<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - SB
GENERAL FORM FOR REGISTRATION OF SEURITIES OF
SMALL BUSINESS ISSUERS Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
FINELINE PROPERTIES.COM, Inc.
---------------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 58-2376296
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3250 West Market Street, Suite 302, Fairlawn, Ohio 44333
- --------------------------------------------------- -------------
(Address of principal executive offices) (zip code)
330-678-5558 (Phone) 330-678-1334 (FAX)
---------------------------------------------------------------------
Issuer's Telephone Numbers
Securities to be registered under section 12(b) of the Act:
Title of Each Class Name on each exchange on which
to be registered each class is to be registered
- -------------------------- --------------------------------
- -------------------------- --------------------------------
Securities to be registered under section 12(g)of the Act:
Common Stock, $0.001 par value per share, 20,000,000 shares authorized,
9,145,477 issued and outstanding as of August 1, 1999. Preferred Non-Voting
Stock, $0.001 par value per share, 1,000,000 shares authorized, none issued
nor outstanding as of August 1, 1999.
Copies of Communications Sent to:
Brain G. Dvorak, Esq.
Dvorak & Associates
500 N. Rainbow, Suite 300
Las Vegas, NV 89107
Tel: (702) 794-4992 - Fax: (702) 794-4532
1
<PAGE>
FORWARD LOOKING STATEMENTS
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
FINELINE PROPERTIES.COM, Inc., ("FineLine Properties.com," "Company" or the
"Registrant") cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements that may be deemed to have been made in this
Document or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in the Document that are not statements of
historical fact may be deemed to be forward-looking statements. This
Registration contains statements that constitute "forward-looking statements."
These forward-looking statements can be identified by the use of predictive,
future-tense or forward-looking terminology, such as "believes," "anticipates,"
"expects," "estimates," "plans," "may," "will," or similar terms. These
statements appear in a number of places in this Registration and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations for its
limited history; (ii) the Company's business and growth strategies; (iii) the
Internet and Internet commerce; and, (iv) the Company's financing plans.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
Factors that could adversely affect actual results and performance include,
among others, the Company's limited operating history, dependence on continued
growth in the use of the Internet, the Company's inexperience with the
Internet, potential fluctuations in quarterly operating results and expenses,
security risks of transmitting information over the Internet, government
regulation, technological change and competition.
The accompanying information contained in this Registration, including,
without limitation, the information set forth under the heading "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" identifies important additional factors
that could materially adversely affect actual results and performance. All
of these factors should be carefully considered and evaluated. All forward-
looking statements attributable to the Company are expressly qualified in
their entirety by the foregoing cautionary statement. Any forward-looking
statements in this report should be evaluated in light of these important
risk factors. The Company is also subject to other risks detailed herein or
set forth from time to time in the Company's filings with the Securities and
Exchange Commission.
2
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Part I ......................................................... 4
Item 1. Description of Business.................................. 4
Item 2. Management's Discussion and Analysis or Plan of
Operation................................................ 31
Item 3. Description of Property.................................. 32
Item 4. Security Ownership of Management and Others and Certain
Security Holders......................................... 32
Item 5. Directors, Executives, Officers and Significant
Employees................................................ 34
Item 6. Remuneration of Directors and Executive
Officers................................................. 35
Item 7. Certain Relationships and Related Transactions........... 35
Part II ......................................................... 36
Item 1. Market Price of and Dividends of the Registrant's
Common Equity and Other Stockholder Matters.............. 36
Item 2. Legal Proceedings........................................ 37
Item 3. Recent Sales of Unregistered Securities.................. 37
Item 4. Description of Securities................................ 38
Item 5. Indemnification of Directors and Officers................ 40
Part F/S ......................................................... 42
Item 1. Financial Statements..................................... 42
Item 2. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure..................... 44
Part III ........................................................ 48
Item 1. Index to Exhibits....................................... 48
Item 2. Description of Exhibits................................. 48
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Financial Statements
and Notes related thereto appearing elsewhere in this Registration. Except
where the context otherwise requires, all references in this Registration to
the "Registrant" or the "Company" or "FINELINE PROPERTIES.Com" refer to
FINELINE PROPERTIES.COM, Inc., a Nevada corporation, (b) the "Web" refer to
the World Wide Web and (c) the "site" refer to the Company's Web site.
3
<PAGE>
Part I
Item 1. DESCRIPTION OF BUSINESS
A. Business Development, Organization and Acquisition Activities
The Company was incorporated under the laws of the State of Ohio, on January
11, 1988. On or about March 30, 1998 the Issuer filed a Certificate of Merger
with the Secretary of State of Nevada pursuant to an Agreement and Plan of
Merger and Reorganization (see Exhibit 2.1) executed on February 27, 1998
between FineLine Properties, Inc. (Ohio) and FineLine Properties, Inc.
(Nevada), which was incorporated on January 12, 1998. The Company filed
Restated Articles of Incorporation on March 12, 1999, in Nevada, correcting
the number of authorized common shares to 20,000,000, which was erroneously
stated in the January 12, 1998 filed Articles (see Exhibit 3.1). By this
merger, the Issuer effected a re-domiciling of the Company to the State of
Nevada. The Company in accordance with Section 78.250 of the Nevada Revised
Statues and as a result of the majority consent of shareholders executed on
February 27, 1999 changed the name of the Company from FineLine Properties,
Inc. to FineLine Properties.com, Inc. The Company is engaged in the
creation, development, licensing and merchandising of cartoon characters.
The Company's mailing address is 3250 Market Street, Suite 302, Fairlawn,
Ohio 44433, and its telephone number is (330) 678-5558. The Company's
E-mail address is: [email protected]. The Company also
maintains an Nevada address at 7631 Bermuda Road, Las Vegas, Nevada 89123
and a Studio at 110 West Main Street, Kent, Ohio, telephone number
(330) 678-4593.
1) Principal Products, Services and Principal Markets.
The Company creates and develops cartoon characters for licensing and
merchandising to major corporations for a fee and/or royalty payments which
permits these companies to use the cartoon images. The Company, is a member of
The International Licensing and Merchandisers Association (LIMA), located in
New York City, which is the largest association of its kind. All major
licensing, merchandising and related firms belong to LIMA whose membership
generates approximately 75% of all licensing and merchandising revenues
recorded in this $130 billion per year industry. With a base of 147 cartoon
characters the Company is developing and or has licensing / merchandising
agreements as well as associations in the United States, South American
marketing region, Europe, and Asia.
(a) Operating History
The Company was first incorporated in the State of Ohio on January 11,
1988. Accordingly, the Company has a limited operating history upon which
an evaluation of the Company, its current business and its prospects can
be based, each of which must be considered in light of the risks, expenses
and problems frequently encountered by all companies in the early stages of
development, and particularly by such companies entering new and rapidly
developing markets like the Internet. The Company's prospects must be
considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets such as online
commerce. Such risks include, without limitation, the lack of broad
acceptance of the company's products on the Internet, the possibility that
the Internet will fail to achieve broad acceptance, the inability of the
Company to generate significant e-Commerce-based revenues from Internet
customers, the company's inability to anticipate and adapt to a developing
4
<PAGE>
market, the failure of the company's network infrastructure (including its
server, hardware and software) to efficiently handle its Internet traffic,
changes in laws that adversely affect the company's business, the ability of
the Company to manage its operations, including the amount and timing of
capital expenditures and other costs relating to the expansion of the
company's operations, the introduction and development of different or more
extensive communities by direct and indirect competitors of the Company,
including those with greater financial, technical and marketing resources, the
inability of the Company to maintain and increase levels of traffic on its
Web site, the inability of the Company to attract, retain and motivate
qualified personnel and general economic conditions.
(b) Description of The Business
The Company operations entail a number of variables as a result of the creative
nature of the business and industry. The Company researches trends in the
industry and then creates cartoons that it believes fill a particular void and
or accepts specific developmental assignments for the design of characters.
These characters are drafted, reviewed, redesigned and finalized for either
internal Company licensing and merchandising programs or as contracted for by
special assignment. The Company, by request and/or as a condition of a specific
license clause(s), will redraw the cartoons in varied poses, utilization's,
etc, to fit defined design considerations as expressed by the Licensee or it
can grant the Licensee the right to redraw the character(s) to fit conditions,
specifications and or circumstances as granted under the license and as
approved by the Company prior to public usage.
In addition to the aforementioned, the Company researches, implements and
develops internally apparel designs for its own branded merchandise lines,
animation concepts, software game designs, animation cells, and other product
utilization(s) for those cartoon characters groups which are either unlicensed,
or for segments of the licensing - merchandising process for which contracted
licensing agreements have not been granted. The Company, at its own discretion,
can decide to cease internal production and/or sales of merchandise items when
a suitable outside Licensee applies for said rights to a Company revenue line.
(c) Company Products
The Company's product are cartoons and this begins with the creation and
development of cartoon characters which are based either upon researched
formats and niches, or as a result of requests by corporations for characters
to be utilized in either brand identification, promotions or product
introductions. At present, the Company has 147 trademarked and copyrighted
cartoons which are in the following character groups: The Moodies(tm), The
Tasties(tm), The Hogstturrs(tm), Soft(tm), The Majors(tm), The Icers(tm), The
Hoopsters(tm), Red Zone(tm), The Kooties(tm), The eKids(tm), The Computoons(tm),
The Internauts(tm), The Milk Drops(tm), The Healthy Dozen(tm). The Company
also maintains an E-Commerce Internet Signature Store which sells FineLine
branded apparel and products, ranging from designer shirts and women(s)
Jersey Tops and dresses, to T-shirts.
The products, goods and or services which the Company's cartoon characters can
appear upon range from apparel items, board games, toys, dolls, lunch boxes,
stickers, software games, posters, comic books, children's books, company event
and promotional venues as well as animation for television, commercials and
feature length movies.
5
<PAGE>
Additionally, the Company has developed the FineLine Signature Store, which
has designed and established an e-Commerce Store on the Internet which sells
over 90 different items, including various apparel items either embroidered or
silk screened with Company cartoon characters. At present, the available
merchandise includes T-shirts, Men's Casual Shirts, Men's Denim Shirts, Ladies
Denim Shirts, designer shirts, casual shirts, Ladies Jerseys, Ladies
Jersey Dresses. The FineLine Sports Group includes products featuring football,
baseball, basketball and hockey featured from entertainment institutions
here in the United States, as well as globally. The Company has developed
character groups for these sports using the specific sporting terms of each
game to name the characters varied positions. Targeted at all age groups,
these cartoon teams have a wide variable of merchandising, promotional and
licensing possibilities. With established sports leagues in the United States,
South America, Europe and Asia, the Company is targeting licensing and
merchandising activities at all of these regions through a comprehensive
program of internal efforts combined with licensing representatives. The
Signature Store is accessible directly from the FineLine Properties new
Internet Web site at http://www.finelineproperties.com.
(d) Specific Product Lines
The competitive factors and realities of the industry were all taken
into account in the Company's developmental stage for the creation of its
cartoon character groups. These character groups have a broad cross section of
appeal as well as specified audience profiles. As the products of the Company
are cartoon characters and cartoon character groups, said characters represent
the basis for Company's marketing, licensing, merchandising activities
and revenues. At present, the Company has 147 cartoons in 16 character
groups for which the Company holds copyrights and trademarks on all of its
cartoon character groups. The following are the Company's current character
groups with a brief description:
1) The Moodies(tm)
The Moodies were developed to reflect human moods and emotions such as
happiness, sadness, being broke, extravagance, etc. (the corresponding
characters are - Happy(tm), Sad(tm), Penniless(tm), Extravagant(tm),
etc.). The 9 cartoons in this character group (Happy(tm), Angry(tm),
Extravagant(tm), Penniless(tm), Innocent(tm), Sad(tm), Ornery(tm), Worried(tm),
Sexy(tm) have appeared on over 450 licensed products in over 20 countries as
well as in promotions for the Wendy's Hamburger chain, Kellogg's Rice Krispies,
Daiwa Securities of Japan, Tom McCan shoes and other venues. These characters
are targeted at all age groups.
The Moodies(tm) are presently under license with The Marvel Entertainment
Group, Inc. (Marvel Comics) in an international license and merchandising
agreement. (See "--Strategic Alliances." and Marvel Agreement, Exhibit 10b)
2) The Tasties(tm)
These characters represent various taste sensations of the palette
such as Chocolate(tm), Fruity(tm), Barbecue(tm), Hot & Spicy(tm),
Natural(tm), Sweet(tm), Lite(tm), Sugar Free(tm), Whole Grain(tm),
Salt Free(tm) for a total of 10 cartoons in this group. The characters
are targeted at the age groups 4 through 12. The Tasties(tm) are
presently under license with The Marvel Entertainment Group, Inc.
(Marvel Comics) in an international license and merchandising
agreement. (See "--Strategic Alliances.")
6
<PAGE>
3) The Hogstturrs(tm)
The Hogstturrs(tm) are cartoons based on the popularity of motor cycles in the
United States as well as globally. An interesting cartoon family utilizing
elements of the city mixed strongly with a country foundation. The appeal
of these characters are age groups 9 through adult.
Based on the current motorcycle riding craze, The Hogstturrs(tm) are a cartoon
family of 17 characters with personality types such as: Boss Hog(tm), Athletic
Hog(tm), Grandma Hog(tm), Grandpa Hog(tm), Lucky Hog(tm), Doc Hog(tm), Sexy
Hog(tm), Bubba Hog(tm), Hot Dog Hog(tm), Warrior Hog(tm), Humble Hog(tm), Rodeo
Hog(tm), Butler Hog(tm), Hard Luck Hog(tm), Professor Hog(tm), Bodybuilder
Hog(tm), and Construction Hog(tm) . These characters are targeted at the age
groups 8 through young adults and adults. The Hogstturrs(tm) are presently
under license with The Marvel Entertainment Group, Inc. (Marvel Comics) in an
international license and merchandising agreement.
4) Y2K(tm)
Over the past four years and increasingly so as the millennium approaches,
significant public and business attention has been focused on the global
situation involving the potential for computer based problems brought about
as a result of the digital computer clock cross over to the year 2000. The six
Y2K(tm) characters give a face to this millennium bug depicted via humorous
adaptations off of the main character theme. Offered free of charge for use by
members of the media to help to publicize the Company, Y2K's media usage is
gaining interest and inquiry as the year 200 draws closer. The characters
appeal is targeted at all age groups.
Drawn to reflect various depiction's of the Millennium Bug, the six Y2K(tm)
characters with names such as Shrug(tm), Crystal(tm), etc., are targeted at all
age groups. The Y2K(tm) character group is current under license to Boein Co.,
Ltd., a division of Intersac, Ltd. of Seoul, Korea for the country of Korea,
with agent representation rights for the Pacific Rim countries. In addition,
Boein Co., Ltd. has options for all the other Company cartoon character groups
which the Licensee can proceed to represent officially for a fee, based upon
the area(s) of usage as well as territory(s). (See "Boein Agreement" Exhibit.)
5) Soft(tm)
A puffy, cuddly creature, Soft(tm) is primarily targeted at the preschool age
group category. This character is not currently under license.
6) The Kooties(tm)
Developed and designed to appeal to all age groups, the Kooties(tm) utilize the
well known word heretofore utilized to describe imaginary creatures. The name
recognition value of the word - Cootie - adds instant consumer awareness for
these characters. The foregoing benefits were translated into visual appeal by
the creation of a character group with multiple image variations to provide
animation and game story lines as well as appeal to the targeted audience via
cartoons that signified differing attitudes.
7
<PAGE>
Based upon the extremely well known and heretofore unseen imaginary
creature of our childhood, the Kooties(tm) moods are reflected by their color
and by the condition of their hair which also changes with their moods.
The Kooties (tm) are Smiley(tm), Jumpy(tm), Meanie(tm), Scaredy(tm) and
Gloomy(tm). These characters are targeted at all age groups. The Kooties(tm)
are under option with Boein Co., Ltd. as well as in negotiation for licensing
and adorn apparel items on the Company's Internet E-Commerce Signature Store.
7) The Computoons(tm)
The Company has developed other character groups to not only appeal to the
aforementioned age groups (4 through 9), but to older audiences and their
allied marketing, merchandising and licensing applications as well.
The computer, hardware and software variation of the eKids(tm), the
Computoons(tm) were also developed to serve a multiple marketing, merchandising
and licensing mode. These characters and their names, such as Scanner(tm), Plug
and Play(tm), Keyboard(tm), Monitor(tm), etc. familiarize children ages 4
through 9 with computer terms as well as hardware and the applications range
from teaching aids in an entertaining format, software games, board games,
stickers, etc..
These 15 characters are named - Scanner(tm) - Plug(tm) and Play(tm) - Laptop
(tm) - Power Strip(tm) - Floppy Disk(tm) - Hard Drive(tm) - Monitor(tm) -
Speaker(tm) - Printer(tm) - Keyboard(tm) - Touch Pad(tm) - Mouse(tm) - Modem
(tm) - CD Rom(tm) and were developed as a result of the high interest which
children have in computers. The Company is developing storyboards with the
Computoons(tm) interacting not only with themselves, but with children as well
in a multiple role teaching, learning modes as well as entertainment, as
children learn and understand faster when experiences are translated into
memorable fun situations and events. Targeted at preschool and grades 1
through 4, these characters are in developmental storyboard, book and product
stages. These characters are under option with Boein Co., Ltd. as well as
in negotiation.
8) The eKids(tm)
The computer revolution brought about by the Internet has created an entire
industry and sub industries where there were none just seven short years ago.
The eKids(tm) are characters utilizing Internet terms, with the application
variables for these cartoons ranging from software games, teaching aids, board
games, stickers, and more. Designed specifically to appeal to age groups 4
through 9, the eKids(tm) are an example of the Company's broad cross sectional
marketing and cartoon development strategy.
Representing the Internet side of the Computoons(tm), the 12 eKids(tm)
represent Web terms such as Dot.com(tm), E-Mail(tm), Java(tm), Home Page(tm),
Search(tm), Web(tm), Bit(tm), Byte(tm), Megabyte(tm), Cursor(tm), URL(tm),
Pixel(tm) as international cartoon characters. Created with the same thought
in mind as the Computoons(tm), the eKids(tm) represent a fun and entertaining
way for children to become familiar with the Internet. Targeted at preschool
and grades 1 through 4, these characters are in developmental storyboard, book
and product stages. These characters are under option with Boein Co., Ltd. as
well as in negotiation.
8
<PAGE>
9) The Internauts(tm)
These characters mesh the appeal of the computer and the Internet along with
known software names for the category of eV.I.L.(tm) under Crash(tm),
Hack(tm), Freeze(tm), Virus(tm), Surge(tm), Bug(tm); and eHeroes(tm) under
Mainframe(tm), Matrix(tm), Hardrive(tm), Firewall(tm), Hyperlink(tm),
Terabyte(tm).
These characters are being developed for a CD-ROM software game in the
Company's own Software Games Division as well as marketing programs seeking
licenses and/or merchandising items, games, etc. The age category appeal of
these characters was designed and developed to be extremely broad based in
that the Company has calculated the age group ranges from 7 through 27,
utilizing the software games and board games as the basis for said wide
demographic cross section. Further applications have become understood by
the Company as a result of its e-mails from shareholders and inquiries. E-mail
inquires have asked the company to include the Internauts(tm) on the Company's
e-commerce Signature Store Web Site in apparel items as well as when a software
game be available. These types of direct consumer feed back aid the Company in
keeping in touch with the market as well as what people want.
10) eHeroes & e.V.I.L. (tm)
This character segment is another of the Company's computer related cartoon
groups, the developed story for these characters is the relationship between
good and evil. e.V.I.L.(tm) (Electronic Viral Infestation League) want
dominance and control of your computer as well as the Internet and attack
these systems from within. And where there is e.V.I.L.(tm), there are heroes,
eHeroes(tm) to be exact. These characters combat e.V.I.L.(tm) where ever and
when ever they rear their ugly heads in the never-ending battle to keep your
computer and the Internet free for you to use as you wish. Company focus group
tests surprising found that the age groups 4 through 7 were also highly
interested in the Internauts(tm), when the Company thought that the operative
age groups would be 8 through young adult, depending upon the merchandising
mode, which spans animation, computer games, etc. These characters are under
option with Boein Co., Ltd. as well as in negotiation.
11) The Icers(tm)
A cartoon hockey team with team players sporting popular sports terms such as
Target(tm), Deek(tm), Wheels(tm), Check(tm), Blue Liner(tm) and Sniper(tm)
these character appeal to age groups 7 through young adult and are under option
with Boein Co., Ltd. as well as in negotiation.
9
<PAGE>
12) The Majors(tm)
Cartoon baseball players with sports term names such as Heat(tm),
Wallcrawler(tm), Meaty(tm), Range(tm), Stretch(tm), Gunner(tm), Wheels(tm),
Turn2(tm), Knuckles(tm), and Scoop(tm) these character appeal to age groups 7
through young adult and are currently in a promotional venue in Europe as a
test as well as under option with Boein Co., Ltd.
13) The Hoopsters(tm)
Cartoon basketball players with sports term names such as Got Game(tm),
Inzone(tm), Floor Burns(tm), Punch(tm), Swatt(tm), Handles(tm), and Hops(tm)
these character appeal to age groups 7 through young adult and are in a
promotional test venue in Europe as a test as well as under option with Boein
Co. Ltd.
14) Red Zone(tm)
Cartoon football players with sports term names such as Slobberknocker(tm),
Work Horse(tm), Clutch(tm), Hitman(tm), Shadow(tm), Snap(tm), Blindside(tm),
Soft Hands(tm), Plug(tm), Pancake(tm), Laser(tm) these character appeal to age
groups 7 through young adult and are in a promotional test venue in Europe as
well as under option with Boein Co. Ltd.
15) The Milk Drops(tm)
Developed as a special project under request, the Milk Drops(tm) are characters
to be utilized depicting the health benefits of milk in promotional venues.
This character group is designed to appeal to all age groups. These cartoons
are currently in licensing negotiation.
16) The Healthy Dozen(tm)
Developed as a special project for the egg industry, the Healthy Dozen(tm) will
be utilized in promotions to extol the benefits of eggs. This character group
is designed to appeal to all age groups. These cartoons are currently in
licensing negotiation.
(e) Developing and Changing Market
The market for films and entertainment products and peripheral technologies
is continually evolving and changing. The Company does not believe that these
risks are material at this time. However, there can be no assurance that the
Company's assessment of the market place is correct, nor that the Company's
products will continue to be accepted in the future.
The profile for the Company's cartoon characters and character groups range
from children aged 4 - 8, preteens 9 - 12, teenagers 13-19, young adults
20 - 26, adults 27 - 44, and older age groups as well. This extremely wide
demographic profile is based upon the fact that the Company has 16 distinct
character groups whose context and concepts were designed to provide the
Company with the widest spectrum of age profiles. This cross-demographic
profile strategy was specifically designed to enable one character group to
help expose and sell another character group as a result of the diverse
spread of cartoon types and categories. The market demographic spread is also
enhanced by the various products, goods, services and entertainment mediums the
product (cartoons) can be and are utilized for.
10
<PAGE>
The market for the Company's products consist of corporations which are sold
under contract for the rights to utilize the Company's cartoon character images
in various licensing and or merchandising formats, as well as to consumers who
purchase products as offered by the Company from its e-commerce Internet
Signature Store or other direct selling techniques. The contractual revenues
for corporate licensing and merchandising agreements can vary from an average
agreement of $50,000 per year, to $25,000,000 based upon the type of usage
format, exposure patterns and or territories involved. Typically, an agreement
in the neighborhood of $50,000 is for the use of a cartoon image on a product
or extremely limited advertising format with territorial restrictions
encompassing a city and or surrounding suburbs.
Generally, a licensing/merchandising agreement for the use of a cartoon image
averages between $100,000 to $175,000 per year with a similar fee for some
national licenses (countries in Europe, South America, Asia, etc.), for
general category utilization's such as caps, T-shirts, etc. Toys, dolls and
board games typically command license fees of between $175,000 to $300,000
per annum. The inclusion of a deal for animation for television multiplies
the aforementioned figures 5 to 10 fold, with an animation deal bringing in
revenues for all merchandising, licensing and broadcast rights in the areas
of $15,000,000 to $50,000,000 per annum in the United States for a moderate
success and $7,000,000 to $25,000,000 for Europe (England, Germany, France,
Belgium, Italy, Spain, Switzerland). An animation deal in Europe, including
the parameters as indicated, for one country can range between $1,500,000 to
$10,000,000+ depending upon the country, station, population, merchandising
and allied aspects.
Because cartoons appeal to varied age groups and take on a life of their own,
cartoons which become animated can be sold, resold and sold over and over again
thus never really losing their revenue generation capability, just the amount
of revenues they take in based upon popularity at any given time in any given
market / territory market. Unless it grants an international license, the
Company is free to sell and contract licenses and merchandising agreements on a
global basis utilizing only the laws of what the market will bear as the
pricing ranges for these agreements. The more popular or exposed a character
group is, the more in up front fees and overall contractual revenue guarantees
it can command. In addition, as a character group gains in exposure, use and
popularity - recognition, later licensing and merchandising agreements command
considerably more in up front fees, contractual revenue minimums and guarantees
than prior agreements.
The Company is also in the process of implementing, or is selling products
directly to either consumers or corporations for those characters groups not
under license for specific segments in specific regions, countries or areas.
The Company's E-Commerce Signature Store on the Internet sells various
apparel items for Y2K(tm), The Kooties(tm), The Internauts(tm), The Majors(tm),
The Icers(tm), The Hoopsters(tm), Red Zone(tm), The Computoons(tm) and the
eKids (tm) at present, and will continue to do so until a suitable license or
merchandising agreement is reached which exceeds Company estimates for
revenues for a specific character group and or product utilization.
11
<PAGE>
The Company is also designing computer software games via its Software Games
Division to sell completed versions first over the Internet as download
versions for trial and then purchase. This marketing / merchandising
methodology was selected due to the fact it eliminates the high cost outlays
associated with the packaging and distribution of product in retail outlets.
Via marketing and advertising campaigns conducted on the Internet as well as
in other media, the Company can promote its software games, induce trial and
then charge for the codes to release the full version all via the Internet.
This elimination of costly packaging, distribution, and related costs permits
the Company to maximize its investment in the games themselves, rather than
portioning money for distribution and packaging measures thus lowering the
break even, profit generation curve attainment point. The Company is
interviewing game designers, developers and programmers for this new product
segment with the schedule first game targeted for the third quarter of 2000.
Research and market conditions have uncovered that certain global market
segments offer exceptional potential for new animation products as well as the
market size to support a direct specialty product aimed developed specifically
for that market. Traditionally, animation has been designed and targeted for
the huge United States market, due to a common language and in place marketing,
merchandising support systems to capitalize upon these efforts. Animators and
animation companies in Canada, Japan, France and Germany devote talent and
resources to the development of animation for the United States market and have
innovated a number of successful series and shows. Naturally, these companies
also develop and produce animated products for their home markets and in some
cases neighboring countries, but mostly, those products are simply dubbed in
the secondary language and sold as is with respect to the original version(s).
The second largest language market globally, Spanish, has exceptionally few
animated products developed or designed for that market and culture save for
those Spanish firms engaged in this market segment. Furthermore, the vast
majority of animated products seen by children in the Spanish market are dubbed
versions of public domain cartoons developed for the U.S. or other markets more
than 20 years hence. The foregoing is due to the limited budgets in most
Spanish markets (Brazil, Argentina, Venezuela, etc.), for original or current
animation products and more specifically for animated products aimed at the
younger generation. Entertainment in these countries utilize live shows and
games which are less costly to air, are in the mode of the market itself and
replace the lack of suitable and cost affordable animated product.
The Company, has researched the foregoing and as a direct result of the
technological developments in enhanced animation software and computing power
at affordable costs, is in the beginning stages of developing animation
products specifically for this market segment. The Company is in the process of
producing its own animated shorts for defined market segments in South America.
Cost factors for animation software have dropped from $350,000 just seven years
ago to $20,000 today for animation software used in movies such a "Star Trek",
"Men in Black", "Rug Rats" etc. The high animation budget costs are a result
of animation complexities and length, not software and hardware costs. Hardware
capable of running animation software has dropped from the $200,000 Hewlett
Packard and Silicon Graphics workstations of just 10 years ago to the present
450 Mhz Macintosh G3 series computers with benchmark speeds in excess of 700
Mhz due to unique backside cache architecture and other innovations. The
foregoing has brought down the cost of setting up the appropriate software and
hardware segment of animation development and production to well under
$75,000.00. The process at the Company is in the beginning stages of
storyboard development and scripts with a projected first animation project
completion date set for the third quarter of 2000.
12
<PAGE>
(f) Internet e-Commerce
The Internet has become a significant marketplace for buying and selling
goods and services. Industry estimates that the amount of goods or services
purchased in on-line consumer transactions will grow from approximately $14.9
billion in 1998 (Reference: Nua Ltd. Internet Survey 1999), to approximately
$36 billion in 1999 (Reference: Boston Consulting Group 7/19/99). Improvements
in security, interface design and transaction-processing technologies have
facilitated an increase in online consumer transactions. Early adopters of
such improvements include online merchants offering broad product catalogs
(such as books, music CDs and toys), those seeking distribution efficiencies
(such as PCs, flowers and groceries) and those offering products and services
with negotiable pricing (such as automobiles and mortgages). The Company
believes that as the volume of online transactions increases, traditional
retailers will offer a wide variety of products and services online. The
Company believes that online companies provide businesses an opportunity to
link Internet customers with like interests. The Internet allows marketers
to collect meaningful demographic information.
The Company is utilizing the Internet as a global platform for the Company as
well as for marketing, licensing and merchandising. The corporate Internet Web
Site located at www.finelineproperties.com is comprised of over 75 pages
showcasing the various character groups as well as information on the Company.
This cyberspace brochure accomplishes more in the presentation of the Company
than any printed material could as a result of the ease in updating and
maintaining a current presentation of all corporate developments and cartoon
lines. The Company established a presence on the Internet in early 1997 and has
either upgraded or completely changed its web site on over 50 occasions as a
result of new character additions, revised design elements and other factors.
The Company's Web presence is also reflected by its listing on over 30 search
engines under 15 categories and cross reference headings. The foregoing is
essential in alerting individuals of the Company's Web Site and driving them to
it. To further increase the global nature of the Web Site, the Company is
translating the entire site into Spanish, French, German. This coincides with
the Company's physical move into the European market, not only via marketing,
merchandising and licensing activities, but also by the establishment of a
European office. With a population base of 379,596,000 people, this region
exceeds the 274,028,000 individuals in the United States and represents the
largest population base outside of China with its 1,255,698,000 people
(Reference: United Nations Population Division, Department of Economic & Social
Affairs 1998). In keeping with this, the Company is also engaged in market
testing and preliminary market exposure programs via promotional venues in
Europe, as well as the evaluation of licensing agents and the projected opening
of a Signature Store in Madrid, which is tentatively scheduled for the first
quarter of 2000.
The public relations aspect of the Company's Internet presence is reflected
by the corporate Web Site on potential new customer's and or shareholders
seeking information on the Company, or to see what the Company is and does.
A further extension of this is the e-commerce Signature Store which is
13
<PAGE>
directly accessible from the Company's Web Site. Offering over 150 differing
apparel items ranging from T-shirts, casual shirts, dress shirts, ladies
jerseys and dresses, the Signature Store is being expanded and upgraded in
terms of look, product offerings and character group additions. Rather than
approach the marketing and promotion of the corporate Web Site and e-commerce
Signature Store Site as separate entity's, the Company promotes both sites
via a singular strategy. This methodology has been undertaken in the
recognition of the tremendous number of commercial sites on the Internet (in
excess of 200,000 in the United States and 500,000 globally, Reference:
Computer Industry Almanac 1998), as well as the varied budgets and marketing
activities of other firms. In reality, the Company, for its size and
positioning within its industry, maintains an Internet presence which exceeds
its competitors. Only firms such as Disney, Warner Brothers, Mainframe
Entertainment EM.T.V. and The Cartoon Network are larger.
According to Nielsen Media 10/12/98, the Entertainment category for packaged
software sales accounted for $861,900,000 out of the total $10,580,400,000 in
packaged software revenues sold. They projected that during the first six
months of 1999 almost 25% of consumers who connected to the Internet will
make an on-line purchase. Of this total, Nielsen Media predicts these
purchases will be up 1.8 million people to 2.7 million, with software up 1.2
million to 4 million from 9/97. In keeping with established trends, men
account for 71% and consumers under 35 years of age represent 64% of all
purchases made in this medium.
As a global marketing platform for the Company, the top 15 countries Internet
usage patterns also closely resemble the Company's expansion plans (USA 54.7%
of the total global Internet user population, Japan 7.97%, United Kingdom
5.83%, Canada 4.33%, Germany 4.07%, Australia 3.35%, Netherlands 1.39%, Sweden
1.31%, Finland 1.25%, France 1.17%, Norway 1.01%, Spain .92%, Brazil .86%,
Italy .84%, Switzerland .70%, Europe represents 21.97% of global Internet
usage) (Reference: Computer Industry Almanac 1998.) Internet utilization in
South America presently stands at just 4.8 million users at the end of 1998,
but that figure is projected to increase to 19.1 million by the end of 2003,
with e-commerce sales rising to $8 billion, up from $167 million in 1998,
according to IDC Research 6/23/99.
To capitalize on the foregoing, the Company maintains an active and
comprehensive Internet bulk e-mail program which is supported by the Company's
Investor Relations Department's fast e-mail reply program. Under this
operation, all e-mails are responded to a time frame of forty-eight hours,
and replied to on an individual basis. This approach and care for inquiries
has been well received by shareholders, e-commerce store purchasers and the
general public. Corporate executives also reply, where warranted, to certain
e-mails requiring their attention or when the subject manner dictates their
response and/or attention.
(g) Dependence on Continued Growth and Viability of the Internet and E-Commerce
The extremely high growth rate and importance of the World Wide Web has been
factored into the Company's immediate, as well as long range plans for both
14
<PAGE>
marketing, promotion and sales. The Company maintains a comprehensive 75 page
corporate web site which showcases the Company's cartoon character groups as
well as provides an in-depth and current picture of the Company's operations,
progress, new developments and products. The Internet Corporate Web Site at -
www.finelineproperties.com - also links directly to the Company's e-commerce
Signature Store which sells directly to the public varied apparel items
utilizing the Company's own cartoon characters.
With over 179 million on-line Internet subscribers and users worldwide and over
75 million in the United States, the importance of the Internet as a revenue
medium is supported by the gross sales of over $14.9 billion in 1998
(Reference: Nua Ltd. Internet Survey 1999), with projections for that figure to
exceed $36 billion on 1999 (Reference: Boston Consulting Group 7/19/99).
Projections conducted by The Computer Industry Almanac (7/6/99), indicate that
there will be over 133 million Internet users in the United States by the year
end 2000, with worldwide Internet users expected to top 318 million. These
growth rates exceed those for any medium during this period and mark the
Internet as the number one consumer marketing tool.
Global commerce and the online exchange of information is new and evolving,
it is difficult to predict with any assurance whether the Web will prove to
be a viable commercial marketplace in the long term. The Web has
experienced, and is expected to continue to experience, significant growth in
the numbers of users and amount of traffic. To the extent that the Web
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users, there can be no assurance that the
Web infrastructure will continue to be able to support the demands placed on
it by this continued growth or that the performance or reliability of the Web
will not be adversely affected.
With 51% of all Internet household incomes topping $40,000.00 (39.2% represent
household incomes in excess of $50,000.00 per annum), over 77.8% of all
Internet users in the United States have ordered over this medium. The
foregoing, compares favorably with Europe, where 73.2% have ordered on-line,
with the rest of the world's ordering rate at 64.7% (Reference: GVU 9th WWW
Survey 4/98). The most important statistic to the Company is the age
composition of both Internet users and buyers as well as their purchasing
habits. Fully 28.1% of all Internet users are between the ages of 5 and 25,
with another 15.7% in the 26 through 30 age group (Reference: Nua Ltd.
Internet Survey 1999). This preponderance of youth on the Internet is also
reflected in the percentage of how these age groups use the Internet. 54.8%
of all individuals in the 11 through 20 age group have ordered on-line, with
74.1% of those in the 21 through 25 category buying, according to GVU 9th WWW
Survey 4/98. These categories represent the prime demographic groups for the
Company.
Management's understanding of this electronic medium is reflected in the
corporate name, which is also the Company's web site address - FineLine
Properties.com (Inc.). With the on-line e-commerce Signature Store in place,
the Company will be designing special items and product lines for the upcoming
Christmas holiday selling season as well as Millennium celebration. Management
believes that the experience it has gained from having had an Internet presence
for over two years has provided the foundation and platform to enable the
Company to maximize on the current and future Internet explosion in growth, on-
line sales and as a global marketing tool.
15
<PAGE>
The Company's future success with its FineLine Signature Store, which sells
various apparel items either embroidered or silk screened with Company
cartoon characters is dependent upon continued growth in the use of the
Internet. To generate product sales for FineLine Properties.com, Inc., the
Internet's recent and rapid growth must continue, and e-Commerce on the
Internet must become widespread. None of these can be assured. The Internet
may prove not to be a viable commercial marketplace. Additionally, due to the
ability of consumers to easily compare prices of similar products or services
on competing Web sites, gross margins for e-Commerce transactions may narrow
in the future and, accordingly, the Company's revenues from e-Commerce
arrangements may be materially negatively impacted.
