and retained
earnings and statements of cash flow for the 12 month period ended on such date
and any notes thereto which are attached hereto as Schedule 2.6 (the Balance
------------
Sheet and financial statements for such period and any notes thereto being
hereinafter referred to collectively as the "Financial Statements"). Each of
the Financial Statements (a) is true and correct in all material respects and
has been prepared from the books and records of the Company and its
subsidiaries, (b) has been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis with prior periods
covered thereby, (c) presents fairly the financial position of both the Company
and its subsidiaries as at the respective dates and the results of both the
Company's and its subsidiaries operations, including changes in retained
earnings and changes in cash flow for such period in all respects. The books
and records of both the Company and its subsidiaries have been kept, and will be
kept to the Closing Date, in reasonable detail and in accordance with the same
accounting principles heretofore used consistently applied and fairly and
accurately reflect, and will fairly and accurately reflect to the Closing Date,
all of the transactions of both the Company and its subsidiaries in all material
respects, and are and will be complete and correct in all material respects.
All accounts receivable of the Company and its subsidiaries reflected on the
Financial Statements, and those arising from the date hereof until the Closing
Date, have arisen in the ordinary course of business and represent sales
actually made to customers which are not subject to any allowances or
adjustments. All such accounts receivables have been properly recorded in
accordance with GAAP consistently applied and are fully collectible.
2.7 Absence of Undisclosed Liabilities. Except as and to the extent
-----------------------------------
disclosed or accrued in the Balance Sheet or disclosed
9
<PAGE>
in Schedule 2.7 hereto, there exist no material liabilities or obligations of
------------
any nature whatsoever known by the Sellers (whether absolute, contingent or
otherwise, matured or unmatured, written or oral) with respect to either the
Company or its subsidiaries. The Sellers do not know of any material claim or
liability of any nature in any amount against either the Company or its
subsidiaries which is not fully disclosed in the Balance Sheet or Schedule 2.7.
------------
2.8 Properties.
----------
(a) Schedule 2.8(a) hereto lists any and all real property and
---------------
fixtures owned, leased, used or otherwise under the control of either the
Company or its subsidiaries. Neither the Company or its subsidiaries has
received any notice of violation of any applicable building, zoning or planning
regulation, ordinance or other law, order, regulation or requirement relating to
any real properties owned by the Company or its subsidiaries;
(b) Schedule 2.8(b) hereto lists all personal property of the
---------------
Company and its subsidiaries with a fair market value of $5,000 or more,
together with model number, manufacturer, purchase price and depreciation. The
Company or its subsidiaries has good and marketable title to all the tangible
and intangible personal properties and assets which are used by it in the
operation of their businesses, free and clear of all mortgages, pledges, liens,
charges, restrictions, easements and other encumbrances (collectively, "Liens"),
except for (i) such Liens which are described in Schedule 2.8(b)(i)
------------------
(collectively, the "Permitted Liens") and (ii) such other Liens which are
described in Schedule 2.8(b)(ii).
-----------
(c) All of the items of personal property of the Company and its
subsidiaries are in operating condition and suitable for the operation of the
business of the Company or its subsidiaries, as the case may be, subject to
ordinary wear and tear, are currently used or usable in the business of the
Company and its subsidiaries as the case may be, and there is no defect or
defects which would interfere with the continued use of such personal property
in the conduct of the normal operations of the Company's and its subsidiaries as
being conducted on the date hereof.
(d) The properties set forth in Section 2.8 constitute all assets
necessary for the Purchaser to conduct after the Closing Date the business of
the Company and its subsidiaries as conducted on the date hereof.
10
<PAGE>
2.9 Intellectual Rights. Schedule 2.9 lists any and all trademarks,
------------------- ------------
trademark registrations and applications therefor, tradenames, service marks,
logos and other identifying symbols, names or marks owned or licensed by either
the Company or its subsidiaries, and all other intellectual property and
privileges and other proprietary information owned or licensed by either the
Company or its subsidiaries (excluding off-the-shelf and pre-packaged software)
(collectively, the "Intellectual Rights"). Such Intellectual Rights are the
only intellectual property rights necessary for the conduct of the business of
the Company or its subsidiaries as now conducted. Except as set forth in
Schedule 2.9, all of the Intellectual Rights are owned exclusively by either the
- ------------
Company or its subsidiaries licensed to either the Company or its subsidiaries,
free and clear of all Liens except Permitted Liens and either the Company or its
subsidiaries has good and marketable title to or a valid license or right to use
such Intellectual Rights. The Company and its subsidiaries have taken
reasonable steps to protect all of the Intellectual Rights owned by the Company
or its subsidiaries (collectively, the "Proprietary Intellectual Rights"). All
such Proprietary Intellectual Rights are in good standing, are valid and
enforceable and are free from default on the part of any party (subject to
bankruptcy, insolvency, moratorium or similar laws affecting the rights of
creditors generally and general equitable principles). Except as set forth in
Schedule 2.9, no proceedings are pending and no claim has been made or, to the
- ------------
knowledge of the Sellers, threatened, which challenges the rights of either the
Company or its subsidiaries with respect to any of the Proprietary Intellectual
Rights or the validity thereof. Except as set forth in Schedule 2.9, none of
------------
the Proprietary Intellectual Rights infringe upon or otherwise violate the
rights of others, are being infringed by others, or are subject to any
outstanding order, decree, judgment or stipulation.
2.10 Books and Records. Except as set forth in Schedule 2.10, all of
----------------- -------------
the Company's and its subsidiaries accounts, minute books, stock record books,
and other records (collectively, the "Books and Records") are complete, true and
correct in all material respects. At the Closing, all of the Books and Records
including copies of the tax sections and records of the Company and its
subsidiaries will be in the possession of the Company or its subsidiaries, as
applicable.
2.11 Litigation. Except as set forth on Schedule 2.11, there are no
---------- -------------
claims, actions, suits, proceedings or investigations pending or, to the
knowledge of the Sellers, threatened against
11
<PAGE>
or affecting either the Company or its subsidiaries, at law or in equity, before
or by any Federal, state, municipal or other court, governmental department,
commission, board, agency or instrumentality, which (i) is not fully covered by
the insurance policies referenced in Section 2.15 (except for applicable
deductibles) or (ii) if adversely determined would reasonably be expected to
result in damages to or an award against the Company or its subsidiaries in
excess of $10,000 individually. Except as set forth on Schedule 2.11, there is
-------------
no order, writ, injunction or of any court or any federal, state, municipal or
local agency or instrumentality affecting the Company or its subsidiaries or to
which the Company or its subsidiaries is subject or bound, and to Sellers'
knowledge, neither the Company nor its subsidiaries is in material default with
respect to any order of any federal, state, municipal or other court,
department, commission, board, agency or instrumentality relating to its
business.
2.12 Compliance with Laws. Except as set forth in Schedule 2.12, (i)
-------------------- -------------
the Company and its subsidiaries have complied in all material respects with all
laws, ordinances, rules, regulations and directives of any and all Federal,
state, county, city and other governments, governmental departments, bureaus,
agencies and other bodies, and any and all public authorities whatsoever
relating to the business and the operation of the Company and its subsidiaries;
and (ii) neither the Company nor its subsidiaries has received any written
notice that it is in violation of any law, ordinance, rule, regulation or
directive pertaining or relating to the business or the operations of the
Company or its subsidiaries, and neither the Company nor its subsidiaries is in
violation of any such law, ordinance, rule, regulation, or directive. Each of
the Company and its subsidiaries has duly made, and on the Closing Date will
have duly made, all reports and filings pertaining to or affecting its business
required to be made pursuant to applicable law, including, but not limited to,
the United States Coast Guard, except where the failure to make any such report
or filing would not have a material adverse effect on the Company and its
business.
2.13 Environmental Matters.
---------------------
(a) Except as set forth on Schedule 2.13, there are no claims
-------------
pending or, to Sellers' knowledge after due inquiry, threatened by any
governmental agency against the Company or its subsidiaries, or any real
properties leased or used by the Company or its subsidiaries, or their
condition, or relating to the use or operation thereof by the Company or its
subsidiaries,
12
<PAGE>
arising out of any Federal, state or local law, rule, regulation or directive
pertaining to the environment, which (i) is not fully covered by the insurance
policies referenced in Section 2.15 (except for applicable deductibles) or (ii)
if adversely determined would reasonably be expected to result in damages to or
an award against the Company or its subsidiaries in excess of $10,000
individually;
(b) Except as set forth on Schedule 2.13, to Sellers'
-------------
knowledge, there are nowhere on any real property leased or used by or otherwise
under the control of the Company or its subsidiaries any deposits, dumps, or
tanks of toxic or other poisonous, dangerous or noxious waste, fluids, solvents,
chemicals or effluent, all of which chemicals, fuels and fluids are properly and
safely stored, identified, labeled and maintained in accordance with applicable
standards and all government or other laws or regulations relating thereto.
Neither the Company nor its subsidiaries discharges in connection with their
respective business, whether by effluent, emission or other means, any noxious,
toxic, hazardous or deleterious matter or gases. All discharges of waste
material and other substances from the Company's or its subsidiaries' operating
facilities are in compliance in all material respects with applicable law and
covered by valid permits and licenses, where required except where the failure
to so comply has not had and would not reasonably be expected to have a material
adverse effect on the Company or its subsidiaries.
2.14 Third Party and Governmental Consents; Permits.
----------------------------------------------
(a) Except as set forth in Schedule 2.5(a) (the "Required
---------------
Consents"), no consent, authorization, approval, order, license, certificate or
permit of or from, or registration, declaration or filing with, any governmental
authority or any court or other tribunal or any other person, firm or entity,
nor under any Material Contract, is required by or with respect to the Company
or its subsidiaries in connection with the execution, delivery or performance of
this Agreement or of any other agreement, document or instrument to be executed
and delivered by the Company or its subsidiaries pursuant hereto or in
connection herewith or the consummation of the transactions contemplated hereby;
(b) Schedule 2.14(b) hereto lists all licenses, permits,
----------------
franchises, approvals, certificates, authorizations and rights issued by any
Federal, state, local or other government or governmental authority, including,
but not limited to, the U.S.
13
<PAGE>
Coast Guard, to the Company or its subsidiaries (collectively, the "Permits").
These are the only licenses, permits, franchises, approvals, certificates,
authorizations and rights issued by any Federal, state or local government or
otherwise which are necessary to operate businesses of the Company or its
subsidiaries as now conducted and for the continuing operation of the businesses
of the Company and its subsidiaries as now conducted. Except as set forth in
Schedule 2.14(b), no Permits (i) have failed to have been obtained by the
- ----------------
Company or its subsidiaries, (ii) have expired or lapsed or have otherwise
become restricted by their terms, or (iii) are likely to be subject to
suspension, revocation or cancellation as a result of any act or omission of
Sellers (including, without limitation, the consummation of the transactions
contemplated by this Agreement, except as set forth on Schedule 2.5(a)).
---------------
2.15 Insurance. Schedule 2.15 hereto lists each policy of insurance
--------- -------------
maintained by either the Company or its subsidiaries (including the cover page
of each such policy) covering the Company and its subsidiaries. Sellers have
provided to Purchaser information on premiums and the insured values of such
policies and comparable information for all major medical, dental, life,
disability, accidental death, and other employee welfare plans of the Company
and its subsidiaries or applicable to employees of the Company or its
subsidiaries. True and complete copies of all such policies have been provided
to Purchaser.
2.16 Transactions Since December 31, 1997. Except as contemplated by this
------------------------------------
Agreement or as set forth in Schedule 2.16 hereto, both the Company and its
-------------
subsidiaries have during the period from and after December 31, 1997 conducted
their businesses only in the ordinary course and on a basis consistent with past
practices, and since said date, except as set forth in Schedule 2.16:
-------------
(a) there has not been any Material Adverse Change (as such term is
defined below);
(b) there has not been any damage, destruction or loss of property
(whether or not covered by insurance) resulting or that could reasonably be
expected to result in a Material Adverse Change;
(c) neither the Company nor its subsidiaries has made any sale,
assignment or transfer of, or additions to, or transactions involving, any of
its tangible or intangible assets
14
<PAGE>
nor engaged in any transactions, other than in the ordinary course of business
on a basis consistent with past practices;
(d) there has not been any change in the relationship or course of
dealings among each of the Company and its subsidiaries and their respective
suppliers; and
(e) neither the Company nor its subsidiaries has agreed, whether in
writing or otherwise, to do or permit any of the foregoing.
2.17 Securities Representations.
--------------------------
(a) Sellers acknowledge that there has been made available to Sellers
the opportunity to obtain additional information to evaluate the merits and
risks of an investment in the Consideration Stock. Sellers have had the
opportunity to ask questions of, and has received satisfactory answers from,
representatives of Purchaser concerning the business of Purchaser. No oral
representations have been made or oral information furnished to Sellers or
Sellers' advisors in connection with the Consideration Stock.
(b) Sellers understand and acknowledge that (i) the shares of
Consideration Stock have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and applicable state securities laws
(collectively, the "Securities Laws"), (ii) that the Consideration Stock is
being sold to the Sellers pursuant to exemptions from registration requirements
under the Securities Laws, and (iii) that Purchaser is relying on Sellers'
representations set forth in this Agreement in entering into this Agreement.
(c) Sellers understand and acknowledge that no federal or state agency
has recommended or endorsed the purchase of the Consideration Stock.
(d) Sellers understand and acknowledge that there will be no public
market for the Consideration Stock, that there will be restrictions on the
transferability of the Consideration Stock and that Sellers will not be able to
readily liquidate an investment in the Consideration Stock.
(e) Sellers are acquiring the Consideration Stock solely for their own
account, for investment, and not with a view to the distribution or resale
thereof, and Sellers have no present intention, agreement, understanding or
arrangement to
15
<PAGE>
sell, assign, transfer, hypothecate or otherwise dispose of all or any part of
the Consideration Stock or any interest therein.
(f) Sellers each meet the requirements of at least one of the
suitability standards for an "accredited investor" set forth on the Accredited
Investor Certification attached hereto as Exhibit C.
