<PAGE> 1
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(g) of
The Securities Exchange Act of 1934
--------------------
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
HAWAII #99-0306492
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4614 Kilauea Ave., Ste. 435
Honolulu, HI 96816
- ---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Issuer's telephone number: (808) 735-8494
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
$.001 Common Stock
------------------
(Title of Class)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I
Item 1. Description of Business............................................... 1
Item 2. Management's Discussion and Analysis or Plan of Operation............. 6
Item 3. Description of Property............................................... 10
Item 4. Security Ownership of Certain Beneficial Owners and Management........ 10
Item 5. Directors and Executive Officers, Promoters and Control Persons....... 12
Item 6. Executive Compensation................................................ 14
Item 7. Certain Relationships and Related Transactions........................ 15
Item 8. Description of Securities............................................. 15
PART II
Item 1. Market Price for Registrant's Common Equity and Related
Shareholder Matters............................................... 16
Item 2. Legal Proceedings..................................................... 16
Item 3. Changes in and Disagreements with Accountants......................... 16
Item 4. Recent Sales of Unregistered Securities............................... 16
Item 5. Indemnification of Directors and Officers............................. 19
PART F/S
F1 Report of Independent Auditors
F2 Balance sheets as of December 31, 1998 and September 30, 1999
(unaudited)
F3 Statements of Operations for the years ended December 31, 1997
and 1998 nine month period ending September 30, 1999 (unaudited)
F4 Statements of Shareholder's Equity for the years ended December
31, 1997 and 1998 and nine month period ended September 30, 1999
(unaudited)
F5 Statements of Cash Flow for the years ended December 31, 1997 and
1998 and nine month period ended September 30, 1999 (unaudited)
F6 Notes to Financial Statements
PART III
Item 1. Index to Exhibits..................................................... III-1
Item 2. Description of Exhibits............................................... III-2
Signatures............................................................ III-3
</TABLE>
<PAGE> 3
ITEM 1 - DESCRIPTION OF BUSINESS:
Business Development
Hawaiian Vintage Chocolate Company, Inc. (the "Company") was
incorporated in July 1993 under the laws of the State of Hawaii to engage in the
development, growing, manufacturing and marketing of cocoa and chocolate
products. From its inception the Company has been developing cocoa genetics and
farming methods for the growing of cocoa in Hawaii. The Company tested its cocoa
genetics through the production, test marketing and sales of a resulting
chocolate product to chefs. In September 1997, the Company entered into an
Agreement of Merger with American Graphics Industries, Inc. (AGI), a
corporation, which had filed a voluntary petition for Reorganization under
Chapter 11 of the United States Bankruptcy Code, pursuant to an Amended Plan of
Reorganization filed with and approved by the Bankruptcy Court (the Plan). The
Plan provided for a merger of the Company with AGI with the Company remaining as
the surviving corporation. In December of 1997, public trading of the Company's
common stock began on the National Association of Securities Dealers OTC
Bulletin Board, under the stock symbol "HWVI". Beginning in 1998, the Company
started its transition from a cocoa genetics and chocolate product development
company to an operating company. The Company operates as a grower, manufacturer,
and marketer of gourmet cocoa and chocolate products. In its operations, the
Company grows cocoa trees using proprietary genetics and produces and markets
gourmet cocoa and chocolate products for both wholesale and retail sale to the
public.
Business of Issuer
The Company is the only producer of Vintage/varietal chocolate in the
world and the only grower of cacao in the United States. It produces five types
of basic chocolate that emphasize the unique flavor of the beans used to make
the chocolate. The Company developed and popularized the gourmet varietal
chocolate category in the United States as a flavorful gourmet alternative to
other chocolates. Currently the Company markets five chocolate varieties under
the Hawaiian Vintage brand. In 1999 the Company started marketing four varieties
of gourmet Hawaiian coffee that are independently cultivated and marketed by the
Company under the Hawaiian Vintage brand for retail sale. The name Hawaiian
Vintage Chocolate has a high level of awareness among gourmet chefs and food
service institutions. Hawaiian Vintage Chocolate products are sold to celebrity
chefs, cooking schools, upscale restaurants, hotels, confectioners, cruise lines
and bakeries. It is also sold at specialty and health food stores in Hawaii, the
West Coast and the Northeast Coast of the United States, and directly "online"
through the Company's Internet website.
The Company develops high quality, gourmet, natural and organically
grown chocolate products as well as attractive, stylish and high quality
packaging for its products. The unique flavors of the Company's chocolate are a
direct result of the cocoa beans and the environment in which they are grown.
The Company uses a variety of suppliers to roast, grind and finish its cocoa
beans into chocolate based on the Company's proprietary formulas. The Company's
mission is to educate the consumer that chocolate is a product of cocoa beans
and the flavor of the bean determines the flavor of the chocolate. The chocolate
produced by the Company is packaged to supply the food service industry in bulk
and the retail industry in quarter pound, half pound, and full pound gold
resealable packages. The Company's products include Keaau, Kona, Royal Pahoa,
Snows of Mauna Kea, and Hapa gourmet Vintage Chocolate, a line of Estate grown
Hawaiian coffees grown for and marketed by the Company under the Hawaiian
Vintage Coffee name, and a line of specialty ingredient chocolates. In September
of 1999 the Company opened its first retail store on the campus of the
University of Illinois in Champaign/Urbana, Illinois. This prototype store
serves products made with the coffees and chocolate of the Company as well as
other related products.
-1-
<PAGE> 4
Principal Products, Markets, and Distribution
The Company's chocolate products contain no artificial flavors or
preservatives, are made from high-quality, natural ingredients and are normally
offered in 48 LB, 1 LB, one-half and one-quarter pound packages. According to
the National Confectionery Association industry sales of gourmet chocolate has
grown by the rate of 12% per year for the last three calendar years. The
following table sets forth the percentages of the Company's sales for each major
market segment category during the last two years and for the first nine months
of this calendar year. The timing of promotional activities, consumer trends,
and the development and introduction of new products will result in changes in
the percentage of the Company's products sold in each of these market segments.
Historical results may not be indicative of results in future years.
<TABLE>
<CAPTION>
1997 1998 Sept. 1999
<S> <C> <C> <C>
Bulk (Food Service) 90% 70% 35%
Retail 10% 29% 34%
Ingredient 0% 0% 25%
Internet 0% 1% 6%
</TABLE>
Bulk (Food Service)
The Company's bulk chocolate is offered in five types of chocolates 64%
cocoa mass chocolates - Kona and Keaau, 56% cocoa mass chocolate - Royal Pahoa,
white chocolate, Snows of Mauna Kea, and milk chocolate - Hapa. The channels of
distribution for food services are specialty distributors who in turn sell the
product to restaurants, hotels, cruise lines, airlines, confectioners and
bakeries. The Company also sells directly to key consulting chefs who act as an
advisory council for the Company such as Emeril Lagasse, Charlie Trotter,
Charlie Palmer, Todd English, Stephan Pyles, Robert Del Grande, Roy Yamaguchi,
and Alan Wong. The Company also sells directly to cooking and culinary schools
as well as national upscale hotel and restaurant chains.
Retail
In 1998, the Company introduced its new stylish, high quality packaging
for it products in one, one-half, and quarter pound stand up pouches for sale at
retail. All the Company's chocolate, Kona, Keaau, Royal Pahoa, Snows of Mauna
Kea (white chocolate) and Hapa (milk chocolate) are available in these retail
sizes. The retail packaging was only available in Hawaii at specialty food and
gift shops until the fall of 1998 when the Company launched a test market on the
West Coast selling directly to natural food and specialty food stores. In 1999
the Company's retail products were also sold by the Company's sales staff and 7
brokers in the Northeast who represent the Company in connection with sales to
the supermarket and grocery trade, natural food stores, and to distributors who
service this market. The seven brokers represent the Company in presenting
marketing and sales programs, supporting retail stores, selling new items, and
establishing sale promotions with the Company's retail clients. The Company's
policy is to grant its brokers the rights to sell the Company's products within
a defined territory.
In September of 1999 the Company opened its first Company owned retail
store on the campus of the University of Illinois in Champaign/Urbana, Illinois.
This store is designed to serve as a prototype for further expansion. The store
features the Company's coffees, chocolates as truffles, bars, other finished
chocolates, baked goods, ice cream, coffee/chocolate smoothies, and other
related products in a Hawaiian setting. The store serves as an educational
center for the story of the Company. The store also provides a training ground
for new store personnel and managers and is a testing ground for new Company
products such as the sale of its Estate coffees which are available only through
the store and the Company's Internet site. It also
-2-
<PAGE> 5
serves as a test center for promotions, operating and training methods and
merchandising techniques planned by the company.
Ingredient Chocolate
In 1999, the Company decided to develop its co-branded business where
the Company would formulate unique chocolate products to be used as a branded
ingredient by other manufacturers. These products will carry the name of the
Company as well as the name of the primary manufacturer. The Company believes
that this will provide the Company with additional exposure to the public and
will inform them that the chocolate used in health bars, ice creams, and baked
goods is a natural gourmet alternative to existing products. The Company's sales
staff services this market directly.
Internet
The Company opened its Internet website in December of 1998 as an
informational site and as an Internet store where all the Company's retail
chocolate and coffee products could be offered for sale to the online retail
customer. Sales for that month contributed 1% of the Company's sales revenues
for the calendar year 1998. For the first nine months of calendar 1999 Internet
sales have accounted for 6% of the Company's sales revenues. The site offers
information on how the chocolate is used, grown, and is cross-linked to over 200
other chefs and chocolate related sites on the Internet so the consumer finds it
easy to access the Company's information even while visiting other web
destinations. The website also features the current news on the Company, its
celebrity chefs, and serves as a direct communication link to the Company.
Marketing
The Company's marketing strategy is based upon emphasizing the
consistently superior quality of its products. It sponsors a number of events
where excellence in the food industry is recognized such as sponsoring the James
Beard Foundation's Pastry Chef of the Year Award which has been renamed the
"Hawaiian Vintage Chocolate Pastry Chef of the Year". It also sponsors a variety
of food events throughout the year designed to educate the consumer to the
qualities of the Company's unique products and to raise the level of
understanding of chocolate in general. The Company employs chef support programs
at various times during the year to highlight the efforts of key chefs and
institutions in promoting the Company products. In 1999 the Company developed
and employed a variety of advertising and promotional programs designed to
support the sell-through of its retail products at the consumer level. These
include, but are not limited to, store personnel training, co-promotions with
local restaurants, radio campaign and contests.
Competitive Business Conditions
The retailing of confectionery products is highly competitive. The
Company competes with numerous businesses that offer confectionery products.
Many of these competitors have greater name recognition and financial, marketing
and other resources than the Company. Hershey and Mars have dominated the 12
billion-dollar per year domestic chocolate industry. Utilizing branding
strategies, these producers have emphasized their name and advertised
extensively to compliment their retail sales activities targeted at the
mass-market consumer. In the gourmet chocolate segment Godiva is the industry
leader having evolved from an upscale gift chocolate into a branded product,
sold through its own stores or department stores as primarily a gift item. The
National Confectionery Association predicts that sales of gourmet chocolate is
presently at $1 billion dollars in the United States and predicts these sales
will rise 12% per annum while total chocolate sales are expected to rise by 2-3%
per annum.
-3-
<PAGE> 6
The Company believes that its principal competitive strengths lie in its
name recognition and its reputation as the leader in varietal chocolates and in
the quality of its products. With its emphasis on the quality of its chocolate,
the Company has demonstrated in its food service markets and lately at retail
that there is a niche for its gourmet varietal chocolate. Nevertheless, past
successes are no guarantee that the Company will be able to compete on a
national scale successfully. The Company believes that the overall market for
its chocolate products is significant in size. An additional advantage for the
Company's chocolate products is that they are grown organically. The organic
candy market is increasing by a rate of 300% per year according to
ResearchFocus, a health and nutrition industry trade journal. As the only
chocolate producer who grows their beans organically, the Company believes it is
well positioned to take advantage of this dynamic market segment.
Sources and Availability of Raw Materials
The principal ingredients used by the Company are cocoa beans and sugar.
Cocoa beans are produced around the world with West Africa accounting for
approximately 65% of the world's crop. Cocoa beans are not uniform, and the
various grades and varieties reflect the diverse agricultural practices and
natural conditions found in the many growing areas. The Company grows its own
beans in the State of Hawaii which, under certain circumstances, could become
scarce or unavailable and purchases beans from independent growers whose
products can reflect the lack of uniformity in the world's crop. No single
source represents more than 10% of the Company's raw material purchases.
The table below sets forth the average annual cocoa prices as well as
the highest and lowest monthly averages for the calendar years indicated. The
prices are the monthly average of the quotations at noon of the three active
futures trading contracts closest to maturity on the New York Coffee, Sugar and
Cocoa Exchange. Because of the premiums paid for its flavor beans these average
futures contract prices are not necessarily indicative of the Company's cost of
cocoa beans or cocoa products.
Cocoa Futures Contract Prices*
(Cents per Pound)
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Annual Average 62.1 70.0 72.7
High 64.4 77.2 78.3
Low 57.4 59.1 65.5
</TABLE>
*Source: International Cocoa Organization Quarterly Bulletin of Cocoa
Statistics.
The price of sugar, the Company's second most important commodity for
its chocolate production is subject to price supports under the Federal
Agricultural and Improvement Reform Act of 1996. Due to import quotas and duties
imposed to support the price of sugar established by that legislation, sugar
prices paid by United States users are currently substantially higher than
prices on the world sugar market. The average wholesale list price of refined
sugar has remained relatively stable in the range of $.28 to $.35 per pound for
the past ten years.
The Company uses a variety of suppliers to roast, grind and finish its
cocoa beans into chocolate based on the Company's proprietary formulas. If, any
of these suppliers should become unavailable, the Company believes there are
numerous companies that could provide these services without any adverse
business impact on the Company's operations.
-4-
<PAGE> 7
Dependence Upon a Single Customer; or a Few Customers
As of September 30, 1999, 39% of the Company's net sales were derived
from three customers (17%, 12%, and 10%).
Patents, Trademarks, Licenses, Franchises, Concessions, Royality Agreements or
Labor Contracts.
The Company has a license agreement for the sale of its products through
kiosks in the Midwest states of Missouri, Illinois, and Indiana with Hobson
Global Marketing. The Company's rights under this agreement are extendible on a
long-term basis at the Company's option, which obligates the licensee to
maintain a minimum inventory level. The license is subject to a minimum sales
requirement for 1999. The Corporation owns various unregistered trademarks and
service marks, which are of material importance to the Company's business and
which are in the process of being registered Federally and at the state level
where it is appropriate.
Regulation
The Company's and its suppliers' production facilities are subject to
inspection by the Foods and Drug Administration and various other governmental
agencies, and its products must comply with regulations under the Federal Food,
Drug and Cosmetic Act and various comparable state statues regulating the
manufacturing and marketing of food products. A finding of a failure to comply
with one or more regulations could result in the imposition of sanctions. The
Company's product labeling is subject to and complies with the Nutrition
Labeling and Education Act of 1990. The Company believes it is operating in
compliance with all applicable laws and regulations.
Environmental Considerations
The Company grows its product organically and is in compliance with
environmental laws and regulations. Accordingly, the costs and effects of
compliance with environmental laws (federal, state and local) has not been
material to the Company's operations.
Research and Development
Despite the fact that there can be no assurance that the Company can
successfully produce new products, nor that such products will be profitable,
the Company will be required to continue to spend substantial sums on research
and development in the foreseeable future in order to enhance its existing
genetics, products, and to develop new products. New technology developed, or
products introduced by other entities could adversely affect the marketability
of the Company's products. Consequently, the Company is compelled to continue
development of new technologies and the implementation of new technologies in
order to remain competitive. In Fiscal 1998 the Company spent $21,000 in product
development and to date the Company has spent $125,000 on Company-related
research and development.
Employees
As of September 30, 1999, the Company employed 17 full time workers of
whom 5 were in corporate administration, 2 in sales and marketing, 3 in
fieldwork and 7 in its retail location. The Company also hires a varying number
of part-time seasonal workers for work in its fields.
Safe Harbor Statement
The nature of the Company's operations and the environment in which it
operates subjects it to changing economic, competitive, regulatory and
technological conditions, risks, and uncertainties. In connection with the
-5-
<PAGE> 8
"safe harbor" provisions of the Private Litigation Reform Act of 1995, the
Company notes the following factors, which among others, could cause future
results to differ materially from the forward-looking statements, expectations
and assumptions expressed or implied herein. Many of the forward looking
statements contained in this registration statement may be identified by the use
of the forward-looking words such as "believe," "expect," "anticipate,"
"should," "planned," "estimated," and "potential," among others. Factors which
could cause results to differ include, but are not limited to: changes in the
chocolate, confectionery and grocery business environment, including actions of
competitors and changes in consumer preferences; changes in governmental laws
and regulations; market demand for new and existing products; the availability
and pricing of raw materials and weather or other environmental problems,
including diseases that could adversely effect the cultivation and availability
of cocoa or coffee beans used in the Company's products.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This discussion should be read in conjunction with the audited and
unaudited financial statements and the related Notes to the Company's Financial
Statements included elsewhere in this registration statement. The Management's
Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements that involve risks and uncertainties. Readers are
cautioned not to place undue reliance on the forward-looking statements in this
registration statement.
Results of Operations --- 1997
Fiscal 1997 compared to Fiscal 1996
"Net Sales." Net sales increased 12% to $136,000 in 1997 from $122,000 in 1996.
The increase was the result of additional test marketing efforts.
"Other Income." During 1996 and 1997, the Company received grant income from the
Federal Government through its Rural Economic Development Assistance program.
This income increased to $69,000 from $52,000 in 1996. This program was designed
to attract agricultural companies to find alternative uses for demised Hawaiian
sugar cane land. The company used this money to offset expenses incurred in the
development of its plantings in Hawaii.
"Gross Profit." As a result of the increase in net sales, the gross profit for
1997 increased to $90,000 from $70,000 in 1996. The Company's gross profit
margin increased by 16% from 1996 primarily due to test market sales increase
and cost reduction.
"Selling and Marketing Expenses." Selling and marketing expenses for 1997
increased 38% to $122,000 from $88,000 in 1996 and as a percentage of net sales
it increased to 89% from 72%. The increase in selling and marketing expenses
primarily was due to an increase in sales payroll and brochure cost.
"General and Administrative expenses." General and administrative expenses for
1997 increased by 25% to $217,000 from $174,000 in 1996 and increased as a
percentage of sales to 159% from 142%. The primary reason for the increase of
the general and administrative expenses was the increase in professional fees as
part of the Company's merger with AGI and subsequent public listing on the OTC
Bulletin Board.
"Operating Income." Operating loss for 1997 increased to $264,000 from $196,000
in 1996 and the loss increased as a percentage of sales to 193% from 160% in
1996. The increase in the operating loss was due to the loss of grant income in
1997 and the increased professional fees paid as a result of the Company's
-6-
<PAGE> 9
preparation for its public listing on the OTC Bulletin Board and its merger with
AGI.
"Income Taxes." The Company has a net loss for the year therefore incurring no
income tax liability.
"Interest Expense." Interest expense for 1997 decreased to $88,000 from $108,000
in 1996 primarily due to the Company's redemption of two of its convertible
debentures.
"Net Income (loss)." Net loss for 1997 increased to $271,000 from $244,000 in
1996 and however the loss decreased as percentage of sales remained unchanged at
199%. This increase of the net loss by the Company was due primarily to the loss
of grant income and the increased professional fees paid as a result of the
Company's public listing on the OTC Bulletin Board in December of 1997 and
merger with AGI.
Results of Operations --- 1998
Fiscal 1998 compared to Fiscal 1997
"Net Sales." Net sales increased 45% to $197,000 from $136,000 in 1997. The
increase was primarily attributable to the increase in the Company's retail test
marketing sales including Internet sales. This increase in sales volume reflects
the Company's 1998 opening of its Internet site and a test market for its
chocolate products at retail in Hawaii and on the West Coast.
"Other Income." During 1997 and 1998, the Company received grant income from the
Federal Government through its Rural Economic Development Assistance program.
This income decreased to $6,000 from $69,000 in 1997. This program was designed
to attract agricultural companies to find alternative uses for demised Hawaiian
sugar cane land. The Company used this money to offset expenses incurred in the
development of its cocoa tree plantings in Hawaii. The Company believes this
grant income to be a one-time occurrence.
"Gross Profit." As a result of the Company's increase in net sales, gross profit
for 1998 increased 65% to $149,000 from $90,000 in 1997. The Company's gross
profit margin was up 10% from 1997 primarily due to the higher per unit price of
the Company's product at retail vs. food service.
"Selling and Marketing Expenses." Selling and marketing expenses for 1998
increased 48% to $181,000 from $122,000 in 1997 and as a percentage of net sales
it increased to 92% from 90%. The increase in selling and marketing expenses
primarily was due to an increase in advertising expenses, distributor support
programs, and retail test market introductions. This increase was partially
offset by a decrease in promotional expenses.
"General and Administrative expenses." General and administrative expenses for
1998 increased by 102% to $439,000 from $217,000 in 1997 and increased as a
percentage of sales to 223% from 160%. The primary reason for the increase of
the general and administrative expenses is the increased staffing by the Company
as part of its conversion from a development company to an operating company.
"Operating Income." Operating losses for 1998 increased 98% to $523,000 from
$264,000 in 1997 and the loss increased as a percentage of sales to 265% from
194% in 1997. The increase in the dollar amount of the operating loss was due to
the additional staffing by the Company and the increased selling and marketing
expenses incurred by the Company as part of its conversion into an operating
company.
-7-
<PAGE> 10
"Income Taxes." The Company has a net loss for the year therefore incurring no
tax liability.
"Interest Expense." Interest expense for 1998 decreased 83% to $15,000 from
$88,000 in 1997 primarily due to the conversion of debentures to equity at the
time of the Company's public listing in December of 1997 of its common stock on
the OTC Bulletin Board.
"Net Income." Net losses for 1998 increased 88% to $510,000 from $271,000 in
1997 and the loss increased as percentage of sales to 259% from 177%. This
increase in the dollar losses is due to the factors discussed above under
"operating income".
Results of Operations - Nine Months Ending September 30, 1999
"Net Sales." Net sales for the nine months ending September 30, 1999 increased
71% to $280,000 from $164,000 during the same period of 1998. These increases
were attributable to increases in the Company's retail sales, Internet sales and
ingredient sales. This increase in sales volume reflects the fact that 1999 was
the Company's first partial year of functioning as an operating company. The
opening of retail accounts in the Northeast, the hiring of brokers and
distributors to represent the products in grocery and health food accounts, the
increase of Internet sales, as well as the direct ingredient sales have all
contributed to the increased revenues.
"Gross Profit." As a result of the Company's increase in net sales, gross profit
for the nine months of 1999 increased 25% to $164,000 from $131,000 during the
same period in 1998. The Company's gross profit margin of 59% was down 21% from
1998 primarily due to the increase in packaging and inventory costs for the
retail sales of the Company's chocolate products.
"Selling and Marketing Expenses." Selling and marketing expenses for the nine
months of 1999 increased 65% to $235,000 from $142,000 during the same period in
1998 with the percentage of net sales down 2.8% from 86% in 1998. The increase
in selling and marketing expenses primarily was due to an increase in
advertising expenses, distributor support programs, the cost of sales personnel
hired to expand the retail market, the cost of retail test market introductions,
and the cost of promotions to encourage the use of the product as a co-branded
ingredient.
"General and Administrative Expenses." General and administrative expenses for
the first nine months of 1999 increased by 43% to $447,000 from $312,000 during
the same period in 1998 and decreased as a percentage of sales to 160% from
190%. The primary reason for the increase of the general and administrative
expenses is the increased staffing by the Company to support the Company's
national sales effort.
"Operating Income." Operating losses for the first nine months of 1999 increased
53% to $549,000 from $358,000 during the same period in 1998 and decreased as a
percentage of sales to 196% from 218% during the similar period in 1998. The
percentage decrease was due primarily to the increased revenues of the Company
from its retail efforts while the dollar increase was due to increased selling,
marketing and administrative costs.
"Income Taxes." The Company anticipates a net loss for fiscal 1999 therefore
incurring no tax liability. The company expects its net operating loss carry
forwards to offset any tax liabilities in the year 2000.
"Interest Expense." Interest expense for the first nine months of 1999 remained
constant at $10,000 compared to the similar period in 1998.
-8-
<PAGE> 11
"Net Income." Net losses for the first nine months of 1999 increased by 60% to
$535,000 from $334,000 in 1998 and decreased as percentage of sales to 191% from
204%. This improvement in the net income of the Company as a percentage of sales
was due primarily to its expanding sales revenue and the increase in the dollar
amount of the net loss was due to the increase staffing both at the sales level
and the administrative level to support the national sales effort and the trade
promotions necessary to build sales.
Seasonality and Stores Openings
The Company's business is seasonal and its quarterly results of
operations reflect seasonal trends resulting from increased demand for the
Company's chocolate products during the Christmas and Valentine's Day seasons.
The Company has experienced quarterly fluctuations in sales volume and operating
results when compared to previous years due to a number of factors, including
the timing of trade promotions, advertising and consumer promotional
expenditures. The Company, as is common in the chocolate industry, offers trade
promotions for limited time periods on specific items in order to provide
incentives for the purchase and promotion of products. The impact on chocolate
sales from period to period due to the timing and extent of such trade
promotions can be significant. In addition, the Company believes that quarterly
results will be affected by the timing of new store openings and possible sale
of franchises; therefore results for any quarter are not necessarily indicative
of results that may be achieved in other quarters or for a full fiscal year.
Liquidity and Capital Resources
As of September 30, 1999, working capital was $293,000 compared with
($245,000) as of September 30, 1998. This increase is primarily due to the
private sale of the Company's common stock in 1999. Cash and cash equivalent
balances increased from ($21,000) on September 30, 1998 to $72,000 on September
30, 1999 as a result of cash flows in excess of operating and financing costs.
The Company's current ratio was 2.50 on September 30, 1999 as compared to .40
on September 30, 1998. The Company has no long-term debt.
The operations of the Company historically have been funded with a combination
of internally generated funds and external private sales of equity. Purchases of
inventory, marketing expenditures and support of account receivable have been,
and are expected to remain, the Company's principal recurring uses of funds for
the foreseeable future. The Company's other principal use of funds in the future
will be the development of new products, the possible acquisition of brands,
product lines or other business activities, the development of corporate and/or
franchise stores and increased staffing costs. The Company has incurred
significant operating loss from its operations through September 30, 1999. The
Company's working capital requirements have been and will continue to be
significant. The Company expects its primary sources of financing for its future
business activities will be funds from operations and the additional sale of
common stock. The Company currently believes that funds from operations and the
possible sale of equity are likely to be sufficient to meet operating and
capital requirements unless a significant acquisition or store expansion is made
during fiscal 2000. The Company cautions, however, that there is no assurance
that these assumptions will prove to be accurate.
2000 Outlook
The Company anticipates as its products move through the distribution
channels planned for 2000 that its gross margins will drop due to pricing
pressures. The Company's forecasts call for gross profit margins of
approximately 75% in 2000. The Company opened a prototype retail store in late
September of 1999 that will serve as the model for corporate expansion of
Company owned and/or franchise stores in 2000. The Company plans to continue its
retail rollout of product by expanding its sales representation to the Midwest,
South and Northwest in the year 2000 and by expanding its food service
distribution. The Company believes that this trend of increased sales will
continue through fiscal 2000.
-9-
<PAGE> 12
The Company believes that in 2000 the revenue increases will offset the
increased cost of personnel, promotions and advertising bringing the percentage
down in relation to total sales. The Company believes the trend of decreasing
administrative cost, as a percentage of sales will continue as a result of
increasing sales in the year 2000. However, administrative cost will continue to
increase to support the Company's expanded sales activities.
The Company believes that the impact of its expansion into the retail market
including the possibility of retail stores, corporate owned and/or franchised,
and its increased distribution in food service will cause the Company to have a
positive improvement in its operating income for the year 2000
The Year 2000 Matters
The Company recognizes that the arrival of the year 2000 poses a unique
worldwide challenge to the ability of systems to recognize the date change from
December 31, 1999 to January 1, 2000. The year 2000 issue could result, at the
Company and elsewhere, in system failures or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to process
transactions or to engage in other normal business activities. The Company has
assessed its computer and business processes and has upgraded its computer
applications to provide for their continued functionality.
The Company's operations are dependent on the year 2000 readiness of third
parties who do business with the Company. In particular, the Company's
information technology systems interact with commercial electronic transaction
processing systems to handle customer credit card purchases and other point of
sale transactions, and the Company is also dependent on third-party suppliers of
such infrastructure elements as telephone services, electric power, water, and
banking facilities. The Company has contacted its relevant third parties.
Although the Company has not been put on notice that any known third party
problem will not be resolved, the Company has limited information and no
assurance of additional information concerning the year 2000 readiness of third
parties. The resulting risks to the Company's business are very difficult to
assess.
The Company believes that, with the modifications it has made to its operating
systems the year 2000 issue is not reasonably likely to pose significant
operational problems for the Company's information technology systems.
ITEM 3. PROPERTIES
The Company occupies office space for its executive offices of 1500
square feet for $1.25 per sq. ft. on a six-month renewable lease in downtown
Honolulu, Hawaii that it will continue to lease until it builds permanent
facilities. The Company leases 115 acres of land on the Big Island of Hawaii for
the growing and cultivation of its cocoa beans that is on a six-year agreement
that is planned to be converted into a 26 year term lease at $250.00 per
acre/year. A factory site in Hawaii of 1 acre and up to an additional 1000 farm
acres is planned to be leased or purchased in 2000/2001.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth information regarding
beneficial ownership as of September 30, 1999 of the Company's outstanding
common stock by any person who is known to the Company to be the beneficial
owner of 5% or more of the Company's common stock.
-10-
<PAGE> 13
<TABLE>
<CAPTION>
Name and Address Class of Amount and Nature Percent
Of Beneficial Owner of Security of Beneficial Owner (1)(2) of Class (2)
- ------------------- ----------- -------------------------- ------------
<S> <C> <C> <C>
James Walsh Common 4,689,500 (3) 53.17%(3)
615 Elepaio Street
Honolulu, HI 96816
DLS Financial Services Common 1,143,318 (4) 12.60%(4)
519 Interstate 30
Suite 243
Rockwall, TX 75087
</TABLE>
(1) To the best knowledge of the Company, all shares are held of record with
sole voting and investment power. All calculations, unless otherwise noted,
are based on 8,568,471 shares of common stock outstanding as of September
30, 1999.
(2) Under Rule 13-d of the Exchange Act, shares not outstanding but subject to
options, warrants, rights, conversion privileges pursuant to which shares
may be acquired in the next 60 days are deemed outstanding for the purpose
of computing the percentage of outstanding shares owned by the persons
having such rights but not deemed outstanding for the purpose of computing
the percentage for such other persons.
(3) Total includes 5,000 shares owned solely by Mr. Walsh, 4,434,500 shares
owned by WF Trust, an irrevocable trust of which Mr. Walsh is acting as
sole trustee on behalf of his family as beneficiaries, and 250,000 options
currently exercisable by Mr. Walsh at $2.00 per share. The calculation of
percent ownership includes the addition of the options to the total number
of shares outstanding, as if they were exercised.
(4) Total includes 643,318 shares owned by DLS Financial Services and 100,000
Class A Warrants exercisable at $2.50 per share, 200,000 Class B Warrants
exercisable at $4.00 per share, and 200,000 Class C Warrants exercisable at
$6.00 per share. The warrants have been added to the shares outstanding for
the purpose of computing the percentage ownership as if the warrants have
been exercised.
The following table and notes thereto set forth certain information
regarding beneficial ownership as of September 30, 1999 of the Company's
outstanding common stock held by each director and executive officers of the
Company and by executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Name and Address Class of Amount and Nature Percent
Of Beneficial Owner of Security of Beneficial Owner (1)(2) of Class (2)
- ------------------- ------------ -------------------------- ------------
<S> <C> <C> <C>
Barry Zwick Common 342,501 (3) 3.99%
925 De La Vina Street
Suite 102
Santa Barbara, CA 93101
Tyrie Jenkins Common 80,066 0.93%
1060 Young Street
Suite 216
Honolulu, HI 96814
Shep Gordon Common 48,500 0.56%
3274 S. Kihei Road
Kihei, HI 96753
</TABLE>
-11-
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
James Walsh Common 4,689,500 (4) 53.17%
615 Elepaio Street
Honolulu, HI 96816
Charles Cheng Common 0 0
330 Saratoga Drive
Honolulu, HI 96830
Honolulu, HI
Kristine Simonds Common 10,000 0.11%
3212 Loulu
Honolulu, HI 96822
Executive Officers and Common 5,170,567 (5) 58.63%
Directors As a Group
Consisting of 5 Persons
</TABLE>
(1) Except as otherwise noted, to the best knowledge of the Company, all
shares are held of record with sole voting and investment power. All
calculations, unless otherwise noted, are based on 8,568,471 shares of
common stock outstanding as of September 30, 1999.
(2) Under Rule 13-d of the Exchange Act, shares not outstanding but
subject to options, warrants, rights, conversion privileges pursuant
to which shares may be acquired in the next 60 days are deemed
outstanding for the purpose of computing the percentage of outstanding
shares owned by the persons having such rights but not deemed
outstanding for the purpose of computing the percentage for such other
persons.
(3) Total includes 5,000 shares owned solely by Mr. Zwick, 233,334 shares
owned by Zwick Financial Corp. Profit Sharing Plan, of which Mr. Zwick
is sole trustee and 91% beneficiary, 79,167 shares owned by Zwick
Financial Corporation, and the following amount owned by Mr. Zwick's
minor children: 25,000 shares.
(4) Total includes 5,000 shares owned solely by Mr. Walsh, 4,434,500
shares owned by WF Trust, an irrevocable trust of which Mr. Walsh is
acting as sole trustee on behalf of his family as beneficiaries and
250,000 options currently exercisable by Mr. Walsh at $2.00 per share.
The calculation of percent ownership includes the addition of the
options to the total number of shares outstanding, as if they were
exercised.
(5) Total includes Mr. Walsh's 250,000 options exercisable at $2.00 per
share as if they were exercised and added to the total number of
shares outstanding as referenced in footnote (4).
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following list identifies the Company's directors and executive
officers. Directors are elected annually at the Company's annual meeting of
stockholders and hold office until their successors are elected and qualified.
The Company's officers are appointed annually by the Board of Directors and
serve at the pleasure of the Board.
Directors and Executive Officers:
Director: Tyrie Jenkins, 44
-12-
<PAGE> 15
Director: Shep Gordon, 54
Director: Barry Zwick, 65
Director, Chairman, CEO: James Walsh, 48
CFO and Vice President: Charles Cheng, 43
Secretary of the Company: Kristine Simonds, 32
Dr. Tyrie Jenkins, 44 has a BS degree from Mount Holyoke College and a
MD from Jefferson Medical School. Dr. Jenkins has been the Medical
Director of Laser Eye Institute of Hawaii since 1994. She has served on
the Board of Directors since September of 1997.
Shep Gordon, 54 is the founder and has served as the Chairman and CEO of
Alive Enterprises, Inc., an entertainment and culinary management
company, since 1980. Mr. Gordon has over 30 years of experience in the
entertainment and culinary industries. Mr. Gordon has served as a member
of the Board of Directors since September of 1997.
Barry Zwick, 65 has a BS degree from the U.S. Military Academy at West
Point and has an MBA from the University of Southern California. Mr.