If use of the Internet does not continue to grow, the Company's business,
results of operations and financial condition would be materially and
adversely affected. Additionally, to the extent that the Internet continues
to experience significant growth in the number of users and the level of use,
there can be no assurance that its technical infrastructure will continue to
be able to support the demands placed upon it. The necessary technical
infrastructure for significant increases in e-Commerce, such as a reliable
network backbone, may not be timely and adequately developed. In addition,
performance improvements, such as high-speed modems, may not be introduced
in a timely fashion. Furthermore, security and authentication concerns with
respect to transmission over the Internet of confidential information, such
as credit cared numbers, may remain. Issues like these could lead to
resistance against the acceptance of the Internet as a viable commercial
marketplace. Also, the Internet could lose its viability due to delays in the
development or adoption of new standards and protocols required to handle
increased levels of activity, or due to increased governmental regulation.
Changes in or insufficient availability of telecommunications services could
result in slower response times and adversely affect usage of the Internet.
Demand and market acceptance for recently introduced services and products
over the Internet are subject to a high level of uncertainty, and there exist
few proven services and products.
The Internet allows marketers to collect meaningful demographic information
and feedback from consumers, and to rapidly respond to this information with
new messages. This offers a significant new opportunity for businesses to
increase the effectiveness of their marketing campaigns. In traditional
media, a significant portion of all advertising budgets are spent on direct
marketing because of its effectiveness. However, the effectiveness of direct
marketing campaigns is dependent upon the quality of consumer data used to
develop and place complementary products, services or facilities are
developed and the Web becomes a viable commercial marketplace in the long
term, the Company might be required to incur substantial expenditures in
order to adapt its products to changing Web technologies, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
16
<PAGE>
The Internet may not be commercially viable in the long term for a number of
reasons, including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies, performance
improvements and security measures. To the extent that the Internet continues
to experience significant growth in the number of users, their frequency of
use or their band width requirement, there can be no assurance that the
infrastructure for the Internet and other on-line services will be able to
support the demands placed upon them. In addition, the Internet or other
on-line services could lose their viability due to delays in the development
or adoption of new standards and protocols required to handle increased levels
of Internet or other on-line service activity, or due to increased governmental
regulation. Changes in or insufficient availability of telecommunications
services to support the Internet or other on-line services also could result
in slower response times and adversely affect usage of the Internet and other
on-line services generally and FineLine Properties.com, Inc. in particular.
If use of the Internet and other on-line services does not continue to grow or
grows more slowly than expected, if the infrastructure for the Internet and
other on-line services does not effectively support growth that may occur, or
if the Internet and other on-line services do not become a viable commercial
marketplace, the Company's business, results of operations and financial
condition would be adversely affected.
(g) Risk of System Failures
The Company's ability to facilitate trade successfully and provide high quality
customer service, depends on the efficient and uninterrupted operation of its
computer and communications through its designated Internet Service Provider
(ISP). These systems and operations are vulnerable to damage or interruption
from earthquakes, floods, fires, power loss, telecommunication failures,
break-ins, sabotage, intentional acts of vandalism and similar events. The
Company does not have fully redundant systems, a formal disaster recovery plan
or alternative providers of hosting services and does not carry business
interruption insurance to compensate it for losses that may occur. Despite
any precautions taken by, and planned to be taken by the Company, the
occurrence of a natural disaster or other unanticipated problems with its ISP
could result in interruptions in the services provided by the Company.
In addition, the failure by the ISP to provide the data communications capacity
required by the Company, as a result of human error, natural disasters other
operational disruption, could result in interruptions in the Company's
service. Any damage to or failure of the systems of the Company could result
in reductions in, or termination's of, the FineLine Properties.com service,
which could have a material adverse effect on the Company's business, results
of operations and financial condition. In the case of frequent or persistent
system failures, the Company's reputation and name brand could be materially
adversely affected. Although the Company has implemented certain network
security measures, the Company and its IPS are also vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions, which
could lead to interruptions, delays, loss of data or the inability to complete
customer auctions. In addition, although the Company works to prevent
unauthorized access to Company data, it is impossible to eliminate this risk
completely. The occurrence of any and all of these events could have a
material adverse effect on the Company's business, results of operations and
financial condition.
17
<PAGE>
Furthermore, the Web has experienced a variety of outages and other delays
as a result of damage to portions of its infrastructure, and could face such
outages and delays in the future, including outages and delays resulting from
the inability of certain computers or software to distinguish dates in the
21st century from dates in the 20th century. These outages and delays could
adversely affect the level of Web usage and also the level of traffic for
FineLine Properties.com, Inc. In addition, the Web could lose its viability
due to delays in the development or adoption of new development or adoption of
new standards and protocols to handle increased levels of activity or due to
increased governmental regulation.
(h) Risk Of Capacity Constraints And Systems Failures
A key element of the Company's strategy is to generate a volume of user
traffic to its Web site. The Company's ability to attract customers and to
achieve market acceptance of its products depends significantly upon the
performance of the Company and its network infrastructure (including its
server, hardware and software). Any system failure that causes interruption
or slower response time of the Company's products and services could result
in less traffic to the Company's Web site and, if sustained or repeated,
could reduce the attractiveness of the Company's products. An increase in the
volume of user traffic could strain the capacity of the Company's technical
infrastructure, which could lead to slower response time or system failures,
and could adversely affect the delivery of the number of impressions that are
owed to advertisers and thus the Company's advertising revenues. In addition,
as the number of Web pages on and users of FineLine Properties.com increase,
there can be no assurance that the Company and its technical infrastructure
will be able to grow accordingly, and the Company faces risks related to its
ability to scale up to its expected customer levels while maintaining superior
performance. Any failure of the Company's server and networking systems to
handle current or higher volumes of traffic would have a material adverse
effect on the Company's business, results of operations and financial
condition. The Company is also dependent upon third parties to provide
potential users with Web browsers and Internet and online services necessary
for access to the site. In the past, users have occasionally experienced
difficulties with Internet and online services due to system failures,
including failures unrelated to the Company's systems. Any disruption in
Internet access provided by third parties could have a material adverse
effect on the Company's business, results of operations and financial
condition. Furthermore, the Company is dependent on hardware suppliers for
prompt delivery, installation and service of equipment used to deliver the
Company's products and services. The Company's operations are dependent in
part upon its ability to protect its operating systems against damage from
human error, fire, floods, power loss, telecommunications failures,
break-ins and similar events. The Company does not presently have redundant,
multiple-site capacity in the event of any such occurrence. The Company's
servers are also vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering with the Company's computer systems.
The occurrence of any of these events could result in the interruption, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, the Company's reputation
could be materially and adversely affected.
18
<PAGE>
(i) Risks Associated With New Services, Features and Functions
There can be no assurance that the Company would be able to expand its
operations in a cost-effective or timely manner or that any such efforts
would maintain or increase overall market acceptance. Furthermore, any new
business launched by the Company that is not favorably received by consumers
could damage the Company's reputation and diminish the value of its brand
name. Expansion of the Company's operations in this manner would also
require significant additional expenses and development, operations train the
Company's management, financial and operational resources. The lack of
market acceptance of the Company's products would result in the Company's
inability to generate satisfactory revenues and its inability to offset their
costs could have a material adverse effect on the Company's business, results
of operations and financial condition.
(j) Online Commerce Security Risks
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. There can
be no assurance that advances in computer capabilities, new discoveries
in the field of cryptography, or other events or developments will not
result in a compromise or breach of the technology used by the Company to
protect customer transaction data.
If any such compromise of the Company's security were to occur, it could have
a material adverse effect on the Company's reputation and, therefore, on its
business, results of operations and financial condition. Furthermore, a
party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the
Company's operations. The Company may be required to expend significant
capital and other resources to protect against such security breaches or to
alleviate problems caused by such breaches. Concerns over the security of
transactions conducted on the Internet and other online services and the
privacy of users may also inhibit the growth of the Internet and other online
services generally, and the Web in particular, especially as a means of
conducting commercial transactions. To the extent that activities of the
Company involve the storage and transmission of proprietary information, such
as credit card numbers, security breaches could damage the Company's reputation
and expose the Company to a risk of loss or litigation and possible liability.
There can be no assurance that the Company's security measures will prevent
security breaches or that failure to prevent such security breaches will not
have a material adverse effect on the Company's business, results of
operations and financial condition.
(k) Risks Associated with Acquisitions
If appropriate opportunities present themselves, the Company would acquire
businesses, technologies, services or product(s) that the Company believes
are strategic.
The Company currently has no understandings, commitments or agreements with
respect to any other material acquisition and no other material acquisition
is currently being pursued. There can be no assurance that the Company will
be able to identify, negotiate or finance future acquisitions successfully,
or to integrate such acquisitions with its current business. The process of
integrating an acquired business, technology, service or product(s) into the
19
<PAGE>
Company may result in unforeseen operating difficulties and expenditures and
may absorb significant management attention that would otherwise be available
for ongoing development of the Company's business. Moreover, there can be no
assurance that the anticipated benefits of any acquisition will be realized.
Future acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, results of operations
and financial condition. Any future acquisitions of other businesses,
technologies, services or product(s) might require the Company to obtain
additional equity or debt financing, which might not be available on terms
favorable to the Company, or at all, and such financing, if available,
might be dilutive.
(l) Risks Associated With International Operations
A component of the Company's strategy is to offer its products to international
customers. Expansion into the international markets will require management
attention and resources. The Company has limited experience in localizing its
service, and the Company believes that many of its competitors are also
undertaking expansion into foreign markets. There can be no assurance that
the Company will be successful in expanding into international markets. In
addition to the uncertainty regarding the Company's ability to generate
revenues from foreign operations and expand its international presence, there
are certain risks inherent in doing business on an international basis,
including, among others, regulatory requirements, legal uncertainty regarding
liability, tariffs, and other trade barriers, difficulties in staffing and
managing foreign operations, longer payment cycles, different accounting
practices, problems in collecting accounts receivable, political instability,
seasonal reductions in business activity and potentially adverse tax
consequences, any of which could adversely affect the success of the
Company's international operations.
To the extent the Company expands its international operations and has
additional portions of its international revenues denominated in foreign
currencies, the Company could become subject to increased risks relating to
foreign currency exchange rate fluctuations. There can be no assurance that
one or more of the factors discussed above will not have a material adverse
effect on the Company's future international operations and, consequently, on
the Company's business, results of operations and financial condition.
2) Description of The Industry (Licensing and Merchandising)
The Company's niche in the Licensing and Merchandising Industry, operates in
the same manner as other cartoon companies such as Disney, Warner Brothers,
Steven Spielberg's Tiny Toons, etc., in that it permits contracted companies
to have the "rights" to use its copyrighted and trademarked characters for a
negotiated fee in licensing agreements with an agreed upon royalty payment
based upon unit sales. The negotiated fee is generally 10 to 15% of the
projected sales estimates of the venture over a combined three year period
with the royalty payments generally in the range of anywhere from 3% to 7% of
net sales revenues as generated by the Licensee. License rights are granted
to corporations in varied industries and the characters are utilized in many
different formats and variations. A Licensee can use an image to adorn
product items, packaging, in conjunction with a logo, or the image might be
utilized for toys, games, dolls as well as in varied animated forms such as
software games, television commercials, television shows and or feature
length movies.
20
<PAGE>
Licensing/merchandising rights can be territorial (such as a state or country),
regional such as a few states or a few countries, national, multinational or
international. These variables as well as the nature of the license being
granted all affect the fee and royalty structure involved. In addition, a
license might grant the Licensee the right to sublicense segments of the
agreement as well as territories. In all cases, the agreement stipulates the
projected minimum sales for the usage of the cartoon image(s), as well as
the term over which the Licensee is active and indicates renewal options. The
Licensor, has the right to revoke the license if the revenues from said
agreement do not meet the minimums as stated in the agreement, as well as other
stipulated contractual clauses.
3) Status of Any Announced New Product or Service
The Company has announced that it recently formed a "Software Games Division"
for the development of interactive game platforms for its cartoon character
groups. The Company plans to model its gaming strategies utilizing the
industry standard techniques of Activision (ATVI), Electronic Arts (ERTS),
and others. The company plans to utilize its Web Site as its retail outlet,
which would enable it to avoid the high merchandising expenditures associated
with software retail outlets. This Internet marketing approach will enable the
Company to place its products in the over 200 Internet web sites which sell and
or promote software games. The Internet sales strategy was decided upon as a
based on the fact that approximately 15% of all software games are sold over
the Internet with projections estimating this number might double by 2001.
Addintionally, in June, 1999 FineLine Properties.com Inc. announced that its
Signature e-Commerce Store plans to include its latest new cartoon creations,
THE RED ZONE and INTERNAUTS. The Company also announced a new pricing
structure and the company's move to start marketing its product lines in
Europe. The company has decided to add The Red Zone and Internauts to its
apparel line up as a result of customer inquiries the company asking for these
characters to be offered. At the same time, the Company also announced that it
is reducing its prices for most items on its e-commerce store due to improved
efficiencies in order techniques, economies of scale in supply costs as well as
quantity manufacturing price reductions.
FineLine's planned entry into Europe will start in Spain as its initial
European roll out market, moving into France, England and other countries
thereafter. The company plans to test market some of its apparel lines in
Spain to gauge initial acceptance and receptivity and met with highly
favorable results. Management believes that in Europe, the younger generation
is receptive to American music, movies and cartoons.
FineLine's planned entry into Europe will start in Spain as its initial
European roll out market, moving into France, England and other countries
thereafter. The company plans to test market some of its apparel lines in
Spain to gauge initial acceptance and receptivity and met with highly favorable
results. Management believe that in Europe, the younger generation is
receptive to American music, movies and cartoons. Therefore, the company
hopes to develop outlet store locations in Spain and later European countries
to go with its Internet e-commerce branding strategy which is modeled on
established and successful online.
4) Competition
The Company's competition for its various cartoon characters includes such
companies as Disney, Warner Brothers, DIC Entertainment, Mainframe
Entertainment, Dreamworks and other internationally known cartoon firms in the
forefront of the industry. Due to the already established positioning of these
firms as well as their long standing network television, movie industry,
licensing, merchandising arrangements and consumer awareness, management at
21
<PAGE>
FineLine Properties.com, Inc. feels that their status does not represent actual
direct competition for the Company at this time. Management, based upon an
analysis of past industry trends with regard to newer cartoon character groups,
feels that the Company's competition stems from less well known cartoon
character companies with new cartoon introductions, as this is the theater
where direct competition for the Company's character lines will come from.
The foregoing is based upon factors such as the competition for licenses with
companies looking for new and up and coming cartoons that demonstrate the
potential to capture the minds of targeted consumer profiles. As this
represents the actual direct competition at this time for the Company,
management prepared for this by the development of a broad assortment of
different cartoon character types aimed at differing yet overlapping
demographic profiles. The foregoing was undertaken and planned for by the
Company's development of its broad cross section of cartoon character groups
designed to appeal to varied age group categories as well as competitive
variables.
The popularity of cartoons as both an entertainment, marketing and revenue
medium has been demonstrated by the movie industry, the television industry,
toy and game industries, software industry and advertising. In 1998, more
feature length animated movies were released than at any time in the industry's
history. The popularity of cartoons as both an entertainment, marketing and
revenue medium has been demonstrated by the movie industry, the television
industry, toy and game industries, software industry and advertising. In 1998,
more feature length animated movies were released than at any time in the
industries history. "Mulan", Out of Egypt", "Antz", "A Bug's Life", "The Rug
Rats Movie" are examples of Hollywood's understanding of the universal audience
appeal and entertainment value of cartoons.
Television is the medium which fueled the foregoing, via prime time programming
and the success of such animated series as "The Simpson's", "King of the Hill",
"Dilbert" and others. The advertising industry has always known that kids,
puppies, kittens and cartoons with their "cute" appeal, have the highest
consumer recall factor in commercial focus group tests. Companies such as AT&T
with his Michael Jordan Space Jam buddies, the Tazmanian Devil Chevrolet
commercials, Warner Brothers use of the Warner Frog to publicize its television
programming, and other examples point to the longevity, selling appeal and
revenue generation of cartoons.
The Company has understood the foregoing and developed cartoon character groups
designed to capitalize upon these variables. Rather than focus upon a single
age group segment, the Company has undertaken the development of character
group types which either address broad demographic profiles, or attract
segments of the market by virtue of the broad character group profiles.
The Company competes with some major companies. Many of these competitors
have substantially greater resources than the Company. The Company has
identified a niche in the market. Should a larger and better financed company
decide to directly compete with the Company, and be successful in its
competitive efforts, the Company's business could be adversely affected.
The market for selling apparel products over the Internet is relatively new,
rapidly evolving and intensely competitive, and the Company expects
competition to intensify further in the future. Barriers to entry are
relatively low, and current and new competitors can launch new sites at a
relatively low cost using commercially-available software. The Company
22
<PAGE>
potentially competes with a number of other companies marketing similar
products over the Internet. Competitive pressures created by any of the
Company's competitors, could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company believes
that the principal competitive factors in its market are volume and selection
of goods, population of buyers and sellers, community cohesion and
interaction, customer service, reliability of delivery and payment by users,
brand recognition, WEB site convenience and accessibility, price, quality of
search tools and system reliability. Some of the Company's potential
competitors have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing, technical
and other resources than the Company. In addition, other on-line trading
services may be acquired by, receive investments from or enter into
other commercial relationships with larger, well-established and well-
financed companies as use of the Internet and other on-line services
increases.
Therefore, certain of the Company's competitors with other revenue sources may
be able to devote greater resources to marketing and promotional campaigns,
adopt more aggressive pricing policies and devote substantially more resources
to Web site and systems development than the Company or may try to attract
traffic by offering services for free. Increased competition may result in
reduced operating margins, loss of market share and diminished value in the
Company's brands. There can be no assurance that the Company will be able to
compete successfully against current and future competitors. Further, as a
strategic response to changes in the competitive environment, the Company may,
from time to time, make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on its business, results
of operations and financial condition. New technologies and the expansion of
existing technologies may increase the competitive pressures on the Company
by enabling the Company's competitors to offer a lower-cost service. Certain
Web-based applications that direct Internet traffic to certain Web sites may
channel users to services that compete with the Company. Although the Company
plans to establish arrangements with on-line services and search engine
companies, there can be no assurance that these arrangements will be renewed
on commercially reasonable terms or that they will otherwise bring traffic to
the FineLine Properties.com WEB site. In addition, companies that control
access to transactions through network access or Web browsers could promote
the Company's competitors or charge the Company substantial fees for inclusion.
Any and all of these events could have a material adverse effect on the
Company's business, results of operations and financial condition.
5) Customers
The Company believes that establishing and maintaining brand identity is a
critical aspect of its efforts to attract new customers, Internet traffic and
advertising and commerce relationships. In order to attract new customers,
advertisers and commerce vendors, and in response to competitive pressures,
the Company intends to make a commitment to the creation and maintenance of
brand loyalty among these groups. The Company plans to accomplish this,
although not exclusively, through advertising its Web site through the
various search engines, through other Web sites, marketing its site to
businesses/customers through e-mail, online media, and other marketing and
promotional efforts.
23
<PAGE>
There can be no assurance that brand promotion activities will yield increased
revenues or that any such revenues would offset the expenses incurred by the
Company in building its brands. Further, there can be no assurance that any
new users attracted to FineLine Properties.com will conduct transactions over
FineLine Properties.com. on a regular basis. If the Company fails to promote
and maintain its brand or incurs substantial expenses in an attempt to
promote and maintain its brand or if the Company's existing or future
strategic relationships fail to promote the Company's brand or increase brand
awareness, the Company's business, results of operations and financial
condition would be materially adversely affected.
6) Strategic Alliances
The success of the Company will be dependent in part upon a number of strategic
relationships that the Company intends to enter. At present, the Company is in
discussions with several companies, both locally and internationally. The
amount and timing of resources which future strategic partners devote to
assisting the Company will not be within the control of the Company. There can
be no assurance that strategic partners will perform their obligations as
expected or that any revenue will be derived from strategic arrangements. If
any of the Company's strategic partners breaches or terminates an agreement
with the Company, or otherwise fails to conduct its collaborative activities
in a timely manner, the development, commercialization, or marketing of the
product, which is the subject of the agreement may be delayed and the Company
may be required to undertake unforeseen additional responsibilities or to
devote additional resources to development, commercialization or marketing of
its products. The inability to enter into strategic relationships or the
failure of a strategic partner to perform its obligations could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will be able to
negotiate acceptable strategic agreements in the future. Or that the
resulting relationships will be successful, or that the Company will continue
to maintain or develop strategic relationships, or to replace strategic
partners in the event any such relationships are terminated. The Company's
failure to maintain any strategic relationship could materially and adversely
affect the Company's business, financial condition and results of operations.
The Company has an agreement with The Marvel Entertainment Group, Inc. which is
dependent upon factors which are not under or within the Company's control.
As a result, the Company will not estimate or project revenues for which it
has no basis for determining the soundness of the estimates or related factors
comprising same. The Company received a flat payment from The Marvel
Entertainment Group, Inc., in 1997 for $25,000.00 as a signing and conditional
payment based upon Marvel proceeding under a schedule spread over a three year
period, with secondary payments during said term to secure permanent retention
of these character groups by Marvel. If the secondary payment schedules are not
exercised by Marvel, which include certain revenue totals, these character
groups revert back to the Company. After such period, if either Marvel elects,
or it has failed to meet certain revenue minimums, the Company can elect to
exercise its option to reclaim The Moodies(tm), Hogstturrs(tm) and Tasties(tm).
As the performance of Marvel under this international licensing agreement is
subject to considerations outside of the Company's control, scheduling,
promotion of the indicated cartoon characters and other factors, estimation of
revenue results for these character groups has not been included here.
24
<PAGE>
7) Potential Fluctuations in Operating Results; Quarterly Fluctuations
The Company's operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside the Company's
control. See "--Operating History." As a strategic response to
changes in the competitive environment, the Company may from time to time
make certain pricing, marketing decisions or acquisitions that could have
a material short-term or long-term adverse effect on the Company's business,
results of operations and financial condition.
In particular, in order to accelerate the promotion of FineLine
Properties.com. Inc., the Company intends to heavily market its Web site.
The Company believes that it may experience seasonality in its business, with
use of the Internet and FineLine Properties.com being somewhat lower during
the summer vacation and year-end holiday periods. Advertising impressions
(and therefore revenues) may be expected to decline accordingly in those
periods. Additionally, seasonality may affect significantly any potential
advertising revenues during the first and third calendar quarters, as
advertisers historically spend less during these periods.
There can be no assurance that such patterns will not have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition to selling its brands, it is the Company's strategy
is to generate additional revenues through e-Commerce arrangements including
for other companies to advertise on the company's Web site. There can be no
assurance that the Company will receive any material amount of revenue
under these agreements in the future. The foregoing factors, in some future
quarters, may lead the Company's operating results to fall below the
expectations.
8) Raw Materials and Suppliers
The Company is a service-type, which creates cartoons, and thus does not use
any raw materials or have any principal suppliers of raw materials.
9) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, or Labor Contracts
The Company relies on a combination of copyrights, trade secret laws and non-
disclosure agreements to protect its proprietary technology. At present, the
Company has 147 trademarked and copyrighted cartoons which are in the following
character groups: The Moodies(tm), The Tasties(tm), The Hogstturrs(tm),
Soft(tm), The Majors(tm), The Icers(tm), The Hoopsters(tm), Red Zone(tm), The
Kooties(tm), The eKids(tm), The Computoons(tm), The Internauts(tm), The Milk
Drops(tm), The Healthy Dozen(tm). The Company's success will depend to a
significant degree on its ability to obtain and maintain copyright protection
and preserve its trade secrets, and operate without infringing on the
proprietary rights of third parties. The company also seeks to protect its
intellectual property rights by limiting access to the distribution of its
software, documentation and other proprietary information.
Many of the processes and much of the know-how of importance to the Company's
technology depend upon the non-patentable technology, knowledge, and experience
of its technical personnel and collaborators. To help protect its rights, the
Company requires employees, collaborators, and significant consultants and
advisors with access to confidential information, to enter into confidentiality
agreements with the Company. There can be no assurance, however, that these
25
<PAGE>
agreements will provide adequate protection for the Company's trade secrets,
know-how or proprietary information in the event of any unauthorized use or
disclosure. The Company's success and ability to compete is dependent in part
upon its proprietary technology. There can be no assurance that the steps taken
by the Company in this regard will be adequate to prevent misappropriation of
its technology or that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technologies.
The Company regards substantial elements of its Web site and underlying
infrastructure and technology as proprietary and attempts to protect them
by relying on trademark, service mark, copyright and trade secret laws
and restrictions on disclosure and transferring title and other methods.
The Company plans to enter into confidentiality agreements with its
future employees, future suppliers and future consultants and in connection
with its license agreements with third parties and generally seeks to control
access to and distribution of its technology, documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's proprietary
information without authorization or to develop similar technology
independently.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any of the Company's proprietary rights. There can be
no assurance that the steps taken by the Company will prevent misappropriation
or infringement of its proprietary information, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation might result in substantial costs and diversion of resources and
management attention. Furthermore, there can be no assurance that the
Company's business activities will not infringe upon the proprietary rights
of others, or that other parties will not assert infringement claims against
the Company, including claims that by directly or indirectly providing
hyperlink text links to Web sites operated by third parties. Moreover, from
time to time, the Company may be subject to claims of alleged infringement by
the Company or service marks and other intellectual property rights of third
parties. Such claims and any resultant litigation, should it occur, might
subject the Company to significant liability for damages, might result in
invalidation of the Company's proprietary rights and, even if not meritorious,
could result in substantial costs and diversion of resources and management
attention and could have a material adverse effect on the Company's business,
results of operations and financial condition.
10) Regulation
The law relating to the liability of online companies is currently unsettled.
It is possible that claims could be made against online e-Commerce companies
under both United States and foreign law for defamation, libel, invasion of
privacy, negligence, copyright or trademark infringement, or other theories
based on the nature and content of the materials disseminated through their
Web site. Several private lawsuits seeking to impose such liability upon
other online companies are currently pending.
26
<PAGE>
11) Effect of Existing or Probable Government Regulations
Government legislation has been proposed that imposes liability for or
prohibits the transmission over the Internet of certain types of information.
The imposition upon the Company and other online providers of potential
liability for information carried on or disseminated through their services
could require the Company to implement measures to reduce its exposure to such
liability, which may require the Company to expend substantial resources
and/or to discontinue certain service offerings. In addition, the increased
attention focused upon liability issues as a result of these lawsuits and
legislative proposals could impact the growth of Internet use.
The Company does not believe that such regulations, which were adopted prior
to the advent of the Internet, govern the operations of the Company's
business nor have any claims been filed by any state implying that the
Company is subject to such legislation. There can be no assurance, however,
that State government will not attempt to impose these regulations upon the
Company in the future or that such imposition will not have a material
adverse effect on the Company's business, results of operations and
financial condition. Several States have also proposed legislation that would
limit the uses of personal user information gathered online or require online
services to establish privacy policies. The Federal Trade Commission has also
recently settled a proceeding with one online service regarding the manner in
which personal information is collected from users and provided to third
parties. Changes to existing laws or the passage of new legislation,
could create uncertainty in the marketplace that could reduce demand for the
services of the Company or increase the cost of doing business as a result of
litigation costs or increased service delivery costs, or could in some other
manner have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, because the Company's
services are accessible worldwide, and the Company may facilitate sales of
goods to users worldwide, other jurisdictions may claim that the Company
is required to qualify to do business as foreign corporation in particular
state or foreign country.
Due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services covering issues such as
user privacy, freedom of expression, pricing, content and quality of products
and services, taxation, advertising, intellectual property rights and
information security. Although sections of the Communications Decency Act of
1996 (the "CDA") that, among other things, proposed to impose criminal
penalties on anyone distributing "indecent" material to minors over the
Internet, were held to be unconstitutional by the U.S. Supreme Court, there
can be no assurance that similar laws will not be proposed and adopted.
Certain members of Congress have recently discussed proposing legislation
that would regulate the distribution of "indecent" material over the Internet
in a manner that they believe would withstand challenge on constitution law.
27
<PAGE>
Any new legislation or regulation, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to the Company's
business, for third-party activities and jurisdiction. The adoption of new
laws or the application of existing laws may decrease the growth in the use
of the Internet, which could in turn decrease the demand for the Company's
services, increase the Company's cost of doing business or otherwise have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company does not believe that such regulations, which were adopted prior
to the advent of the Internet, govern the operations of the Company's
business nor have any claims been filed by any state implying that the
Company is subject to such legislation. There can be no assurance, however,
that State government will not attempt to impose these regulations upon the
Company in the future or that such imposition will not have a material
adverse effect on the Company's business, results of operations and
financial condition.
12) Research and Development Activities
The Company, among other things, plans to execute its business and marketing
strategy successfully, continue to develop and upgrade its technology and
information-processing systems, meet the needs of a changing market, provide
superior customer service, respond to competitive developments and attract,
integrate, retain and motivate qualified personnel provided the company can
generate sales and profit.
The Company also needs to develop and identify products that achieve
market and licensing acceptance. There can be no assurance that any company,
including FineLine Properties.com, will achieve market acceptance. No
assurance can be given that the Company's business model will be successful
or that it can sustain revenue growth or be profitable. The market for the
Company's products are characterized by an increasing number of market
entrants. As is typical of any new and rapidly evolving market, demand and
market acceptance for products are subject to a high level of uncertainty and
risk. Moreover, because Internet market is new and rapidly evolving, it is
difficult to predict its future growth rate, if any, and its ultimate size.
If the market fails to develop, develops more slowly than expected or becomes
saturated with competitors, or if the Company's products do not achieve or
sustain market acceptance, the Company's business, results of operation may
be materially and adversely affected.
There can be no assurances the Company will be successful in accomplishing
all of these things, and the failure to do so could have a material adverse
effect on the company's business, results of operations and financial
condition.
13) Impact of Environmental Laws
The Company is not aware of any federal, state or local environmental laws
which would effect is operations.
14) Employees
The Company presently employs five full time employees and eleven part time or
contracted artists, programmers and designers. Three full time employees are
working management employees.
28
<PAGE>
(i) The Company's performance is substantially dependent on the performance of
its president, Robert Petry. In particular, the Company's success
depends on his ability to develop, design and market the company's products.
(ii) The Company does not carry key person life insurance on any of its
personnel. The loss of the services of any of its executive officers or other
key employees could have a material adverse effect on the business, results of
operations and financial condition of the Company. The Company's future
success also depends on its ability to retain and attract highly qualified
technical and managerial personnel.
(iii) There can be no assurance that the Company will be able to retain its
key managerial and technical personnel or that it will be able to attract and
retain additional highly qualified technical and managerial personnel in the
future. The inability to attract and retain the technical and managerial
personnel necessary to support the growth of the Company's business, due to,
among other things, a large increase in the wages demanded by such personnel,
could have a material adverse effect upon the Company's business, results of
operations and financial condition.
15) Year 2000 Compliance
The Year 2000 issue is the potential for system and processing failures of
data-related data and the result of computer-controlled systems using two
digits rather than four to define the applicable year. For example,
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transaction
The Company may be affected by Year 2000 issues related to non-compliant
information technology ("IT") systems or non-IT systems operated by the
Company or by third parties.
The Company does not design, develop, produce or manufacture products which
utilize processors or other electronic devices which would or does put it in
the position of having problems with Year 2000 compliance. All corporate
computers have been purchased after 1997 and are Apple Macintosh computers
which management believes has no year 2000 compliance problems. All
corporate software has been purchased and or replaced after 1997, and
management also believes this software has no Year 2000 compliance problems.
At this time, the Company is not currently aware of any Year 2000 problems
relating to systems operated by the Company or by third parties that would
have a material effect on the Company's business, results of operations or
financial condition, without taking into account the Company's efforts to
avoid such problems. Based on its assessment to date, the Company does not
anticipate that costs associated with remediating the Company's non-compliant
IT systems or non-IT systems will be material, although there can be no
assurance to such effect.
The Company believes that the primary business risks, in the event of such
failure, would include, but not be limited to, lost of potential revenues,
increased operating costs, loss of customers or persons accessing the
Company's Web site, or other business interruptions of a material nature, as
well as claims of mismanagement, misrepresentation, or breach of contract,
any of which could have a material adverse effect on the Company's business,
results of operations and financial condition.
29
<PAGE>
16) The Industry & Potential Effect on the Company's Plan of Operations
The overall international licensing and merchandising industry market size in
terms of annual revenues, is in excess of $130 billion per year and the
industry has been growing at an annual rate of between 7 to 10% per annum for
the past 15 years (Reference: International Licensing and Merchandisers
Association (LIMA), 2/99). These revenues come from items, goods and services
such as toys, dolls, board games, computer games, stickers, decals, lunch
boxes, apparel items, food, corporate logos and spokescartoons, movies,
animated television shows, animated shorts, commercials, advertising, books,
comics, posters, animation cells, stationary, greeting cards, wrapping paper,
corporate promotions, special events, promotional tie-ins, license plate
decorations, etc.
The rapid adoption of the Internet as a means to gather information,
communicate, interact and be entertained, combined with the vast
proliferation of Web sites, has made the Internet an important new mass
medium. Industry estimates that the number of Web users exceeded 68 million in
1997, and will grow to over 319 million by 2002. The Internet enables
advertisers to target advertising campaigns utilizing sophisticated databases
of information on the users of various sites. As a result, the Internet has
become a compelling means to advertise and market products and services. With
the volume of sites and vast abundance of information available on the
Internet, users are increasingly seeking an online home where they can
interact with others with similar interests and quickly find information,
products and services related to a particular interest or need.
The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and customer demands,
and frequent new product introductions and enhancements. These market
characteristics are exacerbated by the emerging nature of the market and the
fact that many companies are expected to introduce new Internet products and
services in the near future. The Company's future success will depend in
part on its ability to continually improve the performance, features and
reliability of the site in response to both evolving demands of the
marketplace and competitive product and service offerings; and, there can be
no assurance that the Company will be successful in doing so. Accordingly,
the Company's future success will depend on its ability to adapt to rapidly
changing technologies, to adapt to evolving industry standards and to
continually improve the performance, features and reliability of its service
in response to competitive service and product offerings and evolving demands
of the marketplace. The failure of the Company to adapt to such changes would
have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, the widespread adoption of
new Internet, networking or telecommunications technologies or other
technological changes could require substantial expenditures by the Company
to modify or adapt its services or infrastructure, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
30
<PAGE>
17) Present Licensing Status
The Company markets its character groups via mass mailings to major firms,
licensing agents and manufacturing firms which produce licensed products. As
a member of the International Licensing and Merchandisers Association out of
New York (LIMA), the Company belongs to the largest licensing group in the
world. Its membership includes such companies as: Disney, McDonalds, The
National Hockey League, The National Football League, Major League Baseball,
Warner Brothers, etc. The licensing and merchandising industry generated over
$130 billion dollars globally in 1998 and has been growing at the rate of
10% per a year for the past fifteen years.
The company has entered into a licensing representation agreement with the
firm of Fierst & Pucci, LLP, of Northhampton, Massachusetts. The licensing
and merchandising industry, is essentially an entertainment based category,
and as such affiliations, positioning and associations represent important
factors. Mr. Frederick Fierst is known for his involvement with the success
of the Teenage Mutant Ninja Turtles, which at the time broke all records in
the industry for revenue generation (in excess of $400 million globally).
This associative development provides the Company with licensing
representation at levels of the industry hierarchy which the Company might not
have been able avail itself of for some time. At the same time, there are no
assurances that any new associations will develop.
31
<PAGE>
Item 2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
Forward Looking Statements
This registration statement contains forward-looking statements. The Company's
expectation of results and other forward-looking statements contained in this
registration statement involve a number of risks and uncertainties. Among the
factors that could cause actual results to differ materially from those
expected are the following: business conditions and general economic
conditions, competitive factors, such as pricing and marketing efforts; and
the pace and success of product research and development. These and other
factors may cause expectations to differ.
All statements, trend analysis and other information contained in this
Registration relative to markets for the Company's products and trends in
revenues, gross margin and anticipated expense levels, as well as other
statements including words such as "believe," "anticipate," "expect,"
"estimate," "plan" and "intend" and other similar expressions, constitute
forward-looking statements. Those forward-looking statements are subject to
business and economic risks, and the Company's actual results of operations
may differ from those contained in the forward-looking statements.
The following discussion of the financial condition and results of operations
of the Company should also be read in conjunction with the Financial
Statements and Notes related thereto included elsewhere in this Registration.
1) Plan of Operations
The Company is engaged in the business of the design and development of new
cartoon character groups, internal merchandising, external licensing,
merchandising and promotion to primarily corporations who then either
manufacturer products for sale to consumers or utilize the Company's cartoons
in promotions, advertising, animation or similar aspects. The Company has
financed its operations to date through the sale of its securities (see Item
10-Sales of Unregistered Securities) as well as licensing revenues and
direct sales from the corporate e-commerce Internet Signature Store site.
With the addition of the 12 new cartoon product lines introduced in 1999, the
Company is expanding upon its revenue generation strategies for licensing,
merchandising, Internet e-commerce Signature Store sales, new product
development in the form of computer software games, internal animation shorts
and new cartoon character introductions to capitalize upon these diverse spread
of character types and their corresponding demographic profiles. The foregoing,
will be accomplished via the indicated procedures, techniques and operational
venues as detailed under Internet and Internet E-Commerce and The Market, in
this document.
2) In its twelve month operating period ended December 31, 1998 the Company
incurred a net loss of $1,208,435.00 from operations. The Company generated
revenues from operations from the same period of $22,544.00.