---------
(g) Sellers, together with their financial advisors, have such
knowledge and experience in financial, tax, business and investment matters so
as to enable Sellers to utilize the information made available to Sellers
concerning the Purchaser, evaluate the merits and risks of an investment in the
Consideration Stock and to make an informed investment decision with respect to
the Consideration Stock.
(h) Sellers understand and acknowledge that Purchaser has only
recently been organized, has only a short financial and operating history and
that investment in the Purchaser involves significant risks.
2.18 Tax Returns and Payments. The Company and its subsidiaries have duly
------------------------
and timely filed all Federal, state and local United States and foreign tax
returns and reports required to be filed and have duly paid or properly accrued
for the proper payment of all taxes, interest, penalties, assessments and other
governmental charges upon it or its properties, assets, income, franchises,
licenses or sales shown to be due on such tax returns and reports or claimed by
any taxing authority or otherwise to be due in respect thereof. The amount shown
as reserved for the payment of taxes on the Balance Sheet is sufficient for the
payment of all such taxes of the Company and its subsidiaries in respect of the
periods for which such reserve or reserves have been established. The Company
and its subsidiaries have not elected to be taxed in accordance with the
provisions of Subchapter S of Chapter I of Subtitle A of the Code. The Company
and its subsidiaries have made all withholdings of tax required to be made under
all applicable Federal, state and local tax regulations and such withholdings
have either been paid to the respective governmental agencies or set aside in
accounts for such purpose or accrued, reserved against and entered upon the
books of the Company and its subsidiaries. The last year for which the Federal
or state income tax or other taxes of the Company and its subsidiaries have been
examined is stated in Schedule 2.18 hereto. The Company and its subsidiaries
-------------
have not executed any agreement extending the period for assessment or
16
<PAGE>
collection of any tax and no claim for assessment or collection of any tax has
been asserted against them.
2.19 Employment, Deferred Compensation or Similar Agreements; Collective
-------------------------------------------------------------------
Bargaining Agreements; Employee Benefit Plans; Relationships.
- ------------------------------------------------------------
(a) Except as set forth in Schedule 2.19(a) hereto, neither the
----------------
Company nor its subsidiaries is a party to any agreement or employment contract
or deferred compensation or similar arrangement with any of its employees or
former employees. There are no collective bargaining agreements covering any
employees of the Company and its subsidiaries. Neither the Company nor its
subsidiaries is affected by any present strike or other labor disturbance
involving its employees nor, to the knowledge of the Sellers is any union
attempting to represent, as collective bargaining agent, any person employed by
the Company or its subsidiaries;
(b) Except as set forth in Schedule 2.19(b) hereto, neither the
----------------
Company nor its subsidiaries sponsors or maintains nor is otherwise a party to
or liable under, any plan, program, fund or material arrangement (whether or not
qualified for Federal income tax purposes), whether benefiting a single
individual or multiple individuals, and whether funded or not, that is an
"employee pension benefit plan," or an "employee welfare benefit plan," as such
terms are defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any material incentive or other benefit arrangement for
its employees, their dependents and beneficiaries;
(c) Except as set forth in Schedule 2.19(c) hereto, neither the
----------------
Company nor its subsidiaries has nor contributes to any multiemployer plan (as
defined in Section 3(37) of ERISA), nor has the Company or its subsidiaries
incurred any liability under Section 4201 of ERISA for any complete or partial
withdrawal from any multiemployer plan and has not, to its knowledge, assumed
any such liability by any prior owner of its business;
(d) Each employee pension benefit plan maintained by the Company or
its subsidiaries and listed on Schedule 2.19(b) complies in all material
----------------
respects with the requirements of ERISA. No "reportable event" within the
meaning of Section 403 of ERISA has occurred with respect to any such plan and
neither the Company nor its subsidiaries has engaged in any "prohibited
transaction" within the meaning of Section 406(a) or (b) of ERISA
17
<PAGE>
or of Section 4975(c) of the Code, with respect to any such plan; and no such
plan has been terminated in accordance with the procedures set forth in Section
4041 or 4042 of ERISA;
(e) No liability has been incurred by the Company or its subsidiaries
for any tax imposed by Section 4975 of the Code with respect to any plan
described in Schedule 2.19(b). The Company and its subsidiaries have, for all
----------------
periods ending on or prior to the date hereof, administered each employee
pension benefit plan and each employee welfare benefit plan described in
Schedule 2.19(b) in all respects in compliance with the reporting, disclosure
- ----------------
and all other requirements applicable thereto under ERISA, the Code or any other
applicable law;
(f) During the period commencing January 1, 1997 to and including the
date hereof, neither the Company nor its subsidiaries nor any shareholder,
officer, employee or affiliate of either the Company or its subsidiaries
("Related Person") owns or has owned of record or beneficially an equity
interest or any other financial or profit interest in any firm, corporation or
any other entity or person which has had material business dealings or financial
interests in any transaction with the Company or its subsidiaries, or is a
customer or supplier of or is a potential customer, supplier or competitor of,
the Company or its subsidiaries. No Related Person has any claim or right
against the Company or its subsidiaries and no Related Person owns, directly or
indirectly, in whole or in part, any inventions or other Intellectual Rights or
interests therein which the Company or its subsidiaries has used, is presently
using or the use of which is necessary in connection with the business of the
Company or its subsidiaries or for the operation of the Company or its
subsidiaries.
(g) Schedule 2.19(g) sets forth a complete and accurate list of all
----------------
of the employees of the Company and its subsidiaries, each such person's title,
salary, date of hire and date of last salary increase, if any. Schedule 2.19(g)
----------------
also sets forth the current officers and directors of the Company and its
subsidiaries.
2.20 Bank Accounts. Schedule 2.20 lists the names and addresses of each
------------- -------------
bank and other financial institution in which the Company or its subsidiaries
maintains an account, lock box or safe deposit box, and the account numbers and
names of persons having signing authority access thereto. Neither the Company
nor any of its subsidiaries has granted any power of attorney or similar power
to act on its behalf to any other person or entity.
18
<PAGE>
2.21 Disclosure. No representation or warranty of the Sellers contained in
----------
this Agreement or any other agreement, document or instrument to be executed and
delivered by the Sellers pursuant hereto or in connection herewith is untrue in
any material respect or omits a material fact necessary to make the statements
herein or therein, and in light of the circumstances under which such statements
were made, is not materially misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to the Sellers, knowing and
intending that the Sellers are relying hereon in entering into the transactions
contemplated hereby, as follows as of the date hereof:
3.1 Due Organization; Good Standing.
-------------------------------
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey and has the corporate
power and authority to carry on its business as now conducted, to own and
operate the properties and assets now owned and operated by it and to enter into
and perform this Agreement.
3.2 Corporate Authorization; Binding Effect.
---------------------------------------
(a) The execution, delivery and performance of this Agreement by the
Purchaser, and the payments, issuances of Consideration Stock, deliveries and
other agreements to be executed and/or delivered by the Purchaser pursuant
hereto or in connection herewith, have been duly authorized by the Board of
Directors of Purchaser, and other than shareholder approval, if deemed required
by the Purchaser, no other corporate proceedings and no further corporate action
is necessary on the part of Purchaser to make this Agreement, any other
agreement, document, certificate or instrument to be executed by Purchaser
pursuant hereto or in connection herewith or the consummation of the
transactions contemplated hereby authorized, legal, valid and binding upon
Purchaser in accordance with their respective terms. No consent or approval of
any other person to the consummation of any of the transactions contemplated
hereby by Purchaser is required;
19
<PAGE>
(b) This Agreement is a valid and legally binding obligation of
Purchaser, enforceable in accordance with its terms, subject to bankruptcy,
fraudulent conveyance, insolvency, moratorium or similar laws affecting the
rights of creditors generally or general equitable principles, and each
agreement, document, certificate and instrument contemplated by this Agreement,
when executed and delivered by Purchaser in accordance with the provisions of
this Agreement, will be duly authorized, executed and delivered by Purchaser and
will be a valid and legally binding obligation of Purchaser, enforceable in
accordance with its respective terms, subject to bankruptcy, fraudulent
conveyance, insolvency, moratorium or similar laws affecting the rights of
creditors generally or general equitable principles.
3.3 No Breach. Neither the execution nor delivery of this Agreement or any
---------
other agreement, document or instrument to be executed and delivered by the
Purchaser pursuant hereto or in connection herewith, nor the fulfillment of nor
the compliance with the terms and provisions hereof or thereof by the Purchaser,
nor the consummation by the Purchaser of the transactions contemplated hereby or
thereby, will (i) result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in a violation or termination of, or
conflict with or give any third party the right to accelerate the performance
provided by the terms of, (A) the Certificate of Incorporation or By-Laws of the
Purchaser, or (B) any contract or agreement to which either of the Purchaser is
a party and by which it is bound, except where the violation, conflict, breach,
default, acceleration, termination would not have a material adverse effect on
the ability of the parties to consummate the transactions contemplated by this
Agreement, or (ii) to the knowledge of the Purchaser, violate any provision of
any law, rule, regulation, order, judgment or decree applicable to Purchaser;
3.4 Litigation. Except as set forth on Schedule 3.4, there are no claims,
---------- ------------
actions, suits, proceedings or investigations pending or, to the knowledge of
the Purchaser, threatened against or affecting the Purchaser, at law or in
equity, before or by any Federal, state, municipal or other court, governmental
department, commission, board, agency or instrumentality, which (i) is not fully
covered by the Purchase's existing insurance policies (except for applicable
deductibles) or (ii) if adversely determined would reasonably be expected to
result in damages to or an award against the Purchaser or its subsidiaries in
excess of $10,000 individually. Except as set forth on Schedule 3.4,
------------
20
<PAGE>
there is no order, writ, injunction or decree of any court or any federal,
state, municipal or local agency or instrumentality affecting the Purchaser or
to which the Purchaser is subject or bound, and to Purchaser knowledge, the
Purchaser is in material default with respect to any order of any federal,
state, municipal or other court, department, commission, board, agency or
instrumentality relating to its business.
3.5 Citizenship. The Purchaser is a corporation eligible to document a
-----------
vessel under the requirements of 46 U.S.C. Chapter 121-Documentation of Vessels.
3.6 Capitalization; Ownership of Stock. The authorized capital stock of
----------------------------------
the Purchaser on the date hereof is set forth on Schedule 3.6 hereof. All of the
------------
issued and outstanding shares of capital stock of the Purchaser, and the owners
and amounts thereof, are also set forth on Schedule 3.6 hereof. There are no
outstanding rights of subscriptions, warrants, calls, options, contracts or
other similar agreements, issued or granted by the Purchaser or any of its
subsidiaries except as set forth on Schedule 3.6. All dividends and other
------------
distributions paid by the Purchaser or any of its subsidiaries were duly and
lawfully declared and paid in full and the Purchaser has no unpaid note or other
obligation with respect to any such dividend or other distribution. The
Purchaser has not guaranteed, assumed or otherwise become responsible for any
liability or other obligation of its subsidiaries or any of its Affiliates
except as set forth on Schedule 3.6 hereof.
------------
3.7 Title to Consideration Stock.
----------------------------
Upon the transfer and delivery of the Consideration Stock in
accordance with this Agreement, Sellers will acquire, good, valid and marketable
title, subject to federal and state securities laws, to the Consideration Stock,
free and clear of all liens, claims, options, charges, encumbrances, equities,
proxies or voting or other agreements whatsoever.
3.8 Absence of Default; Non-Contravention; No Liens
-----------------------------------------------
Except as set forth in Schedule 3.8, neither the execution nor
------------
delivery of this Agreement or any other agreement, document or instrument to be
executed and delivered by the Purchaser pursuant hereto or in connection
herewith, nor the fulfillment of nor the compliance with the terms and
provisions hereof or thereof by the Purchaser, nor the consummation by the
Purchaser of the transactions contemplated hereby or thereby, will (i) result in
a breach of the terms, conditions or
21
<PAGE>
provisions of, or constitute a default under, or result in a violation or
termination of, or conflict with or give any third party the right to accelerate
the performance provided by the terms of, (A) the Certificate of Incorporation
or Bylaws of the Purchaser, or (B) any contracts, agreements, equipment leases,
warranties and commitments of the Purchaser (the "Purchaser Contracts"), (ii)
violate any provision of any law, rule, regulation, order, judgment or decree to
which either the Purchaser is subject or bound, or (iii) result in the creation
or imposition of any lien, charge, restriction, security interest or encumbrance
of any nature whatsoever on the Purchaser.
3.9 Financial Statements. Purchaser has furnished to Sellers true and
--------------------
correct copies of internally prepared and unaudited balance sheets of the
Purchaser and its subsidiaries as of December 31, 1997 (the "Purchaser Balance
Sheet") and the related internally prepared and unaudited statements of income
and retained earnings and statements of cash flow for the 12 month period ended
on such date and any notes thereto (the Purchaser Balance Sheet and financial
statements for such period and any notes thereto being hereinafter referred to
collectively as the "Purchaser Financial Statements"). Each of the Purchaser
Financial Statements (a) is true and correct in all material respects and has
been prepared from the books and records of the Purchaser, (b) has been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis with prior periods covered thereby, (c) presents fairly the
financial position of the Purchaser as at the respective dates and the results
of the Purchaser operations, including changes in retained earnings and changes
in cash flow for such period in all respects. The books and records of the
Purchaser have been kept, and will be kept to the Closing Date, in reasonable
detail and in accordance with the same accounting principles heretofore used
consistently applied and fairly and accurately reflect, and will fairly and
accurately reflect to the Closing Date, all of the transactions of both the
Purchaser in all material respects, and are and will be complete and correct in
all material respects. All accounts receivable of the Purchaser reflected on the
Purchaser Financial Statements, and those arising from the date hereof until the
Closing Date, have arisen in the ordinary course of business and represent sales
actually made to customers which are not subject to any allowances or
adjustments. All such accounts receivables have been properly recorded in
accordance with GAAP consistently applied and are fully collectible.