Zwick has over 25 years experience in the securities business. Mr. Zwick
has been a member of the Midwest Stock Exchange and the Chicago Board of
trade. Since 1989 he has been a private investor. Prior to this period
Mr. Zwick was a Managing Director of Ladenburg, Thalman & Co., Inc. He
has been a member of the Board of Directors since September of 1997.
James Walsh, 48 founded Hawaiian Vintage Chocolate Company, Inc. in
1993. He has served as CEO and Chairman of the Board since the inception
of the Company. From 1986 - 1992 Mr. Walsh was the managing partner of a
cocoa research joint venture with Amfac Sugar and Hershey Foods. Prior
to that Mr. Walsh owned and operated CI, Inc., a full service
communication conglomerate that included an advertising company, three
printing firms, an merchandise and travel incentive company and a
computer service firm in Chicago. Mr. Walsh also serves as a Director
for Dallas Gold and Silver Exchange, Inc., a NASDAQ listed corporation.
Mr. Cheng joined the Company as Chief Financial Officer in September
1999. Prior the joining the Company, Mr. Cheng was the Executive
Vice-President of UniChinal, Inc., a private firm providing
international financing, investment consulting, and business services
from 1996 through 1999. From 1991 to 1996, he served as Chief Accountant
and Comptroller of Marc Hotels and Resorts, Inc. - Hawaii's third
largest condominium hotel management company. Mr. Cheng received a MBA
degree from Chaminade University of Honolulu.
Ms. Simonds has been the Secretary of the Company and Director of
Operations since 1997. For the past year she has split her time between
the development of the Company's operations and it's Internet presence.
For the preceding three years she was employed as a web designer and
developer by a private engineering firm. Ms. Simonds has a Bachelor's
Degree in Fine Arts from the University of Hawaii.
-13-
<PAGE> 16
Significant Employees
Anthony Roth, 34 has been retained by the Company since May of 1999 to
develop and implement the Company's stated sales and marketing plan. For
three years prior to that period he was employed by Naturade, Inc.
("Naturade"), a manufacturer of health and nutrition products, as their
Vice President of Sales and Marketing. Naturade's common stock is
registered under section 12(g) of the Exchange Act and is traded on the
OTC Bulletin Board. Mr. Roth was President of Performance Nutrition,
Inc., a nutracuetical company for two years prior to his employment at
Naturade. Mr. Roth has a Bachelor's Degree in Agricultural Economics
from the University of Illinois.
Stuart Hersch, 54 has acted in the capacity of advisor to the Chairman.
His responsibilities include assisting in strategic development,
acquisitions, and corporate development. Mr. Hersch is Chairman and CEO
of aka.com, a web portal site he developed in 1999. His prior work
experience includes executive positions as Vice President of Universal
Records from 1996 through 1999, Executive Vice President of Time-Warner
from 1993 through 1996 and CEO of King World from 1988 through 1993.
ITEM 6. EXECUTIVE COMPENSATION
Executive Officers
On September 1, 1997, the Company entered into a seven-year employment
contract with James Walsh, its founder and Chief Executive Officer. This
agreement was amended on September 24, 1997 providing for, among other things, a
base salary of $175,000, annual bonuses to be determined by the Board of
Directors, contractual stock rights to match any additional purchases by third
parties of the Company's Common Stock at seventy-five percent (75%) of the
offering price, and $5,000 per year for costs and expenses for professional,
legal and/or accounting services. It also provides a schedule for Mr. Walsh to
annually receive options for the purchase of 125,000 shares of the Company's
Common Stock starting in 1997 at $2.00 per share. To date because of the
financial operations of the Company, Mr. Walsh has not drawn any salary or
bonuses from the Company and has forgiven the Company of its obligation. In
fiscal 1997 and 1998, Mr. Walsh was granted options for the purchase of 125,000
shares of the Company's common stock at an exercise price of $2.00 per share. He
has taken advances as described in Note 5 of the Financial Statements of the
Company included in this Registration Statement which are scheduled to be
liquidated over a five year period starting in fiscal 2000.
No other executive officer of the Company has an annual salary and
bonuses in excess of $100,000.
Directors:
Members of the Board of Directors do not receive cash compensation for
their services as Directors. Directors are not presently reimbursed for expenses
incurred in attending Board meetings. Starting in 1999, Board members receive
5,000 shares of common stock annually for their services.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements:
Other than the employment contract of Mr. Walsh as referenced above in
the description of executive compensation, the Company has no other such
contracts.
-14-
<PAGE> 17
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a contractual agreement with Shep Gordon for the
promotion of its chocolate products among the celebrity chefs represented by or
known by Mr. Gordon or his firm, Alive Events. He receives an annual grant of
stock that varies depending on the level of sales to these chefs. Since the
inception of the Company he has received 20,040 shares of common stock under
this agreement.
Shares Issued to Corporate Directors
The Company has raised money through the sale of exempt security
offerings of its common stock. Mr. Zwick has participated in these offerings
through his purchase of 233,334, 66,667, and 25,000 shares of common stock at
$.75, $.75, and $.50 per share respectively. Dr. Jenkins purchased three
debentures issued by the Company in 1996 and 1997 respectively for $25,000 each
which were converted into 55,066 shares of common stock at the time of the
Company's initial public listing of its common stock on the OTC Bulletin Board.
In 1998, Dr. Jenkins also subscribed and purchased 20,000 shares of the
Company's restricted common stock at $1.00 per share. Mr. Gordon purchased one
debenture issued by the Company in 1993 for $25,000 which he converted into
30,107 shares of common stock at the time of the Company's initial public
listing of it common stock on the OTC Bulletin Board. All of these shares of the
Company's common stock were sold and issued for investment purposes in a
"private transaction" and are "restricted " shares as defined in Rule 144 under
the Securities Act of 1933, as amended. These shares may not be offered for
public sale except under Rule 144, or otherwise pursuant to said Act.
ITEM 8. DESCRIPTION OF SECURITIES
The Company's Amended Articles of Incorporation currently provide that the
Company is authorized to issue 20,000,000 shares of common stock, par value
.001. As of September 30, 1999, 8,568,471 shares of common stock were issued and
outstanding.
Common Stock
All shares of common stock have equal voting rights and, when validly issued and
outstanding; are entitled to one vote per share in all matters to be voted upon
by shareholders. Cumulative voting is permitted with respect to the election of
the Directors. The shares of common stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully-paid and
non-assessable shares. In the event of liquidation of the Company, each
shareholder is entitled to receive a proportionate share of the Company's assets
available for distribution to shareholders after payment of liabilities and
after distribution in full of preferential amounts, if any. All shares of the
Company's common stock issued and outstanding are fully paid and non-assessable.
Holders of the common stock are entitled to share pro rata in the dividends and
distributions with respect to the common stock, as may be declared by the Board
of Directors out of funds legally available therefor.
-15-
<PAGE> 18
PART II
ITEM 1. MARKET PRICE FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's common stock trades on the OTC Bulletin Board under the
symbol "HWVI". The following table sets forth for the period indicated, the per
share high and low bid quotations for the common stock as reported by the Over
The Counter Market Report. The bid quotations are inter-dealer bid prices and do
not include mark-ups, mark-downs, or commissions. The number of record holders
of the Company's common stock at September 30, 1999 was 121. The Company has not
declared any dividends with respect to its common stock. The Company intends to
retain all earnings to finance future growth; accordingly, it is not anticipated
that cash dividends will be paid to holders of the common stock in the
foreseeable future.
High and low stock prices for the last two years were:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First Quarter 3 3/8 1 3 3/8 1 1/4 - -
Second Quarter 1 15/16 1 3/32 3 7/8 1 3/4 - -
Third Quarter 2 3/8 1 1/4 3 1/4 1 27/32 - -
Fourth Quarter - - 2 3/8 1 13/16 2 1 1/2
</TABLE>
On October 14, 1999, the representative bid for the Company's common
stock, as reported by the OTC Bulletin Board was 1 7/16.
The company's transfer agent is Registrar and Transfer Company, 311 Cox
Street, Roselle, NJ 07203.
ITEM 2. LEGAL PROCEEDINGS
The Company has no material pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The company's principal accountant is Hollander, Lumer & Co., LLP of Los
Angeles, California. The firm's report for the period from January 1, 1997
through December 31, 1998 did not contain any adverse opinion or disclaimer, nor
were there any disagreements between management and the Company's accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has issued and sold the following unregistered shares of its
common stock during the last three years. No underwriters were used in the sale
of any of the Company's securities.
(a) Convertible Debentures
The Company has three convertible debentures due September 15, 2000, one
of which was issued in 1996 and two were issued in 1994. The Company designated
these debentures in an aggregate principal amount of $25,000 at an interest rate
of 13%. The Holder of the debenture is entitled, at his option, any time until
maturity to convert the debenture including interest due into shares of common
stock of the Company at a conversion rate of two dollars worth of stock for
every one dollar of value of the debenture at the time of conversation. The
conversion price will be the average of the bid and the ask price of the
Company's stock for the last 30 days prior to the date of the notice of
conversion. If the holder does not convert his debenture by the maturity date,
the Company can choose to reissue a new debenture for one year including
-16-
<PAGE> 19
accrued interest or pay the note in its entirety. These debentures were issued
pursuant to Section 4(2) of the Securities Act of 1933.
(b) Stock Issuance
1. In connection with its merger with AGI in September of 1997 the
Bankruptcy Court approved the plan of reorganization which called for the
Company to issue shares of its common stock and warrants to parties in interest
in the Bankruptcy proceeding, including creditors of AGI, and original
shareholders of the Company. As a result securities of the Company were issued
pursuant to Section 1145 of the Bankruptcy Code, as follows: 549,993 shares of
common stock to parties in interest issued in consideration for the merger and
in settlement of claims against AGI; three classes of warrants to parties of
interest in settlement of claims as follows: 200,000 Class A Warrants at an
exercise price of $2.50 per share which expire November 14, 2000 unless extended
by action of the Board of Directors; 400,000 Class B Warrants at an exercise
price of $4.00 per share which expire on March 14, 2000 unless extended by
action of the Board of Directors; and 400,000 Class C Warrants at an exercise
price of $6.00 which expire on March 14, 2000 unless extended by action of the
Board of Directors, and 5,000,000 shares of common stock to the original
shareholders of the Company in exchange for the original securities of the
Company issued prior to the merger.
2. The Company issued in October of 1997, 60,300 shares of common stock
given to a class of loyal customers and suppliers in appreciation for their past
services and support of the Company. These shares were issued under Section 4(2)
of the Securities Act of 1933 and were issued as restricted securities.
3. In September 1997 and in May 1998, the Company's entire class of
convertible debenture holders, other than noted in subparagraph (a) above,
exercised their options to convert their debentures into common stock of the
Company. As a result, the Company issued 692,967 shares in September 1997 and
134,828 shares in May 1998 to redeem these debentures. These shares were issued
pursuant to the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. As of the date of this registration statement, all of
these shares of the Company's common stock are eligible for sale under Rule 144
promulgated under the Securities Act of 1933, subject to certain limitations
included in said Rule.
4. The following shares of common stock were purchased and issued for
investment purposes in a "private transaction" and are restricted securities as
defined in Rule 144 pursuant to Section 4(2) of the Securities Act of 1933.
These shares may not be offered for public sale except under Rule 144, or
otherwise, pursuant to said Act. All shares were sold for cash. The following
are the names of the issuees, the number of shares purchased, date purchased and
purchase price.
<TABLE>
<CAPTION>
Price Per Total
Name Share Shares Date
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
DLS Financial Services, Inc. $0.75 213,334 10/20/97
- ----------------------------------------------------------------------------------
Barry Zwick $0.75 233,334 10/20/97
- ----------------------------------------------------------------------------------
Jeffery Ross $0.75 10,000 10/23/97
- ----------------------------------------------------------------------------------
Jeniffer Ross $0.75 10,000 10/23/97
- ----------------------------------------------------------------------------------
David R. McCoy $0.75 5,000 6/8/98
- ----------------------------------------------------------------------------------
William H. Oyster $0.75 10,000 6/8/98
- ----------------------------------------------------------------------------------
John Benson $0.75 5,000 6/8/98
- ----------------------------------------------------------------------------------
Jeffery R. Boyd $0.75 5,000 6/8/98
- ----------------------------------------------------------------------------------
Margaret Lindsley $0.75 5,000 6/8/98
- ----------------------------------------------------------------------------------
Jeffery Ross $0.75 3,000 6/8/98
- ----------------------------------------------------------------------------------
Jeniffer Ross $0.75 3,000 6/8/98
- ----------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
Zwick Financial Corp. $0.75 66,667 6/8/98
- ----------------------------------------------------------------------------------
DLS Financial Services, Inc. $0.75 75,000 6/8/98
- ----------------------------------------------------------------------------------
S.E.Smith $0.75 40,000 6/8/98
- ----------------------------------------------------------------------------------
DLS Financial Services, Inc. $0.75 50,000 9/3/98
- ----------------------------------------------------------------------------------
DLS Financial Services, Inc. $0.50 25,000 10/21/98
- ----------------------------------------------------------------------------------
S.E. Smith $0.50 25,000 10/21/98
- ----------------------------------------------------------------------------------
John Benson $0.75 5,000 6/23/98
- ----------------------------------------------------------------------------------
DLS Financial Services, Inc. $0.50 35,000 11/19/98
- ----------------------------------------------------------------------------------
L.S. Smith $0.50 60,000 11/19/98
- ----------------------------------------------------------------------------------
K.E. Zwick $0.50 12,500 11/19/98
- ----------------------------------------------------------------------------------
J.B. Zwick $0.50 12,500 11/19/98
- ----------------------------------------------------------------------------------
Tyrie Jenkins $1.00 20,000 1/21/99
- ----------------------------------------------------------------------------------
Anthony Roth $1.00 10,000 2/5/99
- ----------------------------------------------------------------------------------
Scott Dmtrenko $1.00 10,000 2/12/99
- ----------------------------------------------------------------------------------
James Desomento $1.125 100,000 7/28/99
- ----------------------------------------------------------------------------------
Alan Johnson $1.125 100,000 7/28/99
- ----------------------------------------------------------------------------------
Michael & Sharon Woodrow $1.125 10,000 9/8/99
- ----------------------------------------------------------------------------------
Gary and Joyce Shaw $1.125 25,000 9/22/99
- ----------------------------------------------------------------------------------
</TABLE>
5. Pursuant to an Offering Memorandum dated February 10, 1999, the
Company accepted subscriptions and issued 693,000 shares of its common stock at
prices of $1.125 and $1.25 per share. These shares were issued under Rule 504 of
Regulation D and a Form D was filed with the United Sates Securities and
Exchange Commission with respect to this offering. The following are the names
of the issuees, the number of shares purchased, date purchased and purchase
price.
<TABLE>
<CAPTION>
Price Per Total
Name Share Shares Date
<S> <C> <C> <C>
- ------------------------------------------------------------------------
Mac Allen Culver III $1.125 20,000 3/26/99
- ------------------------------------------------------------------------
CFO Associates, Inc. $1.125 10,000 3/26/99
- ------------------------------------------------------------------------
Hobson Global Marketing $1.125 40,000 3/26/99
- ------------------------------------------------------------------------
George A. Surovik, II $1.125 40,000 3/26/99
- ------------------------------------------------------------------------
Vincent De Bono, Jr. $1.125 7,000 3/26/99
- ------------------------------------------------------------------------
Jeffrey M. Everson $1.125 40,000 3/26/99
- ------------------------------------------------------------------------
Lafferty Trust $1.125 288,000 3/26/99
- ------------------------------------------------------------------------
Joseph M. LaMotta $1.25 12,000 4/5/99
- ------------------------------------------------------------------------
George Herbert Walker Foundation $1.25 40,000 4/5/99
- ------------------------------------------------------------------------
Kelley Bergstrom $1.25 25,000 4/5/99
- ------------------------------------------------------------------------
Citizens Auto Corp $1.25 35,000 4/5/99
- ------------------------------------------------------------------------
Richard Hurwitz $1.25 15,000 4/5/99
- ------------------------------------------------------------------------
Gregory Mark $1.25 5,000 4/5/99
- ------------------------------------------------------------------------
Thomas Rassieur $1.25 15,000 4/5/99
- ------------------------------------------------------------------------
James Savage $1.25 35,000 4/5/99
- ------------------------------------------------------------------------
Hagemeister Irvin $1.25 6,500 4/5/99
- ------------------------------------------------------------------------
Ms.Hagemeister Irvin $1.25 6,500 4/5/99
- ------------------------------------------------------------------------
Megan Irvin $1.25 6,500 4/5/99
- ------------------------------------------------------------------------
Melissa Ann Irvin $1.25 6,500 4/5/99
- ------------------------------------------------------------------------
Thomas Irvin $1.25 6,500 4/5/99
- ------------------------------------------------------------------------
Hobson Global Marketing $1.25 20,000 4/5/99
- ------------------------------------------------------------------------
Scott Dmtrenko $1.250 13,500 4/5/99
- ------------------------------------------------------------------------
</TABLE>
-18-
<PAGE> 21
6. In 1997, 1998 and 1999 the Company issued restricted shares of its
common stock for services as noted in the following table. The sale and issuance
of these shares of common stock were exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) as a transaction
not involving a public offering. Each of the shareholders has acquired the
shares for investment and not with a view to distribute them to the public.
<TABLE>
<CAPTION>
Number
Name Of Shares Date Consideration
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Jim Johnson 1,000 12/22/97 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Mary Ann Grant 5,000 12/22/97 Employee award
- ----------------------------------------------------------------------------------------
Sheldon Zane 5,000 12/22/97 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Robb Walsh 250 12/22/97 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Adam Robinson 2,000 12/9/98 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Kristine Simonds 5,000 5/6/98 Employee Award
- ----------------------------------------------------------------------------------------
Pat Lafferty 19,344 5/6/98 Nursery work
- ----------------------------------------------------------------------------------------
Steve Goss 2,000 6/8/98 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Elizabeth Robertson 10,000 6/8/98 Advertising and Promotion
- ----------------------------------------------------------------------------------------
DLS Financial Services, Inc. 11,134 6/8/98 Consulting fee
- ----------------------------------------------------------------------------------------
DLS Financial Services, Inc. 2500 9/3/98 Consulting fee
- ----------------------------------------------------------------------------------------
DLS Financial Services, Inc. 2500 10/21/98 Consulting fee
- ----------------------------------------------------------------------------------------
DLS Financial Services, Inc. 6000 11/19/98 Consulting fee
- ----------------------------------------------------------------------------------------
5-Star Nursery 62500 12/9/98 500,000 seedlings
- ----------------------------------------------------------------------------------------
Barry Zwick 5,000 3/3/99 Director fee
- ----------------------------------------------------------------------------------------
Shep Gordon 5,000 3/3/99 Director fee
- ----------------------------------------------------------------------------------------
Jim Walsh 5,000 3/3/99 Director fee
- ----------------------------------------------------------------------------------------
Tyrie Jenkins 5,000 3/3/99 Director fee
- ----------------------------------------------------------------------------------------
Marcus Bender 5,000 3/3/99 Finder's Fee
- ----------------------------------------------------------------------------------------
L.S. Smith 4,000 3/3/99 Consulting Fee
- ----------------------------------------------------------------------------------------
Starr Tech 4,000 4/8/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Steve Goss 2,400 4/8/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
John Harmon 1,300 4/8/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Jack Harmon 9,334 4/8/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Rusty Robertson 2,100 4/8/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Jeremy Railton 6,500 4/8/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Philip Engle 8,000 4/8/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Anthony Roth 7,882 5/19/99 Consulting Fee
- ----------------------------------------------------------------------------------------
Kristine Simonds 5,000 5/19/99 Employee Award
- ----------------------------------------------------------------------------------------
Emeril Lagasse 7,500 5/19/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Robert Del Grande 4,300 5/19/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Stephan Pyles 3,500 5/19/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
Shep Gordon 5,500 5/19/99 Consulting Fee
- ----------------------------------------------------------------------------------------
Anthony Roth 2,812 7/28/99 Consulting Fee
- ----------------------------------------------------------------------------------------
Eddie & Pattie Sherman 10,000 9/22/99 Advertising and Promotion
- ----------------------------------------------------------------------------------------
L.S. Smith 12,000 9/22/99 Consulting Fee
- ----------------------------------------------------------------------------------------
</TABLE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company indemnify and hold harmless any director or
officer who was or is threatened to be made party to any threatened, pending, or
completed action, suit, or proceeding, by reason of the fact that he or she
-19-
<PAGE> 22
is or was a director or officer of the Company, to the fullest extent of the law
as it now exists or may subsequently be amended (but, in case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights).
Section 415-5 of the Hawaii Business Corporation Act authorizes the
indemnification of an officer or director against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe the conduct of the
person was unlawful. Notwithstanding the preceding, no indemnification is
permitted in respect to any claim, issue or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
the person's duty to the corporation unless and only to the extent that the
court in which the action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in review of all circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such
expense as the court deems proper.
In so far as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers or directors of the Company
pursuant to the foregoing, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is therefore
unenforceable.
-20-
<PAGE> 23
PART F/S
FINANCIAL STATEMENTS
-21-
<PAGE> 24
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors F-1
Balance Sheets as of December 31, 1998 and September 30, 1999 (unaudited) F-2
Statements of Operations for the years ended December 31, 1997 and 1998 and
nine months period ended September 30, 1998 and 1999 (unaudited) F-3
Statements of Shareholders' Equity for the years ended December 31, 1997 and
1998 and nine month period ended September 30, 1999 (unaudited) F-4
Statements of Cash Flows for the years ended December 31, 1997 and 1998 and nine
months period ended September 30, 1998 and 1999 (unaudited) F-5
Notes to Financial Statements F-6
</TABLE>
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Hawaiian Vintage Chocolate Company, Inc.
We have audited the accompanying balance sheet of Hawaiian Vintage Chocolate
Company, Inc. as of December 31, 1998 and the related statements of operations,
shareholders' equity, and cash flows for years ended December 31, 1997 and 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
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 that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hawaiian Vintage Chocolate
Company, Inc. as of December 31, 1998, and the results of its operations and its
cash flows for the years ended December 31, 1997 and 1998 in conformity with
generally accepted accounting principles.
HOLLANDER, LUMER & CO. LLP
Los Angeles, California
October 28, 1999
F-1
<PAGE> 26
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ -- $ 72,282
Accounts receivable - net of allowance for
doubtful accounts $30,273 in 1998
and $39,273 in 1999 42,282 133,118
Common stock subscription receivable -- 39,375
Advances -- 22,500
Inventory 21,475 194,039
Other current assets 10,099 27,638
----------- -----------
TOTAL CURRENT ASSETS 73,856 488,952
----------- -----------
PROPERTY AND EQUIPMENT 36,776 121,053
----------- -----------
OTHER ASSETS
Capitalized planting cost 243,361 317,132
----------- -----------
TOTAL OTHER ASSETS 243,361 317,132
----------- -----------
TOTAL $ 353,993 $ 927,137
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 7,731 $ --
Accounts payable - trade 105,452 65,015
Accrued expenses 89,077 125,983
Notes Payable -- 75,000
Other payable 4,502 4,502
----------- -----------
TOTAL CURRENT LIABILITIES 206,762 270,500
----------- -----------
LONG TERM LIABILITIES 75,000 --
----------- -----------
TOTAL LIABILITIES 281,762 270,500
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; authorized 20,000,000
Authorized - 20,000,000 shares
Issued and outstanding - 7,479,843 in 1998 and
8,568,471 in 1999 7,482 8,571
Additional paid-in capital 1,850,052 3,052,965
Due from officer (355,604) (439,597)
Accumulated deficit (1,429,699) (1,965,302)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 72,231 656,637
----------- -----------
TOTAL $ 353,993 $ 927,137
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements
F-2
<PAGE> 27
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
----------------------------- ------------------------------
December 31, December 31, September 30, September 30,
1997 1998 1998 1999
------------ ------------ ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales - net $ 136,519 $ 196,993 $ 164,266 $ 280,013
Cost of sales 45,986 47,429 32,820 115,554
---------- ---------- ---------- ----------
Gross Profit 90,533 149,564 131,446 164,459
---------- ---------- ---------- ----------
Operating expenses
Sales and marketing 121,982 180,953 142,002 235,256
Product development -- 21,209 21,139 13,408
General and administrative 217,007 439,683 312,092 447,454
Depreciation 5,377 16,456 12,342 9,021
Bad debt 10,326 14,674 2,000 9,000
---------- ---------- ---------- ----------
Total operating expenses 354,692 672,975 489,575 714,139
---------- ---------- ---------- ----------
Loss from operations (264,159) (523,411) (358,129) (549,680)
Other income (expense)
Other income 69,734 6,010 17,019 250
Interest income 11,301 21,945 17,107 24,697
Interest expense (87,981) (14,949) (10,165) (10,870)
---------- ---------- ---------- ----------
Total other income (expense) (6,946) 13,006 23,961 14,077
---------- ---------- ---------- ----------
Net loss $ (271,105) $ (510,405) $ (334,168) $ (535,603)
========== ========== ========== ==========
Weighted average shares outstanding 5,667,477 7,051,472 6,960,153 8,050,749
========== ========== ========== ==========
Basic and diluted net loss per share $ (0.05) $ (0.07) $ (0.05) $ (0.07)
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Financial Statements
F-3
<PAGE> 28
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC
STATEMENT OF SHAREHOLDERS' EQUITY
For years ended December 31, 1997, 1998 and nine months ended
September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------------- PAID-IN DUE FROM ACCUMULATED SHAREHOLDERS
SHARES AMOUNT CAPITAL OFFICER DEFICIT EQUITY
--------- -------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 1,000 $ 1,000 $ 86,304 $(226,014) $ (648,189) $ (786,899)
Issuance of shares in connection with
Reorganization Plan
Cancellation of old HVCC shares (1,000) (1,000) 1,000 0
Shares issued to old HVCC shareholders 5,000,000 5,000 (5,000) 0
Shares issued to old AGI creditors 299,993 300 (300) 0
Shares issued for merger advisory services 250,000 250 (250) 0
Issuance of shares for debenture conversion
at $1.25 per share 692,967 693 865,515 866,208
Issuance of shares for cash at $.75 per share 466,668 467 349,533 350,000
Issuance of shares for promotional at $.50 71,550 71 35,704 35,775
Additional due from officer (116,131) (116,131)
Net loss in 1997 (271,105) (271,105)
--------- -------- ---------- ---------- ------------ ----------
Balance as of December 31, 1997 6,781,178 6,781 1,332,506 (342,145) (919,294) 77,848
--------- -------- ---------- ---------- ------------ ----------
Shares surrendered at $.50 per share (11,350) (11) (5,664) (5,675)
Issuance of shares for debenture conversion
at $.385 per share 134,828 135 51,774 51,909
Issuance of shares in exchange of trees at
$2.00 per share 62,500 63 124,937 125,000
Issuance of shares for cash 442,667 443 289,067 289,510
Issuance of shares for services 22,134 23 14,453 14,476
Issuance of share for warrant exercised at
$2.50 per share 9,542 10 23,845 23,855
Issuance of share for promotional purposes at
$.50 per share 38,344 38 19,134 19,172
Additional due from officer (13,459) (13,459)
Net loss in 1998 (510,405) (510,405)
--------- -------- ---------- ---------- ------------ ----------
Balance as of December 31, 1998 7,479,843 7,482 1,850,052 (355,604) (1,429,699) 72,231
--------- -------- ---------- ---------- ------------ ----------
Issuance of shares for cash 968,000 968 1,114,032 1,115,000
Shares surrendered at $.50 per share (500) (1) (249) (250)
Issuance of shares for debt settlement at
$1.35 per share 33,634 34 45,471 45,505
Issuance of shares for promotional at $.50 87,494 88 43,659 43,747
Additional due from officer (83,993) (83,993)
Net loss for 9 months period ended
September 30, 1999 (535,603) (535,603)
--------- -------- ---------- ---------- ------------ ----------
Balance as of September 30, 1999 8,568,471 $ 8,571 $3,052,965 $(439,597) $(1,965,302) $ 656,637
========= ======== ========== ========== ============ ==========
</TABLE>
See accompanying Notes to Financial Statements
F-4
<PAGE> 29
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
------------------------------ --------------------------------
December 31, December 31, September 30, September 30,
1997 1998 1998 1999
------------ ------------ ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(271,105) $(510,405) $(334,168) $ (535,603)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 5,377 16,456 12,342 9,021
Shares issued to convert debenture interest to equity 175,836 1,903 -- --
Shares issued for services -- 14,476 10,226 --
Shares issued for promotional 35,775 13,506 12,497 43,497
Changes in Assets and Liabilities:
Accounts receivable (84,321) 95,424 68,599 (90,836)
Advances -- -- -- (22,500)
Inventory 2,544 (18,475) -- (172,564)
Other current assets (3,334) (1,223) 3,725 (17,539)
Bank overdraft -- 7,731 21,410 (7,731)
Accounts payable - trade (3,783) 74,374 50,182 5,068
Accrued expenses (105,250) 52,384 30,424 36,906
Other payables 5,162 (431) (599)
--------- --------- --------- ----------
NET CASH FROM OPERATING ACTIVITIES (243,099) (254,280) (125,362) (752,281)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (40,973) (14,075) (25,564) (93,298)
Capitalized planting cost (60,588) (42,018) (42,690) (73,771)
Advances to officer (116,130) (13,459) (45,216) (83,993)
--------- --------- --------- ----------
NET CASH USED BY INVESTING ACTIVITIES (217,691) (69,552) (113,470) (251,062)
CASH FLOWS FROM FINANCING ACTIVITIES
Private sales of common stocks 350,000 313,365 228,365 1,075,625
Proceeds from issuance of debentures,
net of debt repayment 116,250 -- -- --
--------- --------- --------- ----------
NET CASH PROVIDED FINANCING ACTIVITIES 466,250 313,365 228,365 1,075,625
NET DECREASE IN CASH AND CASH EQUIVALENT 5,460 (10,467) (10,467) 72,282
CASH AND CASH EQUIVALENT AT BEGINNING OF THE YEAR 5,007 10,467 10,467 --
--------- --------- --------- ----------
CASH AND CASH EQUIVALENT AT END OF THE YEAR $ 10,467 $ -- $ -- $ 72,282
========= ========= ========= ==========
OTHER CASH INFORMATION
Interest paid $ 23,806 $ 10,318 $ 14,600 $ 10,870
========= ========= ========= ==========
NON CASH TRANSACTION
Shares issued for other than cash $ 901,983 $ 210,557 $ 78,398 $ 89,252
========= ========= ========= ==========
</TABLE>
See accompanying Notes to Financial Statements
F-5
<PAGE> 30
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principal Business: Hawaiian Vintage Chocolate Company, Inc. (the Company) was
formed in July 14, 1993 as a Hawaii corporation to develop unique genetics and
grow cocoa beans on the Hawaiian Islands. Beginning 1998, the Company started
its transition from a research and development company to an operating company.
The principal business of the Company is to continue developing and growing
America's only home-grown cocoa beans, and to manufacture and sell aged cold
bean chocolate through distributions and its own retail stores.
The Company's Articles of Incorporation have been amended several times, the
last amendment was regarding the Company's merger with American Graphics
Industries, Inc. On September 30, 1997, Hawaiian Vintage Chocolate Company (Old
HVCC) entered into an Agreement of Merger with American Graphics Industries,
Inc. (AGI) pursuant to an Amended Plan of Reorganization filed with and approved
by the Bankruptcy Court (the Plan). The Plan provided a merger of AGI into the
Company. The management and board of Old HVCC replaced the management and board
of AGI. The merged companies continue under the name of Hawaiian Vintage
Chocolate Company, Inc. (New HVCC). (See Note 7).
Use of Estimates: The financial statements and related notes have been prepared
in conformity with generally accepted accounting principles and include some
amounts and disclosures which are estimated based on currently available
information and management's judgment of current facts and circumstances. Actual
results could differ from those estimates.
Allowance for Bad Debts: Allowance for doubtful accounts is provided on the
basis of the evaluation of the collectability of the accounts at the end of the
year.
Inventories: Inventories, consisting of cocoa beans and chocolate wafers, are
stated at the lower of cost or market. Cost is determined based on the weighted
average cost method.
Advertising Costs: Advertising expenditures relating to marketing are expensed
in the period the advertising initially takes place.
Fair Value of Financial Instruments: The Company's financial instruments consist
of cash equivalents, receivables, accounts payable, accrued expenses, notes
payable and due to related parties. The fair values of the Company's financial
instruments approximate the carrying value of the instruments.
Stock-Based Compensation: Statement of Financial Accounting Standard ("SFAS")
No. 123, "Accounting for Stock-Based Compensation", encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method as prescribed in
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees", and related Interpretations, under which no compensation cost
related to stock options has been recognized as the exercise price of each
option at the date of grant was equal to the fair value of the underlying common
stock.
Revenue Recognition: Sales are recognized net of trade discounts, when goods are
shipped.
Property and Equipment: Property and equipment are stated at cost less
accumulated depreciation. Depreciation of property and equipment is computed
using double-declining balance methods based on the estimated useful lives of
the assets between 5 to 7 years.
The cost of maintenance and repairs is charged to income as incurred;
significant renewals and betterment are capitalized. When assets are retired or
otherwise disposed of, their carrying values and the related accumulated
depreciation are removed from the accounts and any resulting gains or losses are
reflected in operations for the year.
F-6
<PAGE> 31
Capitalized Planting Cost: The cost of cacao tree nursery and field planting,
including direct labor and other related expenses are capitalized as incurred.
By the year the trees become producing, usually two to three years later, they
will then be reclassified as an amortizable asset and will be amortized over 40
years of the trees' useful lives.
Impairment of Long-lived Assets: The Company evaluates the carrying value of
long-lived assets whenever events or changes in circumstances indicate that the
carrying value of the asset may be impaired. An impairment loss is recognized
when estimated future cash flows expected to result from the use of the assets
including disposition, is less than the carrying value of the asset.
Share valuation: Shares issued without cash consideration are accounted for
based on the fair value of the consideration received or the fair market value
of the shares issued, whichever is more reliably measurable.
Basic and Diluted Net Loss per Common Share: The Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" which established
simplified standards for computing and presenting earnings per share
information. Basic EPS is calculated by dividing income available to common
stockholders (the "numerator") by the weighted-average number of common shares
outstanding (the "denominator") during the period. The computation of diluted
EPS is similar to the computation of basic EPS except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the dilutive potential common shares (that is, securities such as
options, warrants, convertible securities, or contingent stock agreements) had
been issued. In addition, in computing the dilutive effect of convertible
securities, the numerator is adjusted to add back (a) any convertible preferred
dividends and (b) the after-tax amount of interest recognized in the period
associated with any convertible debt. The computation of diluted EPS shall not
assume conversion, exercise, or contingent issuance of securities that would
have an antidilutive effect on EPS.
Income Taxes: The Company utilizes the asset and liability method for income
taxes. 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 and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax 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 recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. In assessing the realizability of deferred tax
assets, the Company considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
New Accounting Pronouncement: In April 1998, the Accounting Standards Executive
Committee of the AICPA issued Statement of Position ("SOP") No. 98-5 "Reporting
on the Costs of Start-Up Activities." Costs of start-up activities, including
organization costs, should be expensed as incurred. This SOP is effective for
financial statements for the fiscal year beginning after December 15, 1998.
2. DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Dependence Upon Key Personnel: The success of the Company is largely dependent
on the personal efforts of Mr. Walsh, the President and Chief Executive Officer.
Mr. Walsh has entered into an executive employment agreement with the Company
that, among other things, precludes Mr. Walsh from competing with the Company
for a period of three years following termination of his employment with the
Company. The loss of the services of Mr. Walsh would have a material adverse
effect on the Company's business and prospects (See Note 7).