32
<PAGE>
An original stock offering was made in reliance upon an exemption from the
registration provisions of Section 5 of the Securities Act of 1993, as amended,
pursuant to Regulation D, Rule 504, of the Act. January 19, 1988, two
founding shareholders purchased, at that time the outstanding and issued
stock, which now equates to 3,956,350 shares of the Company's authorized but
unissued treasury stock for bearing the cost of incorporating. Additionally,
on March 13, 1998, the Company completed an offering of seventy-eight
thousand Fifteen shares (78,015) at two dollars and fifty cents ($2.50) per
share of the Common Stock of the Company to approximately 78 unaffiliated
shareholders. The Company raised one hundred ninety-five thousand
thirty-seven dollars and fifty cents ($195,036.50) through this offering.
This offering was made in reliance upon an exemption from registration
provisions 4(2) of the Securities Act of 1933, as amended, pursuant to
Regulation D, Rule 504 of the Act. In connection with this Offering, the
Company issued three (3) Stock Purchase Warrants for each share sold during
this Offering. This represents 234,045 shares of Common Stock (the
"Warrants"). These Warrants are exercisable at $2.50 per share on or prior
to November 28, 1999, the expiration date of the Warrants. The Company may
call the Warrants for exercise, on fifteen (15) days notice if not exercised
by the shareholder(s) prior to the expiration of the fifteen (15) days
notice period should the average closing bid price for the Company's Common
Stock is equal to or greater than $3.00 per share of Common Stock for any
consecutive period of ten (10) consecutive trading days. No Warrants have
been exercised as of August 31, 1999. As of August 31, 1999, the Company has
nine million one hundred forty-five thousand four hundred seventy-seven
(9,145,477) shares of its $0.001 par value common voting stock issued and
outstanding which are held by approximately one hundred eleven (111)
shareholders of record, including the company's founder. Five Million Four
Hundred Forty-eight Thousand Three Hundred Fifty (5,448,350) common shares of
the total number issued are restricted shares. Management fully anticipates
that the proceeds from the sale of all of the Common Shares sold in the
offering delineated above will be sufficient to provide the Company's capital
needs for the next twelve (12) months.
The Company currently anticipates that it has enough available funds to meet
its anticipated needs for working capital, capital expenditures and business
expansion for the next 12 months. The Company expects that it will continue
to experience negative operating cash flow for the foreseeable future as a
result of significant spending on advertising and infrastructure.
If the Company needs to raise additional funds in order to fund expansion,
develop new or enhanced services or products, respond to competitive
pressures or acquire complementary products, businesses or technologies, any
additional funds raised through the issuance of equity or convertible debt
securities, the percentage ownership of the stockholders of the Company will
be reduced, stockholders may experience additional dilution and such
securities may have rights, preferences or privileges senior to those of the
Company's Common Stock. The Company does not currently have any contractual
restrictions on its ability to incur debt and, accordingly, the Company could
incur significant amounts of indebtedness to finance its operations. Any
such indebtedness could contain covenants which would restrict the Company's
operations. There can be no assurance that additional financing will be
available on terms favorable to the Company, or at all. If adequate funds
are not available or are not available on acceptable terms, the Company may
not be able to continue in business, or to a lessor extent not be able to
take advantage of acquisition opportunities, develop or enhance services
or products or respond to competitive pressures.
3) No engineering, management or similar report has been prepared or provided
for external use by the Company in connection with the offer of its securities
to the public.
33
<PAGE>
4) Management believes that the Company's future growth and success will
depend on its ability to find products and suppliers who will permit such
products to be sold over the Internet, and to find customers for these
products. The Company expects to continually evaluate its potential products
to determine what additional products or enhancements are required by the
Internet marketplace.
The Company has yet to incur any research and development costs January 1
through June 30, 1999. The only research and development the Company plans
to incur in developing suitable products which offer the Company potential for
revenues and profits, as the Company markets these products through their Web
site.
(5) Management does not anticipate any significant changes in the number of
its employees over the next approximately twelve (12) months.
B. Segment Data
For fiscal year, ended December 31, 1998, $22,544 sales revenue has been
generated by the Company. There is no table showing percentage breakdown of
revenue by business segment or product line is included.
ITEM 3. DESCRIPTION OF PROPERTY
The Company leases its executive offices at 3250 Market Street, Suite 302,
Fairlawn, Ohio 44333 and maintains a Artist Studio at 110 West Main Street,
Kent, Ohio 44240. The Company also maintains an office address at 7631 Bermuda
Road, Las Vegas, Nevada 89123.
The Company holds United States Trademarks and Copyrights for the cartoon
characters as described under Copyrights and Trademarks. As indicated in the
financial statements, the value(s) of these trademarks and copyrights varies in
relationship to the licenses, merchandising and other agreements the Company
has or projects with corporations. In the case of estimated value, such is
calculated based upon outstanding agreements as well as the revenue generation
potentials in accordance with GAAP accounting standards.
ITEM 4. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the shares of Common Stock of the Company as of the end of the
fiscal year, 1998, by (i) each person who is known by the Company to be the
beneficial owner of more than five percent (5%) of the issued and outstanding
shares of common stock, (ii) each of the Company's directors and executive
officers, and (iii) all directors and executive officers as a group.
34
<PAGE>
<TABLE>
<CAPTION>
Title Name & Address Amount of Percent
of of Beneficial Date shares of
Class Owner of Shares Acquired held by Owner Class
- ------ --------------- -------- ------------- --------
<S> <C> <C> <C> <C>
Common Robert Petry(1) 01-19-88 3,263,000 36.678 %
Common Traveler's
Investments, Ltd.(2) 04-30-98 1,211,000 13.241 %
Common Harcourt Wiltshire(3) 01-19-88 693,350 7.581 %
Common Sidney Rudick(4) 02-18-99 10,000 0.001 %
Common Carl White(5) 02-18-99 10,000 0.001 %
---------------------------------------------------------------------
All Executive Officers Beneficial Owners
and Directors as a Group (5 persons) 3,287,000 35.679 %
</TABLE>
(1) Robert Petry, President/CEO, 7337 Westview Drive, Kent, OH 44240.
Additionally, Robert V. Petry II, son to Robert Petry owns 140,000
shares of common restricted stock.
(2) Traveler's Investments, Ltd., East Bay Street, Nassau, Bahamas
(3) Harcourt A. Wiltshire, Retired Officer of Company, 4362 SW 52 Street,
Fort Lauderdale, FL 33314
(4) Sidney Rudick, Secretary, 4362 SW 52 Street, Fort Lauderdale, FL 33314
(5) Carl White, 3250 Market Street, Suite 302, Fairlawn, Ohio 44433,
B. Persons Sharing Ownership of Control of Shares
Robert Petry, President/CEO and Traveler's Investments, Ltd., owns or
shares the power to vote ten percent (10%) or more of the Company's
securities.
C. Non-voting Securities and Principal Holders Thereof
The Company has not issued any non-voting securities.
D. Options, Warrants and Rights
The Company issued three (3) Stock Purchase Warrants for each share sold
during its 504 Offering. These Warrants represent 234,045 shares of Common
Stock (the "Warrants"). These Warrants are exercisable at $2.50 per share
on or prior to November 28, 1999, the expiration date of the Warrants. The
Company may call the Warrants for exercise, on fifteen (15) days notice if
not exercised by the shareholder(s) prior to the expiration of the fifteen
(15) days notice period should the average closing bid price for the
Company's Common Stock is equal to or greater than $3.00 per share of Common
Stock for any consecutive period of ten (10) consecutive trading days. No
Warrants have been exercised as of August 31, 1999. (See: Management's
Discussion And Analysis of Plan of Operations, Number 2.)
E. Parents of Issuer
Under the definition of parent, as including any person or business entity
who controls substantially all (more than 80%) of the issuers of common
stock, the Company has no parents.
35
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
A. Directors, Executive Officers and Significant Employees
The names, ages and positions of the Company's directors and executive
officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
- -------- ------ ----------
<S> <C> <C>
Robert Petry 53 President
Chairman of the Board
Carl White 44 Vice President, Director
Sidney Rudick 64 Vice President, Board Secretary
</TABLE>
A list of the current officers and directors of the Company appears below. The
directors of the Company are elected annually by the shareholders. The
officers serve at the pleasure of the Board of Directors. The directors do
not presently receive fees or other remuneration for their services save for
the reimbursement of travel and accommodation expenses directly associated with
the attendance of Board meetings.
B. Family Relationships
None - Not Applicable
C. Work Experience
Robert Petry, President Chairman of the Board
1969 - 1975, President, Growth Opportunities, Inc., Kent, Ohio. Owned and
operated a financial, investment company which assisted individuals in
opening store and mall based business of various types for an equity position.
He created business financing measures, bank loan assistance and document
preparations, equity partnerships and lease negotiations. The company
employed seven people and grew from an initial one outlet to ownership
participation in over 20 business operations in the immediate region. During
its operations, the company helped to finance and open over 43 businesses.
1975 - 1988, President, RVPetry Enterprises, Inc., Kent, Ohio. Owned and
operated this real estate investment company which located and financed
various real estate ventures in the Kent, Fairlawn areas on a company owned
and well as multi partnership basis for varied speculation, income, growth
and tax shelter variables in differing percentages of ownership. The company
brought, sold and owned properties ranging from farms to small mall outlets
and both single and multi-residential properties under varied methodologies
and participation levels.
1988 - Present, President, FineLine Properties, Inc., Fairlawn, Ohio.
Established using the resources of RVPetry Enterprises, Inc., FineLine became
a cartoon development company in its own right after participating as a
financial resource for various companies needing start up capital and
management expertise. The company acquired the rights to various cartoon
characters which it utilized to transform its operations to full time cartoon
creation and development in 1995.
36
<PAGE>
His duties with the Company are defined as follows, from the Company
By-laws:
Section 3. President. The President shall be the chief executive officer of
the Corporation and, subject to the control of the Board of Directors, shall
control all business affairs of the Corporation including, but not restricted
to, routine purchasing of inventory, sales and marketing strategies pursued,
hiring and firing of employees of the Corporation, determination of salaries
of employees, risk management, etc. and the devolution of any of these duties
to subordinates as he or she deems necessary and appropriate. He or she
shall execute the decisions of the Board of Directors in a timely manner, or
on any other relevant corporate matter, as Directors or any Director shall
dictate, within the bounds of these By-laws.
Section 7. Chairman of the Board of Directors. The Chairman of the Board of
Directors shall preside at all meetings of the Corporation or adjournments
thereof. The Chairman of the Board shall be elected by, and serve exclusively
at the discretion of, the Board of Directors, and shall serve a term
co-incident with that of all other Board members. The Chairman of the Board
of Directors shall be the spokesperson for the Board of Directors, unless he
or she assigns this duty to another Director. The Chairman of the Board of
Directors shall have no special powers other than those explicitly described in
this Article.
Personal Data: Date of Birth: 7/25/46, Married, Three children excellent
health. Education: 1961 - 1965, Kent State University High School, Kent,
Ohio; 1965 - 1969, Kent State University, Kent, Ohio, Business Degree.
Carl White, Director
1977 - 1982, Producer, Director of Prime Time Programming, Major Market Video
Productions, Inc., Long Beach, California
Responsible for the selection properties as well as editing of purchased
properties for cable television broadcast in the Southern California
region. Supervised a staff of eight employees in the production
department and reported directly to the Vice President of Program
Development / Marketing of the company. Duties included serving on the
finance committee, and interfacing with the editing department as well
as outside contact with cable companies. Attended and organized trade
show participation, presentations and assisted in marketing program
Development and implementation.
1982 - 1984 Distribution Manager, First Tell, Inc., Hollywood,
California. Organized and arranged the distribution of video properties
in the Western Region of the United States, California, Nevada, Colorado,
Washington, New Mexico and Utah, to cable television stations of video
programming as well as selected movies. Opened up markets in Utah,
Washington and New Mexico for the distribution of product, as well as
expansion of the company's programming lines to include movies.
37
<PAGE>
1983 - Present, Co-Owner Belmont Heights Manor, Long Beach, California
Assisted in the founding of a senior care facility with his mother
Mrs. White who secured financing and backing to set up the first 8
person care unit which remained in operation for six years before
moving to the present location which maintains and cares for 34 patients.
Licensed by the State of California, Belmont Heights Manor has
established a reputation for personal care of its residents that has
enabled it to secure a clientele of higher income retirees thereby
permitting the company charge rates which allow the operation to
maintain its high standards.
1996 - Present, Director FineLine Properties.com, Inc.
A member of the Board of Directors, Mr. White serves the Company in
the capacity as follows: Section 1. By-Laws, Nominative Offices. The
named offices of the Board of Directors shall be that of a President,
a Treasurer, and a Secretary. A single Director may hold more than one
named office, but not more than two. Such Directors as do not hold a
named office shall be called and considered Members-at-Large of the
Board of Directors.
Personal Data: Date of Birth: 1/6/55, Single, excellent health.
Education: 1969 - 1973, Long Beach Poly High School, Long Beach,
California; 1973 - 1975, Long Beach City College, Long Beach,
California; 1975 - 1977, Long Beach State, Long Beach, California,
Bachelor of Arts Degree
Sidney Rudick, Secretary, Treasurer
1943 - 1945, United States Marines, Honorable Discharge
PROFESSIONAL
Sidney Rudick, Secretary, Treasurer
1943 - 1945, United States Marines, Honorable Discharge PROFESSIONAL
1946 - 1950, Furniture Manager, Hearn's Department Store, Bronx, New
York. Began as a trainee working various departments within the department
store and was promoted to Manage the furniture and furnishings department
after two years. Reported directly to the Floor Manager.
1950 - 1955, Electronics and Furnishings Manager, R.H. Macy's, Manhattan,
New York. Managed these departments at Macy's Herald Square location in
Manhattan. Responsibilities included personnel management, inventory and
promotional venues. Increased floor revenues per square foot to equal the
higher volume cosmetics and personal beauty aids departments. Oversaw a
department of 24 people.
1955 - 1962, Sales Manager, Montgomery & Company, New York, New York.
Started in one of the first retail carpet operations in the United States
servicing both business and residential locations. Prior to this, carpet was
sold and installed by the mills themselves through their outlets. Directed
efforts and a sales force that established regional accounts as well as
supplier relationships with the various mills.
1962 - 1993, President, Carpet & Draperies, New York, N. Y. And Fort
Lauderdale, Florida Founder of this home decoration and installation business
which services the Dade and Broward Country regions of Southern Florida. The
company grew from a one person establishment to the become the leader of
carpet and drapery retailing installations in the state of Florida during
1984 through 89. Pioneered various retail advertising placement/display ads
which enabled the company to obtain the sales volume to accomplish the
foregoing.
38
<PAGE>
1993 - Present, Owner, Installations Etc., Inc., Fort Lauderdale, Florida.
The business specializes in offering carpet at discount prices to residential
and businesses and measures as well as sees to the installation completion and
satisfaction. The company services the Southern Florida region.
1996 - Present, Secretary - Treasurer - Director, FineLine Properties, Inc.,
Fairlawn, Ohio. Serve as a member of the Board of Directors in the capacity
of Secretary and Treasurer. Responsibilities include the defined duties for
these positions as contained in the Corporate By-laws, as:
Section 5. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and the Board of Directors; (b) see that all
notices are duly given in accordance with the provisions of these By-laws or
as required by law; (c) be custodian of the corporate records and of the seal
of the Corporation; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary of each shareholder;
(e) sign, with the President, certificates for shares of the Corporation
which have been authorized by the Board of Directors or the shareholders;
(f) have general charge of the stock transfer books of the Corporation; and
(g) in general perform all duties incident to the office of Secretary and
such other duties as from time to time may be assigned to him or her by the
Chairman or Board of Directors.
Section 6. Treasurer. The Treasurer shall (a) have custody of and be
responsible for all funds and securities of the Corporation; (b)receive and
give receipts for all money due and payable to the Corporation, and deposit
all such moneys in the name of the Corporation in such banks or other
depositories as shall be designated by the Board of Directors; and (c) in
general perform all of the duties incident to the office of the Treasurer and
which may be assigned to him or her from time to time by the Chairman of the
Board.
Personal Data: Date of Birth 4/22/25, Divorced, Three children, excellent
Health. Education: 1936-1940, Dewitt Clinton High School, Bronx, N.Y.
D. Involvement on Certain Material Legal Proceedings During the Last Five
Years.
(1) No director, officer, significant employee or consultant has been
convicted in a criminal proceeding, exclusive of traffic violations.
(2) No bankruptcy petitions have been filed by or against any business or
property of any director, officer, significant employee or consultant of the
Company nor has any bankruptcy petition been filed against a partnership or
business association where these persons were general partners or executive
officers.
(3) No director, officer, significant employee or consultant has been
permanently or temporarily enjoined, barred, suspended or otherwise limited
from involvement in any type of business, securities or banking activities.
39
<PAGE>
(4) No director, officer or significant employee has been convicted of
violating a federal or state securities or commodities law.
(5) The directors serve for a term of one year, as stated in the Company's
By-laws, the directors are elected at the annual meeting of the stockholders
which shall be held on the third Friday in February.
Members of the Board of Directors hold office and serve until the next annual
meeting of the shareholders of the Company or until their respective successors
have been elected and qualified. Executive officers are appointed by and
serve at the discretion of the Board of Directors. The Company's directors do
not currently receive any cash compensation for service on the Board of
Directors save for the reimbursement of travel and accommodation expenses
directly associated with the attendance of Board meetings.
ITEM 6. EXECUTIVE COMPENSATION
A. Remuneration of Directors and Executive Officers
The following table sets forth the cash and noncash compensation paid by the
Company to its Chief Executive Officer and all other executive officers for
services rendered during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Annual Compensation
Deferred
Name Position Salary Bonus Salary
- -------- --------- ---------- ------ ---------
<S> <C> <C> <C> <C>
Robert Petry President $90,000 0 0
Carl White VP, Director $55,000 0 0
Sidney Rudick VP, Board Secretary $55,000 0 0
</TABLE>
The Company entered into five-year employment agreement with Robert Petry
effective June 1, 1996 and other executives. The agreements require each of
these individuals to devote their entire productive time, ability and attention
to the business of the Company during the term of the agreement. As of the
date of this agreement, they provide for the payment of a base salary of
$90,000.00 to Mr. Petry, with the aforementioned salary from the date of these
agreement until deferred until January 1, 2000. During the indicated period
Mr. Petry is paid expenses only for business directly associated with the
administration and running of the Company. The agreement also provides for
automatic adjustments to base salary and cash bonuses from the Company upon the
satisfaction of certain performance goals based upon gross sales by the Company
during a rolling 12 month period. Employment agreement between the Company and
Mr. White and Mr. Rudick call for these individuals to be compensated at the
rate of $55,000.00 as base salary with performance options starting in January
2000. (See Exhibit 10 (b), (c), (d), "--Employment Agreements.")
40
<PAGE>
B. Compensation of Directors
There were no arrangements pursuant to which any director of the Company was
compensated for any service provided as a director. In addition, no such
arrangement is contemplated for the foreseeable future as the Company's only
directors are its current executive officers.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions since the beginning of fiscal year 1998, or any
currently proposed transactions, or series of similar transactions, to which
the Company was or is to be a party, in which the amount involved exceeds
$60,000, and in which any of the officers, or directors, or holders of over
5% of the Company's stock have or will have any direct or indirect material
interest. The Company does not currently have any policy toward entering into
any future transactions with related parties.
41
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS
A. Market Information
(1) The Company's common stock is listed and trading on the NASDAQ Over The
Counter Bulletin Board under trading symbol FNLN. The Company's Market Maker
is National Capital, LLC, 2804 West Country Club Drive, Oklahoma City, OK
73116.
CERTAIN MARKET INFORMATION
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "FNLN" and commenced its trading under that symbol on November 1, 1998.
The following table sets forth the high and low bid quotations for the Common
Stock for the periods indicated. These quotations reflect prices between
dealers, do not include retail mark-ups, mark-downs, and commissions and may
not necessarily represent actual transactions. These bid quotations have not
been adjusted retroactively by any stock split.
<TABLE>
<CAPTION>
Common Stock
PERIOD HIGH LOW
- ------ ---- ---
<S> <C> <C>
Calendar Year 1998
- ------------------
Fourth Quarter ended 12/31/99 $2.12 $0.37
Calendar Year 1999
- ------------------
First Quarter ended 3/31/99 $3.50 $0.27
Second Quarter ended 6/30/99 $1.44 $0.28
July 1 - August 31, 1999 $1.34 $0.19
</TABLE>
(2)(i) There is currently no Common Stock which is subject to outstanding
options or warrants to purchase, or securities convertible into, the Company's
Common Stock.
(ii) There is currently no common Stock of the Company which could be sold
under Rule 144 under the Securities Act of 1933, as amended, or that the
registrant has agreed to register for sale by the security holders.
(iii) There is currently no common equity that is being or is proposed to be
publicly offered by the registrant, the offering of which could have a material
effect on the market price of the issuer's common equity.
B. Dividends
The Company has not paid any cash dividends since its inception and does not
contemplate paying any in the foreseeable future. It is anticipated that
earnings, if any, will be retained for the operation of the Company's business.
42
<PAGE>
C. Holders
As of August 1, 1999, the Company has approximately one hundred eleven (111)
stockholders of record.
D. Reports to Shareholders
The Company intends to furnish its shareholders with annual reports containing
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law. Upon the
effectiveness of this Registration Statement, the Company will be required to
comply with periodic reporting, proxy solicitation and certain other
requirements by the Securities Exchange Act of 1934.
E. Transfer Agent and Registrar
The Transfer Agent for the shares of common voting stock of the Company is
Shelley Godfrey, Pacific Stock Transfer Company, 5844 S. Pecos, Suite D, Las
Vegas, Nevada 89120 (702) 361-3033.
ITEM 2. LEGAL PROCEEDINGS
In October 1998, counsel for the United States Securities and Exchange
Commission (the "Commission") advised Mr. Robert V. Petry in writing that the
staff of the Commission had made a preliminary determination to recommend to
the Commission that it authorize the staff to file a civil enforcement action
against Robert V. Petry in an appropriate United States District Court for
violations of Section 5 of the Securities Act of 1933 seeking injunctive
relief, disgorgement, penalties and prejudgment interest. The staff's
recommendation is based on Robert V. Petry's alleged actions in connection
with Interactive Multimedia Publishers, Inc. including among other things his
direct or indirect sales of securities of IMP when no registration statement
was in effect as to IMP's securities.
Legal Counsel representing Robert V. Petry, pursuant to Rule 5(c) of the
Commission's Rules on Informal and Other Procedures, 17 C.F.R. Section
202.5(c), has submitted a written statement to the Commission that sets forth
factual and legal arguments (also known as a "Wells submission") hopefully
this will vindicate Robert V. Petry. There are no guarantees as to the
outcome of these proceedings, and it is difficult to determine when these
proceedings might be completed. The securities issued by IMP to Robert V.
Petry are also the subject matter of pending NASD arbitration No. 96-04274
which was initiated by Robert V. Petry two years ago.
Management believes this matter has no relationship or bearing on this Company.
43
<PAGE>
ITEM 3. SALES OF UNREGISTERED SECURITIES
The Company's shares of Common Stock are not registered with the U.S.
Securities and Exchange Commission under the Securities Act of 1933, as
amended (hereinafter referred to as the "Act"), and with the exception of
certain shares issued pursuant to Regulation D-504, are "restricted
securities." Rule 144 of the Act provides, in essence, that holders of
restricted securities for a period of one year (unless an affiliate of the
Company) may, every three months, sell to a market maker or in ordinary
brokerage transactions an amount equal to one percent of the Company's
then outstanding securities. Affiliates may be required to hold for two
years. Non affiliates of the Company who hold restricted securities for a
period of two years may sell their securities without regard to volume
limitations or other restriction. A total of 3,697,127 shares are unrestricted
and the balance of common shares i. e., 5,448,350 are restricted. Sales of
shares of Common Stock under Rule 144 may have a depressive effect on the
market price of the Company's Common Stock, should a public market develop
for such stock. Such sales might also impede future financing by the Company.
Since its inception in 1997, the Company has not paid cash dividends on its
Common Stock. It is the present policy of the Company not to pay cash
dividends and to retain future earnings to support the Company's growth. Any
payments of cash dividends in the future will be dependent upon, among other
things, the amount of funds available therefor, the Company's earnings,
financial condition, capital requirements, and other factors which the Board
of Directors deem relevant. As of August 1, 1999 there were approximately one
hundred eleven (111) Common Shareholders of record.
Private Placements
Prior to becoming listed on the NASDAQ OTC Bulletin Board, the Company
completed an exempt placement of securities of 78,015 shares of common
stock, pursuant to a Regulation D, Rule 504 exempt offering, which was
commenced on March 12, 1997 with the offering closed on March 13, 1998,
resulting in gross offering proceeds of $195,037.50. In connection with this
Offering, the Company issued three (3) Stock Purchase Warrants for each share
sold during this Offering. This represents 234,045 shares of Common Stock
(the "Warrants"). These Warrants are exercisable at $2.50 per share on or
prior to November 28, 1999, the expiration date of the Warrants. The Company
may call the Warrants for exercise, on fifteen (15) days notice if not
exercised by the shareholder prior to the expiration of the fifteen (15) days
notice period should the average closing bid price for the Company's Common
Stock is equal to or greater than $3.00 per share of Common Stock for any
consecutive period of ten (10) consecutive trading days. No Warrants have
been exercised as of August 31, 1999.
On March 13, 1998, the Company completed a public offering of shares of common
stock of the Company pursuant to Regulation D, Rule 504 of the Securities Act
of 1933, as amended, whereby it sold 78,015 shares of the Common Stock of the
Company to 78 unaffiliated shareholders of record. The Company filed an
original Form D on or about Aril 29, 1998 with the Securities and Exchange
Commission on or about March 22, 1998. As of August 1, 1999, the Company has
9,145,477 shares of common stock issued and outstanding held by approximately
one hundred eleven (111) shareholders of record.
44
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES
A. Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock, no par
value, of which, as of 9,145,477 shares are issued and outstanding and held of
record by approximately one hundred eleven (111) stockholders at the date of
the preparation of this document per information as supplied by the Company's
Transfer Agent, Pacific Stock Transfer. The Company can not indicate the
number of shareholders which exist outside of those who have requested physical
delivery of shares or are trading the stock on a daily basis, with any degree
of accuracy. Holders of shares of Common Stock are entitled to one vote per
share on all matters to be voted upon by the stockholders generally. The
approval of proposals submitted to stockholders at a meeting other than for the
election of directors requires the favorable vote of a majority of the shares
voting, except in the case of certain fundamental matters (such as certain
amendments to the Certificate of Incorporation, and certain mergers and
reorganizations), in which cases Nevada law and the Company's By-Laws require
the favorable vote of at least a majority of all outstanding shares.
Stockholders are entitled to receive such dividends as may be declared from
time to time by the Board of Directors out of funds legally available therefor,
and in the event of liquidation, dissolution or winding up of the Company to
share ratably in all assets remaining after payment of liabilities. The
holders of shares of Common Stock have no preemptive, conversion, subscription
or cumulative voting rights.
(1) Description of Rights and Liabilities of Common Stockholders
i. Dividend Rights - The holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefore at such
times and in such amounts as the Board of Directors of the Company may from
time to time determine. The board of directors of the Company will review its
dividend policy from time to time to determine the desirability and feasibility
of paying dividends after giving consideration the Company's earnings,
financial condition, capital requirements and such other factors as the board
may deem relevant.
ii. Voting Rights - Each holder of the Company's common stock are entitled to
one vote for each share held of record on all matters submitted to the vote of
stockholders, including the election of directors. All voting is
noncumulative, which means that the holder of fifty percent (50%) of the
shares voting for the election of the directors can elect all the directors.
The board of directors may issue shares for consideration of previously
authorized but unissued common stock without future stockholder action.
Shares of Common Stock do not have cumulative voting rights, which means that
the holders of a majority of the shareholder votes eligible to vote and voting
for the election of the Board of Directors can elect all members of the Board
of Directors. There are a total of 20,000,000 authorized regular common
shares.
iii. Liquidation Rights - Upon liquidation, the holders of the common stock are
entitled to receive pro rata all of the assets of the Company available for
distribution to such holders.
iv. Preemptive Rights - Holders of common stock are not entitled to preemptive
rights.
v. Conversion Rights - No shares of common stock are currently subject to
outstanding options, warrants, or other convertible securities.
45
<PAGE>
vi. Redemption rights - no redemption rights exist for shares of common stock.
vii. Sinking Fund Provisions - No sinking fund provisions exist.
viii. Further Liability For Calls - No shares of common stock are subject to
further call or assessment by the issuer. The Company has not issued stock
options as of the date of this registration statement.
<PAGE>
(2) Potential Liabilities of Common Stockholders to State and Local
Authorities
No material potential liabilities are anticipated to be imposed on stockholders
under state statutes. Certain Nevada regulations, however, require regulation
of beneficial owners of more than 5% of the voting securities. Stockholders
that fall into this category, therefore, may be subject to fines in
circumstances where non-compliance with these regulations are established.
B. Preferred Stock
The Company has 1,000,000 shares of Preferred Non-Voting Stock at $0.001 par
Value authorized with none issued nor outstanding.
C. Debt Securities
The Company is not registering any debt securities, nor are any outstanding.
D. Other Securities To Be Registered
The Company is not registering any security other than its Common Stock.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation for the Company do contain provisions for
indemnification of the officers and directors; in addition, Section 78.751
of the Nevada General Corporation Laws provides as follows: 78.751
Indemnification of officers, directors, employees and agents; advance of
expenses.
1) A corporation may 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,
except 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 attorney's fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suitor proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
46
<PAGE>
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, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person 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 amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections 1 and 2, or in defense of any claim,
issue or matter therein, he must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably incurred by him
in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court or
advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made: (a) By the stockholders: (b) By the board of
directors by majority vote of a quorum consisting o directors who were not
parties to act, suit or proceeding; (c) If a majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion; or (d) If a quorum
consisting of directors who were not parties to the act, suit or proceeding
cannot to obtained, by independent legal counsel in a written opinion; or
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by
corporation. The provisions of this subsection do not affect any rights to
47
<PAGE>
advancement of expenses to which corporate personnel other than the directors
or officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section: (a) Does not exclude any other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant to
subsection 2 or for the advancement of expenses made pursuant to subsection 5,
may not be made to or on behalf of any director or officer if a final
adjudication establishes that his act or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action. (b) Continues for a person who has ceased to be a director,
officer, employee or agent and endures to the benefit of the heirs, executors
and administrators of such a person.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
48
<PAGE>
Part F/S
Item 1. Financial Statements
The following documents are filed as part of this report:
a) FineLine Properties.com, Inc.
Financial Statements, report from James E. Slayton, CPA;
and notes to Financial Statements
b) Interim Financial Statements are not provided at this time as they
are not applicable at this time.
c) Financial Statements of Businesses Acquired or to be acquired are not
provided at this time, as they are not applicable at this time.
d) Proforma Financial Information is not provided at this time, as it is
not applicable at this time.
Item 2. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None -- Not Applicable.
49
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
FineLine Properties.com, Inc.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 1997
and
December 31, 1998
TABLE OF CONTENTS
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT.......................... F-1
BALANCE SHEET......................................... F-2-3
STATEMENT OF OPERATIONS............................... F-4
STATEMENT OF STOCKHOLDERS' EQUITY..................... F-5
STATEMENT OF CASH FLOWS............................... F-6
NOTES TO FINANCIAL STATEMENTS......................... F-7
</TABLE>
<PAGE>
James E. Slayton, CPA
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
INDEPENDENT AUDITORS' REPORT
Board of Directors September 22, 1999
FineLine Properties.com, Inc. (The Company)
Las Vegas, Nevada 89104
I have audited the Balance Sheet of FineLine Properties.com, Inc.
(A Development Stage Company), as of December 31, 1997 and December 31,
1998, and the related Statements of Operations, Stockholders' Equity and
Cash Flows for the year ended December 31, 1997 and the year ended
December 31, 1998. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on
these financial statements based on my audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis evidence supporting the amounts and
disclosures in the financial statement presentation. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of FineLine
Properties.com, Inc., ( A Development Stage Company), at December 31,
1997 and December 31, 1998, and the results of its operations and cash
flows for the period January 11, 1988 (Date of Inception) to December
31, 1997 and the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 3 to
the financial statements, The Company has had limited operations and has
not established a long term source of revenue. This raises substantial
doubt about its ability to continue as a going concern. Management's
plan in regard to these matters are also described in Note 3. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
s/s James E. Slayton
- ----------------------------
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-1
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
BALANCE SHEET
AS AT
December 31, 1997 and December 31, 1998
<TABLE>
<CAPTION>
ASSETS
December 31 December 31
1998 1997
CURRENT ASSETS
<S> <C> <C>
Cash 458.00 63,284.00
Inventories 0.00 321,524.00
------------ ------------
Total Current Assets 458.00 384,808.00
PROPERTY AND EQUIPMENT
Furniture & fixtures 341,126.00 326,050.00
Equipment 25,869.00 25,869.00
Leasehold Improvements 5,556.00 0.00
------------ ------------
Total Property and Equipment 372,551.00 351,919.00
OTHER ASSETS
Trademarks 2,350,000.00 2,350,000.00
Other intangible assets 78,871.00 78,871.00
Organization Costs net
of Amortization 2,500.00 2,500.00
------------- ------------
Total Other Assets 2,431,371.00 2,431,371.00
TOTAL ASSETS $2,804,380.00 $3,168,098.00
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
BALANCE SHEET
AS AT
December 31, 1997 and December 31, 1998
<TABLE>
<CAPTION>
LIABILITIES & EQUITY
December 31 December 31
1998 1997
CURRENT LIABILITIES
<S> <C> <C>
Accounts Payable $0.00 $13,000.00
------------- --------------
Total Current Liabilities 0.00 13,000.00
OTHER LIABILITIES
Accrued salaries payable 474,556.00 309,410.00
Accrued payable other 232,208.00 301,460.00
Notes payable 2,500.00 2,500.00
------------ --------------
Total Other Liabilities 709,274.00 613,370.00
------------ --------------
Total Liabilities 709,274.00 626,370.00
EQUITY
Common Stock, no par value,
authorized 20,000,000 shares; 3,303,541.00 3,053,762.00
issued and outstanding at
December 31, 1998, 9,145,477
common shares of which 5,448,350
are restricted
Preferred Stock, $.001 par value,
authorized 1,000,000 shares 0.00 0.00
None issued
Additional Paid in Capital 0.00 0.00
Donated Capital
Retained Earnings (Deficit
accumulated during development
stage) (1,208,435.00) (512,034.00)
--------------- -------------
Total Stockholders' Equity 2,095,106.00 2,541,728.00
TOTAL LIABILITIES & OWNER'S EQUITY $2,804,380.00 $3,168,098.00
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR PERIOD
January 11, 1988 (Date of Inception) to December 31, 1997 and Period ended
December 31, 1998
<TABLE>
<CAPTION>
REVENUES
January 11
1988
(Date of
Inception)
to December 31 December 31 December 31
1998 1998 1997
REVENUE
<S> <C> <C> <C>
Revenues 22,544.00 22,544.00 0.00
COSTS AND EXPENSES
Selling, General and
Administrative 756,569.00 553,945.00 202,624.00
Officer's Salaries 474,410.00 165,000.00 309,410.00
------------ ---------- ----------
Total Costs and Expenses 1,230,979.00 718,945.00 512,034.00
------------ ---------- ----------
Net Ordinary Income or
(Loss) (1,208,435.00) (696,401.00) (512,034.00)
============== ============ ============
Weighted average
number of common
shares outstanding 6,650,238 6,650,238 4,383,415
Net Loss Per Share ($0.18) ($0.11) ($0.12)
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD
January 11, 1988 (Date of Inception) to December 31, 1997 and Period ended
December 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
accumulated
Common Additional during Total
Stock paid-in development Stockholder's
Shares Amount capital stage Equity
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock issued
for service
January 11, 1988 3,000,000 540,000.00 540,000.00
May 26, 1996
Acquisition of Wedge
Trade Mark 80,000 200,000.00 200,000.00
Acquisition of Moodies,
Taste Buddies, and
Lottery Trade Marks
and Prepaid Services 1,075,000 2,150,000.00 2,150,000.00
Issued for services
in 1997 434,790 108,662.00 108,662.00
Issued for cash
in 1997 22,040 55,100.00 55,100.00
Net loss
January 11, 1988
(Inception) to
December 31, 1997 (512.034.00) (512,034.00)
-----------------------------------------------------------
Balances as at
December 31, 1997 4,611,830 $3,053,762.00 $0.00 ($512,034.00)$2,541,728.00
Issued for cash
in 1998 4,533,647 249,779.00 249,779.00
January 11, 1988
Net loss
January 1, 1998
to December 31,
1998 ($696,401.00) (696,401.00)
----------------------------------------------------------
Balances as at
December 31,
1998 9,145,477 $3,303,541.00 $0.00 ($1,208,435.00)
$2,095,106.00
=============================================================
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR PERIOD
January 11, 1988 (Date of Inception) to December 31, 1997 and Period ended
December 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
(Date of
Inception)
to December 31 December 31 December 31
1998 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Cash received from customers 22,544.00 22,544.00 0.00
Cash paid to suppliers and
employees 274,365.00 230,049.00 44,316.00
Cash disbursed for Operating
Activities 274,365.00 230,049.00 44,316.00
----------- ---------- ---------
Net cash flow provided by
operating activities (251,821.00) (207,505.00) (44,316.00)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets 0.00 0.00 0.00
----------- ---------- ----------
Net cash used by investing
activities (0.00) (0.00) (0.00)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 249,779.00 194,679.00 55,100.00
Advances from Individual 2,500.00 0.00 2500.00
Cash paid for organizational
costs 0.00 0.00 0.00
----------- ---------- ---------
Net cash provided by
financing activities 252,279.00 194,679.00 57,600.00
Cash and cash equivalents
beginning of year 458.00 13,284.00 0.00
Net increase (decrease)
in cash 458.00 (12,826.00) 13,284.00
Balance as at end of
period 458.00 458.00 13,284.00
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 22, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized January 11, 1988(Date of Inception) under the laws
of the State of Ohio, as FineLine Properties, Inc. (The Company) has had
limited operations and in accordance with SFAS #7, the Company is considered
a development stage company. On or about March 30, 1998, the Company
effected a reorganization and merger with Fineline Properties.com, Inc.
