SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB / A-2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
Golden Opportunity Development Corporation
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(Name of Small Business Issuer in Its Charter)
Louisiana 87-0067813
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
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(Address of Principal Executive Offices) (Zip Code)
801-575-8073
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the Exchange Act:
Title of Each Class to be so registered: Common Stock ($0.001 Par Value)
Name of Each Exchange on Which Each Class is to be Registered: N/A
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TABLE OF CONTENTS
Page No.
PART I
Item 1. Description of Business..........................................1
Item 2. Management's Discussion and Analysis
or Plan of Operation.............................................8
Item 3. Description of Property.........................................13
Item 4. Security Ownership of Certain Beneficial
Owners and Management...........................................14
Item 5. Directors, Executive Officers, Promoters
and Control Persons.............................................15
Item 6. Executive Compensation..........................................17
Item 7. Certain Relationships and Related Transactions..................18
Item 8. Description of Securities.......................................18
PART II
Item 1. Market for Common Equity and Related Stockholder Matters........19
Item 2. Legal Proceedings...............................................19
Item 3. Changes in and Disagreements with Accountants...................20
Item 4. Recent Sales of Unregistered Securities.........................20
Item 5. Indemnification of Directors and Officers.......................22
PART F/S
Consolidated Audited Financial Statements for December 31, 1998 and 1997
Unaudited Financial Statements for September 30, 1999 and 1998.........F-1- F-13
PART III
Item 1. Index to Exhibits...............................................24
Signatures ...................................................................25
Item 2. Description of Exhibits.........................................26
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PART I
Forward-Looking Statements. This Registration Statement includes
"forward-looking statements." Forward looking statements contained in this
registration statement are based on management's beliefs and assumptions and on
information currently available to management. Forward-looking statements
include statements in which words such as "expect, " "anticipate," "intend,"
"plan," "believe," "estimate," "consider," or similar expressions are used.
You should not construe any forward-looking statement as a guarantee of future
performance. These statements inherently involve risks, uncertainties and
assumptions. The future results and stockholder values may differ from those
expressed in these forward-looking statements, and those variations may be
material and adverse. Many factors that will affect these results and values are
beyond our ability to control or predict.
ITEM 1. DESCRIPTION OF BUSINESS
A. General
As used herein the term "Company" refers to Golden Opportunity Development
Corporation, its subsidiaries and predecessors, unless the context indicates
otherwise. The Company was incorporated in Louisiana on May 7, 1997 for the
purpose of engaging in any lawful activity for which corporations may be formed
under the Business Corporation Law of Louisiana.
The Company is currently engaged in the business of operating and acquiring
hospitality property. The Company currently owns a 134 unit motel, a restaurant
facility and four adjacent office retail buildings in Baton Rouge, Louisiana
(the "Motel"). The Motel is located next to the Mississippi River, three blocks
from a river boat dock, at 427 Lafayette Street, Baton Rouge, Louisiana. The
Company is also actively seeking to acquire other hospitality properties.
The Company's operations are largely being overseen by Diversified Holdings I,
Inc., a majority shareholder, (the "Parent Company") by way of a Management
Agreement entered into on April 30th, 1999 between the Company and the Parent
Company. The Company agreed to compensate Diversified Holdings I, Inc. $10,000
per month plus 5% of net income, if any, in excess of $5,000 in return for
management services provided by Diversified Holdings I, Inc.
CyberAmerica Corporation, the majority shareholder and parent corporation of
Diversified Holdings I, Inc., acquired an indirect controlling interest in the
Company through Innovative Property Development Corporation ("IPDC"), a
consolidated subsidiary, that acquired a controlling interest in the Company
pursuant to a Stock Acquisition Agreement dated April 30, 1998. Under the terms
of the Stock Purchase Agreement, IPDC acquired a 51% interest in the Company in
exchange for a $50,000 cash infusion to cover operating deficiencies related to
the Motel and transferred 118,520 shares of restricted stock of Oasis Resorts
International, Inc. (f.k.a. Flexweight Corporation) which was paid to the Smith
Family Trust and San Pedro Securities, Ltd. Then, on April 2, 1999, pursuant to
an Acquisition Agreement, IPDC sold all of its assets to Diversified Holdings 1,
Inc., a 90% owned subsidiary of CyberAmerica Corporation. The sale of IPDC's
assets to Diversified Holding I, Inc. included its entire controlling interest
in the Company. Consequently, Diversified Holdings I, Inc. became the
controlling shareholder of the Company. As a result of this transaction,
CyberAmerica Corporation retained its indirect control interest in the Company
while relinquishing its control interest in IPDC.
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Other substantial beneficial shareholders of the Company include the Smith
Family Trust whose principal and control person is Brad Smith and San Pedro
Securities, Ltd., whose principal and control person is Laura Olsen. Both the
Smith Family Trust and San Pedro Securities, Ltd.,were initial shareholders of
the Company and they each have an 8.9% beneficial ownership interest in the
Company. Neither the Smith Family Trust or San Pedro Securities, Ltd., presently
participate in the management of the Company or the Motel nor did they have any
material relationship to the Motel prior to its acquisition by the Company.
B. The Motel
The Motel was acquired on May 31, 1997 by San Pedro Ltd. and the Smith Family
Trust for the purpose of subsequently transferring the property to the Company
for a 100% interest in the Company. The Company acquired the Motel for a One
Million Nine Hundred Thousand Dollar ($1,900,000) note. Principal and interest
on the mortgage are payable in 359 monthly installments of Eleven Thousand Three
Hundred Ninety-One Dollars and Forty-Six Cents ($11,391.46) until July 1, 2027,
when the remaining principal and interest is due in full. These payments are
made to the General Lafayette Inc. c/o James A. Thom III, M.D. and his wife,
Evelyn M Thom 130 Main Street, Baton Rouge, Louisiana, 70081. Additional
consideration paid by the Company for the acquisition of the Motel included
75,000 shares of SynFuel Technology stock. No other liens or encumbrances on the
Motel exist other than the note. The Motel is located in the Parish of East
Baton Rouge, State of Louisiana. The assessed value of the property and the
Motel when it was acquired by the Company in May of 1997 was $200,000. The
current assessed value of the property and Motel remains approximately $200,000.
The Motel currently has an occupancy rate of 58% of its rentable rooms. However,
the Company expects this rate to increase once the renovations are complete and
the Motel becomes a Villager Lodge. The Motel generates average monthly rental
revenues of Twenty-Nine Thousand Eight Hundred Sixty-Three Dollars ($29,863) and
Three Thousand Two Hundred Sixty Dollars ($3,260) are generated from leases on
other property. .The Motel's current occupancy rate, based upon the number of
available rooms, is as mentioned above, 58%. The current number of available
rooms is 74. The Motel's low occupancy rate is due in part to the fact that the
Motel is in need of substantial repairs including repairs to sixty (60) rooms
that are not rentable. If these sixty (60) unrentable rooms are added into the
calculation of the Motel's occupancy rate, the Motel would have an occupancy
rate of only 32%. The Company is in the process of renovating approximately one
room a month until it obtains sufficient financing to renovate the entire Motel.
At the time the Company acquired the Motel, approximately 40 rooms were rentable
out of a total of 134 rooms. The neighborhood in which the Motel is located was
considered economically depressed prior to the Company's acquisition of the
Motel. However, the neighborhood over the last couple of years has been in the
process of being revitalized. The Company suspects that the Motel's poor
condition was the result of the Motel's prior inability to generate sufficient
revenues to make the necessary upgrades, repair and improvements to properly
maintain the property. The Motel's inability to generate sufficient revenues
historically was most likely the result of the formerly depressed local economy.
The Company has been unable to find adequate financing to fully renovate the
Motel to date.
The Company's current plans are to renovate the Motel in compliance with the
requirements of the Villager Franchise Systems, Inc. uniform franchise offering
circular. The Company has retained the services of an architectural firm in its
effort to begin renovations and thereby, comply with requirements of becoming a
Villager Lodge Extended Stay Living Franchise. In July, 1999, the Company signed
a Franchise Agreement with Villager Lodge. The Company is in the process of
obtaining the necessary financing to begin operations as a Villager Lodge. The
Company expects that the source of such financing will be bank or institutional
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financing, equity offerings and/or private placements. As mentioned above, the
Company is currently financing renovations on a room by room basis with
operating cash flows. The Company expects that initial costs to renovate the
Motel in compliance with the Villager Lodge franchise agreement will be
approximately $2,000 per room during the first year of operation as a Villager
Lodge. The Company expects that after the first year of operations as a Villager
Lodge, additional renovations will need to be made at a cost of approximately
$2,000 to $3,000 per room.
Villager Lodge is a national chain with over ninety (90) locations throughout
the country. Villager Lodge has a toll free 800 number for national reservations
and directory assistance for Villager Lodge locations nation wide. Additionally,
Villager Lodge maintains a national advertising campaign and an Internet website
upon which potential guests can view the Villager Lodge national directory and
make reservations at any Villager Lodge nation wide. Villager lodge has an
Internet web site located at http://www.villager.com. .
The estimated minimal initial costs to begin operations as a Villager Lodge is
$250,000. The Company believes that it will need an additional $250,000 to fully
complete the renovation requirements for the Village Lodge. The completion of
renovations and the successful retention of the Villager Lodge franchise is
expected to significantly increase the Motel's rental revenues. However, there
is no guarantee that the Company will obtain the necessary financing to make the
renovations required under the Licensing Agreement with Villager Lodge. In the
event the Company does not obtain the necessary financing, the Company may not
be able to operate as a Villager Lodge franchisee. In the event the Company is
unable to comply with the requirement of the Villager Lodge Franchise Agreement
because of a lack of financing, the Company will continue to operate its Motel
as the General Lafayette Inn. Villager Lodge has agreed to release the Company
from any liability under the Franchise Agreement, if the Company is unable to
obtain sufficient financing.
The material terms of the Franchise Agreement entered into by the Company and
Villager Lodge are as follows:
o The Company gets the exclusive right to operate as a Villager Lodge
within a 7 mile radius.
o The Company must renovate and operate in accord with Villager Lodge
system standards which include but are not limited to the approved
plans for the pre-opening renovation and all items included on the
Punch list that is part of the franchise agreement. Such renovations
include but are not limited to: re-surfacing and re-srtriping the
parking lot, renovating the pool area or taking it out and filling it
in with landscaping, renovating the Motel's lobby and guest rooms,
providing vending and ice machines throughout the Motel, obtaining the
proper Villager Lodge signage, and implementing the Villager Lodge
Project Power Up Property Management System.
o The Company gets to participate in Villager Lodge's marketing program
(ie. directory and toll free national reservation system).
Additionally, the Company must use Villager Lodge advertising
campaigns.
o Villager Lodge will provide both on and off site management training
for the Company.
o The Company paid a non-refundable initial fee in the amount of $10,200
($5,100 upon execution of the franchise agreement and an additional
$5,100 Initial fee for these Villager Lodge franchise rights).
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o Another material fee that the Company shall pay for operating as a
Villager Lodge is a royalty fee equal to 5% of the monthly gross room
rental revenues. Additionally, neither party has renewal or option
rights.
o By June 1, 2000, the Company must upgrade the swimming pool, repair
its decking, replace pool furniture, replace pool fencing, or remove
the pool in its entirety.
o The Company must resurface the parking lot and must upgrade the
property landscaping. Furthermore, to comply with the Villager Lodge
franchise agreement, the Company must, in its efforts to renovate the
Motel, upgrade the guestrooms and bathrooms, replace carpeting,
bedding and furnishings.
To date all franchise fees have been paid in accord with the franchise
agreement. Also the deadlines for the Company's performance as described in
Section 3 of the franchise agreement, which outline's the Company's improvement
obligations, have been extended to March 1, 2000. The Company is currently in
the process of negotiating a six month extension of its improvement obligations
under the franchise agreement.
Currently, the Company operates the Motel as an economy lodging facility. The
Motel's current room rates are generally under $46 a night. If the Company
successfully operates as a Villager Lodge franchise it will operate as an
extended stay lodging facility which will generate an estimated average room
rental of $52 per night with an estimated average occupancy rate of at least
70%(1). Accordingly, if the Company obtains the franchise, the Company believes
that the rental revenues will improve significantly.
During 1998, the Company expended approximately Two Hundred Thirty Thousand Two
Hundred and Eleven Dollars ($230,211) in improvements and other expenses
relating to the operation of the Motel. The Company's prospects for increasing
value and realizing a profit on the Motel are primarily contingent upon the
Company's ability to obtain adequate financing to renovate the Motel. Upon
completion of the renovations to the Motel, management believes that the Motel
has the potential to operate at a profit. However, there is no guarantee that
adequate financing will be secured or that the Motel will obtain profitability.
The Company has in the past, only had one other attempt to affiliate itself with
a national motel chain. Previously, the Company made an attempt to affiliate
itself with Days Inn, but was unsuccessful in its effort due to the Company's
inability to procure adequate financing for the renovations required by Days
Inn. The Company is now attempting to affiliate itself with Villager Lodge.
These are the only franchises the Motel has attempted to affiliate itself with
that current management is aware of.
C. Leasable Commercial Space on the Company's Property
The property upon which the Motel sits also contains approximately 15,000 square
feet of leaseable commercial space of which approximately 33% is currently
occupied by tenants. The Company currently leases approximately 5,067 square
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(1) The Villager Lodge promotional package that the Company received prior
to its decision to enter into the franchise agreement with Villager Lodge states
that Villager Lodge guarantees that its franchisees will have an occupancy rate
of at least 70% of their rentable rooms by their second year of operation as a
Villager Lodge or they will not have to pay a royalty fee to Villager Lodge
during their third year of operation as such. Accordingly, the Company believes
that Villager Lodge will be able to fill the Motel to these levels. However,
there is no guarantee that the 70% occupancy rate will be reached if the Company
obtains the franchise.
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feet of this commercial space to the Culinary Arts Institute of Louisiana, Inc.
for $3,260 per month on a month to month basis, which may be canceled by either
party with 30 days notice. The Culinary Art Institute of Louisiana, Inc. teaches
students the fine art of cooking and operates a restaurant on its premises in
which its students practice the skills they learn. This facility is only open in
the evenings. The annual rental rate of the commercial space leased to the
Culinary Arts Institute of Louisiana is approximately $8.00 per square foot and
the Motel's average room rental rate is $46.00 per night. The Company
anticipates signing leases to fill the vacant commercial space with a stain
glass maker, a construction company, and a bench maker sometime in the not too
distant future.
D. Acquisition of Other Properties
The Company also intends to acquire additional hospitality properties that
either have the potential for significant capital appreciation with minimal
renovations or may be able to generate positive cash flows by reorganizing and
improving management. The Company has no specific criteria as to the kinds of
hospitality properties it may seek to acquire. Furthermore, the Company has not
limited the geographical location in which it may acquire properties. However,
given the Company's current financial condition, the Company will most likely
only be able to acquire properties that can be acquired for minimal cash down
payments and/or shares of the Company's common stock. Although the Company is
actively seeking to acquire additional hospitality properties, the Company has
not entered into any agreement nor does it have any commitment or understanding
to acquire any additional properties as of the date of this filing. The Company
through its officers and consultants will continue to locate, review and
evaluate various hospitality properties for acquisition or other business
opportunities as they become available.
There is no guarantee that the Company will be successful in its attempts to
acquire additional properties or if such properties are acquired that they will
operate at a profit. To a large extent, the decision to acquire a specific
property or participate in a specific business opportunity may be made upon
management's analysis regarding the quality of the property or business
opportunity. Some of the factors which management may consider include: the
location of the property, local economic factors and demographics, size, age and
physical appearance of the property and numerous other factors which are
difficult, if not impossible, to analyze through the application of any
objective criteria.
E. Competition
The Company currently has no direct competition in the downtown Baton rouge area
because no other economy lodging facilities exist within a one-half mile radius
of the Motel. However, outside of the one-half mile radius there exist several
national branded or franchised lodging chains with significantly newer
facilities and more capital resources which are in indirect competition with the
Motel.
In addition to these nationally branded or franchised lodging facilities that
exist outside of the one-half mile radius of the Motel, the Company is aware
that two lodging facilities are presently being built within approximately a
half-mile radius of the Motel. One of these facilities will be a 300 room Crown
Plaza Hotel which will service the Riverboat Casino and is expected to be open
for business sometime in the Spring of 2000. The other will be a 150 room
lodging facility built by Louisiana State University. The construction of these
facilities could adversely effect the Company's ability to generate revenues
however, the Company believes that it will be able to maintain a competitive
niche in the downtown Baton Rouge area as an economy or extended stay lodging
facility in comparison to these other lodging facilities presently being built
whose market is anticipated to appeal to market segments other than the Motel's.
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Moreover, Motel's ability to remain competitive in the downtown Baton Rouge area
may be affected by a number of factors, including the location and quality of
its property, the number and quality of competing properties nearby, its
affiliation with a recognized name brand, and general regional and local
economic conditions.
If the Company acquires additional hospitality properties they will be subject
to intense competition with other hospitality properties many of which will have
a competitive edge over the Company by virtue of their stronger financial
resources and prior business experience. There is no assurance that the Company
will be successful in obtaining suitable properties.
The profitability of the Motel and future hospitality properties are subject to
general economic conditions, competition, the desirability of the location, the
relationship between supply and demand for motel rooms and other factors. The
Company operates the Motel and may operate future hospitality properties in
markets that contain numerous competitors and the continued success of the
Company will be a result, in large part, of the ability of these competitors to
compete with it in such areas as reasonableness of room rates, quality of
accommodations, service level and convenience of location. There can be no
assurance that demographic, geographic or other changes in the market will not
adversely affect the convenience or desirability of the Company's operations.
Furthermore, there can be no assurance that in the market in which the Company
owns and operates the Motel or future properties that competing motels, hotels,
and inns will not provide greater competition for guests than currently exists,
or that new motels, hotels or inns will not enter such market.
F. Seasonality
The lodging industry is seasonal in nature. Lodging facilities experience
seasonal trends that effect their rate of occupancy depending on the type of
lodging facility and its location. For example, resorts located in warm climates
may experience higher occupancy rates at Christmas time. With respect to the
Company's Motel, it experiences greater revenues due to higher occupancy rates
at several different times throughout the year. In particular, the Motel expects
that it will experience increased occupancy rates during the fall and winter.
The Company bases this belief on the fact that the Louisiana State University
football season attracts many visitors during the fall and the influx of
northerners who visit the south during the winter months to escape the cold.
These seasonal conditions can be expected to cause quarterly fluctuations in the
Company's revenues, profit margins and net earnings. Although the Company's
limited empirical data regarding occupancy rates does not presently reflect an
increase in such rates during these seasonal periods, the Company expects that
future occupancy rates will reflect theses seasonal trends in the future
G. Supply and Demand
In some years construction of lodging facilities in the United States resulted
in an excess supply of available rooms, and the oversupply had an adverse effect
on occupancy levels and room rates in the industry. Although the relationship
between supply and demand has been favorable in recent years, the lodging
industry may be adversely affected in the future by (i) an oversupply of
available rooms, (ii) national and regional economic conditions, (iii) changes
in travel patterns, (iv) taxes and government regulations which influence or
determine wages, prices, interest rates, construction procedures and costs, and
(v) the availability of credit.
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The local occupancy rate for lodging facilities in the area where the Company's
Motel is located is approximately 64%(2). The Company may, in the future, expand
in other places throughout the United States where there may be an oversupply of
lodging facilities. However, as for the area where the Motel is located, there
is currently not an oversupply of lodging facilities. The Company is aware that
two lodging facilities are being constructed in the immediate vicinity. However,
these new facilities may attract greater tourism and exposure for the Motel's
lower end market segment or may result in an oversupply of rooms. The Company is
uncertain as to the effect that these new facilities may have on the Motel's
future occupancy rate, but management believes that the Motel will be able to
remain competitive with these newly constructed facilities due to its niche as
an economy lodging facility.
H. Regulation
The lodging industry is subject to numerous federal, state and local government
regulations, including those relating to the preparation and sale of food and
beverages (such as health and liquor license laws). Additionally the Company's
business is subject to extensive federal, state and local regulatory
requirements, including building and zoning requirements, all of which can
prevent, delay, make uneconomic or significantly increase the cost of renovating
a lodging facility. Furthermore, the Company is subject to laws governing its
relationship with employees, including minimum wage requirements, over time pay,
working conditions, work permit requirements and discrimination claims. An
increase in the minimum wage rate, employee benefit costs or other costs
associated with employees could aversely affect the Company. Under the Americans
with Disabilities Act of 1990 ("ADA"), all public accommodations are required to
meet certain federal requirements related to access and use by disabled persons.
While the Company believes that the Motel is in substantial compliance with
these regulations and requirements, a determination that the Company is not in
compliance with the ADA could result in the imposition of fines or the award of
damages to private litigants. These and other initiatives could adversely affect
the Company as well as the lodging industry in general.
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. Certain environmental laws and common law
principals could be used to impose liability for release of asbestos- containing
materials ("ACM's") into the air, and third parties may seek recovery from
owners or operators of real property for personal injury associated with
exposure to released ACM's. Environmental laws also may impose restrictions on
the manner in which the property may be used or businesses may be operated, and
these restrictions may require substantial expenditures. In connection with the
ownership or operation of the Motel, the Company may be potentially liable for
any such costs. No assurance can be given that a material environmental claim
will not be asserted against the Company. The cost of defending against claims
of liability or remediating a contaminated property could have a material
adverse effect on the results of operations of the Company.
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(2) The Company's source for the 64% local occupancy rate is Smith Travel
Research which generated a report for the Company on local occupancy rates. This
figure represents the local occupancy rate for value Motels in the Baton Rouge,
Louisiana area during 1999. Based on the same report, the local occupancy rate
for this area in 1998 was 66.6%.
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I. Employees
The Company's future success will depend, in part, on its continuing ability to
attract, retain and motivate and skilled personnel who are in great demand. The
Company currently has 11 full time employees and no part time employees.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Nine Months ended September 30, 1999 and September 30, 1998 & Years ended
December 31, 1998 and December 31, 1997
Revenues
Revenues for the nine months ended September 30, 1999 increased to $273,442 from
$223,468 for the comparable period in 1998, an increase of 22%. The increase in
revenues is primarily attributable to an increase in occupancies.
Revenues for the year ended December 31, 1998 increased to $330,527 from
$211,018 for the year ended December 31, 1997, an increase of 25%. The increase
in revenues was primarily attributable to an increase in the number of days the
Motel operated because the Company did not operate the Motel from January 1,
1997 to May 31, 1997.
Losses
Net losses for the nine months ended September 30, 1999, was $149,639 down from
a net loss of $175,451 for the comparable period in 1998, a change of $25,812.
The decrease in loss was primarily attributable to increased occupancies.
Net losses for the year ended December 31, 1998 increased to $281,157 from
$14,105 for the year ended December 31, 1997, an increase of $267,052. The
substantial increase in losses was attributable primarily to the Motel being
operated for only 7 months during 1997 and no management fees paid in 19987
compared to approximately $80,000 in management fees paid to the Company's
parent in 1998.
The Company expects to continue to incur losses at least through fiscal 1999 and
there can be no assurance that the Company will achieve or maintain
profitability or that its revenue growth can be sustained in the future.
Expenses
Selling, general and administrative expenses for September 30, 1999 and 1998
were $100,762 and $86,073, respectively. The increase of $14,689 for the period
ended September 30, 1999 is attributable to an increase in management fees.
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Selling, general and administrative expenses for September 30, 1999 and 1998
were $100,762 and $86,073, respectively. The increase of $14,689 for the period
ended September 30, 1999 is attributable to management fees paid to the
Company's parent totaling $90,000. The Company paid no management fees in 1998
until May.
Selling, general and administrative expenses for December 31, 1998 and 1997 were
$140,515 and $43,557, respectively. The reason for this $96,938 increase is
primarily attributable to a management agreement entered into with Innovative
Property Development Corporation which was entered into in May of 1998. Prior to
this agreement the Company had no management agreement and no management fees
were paid. However, in 1999, the Company was obligated to pay management fees
for every month in 1999 at a rate of $10,000 per month. The Company's future
payment of management fees will increase if the Company generates net income.
Pursuant to the management contract, the Company is obligated to pay $10,000 per
month and 5 % of the effective monthly net income, if any, in excess of $5,000,
payable monthly and for a period of one year from the date of the execution of
the Management Agreement (April 30, 1999).
Depreciation and amortization expenses for the nine months ended September 30,
1999 and September 30, 1998 were $41,694 and $37,097, respectively. The increase
was due to the improvements made to the property.
Depreciation and amortization expenses for the years ended December 31, 1998 and
December 31, 1999 were $49,463 and $23,077, respectively. The increase was due
to improvements and purchase of property and equipment.
The Company expects increases in expenses through 1999 as the Company steps up
its effort to acquire additional properties and works towards finalizing its
efforts to begin operating as a Villager Lodge franchisee.
For the years ended December 31, 1998 and 1997 the hotel's direct operating
costs (which include costs such as: utilities, telephone bills, employee
salaries, management fees, maintenance and repairs) were $298,593 and $101,632
respectively, an increase of $196,961. This increase is due to the fact that the
Company only operated the Motel for nine months in 1997 as opposed to a full
year in 1998. As for the nine months ended September 30, 1999 and 1998 the
hotel's direct operating costs were $207,264 and $191,582 respectively, an
increase of $15,682. This increase is primarily attributable to increased
occupancy rates.
Liquidity and Capital Resources
The Company has expended significant resources on renovating the Motel and
maintenance because of the age and poor condition of the facility. The Company
anticipates spending substantial amounts of capital in an effort to comply with
the requirement of becoming a Villager Lodge franchisee. For example:
o The Company paid an initial fee in the amount of $10,200 that consists
of a $5,100 payment upon execution of the franchise agreement and a
$5,100 payment as an initial fee.
o With respect to future royalties, the Company will pay a royalty fee
equal to 5% of the gross room revenues of the facility per month.
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o Additionally, the Company must construct, equip, and operate upon
completion of the material terms of the franchise agreement an
addition having at least 32 guest rooms to the then existing facility.
The Company will not be required to pay an additional room fee for the
addition.
o The Company does not plan on installing kitchen facilities in the
rooms. However, the Company will install kitchenette units in each
guestroom consisting of a small refrigerator, a microwave, and a small
work top area. The installation of the kitchenette units may cost up
to $750 per room. The effect that the addition of kitchenette
facilities to the guest rooms may have upon the restaurant is
immaterial because the Company does not operate the restaurant. The
Culinary Arts Institute of Louisiana, Inc. operates the restaurant and
the Company does not receive a percentage of rent based upon the
restaurant's sales.
o With respect to additional utilities, the Company must, under the
terms of the franchise agreement with Villager Lodge, supply cable
television (including ESPN, CNN and one more premium movie channel) in
each guest room within 90 days of entering the Villager Lodge system.
The Company is also required, in its front office, to maintain two
dedicated phone lines and a third phone line for Internet access.
Additionally, the Company must install electrical outlets that have no
more than four power receptacles that are of the 115 volt, 60 H, 3
prong type before installing the Villager Lodge Property Management
System.
Cash flow used in operations were $277,185 for the nine months ended September
30, 1999 as compared to cash flows generated by operations of $67,202 for the
comparable period in 1998. Negative cash flows from operating activities for the
nine months ended September 30, 1998, are primarily attributable to management
fees paid by the Company's parent company.
Cash flow generated by operations were $96,438 for the year ended December 31,
1998, and $8,486 for the year ended December 31, 1997. Cash flows from operating
activities for the year ended December 31, 1998 are primarily attributable to
advances by the Parent Company classified as short-term debt.