Major Customers: The Company sold its product to several major customers. In
1997, 30% of the total net sales were derived from two customers (17% and 13%).
In 1998, 34% of the total net sales was derived from one customer. For the nine
months ended September 30, 1999, 39% of net sales were derived from three
customers (17%, 12% and 10%). As of December 31, 1997 and 1998, 59% of accounts
receivable were from three customers (25%, 22% and 12%) and 82% were from one
customer, respectively. As of September 30, 1999, 77% of accounts receivable
were from three customers (35%, 27%, and 15%).
Dependence on Supplier: Because Hawaiian Vintage Chocolates are produced from
unique cocoa beans, the Company is highly dependent on the farmers who grow and
harvest these unique cocoa trees. In 1998, the Company started planting its own
cocoa trees, but the trees will not be productive for the next two years.
F-7
<PAGE> 32
The Year 2000 Matters: The Company's operations are dependent on the year 2000
readiness of third parties who do business with the Company. In particular, the
Company's information technology systems interact with commercial electronic
transaction processing systems to handle customer credit card purchases and
other point of sale transactions, and the Company is also dependent on
third-party suppliers of such infrastructure elements as telephone services,
electric power, water, and banking facilities. The Company has contacted it
relevant third parties. Although the Company has not been put on notice that any
known third parties problem will not be resolved, the Company has limited
information and no assurance of additional information concerning the year 2000
readiness of third parties. The resulting risks to the Company's business are
very difficult to assess. The Company has assessed its computer and business
processes and has upgraded its computer applications to provide for their
continued functionality. The Company believes that, with the modifications it
has made to its operating systems, the year 2000 issues is not reasonably likely
to pose significant operational problems for the Company's information
technology systems.
3. INVENTORY
As of December 31, 1998 and September 30, 1999 inventories consisted of the
following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
(unaudited)
------------ -------------
<S> <C> <C>
Raw material $ 1,760 $132,578
Goods in process 19,715 7,778
Finished goods -- 53,683
------- --------
$21,475 $194,039
======= ========
</TABLE>
At the end of 1998, the Company's raw material, mainly cocoa beans, was located
at a vendor. Its goods in process, mainly chocolate pistoles, were located at a
vendor. Its finished goods were located at its corporate office in Honolulu,
Hawaii.
4. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1998 and September 30, 1999 consisted
of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
(unaudited)
------------ -------------
<S> <C> <C>
Automobiles $ 17,024 $ 31,790
Office equipment 11,315 19,712
Office furniture 21,234 24,487
Computer equipment 10,849 16,533
Warehouse equipment -- 25,177
Store furniture -- 36,020
--------- ---------
60,422 153,719
Less: accumulated
depreciation (23,646) (32,666)
--------- ---------
$ 36,776 $ 121,053
========= =========
</TABLE>
Depreciation expenses charged to operation for the years ended December 31,
1997, 1998 and nine months ended September 30, 1999 (unaudited) were $5,377,
$16,456 and $9,021 respectively.
F-8
<PAGE> 33
5. RELATED PARTY TRANSACTION
Employment Agreements: The Company is party to a seven-year employment agreement
with Mr. Walsh, the President and Chief Executive Officer. Based on the revised
agreement entered into as of September 24, 1997 his minimum base salary is
$175,000 per annum. As of September 30, 1999 Mr. Walsh has forgiven all prior
incurred salary. In recognition of his important role in the Company, he was
granted an exclusive preemptive right to acquire a number of common shares or
other securities of the Company at 75% of the net purchase price of any such
securities offered to any third party. This right extends for a period of
five-years from the conclusion of any third party offering. Should any
transaction be concluded involving options or warrants or other contingent
instruments, he can be granted an equal number of such instruments with an
exercise price equal to 75% of the exercise price offered to third-parties and
such instruments shall be exercisable at any time during the same term as the
third party, in whole or in part, on a cashless basis. Should he elect to
purchase shares or exercise options for cash or the equivalent, he is entitled
to pay for such purchases in the form of a 10-year term promissory note fully
amortized at 6% annual interest.
Stock Option Agreement: On September 28, 1998 the Board of Directors of the
Company adopted a stock option agreement. This agreement grants Mr. Walsh
nontransferable option to purchase up to 500,000 shares of common stock during
the option term at the option price of $2.00 per share. The option term is
determined starting from the grant date until 7 years from the date Mr. Walsh
ceases to be an employee of the Company. The option becomes exercisable in
installments of 25% per year from the grant date through the third anniversary
of the grant date. The issuance of the stock will not be registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933 and
are restricted securities. As of September 1999, none of these options have yet
been exercised.
The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for its
stock options. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans. The compensation cost of the Company's stock
option agreement with Mr. Walsh and other issued stock options have been
determined based upon the fair value at the grant date consistent with the
methodology prescribed under SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net loss and loss per share would have been
increased by approximately $136,250 or $.02 per share in 1998. The fair value of
the options granted during 1998 is estimated to be $1.09 on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
dividend yield of 0%, volatility of 67.5%, risk-free rate of 4.25, and an
expected life of 3 years. Because changes in the subjective input assumptions
can materially affect the fair value estimate, in the opinion of the management,
the existing models do not necessarily provide a reliable single measure of the
fair value of the option.
Due from officer: Interest at 5% is charged at the beginning of each year for
the loan balances at the end of the prior year, including accrued interest.
Commencing January 1, 2000, the amount outstanding, principal and accrued
interest will be repaid in equal annual installments. The entire outstanding
balance will be due and payable in full on or before December 31, 2004.
<TABLE>
<CAPTION>
AS OF LOAN AMOUNT INTEREST BALANCE
- --------------------- -------------- ------------- --------------
<S> <C> <C> <C>
December 31, 1993 $ 7,789 0 $ 7,789
December 31, 1994 56,346 $ 389 64,524
December 31, 1995 90,678 3,227 158,429
December 31, 1996 59,664 7,921 226,014
December 31, 1997 104,830 11,301 342,145
December 31, 1998 (3,648) 17,107 355,604
September 30, 1999 83,993 439,597
</TABLE>
F-9
<PAGE> 34
6. SHAREHOLDERS' EQUITY
Merger: On September 30, 1997, Hawaiian Vintage Chocolate Company (Old HVCC)
entered into an Agreement of Merger with American Graphics Industries, Inc.
(AGI) pursuant to an Amended Plan of Reorganization filed with the Bankruptcy
Court (the Plan). Old HVCC became the continuing accounting entity and all of
the Old HVCC's historical accounting was carried forward to the New HVCC.
Weighted average number of common shares outstanding and basic and diluted net
loss per share have been computed as if shares issued pursuant to the Amended
Plan of Reorganization had been outstanding at the beginning of the year, except
for the shares issued for merger advisory services were computed from the date
of merger.
After consummation of the merger, all shares owned by Old HVCC and AGI
shareholders were cancelled and New HVCC had the following capital structure:
- 20,000,000 shares of common stock authorized, with $0.001 par value.
- 5,000,000 shares of common stock issued to the shareholders of Old
HVCC.
- 299,993 shares of common stock, 100,000 Class A Warrants, 200,000
Class B Warrants and 200,000 Class C Warrants were issued to the
creditors of AGI.
- 250,000 shares of common stock, 100,000 Class A Warrants, 200,000
Class B Warrants and 200,000 Class C Warrants were issued to DLS
Financial Services, a professional advisor used in connection with the
merger.
Debt to equity conversion: The Company had issued unsecured convertible
debentures beginning May 1993. At September 1997, 692,967 shares of common
stocks were issued to convert $866,208 worth of these debentures into equity,
including accrued interest. An additional 134,828 shares were issued for the
debenture conversion in 1998. By the end of 1998, a total of 827,795 shares were
issued in connection with the conversion of $740,372 worth of debenture
principal plus $177,739 of accrued interest.
As of December 31, 1998 and September 30, 1999, the outstanding convertible
debentures were as follows:
<TABLE>
<CAPTION>
Debt No. Issued Date Principal
- ----------- ----------------- ----------
<S> <C> <C>
965281 May 6, 1996 $25,000
965282 May 6, 1996 25,000
119 December 2, 1994 25,000
-------
Total $75,000
=======
</TABLE>
These debentures carry a 13% annual interest rate with an initial term of
180-days from first issuance. Subsequently these debentures were extended up to
September 2000.
Private placements: During 1998, the Company, in private placements, raised
$289,510 through the issuance of 442,667 shares for $.50 to $.75 per share. In
relation to these private placements, the Company also granted the consultant
22,134 shares for financing services. These shares were valued at $14,476.
Regulation D offering: In February, 1999, the Company commenced an offering
pursuant to Rule 504 of Regulation D pursuant to which 693,000 shares were sold
at prices of $1.125 and $1.25 per share.
Exercised warrants: During 1998, 9,542 shares of Class A Warrants were excised
for the purchase of 9,542 shares of common stock at $2.50 per share. As of
December 31, 1998, the Company's stock warrants' balance was as follows:
F-10
<PAGE> 35
<TABLE>
<CAPTION>
WARRANTS
-----------------------------------------------------
Class A Class B Class C Total
----------------- -------------- -------------- -------
<S> <C> <C> <C> <C>
Strike Price $2.50 $4.00 $6.00
Expiration Date November 14, 2000 March 14, 2000 March 14, 2000
Number Outstanding 190,455 399,996 399,994 990,445
</TABLE>
Common stock subscription receivable: On September 1998 the Company received
subscription for 35,000 shares of common stock among which 25,000 shares were
already issued. In October 1999, all funds for stock receivables were collected.
7. GRANT
In 1996 the Company entered into two-year consultant services agreement with the
Research Corporation of the University of Hawaii. The Company provides technical
assistance to small farmers to accelerate cocoa production in Hawaii. For this
service, the Company was compensated for services rendered and costs incurred up
to $192,720. All expenses related to this project were offset against the income
received.
8. COMMITMENTS AND CONTINGENCIES
License Agreements: In August and November 1998, The Company entered into
three-year license agreements (with options to extend) with The Trustees of the
Estate of Bernice Pauahi Bishop to utilize a total of 115 acres of land located
at Umauma, North Hilo, Hawaii, for planting cocoa trees. Minimum annual payments
as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31, Amount
<S> <C>
2000 $3,625
2001 5,438
2002 7,250
</TABLE>
In addition to the license fee, the Company also has to pay certain royalty fees
based on the Company's adjusted gross income as defined by the agreement.
Marketing Agreement: In June 1999 the Company entered into a marketing agreement
with Hobson Marketing Co. Inc. for the establishment and operation of Hawaiian
Vintage Chocolate retail outlets including carts/kiosks. Hobson Marketing Co.,
Inc. will be licensed to operate retail locations subject to the Company's
written approval within the states of Illinois, Missouri and Indiana.
F-11
<PAGE> 36
Part III
ITEM 1. INDEX TO EXHIBITS
Exhibits are listed according to the Exhibit #s as Follows:
"Charter and Bylaws"
<TABLE>
<S> <C>
2.1 Articles of Incorporation - the Articles of Incorporation of
Hawaiian Vintage Chocolate Company, Inc.
2.2 Articles of Amendment - The July 1994 Amended Article of
Incorporation for Hawaiian Vintage Chocolate Company, Inc.
2.3 Bylaws of the Company - The Bylaws of Hawaiian Vintage Chocolate
Company, Inc.
2.4 Order of the Court re: AGI Merger - The Bankruptcy Court ruling
approving the merger of American Graphics Industries, Inc. with Hawaiian
Vintage Chocolate.
2.5 Agreement of Merger with AGI - The merger agreement between
American Graphics Industries, Inc. and Hawaiian Vintage Chocolate
Company, Inc. dated September 30, 1997.
2.6 Certificate of Merger with AGI dated October 2, 1997.
"Instruments defining the Rights of Security Holders"
3.1 Specimen Stock Certificate
3.2 Specimen Class A Warrant
3.3 Specimen Class B Warrant
3.4 Specimen Class C Warrant
"Material Contracts"
6.1 License Agreement - Bishop Estate - License Agreement for use of
land for cocoa planting on Hamakua Coast between the Company and the
trustees of the Bishop Estate dated August 1, 1998
6.2 License Agreement - Bishop Estate - License Agreement for use of
land for cocoa planting on Hamakua Coast between the Company and the
trustees of the Bishop Estate dated November 1, 1998
6.3 Harbor Court Lease - the lease of Hawaiian Vintage Chocolate
Company's offices in Honolulu between Harbor Court Associates and the
Company dated December 5, 1997.
6.4 Employment agreement - the employment agreement as amended
between James Walsh and the Company dated September 24, 1997
6.5 Stock Option Agreement - the stock option agreement between
James Walsh and the Company dated September 24, 1997
6.6 License Agreement with Hobson Marketing - the licensing
agreement with Hobson Global Marketing and the Company to establish
retail kiosks in five Midwest states dated June 2, 1999.
"Additional Exhibits"
12.1 Consent of Hollander, Lumer & Co., LLP, Independent Certified
Public Accountants.
27 Financial Data Schedules
</TABLE>
III-1
<PAGE> 37
ITEM 2. DESCRIPTION OF EXHIBITS
2.1 Articles of Incorporation - the Articles of Incorporation of Hawaiian
Vintage Chocolate Company, Inc.
2.2 Articles of Amendment - The July 1994 Amended Article of Incorporation
for Hawaiian Vintage Chocolate Company, Inc.
2.3 Bylaws of the Company - The Bylaws of Hawaiian Vintage Chocolate
Company, Inc.
2.4 Order of the Court re: AGI Merger - The Bankruptcy Court ruling
approving the merger of American Graphics Industries with Hawaiian
Vintage Chocolate.
2.5 Agreement of Merger with AGI - The merger agreement between American
Graphics Industries, Inc. and Hawaiian Vintage Chocolate Company, Inc.
dated September 30, 1997.
2.6 Certificate of Merger with AGI dated October 2, 1997.
3.1 Specimen Stock Certificate
3.2 Specimen Class A Warrant
3.3 Specimen Class B Warrant
3.4 Specimen Class C Warrant
6.1 License Agreement - Bishop Estate - License Agreement for use of land
for cocoa planting on Hamakua Coast between the Company and the trustees
of the Bishop Estate dated August 1, 1998.
6.2 License Agreement - Bishop Estate - License Agreement for use of land
for cocoa planting on Hamakua Coast between the Company and the trustees
of the Bishop Estate date November 1, 1998.
6.3 Harbor Court Lease - the lease of Hawaiian Vintage Chocolate Company's
offices in Honolulu between Harbor Court Associates and the Company
dated December 5, 1997.
6.4 Employment agreement - the employment agreement as amended between James
Walsh and the Company dated September 24, 1997.
6.5 Stock Option Agreement - the stock option agreement between James Walsh
and the Company dated September 24, 1997.
6.6 License Agreement with Hobson Marketing - the licensing agreement with
Hobson Global Marketing and the Company to establish retail kiosks in
five Midwest states June 2, 1999.
12.1 Consent of Hollander, Lumer & Co., LLP, Independent Certified Public
Accountants.
27 Financial Data Schedules.
III-2
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: November 9, 1999 Hawaiian Vintage Chocolate Company, Inc.
By: /s/ JAMES WALSH
-------------------------------------
James Walsh, Chairman and CEO
III-3
<PAGE> 1
EXHIBIT 2.1
[STATE OF HAWAII DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS LETTERHEAD]
Nonrefundable Filing Fee - $50 DOMESTIC PROFIT
Certified copy, if desired:
$10 plus 25 cents per page RECEIVED
JUL 14 1993
Submit Original and 3:23 PM
One True Copy Dept. of Commerce & Consumer Affairs
STATE OF HAWAII
ARTICLES OF INCORPORATION
(Section 415-54, Hawaii Revised Statutes)
PLEASE TYPE OR PRINT LEGIBLY IN BLACK INK
The undersigned, for the purpose of forming a corporation under the laws
of the State of Hawaii, do hereby make and execute these Articles of
Incorporation:
I
The name of the corporation shall be:
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
---------------------------------------------------------------------------
Note: The name must contain the word "Corporation," "Incorporated," or
"Limited," or an abbreviation of one of the words.
II
The mailing address (must be a street address) of the initial or principal
office of the corporation is:
4614 Kilauea Avenue Suite 435 Honolulu, HI 96816
---------------------------------------------------------------------------
III
The purpose or purposes for which this corporation is organized shall be:
(a) The processing, production and marketing of chocolate and related
---------------------------------------------------------------------------
products.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(b) The transaction of any or all lawful business for which corporations
may be incorporated under Chapter 415, Hawaii Revised Statutes.
<PAGE> 2
IV
The aggregate number of common shares all of the same class which the
corporation shall have authority to issue is 1 Million.
V
The initial Board of Directors shall consist of two (2) members whose
names and residence addresses are as follows:
Name Residence Address
---- -----------------
James Walsh 905 Iiwi St.
-------------------------------- --------------------------------
Honolulu, HI 96816
-------------------------------- --------------------------------
James Johnson 5456 McConnell Ave.
-------------------------------- --------------------------------
Los Angeles, CA. 90066
-------------------------------- --------------------------------
-------------------------------- --------------------------------
Note: At least one member of the board must be a resident of the State of
Hawaii.
The initial Board of Directors shall serve as Directors until the first
annual meeting of shareholders or until their successors are duly elected and
qualified as provided in the By-Laws.
All the powers and authority of the corporation shall be vested in and may
be exercised by the Board of Directors except as otherwise provided by law,
these Articles of Incorporation or the By-Laws of the corporation.
VI
The officers of the corporation shall be a president, one or more vice
presidents, a secretary and a treasurer, who shall be appointed by the Board of
Directors as shall be prescribed by the By-Laws.
The following individuals are the initial officers of the corporation:
Office Held Name Residence Address
- ----------- ---- -----------------
President James Walsh 905 Iiwi St.
-------------------- ---------------------------
Honolulu, HI. 96816
Vice-President James Johnson 5456 McConnell Ave.
-------------------- ---------------------------
Los Angeles, CA. 90066
Secretary James Walsh 905 Iiwi St.
-------------------- ---------------------------
Honolulu, HI. 96816
Treasurer James Walsh 905 Iiwi St.
-------------------- ---------------------------
Honolulu, HI. 96816
-2-
<PAGE> 3
VII
The names of the initial subscribers for shares, the number of shares
subscribed for, the subscription price and the amount of capital paid are as
follows:
<TABLE>
<CAPTION>
Subscription Price
Number of Shares For the Shares Amount of Capital
Subscribed For By Subcribed For By Paid in Cash By
Names of Subscribers Each Subscriber Each Subscriber Each Subscriber
- -------------------- ---------------- ------------------ -----------------
<S> <C> <C> <C>
James P. Walsh, Trustee for WF TRUST 1,000 $1.00 $1,000.00
</TABLE>
VIII
(Optional provisions for the regulation of the internal affairs of the
corporation as may be appropriate. If none, leave blank.)
We certify that we have read the above statements and that the same are
true and correct to the best of our knowledge and belief.
Witness our hands this 6th day of July, 1993.
James Walsh
- ----------------------------------- -----------------------------------
(Type/Print Name of Incorporator) (Type/Print Name of Incorporator)
/s/ JAMES WALSH
- ----------------------------------- -----------------------------------
(Signature of Incorporator) (Signature of Incorporator)
Please sign in black ink.
-3-
<PAGE> 1
EXHIBIT 2.2
Nonrefundable Filing Fee: $25.00 DOMESTIC PROFIT
GENERAL AMENDMENT
Submit Original and
One True Copy
RECEIVED
JUL 1 1994
11:06 AM
Dept. of Commerce & Consumer Affairs
STATE OF HAWAII
STATE OF HAWAII
DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS
BUSINESS REGISTRATION DIVISION
1010 RICHARD STREET
MAILING ADDRESS: P.O. BOX 40, HONOLULU, HAWAII 98810
ARTICLES OF AMENDMENT
(Section 415-61, Hawaii Revised Statutes)
PLEASE TYPE OR PRINT LEGIBLY IN BLACK INK
The undersigned, duly authorized officers of the corporation submitting
these Articles of Amendment, certify as follows:
1. The name of the corporation is:
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
2. The Amendment(s) adopted are attached to these Articles of Amendment (see
page 2).
3. The total number of shares outstanding is: 1,000,000
4. IF ADOPTION OF THE AMENDMENT(S) WAS AT A MEETING, COMPLETE THE FOLLOWING:
The meeting of the shareholders was held on
------------------------------
(Month Day Year)
<TABLE>
<CAPTION>
Number of Shares Voting Number of Shares Voting
Class/Series For Amendment Against Amendment
------------ ----------------------- -----------------------
<S> <C> <C>
</TABLE>
5. IF ADOPTION OF THE AMENDMENT(S) WAS BY UNANIMOUS CONSENT, COMPLETE
THE FOLLOWING:
By written consent dated JULY 30 1993
--------------------------------------------------
(Month Day Year)
the shareholders unanimously adopted the amendment(s).
6. If the amendment(s) provides for any exchange, reclassification, or
cancellation of issued shares, attach a statement describing the manner
in which the exchange, reclassification, or cancellation shall be
effected.
--------------------------------------------------------------------------
We certify under the penalties of Section 415-136, Hawaii Revised Statutes,
that we have read the above statements, and that the same are true and correct.
Witness our hands this 4th day of June, 1994.
JAMES WALSH, PRESIDENT JAMES JOHNSON, V.P.
- ----------------------------------- -----------------------------------
(TYPE/PRINT NAME & TITLE) (TYPE/PRINT NAME & TITLE)
/s/ JAMES WALSH /s/ JAMES JOHNSON
- ----------------------------------- -----------------------------------
(SIGNATURE OF OFFICER) (SIGNATURE OF OFFICER)
SIGNATURES MUST BE IN BLACK INK.
ARTICLES MUST BE SIGNED BY TWO INDIVIDUALS WHO ARE OFFICERS OF THE CORPORATION.
(SEE REVERSE SIDE FOR INSTRUCTIONS)
D1-7
3/94 B14 (Fee)
<PAGE> 2
ATTACHMENT TO ARTICLES OF AMENDMENT
OF
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
----------------------------------------
(CORPORATE NAME)
FILL IN APPLICABLE BLANK(S) AND INSERT TEXT OF THE AMENDMENT.
Article IV , Section , Subsection ,
----------- --------- -----------
Paragraph , is amended to read as follows:
----------
The aggregate number of common shares all of the same class which the
corporation shall have authority to issue is Ten Million (10,000,000).
<PAGE> 1
EXHIBIT 2.3
BYLAWS
OF
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. An annual meeting shall be held once each
calendar year for the purpose of electing directors and for the transaction of
such other business as may properly come before the meeting. The annual meeting
shall be held at the time and place designated by the Board of Directors from
time to time.
Section 2. Special Meetings. Special meetings of the shareholders may be
requested by the President, the Board of Directors, or the holders of a majority
of the outstanding voting shares.
Section 3. Notice. Written notice of all shareholder meetings shall be
provided under this section or as otherwise required by law. The Notice shall
state the place, date, and hour of meeting, and if for a special meeting, the
purpose of the meeting. Such notice shall be mailed to all shareholders of
record at the address shown on the corporate books, at least 10 days prior to
the meeting. Such notice shall be deemed effective when deposited in ordinary
U.S. mail, properly addressed, with postage prepaid.
Section 4. Place of Meeting. Shareholders meetings shall be held at the
corporation's principal place of business unless otherwise stated in the notice.
Section 5. Quorum. A majority of the outstanding voting shares, whether
represented in person or by proxy, shall constitute a quorum at a shareholders
meeting. In the absence of a quorum, a majority of the represented shares may
adjourn the meeting to another time without further notice. If a quorum is
represented at an adjourned meeting, any business may be transacted that might
have been transacted at the meeting as originally scheduled. The shareholders
present at a meeting represented by a quorum may continue to transact business
until adjournment, even if the withdrawal of some shareholders results in
representation of less than a quorum.
Section 6. Informal Action. Any action required to be taken, or which
may be taken, at a shareholders meeting, may be taken without a meeting and
without prior notice if a consent in writing, setting forth the action so taken,
is signed by the shareholders who own all of the shares entitled to vote with
respect to the subject matter of the vote.
ARTICLE II
DIRECTORS
Section 1. Number of Directors. The corporation shall be managed by a
Board of Directors consisting of up to five director(s).
<PAGE> 2
Section 2. Election and Term of Office. The directors shall be elected
at the annual shareholders meeting. Each director shall serve a term of One year
year(s), or until a successor has been elected and qualified.
Section 3. Quorum. A majority of directors shall constitute a quorum.
Section 4. Adverse Interest. In the determination of a quorum of the
directors, or in voting, the adverse interest of a director shall not disqualify
the director or invalidate his or her vote.
Section 5. Regular Meeting. An annual meeting shall be held, without
notice, immediately following and at the same place as the annual meeting of the
shareholders. The Board of Directors may provide, by resolution, for additional
regular meetings without notice other than the notice provided by the
resolution.
Section 6. Special Meeting. Special meetings may be requested by the
President, Vice-President, Secretary, or any two directors by providing five
days' written notice by ordinary United States mail, effective when mailed.
Section 7. Informal Action. Any action required to be taken at a meeting
of Directors, or any action which may be taken at a meeting of Directors or of a
committee of Directors, may be taken without a meeting if a consent in writing
setting forth the action so taken, is signed by all of the Directors or all of
the members of the committee of Directors, as the case may be.
Section 8. Removal / Vacancies. A director shall be subject to removal,
with or without cause, at a meeting of the shareholders called for that purpose.
Any vacancy that occurs on the Board of Directors, whether by death,
resignation, removal or any other cause, may be filled by the remaining
directors. A director elected to fill a vacancy shall serve the remaining term
of his or her predecessor, or until a successor has been elected and qualified.
Section 9. Committees. To the extent permitted by law, the Board of
Directors may appoint from its members a committee or committees, temporary or
permanent, and designate the duties, powers and authorities of such committees.
ARTICLE III
OFFICERS
Section 1. Number of Officers. The officers of the corporation shall be
a President, one or more Vice-Presidents (as determined by the Board of
Directors), a Secretary, and a Treasurer. Two or more offices may be held by one
person.
Section 2. Election and Term of Office. The officers shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors following the annual meeting of the shareholders. Each officer shall
serve a one year term or until a successor has been elected and qualified.
Section 3. Removal or Vacancy. The Board of Directors shall have the
power to remove an officer or agent of the corporation. Any vacancy that occurs
for any reason may be filled by the Board of Directors.
ARTICLE IV
<PAGE> 3
CORPORATE SEAL
The corporation shall have a corporate seal, which shall be affixed to
all deeds, mortgages, and other instruments affecting or relating to real
estate. All instruments that are executed on behalf of the corporation which are
acknowledged and which affect an interest in real estate shall be executed by
the President or any Vice-President and the Secretary or Treasurer. All other
instruments executed by the corporation, including a release of mortgage or
lien, may be executed by the President or any Vice-President. Notwithstanding
the preceding provisions of this section, any written instrument may be executed
by any officer(s) or agent(s) that are specifically designated by resolution of
the Board of Directors.
ARTICLE V
AMENDMENT TO BYLAWS
The bylaws may be amended, altered, or repealed by the Board of
Directors or the shareholders by a majority of a quorum vote at any regular or
special meeting; provided however, that the shareholders may from time to time
specify particular provisions of the bylaws which shall not be amended or
repealed by the Board of Directors.
ARTICLE VI
INDEMNIFICATION
Any director or officer who is involved in litigation by reason of his
or her position as a director or officer of this corporation shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by law as it now exists or may subsequently be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights).
ARTICLE VII
STOCK CERTIFICATES
The corporation may issue shares of the corporation's stock without
certificates. Within a reasonable time after the issue or transfer of shares
without certificates, the corporation shall send the shareholder a written
statement of the information that is required by law to be on the certificates.
Upon written request to the corporate secretary by a holder of such shares, the
secretary shall provide a certificate in the form prescribed by the directors.
CERTIFICATION
I certify that the foregoing is a true and correct copy of the bylaws of
the above-named corporation, duly adopted by the initial Board of Directors on
July 14, 1993.
/s/ JAMES WALSH
-----------------------------------------
James Walsh, Secretary
<PAGE> 1
EXHIBIT 2.4
FILED
JAMES J. WALDRON
COPY AUG 19 1997
U.S. BANKRUPTCY COURT
NEWARK, NJ
BY DEPUTY
----------
HELLRING LINDEMAN GOLDSTEIN & SIEGAL
Attorneys for Debtor/Debtor-In-Possession
One Gateway Center
Newark, New Jersey 07102-5386
(201) 621-9020
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
- ------------------------------x
In the Matter of: : Case No. 94-27979 NLW
AMERICAN GRAPHIC INDUSTRIES, : Chapter 11 Proceeding
INC., t/a AGI,
: Honorable Novalyn L. Winfield
Debtor.
- ------------------------------x Hearing Date: August 19, 1997
ORDER CONFIRMING MODIFICATION OF
AMENDED PLAN OF REORGANIZATION
THIS MATTER, having come on before the Court on August 19, 1997, the date
for confirmation of the modifications to the Debtor's First Amended Plan of
Reorganization ("Plan"), said Plan having been filed on April 23, 1996 and
having been confirmed by the Court on May 21, 1996; and it appearing that the
Debtor filed a motion on May 27, 1997 for an order modifying the May 21, 1996
Confirmation Order and the Debtor's April 22, 1996 Disclosure
<PAGE> 2
Statement and Plan to modify the dividend to Class 2 general unsecured
creditors; and it having been determined that:
1. The Court entered an Order on June 23, 1987 approving the
modification of the Debtor's April 22, 1996 Disclosure Statement and Plan in
accordance with Section 1127(b) of the Bankruptcy Code to provide that:
All Class 2 General Unsecured Creditors, who chose the non-cash dividend
option under the Plan and who were to receive pro rata shares of stock and
warrants in WBAG Resources, Inc. ("WBAG") and a newly formed subsidiary
known as Glycosyn Pharmaceutical, Inc. ("Glycosyn"), shall receive, in lieu
thereof, pro rata shares of stock and warrants in Hawaiian Vintage
Chocolate in place of WBAG and pro rata shares of stock and warrants in
Walton Technologies, Inc. in place of Glycosyn.
2. The Court having determined that the application filed in support
of the Debtor's May 27, 1997 motion to modify the Order Confirming Plan and
Disclosure Statement and Plan ("Application") contains "adequate information" as
required by Section 1125 of the Bankruptcy Code for the purpose of resoliciting
creditors; and
3. The Application and Order authorizing modification of the
Disclosure Statement and Plan have been served on all creditors and other
parties in interest together with a form of ballot approved by the Court, and
the modifications to the Plan
-2-
<PAGE> 3
have been accepted in writing by creditors and interest holders whose
acceptance is required by law; and
4. The identity, qualifications and affiliations of the persons who
are to be directors or officers, or voting trustees, if any, of the Reorganized
Corporate Debtor or successor to the Corporate Debtor under the Plan, after
confirmation of the modifications to the Plan, have been fully disclosed, and
the appointment of such persons to such offices, or the continuance therein, is
equitable and consistent with the interest of the creditors and equity security
holders and with public policy; and
5. Confirmation of the modifications to the Plan is not likely to be
followed by the liquidation, or the need for further financial reorganization,
of the Debtor or any successor to the Debtor under the Plan as modified,
IT IS on this 19th day of August, 1997,
ORDERED that the Plan filed by the Debtor on April 23, 1996 and confirmed
by the Court on May 21, 1996, be and is hereby modified and amended to provide
that the means for execution of the Plan as contained in Article VI on page 17
of the Plan is modified as follows:
-3-
<PAGE> 4
ARTICLE 6.
MEANS FOR EXECUTION OF THE PLAN
The non-cash dividend shall be funded by the issuance of stock and
warrants by the Reorganized Debtor after its merger with Hawaiian Vintage
Chocolate Co. (HVC) and formation of a subsidiary and subsequent merger of said
subsidiary with Walton Technology, Inc. (WTI).
6.1. Reorganized Debtor - On or after September 2, 1997, all currently
issued and outstanding shares of the Debtor will be cancelled. The Debtor will
merge with HVC and the Reorganized Debtor will change its name and will be
known as Hawaiian Vintage Chocolate Co. The present management of HVC will
become the management of the Reorganized Debtor. AGI's officers and management
will be discharged. The Reorganized Debtor's Articles of Incorporation will be
amended to authorize the issuance of 20,000,000 shares of common stock. 300,000
shares of stock will be available for pro rata allocation among AGI's creditors
and other parties in interest. The current shareholders of HVC will receive
5,000,000 shares and DLS will receive 250,000 shares of common stock on account
of its administrative claim. In addition to the 300,000 shares of common stock
available to creditors and other parties in interest, they will also receive a
pro rata interest in 100,000 Class A Warrants with an exercise price of $2.50
per share with a term of six months, a pro rata interest in 200,000 Class B
Warrants with an exercise price of $4.00 per share with an expiration date of
twelve months, and 200,000 Class C warrants with an exercise price of $6.00 per
share for a term of 24 months. Total shares outstanding upon the conclusion of
the transaction will be approximately 5,550,000. DLS will receive 100,000 Class
A and 200,000 Class B and Class C Warrants. No odd lots or warrants will be
issued and all allocations will be rounded up to the next whole number.
Also on the effective date, WTI will merge with a newly-formed,
wholly-owned subsidiary of the Reorganized Debtor which will be called Walton
Technologies, Inc. The newly-formed, wholly-owned subsidiary will have
authorized capital of 20,000,000 shares. 200,000 shares will be available for
pro rata allocation amongst creditors and other parties in interest in AGI.
-4-
<PAGE> 5
In addition the current owner of WTI will receive 1,850,000 shares of common
stock and DLS Financial Services, Inc. will receive 200,000 shares of common
stock on account of its administrative claim. In addition to the 200,000 shares
of common stock available for creditors and other parties in interest, they
will also receive a pro rata interest in 100,000 Class A Warrants with an
exercise price of $1.50 per share with a term six months from the effective
date, 100,000 Class B Warrants with an exercise price of $3.00 per share with a
term of one year from the effective date and 100,000 Class C Warrants with an
exercise price of $5.00 per share with a term of 24 months from the effective
date. DLS will receive 50,000 of each class of warrant on account of its
administrative claim. There will be no odd lots and distributions will be
rounded to the next whole number. Total shares outstanding on the effective
date will be 2,250,000 shares.
The securities to be issued by the Reorganized Debtor and its subsidiary (or
such agent as they may elect to employ) will be issued pursuant to the
exemption provided for under Section 1145 of the Bankruptcy Code. The
securities shall bear the legend required by the Office of the United States
Trustee, which is as follows:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 and were issued pursuant to an exemption
provided by 11 U.S.C. Section 1145, under an order confirming Plan and an
Order confirming modifications to said Plan in a case entitled, IN RE
AMERICAN GRAPHIC INDUSTRIES, Case No. 94-27979 NLW, in the United States
Bankruptcy Court for the District of New Jersey. The holder of this
certificate is referred to 11 U.S.C. Section 1145(b) and (c) for guidance
as to the sale of these securities.
All stock issued pursuant to the Plan and all stock issued upon exercise of the
warrants shall have no par value, each share shall carry one vote and each
share shall rank equally as to rights, dividends and returns. All such stock
shall be free-trading for purposes of public or private sale, to the extent
allowed by law. Further, recipients of the stock and warrants under the Plan
shall not be deemed underwriters, controlling per-
-5-
<PAGE> 6
sons, or affiliates of the issuer, in connection with their resale or other
disposition or liquidation, except as required by applicable law.
IT IS FURTHER ORDERED that, except as stated hereinabove, all of the
provisions and terms of the Court's May 21, 1996 Confirmation Order and the
Debtor's Plan shall remain in full force and effect.
