U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
THE MAJESTIC COMPANIES, LTD.
(Name of Small Business Issuer in its charter)
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
(incorporation or organization)
Nevada 88-0293171
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(Address of principal executive offices) (Zip Code)
8880 Rio San Diego Drive, 8th Floor
San Diego, California 92108
Issuer's telephone number, including area code 619-209-6077
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None N/A
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
On October 11, 1999, the Registrant had outstanding 26,834,070 shares of Common
Stock, par value $.001 per share.
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ITEM 1 DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
COMPANY OVERVIEW
The Majestic Companies, Ltd., hereinafter referred to as ("the
Company") was incorporated under the laws of the State of Nevada on December 3,
1992 under the name of Rhodes, Wolters & Associates, Inc. ("Rhodes"). In May,
1998, Rhodes changed its name to SKYTEX International, Inc. ("SKYTEX") and in
December, 1998, merged with a Delaware corporation named "The Majestic
Companies, Ltd." As a part of the merger SKYTEX's corporate name was changed to
"The Majestic Companies, Ltd."
To consummate the merger, stockholders of the pre-merger "The Majestic
Companies, Ltd." , were issued one share of SKYTEX common stock with par value
of $.001 for each one (1.00) share of common stock owned as of December 11,
1998, of the pre-merger Delaware Corporation "The Majestic Companies, Ltd."
The Company engages in the business of manufacturing, leasing and
selling modular structures such as classrooms, office buildings, medical
facilities and telecommunication equipment shelters. Currently the Company owns
fourteen (14) modular buildings which are leased to several California School
Districts for terms of between three (3) to five (5) years in length.
The Company also designs, engineers and markets transportation related
safety equipment, including, in particular, two (2) passenger safety restraint
products for the school bus industry, named the "SAFE-T-BAR(R)" and the
"SAFE-T-SEAT(TM)".
BUSINESS OF THE COMPANY
MODULAR STRUCTURE PRODUCTS
As a result of net enrollment increases in California schools and
budgetary constraints experienced by the State of California which limited the
availability of funds for the addition of new classrooms over the last few
years, California's schools are among the most crowded in the nation. As the
California State budget deficit has decreased, the California legislature has
increased funding for new classrooms in an effort to reduce the average number
of students per class. California State funding initiatives have included funds
from (i) the State's operating budget, such as $200 million allocated for
construction or addition of classrooms for the 1996-1997 school year, (ii) as
much as $1.5 billion allocated for the 1997-1998 school year for both general
operations and school facilities, and (iii) the sale of statewide bond issues,
such as the $9.2 billion bond issue that recently passed for school
construction, including the addition of classrooms. Further, in 1976, California
adopted legislation that requires, with certain exceptions, that at least 30% of
all new classroom space added using State funds must be relocatable.
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Recent Public School Bond facility measures include: Prop. 1A, and
Prop. MM, which have collectively totaled over $10.7 billion in new funding for
school construction. Proposition 1A, provides $9.2 billion for at least four
years to education facilities for programs to reduce class size, to relieve
overcrowding, to accommodate student enrollment growth, to repair older schools
and to obtain additional teaching staff. Further, Prop. MM, a $1.51 billion
comprehensive San Diego Unified School District (the State's 2nd largest)
measure provides for repair and renovation of existing facilities as well as the
construction of new school classrooms enabling additional class size reduction.
These factors have combined to increase the demand for modular
re-locatable classrooms, which cost significantly less and take much less time
to construct and install than conventional school facilities. Also, their use
permits a school district to relocate the units as student enrollments shift.
Most importantly, the Company's modular products provide added flexibility to
school districts in financing the costs of adding classroom space because
modular classrooms are considered personal property that can be financed out of
a district's operating budget rather than by Bond facility only. Although there
can be no assurance, the Company believes these factors will continue to fuel
the demand for modular re-locatable classrooms.
SCHOOL BUS SAFETY RESTRAINT PRODUCTS
There are approximately 24,000,000 students using the "yellow school
bus" to get to and from school each day, in the U.S. One would hope that every
possible consideration has been made to ensure their safety. In fact, during the
1996-1997 school year alone, over 8,500 student injuries and 15 student deaths
resulted from school bus accidents.
Although many have argued that requiring buses to provide passenger
restraint systems similar to the restraints required on automobiles could
further reduce injuries, no federal requirement currently exists for safety
restraints on full sized buses. The federal regulatory agency that overseas this
issue is the National Highway Traffic and Safety Administration (NHTSA) and its
position for years has been that school buses, while not accident-free, are
still one of the safest forms of transportation on the road today. NHTSA states,
first, that due to the fact that buses greatly outsize and outweigh most
vehicles on the road, they tend to sustain less damage than what they collide
with, and second, that "compartmentalization" protects school children during
bus accidents. Compartmentalization can best be described as the requirement
that bus seats and seat backs are heavily padded to absorb the impact energy of
passengers during accidents. In actuality though, the only identifiable feature
behind this strategy is a 2" thick layer of foam padding added to each seat
back. While helping to absorb the shock and acceleration forces during a frontal
impact, this method fails to provide comprehensive passenger protection in most
other types of impacts because it fails to keep riders from being thrown from
their seats during an accident, and injured from impacting hard surfaces in the
bus (i.e.-roof, walls, and each other).
The Federal government's failure to adopt pro-active measures to reduce
passenger injuries on school buses has prompted several states to pass
legislation in an effort to improve safety. During the last 10 years, New Jersey
and New York have mandated that standard two-
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point-lap belts be installed in all school buses. Unfortunately, a recent study
has revealed that while seat belts can greatly improve passenger safety on
school buses when worn, less than 10% of the students wear them. Over the past
six months, New York and New Jersey have been jointed by Florida, Louisiana and
California which have all adopted some form of School Bus Occupant Restraint
Legislation.
Monitoring and enforcement of conventional seat belts has proven
difficult and especially impractical once the school bus is in motion. Bus
drivers cannot determine whether or not the seat belts are safely secured onto
the children riding the bus. Further, children tend to view seatbelts as a
nuisance to wear rather than as an important safety device. With the new lap bar
design, a bus driver can simply view the center bus aisle through his/her rear
view mirror and quickly ascertain that all safety restraint bars are in their
down position. Also, the lap bar design, which is mounted on the back of the
seat in front of the passenger, is less intrusive to the passenger, and
therefore more apt to be utilized. Adding seat belts to a new school bus at the
factory can cost over $1,500 (note: safety belts would need to be replaced every
3 to 4 years and are susceptible to tampering and vandalism, thus raising their
lifetime cost). The cost to retrofit an existing school bus with lap belts can
run well over $7,500 due to the cost of replacing existing bus seats with
structurally enhanced seat belt ready seats.
For these reasons, seat belts are not an optimal solution and bar type
restraint systems have begun to gain attention. In fact, Congress recently
passed a measure that sets aside $700,000 in federal matching funds to assist
school administrators in setting up pilot programs for non-seat belt restraining
systems. With many interested parties focusing on increased safety, and the
disappointing results of standard seat belt programs, the Company believes there
is an opportunity for an innovative, cost effective solution such as
SAFE-T-BAR(R), although the Company has not prepared any marketing studies and
there can be no assurance that the SAFE-T-BAR(R) will be adopted as an
alternative.
Currently, there are approximately 425,000 school buses in service
throughout the United States. Each year approximately 38,000 new school buses
are produced. Generally, there are 4 bus size classifications: A, B, C and D. By
law, the smaller bus sizes, type A and B, are mandated to provide standard seat
belts. Bus types C and D are considered full size vehicles and are not Federally
mandated to provide seat belts for passengers. Type C buses contain 16 seats (48
passenger), and, type D buses contain 24 seats (72 passenger). Of the 38,000 new
school buses entering service annually around 30,000 of these are C and D type
vehicles. Although there can be no assurance, industry analysts predict the
growth in new school bus orders will remain strong at around 2% to 4% annually
for at least the next 10 years as students enrollment numbers continue to rise
and district demographics continue to decentralize. Of the 425,000 school buses
currently in service nationwide, a potential market of 6.5 million restraint
devices is available in the event of a federal mandate to install lap bar
restraints, although there can be no assurance such a mandate will be imposed.
At a proposed retail price point of $170.00 per bar (3 children/seat) this could
represent a market value in excess of 1 billion dollars, although there can be
no assurance the Company will receive that amount per bar or that the
SAFE-T-
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BAR(R) will be selected as the designated safety solution by the purchasers of
new buses. The Company also is considering the pursuit of international
manufacturing and distribution of its "Safe-T-Bar(R)" product with primary
emphasis on Canada and Europe.
MODULAR STRUCTURES
The Company's core business is the manufacturing and sale or leasing of
modular classrooms. These classrooms are being sold and leased to California
school districts as well as to third party dealers including G.E. Capital
Modular Space, a division of General Electric. The Company's modular classroom
structures are engineered and constructed in accordance with pre-approved
building plans, commonly referred to as "P.C.'s" or "pre-checked plans", that
conform to structural and seismic safety specifications adopted by the
California Department of State Architects ("DSA"). The DSA regulates all
California school construction on public land and the DSA's standards are
believed to be more rigorous than the standards that typically regulate other
classes of commercial portable structures. The Company also manufactures modular
re-locatable structures for use as offices, temporary construction facilities,
medical facilities and equipment bunkers for the cellular telecommunications
industry. These structures are designed and manufactured to conform to
Department of Housing (DOH) specifications.
The Company is currently attempting to obtain DSA approval for a
clustered modular building that would comprise eight to ten classrooms in a
two-story structure. Several third party purchasers have expressed an interest
in this clustered modular classroom configuration.
The Company entered into an agreement on May 17, 1999 to purchase a
selected number of modular buildings currently under lease by several School
districts in California from Custom Modular Structures, located in Pleasanton,
California. The modular buildings, valued at approximately $200,000, were
purchased in exchange for 390,000 Company shares of Common Stock. The lease
contracts are for terms of between 12 and 46 months. At the end of the current
contract term, the Company believes the modular buildings will have a residual
value of $150,000. Although there can be no assurance, the Company hopes that
given the present demand for modular buildings, the Company will have the
opportunity to re-lease the buildings under essentially the same terms and
conditions.
SAFE-T-BAR(R)
The Company has the exclusive manufacturing and marketing rights for an
innovative and potentially valuable new product known as the SAFE-T-BAR(R) that
the Company believes has the potential to become a preferred solution for
on-board school bus passenger restraint systems. The general product design,
closely approximates the type of lap bar safety restraint systems commonly found
on high velocity amusement park rides. The Company plans to produce and
currently is marketing the product to school bus manufacturers and operators
nationwide, including governmental agencies and school systems.
As of March 3, 1999 the SAFE-T-BAR(R) completed and passed the full
complement of testing required under FMVSS 222 & 302 (Federal Motor Vehicle
Safety Standards) and is ready for market roll-out. The test results were
delivered to the Company in a comprehensive fifty page report rendered by KARCO
Engineering, a Federally approved collision testing facility
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located in Adelanto, CA. Now that all federal compliance testing milestones for
the SAFE-T-BAR(R) school bus passenger restraint have been met, the Company is
moving quickly into the Pilot Program stage of this new product on a state by
state basis. Glenn Gruber, Marketing Director for Majestic Transportation
Products, Ltd., is currently in talks with transportation officials and/or
legislators in the States of Minnesota, New Jersey, Delaware, Florida, Illinois,
Tennessee, New Mexico and New York that have expressed interest in the
SAFE-T-BAR(R) passenger restraint system.
The Company launched its first pilot program with the Oceanside Unified
School District and recently completed the program on August 24, 1999. The
program received high marks from the Transportation Staff as well as the many
bus drivers who drove the SAFE-T-BAR(R)'s outfitted bus. The Company has not
sold any SAFE-T-BAR(R)'s to date and has no existing contracts or orders to
produce SAFE-T-BAR(R)s.
SAFE-T-SEAT(TM)
The Company is in the process of developing a new and improved seat
design for school buses, officially labeled the "SAFE-T-SEAT(TM)" restraint
system. The Company envisions that the SAFE-T-SEAT(TM) will enhance students
safety in school buses and hopes to commence the marketing of SAFE-T-SEAT(TM)
devices in the year 2000. The Company expects to release details of the new
SAFE-T-SEAT(TM) design in the near future.
INTELLECTUAL PROPERTY RIGHTS
SAFE-T-BAR(R). The Company has the exclusive right and license to
manufacture and sell the SAFE-T-BAR(R) product under a Patent that is owned
individually by Adrian Corbett, the Company's Vice President of Engineering. The
license from Mr. Corbett is for a period of seven (7) years renewable for two
(2) additional terms of five (5) years. The mark SAFE-T-BAR(R) is a trademark
registered by the Company with the United States Patent and Trademark Office
("PTO").
SAFE-T-SEAT(TM)
SAFE-T-SEAT(TM). The Company's new proposed product SAFE-T-SEAT(TM) is
the subject of a patent application currently pending the with PTO filed by
Adrian Corbett and the Company has applied to register this name with the PTO as
a trademark.
AMOUNT SPENT ON RESEARCH AND DEVELOPMENT ACTIVITIES
During the last two (2) fiscal years the Company has spent
approximately $188,810.00 on research and development activities.
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DEPENDENCE ON ONE OR FEW MAJOR CUSTOMERS
During fiscal year 1999 the Company recognized approximately forty
percent (40%) of its revenues from Cal-American Building Co., Inc.,
("Cal-American"), a California corporation which has filed a Chapter 11 petition
that has not yet been adjudicated. There can be no assurance the Company will
continue to do business with Cal-American.
MARKETING STRATEGY
The Company has approached marketing of its modular structures in a
common-sense, long-term fashion. The Company developed or obtained architectural
plans that are or have been previously approved, obtained contracts with school
districts for long-term orders, hired personnel with modular construction
experience, and negotiated favorable terms with suppliers of construction
materials and parts that the Company believes are favorable. In addition, the
Company is designing a new multiple story clustered modular classroom structure
for DSA review.
The Company also plans on adding at least one additional manufacturing
facility within one (1) year to increase its current output capacity. The
Company believes that this growth strategy is warranted to gain market share
early and help ensure stability and profit margin for the long term.
The goal of the marketing effort is to gain additional market share
through a concentrated campaign of: direct contact with customers using in-house
marketing representatives, a high visibility presence at modular industry trade
shows, open bids, and print advertisements carefully placed in industry trade
periodicals. Management believes that this comprehensive marketing plan will
help establish the Company as a market leader in the construction of quality
modular structures.
COMPETITION IN MODULAR STRUCTURE INDUSTRY
There are approximately 19 companies currently building modular
structures in California. The largest of these companies, Modtech, Inc.
("Modtech"), operates from multiple facilities located in Lathrop and Perris,
California. Modtech's primary revenue source is the construction of modular
classroom structures and its 1997 reported net sales exceed $143 million (up
from $49 million in net revenue for 1996, and $19.3 million in 1995). Other
primary competitors in California for modular structures include American
Modular Systems and Design Mobile Systems. Outside of California, the Company's
competitors include a number of publicly traded companies currently
manufacturing pre-fabricated modular structures, and pre-fabricated housing.
This industry group includes; Miller Business Systems (MBSI NASD), Nobility
Homes (HOBH NASD), Cavalier Homes (CAV NYSE), Palm Harbor Homes (PHHM NASD) and
Clayton Homes (CMH NYSE). All of these competitors have capital and other
resources greater than the Company and could adversely impact the Company's
marketing plans.
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COMPETITION IN SCHOOL BUS SAFETY RESTRAINT INDUSTRY
The Company's competition in the safety restraint products is with
companies that produce different safety restraint devices for school buses such
as Seat Belts. The Company has no knowledge of any other company that produces a
lap bar restraint device similar to the SAFE-T-BAR(R).
Most of the larger sized C & D type school buses currently rely on the
concept of "compartmentalization" to ensure the safety of onboard passengers.
This is a passive type of protection that is meant to contain the child within a
structurally reinforced passenger compartment of padded high-back seats and
crash barriers. There is no guarantee that this "compartmentalization" approach
will not continue to be the dominant approach in the school bus safety restraint
industry or that one of the Company's safety restraint competitors will not
succeed in marketing a competing product as the chosen lap belt solution.
Further, there is no assurance that the federal government, the states,
local governments, and/or school districts will not opt to use seat belts
instead of the Company's SAFE-T-BAR(R) product to enhance school bus safety.
Companies such as Bus Belts Development, Indiana Mills, BESI and
Kinedyne are involved in the manufacturing of seat belts and are competitors of
the Company.
WALDEN STRUCTURES INC.
On September 29, 1999, the Company entered into preliminary discussions
to acquire Walden Structures and Constructions, Inc. ("Walden"), a privately
held manufacturer of modular structures primarily for use by commercial
enterprises. The Company believes the addition of Walden's operations could add
significantly to the Company's annual revenues and allow the Company to become
more involved in manufacturing modular structures other than classrooms.
No formal Letter of Intent outlining the price, terms, and timetable of
the proposed acquisition has been executed and there can be no assurance that a
transaction will be consummated with Walden.
EMPLOYEES
As of October, 1999, the Company has forty-four (44) employees, none of
whom have entered into an employment agreement with the Company, other than the
Company's President, Chief Executive Officer, and Director, Francis A.
Zubrowski. The Company has no collective bargaining agreements covering any of
its employees, has not experienced any material labor disruption and is unaware
of any efforts or plans to organize its employees. The Company considers
relations with its employees to be good.
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YEAR 2000 COMPLIANCE
BACKGROUND. Some computers, software and other equipment include
programming code in which calendar year data is abbreviated to only two digits.
As a result of this design decision, some of these systems could fail to operate
or fail to produce correct results if "00" is interpreted to mean 1900, rather
than 2000. These problems are widely expected to increase in frequency and
severity as the year "2000" approaches and are commonly referred to as the
"Millennium Bug" or "Year 2000 Problem."
ASSESSMENT. The Year 2000 Problem could affect computers, software and
other equipment used, operated or maintained by the Company. Accordingly, the
Company is reviewing its internal computer programs and systems to ensure that
the programs and systems will be Year 2000 compliant. The Company presently
believes that its computer systems will be Year 2000 compliant in a timely
manner. However, while the estimated cost of these efforts is not expected to be
material to the Company's financial position or any year's results of
operations, there can be assurance to this effect.
INTERNAL INFRASTRUCTURE. The Company believes that it has reviewed and
assessed all of the major computers, software applications, and related
equipment used in connection with its internal operations that would potentially
require modification, upgrade, or replacement to minimize the possibility of a
material disruption to its business. The Company's internal review of such
systems did not identify any material Year 2000 Problem. If the Company had
identified an exposure to the "Year 2000 Problem," Management currently
estimates the total cost of internal reprogramming of its software products and
the upgrading of purchased hardware and software would not be material. While
this is management's best current estimate, items outside management's control
relating to the "Year 2000 Problem" may impact the Company. The Company
estimates the total cost to the Company of completing any required
modifications, upgrades, or replacements of these internal systems would not
have a material adverse effect on the Company's business or results of
operations.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to
computers and related systems, the operations of office and facilities equipment
such as fax machines, photocopiers, telephone switches, security systems, and
other common devices may be affected by the Year 2000 Problem.
DISCLAIMER. The discussion of the Company's efforts, and management's
expectations, relating to Year 2000 compliance are forward-looking statements.
The Company's Year 2000 compliance status and the level of incremental costs
associated therewith, if any, could be adversely impacted by, among other
things, the availability and cost of programming and testing resources, vendors'
ability to modify proprietary software, and unanticipated problems identified in
ongoing internal compliance reviews.
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ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis should be read in
conjunction with the financial statements and accompanying notes included in
this Registration Statement.
GENERAL
Since its inception in 1992, The Majestic Companies, Ltd., (the
'Company'), has undergone a succession of developmental changes, which has
brought it to focus on its current set of operations carried out by three wholly
owned subsidiaries. The manufacture and sale of re-locatable modular buildings
by its subsidiary, Majestic Modular Buildings, Ltd., and, the acquisition and
lease of modular buildings by the subsidiary, Majestic Financial, Ltd.
Additionally, the Company has developed and is in the process of marketing a
school bus safety restraint device known as the SAFE-T-BAR(R) through its third
subsidiary, Majestic Transportation Products, Ltd.
The Company's manufacturing division, Majestic Modular Buildings, Ltd.,
which began operations in April of 1998, provides Department of State Architects
(DSA), and, Department of Housing (DOH), certified modular buildings to public,
private and commercial consumers throughout the State of California. Buildings
are manufactured to meet customer specifications while complying with
specifically licensed design plans known as PC's (Previously Checked-State
plans). Typically, the market for DSA approved modular classrooms experiences a
seasonal demand during the first four months of the calendar year when school
districts prepare for the new school year later in the Fall. However, recent
legislation and statewide funding has resulted in a higher year-round demand as
school districts rush to provide entire new schools to satisfy an increasing
student population and statewide mandates. Modular buildings range in use from,
classrooms, housing for communications relay stations, commercial office
buildings, fire stations, hospital housing, etc. Majestic Modular Buildings,
Ltd., is in the process of developing a two story modular classroom design that
has been inspired by the need for schools to maximize the utilization of
economic resources and limited lands available to them. The Company feels that
the above need, as well as, state mandated classroom size reduction policies and
statewide enhanced funding of nearly 11 billion dollars, will continue to
substantiate the production and demand of modular classrooms for years to come.
With the placement of its first single unit operational lease, Majestic
Financial, Ltd. began operations in December of 1998. Its primary mission is to
supply modular classrooms for lease to school districts. This is accomplished by
directly providing modular classrooms for lease, or, through the acquisition of
existing leased fleets from small to medium size entities. The focus is to
establish an asset base that will continuously provide a turnover of revenue
from the renewal of existing leases. Although Majestic Financial, Ltd., current
fleet is only a modest fourteen units in strength, Majestic Financial, Ltd.,
constantly is seeking to augment its fleet while providing schools with limited
budgetary resources the ability to obtain much needed
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classroom space under affordable lease terms.
The SAFE-T-BAR(R) school bus safety restraint has been designed to
fulfill a critical need in the area of school bus safety transportation.
Majestic Transportation Products, Ltd., development of a safety restraint device
similar to lap bars found on high velocity amusement park rides was designed to
provide an effective passive restraint system for school buses. The
SAFE-T-BAR(R), as the device is known, has passed a battery of computerized,
sled, and federal testing requirements. The passive application of the device
while in a 'down' position provides student riders an increased measure of
security not found in conventional seat belts which have proven expensive to
install, easily vandalized, and, not always utilized by the student rider.
Currently, Majestic Transportation Products, Ltd., is aggressively marketing the
SAFE-T-BAR(R) throughout the United States with emphasis being placed on the
states with existing and pending legislation requiring safety restraints for
school buses. A test program with a school bus retrofitted with the
SAFE-T-BAR(R) in Oceanside, California has resulted in successful utilization
such that many school and transportation authorities are pressing for the
general acceptance of the device throughout their districts. Majestic
Transportation, Ltd. anticipates a breakthrough in its marketing efforts
resulting in increasing incremental sales by year-end 1999.
Beginning in 1998 with the start up of Majestic Modular Buildings,
Ltd., the Company experienced a modest revenue flow along with the costs and
growing pains of venturing into a new business. At the quarter ending September
30, 1999, the Company's modular division has posted an increase of 500% in sales
compared to its total first year results. The Company desires to augment
Majestic Financial, Ltd., lease fleet in a modest fashion and establish an asset
base capable of generating a consistent stream of revenues to complement its
modular manufacturing operations. Revenues generated by leases this year have
been modest and have provided the Company with a source of liquid cash
alternatives to fund operations. After two years of development and testing, the
Company expects that Majestic Transportation, Ltd., SAFE-T-BAR(R) extensive
marketing efforts will start resulting in its first revenues before the end of
its fiscal year, December 31, 1999.
Although, The Majestic Companies, Ltd., has experienced growth in
revenues since the inception of operations in 1998, the Company has experienced
losses in each year of its operations, and, there can be no assurance, that, in
the future, The Majestic Companies, Ltd., will sustain revenue growth or achieve
profitability. The Company has identified several steps it feels will begin to
move it toward profitability: (I) provide timely and adequate working capital
for the modular division, (II) further automate the modular production process,
which the Company has started with the purchase of an overhead crane system,
(III) pursue volume purchase discounts for raw materials, (IV) capitalize on
federal and state legislation requiring safety restraints on school buses, and,
begin realizing sales from, Majestic Transportation Products, Ltd., marketing
efforts, (V) continual improvement and development of safety restraint devices
within the same transportation division, and, (VI) control all-around general
overhead cost.
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RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
NET SALES. In fiscal year ending December 31, 1998, the Company
achieved annual sales of $395,857. Net sales in 1997 were non-existent since the
Company had not yet commenced operations, and/or, it was still in a research and
development phase. The 1998 year end sales consisted primarily of the modular
division sales which commenced operations in April of 1998. These sales
comprised 99% of the year's total sales. Sales for this division were modest due
to the fact that start-up and `growing' issues occupied the focus of this
division in its first year. Furthermore, sales for the year were minimal as
reflected by the modular division's attention to assembling a sales force toward
the last quarter of the year. The remaining 1% of sales for 1998 was comprised
of lease revenue from the Company's lease division, which had just commenced
operations in December of 1998.
COST OF SALES. Cost of sales for the modular division totaled $425,281
in 1998. This was primarily due to the fact the Company's modular division was
in the process of establishing and improving its labor efficiency and materials
acquisition during this start up year. In 1997 there was no cost of sales since
the Company had not yet commenced operations, and/or, it was still in a research
and development phase.
RESEARCH AND DEVELOPMENT. Research and Development expenses in 1998
reached $191,687. These research and development expenses were primarily
comprised of operations related to the development of the SAFE-T-BAR(R), which
had just begun research in January of 1998. There were no research and
development expenses in 1997.
SELLING AND MARKETING. Selling and marketing expenses for 1998 were
$144,044. The Company's corporate headquarters accounted for $90,000 of these
expenses, $35,750 was within the modular division and the balance of $18,294 was
a result of marketing within the transportation division. Total selling and
marketing expenses increased slightly over 4 times to $144,044 in 1998 from
$35,000 in 1997. The increase was a result of the Company's concentration on
supporting its newly commenced operations.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased nine times to $1,987,527 in 1998 from $214,866 in 1997, due in part to
management additions, re-location of both the current corporate headquarters and
the modular division, accounting and legal costs related to the start up of the
modular division, and financing activities.
OTHER EXPENSES. Other expenses decreased 63% from $52,086 in 1997 to
$19,178 in 1998. This was due to the amortization expense of a master license
once held by the Company in 1997 to market an all composite vehicle
internationally. Interest expense totaled $1,428 in 1998, a result of equipment
financing for the modular division. There was no interest expense in 1997.
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NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
NET SALES. Net sales for the nine months ended September 30, 1999 were
$2,290,201, a 20.9 times increase from $109,506 in the same period in 1998. This
increase was primarily due to an increase in modular product sales of $2,172,325
through September 1999, which increased 20 times from $107,640 in the same
period in 1998. This increase was a direct result of a concerted sales effort
beginning in the last quarter of 1998. Lease sales comprised $113,725 through
September 30, 1999. There was no sales resulting from leases for the same period
in 1998.
COST OF SALES. Cost of sales increased 20.6 times to $2,072,429 through
September 1999 from $100,494 in the same period 1998. The increase was
attributable mostly to the Company's modular division, which posted an increase
of 20.4 times to $2,055,762 from $100,494 for the same period in 1998. The
Company's transportation division posted a total of $16,667 in royalty fees
through September 1999. There was no royalties paid for the same period in 1998.
Gross profit percentage increased to 10% from a negative (7%) in 1998.
RESEARCH AND DEVELOPMENT. Research and Development expenses increased
45% to $198,043 through the period September 1999 from $136,847 in the same
period 1998. The increase resulted primarily from additional consulting fees and
other costs related to ongoing development projects.
SELLING AND MARKETING. Selling and Marketing expenses increased 43% to
$165,993 through the period September 1999 from $116,033 in the same period
1998. The increase was a result of the Company's overall operational expansions
and concerted efforts to market its products.
GENERAL AND ADMINISTRATIVE. General and Administrative expenses
increased 37% to $1,959,840 through the period September 1999 from $1,428,326 in
the same period 1998. This was partly due to an increase in consultant,
managerial, and professional compensations, financing activities, and, an
increase in product insurance coverage and rent factors.
OTHER EXPENSES. Other expenses increased 67% to $27,242 for the period
ending September 1999 from $16,278 in the same period 1998. This was primarily
due to an increase of depreciation and amortization expenses resulting from the
acquisition of additional capital assets. Interest expenses increased
twenty-eight folds to $23,979 for the period ending September 1999 from $828 in
the same period 1998. Interest expense was primarily a result of repayment of
debt acquired in 1999.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
NET SALES. Net sales for the three months ended September 30, 1999 were
$647,471, a six-fold increase from $109,506 in the same period ending 1998. The
sales consisted of $554,910 in modular product sales for the three periods
ending September 1999, compared to $109,506 for the same period in 1998, a
five-fold increase. The increase is directly attributable
13
<PAGE>
to a structured sales effort by the modular division. The Company's leasing
division accounted for $90,025 in period sales for 1999. There were no lease
sales in the same period 1998. A total of $70,369 of this period's lease sales
were a result of the Company selling off future revenue streams from a portion
of its lease fleet.
COST OF SALES. Cost of sales for the three months ended September 30,
1999 totaled $497,670, a five-fold increase from $100,494 in the same period
ending 1998. The cost of sales increased for the modular division in that period
five-fold to $483,503 in 1999 from $100,494 in the same period ending 1998. The
Company's transportation division experienced a total of $5,555 in royalty
expenses for this period. There was no royalty expense for the same period in
1998. The leasing division experienced $8,612 in cost of sales for this period
in 1999. There was no leasing division cost for the same period in 1998. Gross
profit percentage for this period increased to 23% in 1999 from 8% in the same
period last year. The period's gross profit was affected by the period sale of
future revenue streams from the leasing division.
RESEARCH AND DEVELOPMENT. Research and Development expenses increased
by 49% to $76,014 for the three-month period ending September 30, 1999, from
$51,115 in the same period in 1998. This was primarily a result of the
transportation division continuing improvement of the SAFE-T-BAR(R) as well as
the development of a new product, the SAFE-T-SEAT(TM), a product incorporating
the features of tHE SAFE-T-BAR(R) on an original seat design.
SELLING AND MARKETING. Selling and marketing expense increased by 48%
to $60,331 for the three months period ending September 30, 1999, from $40,677
in the same period in 1998. The increase in expense is largely attributable to
the modular and transportation divisions marketing of their products in 1999.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased 25% to $736,222 for the three-month period ending September 30, 1999,
from $584,061in 1998. This was largely the result of increases in operational
overheads and corporate financing activities.
OTHER EXPENSES. Other expenses increased 86% to $10,230 for the three
months period ending September 30, 1990, from $5,502 in the same period 1998.
This was primarily due to depreciation expense from the modular division's
acquisition of capital equipment in the period ending 1999. Interest expense
increased for the period 15.8 times to $11,516, from $729 in the same
three-month period ended 1998. The interest is largely attributable to repayment
of debt financing and loans.
LIQUIDITY AND CAPITAL RESOURCES
The Majestic Companies, Ltd. has largely financed its operations
through private placements of common and preferred stock, raising net proceeds
of approximately $2.5 million from sales of these securities. Additionally, the
Company has raised approximately $1 million through a Section 504 offering in
1999. Since December 31, 1997 and September 30, 1999, The Majestic Companies has
invested approximately $686,582 (net of accumulated depreciation) in leasehold
improvements, plant and office equipment to support its developmental,
production
14
<PAGE>
and administrative activities. An additional $91,996 has been invested into
licenses of trademarks and PC's. The Company anticipates no other material
commitments in the near term future.
The Majestic Companies, Ltd., principal sources of liquidity are short
and long term debt financing, of which $615,039 remains outstanding as of
September 30, 1999. Additionally, the Company has recently secured lines of
credit totaling $1 million dollars, which will become available in November of
1999.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Company adopted the disclosure requirements under
Statement of Financial Accounting Standards No. 123 (SFAS No. 123) Accounting
for Stock-Based Compensation. See Note 1 in the Consolidated Financial
Statements of the Company, included in this Report on Form 10-SB, for the full
disclosure. In 1997, the Company was required to adopt Statement of Financial
Accounting Standards No. 121 (SFAS No. 121) Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed, which prescribes
accounting and reporting standards when circumstances indicate that the carrying
amount of a long-lived asset may be not recoverable. SFAS No. 121 had no impact
on the Company's financial statements.
The Company adopted Statement of Financial Account Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS 131")
in the year ended December 31, 1998. SFAS establishes standards for reporting
information regarding operating segments in annual financial statements and
requires selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS 131 also establishes standards
for related disclosures about products and services and geographic areas.
Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions how to
allocate resources and assess performance. The information disclosed herein,
materially represents all of the financial information related to the Company's
principal operating segment.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Registration Statement on Form 10-SB contains forward-looking
statements made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995. Such statements consist of any statement other
than a recitation of historical facts and can be identified by words such as
"may", "expect," "anticipate," "estimate," "hopes," "believes," "continue,"
"intends," "seeks," "contemplates," "suggests," "envisions" or the negative
thereof or other variations thereon or comparable terminology. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, including but not limited
to, those risks associated with economic conditions generally and the economy in
those areas where the Company has or expects to have assets and operations;
competitive and other factors affecting the Company's operations, markets,
products and
15
<PAGE>
services; those risks associated with the Company's ability to maintain the
exclusive right and license to use the Patent owned by Adrian Corbett; those
risks associated with the Company's ability to successfully negotiate with
certain customers, risks relating to estimated contract costs, estimated losses
on uncompleted contracts and estimates regarding the percentage of completion of
contracts, risks relating to the ability of the Company to raise the funds
necessary to operate, design, develop, construct, and manage modular classrooms,
risks related to the outcome of Cal-American's Chapter 11 bankruptcy proceeding
because Cal-American has been one of the Company's primary customers; those
risks involved in lobbying the appropriate governmental units or agencies in
California or elsewhere to allocate funding to school districts to purchase or
lease modular classrooms; associated costs arising out of the Company's
activities and the matters discussed in this report; risks relating to changes
in interest rates and in the availability, cost and terms of financing; risks
related to the performance of financial markets; risks related to changes in
domestic laws, regulations and taxes; risks related to changes in business
strategy or development plans; risks associated with future profitability; and
other factors discussed elsewhere in this report and in documents filed by the
Company with the Securities and Exchange Commission. Many of these factors are
beyond the Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this
registration on Form 10-SB will, in fact, occur. The Company does not undertake
any obligation to revise these forward-looking statements to reflect future
events or circumstances and other factors discussed elsewhere in this report and
the documents filed or to be filed by the Company with the Securities and
Exchange Commission.
RISK FACTORS
The securities offered hereby are speculative, involve a high degree of
risk and immediate substantial dilution to the public investors, and should not
be purchased by persons who cannot afford to lose their entire investment.
Prospective investors should consider carefully the following risk factors
inherent in and affecting the Company's business and the Offering, as well as
all other information set forth in this Form 10-SB, before they invest in the
Company.
QUARTERLY FLUCTUATIONS AND SEASONALITY
Operating results may fluctuate on a quarterly basis due to a variety
of factors, including the cycles of orders, shipment of products from suppliers,
the number and timing of new product introductions, the timing of operation and
advertising expenditures, weather, the year end purchasing cycle, and other
factors. The Company believes that factors such as fluctuations in the quarterly
operating results could affect the value of the Company's stock.
RELIANCE UPON PRODUCT ACCEPTANCE
Management believes that demand for the Company's SAFE-T-BAR(R) product
will depend in part, upon the continued interest in improving safety on public
and private bus transportation. There are no assurances that current trends
towards passenger safety will
16
<PAGE>
continue. Even if such trends continue, there are no assurances that the
Company's products will find acceptance with purchasers and operators of school
bus fleets, or if accepted, that such acceptance will continue. While the
conclusions reached by the Company's limited market research have been
favorable, there are no assurances that actual operating results will reach the
levels indicated by such research.
DEPENDENCE ON CERTAIN CUSTOMERS; NO LONG-TERM SUPPLY CONTRACTS
Although the Company sells its products both through distributors and
directly to end users, it relies significantly on relationships with several
customers. The Company does not have any long-term supply agreements with any of
its customers. The loss of any of these customers could adversely affect the
Company's profitability.
SIGNIFICANT INDEBTEDNESS
The Company has incurred substantial short-term indebtedness and
long-term indebtedness which aggregated $228,139 and $386,900 respectively as of
September 30, 1999. Funds generated by the Company's operations have been
sufficient to pay the interest on its short-term and long-term indebtedness.
There can be no assurance, however, that the Company will be able to pay the
principal due on its short-term and long-term indebtedness.
DEPENDENCE ON CERTAIN SUPPLIERS; NO LONG-TERM CONTRACTS
Although the Company has a favorable relationship with its suppliers,
marketplace variants such as a bankruptcy, strike, liquidation, acquisition or
merger, war, civil unrest, and atmospheric and other weather-related phenomenon
could disrupt these relationships at any time. The Company currently has no long
term supply agreements to control costs and assure availability of inventory.
Historically, the Company has generally been able to obtain its inventory
without significant difficulty or delay. There have, however, been times when
the Company was forced to pay a premium for inventory in short supply and has
experienced occasional delays. Any significant changes in supply, including
increased costs, could adversely affect planned growth. The Company has not
experienced any such significant changes in supply or increased costs, other
than the moderate effect of changes in the exchange rate of foreign currencies
against the U.S. dollar, and does not anticipate significant difficulty
regarding these matters.
GOVERNMENT REGULATIONS
The Company's design, manufacturing, and construction activities are
subject to various federal, state, local and foreign laws and regulations
designed to protect the environment from waste emissions and the handling,
treatment and disposal of solid and hazardous wastes, as well as California,
Federal and other state regulations governing the design and construction of
classroom and other modular structures, and transportation safety devices.
Although the Company believes that it is and has been in substantial compliance
with all such laws, ordinances
17
<PAGE>
and regulations applicable to these operations, there may be liabilities or
conditions associated with such activities of which the Company is not aware.
Accordingly, there can be no assurance that future compliance with such
requirements will not have a material adverse effect on the Company's financial
condition and operations.
The Company is also subject to the Federal Occupations Safety and
Health Act and other laws and regulations affecting the safety and health of
employees and the Fair Labor Standards Act and various state laws governing such
matters as minimum wage requirements, overtime and other working conditions and
citizenship requirements. The Company is also subject to various state and local
building codes and licensing requirements. Management of the Company believes
the Company has obtained all necessary licenses and permits and that the Company
is in substantial compliance with applicable federal, state and local laws and
regulations.
LIABILITY INSURANCE
The Company is and may be subject to product liability claims arising
out of the use of the Company's products. In addition, the Company is and may be
subject to other liability resulting from its day to day operations, including
claims for negligence and environmental liability. On April 20, 1999, the
Company procured general liability, automobile and property insurance coverage
with limits in the respective amounts of $1,000,000 ($10,000,000 umbrella),
$1,000,000, and $2,250,000 ($5,000,000 umbrella). If not renewed, these
coverages are scheduled to expire on April 20, 2000. Although management of the
Company believes these coverage limits to be adequate, there can be no assurance
that these limitations are adequate or that the coverage will continue to be
available at affordable rates.
UNCERTAINTY THAT STATES OTHER THAN CALIFORNIA WILL APPROVE COMPANY'S EXISTING
MODULAR STRUCTURES
Currently, the Company's modular classroom structures used in various
California school districts have been approved by the State of California.
There is no guarantee or assurance that other states will approve the
form, composition, size, specifications, materials or components of the
Company's modular classroom or other structures that have already been approved
in California. If other states require the Company to modify the Company's basic
modular classrooms or other structures used in California, the Company could
incur substantial costs to make these classrooms and/or other structures comply
with other states laws and building codes. The incurring of such costs could
significantly, adversely affect the Company's profitability, revenues and
operations.
LABOR AVAILABILITY AND EMPLOYEE RELATIONS
Currently skilled and unskilled labor is reasonably available in
California, but additional light industry moving to the area could reduce these
labor pools. Furthermore, there can be no assurance that the unskilled work
force currently available will be trainable as employees for the Company that
such labor will remain available. Any increase in the competition for employees
18
<PAGE>
could have a significant adverse effect upon both the availability and the price
of skilled and unskilled labor.
The Company currently believes its employee relations are good.
Currently, none of the Company's employees are unionized. There can be no
assurance, however, that a collective bargaining unit will not be organized and
certified in the future. If certified in the future, a work stoppage by a
collective bargaining unit could be disruptive and have a materially adverse
effect on the Company until normal operations resume.
DIVIDENDS UNLIKELY
The Company has never paid dividends on any class of its common stock.
Management of the Company anticipates that earnings generated from the Company's
operations will be used to finance the Company's working capital and market
expansion opportunities and that for the foreseeable future cash dividends will
not be paid to holders of the Company's Common Stock.
DILUTION
The Company has Warrants and stock options outstanding that could
result in the issuance of 1,270,000 shares of Common Stock. To the extent such
shares are issued, the percentage of Common Stock held by existing Company
stockholders will be reduced. Under certain circumstances the exercise of any or
all of the Warrants or stock options might result in further dilution of the net
tangible book value of the existing Company stockholders' shares. For the life
of the Warrants or stock options, the holders thereof are given, at nominal
cost, the opportunity to profit from a rise in the market price of the Common
Stock, if any. The holders of the Warrants or stock options may be expected to
exercise them at a time when the Company may, in all likelihood, be able to
obtain needed capital on more favorable terms.
POTENTIAL FUTURE SALES PURSUANT TO RULE 144
Approximately 15,350,555 shares of the Company's Common Stock presently
outstanding are "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act of 1933, as amended. In general, under Rule
144 a person who has satisfied a one (1) year holding period may, under certain
circumstances, sell within any three (3) month period that number of shares
which does not exceed the greater of one percent of the then outstanding shares
of Common Stock or the average weekly trading volume during the four (4)
calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares by a person who is not an affiliate of the
Company and who has satisfied a two (2) year holding period without any volume
limitation. Possible or actual sales of these shares of Common Stock under Rule
144 may have a material adverse effect on the market price of the Common Stock.
UNCERTAINTY OF GOVERNMENT FUNDING TO SCHOOL DISTRICTS FOR PURPOSES OF PURCHASING
OR LEASING MODULAR STRUCTURES IN CALIFORNIA OR ELSEWHERE
19
<PAGE>
The Company has historically relied on the financial ability of
various school districts to purchase or lease the Company's modular classrooms.
Since the school district's source of funding originates from the government or
various state bonds, there is no guarantee that the government or state bonds
will continue to be available to provide the funding necessary for the school
districts to purchase or lease the Company's modular classrooms.
UNCERTAINTY THAT SCHOOL DISTRICTS WILL CONTINUE TO PURCHASE OR LEASE MODULAR
RELOCATABLE STRUCTURES OVER MORE FIXED, PERMANENT STRUCTURAL ALTERNATIVES
Although the Company believes the conditions affecting the market for
modular buildings to be favorable, there is no assurance that individual school
districts will opt to purchase or lease the Company's modular relocatable
classrooms over more fixed, permanent structural alternatives.
UNCERTAINTY OF PROTECTION OF PATENTS, LICENSES, TRADE SECRETS AND TRADEMARKS
The Company is the exclusive licensee for a patent related to its
SAFE-T-BAR(R) product. The Company's success depends, in part, on its ability to
maintain the exclusive right and license to manufacture and sell the
SAFE-T-BAR(R). There can be no assurance that the Patent License Agreement
between the Company and Adrian Corbett will continue in full force and effect.
If the Patent License Agreement were to be terminated, or the patent for the
SAFE-T-BAR(R) cancelled for any reason, the Company's prospects could be
adversely affected.
There is also no assurance that Adrian Corbett will be able to obtain a
patent on the "SAFE-T-SEAT(TM)" product, or that the Company will be successful
in obtaining the exclusive right and license to use the "SAFE-T-SEAT(TM)"
product from Mr. Corbett.
LIMITED PUBLIC MARKET; POSSIBLE VOLATILITY IN STOCK PRICES; PENNY STOCK RULES
There has, to date, been no substantial, consistent, public market for
the Company's Common Stock, and there can be no assurance that a substantial,
consistent, public market will develop or, if developed, that it will be
sustained. Although the Company's Common Stock has been traded on the OTC
Bulletin Board, the trading has been sporadic without significant volume.
Moreover, the over-the-counter markets for securities of small companies such as
the Company historically have experienced extreme price and volume fluctuations
during certain periods. These broad market fluctuations and other factors, such
as new product developments and trends in the Company's industry and the
investment markets, and economic conditions generally, as well as quarterly
variation in the Company's results of operations, may adversely affect the
market price and trading volume of the Company's Common Stock. In addition, the
Company's Common Stock is subject to rules adopted by the Securities and
Exchange Commission regulating broker-dealer practices in connection with
transactions in the Company's Common Stock because of the added disclosure
requirements.
20
<PAGE>
LIMITED OPERATING HISTORY; LACK OF PROFITABILITY
The Company commenced its operations in 1992. Since that date, the
Company's operations have not been profitable. There can be no assurances that
the Company will be successful in increasing its revenues or developing
profitable operations in the future. Results of operations in the future will be
influenced by numerous factors including increases in expenses associated with
growth, market acceptance of the Company's "SAFE-T-BAR(R)" product and
"SAFE-T-SEAT(TM)" product, competition, the ability of the Company to control
costs and development of its plan of business. There can be no assurance that
revenue growth or profitability on a quarterly or annual basis can ever by
obtained. Additionally, the Company will be subject to all the risks incident to
a developing business with only a limited history of operations. Prospective
investors should consider the frequence with which relatively newly developed
and/or expanding businesses encounter unforeseen expenses, difficulties,
complications and delays, as well as such other factors as the possibility of
competition with larger companies.
EFFECT OF INTEREST RATE CHANGES
The Company is exposed to the impact of interest rate changes. Such
exposure to market risk is inherent in certain of the Company's financial
instruments which arise from transactions entered into in the normal course of
business.
RELIANCE ON KEY PERSONNEL
The success of the Company is dependent upon the experience and
abilities of its senior management. Key senior management include: Francis A.
Zubrowski, Lawrence W. Holland, Ralph D. Morren, Jr., Adrian P. Corbett,
Alejandro V. Tovar, Michael F. Hecker, Clayton S. Chase and Paul S. Hewitt.
There is significant competition in the Company's industry for qualified
personnel, and there can be no assurance that the Company will be able to retain
its existing personnel or recruit new personnel to support its marketing
objectives, goals and plans.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's principal executive and administrative offices are
located in San Diego, California at 8880 Rio San Diego Drive, 8th floor, San
Diego, California 92108 ("Executive Offices"). The Company leases the Executive
Offices from Mission Valley Business Center LLC at a monthly rental of $5,361.00
for a term scheduled to expire June 30, 2000. The Company considers the
Executive Offices to be adequate and suitable for its current needs.
The Company's subsidiary, Majestic Modular Buildings, Ltd., leases
property at 320 9th Street, Modesto, California from Berberian Farms Corporation
at a monthly rental of $12,500.00 for a term scheduled to expire April 30, 2003
("Modesto Property"). The monthly rental for the Modesto Property will increase
to $13,500.00 in December 1999, $14,500.00 in December, 2000, $15,000.00 in
December 2001, and $15,500.00 in December 2002. The Company considers the
Modesto Property to be adequate and suitable for its current needs.
21
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANGEMENT
The following tables set forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 11, 1999 by (i)
each person (or group of affiliated persons who to the knowledge of the Company
is the beneficial owner of five percent or more of the Company's outstanding
shares of Common Stock, (ii) each director and each Named Executive Officer (as
defined in Part I Item 6 of this Form 10-SB) of the Company and (iii) all
directors and executive officers of the Company as a group. Except as otherwise
noted, the Company believes that the persons listed in this table have sole
voting and investment power respecting all shares of Common Stock owned by them.
The Business address of each director and Named Executive Officer listed below
is the Company's corporate address, 8880 Rio San Diego Drive, 8th floor, San
Diego, California, 92108.
<TABLE>
<CAPTION>
<S> <C>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- ---------------------------- ------------------------------ ---------------------------- ------------------
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Owner
- ---------------------------- ------------------------------ ---------------------------- ------------------
Common None - -
- ---------------------------- ------------------------------ ---------------------------- ------------------
SECURITY OWNERSHIP OF MANAGEMENT
- ----------------------------- -------------------------------- --------------------------- -----------------
(1) (2) (3) (4)
Title of Class Name and Address of Beneficial Amount and Nature of Percent of Class
Owner Beneficial Owner
- ----------------------------- -------------------------------- --------------------------- -----------------
Common Francis A. Zubrowski (1) 1,193,578 4.45%
Common Shares
- ----------------------------- -------------------------------- --------------------------- -----------------
Common Adrian A. Corbett 100,000 0.37%
Common Shares
- ----------------------------- -------------------------------- --------------------------- -----------------
Common Clayton S. Chase 224,880 0.84%
Common Shares
- ----------------------------- -------------------------------- --------------------------- -----------------
Common Ralph D. Morren, Jr. 150,000 0.55%
Common Shares
- ----------------------------- -------------------------------- --------------------------- -----------------
Common Lawrence W. Holland 60,000 0.22%
Common Shares
- ----------------------------- -------------------------------- --------------------------- -----------------
Common Alejandro V. Tovar 100,000 0.37%
Common Shares
- ----------------------------- -------------------------------- --------------------------- -----------------
Common Michael F. Hecker 0 Common Shares 0.00%
- ----------------------------- -------------------------------- --------------------------- -----------------
</TABLE>
(1) Does not include 250,000 shares which could be obtained upon exercise of
nonstatutory stock option for years 1999, 2000, 2001, 2002, and 2003.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of the date of
this Registration Statement with respect to the directors and executive officers
of the Company. A summary of
22
<PAGE>
the background and experience of each of these individuals is set forth after
the table. The executive officers serve at the discretion of the Company's Board
of Directors.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------- ---------------------- ------------------------------------------------------
Name Age Position with the Company
- -------------------------------------- ---------------------- ------------------------------------------------------
Francis A. Zubrowski 64 President, Chief Executive Officer, Director
- -------------------------------------- ---------------------- ------------------------------------------------------
Adrian A. Corbett 37 Vice President of Engineering
- -------------------------------------- ---------------------- ------------------------------------------------------
Ralph D. Morren, Jr. 43 Director
- -------------------------------------- ---------------------- ------------------------------------------------------
Lawrence W. Holland 32 Vice President of Sales and Marketing
- -------------------------------------- ---------------------- ------------------------------------------------------
Michael F. Hecker 51 Vice President Manufacturing
- -------------------------------------- ---------------------- ------------------------------------------------------
Alejandro V. Tovar 41 Secretary, Controller
- -------------------------------------- ---------------------- ------------------------------------------------------
Clayton S. Chase 41 Vice President of Investor Relations
- -------------------------------------- ---------------------- ------------------------------------------------------
Paul S. Hewitt 47 Director
- -------------------------------------- ---------------------- ------------------------------------------------------
</TABLE>
FRANCIS A. ZUBROWSKI - Mr. Francis A. Zubrowski is the President and Chief
Executive Officer of The Majestic Companies, Ltd. Mr. Zubrowski has over 39
years of senior management experience and has served as a managing director of
The Owen Stringfellow Ltd. ("Owen Stringfellow"), a Baltimore based consulting
firm with offices in New York, Connecticut and Massachusetts. Owen Stringfellow
provides services in relation to mergers and acquisitions, debt restructuring,
public offerings and turn-around situations. Prior to joining Owen Stringfellow,
Mr. Zubrowski was Chairman and Chief Executive Officer of Consolidated
Industries, a New England based group in the chemical manufacturing and heavy
equipment industries. He has also worked with Bethlehem Steel, U.S. Steel and
Union Carbide operating mining and transportation companies. He represented
Kaiser-Roth Industries on the New York Stock Exchange. Mr. Zubrowski holds a
Bachelors degree in Theology from Fordham University and a Masters in Business
Administration from New York University.
RALPH D. MORREN, JR. - Mr. Morren is a director of the Company and was the
Company's President from May, 1998 through December, 1998. Mr. Morren is a
Director of the Company serving since May 22, 1998 and has over 17 years of
managerial and operational experience in both domestic and international
businesses. From 1994 to 1998 Mr. Morren was the President/CEO of Morren/Laurin
Marketing, LLC, President CEO of Morren Laurin, LLC and President/Chairman of
Creation Homes, Inc. Responsibilities with these businesses have included the
day to day management of corporate affairs and operations and planning
implementation, identification, acquisition and development of company
objectives. Mr. Morren has been the Chief Executive Officer of several companies
specializing in Custom Homebuilding, Real Estate Sales and Marketing, and
Management Asset Evaluation Services. Mr. Morren has extensive expertise in
organizing and technically analyzing project management's optimal critical
paths. Mr. Morren was the President of SKYTEX International, Inc.
ALEJANDRO V. TOVAR - Mr. Alejandro V. Tovar has served as the Company's
secretary and controller since December 23, 1998. With several years experience
as a management accountant, controller and manager with Bonaventure Minerals,
Inc., a California corporation, and Grana Baja, S.A. de C.V. a Mexican
corporation, Mr. Alejandro V, Tovar controls a wide
23
<PAGE>
range of business functions involving the daily and strategic administrative
activities of the Company. Mr. Tovar was also an audit supervisor for Doubletree
Hotels and a branch manager for Norwest Financial in Southern California. Mr.
Tovar has extensive tax preparation education and experience having worked both
with H&R Block and as an independent tax preparer. He served as a captain in the
United States Marine Corps in which he specialized in artillery and logistics.
Mr. Tovar is fluent in Spanish and has maintained an in depth knowledge of
Mexican business and accounting practices. Mr. Tovar attended the University of
California, San Diego, where he received a Bachelors degree in Biology and
Certificate of Accounting. He received his Masters degree in Business
Administration from National University and was recognized with a University
Leadership Award.
CLAYTON S. CHASE - Mr. Clayton S. Chase has served as Vice President of Investor
Relations of the Company since April, 1999 and has been employed by the Company
since 1998. Mr. Chase has nearly ten (10) years experience in representing and
raising capital for both public and private companies. He passed the NASD Series
7 registered representative exam in 1987. Mr. Chase headed the Arete' Design
Group, a company that designs and markets audio accessories from 1994 to 1998.
He was responsible for the identification and certification of a manufacturer in
Tecate, Mexico, which mass produced these audio accessories. Mr. Chase graduated
from the University of Colorado with a B.S. in Engineering Design and Economic
Evaluation. He has served as an account executive for several businesses
including: ROYALE SECURITIES (public) and MOA INVESTMENT CORP. (private), both
located in San Diego, CA. MOA INVESTMENT CORP. acted as the General Partner in
Limited Partnership syndications that purchased mostly all-cash real estate
properties in the hospitality industry and ROYALE SECURITIES acted as the
General Partner in Limited Partnership syndications that purchased and developed
oil and natural gas reserves.
LAWRENCE W. HOLLAND - has served as Vice President of The Majestic Companies
Ltd. since December 23, 1998. Mr. Holland has over ten (10) years in sales and
marketing as an owner of Pinnacle Trading Company, a company which conducts
commerce primarily with Mexico and Central America. He has served as a Senior
Account Executive at Physicians Capital Company, and First Nationwide Investment
Center from March, 1993 to September, 1996. His most recent project was a direct
sales program for Collegiate Sports of America. Mr. Holland received his
Bachelor of Science in Business Administration with an emphasis in Finance from
San Diego State University. His graduate studies include a Professional Degree
in International Business, with an emphasis in Mexican and Latin American Trade,
from the University of California, San Diego.
ADRIAN P. CORBETT - Mr. Adrian P. Corbett has been the Company's Vice President
of Engineering from April, 1998 to the present and has served as President, Vice
President and Director of the Company's subsidiary, Majestic Transportation
Products, Ltd. He is also the inventor of the SAFE-T-BAR(R) bus seat safety
restraint product. Mr. Corbett has an extensive background in automotive and
mechanical design work. He served as Program Manager for Santa Barbara based
ASHSA Corporation in which he was responsible for concept to production of a
third world public transit bus development program. As an engineering planner
for Lockheed Space Operations at Vandenberg Air Force Base from February, 1984
to October, 1986, Mr. Corbett's responsibilities included coordinating
management, engineering, logistics
24
<PAGE>
and operations personnel for launch construction schedules. He received his
education in Aerospace at Northrop and Arizona State University.
MICHAEL HECKER - Mr. Michael Hecker has served as Vice President of
Manufacturing of the Company since December 23, 1998. He has a background in the
construction industry as well as over twenty-seven (27) years experience in
product development, production control and manufacturing. Mr. Hecker's
background in construction began with his early involvement in the family
roofing contractor business until joining the Navy where he attended the U.S.
Naval Construction School in Port Hueneme, California in 1966. Upon graduation
Mr. Hecker was assigned as a Heavy Builder to U.S. Mobile Construction Battalion
Eleven. He spent two tours, attached to the 3rd Marine Division, in Vietnam
building storage facilities, mess halls, bunkers, medical facilities and
airstrips from 1967 through 1968. After leaving the military service, Mr. Hecker
focused on remodeling homes and was Project Manager for several public utility
construction contracts in the Southern California area. Mr. Hecker joined
Industrial Automation Corporation in 1970. He served as both Engineering and
Production Manager and was responsible for the development and manufacturing of
equipment for automated packaging lines. He worked closely with such customers
as Coca-Cola, Procter & Gamble, Lever Brothers, Labatts Breweries and was
instrumental in the design, manufacturing and installation of the first
Pepsi-Cola plant in China. When Industrial Automation Corporation was purchased
by Figgie International, Mr. Hecker became General Manager of Research &
Development for the Packaging Machinery Division.
PAUL S. HEWITT - Mr. Hewitt has served as Executive Director of the National
Taxpayers Union Foundation ("NTUF") from 1990 to present. The NTUF has been one
of Washington's most effective and widely publicized research and public
education programs, focusing on policy issues ranging from demographics and
interest group behavior to health care, budget process and Social Security
reform. From 1988 to 1989 Mr. Hewitt served as Corporate Development Consultant
for New Century Petroleum in which he assisted in raising $1.3 million in seed
capital from private investors. Mr. Hewitt has also served as a Professional
Staff Member and Staff Director on the U.S. Senate Subcommittee on
Inter-Government Relations. Mr. Paul Hewitt graduated from the University of
Berkeley with a B.A. in Economics. He received a Masters of Public
Administration from American University in Washington, D.C.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
compensation paid by the Company during the last three (3) fiscal years to the
Company's former Chief Executive Officer ("Named Executive Officer"). No other
executive officer of the Company received total salary and bonus in excess of
$100,000 during the fiscal year ended December 31, 1998.
25
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C>
- ---------------- ---------- ------------- ------------------ ------------ ---------- ----------- ----------- ------------
Annual Compensation Award Pay-outs
- ---------------- ---------- ------------- ------------------ ------------ ---------- ----------- ----------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ---------------- ---------- ------------- ------------------ ------------ ---------- ----------- ----------- ------------
Name Year Salary ($) Bonus ($) Other Restricted Securities LTIP All
And Annual Stock Underlying Pay-outs Other
Principal Compensation Award ($) Options ($) Compensation
Position ($) SARs (#) ($)
- ---------------- ---------- ------------- ------------------ ------------ ---------- ----------- ----------- ------------
Francis A. 1998 60,000 0 0 18,000 0 0 0
Zubrowski 1997 48,000 0 0 18,000 0 0 0
CEO, President 1996 0 0 0 0 0 0 0
- ---------------- ---------- ------------- ------------------ ------------ ---------- ----------- ----------- ------------
</TABLE>
FRANCIS A. ZUBROWSKI - EMPLOYMENT AGREEMENT
On November 1st, 1998, the Company and its President and Chief
Executive Officer, Francis A. Zubrowski, renewed and amended a five year
employment agreement ("Employment Agreement") whereby the Company will pay Mr.
Zubrowski an annual salary of one hundred eighty thousand dollars ($180,000.00)
for 1999 and 10% increase in Mr. Zubrowski's salary per year for years 2000,
2001, 2002, and 2003. Under the Employment Agreement the Company also granted
Mr. Zubrowski nonstatutory stock options for two hundred fifty thousand
(250,000) shares of the Company's common stock for each year of Mr. Zubrowski's
employment. The exercise price for the stock option is ($0.25) twenty-five cents
per share for year 1999, thirty five cents ($0.35) per share for year 2000,
fifty cents per share ($0.50) for year 2001, seventy-five cents per share
($0.75) for year 2002, and one dollar per share ($1.00) for year 2003. The
Employment Agreement also grants Mr. Zubrowski $1,000 a month as an automobile
allowance, $500.00 per month medical insurance allowance, and a term life
insurance policy in the face amount of one million dollars ($1,000,000.00).
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company executed a Promissory Note in October, 1998, whereby the
Company agreed to pay the aggregate amount of Two Hundred Sixty Thousand Dollars
($260,000.000) to Mei Wah Company, Inc., a California corporation, by December
31, 1999 ("Promissory Note"). The terms, rights, title and interest to the
Promissory Note were restructed and assigned to Francis A. Zubrowski's wife,
Gail E. Bostwick, on April 8, 1999. The Company thereby received more favorable
terms and conditions permitting payment over a period of seventy (70) months
rather than maturing on December 31, 1999.
26
<PAGE>
In May, 1999 the Company obtained a $1,250,000 line of credit from a
private lender for use in its modular operations in Modesto, California. The
Company had drawn a total of $186,680 in proceeds from this facility as of
September 30, 1999, but was unable to draw further sums under the line of
credit. As a result of not being able to reliably draw the balance of funds from
this line of credit, the Company determined to locate and is currently seeking a
replacement line of credit. Subsequent to these events, the Company's CEO,
Francis Zubrowski, liquidated the balance payable on the line of credit in a
private transaction with an exchange of restricted stock he owned. The Company
thereupon agreed to repay to Mr. Zubrowski the amount of $186,680 that Mr.
Zubrowski paid on the line of credit.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value, of which, as of October 11, 1999, 26,834,070 shares were issued
and outstanding. Holders of shares of Common Stock are entitled to one vote per
share on all matters to be voted upon by the stockholders generally. The
approval of proposals submitted to stockholders at a meeting other than for the
election of directors requires the favorable vote of a majority of the shares
voting, except in the case of certain fundamental matters (such as certain
amendments to the Certificate of Incorporation, and certain mergers and
reorganizations), in which cases Delaware law and the Company's Bylaws require
the favorable vote of at least a majority of all outstanding shares.
Stockholders are entitled to receive such dividends as may be declared from time
to time by the Board of Directors out of funds legally available therefor, and
in the event of liquidation, dissolution or winding up of the Company to share
ratably in all assets remaining after payment of liabilities. The holders of
shares of Common Stock have no preemptive, conversion, subscription or
cumulative voting rights.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS.
The Company's Common Stock is currently quoted on the OTC Bulletin
Board under the symbol "MJXC". The Company's Common stock is thinly traded and
any bid or sale prices reported on the OTCBB may not be a true market-based
valuation of the Common Stock. As of October 11, 1999, there were approximately
650 record holders of the Company's Common Stock.
On December 11, 1997 the Board of Governers of the National Association
of Securities Dealers, Inc. ("NASD") approved a series of changes for the OTC
Bulletin Board which affect the Company. The principal changes include: (i) a
rule that only those companies that report their current financial information
to the Securities and Exchange Commission, banking or insurance regulators will
be included for quotation on the OTC Bulletin Board, (ii) that brokers must
review current financial statements on a company they are recommending before
they
27
<PAGE>
recommend a transaction in an OTC security, and (iii) that prior to the initial
purchase of an OTC security, every investor must receive a standard disclosure
statement prepared by the NASD emphasizing the differences between the OTC
securities and other market-listed securities, such as those traded on the
NASDAQ Stock Market, Inc. This Registration Statement is being filed on Form
10-SB with the Securities and Exchange Commission to register the Company's
Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as
amended, which, if declared effective by the Securities and Exchange Commission,
will require the Company to make current financial filings with the Securities
and Exchange Commission, thus qualifying the Company under the proposed rule
change. In the event the Company's proposed Registration Statement is not
declared effective, the Company's securities would not remain eligible for
quotation on the OTC Bulletin Board, which would materially and adversely affect
the liquidity in the Company's Common Stock.
PRICE RANGE OF COMMON STOCK
On June 25, 1998, the Company's Common Stock began trading on the OTC
Bulletin Board under the symbol SKTX. It now trades on the OTC Bulletin Board
under the symbol MJXC. Prior to such date, there had been no market for the
Company's Common Stock; hereafter, there has been a limited trading market.
While a limited public market currently exists, there can be no assurances that
this market will be sustained or that if sustained, such market will operate in
a stable manner. The following table sets forth for the periods indicated the
high and low closing prices of the Company's Common Stock as reported on the OTC
Bulletin Board. The following quotations are over-the-market quotations and,
accordingly, reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
COMMON STOCK
- ------------------- ------------------- --------------------- ------------------
1999 1998 1997
QUARTER TRADE TRADE TRADE
High Low High Low High Low
- ------------------- ------------------- --------------------- ------------------
1st Quarter 1.62 .38 - - - -
- ------------------- ------------------- --------------------- ------------------
2nd Quarter 1.03 .34 - - - -
- ------------------- ------------------- --------------------- ------------------
3rd Quarter .56 .18 5.50 4.05 - -
- ------------------- ------------------- --------------------- ------------------
4th Quarter 4.05 1.00 - -
- ------------------- ------------------- --------------------- ------------------
NO DIVIDENDS ANTICIPATED TO BE PAID
The Company has not paid any cash dividends on its Common Stock since
its inception and does not anticipate paying cash dividends in the foreseeable
future. The future payment of dividends is directly dependent upon future
earnings of the Company, its financial requirements
28
<PAGE>
and other factors to be determined by the Company's Board of Directors, in its
sole discretion. For the foreseeable future, it is anticipated that any earnings
which may be generated from the Company's operations will be used to finance the
growth of the Company, and that cash dividends will not be paid to Common
Stockholders.
ITEM 2. LEGAL PROCEEDINGS
CITIBANK, FEDERAL SAVINGS BANK, a federal savings bank, by and through
its service agent, CITIBANK, N.A., a national banking association v. MAJESTIC
MODULAR BUILDINGS, LTD., CAL-AMERICAN BUILDING COMPANY, INC. et al. (Case No.
182714 in the Superior Court of the State of California for the County of
Stanislaws). On October 19, 1998, Plaintiff commenced an action by filing a
Complaint alleging that Majestic Modular Buildings, Ltd., leased raw materials
from Cal-American Building Company, Inc. that was subject to a security interest
owned by Plaintiff. The Complaint also alleges that Majestic Modular Buildings,
Ltd.'s entering into a License Agreement and Real Property Lease with
Cal-American Building Company, Inc., constituted fraudulent transfers or
conveyances by Cal-American Building Company, Inc. to Majestic Modular
Buildings, Ltd. Plaintiff seeks damages against Majestic Modular Buildings,
Ltd., and the other defendants in the amount of $299,822 and seeks to set aside
the transfers of any asset that occurred under the Equipment Lease Agreement,
the License Agreement and the Real Estate Property Lease between Majestic
Modular Buildings, Ltd. and Cal-American Building Company, Inc. The Company has
answered Plaintiff's complaint and believes it has properly responded to
Plaintiff's Discovery Demands to date. No trial date has yet been set. The
Company believes it bears no liability to Plaintiff, intends to vigorously
defend this lawsuit and is prepared to take the case to trial if Plaintiff does
not agree to a reasonable nuisance value settlement amount.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has not had any changes in or disagreements with its
accountants.
ITEM 4. RECENT SALES IN UNREGISTERED SECURITIES
During the last three (3) years the Company has sold unregistered
shares of its Common Stock in the following transactions:
THE MAJESTIC COMPANIES, LTD. (SECTION 4(2) PRIVATE PLACEMENT) - COMMON
STOCK - Between March 18, 1999 and June 29, 1999 the Company, THE MAJESTIC
COMPANIES, LTD., sold 725,000 common shares at a basis cost of between $0.40 and
$0.50 to two (2) individuals pursuant to a private placement exempt under
Section 4(2) of the Securities Act of 1933, as amended, for an aggregate
consideration of $350,000.
THE MAJESTIC COMPANIES, LTD. - 504 REGULATION D OFFERING - Between
March 10, 1999 and August 30, 1999, the Company, THE MAJESTIC COMPANIES, LTD.,
sold 2,115,498 shares of common stock to a total of 64 individuals at a basis
cost between $0.40 and $0.85 cents in a 504 regulation D offering for an
aggregate consideration of $978,275.
29
<PAGE>
MAJESTIC MINERALS, LTD. (SECTION 4(2) PRIVATE PLACEMENT) - COMMON
STOCK - On September 11, 1995 the Company, MAJESTIC MINERALS, LTD. sold 150,328
shares of common stock to five (5) at a basis cost of $0.06 cents. A total of
$28,000 (US) was raised.
MAJESTIC MOTOR CAR COMPANY, LTD. (PRIVATE PLACEMENT) - SPECIAL WARRANTS
SALE - $0.10 CENT WARRANTS Between April 16, 1997 and June 15, 1998, the
Company, MAJESTIC MOTOR CAR COMPANY, LTD., sold 1,000,000 special warrants (each
warrant good for the purchase of one share of common stock, no strike price) at
a basis cost of $0.10 to 18 individuals pursuant to a private placement. A total
of $100,000 was raised.
MAJESTIC MOTOR CAR COMPANY, LTD. (SECTION 4(2) PRIVATE PLACEMENT) -
SPECIAL WARRANTS SALE - $0.25 CENT WARRANTS - Between September 16, 1997 and
April 7, 1998, the Company, MAJESTIC MOTOR CAR COMPANY, LTD., sold 1,013,322
special warrants (each warrant good for the purchase of one share of common
stock, no strike price) at a basis cost of $0.25 to 51 individuals pursuant to a
private placement. A total of $253,333 was raised.
MAJESTIC MOTOR CAR COMPANY, LTD. (SECTION 4(2) PRIVATE PLACEMENT) -
SPECIAL WARRANTS SALE - $0.35 CENT WARRANTS - Between January 2, 1998 and June
2, 1998, the Company, MAJESTIC MOTOR CAR COMPANY, LTD., sold 1,200,000 special
warrants (each warrant good for the purchase of one share of common stock, no
strike price) at a basis cost of $0.35 to 32 individuals pursuant to a private
placement. A total of $420,000 was raised.
MAJESTIC MOTOR CAR COMPANY, LTD. (SECTION 4(2) PRIVATE PLACEMENT) -
SPECIAL WARRANTS SALE - $0.50 CENT WARRANTS - Between May 1, 1998 and June 29,
1998, the Company, MAJESTIC MOTOR CAR COMPANY, LTD., sold 400,000 special
warrants (each warrant good for the purchase of one share of common stock, no
strike price) at a basis cost of $0.50 to 18 individuals pursuant to a private
placement. A total of $200,000 was raised.
THE MAJESTIC COMPANIES, LTD. - PREFERRED CONVERTIBLE STOCK (SECTION
4(2) PRIVATE PLACEMENT) - Between July 3, 1998 and December 9, 1998. The
pre-merger Delaware corporation, THE MAJESTIC COMPANIES, LTD., ("Delaware
Company") sold 127 units of preferred convertible offering comprised of a class
of preferred shares with detachable warrants to a total of 48 individuals
pursuant to a private placement, at a price of $6,000 per unit raising a total
of $762,000. Each unit was broken down to 5,000 preferred shares at a basis cost
of $1.00 per share and 10,000 warrants (price at $0.10 each) to purchase the
common stock in the future at a strike price of $1.50, $1.75 or $2.00 (depending
on the exercise date). All unit holders elected to convert their preferred
shares to common shares immediately upon acceptance of the investment by the
Company. Each unit of 5,000 shares preferred converted to 7,500 shares of common
resulting in a total of 952,000 shares of common stock issued for a total amount
raised of $635,000 (approx. $0.67 per share basis) and the issuance of 1,270,000
(at $0.10 cents each) warrants raising an additional $127,000.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
30
<PAGE>
The Company's Certificate of Incorporation provides that the directors
of the Company shall be protected from personal liability to the fullest extent
permitted by the laws of the State of Nevada. The Company's Bylaws also contain
a provision for the indemnification of the Company's directors (see
"Indemnification of Directors and Officers - Bylaws" in Exhibit 3.4).
