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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICABILIA.COM, INC.
(Exact Name of Registrant as specified in its charter)
Florida 65-0142472
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
9155 Las Vegas Boulevard
Suite 242 89123
Las Vegas, Nevada ------------------------------------
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 702-914-8411
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SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
None N/A
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.001 par value
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(TITLE OF CLASS)
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PART 1
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
americaBILIA.com, Inc., (the "Company") is engaged in direct Internet
merchandising of American-themed collectibles, gifts and memorabilia. The
Company manufactures and assembles its own products and also purchases products
from a number of sources. All of these products are then marketed and sold over
its Internet shopping site, www.americabilia.com. The Company strives to offer
its customers a broad selection of products, a convenient shopping experience
and competitive pricing.
americaBILIA.com, a Nevada corporation ("americabilia.com Nevada") was
formed on March 2, 1999 to engage in the merchandising of American-themed
collectibles and gifts. On August 11, 1999, americaBILIA.com Nevada acquired the
outstanding capital stock of Veltre Enterprises, Inc., a Nevada corporation, dba
Unique Images. Unique Images is in the business of designing and manufacturing
Hollywood and sports memorabilia for fine art and memorabilia galleries. Unique
Images also provides high volume and custom picture framing services using
computerized joiner and mat cutting equipment. The purchase price paid for
Unique Images consisted of (i) $200,000 in cash, (ii) a Promissory Note in the
original principal amount of $200,000 and (iii) 100,000 shares of the Rule 506
common stock of americaBILIA.com Nevada. The Promissory Note was paid in full in
November 1999. As part of the purchase, americaBILIA.com Nevada agreed to lease
from Mr. Keith Veltre and his affiliates the premises that are used for Unique
Images' business operations as well as certain business equipment.
The Company was organized under the laws of the state of Florida on
August 22, 1989 under the name First Zurich Investments, Inc. On November 15,
1996, the Company changed its name to Terra International Pharmaceuticals, Inc.
On September 7, 1999, the Company changed its name to americaBILIA.com, Inc. On
September 17, 1999, the Company conducted a recapitalization through the merger
of americaBILIA.com Nevada with and into Worldwide Collectibles, Inc., a Nevada
corporation and a wholly owned subsidiary of the Company formed for the purpose
of the merger. Pursuant to an Agreement of Merger dated September 14, 1999, each
of the former stockholders of americaBILIA.com Nevada received one (1) share of
the Company's common stock, $.001 par value per share ("Common Stock"), in
exchange for their shares of americaBILIA.com Nevada. As a result of the
acquisition, a total of 6,115,000 shares of Rule 506 Common Stock were issued to
the former shareholders of americaBILIA.com Nevada. Prior to its acquisition of
americaBILIA.com Nevada, the Company did not have any operations.
Unless the context otherwise requires, all references to the Company
include its wholly-owned subsidiaries, Veltre Enterprises, Inc., a Nevada
corporation, and Worldwide Collectibles, Inc., a Nevada corporation. The
Company's executive offices are located at 9155 Las Vegas Boulevard, Suite 242,
Las Vegas, Nevada 89123; telephone number (702) 914-8411.
BUSINESS OF THE ISSUER
GENERAL DESCRIPTION OF BUSINESS
The Company engages in the direct merchandising of American-themed
collectibles, gifts, and memorabilia, primarily through its Internet shopping
site. The Company also offers products through its Las Vegas showroom and sells
its products through auctions on the eBay Web site. The Company intends to
continue offering products on eBay as a means of making potential customers
aware of the Company's Web site.
The Company was formed to capitalize on the opportunity for online
retailing of collectibles and memorabilia. The Company believes that the
collectibles and memorabilia industry is particularly suited to online
retailing. An online seller has virtually unlimited online shelf space and can
offer customers a vast selection through an efficient search and retrieval
interface. This is particularly valuable in the collectibles and
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memorabilia market because the extraordinary number of different items
precludes even the largest physical store from economically stocking more
than a small number of available products. Beyond the benefits of selection,
purchasing products online is more convenient than shopping in a physical
store because the products can be purchased 24 hours a day and shopping does
not require a trip to a store. Products can be shipped directly to the
customer's home or office. The Company believes that customers may buy more
products because they have more hours to shop, can act immediately on a
purchase impulse and can locate products that are hard to find. Because the
online store has a global reach, it can deliver an extremely broad selection
to customers in rural, international or other locations that cannot support
large-scale physical stores. The Company will strive to offer its customers
compelling value through the use of technology, broad product selection, a
high level of customer service and competitive pricing. As an online
retailer, the Company has virtually unlimited online shelf space and can
offer customers a large selection of products through an efficient search and
retrieval interface. The Company offers more than 2,000 products.
The Company's objective is to be the leading online retailer of
collectibles and memorabilia. To attain this objective, it will be necessary for
the Company to build strong brand recognition by promoting, advertising and
increasing its brand equity and visibility through a variety of marketing and
promotional techniques. As its business develops, the Company may advertise on
leading Web sites.
GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Internet is an increasingly significant global medium for
communications, content and online commerce. International Data Corporation
("IDC") estimates that the number of Web users will grow from approximately 150
million worldwide in 1998 to approximately 500 million worldwide by the end of
2003. The growing adoption of the Web represents an enormous opportunity for
businesses to conduct commerce over the Internet. IDC estimates that commerce
over the Internet will increase from approximately $40 billion worldwide in 1998
to approximately $900 billion worldwide in 2003. The Internet gives companies
the opportunity to develop one-to-one relationships with customers worldwide
from a central location without having the burdensome costs of managing and
maintaining a significant retail store infrastructure or the continuous printing
and mailing costs of catalog marketing. Growth in Internet usage has been fueled
by a number of factors, including the large and growing installed base of
personal computers in the workplace and home, advances in the performance and
speed of personal computers and modems, improvements in network infrastructure,
easier and cheaper access to the Internet and increased awareness of the
Internet among businesses and consumers. The increasing functionality,
accessibility and overall usage of the Internet and online services have made
them an attractive commercial medium. The Internet and other online services are
evolving into a unique sales and marketing channel, just as retail stores,
mail-order catalogs and television shopping have done. Online retailers can
interact directly with customers by frequently adjusting their featured
selections, editorial insights, shopping interfaces, pricing and visual
presentations. The minimal cost to publish on the Web, the ability to reach and
serve a large and global group of customers electronically from a central
location, and the potential for personalized low-cost customer interaction
provide additional economic benefits for online retailers. Because of these
advantages over traditional retailers, online retailers have the potential to
build large, global customer bases quickly and to achieve superior economic
returns over the long term. An increasingly broad base of products is being sold
successfully online, including computers, travel services, brokerage services,
automobiles, music and books.
PRODUCTS
The Company offers a broad range of collectibles, gifts, and
memorabilia, most of which are replicas, and some of which will be authentic
restored merchandise, including Coca-Cola bottle dispenser machines. The Company
offers more than 2,000 products ranging from original autographed photos and
collectibles of Hollywood Stars, Famous Sports Athletes, and Rock `n Roll
Legends to Jukeboxes and Coca-Cola Machines.
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Merchandise offered will have a broad price range, from a low end of
$15 to $20 for such items as coffee mugs and die-cast cars to a high end of up
to $6,500 for such items as love seats made from the rear end of a 1957
Chevrolet Bel Air, to a full-size floor model Wurlitzer Jukebox, to rare and
authenticated autographed photos and collectibles. The Company anticipates that
its average sale will range from $50 to $100.
Most products to be offered by the Company will be supplied by
authorized manufacturers of trademark registered companies, such as Coca-Cola,
Star Wars, Star Trek, Pepsi, Chevrolet, Harley-Davidson, NASCAR, Disney, Warner
Bros., and various Hollywood and entertainment personalities such as Elvis
Presley, Marilyn Monroe, James Dean, and John Wayne, as well as a number of
famous sports figures. The Company's acquisition of Unique Images will allow it
to also design and manufacture its own Hollywood and sports memorabilia and to
offer these products on its Web site.
The Company believes that the market for collectibles and memorabilia
is well suited to online retailing. An online retailer has virtually unlimited
online shelf space and can offer customers a vast selection through an efficient
search and retrieval interface. This is particularly valuable in the
collectibles and memorabilia market because the extraordinary number of
different items precludes even the largest physical store from economically
stocking more than a small minority of available products. Furthermore, unlike
with clothing or other personal products, consumers can make educated purchase
decisions using online information. Collectibles and memorabilia can be selected
effectively through online descriptions.
INTERNET SHOPPING SITE
The Company's Web site uses Shopsite Web hosting software. The
Company's Web site is physically located on a server owned and maintained by
InterLand Incorporated in Atlanta, Georgia.
The Company's Web site features a "secure server" shopping cart for
online ordering and tracking of product shipment. A primary feature of the Web
site is its interactive, searchable catalog of more than 2,000 products. The
Company provides search tools to find products primarily based on categories
such as sports, television stars, movie stars, music artists, political and
historical, game room and home theater, beverage collectibles, Coca-Cola
collectibles, hot collectibles, cartoons, science fiction, neon and electric
art, transportation and metal signs. The Company also plans to offer free e-mail
notification services which will be designed to automatically notify customers
when a new product that matches their criteria becomes available.
Through the Company's Web site, customers are able to order products,
conduct targeted searches, browse from among highlighted product offerings,
participate in promotions and check order status. Clicking with the mouse on any
of the products pulls up more information about the product, as well as a button
which, if clicked, adds the product to the customer's order. Customers can add
and remove products from their shopping baskets as they browse prior to making a
final purchase decision, just as in a physical store. To execute orders,
customers click on the buy button and are prompted to supply shipping and credit
card details, either by e-mail or by telephone.
Customers are offered a variety of delivery services, including
overnight and various international shipping options. The Company's system
automatically confirms each order by e-mail to the customer within minutes after
the order is placed and advises customers by e-mail shortly after orders are
shipped.
The Company ships products from its Las Vegas, Nevada facilities via
the U.S. Postal Service and UPS. In some instances, the Company has made
arrangements for larger products to be drop-shipped by the manufacturer or
supplier directly to the Company's customer.
The Company sources product from a network of distributors. The Company
has implemented the necessary shipping and inventory control capacity to enable
it to provide a rapid response to customer requests. Most of the Company's
products are available for shipment within 24 hours for delivery within two to
four business days. Items too large for conventional shipping may be shipped via
freight. If an item is backordered, the customer is notified immediately via
e-mail.
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All products are shipped with a customer satisfaction guarantee, which
includes credit, refund or exchange of product which is damaged, defective, or
unsatisfactory to the customer in any way, provided the product is returned in
"like-new" condition in its original packaging box with the customer's receipt
within 30 days.
The Company intends to participate in The Council of Better Business
Bureau's BBBONLINE-Registered Trademark- Privacy Program and to comply with
its privacy standards. This will allow the Company to display the
BBBONLINE-Registered Trademark- compliance seal on its Web site. The
BBBONLINE-Registered Trademark- Privacy Program provides verification,
monitoring and review of Web sites and customer dispute resolution services.
Through the BBBONLINE-Registered Trademark- Privacy Program, customers can
check the Company's history and obtain contact information and assurance that
the Company stands behind its advertising claims.
The Company has obtained a Thawte Digital Certificate to register its
right to use the domain name "americaBILIA.com." This certificate authenticates
the Company for purposes of secure online transactions.
