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US SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/a 12/99
(X) Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal period ended December 31, 1998.
( ) Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from to .
Commission File Number 0-24185
CENTRAL AMERICAN EQUITIES CORP.
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Florida 65-0636168
(State or other jurisdiction of (IRS Employer Identification Number)
incorporated or organization)
19100 Von Karman Ste. 1020
Irvine, California 92612
(Address of Principal Executive Offices) (Zip Code)
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(949) 757-0222
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, $.001 Par Value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding twelve (12) months
(or for such shorter period that registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past ninety (90)
days. YES ( X ) NO ( ).
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and if no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10KSB
or any amendment to this Form 10-KSB. [ ]
$1,131,158
(Issuer's revenues for its most recent fiscal year).
(Aggregate market value of the voting stock
held by non-affiliates of Registrant)
12,230,252 Shares Class A Common Stock, $.001 par value
(Number of shares outstanding of each of the Registrant's
classes of common stock, as of December 31, 1998)
Transitional Small Business disclosure format (check one)
YES [ X ] NO [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report on Form 10K of Registrant for the year ended December 31, 1998
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
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ITEM 1. DESCRIPTION OF THE BUSINESS ...................................... 5
Formation of the Company ............................................... 5
ITEM 2. DESCRIPTION OF THE PROPERTIES .................................... 6
Hotel Alta ............................................................. 6
Ecolodge San Luis and Biological Station ............................... 8
Sunset Reef Marine Hotel and Playa Carmen Restaurant ................... 10
Alta Travel Planners ................................................... 11
ITEM 3. LEGAL PROCEEDINGS ................................................ 11
CAE V. Francis ......................................................... 11
Post 1998 Legal Proceedings: Lindemann v. CAE .......................... 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............. 12
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ......... 12
Market Information ..................................................... 12
Holders ................................................................ 12
Dividends .............................................................. 13
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS ............................... 13
Overview ............................................................... 13
New Management ......................................................... 14
Results of Operations --- Years Ending December 31, 1997 and 1998 ...... 14
Liquidity and Capital Resources ........................................ 15
Currency Devaluation ................................................... 16
Inflation .............................................................. 16
Year 2000 Compliance ................................................... 16
ITEM 7. FINANCIAL STATEMENTS ............................................. 17
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS .................... 30
Changes in Registrant's Certifying Accountant .......................... 30
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS ............... 30
Identification of Directors and Executive Officers ..................... 30
Business Experience .................................................... 31
Family Relationships ................................................... 33
Involvement in Certain Legal Proceedings ............................... 33
ITEM 10. EXECUTIVE COMPENSATION .......................................... 33
ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT & CERTAIN BENEFICIAL OWNERS .... 34
Security Ownership of Certain Beneficial Owners ........................ 34
Security Ownership of Management ....................................... 36
ITEM 12. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS ....... 37
ITEM 12a (10-SB ITEM 10) RECENT SALES OF UNREGISTERED SECURITIES ........ 37
ITEM 12b (10-SB ITEM 11) DESCRIPTION OF SECURITIES ....................... 39
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Description of Securities .............................................. 39
Transfer Agent ......................................................... 39
ITEM 12c (10-SB ITEM 12.) INDEMNIFICATION OF DIRECTORS AND OFFICERS ..... 39
ITEM 13. INDEX TO EXHIBITS ............................................... 41
VERIFICATION SIGNATURES .................................................. 42
EXHIBIT 2: AGREEMENT FOR THE EXCHANGE OF COMMON STOCK .................... 43
EXHIBIT 3 (I): ARTICLES OF INCORPORATION OF CAE .......................... 50
EXHIBIT 3 (II): BYLAWS OF CENTRAL AMERICAN EQUITIES CORP ................. 52
EXHIBIT 10: OPTIONS AGREEMENTS ........................................... 59
EXHIBIT 10: MANAGEMENT AGREEMENT ......................................... 63
EXHIBIT 10: AGREEMENT WITH GEORGE SOLANO ................................. 65
EXHIBIT 10: OTHER OPTION AGREEMENTS ...................................... 66
EXHIBIT 21: SUBSIDIARIES OF REGISTRANT ................................... 76
EXHIBIT 21: LETTER CONCERNING OWNERSHIP OF COSTA RICAN SUBSIDIARIES ...... 77
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ITEM 1. DESCRIPTION OF THE BUSINESS
Central American Equities Corp. (the "Company" or "CAE") is a US hospitality
company, based in Irvine, California and incorporated in the State of Florida on
January 23, 1996. The Company specializes in providing high-quality food and
lodging in unique natural settings in Costa Rica. The company is in the business
of owning and operating hotels and restaurants and real property in Costa Rica.
Together, the properties provide an integrated eco-vacation experience in Costa
Rica.
CAE includes among its assets in Costa Rica three (3) hotels: Hotel Alta in
Santa Ana (a suburb of the capital city of San Jose), Ecolodge San Luis and
Biological Station (in the San Luis Valley near the world famous Monteverde
Cloud Forest), and Sunset Reef (on the Pacific Ocean in Mal Pais adjacent to the
protected Cabo Blanco Reserve). CAE also owns and operates La Luz Restaurant
(located in Hotel Alta), Restaurant Playa Carmen (on the beach near Sunset
Reef), and Alta Travel Planners (a full-service reservation, travel planning and
marketing operation that moved its headquarters from California to Costa Rica in
July 1999).
With the opening of Hotel Alta in December of 1997, 1998 marked the beginning of
the first year of full operation of the Company's hotels. All Company owned
facilities, except for Restaurant Playa Carmen, were opened and operating by the
beginning of 1998. The company has approximately 90 full and part-time
employees.
FORMATION OF THE COMPANY
CAE was formed by the acquisition of four limited partnerships. The Company
acquired Cal Tico, L.P. ("Cal Tico"), Ecolodge Partners L.P. ("Ecolodge"),
MarineLodge Partners, L.P. ("MarineLodge") and, L.A. Cal L.P. (Together these
companies are referred to as the "Partnerships"). The following steps describe
the creation of CAE:
1. In July 1992, Cal Tico L.P., a California limited partnership was formed
to raise $3.7 million to purchase the land and construct Hotel Alta in
Santa Ana, Costa Rica. The land and buildings were owned by Hotelera Cal
Tico, S.A., a Costa Rican corporation. Cal Tico, L.P. owned 100% of the
stock in Hotelera Cal Tico, S.A. The general partners of Cal Tico, L.P.
were George Solano and Craig MacClean.
2. In July 1993, Ecolodge Partners L.P., a California limited partnership
was formed to raise a total of $1.3 million to purchase the land and
construct Ecolodge San Luis and Biological Station. The buildings of
Ecolodge San Luis were owned by a Ecoproyecto San Luis, S.A., a Costa
Rican corporation. The land is owned by Confluencia San Luis, S.A. which
is 100% owned by Ecoproyecto San Luis, S.A. In turn, Ecolodge Partners,
L.P. owned 100% of the stock in Ecoproyecto San Luis, S.A. The general
partners of Ecolodge, L.P. were Cal TKCo, S.A. (a Costa Rican
corporation represented by Richard Wm. Talley and Paul King), Tico Star,
Inc. (a California Corporation owned by Joanell Lyon) and Bosque II,
S.A. (a Costa Rican Corporation owned by Milton and Diana Lieberman).
3. In January 1994, L.A. Cal L.P., a California limited partnership was
formed to raise $385,000 to furnish, equip, and build out the upscale
restaurant La Luz (the leasee) in Hotel Alta (the lessor) in Santa Ana,
Costa Rica. The general partner of L.A. Cal L.P. was Cal TKCO, S.A.
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4. In March 1995, MarineLodge Partners, L.P., a California limited
partnership was formed to raise a total of $2.2 million for the purchase
and renovation of Sunset Reef Marine Hotel. The land and buildings were
owned by a Sociedad Protectora de la Fauna y Flora de Mal Pais, S.A. a
Costa Rican company. MarineLodge Partners, L.P. owned 100% of the stock
in Sociedad Protectora de la Fauna y Flora de Mal Pais, S.A. Sociedad
Protectora de la Fauna y Flora de Mal Pais, S.A. also owns 100% of the
stock in Corporacion Muxia, S.A. Corporacion Muxia, S.A. owns the land
and restaurant known as Playa Carmen. The general partners of
MarineLodge Partners, L.P. were Cal TKCo, S.A. and C.R. Escazu Impresa
Costaricense LTDA (W.F.O. Rosenmiller).
5. In December 1996, Central American Equities combined the assets of the
four limited partnerships in a form of entity restructuring referred to
as a "roll up." Under the terms of the roll-up of the dollar value of
each partners' capital account was exchanged for one share of common
stock in Central American Equities (a Florida corporation incorporated
on January 23, 1996) for each dollar of capital. In exchange for the
ownership of the four partnerships, CAE issued 10,881,277 shares of
common stock on December 10, 1996. At this point the partnerships
dissolved.
CAE owns 100% of the stock of the following Costa Rican Corporations: Hotelera
Caltico, S.A.; Ecoproyecto San Luis, S.A (which owns 100% of Confluencia San
Luis, S.A.); and Sociedad Protectora de la Fauna y Flora de Mal Pais, S.A.
(which owns 100% of Corporacion Muxia, S.A.).
The history of the formation of the Company is displayed in the following
exhibit.
[ORGANIZATIONAL CHART GRAPHIC]
ITEM 2. DESCRIPTION OF THE PROPERTIES
HOTEL ALTA
Hotel Alta is a, 23-unit, luxury hotel located on approximately one acre of land
in Santa Ana, 8 miles from downtown San Jose. Nearby Santa Ana (population
26,777) and Escazu (population 44,282) area is considered one of the most
affluent districts of Costa
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Rica and is currently experiencing a significant real estate boom. Nearby
facilities include two golf courses, tennis courts, and an equestrian center.
A 65-seat fine dining restaurant located within the hotel and is owned and
operated by CAE. The restaurant is positioned to receive guests from nearby
hotels and upscale locals who seek gourmet meals.
The hotel and restaurant have a number of positive characteristics that may lead
to their financial success. The quality of the hotel and its amenities are high
(Costa Rica has very few, world class hotels or restaurants), the site is in a
prime location, and the hotel has beautiful architecture. This hotel's location
provides an alternative to the assaulting environment often experienced by
travelers who stay in the downtown areas of San Jose.
Costa Rica tourism authorities projected demand in Hotel Alta's Primary Market
Area (PMA) to grow by one-third from 1995 to 1999, increasing at an average
annual rate of 7.4%. As the affluence of visitors increases, the demand for
better lodgings is also expected to increase.
Hotel Alta is located on a hill overlooking the City of Santa Ana and the Santa
Ana Valley. On a clear day one can see from the residential floors of the hotel
the Pacific Ocean, more than 35 miles away. Although the Juan Santamaria
International Airport is nearby, one cannot see it or hear airport noise because
it is hidden behind a hill.
The parcel is zoned for middle density residential which includes hotels not
more than three stories. To enhance views and not exceed the zoning plan, the
hotel is designed to cascade down the hill. The parcel is surrounded primarily
by homes and small apartments.
Water in the Santa Ana area is known for its high quality. Sewage is completely
treated on-site within a nonmechanical, gravity-flow system. A new, expanded
leachfield system was installed in 1999.
The rooms have updated communication services, including telephone lines that
can accommodate computer modem. Although some areas of Costa Rica are
experiencing difficulty obtaining sufficient telephone lines, Hotel Alta secured
twelve telephone lines for the 23-room hotel. An 800 line was installed in 1999
to receive toll-free calls from the United States.
The site is fully supplied with the necessary electricity. Management is
considering the purchase of a back-up generator for the power outages which
occasionally occur during severe storms. Propane gas is delivered to the site
and cable television service has been installed.
The site provides a very safe and unique environment for its clientele. In
contrast to downtown San Jose, where many business hotels are located, Santa Ana
and the area immediately surrounding the Hotel Alta has a low crime rate.
Two of the best hospitals in the country are located within a short drive from
the site: San Juan de Dios and Mexico Hospital. A new private hospital is being
constructed within 5 minutes of the hotel. A Red Cross ambulance is stationed
within one mile of the site in each direction. The Fire Department is located
about 10 minutes from the hotel. On site, the hotel has fire stations on every
floor and within the restaurant kitchen areas.
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A number of factors suggest demand for Hotel Alta will be sufficient for the
hotel to reach profitability within a few years. First, many business travelers
find downtown to be an assaulting environment. San Jose's air is polluted with
fumes from cars and buses, the streets are crowded and noisy, and street crime
is a potential threat at night. Travelers seek a boutique hotel on the outskirts
of San Jose where they will find a pleasant, unhurried environment, and still
have ready access to downtown.
Second, the suburbs of San Jose are growing in the direction of the Santa Ana
area. Many business travelers are drawn to the area because it is near where
they will do business, the American ambassador's residence is within a mile.
There are many business in the area (anecdotal evidence indicates more than 200
companies) and the hotel is close to the free zones and industrial zones (but
not in them).
ECOLODGE SAN LUIS AND BIOLOGICAL STATION
After leaving Hotel Alta the next stop on the eco-adventure tour planned by CAE
is Ecolodge San Luis and Biological Station, an integrated ecotourism/research/
education project directed on-site by two renowned tropical biologists.
The 162-acre Ecolodge San Luis property is located at the head of the San Luis
Valley, in northwestern Costa Rica, approximately 3.5 hours from San Jose's
International Airport. The property borders on the world famous Monteverde Cloud
Forest Reserve (acclaimed as "one of the most outstanding wildlife sanctuaries
in the New World tropics" and named as one of the top ten ecotourism
destinations in the world) and the Children's International Rain Forest.
CAE has designed Ecolodge San Luis to combine ecotourism, agro-tourism,
education, and tropical forestry research in a showcase project that
demonstrates that private enterprise must play a role in preserving tropical
rain forests and that tourism itself is a critical driving force in their
preservation. The Ecolodge has four complementary facets on one property: (1) a
Biological Station with 40 bunk beds for students, researchers, and other
visitors in rustic accommodations and shared baths; (2) a rain forest lodge with
12 cabinas; (3) four bungalows, each with bunkbeds and private bath; and (4) a
working tropical farm. Priced at varying levels of affordability, Ecolodge San
Luis offers the opportunity for all to experience the rain forest but pay only
for the level of comfort they can afford and desire.
Drs. Milton Lieberman and Diana Lieberman, internationally recognized experts in
the field of tropical ecology, are responsible for the supervision of the
Ecolodge. The Liebermans and their team of professional biologist-guides provide
a full schedule of field activities and informational programs for each guest.
Ecolodge San Luis' isolation is unique in the crowded Monteverde area. With
fewer crowds, guests are much more likely to see animal life. Guests are still
able to visit the nearby "bustle" (relative) of Monteverde and, return to stay
in the more primitive wonders of the San Luis Valley.
Already-made contacts with the Organization of Tropical Studies and university
educational and alumni programs offer a large source of potential guests. This
should contribute to a "smoothing" of the cyclical nature of revenue flows. (In
Costa Rica, tourism is seasonal, increasing during the "dry" season of December
to April and slowing during the so-called "green season" from May to October
when rains are heaviest. Also, tourism usually increases during July and August
when North Americans take their summer vacations.)
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Between 1984 and 1995, annual visitation to the Monteverde Cloud Forest Reserve
increased from 5900 to 50,000. Recently, the Monteverde area had 58,017
foreigner and 1076 local demand for lodgings for a total demand of about 59,093.
Ecolodge San Luis charges a rate of $50 to $75 per night per person for the bunk
beds and $90 per person in cabina rooms including all meals, taxes, and
programs. This rate is within the range of its competitors.
Ecolodge San Luis has what is called a "tropical pre-montane" climate. It is
pleasant and generally cool year round. Because of its elevation, the site does
not have the potential discomfort of hot, steamy, insect-ridden, lowland
habitats. Visitors can expect to enjoy comfortable, healthful conditions.