Cash flow used in financing activities was $282,134 for the nine months ended
September 30, 1999 and $17,985 used for the comparable period in 1998. The
Company's financing activities primarily consisted of private placements of its
common stock.
Cash flow used in financing activities was $19,038 for the year ended December
31, 1998 and $7,492 for the year ended December 31, 1997. The Company had
negative cash flow for these periods primarily because of payments made on
long-term debt.
The Company has funded its cash needs from inception through September 30, 1999
with revenues generated from its operations and advances from its Parent
Company. In addition, the Company may issue additional shares of its common
stock pursuant to a private placement or registered offering, if necessary to
raise additional capital.
10
<PAGE>
Capital Expenditures
The Company made $8,100 and $48,819 in capital expenditures on its property and
equipment for the nine months ended September 30, 1999 and 1998, respectively.
The Company made $71,926 and $0 in capital expenditures on property or equipment
for the years ended December 31, 1998 and 1997, respectively.
The Company has a working capital deficiency at September 30, 1999 in the amount
of $196,077. However, $132,608 of this working capital deficiency is owed to the
Company's parent. The Company intends to fund the Motel's operations over the
course of the next year with long term bank financing, increasing rental
revenues from increased occupancy rates and/or equity financing in the form of a
private placement offering. During the remainder of 1999 and 2000 the Company
expects to spend up to $500,000 in capital improvements on renovations to the
Motel. Anticipated capital expenditures will depend upon financing that is being
sought for renovations. It is anticipated that the cost to make the initial
renovations in each room of the Motel will be approximately $2,000 or $250,000
total. These initial renovations will include new paint, new carpeting, new door
locks and replacing certain fixtures. The Company anticipates spending an
additional $2,000 to $3,000 per room after the initial renovations are made on
new furnishings and updating the exterior of the building. The Company
anticipates the source of these expenditures to come from equity offerings, bank
financing, or loans from insiders and control persons of the Company. In the
event that the Company is unable to obtain the necessary amount of capital, the
Company may choose not to operate as a Villager Lodge and may operate as an
independent motel until financing is obtained.
Income Tax Expense (Benefit)
The Company has an income tax benefit resulting from net operating losses to
offset future operating profit.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor by increasing sales and improving
operating efficiencies.
Known Trends, Events, or Uncertainties
Lodging Industry Operating Risks. The Company is subject to all operating risks
common to the lodging industry. These risks include, among other things, (i)
competition for guests from other hotels, a number of which may have greater
marketing and financial resources than the Company, (ii) increases in operating
costs due to inflation and other factors, which increases may not have been
offset in recent years, and may not be offset in the future, by increased room
rates, (iii) dependance on business and commercial travelers and tourism, which
business may fluctuate and be seasonal, (iv) increase in energy costs and other
expenses of travel which may deter travelers, and (v) adverse effects of general
and local economic and weather conditions.
Capital Requirements and Availability of Financing. The Company's business is
capital intensive, and it will have significant capital requirements in the
future. The Company's leverage could affect its ability to obtain financing in
the future to undertake remodeling or refinancings on terms and subject to
conditions deemed acceptable to the Company. In the event that the Company's
cash flow and working capital are not sufficient to fund the Company's
11
<PAGE>
expenditures or to service its indebtedness, it would be required to raise
additional funds through the sale of additional equity securities, the
refinancing of all or part of its indebtedness or the sale of assets. There can
be no assurances that any of these sources of funds would be available in an
amount sufficient for the Company to meet its obligations. Moreover, even if the
Company were able to meet its obligations, its leveraged capital structure could
significantly limit its ability to finance its remodeling program and other
capital expenditures to compete effectively or to operate successfully under
adverse economic conditions. Additionally, financial and operating restrictions
contained in the Company's existing indebtedness may limit the Company's ability
to secure additional financing, and may prevent the Company from engaging in
transactions that might otherwise be beneficial to the Company and to holders of
the Company's common stock. The Company's ability to satisfy its obligations
will also be dependant upon its future performance, which is subject to
prevailing economic conditions and financial, business and other factors beyond
the Company's control.
General Real Estate Investment Risks. The Company's investments are subject to
varying degrees of risk generally incident to the ownership of real property.
Real estate values and income from the Company's current properties may be
adversely affected by changes in national or local economic conditions and
neighborhood characteristics, changes in interest rates and in the availability,
cost and terms of mortgage funds, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for capital
improvements, changes in governmental rules and fiscal policies, civil unrest,
acts of God, including earthquakes and other natural disasters which may result
in uninsured losses), acts of war, adverse changes in zoning laws and other
factors which are beyond the control of the Company.
Value and Illiquidity of Real Estate. Real estate investments are relatively
illiquid. The ability of the Company to vary its ownership of real estate
property in response to changes in economic and other conditions is limited. If
the Company must sell an investment, there can be no assurance that the Company
will be able to dispose of it in the time period it desires or that the sales
price of any investment will recoup the amount of the Company's investment.
Property Taxes. The Company's property is subject to real property taxes. The
real property taxes on this property may increase or decrease as property tax
rates change and as the property is assessed or reassessed by taxing
authorities. If property taxes increase, the Company's operations could be
adversely affected.
Risks of Remodeling / Expansion Strategy. The Company intends to pursue a
strategy of growth through the remodeling of the Motel and may pursue a similar
strategy in acquiring future properties. There can be no assurance that the
Company will obtain adequate financing for the renovations nor can there be any
assurance that renovations undertaken by the Company will be profitable. The
construction of renovations that are not profitable could adversely affect the
Company's profitability. The Company may in the future require additional
financing in order to continue its renovation plans. There is no assurance that
such additional financing, if any, will be available to the Company on
acceptable terms.
Investment in Single Industry/Property. The Company is subject to risks inherent
in investments in a single industry/property. The effects on the Company's
revenues resulting from a downturn in the lodging industry would be more
pronounced than if the Company had diversified its investments outside of the
lodging industry.
12
<PAGE>
Year 2000. The Year 2000 problem is a result of computer programs being written
using two digits to define the applicable year. If not corrected, any programs
or equipment that have time sensitive components could fail or create erroneous
results. The Company has completed a review of its existing systems and has
upgraded 100% of its existing system with hardware and software that purports to
be Year 2000 compliant.
The Company believes that it is fully year 2000 complaint. The cost associated
with the updating of the Company's computer systems was not material. The
Company only uses a single personal computer for it day to day operations.
The Company currently has limited information concerning the year 2000
compliance status of its clients and associates. However, even if the Company's
client's are not Year 2000 compliant the Company does not anticipate that any
such noncompliance will have a material adverse effect on the Company's
business, financial condition, results of operations or cash flows.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's sole asset is the General Lafayette Inn, a 134 unit Motel and
restaurant, and four adjacent office/retail buildings, in Baton Rouge, Louisiana
(the "Motel"). The Motel is located next to the Mississippi River, three blocks
from a river boat dock, at 427 Lafayette Street, Baton Rouge, Louisiana.
Approximately 60 of the 134 rooms are in disrepair.
The Company presently plans to affiliate the Motel as a Villager Lodge franchise
but must renovate within the franchiser's standards to achieve this status. The
Company intends to finance the renovations necessary to become a Villager Lodge
franchise through operating cash flows on a room by room basis. The initial cost
of such renovations is estimated at $250,000. The Company intends to finance the
renovations necessary to become a Villager Lodge franchise by finding bank or
institutional financing, equity offerings and/or private placements. Currently,
the Company is financing the renovations with operating cash flows on a room by
room basis.
The Company currently leases approximately 5,067 square feet of the
office/retail space on this property to the Culinary Arts Institute of
Louisiana, Inc. for $3,260 per month on a month on a month to month basis, which
may be canceled by either party by giving thirty days prior notice to the other
party. The Culinary Arts Institute of Louisiana, Inc. teaches students the fine
art of cooking and operates a restaurant on its premises in which its students
practice the skills they learn. The restaurant is only open in the evenings.
The Company owns the Motel and the property upon which it sits pursuant to a 30
year mortgage note in the amount of $1,900,000. Under the terms of the note the
Company is required to make 359 monthly payments in the amount of $11,391.46
each. The installments are to be paid to the General Lafayette Inc., c/o James
A. Thom III, M.D. and his wife, Evelyn M. Thom 130 Main Street, Baton Rouge,
Louisiana, 70081.
The Motel's current occupancy rate is approximately 58% of its rentable rooms.
However, the Company expects this rate to increase once the renovations are
complete and it becomes a Villager Lodge. The property upon which the Motel is
located also contains approximately 15,000 square feet of leaseable commercial
space of which 5,067 square feet is presently rented to the Culinary Arts
Institute of Louisiana, Inc. Hence, the occupancy rate of the property's
leaseable commercial space is approximately 33 %. The annual rental rate of the
commercial space leased to the Culinary Arts Institute of Louisiana is also
approximately $8.00 per square foot.
13
<PAGE>
As for the competitive nature of the lodging industry in the local area, within
approximately one mile of the Motel, the Company is aware that two lodging
facilities are presently being built. One of these facilities will be a 300 room
Crown Plaza Hotel, the other a 150 room lodging facility built by Louisiana
State University. The Company believes that it will be able to maintain a
competitive niche as an economy and extended stay lodging facility in comparison
to these other lodging facilities that are presently being built in the area.
The federal tax basis for of the Motel is Two Million Five Hundred Ninety-Nine
Thousand Eight Hundred Forty-Six dollars ($2,599,846). The facilities are being
depreciated by straight line method over a period of thirty-nine (39) years. The
realty tax rate is .627 and the annual realty taxes for 1998 were Sixteen
Thousand Two Hundred Ninety-Eight Dollars ($16,298). The Company is depreciating
the property over a 39 year period and uses the straight line method of
accounting for depreciation purposes. The Company has yet to receive its 1999
realty tax bill and the Company is of the opinion that the Motel and property
are adequately covered by insurance.
The Company's headquarters are located at 268 West 400 South, Salt Lake City,
Utah 84101 where it shares office space with the Company's parent. The Company's
management agreement with its parent includes the cost of using these facilities
and the use of all the office equipment.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the stock of the Company as of October 15, 1999, by each
shareholder who is known by the Company to beneficially own more than 5% of the
outstanding Common Stock, by each director, and by all executive officers and
directors as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and nature of
Title of Class Beneficial Ownership Beneficial Ownership Percent of Class
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Richard D. Surber, Director 188,523(3) 68.4%
Stock 268 West 400 South, Suite 300
.001 Par Value Salt Lake City, Utah 84101
Common Svetlana Senkovskaia 2,000 0.7%
Stock 427 Lafayette Street
.001 Par Value Baton Rouge, LA 70802
Common John Fry 1,000 0.4%
Stock 3619 Lakeview Road
.001 Par Value Carson City, NV 89703
</TABLE>
- -----------------------
(3) Richard Surber owns 25,000 shares of common stock and is also President
and Director of Diversified Holdings I, Inc. which owns 163,523. As a result of
his position he has voting control over a total of 188,523 shares of common
stock.
14
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and nature of
Title of Class Beneficial Ownership Beneficial Ownership Percent of Class
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Diversified Holdings I, Inc.(4) 163,523 59.4%
Stock 268 West 400 South, Suite 300
.001 Par Value Salt Lake City, Utah 84101
Common The Smith Family Trust(5) 24,500 8.9%
Stock 427 Lafayette Street
.001 Par Value Baton Rouge, LA 70802
Common San Pedro Securities, Ltd.(6) 24,500 8.9%
Stock Box 87, Punta Gorda
.001 Par Value Belize, Central America
Common A-Z Oil, LLC(7) 20,000 7.3%
Stock 268 West 400 South, Suite 300
.001 Par Value Salt Lake City, Utah 84101
Common All Executive Officers and 191,523 69.5%
Stock Directors as a Group
.001 Par Value (Three persons)
- ------------------- ----------------------------------- -------------------------------------- -----------------------
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS
The Officers and Directors of the Company as of September 30, 1999 are as
follows:
Name Age Position
- ---- --- --------
Richard D. Surber 26 President & Director
Svetlana Senkovskaia 39 Secretary/Treasurer and
Director
John Fry 66 Director
Richard D. Surber graduated from the University of Utah with a Bachelor of
Science degree in Finance and then with a Juris Doctorate with an emphasis in
corporate law; including securities, taxation, and bankruptcy. He has been an
officer and director of several public companies which include: CyberAmerica
Corporation, the parent corporation of Diversified Holdings I, Inc., the
majority shareholder of the Company (president & director from 1992 to the
present); Vaxcel, Inc., which is unrelated to the Company (president & director
- ----------------------------
(4) The natural person with voting/investment power over Diversified
Holdings I, Inc. is Richard Surber.
(5) The natural person with voting/investment power over the Smith Family
Trust is Brad Smith.
(6) The natural person with voting/investment power over San Pedro
Securities, Ltd. is Laura Olsen.
(7) The natural persons with voting/investment power over A-Z Oil, LLC.,
are BonnieJean C. Tippetts and Allen Wolfson.
15
<PAGE>
from June, 1999 to the present); Kelly's Coffee, Group, Inc., which is unrelated
to the Company (president & director from May, 1999 to the present); Innovative
Property Development Corporation("IPDC"), N.K.A. China Mall USA.com., Inc., IPDC
used to be the parent corporation of the Company but no longer has any
affiliation with it (president & director 1992 to June, 1999); Eurotronics
Corporation, F.K.A. Hamilton Exploration, Inc., which is unrelated to the
Company (president & director 1994-1996); Area Investment Development Company,
which is unrelated to the Company (president & director 1994-1996); Youthline
USA, Inc., F.K.A. Ult-i-Med Health Centers, Inc., which is unrelated to the
Company (secretary & director from April 6, 1999 to July 29,1999); and Premier
Brands, Inc., which is unrelated to the Company(president & director September
1998 - April 1998). Additionally, Mr. Surber specializes in mergers,
acquisitions, corporate turnarounds, debt settlement, and equity financing. Mr.
Surber, is to hold office as the Company's President and one of its Directors
until their successor is elected at an annual or special meeting of the
shareholders.
Svetlana Senkovskaia is 39 years old and graduated from Leningrad University in
Leningrad, Russia with a Master's Degree in Chemistry. Since 1997 Ms.
Senkovskaia has been the property manager of the Company's Motel, the General
Lafayette. Additionally, Ms. Senkovskaia has been a director of the Company for
approximately four months. Prior to her affiliation with the Company and the
Motel, Ms. Senkovskaia was a property manager for four years for Oasis
International, Inc. Ms. Senkovskaia's term of office as one of the Company's
directors is for one year or until each year's annual meeting of the
shareholders.
John Fry is 66 years old and has been a retired executive for the past five
years. Prior to his retirement, Mr. Fry was a the Vice President of Firestone
Tire Company for over 35 years. Presently, Mr. Fry on a part time basis acts as
a business consultant and an outside director to the Company. Mr. Fry's term of
office as one of the Company's directors is for one year or until each year's
annual meeting of the shareholders.
Allen Wolfson has never been named as an officer or director of the Company. He
may, however, have significant influence and "control" (as defined in Rule 12b-2
of the Securities Exchange Act of 1934) over the affairs of the Company by
virtue of Mr. Wolfson's beneficial ownership of over 5% of the Company's Common
Stock and the potential influence Mr. Wolfson has with respect to the Company's
parent. For more information on Mr. Wolfson, see "Item 7. Certain Relationships
and Related Transactions."
Additionally, Mr. Wolfson is the uncle of Richard Surber, the Company's chief
executive officer, president and director. Mr. Wolfson obtained a B.S. in
Marketing from the University of Southern Florida in 1968 and in 1970 he
graduated with an M.A. in Distributive Vocational Education. Mr. Wolfson has
worked 59 credit hours toward an M.B.A. from Troy State University in
Montgomery, Alabama. He has also been a licensed general contractor and a real
estate agent and developer. Mr. Wolfson has been the sole owner of A-Z
Professional Consultants, Inc. since April 11, 1990 and has been a professional
consultant for various public and private companies for 20 years. A-Z has been a
consultant to the Company's parent since 1992 and has been a significant
beneficial owner of the Company's parent Common Stock since that time. A-Z
locates potential business opportunities, primarily related to real estate
transactions, on behalf of the Company's parent. While Mr. Wolfson has no formal
authority to act on behalf of the Company, the influence he exerts on the
Company through this consulting arrangement gives Mr. Wolfson potential control
over the Company's operations.
16
<PAGE>
Furthermore, Mr. Wolfson is the sole shareholder and 100% owner of A-Z Oil,
L.L.C., a Utah Limited Liability Company, that provides consulting services to
its clients. A-Z Oil, owns approximately 7.3% of the Company's common stock.
In 1986, Mr. Wolfson was convicted of violating 18 U.S.C.ss.371; 18
U.S.C.ss.ss.1001 and 1002; and 18 U.S.C.ss.ss.1014 and 1002 in the U.S. District
Court for the Middle District of Florida, Tampa Division (the "Florida Court").
The three counts included: 1) Conspiracy to make false statements for loans from
a federally insured bank in violation of 18 U.S.C.ss.371; 2) Concealment of
material facts in an application for a bank loan in violation of 18
U.S.C.ss.ss.1001 and 1002; and 3) Making false statements for a bank loan in
violation of 18 U.S.C.ss.ss.1014 and 1012. Sentence: Imposition of sentence
suspended and placed on probation for a term of five (5) years with special
terms of probation. Mr. Wolfson was on probation for these offenses until
January 23, 1999.
On October 9, 1996, the Securities and Exchange Commission initiated
administrative proceedings in the Southern District of New York against Mr.
Wolfson based upon allegations that he violating Section 10b of the Securities
Exchange Act of 1934. The allegations involved a payment allegedly made to an
undercover agent of the Federal Bureau of Investigation, who was posing as a
broker, for the purchase of stock in an unaffiliated corporation. The
administrative matter is still pending, but no material developments have
occurred since it was filed in October 1996.
ITEM 6. EXECUTIVE COMPENSATION
No compensation in excess of $100,000 was awarded to, earned by, or paid to any
executive officer of the Company during 1998 or 1997. The following table and
the accompanying notes provide a summary of compensation paid since the
Company's inception on May 7, 1997 concerning cash and noncash compensation paid
or accrued by the Company's president.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payout
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payout Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- -------- ------------ ---------- ----------------- ------------- --------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard D.(8) 1999 - - - 25,000 - - -
Surber, 1998 - - - - - - -
President /
CEO
Charles K.(9) 1998 - - - - - - -
Wilkerson, 1997 - - - - - - -
President
- --------------- -------- ------------ ---------- ------------- ----------- ---------- --------- -------------
</TABLE>
17
<PAGE>
Compensation of Directors
The Company's directors are currently not compensated for their services as
director of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 16th, 1999, the Company issued of 112,523 common shares to Innovative
Property Development Corporation f/k/a TAC, Inc. at $2.00 per share for payment
of $293,686.11 in debt owed to Innovative Property Development Corporation f/k/a
TAC, Inc. by the Company. At the time of the transaction Innovative Property
Development Corporation was a 59.4% shareholder of the Company(10).
On April 30th, 1999 the Company entered into a Management Agreement with the
Parent Company. Richard D. Surber acts as President and Director of both the
Parent Company and the Company. The Company agreed to compensate Diversified
Holdings I, Inc. $10,000 per month plus 5% of net income, if any, in excess of
$5,000 in return for management services provided by Diversified Holdings I,
Inc.(11)
Ownership of the Company is multi-layered. Accordingly, CyberAmerica Corporation
is the parent company of Diversified Holdings 1, Inc. CyberAmerica owns 90% of
Diversified Holdings 1, Inc.'s common stock. In turn, Diversified Holdings 1,
Inc. is the beneficial owner of 59.4% of the Company.
With respect to the Company's transactions with promoters, the Smith Family
Trust and San Pedro Securities, Ltd., each received 100,000 shares of the
Company's common stock for a total contribution of $100 and for forming the
Company.
ITEM 8. DESCRIPTION OF SECURITIES
Dividend, Voting and Preemption Rights
The Company only has one class of authorized shares: $.001 par value common
stock. Holders of common stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available.
Holders of the Company's common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the security holders. At
all elections of directors of the Company, each holder of stock possessing
voting power is entitled to as many votes as equal to the number of his or her
shares of stock multiplied by the number of directors to be elected. Such votes
may be cast for a single director, for any two or more directors, or distributed
among the directors as he or she sees fit (cumulative voting).
- -----------------------
(8) Richard Surber was appointed as President, Director and Chief Executive
Officer on April 30th, 1998.
(9) Charles Wilkerson resigned as President and Director on April 30th,
1998.
(10) The issuance of 112,523 shares to Innovative Property Development
Corporation, a related party, on March 16, 1999 has been valued at the market
value of $2.00 per share. The remaining debt owed by the Company to Innovative
Property Development Corporation, $68,640 was recorded as contributed capital.
(11) Richard Surber was not the sole or direct beneficiary of the $10,000.
Canton Financial Services Corporation, a sibling corporation to the Company,
pays Mr. Surber a salary. The $10,000 went directly to Diversified Holdings I,
Inc. to cover management expenses.
18
<PAGE>
In the event of a liquidation, dissolution or winding up of the Company, holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference of any other securities.
The common stock has no preemptive or other subscription rights. There are no
redemption of sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are duly authorized, fully paid, and
nonassessable.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
The Company currently has no public trading market. The Company intends to file
a Form 15c-(2)(11) in an effort to obtain a listing on the NASD over the counter
bulletin board upon this Form 10SB becoming effective in an effort to provide
some liquidity for its shareholders and create a public market for the Company's
securities. However, there is no guarantee that the Company will obtain a
listing on the NASD over the counter bulletin board or that a public market for
the Company' securities will develop even if a listing on the NASD over the
counter bulletin board is obtained.
Record Holders
As of October 5, 1999, there were 28 shareholders of record holding a total of
275,423 shares of Common Stock. The holders of the Common Stock are entitled to
one vote for each share held of record on all matters submitted to a vote of
stockholders. Holders of the Common Stock have no preemptive rights and no right
to convert their Common Stock into any other securities. There are no redemption
or sinking fund provisions applicable to the Common Stock.
Dividends
The Company has not declared any cash dividends since inception and does not
anticipate paying any dividends in the foreseeable future. The payment of
dividends is within the discretion of the Board of Directors and will depend on
the Company's earnings, capital requirements, financial condition, and other
relevant factors. There are no restrictions that currently limit the Company's
ability to pay dividends on its Common Stock other than those generally imposed
by applicable state law.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently not a party to any pending legal proceedings. However,
its parent corporation, CyberAmerica Corporation is involved in the legal
proceedings mentioned below. These proceedings may or may not have a material
effect on the Company.
CyberAmerica Corporation vs. MJMC, Inc., Lanco International, Inc. and
Mi-Jack Products, Inc. -
Suit was filed on January 10, 1997 in the Circuit Court of Cook County, Law
Division as file no. 97L 000369 seeking recovery of damages suffered by
Canton Tire Recycling Corporation based upon the company's belief that tire
shredding equipment did not perform according to warranties and
representations made by defendants. CyberAmerica has filed a Second Amended
Complaint in the case. Discovery is ongoing with depositions to be
scheduled during this year. CyberAmerica has stated that the total damages
for which it seeks recovery is in an amount of not less than $1 million.
19
<PAGE>
State of West Virginia vs. Canton Tire Recycling West Virginia, Inc.,
Canton Industrial Corporation and CyberAmerica Corporation
Suit was filed on August 14, 1998 in the Circuit Court of Wood County,
Parkersburg, West Virginia as file no. 98 C 354 seeking the completion of
clean up procedures for property owned by Canton Tire Recycling West
Virginia, located in the city of Parkersburg. The state contends that
certain waste material is still present on the site and that any remaining
material needs to be removed from tanks and an oil/water separator located
on the property. A Consent Decree providing for the work to be done on this
site was entered in May of 1999.
Legong Investments N.V., a Netherlands Antilles Corporation v. CyberAmerica
Corporation
On November 12, 1999 this plaintiff filed suit against CyberAmerica in the
Third Judicial District Court, For Salt Lake County, State of Utah, Civil
NO. 990911427. The suit alleges to seek recovery under CyberAmerica's
convertible debenture issued to the plaintiff with a date of September 17,
1996 and a principal face amount of $300,000. The debenture originally had
a maturity date of September 16, 1997, which was extended by the parties in
an agreement dated October 16, 1997. Plaintiff has demanded full payment of
the outstanding balance due and the suit states a demand in the amount of
$543,997, plus costs and reasonable attorney fees or the issuance of
583,090 shares of free trading CyberAmerica common stock. CyberAmerica
acknowledges that some amount is owed and did tender to the Plaintiff a
$20,000 check on October 25, 1999 in partial satisfaction of the debenture.
Efforts by CyberAmerica to resolve the matter for a reasonable amount less
than the demand were being pursued prior to the filing of an answer to the
complaint. However an answer to the complaint has been filed and discovery
is now being conducted at the present time.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants in its
two most recent fiscal or any later interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In May of 1997, the Company issued 50,000 common shares to San Pedro Securities,
Ltd. and 50,000 common shares to The Smith Family Trust for organization cost
associated with the initial organization of the Company pursuant to section 4(2)
of the Securities Act of 1933 in an isolated private transaction by the Company
which did not involve a public offering.
On March 16th, 1999, the Company issued 112,523 of common shares to Innovative
Property Development Corporation f/k/a TAC, Inc. at $2.61 per share pursuant to
section 4(2) of the Securities Act of 1933 in an isolated private transaction by
the Company which did not involve a public offering in exchange for $293,686 in
debt owed to Innovative Property Development Corporation f/k/a TAC, Inc. by the
Company.
20
<PAGE>
On March 30, 1999, the Company issued a total of 5,000 shares of its common
stock at $2.00 per share pursuant to Rule 504 under Regulation D of the
Securities Act of 1933. The Company issued the 5,000 shares to the following 5
investors
Name Shares
---- ------
Alexnovich Larisa Iosifovna 1,000
Avramova Natalia Valerievna 1,000
Avramov Vitaliy Alekseevich 1,000
Ivona Valentina Vasilevna 1,000
Lomikova Lumila Alexandrova 1,000
On October 4th, 1999 the company issued an additional 8,700 shares of common
stock at $1.00 per share to the following individuals for cash pursuant to Rule
504 under Regulation D of the Securities Act of 1933:
No. of
Name Shares
---- ------
Mel Fields 100
Howard Bernstein 100
Ron Friedman 100
Bert Chase 100
Pien Chow Sau Har 100
Nat Hennin 100
Adrienne Bernstein 100
William Wolfson 500
Lee Wolfson 500
Sarah Thorton 500
Rita Surber 1,000
Wendall Hall 500
David Wolfson 5,000
The Company relied on the following facts in determining that Rule 504
Regulation D was available: (a) the Company was not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act; (b) the Company is
engaged in the business of the operation a motel and other rental property and
therefore was neither a development stage company with no specific business plan
or purpose nor a company whose plan was to merger with an unidentified company;
(c) the aggregate offering price did not exceed $1,000,000 and (d) the Company
filed a Form D within 15 days of the first sale of the shares subject to the
offering.
21
<PAGE>
On October 4th, 1999 the Company issued 20,000 shares of common stock to A-Z
Oil, LLC. at $1.00 per share pursuant to section 4(2) of the Securities Act of
1933 in an isolated private transaction by the Company which did not involve a
public offering in exchange for services from A-Z Oil, LLC.