PART III
ITEMS 1 AND 2 INDEX TO AND DESCRIPTION OF EXHIBITS
EXHIBIT DESCRIPTION
2.1- Articles of Incorporation of The Majestic Companies, Ltd., as
amended.
2.2- By-Laws of The Majestic Companies, Ltd., as amended.
3.1- Specimen of Common Stock Certificate.
6.1- Office Lease dated December 31, 1997, between Mission Valley Business
Center LLC and The Majestic Companies, Ltd.
6.2- Real Property Lease dated May 1, 1998, between Berberian Farms
Corporation and Majestic Modular Buildings, Ltd.
6.3- Equipment Lease dated August 10, 1999, between Saddleback Financial
Corporation and Majestic Modular Buildings, Ltd.
6.4- Lease/Purchase Agreement dated August 31, 1999, between A-Z Bus
Sales, Inc., and The Majestic Companies, Ltd.
6.5- Employment Agreement dated November 1, 1998, between Francis A.
Zubrowski and The Majestic Companies, Ltd.
6.6- Assignment by Mei Wah Company, Inc. Note of $260,000 to Gail E.
Bostwick dated April 8, 1999.
6.7- Security Agreement dated May 21, 1999, between Gail E. Bostwick and
The Majestic Companies, Ltd.
6.8- License Agreement dated April 22, 1998, between Cal-American Building
Company, Inc., Steven D. Rosenthal and Majestic Modular Buildings, Ltd.
6.9- Promissory Note dated August 27, 1999, payable to Margaret
31
<PAGE>
C. Hubard by The Majestic Companies, Ltd. and Majestic Transportation
Products, Ltd. in the Aggregate Amount of $100,000.00.
6.11- Agreement for a Funding Source dated May 21, 1999, between Rick Griffey
and Majestic Modular Buildings, Ltd.
6.12- Patent License Agreement dated February 20, 1998, between Adrian P.
Corbett and Majestic Motor Car Company, Ltd.
6.13- Promissory Note payable in the aggregate amount of $260,000.00 from
Skytex International, Inc. to Mei Wah Company, Inc.
6.14- Consulting Agreement dated May 28, 1999, between The Majestic
Companies, Ltd., a Delaware corporation and Venture Consultants, LLC,
terminating May 28, 2000.
6.15- Investment Banking Services Agreement date September 29, 1999 between
NC Capital Markets, Inc. and The Majestic Companies, Ltd.
6.16- Warrants to purchase 100,000 shares of The Majestic Companies, Ltd.,
owned by Margaret C. Hubard expiring August 27, 2001 and executed on
August 27, 1999.
6.17- Security Agreement dated August 26, 1999 between The Majestic
Companies, Ltd. and Majestic Transportation Products, Ltd. and Margaret
C. Hubard.
6.18- Disbursement Agreement dated August 26, 1999 between The Majestic
Companies, Ltd., Majestic Transportation Products, Ltd. and Margaret C.
Hubard in the aggregate amount of $100,000.00.
6.19- Promissory Note between Francis A. Zubrowski and The Majestic
Companies, dated October 20, 1999.
8.1- Agreement and Plan of Merger dated October 8, 1998, between Skytex
International, Inc., and The Majestic Companies, Ltd.
8.2- First Amendment to Agreement and Plan of Merger dated December 10,
1998.
8.3- State of Delaware Certificate of Merger of Domestic Corporation and
Foreign Corporation dated December 16, 1998.
8.4- Articles of Merger of Domestic and Foreign Corporations into Skytex
International, Inc., dated November 3, 1998.
27 Financial Data Schedule.
32
<PAGE>
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.
THE MAJESTIC COMPANIES, LTD.
By:/s/Francis A. Zubrowski 11-12-99
------------------------------------------ ---------
Francis A. Zubrowski, Chairman and C.E.O. DATE
33
<PAGE>
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1998 AND 1997
FORMING A PART OF FORM 10-SB
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
THE MAJESTIC COMPANIES, LTD.
34
<PAGE>
THE MAJESTIC COMPANIES, LTD.
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheet at December 31, 1998 and 1997 F-4
Consolidated Statements of Losses for the two years
ended December 31, 1998 and 1997 F-6
Consolidated Statements of Stockholders' Equity for
the two years ended December 31, 1998 and 1997 F-7
Consolidated Statements of Cash Flows for the two
years ended December 31, 1998 and 1997 F-8
Notes to Consolidated Financial Statements F-9
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheet as of September 30, 1999
and December 31, 1998 F-19
Consolidated Statement of Losses for the nine months ended
September 30, 1999 and 1998 F-20
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1999 and 1998 F-21
Notes to Consolidated Financial Statements at September 30, 1999
35
<PAGE>
STEFANOU & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1360 Beverly Road
Suite 305
McLean, VA 22101-3621
703-448-9200
703-448-3515 (fax)
Philadelphia, PA
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
The Majestic Companies, Ltd.
San Diego, California
We have audited the accompanying consolidated balance sheets of The
Majestic Companies, Ltd. and subsidiaries as of December 31, 1998 and 1997 and
the related consolidated statements of losses, stockholders' equity, and cash
flows for the two years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 our audits provide 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 The Majestic
Companies, Ltd. and subsidiaries as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the two years ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note O, the
Company is experiencing difficulty in generating sufficient cash flow to meet it
obligations and sustain its operations, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note O. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ STEFANOU & COMPANY, LLP
----------------------------
Stefanou & Company, LLP
Certified Public Accountants
McLean, Virginia
April 23, 1999
F-3
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 1998 1997
---- ----
CURRENT ASSETS:
Cash and equivalents $ 305,639 $ 141,319
Accounts receivable 147,238 36,095
Inventory, at lower of cost or market 1,214,026 --
Deposits 64,213 --
Prepaid expenses 12,500 --
---------- ----------
Total current assets 1,743,616 177,414
PROPERTY AND EQUIPMENT-AT COST:
Buildings under operating leases (Note E) 35,000 --
Furniture, equipment and leasehold improvements 279,095 778
---------- ----------
314,095 778
Less accumulated depreciation 18,430 86
---------- ----------
295,665 692
OTHER ASSETS:
Intangible assets (Note F) 5,942 208,000
---------- ----------
$2,045,223 $ 386,106
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
LIABILITIES
CURRENT LIABILITIES:
Current maturities of long-term debt (Note D) $ 271,604 $ --
Accounts payable and accrued expenses 458,318 238,458
Customer deposits 933,446 --
----------- -----------
Total current liabilities 1,663,368 238,458
LONG-TERM DEBT, less current maturities 21,738 --
COMMITMENTS AND CONTINGENCIES (NOTE K)
STOCKHOLDERS' EQUITY (NOTES G AND J)
Common stock, par value, $.001 per share in 1998;
$.01 per share in 1997
50,000,000 shares authorized; 21,111,863 issued
at December 31, 1998; 4,024,758 shares issued
at December 31, 1997 21,112 40,247
Additional paid-in-capital 3,073,945 445,053
Stock subscription receivable (24,000) --
Accumulated deficit (2,710,940) (337,652)
----------- -----------
360,117 147,648
----------- -----------
$ 2,045,223 $ 386,106
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF LOSSES
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
Revenues:
Modular buildings $ 393,382 $ --
Rental income 2,475 --
------------ ------------
395,857 --
Cost and expenses:
Modular buildings 425,281 --
Selling, general and administrative 2,131,571 249,866
Research and development 191,687 --
Interest 1,428 --
Depreciation and amortization 19,178 52,086
------------ ------------
2,769,145 301,952
Operating loss (2,373,288) (301,952)
Income (taxes) benefit -- --
------------ ------------
Net loss $ (2,373,288) $ (301,952)
============ ============
Loss per common share (basic and assuming dilution)
$ (.20) $ (.08)
============ ============
Weighted average common shares outstanding (Note L) 11,998,422 3,929,792
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Stock
Common Stock Additional Subscription Accumulated
SHARES AMOUNT PAID-IN-CAPITAL RECEIVABLE DEFICIT TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 920,329 $ 9,203 26,497 -- $ (35,700) $ --
Sale of stock in connection with private
placement, net of costs 1,624,429 16,244 285,356 -- -- 301,600
Shares issued to consultants and employees in
exchange for services 1,480,000 14,800 133,200 -- -- 148,000
Net loss -- -- -- -- (301,952) (301,952)
----------- ---------- ----------- ---------- ----------- -----------
Balance at December 31, 1997 4,024,758 40,247 445,053 -- (337,652) 147,648
Shares issued in connection with merger with
Skytex, International, Inc. 2,500,000 25,000 -- -- -- 25,000
Shares issued to consultants and employees in
exchanged for services 5,162,044 51,620 636,695 -- -- 688,315
Sale of stock issued pursuant to private
placement, net of costs 2,855,403 28,554 1,047,888 -- -- 1,076,442
Stock split (Note J) 4,904,658 49,047 (49,047) -- -- --
Reduction in par value of common stock -- (190,006) 190,006 -- -- --
Issuance of stock in exchange for debt
(Note M) 1,665,000 16,650 803,350 -- -- 820,000
Subscription note receivable -- -- -- (24,000) -- (24,000)
Net loss -- -- -- -- (2,373,288) (2,373,288)
----------- ---------- ----------- ---------- ----------- -----------
Balance at December 31, 1998 21,111,863 $ 21,112 $ 3,073,945 $ (24,000) $(2,710,940) $ 360,117
=========== ========== =========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
Cash flows from operating activities
Net loss for the year $(2,373,288) $ (301,952)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Common stock issued in connection for services rendered 688,315 148,000
Depreciation and amortization 19,178 52,086
Write-down in value of asset 260,000 --
(Increase) decrease in:
Accounts receivable (111,143) (36,095)
Prepaid expenses and other (82,655) --
Inventory (1,214,026) --
Increase (decrease) in:
Accounts payable and accrued expenses, net 219,860 238,457
Customer deposits 933,446 --
----------- -----------
Net cash (used) provided by operating activities (1,660,313) 219,860
Cash flows used in investing activities:
Capital expenditures, net of disposals (313,318) (260,777)
----------- -----------
Net cash used in investing activities (313,318) (260,777)
Cash flows used in financing activities:
Proceeds from sale of common stock, net of costs 1,076,442 301,600
Proceeds from loans 1,092,935 --
Repayments of loans, net (31,426) --
----------- -----------
Net cash, provided (used) in financing activities 2,137,951 301,600
Net (decrease) increase in cash and equivalents 164,320 141,319
Cash and equivalents at beginning of year 141,319 --
----------- -----------
Cash and equivalents at end of year $ 305,639 $ 141,319
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest $ 1,428 $ --
Common stock issued for services $ 688,315 $ 148,000
Acquisition:
Assets acquired $ 10 --
Accumulated deficit 3,334 --
Liabilities assumed (115) --
Common stock issued (3,229) --
----------- -----------
Net cash paid for acquisition $ -- $ --
=========== ===========
Noncash financing activities
Issuance of common stock in exchanged for debt (Note M) $ 820,000 --
Common stock subscriptions receivable $ 24,000 $ --
</TABLE>
See accompanying notes to consolidated financial statements
F-8
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE A-SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.
Business and Basis of Presentation
On December 11, 1998, The Majestic Companies, Ltd. ("Company") completed a
merger with Skytex International, Inc., an inactive corporation with no
significant assets or operations. The resulting merged corporation was named The
Majestic Companies, Ltd. Effective with the merger, all previously outstanding
common stock of the Company was exchanged for common stock of Skytex
International, Inc., resulting in the previous security holders of the Company
owning approximately 84% of the voting stock of Skytex,, in an exchange ratio of
one (1) share of the Company in exchange for one (1) share of Skytex.
The Company develops, manufactures and markets relocatable modular classrooms,
office buildings, telephone equipment bunkers and modular structures. This
activity is conducted primarily in the western part of the United States. The
Company is also engaged in the origination and servicing of new modular building
leases. This activity is conducted primarily in the state of California. All of
the leases which the Company enters into are accounted for as operating leases.
The Company is also in the business of developing and marketing a proprietary
passenger restraint system for the school bus industry.
The consolidated financial statements include the accounts of The Majestic
Companies, Ltd., and its wholly-owned subsidiaries, Majestic Modular Buildings,
Ltd., Majestic Financial, Ltd., and Majestic Transportation, Ltd.
Significant intercompany transactions have been eliminated in consolidation.
Inventories
Inventories are stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method. Inventories consist of modular buildings
available for sale to contract clients and the public, along with materials and
work-in progress.
Components of inventories as of December 31, 1998, are as follows:
Raw materials $ 143,119
Finished goods and work-in-progress 1,070,907
----------
$1,214,026
==========
The Company had no inventory as of December 31, 1997.
F-9
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997 AND 1997
NOTE A-SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
The Company follows a policy of recognizing modular building sales at the time
of shipment. The Company follows a policy of recognizing revenue from leasing
modular buildings as operating leases. At the inception of the lease, no lease
revenue is recognized and the leased building appears on the balance sheet as
"buildings under operating leases". The capitalized cost of each modular
building is depreciated over the lease term on a straight line basis down to the
Company's original estimate of the projected value of the building at the end of
the scheduled lease term (the "Residual"). Monthly lease payments are recognized
as rental income.
Advertising
The Company follows the policy of charging the costs of advertising to expenses
incurred.
Property and Equipment
For financial statement purposes, property and equipment are depreciated using
the straight-line method over their estimated useful lives (five years for
furniture, fixtures and equipment and 15 years for building and improvements).
The straight line method of depreciation is also used for tax purposes.
Intangible Assets
Intangible assets consist of patents, trademarks, licensing agreements to build
transportation equipment and organization costs, which are amortized using the
straight line method over the estimated useful lives of the assets which range
from five to seven years. Organization costs incurred after December 31, 1998
will be expensed as incurred in accordance with AICPA Statement of Position
98-5.
In 1998 the Company abandoned the development of building transportation
equipment and, accordingly, the asset was disposed of (See Note F).
Income Taxes
Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statements of Financial Standards
No. 109, "Accounting for Income Taxes".
F-10
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE A-SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Under this method deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be removed or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the consolidated statements of operations in the period that includes the
enactment date.
Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.
Impairment of Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS 121). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS No.121 also requires assets to be disposed
of be reported at the lower of the carrying amount or the fair value less costs
to sell.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly actual results
could differ from those estimates.
Research and Development
Company-sponsored research and development costs related to both present and
future products are expended in the year incurred. Total expenditures on
research and product development for 1998 and 1997 were $191,687 and $0,
respectively.
Concentrations of Credit Risk
Financial instruments and related items which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with credit quality institutions. At times, such investments may be in excess of
the FDIC insurance limit. The Company's customers are concentrated primarily in
the state of California and it periodically reviews its trade receivables in
determining its allowance for doubtful accounts.
F-11
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE A-SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Stock Based Compensation
The Company accounts for stock transactions in accordance with APB Opinion 25,
"Accounting for Stock Issued to Employees." In accordance with statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company has adopted the proforma disclosure requirements.
Liquidity
As shown in the accompanying financial statements, the Company incurred a net
loss of $2,373,288 during the year ended December 31, 1998 and $301,952 during
the year ended December 31, 1997. The Company's current assets exceeded its
current liabilities by $80,248 as of December 31, 1998. At December 31, 1998 a
substantial portion of all of the Company's assets are illiquid.
Comprehensive Income
The Company does not have any items of comprehensive income in any of the
periods presented.
New Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS 131")
in the year ended December 31, 1998. SFAS establishes standards for reporting
information regarding operating segments in annual financial statements and
requires selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS 131 also establishes standards
for related disclosures about products and services and geographic areas.
Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions how to
allocate resources and assess performance. The information disclosed herein,
materially represents all of the financial information related to the Company's
principal operating segment.
Earnings Per Share
The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings per share has
been calculated based upon the weighted average number of common shares
outstanding. Stock options and warrant's have been excluded as common stock
equivalents in the diluted earnings per share because they are either
antidilutive, or their effect is not material. There is no effect on earnings
per share information for the year ended December 31, 1998 relating to the
adoption of this standard.
F-12
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE B-BUSINESS COMBINATION
On December, 11, 1998, the Company merged, in an exchange for common stock,
Skytex International, Inc. (Skytex) in a transaction accounted for using the
purchase method of accounting. The total purchase price and carrying value of
net assets acquired of Skytex was $3,229. The net assets acquired were as
follows:
Net assets $ 10
Accumulated deficit 3,334
Net liabilities (115)
-------
$ 3,229
=======
As Skytex was an inactive corporation with no significant operations, the
Company recorded the carryover historical basis of net tangible assets acquired,
which did not differ materially from their historical cost. The results of
operations subsequent to the date of acquisition are included in the Company's
consolidated statement of losses.
NOTE C-ACQUISITIONS
In April, 1998, the Company purchased the inventory (consisting of primarily raw
materials) and licensing rights of Cal-American Building Company for $68,000.
Cal-American manufactures, markets and distributes modular classrooms, office
buildings, medical facilities and telephone communication shelters.
The purchase of inventory and licensing rights were accounted for accordingly
and, the operating results of the business has been included in the Company's
consolidated financial statements since the date of purchase and inception of
operations.
NOTE D-LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 consists of the following:
1998 1997
---- ----
Note payable in monthly installments of $23,101, including
interest at 12% per annum, unsecured; granted by Company
Directors and secured third party collateral (See Note M) $260,000 $ --
Note payable in monthly installments of $1,187 including
interest at 9.75% per annum; secured by office equipment 33,342 --
-------- ------
293,342 --
Less current portion 271,604 --
-------- ------
$ 21,738 $ --
======== ======
F-13
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE D-LONG-TERM DEBT (CONTINUED)
Aggregate maturities of long-term debt as of December 31, 1998 and 1997 are as
follows:
Year Amount
1999 271,604
2000 12,677
2001 9,061
2002 -
2003 and after -
--------
$293,342
========
NOTE E-BUILDINGS UNDER OPERATING LEASES
Buildings under operating leases consist of the following:
1998 1997
---- ----
Buildings $ 35,000 $ -
Less: accumulated depreciation 194 -
-------- ------
$ 34,806 $ -
======== ======
The buildings are depreciated to their estimated residual value of $28,000 over
the life of the lease contracts.
The following is a schedule by years of minimum future rentals on noncancellable
operating leases as of December 31, 1998:
Year ending December 31,
1999 $ 9,900
2000 9,900
2001 7,425
-------
$27,225
=======
F-14
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE F-INTANGIBLE ASSETS
The costs and accumulated amortization of intangible assets at December 31 are
summarized as follows:
1998 1997
---- ----
Product License Agreement $ -- $260,000
Trademarks 5,168 --
Organization costs 1,642 --
-------- --------
6,810 260,000
Less: accumulated amortization 868 52,000
-------- --------
Intangible assets, net $ 5,942 $208,000
======== ========
Amortization expense included as a charge to income amounted to $868 and $52,000
for the year ended December 31, 1998 and 1997, respectively.
The Company determined that there would be no cash flows derived from its
product license agreement. Accordingly, the Company recognized an asset
impairment loss of $208,000, the carrying value of the asset, as of December 31,
1998.
NOTE G-STOCK OPTIONS AND WARRANTS
The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's common stock issued to a key
employee of the Company.
Number Prices Per Number of
of shares Share Range Shares Exercisable
--------- ----------- ------------------
Outstanding at December 31, 1996 - - -
=======
Granted 250,000 .25 250,000
Exercised- - - -
Cancelled - - -
-------- -----------
Outstanding at December 31, 1997 250,000 - 250,000
=======
Granted 500,000 $.35-$1.00 500,000
Exercised - - -
Cancelled - - -
-------- ----------- -------
Outstanding at December 31, 1998 750,000 750,000
======= =========== =======
F-15
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE G-STOCK OPTIONS AND WARRANTS (CONTINUED)
For disclosure purposes the fair value of each stock option grant is estimated
on the date of the grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for stock options granted during the
years ended December 31, 1998 and 1997, respectively: annual dividends of $0.00
for both years, expected volatility of 50%, risk free interest rate of 6.0% an
expected life of two years for all grants. The weighted-average fair values of
the stock options granted during the years ended December 31, 1998 and 1997 were
$.03 and $.04, respectively.
If the Company recognized compensation cost for the employee stock option plan
in accordance with SFAS No. 123, the Company's pro forma net loss and net loss
per share would have been $(2,383,188) and $(.20) in 1998 and $(309,027) and
$(.08) in 1997, respectively.
NOTE H-INCOME TAXES
The Company has adopted Financial Accounting Standard number 109 which
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statement or tax returns. Under this method, deferred tax liabilities and assets
are determined based on the difference between financial statements and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Temporary differences between
taxable income reported for financial reporting purposes and income tax purposes
are insignificant.
For income tax reporting purposes, the Company's aggregate unused net operating
losses approximate $2,700,000, which expire through 2013. The future utilization
of the operating loss carryfowards or the time period in which the carryforwards
could be utilized could be limited if certain historical stockholders of
Majestic sell their shares within two years of the purchase of Skytex. The
deferred tax asset related to the carryforward is approximately $920,000. The
Company has provided a valuation reserve against the full amount of the net
operating loss benefit, since in the opinion of management based upon the
earning history of the Company, it is more likely than not that the benefits
will be realized.
NOTE H-INCOME TAXES
Components of deferred tax assets as of December 31, 1998 are as follows:
Non Current:
Net operating loss carryforward $ 920,000
Valuation allowance 920,000
---------
Net deferred tax asset $ -
=========
F-16
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE I-MAJOR CUSTOMERS
Revenue from three (3) major customers approximated $178,000 or 45% of sales for
the year ended December 31, 1998. There were no significant revenues for the
year ended December 31, 1997.
NOTE J - CAPITAL STOCK
The Company was incorporated in August, 1995 under the name Majestic Minerals,
Ltd., (the Predecessor), a Company formed under the laws of British Columbia,
Canada. In 1995 the Predecessor issued a total of 150,329 shares of its common
stock in a private placements to sophisticated investors in the United States
and Province of British Columbia, Canada and 770,000 shares to consultants for
services rendered on its behalf. In April, 1997, the Predecessor changed its
name to Majestic Motor Car Company, Ltd. During 1997, the Predecessor issued a
total of 1,624,429 shares of its common stock in private placement to
sophisticated investors, primarily in the United States in exchange for $301,600
net of costs and fees. In addition, the Predecessor issued 1,480,000 shares to
consultants and employees for services rendered during 1997.
In February, 1998, the Company's Board of Directors approved a three (3) share
for one (1) common stock split.
In March, 1998, the Shareholders of the Predecessor exchanged all of the
outstanding shares of common stock of the Predecessor on a share for share basis
for shares of common stock in The Majestic Companies, Ltd., a Delaware
Corporation (Company).
In 1998, the Company issued a total of 4,520,403 shares of common stock in a
private placements and exempt offerings to sophisticated investors, primarily in
the United States in exchange for $1,896,442 net of costs and fees. Certain
investors received warrants to purchase the Company's common stock at exercise
prices ranging from $1.50 to $2.00 per share. The warrants expire at various
dates through December 31, 2000. As of December 31, 1998, the Company had
outstanding warrants for 1,270,000 shares.
In December 1998, the Company completed a merger with Skytex International, Ltd.
(Skytex). The Shareholders of the Company exchanged all of the outstanding
shares of common stock of the Company on a one for one basis for shares of
common stock in Skytex.
Immediately following the merger, Skytex was renamed The Majestic Companies,
Ltd.
Share amounts presented in the consolidated balance sheets and consolidated
statements of stockholders' equity reflect the actual share amounts outstanding
for each period presented.
F-17
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE K-COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases office space on a year-to-year basis in San Diego, California
for its Corporate offices. The Company also leases warehouse and plant
facilities in Modesto, California. Commitments for minimum rentals under
non-cancelable leases at the end of 1998 are as follows:
1999 $ 152,000
2000 164,000
2001 175,000
2002 181,000
2003 62,000
---------
$ 734,000
=========
Employment and Consulting Agreements
The Company has an employment agreement with the Company's President and Chief
Executive Officer. In addition to salary and benefit provisions, the agreement
includes defined commitments should the employee terminate the employment with
or without cause.
The Company has consulting agreements with outside contractors, certain of whom
are also Company stockholders. The Agreements are generally for a term of 12
months from inception and renewable automatically from year to year unless
either the Company or Consultant terminates such engagement by written notice.
Litigation
In 1998, a financial institution filed a complaint against Majestic Modular
Buildings, Ltd, a wholly-owned subsidiary of the Company in the Stanislaus
County Superior Court. The complaint alleges the previous owners of Cal-American
Buildings, Inc. (See Note C) improperly transferred property to the Company in
connection with the Sale of certain assets. The Company believes that it has
meritorious defenses to the plaintiff's claims and intends to vigorously defend
itself against the bank's claims.
NOTE L-LOSSES PER COMMON SHARE
The following table presents the computation of basic and diluted loss per
share:
1998 1997
---- ----
Net loss available for common shareholders $ (2,373,288) $ (301,952)
Basic and fully diluted loss per share $ (.20) $ (.08)
Weighted average common shares outstanding 11,988,422 3,929,792
============ ============
F-18
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE L-LOSSES PER COMMON SHARE (CONTINUED)
Net loss per share is based upon the weighted average number of shares of common
stock outstanding. In February, 1998, a three (3) for one (1) stock split of the
Company's common stock was effected in the form of a 200 percent stock split
(See Note J). Accordingly, all historical weighted average share and per share
amounts have been restated to reflect the stock split.
NOTE M-RELATED PARTY TRANSACTIONS
In 1998, the Company's president advanced the Company in the form of a loan,
$820,000. The loan was unsecured and was payable on demand at 0% interest per
annum. The loan was paid in full in 1998 in exchange for 1,665,000 shares of
restricted common stock in the Company. The Company valued the shares based upon
the Company's estimated fair market value of the Company's common stock at the
time of the exchange.
NOTE N-SUBSEQUENT EVENT
Subsequent to the date of the Company's financial statements, the spouse of the
Company's President and Chief Executive Officer purchased, for consideration,
the $260,000 note payable from the Note holder (See Note D). The Company and the
note holder have amended the repayment terms of the note to provide for seventy
(70) equal monthly installments of principal and interest at 12% per annum.
NOTE O-GOING CONCERN MATTERS
The accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the financial statements during the
years ended December 31, 1998 and 1997, the Company incurred loses from
operations of $2,373,288 and $301,952 respectively. These factors among others
may indicate that the Company will be unable to continue as a going concern for
a reasonable period of time.
The Company's existence is dependent upon management's ability to develop
profitable operations and resolve it's liquidity problems. Management
anticipates the Company will attain profitable status and improve it liquidity
through the continued developing, marketing and selling of its products and
additional equity investment in the Company. The accompanying financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.
In order to improve the Company's liquidity, subsequent to the date of these
financial statements the Company has obtained a $1,250,000 credit facility for
the Majestic Modular Buildings, Ltd. subsidiary and a $2,000,000 credit facility
for Majestic Transportation, Ltd. The credit facilities will be utilized for
working capital purposes.
F-19
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE O-GOING CONCERN MATTERS (CONTINUED)
In addition, the Company is actively pursing additional equity financing through
discussions with investment bankers and private investors. There can be no
assurance the Company will be successful in its effort to secure additional
equity financing.
If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of it's liquidity problems.
F-20
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
ASSETS 1999 1998
------------ -----------
Current Assets:
Cash and Equivalents $ 73,781 $ 305,639
Accounts Receivable 176,124 147,238
Deposits and Other Prepaid Expenses 88,763 76,713
Inventory, at Cost 261,443 1,214,026
----------- -----------
Total Current Assets 600,111 1,743,616
Property and Equipment At Cost:
Building under operating leases 236,084 35,000
Furniture, equipment and leasehold improvements 496,170 279,095
----------- -----------
732,254 314,095
Less accumulated depreciation 45,672 18,430
----------- -----------
686,582 285,665
Other Assets:
Intangible Assets 91,996 5,942
----------- -----------
$ 1,378,689 $ 2,045,223
=========== ===========
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities:
Current Maturities of Long Term Debt 228,139 271,604
Accounts Payable and Accrued Liabilities 569,596 458,318
Customer Deposits 62,175 933,446
----------- -----------
Total Current Liabilities 859,910 1,663,368
Long Term Debt, Less Current Maturities 386,900 21,738
Stockholders' Equity:
Common Stock, Par Value $.001 per share:
50,000,000 shares authorized; 21,111,863
issued at December 31, 1998, 26,834,070
shares issued at September 30, 1999 26,834 21,112
Additional Paid-in Capital 4,973,309 3,073,945
Stock Subscription Receivable -- (24,000)
Accumulated Deficit (4,868,264) (2,710,940)
----------- -----------
131,879 360,117
----------- -----------
$ 1,378,689 $ 2,045,223
=========== ===========
</TABLE>
F-21
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENT OF LOSSES
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Modular buildings $ 554,910 $ 107,640 $ 2,172,325 $ 107,640
Leases and other 92,561 1,866 117,876 1,866
------------ ------------ ------------ ------------
647,471 109,506 2,290,201 109,506
Cost and Expenses:
Modular buildings 497,670 100,494 2,072,429 100,494
Selling, general and administrative 796,553 624,739 2,125,832 1,544,359
Research and development 76,014 51,115 198,043 136,847
Interest 11,516 729 23,979 828
Depreciation and amortization 10,230 5,502 27,242 16,278
------------ ------------ ------------ ------------
1,391,983 782,579 4,447,525 1,798,806
Operating loss (744,512) (673,073) (2,157,324) (1,689,300)
Income tax benefit -- -- -- --
------------ ------------ ------------ ------------
Net loss (744,512) (673,073) (2,157,324) (1,689,300)
============ ============ ============ ============
Loss Per Common Share
(Basic and Assuming Dilution) (0.03) (0.05) (0.09) (0.17)
============ ============ ============ ============
Weighted Average Common Shares Outstanding 26,424,551 14,375,646 24,366,373 10,141,345
</TABLE>
F-22
<PAGE>
THE MAJESTIC COMPANIES, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended
Sept 30,
1999 1998
---- ----
Increase (Decrease) in Cash and Equivalents Cash Flows from
Operating Activities:
Net Loss for the Period $(2,157,324) $(1,689,300)
Adjustments to Reconcile Net Earnings (Loss) to Net Cash
Provided By Operating Activities:
Common Stock Issued in Connection with Services Rendered 314,727 151,705
Write Down in Value of Asset -- 260,000
Depreciation and Amortization 27,242 16,278
(Increase) Decrease in:
Accounts Receivables (28,886) --
Prepaid Expenses and Other (12,050) (70,155)
Inventory 952,584 (1,022,112)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses, net 111,278 196,320
Customers Deposits (871,271) 873,446
----------- -----------
Net Cash (used) Provided by Operating Activities (1,663,700) (1,283,818)
Cash Flows Used in Investing Activities:
Capital Expenditures, Net of Disposals (130,874) (297,605)
----------- -----------
Net Cash Used in Investing Activities (130,874) (297,605)
Cash Flows Used in Financing Activities:
Proceeds from Sale of Common Stock, Net of Costs 1,328,275 1,037,379
Proceeds from Loans 286,680 932,410
Repayments of Loans, Net (52,239) (121,000)
----------- -----------
Net Cash, Provided (Used) in Financing Activities 1,562,716 1,848,789
Net (Decrease) Increase in Cash and Equivalents (231,858) 267,366
Cash and Equivalents at beginning of Period 305,639 141,319
----------- -----------
Cash and Equivalents at end of Period 73,781 408,685
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Period for Interest 23,979 828
Common Stock Issued for Services 314,727 151,705
Common Stock Issued for Capital Expenditures 286,084 --
Notes Incurred for Capital Assets Acquired 86,276 --
NONCASH FINANCING ACTIVITIES
Issuance of Common Stock In Exchange for Debt -- 545,000
</TABLE>
F-23
<PAGE>
THE MAJESTIC COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the requirements of Item 310(b) of Regulation S-B, and
therefore, do not include all the information necessary for a fair presentation
of financial position, results of operations and cash flows in conformity with
generally accepted accounting principles.
In the opinion of the Company, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's annual report for the year ended
December 31, 1998 on Form 10-SB.
Amounts for the nine months ended September 30, 1998 have been reclassified to
conform with the September 30, 1999 presentation.
Consolidated Statements
The consolidated financial statements include the accounts of The Majestic
Companies, Ltd. and its wholly owned subsidiaries. Significant intercompany
transactions have been eliminated in consolidation.
Capital Stock
During the nine months ended September 30, 1999, the Company issued 3,090,498
shares of common stock to private investors in exempt offerings in exchange for
$1,328,275, net of offering costs.
In addition, the Company issued 2,631,709 shares of common stock during the nine
months ended September 30, 1999 in exchange for goods and services.
Notes Payable
During the nine months ended September 30, 1999, the Company borrowed $186,680
from its President and Chief Executive Officer. The loan is payable on demand
and incurs interest at 12% per annum.
F-24
<PAGE>
EXHIBIT INDEX
Number Description of Exhibit Page
------ ---------------------- ----
(11) Computation of Losses per Common
and Common Share Equivalents E-1
<PAGE>
THE MAJESTIC COMPANIES, LTD.
COMPUTATION OF LOSSES PER COMMON
AND COMMON EQUIVALENT SHARES
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------- -----------
Shares outstanding at beginning of period 4,024,758 920,329
Weighted average of common shares issued
during the period 7,963,664 3,009,463
Weighted average of common shares
outstanding during the period (adjusted for 3 for 1
stock split in 1998) 11,988,422 3,929,792
Stock options and warrants outstanding-not
included as they have no dilutive effect -- --
Shares used in computing earnings per
common share 11,988,422 3,929,792
Loss per common share ($2,373,288/11,988,422)
Loss per common share ($301,952)/3,929,792) $ (.20) $ (.08)
=========== ===========
E-1
<PAGE>
EXHIBITS
[Secretary of State of the State of Nevada seal appears here]
ARTICLES OF INCORPORATION
OF
RHODES, WOLTERS & ASSOCIATES, INC.
KNOW ALL MEN BY THESE PRESENTS:
The undersigned has this day voluntarily associated to establish a
corporation under and pursuant to the laws of the State of Nevada and certifies:
ARTICLE I
NAME
----
The exact name of this Corporation is:
RHODES, WOLTERS & ASSOCIATES, INC.
ARTICLE II
RESIDENT AGENT and REGISTERED OFFICE
------------------------------------
HANEY & McBRIDE, LTD. shall be the Resident Agent of RHODES, WOLTERS &
ASSOCIATES, INC. The Registered Office and place of business in the State of
Nevada of RHODES, WOLTERS & ASSOCIATES, INC. shall be located at 301 E. Clark
Ave., #100, Las Vegas, Nevada 89101.
ARTICLE III
DURATION
--------
RHODES, WOLTERS & ASSOCIATES, INC. shall have perpetual existence.
ARTICLE IV
PURPOSES
--------
The corporation is authorized to engage as an agent, managing general
agent, and/or broker in all classes of insurance now or hereafter permitted by
statute and may engage in any lawful activity.
ARTICLE V
POWERS
------
The powers of RHODES, WOLTERS & ASSOCIATES, INC. shall be all powers
necessary to accomplish the purpose stated in these Articles. In addition,
RHODES, WOLTERS & ASSOCIATES, INC. shall have the power to make gifts or
contributions for the public
-1-
<PAGE>
welfare or for charitable, scientific or educational purposes and, in time of
war, to make donations in aid of war activities.
ARTICLE VI
CAPITAL STOCK
-------------
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 2,500 shares of common stock with no par
value.
Section 2. Voting rights of Stockholders. Each holder of shares of common
stock of RHODES, WOLTERS & ASSOCIATES, INC. shall be entitled to one vote for
each share of stock standing in such shareholder's name on RHODES, WOLTERS &
ASSOCIATES, INC.'s books. Cumulative voting shall be the method used to elect
the Directors of the Corporation. At each election of directors, each holder of
common stock shall have as many votes as the number of shares of common stock
owned by such shareholder multiplied by the number of Directors to be elected by
the holders of common stock of the Corporation. These votes may be divided among
the total number of Directors to be elected by the holders of common stock, or
distributed among any lesser number, in such proportion as the holder may
desire.
Section 3. Non-Assessable. The capital stock of the Corporation, after the
amount of the subscription price has been paid in, shall not be subject to
assessment; and no stock issued as fully paid up shall ever be assessable or
assessed and the Articles of Incorporation shall not be amended in this
particular.
Section 4. Pre-emptive Rights. Except as otherwise may be provided below
or in addition by the Board of Directors, each holder of any shares of the stock
of RHODES, WOLTERS & ASSOCIATES, INC. shall have a pre-emptive right to
purchase, subscribe for, or otherwise acquire any shares of stock of the
Corporation of any class now or hereafter authorized, or any securities
exchangeable for or convertible into such shares, or any warrants or other
instruments evidencing rights or options to subscribe for, purchase or otherwise
acquire shares.
ARTICLE VII
MANAGEMENT
----------
For the management of RHODES, WOLTERS & ASSOCIATES, INC., the governing
Board of the Corporation shall be styled and called the Board of Directors. It
is further provided:
Section 1. Size of Board. The initial number of the Board of Directors
shall be two. Thereafter, the number of Directors shall be specified in the
By-Laws of RHODES, WOLTERS & ASSOCIATES, INC., and such number may, from time to
time, be increased or decreased in such manner as prescribed by the By-Laws.
-2-
<PAGE>
Section 2. First Board of Directors. The names and post office addresses
of the first Board of Directors, which shall consist of two, and who shall hold
office until successors are duly elected and qualified, are as follows:
NAME ADDRESS
Carl Wolters P.0. Box 27772
Las Vegas, Nevada 89126-
1772
James Rhodes 6243 Santa Maria
Las Vegas, Nevada 89108-
3322
ARTICLE VIII
AMENDMENT OF ARTICLES
---------------------
The provisions of these Articles of Incorporation may be amended, altered
or repealed from time to time by a majority vote of the Shareholders of RHODES,
WOLTERS & ASSOCIATES, INC. to the extent and in the manner prescribed by the
laws of the State of Nevada and additional provisions authorized by such laws as
are then in force may be added. All rights herein conferred on the Directors,
Officers and Stockholders are granted subject to this reservation.
ARTICLE IX
OFFICER AND DIRECTOR LIABILITY AND INDEMNIFICATION
--------------------------------------------------
Section 1. Limitation of Personal Liability. Except for acts or omissions
which involve intentional misconduct, fraud or knowing violation of law or for
the payment of dividends in violation of NRS 78.300, there shall be no personal
liability of a director or officer to RHODES, WOLTERS & ASSOCIATES, INC. or its
stockholders for damages for breach of fiduciary duty as a director or officer.
Section 2. Indemnification. Pursuant to NRS 78.751 Paragraphs 1 through 6
inclusive, and any amendments, additions or changes thereto, the Corporation may
indemnify any person for expenses incurred, including attorneys fees, in
connection with their good faith acts if they reasonably believe such acts are
in and not opposed to the best interests or the Corporation and for acts for
which the person had no reason to believe his or her conduct was unlawful.
Section 3. Time of Indemnification. The Corporation shall indemnify the
Officers and Directors for expenses incurred in defending a civil or criminal
action, suit or proceeding as they are incurred in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the Director or Officer to repay the amount of such expenses if
it is ultimately determined by a court of competent jurisdiction
-3-
<PAGE>
that such Officer or Director is not entitled to be indemnified by the
Corporation.
Section 4. Benefit. The indemnification and advancement of expenses hereby
authorized is continuing and shall inure to the benefit of the heirs, executors
and administrators of each such Officer and Director.
ARTICLE X
INCORPORATOR
------------
The name and address of the incorporator signing these Articles of
Incorporation are as follows:
NAME ADDRESS
----- -------
Cheryl Gex 301 E. Clark Ave., #100
Las Vegas, Nevada 89101
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation the 20th day of November, 1992.
/s/ Cheryl Gex
----------------------------
Cheryl Gex
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On the 20th day of November, 1992, personally appeared before me, a Notary
Public, Cheryl Gex, known to me to be the person described in the foregoing
Articles of Incorporation of RHODES, WOLTERS & ASSOCIATES, INC., who
acknowledged to me that she executed the Articles of Incorporation of RHODES,
WOLTERS & ASSOCIATES, INC. without duress and for the uses and purposes therein
mentioned.
/s/ Mary A. Phelps
-----------------------------------
Mary A. Phelps - Notary Public in and
for said County and State
[GRAPHIC APPEARS HERE] Notary Public - State Of Nevada
COUNTY OF CLARK
MARY A. PHELPS
My Commission Expires
April 22, 1994
-4-
<PAGE>
[Secretary of State of the State of Nevada seal appears here]
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(AFTER ISSUANCE OF STOCK)
Rhodes Wolters & Associates Inc.
- --------------------------------------------------------------------------------
Name of Corporation
We the undersigned Carl E. Wolters and
---------------------------------------------
S.R. Cameron of Rhodes Wolters & Associates, Inc.
- -------------------------------------- ------------------------------------
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened held on the first day July, 1997, adopted a resolution to
amend the original articles as follows:
Article VI is hereby amended to read as follows:
The authorized capital common chares shall be 50,000,000 fifty million.
The par shall be .001 per share and 200 shares of issued and
outstanding shares are forward split 5,000 for 1 making 1,000,000
shares of issued and outstanding.
The 1,000,000 shares are included in the total of 50,000,000 authorized
capital common shares at .001 per share.
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 200, that the said change(s)
and amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
Carl E. Wolters
---------------------------------
President or Vice President
/s/ S.R. Cameron
----------------------------------
Secretary or Assistant Secretary
State of Nevada
---------------------
ss.
County of Clark
--------------------
On August 18, 1997 , personally appeared before me, a Notary Public,
---------------------
/s/ Sandra R. Cameron (S.R. Cameron)
- --------------------------------------------------------------------------------
(name of persons appearing and signing document)
who acknowledged that they executed the above instrument.
/s/ Hazel E. Caldwell
---------------------------
Signature of Notary
[GRAPHIC APPEARS HERE] HAZEL E. CALDWELL
Notary Public Nevada
My appt. exp. May 28, 2001
No. U3-ED42-1
(NOTARY STAMP OR SEAL)
<PAGE>
[Secretary of State of the State of Nevada seal appears here]
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
RHODES, WOLTERS & ASSOCIATES, INC.
A Nevada Corporation
Ralph Morren certifies, that:
1. He is the President and Secretary of Rhodes, Wolters & Associates, Inc., a
Nevada corporation (the "Corporation").
2. Article I of the Articles of Incorporation shall be amended to read in its
entirety as follows:
"The name of this Corporation is SkyTex International Inc."
3. Article VI of the Articles of Incorporation is hereby amended as follows;
"The authorized capital stock of the Corporation consists of
50,000,000 shares of $.001 par value common stock. Each one (1)
share of the 1,250,000 shares of the Corporation's common stock
issued and outstanding shall be and hereby is automatically
changed and reclassified without further action into two (2) fully
paid and nonassessable shares of the Corporation's common stock."
4. The change has been duly approved by the Corporation's Board of
Directors by resolutions duly adopted by Joint Written Consent of
the Board of Directors and Stockholders effective May 26, 1998.
5. The number of shares of the Corporation outstanding and entitled
to vote on these amendments to the Articles of Incorporation is
1,250,000. These amendments have been duly approved by a majority
vote of the Corporation's stockholders holding at least a majority
of the issued and outstanding shares of capital stock of the
Corporation entitled to vote, by resolution, duly adopted by Joint
Written Consent of the Board of Directors and Stockholders
effective May 26, 1998.
The undersigned hereby declares and certifies that the matters set forth
in the foregoing Certificate are true and correct to his knowledge and that this
Certificate was executed on May 26, 1998 at San Antonio, Texas.
/s/ Ralph Morren, Pres.
-------------------------------------
Ralph Morren, President and Secretary
-1-
<PAGE>
STATE OF TEXAS )
) ss.
COUNTY OF BEXAR )
On May 28th, 1998, before me, a notary, personally appeared Ralph Morren,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Connie Smith
----------------------------
[GRAPHIC APPEARS HERE] CONNIE SMITH
Notary Public, State of Texas
My Commission Expires March 24, 2000
(Seal)
-2-
<PAGE>
CERTIFICATE OF AMENDMENT OF AMENDMENT TO ARTICLES OF
INCORPORATION
of
SKYTEX INTERNATIONAL, INC.
I, Ralph Morren certify that:
1. The original articles were filed with the Office of the Secretary of
State on December 3, 1992.
2. As of the date of this certificate, 2,650,000 shares of stock of the
corporation have been issued.
3. Pursuant to a shareholders meeting at which in excess of 5l% voted in
favor of the following amendment, the company hereby adopts the following
amendments to the amendment of the articles of incorporation of this
Corporation:
First: Name of Corporation.
The name of the corporation is The Majestic Companies, Ltd.
(the "Corporation").
/s/ Ralph Morren
------------------------------
Ralph Morren/President/Director
State of Texas )
----- ) ss.
County of Bexar )
-----
On 12/7/98, personally appeared before me, a Notary public, Ralph Morren for the
purpose therein contained, who acknowledged that he executcd the above
instrument.
/s/ Laurie A. Washburn
-------------------------------
A Notary Public in and for said
County and State
[GRAPHIC APPEARS HERE] LAURIE A. WASHBURN
Notary Public, State of Texas
My Commission Expires
JUNE 26, 2000
<PAGE>
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy of
the document as filed in this
office.
JUN 01 '98
/s/ Dean Heller
DEAN HELLER
Secretary of State
By /s/ D. Farmer
---------------
AMENDED AND RESTATED BYLAWS
OF
THE MAJESTIC COMPANIES, LTD.
A NEVADA CORPORATION
(FORMERLY KNOWN AS SKYTEX INTERNATIONAL, INC., FORMERLY KNOWN AS RHODES, WOLTERS
& ASSOCIATES, INC.)
THESE AMENDED AND RESTATED BYLAWS REPLACE IN THEIR ENTIRETY THE
BYLAWS ADOPTED BY THE CORPORATION AS OF DECEMBER 9, 1992.
ARTICLE I.
SHAREHOLDERS
A. ANNUAL MEETING.
1. DATE. The annual meeting of the Shareholders of THE
MAJESTIC COMPANIES, LTD. shall be held on a date set by the Board of Directors
which date shall be within ninety (90) days of the end of the corporate fiscal
year or at such other time as may be set by the Board of Directors.
2. ELECTION OF DIRECTORS. At the annual meeting, the Directors
shall be elected and the Shareholders may consider such other business as may
properly come before them at the meeting. If the election of the Directors is
not held on the day designated in these Bylaws for any annual meeting of the
Shareholders, or at any adjournment thereof, the President shall cause the
election to be held at a special meeting of the Shareholders as soon thereafter
as is convenient.
B. SPECIAL MEETINGS.
1. MANNER CALLED. Special meetings of the Shareholders may be
called by the President, the Secretary, by the Board of Directors or by one or
more of the Shareholders holding not less than 50% of the issued and outstanding
shares of common stock of the Corporation.
2. MATTERS ADDRESSED. All business lawful to be transacted by
the Shareholders may be transacted at any special meeting. However, no business
shall be acted upon at a special meeting except that to which reference is made
in the notice calling the meeting, unless all of the outstanding common capital
stock of THE MAJESTIC COMPANIES, LTD. is represented, either in person or by
proxy. Where all of the capital stock is represented, any lawful business may be
transacted and the meeting shall be valid for all purpose.
1
<PAGE>
C. PLACE OF MEETINGS. Any meeting of the Shareholders shall be held at
the principal office of THE MAJESTIC COMPANIES, LTD. in the State of Nevada or
at such other place as the Board of Directors designate. A waiver of notice
signed by all Shareholders entitled to vote may designate any place for the
holding of such meeting.
D. NOTICE OF MEETINGS.
1. TIME; CONTENTS. Any person, persons or board who is
entitled to call a meeting of Shareholders shall sign and deliver to all
Shareholders of record a written or printed notice of any meeting at least ten
(10) days, but not more than sixty (60) days, before the date of such meeting.
This notice shall state the place, date and time of the meeting and the general
purpose and nature of the business to be transacted; and, in the case of any
meeting at which Directors are to be elected, the names of the nominees, if any,
to be presented for election.
2. SPECIFIC MATTERS. In the case of any meeting, any proper
business may be presented for action, except the following items shall be valid
only if the general nature of the proposal is stated in the notice or a written
waiver of notice is signed by all Shareholders entitled to vote:
A. INTERESTED PARTY CONTRACTS. Action with respect to any
contract or transaction between the Corporation and
one or more of the Corporation's Directors or another
firm, association or corporation in which one or more
of the Directors has a material financial interest;
B. AMENDMENTS. Adoption of amendments to the Articles of
Incorporation; or
C. MERGER. Action with respect to the merger,
consolidation, reorganization, partial or complete
liquidation or dissolution of the Corporation.
E. DELIVERY. The notice shall be personally delivered or mailed by
first-class mail to each Shareholder of record at the last-known address of such
Shareholder, as the same appears on the corporate books; and the giving of such
notice shall be deemed delivered the date the same is deposited in the United
States mail, postage prepaid. If the address of any Shareholder does not appear
upon the Corporation's books, it will be sufficient to address any notice to
such Shareholder at the principal office of the Corporation.
F. EVIDENCE OF NOTICE. The written certificate of the person, persons
or board calling any meeting, duly sworn, setting forth the substance of the
notice, the time and place the notice was mailed or personally delivered to the
several Shareholders, and the addresses to which the notice was mailed, shall be
prima facie evidence of the manner and fact of giving such notice.
G. WAIVER OF NOTICE.
1. WRITTEN. Any Shareholder or Shareholder's duly-authorized
proxy or attorney-in-fact may waive notice of a meeting by written instrument,
signed by such Shareholder, proxy, or attorney-in-fact, either before or after
such meeting, the same shall be deemed the equivalent of notice.
2
<PAGE>
2. ATTENDANCE. Attendance of a Shareholder at a meeting shall
constitute a waiver of notice, unless such attendance is for the express purpose
of objecting to the transaction of business conducted at such meeting because
the meeting is not properly called, noticed or convened. Any objection to the
transaction of business at any meeting shall be made by a Shareholder
immediately upon such Shareholder's appearance at a meeting. Failure to make an
immediate objection shall be deemed a waiver of notice.
3. CONTENTS. Neither the business to be transacted at nor the
purpose of any meeting of Shareholders need be specified in any written waiver
of notice, except as otherwise provided in this Article.
H. DETERMINATION OF SHAREHOLDERS OF RECORD.
1. RECORD DATE. The Board of Directors may, at any time, fix a
future date as a record date for the determination of the Shareholders entitled
to notice of any meeting or to vote or entitled to payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any other lawful action. The record date so fixed shall not
be more than sixty (60) days prior to the date of such meeting nor more than
sixty (60) days prior to any other action. When a record date is so fixed, only
Shareholders of record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of rights, or to
exercise their rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after the record date.
2. ALTERNATE RECORD DATE. If no record date is fixed by the
Board of Directors, then (1) (he record date for determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders shall be at the
close of business on the business day next preceding the date on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for
determining Shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is necessary,
shall be the day on which written consent is given; and (3) the record date for
determining Shareholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto, or the sixtieth (60th) day prior to the date of such other action,
whichever is later.
I. QUORUM; ADJOURNED MEETINGS.
1. QUORUM. At any meeting of Shareholders, a majority of the
issued and outstanding shares of THE MAJESTIC COMPANIES, LTD., represented in
person or proxy, shall constitute a quorum.
2. ADJOURNED MEETINGS. If less than majority of the issued and
outstanding shares are represented, a majority of shares so represented may
adjourn from time to time at tile meeting, until holders of the amount of stock
required to constitute a quorum shall be in attendance.
At any such adjourned meeting at which a quorum shall be present, any business
may be transacted which might have been transacted as originally called. When a
Shareholder meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. When a Shareholder meeting Is
adjourned to another time
3
<PAGE>
or place, notice of such time and place need not be given to any absent
Shareholders
J. VOTING.
1. METHOD. Each Shareholder of record and such Shareholder's
duly-authorized proxy or attorney-in-fact shall be entitled to one (1) vote for
each share of stock standing registered in such Shareholder's name on the books
of the Corporation on the record date. At all meetings of the Shareholders, the
voting may be voice vote; but any qualified voter may demand a stock vote
whereupon such stock vote shall be taken by ballot, each of which shall state
the name of the Shareholder voting and the number of shares voted by such
Shareholder and, if such ballot be cast by proxy, the ballot shall also state
the name of such proxy; provided, however, that the mode of voting prescribed by
statute for any particular case shall be in such case followed.
2. AUTHORIZED VOTERS. Except as otherwise provided in these
Bylaws, all votes with respect to shares standing in the name of an individual
on the record date (including pledged shares) shall be cast only by that
individual or such individual's duly-authorized proxy or attorney-in-fact. With
respect to shares held by a representative of a deceased Shareholder, guardian,
conservator, custodian or trustee, votes may be cast by such holder upon proof
of capacity even though the shares do not stand in the name of such holder. In
the case of shares under the control of a receiver, the receiver may cast votes
carried by such shares even through the shares do not stand in the name of the
receiver provided that the order of the court of competent jurisdiction which
appoints the receiver contains the authority to cast votes carried by such
shares. If shares stand in the name of a minor, votes may be cast only by the
duly-appointed guardian of the estate of such minor if such guardian has
provided the Corporation with written notice and proof of such appointment.
3. CORPORATE VOTERS. With respect to shares standing in the
name of a corporation on the record date, votes may be cast by such officer or
agent at the bylaws of such corporation prescribe or, in the absence of an
applicable bylaw provision, by such person as may be appointed by resolution of
the board of directors of such corporation. In the event no person is so
appointed, such votes of such corporation may be cast by any person (including
the officer taking the authorization) authorized to do so by the chairman of the
board of directors, president or any vice president of such corporation.
4. SUBSIDIARIES. Notwithstanding anything to the contrary
contained in these Bylaws, no votes may be cast by shares owned by this
Corporation or its subsidiaries, if any. If shares are held by the Corporation
or its subsidiaries, if any, in a fiduciary capacity, no votes shall be cast
with respect thereto on any matter except to the extent that the beneficial
owner thereof possesses and exercises either a right to vote or to give the
corporation holding the same binding instructions on how to vote.
5. JOINT OWNERSHIP; VOTING AGREEMENTS. With respect to shares
standing in the name of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, husband and wife as community
property, tenants by the entirety, voting trusts, persons entitled to vote under
a shareholder voting agreement or otherwise and shares held by two or rnore
persons (including proxy holders) having the same fiduciary relationship respect
in the same shares, votes may be cast in the following manner:
A ONE VOTER. If only one such person votes, the vote of
such per-son binds all;
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B. MULTIPLE VOTERS. If more than one person casts votes,
the act of the majority so voting binds all; and
C. SPLIT VOTE. If more than one person casts votes, but
the vote is evenly split on a particular matter, the
votes shall be deemed cast proportionately, as split.
6. MANNER OF VOTING. Any holder of shares entitled to vote on
any matter may cast a portion of the votes in favor of such matter and refrain
from casting the remaining vote or cast the same against the proposal, except in
the case of elections of Directors. If such holder entitled to vote fails to
specify the number of affirmative votes, it will be conclusively presumed that
the holder is casting affirmative votes with respect to all shares held.
7. MAJORITY VOTE OF QUORUM. If a quorum is present, the
affirmative vote of holders of a majority of the shares represented at the
meeting and entitled to vote on any matter shall be the act of the Shareholders7
unless a vote of greater number or voting by classes is required by the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws.
8. CUMULATIVE VOTING. In the election of Directors of THE
MAJESTIC COMPANIES, LTD., the principle of cumulative voting shall apply. In any
such election, each holder of shares entitled to vote shall have a number of
votes equal to the number of shares held multiplied by the number of Directors
to be elected. Such Shareholder may divide arid distribute the votes, so
calculated, among any two or more candidates for the directorships to be filled
or may cast all the votes for a single candidate. Any holder of shares entitled
to vote may cast fewer than all the votes to which such holder is entitled at an
election of Directors, but a ballot shall be invalid if the total number of
votes cast by the holder are in excess of the total number of votes to which
such holder is entitled. At any such election, the candidates receiving the
highest number of votes, up to the number of Directors to be elected, shall
stand elected; and the absolute majority of the votes cast is not a prerequisite
to the election of any candidate to the Board of Directors.
9. VOTING LIST. At each meeting of the Shareholders, a full,
true and complete list, in alphabetical order, of all the Shareholders entitled
to vote, indicating the number of shares held by each shall be furnished and
certified by the Secretary of the Corporation. This list shall be prepared at
least three (3) days before the meeting and shall be open to the inspection of
the Shareholders, or their respective agents or proxies, at the principal office
of the Corporation. Proxies and powers of attorney to vote shall be filed with
the Secretary of the Corporation before or at the meeting of the Shareholders to
which they pertain or they cannot be used at the meeting.
10. INSPECTORS. In advance of any meeting of Shareholders, the
Board of Directors may appoint inspectors to supervise the opening and closing
of polls, issuance and receipt of proxies and ballots, qualifications of voters,
the validity of proxies and the acceptance or rejection of votes at such meeting
or any adjournment thereof. If inspectors are not so appointed, the presiding
officer of the meeting may and, at the request of any holder of shares entitled
to vote, proxy or attorney-in-fact, shall appoint inspectors. In the discretion
of the presiding officer, the number of inspectors shall either be one (1) or
three (3) in number. If appointed at a meeting at the request of one or more
holders of shares entitled to vote, proxies or attorneys-in-fact, the
affirmative vote of holders of a majority of shares entitled to vote shall
determine whether (1) or three (3) inspectors are to be appointed. If any person
appointed as an inspector fails to appear or fails or refuses to act as an
inspector, the vacancy may be filled by
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appointment of the Board of Directors in advance of the convening of the meeting
or by the presiding officer of the meeting at the meeting. If there are three
(3) inspectors, the decision, act or certificate of a majority is effective in
all respects as the decision, act or certificate of all inspectors.
K. PROXIES. At any meeting of Shareholders, any holder of shares
entitled to vote may authorize another person or persons to vote by proxy with
respect to the shares held by an instrument in writing and subscribed to by the
holder of such shares entitled to vote. No proxy shall be valid after the
expiration of six (6) months from the date of execution thereof, unless coupled
with an interest or unless otherwise specified in the proxy. In no event shall
the term of a proxy exceed seven (7) years from the date of its execution. Every
proxy shall continue in full force and effect until its expiration or
revocation. Revocation may be effected by filing an instrument revoking the same
or a duly-executed proxy bearing a later date with the Secretary of the
Corporation.
L. ORDER OF BUSINESS. At the annual Shareholder's meeting, the regular
order of business shall be:
1. Determination of Shareholders present and existence
of quorum;
2. Reading and approval of the minutes of the previous
meeting or meetings;
3. Reports of the Board of Directors, the President,
Secretary and Treasurer of the Corporation, in the
order named;
4. Reports of Committees;
5. Election of Directors;
6. Unfinished business;
7. New business;
8 Adjournment.
M. ABSENTEES' CONSENT TO MEETINGS. Transactions at any meeting of
Shareholders are as valid as though transacted at a meeting duly held after
regular call and notice if a quorum is present, either in person or by proxy,
and if, either before or after the meeting, all of the persons entitled to vote,
not present in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called, noticed or convened, or
expressly object at the meeting to the consideration of matters not included in
the notice which are legally required to be included therein), sign a written
waiver of notice and consent to the holding of the meeting or an approval of the
minutes thereof. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
N. ACTIONS WITHOUT MEETINGS. Any action which may be taken by the vote
of the Shareholders at a meeting may be taken without a meeting if consented to
by the holders of a majority of the shares entitled to vote or such greater
proportion as may be required by the laws of the State of Nevada. Whenever
action is taken by written consent, a meeting of Shareholders need not be called
or
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noticed.
ARTICLE II.
DIRECTORS
A. NUMBER, TENURE: ELECTION: QUALIFICATIONS. Except as otherwise
provided in these Bylaws, the Board of Directors of THE MAJESTIC COMPANIES, LTD.
shall consist of one (1) to ten (10) persons who shall be elected at the annual
meeting of the Shareholders of the Corporation, and who shall hold office for
one (1) year or until their successors are elected and qualify. The number of
directors may be increased or decreased by a two-thirds (2/3) vote of the
Shareholders. No reduction in the number of Directors shall have the effect of
removing any Director from office prior to the expiration of such Director's
term of office. A Director need not be a Shareholder of the Corporation.
B. RESIGNATION.
1. NOTICE. Any Director may resign effective upon giving
written notice to the chairman of the Board of Directors, the President or the
Secretary of the Corporation, unless the notice specifies a later time for
effectiveness of such resignation.
2. SUCCESSOR. If the Board of Directors accepts the
resignation of a Director tendered to take effect at a future date, the board or
the Shareholders may elect a successor to take office when the resignation
becomes effective.
C. REMOVAL.
1. WITH CAUSE. The Board of Directors or the Shareholders of
THE MAJESTIC COMPANIES, LTD., by majority vote, may declare vacant the office of
a Director who has been declared incompetent by an order of court of competent
jurisdiction or convicted of a felony.
2. WITHOUT CAUSE. The entire Board of Directors or any
individual Director may be removed from office without cause by a vote of
holders of at least two-thirds (2/3) of the outstanding shares entitled to vote
at an election of Directors.
D. VACANCIES.
1. MANNER FILLED. A vacancy in the Board of Directors because
of death, resignation, removal1 change in number of Directors or otherwise, may
be filled by the Shareholders, at any regular or special meeting, or any
adjourned meeting thereof by the affirmative vote of a majority thereof,
although they may be less than a quorum. Each successor so elected shall hold
office until the next annual meeting of Shareholders or until a successor shall
have been duly elected and qualified.
2. MULTIPLE VACANCIES. If, after the filling of any vacancy by
the Directors, the Directors then in office who have been elected by the
Shareholders shall constitute less than a majority of the Directors then in
office, any holder or holders of an aggregate of twenty-five percent (25%) or
more of the total number of shares entitled to vote may call a special meeting
of Shareholders to be held to elect
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the entire Board of Directors. The term of office of any Director shall
terminate upon such election of a success9r.
E. REGULAR MEETINGS. Immediately following or following the adjournment
of, and at the same place as, the annual meeting of the Shareholders, the Board
of Directors, including Directors newly elected, shall hold its annual meeting
without notice other than this provision, to elect officers of the Corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
F. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the chairman and shall be called by the chairman upon the request of
any two (2) Directors or the President of the Corporation.
G. PLACE OF MEETINGS. Any meeting of the Board of Directors of THE
MAJESTIC COMPANIES, LTD., may be held at its principal office in the State of
Nevada or at such other place as the Board of Directors may designate. A waiver
of notice signed by Directors may designate any place for the holding of such
meeting.
H. NOTICE OF MEETINGS. Notice of any special meeting of the Board of
Directors shall be given (i) at least twenty-four (24) hours previous to such
meeting by written notice, personally delivered; (ii) five (5) days previous to
such meeting by written notice mailed to each Director at such Director's
business address; or (iii) twenty-four (24) hours previous to such meeting by
telegram or facsimile transceiver. If mailed, such notice shall be deemed to
have been delivered when deposited in the United States Mails, so addressed,
postage prepaid. If notice is given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. If notice
is given by facsimile transceiver, such notice shall be deemed to be delivered
when the transmittal is completed. Any Director may waive notice of any meeting.
Attendance at such meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
I. WAIVER OF NOTICE.
1. WRITTEN. If any Director waives notice of a meeting by
written instrument, signed by such Director, either before or after such
meeting, the same shall be deemed the equivalent of notice.
2. ATTENDANCE. Attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, unless such attendance is for the
express purpose of objecting to the transaction of business thereat because the
meeting is not properly called, noticed or convened.
J. QUORUM, ADJOURNED MEETINGS.
1. QUORUM. A majority of the Board of Directors in office
shall constitute a quorum.
2. ADJOURNED MEETINGS. At any meeting of the Board of
Directors where a quorum is not present. a majority of those present may
adjourn, from time to time, until a quorum is present. When a meeting of the
Board of Directors is adjourned to another time or place, notice of the
adjourned meeting need not be given to the attending Directors at the meeting at
which the adjournment is taken. At
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any adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
K. BOARD DECISIONS.
1. NUMBER OF VOTES. At all meetings of the Board of Directors,
each Director is entitled to one (1) vote per matter presented for vote,
regardless of the number of shares of stock in THE MAJESTIC COMPANIES, LTD. such
Director may bold.
2. POWER OF BOARD OF DIRECTORS. The affirmative vote of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. The Directors shall act only as a
Board, and the individual Directors shall have no power as such.
3. ASSENT; DISSENT. A Director of THE MAJESTIC COMPANIES,
LTD., who is present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be conclusively presumed to have assented to
the action taken unless the dissent of such Director shall be entered in the
minutes of the meeting or unless such Director files written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by certified or registered
mail to the Secretary of the Corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Director who voted in
favor of such action.
L. ACTION WITHOUT MEETING. Any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all of the members
of the Board of Directors or of such committee. Such written consent or consents
shall be filed with the minutes of the proceedings of the Board of Directors of
the committee. Such action by written consent shall have the same force and
effect as the unanimous vote of the Board of Directors or committee.
M. TELEPHONE MEETINGS. Meetings of the Board of Directors may be held
through the use of a conference telephone or similar communications equipment so
long as all members participating in such meeting can hear one another at the
time of such meeting. Each person participating in such meeting shall sign the
minutes thereof, which minutes may be signed in counterparts.
N. ABSENTEES' CONSENT TO MEETINGS. Transactions of any meeting of the
Board of Directors or any committee thereof are as valid as though had at a
meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, all of the persons entitled to vote, not
present in person (and those who, although present, either object at the
beginning of the meeting to the transaction of any business because the meeting
has not been properly called, noticed or convened, or expressly object at the
meeting to the consideration of matters not included in the notice which are
legally required to be included therein), sign a written waiver of notice or
consent to the holding of the meeting. or an approval of the minutes thereof.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
O. POWERS AND DUTIES.
General Powers; Delegation. Except as otherwise provided in the Articles of
Incorporation or the laws of the State of Nevada, the Board of Directors is
vested with the complete and unrestrained authority to
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manage the affairs of THE MAJESTIC COMPANIES, LTD. and is authorized to exercise
for such purpose, as the general agent of the Corporation, its entire corporate
authority in such manner as it sees fit. The Board of Directors may delegate any
of its authority to manage, control or conduct the current business of the
Corporation to any standing or special committee or to any officer or agent and
to appoint any persons to be agents of the Corporation with such powers1
including the power to subdelegate, and upon such terms as may be deemed fit.
2. STATEMENT OF CONDITION OF CORPORATION. The Board of
Directors, in its discretion, may present to the Shareholders at annual meetings
of the Shareholders, and when called for by a majority vote of the Shareholders
at a special meeting of the Shareholders, a full and clear statement of the
condition of the Corporation, and shall, upon request, furnish each of the
Shareholders with a true copy of such statement.
3. SHAREHOLDER RATIFICATION. The Board of Directors, in its
discretion, may submit any contract or act for approval or ratification at any
annual meeting of the Shareholders or any special meeting properly called for
the purpose of considering any such contract or act, provided a quorum is
present. The contract or act shall be valid and binding upon the Corporation and
upon all the Shareholders thereof, if approved and ratified by the affirmative
vote of a majority of the Shareholders at such meeting.
P. COMPENSATION. By resolution of the Board of Directors, the Directors
may be paid their expenses, if any, of attendance at each meeting of the Board
and may be paid a fixed sum for attendance at meetings or a stated salary of
Directors. No such payment shall preclude any Director from serving THE MAJESTIC
COMPANIES, LTD. in any other capacity and receiving compensation therefor.
Q. BOARD OFFICERS.
1. ELECTION. At its annual meeting, the Board of Directors
shall elect, from among its members, a chairman to preside at meetings of the
Board of Directors, and may also elect such other board officers for such term
as the Board may, from time to time, determine advisable.
2. VACANCY. Any vacancy in any board office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the un-expired portion of the term of such office.
R. ORDER OF BUSINESS. The order of business at any meeting of the Board
of Directors shall be as follows:
1. Determination of the members present and the
existence of quorum;
2. Reading and approval of the minutes of any previous
meeting or meetings;
3. Reports of officers;
4. Reports of committees;
5. Election of officers;
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6. Unfinished business;
7. New business;
8. Adjournment.
S. EXECUTIVE COMMITTEE. The Board of Directors may, in its discretion,
appoint from its membeiship an Executive Committee of two (2) or more Directors,
each to serve at the pleasure of the Board of Directors.
1. AUTHORITY. The Executive Committee is authorized to take
any action which the Board of Directors could take, except that the Executive
Committee shall not have the power either to issue or authorize the issuance of
shares of capital stock or to amend the Bylaws or make a resolution of the Board
of Directors. Any authorized action taken by the Executive Committee shall be as
effective as if it had been taken by the full Board of Directors.
2. REGULAR MEETINGS. Regular meetings of the Executive
Committee may be held within or without the State of Nevada at such time and
place as the Executive Committee may provide from time to time.
3. SPECIAL MEETINGS. Special meetings of the Executive
Committee may be called by or at the request of the President or any member of
the Executive Committee.
ARTICLE III.
OFFICERS
A. ELECTION.
1. TIME; OFFICES. The Board of Directors, at its first meeting
following the annual meeting of Shareholders, shall elect a President, a
Secretary and a Treasurer, to hold office for one (1) year next coming, and
until their successors are elected and qualify. Any person may hold two or more
offices.
2. OTHER OFFICES; DUTIES; COMPENSATION. The Board of Directors
may, from time to time, appoint one or more vice-presidents, assistant
secretaries, assistant treasurers and transfer agents of THE MAJESTIC COMPANIES,
LTD. as it may deem advisable; prescribe their duties; and fix their
compensation.
B. REMOVAL; RESIGNATION. Any officer or agent elected or appointed by
the Board of Directors may be removed by the Board whenever, in its judgment,
the best interests of the Corporation would be served thereby. Any officer may
resign at any time upon written notice to the Corporation without prejudice to
the rights, if any, of the Corporation under any contract to which the resigning
officer is a party.
C. VACANCIES. Any vacancy in any office because of death, resignation,
removal or otherwise
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may be filled by the Board of Directors for the unexpired portion of the term of
such office.
D. PRESIDENT
1. POWERS AND DUTIES. The President shall be the general
manager and executive officer of THE MAJESTIC COMPANIES, LTD., subject to the
supervision and control of the Board of Directors, and shall direct the
corporate affairs, with full power to execute all resolutions and orders of the
Board of Directors not especially entrusted to some other official of the
Corporation. The President shall preside at all meetings of the Shareholders and
shall sign the certificates of stock by the Corporation, and shall perform such
other duties as shall be prescribed by the Board of Directors.
2. VOTE SUBSIDIARY STOCK. Unless otherwise ordered by the
Board of Directors, the President shall have full power and authority on behalf
of the Corporation to attend and to act and to vote at any meetings of the
Shareholders of any corporation in which the Corporation may hold stock and, at
any such meetings, shall possess and may exercise any and all rights and powers
incident to the ownership of such stock. The Board of Directors, by resolution
from time to time, may confer like powers on any person or persons in place of
the President to represent the Corporation for these purposes.
E. VICE-PRESIDENT. The Board of Directors may elect one or more
vice-presidents who shall be vested with all the powers and perform all the
duties of the President whenever the President is absent or unable to act,
including the signing of the certificates of stock issued by the Corporation;
and the vice-president shall perform such other duties as shall be prescribed by
the Board of Directors.
F. SECRETARY. The Secretary shall keep the minutes of all meetings of
the Shareholders and the Board of Directors and any committee thereof in books
provided for that purpose. The Secretary shall attend to the giving and service
of all notices of the Corporation, may sign with the President in the name of
the Corporation all contracts authorized by the Board of Directors or
appropriate committee, shall have the custody of the corporate seal, shall affix
the corporate seal to all certificates of stock duly issued by the Corporation,
shall have charge of stock certificate books, transfer books arid stock ledgers
and such other books and papers as the Board of Directors or appropriate
committee may direct, and shall, in general, perform all duties incident to the
office of the Secretary. All corporate books kept by the Secretary shall be open
for examination by any Director at any reasonable time.