Rainfall averages about 2.6 meters (about 100 inches) per year and falls
primarily from May to October.
From San Jose, the capital of Costa Rica, visitors have easy access to the site
by means of bus, taxi, or private car. Several buses a day leave the capital
city of San Jose for the nearby town of Santa Elena. There is no airport in the
Monteverde region although helicopters have landed on private property in the
San Luis Valley. The Tomas Guardia International Airport in Liberia is about 3.5
hours away by car. This new airport will allow international visitors to arrive
in the northwest corner of the country and travel from there to nearby Pacific
locations.
Road access in the remote regions of Costa Rica is an important consideration
for hoteliers concerned with occupancy, particularly during the rainy season.
From San Jose, the main route to the Monteverde area is the Pan American
Highway.
Water for Ecolodge San Luis comes from natural artesian springs located in the
cloud forest high above the ranch. The water consistently tests pure. No
livestock graze in any terrain above the springs. Pipes that bring, the water to
the site have the necessary easements and storage tanks hold up to 10,000
gallons of water in the unlikely event that the water pipes are disrupted.
No sewer or gas lines cross the San Luis Valley. At Ecolodge San Luis,
wastewater is treated and disposed of in 9 independent septic tanks on the
property. Propane gas, brought in by the bottle, heats the hot water and kitchen
stoves.
Only a few years ago, the upper end of the San Luis Valley was not on the
national power grid. Now, Ecolodge San Luis has its own substation and is served
by a 7,250 volt line providing more than enough electricity to power the
Ecolodge through its final stages of expansion. If the power is interrupted,
which historically has happened once or twice a month, two standby generators
provide sufficient electricity to meet the emergency. Although electricity is
plentiful, to inhibit noise pollution, management has decided not to furnish
rooms with television sets.
Phone facilities are still relatively sparse. Before the Ecolodge there were no
telephones in the San Luis Valley. Ecolodge San Luis currently has only one line
and one cellular phone. Guests traveling from Hotel Alta will be offered the
opportunity to rent a portable phone to take to Ecolodge San Luis.
Crime is almost unheard of in the remote San Luis Valley. Fire stations are far
from the Ecolodge San Luis. Although there is no inherent fire danger,
extinguishers are placed in numerous spots within the structures.
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An extensive and well-designed trail system covers the 162 acres of Ecolodge
property. The trails will provide access to all the habitats present: cloud
forest; mountain streams tumbling through rocky gorges; farmland with plantings
of coffee, bananas, vegetables, and fruit trees; pastures with moss-laden shade
trees, secondary forest in stages of recovery, and gardens with a diversity of
ornamental plants. All of these habitats support distinctive floras and faunas,
and all offer opportunities for enjoying and learning about the ecology of the
tropics.
The Ecolodge provides a world-class ecotourism experience, bringing visitors
together with professional research scientists who can give them an up-to-date
and insightful introduction to the complex ecosystems that surround them.
Activities include general orientation talks, guided walks led by tropical
forest experts, night hikes to view nocturnal history, seminars by active
research scientists, and informal discussions of the day's observations. Guides
show the guests tropical forests, animals, and birds. The 230 species of birds
on the property makes it one of the best birding experiences anywhere in the
world.
Family-style meal service offered in the biological station's dining facility
foster the interaction among visitors, researchers, students, and nature guides.
Questions are readily answered by resident biologists, facilitating broader
discussions of each the days experiences and observations. Visitors to the
Ecolodge experience what management believes is a unique, hands-on tropical
experience.
SUNSET REEF MARINE HOTEL AND PLAYA CARMEN RESTAURANT
After leaving Ecolodge San Luis, CAE will take vacationers south to the port
city of Puntarenas, crossing the Gulf of Nicoya by ferry and then driving west
to Sunset Reef. Sunset Reef Marine Hotel and 100 seat restaurant at Playa Carmen
is located in the small Pacific beach-front town of Mal Pais on the southern tip
of the Nicoya Peninsula. Mal Pais lies on the northern border of the renowned
Absolute Natural Reserve of Sunset Reef --- described by one guide book as the
"jewel of nature at the very tip of the Nicoya Peninsula."
Sunset Reef contains about 3 acres of beachfront land with 1500 feet of ocean
frontage. It is surrounded by miles of unspoiled shoreline, spectacular beaches,
and lush forests. Currently on site there is a fully operating 14-room hotel
complete with pool, restaurant and bar. As occupancy increases, CAE plans to
expand the hotel to 26 rooms.
The separate restaurant with bar is located about four miles away on the broad,
white, sandy beach at Playa Carmen, known as one of the best surfing beaches in
Costa Rica. The rectangular parcel has 168 feet of beach frontage and an area of
3.2 acres. Adjacent to the restaurant, CAE plans to construct a lower cost hotel
facility. CAE is also considering subdividing the land and selling or leasing
parts for use in other commercial activities.
Mal Pais and the Absolute Natural Reserve of Sunset Reef are beautiful areas.
The location was considered optimal because of its sunny weather, sunset views
and a nearby waterfall, absence of biting insects, and most of all, the range,
quality, and diversity of contrasting shore environments. A corral reef is
adjacent to Sunset Reef within the reserve protectorate. There is no other
quality hotel in the Mal Pais area. The Hotel is very isolated and quiet in an
unexploited region of Costa Rica. Even though it is isolated, it offers a high
quality of service and food.
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Mal Pais has a warm tropical climate, with ocean breezes moderating temperatures
on the beach. Rainfall is heaviest between July and October, but only rarely
does it rain all day. Occupancy at Sunset Reef is expected to have dry-season
peaks. Visibility is very clear. Scuba diving and snorkeling are excellent
during the dry seasons or January to June. Surfing is excellent all year round
Mal Pais is approximately five hours via car and ferry from San Jose and two
hours via small plane from San Jose to Tambor and taxi from Tambor to the Lodge.
Several buses a day provide inexpensive transportation from San Jose to
Puntarenas where a ferry leaves every few hours for Paquera on the eastern edge
of the Nicoya Peninsula. Once on the Peninsula, buses will take you from Paquera
to Cobano. A taxi from Paquera to Mal Pais costs approximately $30. Two local
airlines fly from San Jose to Tambor on the Nicoya Peninsula.
Water for the hotel comes from natural springs located in the Absolute Natural
Reserve of Cabo Blanco. Storage tanks on the grounds of the Hotel hold an
adequate supply of about 6000 gallons. Mal Pais does not have a public sewer or
treatment plant. The hotel and adjoining restaurant are serviced by 3 large
septic tanks. Playa Carmen is also serviced by septic tanks on site.
Electricity came to Mal Pais only a few years ago, and with it came an increase
in development and real estate values. Electricity is expensive and occasionally
unreliable: about twice a month it goes out for short periods of time, usually
because of lightning. The Hotel is equipped with a back-up generator, although
it will need to be upgraded to power air conditioning units currently being
installed. Management is considering the installation of solar energy
generators. Propane gas is shipped in by cylinder.
There is virtually no crime in the area. A medically equipped helicopter can
reach the isolated resort in less than 25 minutes through radio dispatch from
Tambor.
ALTA TRAVEL PLANNERS
Alta Travel Planners (ATP) is a travel planner providing hotel reservations and
travel planning services primarily to persons wishing to visit CAE's three
properties and other tourist attractions in Costa Rica. Since opening in 1997,
ATP had rented offices in San Luis Obispo, California. During the second quarter
of 1999 management decided to move ATP's reservations office to Hotel Alta in
Santa Ana, Costa Rica. The move was successfully completed on July 14, 1999.
Approximately 2 full-time employees provide reservations, travel planning and
concierge service in Hotel Alta through ATP.
ITEM 3. LEGAL PROCEEDINGS
CAE V. FRANCIS
CAE had brought claims against its former CEO, Warren Francis, for beach of
contract and breach of the covenant of good faith and fair dealing under
California law. The action, entitled Central American Equities, a Florida
Corporation vs. Warren Francis. These claims were pending in the United States
District Court for the Central District of California, case number 98-0485WJR
(Mcx).
CAE's claim against Mr. Francis arise in part out of his alleged failure to
perform his contractual duties from approximately April through August 1997 and
his abrupt departure without notice on or about September 2, 1997. It is alleged
that Mr. Francis
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breached his employment contract by, among other things, allowing a personal
relationship to interfere significantly with his job performance in Cost Rica,
failing to market and promote the business of CAE, failing to create and develop
tour operator and travel agent relationships in order to maximize occupancy
levels in the hotels by the 1997-98 high season, failing responsibly to manage
physical improvements and construction of the Hotel Alta, thus causing delays in
its opening to the public, failing responsibly to hire and train appropriate
staff, and failing to direct and supervise CAE employees and staff in the
performance of their duties. It is alleged that an improper and inappropriate
relationship between Mr. Francis and a member of the staff of the Hotel Alta
resulted in a breach of the covenant of good faith and fair dealing.
The above action was set for trial on July 16, 1999. At a mandatory settlement
conference in May of 1999, the matter was settled. Defendant Warren Francis
agreed to pay plaintiffs (CAE) the sum of $8000 in full settlement of all
claims. Warren Francis also agreed to dismiss the counter claim he had filed
against CAE as well as various third party claims.
On December 31, 1998, there were no other existing lawsuits against the Company.
POST 1998 LEGAL PROCEEDINGS: LINDEMANN V. CAE
This is a civil action filed on or about April 5, 1999 in the Superior Court of
the State of California, County of Orange by CAE's former director of marketing.
Lindemann claimed monetary damages allegedly arising out of breach of contract
and fraud. Defendants Richard Wm. Talley, Paul D. King, and Talley King &
Company, Inc. were served and filed answers. Prior to filing the suit, the
parties discussed settlement of Lindemann's claims. Lindemann demanded
approximately $16,000. On November 9, 1999 CAE paid Mr. Lindemann the sum of
$8652 in full settlement of all claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted no matter to a vote of its security holders during its
fiscal year ended December 31, 1998.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no established public trading market for the Company's issued and
outstanding common stock. In the near future, the Company intends to seek
sponsorship of one or more NASD member registered securities dealers and a
quotation on the National Association of Securities NASDAQ Quotation System on
either the OTC Bulletin Board, Small Cap or National.
HOLDERS
The number of record holders of shares of the Company's common stock as of the
date of this filing is approximately 450. The aggregate number of shares of the
Company's common stock issued and outstanding as of December 31, 1997 was
12,205,252. During 1998 an additional 25,000 shares were issued. As of December
31, 1998 and December 1999, the total number of outstanding shares is
12,230,252.
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DIVIDENDS
The Company has not paid nor declared any dividends upon its shares of common
stock since its inception and, by reason of its present financial status, does
not contemplate or anticipate paying any dividends upon its shares of common
stock in the foreseeable future.
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW
The following is management's discussion and analysis of significant factors
which have affected the Company's financial position and operations during the
fiscal year ended December 31, 1998.
With the opening of Hotel Alta in December of 1997, 1998 marked the first year
of full operation of the Company's hotels. All Company owned facilities, except
for Restaurant Playa Carmen, were opened and operating in 1998. CAE's
performance during the twelve (12) months of 1998 were below expectations, but
reasonable for the start-up of a new hotel group.
Hotel Alta
Revenues at the three (3) hotels are primarily dependent upon the occupancy
rates and per room charges (although other services are sold). The occupancy for
the twelve (12) months of 1998 was about 33% at Hotel Alta. Break-even occupancy
(calculated at an average room rate of $120) is about 48%.
La Luz Restaurant
La Luz Restaurant, the 65-seat restaurant in Hotel Alta, has been operating
since August of 1997. Even though Hotel Alta was not open during the first five
months of La Luz operation, and the occupancy at Hotel Alta has been low, the
restaurant has established itself, receiving support from local businesses and
residents. During the twelve (12) months of 1998, La Luz was approximately cash
flow positive.
La Luz has received substantial positive press since its opening. For example,
Conde Nast Traveler has named La Luz one of the best restaurants in Central
America and Costa Rica's major newspaper, La Nacion, rated La Luz as the top
restaurant in the country in 1999. Because of the attention it has received,
management plans to create a sophisticated club and bar in space currently
available above the restaurant during 2000.
Ecolodge San Luis
The occupancy at Ecolodge San Luis for the twelve (12) months of 1998 was about
16%. Indicating significant expenditure tightening (and future opportunity), the
break-even occupancy (at the current mix of average room rates) at Ecolodge San
Luis is about 17%.
Sunset Reef and Playa Carmen
-13-
<PAGE> 14
Occupancy at Sunset Reef for the twelve (12) months of 1998 was about 12%.
Break-even occupancy at a $60 average room rate is about 23%. At an $80 average
room rate, the hotel breaks even at about 17% occupancy.
In August of 1998, a new general manager, Alberto Carballo, was hired to improve
the operations and marketing of Sunset Reef. Mr. Carballo has, over the past ten
(10) years, acquired extensive management experience at such well known Costa
Rican hotels as Villa Caletas, Hotel Jungle Lodge, and Lapa Rios.
Management is preparing to open the 100-seat restaurant at Playa Carmen during
the 1999-2000 high season. Adjacent to the restaurant, CAE plans to construct a
tent camp for surfers and low budget travelers in the future.
Alta Travel Planners
Alta Travel Planners (ATP) primarily provides hotel reservations and travel
planning services to guests visiting CAE's three properties. ATP is currently
located in Hotel Alta in Costa Rica and is considered an integral part of
providing room reservations for the three hotels. As such, ATP's financial
information is not reported separately from CAE's hotel operations.
The differences are not material.
NEW MANAGEMENT
Management experienced considerable turmoil during late 1997 and early 1998 with
the unanticipated resignation of Warren Francis, the CEO of CAE and General
Manager for Hotel Alta. Mr. Francis resigned because of personal reasons.
Management pursued legal action against Mr. Francis for breach of contract and
failure to perform (see Item 3 - Legal Proceedings).
Mr. Francis' departure and related hotel construction difficulties contributed
to the delay of the opening of Hotel Alta, originally scheduled for June 1997.
Operating cash was limited as the hotel had hired and trained staff in
preparation for a June opening that was postponed until December. The closure of
Ecolodge San Luis and Sunset Reef just prior to the beginning of the 1997-98
high season was also related to the departure of Mr. Francis.
In late 1997, Brain Frazee, then assistant to the Mr. Francis, became the CEO of
CAE and the general manager of Hotel Alta. In September 1998, the board
appointed Michael N. Caggiano, Ph.D. as a Consulting CEO/President. (See Item 9
- - Directors and Executive Officers).
RESULTS OF OPERATIONS --- YEARS ENDING DECEMBER 31, 1997 AND 1998
The following is management's discussion and analysis of significant differences
in the Company's financial position and operations between the fiscal year ended
December 31, 1997 and the fiscal year ended December 31, 1998 (See Item 7 -
Financial Statements).
Assets
Between December 31, 1997 and December 31, 1998 total assets increased from
$8,256,888 to $8,342,522. During this same period, $235,605 in organization
expense were written off in accordance with SOP 98-5.
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<PAGE> 15
By 1998, most of the major expenses on originally planned assets had been made.
Management considers 1998 as the end of the initial building stage of the
hotels.
Liabilities
Between December 31, 1997 and December 31, 1998 total liabilities increased from
$849,825 to $1,854,653. Long term debt grew from $387,682 to $582,398, partially
reflecting the replacement of a $250,000 bank note with a $500,000 bank note.
Stockholders continued to provide additional financing to the Company. Between
December 31, 1997 and December 31, 1998 total loans from investors increased
from $368,414 to $1,054,348.