On October 4th, 1999 the Company issued 29,200 shares of common stock at $1.00
per share for services to the following six individuals, pursuant to Rule 701 of
the Securities Act of 1933:
Name Shares
- ---- ------
Richard Surber 25,000
John Fry, Jr. 1,000
Svetlana Senkovskaia 2,000
Kyle PanKratz 1,000
Delmar Janovec 100
Barry Denslow 100
Richard Surber provided services as President and CEO of the Company. John Fry,
Jr. provided services as a business consultant reviewing business operations and
improving efficiencies. Svetlana Senkovskiaia provided services as an onsite
manager. Kyle PanKratz provided clerical services. Delmar Janovec and Barry
Denslow provided business consultations in reviewing proposed construction
costs.
The Company relied on the following facts in determining that Rule 701 was
available: (a) the shares were issued pursuant to a written compensatory benefit
plan issued by the Company, (b) the individuals listed rendered bonafide
services not in connection with the offer or sale of securities in capital
raising transaction, (c) the shares were issued pursuant to a written contract
relating to the issuance of shares paid as compensation for services rendered,
and (d) the amount of shares offered and sold in reliance on Rule 701 did not
exceed $500,000 and all securities sold in the last 12 months have not exceeded
$5,000,000.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws and section 83 of the Louisiana Revised Statutes provide
for indemnification of the Company's officers and directors in certain
situations where they might otherwise personally incur liability, judgments,
penalties, fines and expenses in connection with a proceeding or lawsuit to
which they might become parties because of their position with the Company.
Indemnification: The Company shall indemnify to the fullest extent permitted by,
and in the manner permissible under the laws of the State of Louisiana, any
person made, or threatened to be made, a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he is or was a director or officer of the Company, or served any other
enterprise as director, officer or employee at the request of the Company. The
Board of Directors, in its discretion, shall have the power on behalf of the
Company to indemnify any person, other than a director or officer, made a party
to any action, suit or proceeding by reason of the fact that he/she is or was an
employee of the Company.
22
<PAGE>
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities ( other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceedings) is asserted by such
director, officer, or controlling person in connection with any securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issues.
PART F/S
The Company's financial statements for the fiscal year ended December 31, 1998
and the interim reports for September 30, 1999 are attached hereto as F-1
through F-12.
INDEX TO FINANCIAL STATEMENTS
Unaudited and Audited Financial Reports for the periods ending September 30,
1999 and December 31, 1998 and 1997
Independent Auditor's Report.................................................F-1
Accountants Balance Sheet....................................................F-2
Statement of Operations......................................................F-3
Statement of Cash Flows......................................................F-4
Statement of Stockholder's Equity............................................F-5
Notes to Interim Financial Statements........................................F-6
23
<PAGE>
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
A Partnership of Office (801) 363-1175
Professional Corporations Fax (801) 363-0615
Brent E. Crouch, CPA, PC Brent's Mobile (801) 916-1999
Nephi J. Bierwolf, CPA, PC Todd's Mobile (801) 898-2222
Todd D, Chisholm, CPA, PC
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Golden Opportunity Development Corporation
We have audited the accompanying balance sheets of Golden Opportunity
Development Corporation as of December 31, 1998 and 1997 and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1998 and from May 7, 1997, the date of incorporation, through
December 31, 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 audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golden Opportunity Development
Corporation as of December 31, 1998 and 1997 the related statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1998 and from May 7, 1997, the date of incorporation, through December 31, 1997
in conformity with generally accepted accounting principles.
/s/ Crouch Bierwolf & Chisholm
- -------------------------------
Salt Lake City, Utah
May 2, 2000
MEMBER AMERICAN INSTITUTE OF CPAS, SEC PRACTICE SECTION, AND UTAH
ASSOCIATION OF CPAS
F-1
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
(A Majority Owned Subsidiary of Diversified Holdings I, Inc.)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December
1999 1998 1997
(Unaudited) (Audited) (Audited)
-------------------- ----------------- ----------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash $ 3,317 $ 6,468 $ 994
Deposits 4,052 4,052 5,000
-------------------- ----------------- ----------------
Total Current Assets 7,369 10,520 5,994
Property and Equipment 2,565,792 2,599,386 2,576,923
-------------------- ----------------- ----------------
TOTAL ASSETS $ 2,573,161 $ 2,609,906 $ 2,582,917
==================== ================= ================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 25,584 $ 67,961 $ -
Accounts payable-related party 132,608 239,223 -
Sales tax payable 13,876 24,514 4,514
Security deposit note payable 4,682 7,586 4,000
Current portion of long-term
obligations 26,696 25,524 24,041
-------------------- ----------------- ----------------
Total Current Liabilities 203,446 364,808 32,555
Long-Term Obligations Net of
Current Portion 1,810,930 1,840,360 1,864,467
-------------------- ----------------- ----------------
TOTAL LIABILITIES 2,014,376 2,205,168 1,897,022
Shareholders' Equity
Common stock, $.001 par value, 50,000,000
shares authorized, 217,523 issued and
outstanding at September 30, 1999, 100,000
shares issued and outstanding at December 31, 1998
and 1997. 218 100 100
Additional paid-in capital 1,003,468 699,900 699,900
Retained earnings (Deficit) (444,901) (295,262) (14,105)
-------------------- ----------------- ----------------
Total Shareholders' Equity 558,785 404,738 685,895
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 2,573,161 $ 2,609,906 2,582,917
==================== ================= ================
</TABLE>
See Notes to Financial Statements
F-2
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
(A Majority Owned Subsidiary of Diversified Holdings, I, Inc.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended Years Ended
September 30 December 31
1999 1998 1998 1997
(Unaudited) (Unaudited) (Audited) (Audited)
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue
Hotel Revenue $ 244,102 $ 194,128 $ 291,407 $ 194,498
Lease Revenue 29,340 29,340 39,120 16,520
---------------- ---------------- --------------- ---------------
Total Revenues 273,442 223,468 330,527 211,018
Operating Expenses
Hotel Direct Costs $ 207,264 $ 191,582 $ 298,593 $ 101,632
General and
administrative 100,762 86,073 140,515 43,557
Depreciation 41,694 37,097 49,463 23,077
Interest expense 74,361 84,167 123,113 56,857
---------------- ---------------- --------------- --------------
Total Operating
Expenses 423,081 398,919 611,684 225,123
Net Loss $ (149,639) $ (175,451) $ (281,157) $ (14,105)
================ ================ =============== ==============
Net Loss per share $ (0.81) $ (1.75) $ (2.81) $ (0.14)
Weighted average
shares outstanding 185,392 100,000 100,000 100,000
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings, I, Inc.)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
September 30 December 31
1999 1998 1998 1997
(Unaudited) (Unaudited) (Audited) (Audited)
----------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss $ (149,639) $ (175,451) $ (281,157) $ (14,105)
Adjustment for Non-Cash Items
Depreciation and Amortization 41,694 37, 49,463 23,077
Changes in Operating Assets and
Liabilities net of effects from
acquisitions
Deposits 948 948 (5,000)
Accounts Payable (42,377) 27,141 67,961 -
Accounts Payable-Related Party (116,225) 157,540 239,223
Accrued Expenses (10,638) 19,927 20,000 4,514
----------------- ---------------- --------------- --------------
Net Cash Provided by (Used in)
Operating Activities (277,185) 67,202 96,438 8,486
----------------- ---------------- --------------- --------------
Cash flow from investing activities -
Purchase of fixed assets (8,100) (48,819) (71,926)
----------------- ---------------- ---------------
Net Cash (Used) by investing activities (8,100) (48,819) (71,926) -
----------------- ---------------- --------------- --------------
Cash flow from financing activities
Contributed Capital 68,640 - - -
Common Stock Issued for Debt 225,046 - - -
Common Stock Issued for Cash 10,000 - - -
Proceeds from note - - 7,586 4,000
Payment of notes (21,552) (17,985) 26,624) (11,492)
----------------- ---------------- --------------- --------------
Net Cash (Used) by Financing
Activities 282,134 (17,985) (19,038) (7,492)
----------------- ---------------- --------------- -------
Net Increase (Decrease) in Cash (3,151) 398 5,474 994
Cash at Beginning of Period 6,468 994 994 -
----------------- ---------------- --------------- -
Net Loss $ (149,639) $ (175,451) $ (281,157) $ (14,105)
Cash at End of Period $ 3,317 $ 1,392 $ 6,468 $ 994
================= ================ =============== ==============
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary
of Diversified Holdings, I, Inc.)
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
------------------ ------------------ -------------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Common Stock issued at 100,000 $ 100 $ 699,900 $ - $ 700,000
inception on May 7, 1997
Net Loss for period ended
December 31, 1997 - - - (14,105) (14,105)
--------------- -------------- ------------- --------- ---------
Balance, December 31, 1997 100,000 100 699,900 (14,105) 685,895
Net Loss for period ended
December 31, 1998 - - - (281,157) (281,157)
--------------- --------------- --------------- --------- ---------
Balance, December 31, 1998 100,000 100 699,900 (295,262) 404,738
Common Stock issued for Debt 112,523 113 224,933 - 225,046
Contributed Capital - - 68,640 - 68,640
Common Stock issued for Cash 5,000 5 9,995 - 10,000
Net Loss for period ended
September 30, 1999 (unaudited) - - - (149,639) (149,639)
--------------- --------------- --------------- --------- ---------
Balance, September 31, 1999 217,523 $ 218 $ 1,003,468 $ (444,901) $ 558,785
=============== ============== =============== ============= ==========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings I, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPT 30, 1999, DECEMBER 31, 1998 AND 1997
NOTE 1: ORGANIZATION AND OPERATIONS
Organization
Golden Opportunity Development Corporation ("Company") was incorporated on May
7, 1997 under the laws of the state of Louisiana. As of Sept 30, 1999 the
Company is a majority owned subsidiary of Diversified Holdings I, Inc.
Operations
The Company owns and manages a hotel located in Baton Rouge, Louisiana.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies reflect current accounting practices and
conform to generally accepted accounting principles. The accompanying unaudited
interim financial statements include all adjustments which in the opinion of
management are necessary in order to present fairly the financial position of
the Company as of September 30, 1999 and 1998. Interim results are not
necessarily indicative of fiscal year performance because of seasonal and
short-term variations. The policies considered to be significant are as follows:
Accounting Method
The accompanying financial statements have been prepared on the accrual method
using generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and the liquidation of liabilities
in the normal course of business. The Company reports income and losses for
financial reporting and income tax purposes on the accrual method of accounting
in accordance with Financial Accounting Standards ("FAS").
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. In these financial statements assets and
liabilities involve extensive reliance on management's estimates. Actual results
could differ from those estimates.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, generally
estimated as follows: buildings, 20 to 39 years, leasehold improvements, 20
years, and vehicles, 5 years. Deprecation expenses for September 30, 1999 and
1998, December 31, 1998 and December 31, 1997 were $41, 694, $37,097, $49,463
and $23,077, respectively. The cost of assets sold or retired and the related
amounts of accumulated depreciation are removed from the accounts in the year of
disposal. Any resulting gain or loss is reflected in current operations.
Expenditures for maintenance and repairs are expended as incurred; additions and
improvements are capitalized.
F-6
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings I, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPT 30, 1999, DECEMBER 31, 1998 AND 1997
The Company reviews quarterly its properties in accordance with the Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long Lived Assets" to determine if its carrying costs will be recovered from
future operating cash flows. In cases where the Company does not expect to
recover its carrying costs, the Company recognizes an impairment loss.
The balances of the major classes of assets as of the balance sheet dates were
as follows:
September 30 December 31, December 31,
1999 1998 1997
---- ---- ----
Building: $1,800,000 $1,800,000 $1,800,000
Land: 800,000 800,000 800,000
Leasehold Improvements: 61,225 53,125 0
Furniture and Fixtures: 9,170 9,170 0
Vehicles: 9,631 9,631 0
----- ----- -----
2,680.026 2,671,926 $2,600,000
Less - Accumulated Depreciation (114,234) (72,540) (23,077)
--------- -------- --------
$2,565,792 $2,599,386 $2,576,923
Revenue Recognition
Motel rental revenue and lease revenue for the Company is reported on an accrual
method of accounting. Revenue is recognized when the earning process is complete
and an exchange has taken place. Revenue for each room rental is recognized at
the point of sale. Revenue from credit sales is recorded at the full amount. Bad
debts from uncollectible credit sales or insufficient funds on checks are
immaterial and account for less than 1% of rental revenue. If a customer refused
to pay for a room rental because of unsatisfactory service, then the room rental
would not be recorded as a sale. Thus, there is no provision for return
privileges because there is no uncertainty that a Motel room rental will be
returned (FAS-48).
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements". The
Staff determined that a lessor should defer recognition of contingent rental
income until the specified target that triggers the contingent rental income is
achieved. The Company recognizes lease revenue on an accrual basis. The lease
revenue is based on a month-to-month lease and revenue is only recognized after
it is received. Accordingly, SAB No. 101 will not have an impact on the Company.
F-7
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings I, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPT 30, 1999, DECEMBER 31, 1998 AND 1997
Income Taxes
The Company reports income and losses for financial reporting and income tax
purposes in accordance with Financial Accounting Standards No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach to financial
accounting and reporting for income taxes. FAS 109 requires deferred tax
balances to be adjusted to reflect the tax rates in effect when those amounts
are expected to become payable or refundable. The Statement requires that
deferred income taxes be provided to reflect the impact of "temporary
differences" between the amount of assets and liabilities for financial
reporting purposes and such amounts as measured by current tax laws and
regulations. A valuation allowance is established, when needed, to reduce
deferred tax assets to the amount expected to be realized.
No provision for income taxes has been recorded due to operating loss
carryforwards totaling approximately $400,000 that will be offset against future
taxable income. These NOL carryforwards begin to expire in the year 2012. No tax
benefit has been reported in the financial statements because the Company
believes there is a 50% or greater chance the carryforwards will expire unused.
Deferred tax assets and the valuation account is as follows at September 30,
1999:
Deferred tax asset:
NOL carryforward $ 136,000
Valuation allowance $(136,000)
----------
Total $ -
F-8
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings I, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPT 30, 1999, DECEMBER 31, 1998 AND 1997
NOTE 3: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following are supplemental disclosures of cash flow information:
1. Cash paid for interest was $74,361, $84,167, $123,113, and $56,857 for
September 30, 1999 and 1998, and December 31, 1998 and 1997, respectively.
2. On May 31, 1997 the Company received a mortgage note from James A. Thom
III, M.D., and Evelyn M. Thom, for the sum of $1,900,000 payable in 360
consecutive monthly installments, namely, 359 installments of $11,391.46
and one final installment, the 360th, for the balance due.
3. Common stock was issued for the following purposes:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount
----------- ------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issued for debt 112,523 $293,685 - - - -
Issued for services - related party 45,000 45,000 - - - -
Issued for services 4,200 4,200 - - 100,000 $100
----------- ------------- ---------- ----------- ----------- -----------
161,273 $342,885 - - 100,000 $100
=========== ============= ========== =========== =========== ===========
</TABLE>
No stock was issued for the debt or services in 1998.
[THIS SPACE LEFT BLANK INTENTIONALLY]
F-9
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings I, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPT 30, 1999, DECEMBER 31, 1998 AND 1997
NOTE 4: LONG-TERM DEBT
Long-term debt consists of the following at:
<TABLE>
<CAPTION>
December 31,
Sept. 30, 1999 1998 1997
-------------- ------------------------- ------------------
<S> <C> <C> <C>
Note payable in the original amount of
$1,900,000, bearing interest at 6% for 30
years, with monthly payments of $11,391,
secured by hotel property. 1,837,626 1,865,884 1,888,508
Less: Current portion (26,696) (25,524) (24,041)
-------- -------- --------
Total Long Term Notes Payable 1,810,930 1,840,360 1,864,467
========= ========= =========
</TABLE>
Scheduled principal reductions are as follows:
December 31, 1999 14,369
December 31, 2000 27,098
December 31, 2001 28,769
December 31, 2002 30,544
December 31, 2003 32,427
Thereafter 1,704,419
NOTE 5: RELATED PARTY TRANSACTION
The Company pays a monthly management fee to its Parent Company,
Diversified Holdings I, Inc., in the amount of $10,000. Diversified
Holdings I, Inc. also pays expenses on behalf of the Company, resulting in
a payable at the end of the period of $132,608.
F-10
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings I, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPT 30, 1999, DECEMBER 31, 1998 AND 1997
NOTE 6: MANAGEMENT AGREEMENTS & FEES
Management's belief is that the $10,000 management fee paid to Innovative
Property Development Corporation and now Diversified Holdings I, Inc., reflects
all costs incurred by the parent or others. This $10,000 fee has been recorded
on the Company's income statement. Diversified Holdings I, Inc., does not pay
any expenses on behalf of the Company which have not been reflected on the
Company's financials. The management fee includes the costs of the following
services provided:
1) Collection of all rents and payments of all costs and expenses of
maintenance
2) Promote and lease available space and Motel rooms
3) Select and obtain tenants, execute leases, extensions, and renewals
4) Legal consulting and services (from parent for staff attorneys)
5) Keep and maintain property (repairs and maintenance)
6) Customary services for leased property
7) Engage and discharge employees for maintenance, onsite management, and
maintenance of the property.
8) Make arrangements for the insurance of the property
9) Maintain accurate records of all transactions
10) Create monthly accounting records of all revenues and expenses.
For further detail, please see Exhibit 6(i) for the complete management
agreement. All other costs of doing business are reflected in the Company's
financial statements.
NOTE 7: LEASE AGREEMENTS
Currently, the Company leases the entire first floor of Building C of the
General Lafayette Inn, with two classrooms on the second floor, approximately
5067 square feet, to Culinary ARTS Institute of Louisiana, Inc. The current
lease is operated month to month and may be canceled on 30 day notice by either
party, with monthly lease payments of $3,260. The Company does not pay any of
the direct costs associated with the leased property. As of the balance sheet
date, the Company is in negotiations with the Culinary ARTS Institute of
Louisiana, Inc. to enter into a one year commercial lease to begin on January
1st, 2000 and end on December 31st, 2000 for monthly lease payments of $3,500.
For September 30, 1999, and December 31, 1998 and 1997, rental revenues from
this leased property included in income were $29,340, $39,120, and $16,520
respectively.
NOTE 8: SUBSEQUENT EVENTS
On October 4, 1999 subsequent to the date of the financial statements the
Company issued 8,700 shares of common stock to thirteen individuals at $1.00 per
share pursuant to Rule 504 under Regulation D of the Securities Act of 1933.
Additionally, on October 4th, 1999 the Company issued 20,000 shares of common
stock to A-Z Oil, LLC, at $1.00 per share pursuant to section 4(2) of the
Securities Act of 1933 for services. Also on October 4th, 1999, the Company
issued 29,200 shares of common stock at $1.00 per share for services to six
individuals, pursuant to Rule 701 of the Securities Act of 1933.
F-11
<PAGE>
GOLDEN OPPORTUNITY DEVELOPMENT
CORPORATION (A Majority Owned Subsidiary of
Diversified Holdings I, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPT 30, 1999, DECEMBER 31, 1998 AND 1997
(NOTE 8: CONTINUED)
Pursuant to FASB No. 123, the Company's policy for accounting for issuance of
stock for goods or services is based on the fair value of the consideration
received. As previously stated, the Company accounts for stock issued for
services according to FASB No. 123. Thus, under the fair value based method,
compensation cost is measured at the grant date based on the fair market value
of the services provided, which was comparable to the value of the services at
the time they were provided and is recognized over the service period. The fair
value of a share of restricted stock awarded for services is measured at the
market price of a share of non-restricted stock on the grant date unless a
restriction will be imposed after the individual has a vested right to it, in
which case fair value it estimated taking that restriction into account.
Accordingly, Richard Surber received 25,000 shares, the fair value of which was
$1.00 per share for the value of his services as President and CEO of the
Company. John Fry, Jr. provided services as a consultant reviewing business
operations and improving efficiencies. Mr. Fry received 1,000 shares, which was
associated with the fair market value of his services as a consultant. Likewise,
Svetlana Senkovskai provided services as an onsite manager; she received 2,000
shares. Kyle PanKratz provided clerical services; he received 1,000 shares.
Delmar Janovec and Barry Denslow provided business consultations in reviewing
proposed construction costs and received 100 shares each. The shares listed the
individuals listed above was based on what the individuals considered to be the
fair market value of their services rendered.
NOTE 9: COMPENSATORY BENEFIT PLANS
Pursuant to Rule 701 of the Securities Act of 19933 for services for consultants
and advisors, the Company has established the following stock option plan,
pursuant to a board resolution of the Board of Directors:
--1999 Benefit Plan, whereby, the total value of shares issued pursuant
to this plan shall not exceed a value of greater than Five Hundred
Thousand dollars ($500,000), the Company may issue common stock or
grant options to acquire the Company's common stock to employees,
directors, officers, consultants, or advisors, including individuals
who contribute to the Company but are not employees, provided that bona
fide services are rendered. The purpose of the plan is to aid the
Company in maintaining and developing a management team, attracting
qualified officers and employees, and rewarding those individuals who
have contributed to the success of the Company. At September 30, 1999
this plan was not in effect. However, at December 31, 1999, the total
value of shares available was Four Hundred Fifty Thousand Eight Hundred
($450,800).
F-12
<PAGE>
PART III
ITEM 1. EXHIBITS
(a) Exhibits. Exhibits required to be attached are listed in the Index to
Exhibits beginning on page 18 of this form 10-SB under "Item 2. Description
of Exhibits."
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
24
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, this 2nd day of May 2000.
Golden Opportunity Development
/s/ Richard Surber
-----------------------
Name: Richard D. Surber
Title: President and Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated
Signature Title Date
- --------- ----- ----
/s/ Richard Surber
- ------------------------
Richard D. Surber President and Director May 2, 2000.
/s/ Svetlana Senkovskaia
- ------------------------
Svetlana Senkovskaia Secretary and Director May 2, 2000.
/s/ John Fry
- ------------------------
John Fry Director May 2, 2000.
25
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS.
INDEX TO EXHIBITS
Exhibit
No. Page No. Description
- -- ------- -----------
2(i) 27 Articles of Incorporation of the Company dated May 7, 1997.
2(ii) 32 Amended Articles of Incorporation of the Company dated April 26,
1999.
2(iv) 40 By-laws of the Company.
27 102 Financial Data Schedule "CE"
Material Contracts
Exhibit
No. Page No. Description
6(i) 51 Management Agreement between the Company and Diversified
Holdings, I, Inc. dated April 30, 1999.
6(ii) 58 Franchise Agreement between the Company and Villager Franchise
Systems, Inc.
23 101 Consent Letter of Independent Auditors
26
<PAGE>
Exhibit 2(i)
Jul 29 97 03:36p P.1
ARTICLES OF INCORPORATION
STATE OF LOUISIANA
OF
GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
PARISH OF IBERVILLE
BE IT KNOWN that on this day of 1996, before me, a Notary Public in
and for the Parish of Iberville,. State of Louisiana personally came and
appeared the subscribers, hereto, of the full age of majority, who declared to
me, Notary, in the presence of the undersigned competent witnesses, that
availing themselves of the provisions of the Louisiana Business Corporation Law,
they do hereby form a Corporation under and in accordance with the following
Articles of Incorporation:
I.
'The name of the corporation is:
GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
II.
The purpose of this Corporation is to engage in any lawful activity for
which Corporations may be formed under the Business Corporation Law,
III.
This Corporation has the authority to issue an aggregate of 100,000
share of capital stock, all of which are designated common stock having, $.01par
value per share.
IV.
Shareholders have pre-emptive rights. Other transfers of stock shall be
regulated as follows:
A. No stock in this Corporation shall be transferred unless the
stock shall have been first offered for sale to the
Corporation, and, if the Corporation shall fail or refuse to
accept the offer, to each of the other stockholders of this
Corporation. The offeror shall have an option to purchase the
stock to be
Aug 07 97 11:06a P.1
27
<PAGE>
Page 1 of 3
transferred at the same terms and conditions as the offeror shall have been
offered by a third person at arm's length, acting in good faith. The offer shall
be in writing and shall set forth the price and terms on which the stock is
offered. It shall be sent by registered mail to the President and Secretary of
the Corporation and to each stockholder at the address listed on the Corporation
books. The right to transfer stock shall not exist until the Corporation and all
existing stockholders either refuse in writing the offer so made, or waive the
requirement of an offer in writing or until they fail for a period of thirty
(30) days after receipt of the written offer to accept it by compliance with the
terms therein set forth. Regulations as to the formalities and procedures to be
followed in effecting the transfer may be prescribed in the by-laws of the
Corporation
B Should the Corporation be unable or unwilling for any reason to exercise
its option as granted above, the option may be exercised by such stockholders as
desire to exercise it, in the proportions in which these stockholders hold stock
in the Corporation.
C After the expiation of the option period, no transfer at a price less than
has been offered to the Corporation and the other stockholders, or on terms or
conditions varying from those stated in the letter notifying the Corporation and
the stockholders of a proposal to transfer, shall be valid, until the right
shall have been offered to the Corporation and the stockholders to purchase the
stock proposed to be transferred at the precise price and on the precise terms
and conditions which were offered to or by the stockholder who proposes to
transfer his stock.
D The stockholders in this Corporation may make agreements, either in By-laws
or by a shareholder agreement, between themselves relative to the purchase,
among themselves, or the stock of this Corporation in the event of the death,
insanity, retirement or disability of any stockholder, and in the event of a
transfer of his stock by donation to the stockholder's spouse and linear
descendants. A copy of such agreement shall be filed with Secretary or
Secretary/Treasurer of this Corporation, and the provisions of any such
agreement shall be binding upon the person who are parties to it and their
respective heirs, administrators, legatees, executors and assigns.
E Except as to a transfer or death or a gift of the stock of stockholder to
his spouse or linear descendants (which shall be controlled if at all by the
By-laws or by a shareholder agreement), no sale, mortgage, pledge, conveyance,
transfer, seizure, donation, sale under legal process or attachment, or by
virtue of any pledge or hypothecation, and no other disposal of stock of any
nature whatsoever shall have any effect as related to the Corporation or its
stockholders, nor shall it be valid in any fashion until the option period
provided above shall have expired.
28
<PAGE>
Page 2 of 3
V.
The name and post office address of each incorporator is:
Brad Smith
24130 Ferdinand
Plaquemine, LA 70764
THUS DONE AND PASSED on the 7th day of May 1997, in the Parish of
Iberville, State of Louisiana, in the presence of the undersigned competent
witness and me, Notary, after a due reading of the whole.
WITNESSES:
/s/ /s/
---------------------- ---------------------
/s/
---------------------
/s/
-------------------------
Notary
29
<PAGE>
Page 3 of 3
INITIAL REPORT BY DOMESTIC CORPORATIONS
(To be filed when the Articles of Incorporation are filed)
(R.S. 1950. 12:101)
- --------------------------------------------------------------------------------
State Of Louisiana
Parish of
To: The Secretary of State
Baton Rouge, Louisiana
Complying with R.S. 1950, 12:101. GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
(Name of Corporation)
hereby makes its initial report as follows:
Municipal Address or Location of its Registered Officer
24130 Ferdinand, Plaquemine, LA 70764
Names and Municipal Address or Location of Each Registered Agent.
Brad Smith, 2 130 Ferdinand, Plaquemine, LA 70764
The undersigned accepts the designation as registered agent as pursuant to Act
769 of 1987. I hereby accept the appointment of registered agent(s):
Registered agent(s)
signature(s)Sworn
to and subscribed
before me, 7th day
of May, 1997.