3.10 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
disclosed or accrued in the Purchaser Balance Sheet or
22
<PAGE>
disclosed in Schedule 3.10 hereto, there exist no material liabilities or
-------------
obligations of any nature whatsoever known by the Purchaser (whether absolute,
contingent or otherwise, matured or unmatured, written or oral) with respect to
the Purchaser. The Purchaser does not know of any material claim or liability of
any nature in any amount against the Purchaser which is not fully disclosed in
the Purchaser Balance Sheet or Schedule 3.10.
-------------
3.11 Books and Records. Except as set forth in Schedule 3.11, all of the
----------------- -------------
Purchaser's and its subsidiaries accounts, minute books, stock record books, and
other records (collectively, the "Purchaser Books and Records") are complete,
true and correct in all material respects. At the Closing, all of the Purchaser
Books and Records will be in the possession of the Purchaser.
3.12 Compliance with Laws. Except as set forth in Schedule 3.12, (i) the
-------------------- -------------
Purchaser has complied in all material respects with all laws, ordinances,
rules, regulations and directives of any and all Federal, state, county, city
and other governments, governmental departments, bureaus, agencies and other
bodies, and any and all public authorities whatsoever relating to the business
and the operation of the Purchaser; and (ii) the Purchaser has not received any
written notice that it is in violation of any law, ordinance, rule, regulation
or directive pertaining or relating to the business or the operations of the
Purchaser, and the Purchaser is not in violation of any such law, ordinance,
rule, regulation, or directive. The Purchaser has duly made, and on the Closing
Date will have duly made, all reports and filings pertaining to or affecting its
business required to be made pursuant to applicable law, except where the
failure to make such reports would not reasonably be expected to have a material
adverse effect on the Purchaser.
3.13 Transactions Since December 31, 1997. Except as contemplated by this
------------------------------------
Agreement or as set forth in Schedule 3.13 hereto, both the Purchaser have
-------------
during the period from and after December 31, 1997 conducted their businesses
only in the ordinary course and on a basis consistent with past practices, and
since said date, except as set forth in Schedule 3.13:
-------------
(a) there has not been any Material Adverse Change (as such term is
defined below);
(b) there has not been any damage, destruction or loss of property
(whether or not covered by insurance) resulting or that could reasonably be
expected to result in a Material Adverse Change;
23
<PAGE>
(c) the Purchaser has not made any sale, assignment or transfer of, or
additions to, or transactions involving, any of its tangible or intangible
assets nor engaged in any transactions, other than in the ordinary course of
business on a basis consistent with past practices;
(d) there has not been any change in the relationship or course of
dealings among the Purchaser and its respective suppliers; and
(e) The Purchaser has not agreed, whether in writing or otherwise, to
do or permit any of the foregoing.
3.14 Securities Representations.
--------------------------
(a) Purchaser acknowledges that that there has been made available to
Purchaser the opportunity to obtain additional information to evaluate the
merits and risks of an investment in the Purchased Shares. Purchaser has had the
opportunity to ask questions of, and has received satisfactory answers from,
Sellers concerning the business of the Company and its Subsidiaries. No oral
representations have been made or oral information furnished to Purchaser's
advisors in connection with the Purchased Shares.
(b) Purchaser understands and acknowledges that (i) the Purchased
Shares have not been registered under the Securities Laws, (ii) that the
Purchased Shares are being sold to the Purchaser pursuant to exemptions from
registration requirements under the Securities Laws, and (iii) that Sellers are
relying on the Purchaser's representations set forth in this Agreement in
entering into this Agreement.
(c) Purchaser understands and acknowledges that no federal or state
agency has recommended or endorsed the purchase of the Purchased Shares.
(d) Purchaser understands and acknowledges that there will be no
public market for the Purchased Shares, that there will be restrictions on the
transferability of the Purchased Shares and that Sellers will not be able to
readily liquidate an investment in the Purchased Shares.
(e) Purchaser is acquiring the Purchased Shares solely for its own
account, for investment, and not with a view to the distribution or resale
thereof, and Purchaser has no present intention, agreement, understanding or
arrangement to sell,
24
<PAGE>
assign, transfer, hypothecate or otherwise dispose of all or any part of the
Purchased Shares or any interest therein.
(f) Purchaser, together with its financial advisors, have such
knowledge and experience in financial, tax, business and investment matters so
as to enable Purchaser to utilize the information made available to Purchaser
concerning the Company, evaluate the merits and risks of an investment in the
Purchased Shares and to make an informed investment decision with respect to the
Purchased Shares.
(g) Purchaser understands and acknowledges that the Company has only
recently been organized, has only a short financial and operating history and
that investment in the Company involves significant risks.
3.15 Tax Returns and Payments. The Purchaser has duly and timely filed all
------------------------
Federal, state and local United States and foreign tax returns and reports
required to be filed and have duly paid or properly accrued for the proper
payment of all taxes, interest, penalties, assessments and other governmental
charges upon it or its properties, assets, income, franchises, licenses or sales
shown to be due on such tax returns and reports or claimed by any taxing
authority or otherwise to be due in respect thereof. The amount shown as
reserved for the payment of taxes on the Purchaser Balance Sheet is sufficient
for the payment of all such taxes of the Purchaser in respect of the periods for
which such reserve or reserves have been established. The Purchaser has not
elected to be taxed in accordance with the provisions of Subchapter S of Chapter
I of Subtitle A of the Code. The Purchaser has made all withholdings of tax
required to be made under all applicable Federal, state and local tax
regulations and such withholdings have either been paid to the respective
governmental agencies or set aside in accounts for such purpose or accrued,
reserved against and entered upon the books of the Purchaser. The last year for
which the Federal or state income tax or other taxes of the Purchaser has been
examined is stated in Schedule 3.15 hereto. The Purchaser has not executed any
-------------
agreement extending the period for assessment or collection of any tax and no
claim for assessment or collection of any tax has been asserted against them.
3.16 Employment, Deferred Compensation or Similar Agreements; Collective
-------------------------------------------------------------------
Bargaining Agreements; Employee Benefit Plans; Relationships.
- ------------------------------------------------------------
25
<PAGE>
(a) Except as set forth in Schedule 3.16(a) hereto, the Purchaser is
----------------
not a party to any agreement or employment contract or deferred compensation or
similar arrangement with any of its employees or former employees. There are no
collective bargaining agreements covering any employees of the Purchaser. The
Purchaser is not affected by any present strike or other labor disturbance
involving its employees nor, to the knowledge of the Purchaser is any union
attempting to represent, as collective bargaining agent, any person employed by
the Purchaser;
(b) Except as set forth in Schedule 3.16(b) hereto, the Purchaser does
----------------
not sponsor or maintain nor is otherwise a party to or liable under, any plan,
program, fund or material arrangement (whether or not qualified for Federal
income tax purposes), whether benefiting a single individual or multiple
individuals, and whether funded or not, that is an "employee pension benefit
plan," or an "employee welfare benefit plan," as such terms are defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
material incentive or other benefit arrangement for its employees, their
dependents and beneficiaries;
(c) Except as set forth in Schedule 3.16(c) hereto, the Purchaser does
----------------
not have nor contributes to any multiemployer plan (as defined in Section 3(37)
of ERISA), nor has the Purchaser incurred any liability under Section 4201 of
ERISA for any complete or partial withdrawal from any multiemployer plan and has
not, to its knowledge, assumed any such liability by any prior owner of its
business;
(d) Each employee pension benefit plan maintained by the Purchaser and
listed on Schedule 3.16(b) complies in all material respects with the
----------------
requirements of ERISA. No "reportable event" within the meaning of Section 403
of ERISA has occurred with respect to any such plan and the Purchaser has not
engaged in any "prohibited transaction" within the meaning of Section 406(a) or
(b) of ERISA or of Section 4975(c) of the Code, with respect to any such plan;
and no such plan has been terminated in accordance with the procedures set forth
in Section 4041 or 4042 of ERISA;
(e) No liability has been incurred by the Purchaser for any tax
imposed by Section 4975 of the Code with respect to any plan described in
Schedule 3.16(b). The Purchaser has, for all periods ending on or prior to the
- ----------------
date hereof, administered each employee pension benefit plan and each employee
welfare benefit plan described in Schedule 3.16(b) in all respects in
----------------
26
<PAGE>
compliance with the reporting, disclosure and all other requirements applicable
thereto under ERISA, the Code or any other applicable law;
(f) During the period commencing January 1, 1997 to and including the
date hereof, neither the Purchaser nor any Related Person owns or has owned of
record or beneficially an equity interest or any other financial or profit
interest in any firm, corporation or any other entity or person which has had
material business dealings or financial interests in any transaction with the
Purchaser, or is a customer or supplier of or is a potential customer, supplier
or competitor of, the Purchaser. No Related Person has any claim or right
against the Purchaser and no Related Person owns, directly or indirectly, in
whole or in part, any inventions or other Intellectual Rights or interests
therein which the Purchaser has used, is presently using or the use of which is
necessary in connection with the business of the Purchaser or for the operation
of the Company Purchaser.
3.17 Disclosure. No representation or warranty of the Sellers contained in
----------
this Agreement or any other agreement, document or instrument to be executed and
delivered by the Purchaser pursuant hereto or in connection herewith is untrue
in any material respect or omits a material fact necessary to make the
statements herein or therein, and in light of the circumstances under which such
statements were made, is not materially misleading.
ARTICLE IV
COVENANTS AND OTHER AGREEMENTS
------------------------------
4.1 General. Each of the parties will use its reasonable efforts to take
-------
all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement.
4.2 Notices and Consents. Each of the parties hereto will give such
--------------------
notices to, make such filings with, and use its reasonable efforts and cooperate
with each other to obtain such consent, authorization or approval of, or any
exemption by, any governmental authority or agency, or other third party,
required to be obtained or made in connection with the transactions contemplated
hereby.
4.3 Risk of Loss; Casualty. Until the Closing Date, the risk of loss or
----------------------
damage to any of the Company's and its
27
<PAGE>
subsidiaries assets by fire or other casualty or any cause whatsoever shall be
upon Sellers, and Purchaser shall bear such risk thereafter. If any of the
material assets of the Company or its subsidiaries are damaged prior to the
Closing, Sellers shall cause such entity to notify Purchaser in writing thereof
with complete details of the nature and extent thereof as soon as such details
are available after the occurrence of such damage, and Purchaser shall have an
opportunity to review the extent of such damage. In the event that the parties
determine that the cost of repairing such can reasonably be expected not to
exceed $100,000, then within five (5) business days after receipt of such notice
from the Sellers, Purchaser may either (i) by written notice to Sellers extend
the Closing Date hereunder by a period of 45 days (or such lesser or greater
period as the parties may determine by mutual agreement) and cause Sellers to
have those repaired prior to Closing, and upon completion of such repair to
Purchaser's reasonable satisfaction Purchaser shall promptly proceed to close;
or (ii) by notice to Sellers elect to close without adjustment to the Purchase
Price. In the event Purchaser elects to cause Sellers to cause the Company or
its subsidiaries to repair the damaged property and either (i) repairs or
replacement of such damage are not fully covered by insurance or (ii) such
repairs cannot reasonably be completed within the forty-five day period set
forth above, Purchaser shall have the option to terminate this Agreement in
accordance with the provisions of Section 4.14 hereof.
In the event that the parties determine that the cost of repairing such
damage can reasonably be expected to exceed $100,000 ("Major Damage"), then,
either party may terminate this Agreement by written notice to the other party
if such notice to terminate is given in accordance with the notice provisions of
this Agreement within ten (10) business days after all details relating to such
damage have been made available to such party although the parties may mutually
agree to extend such time period in writing if additional time is required to
assess such damage.
4.4 Covenants of the Sellers. During the period commencing on the date
------------------------
hereof and continuing until the Closing, the Sellers covenant and agree (except
to the extent that Purchaser shall otherwise expressly consent in writing, which
consent shall not be unreasonably withheld) that:
(a) Sellers will cause the Company and its subsidiaries to operate
only in the ordinary course in substantially the same manner as heretofore
conducted and, to the
28
<PAGE>
extent consistent and necessary with such operation of the Company and its
subsidiaries, use all reasonable efforts to (i) preserve intact the present
operations of their businesses, (ii) maintain the businesses of the Company and
its subsidiaries and their assets in the same condition and repair in all
material respects as they are on the date hereof, (iii) keep available the
services of the present employees of the Company and its subsidiaries, and (iv)
preserve the relationships of the Company and its subsidiaries with customers,
suppliers and others having business dealings with them so that the goodwill and
going business of the Company and its subsidiaries shall be unimpaired on the
Closing Date in all material respects as compared to the state thereof on the
date hereof. Sellers (i) will not allow the Company or its subsidiaries to
cancel any of the current insurance policies or any of the coverage thereunder
maintained by it for the protection of their business or assets, and (ii) shall
use their reasonable efforts to protect and maintain the registration of any and
all Intellectual Rights which are registered as of the date hereof.
(b) Sellers will cause the Company of its subsidiaries to comply
promptly in all material respects with all requirements of federal, state, local
or other law with respect to the transactions contemplated hereby and will
cooperate with and furnish information to Purchaser in connection with any such
requirements imposed upon Purchaser in connection with the transactions
contemplated hereby;
(c) Except as set forth on Schedule 4.4(c), Sellers will not allow the
---------------
Company or its subsidiaries to lease, mortgage, pledge or encumber in any way
whatsoever any of their assets;
(d) Sellers will not sell, assign, transfer or otherwise dispose of
anything belonging to the Company or its subsidiaries, except in the ordinary
course of business; provided that it will not, without the prior written consent
of the Purchaser, dispose of any asset with a current market value of $5,000 or
more;
(e) Except as set forth on Schedule 4.4(e), Sellers will not allow the
---------------
Company or its subsidiaries to terminate or amend any other Contract or Permit
except in the ordinary course of business;
(f) Sellers will promptly advise Purchaser in writing of the
occurrence since the date of this Agreement of any
29
<PAGE>
Material Adverse Change or to Sellers' knowledge, any event or circumstance
which could reasonably be expected to result in a Material Adverse Change;
(g) Except for the Bareboat Charter Party dated March 23, 1998, and
the Bareboat Charter Party dated as of March 10, 1998, Sellers will not allow
the Company or its subsidiaries to enter into any oral or written consent,
lease, agreement, commitment, understanding or instrument pursuant to which the
aggregate financial obligation of the Company of its subsidiaries subsequent to
the Closing Date under any such consent, lease, agreement, commitment,
understanding or instrument may exceed $5,000, and which is not terminable by
the Company or its subsidiaries subsequent to the Closing Date without penalty
upon thirty (30) days' notice or less.