MARKETING AND PROMOTION
The Company's marketing strategy is designed to strengthen the
americaBILIA.com brandname, increase customer traffic to its Web site, build
strong customer loyalty and maximize repeat purchases. The Company intends to
build customer loyalty by both creatively applying technology to deliver planned
personalized programs and services, as well as through creative and flexible
merchandising. The Company will be able to provide increasingly targeted and
customized services by using the extensive customer preference and behavioral
data obtained as a result of its online experience and market share. The
Internet allows rapid and effective experimentation and analysis and instant
user feedback, which the Company intends to incorporate in its merchandising. In
contrast to traditional direct-marketing efforts, the Company's planned
personalized notification services will be designed to send customers customized
notices at their request. The Company hopes that these customized notices will
increase the number of visitors that make purchases at its site, will encourage
repeat visits and purchases and will assist customer retention. Loyal, satisfied
customers also generate word-of-mouth advertising and awareness and are able to
reach thousands of other customers and potential customers because of the reach
of online communication.
The Company intends to employ a variety of media, program and product
development, business development and promotional activities to achieve these
goals. The Company's Web site has been registered with key search engine/online
web sites, including Yahoo, HotBot, Lycos, WebCrawler, Excite, Infoseek,
AltaVista, Northern Light, Whatyouseek, GoTo, Snap and AOL Netfind. In the
future, the Company may place advertisements on various high-profile and
high-traffic conduit Web sites. The Company is investigating the use of link
exchanges and paid banner advertising and in the future, the Company may
advertise through the use of banners that encourage readers to click through
directly to the Company's Web site. The Company will also engage in a program of
print advertising in specialized newspapers and magazines.
The Company believes that its ability to establish and maintain
long-term relationships with its customers and encourage repeat visits and
purchases depends, in part, on the strength of its customer support and service
operations and staff. Furthermore, the Company values frequent communication
with and feedback from its customers in order to continually improve the store
and its services. The Company offers e-mail addresses to enable customers to
request information and to encourage feedback and suggestions. The Company's
customer support and service personnel will be responsible for handling general
customer inquiries, answering customer questions about the ordering process, and
investigating the status of orders, shipments and payments.
MARKET AND COMPETITION
The market for collectibles and memorabilia is large and relatively
fragmented. Although the market for collectibles and antiques is worldwide, the
Company anticipates that the majority of customers will be from the United
States (with more than 80 million households currently connected to the
Internet), as well as Japan, Western Europe and the United Kingdom. The Company
believes that collectible and memorabilia Web sites
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currently doing business on the Internet generally lack product selection and
customer appeal. The Company has attempted to select a product line which
will not only fill a niche in Internet marketing, but will also have a broad
appeal for collectors of all types of American-themed collectibles and
memorabilia.
The online commerce market, particularly over the Internet, is new,
rapidly evolving and intensely competitive. The Company expects this competition
to intensify in the future. Barriers to entry are minimal, and current and new
competitors can launch new sites at a relatively low cost. The Company believes
that the principal competitive factors in its market are brand recognition,
selection, personalized services, convenience, price, accessibility, customer
service, quality of search tools, reliability and speed of fulfillment. Many of
the Company's current and potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than the Company. In addition, online
retailers may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of the Internet and other online services increases.
Certain of the Company's competitors may be able to secure merchandise
from vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to Web site and systems
development than the Company. Increased competition over time may result in
reduced operating margins, loss of market share and a diminished brand
franchise. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and competitive pressures
faced by the Company may have a material adverse effect on the Company's
business, prospects, financial condition and results of operations. Further, as
a strategic response to changes in the competitive environment, the Company may
from time to time make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on its business,
prospects, financial condition and results of operations.
New technologies and the expansion of existing technologies may
increase the competitive pressures on the Company. For example, client-agent
applications that select specific products from a variety of Web sites may
channel customers to companies that compete with the Company. In addition,
companies that control access to transactions through network access or Web
browsers could promote the Company's competitors or charge the Company a
substantial fee for inclusion.
SEASONALITY
The Company anticipates that its business will be seasonal with higher
than average sales occurring in the fourth calendar quarter as a result of
holiday gift purchases. Some companies marketing products over the Internet may
experience in excess of a majority of their sales in the fourth calendar quarter
each year.
EMPLOYEES AND CONSULTANTS
The Company currently employs eighteen (18) full time employees and
five (5) part time employees at its Las Vegas, Nevada locations to handle
product production, administration and shipping. In addition, seven (7) of the
Company's shareholders currently work for the Company without compensation. It
is anticipated that the Company's management will continue to conduct all
aspects of the Company's business until sales generate cash flow sufficient to
permit the payment of salaries. The Company believes that its relations with its
employees are good. The Company anticipates that within the next twelve months,
the Company will need to hire additional personnel for shipping and sales. The
Company also may hire additional management personnel.
The Company intends to start paying compensation to existing management
and increase compensation for other employees at such time and in such amounts
as determined by the Company's officers and directors in their sole discretion.
TRADENAME
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In April, 1999, the Company filed a federal trademark application for
"americaBILIA."
INVESTMENT RISKS
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED LOSSES. The
Company has only a limited operating history on which to base an evaluation of
its business and prospects. The Company's prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as online commerce. Such risks for the Company include,
but are not limited to, an evolving and unpredictable business model and the
management of growth. To address these risks, the Company must, among other
things, continually update its Web site and product offerings, establish and
increase its customer base, implement and successfully execute its business and
marketing strategy, continue to develop and upgrade its technology and
transaction-processing systems, provide superior customer service and order
fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will be
successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. It is anticipated that the Company may
initially incur substantial losses. The Company believes that its success will
depend in large part on its ability to (i) establish its brand position, (ii)
provide its customers with outstanding value and a superior shopping experience,
and (iii) achieve sufficient sales volume to realize economies of scale.
Accordingly, the Company intends to invest heavily in marketing and promotion,
site development and technology and operating infrastructure development.
POSSIBLE NEED FOR ADDITIONAL FINANCING. The Company recently commenced
a private placement of Units of its securities, pursuant to which the Company
seeks to raise up to $3,000,000 in gross proceeds. The Company is dependent on
and intends to use a substantial portion of the proceeds of that offering to
acquire inventory, for advertising, to upgrade its Web site and server and for
working capital. The Company anticipates, based on currently proposed plans and
assumptions relating to its operations, that the proceeds of its private
placement, together with projected cash flow from operations and available cash
resources, will be sufficient to satisfy its anticipated cash requirements for
the next twelve months. If the gross proceeds from the private placement are
less than $3,000,000, however, the Company's ability to implement its plan of
operations will be hindered and the planned expenditures towards acquiring
inventory and advertising may not be made. In the event that the Company's plans
change, its assumptions change or prove to be inaccurate or the proceeds of the
offering and cash flow prove to be insufficient to fund operations (due to
smaller than anticipated revenues, unanticipated expenses, delays, problems,
difficulties or otherwise), the Company would be required to seek additional
financing sooner than anticipated or to curtail its business activities. The
Company may determine, depending upon the opportunities available to it, to seek
additional debt or equity financing to fund the cost of its operations. To the
extent that the Company finances its operations with a combination of internally
generated funds and the sale of equity securities, such issuance of equity
securities could result in dilution to the interests of the Company's
shareholders. Additionally, to the extent that the Company incurs indebtedness
or issues debt securities in connection with any acquisition, the Company will
be subject to risks associated with incurring indebtedness, including the risks
that interest rates may fluctuate and cash flow may be insufficient to pay
principal and interest on any such indebtedness. The Company has no current
arrangements with respect to, or sources of, additional financing, and it is not
anticipated that existing shareholders will provide any additional financing to
the Company. There can be no assurance that additional financing will be
available to the Company on commercially reasonable terms, or at all.
UNPREDICTABILITY OF FUTURE REVENUES. As a result of the Company's lack
of operating history and the emerging nature of the market in which it competes,
the Company is unable to accurately forecast its revenues. The Company's current
and future expense levels are based largely on its existing commitments and
plans to acquire inventory and engage in acquisitions. Sales and operating
results generally depend on the volume of, timing of and ability to fulfill
orders received, which are difficult to forecast. The Company may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues in relation to the
Company's planned expenditures would have an immediate adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain
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pricing or marketing decisions that could have a material adverse effect on
its business, prospects, financial condition and results of operations.
POTENTIAL FLUCTUATION IN OPERATING RESULTS; SEASONALITY. The Company
expects to experience significant fluctuations in its future quarterly operating
results due to a variety of factors, many of which are outside the Company's
control. Factors that may adversely affect the Company's quarterly operating
results include (i) the Company's ability to retain existing customers, attract
new customers at a steady rate and maintain customer satisfaction, (ii) the
Company's ability to manage inventory and fulfillment operations and maintain
gross margins, (iii) the announcement or introduction of new sites, services and
products by the Company and its competitors, (iv) price competition or higher
wholesale prices in the industry, (v) the level of use of the Internet and
online services and increasing consumer acceptance of the Internet and other
online services for the purchase of consumer products such as those offered by
the Company, (vi) consumer confidence in the security of transactions on the
Company's Web site, (vii) the Company's ability to develop and upgrade its
systems and infrastructure and attract new personnel in a timely and effective
manner, (viii) the level of traffic on the Company's Web site, (ix) technical
difficulties, system downtime or Internet brownouts, (x) the amount and timing
of operating costs and capital expenditures relating to expansion of the
Company's business, operations and infrastructure, (xi) the number of products
introduced during the period, (xii) the level of merchandise returns experienced
by the Company, (xiii) governmental regulation, and (xiv) general economic
conditions and economic conditions specific to the Internet, online commerce and
the collectibles and memorabilia industry including consumer trends and
popularity of some categories of collectible items. The Company expects that it
will experience seasonality in its business, reflecting a combination of
seasonal fluctuations in Internet usage and traditional retail seasonality
patterns. Internet usage and the rate of Internet growth may be expected to
decline during the summer. Further, sales in the collectibles and memorabilia
industry are expected to be significantly higher in the fourth calendar quarter
of each year than in the preceding three quarters.
COMPETITION. The online commerce market is new, rapidly evolving and
intensely competitive, which competition the Company expects to intensify in the
future. Barriers to entry are minimal, and current and new competitors can
launch new sites at a relatively low cost. In addition, the collectibles and
memorabilia industry is intensely competitive. Most of the products that the
Company intends to sell are available from other retail sources including mail
order catalogs. The Company will compete with these other sources in the sale of
these products and will compete generally with other sellers of novelty items.
The Company believes that the principal competitive factors in its market will
be brand recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, and reliability and
speed of fulfillment. Many of the Company's current and potential competitors
have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and other resources
than the Company. In addition, online retailers may be acquired by, receive
investments from or enter into other commercial relationships with larger,
well-established and well-financed companies as use of the Internet and other
online services increases. The financial resources and established arrangements
of such companies may provide them with competitive advantages over the Company.
Certain of the Company's competitors may be able to secure merchandise from
vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to Web site and systems
development than the Company. Increased competition may result in reduced
operating margins, inability to establish or loss of market share and a
diminished brand value. There can be no assurance that the Company will be able
to compete successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
New technologies and the expansion of existing technologies may increase the
competitive pressures on the Company. For example, client-agent applications
that select specific products from a variety of Web sites may channel customers
to competitors of the Company. In addition, companies that control access to
transactions through network access or Web browsers could promote the Company's
competitors or charge the Company a substantial fee for inclusion.