(incorporated under the laws of the State of Nevada, January 12, 1998) which
had no assets or liabilities. The Company re-domiciled its location to the
state of Nevada. The Company is authorized to issue 20,000,000 shares of its
no par value common stock. The Company is authorized to issue 1,000,000 shares
of its $.001 par value preferred stock.
The Company has 9,145,677 shares of its common stock issued and outstanding;
5,448,350 of these shares are restricted.
There have been no other issues of common or preferred stock.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting polices and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, $2,500.00 has been capitalized. Management has
elected not to amortize these and other intangible costs until the firm exits
its developmental stage.
3. Earnings per share is computed using the weighted average number of shares
of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of dividends.
No dividends have been paid since inception.
5. The Company experienced losses during its last two fiscal tax years.
Therefore the Company has not provided for a provision for federal income
taxes. The Company will review its need for a provision for federal income
tax after each operating quarter. The Company has net operating losses of
$1,208,435.00. These losses are due to expire for tax purposes $512,034.00
in tax year 2012 and $696,401.00 in tax year 2013.
6. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as
at the date of the financial statements and revenues and expenses for the
period reported. Actual results may differ from these estimates.
7. The Company has not yet adopted certain accounting policies. The effects
of not adopting these polices are deemed to be insignificant and immaterial.
F-7
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 22, 1999
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current
source of revenue. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. To date,
the Company has directed its efforts to the development of uniqueness and
characteristics for its holdings. Company officials have also been
engaged in discussions and negotiations with potential strategic alliance
partners. In February of 1998, the Company entered into agreement with
Marvel Comics whereby certain of the Company's trademarked characters
will be licensed to and marketed by Marvel in such venues as animated
television series.
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the
resolution of such conflicts.
NOTE 5 - WARRANTS AND OPTIONS
The Company issued 234,045 warrants in connection with the stock offering of
March 13, 1998. These warrants represent a potential 234,045 shares of
common stock. These Warrants are exercisable at $2.50 per share on or prior
to November 28, 1999, the expiration date of the Warrants. The Company may
call the Warrants for exercise if the average closing bid price for the
Company's Common Stock is equal to or greater than $3.00 per share of Common
Stock for any consecutive period of ten (10) trading days. No warrants have
been exercised through August 31, 1999.
NOTE 6 - YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition,
similar problems may arise in systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000
issue may be experienced before on, or after January 1, 2000 and if not
addressed, the impact on operations and financial reporting may range
from minor errors to significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 issue affecting
the entity, including those related to the efforts of customers,
suppliers, or other third parties will be fully resolved.
F-8
<PAGE>
FineLine Properties.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 22, 1999
NOTE 7 - LONG TERM OBLIGATIONS
The Company leases real property at 3250 W Market St, Suite 302,
Fairlawn, Ohio and 110 W Main Street, Kent, Ohio. Rent was paid in the
amount of $12,450.00 for the year ending 12/31/1997 and $19,090.00 for
the year ending 1998.
The Company owes two officers/shareholders of the Company a total of
$706,774.00 in accrued salaries payable and inventory purchase. It will
be the policy of Management to retire these legitimate and recognized
obligations in such a time and manner as when the Company has determined,
at the Board level, that the Company has achieved profitability to the
extent that the repayment schedule will not severely impair or adversely
affect the Company's cash flow. As such, these liabilities are
represented on the financial statements as long-term.
F-9
<PAGE>
Part III
Item 1. Index to Exhibits (Pursuant to Item 601 of Regulation SB)
Exhibit Number Name and/or Identification of Exhibit
1. Underwritten agreement
None. Not Applicable
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession.
2.1 Agreement and Plan of Merger and Reorganization, Filed
February 23, 1998
b) Asset Purchase and Liability Assumption Agreement
None. Not Applicable
c) Interest Purchase Agreement
None. Not Applicable
d) Agreement for Bill of Sale and Assignment of Assets
None. Not Applicable
e) Exchange Stock Agreement
None. Not Applicable
3. Articles of Incorporation & By-Laws
3.1 Articles of Incorporation of the Company Filed January 12, 1998
Restated Articles of Incorporation Filed March 12, 1999
3.2 By-Laws of the Company adopted February 27, 1998
4. Instruments Defining the Rights of Security Holders
4.1 Those included in exhibit 3, and sample of Stock Certificate
5. Opinion on Legality
None. Not Applicable
6. No Exhibit Required
Not Applicable
7. Opinion on Liquidation Preference
None. Not Applicable
8. Opinion on Tax Matters
None. Not Applicable
9. Voting Trust Agreement and Amendments
None. Not Applicable
10. Material Contracts
10.1 Lease
10.2 Marvel Agreement
10.3 Boein Co. LTD. Agreement
10.4 Employment Agreements with Robert Petry
10.5 Employment Agreements with Sidney Rudick
10.6 Employment Agreements with Carl White
<PAGE>
11. Statement Re Computation of Per Share Earnings
None. Not Applicable. Computation of per share earnings can be
clearly determined from the Statement of Operation from the Company's
financial statements.
12. No Exhibit Required
13. Annual or Quarterly Reports - Form 10-Q
None. Not Applicable
14. Material Foreign Patents
None. Not Applicable
15. Letters on Unaudited Interim Financial Information
None. Not Applicable
16. Letter on Change in Certifying Accountant
None. Not Applicable
17. Letter of Director Resignation
17.1 Resignation Letter from Gaye Knowles, dated August 25, 1998
18. Letter on Change in Accounting Principles
None. Not Applicable
19. Reports Furnished to Security Holders
None. Not Applicable
20. Other Documents or Statements to Security Holders
None. Not Applicable
21. Subsidiaries of Small Business Issuers
None. Not Applicable
31
<PAGE>
22. Published Report Regarding Matters Submitted to Vote of
None. Not Applicable
23. Consent of Experts and Counsel
23.1 Statement from James E. Slayton, CPA
24. Power of Attorney
None. Not Applicable
25. Statement of Eligibility of Trustee
None. Not Applicable
26. Invitations for Competitive Bids
None. Not Applicable
27. Financial Data Schedule
27.1 Financial Data Schedule
28. Information from Reports Furnished to State Insurance Regulatory
Authorities
None. Not Applicable
29. Additional Exhibits
None. Not Applicable
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FINELINE PROPERTIES.COM, INC.
/s/ Robert Petry
- -------------------
ROBERT PETRY,
President and Chairman
Date: September 24, 1999, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
FINELINE PROPERTIES.COM, INC.
/s/ Sidney Rudick
- ------------------------
SIDNEY RUDICK, SECRETARY
Date: September 24, 1999
/s/ Carl White
- ------------------------
CARL WHITE, Director
Date: September 24, 1999, 1999
33
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement")
is dated as of February 23, 1998, between FineLine Properties, Inc., a Nevada
Corporation, (hereinafter, FPIN) and FineLine Properties, Inc., an Ohio
corporation (hereinafter, FPIO).
WHEREAS, FPIN and FPIO deem it advisable and in the best interest of
each of them and of the stockholders of FPIO that FPIO be merged into FPIN
pursuant to the General Corporation Law of the State of Nevada in a transaction
intended to qualify as a "reorganization" as that term is used in Section 368
of the Internal Revenue Code of 1954, as amended (the "Code"), and upon the
terms and conditions contained in this Agreement:
NOW, THEREFORE, FPIN and FPIO hereby agree as follows:
ARTICLE I
The Merger
1.1. Constituent, Surviving Corporations. FPIN and FPIO shall be the
constituent corporations to the Merger, (Such terms and certain other
capitalized terms used herein are defined in Section 7.1.). At the Effective
Time, FPIO shall be merged into FPIN in accordance with the General Corporation
Law of the State of Nevada and FPIN shall be the surviving corporation of the
Merger (sometimes called the "Surviving Corporation"). The name, identity,
existence, rights, privileges, powers, franchises, properties, and assets, and
the liabilities and obligations of FPIN shall continue unaffected by the
Merger. At the Effective Time, the identity and separate existence of FPIO
shall cease, and all rights, privileges, powers, franchises, properties, and
assets, and the liabilities and obligations of FPIO shall be vested in FPIN.
For accounting purposes, the merger shall be deemed effective as of March 1,
1998.
1.2. Certificates of Incorporation; By-laws. At the Effective Time, the
Certificate of Incorporation of FPIN shall be amended to read in its entirety
as set forth in Exhibit A and such Certificate of Incorporation as so amended,
shall be the Certificate of Incorporation of the Surviving Corporation until
further amended as provided therein or by law. At the Effective Time, the By-
laws of FPIN shall be amended to read in their entirety as set forth in Exhibit
B and such By-laws, as so amended, shall be the By-laws of the surviving
Corporation, until further amended as provided therein or by law.
1.3. Officers and Directors. Each officer and director of FPIN immediately
prior to the Effective Time shall continue as an officer or director of the
Surviving Corporation until his successor has been elected or appointed and
qualified, or as otherwise provided in the Articles of Incorporation or By-laws
of the Surviving Corporation.
1.4. Conversion of FPIO Common Stock At the Effective Time. Each share of
FPIO Common stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one fully paid and nonassessable
share of Common stock, $0,001 par value, of the Surviving Corporation.
1.5. Conversion of FPIO Warrants For Common Stock. At the Effective Time,
each warrant for one share of FPIO Common stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the
-1-
<PAGE>
holder thereof, be converted into and become one warrant for one fully paid and
nonassessable share of Common stock, $0,001 par value, of the Surviving
Corporation on the same terms and conditions as were stipulated when the
Warrants were for Common stock of FPIO. Any legends, restrictions, or other
covenants applying to shares of FPIO shall be carried over and transferred to
the securities of FPIN issued in exchange therefor.
ARTICLE II
Representations and Warranties
2.1. Representations and Warranties of FPIN. FPIN represents and
warrants to FPIO as follows:
2.1.1. FPIN Corporation Status. FPIN is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada
with full corporate authority and power to carry on its business as now
conducted and to own or lease and operate properties, and is qualified and in
good standing in all places where such business may now be conducted, FPIN has
delivered to FPIO complete and correct copies of its Articles of Incorporation
and By-laws, as amended through the date of this Agreement.
2.1.2. FPIN Capitalization. The authorized capital stock of FPIN consists
of Twenty Million (20,000,000) shares of Common stock, par value $0.001 per
share Common, of which there are no shares, outstanding. There are no shares
of Common stock of FPIN held in treasury. No options, warrants, conversion or
other rights, agreements, or commitments of any kind, contingent or otherwise,
to issue or sell any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares, are outstanding, and
authorization therefor has not been given.
2.1.3. FPIN Subsidiaries. FPIN has no subsidiaries.
2.1.4. Authority for Agreement. FPIN has the corporate power to execute
and deliver this Agreement and to carry out its obligations hereunder. The
execution and delivery, of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby have been duly authorized by
FPIN's Board of Directors, and so, therefore, this Agreement constitutes the
valid and legally binding obligation of FPIN in accordance with its terms.
The execution and delivery of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby will not conflict with or result
in any violation of or default under any provision of the Certificate of
Incorporation or By-laws of FPIN or any mortgage, indenture, lease, agreement
or other instrument, permit, concessions, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to FPIN
or any of its properties. No consent, approval, order, or authorization of, or
registration, declaration or filing with any governmental authority is required
in connection with the execution and delivery of this Agreement or the
consummation of the Merger and the transactions contemplated hereby by FPIN
(including the transfer to the Surviving Corporation of all the rights and
assets of FPIN), except for the filing with the Department of State of Nevada
of the Certificate of Merger.
2.1.5. Financial Statements. FPIN has delivered to FPIO copies of the FPIN
Financial Statements. The FPIN Financial Statements are complete and current in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied
-2-
<PAGE>
on a consistent basis throughout the periods covered thereby and the periods
preceding the periods so covered, except as may be indicated in the notes
thereto. The balance sheets included in the FPIN Financial Statements present
fairly its financial position of FPIN as to the respective dates therefor and
the statements of income and of changes in financial position included in the
FPIN Financial Statements present fairly its results of operations and changes
in financial position for the respective periods. At December 31, 1997, FPIN
had no known material assets or liabilities, whether absolute, accrued,
contingent, or otherwise, and, as for liabilities, whether due or to become
due.
2.1.6. Absence of Changes. Since, December 3l, 1997, FPIN has not;
(a) undergone any changes in its condition (financial or other),
properties, assets, liabilities, business, operations, or prospects other than
changes in the ordinary course of business which have not been, either in any
case in the aggregate, materially adverse to FPIN:
(b) declared, set aside, made, or paid any dividend or other distribution
in respect of its capital stock or purchased or redeemed, directly or
indirectly, any shares of its capital stock:
(c) issued or sold any shares of its capital stock of any class or any
warrants options, conversion, or other rights to purchase any such shares or
any securities convertible into or exchangeable for such shares.
(d) incurred any indebtedness for borrowed money or issued or sold any debt
securities:
(e) mortgaged, pledged, or subjected to any lien, lease, security interest,
or other charge or encumbrance any properties or assets, tangible or intangible:
(f) acquired or disposed of any assets or properties of material value;
(g) forgiven or canceled any debts or claims, or waived any rights:
(h) entered into any material transaction:
(i) had any salaried employees;
(j) adopted or amended in any material respect, any collective bargaining,
bonus, profit-sharing, compensation stock option, pension, retirement, deferred
compensation, or other plan, agreement, trust, fund, or other arrangement for
the benefit of employees (whether or not legally binding):
(k) suffered any damage, destruction or loss (whether or not covered by
insurance);
(l) suffered any strike or other labor trouble;
(m) suffered any loss of employees, customers, or clients: or
(n) incurred any liability or obligation (whether absolute, accrued,
contingent, or otherwise) material to FPIN:
2.1.7. Taxes. FPIN has filed all federal, state, county, municipal, and
foreign tax returns, reports, and declarations, which are required to be filed
by it and has paid all taxes,
-3-
<PAGE>
assessments, and other governmental charges imposed by law upon it or any of
its properties, assets, income, receipts, payrolls, transactions, capital, net
worth or franchises other than those not delinquent, FPIN has not received any
notice of deficiency, or assessment of taxes,
2.1.8. Properties. FPIN has no real properties and interests therein.
2.1.9. Material Contracts. FPIN is not a party to any material contracts.
2.1.10. ERISA. FPIN does not have, nor has it ever had, any employees: as
such, there are no employee benefit plans established, maintained or
contributed to by FPIN, and therefore none which would or must comply with the
requirements of ERISA and no such plan which is subject to Part 3 of Subtitle B
of Title I of ERISA has incurred any "accumulated funding deficiency" with
respect to any employee benefit plan subject to ERISA, no material liability
to the Pension Guarantee Corporation established under ERISA has been incurred
with respect to any plan subject to ERISA and FPIN has not incurred any
liability for any tax imposed by Section 4975 of the code.
2.1.11. Accounts Receivable. FPIN has no accounts receivable.
2.1.12. Patents, Trademarks, Etc.. FPIN owns no patents, patent applications,
trade names, trademarks, trademark applications, copyrights, or copyright
applications, and there are no patents, trade names, trademarks, copyrights,
inventions, processes, designs, formulae, trade secrets, know-how, or other
industrial property rights necessary for the conduct of its business.
2.1.13. Insurance. FPIN has no insurance policies in effect, nor has it ever
had insurance policies, surety, performance, or other insurance bonds bound.
2.1.14. Clients. FPIN has no clients.
2.1.15. Bank Accounts. FPIN has no bank accounts or other deposits at any
depository institution.
2.1.16. Litigation. There are no judicial or other administrative actions,
suits, proceedings, or investigations pending or, to the best of FPIN's
knowledge, threatened which might result in any material adverse change in the,
conditions (financial or other), properties, assets, business, operations, or
prospects of FPIN or any material liabilities on the part of FPIN, or which
question the validity of this Agreement or of any action taken or to be taken
in connection herewith, There are no citations, fines, or penalties against
FPIN under any federal, state, or local law.
2.1.17. Compliance with Laws; Governmental Authorizations. FPIN is not in
violation or default in any material respect under any statute, law, ordinance,
rule, regulation, judgment, order, decree, permit, concession, grant,
franchise, license, or other governmental authorization or approval applicable
to it or any properties, nor has it failed to comply in any material respect
with any standards now or hereafter applicable to it under any such existing
statute, law, ordinance, rule, regulation, judgment, order, decree, permit,
concession, grant, franchise, license, or other governmental authorization or
approval. All permits, concessions, grants, franchises, licenses, and other
governmental authorizations and approvals necessary for the conduct of the
business of FPIN have been duly obtained
-4-
<PAGE>
and are in full force and effect, and there, are no proceedings pending or
threatened which may result in the revocation cancellation or suspension, or
any materially adverse modification, of any thereof: the consummation of the
Merger and, other Transactions contemplated hereby will not result in any
revocation, cancellation, suspension or modification and the Surviving
Corporation shall be able, immediately following the Effective Time and without
any further action, to exercise all rights thereunder which FPIN could have
exercised immediately prior to the Effective Time.
2.1.18. Brokers, Finders, Etc.. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of FPIN in such manner as to give
rise to any valid claim against FPIN or FPIO for any, brokerage or finder's
commission fee, or similar compensation.
2.1.19. Disclosure. Neither this Agreement or any attached Schedules, nor any
other certificate or documents furnished by FPIN to FPIO pursuant hereto,
contains any untrue statements of a material fact or omits a material fact
necessary to make the statements contained therein and herein not misleading.
There is no fact known to FPIN which materially adversely affects, or in the
future may (so far as FPIN can now reasonably foresee) materially adversely
affect its condition (financial or other'), properties, assets, liabilities,
business, operations, or prospects of FPIN.
2.2. Representations and Warranties of FPIO. FPIO represents and warrants
to FPIN as follows:
2.1.1. FPIO Corporate Status. FPIO is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Ohio with full
corporate authority and power to carry on its business as now conducted and to
own or lease and operate its properties and is qualified and in good standing
in all places where such business is now conducted and such properties are now
owned, leased or operated. FPIO has delivered to FPIN complete and correct
copies of its Articles of Incorporation and By-laws, as amended through the
date of this Agreement.
2.2.2. Authority for Agreement. FPIO has the corporate power to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby have been duly authorized by FPIO's
Board of Directors, and so, therefore, this Agreement constitutes the valid and
legally binding obligation of FPIO in accordance with its terms. The execution
and delivery of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby will not conflict with or result in any
violation of or default under any provision of the Certificate of Incorporation
or By-laws of FPIO or any mortgage, indenture, lease, agreement or other
instrument, permit, concessions grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to FPIO or any
of its properties, No consent, approval, order or authorization of, or
registration, declaration or filing with any governmental authority is required
in connection with the execution and delivery of this Agreement or the
consummation of the Merger and the transactions contemplated hereby by FPIO
(including the transfer to the Surviving Corporation of all the rights and
assets of FPIO), except for the filing with the Department of State of Nevada
of the Certificate of Merger (which is the responsibility of the Surviving
Corporation).
-5-
<PAGE>
2.2.3. Financial Statements. FPIO has delivered to FPIN copies of the FPIO
Financial Statements audited at September 30, 1997 (FPIO's fiscal year-end
1997), and compiled for the First Quarter of Fiscal Year 1998. The FPIO
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby and the
periods preceding the periods so covered, except as may be indicated in the
notes thereto. The balance sheets included in the FPIO Financial Statements
present fairly the financial position of FPIO as to the respective dates
therefor and the statements of income and of changes in financial position
included in the FPIO Financial Statements present fairly its results of
operations and changes in financial position for the respective periods.
2.2.4. Absence of Changes. Since December 31, 1997, FPIO has not:
(a) undergone any, changes in its condition (financial or other)
properties, assets, liabilities, business operations, or prospects other than
changes in the ordinary course of business which have not been, either in any
case in the aggregate, materially adverse to FPIO;
(b) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock or purchased or redeemed,
directly, or indirectly, any, shares of its capital stock:
(c,) issued or sold any shares of its capital stock of any class or
any warrants, options, conversion, or other rights to purchase any such shares
or any securities convertible into or exchangeable for such shares, except as
may have been sold under an on-going offering of Units (consisting of one share
of Common stock of FPIO plus three warrants for shares of Common stock of FPIO)
pursuant to an Offering Circular, dated April 22, 1997, exempted from
registration under Regulation D, Rule 504 of Section 4(6) of the Securities Act
of 1933, as amended;
(d) incurred any indebtedness for borrowed money or issued or sold
any debt securities:
(e) mortgaged, pledged or subjected to any lien, lease, security
interest, or other charge or encumbrance any of its properties or assets,
tangible or intangible:
(f) acquired or disposed of any assets or properties of material
value except in the ordinary course of business:
(g) forgiven or canceled any debts or claims, or , waived any rights,
except in the ordinary course of business;
(h) entered into any material transaction other than in the ordinary
course of business:
(i) granted to any salaried employee having annual direct
remuneration in excess, of $50,000 or any officer any increase in compensation
in any form, or any severance or termination pay, or entered into any
employment agreement with any officer or salaried employee which is not
terminable by the employer, without cause and without penalty, upon notice of
30 days or less:
-6-
<PAGE>
(j) adopted or amended in any material respect, any collective
bargaining, bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, or other plan, agreement, trust, fund, or
other arrangement for the benefit of employees (whether or not legally binding);
(k) suffered any damage, destruction, or loss (whether or not
covered by insurance) which materially and adversely affects (in any case or in
the aggregate) its condition (financial or other), properties, assets,
business, operations, or prospects;
(l) suffered any strike or other labor trouble materially,
adversely affecting the business, operations, or prospects of FPIO:
(m) suffered any loss of employees, customers, or clients that
materially and adversely affects its business; or
(n) incurred any liability or obligation (whether absolute, accrued,
contingent, or otherwise) material to FPIO, except in the ordinary course of
business.
2.2.5. Taxes. FPIO has filed all federal, state, county, municipal, and
foreign tax returns, reports, and declarations which are required to be filed
by it and has paid all taxes, assessments, and other governmental changes
imposed by law upon it or any of its properties, assets, income, receipts,
payrolls, transactions, capital, net worth, or franchises, other than those not
delinquent, FPIO has not received any notice of deficiency, or assessment of
additional taxes, United States federal income tax returns for FPIO have been
examined and closed by the Internal Revenue Service for all years through
December 31, 1996. FPIO has not granted any waiver of any statute of limitation
with respect to, or any extension of a period for the assessment of, any
federal, state, county, municipal, or foreign income tax. Any accruals and
reserves for taxes reflected in the consolidated balance sheets of FPIO
included in the FPIO Financial Statements are adequate to cover all taxes due
and payable or accruable (including interest and penalties, if any, thereon) in
accordance with generally accepted accounting principles as a result of FPIO's
operations for all periods prior to the dates indicated in such Financial
Statements.
2.2.6. Properties. A complete and correct list of all real properties
and interests therein owned or leased by FPIO is attached as Schedule 1. FPIO
has good and marketable title to all such real properties listed as owned by it
and to all properties reflected in the FPIO Financial Statements as of December
31, 1997 or acquired after such date (except to the extent disposed of since
such date in the ordinary course of business), and valid leasehold interests in
all such real properties listed as leased by it and all tangible and intangible
properties leased by it, in each case free and clear of all mortgages, liens,
charges, encumbrances, easements, security interests, pledges, or title
imperfections. FPIO has delivered complete and correct copies of all such cases
of real property and material personal properties to FPIN: all such leases are
valid, subsisting and effective in accordance with their terms and in good
standing and there does not exist thereunder any default or event or conditions
which after notice or lapse of time or both would constitute default
thereunder. All structures and improvements located on such real properties
and all such tangible personal property are in good operating condition and
repair, subject to ordinary wear and tear.
-7-
<PAGE>
2.2.7. Material Contracts. A complete and correct list attached as Schedule
2 includes all agreements, contracts, and commitments of the following types,
written or oral, to which FPIO is a party or by which it or any of its
properties is bound as of the date hereof: (a) mortgages, indentures, security
agreements and other agreements and instruments relating to relating the
borrowing of money or extension of credit: (b) employment and consulting
agreements: (c) collective bargaining agreements: (d) bonus, profit-sharing,
compensation stock option, pension, retirement, deferred compensation, or other
plans, agreements, trusts, funds, or arrangements for the benefit of employees
(whether or not legally binding): (e) agreements, orders, or commitments for
the purchase by FPIO of materials, supplies, or finished products exceeding
$100,000, (f) agreements, orders, or commitments for the sale by FPIO of its
products or services exceeding $200,000: (g) licenses of patents, trademarks,
or other industrial property rights: (h) agreements or commitments for capital
expenditures: (i) brokerage or finder's agreements: (j) joint venture
agreements: and (k) other agreements, contracts, and commitments which in any
case involves payments or receipts of more than $100,000. FPIO has delivered or
made available to FPIO complete and correct copies of all written agreements,
contracts, and commitments, together with all amendments thereto, and accurate
descriptions of all oral agreements listed in Schedule 2. Such agreements,
contracts, and commitments are in full force and effect and except as disclosed
in Schedule 2, all parties to such agreements, contracts, and commitments have,
to the best of FPIO's knowledge and belief, in all material respects performed
all obligations required to be performed by them to date and are not in default
in any material respect. No agreement, contract, or Commitment to which FPIO is
a party or by which it or any of its properties is bound contains any provision
which is unusually burdensome, restrictive, or unfavorable to FPIO or which
materially adversely affects or in the future may (so far as FPIO can now
foresee) materially adversely affect the condition, properties, assets,
liabilities, business, operations, or prospects of FPIO. FPIO does not have
outstanding, any power of attorney, except routine powers of attorney relating
to representation before governmental agencies or given in connection with
qualification to conduct business in another jurisdiction.
2.2.8. ERISA. All employee benefit plans established, maintained, or
contributed to by FPIO comply in all material respects with the requirements of
ERISA and no such plan which is subject to Part 3 of Subtitle B of Title I of
ERISA has incurred any "accumulated funding deficiency" within the meaning of
Section 302 of ERISA or Section 412 of the Code and FPIO has not incurred any
liability on account of such an "accumulated funding deficiency" with respect
to any employee benefit plan subject to ERISA. No material liability to the
Pension Guarantee Corporation established under ERISA has been incurred with
respect to any plan subject to ERISA and FPIO has not incurred any liability
for any tax imposed by action 4975 of the Code.
2.2.9. Accounts Receivable. FPIO has no accounts receivable.
2.2.10. Patents, Trademarks, Etc. A complete list of FPIO's patents, patent
applications, trade names, trademarks, trademark applications, copyrights, and
copyright applications, and there are no patents, trade names, trademarks,
copyrights, inventions, processes, designs, formulae, trade secrets, know-how,
and other industrial property rights necessary for the conduct of its business
is attached hereto as Schedule 3,
2.2.11 Insurance. FPIO has no insurance policies in effect, nor has it ever
had insurance policies, surety, performance, or other insurance bonds bound.
-8-
<PAGE>
2.2.12. Clients. A complete and correct list of all clients of FPIO is
attached as Schedule 4.
2.2.13. Bank Accounts. FPIO has delivered to FPIN a complete and correct
list of each bank and other depository institution in which FPIO has an account
or safe deposit box together with the names of all persons authorized to draw
thereon or have access thereto.
2.2.14. Litigation. There are no judicial or other administrative actions,
suits, proceedings, or investigations pending or, to the best of FPIO's
knowledge, threatened which might result in any material adverse change in the
conditions (financial or other), properties, assets, business, operations, or
prospects of FPIO or any material liabilities on the part of FPIO, or which
question the validity of this Agreement or of any action taken or to be taken
in connection herewith. There are no citations, fines, or penalties heretofore
asserted against FPIO under any federal, state, or local law which remain
unpaid.
2.2.15. Compliance with Laws; Governmental Authorizations. FPIO is not
in violation or default in any material respect under any statute, law,
ordinance, rule, regulation, judgment, order, decree, permit, concession,
grant, franchise, license, or other governmental authorization or approval
applicable to it or any of its properties, nor has it failed to comply in any
material respect with any standards now or hereafter applicable to it under any
such existing statute, law, ordinance, rule, regulation, judgment, order,
decree, permit, concession, grant, franchise, license, or other governmental
authorization or approval. All permits, concessions, grants, franchises,
licenses, and other governmental authorizations and approvals necessary for
the conduct of the business of FPIO have been duly obtained and are in full
force and effect, and there are no proceedings pending or threatened which
may result in the revocation, cancellation, or suspension, or any materially
adverse modification, of any thereof: the consummation of the Merger and other
transactions contemplated hereby will not result in any revocation
cancellation, suspension, or modification: and the Surviving Corporation
shall be able, immediately following the Effective Time and without any further
action, to exercise all rights thereunder which FPIO could have exercised
immediately prior to the Effective Time.
2.2.16. Brokers, Finders, Etc. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of FPIO in such manner as to give
rise to any valid claim against FPIO or FPIN for any brokerage or finder's
commission, fee, or similar compensation.
2.2.17. Disclosure. Neither this Agreement or any attached Schedules, nor
any other certificate or document furnished by FPIO to FPIN pursuant hereto,
contains any untrue statements of a material fact or omits a material fact
necessary to make the statements contained therein and herein not misleading.
There is no fact known to FPIO which is materially adversely affect or in the
future may (so far as FPIO can now reasonable, foresee) materially adversely
affect its condition (financial or other), properties, assets, liabilities,
business, operations, or prospects of FPIO which have not been set forth herein
or in the attached Schedules.
-9-
<PAGE>
ARTICLE III
Covenants Of FPIN
3.1. Conduct of Business. From the date hereof to the Effective Time,
except as otherwise consented to by FPIO in writing, FPIN shall:
(a) carry on its business in and only in, the usual, ordinary, and regular
course in substantially the same manner as heretofore and, to the extent
consistent with such business, use all reasonable efforts to preserve intact
its present business organization, keep available to services of its present
officers, and otherwise ensure that its business will be unimpaired at the
Effective Time:
(b) comply in all material respects with all statutes, ordinances, rules,
and regulations applicable to it;
(c) except as disclosed to FPIO, not amend its Articles of Incorporation
or By-laws;
(d) not enter into or assume any agreement, contract, or commitment:
(e) not merge or consolidate with, or agree to merge or consolidate, with,
or purchase substantially all of the assets of, or otherwise acquire any
business or any corporation, partnership, association, or other business
organization or division thereof:
(f) not take or permit to be taken, any action which is represented and
warranted in clauses(a) through (n) of Section 2.1.6. not to have been taken
since December 31, 1997;
(g) not issue any stock, warrants, options, debentures, notes, bonds, or
other securities of FPIN; and
(h) promptly advise FPIO of any materially, adverse chance in the
financial condition, operations, business, or prospects of FPIN.
3.2 Access and Information. FPIN shall give FPIO and its representatives
full access to its properties, books, records, contracts, and commitments and
will furnish all such information and documents relating to its properties and
business as FPIO may reasonable request. In the event that this Agreement is
terminated and the Merger is abandoned, FPIO will keep confidential any
information (unless readily ascertainable from public information or sources or
otherwise required by law to be disclosed) obtained from FPIN in connection
with the Merger and will return to FPIN all documents, work papers and other
written material obtained by FPIO from FPIN.
3.3 Subsequent Financial Statements. With respect to each fiscal quarter
ending more than 45 days prior to the Effective Time, FPIN will deliver to
FPIO, no later than 45 days after the end of such fiscal quarter, an unaudited,
consolidated balance sheet of FPIN as of the last day of such fiscal quarter,
and the statements of income, changes in stockholders equity, and changes in
financial position of FPIN for the fiscal period then ended, certified as to
the completeness and accuracy, by the Treasurer of FPIN.
3.4. Certificate of Merger. Upon the fulfillment of all of the conditions
precedent to the obligations of the parties to this Agreement, FPIN will cause
to be executed and filed a Certificate of Merger in the office of the Secretary
of State of Nevada.
-10-
<PAGE>
ARTICLE IV
Covenants Of FPIO
4.1. Conduct of Business. From the date hereof to the Effective Time except
as otherwise consented to by FPIN in writing, FPIO shall:
(a) carry on its business in and only in, the usual, ordinary, and
regular course in substantially the same manner as heretofore and, to the
extent consistent such business, use all reasonable efforts to preserve intact
its present business organization, keep available to services of its present
officers, and otherwise ensure that its business will be unimpaired at the
Effective Time;
(b) comply in all material respects with all statutes, laws, ordinances,
rules, and regulations applicable to it;
(c) except as disclosed to FPIN, not amend its Articles of Incorporation
or By-laws;
(d) not enter into or assume any agreement, contract, or commitment which
might materially adversely, affect FPIN:
(e) not merge or consolidate with, or agree to merge or consolidate
with, or purchase substantially, all of the assets of, or otherwise acquire any
business or any corporation, partnership, association or other business
organization or division thereof;
(f) not take or permit to be taken, any action which is represented and
warranted in clauses (a) through (n) of Section 2.2.4/ not to have been taken
since December 31, 1997;
(g) not issue any stock, warrants, options, debentures, notes, bonds, or
other securities of FPIO: and
(h) promptly advise FPIN of any materially adverse change in the
financial condition, operations, business, or prospects of FPIO,
4.2. Access and Information. FPIO shall give FPIN and its representatives
full access to its properties, books, records, contracts, and commitments and
will furnish all such information and documents relating to its properties and
business as FPIN may reasonably request. In the event that this Agreement is
terminated and the Merger is abandoned, FPIN will keep confidential any
information (unless readily ascertainable from public information or sources or
otherwise required by law to be disclosed) obtained from FPIO in connection
with the Merger and will return to FPIO all documents, work papers and other
written material obtained by FPIN from FPIO.
4.3. Subsequent Financial Statements. With respect to each fiscal quarter
ending more than 45 days prior to the Effective Time, FPIO will deliver to
FPIN, no later than 45 days after the end of such fiscal quarter, an unaudited,
consolidated balance sheet of FPIO as of the last day of such fiscal quarter,
and the statements of income, changes in stockholders' equity, and changes in
financial position of FPIO for the fiscal period then ended certified as to the
completeness and accuracy by the Treasurer or chief financial officer of FPIO.
-11-
<PAGE>
ARTICLE V
Conditions Precedent
5.1. Conditions to Obligations of Each Party. The obligations of FPIN and
FPIO to effect the Merger, and for FPIN to issue the shares of Common stock to
the shareholders of FPIO in exchange for their shares of Common stock in FPIO
shall be, subject to the fulfillment at or prior to the Effective Time of the
following conditions:
5.1.1. Stockholder Approval. This Agreement and Merger shall have, been
approved by the unanimous affirmative vote of at least two-thirds of all the
holders of the outstanding shares of FPIO without any exercise of dissenter's
appraisal rights.
5.1.2. No Injunction, Etc. No action or proceeding shall have been
instituted by any public authority or private party prior to the Effective Time
before any court or administrative body to restrain, enjoin, or otherwise
prevent the consummation of the Merger or the transactions contemplated hereby
or to recover any damages or obtain other relief as a result of the Merger.
5.2.3. Governmental Compliance. All permits, approvals, and consents of any
governmental body or agency, which FPIO and/or FPIN may reasonably deem
necessary or appropriate, shall have been obtained.
5.2.4. Conditions to the Obligations of FPIO. The obligation of FPIO to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
5.2.1 FPIN Representations, Performance. The representations and
Warranties of FPIN contained in Section 2.1 shall be true at and as of the date
hereof and shall be repeated and shall be true at and as of the Effective Time
with the same effect as though made at and as of the Effective Time, FPIN shall
have duly performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Effective Time, FPIN shall have delivered to FPIO a certificate, dated the date
of the Effective Time, and signed by its Chairman or its President and by its
Treasurer or chief financial officer to the effect set forth in this Section
5.2.1.
5.2.2. FPIN Board of Directors Approval. This Agreement and Merger shall
have been approved by the unanimous affirmative vote of the Board of Directors
of FPIN without any exercise of dissent or abstention.
5.2.3 Consents. Any required consent to the Merger under any agreement
or contract, the withholding of which would have a material adverse effect on
the properties or business of FPIN or FPIO, shall have been obtained.
5.2.4. Letter as to Certain Tax Matters. FPIN shall deliver to FPIO, at a
time reasonable to all concerned, a letter as to certain tax matters relating
to the qualification of the Merger within the meaning of Section 368 of the
Code.
5.2.5 Opinion of Counsel. FPIO shall have received a favorable
opinion, addressed to it and dated the date of the Effective Time, from general
counsel to FPIO, satisfactory, to FPIN in form and substance to the effect
that: (a) FPIO is a corporation duly organized validly existing, and in good
standing, under the laws of the State of Ohio with full
-12-
<PAGE>
corporate authority and power to carry on its business as now conducted and to
own or lease and operate its properties and is qualified and in good standing
in all places where such business is now conducted and such properties are now
owned, leased, or operated, and with full corporate power and authority to
execute this Agreement and the Merger: (b) the issued and outstanding capital
stock is as stated in such opinion (which statement shall be consistent with
the representations and warranties of FPIO), and all outstanding shares of
capital stock of FPIO are fully paid and nonassessable; (c) this Agreement has
been duly authorized by all necessary corporate action on the part of FPIO;
(e) the execution delivery, and performance of this Agreement and the Merger
does not constitute a violation of any federal, state, or local law, rule, or
regulation: (f) to the best of counsel's knowledge, there are no judicial or
administrative proceedings pending or, to FPIO's knowledge, threatened which
might result in any material adverse change in conditions (financial or other),
properties, assets, business, operations, or prospects of FPIO or in any
material liability on the part of FPIO, or which question the validity of this
Agreement or the Merger or of any action taken or to be taken in connection
herewith, nor are there any penalties, fines, or citations asserted against
FPIO by any federal, state, or local authority; (g) upon the filing of the
Certificate of Merger the merger shall have been duly consummated and
completed, and the shares of FPIO shall have been effectively canceled, and
in their stead, each of those shares of FPIO shall have been replaced by one
share of FPIN, fully paid and nonassessable.