NOVALYN L. WINFIELD
------------------------------
NOVALYN L. WINFIELD
United States Bankruptcy Judge
-6-
<PAGE> 1
EXHIBIT 2.5
AGREEMENT OF MERGER
OF
AMERICAN GRAPHICS INDUSTRIES, INC.
a Delaware Corporation
AND
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
a Hawaii Corporation
This agreement of merger (the "Agreement of Merger") is made on 9/30, 1997
by and between Hawaiian Vintage Chocolate Company, Inc. (""HVCC"), a corporation
organized under the laws of the State of Hawaii, with its principal office
located at 4614 Kilauea Avenue, Suite 435, Honolulu, Hawaii 96816, and American
Graphics Industries, Inc. (""AGI"), a corporation organized under the laws of
the State of Delaware, with its principal office located at One Gateway Center,
8th Floor, Newark, New Jersey 07102.
RECITALS
WHEREAS, AGI is a debtor in a Chapter 11 proceeding in the U.S. Bankruptcy
Court of the District of New Jersey, Case No. 94-27979 (NLW) (the "Proceeding"),
in which Proceeding AGI is subject to the Order Confirming Modification of
Amended Plan of Reorganization filed August 19, 1997 (the "Order");
WHEREAS, the board of directors of HVCC deems it desirable and in the best
interest of the corporation and its shareholders that AGI be merged into HVCC
pursuant to the Order;
WHEREAS, AGI, pursuant to the Order, has agreed to and is authorized to
merge into HVCC; and
WHEREAS, for the reasons set forth above, and in consideration of the
mutual covenants and promises of the parties hereto, the constituent
corporations agree, pursuant to the Order, that AGI shall be merged into HVCC
and the parties agree to and prescribe the terms and conditions of such merger,
the method of carrying it into effect, and the manner of converting the shares
of AGI into shares or other securities of HVCC, as hereinafter set
forth and as set forth in the Order.
SECTION ONE
HVCC TO BE SURVIVING CORPORATION
AGI shall be merged into HVCC, and the corporate existence of AGI shall
cease and the corporate existence of HVCC shall continue under the name Hawaiian
Vintage Chocolate Company, Inc. HVCC shall succeed to all the rights,
privileges, immunities, and franchises,
<PAGE> 2
and all the property, real, personal, and mixed, of AGI, without the necessity
for any separate transfer.
HVCC hereby agrees that it may be served with process in Delaware in any
suit or proceeding for enforcement of any obligation (a) of AGI or (b) of HVCC
arising from this merger, and hereby irrevocably appoints the Delaware
Secretary of State as agent to accept service of process in any such suit or
proceeding. The Delaware Secretary of State shall mail a copy of such process
to HVCC at the following address:
4614 Kilauea Avenue, Suite 435
Honolulu, HI 96816
SECTION TWO
PRINCIPAL OFFICE
The principal office of HVCC, at the address set forth in Section One
hereof, shall remain the principal office of the corporation following the
merger.
SECTION THREE
ARTICLES OF INCORPORATION OF HVCC
The Articles of Incorporation of HVCC shall continue to be its Articles of
Incorporation following the effective date of the merger subject to the
following amendment:
Article IV of the Articles of Incorporation shall be deleted in its
entirety and the following shall be inserted in its place and stead:
IV.
The aggregate number of common shares all of the same class which the
corporation shall have the authority to issue is twenty million
(20,000,000).
SECTION FOUR
BYLAWS
The present bylaws of HVCC, insofar as not inconsistent with this
Agreement of Merger, shall be the bylaws of the corporation following the
merger until altered, amended, or repealed as therein provided.
SECTION FIVE
DIRECTORS AND OFFICERS
The directors and officers of HVCC on the effective date of the merger (as
set forth in Section Eight hereof) shall continue as
2
<PAGE> 3
the directors of officers of HVCC for the full unexpired terms of their offices
or until their successors have been elected or appointed and qualified.
SECTION SIX
SHARES OF AGI
All authorized shares of AGI stock shall be cancelled pursuant to the
Order. AGI's creditors and other parties in interest will receive shares in
HVCC on account of their allowed claims in accordance with the provisions of
the Order, which provisions are summarized as follows:
300,000 shares of HVCC common stock will be available for pro rata
allocation among AGI's creditors and other parties in interest under
the Plan. The current shareholders of HVCC will receive 5,000,000
shares and DLS Financial Services, Inc. ("DLS") will receive 250,000
shares of common stock on account of its administrative claim. In
addition to the 300,000 shares of common stock available to AGI's
creditors and other parties in interest, such creditors and other
parties in interest will also receive a pro rata share of 100,000
Class A Warrants with an exercise price of $2.50 per share with an
expiration date of six months from the effective date, a pro rata
share of 200,000 Class B Warrants with an exercise price of $4.00 per
share with an expiration date of twelve months from the effective
date, and a pro rate share of 200,000 Class C Warrants with an
exercise price of $6.00 per share with an expiration date of 24 months
from the effective date. Total HVCC shares outstanding upon the
conclusion of the transaction will be approximately 5,550,000. In
addition to the foregoing, DLS will receive 100,000 Class A and
200,000 Class B and Class C Warrants. No odd lots of shares or
warrants and no fractional shares or fractional warrants will be
issued and all allocations of shares will be rounded up to the next
whole number.
SECTION SEVEN
EXTRAORDINARY TRANSACTIONS
Neither corporation shall, from the date hereof and until the effective
date of the merger or until the merger is abandoned (as provided for in Section
Nine hereof), engage in any activity or
3
<PAGE> 4
transaction other than in the ordinary course of business, except as
contemplated by this Agreement of Merger.
SECTION EIGHT
SUBMISSION TO STOCKHOLDERS; EFFECTIVE DATE
Agreement to this merger by AGI has been mandated through the balloting in
the Proceeding. Pursuant to the Order, the Court in the Proceeding has
authorized this merger. This Agreement of Merger shall be submitted to the
stockholders of HVCC in the manner provided by the General Corporation Law of
the State of Hawaii. Upon approval of HVCC stockholders, this Agreement of
Merger shall, subject to the provisions of Section Nine hereof, take effect as
the Agreement of Merger of the constituent corporations. The constituent
corporations agree that they will cause to be executed and filed and/or
recorded any document or documents prescribed by the laws of the State of
Hawaii and State of Delaware, respectively, and that they will cause to be
performed all necessary acts therein and elsewhere to effectuate the merger.
The merger will become effective on the date on which this Agreement of Merger
is filed in the office of the Secretary of State of the State of Hawaii,
together with evidence of its adoption as required by law.
SECTION NINE
ABANDONMENT OF MERGER
Anything to the contrary herein notwithstanding, if the Board of Directors
of HVCC, should determine, either before or after the meeting of the
stockholders of HVCC called to vote on the adoption or rejection of this
Agreement of Merger, that for any legal, financial, economic, or business
reason deemed sufficient by the Board it is not in the interest of HVCC, or the
stockholders of HVCC, or is otherwise inadvisable or impracticable to
consummate the merger, the Board of Directors may abandon the merger by
directing the officers of the corporation to refrain from executing or filing
this Agreement of Merger, and thereupon this Agreement shall be void and of no
effect. HVCC nor its Board shall have the right to abandon this merger
following the filing of this Agreement of Merger with the Secretary of State of
the State of Hawaii.
SECTION TEN
EXECUTION OF AGREEMENT
This Agreement of Merger may be executed in any number of counterparts,
and each such counterpart shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties by their proper corporate
4
<PAGE> 5
officers have executed below and have sealed with their corporate seals,
respectively, as of the date first written above.
HAWAIIAN VINTAGE CHOCOLATE
COMPANY, INC.
a Hawaii corporation
By: /s/ JAMES WALSH
------------------------------
James Walsh, President
AMERICAN GRAPHICS INDUSTRIES,
INC.
a Delaware corporation
By: /s/ RAYMOND L. BURKE
------------------------------
Raymond L. Burke, President
5
<PAGE> 1
STATE OF HAWAII
DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS
Honolulu
CERTIFICATE OF MERGER
I, KATHRYN S. MATAYOSHI, Director of Commerce and Consumer Affairs of the
State of Hawaii, do hereby certify that AMERICAN GRAPHICS INDUSTRIES, INC., a
Delaware corporation has been merged with and into HAWAIIAN VINTAGE CHOCOLATE
COMPANY, INC., a Hawaii corporation; that the name of the surviving corporation
is HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.; that the Articles of Merger and
Plan of Merger in conformity with Chapter 415, Hawaii Revised Statutes, were
filed in the Department of Commerce and Consumer Affairs on October 2, 1997,
and that the merger became effective on October 2, 1997, at 12:39 p.m.,
Hawaiian Standard Time.
IN WITNESS WHEREOF, I have hereunto
set my hand and affixed the seal of the
Department of Commerce & Consumer
Affairs, at Honolulu, State of Hawaii,
this 16th day of October, 1997.
/s/ KATHRYN S. MATAYOSHI
----------------------------------------
Director of Commerce and Consumer
Affairs
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
for Commissioner of Securities
<PAGE> 2
CERTIFICATE OF MERGER
OF
AMERICAN GRAPHICS INDUSTRIES, INC.
A Delaware Corporation
AND
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
A Hawaii Corporation
The undersigned hereby certifies, pursuant to Sections 103 and 252 of the
General Corporation Law of the State of Delaware, as follows.
1. American Graphics Industries, Inc. ("AGI"), a Delaware corporation,
and Hawaiian Vintage Chocolate Company, Inc. ("HVCC"), a Hawaii corporation,
have agreed to merge.
2. AGI and HVCC have each approved, adopted, certified, executed and
acknowledged an agreement of merger (the "Agreement").
3. HVCC shall be the surviving corporation, and its name shall remain:
Hawaiian Vintage Chocolate Company, Inc.
4. The Articles of Incorporation of HVCC shall continue to be its
Articles of Incorporation following the effective date of the merger, subject to
the following amendment:
Article IV of the Articles of Incorporation shall be deleted in its
entirety and the following shall be inserted in its place and stead.
IV.
The aggregate number of common shares all of the same class which
the corporation shall have the authority to issue is twenty million
(20,000,000).
5. The fully executed Agreement is on file at HVCC's office at the
following address:
4614 Kilauea Avenue, Suite 435
Honolulu, HI 96816
6. A copy of the Agreement will be furnished by the surviving
corporation, upon request and without cost, to any
<PAGE> 3
stockholder of record of AGI on the date hereof.
7. HVCC hereby agrees that it may be served with process in Delaware in
any suit of proceeding for enforcement of any obligation (a) of AGI or (b) of
HVCC arising from this merger, and hereby irrevocably appoints the Delaware
Secretary of State as agent to accept service of process in any such suit or
proceeding. The Delaware Secretary of State shall mail a copy of such process
to HVCC at the following address:
4614 Kilauea Avenue, Suite 435
Honolulu, HI 96816
IN WITNESS WHEREOF, Hawaiian Vintage Chocolate Company, Inc. hereby
executes this Certificate of Merger as of the 30th day of September, 1997.
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
By: /s/ JAMES WALSH
------------------------------
James Walsh, President
2
<PAGE> 1
EXHIBIT 3.1
[HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC. COMMON STOCK CERTIFICATE]
Number Shares
HVC [HAWAIIAN VINTAGE CHOCOLATE LOGO] SPECIMEN
COMMON STOCK COMMON STOCK
CUSIP 420040 10 7
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF HAWAII
This certifies that
SEE REVERSE FOR
CERTAIN DEFINITIONS
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, OF THE
PAR VALUE OF $.001 EACH, OF
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
transferable on the books of the Corporation by the owner in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and By-laws
of the Corporation and all amendments thereto and restatements thereof (copies
of which are on file with the Transfer Agent), to all of which the holder, by
acceptance hereof, assents. This certificate is not valid unless countersigned
by the Transfer Agent and registered by the Registrar.
In Witness Whereof, the Corporation has caused this certificate to be signed by
its duly authorized officers, and its corporate seal to be hereunto affixed.
Dated:
[HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC. SEAL]
INCORPORATED
JULY 14, 1993
HAWAII
/s/ [Signature Illegible] /s/ JAMES WALSH
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
REGISTRAR AND TRANSFER COMPANY
TRANSFER AGENT AND REGISTRAR
BY
SPECIMEN
AUTHORIZED SIGNATURE
<PAGE> 1
EXHIBIT 3.2
EXERCISE PRICE $2.50 PER
SHARE OF COMMON WARRANT
STOCK, WITH A TERM OF SPECIMEN
SIX MONTHS FROM
ISSUANCE DATE, OF
[HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC. LOGO]
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
VOID AFTER 5:00 P.M. EASTERN TIME ON APRIL 7, 1998
CLASS A WARRANT CERTIFICATE
CUSIP 420040 11 5
THIS CERTIFIES THAT for value received,
SPECIMEN
or registered assigns, is the owner of the number of Class A Warrants set forth
above each of which represents the right, at any time prior to the expiration
date (as hereinafter defined) to purchase one fully paid for and non-assessable
share of the Common Stock, of par value of $.001 (the "Common Stock") of
Hawaiian Vintage Chocolate Company, Inc. (the "Company") at the price of $2.50
per share, subject to the terms and conditions hereof and of the Warrant
Agreement (as hereinafter defined), each such purchase to be made, and to be
deemed effective for the purpose of determining the date of exercise hereof,
only upon the surrender of this Warrant Certificate to the Company at the
office in Cranford, New Jersey, of Registrar and Transfer Company, as "Warrant
Agent" (or any successor Warrant Agent), with the form of Election to Exercise
on the reverse hereof duly completed and executed and upon simultaneous
payment, to the Warrant Agent for the account of the Company, in cash or by
certified or bank's cashier check, of the exercise price as provided in the
Warrant Agreement and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement. Each Warrant may be exercised on any
Business Day (as hereinafter defined) on or after October 7, 1997 and on or
before 5:00 p.m. Eastern Standard Time, on April 7, 1998 (the "Expiration
Date"). After the Expiration Date, any previously unexercised warrants shall be
void, have no value, and be of no further effect.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement, dated as of October 7, 1997 (hereinafter called the "Warrant
Agreement"), between the Company and the Warrant Agent and is subject to the
terms of the Warrant Agreement, to all of which terms every holder of this
Warrant Certificate consents by acceptance hereof. Reference is hereby made to
the Warrant Agreement for a more complete statement of the rights and
limitations of the registered holder hereof, the rights and duties of the
Warrant Agent and the rights and obligations of the Company thereunder. Copies
of the Warrant Agreement are on file at the office of the Warrant Agent.
The Company shall not be required upon exercise of the Warrants
represented hereby to issue fractions of shares but in lieu thereof the Company
shall pay in cash an appropriate amount (or any fraction of a share based upon
the last reported sales price of the Common stock on the trading day
immediately preceding the date of exercise (all as computed in the Warrant
Agreement)). If the Warrants represented hereby shall be exercised in part, the
registered holder hereof shall be entitled to receive, upon surrender hereof, a
new Warrant Certificate for the Warrants not yet exercised as provided in the
Warrant Agreement.
The Warrant Certificate may be exchanged at the office in Cranford, New
Jersey (or at the office of its successor Warrant Agent), either separately or
in combination with other Warrant Certificates, for new Warrant Certificates
representing the same aggregate number of Warrants as were evidenced by the
Warrant Certificate or Warrant Certificate exchanged, upon compliance with and
subject to the conditions set forth herein and in the Warrant Agreement.
The Warrant Certificate is transferable at the office in Cranford, New
Jersey, of the Warrant Agent (or its successor Warrant Agent) by the registered
holders hereof in person or by attorney duly authorized in writing, upon
surrender of this Warrant Certificate and upon compliance with and subject to
the conditions set forth herein and in the Warrant Agreement. Upon any such
transfer, a new Warrant Certificate or new Warrant Certificate of different
denominations, representing in the aggregate a like number of Warrants, will be
issued to the transferee. Every holder of Warrants, by accepting this Warrant
Certificate, consents and agrees with the Company, the Warrant Agent and every
subsequent holder of the Warrant Certificate that until the registration of
transfer of this Warrant Certificate is effected on the books of the Warrant
Agent, the Company and the Warrant Agent may deem and treat the person in whose
name this Warrant Certificate is registered as the absolute and lawful owner of
the Warrants represented hereby for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
This Warrant Certificate does not entitle the registered holder hereof to
any rights of a stockholder of the Company.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS, the Company has caused the facsimile signatures of its
President to be printed hereon and the facsimile of its corporate seal to be
affixed hereunto and attested by the facsimile signature of its Secretary.
Dated:
COUNTERSIGNED:
REGISTRAR AND TRANSFER COMPANY
as Warrant Agent [SEAL]
By: SPECIMEN
AUTHORIZED OFFICER
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
By: /s/ [Signature Illegible]
------------------------------------
SECRETARY
By: /s/ JAMES WALSH
------------------------------------
PRESIDENT
<PAGE> 1
EXHIBIT 3.3
EXERCISE PRICE $4.00 PER
SHARE OF COMMON WARRANT
STOCK, WITH A TERM OF SPECIMEN
ONE YEAR FROM
ISSUANCE DATE, OF
[HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC. LOGO]
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
VOID AFTER 5:00 P.M. EASTERN TIME ON OCTOBER 7, 1998
CLASS B WARRANT CERTIFICATE
CUSIP 420040 12 3
THIS CERTIFIES THAT for value received,
SPECIMEN
or registered assigns, is the owner of the number of Class B Warrants set forth
above each of which represents the right, at any time prior to the expiration
date (as hereinafter defined) to purchase one fully paid for and non-assessable
share of the Common Stock, of par value of $.001 (the "Common Stock") of
Hawaiian Vintage Chocolate Company, Inc. (the "Company") at the price of $4.00
per share, subject to the terms and conditions hereof and of the Warrant
Agreement (as hereinafter defined), each such purchase to be made, and to be
deemed effective for the purpose of determining the date of exercise hereof,
only upon the surrender of this Warrant Certificate to the Company at the
office in Cranford, New Jersey, of Registrar and Transfer Company, as "Warrant
Agent" (or any successor Warrant Agent), with the form of Election to Exercise
on the reverse hereof duly completed and executed and upon simultaneous
payment, to the Warrant Agent for the account of the Company, in cash or by
certified or bank's cashier check, of the exercise price as provided in the
Warrant Agreement and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement. Each Warrant may be exercised on any
Business Day (as hereinafter defined) on or after October 7, 1998 and on or
before 5:00 p.m. Eastern Standard Time, on April 7, 1998 (the "Expiration
Date"). After the Expiration Date, any previously unexercised warrants shall be
void, have no value, and be of no further effect.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement, dated as of October 7, 1997 (hereinafter called the "Warrant
Agreement"), between the Company and the Warrant Agent and is subject to the
terms of the Warrant Agreement, to all of which terms every holder of this
Warrant Certificate consents by acceptance hereof. Reference is hereby made to
the Warrant Agreement for a more complete statement of the rights and
limitations of the registered holder hereof, the rights and duties of the
Warrant Agent and the rights and obligations of the Company thereunder. Copies
of the Warrant Agreement are on file at the office of the Warrant Agent.
The Company shall not be required upon exercise of the Warrants
represented hereby to issue fractions of shares but in lieu thereof the Company
shall pay in cash an appropriate amount (or any fraction of a share based upon
the last reported sales price of the Common stock on the trading day
immediately preceding the date of exercise (all as computed in the Warrant
Agreement)). If the Warrants represented hereby shall be exercised in part, the
registered holder hereof shall be entitled to receive, upon surrender hereof, a
new Warrant Certificate for the Warrants not yet exercised as provided in the
Warrant Agreement.
The Warrant Certificate may be exchanged at the office in Cranford, New
Jersey (or at the office of its successor Warrant Agent), either separately or
in combination with other Warrant Certificates, for new Warrant Certificates
representing the same aggregate number of Warrants as were evidenced by the
Warrant Certificate or Warrant Certificate exchanged, upon compliance with and
subject to the conditions set forth herein and in the Warrant Agreement.
The Warrant Certificate is transferable at the office in Cranford, New
Jersey, of the Warrant Agent (or its successor Warrant Agent) by the registered
holders hereof in person or by attorney duly authorized in writing, upon
surrender of this Warrant Certificate and upon compliance with and subject to
the conditions set forth herein and in the Warrant Agreement. Upon any such
transfer, a new Warrant Certificate or new Warrant Certificate of different
denominations, representing in the aggregate a like number of Warrants, will be
issued to the transferee. Every holder of Warrants, by accepting this Warrant
Certificate, consents and agrees with the Company, the Warrant Agent and every
subsequent holder of the Warrant Certificate that until the registration of
transfer of this Warrant Certificate is effected on the books of the Warrant
Agent, the Company and the Warrant Agent may deem and treat the person in whose
name this Warrant Certificate is registered as the absolute and lawful owner of
the Warrants represented hereby for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
This Warrant Certificate does not entitle the registered holder hereof to
any rights of a stockholder of the Company.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS, the Company has caused the facsimile signatures of its
President to be printed hereon and the facsimile of its corporate seal to be
affixed hereunto and attested by the facsimile signature of its Secretary.
Dated:
COUNTERSIGNED:
REGISTRAR AND TRANSFER COMPANY
as Warrant Agent [SEAL]
By: SPECIMEN
AUTHORIZED OFFICER
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
By: /s/ [Signature Illegible]
------------------------------------
SECRETARY
By: /s/ JAMES WALSH
------------------------------------
PRESIDENT
<PAGE> 1
EXHIBIT 3.4
EXERCISE PRICE $6.00 PER
SHARE OF COMMON WARRANT
STOCK, WITH A TERM OF SPECIMEN
TWO YEARS FROM
ISSUANCE DATE, OF
[HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC. LOGO]
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
VOID AFTER 5:00 P.M. EASTERN TIME ON OCTOBER 7, 1999
CLASS C WARRANT CERTIFICATE
CUSIP 420040 13 1
THIS CERTIFIES THAT for value received,
SPECIMEN
or registered assigns, is the owner of the number of Class C Warrants set forth
above each of which represents the right, at any time prior to the expiration
date (as hereinafter defined) to purchase one fully paid for and non-assessable
share of the Common Stock, of par value of $.001 (the "Common Stock") of
Hawaiian Vintage Chocolate Company, Inc. (the "Company") at the price of $6.00
per share, subject to the terms and conditions hereof and of the Warrant
Agreement (as hereinafter defined), each such purchase to be made, and to be
deemed effective for the purpose of determining the date of exercise hereof,
only upon the surrender of this Warrant Certificate to the Company at the
office in Cranford, New Jersey, of Registrar and Transfer Company, as "Warrant
Agent" (or any successor Warrant Agent), with the form of Election to Exercise
on the reverse hereof duly completed and executed and upon simultaneous
payment, to the Warrant Agent for the account of the Company, in cash or by
certified or bank's cashier check, of the exercise price as provided in the
Warrant Agreement and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement. Each Warrant may be exercised on any
Business Day (as hereinafter defined) on or after October 7, 1999 and on or
before 5:00 p.m. Eastern Standard Time, on April 7, 1998 (the "Expiration
Date"). After the Expiration Date, any previously unexercised warrants shall be
void, have no value, and be of no further effect.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement, dated as of October 7, 1997 (hereinafter called the "Warrant
Agreement"), between the Company and the Warrant Agent and is subject to the
terms of the Warrant Agreement, to all of which terms every holder of this
Warrant Certificate consents by acceptance hereof. Reference is hereby made to
the Warrant Agreement for a more complete statement of the rights and
limitations of the registered holder hereof, the rights and duties of the
Warrant Agent and the rights and obligations of the Company thereunder. Copies
of the Warrant Agreement are on file at the office of the Warrant Agent.
The Company shall not be required upon exercise of the Warrants
represented hereby to issue fractions of shares but in lieu thereof the Company
shall pay in cash an appropriate amount (or any fraction of a share based upon
the last reported sales price of the Common stock on the trading day
immediately preceding the date of exercise (all as computed in the Warrant
Agreement)). If the Warrants represented hereby shall be exercised in part, the
registered holder hereof shall be entitled to receive, upon surrender hereof, a
new Warrant Certificate for the Warrants not yet exercised as provided in the
Warrant Agreement.
The Warrant Certificate may be exchanged at the office in Cranford, New
Jersey (or at the office of its successor Warrant Agent), either separately or
in combination with other Warrant Certificates, for new Warrant Certificates
representing the same aggregate number of Warrants as were evidenced by the
Warrant Certificate or Warrant Certificate exchanged, upon compliance with and
subject to the conditions set forth herein and in the Warrant Agreement.
The Warrant Certificate is transferable at the office in Cranford, New
Jersey, of the Warrant Agent (or its successor Warrant Agent) by the registered
holders hereof in person or by attorney duly authorized in writing, upon
surrender of this Warrant Certificate and upon compliance with and subject to
the conditions set forth herein and in the Warrant Agreement. Upon any such
transfer, a new Warrant Certificate or new Warrant Certificate of different
denominations, representing in the aggregate a like number of Warrants, will be
issued to the transferee. Every holder of Warrants, by accepting this Warrant
Certificate, consents and agrees with the Company, the Warrant Agent and every
subsequent holder of the Warrant Certificate that until the registration of
transfer of this Warrant Certificate is effected on the books of the Warrant
Agent, the Company and the Warrant Agent may deem and treat the person in whose
name this Warrant Certificate is registered as the absolute and lawful owner of
the Warrants represented hereby for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
This Warrant Certificate does not entitle the registered holder hereof to
any rights of a stockholder of the Company.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS, the Company has caused the facsimile signatures of its
President to be printed hereon and the facsimile of its corporate seal to be
affixed hereunto and attested by the facsimile signature of its Secretary.
Dated:
COUNTERSIGNED:
REGISTRAR AND TRANSFER COMPANY
as Warrant Agent [SEAL]
By: SPECIMEN
AUTHORIZED OFFICER
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
By: /s/ [Signature Illegible]
------------------------------------
SECRETARY
By: /s/ JAMES WALSH
------------------------------------
PRESIDENT
<PAGE> 1
EXHIBIT 6.1
LICENSE AGREEMENT
License No. 331-1
THIS LICENSE AGREEMENT is dated this 5TH day of Feb, 1999, but effective
August 1, 1998, (the "Effective Date"), made by and between THE TRUSTEES OF THE
ESTATE OF BERNICE PAUAHI BISHOP, hereinafter referred to as "Licensor" whose
principal place of business and post office address is 567 South King Street,
Honolulu, Hawaii 96813 and HAWAIIAN VINTAGE CHOCOLATE COMPANY, Inc., a Hawaii
corporation, hereinafter referred to as "Licensee", whose residence is in
Kahoahuna Homestead, and whose post office address is 4614 Kilauea Avenue, Suite
435, Honolulu, Hawaii 96816.
W I T N E S S E T H:
WHEREAS, the parties have agreed that Licensee shall be allowed to
utilize the property (the "licensed area"), consisting of 75.0 (40.0 usable)
Acres, more or less, located at Umauma, North Hilo, Hawaii, being a portion of
Tax Map Key 331-001-026, (the "land"), more particularly shown on the sketch
attached hereto and made a part hereof as Exhibit "A", together with the rights
of others to use the existing roadways for ingress and egress purposes;
NOW, THEREFORE, the parties hereto, in consideration of the property
hereby agree to the following terms and conditions:
1. Term. The term of this License Agreement shall commence from
the Effective Date and shall continue for a period of Three (3) years, unless
sooner terminated or extended as set forth in this License Agreement.
2. Option to Extend Term. Licensee shall have the option to
extend the term (the "extended term") of this License Agreement for Three (3)
year periods on the same terms, covenants, and conditions as contained in this
License Agreement, except as to the amount of the annual license fee, upon the
following conditions:
(a) Licensee shall deliver to Licensor written irrevocable
notice of Licensee's intent to extend the term no earlier than one hundred fifty
(150) days and no later than one hundred twenty (120) days prior to the
expiration of the then effective term of this License Agreement.
<PAGE> 2
(b) Subject to the provisions in Paragraph 3(b), Licensee
and Licensor shall have mutually agreed upon the amount of the new annual
license fee no later than ninety (90) days prior to the expiration of the then
effective term of this License Agreement.
(c) Licensee shall have been, throughout the term of this
License Agreement, and shall be at the time of the extension, in full compliance
with all of the terms and conditions of this License Agreement and not in
default of any of the provisions stated herein.
(d) Licensee shall be personally in occupancy of the
licensed area upon expiration of the then effective term.
(e) this License Agreement shall be in full force and
effect at the time of the exercise of the option as well as upon commencement of
the extended term of this License Agreement.
If Licensee fails to exercise the option to extend in
strict compliance with the time, manner and conditions set forth in this
paragraph, the option shall have no further force and effect. Licensee shall not
have any option to further extend the time of this License Agreement.
3. License Fee.
(a) For Licensee's use of the licensed area, Licensee
shall pay to the Licensor an annual license fee, payable in advance in equal
monthly payments, to be paid on the first day of each month during the entire
term of this License Agreement. The annual license fee for the first (l) year of
this License Agreement shall be fixed at TWO THOUSAND AND N0/100 DOLLARS
($2,000.00). Licensee shall pay said annual license fee in equal monthly
installments of ONE HUNDRED SIXTY SIX AND 67/100 DOLLARS ($166.67). The annual
license fee for the second (2) year of this License Agreement shall be fixed at
THREE THOUSAND AND N0/100 DOLLARS ($3,000.00). Licensee shall pay said annual
license fee in equal monthly installments of TWO HUNDRED FIFTY AND N0/100
DOLLARS ($250.00). The annual licensee fee for the third (3) year of the License
Agreement shall be fixed at FOUR THOUSAND AND N0/100 DOLLARS ($4,000.00).
Licensee shall pay said annual license fee in equal monthly installments of
THREE HUNDRED THIRTY THREE AND 33/100 DOLLARS ($333.33).
(b) The annual license fee during the extended three year
term for the fourth (4) year is fixed at SIX THOUSAND AND N0/100 DOLLARS
($6,000.00). Licensee shall pay said annual license fee in equal monthly
installments of FIVE HUNDRED AND N0/100 DOLLARS ($500.00). The annual license
fee for the fifth (5)
-2-
<PAGE> 3
year of this License Agreement shall be fixed at SEVEN THOUSAND AND N0/100
DOLLARS ($7,000.00). Licensee shall pay said annual license fee in equal monthly
installments of FIVE HUNDRED EIGHTY THREE AND 33/100 DOLLARS ($583.33). The
annual license fee for the sixth (6) year of this License Agreement shall be
fixed at EIGHT THOUSAND AND N0/100 DOLLARS ($8,000.00). Licensee shall pay said
annual license fee in equal monthly installments of SIX HUNDRED SIXTY SIX AND
66/100 DOLLARS ($666.66).
(c) Licensee shall pay said license fee in lawful money of
the United States of America at the times and in the manner aforesaid, without
deduction and without any notice or demand at the office of the Licensor at the
address aforesaid.
4. Royalty Fee, Renegotiation of Royalty Fee, Adjusted Gross
Income and Reports and Audit.
(a) Royalty Fee. In addition to the annual license fee,
Licensee shall pay to Licensor within one hundred twenty (120) days after each
calendar year, a royalty fee for each calendar year during the term of this
License Agreement and any extended term, prorated if necessary, four and
one-half percent (4.5%) of Licensee's Adjusted Gross Income exceeding SIXTY FOUR
THOUSAND SEVENTY THREE AND 78/100 DOLLARS ($64,073.78) for the first (1) year;
and EIGHTY SEVEN THOUSAND TWO HUNDRED TWENTY ONE AND 78/100 DOLLARS ($87,221.78)
for the second (2) year; ONE HUNDRED TEN THOUSAND THREE HUNDRED SIXTY NINE AND
78/100 DOLLARS ($110,369.78) for the third (3) year; and ONE HUNDRED FIFTY SIX
THOUSAND SIX HUNDRED SIXTY FIVE AND 78/100 DOLLARS ($156,665.78) for the forth
(4) to sixth (6) year. Licensee shall submit reports indicating gross revenues
prior to May 1st of each year.
(b) Renegotiation of Royalty Fee. At the end of the third
year of the term of this License Agreement, the royalty fee shall be subject to
negotiation. Should Licensee and Licensor fail to reach an agreement as to the
annual license fee sixty (60) days prior to the commencement date of the
extended term, this License Agreement shall be surrendered pursuant to paragraph
15.
(c) Adjusted Gross Income. For each calendar year during
the term of this License Agreement, Licensee's gross income derived from or
attributable to the licensed area, including without limitation the gross
proceeds from the sale of crops, regardless of whether such sales are made by
Licensee or any contract farmer of Licensee, if any, or otherwise, as shown on
the annual federal or state income tax return or Hawaii general excise tax
return of Licensee and any contract farmer, less all Hawaii general excise tax
paid on such gross proceeds, and less real property taxes and assessments paid
with respect to the licensed area in the calendar year.
-3-
<PAGE> 4
(d) Report and Audits. Licensee will submit to Licensor
together upon each payment of the royalty fee within one hundred twenty (120)
days after the end of each calendar year during the term of this License
Agreement and any extended term, a signed statement of Licensee's Adjusted Gross
Income for the licensed area received by Licensee during such calendar year and
the amount of royalty fee due to Licensor under subparagraph (a) of this
paragraph 4. Licensee shall submit to Licensor with such statement a copy of
Licensee's federal or state income tax return and Hawaii general excise tax
return submitted to the State of Hawaii for such calendar year. Licensee shall
keep at a location on the Island of Hawaii known to Licensor, for a period of
three (3) full calendar years following the end of each such calendar year, all
books, records and federal or state income tax returns and Hawaii general excise
tax returns of Licensee pertaining to operations on the licensed area during
such calendar year. All such books, records and tax returns shall be open to
inspection and audit by Licensor and Licensor's agents at all reasonable times
during ordinary business hours. If any audit of Licensee's annual statement made
within two (2) years after the end of the year covered by such statement by a
certified public accountant or accounting firm employed by Licensor shall
disclose an error prejudicial to Licensor in an amount equal to two percent (2%)
or more in the amount of royalty fee payable to Licensor, then Licensee will pay
to Licensor the expense of such audit. Any deficiency or excess in the payment
of royalty fee for such year as determined by such audit shall thereupon be
adjusted between Licensor and Licensee.
(e) Licensee shall pay said license fee in lawful money of
the United States of America at the times and in the manner aforesaid, without
deduction and without any notice or demand at the office of the Licensor at the
address aforesaid.
5. Use. Licensee shall use the property for agricultural
purposes only. Licensee may construct an irrigation system, packing, cleaning
and storage sheds on the licensed area without an increase in the license fee.
No residential use will be permitted. Licensee shall not use the licensed area
for any other purpose or purposes. Licensee shall not cause any use or cause any
act to be done in or about the licensed area which is illegal, unlawful or
violates any covenant affecting the licensed area.
6. Additional License Fee. Licensee will also pay to Licensor, as
additional license fee, within ten (10) days after the date of mailing or
personal delivery of statements therefor, all costs and expenses paid or
incurred by Licensor and required to be paid by Licensee under any provision of
this License Agreement. If Licensee shall become delinquent in the payment of
its license fee or other payments required hereunder to be made by Licensee to
-4-
<PAGE> 5
Licensor, Licensee will also pay to Licensor as an additional license fee,
interest thereon from the respective due dates thereof until fully paid at the
rate of 12% per year.
7. General Excise Tax. Licensee will pay to Licensor as an
additional license fee, at the time and together with each payment of its
license fee, or other charge required hereunder to be made by Licensee to
Licensor which is subject to the Hawaii general excise tax on gross income or
any successor or similar tax, an amount which, when added to the license fee, or
other charge (whether actually or constructively received by Licensor), shall
yield to Licensor after deduction of all such taxes payable by Licensor with
respect thereto, a net amount equal to that which Licensor would have realized
therefrom had no such tax been imposed.