DEPENDENCE ON PRODUCT ACCEPTANCE. The Company's business is subject to
consumer trends. The popularity of certain categories of items among consumers
may vary from time to time due to subjective value among consumers and consumer
trends in general. The Company has not conducted any market studies or
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surveys to evaluate the potential market acceptance of the collectibles and
memorabilia that it plans to sell. Most of the items that are offered by the
Company are also offered in mail order catalogs. The Company has based its
product selection in part on verbal indications from individual product
suppliers as to the relative demand for the various products manufactured or
distributed by that product supplier. The Company did not independently
verify any demand information provided by these product suppliers. In the
event the Company experiences insufficient product acceptance, the Company
may be forced to cease business and the shareholders' may lose their entire
investment in the Company.
INTRODUCTION OF NEW PRODUCTS. The market for memorabilia is
characterized by the need to develop and introduce new products. There is always
the potential threat of new entrants offering competitive products. Accordingly,
the Company believes its future prospects depend on its ability not only to
successfully market its existing products, but also to introduce new products
that achieve market acceptance. There can be no assurance that the Company will
be able to identify or market such additional products successfully or that the
Company will be able to respond effectively to new product offerings by
competitors. In particular, if the Company fails to successfully anticipate
customer demand for new products or otherwise makes incorrect decisions
pertaining to new products, the Company could be adversely affected both by the
loss of anticipated revenue and, possibly, its competitors' increase in their
established bases of customers. The Company may also experience delays in the
introduction of new products, resulting in delay or loss of revenues. There can
be no assurance that announcements of new product offerings will not cause
customers to defer purchasing existing Company products.
POSSIBLE CHANGE IN PRODUCT LINES. It is anticipated that changes in the
acceptance of the Company's product line may require the Company to change its
product focus and business plan to respond to the market. The Company
anticipates expanding its product focus to include additional product lines in
the future. The Company may develop or acquire additional product lines or may
acquire existing companies which market products. In the event the Company is
not successful in marketing collectibles and memorabilia, the Company may cease
doing business or may attempt to replace its product line. The Company
anticipates that it would take at least six (6) months to develop a new product
line and there can be no assurance that the Company would decide to do so.
Investors in the Company must rely solely on the Company's management in making
these decisions.
RISK OF CAPACITY CONSTRAINTS. A key element of the Company's strategy
is to generate a high volume of traffic on, and use of, its Web site.
Accordingly, the satisfactory performance, reliability and availability of the
Company's Web site, transaction-processing systems and network infrastructure
are critical to the Company's reputation and its ability to attract and retain
customers and maintain adequate customer service levels. The Company's revenues
depend on the number of visitors who shop on its Web site and the volume of
orders it fulfills. Any system interruptions that result in the unavailability
of the Company's Web site or reduced order fulfillment performance would reduce
the volume of goods sold and the attractiveness of the Company's product
offerings. The Company expects that it will experience periodic system
interruptions. Based on the volume of traffic on the Company's Web site or the
number of orders placed by customers, the Company may need to expand and upgrade
its technology, transaction-processing systems and network infrastructure. There
can be no assurance that the Company will be able to accurately project the rate
or timing of increases, if any, in the use of its Web site or timely expand and
upgrade its systems and infrastructure to accommodate such increases. Any
inability to do so would have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
RISK OF SYSTEM FAILURE; SINGLE SITE AND ORDER INTERFACE. The Company's
success, in particular its ability to successfully receive and fulfill orders
and provide high-quality customer service, largely depends on the efficient and
uninterrupted operation of its computer and communications hardware systems. The
Company's domain host, InterLand, Incorporated, has servers located in Atlanta,
Georgia. These systems and operations are vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure, break-ins, earthquake
and similar events. The Company does not presently maintain redundant systems or
a formal disaster recovery plan and does not carry business interruption
insurance to compensate it for losses that may occur. Despite the implementation
of security measures, the server on which the Company's Web site is located is
-9-
<PAGE>
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data or the
inability to accept and fulfill customer orders. The occurrence of any of the
foregoing risks could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
MANAGEMENT OF POTENTIAL GROWTH; LIMITED SENIOR MANAGEMENT RESOURCES.
The Company may be required to rapidly and significantly expand its operations
to address potential growth in its customer base and market opportunities. This
expansion would place a significant strain on the Company's management,
operational and financial resources. To manage the expected growth of its
operations and personnel, the Company will be required to improve existing and
implement new transaction-processing, operational and financial systems,
procedures and controls, and to expand, train and manage a growing employee
base. The Company also will be required to expand its finance, administrative
and operations staff. Further, the Company's management will be required to
maintain and expand its relationships with various distributors and suppliers,
freight companies, other Web sites and other Web service providers, Internet and
other online service providers and other third parties necessary to the
Company's business. There can be no assurance that the Company's current and
planned personnel, systems, procedures and controls will be adequate to support
the Company's future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that Company management will
be able to successfully identify, manage and exploit existing and potential
market opportunities. If the Company is unable to manage growth effectively, its
business, prospects, financial condition and results of operations will be
materially adversely affected.
DEPENDENCE OF CONTINUED GROWTH OF ONLINE COMMERCE. The Company's future
revenues and any future profits are substantially dependent upon the widespread
acceptance and use of the Internet and other online services as an effective
medium of commerce by consumers. Rapid growth in the use of and interest in the
Web, the Internet and other online services is a recent phenomenon, and there
can be no assurance that acceptance and use will continue to develop or that a
sufficiently broad base of consumers will adopt, and continue to use, the
Internet and other online services as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty and there exist few proven services and
products. The Company relies on consumers who have historically used traditional
means of commerce to purchase merchandise. For the Company to be successful,
these consumers must accept and utilize novel ways of conducting business and
exchanging information. In addition, the Internet and other online services may
not be accepted as a viable commercial marketplace for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies and performance
improvements. To the extent that the Internet and other online services continue
to experience significant growth in the number of users, their frequency of use
or an increase in their bandwidth requirements, there can be no assurance that
the infrastructure for the Internet and other online services will be able to
support the demands placed upon them. In addition, the Internet or other online
services could lose their viability due to delays in the development or adoption
of new standards and protocols required to handle increased levels of Internet
or other online service activity, or due to increased governmental regulation.
Changes in or insufficient availability of telecommunications services to
support the Internet or other online services also could result in slower
response times and adversely affect usage of the Internet and other online
services generally. If use of the Internet and other online services does not
continue to grow or grows more slowly than expected, if the infrastructure for
the Internet and other online services does not effectively support the growth
that may occur, or if the Internet and other online services do not become a
viable commercial marketplace, the Company's business, prospects, financial
condition and results of operations would be materially adversely affected.
RAPID TECHNOLOGICAL CHANGE. To become and remain competitive, the
Company must continually enhance and improve the responsiveness, functionality
and features of its Web site. The Internet and the online commerce industry are
characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and
practices that could render the Company's existing Web site obsolete. The
Company's success will depend, in part, on its ability to license leading
technologies useful in its business, enhance its existing services, develop new
services that address the increasingly sophisticated and varied needs of its
prospective customers, and respond to technological advances and emerging
industry standards and practices
-10-
<PAGE>
on a cost-effective and timely basis. The development of the Web site entails
significant technical and business risks. There can be no assurance that the
Company will successfully adapt its Web site, technology and
transaction-processing systems to customer requirements or emerging industry
standards. If the Company is unable, for technical, legal, financial or other
reasons, to adapt in a timely manner in response to changing market
conditions or customer requirements, its business, prospects, financial
condition and results of operations would be materially adversely affected.
ONLINE COMMERCE SECURITY RISKS. A significant barrier to online
commerce and communications is the secure transmission of confidential
information over public networks. The Company will rely on encryption and
authentication technology licensed from third parties to provide the security
and authentication necessary to effect secure transmission of confidential
information, such as customer credit card numbers. There can be no assurance
that advances in computer capabilities, new discoveries in the field of
cryptography, or other events or developments will not result in a compromise or
breach of the algorithms used by the Company to protect customer transaction
data. If any such compromise of the Company's security were to occur, it could
have a material adverse effect on the Company's reputation, business, prospects,
financial condition and results of operations. A party who is able to circumvent
the Company's security measures could misappropriate proprietary information or
cause interruptions in the Company's operations. The Company may be required to
expend significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches. Concerns over the
security of transactions conducted on the Internet and other online services and
the privacy of users may also inhibit the growth of the Internet and other
online services generally, and the Web in particular, especially as a means of
conducting commercial transactions. To the extent that activities of the Company
or third-party contractors involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage the
Company's reputation and expose the Company to a risk of loss or litigation and
possible liability. There can be no assurance that the Company's security
measures will prevent security breaches or that failure to prevent such security
breaches will not have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL. The
Company's performance will be substantially dependent on the continued services
and on the performance of its senior management and other key personnel,
particularly Henry E. Cartwright, its Chairman of the Board, Gary Moore, its
President, and Keith Veltre, the President of the Company's subsidiary, Unique
Images. The Company's performance also depends on the Company's ability to
retain and motivate its other officers and key employees. The loss of the
services of any of its executive officers or other key employees could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. The Company does not have long-term
employment agreements with any of its key personnel other than Keith Veltre and
maintains no "key person" life insurance policies. The Company's future success
also depends on its ability to identify, attract, hire, train, retain and
motivate other highly skilled technical, managerial, merchandising, marketing
and customer service personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to successfully attract,
assimilate or retain sufficiently qualified personnel. The failure to retain and
attract the necessary technical, managerial, merchandising, marketing and
customer service personnel could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
RELIANCE ON SUPPLIERS. The Company will purchase a majority of its
products from in excess of 70 vendors. The Company intends to carry minimal
inventory and to rely to a large extent on rapid fulfillment from its vendors.
The Company has no long-term contracts or arrangements with any of its vendors
that guarantee the availability of merchandise, the continuation of particular
payment terms or the extension of credit limits. There can be no assurance that
the Company's current vendors will continue to sell merchandise to the Company
on current terms or that the Company will be able to establish new or extend
current vendor relationships to ensure acquisition of merchandise in a timely
and efficient manner and on acceptable commercial terms. If the Company were
unable to develop and maintain relationships with vendors that would allow it to
obtain sufficient quantities of merchandise on acceptable commercial terms, its
business, prospects, financial condition and results of operations would be
materially adversely affected.
-11-
<PAGE>
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES. The Company is not
currently subject to direct regulation by any domestic or foreign governmental
agency, other than regulations applicable to businesses generally, and laws or
regulations directly applicable to access to online commerce. However, due to
the increasing popularity and use of the Internet and other online services, it
is possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
pricing, content, copyrights, distribution and characteristics and quality of
products and services. Furthermore, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or other online services, which could, in turn, decrease
the demand for the Company's products and services and increase the Company's
cost of doing business, or otherwise have an adverse effect on the Company's
business, prospects, financial condition and results of operations. Moreover,
the applicability to the Internet and other online services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Any such new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to the
Company's business, or the application of existing laws and regulations to the
Internet and other online services could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
SALES AND OTHER TAXES. The Company does not intend to collect sales or
other similar taxes in respect of shipments of goods into states other than
Nevada. Any new operation in states outside Nevada could subject shipments into
such states to state sales taxes under current or future laws. In October 1998,
the U.S. federal government enacted legislation prohibiting states or other
local authorities from imposing new taxes on Internet commerce for a period of
three years. This tax moratorium will last only for a limited period and does
not prohibit states or the Internal Revenue Service from collecting taxes on the
Company's income, if any, or from collecting taxes that are due under existing
tax rules. A successful assertion by one or more states or any foreign country
that the Company should collect sales or other taxes on the sale of products
could harm the Company's business.