G. ASSISTANT SECRETARY. The Board of Directors may appoint an assistant
secretary who shall have such powers and perform such duties as may be
prescribed by the Secretary of the Corporation or by the Board of Directors.
H. TREASURER. The Treasurer shall be the chief financial officer of the
Corporation, subject to the supervision and control of the Board of Directors,
and shall have custody of all the funds and securities of the Corporation. When
necessary or proper, the Treasurer shall endorse on behalf of the Corporation
for collection checks, notes and other obligations, and shall deposit all monies
to the credit of the Corporation in such bank or banks or other depository as
the Board of Directors may designate, and shall sign all receipts and vouchers
for payments made by the Corporation. Unless otherwise specified by the Board of
Directors, the Treasurer shall sign with the President all bills of exchange
and promissory notes of the Corporation, shall also have the care and custody of
the stocks, bonds, certificates, vouchers, evidence of debts, securities, and
such other property belonging to the Corporation
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as the Board of Directors shall designate, and shall sign all papers required by
law, by these Bylaws, or by the Board of Directors to be signed by the
Treasurer. The Treasurer shall enter regularly in the books of the Corporation,
to be kept for that purpose, fill and accurate accounts of all monies received
and paid on account of the Corporation and, whenever required by the Board of
Directors, the Treasurer shall render a statement of any and all accounts. The
Treasurer shall, at all reasonable times, exhibit the books of the account to
any Directors of the Corporation and shall perform all acts incident to the
position of Treasurer subject to the control of the Board of Directors. If
required by the Board of Directors, the Treasurer shall give a bond to the
Corporation in such sum and with such security as shall be approved by the Board
of Directors for the faithful performance of all the duties of Treasurer and for
restoration to the Corporation of all books, records, papers, vouchers, money
and other property belonging to the Corporation in the event of the Treasurer's
death, resignation, retirement or removal from office. The expense of such bond
shall be borne by the Corporation.
I. ASSISTANT TREASURER. The Board of Directors may appoint an assistant
treasurer who shall have such powers and perform such duties as may be
prescribed by the Treasurer of the Corporation or by the Board of Directors; and
the Board of Directors may require the assistant treasurer to give a bond to the
Corporation in such sum and with such security as the Board may approve for the
faithful performance of the duties of assistant treasurer and for restoration to
the Corporation of all books, records, papers, vouchers, money and other
property belonging to the Corporation, in the event of the assistant treasurer's
death, resignation, retirement or removal from office. The expense of such bond
shall be borne by the Corporation.
ARTICLE IV.
CAPITAL STOCK
A. ISSUANCE. Shares of capital stock of THE MAJESTIC COMPANIES, LTD.
shall be issued in such manner and at such times upon such conditions as shall
and be prescribed by the Board of Directors.
B. CERTIFICATES. Ownership of shares of capital stock in the
Corporation shall be evidenced by certificates in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the Corporation
and shall be signed by the President or the vice-president and also by the
Secretary or an assistant Secretary. Each certificate shall contain the name of
the record holder, the number, designation, if any, class or series of shares
represented, a statement or summary of any applicable rights, preferences,
privileges or restrictions affecting the shares represented by the certificate,
and a statement that the shares are not assessable. All certificates shall be
consecutively numbered. The name and address of the Shareholder, the number of
shares and the date of issue shall be entered on the stock transfer books of the
Corporation.
C. SURRENDER; LOST OR DESTROYED CERTIFICATES. All certificates
surrendered to the Corporation, except those representing shares of treasury
stock, shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been canceled, except
that, in the case of a lost, stolen, destroyed or mutilated certificate, a the
replacement certificate may be
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issued. Any Shareholder applying for the issuance of a stock certificate in lieu
of one alleged to have been lost, stolen or mutilated shall, prior to the
issuance of a replacement, provide the Corporation with such Shareholder's
affidavit of the facts surrounding the loss, theft, destruction or mutilation
and, if requested by the Board of Directors, an indemnity bond in an amount and
upon such terms as the Board of Directors shall require. In no case shall the
bond be in an amount less than twice the current market value of the stock. Such
bond shall indemnify the Corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
D. REPLACEMENT CERTIFICATES. When the Articles of Incorporation are
amended in any way affecting the statements contained in the certificates for
outstanding shares of capital stock of the Corporation or it becomes desirable
for any reason, including without limitation, the merger or consolidation of the
Corporation with another corporation or the reorganization of the Corporation,
to cancel any outstanding certificate for shares and issue a replacement
certificate conforming to the rights of the holder, the Board of Directors may
order any holder of outstanding certificates for shares to surrender and
exchange the same for new certificates within a reasonable time to be fixed by
the Board of Directors. The order may provide that a holder of any
certificate(s) ordered to be surrendered shall not be entitled to vote, receive
dividends or exercise any other rights of Shareholders until the holder has
complied with the order, provided that such order operates to suspend such
rights only after notice and until compliance.
E. TRANSFER OF SHARES. All transfers of shares of stock in the
Corporation shall be made in such manner as may be provided in NRS Chapter 104;
and no transfer of shares shall be valid as against the Corporation except on
surrender and cancellation of the certificate, accompanied by a written
assignment or transfer by the registered owner. Whenever any transfer shall be
expressly made for collateral security and not absolutely, the collateral nature
of the transfer shall be reflected in the entry of transfer on the books of the
Corporation.
F. TRANSFER AGENT. The Board of Directors may appoint one or more
transfer agents and registrars of transfer and may require all certificates for
shares of stock to bear the signature of a transfer agent and registrar of
transfer so appointed. In the event a certificate is so countersigned by a
transfer agent and registrar, then a facsimile of the signatures of the officers
may be printed or lithographed upon such certificate in lieu of the actual
signatures of such officers. The Corporation cannot act as the registrar of its
own stock, but a transfer agent and the registrar may be identical if the
institution so acting countersigns the certificates in both capacities.
G. STOCK TRANSFER BOOKS. The stock transfer books shall be closed for a
period of ten (10) days prior to all meetings of the Shareholders, for the
payment of dividends as provided in Article V hereof and during such periods as,
from time to time, may be fixed by the Board of. Directors and, during such
periods, no stock shall be transferable.
H. RESOLUTIONS. The Board of Directors shall have the power and
authority to make such rules and regulations, not inconsistent with these
Bylaws, the Articles of Incorporation, and the laws of the State of Nevada, as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the Corporation.
ARTICLE V.
14
<PAGE>
DIVIDENDS
A. AUTHORITY TO DECLARE DIVIDENDS. Subject to the provisions of the
laws of the State of Nevada and the Articles of Incorporation, dividends may be
declared by the Board of Directors at any regular or special meeting or by the
unanimous written consent in accordance with Article II of these Bylaws, and may
be paid in cash, in property, or in shares of corporate stock. The Board of
Directors may fix in advance a record date, as provided in Article I of these
Bylaws, prior to the dividend payment, for the purpose of determining
Shareholders entitled to receive payment of any dividend. The Board of Directors
may close the stock transfer books for such purpose for a period not exceeding
fifteen (15) days prior to the payment date of such dividend.
B. ACCUMULATED EARNINGS. Before payment of any dividend or making any
distribution of profits, there may be set aside out of funds of THE MAJESTIC
COMPANIES, LTD. available for dividends, such sum or sums as the Directors may,
from time to time, in their absolute discretion, deem proper as a reserve fund
to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for any other purpose as the
Board of Directors shall deem conducive to the interest of the Corporation; and
the Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE VI.
OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
A. PRINCIPAL OFFICE. The initial principal office of THE MAJESTIC
COMPANIES, LTD. in the State of Nevada shall be as set forth in the Articles of
Incorporation or such other place as may be established by the Board of
Directors.
B. OTHER OFFICES. In addition to the principal office, other offices
may be maintained at such other place or places, either within or without the
State of Nevada, as may be designated from time to time by the Board of
Directors, where any and all business of THE MAJESTIC COMPANIES, LTD. may be
transacted and where meetings of the Shareholders and of the Directors may be
held with the same effect as though done or held at the principal office.
C. RECORDS. The Corporation shall keep and maintain at its principal
office a certified copy of the Corporation's Articles of Incorporation and all
amendments to the Corporation's Articles of Incorporation; a certified copy of
the Corporation's Bylaws, including any amendments to Bylaws; the Corporate
stock ledger, or a duplicate of the Corporate stock ledger, revised annually,
containing the names, alphabetically arranged, of all persons who are
Shareholders, showing their places of residence, if known, and the number of
shares held by each.
D. RIGHT TO INSPECT AND AUDIT FINANCIAL RECORDS.
1. SHAREHOLDERS; VOTING TRUSTS. Any Shareholder of record of
THE MAJESTIC COMPANIES, LTD. who owns not less than fifteen percent (15%) of all
of the issued and outstanding shares of stock of the Corporation or has been
authorized in writing by the holders of at least fifteen
15
<PAGE>
percent (15%) of all the issued and outstanding shares, upon at least five (5)
days' written demand, is entitled to inspect in person or by agent or attorney,
during normal business hours, the books of account and all financial records of
the Corporation, to make extracts therefrom, and to conduct an audit of such
records. Holders of voting trust certificates representing fifteen percent (15%)
of the issued and outstanding shares of the Corporation shall be regarded as
Shareholders for the purpose of this Section.
2. AFFIDAVIT. Any Shareholder or other person authorized by
this Section to inspect the accounting books and records and the minutes shall
furnish to the Corporation such person's affidavit stating that such inspection
is not desired for a purpose which is in the interest of a business or object
other than the business of the Corporation and that such person has not, at any
time, sold or offered for sale any list of shareholders of any domestic or
foreign corporation or aided or abetted any person in procuring any such record
of Shareholders for any such purpose.
E. RIGHT TO INSPECT STOCK LEDGER.
1. SHAREHOLDER. Upon five (5) days' written demand, the stock
ledger or duplicate stock ledger shall be open to inspection by any Shareholder
who has been a Shareholder of record for at least six (6) months or any person
authorized in writing by the holders of at least five percent (5%) of all the
issued and outstanding shares of the Corporation.
2. JUDGMENT CREDITOR. Any judgment creditor of the
Corporation, without prior demand, shall have the right to inspect, in person or
by agent or attorney, during normal business hours, the stock ledger or
duplicate stock ledger, whether kept in the principal office of the Corporation
in the State of Nevada or elsewhere.
3. AFFIDAVIT OF INSPECTOR. Any Shareholder or other person
authorized by this Section to inspect the stock ledger or duplicate stock ledger
shall furnish to the Corporation such person's affidavit stating that such
inspection is not desired for a purpose which is in the interest of a business
or object other than the business of the Corporation and that such person has
not, at any time, sold or offered for sale any list of shareholders of any
domestic or foreign corporation or aided or abetted any person in procuring any
such record of Shareholders for any such purpose.
F. CORPORATE SEAL. Tile Board of Directors may, by resolution,
authorize a Corporate seal, which shall be ii) the form of a circle and shall
bear the full name of the Corporation, the year of incorporation, and words
identifying THE MAJESTIC COMPANIES, LTD. as a Nevada corporation. Such seal may
be used by causing it, or a facsimile, to be impressed, affixed or reproduced or
otherwise. Except when otherwise specifically provided in these Bylaws, any
officer of the Corporation shall have the authority to affix the seal to any
document requiring the same.
G. FISCAL YEAR. The fiscal year of THE MAJESTIC COMPANIES, LTD. shall
be such term as may be fixed by resolution of the Board of Directors.
H. RESERVES. The Board of Directors may create, by resolution, out of
the earned surplus of the Corporation, such reserves as the Board of Directors,
from time to time, in its discretion, may deem proper to provide for
contingencies, to equalize dividends, to repair or maintain any property of the
Corporation, or for such other purpose as the Board of Directors may deem
beneficial to the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
16
<PAGE>
ARTICLE VII.
INDEMNIFICATION
A. IN GENERAL. Subject to the laws of the State of Nevada, the
Corporation shall indemnify any Director, officer, employee or agent of the
Corporation, or any person serving in such capacity for any other entity or
enterprise at the request of the Corporation, against any and all legal expenses
(including attorneys fees), claims and liabilities arising out of any action,
suit or proceeding, except an action by or in the right of the Corporation.
B. LACK OF GOOD FAITH; CRIMINAL CONDUCT. The Corporation shall not be
required to indemnify any person unless such person acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, where there
was no reasonable cause to believe the conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order of settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of THE MAJESTIC
COMPANIES, LTD., and that, with respect to any criminal action or proceeding,
there was reasonable cause to believe that the conduct was unlawful. Moreover,
the Corporation shall not indemnify any person adjudged to be liable for
negligence or misconduct, ill the performance of a duty to the Corporation
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
C. SUCCESSFUL DEFENSE OF ACTIONS. The Corporation shall reimburse or
otherwise indemnify any Director, officer, employee or agent against legal
expenses (including attorneys fees) actually and reasonably incurred in
connection with the defense of any action, suit or proceeding herein above
referred to, to the extent such person is successful on the merits or otherwise.
D. AUTHORIZATION. Indemnification shall be made by the Corporation only
when authorized in the specific case and upon a determination that
indemnification is proper by:
1. The Shareholders;
2. Majority vote of a quorum of the Board of Directors
consisting of Directors who are not parties to the
action, suit or proceeding; or
3. Independent legal counsel in a written opinion if a
quorum of disinterested Directors cannot be obtained.
E. ADVANCING EXPENSES. Expenses incurred in defending any action, suit
or proceeding may be paid by THE MAJESTIC COMPANIES, LTD. in advance of the
final disposition, when authorized by the Board of Directors, upon receipt of an
undertaking by or on behalf of the person defending to repay such advances if
indemnification is not ultimately available under these provisions.
17
<PAGE>
F. OTHER RIGHTS; CONTINUING INDEMNIFICATION. The indemnification
provided by these Bylaws does not exclude any other rights to which the person
seeking indemnification may be entitled under the law, shall continue as to a
person who has ceased to be a Director, officer, employee or agent, and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
G. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of the
Corporation1 or who is or was serving at the request of the Corporation in any
capacity against any liability asserted against such person.
ARTICLE VIII.
BYLAWS
A. AMENDMENT. These Bylaws may only be altered, amended or repealed at
a meeting of the Shareholders at which a quorum is present, by the affirmative
vote of the holders of two-thirds (2/3) of the capital stock of the Corporation
entitled to vote, or consent of Shareholders in accordance with Article I of
these Bylaws.
B. ADDITIONAL BYLAWS. Additional Bylaws not inconsistent with these
Bylaws may be adopted by the Board of Directors at any meeting of the Board of
Directors at which a quorum is present, by an affirmative vote of a majority of
the Directors present, or by unanimous consent of the Board of Directors in
accordance with Article II of these Bylaws. Any bylaws so adopted shall be
presented to the Shareholders for ratification, alteration, amendment or repeal
in accordance with the provisions of the preceding Section of these Bylaws.
CERTIFICATE
The undersigned, being the duly elected Secretary of THE MAJESTIC COMPANIES,
LTD., certify that the foregoing Bylaws were adopted by the Board of Directors
of THE MAJESTIC COMPANIES, LTD., on January 4, 1999 and the same have not been
revoked, amended, modified or rescinded and are in full force and effect.
/s/Alejandro V. Tovar
-------------------------------
Alejandro V. Tovar, Secretary
18
[GRAPHIC APPEARS HERE]
COMMON STOCK COMMON STOCK
NUMBER ???
MC 0033 THE MAJESTIC COMPANIES, LTD. SPECIMEN
Incorporated Under the Laws See Reverse for
of the State of Nevada Certain Definitions
CUSIP 560710 10 5
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
Fully Paid and Nonassessable Shares of the Common Stock, Par Value $.001 of
THE MAJESTIC COMPANIES, LTD.
?????
CERTIFICATE OF STOCK
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
SPECIMEN
/s/ Alejandro V. Tovar [SEAL APPEARS HERE] /s/ Francis A. Zubrowski
SECRETARY PRESIDENT
???
Countersigned and Registered:
??? Shareholder Services, L.L.C.
Transfer Agent and Registrar
by
SPECIMEN
AUTHORIZED SIGNATURE
<PAGE>
The Corporation will furnish to any stockholder, upon request and without
charge, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights, so far as the same shall have been fixed, and of the authority of
the Board of Directors to designate and fix any preferences, rights and
limitations of any wholly unissued series. Any such request should be addressed
to the Secretary of the Corporation at its corporate headquarters.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED
THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COMM - as tenants in common
TEN ENT - as tenants by this ???
JT TEN - as joint tenants with right of
survivorship and not as ???
in common
UNIF GIFT MIN ACT - Custodian
------------- -------------
(???) (Minor)
under Uniform Gifts to Minors
Act
--------------------------------
(State)
UNIF TRF MIN ACT - Custodian (? age)
-------------- ------------
(???)
under Uniform Transfers
-------------
(Minor)
to Minors Act
-----------------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign and transfer unto
--------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-------------------------
X
-------------------------------------------------
X
-------------------------------------------------
NOTICE: THE SIGNATURES TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED
BY
-------------------------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE ???.
<TABLE>
<CAPTION>
OFFICE LEASE AND GENERAL SERVICE AGREEMENT
SUMMARY AND DEFINITIONS OF TERMS
<S> <C> <C>
Center Address 8880 Rio San Diego Drive, Eighth Floor, San Diego, CA 92108 ("Center")
Center Own Mission Valley Business Center, LLC ("Company")
Client Name Majestic Motor Car Company, Ltd. ("Client")
--------------------------------
Client Address 916 C Sealane Drive
--------------------------------
Encinitas, CA 92024
--------------------------------
Contact Person Francis A. Zubrowski
--------------------------------
Client Telephone (H) (W) 619-634-2475
----------------------- ------------------------
Lease/GSA Commencement Date/Term 12-31, 1997 through 6-30, 1998 ("Term")
----- -- ---- --
Office Number(s) 61, 63, 64 ("Premises")
----------------------------------
</TABLE>
MONTHLY FIXED CHARGES:
Lease Rental $ 1,575.00 (See Addendum A attached)
-----------
GSA Rental (see page 2) $ 795.00
-----------
ONE-TIME CHARGES:
Lease/GSA Deposit (required) $ 2,320.00
-----------
Telephone Use Deposit (required) $ 400.00
-----------
Telephone Installation $ 250.00
-----------
Set Up $ 100.00
-----------
Other $
-----------
First Months Rebate $ (275.00) per month rebate
-----------
TOTAL OPENING CHARGES: $ 5,390.00
-----------
DEFINITION OF TERMS:
Lease: That certain Lease Agreement between Company and Client attached hereto
as Section "A."
GSA: That certain General Services Agreement between Company and Client
attached hereto as Section "B."
FAZ
- ---
INITIAL (REV GSA 010197 MV)
1
<PAGE>
CENTER: MISSION VALLEY BUSINESS CENTER, LLC
GSA SCHEDULE
CLIENT NAME: Majestic Motors OFFICE NO(S): 61, 63, 64
--------------- ----------
DESCRIPTION/ALLOWANCE MONTHLY
FIXED CHARGE
- --------------------------------------------------------------------------------
TELEPHONE (3) Telephone(s) $ 225.00
---
SERVICE Live Answering
----
Voicemail Messages
- --------------------------------------------------------------------------------
CONFERENCE ROOM/ Includes 12 hours per month allowance $ N/C
--
PRIVATE OFFICE
- --------------------------------------------------------------------------------
FURNITURE $ 540.00
RENTAL at no charge.
At least 2 month will remove after 2 month if requested only
- --------------------------------------------------------------------------------
EXECUTIVE Use of Executive Lounge, beverage service, $ N/C
LOUNGE kitchen facilities
- --------------------------------------------------------------------------------
OTHER 1 Fax/Modem Line (s) $ 30.00
-
$
$
- --------------------------------------------------------------------------------
TOTAL MONTHLY FIXED CHARGES ("GSA RENTAL"): $ 795.00
=========
*Allowance not utilized in any billing cycle may not be carried
forward. Charges for additional services are described in Company's
Price List and are subject to change. Services are subject to change.
FAZ (REV GSA 010197 MV)
- ---
INITIAL
2
<PAGE>
SECTION A - OFFICE LEASE
This Office Lease (the "Lease"); is made by and between Client and Company whose
names appear In the Summary and Definition of Terms (the Summary") attached
hereto and Incorporated herein and states the terms and conditions under which
Company hereby leases to Client, and Client hereby leases from Company, the
Premises described in Summary. All term s defined in the Summary shall have the
same meaning herein.
This Lease shall be subject to the terms; and conditions of the ("General
Provisions"), attached hereto as Section C and incorporated herein.
1. PREMISES. Company leases to Client and Client leases from Company the
Premises designated in the Summary. The Premises includes access to common areas
including restrooms, corridors, reception lobby and client services area at no
charge. Utilities and janitorial services are included in the Lease Rental, with
utilities provided in accordance with building rules and regulations.
2. TERM. Subject to earlier termination as provided for herein, this Lease
shall commence and expire on the dates set forth in the Summary.
3. COMMENCEMENT DATE. Client's obligation to pay Lease Rental shall begin on
the commencement date (the "Commencement Date"). If Company is unable to deliver
possession of the Premises to Client on the Commencement Date, Company will not
be liable for any resulting damage, nor will this Lease be affected, except that
Client will not be obligated to pay Lease Rental until Company delivers
possession. If Client occupies the Premises prior to the Commencement Date, such
occupancy shall be subject to the terms and conditions herein.
4. RENTAL PAYMENTS. Client agrees to pay Company the monthly Lease Rental
stated in the Summary.
5. POSSESSION AND USE. (a) Client shall use the Premises for general
professional office business purposes and for no other purpose, without the
prior written consent of Company. Client shall abide by all rules, laws,
ordinances and regulations, pertaining to the use of the Center which may be
changed from time to time at the discretion of the Company. Client agrees that
no more than two (2) persons shall occupy an office, without the prior written
consent of Company. Client shall not offer or use the Premises to provide
services provided by Company to third parties, nor use or permit any use of the
Premises which is forbidden by law or regulation, may be hazardous or unsafe, or
may impair the character, reputation, appearance or operation of the Center.
Client shall not create a noise level which interferes with or annoys other
clients. Only telephone equipment and telephone service provided by Company will
be used by Client and any ringing devices shall be adjusted to the lowest
reasonable volume. Client supplied coffee makers are prohibited.
(b) Client understands and agrees that occupancy of the Premises and
the Center is subject to, in addition to the Lease, the provisions of the master
lease pursuant to which Company occupies office space in the building
("Building") which includes the Premises. Client will comply with all rules,
regulations, and requirements of Building and with other reasonable rules and
regulations established by Company and the master lessor relating to the
Premises and Client's use thereof. Client shall attorn to the lessor under the
master lease in such cases as may be required by the master lease. In accordance
with the provisions of the Master Lease ("Master Lease"), in the event of a
default by Company thereunder this Lease shall either terminate or shall
continue in full force and effect, at the election of the landlord under the
Master Lease. In the event that the landlord under the Master Lease elects to
continue this Lease, Client shall attorn to such landlord. No provisions of the
master lease impose obligations on Client which are in addition to or
inconsistent with the obligations hereunder.
FAZ
- ---
INITIAL (REV GSA 010197 MV)
3
<PAGE>
(c) In Company's sole and absolute discretion, upon fifteen (15) days prior
Written notice to Client, Company shall have the right to relocate Client to
comparable premises within the Center. Company will incur all reasonable direct
out-of-pocket moving costs associated with such relocation. Client shall not be
entitled to any compensation for any inconvenience or interference with its
business, nor to any abatement or reduction in Lease Rental, nor shall the terms
and conditions of this Lease be otherwise affected as a result of the
relocation. Client's failure to comply with all obligations included In this
paragraph shall constitute a material breach of this Lease.
(d) Client shall neither use nor occupy the Premises in any manner, nor
commit any act, resulting in a cancellation or reduction of any insurance
coverage or Increase in premiums on any insurance policy covering the Premises,
Center, or Building. Client agrees to maintain a general liability Insurance
policy with a minimum coverage of One Million Dollars ($1,000,000.00). Client
also agrees to furnish Company with a Certificate of Insurance naming Company
and the master lessor as additional insureds. Failure to furnish Company with a
Certificate of Insurance within fifteen (15) days of occupancy shall constitute
a material breach of this Lease.
6. IMPROVEMENTS AND ALTERATIONS. Company has made no promise to alter or
improve the Premises and has made no representations concerning the condition
thereof. By taking possession of the Premises, Client acknowledges that the
Premises are in good order and condition and accepts them "AS-IS" in their
present condition. Client shall maintain the Premises in good condition and
repair, will not make any holes in walIs for any reason except hanging pictures,
or cause or permit the Premises and/or the Center to be damaged or defaced in
any manner whatsoever. Client will make no alterations or additions to the
Premises or the Center without Company's prior written consent, which Company
may grant or withhold in its sole discretion. Client will return the Premises at
the end of the Term in the same condition and repair as when Client took
possession. Client shall provide, at Client's expense, a plastic mat(s) to be
placed under each executive chair located within the Premises and will use it
(them) at all times. The cost of repairing any damage done to the Premises and
the Center by Client or any person who may be in or upon the Premises or Center
with the consent of Client shall be paid by Client. Company may make repairs or
replacements for Client's account, and Client will pay Company all costs and
expenses for such repairs and replacements upon demand. Upon termination of this
Lease, whether upon expiration of the Term hereof or sooner, Client agrees to
pay Company Two Hundred Dollars ($200.00) per leased office within the Premises
to cover painting and cleaning costs for each such office.
7. DESTRUCTION OF PREMISES. Should the Premises, Center, or Building be so
damaged by flood, fire, earthquake, explosion, or other cause, that, in the
opinion of Company, it is impractical or inadvisable to restore the same, then
this Lease shall terminate as of the date of such damage, and both Company and
Client shall be released from all obligations hereunder, subsequent to the date
of such damage. If Company elects to restore the Premises or the Center, Company
shall have one hundred eighty (180) days from the date of -destruction to do so,
or such additional time as may be mutually agreed to between the parties herein.
In such event, this Lease shall remain in full force and effect except that the
Lease Rental due hereunder during the period that the Premises are in need of or
are being restored shall be proportionately abated to the extent that the
Premises are untenantable.
8. EMINENT DOMAIN. In the event that all or part of the Premises shall be
taken under the power of eminent domain or sold under threat of such taking,
this Lease shall terminate. The entire award of proceeds from such taking or
sale of land and/or improvements, including severance damages, shall belong to
Company and Client shall be entitled only to the portion of the award
specifically allocated to its personal property which may be taken, and any
relocation allowance actually paid by the condemning authority.
FAZ
- ---
INITIAL (REV GSA 010197 MV)
4
<PAGE>
9. ASSIGNMENT AND SUBLETTING. Only with the prior written consent of Company
may Client assign this Lease or any interest herein or sublet the, Premises or
any portion, thereof or permit any other person to occupy the Premises or any
portion hereof. Such consent will not be unreasonably withheld provided that
such consent may be conditioned upon Client agreeing to pay Company all rent or
other consideration paid by such assignee in excess of the Lease Rental. No
transfer permitted by this paragraph shall release Client, change Client's
primary liability to pay the Lease Rental and to perform all other obligations
of Client hereunder. Consent to assignment or subletting shall not constitute a
waiver of this provision or consent to any further assignments or subletting. No
assignee for the benefit of creditors trustee in bankruptcy or purchaser in any
execution sale shall have any right to possess or occupy the Premises or any
part thereof, or claim of right hereunder. Client agrees to reimburse Company
all reasonable attorney's fees incurred in connection with the processing and
documentation of any requested transfer, assignment, or subletting. The consent
of Company required hereunder shall not be unreasonably withheld; provided,
however, that Company and Client agree that it shall not be unreasonable for
Company to withhold its consent to any proposed assignment subletting or other
transfer for any of the following reasons, which are not exclusive:
(a) The transferee is a party of reasonable financial stability in light
of the responsibilities involved on the date consent is requested;
(b) In the sole judgment of Company, the transferee is not of a character
or engaged in a business which is in keeping with the standards of Company for
the Center;
(c) In the reasonable discretion of Company, the transferee would (i)
materially increase burdens upon the Center, in relation to uses of other
clients then occupying space in the Center, or (ii) cause potential security
problems or additional security concerns for the Center or the Building.
(d) The transferee is an existing client of Company in the Center or a
previous client of Company.
Notwithstanding the foregoing, in the event that the Client under this Lease is
a sole proprietorship, the association of partners shall be deemed to have
resulted in a prohibited transfer under this paragraph 9, unless Company's prior
written consent is obtained, which consent shall not be unreasonably withheld.
Any such attempted or purported transfer, without Company's prior written
consent, shall be void and shall be of no force and effect and shall not confer
any interest or estate in the purported transferee, shall constitute default
under this Lease and permit Company, at its election, to terminate this Lease.
10. SURRENDER OF POSSESSION BY CLIENT. Client hereby agrees, upon termination
of this Lease, to immediately and peaceably yield possession of the Premises.
Any personal property remaining in the Premises upon expiration or termination
shall be deemed abandoned. Company may demand possession of the Premises upon
termination of the Term or any applicable renewal period (the "Possession
Date"). If Client remains in possession of the Premises after the Possession
Date, Client shall become a tenant at will upon the same terms and conditions
contained herein except that the Lease Rental shall equal Two Hundred Percent
(200%) of the Lease Rental which was in effect immediately prior to the
Possession Date. Acceptance by Company of any payments after the Possession Date
shall not constitute consent to a holdover by Client or result in a renewal of
this Lease. In addition, Client shall indemnify and hold harmless Company from
any and all claims, demands, losses or damages incurred by or asserted against
Company due to Client's failure to deliver possession of the Premises on the
Possession Date including, without limitation, any claims by any succeeding
tenant for the Premises based on such delay.
FAZ
- ---
INITIAL (REV GSA 010197 MV)
5
<PAGE>
11. RIGHT OF ENTRY. Company and the master lessor's agents and employees may
enter upon the Premises at any reasonable time to inspect the Premises and to
see that the covenents hereof are being maintained and performed, to take action
which may be required or permitted hereunder, to make such repairs, additions or
Improvements as Company may deem necessary or to exhibit the Premises to
prospective tenants or purchasers.
12. SIGNS, AND KEY: Except pursuant to the express written consent of Company,
or as provided pursuant to this Lease, Client shall not place or permit to be
placed any sign, advertisement, notice or other similar matter on any doors,
windows, walls or other areas of the Premises and the Center, which are open to
the view of persons in common areas of the Center or Building. Two (2) keys to
the Premises will be furnished by Company. Additional keys will be furnished at
the rates described in Company's Price List. Client shall not cause or permit
the duplication of any keys to be made, and Client shall not cause or permit any
keys to be possessed by any person other than an authorized agent of Client.
Client agrees to return to Company all keys to the Premises and Building upon
termination of this Lease. Company shall have the right to charge Client Twenty
Dollars ($20.00) for each key (including additional keys furnished to Client as
provided hereunder), which Client does not return to Company within five (5)
days of termination of the Term.
13. EXHIBITS. Any and all exhibits or riders attached to this Lease, including,
but not limited to, the General Provisions attached hereto as Section C are
incorporated herein and made part of this Lease. Without limiting the generality
of the foregoing, it is expressly agreed that this Lease is subject to the terms
and provisions of the General Provisions and Client agrees to abide with the
General Provisions. Breach of any obligation under the General Provisions shall
constitute a material breach of this Lease. This Lease may be executed in one or
more counterparts. In the event of variation or discrepancy, the duplicate
original hereof (including exhibits or riders, if any) held by Company shall
control.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed on the
date set forth below.
Company: MVBC Client:
By: /s/ Audrey A. Munchow By: /s/ Francis A. Zubrowski
---------------------------- --------------------------------
Name: /s/ Audrey A. Munchow Name: /s/ Francis A. Zubrowski
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(Please Print) (Please Print)
Date: 12-30-97 Title: CSM Date: 12-29-97 Title: C.E.O.
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SECTLON B - GENERAL SERVICES AGREEMENT
This General ServIces Agreement ("GSA") Is made by and between Client and
Company whose names appear In the Summary attached hereafter as page one (1) and
Incorporated herein and states the terms and conditions under which Company will
provide services and rent furniture and equipment (the "equipment") to Client.
All terms defined In the Summary shall have the same meaning herein.
This GSA shall be subject to the terms and conditions of the General Provisions
attached hereto as Section C and incorporated herein. The GSA Schedule attached
hereto as page two (2) sets forth the services Company shall provide and the
monthly fixed charges Client shall pay Company for such services.
1. TERM. Subject to earlier termination as provided for herein, this GSA
shall commence and expire on the dates set forth in this Summary.
2. SERVICES PROVIDED. Company agrees to provide reception, telephone and other
services and facilities, including conference room allowance at the Center from
8:30 a.m. to 5:00 p.m., Monday through Friday, Company recognized holidays
excepted, at the monthly fixed charges described in the GSA Schedule. Company
agrees to provide services and facilities at the In-House rates described on
Company's Price List. Telephone Service includes:
(a) Telephone instrument rental, including dial tone and telephone number.
(b) Live Answering, which includes a reasonable allowance of answers of
incoming calls, defined as four hundred (400) per month for one office, one
hundred (100) per month for each additional office. Client agrees not to place
advertisements using Center owned telephone numbers that would result in
unreasonable numbers of incoming calls. In the event Client's incoming calls
exceed the allowance defined above, at Company's election, the Client shall be
required to answer their own incoming calls, upon thirty (30) days notice from
Company. Client shall not be entitled to any compensation for any inconvenience
to or interference with its business which results from such conversion. Client
shall be entitled to a reduction of the GSA Rental in the amount of the monthly
charge for Live Answering.
(c) Voice Mail, 24 hours, 7 days per week retrieval from any touchtone
phone.
(d) Client: (I) will be provided with local, long distance, and
international services and moves, adds and changes at Company's published rates;
(ii) understands that it has chosen to use telephone services exclusively
provided by Company, which is acting as a multi-tenant service provider; (iii)
understands that it is not a member of the general public, is not protected by
the Public Utilities Commission and waives any right to such protection; (iv)
shall direct any requests for service, or complaints, to Company and not the
local telephone company; (v) shall provide Company with a forwarding address so
that residual billings can be mailed to Client; and (vi) agrees that Company may
increase the telephone use deposit at any time during the Term to an amount not
to exceed Client's highest monthly telephone billing during the preceding
portion of the Term.
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Services offered by Company are subject to human, electrical and mechanical
error, failure, or illness which may result in the delay or discontinuance of
these services. Client hereby represents that Client has read and agrees to the
provisions of Section C, Paragraph 2 (Limitation of Liability) and Section, C,
Paragraph 3, (Indemnity), included in the General Provisions and incorporated
herein. IN THE EVENT THIS GSA TERMINATES, OR CLIENT IS IN DEFAULT UNDER THIS GSA
COMPAPNY MAY, AT ITS ELECTION; REFUSE TO PROVDE ANY SERVICE INCLUDING WITHOUT
LIMITATION, TELEPHONE SERVICE; AND COMPANY SHALL NOT BE IN BREACH OF ANY OF ITS
OBLIGATIONS HEREUNDER, OR UNDER ANY OTHER AGREEMENT, NOR SHALL SUCH REFUSAL BE
DEEMED AN EVICTION OF CLIENT UNDER THE LEASE.
3. EQUIPMENT. In the event Client uses Company's Equipment, Client shall not
damage Equipment or make any modifications or attachments thereto, nor remove
the same. If in the opinion of Company, any of Client's modifications, whether
or not made with the permission of Company, interfere with the normal use or
maintenance of Equlpment and/or telephone system at the Center or otherwise
creates a safety hazard, Company may, at Client's expense, remove any such
modifications, Equipment shall only be moved by Company or its authorized
representatives. . Client shall be responsible to pay all costs of such moves at
the rates described in Company's Price List. Client agrees that only Company
provided telephone equipment will be used In the Premises.
4. MAIL. Subject to any restrictions set forth herein, Client is hereby
authorized to use the Center address as Client's business address. Client
acknowledges that it has read United States Post Office Form #1 583 and
understands that in the event its use of the Center address terminates, Company
shall cease to act as its agent for receipt of mail. It will be Client's
responsibility to notify all parties of termination of use of the Center
address. In the event that this GSA terminates for whatever reason including an
event of default hereunder, Client's right to use the Center address shall
immediately terminate, and Company shall return to senders all mail addressed to
Client. Provided Client is not in default under this GSA, Client may elect to
maintain Mail Service by submitting Company a completed Communications Service
Agreement ("CSA"). Payment for such service shall be made monthly, in advance,
prior to the first day of each month. Failure to make such payment shall
immediately terminate all of Company's obligations under the CSA.
5. EMPLOYEES. Client, including its principals, and any parent, subsidiary, or
affiliated companies, jointly and severally, agrees that during the term of this
GSA, or within one (1) year following the termination of this GSA, it will not
hire any of Company's employees or persons employed by Company during the Term
hereof. In the event Client shall breach any obligation contained in this
paragraph, Client shall be liable for, and shall pay Company on demand, damages
of Ten Thousand Dollars ($10,000.00) for each employee so hired, it being
mutually agreed by Client and Company that this provision for liquidated damages
is reasonable and that the actual damage which would be sustained by Company as
the result of the failure to comply with this provision would be impractical or
extremely difficult to determine.
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6. EXHIBITS. Any and all exhibits or riders attached to this GSA; including,
but not limited to the general Provisions attached hereto are incorporated
herein and made part of this GSA. Without limiting the foregoing, it is
expressly agreed that this GSA is subject to the terms and conditions of the
General Provisions by which Client agrees to abide. Breach of any obligation
under Provisions shall be deemed a material breach of this GSA. This GSA may be
executed in one or more counterparts, in the event of variation or discrepancy,
the duplicate original hereof (including exhibits or riders, if any) held by
Company shall control.
IN WITNESS WHEREOF, the parties have caused this GSA to be executed on the date
set forth below.
Company: MVBC Client:
By: /s/ Audrey A. Munchow By: /s/ Francis A. Zubrowski
----------------------------- ------------------------------------
Name: /s/ Audrey A. Munchow Name: /s/ Francis A. Zubrowski
--------------------------- ----------------------------------
(Please Print) (Please Print)
Date: 12-30-97 Title: CSM Date: 12-29-97 Title: C.E.O.
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SECTION C - GENERAL PROVISIONS
Company and Client hereby agree to the following terms and conditions which
supplement the Lease and/or GSA to which these General Provisions are attached
as Section C All definitions included in the Lease and/or GSA shall apply herein
unless, otherwise indicated As used herein, the "Agreements" shall refer to the
Lease and/or GSA, as the context may indicate
1. PAYMENTS. Client agrees to pay Company when due the Lease Rental, GSA
Rental, and other charge(s) including any applicable sales, use and other taxes
now or hereafter imposed by any governmental body to:
Mission Valley Business Center, LLC
8880 Rio San Diego
Eighth Floor
San Diego, CA 92108
ALL PAYMENTS ARE DUE AND PAYABLE PRIOR TO THE FIRST OF EVERY MONTH WITHOUT
NOTICE demand or offset. The billing cycle for all non GSA Rental amounts shall
be from the 16th of the prior month through the 15th of the current month. ANY
PAYMENTS NOT RECEIVED WITHIN FIVE (5) DAYS OF THE DUE DATE ARE SUBJECT TO A LATE
CHARGE EQUAL TO TEN PERCENT (10%) OF THE PAST DUE BALANCE, BUT NOT LESS THAN
TWENTY DOLLARS ($20.00), TO COMPENSATE COMPANY FOR THE EXTRA COSTS INCURRED AS A
RESULT OF SUCH LATE PAYMENT. Company shall charge Client Twenty-Five Dollars
($25.00) for each dishonored check. In the event Client fails to pay any amount
when due, Client shall pay Company interest thereon at an annual rate of Twelve
Percent (12%) or such lower rate as may be the maximum lawful rate. Client
agrees to pay Company Two Hundred Dollars ($200.00) for each Three (3) Day
Notice or Notice of Termination of Services which Company serves upon Client's
failure to make timely payments in the event more than one of either notice is
served during the Term. Client agrees to pay for all services ordered or
incurred by Client, its employees, agents, and invitees, even if such services
are not described in the Lease, GSA or GSA Schedule attached hereto. Client will
complete Company's Answering Service Form, indicating which individuals are
authorized to use Company's services and incur charges at the Center.
2. LIMITATION OF LIABILITY. (a) THE AGREEMENTS ARE MADE UPON THE EXPRESS
CONDITION THAT COMPANY SHALL BE FREE FROM ALL LIABILITY AND CLAIM FOR DAMAGES,
EXCEPT THOSE SOLELY CAUSED BY THE GROSS NEGLIGENCE OF COMPANY. By reason of any
injury to any person(s) or property of any kind, from any cause(s), in any way
connected with the Center or it's use or occupancy thereof during the term of
the Agreements or any extensions. In no event shall Company be liable for the
conduct of any other Client or tenant of Building, and any such conduct shall
not give Client the right to terminate the Agreements between Company and
Client. Company shall not be liable under any circumstances for consequential
damages or damages or injury to Client's business or potential business.
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(b) THE USE OF THE PREMISES AND ANY SERVICES, FURNISHINGS AND FACILITIES
PROVIDED PURSUANT TO THE AGREEMENTS IS MADE WITHOUT WARRANTY. Client's sole
remedy, and Company's sole obligation for any failure to render any service,
furnishing or facility, any error or omission, or any delay or interruption with
respect thereto, Is limited to an adjustment to Client's billing in an amount
equal to the charge for such service, furnishing or facility, for the period
during which the failure, delay, or interruption continues. (By way of example
only, if the Premises are reasonably determined to be unusable solely due to the
gross negligence of Company; Client's billing will be reduced in proportion to
Client's reduced use thereof). With the sole exception of the remedy set forth
in this paragraph 2(b), Client expressly and specifically agrees to waive, and
agrees not to make any claim for damages, direct or consequential, arising out
of any failure to furnish any service, furnishing or facility, any error or
omission, or any delay or interruption of the same. Notwithstanding anything in
this paragraph, there shall be no billing adjustment if Client is in default
hereunder.
3. INDEMNITY. Client hereby covenants and agrees to indemnify and save
harmless Company and the master lessor from all liability, loss, cost, or
obligations including actual attorney's fees relating to Client's use of the
Center and anything done or allowed to be done by Client, in the Center or
Building.
4. DEFAULT. Client shall be in default hereunder if it does not pay all
amounts due under either the Lease or the GSA, or if Client fails to perform any
of it's other covenants or provisions under the Agreements. If Client does not
cure such default within three (3) days after written notice, Company shall have
the right, with or without further notice, and in addition to and not in lieu of
other remedies available by law, to terminate all of Client's rights under the
Agreements. Or such of those rights as Company designates in such written
notice. Such notice shall be in lieu of, and not in addition to, any notice
required by California Code of Civil Procedure Section 1161. If Client's rights
under the Lease are so terminated, Company may, after complying with any
applicable requirements of law, take possession of the Premises. Upon any such
action by Company, Client shall remain liable for all obligations which have
previously accrued, and, to the maximum extent permitted by law, for all
obligations which may subsequently accrue under the Agreements. In addition to
terminating Client's rights to possession under the Lease and/or discontinuing
services under the GSA, Company shall have the right to pursue all other
remedies provided by law.
5. SECURITY DEPOSIT. Upon execution of the Agreements, Client shall pay
Company the amounts set forth in the Summary as Lease Deposit and GSA Deposit
(the "Deposits"). The Deposits shall be held by Company as security for the
full, faithful, and complete performance by Client of all terms, covenants, and
agreements to be kept by Client under the Agreements. If Client fails to perform
any of its obligations, Company may apply the Deposits to any amounts due,
including any amounts Company may be required to spend by reason of Client's
breach under the Agreements. Upon written demand by Company, Client will pay
Company any amount so applied so that the Deposits are returned to their
original amount. If at the end of the Term. Client has performed all of the
provisions of the Agreements, the Deposits, or any remaining balance, will be
returned, without interest, within sixty (60) days after the end of the Term.
6. TERMINATION AND NOTICES. UPON THE ENDING DATE SET FORTH HEREIN, OR ANY
EXTENSION THEREOF, THE AGREEMENT SHALL BE EXTENDED FOR THE SAME PERIOD OF TIME
AS THE INITIAL TERM AND, UPON THE SAME TERMS AND CONDITIONS AS CONTAINED HEREIN,
UNLESS EITHER PARTY NOTIFIES THE OTHER IN WRITING BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, THAT THE AGREEMENT WILL NOT BE EXTENDED WITHIN
THE PERIOD HEREINAFTER SPECIFIED. IF CLIENT HAS LESS THAN THREE OFFICES, SUCH
NOTICE MUST BE GIVEN AT LEAST SIXTY (60) DAYS PRIOR TO THE EXPIRATION DATE OF
THIS AGREEMENT. lF
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CLIENT HAS THREE OR MORE OFFICES, SUCH NOTICE MUST LEAST NINETY (90) PRIOR TO
THE EXPIRATION DATE OF THIS AGREEMENT. FAZ
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7. FORCE MAJEURE. If company's performance of Its obligation's under the
Agreements is prevented or restricted by any cause the Company, including, but
not limited to, mechanical or electrical breakdown, (fire, explosion or other
casualty, acts of God, acts of public enemies, embargo, delays of supplies, acts
of any governmental agency, labor difficulties, strikes or inclement weather,
Company, upon giving timely notice to Client, shall be excused from such
performance to the extent of such breakdown, prevention or restriction, provided
that Company shall resume performance within a reasonable time after any such
cause has been removed or ceases. Except as set forth in the Lease there shall
be no abatement or reduction of Lease Rental.
8. WAIVER. One or more waivers by Company of any breach of any covenant or
condition under the Agreements shall not be construed as a waiver of a
subsequent or continuing breach of the same or any other covenant or condition,
and consent or approval by Company of any act by Client requiring Company's
consent or approval shall not be deemed to waive or render unnecessary Company's
consent or approval to any subsequent act.
9. TIME OF THE ESSENCE. Time is expressly of the essence under the Agreements.
10. AUTHORITY, SUCCESSORS AND ASSIGNS. Each party represents that it has full
power and authority to enter into and perform the Agreements. The covenants and
conditions herein contained shall, subject to the Lease's provision as to
assignments and subletting, apply to and bind the heirs, successors, executors,
administrators, and assigns of the respective parties hereto. If the Agreements
are executed by more than one party as Client, their obligation shall be joint
and several.
11. ATTORNEY'S FEES. In the event of any legal action or proceeding by Client
or Company against the other under the Agreements, the prevailing party shall be
entitled to recover all expenses and costs, including reasonable attorney's fees
and costs of appeal, if any.
12. SEVERABILITY. The invalidity or unenforceability of any provision of the
Agreements shall not affect or impair the validity or enforceability of any
other provision. No waiver of any default of Client shall be implied from any
failure by Company to take action with respect to such default. Except for the
provisions of Section C, Paragraph 4 above regarding default, each of the Lease
and GSA are separate and independent agreements.
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13. DOCUMENTS AND ENTIRE AGREEMENT. Client agrees to complete and sign
additional documents and do such other things as may be required by Company or
any other entity In order to permit Company to provide services and facilities
to Client. The agreements supercede any prior agreement(s), and embodies the
entire agreement between Company and Client; and may not be modified or altered
except in writing. Submission of this Instrument for examination does not
constitute a reservation of or option of or option for the Premises. The
Agreements become effective only upon execution and, delivery by both parties.
The Agreements shall be Interpreted and enforced in accordance with the laws of
the State of California.
IN WITNESS WHEREOF, the parties have caused the General Provisions to be
executed on the date set forth below.
Company: MVBC Client:
By: /s/ Audrey A. Munchow By: /s/ Francis A. Zubrowski
----------------------------- -------------------------------
Name: /s/ Audrey A. Munchow Name: /s/ Francis A. Zubrowski
--------------------------- -----------------------------
(Please Print) (Please Print)
Date: 12-30-97 Title: CSM Date: 12-29-97 Title: CEO
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ADDENDUM A
----------
This Addendum dated December 29, 1997 shall be attached to and become a
part of that certain Office Lease and General Services Agreement dated December
29, 1997 by and between Mission Valley Business Center, LLC ("Company") and
Majestic Motor Car Company, Ltd. ("Client").
In consideration of the execution of this lease by client and provided
that Client is not in default hereunder or under any other agreement with
Company, or any parent, subsidiary or affiliate corporation of Company, Company
hereby agrees to rebate $ ____of rent otherwise due hereunder pursuant to the
following schedule provided; however, that the entire amount of rent rebated is
pursuant to this Addendum plus interest thereon at the rate of 12% per annum
shall be repaid to Company should Client breach this lease. At the end of the
schedule listed below, this Addendum shall become null and void.
Month Amount
----- ------
January 1998 $275.00
February 1998 $275.00
March 1998 $275.00
April 1998 $275.00
May 1998 $275.00
June 1998 $275.00
All other terms and conditions of the above reference lease agreement
remain in effect. IN WITNESS WHEREOF, Company and Client have caused these
presents to be duly executed as of the first date written above
Company: Mission Valley Business Center Client:
By: /s/ Audrey A. Munchow By: /s/ Francis A. Zubrowski
----------------------------------- -------------------------------
Date: 12/30/97 Date: Dec. 29, 1997
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LEASE I GSA ADDENDUM
This Addendum to the Office Lease ("Lease") and General Services Agreement
("GSA") attached hereto amends the Lease and GSA by and between Mission Valley
--------------
Business Center LLC, ("Company") and The Majestic Companies ("Client") dated the
- ------------------- ----------------------
31st day of December 1997. The Lease and GSA shall be amended and supplemented
- ---- -------- -
as follows:
The Premises subject to the Lease shall be Office Number(s) 56, 57, 61, 62, 63,
-------------------
64,& 66.
- -------
Client is vacating office # 59 and adding office # 66
The Term of the Lease and GSA is extended June 30, 2000
-------- -
As of June 1, 1999 Lease Rental rate shall be $ 4,525.00
------ - -----------------
As of July 1, 1999 Lease Rental shall be: $ 4,800.00
-----------------
GSA Rental shall be (see GSA schedule below): $ 836.00
-----------------
As of July 1,1999 GSA Rental shall be $ 700.00
-----------------
Total Monthly Fixed Charges: $ 5,361.00
-----------------
The Lease Deposit is increased by: $
The Telephone Use Deposit is increased by: $
TOTAL AMOUNT DUE: $ 5,361.00
------------------
GSA SCHEDULE
TELEPHONE SERVICE 7 Telephone(s) $ 500.00
- ---------
Live Answering
----
Voicemail Messages
CONFERENCE ROOM/ Includes 12 hours
--
PRIVATE OFFICE per month allowance $ Included
---------
FURNITURE RENTAL $ 136.00
---------
EXECUTIVE LOUNGE Use of executive Lounge,
beverage service kitchen
facilities $
---------
OTHER Fax/Modem Lines $ 175.00
---------
Parking $ 25.00
---------
Except as modified above all terms and conditions of the Lease and the GSA will
remain in full force and effect.
Company: Mission Valley Business Center Client: The Majestic Companies, Ltd.
By: /s/ Audrey Munchow By: /s/ Francis A. Zubrowski
----------------------------------- --------------------------------
Title: Center Manager Title: President
-------------------------------- ------------------------------
Date: 6-2-99 Date: 6-2-99
--------------------------------- ------------------------------
(Rev 021596)
REAL PROPERTY LEASE
THIS REAL PROPERTY LEASE ("lease") is entered into effective as of May
1, 1998, by and between BERBERIAN FARMS CORPORATION, a California corporation
("Landlord"), and MAJESTIC MODULAR BUILDINGS, LTD., a Maryland corporation
("Tenant"). Landlord and Tenant recite and agree as follows:
RECITALS
(a) Landlord is the owner of that certain improved real property (the
"Premises") commonly known as 320 9th Street, Modesto, California, and described
more fully in Exhibit "A" attached hereto and incorporated herein by this
reference.
(b) Landlord desires to lease the Premises to Tenant, and Tenant
desires to lease the Premises from Landlord, all on the terms and conditions set
forth below.
(c) Landlord has requested, and would not enter into this lease
without, an unconditional guaranty of Tenant's obligations under this lease from
Steven D. Rosenthal, Linda D. Rosenthal, Cal-American Building Company, Inc.,
and The Majestic Companies, Ltd. in the form attached hereto marked Exhibit "B"
and incorporated herein by this reference.
AGREEMENT
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, Landlord and
Tenant hereby agree as follows:
1. Premises. Landlord hereby leases the Premises to Tenant, and Tenant
hereby leases the Premises from Landlord, for the term of this lease and at the
rental and upon the conditions set forth below.
2. Term.
(a) The initial term of this lease shall commence on May 1,
1998 and shall end on April 30, 2003, unless terminated earlier as provided in
this lease or under applicable law.
(b) Tenant shall have two successive options to extend the
term of this lease (the "First Option" and the "Second Option," respectively);
provided, however, that neither option shall be effective if Tenant (i) has
defaulted under any provision of this lease and has failed to cure such default
within any cure period specified herein, or (ii) is in default under any of the
material terms and provisions of this lease when Tenant exercises the option or
when the term for which the Option is being exercised begins.
<PAGE>
(c) To be effective, the First Option must be exercised on or
before October 31, 2002 by written notice from Tenant to Landlord. If Tenant
timely exercises the First Option, the term of this lease shall be extended for
an additional sixty (60) months (the "First Option Term") until April 30, 2008.
(d) To be effective, the Second Option must be exercised on or
before October 31, 2007 by written notice from Tenant to Landlord. If Tenant
timely exercises the Second Option, the term of this lease shall be extended for
an additional sixty (60) months (the "Second Option Term") until April 30, 2013.
(e) If this lease terminates for any reason, the unexpired
options shall terminate and be of no further force or effect.
(f) The base monthly rental payable during the first twelve
(12) months of the First Option Term shall be the fair market monthly rental of
the Premises as agreed upon by Landlord and Tenant, or as determined by
appraisal as provided in Section 2(h), but no less than the adjusted base
monthly rent for the last month of the original term without regard to any
temporary abatement.
(g) The base monthly rental payable during the first twelve
(12) months of the Second Option Term shall be the fair market monthly rental of
the Premises as agreed upon by Landlord and Tenant, or as determined by
appraisal as provided in Section 2(h), but no less than the adjusted base
monthly rent for the last month of the First Option Term without regard to any
temporary abatement.
(h) If Tenant timely exercises the First Option or the Second
Option, Landlord and Tenant shall attempt, in good faith within thirty (30) days
of the notice of exercise thereof, to agree upon the fair market monthly rental
of the Premises. If Landlord and Tenant have not agreed upon the fair market
monthly rental for the Premises, then Tenant may elect to either (x) terminate
the lease within ten (10) days of the aforesaid 30-day period or (y) have the
fair market monthly rental of the Premises determined by binding appraisal in
accordance with the following provisions:
(1) If, pursuant to the foregoing provisions, the
fair market monthly rental of the Premises is to be determined by appraisal, no
later than one hundred twenty (120) days prior to the commencement of the next
option term, Landlord and Tenant shall each notify the other of their selections
of appraisers to participate in the appraisal process.
(2) The two appraisers shall within forty-five (45)
days of the aforesaid 120-day period jointly determine the fair market monthly
base rental of the Premises. The joint determination of the fair market monthly
base rental for the Premises shall be the monthly rent payable during the first
twelve (12) months of the First Option Term or the Second Option Term (as
appropriate) under Section 3(a), below, subject to the minimum amount set forth
above.
2
<PAGE>
(3) If, within the aforesaid 45-day period, the two
appraisers cannot agree upon the fair market monthly base rental of the
Premises, they shall within ten (10) days thereafter jointly select a third
appraiser who shall, prior to the commencement of the next option term,
determine the fair rental value of the Premises. The fair rental value so
determined shall be the base monthly rent payable during the first twelve (12)
months of the First Option Term or the Second Option Term, as appropriate, under
Section 3(a), below, subject to the minimum amount set forth above. If the
appraisers cannot agree on the selection of a third appraiser, the parties shall
immediately petition the American Arbitration Association to select the third
appraiser. Within fifteen (15) days of being selected, the third appraiser shall
determine the fair rental value of the Premises,
(4) Each appraiser selected under this Section 2(h)
shall be a licensed MAI appraiser who is active in Stanislaus County or an
adjoining county.
(5) Landlord and Tenant shall each pay the fees of
the appraiser they select. If a third appraiser is required, the fees of the
third appraiser shall be paid 50% by Landlord and 50% by Tenant.
(6) In determining the fair rental value of the
Premises, the appraisers shall be instructed to consider the highest and best
use of the Premises in its then-existing structural layout and condition, on the
same terms as this lease except for base rent.
(7) In addition, commencing with the thirteenth month
of the First Option Term, if the First Option was duly exercised, and the
thirteenth month of the Second Option Term, if the Second Option was duly
exercised, the base monthly rent for the following twelve (12) month period
("Adjustment Period") shall be an amount equal to the greater of: (i) one
hundred three percent (103%) of the base monthly rent in effect immediately
prior to the commencement of such Adjustment Period (without regard to any
temporary abatement of rent then or previously in effect pursuant to the
provisions of this lease), or (ii) the product obtained by multiplying the base
monthly rent in effect immediately prior to the commencement of the Adjustment
Period (without regard to any temporary abatement of rent then or previously in
effect pursuant to the provisions of this lease) by a fraction, the numerator of
which is in the Index published nearest but prior to the commencement date of
the Adjustment Period and the denominator of which is the Index published
nearest but prior to the commencement of the twelve (12) month period
immediately preceding the Adjustment Period, provided, however, the adjustment
to the base monthly rent shall be no greater than one hundred six percent (106%)
of the prior base monthly rent that is being adjusted.
The term "Index" means the Consumer Price Index for
Urban Wage Earners and Clerical Workers, San Francisco-Oakland-San Jose, All
Items, 1982-1984 equals 100, published by the Bureau of Labor Statistics of the
United States Department of Labor. If the Bureau of Labor Statistics revises the
Index, the parties agree
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that the Bureau of Labor Statistics will be the sole judge of the comparability
of successive indexes, but if that agency fails to supply indexes that it deems
comparable, or if no succeeding index is published, then the parties shall
negotiate to determine an appropriate alternative published price index. If they
are unable to agree on an alternative index within thirty (30) days after the
request to do so is made by one party to the other, then either party may
request arbitration.
3. Rent and Impositions.
(a) Monthly Installments. On or before the first day of the
term of this lease, and on or before the first day of each calendar month
thereafter, Tenant shall pay to Landlord base rent for the Premises in monthly
installments as follows:
<TABLE>
<CAPTION>
<S> <C>
Months one (1) through six (6): $12,000/month
Months seven (7) through eighteen (18): $12,500/month
Months nineteen (19) through thirty (30): $13,500/month
Months thirty-one (31) through forty-two (42): $14,500/month
Months forty-three (43) through fifty-four (54): $15,000/month
Months fifty-five (55) through sixty (60): $15,500/month
</TABLE>
If Tenant exercises the First Option or the Second
Option, the monthly base rental payable during the First Option Term or the
Second Option Term shall be determined as provided above in Section 2.
(b) Payments of Rental. All rent shall be payable in
installments as set forth above of lawful money of the United States on or
before the due date set forth above, without demand therefor or any deduction or
offset whatsoever, at the offices of Landlord at 3501 Coffee Road, Suite 1,
Modesto, California 95355, or such other place as Landlord may direct by written
notice given to Tenant. All payments of rent or any other sums due under this
lease not received by Landlord within five (5) days after the due date shall be
subject to a late charge of 5% of the amount of the overdue payment.
(c) Definition of Impositions. The term "Impositions" shall
mean all real property taxes and assessments related to the Premises. The term
"Impositions" does not include federal, state or local income or franchise taxes
assessed against Landlord, or any estate, inheritance, succession or transfer
tax of Landlord.
(d) Payment of Impositions. Landlord shall pay or cause to be
paid to the appropriate person, entity or governmental agency, before the same
shall become delinquent, all Impositions which shall become due or payable
during the lease term. As additional rent, Tenant shall pay to Landlord the full
amount of such Impositions prior to the due date for payment without penalty or
interest provided that Landlord shall submit to Tenant notice of the amount of
payment of the Impositions. Where any Imposition is permitted to be paid in
installments, Landlord shall pay such Imposition in installments as and when
such installments become due and Tenant shall pay Landlord accordingly. All
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Impositions or installments of Impositions covering periods of time before or
after the lease term shall be prorated between Landlord and Tenant on a daily
basis. Tenant shall be responsible for paying all personal property taxes and
assessments applicable to periods of time after the commencement of the lease
term.
4. Use of Premises. The Premises shall be used for the manufacturing of
portable buildings and related uses and products, or with the prior written
consent of Landlord, which Landlord shall not unreasonably withhold, any other
industrial use provided such uses are permitted from time to time under
applicable zoning ordinances or other local or state ordinances, regulations,
agreements, or restrictions affecting the use of the Premises.
5. Improvements.
(a) As is Condition, Tenant agrees to accept the Premises in
its "as is" condition at the date of commencement of the lease term. Tenant
shall, at Tenant's sole cost and expense, design, construct, and install all
improvements to the Premises desired by Tenant or necessary for the Premises to
be occupied and used for the purposes contemplated hereby. Said improvements
shall be generally as shown in the conceptual plans delivered to Landlord prior
to signing of this lease. In addition to complying with all other requirements
pertaining to alterations and improvements as hereinafter set forth, detailed
plans and specifications for said initial alterations and improvements shall be
prepared by Tenant and submitted to Landlord for Landlord's review and approval,
which shall not be unreasonably withheld. Landlord's response to any request for
review and approval shall be given within seven (7) business days (excluding
Saturdays, Sundays, and legal holidays) following the date Landlord receives the
items to be reviewed.
(b) Liens. Tenant shall not suffer or permit to be enforced
against the Premises, or any part of or interest in it, any mechanic's,
materialman's, contractor's or subcontractor's lien arising from any work of
improvement, however it may arise.
(c)Improvements. After Tenant commences to do business from
the Premises, Tenant shall not make any alterations, improvements or additions
on or about the Premises involving anticipated costs in excess of Ten Thousand
Dollars ($10,000) without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed. If Tenant assigns this lease, the
assignee shall be required to provide reasonable security to the Landlord for
the payment and performance of any alterations, improvements or additions
consented to by Landlord in excess of Ten Thousand Dollars ($10,000). All
alterations, improvements or additions which may be made on the Premises shall
remain the property of Tenant until expiration of the lease term or sooner
termination of this lease. Upon expiration of the lease term or sooner
termination of this lease, all alterations, improvements or additions on the
Premises shall, without compensation to Tenant, become the property of Landlord;
provided, however, that Tenant shall have the right, at its option, to remove
and retain any such alterations, improvements or additions (as well as any of
Tenant's personal property, equipment and trade fixtures), so long as
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Tenant repairs any damage to the Premises caused by such removal. Landlord may,
at its option exercised by written notice given to Tenant within thirty (30)
days of the termination of this lease, require Tenant to remove any improvements
made by Tenant to the Premises and to restore the Premises to its prior
condition, reasonable wear and tear excepted.
(d) Notice. To enable Landlord to post notices of
nonresponsibility on the Premises, Tenant shall give Landlord at least ten (10)
days prior written notice before commencing any alterations, additions or
improvements to the Premises involving anticipated costs in excess of Ten
Thousand Dollars ($10,000).
6. Maintenance and Repairs. Tenant shall maintain the Premises in good
order and condition, reasonable wear and tear excepted, and shall make all
necessary repairs thereto; provided, however, Landlord shall be responsible for
and shall undertake any repairs required to the foundation and structural or
load-bearing components of the Premises and major replacement of all or part of
the roof, except any repairs required as a result of acts or omissions of Tenant
or its agents or employees. Tenant shall be responsible for normal roof
maintenance and repairs not requiring replacement and for all aspects of all
electrical, plumbing, heating and air conditioning systems whether open or
concealed and even if considered to be "structural" in nature; and all
landscaping of the Premises. Except as provided in this Section 6 Landlord shall
not be required to furnish any services or facilities, or make any repairs,
alterations, additions, replacements or betterments in or to the Premises, and
Tenant hereby waives any and all rights, whether conferred by statute or
otherwise, to make any repairs, replacements, alterations or improvements at the
expense of Landlord. Tenant further waives all rights to make repairs at the
expense of Landlord pursuant to Section 1942 of the Civil Code of the State of
California, and all rights provided for by Section 1941 of said Civil Code, and
further agrees that any repairs to the Premises to make them tenantable shall be
undertaken by Tenant as part of the consideration for the rental of the
Premises. All repairs and replacements made by Tenant hereunder shall be of
equivalent quality, appearance and functionality as originally provided by
Landlord, unless otherwise approved by Landlord in writing.
7. Compliance With Laws, Ordinances, Etc. During the lease term, Tenant
at its sole cost and expense shall promptly comply with all present and future
laws, ordinances, orders, rules, regulations and requirements of all federal,
state and municipal governments, courts, departments, commissions, agencies, and
boards which may be applicable to Tenant's use of the Premises, including,
without limitation, all environmental laws, and regulations and the laws and
regulations governing the Americans with Disabilities Act (ADA), whether
requiring alterations, improvements, or repairs of a structural nature or not.
8.Indemnity.
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(a) Landlord shall not be liable and Tenant shall defend and
indemnify Landlord against all liability and claims of liability from the date
on which possession of the Premises is delivered to Tenant until expiration or
termination of this lease for damage or injury to person or property on or about
the Premises from any cause other then from the gross negligence or intentional
misconduct of Landlord or its agents or employees. Tenant waives all claims
against Landlord for damage or injury to person or property arising or asserted
to have arisen from damages to persons or property on or about the Premises
other than from the gross negligence or intentional misconduct of Landlord or
its agents or employees.
9. Hazardous Materials. For purposes hereof, "Hazardous Materials"
shall mean any and all flammable explosives, radioactive materials,
hydrocarbons, petroleum (and fractions and bi-products thereof), hazardous
waste, toxic substances, lead or similar materials, including but not limited to
those materials and substances defined as "hazardous substances," "hazardous
materials," hazardous waste" or "toxic substances" in the Environmental Laws.
For purposes hereof; "Environmental Laws" shall include the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S. Section
9601 et seq.; the Hazardous Materials Transportation Act, 39 U.S. Section 1801,
et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act, 42 U.S. Section 6901 et seq.; the Federal Clean Water Act, 33
U.S. Section 1251 et seq.; the Clean Air Act, 42 U.S Section 7401 et seq.; the
Porter-Cologne Water Quality Act, California Water Code Section 13020 et seq.;
the California Health and Safety Code, Section 25100 et seq., and California
Proposition 65 (including its statutory implementation), including all
amendments thereto, replacements thereof; and regulations adopted and
publications promulgated pursuant thereto, and all other laws, regulations,
rules or ordinances governing or regulating hazardous substances.
(a) Tenant shall have the right to store, use and dispose of
in, on, or about the Premises, such hazardous material as are customarily used
in businesses similar to Tenant's business, provided that such storage, use and
disposal shall be done in such manner as to have no adverse impact upon
Landlord's property and is done in compliance with all Environmental Laws.
Tenant agrees that it shall not use, dispose, store, generate, or release any
hazardous materials, on, from, or under the Premises in violation of any
Environmental Laws.
(b) Tenant acknowledges that neither Landlord nor any agent,
officer, broker or other representative thereof has made any warranty or
representation to Tenant regard the presence or absence of Hazardous Materials
on, under or about the Premises and that if Hazardous Materials inspection,
monitoring, testing, removal or remediation be required in respect of Premises,
and if such removal or other work shall have been caused by or resulted from
Tenant's use or alteration of the Premises, such shall be performed by Tenant at
its sole cost and expenses, and whether the work be structural or not. In
addition, Tenant shall be responsible for any and all asbestos or lead removal
work related to or necessary for its use, occupancy or enjoyment of the
Premises. Tenant shall not be
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responsible for costs, claims, damages or actions resulting from any form of
contamination or hazardous materials located in or on the Premises that existed
prior to commencement of the lease term.
(c) Tenant shall indemnify, defend, protect and hold harmless
Landlord, its brokers, directors, officers, employees, partners and agents from
and against any and all losses, claims, demands, actions, damages (whether
direct or consequential), penalties, liabilities, costs and expenses, including
all attorneys' fees and legal expenses, arising out of any violation or alleged
violation by Tenant or its employees, agents, contractors, guests or invitees of
any of the laws or regulations referred to in this paragraph, or breach of any
of the provisions of this paragraph. The foregoing indemnification shall survive
the expiration or termination of this lease.
10. Casualty.
(a) If the Premises are damaged by fire, earthquake, act of
God, the elements or other casualty, Landlord shall, subject to the provisions
of this Section 10, promptly repair the damage, if such repairs can, in
Landlord's reasonable opinion, be completed within ninety (90) calendar days and
with available insurance proceeds. If Landlord determines that repairs can be
completed within ninety (90) calendar days out of available insurance proceeds,
this lease shall remain in full force and effect, except that if such damage is
not the result of the gross negligence or willful misconduct of Tenant or
Tenant's agents, employees, contractors, licensees or invitees, the rent shall
be abated to the extent Tenant's use of the Premises is impaired, commencing
with the date of damage and continuing until completion of the repairs required
of Landlord.
(b) If such repairs to the Premises cannot be completed within
ninety (90) calendar days out of available insurance proceeds, Landlord may
elect, upon notice to Tenant given within thirty (30) calendar days after the
date of such fire or other casualty, to repair such damage, in which event this
lease shall continue in full force and affect, but rent shall be abated as
provided in Section 10(a). If Landlord does not so elect to make such repairs,
this lease shall terminate as of the date of such fire or other casualty. If
Landlord does not complete repairs within one hundred eighty (180) calendar days
after the occurrence of the damage, Tenant may elect to terminate this lease in
which case Tenant shall be relieved of all further liability under this lease.
(c) If the Premises are to be repaired under this Section 10,
Landlord shall repair the Premises out of any available insurance proceeds and
Tenant shall be entitled to use, for the repair, restoration and replacement of
any Tenant Improvements or Tenant's furniture, fixtures, and equipment, all
insurance proceeds available for Tenant Improvements and Tenant's furniture,
fixtures and equipment.
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11. Fire, Extended Coverage Insurance and Worker's Compensation
Insurance.
(a) Throughout the lease term, Landlord shall maintain, but
Tenant shall bear the cost and expense of; insuring the Premises and all of the
Tenant's improvements located on or appurtenant to the Premises against loss or
damage by fire and such other risks, including earthquake, as are now or
hereafter included in an extended coverage endorsement in common use for
commercial structures. The amount of the insurance shall not be less than the
full replacement value of the Premises. Earthquake insurance shall not be
acquired if the cost is deemed to be not commercially reasonable by Landlord.
(b) All policies of fire and extended coverage insurance
required by this Section (other than for Tenant's furniture, fixtures and
equipment) shall provide that the proceeds shall be adjusted by and paid to
Landlord.
(c) Tenant shall maintain worker's compensation insurance in
effect throughout the lease term for all employees of Tenant.
12. Public Liability Insurance. Throughout the lease term, Tenant shall
at its sole cost and expense keep or cause to be kept in force for the mutual
benefit of Landlord and Tenant comprehensive broad form general public liability
insurance in an amount not less than $2,000,000 per single occurrence,
$5,000,000 for aggregate occurrences. Landlord shall be named as an additional
insured on such policy.
13. Insurance Policy Form, Content and Insurer.
(a) All insurance required by express provisions of this lease
shall be carried only by responsible insurance companies licensed to do business
in California, and shall contain a provision to the effect that such insurance
may not be terminated without thirty (30) days prior written notice to Landlord.
(b) Upon request, Tenant shall furnish Landlord with copies of
all such policies promptly on receipt of them, or with certificates evidencing
the insurance. Tenant may effect for its own account any insurance not required
under this lease.
14. Failure to Maintain Insurance. If Tenant fails or refuses to
procure or maintain insurance as required hereby or fails or refuses to furnish
Landlord with required proof that the insurance has been procured and is in
force and paid for, Landlord shall have the right, at Landlord9s election and on
ten (10) days' prior written notice to Tenant, to procure and maintain such
insurance. The premiums paid by Landlord shall be treated as additional rent due
from Tenant, with interest at the maximum rate then permitted by law, to be paid
to Landlord within three (3) days after written demand by Landlord shall give
Tenant prompt notice of the payment of premiums, stating the amounts paid and
the names of the insurer or insurers.