8. Taxes and Assessments. Licensee will also pay to Licensor as
an additional license fee, at least ten (10) days before the same become
delinquent, all real property taxes and assessments of every description to
which the licensed area or any part thereof or improvement thereon or Licensor
or Licensee in respect thereof, are now or may during said term be assessed or
become liable, whether assessed to or payable by Licensor or Licensee provided,
however, that with respect to any assessment made under any betterment or
improvement law which may be payable in installments, Licensee shall be required
to pay only such installments of principal together with interest on unpaid
balances thereof as shall become due and payable during said term, and that such
taxes shall be prorated as of the dates of commencement and expiration
respectively of said term. If at any time during said term there shall be
assessed against the licensed area or any part thereof or any improvement
thereon or any fees payable to Licensor therefor or against Licensor in respect
thereof any new taxes (other than federal or state net income taxes or any other
taxes existing at the commencement of said term) which are in substitution for
real property taxes or are in lieu of increase thereof, Licensee will also pay
to Licensor as additional license fee at least ten (10) days before the same
become delinquent, all such new taxes. Licensee will also pay any and all
conveyance taxes imposed by the State of Hawaii in respect to this License
Agreement. In the event that there shall be more than one licensee of Licensor
on the Land, Licensor shall have the right to allocate the real property taxes
and any other taxes payable by Licensee under this License Agreement among such
licensees, including the Licensee, in a fair and equitable manner. Such
allocation by Licensor shall be final and binding on Licensee. It is agreed that
Licensee will pay all Real Property Taxes on the lands encumbered by this
agreement beginning in 1999-2000 tax year. Licensee will pay Real Property Tax
for the tax period before the 1999-2000 tax year at the agricultural rate
appropriate to the crops planted.
-5-
<PAGE> 6
9. Rates and Other Charges. Licensee will pay directly before
the same become delinquent all utility charges including water and sewer rates,
garbage rates and other charges and outgoings of every description to which the
licensed area or any part thereof or improvement thereon, or Licensor or
Licensee in respect thereof, may during said term be assessed or become liable,
whether assessed to or payable by Licensor or Licensee.
10. Assignment and Consent to Assignment. Licensee shall not
assign or mortgage this License Agreement or any interest hereunder, voluntarily
or involuntarily, without the prior written consent of Licensor. Such consent
may be withheld if, in the sole judgment of Licensor, the technical and
financial capabilities of the proposed assignee of this License Agreement or any
interest hereunder do not meet the criteria for evaluating such technical and
financial capabilities as established by Licensor.
11. Sublicense and Consent to Sublicense. Licensee will not
without the prior written consent of Licensor rent, sublicense or part with
Licensee's right to use the licensed area or any part thereof and any request
for Licensor's consent to a proposed sublicense must be accompanied by a copy of
the proposed sublicense agreement and disclosure of all terms of the sublicense
agreement. Prior to granting such consent, Licensor shall have the right to
review and approve the proposed sublicensee fee and may withhold their consent,
in the sole judgment of Licensor, 1) if the proposed sublicense fee is below
existing market sublicense fee for similar licensed areas, 2) if the proposed
sublicensee (or its principal or affiliates) has fewer than five years of prior
experience in agricultural, 3) if the proposed sublicensee is not credit worthy,
as evidenced by a lack of existing lines of credit, loans or other sources of
financing, or 4) if the proposed sublicensee's proposed use of the licensed area
will conflict with the operations of adjacent or nearby tenants or licensees.
In the event of the sublicensing with the consent of
Licensor, Licensee shall pay Licensor, on the first day of each month of the
term of this License Agreement, one-half (1/2) of the monthly rent payable to
Licensee by the sublicensee. For purposes of this paragraph, the term "monthly
rent" shall mean so much of the total valuable consideration (whether consisting
of fixed, minimum and/or percentage rent; and/or commission, percentage and
premiums payable by the sublicensee to Licensee on amounts owing to third
parties by the sublicensees and/or Licensee in consequence of this License
Agreement and/or the sublicensee; and/or any amounts that would constitute
additional license fee as that term is defined in paragraph 6 above), prorated
on a monthly basis, without deduction or setoff by Licensee, as shall be
payable by the sublicensee to or on behalf of Licensee.
-6-
<PAGE> 7
In addition to any amounts otherwise owing by Licensee to
Licensor above, Licensee shall pay to Licensor an amount equal to the amount
payable by Licensor pursuant to Hawaii General Excise Tax Law, or any successor
substitute law, on gross income actually or constructively received by Licensor
pursuant to this paragraph 11.
12. Improvements Required By Law. Licensee will at its own
expense during the term of this License Agreement maintain and make any and all
necessary repairs required by law to be made to the licensed area, and shall
abide by all Federal, State and local laws, statutes, ordinances, rules and
regulations pertaining to its operations and to the installation, maintenance
and/or operation of its improvements.
13. Restoration, Repair and Maintenance. Licensee will at its
own expense from time to time and at all times during said term substantially
restore, repair, maintain, amend and keep all equipment, buildings, if any, and
towers, including any other improvements now or hereafter built or made on the
licensed area with all necessary reparations and amendments whatsoever in good
and safe repair, order and condition, reasonable wear and tear and destruction
by unavoidable casualty not herein required to be insured against.
14. Inspection. Licensee will permit Licensor and their agents at
all reasonable times during said term to enter the licensed area and examine
the state of repair, cultivation and condition thereof, and Licensee will
repair and make good at its own expense all defects required by the provisions
of this License Agreement to be repaired by Licensee of which notice shall be
given by Licensor or their agents within thirty (30) days after the giving of
such notice or such other reasonable time as may be specified therein. If for
any reason Licensee shall fail to commence and complete such repairs within
thirty (30) days after the giving of such notice or such other reasonable time
as may be specified therein, Licensor may, but shall not be obligated to, make
or cause to be made such repairs and shall not be responsible to Licensee or
anyone claiming by, through or under it for any loss or damage to the occupancy,
business or property of any of it by reason thereof, and Licensee will pay to
Licensor on demand and as additional license fee all costs and expenses paid or
incurred by Licensor in connection with such repairs.
15. Surrender. At the end of said term Licensee will peaceably
deliver up to Licensor possession of the licensed area, together with all
equipment and buildings (if any), including any other improvements, upon or
belonging to the licensed area, by whomsoever made, in good and safe repair,
order and condition, except as otherwise expressly provided in paragraph 13
hereof;
-7-
<PAGE> 8
provided, further, that if Licensee is not then in default under this License
Agreement, Licensee may thereupon remove any removable or salvageable equipment
which can be removed without material damage to the licensed area, land or
building. The foregoing covenant of Licensee shall survive the expiration of
said term.
16. Construction. Licensee will not construct or place any
buildings or structures, fences or walls, or other improvements on the licensed
area, nor make or suffer any additions to or structural alterations of the basic
structure of any buildings, nor change the grading or drainage thereof, without
the prior written consent of Licensor; provided, however, that Licensee may
construct an irrigation system, packing, cleaning and storage sheds. Any such
construction or alterations shall be done under the supervision of a licensed
architect or structural engineer and in accordance with complete plans,
specifications and detailed plot plans therefor prepared by such an architect or
structural engineer and first approved in writing by Licensor. No such approval
by Licensor shall be deemed a warranty or other representations on their part
that such plans, specifications or detailed plot plans or the building or
buildings, or other improvements therein described are legal, safe or sound
prior to commencing any construction of new buildings on the licensed area.
Licensee shall furnish Licensor evidence that all governmental
approvals necessary to commence construction have been obtained, including,
without limitation, a building permit. Licensee shall provide Licensor with
evidence satisfactory to Licensor that funds are available and/or committed to
Licensee sufficient to pay for 100% of the total direct and indirect costs of
constructing such alterations, additions or improvements. Licensee shall deposit
with Licensor copies of performance and labor and material payment bonds for not
less than 100% of the total cost of such construction, naming Licensor and such
other persons as Licensor may direct, as their interest may appear, as
co-obligees. Such bonds shall be in form and amount and with surety satisfactory
to Licensor. In addition to any other insurance required under this License
Agreement, during any construction Licensee and/or its contractor shall maintain
the comprehensive general liability insurance policy and other insurance
policies required under this License Agreement, which policies shall be
satisfactory to Licensor in form, content and amount of coverage, insuring
Licensor, Licensee and such other parties as Licensor shall specify, against
loss or damage to third parties or their property from hazards normally insured
against in the construction industry with respect to construction of the type to
be undertaken by Licensee. Licensee shall deliver to Licensor certificates of
insurance certifying that such insurance is in full force and effect.
-8-
<PAGE> 9
17. Fire and Other Casualty Insurance. Licensee will at
Licensee's own expense at all times during said term keep its portion of all
equipment and buildings, including any other improvements on the licensed area
insured against loss or damage by fire and other causes of loss included in the
standard ISO Special Coverage Form. The policy shall be with an insurance
company authorized to do business in Hawaii, in an amount as near as practicable
to the full replacement cost thereof (which amount Licensee will review as to
sufficiency at least annually and, if insufficient, will increase), and shall be
in the joint names of Licensor, Licensee and any mortgagee as each of their
interest may appear. Licensee will pay all premiums on such insurance when due,
and will deliver to Licensor a copy of the policy or a certificate of insurance
within thirty (30) days after execution of this License Agreement and will
provide copies of renewal policies or certificates of insurance prior to the
renewal date of such insurance. The policy shall contain a clause that the
insurer will not cancel or reduce coverages without first giving Licensor thirty
(30) days prior written notice. In every case of loss or damage to Licensee's
portion of said equipment or buildings, including any other improvements, all
proceeds of such insurance (excluding the proceeds of any rental value or use
and occupancy insurance of Licensee) shall be used with all reasonable speed by
Licensee for rebuilding, repairing or otherwise reinstating the same portion of
said equipment or buildings, including any other improvements in a good and
substantial manner according to the original plan and elevation thereof or such
modified plan conforming to laws and regulations then in effect as shall be
first approved in writing by Licensor and any mortgagee, and Licensee will make
up from its own funds any deficiency in the insurance proceeds. If Licensee's
portion of the existing equipment or buildings, including any other improvements
on the licensed area shall during the last two years of said term be destroyed
or damaged to an extent exceeding 50% of the actual cash value thereof
immediately prior to such casualty, and the insurance proceeds are insufficient
for restoring Licensee's portion of such restoration, Licensee may at its option
within thirty (30) days after such casualty notify Licensor in writing of its
intention to surrender this License Agreement, and Licensor shall, within thirty
(30) days after receipt of such notice, advise Licensee in writing of their
acceptance of such surrender, in which case Licensee shall, within sixty (60)
days after receipt of such acceptance, cause all debris and remains of its
portion of damaged equipment or buildings, including any other improvements to
be removed from the licensed area under a contract therefor first approved in
writing by Licensor and surrender to Licensor this License Agreement free and
clear of any encumbrances and all interests of Licensee and any mortgagee in the
remaining insurance proceeds and thereby be relieved of all further obligations
hereunder, it being understood that if Licensor shall fail to so advise Licensee
of their acceptance of such surrender or
-9-
<PAGE> 10
their election to restore such equipment or buildings, including any other
improvements as hereinafter provided, such failure shall be deemed to constitute
acceptance of such surrender.
18. Liability Insurance. Licensee shall, during the entire term
of this License Agreement, keep in full force and effect, liability insurance
with respect to the licensed area and the business operated by Licensee and
subtenants of Licensee, if any. This insurance shall be provided by an insurance
company acceptable to Licensor, with combined single limit of public liability
for personal injury and property damage of not less than $2,000,000.00 per
occurrence. Licensee shall name Licensor as additional insureds. The policy
shall contain a clause that the insurer will not cancel or change the insurance
without first giving Licensor thirty (30) days prior written notice. A copy of
the policy or a certificate of insurance shall be delivered to Licensor within
thirty (30) days after the execution of this License Agreement, and Licensee
will provide certificates of insurance or, upon request, copies of such
insurance policies, prior to the renewal date of any such insurance.
19. Licensee's Personal Property. Licensee shall insure and keep
insured all personal property of Licensee, in, on or upon the licensed area.
Such insurance shall insure against loss from fire and other causes of loss
provided for in the standard ISO Special Coverage Form. Any policy proceeds
shall be used for the repair or replacement of any personal property damaged or
destroyed unless this License Agreement shall cease and terminate under the
provisions hereof.
20. Preservation of Historic and Archaeological Sites. The
Licensee shall take every reasonable precaution to preserve and leave unaltered
all places, if any, of historic and/or archaeological interest, including
without limitation structures and sites listed on the Hawaii State Register of
Historic Places and/or the National Register of Historic Places, ponds,
reservoirs, heiau, altars, agricultural terraces, lo'i, walls, auwai, house
platforms, imu, petroglyph sites, cemeteries; and all objects, if any, of
historic and/or archaeological interest, including without limitation
antiquities and specimens of Hawaiian or other ancient art or handicraft which
may be found in or on the licensed area. Upon the discovery of such objects or
of any human remains in or on the licensed area, the Licensee will leave the
same untouched and will immediately notify the Licensor of the type and location
of such discovery.
21. Indemnity. Licensee will indemnify and hold Licensor harmless
from and against all claims and demands for loss or damage, including property
damage, personal injury and wrongful death, arising out of or in connection with
the use or occupancy of
-10-
<PAGE> 11
the licensed area by Licensee or any other person under Licensee, or any
accident or fire on the licensed area or any nuisance made or suffered thereon,
or any failure by Licensee to keep the licensed area in a safe condition, and
will reimburse Licensor for all costs and expenses including reasonable
attorneys' fees incurred in connection with the defense of any such claims, and
will hold all equipment or buildings, including any other improvements and
personal property belonging to Licensee on the licensed area at the sole risk of
Licensee and shall save Licensor harmless from any loss or damage thereto by any
cause whatsoever.
22. Expenses of Licensor. Licensee will pay to Licensor, within
ten (10) days after the date of mailing or personal delivery of statements
therefor, (a) all costs and expenses including reasonable attorneys' fees paid
or incurred by Licensor but required to be paid by Licensee under any covenant
herein contained or paid or incurred by Licensor in enforcing any of Licensee's
covenants herein contained, in protecting themselves against any breach thereof,
in remedying any breach thereof, in recovering possession of the licensed area
or any part thereof, in collecting or causing to be paid any delinquent license
fees, taxes or other charges hereunder payable by Licensee, or in connection
with any litigation (other than condemnation proceedings) commenced by or
against Licensee to which Licensor shall without fault be made parties, and (b)
a reasonable fee for reviewing and processing any request by Licensee for
Licensor's consent or approval, which fee shall be a flat-rate service charge as
established by the policy of Licensor then in effect or a sum equal to all costs
and expenses paid or incurred by Licensor, including without limitation
reasonable fees of attorneys and other consultants retained by Licensor and the
costs of Licensor's regular salaried staff in connection therewith, whichever is
greater. All such costs, expenses and fees shall constitute additional license
fee and shall bear interest as provided in paragraph 23 hereof.
23. Default and Defeasance. This License Agreement is upon the
express condition that if Licensee shall fail to pay said license fee or any
part thereof within fifteen (15) days after the same becomes due and payable,
whether the same shall or shall not have been legally demanded, or shall fail to
observe and perform faithfully any of its covenants or agreements herein
contained performable by the payment of money (other than the payment of license
fee) and such default shall continue for thirty (30) days after a statement
therefor given by the obligee to Licensee, or shall fail to observe or perform
faithfully any of its other covenants or agreements herein contained and such
default shall continue for thirty (30) days after written notice thereof given
by Licensor to Licensee, or shall abandon the licensed area, or if this License
Agreement or any estate or interest of Licensee hereunder shall be sold under
any attachment or execution, Licensor
-11-
<PAGE> 12
may at once re-enter the licensed area or any part thereof in the name of the
whole and, upon or without such entry, at their option terminate this License
Agreement, without service of notice or legal process and without prejudice to
any other remedy or right of action for arrears of license fee or other charges
or other breach of contract. If Licensee shall fail to observe or perform any of
its covenants herein contained, Licensor at any time thereafter and without
notice may, but shall not be obligated to, observe or perform such covenant for
the account and at the expense of Licensee, and all costs and expenses incurred
by Licensor in observing and performing such covenant shall constitute
additional license fee and shall bear interest at the rate of 12% per year.
24. Condemnation. If the whole of the licensed area shall be
taken by any public authority under the power of eminent domain, then the term
of this License Agreement shall cease as of the day possession is taken by such
public authority and all license fees shall be paid up to that date. All
compensation and damages payable or to be paid for or by reason of such taking
shall be payable or to be the sole property of Licensor. If only a part of the
licensed area shall be taken under eminent domain, this License Agreement shall
terminate as to the portion taken and unless this License Agreement shall be
terminated, as hereinafter provided, it shall continue in full force and effect
as to the remainder of the licensed area.
If the remainder of the licensed area cannot be used for the
purpose for which Licensee has been using the licensed area, Licensee shall have
the option, to be exercised within thirty (30) days after the filing of such
eminent domain action, of cancelling this License Agreement effective as of the
date the condemning authority shall take possession.
Licensee shall have the right to claim and recover from the
condemning authority, but not from Licensor, such compensation as may be
separately awarded or recoverable by Licensee in Licensee's own right on account
of any cost or loss to which Licensee might be put in removing Licensee's
fixtures and equipment.
25. Hazardous Waste. Licensee shall keep and maintain the
licensed area including without limitation the groundwater on or under the
licensed area, in compliance with, and shall not cause or permit the licensed
area or any portion thereof to be in violation of, any federal, state or local
laws, ordinances or regulations, now or hereafter in effect, relating to
environmental conditions, industrial hygiene or Hazardous Materials (as
hereinafter defined), on, under or about the licensed area including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42
-12-
<PAGE> 13
U.S.C. Section 9601, et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et
seq., the Clean Air Act, 42 U.S.C. Section 7401, et seq., the Toxic Substances
Control Act, 15 U.S.C. Sections 2601 through 2629, the Safe Drinking Water Act,
42 U.S.C. Sections 300f through 300j, and any similar state and local laws and
ordinances and the regulations now or hereafter adopted, published and/or
promulgated pursuant thereto (collectively the "Hazardous Materials Laws"),
Licensee shall not use, generate, manufacture, treat, handle,
refine, produce, process, store, discharge, release, dispose of or allow to
exist on, under or about the licensed area any flammable explosives, radioactive
materials, asbestos, organic compounds known as polychlorinated biphenyls,
chemicals known to cause cancer or reproductive toxicity, pollutants,
contaminants, hazardous wastes, toxic substances or related materials, including
without limitation any substances defined as, or included in, the definition of
"hazardous substances", "hazardous wastes", hazardous materials", or "toxic
substances" under the Hazardous Materials Laws (collectively "Hazardous
Materials"), except in strict compliance with all applicable Hazardous Materials
Laws. Furthermore, Licensee shall not allow to exist on, under or about the
licensed area any underground storage tanks or underground deposits.
Licensee shall immediately advise Licensor in writing of (i) any
and all enforcement, clean up, removal, mitigation remediation or other
governmental or regulatory actions instituted, contemplated or threatened
pursuant to any Hazardous Materials Laws affecting the licensed area, (ii) all
claims made or threatened by any third party against the Licensee or the
licensed area relating to damage, contribution, cost recovery, compensation,
loss or injury resulting from any Hazardous Materials (the matters set forth in
clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials
Claims"), (iii) the Licensee's discovery of any occurrence or condition on the
licensed area which could subject Licensee, Licensor or the licensed area to any
restrictions on ownership, occupancy, transferability or use of the licensed
area under any Hazardous Materials Laws.
Licensor shall have the right to join and participate in, as a
party if it so elects, any settlements, remedial actions, legal proceedings or
actions initiated in connection with any Hazardous Materials Claims and to have
its reasonable attorneys' fees incurred in connection therewith paid by the
Licensee. Licensee shall be solely responsible for and shall indemnify and hold
harmless Licensor and its employees, agents, successors and assigns from and
against any loss, damage, cost, expense or
-13-
<PAGE> 14
liability directly or indirectly arising out of or attributable to the use,
generation, manufacture, treatment, handling, refining, production, processing,
storage, release, threatened release, discharge, disposal or presence of
Hazardous Materials, on, under or about the licensed area by or through Licensee
including without limitation: (a) the costs of any required or necessary repair,
cleanup or detoxification of the licensed area, and the preparation and
implementation of any closure, remedial or other required plans; and (b) all
reasonable costs and expenses incurred by Licensor in connection therewith,
including without limitation reasonable attorneys' fees.
Licensee will indemnify Licensor against and hold Licensor
harmless from all costs and expenses (including reasonable fees of legal
counsel), losses, damages (including foreseeable or unforeseeable consequential
damages) and liabilities incurred by Licensor which may arise out of or may be
directly or indirectly attributable to (a) the use, generation, manufacture,
treatment, handling, refining, production, processing, storage, release,
discharge, disposal or presence of any Hazardous Material on, within, under or
about the licensed area, (b) Trustee's investigation and handling (including the
defense) of any Hazardous Materials Claims, whether or not any lawsuit or other
formal legal proceeding shall have been commenced in respect thereof, and (c)
Licensor enforcement of this License Agreement, whether or not suit is brought
therefor. The provisions of paragraph 25 of this License Agreement shall
survive the termination of this License Agreement.
If requested by Licensor at the end of the license term Licensee,
at its sole cost and expense, shall cause a Phase I Environmental Survey of the
licensed area to be conducted of the property by a competent and experienced
environmental engineer or engineering firm and shall provide a copy of such
Survey to the Licensor in order to confirm Licensee's compliance with the
covenants contained in this paragraph.
26. Permits and Notices. Licensee shall at its own expense be
solely responsible for obtaining any governmental zoning classification,
approval or consent required by law for or in connection with Licensee's
operations hereunder and shall also give any notices necessary or incidental to
said operations.
27. Survey. Within six (6) months of the Effective Date, Licensee
shall provide to Licensor a metes and bounds survey and boundary map for the
licensed area prepared and certified by a professional land surveyor registered
to practice in the State of Hawaii.
-14-
<PAGE> 15
29. Liens. Licensee shall not permit any liens to be attached to
the improvements or the licensed area.
30. Successors. All of the covenants, agreements, provisions,
terms and conditions contained in this License Agreement shall apply to, inure
to, and be binding upon Licensor, Licensee, and its successors, successors in
trust and assigns.
31. Disclaimer of Warranties. The provisions of this License
Agreement constitute, and are intended to constitute, the entire agreement of
the parties to this License Agreement, and no terms, conditions, warranties,
promises or undertakings of any nature whatsoever, express or implied, exist
between the parties, except as herein expressly set forth.
32. Non Waiver. The waiver by Licensor of any breach of any term,
covenant or condition herein contained, shall not be deemed to be a waiver of
such term, covenant or condition of any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
any license fee or other sums due hereunder by Licensor shall not be deemed to
be a waiver of any preceding breach by Licensee of any term, covenant or
condition of this License Agreement, other than the failure of Licensee to pay
the particular license fee or other amount so accepted, regardless of Licensor's
knowledge of such preceding breach at the time of acceptance of such license fee
or other amount. No covenant, term or condition of this License Agreement shall
be deemed to have been waived by Licensor unless such waiver is in writing,
signed by Licensor.
33. Licensee's Assumption of Risk Regarding Restriction on Use.
Notwithstanding any provision to the contrary, Licensee expressly acknowledges
and agrees that by accepting this License Agreement upon the terms and
conditions provided herein, Licensee has agreed to assume all risks relating to
any restriction on the use of the licensed area arising out of, or relating to,
any governmental land use and zoning laws, the building code, or the design of
the improvements comprising the property. If, for any of the foregoing reasons
or causes, Licensee is unable to use the licensed area for the purposes set
forth in paragraph 5, Licensee's sole remedy shall be to terminate this License
Agreement, and upon such termination and the payment of any outstanding sums
owed by Licensee to Licensor, Licensee shall be relieved of any further
obligations to Licensor under this License Agreement. In no event shall Licensee
have any recourse against Licensor for any claims for damages, loss of profits
or other general or consequential damages arising out of the termination of this
License Agreement due to the reasons or causes set forth in this paragraph. This
release of liability has been expressly bargained for by Licensor in agreeing to
issue this License Agreement to Licensee upon the
-15-
<PAGE> 16
terms and conditions contained herein, and Licensee acknowledges that Licensee
has been advised by its legal counsel of the consequences of this release of
liability in favor of Licensor. This release of liability shall accordingly be
liberally construed in favor of Licensor to effect the intention of the parties
in entering into this License Agreement.
34. Subdivision. If at any time during the term of this License
Agreement any governmental authority shall require that the licensed area be
legally subdivided in order for this License Agreement to be kept in effect,
Licensee agrees to undertake, at its sole cost and expense all the steps
necessary to obtain a legal subdivision of the Land. If Licensee fails to effect
the required subdivision within the time permitted by the complaining
governmental authority, this License Agreement shall terminate.
35. Paragraph Headings. The headings of paragraphs herein are
inserted only for convenience and reference and shall in no way define or limit
the scope or intent of any provision of this License Agreement.
36. No Interest in Real Property. Licensee agrees that Licensee
does not and shall not claim at any time any real property interest in the land
owned by Licensor or any landlord-tenant relationship with Licensor by virtue of
this License Agreement or its occupancy or use of the licensed area. THIS
LICENSE AGREEMENT IS NOT A LEASE.
37. Severability. If any term of this License Agreement or any
application thereof shall be invalid or unenforceable, the remainder of this
License Agreement and any other application of such term shall not be affected
thereby.
38. Entire Agreement. This License Agreement and the Exhibit
attached hereto and forming a part hereof set forth all the covenants, promises,
agreements, conditions and understandings between Licensee and Licensor
concerning the licensed area and there are no covenants, promises, agreements,
conditions or understandings, either oral or written, between them, other than
are herein set forth. Except as herein otherwise provided, no subsequent
alteration, amendment, change or addition to this License Agreement shall be
binding upon Licensor or Licensee unless reduced to writing and signed by them.
39. No Partnership Intended. It is expressly understood that
Licensor does not intend and shall not, in any way or for any purpose
whatsoever, become a partner of Licensee in the conduct of its business, or
otherwise, or joint venturer or a member of a joint enterprise with Licensee
pursuant to this License Agreement.
-16
<PAGE> 17
40. Notices. All notices, requests, demands or documents which
are required or permitted to be given or served hereunder shall be in writing
and personally delivered, or sent by registered or certified mail addressed as
follows:
To Licensor:
567 South King Street, Suite 200
Honolulu, Hawaii 96813
Attention: Hawaii Island
Region Regional Director
To Licensee:
4614 Kilauea Avenue, Suite 435
Honolulu, Hawaii 96816
The addresses may be changed from time to time by the addressee
by serving notice as heretofore provided. Service of such notice or demand shall
be deemed complete on the date of actual delivery as shown by the addressee's
registry or certification receipt or at the expiration of the third day after
the date of mailing, whichever is earlier in time.
41. Consents of Parties. Except as otherwise set forth in this
License Agreement, where the consent of either party is required under the terms
of this License Agreement, such consent shall not be unreasonably withheld.
42. Trustees Not Personally Liable. This License Agreement has
been approved or executed by the Trustees of the Estate of Bernice Pauahi Bishop
in their fiduciary capacities as said Trustees, and not in their individual
capacities. No personal liability or obligation under this instrument shall be
imposed or assessed against said Trustees in their individual capacities.
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed these presents as
of the day and year first above written.
TRUSTEES OF THE ESTATE OF HAWAIIAN VINTAGE CHOCOLATE
BERNICE PAUAHI BISHOP COMPANY, Inc., a Hawaii
corporation
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ [SIGNATURE ILLEGIBLE]
--------------------------------- --------------------------------
Area Development Manager) Its President
Licensor Licensee
- ------------------------------------
Approved:
Approved as Date:
to Form: /s/ [SIGNATURE ILLEGIBLE] -----------------------------
----------------------------
Witness: /s/ [SIGNATURE ILLEGIBLE]
------------------------------
-18-
<PAGE> 1
EXHIBIT 6.2
LICENSE AGREEMENT
License No. 331-2
THIS LICENSE AGREEMENT is dated this_________________ day of
_________________, 19____, but effective November 1, 1998, (the "Effective
Date"), made by and, between THE TRUSTEES OF THE ESTATE OF BERNICE PAUAHI
BISHOP, hereinafter referred to as "Licensor" whose principal place of business
and post office address is 567 South King Street, Honolulu, Hawaii 96813 and
HAWAIIAN VINTAGE CHOCOLATE COMPANY, Inc., a Hawaii corporation, hereinafter
referred to as "Licensee", whose residence is in Kahoahuna Homestead, and whose
post office address is 4614 Kilauea Avenue, Suite 435, Honolulu, Hawaii 96816.
W I T N E S S E T H:
WHEREAS, the parties have agreed that Licensee shall be allowed to
utilize the property (the "licensed area"), consisting of 39.78 (32.50 usable)
Acres, more or less, located at Umauma, North Hilo, Hawaii, being a portion of
Tax Map Key 331-001-024/025, (the "land"), more particularly shown on the sketch
attached hereto and made a part hereof as Exhibit "A", together with the rights
of others to use the existing roadways for ingress and egress purposes;
NOW, THEREFORE, the parties hereto, in consideration of the property
hereby agree to the following terms and conditions:
1. Term. The term of this License Agreement shall commence from
the Effective Date and shall continue for a period of Three (3) years, unless
sooner terminated or extended as set forth in this License Agreement.
2. Option to Extend Term. Licensee shall have the option to
extend the term (the "extended term") of this License Agreement for Three (3)
year periods on the same terms, covenants, and conditions as contained in this
License Agreement, except as to the amount of the annual license fee, upon
the following conditions:
(a) Licensee shall deliver to Licensor written
irrevocable notice of Licensee's intent to extend the term no earlier than one
hundred fifty (150) days and no later than one hundred twenty (120) days prior
to the expiration of the then effective term of this License Agreement.
<PAGE> 2
(b) Subject to the provisions in Paragraph 3(b), Licensee and
Licensor shall have mutually agreed upon the amount of the new annual license
fee no later than ninety (90) days prior to the expiration of the then effective
term of this License Agreement.
(c) Licensee shall have been, throughout the term of this License
Agreement, and shall be at the time of the extension, in full compliance with
all of the terms and conditions of this License Agreement and not in default of
any of the provisions stated herein.
(d) Licensee shall be personally in occupancy of the licensed
area upon expiration of the then effective term.
(e) this License Agreement shall be in full force and effect at
the time of the exercise of the option as well as upon commencement of the
extended term of this License Agreement.
If Licensee fails to exercise the option to extend in strict
compliance with the time, manner and conditions set forth in this paragraph, the
option shall have no further force and effect. Licensee shall not have any
option to further extend the time of this License Agreement.
3. License Fee.
(a) For Licensee's use of the licensed area, Licensee
shall pay to the Licensor an annual license fee, payable in advance, in equal
monthly payments, to be paid on the first day of each month during the entire
term of this License Agreement. The annual license fee for the first (l) year of
this License Agreement shall be fixed at ONE THOUSAND SIX HUNDRED TWENTY FIVE
AND NO/100 DOLLARS ($1,625.00). Licensee shall pay said annual license fee in
equal monthly installments of ONE HUNDRED THIRTY FIVE AND 41/100 DOLLARS
($135.41). The annual license fee for the second (2) year of this License
Agreement shall be fixed at TWO THOUSAND FOUR HUNDRED THIRTY SEVEN AND 50/100
DOLLARS ($2,437.50). Licensee shall pay said annual license fee in equal monthly
installments of TWO HUNDRED THREE AND 12/100 DOLLARS ($203.12). The annual
licensee fee for the third (3) year of the License Agreement shall be fixed at
THREE THOUSAND TWO HUNDRED FIFTY AND NO/100 DOLLARS ($3,250.00). Licensee shall
pay said annual license fee in equal monthly installments of TWO HUNDRED
SEVENTY AND 83/100 DOLLARS ($270.83).
(b) The annual license fee during the extended three year
term for the fourth (4) year is fixed at FOUR THOUSAND EIGHT HUNDRED SEVENTY
FIVE AND NO/100 DOLLARS ($4,875.00). Licensee shall pay said annual license fee
in equal monthly installments of FOUR HUNDRED SIX AND 25/100 DOLLARS ($406.25).
The
-2-
<PAGE> 3
annual license fee for the fifth (5) year of this License Agreement shall be
fixed at FIVE THOUSAND SIX HUNDRED EIGHTY SEVEN THOUSAND AND 50/100 D0LLARS
($5,687.50). Licensee shall pay said annual license fee in equal monthly
installments of FOUR HUNDRED SEVENTY THREE AND 95/100 DOLLARS ($473.95). The
annual license fee for the sixth (6) year of this License Agreement shall be
fixed at SIX THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($6,500.00). Licensee
shall pay said annual license fee in equal monthly installments of FIVE HUNDRED
FORTY ONE AND 66/100 DOLLARS ($541.66).
(c) Licensee shall pay said license fee in lawful money
of the United States of America at the times and in the manner aforesaid,
without deduction and without any notice or demand at the office of the Licensor
at the address aforesaid.
4. Royalty Fee, Renegotiation of Royalty Fee, Adjusted Gross
Income and Reports and Audit.
(a) Royalty Fee. In addition to the annual license fee,
Licensee shall pay to Licensor within one hundred twenty (120) days after each
calendar year, a royalty fee for each calendar year during the term of this
License Agreement and any extended term, prorated if necessary, four and
one-half percent (4.5%) of Licensee's Adjusted Gross Income exceeding FIFTY TWO
THOUSAND SIX HUNDRED SIXTY FOUR AND 30/100 DOLLARS ($52,664.30) for the first
(1) year; SEVENTY ONE THOUSAND FOUR HUNDRED SEVENTY ONE AND 08/100 DOLLARS
($71,471.08) for the second (2) year; NINETY THOUSAND TWO HUNDRED SEVENTY SEVEN
AND 85/100 DOLLARS ($90,277.85) for the third (3) year; ONE HUNDRED TWENTY SEVEN
THOUSAND EIGHT HUNDRED NINETY ONE AND 08/100 DOLLARS ($127,891.08) for the forth
(4) year; ONE HUNDRED FORTY SIX THOUSAND SIX HUNDRED NINETY SEVEN AND 85/100
DOLLARS ($146,697.85) for the fifth (5) year; and ONE HUNDRED SIXTY FIVE
THOUSAND AND FIVE HUNDRED ELEVEN AND 78/100 DOLLARS ($165,511.78) for the sixth
(6) year. Licensee shall submit reports indicating gross revenues prior to May
1st of each year.
(b) Renegotiation of Royalty Fee. At the end of the third
year of the term of this License Agreement, the royalty fee shall be subject to
negotiation. Should Licensee and Licensor fail to reach an agreement as to the
annual license fee sixty (60) days prior to the commencement date of the
extended term, this License Agreement shall be surrendered pursuant to paragraph
15.
(c) Adjusted Gross Income. For, each calendar year during
the term of this License Agreement, Licensee's gross income derived from or
attributable to the licensed area, including without limitation the gross
proceeds from the sale of crops, regardless of whether such sales are made by
Licensee or any contract farmer of Licensee, if any, or otherwise, as shown on
the annual federal or state income tax return or Hawaii general excise tax
return of Licensee and any contract farmer, less all Hawaii
-3-
<PAGE> 4
general excise tax paid on such gross proceeds, and less real property taxes and
assessments paid with respect to the licensed area in the calendar year.