Revenues
Between December 31, 1997 and December 31, 1998 total sales revenue increased by
about 180% from $404,898 to $1,131,158. Company restaurant revenues grew almost
13 fold from approximately $35,000 to more than $488,000. Hotel revenue grew
from about $369,000 to about $642,000 partially reflecting the fact that Hotel
Alta was able to receive room guests during all 12 months of 1998. As revenue
grew and fixed costs slowed, gross margins almost doubled from 1997 (8%) to 1998
(15%).
Expenses
Between 1997 and 1998, total operational expenses declined from $1,517,362 to
$1,026,737. This reflected a drop in initial start-up costs including
advertising and professional fees (initial legal, accounting, public relations,
and consultant fees).
Net Income
As sales revenues grew rapidly and expense growth decelerated, the Company
losses declined. Between December 31, 1997 and December 31, 1998 annual net
losses declined from $1,472,983 to $972,813. Between December 31, 1997 and
December 31, 1998 cumulative losses (retained deficit) grew from $1,477,983 to
$2,450,796.
Due to application of SOP 98-5 the statement of operations for 1998 reflect an
additional $235,000 of organization expense (See Financial Statements - Footnote
1). The Statement of Operations indicates $61,000 in forgiveness of debt. If
these unusual or one-time events were not charged in 1998, the net loss for 1998
would be approximately $798,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had relied on sales of shares of common stock to fund operations and
make capital improvements. To date, operations have resulted in losses and the
Company has limited cash liquidity and capital resources. During 1998,
capitalization was not sufficient to fund necessary expenses and management
sought and succeeded in acquiring about $925,000 in loans for working capital,
i.e., an additional $250,000 bank loan (which makes the total line of credit
$500,000) and approximately $675,000. We note, however, that on December 31,
1998, the Company had a positive net worth of about $6.5 million and the debt to
equity ratio was approximately .29.
The Company has extremely limited cash liquidity and capital resources. To the
extent that the funds generated by revenues are insufficient to fund CAE's
activities, it will be necessary to raise additional funds. In the short-term
the Company will continue to seek
-15-
<PAGE> 16
loans from investors and other sources. Long-term plans include raising
additional funds through the sale of equity. At this time there are no
commitments for capital expenditures.
CURRENCY DEVALUATION
Historically, changes in the rate of exchange between dollars and colones (the
Costa Rican currency) has had an insignificant effect on liquidity because the
rate of exchange is relatively predictable. The Central Bank eases devaluation
pressure on the colon through a system called "mini-devaluation" whereby it
decreases the colon's value daily by centimos, establishing a rate that is
generally followed by most banks and exchange houses in the country. Since
January 1996, the speed of devaluation of the colon against the dollar has
markedly slowed.
Currency devaluations may actually have a positive effect on the Company's net
operating revenues. Although the hotels are in Costa Rica, all hotel rates are
quoted in US dollars (the majority of hotel guests are from the US and other
parts of North America) and, as such, hotel revenues are generally unaffected by
devaluation of the colon relative to the US dollar. The majority of hotel
expenses in Costa Rica (including most, but not all, salaries) are in colones.
INFLATION
Inflation in Costa Rica has remained relatively low during the past four years
and has had a relatively low impact on the operating performance of the Company.
As previously stated in the above discussion of the effects of currency
devaluation, hotel rates are in dollars, while most expenses in Costa Rica are
in colones.
YEAR 2000 COMPLIANCE
As of September 1999, the Company was completing a comprehensive review of its
computer systems to identify which of its systems will have to be modified,
upgraded or converted to recognize and process dates after December 31, 1999
(the Year 2000 Issue). As of that date, the company has identified one
computerized system that required reconfiguration to adjust adequately to the
Year 2000 issue.
CAE's centralized reservations and financial control system, known as RDP
(Resort Data Processing) had been determined to be potentially Y2K
non-compliant. CAE elected to replace the system entirely with a new, Y2K
compliant system manufactured and installed by Hovysis Corporation. CAE is in
the process of installing the Hovysis system. As of September 1999, telephone
accounting systems, front desk operations, and restaurant operations were
operating with the new Hovysis system. It is anticipated that all reservations
and financial accounting systems will be fully operational by October 31, 1999.
Most PC-based software used by staff throughout the company are Year 2000
compliant. The Company presently believes that, with the successful completion
of Hovysis installation, the Year 2000 Issue will not pose significant
operational problems for the Company's systems as so modified or upgraded.
When the Hovysis download is completed, the system will be fully Y2K compliant.
Purchase and installation of Hovysis is expected to cost approximately $7000.
The Company has incurred and expects to incur additional minor internal staff
costs, as well as other expenses, related to updating its systems to prepare for
the Year 2000.
-16-
<PAGE> 17
ITEM 7. FINANCIAL STATEMENTS
Report of Independent Auditors
Board of Directors
Central American Equities Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Central American
Equities Corp. and Subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years ended, December 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Central American
Equities Corp. and Subsidiaries at December 31, 1998 and 1997 and the results of
their operations, and their cash flows for the years ended December 31, 1998 and
1997 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. In 1998, the Company completed its
inaugural year of full operation and experienced net losses and had limited
liquidity and capital resources. The Company's uncertainty as to its sales
growth and its ability to raise sufficient capital raise doubt about the
entity's ability as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 1 to the financial statements, the Company changed its
method of reporting on organization and start-up costs in 1998.
As discussed in Note 10 to the financial statements, the Company changed from
an unacceptable method of accounting to an acceptable method. The change in
accounting principles has been accounted for as a correction of an error and
prior years' financial statements have been restated.
Pinkham & Pinkham, P.C.
Certified Public Accountants
October 15, 1999
Cranford, New Jersey
-17-
<PAGE> 18
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31,
Assets
<TABLE>
<CAPTION>
1998 1997
Restated Restated
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 19,078 $ 11,978
Account receivable 46,608 --
Inventory 27,521 16,812
Prepaid expenses 14,575 --
----------- -----------
107,782 28,790
----------- -----------
Property and equipment,
Buildings and other depreciable assets 8,229,939 7,992,494
----------- -----------
Other assets
Security deposits 4,801 --
Organization costs -- 235,605
----------- -----------
4,801 235,605
----------- -----------
Total assets $ 8,342,522 $ 8,256,889
=========== ===========
Liability and Stockholders' Equity
Current liabilities
Accounts payable $ 58,011 $ 20,500
Accrued expenses 159,896 73,229
----------- -----------
217,907 93,729
----------- -----------
Other liabilities
Long term debt 582,398 387,682
Due to officers 1,054,348 368,414
----------- -----------
1,636,746 756,096
----------- -----------
Stockholders' equity
Common stock - $.001 par value; 20,000,000
Authorized, 12,230,252 issued and outstanding 12,230 12,205
Preferred stock - $.001 par value; 1,000,000
shares authorized, 0 issued and outstanding -- --
Additional paid-in capital 8,897,817 8,872,842
Unrealized gain on foreign exchange 28,618 --
Retained deficit (2,450,796) (1,477,983)
----------- -----------
6,487,869 7,407,064
----------- -----------
Total liabilities and stockholders' equity $ 8,342,522 $ 8,256,889
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-18-
<PAGE> 19
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Years Ended December 31,
<TABLE>
<CAPTION>
1998 1997
Restated Restated
------------ ------------
<S> <C> <C>
Revenues $ 1,131,158 $ 404,898
Cost of services 962,144 371,419
------------ ------------
Gross profit 169,014 33,479
------------ ------------
Operations
General and administrative 768,015 1,291,226
Depreciation 258,722 226,136
------------ ------------
1,026,737 1,517,362
------------ ------------
(857,723) (1,483,883)
------------ ------------
Other (income) expense
Interest expense 139,523 41,247
Loss (gain) on foreign exchange 36,567 (52,147)
------------ ------------
176,090 (10,900)
------------ ------------
Loss before extraordinary item
and provision for taxes (1,033,813) (1,472,983)
Extraordinary item -forgiveness of debt 61,000 --
Provision for income taxes -- --
------------ ------------
Net loss $ (972,813) $ (1,472,983)
============ ============
Net loss per common share $ (.08) $ (.12)
============ ============
Weighted average share of
common stock outstanding 12,230,252 12,230,227
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
-19-
<PAGE> 20
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Unrealized
Common Paid in Retained Foreign
Stock Capital Deficit Exchange Total
------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock $ 500 $ 4,500 $ -- $ -- $ 5,000
Exchange of common stock
For partnership interest 10,856 7,243,816 -- -- 7,254,672
Net loss -- (5,000) -- (5,000)
------- ----------- ----------- ------- -----------
Balance 12/31/96 11,356 7,248,316 (5,000) -- 7,254,672
Issuance of common stock 749 1,424,626 -- -- 1,425,375
Common stock issued for
consulting services rendered 100 199,900 -- -- 200,000
Net loss - Restated -- (1,472,983) -- (1,472,983)
------- ----------- ----------- ------- -----------
Balance 12/31/97 - restated 12,205 8,872,842 (1,477,983) -- 7,407,064
Issuance of common stock 25 24,975 -- -- 25,000
Unrealized foreign exchange 28,618 28,618
Net loss - Restated -- -- (972,813) -- (972,813)
------- ----------- ----------- ------- -----------
Balance 12/31/98 - restated $12,230 $ 8,897,817 $(2,450,796) $28,618 $ 6,487,869
======= =========== =========== ======= ===========
</TABLE>
See Notes to Consolidated Financial Statements
-20-
<PAGE> 21
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Restated Restated
For the Year Ended For the year Ended
December 31, 1998 December 31, 1997
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(972,813) $(1,472,983)
Adjustments to reconcile net loss to
net cash provided by
operating activities:
Depreciation and amortization 258,722 226,136
Unrealized gain on foreign exchange 28,618 --
Write-off of organization costs 235,605 --
Forgiveness of debt (61,000) --
Stock issued in exchange for services -- 200,000
Change in assets and liabilities:
(Increase) in:
Accounts receivable (46,608) --
Inventory (10,709) (16,812)
Prepaid expense (14,575) --
Increase in:
37,511 20,500
Accrued expenses 86,667 73,229
--------- -----------
Net cash used in operating activities (458,582) (969,930)
--------- -----------
Cash flow from investing activities:
Security deposits (4,801) --
Organization and start-up costs -- (289,150)
Capital expenditures (496,167) (910,413)
--------- -----------
Net cash used in investing activities (500,968) (1,199,563)
--------- -----------
Cash flows from financing activities:
Proceeds from loans 505,716 387,682
Proceeds from loans from officers 685,934 368,414
Payment of loans (250,000) --
Proceeds from issuance of common stock 25 749
Proceeds from additional paid-in capital 24,975 1,424,626
--------- -----------
Net cash provided by financing activities: 966,650 2,181,471
--------- -----------
Net increase in cash 7,100 11,978
Cash - beginning of year 11,978 --
--------- -----------
Cash - end of year $ 19,078 $ 11,978
========= ===========
</TABLE>
See Notes to Consolidated Financial Statements
-21-
<PAGE> 22
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Interest paid $42,308 $ 11,908
======= ========
Income taxes paid $ -- $ --
======= ========
Schedule of non-cash investing and financing transactions:
Company exchanged shares of stock
for services $ -- $200,000
======= ========
</TABLE>
See Notes to Consolidated Financial Statements
-22-
<PAGE> 23
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies
Nature of Business
Central American Equities Corp. and Subsidiaries (the "Company") was
incorporated under the laws of the State of Florida on January 23,
1996. The Company provides an integrated eco-vacation experience in
Costa Rica, and is in the business of owning and operating hotels and
real property in Costa Rica.
In December of 1996, the Company entered into an agreement for the
exchange of common stock ("Exchange Agreement") with Cal Tico, L.P.,
Ecolodge Partners, L.P. and Marine Lodge Partners, L.P.
(Partnership). Pursuant to the exchange agreement, the company issued
7,756,885 and 3,099,392 shares of common stock to limited partners
and the general partners, respectively, of the partnerships. In
exchange for the shares, the partnership transferred all of their
interests (i.e. 100% of the outstanding common stock) in the
following Costa Rican corporations: Hoteleria Cal Tico, S.A.;
Bandirma, S.A.; Sociedad Protectora De La Fuana y Flora Marintima De
Mal Pais, S.F.; Ecoprojecto San Luis, S.A. and Confluencia, S.A.
Cal Tico, L.P. was a California limited partnership that was formed
in July 1992 to raise $2 million to purchase the land and construct
Hotel Alta. Cal Tico, L.P. owns 100% of the stock in Hoteleria Cal
Tico, S.A., a Costa Rican corporation. Hoteleria Cal Tico, S.A, owns
the land and buildings at Hotel Alta.
Ecolodge Partners, L.P. was formed in July 1993 to raise a total of
$1.3 million in a private placement offering to purchase the land and
construct the Ecolodge San Luis and Biological Station. Ecolodge
Partners was a California limited partnership that own all of the
stock in Ecoproyecto San Luis, S.A. and Confluencia San Luis, S.A.,
the two Costa Rican companies that own the Ecolodge land and
buildings.
MarineLodge Partners L.P. was formed in March 1995 to raise $1
million for the purchase and renovation of the Sunset Reef.
MarineLodge Partners was a California limited partnership.
MarineLodge Partners owned 100% of the stock in Bandirma, S.A.
Bandirma owns: a)90% of the Sociedad Protectora De La Fauna y Flora
Maritima de Mal Pais S.A., a Costa Rican corporation which owns the
land and buildings at Sunset Reef, and b)100% of Muxia, S.A.
which owns 100% of the land and buildings at Playa Carmen.
In 1997 the Company issued 748,975 shares of common stock for an
aggregate purchase price of $1,425,375 pursuant to Rule 506. The
proceeds were used to make capital improvements to the various hotels
acquired pursuant to the Exchange Agreement. The shares were sold to
36 investors.
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<PAGE> 24
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
In a separate transaction, the Company issued 100,000 shares of
common stock to Steven Aronson on August of 1997. The shares were
issued as compensation for Mr. Aronson's services in conducting due
diligence on the Costa Rican hotels and consulting services.
Basis of Consolidation
The consolidated financial statements include the consolidated
accounts of Central American Equities Corp. and its subsidiaries.
Hoteleria Cal Tico, S.A., Bandirma, S.A., Sociedad Protectora De La
Fuana y Flora Marintima De Mal Pais, S.F., Ecoprojecto San Luis, S.A.
and Confluencia, S.A. are held 100% by the Company. All intercompany
transactions and accounts have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the statement of cash flows all certificates of
deposits with maturities of 90 days or less, were deemed to be cash
equivalents.
Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed provided using the
straight-line method over the estimated useful lives of five for
equipment, seven years for furniture and fixtures and forty years for
buildings and improvements.
Repairs and maintenance costs are expensed as incurred while
additions and betterments are capitalized. The cost and related
accumulated depreciation of assets sold or retired are eliminated
from the accounts and any gain or losses are reflected in earnings.
Estimates
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Adoption of Statement of Accounting Standard No. 123
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 encourages, but does not require companies to record
at fair value compensation cost for stock-based compensation plans.
The Company has chosen to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board
-24-
<PAGE> 25
CENTRAL AMERICAN EQUITIES, CORP.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock. The difference between the
fair value method of SFAS-123 and APB 25 is immaterial.
Adoption of Statement of Position 98-5
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, Reporting the Costs of Start-Up
Activities, which requires that costs related to start-up activities
be expensed as incurred. Prior to 1998, the Company capitalized its
organization costs. The Company adopted the provisions of the SOP in
its financial statements for the year ended December 31, 1998. The
effect of adoption of SOP 98-5 was to record a charge for the
cumulative effect of an accounting change of $235,605 ($.02 per
share), to expense costs that had been previously capitalized prior
to 1998.
Adoption of Statement of Accounting Standard No. 128
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings
per Share" (SFAS 128). SFAS 128 changes the standards for computing
and presenting earnings per share (EPS) and supersedes Accounting
Principles Board Opinion No. 15, "Earnings per Share." SFAS 128
replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after December 15,
1997, including interim periods. This Statement requires restatement
of all prior-period EPS data presented.