CONTROL BY MANAGEMENT. The Company's officers and directors will
beneficially own approximately 26% of the Company's outstanding Common Stock.
Such persons together with their adult children who also own Common Stock of the
Company, acting together, will be in a position to control the Company, elect a
majority of the Company's directors, increase the authorized capital, dissolve,
merge, or sell the assets of the Company and generally direct the affairs of the
Company.
NO ASSURANCE OF PUBLIC MARKET. There is currently only a limited public
trading market for the Common Stock. There can be no assurance that a regular
trading market for the Common Stock will develop or that, if developed, it will
be sustained. Factors such as the financial results or acquisition of additional
businesses may have a significant impact on the ability of the Company to
operate profitably. This may in turn have a significant impact on the market
price of the Common Stock. Additionally, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
the stock of many companies, particularly Internet and technology companies,
with common stock that trades in the over-the-counter market, have experienced
wide fluctuations which have not necessarily been related to the operating
performance of such companies.
NO DIVIDENDS. The Company has not paid any cash dividends to date and
does not expect to pay dividends for the foreseeable future. The Company intends
to retain earnings, if any, as necessary to finance the operation and expansion
of its business.
-12-
<PAGE>
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL INFORMATION
The summary financial information set forth below has been derived from
the Company's financial statements and should be read in conjunction with the
financial statements and notes thereto, included elsewhere in this Registration
Statement. The operations amounts do not cover a full year since the Company was
formed in 1999. The operations amounts do not include a full year of the results
for the acquired companies as the acquisitions occurred during the fiscal year.
OPERATIONS DATA:
<TABLE>
<CAPTION> PERIOD FROM MARCH 2, 1999
THROUGH
DECEMBER 31, 1999
---------------------------------------
<S> <C>
Revenues...................................................... $ 662,231
Total expenses................................................ 1,055,188
Net loss...................................................... (349,551)
Loss per share................................................ (0.08)
Weighted average shares outstanding........................... 4,172,576
BALANCE SHEET DATA
---------------------------------------
DECEMBER 31, 1999
---------------------------------------
Working capital............................................... $ 746,261
Total assets.................................................. 1,473,908
Total liabilities............................................. 283,693
Stockholders' equity.......................................... 1,190,215
</TABLE>
- ---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes
thereto, and the other financial information included elsewhere in this
prospectus. The period from March 2, 1999 through December 31, 1999 is referred
to as "fiscal 1999". Because this is the first year of operations for the
Company, there are no comparative amounts for prior periods.
REVENUES
Company revenues reached $662,231 in fiscal 1999 due to $294,009 in
revenues from sales by World Wide Collectibles and external sales of $368,223
from Unique Images whose operations were acquired on August 11, 1999.
EXPENSES
Cost of sales in fiscal 1999 increased to $415,330 as a result of
product costs of World Wide Collectibles and of $272,778 from Unique Images
whose operations were acquired on August 11, 1999. General and administrative
expenses increased to $557,310 in fiscal 1999. These expenses increased to
reflect the Company's
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<PAGE>
recognition opening expenses and ordinary costs. Several officers of the Company
are currently not receiving salaries from the Company. However contribution
expense has been recognized in the form of contributed capital.
OTHER INCOME (EXPENSE)
Interest expense in fiscal 1999 increased to $13,648 as a result of
loans of World Wide Collectibles and of Unique Images whose operations were
acquired on August 11, 1999. Interest income and other income in fiscal 1999
increased to $12,405 as a result of interest on cash in interest bearing bank
accounts of World Wide Collectibles and of Unique Images whose operations were
acquired on August 11, 1999
NET INCOME (LOSS)
The Net Loss in fiscal 1999 increased to $349,551 as a result of
corporate operations and due to the results of operations for World Wide
Collectibles and from Unique Images whose operations were acquired on August 11,
1999 due to matters discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had cash and cash equivalents of
$323,127. The Company had working capital of $792,861 and shareholders equity of
$1,190,215. The cash increased during fiscal 1999 as a result of the issuance of
stock and as a result of two loans from officers of the Company.
Cash flow from operations is expected to be sufficient to pay operating
costs of the Company during fiscal 2000. However the Company expects to raise
additional funds through a combination of private placements, public offerings
of its stock or bank loans in order to expand operations and increase its
technical infrastructure and inventory. However, there can be no assurance that
any additional financing, if needed to meet liquidity needs, will be available
to us on favorable terms or at all. There can be no assurance that our estimate
of foreseeable liquidity needs is accurate or that no new business developments
or other unforeseen events will not occur, any of which could result in the need
to raise additional funds. We expect that the adequacy of our operating cash
flow will depend upon:
- customer acceptance of our products;
- the continued development of the Internet market as a source for
our products;
- the intensity of our competition;
- the efficiency of operations;
- the depth of customer demand, and the effectiveness of our marketing
and promotional efforts:
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued FAS No. 137,
`Deferral of FAS 133 Accounting for Derivatives' which delays the implementation
of that pronouncement to June 15, 2000. The Company has not determined what
effect, if any, that FAS 133 may have on our results of operations.
YEAR 2000
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This situation is generally referred to as the "Year 2000
Problem". If such situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
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<PAGE>
The Company has conducted a comprehensive review of its computer
systems and other systems for the purpose of assessing its potential Year 2000
Problem. Based upon this review, the Company's management believes such systems
are compliant.
All costs related to the Year 2000 Problem were expensed as incurred,
while the cost of new hardware and software is capitalized and amortized over
its expected useful life. The costs associated with Year 2000 compliance have
not been and are not anticipated to be material to the Company's financial
position or results of operations. As of December 31, 1999, the Company incurred
costs of approximately $2,000, primarily for analysis by internal labor, related
to the system applications. The Company does not anticipate spending any
additional amounts on Year 2000 compliance matters since all of its software and
hardware was Year 2000 compliant when purchased in fiscal 1999.
In addition, the Company has communicated with its major suppliers and
vendors to determine their state of readiness relative to the Year 2000 Problem
and its possible exposure to Year 2000 issues with any such party. The suppliers
have responded indicating that they have reached operational sustainability in
all areas. However, there can be no guarantee that the systems of other
companies, which the Company's systems may rely upon, have been converted or
representations made to the Company by these parties are accurate. As a result
the failure of a major vendor or supplier to adequately address their Year 2000
Problem could have a significant adverse impact on the Company's operations.
As a result of various external risk factors, the Company could be
adversely impacted and the effect could be material regardless of the readiness
of its own systems. The most reasonable worst case scenario - if one or more of
the Company's suppliers, or its web site provider, experiences Year 2000
problems that impact their ability to provide their services, the Company's
operations could be adversely impacted. The Company has developed, and continues
to update and revise, contingency plans to address the identified risks. As of
the date of this Registration Statement, nothing has come to the Company's
attention that would indicate that any of its computer systems are unable to
operate accurately after January 1, 2000. However, the Company has been advised
that the consequences of a Year 2000 failure may not become apparent for several
weeks following January 1, 2000. Should the Company experience any problems, its
response will include seeking other suppliers who have demonstrated fully
compliant systems and the impact on its results of operations could be material.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company invests its cash and cash equivalents in FDIC insured
savings accounts which, by their nature, are not subject to interest rate
fluctuation.
As of December 31, 1999, the Company had $55,700 in borrowings. The
borrowings are primarily related to capitalized leases which, by their nature,
are not subject to interest rate fluctuations.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1997 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements.
ITEM 3. DESCRIPTION OF PROPERTY
PROPERTY
The Company currently occupies approximately 6,500 square feet of
office/retail/warehouse space at a cost of $3,250 per month pursuant to a lease
that expires on June 1, 2000 with an option to extend for an additional three
(3) year term. The Company has leased an additional 4,500 square feet of space
at a cost of
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<PAGE>
$2,250 per month for a term which commences on August 1, 1999 and expires on
June 1, 2000, with an option to extend the lease for an additional three (3)
year term.
Unique Images occupies approximately 7,616 square feet of office/
production space which it leases for $5,000 per month pursuant to a lease
which expires on September 1, 2009 with an option to extend for two five year
periods. The building is owned by the wife of the president of Unique Images.
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<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock as of February 29, 2000 by
(i) each person who is known by the Company to be the beneficial owner of more
than five percent (5%) of the issued and outstanding shares of Common Stock,
(ii) each of the Company's directors and executive officers and (iii) all
directors and executive officers as a group. Each stockholder listed below has
sole voting power and investment power with respect to the shares beneficially
owned by such person.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OWNED
- --------------------------------------------------------- ---------------------- ---------------------
<S> <C> <C>
Gary Moore(1) 559,000 8.4%
Henry E. Cartwright(1) 500,000 7.5%
Keith Veltre(2) 500,000 7.5%
Paul Heroy(1) 345,000 5.2%
Tom Pitch(1) 335,000 5.0%
Dixie Cartwright(1) 125,000 1.9%
Joseph P. Flynn(3) 50,000 (4)
Dalton L. Conners(5) 46,900 (4)
All Directors and Officers
as a group (6 persons) 1,780,900 26.8%
</TABLE>
- ---------------
(1) Address is 9155 Las Vegas Boulevard South, Suite 242, Las Vegas, Nevada
89123.
(2) Address is 6080 East Burnham Avenue, Suite 28, Las Vegas, Nevada 89119.
(3) Address is 8236 E. Sands Drive, Scottsdale, AZ 85255.
(4) Less than one percent.
(5) Address is 32 Paladin Court, Henderson, NV 89014.
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<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- ---------- -------------------------------------------------------
<S> <C> <C>
Henry E. Cartwright 60 Chairman of the Board of Directors
Gary Moore 54 President and Director
Joseph Flynn 60 Director
Keith Veltre 28 Director
Dalton L. Conners 54 Director
Dixie Cartwright 60 Secretary and Treasurer
</TABLE>
Mr. Cartwright has served as Chairman of the Board of the Company since
September 1999. Mr. Cartwright is a private investor in numerous real estate,
lending transactions and other ventures. Mr. Cartwright served as Chairman of
the Board of Major Video Corp. from December 1982 until its merger with
Blockbuster Entertainment Corporation in January 1989. In September 1993, Mr.
Cartwright founded Back to the 50's, Inc., a company that sold 50's and 60's
memorabilia through a mail order catalog and showroom. Back to the 50's, Inc.
was acquired by Crowne Ventures, Inc. in November 1995. Mr. Cartwright served as
director of Crowne Ventures, Inc. from 1995 until he resigned in April 1998.
Mr. Moore has served as the President of the Company and as director
since September 1999. Mr. Moore is a private investor. Mr. Moore was the
President and Chief Operations Officer of Major Video Corp. from 1984 until its
merger with Blockbuster Entertainment Corp. in 1989. Mr. Moore continues to be a
Blockbuster Video franchisee.