(d) Reports and Audits. Licensee will submit to Licensor
together upon each payment of the royalty fee within one hundred twenty (120)
days after the end of each calendar year during the term of this License
Agreement and any extended term, a signed statement of Licensee's Adjusted Gross
Income for the licensed area received by Licensee during such calendar year and
the amount of royalty fee due to Licensor under subparagraph (a) of this
paragraph 4. Licensee shall submit to Licensor with such statement a copy of
Licensee's federal or state income tax return and Hawaii general excise tax
return submitted to the State of Hawaii for such calendar year. Licensee shall
keep at a location on the Island of Hawaii known to Licensor, for a period of
three (3) full calendar years following the end of each such calendar year, all
books, records and federal or state income tax returns and Hawaii general excise
tax returns of Licensee pertaining to operations on the licensed area during
such calendar year. All such books, records and tax returns shall be open to
inspection and audit by Licensor and Licensor's agents at all reasonable times
during ordinary business hours. If any audit of Licensee's annual statement made
within two (2) years after the end of the year covered by such statement by a
certified public accountant or accounting firm employed by Licensor shall
disclose an error prejudicial to Licensor in an amount equal to two percent (2%)
or more in the amount of royalty fee payable to Licensor, then Licensee will pay
to Licensor the expense of such audit. Any deficiency or excess in the payment
of royalty fee for such year as determined by such audit shall thereupon be
adjusted between Licensor and Licensee.
(e) Licensee shall pay said license fee in lawful money of
the United States of America at the times and in the manner aforesaid, without
deduction and without any notice or demand at the office of the Licensor at the
address aforesaid.
5. Use. Licensee shall use the property for agricultural
purposes only. Licensee may construct an irrigation system, packing, cleaning
and storage sheds on the licensed area without an increase in the license fee.
No residential use will be permitted. Licensee shall not use the licensed area
for any other purpose or purposes. Licensee shall not cause any use or cause any
act to be done in or about the licensed area which is illegal, unlawful or
violates any covenant affecting the licensed area.
6. Additional License Fee. Licensee will also pay to Licensor, as
additional license fee, within ten (10) days after the date of mailing or
personal delivery of statements therefor, all costs and expenses paid or
incurred by Licensor and required to be
-4-
<PAGE> 5
paid by Licensee under any provision of this License Agreement. If Licensee
shall become delinquent in the payment of its license fee or other payments
required hereunder to be made by Licensee to Licensor, Licensee will also pay to
Licensor as an additional license fee, interest thereon from the respective due
dates thereof until fully paid at the rate of 12% per year.
7. General Excise Tax. Licensee will pay to Licensor as an
additional license fee, at the time and together with each payment of its
license fee, or other charge required hereunder to be made by Licensee to
Licensor which is subject to the Hawaii general excise tax on gross income or
any successor or similar tax, an amount which, when added to the license fee, or
other charge (whether actually or constructively received by Licensor), shall
yield to Licensor after deduction of all such taxes payable by Licensor with
respect thereto, a net amount equal to that which Licensor would have realized
therefrom had no such tax been imposed.
8. Taxes and Assessments. Licensee will also pay to Licensor as
an additional license fee, at least ten (10) days before the same become
delinquent, all real property taxes and assessments of every description to
which the licensed area or any part thereof or improvement thereon, or Licensor
or Licensee in respect thereof, are now or may during said term be assessed or
become liable, whether assessed to or payable by Licensor or Licensee provided,
however, that with respect to any assessment made under any betterment or
improvement law which may be payable in installments, Licensee shall be required
to pay only such installments of principal together with interest on unpaid
balances thereof as shall become due and payable during said term, and that such
taxes shall be prorated as of the dates of commencement and expiration
respectively of said term. If at any time during said term there shall be
assessed against the licensed area or any part thereof or any improvement
thereon or any fees payable to Licensor therefor or against Licensor in respect
thereof any new taxes (other than federal or state net income taxes or any other
taxes existing at the commencement of said term) which are in substitution for
real property taxes or are in lieu of increase thereof, Licensee will also pay
to Licensor as additional license fee at least ten (10) days before the same
become delinquent, all such new taxes. Licensee will also pay any and all
conveyance taxes imposed by the State of Hawaii in respect to this License
Agreement. In the event that there shall be more than one licensee of Licensor
on the Land, Licensor shall have the right to allocate the real property taxes
and any other taxes payable by Licensee under this License Agreement among such
licensees, including the Licensee, in a fair and equitable manner. Such
allocation by Licensor shall be final and binding on Licensee. It is agreed that
Licensee will pay all Real Property Taxes on the lands encumbered by this
agreement beginning in 1999-2000 tax year. Licensee will
-5-
<PAGE> 6
pay Real Property Tax for the tax period before the 1999-2000 tax year at the
agricultural rate appropriate to the crops planted.
9. Rates and Other Charges. Licensee will pay directly before the
same become delinquent all utility charges including water and sewer rates,
garbage rates and other charges and outgoings of every description to which the
licensed area or any part thereof or improvement thereon, or Licensor or
Licensee in respect thereof, may during said term be assessed or become liable,
whether assessed to or payable by Licensor or Licensee.
10. Assignment and Consent to Assignment. Licensee shall not
assign or mortgage this License Agreement or any interest hereunder, voluntarily
or involuntarily, without the prior written consent of Licensor. Such consent
may be withheld if, in the sole judgment of Licensor, the technical and
financial capabilities of the proposed assignee of this License Agreement or any
interest hereunder do not meet the criteria for evaluating such technical and
financial capabilities as established by Licensor.
11. Sublicense and Consent to Sublicense. Licensee will not
without the prior written consent of Licensor rent, sublicense or part with
Licensee's right to use the licensed area or any part thereof and any request
for Licensor's consent to a proposed sublicense must be accompanied by a copy of
the proposed sublicense agreement and disclosure of all terms of the
sublicense agreement. Prior to granting such consent, Licensor shall have the
right to review and approve the proposed sublicensee fee and may withhold their
consent, in the sole judgment of Licensor, 1) if the proposed sublicense fee is
below existing market sublicense fee for similar licensed areas, 2) if the
proposed sublicensee (or its principal or affiliates) has fewer than five years
of prior experience in agricultural, 3) if the proposed sublicensee is not
credit worthy , as evidenced by a lack of existing lines of credit, loans or
other sources of financing, or 4) if the proposed sublicensee's proposed use of
the licensed area will conflict with the operations of adjacent or nearby
tenants or licensees.
In the event of the sublicensing with the consent of
Licensor, Licensee shall pay Licensor, on the first day of each month of the
term of this License Agreement, one-half (1/2) of the monthly rent payable to
Licensee by the sublicensee. For purposes of this paragraph, the term "monthly
rent" shall mean so much of the total valuable consideration (whether consisting
of fixed, minimum and/or percentage rent; and/or commission, percentage and
premiums payable by the sublicensee to Licensee on amounts owing to third
parties by the sublicensees and/or Licensee in consequence of this License
Agreement and/or the sublicensee; and/or any amounts that would constitute
additional license fee as that term is defined in paragraph 6 above), prorated
on a monthly basis, without
-6-
<PAGE> 7
deduction or setoff by Licensee, as shall be payable by the sublicense to or on
behalf of Licensee.
In addition to any amounts otherwise owing by Licensee to
Licensor above, Licensee shall pay to Licensor an amount equal to the amount
payable by Licensor pursuant to Hawaii General Excise Tax Law, or any successor
substitute law, on gross income actually or constructively received by Licensor
pursuant to this paragraph 11.
12. Improvements Required By Law. Licensee will at its own
expense during the term of this License Agreement maintain and make any and all
necessary repairs required by law to be made to the licensed area, and shall
abide by all Federal, State and local laws, statutes, ordinances, rules and
regulations pertaining to its operations and to the installation, maintenance
and/or operation of its improvements.
13. Restoration, Repair and Maintenance. Licensee will at its own
expense from time to time and at all times during said term substantially
restore, repair, maintain, amend and keep all equipment, buildings, if any, and
towers, including any other improvements now or hereafter built or made on the
licensed area with all necessary reparations and amendments whatsoever in good
and safe repair, order and condition, reasonable wear and tear and destruction
by unavoidable casualty not herein required to be insured against.
14. Inspection. Licensee will permit Licensor and their agents at
all reasonable times during said term to enter the licensed area and examine the
state of repair, cultivation and condition thereof, and Licensee will repair and
make good at its own expense all defects required by the provisions of this
License Agreement to be repaired by Licensee of which notice shall be given by
Licensor or their agents within thirty (30) days after the giving of such notice
or such other reasonable time as may be specified therein. If for any reason
Licensee shall fail to commence and complete such repairs within thirty (30)
days after the giving of such notice or such other reasonable time as may be
specified therein, Licensor may, but shall not be obligated to, make or cause to
be made such repairs and shall not be responsible to Licensee or anyone claiming
by, through or under it for any loss or damage to the occupancy, business or
property of any of it by reason thereof, and Licensee will pay to Licensor on
demand and as additional license fee all costs and expenses paid or incurred by
Licensor in connection with such repairs.
15. Surrender. At the end of said term Licensee will peaceably
deliver up to Licensor possession of the licensed area, together with all
equipment and buildings (if any), including any other improvements, upon or
belonging to the licensed area, by
-7-
<PAGE> 8
whomsoever made, in good and safe repair, order and condition, except as
otherwise expressly provided in paragraph 13 hereof; provided, further, that if
Licensee is not then in default under this License Agreement, Licensee may
thereupon remove any removable or salvageable equipment which can be removed
without material damage to the licensed area, land or building. The foregoing
covenant of Licensee shall survive the expiration of said term.
16. Construction. Licensee will not construct or place any
buildings or structures, fences or walls, or other improvements on the licensed
area, nor make or suffer any additions to or structural alterations of the basic
structure of any buildings, nor change the grading or drainage thereof, without
the prior written consent of Licensor; provided, however, that Licensee may
construct an irrigation system, packing, cleaning and storage sheds. Any such
construction or alterations shall be done under the supervision of a licensed
architect or structural engineer and in accordance with complete plans,
specifications and detailed plot plans therefor prepared by such an architect or
structural engineer and first approved in writing by Licensor. No such approval
by Licensor shall be deemed a warranty or other representations on their part
that such plans, specifications or detailed plot plans or the building or
buildings, or other improvements therein described are legal, safe or sound
prior to commencing any construction of new buildings on the licensed area.
Licensee shall furnish Licensor evidence that all governmental
approvals necessary to commence construction have been obtained, including,
without limitation, a building permit. Licensee shall provide Licensor with
evidence satisfactory to Licensor that funds are available and/or committed to
Licensee sufficient to pay for 100% of the total direct and indirect costs of
constructing such alterations, additions or improvements. Licensee shall deposit
with Licensor copies of performance and labor and material payment bonds for not
less than 100% of the total cost of such construction, naming Licensor and such
other persons as Licensor may direct, as their interest may appear, as
co-obligees. Such bonds shall be in form and amount and with surety satisfactory
to Licensor. In addition to any other insurance required under this License
Agreement, during any construction Licensee and/or its contractor shall maintain
the comprehensive general liability insurance policy and other insurance
policies required under this License Agreement, which policies shall be
satisfactory to Licensor in form, content and amount of coverage, insuring
Licensor, Licensee and such other parties as Licensor shall specify, against
loss or damage to third parties or their property from hazards normally insured
against in the construction industry with respect to construction of the type to
be undertaken by Licensee. Licensee shall deliver to Licensor certificates of
insurance certifying that such insurance is in full force and effect.
-8-
<PAGE> 9
17. Fire and Other Casualty Insurance. Licensee will at
Licensee's own expense at all times during said term keep its portion of all
equipment and buildings, including any other improvements on the licensed area
insured against loss or damage by fire and other causes of loss included in the
standard ISO Special Coverage Form. The policy shall be with an insurance
company authorized to do business in Hawaii, in an amount as near as practicable
to the full replacement cost thereof (which amount Licensee will review as to
sufficiency at least annually and, if insufficient, will increase), and shall be
in the joint names of Licensor, Licensee and any mortgagee as each of their
interest may appear. Licensee will pay all premiums on such insurance when due,
and will deliver to Licensor a copy of the policy or a certificate of insurance
within thirty (30) days after execution of this License Agreement and will
provide copies of renewal policies or certificates of insurance prior to the
renewal date of such insurance. The policy shall contain a clause that the
insurer will not cancel or reduce coverages without first giving Licensor thirty
(30) days prior written notice. In every case of loss or damage to Licensee's
portion of said equipment or buildings, including any other improvements, all
proceeds of such insurance (excluding the proceeds of any rental value or use
and occupancy insurance of Licensee) shall be used with all reasonable speed by
Licensee for rebuilding, repairing or otherwise reinstating the same portion of
said equipment or buildings, including any other improvements in a good and
substantial manner according to the original plan and elevation thereof or such
modified plan conforming to laws and regulations then in effect as shall be
first approved in writing by Licensor and any mortgagee, and Licensee will make
up from its own funds any deficiency in the insurance proceeds. If Licensee's
portion of the existing equipment or buildings, including any other improvements
on the licensed area shall during the last two years of said term be destroyed
or damaged to an extent exceeding 50% of the actual cash value thereof
immediately prior to such casualty, and the insurance proceeds are insufficient
for restoring Licensee's portion of such restoration, Licensee may at its option
within thirty (30) days after such casualty notify Licensor in writing of its
intention to surrender this License Agreement, and Licensor shall, within thirty
(30) days after receipt of such notice, advise Licensee in writing of their
acceptance of such surrender, in which case Licensee shall, within sixty (60)
days after receipt of such acceptance, cause all debris and remains of its
portion of damaged equipment or buildings, including any other improvements to
be removed from the licensed area under a contract therefor first approved in
writing by Licensor and surrender to Licensor this License Agreement free and
clear of any encumbrances and all interests of Licensee and any mortgagee in the
remaining insurance proceeds and thereby be relieved of all further
obligations hereunder, it being understood that if Licensor shall fail to so
advise Licensee of their acceptance of such surrender or their election to
restore such equipment or buildings, including
-9-
<PAGE> 10
any other improvements as hereinafter provided, such failure shall be deemed to
constitute acceptance of such surrender.
18. Liability Insurance. Licensee shall, during the entire term
of this License Agreement, keep in full force and effect, liability insurance
with respect to the licensed area and the business operated by Licensee and
subtenants of Licensee, if any. This insurance shall be provided by an insurance
company acceptable to Licensor, with combined single limit of public liability
for personal injury and property damage of not less than $2,000,000.00 per
occurrence. Licensee shall name Licensor as additional insureds. The policy
shall contain a clause that the insurer will not cancel or change the insurance
without first giving Licensor thirty (30) days prior written notice. A copy of
the policy or a certificate of insurance shall be delivered to Licensor within
thirty (30) days after the execution of this License Agreement, and Licensee
will provide certificates of insurance or, upon request, copies of such
insurance policies, prior to the renewal date of any such insurance.
19. Licensee's Personal Property. Licensee shall insure and keep
insured all personal property of Licensee, in, on or upon the licensed area.
Such insurance shall insure against loss from fire and other causes of loss
provided for in the standard ISO Special Coverage Form. Any policy proceeds
shall be used for the repair or replacement of any personal property damaged or
destroyed unless this License Agreement shall cease and terminate under the
provisions hereof.
20. Preservation of Historic and Archaeological Sites. The
Licensee shall take every reasonable precaution to preserve and leave unaltered
all places, if any, of historic and/or archaeological interest, including
without limitation structures and sites listed on the Hawaii State Register of
Historic Places and/or the National Register of Historic Places, ponds,
reservoirs, heiau, altars, agricultural terraces, lo'i, walls, auwai, house
platforms, imu, petroglyph sites, cemeteries; and all objects, if any, of
historic and/or archaeological interest, including without limitation
antiquities and specimens of Hawaiian or other ancient art or handicraft which
may be found in or on the licensed area. Upon the discovery of such objects or
of any human remains in or on the licensed area, the Licensee will leave the
same untouched and will immediately notify the Licensor of the type and location
of such discovery.
21. Indemnity. Licensee will indemnify and hold Licensor harmless
from and against all claims and demands for loss or damage, including property
damage, personal injury and wrongful death, arising out of or in connection with
the use or occupancy of the licensed area by Licensee or any other person under
Licensee, or any accident or fire on the licensed area or any nuisance made
-10-
<PAGE> 11
or suffered thereon, or any failure by Licensee to keep the licensed area in a
safe condition, and will reimburse Licensor for all costs and expenses
including reasonable attorneys' fees incurred in connection with the defense of
any such claims, and will hold all equipment or buildings, including any other
improvements and personal property belonging to Licensee on the licensed area at
the sole risk of Licensee and shall save Licensor harmless from any loss or
damage thereto by any cause whatsoever.
22. Expenses of Licensor. Licensee will pay to Licensor, within
ten (10) days after the date of mailing or personal delivery of statements
therefor, (a) all costs and expenses including reasonable attorneys' fees paid
or incurred by Licensor but required to be paid by Licensee under any covenant
herein contained or paid or incurred by Licensor in enforcing any of Licensee's
covenants herein contained, in protecting themselves against any breach thereof,
in remedying any breach thereof, in recovering possession of the licensed area
or any part thereof, in collecting or causing to be paid any delinquent license
fees, taxes or other charges hereunder payable by Licensee, or in connection
with any litigation (other than condemnation proceedings) commenced by or
against Licensee to which Licensor shall without fault be made parties, and (b)
a reasonable fee for reviewing and processing any request by Licensee for
Licensor's consent or approval, which fee shall be a flat-rate service charge as
established by the policy of Licensor then in effect or a sum equal to all costs
and expenses paid or incurred by Licensor, including without limitation
reasonable fees of attorneys and other consultants retained by Licensor and the
costs of Licensor's regular salaried staff in connection therewith, whichever is
greater. All such costs, expenses and fees shall constitute additional license
fee and shall bear interest as provided in paragraph 23 hereof.
23. Default and Defeasance. This License Agreement is upon the
express condition that if Licensee shall fail to pay said license fee or any
part thereof within fifteen (15) days after the same becomes due and payable,
whether the same shall or shall not have been legally demanded, or shall fail to
observe and perform faithfully any of its covenants or agreements herein
contained performable by the payment of money (other than the payment of license
fee) and such default shall continue for thirty (30) days after a statement
therefor given by the obligee to Licensee, or shall fail to observe or perform
faithfully any of its other covenants or agreements herein contained and such
default shall continue for thirty (30) days after written notice thereof given
by Licensor to Licensee, or shall abandon the licensed area, or if this License
Agreement or any estate or interest of Licensee hereunder shall be sold under
any attachment or execution, Licensor may at once re-enter the licensed area or
any part thereof in the name of the whole and, upon or without such entry, at
their option terminate this License Agreement, without service of notice or
-11-
<PAGE> 12
legal process and without prejudice to any other remedy or right of action for
arrears of license fee or other charges or other breach of contract. If
Licensee shall fail to observe or perform any of its covenants herein contained,
Licensor at any time thereafter and without notice may, but shall not be
obligated to, observe or perform such covenant for the account and at the
expense of Licensee, and all costs and expenses incurred by Licensor in
observing and performing such covenant shall constitute additional license fee
and shall bear interest at the rate of 12% per year.
24. Condemnation. If the whole of the licensed area shall be
taken by any public authority under the power of eminent domain, then the term
of this License Agreement shall cease as of the day possession is taken by such
public authority and all license fees shall be paid up to that date. All
compensation and damages payable or to be paid for or by reason of such taking
shall be payable or to be the sole property of Licensor. If only a part of the
licensed area shall be taken under eminent domain, this License Agreement shall
terminate as to the portion taken and unless this License Agreement shall be
terminated, as hereinafter provided, it shall continue in full force and effect
as to the remainder of the licensed area.
If the remainder of the licensed area cannot be used for the
purpose for which Licensee has been using the licensed area, Licensee shall have
the option, to be exercised within thirty (30) days after the filing of such
eminent domain action, of cancelling this License Agreement effective as of the
date the condemning authority shall take possession.
Licensee shall have the right to claim and recover from the
condemning authority, but not from Licensor, such compensation as may be
separately awarded or recoverable by Licensee in Licensee's own right on account
of any cost or loss to which Licensee might be put in removing Licensee's
fixtures and equipment.
25. Hazardous Waste. Licensee shall keep and maintain the
licensed area including without limitation the groundwater on or under the
licensed area, in compliance with, and shall not cause or permit the licensed
area or any portion thereof to be in violation of, any federal, state or local
laws, ordinances or regulations, now or hereafter in effect, relating to
environmental conditions, industrial hygiene or Hazardous Materials (as
hereinafter defined), on, under or about the licensed area including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Section 9601, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Clean Water
Act, 33 U.S.C. Section 1251, et seq., the Clean Air
-12-
<PAGE> 13
Act, 42 U.S.C. Section 7401, et seq., the Toxic Substances Control Act, 15
U.S.C. Sections 2601 through 2629, the Safe Drinking Water Act, 42 U.S.C.
Sections 300f through 300j, and any similar state and local laws and ordinances
and the regulations now or hereafter adopted, published and/or promulgated
pursuant thereto (collectively the "Hazardous Materials Laws").
Licensee shall not use, generate, manufacture, treat, handle,
refine, produce, process, store, discharge, release, dispose of or allow to
exist on, under or about the licensed area any flammable explosives, radioactive
materials, asbestos, organic compounds known as polychlorinated biphenyls,
chemicals known to cause cancer or reproductive toxicity, pollutants,
contaminants, hazardous wastes, toxic substances or related materials, including
without limitation any substances defined as, or included in, the definition of
"hazardous substances", "hazardous wastes", "hazardous materials", or "toxic
substances" under the Hazardous Materials Laws (collectively "Hazardous
Materials"), except in strict compliance with all applicable Hazardous Materials
Laws. Furthermore, Licensee shall not allow to exist on, under or about the
licensed area any underground storage tanks or underground deposits.
Licensee shall immediately advise Licensor in writing of (i) any
and all enforcement, clean up, removal, mitigation remediation or other
governmental or regulatory actions instituted, contemplated or threatened
pursuant to any Hazardous Materials Laws affecting the licensed area, (ii) all
claims made or threatened by any third party against the Licensee or the
licensed area relating to damage, contribution, cost recovery, compensation,
loss or injury resulting from any Hazardous Materials (the matters set forth in
clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials
Claims"), (iii) the Licensee's discovery of any occurrence or condition on the
licensed area which could subject Licensee, Licensor or the licensed area to any
restrictions on ownership, occupancy, transferability or use of the licensed
area under any Hazardous Materials Laws.
Licensor shall have the right to join and participate in, as a
party if it so elects, any settlements, remedial actions, legal proceedings or
actions initiated in connection with any Hazardous Materials Claims and to have
its reasonable attorneys' fees incurred in connection therewith paid by the
Licensee. Licensee shall be solely responsible for and shall indemnify and hold
harmless Licensor and its employees, agents, successors and assigns from and
against any loss, damage, cost, expense or liability directly or indirectly
arising out of or attributable to the use, generation, manufacture, treatment,
handling, refining, production, processing, storage, release, threatened
release, discharge, disposal or presence of Hazardous Materials, on, under or
about the licensed area by or through Licensee including without
-13-
<PAGE> 14
limitation: (a) the costs of any required or necessary repair, cleanup or
detoxification of the licensed area, and the preparation and implementation of
any closure, remedial or other required plans; and (b) all reasonable costs and
expenses incurred by Licensor in connection therewith, including without
limitation reasonable attorneys' fees.
Licensee will indemnify Licensor against and hold Licensor
harmless from all costs and expenses (including reasonable fees of legal
counsel), losses, damages (including foreseeable or unforeseeable consequential
damages) and liabilities incurred by Licensor which may arise out of or may be
directly or indirectly attributable to (a) the use, generation, manufacture,
treatment, handling, refining, production, processing, storage, release,
discharge, disposal or presence of any Hazardous Material on, within, under or
about the licensed area, (b) Trustee's investigation and handling (including the
defense) of any Hazardous Materials Claims, whether or not any lawsuit or other
formal legal proceeding shall have been commenced in respect thereof, and (c)
Licensor enforcement of this License Agreement, whether or not suit is brought
therefor. The provisions of paragraph 25 of this License Agreement shall survive
the termination of this License Agreement.
If requested by Licensor at the end of the license term Licensee,
at its sole cost and expense, shall cause a Phase I Environmental Survey of the
licensed area to be conducted of the property by a competent and experienced
environmental engineer or engineering firm and shall provide a copy of such
Survey to the Licensor in order to confirm Licensee's compliance with the
covenants contained in this paragraph.
26. Permits and Notices. Licensee shall at its own expense be
solely responsible for obtaining any governmental zoning classification,
approval or consent required by law for or in connection with Licensee's
operations hereunder and shall also give any notices necessary or incidental to
said operations.
27. Survey. Within six (6) months of the Effective Date, Licensee
shall provide to Licensor a metes and bounds survey and boundary map for the
licensed area prepared and certified by a professional land surveyor registered
to practice in the State of Hawaii.
29. Liens. Licensee shall not permit any liens to be attached to
the improvements or the licensed area.
30. Successors. All of the covenants, agreements, provisions,
terms and conditions contained in this License Agreement shall apply to, inure
to, and be binding upon Licensor, Licensee, and its successors, successors in
trust and assigns.
-14-
<PAGE> 15
31. Disclaimer of Warranties. The provisions of this License
Agreement constitute, and are intended to constitute, the entire agreement of
the parties to this License Agreement, and no terms, conditions, warranties,
promises or undertakings of any nature whatsoever, express or implied, exist
between the parties, except as herein expressly set forth.
32. Non Waiver. The waiver by Licensor of any breach of any term,
covenant or condition herein contained, shall not be deemed to be a waiver of
such term, covenant or condition of any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
any license fee or other sums due hereunder by Licensor shall not be deemed to
be a waiver of any preceding breach by Licensee of any term, covenant or
condition of this License Agreement, other than the failure of Licensee to pay
the particular license fee or other amount so accepted, regardless of Licensor's
knowledge of such preceding breach at the time of acceptance of such license fee
or other amount. No covenant, term or condition of this License Agreement shall
be deemed to have been waived by Licensor unless such waiver is in writing,
signed by Licensor.
33. Licensee's Assumption of Risk Regarding Restriction on Use.
Notwithstanding any provision to the contrary, Licensee expressly acknowledges
and agrees that by accepting this License Agreement upon the terms and
conditions provided herein, Licensee has agreed to assume all risks relating to
any restriction on the use of the licensed area arising out of, or relating to,
any governmental land use and zoning laws, the building code, or the design of
the improvements comprising the property. If, for any of the foregoing reasons
or causes, Licensee is unable to use the licensed area for the purposes set
forth in paragraph 5, Licensee's sole remedy shall be to terminate this License
Agreement, and upon such termination and the payment of any outstanding sums
owed by Licensee to Licensor, Licensee shall be relieved of any further
obligations to Licensor under this License Agreement. In no event shall Licensee
have any recourse against Licensor for any claims for damages, loss of profits
or other general or consequential damages arising out of the termination of this
License Agreement due to the reasons or causes set forth in this paragraph. This
release of liability has been expressly bargained for by Licensor in agreeing to
issue this License Agreement to Licensee upon the terms and conditions contained
herein, and Licensee acknowledges that Licensee has been advised by its legal
counsel of the consequences of this release of liability in favor of Licensor.
This release of liability shall accordingly be liberally construed in favor of
Licensor to effect the intention of the parties in entering into this License
Agreement.
34. Subdivision. If at any time during the term of this License
Agreement any governmental authority shall require that the
-15-
<PAGE> 16
licensed area be legally subdivided in order for this License Agreement to be
kept in effect, Licensee agrees to undertake, at its sole cost and expense all
the steps necessary to obtain a legal subdivision of the Land. If Licensee fails
to effect the required subdivision within the time permitted by the complaining
governmental authority, this License Agreement shall terminate.
35. Paragraph Headings. The headings of paragraphs herein are
inserted only for convenience and reference and shall in no way define or limit
the scope or intent of any provision of this License Agreement.
36. No Interest in Real Property. Licensee agrees that Licensee
does not and shall not claim at any time any real property interest in the land
owned by Licensor or any landlord-tenant relationship with Licensor by virtue of
this License Agreement or its occupancy or use of the licensed area. THIS
LICENSE AGREEMENT IS NOT A LEASE.
37. Severability. If any term of this License Agreement or any
application thereof shall be invalid or unenforceable, the remainder of this
License Agreement and any other application of such term shall not be affected
thereby.
38. Entire Agreement. This License Agreement and the Exhibit
attached hereto and forming a part hereof set forth all the covenants, promises,
agreements, conditions and understandings between Licensee and Licensor
concerning the licensed area and there are no covenants, promises, agreements,
conditions or understandings, either oral or written, between them, other than
are herein set forth. Except as herein otherwise provided, no subsequent
alteration, amendment, change or addition to this License Agreement shall be
binding upon Licensor or Licensee unless reduced to writing and signed by them.
39. No Partnership Intended. It is expressly understood that
Licensor does not intend and shall not, in any way or for any purpose
whatsoever, become a partner of Licensee in the conduct of its business, or
otherwise, or joint venturer or a member of a joint enterprise with Licensee
pursuant to this License Agreement.
40. Notices. All notices, requests, demands or documents which
are required or permitted to be given or served hereunder shall be in writing
and personally delivered, or sent by registered or certified mail addressed as
follows:
-16-
<PAGE> 17
To Licensor:
567 South King Street, Suite 200
Honolulu, Hawaii 96813
Attention: Hawaii Island Region
Regional Director
To Licensee:
4614 Kilauea Avenue, Suite 435,
Honolulu, Hawaii 96816
The addresses may be changed from time to time by the addressee by
serving notice as heretofore provided. Service of such notice or demand shall be
deemed complete on the date of actual delivery as shown by the addressee's
registry or certification receipt or at the expiration of the third day after
the date of mailing, whichever is earlier in time.
41. Consents of Parties. Except as otherwise set forth in this
License Agreement, where the consent of either party is required under the terms
of this License Agreement, such consent shall not be unreasonably withheld.
42. Trustees Not Personally Liable. This License Agreement has
been approved or executed by the Trustees of the Estate of Bernice Pauahi Bishop
in their fiduciary capacities as said Trustees, and not in their individual
capacities. No personal liability or obligation under this instrument shall be
imposed or assessed against said Trustees in their individuals capacities.
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed these presents as
of the day and year first above written.
TRUSTEES OF THE ESTATE OF HAWAIIAN VINTAGE CHOCOLATE
BERNICE PAUAHI BISHOP COMPANY, Inc., a Hawaii
corporation
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
-------------------------------- --------------------------------
Area Development Manager) Its President
Licensor Licensee
- -----------------------------------
Approved:
Approved as Date:
to Form:[SIGNATURE ILLEGIBLE] ------------------------
---------------------
Witness:
---------------------
-18-
<PAGE> 1
EXHIBIT 6.3
Hawaii REALTOR(R) [LOGO]
Association of
REALTORS(R)
RENTAL AGREEMENT
HAWAII ASSOCIATION OF REALTORS(R) STANDARD FORM
1. DATE: The date of this Rental Agreement is: December 5, 1997.
2. WORDS THAT HAVE SPECIAL MEANING, WE, OUR and US, mean the Landlord. YOU and
YOUR mean everyone listed as a tenant in Par. 3. DWELLING UNIT and UNIT mean
the place you are renting from the Landlord.
<TABLE>
<CAPTION>
3. TENANTS. NAME AGE(IF MINOR) SOCIAL SECURITY NUMBER BUSINESS PHONE
<S> <C> <C> <C> <C>
Hawaiian Vintage Chocolate Fed # 99-0306492 808-735-8494
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
4. ALL TENANTS RESPONSIBLE. By signing this Agreement, each tenant agrees to
pay the rent and obey this Agreement. If signed by two or more tenants, each
of you is liable for all the rent and for obeying this agreement. Each
adult is also responsible for all minors and must make sure they obey, too.
5. YOU MAY NOT SUBLET, ETC. You may not sublet, or let anyone else occupy the
Unit or replace you as the tenant, unless you have our written permission in
advance.
6. WHEN AND HOW LONG YOU MAY OCCUPY. The Unit will be ready for you to move
into on January 1, 1998 (date).
The length of your occupancy will be as checked. [ ] Month-to-Month Lease.
Par. 1 on the reverse side explains how this lease may be ended.
[ ] Fixed Lease, which will end on June 30, 1998 (date).
This means your occupancy will automatically end ON THAT DATE - we do not
have to tell you to move out. (NOTE: If you have our permission in writing
to do so, you may continue to rent. In this case, your rent and all the
other terms will remain the same as in this Agreement, unless we tell you
differently in writing.)
[ ] Other, as stated in the Special Terms, Par. 14 on this side.
NOTE: Your lease may be ended earlier, if you do not pay the rent and/or
obey this Agreement. If, after this lease is terminated, you stay in the
Unit without our written consent, the monthly rent will be set according to
Par. K on the reverse side.
7. RENT. The rent is $2,604.15 per month (year, month, week, day, etc.)
IN ADVANCE. You will not get any notice to pay from us. Payment is due on
the first day of each month. BEGINNING ON January 1, 1998. (date). You must
pay to Harbor Court Developers at this address c/o AHI Harbor Ltd.,
Partnership, Lock Box #47892, P.O. Box 1300, Honolulu, HI 96807.
Later we may tell you in writing to pay (1) at a different address; or (2)
to pay someone else or that we have transferred this lease to someone else.
If we do so, you must pay at that address and to that person.
8. SERVICE CHARGE AND INTEREST. You must pay a service charge of 10% for each
payment we do not receive by 5:00 p.m. of the fifth day of the month in
which the payment is due. Interest at 12% per year will be charged on all
rent and other sums you do not pay to us on time.
9. SECURITY DEPOSIT. You must pay $2,500.00 IN ADVANCE as a security deposit.
By law, this deposit may not be more than one month's rent. You may not use
this deposit as your last month's rent. Par. H on the reverse side explains
how your deposit will be handled when you move out. Any interest earned on
the security deposit shall be paid to: CB Commercial-Koll. The person or
entity responsible for safe keeping or custody of your security deposit
shall be: CB Commercial-Koll.
10. UTILITIES AND SERVICES. If they are checked, you must take care of and pay
for the following items from the date your occupancy starts until it ends.
You must arrange for these items yourself, unless something different is
stated in the Special Terms, Par. 14. We will provide and maintain items
that apply and are not checked. (NOTE: Cross out what does not apply.)
[X] telephone [X] electricity [X] other (describe) Chilled water
consumption
11. ADDRESS AND DESCRIPTION OF THE DWELLING UNIT (includes any grounds, common
other areas and facilities the tenant may use): 66 Queen Street, Apartment
#2703, Honolulu, Hawaii 96813 with parking stall(s) P-12 20-21.
12. CONDITION OF THE UNIT AND THINGS IN IT:
(a) WHEN YOU MOVE IN. Before you move in, we will inspect and inventory the
Unit and the things in it (items like fixtures, appliances, and other
personal property). We will prepare an INVENTORY & CONDITION FORM,
which you should check carefully. You and we will sign it. When signed,
this form will be our agreement about (1) what the condition of the
Unit was; and (2) what things were in the unit, and what their
condition was, when you moved in.
(b) WHEN YOU MOVE OUT. Whenever you move out:
(1) You must take all your personal things with you. If you leave any
behind, you must pay for any storage and other costs, including
advertising costs, involved in selling or getting rid of them.