As it relates to the Company, the principal differences between the
provisions of SFAS 128 and previous authoritative pronouncements are
the exclusion of common stock equivalents in the determination of
Basic Earnings Per Share and the market price at which common stock
equivalents are calculated in the determination of Diluted Earnings
Per Share.
Basic earnings per common share is computed using the weighted
average number of shares of common stock outstanding for the period.
Diluted earnings per common share is computed using the weighted
average number of shares of common stock and dilutive common
-25-
<PAGE> 26
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
equivalent shares related to stock options and warrants outstanding
during the period.
The adoption of SFAS 128 had no effect on previously reported loss
per share amounts for the year ended December 31, 1997. For the years
ended December 31, 1998 and 1997, primary loss per share was the same
as basic loss per share and fully diluted loss per share was the same
as diluted loss per share. A net loss was reported in 1998 and 1997,
and accordingly, in those years the denominator was equal to the
weighted average outstanding shares with no consideration for
outstanding options and warrants to purchase shares of the Company's
common stock, because to do so would have been anti-dilutive. Stock
options for the purchase of 47,500 shares at December 31, 1998 were
not included in loss per share calculations, because to do so would
have been anti-dilutive.
Revenue Recognition
The Company records revenue at the point of service and maintains its
corporate records for both financial statement and tax return
purposes on the accrual method of accounting.
Foreign Exchange
Assets and liabilities of the Company, which are denominated in
foreign currencies, are translated at exchange rates prevailing at
the balance sheet date. Revenues and expenses are translated at
average rates throughout the year.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, which
principally include cash, note receivable, accounts payable and
accrued expenses, approximates fair value due to the relatively short
maturity of such instruments.
The fair value of the Company's debt instruments are based on the
amount of future cash flows associated with each instrument
discounted using the Company's borrowing rate. At December 31, 1998
and 1997, respectively, the carrying value of all financial
instruments was not materially different from fair value.
Income Taxes
The Company has net operating loss carryovers of approximately $2
million as of December 31, 1998, expiring in the years 2012 through
2013. However, based upon present Internal Revenue regulations
governing the utilization of net operating loss carryovers where the
corporation has issued substantial additional stock, most of this
loss carryover may not be available to the Company.
-26-
<PAGE> 27
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes, effective July 1993.
SFAS No.109 requires the establishment of a deferred tax asset for
all deductible temporary differences and operating loss
carryforwards. Because of the uncertainties discussed in Note 2,
however, any deferred tax asset established for utilization of the
Company's tax loss carryforwards would correspondingly require a
valuation allowance of the same amount pursuant to SFAS No. 109.
Accordingly, no deferred tax asset is reflected in these financial
statements.
Note 2 - Going Concern
As shown in the accompanying financial statements, the Company
incurred a net loss of approximately $973,000 during the year ended
December 31, 1998.
The Company is currently in the process of formulating a plan to
effect an additional public offering, the proceeds of which would be
used for working capital and capital expansion. The ability of the
Company to continue as a going concern is dependent on the success of
the plan. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a
going concern.
Note 3 - Property and Equipment
As of December 31, 1998 plant and equipment consisted of the
following:
<TABLE>
<S> <C>
Land $ 1,445,344
Buildings 6,643,549
Machinery and equipment 124,963
Furniture and fixtures 382,180
Computer equipment 65,217
-----------
8,661,253
Less accumulated depreciation 431,314
-----------
$ 8,229,939
===========
</TABLE>
Note 4 - Notes Payable
The Company has $500,000 outstanding against a $500,000 line of
credit with Commerce Overseas Bank, which bears interest at the prime
rate plus 2.5%. Interest only is payable on the last day of each
month. As of December 31, 1998, a total of $39,113 of interest had
been paid and is reflected as interest expense in the financial
statements. The principal is payable beginning January 10, 2000 in
monthly installments of $38,462 with a final payment of $76,923 at
December 11, 2000. The funds advanced under this line of credit were
-27-
<PAGE> 28
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
utilized to supplement cash flow for operating expenses and
construction costs. The note is collateralized by property of the
Company. The prime rate of interest at December 31, 1998 was 8%. At
December 31, 1997 the Company had $250,000 outstanding against a
$250,000 line of credit. This was subsequently refinanced in the
$500,000 line of credit.
The Company has a note payable in the amount of $71,443 payable to a
shareholder, which is due when the Company goes public. The note
bears simple interest at 8% per annum, which is added to the basis of
the note and is secured by property owned by the Company. The balance
of $82,398 and $76,682 was due at December 31, 1998 and 1997,
respectively.
Note 5 - Related Party Transactions
At December 31, 1998 and 1997, the Company had notes payable from
various officers in the amount of $1,054,000 and $368,000,
respectively which bear interest at an annual rate of 7%.
During the year ended December 31, 1997 the Company paid a management
fee of $100,100 to a corporation owned by two of the directors of the
Company.
Note 6 - Exchange of Common Stock for Services
During the year ended December 31, 1997, the Company issued common
stock to an individual in exchange for services performed totaling
$200,000. The dollar amounts assigned to such transactions have been
recorded at the fair value of the services received, because the fair
value of the services received was more evident than the fair value
of the stock surrendered.
Note 7 - Commitments
The Company leases land under an agreement for a term from June 15,
1998 to June 14, 2001. The Company has an option to buy this property
for $257,400 if purchased on June 15, 2000 or $283,040 if purchased
on June 15, 2001. Minimum rentals in each of the next two years is as
follows:
<TABLE>
<CAPTION>
December 31, Amount
------------ ------
<S> <C>
1999 $ 9,500
2000 15,500
2001 7,500
--------
$ 32,500
========
</TABLE>
-28-
<PAGE> 29
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8 - Business Combination
On December 6, 1996 the Company entered into an agreement for the
exchange of common stock ("Exchange Agreement") with Cal Tico, L.P.,
Ecolodge Partners, L.P. and Marine Lodge Partners, L.P.
("Partnership"). Pursuant to the exchange agreement, the Company
issued 7,756,885 and 3,099,392 shares of common stock to the limited
partners and the general partners, respectively, of the partnerships.
In exchange for the shares, the partnership transferred all of their
interests (i.e. 100% of the outstanding common stock) in the
following Costa Rican corporations: Hotelera Cal Tico, S.A.;
Bandirma, S.A.; Sociedad Protectora De La Fuana y Flora Marintima De
Mal Pais, S.F.; Ecoprojecto San Luis, S.A. and Confluencia, S.A. The
acquisition has been accounted for as a purchase transaction and,
accordingly, the fair value of the Company's stock that was issued
was allocated to assets and liabilities based on the estimated fair
value as of the acquisition date.
Note 9 - Forgiveness of Debt
During the year ended December 31, 1998, a director of the Company
forgave a debt in the amount of $61,000. This amount was included in
long-term debt at December 31, 1998. This amount has been reflected
as an extraordinary item in the statement of operations.
Note 10 - Restated Financial Statements
The financial statements released by management and dated March 31,
1999 contained various errors which included omission of accounts
receivable, prepaid expenses, property and equipment accrued
expenses, notes payable and unrealized gains on foreign exchange.
These errors were corrected by restating both the 1998 and 1997
financial statements. The effects of the errors were to understate
the 1997 loss by $899,995 ($.07 per share) and overstate the 1998
loss by $198,794 ($.02 share).
-29-
<PAGE> 30
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company's accountants are Pinkham and Pinkham, P.C., C.P.A. The Company does
not presently intend to change accountants. At no time have there been any
disagreements with such accountants regarding any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
At a board of directors meeting held on July 7, 1999 of which a quorum was
present, the Board of Directors of Central American Equities Corp. accepted the
resignation of Steven J. Gannuscio as its accountant for the fiscal years ended
December 31, 1997 and December 31, 1998. Mr. Gannuscio resigned because he did
not hold the proper credentials to file audited reports with the Securities and
Exchange Commission nor was he at the time licensed as a CPA.
During the past two years, Mr. Gannuscio was the principal accountant for
Central American Equities Corp. At no time did Mr. Gannuscio's financial
statements contain an adverse opinion or disclaimer of opinion or was modified
as to uncertainty, audit scope, or accounting principles. Nor were there any
disagreements with Mr. Gannuscio on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
On July 7, 1999, Central American Equities Corp. engaged Pinkham and Pinkham,
P.C. Certified Public Accountants as the principal accountant for the company.
Central American Equities Corp. has authorized Mr. Gannuscio to respond fully to
the inquiries of the successor accountant. On October 15, 1999, Pinkham and
Pinkham, P.C. issued an independent audit of Central American Equities Corp.
This new audit was first filed on October 19, 1999 with the SEC as Item 7 of
Form 10-KSB/A. A revised version of this audit is contained herewith as Item 7.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names of all current directors and executive
officers of the Company. Mr. Talley, Mr. Rosenmiller, and Mr. King were elected
on 01/20/97. They will serve until the next annual meeting of the stockholders
or until their successors are elected or appointed and qualified, or their prior
resignation or termination. Per the original 10-SB filing, Brian Frazee was
CEO/President/Director from October 1997 to August 1998. In September 1998, Mr.
Caggiano replaced Mr. Frazee as the CEO and President of CAE and as a board
member of CAE. In September 1998, Mr. Frazee became the General Manager of CAE's
hotels in Costa Rica (a non-director position.
-30-
<PAGE> 31
<TABLE>
<CAPTION>
Name Position Held Dates Age
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
W.F.O. Rosenmiller Secretary/Treasurer/Director 1/1997 to current 66
Richard Talley Director 1/1997 to current 56
Paul King Director 1/1997 to current 34
Brian Frazee President/CEO/Director 10/1997 to 8/1998 38
Michael Caggiano President/CEO/Director 9/1998 to current 45
</TABLE>
BUSINESS EXPERIENCE
W.F.O. ROSENMILLER, Secretary, Treasurer and Director of Central American
Equities Corp (age 66, time spent on Company business: one percent). During the
past five years, Mr. Rosenmiller has been self-employed as a real estate broker,
land developer, entrepreneurial investor and venture capitalist in the United
States. He has also been an individual and partnership investor in Costa Rica.
Since 1998, Mr. Rosenmiller has been a board member of Centracan, Inc., a
US-based medical corporation that owns and operates medical diagnostic and
treatment facilities in Costa Rica.
A graduate of Penn State University (BS) and Drexel University (MBA). Mr.
Rosenmiller spent four years in the US Navy and was honorably discharged as a
full lieutenant with expertise in open sea navigation as well as general
nautical knowledge. Mr. Rosenmiller brings to the Partnership a wealth of
management and development experience. As a director/owner of the Snow Time
Inc., a ski resort complex consisting of facilities in New York State and
Lancaster, Pennsylvania with revenues in excess of 20 million, Mr. Rosenmiller
who founded Ski Windham, Ski Round Top and Ski Liberty has had over thirty years
experience in the hotel, restaurant, and bar business. As a director of Hamilton
Bank, (subsidiary of Corestate Bank) he has had extensive experience on both the
audit and credit sides of partnership lending as well as project projections.
Most recently he has been involved in all aspects of a 200 acre subdivision of
high end homes in York, PA. This project has received numerous national design
awards.
Active in civic activities for over thirty years in New York, he was the
recipient of the Jay Cee's Distinguished Service Award. As a veteran diver and
powerboat owner/operator, his knowledge of protocol and certification will be a
help in creating the underwater and marine experiences in Costa Rica.
RICHARD Wm. TALLEY, Director of Central American Equities Corp (age 56, time
spent on company business: 1 (one) percent). Mr. Talley is (with Mr. King) a
representative of Cal TKCo, S.A., the general partner in several of the
California Limited Partnerships that raised the seed money for the Costa Rican
corporations that built the hotels (see Item 1 - Description of Business,
Formation).
Mr. Talley began his finance career with Smith Barney in New York. He opened and
managed the Shearson office in Santa Barbara until its sale to American Express
in 1983, at which time he founded Talley McNeil and Tormey, a regionally focused
investment bank and brokerage firm. The firm was merged into a larger Southern
California investment banking and brokerage firm in 1989. In 1993, Mr. Talley
and Paul D. King founded Talley, King and Co., Inc. ("Talley King") with offices
in Irvine, California. Talley, King & Co., Inc. is an investment bank which
focuses on private placement financing.
-31-
<PAGE> 32
Mr. Talley has been actively involved in Costa Rica for the last seven years. In
addition to his role in Talley King, Mr. Talley is also Chairman of the Board of
Centracan, Inc. a US-based medical corporation that owns and operates diagnostic
and treatment facilities in Costa Rica. Mr. Talley holds a bachelor of arts
degree in European History from the University of California, Santa Barbara and
an MBA in Finance from Cornell University, Ithaca, New York.
PAUL KING, Director of Central American Equities Corp (age 34, time spent on
company business: 1 (one) percent). Mr. King is a principal in Talley King &
Company, Inc. and a partner with Mr. Talley since 1989. During the last seven
years, Mr. King has been intimately involved in the development of the Costa
Rican properties. He has overseen the land acquisition permit, bidding, and
construction process. He was responsible for all activities including the
interface between Costa Rican corporations and US entities.
In the medical area, Talley King and Company, Inc. has funded and built
diagnostic and treatment medical facilities in San Jose, Costa Rica (Centracan,
Inc.). Mr. King attended Westmont College.
MICHAEL N. CAGGIANO, Ph.D. President, Chief Executive Officer, and Director of
Central American Equities (age: 45, time spent on company business: ninety (90)
percent). Dr. Caggiano is also a Director of Cafe Britt, a roaster and
distributor of premium Costa Rican coffee and a consultant to Centracan, a
provider of high technology medical services in San Jose, Costa Rica.
Prior to joining CAE, as a private consultant, Dr. Caggiano has specialized in
furnishing advice to management regarding economic performance, corporate
strategy, obtaining financing (business plans, prospectuses, SEC and NASD
filings), mergers and acquisitions, and organizational change. His clients have
included health care, real estate, hospitality, international exporting,
electronics, and manufacturing companies. Dr. Caggiano has also provided public
policy and litigation analysis for local governments and private entities.
Prior to establishing his own company, Dr. Caggiano was Executive Vice President
in Charge of Consulting Operations at Robert Charles Lesser & Co. (RCLCo) a
50-person, 5-office, national consulting firm based in Los Angeles. While at
RCLCo, he oversaw the management of more than 300 consulting engagements
annually.
In 1990, Dr. Caggiano was elected to the first City Council of Malibu and later
served as its Mayor Pro Tem. He helped create the city from conception. Before
serving as an elected official, he was a Fellow and Policy Analyst with The RAND
Corporation. While at RAND, he specialized in solving state and local government
financial and criminal justice problems. During his nine years at RAND, he
authored 18 publications on finance and other government policy-related issues.
For five years, Dr. Caggiano served as the President of Heal the Bay, one of
Southern California's most successful environmental groups. Currently he is a
board director.
Dr. Caggiano holds a Ph.D. in Public Policy Analysis from the RAND Graduate
School of The RAND Corporation, an M.P.A. from the University of Southern
California, and a B.A. in Government from Pomona College.
BRIAN FRAZEE, President/CEO/Director of Central American Equities Corp. from
October 1997 to September 1998 (age 38, time spent on company business: 100 (one
hundred) percent). In September 1998, Mr. Frazee became the General Manager of
-32-
<PAGE> 33
CAE's hotels in Costa Rica and his positions of President/CEO/Director. Mr.
Frazee joined CAE in May of 1997 as assistant General Manager. He was trained at
Hotel Alta by Warren Francis, who received his classical training in hotel
management from Cornell's School of Hotel Administration (Master's Degree 1985).