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15. Condemnation.
(a) If the whole of the Premises is lawfully taken by
condemnation or in any other manner for any public or quasi-public purpose, this
lease shall terminate as of the date of such taking, and rent shall be prorated
to such date. If less than the whole of the Premises is so taken, this lease
shall be unaffected by such taking, provided that Tenant shall have the right to
terminate this lease by notice to Landlord given within ninety (90) calendar
days after the date of such taking if twenty percent (20%) or more of the
Building floor area or 40% of the total area of the entire Premises is taken,
increased by any adjacent area that is received by Landlord in a governmental
exchange and offered to Tenant to be included within the leased premises; and
the remaining area of the Premises is not reasonably sufficient for Tenant to
continue operation of its business. If either Landlord or Tenant so elects to
terminate this lease, the lease shall terminate on the thirtieth (30th) calendar
day after either such notice. Rent shall be prorated to the date of termination.
If this lease continues in force upon such partial taking, the rent shall be
equitably adjusted according to the remaining area of the Premises. The partial
taking contemplated in Section 30 of the lease, if it occurs, shall not give
Tenant a right to terminate the lease. Should Tenant be forced to temporarily
cease operating its business at the Premises as a result of a governmental
infrastructure process directly affecting the Premises, base rent shall be
abated until such time as Tenant is able to resume the operations of its
business.
(b) In the even of any taking, partial or whole, all of the
proceeds of any award, judgment or settlement payable by the condemning
authority shall be the exclusive property of Landlord and Tenant hereby assigns
to Landlord all of its right, title and interest in any award, judgment or
settlement from the condemning authority. Tenant, however, shall have the right,
to the extent that Landlord's award is not reduced or prejudiced, to claim from
the condemning authority (but not from Landlord) such compensation as may be
recoverable by Tenant in its own right for relocation expenses and damage to
Tenant's Improvements and personal property.
(c) In the event of a partial taking of the Premises which
does not result in a termination of this lease, Landlord shall, to the extent
there are proceeds from the partial taking available, restore the remaining
portion of the Premises as nearly as practicable to its condition prior to the
condemnation or taking, excluding any Tenant improvements. Tenant shall be
responsible at its sole cost and expense for the repair, restoration and
replacement of any other Tenant improvements or personal property.
16. Utilities. Tenant shall pay for all water, gas, heat, light, power,
telephone, sewer, and other utilities and services supplied to the Premises
during the term of this lease, together with any taxes, fees and/or assessments
thereon. Tenant shall pay for such utilities promptly and in no event after the
dates upon which payment is due. All such utilities shall be maintained in
Tenant's name. If Landlord is for any reason required to pay for such utilities,
Tenant shall reimburse Landlord for such utilities within three (3) days after
written demand therefor from Landlord.
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17. Tenant's Default and Remedies.
(a) The occurrence of any one or more of the following events shall
constitute a default and breach of this lease by Tenant:
(1) The vacating or abandonment of the Premises by Tenant.
(2) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this lease to be observed or performed by Tenant,
including Tenant's obligations to pay rent and other sums hereunder as and when
due, which failure shall continue for a period of three (3) days after written
notice thereof from Landlord to Tenant.
(3) The making by Tenant of any general assignment, or general
arrangement for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within ninety (90) days);
the appointment of a trustee or receiver to take possession of substantially all
of Tenant's assets or of Tenant's interest in this lease, where possession is
not restored to Tenant within ninety (90) days; or the attachment, execution or
other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this lease, where such seizure is not
discharged within ninety (90) days.
(b) In the event of any such default or breach by Tenant, Landlord may at
any time thereafter, with or without notice or demand and without limiting
Landlord in the exercise of any other right or remedy which Landlord may have by
reason of such default or breach, terminate this lease and all rights of Tenant
hereunder by giving Tenant written notice of such termination. If this lease is
terminated, Tenant shall peaceably quit and surrender the Premises to Landlord,
and Landlord may, without further notice, enter upon, re-enter, possess and
repossess the same by summary proceedings, ejectment or other legal proceedings,
and again have, repossess and enjoy the same as if this lease had not been made,
and in any such event neither Tenant nor any person claiming through or under
Tenant by virtue of any law or an order of any court shall be entitled to
possession or to remain in possession of the Premises but shall forthwith quit
and surrender the Premises, and Landlord shall be entitled to recover:
(1) The worth at the time of award of the unpaid rent
which had been earned at the time of termination;
(2) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Tenant proves
could have been reasonably avoided;
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(3) The worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Tenant proves could be
reasonably avoided; and
(4) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under the lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to: (i) all Landlord's
costs, charges and expenses, including the fees of counsel, agents and others
retained by Landlord, incurred in enforcing Tenant's obligations hereunder or
incurred by Landlord in any litigation, negotiation or transaction in which
Tenant causes Landlord, without Landlord's fault, to become involved or
concerned; (ii) all Landlord's costs, charges and expenses for repairs,
alterations and additions in or to the Premises and the fees and costs of
brokers and agents incurred in reletting or attempting to relet the Premises.
The "worth at the time of award" of the amounts referred to above shall
be computed by allowing interest at the maximum rate allowed by applicable law
from the date the rent became due and payable or the costs, charges and expenses
were incurred by Landlord. As used herein, unpaid rent includes rent and any
Impositions and other charges payable by Tenant hereunder. The worth at the time
of award of the amount referred to in Section (3) of paragraph 17(b) is computed
by discounting the amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).
(c) Should Landlord, following any default hereunder by
Tenant, elect to keep this lease in full force and effect, with Tenant retaining
the right to possession of the Premises (notwithstanding the fact that Tenant
may have abandoned the Premises), then Landlord, in addition to all other rights
and remedies Landlord may have at law or equity, shall have the right to enforce
all of Landlord's rights and remedies under this lease, including, but not
limited to, the right to recover the installments of rent and Impositions as
they become due under this lease. Notwithstanding any such election to have this
lease remain in full force and effect, Landlord may at any time thereafter elect
to terminate Tenant's right to possession of the Premises and thereby terminate
this lease for any previous breach or default which remains uncured, or for any
subsequent breach or default.
18. Assignment. Tenant shall not assign, sell or otherwise transfer
(collectively "assign" and the act thereof "assignment") its interest in this
lease or in the estate created hereby, in whole or in part, unless:
(a) The proposed assignment is first approved in writing by
Landlord, which approval shall not be unreasonably withheld;
(b) There is no existing default on the part of Tenant in the
performance or observance of any of the provisions hereof;
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(c) The assignment is in writing, is duly executed and
acknowledged by Tenant and the assignee and provides that the assignee assumes
and agrees to carry out and perform all of the provisions hereof on the part of
Tenant to be carried out and performed and Tenant remains fully liable under the
lease after the assignment; and
(d) An executed original of such assignment is delivered to
Landlord.
19. Subletting. Tenant shall have the right at any time and from time
to time during the term of this lease to sublet all or any part or parts of the
Premises and to extend or renew any sublease, provided that Tenant shall remain
primarily obligated to perform Tenant's obligations hereunder and provided that
the following provisions are complied with:
(a) Each sublease shall contain a provision requiring the
subtenant to attorn to Landlord in the event that, by reason of Tenant's
default, this lease is terminated and if the subtenant is notified by Landlord
of such termination and instructed to make subtenant's rental payments to
Landlord.
(b) Tenant shall, promptly after execution of each sublease,
notify Landlord of the name and mailing address of the subtenant and shall, on
demand, permit Landlord to examine and copy the sublease.
(c) Tenant shall have obtained Landlord's prior written
consent to each sublease, which consent shall not be unreasonably withheld or
delayed.
20. Subordination to Fee Mortgage.
(a) This lease shall be subject and subordinate to any ground
lease, mortgage, deed of trust, sale4easeback transaction, or any other
hypothecation for security now or hereafter placed upon the Premises (a "Fee
Security Instrument") and the rights of the holder of or beneficiary under the
Fee Security Instrument (the "Fee Mortgagee") and to any and all advances made
on the security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, that, as a condition of
such subordination, Tenant shall receive an agreement from the Fee Mortgagee,
for itself and for its successors and assigns, that notwithstanding any
foreclosure (private or judicial), deed in lieu of foreclosure, or similar
action taken in connection with the Fee Security Instrument, so long as Tenant
is not in default hereunder and shall pay the rent and perform all its other
obligations under this lease, unless this lease is otherwise terminated pursuant
to the terms hereof,
(1) Tenant's right to quiet possession of the Premises
shall not be disturbed;
(2) The Fee Mortgagee and its successors and assignees
will continue to recognize this lease and the rights of Tenant;
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(3) The Fee Mortgagee and its successors and assigns will
continue to recognize the leasehold estate created under this lease and the
rights of Tenant in connection with that leasehold; and
(4) That insurance proceeds and condemnation awards
relating to the Premises will be allocated, used and disbursed as provided in
this lease.
(b) If any Fee Mortgagee shall elect to have this lease be an
encumbrance upon the Premises prior to the lien of its Fee Security Instrument,
and shall give notice thereof to Tenant, this lease shall be deemed prior
thereto, whether this lease is dated prior or subsequent to the date thereof or
the date of recording thereof
(c) Tenant shall execute any nondisturbance agreement as may
reasonably be requested by any Fee Mortgagee to evidence the subordination
herein set forth or to make this lease prior to the lien of any Fee Security
Instrument (as the case may be).
(d) Upon any default by Landlord in the performance of its
obligations under any Fee Security Instrument, Tenant shall attorn to the Fee
Mortgagee, upon demand, and shall execute and deliver any instrument or
instruments confirming the attornment herein provided for, so long as such
agreements contain appropriate nondisturbance covenants which protect Tenant's
rights hereunder.
21. Sale of Landlord's Interest. Upon sale, transfer or assignment of
Landlord's entire interest in the Premises and assumption by the buyer,
transferee or assignee of all of Landlord's obligations under this lease,
Landlord shall be relieved of its obligations hereunder with respect to
liabilities accruing from and after the date of such sale, transfer or
assignment.
22. Holding Over. If after expiration of the lease term, if not
renewed, or an unrenewed option term, Tenant remains in possession of the
Premises with Landlord's permission (express or implied), Tenant shall become a
tenant from month to month only, upon all the provisions of this lease, but,
except as provided otherwise in Section 2(h) of this lease, the rent payable by
Tenant shall be increased to one hundred fifty percent (150%) of the rent
payable by Tenant at the expiration of the previous term. Such adjusted rent
shall be payable in advance on or before the first day of each month. If either
party desires to terminate such month to month tenancy, it shall give the other
party not less than thirty (30) calendar days advance written notice of the date
of termination.
23. Binding Effect. Subject to the provisions of this lease relating to
assignment and subletting, each and all of the covenants, agreements,
obligations, conditions and provisions of this lease shall inure to the benefit
of and shall bind not only the parties hereto, but each and all of the heirs,
executors, administrators, successors and assigns of the respective parties
hereto.
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24. Estoppel Certificates. Tenant shall, without charge, at any time
and from time to time, within ten (10) days after receipt of written request,
deliver a written instrument to Landlord or to any other person, firm or
corporation specified in said request, duly executed and acknowledged,
certifying:
(a) that this lease is unmodified and in full force and effect, or,
if there has been a modification, that the same is in full force and effect as
modified and stating any such modification;
(b) that Tenant is not in default under the terms of this lease,
or, if in default, the details thereof;
(c) whether or not there are then existing any setoffs or defenses
against the enforcement of any of the agreements, terms, covenants or conditions
of this lease and any modification thereof upon the part of Tenant to be
performed or complied with, and, if so, specifying the same; and
(d) the date to which the rent and other charges hereunder have
been paid.
Any such statement delivered pursuant to this Section may be relied
upon by any prospective buyer of the fee or mortgagor or assignee or any
mortgage upon the fee of the Premises.
25. Notices. Written notices required or permitted under this lease or
by law shall be deemed duly served when personally delivered to the appropriate
party or, in lieu of such personal service, three (3) days after deposited in
the United States mail, certified, postage prepaid, addressed to such party at
the address specified below (or to such other place as may from time to time be
specified in a notice given pursuant to this paragraph as the address for
service of notice on such party):
To Landlord: BERBERIAN FARMS CORP.
3501 Coffee Road, Suite 1
Modesto, CA 95355
Attn: Arnold H. Gazarian
To Tenant: CAL-AMERICAN BUILDING COMPANY, INC.
320 9th Street
Modesto, CA 95350
26. Landlord's Consent. In any circumstance hereunder in which
Landlord's consent, approval or permission is required as a precondition to any
act by Tenant, such consent, permission or approval shall not be unreasonably
delayed or withheld, and if such consent, approval or permission is withheld,
Landlord shall advise Tenant in writing of the reasons therefor.
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27. Arbitration. Any dispute between Landlord and Tenant arising out
of the provisions of this lease (with the exception of disputes involving the
payment or nonpayment of rent, taxes, insurance, or other sums due hereunder,
the violation by Tenant of any term, covenant, or condition of this lease, an
action for unlawful detainer of the Premises, or the determination of fair
monthly rental as provided in section 2(h), above) shall be arbitrated in
Modesto, California, in accordance with the rules then in effect of the American
Arbitration Association. Any arbitration award shall be enforceable in a court
of competent jurisdiction. The arbitrator selected for any such arbitration
shall have no less than five (5) years' experience related to the commercial
real estate business.
28. Invalidity of Particular Provisions. If any term or provision of
the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is invalid or unenforceable shall not be affected thereby, and each term and
provision of this lease shall be valid and be enforced to the fullest extent
permitted by law.
29. Cumulative Remedies. The specified remedies to which Landlord or
Tenant may resort under the terms of this lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which
Landlord or Tenant may be lawfully entitled in case of any breach or threatened
breach by Landlord or Tenant of any provision of this lease. The failure of
Landlord or Tenant to insist in any one or more cases upon the strict
performance of any of the covenants of this lease or to exercise any option
herein contained shall not be construed as a waiver or relinquishment of any
right of Landlord or Tenant as to future performance of the same or other
covenant, condition or provision.
30. Quiet Enjoyment. Subject to the terms and provisions of this lease,
Landlord covenants and agrees that Tenant, upon paying the rent, impositions and
all other charges provided for in this lease and upon observing and keeping all
of the covenants, conditions and provisions of this lease on its part to be
observed and kept, shall lawfully and quietly hold, occupy and enjoy the
Premises during the term of this lease, without hindrance or molestation by or
from anyone claiming by, through or under Landlord. Notwithstanding this or any
other provision of this lease, Tenant acknowledges that it is aware that a
portion of the unimproved Premises may be subject to a government taking for a
right of way or roadway, which could involve a condemnation or agreed sale or
exchange with Landlord, and if such an event arises, it will not create a right
or option in Tenant to terminate the balance of the lease.
31. Time Periods. All references in this lease to periods of time
measured by days shall mean calendar days rather than "business" or "working"
days. Any period of time under this lease for the performance of any obligation
or the exercise of any right which expires on a weekend or legal holiday shall
be extended to the close of the next following "working" or "business" day.
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32. Inspection. Landlord shall have the right to enter the Premises
from time to time, at reasonable intervals, for purposes of inspecting the
Premises. Except in the case of emergencies, all such inspections shall be made
(a) after giving at least 24 hours prior written notice to Tenant, (b) during
normal business hours or at other times reasonably acceptable to Tenant and (c)
in such a manner so as to avoid-any interference with Tenant's conduct of its
business on the Premises.
33. Further Assurances. The parties hereby agree to execute such other
documents and perform such other acts as may be necessary or desirable to carry
out the purposes of this lease.
34. Tenant's Assistance. Tenant hereby expressly agrees that if any
controversy, litigation or court proceeding is prosecuted or defended by
Landlord in connection with the Premises, Tenant will render all reasonable
assistance to Landlord.
35. Fair Meaning. In all cases the language in all parts of this lease
shall be construed simply, according to its fair meaning and not strictly for or
against Landlord or Tenant. This lease shall not be strictly construed against
the party who drafted it.
36. Law Governing. This lease is entered into and is to be performed in
California and shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts executed and intended to be
performed entirely within the State of California by residents of the State of
California.
37. Amendments. This lease cannot be changed orally, but only by an
agreement in writing signed by Landlord and Tenant.
38. Entire Agreement. This lease, together with any writing
modifications or amendments hereto hereafter entered into shall constitute the
entire agreement between the parties relative to the subject matter hereof; and
shall supersede any prior agreement or understanding, if any, whether written or
oral.
39. Counterparts. This lease may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
40. Attorneys' Fees. In the event of any litigation between the parties
hereto with respect to the subject matter hereof; the unsuccessful party to such
litigation agrees to pay to the successful party all costs and expenses,
including reasonable attorneys' fees, incurred therein by the successful party,
all of which shall be included in and as a part of the judgment rendered in such
litigation.
41. Offer. Preparation of this lease by Landlord and submission of
same to Tenant shall not be deemed an offer to lease to Tenant.
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<PAGE>
42. Time is of the Essence. Time is of the essence of each and every
covenant, condition and agreement contained in this lease.
43. Representations. Tenant acknowledges that neither Landlord nor any
agent, servant or representative of Landlord, or any person purporting to act on
Landlord's behalf; has made any representation, warranty, or statement with
respect to permissible uses of the Premises, the amount of taxes which may or
will be assessed against said Premises, the cost of any insurance required to be
secured by Tenant hereunder, the cost or possibility of making any type of
leasehold improvements, or any other matter relating to this lease agreement.
With respect to such matters, Tenant is relying upon Tenant's own independent
investigation and sources of information, and Tenant expressly waives any right
Tenant might otherwise have under the law to rescind this lease or claim damages
by reason of the fact that the premises cannot be used for the intended
purposes, or that said taxes or assessments, costs of insurance, or costs of
making any leasehold improvements may be in excess of any sum deemed reasonable
by Tenant, or in excess of any amount Tenant anticipated paying hereunder.
44. Security Measures. Tenant hereby acknowledges that the rental
payable to Landlord hereunder does not include the cost of guard service or
other security measures and that Landlord shall have no obligation whatsoever to
provide the same.
45. Brokers. Tenant represents and warrants to Landlord that, except
for Velthoen & Associates, Tenant has not had any dealings with any agents,
brokers, finders, or other similar parties in connection with the negotiation of
this lease or the consummation of the transaction contemplated hereby. Tenant
hereby agrees to indemnify, defend and hold Landlord free and harmless from and
against any liability for compensation or charges which may be claimed by any
other agent, broker, finder or other similar party by reason of any dealings
with or actions of Tenant in connection with the negotiation of this lease or
the consummation of this transaction, including any costs, expenses and
attorneys' fees incurred with respect thereto.
46. Recording. Neither this lease nor a memorandum thereof shall be
recorded without the prior written consent of Landlord, which consent shall not
be unreasonably withheld, provided that prior to any such recordation, Tenant
shall deliver to Landlord a proper and fully executed quitclaim deed to the
Premises in recordable form, which Landlord shall hold during the term of the
lease and any proper extensions and may record at the termination of the lease,
whether caused by reason of expiration or for any other reason under the
provisions of this agreement.
47. Landlord's Estate. Tenant shall look only to Landlord's estate in
the Premises for the satisfaction of Tenant's remedies or for the collection of
a judgment (or other judicial process) requiring the payment of money by
Landlord in the event of any default by Landlord hereunder, and no other
property or assets of Landlord or its principals, disclosed or undisclosed,
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to
18
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this lease, the relationship of Landlord and Tenant hereunder, or Tenant's use
or occupancy of the Premises.
48. No Discrimination. Tenant hereby agrees to indemnify, defend and
hold Landlord's harmless from and against any and all claims, costs, liabilities
and expenses (including reasonable attorneys' fees) that Landlord may suffer or
incur as a result of any persons claiming in connection with the use or
operation by Tenant of the Premises, discrimination against or segregation on
account of race, color, creed, religion, sex, marital status, age, handicaps,
national origin or ancestry.
Landlord hereby agrees to indemnify, defend and hold Tenant
harmless from and against any and all claims, costs, liabilities and expenses
(including reasonable attorneys' fees) that Tenant may suffer or incur as a
result of any persons claiming discrimination against or segregation by Landlord
on account of race, color, creed, religion, sex, Marital status, age, handicaps,
national origin or ancestry.
49. Authority. Each of the persons executing this lease on behalf of
Tenant hereby covenant and warrant that Tenant is a duly authorized and existing
entity, that Tenant is qualified to do business in California, that Tenant has
full right and authority to enter into this lease and that all of the persons
signing on behalf of Tenant are authorized to do so. Upon Landlord's request,
Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord
confirming the foregoing covenants and warranties.
50. Security Deposit. Tenant shall deposit with Landlord the sum of
Sixty Thousand Dollars ($60,000.00), as security for the faithful performance by
Tenant of the terms and conditions of a lease of the demised premises
("Deposit"). Landlord shall retain the Deposit as security for the faithful
performance by Tenant of the terms and conditions of this lease. The Deposit is
not rent and shall not be applied by Tenant to any rental due hereunder;
provided, however, that if Tenant has not defaulted under this lease, Landlord
shall apply $12,000.00 of the Deposit to rent to come due in each of the months
13, 25, 37, and 49 of the term of this lease and retain the $12,000.00 balance
for the remainder of the term. The balance of the Deposit will be returned to
Tenant on termination of this lease if Tenant has fully performed Tenant's
obligations hereunder to that date.
If any of the rent herein reserved shall be overdue and unpaid
or any other sum payable by Tenant to Landlord hereunder shall be overdue and
unpaid, or if Tenant breaches any covenant of this lease, then Landlord may, at
Landlord's option, appropriate and apply any portion of the Deposit to the
payment of such overdue rent or other sum or to the damages suffered by Landlord
as a result of Tenant's default hereunder. If Landlord does so apply any portion
of the Deposit for any such purpose, then Tenant shall promptly, upon demand,
redeposit with Landlord a sufficient amount of cash to restore the security to
the amount of the Deposit existing immediately prior to such application by A
Landlord. Tenant's failure so to do, within five (5) days after receipt of such
demand, will constitute a breach of this lease and a default hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this instrument
the day and year first above written.
LANDLORD:
BERBERIAN FARMS CORP.,
a California corporation
By: /s/ Arnold H. Gazarian
---------------------------------
Arnold H. Gazarian, President
TENANT:
MAJESTIC MODULAR BUILDINGS, LTD.,
a Maryland corporation
By: /s/ Alejandro V. Tovar
-----------------------------
Name: Alejandro V. Tovar
------------------
Title: President
------------------
By: /s/ Alejandro V. Tovar
-----------------------------
Name: Alejandro V. Tovar
------------------
Title: Secretary
------------------
20
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SADDLEBACK FINANCIAL CORPORATION LEASE AGREEMENT
TO OUR VALUED CUSTOMER: This Lease has been written in "Plain English". When
a UniCapital Company we use the words you and your in this Lease, we mean you, our customer,
which is the Lessee indicated below. When we use the words we, us and our
in this Lease, we mean the Lessor, Saddleback Financial Corporation,
625 The City Drive, Suite 140, Orange, CA 92868, (717) 938-9500
- ------------------------------------------------------------------------------------------------------------------------------------
CUSTOMER
INFORMATION Lessee Name:
MAJESTIC MODULAR BUILDINGS, LTD.
Billing Street Address/City/State/Zip Lease #
320 - 9TH STREET, MODESTO, CA 95351 13114-0899
Equipment Location (if other from above) Tax ID #
52-2094161
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLIER Supplier Name:
INFORMATION KNUDSON MANUFACTURING, INC ("Supplier")
Business Address/City/County/State/Zip
10401 WEST 120TH AVE. BROOMFIELD, CO 80021
- ------------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT ONE ( 1 ) VARIPAN PANEL MANUFACTURING SYSTEM, MODEL VP-21 MORE THOROUGHLY
DESCRIPTION DESCRIBED ON THE SCHEDULE "A" DESCRIPTION ATTACHED HERETO AND MADE A PART HEREOF,
INCLUDING ALL ATTACHMENTS AND ACCESSORIES.
- ------------------------------------------------------------------------------------------------------------------------------------
TERM AND = Total
LEASE Lease Term No. of Amount of Lease ADVANCE PAYMENT(S)
PAYMENT Months payments payment + Tax Payment First and last $2,938.00
SCHEDULE ------------ ---------- ----------- ---------- ------------- ----------- Upfront documentation
Followed and recording fee(s): $150.00
36 36 1,469.00 + = 1,469.00 by TOTAL INITIAL PAYMENT $3,088.00
- ------------------------------------------------------------------------------------------------------------------------------------
END OF LEASE (Check one applicable box. If no box is checked, the Fair Market Value Purchase Option PLUS
PURCHASE will apply.) APPLICABLE
OPTION TAXES
[ ] Fair Market Value Purchase Option [ ]See attached Option Rider
[X] Fixed Price Purchase Option of $1.00
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE You are required to provide and maintain insurance related to the Equipment, and to pay any property,
AND TAXES use and other taxes related to this Lease or the Equipment. (See Sections and 6 on the back of this Lease.)
If you are tax-exempt, you agree to furnish us with satisfactory evidence of your exemption.
- ------------------------------------------------------------------------------------------------------------------------------------
TERMS AND BY SIGNING THIS LEASE:(I)YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND THE TERMS AND CONDITIONS ON
FRONT AND BACK OF THIS LEASE, (II) YOU AGREE THAT THIS LEASE IS A NET LEASE THAT YOU CANNOT TERMINATE OR
CANCEL, YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS DUE UNDER THIS LEASE, AND YOU CANNOT
WITHHOLD, SET OFF OR REDUCE SUCH PAYMENTS FOR ANY REASON, (III) YOU WILL USE THE EQUIPMENT ONLY FOR
BUSINESS PURPOSES, (IV) YOU WARRANT THAT THE PERSON SIGNING THIS LEASE FOR YOU HAS THE AUTHORITY TO DO SO
AND TO GRANT THE POWER OF ATTORNEY SET FORTH IN SECTION 7 OF THIS LEASE, (V) YOU CONFIRM THAT YOU
DECIDED TO ENTER INTO THIS LEASE RATHER THAN PURCHASE THE EQUIPMENT FOR THE TOTAL CASH PRICE, AND (VI) YOU
AGREE THAT THIS LEASE WILL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA AND YOU CONSENT TO THE
JURISDICTION OF ANY COURT LOCATED WITHIN CALIFORNIA. YOU AND WE EXPRESSLY WAIVE ANY RIGHTS TO A TRIAL BY
JURY.
SADDLEBACK FINANCIAL CORPORATION MAJESTIC MODULAR BUILDINGS, LTD.
LESSOR LESSEE
X /s/ Warren E. Enard X /s/ Lawrence Holland
- ------------------------------------------------------------------ -----------------------------------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
Warren E. Enard, President 8/17/99 LAWRENCE HOLLAND, PRESIDENT
- ------------------------------------------------- ---------------- ----------------------------------------------- -----------
PRINT NAME & TITLE DATE PRINT NAME & TITLE DATE
</TABLE>
<PAGE>
1. LEASE; DELIVERY AND ACCEPTANCE. You agree to lease the equipment described on
the front of the lease agreement (collectively "Equipment") on the terms and
conditions shown on the front and back of this lease ("Lease"). If you have
entered into any purchase or supply contract (collectively "Supply Contract")
with any Supplier, you assign to us your rights under such Supply Contract, but
none of your obligations (other than the obligation to pay for the Equipment if
it is accepted by you as stated below and you timely deliver to us such
documents and assurances as we request). If you have not entered into a Supply
Contract, you authorize us to enter into a Supply Contract on your behalf. You
will arrange for the delivery of the Equipment to you. When you receive the
Equipment you agree to inspect it to determine if it is good working order. This
Lease will begin on the date when the Equipment is delivered to you and the
Equipment will be deemed irrevocably accepted by you upon the earlier of: a) the
delivery to us of a signed Delivery and Acceptance Certificate (if requested by
us); or b) 10 days after delivery of the Equipment to you if previously you have
not given written notice to us of your non-acceptance. The first Lease Payment
is due on or before the date the Equipment is delivered to you. The remaining
Lease Payments will be due on the day of each subsequent month (or such other
time period specified on the front of this Lease) designated by us. You will
make all payments required under the Lease to us at such address we may specify
in writing. You authorize us to adjust the Lease Payment by not more than 15% if
the actual Total Cash Price (which is all amounts we have paid in connection
with the purchase, delivery and installation of the Equipment, including any
trade-up and buyout amounts) differs from the estimated Total Cash Price of the
Equipment. If any Lease Payment or other amount payable to us under this Lease
is not paid within 10 days of its due date, you will pay us a late charge not to
exceed 7% of each late payment (or such lesser rate as is the maximum rate
allowable under applicable law).
2. NO WARRANTIES. WE ARE LEASING THE EQUIPMENT TO YOU "AS-IS". YOU ACKNOWLEDGE
THAT WE DO NOT MANUFACTURE THE EQUIPMENT, WE DO NOT REPRESENT THE MANUFACTURER
OR THE SUPPLIER, AND YOU HAVE SELECTED THE EQUIPMENT AND SUPPLIER BASED UPON
YOUR OWN JUDGEMENT. WE MAKE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE.
YOU AGREE THAT REGARDLESS OF CAUSE, WE ARE NOT RESPONSIBLE FOR AND YOU WILL NOT
MAKE ANY CLAIM AGAINST US FOR ANY DAMAGES, WHETHER CONSEQUENTIAL, DIRECT ,
SPECIAL, OR INDIRECT. YOU AGREE THAT NEITHER SUPPLIER NOR SALESPERSON, EMPLOYEE
OR AGENT OF THE SUPPLIER IS OUR AGENT OR HAS ANY AUTHORITY TO SPEAK FOR US OR
BIND US IN ANY WAY. WE TRANSFER TO YOU FOR THE TERM OF EACH SCHEDULE ANY
WARRANTIES MADE BY THE MANUFACTURER OR SUPPLIER WITH RESECT TO THE EQUIPMENT
LEASED.
3. EQUIPMENT LOCATION; USE AND REPAIR; RETURN. You will keep and use the
Equipment only at the Equipment Location shown on the front of this Lease. You
may not move the Equipment without our prior written consent. At your own cost
and expense, you will keep the Equipment eligible for any manufacturer's
certification, in compliance with all applicable laws and in good condition,
except for ordinary wear and tear. You will not make any alterations, additions
or replacements to the Equipment without our prior written consent. All
alterations, additions or replacements will become part of the Equipment and our
property at no cost or expense to us. We may inspect the Equipment at any
reasonable time. Unless you purchase the Equipment in accordance with this
Lease, at the end of this Lease you will immediately deliver the Equipment to us
in as good condition as when you received it, except for ordinary wear and tear,
to any place in the United States that we tell you. You will pay all expenses of
deinstalling, crating and shipping, and you will insure the Equipment for its
full replacement value during shipping.
4. TAXES AND FEES. You will pay when due, either directly or to us upon demand,
all taxes, fines and penalties relating to this Lease or the Equipment that are
now or in the future assessed or levied by any state, local or other government
authority. We will file all personal property, use or other tax returns (unless
we notify you otherwise in writing) and you agree to pay us a fee for making
such filings. We do not have to contest any taxes, fines or penalties. You will
pay estimated property taxes with each Lease Payment or annually, as invoiced.
5. LOSS OR DAMAGE. As between you and us, you are responsible for any loss,
theft or destruction of, or damage to, the Equipment (collectively "Loss") from
any cause at all, whether or not insured, until it is delivered to us at the end
of this Lease and comply with all other Lease obligation even if there is a
loss. You are required to make all Lease Payments even if there is a Loss. You
must notify us in writing immediately of any Loss. Then, at our option, you will
either (a) repair the Equipment so that it is in good condition and working
order, eligible to any manufacturer's certification, or (b) pay us the amount
specified in section 9(b) below.
6. INSURANCE. You will provide and maintain at your expense (a) property
insurance against the loss, theft or destruction of, or damage to, the Equipment
for its full replacement value, naming us as loss payee, and (b) public
liability and third party property insurance, naming us as an additional
insured. You will give us certificates or other evidence of such insurance when
requested. Such insurance will be in a form, amount and with companies
acceptable to us, and will provide that we will be given 30 days advance notice
of any cancellation or material change of such insurance. If you do not give us
evidence of insurance acceptable to us, we have the right, but not the
obligation, to obtain insurance covering our interest in the Equipment for the
term of this Lease, including any renewal or extensions, from an insurer of our
choice, including an insurer that is our affiliate. We may add the costs of
acquiring and maintaining such insurance and our fees for our services in
placing and maintaining such insurance (collectively "Insurance Charge") to the
amounts due from you under this Lease. You will pay the Insurance Charge in
equal installments allocated to the remaining Lease Payments. If we purchase
insurance, you will cooperate with our insurance agent with respect to the
placement of insurance and the processing of claims. Nothing in this Lease will
create an insurance relationship of any type between us and any other person.
You acknowledge that we are not required to secure or maintain any insurance,
and we will not be liable to you if we terminate any insurance coverage that we
arrange. If we replace or renew any insurance coverage, we are not obligated to
provide replacement or renewal coverage under the same terms, costs, limits, or
conditions as the previous coverage.
7. TITLE; RECORDING. We are the owner of and will hold title to the Equipment.
You will keep the Equipment free of all liens and encumbrances. Unless the
Purchase Option price shown on the front of this Lease is $1.00, you agree that
this transaction is a true lease. However, if the transaction is deemed to be a
lease intended for security, you grant us a purchase money security interest in
the Equipment (including any replacements, substitutions, additions, attachments
and proceeds). You will deliver to us signed financing statements or other
documents we request to protect our interest in the Equipment. YOU AUTHORIZE US
TO FILE A COPY OF THIS LEASE AS A FINANCING STATEMENT AND APPOINT US OR OUR
DESIGNEE AS YOUR ATTORNEY-IN-FACT TO EXECUTE AND FILE, ON YOUR BEHALF, FINANCING
STATEMENTS COVERING THE EQUIPMENT.
8. DEFAULT. Each of the following is a "default" under this Lease (a) you fail
to pay any Lease Payment or any other payment within 10 days of its due date,
(b) you do not perform any of your obligations under this Lease or in any other
agreement with us or with any of our affiliates and this failure continues for
10 days after we have notified you of it, (c) you become insolvent, you dissolve
or are dissolved, or you assign your assets for the benefit of your creditors,
or enter (voluntarily or involuntarily) any bankruptcy or reorganization
proceeding, (d) any guarantor of this Lease dies, does not perform its
obligations under the guaranty, or becomes subject to one of the events listed
in clause (c) above, (e) you fail to keep the Equipment insured as required by
Section 6 hereof or (f) you attempt to transfer or encumber the Equipment.
9. REMEDIES. If a Default occurs, we may do one or more of the following (a) we
may cancel or terminate this Lease or any or all other agreements that we have
entered into with you, (b) we may require you to immediately pay us, as
compensations for loss of our bargain and not as a penalty, a sum equal to (i)
the present value of all unpaid Lease Payments for the remainder of the term
plus the present value of our anticipated residual interest in the Equipment,
each discounted at 5% per year, compounded monthly, plus (ii) all other amounts
due or that become due under this Lease, (c) we may require you to deliver the
Equipment to us as set forth in Section 3; (d) we or our agent may peacefully
repossess the Equipment without court order and you will not make any claims
against us for damages or trespass or any other reason, and (e) we may exercise
any other right or remedy available at law or in equity. YOU AGREE TO PAY ALL OF
OUR COSTS OF ENFORCING OUR RIGHTS AGAINST YOU, INCLUDING REASONABLE ATTORNEYS'
FEES. If we take possession of the Equipment, we may sell or otherwise dispose
of it with or without notice, at a public or private sale, and apply the net
proceeds (after we have deducted all costs related to the sale or disposition of
the Equipment) to the amounts that you owe us. You agree that if notice of sale
is required by law to be given, 10 days' notice shall constitute reasonable
notice. You will remain responsible for any amounts that are due after we have
applied such net proceeds.
10. ASSIGNMENT. YOU MAY NOT ASSIGN, SELL, TRANSFER OR SUBLEASE THE EQUIPMENT OR
YOUR INTEREST IN THIS LEASE. We may, without notifying you, sell, assign, or
transfer this Lease or our rights in the Equipment. YOU AGREE THAT THE NEW OWNER
WILL HAVE THE SAME RIGHTS AND BENEFITS THAT WE HAVE NOW UNDER THIS LEASE BUT NOT
OUR OBLIGATIONS. THE RIGHTS OF THE NEW OWNER WILL NOT BE SUBJECT TO ANY CLAIM,
DEFENSE OR SET-OFF THAT YOU MAY HAVE AGAINST US. Following any assignment you
will make all payments due under this Lease as directed by the new owner.
11. PURCHASE OPTION; AUTOMATIC RENEWAL. If no Default exists under this Lease,
you will have the option at the end of the original or any renewal term to
purchase all (but not less than all) of the Equipment at the Purchase Option
price shown on the front of this Lease, plus any applicable taxes. If the Fair
Market Value Purchase Option has been selected, you must give us at least 30
days written notice before the end of the original term that you will purchase
the Equipment or that you will deliver the Equipment to us to an address
specified by us. If you do not give us such written notice or if you do not
purchase or deliver the Equipment in accordance with the terms and conditions of
Lease, this Lease will automatically renew for an additional 12 month term and
thereafter renew for successive one month terms until you deliver the Equipment
to us. During such renewal(s) the Lease Payment will remain the same. We may
cancel an automatic renewal term by sending you written notice 10 days prior to
such renewal term. If the Fair Market Value Purchase Option has been selected,
we will use our reasonable judgement to determine the Equipment's fair market
value. If you do not agree with our determination of the Equipment's fair market
value, the fair market value (on a retail basis) will be determined at your
expense by an independent appraiser selected by us. Upon payment of the Purchase
Option price, we shall transfer our interest in the Equipment to you "AS IS,
WHERE IS" without any representation or warranty whatsoever and this Lease will
terminate.
12. INDEMNIFICATION. You are responsible for any losses, damages, penalties,
claims, suits and actions (collectively "Claims"), whether based on a theory of
strict liability or otherwise caused by or related to (a) the manufacture,
installation, ownership, use, lease, possession, or delivery of the Equipment or
(b) any defects in the Equipment. You agree to reimburse us for and if we
request, to defend us against, any Claims.
13. CREDIT INFORMATION. YOU AUTHORIZE US OR ANY OF OUR AFFILIATES OR OUR ASSIGNS
TO OBTAIN CREDIT BUREAU REPORTS, AND MAKE OTHER CREDIT INQUIRIES THAT WE
DETERMINE ARE NECESSARY. ON YOUR WRITTEN REQUEST, WE WILL INFORM YOU WHETHER WE
HAVE REQUESTED A CONSUMER CREDIT REPORT AND THE NAME AND ADDRESS OF ANY CONSUMER
CREDIT REPORTING AGENCY THAT FURNISHED A REPORT. YOU ACKNOWLEDGE THAT WITHOUT
FURTHER NOTICE WE MAY USE OR REQUEST ADDITIONAL CREDIT BUREAU REPORTS TO UPDATE
OUR INFORMATION SO LONG AS YOUR OBLIGATIONS TO US ARE OUTSTANDING.
14. MISCELLANEOUS. You agree that the terms and conditions contained in this
Lease make up the entire agreement between you and us regarding the lease of the
Equipment. To the extent permitted by applicable law, you hereby waive any and
all rights and remedies conferred upon a lessee by Sections 2A508 through 2A-522
of the Uniformed Commercial Code. This Lease is not binding on us until we sign
it. Any change in any of the terms and conditions of this Lease must be in
writing and signed by us. YOU AGREE, HOWEVER, THAT WE ARE AUTHORIZED, WITHOUT
NOTICE TO YOU, TO SUPPLY MISSING INFORMATION OR CORRECT OBVIOUS ERRORS IN THIS
LEASE. If we delay or fail to enforce any of our rights under this Lease, we
will still be entitled to enforce those rights at a later time. All notices
shall be given in writing by the party sending the notice and shall be effective
when deposited in the U.S. Mail, addressed to the party receiving the notice at
its address shown on the front of this Lease (or to any other address specified
by that party in writing) with postage prepaid. All representations, warranties,
indemnities and covenants made by you under this Lease will survive the
termination of this Lease. It is the express intent of the parties not to
violate any applicable usury laws or to exceed the maximum amount of time price
differential or interest, as applicable, permitted to be charged or collected by
applicable law, and any such excess payment will be applied to Lease Payments in
inverse order of maturity, and any remaining excess will be refunded to you. If
you do not perform any of your obligations under this Lease, we have the right,
but not the obligation, to take any action or pay any amounts that we believe
are necessary to protect our interests. You agree to reimburse us immediately
upon our demand for any such amounts that we pay. If more than one Lessee has
signed this Lease, each of you agree that your liability is joint and several.
15. ACCORD AND SATISFACTION. No endorsement or statement on any check or any
letter accompanying any check or payment of Lease Payment be deemed and accord
and satisfaction, and we may accept such check or payment without prejudice to
our right to recover the balance of such Lease Payment or pursue other remedy.
LEASE AGREEMENT
---------------
THIS AGREEMENT, entered into the 31ST day of August by and between A-Z
Bus Sales, Inc., a California Corporation, hereinafter referred to as "A-Z Bus
Sales, Inc." and The Majestic Companies, Ltd. hereinafter referred as " Lessee".
WITNESSETH
----------
WHEREAS, A-Z Bus Sales, Inc. is the owner of certain bus described as
follows:
Year/Make: Serial No: Stock No.:
---------- ------------ ----------
1996 IHC AM TRANS AST902136 99U209S
hereinafter referred to (plurally or Singular) as ("buses or bus") and
WHEREAS, Lessee desires to lease the (buses or bus) for a term as hereinafter
specified.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
promises herein contained, the parties mutually agree as follows:
Article 1 - Term. A-Z Bus Sales, Inc. hereby leases the (Buses or bus) to Lessee
and Lessee hereby leases from A-Z Bus Sales, Inc., for a 24 month period from
the date the bus is delivered and accepted on or about SEPTEMBER 15, 1999. Each
rental payment in the amount of $1,276.54, is due on the 15th. THE SCHEDULE OF
PAYMENT IS SET FORTH IN THE SCHEDULE ATTACHED AND INCORPORATED IN THIS LEASE BY
THIS REFERENCE. Sales tax, if applicable, shall be in addition to monthly rental
payments. Security deposit in the amount of $20,000.00, is payable upon
execution of this agreement and will be applied as non-refundable rent due under
the agreement. Licensing and title fees paid by A-Z Bus Sales, Inc. shall be
reimbursed by Lessee when invoiced.
Article 2 - General Lease Provisions
- ------------------------------------
.
A. The provisions of the Article 2 create a lease of the bus only and
not a sale thereof or the creation of any other interest therein by
Lessee. A-Z Bus Sales, Inc., shall remain the sole owner of the
(buses or bus), and nothing contained in this Agreement or in the
payment of rent hereunder shall enable Lessee to acquire any right,
title or interest in or to the (buses or bus).
B. The (buses or bus) leased herein shall be at all times under the sole
and absolute control of Lessee, subject to the rights of A-Z Bus
Sales, Inc., as provided herein.
C. The interest in the bus leased hereunder of A-Z Bus Sales, Inc., and
any Lessor or Lessee hereunder are subject to a first security
interest in favor of N/A.
<PAGE>
D. Lessee shall mark the interior of each bus in clear, legible type
with the inscription "Property of A-Z Bus Sales, Inc., Colton,
California" and shall maintain such inscription herein throughout the
term of this Agreement.
E. Lessee shall, at its own expense, keep and maintain the (buses or
bus) in good operating condition and working order, including, but
not limited to, all fuel and oil changes and all washing, polishing
and storing, including, all proper oil, battery, cooling and
anti-freeze levels and ratios, and all repairs occasioned by accident
or casualty; and further, Lessee shall perform, subject to the
assignments in Paragraph G hereof, all preventive maintenance
required to insure full validation of the manufacturer's warrants
F. A-Z Bus Sales, Inc., is hereby given the right and privilege, upon
reasonable prior notice to Lessee and during its regular business
hours, to inspect the (buses or bus) on the premises of Lessee, or
wherever located, to verify that Lessee is maintaining the bus in
good operating condition; in the event that A-Z Bus Sales, Inc.
determines that Lessee is not maintaining the bus in good operating
condition, Lessee shall then have 3 days to cure same, failing which
Lessee shall be deemed in default hereunder.
G. A-Z Bus Sales, Inc. makes no warranty, representation, or guaranty,
express or implied, written or oral, of mechanical condition or
fitness of purpose whatsoever; except that if a manufacturer's does
cover the bus, A-Z Bus Sales, Inc. shall assign to Lessee that
warranty during lease term.
LESSEE AGREES to indemnify and hold Lessor harmless from any liability from
any personal injuries, property damage, or any other damages or injuries
which result from the use or operation of said vehicles. Lessee and A-Z Bus
Sales, Inc. agree there is categorically no employment relationship between
Lessee and A-Z Bus Sales. Lessee shall assume any and all loss or damages
to said vehicles while within the Lessee's control and possession.
H. Lessee shall employ and have absolute control and supervision over
the operators of the (buses or bus); provided, however, that it will
not permit any person to operate the (buses or bus) unless such
person is a competent and careful duly licensed driver.
I. This lease shall not be assignable nor sublet in any form by Lessee
unless to one of its related companies.
J. Lessee shall pay all use taxes, personal property taxes and other
direct taxes imposed on the ownership, possession, use or operation
of the(buses or bus) or levied against or based upon the amount of
rent to be paid hereunder or assessed in connection with the
execution, filing or recording of this Agreement. The term "direct
taxes" as used herein shall include all taxes (except income taxes),
charges and fees imposed by any federal, state or local authority.
Further, Lessee assumes all responsibility and the cost expense of
all licensing, registration, permits and such other certificates as
may be
-2-
<PAGE>
required for the lawful operation of the bus. If Lessee fails to make
the payments herein, Lessee shall be deemed to be in default
hereunder.
K. Lessee shall insure the bus and keep said insurance in full force and
effect with insurance companies satisfactory to A-Z Bus Sales, Inc.,
as follows: For comprehensive fire, theft, and collision in the
amount of $42,292.00 with $1,000.00 deductible, personal liability
insurance in the amount of $5,000,000.00 and property damage
insurance in the amount of $500,000.00 with no deductible; such
insurance shall be written in the name of Lessee and A-Z Bus Sales,
Inc., 1900 S. Riverside Ave., P.O. Box 700, Colton, California 92324
shall be named as additional insured, and also, indorsed "Insurance
as to interest of A-Z Bus Sales, Inc. shall not be invalidated by any
act of the insures". In the event that Lessee fails to procure or
maintain the insurance required herein, A-Z Bus Sales, Inc. shall
have the option to secure such insurance for the account if Lessee,
and if A-Z Bus Sales, Inc. pays the premiums, Lessee shall reimburse
A-Z Bus Sales, Inc. within seven (7) days after receipt of an invoice
thereof, and the failure of Lessee to make such reimbursement when
due, shall be deemed a default hereunder. A thirty (30) day
cancellation notice is required by A-Z Bus Sales, Inc. In the event
Lessee fails to procure or maintain insurance as required herein,
Lessee shall defend, indemnify, and hold A-Z Bus Sales, Inc. harmless
of all claims, including risks against which it would otherwise have
been required to insure hereunder, including but not limited to,
property damage, theft and personal injury.
Ten days prior to the expiration date of Certificate of Insurance,
entire lease becomes null and void and the bus shall be returned to
A-Z Bus Sales, Inc. This is to insure that vehicles will not be
operated without proper insurance. No advance notice of this
agreement is necessary and A-Z Bus Sales, Inc. has full authority to
reclaim the vehicles.
L. If: (1) Lessee shall default in the payment of any rent or additional
rent as provided herein, or the making or any other payment hereunder
when due; or (b) Lessee shall default in the performance of any other
covenant herein, and any of the foregoing defaults shall continue for
seven (7) days after notice, thereto to Lessee by A-Z Bus Sales,
Inc.; or (c) Lessee becomes insolvent or makes an assignment for the
benefit of creditors; or (d) Lessee applies for or consents to the
appointment of a received, trustee, or liquidator of Lessee, or of
all of a substantial part of the assets of Lessee, or if such
receiver, trustee , or liquidator is appointed without the
application or consent of Lessee; or (3) a petition, if filed by or
against Lessee under the Bankruptcy Act of any amendment thereto
(including, without limitation, a petition for reorganization,
arrangement, or extension) or under any other insolvency law or law
providing for the relief of debtors, then if and to the extent
permitted by applicable law, A-Z Bus Sales, Inc. shall have the right
to exercise either of the following remedies: (1) to declare any
unpaid rents due and payable whereupon the same shall become
immediately due and payable; (2) without demand or legal process to
enter upon the premises where the
-3-
<PAGE>
(buses or bus) may be found and take possession of and remove the
(buses or bus), whereupon all rights of Lessee in the vehicle shall
terminate absolutely. Lessee shall hold A-Z Bus Sales, Inc. harmless
and waive any claim or any damages incurred in connection with
removing the (buses or bus). Lessee shall remain liable for all
reasonable expenses incurred in the enforcement of these provisions
and all prepaid rents and security deposits shall be forfeited by
Lessee. The remedies of A-Z Bus Sales, Inc. hereunder are cumulative
and may, to the extent permitted by law, be exercised concurrently or
separately and the exercise of one remedy shall not be deemed to be
an election of such remedy or to preclude the exercise of the other
remedy. No failure on the part of A-Z Bus Sales, Inc. to exercise,
and no delay in exercising any right or remedy herein, shall operate
as a waiver thereof, of any other right or remedy hereunder preclude
any other of further exercise thereof, or the exercise of any other
right or remedy.
Failure to pay A-Z Bus Sales on a current basis under the terms and
conditions as agreed herein will nullify and void the entire
agreement immediately. By such action, customer's further use of
(buses or bus) is unauthorized and same (buses or bus) are to be
returned to A-Z Bus Sales, Inc. within twenty-four (24) hours of same
cancellation of agreement. Local authorities will be notified of any
unauthorized use.
Should Lessee fail to timely make lease payments within five days
following the payment due date, A-Z Bus Sales, Inc. may, at its
option, for charge Lessee a penalty equal to ten percent (10%) of the
overdue payment or payments.
Article 3 - Options at Expiration of Term. Provided Lessee is not in
default of any obligation hereunder, then Lessee, at the expiration of this
Agreement, shall have an option to lease purchase from A-Z Bus Sales, Inc. any
or all of the referenced buses for $1.00. Lessee shall exercise the option
herein granted by giving written notice of this exercise to A-Z Bus Sales, Inc.
at least thirty (30) days prior to the expiration of the Lease period. In the
event that Lessee does not make any election as to an option, then Lessee shall
be deemed to have elected to return the (buses or bus) to A-Z Bus Sales, Inc.
and to terminate this Agreement, pursuant to the terms of Article 4.
Article 4 - Termination. In the event that Lessee elects not to lease the (buses
or bus) at the expiration of the term, then Lessee shall, at its own expense,
return the (buses or bus) to A-Z Bus Sales, Inc. in Colton, CA in the same
condition as received, and in good operating order, repair, and condition,
reasonable wear and normal depreciation excepted. If the Lessee fails to perform
on any of the terms or revisions, A-Z Bus Sales, Inc. has the right to terminate
this Lease and consider all deposits forfeited.
Article 5 - Security Interest. Lessee hereby grants A-Z Bus Sales, Inc. a
security interest in the(buses or bus) described herein to the extent of A-Z Bus
Sales' interest hereunder, whether as a Lessor or a Vendor, and for this purpose
this Lease Agreement shall, in addition to all other rights and obligations
herein created, be deemed a Security Agreement.
-4-
<PAGE>
Article 6 - Succession and Notice
- ---------------------------------
A. This Agreement shall inure to the benefit of, and be binding upon,
the parties hereto, their assigns, successors, transferees and their
heirs, executors, administrators and legal representatives.
B. This Agreement constitutes the entire agreement between the parties,
and cannot be amended or altered in any manner except in writing,
signed by both parties.
C. This Agreement shall be construed under laws of the State of
California, and if any provisions hereof, or the application of any
provision to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement shall be valid and
binding between the parties hereto.
D. Any Notice, payments or correspondence required to be given under
this Agreement or by any applicable provision of any state or federal
law, regulation or resolution shall be given to A-Z Bus Sales, Inc.,
1900 S. Riverside Ave., P.O. Box 700, Colton, California, 92324; and
to Lessee, The Majestic Companies, Ltd., 8880 Rio San Diego Dr., 8th
Floor, San Diego, California 92108.
Article 7 - Standard Arbitration Clause. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, the names of A-Z Bus Sales, Inc. and Lessee have
been hereunto subscribed by the respective officers thereunto duly
authorized.
A-Z Bus Sales, Inc. The Majestic Companies, Ltd.
-------------------- ----------------------------
By: /s/ Dan Burns By: /s/ Francis A. Zubrowski
----------------- ----------------------------
Date: 8-31-99 Date: 8-31-99
------------- -------------
-5-
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made as of the 1st day
of November, 1998, by and between THE MAJESTIC COMPANIES, LTD., a Delaware
corporation (the "Company"), and FRANCIS A. ZUBROWSKI (the "Employee").
RECITALS
A. The Employee was employed prior to the date hereof as the President
and Chief Executive Officer of The Majestic Companies, Ltd., a Delaware
corporation ("Majestic") under an Executive Employment Agreement dated June 1,
1997 (the "Prior Agreement") by and between Majestic and the Executive.
B. On or about the date of this Agreement, Majestic was merged into the
Company pursuant to the terms, conditions and agreements of an Agreement and
Plan of Merger, dated October 8, 1998 (the "Merger Agreement"), which Merger
Agreement calls for the entry by the Company and the Employee into an employment
arrangement whereby the Employee will be the President and Chief Executive
Officer of the Company.
C. The Company therefore wishes to obtain the services of the Employee
as the Chief Executive Officer and President of the Company and the Employee
desires to render such services to the Company, all upon the terms and
conditions set forth in this Agreement, and
D. In order to formalize this relationship the Employee, the Company
and the Employee wish to execute and enter into this Agreement.
NOW THEREFORE, in consideration of mutual covenants herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Employment of Employee.
The Company hereby employs the Employee in the capacity hereafter set forth
and the Employee hereby accepts such employment with the Company, all upon the
terms and conditions set forth in this Agreement.
2. Term.
Unless sooner terminated or extended as provided for in this Agreement, the
term of employment of the Employee by the Company under this Agreement shall be
for an initial term of five (5) years. For purposes of this Agreement, an
Employment Year begins on November 1 in each year and ends on October 31 in each
year.
3. Employment Services.
1
<PAGE>
3.1. The Employee shall serve as the Chief Executive Officer and President of
the Company, supervising such functions as are assigned by the Board of
Directors of the Company to the Employee. The Employee shall have such specific
duties and powers and shall assume such duties and responsibilities as may be
customarily incident to his employment.
3.2. During the term of this Agreement, the Employee shall serve the Company
faithfully and to the best of the Employee's ability, and shall devote his full
time, attention, skill and efforts to the performance of the duties required by
or appropriate to the employment of the Employee. The Employee shall not, during
the term of employment hereunder, engage in any business activity other than
those required by or incident to employment under this Agreement without the
prior written consent of the Company. Notwithstanding the foregoing prohibition
against other business activities set forth above, the Employee shall be
permitted to engage in and manage personal investments and to participate in
community and charitable affairs, so long as such activities do not interfere
with the duties of the Employee under this Agreement. The Employee shall
immediately notify the Company of any illness, disability or other condition
which will cause the Employee to be absent from work.
4. Compensation.
4.1. In consideration of the services to be rendered by the Employee
hereunder the Company shall pay to the Employee, and the Employee agrees to
accept as full compensation for such services, a salary at the rate of One
Hundred Eighty Thousand Dollars ($180,000.00) for the first year of this
Agreement, payable in accordance with the normal payroll practices of the
Company. Thereafter, the annual salary of the Employee shall increase at a
rate of 10% per year for the remaining four (4) years.
4.2. In addition to his salary, the Employee may be entitled to receive an
annual bonus, in an amount determined at the discretion of the Board of
Directors of the Company, payable within ninety (90) days after the end of each
Employment Year.
4.3. The Employee shall be granted stock options (the "Options") exercisable
for two hundred fifty thousand (250,000) shares of common stock by the Company
for each year of Employee's employment under this Agreement. The exercise price
for such Options shall be (i) One Dollar ($1.00) per share for Options vesting
in the first year of Employee's employment, (ii) One Dollar and twenty-five
cents ($1.25) per share for Options vesting in the second year of Employee's
employment, (iii) One Dollar and fifty cents ($1.50) per share for Options
vesting in the third year of Employee's employment, (iv) One Dollar and
seventy-five cents ($1.75) per share for Options vesting in the fourth year of
Employee's employment, and (v) Two Dollars ($2.00) per share for Options vesting
in the fifth year of Employee's employment and in each successive year of
Employee's employment. The Options shall be granted on the date this Agreement
is executed by the Company. The Options for each Employment Year, as set forth
above, shall vest annually on the first day of each year of Employee's
employment under this Agreement. The Options shall be subject to equitable
adjustment for any stock split, stock dividend or other similar event to protect
the Employee from dilution of the Options.
2
<PAGE>
4.4. The Employee shall receive (i) an automobile allowance of One Thousand
Dollars ($1,000.00) per month, (ii) at the election of the Company, a health
insurance allowance of Five Hundred Dollars ($500.00) per month or medical
insurance coverage, and (iii) a term life insurance policy in the face amount of
One Million Dollars ($1,000,000.00) payable to the beneficiaries of the
Employee. The Employee shall receive standard Company health and related
benefits and other standard employee fringe benefits, as offered by the Company
from time to time, and as more fully described in the Company's employee manual.
4.5. The Employee shall receive all statutory benefits including, but not
limited to, worker's compensation, as are proved under applicable laws, rules
and regulations.
4.6. Subject to approval of classes or categories of reimbursable expenses
and Company policies regarding same, as established by the Company from time to
time, the Employee shall receive reimbursement for all actual and necessary
business expenses upon the presentation of documentation in form sufficient to
permit the Company to determine the necessity and reasonableness of the expense,
to comply with all governmental reporting requirements and to substantiate the
Company's right to claim income tax deductions for such expenses.
5. Termination.
5.1. In the event the Employee, due to physical or mental injury, illness,
disability, or incapacity, shall fail to render the services provided for in
this Agreement for a consecutive period of ninety (90) days, the Company may, at
its option, terminate the Employee's employment hereunder by thirty (30) days
prior written notice to the Employee or his legal representative, provided that
such incapacity is judged to be of permanent nature as confirmed by a medical
doctor mutually selected by the Company and the Employee or his legal
representative.
5.2. If the employment of the Employee terminates for any reason (including
death, disability, or voluntary resignation), the Employee, in the event of his
death, the Employee's estate) shall be entitled to receive from the Company a
termination benefit (the "Termination Benefit") equal to the payments due by the
Company to the Employee under this Agreement for (ii) the balance of the Term of
this Agreement. The Termination Benefit will be payable in monthly installments
on the first day of each month for period of payments comprising the
Termination Benefit. Notwithstanding the foregoing, the Termination Benefit to
be paid to the Employee under this Paragraph A shall be reduced by the total
payments received by the Employee during the ninety (90) day period preceding
the Employee's termination of employment as disability payments under this
Agreement.
6. Non-Disclosure of Confidential Information.
6.1. The Employee acknowledges that it is the policy of the Company to
maintain as secret and confidential all Confidential Information as hereinafter
defined. "Confidential Information" shall mean any information, not generally
known in the Company's industry, which gives the Company a competitive
advantage in the industry, heretofore or hereafter acquired, discovered,
developed, conceived, originated, used or prepared by the Company or by an
employee of the Company as the result of employment with the Company and which
falls within the following categories:
3
<PAGE>
(i) information to trade secrets of the Company or any supplier, customer,
distributor, independent representative or consultant of the Company;
(ii) information relating to existing or contemplated products, services,
technology, designs, processes, manuals, formulas, computer systems and/or
software, and any research or development of the Company or any supplier or
customer of the Company;
(iii) information relating to business plans, sales or marketing methods,
methods of doing business, distributor or independent representative lists or
information, customer lists, customer usage and/or requirements, and supplier or
customer information of the Company or any supplier or customer of the Company.
(iv) information relating to work products in general or as described in
Section 8 of this Agreement; and
(v) any other Confidential Information that either the Company or any
supplier, licensor or customer of the Company may wish to protect by patent,
copyright or by keeping it secret and confidential.
6.2. The Employee recognizes that the services to be performed by the
Employee are special and unique, and that by reason of his duties, he will
acquire Confidential Information. The Employee recognizes that all such
Confidential Information is the property of the Company. In consideration of
the Company's entering into this Agreement, the Employee agrees that:
(i) the Employee shall never, during the term of employment or thereafter,
directly or indirectly, use, publish, disseminate or otherwise disclose any
Confidential Information obtained in connection with his employment by the
Company without prior written consent of the Company;
(ii) during the term of his employment by the Company, the Employee shall
exercise all due and diligent precautions to protect the integrity of the
Company's Confidential Information and, upon termination of his employment,
Employee shall return all documents containing any Confidential Information and
any copies thereof, in his possession or control; and
(iii) during the Non-Competition Period as described hereinafter, Employee
shall exercise all due and diligent precautions to protect any Confidential
Information and shall never, directly or indirectly, use, publish, disseminate
or otherwise disclose any Confidential Information obtained in connection with
his employment.
6.3. Upon termination or expiration of this Agreement, the Employee shall
immediately deliver to the Company all books, records, memoranda, reports,
software data and documents relating to the Company's business, suppliers,
customers and other assets of the Company in the possession, custody or under
the control of the Employee, whether or not such material contains Confidential
Information.
6.4. The Employee agrees that the provisions of this Section 6 are reasonably
necessary to protect the proprietary rights of the Company in Confidential
Information and its trade secrets, goodwill and reputation. The provisions of
this Section 6 shall survive any termination of this Agreement.
4
<PAGE>
7. Non-Competition Covenant.
7.1. During the Non-Competition Period (as hereinafter defined), the Employee
covenants and agrees that the Employee shall not in any way be engaged, either
directly or indirectly, anywhere within the United States, whether as an
employee, consultant, agent or representative of any corporation or any other
form of business entity, in the business of developing, marketing or selling
products or services which are competitive to the products or
services of the Company, nor will the Employee solicit or cause to be solicited
for or on behalf of the Employee or any third party, any business which is
competitive with the business of the Company.
7.2. During the Non-Competition Period the Employee further covenants and
agrees that the Employee shall not seek to persuade, directly or indirectly, any
director, officer, employee, agent, consultant or any person who receives
compensation from the Company, or any person who has served in any such capacity
during the twelve (12) months prior to any such action, to discontinue that
individual's status, relationship or employment with the Company, nor to become
employed or engaged in any activity similar to or competitive with the
activities of the Company, nor will the Employee, directly or indirectly, hire
or retain any such person.
7.3. During the Non-Competition Period, the Employee further covenants and
agrees that the Employer shall not, directly or indirectly, approach, contact,
solicit, sell to or deal with any supplier or service provider to the Company,
or any customer, consultant, or any person who receives compensation from the
Company, for the purpose of offering, obtaining, selling, diverting or
receiving sales, quotations or orders for any products which are in competition
with those of the Company.
7.4. The Employee acknowledges that any breach by the Employee of the
provisions of this Section 7 can cause irreparable harm to the Company for
which the Company would have no adequate remedy at law. In the event of a
breach or threatened breach or alleged breach or threatened alleged breach of
any such provisions, the Company, in addition to any and all other rights and
remedies it may have under this Agreement or otherwise, and may immediately
seek any judicial action that the Company may deem necessary including, without
limitation, the obtaining of temporary and preliminary injunctive relief.
7.5. The provisions of this Section 7 shall survive any termination of this
Agreement.
8. Work Product.
8.1 In the event that, during or subsequent to his employment the Employee's
assistance is needed in regard to securing, defending or enforcing any patent or
copyright of which the Employee is the inventor, co-inventor, author, designer,
etc., the Employee shall comply with reasonable requests to assist the Company.
If such assistance is required during employment by the Company, no additional
compensation shall be paid for such assistance. In the event that assistance is
required after the termination of employment, it is understood that requirements
for compensation may be outside the control of the Employee and shall therefore
be negotiated or arbitrated as required with the Employee or his new employer.
9. Notices.
5
<PAGE>
Any notice, request, instruction or other document to be given under this
Agreement to any party hereunder shall be in writing and delivered personally,
by overnight courier delivery service or by certified mail, postage prepaid, to
the following addresses:
If to the Company:
The Majestic Companies, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Attention: James R. Deveney, II
Fax No.: (619) 209-6078
If to the Employee:
Francis A. Zubrowski
916 Sealane Drive, Suite C
Encinitas, California
or to such other addresses as a party hereto may hereafter designate in writing
to the other party and shall be deemed delivered as of the date of hand
delivery, as of the date following delivery to an overnight courier delivery
service or as of three (3) days following mailing by certified mail.
10. Benefit and Assignment.
This Agreement shall be binding upon and shall inure to the benefit of the
Company and the Employee and their respective heirs, legal representatives,
successors and assigns. Neither the Employee or the Company may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other parties hereto.
11. Amendment and Entire Agreement.
This Agreement cannot be modified or changed except by an instrument in
writing, signed by both parties to the Agreement. This Agreement contains the
entire understanding between the Company and the Employee with respect to the
matters referenced herein.
12. Severability.
In the event of invalidity or unenforceability of any one or more provisions
of this Agreement, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such provisions
shall be deemed to remain in full force and effect.
13. Survival of Provisions.
The provisions of this Agreement set forth in 6, 7, 8 and 9 hereof shall
survive the termination of the Employee's employment under this Agreement.
14. Governing Law.
This Agreement shall be construed and governed in accordance with the laws
of the State of California.
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<PAGE>
15. Consent to Suit.
Any legal proceeding arising out of or relating to this Agreement shall be
instituted in the United States District Court for the District of San Diego, or
if such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in the State of California, and the Employee
hereby consents to the personal and exclusive jurisdiction of such court and
hereby waives any objection that the Employee may have as to the venue of any
such proceeding and any claim or defense of inconvenient forum.
16. Waiver of Breach.
The waiver by either party hereto of a breach of any provisions of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
by either party.
17. Execution in Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date noted below and to be in effect from and after the date
first set forth above, in accordance with the terms set forth in this Agreement.
WITNESS: The Company:
THE MAJESTIC COMPANIES, LTD.,
a Delaware corporation
/s/ CONNIE K. WHITE By: /s/ ALEJANDRO TOVAR (SEAL)
- ------------------------------------ ------------------------
Alejandro Tovar
Secretary/Treasurer
Date: 12/11/98
----------------------
The Employee:
/s/ CONNIE K. WHITE By: /s/ FRANCIS A. ZUBROWSKI (SEAL)
- ------------------------------------- -------------------------
Francis A. Zubrowski
Chief Executive Officer &
President
Date: 12/11/98
-----------------------
7
ASSIGNMENT OF THE MAJESTIC NOTE
FOR VALUE RECEIVED, the undersigned hereby assigns and transfers to:
Gail E. Bostwick
916C Sealane Drive
Encinitas, CA 92024-5058
ALL rights, title and interest in and to the "Majestic Note of $260,000 (TWO
HUNDRED SIXTY THOUSAND) INCLUDING all Unpaid Interest."
THIS DOCUMENT SUPERSEDES ALL VERBAL AND WRITTEN AGREEMENTS. ALL RECOURSE AND
COLLATERAL IS HEREBY NULL AND VOID. THERE ARE NO WARRANTIES OF ANY KIND (KNOW OR
UNKNOWN). THE NOTE IS SOLD WITHOUT RECOURSE TO THE UNDERSIGNED. COLLECTION OF
ALL PAYMENTS OF PRINCIPAL AND UNPAID INTEREST IS THE RESPONSIBILITY OF GAIL E.
BOSTWICK.
This agreement shall be binding upon and inure to the benefit of the parties,
their successors, assigns, and personal representatives.
4/8/99 /s/ Chung F. Han
- -------------------- ------------------------------
Date Chung F. Han, President
Mei Wah Company, Inc.
4/8/99 /s/ Danny Y. Lee
- -------------------- -----------------------------
Date Danny Y. Lee (Witness)
EXHIBIT 6.7
1 of 1
SECURITY AGREEMENT
THIS AGREEMENT IS ENTERED INTO ON THE 21ST OF MAY 1999 BY AND BETWEEN GAIL E.
BOSTWICK, (the "LENDER"), AND, THE MAJESTIC COMPANIES, LTD., (the "BORROWER").
WHEREAS, the LENDER has notified the BORROWER that she has assumed a promissory
note in the aggregate amount of $260,000, as the LENDER between Mei-Wah, Inc.,
and, Skytex International, Inc., dated, October 1, 1998.
WHEREAS, Skytex International, Inc., has since acquired, The Majestic Companies,
Ltd., and is acknowledged to be the one in the same. .
NOW, THEREFORE, in consideration of the original terms and conditions of the
note between Mei-Wah, Inc., and, Skytex International, Inc., the LENDER and the
BORROWER mutually agree to the following:
A The LENDER releases the BORROWER of any and all original security agreement
requirements pertaining to the promissory note dated October 1, 1998, between
Mei-Wah, Inc., and, Skytex International, Inc..
B The BORROWER agrees to provide the LENDER, and the LENDER accepts, with a
UCC-1 filing in order to replace the original security agreement provided for in
the promissory note between, Mei-Wah, Inc., and, Skytex International, Inc.,
dated, October 1, 1998.
This AGREEMENT shall be construed under the laws of the State of California, and
if any provisions hereof, or the application of any provision to any person or
circumstance, is held invalid or unenforceable, the remainder of this AGREEMENT
shall be valid and binding between the parties hereto.
ARBITRATION, any controversy or claim arising out of or relating to this
AGREEMENT , or the breach thereof, shall be settled by arbitration administered
by the American Arbitration Association in accordance with its applicable rules,
and judgement on the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
Signed and agreed to by both parties this 21st day of May 1999 in the City of
San Diego, California:
/s/ Connie White /s/ Gail E. Bostwick
- ------------------------ ----------------------------------------
Witness Gail E. Bostwick-Lender
/s/ Alex Tovar /s/ Francis A. Zubrowski
- ------------------------ ----------------------------------------
Witness Francis A. Zubrowski
Chairman/CEO-The Majestic Companies, Ltd.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is made and dated this 2 day
of April, 1998, by and between CAL-AMERICAN BUILDING COMPANY, INC., a California
corporation and STEVEN D. ROSENTHAL, jointly and severally (collectively, the
"LICENSOR") and MAJESTIC MODULAR BUILDINGS, LTD., a Maryland corporation (the
"LICENSEE").
RECITALS
A. The Licensor owns all right, title and interest in and to the
Approval Rights, as defined in Section 1.2 hereof, and Technical Information,
as defined in Section 1.4 hereof, relating to the Licensed Products; and
B. The Licensor has the right to grant licenses to the Approval Rights
and Technical Information for the use; and
C. The Licensee desires to obtain a license to enable it to use the
Approval Rights and Technical Information, under the terms and conditions
hereinafter set forth, for the purpose of developing and marketing the Licensed
Products for the purposes and in the Territory specified in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
undertakings contained herein, the parties to this Agreement do hereby covenant
and agree as follows:
1. DEFINITIONS.
1.1 "Approval Rights" shall mean any existing Plan Checks, licenses,
approvals, authorizations, permits and other documents for the construction and
assembly of Licensed Products in the States of California, Nevada and Arizona,
as are listed in Schedule A annexed hereto, any continuation,
continuation-in-part, or division of such rights, any applications based on the
subject matter of said rights or improvements thereof, and any applications
based on the subject matter of said rights or improvements thereof, and any
rights issuing on said applications.
1.2 "Licensed Products" shall mean the various types and models of
modular buildings and structures, and component parts thereof, to be
manufactured, assembled and sold by the Licensee using the Approval Rights and
Technical Information licensed by the Licensor to the Licensee hereunder as more
fully described on Schedules A and B annexed hereto.