5.2.6. Corporate Proceedings. All corporate and other proceedings in
connection with the Merger and the other transactions contemplated hereby, and
all documents and instruments incidental thereto, shall be satisfactory in form
and substance to FPIN, and FPIN and its counsel shall have received all such
documents and instruments or copies thereof, certified if requested, as may be
reasonably requested.
5.3. Conditions to Obligations of FPIO to Effect Merger. The
obligation of FPIN to effect the Merger shall be subject, at or prior to the
Effective Time (or waiver by FPIN) of the following additional conditions:
5.3.1 FPIO Representations, Performance, Etc. The representations and
warranties of FPIO contained in Section 2.2 shall be true at and as of the date
hereof and shall be repeated and shall be true at and as of the Effective Time
with the same effect as though made at and as of such time (except for changes
not material to the aggregate), FPIO shall have duly performed and complied
with all agreements and conditions required by this Agreement to be performed
or complied with by them prior to or at the Effective Time, FPIO shall have
delivered to FPIN a certificates dated the date of the Effective Time and
signed by its President or Chairman to such effect.
5.3.2. Opinion of Counsel. FPIN shall have received a favorable opinion,
addressed to it and dated the date of the Effective Time, from general counsel
to FPIN, satisfactory to FPIO in form and substance to the effect that: (a)
FPIN is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada with full corporate authority and power
to carry on its business as now conducted and to own or lease and operate
properties and is qualified and in good standing in all places where such
-13-
<PAGE>
business may now be conducted and such properties may now be owned leased or
operated, and with full corporate power and authority to execute this
Agreement, and the Merger: (b) the issued and outstanding capital stock is as
stated in such opinion (which statement shall be consistent with the
representations and warranties of FPIN), and all outstanding shares of capital
stock of FPIN are fully paid and nonassessable; (c) this Agreement has been
duly authorized by all necessary corporate action on the part of FPIN: any
order, authorization, consent, or approval of, or registration, declaration, or
filing with any governmental authority shall have been carried out or will be
carried out as by FPIN; (e) the execution, delivery and performance of this
Agreement and the Merger does not constitute a violation of the Articles of
Incorporation or the By-laws of FPIN, nor does it constitute a violation of any
federal, state, or local law, rule, or regulation; (f) to the best of counsels
knowledge, there are no judicial or administrative proceedings pending or, to
FPIN's knowledge, threatened which might result in any material adverse change
in conditions (financial or other), properties assets, business, operations, or
prospects of FPIN or in any material liability on the part of FPIN, or which
question the validity of this Agreement or the Merger or of any action taken or
to be taken in connection herewith, nor are there any penalties, fines, or
citations asserted against FPIN by any federal, state, or local authority.
5.3.3 Corporate Proceedings. All corporate and other proceeding in
connection with the Merger and the other transactions contemplated hereby, and
all documents and instruments incidental thereto, shall be satisfactory in form
and substance to FPIO, and FPIO and its counsel shall have received all such
documents and instruments or copies thereof, certified if requested, as may be
reasonably requested.
ARTICLE VI
Termination, Amendment, Waiver
6.1. Automatic Termination. This Agreement shall automatically,
terminate and the Merger shall automatically be abandoned without any further
action on the part of any party hereto on March 15, 1998 if the Merger shall
not have theretofore become effective.
6.2. Termination. This Agreement may be terminated and the Merger
abandoned at any time (whether before or after the approval thereof by the
stockholders of FPIO) prior to the Effective Time:
(a) by mutual consents of the Boards of Directors of the parties
hereto evidenced by appropriate resolutions:
(b) by FPIO by notice to FPIN (i) if any of the conditions set forth
in Section 5.1 or 5.2 shall not have been fulfilled by February, 28, 1998, or
(ii) if any material default under or any material breach of any agreement or
condition of this Agreement, or any material misrepresentation or material
breach of any warranty contained herein, on the, part of FPIN shall have
occurred and shall not have been cured, or
(c) by FPIN by notice to FPIO (i) if any of the conditions set forth
in Section 5.1 or 5.3 shall not have been fulfilled by February 23, 1998, (ii)
if any material default under or any material breach of any agreement or
condition of this Agreement, or any material
-14-
<PAGE>
misrepresentation or material breach of any warranty contained herein, on the
part of FPIO shall have occurred and shall not have been cured.
6.3. Effect of Termination. In the event of the termination of this
Agreement and the abandonment of the Merger pursuant to the provisions of
Section 6.1 or 6.2 hereof, this Agreement shall become void and have no effect,
without any liability on the part of any party thereto or its directors,
officers, or stockholders in respect of this Agreement, except the liabilities
of each of the parties hereto to pay the expenses incurred by it or on its
behalf.
6.4 Amendment. This Agreement may be amended by action of the Boards
of Directors of the parties hereto (or a duly authorized committee thereof) at
any time before or after approval hereof by the stockholders of FPIO, but after
any such approval no amendment shall be made which substantially changes the
terms hereof without the further approval of the stockholders. This Agreement
may not be amended except by an instrument in writing duly executed and
delivered on behalf of each of the parties hereto.
6.5. Extension; Waiver. At any time prior to the Effective Time, the
Boards of Directors of FPIO, on the one hand, or FPIN on the other (or a duly
authorized committee of either of them may (a) extend the time for the
performance of any of the obligations or other acts of the other, (b) waive any
inaccuracies in the representations and warranties of the other party container
herein or in any document or instrument delivered pursuant hereto, and (c)
waive compliance by the other with any of the agreements or conditions
contained herein any agreement of the part of a party hereto to any extension
or waiver shall be valid if set forth in an instrument in writing duly executed
and delivered on behalf of such party to the other.
ARTICLE VII
Definitions, Miscellaneous
7.1 Definition of Certain Terms. As used herein, the following terms
shall have the following meanings:
Agreement: this Agreement and Plan of Merger and Reorganization.
Code: the Internal Revenue Code of 1986, as amended.
FPIN: as defined in the first paragraph of this Agreement,
FPIN Common Stock: shares of Common stock, par value $0.001 per share Common
of FPIN,
FPIN Financial
Statements: the consolidated financial statements of FPIN, as
at January 31, 1998, including the notes thereto,
including, a balance sheet and an income statement
Effective Time: the time at which the Certificate of Merger is filed with
the Secretary of State of Nevada.
ERISA: the Employment Retirement Income Security Act of 1974, as
amended,
Merger: the merger of FPIO into FPIN in accordance with the terms
and conditions of this Agreement.
FPIO: as defined in the first paragraph of this Agreement,
FPIO Common Stock: shares of Common stock, no par value Common, of FPIO.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
FineLine Properties, Inc. (Ohio)
By: s/s Robert Petry
- -----------------------------
Robert Petry
President
Attest:
s/s Sidney Rudick
- -----------------------------
Sidney Rudick
Director
FineLine Properties, Inc. (Nevada)
By s/s Robert Petry
- ------------------------------
Robert Petry
President
Attest:
s/s Sidney Rudick
- ---------------------
Sidney Rudick
Director
-16-
<PAGE>
EXHIBIT 3.1
FILED # 626-1998
JAN 12 1998
IN THE OFFICE OF
Dean Heller
DEAN HELLER SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
FINELINE PROPERTIES.COM, Inc.
-------------------------------
KNOW ALL MEN BY THESE PRESENTS:
That we the undersigned, have this day voluntarily associated ourselves
together for the purposes of forming a corporation under the laws of the
State of Nevada and we do hereby certify:
I.
The name of this corporation is FINE PROPERTIES, INC.
II.
The resident agent of said corporation shall be Pacific Corporate
Services, Inc., 7631 Bermuda Road, Las Vegas, Nevada 89123 and such other
offices as may be determined by the By-Laws in and outside of the State
of Nevada.
III.
The objects to be transacted, business and pursuit and nature of the
business, promoted or carried on by this corporation are and shall
continue to be engaged in any lawful activity except banking or insurance.
IV.
The members of the governing board shall be styled Directors and the first
Board of Directors shall consist of two (2). The number of stockholders
of said corporation shall consist of two (2). The number of directors and
stockholders of this corporation may, from time to time, be increased or
decreased by an amendment to the By-Laws of this Corporation in that
regard, and without the necessity of amending these Article of
Incorporation. The names and addresses of the first Board of Directors
and of the Incorporators signing these Articles are as follows:
Robert Petry 7337 Westview Drive
Kent, OH 44240
Harcourt A. Wiltshire 7337 Westview Drive
Kent, OH 44240
-1-
<PAGE>
V.
The Corporation is to have perpetual existence.
VI.
The total authorized capitalization of this Corporation shall be and is
the sum of 3,000,000 shares of Common Stock at $.001 par value, said stock
to carry full voting power and the said shares shall be issued fully paid
at such time as the Board of Directors may designate, in exchange for cash
property, or services, the stock of other corporations or other values,
rights or things, and the judgement of the Board of Directors as to the
value thereof shall be conclusive.
VII.
The capital stock shall be and remain non-assessable. Then private
property of the stockholders shall not be likable for the debts or
liabilities of the Corporation.
IN WITNESS WHEREOF, we have set our hand this 14th day of October, 1997.
s/s Robert Petry
- ----------------------------
Robert Petry
s/s Harcourt A. Wiltshire
- ----------------------------
Harcourt A. Wiltshire
-2-
<PAGE>
January 12, 1998
State of Nevada
Secretary of State
I hereby certify that this is a
true and complete copy of the
document filed in this office.
/s/ Dean Heller
Dean Heller, Secretary of State
By: /s/ D. Bates
- -------------------
D. Bates
<PAGE>
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 12, 1999
No. C626-98
s/s Dean Heller
- -----------------
Dean Heller, Secretary of State
RESTATED ARTICLES OF INCORPORATION
OF
FINELINE PROPERTIES, INC.
We, the undersigned President and Secretary of FINELINE PROPERTIES, INC.
do hereby certify:
That the board of directors and shareholders by written consent have
adopted resolutions to amend and restate the Article of Incorporation;
That the number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 9,531,830; that
said amendments have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon;
That the primary purpose of the amendments is to change the name of the
corporation to FINELINES PROPERTIES.COM, INC.; and to provide
indemnification for directors and officers; and
That the text of Articles of Incorporation as amended to date reads as
herein set forth in full:
ARTICLE I
NAME
----
The name of this corporation (hereinafter called "Corporation") is
FINELINE PROPERTIES.COM, INC.
ARTICLE II
REGISTERED OFFICE AND AGENT
---------------------------
The registered agent of said corporation shall be Pacific Corporate
Services, Inc., 7631 Bermuda Road, Las Vegas, Nevada 89123 and such other
offices as may be determined by the By-Laws in and outside of the State of
Nevada.
-1-
<PAGE>
ARTICLE III
PURPOSES AND POWERS
-------------------
The objects to be transacted, business and pursuit and nature of the
business, promoted or carried on by this Corporation are and shall continue
to be engaged in any lawful activity except banking or insurance.
ARTICLE IV
DIRECTORS
---------
The Corporation shall be governed by a Board of Directors consisting
of such number of directors as shall be fixed the Corporation's by-laws.
The number of directors constituting the current board of directors of
the corporation is three and the name and addresses of the directors are
as follows:
Name Address
---- -------
Robert Petry 7337 Westview Drive
Kent, Ohio 44240
Sidney Rudick 4362 S.W. 52 Street
Fort Lauderdale, Florida 33314
Carl White 420 North Grand Avenue
Long Beach, California 90814
ARTICLE V
DURATION
--------
The corporation is to have perpetual existence.
ARTICLE VI
CAPITALIZATION
--------------
The total authorized capitalization of this Corporation shall be and is
in the sum of 20,000,000 shares of Common Stock at $.001 par value, said
stock to carry full voting power, and 1,000,000 shares of Preferred Non-Voting
Stock at $.001 par value. The said shares shall be issued fully paid at
such time as the Board of Directors may designate, in exchange for cash,
property, or services, the stock of other corporation or other values,
-2-
<PAGE>
rights or things, and the judgment of the Board of Directors as to the value
thereof shall be conclusive.
ARTICLE VII
STOCKHOLDER LIABILITY
---------------------
The capital stock shall be and remain non-assessable. The private
property of the stockholders shall not be liable for the debts and liabilities
of the Corporation.
ARTICLE VIII
LIABILITY OF OFFICERS AND DIRECTORS
-----------------------------------
A director or officer of the Corporation shall not be liable to the
Corporation or its shareholders for damages for breach of fiduciary duty
as a director or officer unless the act or omission involves intentional
misconduct, fraud, a knowing violation of law or the payment of any
unlawful dividend in violation of NRS 78.300.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The Corporation shall indemnify any and all persons who may serve or
who have served at any time as directors or officers or who, at the request
of the Board of Directors of the Corporation, may serve or at any time have
served as directors or officers of another corporation in which the
Corporation at such time owned or may own shares of stock or of which it
was or may be a creditor, and their respective heirs, administrators,
successors and assigns, against any and all expenses, including amounts paid
upon judgments, counsel fees and amounts paid in settlement (before or after
suit is commenced), actually and necessarily by such persons in connection
with the defense or settlement of any claim, action, suit or proceeding in
which they, or any of them, are made parties, or a party, or which may be
asserted against them or any of them, by reason of being or having been
directors or officers of the Corporation, or of such other corporation,
except in relation to matters as to which any such director or officer of
the Corporation, or of such other corporation or former director or officer
or person shall be adjudged in any action, suit or proceeding to be liable
for his own negligence or misconduct in the performance of his duty. Such
indemnification shall be in addition to any other rights to which those
indemnified may be entitled under any law, by law, agreement, vote of
shareholder or otherwise.
DATED this 27 day of February, 1999.
-3-
<PAGE>
s/s Robert Petry
- ------------------
Robert Petry
President
ATTEST:
s/s Sidney Rudick
- ------------------
Sidney Rudick
Secretary
STATE OF OHIO
COUNTY OF PORTAGE
On February 27, 1999, personally appeared before me, a Notary Public,
Robert Petry, who acknowledged that he executed the above document in his
capacity as President of FINELINE PROPERTIES.COM, INC./aka FINELINE
PROPERTIES, INC.
s/s Albert E. Grimes
- ---------------------
Notary Public
Albert E. Grimes
Notary Public, State of Ohio
My Commission Expires March 11, 1999
Recorded in Portage County
-4-
<PAGE>
EXHIBIT 3.2
By-laws of FineLine Properties, Inc.
Article I
OFFICES
The principle office of the Corporation shall be located in the City of
Fairlawn in the State of Ohio. The Corporation may relocate its
principle office or have such other office within the United States of
America as the Board of Directors may designate or as the business of
the Corporation may require from time to time.
Article II
SHAREHOLDERS
Section 1. Annual Meeting. The Annual Meeting of the Shareholders shall
be held on the Third Friday of February in each year, beginning with
the next year, for the purpose of electing Directors and for the
transaction of such other business as may come before the meeting. If the
election of Directors shall not be held on the day designated herein for any
Annual Meeting of the Shareholders, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a Special
Meeting of the Shareholders as soon thereafter as conveniently may be.
Section 2. Special Meetings. Special Meetings of the Shareholders, for
any purpose, unless otherwise prescribed by statute, may be called by a
President or by the Directors, or by the holders of not less than Ten
percent (10%) of all the outstanding shares of the Corporation entitled
to vote at such meeting.
Section 3. Place of Meeting. The Board of Directors may designate any
place, within or without the State of Incorporation, unless otherwise
prescribed by statute, as the place of any Annual or Special Meeting
called by the Board of Directors. If no designation is made, or if a
Special Meeting is otherwise called, the place of meeting shall be the
principle office of the Corporation.
Section 4. Notice of Meeting. Written notice stating the place, day,
and hour of the meeting, and for Special Meetings, the purpose for which
the meeting is called, shall, unless otherwise prescribed by statute, be
delivered not less than ten (10) nor more than fifty (50) days before
the date of the meeting, either personally, or by mail, by direction of
the Chairman or the Secretary, or the persons calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed,
such notices shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address
as it appears on the stock transfer books of the Corporation.
Section 5. Closing of Transfer Books or Fixing of the Record Date. For
the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or adjournments thereof, or shareholders
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other purpose, the Board of
Directors of the Corporation may provide that the stock transfer books
shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting on the date on which the resolution
of the Board of Directors declaring such dividend, as the case may be, and
this date shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at
any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof.
Section 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make available a
complete list of the shareholders entitled to vote at any meeting of
shareholders or any adjournment thereof, with the address of and the
number of shares held by each, at least ten (10) days before such
meeting or adjournment thereof. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to
the inspection of any shareholder during the meeting.
Section 7. Quorum. The majority of the outstanding shares voting of the
Corporation that are entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. At such
meeting at which a quorum shall be present or represented, any business
may be transacted at the meeting as originally noticed. The majority of
shareholders present at the meeting may continue to transact business
until adjournment.
Section 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by
his or her duly authorized attorney in fact. Such proxy shall be filed
with the Secretary of the Corporation before or at the time of the
meeting.
Section 9. Voting of Shares. Subject to the provisions, each
outstanding share eligible to vote shall be entitled to one (1) vote
upon each matter submitted to a vote at a meeting of the shareholders. Upon
demand of any shareholder, the vote for directors or upon any question before
the Meeting shall be by ballot. All elections for directors shall be
decided by expressed will of the quorum, except when a quorum is not
obtained, in which case the will of a plurality shall carry. All other
questions shall be decided by quorum vote except as otherwise provided
by the Certificate of Incorporation or the laws of the States of
Incorporation.
Section 10. Voting of Shares by Certain Shareholders. Shares
outstanding in the name of another corporation may be voted by such
officer, or proxy as the by-laws of such corporation may prescribe, or,
in the absence of such provision, as the board of directors of such
corporation shall determine.
Shares held by an administrator, executor, guardian, or server may be
voted by him or her, either in person or by proxy, without transfer of
shares into his or her name. shares outstanding in the name of a
trustee may be voted by him or by her, into the name of the trustee.
Shares outstanding in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be
voted by the same without the transfer thereof into his or her name if
authority to do so is contained in an appropriate order of the court by
which such receiver was appointed; such court order shall be presented
to the Secretary of the Corporation before the shares are voted.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred from the name of the
shareholder to another.
Shares if its own stock belonging to the Corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
Section 11. Informal Action by Shareholders. Unless otherwise provided
by law, any action required to be taken at a meeting of the
shareholders, or any other action which may be taken at a meeting of
the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter
thereof.
Section 12. Non-cumulative Voting. Unless otherwise provided by law, at
each election of Directors, every shareholders entitled to vote in such
election shall have the right to vote, in person or by proxy, the
number of shares owned by him or her for as many persons as there are
Directors to be elected and for whose election he or she has the right to vote.
Section 13. Order of Business. The order of business at all meetings of
stockholders shall be as follows; 1). Roll Call; 2) Proof of notice of
meeting or waiver of notice; 3) Reading of minutes of previous meeting;
4) Reports of Officers; 5) Reports of Committees; 6) Election of
Directors; 7) Unfinished Business; 8) New Business.
Article III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors
shall not be less than three (3) nor more than nine (9) as directed by
the Board of Directors. Each Director shall hold office until the next
Annual Meeting of the Shareholders and until a successor has been
elected and qualified. Additional Directors may be added by majority
vote of the then-existing Board.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held, without other notice than this By-law,
Immediately after, and at the same place as, each Annual Meeting of
the Shareholders. The Board of Directors shall hold a regular meeting
on the First day of each month, without notice of meeting other than
this Article and Section of these By-laws.
Section 4, Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of any Director. The person(s)
authorized to call such a special meeting of the Board of Directors may
fix the place for holding such meetings.
Section 5. Notice. Notice of any special meeting of the Board of
Directors shall be given at least ten (10) days previous thereto by
written notice delivered personally or by certified mail, return
receipt requested, which notice shall be deemed to be delivered when
deposited in the United States mail. Any Director may waive notice of any
meeting. The attendance of a Director at a meeting shall constitute
a waiver of notice for such meeting, except where a Director attends
a meeting for the express purpose of objecting to the transaction of
business because the meeting was not lawfully called or convened.
Section 6. Quorum. A majority of the number of Directors fixed by these
By-laws shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but if less than a majority is
present at a meeting, the majority of the Directors present may adjourn
the meeting from time to time without further notice.
Section 7. Manner of Acting. Any act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 8. Action Without Meeting. Any action that may be taken by the
Board of Directors at a meeting may be taken without a meeting if
written consent setting forth the action to be taken shall be signed
before such action by a majority of the Directors.
Section 9. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of the majority of the remaining
Directors, though possibly less than a quorum of the Board of
Directors, unless otherwise prohibited by law. A Director elected to fill a
vacancy shall be elected for the unexpired term of his or her predecessor on
office. Any directorship to be filled by reason of an increase in the
number of Directors may be filled by the Board of Directors for a term
of office continuing only until the next election of Directors by the
shareholders..
Section 10. Compensation. By resolution of the Board of Directors, each
Director may be reimbursed for expenses of attending any meeting and
may be paid a stated salary as a Director, or a fixed sum for attendance at
each meeting of the Board of Directors, or both. No such payment shall
preclude ant Director from serving the Corporation in any other
capacity and receiving compensation therefrom.
Section 11. Presumption of Assent. A Director who is present at a
meeting of the Board of Directors at which any action or corporate
matter is taken shall be presumed to have assented to the action taken
unless his or her dissent shall be entered into the minutes of the
meeting or unless he or she shall file his or her dissent with the
person acting as the Secretary of the Meeting before the adjournment of
the meeting or within three (3) days thereafter. Such right of dissent
shall not apply to any Director who voted in favor of such action.
Section 12. Special Powers. The Board of Directors shall have the right
to re-incorporate the Company, to declare splits or reverse splits of
the stock of the Company, or otherwise act on matters concerning the
corporate status and capital structure of the Company.
Article IV
STRUCTURE OF THE BOARD OF DIRECTORS
Section 1. Nominative Offices. The named offices of the Board of
Directors shall be that of a President, a Treasurer, and a Secretary. A
single Director may hold more than one named office, but not more than
two. Such Directors as do not hold a named office shall be called and
considered Members-at-Large of the Board of Directors.
Section 2. Election and Term of Office. The named offices of the Board
of Directors shall be filled by election of the Board of Directors at
the Annual Meeting of Shareholders. The term of office shall coincide
with the term of directorship, or, by appointment by the Board of
Directors to fill a vacancy caused by the resignation, death, or
removal from office of a Director who holds a named office, only for the
unexpired term of that Director, until the next election of Directors
by the shareholders. A candidate for election to the Board of Directors
shall be presented with the named office, if any, to the shareholders
for their votes.
Section 3. President. The President shall be the chief executive
Officer of the Corporation and, subject to the control of the Board of
Directors, shall control all business affairs of the Corporation
including, but not restricted to, routine purchasing of inventory,
sales and marketing strategies pursued, hiring and firing of employees of the
Corporation, determination of salaries of employees, risk management,
etc. and the devolution of any of these duties to subordinates as he or
she deems necessary and appropriate. He or she shall execute the
decisions of the Board of Directors in a timely manner, or on any other
relevant corporate matter, as Directors or any Director shall dictate,
within the bounds of these By-laws.
Section 4. Vice-President. A Vice President of the Corporation shall
carry out such duties as prescribed by the Board of Directors in the
appointment of him or her to the position. A Vice President may, at the
discretion of the Board of Directors upon his or her appointment, be
designated with a prefix title )e.g. "Senior"), and may be assigned a
suffix descriptor of his or her general or specific area of activity or
activities (e.g. "Marketing"). In general, a Vice President shall
report directly to the President, but may from time to time report directly to
the Board of Directors if expressly requested to do so by the Board of
Directors or any Director.
Section 5. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and the Board of Directors; (b) see
that all notices are duly given in accordance with the provisions of these
By-laws or as required by law; (c) be custodian of the corporate
records and of the seal of the Corporation; (d) keep a register of the post
office address of each shareholder which shall be furnished to the
Secretary of each shareholder; (e) sign, with the President,
certificates for shares of the Corporation which have been authorized
by the Board of Directors or the shareholders; (f) have general charge of
the stock transfer books of the Corporation; and (g) in general perform
all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him or her by the Chairman or
Board of Directors.
Section 6. Treasurer. The Treasurer shall (a) have custody of and be
responsible for all funds and securities of the Corporation; (b)
receive and give receipts for all money due and payable to the
Corporation, and deposit all such moneys in the name of the
Corporation in such banks or other depositories as shall be
designated by the Board of Directors; and (c) in general perform all
of the duties incident to the office of the Treasurer and which may
be assigned to him or her from time to time by the Chairman of the Board.
Section 7. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the Corporation or
adjournments thereof. The Chairman of the Board shall be elected by,
and serve exclusively at the discretion of, the Board of Directors, and
shall serve a term co-incident with that of all other Board members.
The Chairman of the Board of Directors shall be the spokesperson for the
Board of Directors, unless he or she assigns this duty to another
Director. The Chairman of the Board of Directors shall have no special
powers other than those explicitly described in this Article.
Section 8. Salaries. The salaries of the named Directors shall be fixed
from time to time by the Board of Directors, and no such Director shall
be prevented from receiving such salary because he is a Director or
otherwise an Officer as described in this Article, or employed in some
other capacity by the Corporation.
Article V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation,
and such authority may be general or limited to specific events.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such
authority may be general or limited to specific events.
Section 3. Checks, Drafts, Et Cetera. All checks, drafts, or other
orders for payment of money, notes, or other evidence of indebtedness
issued in the name of the Corporation shall be signed by the President,
acting in his capacity as the chief executive officer of the
Corporation, or such officer or officers or agent or agents of the
Corporation and in such manner as from time to time shall be determined
by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such bank or other depositories as the Board of Directors shall
designate.
Article VI
CERTIFICATES OF SHARES AND THEIR TRANSFER
Section 1. Certificates of Shares. Certificates representing shares of
the Corporation shall be in such from as shall be determined by the
Board of Directors. Such certificates shall be signed by either the
President in his capacity as he chief executive officer of the
Corporation, and by the Secretary, or by such other officer or officers
as shall be authorized by the Directors in conformity with applicable
law, and sealed with the corporate seal. All certificates for shares
issued, with the number of shares and date of issue, shall be entered
on the transfer books of the Corporation. All certificates surrendered to
the Corporation for transfer shall be canceled, except that in the case
of a lost, destroyed, or mutilated certificate a new one may be issued
therefor upon such terms and indemnity to the Corporation as the Board
of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by
the holder of he record thereof or by his or her legal representative(s),
who shall furnish proper evidence of the authority to transfer, or by
his or her duly authorized attorney, and on surrender for cancellation
of the certificate(s) of such shares. The person or other entity in
whose name the shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
Article VII
FISCAL YEAR
The fiscal year of the Corporation shall end on the last day of
December of each year.
Article VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation my pay, dividends on its outstanding shares in the manner
and upon the terms and conditions provided by laws and the Articles of
its Certificate of Incorporation, except that no such dividend shall be
paid except from accrued profits.
Article IX
CORPORATE SEAL
The Directors at their discretion, may provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of
the Corporation, the state of incorporation, year of incorporation and
the words "Corporate Seal".
Article X
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or Director of the Corporation, a waiver
thereof in writing, signed by the person entitled to such notice,
whether before or after the time started therein, shall be deemed
equivalent to the giving of such notice.
Article XI
AMENDMENTS
These By-laws may be altered or amended or replaced by the Board of
Directors at any meeting thereof.
I, Sidney Rudick, Secretary of the Corporation, hereby certify that the
foregoing By-laws of FineLine Properties, Inc. consisting of Eleven
(11) Articles, were approved by unanimous vote at the First (Organizational)
Meeting of the Board of Directors of FineLine Properties, Inc., held on
the Twenty-seventh day of February, Nineteen Hundred Ninety-eight.
s/s Sidney Rudick
- ------------------------
Sidney Rudick,
Secretary
Attest:
s/s Robert Petry
- -------------------------
Robert Petry
President and Chairman of the Board of Directors
<PAGE>
SECRETARY'S CERTIFICATE
- -------------------------
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of
FINELINE PROPERTIES.COM, INC., and that the above and foregoing Bylaws were
adopted as the Bylaws of said corporation on the 27th day of February, 1998, by
the Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day
of February, 1998.
By /s/ Sidney Rudick
------------------------
SIDNEY RUDICK, Secretary
<PAGE>
EXHIBIT 4.1
Stock Certificate
FineLine Properties.com, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
20,000,000 SHARES COMMON STOCK AUTHORIZED $0.001 VALUE
SHARES
CUSIP NO. 31787B 10 9
THIS CERTIFIES THAT
----------------------------
IS THE RECORD HOLDER OF
Shares of FINELINE PROPERTIES.COM, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
and the shares represented hereby are subject to the laws of the State of
Nevada, and to the Certificate of Incorporation and "Bylaws of the Corporation,
as now or hereafter amended. This certificate is not valid until countersigned
by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the
signature of its duly authorized officers
Dated:
/s/ Robert Petry /s/ Sidney Rudick
- ------------------ --------------------
PRESIDENT SECRETARY
Countersigned & Registered:
PACIFIC STOCK TRANSFER CORPORATION.
P.O. Box 93385
Las Vegas, Nevada 89193-3385
By
------------------------------------------
Authorized Signature
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT - . . . . Custodian. . . .
(Cust) (Minor)
under Uniform Gifts to Minors Act ____________ (State)
Additional abbreviations may also be used though
not in the above list.
For the value received ----------------hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE [ ]
- ---------------------------------------------------
(Please print or typewrite name and address including
postal zip code of assignee)
- ----------------- Shares
of capital stock represented by the within Certificate,
do hereby irrevocably constitute and appoint
- ---------------------------
to transfer the sad Shares, on the books of the within names Corporation
with full power of substitution in the premises.
Dated -----------------------
X-----------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTERN UPON
THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERNATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan
Associations and Credit Unions)
SIGNATURE GUARANTEED:
TRANSFER FEE WILL APPLY
<PAGE>
EXHIBIT 10.1 Corporate Lease
LEASE
This lease made this 9th day of February, by and between Carl A Picelle, 108
South Water Street, Kent, Ohio, hereinafter referred to as "Lessor" and Robert
Petry DBA: FineLine Properties.com, Inc., hereinafter referred to as "Lessee".
WITNESSETH:
That Lessor and Lessee covenant with each other as follows:
Demised Premises
The lessor, for and in consideration of the rents, covenants and agreements
specified to be paid, kept and performed by the Lessee, hereby leases to the
lessee, the entire office area located on the second (2 nd) floor of the
building found at 108 South Water Street, Kent Ohio, 44240, and using the
address 110 South Water Street, Kent Ohio, 44240. Such premises, including rest
rooms, hallways, stairwells and entranceways leading to them are hereinafter
referred to as "Demised Premises", and lessor represents said premises in good
condition and repair, including heat, air conditioning , electric and plumbing.
No other representations or promises except such as are contained herein or
endorsed hereon have been made to the Lessee as to the condition of the demised
premises. Lessee's act of taking possession of said premises shall be
conclusive evidence that said premises are in good and satisfactory condition.
Terms of Lease
The terms of this lease will be two ( 2 ) years, commencing February 10th, 1999.
Rent
Lessee hereby covenants and agrees to pay Lessor as rent for the demised
premises the following: The total sum of $9,600.00 payable in advance on the
first of the month and in 12 consecutive monthly installments of $800.00
commencing on February 10th, 1999
2
<PAGE>
Liability
It is specifically agreed that the "Lessee" shall be jointly and severally
liable for the performance of all "Lessee's" covenants contained herein.
Security Deposit
As a security fund for the faithful performance of the terms and conditions set
forth within this lease, Lessee agrees to deposit with lessor on or before
taking possession of the demised premises, the sum of $800.00. Providing that
Lessee has fully performed all the terms and conditions of the within lease,
this security fund shall be returned to Lessee at the termination of this lease.
It is understood between Lessor and Lessee that in the event of breach or
default of the covenants, terms and conditions of this lease, Lessor shall
return Security Deposit to Lessee less any amount required to cure any default
hereunder; however, this shall not prevent Lessor from asserting any other
claims for damages which Lessor may have against Lessee.
Renewal Options
Lessee is granted the option provided it is not in default of the provisions
and conditions of this lease, to renew this lease for (2) renewal period of
(2) years by giving written intention to do so to Lessor at least ninety (90)
days before the end of initial term of lease; renewal shall be upon the same
terms and conditions set forth in this lease , with rent increases, based upon
leading indexes, not to exceed 15%.
Whereupon Lessee fails to notify Lessor of intention to vacate demised premises
upon completion of initial term of this lease by written notice at least ninety
(90) days before the end of initial term of lease, Lessor shall have the option
to assess Lessee an automatic renewal period of twelve ( 12 ) months upon the
same terms and conditions set forth in this lease, with rent increase, based
upon leading indexes, not to exceed 10%.
3
<PAGE>
Use of Premises
The demised premises shall he occupied and used solely for the purpose of an
office-oriented business including all things necessary and incidental thereto.
Lessee agrees to use demised premises in a careful, safe manner, and to
continuously operate said business in a high grade and reputable manner.
Alterations
No structural alteration, addition or improvement to the demised premises shall
be made by the Lessee without the prior written consent of the Lessor, of which
consent shall not be unreasonably withheld. All leasehold improvements,
additions or alterations made by Lessee after receiving such consent shall be
in accordance with all applicable laws including permits, and shall be
accomplished at Lessee's sole expense. Lessee shall further indemnify Lessor
harmless from and against all liens, claims or damages by reason of any such
improvement, addition or alteration.
Maintenance and Repair of Demised Premises
Lessee agrees to make necessary ordinary interior repairs, including walls,
floors, light fixtures, and ceilings, except repairs due to fire or other
casualty however caused. Lessor assumes responsibility of normal wear of
carpeting, however, any damage brought about by the negligence of Lessee shall
be the sole responsibility of the Lessee and agrees repairs will be made to the
satisfaction of the Lessor. Lessee shall comply with all building codes
relative to the upkeep of furnished fire extinguishers and smoke alert devices.
Lessee agrees to repair any broken window glass. If Lessee refuses or neglects
to commence or complete repairs promptly and adequately for which they are
responsible under the terms of this lease, Lessor may, but is not required to
do so, notify Lessee of intention, and complete said repairs, at the expense of
the Lessee. In as much as the demised premises are defined as inclusive of all
hallways and stairwells. Lessor agrees to maintain the structural soundness of
any said hallways and stairwells and repair any damage brought about by normal
wear. Lessee agrees to maintain hallways and stairwells on a daily basis and
agrees to provide for the safety, care, and cleanliness reasonable rules and
regulations to insure LESSEE'S comfort, quiet enjoyment of the Premises.
IN WITNESS WHEREOF, the parties have hereunto set their hands or caused this
Lease Agreement to be executed by their authorized agents as of this 9th day of
February, 1999.
s/s Carl A. Picelle
- -------------------------------
By: Carl A Picelle
108 South Water Street
Kent, Ohio 44042
s/s Robert Petry
- -------------------------------
By: Robert Petry
President
FineLine Properties.com, Inc.
3250 Market Street
Fairlawn, Ohio 44333
5
<PAGE>
EXHIBIT "A"
3200 & 3250 OFFICE BUILDINGS
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, elevators, vestibules, stairways,
corridors, and halls shall not be obstructed or encumbered by any LESSEE or
used for any purpose other than ingress and egress to and from the Premises,
2. No awnings or other projections shall be attached to the outside walls
of the Building, There shall be no marking, painting, drilling into or in any
way defacing part of the demised Premises or the Building of which they form a
part without LESSOR's written consent which shall not be unreasonably withheld,
no boring, cutting, or stringing of wires, shall be permitted except with prior
written consent of the LESSOR which shall not be unreasonably withheld and as
the LESSOR may direct.
3. No sign, decoration, advertisement, notice or other lettering shall be
exhibited, inscribed. painted or affixed by any LESSEE on any part of the
outside or inside of the demised Premises or Building without the prior written
consent of the LESSOR which shall not be unreasonably withheld. In the event of
the violation of the foregoing by any LESSEE, LESSOR may remove same without
any liability, and may charge the expense incurred by such removal to the
LESSEE or LESSEE's violating this rule. Interior signs or directories shall be
inscribed for each LESSEE by the LESSOR and be of a size, color, and style
acceptable to the LESSOR.
4. The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, coffee grounds, or other substances shall be, thrown
therein. All damages resulting from any misuse of these fixtures shall be borne
by the LESSEE who, or whose servants, employees , agents, visitors, or
licensees, shall have caused the same.
5. No bicycles, vehicles, or animals of any kind shall be brought into or
kept on or about the demised Premises of the Building of which they form a
part, and no cooking shall be done or permitted by any LESSEE on said
Premises. No LESSEE shall cause or permit any unusual or objectionable odors
to be produced upon or permeate from the demised Premises.
6. No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods, or property of
any kind.