Mr. Francis returned to the United States in September of 1997, at which time
Mr. Frazee was promoted to General Manager. Mr. Frazee received his degree in
Hotel Administration from Washington State University in Pullman, Washington. He
has worked extensively for the Westin Hotel Group and Gleneagles Hotel in
Scotland.
FAMILY RELATIONSHIPS
There are no family relationships between the directors or executive officers of
the Company, either by blood or by marriage.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, no present or former director, executive officer or
person nominated to become a director or an executive officer of the Company
was:
1. A general partner or executive officer of any business against which
any bankruptcy petition was filed, either at the time of the bankruptcy or
two years prior to that time;
2. Convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
3. Subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities; or
4. Found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity futures trading
Commission to have violated a commodities law, and the judgment has not
been reversed, suspended or vacated.
ITEM 10. EXECUTIVE COMPENSATION
The Company has no stock option or stock appreciation rights, long term or other
incentive compensation plans, deferred compensation plans, stock bonus plans,
pension plans, or any other type of compensation plan in place for its executive
officers, or directors; none of its executive officers or directors have
received any compensation of any such types from the Company pursuant to plans
or otherwise.
The following table sets forth the total compensation of all officers and
directors during the fiscal years ended December 31, 1997 and 1998. No officer
of the Company earned more than $100,000 during such fiscal years.
-33-
<PAGE> 34
<TABLE>
<CAPTION>
Name Title Compensation
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael N. Caggiano (1) NA 1997 NA
CEO/President/Director 1998 $20,000
W.F.O. Rosenmiller Secretary/Treasurer/Director 1997 0
Secretary/Treasurer/Director 1998 0
Richard Wm. Talley (2) Director 1997 0
Richard Wm. Talley Director 1998 0
Paul King (2) Director 1997 0
Paul King Director 1998 0
Brian Frazee CEO/President/Director 1997 5,400
Brian Frazee CEO/President/Director 1998 24,400
Warren Francis (3) President 1997 103,500
Warren Francis NA 1998 NA
</TABLE>
(1) During the third quarter of 1998 the Company issued 19,200 shares of
its Class A Common Stock to Michael N. Caggiano, the Company's Consultant
CEO/President. The shares were issued in lieu of payment for services
rendered prior to him being appointed in his current position as CEO and
President.
(2) Does not include $100,100 in management fees received by Talley, King
& Company, Inc. in 1997. Messrs. Talley and King are owners of Talley,
King & Company, Inc.
(3) Mr. Francis' compensation includes a home allowance of $2,500 per
month totaling approximately $22,500 in 1997. During 1997 Mr. Francis also
received access to a car rented for him at a cost of approximately $1000
per month for a total of $9,000 (not included above).
The Company has not entered into any employment contracts with its officers or
directors but intends to enter into same in the future. The Company has no bonus
plan at the present time but intends to implement same in the future. The terms
and conditions of any such plan or employment contract are subject to the
approval of the Company's board of directors in their sole discretion.
The Company does not compensate its board directors except for their
reimbursement of expenses incurred in relation to attendance at board of
directors meetings.
ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT & CERTAIN BENEFICIAL OWNERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the shareholdings of those persons who owned more
than five percent of the Company's common stock as of December 31, 1998:
-34-
<PAGE> 35
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Total Class
Beneficially Owned
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard Wm. Talley 805,114 6.6% Common Stock
19200 Von Karman
Irvine, CA 92612
Paul King 805,116(1) 6.6% Common Stock
19200 Von Karman --------- ----
Irvine, CA 92612
Totals 1,610,230 13.2%
</TABLE>
(1) Includes 250,000 shares of common stock registered in the name of
"King Family Trust", 50,000 shares registered in the name of Caroline
King, Mr. King's spouse and 10,000 shares registered in the name of
Christopher King, Mr. King's son. Due to Mr. King's "control"
relationship to the King "Family Trust" his spouse and son, Mr. King may
be deemed to be the beneficial owners of the shares of the company and
such shares have been included in Mr. King's stockholdings in this
table.
The following table sets forth the shareholdings of those persons who own more
than five percent of the Company's total common stock as of the date of this
filing:
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Total Class
Beneficially Owned
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard Wm. Talley 757,514 6.2% Common Stock
19200 Von Karman
Irvine, CA 92612
Paul King 767,516(1) 6.3% Common Stock
19100 Von Karman --------- ----
Irvine, CA 92612
Totals 1,525,030 12.5%
</TABLE>
(1) Includes 250,000 shares of common stock registered in the name of
"King Family Trust", 50,000 shares registered in the name of Caroline
King, Mr. King's spouse and 10,000 shares registered in the name of
Christopher King, Mr. King's son. Due to Mr. King's "control"
relationship to the King "Family Trust" his spouse and son, Mr. King may
be deemed to be the beneficial owners of the
-35-
<PAGE> 36
shares of the company and such shares have been included in Mr. King's
stockholdings in this table.
SECURITY OWNERSHIP OF MANAGEMENT.
The following sets forth the shareholdings of the Company's directors and
executive officers as of April 21, 1998 (the date used for the initial 10-SB
filing):
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Total Class
Beneficially Owned
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard Wm. Talley 805,114 6.6% Common Stock
Paul King (1) 805,116(1) 6.6% Common Stock
W.F. Rosenmiller (2) 388,887 3.2% Common Stock
Brian Frazee (3) 0 0%
--------- -----
Totals 1,999,117 16.4%
</TABLE>
(1) Includes 250,000 shares of common stock registered in the name of
"King Family Trust", 50,000 shares registered in the name of Caroline
King, Mr. King's spouse and 10,000 shares registered in the name of
Christopher King, Mr. King's son. Due to Mr. King's "control"
relationship to the King "Family Trust" his spouse and son, Mr. King may
be deemed to be the beneficial owners of the shares of the company and
such shares have been included in Mr. King's stockholdings in this
table.
(2) The shares are registered as follows: CR DE ESCAZU EMPRESA
COSTARICENSE-340,000 shares of common stock and CR INVERSION ESCAZU
LIMITADA- 48,887 shares of common stock
(3) Does not include options to purchase 10,000 shares of Company common
stock for $1.00 per share. The options were issued on April 9, 1998 and
vest at 2,000 shares per year for five years commencing in 1998.
The following sets forth the shareholdings of the Company's directors and
executive officers as of the date of this filing:
-36-
<PAGE> 37
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Total Class
Beneficially Owned
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard Wm. Talley 757,514 6.2% Common Stock
Paul King (1) 767,516(1) 6.3% Common Stock
W.F. Rosenmiller (2) 413,828 3.4% Common Stock
Michael Caggiano 31,202 0.3% Common Stock
--------- ----
Totals 1,970,060 16.1%
</TABLE>
(1) Includes 250,000 shares of common stock registered in the name of
"King Family Trust", 50,000 shares registered in the name of Caroline
King, Mr. King's spouse and 10,000 shares registered in the name of
Christopher King, Mr. King's son. Due to Mr. King's "control"
relationship to the King "Family Trust" his spouse and son, Mr. King may
be deemed to be the beneficial owners of the shares of the company and
such shares have been included in Mr. King's stockholdings in this
table.
(2) The shares are registered as follows: CR DE ESCAZU EMPRESA
COSTARICENSE-364,941 shares of common stock and CR INVERSION ESCAZU
LIMITADA- 48,887 shares of common stock.
ITEM 12. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Richard Wm. Talley and Paul King, in association with CAL TKCO S.A., were
general partners of several of the Partnerships described in Item 1. As such,
Mr. Talley and Mr. King received an aggregate of 1,610,230 shares of common
stock pursuant to the exchange agreement. Messrs. Talley and King own 100% of
Talley, King and Co., Inc. Talley, King and Co., Inc. received management fees
of $100,100 in 1997 from the Company. The management agreement expired in 1997.
There is no management agreement in 1998.
In June 1996, under Rule 504 Reg D, 500,000 shares were issued in exchange for
$5,000. Mr. Dale Finfrock, founder of CAE, holds 183,466 of these shares
obtained pursuant to Rule 504. These shares are without restrictive legend.
However, Mr. Finfrock has agreed to refrain from selling any of said shares
until ninety days after public listing of CAE stock.
ITEM 12A (10-SB ITEM 10) RECENT SALES OF UNREGISTERED SECURITIES.
-37-
<PAGE> 38
In June of 1996, the Company filed a Form D relating to the offer and sale of
500,000 shares of common stock pursuant to Rule 504. The Company sold said
shares for an aggregate consideration of $15,000 to ten (10) investors. No
Commissions were paid on sales of these Common Shares.
In December of 1996, the Company entered into an agreement for the exchange of
common stock ("Exchange Agreement") with Cal Tico, L.P., Ecolodge Partners,
L.P., and L.A. Cal, L.P., and Marine Lodge Partners, L.P. ("Partnership").
Pursuant to the exchange agreement, the company issued 7,756,885 and 3,099,392
shares of common stock to the limited partners (approximately 450) and the
general partners, respectively, of the partnerships. The general partners who
received shares included: George Solano (121,821 shares received), Craig
MacClean (40,593 shares), Joanell Lyon (182,000), Milton and Diana Lieberman
(520,000), and current CAE board directors: Richard Wm. Talley, Paul King, and
W.F.O. Rosenmiller (see Item 11 - Security Ownership of Management). In exchange
for the shares, the partnership transferred all of their interests (i.e. 100% of
the outstanding common stock) in the following Costa Rican corporation: Hotelera
Caltico, S.A.; Ecoproyecto San Luis, S.A (which owns 100% of Confluencia San
Luis, S.A.); and Sociedad Protectora de la Fauna y Flora de Mal Pais, S.A.
(which owns 100% of Corporacion Muxia, S.A.) (See Item 1 - Business of the
Company). The receipt of shares by Mr. Solano are contingent upon him reaching
certain sales goals (See Exhibit 10). No Commissions were paid on sales of these
Common Shares.
In 1997 the Company issued 748,975 shares of common stock for an aggregate
purchase price of $1,425,375.45 pursuant to Rule 506. These investors are exempt
because they are accredited investors. The proceeds were used to make capital
improvements to the various hotels acquired pursuant to the Exchange Agreement.
The shares were sold to 64 accredited investors. A 10 percent commission, or
approximately $142,500 was paid to Talley King & Co., Inc. on sales of these
Common Shares.
In a separate transaction, the Company issued 100,000 shares of common stock to
Steven Aronson on August of 1997. The shares were issued as compensation for Mr.
Aronson's services in conducting due diligence on the Costa Rican hotels and
consulting services.
In April 1998, the Company issued options to purchase shares of common stock in
equal yearly amounts over the next five years. The shares may be purchased
pursuant to the options at a price of $1.00 per share. The details for said
options are as follows:
<TABLE>
<CAPTION>
Option Holder Amount of Shares Consideration
- --------------------------------------------------------------------------------
<S> <C> <C>
Elsa Monge 10,000 none
Brian Frazee 10,000 none
Sherman Johnson (1) 15,000 none
Mario Araya 5,000 none
O. Ramirez 5,000 none
S. Rodriguez 500 none
D. Munoz 500 none
C. Elizondo 500 none
M. Salazar 500 none
J. Cruz 500 none
------
Total 47,500 none
</TABLE>
-38-
<PAGE> 39
(1) See exhibits for the text of the option and an explanation of how
they vest.
For each of the above transactions, the Company relied upon the exemption from
registration under the Securities Act of 1933, as amended, as provided by
Section 4(2) of the Act.
ITEM 12B (10-SB ITEM 11) DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 20,000,000 shares of common
stock, par value $.001 per share, and 1,000,000 shares of preferred stock, par
value $.001 per share. As of December 31, 1998, 12,205,252 shares of common
stock were issued and outstanding and no (0) shares of preferred stock were
issued and outstanding. As of the date of this filing, 12,230,252 shares of
common stock were issued and outstanding.
DESCRIPTION OF SECURITIES
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the stockholders. The common stock does not have
cumulative voting rights, which means that the holders of a majority of the
outstanding shares of common stock voting for the election of directors can
elect all members of the board of directors. A majority vote is also sufficient
for other actions that require the vote or concurrence of the stockholders
(except in cases in which more than a simple majority is required by law).
Holders of common stock are entitled to receive dividends, when, as and if
declared by the board of directors, in its discretion, from funds legally
available therefore. Subject to the dividend rights of the holders of preferred
stock, holders of shares of common stock are declared by the board of directors
out of funds legally available therefore. Upon liquidation, dissolution or
winding up of the Company, after payment to creditors and holders of preferred
stock that may be outstanding, the holders of common stock are entitled to share
ratably in the assets of the Company, if any. The Bylaws of the Company require
that only a majority of the issued and outstanding shares of common stock of the
Company need be represented to constitute a quorum and to transact business at a
stockholders' meeting.
The common stock has no preemptive rights or subscription, redemption or
conversion privileges. All of the outstanding shares of common stock are fully
paid and nonassessable.
The Company's board of directors has total discretion as to the issuance and the
determination of the rights and privileges of any shares of preferred stock
which may be issued in the future. Such rights and privileges may be detrimental
to the rights and privileges of the holders of common stock.
TRANSFER AGENT
The transfer agent for the Company's common stock is Olde Monmouth Stock
Transfer Company, Atlantic Highlands, NJ.
ITEM 12C (10-SB ITEM 12.) INDEMNIFICATION OF DIRECTORS AND OFFICERS
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Under Florida law, a director is not personally liable for monetary damages to
the corporation or any other persons for any statement, vote, decision, or
failure to act unless (I) the director breached or failed to perform his duties
as a director, and (ii) a director's breach of, or failure to perform, those
duties constitutes (1) a violation of the criminal law unless the director had
reasonable cause to believe his conduct was lawful (2) a transaction from which
the director derived an improper personal benefit, either directly or
indirectly; (3) a circumstance under which an unlawful distribution is made; (4)
in a proceeding by or in the right of the corporation or in a proceeding in
which the corporation procures a judgment in its favor or by or in the right of
a shareholder, conscious disregard for the best interest of the corporation or
willful misconduct; or (5) in a proceeding by or in the right of someone other
than the corporation or a shareholder, recklessness or an act or omission which
was committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard to human rights, safety, or property. A corporation
may purchase and maintain insurance on behalf of any director or officer against
any liability asserted against him and incurred by him in his capacity or
arising out of his status as such, whether or not the corporation would have the
power to indemnify under Florida law.
The Company's Bylaws limit, to the maximum extent permitted by Florida law the
personal liability of directors and officers for monetary damages for breach of
their fiduciary duties as directors and officers. The Bylaws provide further
that the Company shall indemnify to the fullest extent permitted by Florida law
any person made a party to any action or proceeding by reason of the fact that
such person was a director, officer, employee or agent of the Company. The
Bylaws also provide that directors and officers who are entitled to
indemnification shall be paid their expenses incurred in connection with any
action, suit or proceeding in which such director or officer is made a party by
virtue of his being an officer or director of the Company to the maximum extent
permitted by Florida Law.
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ITEM 13. INDEX TO EXHIBITS
The following exhibits are filed with this Form 10-SB:
<TABLE>
<CAPTION>
Exhibit Number Name
- -------------- ----
<S> <C>
Exhibit 2. Agreement for Exchange of Common Stock dated December 10, 1996 by
and between Central American Equities Corp. and Cal Tico, LP,
Ecolodge Partners, LP, MarineLodge Partners LP, and L.A. Cal, L.P.
Exhibit 3 (I) Articles of Incorporation of Central American Equities
Exhibit 3 (II) Bylaws of Central American Equities
Exhibit 10 (I) Option Agreements dated April 9, 1998 by and between Central
American Equities Corp. and Elsa Monge, Sherman Johnson and Brian
Frazee
Exhibit 10 (II) Material Contracts: Management Agreement with Talley King
Management
Exhibit 10 (III) Agreement with George Solano
Exhibit 10 (IV) Other Option Agreements
Exhibit 21 (I) Subsidiaries of the Registrant
Exhibit 21 (II) Letter Concerning Ownership of Costa Rican Subsidiaries
</TABLE>
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VERIFICATION SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTRAL AMERICAN EQUITIES CORP.