1.3 "Subcontractor Licensee" shall mean a licensee under Article 2 of
this Agreement who has been awarded a limited license to manufacture and/or sell
Licensed Products. The Licensee shall remain responsible for all of its duties
agreed upon in this Agreement, regardless of the award of licenses to
Subcontractor Licensee(s).
<PAGE>
1.4 "Technical Information" shall mean the know-how, trade secrets,
technical data, design data, drawings, test results, and the like, licensed by
the Licensor to the Licensee hereunder which relate uniquely to the manufacture
of the Licensed Products for sale, all as listed on Schedule B annexed hereto.
2. LICENSE
2.1 The Licensor hereby grants to the Licensee, and the Licensee hereby
accepts from the Licensor, upon the terms and conditions hereinafter specified,
and subject to the provisions of Section 2.2 below, an exclusive license (except
as to PC 292, PC 371 and PC 339 as set forth below) to use the Approval Rights
and Technical Information solely to develop, manufacture, use, sell and service
the Licensed Products and replacement and spare parts therefor strictly in
compliance with all federal, state and local laws, regulations and rules.
2.2 The license granted by the Licensor to the Licensee under this
Agreement in the Territory as provided above shall be an exclusive license
arrangement. The Licensor represents that no rights have been granted to others
which would conflict with the license rights of the Licensee under this
Agreement or which would diminish the value of the rights conveyed hereunder.
2.3 The license granted herein shall not be assignable by the Licensee,
nor shall the Licensee have the right to grant sublicenses without the written
consent of the Licensor. The prohibition against assignment shall not preclude
the assignment of this Agreement to any corporation or other entity which is a
wholly owned subsidiary of the Licensee. The prohibition against assignment
shall further not preclude the Licensee from subcontracting to Subcontractor
Licensees for the manufacture and/or assembly of the Licensed Products, any
component parts thereof or any replacement parts therefor.
3. TECHNICAL ASSISTANCE AND INFORMATION
3.1 The Licensor agrees that the Licensor shall furnish to the Licensee
such Technical Information as will enable the Licensee to develop and
manufacture the Licensed Products.
3.2 All Technical Information furnished hereunder shall be used by the
Licensee exclusively for the purpose of performing its obligations under this
Agreement and shall not be used for any other purpose without the specific
written approval of the Licensor.
4. CLAIMS BY THIRD PARTIES
4.1 The Licensor declares that, to the best of its knowledge, the
Approval Rights do not infringe any right or other protection owned or
controlled by persons other than the Licensor, excepting a non-exclusive license
to Dura-Bilt Modular Company, Inc. to use PC 292, PC 371 and PC 339. However,
nothing in this Agreement shall be construed as a representation or a warranty
by the Licensor as to the validity of any right or other protection hereby
agreed to
2
<PAGE>
be licensed or that manufacture, use or sale of the Licensed Products
will not infringe any right or other protection owned or controlled by persons
who are not parties to this Agreement.
4.2 In the event any action is instituted against the Licensee based
upon the exercise of any of the licenses or rights granted under this Agreement,
the Licensee shall promptly notify the Licensor and the Licensor shall
thereafter, through legal counsel of its choice, defend and prosecute any legal
action which results therefrom. The parties hereto will cooperate fully in all
respects in the conduct of such litigation or any settlement negotiations. The
Licensor may not, however, without the prior written approval of the Licensee,
enter into any compromise, stipulation or other agreement of settlement which
may prejudice the Licensee's rights or obligate the Licensee to pay any monies
or other consideration to a third party. Any costs or expense incurred, or any
profits or awards obtained under this Section 4.2 will be paid or collected by
the Licensee and thereafter deducted or added to the "gross selling price" for
the appropriate reporting period under Section 9 of this Agreement.
4.3 In the event any action is instituted against the Licensor based
upon the exercise of any of the licenses or rights granted under this Agreement,
the Licensor shall promptly notify the Licensee and the Licensee shall have the
right to participate in any legal action which results therefrom. The parties
hereto will cooperate fully in all respects in the conduct of such litigation or
any settlement negotiations. The Licensor may not, however, without the prior
written approval of the Licensee, enter into any compromise, stipulation or
other agreement of settlement which may substantially affect the Licensee's
rights or obligate the Licensee to pay any monies or other consideration to a
third party.
5. TECHNICAL REALIZATION AND COMMERCIAL EXPLOITATION
5.1 The obligations of the Licensor hereunder shall be fully
discharged upon the furnishing to Licensee of the Technical Information as
hereinabove described. The Licensee acknowledges that it fully understands the
subject matter of the license granted under this Agreement and has sufficient
knowledge concerning the Licensed Products to manufacture it in a manner which
will render it suitable for the particular purpose for which it is designed.
5.2 The Licensor agrees that, from and after the date of execution of
this Agreement and until this Agreement shall expire or be sooner terminated,
the Licensor shall not manufacture any Licensed Products, directly or
indirectly.
6. QUALITY
6.1 The Licensee agrees that all Licensed Products manufactured and
sold by the Licensee shall be of the standards of quality and reliability
required by applicable laws and regulations pertaining to the Licensed Products.
6.2 The representatives of the Licensor and/or the Licensor shall have
the right, in conjunction with representatives of the Licensee and during
reasonable business hours, to inspect the assembly and/or manufacturing
facilities of the Licensee relating to the Licensed
3
<PAGE>
Products and the Licensor shall have the right to test the Licensed Products at
Licensor's expense on the premises of the Licensee or in other facilities of its
own selection; provided, however, that such inspection rights shall be limited
to two visits annually.
7. MODIFICATIONS
Both parties agree that any modifications of the Licensed Products
conceived or acquired by either of them shall be made available to the other
during the term of this Agreement, provided that an agreement with respect to
such modifications or improvements, including the payment of reasonable
royalties therefor, shall have been reached.
8. INSURANCE
8.1 The Licensee shall be responsible for obtaining and maintaining in
full force and effect workers' compensation, employers' liability, business
automobile liability, umbrella liability, intellectual property liability and
commercial general liability insurance pursuant to the requirements of this
Section hereinafter set forth and any other requirements contained herein. The
Licensee shall comply with all state and local insurance statutes and
regulations. The Licensee's commercial general liability and umbrella insurance
policies shall include contractual liability, with commercially reasonable
limits, and shall include all defense costs, including, but not limited to,
attorneys' fees, court costs, and other similar costs and expenses. It is
understood and agreed that any insurance limits shall not be construed as a
limitation on the Licensee's liability. The policies shall provide coverage for
any liability the Licensee (including its employees, agents, invitees,
contractors and subcontractors) may have for bodily injury or death, personal
and advertising injury, or property damage. The Licensor, including its
divisions, subsidiaries, parent and corporate affiliates, and its owner,
shareholders, officers, directors, employees, and agents shall be included as
"additional insureds" under all insurance policies provided by the Licensee, if
requested by the Licensor, and each policy shall provide a waiver of
subrogation.
8.2 If at any time the Licensee fails to obtain insurance (or provide
proof of insurance) in accordance with this Agreement, or otherwise required by
the Licensor, the Licensor may obtain the coverage specified in this Agreement
and charge all associated premiums and costs to the Licensee. The Licensee shall
reimburse the Licensor the cost thereof within fifteen (15) days of receipt of
notice from the Licensor
9. ROYALTIES
9.1 During the term of this Agreement, the Licensee agrees to pay to
the Licensor a royalty of (i) three and one-half percent (3 1/2%) of Licensee's
gross selling price with respect to sales of Licensed Products, made by the
Licensee, up to Five Million Dollars ($5,000,000.00) annually, and (ii) two
percent (2%) of such gross selling price in excess of Five Million Dollars
($5,000,000.00) annually. Upon execution of this Agreement, the Licensee shall
tender to and deposit with the Licensor the sum of Five Thousand Dollars
($5,000.00) as an advance payment of royalties due under this Agreement. Such
amount shall be used to satisfy the
4
<PAGE>
initial royalties due hereunder in the amount of the deposit.
9.2 The Licensor's right to receive payment of the royalty shall accrue
when Licensed Products shall have been completed and shipped by the Licensee and
payment or other consideration is received therefor.
9.3 For the purpose of computing royalties under this Agreement, the
Licensee's "gross selling price" shall be the Licensee's gross invoice price,
without deductions, for Licensed Products, exclusive of transportation costs,
taxes, duties and other miscellaneous charges paid by the Licensee, regardless
of whether subsequently reimbursed by the customer. The "gross selling price"
shall not include amounts which are derived from sales of products, including
modular buildings and structures, which are manufactured and assembled without
the use of, or reliance on the Approval rights licensed hereunder.
10. SETTLEMENT OF ACCOUNTS
10.1 Royalties for each three month period (the "Quarter") shall be due
and payable within thirty (30) days after the end of the Quarter. Within thirty
(30) days after the expiration of the Quarter, the Licensee shall deliver to the
Licensor a true and accurate report in writing, giving such particulars of the
business conducted by the Licensee during the preceding Quarter as are pertinent
to any accounting for any such royalties under this Agreement.
10.2 Each quarterly royalty payment shall be by bank draft, payable in
U.S. currency and delivered to such account or accounts of the Licensor as shall
be designated in writing by the Licensor on or before the due date specified in
Section 10.1.
10.3 The Licensee agrees to keep records showing the quantity,
description and total gross selling price of all Licensed Products and parts and
manuals therefor that have been sold or otherwise disposed of and such other
related information in sufficient detail to enable the compensation payable
hereunder by the Licensee to be determined . The Licensee further agrees to
permit its books and records to be examined from time to time by an outside
auditor selected by the Licensor, at the Licensor's expense, to verify the
reports provided for in Section 10.1 hereof and the compensation due and
payable hereunder.
11. COVENANTS OF PARTIES
11.1 Neither party shall be obligated to disclose to the other party
any proprietary information of a third party without the consent of such third
party, nor any information the furnishing of which would require the payment of
consideration to a third party other than an employee of the party furnishing
the information.
11.2 Each party will use reasonable efforts to perform its obligations
under this Agreement, but shall, except for Licensee's obligation to make any
payment of money under this Agreement, be excused for failure to perform or for
delay in performance hereunder due to (1) causes beyond its reasonable control
or (2) acts of God, acts of the other Party or its contractors,
5
<PAGE>
acts of civil or military authorities (including the Governments of Canada and
the United States and political subdivisions thereof), U.S. Government
priorities, fires, strikes, floods, epidemics, war, riot, delays in
transportation, or (3) causes beyond its reasonable control to obtain necessary
labor or materials.
12. CONFIDENTIALITY OF TECHNICAL INFORMATION
12.1 All Technical Information furnished by the Licensor to the
Licensee pursuant to this Agreement shall be treated as confidential by the
Licensee, even after the expiration or earlier termination of this Agreement.
The Licensee shall take all necessary steps to prevent disclosure of any and all
such Technical Information. With the prior consent of the Licensor, the
Licensee shall have the right to disclose to subcontractors such Technical
Information as is necessary but only if a confidentiality agreement
substantially in acceptable form to the Licensor, shall have been executed by
such subcontractor in accordance with this paragraph.
12.2 All Technical Information provided by the Licensor to the Licensee
under this Agreement, as well as any copies or translations thereof made by the
Licensee, shall remain the property of the Licensor and shall be returned by the
Licensee within thirty (30) days from the date of termination or expiration of
this Agreement. At the discretion of the Licensor, the Technical Information
shall be destroyed by the Licensee upon termination or expiration of this
Agreement when so requested by the Licensor, whereupon the Licensee shall
destroy the Technical Information within thirty (30) days from its receipt of
such request and thereafter promptly provide a written certification to the
Licensor that all Technical Information has been destroyed.
13. WARRANTY AND LIMITATION OF LIABILITY
13.1 The Licensor represents to the Licensee that the Technical
Information furnished pursuant to this Agreement will correspond to the
Technical Information used by the Licensor.
13.2 The Licensor makes no express warranty, and no warranty shall be
implied, with respect to any Technical Information furnished by it under this
Agreement. It is agreed that the Licensor shall not be liable, whether in
contract, tort or otherwise, nor in any way responsible for:
1. The accuracy, utility, or adequacy of any Technical Information furnished
or disclosed by it in connection with this Agreement, or
2. The performance of products manufactured or repaired or overhauled by
Licensee on the basis of any Technical Information furnished in connection
with this Agreement.
13.3 The Licensee hereby agrees to indemnify, defend and hold harmless
the Licensor from and against any claim, demand, action, cause, liability,
obligation, cost or expense,
6
<PAGE>
including reasonable attorney's fees, arising out of any breach by the Licensee
of its covenants set forth in Section 2.1 of this Agreement.
14. DURATION OF THE AGREEMENT
14.1 This Agreement shall become effective after it has been executed
by both Parties hereto and shall continue in force for an initial term of three
(3) years. The Licensee may elect to renew the term of this Agreement for three
(3) successive renewal terms of three (3) years each by providing written notice
of renewal to the Licensor not less than ninety (90) days prior to the
expiration of the initial term or any renewal term hereunder.
14.2 Either party shall have the right to terminate this Agreement if
the other party shall be in default of any material obligation hereunder. In
such event, the non-defaulting party may give written notice of its election to
terminate the Agreement under this Section 14.2, specifying such default. Unless
the defaulting party remedies the default within ninety (90) days after receipt
of such notice, the non-defaulting party may terminate this Agreement by written
notice, effective on receipt.
14.3 Upon the termination of this Agreement, the Licensee shall
immediately cease and desist from offering for sale or selling any Licensed
Products parts or manuals therefor or services relating thereto, provided,
however, that the Licensee may make sales and perform services required by
contracts or agreements entered into and effective one hundred eighty (180)
calendar days before the date of termination of this Agreement.
14.4 The Licensee's obligations under this Agreement will continue
until the termination or expiration date, for whatever reason, of this
Agreement. In particular, any royalties accrued prior to the effective date of
expiration or termination, or any royalties payable as a result of sales made
after the date of expiration or termination as provided in Section 14.3 above,
shall be payable in accordance with Article 9. In addition, the Licensee's
obligations under Sections 12.1 and 12.2 shall remain in full force and effect
after termination of this Agreement for whatever reason.
15. SEVERABILITY
15.1 In the event that any particular provision or requirement of this
Agreement is held to be invalid, such provision or requirement shall remain in
full force and effect to the extent it is not invalid or otherwise
unenforceable, and all other provisions and requirements of this Agreement shall
remain in full force and effect.
7
<PAGE>
15.2 In the event that any provision or requirement hereof shall be
held invalid by any court or other tribunal of competent jurisdiction, the
parties hereto shall endeavor to agree on a new provision or requirement of
comparable economic effect.
16. AMENDMENTS AND AMPLIFICATIONS
16.1 This Agreement, including its Schedules, contains the entire
understanding of the parties with respect to the subject matter herein.
16.2 All amendments, amplifications and interpretations, including
additions and notices of termination, must be in writing and shall not be
binding unless signed by both parties hereto.
17. GOVERNING LAW
This Agreement shall be governed by and construed under the laws of the
State of California.
18. ARBITRATION
The parties shall attempt, in good faith, to resolve by negotiation any
claim or controversy arising out of or relating to this Agreement. If a dispute
cannot be resolved by negotiation, such dispute shall be resolved by arbitration
conducted in San Diego, California, in accordance with the rules of the American
Arbitration Association, which rules are deemed to be incorporated by reference
into this Agreement. There shall be three arbitrators, one to be chosen by the
Licensor, one to be chosen by the Licensee, and the third, who shall be chairman
of the arbitration panel, to be chosen by the two arbitrators selected by the
parties, or, if such persons fail to agree, by the American Arbitration
Association. The arbitration shall be conducted in a single hearing, and the
arbitrators shall render their decision within thirty (30) days of the
conclusion of the hearing. The expenses of the arbitration (including reasonable
attorneys' fees) shall be borne as specified in the decision of the arbitrators
and shall be allocated based on the relative merit of the two positions, as
determined by the arbitrators. The decision of the arbitrators shall be final
and nonappealable. Judgment upon any decision rendered by the arbitrators may be
entered by any court having jurisdiction. Notwithstanding the foregoing:
(1) At the discretion of the party seeking relief, any claim for
temporary or permanent injunctive relief under this Agreement may be heard in
and decided by the state or federal courts in the State of California, and in
no other courts, and each party consents to the jurisdiction of such courts
for such purpose.
8
<PAGE>
(2) If an action is brought in such a court for such injunctive relief,
such court shall also decide, in the same action, any claims for damages
related to Article X and the Confidentiality Agreement that may be raised in
the same action.
This Section 18 shall apply to all disputes under this Agreement, whether
arising before or after the date of this Agreement.
19. FORCE MAJEURE
Neither party shall be liable to the other for delay or failure in
performance of any of the obligations imposed by this agreement if such failure
is beyond the reasonable control of such party due to FORCE MAJEURE. Force
majeure shall include any act of God, action of the elements, fire, accident,
riot, labor disturbance, failure or lack of transportation facilities, issuance
of governmental laws, orders, or regulations, or other cause, whether similar or
dissimilar, beyond the reasonable control of the party required to perform. The
party whose performance is impeded by the force majeure condition shall notify
promptly the other party upon the discovery of the force majeure condition,
indicating the anticipated duration and effect of the force majeure condition,
and such party shall be diligent in attempting to remove such force majeure
condition.
20. NO JOINT VENTURE
Nothing herein contained shall be construed to place the Licensor and
Licensee in the relationship of partners or joint ventures and neither shall
have any power to obligate or bind the other in any manner whatsoever.
21. NOTICES
Any notice or consent required or permitted by or in connection with
this Agreement shall be in writing and made by hand delivery, by wire or by
certified mail, return receipt requested, postage prepaid, addressed to the
Licensor or the Licensee at the appropriate address set forth below or to such
other address as may be hereafter specified by written notice by the Licensor or
the Licensee, and shall be considered given as of the date of hand delivery,
wire or as of two (2) business days after the date of mailing, as the case
may be:
If to the Licensee:
MAJESTIC MODULAR BUILDINGS
8880 Rio San Diego Drive
8th Floor
San Diego, CA 92108
Attention: Francis A. Zubrowski, Chief Executive Officer & President
Fax No.: (619) 209-6078
9
<PAGE>
If to the Licensor:
CAL-AMERICAN BUILDING COMPANY, LTD.
Steven D. Rosenthal
320 9th Street
Modesto, California 95351
Fax No.: (209) 571-1456
22. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of
the Licensor and the Licensee and their respective heirs, legal representatives,
successors and assigns.
23. WAIVER OF BREACH
The waiver by either party hereto of a breach of any provisions of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
by either party.
24. EXECUTION IN COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of
the first date set forth above.
WITNESS: LICENSOR:
CAL-AMERICAN BUILDING COMPANY, INC.
/s/ David R. Griffith By: /s/ STEVEN D. ROSENTHAL (SEAL)
- ------------------------------- ------------------------------------
Steven D. Rosenthal, President
/s/ David R. Griffith /s/ STEVEN D. ROSENTHAL (SEAL)
- ------------------------------- ------------------------------------
Steven D. Rosenthal, President
LICENSEE:
MAJESTIC MODULAR BUILDINGS
COMPANY, INC.
/s/ David R. Griffith By: /s/ FRANCIS A. ZUBROWSKI (SEAL)
- ------------------------------ -----------------------------------
Francis A. Zubrowski
President & Chief Executive Officer
PROMISSORY NOTE
---------------
[$100,000 Line of Credit]
From
THE MAJESTIC COMPANIES, LTD.,
A DELAWARE CORPORATION
AND
MAJESTIC TRANSPORTATION PRODUCTS, LTD.,
A DELAWARE CORPORATION
to the Order of
Margaret Hubard
---------------
an individual
August 27, 1999
<PAGE>
Baltimore, Maryland $100,000.00
August , 1999
PROMISSORY NOTE
---------------
FOR VALUE RECEIVED, the undersigned THE MAJESTIC COMPANIES, LTD., a
Delaware corporation and MAJESTIC TRANSPORTATION PRODUCTS, LTD., a Delaware
corporation (the "Borrower") jointly and severally promise to pay to the order
of Margaret C. Hubard and its successors and assigns (the "Lender") at the
Lender's offices at c/o 2747 N. Nelson Street, Arlington, VA, 22207-5033 or at
such other place as the Lender may from time to time designate, the principal
sum of One Hundred Thousand Dollars ($100,000.00) or so thereof as has been
advanced by the Lender to the Borrower under a line of credit (the "Line of
Credit") extended, pursuant to the provisions of this promissory note (the
"Promissory Note") and certain documents and writings executed and delivered to
the Lender by the Borrower and other signatory parties (the "Loan Documents") in
connection with the obligation evidenced herein (the "Loan"), together with
interest thereon at the rate hereafter specified and any and all other sums
which may be owing to the Lender by the Borrower under this Promissory Note, on
August 26, 2000 (the "Maturity Date"), which is the final and absolute due date
of this Promissory Note, subject to acceleration as herein set forth. The
following terms shall apply to this Promissory Note:
Section 1. Interest Rate. For the period from the date hereof until all
sums due hereunder, whether principal, interest, penalties, fees or other sums
have been paid in full, interest shall accrue on the disbursed and unpaid
principal balance of this Promissory Note at a fixed rate equal to ten percent
(10%) per annum.
Section 2. Calculation of Interest. Interest shall be calculated on the
basis of a three hundred sixty (360) days per year factor applied to the number
of actual days elapsed.
Section 3. Term. The term of this Promissory Note shall be for a period
(the "Term") extending from the date of this Promissory Note and continuing
until the Maturity Date, which Maturity Date is subject to acceleration as set
forth herein.
Section 4. Repayment. This Promissory Note shall be repaid in monthly
installments of accrued interest only, payable on the first day of the month
preceding the month, beginning on September 1, 1999 and continuing on the first
day of each succeeding month until the Maturity Date as above set forth, or such
earlier date arising by acceleration, at which time the unpaid principal balance
and any and all sums due under this Promissory Note and the other Loan
Documents, including accrued interest, late fees and penalties shall be due and
payable in full. Notwithstanding the foregoing, revenues of the Borrower which
are not to be immediately expended shall be paid by the Borrower to the Lender
as, principal payments under the Line of Credit.
Section 5. Application of Payments. All payments made hereunder shall
be applied
2
<PAGE>
first to any fees or expenses incurred by Lender hereunder, if any, next to
accrued interest, and then to principal or, during any default by the Borrower,
in such other order or proportion as the Lender, in its discretion, may
determine.
Section 6. Manner and Method of Payment. All payments called for in this
Promissory Note shall be made in lawful money of the United States of America.
If made by check, draft, or other payment instrument, such check, draft, or
other payment instrument shall represent immediately available funds.
Section 7. Prepayment. The Borrower may prepay this Promissory Note at any
time without additional penalty or interest.
Section 8. Warrants. As an inducement to the Lender to provide the Loan,
as set forth in this Promissory Note and the other Loan Documents, The Majestic
Companies, Ltd. ("Majestic") shall issue to the Lender a warrant or warrants
(the "Warrant") for one hundred thousand (100,000) shares of the common stock of
Majestic upon the execution and delivery of the Loan Documents. The Warrant
shall provide for an exercise price equal to the average of the Closing Price
for shares of Majestic's common stock for the ten (10) trading days immediately
preceding the date of issuance of the Warrant and the Warrant may be exercised
on a cash or cashless basis, for a period extending for two (2) years from the
date of issuance of the Warrant.
Section 9. Late Payment Penalty. Should any payment of interest, or of
principal and interest, or any other sum due hereunder be received by the Lender
more than five (5) days following receipt of written notice therefor, the
Borrower shall pay a late payment penalty equal to five percent (5%) of the
amount of the payment then due.
Section 10. Acceleration Upon Default. Upon the failure to pay any amount
when due under this Promissory Note, which failure is not cured or discharged
within a period of five (5) days following receipt of written notice therefor,
or upon any default under any other Loan Document, which default is not cured
within the applicable cure period following written notice thereof, the Lender
may, in the Lender's sole and absolute discretion and without notice or demand,
declare the entire unpaid balance of principal plus accrued interest and any
other sums due hereunder immediately due and payable.
Section 11. Default Interest Rate. Upon the failure to pay any amount when
due under this Promissory Note, which failure is not cured or discharged within
a period of five (5) days following receipt of written notice therefor, or upon
any default under any other Loan Document, which default is not cured within the
applicable cure period following written notice thereof, the Lender may, in
addition to any other remedy the Lender may exercise, raise the rate of interest
accruing on the disbursed unpaid principal balance by four (4) percentage points
above the rate of interest otherwise applicable, until such default is cured.
Section 12. Confession of Judgment. Upon the failure to pay any amount
when due under this Promissory Note, which failure is not cured or discharged
within a period of five (5) days following receipt of written notice therefor,
or upon any default under any other Loan Document, which default is not cured
within the applicable cure period following written notice
3
<PAGE>
thereof, the Borrower authorizes the clerk of any court and any attorney
admitted to practice before any court of record in the United States, on behalf
of the Borrower, to then confess judgment against the Borrower in favor of the
Lender in the full amount due on this Promissory Note plus attorneys' fees in an
amount equal to fifteen percent (15%) of the outstanding balance hereof,
including principal, interest and other costs and expenses other than attorneys
fees. The Borrower consents to the jurisdiction of and agrees that venue shall
be proper in the United States District Court for the District of Maryland, if
jurisdiction exists, and/or in any Circuit Court for any county or the City of
Baltimore, Maryland. The Borrower waives all errors, defects and imperfections
in the entry of judgment as aforesaid or in any proceeding pursuant thereto and
the benefit of any and every statute, ordinance or rule of court which may be
lawfully waived conferring upon the Borrower any right or privilege of
exemption, stay of execution, or supplementary proceedings, or other relief from
the enforcement or immediate enforcement of a judgment or related proceedings on
a judgment. The authority and power to appear for and to enter judgment against
the Borrower shall not be extinguished by any judgment entered pursuant thereto;
such authority and power may be exercised on one or more occasions from time to
time, in the same or different courts or jurisdictions, as often as the Lender
shall deem necessary or advisable until all sums due under this Promissory Note
have been paid in full.
Section 13. Expenses of Collection. Should this Promissory Note be
referred to an attorney for collection following a default by the Borrower, the
Borrower shall pay all of the Lender's costs, fees and expenses (including
reasonable attorneys' fees) resulting from such referral, even if judgment has
not been confessed or suit filed.
Section 14. Waivers by the Borrower. The Borrower waives presentment,
notice of dishonor and protest, notice of intention to accelerate the maturity
hereof and notice of the actual acceleration of the maturity hereof.
Section 15. Extensions of Maturity. The Borrower hereby agrees that the
Maturity Date, or any payment due hereunder, may be extended at any time or from
time to time by the Lender without releasing, discharging, or affecting the
liability of such party.
Section 16. Commercial Loan. The Borrower represents and warrants that the
debt evidenced hereby is a commercial loan transaction within the meaning of
Sections 12-101(c) and 12-103(e), Commercial Law Article, Annotated Code of
Maryland.
Section 17. Notices. Any notice or demand required or permitted in
connection with this Promissory Note shall be in writing and made by hand
delivery, by wire or facsimile transmission, by overnight courier service for
next day delivery or by certified mail, return receipt requested, postage
prepaid, addressed to the Lender or the Borrower at the appropriate address set
forth below or to such other address as may be hereafter specified by written
notice by the Lender or the Borrower, and shall be considered given as of the
date of hand delivery, wire or facsimile transmission, as of the date specified
for delivery if by overnight courier service, or as of two (2) days after the
date of mailing, as the case may be:
If to the Lender:
4
<PAGE>
Margaret C. Hubard
2747 N. Nelson Street
Arlington, VA 22207-5033
If to the Borrower:
The Majestic Companies, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Majestic Transportation Products, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Section 18. Governing Law. This Promissory Note shall be strictly governed
by and construed under the laws of the State of Maryland, and the undersigned
expressly acknowledges that this Promissory Note was executed and delivered to
the Lender within the geographic boundaries of the State of Maryland.
Jurisdiction and venue in the enforcement or interpretation of this Promissory
Note shall be appropriate in any court of competent jurisdiction in the State of
Maryland, or in the United States District Court for the District of Maryland,
if jurisdiction exists, and the undersigned expressly consents thereto.
Section 19. Tense and Gender. As used herein, the term "Borrower" includes
the singular and the plural and refers to all genders.
Section 20. Binding Nature. This Promissory Note shall inure to the
benefit of and be enforceable by the Lender and the Lender's successors and
assigns and any other person to whom the Lender may grant an interest in the
Borrower's obligations to the Lender, and shall be binding and enforceable
against the Borrower and the Borrower's successors and assigns.
Section 21. Joint and Several Obligation. In the event there exists more
than one person described by the term "Borrower," the liabilities and
obligations of each such person hereunder shall be joint and several liabilities
and obligations.
Section 22. Invalidity of Any Part. If any provision or part of any
provision of this Promissory Note shall for any reason be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Promissory Note and this
Promissory Note shall be construed as if such invalid, illegal or unenforceable
provision or part hereof had never been contained herein, but only to the extent
of its invalidity, illegality or unenforceability.
5
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Promissory Note under
seal as of August 27, 1999, with the specific intention that this Promissory
Note constitute an instrument under seal.
WITNESS/ATTEST:
BORROWER:
THE MAJESTIC COMPANIES, LTD.,
a Delaware Corporation
/s/ Alex V. Tovar By: /s/ Francis A. Zubrowski (SEAL)
- -------------------------- -----------------------------------
Francis A. Zubrowski, President and
Chief Executive Officer
THE MAJESTIC COMPANIES, LTD.,
a Maryland Corporation
/s/ Alex V. Tovar By: /s/ Francis A. Zubrowski (SEAL)
- -------------------------- -----------------------------------
Francis A. Zubrowski, President and
Chief Executive Officer
6
AGREEMENT FOR A FUNDING SOURCE
This agreement made this 21st day of May, 99, by and between MAJESTIC MODULAR
BUILDINGS, LTD. (herein referred to as Client) located at 320 9th Street,
Modesto, CA 95351, and RICK GRIFFEY, an individual and/or assigns (herein
referred to as RG) located at 2048 Oliva Court, Colton CA, 92324, all of which
are identified herein as the "Parties".
Whereas, Client has approached RG in order to retain RG as a lender/funding
source for a secured revolving line of credit, herein referred to as "LOC", in
the amount of $1,250,000 on the construction contracts of the Client.
Whereas, the parties have concurrently executed a Memorandum of Understanding,
dated May 21, 1999 which shall be a part of and incorporated into this
Agreement, acting out general terms and conditions of the requested LOC.
Now, therefore, in consideration of the foregoing and mutual promises, covenants
and conditions hereinafter set forth, the parties agree as follows:
SECTION A
SERVICES TO BE RENDERED BY RG
RG will arrange and conduct a credit search and obtain the applicable
verification of any financial, general information or pertinent project or firm
data it deems necessary, herein referred to as general "due diligence".
When RG determines that the financial information, supporting documents and any
other information or paperwork are sufficient, RG will issue to client a notice
that the due diligence in complete.
SECTION B
CLIENT'S REPRESENTATION AND OBLIGATIONS
Client will provide all financial information, project related description and
supporting documents and any and all backup documentation including, but not
limited to, corporate financial statements, bank information, corporate tax
returns, full and complete credit history. Client warrants and represents that
all such information will be true, accurate and complete and will not be
misleading in any manner whatsoever nor shall any material fact not be
disclosed. Said information will be updated by Client at RG request. Client
acknowledges that a breech of this representation will cause the refundable fee
to be retained by RG as liquidated damages.
Client will cooperate with RG in providing any additional information or
documents as may be requested with respect to both the financial status of
client and/or its officers, directors, shareholders, partners or members as well
as any information with respect to the project including, without limitation,
appraisals, engineering plans, test bids, construction contracts, purchase
contracts and any and all documents of every kind and description in any way
related to client's financial or other described affairs of the company.
Client agrees to indemnify, defend and hold harmless from and against any and
all claims, costs, damages, actions, losses or expenses including reasonable
attorney's fees which RG may incur by reason of any breach of the terms of this
agreement by Client or due to inaccuracy, falsity or omission contained in any
of the financial or other information provided by Client to RG.
Client represents that the LOC request made to RG hereunder is for commercial
purposes and all funds will be used for the Client only. Client understands and
agrees that the services to be provided by RG hereunder are on a best effort
basis and RG will not be liable or in any way responsible to Client for any
damages whatsoever in the event of any due diligence finding creating a denial
by RG to provide the requested funding commitment. Due Diligence to be completed
within 10 days of the execution of this document.
<PAGE>
SECTION C
FEES PAYABLE TO RG
Client agrees that in partial consideration of the LOC services to be rendered
by RG, Client shall pay to RG a loan application fee of 1.25% of $1,250,000 LOC
or $15,625.00 upon execution of this document. In the event that the loan
application is denied, RG agrees to refund the entire amount to client.
The parties hereto irrevocably submit to the jurisdiction of the American
Arbitration Association located in the State of California in any action, suit
or proceeding brought as a result of or arising out of the agreement or the
relationship between the parties. To the extent permissible by law, the parties
hereto waive a trial by jury in the event any suit is brought.
SECTION D
MISCELLANEOUS PROVISIONS
BINDING EFFECT: This agreement shall be binding upon and inure to the benefits
of the heirs, successors and assigns of the respective parties hereto.
INTEGRATION: This agreement shall not be modified except by writing executed by
all parties hereto. This agreement, and the Memorandum of Understanding, dated
May 21, 1999, set forth all of the promises, conditions, understanding,
warranties or representations, oral or written, expressed or implied, among the
parties.
NOTICES: All notices hereunder shall be deemed given three days after they have
been deposited in the U.S. Mail, postage paid, certified mail return requested,
addressed to RG at:
Rick Griffey
2048 Oliva Court
Colton, CA 92324
And to the Client at:
Majestic Modular Buildings, Ltd.
320 9th Street
Modesto, CA 95351
In witness whereof the parties have executed this agreement on the day and year
first above stated:
AUTHORIZED SIGNATURES
RICK GRIFFEY
By: /s/ Rick Griffey Dated: 5/26/99
- -------------------- --------------
CLIENT
MAJESTIC MODULAR BUILDINGS, LTD.
By: /s/ Francis A. Zubrowski Dated: 5-26-99
- ---------------------------- --------------
Francis A. Zubrowski, CEO
PATENT LICENSE AGREEMENT
BETWEEN:
ADRIAN CORBETT
&
MAJESTIC MOTOR CAR COMPANY, LTD.
FEBRUARY 1998
<PAGE>
PATENT LICENSE AGREEMENT
------------------------
THIS PATENT LICENSE AGREEMENT (the "Agreement") is made and dated this
20 day of February, 1998, by and between ADRIAN P. CORBETT, individually (the
"LICENSOR") and MAJESTIC MOTOR CAP COMPANY, LTD., a corporation duly organized
and existing under the laws of Canada, (the "LICENSEE").
RECITALS
--------
A. The Licensor owns all rights to and under a now pending U.S. patent
application filed January 12, 1998 and having Application Serial No. 09\005660
(the "Patent Application") which discloses and claims a proprietary invention
designated as the "Improved Bus Seat Safety Restraint" (the "Licensed Product")
as more specifically hereinafter defined in Article I hereof; and
B. The Licensor has all right, title and interest in and to the Patent
Rights, as defined in Section 1.2 hereof, and Technical Information, as defined
in Section 1.4 hereof, relating to the Licensed Product; and
C. The Licensor has the right to grant licenses to the Patent Rights
and Technical Information within a defined Territory; and
D. The Licensee desires to obtain a license to enable it to use the
Patent Rights and Technical Information, under the terms and conditions
hereinafter set forth, for the purpose of developing and marketing the Licensed
Product for the purposes and in the Territory specified in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
undertakings contained herein, the parties to this Agreement do hereby covenant
and agree as follows:
1. DEFINITIONS.
---------------
1.1 "Licensed Product" shall mean the Improved Bus Seat Safety
Restraint to be developed, manufactured and sold by Licensee using the Patent
Rights and Technical Information licensed by Licensor to Licensee hereunder as
more fully described on Schedules A and B annexed hereto.
1.2 "Licensee" shall mean a licensee under Article 2 of this
Agreement who has been awarded a license beyond the scope of Article 1.5 of this
Agreement.
1.3 "Patent Rights" shall mean any existing patents and patent
applications, including the Patent Application, that are listed in Schedule B
annexed hereto, any continuation, continuation-in-part, or division of such
listed applications, any applications, based on the subject matter of said
patents or patent applications or improvements thereof, and any applications
based
<PAGE>
on the subject matter of said patents or patent applications or improvements
thereof, and any patent issuing on said applications.
1.4 "Subcontractor Licensee" shall mean a licensee under Article 2
of this Agreement who has been awarded a limited license to manufacture and/or
sell Licensed Products. The Licensee shall remain responsible for all of its
duties agreed upon in this Agreement, regardless of the award of licenses to
Subcontractor Licensee(s).
1.5 "Territory" shall mean the United States, Canada and Mexico. The
Licensor and the Licensee understand that the Licensor has no vested
intellectual property rights in any country outside of the United States unless
individual patents are obtained in each particular country where these rights
are desired.
1.6 "Technical Information" shall mean the know-how, trade secrets,
technical data, design data, drawings, test results, source code and the like,
licensed by the Licensor to the Licensee hereunder which relate uniquely to the
development of the Licensed Product for commercial distribution and sale and
which are referred to in Section 3.1 below and on Schedule C annexed hereto, as
well as the additional training and assistance to be provided by Licensor to
Licensee as described in Section 3.2 below. Such Technical Information shall not
be made available to non-licensed parties or their employees.
2. LICENSE
----------
2.1 The Licensor hereby grants to the Licensee, and the Licensee
hereby accepts from the Licensor, upon the terms and conditions hereinafter
specified, and subject to the provisions of Section 2.2, below, an exclusive
license to use the Patent Rights and Technical Information solely to develop,
manufacture, use, sell and service the Licensed Product and replacement and
spare parts therefor in the Territory and to sell the Licensed Product for
export from the Territory to the countries listed on Schedule D hereto, as such
Schedule D may from time to time be amended by agreement between the parties.
2.2 The license granted by the Licensor to the Licensee under this
Agreement in the Territory and for export as provided above shall be an
exclusive license arrangement. The Licensor represents that no rights have been
granted to others which would conflict with the license rights of the Licensee
under this Agreement or which would diminish the value of the rights conveyed
hereunder.
2.3 The license granted herein shall not be assignable by the
Licensee, nor shall the Licensee have the right to grant sublicenses without
the written consent of the Licensor The prohibition against assignment shall not
preclude the assignment of this Agreement to any corporation or other entity
which is a wholly owned subsidiary of the Licensee. The prohibition against
assignment shall further not preclude the Licensee from subcontracting to
Subcontractor Licensees for the manufacture and/or assembly of the Licensed
Product, any component parts thereof or any replacement parts therefor as
provided in Section 2.4 hereof.
2
<PAGE>
2.4 The Licensee may grant sublicenses to Subcontractor Licensees
for the manufacture and/or sale of Licensed Products to be sold only in the
Territory and those countries where the Licensee has export rights as set forth
in Section 2.1 hereof. As to each sublicense to a Subcontractor Licensee granted
by the Licensee, the following shall apply:
(1) The Licensee shall promptly inform the Licensor of the
subcontract to a Subcontractor Licensee and shall provide the Licensor with
a copy of the agreement with the Subcontractor Licensee, and all amendments
thereto, promptly after execution.
(2) The Licensee shall require its Subcontractor Licensees to
account to it periodically for all sales of the Licensed Products and shall
furnish the Licensor, promptly after receipt, with copies of all such
accountings.
(3) The Subcontractor Licensee agreement shall prohibit sales of
the Licensed Products outside the Territory, except for countries where the
Licensee has export rights and shall provide for termination of the
Subcontractor License agreement if such condition is breached.
(4) The subcontract to the Subcontractor Licensee shall be in
every respect subject to this Agreement, and the Subcontractor Licensee
shall be required, by the Subcontractor Licensee agreement, to honor and be
bound by the provisions of this Agreement as though it were the Licensee
hereunder.
(5) The subcontract to the Subcontractor Licensee shall provide
that it will terminate if this License Agreement is terminated.
2.5 No license is granted under this agreement by the Licensor to
the Licensee, either directly or by implication, estoppel or otherwise, except
as expressly provided in this Article 2. The Licensee shall have rights under
the License only in the Territory, and such rights shall be only as defined and
conditioned in this Agreement. Within the Territory, the Licensee's license
shall be exclusive, subject to the terms and conditions stated in this
Agreement. The Licensor shall not exercise its own rights in the Territory under
the Licensed Technology, but may do so outside the Territory and may issue
licenses to others outside the Territory.
2.6 In the event the Licensor wishes to grant a license allowing the
sale of the Licensed Product outside the Territory, the Licensee shall first be
given a right of first refusal to expand the Territory of this Agreement to
include the area as to which the Licensor wishes to grant such license. Thus,
before granting to a third party a license to sell the Licensed Product outside
the Territory, the Licensor will first offer the Licensee the opportunity to
secure an exclusive license to sell the Licensed Product in such geographic area
on terms no less favorable than those offered by the Licensor to such third
party. Should the Licensee fail to accept the Licensor's offer under this
Article within thirty (30) days after received in writing, the Licensor will be
free to grant a license allowing the making, using or selling of the Licensed
Product in
3
<PAGE>
such geographic area outside the Territory.
2.7 The Licensee agrees to mark, and to cause its sublicensees to
mark, such notices of patents, patent applications, and other proprietary rights
on documentation and packaging for the Licensed Product made and/or sold by the
Licensee as are appropriate to protect the Licensor's intellectual property
rights. The contents of such notices shall be designated by the Licensor,
subject to the consent of the Licensee which shall not be unreasonably delayed
or withheld. The Licensed Product will have, at the option of the Licensor and
subject to the reasonable approval of the Licensee and its sublicensees with
respect to size and placement, either (a) a notice stating that the Licensed
Product was made with the Licensor's technology or (b) a designated trademark of
The Licensor.
3. TECHNICAL ASSISTANCE AND INFORMATION
---------------------------------------
3.1 The Licensor agrees that the Licensor shall furnish to the
Licensee such Technical Information as will enable the Licensee to develop and
manufacture the Licensed Product. Technical Information to be furnished to the
Licensee hereunder is set forth in Schedule C, annexed hereto. All Technical
Information furnished hereunder shall be used by the Licensee exclusively for
the purpose of performing its obligations under this Agreement and shall not be
used for any other purpose without the specific written approval of the
Licensor.
3.2 Upon request of the Licensee, and subject to compliance by the
Licensee and its employees with Section 12.1 hereof, the Licensor shall provide
the Licensee with the services of the Licensor for the purposes of effecting the
transfer of Technical Information. In addition, to the extent practicable, the
Licensor is prepared to furnish additional training and assistance to employees
of the Licensee, provided the parties shall have reached mutual agreement as to
details of, and any compensation to the Licensor for, such additional training
and assistance.
4. CLAIMS BY THIRD PARTIES
--------------------------
4.1 The Licensor declares that, to the best of its knowledge, the
Patent Rights do not infringe any patent or other protection owned or
controlled by persons other than the Licensor. However, no in this Agreement
shall be construed as a representation or a warranty by the Licensor as to the
validity of any patent or other protection hereby agreed to be licensed or that
manufacture, use or sale of the Licensed Product will not infringe any patent or
other protection owned or controlled by persons who are not parties to this
Agreement.
4.2 In the event any patent infringement action is instituted
against the Licensee based upon the exercise of any of the licenses or rights
granted under this Agreement, the Licensee shall promptly notify the Licensor
and the Licensor shall thereafter, through legal counsel of its choice, defend
and prosecute any legal action which results therefrom. The parties hereto will
cooperate fully in all respects in the conduct of such litigation or any
settlement negotiations. The Licensor may not, however, without the prior
written approval of the Licensee, enter into any compromise, stipulation or
other agreement of settlement which may prejudice the
4
<PAGE>
Licensee's rights or obligate the Licensee to pay any monies or other
consideration to a third party. Any costs or expense incurred, or any profits or
awards obtained under this Section 4.2 will be paid or collected by the Licensee
and thereafter deducted or added to the "gross selling price" for the
appropriate reporting period under Section 9 of this Agreement.
4.3 In the event any patent infringement action is instituted
against the Licensor based upon the exercise of any of the licenses or rights
granted under this Agreement, the Licensor shall promptly notify the Licensee
and the Licensee shall have the right to participate in any legal action which
results therefrom. The parties hereto will cooperate fully in all respects in
the conduct of such litigation or any settlement negotiations. The Licensor may
not, however, without the prior written approval of the Licensee, enter into any
compromise, stipulation or other agreement of settlement which may substantially
affect the Licensee's rights or obligate the Licensee to pay any monies or other
consideration to a third party.
5. TECHNICAL REALIZATION AND COMMERCIAL EXPLOITATION
----------------------------------------------------
5.1 The obligations of the Licensor hereunder shall be fully
discharged upon the furnishing to Licensee of the Technical Information as
hereinabove described. The Licensee acknowledges that it fully understands the
subject matter of the license granted under this Agreement and has sufficient
knowledge concerning the Licensed Product to manufacture it in a manner which
will render it suitable for the particular purpose for which it is designed.
5.2 The Licensor does not make any warranty that the Licensed
Product is capable of commercial exploitation and sale, the risks of such
commercial exploitation and sale being assumed exclusively by the Licensee.
5.3 The Licensor agrees that, from and after the date of execution
of this Agreement and until this Agreement shall expire or be sooner terminated,
the Licensor shall not manufacture any Licensed Products, directly or
indirectly.
6. MARKING AND QUALITY
----------------------
6.1 If requested by the Licensor, the Licensee shall affix to each
of the Licensed Products a legend setting forth patent and license information.
6.2 The Licensee agrees that all Licensed Products manufactured and
sold by the Licensee shall be of the standards of quality and reliability
required by applicable laws and regulations pertaining to the Licensed Products.
6.3 The representatives of the Licensor and/or the Licensor shall
have the right, in conjunction with representatives of the Licensee and during
reasonable business hours, to inspect the assembly and/or manufacturing
facilities of the Licensee relating to the Licensed Products and the Licensor
shall have the right to test the Licensed Products at Licensor's expense on the
premises of the Licensee or in other facilities of its own selection; provided,
however, that
5
<PAGE>
such inspection rights shall be limited to two visits annually.
6.4 If the Licensor shall determine that any Licensed Product
manufactured by the Licensee does not comply with the requirements of Section
6.2, the Licensor shall give notice of such fact to the Licensee and shall have
the right, without penalty or retribution, to prevent the sale of any such
Licensed Product of inferior quality.
7. MODIFICATIONS
----------------
Both parties agree that any modifications of the Licensed Product
conceived or acquired by either of them shall be made available to the other
during the term of this Agreement, provided that an agreement with respect to
such modifications or improvements, including the payment of reasonable
royalties therefor, shall have been reached.
8. INSURANCE
------------
8.1 The License shall be responsible for obtaining and maintaining
in full force and effect workers' compensation, employers' liability, business
automobile liability, umbrella liability, intellectual property liability and
commercial general liability insurance pursuant to the requirements of this
Section hereinafter set forth and any other requirements contained herein. The
Licensee shall comply with all state and local insurance statutes and
regulations. The Licensee's commercial general liability and umbrella insurance
policies shall include contractual liability, with limits of not less than the
amounts specified below, and shall include all defense costs, including, but not
limited to, attorneys' fees, court costs, and other similar costs and expenses.
It is understood and agreed that any insurance limits shall not be construed as
a limitation on the Licensee's liability. The policies shall provide coverage
for any liability the Licensee (including its employees, agents, invitees,
contractors and subcontractors) may have for bodily injury or death, personal
and advertising injury, or property damage. The Licensor, including its
divisions, subsidiaries, parent and corporate affiliates, and its owner,
shareholders, officers, directors, employees, and agents shall be included as
"additional insureds" under all insurance policies provided by the Licensee, if
requested by the Licensor, and each policy shall provide a waiver of
subrogation. The Licensor shall not be deemed to fall within the definition of
"an Insured" for purposes of any bodily injury to employee exclusions that may
exist within the Licensee's policy, and the Licensee will provide an endorsement
to this effect. All insurance maintained by Licensee shall be primary to any
which may otherwise be available to the Licensor. All insurance required
hereunder shall be obtained through insurers reasonably satisfactory to the
Licensor.
8.2 If at any time the Licensee fails to obtain insurance (or
provide proof of insurance) in accordance with this Agreement, or otherwise
required by the Licensor, the Licensor may obtain the coverage specified in this
Agreement and charge all associated premiums and costs to the Licensee. The
Licensee shall reimburse the Licensor the cost thereof within fifteen (15) days
of receipt of notice from the Licensor insurance:
6
<PAGE>
<TABLE>
<CAPTION>
8.3 The Licensee agree to maintain the following minimum limits of
insurance:
8.3.1. Workers' Compensation and Employers' Liability Limits:
<S> <C>
8.3.1.1. Workers' Compensation: Statutory Limits
8.3.1.2. Employers' Liability: $1,000,000
8.3.2. Commercial General Liability: (Commercial General Liability Form ISO
1988 or equivalent), including Contractual Liability and Products
and Completed Operations, on an occurrence form for bodily injury
and personal injury or property damage Limits:
8.3.2.1. Bodily Injury & Property Damage per occurrence: $1,000,000
8.3.2.2. Personal Injury & Advertising Injury per occurrence: $1,000,000
8.3.2.3. Products/Completed Operations Aggregate: $1,000,000
8.3.2.4. General Aggregate per location: $2,000,000
8.3.3. Intellectual Property Liability $ 500,000
8.3.4. Umbrella Liability: Liability coverage attaching excess of
Commercial General Liability, Automobile Liability, and Employers'
Liability policies Limits:
8.3.4.1. Per Claim: $3,000,000
</TABLE>
8.4 The Licensee shall obtain and maintain its own expense,
commencing at least thirty (30) days prior to the date of commencement of
distribution of the Licensed Products, product liability insurance, naming the
Licensor as an insured party, from a qualified insurance carrier in an amount
and containing provisions reasonably acceptable to the Licensor, which, as to
amount, the Licensor agrees initially shall be Three Million Dollars
($3,000,000), for personal injury and for property damage. This policy shall
specify that it may not be cancelled by the insuror except after thirty (30)
days prior written notice by the insurer to the Licensor. The Licensee shall
provide a copy of the policy to the Licensor before selling or distributing any
Licensed Products and whenever the policy is modified, renewed or replaced
thereafter.
8.5 The Licensee shall provide a certificate of insurance as
evidence of all insurance policies satisfying the terms and minimum limits
specified above. The Licensee shall cause its insurer to provide thirty (30)
days prior written notice to Licensor of cancellation of, or any material change
in, coverage and the certificate shall provide for such notice.
7
<PAGE>
9. ROYALTIES
------------
9.1 During the term of this Agreement, the Licensee agrees to pay to
the Licensor a royalty of (i) four Percent (4%) of Licensee's gross selling
price with respect to each Licensed Product, parts therefor or manuals relating
thereto sold by the Licensee, up to Five Million Dollars ($5,000,000.00)
annually, and (ii) two percent (2%) of such gross selling price in excess of
Five Million Dollars ($5,000,000.00) annually, provided however, that no royalty
payment shall be paid or required with respect to Licensed Products, parts or
manuals sold by Licensee to Licensor.
9.2 The Licensee agrees to pay to the Licensor a minimum royalty
with respect to each year during the term of this Agreement as follows:
9.2.1 No minimum royalty shall be due with respect to the first
year of the term of this Agreement;
9.2.2 The amount of Twenty-Five Thousand Dollars ($25,000) shall
be due and payable as a minimum annual royalty; and, unless the percentage
royalties above shall exceed such amount, shall be paid on the tenth day
following the second year of this Agreement; and
9.2.3 The amount of Fifty Thousand Dollars ($50,000) shall be
due and payable as a minimum annual royalty, and, unless the percentage
royalties above shall exceed such amount, shall be paid on the tenth day
following the third and each successive year of this Agreement.
9.2.4 The minimum annual royalty shall only be due and payable
if and to the extent that the percentage royalties provided under this
Agreement do not equal the applicable minimum annual royalty due hereunder.
9.3 Subject to payment of the minimum royalty set forth in Section
9.2 above, the Licensor's right to receive payment of the royalty shall accrue
when such Licensed Product, or part or manual therefor, shall have been shipped
by the Licensee and payment or other consideration is received therefor.
9.4 For the purpose of computing royalties under this Agreement,
Licensee's "gross selling price" shall be (1) Licensee's gross invoice price,
without deductions, for Licensed Products and parts and manuals therefor as
packed for shipment, exclusive of transportation costs, taxes, duties and other
miscellaneous changes paid by the Licensee, regardless of whether subsequently
reimbursed by the customer.
9.5 In addition to the royalties provided for above, the Licensee
shall, upon execution of this Agreement, receive from the Licensor one hundred
thousand (100,000) shares of the common stock of the Licensee and, further, upon
the commencement of sales of the Licensed Product by the Licensee, the Licensee
shall issue and deliver to the Licensor shares of 8
8
<PAGE>
common stock of the Licensee with a value upon issuance of One Hundred Thousand
(100,000). The shares of common stock of the License to be transferred to the
Licensor hereunder shall, upon delivery to the Licensor, be fully paid and
non-assessable. The Licensee has a single class of authorized and issued capital
stock, being the common stock described herein. Excepting the common stock, and
warrants and options to purchase or acquire common stock of the Licensee, there
are no other securities, classes of capital stock, rights or preferences of the
Licensee existing or outstanding.
10. SETTLEMENT OF ACCOUNTS
---------------------------
10.1 Royalties for each three month period (the "Quarter") shall be
due and payable within thirty (30) days after the end of the Quarter. Within
thirty (30) days after the expiration of the Quarter, the Licensee shall deliver
to the Licensor a true and accurate report in writing, giving such particulars
of the business conducted by the Licensee during the preceding Quarter as are
pertinent to any accounting for any such royalties under this Agreement.
10.2 Each quarterly royalty payment shall be by bank draft, payable
in U.S. currency and delivered to such account or accounts of the Licensor as
shall be designated in writing by the Licensor on or before the due date
specified in Section 10.1.
10.3 Licensee agrees to keep records showing the quantity,
description and total gross selling price of all Licensed Products and parts and
manuals therefor that have been sold or otherwise disposed of and such other
related information in sufficient detail to enable the compensation payable
hereunder by Licensee to be determined. Licensee further agrees to permit its
books and records to be, examined from time to time, by an outside auditor
selected by Licensor, at Licensor's expense, to verify the reports provided for
in Section 10.1 hereof and the compensation due and payable hereunder.
11. COVENANTS OF PARTIES
------------------------
11.1 Neither Party shall be obligated to disclose to the other party
any proprietary information of a third Party without the consent of such third
party, nor any information the furnishing of which would require the payment of
consideration to a third party other than an employee of the party furnishing
the information.
11.2 Neither party shall be obligated to disclose to the other party
any information which its government does not permit to be disclosed.
11.3 Each Party will use reasonable efforts to perform its
obligations under this Agreement, but shall, except for Licensee's obligation to
make any payment of money under this Agreement, be excused for failure to
perform or for delay in performance hereunder due to (1) causes beyond its
reasonable control or (2) acts of God, acts of the other Party or its
contractors, acts of civil Or militarY authorities (including the Governments of
Canada and the United States and political subdivisions thereof), U. S.
Government priorities, fires, strikes floods, epidemics, war, riot, delays in
transportation, or (3) causes beyond its reasonable control to obtain necessary
9
<PAGE>
labor or materials.
12. CONFIDENTIALITY OF TECHNICAL INFORMATION
--------------------------------------------
12.1 All Technical Information furnished by the Licensor to the
Licensee pursuant to this Agreement shall be treated as confidential by the
Licensee, even after the expiration or earlier termination of this Agreement.
The Licensee shall take all necessary steps to prevent disclosure of any and all
such Technical Information. With the prior consent of the Licensor, the Licensee
shall have the right to disclose to subcontractors such Technical Information as
is necessary but only if a confidentiality agreement substantially in acceptable
form to the Licensor, shall have been executed by such subcontractor in
accordance with this paragraph.
12.2 All Technical Information provided by the Licensor to the
Licensee under this Agreement, as well as any copies or translations thereof
made by the Licensee, shall remain the property of the Licensor and shall be
returned by the Licensee within thirty (30) days from the date of termination or
expiration of this Agreement. At the discretion of the Licensor, the Technical
Information shall be destroyed by the Licensee upon termination or expiration of
this Agreement when so requested by the Licensor, whereupon the Licensee shall
destroy the Technical Information within thirty (30) days from its receipt of
such request and thereafter promptly provide a written certification to the
Licensor that all Technical Information has been destroyed.
13. WARRANTY AND LIMITATION OF LIABILITY
----------------------------------------
13.1 The Licensor represents to the Licensee that the Technical
Information furnished pursuant to this Agreement will correspond to the
Technical Information used by the Licensor.
13.2 The Licensor makes no express warranty, and no warranty shall
be implied, with respect to any Technical Information furnished by it under this
Agreement. It is agreed that the Licensor shall not be liable, whether in
contract, tort or otherwise, nor in any way responsible for:
1. The accuracy, utility, or adequacy of any Technical Information
furnished or disclosed by it in connection with this Agreement, or
2. The performance of products manufactured or repaired or overhauled by
Licensee on the basis of any Technical Information furnished in connection
with this Agreement.
13.3 Each party shall be responsible for the safety of its own
employees and agents with respect to the handling or use of compounds,
materials, and equipment involved in this Agreement. The Licensor makes no
representations, extends no warranties of any kind, either express or implied,
and assumes no responsibility whatever with respect to use, sale, or other
disposition by the Licensee or its venders or other transferees of the Licensed
Product.
10
<PAGE>
The Licensor shall not be liable for any loss, expense, claim, or damages
arising out of or relating to the practice or use of any licensed technology in
the design, construction, and operation of a facility manufacturing or handling
the Licensed Products or in the use or sale of the Licensed Products produced in
such facility.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL,
SPECIAL, CONSEQUENTIAL, OR INDIRECT DAMAGES OF ANY NATURE WHATSOEVER ARISING
FROM THE PERFORMANCE OR FAILURE TO PERFORM OF EITHER PARTY HEREUNDER, OR THE
PERFORMANCE OR FAILURE TO PERFORM OF ANY GOODS DELIVERED UNDER THIS AGREEMENT,
WHETHER DUE TO BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, OR OTHERWISE
EXCEPT AS A RESULT OF SUCH PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE.
14. DURATION OF THE AGREEMENT
-----------------------------
14.1 This Agreement shall become effective after it has been
executed by both Parties hereto and shall continue in force for an initial term
of seven (7) years. The Licensee may elect to renew the term of this Agreement
for three (3) successive renewal terms of five (5) years each by providing
written notice of renewal to the Licensor not less than ninety (90) days prior
to the expiration of the initial term or any renewal term hereunder.
14.2 Either party shall have the right to terminate this Agreement
if the other party shall be in default of any material obligation hereunder. In
such event, the non-defaulting party may give written notice of its election to
terminate the Agreement under this Section 14.2, specifying such default. Unless
the defaulting party remedies the default within ninety (90) days after receipt
of such notice, the non-defaulting party may terminate this Agreement by written
notice, effective on receipt.
14.3 Upon the termination of this Agreement, the Licensee shall
immediately cease and desist from offering for sale or selling any Licensed
Products parts or manuals therefor or services relating thereto, provided,
however, that the Licensee may make sales and perform services required by
contracts or agreements entered into and effective one hundred eighty (180)
calendar days before the date of termination of this Agreement.
14.4 The Licensee's obligations under this Agreement will continue
until the termination or expiration date, for whatever reason, of this
Agreement. In particular, any royalties accrued prior to the effective date of
expiration or termination, or any royalties payable as a result of sales made
after the date of expiration or termination as provided in Section 14.3 above,
shall be payable in accordance with Article 9. In addition, the Licensee's
obligations under Sections 12.1 and 12.2 shall remain in full force and effect
after termination of this Agreement for whatever reason.
11
<PAGE>
14.5 Provided that the Licensed Product is developed for commercial
exploitation and sale, that the Licensed Product successfully passes all
applicable safety and usage tests and standards and that termination of this
Agreement is not due to a breach or default on the part of the Licensor under
this Agreement, then upon any other termination or expiration of this Agreement,
the Licensee shall refrain, for a period of eighteen (18) months following such
termination or expiration, from making, selling or marketing any products which
utilize a safety or lap bar restrain and which compete with the Licensed Product
(and any enhancement thereof developed by the Licensor) in the commercial and
school bus market.
15. SEVERABILITY
----------------
15.1 In the event that any particular provision or requirement of
this Agreement is held to be invalid, such provision or requirement shall remain
in full force and effect to the extent it is not invalid or otherwise
unenforceable, and all other provisions and requirements of this Agreement shall
remain in full force and effect.
15.2 In the event that any provision or requirement hereof shall be
held invalid by any court or other tribunal of competent jurisdiction, the
parties hereto shall endeavor to agree on a new provision or requirement of
comparable economic effect.
16. PROSECUTION
---------------
16.1 Although the Licensor intends to continue prosecution of the
Patent Application, the Licensor reserves the right, in its sole discretion,
with prior written notice to the Licensee, to abandon or to permit to lapse the
Patent Application or any claims set out in the Patent Application. The Licensor
will provide such notice sufficiently prior to such abandonment or lapse so that
it wi1l be possible for Licensee to act to prevent such abandonment or lapse. In
the event the Licensee desires to prevent such abandonment or lapse, the
Licensee shall have the right to itself continue the prosecution and/or to make
payment of any fees or taxes necessary to prevent lapse, provided, however, that
title to the application and any resulting Patent(s) shall remain in the
Licensor, and the Licensee's rights and licenses under this Agreement shall not
change, but the Licensee shall no longer have the obligation to make further
payments to the Licensor under this Agreement with respect to the manufacture,
use, sale, or other disposition of the Licensed Product under any claim that
would have lapsed or been abandoned or any Licensed Patent that would not have
been issued in the absence of such action by Licensee under this Section 16.1.
16.2 During the life of this Agreement, the Licensee agrees not to
attack, directly or indirectly, the validity of any licensed Patent and not to
oppose, directly or indirectly, the issuance of any Patent on the Patent
Application and its non-U.S. counterparts.
16.3 The Licensee shall provide all reasonable assistance to the
Licensor in the prosecution before the United States Patent Office of the Patent
Application. This undertaking by the Licensee is made in recognition that the
protection of the Licensor's intellectual property rights is in the interest of
both parties. In providing such assistance, the Licensee shall act in the
12
<PAGE>
best interests of the Licensor and subject to the continuing consent of the
Licensor, which consent may be withdrawn at any time.
16.4 In the event that any Patent or portion thereof included within
the Licensed Patents shall, during the life of this Agreement, be declared
invalid by a court of last resort or by a court of competent jurisdiction from
whose decision no appeal is seasonably taken, all further payments under Section
9 by the Licensee with respect to such Patent or portion thereof held invalid
shall cease, and the Licensee shall have no further royalty obligations
hereunder with respect thereto, except that, if the Licensee chooses to sell the
Licensed Product notwithstanding the absence of a patent, payment of royalties
shall be made as set forth above in this Agreement. In such event, all the terms
of this Agreement shall continue as to any portions of any such Patent which
shall not have been held invalid. Should the Licensee choose not to sell the
Licensed Product as a result of events described in this Section 16.4, the
Licensee shall notify the Licensor of said choice in writing within a reasonable
time, and this notification will result in immediate mutual termination of this
Agreement.
16.5 Each party shall advise the other promptly upon its becoming
aware of any third-party infringement of the licensed Patent. If, within sixty
(60) days of giving or receiving such notice of a third-party infringement of a
licensed Patent in the Territory, the Licensor fails to institute an
infringement suit and, in the Licensee's judgment, such suit is reasonably
required or justified, the Licensee shall have the right, at its own discretion,
within thirty (30) days thereafter, to institute an action for infringement of
any claim or claims of licensed Patents as embodied in the Licensed Products
manufactured and/or sold by the Licensee. It is agreed that in such event the
Licensee can institute any such suit in the names of both parties to this
agreement and that the Licensee shall bear the expense of any such suit or
suits. Should the Licensee bring any such suit, the Licensor shall cooperate in
all reasonable ways in such suit.
17. AMENDMENTS AND AMPLIFICATIONS
---------------------------------
17.1 This Agreement, including its Schedules, contains the entire
understanding of the parties with respect to the subject matter herein.
17.2 All amendments, amplifications and interpretations, including
additions and notices of termination, must be in writing and shall not be
binding unless signed by both parties hereto.
18. GOVERNING LAW
-----------------
This Agreement shall be governed by and construed under the laws of the
State of California.
19. ARBITRATION
---------------
The parties shall attempt, in good faith, to resolve by negotiation any
claim or controversy arising out of or relating to this Agreement. If a dispute
cannot be resolved by
13
<PAGE>
negotiation, such dispute shall be resolved by arbitration conducted in San
Diego, California, in accordance with the rules of the American Arbitration
Association, which rules are deemed to be incorporated by reference into this
Agreement. There shall be three arbitrators, one to be chosen by the Licensor,
one to be chosen by the Licensee, and the third, who shall be chairman of the
arbitration panel, to be chosen by the two arbitrators selected by the parties,
or, if such persons fail to agree, by the American Arbitration Association. The
arbitration shall be conducted in a single hearing, and the arbitrators shall
render their decision within thirty (30) days of the conclusion of the hearing.
The expenses of the arbitration (including reasonable attorneys' fees) shall be
borne as specified in the decision of the arbitrators and shall be allocated
based on the relative merit of the two positions, as determined by the
arbitrators. The decision of the arbitrators shall be final and nonappealable.
Judgment upon any decision rendered by the arbitrators may be entered by any
court having jurisdiction. Notwithstanding the foregoing:
(1) At the discretion of the party seeking relief, any claim for
temporary or permanent injunctive relief under this Agreement may be heard
in and decided by the state or federal courts in the State of South
Carolina, and in no other courts, and each party consents to the
jurisdiction of such courts for such purpose.
(2) If an action is brought in such a court for such injunctive relief,
such court shall also decide, in the same action, any claims for damages
related to Article X and the Confidentiality Agreement that may be raised
in the same action.
This Section 19 shall apply to all disputes under this Agreement, whether
arising before or after the date of this Agreement.
20. FORCE MAJEURE
-----------------
Neither party shall be liable to the other for delay or failure in
performance of any of the obligations imposed by this agreement if such failure
is beyond the reasonable control, of such party due to FORCE MAJEURE, Force
Majeure shall include any act of God, action of the elements, fire, accident,
riot, labor disturbance, failure or lack of transportation facilities, issuance
of governmental laws, orders, or regulations, or other cause, whether similar or
dissimilar, beyond the reasonable control of the party required to perform. The
party whose performance is impeded by the force majeure condition shall notify
promptly the other party upon the discovery of the force majeure condition,
indicating the anticipated duration and effect of the force majeure condition,
and such party shall be diligent in attempting to remove such force majeure
condition.
21. NO JOINT VENTURE
--------------------
Nothing herein contained shall be construed to place the Licensor and
Licensee in the relationship of partners or joint ventures and neither shall
have any power to obligate or bind the other in any manner whatsoever.
14
<PAGE>
22. NOTICES
-----------
Any notice or consent required or permitted by or in connection with
this Agreement shall be in writing and made by hand delivery, by wire or by
certified mail, return receipt requested, postage prepaid, addressed to the
Licensor or the Licensee at the appropriate address set forth below or to such
other address as may be hereafter specified by written notice by the Licensor or
the Licensee, and shall be considered given as of the date of hand delivery,
wire or as of two (2) business days after the date of mailing, as the case may
be:
If to the Licensee:
MAJESTIC MOTOR CAR COMPANY, LTD.
8880 Rio San Diego Drive
8th Floor
San Diego, CA 92108
Attention: Francis A. Zubrowski, Chief Executive Officer & President
Fax No.: (619) 209-6078
With a copy to:
PATTON BOGGS, L.L.P.
250 West Pratt Street
Suite 1100
Baltimore, Maryland 21201
Attention: James K Deveney, II, Esquire
Fax No.: (410) 659-0621
If to the Licensor:
Adrian P. Corbett
7283 Alliance Court
San Diego, CA 92119
Fax No.: (619)_____-______
With a copy to:
STEINS & ASSOCIATES
7770 Regents, #258
San Diego, CA 92122
Attention: Karl M. Steins
Fax No.: (619) 275-4028
15
<PAGE>
23. BINDING EFFECT
------------------
This Agreement shall be binding upon and shall inure to the benefit
of the Licensor and the Licensee and their respective heirs, legal
representatives, successors and assigns.
24. WAIVER OF BREACH
--------------------
The waiver by either party hereto of a breach of any provisions of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by either party.
25. EXECUTION IN COUNTERPARTS
-----------------------------
This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the first date set forth above.
WITNESS:
LICENSOR:
/s/ Anne C. Dolsen /s/ Adrian P. Corbett (SEAL)
- ------------------ ---------------------
LICENSEE:
MAJESTIC MOTOR CAR
COMPANY, LTD.
/s/ Anne C. Dolsen By: /s/ Francis A. Zubrowski (SEAL)
- ------------------ ------------------------
Francis A. Zubrowski
President & Chief Executive Officer
16
<PAGE>
SCHEDULE A
ATTACHMENT TO LICENSE AGREEMENT BETWEEN CORBETT AND
MAJESTIC MOTOR CAR COMPANY
SUMMARY OF THE LICENSED PRODUCT
-------------------------------
The Licensed Product, as defined specifically in Attachment B to this Agreement,
is an improved bus seat restraint comprising a U-shaped padded bar equipped with
hinges and locking mechanisms at the bar's ends. The restraint bar is designed
to raise up and down to permit passengers to get in and out of the seat, however
the bar will lock and restrain the passenger(s) in the event that the vehicle
experiences a potentially hazardous front or side impact, or in the event of
vehicle roll-over. The restraint bar system is intended to be retrofittable onto
existing vehicle seats, as well as being attachable to new seats at the seat or
bus manufacturer.
<PAGE>
- -------------------------------------------
SCHEDULE B
PATENT APPLICATION
ATTACHMENT TO LICENSE AGREEMENT
BETWEEN CORBETT AND CORI -B17
MAJESTIC MOTOR CAR COMPANY
- -------------------------------------------
IMPROVED BUS SEAT SAFETY RESTRAINT
Inventor: Adrian Corbett
San Diego, CA; U.S.A.
<PAGE>
-1-
IMPROVED BUS SEAT SAFETY RESTRAINT
BACKGROUND OF THE INVENTION
---------------------------
I. Field of the Invention
- --------------------------
This invention relates generally to vehicle passenger safety restraints
and, more specifically, to an Improved Bus Seat Safety Restraint.
2. Description of Related Art
- -----------------------------
Mass transportation vehicles such as buses have been widely used in
virtually every city and town in the developed world for decades. Generally
speaking, these vehicles typically include two or more columns of bench seats
aligned one behind the other with a minimum necessary distance between a
seat and the seat behind it. It is uncommon to find automobile-type lap or
shoulder restraints for the passengers on public transportation vehicles,
apparently because passengers repeatedly fail to engage the belts, either due to
carelessness or due to perceived discomfort. In general, then, there is not
currently a widely used restraint system to prevent passengers of mass
transportation systems from being tossed from their seats in the event of a
vehicle collision or rollover.
This problem is particular egregious in the case of school buses. Many
children ride the bus to and from school five days a week in all weather,
traffic and road
<PAGE>
-2-
conditions. The high frequency of ridership under a variety of conditions
indicates that it is inevitable that more children passengers will experience a
collision while riding a bus than virtually any other passenger group. This is
exacerbated by the fact that children can tend to be particularly unruly while
riding the bus to and from school; the children cannot be relied upon to
engage the current safety restraints, even if they were provided. What is
needed, therefore, is a safety restraint system for vehicles with bench seats
that is easy to use and to be monitored.