4.5 Covenants of the Purchaser. During the period commencing on the date
--------------------------
hereof and continuing until the Closing, the Purchaser covenants and agrees that
Purchaser will comply promptly with all requirements of federal, state, local or
other law with respect to the transactions contemplated hereby and will
cooperate with and furnish information to Sellers in connection with any such
requirements imposed upon Sellers in connection with the transactions
contemplated hereby.
4.6 Notice of Developments.
-----------------------
(a) All of the Sellers' representations and warranties will be
accurate and compete in all material respects at the time this document is
executed. However, notwithstanding the foregoing, the Sellers shall at any time
from the date of this Agreement through the Closing notify the Purchaser
(including pursuant to the officer's certificate referred to in Section 5.1(d))
if it becomes aware of any fact or condition that causes or constitutes a breach
of any of Sellers' representations and warranties as of the date of this
Agreement or of any development causing a breach of any of its representations
and warranties. If such fact, condition or development does not cause a failure
of the condition set forth in Section 5.1(b) or if such condition does cause a
failure of the condition set forth in Section 5.1(b) but is waived by Purchaser
with respect to such fact, condition or development, in writing, the written
notice pursuant to this Section 4.6 will be deemed to have amended the
disclosure Schedules to this Agreement, to have qualified the representations
and warranties contained in this Agreement, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the fact,
30
<PAGE>
condition or development. In all other cases, such fact, condition or
development shall be deemed to have caused a failure of the condition set forth
in Section 5.1(b).
(b) All of the Purchaser's representations and warranties will be
accurate and compete in all material respects at the time this document is
executed. However, notwithstanding the foregoing, the Purchasers shall at any
time from the date of this Agreement through the Closing notify the Purchasers
(including pursuant to the officer's certificate referred to in Section 5.2(d))
if it becomes aware of any fact or condition that causes or constitutes a breach
of any of Purchaser's representations and warranties as of the date of this
Agreement or of any development causing a breach of any of its representations
and warranties. If such fact, condition or development does not cause a failure
of the condition set forth in Section 5.2(b) or if such condition does cause a
failure of the condition set forth in Section 5.2(b) but is waived by Purchaser
with respect to such fact, condition or development, in writing, the written
notice pursuant to this Section 4.6 will be deemed to have amended the
disclosure Schedules to this Agreement, to have qualified the representations
and warranties contained in this Agreement, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the fact, condition or development. In all other cases,
such fact, condition or development shall be deemed to have caused a failure of
the condition set forth in Section 5.2(b).
4.7 Access to Property and Records. At all times prior to the Closing,
------------------------------
Sellers shall cause the Company and its subsidiaries to afford the officers and
authorized representatives of Purchaser full access to the personnel, offices,
properties, business, books, records and other information of the Company and
its subsidiaries at Purchaser's sole cost and expense, as Purchaser shall
reasonably request during business hours and upon reasonable notice and in a
manner so as not to interfere with the normal business operations of the Company
or its subsidiaries, and, to the extent available, shall cause the Company and
its subsidiaries to furnish or provide access to Purchaser or such authorized
representatives at Purchaser's sole cost and expense, such financial, technical
and operating data and information as shall be reasonably requested, including
all such information and data as shall be necessary in order to enable Purchaser
or its representatives to investigate the business and the operations of its
subsidiaries and the Company. In furtherance of the foregoing, Sellers agrees
that upon the reasonable request and upon reasonable notice and at Purchaser's
sole cost and expense, Purchaser may place employees or representatives in the
31
<PAGE>
facilities and offices of the Company or its subsidiaries during reasonable
business hours to observe the conduct of their businesses and to permit such
employees or representatives reasonable access to the facilities, offices and
management personnel of the Company and its subsidiaries in connection with
their operations during reasonable business hours; provided that the Company and
its subsidiaries may place and all such employees or representatives of
Purchaser under the strict supervision of the Company and its subsidiaries and
any such review shall be conducted by the Purchaser and its employees or
representatives in a manner so as not to interfere with the normal business
operations of the Company and its subsidiaries. The Purchaser and its employees
and representatives will treat and hold any information it receives from any of
employees or representatives in the course of the reviews contemplated by this
Section 4.7 as "Confidential Information", as such term is defined in the Letter
of Intent dated February 11, 1998 and will not use any of such Information
except in connection with this Agreement or as provided in the Letter of Intent.
4.8 Material Events. At all times prior to the Closing, each party
---------------
shall promptly notify the other party in writing if such party becomes aware of
the occurrence of any material event which will result in the failure to satisfy
the conditions specified in Section 5.1 or Section 5.2 hereof.
4.9 Brokers. Each party hereto represents and warrants to the other
-------
party hereto that neither it nor any agent affiliated with it has employed any
broker or finder in connection with this Agreement or the transactions
contemplated hereby, and agrees to indemnify and hold the other harmless from
any and all liabilities (including, without limitation, reasonable counsel fees
and disbursements paid and incurred in connection with such liabilities) as to
brokers, finders and similar fees in connection with this Agreement and the
transactions contemplated hereby insofar as such claims are based on
arrangements or agreements or actions alleged to have been made on behalf of
such party. This indemnification obligation shall survive the Closing.
4.10 Public Announcements. Neither Sellers nor Purchaser shall issue
--------------------
or permit any of their respective officers, directors or employees to issue any
press release, public announcement or other information with respect to this
Agreement or the transactions contemplated hereby, without the express prior
consent of the other party, except as may be required by applicable securities
or other laws.
32
<PAGE>
4.11 Indemnification.
---------------
(a) The Sellers hereby jointly and severally agree to indemnify and
hold Purchaser, its officers, directors and shareholders harmless from and
against any and all liabilities, losses, damages, costs or expenses (including,
without limitation, reasonable attorneys' and accountants' fees and expenses,
court costs and all other out-of-pocket expenses) (collectively "Obligations")
arising out of (i) the breach of any warranty or the inaccuracy of any
representation by the Sellers contained in this Agreement or in any Exhibit or
Schedule hereto or in any agreement, instrument, certificate or other document
executed by or on behalf of Sellers and delivered at Closing, and (ii) any
failure by the Sellers perform any of the covenants, agreements or obligations
under this Agreement or any other agreement or instrument executed and delivered
by or on behalf of the Sellers pursuant hereto or in connection herewith,
provided, however, that in no event shall the Sellers have any liability with
- -------- -------
respect to any matters described in this Section 4.11(a) in the aggregate in
excess of the Escrow Shares; or until the aggregate amount of such liabilities
exceeds $100,000, provided, further, however, that none of the limitations set
-------- ------- -------
forth in the preceding provision apply to any Obligations arising out of fraud
or intentional misrepresentations of the Sellers. The indemnification
obligations of the Sellers herein shall survive the Closing but shall terminate
on the date which is 18 months after the Closing Date;
(b) Purchaser hereby jointly and severally agree to indemnify and hold
the Sellers harmless, from and against any and all Obligations directly or
indirectly incurred by Sellers or their respective officers, directors or
shareholders arising out of or in connection with (i) the breach of any warranty
or the inaccuracy of any representation by the Purchaser contained in this
Agreement or in any Exhibit or Schedule hereto or in any agreement, instrument,
certificate or other document executed by Purchaser and delivered at Closing,
(ii) any failure by the Purchaser to perform any of the covenants, agreements or
obligations under this Agreement or any other agreement or instrument executed
and delivered by or on behalf of one or more of the Purchaser pursuant hereto or
in connection herewith, and (iii) any and all and matters arising out the
operation of the Company or its subsidiaries after Closing; provided, however,
-------- -------
that in no event shall the Purchaser have any liability with respect to any
matters described in this Section 4.11(b) in the aggregate in excess of the
$1,150,000 or until the aggregate
33
<PAGE>
amount of such liabilities exceeds $100,000; provided, further, however, that
-------- ------- -------
none of the limitations set forth in the preceding provision apply to any
Obligations arising out of fraud or intentional misrepresentations of the
Purchaser. The indemnification obligations of Purchaser herein shall survive the
Closing but shall terminate 18 months after the Closing Date;
(c) Promptly after Purchaser or Sellers, as the case may be
(hereinafter the "Indemnified Party") has received notice of or has knowledge of
any claim by any person not a party to this Agreement ("third person") of the
commencement of any action or proceeding by a third person, the Indemnified
Party shall, if a claim with respect thereto is indemnifiable by the other party
pursuant hereto (hereinafter the "Indemnifying Party"), give the Indemnifying
Party written notice of such claim or the commencement of such action or
proceeding (each, a "Third Party Claim"). Such notice shall state the nature and
basis of such claim and, if ascertainable, the amount thereof. In each such case
the Indemnified Party agrees to give such notice to the Indemnifying Party
promptly; provided, however, that the failure of the Indemnified Party to give
-------- -------
notice shall not excuse the Indemnifying Party's obligation to indemnify except
to the extent the Indemnifying Party has suffered damage or prejudice by reason
of the Indemnified Party's failure to give or delay in giving such notice.
Provided that the Indemnifying Party shall have acknowledged in writing its
obligation to indemnify in respect to such claim, the Indemnifying Party may, at
its expense, participate in the defense of such third person claim and no such
third person claim shall be settled by the Indemnified Party without the consent
of the Indemnifying Party. At any time after notice of any Third Party Claim,
the Indemnifying Party may request the Indemnified Party to agree in writing to
the payment or compromise of the third person claim (provided such payment or
compromise has been previously approved in writing by the third party claimant),
whereupon such action shall be deemed agreed to by the Indemnified Party and
shall be agreed to in writing by the Indemnified Party unless (i) such
settlement would involve a remedy or remedies other than the payment of money
damages by the Indemnifying Party and (ii) the Indemnified Party determines that
the contest shall be continued, and so notifies the Indemnifying Party in
writing within fifteen (15) days of such request from the Indemnifying Party. In
the event that the Indemnified Party determines that the contest shall be
continued, the Indemnifying Party shall be liable pursuant to this Section 4.11
with respect to such claim only to the extent of the lesser of (A) the amount
which the other party to the contested third person claim had agreed to accept
in complete payment or compromise as of the time
34
<PAGE>
the Indemnifying Party made its request therefor to the Indemnified Party plus
reasonable attorneys' fees and expenses incurred to such date with respect to
such claim, or (B) such amount for which the Indemnifying Party may be liable
with respect to such third person claim by reason of the provisions of this
Section 4.11;
(d) If the Indemnified Party shall have any claim pursuant to this
Section 4.11, including but not limited to a claim for damages as the result of
the Indemnifying Party's failure to acknowledge its obligation to indemnify, the
Indemnified Party shall deliver to the Indemnifying Party written notice
explaining the nature and amount of such claim promptly after the Indemnified
Party shall know the amount of such claim. The Indemnified Party and the
Indemnifying Party shall thereafter attempt in good faith for a period of not
less than thirty (30) days to agree upon whether the Indemnified Party is
entitled to be indemnified and held harmless under this Section 4.11 and the
extent to which it is entitled to be indemnified and held harmless hereunder.
If the parties cannot so agree within said period, the Indemnified Party may
thereafter commence litigation in a court of competent jurisdiction for a
determination of its claim. Upon resolution of any claim pursuant to this
Section 4.11, whether by agreement between the parties or the rendering of a
final judgment in any litigation, the appropriate party under an agreement or
the party against which judgment is rendered in litigation shall, within ten
(10) days of such resolution, pay over and deliver to the other party funds in
the amount of any claim as resolved, and any fees, including attorneys' fees,
incurred by such other party with respect to any such litigation.
(e) The remedies provided to any Indemnified Party by the provisions
of this Section 4.11 shall be the exclusive remedies to which such Indemnified
Party is entitled after the Closing Date for any breach or non-compliance of any
of the terms of this Agreement.
4.12 [INTENTIONALLY OMITTED]
4.13 Effect of Disclosure Schedules.
------------------------------
All statements contained herein and in any Exhibit or Schedule hereto
and in any certificate or other agreement, document or instrument delivered by
or on behalf of the Sellers pursuant hereto shall be deemed representations and
warranties by Sellers hereunder. Sellers shall not be liable or bound in any
manner by representations, warranties, covenants, agreements or
35
<PAGE>
indemnifications pertaining to the subject matter of this Agreement, whether
express or implied, or any other matter whatsoever, which are made or furnished
by any agent, employee, Representative or other person representing or
purporting to represent Sellers unless and only to the extent that such
representations, warranties, covenants, agreements or indemnifications are
expressly and specifically set forth in this Agreement or the Exhibits or
Schedules hereto or in any certificate or other agreement, document or
instrument delivered pursuant to the provisions of this Agreement.
4.14 Termination.
-----------
(a) Manner of Termination. This Agreement may be terminated and
the sale and transfer provided for by this Agreement may be abandoned on or
before the Closing Date:
(1) By mutual agreement of Sellers and Purchaser;
(2) By Purchaser, if Purchaser is not then in default under
this Agreement and any of the conditions provided for in Section 5.1 of this
Agreement have not been met on the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Purchaser
to comply with its obligations under this Agreement) and have not been waived by
Purchaser in writing;
(3) By Sellers, if Sellers are not then in default under
this Agreement and any of the conditions of Section 5.2 of this Agreement have
not been met on the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers to comply with
their obligations under this Agreement) and have not been waived in writing by
Sellers;
(4) By either party (the "Non-Breaching Party"), if such
party is not then in default under this Agreement and all of the conditions of
Sections 5.1 and 5.2 of this Agreement have been met and/or waived by Closing
and the other party (the "Breaching Party") is unable or unwilling to close;
(5) By either Purchaser or Sellers if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before the 30/th/ day after the date hereof or such later date as the parties
may agree upon;
36
<PAGE>
(6) By Purchaser or Sellers, pursuant to Section 4.3 hereof;
or
(7) By Purchaser or Sellers, pursuant to Section 1.11
hereof.