Mr. Flynn has served as a director of the Company since September
1999. From 1987 through the present, Mr. Flynn has been the legal counsel for
Gaelic Management, Inc., which provides legal, management, franchise, merger
and acquisitions and operations consulting to restaurant, real estate
development, communications, aircraft maintenance and athletic supply chains
for affiliated and unrelated domestic and international companies.
Mr. Veltre has served as a director of the Company since September
1999 and President of Veltre Enterprises, Inc. dba Unique Images, a subsidiary
of the Company. Unique Images is a supplier of novelty and autographed
collectibles that was founded by Mr. Veltre in 1996.
Mr. Conners has served as a director of the Company since September
1999. Since 1998, Mr. Conners has been a private investor and financial
consultant. For thirty years prior thereto, Mr. Conners was employed in the
commercial banking business and served in the positions of Vice President and
Branch Manager, Area Sale Manager, Manager Automobile Lending Center and Senior
Commercial Real Estate Officer.
Mrs. Cartwright has served as the Secretary and Treasurer of the
Company since September 1999. Mrs. Cartwright is a private investor. From 1983
until 1989, Mrs. Cartwright managed all aspects of the office operations of
Major Video Corp. From 1993 to 1995, Mrs. Cartwright managed all aspects of the
office and financial operations of Back to the 50's, Inc.
Each director serves for a term of one year or until his or her
successor has been elected and qualified. Each executive officer serves at the
pleasure of the Board of Directors. Henry E. Cartwright and Dixie Cartwright
are husband and wife. Gary Moore and Dixie Cartwright are brother and sister.
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<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS AND DIRECTORS. The following table sets forth
the cash compensation the Company paid to its executive officers for services
rendered from its inception in March 1999 through December 31, 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- ----------------------------
COMMON
OTHER RESTRICTED SHARES ALL OTHER
ANNUAL STOCK UNDERLYING COMPENSATION
NAME AND YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS n (1)
POSITION ($) GRANTED
(# SHARES)
- --------------------- ------- ----------- -------- --------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary Moore, 1999 -0- -0- -0- -0- -0- -0-
President
Keith Veltre, 1999 26,000(1)
President of Unique
Images
</TABLE>
- --------------------
(1) Represents salary paid to Mr. Veltre since September 1999 following the
Company's acquisition of Unique Images.
Since its inception in March 1999, the Company has paid no salaries
to any of its executive officers other than Keith Veltre, the President of
Unique Images. No salaries have been accrued although amounts have been
included in the income statement and as contributed capital for the value of
such services. It is anticipated that payment of salaries will commence at such
time as the Company's operations have generated sufficient cash flow to enable
the payment of salaries. The Company has not yet determined the amount or
timing of the payment of salaries to its executive and management personnel and
will do so in the discretion of its officers and directors. Directors do not
receive compensation for their services.
EMPLOYMENT CONTRACTS. The Company has an employment contract with
Keith Veltre, the President of the Company's wholly-owned subsidiary, Veltre
Enterprises, Inc. The employment contract with Mr. Veltre is for a period of
five years commencing in September 1999 and provides for compensation of $6,500
per month.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
LOANS FROM RELATED PARTIES
As of September 30, 1999, Henry E. Cartwright, the Company's Chairman
of the Board and Gary Moore, the Company's President, have each loaned the
Company $50,000. Each of these loans bear interest at the rate of eight percent
(8%) per annum and are all due and payable on July 1, 2000. In addition, Mr.
Cartwright sold the Company inventory owned by him for a promissory note in the
amount of $31,943 payable on the same terms as the loans mentioned above.
During July 1999, the Company issued notes totaling $200,000 to six
shareholders in connection with the issuance of shares of the Company's Common
Stock. The notes bear interest at a rate of 8% per annum with all principal and
interest due July 31, 2004. During 1999, Mr. Cartwright, the Company's
Chairman, exchanged $67,778 of his note payable for the same amount of the
notes receivable of two of the above-mentioned shareholders. In addition, Mr.
Moore, the Company's President, exchanged $33,889 of his note payable for the
note payable of one of the remaining shareholder mentioned above.
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<PAGE>
ACQUISITION
On August 11, 1999, americaBILIA.com Nevada acquired all of the
outstanding common stock of Veltre Enterprises, Inc. dba Unique Images. Unique
Images was wholly owned by Keith Veltre who at the time of the transaction owned
8% of the common stock of americaBILIA.com Nevada. The purchase price paid for
Unique Images consisted of (i) $200,000 in cash, (ii) a Promissory Note in the
original principal amount of $200,000 and (iii) 100,000 shares of common stock
of americaBILIA.com Nevada. The Promissory Note was paid in full in November
1999. As part of the purchase, the Company agreed to lease from Mr. Keith Veltre
and his affiliates the premises that are used for Unique Images' business
operations as well as certain business equipment.
ITEM 8. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which the Company or the
property of the Company is subject. In addition, no other such proceedings are
known to be contemplated against the Company.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
The Company's Common Stock has been listed on the OTC Bulletin Board
under the symbol "ABIL" since September 16, 1999. Set forth in the following
table are the high and low bid quotations for the Company's Common Stock for
each of the quarters of the fiscal year ended December 31, 1999 during which
the Common Stock was listed. The Company considers its Common stock to be
thinly traded and that any reported bid or sale prices may not be a true
market-based valuation of the Common Stock. The quotations represent
inter-dealer quotations without retail markups, markdowns or commissions and
may not represent actual transactions.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- ------------- ---- ---
<S> <C> <C>
September 30, 1999 $ 20.60 $10.75
December 31, 1999 $ 14.31 $9.50
</TABLE>
As of February 29, 2000, there were approximately 560 record holders
of the Company's Common Stock.
The Company has not paid any cash dividends since its inception and
does not contemplate paying dividends in the foreseeable future. It is
anticipated that earnings, if any, will be retained for the operation of the
Company's business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years the Company sold unregistered shares of
its Common Stock in only one transaction. In August 1999, pursuant to an
Agreement and Plan of Reorganization dated August 31, 1999, the holders of all
of the issued and outstanding capital shares of americaBILIA.com Nevada
transferred those shares to the Company in exchange for the Company's issuance
of 6,115,000 shares of Common Stock. There was no underwriter involved in this
issuance. The issuance was conducted pursuant to Rule 506 under the 1933 Act.
ITEM 11. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value, of which, as of the date hereof, 6,652,692 shares are issued
and outstanding and held of record by approximately 550 persons. Holders of
shares of Common Stock are entitled to one vote per share on all matters to be
voted upon by the shareholders generally. The approval of proposals submitted
to shareholders at a meeting other than for the election of directors requires
the favorable vote of a majority of the shares voting, except in the case of
certain
-20-
<PAGE>
fundamental matters (such as certain amendments to the Articles of
Incorporation, and certain mergers and reorganizations), in which cases Florida
law and the Company's Bylaws require the favorable vote of at least a majority
of all outstanding shares. Stockholders are entitled to receive such dividends
as may be declared from time to time by the Board of Directors out of funds
legally available therefor, and in the event of liquidation, dissolution or
winding up of the Company to share ratably in all assets remaining after
payment of liabilities. The holders of shares of Common Stock have no
preemptive, conversion or subscription rights.
STOCK OPTION PLAN
The Company has adopted a 1999 Stock Option Plan ("Plan"), which
permits the Company to grant options to its employees, officers, directors,
consultants and independent contractors. The Company may issue an aggregate of
600,000 shares of Common Stock pursuant to the Plan. The Plan is governed by
the board of directors, which has the power to determine the terms of any
options granted, including the exercise price, the number of shares subject to
the option, and the exercisability thereof. Options under the Plan generally
are not transferable, and each option is exercisable during the lifetime of the
optionee only by such optionee. Stock options can be exercised at any time
before expiration after they are vested. As of the date of this Registration
Statement, the Company has granted options under the Plan to purchase an
aggregate of 25,000 shares of Common Stock at an exercise price of $1.00 to
certain employees of its subsidiary, Unique Images.
DIVIDENDS
The Company has never paid dividends and does not anticipate the
payment of cash dividends on its common stock in the foreseeable future.
-21-
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
FLORIDA STATUTES
Section 607.0850 of the General Corporation law of the State of Florida
provides as follows:
"Section 607.0850 --Indemnification of officers, directors, employees,
and agents.--
(1) A corporation shall have power to indemnify any person who was or
is a party to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in, or not opposed to, the best interests of the corporation or, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(2) A corporation shall have power to indemnify any person, who was or
is a party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made under
this subsection in respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable unless, and only to the extent
that, the court in which such proceeding was brought, or any other court of
competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of any
claim, issue, or matter therein, he or she shall be indemnified against expenses
actually and reasonably incurred by him or her in connection therewith.
(4) Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in subsection (1) or
subsection (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable,
by majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two or
more directors not at the time parties to the proceeding;
(c) By independent legal counsel:
-22-
<PAGE>
1. Selected by the board of directors prescribed in
paragraph (a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained
for paragraph (a) and the committee cannot be designated under paragraph (b),
selected by majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) By the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (4)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he or she is ultimately found
not to be entitled to indemnification by the corporation pursuant to this
section. Expenses incurred by other employees and agents may be paid in advance
upon such terms or conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and a corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not be made to
or on behalf of any director, officer, employee, or agent if a judgment or other
final adjudication establishes that his or her actions, or omissions to act,
were material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director,
officer, employee, or agent had reasonable cause to believe his or her conduct
was lawful or had no reasonable cause to believe his or her conduct was
unlawful;
(b) A transaction from which the director, officer, employee,
or agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(9) Unless the corporation's articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting the
proceeding, to the circuit court, or to another court of competent jurisdiction.
On receipt of an application, the
-23-
<PAGE>
court, after giving any notice that it considers necessary, may order
indemnification and advancement of expenses, including expenses incurred in
seeking court-ordered indemnification or advancement of expenses, if it
determines that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (3), in which case the court shall
also order the corporation to pay the director reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both,
in view of all the relevant circumstances, regardless of whether such person
met the standard of conduct set forth in subsection (1), subsection (2), or
subsection (7).
(10) For purposes of this section, the term "corporation" includes,
in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger, so that any person who is or was a director, officer, employee, or
agent of a constituent corporation, or is or was serving at the request of a
constituent corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, is in
the same position under this section with respect to the resulting or
surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit
plans;
(b) The term "expenses" includes counsel fees, including those
for appeal;
(c) The term "liability" includes obligations to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation"
includes any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties relating to an
employee benefit plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the
corporation" describes the actions of a person who acts in good faith and in a
manner he or she reasonably believes to be in the best interests of the
participants and beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against the
person and incurred by him or her in any such capacity or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify the person against such liability under the provisions of this
section."
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<PAGE>
BYLAWS
The Company's Amended and Restated Bylaws provide for the
indemnification of the Company's directors, officers, employees, or agents under
certain circumstances as follows:
"ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and attorneys'
fees, actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director,
officer, employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2, or in defense of any claim, issue or matter therein, he must
be indemnified by the corporation against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense.
Section 4. REQUIRED APPROVAL. Any indemnification under
Sections 1 and 2, unless ordered by a court or advanced pursuant to Section 5,
must be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a
quorum consisting of directors who were not parties to the act, suit or
proceeding;
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<PAGE>
(c) If a majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 5. ADVANCE OF EXPENSES. The articles of incorporation,
the bylaws or an agreement made by the corporation may provide that the expenses
of officers and directors incurred in defending a civil or criminal action, suit
or proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of this
section do not affect any rights to advancement of expenses to which corporate
personnel other than directors or officers may be entitled under any contract or
otherwise by law.