MAJERUS, U.S. Patent No. 4,681,344 sought to solve this problem. The
MAJERUS unit comprises a hinged, U-shaped bar attachable to the legs of each
seat in a column and a releasable belt which holds the bar in a
lowered position, laying across the passengers' laps, restraining them from
striking the seat in front of them. When not in use, the MAJERUS belt is
released, and the bar is pivoted up to the stowed position. There are three
serious problems with the MAJERUS system: (1) the locking belt system is as
difficult to enforce as a common lap belt-if the passenger pulls down the bar
(i.e. to mislead the driver into believing that the bar is engaged), but
fails to lock the belt, the system will not provide any restraint; (2) the
MAJERUS belt extends from the bar to the seat at the aisle side of the seat,
thereby trapping the restrained passengers in the seat until the belt is
released; and (3) the system relies upon the passenger to adjust the belt
until the bar is in the proper position - if the belt is left too loose, the bar
won't provide restraint to the passengers, and may even be a hazard. What
is needed, therefore, is a bus passenger safety restraint that is
<PAGE>
-3-
easily engaged, automatically adjusted, and easily verified as such by the bus
driver. This system should further permit the passengers to easily egress in
case of system malfunction.
AMABILE, U.S. Patent No. 4,796,913 sought to solve some of the MAJERUS
problems. The AMABILE device is also a hinged U-shaped bar attached to the next
seat forward. The AMABILE device differs from MAJERUS in that it attaches to
the seatback frame directly and does not require a belt for engagement. The
AMABILE system comprises a pair of pivoting cam hinges at each end of the
U-shaped bar attached to either side of the forward seatback frame. These cam
hinges define three bar positions: an upper limit (stowed position), a lower
limit, and a lower locked limit. The AMABILE bar is automatically engaged
in the lower locked limit position whenever the restrained passengers' inertia
forces the bar forward and into the lower locked cam in the hinges.
One serious problem with the AMABILE system is that it is only
responsive to a passenger accelerating forward relative to the seats, such as in
a front-end collision. The AMABILE bar will not restrain the passengers in the
event of a side collision, or in a bus rollover. Furthermore, the AMABILE
bar is not height-adjustable by the passengers for their particular thigh
height. Once installed, the AMABILE cam hinge has a set locked position that
cannot be adjusted; it is conceivable that a passenger with sufficiently large
thighs will prevent the bar from dropping down low enough to engage if a
collision occurs. Finally, the AMABILE bar is difficult to install in existing
buses. In order to activate both cam hinges (i.e. on both ends of the bar),
the cams must be aligned with each other to a very close tolerance.
Misalignments due to seat frame bending or simply inconsistent installations may
create a
<PAGE>
-4-
situation where one hinge's cam locks while the other hinge doesn't. What is
needed, therefore, is a safety restraint system that engages and locks in front,
and side collisions, and even in the event of vehicle rollover. The system
should be easily installed and aligned on existing buses, and further should
provide adjustability for differing passenger body types.
<PAGE>
-5-
SUMMARY OF THE INVENTION
------------------------
In light of the aforementioned problems associated with the prior
devices, it is an object of the present invention to provide an Improved Bus
Seat Safety Restraint. The preferred safety restraint will comprise a padded
U-shaped bar. The bar has indexed stops at stowed, in-use and lower locked
positions. It is an object that the bar lock and restrain the passenger when the
vehicle experiences a side or front collision, or if the vehicle rolls over. It
is a further object that the bar have a single, fixed pivot point. The preferred
bar will further comprise a padded thigh pad that is height-adjustable to
provide greater comfort to a wide variety of body shapes and sizes. It is a
still further object that the restraint bar system be installable on both
new and existing buses and the like.
<PAGE>
-6-
BRIEF DESCRIPTION OF THE DRAWINGS
---------------------------------
The objects and features of the present invention, which are believed
to he novel, are set forth with particularity in the appended claims. The
present invention, both as to its organization and manner of operation, together
with further objects and advantages, may best be understood by reference to
the following description, taken with in connection the accompanying drawings,
of which:
Figure I is a side view of a pair of school bus seats, the forward of
which has a preferred device of the present invention installed thereon,
Figure 2 is a back view of the forward seat of Figure I depicting the
restraint bar in the in-use and lower locked positions;
Figure 3 is a back view, similar to Figure 2, depicting the restraint
bar in the stowed position,
Figure 4 is a partial cutaway side view of a preferred aisle-side hinge
assembly as it is attached to the front seat of Figure 1,
Figures 5A and 5B are partial side views of the aisle-side hinge
assembly of Figure 4, depicting the rest and engaging positions of the weight;
Figure 6 is a partial cutaway top view of the hinge assembly of Figures
4 and 5;
Figure 7 is a partial cutaway bottom view of the hinge assembly of
Figures 4 - 20 6;
<PAGE>
-7-
Figure 8 is a partial back view of the preferred hinge assembly of
Figures 4 - 7;
Figures 9A and 9B are partial perspective views of the preferred shaft
and spring of Figures 4-8 depicting the relationship between the spring and the
indexing notches 5 on the shaft;
Figures 10A and 10B are perspective views of the preferred restraint
bar of the present invention depicting the action of the preferred thigh pad,
and
Figures 11A and 11B are cutaway side view of the thigh pad of Figures
10A and 10B and the restraint bar of previous figures.
<PAGE>
-8-
DETAILED DESCRIPTION
OF THE PREFERRED EMBODIMENTS
----------------------------
The following description is provided to enable any person skilled in
the art to make and use the invention and sets forth the best modes contemplated
by the inventor of carrying out his invention. Various modifications,
however, will remain readily apparent to those skilled in the art, since the
generic principles of the present invention have been defined herein
specifically to provide an Improved Bus Seat Safety Restraint.
The present invention can best be understood by initial consideration
of Figure 1. Figure 1 is a side view of a pair of school bus seats 10 and 12,
with the forward seat 10 having a preferred device of the present invention
installed thereon to restrain the person(s) seated in the next-rear seat 12. The
device includes a U-shaped restraint bar 14 in hinged attachment to the seat
back 16 of the forward seat 10. The restraint bar 14 may be pivoted into a
stowed position 18 to permit passenger ingress to and egress from the next-rear
seat 12; the hinge assembly (see Figures 4-10) preferably provides an indexed
stop to hold the bar 14 in the stowed position 18 until it is pulled down,
presumably by a passenger seated in the next-rear seat 12. When pulled down from
the stowed position 18, the bar 14 will drop until it either reaches the
passengers' thighs or reaches an indexed in-use position 20. The system further
preferably defines a lower locked position 22 that will permit the bar 14 to
approach the seating surface 24 of the next-rear seat 12 no closer than the
minimum thigh distance 26. This minimum thigh distance 26 may be defined by
law to be a distance sufficient to prevent crushing the passengers' legs. The
system may include a bulkhead stop
<PAGE>
-9-
27, which is essentially a padded protrusion mounted to the bulkhead of the
vehicle, positioned to prevent the bar 14 from traveling down further than the
lower locked position 22. If the seat back 16 happens to be deformed, such as
in the event of a heavy rear impact, the bulkhead stop 27 will prevent the bar
14 from violating the minimum thigh distance 26. It should be appreciated
that one critical aspect of the present invention is the novel pivoting-and-
locking action of the bar 14 that defines a single fixed hinge axis 28 about
which the bar 14 pivots.
Turning to Figure 2, we can view the restraint bar 14 from another
perspective. Figure 2 is a back view of the forward seat 10 of Figure 1
depicting the restraint bar 14 in the in-use and lower locked positions 20
and 22, respectively. As can be seen, the bar 14 is U-shaped, with a center
section 30 and aisle- and window-side ends 32 and 34 extending forwardly where
they are pivotally attached to the seatback 16. As discussed above, the
restraint bar 14 may pivot along the hinge axis 28 to in-use and lower locked
positions 20 and 22, respectively.
Figure 3 is a back view, similar to Figure 2, depicting the restraint
bar 14 in the stowed position 18. In the stowed position 18, the bar's center
section 30 extends above the top of the seat back 16 such that it is easily
viewable by the bus driver desiring to check whether the bar 14 is being
employed properly by the passenger.
Now turning to Figure 4, we might discuss the novel functioning of the
present invention. Figure 4 is a partial cutaway side view of a preferred
aisle-side hinge assembly 36 as it is attached to the front seat of Figure 1. It
should be appreciated that both
<PAGE>
-10-
the aisle-side and window-side hinge assemblies are identical mirror images of
one another; we simply focus on the aisle-side assembly 36 here for ease of
understanding.
The hinge assembly 36 comprises a plurality of mounting brackets 38
made from a hardened material, such as steel, attached to the typically tubular
frame 40 of the seat back 16. The hinge assembly 36 can be attached at
virtually any height along the seat frame 40 that is desired, depending upon the
particular installation. A critical feature of the hinge assembly 36 is that
virtually all components, with the possible exception of the end of shaft 42,
are contained within the seat cover 44 and/or the padding 46 surrounding the
frame 40. As such, all mechanical components of the hinge assembly 36 are hidden
from view and protected from tampering and against injuring the passengers.
Another preferred hinge assembly 36 may comprise "U"-bolts or other substitutes
for the mounting brackets 38, depending upon the particular installation
requirements.
The restraint bar end 32 comprises, a frame 48 surrounded by rubberized
padding thereover, and is fixedly attached to the shaft 42, such that when the
shaft 42 rotates on the hinge axis 28, the restraint bar (see Figures 1-3)
pivots upwardly and downwardly. The shaft 42 is further configured with a
plurality of teeth 52 formed on its surface. A jaw member 54 is pivotally
attached to the mounting brackets 38 in the vicinity of the shaft 42. The jaw
member 54 is also formed with teeth 56 thereon opposite the shaft teeth 52. It
should be obvious that if the jaw member 54 is pivoted such that the jaw teeth
56 engage the shaft teeth 52, the shaft 42 will be prevented from rotating,
which in turn will prevent the restraint bar (see Figures 1-3) from moving. As
designed, the system may be configured to
<PAGE>
-11-
engage in the event of heavy braking or swerving of the vehicle, prior to any
actual impact; it is unnecessary that the passenger strike the bar (see Figures
1 and 2) in order to engage the locking system.
The jaw teeth 56 are caused to engage the shaft teeth 52 when the jaw
member 54 is forced to pivot by the rocking pad 58. The rocking pad 58 is
attached to, and rides on, the fulcrum 69, such that when the fulcrum 69 is
caused to rock back and forth, the rocking pad 58 will urge the jaw member 54
towards the shaft 42. The fulcrum 60 rides atop the fulcrum bracket 62, which is
essentially a metal bracket attached to the mounting brackets 38 to provide a
substantially horizontal surface upon which the fulcrum 60 may rest.
Extending downwardly from the fulcrum 60 is the pendulum rod 64, at the end of
which is a weight 66. It should be apparent, then, that the system functions
like a pendulum such that when impact or gravitational forces cause the weight
66 and pendulum rod 64 to leave vertical alignment by a sufficient amount, the
fulcrum 60 will rock, thereby causing the rocking pad 58 to urge the jaw member
54 towards the shaft 42 until the jaw teeth 56 engage the shaft teeth 52.
To prevent the system from being damaged by excessive downward force
being place on the restraint bar (see Figures 1 and 2), such as if a large child
sits of bounces on it, the preferred hinge assembly may also include a pin 63
protruding radially from the shaft 42 and configured to engage a shaft stop 65
to prevent further rotation of the shaft 42. Further detail regarding the
shaft stop pin 63 and the shaft stop 65 is provided below in connection with
Figures 5, 6 and 8.
<PAGE>
-12-
In order to prevent the bar 14 from being locked in position when the
vehicle is struck from the rear, a weight stop 67 is provided. The weight stop
67 may be a protrusion from the mounting bracket 38, or may actually be a
feature of a metal enclosure for the hinge assembly 36 (not shown). The weight
stop 67 is positioned to prevent the weight 66 from traveling backwards
beyond the rest position (see below).
Figures 5A and 5B are partial side views of the aisle-side hinge
assembly of Figure 4, depicting the rest and engaging positions 68 and 70 of the
weight 66, provided to further illuminate the novel functioning of the present
invention. As can be seen in Figure 5A, the pendulum rod 64 is in vertical
alignment with the fulcrum 60 and the weight 66; the weight 66 being in the
rest position 68. In this rest position 68, the jaw member 54 is also "at
rest", its teeth 56 are not engaged with the shaft teeth 52, and the shaft 42 is
free to rotate about the hinge axis 28.
Figure 5B depicts the weight 66 in the engaging position 70, wherein
the weight 66 is no longer in vertical alignment with the pendulum rod 64 and
the fulcrum 60. In this case, the weight 66 has traveled forward, such as
from the vehicle suffering a front-end collision. When the weight 66 reaches the
engaging position 70, the attached components have forced the jaw member 54 to
pivot around the pivot shaft 72 until the jaw teeth 56 have engaged the shaft
teeth 52. Furthermore, if the vehicle drives up or down a severe enough incline,
the weight 66 might also reach the engaging position 70, thereby locking the
shaft 42 (and restraint bar) from movement. This is an added safety benefit
not available with the prior devices.
<PAGE>
-13-
Still further, it should be understood that the actual location
limit setting of the engaging position 70 is configurable by altering the length
of the pendulum rod 64, for example. It should also be appreciated that once the
jaw teeth 56 and shaft teeth 52 are engaged, the shaft 42 will be released for
rotation after the weight 66 drops to the rest position 68 and any
rotational force on the shaft 42 is relieved (such as by slightly lifting the
restraint bar). It can further be seen that the weight stop 67 will prevent the
weight 66 from traveling backwards sufficiently past the rest position 68 to
cause the jaw 54 to engage the shaft 42.
Figure 6 is a partial cutaway top view of the hinge assembly 36 of
Figures 4 and 5. As depicted here, the mounting brackets 38 are preferably
attached to the frame 40 by a plurality of mounting bolts 74. The shaft 42 is
also configured to rotate in one of the mounting brackets 38 around the hinge
axis 28. Another aspect shown here is the novel means for attaching the
restraint bar 14 to the shaft 42. The preferred restraint bar 14 is formed with
an adapter 78 at its end. The adapter 78 is of the same cross-section as the
shaft 42, and has a mating surface configured to be accepted by a V-notch 76
formed in the end of the shaft 42. As long as the adapter 78 is firmly attached
to the shaft 42, such as by a bolt or the like, the mating surface of the
adapter 78 will engage the V-notch 76 to prevent rotational motion between the
shaft 42 and the bar 14. To remove the restraint bar 14, one need merely remove
the attaching means (i.e. a bolt), and the adapter 78 will slip out of the
V-notch.
Also depicted in Figure 6 is the spring 80. The spring 80 attaches
between the shaft 42 and the mounting bracket(s) 38 to urge the shaft 42 to
rotate and cause the restraint
<PAGE>
-14-
bar 14 to be biased towards the stowed position (see Figures 1-3). This spring
action will assist the passenger in lifting the bar 14 up and out of the way,
but will not be strong enough to cause the bar 14 to lift without manual
passenger assistance. Furthermore, the shaft stop pin 63 is depicted located on
the restraint bar 14 side of the hinge assembly 36 to reduce the torque
generated within the system when engaging the shaft stop (see Figures 4 and 8).
Figure 7 is a partial cutaway bottom view of the hinge assembly 36 of
Figures 4-6 presented to show additional detail regarding these components. It
can be seen that the preferred jaw member 54 extends over substantially the
entire exposed length of the shaft 42, such that all resultant forces created
between the jaw member 54 and the shaft 42 when their teeth (see Figures
4-5) are engaged are adequately transferred to the seat frame 40. Further
depicted is the beveled aperture 82 formed in the fulcrum bracket 62 to allow
the pendulum rod (see Figures 4-5) to pass through and attach to the fulcrum
(see Figures 4-5) and still permit the weight 66 a full range of motion.
Figure 8 is a partial back view of the preferred hinge assembly 36 of
Figures 4-7, provided to give insight into the response of the hinge
assembly 36 in the event of a side collision to the vehicle. As discussed above,
when at rest, the weight 66 will hang in vertical alignment with the pendulum
rod 64, Such that the rocking pad 58 does not push the jaw member 54 to engage
its teeth with those of the shaft 42. When a lateral- or side-impact to the
vehicle causes the weight 66 to move sufficiently left or right to reach one of
the lateral engaging positions 84, the fulcrum (see Figures 4-5) will cause
the rocking pad 58 to push the jaw member 54 upwardly until its teeth are
engaged with the shaft teeth (see Figures 4-5).
<PAGE>
-15-
Here, the shaft stop pin 63 and shaft stop 65 are also depicted; as can be seen,
the preferred shaft stop 65 is inserted in a pair of cooperating apertures (not
shown) in the mounting bracket 38 to provide a rigid stop for the shaft stop pin
63 and shaft 42.
It should also be understood that vehicle rollover will also cause the
weight 66 to reach one of the lateral engaging positions 84, thereby
engaging the jaw member 54 with the shaft teeth (see Figures 4 and 5).
Now turning to Figures 9A and 9B, which are partial perspective views
of the preferred shaft 42 and spring 80 of Figures 4-8, we might discuss the
relationship between the spring 80 shaft 42. In its preferred form, the spring
80 will be formed with an arch 86 near its center. The arch 86 defines an
indexing segment 88 at its apex. The indexing segment 88 is located and
configured to engage the in-use indexing notch 90 and the stowed indexing notch
92, which are formed in the shaft 42. In addition to urging the restraint bar
towards the stowed position, the spring 80 interacts with these indexing notches
90 and 92 to provide positive "stops" at the in-use and stowed positions. Other
intermediate stops may be provided by forming the appropriate notches in
the shaft 42. Once "stopped", the user need merely exert a minimum amount of
force on the restraint bar in order to pop the indexing segment 88 out of the
in-use indexing notch 90. Figure 9B depicts that the shaft 42 has now rotated
until the indexing segment 88 has engaged the stowed indexing notch 92. The
shall teeth 52 are also depicted to show that they do extend over a substantial
portion of the shaft's 42 length. The indexed rotation of the shaft 42 will
provide smoother, less jarring, engagement than the prior devices.
<PAGE>
-16-
Finally, turning to Figures 10A and 10B we may discuss still another
novel aspect of the present invention. These figures are perspective views of
the preferred restraint bar 14 of the present invention depicting the action of
the preferred thigh pad 94. The thigh pad 94 may simply be an oblong pad formed
over the center section 30 of the restraint bar 14. The thigh pad 94 is
rotatable in the upward direction 96 and the downward direction 98 in order to
provide the user with a comfortable place upon which to rest his or her arms
and/or hands. Furthermore, the thigh pad 94 may be rotated to provide greater or
less distance between the restraint bar 14 and the passengers' thighs, if
desired.
While only the pendulum-type locking mechanism has been described
heretofore, it is understood that (1) other locking mechanisms are conceived of
for use in this invention, such as other forms or arrangements of jaw members
and shafts; and (2) any accelerometer-type sensing system beyond the
pendulum-fulcrum system may be used, depending upon the details of a particular
installation.
Now turning to Figures 11A and 11B, we may discuss the details of the
novel thigh pad 94 of the present invention. Figure 11A is a cutaway side
view of the thigh pad of Figures 10A and 10B, and Figure 11B is a partial
cutaway side view of the restraint bar 14 of the previous figures. The thigh pad
94 comprises a thigh pad frame 100, preferably made from metal or other durable
material. The frame 100, like the rest of the restraint bar 14, is surrounded by
padding 50, such as is commonly used in prior restraint bars. The pad 94
further has a durable cover 102 over the padding 50 and frame 100, made from
material which resists cutting, tearing or wear.
<PAGE>
-17-
The frame 100 is further defined by a bore 104, configured to accept
the restraint bar frame 48, and further includes a keyway 106. The keyway 106 is
cooperates with the key 108 such that the thigh pad 94 is permitted to rotate
through it desired range of rotation 96 (in this case 130 degrees). The assist
in assembly of the thigh pad 94, the frame 100, padding 50 (and possibly
other elements) may be divided into two or more sections that are assembled
around the restraint bar frame 48.
Those skilled in the art will appreciate that various adaptations and
modifications of the just-described preferred embodiment can be configured
without departing from the scope and spirit of the invention. Therefore, it is
to be understood that, within the scope of the appended claims, the
invention may be practiced other than as specifically described herein.
<PAGE>
-18-
CLAIMS
------
What Is Claimed Is:
- -------------------
1. An improved passenger safety restraint for vehicles having a column of at
least two seats, each said seat defined by a frame, and each pair of said seats
having a front seat and a rear seat, said vehicles configured to travel along a
geometric plane, comprising:
a pair of hinge assemblies, each said assembly comprising a shaft
pivotally attached to said front seat to rotate about a fixed axis;
a restraint bar attached to said shaft for restraining a passenger
seated in said rear seat;
sensing means for sensing acceleration to the vehicle along the
vehicle's driving plane; and
locking means for preventing said shaft from rotating, said locking
means responsive to said sensing means.
2. The safety restraint of Claim 1, wherein said sensing means further senses
when said vehicle is tilting.
3 The safety restraint of Claim 2, wherein each said hinge assembly further
comprises indexing means for providing indexed stops in the rotation of said
shaft.
4. The safety restraint of Claim 3, wherein said restraint bar further comprises
a U-shaped bar, comprising:
a center section having ends;
<PAGE>
-19-
a pair of arms, each said arm extending from one said end and
terminating in a hinge adapter; and
an adjustable thigh pad attached over said center section.
5. The safety restraint of Claim 4, wherein said restraint bar further defines a
stowed position, an in-use position, and a lower locked position.
6. The safety restraint of Claim 5, wherein one said hinge assembly is attached
to each said center section end, and said hinge assemblies further comprise:
at least one mounting bracket for attachment to one side of said frame;
a pair of shaft apertures formed in at least one of said mounting
brackets for accepting said shaft and permitting said shaft to rotate, and
said locking means.
7. The safety restraint of Claim 6, wherein:
said locking means further comprises a jaw member further defined by
teeth, said jaw member pivotally attached to at least one of said mounting
brackets;
said shaft is further defined by a cylindrical outer surface further
defined by a plurality of teeth; and
said sensing means further includes a rocking pad, said rocking pad
configured to drive said jaw member teeth into said shaft teeth to lock rotation
of said shaft.
8. The safety restraint of Claim 7, wherein said sensing means further
comprises:
<PAGE>
-20-
a free-hanging weight, said weight being suspended from said rocking
pad by a pendulum rod, said weight and said pendulum rod normally being in
vertical alignment; and
whereby if said weight and said pendulum make sufficient departure from
vertical alignment to indicate an emergency situation, said rocking pad will be
caused to drive said jaw member teeth into said shaft teeth.
9. The safety restraint of Claim 8, wherein each said restraint bar end is
further defined by an adapter forming a knife edge; and
said shaft is further defined by a V-notch at each end, each said
V-notch configured to accept one said adapter, said knife edges and said
V-notches dependently configured to prevent rotation between said shaft and said
restraint bar.
10. The safety restraint of Claim 9, wherein said sensing means further
comprises:
a fulcrum bracket attached to at least one of said mounting brackets,
and
a fulcrum attached between said rocking pad and said pendulum rod,
whereby said rocking pad, said fulcrum, said pendulum rod and said weight rest
on said fulcrum bracket.
11. A safety restraint for buses having columns of seats, comprising:
a U-shaped restraint bar defining a center section and two ends
extending perpendicularly therefrom;
a pair of hinge assemblies attached to one said seat, each said
assembly further including a shaft attached one said end, and configured to
permit said restraint bar to rotate about said shaft axis on a fixed rotation
axis.
<PAGE>
-21-
12. The safety restraint of Claim 11, wherein said hinge assemblies are further
configured to lock said rotation in response to said bus entering a collision or
being excessively tilted.
13. The safety restraint of Claim 12, wherein each said hinge assembly further
comprises a pendulum assembly, each said pendulum assembly being configured to
lock said rotation when forces incident upon said seats exceed predetermined
settings.
14. The safety restraint of Claim 13, wherein said exceeding of settings is
indicated when said pendulum assembly deflects to an engaging position, said
engaging position defined as being some predetermined distance from a rest
position.
15. The safety restraint of Claim 14, wherein said shaft is further configured
to be releasibly held in a stowed position and an in-use position.
16. The safety restraint of Claim 16, wherein said center section is further
defined by a thigh pad, said thigh pad having a generally oblong cross section,
and said thigh pad being further configured to be rotatable about the axis of
said center section.
17. A safety restraint system for bench seats, said seats comprising seatbacks
and said seats being aligned in at least one column, comprising:
a pivotal restraint bar; and
a locking means, sensitive to lateral acceleration and tilting, for
locking said pivotal motion.
18. The safety restraint system of Claim 17, further comprising a thigh pad
rotatably attached to said restraint bar, said thigh pad comprising a
substantially flat upper surface and a substantially oblong cross section.
<PAGE>
-22-
19. The safety restraint system of Claim 18, wherein said locking means further
comprises:
a rotatable shaft attached to said restraint bar and further defined by
a plurality of teeth formed on its surface; and
a jaw member configured with teeth to engage said shaft teeth to
prevent rotation of said shaft.
20. The safety restraint system of Claim 19, wherein said locking means further
comprises a spring and said shaft is further defined by at least one indexing
notch in its surface, said spring and said at least one notch dependently
configured to provide at least one indexed stop in the rotation of said shaft.
<PAGE>
-23-
ABSTRACT OF THE DISCLOSURE
--------------------------
An Improved Bus Seat Safety Restraint is disclosed. The preferred
safety restraint comprises a padded U-shaped bar that has indexed stops at
stowed, in-use and lower locked positions. The bar locks and restrains the
passenger when the vehicle experiences a side or front collision, or if the
vehicle rolls over. The bar preferably has a single, fixed pivot point. The bar
further comprises a padded thigh pad that is height-adjustable to provide
greater comfort to a wide variety of body shapes and sizes. Still further, the
restraint bar system is installable and easily aligned on both new and existing
buses and other mass transportation vehicles.
<PAGE>
[FIG. 1 GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 2 GRAPHIC APPEARS HERE]
[FIG. 3 GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 4 GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 5B GRAPHIC APPEARS HERE]
[FIG. 5A GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 7 GRAPHIC APPEARS HERE]
[FIG. 6 GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 8 GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 9A GRAPHIC APPEARS HERE]
[FIG. 9B GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 10A GRAPHIC APPEARS HERE]
[FIG. 10B GRAPHIC APPEARS HERE]
<PAGE>
[FIG. 11A GRAPHIC APPEARS HERE]
[FIG. 11B GRAPHIC APPEARS HERE]
<PAGE>
[BAR CHART APPEARS HERE]
PROJECTED LAP BAR DEVELOPMENT SCHEDULE
TASK MARCH APRIL MAY JUNE JULY AUGUST
1. COMPLETE DRAWINGS
2. PRODUCE PROTO. #1
3. SEATS ARRIVE
4. CONFIRM SEATS TO
DRAWINGS
5. PRODUCE FOAM PLUG
AND MOLD
6. PRODUCE 5 PROTOTYPES
7. CONFIRM PROTOTYPES
8. PRODUCE 50 UNITS
9. CONFIRM UNITS
10. LAB TESTS
STATIC & DYNAMIC
11. DOT TEST
12. PRODUCE SHORT RUN
TOOLING
13. RUN 1000 UNITS
SCHEDULE C
ATTACHMENT TO LICENSE AGREEMENT
BETWEEN CORBETT AND
MAJESTIC MOTOR CAR COMPANY
<PAGE>
SCHEDULE D
ATTACHMENT TO LICENSE AGREEMENT BETWEEN CORBETT
AND MAJESTIC MOTOR CAR COMPANY
COUNTRIES TO SELL LICENSED PRODUCT WITHIN
-----------------------------------------
1. Europe (all countries)
2. Australia
3. Korea
PROMISSORY NOTE
---------------
From
SkyTex International, Inc.
a Nevada corporation
to the Order of
MEI WAH COMPANY, INC.,
a California corporation
October 1, 1998
<PAGE>
October 1, 1998 $260,000.00
PROMISSORY NOTE
---------------
FOR VALUE RECEIVED, the undersigned SKYTEX INTERNATIONAL, INC., a
Nevada corporation (the "Borrower") promises to pay to the order of MEI WAH
COMPANY, INC., a California corporation (the "Lender") at the Lender's offices
at 645 Battery Street, San Francisco, California, 94111 or at such other place
as the Lender may from time to time designate, the principal sum of Two Hundred
Sixty Thousand Dollars ($260,000.00), or so much of the principal sum of this
Promissory Note as has been advanced to the Borrower pursuant to the provisions
of this promissory note (the "Promissory Note") and certain documents and
writings executed and delivered to the Lender by the Borrower and other
signatory parties (the "Loan Documents") in connection with the obligation
evidenced herein (the "Loan"), together with interest thereon at the rate
hereafter specified and any and all other sums which may be owing to the Lender
by the Borrower under this Promissory Note, on December 31, 1999 (the "Maturity
Date"). which is the final and absolute due date of this Promissory Note,
subject to acceleration as herein set forth. The following terms shall apply to
this Promissory Note.
Section 1. INTEREST RATE. For the period from the date hereof until all
sums due hereunder, whether principal, interest, penalties, fees or other sums
have been paid in full, interest shall accrue on the disbursed and unpaid
principal balance of each Advance under this Promissory Note at the fixed rate
of twelve percent (12%) per annum.
Section 2. CALCULATION OF INTEREST. Interest shall be calculated on the
basis of a three hundred and sixty (360) days per year factor applied to the
number of actual days elapsed.
Section 3. TERM. The term of this Promissory Note shall be for a period
(the "Term") extending from the date of this Promissory Note and continuing
until the Maturity Date, which Maturity Date is subject to acceleration as set
forth herein.
Section 4. REPAYMENT. For the period from the date of this Promissory
Note until and including January 1, 1999, this Promissory Note shall be repaid
in monthly installments of accrued interest only, in the amount of Two Thousand
Six Hundred Dollars (2,600.00) per month, as prorated for any portion of a
month, payable on the first day of November and December, 1998 and on the first
day of January 1999. Beginning on February 1, 1999 and continuing until January
1, 2000, this Promissory Note shall be paid in twelve (12) equal monthly
installments of principal and interest, in the amount of Twenty Three Thousand
One Hundred Dollars and Sixty Nine Cents ($23,100.69) until the Maturity Date as
above set forth, or such earlier date arising by acceleration, at which time the
unpaid principal balance and any and all sums due under this Promissory Note and
the other Loan Documents, including accrued Interest, late fees and penalties
shall be due and payable in full.
<PAGE>
Section 5. APPLICATION OF PAYMENTS. All payments made hereunder shall
be applied first to any fees or expenses incurred by Lender hereunder, if any,
next to accrued interest, and then to principal or, during any default by the
Borrower, in such other order or proportion as the Lender, in its discretion,
may determine.
Section 6. MANNER AND METHOD OF PAYMENT. All payments called for in
this Promissory Note shall be made in lawful money of the United States of
America. If made by check, draft, or other payment instrument, such check,
draft, or other payment instrument shall represent immediately available funds.
Section 7. PREPAYMENT. The Borrower may not prepay this Promissory Note
at any time on or after the date which occurs sixty (60) days from the date of
this Promissory Note. In the event that this Promissory Note is prepaid prior to
such date, the Borrower shall pay a prepayment penalty to the Lender in an
amount equal to the interest which would have accrued under this Promissory Note
from the date of prepayment to the date which occurs sixty (60) days from the
date of this Promissory Note.
Section 8. ACCELERATION UPON DEFAULT. Upon the failure to pay any
amount when due under this Promissory Note, which failure is not cured or
discharged within a period of five (5) days following receipt of written notice
therefor, or upon any default under any other Loan Document, which default is
not cured within the applicable cure period following written notice thereof,
the Lender may, in the Lender's sole and absolute discretion and without notice
or demand, declare the entire unpaid balance of principal plus accrued interest
and any other sums due hereunder immediately due and payable.
Section 9. DEFAULT INTEREST RATE. Upon the failure to pay any amount
when due under this Promissory Note, which failure is not cured or discharged
within a period of five (5) days following receipt of written notice therefor,
or upon any default under any other Loan Document, which default is not cured
within the applicable cure period following written notice thereof, the Lender
may, in addition to any other remedy the Lender may exercise, raise the rate of
interest accruing on the disbursed unpaid principal balance by four (4)
percentage points above the rate of interest otherwise applicable, until such
default Is cured.
Section 10. EXPENSES OF COLLECTION. Should this Promissory Note be
referred to an attorney for collection following a default by the Borrower, the
Borrower shall pay all of the Lenders costs, fees and expenses (including
reasonable attorneys' fees) resulting from such referral, even if judgement has
not been confessed or suit filed.
Section 11. WAIVERS BY THE BORROWER. The Borrower waives presentment,
notice of dishonor and protest, notice of intention to accelerate the maturity
hereof and notice of the actual acceleration of the maturity hereof.
Section 12. EXTENSIONS OF MATURITY. The Borrower hereby agrees that the
Maturity Date, or any payment due hereunder, may be extended at any time or from
time to time by the Lender without releasing, discharging, or affecting the
liability of such party.
<PAGE>
Section 13. COMMERCIAL LOAN. The Borrower represents and warrants that
the debt evidenced hereby is a commercial loan transaction within the meaning of
Sections 12-103(c) and 12-103(e), Commercial Law Article, Annotated Code of
Maryland.
Section 14. NOTICES. Any notice or demand required or permitted in
Connection with this Promissory Note shall be in writing and made by hand
delivery, by wire or facsimile transmission, by overnight courier service for
next day delivery or by certified mail, return receipt requested, postage
prepaid, addressed to the Lender or the Borrower at the appropriate address set
forth below or to such other address as may be hereafter specified by written
notice by the Lender or the Borrower, and shal1 be considered given as of the
date of hand delivery, wire or facsimile transmission, as of the date specified
for delivery if by overnight courier service, or as of two (2) days after the
date of mailing as the case may be:
If to the Lender:
Mei Wah Company, Inc.
645 Battery Street
San Francisco, California 94111
Attention: Chung F. Han, President
Fax No.: (415)398-2232
If to the Borrower:
SkyTex International, Inc.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Fax No. (619) 209-6077
Section 15. GOVERNING LAW. This Promissory Note shall be strictly
governed by and construed under the laws of the State of Maryland.
Section 16. BINDING NATURE. This Promissory Note shall inure to the
benefit of and be enforceable by the Lender and the Lender's successors and
assigns and any other person to whom the Lender may grant an interest in the
Borrower's obligations to the Lender, and shall be binding and enforceable
against the Borrower and the Borrower's successors and assigns.
Section 17. INVALIDITY OF ANY PART. If any provision or part of any
provision of this Promissory Note Shall for any reason be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Promissory Note and this
Promissory Note shall be construed as if such invalid, illegal or unenforceable
provision or part hereof had never been contained herein, but only to the extent
of its invalidity, illegality or unenforceability.
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Promissory Note under seal on
this 1st day of October, 1998 with the specific intention that this Promissory
Note constitute an instrument under seal.
WITNESS: BORROWER:
SKYTEX INTERNATIONAL, INC.,
a Nevada corporation
/s/ MARK ROBERTS By: /s/ RALPH MORREN (SEAL)
- -------------------------------- -----------------------
Ralph Morren, President
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made as of the 28th day
of May, 1999, by and between The Majestic Companies, Ltd., a Delaware
corporation (the "Company"), and Venture Consultants, LLC, a Maryland limited
liability company (the "Consultant").
RECITALS
A. The Company wishes to obtain the services of Consultant as a
consultant to the Company and Consultant desires to render such services to the
Company, all upon the terms and conditions set forth in this Agreement;
B. In order to retain the Consultant, the Company and the Consultant
wish to execute and enter into this Agreement;
NOW THEREFORE, in consideration of mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
1. Engagement of Consultant.
The Company hereby engages the Consultant as a consultant and advisor
with respect to the matters specified in Section 3 hereof under the terms and
conditions set forth in this Agreement. The Consultant hereby accepts such
engagement as a consultant to the Company upon the terms and conditions set
forth in this Agreement
2. Term.
Unless sooner terminated or extended as provided for in this Agreement,
the term of engagement of the Consultant by the Company under this Agreement
shall be for an initial term of one (1) year. Thereafter, the engagement of the
Consultant under this Agreement shall renew automatically from year to year.
However, either party may terminate such engagement at any time during the term
of this Agreement upon thirty (30) days or more prior written notice to the
other party.
3. Consulting Services.
3.1. The Consultant shall assist and advise the Company in its
marketing efforts and in the formation of strategic relationships, the
introduction of the Company to individual and institutional investors and the
implementation of a shareholder relationship plan During the term of the
consulting engagement under this Agreement, the Consultant shall use the best
efforts of the Consultant to further the operations of the Company and, in this
regard the Consultant shall be reasonably available, at such times and places as
reasonably requested by the
<PAGE>
Company and agreed to by the Consultant to meet with, assist, advise and
otherwise work with and for the Company and its responsible personnel with
regard to: (i) advice on the proper and efficient conduct of the business of the
Company; (ii) future business activities of the Company as to which the
Consultant may have or acquire knowledge; (iii) the development of business
opportunities and (iv) any other matters which the parties may hereafter
reasonably agree upon. It is specifically understood that the Consultant has
complete discretion and control as to how the duties of the Consultant under
this Agreement shall be discharged. The Consultant shall be under the
supervision of and shall report to the President and Chief Executive Officer of
the Company.
3.2. During the term of this Agreement, the Consultant shall
serve the Company faithfully and to the best of the Consultant's ability, and
shall devote such time, attention, skill and efforts to the performance of the
duties required by or appropriate to the engagement of the Consultant as the
Consultant deems necessary or advisable.
3.3. The Company agrees that the Consultant's undertaking
herein shall be on a "best efforts" basis and the Company is satisfied, after
completing its due diligence, that the Consultant has the experience and ability
to perform the services to be performed under this Agreement. However, the
Company acknowledges that the Consultant does not guarantee that the
Consultant's efforts will have any impact on the Company's business or that any
financial improvement will result from the Consultant's efforts.
3.4. The Company understands that the Consultant is currently
providing services, which may be substantially similar in nature to the services
being rendered to the Company, to other individuals or entities, and the Company
agrees that the Consultant is not prevented or barred from rendering such
services of the same nature or of a similar nature to any other individual or
entity. In addition, the Consultant understands and agrees that the Company
shall not be prevented or barred from retaining other persons or entities to
provide services of the same or similar nature as those provided by the
Consultant.
4. Compensation
4.1. In consideration of the services to be rendered by the
Consultant hereunder the Company shall pay to the Consultant, and the Consultant
agrees to accept, as full compensation for such services, consulting fees of (i)
upon the execution of this Agreement, warrants to purchase one hundred thousand
(100,000) shares of the common stock of the Company at an exercise price of
Fifty Cents ($.50), exercisable on a cash or cashless basis, for a period of
three (3) years from the date of issuance thereof, (ii) for each month of the
consulting engagement hereunder, additional warrants to purchase ten thousand
(10,000) shares of common stock of the Company, on the same terms as set forth
above, (iii) upon the placement of any debt or equity offering arising from the
efforts of the Consultant, whether during or after the term of engagement of the
Consultant under this Agreement, a commission of six percent (6%) of the
principal amount of such offering payable in cash upon closing of such
transaction, and (iv) upon a closing by the Company, as a result of the efforts
of the Consultant, of either a relationship with an investment banking firm or
the implementation
2
<PAGE>
and funding of a financial services operation, warrants for thirty thousand
(30,000) shares of the common stock of the Company for each such transaction on
the same terms as set forth above. The initial monthly payment of compensation
due under this Agreement has been paid by the Company to the Consultant prior to
the execution of this Agreement.
4.2. All third party and out of pocket expenses that the
Consultant shall incur on behalf of the Company in performing services under
this Agreement will be the responsibility of the Company and will be paid or
reimbursed upon the presentation of appropriate receipts or other requisite tax
documentation. Any single expense item which exceeds One Thousand Dollars
($1,000.00) must be approved in advance by the Company. In addition to specific
reimbursable expenses, the Company shall pay to the Consultant, on the first day
of each month a monthly non-allocated expense reimbursement to defray indirect
expenses in the sum of Five Hundred Dollars ($500.00) per month.
4.3. The Consultant shall not be nor be deemed to be an
employee of the Company and shall not be eligible to participate in any fringe
benefit programs adopted by the Company from time to time.
4.4. The Consultant shall be responsible and liable for the
payment of any and all federal, state and local taxes payable by reason of the
Consultant's receipt of compensation under this Agreement and for any and all
taxes, contributions or other sums payable for unemployment compensation
insurance and old age retirement benefits. The Consultant agrees to indemnify
and hold harmless the Company from and against any and all liabilities,
obligations, costs and expenses, including attorneys' fees, resulting from any
claim asserted against the Company with respect to the withholding, reporting or
payment of employment or income taxes in connection with compensation or amounts
payable to the Consultant under this Agreement.
4.5. The Consultant shall not be entitled to participate in or
receive any fringe or retirement benefits, including medical, dental, life
insurance, disability insurance or retirement benefits, which the Company may
provide to its employees from time to time.
4.6. The Consultant shall be responsible for providing
worker's compensation and liability insurance coverages for the Consultant and
any agents or employees retained by the Consultant and shall be responsible for
any and all claims, damages and suits resulting from the negligence or improper
performance of obligations by the Consultant or any agents or employees of the
Consultant.
5, Relationship of Parties.
The Company and the Consultant acknowledge and agree that the
relationship between them shall be that of principal and independent contractor
and this Agreement shall be so construed for all purposes. The Consultant shall
have the right to determine the manner in which the consulting services provided
for herein shall be performed. The Company expressly retains the right to
approve, in its sole discretion, each and every transaction on which the
Consultant
3
<PAGE>
shall render consulting services that involves the Company as a party to any
agreement. The Consultant and the Company mutually agree that the Consultant is
not authorized to enter into any agreements on behalf of the Company.
6. Termination.
6.1. The Consultant's engagement hereunder may be terminated
immediately by the Company for Cause upon written notice to the Consultant. The
term "for Cause" for the purposes of this Agreement shall mean any (1) breach or
violation of the terms and conditions of this Agreement by the Consultant which
is not cured within fifteen (15) days after notice from the Company thereof; (2)
willful disregard of or failure to perform duties or obligations under this
Agreement; (3) dishonesty; (4) selling, passing, or otherwise using without
permission any confidential information of the Company; (5) action or engagement
in competition of the Company; or (6) the death of the Consultant.
6.2. The Consultant's engagement hereunder may be terminated
by the Consultant for breach by the Company of any material provision of this
Agreement Following written notice thereof by the Consultant to the Company and
the failure to cease such breach within a period of fifteen (15) days, following
such written notice.
6.3. Either party may terminate the Consultant's engagement
under this Agreement by providing the other with written notice of termination
pursuant to Section 2 above.
7. Non-Disclosure of Confidential Information.
7.1. The Consultant acknowledges that it is the policy of the
Company to maintain as secret and confidential all Confidential Information as
hereinafter defined. "Confidential Information" shall mean any information, not
generally known in the Company's industry, heretofore or hereafter acquired,
discovered, developed, conceived, originated, used or prepared by the Company or
by an employee of the Company as the result of employment with the Company and
which falls within the following categories:
(i) information relating to trade secrets of the
Company or any supplier, customer, distributor, independent representative or
consultant of the Company;
(ii) information relating to existing or contemplated
products, services, technology, designs, processes, manuals, formulas, computer
systems and/or software, and any research or development of the Company or any
supplier or customer of the Company;
(iii) information relating to financial statements,
business plans, sales or marketing methods, methods of doing business,
distributor or independent representative lists or information, customer lists,
customer usages and/or requirements, and supplier or customer information of the
Company or any supplier or customer of the Company;
4
<PAGE>
(iv) information relating to work products of the
Company in general; and
(v) any other Confidential Information that either
the Company or any supplier, distributor, independent representative or
consultant customer of the Company may wish to protect by patent, copyright or
by keeping it secret and confidential.
7.2. The Consultant recognizes that the services to be
performed by the Consultant are special and unique, and that by reason of such
services, the Consultant will acquire Confidential Information. The Consultant
recognizes that all such Confidential Information is the property of the
Company. In consideration of the Company's entering into this Agreement, the
Consultant agrees that:
(i) the Consultant shall never, during the term of
engagement or thereafter, directly or indirectly, use, publish, disseminate or
otherwise disclose any Confidential Information obtained in connection with the
Consultant's engagement by the Company without the prior written consent of the
Company; and
(ii) during the term of engagement by the Company,
the Consultant shall exercise all due and diligent precautions to protect the
integrity of the Company's Confidential Information and, upon termination of
such engagement, the Consultant shall return all documents containing any
Confidential Information and any copies thereof, in the possession or control of
the Consultant.
7.3. Upon termination or expiration of this Agreement, the
Consultant shall immediately deliver to the Company all books, records,
memoranda, reports, software data and documents relating to the Company's
business, suppliers, customers and other assets of the Company in the
possession, custody or under the control of the Consultant, whether or not such
material contains Confidential Information.
7.4. The Consultant agrees that the provisions of this Section
7 are reasonably necessary to protect the proprietary rights of the Company in
Confidential Information and its trade secrets, goodwill and reputation. The
provisions of this Section 7 shall survive any termination of this Agreement.
8. Representations and Warranties of the Consultant. The Consultant
hereby represents and warrants the following to the Company:
8.1. The Consultant is able in all respects to execute and
perform this Agreement, and the execution and performance hereof does not
constitute a breach or default under any other agreement, contract or
arrangement which is binding upon the Consultant.
8.2. The Consultant is entering into this Agreement in good
faith, is free to execute this Agreement and to enter into the engagement
pursuant to the provisions hereof.
5
<PAGE>
9. Representations and Warranties of the Company. The Company
represents and warrants to the Consultant, each such representation and warranty
being deemed to be material, that:
(a) The Company will cooperate fully and timely with the
Consultant to enable the Consultant to perform the obligations of the Consultant
under this Agreement;
(b) The execution and performance of this Agreement by the
Company has been duly authorized by the Board of Directors of the Company in
accordance with applicable law;
(c) The performance by the Company of this Agreement will not
violate any applicable court decree, law or regulation nor will it violate any
provision of the organizational documents of the Company or any contractual
obligation by which the Company may be bound;
(d) Because the Consultant will rely upon information being
supplied by the Company, all such information shall be true, accurate, complete
and not misleading, in all material respects;
(e) Any warrants or shares issued to the Consultant under this
agreement, when issued, will be duly and validly issued, fully paid and
non-assessable with no personal liability to the ownership thereof; and
(f) The Company will act diligently and promptly in reviewing
materials submitted to it by the Consultant to enhance timely distribution of
such materials and will inform the Consultant of any inaccuracies contained
therein prior to dissemination.
10. Notices.
Any notice, request, instruction or other document to be given under
this Agreement to any party hereunder shall be in writing and delivered
personally, by overnight courier delivery service or by certified mail, postage
prepaid, to the following addresses:
If to the Company:
<TABLE>
<CAPTION>
<S> <C>
The Majestic Companies, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Attention: Francis A. Zubrowski, President and Chief Executive Officer
</TABLE>
6
<PAGE>
If to the Consultant:
Venture Consultants, LLC
8100 Oakberry Court
Suite 910
Pasadena, Maryland 21122
Attention: D. Jeffrey Rice, Managing Director
or to such other addresses as a party hereto may hereafter designate in writing
to the other party and shall be deemed delivered as of the date of hand
delivery, as of the date following delivery to an overnight courier delivery
service or as of three (3) days following mailing by certified mail.
11. Benefit and Assignment.
This Agreement shall be binding upon and shall inure to the benefit of
the Company and the Consultant and their respective heirs, legal
representatives, successors and assigns, provided, that, neither the Consultant
or the Company may make any assignments of this Agreement or any interest
herein, by operation of law or otherwise, without the prior written consent of
the other party hereto.
12. Amendment and Entire Agreement.
This Agreement cannot be modified or changed except by an instrument in
writing, signed by both parties to the Agreement. This Agreement contains the
entire understanding between the Company and Consultant with respect to the
matters referenced herein.
13. Severability.
In the event of invalidity or unenforceability of any one or more
provisions of this Agreement, such invalidity or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other provisions shall be deemed to remain in full force and effect.
14. Governing Law.
This Agreement shall be construed and governed in accordance with the
laws of the State of Maryland.
15. Consent to Suit.
Any legal proceeding arising out of or relating to this Agreement shall
be instituted in the United States District Court for the District of Maryland,
or if such court does not have jurisdiction or will not accept jurisdiction, in
any court of general jurisdiction in the State of Maryland, and the Consultant
hereby consents to the personal and exclusive jurisdiction of such court and
hereby waives any objection that the Consultant may have as to the venue of any
such
7
<PAGE>
proceeding and any claim or defense of inconvenient forum.
16. Disputes.
16.1. All claims, disputes, controversies, differences or
misunderstandings between the parties arising out of; or by virtue of this
Agreement or the interpretation of this Agreement, including the determination
of "for Cause" under Section 6 hereof which cannot be settled or resolved by the
parties hereto will be settled or determined by arbitration by a panel of three
arbitrators as herein provided. When a party wishes to submit a question or an
issue to arbitration it will serve a notice upon the other party, setting forth
the matter or matters to be arbitrated and the name and address of its
arbitrator and within thirty (30) business days thereafter the other party will
name its arbitrator and give written notice to the other party originally
invoking arbitration of his name and address. Within ten (10) business days
thereafter a third arbitrator will be appointed by the two arbitrators so
selected.
16.2. If the party upon whom notice is served should fail to
appoint an arbitrator within the time provided, or if the two arbitrators named
in accordance with Section 16.1 of this Section should not agree upon a third
arbitrator, such second or third arbitrator (or both) shall be appointed by the
American Arbitration Association in Washington, D.C.
16.3. Unless all the arbitrators otherwise agree, an
arbitration under this Agreement will be conducted in Baltimore, Maryland under
the rules and regulations of the American Arbitration Association not in
conflict with the provisions of this Section.
16.4. The parties will abide by and perform in accordance with
the decisions, awards or orders of the arbitrators selected at any time, or from
time to time pursuant to the provisions of this Section, and the arbitrators
may, and are empowered to, grant or direct injunctive relief as well as monetary
damages. A judgment of any court having jurisdiction of the parties may be
entered upon the decision, award or order of arbitrators under or pursuant to
the provisions of this Agreement.
17. Waiver of Breach.
The waiver by either party hereto of a breach of any provisions of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
by either party.
18. Execution in Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together constitute
one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date noted below and to be in effect from and after May 28,
1999, in accordance with the terms set forth in this Agreement.
WITNESS:
The Company:
THE MAJESTIC COMPANIES, LTD.
/s/ Clayton Chase By: /s/ Francis A. Zubrowski (SEAL)
- --------------------- ----------------------------------------
President and Chief Executive Officer
Date: 6/3/99
------------
The Consultant:
VENTURE CONSULTANTS, LLC
/s/ Paul Kustes By: /s/ D. Jeffrey Rice (SEAL)
- --------------------- ----------------------------------------
Managing Director
Date: 5-28-99
-------------
9
NC Capital Markets, Inc.
18952 MacArthur Blvd., Ste. 315
Irvine, CA 92612
Ph.: (949) 261-2101 Fax: (949) 261-7751
INVESTMENT BANKING SERVICES AGREEMENT
This Financial Consulting Services Agreement (the "Agreement") is
entered this 29th day of September, 1999 by and between NC Capital Markets, Inc.
("Consultant"), a Nevada corporation, and Majestic Companies, Ltd. (OTC BB:MJXC)
("Client"), a Nevada Corporation, with reference to the following:
RECITALS
A. The Client desires to be assured of the association and services of
the Consultant in order to avail itself of the Consultant's experience, skills,
abilities, knowledge, and background to facilitate long range strategic
planning, and to advise the Client in business and/or financial matters and is
therefore willing to engage the Consultant upon the terms and conditions set
forth herein.
B. The Consultant agrees to be engaged and retained by the Client and
upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Engagement. Client hereby engages Consultant on a non-exclusive
basis, and Consultant hereby accepts the engagement to become a
financial consultant to the Client and to render such advice,
consultation, information, and services to the Directors and/or
Officers of the Client regarding general financial and business
matters including, but not limited to:
A. Mergers and acquisitions, reorganizations, reverse mergers,
divestitures, and due diligence studies;
B. Capital structures and sources, and financial transactions;
C. Banking methods and systems;
D. Guidance and assistance in available alternatives to maximize
shareholder value;
E. Periodic reporting as to developments concerning the general
financial markets and public securities markets and industry which
may be relevant or of interest or concern to the Client or the
Client's business;
F. Periodic preparation and distribution of research reports and
information to the broker/dealer and investment banking community.
1
<PAGE>
It shall be expressly understood that Consultant shall have no power to
bind Client to any contract or obligation or to transact any business in
Client's name or on behalf of Client in any manner.
2. Term. The term ("Term") of this Agreement shall commence on the date
hereof and continue for twelve (12) months. The Agreement may be extended upon
agreement by both parties, unless or until the Agreement is terminated. Either
party may cancel this Agreement upon five days written notice in the event
either party violates any material provision of this Agreement and fails to cure
such violation within five (5) days of written notification of such violation
from the other party. Such cancellation shall not excuse the breach or
non-performance by the other party or relieve the breaching party of its
obligation incurred prior to the date of cancellation.
3. Compensation and Fees. As consideration for Consultant entering into
this Agreement, Client and Consultant shall agree to the following:
A. A cash Engagement Fee ("Engagement Fee") of eighty thousand dollars
($80,000), payable to the Consultant on the date hereof
B. The Engagement Fee may be satisfied by issuing certificates
representing an aggregate of five hundred thousand (500,000) shares of free
trading common stock (the "Shares"). The Shares, when issued to Consultant, will
be duly authorized, validly issued and outstanding, fully paid and nonassessable
and will not be subject to any liens or encumbrances.
Securities shall be issued to Consultant in accordance with a mutually
acceptable plan of issuance as to relieve securities or Consultant from
restrictions upon transferability of shares in compliance with applicable
registration provisions or exemptions.
4. Exclusivity; Performance; Confidentiality. The services of Consultant
hereunder shall not be exclusive, and Consultant and its agents may perform
similar or different services for other persons or entities whether or not they
are competitors of Client. Consultant shall be required to expend only such time
as is necessary to service Client in a commercially reasonable manner.
Consultant acknowledges and agrees that confidential and valuable information
proprietary to Client and obtained during its engagement by the Client, shall
not be, directly or indirectly, disclosed without the prior express written
consent of the Client, unless and until such information is otherwise known to
the public generally or is not otherwise secret and confidential.
5. Independent Contractor. In its performance hereunder, Consultant and
its agents shall be an independent contractor. Consultant shall complete the
services required hereunder according to his own means and methods of work,
shall be in the exclusive charge and control of Consultant and which shall not
be subject to the control or supervision of Client, except as to the results of
the work. Client acknowledges that
2
<PAGE>
nothing in this Agreement shall be construed to require Consultant to provide
services to Client at any specific time, or in any specific place or manner.
Payments to consultant hereunder shall not be subject to withholding taxes or
other employment taxes as required with respect to compensation paid to an
employee.
6. Miscellaneous. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision and no
waiver shall constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in writing by
all parties. This Agreement constitutes the entire agreement between the parties
and supersedes any prior agreements or negotiations. There are no third party
beneficiaries of this Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the date first written above.
"Client"
Signature: /s/ Francis A. Zubrowski
------------------------------------------
Print with Title: Chairman & President
-----------------------------------
Company:Majestic Companies, Ltd.
"Consultant"
Signature: /s/ M. B. Riley
------------------------------------------
Print with Title: M. Blaine Riley, Managing Director
----------------------------------
Company: NC Capital Markets, Inc.
3
THE MAJESTIC COMPANIES, LTD.
A Delaware corporation
Not Transferable or Exercisable Except
Upon Conditions Herein Specified
Void After 5:00 O'Clock P.M.,
Eastern Daylight Time, August 27, 2001
WARRANT
-------
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933
(THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT
BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR
NOT FOR CONSIDERATION) BY THE HOLDER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING THIS WARRANT AND/OR THE SHARES OF COMMON STOCK ISSUABLE UPON
THE EXERCISE OF THIS WARRANT EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL AND/OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE
AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE
ACTS.
WARRANT TO PURCHASE AN AGGREGATE of ONE HUNDRED THOUSAND (100,000) SHARES
OF COMMON STOCK.
<PAGE>
THE MAJESTIC COMPANIES, LTD.
a Delaware corporation
Not Transferable Or Exercisable Except
Upon Conditions Herein Specified
Void after 5:00 O'clock P.M.,
Eastern Daylight Time, August 27, 2001
-------------------------------------------------------------------------------
WARRANT TO PURCHASE 100,000 SHARES
-------------------------------------------------------------------------------
The Majestic Companies, Ltd., a Nevada Corporation (the "Company") hereby
certifies that, Margaret C. Hubard with an address of 2747 N. Nelson Street,
Arlington, VA 22207-5033 and its registered successors and permitted assigns
registered on the books of the Company maintained for such purposes as the
registered holder hereof (the "Holder"), for value received, is entitled to
purchase from the Company one hundred thousand (100,000) fully paid and
nonassessable shares (the "Shares") of common stock of the Company, par value
one cent ($.001) per share, (the "Common Stock"), at a purchase price equal to
the Current Market Price per Share on the date hereof (the "Exercise Price")
(the number of Shares being subject to adjustment as hereinafter provided) upon
the terms and conditions herein provided.
1. Exercise of Warrants.
(a) Cash Exercise. Subject to subsection (d) of this Section 1, upon
presentation and surrender of this Warrant with the Purchase Form in the form of
Exhibit A hereto duly executed, at the principal office of the Company at 8880
Rio San Diego Drive, 8th Floor, San Diego, California 92108, or at such other
place as the Company may designate by notice to the Holder hereof, together with
a wire transfer or certified or bank cashier's check payable to the Company in
the amount of the Exercise Price times the number of Shares being purchased, the
Company shall promptly deliver to the Holder hereof, certificates representing
the Shares being purchased.
(b) Cashless Exercise. Subject to subsection (d) of this Section 1,
the Holder hereof may effect a cashless exercise of this Warrant by delivery of
this Warrant, upon presentation and surrender of this Warrant Certificate with
the Purchase Form in the form of Exhibit B hereto duly executed, to the
principal office of the Company at 8880 Rio San Diego Drive, 8th Floor, San
Diego, California 92108, or at such other place as the Company may designate by
notice to the Holder hereof, in which case no payment of cash will be required,
and the Company shall promptly deliver to the Holder hereof certificates
representing the Shares being purchased pursuant to such cashless exercise. Upon
such cashless exercise, the number of Shares to be received by the Holder hereof
shall be that number of Shares having an aggregate fair market value, based upon
the Current Market Price (as defined in Section 6(e) hereof), on the date of
such exercise equal to the difference between (x) the fair market value of the
number of
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Shares subject to the Warrant designated by the Holder on the date of the
exercise and (y) the aggregate exercise price of the Warrant otherwise payable
by the Holder for such designated Shares. Upon any such exercise, the number of
Shares purchasable upon the exercise of the Warrant shall be reduced by such
designated number of Shares and, if a balance of purchasable Shares remains
after such exercise, the Company shall execute and deliver to the Holder a new
Warrant for such balance of Shares. No payment of any cash or other
consideration by the Holder shall be required. Such exchange shall be effective
upon the date of receipt by the Company of the original Warrant surrendered for
cancellation and a written request from the Holder that the exchange pursuant to
this Section 1(b) be made, or at such later date as may be specified in such
request. No fractional shares arising out of the above formula for determining
the number of Shares issuable in such exchange shall be issued, and the Company
shall in lieu thereof make payment to the Holder of cash in the amount of such
fraction multiplied by the Current Market Price per Share on the date of the
exchange.
(c) Installments. Subject to subsection (d) of this Section 1, this
Warrant may be exercised in whole or in part in installments of ten thousand
(10,000) Shares each; and, in case of exercise hereof in part only, the Company,
upon surrender hereof, will deliver to the Holder a new Warrant or Warrants of
like tenor entitling the Holder to purchase the number of Shares as to which
this Warrant has not been exercised.
(d) Expiration. This Warrant may be exercised in whole or in part in
installments as set forth above at any time following the satisfaction of the
aforesaid condition pursuant and prior to August 27, 2001 (the "Expiration
Date"), provided that at the time of each exercise the requirements of all
applicable statutes regarding the issuance of shares are satisfied. Upon such
expiration or any exercise of this Warrant in whole, this Warrant shall
terminate and be null, void and of no further force or effect.
2. Exchange and Transfer of Warrant. This Warrant (a) at any time prior to
the exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Warrants of like tenor registered in the name of
the Holder, for another Warrant or other Warrants of like tenor in the name of
such transferee Holder exercisable for the same aggregate number of Shares as
the Warrant or Warrants surrendered, and (b) may be sold, transferred,
hypothecated, or assigned, in whole or in part, but only upon compliance with
applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if requested by the
Company).
3. Rights and Obligations of Warrant Holder.
(a) The Holder of this Warrant shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, in the event that any certificate representing the
Shares is issued to the
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Holder hereof upon exercise of this Warrant, such Holder shall, for all
purposes, be deemed to have become the holder of record of such Shares on the
date on which this Warrant was surrendered pursuant to the terms of this
Warrant, irrespective of the date of delivery of such Share certificate. The
rights of the Holder of this Warrant are limited to those expressed herein and
the Holder of this Warrant, by its acceptance hereof, consents to and agrees to
be bound by and to comply with all the provisions of this Warrant, including,
without limitation, all the obligations imposed upon the Holder hereof by
Sections 2 and 5 hereof. In addition, the Holder of this Warrant, by accepting
the same, agrees that the Company may deem and treat the person in whose name
this Warrant is registered on the books of the Company maintained for such
purpose as the absolute, true and lawful owner for all purposes whatsoever,
notwithstanding any notation of ownership or other writing thereon, and the
Company shall not be affected by any notice to the contrary.
(b) No Holder of this Warrant, as such, shall be entitled to vote or
receive dividends or to be deemed the holder of Shares for any purpose, nor
shall anything contained in this Warrant be construed to confer upon any Holder
of this Warrant, as such, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any action by the Company,
whether upon any recapitalization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise, receive notice of meetings or
other action affecting stockholders (except for notices provided for herein),
receive dividends, subscription rights, or otherwise, until this Warrant shall
have been exercised and the Shares purchasable upon the exercise thereof shall
have become deliverable as provided herein; provided, however, that any such
exercise on any date when the stock transfer books of the Company shall be
closed shall constitute the person or persons in whose name or names the
certificate or certificates for those Shares are to be issued as the record
holder or holders thereof for all purposes at the opening of business on the
next succeeding day on which such stock transfer books are open, and the Warrant
surrendered shall not be deemed to have been exercised, in whole or in part as
the case may be, until the next succeeding day on which stock transfer books are
open for the purpose of determining entitlement to dividends on the Company's
common stock.
4. Shares Underlying Warrants. The Company covenants and agrees that all
Shares delivered upon exercise of this Warrant shall, upon delivery and payment
therefor, be duly and validly authorized and issued, fully-paid and
non-assessable, and free from all stamp-taxes, liens, and charges with respect
to the purchase thereof. The Company further covenants and agrees that, at all
times prior to the Expiration Date, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for and
permit the exercise in full of this Warrant and, should the need in the future
arise, the Company shall take any such actions as are necessary to authorize the
requisite number of Shares therefor.
5. Disposition of Warrants or Shares.
(a) The Holder of this Warrant and any transferee hereof or of the
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Shares issuable upon the exercise of the Warrant, by their acceptance hereof,
hereby understand and agree that the Warrant, and the Shares issuable upon the
exercise hereof, have not been registered under either the Securities Act of
1933 (the "Act") or applicable state securities laws (the "State Acts") and
shall not be sold, pledged, hypothecated, donated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of a
favorable opinion of counsel and/or submission to the Company of such evidence
as may be satisfactory to counsel to the Company, in each such case, to the
effect that any such transfer shall not be in violation of the Act and the State
Acts. It shall be a condition to the transfer of this Warrant that any
transferee thereof deliver to the Company its written agreement to accept and be
bound by all of the terms and conditions of this Warrant.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OFFERED OR
SOLD PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENT OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
Except as provided in Section 9 of this Warrant, the Company
has not agreed to register any of the holder's shares of Common Stock of the
Company with respect to which this Warrant may be exercisable for distribution
in accordance with the provisions of the Act or the State Acts, and the Company
has not agreed to comply with any exemption from registration under the Act or
the State Acts for the resale of the holder's shares of Common Stock of the
Company with respect to which this Warrant may be exercised. Hence, it is the
understanding of the holders of this Warrant that by virtue of the provisions of
certain rules respecting "restricted securities" promulgated by the Securities
and Exchange Commission (the "SEC"), the shares of Common Stock of the Company
with respect to which this Warrant may be exercisable may be required to be held
indefinitely, unless and until registered under the Act and the State Acts,
unless an exemption from such registration is available, in which case the
holder may still be limited as to the number of shares of Common Stock of the
Company with respect to which this Warrant may be exercised that may be sold.
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6. Adjustments. The number of Shares purchasable upon the exercise of
each Warrant is subject to adjustment from time to time upon the occurrence of
any of the events enumerated below.
(a) In case the Company shall: (i) pay a dividend in Shares, (ii)
subdivide its outstanding Shares into a greater number of Shares, (iii) combine
its outstanding Shares into a smaller number of Shares, or (iv) issue, by
reclassification of its Shares, any shares of its capital stock, the number of
Shares purchasable upon the exercise of each Warrant immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive upon exercise
of the Warrant that number of Shares which such Holder would have owned or would
have been entitled to receive after the happening of such event had such Holder
exercised the Warrant immediately prior to the record date, in the case of such
dividend, or the effective date, in the case of any such subdivision,
combination or reclassification. An adjustment made pursuant to this subsection
(a) shall be made whenever any of such events shall occur, but shall become
effective retroactively after such record date or such effective date, as the
case may be, as to Warrants exercised between such record date or effective date
and the date of happening of any such event.
(b) In case the Company shall (i) issue or sell any Shares for less
than the Current Market Price per Share at the time of such issuance or sale, or
(ii) grant (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options or warrants for the
purchase of, Shares or any stock or securities convertible into or exchangeable
for Shares, whether or not immediately exercisable, convertible or exchangeable
(such rights, options or warrants being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities"), or issue or sell (whether directly or by assumption in a merger or
otherwise) options or Convertible Securities, and the price per Share for which
Shares are issuable upon exercise, conversion or exchange of such Options or
Convertible Securities (determined by dividing (x) the aggregate amount received
or receivable by the Company as consideration for the issue, sale or grant of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof, by (y) the total maximum number of Shares
issuable upon the exercise, conversion or exchange of all such Options or
Convertible Securities) shall be less than the Current Market Price per Share on
the date of such issue, sale or grant, whether or not the rights to exercise,
exchange or convert thereunder are immediately exercisable, then (A) the
Exercise Price shall be reduced to a price determined by multiplying the
Exercise Price in effect prior to the adjustment referred to in this Section
6(b) by a fraction, the numerator of which is an amount equal to the sum of (x)
the number of Shares outstanding immediately prior to such issue, sale or grant,
plus (y) the consideration, if any, received by the Company upon any such issue
or sale divided by the Current Market Price per Share at the time of such issue
or sale, and the denominator of which is the total number of Shares outstanding
immediately after such issue, sale or grant, and (b) the number of Shares for
which this Warrant is exercisable shall be adjusted to equal the number obtained
by dividing (x) the Exercise Price in
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effect immediately prior to such issue, sale or grant multiplied by the number
of Shares for which this Warrant is exercisable immediately prior to such issue,
sale or grant by (y) the Exercise Price resulting from the adjustment made
pursuant to this Section 6(b).
(c) In case the Company shall pay a dividend or make a distribution
of shares of its capital stock (other than Shares), evidences of its
indebtedness, assets or rights, warrants or options (excluding (i) dividends or
distributions payable in cash out of the current year's or retained earnings of
the Company, (ii) distributions relating to subdivisions and combinations
covered by Section 6(a), (iii) distributions relating to reclassifications,
changes, consolidations, mergers, sales or conveyances covered by Section 6(d)
and (iv) rights, warrants, or options to purchase or subscribe for Shares or
Convertible Securities), then in each such case (A) the Exercise Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the record date mentioned below by
a fraction, the numerator of which shall be (x) the total number of Shares then
outstanding multiplied by the Current Market Price per Share on the record date
mentioned below, less, (y) the fair market value (as determined by the board of
directors of the Company or any duly authorized committee thereof) as of such
record date of said shares of stock, evidences of indebtedness or assets so paid
or distributed or of such rights, warrants or options, and the denominator of
which is the total number of Shares then outstanding multiplied by the Current
Market Price per Share on the record date mentioned below; and (B) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the number obtained by dividing (x) the purchase price in effect
immediately prior to such dividend or distribution multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such dividend or distribution by (y) the purchase price resulting from the
adjustment made pursuant to this Section 6(c). Such adjustment shall be made
whenever any such dividend is paid or such distribution is made and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution.
In the event of a distribution by the Company of stock or a subsidiary or
securities convertible into or exercisable for such stock, then in lieu of an
adjustment in the Exercise Price, the Holder of this Warrant, upon the exercise
thereof at any time after such distribution, shall be entitled to receive from
the Company, such subsidiary or both, as the Company shall determine, the stock
or other securities to which such Holder would have been entitled if such Holder
had exercised such Warrant immediately prior thereto, all subject to further
adjustment as provided in this Section 6.
(d) If any capital reorganization, reclassification or similar
transaction involving the capital stock of the Company (other than as provided
in Section 6(a)), any consolidation, merger or business combination of the
Company with another corporation, or the sale or conveyance of all or
substantially all of its assets to another corporation, shall be effected in
such a way that holders of Shares shall be entitled to receive stock,
securities, or assets with respect to or in exchange for Shares, then, prior to
and as a condition of such reorganization, reclassification, consolidation,
merger,
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business combination, sale or conveyance, lawful and adequate provision
shall be made whereby the Holder shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the Shares immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding Shares equal to the number of Shares
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger, business combination, sale or conveyance not taken place.
In any such case, appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the number of Shares
purchasable upon the exercise of this Warrant) shall thereafter be applicable,
as nearly as may be, in relation to any stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any such
consolidation, merger, business combination, sale or conveyance unless prior to
or simultaneously with the consummation thereof the survivor or successor
corporation (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets shall (1) assume by written
instrument executed and sent to each registered Holder, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
receive, and containing the express assumption by such successor corporation of
the due and punctual performance and observance of every provision of this
Warrant to be performed and observed by the Company and of all liabilities and
obligations of the Company hereunder, and (2) deliver to the registered Holder
an opinion of counsel, in form and substance satisfactory to such Holder, to the
effect that such written instrument has been duly authorized, executed and
delivered by such successor corporation and constitutes a legal, valid and
binding instrument enforceable against such successor corporation in accordance
with its terms (except as enforcement thereof may be subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally, and general principles or equity
(regardless of whether such enforcement is sought in a proceeding in equity or
at law)), and to such further effects as such Holder may reasonably request.
(e) For the purpose of any computation under this Warrant
certificate, the Current Market Price per Share at any date shall be (I) if the
Shares are listed on any national securities exchange, the average of the daily
closing prices for the 10 consecutive business days before the day in question
(the "Trading Period"); (ii) if the Shares are not listed on any national
securities exchange but are quoted on the National Association of Securities
Dealers, inc. Automated Quotation System ("NASDAQ"), the average of the high and
low bids as reported by NASDAQ for the Trading Period; and (iii) if the Shares
are neither listed on any national securities exchange nor quoted on NASDAQ, the
higher of (x) the exercise price then in effect, or (y) the tangible book value
per Share as of the end of the Company's immediately preceding fiscal year.
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(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least $.01;
provided, however, that any adjustments which by reason of this subsection (f)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 6 shall be made
to the nearest cent or to the nearest one-hundredths of a Share, as the case may
be.
(g) Whenever the number of Shares purchasable hereunder is adjusted
as herein provided, the Company shall cause to be mailed to the Holder in
accordance with the provisions of this Section 6 a notice (i) stating that the
number of Shares purchasable upon exercise of this Warrant have been adjusted,
(ii) setting forth the adjusted number of Shares purchasable upon the exercise
of a Warrant, and (iii) showing in reasonable detail the computations and the
facts, including the amount of consideration received or deemed to have been
received by the Company, upon which such adjustments are based.