(b) Election to Terminate. Any election to terminate this
---------------------
Agreement under this Section 4.14 shall be exercised in writing by a duly
authorized officer of Purchaser and/or Sellers, as the case may be ;
(c) Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to the provisions of this Section 4.14,
this Agreement shall terminate, except that the provisions of Section 6.2 hereof
shall survive the termination hereof. In the event this Agreement is terminated
by either party pursuant to Section 4.14(a)(4), such party shall have the right
to recover its costs and expenses, from the Breaching Party, and in addition, in
the event Purchaser is the Breaching Party, Sellers shall have the right to
obtain a release of the Escrow Shares in accordance with the terms of the Stock
Escrow Agreement.
4.15 Other Negotiations. In order to evidence Sellers' commitment to
------------------
the consummation of the transactions contemplated hereby, the Sellers agrees
that, between the date hereof and the Closing, Sellers will not directly or
indirectly begin or continue any discussions with or consider any proposal from
any person or entity other than Purchaser which relates to the sale of all or
substantially all of the shares of Company or its subsidiaries, the sale of a
substantial portion of the assets of the Company or its subsidiaries, or a
merger or other business combination involving the Company or its subsidiaries.
4.16 Management and Employee Related Matters. Sellers (acting through
---------------------------------------
John Koenig) shall have the absolute right to (i) appoint one (1) member of the
Board of Directors of the Company and shall be entitled at any time, with or
without cause, to remove such member and to designate a successor member of such
Board of Directors for so long as Sellers shall in the aggregate own not less
than fifty percent (50%) of the Consideration Stock issued to them at Closing,
and (ii) for a period of three (3) years from and after the Closing Date,
nominate and cause to be appointed by the Board of Directors of the Company the
President of the Company and any successor thereto during such period. At the
Closing, the Company shall execute and deliver an employment agreement (the
"Employment Agreement") with the individual
37
<PAGE>
nominated by Sellers to serve as President of the Company on such terms and
conditions as shall be mutually agreeable to the Purchaser, the Company, Sellers
and such individual. Purchaser agrees to cause its shares of the Company to be
voted in such a manner so as to effectuate the agreements set forth in this
Section 4.16.
4.17 Operating Capital. (a) For a period of twelve months from and
-----------------
after the Closing Date, Purchaser shall provide the Company with up to $50,000
of operating capital each month as and if the same shall be reasonably required
in order to implement the Business Plan (as such term is hereinafter defined)
adopted by the Company.
(b) Simultaneously with the Closing, Purchaser shall deposit with
___________ (the "Operating Capital Escrow Agent") the sum of $50,000 to be held
in escrow (the "Operating Capital Escrow") by the Operating Capital Escrow Agent
pursuant to the terms and conditions of an Escrow Agreement substantially in the
form attached hereto as Exhibit D (the "Operating Capital Escrow Agreement"),
---------
for use as operating capital as and when needed by the Company. After the
Operating Capital Escrow has been exhausted, further payments of operating
capital shall be made directly by the Purchaser to the Company as may be
required in accordance with paragraph (a) hereof.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
5.1 Conditions Precedent to Purchaser's Obligations. The obligations
-----------------------------------------------
of Purchaser to purchase the Purchased Stock and to consummate the transactions
contemplated hereby are subject to and conditioned upon the satisfaction prior
to or on the Closing Date of each of the following (unless waived in writing by
Purchaser):
(a) All the terms and conditions of this Agreement to be complied
with and performed by the Sellers on or before the Closing Date, including the
delivery to Purchaser of all consents, documents and instruments required to be
delivered to the Purchaser under the terms of this Agreement, shall have been
materially complied with and materially performed;
(b) All representations and warranties by the Sellers which are
contained in this Agreement or in any written document executed and delivered by
the Sellers pursuant hereto or in connection herewith shall be true and correct
in all material
38
<PAGE>
respects when made and, except for representations and warranties which relate
to a specific earlier date, at and as of the Closing Date as though such
representations and warranties were made at and as of the Closing Date;
(c) Since the date of this Agreement, there shall not have been
any Material Adverse Change;
(d) Purchaser shall have received a certificate of the Sellers,
in form and substance reasonably satisfactory to Purchaser, dated the Closing
Date, certifying, in such detail as Purchaser may reasonably request, to the
fulfillment of the conditions specified in paragraphs (a), (b) and (c) of this
Section 5.1;
(e) Purchaser shall have received the stock certificates and
stock powers referred to in Section 1.2, in form and substance reasonably
satisfactory to Purchaser and its counsel, sufficient to transfer to Purchaser
the Purchased Stock as contemplated by this Agreement and the resignations set
forth in Section 1.2;
(f) There shall be no suits, actions, litigation or other legal,
administrative, arbitration or other proceedings or governmental investigations
pending or, to the knowledge of Purchaser or its counsel, threatened against
Purchaser which seek to delay, enjoin or otherwise prohibit the consummation of
the transactions contemplated hereby; and there shall not be any statute, rule
or regulation enacted or any opinion, order or directive issued which would
render Purchaser unable to consummate the transactions contemplated hereby or
render such transactions illegal;
(g) Required Consents shall have been obtained by Sellers or the
Purchaser, as applicable, in writing to the reasonable satisfaction of Purchaser
before the Closing Date and delivered to Purchaser on or before the Closing
Date;
(h) Sellers shall have obtained and delivered to Purchaser
releases in form and substance satisfactory to Purchaser from all lenders,
lessors and other persons and entities terminating all mortgages, pledges,
liens, charges, restrictions, easements and other encumbrances on the Included
Assets, other than Permitted Liens;
(i) The Stock Escrow Agreement and Operating Capital Escrow
Agreement shall have been duly executed and delivered by Sellers and the Escrow
Agent;
39
<PAGE>
(j) Sellers shall have delivered to Purchaser the legal opinion
of Seward & Kissel, in the form of Exhibit E hereto;
---------
(k) The Purchaser and the Sellers shall have restructured the
obligations of the Company to debis Financial Services, Inc. on terms and
conditions mutually acceptable to the Purchaser and the Sellers in all respects;
and
(l) The Employment Agreement shall have been duly executed and
delivered by Purchaser and the individual referred to in Section 4.16 of this
Agreement.
5.2 Conditions Precedent to Sellers' Obligations. The obligations of
--------------------------------------------
Sellers to sell the Purchased Stock and to consummate the transactions
contemplated hereby are subject to and conditioned upon the performance prior to
or at the Closing Date of each of the following (unless waived in writing by
Sellers):
(a) All of the terms and conditions of this Agreement to be
complied with and performed by Purchaser on or before the Closing Date,
including the payment by the Purchaser to the Sellers of the Purchase Price and
the delivery to Sellers of all commitments, stock certificates, documents and
instruments referred to in this Agreement, shall have been materially complied
with and materially performed;
(b) All representations and warranties by the Purchaser which are
contained in this Agreement or in any written document executed and delivered by
the Purchaser pursuant hereto or in connection herewith shall be true and
correct in all material respects when made and, except for representations and
warranties which relate to a specific earlier date, at and as of the Closing
Date as though such representations and warranties were made at and as of the
Closing Date;
(c) Sellers shall have received a certificate of the President
and the Secretary of Purchaser, in form and substance reasonably satisfactory to
Sellers, dated the Closing Date, certifying, in such detail as Sellers may
reasonably request, to the fulfillment of the conditions specified in paragraphs
(a) and (b) of this Section 5.2;
(d) Sellers shall have received the resolutions of the Board of
Directors of Purchaser, certified by the Secretary or an
40
<PAGE>
Assistant Secretary of Purchaser, authorizing the execution, delivery and
performance by Purchaser of this Agreement, all agreements, documents and
instruments to be executed and delivered by Purchaser pursuant hereto or in
connection herewith and the consummation of the transactions contemplated
hereby;
(e) There shall be no suits, actions, litigation or other legal,
administrative, arbitration or other proceedings or governmental investigations
pending or, to the knowledge of Sellers or its counsel, threatened against
Sellers, the Company or its subsidiaries which seek to delay, enjoin or
otherwise prohibit the consummation of the transactions contemplated hereby, and
there shall not be any statute, rule or regulation enacted or any opinion, order
or directive issued which would render Sellers, the Company or its subsidiaries
unable to consummate the transactions contemplated hereby or render such
transactions illegal;
(f) All approvals, authorizations, consents, licenses, orders and
permits of all governmental agencies and of all other third parties required to
be obtained by the Purchaser by reason of this Agreement, shall have been
obtained by Purchaser in writing to the satisfaction of Sellers before the
Closing Date and delivered to Sellers on or before the Closing Date;
(g) The Employment Agreement shall have been duly executed and
delivered by Purchaser and the individual referred to in Section 4.16 of this
Agreement;
(h) The Sellers shall have received from the Purchaser, at least
ten (10) days prior to the Closing Date, a business plan (the "Business Plan")
for the operation of the Company's business with a provision for the operating
capital to be provided to the Company by the Purchaser, which plan shall (i) be
implemented as of the Closing Date, (ii) include a reasonable plan pursuant to
which the obligations of the Company and its subsidiaries (other than long term
debt) would be satisfied and (iii) be reasonably satisfactory to Sellers;
(i) The Purchaser and the Sellers shall have restructured the
obligations of the Company to debis Financial Services, Inc. on terms and
conditions mutually acceptable to the Purchaser and the Sellers in all respects;
and
(j) The Registration Rights Agreement shall have been duly
executed and delivered.
41
<PAGE>
ARTICLE VI
MISCELLANEOUS
-------------
6.1 Entire Understanding; Amendment. This Agreement, including all
-------------------------------
Exhibits and Schedules hereto, and the agreements and instruments referenced
herein, together with the Confidentiality Agreement, represent the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous negotiations, understandings and
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof, all of which prior agreements and understandings are
hereby rendered null and void. This Agreement may not be amended or modified
except by a writing executed by all of the parties hereto.
6.2 Further Assurances. Purchaser and the Sellers each agree that
------------------
they shall, at any time and from time to time after the Closing Date, upon
reasonable request of the other party, do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged and delivered, such further acts,
deeds, assignments, assumptions, transfers, conveyances and assurances as may be
reasonably necessary to further effectuate the terms of this Agreement.
6.3 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto, and their respective successors and
permitted assigns.
6.4 Assignment. No party hereto shall assign this Agreement to any
----------
other person, corporation, partnership or other entity without the prior written
consent of the other party except to an Affiliate, subsidiary or successor to
all or substantially all of such party's assets provided that in the event of
such assignment the assignor shall remain fully liable for the performance of
all of its obligations hereunder.
6.5 Waiver. Subject to the provisions of Sections 5.1 and 5.2
------
allowing waiver by one party, no waiver of any provision hereof shall be
effective unless set forth by a written instrument signed by all of the parties
hereto.
6.6 Counterparts. This Agreement may be signed in counterparts, each
------------
of which shall be considered an original and together they shall constitute one
agreement.
6.7 Section Headings; Exhibits; Schedules. Section headings contained
-------------------------------------
in this Agreement are for convenience or reference only and shall not be deemed
a part of this Agreement. Any reference
42
<PAGE>
to Exhibits or Schedules shall signify that such Exhibits or Schedules are
incorporated herein by reference.
6.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York without regard to its
conflict of laws rules.
6.9 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be given to the parties at their
respective addresses set forth below and shall be sent by (a) hand delivery, (b)
certified mail, return receipt requested, postage prepaid, (c) a recognized
overnight delivery service, or (d) telecopy or other means of facsimile.
Notices sent by hand delivery shall be deemed received when delivered to the
address and/or person set forth below; notices sent by certified mail shall be
deemed received when accepted; notices sent by overnight delivery service shall
be deemed received delivered and notices sent by telecopy shall be deemed
received upon receipt of confirmation of dispatch.
(a) If to Purchaser, to:
Anthony Cappaze, President
Lighthouse Landings, Inc.
P.O. Box 248, Highway 34, Suite 3
Matawan, New Jersey 07747
Telecopy No. (732) 566-0102
with a copy to:
Kevin M. Kilcullen, Esq.
Shanley & Fisher, P.C.
131 Madison Avenue
Morristown, New Jersey 07962
Telecopy No. (973) 285-1625
(b) If to Sellers, to:
John Koenig
311 East Boston Post Road
Mamaroneck, New York 10543
Telecopy No. (914) 777-7349
43
<PAGE>
with a copy to:
Bruce Paulsen, Esq.
Seward & Kissel
One Battery Park Plaza
New York, N.Y. 10004
Telecopy No. (212) 480-8421
or to such other address or telecopy number as any party may designate by
written notice in the aforesaid manner.
6.10 Jurisdiction; Service of Process. Any action or proceeding
--------------------------------
seeking to enforce any provision of, or based on any right arising out of, this
Agreement shall be brought against any of the parties, in the United States
District Court for the Southern District of New York, or, if it cannot acquire
that jurisdiction and venue, in the courts of the State of New York, County of
New York and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein.
6.11 Expenses. Sellers and Purchaser shall each pay its respective
--------
expenses, fees and costs incident to the preparation and execution of this
Agreement and, except as otherwise expressly provided for herein, each party
shall bear its respective expenses or fees involved in the preparation and
delivery of all documents, reports and opinions required to be delivered by or
on behalf of such party hereunder, whether or not the transactions contemplated
hereunder are consummated. Notwithstanding the foregoing, the Purchaser shall
at Closing pay the documented legal fees incurred by the Company and the Sellers
in the negotiation, execution and closing of this Agreement (including amounts
incurred in connection with the negotiation of the letter of intent with respect
thereto; in an amount not to exceed $50,000.