Section 6. OTHER RIGHTS. The indemnification and advancement
of expenses authorized in or ordered by a court pursuant to this Article VI:
(a) Does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to Section 2 or for the
advancement of expenses made pursuant to Section 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a
director, officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
Section 7. INSURANCE. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of this Article VI.
Section 8. RELIANCE ON PROVISIONS. Each person who shall act
as an authorized representative of the corporation shall be deemed to be doing
so in reliance upon the rights of indemnification provided by this Article.
Section 9. SEVERABILITY. If any of the provisions of this
Article are held to be invalid or unenforceable, this Article shall be construed
as if it did not contain such invalid or unenforceable provision and the
remaining provisions of this Article shall remain in full force and effect.
Section 10. RETROACTIVE EFFECT. To the extent permitted by
applicable law, the rights and powers granted pursuant to this Article VI shall
apply to acts and actions occurring or in progress prior to its adoption by the
board of directors."
ITEM 13. FINANCIAL STATEMENTS.
See pages F-1 through F-32.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
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<PAGE>
Deloitte & Touche, LLP, Las Vegas, Nevada, was engaged as the Company's
independent accountants. During the Company's fiscal years ended December 31,
1999, the Company did not consult Deloitte & Touche LLP regarding (i) either the
application of accounting principles to a specified transaction or the type of
audit opinion that might be rendered on the Company's financial statements, or
(ii) any matter that was the subject of a disagreement or was a reportable
event.
ITEM 15. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
<C> <S>
2.1 Agreement and Plan of Reorganization dated August 31, 1999
3.1 Certificate of Incorporation of the Company
3.2 Amended and Restated Bylaws of the Company
3.3 Amendment to Articles of Incorporation filed June 20, 1996
3.4 Amendment to Articles of Incorporation filed November 15, 1996
3.5 Amendment to Articles of Incorporation filed September 7, 1999
4.1 Specimen of Common Stock Certificate
10.1 The Company's 1999 Stock Option Plan
10.2 Stock Purchase Agreement between the Company and Keith Veltre dated July 23, 1999
10.3 Employment Agreement between the Company and Keith Veltre, dated August 11, 1999
10.4 Promissory Note of the Company in favor of Henry E. Cartwright dated November 30, 1999
10.5 Promissory Note of the Company in favor of Gary Moore dated November 30, 1999
10.6 Lease Agreement between the Company and KPT REMIC Loan LLC dated May 7, 1999
10.7 Commercial Lease Agreement between the Company and Tricia Veltre dated as of September 1, 1999
21.1 Subsidiaries
27.1 Financial Data Schedule
</TABLE>
- -----------------------------
-27-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AMERICABILIA.COM, INC.
<S> <C>
Independent Auditors' Reports..........................................................................F-1
Consolidated Balance Sheet dated December 31, 1999.....................................................F-2
Consolidated Statement of Income for the period from March 2, 1999 (date of inception)
through December 31, 1999............................................................................F-4
Consolidated Statement of Stockholders' Equity for the period from March 2, 1999
(date of inception) through December 31, 1999........................................................F-5
Consolidated Statement of Cash Flows for the period from March 2, 1999
(date of inception) through December 31, 1999........................................................F-6
Notes to Consolidated Financial Statements ............................................................F-7
UNIQUE IMAGES, INC.
Independent Auditors' Reports.........................................................................F-22
Balance Sheets dated August 10, 1999 and December 31, 1998 and 1997...................................F-23
Statements of Income for the period from January 1, 1999 to August 10, 1999 and
the years ended December 31, 1998, 1997 and 1996....................................................F-24
Statements of Stockholders' Equity from January 1, 1999 to August 10, 1999 and
the years ended December 31, 1998, 1997 and 1996....................................................F-25
Statements of Cash Flows from January 1, 1999 to August 10, 1999 and
the years ended December 31, 1998, 1997 and 1996....................................................F-26
Notes to Consolidated Financial Statements ...........................................................F-27
</TABLE>
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<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
americabilia.com, Inc.
We have audited the accompanying consolidated balance sheet of americabilia.com,
Inc. (the "Company") as of December 31, 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the period
from March 2, 1999 (date of inception) through December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements, present fairly, in all
material respects, the consolidated financial position of the Company as of
December 31, 1999, and the consolidated results of its operations and its cash
flows for the period from March 2, 1999 (date of inception) through December 31,
1999, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 5, 2000
F-1
<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 323,127
Accounts receivable, net 236,583
Inventories 446,448
Prepaid expenses and deposits 23,796
-----------
Total current assets 1,029,954
-----------
PROPERTY AND EQUIPMENT, Net 154,399
GOODWILL, Net 282,061
OTHER ASSETS 7,494
-----------
TOTAL $1,473,908
-----------
-----------
See accompanying notes to consolidated financial statements.
(Continued)
</TABLE>
F-2
<PAGE>
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 224,422
Current portion of long-term debt 9,122
Income taxes payable 3,549
-----------
Total current liabilities 237,093
-----------
LOANS FROM SHAREHOLDERS 34,508
LONG-TERM DEBT, Less current portion 12,092
-----------
Total liabilities 283,693
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; authorized 50,000,000 shares; 6,652,690 shares
issued and outstanding 6,653
Additional paid-in capital 1,637,525
Notes receivable from shareholders for stock (104,412)
Accumulated deficit (349,551)
-----------
Total stockholders' equity 1,190,215
-----------
TOTAL $1,473,908
-----------
-----------
See accompanying notes to consolidated financial statements.
(Concluded)
</TABLE>
F-3
<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM MARCH 2, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUES:
Retail/wholesale $ 662,231
Cost of sales 415,330
-----------
Gross profit 246,901
OPERATING EXPENSES:
General and administrative expenses 431,301
Marketing expenses 126,009
Depreciation and amortization 34,368
Organization costs 34,532
-----------
Total operating expenses 626,210
-----------
LOSS FROM OPERATIONS BEFORE INTEREST AND TAXES (379,309)
OTHER INCOME (EXPENSE):
Interest expense (13,648)
Other 12,405
-----------
Total other (1,243)
-----------
LOSS FROM OPERATIONS BEFORE INCOME TAXES (380,552)
PROVISION (BENEFIT) FOR INCOME TAXES -
Deferred tax benefit (31,001)
-----------
NET LOSS $(349,551)
-----------
-----------
EARNINGS PER SHARE:
Basic:
Net loss $(349,551)
-----------
-----------
Weighted average common shares outstanding 4,172,576
-----------
-----------
Loss per share $0.08
-----------
-----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM MARCH 2, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RECEIVABLE NOTES
------------------- PAID-IN FROM ACCUMULATED
SHARES AMOUNT CAPITAL SHAREHOLDERS DEFICIT TOTALS
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 2, 1999
(Date on inception) - $ - $ - $ - $ - $ -
Proceeds from issuance
to original investors 5,000,000 5,000 495,000 (200,000) 300,000
Proceeds from private placement 1,000,000 1,000 989,178 990,178
Stock issued in connection with
acquisition 100,000 100 99,900 100,000
Stock options exercised 15,000 15 14,985 15,000
Effect of a reverse merger accounted
for as a recapitalization 537,690 538 (538)
Interest income from notes
receivable from shareholders (3,412) (3,412)
Contributed services of officers
and employees 39,000 39,000
Loans payable to officers exchanged
for shareholder loans 99,000 99,000
Net loss (349,551) (349,551)
--------- ------ ---------- --------- ---------- ----------
BALANCE,
DECEMBER 31, 1999 6,652,690 $6,653 $1,637,525 $(104,412) $(349,551) $1,190,215
--------- ------ ---------- --------- ---------- ----------
--------- ------ ---------- --------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 2, 1999 TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net loss $(349,551)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 34,368
Provision for bad debts (150)
Contributed services of officers and employees 39,000
Deferred income taxes (7,600)
Changes in operating assets and liabilities, net of effects from acquisition
of businesses:
Increase in trade accounts receivable (10,511)
Increase in inventories (410,768)
Increase in prepaid assets and deposits (8,447)
Decrease in other assets 24,875
Increase in trade accounts payable and accrued expenses 152,244
Decrease in income taxes payable (20,100)
---------
Net cash used in operating activities (556,640)
---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (103,998)
Acquisition of business, net of cash acquired (394,434)
---------
Net cash used in investing activities (498,432)
---------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Net payments on long-term borrowings (26,979)
Loans from shareholders 100,000
Common stock issued 1,305,178
---------
Net cash provided by financing activities 1,378,199
---------
INCREASE IN CASH AND CASH EQUIVALENTS 323,127
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -
---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $323,127
---------
---------
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
F-6
<PAGE>
<TABLE>
<S> <C>
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Stock issued for notes receivable $ 104,412
Inventory acquired through loan to shareholder 34,506
The Company purchased all of the capital stock of Unique Images for $500,000.
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired through purchase of Unique Images, Inc. 586,128
Cash paid for capital stock (400,000)
---------
Liabilities assumed through purchase of Unique Images, Inc. $ 186,128
---------
---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
Cash paid during the year for:
Interest $ 12,842
Taxes -
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
(Concluded)
<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - americabilia.com, Inc., a Florida corporation
(the "Company"), is engaged in direct internet merchandising of
American-themed collectibles, gifts, and memorabilia. The Company
manufactures and assembles its own products and also purchases products
from a number of sources. The Company's products are marketed on an
internet shopping site, www.americabilia.com. The Company strives to offer
its customers a broad selection of products, a convenient shopping
experience, and competitive pricing. The Company commenced with
organizational and operational activities on March 2, 1999 in Nevada as
americabilia.com. On August 11, 1999, the Company acquired the outstanding
capital stock of Veltre Enterprises, Inc. dba Unique Images. Unique Images
designs and manufactures Hollywood and sports memorabilia for fine art and
memorabilia galleries. Unique Images also provides high volume and custom
picture framing services. Unique Images uses computerized joiner and mat
cutting equipment.
On September 17, 1999, the Company merged into Terra Pharmaceuticals
International, Inc. ("Terra") a shell corporation with approximately 300
shareholders of record (the "Shell Reorganization"). The Shell
Reorganization was accomplished pursuant to Rule 506 of Regulation D of
the Securities Act of 1933. Terra issued one share of common stock in
exchange for each of the issued and outstanding shares of the Company. The
issued stock cannot be traded for one year. Following the Shell
Reorganization, the shareholders of the Company prior to the merger, owned
approximately ninety-one percent (91 percent) of the outstanding common
stock of Terra. Terra changed its name to americabilia.com, Inc. For
accounting purposes, the acquisition has been treated as a
recapitalization of americabilia.com with americabilia.com as the acquirer
(reverse merger). As a result of this transaction the Company became a
publicly traded company.
During the period ended December 31, 1999, certain shareholders provided
services for the Company. The accompanying financial statements for the
period ended December 31, 1999 include contributions to capital
representing estimates of compensation costs for services rendered to the
Company by the executive officers of the Company upon commencement of
sales. These contributions, which amounted to $60,000 for the period ended
December 31, 1999, were based on management's estimate of time expended on
the Company's behalf by the executive officers. Such contributions have
been accounted for with charges to operations and with credits net of tax
effects in like amounts to paid-in capital.