7. Fractional Shares. The Company shall not be required to issue any
fraction of a Share upon the exercise of Warrants. If more than one Warrant
shall be surrendered for exercise at one time by the same Holder, the number of
full Shares which shall be issuable upon exercise thereof shall be computed on
the basis of the aggregate number of Shares with respect to which this Warrant
is exercised. If any fractional interest in a Share shall be deliverable upon
the exercise of this Warrant, the Company shall make an adjustment therefor in
cash equal to such fraction multiplied by the Current Market Price.
8. REPURCHASE. The Company shall have no right to repurchase this Warrant
or the Shares which may be purchased under this Warrant.
9. REGISTRATION RIGHTS.
9.1 Company's Registration Option.
(a) (i) If the Company at any time elects or proposes to
register any of its Shares (the "Registration Shares") under the Act on any
Registration Statement forms in effect at such time with the SEC pursuant to
which Shares owned by any shareholder of the Company may be registered, the
Company shall give prompt written notice (the "Registration Notice" ) to the
Holder of its intention to register the Registration Shares.
(ii) Within fifteen (15) days after the Registration Notice
shall have been given to the Holder, the Holder shall give written notice to the
Company (the "Holder Notice"), stating the number of Shares to be registered
(the "Holder Shares") and the states in which the Holder wishes to register the
Shares. In the event the Registration Notice is given by the Company prior to
the time that this Warrant is otherwise exercisable pursuant to Section l (b)
hereof, the Holder Notice shall be accompanied by this Warrant together with a
duly executed Purchase Form and
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payment of the Exercise Price for the Holder Shares in accordance with Section 1
hereof.
(iii) The Company shall use its best efforts to register the
Holder Shares under the Act and the applicable state securities laws (the "State
Acts") designated by the Holder in the Holder Notice. Anything contained herein
to the contrary notwithstanding, the Company shall have the right to withdraw
and discontinue registration of the Holder Shares at any time prior to the
effective date of such Registration Statement if the registration of the
Registration Shares is withdrawn or discontinued.
(iv) The Company shall not be required to include any of the
Holder Shares in any Registration Statement unless the Holder agrees, if so
requested by the Company, to: (A) offer and sell the Holder Shares to or through
an underwriter selected by the Company and, to the extent possible, on
substantially the same terms and conditions under which the Registration Shares
are to be offered and sold; (B) comply with any arrangements, terms and
conditions with respect to the offer and sale of the Shares to which the Company
may be required to agree; and (C) enter into any underwriting agreement
containing customary terms and conditions, including provisions for the
indemnification of the underwriters.
(b) If the offering of the Registration Shares by the Company is, in
whole or in part, an underwritten public offering, and if the managing
underwriter determines and advises the Company in writing that the inclusion in
such Registration Statement of all of the Holder Shares, together with the
Shares of other persons who have exercised their right to include their Shares
in the Registration Statement (collectively referred to as the "Aggregate
Shares") would adversely affect the marketability of the offering of the
Registration Shares, then the Holder shall be entitled to register a proportion,
as determined in Subsection (b)(i) below, of such number of Aggregate Shares as
the managing underwriter determines may be included without such adverse effects
("Aggregate Underwriter Shares"), subject to the terms, exceptions and
conditions of this Section 9.
(i) The proportion of the Aggregate Underwriter Shares which
the Holder shall be entitled to register shall be equal to the ratio which the
Holder Shares bears to the Aggregate Shares.
(c) The Company shall bear all costs and expenses of registration of
the Registration Shares and the Holder Shares.
(d) It shall be a condition precedent to the Company's obligation to
utilize its best efforts to register any Holder Shares pursuant to this Section
9 that the Holder provide the Company with all information and documents, and
shall execute, acknowledge, seal and deliver all documents reasonably necessary,
to enable the Company to comply with the Act, the State Acts, and all applicable
laws, rules and regulations of the SEC or of any State Securities Commission.
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(e) The Holder shall indemnify and hold harmless the Company, each
of its directors and officers who have signed the Registration Statement, each
person, if any, who is a controlling person or the Company and any underwriter
from and against any and all losses, claims, damages, expenses or liabilities
(including amounts paid in settlement and reasonable attorneys' fees) (the
"Liabilities"), joint or several, to which they or any of them may become
subject under the Act, under any State Act or at common law or otherwise insofar
as the Liabilities arise from written information provided by the Holder for
specific inclusion in such Registration Statement; provided that the maximum
amount which may be recovered from the Holder pursuant to this paragraph or
otherwise shall be limited to the amount of net proceeds received by the Holder
from the sale of Shares pursuant to such Registration Statement.
(f) The Company shall indemnify and hold harmless the Holder from
and against any and all losses, claims, damages, expenses or liabilities
(including amounts paid in settlement and reasonable attorneys' fees) (the
"Liabilities"), joint or several, to which they or any of them may become
subject under the Act, under any State Act or at common law or otherwise insofar
as the Liabilities arise from written information provided by the Company for
specific inclusion in such Registration Statement; provided that the maximum
amount which may be recovered from the Company pursuant to this paragraph or
otherwise shall be limited to a sum equal to the number of Shares exercised by
Holder multiplied by the then Closing Price at the time of exercise.
9.2 Registration Procedures and Expenses. If and whenever the Company is
required by the provisions of Section 9.1 hereof to use its best efforts to
effect the registration of any of the Shares under the Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement
(which, in the case of an underwritten public offering, shall be on Form S-1 or
other form of general applicability satisfactory to the managing underwriter
selected as therein provided) with respect to such securities and use its best
efforts to cause such Registration Statement to become and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided);
(b) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the period hereinafter provided and as shall comply with the provisions of the
Act with respect to the disposition of all Shares covered by such Registration
Statement in accordance with the sellers' intended method of disposition set
forth in such Registration Statement for such period;
(c) furnish to each seller and to each underwriter such number
of copies of the Registration Statement and the prospectus included therein
(including
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each preliminary prospectus) as such persons may reasonably request in order to
facilitate the public sale or other disposition of the Shares covered by such
Registration Statement;
(d) use its best efforts to register or qualify the Shares
covered by such Registration Statement under the securities or blue sky laws of
such jurisdictions as the sellers of Shares or, in the case of an underwritten
public offering, the managing underwriter, shall reasonably request;
(e) immediately notify each seller under such Registration
Statement and each underwriter, at any time when a prospectus relating thereto
is required to be delivered under the Act, of the happening of any event as a
result of which the prospectus contained in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(f) use its best efforts (if the offering is underwritten) to
furnish, at the request of any seller, on the date that Shares are delivered to
the underwriters for sale pursuant to such registration: (i) an opinion dated
such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, stating that
such Registration Statement has become effective under the Act and that (A) to
the best knowledge of such counsel, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been instituted
or are pending or contemplated under the Act, (B) the Registration Statement,
the related prospectus, and each amendment or supplement thereof, comply as to
form in all material respects with the requirements of the Act and the
applicable rules and regulations of the SEC thereunder (except that such counsel
need express no opinion as to financial statements contained therein) and (C) to
such other effects as may reasonably be requested by counsel for the
underwriters or by such seller or its counsel, and (ii) a letter dated such date
from the independent public accountants retained by the Company, addressed to
the underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Act and that, in the opinion of such
accountants, the financial statements of the Company included in the
Registration Statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Act, and such letter shall additionally cover
such other financial matters (including information as to the period ending no
more than five business days prior to the date of such letter) with respect to
the registration in respect of which such letter is being given as such
underwriters or seller may reasonably request; and
(g) make available for inspection by each seller, any
underwriter participating in any distribution pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and
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cause the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such Registration Statement.
For purposes of Section 9.2(a) and (b) hereof, the period of
distribution of Shares in an underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Shares in any other
registration shall be deemed to extend until the earlier of the sale of all
Shares covered thereby or nine (9) months after the effective date thereof.
In connection with each registration hereunder, the selling holders
of Shares will furnish to the Company in writing such information with respect
to themselves and the proposed distribution by them as shall be reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 9.1 hereof
covering an underwritten public offering, the Company agrees to enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between major underwriters and
companies of the Company's size and investment stature, provided that such
agreement shall not contain any such provision applicable to the Company which
is inconsistent with the provisions hereof and, further, provided, that the time
and place of the closing under said agreement shall be as mutually agreed upon
between the Company and such managing underwriter.
10. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement or bond satisfactory in form, substance and amount to the Company or,
in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
11. Survival. The various rights and obligations of the Holder hereof as
set forth herein shall survive the exercise of the Warrant represented hereby
and the surrender of this Warrant.
12. Notices. Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery, by overnight
courier for next day delivery or by United States certified mail, return receipt
requested, postage prepaid, and will be deemed to have been given or delivered
on the date such notice, purchase price or other communication is so delivered
and, if to the Company, it will be addressed to the address specified in Section
1 hereof, and if to the Holder, it will be addressed to the registered Holder at
his address as it appears on the books of the Company.
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13. Successors. This Warrant shall be binding upon any successors or
assigns of the Company and upon any heirs, successors or assigns of the Holder.
14. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
15. Headings. The headings used in this Warrant are used for
convenience only and are not to be considered in construing or interpreting this
Warrant.
16. Saturdays, Sundays, Holidays. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday in the State of
California, then such action may be taken or such right may be exercised on the
next succeeding day not a legal holiday.
17. Attorney's Fees. In the event that any dispute among the parties to
this Warrant should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Warrant, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
IN WITNESS WHEREOF, The Majestic Companies, Ltd. has caused this Warrant
to be executed and attested under seal by its officers thereunto duly authorized
as of the 27th day of August, 1999.
ATTEST THE MAJESTIC COMPANIES, LTD.
/s/ Alex V. Tovar /s/ Zubrowski (SEAL)
- ------------------------ ---------------------------
Alex V. Tovar, Secretary Francis A. Zubrowski, Chairman and
Chief Executive Officer
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EXHIBIT A
---------
PURCHASE FORM TO BE EXECUTED
UPON CASH EXERCISE OF WARRANT
-----------------------------
The Majestic Companies, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
The undersigned hereby irrevocably elects to exercise, the attached
Warrant, according to the terms and conditions thereof, to the extent of
___________ shares of Common Stock, and hereby tenders $___________ in full
payment of the purchase price in accordance with Section 1(a) of the Warrant.
- ------------------------------
Date: ------------------------
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EXHIBIT B
---------
PURCHASE FORM TO BE EXECUTED
UPON CASHLESS EXERCISE OF WARRANT
---------------------------------
The Majestic Companies, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
The undersigned hereby irrevocably elects to exercise, on a cashless
basis, the attached Warrant Certificate, according to the terms and conditions
thereof, to the extent of ___________ shares of Common Stock, and hereby agrees
to accept the number of shares of Common Stock determined by utilizing the
agreed upon Current Market Price of $20.00 per share of Common Stock, as
provided for in Section 1(b) of the Warrant Certificate, as full consideration
for such exercise.
-----------------------------------
Date: ____________, 1999
The Common Stock certificates are to be issued as indicated below:
Name: ____________________________
Address: ____________________________
SSN/EIN: ____________________________
No. of Shares: ____________________________
16
SECURITY AGREEMENT
By
THE MAJESTIC COMPANIES, LTD.,
A DELAWARE CORPORATION
AND
MAJESTIC TRANSPORTATION PRODUCTS, LTD.,
A DELAWARE CORPORATION
TO
MARGARET C. HUBARD,
AN INDIVIDUAL
($100,000 Line of Credit)
AUGUST 26, 1999
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made as of the day of
August, 1999 by and among THE MAJESTIC COMPANIES, LTD., a Delaware corporation
and Delaware MAJESTIC TRANSPORTATION PRODUCTS, LTD., a Delaware corporation
(collectively the Delaware "Borrower"), jointly and severally and ,
(the "Lender").
RECITALS
A. The Lender has, as of this date, extended to the Borrower a line of
credit in the maximum principal amount of One Hundred Thousand Dollars
($100,000.00) (the "Loan"), which Loan is to be evidenced by a promissory note
of even date herewith from the Borrower to the Lender in the principal amount of
the Loan (the "Note"). The Note is to be secured by this Agreement and by
various other documents, instruments and writings executed and delivered by the
Borrower to the Lender in connection with the Note (collectively, the "Loan
Documents").
B. The Lender agreed to extend the Loan to the Borrower on the
condition that this Agreement be executed and delivered by the Borrower to the
Lender and the security interests contained herein be granted by the Borrower to
the Lender.
C. The parties have entered into this Security Agreement to effectuate
the above stated purposes.
W I T N E S S E T H
NOW THEREFORE, in consideration of the premises, the covenants and
agreements of the parties hereinafter set forth, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth as definitions, unless the specific context of this Agreement clearly
requires a different meaning, and all terms defined in this Article, or
elsewhere in this Agreement, shall be in initial capital letters throughout this
Agreement. The plural use of any defined term shall include the singular and the
singular use of any defined term shall include the plural:
Section 1.1. Accounts, Chattel Paper Documents, Fixtures, General
Intangibles, Goods, Instruments and Inventory. The terms "Accounts," "Chattel
Paper, " "Documents," "Equipment," "General Intangibles," "Goods," "Instruments"
and "Inventory" shall have the same respective meanings as are given to those
terms in the Maryland Uniform Commercial Code-Secured Transactions, Title 9,
Commercial Law Article, Annotated Code of Maryland, as amended. The
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term "Fixtures" shall have the meaning provided by the common law of the State
of Maryland.
Section 1.2. Agreement. The term "Agreement" shall mean this Security
Agreement, as amended, extended, or modified by the parties hereto from time to
time, together with all attachments and exhibits thereto.
Section 1.3. Collateral. The term "Collateral" shall mean all of the
tangible and intangible property with respect to which the Borrower or the
Guarantor has assigned an interest to the Lender or has granted a security
interest or lien to the Lender pursuant to the terms of this Agreement or any of
the other Loan Documents.
Section 1.4. ERISA. The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
Section 1.5. Event of Default. The term "Event of Default" shall mean
the events constituting defaults under this Agreement as set forth in Article VI
of the Agreement.
Section 1.6. Guarantor. The term "Guarantor" shall mean any guarantor
of the obligations of the Borrower with respect to the Loan.
Section 1.7. Guaranty Agreement. The term "Guaranty Agreement" shall
mean any guaranty agreement executed by the Guarantor in favor of the Lender,
pursuant to which the Guarantor has guaranteed the Obligations of the Borrower
to the Lender.
Section 1.8. Indebtedness. The term indebtedness shall mean all items
of indebtedness, obligation or liability, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, including,
but not limited to: (a) all indebtedness guaranteed, directly or indirectly, in
any manner, or endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse; (b) all indebtedness in effect
guaranteed, directly or indirectly, through agreements, contingent or otherwise:
(1) to purchase such indebtedness; or (2) to purchase, sell or lease (as lessee
or lessor) property, products, materials, or supplies or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such indebtedness or to assure the owner of the indebtedness against loss; or
(3) to supply funds to or in any other manner invest in the debtor; (c) all
indebtedness secured by (or for which the holder of such indebtedness has a
right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance upon property
owned or acquired subject thereto, whether or not the liabilities secured
thereby have been assumed; and (d) all indebtedness incurred as the lessee of
goods or services under leases that, in accordance with generally accepted
accounting principles, should not be reflected as leases on the balance sheet of
the lessee.
Section 1.9. Laws. The term "Laws" shall mean all ordinances, statutes,
rules, regulations, orders, injunctions, writs or decrees of any government or
political subdivision or agency thereof, or any court or similar entity
established by any thereof.
Section 1.10. Loan. The term "Loan" shall mean the indebtedness
evidenced by the
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Note.
Section 1.11. Loan Documents. The term "Loan Documents" shall mean all
documents executed by the Borrower in connection with the Loan, including, but
not limited to, the Note, the Guaranty Agreement, this Agreement, appropriate
financing statements and continuation statements, or any amendments or
modifications thereto.
Section 1.12. Note. The term "Note" shall mean the promissory note in
the amount of $100,000 from the Borrower to the Lender.
Section 1.13. Obligations. The terms "Obligation" or "Obligations"
shall mean the obligation(s) of the Borrower to pay: (a) any and all sums due to
the Lender under the Loan otherwise under the terms of this Agreement, the Note
and the Loan Documents; (b) any and all sums advanced by the Lender to preserve
or protect the Collateral and the value of the Collateral or to preserve,
protect, or perfect the Lender's security interest in the Collateral; (c) in the
event of any proceeding to enforce the collection of the Obligations or any of
them, after default, the reasonable expenses of retaking, holding, preparing for
sale, selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Lender of the Lender's rights in the event of default,
together with reasonable attorneys' fees, expenses of collection, and court
costs as provided in the Loan Documents; and (d) any other indebtedness or
liability of the Borrower to the Lender, whether direct or indirect, joint or
several, absolute or contingent, now or hereafter arising while this Agreement
is in effect.
Section 1.14. Person. The term "Person" shall mean any individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated organization, joint venture, court, or government or political
subdivision or agency thereof.
Section 1.15. Records. The term "Records" shall mean correspondence,
memoranda, tapes, discs, papers, books and other documents, or transcribed
information of any type, whether expressed in ordinary or machine language.
ARTICLE II
SECURITY FOR THE LOAN
The repayment of the Loan, the satisfaction of the Obligations, and the
full complete and absolute performance by the Borrower of each of the terms and
conditions of the Agreement, the Note and the Loan Documents shall be secured by
the granting by the Borrower to the Lender of the following described security
interests, liens, guarantees, and assignments:
Section 2.1. Grant of Security Interest. The Borrower hereby assigns to
the Lender all right, title, and interest in and to, and grants to the Lender a
continuing security interest in and to all of the tangible and intangible assets
owned by the Borrower, wherever located, whether now owned or hereafter
acquired, together with all substitutions therefor, and replacements and
renewals thereof, including but not limited to the following:
(a) Accounts;
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(b) Cash on hand and in any deposit, passbook, savings or checking
account;
(c) Chattel Paper;
(d) Documents;
(e) Contracts and Contract rights;
(f) General Intangibles;
(g) Goods;
(h) Instruments;
(i) Inventory; and
(j) All Records relating to or pertaining to any of the above
listed Collateral.
Section 2.2. Proceeds and Products. The Lender's security interests
provided for herein shall apply to the proceeds, including but not limited to
insurance proceeds, and the products of the Collateral.
Section 2.3. Priority of Security Interest. Each of the assignments and
security interests granted pursuant to this Agreement at the time of any
disbursement hereunder shall be a first lien priority assignment of and security
interest on the Collateral.
Section 2.4. Future Advances. The security interest granted by the
Borrower shall secure all current and all future advances made by the Lender to
the extent such current and future advances constitute Obligations and any such
advancement or readvancement shall be fully secured by the security interests
created by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lender to make the Loan and enter into the Agreement, the
Borrower makes the following representations and warranties and acknowledges the
Lender's justifiable reliance upon the representations and warranties and the
Lender's full right to so rely:
Section 3.1. Accuracy and Completeness of Information. All information,
documents, reports, statements, financial statements, and data submitted by or
on behalf of the Borrower in connection with the Loan, or in support thereof,
are true, accurate, and complete in all material respects and contain no
knowingly false, incomplete or misleading statements.
Section 3.2. Non-Existence of Defaults, etc. Except to the extent
disclosed to the Lender as of the date hereof, the Borrower, to the best of its
knowledge, information and belief, is not in material default with respect to
any of its existing Indebtedness, and the making and performance of this
Agreement, and the Loan Documents will not immediately, or with the passage of
time, the giving of notice, or both: (a) violate the charter or bylaw provisions
of the Borrower, violate any Laws or result in a default under any contract,
agreement, or instrument to which the Borrower is a party or by which it or its
property is bound; or (b) result in the creation or imposition of any security
interest in, or lien or encumbrance upon, any of the assets of the Borrower,
except in favor of the Lender.
Section 3.3. Litigation. Except to the extent disclosed to the Lender
as of the date
5
<PAGE>
hereof, there is no action, suit, investigation, or proceeding against
or pending against the Borrower.
Section 3.4. Liabilities or Adverse Changes. The Borrower has, to the
best of its knowledge, information and belief, no direct or contingent liability
or Indebtedness known to them and not previously disclosed to the Lender, or
which is shown on the books and records of the Borrower, nor does the Borrower
know of or expect any circumstance or event which would result in a material and
adverse change in the assets, liabilities, properties, business, or condition,
financial or otherwise, of the Borrower.
Section 3.5. Corporate Status. Each corporation comprising the Borrower
is a corporation validly incorporated under the Laws of the State of Delaware
and has the power to own its properties, conduct its business and affairs, enter
into the Loan and perform the Obligations. The Borrower's entry in the Loan with
the Lender has been validly and effectively approved by its Board of Directors
and shareholders as may be required by their respective charter, bylaws, or
applicable law. All copies of the charter, bylaws, and corporate resolutions, as
the case may be, of the Borrower shown to the Lender are true, accurate, and
complete and no action has been taken in diminution or abrogation thereof.
Section 3.6. Validity, Binding Nature, and Enforceability of the Loan
Documents. The Loan Documents executed by the Borrower are the valid and binding
obligations thereof, fully enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency or other laws affecting
enforcement of creditors rights generally.
Section 3.7. Defaults Under Loan Documents. There is not currently
existing any action, event, or condition which would constitute a default on the
part of the Borrower under this Agreement or of the Borrower under any other
Loan Document, and no action, event or condition has occurred and is continuing
to occur which, with notice or the passage of time or both, would constitute a
default by the Borrower under any provision of this Agreement or by the Borrower
under any other Loan Document.
Section 3.8. Compliance With Laws. Except as otherwise disclosed to the
Lender, or except to the extent that the failure to comply would not materially
interfere with the conduct of the business of the Borrower or a Guarantor, as
the case may be, the Borrower and such Guarantor have complied with all
applicable Laws with respect to: (a) any restrictions, specifications, or other
requirements pertaining to the Borrower or such Guarantor; (b) the conduct of
their business; and (c) the use, maintenance, and operation of the real and
personal properties owned or leased by them in the conduct of their business.
Section 3.9. Accuracy of Representations and Warranties. No
representation or warranty made by the Borrower contained herein or in any
certificate or other document furnished by the Borrower pursuant hereto contains
any untrue statement of material fact or omits to state a material fact
necessary to make such representation or warranty not misleading in light of the
circumstances under which it was made.
Section 3.10. Consents, Approvals, and Authorizations. Each consent,
approval or
6
<PAGE>
authorization of, or filing, registration or qualification with, any Person
which is required to be obtained or effected by the Borrower or any Guarantor in
connection with the execution and delivery of this Agreement and the Loan
Documents, or the undertaking or performance of any obligation hereunder or
thereunder, has been duly obtained or effected.
Section 3.11. Title to Assets Other Than Collateral. The Borrower has
good and marketable title to all of their assets, subject to no security
interest, encumbrance, lien, or claim of any Person, excepting only those
granted to the Lender hereunder.
Section 3.12. Place of Business. The chief executive office and chief
place of business of the Borrower is located at 8880 Rio San Diego Drive, 8th
Floor, San Diego, California 92108. All Collateral shall be maintained only at
one of the addresses and shall not be moved or relocated, except in the ordinary
course of business, without prior written notice from the Borrower to the Lender
thereof.
ARTICLE IV
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees, during the term of this Agreement
and while any Obligations are outstanding and unpaid, to do and perform the
following:
Section 4.1. Payments. All Obligations shall be paid in full when and
as due, subject to any applicable notice requirements and cure or grace periods.
Section 4.2. Performance. All Obligations shall be fully and completely
performed, when and as required, subject to any applicable notice requirements
and cure or grace periods.
Section 4.3. Protection of Security. The value of the Collateral shall
at all times be protected and preserved.
Section 4.4. Insurance. The Borrower shall obtain and maintain the
following insurance coverage:
Section 4.4.1. Casualty Insurance. The Borrower shall obtain
and maintain during the term of the Loan for all of its respective assets and
properties, both real, personal, and mixed, including but not limited to the
Collateral, fire and extended coverage casualty insurance, in amounts reasonably
satisfactory to the Lender and sufficient to prevent any co-insurance liability
(which amount shall be the full insurable value of their respective assets and
properties unless the Lender in writing agrees to a lesser amount). The Lender,
on request, shall be supplied with the originals or copies of the aforementioned
insurance policies and paid receipts evidencing payment of the premiums due on
the same. The aforementioned policies shall be endorsed so as to make them
noncancellable unless thirty (30) days prior notice of cancellation is provided
to the Lender. The proceeds of any loss payable under the aforementioned
policies of the Borrower shall be used to replace or repair the damaged or
destroyed assets or properties of the Borrower. If the proceeds are not applied
to replace or repair assets or properties of the Borrower, they shall be paid,
first, to satisfy any and all Indebtedness of the Borrowers to lenders which
hold liens or
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<PAGE>
security interests superior to those of the Lender, second, to the payment of
any and all Indebtedness of the Borrowers to the Lender and, third, to the
Borrowers.
Section 4.4.2. Liability and Worker's Compensation Insurance.
The Borrower shall obtain and maintain during the term of the Loan public
liability and property damage insurance in such amounts, with insurance
companies, and upon policy forms reasonably acceptable to and reasonably
approved by the Lender. The Borrower shall obtain and maintain during the term
of the Loan, worker's compensation insurance, in such amounts, with insurance
companies, and in forms reasonably acceptable to and reasonably approved by the
Lender. The Borrower, on request, shall supply the Lender with copies of the
liability and worker's compensation insurance policies and receipts evidencing
the payment of premiums due thereon or, alternatively, certificates from the
insurance companies certifying to the existence of policies, summarizing the
terms of the policies, and indicating the payment of premiums due thereon.
Section 4.5. Sale or Transfer of Assets. The Borrower shall not sell,
transfer or dispose of any of the assets of the Borrower without the prior
written consent of the Lender.
Section 4.6. Maintenance of Existence. The Borrower shall take all
necessary steps to preserve its existence, franchise and good standing in the
applicable state of incorporation and in any other state where it may be
qualified as a foreign corporation, and shall comply with all present and future
Laws applicable in the operation and conduct of its businesses, and all material
agreements to which it is subject.
Section 4.7. Notice of Litigation and Proceedings. The Borrower shall
give immediate notice to the Lender of: (a) any litigation or proceeding in
which it is a party if an adverse decision therein would require it to pay more
than Ten Thousand Dollars ($10,000.00) or deliver assets the value of which
equals or exceeds such sum (whether or not the claim is considered to be covered
by insurance); and (b) the institution of any other suit or proceeding which
might materially and adversely affect the Collateral.
Section 4.8. Payment of Indebtedness to Third Persons. The Borrower
shall pay when and as due, or within applicable grace periods, all Indebtedness
due third persons, except when the amount thereof is being contested in good
faith by appropriate proceedings and with adequate reserves therefor being set
aside by the Borrower.
Section 4.9. Notice of Change of Business Location. The Borrower shall
notify the Lender thirty (30) days in advance of: (a) any change in the location
of its existing offices or place of business; (b) the establishment of any new,
or the discontinuance of any existing, place of business; and (c) any change in
or addition to the location of the place where the Inventory or Records are
kept.
Section 4.10. Payment of Taxes. The Borrower shall pay or cause to be
paid when and as due, all taxes, assessments and charges or levies imposed upon
it or on any of its property or which it is required to withhold and pay over to
the taxing authority or which it must pay on its income, except where contested
in good faith by appropriate proceedings with adequate reserves therefor having
been set aside by it. The Borrower shall pay or cause to be paid all such
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<PAGE>
taxes, assessments, charges or levies forthwith whenever foreclosure on any lien
that attaches (or security therefor) appears imminent, unless such foreclosure
has been enjoined by appropriate proceedings.
Section 4.11. Further Assurances. The Borrower agrees to execute such
confirmatory deeds and continuation statements as may from time to time be
necessary to perfect, confirm, establish, or continue the security interest in
the Collateral.
Section 4.12. Maintain Records and Make Available to Lender for
Inspection. The Borrower shall maintain Records pertaining to the Collateral,
and the conduct and operation of its business, in such detail, form and scope as
the Lender shall require. At all reasonable times, the Lender and its duly
authorized representatives shall have full access to, and the right to audit,
check, inspect and make abstracts and copies from, such Records. The Lender or
the Lender's agents may enter upon any of the Borrower's premises at any
reasonable time during business hours and from time to time for the purpose of
inspecting the Collateral and any and all such Records, and at any time upon the
occurrence of an Event of Default the Lender may take possession of and remove
any of all such Records.
Section 4.13. Financial Statements. The Borrower shall furnish the
Lender, within ninety (90) days after the close of each fiscal year: (1) a
statement of stockholders' equity and a statement of changes in the financial
positions for such fiscal year; (2) an income statement of each Borrower for
such fiscal year; and (3) a balance sheet of each Borrower as of the end of such
fiscal year, all in reasonable detail, including all supporting schedules and
comments and prepared on a compilation basis by an independent certified public
accountant.
ARTICLE V
NEGATIVE COVENANTS
The Borrower covenants and agrees during the term of this Agreement and
while any Obligations are outstanding and unpaid not to do or to permit to be
done or to occur any of the acts or happenings set forth below:
Section 5.1. Change of Name. The Borrower shall not change its name
without providing thirty (30) days prior written notice to the Lender.
Section 5.2. Encumbrance of Assets. The Borrower shall not mortgage,
pledge, grant or permit to exist a security interest in or lien upon any of its
assets of any kind, whether now owned or hereafter acquired.
Section 5.3. Indebtedness. The Borrower shall not incur, create,
assume, or permit to exist any Indebtedness except: (1) the Loan; (2) trade
Indebtedness incurred in the ordinary course of business; (3) Indebtedness for
the acquisition of capital assets for the operation of the business of the
Borrower; (4) Indebtedness to its shareholders, provided such Indebtedness is
subordinated as to lien priority to the Lender; and (7) other Indebtedness
approved in writing by the Lender.
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ARTICLE VI
EVENTS OF DEFAULT
The following shall constitute Events of Default and shall entitle the
Lender to exercise the Lender's rights and remedies under Article VII:
Section 6.1. Failure to Pay. The failure by the Borrower to pay any
Obligation, when and as due, which failure shall remain uncured for a period of
more than five (5) days after written notice thereof from the Lender.
Section 6.2. Failure to Perform. The failure of the Borrower to perform
or observe any material Obligation (which failure is not specifically enumerated
in this Article VI as an Event of Default), when and as required, which failure
shall remain uncured for a period of more than thirty (30) days after receipt of
written notice thereof from the Lender, provided, that if the failure or default
is of a nature that it cannot be cured or discharged within such thirty (30) day
period, then the Borrower shall have an additional period of time subsequent
thereto within which to cure such failure or default. So long as the Borrower is
working reasonably diligently to cure such default, the additional time to cure
shall be for a period extending for ninety (90) days.
Section 6.3. Failure of Warranty or Representation to be True. The
failure of any representation or warranty provided in this Agreement to be true
and accurate as of the date hereof.
Section 6.4. Default Under Loan Documents. A material breach of or
material default by the Borrower under the terms, covenants, and conditions set
forth in any other Loan Documents which is not cured within any applicable cure
or grace period.
Section 6.5. Cross-Default. A breach of or default by the Borrower or
any Guarantor under the terms, covenants, or conditions of any present or future
agreements, loans, guarantees, or other transactions with the Lender.
Section 6.6. Judgments. The Borrower shall suffer final judgments for
payment of money aggregating in excess of One Hundred Thousand Dollars
($100,000.00) and shall not discharge the same within a period of thirty (30)
days unless, pending further proceedings, execution has not been commenced or if
commenced has been effectively stayed.
Section 6.7. Levy By Judgment Creditor. A judgment creditor of the
Borrower shall obtain possession of any of the Collateral by any means,
including, but without limitation, levy, distraint, replevin or self-help.
Section 6.8. Failure to Pay Debts to Third Persons. The Borrower shall
fail to pay any Indebtedness of any material nature due any third Person, if
such failure shall continue beyond any applicable grace period and a default
with respect thereto shall be actually declared or such Indebtedness shall be
accelerated prior to maturity.
10
<PAGE>
Section 6.9. Involuntary Bankruptcy. The entry of a decree or order for
relief by a court having jurisdiction against or with respect to the Borrower or
any Guarantor in an involuntary case under the federal bankruptcy laws or any
state insolvency or similar laws ordering: (1) the liquidation of the Borrower
or any Guarantor; (2) a reorganization of the Borrower or any Guarantor or the
Borrower's or any Guarantors business and affairs, or (3) the appointment of a
receiver, liquidator, assignee, custodian, trustee, or similar official for the
Borrower or any Guarantor or any of the Borrower's or any Guarantor's property
including, but not limited to, the Collateral, and the failure to have such
decree, order or appointment discharged or dismissed within one hundred eighty
(180) days from the date of entry.
Section 6.10. Voluntary Bankruptcy. The commencement by the Borrower or
any Guarantor of a voluntary case under the federal bankruptcy laws or any state
insolvency or similar laws or the consent by the Borrower or any Guarantor to
the appointment for taking possession by a receiver, liquidator, assignee,
custodian, trustee, or similar official for the Borrower or any Guarantor or any
of the Borrower's or Guarantor's property including, but not limited to, the
Collateral, or the making by Borrower or any Guarantor of any assignment for the
benefit of creditors or the failure by Borrower or any Guarantor generally to
pay its debts as they become due either as to the amount of such debts or the
number of such debts.
ARTICLE VII
RIGHTS AND REMEDIES ON THE OCCURRENCE
OF AN EVENT OF DEFAULT
Section 7.1. Rights and Remedies. In addition to all other rights and
remedies provided by Law and the Loan Documents, the Lender, on the occurrence
of any Event of Default, may:
a. Accelerate and call due the unpaid principal balance of the
Loan, and all accrued interest and other sums due as of the date of default;
b. Impose the default rate of interest provided in the Note,
with or without acceleration of the Note;
c. Foreclose any security interest, lien, assignment, or
pledge created by any Loan Document or the Agreement;
d. Confess judgment or file suit against the Borrower on the
Note;
e. File suit against the Borrower on this Agreement, or any
other Loan Document;
f. Seek specific performance or injunctive relief to enforce
performance of the undertakings, duties, and agreements provided in the Loan
Documents, whether or not a remedy at law exists or is adequate;
g. Exercise any rights of a secured creditor under the
Maryland Uniform Commercial Code-Secured Transactions, Title 9, Commercial Law
Article, Annotated Code of
11
<PAGE>
Maryland, as amended, including the right to take possession of the Collateral
without the use of judicial process and the right to require the Borrower to
assemble the Collateral at such place as the Lender may specify; or
h. Set-off any amounts owed to the Borrower.
Section 7.2. Sale of Collateral. In addition to any other remedy
provided herein, the Lender may immediately, without advertisement, sell at
public or private sale or otherwise realize upon, in Baltimore, Maryland, or
elsewhere, the whole or, from time to time, any part of the Collateral, or any
interest which the Borrower may have therein. After deducting from the proceeds
of sale or other disposition of the Collateral all expenses, including all
expenses for legal services, the Lender shall apply such proceeds toward the
satisfaction of the Obligations. Any remainder of the proceeds after
satisfaction in full of the Obligations shall be distributed as required by
applicable Law. Notice of any sale or other disposition shall be given to the
Borrower at least ten (10) days before the time of any intended public sale or
of the time after which any intended private sale or other disposition of the
Collateral is to be made, which the Borrower hereby agrees shall be reasonable
notice of such sale or other disposition. The Borrower agrees to assemble, or to
cause to be assembled, at the Borrower's own expense, the Collateral at such
place or places as the Lender shall designate. At any such sale or other
disposition, the Lender may, to the extent permissible under applicable law,
purchase the whole or any part of the Collateral, free from any right of
redemption on the part of the Borrower, which right is hereby waived and
released. Without limiting the generality of any of the rights and remedies
conferred upon the Lender under this Section, the Lender may, to the full extent
permitted by applicable law: (a) enter upon the premises of the Borrower,
exclude therefrom the Borrower or any entity connected therewith, and take
immediate possession of the Collateral, either personally or by means of a
receiver appointed by a court of competent jurisdiction, using all necessary
force to do so; (b) at the Lender's option, use, operate, manage, and control
the Collateral in any lawful manner; (c) collect and receive all rents, income,
revenue, earnings, issues, and profits therefrom; and (d) maintain, repair,
renovate, alter or remove the Collateral as the Lender may determine in the
Lender's discretion.
Section 7.3. Collection of Accounts. The Lender, at any time or from
time to time following the occurrence of an Event of Default which is a
continuing Event of Default, and unless and until the same is cured (if Borrower
has the right to cure such Event of Default hereunder) may terminate the
Borrower's authority to collect the Accounts and-may exercise any or all of the
rights contained herein to directly collect all Accounts. Upon such a
termination of the Borrower's authority, the Lender shall have the right to send
notice of assignment or notice of the Lender's security interest to any and all
customers or any third party holding or otherwise concerned with any of the
Accounts, and thereafter the Lender shall have the sole right to collect the
Receivables and take possession of the Accounts and Records relating thereto.
All of the Lender's collection expenses shall be charged to the Borrower's
account and added to the Obligations. If the Lender is collecting the Accounts
as provided, the Lender shall have the right to receive, indorse, assign and
deliver in the Lender's name or the Borrower's name any and all checks, drafts
and other instruments for the payment of money relating to the Accounts, and the
Borrower hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. If the Lender is collecting the Accounts, directly as
above provided, the Borrower
12
<PAGE>
hereby constitutes the Lender or the Lender's designee as the Borrower's
attorney-in-fact with power with respect to the Accounts: (a) to indorse the
Borrower's name upon any note, acceptances, checks, drafts, money orders or
other evidences of payment that may come into the Lender's possession; (b) to
sign the Borrower's name on any invoice relating to any of the Accounts, drafts
against customers, assignments and verifications of Accounts and notices to
Customers; (c) to send verifications of Accounts to any customer; (d) to notify
the Post Office authorities to change the address for delivery of mail addressed
to the Borrower; (f) to do all other acts and things necessary, proper, or
convenient to carry out the terms and conditions and purposes and intent of this
Agreement. All acts of such attorney or designee are hereby ratified and
approved, and such attorney or designee shall not be liable for any acts of
omission or commission other than acts of intentional wrongdoing, nor for any
error of judgment or mistake of fact of law in accordance with this Agreement.
The power of attorney hereby granted, being coupled with an interest, is
irrevocable while any of the Obligations remain unpaid. The Lender may, without
notice to or consent from the Borrower, sue upon or otherwise collect, extend
the time of payment of or compromise or settle for cash, credit or otherwise
upon any terms, any of the Accounts or any securities, instruments or insurances
applicable thereto or release the obligor thereon. The Lender is authorized and
empowered to accept the return of the goods represented by any of the Accounts,
without notice to or consent by the Borrower, all without discharging or in any
way affecting the Borrower's liability hereunder. The Lender does not, by
anything herein or in any assignment or otherwise, assume any of the Borrower's
obligations under any contract or agreement assigned to the Lender, and the
Lender shall not be responsible in any way for the performance by the Borrower
of any of the terms and conditions thereof.
Section 7.4. Attorneys' Fees and Expenses. The Borrower shall pay all
reasonable attorneys' fees and expenses which the Lender may incur as a result
or in Consequence of the happening of an Event of Default, provided the Event of
Default is not cured and the Loan is placed in good standing.
Section 7.5. Remedies Cumulative. The rights and remedies provided in
this Agreement or in the Loan Documents or under applicable Laws shall be
cumulative and the exercise of any particular right or remedy shall not preclude
the exercise of any other rights or remedies in addition to, or as an
alternative of, such right or remedy.
ARTICLE VIII
GENERAL CONDITIONS AND TERMS
Section 8.1. Waivers. The Lender may at any time or from time to time
waive all or any rights under this Agreement or any other Loan Document, but any
waiver or inducement by the Lender at any time or from time to time shall not
constitute, unless specifically so expressed by the Lender in writing (except to
the extent an express waiver need not be in writing under the provisions of
another section of this Agreement), a future waiver of performance or exact
performance by the Borrower.
Section 8.2. No Third Parts Beneficiary Rights. No person not a party
to this Agreement shall have any benefit hereunder nor have third party
beneficiary rights as a result of
13
<PAGE>
this Agreement or any other Loan Documents, nor shall any party be entitled to
rely on any actions or inactions of the Lender or the Lender's agents, all of
which are done for the sole benefit and protection of the Lender.
Section 8.3. Continuing Obligation of Borrower. The terms, conditions,
and covenants set forth herein and in the Loan Documents shall survive closing
and shall constitute a continuing obligation of the Borrower during the course
of the transaction contemplated herein. The obligations of the Borrower under
this Agreement shall remain in effect so long as any Obligation is outstanding,
unpaid or unsatisfied between the Borrower or any Guarantor and the Lender.
Section 8.4. Binding Obligation. This Agreement shall be binding upon
the parties and their successors and assigns.
Section 8.5. Notices. Any notice or consent required or permitted by or
in connection with this Agreement or any other Loan Document shall be in writing
and made by hand delivery, by wire, by overnight courier service for next day
delivery or by certified mail, return receipt requested, postage prepaid,
addressed to the Lender or the Borrower at the appropriate address set forth
below or to such other address as may be hereafter specified by written notice
by the Lender or the Borrower, and shall be considered given as of the date of
hand delivery or wire, as of the date following delivery to the overnight
courier service, or as of two (2) business days after the date of mailing, as
the case may be:
If to the Lender:
Margaret Hubard
2747 N. Nelson St.
Arlington, VA 22207-5033
If to the Borrower:
The Majestic Companies, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Majestic Transportation Products, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Section 8.6. Final Agreement. This Agreement and the Loan Documents
contain the final and entire agreement and understanding of the parties, and any
terms and conditions not set
14
<PAGE>
forth in this Agreement or the Loan Documents are not a part of this Agreement
and the understanding of the parties hereof.
Section 8.7. Amendment. This Agreement may be amended or altered only
in writing signed by the party to be bound by the amendment or alteration.
Section 8.8. Time. Time is of the essence of this Agreement.
Section 8.9. Choice of Law. The laws of the State of Maryland shall
govern the rights and obligations of the parties to this Agreement and all other
Loan Documents, and the interpretation and construction and enforceability
thereof and any and all issues relating to the transactions contemplated herein.
The Borrower consents to the jurisdiction of the Courts of the State of
Maryland, including the jurisdiction of the United States District Court for the
District of Maryland (to the extent diversity of citizenship or other
jurisdictional basis exists) and agrees that venue shall be proper in any county
or the City of Baltimore if suit is filed by the Lender to enforce or construe
the Loan Documents in the courts of the State of Maryland.
Section 8.10. Number, Gender, and Captions. As used herein, the
singular shall include the plural and the plural may refer to only the singular.
The use of any gender shall be applicable to all genders. The captions contained
herein are for purposes of convenience only and are not a part of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE>
IN WITNESS WHEREOF, the Lender, the Borrower and the Guarantor execute
and seal this Agreement as of the 27th day of August, 1999, with the specific
intention that this Agreement constitute a document under seal.
WITNESS:
LENDER:
/s/ Margaret C. Hubard,
-----------------------------------
a
--------------------------
/s/ John B. Hubard By: /s/ Margaret C. Hubard (SEAL)
- -------------------- ---------------------------------
10-1-99
--------------------
WITNESS:
BORROWER:
THE MAJESTIC COMPANIES, LTD.,
a Delaware corporation
/s/ Alex Tovar By: /s/ Francis A. Zubrowski (SEAL)
- -------------------- ------------------------------------
Francis A. Zubrowski, President and
Chief Executive Officer
MAJESTIC TRANSPORTATION PRODUCTS,
LTD., a Delaware corporation
/s/ Alex Tovar By: /s/ Francis A. Zubrowski (SEAL)
- -------------------- ------------------------------------
Francis A. Zubrowski, President and
Chief Executive Officer
16
DISBURSEMENT AGREEMENT
----------------------
By and Between
THE MAJESTIC COMPANIES, LTD.,
A DELAWARE CORPORATION
AND
MAJESTIC TRANSPORTATION PRODUCTS, LTD.,
A DELAWARE CORPORATION
AND
/s/ Margaret C. Hubard
----------------------
MARGARET C. HUBARD, AN INDIVIDUAL
AUGUST 26, 1999
<PAGE>
DISBURSEMENT AGREEMENT
----------------------
THIS DISBURSEMENT AGREEMENT (the "Disbursement Agreement") is made by
and among THE MAJESTIC COMPANIES, LTD., a Nevada corporation, MAJESTIC
TRANSPORTATION PRODUCTS, LTD., a Maryland corporation, jointly and severally
(collectively the "Borrower"), and MARGARET C. HUBARD, an Individual (the
"Lender").
RECITALS
--------
A. The Borrower has requested financing in the principal amount of One
Hundred Thousand Dollars ($100,000.00) (the "Loan") and the Lender has agreed to
provide the financing requested by the Borrower. The proceeds of the Loan shall
be disbursed by the Lender to the Borrower as a line of credit as hereafter set
forth.
B. This Agreement is made for the purpose of setting forth the terms
and conditions pursuant to which the Lender will disburse the Loan to the
Borrower and to set forth the Borrower's obligations and duties with respect to
the application of Loan proceeds.
NOW, THEREFORE, in consideration of the premises, the terms and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Lender and the
Borrower agree as follows:
ARTICLE I
---------
TERMS AND PURPOSES OF THE LOAN
------------------------------
The general terms and the purposes of the Loan shall be as follows:
Section 1.1. General Terms of the Loan. Subject to the limitations set
forth herein, the Lender shall lend to the Borrower as the Loan an amount of up
to One Hundred Thousand Dollars ($100,000.00) upon the terms and conditions
contained herein and in the other loan documents of even date herewith relating
to the Loan (the "Loan Documents"). The Loan shall be disbursed in accordance
with the provisions of this Agreement and shall be repaid with interest thereon
by the Borrower to the Lender in accordance with the terms and provisions of a
certain Promissory Note of even date herewith evidencing the Loan (the
"Promissory Note"), the terms and provisions of which are incorporated by
reference herein to the same extent as if set forth in full in this Agreement.
Section 1.2. Security for the Loan. All advances made under this
Agreement and all obligations of the Borrower under this Agreement, the
Promissory Note and the other Loan Documents shall be secured by: (a) the grant
by the Borrower to the Lender under a Security Agreement of even date herewith
(the "Security Agreement") of a lien and security interest in all Personalty,
now existing or hereafter acquired by the Borrower, and the proceeds and
products thereof; (b) the additional security and assurance of performance and
repayment to be furnished to the Lender by the Borrower under the Loan Documents
in accordance with the terms and conditions thereof.
2
<PAGE>
ARTICLE II
----------
DISBURSEMENT OF LOAN PROCEEDS
-----------------------------
Subject to the terms and conditions of this Agreement, the Lender shall
disburse the Loan Proceeds in the following manner:
Section 2.1. Purpose. The purpose of the Loan is to provide working
capital as needed by the Borrower for the Borrower's business operations.
Section 2.2. Term. The term of the Loan shall be for the period
extending to the Maturity Date of the Promissory Note, as defined and set forth
therein.
Section 2.3. Loan Documents. This Agreement, the Note, and all other
documents, agreements, certifications, instruments executed or to be executed
and delivered or to be delivered in connection with the Loan and the Note
evidencing the Loan, are collectively referred to herein as the "Loan
Documents".
Section 2.4. Disbursements under the Loan. Advances under the Loan
shall be made by the Lender in its sole discretion from time to time upon the
request of the Borrower, which may be written or telephoned and shall be made by
the President of the Borrower or by any other authorized officer of the
Borrower. The Lender shall advance such sums to the Borrower which the Lender,
in its sole discretion, deems reasonable and proper and the Lender may reject
any request for an advance which the Lender deems not reasonable or proper in
its sole discretion. The Lender shall credit such advances to a commercial
account established or to be established by the Borrower. Any obligation of the
Lender to advance under the Loan is subject to the continued determination by
the Lender, in good faith, that the Borrower remains in acceptable financial
condition and continues to be creditworthy. The Borrower agrees that no request
for an advance under the Loan shall be made which, if honored or paid, would
cause the aggregate amount of advances made and outstanding to exceed the
limitations as to the maximum amount of advances set forth herein. In no event
shall the Lender be obligated to make any advance if a default under the Note or
an Event of Default under the Security Agreement shall have occurred, unless and
until such default or Event of Default shall be cured (if the Borrower is given
the right to cure the applicable Event of Default hereunder), or if such advance
would cause the total advances made to or for the Borrower and outstanding under
this Agreement to exceed the limitations as to the maximum amount of advances
set forth herein.
Section 2.5. Safeguards as to Application of Disbursements. The Lender
shall have the right to require the Borrower to submit a breakdown of each
disbursement which is to be made by the Lender hereunder. The Lender shall have
the right to require at any time, or from time to time, the presentation of
receipts evidencing the payment of bills for which advances have been made
hereunder. The Lender may, in the Lender's reasonable judgment, make
disbursement checks payable jointly to the Borrower and those creditors of the
Borrower due or who will be due sums which are advanced hereunder. This
Agreement shall constitute an irrevocable and automatic authorization and
direction on the part of the Borrower to the direction on the part of the
Borrower to the Lender to so disburse the Loan proceeds and the Lender shall
need no further
3
<PAGE>
authorization from the Borrower to make disbursements in this manner. Any such
disbursements shall satisfy the Lender's obligations hereunder, and shall be
fully secured in accordance with and by way of the Loan Documents securing the
Loan. The Lender shall at all reasonable times have access to the books and
records of the Borrower so as to enable the Lender to verify that funds
disbursed by the Lender for the Real Property are being used properly.
ARTICLE III
-----------
GENERAL CONDITIONS AND TERMS
----------------------------
Section 3.1. Waivers. The Lender may at any time or from time to time
waive all or any rights under this Agreement or any other Loan Document, but any
waiver or indulgence by the Lender at any time and from time to time shall not
constitute, unless specifically so expressed by the Lender in writing, a future
waiver of performance or exact performance by the Borrower or the Guarantor.
Section 3.2. No Third Party Beneficiary Rights. No person not a party
to this Agreement shall have any benefit hereunder nor have third party
beneficiary rights as a result of this Agreement or any other Loan Documents,
nor shall any party be entitled to rely on any actions or inactions of the
parties hereto or their agents, all of which are done for the sole benefit of
the parties hereto.
Section 3.3. Continuing Obligation of Borrower. The terms, conditions,
and covenants set forth herein and in the Loan Documents shall survive closing
and shall constitute a continuing obligation of the Borrower during the course
of the Loan.
Section 3.4. Binding Obligation. This Agreement shall be binding upon
the parties, their successors, personal representatives, and assigns.
Section 3.5. Final Agreement. This Agreement and the Loan Documents
contain the final and entire agreement and understanding of the parties, and any
terms and conditions not set forth in this Agreement or the Loan Documents are
not a part of this Agreement and understanding of the parties hereof. This
Agreement may be amended or altered only in writing signed by the party to be
bound by the change or alteration.
Section 3.6. Photocopies Sufficient. A xerox, photographic, or other
reproduction of a security agreement or financing statement shall be sufficient
as a financing statement.
Section 3.7. Time. Time as of the essence of this Agreement.
Section 3.8. Choice of Law. This Agreement shall be governed,
construed, and enforced in accordance with the laws of the State of Maryland.
Section 3.9. Assignability. This Agreement may be assigned by the
Lender or its successors and assigns at any time or from time to time; this
Agreement may not be assigned by the Borrower.
4
<PAGE>
Section 3.10. Invalidity of Any Part. If any provision or part of any
provision of this Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement and this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision or part
thereof had never been contained herein, but only to the extent of its
invalidity, illegality or unenforceability.
Section 3.11. Number, Gender, and Captions. As used herein, the
singular shall include the plural and the plural shall include the singular. The
use of any gender shall be applicable to all genders. The captions contained
herein are for purposes of convenience only and are not a part of this
Agreement.
IN WITNESS WHEREOF, the Lender and the Borrower have executed this
Agreement under seal as of the 26th day of August, 1999, with the specific
intention that this Agreement constitutes an instrument under seal.
WITNESS:
LENDER:
/s/ Margaret C. Hubard,
-----------------------
An Individual
-------------
John B. Hubard By : Margaret C. Hubard(SEAL)
-------------- ---------------------------------------
An Individual
-------------
WITNESS:
BORROWER:
THE MAJESTIC COMPANIES, LTD., a
Nevada corporation
/s/ Alex Tovar By: Francis A. Zubrowski (SEAL)
-------------- ---------------------------------------
Francis A. Zubrowski, Chairman and
Chief Executive Officer
MAJESTIC TRANSPORTATION
PRODUCTS, LTD., a Maryland corporation
/s/ Alex Tovar By: Adrian Corbett (SEAL)
-------------- ---------------------------------------
Adrian Corbett, President
5
<PAGE>
TO FILING OFFICER: AFTER RECORDATION RETURN TO:
/s/ Margaret C. Hubard
----------------------
----------------------
2747 N. Nelson St.
----------------------
Arlington, VA 22207-5033
------------------------
______ To Be Recorded in the Financing Statement Records of the Secretary
of State of California
_______ To Be Recorded in the Financing Statement Records of ______ County,
California
FINANCING STATEMENT
-------------------
($200,000.00 LINE OF CREDIT)
1. Debtor: THE MAJESTIC COMPANIES, LTD.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
MAJESTIC TRANSPORTATION PRODUCTS, LTD.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
2. Secured Party: /s/ Margaret C. Hubard
----------------------
----------------------
2747 N. Nelson St.
----------------------
Arlington, VA 2207-5033
-----------------------
3. Each of the above referred corporations comprising the Debtor as set forth
above hereby grants to the Secured Party a security interest in and to, and
this Financing Statement covers, all of the Debtor's right, title and
interest in and to all of the tangible and intangible assets owned by the
Debtor, wherever located, whether now owned or hereafter acquired by the
Debtor, together with all substitutions therefor, and replacements and
renewals thereof, including but not limited to the following: (a) Accounts;
(b) Cash on hand and in any deposit, passbook, savings or checking account;
(c) Chattel Paper; (d) Documents; (e) Contracts and Contract rights; (f)
General Intangibles; (g) Goods; (h) Instruments; (i) Inventory; and (j) All
Records relating to or pertaining to any of the above listed Collateral.
The terms "Accounts," "Chattel Paper," "Documents," "General Intangible,"
"Goods," "Instruments," and "Inventory" as used above shall have the same
respective meanings as
<PAGE>
are given to those terms in the Maryland Uniform Commercial Code - Secured
Transactions, Title 9, Commercial Law Article, Annotated Code of Maryland, as
amended.
4. The proceeds (including insurance proceeds) and products of the collateral
are secured, as are future advances and after acquired property, and any
substitutions, renewals, replacements, additions and accretions of or to any
of the above-described collateral.
DEBTOR:
THE MAJESTIC COMPANIES, LTD.,
a Delaware corporation
By: /s/ Francis A. Zubrowski (SEAL)
- ---------------------------------------
Francis A. Zubrowski, President
and Chief Executive Officer
August 27, 1999
---
MAJESTIC TRANSPORTATION PRODUCTS, LTD.,
a Delaware corporation
By: /s/ Francis A. Zubrowski (SEAL)
- ---------------------------------------
Francis A. Zubrowski, President
and Chief Executive Officer
August 27, 1999
---
2
PROMISSORY NOTE
October 20, 1999
PROMISSSORY NOTE (the "AGREEMENT") between, FRANCIS A. ZUBROWSKI (the 'LENDER'),
and, THE MAJESTIC COMPANIES, LTD. (the 'BORROWER'), dated, October 20, 1999:
The LENDER agrees to lend the BORROWER the amount of $186,680 U.S dollars.
The BORROWER acknowledges receipt of, and agrees to repay the $186,680 to the
LENDER upon demand.
Furthermore, the LENDER and the BORROWER agree that the amount shall accrue
interest at an annualized rate of 12%. Both principal and interest shall be paid
in full upon demand.
This note contains all terms and conditions of the advance between the LENDER
and the BORROWER, no other understandings or terms are implied unless previously
agreed to in writing between the two parties.
Signed this 20th day of October 1999 in the City of San Diego, CA.
BORROWER LENDER
/s/ Alex V. Tovar /s/ Francis A. Zubrowksi
- ------------------------- ------------------------------
Alex V. Tovar-Controller Francis A. Zubrowski
The Majestic Companies, Ltd.
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE MAJESTIC COMPANIES, LTD.,
a Delaware corporation
AND
SKYTEX INTERNATIONAL, INC.,
a Nevada corporation
Dated as of Octobr 8, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and dated as
of 8th day of October, 1998, by and between The Majestic Companies, Ltd., a
Delaware corporation ("Majestic") and SkyTex International, Inc., a Nevada
corporation ("SkyTex"). Majestic and SkyTex are hereinafter sometimes
collectively referred to as the "Constituent Corporations".
W I T N E S S E T H:
--------------------
WHEREAS, Majestic's authorized capital consists of 20,000,000 shares of
capital stock, consisting of 18,000,000 shares of common stock, $.01 par value
(the "Common Stock"), of which 16,191,863 shares are issued and outstanding, and
2,000,000 shares of preferred common stock, $0.01 par value (the "Preferred
Stock"), of which no shares are issued and outstanding and owned by the current
stockholders (the "Stockholders"); and
WHEREAS, SkyTex's authorized capital consists of 50,000,000 shares of
common stock, $.001 par value (the "SkyTex Stock"), 2,500,000 shares of which
are issued and outstanding; and
WHEREAS, SkyTex, and Majestic desire that Majestic be merged into SkyTex
(the "Merger") on the terms and conditions set forth in this Agreement; and
WHEREAS, SkyTex and Majestic entered into a letter of intent dated October
2, 1998 (the "Letter of Intent"), which Letter of Intent calls for the parties
to enter into a definitive agreement, being this Agreement, as the terms and
conditions set for in the Letter of Intent.
NOW, THEREFORE, in consideration of the premises and the mutual and
dependent promises hereinafter set forth, and other good and valuable
consideration, the adequacy and receipt of which are hereby mutually
acknowledged, the parties hereby agree as follows:
1. THE MERGER
1.1. Merger; Surviving Corporation. Upon the performance of all
covenants and obligations of the parties contained herein and upon the
fulfillment of all conditions to the obligations of the parties contained herein
(other than such covenants, obligations and conditions as shall have been waived
in accordance with the terms hereof), and in accordance with the general
corporation laws of Delaware and Nevada (the "Corporate Laws"), at the Effective
Time (as defined in Section 2.1), Majestic shall be merged with and into SkyTex,
and SkyTex shall be the surviving corporation (the "Surviving Corporation") and
shall continue its corporate existence under the laws of
<PAGE>
Nevada. The name of the Surviving Corporation shall be amended to be The
Majestic Companies, Ltd. At the Effective Time, the separate existence of
Majestic shall cease.
1.2. Effect of the Merger. At the Effective Time, all rights, privileges,
powers and franchises, whether public or private, all the property, real,
personal and mixed, of each of the Constituent Corporations, all debts due to
either of them on whatever account and all other things in action belonging to
either of them shall be vested in the Surviving Corporation without further act
or deed; and all property, rights, privileges, powers and franchises and all and
every other interest shall be thereafter as effectively the property of the
Surviving Corporation as they were of the Constituent Corporations; and the
title to any real estate, whether vested by deed or otherwise, in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; and the Surviving Corporation shall thenceforth be liable for all
debts, liabilities and duties of each of the Constituent Corporation, and all
said debts, liabilities and duties shall thenceforth attach to and become the
debts, liabilities and duties of the Surviving Corporation. No liability or
obligation due or to become due at the Effective Time, and no claim or demand
for any cause then existing against either of the Constituent Corporations shall
be released or impaired by the Merger, and all rights of creditors and all liens
upon property of either of the Constituent Corporations shall be preserved
unimpaired.
1.3. Surviving Corporation Organization.
(a) After the Effective Time, the Articles of Incorporation and
Bylaws of SkyTex shall continue as the Articles of Incorporation and Bylaws of
the Surviving Corporation unless and until amended in accordance with their
terms and as provided by law.
(b) The board of directors of the Surviving Corporation at the
Closing shall consist of four (4) directors nominated by Majestic and one (1)
director nominated by SkyTex and such individuals shall serve until their
respective successors are duly elected and qualified. The officers of Majestic
immediately prior to the Effective Time shall be appointed by the Board of
Directors as the officers of the Surviving Corporation until their respective
successors are duly elected and/or appointed and qualified in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
1.4. Conversion of Shares. The manner of converting or exchanging shares
of the capital stock of the Constituent Corporations shall, by virtue of the
Merger and without any action on the part of the holders thereof, be as follows:
(a) Immediately prior to the Closing, Francis A. Zubrowski, James R.
Deveney, II and Golden Capital Corporation shall collectively exchange a total
of 2,575,000 shares of Majestic's common stock for various considerations from
SkyTex including 750,000 warrants for shares of common stock of SkyTex. The
terms of such warrants shall provide for exercise of a ratable portion of the
aggregate warrants during each succeeding calendar quarter for a period of two
(2) years (at the rate of 93,750
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warrants per quarter) and for an additional two-year period for the exercise of
all such warrants. The exercise price for the warrants shall be the current par
value of SkyTex's common stock. The shares of Majestic stock to be exchanged
hereunder shall, upon exchange, be canceled, and retired by SkyTex and
thereafter shall be of no further force and effect.
(b) At the Closing, the Stockholders of Majestic shall be entitled
to receive and shall be issued one (1) share of SkyTex Stock for each one and
ninety eight one-hundredths (1.98) shares of Common Stock held at the Effective
Time, which shares of SkyTex Stock shall be validly issued, fully paid and
non-assessable shares of common stock, par value $.001. As of the Effective Time
and upon issuance of SkyTex Stock as set forth above, all shares of Common Stock
and Preferred Stock of Majestic shall be of no further force and effect,
excepting the right to receive SkyTex Stock therefor. Any fractional shares of
SkyTex Stock shall be rounded up to the next highest number.
1.5. SkyTex Loan.
(a) A condition to the Closing shall be that Majestic furnish or
make arrangements for a loan to SkyTex at the Closing in an amount of not less
than Two Hundred and Sixty Thousand Dollars ($260,000) (the "Loan"). The terms
of the Loan shall provide for a term to December 31, 1999, interest only
payments in November and December of 1998 and a amortizing monthly payment in
the amount of $23,100.69 each month during 1999. The Loan shall bear interest at
the fixed interest rate of 12% per annum. The Loan shall be secured by
collateral as agreed upon by the parties thereto. The Loan shall be used by
SkyTex only for the purpose of acquiring the business operations of third
parties.
2. CLOSING
2.1. The Closing and Effective Time of the Merger.
(a) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, or on such later
other date as SkyTex and Majestic shall agree, SkyTex and Majestic shall file a
certificate of merger substantially in the form attached as Exhibit C hereto
(the "Certificate of Merger") with the Delaware Secretary of State (the
"Delaware Secretary of State") and articles of merger substantially in the form
attached as Exhibit D (the "Articles of Merger") with the Secretary of State of
the State of Nevada (the "Nevada Secretary of State"), and will make all other
filings or recordings required by the Corporation Laws in connection with the
Merger. The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur immediately prior to, and the Merger shall become
effective at, the time at which the Certificate of Merger is duly filed with the
Delaware Secretary of State and the Articles of Merger are duly filed with the
Nevada Secretary of State, or at such later time as is specified by mutual
consent of the parties hereto. When used in this Agreement, the term "Effective
Date" or "Effective Time" shall mean the date on or time at which the Merger
becomes effective by filing and recordation of the later of, or
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as so provided in, the Certificate of Merger and the Articles of Merger. The
date of the Closing is referred to herein as the "Closing Date."
(b) The Closing shall be held at the offices of Patton, Boggs,
L.L.P., 250 W. Pratt Street, Baltimore, Maryland 21201 at 11:00 a.m. on November
3, 1998, or at such other place and time as SkyTex and Majestic shall agree;
provided, however, that if Majestic reasonably believes that any of the
conditions set forth in Section 5 will not be satisfied, Majestic shall have the
right by written notice to SkyTex and Stockholders to postpone the Closing from
time to time for up to an aggregate of 60 business days; and, if SkyTex
reasonably believes that any of the conditions set forth in Section 6 will not
be satisfied, SkyTex shall have the right by written notice to Majestic to
postpone the Closing from time to time for up to an aggregate of 60 business
days. In the event that the Closing does not occur as herein contemplated, any
party hereto not then in default hereunder shall have the right to terminate
such party's obligations under this Agreement (by written notice to the other
parties), without liability hereunder.
2.2. Surrender of Stockholders' Stock Certificates. Each certificate
evidencing the Common Stock outstanding immediately prior to the Effective Date
shall, on or after the Effective Time, be deemed for all corporate purposes to
represent and evidence only the right to receive the shares of SkyTex Stock to
be received in accordance with Section 1.4(a). Except as provided in the next
succeeding sentence, until tender by a stockholder of a certificate evidencing
Common Stock, a Stockholder of Majestic shall not have any right to receive
SkyTex Stock. The Surviving Corporation shall issue SkyTex Stock on account of
any Common Stock certificate which has been lost, stolen or destroyed upon
receipt of satisfactory evidence of ownership of the Common Stock represented
thereby and of such loss, theft or destruction, and after appropriate
indemnification.
2.3. Surrender of Majestic Stock Certificates. Promptly after the
Effective Date, the Surviving Corporation shall issue in the name of each holder
of Majestic Stock a stock certificate representing the appropriate number of
shares of SkyTex Stock of the Surviving Corporation in exchange for the
certificate or certificates which formerly represented shares of Majestic Stock,
which shall be immediately cancelled.
3. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF MAJESTIC.
Majestic hereby represents, warrants and agrees as follows:
3.1. Organization and Good Standing.
(a) Majestic is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the legal right
and all necessary corporate power and authority to own all of its assets and to
carry on its business as it is now being conducted, and the character of the
properties owned or leased by Majestic and the nature of the business transacted
by Majestic do not require that Majestic be qualified to do business as a
foreign corporation in any jurisdiction
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other than the State of California in which jurisdiction Majestic has so
qualified and is in good standing.
(b) A copy of the Certificate of Incorporation, as amended, of
Majestic (certified by the Delaware Secretary of State as of a recent date) and
the By-Laws, as amended, of Majestic (certified by the Secretary of Majestic as
of the date hereof) have been delivered to SkyTex, are complete and correct and
reflect all amendments to such documents.
3.2. Capitalization. Majestic's authorized capital stock consists of
18,000,000 shares of common stock, $.01 par value (the "Common Stock") and
2,000,000 shares of preferred stock, ($0.01 par value (the "Preferred Stock"). A
total of 16,191,863 shares of Common Stock are outstanding, all of which are
validly issued, fully paid and non-assessable and are not subject to pre-emptive
rights. No shares of Preferred Stock are issued and outstanding. Schedule 3.2
sets forth a list of all stockholders of Majestic and the number of shares held
by each stockholder. No securities convertible into equity securities of
Majestic have been issued. Other than this Agreement and the capital stock and
warrants set forth on Schedule 3.2 hereof, there are no outstanding warrants,
options, rights, agreements, calls or commitments (i) to which Majestic is a
party relating to the authorized but unissued Common Stock of Majestic or
providing for the authorization or issuance of additional shares of the capital
stock of Majestic, or (ii) to which Majestic or any other person or entity is a
party relating to the issued and outstanding Common Stock.
3.3. Subsidiaries. Schedule 3.3 sets forth the name, authorized capital
stock and the record ownership of the outstanding shares of capital stock of
each corporation as to which Majestic owns more than ten percent (10%) of its
outstanding capital stock (each such corporation, a "Subsidiary"). All of the
outstanding shares of capital stock of each Subsidiary have been validly issued
and are fully paid and nonassessable. Other than as set forth on Schedule 3.3,
there are no other issued or outstanding equity securities of any Subsidiary,
and there are no other issued or outstanding equity securities of any of
Subsidiary convertible at any time into equity securities of any Subsidiary. No
Subsidiary is subject to any commitment or obligation that would require the
issuance or sale of additional shares of its capital stock at any time under
options, subscriptions, warrants, rights or any other obligations.
3.4. Title to Shares. Each Stockholder now owns, and has good, valid and
marketable title to the shares of Common Stock to be exchanged by him pursuant
to this Agreement free and clear of any Liens. Other than this Agreement, there
are no agreements, understandings or commitments between Stockholders and any
person or entity with respect to the sale, transfer or other disposition of any
of such shares of Common Stock.
3.5. Authority; Validity of Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by Majestic does not, and will not, violate any provisions
of the Certificate of
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<PAGE>
Incorporation or By-Laws of Majestic or violate any provision of, or cause a
default under, or result in the acceleration of any obligation under, any
agreement, instrument, lease, Lien, Judgment, statute, law, rule or regulation
to which Majestic is a party or by which Majestic or the property of Majestic
may be bound or affected, or conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any Lien upon any of the assets of Majestic under any note,
indenture, mortgage, lease, agreement, contract, purchase order or other
instrument or document to which Majestic is a party or by which any of the
Company or the assets of the Company is bound or affected. Except as set forth
in Schedule 3.5, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby by Majestic does not,
and will not, require the consent or approval of, or filing with, any court or
administrative or governmental authority, or any other third party. Majestic has
the full legal right, power and authority to enter into this Agreement and to
carry out the transactions herein contemplated. The execution, delivery and
performance of this Agreement have been duly authorized and approved by all
necessary corporate action on the part of Majestic, subject to approval of the
stockholders of Majestic as required by Section 8.5 hereof. This Agreement, when
executed, will constitute the legal, valid and binding agreement of Majestic,
enforceable against Majestic in accordance with its terms, subject only to any
applicable bankruptcy, insolvency or other laws affecting creditors' rights
generally, and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.6. Financial Statements. Attached as Schedule 3.6. is the unaudited
consolidated balance sheet for Majestic as of September 30, 1998, a related
statement of income, and a stockholders' equity for such period. All such
financial statements (i) are in accordance with the books and records of
Majestic and (ii) present accurately, fairly and in accordance with generally
accepted accounting principles applied on a consistent basis the financial
position and results of operations and changes in financial position of Majestic
as of the date and for the period indicated.
3.7. Accounts and Notes Receivable. Schedule 3.7 lists the obligors and
outstanding balances of all accounts and notes receivable of Majestic; all such
accounts and notes receivable are reflected on the Balance Sheet. The accounts
and notes receivable of Majestic reflected or shown on the Balance Sheet arose
and will arise from bona fide transactions in the ordinary course of business,
and will have been collected or be fully collectible in the book amounts
thereof, after taking into account the reserve for doubtful accounts shown on
the Balance Sheet.
3.8. Inventories. All of the inventories of Majestic, including work in
progress inventories, consist of a quality and quantity usable and saleable in
the ordinary and usual course of the business. The quantities of each type of
inventory are not excessive, but are reasonable and warranted in the present
circumstances of Majestic.
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<PAGE>
Except as set forth in Schedule 3.8, the value, quantities and types of
inventories of Majestic in all material respects are as reflected in the Balance
Sheet.
3.9. Absence of Undisclosed Liabilities. Except as set forth in Schedule
3.9 and as reflected in the Balance Sheet, (i) Majestic has no liabilities of
any nature (matured or unmatured, fixed or contingent); (ii) all reserves
established by Majestic and set forth in the Balance Sheet are adequate; and
(iii) there are no loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards board in March, 1975) which are not adequately disclosed in the
Balance Sheet as required by said Statement No. 5.
3.10. Absence of Certain Changes or Events.
3.10.1. Financial Condition; Assets and Operations. Except as
disclosed in writing to SkyTex prior to the date of this Agreement, since
September 30, 1998 there has been no material adverse change in Majestic's
financial condition, properties, business, prospects or results of operations,
and no material adverse change in the equity or long-term debt of Majestic or
decrease in net working capital of Majestic as compared with the amounts shown
on the Balance Sheet (all as determined in accordance with generally accepted
accounting principles consistently applied throughout the applicable period).
Since September, 1998, Majestic has conducted its business only in the usual and
ordinary manner and in the ordinary course of business.
3.10.2. Capital Stock, Options, Dividends, etc. Since September 30,
1998, there has not been (i) any change in Majestic's authorized, issued or
outstanding capital stock, except in the ordinary course of business and for
valid consideration; (ii) any pledge, hypothecation or other encumbrance of any
shares of Majestic's capital stock; the granting of any stock option or right to
purchase shares of Majestic's capital stock; (iii) any issuance of any security
convertible into shares of Majestic's capital stock; (iv) any purchase,
redemption, retirement or other acquisition or sale of any shares of Majestic's
capital stock; or (v) any declaration, setting aside or payment of any dividend
or the making of any other distribution or payment in respect of Majestic's
capital stock.