(2) You must leave the Unit clean and neat. We will charge you
additional rent for the number of days it takes us to clean and
fix up the Unit if you do not do your part. REMEMBER: It is your
duty to have the Unit in clean and proper condition ON THE DAY YOU
MOVE OUT, NOT ON ANY LATER DAY.
(3) You must have the same things in it that were there when you moved
in; and (4) you must leave these things and the Unit in the same
condition they were in when you moved in, except for normal wear
and tear. If there is any disagreement about (3) or (4), the
signed INVENTORY & CONDITION FORM will be treated as correct.
13. KEYS, CARDS AND LOCKS. We are giving you the keys, parking cards and locks
listed below. You may not have additional keys or cards made or locks
changed or added, unless you have our written permission in advance. You
must return all these items when you move out, or pay to replace them.
<TABLE>
<CAPTION>
ITEM: NUMBER GIVEN TO YOU: ITEM: NUMBER GIVEN TO YOU:
<S> <C> <C> <C>
Door/mail box key(s) Residential Security Access Cards
Parking Access Cards @$20.00 each* @$25.00 each*
</TABLE>
* refundable
14. SPECIAL TERMS. You and we agree that: (Please Number)
1. Conditions Acknowledged by Tenant are made a part hereof. 2. Rental
Agreement Addendum attached hereto is made a part hereof. 3. Hawaii State
Excise Tax is included in the monthly rent. 4. Tenant may renew leased for
an additional 6 months.
15. STANDARD TERMS. YOU AND WE AGREE THAT THE STANDARD TERMS ON THE REVERSE SIDE
OF THIS FORM ARE PART OF THIS AGREEMENT. BE SURE YOU READ ALL OF THESE TERMS
BEFORE YOU SIGN.
16. RECEIPT BY TENANT: You have received a copy of this Agreement and the
following as checked:
<TABLE>
<S> <C>
[X] Inventory and Condition Form ([SIGNATURE]) (initials) [ ] Fair Housing Information (______/_____) (initials)
[X] House Rules of Condominium or Co-op (___/___) (initials) [X] Other Rules (describe): Condominium By-Laws
</TABLE>
17. TENANT SIGNATURES. By signing below, each tenant agrees to pay rent and obey
this Agreement. X Tenant Manual [SIGNATURE ILLEGIBLE]
<TABLE>
<CAPTION>
Print Tenant's Name Signature of Tenant
<S> <C>
Hawaiian Vintage Chocolate /s/ JAMES WALSH, President
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
18. LANDLORD/MANAGING AGENT SIGNATURE AND INFORMATION:
Name (print) McCormack Real Estate Service, Ltd, Signature [SIGNATURE
ILLEGIBLE] as Agent
Address 841 Bishop Street, Suite 2301, Honolulu, HI 96813
Telephone (808) 537-5378 Emergency Phone# (808) 524-4188
List all other owners:______________________________________________________
Manager: [X] Yes. [ ] No. If checked YES by the Landlord, the Manager will
act for us to receive rents, requests, notices and demands from you. He may
also give requests, notices and demands to you. (NOTE: There must be a
Manager on the island where this unit is located, if the Landlord does not
live on the island.)
The Manager is: McCormack Real Estate Services, Ltd. - Mike McCormack, Jr.
19. RECEIPT. The sum of $5,244.15 in the form of Checks has been received from
you, and is to be applied as follows: **Security deposit of $2,500.00
(payable to CB Commercial-Koll pro-rated 1st.
(NOTE: We may not receive an amount more than the security deposit and one
month's rent.) month's rent & security access cards
<PAGE> 2
RENTAL AGREEMENT ADDENDUM
This Rental Agreement Addendum shall be an integral part of and amend the Rental
Agreement dated December, 1997 ("Rental Agreement") by and between Hawaiian
Vintage Chocolate ("TENANT") and McCORMACK REAL ESTATE, INC. ("LANDLORD") for
the property located at the Harbor Court Condominium (the "Project"), Unit
Number: 2703 ("Dwelling Unit").
COVENANTS AND CONDITIONS
1. HOUSE RULES & BYLAWS.
a. TENANT must register with the Resident Manager and obtain
current copies of the House Rules and Bylaws prior to moving
into the property.
b. TENANT must abide by the House Rules and Bylaws.
2. TENANT COVENANTS. TENANT shall at all times during the tenancy:
a. Comply with all applicable building and housing laws materially
affecting health and safety.
b. Keep that part of the Project which TENANT occupies and uses as
clean and safe as the conditions of the Project permit.
c. Dispose from TENANTs Dwelling Unit all rubbish, garbage, and
other organic, hazardous or flammable waste in a clean and safe
manner.
d. Keep all plumbing fixtures in the Dwelling Unit or used by
TENANT as clean as their condition permits.
e. Properly use, maintain and operate all electrical and plumbing
fixtures and appliances in the Dwelling Unit or used by TENANT.
f. Not permit any person on the Project with TENANT's permission to
willfully destroy, deface, damage, impair, or remove any part of
the Project including without limitations the Dwelling Unit or
the facilities, equipment, or appurtenances thereto, nor shall
TENANT do any such thing.
g. Keep the Dwelling Unit and all fixtures, facilities, appliances,
furniture, and furnishings supplied therein by LANDLORD in fit
condition, reasonable wear and tear excepted.
-1-
<PAGE> 3
h. Use the Dwelling Unit only for residential and commercial office
purposes and not for any transient hotel purposes.
i. Not permit the toilets, sinks, tubs, swimming pool, spa, water
features and other water apparatus in the Project to be used for
any purpose other than those for which they were designed, nor
permit any sweepings, rubbish, rags or other articles to be
thrown therein.
j. Make no alteration or addition to the Dwelling Unit nor any
alteration or addition to the common elements including without
limitations painting, wall papering, use of nails or other
objects in or through concrete walls or altering floor
coverings, nor permit any person on the Project with TENANT's
permission to do the same.
3. RENT. Rent payment is due on the first (1st) day of every month.
All checks must be made payable to HARBOR COURT DEVELOPERS,
should include the Dwelling Unit number and should be mailed to
the following address:
HARBOR COURT DEVELOPERS
c/o AHI Harbor Ltd.Partnership
Lock Box #47892
P.O. Box 1300
Honolulu, Hawaii 96807-1300
4. SECURITY DEPOSIT.
a. TENANT's security deposit should not be construed by TENANT as
payment of the last month's rent nor applied as such.
b. Any interest earned on TENANTs security deposit shall be
retained by LANDLORD as compensation for administering these
funds.
5. ILLEGAL SUBSTANCES & ACTIVITIES. NO USE OR POSSESSION OF ILLEGAL
SUBSTANCES OR OTHER ILLEGAL ACTIVITIES SHALL BE PERMITTED ON OR
IN THE DWELLING UNIT AND/OR THE PROJECT.
6. DISTURBANCES.
a. No excessively loud talking, unnecessarily loud and disturbing
noises, or boisterous conduct is permitted at any time.
-2-
<PAGE> 4
b. Loud vocal or instrumental music, radio or TV programs are not
permitted before 8:00 am or after 10:00 pm, or on a continuous
basis.
7. SUBLETTING OR ASSIGNING. TENANT shall not sublet Tenant's Dwelling
Unit and/or stall(s), or assign this Rental Agreement to another without
the prior consent of LANDLORD whose consent may be withheld for any
reason.
8. NUMBER OF OCCUPANTS. The number of occupants shall not be increased to
more than that stated in the Rental Agreement without the prior written
consent of LANDLORD. Only the individuals named on the Rental Agreement
may reside within the Dwelling Unit.
9. EXTERIOR DOORS & LOCKS.
a. All exterior doors must be locked during TENANT's absence and kept
closed at all times, particularly, any applicable security doors
to ensure adequate security.
b. TENANT shall neither change any of the existing locks nor add any
new locks to the Dwelling Unit without LANDLORD's prior written
consent
C. Lockout services are provided by the Resident Manager at a cost of
FIFTY AND NO/00 DOLLARS ($50.00) between the hours of 8:00 am. and
5:00 p.m. daily and SEVENTY-FIVE AND NO/100 DOLLARS ($75.00) for
all other times. If TENANT is unable to contact the Resident
Manager through Security, then TENANT is advised to obtain a
locksmith at TENANT's sole cost and expense after first notifying
Security of TENANT's intent to utilize the services of a
locksmith.
10. REPAIRS & PLUMBING.
a. Any defective condition within the Dwelling Unit which comes to
TENANT's attention, which TENANT has reason to believe is unknown
to LANDLORD, and which TENANT has reason to believe is the duty of
LANDLORD or of another tenant to repair, shall be reported by
TENANT to LANDLORD in writing immediately thereof or as soon as
practicable. Such written notification should be sent to the
attention of the following:
Mr. Michael McCormack, Jr.
Customer Service Manager
66 Queen Street, Residential Lobby
Honolulu, Hawaii 96813
-3-
<PAGE> 5
b. TENANT's failure to comply with such notification may result in
TENANT's 'liability to pay for the repair and/or replacement of
any such defective condition and/or further damages as a result of
such defective condition.
c. Damage within the Dwelling Unit caused by stopping or plugging of
waste pipes, or overflow from bath tubs, water closets, wash
basins, or sinks must be paid for by TENANT (see Standard Terms,
paragraph F1 of the Rental Agreement)
11. PETS. No pets are allowed. No visiting pets and no pet-sitting are
permitted at any time. If this Rental Agreement is terminated due to
TENANT's breach of this provision the Dwelling Unit may be fumigated by a
professional licensed exterminator at TENANT's expense should LANDLORD
determine in LANDLORD's sole discretion that fumigation is necessary.
12. WATERBEDS. No waterbeds of any kind are permitted within the Dwelling
Unit.
13. WASHERS AND DRYERS. TENANT has been provided a washer and dryer in the
Dwelling Unit. TENANT is required to turn the water valves "ON"
immediately prior to "OFF" immediately after EACH use. Do not start the
wash and then leave the unit unattended. TENANT will be held liable for
any damages in the event of non-compliance. TENANT is required to check
TENANT's WATER HOSES once per month and to contact LANDLORD immediately
if TENANT notices any signs of wear, leaks, or any other damage. TENANT
may be held liable for unreported damages.
14. LANAIS - CARE, MAINTENANCE AND USE.
a. TENANT shall be responsible for the care and maintenance of all
lanais, if any such lanai is included in TENANT's Dwelling
Unit. TENANT may not, however, paint or otherwise decorate the
walls and ceilings of such lanais. TENANT agrees to keep the
lanais cleaned by vacuum or sweeping. The use of a water hose
or other high volume containers to clean the lanais is strictly
prohibited.
b. TENANT shall keep and maintain no more than four (4) potted
plants on the lanais. The maximum pot dimensions permissible
are twenty inches high by twenty-four inches wide (20" x 24")
and all pots should be in earthtone colors. All pots must be
placed on drainage saucers to catch excess water.
c. Any unsightly or disturbing items should not be kept on the
lanais. These areas are not to be used for storage purposes of
any kind, except in designated storage areas.
-4-
<PAGE> 6
d. Banners commemorating holidays or festivals may be displayed
from lanais only during the actual holidays or festivals except
that reasonable Christmas decorations may be displayed during
the month of December and the first week of January.
15. CONSENT AND NOTICE TO ENTER.
a. TENANT shall not unreasonably withhold TENANT's consent to
LANDLORD or LANDLORD's Agent to enter into the Dwelling Unit in
order to inspect the Project; make necessary or agreed upon
repairs, decorations, alterations, or improvements; supply
services; or exhibit the Dwelling Unit to prospective
purchasers, mortgagees, tenants, or others who may have
reasonable cause to inspect such Dwelling Unit.
b. In any such event as mentioned in paragraph "15. a." above,
LANDLORD shall give Tenant at least forty-eight (48) hours
notice of LANDLORD's intent to enter the Dwelling Unit and such
entering shall be conducted only during reasonable hours unless
emergency situations require otherwise.
16. INSURANCE. TENANT IS STRONGLY ADVISED TO OBTAIN THEIR OWN RENTER'S
INSURANCE. LANDLORD's policy, if any, may not cover TENANT or TENANT's
belongings for losses which may be due to events such as but not limited
to earthquakes, wind, hurricanes, fire, theft, water damage and/or
negligence.
17. LATE RENT & NON-SUFFICIENT FUNDS.
a. LANDLORD will NOT tolerate LATE RENT payments or BOUNCED
CHECKS. ALL rents are due on the 1st of each month. You must
pay a service charge of ten percent (10%) for each payment we
do not receive by 5:00 p.m. of the fifth day of the month in
which the payment is due. If rent is not received by the fifth
day of the month TENANT will be charged an interest of 12% per
year on all rent and other sums not paid on time until all rent
and late fees are paid in full. TENANTS who are LATE with their
rent may be reported to Rent Check. Unicheck may also be
notified. Late charges and bank charges may apply.
b. All checks returned Non-Sufficient Funds shall cause TENANT to
be charged TWENTY-FIVE AND N0/100 DOLLARS ($25.00) for each
rejection. Late fees may also be incurred.
c. In the event TENANT provides a personal rent check that is
subsequently determined to have Non-Sufficient Funds then
LANDLORD will NOT accept any future personal checks from TENANT
and TENANT must pay all subsequent rental fees with a cashier's
check or money order.
-5-
<PAGE> 7
d. In the event LANDLORD institutes legal proceedings and/or
incurs legal costs to recover any unpaid rent and late fees due
and owing, TENANT shall be held responsible for any such costs.
18. VISITORS.
a. No visitors are permitted on the Project in excess of a one (1)
week stay without the prior written consent of LANDLORD.
b. No parties or commercial gatherings in excess of fifteen (15)
persons in total attendance shall be conducted within the
Dwelling Unit.
c. TENANT shall be responsible for the conduct of TENANT's family
and guests. TENANT shall upon request by the Resident Manager
immediately abate and remove at TENANT's sole cost and expense
any person, structure, thing or condition that may exist with
regard to the occupancy or use of the Dwelling Unit contrary to
the intent and meaning of this Rental Agreement, or if TENANT
is unable to control the conduct of any such person, structure,
thing or condition to conform with the intent and meaning of
this Rental Agreement then, and upon request of the Resident
Manager, the Resident Manager shall remove such person,
structure, thing or condition from the Project at TENANT's sole
cost, expense and liability.
19. PARKING STALLS. TENANT shall be responsible for any applicable charges
incurred for the cleaning and possible de-greasing of the
parking stalls/area.
20. SORTING AND SEPARATION OF REFUSE AND TRASH.
a. TENANT's Duties: TENANT agrees, at TENANT's sole cost and
expense, to comply with all present and future laws, orders,
and regulations of all federal, state, municipal, and local
governments, departments, commissions, and boards (including
the Board of Directors of the Association of Apartment Owners
of the Project) regarding the collection, sorting, separation,
and recycling of waste products, garbage, refuse, and trash.
TENANT shall sort and separate such items into categories as
provided by law or as otherwise required, and in accordance
with the rules and regulations adopted by any or all of the
aforementioned named entities for the sorting and separating of
such designated recyclable materials.
b. Fines and Penalties; Indemnification of LANDLORD: TENANT shall
pay all costs, expenses, fines, penalties, or damages imposed
on LANDLORD or TENANT by reason of TENANT's failure to comply
with Paragraph "20. a." above, and shall indemnify, defend, and
hold LANDLORD harmless from and against any actions, claims,
and suits arising from such noncompliance, using counsel
reasonably
-6-
<PAGE> 8
satisfactory to LANDLORD, if LANDLORD so elects. TENANT's
noncompliance with Paragraph "20.", in whole or in part, shall
constitute a violation of a substantial obligation of this
tenancy. TENANT shall be liable to LANDLORD for any costs or
expenses, including attorneys' fees, of any action or
proceeding by LANDLORD against TENANT, based upon TENANT's
breach of Paragraph "2O.".
21. TENANT'S TEMPORARY ABSENCE.
a. In the event TENANT will be absent from the Dwelling Unit for
any anticipated extended period of time exceeding five (5) days
TENANT shall notify LANDLORD in writing of such absence no
later than the first day of such absence.
b. In the event TENANT fails to give such notification of TENANT's
anticipated extended absence TENANT agrees to indemnify and
hold harmless LANDLORD for any damage resulting from such
absence.
22. VACATING THE PROJECT.
a. NOTICE OF INTENT TO VACATE MUST BE IN WRITING AND DELIVERED TO
LANDLORD AT LEAST TWENTY EIGHT (28) DAYS PRIOR TO THE RENTAL
AGREEMENT EXPIRING OR TERMINATING. One (1) week prior to
vacating, TENANT must notify LANDLORD to set up an appointment
for check-out.
b. If applicable, TENANT must schedule in advance with Resident
Manager TENANT's moving date and time. TENANT's
responsibilities include, but are not limited to, complying
with move-out procedures and phone and utilities disconnection.
c. TENANT understands that TENANT's "last day of occupancy" is the
date that ALL KEYS are returned to LANDLORD and the property
has been completely cleaned and repaired for any damage
attributable to TENANT, inspected by LANDLORD, and is ready for
the next tenant to occupy. TENANT agrees to pay through the
"last day of occupancy." The term "ALL KEYS" shall include
without limitation keys of entry, recreation keys, padlocks,
deadbolts, entry gate keys, parking gate cards, openers, and
mailbox keys.
d. All personal effects should be removed and the Dwelling Unit
should be thoroughly cleaned and ready for occupancy by the
next tenant.
-7-
<PAGE> 9
e. Walls must be washed and smudges removed from all areas
including light switches and doors. Nail holes and any other
holes should be filled-in, smoothed, and painted with matching
paint.
f Walls' should be restored to their original condition if
pictures and/or nails were installed in the walls, pursuant to
the inventory and condition form.
g. Carpets shall be PROFESSIONALLY Cleaned no earlier than two (2)
days prior to check-out by a company approved by LANDLORD. A
copy of the cleaning receipt shall be provided by TENANT to
LANDLORD at time of check-out. If TENANT fails to have the
carpets professionally cleaned, LANDLORD shall make such
arrangements and shall deduct the appropriate cost from
TENANT's security deposit. All other floors must be cleaned by
TENANT or someone TENANT employs.
h. All appliances must be cleaned and in the same working
condition as first provided to TENANT. The refrigerator must be
emptied of all food, wiped clean, and left on NORMAL setting.
Likewise, the freezer compartment must be cleaned and left on
NORMAL setting.
i. All cupboards and shelves must be emptied and wiped clean,
including removal of any and all shelf paper TENANT installed.
j. Bath fixtures must be cleaned and grout/tile free of soap
residue and mildew. All other plumbing fixtures should be
cleaned and in good working condition.
k. All windows and window sills must be cleaned.
1. Drapes should be vacuumed (and dry cleaned, if necessary.)
Sills, shelves, and light fixtures should be wiped clean and
bulbs replaced if not in working order.
m. Any damage attributable to TENANT, or TENANT's guests or
invitees must be completely repaired. If repairs need to be
coordinated with LANDLORD then TENANT must contact LANDLORD in
advance. Do NOT wait to report the repairs on TENANT's
move-out day.
n. During the move-out inspection, TENANT must return ALL KEYS and
provide LANDLORD with TENANT's forwarding address and telephone
number to facilitate refunding any TENANT security deposit.
23. BREACH OF THE RENTAL AGREEMENT.
-8-
<PAGE> 10
a. If TENANT breaches this Rental Agreement for any reason or,
when applicable and prior to vacating, does not give twenty
eight days (28) written notice to vacate TENANT will be
considered to have "WRONGFULLY QUIT" the Project.
Notwithstanding the above sentence, active duty military
tenants may be released earlier from their Rental Agreement
only after providing LANDLORD with a copy of their permanent
change of duty station orders or other such similar permanent
transfer orders.
b. If TENANT wrongfully quits the Project, TENANT may be liable
for the lesser of the following amounts for such abandonment:
1) All rent due for the remainder of the term of the Rental
Agreement; or
2) All rent accrued during the period reasonably necessary
to rent the Dwelling Unit at the fair market rental,
plus the difference between such fair rent and the rent
agreed to in this Rental Agreement, and reasonable
commission for the renting of the Dwelling Unit. In
addition, TENANT understands TENANT may be liable for
late fees and advertising cost.
c. Eviction proceedings, if required, will be at TENANT's cost.
(See Rental Agreement Standard Terms, paragraph G.)
24. INDEMNIFICATION.
a. TENANT shall indemnify and hold harmless LANDLORD, LANDLORD's
employees, directors, officers, agents, and servants from any
and all liability or claim whatsoever that may arise from or
out of any damages to persons or property caused by or
resulting from the acts or omissions of the TENANT in or about
the Dwelling Unit covered herein or in or about the Project of
which it is a part.
b. TENANT agrees to pay all reasonable legal fees and costs of
LANDLORD should there be any reason whatsoever to defend
LANDLORD.
c. This indemnification and hold harmless shall be joint and
several as to the TENANT and shall survive the termination or
expiration of this Rental Agreement
25. ACKNOWLEDGMENT, UNDERSTANDING & AGREEMENT. Your initials on each
paragraph in this Addendum and signature on the Rental
Agreement Form shall constitute your acknowledgment,
understanding, and agreement of the Covenants and Conditions
contained therein. TENANT's shall be jointly and severally
liable under the Rental Agreement and any Addenda.
-9-
<PAGE> 11
26. PROFESSIONAL ASSISTANCE. By initialing this paragraph TENANT agrees and
acknowledges that prior to signing and initialing the Rental
Agreement and its Addendum TENANT has been advised and given
the opportunity by LANDLORD to seek TENANT's own professional
assistance, such as an attorney, to help TENANT understand each
and every one of the paragraphs contained herein. TENANT has
either chosen to seek such professional assistance or has
decided against such assistance. In either event, TENANT agrees
and acknowledges that TENANT is making a conscience decision to
execute this Rental Agreement and its Addendum and further
understands and agrees to abide by each and every part of this
Agreement and its Addendum.
27. SEVERABILITY. If any paragraph or provision in this Rental Agreement
or Addendum is held invalid by a Court of proper jurisdiction,
the invalidity does not affect other paragraphs or provisions
of this Rental Agreement or Addendum which can be given full
force and effect without the invalid paragraph or provision,
and to this end the paragraphs or provisions of this Rental
Agreement and Addendum are severable.
28. APPLICABLE LAW. This Rental Agreement and it's Addendum shall be
governed and construed in accordance with the laws of the State
of Hawaii.
29. EXCUSE OF LANDLORD'S PERFORMANCE. Anything in this Rental Agreement
and its Addendum to the contrary notwithstanding, providing
such cause is not due to the willful act or gross neglect of
LANDLORD, LANDLORD shall not be deemed in default with respect
to the performance of any of the terms, covenants and
conditions of this Rental Agreement and it's Addendum if the
same shall be due to any strike, lockout, civil commotion,
war-like operation, invasion, rebellion, hostilities, military
or usurped power, sabotage, governmental regulations or
controls, inability to obtain any material, service or
financing, through act of God or other cause beyond the control
of LANDLORD.
30. ENTIRE AGREEMENT. The provisions of this Rental Agreement and it's
Addendum constitute, and are intended to constitute, the entire
agreement between LANDLORD and TENANT. No terms, conditions,
warranties, actual or implied, exist between LANDLORD and
TENANT except as herein expressly set forth.
31. NONWAIVER. The acceptance of rent by LANDLORD shall not be deemed
a waiver by LANDLORD of any breach by TENANT of any term,
covenant or condition herein contained, nor of LANDLORD's right
to declare and enforce a forfeiture for any such breach, and
failure of LANDLORD to insist upon strict performance of any
term, covenant or condition herein shall not be construed as a
waiver of any subsequent breach of the same nor of any other
term, covenant or condition.
-10-
<PAGE> 12
32. NO PARTY DEEMED DRAFTER. LANDLORD and TENANT agree and acknowledge that
both Parties have had an opportunity to negotiate the terms and
conditions of this Rental Agreement and its Addenda. LANDLORD
and TENANT further agree that neither Party shall be deemed to
be the drafter of this Rental Agreement and its Addenda. In the
event tins Rental Agreement and its Addenda are ever reviewed
by a court of law, such court shall not construe this Rental
Agreement and its Addenda or any provision herein against
either Party as the drafter of this Rental Agreement and its
Addenda.
33. AGENCY. LANDLORD is a real estate licensee and is associated with the
Owner of the Project ("Owner"). LANDLORD and all its real estate
licensees REPRESENTS THE OWNER ONLY and NOT the TENANT. TENANT is
aware, agrees and acknowledges that LANDLORD:
a. Represents and is the agent of the Owner only;
b. Is NOT the agent of the TENANT; and
c. Owes fiduciary duties to the Owner only and not the TENANT.
TENANT further agrees not to claim that LANDLORD is or acted as
TENANTs agent or the dual agent of TENANT and the Owner.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed the day and year first above written.
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
- --------------------------- --------------------------------
TENANT TENANT
HARBOR COURT DEVELOPERS
By McCormack Real Estate, Inc.
As Agent
- ---------------------------
LANDLORD
===============================================================================
EMERGENCY CALLS
Monday - Friday between 8:00 a.m. and 5:00 p.m.................. Michael
McCormack, Jr.
Office Phone Number............................................. 537-5378
-11-
<PAGE> 13
Digital Pager................................................... 289-0171
Though Security................................................. 524-4188,
ext. 306
After hours and on weekends Call Security at 524-4188
===============================================================================
-12-
<PAGE> 1
EXHIBIT 6.4
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of September 24, 1997, is made and
entered into by and between HAWAIIAN VINTAGE CHOCOLATE COMPANY, a Hawaii
corporation, having an office at 4614 Kilauea Avenue, Suite 435, Honolulu,
Hawaii 96816 and JAMES P. WALSH, an executive employee of Employer (hereinafter
referred to as "Executive")
WHEREAS, Executive is employed by HAWAIIAN VINTAGE CHOCOLATE
COMPANY, INC. (hereinafter referred to collectively as "Employer") in an
executive capacity;
WHEREAS, Employer and Executive entered into that certain
Executive Employment Agreement dated as of September 01, 1997 (the "Original
Agreement"); and
WHEREAS, the parties desire to amend and restate the Original
Agreement so as to provide for the terms and conditions set forth in this
Agreement, and Executive has agreed to continue as an employee of Employer
pursuant to the terms of this Agreement; and
WHEREAS, Employer desires that the Executive continue as an
employee of Employer to provide the necessary leadership and senior management
skills that are important to the success of Employer. Employer believes that
retaining the Executive's services as an employee of Employer and the benefits
of his business experience are of material importance to Employer and Employer's
shareholders.
NOW, THEREFORE, in consideration of Executive's continued
employment by Employer and the mutual promises and covenants contained herein,
the receipt and sufficiency of which consideration is hereby acknowledged,
Employer and Executive intend by this Agreement to specify the terms and
conditions of Executive's employment relationship with Employer and the
post-employment obligations of Executive.
1. GENERAL DUTIES OF EMPLOYER AND EMPLOYEE
1.1. Employer agrees to employ Executive and Executive agrees to
accept employment by Employer and to serve Employer in an executive capacity
upon the terms and conditions set forth herein. The duties and responsibilities
of Executive shall include those described for the particular position held by
Executive while employed hereunder in the By-laws of Employer or other documents
of Employer, and shall also include such other or additional duties as may from
time-to-time be assigned to Executive by the Board of Directors of Employer or
any duly authorized committee thereof or an authorized officer of Employer. The
executive capacity that Executive shall hold during the term hereof shall be
that position as determined by the Board of Directors, or any
<PAGE> 2
duly authorized committee thereof, from time-to-time in its sole discretion.
While employed hereunder, the initial position that Executive shall hold (until
such time as such position may be changed as aforesaid) shall be the position of
Chairman of the Board of Directors and Chief Executive Officer.
1.2. While employed hereunder, Executive shall obey the lawful
directions of the Board of Directors of Employer, or any duly authorized
committee thereof, or authorized officers of Employer and shall use his best
efforts to promote the interests of Employer and to maintain and to promote the
reputation thereof. While employed hereunder, Executive shall devote his time,
efforts, skills, and attention to the affairs of Employer in order that he shall
faithfully perform his duties and obligations hereunder and such as may be
assigned to or vested in him by the Board of Directors of Employer, or any duly
authorized committee thereof, or any duly authorized officer of Employer.
1.3. During the term of this Agreement, Executive may from
time-to-time engage in any businesses or activities that do not compete directly
and materially with Employer and any of its subsidiaries, provided that such
businesses or activities do not materially interfere with his performance of the
duties assigned to him in compliance with this Agreement by the Board of
Directors of Employer or any duly authorized committee thereof or an authorized
officer of Employer. In any event, Executive is permitted to (i) invest his
personal assets as a passive investor in such form or manner as will not
contravene the best interests of Employer and (ii) participate in various
charitable efforts.
2. COMPENSATION AND BENEFITS
2.1. As Compensation for services to Employer, Employer shall pay to
Executive during the term of this Agreement a salary at an annual rate to be
fixed from time-to-time by the Board of Directors of Employer or any duly
authorized committee thereof, which annual rate shall in no event be less than
$175,000 per annum while Executive is employed hereunder. The salary shall be
payable in equal bi-weekly installments, subject only to such payroll and
withholding deductions as may be required by law and other deductions applied
generally to employees of Employer for insurance and other employee benefit
plans. The Board of Directors or any authorized committee or officer of Employer
shall review Executive's overall annual Compensation at least annually, with a
view to ascertaining the adequacy thereof and such Compensation may be increased
by the Board of Directors from time-to-time by an amount that in the opinion of
the Board of Directors is justified by Executive's performance.
2.2. In recognition of the essential role that the Chief Executive
Officer plays in the reputation and development of the company, commencing on
the execution date of this agreement, the CEO shall have the exclusive
contractual right, but not the obligation to acquire a number of common shares
or other securities of Hawaiian Vintage Chocolate Company at 75 percent of the
net purchase price of any such securities offered to any third party. The right
to elect to participate on the above terms shall extend for a period
<PAGE> 3
of five-years from the conclusion of any third party offering, whether public or
private, and may be exercised at any time, in whole or in part, by the CEO.
Should any transaction be concluded involving options or warrants or other
contingent instruments, the CEO shall be granted an equal number of such
instruments with an exercise price equal to 75 percent of the exercise price
offered to third-parties and such instruments shall be exercisable by the CEO at
any time during the same term as the third party, in whole or in part, on a
cashless basis. Should the CEO elect to purchase shares or exercise options for
cash or equivalent, then he shall be entitled to pay for such purchases in the
form of a 10 year term fully amortized note at 6 percent annual interest. The
Employer also grants option rights to the Executive as covered in the Option
Agreement.
2.3. Upon Executive's furnishing to Employer customary and reasonable
documentary support (such as receipts or paid bills) evidencing costs and
expenses incurred by him in the performance of his services and duties hereunder
(including, without limitation, travel and entertainment expenses) and
containing sufficient information to establish the amount, date, place and
essential character of the expenditure, Executive shall be reimbursed for such
costs and expenses in accordance with Employer's normal expense reimbursement
policy. Executive shall be entitled to participate in all insurance, stock
option, and other stock programs and compensation plans and such other benefits
plans, or programs as may be from time-to-time specifically adopted and approved
by Employer for Executive.
2.4. As long as this Agreement is in effect, Employer shall maintain
hospitalization and medical insurance coverage on Executive as may from
time-to-time be specifically approved and adopted by Employer for its executive
officers generally. In addition, Employer agrees to provide and maintain life
insurance coverage on the life of Executive in the face amount of as may be
available and determine by the Board of Directors, with proceeds thereunder
payable one-half to such beneficiaries as Executive may designate and one-half
to Employer, and Employer agrees to pay all premiums on such policy. Coverage
shall continue throughout the employment term hereof. Such coverage may consist
of term, group term, whole life, or any other form of coverage, and with such
insurers as Employer may select.
2.5. While Executive is employed hereunder, Employer agrees to
provide an allowance to Executive of $5,000 per annum for costs and expenses
incurred by Executive for professional, legal, and/or accounting services
rendered personally to Executive, which amount shall be paid to Executive on
December 1 of each year (or such earlier time that Executive and Employer may
otherwise agree).
2.6. Executive shall be eligible to receive cash bonuses or other
incentive compensation as may be determined by the Board of Directors of
Employer from time-to-time. As long as this Agreement is in effect, Employer
shall maintain an Executive Compensation Program, and Executive shall be
eligible to participate therein, all in accordance with Employer's regular
practices with its senior officers.
<PAGE> 4
2.7. Executive shall receive an allowance, paid monthly, as
determined by the Board of Directors for the maintenance of a home office and
for an automobile.
2.8. Executive shall have the right to participate in any additional
compensation, benefit, life insurance, hospitalization, medical services or
other plan or arrangement of Employer now or hereafter existing for the benefit
of executives of Employer.
2.9. Executive shall be entitled to such vacation (in no event less
that four weeks per year), holiday, and (subject to the provisions of Section
5.3 hereof) other paid or unpaid leave of absence as consistent with Employer's
normal policies or as otherwise approved by the Board of Directors.
3. PRESERVATION OF BUSINESS: FIDUCIARY RESPONSIBILITY:
Executive shall use his best efforts to preserve the business and
organization of Employer, to keep available to Employer the services of present
employees and to preserve the business relations of Employer with suppliers,
distributors, customers and others. The Executive shall not commit any act, or
in any way assist others to commit any act, that would injure Employer.
4. INITIAL TERM: EXTENSIONS OF THE TERM
4.1. The initial term of this Agreement shall commence on the
effective date hereof and shall end on June 30, 2004.
4.2. The Board of Directors may extend the term of this Agreement for
additional successive seven-year renewal terms commencing June 30, 2004 by
notifying Executive in writing, at least sixty (60) days prior to the expiration
of the then current term, of its intention to extend this Agreement.
5. TERMINATION OTHER THAN BY EXPIRATION OF THE TERM:
Employer or Executive may terminate Executive's employment under this
Agreement at any time, but only on the following terms:
5.1. Executive may terminate his employment under this Agreement at
any time upon at least sixty (60) days' prior written notice to Employer.
5.2. Employer may terminate Executive's employment under this
Agreement at any time, without prior notice, for "due cause" upon the good faith
determination by the Board of Directors of Employer that "due cause" exists for
the termination of the employment relationship. As used herein, the term "due
cause" shall mean any of the following events:
<PAGE> 5
(i) any intentional and material misapplication by Executive
of Employer's funds, or any other material act of dishonesty committed
by Executive; or
(ii) Executive's material breach, nonperformance or
nonobservance of any of the terms of this Agreement if such breach,
nonperformance or nonobservance shall continue beyond a period of thirty
(30) days immediately after notice thereof by Employer to Executive; or
(iii) any other action by the Executive involving willful and
material malfeasance or gross negligence in the performance of
Executive's duties.
5.3. In the event Executive is incapacitated by accident, sickness or
otherwise so as to render Executive mentally or physically incapable of
performing the services required under Section 1 of this Agreement for a period
of one hundred eighty (180) consecutive business days, and such incapacity is
confirmed by the written opinion of two (2) practicing medical doctors licensed
by and in good standing in the state in which they maintain offices for the
practice of medicine, upon the expiration of such a period or at any time
reasonably thereafter, or in the event of Executive's death, Employer may
terminate Executive's employment under this Agreement upon giving Executive or
his legal representative written notice at least thirty (30) days' prior to the
termination date. Executive agrees, after written notice by the Board of
Directors of Employer or a duly authorized committee or officer of Employer, to
submit to examinations by such practicing medical doctors selected by the Board
of Directors of Employer or a duly authorized committee or officer of Employer.
5.4. Employer may terminate Executive's employment under this
Agreement at any time for any reason whatsoever, even without "due cause," by
giving a written notice of termination to Executive, in which case the
employment relationship shall terminate immediately upon the giving of such
notice.