-----------------------
Notary Public
Names and Addresses of the First Directors (if elected when Articles are
Filed) Brad Smith, 24130 Ferdinand, Plaquemine, LA 70764
Dated at Lafayette, LA on the 7th day of May, 1997
---------------------------------------------------------------------
30
<PAGE>
Jul 29 97 03:10p P.10
###-##-####
Acknowledgement
STATE OF LOUISIANA
PARISH OF
This instrument was acknowldged before me on 10 day of March , 1996 by
/s/ Jimmie Wilkerson.
-------------------------
Notary Public in and for
State of Louisiana
31
Exhibit 2(ii)
STATE OF LOUISIANA
AMENDED ARTICLES OF INCORPORATION
OF
GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
(A Louisiana Corporation)
The undersigned directors, desiring to amend the Articles of
Incorporation o form a corporation under the laws and constitution of the State
of Louisiana, do hereby sign and deliver, in duplicate, the Division of
Corporations and Commercial Code of the State of Louisiana these amended
Articles of Incorporation for Golden Opportunity Development Corporation.
ARTICLE ONE
NAME
The name of the Corporation is Golden Opportunity Development Corporation.
ARTICLE TWO
PURPOSE
This corporation is organized to engage in any lawful activity for
which corporations may be formed under the Business Corporation Law.
ARTICLE THREE
BOARD OF DIRECTORS
The affairs of the Corporation shall be governed by a Board of
Directors.
ARTICLE FOUR
AUTHORIZED SHARES
The corporation shall have the authority to issue ten million
(10,000,000) shares of common stock, $0.001 per value ("Common Stock"). Shares
of any class of stock may be issued, without shareholder action, from time to
time in one or more series as may from time to time be determined the board of
directors. The Corporation's board of directors is hereby expressly granted
authority, without the necessity of shareholder action, and within the limits
set forth in the Louisiana business Corporation Law, to:
32
<PAGE>
(a) designate in whole or in part, the preferences, limitations, and
relative rights of any class of shares before the issuance of any
shares of that class;
(b) create one or more series within a class of shares, fix the number
of shares of each such series, and designate, in whole or in part, the
preferences, limitations, and relative rights of the series, all before
the issuance of any shares of that series;
(c) alter or revoke the preferences, limitations, and relative rights
granted to or imposed upon any wholly unissued class of shares or any
wholly unissued series of any class of shares; and
(d) increase or decrease the number of shares constituting any series,
the number of shares of which was originally fixed by the board of
directors, either before or after the issuance of shares of the series;
provided that, the number my not be decreased below the number of
shares of the series then outstanding, or increased above the total
number of authorized shares of the applicable class of shares available
for designation as part of the series.
The allocation between the classes, or among the series of each class,
of unhnfited voting rights and the right to receive the net assets of the
Corporation upon dissolution, shall be as designated by the board of directors.
All rights accruing to the outstanding shares of the Corporation not expressly
provided, or to the contrary, herein or in the Corporation's bylaws or in any
amendment hereto or thereto shall be vested in the Common Stock. Accordingly,
unless and until otherwise deigned by the Corporation's board of directors and
subject to any superior rights as so designated, the Common Stock shall have
unlimited voting rights and shall be entitled to receive the net assets of the
Corporation upon dissolution.
The capital stock of the Corporation shall be issued as fully paid, and
the private property of the shareholders shall not be subject to pay debts,
obligations, or liabilities of the Corporation, and no paid up stock, and no
stock issued as fully paid up shall ever be assessable or assessed.
The holders of shares of capital stock of the Corporation shall not be
entitled to preemptive or preferential rights to subscribe to any unissued stock
or any other securities which the Corporation may now or hereafter be authorized
to issue.
The Corporations's capital stock may be issued and sold from time to
time for such consideration as may be fixed by the board of directors.
The shareholders shall not possess cumulative voting rights.
33
<PAGE>
ARTICLE FIVE
CONTROL SHARES
No shareholder shall have the right to demand payment for his or her
shares in the event of a control share acquisition as provided in Louisiana's
Business Corporation Law or successor statute of like tenor, which section shall
not be applicable to the Corporation.
ARTICLE SIX
PERPETUAL EXISTENCE
The period of existence of the Corporation shall be
perpetual.
ARTICLE SEVEN
BYLAWS
The bylaws of the Corporation shall be adopted by its board of
directors. The power to alter, amend, or repeal the bylaws, or to adopt new
bylaws, shall be vested in the board of directors, except as otherwise may be
specifically provided by law or in the bylaws.
ARTICLE EIGHT
SHAREHOLDER'S MEETINGS
Meetings of shareholders shall be held at such place within or without
the State of Louisiana as may be provided by the Corporation's bylaws. Special
meetings of the shareholders may be called by the president or any other
executive officer of the Corporation, the board of directors, or any member
thereof, or by the record holder or holders, of at least ten percent (1O%) of
all shares entitled to vote at the meeting. Any action otherwise required to be
taken at a meeting of the shareholders, except election of directors, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by shareholders having at least a majority of the voting
power.
34
<PAGE>
ARTICLE NINE
LIMITATION ON LIABILITY
To the fullest extent permitted by the Louisiana Business Corporation
Law or any other applicable law as now in effect or as it may hereafter be
amended, a director of the Corporation shall have no personal liability to the
Corporation or its shareholders for monetary damages for any action taken or
failure to take any action as a director.
ARTICLE TEN
INDEMNIFICATION
To the fullest extent permitted by the Louisiana Business Corporation
Law or any other applicable law as now in effect or as it may hereafter be
amended, the Corporation shall indemnify directors and executive officers as
defined in the bylaws. The Corporation may indemnify employees, fiduciaries, and
agents to the exert provided for in the bylaws or authorized by the board of
directors.
ARTICLE ELEVEN
REGISTERED AGENT
The address of the Corporation's registered office is 427 Lafayette
Street, Baton Rouge, Louisiana. The name of registered agent at the
Corporation's registered office is Richard Surber.
I hereby accept my appointment as registered agent for the Corporation:
Dated this 30 day of Mar , 1999
---------------------
/s/ Richard Surber
-----------------------------
Registered Agent
ARTICLE TWELVE
DIRECTORS
The name and address of the Corporation is as follows:
NAME AND TITLE ADDRESS
Richard Surber 268 W. 400 S. #300 SLC,UT 84101
Bonnie Jean Tippetts 3432 S. 575 W. Ste. C Bountiful, UT 84010
35
<PAGE>
IN WITNESS WHEREOF, the undersigned director affirms and acknowledges,
under penalties of perjury, that the foregoing instrument is their act and deed
and that the facts stated herein are true.
DATED this 30 day of Mar , 1999.
-----------------------
/s/ Richard Surber
-----------------------------------
Richard Surber, President, Director
/s/ BonnieJean C Tippetts
-----------------------------------
BonnieJean Tippetts, Secretary, Director
State of Utah )
)ss.
County of Salt Lake )
On the 30 day of Mar 1999 before me, a Notary Public, personally
appeared Richard Surber, who is personally known to me to be an officer of
Golden Opportunity Development Corporation (or proved to me on the basis of
satisfactory evidence) and who by me duly sworn (or affirmed), did say that he
is a director of Golden Opportunity Development Corporation, and that said
document was signed on behalf of said Corporation.
/s/ BonnieJean C Tippetts
-----------------------------
Notary Public
36
<PAGE>
State of Utah )
) ss.
County of Salt Lake )
On the 30 day of March, 1999 before me, a Notary Public, personally appeared
------
BonnieJean Tippetts, who is personally known to me to be an officer of Golden
Opportunity Development Corporation (or proved to me on the basis of
satisfactory evidence) and who by me duly sworn (or affirmed), did say she is a
director of Golden Opportunity Development Corporation, and that said document
was signed on behalf of said Corporation.
/s/ Bethany Stringham
-------------------------
Notary Public
37
<PAGE>
EXHIBIT "'A"
TO AMENDED ARTICLES OF INCORPORATION
OF
GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
CERTIFICATE AND REPORT OF INSPECTOR OF ELECTIONS
I, the undersigned duly appointed Inspector of Elections at the Special
Meeting of Shareholders ("Meeting") of Golden Opportunity Development
Corporation, a Louisiana Corporation (the "Corporation")
held on March 13, 1999, do hereby report:
(1) The number of shares of common stock of the Corporation issued and
outstanding and entitled to vote at the Meeting was 100,000.
(2) There were present at the Meeting, in person or by proxy, 1 stock-
holder holding shares of common stock representing 51 % of the total common
stock issued and outstanding and entitled to vote.
(3) The following votes were cast by the stockholders at the Meeting for
the (2) proposals-.
Votes For Votes Against Abstentions
I. To amend the Company's
By-laws and Articles to
allow for an increase in the
number of authorized shares to
ten million as attached hereto.
("Proposal") 51,000 0 0
--------- ---------- ---------
II. To ratify the actions taken by
the Board of Directors since the
last shareholders' meeting.
("Proposal 2") 51,000 0 0
--------- ---------- ----------
III. To approve the issuance of ten
million shares to Hudson
Consulting Group, Inc.
("Proposal 3") 0 51,000 0
--------- ---------- ----------
IV. To approve the issuance of One
Hundred Twelve Thousand Five
Hundred Twenty Three shares
to Innovative Property
Development Corporation.
("Proposal 4")
51,000 0 0
---------- ---------- ----------
Date-. March 16, 1999 /s/Melinda Druce
----------------
Melinda Druce
Inspector of Elections
(DOMESTIC/FOREIGN)
38
<PAGE>
AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT
BY DESIGNATED REGISTEFIED AGENT
ACT 769 OF 1987
To the State Corporation Department
State of Louisiana
STATE OF UTAH
PARISH/COUNTY OF SALT LAKE
On this 8th day of April 1999 , before me, a Notary Public in and for the
--- ------------ -----
State and Parish aforesaid, personally came and appeared Richard D. Surber who
is to me known to be the person, and who, being duly sworn, acknowledged to me
that he does hereby accept appointment as the Registered Agent of Golden
Opportunity Development Corporation which is a Corporation authorized to
transact business in the State of Louisiana pursuant to the provisions of the
Title 12, Chapter 1, 2 and 3.
/s/ Richard Surber
----------------------------
REGISTERED AGENT
Subscribed and sworn to before
me on the day, month, and year
first set forth
/s/ BonnieJean C Tippetts
--------------------------------
NOTARY PUBLIC
NOTE: If the Agent is a Corporation authorized to act as an
agent then the affidavit must be executed by an
officer of the corporation.
SS 388 (9/87)
39
Exhibit 2(iii) BYLAWS
OF
Golden Opportunity Development Corporation
ARTICLE 1
Offices
Section 1.01 - Principal Office.
The principal and registered office for the transaction of the business of the
Corporation is hereby fixed and located at: 268 West 4OO South, Suite 3OO, Salt
Lake City, Utah 84101. The Corporation may have such other offices as the
Corporation's Board of Directors (the "Board") may designate or as the business
of the Corporation may require from time to time.
Section 1.02 - Other Offices.
Branch or subordinate offices may at any time be established by the Board at any
place or places wherein the Corporation is qualified to do business.
ARTICLE 2
Meetings of Shareholders
Section 2.01 - Meeting Place.
All annual meetings of shareholders and all other meetings of shareholders shall
be held either at the principal office or at any other place which may be
designated either by the Board, pursuant to authority hereinafter granted, or by
the written consent of all shareholders entitled to vote thereat given either
before or after the meeting and filed with the secretary of the Corporation.
Section 2.02 - Annual Meetings.
A. The annual meetings of shareholders shall be held on the anniversary date of
the date of incorporation at the hour of two o'clock p.m., provided, however,
that should the day of the annual meeting fall upon a legal holiday, then any
such annual meeting of shareholders shall be held at the same time and place on
the next business day thereafter which is not a legal holiday.
B. Written notice of each annual meeting signed by the president or vice
president, or the secretary, or an assistant secretary, or by such other person
or persons as the Board may designate, shall be given to each shareholder
entitled to vote thereat, either personally or by mail or other means of written
communication, charges prepaid, addressed to such shareholder at his address
appearing on the books of the Corporation or given by him to the Corporation for
the purpose of notice. If a shareholder gives no address, notice shall be deemed
to have been given to him if sent by mail or other means of written
communication addressed to the place where the principal office of the
Corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. As such
notices shall be sent to each shareholder entitled thereto, or published, not
less than ten (10) nor more than sixty (60) days before each annual meeting, and
shall specify the place, the day, and the hour of such meeting, and shall
Page 1 of 11
40
<PAGE>
also state the purpose or purposes for which the meeting is called.
C. Failure to hold the annual meeting shall not constitute dissolution or
forfeiture of the Corporation, and a special meeting of the shareholders may
take the place thereof.
Section 2.03 - Special Meeting.
Special meetings of the shareholders, for any purpose or purposes whatsoever,
may be called at any time by the President or by the Board, or by one or more
shareholders holding not less than ten percent (10%) of the voting power of the
Corporation. Except in special cases where other express provision is made by
statute, notice of such special meetings shall be given in the same manner as
for annual meetings of shareholders. Notices of any special meeting shall
specify in addition to the place, day, and hour of such meeting, the purpose or
purposes for which the meeting is called.
Section 2.04 - Adjourned Meetings and Notice Thereof.
A. Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of a majority of the
shares, the holders of which are either present in person or represented by
proxy thereat, but in the absence of a quorum, no other business may be
transacted at any such meeting.
B. When any shareholders' meeting, either annual or special is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Otherwise, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at an adjourned
meeting, other than by announcement at the meeting at which such adjournment is
taken.
Section 2.05 - Entry of Notice.
Whenever any shareholder entitled to vote has been absent from any meeting of
shareholders, whether annual or special, an entry in the minutes to the effect
that notice has been duly given shall be conclusive and incontrovertible
evidence that due notice of such meeting was given to such shareholder, as
required by law and these Bylaws.
Section 2.06 - Voting.
At all annual and special meetings of shareholders, each shareholder entitled to
vote thereat shall have one vote for each share of stock so held and represented
at such meetings, either in person or by written proxy, unless the Corporation's
Articles of Incorporation ("Articles") provide otherwise, in which event, the
voting rights, powers, and privileges prescribed in the Articles shall prevail.
Voting for Directors and, upon demand of any shareholder, upon any question at
any meeting, shall be by ballot. If a quorum is present at a meeting of the
shareholders, the vote of a majority of the shares represented at such meeting
shall be sufficient to bind the Corporation, unless otherwise provided in the
Bylaws or the Articles.
Section 2.07 - Quorum.
The presence in person or by proxy of the holders of a majority of the shares
entitled to vote at any meeting shall constitute a quorum for the transaction of
business. The shareholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.
Page 2 of 11
41
<PAGE>
Section 2.08 - Consent of Absentees.
The transactions of any meeting of shareholders, either annual or special,
however called and notice given thereof, shall be as valid as though done at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before of after the meeting, each of the
shareholders entitled to vote, not present in person or by proxy, signs a
written Waiver of Notice, or a consent to the holding of such meeting, or an
approval of the Minutes thereof. All such waivers, consents or approvals shall
be filed with the corporate records or made a part of the Minutes of such
meeting.
Section 2.09 - Proxies.
Every person entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a written proxy executed
by such person or his duly authorized agent and filed with the secretary of the
Corporation; provided however, that no such proxy shall be valid after the
expiration of eleven (I 1) months from the date of its execution, unless the
shareholder executing it specifies therein the length of time for which such
proxy is to continue in force, which in no case shall exceed seven (7) years
from the date of its execution.
Section 2.10 - Shareholder Action Without a Meeting.
Any action required or permitted to be taken at a meeting of the shareholders
may be taken without a meeting if a written consent thereto is signed by
shareholders holding at least a majority of the voting power, except that if a
different proportion of voting power is required for such an action at a
meeting, then that proportion of written consents is required. In no instance
where action is authorized by this written consent need a meeting of
shareholders be called or notice given. The written consent must be filed with
the proceedings of the shareholders.
ARTICLE 3
Board of Directors
Section 3.01 - Powers.
Subject to the limitations of the Articles, these Bylaws, and the provisions of
Louisiana corporate law as to action to be authorized or approved by the
shareholders, and subject to the duties of Directors as prescribed by these
Bylaws, all corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be controlled by, the
Board. Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the Directors shall have the
following powers:
A. To select and remove all the other officers, agents, and employees of the
Corporation, prescribe such powers and duties for them as are not inconsistent
with law, with the Articles, or these Bylaws, fix their compensation, and
require from them security for faithful service.
B. To conduct, manage, and control the affairs and business of the Corporation,
and to make such rules and regulations therefore not inconsistent with the law,
the Articles, or these Bylaws, as they may deem best.
C. To change the principal office for the transaction of the business if such
change becomes necessary or useful; to fix and locate from time to time one or
more subsidiary offices of the Corporation, as provided in Section 1.02 of
Article I hereof, to designate any reasonable place for the holding of any
shareholders' meeting or meetings; and to adopt, make, and use a corporate seal,
and to prescribe the forms of
Page 3 of 11
42
<PAGE>
certificates of stock, and to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of law.
D. To authorize the issuance of shares of stock of the Corporation from time to
time, upon such terms as may be lawful, in consideration of money paid, labor
done or services actually rendered, debts or securities canceled, or tangible or
intangible property actually received, or in the case of shares issued as a
dividend, against amounts transferred from surplus to stated capital.
E. To borrow money and incur indebtedness for the purposes of the Corporation,
and to cause to be executed and delivered therefore, m the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecation, or other evidences of debt and securities therefore.
F. To appoint an executive committee and other committees and to delegate to the
executive committee any of the powers and authority of the Board in management
of the business and affairs of the Corporation, except the power to declare
dividends and to adopt, amend, or repeal Bylaws. The Executive Committee shall
be composed of one or more Directors.
Section 3.02 - Number and Qualifications of Directors.
The authorized number of Directors of the Corporation shall not be less than one
(1) nor more than twelve (12).
Section 3.03 - Election and Term of Office,
The Directors shall be elected at each annual meeting of shareholders, but if
any such annual meeting is not held, or the Directors are not elected thereat,
the Directors may be elected at any special meeting of shareholders. All
Directors shall hold office until their respective successors are elected.
Section 3.04 - Vacancies.
A. Vacancies in the Board may be filled by a majority of the remaining
Directors, though less than a quorum, or by a sole remaining Director, and each
Director so elected or appointed shall hold office until his successor is
elected at an annual or a special meeting of the shareholders.
B. A vacancy or vacancies in the Board shall be deemed to exist in case of the
death, resignation, or removal of any Director, or if the authorized number of
Directors be increased, or if the shareholders fail at any annual or special
meeting of shareholders at which any Director or Directors are elected to elect
the full authorized number of Directors to be voted for at that meeting.
C. The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Directors.
D. No reduction of the authorized number of Directors shall have the effect of
removing any Director unless also authorized by a vote of the shareholders.
ARTICLE 4
Meetings of the Board of Directors
Page 4 of 11
43
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Section 4.01 - Place of Meetings.
Regular meetings of the Board shall be held at any reasonable place, with
sufficient notice given, which has been designated from time to time by
resolution of the Board or by written consent of all members of the Board. In
the absence of such designation, regular meetings shall be held at the principal
office of the Corporation. Special meetings of the Board may be held either at a
place so designated, or at the principal office. Failure to hold an annual
meeting of the Board shall not constitute forfeiture or dissolution of the
Corporation.
Section 4.02 - Organization Meeting.
Immediately following each annual meeting of shareholders, the Board shall hold
a regular meeting for the purpose of organization, election of officers, and the
transaction of other business. Notice of such meeting is hereby dispensed with.
Section 4.03 - Other Regular Meetings.
Other regular meetings of die Board shall be held, whether monthly or quarterly
or by some other schedule, at a day and time as set by the President; provided
however, that should the day of the meeting fall upon a legal holiday, then such
meeting shall be held at the same time on the next business day thereafter which
is not a legal holiday. Notice of all such regular meetings of the Board is
hereby required.
Section 4.04 - Special Meetings.
A. Special meetings of the Board may be called at any time for any purpose or
purposes by the President, or, if he is absent or unable or refuses to act, by
any Vice President or by any two Directors.
B. Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail (including
overnight delivery services such as Federal Express) or telegraph, charges
prepaid, addressed to him at his address as it is shown upon the records of the
Corporation, or if it is not shown upon such records or is not readily
ascertainable, at the place in which the regular meetings of the Directors are
normally held. No such notice is valid unless delivered to the Director to whom
it was addressed at least twenty-four (24) hours prior to the time of the
meeting. However, such mailing, telegraphing, or delivery as above provided
herein shall constitute prima facie evidence that such director received proper
and timely notice.
Section 4.05 -- Notice of Adjournment.
Notice of the time and place of an adjourned meeting need not be given to absent
Directors, if the time and place be fixed at the meeting adjourned.
Section 4.06 - Waiver of Notice.
The transactions of any meeting of the Board, however called and noticed or
wherever held, shall be as valid as though a meeting had been duly held after
regular call and notice, if a quorum be present, and if, either before or after
the meeting, each of the Directors not present signs a written waiver of notice
or a consent to holding such meeting or an approval of the Minutes thereof. All
such waivers, consents, or approvals shall be filed with the corporate records
or made a part of the Minutes of the meeting.
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Section 4.07 - Quorum.
If the Corporation has only one Director, then the presence of that one Director
constitutes a quorum. If the Corporation has only two Directors, then the
presence of both such Directors is necessary to constitute a quorum. If the
Corporation has three or more Directors, then a majority of those Directors
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. A Director may be present at a
meeting either in person or by telephone. Every act or decision done or made by
a majority of the Directors present at a meeting duly held at which a quorum is
present, shall be regarded as the act of the Board, unless a greater number be
required by law or by the Articles.
Section 4.08 - Adjournment.
A quorum of the Directors may adjourn any Directors' Meeting to meet again at a
stated day and hour; provided however, that in the absence of a quorum, a
majority of the Directors present at any Directors' Meeting, either regular or
special, may adjourn such meeting only until the time fixed for the next regular
meeting of the Board.
Section 4.09 - Fees and Compensation.
Directors shall receive a stated salary for their services as Directors in stock
of the Corporation. In addition, by resolution of the Board, a fixed fee, with
or without expenses of attendance, may be allowed for attendance at each
meeting. Nothing stated herein shall be construed to preclude any Director from
serving the Corporation in any other capacity as an officer, agent, employee, or
otherwise, and receiving compensation therefore.
Section 4.10 - Action Without a Meeting.
Any action required or permitted to be taken at a meeting of the Board, or a
committee thereof, may be taken without a meeting if, before or after the
action, a written consent thereto is signed by all the members of the Board or
of the Committee. The written consent must be filed with the proceedings of the
Board or Committee.
ARTICLE 5
Officers
Section 5.01 - Executive Officers.
The executive officers of the Corporation shall be a President, a Secretary, and
a Treasurer/Chief Financial Officer. The Corporation may also have, at the
direction of the Board, a Chairman of the Board, one or more Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.03 of this Article. Officers other than the President and the Chairman of the
Board need not be Directors. Any one person may hold two or more offices, unless
otherwise prohibited by the Articles or by law.
Section 5.02 -- Appointment.
The officers of the Corporation, except such officers as may be appointed in
accordance with the provisions of Sections 5.03 and 5.05 of this Article, shall
be appointed by the Board, and each shall hold hi s office until he resigns or
is removed or otherwise disqualified to serve, or his successor is appointed and
qualified.
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Section 5.03 - Subordinate Officers.
The Board may appoint such other officers as the business of the Corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these Bylaws or as the Board may from
time to time determine.
Section 5.04 - Removal and Resignation.
A. Any officer may be removed, either with or without cause, by a majority of
the Directors at the time in office, at any regular or special meeting of the
Board.
B. Any officer may resign at any time by giving written notice to the Board or
to the President or Secretary. Any such resignation shall take effect on the
date such notice is received or at any later time specified therein.
Unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5.05 - Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to such office.
Section 5.06 - Chairman of The Board.
The Chairman of the Board, if there be such an officer, shall, if present,
preside at all meetings of the Board, and exercise and perform such other powers
and duties as may be from time to time assigned to him by the Board or
prescribed by these Bylaws.
Section 5.07 - President.
Subject to such supervisory powers, if any, as may be given by the Board to the
Chairman of the Board (if there be such an officer), the President shall be the
Chief Executive Officer of the Corporation and shall, subject to the control of
the Board, have general supervision, direction, and control of the business and
officers of the Corporation. He shall preside at all meetings of the
shareholders and, in the absence of the Chairman of the Board, or if there be
none, at all meetings of the Board. He shall be an ex-officio member of all the
standing committees, including the Executive Committee, if any, and shall have
the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board or these Bylaws.
Section 5.08 - Vice President.
In the absence or disability of the President the Vice Presidents, in order of
their rank as fixed by the Board, or if not ranked, the Vice President
designated by the Board, shall perform all the duties of the President and when
so acting shall have all the powers of, and be subject to all the restrictions
upon, the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board or these Bylaws.
Section 5.09 - Secretary.
A. The Secretary shall keep, or cause to be kept, at the principal office or
such other place as the Board may direct a book of (i) Minutes of all meetings
of directors and shareholders, with the time and place of holding, whether
regular or special, and if special how authorized, the notice thereof given, the
names of
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those present and absent at Directors' Meetings, the number of shares present or
represented at Shareholders' Meetings, and the proceedings thereof, and (ii) any
waivers, consents, or approvals authorized to be given by law or these Bylaws.
B. The Secretary shall keep, or cause to be kept, at the principal office, a
share register, or a duplicate share register, showing (i) the name of each
shareholder and his or her address; (ii) the number and class or classes of
shares held by each, and the number and date of certificates issued for the
same; and (iii) the number and date of cancellation of every certificate
surrendered for cancellation.
C. The Secretary shall give, or cause to be given, notice of all the meetings of
the shareholders and of the Board required by these Bylaws or by law to be
given, and he shall keep the seal of the Corporation, if any, in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board or these Bylaws.
Section 5.10 - Treasurer/Chief Financial Officer.
A. The Treasurer/Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus, and
shares. Any surplus, including earned surplus, paid-in surplus, and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all times
be open to inspection by any Director.
B. The Treasurer/Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. He shall disburse the funds of
the Corporation as may be ordered by the Board, shall render to the President
and Directors, whenever they request it, an account of all of his transactions
as Treasurer and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board or these Bylaws.
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ARTICLE 6
Miscellaneous
Section 6.01 - Record Date and Closing Stock Books.
The Board may fix a time in the future, for the payment of any dividend or
distribution, or for the allotment of rights, or when any change or conversion
or exchange of shares shall go into effect, as a record date for the
determination of the shareholders entitled to notice of and to vote at any such
meeting, or entitled to receive any such dividend or distribution, or any such
allotment of rights, or to exercise the rights in respect to any such change,
conversion or exchange of shares, and in such case only shareholders of record
on the date so fixed shall be entitled to notice of and to vote at such
meetings, or to receive such dividend, distribution, or allotment of rights, or
to exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after any record date fixed as herein set
forth. The Board may close the books of the Corporation against transfers of
shares during the whole, or any part, of any such period.
Section 6.02 - Inspection of Corporate Records.
The Share Register or Duplicate Share Register, the Books of Account, and
Records of Proceedings of the Shareholders and Directors shall be open to
inspection upon the written demand of any shareholder or the holder of a voting
trust certificate, at any reasonable time, and for a purpose reasonably related
to his interests as a shareholder or as the holder of a voting trust
certificate, and shall be exhibited at any time when required by the demand of
ten percent (10%) of the shares represented at any shareholders' meeting. Such
inspection may be made in person or by an agent or attorney, and shall include
the right to make extracts. Demand of inspection other than at a Shareholders'
Meeting shall be made in writing upon the President, Secretary, or Assistant
Secretary, and shall state the reason for which inspection is requested.