3.10.3. Sale or Pledge of Assets; Incurring of Indebtedness. Since
September 30, 1998, (i) there has not occurred any sale or lease of capital
assets of Majestic with an original cost in excess of $10,000 for any single
item; (ii) no Lien has been imposed on any of the properties or assets of
Majestic; (iii) no indebtedness has been incurred, assumed or guaranteed by
Majestic, except in the ordinary course of business; or (iv) there has been no
entering into or termination by Majestic of any material agreement, other than
the Letter of Intent and this Agreement, except in the ordinary course of
business. There are no agreements, understandings or commitments between
Majestic or Stockholders and any person or entity with respect to any merger,
consolidation or sale of substantially all assets by Majestic.
3.11. Assets; Encumbrances. Schedule 3.11 lists or describes: (i) all
capitalized improvements located on premises leased or owned by Majestic; and
(ii) by
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location, all capitalized machinery, office equipment, furniture, fixtures,
components, tools and similar personal property owned or leased (identifying
those leased) by Majestic which are used or useful in connection with its
business, along with a brief description of each, with items having a value of
less than $10,000 grouped together for identification. Except as set forth in
Schedule 3.11 or as reflected in the Balance Sheet, Majestic has good and
marketable title to all property and assets, real, personal or mixed, tangible
or intangible, reflected in the Balance Sheet, free and clear of all Liens. The
tangible assets of Majestic are in good operating condition, well-maintained,
free from any material defects, and are adequate for the operation of Majestic's
business as presently conducted, except for technological obsolescence. Since
September 30, 1998, there has been no material damage or destruction of
Majestic's property by fire or other casualty, whether or not covered by
insurance.
3.12. Leases. All leases for any property leased by Majestic are listed on
Schedule 3.12. With respect to such leases, (i) all are legally valid and
binding on Majestic or as the case may be on the other parties thereto and in
full force and effect; (ii) no material event of default or event which would
constitute a material event default but for the requirement that notice be
given, a period of time elapse, or both, has occurred or is continuing; (iii)
none of the rights of Majestic thereunder will be impaired by the execution,
delivery or performance of this Agreement; (iv) all of the rights of Majestic
thereunder will be enforceable by Majestic after the Closing without the consent
or agreement of any other party; (v) Majestic has furnished or made available to
SkyTex true and correct copies of all leases listed in Schedule 3.12, as amended
to date; and (vi) no offset or defense presently exists with respect to any
rents or other sums payable or to become payable by any lessee under a lease of
any property owned by Majestic.
3.13. Agreements. Majestic is not a party to any written or oral (i)
contract, agreement, arrangement, understanding or commitment for the future
purchase of fixed assets or for the future purchase of materials, supplies or
equipment involving payments by Majestic of more than $25,000 or in excess of
normal operating requirements; (ii) indenture or other contract, agreement,
arrangement, understanding or commitment relating to the borrowing of money or
to the mortgaging, pledging or otherwise placing a Lien on any assets of
Majestic; (iii) contract, agreement, arrangement, understanding or commitment
for capital expenditures in excess of $25,000; (iv) guaranty of any obligations,
whether for borrowed money or otherwise, or other commitment under which
Majestic is or may be liable for the debts of others; (v) contract, agreement,
arrangement, understanding or commitment under which Majestic is obligated to
pay any broker's fees, finder's fees or any such similar fees, to any third
party for any reason; (vi) partnership, joint venture, joint operating, joint
marketing or similar contract, agreement, arrangement, understanding or
commitment; (vii) agreement vesting a power of attorney in any third party; or
(viii) any other contract, agreement, arrangement, understanding or commitment
which is material to the business of Majestic, and which is not otherwise set
forth on any Schedule hereto. Except as set forth in Schedule 3.13, Majestic is
not engaged in any negotiations
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which, if reduced to a written contract of a type required to be disclosed
pursuant to this Section 3.13, would be required to be set forth in Schedule
3.13. With respect to the contracts, agreements, arrangements, understandings
and commitments listed in Schedule 3.13, (i) all are legally valid and binding
on Majestic or as the case may be on the other parties thereto and in full force
and effect; (ii) no material event of default or event which would constitute a
material event of default but for the requirement that notice be given, a period
of time elapse, or both has occurred or is continuing; (iii) none of the rights
of Majestic thereunder will be impaired by the execution, delivery or
performance of this Agreement; (iv) all of the rights of Majestic thereunder
will be enforceable by Majestic after the Closing Date without the consent or
agreement of any other party, except as disclosed on Schedule 3.13 or 3.5; and
(v) Majestic has furnished or made available to SkyTex true and correct copies
of all written agreements and other documents listed in Schedule 3.13, as
amended to date.
3.14. Equity Investments. Schedule 3.14 lists all equity and proprietary
holdings in any corporation, association, trust, partnership or other entity
including, but not limited to, stocks, bonds, negotiable instruments, other
interests currently owned by or held in the name of Majestic.
3.15. Burdensome Restrictions. Majestic is not (i) obligated under any
contract or agreement not a part of or described in a Schedule to this Agreement
or (ii) subject to any commitment, charter or other corporate restriction which
materially and adversely affects, or is expected by Stockholders in the future
materially and adversely to affect, its business, properties, assets, prospects
or condition (financial or otherwise).
3.16. Intellectual Property Rights. Except in each case as set forth in
Schedule 3.16:
(a) Majestic owns, possesses, or has the right to use all
Intellectual Property Rights (as hereinafter defined) necessary or required for
the conduct of their business as presently conducted or as currently proposed to
be conducted in the future, including, but not limited to, those Intellectual
Property Rights identified in said Schedule 3.16;
(b) no royalties or other amounts are payable by Majestic to other
persons by reason of the ownership or use of Intellectual Property Rights except
as set forth in any licenses therefor; and
(c) (i) no product or service marketed or sold or currently proposed
to be marketed or sold in the future by Majestic violates or will violate any
license or infringes or will infringe any Intellectual Property Rights of
others, (ii) Majestic has not received any notice that any of their Intellectual
Property Rights or the operation or currently proposed operation of Majestic's
businesses conflicts or will conflict with Intellectual Property Rights of
others, and (iii) there is not any reasonable basis to believe that any such
violation, infringement or conflict will or may exist.
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(d) Majestic is not a party or subject to any contract or agreement
which currently requires, or upon the passage of time or occurrence of an event
or contingency (whether of default or otherwise) will require, the conveyance
of, or disclosure of secret processes or formulae related to, any Intellectual
Property Right necessary or required for the conduct of its business.
As used herein, the term "Intellectual Property Rights" means all
licenses, patents, trademarks, service marks, trade names, copyrights,
inventions, trade secrets, customer lists, proprietary processes and formulae,
applications for patents, trademarks and copyrights, and other industrial and
intellectual property rights.
3.17. Books of Account; Returns and Reports. The books of account of
Majestic fairly and reflect all of Majestic's items of income and expense, and
all assets and liabilities and accruals, capital and surplus, and are prepared
and maintained in form and substance adequate for preparing audited financial
statements, in accordance with generally accepted accounting principles
consistently applied. Majestic has filed all reports and returns required by any
law or regulation to be filed for Majestic, and has duly paid or accrued on its
books of account all applicable duties and charges due (or assessed against
them) pursuant to such reports. There has been no material transaction with
respect to the business or operations of Majestic which is not fully described
in such books of account, herein or on the schedules hereto.
3.18. No Defaults. Majestic is not in violation or default (i) under its
Certificate of Incorporation or its By-Laws, (ii) under any note, indenture,
mortgage, lease, agreement, franchise agreement, contract, purchase order or
other instrument or document to which Majestic is a party or by which it or any
of its assets is bound or affected, or (iii) with respect to any order, writ,
law, regulation, statute, rule, injunction or decree of any court or any
Federal, state, local or other governmental agency or instrumentality. There
exists no condition, event or act which, with or without the passage of time or
the giving of notice or both, could conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default (or give rise
to any right of termination, cancellation or acceleration) under, or result in
the creation of any Lien upon any of the assets of Majestic under any note,
indenture, mortgage, lease, agreement, contract, purchase order or other
instrument or document or order, writ, injunction or decree.
3.19. Tax Returns. The provisions for taxes reflected in the Balance
Sheet is sufficient for the payment of all unpaid Fees, Taxes and Other Charges
of Majestic, whether or not disputed, which were then, are or may become payable
by Majestic at any time as a result of events occurring on or before the Balance
Sheet Date. Majestic has timely and duly filed all United States Federal, state
and local and non-United States tax returns which are required to be filed and
has paid, or in its books made provision for the payment of, all Fees, Taxes and
Other Charges which said returns disclose as having become due and payable or
which have become due and payable pursuant to any assessment received. Majestic
has not received from any authority any notice of underpayment of any Fees,
Taxes and Other Charges. No administrative
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or judicial proceedings relating to the tax liability of Majestic are pending
and, to the knowledge of Majestic, the institution of any such proceedings is
not contemplated by any authority. Majestic has not filed any consent or
agreement under Section 341(f) of the Internal Revenue Code of 1986, as amended,
nor has Majestic waived restrictions on assessment or collection of taxes or
consented to the extension of any statute of limitations with respect to
taxation.
3.20. Insurance. Schedule 3.20 sets forth each insurance policy
(specifying the insurer, the amount of coverage, the type of insurance, the
policy number, the expiration date, the annual premium and any pending claims
thereunder) maintained by Majestic on its properties, assets, business or
personnel, including, without limitation, product liability, fidelity, business
interruption and other liability insurance, and true and complete copies of the
most recent inspection reports, if any, received from insurance underwriters as
to the conditions of the properties and assets owned, leased, occupied and
operated by Majestic. No notice from any insurance carrier insuring Majestic has
been received by Majestic claiming that Majestic is in default with respect to
any provision contained in any insurance policy, and Majestic has not failed to
give any notice or present any claim under any insurance policy in due and
timely fashion. The insurance maintained by Majestic on its assets, business and
personnel is in type and amount adequate for Majestic's business and in
accordance with the standards of the industry in which Majestic operates, and is
under policies currently in effect and issued by insurers of recognized
responsibility.
3.21. Compliance with Laws, etc. Majestic is in compliance with all
Federal, state, local and foreign laws, ordinances, regulations and orders
applicable to its business, and the business of Majestic as currently conducted
and as proposed to be conducted in the future is not and will not conflict in
any way materially adverse to Majestic with any such law, ordinance, regulation
or order. Majestic has obtained all Federal, state, local and foreign
governmental consents, authorizations, licenses, registrations, permits and
approvals material to or necessary for the ownership of its properties and
assets and the conduct of its business; all such licenses, registrations and
permits are in full force and effect; there have been no violations in respect
of any such authorization, license, registration or permit in any way materially
adverse to Majestic; and no proceeding is pending or, to the Knowledge of
Majestic threatened, to revoke or limit any such authorization, license,
registration or permit.
3.22. Related Transactions. Except as set forth in Schedule 3.22, no
current or former stockholder, director, officer, employee, consultant or
independent contractor of Majestic is currently, directly or indirectly, a party
to any transaction with Majestic providing for the furnishing of services by or
to, the rental of real or personal property to or from, the loan of money to or
from, or otherwise requiring the payment of consideration to or from, any such
person. With respect to such agreements and transactions set forth in Schedule
3.22, each constitutes a bona fide, arms-length transaction, is commercially
reasonable, and reasonably benefits Majestic.
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3.23. Litigation. Except as disclosed in Schedule 3.23, (i) there is no
Proceeding pending or threatened against or relating to Majestic or its
properties or business or the transactions contemplated by this Agreement, (ii)
there is no basis for any Proceeding against or relating to Majestic or its
properties or business or the transactions contemplated by this Agreement, and
(iii) Majestic is not subject to any outstanding Judgment. There is no
Proceeding pending or threatened, which would prevent or interfere with the
consummation of the transactions contemplated by this Agreement.
3.24. Employment of Officers, Employees and Consultants.
(a) Schedule 3.24 sets forth (i) the name of, and the current annual
salary and other compensation (including benefits such as provision of an
automobile, insurance, retirement plans, etc.) or the rate of compensation
payable by Majestic to each director, officer, employee, consultant, independent
contractor, and stockholder of Majestic, (ii) each loan or advance (other than
routine travel advances) made by Majestic to any director, officer, employee,
consultant, independent contractor or stockholder of Majestic, and the current
status thereof, whether or not presently outstanding and (iii) the names of all
persons or entities that have been employed by Majestic since January 1, 1998,
as consultants or other similar independent contractors and the amount of
compensation paid to or for the benefit of each such person or entity since such
date.
(b) No third party may assert any valid claim against Majestic or
SkyTex with respect to (i) the continued employment by or association with
Majestic of any of the present directors, officers or employees of, or
independent contractors to, Majestic, or (ii) the continued use by Majestic or
any of the present directors, officers or employees of Majestic of any
information which Majestic or any present director, officer or employee of
Majestic would be prohibited from using under any prior agreements or
arrangements or under any laws, including, without limitation, laws applicable
to unfair competition, trade secrets or proprietary information.
(c) Except as set forth in Schedule 3.24, there are no grievances,
disputes or controversies pending or threatened between Majestic and any of its
or their present or former directors, officers, employees, consultants or
independent contractors, and Majestic is not currently subject to any claims by
present or former directors, officers, employees, consultants or independent
contractors, including, without limitation, claims for wages, salaries,
commissions or benefits.
3.25. Employment Contracts, Profit Sharing Plans, etc. Schedule 3.25 sets
forth all employment contracts, bonus, stock option, stock purchase, profit
sharing, pension, retirement, medical insurance, disability insurance, incentive
or other compensation or retirement arrangements to which Majestic is a party
(together with and including all Majestic Employee Plans) and all amendments or
modifications, if any, thereto accompanied by certified copies of any
agreements, including trust agreements, embodying such contracts, plans or
arrangements, together with certified copies of any
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determination letters issued by the Internal Revenue Service or U.S. Department
of Labor with respect thereto. Each Majestic Employee Plan and other employment
benefit set forth on Schedule 3.25 is in compliance with all applicable Federal,
state and local laws, ordinances and regulations.
3.26. Investment in Competing Business. No director or officer of Majestic
owns of record or beneficially (i) any equity interest or any other financial or
profit interest in any firm, corporation, partnership, joint venture, trust,
association or other entity (a "Business Entity") which is in competition with
Majestic with respect to any line of Majestic's products in any market (a
"Competing Business"), or (ii) more than three per cent (3%) of the outstanding
capital stock of any Competing Business which is publicly traded on any
recognized exchange or in the over-the-counter market.
3.27. Compliance with Environmental Laws. Without in any way limiting the
generality of Section 3.21, Majestic is in substantial compliance with all
applicable laws, governmental rules, ordinances, regulations and orders
pertaining to the presence, management, release, discharge, and disposal of
toxic or hazardous waste material or substances, pollutants (including
conventional pollutants) and contaminants ("Waste"), including, without
limitation, the Emergency Planning and Community Right to Know Act (Title III of
Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. ss.11001 et
seq., the Occupational Safety and Health Act, 29 U.S.C. ss.660, and the
standards, including hazard communications and the reporting, labeling and
document retention standards relating to hazardous substances, wastes, materials
and/or chemicals promulgated thereunder, the federal Clean Water Act, 33 U.S.C.
ss.1251 et seq., the federal Clean Air Act, 42 U.S.C. ss.7401 et seq., the
federal Resource Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq., the
Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42
U.S.C. ss.9601 et seq., the Toxic Substances Control Act, 15 U.S.C. ss.2601 et
seq., as well as applicable state and local law, including state law
implementing such federal statutes, and with applicable federal, state, and
local regulations implementing any of the foregoing environmental laws.
3.28. Labor Relations. Majestic is not a party to any collective
bargaining agreement or other labor contract. There has not been any effort to
organize the employees of Majestic not belonging to any union, and no
application or complaint has been filed by a union or employee of Majestic with
the National Labor Relations Board.
3.29. Minute Books, Records, etc. The minute books of Majestic contain
complete and accurate records of all actions of the stockholders and Board of
Directors of Majestic, including, without limitation, all committees of either.
The minute books, stock certificate books and stock ledgers of Majestic contain
no errors or omissions, and there has been no transaction involving the business
of Majestic which, according to accepted legal practice, should have been set
forth in such books other than those in fact set forth therein.
4. REPRESENTATIONS AND WARRANTIES OF SKYTEX
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SkyTex hereby represents, warrants and agrees as follows:
4.1. Organization and Good Standing.
(a) SkyTex is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the legal right and
all necessary corporate power and authority to own all of its assets and to
carry on its business as it is now being conducted, and the character of the
properties owned or leased by SkyTex and the nature of the business transacted
by SkyTex do not require that SkyTex be qualified to do business as a foreign
corporation in any other jurisdiction.
(b) A copy of the Articles of Incorporation, as amended, of SkyTex
(certified by the Secretary of State of Nevada as of a recent date) and the
By-Laws, as amended, of SkyTex (certified by the Secretary of SkyTex as of the
date hereof) and attached hereto on Schedule 4.1 are complete and correct and
reflect all amendments to such documents.
4.2. Capitalization. SkyTex's authorized capital stock consists of
50,000,000 shares of common stock, $.001 par value (the "SkyTex Stock"). No
other equity securities of SkyTex have been authorized for issuance. A total of
2,500,000 shares of SkyTex Stock are outstanding, all of which are
validly issued, fully paid and non-assessable and are not subject to pre-emptive
rights. Schedule 4.2 sets forth a list of all stockholders of SkyTex and the
number of shares held by each stockholder. No securities convertible into equity
securities of SkyTex have been issued. There are no outstanding warrants,
options, rights, agreements, calls or commitments (i) to which SkyTex is a party
relating to the authorized but unissued SkyTex Stock or providing for the
authorization or issuance of additional shares of the capital stock of SkyTex,
or (ii) to which SkyTex or any other person or entity is a party relating to the
issued and outstanding SkyTex Stock.
4.3. Subsidiaries. Schedule 4.3 sets forth the name, authorized capital
stock and the record ownership of the outstanding shares of capital stock of
each corporation as to which SkyTex owns more than ten percent (10%) of its
outstanding capital stock (each such corporation, a "Subsidiary"). All of the
outstanding shares of capital stock of each Subsidiary have been validly issued
and are fully paid and nonassessable. Other than as set forth on Schedule 4.3,
there are no other issued or outstanding equity securities of any Subsidiary,
and there are no other issued or outstanding equity securities of any of
Subsidiary convertible at any time into equity securities of any Subsidiary. No
Subsidiary is subject to any commitment or obligation that would require the
issuance or sale of additional shares of its capital stock at any time under
options, subscriptions, warrants, rights or any other obligations.
4.4. Title to Shares. Each stockholder of SkyTex has good, valid and
marketable title to the shares of SkyTex Stock free and clear of any Liens.
Other than this Agreement and any agreements disclosed to Majestic or as set for
on Schedule 4.4, there are no agreements, understandings or commitments between
such
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stockholders and any person or entity with respect to the sale, transfer or
other disposition of any of such shares of SkyTex Stock.
4.5. Authority; Validity of Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by SkyTex do not, and will not, violate any provisions of
the Articles of Incorporation or By-Laws of SkyTex or violate any provision of,
or cause a default under, or result in the acceleration of any obligation under,
any agreement, instrument, lease, Lien, Judgment, statute, law, rule or
regulation to which SkyTex is a party or by which SkyTex or the property of
SkyTex may be bound or affected, or conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default (or give rise
to any right of termination, cancellation or acceleration) under, or result in
the creation of any Lien upon any of the assets of SkyTex under any note,
indenture, mortgage, lease, agreement, contract, purchase order or other
instrument or document to which SkyTex is a party or by which SkyTex or the
assets of SkyTex are bound or affected. Except as set forth in Schedule 4.5, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby by SkyTex does not, and will not, require
the consent or approval of, or filing with, any court or administrative or
governmental authority, or any other third party. SkyTex has the full legal
right, power and authority to enter into this Agreement and to carry out the
transactions herein contemplated. The execution, delivery and performance of
this Agreement have been duly authorized and approved by all necessary corporate
action on the part of SkyTex, subject to approval of the stockholders of SkyTex
as required by Section 9.5 hereof. This Agreement, when executed, will
constitute the legal, valid and binding agreement of SkyTex, enforceable against
SkyTex in accordance with its terms, subject only to any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.6. Financial Statements. Attached as Schedule 4.6. is the unaudited
consolidated balance sheet for SkyTex as of August 31, 1997, December 31, 1996
and December 31, 1995, and the related audited statement of income, and
stockholders' equity and changes in financial position for the years ending on
the foregoing dates, in each case including the notes thereto and certified by
Barry L. Friedman, P.C., independent certified public accountants. Attached as
Schedule 4.6(A) is the unaudited consolidated balance sheet of SkyTex as of
September 30, 1998 (the "Balance Sheet"), and the related unaudited statement or
income, stockholders' equity and changes in financial position for the period
ended September 30, 1998 in each case including the notes thereto. (August 31,
1997, is hereinafter sometimes referred to as the "Audit Date"; September 30,
1998 is hereinafter sometimes referred to as the "Balance Sheet Date".) All such
financial statements (i) are in accordance with the books and records of SkyTex
and (ii) present accurately, fairly and in accordance with generally accepted
accounting principles applied on a consistent basis the financial
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position and results of operations and changes in financial position of SkyTex
as of the date and for the period indicated.
4.7. Accounts and Notes Receivable. Schedule 4.7 lists the obligors and
outstanding balances of all accounts and notes receivable of SkyTex; all such
accounts and notes receivable are reflected on the Balance Sheet. The accounts
and notes receivable of SkyTex reflected or shown on the Balance Sheet arose and
will arise from bona fide transactions in the ordinary course of business, and
will have been collected or be fully collectible in the book amounts thereof,
after taking into account the reserve for doubtful accounts shown on the Balance
Sheet.
4.8. Inventories. All of the inventories of SkyTex, including work in
progress inventories, consist of a quality and quantity usable and saleable in
the ordinary and usual course of the business. The quantities of each type of
inventory are not excessive, but are reasonable and warranted in the present
circumstances of SkyTex. Except as set forth in Schedule 4.8, the value,
quantities and types of inventories of SkyTex in all material respects are as
reflected in the Balance Sheet.
4.9. Absence of Undisclosed Liabilities. Except as set forth in Schedule
4.9 and as reflected in the Balance Sheet, (i) SkyTex has no material
liabilities of any nature (matured or unmatured, fixed or contingent); (ii) all
reserves established by SkyTex and set forth in the Balance Sheet are adequate;
and (iii) there are no loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards board in March, 1975) which are not adequately disclosed in the
Balance Sheet as required by said Statement No. 5.
4.10. Absence of Certain Changes or Events.
4.10.1. Financial Condition; Assets and Operations. Except as
disclosed in writing to Majestic prior to the date of this Agreement, since
September 30, 1998 there has been no material adverse change in SkyTex's
financial condition, properties, business, prospects or results of operations,
and no material adverse change in the equity or long-term debt of SkyTex or
decrease in net working capital of SkyTex as compared with the amounts shown on
the Balance Sheet (all as determined in accordance with generally accepted
accounting principles consistently applied throughout the applicable period).
Since September 30, 1998, SkyTex has conducted its business only in the usual
and ordinary manner and in the ordinary course of business.
4.10.2. Capital Stock, Options, Dividends, etc. Since September 30,
1998, there has not been (i) any change in SkyTex's authorized, issued or
outstanding capital stock except in the ordinary course of business and for
valid consideration; (ii) any pledge, hypothecation or other encumbrance of any
shares of SkyTex's capital stock; the granting of any stock option or right to
purchase shares of SkyTex's capital stock; (iii) any issuance of any security
convertible into shares of SkyTex's capital stock; (iv) any purchase,
redemption, retirement or other acquisition or sale of any shares of SkyTex's
capital stock except on the ordinary course of business
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and for valid consideration; or (v) any declaration, setting aside or payment of
any dividend or the making of any other distribution or payment in respect of
SkyTex's capital stock.
4.10.3. Sale or Pledge of Assets; Incurring of Indebtedness. Since
September 30, 1998, (i) there has not occurred any sale or lease of capital
assets of SkyTex with an original cost in excess of $10,000 for any single item;
(ii) no Lien has been imposed on any of the properties or assets of SkyTex;
(iii) no indebtedness has been incurred, assumed or guaranteed by SkyTex, except
in the ordinary course of business; or (iv) there has been no entering into or
termination by SkyTex of any material agreement, other than the Letter of Intent
and this Agreement, except in the ordinary course of business. There are no
agreements, understandings or commitments between SkyTex or Stockholders and any
person or entity with respect to any merger, consolidation or sale of
substantially all assets by SkyTex.
4.11. Assets; Encumbrances. Schedule 4.11 lists or describes: (i) all
capitalized improvements located on premises leased or owned by SkyTex; and (ii)
by location, all capitalized machinery, office equipment, furniture, fixtures,
components, tools and similar personal property owned or leased (identifying
those leased) by SkyTex which are used or useful in connection with its
business, along with a brief description of each, with items having a value of
less than $10,000 grouped together for identification. Except as set forth in
Schedule 4.11 or as reflected in the Balance Sheet, SkyTex has good and
marketable title to all property and assets, real, personal or mixed, tangible
or intangible, reflected in the Balance Sheet, free and clear of all Liens. The
tangible assets of SkyTex are in good operating condition, well-maintained, free
from any material defects, and are adequate for the operation of SkyTex's
business as presently conducted, except for technological obsolescence. Since
September 30, 1998, there has been no material damage or destruction of SkyTex's
property by fire or other casualty, whether or not covered by insurance.
4.12. Leases. All leases for any property leased by SkyTex are listed on
Schedule 4.12. With respect to such leases, (i) all are legally valid and
binding on SkyTex or as the case may be on the other parties thereto and in full
force and effect; (ii) no material event of default or event which would
constitute a material event default but for the requirement that notice be
given, a period of time elapse, or both, has occurred or is continuing; (iii)
none of the rights of SkyTex thereunder will be impaired by the execution,
delivery or performance of this Agreement; (iv) all of the rights of SkyTex
thereunder will be enforceable by SkyTex after the Closing without the consent
or agreement of any other party; (v) SkyTex has furnished or made available to
Majestic true and correct copies of all leases listed in Schedule 4.12, as
amended to date; and (vi) no offset or defense presently exists with respect to
any rents or other sums payable or to become payable by any lessee under a lease
of any property owned by SkyTex.
4.13. Agreements. SkyTex is not a party to any written or oral (i)
contract, agreement, arrangement, understanding or commitment for the future
purchase of fixed
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assets or for the future purchase of materials, supplies or equipment involving
payments by SkyTex of more than $25,000 or in excess of normal operating
requirements; (ii) indenture or other contract, agreement, arrangement,
understanding or commitment relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing a Lien on any assets of SkyTex; (iii)
contract, agreement, arrangement, understanding or commitment for capital
expenditures in excess of $25,000; (iv) guaranty of any obligations, whether for
borrowed money or otherwise, or other commitment under which SkyTex is or may be
liable for the debts of others; (v) contract, agreement, arrangement,
understanding or commitment under which SkyTex is obligated to pay any broker's
fees, finder's fees or any such similar fees, to any third party for any reason;
(vi) partnership, joint venture, joint operating, joint marketing or similar
contract, agreement, arrangement, understanding or commitment; (vii) agreement
vesting a power of attorney in any third party; or (viii) any other contract,
agreement, arrangement, understanding or commitment which is material to the
business of SkyTex, and which is not otherwise set forth on any Schedule hereto.
Except as set forth in Schedule 4.13, SkyTex is not engaged in any negotiations
which, if reduced to a written contract of a type required to be disclosed
pursuant to this Section 4.13, would be required to be set forth in Schedule
4.13. With respect to the contracts, agreements, arrangements, understandings
and commitments listed in Schedule 4.13, (i) all are legally valid and binding
on SkyTex or as the case may be on the other parties thereto and in full force
and effect; (ii) no material event of default or event which would constitute a
material event of default but for the requirement that notice be given, a period
of time elapse, or both has occurred or is continuing; (iii) none of the rights
of SkyTex thereunder will be impaired by the execution, delivery or performance
of this Agreement; (iv) all of the rights of SkyTex thereunder will be
enforceable by SkyTex after the Closing Date without the consent or agreement of
any other party, except as disclosed on Schedule 4.13 or 3.5; and (v) SkyTex has
furnished or made available to Majestic true and correct copies of all written
agreements and other documents listed in Schedule 4.13, as amended to date.
4.14. Equity Investments. Schedule 4.14 lists all equity and proprietary
holdings in any corporation, association, trust, partnership or other entity
including, but not limited to, stocks, bonds, negotiable instruments, other
interests currently owned by or held in the name of SkyTex.
4.15. Burdensome Restrictions. SkyTex is not (i) obligated under any
contract or agreement not a part of or described in a Schedule to this Agreement
or (ii) subject to any commitment, charter or other corporate restriction which
materially and adversely affects, or is expected by Stockholders in the future
materially and adversely to affect, its business, properties, assets, prospects
or condition (financial or otherwise).
4.16. Intellectual Property Rights. Except in each case as set forth in
Schedule 4.16:
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(a) SkyTex owns, possesses, or has the right to use all Intellectual
Property Rights (as hereinafter defined) necessary or required for the conduct
of their business as presently conducted or as currently proposed to be
conducted in the future, including, but not limited to, those Intellectual
Property Rights identified in said Schedule 4.16;
(b) no royalties or other amounts are payable by SkyTex to other
persons by reason of the ownership or use of Intellectual Property Rights except
as set forth in any licenses therefor; and
(c) (i) no product or service marketed or sold or currently proposed
to be marketed or sold in the future by SkyTex violates or will violate any
license or infringes or will infringe any Intellectual Property Rights of
others, (ii) SkyTex has not received any notice that any of their Intellectual
Property Rights or the operation or currently proposed operation of SkyTex's
businesses conflicts or will conflict with Intellectual Property Rights of
others, and (iii) there is not any reasonable basis to believe that any such
violation, infringement or conflict will or may exist.
(d) SkyTex is not a party or subject to any contract or agreement
which currently requires, or upon the passage of time or occurrence of an event
or contingency (whether of default or otherwise) will require, the conveyance
of, or disclosure of secret processes or formulae related to, any Intellectual
Property Right necessary or required for the conduct of its business.
As used herein, the term "Intellectual Property Rights" means all
licenses, patents, trademarks, service marks, trade names, copyrights,
inventions, trade secrets, customer lists, proprietary processes and formulae,
applications for patents, trademarks and copyrights, and other industrial and
intellectual property rights.
4.17. Books of Account; Returns and Reports. The books of account of
SkyTex fairly and reflect all of SkyTex's items of income and expense, and all
assets and liabilities and accruals, capital and surplus, and are prepared and
maintained in form and substance adequate for preparing audited financial
statements, in accordance with generally accepted accounting principles
consistently applied. SkyTex has filed all reports and returns required by any
law or regulation to be filed for SkyTex, and has duly paid or accrued on its
books of account all applicable duties and charges due (or assessed against
them) pursuant to such reports. There has been no material transaction with
respect to the business or operations of SkyTex which is not fully described in
such books of account, herein or on the schedules hereto.
4.18. No Defaults. SkyTex is not in violation or default (i) under its
Articles of Incorporation or its By-Laws, (ii) under any note, indenture,
mortgage, lease, agreement, franchise agreement, contract, purchase order or
other instrument or document to which SkyTex is a party or by which it or any of
its assets is bound or affected or (iii) with respect to any order, writ, law,
regulation, statute, rule, injunction or decree of any court or any Federal,
state, local or other governmental agency or instrumentality. There exists no
condition, event or act which, with or without the
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passage of time or the giving of notice or both, could conflict with or result
in any breach of any of the terms, conditions or provisions of, or constitute a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of any Lien upon any of the assets of SkyTex
under any note, indenture, mortgage, lease, agreement, contract, purchase order
or other instrument or document or order, writ, injunction or decree.
4.19. Tax Returns. The provisions for taxes reflected in the Balance Sheet
is sufficient for the payment of all unpaid Fees, Taxes and Other Charges of
SkyTex, whether or not disputed, which were then, are or may become payable by
SkyTex at any time as a result of events occurring on or before the Balance
Sheet Date. SkyTex has timely and duly filed all United States Federal, state
and local and non-United States tax returns which are required to be filed and
have paid, or in its books made provision for the payment of, all Fees, Taxes
and Other Charges which said returns disclose as having become due and payable
or which have become due and payable pursuant to any assessment received. The
last year for which the United States Internal Revenue Service has completed its
formal audit and review of the United States income tax returns of the Company
is the year ended December 31, 199_, and the results of such audit are properly
reflected in the financial statements referred to in Section 4.6. SkyTex has not
received from any authority any notice of underpayment of any Fees, Taxes and
Other Charges. No administrative or judicial proceedings relating to the tax
liability of SkyTex are pending and, to the knowledge of SkyTex, the institution
of any such proceedings is not contemplated by any authority. SkyTex has not
filed any consent or agreement under Section 341(f) of the Internal Revenue Code
of 1986, as amended, nor has SkyTex waived restrictions on assessment or
collection of taxes or consented to the extension of any statute of limitations
with respect to taxation.
4.20. Insurance. Schedule 4.20 sets forth each insurance policy
(specifying the insurer, the amount of coverage, the type of insurance, the
policy number, the expiration date, the annual premium and any pending claims
thereunder) maintained by SkyTex on its properties, assets, business or
personnel, including, without limitation, product liability, fidelity, business
interruption and other liability insurance, and true and complete copies of the
most recent inspection reports, if any, received from insurance underwriters as
to the conditions of the properties and assets owned, leased, occupied and
operated by SkyTex. No notice from any insurance carrier insuring SkyTex has
been received by SkyTex claiming that SkyTex is in default with respect to any
provision contained in any insurance policy, and SkyTex has not failed to give
any notice or present any claim under any insurance policy in due and timely
fashion. The insurance maintained by SkyTex on its assets, business and
personnel is in type and amount adequate for SkyTex's business and in accordance
with the standards of the industry in which SkyTex operates, and is under
policies currently in effect and issued by insurers of recognized
responsibility.
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4.21. Compliance with Laws, etc. SkyTex is in compliance with all Federal,
state, local and foreign laws, ordinances, regulations and orders applicable to
its business, and the business of SkyTex as currently conducted and as proposed
to be conducted in the future is not and will not conflict in any way materially
adverse to SkyTex with any such law, ordinance, regulation or order. SkyTex has
obtained all Federal, state, local and foreign governmental consents,
authorizations, licenses, registrations, permits and approvals material to or
necessary for the ownership of its properties and assets and the conduct of its
business; all such licenses, registrations and permits are in full force and
effect; there have been no violations in respect of any such authorization,
license, registration or permit in any way materially adverse to SkyTex; and no
proceeding is pending or, to the Knowledge of SkyTex threatened, to revoke or
limit any such authorization, license, registration or permit.
4.22. Related Transactions. Except as set forth in Schedule 4.22, no
current or former stockholder, director, officer, employee, consultant or
independent contractor of SkyTex is currently, directly or indirectly, a party
to any transaction with SkyTex providing for the furnishing of services by or
to, the rental of real or personal property to or from, the loan of money to or
from, or otherwise requiring the payment of consideration to or from, any such
person. With respect to such agreements and transactions set forth in Schedule
4.22, each constitutes a bona fide, arms-length transaction, is commercially
reasonable, and reasonably benefits SkyTex.
4.23. Litigation. Except as disclosed orally and in Schedule 4.23, (i)
there is no Proceeding pending or threatened against or relating to SkyTex or
its properties or business or the transactions contemplated by this Agreement,
(ii) there is no basis for any Proceeding against or relating to SkyTex or its
properties or business or the transactions contemplated by this Agreement, and
(iii) SkyTex is not subject to any outstanding Judgment. There is no Proceeding
pending or threatened, which would prevent or interfere with the consummation of
the transactions contemplated by this Agreement.
4.24. Employment of Officers, Employees and Consultants.
(a) Schedule 4.24 sets forth (i) the name of, and the current annual
salary and other compensation (including benefits such as provision of an
automobile, insurance, retirement plans, etc.) or the rate of compensation
payable by SkyTex to each director, officer, employee, consultant, independent
contractor, and stockholder of SkyTex, and the profit sharing, bonus or other
form of extra compensation paid or payable by SkyTex to or for the benefit of
each such person for the year ended December 31, 1997; (ii) any increase, since
January 1, 1998, in the total compensation paid, payable or to become payable by
SkyTex to each such person, (iii) each loan or advance (other than routine
travel advances) made by SkyTex to any director, officer, employee, consultant,
independent contractor or stockholder of SkyTex, and the current status thereof,
whether or not presently outstanding and (iv) the names of all persons or
entities that have been employed by SkyTex since January 1, 1997, as
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consultants or other similar independent contractors and the amount of
compensation paid to or for the benefit of each such person or entity since such
date.
(b) No third party may assert any valid claim against SkyTex, or
with respect to (i) the continued employment by or association with SkyTex of
any of the present directors, officers or employees of, or independent
contractors to, SkyTex, or (ii) the continued use by SkyTex or any of the
present directors, officers or employees of SkyTex of any information which
SkyTex or any present director, officer or employee of SkyTex would be
prohibited from using under any prior agreements or arrangements or under any
laws, including, without limitation, laws applicable to unfair competition,
trade secrets or proprietary information.
(c) Except as set forth in Schedule 4.24, there are no grievances,
disputes or controversies pending or threatened between SkyTex and any of its or
their present or former directors, officers, employees, consultants or
independent contractors, and SkyTex is not currently subject to any claims by
present or former directors, officers, employees, consultants or independent
contractors, including, without limitation, claims for wages, salaries,
commissions or benefits.
4.25. Employment Plans. Schedule 4.25 sets forth all employment contracts,
bonus, stock option, stock purchase, profit sharing, pension, retirement,
medical insurance, disability insurance, incentive or other compensation or
retirement arrangements to which SkyTex is a party (together with and including
all SkyTex Employee Plans) and all amendments or modifications, if any, thereto
accompanied by certified copies of any agreements, including trust agreements,
embodying such contracts, plans or arrangements, together with certified copies
of any determination letters issued by the Internal Revenue Service or U.S.
Department of Labor with respect thereto. Each SkyTex Employee Plan and other
employment benefit set forth on Schedule 4.25 is in compliance with all
applicable Federal, state and local laws, ordinances and regulations.
4.26. Investment in Competing Business. No director or officer of SkyTex
owns of record or beneficially (i) any equity interest or any other financial or
profit interest in any firm, corporation, partnership, joint venture, trust,
association or other entity (a "Business Entity") which is in competition with
SkyTex with respect to any line of SkyTex's products in any market (a "Competing
Business"), or (ii) more than three per cent (3%) of the outstanding capital
stock of any Competing Business which is publicly traded on any recognized
exchange or in the over-the-counter market.
4.27. Environmental Matters. Without in any way limiting the generality
of Section 4.21, SkyTex is in substantial compliance with all applicable laws,
governmental rules, ordinances, regulations and orders pertaining to the
presence, management, release, discharge, and disposal of toxic or hazardous
waste material or substances, pollutants (including conventional pollutants) and
contaminants ("Waste"), including, without limitation, the Emergency Planning
and Community Right to Know Act (Title III of Superfund Amendments and
Reauthorization Act of 1986), 42 U.S.C.
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ss.11001 et seq., the Occupational Safety and Health Act, 29 U.S.C. ss.660, and
the standards, including hazard communications and the reporting, labeling and
document retention standards relating to hazardous substances, wastes, materials
and/or chemicals promulgated thereunder, the federal Clean Water Act, 33 U.S.C.
ss.1251 et seq., the federal Clean Air Act, 42 U.S.C. ss.7401 et seq., the
federal Resource Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq., the
Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42
U.S.C. ss.9601 et seq., the Toxic Substances Control Act, 15 U.S.C. ss.2601 et
seq., as well as applicable state and local law, including state law
implementing such federal statutes, and with applicable federal, state, and
local regulations implementing any of the foregoing environmental laws.
4.28. Labor Relations. SkyTex is not a party to any collective bargaining
agreement or other labor contract. There has not been any effort to organize the
employees of SkyTex not belonging to any union, and no application or complaint
has been filed by a union or employee of SkyTex with the National Labor
Relations Board.
4.29. Minute Books, Records, etc. The minute books of SkyTex contain
complete and accurate records of all actions of the stockholders and Board of
Directors of SkyTex, including, without limitation, all committees of either.
The minute books, stock certificate books and stock ledgers of SkyTex contain no
errors or omissions, and there has been no transaction involving the business of
SkyTex which, according to accepted legal practice, should have been set forth
in such books other than those in fact set forth therein.
4.30. Authorizations and Business Licenses. All material current
authorizations or business licenses which have been obtained by or issued to the
Company are listed in Schedule 4.30 and are legal, valid and in full force and
effect.
5. COVENANTS OF MAJESTIC
Majestic covenants as follows:
5.1. Investigation. SkyTex and its authorized representatives shall have
the right at any reasonable time to investigate the financial, technical and
operating aspects of Majestic; Majestic will give to SkyTex and its authorized
representatives full access at all reasonable times to all records and all other
properties of Majestic; Majestic will permit SkyTex to make copies thereof or
extracts therefrom; and Majestic will secure for SkyTex the full cooperation of
all officers, directors and employees of Majestic in connection with such
investigation. Nothing contained in this Section shall relieve Stockholders from
any liability which may arise from any breach of warranty, covenant,
representation or agreement contained in this Agreement.
5.2. Operation in Usual Manner. Unless expressly approved in writing by
SkyTex, from and after the date of this Agreement until the Effective Time,
Majestic shall carry on its business in substantially the same manner as it has
heretofore. Without limitation of the foregoing, Majestic shall not, except in
the ordinary course of
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business: (i) borrow money or otherwise incur indebtedness; (ii) issue
additional stock or options or other rights; agreements or commitments relating
to its share capital; (iii) declare any dividends or other distributions; (iv)
enter into employment or consulting arrangements with officers or directors, (v)
grant other than normal increases in salary, bonuses and other compensation to
its officers, employees, and consultants; or (vi) enter into any contract,
agreement or undertaking or take any other action outside of the ordinary course
of business without obtaining SkyTex's prior written approval.
5.3. Inconsistent Actions. Majestic will not take any action, or omit the
taking of any action, which would result in the breach of any representation or
warranty or the violation of any covenant contained in this Agreement.
5.4. Notice of Material Contracts. From and after the date of this
Agreement until the Effective Time, Majestic shall not enter into any new
material contract, agreement, or other commitment without having first used its
best efforts to furnish SkyTex with prior notice (either written or oral)
thereof as much in advance as is reasonably possible. Such notice may be given
by telex, telecopy, or other means of telecommunications, and if given orally
shall be promptly confirmed in writing. Provision of such notice shall not
relieve Majestic of its obligations under any other provision of this Agreement,
including Section 5.3; nor upon receiving such notice shall SkyTex be deemed to
have consented to the matter that is the subject of notice.
6. COVENANTS OF SKYTEX
SkyTex covenants as follows:
6.1. Investigation. Majestic and its authorized representatives shall have
the right at any reasonable time to investigate the financial, technical and
operating aspects of SkyTex; SkyTex will give to Majestic and its authorized
representatives full access at all reasonable times to all records and all other
properties of SkyTex; SkyTex will permit Majestic to make copies thereof or
extracts therefrom; and SkyTex will secure for Majestic the full cooperation of
all officers, directors and employees of SkyTex in connection with such
investigation. Nothing contained in this Section shall relieve Stockholders from
any liability which may arise from any breach of warranty, covenant,
representation or agreement contained in this Agreement.
6.2. Operation in Usual Manner. Unless expressly approved in writing by
Majestic, from and after the date of this Agreement until the Effective Time,
SkyTex shall carry on its business in substantially the same manner as it has
heretofore. Without limitation of the foregoing, SkyTex shall not, except in the
ordinary course of business: (i) borrow money or otherwise incur indebtedness;
(ii) issue additional stock or options or other rights; agreements or
commitments relating to its share capital; (iii) declare any dividends or other
distributions; (iv) enter into employment or consulting arrangements with
officers or directors; (v) grant other than normal increases in salary, bonuses
and other compensation to its officers, employees, and consultants; or (vi)
enter into any contract, agreement or undertaking or take any other action
outside of the ordinary course of business without obtaining Majestic's prior
written approval.
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6.3. Inconsistent Actions. SkyTex will not take any action, or omit the
taking of any action, which would result in the breach of any representation or
warranty or the violation of any covenant contained in this Agreement.
6.4. Notice of Material Contracts. From and after the date of this
Agreement until the Effective Time, SkyTex shall not enter into any new material
contract, agreement, or other commitment without having first used its best
efforts to furnish Majestic with prior notice (either written or oral) thereof
as much in advance as is reasonably possible. Such notice may be given by telex,
telecopy, or other means of telecommunications, and if given orally shall be
promptly confirmed in writing. Provision of such notice shall not relieve SkyTex
of its obligations under any other provision of this Agreement, including
Section 6.3; nor upon receiving such notice shall Majestic be deemed to have
consented to the matter that is the subject of notice.
7. ADDITIONAL AGREEMENTS OF THE PARTIES
7.1. Post Merger Operations. The operations of the Surviving Corporation
shall be as follows:
7.1.1. Name Change. Following the Closing, SkyTex shall take all
appropriate actions required to amend its corporate name to be "The Majestic
Companies, Ltd.", a Nevada corporation and to change the stock ticker symbol to
a symbol reflecting the new corporate name.
7.1.2. Corporate Offers. Following the Closing, the Surviving
Corporation shall maintain its corporate offices at the current offices
maintained by Majestic in San Diego, California.
7.1.3. Officers and Directors. Following the Closing, the officers
and directors of the surviving corporation shall be as set forth in Section 2
hereof.
7.2. Stockholder Approval. SkyTex and Majestic will call and hold their
respective stockholders meetings as promptly as practicable and in accordance
with applicable laws for the purpose of voting upon the approval of the Merger.
Unless otherwise requested by applicable fiduciary duties, SkyTex and Majestic
shall recommend approval of the Merger and the transactions set forth herein to
their respective stockholders and shall use all reasonable efforts to solicit
from their respective stockholders proxies in favor of the adoption of this
Agreement and approval of the transactions set forth herein.
7.3. Tax Treatment. Each of SkyTex and Majestic shall use its best efforts
to cause the Merger to qualify, and will not take any actions which to its
knowledge could reasonably be expected to prevent the merger from qualifying, as
a reorganization under the provisions of Section 368 of the Code.
7.4. Amendment of Employment Agreement. At the Closing, the Executive
Employment Agreement by and between Majestic and Francis A. Zubrowski shall be
assumed by SkyTex and amended or restated to provide (i) for an annual salary of
One
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Hundred Eighty Thousand Dollars ($180,000), payable in cash in an amount of
Fifteen Thousand Dollars (15,000) per month; (ii) for an automobile allowance of
One Thousand Dollars ($1,000) per month; (iii) a term of five (5) years from the
date of Closing; (iv) a key man life insurance policy of One Million Dollars
($1,000,000); and (v) the accrual of stock options for the remainder of the term
thereof (without prejudice to the stock options which accrued and vested as of
June 1, 1997 and June 1, 1998), as determined by the Board of Directors of the
surviving corporation from time to time.
7.5. Press Releases. SkyTex and Majestic will consult with each other
before issuing, and provide each other the opportunity to review, comment upon
and concur with and use reasonable efforts to agree on, any press release or
other public statements with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation, except as either party may determine is
required by applicable law.
8. CONDITIONS PRECEDENT TO MAJESTIC OBLIGATIONS
All obligations of Majestic under this Agreement are subject to the
fulfillment, prior to or at the Closing Date, of each of the following
conditions:
8.1. Misrepresentations. Majestic shall not have discovered any material
error, misstatement or omission in the representations and warranties made by
SkyTex in this Agreement or any default under or breach of any covenant or
agreement of SkyTex contained in this Agreement.
8.2. Representations and Warranties Accurate. All representations and
warranties of SkyTex contained in this Agreement shall have been true when made
and shall be true in all respects on and as of the Closing Date as if the
representations and warranties were made on and as of the Closing Date; and
SkyTex shall have performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with prior to
or at the Closing Date.
8.3. Litigation Affecting Closing. No Proceeding against SkyTex shall be
pending or threatened before any court or any administrative or governmental
authority to restrain or prohibit or to obtain damages or other relief in
connection with the consummation of the transactions contemplated by this
Agreement, and no investigation that might eventuate in any such Proceeding
shall be pending or threatened.
8.4. Third Party Consents. All approvals, consents and releases by third
parties which are necessary and advisable for the Merger and the transactions
contemplated herein on the part of SkyTex shall have been obtained and shall be
satisfactory to Majestic in form and substance, and originals or certified
copies thereof shall have been delivered to Majestic.
8.5. Stockholder Approval. The stockholders of Majestic shall have
approved the Merger on the terms and conditions of this Agreement as required by
applicable laws.
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<PAGE>
8.6. No Material Adverse Change. At any time after this Agreement there
shall not have occurred any material adverse change relating to SkyTex.
9. CONDITIONS PRECEDENT TO SKYTEX'S OBLIGATIONS
All obligations of SkyTex under this Agreement are subject to the
fulfillment, prior to or at the Closing Date, of each of the following
conditions:
9.1. Misrepresentations. An investigation to be made by SkyTex and its
authorized representatives does not disclose, and SkyTex has not otherwise
discovered any material error, misstatement or omission in the representations
and warranties made by Majestic or Stockholders in this Agreement or any default
under or breach of any covenant or agreement of Majestic contained in this
Agreement.
9.2. Representations and Warranties Accurate. All representations and
warranties of Majestic contained in this Agreement shall have been true when
made and shall be true in all respects on and as of the Closing Date as if the
representations and warranties were made on and as of the Closing Date; Majestic
shall have performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed or complied with by it or him prior
to or at the Closing Date. and shall have caused Majestic to perform and comply
with all agreements and covenants required by this Agreement to be performed or
complied with by Majestic.
9.3. Litigation Affecting Closing. No Proceeding against Majestic shall be
pending or threatened before any court or any administrative or governmental
authority to restrain or prohibit or to obtain damages or other relief in
connection with the consummation of the transactions contemplated by this
Agreement, and no investigation that might eventuate in any such Proceeding
shall be pending or threatened.
9.4. Third Party Consents. All approvals, consents and releases by third
parties which are necessary and advisable for the Merger and the transactions
contemplated herein on the part of SkyTex shall have been obtained and shall be
satisfactory to SkyTex in form and substance, and originals or certified copies
thereof shall have been delivered to SkyTex.
9.5. Stockholder Approval. The stockholders of SkyTex shall have approved
the Merger on the terms and conditions of this Agreement as required by
applicable laws.
9.6. No Material Adverse Change. At any time after this Agreement there
shall not have occurred any material adverse change relating to Majestic.
10. BROKERS
The parties acknowledge a commission to Shogun Investments Group, Ltd.
(the "Shogun Commission") and its agents and representatives (including, but not
limited to Donald Bradley and Craig Shaber) of 210,000 shares of SkyTex Stock,
which commission shall be payable by SkyTex from SkyTex Stock that is issued at
the
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Closing and is restricted stock. Excepting the Shogun Commission, SkyTex and
Majestic represent to each other that all negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
SkyTex and Majestic and their respective representatives without the
intervention of any person or firm in such manner as to give rise to any valid
claim against any of the parties hereto for a brokerage commission, finder's fee
or other like payment to any person or entity.
11. INDEMNIFICATION.
11.1. Indemnification of Majestic. SkyTex agrees to indemnify and hold
harmless Majestic, and its directors, officers, shareholders, employees and
agents against and in respect of any and all loss, liability, claims, fines,
damages, expenses or deficiencies resulting (i) from any intentional
misrepresentation, breach of or any default under any representation or
warranty, or breach of or default under any covenant or agreement on the part of
SkyTex under this Agreement or any certificate or other instrument furnished or
caused to be furnished by SkyTex with respect to the transactions herein
contemplated; (ii) from any material misstatement made knowingly and
intentionally or in a reckless manner or any omission to state a material fact
made knowingly and intentionally or in a reckless manner, in any information
submitted by SkyTex or in connection with the transactions contemplated by this
Agreement; (iii) from any claim or assertion of facts by a third party; and (iv)
from any and all actions, suits, proceedings, demands, assessments, Judgments,
costs, reasonable attorneys' fees and other expenses incidental to or arising
out of or by reason of any of the foregoing, including interest on any amount
payable pursuant to any of the foregoing. If Majestic becomes aware of any facts
which could give rise to a claim under this Section 11.1, it shall give prompt
notice to SkyTex and if such facts involve the commencement of a proceeding by a
third party, Majestic shall give SkyTex an opportunity to cooperate in the
defense thereof.
11.2. Limitation of Liability. Notwithstanding Section 11.1, SkyTex shall
not be obligated to pay, in the aggregate, more than $250,000.00 in losses and
from the first anniversary of the Closing Date to the second anniversary
thereof, not more than $100,000.00 in losses. SkyTex shall have no further
liability pursuant to this Section 11 for any claims or other cause of action of
which they are not notified within two (2) years from the Closing Date.
11.3. Indemnification of SkyTex. Majestic agrees to indemnify and hold
harmless SkyTex, its directors, officers, stockholders, employees and agents
against and in respect of any and all loss, liability, claims, fines, damage,
expense or deficiency resulting (i) from any intentional misrepresentation,
breach of or default under any representation or warranty, or breach of or
default under any covenant or agreement on the part of Majestic under this
Agreement; (ii) from any material misstatement made knowingly and intentionally
or in a reckless manner, or any omission to state a material fact made knowingly
and intentionally or in a reckless manner, in any information submitted by
Majestic in connection with the transactions contemplated by
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this Agreement; (iii) from any claim or assertion of facts by a third party; and
(iv) from any and all actions, suits, proceedings, demands, assessments,
Judgments, costs, reasonable legal fees and other expenses incidental to or
arising out of or by reason of any of the foregoing, including interest on any
amount payable pursuant to any of the foregoing. If SkyTex becomes aware of any
facts which could give rise to a claim under this Section 11.3, SkyTex shall
give prompt notice to Majestic and if such facts involve the commencement of a
proceeding by a third party, SkyTex shall give Majestic an opportunity to
cooperate in the defense thereof.
11.4. Limitation of Liability. Notwithstanding Section 11.3, Majestic
shall not be obligated to pay, in the aggregate, more than $250,000.00 in losses
and from the first anniversary of the Closing Date to the second anniversary
thereof, more than $100,000.00 of losses. Majestic shall have no further
liability pursuant to this Section 11 for any claims or other cause of action of
which it is not notified within two (2) years from the Closing Date.
12. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All of the representations, warranties, covenants and agreements made in
or pursuant to this Agreement, including but not limited to the indemnification
obligations of the parties hereto to one another as provided herein, shall
survive the Closing and any investigation made by or on behalf of any party
hereto for a period of two (2) years from the Closing Date.
13. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS
SkyTex and Majestic agree to use their best efforts to obtain the
satisfaction of the conditions specified in this Agreement.
14. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon, and inure to the benefit of, each of
the parties hereto and their respective heirs, legal representatives, successors
and assigns.
15. ENTIRE AGREEMENT; EFFECT ON PRIOR DOCUMENTS
This Agreement and the other documents referred to herein or delivered
pursuant hereto contain the entire Agreement among the parties with respect to
the transactions contemplated hereby and supersede all prior negotiations,
commitments, agreements and understandings among them with respect thereto.
16. NOTICES
All notices, requests, consents and other communications hereunder to any
party shall be deemed to be sufficient if contained in a written instrument
delivered in person or duly sent by facsimile, overnight courier service or
first-class registered or certified mail, postage prepaid, addressed to such
party at the address set forth below
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or such other address as may hereafter be designated in writing by the addressee
to the addressor:
(i) if to Majestic, to:
The Majestic Companies, Ltd.
8880 Rio San Diego Drive
8th Floor
San Diego, California 92108
Attention: Francis A. Zubrowski,
President & Chief Executive Officer
Fax: (619) 209-6078
with a copy to:
Patton Boggs, LLP
250 West Pratt Street
Suite 1100
Baltimore, Maryland 21201
Attention: James R. Deveney, II
Fax: (410) 659-0621
(ii) if to SkyTex, to:
SkyTex International, Inc.
15651 Chase Hill Boulevard
#502
San Antonio, Texas 78256
Attention: Ralph Morren
Fax: (210) 694-5947
17. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original instrument, and all such counterparts
together shall constitute but one Agreement.
18. HEADINGS
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.
19. NOUNS AND PRONOUNS
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Whenever the context may require, any pronouns used herein shall include
the corresponding masculine, feminine or neuter forms, and the singular form of
names and pronouns shall include the plural and vice-versa.
20. GOVERNING LAW
This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware, without regard
to its principles of conflicts of laws.
21. SEVERABILITY
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
22. AMENDMENT; WAIVER
Any provision of this Agreement may only be amended or waived if such
amendment or waiver is in writing; and, if an amendment, executed by all parties
hereto and, if a waiver, executed by the party which is waiving the term,
condition or right.
23. EXPENSES
Each party shall be responsible for its own expenses in connection with
all matters relating to the transactions contemplated hereby.
24. CERTAIN DEFINITIONS
For purposes of this Agreement:
24.1. "Closing Date" means the date determined pursuant to Section 2.1
hereof on which the Closing shall occur and the transactions contemplated by
this Agreement shall be consummated.
24.2. "Code" means the Internal Revenue Code of 1986, as amended.
24.3. "SkyTex Employee Plan" means all SkyTex Pension Plans and all SkyTex
Welfare Plans taken together.
24.4. "SkyTex Pension Plan" means any "employee pension benefit plan" as
such term is defined in Section 3 of ERISA which SkyTex has maintained, has made
contributions to, or has been obligated to make contributions to since September
1, 1974.
24.5. "SkyTex Welfare Plan" means any "employee welfare benefit plan" as
such term is defined in Section 3 of ERISA which SkyTex maintains or to which it
makes contributions.
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24.6. "Constructive Knowledge" means that a person is deemed to have
knowledge of a particular fact or circumstance if a reasonable person made aware
of all the facts and circumstances actually known to the person whose knowledge
is in question would be put on notice of the existence of such particular fact
or circumstance.
24.7. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
24.8. "Fees, Taxes and Other Charges" means all United States Federal,
state or local or non-United States fees (including, without limitation, filing,
license, recording and registration fees, taxes (including, without limitation,
income, franchise, excise, sales, use, transfer, and property (real or personal,
tangible or intangible)), assessments, levies, imposts, duties, charges or
withholdings of any nature whatsoever, together with any and all penalties,
fines, additions thereto or interest thereon.
24.9. "Intellectual Property" shall have the meaning set forth in Section
3.16.
24.10. "Judgment" means any judgment, decree, writ, injunction or order of
any court or administrative authority or any arbitration award.
24.11. "Knowledge" means both actual knowledge or Constructive Knowledge.
24.12. "Liens" means all mortgages, claims, charges, liens, encumbrances,
restrictions, options, pledges, calls, commitments, security interests,
conditional sales agreements, leases, and other restrictions of any kind and
nature.
24.13. "Proceeding" means any litigation, administrative proceeding,
investigation or arbitration.
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the day and year first above written.
WITNESS: THE MAJESTIC COMPANIES, LTD.
/s/ Connie K. White By: /s/ Zubrowski (SEAL)
- ----------------------- ---------------------------------
Francis A. Zubrowski, President &
Chief Executive Officer
SKYTEX INTERNATIONAL, INC.
/s/ Mark Roberts By: /s/ Ralph Morren (SEAL)
- ----------------------- ----------------------------------
Ralph Morren, President
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FIRST AMENDMENT
TO AGREEMENT AND PLAN
OF MERGER
THIS FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER (the
"Amendment") is made and dated as of 10th day of December, 1998, by and between
The Majestic Companies, Ltd., a Delaware corporation ("Majestic") and SkyTex
International, Inc., a Nevada corporation ("SkyTex").
WITNESSETH:
WHEREAS, Majestic and SkyTex entered into an Agreement and Plan of
Merger dated as of October 8, 1998 (the "Agreement") for the merger of Majestic
and SkyTex, with SkyTex being the surviving corporation; and
WHEREAS, the parties have entered into negotiations for certain
amendments to the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, the parties agree as follows:
1. Change in Surrender of Shares. Section 1.4 (a) is hereby deleted in
its entirety and shall be of no further force and effect.
2. Change in Conversion Ratio. Section 1.4 (b) shall be amended to
reflect the stockholders of Majestic shall be entitled to receive one (1) share
of common stock of SkyTex for each one (1) share of common stock of Majestic,
rather than one (1) share of common stock of SkyTex for each one and ninety
eight one-hundredths (1.98) shares of common stock of Majestic.
3. Effect of Amendment. Except as expressly amended in this Amendment,
the terms, conditions and agreements set forth in the Agreement shall remain in
full force and effect and unmodified.
IN WITNESS WHEREOF, the parties have executed this Amendment under seal
as of the day and year first above written.
WITNESS: THE MAJESTIC COMPANIES, LTD.
Connie K. White By: Francis A. Zubrowski, (SEAL)
- ------------------------- -----------------------------------
Francis A. Zubrowski,
President & Chief Executive Officer
SKYTEX INTERNATIONAL, INC.
M. Roberts By: Ralph Morren (SEAL)
- ------------------------- -----------------------------------
Ralph Morren, President
<PAGE>
Articles of Merger of Domestic and Foreign Corporations Into
Skytex International, Inc.
Pursuant to the provisions of the State of Nevada Revised Statutes, the
undersigned domestic and foreign corporations adopt the following articles of
merger for the purpose of merging them into one of such corporations:
First: The names of the undersigned corporations and the states under the laws
of which they are respectively organized are:
The Majestic Companies, LTD.-Delaware
Skytex International, Inc.-Nevada
Second: The laws of the state under which such foreign corporation is organized
permit such a merger.
Third: Skytex International, Inc. shall be the surviving corporation. The name
of the surviving corporation shall then immediately be changed to The Majestic
Companies, LTD., and it is to be governed by the laws of the state of Nevada.
Fourth: The following plan of merger was approved by the shareholders of the
undersigned domestic corporation in the manner prescribed by the Nevada Revised
Statutes, and was approved by the undersigned foreign corporation in the manner
prescribed by the laws of the state under which it is organized: Skytex
International, Inc. will exchange one share for each I shares of The Majestic
Companies, LTD outstanding shares at the time of merger.
Fifth: As to each of the undersigned corporations, the number of shares
outstanding, and the designation and number of outstanding shares of each class
entitled to vote as a class on such plan, are as follows:
<PAGE>
The Majestic Companies, Ltd.-Delaware: 12,797,231 common shares voted in favor
of merger with 638,300 shares abstained from voting, with no votes against.
SkyTex International, Inc.-Nevada: 2,194,300 common shares voted in favor of
merger with 455,700 abstained from voting, with no votes against.
Seventh: If the surviving corporation is to be governed by the laws of any other
state, such surviving corporation hereby: (a) agrees that it may be served with
process in the State of Nevada in any proceeding for the enforcement of any
obligation of the undersigned domestic corporation and in any proceeding for the
enforcement of the rights of a dissenting shareholder of such domestic
corporation against the surviving corporation; (b) irrevocably appoints the
Secretary of State of Nevada as its agent to accept service of process in any
such proceeding, and (c) agrees that it will promptly pay to the dissenting
shareholders of such domestic corporation the amount, if any to which they shall
be entitled under the provisions of the Nevada Revised Statutes with respect to
the rights of dissenting shareholders.
Dated: November 3, 1998
SkyTex International, Inc. (Nevada)
By /s/ Ralph Morren
------------------
Ralph Morren, Pres. And Sec.
SUBSCRIBED and SWORN to me
This 5th day of December, 1998
/s/ Laurie A. Washburn
- -------------------------------
NOTARY PUBLIC in and for said County and State
The Majestic Companies, Ltd.
By: /s/ Francis A. Zubrowski
-------------------------
Francis A. Zubrowski, President
& Chief Executive Officer
SUBSCRIBED and SWORN to me
This 4th day of December, 1998
????????
- --------------------------------
NOTARY PUBLIC in and for said County and State
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/17/1998
981493211 - 2816290
STATE OF DELAWARE
CERTIFICATE OF MERGER OF
DOMESTIC CORPORATION AND
FOREIGN CORPORATION
Pursuant to Title 8, Section 252(c) of the Delaware General Corporation Law, the
undersigned corporation executed the following Certificate of Merger:
FIRST: The name of the surviving corporation is The Majestic Companies, Ltd., a
Nevada corporation, formerly known as SkyTex International, Inc, a Nevada
corporation; and the name of the corporation being merged into this surviving
corporation is The Majestic Companies, Ltd., a Delaware corporation.
SECOND: The Agreement and Plan of Merger has been approved, adopted, certified
executed and acknowledged by each of the constituent corporations.
THIRD: The name of the surviving corporation is The Majestic Companies, Ltd., a
Nevada corporation, formerly known as SkyTex International, Inc., a Nevada
corporation.
FOURTH: The articles of incorporation of the surviving corporation shall be
amended in accordance with the laws the State of Nevada, the jurisdiction where
the surviving corporation is incorporated.
FIFTH: The Agreement and Plan of Merger is on file at 8880 Rio San Diego Drive,
8th Floor, San Diego, CA 92108, the place of business of the surviving
corporation.
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by the
surviving corporation on request, without cost, to any stockholder of the
constituent corporations.
SEVENTH: The surviving corporation agrees that it may be served with process in
the State of Delaware in any proceeding for enforcement of any obligation of any
constituent corporation of the State of Delaware, as well as for enforcement of
any obligation of the surviving corporation arising from the merger, including
any suit or other proceeding to enforce the right of any stockholders as
determined in appraisal proceedings pursuant to Title 8, Section 262 of the
Delaware General Corporation Law. The surviving corporation irrevocably appoints
the Secretary of State of the State of Delaware as its agent to accept service
of process in any such suit or other proceeding, and specifies The Majestic
Companies, Ltd., 8880 Rio San Diego Drive, 8th Floor, San Diego, CA 92108, as
the address to which a copy of such process shall be mailed to the surviving
corporation by the Secretary of State.
<PAGE>
IN WITNESS WHEREOF, the surviving corporation has caused this certificate to be
signed by an authorized officer, the 16th day of December, 1998.
THE MAJESTIC COMPANIES, LTD.
a Nevada corporation
By: Francis A. Zubrowski
---------------------------
Francis A. Zubrowski,
President and CEO
<PAGE>
PAGE 1
STATE OF DELAWARE
SECRETARY OF STATE 981493211
DIVISION OF CORPORATIONS
P.O. BOX 898
DOVER, DELAWARE 19903
9166491
PATTON, BOGGS & BLOW
250 WEST PRATT STREET
BALTIMORE MD 21201
ATTN: JAMES R. DEVENEY, II
DESCRIPTION AMOUNT
THE MAJESTIC COMPANIES, LTD.
2816290
Franchise Tax Paid by Agent 20.00
FILING TOTAL 20.00
THE MAJESTIC COMPANIES, LTD.
2816290 0250N Merger; Non-Survivor
Franchise Tax Balance 546.90
FILING TOTAL 546.90
THE MAJESTIC COMPANIES, LTD.
2985143 0250S Merger; Survivor
Merger 75.00
Receiving/Indexing 50.00
Data Entry Fee 20.00
Surcharge Assessment-New Castle 6.00
Page Assessment-New Castle Count 27.00
FILING TOTAL 178.00
TOTAL CHARGES 744.90
TOTAL PAYMENTS 800.88
CHARGED TO ACCOUNT 55.98CR
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA
DEC-11-1998
No. C13193-92
/s/ Dean Meuller
DEAN MEULLER, SECRETARY OF STATE
ARTICLES OF MERGER OF DOMESTIC AND FOREIGN CORPORATIONS INTO
SKYTEX INTERNATIONAL, INC.
PURSUANT TO THE PROVISIONS OF THE STATE OF NEVADA REVISED STATUTES, THE
UNDERSIGNED DOMESTIC AND FOREIGN CORPORATIONS ADOPT THE FOLLOWING ARTICLES OF
MERGER FOR THE PURPOSE OF MERGING THEM INTO ONE OF SUCH CORPORATIONS.
First: The names of the undersigned corporations and the states under the loaws
of which they are respectively organized are:
The Majestic Companies, LTD. - Delaware
Skytex International, Inc. - Nevada
Second: The laws of the state under which such foreign corporation is organized
permit such a merger.
Third: Skytex International, Inc. shall be the surviving corporation. The name
of the surviving corporation shall then immediately be changed to The Majestic
Companies, LTD., and it is to be governed by the laws of the state of Nevada.
Fourth: The following plan of merger was approved by the shareholders of the
undersigned domestic corporation in the manner prescribed by the Nevada Revised
Statutes, and was approved by the undersigned foreign corporation in the manner
prescribed by the laws of the state under which it is organized: Skytex
International, Inc. will exchange one share for each 1 shares of The Majestic
Companies; LTD outstanding shares at the time of merger.
Fifth: a to each of the undersigned corporations, the number of shares
outstanding, and the designation and number of outstanding shares of each class
certified class entitled to vote as a class on such plan, are as follows:
<PAGE>
THE MAJESTIC COMPANIES, LTD. -- DELAWARE: 12,797,231 common shares voted in
favor of merger with 638,300 shares from voting, with no votes against.
SKYTEX INTERNATIONAL, iNC. -- NEVADA: 2,194,300 common shares voted in favor of
merger with 455,700 abstained from voting with no votes against.
Seventh: If the surviving corporation is to be governed by the laws of any other
state, such surviving corporation hereby: (a) agrees that it may be served with
process in the State of Nevada in any proceeding for the enforcement of any
obligation of the undersigned domestic corporation and in any proceeding for the
enforcement of the rights of a dissenting shareholder of such domestic
corporation against the surviving corporation; (b) irrevocably appoints the
Secretary of State-of-Nevada as is agent to accept service of State-of-Nevada as
its agent to accept service of process in any such proceeding, and (c) agrees
that it will promptly pay to the dissenting shareholders of such domestic
corporation the amount, if any to which they shall be entitled under the
provisions of the Nevada Revised Statutes with respect to the rights of
dissenting shareholders.
Dated: November 3, 1998
Skytex International, Inc. (Nevada)
By: /s/ Ralph Morren
--------------------------------
Ralph Morren, Pres. and Sec.
SUBSCRIBED and SWORN to me
This 5th day of December 1998
/s/ Laurea Washburn [NOTARY STAMP APPEARS HERE]
- --------------------------
NOTARY PUBLIC in and for said County and State
The Majestic Companies, Ltd.
By: /s/ Zubrowski
-----------------------
Prancis A. Zubrowski, President
& Chief Executive Officer
SUBSCRIBED and SWORN to me
This 4th day of December, 1998
- ------------------------------
NOTARY PUBLIC in and for said County and States [NOTARY STAMP APPEARS HERE]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE MAJESTIC COMPANIES, LTD. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1999 DEC-31-1998 DEC-31-1997
<CASH> 73,781 305,639 141,319
<SECURITIES> 0 0 0
<RECEIVABLES> 176,124 147,238 36,095
<ALLOWANCES> 0 0 0
<INVENTORY> 261,443 1,214,026 0
<CURRENT-ASSETS> 600,111 1,743,616 177,414
<PP&E> 732,254 314,095 778
<DEPRECIATION> 45,672 18,430 86
<TOTAL-ASSETS> 1,378,689 2,045,223 386,106
<CURRENT-LIABILITIES> 859,910 1,663,368 238,458
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 26,834 21,112 40,247
<OTHER-SE> 105,045 339,003 107,401
<TOTAL-LIABILITY-AND-EQUITY> 257,434 426,944 78,077
<SALES> 2,290,201 395,857 0
<TOTAL-REVENUES> 2,290,201 395,857 0
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 4,423,546 2,767,717 301,952
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 23,979 1,428 0
<INCOME-PRETAX> (2,157,324) (2,373,288) (301,952)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (2,157,324) (2,373,288) (301,952)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (2,157,324) (2,373,288) (301,952)
<EPS-BASIC> (.09) (.20) (.08)
<EPS-DILUTED> (.09) (.20) (.08)
</TABLE>