7. No LESSEE, nor any of LESSEE's servants. employees, agents, visitors, or
licensees, shall at any time bring or keep upon the demised Premises any
inflammable,combustible, or explosive fluid, chemicals, or substance.
8. No additional locks or bolts of any kind shall be placed upon any of
the doors, or windows by any LESSEE, nor shall any changes be made in existing
locks or the mechanism thereof. Each LESSEE must, upon the termination of his
tenancy, restore to the LESSOR all keys of offices, store rooms, and toilet
rooms, either furnished to or otherwise procured by, such LESSEE.
1
<PAGE>
9. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which the LESSOR or its Agent may determine from time to time. The LESSOR
reserves the right to prescribe the weight and position of all safes, which
must be placed upon two inch (2") thick plank strips to distribute the weight,
the moving of safes or other fixtures or bulky matter of any kind must be made
upon previous notice to the management of the Building and under his
supervision, and the persons employed by any LESSEE for such work must be
acceptable to the LESSOR. The LESSOR reserves the right to inspect all freight
to be brought into the Building and to exclude from the Building any freight
which violates any of these Rules and Regulations or the Lease Agreement of
which these Rules and Regulations are a part.
10. No LESSEE shall occupy or permit any portion of the demised Premises
to be occupied as an office for the possession, storage, manufacture, or sales
of liquor, narcotics, dope, tobacco, in any form, or as a barber or manicure
shop, or as an employment bureau, unless said LESSEE's lease expressly grants
permission to do so. No LESSEE shall engage or pay any employees on the demised
Premises, except those actually working for such LESSEE on said Premises, not
advertise for laborers giving an address at said Premises,
11. LESSOR shall have the right to prohibit any advertising by the LESSEE
which, in LESSOR's opinion, tends to impair the reputation of the Building or
its desirability as a building for offices, and upon written notice from
LESSOR, LESSEE shall refrain from or discontinue such advertising.
12. Any person employed by any LESSEE to do janitor work must obtain
LESSOR's consent and such person shall while in said Building and outside of
said demised Premises comply with all instructions issued by the management of
the Building.
13. Each LESSEE, before closing and leaving the demised Premises at any
time, shall see to it that all lights, coffee pots, etc. are turned off.
Further, no LESSEE shall, at any time, unlock and remain unlocked a main
Building door; nor shall any LESSEE prop a locked door open to prevent it from
closing fully.
14. The demised Premises shall not be used for lodging, or sleeping, or
for any immoral or illegal purpose.
15. The requirements of LESSEE's will be attended to only upon
application at the office of the Building management. LESSOR's employees shall
not perform any work or do anything outside of their regular duties unless
under special instruction from the Building manager. Any such requirements
from LESSEE's should be made known to LESSOR by calling the office of the
Building at 867-5024.
16. Canvassing, soliciting, and peddling in the Building is prohibited
and each LESSEE shall cooperate to prevent the same.
2
<PAGE>
17. All office equipment of any electrical or mechanical nature shall
be placed by LESSEE in demised Premises in approved settings to absorb or
prevent any vibration, noise, or annoyance.
18. No water cooler, plumbing, or electrical fixtures shall be
installed by any LESSEE without the prior written consent of the LESSOR which
shall not be unreasonably withheld.
19. There shall not be used in any space, or in the public halls of the
Building, either by any LESSEE or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
20. Mats, trash, boxes or other objects are not permitted in the
public corridors.
21. LESSOR s janitor shall take charge of leased Premises and keep the
same in order without additional cost to LESSEE, but the LESSEE shall not cause
unnecessary labor by reason of his carelessness and indifference to the
preservation of good order and cleanliness.
22. Since LESSOR has the right to exclude any undesirable and
disorderly persons from the Building at any time, LESSOR may require
satisfactory identification, including signing of a register of all persons
seeking admission to the Building between the hours of 6:00 p.m. and 8:00 am.,
Monday through Friday, and after 12:00 noon on Saturday to 8:00 a.m. on the
following Monday,
23. LESSEE is obligated to require his employees, guests, and
visitors to observe proper parking as designated in the adjacent parking areas
and to promptly cooperate with LESSOR and his agent in enforcement of this
requirement.
24. LESSEE must also comply with any subsequent rules that may be
promulgated or issued by LESSOR for the general benefit of all LESSEE's as a
whole in said Building.
3
<PAGE>
LEASE AMENDMENT
This Lease Amendment, dated January 19, 1999 by and between Fairlawn
Associates Limited, an Ohio Limited Liability Company, hereinafter called the
LESSOR, and Fineline Properties.com, Inc., an Nevada Corporation, hereinafter
called the LESSEE.
WITNESSETH
WHEREAS, LESSOR and LESSEE did make and execute a Lease Agreement dated
September 10, 1996, as amended on April 28, 1998, for space designated as Suite
#302, comprising of approximately 885 square feet of office space located in
the office building known as 3250 West Market Street, City of Akron, County of
Summit, and State of Ohio (hereinafter referred to as the "Premise" or
"Premises"); and
WHEREAS, the parties hereto desire to alter and modify said Lease
Agreement in the manner hereinafter set forth;
NOW THEREFORE, in consideration of the mutual and reciprocal promises
herein contained, LESSOR and LESSEE hereby agree that said Lease Agreement
hereinabove described be, and the same is hereby modified, in the following
particulars effective February 11 1999:
1. The term of the hereinabove described Lease Agreement shall be
extended for a, one (1) year term, commencing February l, 1999 and expiring
January 31, 2000.
2. LESSEE hereby agrees to pay LESSOR, as rent for the Premises,
Fourteen and 25/100 Dollars ($14.25) per square foot, or the annual sum of
Twelve Thousand Six Hundred Eleven and 28/100 Dollars ($12,611.28), payable
monthly in the amount of One Thousand Fifty and 94/100 Dollars ($1050.94).
All rents are due and payable on or before the first day of the month
commencing February 1, 1999.
3. Except as hereby amended, said Lease Agreement shall continue in
full force and effect, and the parties hereto affirm and ratify all provisions
thereof.
4. This Lease Amendment shall be binding upon and inure to The benefits
of the parties hereto, or their successors and assigns.
IN WITNESS WHEREOF, LESSOR and LESSEE have caused this instrument to be
executed as of the date first above written, by their respective officers or
parties thereunto duly authorized.
Signed in the presence of:
Fairlawn Associates Limited
An Ohio Limited Liability,
Company by
RDA Management, Inc. its Managing Member
Reunick A. Andreoli, President
Fineline Properties.com, Inc.
A Nevada Corporation
s/s Robert Petry
- -------------------------
Bob Petry, President
4
<PAGE>
EXHIBIT 10.2 Marvel Agreement
AGREEMENT as of February 29, 1998, by and between FineLine Properties, Inc., an
Ohio corporation having a place of business at 7337 Westview Drive, Kent, Ohio
44240 ("FineLine") and Marvel Entertainment Group, Inc., a Delaware corporation
having its principal office at 387 Park Avenue South, New York, New York 10016
("Marvel").
WHEREAS, FineLine owns or controls all rights, title and interest in and to the
valuable property known under the character group names of "Moodiest, Tasties"
and "The Hogstturrs" (individually a "Character Group" and collectively the
'Character Groups"), which property includes, without limitation, the rights to
all names, characters, symbols, designs, depictions, likeness, costumes, visual
representations, characteristics, concepts, pictorial and written graphics, and
other intellectual, literary, moral, and property rights and goodwill contained
in, relating to or associated with the property or any part thereof
(hereinafter the "Property");
WHEREAS, FineLine has the sole and exclusive right to create, design, print,
reprint, publish and republish, distribute and redistribute, translate, sell
and license anywhere in the world in any language literary works, printed
matter, publications, and any and all merchandise or any other goods or
products, and also the sole and exclusive right to reproduce and record, or
option and/or license others to do the same, all or any part of the Property in
any audio, visual, or audiovisual mode now known or hereafter devised and to
release, distribute, sell, and/or exploit, and to license others to do the
same, said recorded work in all languages throughout the world. FineLine also
has the sole and exclusive right to sell, dispose of, license and exploit all
merchandise, ancillary, allied and subsidiary rights in and to the Property
and/or based upon or derived or adapted from or incorporating the Property or
any part, portion, element, aspect or feature thereof, including but not
limited to all merchandising rights and all (including, without limitation,
remakes and sequels) motion picture, television, video, radio, and live
dramatic stage rights, and all ancillary rights related thereto, in all
languages throughout the world. All rights enumerated herein shall hereinafter
be collectively referred to as the "Exploitation Rights"; and WHEREAS, FineLine
desires to sell its entire right, title and interest throughout the world in
and to the ownership of the Property and to all rights in and to the Property
including the Exploitation Rights, and Marvel desires to purchase same, upon
the terms, conditions, covenants and representations hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and all of the mutual
promises, terms, and conditions hereinafter set forth, it is agreed as follows:
I. CLOSING
1.1 The Closing, as such term is herein employed, shall take place following
the execution of this Agreement but in no event later than ten (10) business
days from full execution of this Agreement.
1
<PAGE>
II. PURCHASE AND SALE OF PROPERTY
2.1 Assets to Be Transferred-Upon the terms and subject to all of the
conditions herein and the performance by each of the parties of their
respective material obligations hereunder, FineLine agrees to sell, transfer,
convey, assign and deliver to Marvel (or its designee company or companies
which shall execute an agreement assuming Marvel's obligations hereunder), and
Marvel agrees to acquire and accept (or have such designee company or
companies acquire and accept) from FineLine as hereinafter provided, at the
Closing, the entire right, title and interest of FineLine in and to the
ownership of the Property and the Exploitation Rights throughout the world,
including but not limited to the following:
(a) The Property as it may be used and has been used and all trademarks, trade
names, service marks, trade styles, indicia and all variations thereof
throughout the world used with, included in, associated with or relating to the
Property, including but not limited to the characters identified on Schedule A
hereto and the trademarks comprised of the character names identified on
Schedule A identified on Schedule B hereto, and all registrations and
applications for registration thereof in all classifications throughout the
world including but not limited to the registrations and applications listed
and/or indicated on Schedule B hereto, together with the goodwill symbolized
thereby and the right to recover for past infringement thereof.
(b) All copyright rights throughout the world in or relating to the Property
and/or all previously published, produced or created works utilizing or
associated with the Property, including all registrations therefor and all
renewals and extensions thereof.
(c) All published and unpublished artwork and all copies thereof, all editorial
material and all advertising and publicity material pertaining to all works or
publications featuring the Property.
2.2 Purchase Price. The purchase price for the Property and the Exploitation
Rights (the "Purchase Price') shall be comprised of the following:
(a) A non-refundable fee of Seven Thousand Five Hundred Dollars ($7,500) per
Character Group or a total of Twenty-two Thousand Five Hundred Dollars
{$22,500) for the three Character Groups named hereinabove, payable at the
Closing;
(b) For a period of fifteen (15) years commencing on the date of first
commercial use of the Property by Marvel, Marvel shall pay to FineLine
royalties based on the net revenues generated from the exploitation of the
Property or flat fees for certain types of exploitation. "Net Revenue" shall
mean gross revenues actually received by Marvel from the exploitation of the
Property less returns, against commissions, applicable taxes, and Marvel's
2
<PAGE>
direct expenses in connection with such exploitation (excluding overhead
costs). The royalties or flat fees shall be as follows:
(i) a royalty of one percent (1%) of Marvel's net revenues for all publishing
and print publications featuring or utilizing the Property;
(ii) a royalty of twenty percent (20%) of Marvel's net revenues from the sale
or license of merchandise featuring or utilizing the Property;
(iii) a flat fee of Seven Thousand Five Hundred Dollars ($7,500) for each
television production Marvel produces or licenses others to produce in which
one or more of the Character Groups are the primary featured characters,
meaning that the name(s) of the Character Group(s) appears in the title of the
television show and/or the characters comprising the Character Group(s) appear
in at least 50% of the duration of the television show; and
(iv) a flat fee of Twenty-five Thousand Dollars ($25,000) for each major motion
picture Marvel produces or licenses others to produce in which one or more of
the Character Groups are the primary featured characters, such term having the
same meaning as defined in (iii) above.
(c) In the event Marvel utilizes the Property in a publication, merchandise
item or other medium also containing properties other than the Character
Groups, the royalty due FineLine shall be a pro rata share of the aforesaid
royalties equal to the ratio of the appearance time of the Property to the
total length of the project calculated. If the prominence of all properties is
almost equal, the royalty due shall be the prorata share of the royalties equal
to the ratio of the number of characters from the Property featured to the
total number of characters featured in the project or merchandise item.
(d) Marvel shall render semi-annual statements to FineLine relating to
royalties payable in respect of each semi-annual period after initial
exploitation of the Property in accordance with Marvel's regular accounting
practices, showing the number, description, invoiced selling price, and other
pertinent information for each publication, item of merchandise or other use
of the Property, and the amounts due FineLine for each such period. Payment
of the amount due on each statement, after allowance of estimate for returns
of publications or other items sold on a returnable basis, shall accompany
each such statement, and shall be submitted no later than sixty (60) days
after the end of such semi-annual period.
(e) Marvel shall maintain, in accordance with generally accepted accounting
principles, accurate and complete books and records relating to the
exploitation of the Property. Marvel shall keep all such books of account
and records available to FineLine at Marvel's principal place of business
for at least two (2) years after the termination or expiration of this
Agreement. During this Agreement, but not more than once each year, FineLine
or FineLine's designee may, during regular business hours, on at least ten
3
<PAGE>
(10 days written notice to Marvel, examine and, at FineLine's sole cost and
expense, make extracts and copies of Marvel's books of account, records,
vouchers, invoices and all other documents, as they relate to the Property,
in order to determine the accuracy of the statements furnished to FineLine
hereunder. In the event that FineLine or its authorized representatives shall
discover a deficiency for any accounting period of five percent (5%) or more
by any such inspection or audit provided said five percent (5%) equals or
exceeds Five Hundred Dollars ($500.00), Marvel shall pay to FineLine the costs
of such examination and/or audit. The audit fee per them shall be Five Hundred
Dollars ($500.00). In no event, however, shall Marvel be charged for any
individual inspection or audit in excess of One Thousand Five Hundred Dollars
($1,500.00).
(f) FineLine shall be entitled to payment, royalties, or other forms of
remuneration only as provided by this Agreement. Therefore, it is acknowledged
and agreed that FineLine will have no rights in, nor be entitled to receive,
compensation, royalties, or other remuneration for exploitation of the Property
in any form, format, or media now known or hereafter created anywhere in the
universe, except as expressly provided herein; all other revenues shall be the
sole property of Marvel.
2.3 Reversion of Sale. The ownership of the Property and the Exploitation
Rights shall revert to FineLine only if the following takes place: at the end
of a period of three (3) years after the date of execution of this Agreement,
if FineLine has not received at least Twenty-five Thousand Dollars in royalties
and fees generated pursuant to Section 2.2(b) above, FineLine must notify
Marvel in writing within a period of time ending sixty (60) days after the end
of such three (3) year period of its intention to exercise these reversion
rights (the "Reversion Notice'). If FineLine so notifies Marvel, Marvel shall
have ten (10) business days after receipt of such notification to pay to
FineLine a sum equal to the difference between Twenty-five Thousand Dollars
($25,000) and the amount received by FineLine during such previous three (3)
year period for royalties and fees pursuant to Section 2.2(b), and if Marvel
makes such payment to FineLine, then the ownership will not revert to FineLine
and there will be no other reversion of rights possible under this Agreement.
If Marvel does not timely make the requisite payment, all rights granted
hereunder to Marvel shall revert to FineLine except that Marvel shall have the
right to fulfill any outstanding orders or commitments entered into prior to
receipt of the Reversion Notice for one hundred eighty (180) days from receipt
of the Reversion Notice.
III. REPRESENTATIONS AND WARRANTIES OF FINELINE
FineLine represents and warrants as follows:
3.1 Completeness and Accuracy of Schedules. Schedule A annexed hereto is
correct and complete in all material respects. Schedules B and C annexed
hereto are incomplete with respect to the filing, registration status and
ownership information for the trademarks and copyrights, Within a period of
time no longer than twenty (20) business days after the closing, FineLine
shall use its best efforts, and at its own expense, to provide Marvel
4
<PAGE>
with revised schedules that include complete information on the trademarks
and copyrights. In the event that FineLine does not provide such schedules,
Marvel may take action to verify the missing information and the costs
incurred in doing so shall be deducted from the amounts due to FineLine
under Section 2.2(b) above. There are no corporations, partnerships or persons
who have any rights in or claim to the ownership or any of the Exploitation
Rights.
3.2 Legal Existence of FineLine. FineLine is a corporation duly organized
and existing in good standing under the laws of the State of Ohio, and has
full corporate power to carry on its business as now conducted, and is
entitled to own, lease or operate its properties and assets now owned, leased
or operated by it.
3.3 Authority and Capacity of FineLine. The execution of this Agreement by
FineLine and the transfers, assignments and deliveries contemplated hereby,
have been approved by all persons or entities required to approve the same,
and no further corporate action is necessary on the part of FineLine to make
this Agreement valid and binding upon FineLine. The execution of this Agreement
by FineLine and the consummation of the transactions contemplated hereby does
not and will not violate the provisions of the Certificate of Incorporation or
By-Laws of FineLine.
3.3 Property Free of Encumbrances. All assets comprising the Property and
Exploitation Rights are free and clear of any and all liens, pledges, security
interests, restrictions, prior assignments, licenses, encumbrances, claims and
liabilites of every kind and nature, including claims for unpaid taxes of any
kind or nature based upon or arising out of the operation of the business of
FineLine as well as the sale of the ownership of the Property and the
Exploitation Rights hereunder.
3.5 Title, Adverse Claims. FineLine makes the warranties and representations
which follow in subparagraphs (a) through (d) of this Section 3.5 without
limitation, with respect to the world regarding the Exploitation Rights in and
relating to the Property and all material elements thereof:
(a) FineLine is the owner of the entire right, title and interest in and to
the Property and the Exploitation Rights, and all trademark registrations and
applications and all copyright registrations reflect such ownership. In the
event Marvel learns of any inconsistency with this representation and warranty,
FineLine will be responsible for any and all costs associated with correcting
such inconsistency.
(b) All of the pertinent and material elements of the Property and the
Exploitation Rights which are or were subject to copyright protection were
prepared as works for hire pursuant to United States copyright law, and there
are no reversionary rights to any of the copyrights therein held or exercisable
now or in the future by FineLine or any other person under any copyright law.
The Property is not in the public domain. The names, likeness, and all
trademarks are valid and enforceable, are owned exclusively by FineLine,
5
<PAGE>
and no other person or company has the right to use such names or likenesses
in any manner and FineLine has not granted to anyone the right or permission
to use any confusingly similar names or likenesses. Each trademark
registration and/or application set forth on Schedule B is valid, subsisting
and in full force and effect on the Principal Register of the United States
Patent and Trademark Office or on the records of the trademark office of the
country of jurisdiction indicated.
(b) There does not, and will not on the date of Closing, exist any
infringement, violation or claimed infringement or violation by FineLine (and
FineLine has no knowledge, information or belief as to any past event or
condition which may reasonably be expected to result in a claim of infringement
or violation being made at any time after the Closing) of any copyright,
trademark, privacy, publicity, contractual or any other rights of others, or
any libel or defamation of any person or entity arising out of the publication,
use and/or exploitation of the Property.
(c) Marvel's use, licensing or other exploitation of the Property will not
violate or infringe any rights of any other person, company, corporation,
association or other entity, including but not limited to trademark rights,
copyrights, privacy rights, publicity rights, and/or contractual rights whether
common law, statutory or otherwise, will not constitute a libel or defamation
of any person or entity, and will not be otherwise unlawful.
3.6 Transferability. All of the material assets comprising the Property are
freely transferable and assignable without obtaining the consent or approval of
any other person or party. FineLine has not heretofore assigned rights and will
not hereafter grant or enter into any agreement purporting to sell or grant any
rights in the Property or any part thereof to anyone else.
3.7 Litigation. There are no actions, suits, claims or proceedings pending, or
threatened against FineLine or affecting or relating to any of the rights in
the Property.
3.8 No Infringement There is no infringement or violation by any third party
of any of the rights in the Property.
3.9 Material Misstatements or Omissions. No representation or warranty by
FineLine in this Agreement, nor any covenant or Schedule hereto, nor any
document furnished or to be furnished to Marvel in connection with the
transactions contemplated hereby, is materially inaccurate or untrue or
contains or will contain any materially untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained therein not materially misleading, and FineLine has no
knowledge, information or belief that any person or entity has made a claim,
contention or assertion inconsistent with the material truth or accuracy
thereof.
3.10 No Prohibitions. The performance by Fine Line of its obligations
hereunder and the consummation of the transactions contemplated hereby is not
prohibited by any contract
6
<PAGE>
or instrument to which FineLine is a party or by which FineLine is bound,
and will not violate any applicable statute, order, rule or regulation, or be
otherwise contrary to law, or violate the rights of any person or entity, and
no consent, approval, authorization or order of any court, governmental agency
or administrative body is required for the consummation of the transactions
contemplated hereby.
IV. COVENANTS OF FINELINE
4.1 Representations and Warranties to Survive Closing.
The representations and warranties of FineLine set forth in this Agreement
shall be true on and as of the date of Closing and shall survive the closing
as though such representations and warranties were made on and as of such time,
and shall be deemed to have been relied upon by Marvel notwithstanding any
investigation made by or on behalf of Marvel, and no such investigation shall
affect FineLine's representations or warranties in any manner.
4.2 FineLine to Hold Harmless and Indemnify Marvel. FineLine agrees to
indemnify and hold Marvel, its subsidiaries and affiliates, and its and their
officers, directors, employees, agents, customers and licensees harmless from
and against the following claims (including any expenses, costs and attorneys'
fees incident to the defense of such claims, and any damages or penalties
awarded or losses suffered):
Any and all claims of any kind or nature whatsoever asserted against any of
them either (i) based upon or arising from acts or events occurring prior to
Closing, or (ii) involving a breach by FineLine of any of FineLine's
representations, warranties or covenants herein except any modifications or
alterations made by Marvel to the Property for purposes of exploiting the
Property with respect to which Marvel hereby agrees to indemnify FineLine
against third party claims caused by such modifications or alterations.
4.3 Assistance of FineLine. From time to time at Marvel's request, whether
on or after the closing, FineLine will furnish such information, facts and
documents, and execute and deliver such further instruments of assignment,
transfer or conveyance of any of the assets comprising the Property, or
documents to acknowledge, confirm, record, perfect, enforce or support the
same, as Marvel may reasonably request or deem desirable to assist Marvel in
protecting or registering rights in the Property or otherwise, and to assist
Marvel in any litigation relating to the Property . In order to accomplish
any of the foregoing purposes in the event that FineLine is unable or unwilling
promptly to render such assistance to Marvel, FineLine hereby irrevocably
appoints Marvel as FineLine's true and lawful attorney-in-fact, with full
power of substitution in FineLine's name and stead but for Marvel's benefit,
without further consideration to FineLine, to take all Steps (including
proceedings at law, in equity or otherwise) and to execute, acknowledge and
deliver any and all such instruments to accomplish the foregoing. FineLine
acknowledges that this Power is coupled with an interest. Provided that
FineLine is not in breach of any material warranty, representation, covenant
or obligation hereunder pertaining to the subject matter of Marvel's action
pursuant to this appointment, Marvel agrees to hold harmless and indemnify
7
<PAGE>
Fineline from and against claims asserted against FineLine or any of them
as a result of such action taken by Marvel on FineLine's behalf pursuant to
this appointment.
4.4 Cessation of Use and Representation of Ownership. FineLine agrees that
after the Closing, it will cease to use or exploit in any manner whatsoever
any part of the Property , and will cease to hold itself out to the public as
having any ownership in any part of the Property , or as having any right to
use the same or to authorize others to use the same, and shall not assist or
cooperate with anyone else in so doing.
4.5 Use of Property and Exploitation Rights by FineLine After Closing.
FineLine specifically acknowledges that in the event it makes use of any of
the rights in the Property after the closing, or violates the restriction
contained in Paragraph
4.4 above, Marvel will suffer immediate irreparable and irrevocable damage
and harm, and FineLine acknowledges and admits that there is no adequate remedy
at law for such use or violation and further agrees that in the event of such
use or violation Marvel shall be entitled to seek equitable relief in the way
of temporary and permanent restraining orders and injunctions against FineLine
and such further and other relief as any court of competent jurisdiction may
deem just and proper.
4.6 No Restrictions on Marvel's Use. The sale, transfer, conveyance and
assignment of the Property and Exploitation Rights to Marvel contemplated
herein is without any restriction whatsoever as to the manner in which Marvel
may use and exploit the Property in the future, and Marvel may after the
closing change, adapt, transpose, vary or otherwise modify the Property for
purposes of exploitation only in whatever manner Marvel may in its sole
discretion determine. No claim or objection will ever be made by FineLine
with respect to the use or exploitation of the Property by or on behalf of
Marvel or by its licensees, successors or assigns, and all moral rights of
FineLine, if any, relating to the Publishing Rights are hereby waived.
4.7 Ownership of New Characters. FineLine acknowledges and agrees that after
the Closing, any and all new characters appearing in any manner, using, based
upon and/or adapted from the Property or any part thereof which are created by
Marvel and the distinctive likenesses thereof and any and all trademarks
therein shall be owned by Marvel for all purposes.
4.8 No Chal1enge- After the Closing, and provided Marvel is not then in breach
of any of its material obligations hereunder, FineLine will never dispute,
challenge or contest, directly or indirectly, Marvel's title or ownership in
or to any of the assets comprising the Property, or the validity or
enforceability of any rights therein, and will not aid or assist any others
in so doing, and will not make any claim or assert any right inconsistent
therewith.
V. REPRESENTATIONS AN WARRANTIES OF MARVEL
Marvel represents and warrants as follows:
8
<PAGE>
5.1 Legal Existence of Marvel. Marvel is a corporation duly organized and
existing under the laws of the State of Delaware and has full corporate power
to carry on its business as now conducted, and is entitled to own, lease or
operate its properties and assets now owned, leased or operated by it.
5.2 Authority and Capacity of Marvel.
(a) The execution of this Agreement by Marvel and the consummation of the
transactions contemplated hereby, have been approved by all persons or
entities required to approve the same, and no further corporate action is
necessary on the part of Marvel to make this Agreement valid and binding upon
Marvel in accordance with its terms. The execution of this Agreement by Marvel
and the consummation of the transactions contemplated hereby does not and will
not violate the provisions of the Certificate of incorporation or By- Laws of
Marvel.
(b) The performance by Marvel of its obligations hereunder and the
consummation of the transactions contemplated hereby is not prohibited by any
contract or instrument to which Marvel is a party or by which it is bound, and
(as far as Marvel is concerned) will not violate any applicable statute, order,
rule or regulation, or be otherwise contrary to law, or violate the rights of
any persons or entity, and no consent, approval, authorization or order of any
Court, governmental agency or administrative, body is required for the
consummation of the transactions contemplated hereby.
5.3 Material Misstatements or Omissions. No representation or warranty by
Marvel in this Agreement, nor any information or document furnished or to be
furnished to FineLine in connection with the transactions contemplated hereby,
is untrue or contains or will contain any untrue statement of a material fact,
or omits or will omit to state a material fact necessary to make the statements
or facts contained therein not misleading, and Marvel has no knowledge,
information or belief that any person or entity has made a claim, contention or
assertion inconsistent with the truth or accuracy thereof.
VI. COVENANTS OF MARVEL.
6.1 Representations and Warranties to Survive Closing. The representations and
warranties of Marvel set forth in this Agreement shall be true on and as of
the date of closing and shall survive the closing as though such
representations and warranties were made on and as of such time, and shall be
deemed to have been relied upon by FineLine notwithstanding any investigation
made by or on behalf of FineLine and no such investigation shall affect
Marvel's representations or warranties in any manner,
VII. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF MARVEL.
9
<PAGE>
The obligation by Marvel to consummate the transactions contemplated by this
Agreement is subject to and conditioned upon the satisfaction by FineLine
prior to or on the date of closing of each of its obligations hereinbefore
stated and also upon the following further conditions:
7.1 No Impairment of Value. In the event that the Closing does not occur
simultaneously with the execution of this Agreement, FineLine shall not have
taken any action or omitted to take action where appropriate by the date of
Closing, which action or omission materially adversely affects or impairs the
value of any of the rights in the Property. FineLine specifically shall not
have entered into any license agreements granting any rights in the Property.
7.2 Documents Being Delivered. In addition to documents already referenced
herein, FineLine is delivering to Marvel the following documents:
(a) A Bill of Sale;
(b) Separate assignments for the purposes of recording the transfer of
ownership of the trademarks identified on Schedule B hereto, together with
the goodwill of the business symbolized thereby;
(c) Separate assignments of the copyrights identified on Schedule C hereto;
(d) Evidence of no UCC filings or tax or judgment
liens against the FineLine or any of the Property; and
(e) Certified resolutions passed and adopted by the Board of Directors of
FineLine effective on the closing date, authorizing and approving the
transfers, assignments and deliveries being made by such corporation
pursuant to this Agreement.
VIII. GENERAL PROVISIONS
8.1 No Rights in Third Parties Created. This Agreement is solely between the
parties hereto and all rights arising from it are intended to inure to
the sole benefit of the parties. Subject to Section 8.2, it is not the
intention of the parties to create any rights in any third parties, whether
as third party beneficiaries or otherwise, and whether in the nature of a
guarantee or otherwise, and the parties expressly disavow any such intention,
and this Agreement shall be construed and interpreted so as not to create or
confer any such third party rights.
8.2 Assignment, During the first three (3) years of this Agreement, this
Agreement may not be assigned by Marvel without FineLine's written consent,
which shall not be reasonably withheld, except that no consent is required for
assignment to an owned subsidiary or affiliate, a successor by merger,
consolidation or sale, or exchange of assets.
10
<PAGE>
and this Agreement may not be assigned by FineLine.
8.3 Waiver and Modification. Either party hereto may waive satisfaction of any
condition precedent to its obligation to consummate the transactions
contemplated hereby. Such waiver must be made in writing by the party
entitled to the benefit of such condition.
8.4 Expenses of this Transaction. All expenses and charges in connection with
this transaction, including without limitation, accounting, legal and
professional services, shall be borne by the party incurring same.
8.5 Notices. Any notice required or permitted to be given hereunder shall be
deemed duly given if sent by registered mail, postage prepaid, addressed as
follows or such other address as may be furnished in writing by any such person.
(a) If to Marvel:
Marvel Entertainment Group, Inc.
387 Park Avenue South
New York, New York 10016
Attention: General Counsel
(b) If to FineLine:
FineLine Properties, Inc.
7337 Westview Drive
Kent, Ohio 44240
Attention: President
8.6 Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
8.7 Severability. All provisions of this Agreement are limited to the extent
mandated by any applicable law. If any provision or portion of this Agreement
shall be determined by any court of competent jurisdiction to be invalid,
illegal or unenforceable, and such determination shall become final, such
provision or portion shall be deemed to be severed and deleted herefrom and
the remaining provisions and portions shall survive and be enforced to give
effect to the intentions of the parties insofar as that is possible.
8.8 Force Maicure. If Marvel's failure to perform any obligation hereunder
is caused by unavailability of services or materials, labor disputes,
governmental restrictions, acts of God, or any other circumstances beyond
Marvel's control, such failure shall not be deemed a breach of this Agreement,
and if any time period for performance is involved, such period shall be deemed
extended for the period of such delay.
11
<PAGE>
8.9 Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York.
8.10 Section Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.11 Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties and supersedes all prior oral or written
agreements or understandings relating to the subject matter hereof.
8.12 Effect and Modification. This Agreement and any and all provisions hereof
shall not be effective unless and until this Agreement shall have been fully
executed by the parties hereto. This Agreement may not be modified or amended
except by a writing executed by each of the Parties hereto.
8.13 Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed an original but all of which counterparts collectively
shall constitute one instrument representing the Agreement between FineLine and
Marvel.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
FINELINE PROPERTIES, INC.
Date: 2-18-98
By: s/s Robert Petry
---------------------
Name:
Title: Pres
MARVEL ENTERTAINMENT GROUP, INC.
Date: 2-20-98
By: s/s Joseph Calamari
------------------------
Name:
Title:
12
<PAGE>
EXHIBIT 10.3 BOEIN CO. LTD. Agreement
This Agreement is made as of the 2nd day of April, 1999 by and between
BOEIN CO. LTD, a Korean corporation organized and existing under the
laws of Korea and having its principal place of business at #1201
Kirim Officetel, 1330-18 Seocho-dong, Seocho-ku, Seoul, Korea
(hereinafter referred to as the "Licensee"), and FINELINE
PROPERTIES.COM, INC. an Nevada corporation, having its principal place
of business at 3250 Market Street, Suite 302, Fairlawn, Ohio 44433
U.S.A. USA (hereinafter referred to as the "Licensor").
WITNESSETH
WHEREAS, Licensor is the owner and licensor of proprietary rights
(including but not limited to trademark and copyright rights) in and
to the name Y2K and the character names associated therewith,
including combinations and variations thereof (hereinafter referred to
as the 'Names') and in and to the appearance, design, description,
personality, characteristics, likeness, visual representation, and all
other elements of Y2K and all related characters (hereinafter referred
to as the "Characters"), together with the valuable goodwill
associated with the Names and Characters, and
WHEREAS Licensee desires to use the Name and Characters on and in
connection with the sub licensing, manufacture, advertising,
promotion, offering for sale, sale and distribution in Korea and
Licensor is willing to grant Licensee such right to use under the
terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual premises, covenants and
conditions herein contained, it is hereby agreed as follows:
ARTICLES
1. Licensor hereby grants to Licensee an exclusive, non-transferable,
non-assignable license, with the right to grant sub-licenses in Korea
only, to use the Names and Characters in Korea in connection with the
right to enter into sub license agreements, manufacture, advertising,
promotion, offering for sale, sale and distribution of the character
Y2K is so stipulated in the Articles set forth herein (hereinafter
referred to as the "Articles"). No license to any other character(s)
is granted hereunder and Licensor reserves for use as it may determine
all rights of every kind other than the rights herein licensed to
Licensee. The Licensee is hereby granted the first right of refusal
for any and all other characters and character groups of the Licensor
which shall be stipulated in separate agreements defining such
characters and the terms, provided that this Agreement is in force and
that the terms and conditions as so stipulated herein are in good
standing.
1
<PAGE>
TERM
2. The term of the license hereby granted (the "Term') shall be for
the period of three (3) years, with renewal options, subject to the
right of either party to terminate said license at the end of the
initial Term or any subsequent term by ninety (90) days' prior written
notice to the other party, unless the license is sooner terminated in
accordance with the provisions of, this Agreement, for cause. Cause
being described as a material breach of any of the provisions of this
Agreement by either party which is not resolved by the provisions as
so set forth herein under Termination, Injunction, Remedies, Excuse,
Attachment A, Waiver, Modification, Notice, Arbitration.
MARKETING DATE
3. Licensee agrees to commence distribution and sale of each of the
Articles in quantities reasonable in the trade on or before the
relevant Marketing Date set forth in Attachment A and to continue to
market all of the Articles in quantities reasonable to the trade
during the entire Term. Licensor may terminate the license granted
hereunder as to any of the Articles not distributed or sold by
Licensee in quantities reasonable to the trade on or before such
relevant Marketing Date or not continuously so distributed during the
entire Term by giving written notice of such termination, effective on
the date specified therein, to Licensee. Paragraphs 20 through 22
hereunder shall apply to such terminated Articles. As to all remaining
Articles, if any, the license shall continue in full force and effect.
ROYALTY RATE
4. Licensee agrees to pay to Licensor royalties at the rate set forth
in Attachment A hereto. Such royalties shall be paid on all net sales
by Licensee of the Articles and accrue when the Articles are billed
out or shipped whichever occurs earlier. The term "net sales', as
applied to the Articles, means the Licensee's gross invoice selling
price therefore in the form in which they are sold, less credits for
usual trade discounts actually allowed (other than cash discounts) and
returns, without any other deductions of any kind or character
whatsoever. As to all Articles distributed by Licensee though not
billed, such as free introductory offers, samples and the like, or
billed at a special price, such as sales directly or indirectly to
itself or to any other person, firm or corporation related in any
manner (by or through ownership, affiliation, contract or otherwise)
to Licensee, the usual gross invoice selling price to third parties
for the same shall be included in "net sales".
MINIMUM ROYALTIES
5. Licensee, in any event, agrees to pay to Licensor the non-
returnable, non-repayable minimum royalty as set forth in Attachment A
hereto. The minimum royalty for the Term shall be paid on the signing
of this Agreement. This minimum royalty payment shall be treated as a
non-refundable advance against those royalty payments due for the Term
under Paragraph 7 of this Agreement. Royalty payments due under
Paragraph 7 hereof for the Term shall be credited against the minimum
royalty for such Term.
2
<PAGE>
If the amount of royalties payable to Licensor during any Term based
upon actual sales of the Articles is less than the amount of the
Minimum Royalty for that Term, then Licensee agrees to pay to Licensor
the amount of said difference at the time it is required to pay
Licensor royalties for the final quarter of the of the Term.
6. Promptly within thirty (30) days of the end of each calendar
quarter (calendar quarters end on March 31, June 30, September 30 and
December 31), Licensee shall furnish to Licensor at the address above
given, unless otherwise directed in writing by Licensor complete and
accurate statements, certified to be accurate by Licensee, showing the
number, description and gross invoice selling price of the Articles
distributed and/or sold by Licensee and/or sub-Licensee(s) during the
preceding calendar quarter together with trade discounts and returns
allowed during the preceding calendar quarter. Such statements shall
be furnished to Licensor whether or not any of the Articles have been
distributed and/or sold during the calendar quarters for which such
statement is due. If the Territory includes countries outside of the
United States, the royalty statement shall contain a breakdown by
countries, and all figures and monetary amounts shall first be stated
in the currency in which the pertinent sales were actually made. Next
to each currency amount shall be the equivalent amount stated in
United States dollars and the rate of exchange used in making the
required conversion calculation. Said rate of exchange shall be the
actual rate of exchange obtained by Licensee and/or sub-Licensee(s) on
the date of payment.