Section 6.03 - Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the Corporation,
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the Board.
Section 6.04 - Annual Report.
The Board shall cause to be sent to the shareholders, not later than one hundred
twenty (120) days after the close of the fiscal or calendar year, an annual
report.
Section 6.05 - Contracts: How Executed.
The Board, except as otherwise provided in these Bylaws, may authorize any
officer, officers, agent, or agents, to enter into any contract, deed, or lease,
or execute any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances; and unless so
authorized by the Board, no officer, agent, or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or render it liable for any purpose or for any amount.
Section 6.06 - Certificates of Stock.
A certificate or certificates for shares of the capital stock of the Corporation
shall be issued to each shareholder when any such shares are fully paid up. All
such certificates shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
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signature of the President and Secretary or by a facsimile of the signatures of
the President and the written signature of the Secretary or an Assistant
Secretary. Every certificate authenticated by a facsimile of a signature must be
countersigned by a transfer agent or transfer clerk.
Section 6.07 - Representations of Shares of Other Corporations.
The President or any Vice President and the Secretary or Assistant Secretary of
this Corporation are authorized to vote, represent, and exercise on behalf of
this Corporation, all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of this
Corporation or corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of attorney duly executed
by said officers.
Section 6.08 - Inspection of Bylaws.
The Corporation shall keep in its principal office for the transaction of
business the original or a copy of these Bylaws, as amended or otherwise altered
to date, certified by the Secretary, which shall be open to inspection by the
shareholders at all reasonable times during office hours.
Section 6.09 - Indemnification.
A. The Corporation shall indemnify its officers and directors for any liability
including reasonable costs of defense arising out of any act or omission of any
officer or director on behalf of the Corporation to the full extent allowed by
the laws of the State of Louisiana, if the officer or director acted in good
faith and in a manner the officer or director reasonably believed to be in, or
not opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful.
B. Any indemnification under this section (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because the officer or director has met the applicable standard of
conduct. Such determination shall be made by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to such
action, suit, or proceeding, or, regardless of whether or not such a quorum is
obtainable and a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or by the stockholders.
ARTICLE 7
Amendments
Section 7.01 - Power of Shareholders.
New Bylaws may be adopted, or these Bylaws may be amended or repealed, by the
affirmative vote of the shareholders collectively having a majority of the
voting power or by the written assent of such shareholders.
Section 7.02 - Power of Directors.
Subject to the rights of the shareholders as provided in Section 7.01 of this
Article, Bylaws other than a bylaw, or amendment thereof, changing the
authorized number of Directors, may also be adopted, amended, or repealed by the
Board.
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Certificate
The undersigned, being a majority of the initial Board of Golden Opportunity
Development Corporation, a corporation duly organized and existing under and by
virtue of the laws of the State of Louisiana; certify that the above and
foregoing Bylaws of said corporation were duly and regularly adopted as such by
the Board of Directors of the Corporation at a meeting of said Board, which was
duly held on the 12th day of March, 1999, that the above and foregoing Bylaws
are now in full force and effect.
DATED this 12th day of March, 1999
/s/ Richard Surber
-------------------------
Richard Surber, Director
50
Exhibit 6(i)
MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the.30th Day of April , 1999
(hereinafter between Golden Opportunity Development Corporation, a Louisiana
corporation referred to as "Owner") and Diversified Holdings 1, Inc. a Nevada
corporation (hereinafter referred to as "Manager"). The subject matter of this
Agreement is the motel and retail buildings located in the city of Baton Rouge,
Louisiana owed by Owner (hereinafter referred to as the "Property").
Owner desires that the Property be managed and that accounting,
management and maintenance services be provided by Manager serving as an agent
for the Owner on the terms and conditions herein set forth.
In consideration for the terms, conditions and covenants set forth
herein, the parties mutually agree as follows:
AGENCY
Owner hereby appoints Manager as Owner's agent for the retail
management of the Property, commencing as of the date of this Agreement. Manager
shall serve in such capacity as an independent contractor and not as an employee
of Owner. Subject to such express restrictions or limitations on its authority
as are set forth below or as may be agreed upon by the parties hereto in
writing, Manager shall perform the services and have the powers as herein set
forth as to the property.
MANAGEMENT
So long as it manages the Property:
(a) Manager shall use all rents collected from the Property to pay all
items set forth herein which Manager is to pay at Owner's cost and expense. It
is the intent of the parties that Manager shall be reimbursed for all legitimate
expenses of the Property incurred by Manager.
(b) Manager shall use its best efforts to rent or lease all available
space within the Property. Manager shall, at owner's expense, promote such
leasing and rental of motel rooms by such reasonable use of advertising,
circulars and other promotional aids as it deems appropriate.
(c) As agent for the Owner, Manager shall select and obtain tenants,
arrange for and execute leases and extensions and renewals of leases on tenants
established by mutual agreement of the parties, terminate tenancies and leases,
and arrange and consent to assignments of leases and subletting of property,
subject to such instructions or directions from Owner as Owner may deem
necessary or appropriate.
(d) Manager shall use its best efforts to collect rent and other income
from the Property. It may in its discretion institute legal proceedings in the
name of Owner, or, in the cases of routine
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matters, in its own name, to collect the same, to oust or dispossess tenants or
other occupying the Property, and otherwise to enforce the rights of Owner with
respect thereto. Manager may in its discretion compromise claims for rent and
other income or settle such legal proceedings.
(e) Manager shall at Owner's expense (except in cases where a tenant may
be obligated to do so) keep and maintain (i) the entire Property, including
without limitation: the roofs, walls, foundations and appurtenances, exterior
and interiors of the buildings, pipes, heating, cooling, lighting, plumbing and
electrical distribution systems and all other fixtures, machinery and equipment
forming part of the Property and (ii) the entire extent of the personal
property located on or within the Property, including without limitation: the
appliances, drapes, furniture, fixtures, machinery and equipment, in constant
good order, repair and condition, whether the necessity of such repairs may
arise from wear, tear, obsolescence, casualty or other cause, suffering no waste
or injury. To that end, Manager shall, at Owner's expense, promptly make all
needed repairs, replacements and renewals, ordinary and extraordinary,
structural or otherwise. Upon termination of this Agreement, Manager shall
deliver to Owner all real and personal property belonging to the Property in the
condition in which Manager is required to maintain it.
(f) Manager shall contract, in Owner's name, and shall pay from Owner's
accounts at Owner's expense all services to tenants which are usually or
customarily furnished or rendered in connection with the rental of the Property
with reference to the type of property involved and the area in which the
Property is located (hereinafter referred to as "customary services"). No
separate charge shall be made to the tenants by Manager for customary services
which are furnished except as set forth in the leases entered into with the
individual tenants.
(g) Manager shall, in Owner's name, engage and discharge such employees
and others as it deems necessary or appropriate for the maintenance, on site
management and operation of the Property to furnish customary services to the
tenants of the Property and to make repairs with respect to the real and
personal property located on the Property. All such employees shall be in the
employ of the Owner, Owner at it's expense and discretion maintain fidelity
insurance on those of its employees handling funds or assets of the Property.
All such employees shall be covered as necessary with statutory Workmen's
Compensation coverage and shall be subject to all required federal, state and
local tax with holdings with respect to such employees.
(h) Manager shall make any necessary or appropriate rules and
regulations for the operation of the Property.
(i) Manager at Owner's expense shall pay all real property taxes,
special improvements and other assessments, water and sewer rents and charges,
and all other taxes, duties, charges, fees and payments imposed by and
governmental or public authority or which shall be imposed, assessed or levied
or arise in connection with the use, occupancy, or possession of the Property or
any part thereof during the term of this Agreement, all of which are called
"Governmental impositions". In each case, Manager shall deliver to Owner thirty
(30) days prior to the last day upon which Governmental impositions may be paid
without penalty or interest, a copy of the notice of such Governmental
imposition or a copy of a receipt showing payment thereof. Manager shall, upon
the written request of Owner, contest in good faith by appropriate proceedings
conducted promptly at Owner's expense, the validity and enforcement of any
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Governmental impositions. Manager shall diligently prosecute such contest to
final determination by the court, department or governmental authority or body
having jurisdiction of such contest. Owner agrees to cooperate reasonably with
Manager and to execute any documents or pleadings required for such purpose and
any expense or liability in connection therewith shall be the expense or
liability of the Owner. Manager may defer payment of the contested Governmental
Imposition pending such contest so long as such deferment shall not subject the
interest of Owner in the Property to forfeiture.
(j) Manager shall, at Owner's expense, promptly comply with all present
and future laws, rules, and requirements, orders, directions, ordinances and
regulations of the United States of America or of the state, county and city
governments, or of any other municipal, governmental and lawful authority
whatsoever, affecting the Property or appurtenances of any part thereof, and of
all their departments, bureaus or officials (all of the foregoing being
hereinafter called "Requirements of Law"), whether such requirements may relate
to: (i) structural or other alterations, changes, additions, improvements; or
(ii) repairs, inside or outside, extraordinary or ordinary; or (iii) the manner
in which the Property may be used or occupied; or (iv) any other matter
affecting the Property, whether like or unlike the foregoing. Manager shall
immediately upon the discovery of any violation of a Requirement of Law which
might subject Owner to liability or forfeiture of any interest, take all
necessary steps, legal or equitable, to compel the discontinuance thereof and to
oust and remove any tenants, occupants or other persons guilty of such use.
Manager shall upon the written request of Owner, contest in good faith by
appropriate proceedings conducted promptly at Owner's expense, the validity or
enforcement of any Requirement of Law. Manager shall diligently prosecute such
contest to final determination by the court, department of governmental
authority or body having jurisdiction of such contest. Owner agrees to cooperate
reasonably with Manager, and to execute all documents and pleadings required for
the purpose of such contest and any expense or liability in connection therewith
shall be the expense or liability of the Property and the Owner. Manager may
defer compliance with any Requirement of Law pending such contest so long as
such noncompliance shall not constitute a crime or misdemeanor on the part of
Owner.
(k) Manager, at Owner's expense, shall keep the buildings, personal
property and all improvements included with the Property insured against loss by
fire and so-called extended coverage perils in an amount equal to the full
replacement cost, exclusive of foundations, including all buildings and the
personal property and equipment situated therein. Manager will, at Owner's
expense, obtain at no longer than three year intervals during the period of this
Agreement is in effect, successive appraisals of the building, personal property
and improvement included within the Property by a reliable insurance appraiser
and in the event an appraisal shows a valuation of such improvements in excess
of the valuation theretofore being used for insurance coverage purposes under
the provisions of this paragraph, Manger will increase said insurance coverage
so as to cover such increase in valuation. Manager at Owner's expense shall
provide and keep in force, for the protection of Owner, comprehensive general
public liability and property damage insurance against claims for bodily injury
or death or property damage occurring upon the Property and the sidewalks or
property adjacent thereto, in the limits of not less than $100,000 in respect of
bodily injury or death to any one person and not less than $ 1,000,000 for
bodily injury or death to any number of persons arising our of one accident or
disaster, and in limits of not less than $500,000 for damage to property, and if
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higher limits shall at any time be customary to protect against possible tort
liability, such higher limits shall be carried. Manager at Owner's expense shall
carry insurance in such amounts as may from time to time be reasonably required
by Owner against other insurable hazards what are at the time commonly insured
against in the case of a similar property in Baton Rouge, Louisiana under this
paragraph shall be carried in the name of the Owner, Manager and the holder of
any indebtedness secured by the Property, as their respective interests shall
appear. Manager shall upon execution of this Agreement deliver such policies to
Owner with evidence of the payment of premiums thereon. Renewals of all policies
at any time in force, with such evidence of payments, shall be delivered to
Owner from time to time at least thirty (30) days before the expiration thereof.
All such insurance shall be taken in such responsible companies as Owner shall
reasonably approve, and each policy shall provide that no cancellation thereof
may be made by the insurance carrier without having first given ten days notice
in writing thereof to Owner, Manager and the holder of any indebtedness secured
by the Property.
(l) Any funds required to be paid by Manager for Governmental
Impositions or for insurance under which any holder of any indebtedness secured
by the Project shall require Owner to pay the same amount over to Manager upon
notice of such payment by Manager of Owner's obligation.
(m) Manager shall in its discretion and at Owner's expense engage
counsel acceptable to Owner to advise on legal matters and conduct legal
proceedings arising in the performance of Manager's duties hereunder.
(n) Manager shall maintain complete and accurate records of all
transactions relating to the Property, including disbursements, receipts and all
correspondence and data relating to the supervision, management and operation of
the Property, and shall make such records available for inspection and copying
by owner or its representatives at reasonable times. Such books and records
shall be separate from those recording Manager's own accounts and those of any
other principal. Owner, at its expense may cause such books, records and data to
be audited by a firm of independent certified public accountants which it shall
designate. Manager shall comply with such instructions as may be given to it by
Owner concerning the specific form or content of such records.
(o) If specifically instructed to do so, Manager shall pay at Owner's
expense, all sums that become due as they become due on indebtedness secured by
the Property.
(p) Manager shall render to Owner, within fifteen (I 5) days after the
end of each month, a monthly statement of receipts and disbursements during the
preceding month with respect to the Property, showing the revenues and expenses
of the Property. Along with each monthly statement Manager shall remit to Owner
a statement of "net income" of the Property for the preceding month. For the
purposes of this Agreement, "net income" shall mean all rent monies collected
for the month minus all expenses incurred and payments made by Manager on behalf
of Owner under this Agreement and minus any compensation due Manager which
Manager is entitled to deduct from "net income" under Compensation. In any month
in which the expenses incurred by Manager on behalf of Owner exceed the net
income of the Property, the amount of the expenses in excess of the net income
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shall be billed to Owner and paid by Owner within fifteen (15) days after
receipt of such bill. Manager shall also render to Owner, within thirty (30)
days after the end of the calendar year, an annual report which shall include a
statement of receipts and disbursements during the preceding calendar year with
respect to the Property and a brief report of Manager's activities in regard to
the Property during the preceding calendar year.
(q) Manager shall perform such additional administrative and managerial
duties in connection with the Property as Owner may request in writing from time
to time.
COMPENSATION
As compensation for its services Manager shall be entitled to a
professional management fee which shall be the sum of Ten Thousand ($ 1 0,000)
dollars per month and 5 % of the effective monthly net income, if any, in excess
of Five Thousand ($5,000) dollars, payable monthly. Manager may deduct these
fees from any amounts due Owner hereunder.
INDEMNITY
Manager shall indemnify, defend and save harmless Owner from any and
all liabilities, damages, penalties, costs, expenses, claims, suits or actions
due to or arising out of any breach, violation or nonperformance of any
obligation of Manager hereunder. Manager shall indemnify and hold harmless Owner
from contract of other liability, claims or damages, or act committed by Manager
beyond the scope of this Agreement to the extent that such liability is not
covered by insurance.
TERM
This Agreement shall commences on the date of its execution and
continue in full force and effect for a period of one (1) year after the date of
its execution. After such initial term, this Agreement shall automatically
continue until canceled by Owner or Manager upon thirty (30) days prior written
notice given to the other Party. Upon termination of this Agreement, Manager
shall be entitled to any compensation specified herein which has accrued and
become payable but has not been paid to manager hereunder as of the date of such
termination.
PERFORMANCE OF MANAGER'S OBLIGATION BY OWNER
Owner may make any payment or perform or cause to be performed or all
obligation of Manager under this Agreement which Manager may neglect or refuse
to perform. All costs in excess of amounts normally paid on behalf of Owner
incurred by Owner in connection therewith shall be paid to Owner by Manager. The
provisions contained in this section shall not limit Manager's obligations under
this Agreement and the right and authority hereby reserved does not impose upon
Owner any responsibility for the care, repair or supervision of the Property or
any building, personal property, equipment, fixture or appurtenance. Owner shall
h
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ave the right without terminating this Agreement to sue for and recover all
sums payable hereunder.
DAMAGE OR DESTRUCTION
In the event of damage to or destruction of the Property or any part
thereof, Owner may at its election proceed to repair or rebuild. If Owner elects
to repair or rebuild the Property, the Agreement shall not be terminated or
affected in any manner by reason of the destruction or damage in whole or in
part of the Property or any such building or improvement located thereon, or by
reason of the untenantability of the Property or any such building or
improvements, and the payments to Owner under this Agreement as well as all
other charges payable hereunder shall be paid by Manager in accordance with the
terms, covenants and conditions of this Agreement without abatement, diminution
or reduction, provided the funds therefore are available from the Property or
otherwise provided to Manager by Owner. If Owner within sixty (60) days after
such damage or destruction elects not to repair or rebuild the Property, this
Agreement shall terminate as of the date of such damage or destruction. If under
the terms of any mortgage, deed of trust or other such instrument covering the
Property, the holder of the indebtedness secured thereby has the right to apply
any insurance proceeds to the reduction of such indebtedness or to the
restoration of the Property, and the holder of such indebtedness has not made
such decision within sixty (60) days after such damage or destruction, the
period of time under this section in which Owner shall decide whether to repair
or rebuild shall be extended until ten (1O) days after the holder of such
indebtedness shall have made its decision.
SCOPE OF MANAGER'S AUTHORITY
The scope of Manager's authority to bind Owner shall be determined by
provisions of this Agreement and any amendments hereto. Manager may not bind
Owner to make any expenditure or bind Owner to any contract calling for any
expenditure except pursuant to the terms of this Agreement.
AMENDMENTS
This Agreement may be amended only by the mutual consent in writing of
the Parties.
NOTICE
All notices, requests, consents, approval, written instructions,
reports or other communication by Owner and Manager under this Agreement shall
be in writing and shall be deemed to have been given or served if delivered or
if mailed by certified mail, postage prepaid, addressed as follows:
To Owner: Golden Opportunity Development Corp.
427 Lafayette Street
Baton Rouge, Louisiana 70802-5408
(225) 387-0421
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To Manager: Diversified Holdings 1, Inc.
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
801) 575-8073
Either party may change the address to which notice, requests, consents,
approvals, written instruction, reports or other communications are to be given
by a notice of change of address given in the manner set forth in this section.
NONASSIGNABILITY
Owner has entered into this Agreement in reliance upon the experience,
ability and financial worth of Manager and Manager shall not assign or transfer
any interest in this Agreement without the prior written consent of Owner.
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the laws of
the state of Utah
EXECUTED as of the date first set forth above.
GOLDEN OPPORTUNITY DEVELOPMENT CORP. - "OWNER"
BY: /s/ BonnieJean C Tippetts TITLE: Sec
--------------------------
DIVERSIFIED HOLDINGS I, INC. - "MANAGER"
BY: /s/ Richard Surber TITLE: President
---------------------------
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Exhibit 6(ii)
Location: BATON ROUGE, LA Entity No.: Unit No.: 11730
VILLAGER FRANCHISE SYSTEMS, INC.
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("Agreement"), dated July 9, 1999 is between
VILLAGER FRANCHISE SYSTEMS, INC., a Delaware corporation("we", "our" or "us"),
and, GOLDEN OPPORTUNITY DEVELOPMENT, a corporation ("you"). The definitions of
capitalized terms are found in Appendix A. In consideration of the following
mutual promises, the parties agree as follows:
1. License. We have the exclusive right to license and franchise to you the
distinctive "Villager Lodge" System for providing economy, extended stay lodging
services. We grant to you and you accept the License, effective and commencing
on the Opening Date and ending on the earliest to occur of the Term's expiration
or a Termination. The License is effective only at the Location and may not be
transferred or relocated. You will call the Facility a "Villager Lodge." You may
adopt additional or secondary designations for the Facility with our prior
written consent, which we may withhold, condition, or withdraw on written notice
in our sole discretion.
2. Protected Territory. We will not own, operate, lease, manage, or license
anyone but you to operate a Chain Facility of the same name (Villager Lodge) in
the "Protected Territory", defined in Appendix A, while this Agreement is in
effect. We may own, operate, lease, manage, franchise or license anyone to
operate any Chain Facility located anywhere outside the Protected Territory
without any restriction or obligation to you. We may grant protected Territories
for other Chain Facilities that overlap your Protected Territory. You will use
any information obtained through the Reservation System to refer guests,
directly or indirectly, only to Chain Facilities. This Section does not apply to
any Chain Facility located in the Protected Territory on the Effective Date,
which we may renew, relicense, allow to expand, or replace with a replacement
Facility located within the same trading area having not more than 120% of the
guest rooms of the replaced Chain Facility if its franchise with us terminated
or is not renewed. The Protected Territory fairly represents the Facility's
trading area, and you acknowledge that. There are no express or implied
territorial rights or agreements between the parties except as stated in this
Section. The covenants in this Section are mutually dependent; if you breach
this Section, your Protected Territory will be the Location only.
3. Your Improvement and Operating Obligations. Your obligations to improve,
operate and maintain the Facility are:
3.1 Improvements. You must select and acquire the Location and acquire, equip
and supply the Facility in accordance with System Standards. You must provide us
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with proof that you own or lease the Facility before or within 30 days after the
Effective Date. You must begin renovation of the Facility no later than thirty
(30) days after the Effective Date. The deadline for completing the pre-opening
phase of conversion and renovation, when the Facility must attain a satisfactory
preopening score under our quality assurance inspection system and be ready to
open for business under the System, is ninety (90) days after the Effective
Date. All renovations will comply with System Standards, the Approved Plans and
any Punch List attached to this Agreement. Your general contractor or you must
carry the insurance required under this Agreement during renovation. You must
complete the pre-opening renovation specified on the Punch List and the Facility
must pass its pre-opening quality assurance inspection before we consider the
Facility to be ready to open under the System. You must continue renovation and
improvement of the Facility after the Opening Date as the Punch List requires so
that the Facility attains a satisfactory score on its post-opening quality
assurance inspection given within nine (9) months after the Opening Date. We
may, in our sole discretion, terminate this Agreement by giving written notice
to you (subject to applicable law) if (1) you do not commence or complete the
pre-opening or post- opening improvements of the Facility by the dates specified
in this Section, or (2) you prematurely identify the Facility as a Chain
Facility or begin operation under the System name described in Schedule B in
violation of Section 3.3 and you fail to either complete the pre-opening
Improvement Obligation or cease operating and/or identifying the Facility under
the Marks and System within five days after we send you written notice of
default. Time is of the essence for the Improvement Obligation. We may, however,
in our sole discretion, grant one or more extensions of time to perform any
phase of the Improvement Obligation. You will pay us a non-refundable extension
fee of $1.50 per room for each day of any extension of the deadline for
completing pre-opening improvements. This fee will be payable to us after each
30 days of the extension. You will pay us the balance of the extension fee
outstanding when the Facility opens under the System 10 days after the Opening
Date. The grant of an extension will not waive any other default existing at the
time the extension is granted.
3.2 Improvement Plans. You will create plans and specifications for the work
described in Section 3.1 (based upon the System Standards and this Agreement) if
we so request and submit them for our approval before starting improvement of
the Location. We will not unreasonably withhold or delay our approval, which is
intended only to test compliance with System Standards, and not to detect errors
or omissions in the work of your architects, engineers, contractors or the like.
Our review does not cover technical, architectural or engineering factors, or
compliance with federal, state or local laws, regulations or code requirements.
We will not be liable to your lenders, contractors, employees, guests, others,
or you on account of our review or approval of your plans, drawings or
specifications, or our inspection of the Facility before, during or after
renovation or construction. Any material variation from the Approved Plans
requires our prior written approval. You will promptly provide us with copies of
permits, job progress reports, and other information as we may reasonably
request. We may inspect the work while in progress without prior notice.
3.3 Pre-Opening. You may identify the Facility as a Chain Facility prior to the
Opening Date, or commence operation of the Facility under a Mark and using the
System, only after first obtaining our approval or as permitted under and
strictly in accordance with the System Standards Manual. If you identify the
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Facility as a Chain Facility or operate the Facility under a Mark before the
Opening Date without our express written consent, then in addition to our
remedies under Sections 3.1 and 1 1.2, you will begin paying the Royalty to us,
as specified in Section 7. 1, from the date you identify or operate the Facility
using the Mark. We may delay the Opening Date until you pay the Royalty accruing
under this Section.
3.4 Operation. You will operate and maintain the Facility continuously after the
Opening Date on a year-round basis as required by System Standards and offer
extended stay lodging and other services of the Facility (including those
specified on Schedule B) to the public in compliance with the law and System
Standards. You will keep the Facility in a clean, neat, and sanitary condition.
You will clean, repair, replace, renovate, refurbish, paint, and redecorate the
Facility and its FF&E as and when needed to comply with System Standards. The
Facility will accept payment from guests by all credit and debit cards we
designate in the System Standards Manual. You may add to or discontinue the
amenities, services and facilities described in Schedule B, or lease or
subcontract any service or portion of the Facility, only with our prior written
consent which we will not unreasonably withhold or delay. Your front desk
operation, telephone system, parking lot, swimming pool and other guest service
facilities may not be shared with or used by guests of another lodging or
housing facility.
3.5 Training. The Facility's general manager will attend the training program
described in Section
4.1. You will train or cause the training of all Facility personnel as and when
required by System Standards and this Agreement. You will pay for all tuition,
travel, lodging, meals and compensation expenses of the people you send for
training programs, other reasonable charges we may impose for training under
Section 4. 1, and all travel, lodging, meal and facility and equipment rental
expenses of our representatives for training provided at the Facility.
3.6 Marketing. (a) You will participate in System marketing programs, including
the Directory and the Reservation System. You will obtain and maintain the
computer and communications service and equipment we specify to participate in
the Reservation System. You will comply with our rules and standards for
participation, and will honor reservations and commitments to guests and travel
industry participants. You may implement, at your option and expense, your own
local advertising. Your advertising materials must use the Marks correctly, and
must comply with System Standards or be approved in writing by us prior to
publication. You will stop using any non-conforming, out-dated or misleading
advertising materials if we so request.
(b) You must place daily classified advertisements, meeting System
Standards, in the largest circulation daily newspaper serving the hotel trading
area for your Facility. You must perform all other advertising and marketing
activities that we require on a Chain-wide basis.
3.7 Governmental Matters. You will obtain as and when needed all governmental
permits, licenses and consents required by law to construct, acquire, renovate,
operate and maintain the Facility and to offer all services you advertise or
promote. You will pay when due or properly contest all federal, state and local
payroll, withholding, unemployment, beverage, permit, license, property, ad
valorem and other taxes, assessments, fees, charges, penalties and interest, and
will file when due all governmental returns, notices and other filings.
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3.8 Inspections and Audits. You will permit our representatives to perform
quality assurance inspections of the Facility and audit your financial and
operating books and records (including tax returns) particularly those relating
to the Facility and any related business, with or without prior
notice of the inspection or audit. The inspections and audits will commence
during normal business hours, although we may observe Facility operation and
accounting activity at any time. You, the Facility staff and your other agents
and employees will cooperate with our inspectors and auditors in the performance
of their duties. You will pay us any underpayment of, and we will pay you or
credit your Recurring Fee account for any overpayment of, Recurring Fees
discovered by the audit. If the Facility does not pass an inspection, you refuse
to cooperate with our inspectors or our auditors when they arrive for an audit
at a time scheduled at least 3 business days in advance or the audit reveals
that you paid us less than 97% of the correct amount of Recurring Fees for a
fiscal year or longer, you will pay us the Audit Fee described in Section 4.8,
or the reasonable costs of travel, lodging and meal expenses for reinspection
and any reinspection fee we may impose. We may publish or disclose the results
of quality assurance inspections.