6.13 Interpretation. No provision of this Agreement or any agreement
--------------
ancillary hereto shall be interpreted or construed against any party because
that party or his or its legal representative drafted such provision. Any
pronoun used in this Agreement shall be deemed to include singular and plural
and masculine, feminine and neuter gender, as the case may be.
6.14 Certain Definitions. For purposes of this Agreement, in
-------------------
addition to the terms defined elsewhere in this Agreement, the
44
<PAGE>
following terms have the meanings specified or referred to in this Section 6.15:
"Affiliate" -- with respect to any specified Person (the "specified
person"), any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with, the specified person. For the purposes
of this definition, the term "control" when used with respect to any specified
person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such specified person,
whether through the ownership of voting securities, by contract or otherwise.
"Business Days" -- shall mean those days other than Saturdays and
Sundays on which banks are open for business in the State of New York.
"Material Adverse Change" - with respect to representations warranties
or covenants of Sellers shall mean, from any point of reference in time to the
point of determination, any material adverse change in the business, operations,
assets or financial condition of the Company or its subsidiaries in each case
taken as a whole, or the ability of the Company or its subsidiaries to operate
their businesses as operated on the date hereof or as proposed to be operated by
Purchaser in all material respects.
"Material Adverse Change" - with respect to representations,
warranties or covenants of the Purchaser shall mean, from any point of reference
in time to the point of determination, any material adverse change in the
business, operations, assets or financial condition of the Purchaser taken as a
whole, or in the ability of the Purchaser to operate its business is operated on
the date hereof in all material respects.
"Material Adverse Effect" with respect to the Purchaser, shall mean
any material adverse effect on the business, operations, assets or financial
condition of the Purchaser, or the ability of the Purchaser to operate its
business as operated on the date hereof in all material respects.
"Material Adverse Effect" with respect to the Company and its
subsidiaries, shall mean any material adverse effect on the business,
operations, assets or financial condition of the Company or its subsidiaries, or
the ability of the Company or its subsidiaries to operate its business as
operated on the date hereof or as proposed to be operated by the Purchaser in
all material respects.
45
<PAGE>
"subsidiaries" shall mean Ferry I, Ferry II and Ferry Services.
"Net Worth" -- shall mean the combined net worth of the Company and
its subsidiaries determined in accordance with GAAP excluding Excluded
Liabilities.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or governmental body.
"Representative" -- with respect to a Person, shall mean such Person's
shareholders, officers, directors, agents, employees, or other representatives
(including, without limitation, attorneys, accountants, experts, consultants,
financial advisors and investment bankers).
6.15 Effectiveness of this Agreement. Notwithstanding the execution
-------------------------------
and delivery of this Agreement and notwithstanding anything contained in this
Agreement to the contrary, all of the terms and conditions of this Agreement
(other than this Section 6.15) shall be null and void and without force and
effect unless and until Purchaser and Sellers shall have agreed to the
definitive form of the Exhibits and Schedules to this Agreement and such other
agreements as are provided for hereunder in a signed writing; provided, however,
that this Section 6.15 shall not be deemed, in and of itself, to impose any
obligations on any party to enter into any agreement regarding the definitive
form of the Exhibits and Schedules to this Agreement or other agreements as are
provided for hereunder.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the date first above written.
SELLERS:
__________________________
Jack Davis
__________________________
John Koenig
__________________________
Paul Derecktor
PURCHASER:
46
<PAGE>
LIGHTHOUSE LANDINGS, INC.
By:__________________________
Name: Anthony Cappaze
Title: President
47
<PAGE>
EXHIBIT 10.2
Exhibit A
---------
Agreement
---------
THIS AGREEMENT dated as of March 30, 1998 is between New York Fast Ferry
Services, Inc., a corporation organized and existing under the laws of the State
of New York, with its principal place of business at 311 E. Boston Post Road,
Mamaroneck, New York ("Fast Ferry") and Prospect Fast Ferry, Inc. a corporation
organized and existing under the laws of the State of Delaware with his
principal place of business at 1 Willow Street, Highlands, New Jersey (the
"Marina").
WHEREAS, Fast Ferry and the Marina are desirous for Fast Ferry to operate a
high-speed ferry service between the Marina's property located at 1 Willow
Street, Highlands, New Jersey and a terminal located in the borough of
Manhattan, New York, New York, on the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the material covenants set forth herein
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions
-----------
The following terms shall have the following respective meanings for all
purposes of this Agreement:
"BRAVEST" shall mean the high-speed catamaran, 38 meter vessel Bravest
-------
(official number 1044083) registered in the name of Fast Ferry II Corp., a
wholly-owned subsidiary of Fast Ferry.
"Commencement Date" shall mean the date on which Ferry Services first
-----------------
commence under the terms of this agreement.
"Facilities" shall mean each of the facilities identified in Sections 3 (a)
----------
(I) - (v) hereof.
"Ferry Services" shall mean the service of transporting Passengers aboard
--------------
the Vessel between the Sandy Hook Terminal and the Manhattan Terminal.
"FINEST" shall mean the high-speed catamaran, 38 meter vessel Finest
------
(official number 1044082) registered in the name of Fast Ferry I Corp., a
wholly-owned subsidiary of Fast Ferry.
"Manhattan Terminal" shall mean the Wall Street terminal located at Pier
------------------
11, East River New York, New York or any other location selected by Fast Ferry
which is suitable for the berthing of Passengers and is located within the
borough of Manhattan, New York, New York.
<PAGE>
"Passengers" shall mean any individual paying Fast Ferry a fee for Ferry
----------
Services and traveling in either direction aboard the Vessel between the Sandy
Hook Terminal and the Manhattan Terminal.
"Passenger Trip" shall mean any one-way trip in either direction by a
--------------
Passenger aboard the Vessel between the Sandy Hook Terminal and the Manhattan
Terminal.
"Sandy Hook Terminal" shall mean the Marina's property located at 1 Willow
-------------------
Street, Highlands, New Jersey.
"Term" shall mean the period from and including the Commencement Date up to
----
and including the date which occurs five (5) years after the Commencement Date.
"Vessel" shall mean either the Finest or the Bravest, or any other similar
------
vessel acceptable to the Marina which is owned or operated by Fast Ferry, such
acceptance not to be unreasonably withheld.
Section 2. Agreement
---------
The Marina hereby agrees to provide Fast Ferry with access to the
Facilities and the exclusive right to operate Ferry Services between the Sandy
Hook Terminal and any location in the borough of Manhattan, New York, New York,
and Fast Ferry hereby agrees to provide Ferry Services between the Sandy Hook
Terminal and the Manhattan Terminal, on the terms of this Agreement.
Section 3. Facilities
----------
(a) The Marina shall construct, to the extent necessary, and provide Fast
Ferry with access to the following Facilities at least three (3) weeks prior to
the Commencement Date:
(i) landing facilities for the docking of, navigation of and safe,
efficient and comfortable loading and unloading of passengers from the
Vessel, which facilities shall include, but not be limited to,
adequate ramps, docks, stairs, awnings, piles, dolphins, fendering,
cleats and bollards as are reasonably necessary for the berthing of
the Vessel;
(ii) layover facilities suitable for the safe berthing and layover of
a Vessel during all reasonable weather conditions and the bunkering
of, and performance of light maintenance on a Vessel, which facilities
shall be equipped with access to 208 v. 3 phase power and shall
include, but not be limited to, adequate ramps, docks, stairs,
awnings, piles, dolphins, fendering, cleats and bollards as are
reasonably necessary for the berthing of a Vessel;
(iii) adequate shop space and office space for Fast Ferry employees;
2
<PAGE>
(iv) a suitable site (with electric power and phone lines) for a
ticket booth and;
(v) ample free parking, reserved for Passengers, with a capacity for
up to a minimum of two hundred fifty (250) cars per day, which
capacity shall be increased to three hundred (300) cars per day within
sixty (60) days after the first calendar month during which the number
of Passengers utilizing Ferry Services averages six hundred (600) or
more Passengers per day, (excluding weekends and public holidays) or
valet parking will be provided for 50 additional cars.
in each case, the suitability of the Facilities identified in this Section 3 (a)
shall be determined in the sole discretion of Fast Ferry after considering
input, if any, received from the Marina.
(b) The Marina shall be responsible for maintaining the Facilities and
ensuring that the Facilities remain suitable for the operation of Ferry Services
during the Term.
(c) If at any time, in the reasonable discretion of Fast Ferry after
considering input, if any, received from the Marina, the Facilities are either
unavailable or inadequate for the layover of the Vessel, until such time as Fast
Ferry deems the Facilities to be available and adequate for the layover berthing
of the Vessel, including but not limited to berthing fees, fuel and crewing
costs shall be deducted from any fees payable to the Marina under Section 5
hereof.
Section 4. Ferry Services: Charters and Excursions
---------------------------------------
(a) Fast Ferry shall provide Ferry Services between the Sandy Hook terminal
and the Manhattan Terminal consisting of a minimum of two (2) morning departures
from the Sandy Hook Terminal and two (2) afternoon departures from the Manhattan
Terminal. All such departures shall be daily Monday through Friday (excluding
weekends and public holidays). Fast Ferry shall be entitled to offer additional
Ferry Services between the Sandy Hook Terminal and the Manhattan Terminal at its
sole discretion.
(b) Fast Ferry may, at its reasonable discretion, conduct charters or
excursions which originate from and terminate at the Sandy Hook Terminal.
(c) Fast Ferry shall not be obligated to conduct ferry services on any day
which:
(i) Fast Ferry, in its reasonable discretion after considering input,
if any, received from the Marina, determines that the Facilities are
not suitable for the operation of Ferry Services;
(ii) neither the Marina nor Fast Ferry possesses any permit,
permission or approval which may be required by any local, state or
other controlling authority for the operation of Ferry Services;
3
<PAGE>
(iii) weather conditions are such that, in the sole discretion of Fast
Ferry after considering input, if any, received from the Marina, it
would be unsafe to conduct Ferry Services; or
(iv) Fast Ferry is unable to conduct Ferry Services due to any of the
reasons set forth in Section 10 (b) hereof.
Section 5. Payment of Fees
---------------
(a) On the tenth day of each calendar month during the Term and the first
calendar month after the expiration of the Term, Fast Ferry shall pay the Marina
a landing and layover fee equal to the sum of (i) $1.25 per Passenger Trip for
every Passenger trip which occurred during the calendar month, up to a maximum
of four hundred (400) Passenger Trips in any one (1) day, plus (ii) $1.50 per
Passenger Trip for every Passenger Trip which occurred in excess of four hundred
(400) Passenger Trips during any one (1) day of the preceding month.
(b) Fast Ferry shall pay the Marina ten percent (10%) of all gross
passenger revenues earned by Fast Ferry for any charters or excursions where
passengers load and unload at Sandy Hook Bay Marina.
Section 6. Representations and Warranties
------------------------------
(a) The Marina hereby makes the following representations and warranties,
which representations and warranties shall survive the execution and delivery of
this Agreement:
(i) that Prospect Fast Ferry Inc. shall have a valid lease for the
property at 1 Willow Street, Highlands, New Jersey including the
marina and ferry landing facility for the entire term of this
agreement. Which lease shall give Prospect Fast Ferry the ability to
meet all its obligations under this agreement and be provided to Fast
Ferry upon request.
(ii) this Agreement has been duly entered into and delivered by the
Marina and constitutes the legal, valid and binding obligations of the
Marina.
(iii) the Marina has received prior to the date hereof, and has
provided Fast Ferry with copies of all permits, permissions and
approvals from local, state and any other applicable controlling
authorities presently necessary to allow Fast Ferry to provide Ferry
Services, as described herein, and shall obtain and provide Fast Ferry
with copies of any additional permits, permissions or approvals which
may from time to time be required during the Term to allow Fast Ferry
to provide Ferry Services, as described herein.
(b) Fast Ferry hereby makes the following representations and warranties,
which representations and warranties shall survive the execution and delivery of
this Agreement:
4
<PAGE>
(i) Fast Ferry is a corporation duly organized and validly existing in
good standing under the laws of the State of New York and has the
corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement.
(ii) this Agreement has been duly entered into and delivered by Fast
Ferry and constitutes the legal, valid and binding obligations of Fast
Ferry.
(iii) Fast Ferry will obtain prior to the Commencement Date all
permits, permissions and approvals from local, state and any other
applicable controlling authorities presently necessary to allow Fast
Ferry to land the Vessel at the Manhattan Terminal.
Section 7. Termination
-----------
(a) This Agreement shall terminate automatically upon the expiration of the
Term unless sooner terminated as set forth herein.
(b) The Marina may terminate this Agreement upon the giving of at least ten
(10) days written notice after the occurrence of any of the following:
(i) the failure of Fast Ferry to provide Ferry Services as required in
Section 4 for a period of thirty (30) consecutive days at any time
after the Commencement Date, which thirty (30) day period shall not
include any days during which Fast Ferry Services was not obligated to
perform hereunder; or
(ii) the deliberate failure of Fast Ferry to perform its obligations
hereunder for two separate periods of at least five (5) consecutive
days each, during any twelve (12) month period.
(c) Fast Ferry may terminate this Agreement upon the giving of at least ten
(10) days written notice after the occurrence of any of the following:
(i) the failure of the Marina to provide any of the Facilities
required in Section 3 prior to (April 30, 1998) or for a period of
thirty (30) consecutive days at any time after the Commencement Date;
(ii) the deliberate failure of the Marina to perform its obligations
hereunder for two separate periods of at least five (5) consecutive
days each during any twelve (12) month period;
(iii) the failure of the Marina to possess any permit, permission or
approval from any local, state, or other controlling authority
necessary to allow Fast Ferry to conduct Ferry Services for a period
of ten (10) days; or
5
<PAGE>
(iv) the inability of Fast Ferry to acquire any permit, permission or
approval from any local, state or other controlling authority
necessary to land the vessel at the Manhattan Terminal.