/s/ Michael N. Caggiano,
BY: Michael N. Caggiano, President/CEO/Board Director
MICHAEL N. CAGGIANO, President/CEO/Board Director
Principal Financial and Accounting Officer
/s/ Richard Wm. Talley
BY: Richard Wm. Talley, Board Director
RICHARD WM. TALLEY, Board Director
/s/ W. F. Rosenmiller
BY: W.F. Rosenmiller, Board Director
W.F. ROSENMILLER, Board Director
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EXHIBIT 2: AGREEMENT FOR THE EXCHANGE OF COMMON STOCK
NOTICE ON NON REGISTRATION
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE " 1933 ACT"), NOR REGISTERED UNDER ANY
STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
AGREEMENT FOR THE EXCHANGE OF COMMON STOCK
AGREEMENT made this 10th day of December, 1996, by and between Central American
Equities Corp., a Florida corporation, (the "ISSUER') and Cal Tico,L.P.,
Ecolodge Partners, L.P. and MarineLodge Partners, L.P., three California Limited
Partnerships (the "PARTNERSHIPS").
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EXCHANGE OF SECURITIES. Subject to the terms and conditions of this
Agreement, the ISSUER agrees to issue to the PARTNERSHIPS, 10,000,000 shares of
the common stock of ISSUER, $0.01 par value (the "Shares"), in exchange for 100%
of the partnership interests in the PARTNERSHIPS, such that Costa Rican
Companies (as defined below) shall become wholly owned subsidiaries of the
ISSUER.
2. REPRESENTATIONS AND WARRANTIES. ISSUER represents and warrants to
PARTNERSHIPS the following:
i. Organization. ISSUER is a corporation duly organized, validly existing, and
in good standing under the laws of Florida, and has all necessary corporate
powers to own properties and carry on a business, and is duly qualified to do
business and is in good standing in Florida. All actions taken by the
Incorporators, directors and shareholders of ISSUER have been valid and in
accordance with the laws of the State of Florida.
ii. Capital. The authorized capital stock of ISSUER consists of 20,000,000
shares of common stock, $0.001 par value, of which 500,000 are issued and
outstanding, and 1,000,000 shares of preferred stock, par value $.001, none of
which are issued. All outstanding shares are fully paid and non assessable, free
of liens, encumbrances, options, restrictions and legal or equitable rights of
others not a party to this Agreement. At closing, there will be no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating ISSUER to issue or to transfer from
treasury any additional shares of its capital stock.
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None of the outstanding shares of ISSUER are subject to any stock restriction
agreements. All of the shareholders of ISSUER have valid title to such shares
and acquired their shares in a lawful transaction and in accordance with the
laws of Florida.
iii. Financial Statements. Exhibit B to this Agreement includes the balance
sheet of ISSUER as of December 1, 1996, and the related statements of income and
retained earnings for the period then ended. The financial statements have been
prepared in accordance with generally accepted accounting principles
consistently followed by ISSUER throughout the periods indicated, and fairly
present the financial position of ISSUER as of the date of the balance sheet in
the financial statements, and the results of its operations for the periods
indicated.
iv. Absence of Chances. Since the date of the financial statements, there has
not been any change in the financial condition or operations of ISSUER, except
changes in the ordinary course of business, which changes have not in the
aggregate been materially adverse.
V. Liabilities. ISSUER does not have any debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that is not reflected on the ISSUERS' financial statement. ISSUER
is not aware of any pending, threatened or asserted claims, lawsuits or
contingencies involving ISSUER or its common stock. There is no dispute of any
kind between ISSUER and any third party, and no such dispute will exist at the
closing of this Agreement. At closing, ISSUER will be free from any and all
liabilities, liens, claims and/or commitments.
vi. Ability to Carry Out Obligations. ISSUER has the right, power, and authority
to enter into and perform its obligations under this Agreement. The execution
and delivery of this Agreement by ISSUER and the performance by ISSUER of its
obligations hereunder will not cause, constitute, or conflict with or result in
(a) any breach or violation or any of the provisions of or constitute a default
under any license, indenture, mortgage, charter, instrument, articles of
incorporation, bylaw, or other agreement or instrument to which ISSUER or its
shareholders are a party, or by which they may be bound, nor will any consents
or authorizations of any party other than those hereto be required, (b) an event
that would cause ISSUER to be liable to any party, or (c) an event that would
result in the creation or imposition or any lien, charge or encumbrance on any
asset of ISSUER or upon the securities of ISSUER to be acquired by The
PARTNERSHIPS.
vii. Full Disclosure. None of representations and warranties made by the ISSUER,
or in any certificate or memorandum furnished or to be furnished by the ISSUER,
contains or will contain any untrue statement of a material fact, or omit any
material fact the omission of which would be misleading.
viii. Contract and Lease . ISSUER is not currently carrying on any business and
is not a party to any contract, agreement or lease. No person holds a power of
attorney from ISSUER.
ix. Compliance with Laws. ISSUER has complied with, and is not in violation of
any federal, state, or local statute, law, and/or regulation pertaining to
ISSUER - ISSUER has complied with all federal and state securities laws in
connection with the issuance, sale and distribution of its securities.
X. Litigation. ISSUER is not (and has not been) a party to any suit, action,
arbitration, or legal, administrative, or other proceeding, or pending
governmental investigation. To the best knowledge of the ISSUER, there is no
basis for any such action or proceeding and no
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<PAGE> 3
such action or proceeding is threatened against ISSUER and ISSUER is not subject
to or in default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or instrumentality.
xi. Conduct of Business. Prior to the closing, ISSUER shall conduct its business
in the normal course, and shall not (1) sell, pledge, or assign any assets (2)
amend its Articles of Incorporation or Bylaws, (3) declare dividends, redeem or
sell stock or other securities, (4) incur any liabilities, (5) acquire or
dispose of any assets, enter into any contract, guarantee obligations of any
third party, or (6) enter into any other transaction.
xii. Corporate Documents. Copies of each of the following documents, which are
true complete and correct in all material respects, will be attached to and made
a part of this Agreement:
xiii. Articles of Incorporation;
xiv. Bylaws;
(1) Minutes of Shareholders Meetings;
(2) Minutes of Directors Meetings;
(3) List of Officers and Directors;
(4) Balance Sheet as of December 1, together with other financial statements
described in Section 2(iii);
(5) Stock register and stock records of ISSUER and a current, accurate list of
Issuer's shareholders.
xv. Documents. All minutes, consents or other documents pertaining to ISSUER to
be delivered at closing shall be valid and in accordance with the laws of
Florida.
xvi. Title. The Shares to be issued to the PARTNERSHIPS will be, at closing,
free and clear of all liens, security interests, pledges, charges, claims,
encumbrances and restrictions of any kind. None of such Shares are or will be
subject to any voting trust or agreement. No person holds or has the right to
receive any proxy or similar instrument with respect to such shares, except as
provided in this Agreement, the ISSUER is not a party to any agreement which
offers or grants to any person the right to purchase or acquire any of the
securities to be issued to The PARTNERSHIPS. There is no applicable local, state
or federal law, rule, regulation, or decree which would, as a result of the
issuance of the Shares, impair, restrict or delay The PARTNERSHIPS' voting
rights with respect to the Shares.
3. The PARTNERSHIPS represent and warrant to ISSUER the following:
i. Organization. The PARTNERSHIPS are limited partnerships duly organized,
validly existing, and in good standing under the laws of California, have all
necessary corporate powers to own properties and carry on a business, and is
duly qualified to do business and is in good standing in California.
ii. Costa Rica Corporations. The PARTNERSHIPS own 100% of the -following Costa
Rica Corporations: Hotelera Cal Tico, S.A., Bandirma, S.A., Sociedad Protectora
De La Fuana Y Flora Marintima De Mal Pais, S.A., Ecoproyecto San Luis, S.A., and
Confluencia, S.A., each of which is duly organized, validly existing, and in
good standing under the laws of Costa Rica, have all necessary corporate powers
to own properties and carry on a business, and is duly qualified to do business
and is in good standing in Costa Rica.
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<PAGE> 4
iii. PARTNERSHIP Action, All the limited partners of the PARTNERSHIPS have
approved the exchange of their interests in the PARTNERSHIPS, at the rate of
$1.00 of partnership interest, for one share of common stock of the ISSUER, for
a total 10,000,000 shares of the Issuer to be issued pursuant to this Agreement.
This Agreement has been duly executed and delivered by the PARTNERSHIPS and
constitutes the valid and binding obligation of the PARTNERSHIPS, and is a valid
and binding obligation of the PARTNERSHIPS, enforceable against the PARTNERSHIPS
in accordance with the terms herein.
4. INVESTMENT INTENT. The Shares being issued pursuant to this Agreement may be
sold, pledged, assigned, hypothecate or otherwise transferred, with or without
consideration ( a "Transfer"), only pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration under the
Act.
5. CLOSING ( The closing of this transaction shall take place at the law offices
of Eric P. Miami, Florida. Unless the closing of this transaction takes place on
or before December 31, 1996, then either party may terminate this Agreement.
6. DOCUMENTS TO BE DELIVERED AT CLOSING.
i. By the ISSUER
(1) Board of Directors Minutes authorizing the issuance of a certificate or
certificates for 10,000,000 Shares, registered in the names of the holders in
interest of the PARTNERSHIP equal to their pro-rata holdings in the
PARTNERSHIPS.
(2) The resignation of all officers of ISSUER.
(3) A Board of Directors resolution appointing such person as The PARTNERSHIPS
designate as a director(s) of ISSUER.
(4) The resignation of all the directors of ISSUER, except that of SHAREHOLDER'S
designee, dated subsequent to the resolution described in 3, above..
(5) Unaudited financial statements of ISSUER, which shall include a balance
sheet dated as of December 1, 1996 and statements of operations, stockholders
equity and cash flows for the twelve month period then ended.
(6) All of the business and corporate records of ISSUER, including but not
limited to correspondence files, bank statements, checkbooks, savings account
books, minutes of shareholder and directors meetings, financial statements,
shareholder listings, stock transfer records, agreements and contracts.
(7) Such other minutes of ISSUER's shareholders or directors as may reasonably
be required by the PARTNERSHIPS.
(8) An Opinion Letter from ISSUER's Attorney attesting to the validity and
condition of the ISSUER.
ii. By the PARTNERSHIPS:
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(1) Delivery to the ISSUER, or to its Transfer Agent, the certificates
representing 100% of the issued and outstanding stock of Costa Rican Companies.
(2) Consents signed by all PARTNERSHIPS consenting to the terms of this
Agreement.
(3) An opinion Letter from the PARTNERSHIPS' attorney setting forth the
following:
(a) The PARTNERSHIPS are organized under the laws of the State of California.
(b) The PARTNERSHIPS are duly qualified and in good standing in each state and
country in which the nature of the activities conducted by them or the character
of the properties or assets owned or leased by them makes such qualification
necessary, except where its failure to be so qualified would not have a material
adverse effect on their business, properties, business prospects, condition
(financial or otherwise) or results of operations.
(c) The PARTNERSHIPS have full power and authority to execute, deliver and
perform this Agreement, and to consummate the transactions contemplated herein.
The execution, delivery and performance of this Agreement and the consummation
by the PARTNERSHIPS of the transactions herein contemplated and the compliance
by the PARTNERSHIPS with the terms of this Agreement have been duly authorized
by all necessary partnership action, and this Agreement has been duly executed
and delivered by the PARTNERSHIPS. This Agreement is a valid and binding
obligation of the PARTNERSHIPS, enforceable in accordance with its terms,
subject to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the discretion of courts in granting equitable remedies.
(d) Costa Rico Corporations are corporations validly existing and in good
standing under the laws of Costa Rico.
7. REMEDIES:
i. Arbitration. Any controversy or claim arising out of, or relating to, this
Agreement, or the making, performance, or interpretation thereof, shall be
settled by arbitration in Miami, Dade County, Florida in accordance with the
Rules of the American Arbitration Association then existing, and judgment on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy.
8. MISCELLANEOUS:
i. Captions and Headings. The Article and paragraph headings throughout this
Agreement are for convenience and reference only, and shall in no way be deemed
to define, limit, or add to the meaning of any provision of this Agreement.
ii. No oral Change. This Agreement and any provision hereof, may not be waived,
changed, modified, or discharged orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
iii. Non Waiver. Except as otherwise expressly provided herein, no waiver of any
covenant, condition, or provision of this Agreement shall be deemed to have been
made
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unless expressly in writing and signed by the party against whom such waiver is
charged; and (I) the failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants, or conditions of this
Agreement or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants, or
conditions, ii. the acceptance of performance of anything required by this
Agreement to be performed with knowledge of the breach or failure of a covenant,
condition, or provision hereof shall not be deemed a waiver of such breach or
failure, and iii. no waiver by any party of one breach by another party shall be
construed as a waiver with respect to any other or subsequent breach.
iv. Time of Essence. Time is of the essence of this Agreement and of each and
every provision hereof.
V. Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings.
vi. Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
vii. Notices. All notices, requests, demands, and other communications -under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed, and by fax, as follows:
ISSUER: Dale B. Finfrock
P.O. Box 669
Palm Beach, FL 33480
Copy to: Eric P. Littman, Esquire
1428 Brickell Ave, 8th Floor
Miami, Florida 33131
PARTNERSHIPS: Mr. Richard Talley
Talley King & Co., Inc.
19200 Von Karman, Suite 805
Irvine, CA 92715
IN WITNESS WHEREOF, the undersigned has executed this Agreement this 10th day of
December, 1996.
Central American Equities Corp. Cal Tico, L.P.
By: Dale B. Finfrock By: Richard Talley
Dale B. Finfrock, President Richard Talley, General Partner
MarineLodge Partners, L.P. Ecolodge Partners, L.P.
By: Richard Talley By: Richard Talley
Richard Talley, General Partner Richard Talley, General Partner
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EXHIBIT 3 (I): ARTICLES OF INCORPORATION OF CAE.
ARTICLE I. NAME
The name of this Florida corporation is:
Central American Equities Corp.
ARTICLE II. ADDRESS
The mailing address of the Corporation is:
Central American Equities Corp.
P.O. Box 669
Palm Beach FL 33480
ARTICLE III. CAPITAL STOCK
The Corporation shall have the authority to issue 20,000,000 shares of common
stock, par value $.001 per share.
The Corporation shall have the authority to issue 1,000,000 shares of preferred
stock, par value $ .001 per share, which may divided into series and with the
preferences, limitations and relative rights determined by the Board of
Directors.
ARTICLE V. REGISTERED AGENT
The name and address of the registered agent of the Corporation is:
Corporate Creations Enterprises, Inc.
4521 PGA Boulevard, Suite 211
Palm Beach Gardens FL 33418
Article V. Board of Directors
The affairs of the Corporation shall be managed by a Board of Directors
consisting of no less than one director. The number of directors may be
increased or decreased from time to time in accordance with the Bylaws of the
Corporation.
The election of directors shall be done in accordance with the Bylaws. The
directors shall be Protected from personal liability to the fullest extent
permitted by law. The name of each initial member of the Corporation's Board of
Directors is:
Dale B. Finfrock, Jr.
Article VI. Incorporator
The name and address of the incorporator is:
Corporate Creations International Inc.
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4521 PGA Boulevard & Suite 211
Palm Beach Gardens FL 33418-3967
Article VII. Corporate Existence
The corporate existence of the Corporation shall begin effective January 23,
1996
Article VIII. Anti-Takeover Opt Out
The Corporation elects not to be governed by the Affiliated Transactions
Statute, P.S. 607.0901. The Control Share Acquisitions Statute, P.S. 607.0902,
shall not apply to control share acquisitions of shares of the Corporation.