3.9 Reports and Accounting. You will prepare and submit timely monthly reports
containing the information we require about the Facility's performance during
the preceding month. You will prepare and submit other reports and information
about the Facility as we may reasonably request from time to time or in the
System Standards Manual. You will prepare and maintain any reports required
under the System Standards Manual in the Facility's property management or
reservation computer system, including the name and address of Facility guests,
if collected, and send them to us or allow us to access them by means of a
telephone datalink. You will allow us access to the reports and data stored on
the Facility's property management or reservation computer system via telephone,
provided that we will not unreasonably interfere with normal functioning of the
property management or reservation computer system. You will maintain accounting
books and records in accordance with generally accepted accounting principles
and the American Hotel & Motel Association Uniform System of Accounts for
Hotels, as amended, subject to this Agreement and other reasonable accounting
standards we may specify from time to time. You will prepare and submit to us if
we so request your annual and semi-annual financial statements. We do not
require that your financial statements be independently audited, but you will
send us a copy of your audited statements if you have them audited and we ask
for them.
3.10 Insurance. You will obtain and maintain during the Term of this Agreement
the insurance coverage required under the System Standards Manual from insurers
meeting the standards established in the Manual. Unless we instruct you
otherwise, your liability insurance policies will name Villager Franchise
Systems, Inc., Cendant Finance Holding Corporation and Cendant Corporation,
their successors and assigns as additional insureds.
3.11 Conferences. You or your representative will attend each annual Chain
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conference and pay the Conference Fee we set for the Chain franchisees, if and
when we determine to hold an annual Chain conference. The Fee will be the same
for all Chain Facilities that we license in the United States. You will receive
reasonable notice of a Chain conference.
3.12 Purchasing. You will purchase or obtain certain items we designate as
proprietary or that bear Marks, such as signage, only from suppliers we approve.
You may purchase any other items for the Facility from any competent source you
select, so long as the items meet or exceed System Standards.
3.13 Good Will. You will use reasonable efforts to protect, maintain and promote
the name "Villager Lodge" and its distinguishing characteristics, and the other
Marks. You will not permit or allow your officers, directors, principals,
employees, representatives, or guests of the Facility to engage in, conduct
which is unlawful or damaging to the good will or public image of the Chain or
System. You will participate in Chain-wide guest service and satisfaction
guaranty programs we require in good faith for all Chain Facilities. You will
follow System Standards for identification of the Facility and for you to avoid
confusion on the part of guests, creditors, lenders, investors and the public as
to your ownership and operation of the Facility, and the identity of your
owners.
3.14 Facility Modifications. You may materially modify, diminish or expand the
Facility (or change its interior design, layout, FF&E, or facilities) only after
you receive our prior written consent, which we will not unreasonably withhold
or delay. You will pay our Rooms Addition Fee then in effect for each guest room
you add to the Facility. If we so request, you will obtain our prior written
approval of the plans and specifications for any material modification, which we
will not unreasonably withhold or delay. You will not open to the public any
material modification until we inspect it for compliance with the Approved Plans
and System Standards.
3.15 Courtesy Lodging. You will provide lodging at the "Employee Rate"
established in the System Standards Manual from time to time (but only to the
extent that adequate room vacancies exist) to our representatives traveling on
business, but not more than three standard guest rooms at the same time.
3.16 Minor Renovations. Beginning three years after the Opening Date, we may
issue a "Minor Renovation Notice" to you that will specify reasonable Facility
upgrading and renovation requirements (a "Minor Renovation") to be commenced no
sooner than 60 days after the notice is issued, having an aggregate cost for
labor, FF&E and materials estimated by us to be not more than the Minor
Renovation Ceiling Amount. You will perform the Minor Renovations as and when
the Minor Renovation Notice requires. We will not issue a Minor Renovation
Notice within three years after the date of a prior Minor Renovation Notice, or
if the three most recent quality assurance inspection scores of the Facility
averaged at least 425 points or equivalent and the most recent quality assurance
inspection score for the Facility was at least 400 points or equivalent when the
Facility is otherwise eligible for a Minor Renovation.
4. Our Operating and Service Obligations. We will provide you with the following
services and assistance:
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4.1 Training.
4.1.1 Management Training. Between 30 days prior to the projected Opening Date
and 120 days afterwards, we will offer at a location in the United States we
designate and your general manager must complete a training program to our
satisfaction. The training program will not exceed ten days in duration and will
cover such topics as System Standards, services available from us, and operating
a Chain Facility. Any replacement or supplemental general manager of the
Facility must complete the management training program to our satisfaction
within 120 days after assuming his responsibilities. Attendance is optional for
other members of your staff. We charge you tuition of $250 for each trainee. You
must also pay for your trainee's travel, lodging, meals, incidental expenses,
compensation and benefits.
4.1.2 New Property On-Site Training. We will provide at the Facility a "New
Property On-Site Training Program" (at our discretion as to length and
scheduling) to assist you in opening the Facility. There is no tuition for the
Program. However, we reserve the right to charge you for the reasonable expenses
for travel, room, board and other out-of-pocket costs of our representatives.
4.1.3 Recurrent Training. We may provide additional training for you and the
Facility's general manager if we determine that additional mandatory training
for franchisees and general managers is necessary in the future. Training will
be held in our corporate office or other locations. You will pay for your
representative's travel, lodging, meals, incidental expenses, compensation and
benefits for this training directly or through an ancillary services fee to us.
4.1.4 Supplemental Training. We may offer mandatory or optional training
programs without charge or for tuition. We may offer or sell to you video tapes,
computer discs or other training aids and materials, or require you to buy them
at reasonable prices.
4.1.5 A portion of the Advertising and Reservation Fee proceeds, determined in
our sole discretion, will be allocated to our training activities and related
direct and indirect overhead expenses.
4.2 Reservation System. We will operate and maintain (directly or by
subcontracting with an affiliate or one or more third parties) a computerized
Reservation System or such technological substitute(s) as we determine, in our
discretion. The Facility will participate in the Reservation System, commencing
with the Opening Date for the balance of the Term. We have the right to provide
reservation services to lodging facilities other than Chain Facilities or to
other parties. We will not offer callers to our general consumer toll free
reservation telephone number in the United States the opportunity to make
reservations for other lodging chains.
4.3 Marketing.
4.3.1 We will use Marketing Fees as specified in Schedule C, allocated in our
discretion, to promote public awareness and usage of Chain Facilities by
implementing advertising, promotion, publicity, market research and other
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marketing programs, for training programs and related activities, for the
production and distribution of Chain publications and directories of hotels, and
for the acquisition, development, support, equipping, maintenance, improvement
and operation of the Reservation System. We will determine in our discretion:
(i) The nature and type of media placement; (ii) The allocation (if any) among
international, national, regional and local markets; and (iii) The nature and
type of advertising copy, other materials and programs. We or an affiliate may
be reimbursed from Marketing Fees for the reasonable direct and indirect costs,
overhead or other expenses of providing marketing services. We are not obligated
to supplement the Marketing Fees or to advance funds to pay for System marketing
activities. We do not promise that the Facility or you will benefit directly or
proportionately from System marketing activities.
4.3.2 We may, at our discretion, implement special international, national,
regional or local promotional programs (which may or may not include the
Facility) and may make available to you (to use at your option) media
advertising copy and other marketing materials for prices which reasonably cover
the materials' direct and indirect costs.
4.3.3 We will use the System Assessment Fees to publish the Chain Directory. We
will include the Facility in the Chain Directory after it opens if you submit
the information we request on time, and you are not in default under this
Agreement at the time we must arrange for publication. We will supply
Directories to you for display at locations specified in the System Standards
Manual or policy statements. We may assess you a reasonable charge for the
direct and indirect expenses (including overhead) of producing and delivering
the Directories.
4.4 Purchasing. We may offer optional assistance to you with purchasing items
used at or in the Facility. Our affiliates may offer this service on our behalf
We may restrict the vendors authorized to sell proprietary or Mark-bearing items
in order to control quality, provide for consistent service or obtain volume
discounts. We will maintain and provide to you lists of suppliers approved to
furnish Mark-bearing items, or whose products conform to System Standards.
4.5 The System. We will control and establish requirements for all aspects of
the System. We may, in our discretion, change, delete from or add to the System,
including any of the Marks or System Standards, in response to changing market
conditions. We may, in our discretion, permit deviations from System Standards,
based on local conditions and our assessment of the circumstances.
4.6 Consultations and Standards Compliance. We will assist you to understand
your obligations under System Standards by telephone, mail, during quality
assurance inspections, through the System Standards Manual, at training sessions
and during conferences and meetings we conduct. We will provide telephone and
mail consultation on Facility operation and marketing through our
representatives.
4.7 System Standards Manual and Other Publications. We will specify System
Standards in the System Standards Manual, policy statements or other
publications. We will lend you one copy of the System Standards Manual promptly
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after we sign this Agreement. We will send you any System Standards Manual
revisions and/or supplements as and when issued. We will send you all other
publications for Chain franchisees and all separate policy statements in effect
from time to time.
4.8 Inspections and Audits. We have the unlimited right to conduct unannounced
quality assurance inspections of the Facility and its operations, records and
Mark usage to test the Facility's compliance with System Standards and this
Agreement, and the audits described in Section 3.8. We have the unlimited right
to reinspect if the Facility does not achieve the score required on an
inspection. We may impose a reinspection fee and will charge you for our costs
as provided in Section 3.8. You will pay us an "Audit Fee" of $300.00 when we
invoice you for an Audit Fee under Section 3.8. We may increase the Audit Fee on
a Chain-wide basis to cover any increases in our audit costs to not more than
$500.00, effective any time after December 31, 2005. Our inspections are solely
for the purposes of checking compliance with System Standards.
5. Term. The Tenn begins on the Effective Date and expires on the day prior to
the fifteenth anniversary of the Opening Date. Some of your duties and
obligations will survive termination or expiration of this Agreement. You will
execute and deliver to us with this Agreement a notarized Declaration of
Franchise Agreement in recordable form. We will countersign and return one copy
of the Declaration to you. We may, at our option, record the Declaration in the
real property records of the county where the Facility is located. The
Declaration will be released at your request and expense when this Agreement
terminates or expires and you perform your post-termination obligations.
NEITHER PARTY HAS RENEWAL RIGHTS OR OPTIONS.
6. Application and Initial Fees. We should receive from you a non-refundable
Application Fee of $1,000.00 which will be credited towards the Initial Fee. You
will pay us a non-refundable Initial Fee in the amount of $10,200.00; $5,100.00
when you sign this Agreement and $5,100.00 as per the Initial Fee Note attached
hereto,
which is fully earned when we sign this Agreement.
7. Recurring Fees, Taxes and Interest.
7.1 You will pay us certain "Recurring Fees" payable in U.S. dollars (or such
other currency as we may direct if the Facility is outside the United States)
ten days after the month in which they accrue, without billing or demand.
Recurring Fees include the following:
7.1.1 A "Royalty" equal to five percent (5%) of Gross Room Revenues of the
Facility accruing during the calendar month, accrues from the earlier of the
Opening Date or the date you identify the Facility as a Chain Facility or
operate it under a Mark until the end of the Term.
7.1.2 A System Assessment Fee" comprised of the Marketing Fee and the
Reservation Fee, as stated in Schedule C, accrues from the Opening Date until
the end of the Term, including during suspension periods. After 60 days written
notice, we may change either or both of the components of the System Assessment
Fee to cover costs as described in Schedule C or to cover the cost of additional
services or programs for Chain Facilities. At our option, you will also pay or
reimburse us for travel and other agent commissions paid for certain
reservations at the Facility and a " GDS Fee" levied to pay for reservations for
the Facility originated or
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processed through the Global Distribution System, the Internet and other
reservation systems and networks. We may charge a reasonable service fee for
this service.
7.2 You will pay to us "Taxes" equal to any federal, state or local sales, gross
receipts, use, value added, excise or similar taxes assessed against us on the
Recurring Fees by the jurisdictions where the Facility is located, but not
including any income tax, franchise or other tax for the privilege of doing
business by us in your State. You will pay Taxes to us when due.
7.3 " Interest" is payable when you receive our invoice on any past due amount
payable to us under this Agreement at the rate of 1.5% per month or the maximum
rate permitted by applicable law, whichever is less, accruing from the due date
until the amount is paid.
7.4 Your transferee or you will pay us a "Relicense Fee" equal to the Initial
Fee we would then charge a new franchisee for the Facility if a Transfer occurs.
8. Indemnifications.
8.1 Independent of your obligation to procure and maintain insurance, you will
indemnify, defend and hold the Indemnitees harmless, to the fullest extent
permitted by law, from and against all Losses and Expenses, incurred by any
Indemnitee for any investigation, claim, action, suit, demand, administrative or
alternative dispute resolution proceeding, relating to or arising out of any
transaction, occurrence or service at, or involving the operation of, the
Facility, any breach or violation of any contract or any law, regulation or
ruling by, or any act, error or omission (active or passive) of, you, any party
associated or affiliated with you or any of the owners, officers, directors,
employees, agents or contractors of you or your affiliates, including when you
are alleged or held to be the actual, apparent or ostensible agent of the
Indemnitee, or the active or passive negligence of any Indemnitee is alleged or
proven. You have no obligation to indemnify an Indemnitee for damages to
compensate for property damage or personal injury if a court of competent
jurisdiction makes a final decision not subject to further appeal that the
Indemnitee engaged in willful misconduct or intentionally caused such property
damage or bodily injury. This exclusion from the obligation to indemnify shall
not, however, apply if the property damage or bodily injury resulted from the
use of reasonable force by the Indemnitee to protect persons or property.
8.2 You will respond promptly to any matter described in the preceding
paragraph, and defend the Indemnitee. You will reimburse the Indemnitee for all
costs of defending the matter, including reasonable attorneys' fees, incurred by
the Indemnitee if your insurer or you do not assume defense of the Indemnitee
promptly when requested, or separate counsel is appropriate, in our discretion,
because of actual or potential conflicts of interest. We must approve any
resolution or course of action in a matter that could directly or indirectly
have any adverse effect on us or the Chain, or could serve as a precedent for
other matters.
8.3 We will indemnify, defend and hold you harmless, to the fullest extent
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permitted by law, from and against all Losses and Expenses incurred by you in
any action or claim arising from your proper use of the System alleging that
your use of the System and any property we license to you is an infringement of
a third party's rights to any trade secret, patent, copyright, trademark,
service mark or trade name. You will promptly notify us in writing when you
become aware of any alleged infringement or an action is filed against you. You
will cooperate with our defense and resolution of the claim. We may resolve the
matter by obtaining a license of the property for you at our expense, or by
requiring that you discontinue using the infringing property or modify your use
to avoid infringing the rights of others.
9. Your Assignments, Transfers and Conveyances.
9.1 Transfer of the Facility. This Agreement is personal to you (and your owners
if you are an entity). We are relying on your experience, skill and financial
resources (and that of your owners and the guarantors, if any) to sign this
Agreement with you. You may finance the Facility and grant a lien, security
interest or encumbrance on it without notice to us or our consent. If a Transfer
is to occur, the transferee or you must comply with Section 9.3. Your License is
subject to termination when the Transfer occurs. The License is not transferable
to your transferee, who has no right or authorization to use the System and the
Marks when you transfer ownership or possession of the Facility. The transferee
may not operate the Facility under the System, and you are responsible for
performing the post-termination obligations in Section 13. You and your owners
may, only with our prior written consent and after you comply with Sections 9.3
and 9.6, assign, pledge, transfer, delegate or grant a security interest in all
or any of your rights, benefits and obligations under this Agreement, as
security or otherwise. Transactions involving Equity Interests that are not
Equity Transfers do not require our consent and are not Transfers.
9.2 Public Offerings and Registered Securities. You may engage the first
registered public offering of your Equity Interests only after you pay us a
public offering fee equal to $15,000. Your Equity Interests (or those of a
person, parent, subsidiary, sibling or affiliate entity, directly or indirectly
effectively controlling you), are freely transferable without the application of
this Section if they are, on the Effective Date, or after the public offering
fee is paid, they become, registered under the federal Securities Act of 1933,
as amended, or a class of securities registered under the Securities Exchange
Act of 1934, as amended, or listed for trading on a national securities exchange
or the automated quotation system of the National Association of Securities
Dealers, Inc. (or any successor system), provided that any tender offer for at
least a majority of your Equity Interests will be an Equity Transfer subject to
Section 9. 1.
9.3 Conditions. We may, to the extent permitted by applicable law, condition and
withhold our consent to a Transfer when required under this Section 9 until the
transferee and you meet certain conditions. If a Transfer is to occur, the
transferee (or you, if an Equity Transfer is involved) must first complete and
submit our Application, qualify to be a franchisee in our sole discretion, given
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the circumstances of the proposed Transfer, provide the same supporting
documents as a new franchise applicant, pay the Application and Relicense Fees
then in effect, sign the form of Franchise Agreement we then offer in conversion
transactions and agree to renovate the Facility as if it were an existing
facility of similar age and condition converting to the System, as we reasonably
determine. We will provide a Punch List of improvements we will require after
the transferee's Application is submitted to us. We must also receive general
releases from you and each of your owners, and payment of all amounts then owed
to us and our affiliates by you, your owners, your affiliates, the transferee,
its owners and affiliates, under this Agreement or otherwise. Our consent to the
transaction will not be effective until these conditions are satisfied.
9.4 Permitted Transferee Transactions. You may transfer an Equity Interest or
effect an Equity Transfer to a Permitted Transferee without obtaining our
consent, renovating the Facility or paying a Relicense Fee or Application Fee.
No Transfer will be deemed to occur. You also must not be in default and you
must comply with the application and notice procedures specified in Sections 9.3
and 9.6. Each Permitted Transferee must first agree in writing to be bound by
this Agreement, or at our option, execute the Franchise Agreement form then
offered prospective franchisees. No transfer to a Permitted Transferee shall
release a living transferor from liability under this Agreement or any guarantor
under any Guaranty of this Agreement. You must comply with this Section if you
transfer the Facility to a Permitted Transferee. A transfer resulting from a
death may occur even if you are in default under this Agreement.
9.5 Attempted Transfers. Any transaction requiring our consent under this
Section 9 in which our consent is not first obtained shall be void, as between
you and us. You will continue to be liable for payment and performance of your
obligations under this Agreement until we terminate this Agreement, all your
financial obligations to us are paid and all System identification is removed
from the Facility. 9.6 Notice of Transfers. You will give us at least 30 days
prior written notice of any proposed Transfer or Permitted Transferee
transaction. You will notify us when you sign a contract to Transfer the
Facility and IO days before you intend to close on the transfer of the Facility.
We will respond to all requests for our consent and notices of Permitted
Transferee transactions within a reasonable time not to exceed 30 days. You will
notify us in writing within 30 days after a change in ownership of 25% or more
of your Equity Interests that are not publicly held or that is not an Equity
Transfer, or a change in the ownership of the Facility if you are not its owner.
You will provide us with lists of the names, addresses, and ownership
percentages of your owner(s) at our request.
10. Our Assignments. We may assign, delegate or subcontract all or any part of
our rights and duties under this Agreement, including by operation of law,
without notice and without your consent. We will have no obligations to you
after you are notified that our transferee has assumed our obligations under
this Agreement except those that arose before we assign this Agreement.
11. Default and Termination.
11. 1 Default In addition to the matters identified in Section 3. 1, you will be
in default under this Agreement if (a) you do not pay us when a payment is due,
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(b) you do not perform any of your other obligations when this Agreement and the
System Standards Manual require, or (c) if you otherwise breach this Agreement.
If your default is not cured within ten days after you receive written notice
from us that you have not filed your monthly report, paid us any amount that is
due or breached your obligations regarding Confidential Information, or within
30 days after you receive written notice from us of any other default (except as
noted below), then we may terminate this Agreement by written notice to you,
under Section 11.2. We will not exercise our right to terminate if you have
completely cured your default, or until any waiting period required by law has
elapsed. In the case of quality assurance default, if you have acted diligently
to cure the default but cannot do so and have entered into a written improvement
agreement with us within 30 days after the failing inspection, you may cure the
default within 90 days after the failing inspection. We may terminate the
License if you do not perform that improvement agreement.
11.2 Termination. We may terminate the License, effective when we send written
notice to you or such later date as required by law or as stated in the default
notice, when (1) you do not cure a default as provided in Section II. I or we
are authorized to terminate under Section 3.1, (2) you discontinue operating the
Facility as a "Villager Lodge", (3) you do or perform, directly or indirectly,
any act or failure to act that in our reasonable judgment is or could be
injurious or prejudicial to the goodwill associated with the Marks or the
System, (4) you lose possession or the right to possession of the Facility, (5)
you (or any guarantor) suffer the termination of another license or franchise
agreement with us or one of our affiliates, (6) you intentionally maintain false
books and records or submit a materially false report to us, (7) you (or any
guarantor) generally fail to pay debts as they come due in the ordinary course
of business, (8) you, any guarantor or any of your owners or agents misstated to
us or omitted to tell us a material fact to obtain or maintain this Agreement
with us, (9) you receive two or more notices of default from us in any one year
period (whether or not you cure the defaults), (10) a violation of Section 9
occurs, or a Transfer occurs before the relicensing process is completed, (I 1)
you or any of your Equity Interest owners contest in court the ownership or
right to franchise all or any part of the System or the validity of any of the
Marks, (12) you, any guarantor or the Facility is subject to any voluntary or
involuntary bankruptcy, liquidation, dissolution, receivership, assignment,
reorganization, moratorium, composition or a similar action or proceeding that
is not dismissed within 60 days after its filing, or (I 3) you maintain or
operate the Facility in a manner that endangers the health or safety of the
Facility's guests.
11.3 Casualty and Condemnation.
11.3.1 You will notify us promptly after the Facility suffers a Casualty that
prevents you from operating in the normal course of business, with less than 75%
of guest rooms available. You will give us information on the availability of
guest rooms and the Facility's ability to honor advance reservations. You will
tell us in writing within 60 days after the Casualty whether or not you will
restore, rebuild and refurbish the Facility to conform to System Standards and
its condition prior to the Casualty. This restoration will be completed within
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180 days after the Casualty. You may decide within the 60 days after the
Casualty, and if we do not hear from you, we will assume that you have decided,
to terminate this Agreement, effective as of the date of your notice or 60 days
after the Casualty, whichever comes first. If this Agreement so terminates, you
will pay all amounts accrued prior to termination and follow the
post-termination requirements in Section 13. You will not be obligated to pay
Liquidated Damages if the Facility will no longer be used as an extended stay or
transient lodging facility after the Casualty. 11.3.2 You will notify us in
writing within 10 days after you receive notice of any proposed Condemnation of
the Facility, and within IO days after receiving notice of the Condemnation
date. This Agreement will terminate on the date the Facility or a substantial
portion is conveyed to or taken over by the condemning authority.
11.3.3 The exclusive territory covenants in Section 2 will terminate when you
give us notice of any proposed Condemnation or that you will not restore the
Facility after a Casualty.
11.4 Our Other Remedies. We may modify the Protected Territory granted in
Section 2 if you violate your covenant in Section 2. We may suspend the Facility
from the Reservation System for any default or failure to pay or perform under
this Agreement, discontinue Reservation System referrals to the Facility for the
duration of such suspension, and may divert previously made reservations to
other Chain Facilities after giving notice of non-performance, non-payment or
default. You will continue to be liable for all Reservation Fees throughout the
suspension period. All Reservation System User Fees accrue during the suspension
period. Reservation service will be restored after you have fully cured any and
all defaults and failures to pay and perform. We may omit the Facility from the
Directory if you are in default on the date we must determine which Chain
Facilities are included in the Directory. You recognize that any use of the
System not in accord with this Agreement will cause us irreparable harm for
which there is no adequate remedy at law, entitling us to injunctive and other
relief We may litigate to collect amounts due under this Agreement without first
issuing a default or termination notice. Our consent or approval may be withheld
if needed while you are in default under this Agreement or may be conditioned on
the cure of all your defaults.
11.5 Your Remedies. If we fail to issue our approval or consent as and when
required under this Agreement within a reasonable time of not less than 30 days
after we receive all of the information we request, and you believe our refusal
to approve or consent is wrongful, you may bring a legal action against us to
compel us to issue our approval or consent to the obligation. To the extent
permitted by applicable law, this action shall be your exclusive remedy. We
shall not be responsible for direct, indirect, special, consequential or
exemplary damages, including, but not limited to, lost profits or revenues.
12. Liquidated Damages.
12.1 Generally. If we terminate this Agreement under Section 11.2, or you
terminate this Agreement (except under Section 11.3 or as a result of our
default which we do not cure within a reasonable time after written notice), you
will pay us within 30 days following the date of termination, as Liquidated
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Damages, an amount equal to the sum of accrued Royalties and System Assessment
Fees during the immediately preceding 24 full calendar months (or the number of
months remaining in the unexpired Tenn at the date of termination, whichever is
less). If the Facility has been open for less than 24 months, then the amount
shall be the average monthly Royalties and System Assessment Fees since the
Opening Date multiplied by 24. You will also pay any applicable Taxes assessed
on such payment. Liquidated Damages will not be less than the product of
$1,200.00 multiplied by the number of guest rooms in the Facility. If we
teerminate this Agreement under Section 3 before the Opening Date, you will pay
us within 10 days after you receive our notice of termination Liquidated Damages
equal to one-half the amount payable for termination under Section 11.2.
Liquidated Damages are paid in place of our claims for lost future Recurring
Fees under this Agreement. Our right to receive other amounts due under this
Agreement is not affected.
12.2 Condemnation Payments. In the event a Condemnation is to occur, you will
pay us the fees set forth in Section 7 for a period of six months after we
receive the initial notice of condemnation described in Section 11.3.2, or until
the Condemnation occurs, whichever is longer. You will pay us Liquidated Damages
equal to the average daily Recurring Fees for the six month period preceding the
date of your condemnation notice to us multiplied by the number of days
remaining in the six month notice period if the Condemnation is completed before
the six month notice period expires. This payment will be made within 30 days
after Condemnation is completed (when you close the Facility or you deliver it
to the condemning authority). If the Condemnation is completed after the six
month notice period expires you will pay no Liquidated Damages, but you must pay
the fees set forth in Section 7 when due until Condemnation is completed.
13. Your Duties At and After Termination. When the license or this Agreement
terminates for any reason whatsoever:
13.1 System Usage Ceases. You will immediately stop using the System to operate
and identify the Facility. You will remove all signage and other items bearing
any Marks and follow the other steps detailed in the System Standards Manual for
changing the identification of the Facility. You will promptly paint over or
remove the Facility's distinctive System trade dress, color schemes and
architectural features.
13.2 Other Duties. You will pay all amounts owed to us under this Agreement
within 10 days after termination. You will owe us Recurring Fees on Gross Room
Revenues
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accruing while the Facility is identified as a "Villager Lodge", including the
System Assessment Fees for so long as the Facility receives service from the
Reservation System. We may immediately remove the Facility from the Reservation
System and divert reservations as authorized in Section 11.4. We may also, to
the extent permitted by applicable law, and without prior notice enter the
Facility and any other parcels, remove software (including archive and back-up
copies) for accessing the Reservation System, all copies of the System Standards
Manual, Confidential Information, equipment and all other personal property of
ours, and paint over or remove and purchase for $10.00, all or part of any
interior or exterior Mark-bearing signage (or signage face plates), including
billboards, whether or not located at the Facility, that you have not removed or
obliterated within five days after termination. You will promptly pay or
reimburse us for our cost of removing such items, net of the $10.00 purchase
price for signage. We will exercise reasonable care in removing or painting over
signage. We will have no obligation or liability to restore the Facility to its
condition prior to removing the signage. We shall have the right, but not the
obligation, to purchase some or all of the Facility's Mark-bearing FF&E and
supplies at the lower of their cost or net book value, with the right to set off
their aggregate purchase price against any sums then owed us by you.