Section 8. Indemnification
---------------
The Marina agrees to indemnify and hold harmless Fast Ferry, its
shareholders agents, representatives, employees, officers and directors from and
against any and all claims, losses damages, judgments, costs or expenses
(including without limitation attorneys' fees) arising out of (i) incidents
occurring at the Sandy Hook Terminal including, but not limited to, incidents
occurring on, at or in the Facilities or any and all parking areas, roads,
ramps, docks, platforms, etc. located at the Sandy Hook Terminal, (ii) any
breach by the Marina of its representations, warranties or covenants or (iii)
the negligence or misconduct of the Marina or the Marina's agents or employees.
Section 9. Taxes
-----
The Marina shall be liable for any local, state and/or federal sales, use
or other taxes (except for income and corporate excise taxes imposed upon the
Fast Ferry) resulting from the use and operation of the Vessel by Fast Ferry,
and Fast Ferry shall be entitled to request proof of payment by the Marina of
any applicable taxes.
Section 10. Miscellaneous
-------------
(a) Quiet Enjoyment. The Marina covenants that Fast Ferry shall quietly
---------------
enjoy, in accordance with the terms hereof, use of the Facilities, without
interference by the Marina or by any person lawfully claiming by or through the
Marina.
(b) Excusable Delays. The time for Fast Ferry or the Marina to perform any
----------------
of their respective obligations hereunder shall be reasonable extended if and to
the extent that the performance thereof shall be prevented or delayed due to any
strikes, lockouts, civil commotions, warlike operations, invasions, rebellions,
hostilities, military or inability to obtain labor or materials despite due
diligence, acts of God or other causes beyond the reasonable control of the
party whose performance is required.
(c) Assignment. Neither party may assign or transfer any of its respective
----------
rights or obligations hereunder without the prior written consent of the other
party, which consent shall not be unreasonably withheld. This agreement shall
be binding on the heirs, successors and/or assignees of either party.
(d) Notices. All notices required under the terms and provisions hereof
-------
shall be in writing, shall be sent to Fast Ferry or the Marina at their
respective addresses set forth below (or such other addresses as the parties may
designate from time to time in writing) and, except as
6
<PAGE>
otherwise provided herein, such notice shall become effective upon the earlier
of actual receipt or the fifth day following the date such notice is sent:
If to Fast Ferry:
New York Fast Ferry Services, Inc.
311 E. Boston Post Road
Mamaroneck, New York 10543
ph. (914) 698 5927
fax (914) 777 7349
If to the Marina:
Prospect Fast Ferry, Inc.
1 Willow Street
Highlands, New Jersey 07747
ph. (732) 872 1450
fax (732) 872 1793
(e) Time is of the Essence. Time and strict and punctual performance are
----------------------
the essence with respect to each provision of this Agreement.
(f) Best Efforts. The parties hereto agree to use their best efforts to
------------
comply with each and every term and condition contained in this agreement.
(g) Entire Agreement; Modification or Revision. This Agreement is intended
------------------------------------------
to be a complete and exclusive statement of the terms of the agreement of the
parties hereto, and this Agreement supersedes any prior or contemporaneous
agreements, whether oral or in writing. Neither this Agreement nor any term of
this Agreement may be modified, rescinded, changed, waived, discharged or
terminated except by a writing signed by the patty to be charged. The Marina
and Fast Ferry acknowledge their agreement to the provision of this Section 10
(f) by their signatures below.
(h) Article Headings and Captions. All section headings and captions used
-----------------------------
in this Agreement are for convenient reference and shall not affect the
interpretation of this Agreement.
(i) Jurisdiction; Governing Law. The rights and obligations of the parties
---------------------------
under this Agreement shall be governed by and construed in accordance with the
laws of the state of New York. All disputes arising in connection with the
Agreement shall be finally settled under the Commercial Arbitration Rules of the
American Arbitration Association by three independent arbitrators appointed in
accordance with the said Rules. The place of arbitration shall be New York, New
York. Each party irrevocably consents to the service of process by the mailing
of copies thereof by registered or certified airmail, postage prepaid, to such
party at its address as such party may designate from time to time in writing.
7
<PAGE>
(j) Legality of Provisions. If any provision of this Agreement shall be
----------------------
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
IN WITNESS WHEREOF,
the parties hereto have executed this Agreement on the day and year first above
written.
New York Fast Ferry Services, Inc.
By /s/John Davis
--------------
Name: John Davis
Title: President
Prospect Fast Ferry, Inc.
By /s/
----
Name:
Title:
8
<PAGE>
EXHIBIT 10.3
LEASE AGREEMENT
THIS LEASE, made as of the _____ day of October, 1999, by and between THE
CONNECTICUT LIGHT AND POWER COMPANY, a specially chartered Connecticut
corporation having a place of business at 107 Selden Street, Berlin, Connecticut
("Landlord") and LIGHTHOUSE LANDINGS, INC. having a place of business at One
Springfield Avenue, Summit, New Jersey ("Tenant").
WITNESSETH:
WHEREAS,
Landlord is the owner of the parcel of land located at Atlantic Street and
Washington Boulevard in Stamford, Connecticut, that is shown on the site
plan attached hereto as Exhibit A and made a part hereof.
Tenant wishes to lease from Landlord the area cross-hatched on said Exhibit
and containing 3.6 acres, more or less, together with the dock located
thereon (the "Premises") for the purpose of operating a ferry service.
Landlord is willing to lease the Premises to Tenant on the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the rents, covenants and conditions herein
set forth, Landlord and Tenant do hereby covenant, promise and agree as follows:
1. Term:
----
The initial term of the lease shall be five (5) years, commencing as of
November 1, 1999 and ending on October 31, 2004 ("Initial Terns"), unless
sooner terminated in accordance with the terms of this Lease.
Rental payments shall commence on March 1, 2000. ("Rent Commencement Date")
2. Renewal Option:
---------------
If immediately prior to the expiration of the Initial Term, this lease
shall be in full force and effect, and provided Tenant, not less than six
(6) months prior to the expiration of the Initial Term shall have given
Landlord written notice to renew, then upon the expiration of the Initial
Term, the term of the Lease shall be automatically renewed and extended for
a further term of five (5) years ("Renewal Term"). The terms and
conditions of this Lease shall remain in full force and effect during the
Renewal Term; provided, however, that rent for the Renewal Term shall be
determined in accordance with Section 3 of this Lease.
<PAGE>
3. Rent:
----
Initial Term: Annually
--------
Rent Commencement
Date - Sixth Month $100,000 ($8,333.33/month)
Seventh - Twelfth Month $150,000 ($12,500/month)
Second Year $150,000 ($12,500/month)
Third and Fourth Years $175,000 ($14,583.33/month)
Fifth Year $200,000 ($16,666.67/month)
Renewal Term:
Additional Five (5) Years
The annual Base Rent during the Renewal Term shall be increased in
accordance with the U.S. Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for All Urban Consumers, U.S. City Average - All Items
- (1982-84 = 100).
The annual Base Rent for each year of the Renewal Term shall equal the sum
of the annual Base Rent for the immediately preceding lease year plus the
product of said annual Base Rent for the immediately preceding lease year
times any percentage increase in the Consumer Price Index ("CPI") occurring
between the first day of the immediately preceding lease year and the last
day of the immediately preceding lease year. But in no event will that
amount be less than the amount payable in the immediately preceding lease
year. Tenant shall continue to pay monthly Base Rent at the rate
applicable to the immediately preceding lease year until such time as the
CPI schedule is published and Landlord notifies Tenant of the adjusted Base
Rent for the current lease year. Upon receipt of notification of the Base
Rent for tile current lease year, Tenant shall remit any additional amounts
due with the next Base Rent payment.
4. Taxes:
-----
Landlord shall pay all taxes, charges and assessments levied against the
Premises on or before the due date thereof. Within thirty (30) days of
receipt of Landlord's invoice for the same, Tenant shall reimburse Landlord
for the amount of any increase in taxes assessed against the Premises based
on Tenant's particular use of the Premises. Tenant shall not be
responsible for any other type of tax increase, including without
limitation, general rate increases or general reassessments, except to the
extent that such increases are attributable to Tenant's use of the
Premises. Tenant shall have the right to appeal any tax increase which it
is obligated to pay under this Section 4. Tenant shall be solely
responsible for all taxes, including but not limited to sales and use
taxes, attributable to Tenant's business operations.
5. Use:
---
The Premises will be used as a ferry service terminal including, without
limitation, a parking lot, ticket office, terminal and dock for Tenant's
vessels.
2
<PAGE>
6. Approvals:
---------
After the execution of this Lease, Tenant shall diligently proceed to
obtain all governmental permits, approvals, licenses and/or certificates
required in connection with Tenant's use of the Premises, Tenant's
alterations or improvements to the Premises, and Tenant's operation of
passenger ferry services between the Premises and destinations selected by
Tenant (collectively called herein the "Permits"). Tenant shall not be
deemed to have obtained the Permits unless (a) all of the Permits contain
terms and conditions acceptable to Tenant in its sole discretion, and (b)
all of the Permits are final and unappealable (it being understood that all
appeal periods applicable to the Permits shall have expired with no appeal
having been filed, or if an appeal should be filed, it having been finally
and conclusively resolved, without right of further appeal, in favor of the
Permit).
If Tenant has not obtained all such Permits within one hundred eighty days
(180) days after the date of this Lease, then Tenant shall have the right
to either (i) terminate this Lease or (ii) extend the contingency period
for another sixty (60) days by notice given to Landlord within ten (10)
days after the expiration of said one hundred eighty (180) day period; if
Tenant exercises its right to extend the contingency period for an
additional sixty (60) days, and if Tenant has not obtained all such Permits
within the additional sixty (60) days, then Landlord and Tenant shall each
have the right to terminate the lease by notice given to the other party
within ton (10) days after the expiration of said sixty (60) day period.
In the event that either party elects to terminate this Lease in accordance
with this Paragraph 6, the Lease shall terminate as of the date of such
notice of termination and thereafter neither party shall have any
obligations or liability hereunder, except those which arose prior to the
termination date. Landlord agrees to cooperate with Tenant in connection
with the Permits; Tenant agrees to reimburse Landlord for its out of pocket
costs incurred at Tenant's request in connection with obtaining the
Permits.
7. Insurance:
---------
For so long as this Lease is in effect, and as a condition to entering the
Premises, the Tenant must provide evidence of at least the following
insurance coverages:
(a) Workers' Compensation at statutory limits with Employer's Liability of
at least $500,000 limits.
(b) Comprehensive General Liability insurance, including broad form
property damage liability, with a combined single limit of at least
$2,000,000 per occurrence for bodily injury and property damage per
occurrence.
3
<PAGE>
All policies shall be endorsed to:
(a) Name the Landlord, its directors, officers, agents, employees, assigns
and affiliates as additional insureds with respect to any and all
third party bodily injury and/or property damage; and
(b) Require that thirty (30) days written notice be given to the landlord
prior to any cancellation or material change in the policy.
Additionally: All insurance certificates must identify the location of the
Premises.
8. Indemnification:
---------------
Tenant shall indemnify and hold the Landlord, its directors, officers,
agents, employees, assigns and affiliates harmless from any and all claims,
costs (including ally attorneys' fees), loss or liability whatsoever,
including but not limited to injury to persons (including death) or damage
to the Premises (including environmental damage to the Premises) caused by
or resulting from (a) the negligence or willful misconduct of Tenant or its
agents, employees, contractors or invitees, or (b) any breach by Tenant of
the terms of this Lease.
Landlord shall indemnify and hold the Tenant, its directors, officers,
agents, employees, assigns and affiliates harmless from any and all claims,
costs (including any attorneys' fees), loss or liability whatsoever,
including but not limited to injury to persons (including death) or damage
to the Premises (including environmental damage to the Premises) caused by
or resulting from (a) the negligence or willful misconduct of Landlord or
its agents, employees, contractors or invitees, or (b) any breach by
Landlord of the terms of this Lease. The provisions of this Section 8
should survive the termination of this Lease.
9. Damage to or destruction of the Premises:
----------------------------------------
(a) Lease Termination.
--- -----------------
If the Premises: (a) by reason of fire or casualty are rendered unsuitable,
in Tenant's judgment, for Tenant's business purposes and Tenant elects not
to repair; or (b) are damaged as a result of a risk which is not covered by
Tenant's insurance and Tenant elects not to repair; Tenant may terminate
this Lease by written notice given to Landlord within sixty (60) days after
such event. In the event of termination, this Lease shall expire thirty
(30) days after the date on which such notice of termination is given and
Tenant shall vacate and surrender the Premises to the Landlord. In the
event that this Lease is not terminated, Tenant shall commence repairs and
restoration as soon as is reasonably possible and prosecute the same to
completion with all due diligence.
4
<PAGE>
(b) Rent Abatement.
--- --------------
The Base Rent shall be abated proportionately if Tenant's use of the
Premises is impaired during the period of any damage, repair or restoration
provided for in this Section 9, provided, however, any such abatement of
rent shall end five (5) days after the repair of the Premises has been
substantially completed and Tenant has obtained any certificate or approval
necessary to re-occupy or use the Premises. Tenant shall continue the
operation of its business at the Leased Premises during any such period to
the extent reasonably practicable from the standpoint of prudent business
management, and any other obligations of Tenant under the Lease shall
remain in full force. Except for the abatement of Rent herein provided,
Tenant shall not be entitled to any compensation or damage for loss in the
use of the whole or any part of the Premises and/or any inconvenience or
annoyance occasioned by any damage, destruction, repair or restoration. In
the event the cause of the damage was due to the negligence or willful
misconduct of the Tenant or its agents, employees, contractors or invitees,
there shall be no abatement of rent.