The authorized representative of the incorporator executed these Articles of
Incorporation on January 24, 1996
Corporate Creations International Inc.
By: Frank A. Rodriguez, President
Frank A. Rodriguez, President
Corporate Creations International Inc.
4521 PGA Boulevard - Suite 211
Palm Beach Gardens, Florida 33418-3967
(407)694-8107
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EXHIBIT 3 (II): BYLAWS OF CENTRAL AMERICAN EQUITIES CORP.
ARTICLE I. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under the
authority of the Board of Directors. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors. Directors must
be natural persons who are at least 18 years of age but need not be shareholders
of the Corporation. Residents of any state may be directors.
Section 2. Compensation. The shareholders shall have authority to fix the
compensation of directors. Unless specifically authorized by a resolution of the
shareholders, the directors shall serve in such capacity without compensation.
Section 3. Presumption of Assent. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon
arriving) to the holding of the meeting or transacting the specified business at
the meeting, or if the director votes against the action taken or abstains from
voting because of an asserted conflict of interest.
Section 4. Number. The Corporation shall have at least the minimum number of
directors required by law. The number of directors may be increased or decreased
from time to time by the Board of Directors.
Section 5. Election and Term. At each annual meeting of shareholders, the
shareholders shall elect directors to hold office until the next annual meeting
or until their earlier resignation, removal from office or death. Directors
shall be elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present.
Section 6. vacancies. Any vacancy occurring in the Board of Directors, including
a vacancy created by an increase in the number of directors, may be filled by
the shareholders or by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders. If there are no remaining directors, the vacancy
shall be filled by the shareholders.
Section 7. Removal Of Directors. At a meeting of shareholders, any director or
the entire Board of Directors may be removed, with or without cause, provided
the notice of the meeting states that one of the purposes of the meeting is the
removal of the director. A director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast against removal.
Section 8. Quorum and Voting. A majority of the number of directors fixed by
these Bylaws shall constitute a quorum for the transaction of business. The act
of a majority of directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 9. Executive and Other Committees. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its
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members one or more committees each of which must have at least two members.
Each committee shall have the authority set forth in the resolution designating
the committee.
Section 10. Place of meeting. Regular and special meetings of the Board of
Directors shall be held at the principal place of business of the Corporation or
at another place designated by the person or persons giving notice or otherwise
calling the meeting.
Section 11. Time, - Notice and Call of Meetings. Regular meetings of the Board
of Directors shall be held without notice at the time and on the date designated
by resolution of the Board of Directors. Written notice of the time, date and
place of special meetings of the Board of Directors shall be given to each
director by mail delivery at least two days before the meeting.
Notice of a meeting of the Board of Directors need not be given to director who
signs a waiver of notice either before or after the meeting. Attendance of a
director at a meeting constitutes a waiver of notice of that meeting and waiver
of all objections to the place of the meeting, the time of the meeting, and the
manner in which it has been called or convened, unless a director objects to the
transaction of business (promptly upon arrival at the meeting) because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors must be specified in the notice or waiver of notice of the meeting.
A majority of the directors present, whether or not a quorum exists, may adjourn
any meeting of the Board of Directors to another time and place. Notice of an
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless the time and place of the adjourned meeting
are announced at the time of the adjournment, to the other directors. Meetings
of the Board of Directors may be called by the President or the chairman of the
Board of Directors. Members of the Board of Directors and any committee of the
Board may participate in meeting by telephone conference or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation by these means constitutes presence
in person at a meeting.
Section 12, Action By Written Consent. Any action required or permitted to be
taken at a meeting of directors may be taken without a meeting if a consent in
writing setting forth the action to be taken and signed by all of the directors
is filed in the minutes of the proceedings of the Board. The action taken shall
be deemed effective when the last director signs the consent, unless the consent
specifies otherwise.
ARTICLE II. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the
corporation for the election of officers and for such other business as may
properly come before the meeting shall be held at such time and place as
designated by the Board of Directors.
Section 2. Special Meeting. Special meetings of the shareholders shall be held
when directed by the President or when requested in writing by shareholders
holding at least 10% of the corporation's stock having the right and entitled to
vote at such meeting. A meeting requested by shareholders shall be called by the
President for a date not less than 10 nor more than 60 days after the request is
made. Only business within the purposes described in the meeting notice may be
conducted at a special shareholders' meeting.
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Section 3. Place. Meetings of the shareholders will be held at the principal
place of business of the corporation or at such other place as is designated by
the Board of Directors.
Section 4. Notice. A written notice of each meeting of shareholders shall be
mailed to each shareholder having the right and entitled to vote at the meeting
at the address as it appears on the records of the Corporation. The meeting
notice shall be mailed not less than 10 nor more than 60 days before the date
set for the meeting. The record date for determining shareholders entitled to
vote at the meeting will be the close of business on the day before the notice
is sent. The notice shall state the time and place the meeting is to be held. A
notice of a special meeting shall also state the purposes of the meeting. A
notice of meeting shall be sufficient for that meeting and any adjournment of
it. If a shareholder transfers any shares after the notice is sent, it shall not
be necessary to notify the transferee. All shareholders may waive notice of a
meeting at any time.
Section 5. Shareholder Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. Any number of shareholders, even if less than a quorum, may
adjourn the meeting without further notice until a quorum is obtained.
Section 6. Shareholder Voting. if a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders. Each outstanding share
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. An alphabetical list of all shareholders who are entitled to
notice of a shareholders' meeting along with their addresses and the number of
shares held by each shall be produced at a shareholders' meeting upon the
request of any shareholder.
Section 7. Proxies. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy executed
in writing and signed by the shareholder or his attorney-in-fact. The
appointment of proxy will be effective when received by the Corporation's
officer or agent authorized to tabulate votes. No proxy shall be valid more than
11 months after the date of its execution unless a longer term is expressly
stated in the proxy.
Section 8. Validation. If shareholders who hold a majority of the voting stock
entitled to vote at a meeting are present at the meeting, And sign a written
consent to the meeting on the record, the acts of the meeting shall 'be valid,
even if the meeting was not legally called and noticed.
Section 9. Conduct-of Business By written Consent. Any action of the
shareholders may be taken without a meeting if written consents, setting forth
the action taken, are signed by at least a majority of shares entitled to vote
and are delivered to the officer or agent of the Corporation having custody of
the Corporation's records within 60 days after the date that the earliest
written consent was delivered. Within 10 days after obtaining an authorization
of an action by written consent, notice shall be given to those shareholders who
have not consented in writing or who are not entitled to vote on the action. The
notice shall fairly summarize the material features of the authorized action. if
the action creates dissenters' rights, the notice shall contain a clear
statement of the right of dissenting shareholders to be paid the fair value of
their shares upon compliance with and as provided for by the state law governing
corporations.
ARTICLE III. OFFICERS
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Section 1. Officers; Election; Resignation; Vacancies. The Corporation shall
have the officers and assistant officers that the Board of Directors appoint
from time to time. Except as otherwise provided in an employment agreement which
the Corporation has with an officer, each officer shall serve until a successor
is chosen by the directors at a regular or special meeting of the directors or
until removed. Officers and agents shall be chosen, serve for the terms, and
have the duties determined by the directors. A person may hold two or more
offices.
Any officer may resign at any time upon written notice to the Corporation. The
resignation shall be effective upon receipt, unless the notice specifies a later
date. if the resignation is effective at a later date and the Corporation
accepts the future effective date, the Board of Directors may fill the pending
vacancy before the effective date provided the successor officer does not take
office until the future effective date. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 2. Powers and Duties of officers. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as may be
prescribed by the Board of Directors and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control of the
Board of Directors.
Section 3. Removal of Officers. An officer or agent or member of a committee
elected or appointed by the Board of Directors may be removed by the Board with
or without cause whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of an
officer, agent or member of a committee shall not of itself create contract
rights. Any officer, if appointed by another officer, may be removed by that
officer.
Section 4. Salaries. The Board of Directors may cause the Corporation to enter
into employment agreements with any officer of the Corporation. Unless provided
for in an employment agreement between the Corporation and an officer, all
officers of the Corporation serve in their capacities without compensation.
Section 5. Bank Accounts. The Corporation shall have accounts with financial
institutions as determined by the Board of Directors.
ARTICLE IV. DISTRIBUTIONS
The Board of Directors may, from time to time, declare distributions to its
shareholders in cash, property, or its own shares, unless the distribution would
cause (i) the Corporation to be unable to pay its debts as they become due in
the usual course of business, or (ii) the Corporation's assets to be less than
its liabilities plus the amount necessary, if the Corporation were dissolved at
the time of the distribution, to satisfy the preferential rights of shareholders
whose rights are superior to those receiving the distribution. The shareholders
and the * Corporation may enter into an agreement requiring the distribution of
corporate profits, subject to the provisions of law.
ARTICLE V. CORPORATE RECORDS
Section 1. Corporate Records. The corporation shall maintain its records in
written form or in another form capable of conversion into written form within a
reasonable time. The Corporation shall keep as permanent records minutes of all
meetings of its shareholders
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and Board of Directors, a record of all actions taken by the shareholders or
Board of Directors without a meeting, and a record of all actions taken by a
committee of the Board of Director's on behalf of the Corporation. The
Corporation shall maintain accurate accounting records and a record of its
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
The Corporation shall keep a copy of its articles or restated articles of
incorporation and all amendments to them currently in affect; these Bylaws or
restated Bylaws and all amendments currently in effect; resolutions adopted by
the Board of Directors creating one or more classes or series of shares and
fixing their relative rights, preferences, and limitations, if shares issued
pursuant to those resolutions are outstanding; the minutes of all shareholders'
meetings and records of all actions taken by shareholders without a meeting for
the past three years; written communications to all shareholders generally or
all shareholders of a class of series within the past three years, including the
financial statement furnished for the last three years; a list of names and
business street addresses of its current directors and officers; and its most
recent annual report delivered to the Department of State.
Section 2. Shareholders, inspection Rights. A shareholder is entitled to inspect
and copy, during regular business hours at a reasonable location specified by
the Corporation, any books and records of the Corporation. The shareholder must
give the Corporation written notice of this demand at least five business days
before the date on which he wishes to inspect and copy the record(s). The demand
must be made in good faith and for a proper purpose. The shareholder must
describe with reasonable particularity the purpose and the records he desires to
inspect, and the records must be directly connected with this purpose. This
Section does not affect the right of a shareholder to inspect and copy the
shareholders' list described in this Article if the shareholder is in litigation
with the Corporation. In such a case, the shareholder shall have the same rights
as any other litigant to compel the production of corporate records for
examination.
The Corporation may deny any demand for inspection if the demand was made for an
improper purpose, or if the demanding shareholder has within the two years
preceding his demand, sold or offered for sale any list of shareholders of the
Corporation or of any other corporation, has aided or abetted any person in
procuring any list of shareholders for that purpose, or has improperly used any
information secured through any prior examination of the records of this
Corporation or any other corporation.
Section 3. Financial Statements for Shareholders. Unless modified by resolution
of the shareholders within 120 days after the close of each fiscal year, the
Corporation shall furnish its shareholders with annual financial statements
which may be consolidated or combined statements of the Corporation and one or
more of its subsidiaries, as appropriate, that include a balance sheet as of the
end of the fiscal year, an income statement for that year, and a statement of
cash flows for that year. if financial statements are prepared for the
Corporation on the basis of generally accepted accounting principles, the annual
financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public accountant, his
report must accompany them. If not, the statements must be accompanied by a
statement of the President or the person responsible for the Corporation's
accounting records stating his reasonable belief whether the statements were
prepared on the basis of generally accepted accounting principles and, if not,
describing the basis of preparation and describing any respects in which the
statements were not prepared on a basis of accounting consistent with the
statements prepared for the preceding year. The Corporation shall mail the
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annual financial statements to each shareholder within 120 days after the close
of each fiscal year or within such additional time thereafter as is reasonably
necessary to enable the Corporation to prepare its financial statements.
Thereafter, on written request from shareholder who was not mailed the
statements, the corporation shall mail him the latest annual financial
statements.
Section 4. Other Reports to Shareholders. If the Corporation indemnifies or
advances expenses to any director, officer, employee or agent otherwise than by
court order or action by the shareholders or by an insurance carrier pursuant to
insurance maintained by the Corporation, the Corporation shall report the
indemnification or advance in writing to the shareholders with or before the
notice of the next annual shareholders' indemnification or advance occurs after
the giving of the notice but prior to the time the annual meeting is held. This
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
If the Corporation issues or authorizes the issuance of shares for promises to
render services in the future, the Corporation shall report in writing to the
shareholders the number of shares authorized or issued, and the consideration
received by the corporation, with or before the notice of the next shareholders'
meeting.
ARTICLE VI. STOCK CERTIFICATES
Section 1. Issuance. The Board of Directors may authorize the issuance of some
or all of the shares of any or all of its classes or series without
certificates. Each certificate issued shall be signed by the President and the
Secretary (or the Treasurer). The rights and obligations of shareholders are
identical whether or not their shares are represented by certificates.
Section 2. Registered Shareholders. No certificate shall be issued for any share
until the share is fully paid. The Corporation shall be entitled to treat the
holder of record of shares as the holder in fact and, except as otherwise
provided by law, shall not be bound to recognize any equitable or other claim to
or interest in the shares.
Section 3. Transfer of Shares. Shares of the Corporation shall be transferred on
its books only after the surrender to the Corporation of the share certificates
duly endorsed by the holder of record or attorney- in- fact. If the surrendered
certificates are canceled, new certificates shall be issued to the person
entitled to them, and the transaction recorded on the books of the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. If a shareholder claims to
have lost or destroyed a certificate of shares issued by the Corporation, a new
certificate shall be issued upon the delivery to the Corporation of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity as the Board reasonably requires.
ARTICLE VII. INDEMNIFICATION
Section 1. Right to Indemnification. The Corporation hereby indemnifies each
person (including the heirs, executors, administrators, or estate of such
person) who is or was a director or officer of the Corporation to the fullest
extent permitted or authorized by current or future legislation or judicial or
administrative decision against all fines, liabilities, costs and expenses,
including attorneys, fees, arising out of his or her status as
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a director, officer, agent, employee or representative. The foregoing right of
indemnification shall not be exclusive of other rights to which those seeking an
indemnification may be entitled. The Corporation may maintain insurance, at its
expense, to protect itself and all officers and directors against fines,
liabilities, costs and expenses, whether or not the Corporation would have the
legal power to indemnify them directly against such liability.
Section 2. Advances. Costs, charges and expenses (including attorneys, fees)
incurred by a person referred to in Section 1 of this Article in defending a
civil or criminal proceeding shall be paid by the Corporation in advance of the
final disposition thereof upon receipt of an undertaking to repay all amounts
advanced if it is ultimately determined that the person is entitled to be
indemnified by the Corporation as authorized by this Article, and upon
satisfaction of other conditions required by current or future legislation.
Section 3. Savings Clause. If this Article or any portion of it is invalidated
on any ground by a court of competent jurisdiction, the Corporation nevertheless
indemnifies each person described in Section 1 of this Article to the fullest
extent permitted by all portions of this Article that have not been invalidated
and to the fullest extent permitted by law.
ARTICLE VIII. AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws adopted, by a
majority vote of the directors or by a vote of the shareholders holding a
majority of the shares.
I certify that these are the Bylaws adopted by the Board Of Directors of the
Corporation.
January 23, 1996 WFO Rosenmiller
Date WFO Rosenmiller
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EXHIBIT 10: OPTIONS AGREEMENTS
OPTION AGREEMENT WITH ELSA MONGE
This Agreement is entered into this 9th day of April 1998 between Central
American Equities, a Florida Corporation ("Company") and Elsa Monge (Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 10,000 shares
of Company's common stock at $1.00 per share ("Option Shares*). The option
granted by this Agreement shall vest 20% per year, so that Purchaser shall have
the right to purchase 2,000 shares per year for five years in accordance with
the terms of this agreement.