6. EFFECT OF TERMINATION:
6.1. In the event the employment relationship is terminated (a) by
Executive upon sixty (60) days' written notice pursuant to Section 5.1 hereof,
(b) by Employer for "due cause" continue his employment and failing to give the
requisite sixty (60) days' written notice, all compensation and benefits shall
cease as of the date of termination other than: (i) those benefits that are
provided by retirement and benefit plans and programs specifically adopted and
approved by Employer for Executive that are earned and vested by the date of
termination, and (ii) Executive's pro rata annual salary plus all earned and
vested bonuses through the date of termination. Executive's right to exercise
stock options, these options will be redeemed as a cashless transaction for the
Executive, Executive's rights in other stock plans, if any, shall remain
governed by the terms and conditions of the appropriate stock plan.
<PAGE> 6
6.2. If Executive's employment relationship is terminated pursuant to
Section 5.3 hereof due to Executive's incapacity or death, Executive (or, in the
event of Executive's death, Executive's legal representative) will be entitled
to those benefits that are provided by retirement and benefits plans and
programs specifically adopted and approved by Employer for Executive that are
earned and vested at the date of termination and, even through no longer
employed by Employer, shall continue to receive the salary Compensation (payable
in the manner as prescribed in the second sentence of Section 2.1 for one (1)
year following the date of termination. Executive (or, in the event of
Executive's death, Executive's legal representative) shall not, however, be
entitled to any bonuses not yet paid at the date of the termination of
employment. Executive's right to exercise stock options and Executive's rights
in other stock plans, if any, shall remain governed by the terms and conditions
of the appropriate stock plan.
6.3. If Employer (i) allows the initial term or any renewal term of
this Agreement to expire without further extending this Agreement pursuant to
Section 4.2, (ii) terminates the employment of Executive other that pursuant to
Section 5.2 hereof for "due cause" or other than for a disability or death
pursuant to Section 5.3 hereof, (iii) demotes the Executive to a non-executive
position, or (iv) decreases the Executive's salary below the level or reduces
the employee benefits and perquisites below the level provided for by the terms
of Section 2 hereof, other than as a result of any amendment or termination of
any employee and/or executive benefit plan or arrangement, which amendment or
termination is applicable to all executives of Employer, then such action by
Employer, unless consented to in writing by Executive, shall be deemed to be a
constructive termination by Employer of Executive's employment (a "Constructive
Termination"). In the event of a Constructive Termination, Executive shall be
entitled to receive, in a lump sum within thirty (30) days after the date of the
Constructive Termination, an amount equal to the remainder of Executive's
current year's salary. In such event, Executive shall also be entitled to
receive an amount equal to Executive's salary, at the rate in effect immediately
prior to the event giving rise to the Constructive Termination, for a period
equal to the greater of three-years or the remainder of the initial term under
Section 4.1, with such amount payable in thirty-six (36) equal monthly
installments on the first day of each month beginning with the month after the
Constructive Termination; provided, however, that Employer's obligation to pay
such monthly installments shall be expressly conditioned on Executive's
continuing compliance with the non-competition requirements of Section 8.1 For
Purposes of the Section 6.3, the term "salary" shall mean the sum of (i) the
annual rate of Compensation provided to Executive under Section 2.1 hereof
immediately prior to the event giving rise to the Constructive Termination, plus
(ii) the average annual cash bonuses or other cash incentive Compensation paid
to Executive by Employer under Section 2.6 hereof for the three years in the
three year period immediately preceding the year in which there shall occur a
Constructive Termination. In the event of such Constructive Termination, all
other rights and benefits Executive may have under the employee and/or executive
benefit plans and arrangements of Employer generally shall be determined in
accordance with the terms and conditions of such plans and arrangements.
<PAGE> 7
7. CHANGE OF CONTROL:
7.1. Notwithstanding anything to the contrary otherwise provided in
this Agreement, if a "change of control" (as defined below) of Employer occurs
and within twelve (12) months from the date of such "change of control",
Executive voluntarily terminates the employment relationship under this
Agreement by giving sixth (60) days' written notice to Employer under Section
5.1 hereof, or Employer allows the initial term or any renewal term of this
Agreement to expire within such twelve (12) month period by not extending this
Agreement pursuant to Section 4.2 or terminates Employee's employment
relationship without "due cause" pursuant to Section 5.4, then Executive, even
though no longer employed by Employer, shall be entitled to earned and vested
bonuses at the date of termination plus a payment in the amount of the remainder
of Executive's current year's salary (undiscounted) plus the present value
(employing an interest rate of 8%) of five additional year's salary, based on
the salary in effect immediately prior to the "change of control", payable at
the option of the Executive either in a lump sum within 30 days after the date
of termination or in four payments as follows: one-fourth of the total amount
payable within 30 days after the date of termination and one-third of the
remainder payable together with interest at the rate of 8% per annum on each of
the first three anniversary dates of the date of termination. For purposes of
this Section 7.1, the term "salary" shall mean the sum of (i) the annual rate of
Compensation provided to Executive under Section 2.1 hereof immediately prior to
the "change of control," plus (ii) the average annual cash bonuses or other cash
incentive Compensation paid to Executive by Employer under Section 2.6 hereof
for the three years in the three year period immediately preceding the year in
which there shall occur a "change of control". Executive's right to exercise
stock options and Employee's rights in other stock plans, if any, shall remain
governed by the terms and conditions of the appropriate stock plan. "Change of
control" shall be deemed to have occurred if (i) any person (as such term is
used in Section 13(d) and 14(d) (2) of the Securities Exchange Act of 1934),
becomes the beneficial owner, directly or indirectly, or securities of Employer
representing 30% or more of the combined voting power of Employer's then
outstanding securities, (ii) during any period of 12 months, individuals who at
the beginning of such period constitute the Board of Directors of Employer cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by Employer's stockholders of each new director was
approved by a vote of at least a majority of the directors then still in office
who were directors at the beginning of the period or (iii) a person (as defined
in clause (i) above) acquires (or, during the 12-month period ending on the date
of the most recent acquisition by such person or group of persons, has acquired)
gross assets of Employer that have an aggregate fair marker value greater than
or equal to over 50% of the fair market value of all of the gross assets of
Employer immediately prior to such acquisition or acquisitions.
7.2. Notwithstanding any other provision of this Agreement, if (a)
there is a change in the ownership or effective control of Employer or in the
ownership of a substantial portion of the assets of Employer within the meaning
of Section 280G (b) (2) (A) of the Internal Revenue Code (the "Code") and (b)
the payments otherwise to be made pursuant of Section 7.1 and any other payments
or benefits otherwise to be paid to
<PAGE> 8
Executive in the nature of Compensation to be received by or for the benefit of
Employee and contingent upon such event (the "Termination Payments") would
create an "excess parachute payment" within the meaning of Section 280G of the
Code, then Employer shall make the Termination Payments in substantially equal
installments, the first installment being due within thirty days after the date
of termination and each subsequent installment being due on January 31 of each
year, such that the aggregate present value of all Termination Payments, whether
pursuant to this Agreement or otherwise, will be as close as possible to, but
not exceed, 299% of the Executive's base amount, within the meaning of Section
2800.
8. EXECUTIVE'S NON-COMPETITION OBLIGATION:
8.1. Executive acknowledges and agrees that he serves in a special
capacity for Employer pursuant to which he has acquired unique knowledge of the
operations and business of Employer and, as such, is not engaged in a common
calling. During the existence of Executive's employment by Employer hereunder
and, if the employment of Executive is terminated by Employer for any reason
pursuant to Section 5.2 or Executive voluntarily terminates his employment
pursuant to Section 5.1 (unless such voluntary termination occurs within twelve
months after a "change of control," as defined in Section 7.1), for a period of
one (1) years from the date on which he shall cease to be employed by Employer,
Executive shall not, acting alone or in conjunction with others directly or
indirectly, and whether as principal, agent, officer, director, partner,
employee, consultant, broker, dealer or otherwise, in any of the Business
Territories (as defined below), engage in any business in competition with the
business conducted by Employer or any subsidiary of Employer, whether for his
own account or otherwise, or solicit, canvass or accept any business or
transaction for or from any other company or business in competition with such
business of Employer in any of the Business Territories. For purposes hereof,
the term "Business Territories" means the geographical regions within the
geographic borders of each State in which Employer is doing business during the
term of this Agreement and (and, in the case of post-employment non-competition
obligations) at the date of the termination of Executive's employment with
Employer and any State in which Employer had reasonable prospects of engaging in
business during the three-year non-competition period following termination of
employment. This provision will specifically exclude activities involving
insolvency proceeding relating to unrelated enterprises.
8.2. It is the desire and intent of the parties that the provisions
of Section 8.1 shall be enforced to the fullest extent permissible under the
laws and public policies of the State of Hawaii. Accordingly, if any particular
portion of Section 8.1 shall be adjudicated to be invalid or unenforceable,
Section 8.1 shall be deemed amended to (i) reform the particular portion to
provide for such maximum restrictions as will be valid and enforceable, or if
that is not possible, then, (ii) delete therefrom the portion thus adjudicated
to be invalid or unenforceable. The parties acknowledge and agree that if
Executive shall enter into any license or franchise agreement or comparable
arrangement with Employer or any subsidiary or affiliate of Employer for the
operation of a business
<PAGE> 9
also conducted by Employer or such subsidiary or affiliate, Executive shall not
be deemed to be "engaged" in any business in competition with the business
conducted by Employer or any subsidiary of Employer for purposes of Section 8.1,
provided Executive has first obtained the approval of the Board of Directors.
9. OBLIGATIONS TO REFRAIN FROM COMPETING UNFAIRLY:
9.1. In addition to the other obligations agreed to by Executive in
this Agreement, Executive agrees that during his employment with Employer and
following the termination of his employment by Employer he shall not at any
time, directly or indirectly (a) induce, entice, or solicit any employee of
Employer to leave his employment, or (b) contact, communicate or solicit any
customer of Employer derived from any customer list, customer lead, mail,
printed matter or other information secured from Employer or its present or past
employees, or (c) in any other manner use any customer lists or customer leads,
mail, telephone numbers, printed material or material of Employer relating
thereto. Notwithstanding the above, the parties acknowledge and agree that if
Executive shall enter into any license or franchise agreement or comparable
arrangement with Employer or any subsidiary or affiliate of Employer for the
operation of a business also conducted by Employer or such subsidiary or
affiliate, then Executive's operation of such business in the ordinary course
shall not be deemed to be a violation of the restrictions in clauses (b) and (c)
of the preceding sentence, provided Executive has first obtained the approval of
the Executive Compensation Committee of Employer's Board of Directors.
10. MISCELLANEOUS
10.1. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when mailed by registered mail or
certified mail, return receipt requested as following (provided that notice of
change of address shall be deemed given only when received)
If to Employer, to:
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
4614 Kilauea Avenue, Suite 435
Honolulu, Hawaii 96816
Attention: President
If to Executive, to:
James P. Walsh
4528 Kolohala Street
Honolulu, Hawaii 96816
<PAGE> 10
or to such other names or addresses as Employer or Executive as the case may be,
shall designate by notice to the other party hereto in the manner specified in
this Section 10.1.
10.2. This Agreement shall be binding upon and inure to the benefit of
Employer, its successors, legal representatives and assigns, and upon Executive,
his heirs, executors, administrators, representatives and assigns. It is
specifically agreed that upon the occurrence of any of the events specified in
Section 7.1, the provisions of this Employment Agreement shall be binding upon
and inure to the benefit of and be assumed by the surviving or resulting
corporation or the corporation to which such assets shall be transferred.
Executive agrees that his rights and obligations hereunder are personal to him
and may not be assigned without the express written consent of Employer.
10.3. This Agreement may not be modified in any respect by any verbal
statement, representation or agreement made by any employee, officer, or
representative of Employer or by any written agreement unless signed by an
officer of Employer who is expressly authorized by Employer to execute such
document.
10.4. (a) If any provision of this Agreement or application
thereof to anyone or under any circumstance shall be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
(b) Without intending to limit the remedies available to
Employer, it is mutually understood and agreed that Executive's services are of
a special, unique, unusual, extraordinary and intellectual character giving them
a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in an action at law, and, therefore, in the event of a
breach by Executive, Employer shall be entitled to equitable relief by way of
injunction or otherwise.
(c) Executive acknowledges that Sections 8 and 9 are
expressly for the benefit of Employer, that Employer would be irreparably
injured by a violation of Section 8 and/or 9 and that Employer would have no
adequate remedy at law in the event of such violation. Therefore, Executive
acknowledges and agrees that injunctive relief, specific performance or any
other appropriate equitable remedy (without any bond or other security being
required) are appropriate remedies to enforce compliance by Employer with
Section 8 and Section 9.
10.5 Executive acknowledges that, from time-to-time, Employer may
establish, maintain and distribute employee manuals or handbooks or personnel
policy manuals, and officers or other representatives of Employer may make
written or oral statements relating to personnel policies and procedures. Such
manuals, handbooks and statements are intended only for general guidance. No
policies, procedures or statements of any nature by or on behalf of Employer
(whether written or oral, and whether or not contained in any employee manual or
handbook or personnel policy manual), and no acts
<PAGE> 11
or practices of any nature shall be construed to modify this Agreement or to
create express or implies obligations of any nature to Executive.
10.6. The laws of the State of Hawaii will govern the interpretation,
validity and effect of this Agreement without regard to the place of execution
or the place for performance thereof, and Employer and Executive agree that the
state and federal courts situated in Honolulu County, Hawaii shall have personal
jurisdiction over Employer and Executive to here all disputes arising under this
Agreement. This Agreement is to be at least partially performed in Honolulu
County, Hawaii, and, as such, Employer and Executive agree that venue shall be
proper with the state or federal courts in Honolulu County, Hawaii to hear such
disputes. In the event either Employer or Executive is not able to effect
service of process upon the other with respect to such disputes, Employer and
Executive expressly agree that the Secretary of State for the State of Hawaii
shall be an agent of Employer and/or the Executive to receive service of process
on behalf of Employer and/or the Executive with respect to such disputes.
11. ADDITIONAL INSTRUMENTS
Executive and Employer shall execute and deliver any and all additional
instruments and agreements that may be necessary or proper to carry out the
purposes of this Agreement.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
affixed their signatures hereto.
James P. Walsh HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
James Walsh (signature) By: J.P.Walsh (signature)
--------------------------------------
Its: CEO
-------------------------------------
<PAGE> 1
EXHIBIT 6.5
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
STOCK OPTION AGREEMENT
AGREEMENT made as of this 28 day of September, 1998 (the "Grant Date")
by and between HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC., a Hawaii corporation
(hereinafter called the "Corporation"), and JAMES WALSH (hereinafter called
"Optionee").
WITNESSETH:
RECITALS
A. The Board of Directors of the Corporation (the "Board") has adopted a
resolution approving this Stock Option Agreement.
B. This Stock Option Agreement is granted without regard to qualifications or
under any particular section of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject and upon the terms and conditions set forth
in this Agreement, the Corporation hereby grants to Optionee, as of the Grant
Date, an option (the "Option") to purchase up to FIVE HUNDRED THOUSAND (500,000)
shares (the "Optioned Shares") of the Corporation's Common Stock from time to
time during the Option term at the Option price of TWO DOLLARS ($2.00) per
share.
2. OPTION TERM. The specified term of this Option shall be the period
commencing on the Grant Date and, unless sooner terminated in accordance with
Paragraphs 6 or 8(a), terminating upon the expiration of seven (7) years from
the date Optionee shall cease to be an employee of the Corporation. Upon the
expiration of the Option term or upon its sooner termination under Paragraphs 6
or 8(a), this Option shall cease to be exercisable and have no further force or
effect whatsoever.
3. OPTION NONTRANSFERABLE: EXCEPTION. This Option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution and may be exercised, during Optionee's lifetime, only
by Optionee, or his duly appointed representative.
1
<PAGE> 2
4. DATES EXERCISABLE. The Option shall become exercisable in four (4)
cumulative installments on the following dates:
<TABLE>
<S> <C> <C>
September 28, 1998 125,000 Optioned Shares (25%)
September 28, 1999 125,000 Optioned Shares (25%)
September 28, 2000 125,000 Optioned Shares (25%)
September 28, 2001 125,000 Optioned Shares (25%)
</TABLE>
Optioned Shares as to which the Option has become exercisable pursuant to this
paragraph may be purchased any time after the applicable exercise date and
before the expiration or termination of the Option.
5. EXERCISABLE IN INSTALLMENTS. Exercisable installments may be
exercised in whole or in part and to the extent not exercised shall accumulate
and be exercisable at any time on or before the expiration or sooner termination
of the Option term.
6. ACCELERATED TERMINATION OF OPTION TERM. The Option term specified in
Paragraph 2 shall terminate prior to the expiration of its term should one of
the following provisions become applicable:
(i) Should Optionee cease to be an employee of the Corporation or
its subsidiaries (other than by reason of death) at any time during the Option
term, then this Option may not be exercised for more than the number of Optioned
Shares for which it is exercisable at the date of Optionee's cessation of
employee status.
(ii) Should Optionee die while this Option is outstanding, the
executors or administrators of Optionee's estate or Optionee's heirs or legatees
(as the case may be) shall have the right to exercise this Option, but only with
respect to that number of Optioned Shares, if any, for which the Option is
exercisable on the date of Optionee's death. Such right shall lapse and this
Option shall cease to be exercisable upon the expiration of the one (1) year
period measured from the date of Optionee's death or upon the expiration of
seven (7) years from the date Optionee shall cease to be an employee of the
Corporation, whichever occurs first.
7. ADJUSTMENT IN OPTIONED SHARES. In the event of any change in the
outstanding shares of Common Stock of the Corporation resulting from any merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in capital structure
effected without receipt of consideration, then unless such changes result in
the termination of all outstanding options pursuant to the provisions of
Paragraph 8(a), the Board shall make appropriate adjustments to the number of
Optioned Shares subject to this Option and to the Option price per share in
order to prevent the dilution of benefits under this Agreement. The adjustments
determined by the Board shall be final, binding and conclusive.
2
<PAGE> 3
8. ACCELERATION AND TERMINATION OF OPTION.
(a) In the event the Corporation or its shareholders enter into
an agreement to dispose of all or substantially all of the assets or outstanding
capital stock of the Corporation by means of sale, merger, reorganization or
liquidation, then this Option, if outstanding at such time, shall become
exercisable during the fifteen (15) days immediately prior to the scheduled
consummation of such sale, merger, reorganization or liquidation, with respect
to the full number of Optioned Shares at the time covered by this Option. No
such acceleration of exercise dates shall occur, however, if the terms of the
agreement provide as a prerequisite to the consumption of such sale, merger,
reorganization or liquidation that outstanding options under nonqualified Stock
Option Agreements (including this Option) are either to be assumed by the
successor corporation or parent thereof or are to be replaced with comparable
options to purchase shares of capital stock of the successor corporation or
parent thereof, and that any such exercise of an option during such fifteen (15)
day period shall be conditioned upon the consummation of such transaction,
except to the extent that an Optionee may indicate, in writing, that such
exercise is unconditional with regard to all or part of the unaccelerated
portion of the Option. The determination of such comparability shall be made by
the Board and its determination shall be final, binding and conclusive. Upon
consummation of such sale, merger, reorganization or liquidation, this Option
(whether or not accelerated) shall terminate, unless assumed by the successor
corporation or parent thereof.
(b) This Agreement shall not in any way affect the right of the
Corporation to make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell or transfer all or any part of its
business or assets.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this Option with respect to all or any
part of the Optioned Shares for which this Option is at the time exercisable,
Optionee (or in the case of exercise after Optionee's death, the Optionee's
executor, administrator, heir or legatee, as the case may be) must take the
following actions:
(i) Provide the Secretary of the Corporation with written
notice of such exercise, specifying the number of Optioned Shares with respect
to which the Option is being exercised;
(ii) Pay the Option price in one or more of the following
alternative forms: (A) full payment, in cash or check payable to the
Corporation's order, of the option price for the Optioned Shares being
purchased; (B) full payment in shares of Common Stock of the Corporation having
a Fair Market Value on the Exercise Date (as such terms are defined below) equal
to the Option price for the Optioned Shares being purchased; (C) a combination
of such shares of Common Stock of the Corporation valued at Fair Market Value on
the Exercise Date and cash or check payable to the Corporation's order equal in
the aggregate to the Option price for the Optioned Shares being purchased; and
(D) or options can be exercised on a "cashless" basis with the Corporation; and
3
<PAGE> 4
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the Option, if other than Optionee,
has/have the right to exercise this Option on behalf of and for Optionee.
(b) The Option price per share has been fixed by the Board.
(c) No fractional shares shall be issued, and fractional shares
remaining in any option shall be rounded down to the next nearest whole number
of shares.
(d) The Exercise Date is the date the Secretary of the
Corporation receives the notice described in Paragraph 9(a)(i).
(e) "Fair Market Value on the Exercise Date" means the average of
the last bid price and last asking price, if any, and if none, the last trading
price, on the last trading day of the Corporation's Common Stock preceding the
Exercise Date, provided neither the asking price, the bid price or the last such
trade, involved Optionee, directly or indirectly. Common Stock not registered in
accordance with the Securities Act of 1933, or not saleable through a stock
broker and transferable without such registration, does not have the Fair Market
Value on the Exercise Date defined herein.
10. CERTIFICATE LEGEND. Each certificate evidencing the issuance of
0ptioned Shares shall have imprinted on it the following legend condition:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
("ACT") AND ARE RESTRICTED SECURITIES. THE RESTRICTED
SECURITIES HAVE BEEN ACQUIRED FOR HOLDER'S OWN ACCOUNT
AND NOT WITH A VIEW TO DISTRIBUTE THEM TO THE PUBLIC.
RESTRICTED SECURITIES MUST BE HELD INDEFINITELY UNLESS
THEY ARE SUBSEQUENTLY REGISTERED UNDER THE ACT OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 8(a), the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of
Corporation.
12. LIABILITY OF CORPORATION. The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this Option shall relieve the Corporation of any liability in respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained.
4
<PAGE> 5
13. WITHHOLDING. Optionee hereby agrees to make appropriate arrangement
with the Corporation or subsidiary employing Optionee for satisfaction of any
federal, state or local income tax withholding requirements and federal social
security employee tax requirements applicable to the exercise of this Option (if
any).
14. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Hawaii.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed in duplicate on its behalf by its duly authorized officer and Optionee
has also executed this Agreement in duplicate, a1l as of the day and year
indicated above.
HAWAIIAN VINTAGE CHOCOLATE COMPANY, INC.
BY: /s/ JIM WALSH
------------------------------------------
Jim Walsh, Chief Executive Officer
/s/ JAMES WALSH
---------------------------------------------
James Walsh, Optionee
5
<PAGE> 1
Exhibit 6.6
LICENSE AGREEMENT
DEDICATED RETAIL LOCATIONS - CARTS/KIOSKS/SEMI-PERMANENT LOCALS
(Excluding in-line stores of a permanent nature in excess of 500 square feet in
size)
This License Agreement is made at Honolulu, Hawaii as of the 2nd day of June,
1999, by and between Hawaiian Vintage Chocolate Co., Inc., a Hawaiian
Corporation, (HVC) located at 4614 Kileau Ave., Suite 435, Honolulu, Hi. 96816
(hereinafter called "we", "us" or "our") and Hobson Marketing Co., Inc., P.O.
Box 133, Oakwood, Illinois 61858 hereinafter called "you").
This Agreement is concerned with the offer and license of dedicated retail
outlets and the establishment and operation of Hawaiian Vintage Chocolate
carts/kiosks. The distinguishing characteristics of our license agreement
includes, but is not limited to, the registered trade name "Hawaiian Vintage
Chocolate", readily recognized product and trade names, trademarks and service
marks identifying our chocolate retail locations.
You are desirous of obtaining a license agreement to own and operate locations
selling products under the trademark and service mark of "Hawaiian Vintage
Chocolate." We and you, intending to be legally bound, for and in consideration
of the mutual covenants hereinafter following, do mutually covenant and agree:
1. Licenses, Service Marks, Exclusive Territory
1.1 License
We hereby grant you the right to use the federally registered service mark
"Hawaiian Vintage Chocolate" and other such service marks, trademarks and
copyrights as we may designate from time to time. You will be qualified to
purchase our products at distributor prices while operating a retail location.
You will be licensed to operate multiple retail locations within the limitations
of the state of Illinois, Missouri and Indiana.
You agree not to open HVC retail locations without our written approval per
market nor to change its store location thereafter without such written approval
of us. You further acknowledge that we may, from time to time, and at our sole
discretion, modify or discontinue use of any trade names, trademarks, service
marks or use of one or more additional or substituted trade names, trademarks,
or service marks and, you agree to operate under such trade names and trademarks
as directed by us in our good discretion. You will receive protection for a
minimum number of items per a mutually agreed upon definition to be designated
during the six months following the execution of this Agreement.
<PAGE> 2
1.2 Trade Practices.
You agree that we have the sole rights to certain trade practices and that no
goodwill association with any of the trade practices shall inure to you.
1.3 Service Marks.
You, in conducting HVC retail business, shall use such service marks,
trademarks, or trade names in such art form and in such logo form as specified
from time to time by us including indoor signs identifying the store as
"Hawaiian Vintage Chocolate" or such other service marks designated by us. We
may, at sole discretion, prosecute or defend any action or proceeding which we
deem necessary or desirable for the protection of service marks, trademarks,
trade names or logos.
1.4 Exclusive Territory.
During the term of this Agreement and provided that you are not in default of
this Agreement or any other Agreement between us and you, we shall not own,
operate, or sell or transfer an HVC Dedicated Retail Location (of a
semi-permanent nature) within Illinois, Missouri, Minnesota and Indiana.
In addition we have provided you with the right of first refusal for the states
of; Michigan, Wisconsin, Iowa, Kentucky, Tennessee, Oklahoma, Arkansas, Kansas,
Ohio, and Nebraska until December 31, 1999, providing that the company sells you
a reasonable inventory of our products at a bona fide wholesale price.
2 Term
2.1 Life Term
There is no set term for the License Agreement and you are assured of at least a
lifetime license, provided you have not breached any Agreement with us.
2.2 No Renewal Fees
Since the License Agreement has no set term, there are no renewal fees.
3 Retail Lease, Signage, Location Upkeep, Indemnification
<PAGE> 3
3.1 Retail Lease
You are solely responsible for selecting the Retail Location for the operation
of your store, which you shall lease directly from the landlord subject to our
prior written approval. The Retail Location shall be used for no purpose other
than our product sales.
3.2 Signage
Exterior and interior signs are to be used in connection with the Retail
Location and must conform to our criteria. We must approve all signs in writing
prior to installation or display. We will promptly (within 72 hours) approve or
disapprove all submitted sign designs once received via fax, email or delivery.
3.3 Retail Location Upkeep
Maintenance and repair of the Retail Location is your sole responsibility. You
shall maintain your signs, pictures, and other uses of the company's marks in
the Location in excellent condition and repair. All replacement signs, pictures,
decor, equipment and fixtures that bear our mark shall comply with our
requirements and approval.
3.4 Indemnification
You are strictly responsible for the acts or omissions of your contractors
regarding compliance with this paragraph and we shall have no responsibility for
such acts or omissions. We shall not be liable for any loss or damage arising
from the design or plan of the Retail Location, Cart or Kiosk, by reason of it's
approval of plans or otherwise. You shall indemnify us for any loss, cost or
expense, including attorney's fees, that may be sustained by us because of the
acts or omissions of your contractors or arising out of the design or
construction of Retail Location. We shall indemnify you from any claims
regarding our corporate activities as a supplier to your retail locations.
4 Retail Location Operation
4.1 Sale of Products and Services
In order to retain product control for trademark purposes, you agree not to sell
any product without our prior written consent. We agree to set a minimum number
of differentiated exclusive products to be sold by at unique price points.
Rollout and designation of these products will occur during the first six months
of License Agreement.
<PAGE> 4
4.2 Retail Location Supervision
It is our belief and recommendation that you or a designated manager should
devote full time and attendance as well as that person's best efforts to the
performance of the supervisory duties. A person trained in the methods and
procedures established mutually and updated from time to time must manage each
Location.
4.3 Retail Location Standards
All personnel employed by you at the Location shall maintain such standards of
sanitation, cleanliness, demeanor and dress as shall be established from time to
time.
4.4 Operating Licenses
You shall promptly procure and maintain all necessary licenses and permits
required for the operation of the Retail Location as a contingency to the
opening and operation of the Location. You further agree to comply with all laws
and regulations affecting or applicable to the Retail Location.
4.5 Store Inspection
You shall allow us to periodically visit the Location from time to time for the
purpose of determining that the company's marks are being used correctly in the
operation of the Retail Location in accordance with the terms of this Agreement.
4.6 Discontinuance of Sale of Item or Product
We may require you to discontinue the use or sale of any product or item which,
in our opinion, does not conform to the image of our trademark.
5 Insurance and Hold Harmless
Throughout the term of this Agreement, you shall maintain in effect at all times
a policy or policies of insurance with an "A" insurance carrier naming us as an
additional insured on the face of each policy at our sole cost and expense as
follows:
5.1 Public Liability
Public liability no less than $1,000,000 combined single limits for bodily
injury and property damage which amounts may be changed from time to time upon
receipt of written demand of us from time to time, according to normal and
generally accepted practice in each geographic territory.
<PAGE> 5
5.2 Worker's Compensation
Worker's compensation insurance as required by state law. You shall deliver to
us certificates evidencing that such insurance is in full force.
5.3 Product Liability
We shall add you to our product liability coverage as a qualified distributor
and retailer of our products. We will maintain such coverage at adequate levels
as generally accepted throughout the industry.
6. Indemnification
We mutually agree to defend at our own cost and to indemnify and hold each other
harmless, including shareholders, directors, officers, employees and agents,
from and against any and all loss, costs, expenses (including attorney's fees),
damages and liabilities, arising out of the other's negligence, breach of
contract or other civil wrong, resulting directly or indirectly from or
pertaining to the use, condition, construction, decorating, maintenance, or
operation of the Retail Location, including the preparation and sale of any
product made in or sold from the Location.
7. Transfer of the License Agreement
This Agreement shall not be assigned, either voluntarily or by operation of the
law, without prior written consent. Such consent shall not be unreasonably
withheld.
8. Non-Competition
8.1 Competitive Ownership
During the term of this License Agreement, neither you nor any of your
principals shall directly or indirectly engage or be financially involved in
(except for ownership of not more than five percent (5%) of the outstanding
stock, voting and non-voting, of a corporation, the stock of which is traded on
a national securities exchange), or be employed by any chocolate or candy store
business or related products as a significant aspect of its operation. For three
(3) years after termination of this Agreement, you and your principals agree not
to engage in any chocolate business and related products. We will not own or
operate any Retail Locations within your exclusive territory so long as the
License Agreement remains in force.
<PAGE> 6
8.2 Trade Secrets Non-Disclosure
At no time during or after the term of this Agreement or thereafter, use or
assist another in the use of any of our Trade Practices in any other business of
you or any other person or entity.
9. Relationship of the Parties
In all matters pertaining to the operation of the Retail Location, you are and
shall be an independent contractor. No employee of you shall be deemed to be an
employee of us. Nothing herein contained shall be construed to create a
partnership, joint venture or agency between you and us. Neither party hereto
shall be liable for the debts or obligations of the other unless expressly
assumed in writing.
10. Default
The occurrences of any of the following events shall constitute default by you
under this Agreement:
10.1 Acts of Immediate Termination
If during the period in which the license is in effect, there occurs any of the
following events which is relevant to the license, immediate notice of
termination without an opportunity to cure, shall be deemed reasonable:
1. You are declared bankrupt or judicially determined to be insolvent, or
all or a substantial part of the assets thereof are assigned to or for
the benefit of any creditor, or you admit your inability to pay your
debts as they come due.
2. You abandon a state territory by failing to open and operate two
individual retail locations within the first eighteen months of being
granted the state or by failing to operate or implement a mutually
agreed upon plan for at least two retail locations for a period of
thirty consecutive days. This License termination will be exclusive to
the state territory in which the abandonment or failure to operate
occurs. Such failure to operate is acceptable in the case of fire,
flood, earthquake or similar causes beyond your control.
3. We and you agree in writing to terminate the License Agreement.
4. You are convicted of a felony or any other criminal misconduct which is
relevant to the operation of the retail locations.
5. We make a reasonable determination that continued operation of the
retail location by you will result in an imminent danger to public
health or safety.
<PAGE> 7
10.2 Acts Requiring Period to Cure before Termination
1. Other Agreements
Default under any agreement between you and us, or under the lease
agreements with the landlords of the retail locations, which default is
not cured within the period required in said agreements.
2. Transfers Without Prior Written Consent
Any purported assignment, transfer, or sublicense of this franchise, or
any right hereunder, without our prior written consent.
3. Failure to Comply
Failure to comply within reasonable written notice with any/all of the
terms of this Agreement or any other agreement between us and you.
10.3 Remedies and Termination
You acknowledge and agree that complete performance of all the terms and
conditions of this Agreement is necessary for the protection of us and the Trade
Practices and that complete and exact performance by you of each of his promises
contained herein is a condition to the continuance of this license agreement.
11. Governing Law on Breach
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Hawaii.
12. Entire Agreement
THE UNDERSIGNED ACKNOWLEDGES THAT THEY, AND EACH OF THEM HAVE READ THIS
AGREEMENT IN FULL; ARE COGNIZANT OF EACH AND EVERY ONE OF THE TERMS AND
PROVISIONS THEREOF AND AGREEABLE THERETO; THAT NO REPRESENTATIONS OR AGREEMENTS,
WHETHER ORAL OR WRITTEN, EXCEPT AS HEREINAFTER SET FORTH HAVE BEEN MADE OR
RELIED UPON; AND THAT THE TERMS AND PROVISIONS OF THIS LICENSE AGREEMENT CANNOT
BE CHANGED OR MODIFIED UNLESS IN WRITING SIGNED BY YOUR AUTHORIZED
REPRESENTATIVE AND OUR AUTHORIZED CORPORATE OFFICER.
13. Additional Actions
The parties agree to execute such other documents and perform such further acts
as may be necessary or desirable to carry out the purposes of this Agreement.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Hawaiian Vintage Chocolate Co., Inc.
By: James Walsh (signature)
--------------------------------------
President
Licensee: Doug Dawson (signature)
--------------------------------
--------------------------
It's Executive VP
--------------------------
--------------------------
It's
--------------------------
<PAGE> 1
EXHIBIT 12.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Registration Statement on Form 10-SB of our
report dated October 28, 1999 relating to the Financial Statements of Hawaiian
Vintage Chocolate Company, Inc. which appears in such Registration Statement.
HOLLANDER, LUMER & CO. LLP
Los Angeles, California
November 10, 1999
HAWFORM10SB.CONS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 72,282
<SECURITIES> 0
<RECEIVABLES> 172,391
<ALLOWANCES> 39,273
<INVENTORY> 194,039
<CURRENT-ASSETS> 488,952
<PP&E> 153,719
<DEPRECIATION> 32,666
<TOTAL-ASSETS> 927,137
<CURRENT-LIABILITIES> 270,500
<BONDS> 0
0
0
<COMMON> 8,571
<OTHER-SE> 648,066
<TOTAL-LIABILITY-AND-EQUITY> 927,137
<SALES> 280,013
<TOTAL-REVENUES> 280,013
<CGS> 115,554
<TOTAL-COSTS> 714,139
<OTHER-EXPENSES> (24,947)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,870
<INCOME-PRETAX> (535,603)
<INCOME-TAX> 0
<INCOME-CONTINUING> (535,603)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (535,603)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