13.3 Advance Reservations. The Facility will honor any advance reservations,
including group bookings, made for the Facility prior to termination at the
rates and on the terms established when the reservations are made and pay when
due all related travel agent commissions.
13.4 Survival of Certain Provisions. Sections 3.8 (as to audits, for 2 years
after termination), 3.9 (as to information relating to the Term, for 2 years
after termination), 3.13, 7 (as to amounts accruing through termination), 8,
11.4, 12, 13, 15, 16 and 17 survive termination of the License and this
Agreement, whether termination is initiated by you or us, even if termination
is wrongful.
14. Your Representations and Warranties. You expressly represent and warrant
to us as follows:
14.1 Quiet Enjoyment. You own, or will own prior to commencing improvement, or
lease, the Location and the Facility. You will be entitled to possession of the
Location and the Facility during the entire Term without restrictions that would
interfere with your performance under this Agreement, subject to the reasonable
requirements of any financing secured by the Facility.
14.2 This Transaction. You have received, at least 10 business days prior to
execution of this Agreement and making any payment to us, our current Uniform
Franchise Offering Circular for prospective franchisees. Neither we nor any
person acting on our behalf has made any oral or written representation or
promise to you that is not written in this Agreement on which you are relying to
enter into this Agreement. You release any claim against us or our agents based
on any oral or written representation or promise not stated in this Agreement.
You and the persons signing this Agreement for you have full power and authority
and have been duly authorized, to enter into and perform or cause performance of
your obligations under this Agreement. You have obtained all necessary approvals
of your owners, Board of Directors and lenders. Your execution, delivery and
performance of this Agreement will not violate, create a default under or breach
of any charter, bylaws, agreement or other contract, license, permit,
indebtedness, certificate, order, decree or security instrument to which you or
any of your principal owners is a party or is subject or to which the Facility
is subject. Neither you nor the Facility is the subject of any current or
pending merger, sale, dissolution, receivership, bankruptcy, foreclosure,
reorganization, insolvency, or similar action or proceeding on the date you
execute this Agreement and was not within the three years preceding such date,
except as disclosed in the Application. You will submit to us the documents
about the Facility, you, your owners and your finances that we request in the
Franchise Application (or after our review of your initial submissions) before
or within 30 days after you sign this Agreement.
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14.3 No Misrepresentations or Implied Covenants. All written information you
submit to us about the Facility, you, your owners, any guarantor, or the
finances of any such person or entity, was or will be at the time delivered and
when you sign this Agreement, true, accurate and complete, and such information
contains no misrepresentation of a material fact, and does not omit any material
fact necessary to make the information disclosed not misleading under the
circumstances. There are no express or implied covenants or warranties, oral or
written, between we and you except as expressly stated in this Agreement.
15. Proprietary Rights.
15.1 Marks and System. You will not acquire any interest in or right to use the
System or Marks except under this Agreement. You will not apply for governmental
registration of the Marks, or use the Marks or our corporate name in your legal
name, but you may use a Mark for an assumed business or trade name filing.
15.2 Inurements. All present and future distinguishing characteristics,
improvements and additions to or associated with the System by us, you or
others, and all present and future service marks, trademarks, copyrights,
service mark and trademark registrations used and to be used as part of the
System, and the associated good will, shall be our property and will inure to
our benefit. No good will shall attach to any secondary designator that you use.
15.3 Other Locations and Systems. We and our affiliates each reserve the right
to own, in whole or in part, and manage, operate, use, lease, finance, sublease,
franchise, license (as licensor or licensee), provide services to or joint
venture (i) distinctive separate lodging or food and beverage marks and other
intellectual property which are not part of the System, and to enter into
separate agreements with you or others (for separate charges) for use of any
such other marks or proprietary rights, (ii) other lodging, food and beverage
facilities, or businesses, under the System utilizing modified System Standards,
and (iii) a Chain Facility at or for any location other than the Location or, in
the case of a Chain Facility of the same name, in the Protected Territory. You
acknowledge that we are affiliated with or in the future may become affiliated
with other lodging providers or franchise systems that operate under names or
marks other than the Marks. We and our affiliates may use or benefit from common
hardware, software, communications equipment and services and administrative
systems for reservations, franchise application procedures or committees,
marketing and advertising programs, personnel, central purchasing, approved
supplier lists, franchise sales personnel (or independent franchise sales
representatives), etc.
15.4 Confidential Information. You will take all appropriate actions to preserve
the confidentiality of all Confidential Information. Access to Confidential
Information should be limited to persons who need the Confidential Information
to perform their jobs and are subject to your general policy on maintaining
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confidentiality as a condition of employment or who have first signed a
confidentiality agreement. You will not permit copying of Confidential
Information (including, as to computer software, any translation, decompiling,
decoding, modification or other alteration of the source code of such software).
You will use Confidential Information only for the Facility and to perform under
this Agreement. Upon termination (or earlier, as we may request), you shall
return to us all originals and copies of the System Standards Manual, policy
statements and Confidential Information " fixed in any tangible medium of
expression," within the meaning of the U.S. Copyright Act, as amended. Your
obligations under this subsection commence when you sign this Agreement and
continue for trade secrets (including computer software we license to you) as
long as they remain secret and for other Confidential Information, for as long
as we continue to use the information in confidence, even if edited or revised,
plus three years. We will respond promptly and in good faith to your inquiry
about continued protection of any Confidential Information.
15.5 Litigation. You will promptly notify us of (i) any adverse or infringing
uses of the Marks (or names or symbols confusingly similar), Confidential
Information or other System intellectual property, and (ii) or any threatened or
pending litigation related to the System against (or naming as a party) you or
us of which you become aware. We alone handle disputes with third parties
concerning use of all or any part of the System. You will cooperate with our
efforts to resolve these disputes. We need not initiate suit against imitators
or infringers who do not have a material adverse impact on the Facility, or any
other suit or proceeding to enforce or protect the System in a matter we do not
believe to be material.
16. Relationship of Parties.
16.1 Independence. You are an independent contractor. You are not our legal
representative or agent, and you have no power to obligate us for any purpose
whatsoever. We and you have a business relationship based entirely on and
circumscribed by this Agreement. No partnership, joint venture, agency,
fiduciary or employment relationship is intended or created by reason of this
Agreement. You will exercise full and complete control over and have full
responsibility for your contracts, daily operations, labor relations, employment
practices and policies, including, but not limited to, the recruitment,
selection, hiring, disciplining, firing, compensation, work rules and schedules
of your employees.
16.2 Joint Status. If you comprise two or more persons or entities
(notwithstanding any agreement, arrangement or understanding between or among
such persons or entities) the rights, privileges and benefit so this Agreement
may only be exercised and enjoyed jointly. The liabilities and responsibilities
under this Agreement will be the joint and several obligations of all such
persons or entities.
17. Legal Matters.
17.1 Partial Invalidity. If all or any part of a provision of this Agreement
violates the law of your state (if it applies), such provision or part will not
be given effect. If all or any part of a provision of this Agreement is declared
invalid or unenforceable, for any reason, or is not given effect by reason of
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of the prior sentence, the remainder of the Agreement shall not be affected.
However, if in our judgment the invalidity or ineffectiveness of such provision
or part substantially impairs the value of this Agreement to us, then we may at
any time terminate this Agreement by written notice to you without penalty or
compensation owed by either party.
17.2 Waivers, Modifications and Approvals. If we allow you to deviate from this
Agreement, we may insist on strict compliance at any time after written notice.
Our silence or inaction will not be or establish a waiver, consent, course of
dealing, implied modification or estoppel. All modifications, waivers, approvals
and consents of or under this Agreement by us must be in writing and signed by
our authorized representative to be effective.
17.3 Notices. Notices will be effective if in writing and delivered by facsimile
transmission with confirmation original sent by first class mail, postage
prepaid, by delivery service, with proof of delivery, or by first class, prepaid
certified or registered mail, return receipt requested, to the appropriate party
at its address stated below or as may be otherwise designated by notice. Notices
shall be deemed given on the date delivered or date of attempted delivery, if
refused.
Your name: GOLDEN OPPORTUNITY DEVELOPMENT
Your address: 268 West 400 South, Suite 300, Salt Lake City, Utah 84101
Your fax No.: 901-575-8092
Attention: Delmar Janovic
Villager Franchise Systems, Inc.:
Our address: 6 Sylvan Way, P.O. Box 278, Parsippany, New Jersey 07054-0278,
Attention: Vice President-Franchise Administration; Fax No. (973) 496-5359
17.4 Remedies. Remedies specified in this Agreement are cumulative and do not
exclude any remedies available at law or in equity. The non-prevailing party
will pay all costs and expenses, including reasonable attorneys' fees, incurred
by the prevailing party to enforce this Agreement or collect amounts owed under
this Agreement. You consent and waive your objection to the nonexclusive
personal jurisdiction of and venue in the New Jersey state courts situated in
Morris County, New Jersey and the United States District Court for the District
of New Jersey for all cases and controversies under this Agreement or between we
and you.
17.5 Miscellaneous. This Agreement will be governed by and construed under the
laws of the State of New Jersey. The New Jersey Franchise Practices Act will not
apply to any Facility located outside the State of New Jersey. This Agreement is
exclusively for the benefit of the parties. There are no third party
beneficiaries. No agreement between us and anyone else is for your benefit. The
section headings in this Agreement are for convenience of reference only. We may
unilaterally revise Schedule C under this Agreement. This Agreement, together
with the exhibits and schedules attached, is the entire agreement (superseding
all prior representations, agreements and understandings, oral or written) of
the parties about the Facility.
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17.6 Waiver of Jury Trial. The parties waive the right to a jury trial in any
action related to this Agreement or the relationship between the franchisor, the
franchisee, any guarantor, and their respective successors and assigns.
17.7 Special Acknowledgements.
17.7.1 You received our Uniform Franchise Offering Circular ("UFOC") for
prospective franchisees at least 10 business days before, and a copy of this
Agreement and all other agreements we are asking you to sign at least 5 business
days before, signing this Agreement and paying the Initial Fee to us. You have
received our UFOC at least 10 business days before you paid any fee to us or
signed any contract with us.
17.7.2 Neither we nor any person acting on our behalf has made any oral or
written representation or promise to you on which you are relying to enter into
this Agreement that is not written in this Agreement. You release any claim
against us or our agents based on any oral or written representation or promise
not stated in this Agreement.
17.7.3 This Agreement, together with the exhibits and schedules attached, is the
entire agreement superseding all previous oral and written representations,
agreements and understandings of the parties about the Facility and the License.
17.7.4 You acknowledge that no salesperson has made any promise or provided any
information to you about projected sales, revenues, income, profits or expenses
from the Facility except as stated in Item 19 of the UFOC or in a writing that
is attached to this Agreement.
17.7.5 You understand that the franchise relationship is an arms' length,
commercial business relationship in which each party acts in its own interest.
18. Royalty Waiver. We will waive your obligation to pay the Royalty on Gross
Room Revenues accruing during the third License Year if (i) the Facility's
occupancy rate during the second License Year, determined by dividing the number
of occupied room nights (including complimentary rooms) by the number of
available room nights during the period, is less than 70%, (ii) you are not in
default under this Agreement at the beginning of the License Year and you cure
any default that occurs during the third License Year within the time period
permitted under this Agreement, (iii) you pay the System Assessment Fee when due
during the third License Year, (iv) you install the combination refrigerator,
microwave and dry storage unit in each guest room at or before the Opening Date,
(v) the Facility passes all quality assurance inspections during the second
License Year, and completes the entire Punch List when required, (vi) during the
second License Year, you insert and run our standard or a larger classified
advertisement in the largest circulation daily newspaper in your hotel trading
area, making your tear sheets and insertion orders available to us on request,
and (vii) you implement and continue during the second License Year the
mandatory local marketing and advertising activities specified in the Direct
Sales & Marketing Guide.
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19. Special Stipulations. The following special stipulations apply to this
Agreement and supersede any inconsistent or conflicting provisions. These are
personal to you and are not transferable or assignable except to a Permitted
Transferee.
19.1 Reduced Relicense Fee. If you are not then in default under this Agreement,
the Relicense Fee for a Transfer will be $5,000 if we receive the written
Transfer request before the third anniversary of the Opening Date. After that
anniversary, the Relicense Fee will be $7,500.00.
19.2 Liquidated Damages. Liquidated Damages payable upon Termination will be Six
Hundred Dollars ($600.00) for each guest room of the Facility you are authorized
to operate at the time of Termination.
19.3 Your Additional Termination Right. You may terminate the License without
cause or penalty effective only on the fifth or tenth anniversary of the Opening
Date provided you give us at least six (6) months prior written notice of
termination and you are not in default under this Agreement at the time notice
must be given or at the effective date of termination. You will pay no
Liquidated Damages if you satisfy the conditions of the preceding sentence and
you perform the post termination obligations specified in this Agreement within
10 days after the effective date of termination. Your rights under this Section
will automatically terminate without notice if and as of the date (i) a
Termination occurs, (ii) you fail to cure any default under this Agreement
within the time permitted, if any, in the notice of default we send you, or
(iii) after the Facility satisfies the Improvement Obligation, the Facility
scores less than 350 (or its then equivalent) on a quality assurance inspection
and then fails to achieve a score of at least 350 (or its then equivalent) in a
reinspection to be performed no sooner than 30 days after the initial
inspection.
19.4 Our Additional Termination Right. We may terminate the License without
cause or penalty effective only on the fifth or tenth anniversary of the Opening
Date provided we give you at least six (6) months prior written notice of
termination. You will perform the post termination obligations specified in this
Agreement within 10 days after the effective date of temiination. You will pay
no Liquidated Damages if we terminate the License under this Section and you
perform the post termination obligations specified in this Agreement within 10
days after the effective date of termination.
19.5. Special Combined Fees. Notwithstanding Section 7.1, you will pay the
"Combined Fee," consisting of the Royalty and the System Assessment Fee
(excluding agent and property to property commissions, Internet fees, guest
reward and affinity program fees, service fees and charges, guest complaint
assessments, and GDS Fees), to us at the rates set forth in this Section,
provided that the Facility opens in accordance with the deadline established by
the terms of this Agreement:
19.5.1 The Combined Fee shall be five percent (5.0%) of Gross Room Revenues
accruing during the first and second License Years; and
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19.5.2 The Combined Fee shall be five and one half percent (5.5 %) of Gross
Room Revenues accruing during the third License Year; and
19.5.3 The Combined Fee shall be six percent (6.0%) of Gross Room Revenues
accruing during the fourth License Year; and
19.5.4 The Royalty and System Assessment Fees shall be computed and paid at the
rates specified in Section 7.1 on Gross Room Revenues accruing after the fourth
License Year.
19.5.5 The rate changes set forth in this Section automatically terminate
without notice or opportunity to cure, and the Combined Fees shall reset to the
rates specified in Section 7, if and as of the date (i) a Termination occurs, or
we send you a notice of default and you fail to cure the default within the time
specified, if any, in the notice of default, or (ii) after you satisfy the
Improvement Obligation, the Facility receives a quality assurance inspection
score of less than 350 (or its then equivalent) and the Facility fails to
achieve a quality assurance inspection score of at least 350 in a reinspection
to be performed not less than 30 days after the initial inspection.
19.6 Mandatory Rooms Addition. You must construct, equip and operate when
completed under applicable System Standards and the approval procedures for
improvements set forth in Sections 3.1 and 3.2 of this Agreement, an addition
having at least 32 guest rooms (the "Addition") to the then existing Facility.
You will not be required to pay a Rooms Addition Fee for the Addition. You must
commence construction of the Addition within 90 days after the Effective Date
and then proceed diligently to construct the Addition. The Addition shall be
ready to open for business under the System, after obtaining our approval to
open (which we will not unreasonably withhold or delay), within eighteen months
after the Effective Date.
Balance of page intentionally blank
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
WE:
Villager Franchise systems, Inc.:
By: /s/ Attest: /s/
--------------------------- ------------------------------------
Vice President Assistant Secretary
YOU, as franchisee
GOLDEN OPPORTUNITY DEVELOPMENT
By: /s/ Attest: /s/
--------------------------- -------------------------------------
President
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APPENDIX A
DEFINITIONS
Agreement means this Franchise Agreement.
Application Fee means the fee you pay when you submit your Application under
Section 6. Approved Plans means your plans and specifications for constructing
or improving the Facility initially or after opening, as approved by us under
Section 3.
Casualty means destruction or significant damage to the Facility by act of God
or other event beyond your reasonable anticipation and control.
Chain means the network of Chain Facilities.
Chain Facility means a lodging facility we own, lease, manage, operate or
authorize another party to operate using the System and identified by the Marks.
Condemnation means the taking of the Facility for public use by a government or
public agency legally authorized to do so, permanently or temporarily, or the
taking of such a substantial portion of the Facility that continued operation in
accordance with the System Standards, or with adequate parking facilities, is
commercially impractical, or if the Facility or a substantial portion is sold to
the condemning authority in lieu of condensation.
Conference Fee means the fee we charge for your attendance at a conference for
Chain Facilities and their franchisees when and if held.
Confidential Information means any trade secrets we own or protect and other
proprietary information not generally known to the lodging industry including
confidential portions of the System Standards Manual or information we otherwise
impart to you and your representatives in confidence. Confidential Information
includes the " Rules of Operation Manual" and all other System Standards manuals
and documentation, including those on the subjects of employee relations,
finance and administration, field operation, purchasing and marketing, the
Reservation System software and applications software.
Declaration means the Declaration of Franchise Agreement you and we sign under
Section 5.
Design Standards mean standards specified in the System Standards Manual from
time to time for design, construction, renovation, modification and improvement
of new or existing Chain Facilities, including all aspects of facility design,
number of rooms, rooms mix and configuration, construction materials,
workmanship, finishes, electrical, mechanical, structural, plumbing, HVAC,
utilities, access, life safety, parking, systems, landscaping, amenities,
interior design and decor and the like for a Chain Facility.
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Directory means the general purpose directory we publish listing the names and
addresses of Chain Facilities, and at our discretion, other Villager Lodge
facilities located outside the United States, Canada and Mexico.
Effective Date means the date we insert in the Preamble of this Agreement after
we sign it.
Equity Interests shall include, without limitation, all forms of equity
ownership of you, including voting stock interests, partnership interests,
limited liability company membership or ownership interests, joint and tenancy
interests, the proprietorship interest, trust beneficiary interests and all
options, warrants, and instruments convertible into such other equity interests.
Equity Transfer means any transaction in which your owners or you sell, assign,
transfer, convey, pledge, or suffer or permit the transfer or assignment of, any
percentage of your Equity Interests that will result in a change in control of
you to persons other than those disclosed on Schedule B, as in effect prior to
the transaction. Unless there are contractual modifications to your owners'
rights, an Equity Transfer of a corporation or limited liability company occurs
when either majority voting rights or beneficial ownership of more than 50% of
the Equity Interests changes. An Equity Transfer of a partnership occurs when a
newly admitted partner will be the managing, sole or controlling general
partner, directly or indirectly through a change in control of the Equity
Interests of an entity general partner. An Equity Transfer of a trust occurs
when either a new trustee with sole investment power is substituted for an
existing trustee, or a majority of the beneficiaries convey their beneficial
interests to persons other than the beneficiaries existing on the Effective
Date. An Equity Transfer does not occur when the Equity Interest ownership among
the owners of Equity Interests on the Effective Date changes without the
admission of new Equity Interest owners. An Equity Transfer occurs when you
merge, consolidate or issue additional Equity Interests in a transaction which
would have the effect of diluting the voting rights or beneficial ownership of
your owners' combined Equity Interests in the surviving entity to less than a
majority.
Facility means the Location, together with all improvements, buildings, common
areas, structures, appurtenances, facilities, entry/exit rights, parking,
amenities, FF&E and related rights, privileges and properties existing at the
Location on the Effective Date or afterwards.
FF&E means furniture, fixtures and equipment.
FF&E Standards means standards specified in the System Standards Manual for FF&E
and supplies to be utilized in a Chain Facility.
Food and Beverage means any restaurant, catering, bar/lounge, entertainment,
room service, retail food or beverage operation, continental breakfast, food or
beverage concessions and similar services offered at the Facility.
Gross Room Revenues means gross revenues attributable to or payable for rentals
of guest rooms at the Facility, including all credit transactions, whether or
not collected, but excluding separate charges to guests for Food and Beverage,
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room service, telephone charges, key forfeitures and entertainment; vending
machine receipts; and federal, state and local sales, occupancy and use taxes.
Improvement Obligation means your obligation to either (i) renovate and upgrade
the Facility, or (ii) construct and complete the Facility, in accordance with
the Approved Plans and System Standards, as described in Section 3.
Indemnitees means us, our direct and indirect parent, subsidiary and sister
corporations, and the respective officers, directors, shareholders, employees,
agents and contractors, and the successors, assigns, personal representatives,
heirs and legatees of all such persons or entities.
Initial Fee means the fee you are to pay for signing this Agreement as stated in
Section 6.
License means the non-exclusive license to operate the type of Chain Facility
described in Schedule B only at the Location, using the System and the Mark we
designate in Section 1.
License Year means the one year period beginning on the Opening Date and each
subsequent anniversary of the Opening Date and ending on the day preceding the
next anniversary of the Opening Date.
Liquidated Damages means the amounts payable under Section 12, set by the
parties because actual damages will be difficult or impossible to ascertain on
the Effective Date and the amount is a reasonable pre-estimate of the damages
that will be incurred and is not a penalty.
Location means the parcel of land situated at Baton Rouge, Louisiana, as more
fully described in Schedule A.
Losses and Expenses means all payments or obligations to make payments either
(i) to or for third party claimants by any and all Indemnitees, including guest
refunds, or (ii) incurred by any and all Indenmitees to investigate, respond to
or defend a matter, including without limitation investigation and trial
charges, costs and expenses, attorneys' fees, experts' fees, court costs,
settlement amounts, judgments and costs of collection.
Maintenance Standards means the standards specified from time to time in the
System Standards Manual for repair, refurbishment and replacement of FF&E,
finishes, decor, and other capital items and design materials in Chain
Facilities.
Marketing Fee means the fee you pay to us under Section 7 and Schedule C, as
amended, for advertising, marketing, training and other services.
Marks means, collectively (i) the service marks associated with the System
published in the System Standards Manual from time to time including, but not
limited to, the name, design and logo for "Villager Lodge" and other marks (U.S.
Reg. Nos.: 1,664,513 and 1,761,888) and (ii) trademarks, trade names, trade
dress, logos and derivations, and associated good will and related intellectual
property interests.
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Marks Standards means standards specified in the System Standards Manual for
interior and exterior Mark-bearing signage, advertising materials, china,
linens, utensils, glassware, uniforms, stationery, supplies, and other items,
and the use of such items at the Facility or elsewhere.
Minor Renovation means the repairs, refurbishing, repainting, and other
redecorating of the interior, exterior, guest rooms, public areas and grounds of
the Facility and replacements of FF&E we may require you to perform under
Section 3.16.
Minor Renovation Ceiling Amount means $750.00 per guest room.
Minor Renovation Notice means the written notice from us to you specifying the
Minor Renovation to be performed and the dates for commencement and completion
given under Section 3.16.
Opening Date means the date on which we authorize you to open the Facility for
business identified by the Marks and using the System.
Operations Standards means standards specified in the System Standards Manual
for cleanliness, housekeeping, general maintenance, repairs, concession types,
food and beverage service, vending machines, uniforms, staffing, employee
training, guest services, guest comfort and other aspects of lodging operations.
Permitted Transferee means (i) any entity, natural person(s) or trust receiving
from the personal representative of an owner any or all of the owner's Equity
Interests upon the death of the owner, if no consideration is paid by the
transferee or (ii) the spouse or adult issue of the transferor, if the Equity
Interest transfer is accomplished without consideration or payment, or (iii) any
natural person or trust receiving an Equity Interest if the transfer is from a
guardian or conservator appointed for an incapacitated or incompetent
transferor.
Protected Territory means a seven (7) mile radius from the front door of the
Facility.
Punch List means the list of upgrades and improvements attached as part of
Schedule B, which you are required to complete under Section 3.
Recurring Fees means fees paid to us on a periodic basis, including without
limitation, Royalties, System Assessment Fees, and other reservation fees and
charges as stated in Section 7.
Relicense Fee means the fee your transferee or you pay to us under Section 7
when a Transfer occurs.
Reservation Fee means the fees you pay to us under Section 7 and Schedule C for
reservation services.
Reservation System or " Central Reservation System" means the system for
offering to interested parties, booking and communicating guest room
reservations for Chain Facilities described in Section 4.2.
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Rooms Addition Fee means the fee we charge you for adding guest rooms to the
Facility.
Royalty means the monthly fee you pay to us for use of the System under Section
7(a). Royalties means the aggregate of all amounts owed as a Royalty.
System means the comprehensive system for providing guest lodging facility
services under the Marks as we specify which at present includes only the
following: (a) the Marks; (b) other intellectual property, including
Confidential Information, System Standards Manual and knowhow; (c) marketing,
advertising, publicity and other promotional materials and programs; (d) System
Standards; (e) training programs and materials; (f) quality assurance inspection
and scoring programs; and (g) the Reservation System.
System Assessment Fee means the Marketing Fee and the Reservation Fee.
System Standards means the standards for the participating in the System
published in the System Standards Manual, including but not limited to Design
Standards, FF&E Standards, Marks Standards, Operations Standards, Technology
Standards and Maintenance Standards and any other standards, policies, rules and
procedures we promulgate about System operation and usage.
System Standards Manual means the Rules of Operations Manual, the Trademark
Identification Standards Manual and any other manual we publish or distribute
specifying the System Standards.
Taxes means the amounts payable under Section 7.3 of this Agreement.
Technology Standards means standards specified in the System Standards Manual
for local and long distance telephone communications services, telephone,
telecopy and other communications systems, point of sale terminals and computer
hardware and software for various applications, including, but not limited to,
front desk, rooms management, records maintenance, marketing data, accounting,
budgeting and interfaces with the Reservation System to be maintained at the
Chain Facilities.
Term means the period of time during which this Agreement shall be in effect, as
stated in Section 5.
Termination means a termination of the License under Sections I 1. I or 1 1.2 or
your termination of the License or this Agreement.
Transfer means (1) an Equity Transfer, (2) you assign, pledge, transfer,
delegate or grant a security interest in all or any of your rights, benefits and
obligations under this Agreement, as security or otherwise without our consent
as specified in Section 9.2, (3) you assign (other than as collateral security
for financing the Facility) your leasehold interest in (if any), lease or
sublease all or any part of the Facility to any third party, (4) you engage in
the sale, conveyance, transfer, or donation of your right, title and interest in
and to the Facility, (5) your lender or secured party forecloses on or takes
possession of your
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interest in the Facility, directly or indirectly, or (6) a receiver or trustee
is appointed for the Facility or your assets, including the Facility. A Transfer
does not occur when you pledge or encumber the Facility to finance its
acquisition or improvement, you refinance it, or you engage in a Permitted
Transferee transaction.
"You" and "Your" means and refers to the party named as franchisee identified in
the first paragraph of this Agreement and its Permitted Transferees.
"We", "Our" and "Us" means and refers to Villager Franchise Systems, Inc., a
Delaware corporation, its successors and assigns.