10. Condemnation of the Premises:
----------------------------
If all or substantially all of the Premises shall be condemned or taken in
any manner for any public or quasi-public use, this Lease shall cease and
terminate as of the date of actual taking and Base Pent and additional rent
payable hereunder shall be prorated to the date of such taking. For the
purposes of this Paragraph 10 "substantially all" of the Premises shall be
deemed to have been taken if such condemnation or taking shall, in the
reasonable deternnination of Tenant, render the Premises unusable for the
Purposes set forth in Section 5 of this Lease.
11. Leasehold Improvements:
----------------------
Tenant shall have the right to install a ticket office, restripe the
parking lots, relocate existing fence, make lighting improvements,
landscape the Premises and construct a pedestrian ramp. Tenant shall also
have the right to make other alterations and improvements to the Premises,
consistent with Paragraph 5, subject to Landlord's prior written approval
which shall not be unreasonably withheld or delayed. Upon receipt of an
itemized invoice, Landlord shall reimburse Tenant for the costs and
expenses incurred by Tenant in connection with the alterations and
improvements described in this Section 11 up to but not exceeding $15,000.
On the expiration or earlier termination of the Lease, tenant shall have
the right, but not the obligation, to remove all improvements made by
Tenant. All trade fixtures and personal property installed at the Premises
shall remain Tenant's property and will be removed by Tenant within sixty
(60) days of termination.
5
<PAGE>
12. Estoppel Certificate:
--------------------
Tenant shall, at any tune and from a time to time, upon not less than ten
(10) days prior notice by Landlord, execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the
same is in full force and effect as modified and stating such
modifications), and the dates to which the Base Rent and other payments
have been paid in advance, if any, and stating whether or not Landlord is
in default in performance of the terms of this Lease and, if so, specifying
each such default of which the signer may have knowledge, it being intended
that any such statement delivered pursuant to this Paragraph may be relied
upon by any prospective purchaser of the fee of the Demised Premises or any
mortgagees thereof or any assignee of any mortgage upon said fee.
Landlord shall, at any time and from time to time, upon not less than ten
(10) days prior notice by Tenant, execute, acknowledge and deliver to
Tenant a statement in writing certifying that this Lease is unmodified and
in full force and effect (or if there have been modifications, that the
same is in full force and effect as modified and stating such
modifications), and the dates to which the Base Rent and other payments
have been paid in advance, if any, and stating whether or not Tenant is in
default in performance of the terms of this Lease and, if so, specifying
each such default of which the signer may have knowledge, it being intended
that any such statement delivered pursuant to this Paragraph may be relied
upon by any prospective assignee of the Tenant's interest hereunder or any
mortgagees thereof or any assignee of any mortgage upon said interest or
any permitted subtenant.
13. Compliance With Laws:
--------------------
Tenant shall comply with ail laws, statutes, ordinances, regulations and
other requirements of any governmental authority ("Legal Requirements") to
the extent such compliance is required as a result of (a) Tenant's specific
use of the premises, and/or (b) Tenant's acts.
Landlord shall comply with all Legal Requirements applicable to the
Premises, except to the extent set forth above.
14. Maintenance/Repairs:
-------------------
During the entire Lease Term, Tenant shall be responsible for ongoing
maintenance and repairs of the Premises.
15. Signage:
-------
Tenant shall have the right to install one or more signs on the Premises
provided all applicable laws and ordinances are complied with.
6
<PAGE>
16. Services:
--------
Tenant is responsible for the collection of all garbage on the Premises,
for the removal of all ice and snow, and for the maintenance of the
landscaped areas; Landlord does not have any obligation with respect to
said services.
Additionally, Tenant shall pay for all electrical services related to
Tenant's use of leased Premises, as monitored through a separate meter.
17. Assignment/Sublease:
-------------------
Tenant shall have the right to assign the Lease or to sublet all or any
portion of the Premises without Landlord's prior consent, (i) to any
parent, affiliate or subsidiary of Tenant, (ii) to any purchaser of all or
substantially all of Tenant's assets, (iii) to any purchaser of all or
substantially all of Tenant's outstanding stock, and (iv) to any entity
into which Tenant is merged or consolidated provided, however, that the use
of the Premises by any such assignee or subtenant is consistent with, and
expressly limited to, the use described in Paragraph 5, above. In the
event of any such assignment or sublease, Tenant shall promptly notify
Landlord.
With respect to any other assignment or sublease to another ferry service
operator, Landlord agrees not to unreasonably withhold or condition its
consent; if Landlord fails to respond to Tenant's written request within
thirty (30) days after its receipt by certified mail, then Landlord shall
be deemed to have consented.
18. Environmental Indemnification:
-----------------------------
(a) As a supplement to, and not a limitation of, the provisions of Section
13 hereof, Landlord shall, at its sole cost and expense, comply with
all laws, statutes, ordinances, regulations and other requirements of
any governmental authority relating to the environmental condition of
the Premises ("Environmental Requirements"), including, without
limitation, performing any testing, investigations, removal and
remediation required by such Environmental Requirements, except that
tenant shall be responsible for compliance with Environmental
Requirements in connection with any release or discharge of a
hazardous substance or hazardous waste occurring after the date hereof
which is caused by Tenant or its agents, employees, contractors or
invitees.
(b) Landlord shall indemnify, defend and hold Tenant harmless from and
against any and all claims, costs (including attorneys' fees),
actions, loss, judgments, fines and liability whatsoever (including,
without limitation, actions brought by any governmental authority or
third party) arising out of or in connection with the environmental
condition of the Premises or any other property owned or operated by
Landlord, except for any environmental condition arising out of any
release or discharge of a hazardous waste or hazardous substance at
the Premises after the
7
<PAGE>
date hereof which is caused by Tenant or its agents, employees,
contractors or invitees.
(c) Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims, costs (including attorneys' fees),
actions, loss judgments, fines and liability whatsoever (including,
without limitation, actions brought by any governmental authority or
third party) arising out of or in connection with any release or
discharge of a hazardous waste or hazardous substance at the Premises
after the date hereof which is caused by Tenant or its agents,
employees, contractors or invitees.
(d) Notwithstanding anything to the contrary contained in this Lease,
Tenant shall have the right during the Investigation Period (as
hereinafter defined) to conduct such investigations and analyses of
the environmental condition of the Premises and its environs as it
deems prudent. Landlord shall cooperate with Tenant, at no cost to
Landlord, in connection with such investigations and analyses. In the
event that Tenant, in its sole discretion, is not satisfied with the
results of any such investigation or analysis, it shall have the
right, by notice given to Landlord prior to the expiration of the
Investigation Period, to terminate this Lease. As of the date of any
such notice, this lease shall terminate and neither party shall have
any further liability hereunder. The term "Investigation Period" as
used herein shall mean the period commencing on the date of this Lease
and ending on the thirtieth (30) day thereafter.
(e) The indemnification provisions of this Section 18 shall survive the
termination of this Lease.
19. Pollutants/Permits:
------------------
Tenant shall not at any time use or store any pollutant or hazardous
---
material on the Premises, and shall at all times maintain the Premises in a
safe and lawful condition. Upon Landlord's request, Tenant shall provide
evidence reasonably satisfactory to Landlord that all required consents or
permits are in force for Tenant's use of the Premises.
20. Cancellation:
------------
Tenant recognizes that the Premises is a component of the entire twenty-
five (25) acre parcel (the "Property") being marketed for redevelopment in
conjunction with the City of Stamford's redevelopment efforts for the
entire Southend.
In the event of any sale of the Prep rises by Connecticut Light and Power
Company, Landlord shall have the right to require Tenant to relocate to new
premises owned by Landlord, subject, however, to the following:
8
<PAGE>
(a) Landlord shall give Tenant not less than one (1) year's prior written
notice of the relocation (the date which is one (1) year after the
date of such notice being hereinafter called the "Relocation Date"),
which notice shall include a plan identifying the New Premises (as
hereinafter defined);
(b) the Premises shall be relocated to another portion of the Property
(the "New Premises") which (i) shall be suitable to Tenant for the
operation of its ferry service terminal, (ii) shall be in good and
safe condition and in compliance with all applicable laws, statutes,
ordinances and other requirements of any governmental authority, and
(iii) shall include, without limitation, an on site dock, on site
parking with at least as many spaces as the original Premises,
vehicular access directly to a main public road, and location for
signage to adequately identify to the public the location of Tenant's
operation;
(c) commencing not less than ninety (90) days prior to the Relocation
Date, Tenant shall have the right to access the New Premises and to
construct and install such alterations, improvements and facilities as
Tenant deems necessary, provided such alterations, improvements and
facilities are consistent with the use permitted under Paragraph 5
hereof (such alterations, improvements and facilities being called
herein the "Relocation Work") and to otherwise prepare the New
Premises for Tenant's use and occupancy; and
(d) Landlord shall cooperate with Tenant, at Tenant's cost, in connection
with all governmental permits, approvals, licenses and/or
certifications required in connection with Tenant's use of the New
Premises, the Relocation Work, and Tenant's operation of passenger
ferry services between the New Premises and destinations selected by
Tenant (the permits, approvals, licenses and/or certifications
referred to herein being called collectively, the "New Permits").
Subject to the foregoing provisions, on or before the Relocation Date (or
such later date as shall be reasonably necessary for Tenant to complete the
Relocation Work and to commence its operations from the New Premises,
provided Tenant shall have diligently pursued the New Permits and after
obtaining the New Permits shall have diligently pursued the Relocation
Work), Tenant shall surrender the original Premises to Landlord and from
and after the date of such surrender, the New Premises shall be deemed to
be the Premises under this Lease and all other terms and conditions of this
Lease shall remain unmodified and in full force and effect.
Notwithstanding anything to the contrary contained herein, in the event
that Tenant has not obtained all of the New Permits on or before the
Relocation Date, Tenant shall have the right to terminate this Lease by
notice given to Landlord within ten (10) days after the Relocation Date.
In the event that Tenant gives such termination notice, this Lease shall
terminate as of the date of the notice. Tenant shall not be deemed to have
obtained the New Permits unless (a) all of the New Permits contain terms
and conditions acceptable to Tenant in its sole discretion, and (b) all of
the New Permits are final and unappealable (it
9
<PAGE>
being understood that all appeal periods applicable to the New Permits
shall have expired with no appeal having been filed, or if an appeal should
be filed, it having been finally and conclusively resolved, without right
of further appeal, in favor of the New Permit).
21. Quiet Enjoyment:
---------------
Landlord represents and warrants that (a) it is the owner of the Premises,
and (b) there are no covenants, easements, restrictions, agreements or
other encumbrances affecting the Premises which would interfere with
Tenant's use of the Premises as contemplated hereby. Landlord covenants
that if, and so long as, Tenant performs its obligations hereunder, Tenant
shall have the right to peaceably and quietly have, hold and enjoy the
Premises for the term herein mentioned, subject to the provisions of this
Lease.
22. Notices:
-------
All Notices permitted or required to be made by the Tenant or the Landlord
shall be made in writing and will be considered to be received upon
personal delivery or three (3) business days following mailing of a Notice
by certified mail, postage prepaid, return receipt requested to:
Landlord: The Connecticut Light and Power Company
Real Estate Department
Box 270
Hartford, CT 06141-0270
Attention: Manager - Real Estate and Land Planning
Tenant: Lighthouse Landings, Inc.
One Springfield Avenue
Summit, NJ 07901
Attention: Raymond F. Wright,
Executive Vice President and Chief Financial Officer
23. Entire Agreement:
----------------
This Lease constitutes the entire agreement between the Landlord and the
Tenant with respect to the Premises and no oral statements, promises,
express or implied warranties, or other understandings except those
expressly set forth in this Lease shall be valid unless reduced to writing
and signed by both parties on or after the date of this Lease.
24. No Broker:
---------
Tenant represents that no broker or agent brought the Premises to the
Tenant's attention or was the procuring cause of this Lease transaction.
Landlord enters into this Lease in reliance on Tenant's representation that
no broker or agent, in any way, brought the Premises to the Tenant's
attention or was the procuring cause of this Lease transaction.
10
<PAGE>
Landlord represents that no broker or agent was the procuring cause of this
Lease transaction. Tenant enters into this Lease in reliance on Landlord's
representation, that no broker or agent was, in any way, the procuring
cause of this Lease transaction.
25. Binding Effect:
--------------
This Lease is binding upon and shall inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
LANDLORD: THE CONNECTICUT (LIGHT AND
POWER COMPANY
By: /s/Salvatore Giuliano
--------------------------------------------
Salvatore Giuliano
Manager - Real Estate and Land Planning
TENANT: LIGHTHOUSE LANDINGS, INC.
By: /s/Raymond F. Wright
--------------------------------------------
Raymond F. Wright
Executive Vice President and
Chief Financial Officer
11
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The Cigar Box, Inc.
Fast Ferry Holding Corporation
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 62,606 274,957
<SECURITIES> 0 0
<RECEIVABLES> 0 17,409
<ALLOWANCES> 0 0
<INVENTORY> 1,057 5,608
<CURRENT-ASSETS> 1,041,320 1,328,842
<PP&E> 13,103,525 12,468,633
<DEPRECIATION> 251,414 928,003
<TOTAL-ASSETS> 15,346,019 14,971,701
<CURRENT-LIABILITIES> 2,977,311 3,850,138
<BONDS> 11,301,455 10,791,096
0 0
0 0
<COMMON> 31,508 35,208
<OTHER-SE> 1,035,745 (219,947)
<TOTAL-LIABILITY-AND-EQUITY> 15,346,019 14,971,701
<SALES> 681,167 2,550,701
<TOTAL-REVENUES> 681,167 2,550,701
<CGS> 0 0
<TOTAL-COSTS> 509,742 1,836,922
<OTHER-EXPENSES> 530,589 900,696
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 347,340 1,053,027
<INCOME-PRETAX> (706,504) (1,239,944)
<INCOME-TAX> 1,014 1,687
<INCOME-CONTINUING> (707,518) (1,241,631)
<DISCONTINUED> (693,207) (69,288)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,358,191) (1,310,919)
<EPS-BASIC> (0.25) (0.37)
<EPS-DILUTED> (0.24) (0.03)
</TABLE>