It is anticipated that payment of salaries will commence at such a time as
the Company's operations have generated sufficient cash flow to enable the
payment of salaries. The Company has not yet determined the amount or
timing of the payment of salaries to certain of its executive personnel
and will do so at the discretion of its officers and directors. The
Company will continue to estimate and record compensation costs for
services rendered by executive officers as charges to operations and
credits in like amounts to paid-in capital.
BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries. All material
intercompany transactions and accounts have been eliminated in
consolidation. Results of operations of the acquisition of Unique Images,
Inc., as described in Note 3, accounted for using the purchase method, are
included from its date of acquisition. The period from March 2, 1999
through December 31, 1999, is herein referred to as "fiscal 1999."
F-8
<PAGE>
CASH AND CASH EQUIVALENTS - Cash and cash equivalents are defined as
highly liquid investments with original maturities of three months or less
and at December 31, 1999 consist of amounts held as bank deposits.
ACCOUNTS RECEIVABLE - The Company's accounts receivable principally result
from credit sales to third-party customers. Allowances for doubtful
accounts are made when management believes that accounts are
uncollectible.
INVENTORIES - Inventories, consisting primarily of framed
celebrity-autographed memorabilia pictures and collectibles, are valued at
the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method for both raw materials and finished goods.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Equipment under capital leases is stated at the present value of future
minimum lease payments. Depreciation and amortization is provided in
amounts sufficient to allocate the cost of depreciable or amortizable
assets to operations over their estimated service lives or the lease term,
using the straight-line method. The estimated service lives are generally
as follows:
<TABLE>
<S> <C>
Machinery and equipment 5-10 years
Vehicles 5-7 years
Office furniture and equipment 3-7 years
Leasehold improvements 5-10 years
</TABLE>
GOODWILL - The excess of cost over the fair value of net assets of
purchased companies (goodwill) is being amortized by the straight-line
method over 5 years. As of December 31, 1999, unamortized goodwill was
$282,061, net of accumulated amortization of $20,147. Goodwill and other
intangibles are reassessed annually to determine whether any potential
impairment exists.
RETAIL AND WHOLESALE REVENUES - Retail and wholesale revenues are
recognized as the products are sold and shipped to customers. Revenues are
shown net of returns.
ADVERTISING AND PROMOTIONAL COSTS - All advertising and promotional costs
associated with advertising and promoting the Company's lines of business
are expensed in the period incurred.
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and
circumstances indicate that the carrying value of long-lived assets,
including associated intangibles, may be impaired, an evaluation of
recoverability is performed by comparing the estimated future undiscounted
cash flows associated with the asset to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow is
required. As of December 31, 1999, no adjustments or write-downs were
required.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
approximated their fair values because of the short maturity of these
instruments. The fair value of the Company's notes payable and long-term
debt is estimated based on quoted market prices for the same or similar
issues or on current rates offered to the Company for debt of the same
remaining maturities. At December 31, 1999, the aggregate fair value of
the Company's notes payable and long-term debt approximated its carrying
value.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting
for Income Taxes." Under the asset and liability method with SFAS No. 109,
deferred income taxes are required for the tax consequences of
F-9
<PAGE>
temporary differences by applying enacted statutory rates applicable to
future years to the difference between the financial statement carrying
amounts and the tax bases of existing assets and liabilities. Under
SFAS No. 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
NET INCOME PER SHARE - Basic earnings per share ("EPS") is computed by
dividing the net income available to common stockholders by the weighted
average of common shares outstanding during the period. Dilutive earnings
per share was not presented, as its effect was not material to the
financial statements for fiscal years presented. When applicable, the
Company's diluted EPS will include the dilutive effect of potential stock
options and certain warrant exercises, calculated using the treasury stock
method.
STOCK-BASED COMPENSATION - SFAS No. 123 provides companies with a choice
to follow the provisions of SFAS No. 123 in determination of stock-based
compensation expense or to continue with the provisions of the Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees." The Company continues to follow APB No. 25 and will provide
pro forma disclosure as required by SFAS No. 123 in the notes to the
consolidated financial statements.
RECENTLY ISSUED ACCOUNTING STANDARDS - The Financial Accounting Standards
Board ("FASB") issued SFAS No. 133, "Accounting for Derivatives," which is
effective for fiscal years beginning after June 15, 2000. This statement
defines derivatives and requires qualitative disclosure of certain
financial and descriptive information about a company's derivatives. The
Company will adopt SFAS No. 133 in the year ending December 31, 2001.
Management has not finalized its analysis of this SFAS or the impact on
the Company.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and related notes to the consolidated
financial statements. Estimates are used when accounting for uncollectible
accounts receivable, inventory obsolescence, depreciation, taxes,
contingencies, and sales returns. Actual results could differ from those
estimated by management and changes in such estimates may affect amounts
reported in future periods.
2. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk are cash and cash equivalents and accounts
receivable arising from its normal business activities.
Regarding retail accounts receivable, the Company believes that credit
risk is limited due to the large number of entities comprising the
Company's customer base. The Company performs certain credit evaluation
procedures and does not require collateral. The Company believes that
credit risk is limited because the Company routinely assesses the
financial strength of its customers, and based upon factors surrounding
the credit risk of customers, establishes an allowance for uncollectible
accounts and, as a consequence, believes that its accounts receivable
credit risk exposure beyond such allowances is limited. The Company
believes that credit risk beyond this amount, if any, would be negligible.
Changes in the allowance for doubtful accounts for fiscal 1999 consist of
the following:
F-10
<PAGE>
<TABLE>
<S> <C>
Beginning balance (acquired from Unique Images) $6,914
Recoveries of allowances 150
------
Ending balance $6,764
------
------
</TABLE>
3. BUSINESS COMBINATIONS
On August 11, 1999, the Company acquired the outstanding capital stock of
Veltre Enterprises, Inc. dba Unique Images. The purchase price paid for
Unique Images consisted of (i) $200,000 in cash and $200,000 by delivery
of a Promissory Note and (ii) 100,000 shares of common stock of the
Company. The Promissory Note was paid in full in November 1999. As part of
the purchase, the Company entered into leases with Mr. Keith Veltre and
his affiliates for the premises being used in Unique Images' business
operations and certain business equipment.
The fair value of Unique Images' assets and liabilities at the date of
acquisition are presented below.
<TABLE>
<S> <C>
Cash and cash equivalents $ 5,566
Accounts receivable, net 225,922
Inventories 35,680
Prepaid expenses and deposits 15,349
Other assets 36,784
Property and equipment, net 64,622
Accounts payable and accrued expenses (72,178)
Income taxes payable (23,649)
Deferred taxes (7,600)
Debt (82,701)
--------
Net assets acquired $ 197,795
--------
--------
</TABLE>
The transaction was recorded as a purchase. The resulting goodwill of
$302,208 is being amortized over five years.
On September 21, 1999, the Company merged with Terra. The shareholders of
americabilia.com exchanged 100 percent of their stock for approximately 91
percent of the stock of Terra. The transaction was accounted for as a
recapitalization of the Company. Terra had no assets or liabilities. At
the date of the merger, the financial position of Terra reflected $397,000
of accumulated deficit and an equal amount of additional paid-in capital
and common stock. Its net equity was equal to $0. Terra had no operations
for the years ended 1999, 1998, or 1997.
The following unaudited pro forma information has been prepared assuming
Unique Images had been acquired as of the beginning of the period
presented. The pro forma information is presented for information purposes
only and is not necessarily indicative of what would have occurred if the
acquisition had been made as of those dates. In addition, the pro forma
information is not intended to be a projection of futures results and does
not reflect synergies expected to result from the integration of Unique
Images and the Company's operations. Terra had no operations for the
period, and, accordingly, no separate disclosure is presented.
Pro forma information (unaudited), for the period from March 2, 1999
through December 31, 1999, is as follows (dollars in thousands, except per
share amounts):
F-11
<PAGE>
<TABLE>
<S> <C>
Sales and other income $ 1,350,578
-----------
-----------
Net loss from operations $ (171,031)
-----------
-----------
Loss per share from continuing operations $ 0.04
-----------
-----------
</TABLE>
F-12
<PAGE>
4. INVENTORIES
The components of inventories, for the period from March 2, 1999 through
December 31, 1999, are as follows:
<TABLE>
<S> <C>
Memorabilia and collectibles $344,886
Raw materials 101,562
--------
Total $446,448
--------
--------
</TABLE>
5. PROPERTY AND EQUIPMENT
The components of property and equipment as of December 31, 1999, are as
follows:
<TABLE>
<S> <C>
Machinery and equipment $ 58,400
Vehicles 4,500
Office furniture and equipment 79,179
Leasehold improvements 26,541
--------
168,620
Less accumulated depreciation and amortization 14,221
--------
Total $154,399
--------
--------
</TABLE>
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following at
December 31, 1999:
<TABLE>
<S> <C>
Accounts payable and accrued expenses $210,001
Accrued interest payable 225
Payroll and related costs (including commissions) 14,196
--------
Total $224,422
--------
--------
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1999:
F-13
<PAGE>
<TABLE>
<S> <C>
Notes payable to related parties (company shareholders), interest at 8%, due
November 30, 2004, unsecured $34,508
Capitalized lease obligations with interest at 9.569% and 13.376% collateralized
by certain manufacturing equipment 20,764
Other debt 450
-------
Total debt 55,722
Less current portion 9,122
-------
Long-term debt $46,600
-------
-------
</TABLE>
At December 31, 1999, annual maturities on long-term debt and capitalized
lease obligations were as follows:
<TABLE>
<S> <C>
2000 $ 9,122
2001 8,705
2002 3,387
2003 -
2004 34,508
Thereafter -
-------
$55,722
-------
-------
</TABLE>
8. LEASES
The Company leases certain office space, warehouse, and equipment. The
Company paid $58,570 in rent expense for the period from March 2, 1999
through December 31, 1999. See Note 12 regarding the lease on the building
for Unique Images. The Company rents its corporate offices and retail
store in two adjoining spaces with monthly rentals of $3,250 and $2,250
whose leases expire in June of 2000. Commitments for minimum rentals under
noncancelable leases at the end of 1999 are as follows:
<TABLE>
<CAPTION>
CAPITALIZED OPERATING
LEASE LEASE
----------- ----------
<S> <C> <C>
2000 $ 10,500 $ 114,982
2001 9,541 62,232
2002 3,936 62,232
2003 - 61,116
2004 - 60,000
Thereafter - 280,000
---------- ----------
Total minimum lease payments 23,977 $ 640,562
Less amount representing interest 3,213 ----------
---------- ----------
Present value of net minimum lease payments, including
current maturities of $8,672 $ 20,764
----------
----------
</TABLE>
F-14
<PAGE>
Property and equipment at year-end include the following amounts for
capitalized leases:
<TABLE>
<S> <C>
Machinery and equipment $25,251
Less allowance for depreciation 2,323
-------
$22,928
-------
-------
</TABLE>
9. STOCKHOLDERS' EQUITY
COMMON STOCK - In June and July of 1999 through July 15, 1999, the Company
issued 5,000,000 common shares valued at $.10 per share or $500,000 to the
original investors of the Company. The stock was restricted from trading
for a period of one year after issuance.