Exercise of Option'. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31 st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (2,000 per year), the option granted
by this Agreement shall I be deemed expired as to such remaining Option Shares
and purchaser shall have no further right to purchase said shares pursuant to
the terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m. on December 31 st of each Option Year. In the event
December 31 st in any Option Year falls on a Sunday or a legal holiday, said
notice must be actually received by Company no later than 5:00 p.m. on the last
regular business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
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Dated: April 9, 1998
Company
By Richard Talley
Richard Talley/Paul King
Authorized Representatives
Dated: April 9, 1998
Purchaser
Elsa Monge
Elsa Monge
OPTION AGREEMENT WITH SHERMAN JOHNSON
This Agreement is entered into this 9th day of April 1998 between Central
American Equities, a Florida Corporation ("Company") and Sherman Johnson
(Purchaser).
Option- Company hereby grants to Purchaser an option to purchase 15,000 shares
of Company's common stock at $1.00 per share ('Option Shares'). The option
granted by this Agreement shall vest 20% per year, so that Purchaser shall have
the right to purchase 3,000 shares per year for five years in accordance with
the terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31 st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (3,000 per year), the option granted
by this Agreement shall be deemed expired as to such remaining Option Shares and
purchaser shall have no further right to purchase said shares pursuant to the
terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
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<PAGE> 3
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31 st of each Option Year. In the event December
31 st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement . This Agreement constitutes the entire agreement of the
parties with respect to the matters contemplated herein. This Agreement
supersedes any and all prior understandings, promises, covenants, or agreements
as to the subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
DATED: April 9, 1998
Company
By Richard Talley
Richard Talley/Paul King
Authorized Representatives
DATED: April 9, 1998
Purchaser
By Sherman Johnson
Sherman Johnson
OPTION AGREEMENT WITH BRIAN FRAZEE
This Agreement is entered into this 9th day of April 1998 between Central
American Equities, a Florida Corporation ("Company") and Brian Frazee
(Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 10,000 shares
of Company's common stock at $1.00 per share ("Option Shares"). The option
granted by this Agreement shall vest 20% per year, so that Purchaser shall have
the right to purchase 2,000 shares per year for five years in accordance with
the terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 3 1 st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available
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<PAGE> 4
under the option, Purchaser shall be entitled subsequently to exercise the
option as to any remaining Option Shares so long as notice of the exercise of
said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (2,000 per year), the option granted
by this Agreement shall I be deemed expired as to such remaining Option Shares
and purchaser shall have no further right to purchase said shares pursuant to
the terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m. on December 31st of each Option Year. in the event December
31 st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/9/98
Company
By Richard Talley
Richard Talley/Paul King
Authorized Representatives
DATED: 4/9/98
Purchaser
Brian Frazee
Brian Frazee
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<PAGE> 1
EXHIBIT 10: MANAGEMENT AGREEMENT
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<PAGE> 2
TALLEY KING MANAGEMENT
AGREEMENT
This Agreement is entered into this 1st day of January, 1997, by and
between Talley King Management ("Talley King") and Central American Equities
Corp. ("CAE").
Talley King will provide CAE with the day to day management services of
CAE's three Hotels: The Ecolodge, Sunset Reef and Hotel Alta. In consideration
therefor, CAE will pay Talley King a monthly fee of $9,000.00 for its services.
This agreement shall be in effect from January 1, 1997 through December 31,
1997. This agreement is renewable annually by both parties unless terminated by
either party upon 30 days written notice.
Talley King Management
19200 Von Karman Avenue
Suite 850
Irvine, CA 92612
By: /s/ Paul D. King
------------------------------------
Paul D. King
Central American Equities Corp.
Carretera Vieja A
Santa Ana
Frente A Tierra Rica
El Alta de Las Palomas
San Jose, Costa Rica
By: /s/ Brian Frazee
------------------------------------
Brian Frazee, President
19200 Von Karman Avenue, Suite 850, Irvine, CA 92612
800-795-9390 949-757-0222 949-757-0444 Fax
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<PAGE> 1
EXHIBIT 10: AGREEMENT WITH GEORGE SOLANO
CENTRAL AMERICAN EQUITIES, INC.
A FLORIDA CORPORATION
Therefore, it is hereby
RESOLVED, to amend the contract as follows:
1. All business done by George Solano between April 1, 1998 and
November 8, 1999 will be accrued against his required net revenue target of
$350,000; and
2. All business between Solano Travel and Central American Equities
Corp. will be fully commissionable at prevailing industry rates.
There being no further business before the Board at this time, the
meeting was adjourned.
/s/ Richard Wm. Talley
------------------------------------------
Richard Wm. Talley, Chairman
/s/ Paul D. King
------------------------------------------
Paul D. King, Director
/s/ W.F.O. Rosenmiller
------------------------------------------
W.F.O. Rosenmiller, Director
19200 VON KARMAN AVENUE, SUITE 850, IRVING, CA 92612
800-795-9390 714-757-0222 714-757-0444 FAX
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<PAGE> 1
EXHIBIT 10: OTHER OPTION AGREEMENTS
MARIO OSCAR FENNELL ARAYA
This agreement is entered into this 29th day of April 1998 between Central
American Equities, A Florida Corporation ("Company") and Mario Oscar Fennell
Araya (Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 5,000 shares of
Company's common stock at $1.00 per share ("Option Shares"). The option granted
by this Agreement shall vest 20% per year, so that Purchaser shall have the
right to purchase 1,000 shares per year for five years in accordance with the
terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (1,000 per year), the option granted
by this Agreement shall be deemed expired as to such remaining Option Shares and
purchaser shall have no further right to purchase said shares pursuant to the
terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31st of each Option Year. In the event December
31st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
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<PAGE> 2
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/29/98
Company
By Paul King
Richard Talley/Paul King
Authorized Representatives
DATED: 4/29/98
Purchaser
Mario Oscar Fennell Araya
O RAMIREZ
This agreement is entered into this 29th day of April 1998 between Central
American Equities, A Florida Corporation ("Company") and O Ramirez (Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 5,000 shares of
Company's common stock at $1.00 per share ("Option Shares"). The option granted
by this Agreement shall vest 20% per year, so that Purchaser shall have the
right to purchase 1,000 shares per year for five years in accordance with the
terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (1,000 per year), the option granted
by this Agreement shall be deemed expired as to such remaining Option Shares and
purchaser shall have no further right to purchase said shares pursuant to the
terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
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<PAGE> 3
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31st of each Option Year. In the event December
31st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/29/98
Company
By Paul King
Richard Talley/Paul King
Authorized Representatives
DATED: 4/29/98
Purchaser
O Ramirez
S. RODRIGUEZ
This agreement is entered into this 29th day of April 1998 between Central
American Equities, A Florida Corporation ("Company") and S. Rodriguez
(Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 500 shares of
Company's common stock at $1.00 per share ("Option Shares"). The option granted
by this Agreement shall vest 20% per year, so that Purchaser shall have the
right to purchase 100 shares per year for five years in accordance with the
terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
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<PAGE> 4
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (500 per year), the option granted by
this Agreement shall be deemed expired as to such remaining Option Shares and
purchaser shall have no further right to purchase said shares pursuant to the
terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31st of each Option Year. In the event December
31st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/29/98
Company
By Paul King
Richard Talley/Paul King
Authorized Representatives
DATED: 4/29/98
Purchaser
S. Rodriguez
D. MUNOZ
This agreement is entered into this 29th day of April 1998 between Central
American Equities, A Florida Corporation ("Company") and D.Munoz (Purchaser).
-68-
<PAGE> 5
Option. Company hereby grants to Purchaser an option to purchase 500 shares of
Company's common stock at $1.00 per share ("Option Shares"). The option granted
by this Agreement shall vest 20% per year, so that Purchaser shall have the
right to purchase 100 shares per year for five years in accordance with the
terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (500 per year), the option granted by
this Agreement shall be deemed expired as to such remaining Option Shares and
purchaser shall have no further right to purchase said shares pursuant to the
terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31st of each Option Year. In the event December
31st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/29/98
Company
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<PAGE> 6
By Paul King
Richard Talley/Paul King
Authorized Representatives
DATED: 4/29/98
Purchaser
D. Munoz
C. ELIZONDO
This agreement is entered into this 29th day of April 1998 between Central
American Equities, A Florida Corporation ("Company") and C. Elizondo
(Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 500 shares of
Company's common stock at $1.00 per share ("Option Shares"). The option granted
by this Agreement shall vest 20% per year, so that Purchaser shall have the
right to purchase 100 shares per year for five years in accordance with the
terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (500 per year), the option granted by
this Agreement shall be deemed expired as to such remaining Option Shares and
purchaser shall have no further right to purchase said shares pursuant to the
terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31st of each Option Year. In the event December
31st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by
-70-
<PAGE> 7
Company no later than 5:00 p.m. on the last regular business day prior to
December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/29/98
Company
By Paul King
Richard Talley/Paul King
Authorized Representatives
DATED: 4/29/98
Purchaser
C. Elizondo
M. SALAZAR
This agreement is entered into this 29th day of April 1998 between Central
American Equities, A Florida Corporation ("Company") and M. Salazar (Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 500 shares of
Company's common stock at $1.00 per share ("Option Shares"). The option granted
by this Agreement shall vest 20% per year, so that Purchaser shall have the
right to purchase 100 shares per year for five years in accordance with the
terms of this agreement.
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (500 per year), the option granted by
this Agreement
-71-
<PAGE> 8
shall be deemed expired as to such remaining Option Shares and purchaser shall
have no further right to purchase said shares pursuant to the terms of this
Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31st of each Option Year. In the event December
31st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/29/98
Company
By Paul King
Richard Talley/Paul King
Authorized Representatives
DATED: 4/29/98
Purchaser
M. Salazar
J. CRUZ
This agreement is entered into this 29th day of April 1998 between Central
American Equities, A Florida Corporation ("Company") and J. Cruz (Purchaser).
Option. Company hereby grants to Purchaser an option to purchase 500 shares of
Company's common stock at $1.00 per share ("Option Shares"). The option granted
by this Agreement shall vest 20% per year, so that Purchaser shall have the
right to purchase 100 shares per year for five years in accordance with the
terms of this agreement.
-72-
<PAGE> 9
Exercise of Option. Purchaser shall have the right to purchase all or any part
of the Option Shares upon written notice of the exercise of the option on or
before December 31st of each year in which an option is granted, commencing in
1998. In the event Purchaser exercises the option to purchase less than the
total number of shares available under the option, Purchaser shall be entitled
subsequently to exercise the option as to any remaining Option Shares so long as
notice of the exercise of said option conforms to the terms of this agreement.
Delivery of Option Shares. Within five days after receiving written notice of
the exercise of the option set forth herein, Company shall deliver stock
certificates representing the Option Shares and any and all other documents
which are required to transfer the Option Shares, duly endorsed for transfer, to
the purchaser thereof and shall receive the consideration therefor.
Failure to Exercise Option. In the event Purchaser does not elect to purchase
all of the Option Shares in any given year (500 per year), the option granted by
this Agreement shall be deemed expired as to such remaining Option Shares and
purchaser shall have no further right to purchase said shares pursuant to the
terms of this Agreement.
Notice of Exercise of Option. If Purchaser elects to purchase Option Shares
pursuant to this Agreement, Purchaser shall give written notice of such
election, setting forth the number of Option Shares to be purchased, to:
Richard Talley/Paul King
Central American Equities
c/o Talley King & Company
19200 Von Karman, Suite 850
Irvine, Ca. 92715
To be effective, said written notice must be actually received by Company no
later than 5:00 p.m on December 31st of each Option Year. In the event December
31st in any Option Year falls on a Sunday or a legal holiday, said notice must
be actually received by Company no later than 5:00 p.m. on the last regular
business day prior to December 31 of each Option Year.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the matters contemplated herein. This Agreement supersedes any
and all prior understandings, promises, covenants, or agreements as to the
subject matter of this Agreement.
Amendments/Modifications. Any provision in this Agreement may be amended and/or
modified only in writing signed by the party to be charged.
Dated: 4/29/98
Company
By Paul King
Richard Talley/Paul King
Authorized Representatives
DATED: 4/29/98
-73-
<PAGE> 10
Purchaser
J. Cruz
-74-
<PAGE> 1
EXHIBIT 21: SUBSIDIARIES OF REGISTRANT
The Company owns 100% of the stock of the following Costa Rican Corporations:
1) Hotelera Caltico, S.A.;
2) Ecoproyecto San Luis, S.A (which owns 100% of Confluencia San Luis, S.A.);
and
3) Sociedad Protectora de la Fauna y Flora de Mal Pais, S.A. (which owns 100% of
Corporacion Muxia, S.A.).
-75-
<PAGE> 1
EXHIBIT 21: LETTER CONCERNING OWNERSHIP OF COSTA RICAN SUBSIDIARIES
Victor Hugo Mora Casasola
Lawyer & Notary
Tel (506) 296-5425. Fax (506) 290-2017.
San Jose, September 18th, 1999.
Mr.
Jeffrey Pinkham
Pinkham & Pinkham, P.C
Pte.
Dear Mr. Pinkham,
In relationship and have in my hands the legal books of the companies and
internal stationery of the companies to be mention, I certify three groups of
societies with hotels and tourist activities as follows.
1) CORPORACION MUXIA, S.A., a Costa Rican corporation inscribed in the
Public Registration, Commercial Section, to the volume nine hundred, page
seventy one, seat ninety five, with identification number three-hundred
one-hundred sixty one thousand three hundred eighty two; this company is the
owner of the Tourist Center know as "Playa Carmen", located in "Mal Pais de
Cobano, Puntarenas". The owner of CORPORACION MUXIA, S.A., is the corporation
"SOCIEDAD PROTECTORA DE LA FAUNA Y FLORA MARITIMA DE MAL PAIS, S.A.". This is a
Costa Rican corporation, inscribed in the Public Registration, Commercial
Section, to the volume four hundred twenty-three, folio two hundred fifty, seat
two hundred ten, with identification number three-hundred one-seventy three
thousand six hundred fifty one. This company is the owner of the hotel "SUN SET
REEF", in "Mal Pais de Cobano de Puntarenas". The owner of "SOCIEDAD PROTECTORA
DE LA FAUNA Y FLORA DE MAL PAIS, S.A.", is the company CENTRAL AMERICAN
EQUITIES CORPORACION.
2) "HOTELERA CALITICO, S.A.", a Costa Rican corporation inscribed in
the Public Registration, Commercial Section, to the volume seven hundred ten,
page hundred twenty-six, seat two hundred nineteen, with identification number
three-hundred one-hundred-twenty-three thousand four hundred nine, is the owner
of the land where "ALTA HOTEL" is located, and the restaurant "LA LUZ", in San
Jose, Costa Rica. The owner of "HOLETERA CALTICO, S.A.", is the Company
CENTRAL AMERICAN EQUITIES CORPORACION
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<PAGE> 2
Victor Hugo Mora Casasola
Lawyer & Notary
Tel (506) 296-5425. Fax (506) 290-2017
3) "CONFLUENCIA SAN LUIS, S.A.", a Costa Rican corporation, manage a
Hotel in Monteverde, Puntarenas, the owner of this corporation and the property
where the Hotel is sited, is "ECOPROYECTO SAN LUIS, S.A.". The owner of this
corporation is CENTRAL AMERICAN EQUITIES CORPORACION.
Hoping that the information giving fulfill yours needs.
Best regards.
/s/ Victor Hugo Mora Casasola
---------------------------------------------
Lic. Victor Hugo Mora Casasola.