ROYALTY PAYMENTS
7. Royalty payments shall be due promptly within thirty (30) days
after the end of each calendar quarter for all sales and/or
distributions made during the preceding calendar quarter, and payments
shall accompany the statements required by Paragraph 6. All royalties
and other payments to Licensor hereunder shall be made in United
States dollars to Licensor at Licensor's above given address in the
United States of America, unless licensee is otherwise advised in
writing by Licensor and Licensee shall pay Licensor interest on
royalties which are not paid when due at the highest legal rate of
interest. Royalties shall first be computed in accordance with the
instructions for preparing statements in paragraph 6 and converted to
dollars at the rate established for purchase of dollars by a licensed
foreign exchange bank in the specific country on the date of
remittance. Income or withholding taxes imposed by the laws of said
country or countries on Licensor with respect to payments of royalty
hereunder shall be borne by Licensor and will be collected by Licensee
on behalf of Licensor for payment to the government of said country or
countries as and when required by the laws of said country or
countries. Licensee will obtain from the tax authority of applicable
countries certificates and other documents relating to such payments
as required by Licensor to obtain credit in the United States of
America for such taxes, and shall promptly forward the same to
Licensor. Receipt or acceptance by Licensor of any of the statements
furnished pursuant to this Agreement or of any royalties paid
hereunder shall not preclude Licensor from questioning the correctness
of such statements and royalties at any time and in the event that any
inconsistencies or mistakes are discovered in such statements or
royalties, they shall immediately be rectified and the appropriate
payment made by Licensee plus interest on overdue amounts at the
highest legal rate of interest.
3
<PAGE>
BOOKS
8. Licensee a agrees to keep accurate books, of account and records
covering all transactions relating to the license hereby granted at
its address specified above and agrees that Licensor shall have the
right at all reasonable hours of the day, upon five days' prior
notice, to an examination of said books of account and records and of
all other documents and materials in the possession, custody or
control of Licensee with respect to the subject matter and the terms
of this Agreement and shall have free and full access thereto for said
purposes and for the purpose of making extracts therefrom.
INDEMNIFICATION
9. Licensee hereby indemnities and holds Licensor free and harmless of
and from any and all actions, claims, suits, losses, damages costs,
attorney's fees and other expenses, arising out of Licensee's and/or
sub-Licensee(s) manufacture, advertising, promotional offering for
sale, sale or distribution of the Articles, or out of any violation by
Licensee of any provision of this Agreement. Licensee shall be
entitled to participate and/or sub-Licensee(s), at its own expense, in
the defense of any action in this respect brought against Licensor.
Licensee and/or sub-Licensee(s) will obtain, at their own expense,
product liability insurance from a recognized insurance company at
least in the amount of $1,000,000/$2,000,000 USD against any claims,
suits, loss or damage arising out of any defects in the Articles. As
proof of such insurance, a fully paid certificate of insurance naming
Licensor as an insured party will be furnished to Licensor prior to
the sale or distribution of any of the Articles.
Licensor warrants that it owns the Names and Characters, that it has
the right to grant Licensee the rights herein granted, and will hold
Licensee and/or sub-Licensee(s) free and harmless of and from any and
all actions based upon any infringement of the proprietary rights of
any third party and because of Licensee's and/or sub-Licensee(s) use
of the Names and Characters in connection with the manufacture,
advertising, promotion, offering for sale, or distribution of the
Articles except those arising out of any violation by Licensee and/or
sub-Licensee(s) of any. provision of this Agreement, provided Licensee
and/or sub-Licensee(s) shall give Licensor prompt and timely notice
thereof. The defense of any such lawsuit shall be within the sole
control of Licensor, and Licensor shall have the right to choose the
attorneys in such. If the lawsuit names the Licensee and/or sub-
Licensee(s) as a defendant, then Licensee and/or sub-Licensee(s) may
participate in any such lawsuit at its own expense. Licensor shall
have no liability for consequential damages or loss of profits.
Each party agrees to provide the other, at no expense, with all
reasonable assistance requested of it in connection with any such
claims, suits, losses, damages, and costs,
INFRINGEMENTS
10. If Licensee and/or sub-Licensee(s) becomes aware of use by a third
party of the Names and/or Characters, it shall take no action whatever
but shall immediately notify Licensor, which shall then take whatever
action it deems appropriate. If Licensor takes action, Licensee and/or
sub-Licensee(s) agrees to provide Licensor, without expense to
Licensor, with all reasonable assistance requested of it by Licensor
in connection with said action.
4
<PAGE>
If a claim is made or an action is brought against Licensee and/or
sub-Licensee(s) for its use of the Names and/or/or Characters, it
shall immediately notify Licensor, which shall then have the option to
assume the defense of said claim or action. If Licensor assumes said
defense, Licensee and/or sub-Licensee(s) agrees to provide Licensor,
without expense to Licensor, with all reasonable assistance requested
of it by Licensor in connection with said defense.
PROPRIETARY RIGHTS
11. Licensee and/or sub-Licensee(s) hereby acknowledges Licensor's
proprietary rights in and to. the Names and Characters and recognizes
the .exclusive right of Licensor to (a) grant rights to use of said
Names and Characters and (b) control the use thereof.
BENEFIT
12. Licensee and/or sub-Licensee(s) agrees that every use of the Names
and Characters made by it on or in connection with the manufacture,
advertising, promotion, offering for sale, sale or distribution of any
of the Articles shall inure solely to the benefit of the Licensor.
RESTRICTIONS
13. Licensee and/or sub-Licensee(s) agrees to make no use of the Names
and/or Characters other than as permitted herein under, and both
during and after the term of this Agreement. Licensee and/or sub-
Licensee(s) agrees that it will make no use of names, marks or
configurations which in Licensor's sole judgment are confusingly
similar to the Names and/or Characters. Licensee and/or sub-
Licensee(s) agrees that in using the Names and/or Characters, it will
in no way represent that it has any right, title or interest in or to
the Names and/or Characters or in any application or registration
therefore which may be granted, or in any Names or Character similar
thereto, other than those expressly granted under this agreement.
Licensee and/or sub-Licensee(s) will not register or attempt to
register the Names and/or the Characters either alone or in
combination with any word, name, symbol, device or character, or aid
or abet anyone else in doing so and Licensee and/or sub-Licensee(s)
agrees that any use, application or registration in breach of this
covenant will inure to the benefit of Licensor, and Licensee and/or
sub-Licensee(s) further agrees to assign all rights, title and
interest in and to any such application or registration to Licensor.
QUALITY CONTROL
14. Licensee and/or sub-Licensee(s) agrees that Licensor has the right
to control the standards and quality for each of the Articles.
Licensee and/or sub-Licensee(s) further agrees that the Articles shall
be of such high standards of quality as to be safe, adequate and
suited to their utilization to the best advantage and to the
protection and enhancement of the Names and Characters, that such
Articles will be manufactured, sold and distributed in accordance with
all applicable national, federal, state and local laws and
regulations, and that the policy of sale, distribution and utilization
by Licensee and/or sub-Licensee(s) shall be of high standards and
shall in no manner adversely reflect upon the good name of Licensor or
upon the reputation of the Names and Characters. The quality, artwork
and style of such Articles as well as of any labels cartons,
containers packaging or wrapping materials, shall be subject to the
5
<PAGE>
prior written approval of Licensor, which may be granted or withheld
in Licensor's sole discretion which shall be reasonably exercised. To
this end, Licensee and/or sub-Licensee(s) shall, before commercially
producing, selling or distributing any of the Articles furnish to the
Licensor, free of cost, for its written approval, preliminary sketches
of all proposed Articles, labels, cartons, containers, packaging and
wrapping materials, followed by a finished art sample of each proposed
Article together with its finished cartons, labels containers,
packaging and wrapping materials. After samples have been approved
pursuant to this paragraph, Licensee and/or sub-Licensee(s) shall not
depart therefrom in any material respect without Licensor's prior
written consent. It is understood and agreed that Licensor shall have
the right-to change, from time to time, the artwork and style of the
Characters, and Licensee and/or sub-Licensee(s) shall conform to such
changes with respect to all Articles manufactured after samples
containing such changes have been delivered to Licensor. From time to
time during the term of this Agreement in order for Licensor to
insure that the standards of quality set forth above are being
maintained, Licensee and/or sub-Licensee(s) upon Licensor's reasonable
request shall furnish to the Licensor, free of cost, current samples
of each Article being manufactured, sold, or distributed by Licensee
and/or sub-Licensee(s) herein under, together with any cartons,
labels, containers, packaging and wrapping materials used in
connection therewith.
Licensor, or its authorized representative, without notice but during
reasonable business hours, may at any time enter upon the premises of
Licensee and/or sub-Licensee(s) where any of the Articles are
manufactured, stored or distributed, for purposes of ensuring
Licensee's and/or sub-Licensee(s) observance of standards of quality.
ADVERTISING AND PROMOTION
15. All advertising and promotional materials including but not
limited to catalog sheets, trade, and consumer print and video
advertising, flyers, and point of purchase displays, and the like,
relating to the Articles shall be submitted to the Licensor for its
prior written approval.
ARTWORK
16. For guidance of Licensee and/or sub-Licensee(s) in preparing
preliminary art work, attached hereto are specimens of representative
depiction's of the Characters. It is understood that all final artwork
is subject to Licensor's prior written approval in accordance with
Paragraph 14 hereof. All depiction's of the Characters, even though
prepared by or for Licensee and/or sub-Licensee(s) , remain the sole
property of Licensor and may be used for any such purposes as Licensor
desires.
LEGEND
17. Unless approved in other form by Licensor the following legend
shall appear on all Articles, cartons, labels, containers, signs,
packaging, wrapping, advertising and promotional materials or the like
which bear the Names and/or Characters:
6
<PAGE>
Y2K and related characters are
trademarks of FineLine Properties.com, Inc.
Whenever the Names appears on such Articles, cartons, labels,
containers, signs, packaging, wrapping, advertising and promotional
materials or the like, each of the Names shall be followed by a TM
symbol.
In addition, whenever the Characters appear on such Articles, cartons,
labels, containers, signs, packaging, wrapping, advertising and
promotional materials or the like, the following copyright right
notice shall appear thereon in conjunction with the Characters:
C1999 FineLine Properties.com, Inc.
ADDITIONAL. SPECIFIC UNDERTAKINGS
18. Licensee and/or sub-Licensee(s) also agrees that:
(a) It will not attack the title of Licensor in and to the Names
and/or Characters or any proprietary rights of Licensor pertaining
thereto, nor will it attack the validity of the Names and Characters
and of the license granted hereunder
(b) It will not harm, misuse or bring into disrepute the Names
and Characters.
(c) It will not create any expenses chargeable to Licensor or
obligate Licensor in any way without the prior written approval of
Licensor.
(d) It will enter into no other agreement affecting either
directly or indirectly the Names and/or Characters without the prior
written approval of Licensor.
(e) It will not use the Articles for combination sales, for
example, premiums, giveaways and the like, without the prior written
consent of Licensor.
TERMINATION
19. (a) Even though Licensee and/or sub-Licensee(s) may commence
distribution and sale of any Article or Articles in quantities
reasonable to the trade on or before the relevant marketing date set
forth in Attachment A, but subsequent to such Marketing Date fails to
continue distribution and sale of such Article or Articles in
quantities reasonable in the trade during any three month period,
Licensor may then terminate the license granted hereunder as to any
Articles or all Articles by giving written notice of such termination,
effective on the date specified therein, which shall be effective
immediately, to Licensee and/or sub-Licensee(s). As to all remaining
articles, if any, the license shall continue in full force and effect.
(b) If Licensee and/or sub-Licensee(s) files a petition in
bankruptcy or is adjudged bankrupt or if a petition in bankruptcy is
filed against Licensee and/or sub-Licensee(s) , or if it becomes
insolvent, or makes. an assignment for the benefit of its creditors or
an arrangement pursuant to any bankruptcy law, or if Licensee and/or
sub-Licensee(s) discontinues its business or a receiver is appointed
for it or its business, the license hereby granted shall automatically
terminate forthwith without notice with respect to the Licensee and/or
sub-Licensee(s) so affected and fitting said clause.
(c) If, either directly or indirectly, Licensee and/or sub-
Licensee(s) , in whole or in part, or the business of Licensee and/or
sub-Licensee(s), in whole or in part, is expropriated, confiscated or
nationalized, the license hereby granted shall automatically terminate
immediately without notice so affected and fitting said clause.
7
<PAGE>
(d) If Licensee and/or sub-Licensee(s), in Licensor's sole
judgment which shall be reasonably exercised, fails to maintain the
Standards of quality for the Articles set forth herein Licensor shall
have the right to terminate the license in whole or in part upon
thirty (30) days' notice in writing.
(e) If Licensee and/or sub-Licensee(s) shall violate any of
its other obligations under the terms of this agreement, Licensor
shall have the right to terminate the license in whole or in part upon
thirty (30) days' notice in writing.
EFFECT OF TERMINATION
20. In the event of the expiration or sooner termination of this
Agreement, all rights acquired by Licensee and/or sub-Licensee(s)
hereunder shall automatically, without the need for any further act or
deed, vest in Licensor, but such expiration or termination shall not
terminate any obligation of Licensee and/or sub-Licensee(s) under this
Agreement. Upon any such expiration or termination, Licensee and/or
sub-Licensee(s) agrees, except as expressly provided in Paragraph 22,
to immediately discontinue any and all use of the Names and
Characters.
INVENTORY
21. Within thirty (30) days after the expiration or sooner termination
of this Agreement, a report showing the number and description of the
Articles on hand or in process at the time of expiration or
termination shall be furnished by Licensee and/or sub-Licensee(s) to
Licensor. Failure to supply this report or to allow Licensor to verify
same shall result in a forfeiture of the rights granted under
Paragraph 22.
DISPOSAL OF MERCHANDISE
22. After expiration or termination of the License, Licensee and/or
sub-Licensee(s) may dispose of the Articles covered by this Agreement
which were on hand or in process at the time of expiration or
termination for a period of sixty (60) days after said expiration or
termination, provided that with respect to that period royalties are
paid and statements are furnished in accordance with the terms of this
Agreement. However, in the event of termination under the provisions
of Paragraph 19(d) of this Agreement, Licensee and/or sub-Licensee(s)
shall have no rights of disposal and shall be obligated to destroy all
such merchandise.
INJUNCTION
23. Licensee and/or sub-Licensee(s) agrees that Licensor shall, in
addition to all legal and other equitable remedies, have the right of
injunction for any breach of this Agreement by Licensee and/or sub-
Licensee(s).
8
<PAGE>
REMEDIES
24. Resort to any remedies referred to herein shall not be construed
as a waiver of any other rights or remedies to which the Licensor is
entitled under this Agreement or otherwise.
EXCUSE
25. Obligations of Licensee and/or sub-Licensee(s) herein under shall
be suspended in the event that Government regulations or other causes
completely beyond the control of Licensee and/or sub-Licensee(s)
render continuing performance impossible. In such event all royalties
due on sales theretofore made shall become immediately due and
payable. In no event shall minimum royalties be repayable.
The obligations of Licensee and/or sub-Licensee(s) hereunder shall
only be suspended for that period during which performance is
impossible. Once the causes which render performance impossible have
been removed, Licensee's and/or sub-Licensee(s) obligation shall be in
full force and effect. However, no period or periods of suspension
shall in any way extend the term of this Agreement beyond the actual
expiration date set forth in Attachment A.
9
<PAGE>
ATTACHMENT A
26. Attachment A in its entirety is incorporated by reference in this
Agreement and forms an integral part thereof.
WAIVER, MODIFICATION, ETC.
27. This Agreement constitutes the entire Agreement between the
parties and no waiver or modification of any term or condition shall
be effective unless executed in writing by Licensor and Licensee.
RELATIONSHIP
28. This Agreement does not constitute and shall not be construed as
constituting an agency, partnership, or joint venture between Licensor
and Licensee and/or sub-Licensee(s).
NOTICE
29. All notices hereunder, including but not limited-to notices of
termination, shall be given in writing by registered mail, certified
mail, or any documented carrier, addressed by either party to the
other at their respective addresses above given or at such other
address as previously designated in writing by the other party. The
post office registry receipt or executed carrier waybill for any such
notice shall be deemed to be prima facie evidence of the date of
giving thereof. Licensee and/or sub-Licensee(s) shall also give all
copies of all notices and statements to the Licensor.
ARBITRATION
30. All disputes controversies or differences which may arise between
the parties hereto, out of or in relation to or in connection with
this Agreement, or for the breach thereof, shall be finally settled by
arbitration pursuant to international trade and arbitration agreements
and treaties by which each party is bound.
ASSIGN ABILITY
31. This Agreement shall bind and inure to the benefit of Licensor,
its successors and assigns and may be assigned or transferred by the
Licensor without the consent of the Licensee and/or sub-Licensee(s).
However, Licensee and/or sub-Licensee(s) may not transfer or assign
this Agreement without the prior written consent of Licensor which
Licensor, in its sole discretion, may withhold.
32. The English text of this Agreement shall be binding upon both
parties. This Agreement shall be deemed a contract made and to be
performed under, and shall be governed by and construed in accordance
with the laws of the state of Nevada, U.S.A., and the effect to be
given to any breach hereof shall be determined in accordance with such
laws.
10
<PAGE>
HEADINGS
33. Paragraph headings used in this Agreement serve for convenience of
reference only and shall not affect the construction of the
provisions.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
dates set forth below:
Place: Ohio
Date: 4/2/99
FineLine Properties.com, Inc.
By: Robert Petry
--------------------------------
Mr. Robert Petry
Title: President
Place: Korea
Date: 4/2/99
Boein Co. Ltd.
By: Hyunwan Kim
------------------------------------
Mr. Hyunwan (Harry) Kim
Title: Managing Director
11
<PAGE>
ATTACHMENT A
ARTICLES:
All merchandise types
TERRITORY: Korea
TERM: The executed date of the Licensing Agreement, 1999 for three
(3) years hence with the option to renew at mutual option.
GUARANTEE: The minimum guarantee revenue hereto agreed is $50,000.00
USD (Fifty Thousand U.S. Dollars) for the first year, payable on the
anniversary date of the executed Agreement. $70,000.00 USD (Seventy
Thousand U.S. Dollars) for the second year, payable on the second
anniversary date of the executed Agreement and $100,000.00 USD (One
Hundred Thousand Dollars) for the third year, payable on the third
anniversary date of the executed Agreement.
MARKETING DATE: The executed date of the Licensing Agreement.
ROYALTY RATE: 3% (three percent) of wholesale selling price
NON REFUNDABLE ADVANCE AGAINST ROYALTIES: $10,000.00 USD (Ten Thousand
Dollars) which shall be deducted from the minimum guarantee payment
for the first year of this Agreement on the anniversary date. The
Advance is calculated at the rate of fifteen percent (15%) against the
first year guaranteed minimum royalty payment.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
dates set forth below:
Place: Ohio
Date: 4/2/99
FineLine Properties.com, Inc.
By: s/s Robert Petry
--------------------------------
Mr. Robert Petry
Title: President
Place: Korea
Date: 4/2/99
Boein Co. Ltd.
By: Hyunwan Kim
----------------------------------
Mr. Hyunwan (Harry) Kim
Title: Managing Director
<PAGE>
EXHIBIT 10.4 EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
Agreement dated this 1st day of June, 1996 by and between Robert Petry
("Executive") and FineLine Properties, Inc. (the "Company").
WHEREAS the Company desires to employ Executive, and Executive desires
to accept employment with the Company, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
1. Period of Employment.
The Company shall employ Executive, and Executive shall serve the Company
during the period commencing on June 1, 1996, and continuing through and
including June 1, 2001 (the "Term"). The Term shall automatically be
extended by one (1) additional year, unless, at least sixty (60) days prior
to June 1, 2001 or any anniversary thereafter, the Company shall deliver to
Executive, or Executive shall deliver to the Company, written notice that
the Term shall not be so extended.
2. Duties and Responsibilities.
(a) During the Term, Executive shall be employed by the Company as Chief
Operating and Executive Officer and the Executive's employment with the
Company shall be full-time and exclusive. During the Term, Executive shall,
except during periods of vacation, sick leave, or other duly authorized leave
of absence, devote the whole of Executive's time, attention, skill, and
ability during usual business hours (and outside those hours when reasonably
necessary to Executive's duties hereunder) to the faithful and diligent
performance of such duties and the exercise of such powers as may from time
to time be assigned to or vested in Executive by the Company's Board of
Directors or by any officer of the Company superior to Executive. Executive
acknowledges and agrees that Executive may be required, without additional
compensation, to perform services for any business entity controlling,
controlled by, or under common control with the Company (such business
entities hereinafter individually and collectively, "Affiliates") and to
accept such office or position with any Affiliate as the Board of Directors
may require, including, but not limited to, service as an officer or director
of the Company or any Affiliate. Executive shall comply with all applicable
policies of the Company and Affiliates.
(b) Executive's services shall be performed at the Company's offices in
Kent, Ohio as well as at such other locations and subject to such travel
requirements as reasonably necessary to the performance of Executive's duties
hereunder.
3. Compensation.
(a) During the Term, as compensation for services rendered hereunder and in
consideration of this Agreement, the Company shall pay Executive a salary,
in accordance with the Company's then-prevailing payroll practices, at the
annual rate of $90,000.00 (ninety thousand USD), or such greater amount as
the Company may from time to time and in its sole discretion determine.
(b) During the Term, as additional compensation, Executive shall be
entitled to participate in and receive all benefits under any welfare
benefit plan or program (including, without limitation, medical, dental,
disability, group life (including accidental death and dismemberment)
and business travel insurance plans and programs), any retirement savings
plan or program (including, without limitation, 401(k) and pension), and
such other perquisites of office as the Company may, from time to time and
in its sole discretion, make available generally to employees of similar
rank as Executive. Such participation shall be subject to the terms and
conditions of such plans or programs, including, but not limited to, such
generally applicable eligibility provisions as may be in effect from time to
time.
(c) During the Term, as additional compensation, Executive shall be entitled
to participate in the Company's Supplemental Executive Retirement Plan
("SERP") pursuant to the terms and conditions thereof.
(d) The Company shall reimburse Executive for all reasonable, ordinary,
and necessary business expenses incurred in the performance of Executive's
duties hereunder in accordance with and subject to the terms and conditions
of the Company's then-prevailing expense policy. As a condition precedent
to obtaining such reimbursement, Executive shall provide to the Company any
and all statements, bills, or receipts evidencing the expenses for which
Executive seeks reimbursement, and such other related information or
materials as the Company may from time to time reasonably require.
4. Termination.
Unless Executive's employment is terminated pursuant to this Paragraph 4,
the Company shall continue to employ Executive and Executive shall continue
to serve the Company throughout the Term.
(a) This Agreement shall terminate automatically upon Executive's death.
(b) Upon Executive's "Disability", the payment of benefits under the
Company's short-term and long-term disability insurance programs, if
any, shall satisfy the Company's obligations under the foregoing
Paragraph 3(a). For purposes of this Agreement, Executive shall be
deemed to be under a disability if Executive shall be unable, by virtue
of illness or physical or mental incapacity or disability (from any
cause or causes whatsoever), to perform Executive's essential job
functions hereunder, whether with or without reasonable accommodation,
in substantially the manner and to the extent required hereunder prior
to the commencement of such disability, for a period exceeding 180
days. In the event Executive shall remain under a Disability for a period
exceeding 270 days, the Company shall have the right to terminate
Executive's employment hereunder at the end of any calendar month
during the continuance of such disability upon at least thirty (30) days prior
written notice to Executive.
(c) The Company shall have the right to terminate Executive's
employment at any time for "Cause". For purposes of this Agreement, Cause shall
include:
(i) material default or other material breach by Executive of
Executive's obligations hereunder;
(ii) failure by Executive to perform diligently and competently
Executive's duties hereunder; or
(iii) misconduct, dishonesty, insubordination, or other act by
Executive detrimental to the Company's good will or damaging to its
relationships with its customers, suppliers, or employees, including,
without limitation.
(d) The Company may terminate Executive's employment without Cause at
any time and without prior notice. In the event of such termination,
the Company shall
(i) pay to Executive an amount equal to the lesser of
(A) 8 months' salary from the date of termination, and
(B) Executive's salary for the remainder of the Term, such
amount to be paid in accordance with the Company's then-
prevailing payroll practices, and
(ii) continue Executive's participation, if any, in such group medical,
hospitalization and dental plans or programs as were in place
immediately prior to such termination, for a period equal to the
lesser of (A) 8 months from the date of termination, and (B) the
remainder of the Term.
(e) Upon termination of Executive's employment pursuant to any of the
foregoing Paragraphs 4(a), (b), (c), or (d), or upon expiration of the
Term, any right or benefit accrued by Executive or to which Executive
had become entitled pursuant to this Agreement prior to such
termination or expiration (other than payment of salary with respect
to periods after such termination or expiration), and any Company
obligation with respect to any such right or benefit, shall not be
extinguished by reason of such termination or expiration and, together
with any salary earned but unpaid as of the date of termination or
expiration and any unpaid reimbursable expenses outstanding as of
such date, shall be paid to Executive or Executive's estate, less any
outstanding amounts previously advanced by the Company to or on behalf
of Executive.
(f) The payments and benefits (if any) required to be provided to
Executive pursuant to this Paragraph 4 shall be in full and complete
satisfaction of any and all obligations owing to Executive pursuant to
this Agreement.
(g) In the event of resignation and or termination the Company shall
pay to the Executive all salary due and owing in full in accordance with
the Company's financial ability to do same. The Company shall either make
such payment in total, or in monthly increments within the financial
ability of the Company to do same, with such schedule to be provided to
the Executive within three weeks of such resignation and or
termination.
(f) In the event the Company's financial position enables it to do so,
in consideration of the Company's obligations to suppliers, investors
and other business interests, the Company shall at it option, revert
payment due to the Executive to the date of this Agreement.
5. Confidential Information.
Both during and after the Term, Executive shall not divulge or communicate
to any person, corporation, governmental agency, or other entity (except
in performing Executive's duties hereunder), or use for Executive's own
purposes, any trade secret or confidential commercial information, or
any other information, knowledge, or data of the Company or any Affiliate
which is not generally known to the public (including, but not limited to,
information relating to research, product development, manufacturing or
manufacturing processes, maintenance or repair processes, purchasing,
product or material costs, sales or sales strategies or prospects, pricing
or pricing strategies, advertising or promotional programs, product
information, or mailing or customer lists), and shall use Executive's best
efforts to prevent the publication or disclosure by any other person or
entity of any such secret, information, knowledge, or data. While Executive
is employed by the Company, all documents and objects made, compiled,
received, held, or used by Executive in connection with the business of the
Company shall remain the Company's property, and shall be delivered by
Executive to the Company upon the termination of Executive's employment,
for whatever reason, or at any earlier time requested by the Company. It
is understood that Executive shall retain ownership of Executive's personal
property, including Executive's private papers not containing any trade
secret or confidential commercial information, or any other information,
knowledge, or data of the Company or any Affiliate.
6. Unfair Competition.
(a) While Executive is employed by the Company, and during any period,
if any, during which the Company is making payments to Executive
pursuant to the foregoing Paragraph 4(d), Executive shall not, directly
or indirectly, whether or not for compensation, and whether or not as
an employee, be engaged in or have a financial interest in any other
business, continue or assume any other corporate affiliations, or
pursue any other commercial activities, duties, or pursuits whatsoever
without the prior written consent of the Company when said activities
are in competition with the business or interests of the Company.
(b) As a condition of employment with the Company, and as a material
inducement to the Company to employ Executive, the agrees that for a
period of one (1) year after the later of (i) termination of
Executive's employment, for whatever reason, and (ii) the conclusion of the
period, if any, during which the Company is making payments to Executive
pursuant to the foregoing Paragraph 4(d), Executive shall not, directly
or indirectly, whether or not for compensation, and whether or not as
an employee, be engaged in or have any financial interest in any business
competing with or which may compete with the business of the Company
(or with any business of any Affiliate for which the Executive performed
services hereunder) within any state, region or locality in which the
Company or such Affiliate is then doing business or marketing its
products, as the business of the Company or such Affiliates may then be
constituted.
(c) Executive agrees and acknowledges that, by virtue of Executive's
employment with the Company, Executive shall have access to and
maintain an intimate knowledge of the Company's activities and affairs,
including trade secrets and confidential commercial information, and other
confidential matters. As a result of such access and knowledge, and
because of the special, unique, and extraordinary services that
Executive is capable of performing for the Company or one of its
competitors, Executive acknowledges that the services to be rendered by
Executive pursuant to this Agreement are of a character giving them a
peculiar value, the loss of which cannot adequately or reasonably be
compensated by money damages. Consequently, Executive agrees that any
breach or threatened breach by Executive of Executive's obligations
under this Paragraph 6, or of Paragraphs 5 or 7 of this Agreement,
would cause irreparable injury to the Company, and that the Company shall
be entitled to (i) preliminary and permanent injunctions enjoining
Executive from violating such provisions, and (ii) money damages in the
amount of fees, compensation, benefits, profits or other remuneration
earned by Executive or any competitor as a result of any such breach,
together with interest, and costs and attorneys' fees expended to
collect such damages or secure such injunctions. Nothing in this
Agreement, however, shall be construed to prohibit the Company from
pursuing any other remedy, the Company and Executive having agreed that
all such remedies shall be cumulative.
(d) Executive acknowledges that the limitations set forth in this
Paragraph 6 shall not prevent Executive from earning a livelihood after
Executive leaves the Company's employ, but merely prevents unfair
competition against the Company for a limited period.
7. Solicitation of Employees.
Executive agrees that for a period of one (1) year after the later of (a)
termination of Executive's employment, for whatever reason, and (b) the
conclusion of the period, if any, during which the Company is making payments
to Executive pursuant to the foregoing Paragraph 4(d), Executive shall not,
directly or indirectly, employ any person who was employed by the Company or
any Affiliate or induce such person to accept employment other than with the
Company or any Affiliate.
8. Inventions.
Executive hereby agrees that any and all improvements, inventions,
discoveries, formulae, processes, methods, or designs, and any documents,
things, or information relating thereto (individually and collectively,
"Work Product") within the scope of any business of the Company or any
Affiliate which Executive may conceive or make, or may have conceived
or made during Executive's employment with the Company, shall be and are
the sole and exclusive property of the Company, and that Executive shall,
whenever requested to do so by the Company (whether during Executive's
employment or thereafter), at the Company's expense, execute any and all
applications, assignments, or other instruments, and do all other things
(including giving testimony in any legal proceeding) which the Company
may deem necessary or appropriate in order to (a) apply for, obtain,
maintain, enforce, or defend letters patent of the United States or any
other country for any Work Product, or (b) assign, transfer, convey, or
otherwise make available to the Company any right, title or interest which
Executive might otherwise have in any Work Product. Executive shall
promptly communicate, disclose, and, upon request, report upon and deliver
all Work Product to the Company, and shall not use or permit any Work
Product to be used for any purpose other than on behalf of the Company,
whether during Executive's employment or thereafter.
9. Arbitration.
(a) Any dispute or controversy between the Company and Executive
relating to this Agreement (except any dispute relating to the
foregoing Paragraphs 5, 6, or 7) or relating to or arising out of Executive's
employment with the Company, shall be settled by binding arbitration
in the City of Kent, State of Ohio, pursuant to the governing rules of the
American Arbitration Association. Judgment upon any resulting
arbitration award may be entered in any court of competent
jurisdiction.
(b) Notwithstanding anything herein to the contrary, the Company shall
not be required to arbitrate any dispute arising between it and
Executive relating to the foregoing Paragraphs 5, 6, or 7, but shall
have the right to institute judicial proceedings in a court of
competent jurisdiction within the State of Ohio, in the district or county in
which the Company's principal offices are located with respect to such
dispute or claim. Executive hereby consents to, and waives any
objection to, the personal jurisdiction and venue of the aforesaid courts, and
waives any claim that the aforesaid courts constitute an inconvenient
forum. If such judicial proceedings are instituted, the parties agree
that such proceedings shall not be stayed pending the outcome of any
arbitration proceedings hereunder.
10. Additional Obligations.
Both during and after the Term, Executive shall, upon reasonable notice,
furnish the Company with such information as may be in Executive's
possession, and cooperate with the Company, as may reasonably be requested
by the Company (and, after the Term, with due consideration for Executive's
obligations with respect to any new employment or business activity) in
connection with any litigation in which the Company or any Affiliate is or
may become a party. The Company shall reimburse Executive for all reasonable
expenses incurred by Executive in fulfilling Executive's obligations under
this Paragraph 10.
11. Notice.
Any notice or other communication required or permitted under this Agreement
by either party hereto to the other shall be in writing, and shall be deemed
effective upon
(a) personal delivery, if delivered by hand,
(b) three days after the date of deposit in the mails, postage prepaid,
if mailed by certified or registered mail, or
(c) the next business day, if sent by a prepaid overnight courier
service, and in each case addressed as follows:
If to Executive:
Robert Petry
7337 Westview Drive
Kent, OH 44240
If to the Company:
FineLine Properties, Inc.
7337 Westview Drive
Kent, OH 44240
Either party may change the address or addresses to which notices are
to be sent by giving notice of such change of address in the manner
provided by this Paragraph 11.
12. Entire Agreement.
This Agreement represents the entire agreement between the Company and
Executive with respect to Executive's employment with the Company, and
supersedes and is in full substitution for any and all prior agreements
or understandings, whether oral or written, relating to Executive's
employment.
13. Amendment.
This Agreement may not be canceled, changed, modified, or amended orally,
and no cancellation, change, modification or amendment hereof shall be
effective or binding unless in a written instrument signed by the Company
and Executive. A provision of this Agreement may be waived only by a
written instrument signed by the party against whom or which enforcement
of such waiver is sought.
14. No Waiver.
The failure at any time either of the Company or Executive to require the
performance by the other of any provision of this Agreement shall in no way
affect the full right of such party to require such performance at any time
thereafter, nor shall the waiver by either the Company or Executive of any
breach of any provision of this Agreement be taken or held to constitute a
waiver of any succeeding breach of such or any other provision of this
Agreement.
15. Assignment.
This Agreement is binding on and for the benefit of the Company and Executive
and their respective successors, heirs, executors, administrators, and other
legal representatives. Neither this Agreement nor any right or obligation
hereunder may be sold, transferred, assigned, or pledged by the Company
(except to an Affiliate) or by Executive without the prior written consent
of the other. However, nothing in this Agreement shall preclude the Company
from consolidating or merging into or with, or transferring all or
substantially all of its assets to, another entity which assumes this Agreement
and all obligations and undertakings of the Company hereunder.
16. Interpretation and Severability.
In the event any provision of this Agreement, or any portion thereof, is
determined by any arbitrator or court of competent jurisdiction to be
unenforceable as written, such provision or portion thereof shall be
interpreted so as to be enforceable. In the event any provision of this
Agreement, or any portion thereof, is determined by any arbitrator or
court of competent jurisdiction to be void, the remaining provisions of
this Agreement shall nevertheless be binding upon the Company and Executive
with the same effect as though the void provision or portion thereof had
been severed and deleted.
AGREED TO THIS 1st DAY OF JUNE, 1996, BY AND BETWEEN;
THE EXECUTIVE:
s/s Robert Petry
- ------------------------------
Robert Petry
7337 Westview Drive
Kent, OH 44240
THE COMPANY:
s/s Harcourt Aldrich Wiltshire
- -------------------------------
(Duly Authorized Officer)
FineLine Properties, Inc.7337 Westview Drive
Kent, OH 44240
<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
Agreement dated this 1st day of November, 1996 by and between Sidney
Rudick ("Executive") and FineLine Properties, Inc. (the "Company").
WHEREAS the Company desires to employ Executive, and Executive desires
to accept employment with the Company, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
1. Period of Employment. The Company shall employ Executive, and
Executive shall serve the Company during the period commencing on November 1,
1996, and continuing through and including June 1, 2001 (the "Term"). The Term
shall automatically be extended by one (1) additional year, unless, at
least sixty (60) days prior to June 1, 2001 or any anniversary
thereafter, the Company shall deliver to Executive, or Executive shall
deliver to the Company, written notice that the Term shall not be so
extended.
2. Duties and Responsibilities.
(a) During the Term, Executive shall be employed by the Company as Chief
Operating and Executive Officer of The Wedge and the Executive's
employment with the Company shall be full-time and exclusive. During the
Term, Executive shall, except during periods of vacation, sick leave, or
other duly authorized leave of absence, devote the whole of Executive's
time, attention, skill, and ability during usual business hours (and
outside those hours when reasonably necessary to Executive's duties
hereunder) to the faithful and diligent performance of such duties and
the exercise of such powers as may from time to time be assigned to or
vested in Executive by the Company's Board of Directors or by any
officer of the Company superior to Executive. Executive acknowledges and
agrees that Executive may be required, without additional compensation,
to perform
services for any business entity controlling, controlled by, or under
common control with the Company (such business entities hereinafter
individually and collectively, "Affiliates") and to accept such office
or position with any Affiliate as the Board of Directors may require,
including, but not limited to, service as an officer or director of the
Company or any Affiliate. Executive shall comply with all applicable
policies of the Company and Affiliates.