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SCHEDULE A
(Legal Description of Facility)
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SCHEDULE B
PART 1: YOUR OWNERS:
Name Ownership Percentage Type of Equity Interest
Diversified Holdings 1, Inc. 74.6% stock
San Pedro Securities, Ltd. 12.7% stock
The Smith Family Trust 12.7% stock
PART I: THE FACILITY:
Primary designation of Facility: Villager Lodge
Number of approved guest rooms: 134
Parking facilities (number of spaces, description): At least 134 Other
amenities, services and facilities:
PART III: DESCRIPTION AND SCHEDULE OF RENOVATIONS TO BE COMPLETED AS
THE IMPROVEMENT OBLIGATION:
[Punch List to be attached.]
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VILLAGER LODGE
VILLAGER FRANCHISE SYSTEMS, INC.
SCHEDULE C
The System Assessment Fee is a recurring, non-refundable payment. All or
any part of Fund proceeds received during an accounting period need not be
disbursed within that accounting period.
he Marketing Fee is 1% of Gross Room Revenues.
The Reservation Fee is 1% of Gross Room Revenues.
Notwithstanding the above, after 60 days written notice, either the
Marketing Fee or the Reservation Fee may be changed, in our sole discretion, on
a Chain-wide basis to cover costs (including reasonable direct or indirect
overhead costs) related to such services and. programs or the cost of additional
services or programs.
If you elect to participate in optional Internet reservation programs,
you will be charged a fee per net reservation originated through the Internet
that we may charge in our discretion. Internet-originated reservations carry
fees of either (i) $2.50 per gross reservation booked through the Chain's web
site or other Internet sources, or (ii) $7.00 per gross reservation booked over
the TravelWeb.com Internet booking web site. If a reservation booked on the
Chain web site or other Internet source, or TravelWeb.com, is canceled by the
guest using the same source or web site as was used to make the reservation, you
will not be charged the applicable fee. You may discontinue the Facility's
TravelWeb.com listing only by giving us written notice. You must pay the
TravelWeb.com fee on all reservations booked through that web site until
TravelWeb.com makes the delisting request effective. We may charge additional
fees for creating or modifying the Facility's Website, Webpage or performing
other services.
If the number of guest complaints per 1,000 occupied room nights about
you or the Facility in a calendar year exceed the "Annual Facility Allotment" we
establish with the approval of the Villager Franchise Advisory Board, you will
be charged a "First Assessment" of $10.00 for each additional complaint received
during that year. You will be contacted when the complaint is received and you
will be responsible to resolve the complaint to the satisfaction of the guest.
If you do not respond to any complaint for which you have received a First
Assessment within 14 business days after referral to you and the guest contacts
us again to seek a response, you will be charged a "Second Assessment" of
$25.00, plus the costs we incur to settle the matter with the guest. If you
respond in a timely manner but the guest remains unsatisfied, you will be
charged the costs we incur to settle the matter with the guest. You will be
informed of your Annual Facility Allotment when it is established. The amounts
of the First and Second Assessments may be changed on a Chain-wide basis at any
time upon 60 days advance notice, with the approval of the Villager Franchise
Advisory Board.
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General Lafayette Inn
Baton, Rouge, Louisiana
FRANCHISER: VILLAGER FRANCHISE SYSTEMS, INC.
"EXHIBIT A"
PUNCHLIST FOR CONVERSION
JUNE 10, 1999
(Final revision on July 13, 1999)
- --------------------------------------------------------------------------------
FACILITY TIER GUEST ROOMS
- -------- ---- -----------
General Lafayette Inn Lodge 134 Actual
427 Lafayette Street 32 Closed
Baton Rouge, Louisiana 70802
OWNER/APPLICANT SALESPERSON
- --------------- -----------
Delmar Janovec James Cua
(800) 575-8073 (404) 240-0518
O.A. REPRESENTATIVE
Sara Jabs
PROPERTY CONDITION SUMMARY
--------------------------
This 33-year-old property consists of three 4-story, double loaded buildings.
All the buildings are inter-connected by walkways and form an L-shape. Two
buildings are exterior corridor; the remaining building is interior corridor.
All the buildings are concrete block construction with stone facades and flat
rooflines. The first floor is parking and floors 2 - 4 are guestrooms. The lobby
is located on the ground floor in the center of the 'V'. Extensive renovations
will be required in the guestrooms. Public areas, building exteriors and
landscaping will require upgrading to enhance curb appeal. All but 33 guestroom
bath areas have shower units only,
There is the Culinary Arts Institute of Louisiana located on the first floor of
one of the buildings. The institute operates the restaurant on the property. The
facility is only open in the evenings,
EXISTING
--------
Lobby Dimensions: 300 SF
Guest Room Dimensions: 264 SF - 101 Rms.
288 SF - 33 Rms.
COMPLETION' TIME
All items listed in this punchlist must be completed before opening as a
Villager Lodge. 3 ATTACHMENTS (will follow under a separate cover)
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General Lafayette Inn
Baton, Rouge, Louisiana
1. Operational Requirements
2. Quick Reference for Punchlist Requirements
3. Kitchenette Unit
PROPERTY SIGNAGE
Provide Villager Lodge exterior signage per Company specifications. Signage must
be purchased from a vendor approved in advance by the Franchisor, and may not be
installed without prior written approval from the Property Opening Department.
Your License Agreement controls your use of signage and timing of installation.
All existing signage (building, high-rise, channel letters, billboards, etc.)
must be removed. Modification of the existing signage or face replacement must
be approved by the Design and Development Department.
PROPERTY EXTERIOR
1. Upon ncxt painting, ensure exterior areas comply with Company specifications.
The color scheme is blue doors and white trim.
2. Provide oversized multiple exterior trash receptacles within -10 days of
entering the system.
3. Resurface badly cracked and damaged areas of parking lot. Re-seal and
stripe. To be completed by June 1, 2000.
4. Upgrade property landscaping by installing landscaping beds throughout the
property. Plant shrubs, seasonal flowers and ground cover throughout the
property. Emphasis should concentrate around property entrance, lobby and
pool area. Consulting with a local landscaping company is highly
recommended to maximize usage of existing flowerbeds.
5. Upgrade swimming pool to include to following: To be completed by June 1,
2000.
a. Repair area decking. Pool deck is to be concrete or other
non-slip approved surface.
b. Replace furniture. Recommend 3 umbrella tables with 4 armchairs
each and 8 chaise lounge chairs.
c. Replace fence. New pool fence must be a minimum height of 4'.
Gates are to be self-closing and latching. The installation of
chain link is acceptable.
d. Villager Lodge does not require a pool Completely eliminating
(fence, deck, coping, pool) and landscaping are is acceptable.
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General Lafayette Inn
Baton, Rouge, Louisiana
PUBLIC AREAS
1. Villager Lodge interior lobby sign mus be ordered and installed within
30 day of entering the system.
2. Villager Lodge requires either vinyl wall covering, an approved
textured finish or a good quality, durable paint.
3. The owner is responsible to provide facilities to assist the
handicapped i accordance with Local, State, and Federal codes,
regulations and ordinances.
4. Provide/lease guest laundry equipment to include: 3 washers and 3
dryers.
5. Replace ice machines. A minimum of on sanitary dispensing ice and soda
machine for every 60 guestrooms is required. Recommended placement is
on per building.
6. Provide a vending area to include: a soda machine and a snack machine.
An enclosed area is strongly recommended. To be completed within 90
days of entering the system.
PROJECT POWER UP REQUIREMENTS
1. The installation of a Project Power Up Property
Management System (PMS) or an
approved variation, is required. The General
Requirements are as follows:
a. Remove any existing room rack, room tree or posting machine.
b. Front desk should be renovated to allo for the keyboard, monitor and
printer to be in comfortable working positions for the employees.
System units for each workstation must also have a well-ventilated
space to reside in close proximity to the Monitor and Keyboard, with
the exception of Wyse terminals on the HSS PMS.
c. Dot matrix printers will require a paper hole for the bottom feed of
forms.
d. A file or "bucket" will be needed for registration cards. In addition,
an alphabetical file or "bucket" for pre- printed registration cards
arriving will be needed. A secondary file or "bucke in room number
order is needed for check in registration cards and an vouchers.
e. A space for the file server must be made in the front desk area. This
space must allow for sufficient airflow. If the file server will not
be located at the front desk, the area in which it will be located
must be accessed 24 hours a day including the ability for the nigh
auditor to utilize it.
f. Space must be located near the file server for any interface equipment
tha will be needed, i.e.: call accounting and Point of Sale (POS)
terminals. When considering the placement of this equipment remember
that it will
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General Lafayette Inn
Baton, Rouge, Louisiana
need electrical outlets and that the interface vendor will need to run
cabl from the interface equipment to the Property Management System
(PMS).
g. The areas designated for all PMS equipment must be well ventilated
with a temperature of approximately 72 degrees. Equipment must not be
placed in the direct vicinity of air conditioning or heating
ducts/vents. Equipment must not be placed in closed cabinets.
2. Hardware power requirements are as follows:
a. Proper electrical connections must be in place or the Property
Management System will not be installed. Each power outlet should
contain no more than four power receptacles. The powe outlets must
meet the following specifications: 115 volts, 60 H, 3 prong, dedicated
power circuit, protected by a dedicated 20-amp circuit breaker. Any
device other than the designated computer equipment will not be
connected to the same circuit. The use of power strips for any of the
equipment will not be supported. Appropriate surge protectors are
required for all equipment. A certified electrician with good
knowledge of the power supplies that the PMS will be utilizing should
be contacted to complete the installation of all power requirements.
The placement of any other electrical devices such as a credit card
imprinter should be at least 3 feet away from the
terminals/workstations.
b. One Uninterrupted Power Supply (UPS) unit will be supplied with the
Power Up Package. The UPS must be placed at least three feet from the
file server.
c. The file server and its monitor will plug into the UPS using 2 of its
power outlets. d. Each workstation will require 1 power outlet. e.
Each modem will require 1 power outlet f. The UPS will require 1
Dedicated power outlet on its own dedicated circuit breaker.
3. Telephone line requirements are as follows:
a. Two dedicated telephone lines with their own numbers are required.
Three are recommended for the MSI Property Management System. No other
modems, fax machines, etc. are to be connected to these phone lines.
For the third phone line, used for Interne access, we will allow a
line to run through your phone switch.
b. Two modems will be supplied with the Project Power Up Package. These
modems will utilize the two dedicated phone lines.
4. Interface vendors must be contacted in advance to insure that they will
meet the Power Up requirements. The franchisee is responsible for arranging
any required interface upgrades that may be necessary for th testing of
these upgrades. With the exception of Credit Cards, we strongly recommen
that Interface Vendors be on site for the installation of the interface.
Require cable connections must be obtained from your vendor.
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General Lafayette Inn
Baton, Rouge, Louisiana
5. Cable run requirements are as follows:
a. All holes drilled at the front desk must be a minimum of 1 1/2 inch in
diameter for pulling of power cords an cables with connectors.
b. If any cable run will be more than 10 feet the Power Up Pre-
Implementation Help Desk must be contacted.
c. All cable must be from a Company approved vendor.
6. All questions regarding selection of one of the approved systems are to be
handled by Kim Anglin. She may be reached at 602-389- 3903 or by email at
[email protected].
GUESTROOMS/BATH (Rooms Inspected)
1. The property has 32 rooms that closed and in an unrentable condition. These
rooms are located in the Lafayette Street building. If these rooms are to
remain unrentable, linens and all furnishings must be removed from these
rooms. If at any time these rooms are brought back on line, Villager Lodge
standards must be met. The Quality Assurance Department must inspect and
approve vacant the closed rooms prior to reentering the system. These rooms
are not to appear vacant from the property exterior. Good quality drapes
must be in position and closed at all times.
2. Upgrade entrance doors to include to following: a. Install a hotel function
cylindrical knob lock and 1" throw separate keyed deadbolt (keyed for
emergency access only) per Company standards. Ensure locks meet state and
local codes.
b. Install a one-way viewer.
c. Provides secondary locks (u-bar or chain).
3. Provide a one way, doorknob latchset and a separate, non-keyed, 1" deadbolt
lock on all connecting room doors. Operating knobs must be located on room
side only with flush plates between doors.
4. Company requires hardwired smoke detectors. However, recommend the
installation of hardwired smoke detectors with backup system. This system
may be battery within the unit or a generator syste that is capable of
restoring electrical service in case of an outage.
5. Each guestroom is required to have a free standing kitchenette unit that
meets the Villager Lodge Standards. This is a Villager Lodge Signature
item. This unit must include a microwave, refrigerator, and a work top or
storage area. Several options are available through Cendant Supplier
Services (800) 225-5411. 40% to be completed prior to entering the system
and the remaining 60% within 12 months.
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General Lafayette Inn
Baton, Rouge, Louisiana
6. Many of the guestrooms are in various stages of renovation. All Villager
Lodge standards must be met. In addition, ensure renovated guestrooms
provide the following:
a. Paint rooms where worn or discolored t include ceilings, walls, doors
(bath, entrance, and connecting) and trim work.
b. Apply an approved finish over concrete block walls. Remove vinyl wall-
covering from bath areas. Villager Lodge requires either vinyl wall-
covering, an approved textured finish or a good quality, durable
paint. To be completed by January 1, 2001.
c. Replace artwork, one piece per headboard, 20" x 24" minimum is
required.
d. Replace carper where worn, stained, matted. Villager Lodge requires
cut pile carpet with padding. Carpet must also be wall to wall.
e. Replace furniture package. A minimum of one credenza/armoire, a framed
wall mirror, one headboard per bed, an one free standing night stand
per room is required. A writing surface i required to consist of
either a desk or an activity table. Two comfortable fabric upholstered
chairs per room are required.
f. Replace lamp package. Provide 2 lamps per headboard wall, a credenza
lamp and a lamp at leisure area. All wall-mounted lamps must have wire
covers or molding, loose cords are not acceptable. Lamp package must
be neutral and contemporary (i.e. brass). The use of red or other
colors of anodized metal is not acceptable.
g. Replace/provide televisions. Minimum 20" remote control type is
required. Recommend 25" set.
h. Replace bedspread and drapery package. New draperies must have
blackout capabilities, be pleated to double fullness, provide for
overlapping of panels, and must be baton or mechanically operated.
Each bed must have a quilted bedspread of an appropriate size for the
bed.
i. A minimum of 10% of guestrooms must be prepared and designated as
non-smoking rooms.
7. Renovate bath area to include the following:
a. Replace wall-mounted sinks with vanity/sink units. New units must be
of a light neutral color, high-pressure laminate or other similar
finish. Add sinks where necessary.
b. Purchase a complete inventory of terry stock to comply with company
specifications.
c. Provide a Ground Fault Duplex outlet (GFI) in each vanity area.
d. Replace/refinish tub and sink chrome plumbing fixtures (drain covers,
handles, showerheads, spouts, etc.) where tarnished.
e. Replace flooring where worn, discolore Company requires .085 gauge
sheet vinyl or minimum of 2" single color ceramic tile (recommend 6" -
8" tile).
f. Professionally clean shower units, tub and ceramic surrounds to
eliminate discoloration. Regrout and recaulk where needed.
94
<PAGE>
General Lafayette Inn
Baton, Rouge, Louisiana
g. Replace ceiling and tile as needed.
h. Remove "Sleepy Bear" shower doors. Replace with a safety glass design
or shower rod/curtain design.
8. Provide Cable TV to include ESPN, CNN and one premium movie channel within
90 days of entering the system.
9. Logo supplies must be available at the entry inspection by may not be
placed in the guestrooms until official opening.
10. Company requires that all properties maintain housekeeping at the highest
levels. We strongly recommend that the property implement housekeeping
training programs to ensure customer satisfaction.
11. The operational requirements listed on Attachment 1, pag 1 and 2 must be
completed prior to entering the System. If these items are not completed,
it will cause a significant point loss on the Quality Assurance Inspection.
- --------------------------------------------------------------------------------
HANDWRITTEN OR UNAUTHORIZED REVISIONS TO THIS PUNCHLIST ARE NOT VALID AND DO NOT
BIND THE FRANCHISER. ANY AND ALL REVISIONS TO THIS PUNCHLIST MUST BE MADE AND
APPROVED BY THE FRANCHISER'S QUALITY ASSURANCE DEPARTMENT.
- --------------------------------------------------------------------------------
This Punchlist identifies items that require action due to meet the Franchiser's
standards. The Franchiser does not warrant that completion of the items on this
Punchlist will cause the converting facility to be in compliance with any
applicable federal, state, local codes, ordinances or regulations. You (and your
architect, contractor and engineer, if applicable) are solely responsible for
conforming the Facility to the requirements of federal, state and local codes,
ordinances and regulations that may apply to your site.
This Punchlist has been prepared on the basis of a random sample inspection of
the Facility on the date specified. The owner is responsible for meeting all
Franchiser Standards. All repairs, replacements and improvements must cause the
item to meet or exceed the Franchisers standards published in the Standards of
Operation and Design Manual.
This Punchlist will be subject to revision at the discretion of the Franchiser
if the condition of the facility changes materially or the License (Franchise)
Agreement to which this is attached is executed more than 90 days after the date
of the Punchlist. Note, that ordinary wear and tear, particularly during busy
seasons, may result in the need for additional work to meet entry standards of
the System within 180 days after the punchlist date or as otherwise specified by
the license (franchise) agreement.
This is not a License (Franchise) Agreement, the Company is bound by this
punchlist unless and until the Company signs the License (Franchise) Agreement
for the inspected facility.
95
<PAGE>
General Lafayette Inn
Baton, Rouge, Louisiana
NOTE: Any item on this Punchlist that is not required to be completed prior to
opening as a Villager Lodge will continue to be evaluated for appearance and
condition during all Quality Assurance inspections conducted before the date
when completion is required.
This punchlist was finally revised on July 13, 1999; all previous copies are
invalid.
1. FINAL revision on 7/13/99 by:
Signed: /s/ Delmar Janovec Date: July 14, 1999
-------------------- -------------
Print Name: Delmar Janovec
96
THE 1999 BENEFIT PLAN
OF
Golden Opportunity Development
Corporation
97
<PAGE>
THE 1999 BENEFIT PLAN OF GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
Golden Opportunity Development Corporation, a Louisiana corporation
(the "Company"), hereby adopts The 1999 Benefit Plan of Golden Opportunity
Development Corporation's employees (the "Plan") this day of October 1999. Under
the Plan, the Company may issue shares of the Company's common stock or grant
options to acquire the Company's common stock, par value $0.001 (the "Stock"),
from time to time to employees, directors, officers, consultants or advisors of
the Company or its subsidiaries, all on the terms and conditions set forth
herein. In addition, at the discretion of the Board of Directors, Shares may
from time to time be granted under this Plan to other individuals, including
consultants or advisors, who contribute to the success of the Company or its
subsidiaries but are not employees of the Company or its subsidiaries, provided
that bona fide services shall be rendered by consultants and advisors and such
services must not be in connection with the offer or sale of securities in a
capital-raising transaction.
1. Purpose of the Plan. The Plan is intended to aid the Company in maintaining
and developing a management team, attracting qualified officers and employees
capable of assuring the future success of the Company, and rewarding those
individuals who have contributed to the success of the Company. The Company has
designed this Plan to aid it in retaining the services of executives and
employees and in attracting new personnel when needed for future operations and
growth and to provide such personnel with an incentive to remain employees of
the Company, to use their best efforts to promote the success of the Company's
business, and to provide them with an opportunity to obtain or increase a
proprietary interest in the Company. It is also designed to permit the Company
to reward those individuals who are not employees of the Company but who
management perceives to have contributed to the success of the Company or who
are important to the continued business and operations of the Company. The above
goals will be achieved through the granting of Shares.
2. Administration of this Plan. Administration of this Plan shall be determined
by the Company's Board of Directors (the "Board"). Subject to compliance with
applicable provisions of the governing law, the Board may delegate
administration of this Plan or specific administrative duties with respect to
this Plan on such terms and to such committees of the Board as it deems proper
(hereinafter the Board or its authorized committee shall be referred to as "Plan
Administrators"). The interpretation and construction of the terms of this Plan
by the Plan Administrators thereof shall be final and binding on all
participants in this Plan absent a showing of demonstrable error. No member of
the Plan Administrators shall be liable for any action taken or determination
made in good faith with respect to this Plan. Any shares approved by a majority
vote of those Plan Administrators attending a duly and properly held meeting
shall be valid. Any shares approved by the Plan Administrators shall be approved
as specified by the Board at the time of delegation.
3. Shares of Stock Subject to this Plan. The total value of shares issues
pursuant to this Plan shall not exceed a value of greater then Five Hundred
Thousand dollars ($500,000). If any right to acquire Stock granted under this
Plan is exercised by the delivery of shares of Stock or the relinquishment of
rights to shares of Stock, only the net shares of Stock issued (the shares of
stock issued less the shares of Stock surrendered) shall count against the total
number and value of shares reserved for issuance under the terms of this Plan.
4. Reservation of Stock on Granting of Rights. At the time any right is granted
under the terms of this Plan, the Company will reserve for issuance the number
of shares of Stock subject to such right until
98
<PAGE>
that right is exercised or expires. The Company may reserve either authorized
but unissued shares or issued shares reacquired by the Company.
5. Eligibility. The Plan Administrators may grant shares to employees, officers,
and directors of the Company and its subsidiaries, as may be existing from time
to time, and to other individuals who are not employees of the Company or its
subsidiaries, including consultants and advisors, provided that such consultants
and advisors render bona fide services to the Company or its subsidiaries and
such services are not rendered in connection with the offer or sale of
securities in a capital-raising transaction. In any case, the Plan
Administrators shall determine, based on the foregoing limitations and the
Company's best interests, which employees, officers, directors, consultants and
advisors are eligible to participate in this Plan. Shares shall be in the
amounts, and shall have the rights and be subject to the restrictions, as may be
determined by the Plan Administrators, all as may be within the provisions of
this Plan.
6. Terms of Grants and Certain Limitations on Right to Exercise.
-------------------------------------------------------------
a. Each right to shares may its terms established by the Plan
Administrators at the time the right is granted.
b. The terms of the right, once it is granted, may be reduced only as
provided for in this Plan and under the express written provisions of
the grant.
c. Unless otherwise specifically provided by the written provisions of
the grant or required by applicable disclosure or other legal
requirements promulgated by the Securities and Exchange Commission
("SEC"), no participant of this Plan or his or her legal
representative, legatee, or distributee will be, or shall be deemed to
be, a holder of any shares subject to any right unless and until such
participant exercises his or her right to acquire all or a portion of
the Stock subject to the right and delivers any required consideration
to the Company in accordance with the terms of this Plan and then only
as to the number of shares of Stock acquired. Except as specifically
provided in this Plan or as otherwise specifically provided by the
written provisions of any grant, no adjustment to the exercise price
or the number of shares of Stock subject to the grant shall be made
for dividends or other rights for which the record date is prior to
the date on which the Stock subject to the grant is acquired by the
holder.
d. Rights shall vest and become exercisable at such time or times and
on such terms as the Plan Administrators may determine at the time of
the grant of the right.
e. Grants may contain such other provisions, including further lawful
restrictions on the vesting and exercise of the grant as the Plan
Administrators may deem advisable.
f. In no event may an grant be exercised after the expiration of its
term.
g. Grants shall be non-transferable, except by the laws of descent and
distribution.
7. Exercise Price. The Plan Administrators shall establish the exercise
price payable to the Company for shares to be obtained pursuant to any purchase
options which exercise price may be amended from time to time as the Plan
Administrators shall determine.
99
<PAGE>
8. Payment of Exercise Price. The exercise of any option shall be contingent on
receipt by the Company of the exercise price paid in either cash, certified or
personal check payable to the Company.
9. Withholding. If the grant or exercise of any right is subject to withholding
or other trust fund payment requirements of the Internal Revenue Code of 1986,
as amended (the "Code"), or applicable state or local laws, the Company will
initially pay the recipient's liability and will be reimbursed by that person no
later than six months after such liability arises and such person hereby agrees
to such reimbursement terms.
10. Dilution or Other Adjustment. The shares of Common Stock subject to this
Plan and the exercise price of outstanding options are subject to proportionate
adjustment in the event of a stock dividend on the Common Stock or a change in
the number of issued and outstanding shares of Common Stock as a result of a
stock split, consolidation, or other recapitalization. The Company, at its
option, may adjust the grants and rights made hereunder, issue replacements, or
declare grants void.
11. Options to Foreign Nationals. The Plan Administrators may, in order to
fulfill the purpose of this Plan and without amending this Plan, grant Options
to foreign nationals or individuals residing in foreign countries that contain
provisions, restrictions, and limitations different from those set forth in this
Plan and the Options made to United States residents in order to recognize
differences among the countries in law, tax policy, and custom. Such grants
shall be made in an attempt to give such individuals essentially the same
benefits as contemplated by a grant to United States residents under the terms
of this Plan.
12. Listing and Registration of Shares. Each grant shall be subject to the
requirement that if at any time the Plan Administrators shall determine, in
their sole discretion, that it is necessary or desirable to list, register, or
qualify the shares covered thereby on any securities exchange or under any state
or federal law, or obtain the consent or approval of any governmental agency or
regulatory body as a condition of, or in connection with, the granting of such
rights or the issuance or purchase of shares thereunder, such right may not be
exercised in whole or in part unless and until such listing, registration,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Plan Administrators.
13. Expiration and Termination of this Plan. This Plan may be abandoned or
terminated at any time by the Plan Administrators except with respect to any
rights then outstanding under this Plan. This Plan shall otherwise terminate on
the earlier of the date that is five years from the date first appearing in this
Plan or the date on which the 1.5 millionth share is issued hereunder.
14. Amendment of this Plan. This Plan may not be amended more than once during
any six month period, other than to comport with changes in the Code or the
Employee Retirement Income Security Act or the rules and regulations promulgated
thereunder. The Plan Administrators may modify and amend this Plan in any
respect; provided, however, that to the extent such amendment or modification
would cause this Plan to no longer comply with the applicable provisions of the
Code governing incentive stock options as they may be amended from time to time,
such amendment or modification shall also be approved by the shareholders of the
Company.
ATTEST:
/s/ Richard D. Surber
- -------------------------------
Richard D. Surber, President
100
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130 Nephi's Mobile (801) 971-0405
Salt Lake City, Utah 84101
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated May 2, 2000, in this
annual report on Form 10-SB for Golden Opportunity Development Corporation.
/s/ Crouch, Bierwolf & Chisholm
-------------------------------
Crouch, Bierwolf, & Chisholm
Salt Lake City, Utah
May 2, 2000
101
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED AUDITED AND UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR THE
PERIODS ENDED DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 RESPECTIVELY, THAT
WERE FILED WITH THE COMPANY'S REPORT ON FORM 10-SB AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 6,468 3,317
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,520 7,369
<PP&E> 2,713,620 2,721,720
<DEPRECIATION> (114,234) (155,928)
<TOTAL-ASSETS> 2,609,906 2,573,161
<CURRENT-LIABILITIES> 364,808 203,446
<BONDS> 0 0
0 0
0 0
<COMMON> 100 218
<OTHER-SE> 404,638 588,567
<TOTAL-LIABILITY-AND-EQUITY> 2,606,906 2,573,161
<SALES> 330,527 273,442
<TOTAL-REVENUES> 330,527 273,442
<CGS> 0 0
<TOTAL-COSTS> 488,571 348,720
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 123,113 74,361
<INCOME-PRETAX> (281,157) (149,639)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (281,157) (149,639)
<EPS-BASIC> (2.81) (.81)
<EPS-DILUTED> (2.81) (.81)
</TABLE>