(b) Executive's services shall be performed at the Company's offices in
Kent, Ohio as well as at such other locations and subject to such travel
requirements as reasonably necessary to the performance of Executive's
duties hereunder.
3. Compensation.
(a) During the Term, as compensation for services rendered hereunder and
in
consideration of this Agreement, the Company shall pay Executive a
salary, in accordance with the Company's then-prevailing payroll
practices, at the annual rate of $55,000.00 (fifty-five thousand USD),]
or such greater amount as the Company may from time to time and in its
sole discretion determine.
(b) During the Term, as additional compensation, Executive shall be
entitled to
participate in and receive all benefits under any welfare benefit plan
or program (including, without limitation, medical, dental, disability,
group life (including accidental death and dismemberment) and business
travel insurance plans and programs), any retirement savings plan or
program (including, without limitation, 401(k) and pension), and such
other perquisites of office as the Company may, from time to time and in
its sole discretion, make available generally to employees of similar
rank as Executive. Such participation shall be subject to the terms and
conditions of such plans or programs, including, but not limited to,
such generally applicable eligibility provisions as may be in
effect from time to time.
(c) During the Term, as additional compensation, Executive shall be
entitled to participate in the Company's Supplemental Executive
Retirement Plan ("SERP") pursuant to the terms and conditions thereof.
(d) The Company shall reimburse Executive for all reasonable, ordinary,
and necessary business expenses incurred in the performance of
Executive's duties hereunder in accordance with and subject to the terms
and conditions of the Company's then-prevailing expense policy. As a
condition precedent to obtaining such reimbursement, Executive shall
provide to the Company any and all statements, bills, or receipts
evidencing the expenses for which Executive seeks reimbursement, and
such other related information or materials as the Company may from time
to time reasonably require.
4. Termination. Unless Executive's employment is terminated pursuant to
this Paragraph 4, the Company shall continue to employ Executive and
Executive shall continue to serve the Company throughout the Term.
(a) This Agreement shall terminate automatically upon Executive's death.
(b) Upon Executive's "Disability", the payment of benefits under the
Company's short-term and long-term disability insurance programs, if
any, shall satisfy the Company's obligations under the foregoing
Paragraph 3(a). For purposes of this Agreement, Executive shall be
deemed to be under a disability if Executive shall be unable, by virtue
of illness or physical or mental incapacity or disability (from any
cause or causes whatsoever), to perform Executive's essential job
functions hereunder, whether with or without reasonable accommodation,
in substantially the manner and to the extent required hereunder prior
to the commencement of such disability, for a period exceeding 180 days.
In the event Executive shall remain under a Disability for a period
exceeding 270 days, the Company shall have the right to terminate
Executive's employment hereunder at the end of any calendar month during
the continuance of such disability upon at least thirty (30) days prior
written notice to Executive.
(c) The Company shall have the right to terminate Executive's employment
at any time for "Cause". For purposes of this Agreement, Cause shall
include: (i) material default or other material breach by Executive of
Executive's obligations hereunder; (ii) failure by Executive to perform
diligently and competently Executive's duties hereunder; or
(d) In the event of termination, the Company shall (i) pay to Executive
an amount equal to the lesser of
(A) 8 months' salary from the date of termination, and
(B) Executive's salary for the remainder of the Term, such amount
to be paid in accordance with the Company's then-prevailing payroll
practices, and (ii) continue Executive's participation, if any, in such
group medical, hospitalization and dental plans or programs as were in
place immediately prior to such termination, for a period equal to
the lesser of (A) 8 months from the date of termination, and (B) the
remainder of the Term.
(e) Upon termination of Executive's employment pursuant to any of the
foregoing Paragraphs 4(a), (b), (c), or (d), or upon expiration of the
Term, any right or benefit accrued by Executive or to which Executive
had become entitled pursuant to this Agreement prior to such termination
or expiration (other than payment of salary with respect to periods
after such termination or expiration), and any Company obligation with
respect to any such right or benefit, shall not be extinguished by
reason of such termination or expiration and, together with any salary
earned but unpaid as of the date of termination or expiration and any
unpaid reimbursable expenses outstanding as of such date, shall be paid
to Executive or Executive's estate, less any outstanding amounts
previously advanced by the Company to or on behalf of Executive.
(f) The payments and benefits (if any) required to be provided to
Executive pursuant to this Paragraph 4 shall be in full and complete
satisfaction of any and all obligations owing to Executive pursuant to
this Agreement.
(g) In the event of resignation and or termination the Company shall pay
to the Executive all salary due and owing in full in accordance with the
Company's financial ability to do same. The Company shall either make
such payment in total, or in monthly increments within the financial
ability of the Company to do same, with such schedule to be provided
to the Executive within three weeks of such resignation and or
termination.
(f) In the event the Company's financial position enables it to do so,
in consideration of the Company's obligations to suppliers, investors
and other business interests, the Company shall at it option, revert
payment due to the Executive to the date of this Agreement.
5. Confidential Information. Both during and after the Term, Executive
shall not divulge or communicate to any person, corporation,
governmental agency, or other entity (except in performing Executive's
duties hereunder), or use for Executive's own purposes, any trade secret
or confidential commercial information, or any other information,
knowledge, or data of the Company or any Affiliate which is not
generally known to the public (including, but not limited to,
information relating to research, product development, manufacturing or
manufacturing processes, maintenance or repair processes, purchasing,
product or material costs, sales or sales strategies or prospects,
pricing or pricing strategies, advertising or promotional programs,
product information, or mailing or customer lists), and shall use
Executive's best efforts to prevent the publication or disclosure by any
other person or entity of any such secret, information, knowledge, or
data. While Executive is employed by the Company, all documents and
objects made, compiled, received, held, or used by Executive in
connection with the business of the Company shall remain the Company's
property, and shall be delivered by Executive to the Company upon the
termination of Executive's employment, for whatever reason, or at any
earlier time requested by the Company. It is understood that Executive
shall retain ownership of Executive's personal property, including
Executive's private papers not containing any trade secret or
confidential commercial information, or any other information,
knowledge, or data of the Company or any Affiliate.
6. Unfair Competition.
(a) While Executive is employed by the Company, and during any period,
if any, during which the Company is making payments to Executive
pursuant to the foregoing Paragraph 4(d), Executive shall not, directly
or indirectly, whether or not for compensation, and whether or not as
an employee, be engaged in or have a financial interest in any other
business, continue or assume any other corporate affiliations, or
pursue any other commercial activities, duties, or pursuits whatsoever
without the prior written consent of the Company when said activities
are in competition with the business or interests of the Company.
(b) As a condition of employment with the Company, and as a material
inducement to the Company to employ Executive, Executive agrees that for
a period of one (1) year after the later of (i) termination of
Executive's employment, for whatever reason, and (ii) the conclusion of
the period, if any, during which the Company is making payments to
Executive pursuant to the foregoing Paragraph 4(d), Executive shall not,
directly or indirectly, whether or not for compensation, and whether or
not as an employee, be engaged in or have any financial interest in any
business competing with or which may compete with the business of the
Company (or with any business of any Affiliate for which the Executive
performed services hereunder) within any state, region or locality in
which the Company or such Affiliate is then doing business or marketing
its products, as the business of the Company or such Affiliates may then
be constituted.
(c) Executive agrees and acknowledges that, by virtue of Executive's
employment with the Company, Executive shall have access to and maintain
an intimate knowledge of the Company's activities and affairs, including
trade secrets and confidential commercial information, and other
confidential matters. As a result of such access and knowledge,
and because of the special, unique, and extraordinary services that
Executive is capable of performing for the Company or one of its
competitors, Executive acknowledges that the services to be rendered by
Executive pursuant to this Agreement are of a character giving them a
peculiar value, the loss of which cannot adequately or reasonably be
compensated by money damages. Consequently, Executive agrees that any
breach or threatened breach by Executive of Executive's obligations
under this Paragraph 6, or of Paragraphs 5 or 7 of this Agreement, would
cause irreparable injury to the Company, and that the Company shall be
entitled to (i) preliminary and permanent injunctions enjoining
Executive from violating such provisions, and (ii) money damages in the
amount of fees, compensation, benefits, profits or other remuneration
earned by Executive or any competitor as a result of any such breach,
together with interest, and costs and attorneys' fees expended to
collect such damages or secure such injunctions. Nothing in this
Agreement, however, shall be construed to prohibit the Company from
pursuing any other remedy, the Company and Executive having agreed that
all such remedies shall be cumulative.
(d) Executive acknowledges that the limitations set forth in this
Paragraph 6 shall not prevent Executive from earning a livelihood after
Executive leaves the Company's employ, but merely prevents unfair
competition against the Company for a limited period.
7. Solicitation of Employees. Executive agrees that for a period of one
(1) year after the later of (a) termination of Executive's employment,
for whatever reason, and (b) the conclusion of the period, if any,
during which the Company is making payments to Executive pursuant to the
foregoing Paragraph 4(d), Executive shall not, directly or indirectly,
employ any person who was employed by the Company or any Affiliate or
induce such person to accept employment other than with the Company or
any Affiliate.
8. Inventions. Executive hereby agrees that any and all improvements,
inventions, discoveries, formulae, processes, methods, or designs, and
any documents, things, or information relating thereto (individually and
collectively, "Work Product") within the scope of any business of the
Company or any Affiliate which Executive may conceive or make, or may
have conceived or made during Executive's employment with the
Company, shall be and are the sole and exclusive property of the
Company, and that Executive shall, whenever requested to do so by the
Company (whether during Executive's employment or thereafter), at the
Company's expense, execute any and all applications, assignments, or
other instruments, and do all other things (including giving
testimony in any legal proceeding) which the Company may deem necessary
or appropriate in order to (a) apply for, obtain, maintain, enforce, or
defend letters patent of the United States or any other country for any
Work Product, or (b) assign, transfer, convey, or otherwise make
available to the Company any right, title or interest which Executive
might otherwise have in any Work Product. Executive shall promptly
communicate, disclose, and, upon request, report upon and deliver all
Work Product to the Company, and shall not use or permit any Work
Product to be used for any purpose other than on behalf of the Company,
whether during Executive's employment or thereafter.
9. Arbitration.
(a) Any dispute or controversy between the Company and Executive
relating to this Agreement (except any dispute relating to the foregoing
Paragraphs 5, 6, or 7) or relating to or arising out of Executive's
employment with the Company, shall be settled by binding arbitration in
the City of Kent, State of Ohio, pursuant to the governing rules of
the American Arbitration Association. Judgment upon any resulting
arbitration award may be entered in any court of competent jurisdiction.
(b) Notwithstanding anything herein to the contrary, the Company shall
not be required to arbitrate any dispute arising between it and
Executive relating to the foregoing Paragraphs 5, 6, or 7, but shall
have the right to institute judicial proceedings in a court of competent
jurisdiction within the State of Ohio, in the district or county in
which the Company's principal offices are located with respect to such
dispute or claim. Executive hereby consents to, and waives any objection
to, the personal jurisdiction and venue of the aforesaid courts, and
waives any claim that the aforesaid courts constitute an inconvenient
forum. If such judicial proceedings are instituted, the parties agree
that such proceedings shall not be stayed pending the outcome of any
arbitration proceedings hereunder.
10. Additional Obligations. Both during and after the Term, Executive
shall, upon reasonable notice, furnish the Company with such information
as may be in Executive's possession, and cooperate with the Company, as
may reasonably be requested by the Company (and, after the Term, with
due consideration for Executive's obligations with respect to any new
employment or business activity) in connection with any litigation in
which the Company or any Affiliate is or may become a party. The Company
shall reimburse Executive for all reasonable expenses incurred by
Executive in fulfilling Executive's obligations under this Paragraph 10.
11. Notice. Any notice or other communication required or permitted
under this Agreement by either party hereto to the other shall be in
writing, and shall be deemed effective upon
(a) personal delivery, if delivered by hand,
(b) three days after the date of deposit in the mails, postage prepaid,
if mailed by certified or registered mail, or
(c) the next business day, if sent by a prepaid overnight courier
service, and in each case addressed as follows:
If to Executive:
Sidney Rudick
4362 SW 52nd Street
Fort Lauderdale, FL 33314
If to the Company:
FineLine Properties, Inc.
7337 Westview Drive
Kent, OH 44240
Either party may change the address or addresses to which notices are to
be sent by giving notice of such change of address in the manner
provided by this Paragraph 11.
12. Entire Agreement. This Agreement represents the entire agreement
between the Company and Executive with respect to Executive's employment
with the Company, and supersedes and is in full substitution for any and
all prior agreements or understandings, whether oral or written,
relating to Executive's employment.
13. Amendment. This Agreement may not be canceled, changed, modified, or
amended orally, and no cancellation, change, modification or amendment
hereof shall be effective or binding unless in a written instrument
signed by the Company and Executive. A provision of this Agreement may
be waived only by a written instrument signed by the party against whom
or which enforcement of such waiver is sought.
14. No Waiver. The failure at any time either of the Company or
Executive to require the performance by the other of any provision of
this Agreement shall in no way affect the full right of such party to
require such performance at any time thereafter, nor shall the
waiver by either the Company or Executive of any breach of any provision
of this Agreement be taken or held to constitute a waiver of any
succeeding breach of such or any other provision of this Agreement.
15. Assignment. This Agreement is binding on and for the benefit of the
Company and Executive and their respective successors, heirs, executors,
administrators, and other legal representatives. Neither this Agreement
nor any right or obligation hereunder may be sold, transferred,
assigned, or pledged by the Company (except to an Affiliate) or by
Executive without the prior written consent of the other. However,
nothing in this Agreement shall preclude the Company from consolidating
or merging into or with, or transferring all or substantially all of its
assets to, another entity which assumes this Agreement and all
obligations and undertakings of the Company hereunder.
16. Interpretation and Severability. In the event any provision of this
Agreement, or any portion thereof, is determined by any arbitrator or
court of competent jurisdiction to be unenforceable as written, such
provision or portion thereof shall be interpreted so as to be
enforceable. In the event any provision of this Agreement, or any
portion thereof, is determined by any arbitrator or court of competent
jurisdiction to be void, the remaining provisions of this Agreement
shall nevertheless be binding upon the Company and Executive with the
same effect as though the void provision or portion thereof had been
severed and deleted.
AGREED TO THIS 1st DAY OF NOVEMBER, 1996, BY AND BETWEEN;
THE EXECUTIVE:
s/s Sidney Rudick
- --------------------------
Sidney Rudick
4362 SW 52nd Street
Fort Lauderdale, FL 33314
THE COMPANY:
s/s Robert Petry
- ---------------------------
(Duly Authorized Officer)
FineLine Properties, Inc.
7337 Westview Drive
Kent, OH 44240
EMPLOYMENT AGREEMENT AMENDMENT
Agreement Amendment dated this 22nd day of November, 1996 by and between
Sidney Rudick ("Executive") and FineLine Properties, Inc. (the "Company").
WHEREAS the Company desires to retain the Executive, and Executive
desires to continue association with the Company, subject to the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
1. Period of Employment Modification. It is mutually agreed that the
Employment Agreement dated November 1, 1996 shall be hereby modified
and changed to reflect that the Executive shall serve as a member of the
Board of Directors with the employment as executive in the Company
deferred due to modification of the Company's operating plans.
2. Duties., Responsibilities and Compensation.
(a) During the Term, Executive shall serve in the capacity as a member
and Director on the Board and shall attend Board meetings, vote on Board
matters and conduct himself in accordance with the Company's bylaws. In
accordance with this change and modification, the Executive shall not
participate in any Company benefit plans, including but not limited to
welfare benefit plans or program (including, but not limited to medical,
dental, disability, group life [ including accidental death and
dismemberment, business travel insurance plans and programs], retirement
savings plan or program [ including without limitation 401(k) and
pension] and such other perquisites of office as the Company may from
time to time an in its sole discretion make available generally to
employees of similar rank as Executive. This Agreement also excludes
inclusion in participation in the Company's Supplemental Executive
Retirement Plan ("SERP"). The Executive shall serve as President of The
Wedge, a product and subsidiary of the company and shall be entitled to
the compensation and benefits as indicated in the original Employment
Agreement if and when said subsidiary of the Company assumes operation.
(b) The Company shall reimburse Executive for all reasonable, ordinary,
and necessary business expenses incurred in the performance of
Executive's duties hereunder in accordance with and subject to the
terms and conditions of the Company's then-prevailing expense policy. As a
condition precedent to obtaining such reimbursement, Executive shall
provide to the Company any and all statements, bills, or receipts
evidencing the expenses for which Executive seeks reimbursement, and
such other related information or materials as the Company may from
time to time reasonably require.
3. Other Provisions. All other provisions and terms of the original
Employment Agreement with respect to Confidential Information - Unfair
Competition - Arbitration - Additional Obligations - Notice - Entire
Agreement - Amendment - No Waiver - Assignment - Interpretation and
Severability shall remain in force.
AGREED TO THIS 22nd DAY OF NOVEMBER, 1996,BY AND BETWEEN;
THE EXECUTIVE:
s/s Sidney Rudick
- ---------------------
Sidney Rudick
4362 SW 52nd Street
Fort Lauderdale, FL 33314
THE COMPANY:
s/s Robert Petry
- ----------------------
(Duly Authorized Officer)
FineLine Properties, Inc.
7337 Westview Drive
Kent, OH 44240
<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
Agreement dated this 8th day of August, 1996 by and between Carl White
("Executive") and FineLine Properties, Inc. (the "Company").
WHEREAS the Company desires to employ Executive, and Executive desires
to accept employment with the Company, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
1. Period of Employment. The Company shall employ Executive, and
Executive shall serve the Company during the period commencing on
November 1, 1996, and continuing through and including June 1, 2001 (the
"Term"). The Term shall automatically be extended by one (1) additional
year, unless, at least sixty (60) days prior to June 1, 2001
or any anniversary thereafter, the Company shall deliver to Executive,
or Executive shall deliver to the Company, written notice that the Term
shall not be so extended.
2. Duties and Responsibilities.
(a) During the Term, Executive shall be employed by the Company as Chief
Operating and Executive Officer of The Tasties and the Executive's
employment with the Company shall be full-time and exclusive. During the
Term, Executive shall, except during periods of vacation, sick leave, or
other duly authorized leave of absence, devote the whole of Executive's
time, attention, skill, and ability during usual business hours (and
outside those hours when reasonably necessary to Executive's duties
hereunder) to the faithful and diligent performance of such duties and
the exercise of such powers as may from time to time be assigned to or
vested in Executive by the Company's Board of Directors or by any
officer of the Company superior to Executive. Executive acknowledges and
agrees that Executive may be required, without additional compensation,
to perform services for any business entity controlling, controlled by,
or under common control with the Company (such business entities
hereinafter individually and collectively, "Affiliates") and to accept
such office or position with any Affiliate as the Board of
Directors may require, including, but not limited to, service as an
officer or director of the Company or any Affiliate. Executive shall
comply with all applicable policies of the Company and Affiliates.
(b) Executive's services shall be performed at the Company's offices in
Kent, Ohio as well as at such other locations and subject to such travel
requirements as reasonably necessary to the performance of Executive's
duties hereunder.
3. Compensation.
(a) During the Term, as compensation for services rendered hereunder and
in
consideration of this Agreement, the Company shall pay Executive a
salary, in accordance with the Company's then-prevailing payroll
practices, at the annual rate of $55,000.00 (fifty-five thousand USD),]
or such greater amount as the Company may from time to time and in its
sole discretion determine.
(b) During the Term, as additional compensation, Executive shall be
entitled to participate in and receive all benefits under any welfare benefit
plan or program (including, without limitation, medical, dental, disability,
group life (including accidental death and dismemberment) and business
travel insurance plans and programs), any retirement savings plan or
program (including, without limitation, 401(k) and pension), and such
other perquisites of office as the Company may, from time to time and in
its sole discretion, make available generally to employees of similar
rank as Executive. Such participation shall be subject to the terms and
conditions of such plans or programs, including, but not limited to,
such generally applicable eligibility provisions as may be in
effect from time to time.
(c) During the Term, as additional compensation, Executive shall be
entitled to participate in the Company's Supplemental Executive
Retirement Plan ("SERP") pursuant to the terms and conditions thereof.
(d) The Company shall reimburse Executive for all reasonable, ordinary,
and necessary business expenses incurred in the performance of
Executive's duties hereunder in accordance with and subject to the terms
and conditions of the Company's then-prevailing expense policy. As a
condition precedent to obtaining such reimbursement, Executive shall
provide to the Company any and all statements, bills, or receipts
evidencing the expenses for which Executive seeks reimbursement, and
such other related information or materials as the Company may from time
to time reasonably require.
4. Termination. Unless Executive's employment is terminated pursuant to
this Paragraph 4, the Company shall continue to employ Executive and
Executive shall continue to serve the Company throughout the Term.
(a) This Agreement shall terminate automatically upon Executive's death.
(b) Upon Executive's "Disability", the payment of benefits under the
Company's short-term and long-term disability insurance programs, if
any, shall satisfy the Company's obligations under the foregoing
Paragraph 3(a). For purposes of this Agreement, Executive shall be
deemed to be under a disability if Executive shall be unable, by virtue
of illness or physical or mental incapacity or disability (from any
cause or causes whatsoever), to perform Executive's essential job
functions hereunder, whether with or without reasonable accommodation,
in substantially the manner and to the extent required hereunder prior
to the commencement of such disability, for a period exceeding 180 days.
In the event Executive shall remain under a Disability for a period
exceeding 270 days, the Company shall have the right to terminate
Executive's employment hereunder at the end of any calendar month during
the continuance of such disability upon at least thirty (30) days prior
written notice to Executive.
(c) The Company shall have the right to terminate Executive's employment
at any time for "Cause". For purposes of this Agreement, Cause shall
include: (i) material default or other material breach by Executive of
Executive's obligations hereunder; (ii) failure by Executive to perform
diligently and competently Executive's duties hereunder; or
(d) In the event of termination, the Company shall (i) pay to Executive
an amount equal to the lesser of
(A) 8 months' salary from the date of termination, and
(B) Executive's salary for the remainder of the Term, such amount
to be paid in accordance with the Company's then-prevailing payroll
practices, and (ii) continue Executive's participation, if any, in such
group medical, hospitalization and dental plans or programs as were in
place immediately prior to such termination, for a period equal to
the lesser of (A) 8 months from the date of termination, and (B) the
remainder of the Term.
(e) Upon termination of Executive's employment pursuant to any of the
foregoing Paragraphs 4(a), (b), (c), or (d), or upon expiration of the
Term, any right or benefit accrued by Executive or to which Executive
had become entitled pursuant to this Agreement prior to such termination
or expiration (other than payment of salary with respect to periods
after such termination or expiration), and any Company obligation with
respect to any such right or benefit, shall not be extinguished by
reason of such termination or expiration and, together with any salary
earned but unpaid as of the date of termination or expiration and any
unpaid reimbursable expenses outstanding as of such date, shall be paid
to Executive or Executive's estate, less any outstanding amounts
previously advanced by the Company to or on behalf of Executive.
(f) The payments and benefits (if any) required to be provided to
Executive pursuant to this Paragraph 4 shall be in full and complete
satisfaction of any and all obligations owing to Executive pursuant to
this Agreement.
(g) In the event of resignation and or termination the Company shall pay
to the Executive all salary due and owing in full in accordance with the
Company's financial ability to do same. The Company shall either make
such payment in total, or in monthly increments within the financial
ability of the Company to do same, with such schedule to be provided
to the Executive within three weeks of such resignation and or
termination.
(f) In the event the Company's financial position enables it to do so,
in consideration of the Company's obligations to suppliers, investors
and other business interests, the Company shall at it option, revert
payment due to the Executive to the date of this Agreement.
5. Confidential Information. Both during and after the Term, Executive
shall not divulge or communicate to any person, corporation,
governmental agency, or other entity (except in performing Executive's
duties hereunder), or use for Executive's own purposes, any trade secret
or confidential commercial information, or any other information,
knowledge, or data of the Company or any Affiliate which is not
generally known to the public (including, but not limited to,
information relating to research, product development, manufacturing or
manufacturing processes, maintenance or repair processes, purchasing,
product or material costs, sales or sales strategies or prospects,
pricing or pricing strategies, advertising or promotional programs,
product information, or mailing or customer lists), and shall use
Executive's best efforts to prevent the publication or disclosure by any
other person or entity of any such secret, information, knowledge, or
data. While Executive is employed by the Company, all documents and
objects made, compiled, received, held, or used by Executive in
connection with the business of the Company shall remain the Company's
property, and shall be delivered by Executive to the Company upon the
termination of Executive's employment, for whatever reason, or at any
earlier time requested by the Company. It is understood that Executive
shall retain ownership of Executive's personal property, including
Executive's private papers not containing any trade secret or
confidential commercial information, or any other information,
knowledge, or data of the Company or any Affiliate.
6. Unfair Competition.
(a) While Executive is employed by the Company, and during any period,
if any, during which the Company is making payments to Executive
pursuant to the foregoing Paragraph 4(d), Executive shall not, directly
or indirectly, whether or not for compensation, and whether or not as
an employee, be engaged in or have a financial interest in any other
business, continue or assume any other corporate affiliations, or
pursue any other commercial activities, duties, or pursuits whatsoever
without the prior written consent of the Company when said activities
are in competion with the business or interests of the Company.
(b) As a condition of employment with the Company, and as a material
inducement to the Company to employ Executive, Executive agrees that for
a period of one (1) year after the later of (i) termination of
Executive's employment, for whatever reason, and (ii) the conclusion of
the period, if any, during which the Company is making payments to
Executive pursuant to the foregoing Paragraph 4(d), Executive shall not,
directly or indirectly, whether or not for compensation, and whether or
not as an employee, be engaged in or have any financial interest in any
business competing with or which may compete with the business of the
Company (or with any business of any Affiliate for which the Executive
performed services hereunder) within any state, region or locality in
which the Company or such Affiliate is then doing business or marketing
its products, as the business of the Company or such Affiliates may then
be constituted.
(c) Executive agrees and acknowledges that, by virtue of Executive's
employment with the Company, Executive shall have access to and maintain
an intimate knowledge of the Company's activities and affairs, including
trade secrets and confidential commercial information, and other
confidential matters. As a result of such access and knowledge,
and because of the special, unique, and extraordinary services that
Executive is capable of performing for the Company or one of its
competitors, Executive acknowledges that the services to be rendered by
Executive pursuant to this Agreement are of a character giving them a
peculiar value, the loss of which cannot adequately or reasonably be
compensated by money damages. Consequently, Executive agrees that any
breach or threatened breach by Executive of Executive's obligations
under this Paragraph 6, or of Paragraphs 5 or 7 of this Agreement, would
cause irreparable injury to the Company, and that the Company shall be
entitled to (i) preliminary and permanent injunctions enjoining
Executive from violating such provisions, and (ii) money damages in the
amount of fees, compensation, benefits, profits or other remuneration
earned by Executive or any competitor as a result of any such breach,
together with interest, and costs and attorneys' fees expended to
collect such damages or secure such injunctions. Nothing in this
Agreement, however, shall be construed to prohibit the Company from
pursuing any other remedy, the Company and Executive having agreed that
all such remedies shall be cumulative.
(d) Executive acknowledges that the limitations set forth in this
Paragraph 6 shall not prevent Executive from earning a livelihood after
Executive leaves the Company's employ, but merely prevents unfair
competition against the Company for a limited period.
7. Solicitation of Employees. Executive agrees that for a period of one
(1) year after the later of (a) termination of Executive's employment,
for whatever reason, and (b) the conclusion of the period, if any,
during which the Company is making payments to Executive pursuant to the
foregoing Paragraph 4(d), Executive shall not, directly or indirectly,
employ any person who was employed by the Company or any Affiliate or
induce such person to accept employment other than with the Company or
any Affiliate.
8. Inventions. Executive hereby agrees that any and all improvements,
inventions, discoveries, formulae, processes, methods, or designs, and
any documents, things, or information relating thereto (individually and
collectively, "Work Product") within the scope of any business of the
Company or any Affiliate which Executive may conceive or make, or may
have conceived or made during Executive's employment with the
Company, shall be and are the sole and exclusive property of the
Company, and that Executive shall, whenever requested to do so by the
Company (whether during Executive's employment or thereafter), at the
Company's expense, execute any and all applications, assignments, or
other instruments, and do all other things (including giving
testimony in any legal proceeding) which the Company may deem necessary
or appropriate in order to (a) apply for, obtain, maintain, enforce, or
defend letters patent of the United States or any other country for any
Work Product, or (b) assign, transfer, convey, or otherwise make
available to the Company any right, title or interest which Executive
might otherwise have in any Work Product. Executive shall promptly
communicate, disclose, and, upon request, report upon and deliver all
Work Product to the Company, and shall not use or permit any Work
Product to be used for any purpose other than on behalf of the Company,
whether during Executive's employment or thereafter.
9. Arbitration.
(a) Any dispute or controversy between the Company and Executive
relating to this Agreement (except any dispute relating to the foregoing
Paragraphs 5, 6, or 7) or relating to or arising out of Executive's
employment with the Company, shall be settled by binding arbitration in
the City of Kent, State of Ohio, pursuant to the governing rules of
the American Arbitration Association. Judgment upon any resulting
arbitration award may be entered in any court of competent jurisdiction.
(b) Notwithstanding anything herein to the contrary, the Company shall
not be required to arbitrate any dispute arising between it and
Executive relating to the foregoing Paragraphs 5, 6, or 7, but shall
have the right to institute judicial proceedings in a court of competent
jurisdiction within the State of Ohio, in the district or county in
which the Company's principal offices are located with respect to such
dispute or claim. Executive hereby consents to, and waives any objection
to, the personal jurisdiction and venue of the aforesaid courts, and
waives any claim that the aforesaid courts constitute an inconvenient
forum. If such judicial proceedings are instituted, the parties agree
that such proceedings shall not be stayed pending the outcome of any
arbitration proceedings hereunder.
10. Additional Obligations. Both during and after the Term, Executive
shall, upon reasonable notice, furnish the Company with such information
as may be in Executive's possession, and cooperate with the Company, as
may reasonably be requested by the Company (and, after the Term, with
due consideration for Executive's obligations with respect to any new
employment or business activity) in connection with any litigation in
which the Company or any Affiliate is or may become a party. The Company
shall reimburse Executive for all reasonable expenses incurred by
Executive in fulfilling Executive's obligations under this Paragraph 10.
11. Notice. Any notice or other communication required or permitted
under this Agreement by either party hereto to the other shall be in
writing, and shall be deemed effective upon
(a) personal delivery, if delivered by hand,
(b) three days after the date of deposit in the mails, postage prepaid,
if mailed by certified or registered mail, or
(c) the next business day, if sent by a prepaid overnight courier
service, and in each case addressed as follows:
If to Executive:
Carl White
420 Grand Avenue
Long Beach, CA 40816
If to the Company:
FineLine Properties, Inc.
7337 Westview Drive
Kent, OH 44240
Either party may change the address or addresses to which notices are to
be sent by giving notice of such change of address in the manner
provided by this Paragraph 11.
12. Entire Agreement. This Agreement represents the entire agreement
between the Company and Executive with respect to Executive's employment
with the Company, and supersedes and is in full substitution for any and
all prior agreements or understandings, whether oral or written,
relating to Executive's employment.
13. Amendment. This Agreement may not be canceled, changed, modified, or
amended orally, and no cancellation, change, modification or amendment
hereof shall be effective or binding unless in a written instrument
signed by the Company and Executive. A provision of this Agreement may
be waived only by a written instrument signed by the party against whom
or which enforcement of such waiver is sought.
14. No Waiver. The failure at any time either of the Company or
Executive to require the performance by the other of any provision of
this Agreement shall in no way affect the full right of such party to
require such performance at any time thereafter, nor shall the
waiver by either the Company or Executive of any breach of any provision
of this Agreement be taken or held to constitute a waiver of any
succeeding breach of such or any other provision of this Agreement.
15. Assignment. This Agreement is binding on and for the benefit of the
Company and Executive and their respective successors, heirs, executors,
administrators, and other legal representatives. Neither this Agreement
nor any right or obligation hereunder may be sold, transferred,
assigned, or pledged by the Company (except to an Affiliate) or by
Executive without the prior written consent of the other. However,
nothing in this Agreement shall preclude the Company from consolidating
or merging into or with, or transferring all or substantially all of its
assets to, another entity which assumes this Agreement and all
obligations and undertakings of the Company hereunder.
16. Interpretation and Severability. In the event any provision of this
Agreement, or any portion thereof, is determined by any arbitrator or
court of competent jurisdiction to be unenforceable as written, such
provision or portion thereof shall be interpreted so as to be
enforceable. In the event any provision of this Agreement, or any
portion thereof, is determined by any arbitrator or court of competent
jurisdiction to be void, the remaining provisions of this Agreement
shall nevertheless be binding upon the Company and Executive with the
same effect as though the void provision or portion thereof had been
severed and deleted.
AGREED TO THIS 8th DAY OF AUGUST, 1996, BY AND BETWEEN;
THE EXECUTIVE:
s/s Carl White
- -----------------------
Carl White
420 Grand Avenue
Long Beach, CA 40816
THE COMPANY:
s/s Robert Petry
- -------------------------------
(Duly Authorized Officer)
FineLine Properties, Inc.
7337 Westview Drive
Kent, OH 44240
<PAGE>
EMPLOYMENT AGREEMENT AMENDMENT
Amendment dated this 22nd day of November, 1996 by and between Carl White
("Executive") and FineLine Properties, Inc. (the "Company"). WHEREAS the
Company desires to retain the Executive, and Executive desires to continue
association with the Company, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
1. Period of Employment Modification. It is mutually agreed that the
Employment Agreement dated November 1, 1996 shall be hereby modified
and changed to reflect that the Executive shall serve as a member of the
Board of Directors with the employment as executive in the Company
deferred due to modification of the Company's operating plans.
2. Duties., Responsibilities and Compensation.
(a) During the Term, Executive shall serve in the capacity as a member
and Director on the Board and shall attend Board meetings, vote on Board
matters and conduct himself in accordance with the Company's bylaws. In
accordance with this change and modification, the Executive shall not
participate in any Company benefit plans, including but not limited to
welfare benefit plans or program (including, but not limited to medical,
dental, disability, group life (including accidental death and
dismemberment), business travel insurance plans and programs], retirement
savings plan or program [including without limitation 401(k) and
pension] and such other perquisites of office as the Company may from
time to time an in its sole discretion make available generally to
employees of similar rank as Executive. This Agreement also excludes
inclusion in participation in the Company's Supplemental Executive
Retirement Plan ("SERP"). The Executive shall serve as President of The
Tasties, a subsidiary of the company and shall be entitled to the
compensation and benefits as indicated in the original Employment
Agreement if and when said subsidiary of the Company assumes operation.
(b) The Company shall reimburse Executive for all reasonable, ordinary,
and necessary business expenses incurred in the performance of
Executive's duties hereunder in accordance with and subject to the terms
and conditions of the Company's then-prevailing expense policy. As a
condition precedent to obtaining such reimbursement, Executive shall
provide to the Company any and all statements, bills, or receipts
evidencing the expenses for which Executive seeks reimbursement, and
such other related information or materials as the Company may from time
to time reasonably require.
3. Other Provisions. All other provisions and terms of the original
Employment Agreement with respect to Confidential Information - Unfair
Competition - Arbitration - Additional Obligations - Notice - Entire
Agreement - Amendment - No Waiver - Assignment - Interpretation and
Severability shall remain in force.
AGREED TO THIS 22nd DAY OF NOVEMBER, 1996, BY AND BETWEEN;
THE EXECUTIVE:
s/s Carl White
- -----------------------
Carl White
420 North Grand Avenue
Long Beach, CA 90814
THE COMPANY:
s/s Robert Petry
- -----------------------
( Duly Authorized Officer)
FineLine Properties, Inc.
7337 Westview Drive
Kent, OH 44240
<PAGE>
Exhibit 17.1
25/8/98
Mr. Robert Petry
Chairman
Board of Directors
FineLine Properties.com, Inc.
3250 Market Street
Suite 302
Fairlawn, OH 44240
USA
Dear Mr. Petry:
Effective immediately, I am tendering my resignation as Treasurer and as a
Member of the Board of Directors for FineLine Properties.com, Inc. due to
personal as well as business reasons.
I enjoyed serving with the members of the Board and am available for any items
which need clarification in the records during my term.
Sincerely;
s/s Gaye Knowles
- ----------------------
Gaye Knowles
<PAGE>
Exhibit 23.1 Consent from James E. Slayton, CPA
FINELINE PROPERTIES.COM, INC.
EXHIBIT #23 Consent of Experts and Counsel
James E. Slayton, CPA
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
To Whom It May Concern: September 22, 1999
The firm of James E. Slayton, Certified Public Accountant consents
to the inclusion of my report of December 31, 1998, on the Financial
Statements of FineLine Properties.com, Inc. from the inception date of
January 11, 1988 through December 31, 1998, in any filings that are
necessary now or in the near future to be filed with the U. S.
Securities and Exchange Commission.
Professionally,
s/s James E. Slayton, CPA
- ----------------------------
James E. Slayton, CPA
Ohio License ID # 04-1-15582
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET, THE STATEMENT OF OPERATIONS, AND THE
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 458
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 458
<PP&E> 2,803,922
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,804,380
<CURRENT-LIABILITIES> 709,274
<BONDS> 0
0
0
<COMMON> 3,303,541
<OTHER-SE> (1,208,435)
<TOTAL-LIABILITY-AND-EQUITY> 2,804,380
<SALES> 22,544
<TOTAL-REVENUES> 22,544
<CGS> 756,569
<TOTAL-COSTS> 756,569
<OTHER-EXPENSES> 474,410
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,208,435)
<EPS-BASIC> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