F-15
<PAGE>
During August and September of 1999, the Company issued 1,000,000 shares
at $1.00 per share of its authorized, but unissued common stock in a
private placement. The proceeds from the sale of stock, net of issuance
costs of $9,822, totaled $990,178. The stock was restricted from trading
for a period of one year after issuance.
NOTES RECEIVABLE FROM SHAREHOLDERS - In June of 1999, the Company issued
notes totaling $200,000 to six shareholders in connection with the
issuance of 2,000,000 shares of stock. The stock was restricted from
trading for a period of one year after issuance. The notes bear interest
at 8 percent per annum with principal and interest due December 31, 2000
(see Note 12).
EARNINGS PER SHARE - Basic Earnings Per Share ("EPS") is computed by
dividing net income by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed by dividing net income
by common and common equivalent shares outstanding for the period. Options
to purchase common stock, whose exercise price was greater than the
average market price for the period, have been excluded from the
computation of diluted EPS. For fiscal 1999, there were no dilutive
options as the options would have been anti-dilutive due to the net loss
for the period.
STOCK OPTIONS - During fiscal 1999, the Company's Board of Directors
adopted a stock option plan for certain employees ("Optionees") whereby
Optionees are granted the right to purchase shares of the Company's common
stock at a price of $1.00. The options generally vest immediately and
expire one year after grant. The stock was restricted from trading for a
period of one year after issuance.
Transactions and other information relating to the plan for fiscal year
1999 are summarized as follows:
<TABLE>
<CAPTION>
STOCK OPTIONS
--------------------------------------------
WEIGHTED
SHARES AVERAGE PRICE
<S> <C> <C>
Outstanding at March 2, 1999 - $ -
Granted 20,000 1.00
Exercised (15,000) 1.00
------- --------
Outstanding at December 31, 1999 5,000 $ 1.00
------- --------
------- --------
</TABLE>
The exercise price of the stock options discussed below were at the fair
market value of the common stock on the date the options were granted:
On August 11, the Company issued options to purchase 15,000 shares at
$1.00 per share to three employees of the Company's subsidiary, Unique
Images. The options vested immediately and were exercised in August
1999 at the market value of $1.00 per share. The stock was restricted
from trading for a period of one year after issuance.
On August 12, the Company issued options to purchase 5,000 shares at
$1.00 per share to an employee of the Company. The options vested
immediately and expire after August 12, 2000. The stock was restricted
from trading for a period of one year after issuance.
For purposes of the following pro forma disclosures, the weighted average
fair value of each option has been estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted
average assumptions used for grants in fiscal 1999: no dividend yield;
volatility
F-16
<PAGE>
of 20 percent; risk-free interest rate of three percent; and an expected
term of one year. The weighted average Black-Scholes value of options
granted during fiscal 1999 was $.12 per option. Had compensation cost for
the
F-17
<PAGE>
Company's fixed stock-based compensation plan been determined based on the
fair value at the grant dates for awards under this plan consistent with
the method of SFAS No. 123, the Company's pro forma net income and pro
forma net income per share would have been as indicated below:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 2, 1999
(INCEPTION)
THROUGH
DECEMBER 31,
1999
<S> <C>
Net loss:
As reported $ (349,551)
-----------
-----------
Pro forma $ (350,771)
-----------
-----------
Basic loss per share:
As reported $ (0.08)
-----------
-----------
Pro forma $ (0.08)
-----------
-----------
Diluted loss per share:
As reported $ (0.08)
-----------
-----------
Pro forma $ (0.08)
-----------
-----------
</TABLE>
10. INCOME TAXES
The effective tax rate varies from the U.S. Federal statutory tax rate for
the period ended December 31, 1999 principally due to the following:
<TABLE>
<S> <C>
U.S. federal statutory tax rate (34.0)%
Valuation allowance for deferred taxes 25.2 %
All other 0.8 %
---------
Efective tax rate (8.0)%
---------
---------
</TABLE>
The differences between the benefit (provision) for income taxes at the
U.S. statutory rate and the Company's effective rate are summarized as
follows:
<TABLE>
<S> <C>
Expected benefit for income taxes $(100,662)
Valuation allowance for deferred taxes 90,156
Non-deductible items (20,495)
---------
Provision for income taxes $ (31,001)
---------
---------
</TABLE>
F-18
<PAGE>
The benefits for taxes for the period from March 2, 1999 through December
31, 1999 consist of:
<TABLE>
<S> <C>
Current benefit $31,001
Deferred benefit
-------
Benefit for income taxes $31,001
-------
-------
</TABLE>
The tax effects of items comprising the Company's net deferred tax asset
consist of the following at December 31, 1999:
<TABLE>
<S> <C>
Deferred tax liabilities -
Difference between book and tax depreciable property $ (8,112)
Deferred tax assets:
Net operating loss carryforwards 98,268
Valuation allowance (90,156)
--------
Net deferred tax asset $ -
--------
--------
</TABLE>
SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized. A valuation allowance has been established on the computed
deferred tax asset at December 31, 1999 due to the uncertainties
associated with realizing such assets in the future.
The accompanying financial statements do not include a provision for state
income tax as the Company's income is earned in Nevada, which does not
have a corporate income tax.
11. COMMITMENTS AND CONTINGENCIES
LEASES - The following is a schedule of future minimum lease payments
under operating leases, including those with related parties as more fully
described in Note 12, that have initial or remaining noncancelable lease
terms in excess of one year at December 31, 1999.
<TABLE>
<S> <C>
2000 $114,982
2001 62,232
2002 62,232
2003 61,116
2004 60,000
Thereafter 280,000
</TABLE>
EMPLOYMENT CONTRACTS - The Company has no employment contracts with any of
its executive officers other than the President of Unique Images, Inc. The
contract is for five years beginning September 1999 and provides for
compensation of $6,500 per month.
F-19
<PAGE>
12. RELATED PARTY TRANSACTIONS
The Company leases its office space, production facilities, and certain
equipment from a related party. These multiple lease agreements require
base monthly payments of $8,000 at December 31, 1999, and have been
classified as operating leases. These leases require the Company to
provide insurance, repairs and maintenance, and to pay real estate taxes
on the leased property. These leases expire at various dates through
September 1, 2009. Lease expense for the year ended December 31, 1999
incurred under these agreements was $32,000.
The Company's Chairman of the Board and the Company's President, each
loaned the Company $50,000, which bears interest at the rate of 8 percent
per annum and is all due and payable on November 30, 2004. In addition,
the Chairman sold to the Company inventory and vehicles owned by him for a
promissory note in the amount of $34,506 payable on the same terms.
During November 1999, the Company's chairman exchanged $67,778 of his
notes payable including accrued interest for the same amount of the note
receivable from shareholders arising from the issuance of stock in June
1999. During fiscal 1999, the Company's president exchanged $33,889 of his
note payable including accrued interest for the same amount of notes
receivable arising from the issuance of stock in June 1999 (see Note 9).
13. SEGMENT REPORTING
The Company has two reportable segments based upon products offered:
retail sales and corporate operations, and wholesale distribution and
manufacturing.
The Company evaluates each segment's performance based on segment
operating profit. The accounting policies of the operating segments are
the same as those described in the summary of significant accounting
policies.
F-20
<PAGE>
Information pertaining to the operations of reportable segments are as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM MARCH 2, 1999 (INCEPTION)
FOR RETAIL AND CORPORATE AND FROM AUGUST 11, 1999 WHOLESALE
FOR WHOLESALE, DISTRIBUTION AND MANUFACTURING RETAIL AND DISTRIBUTION AND
TO DECEMBER 31, 1999 CORPORATE MANUFACTURING TOTAL
<S> <C> <C> <C>
Revenues from external customers $ 294,009 $ 368,222 $ 662,231
Intersegment revenues 89,065 89,065
Depreciation and amortization 13,785 5,473 19,258
Interest income 13,491 1,363 14,854
Intersegment interest income 2,449 2,449
Interest expense 7,987 5,661 13,648
Intersegment interest expense 2,449 2,449
Segment (loss) income before interest and taxes (437,946) 58,637 (379,309)
Net (loss) income before taxes (434,891) 54,339 (380,552)
Income tax (benefit) provision (50,713) 19,712 (31,001)
Net property and equipment 59,902 94,497 154,399
RECONCILIATION OF SEGMENT REVENUES TO CONSOLIDATED
REVENUES
Total revenues for reportable segments $ 751,296
Elimination of intersegment revenues (89,065)
---------
Total consolidated revenues $ 662,231
---------
---------
</TABLE>
Significantly all (over 95 percent) of the Company's sales are in the United
States.
******
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Unique Images, Inc.
We have audited the accompanying balance sheets of Unique Images, Inc. (the
"Company") as of August 10, 1999 and December 31, 1998 and 1997, and the related
statements of income, stockholder's equity and cash flows for the period from
January 1, 1999 to August 10, 1999 and for each of the years ended December 31,
1998, 1997, and 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at August 10, 1999 and December
31, 1998 and 1997, and the results of its operations and its cash flows for the
period ended August 10, 1999 and for each of the years ended December 31, 1998,
1997, and 1996, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 5, 2000
F-22
<PAGE>
UNIQUE IMAGES, INC.
BALANCE SHEETS
AUGUST 10, 1999 AND DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DECEMBER 31,
AUGUST 10, ----------------------------------
ASSETS 1999 1998 1997
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,566 $ 34,260 $ 16,190
Accounts receivable, net 225,922 143,815 99,298
Inventory 35,680 25,500 14,720
Prepaid expenses and deposits 15,349 5,695 3,117
Other assets 36,784 15,584 -
-------- -------- --------
Total current assets 319,301 224,854 133,325
PROPERTY AND EQUIPMENT, Net 64,622 30,803 15,617
-------- -------- --------
TOTAL $383,923 $255,657 $148,942
-------- -------- --------
-------- -------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 72,178 $ 69,900 $ 63,368
Income taxes payable 23,649 9,789 5,394
Current portion of long-term debt 9,229
Notes payable 63,654 68,391 12,873
Notes payable to shareholders 2,562 18,199
Deferred taxes 7,600 3,665 793
-------- -------- --------
Total current liabilities 176,140 154,307 100,627
LONG-TERM DEBT, Less current portion 9,818 - -
-------- -------- --------
Total liabilities 186,128 154,307 100,627
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock $1.00 par value; 1,000 shares authorized,
issued and outstanding 1,000 1,000 1,000
Retained earnings 196,795 100,350 47,315
-------- -------- --------
Total stockholder's equity 197,795 101,350 48,315
-------- -------- --------
TOTAL $383,923 $255,657 $148,942
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements.
F-23
<PAGE>
UNIQUE IMAGES, INC.
STATEMENTS OF INCOME
PERIOD FROM JANUARY 1, 1999 TO AUGUST 10, 1999 AND YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED
1999 TO DECEMBER 31,
AUGUST 10, ----------------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Retail sales $ 688,347 $ 966,032 $ 737,806 $ 521,807
Cost of sales 420,923 695,539 588,944 401,078
--------- --------- --------- ---------
Gross profit 267,424 270,493 148,862 120,729
--------- --------- --------- ---------
OPERATING EXPENSES:
General and administrative expenses 133,357 198,126 105,988 100,251
Depreciation and amortization 4,980 3,862 5,300 2,970
--------- --------- --------- ---------
Total operating expenses 138,337 201,988 111,288 103,221
--------- --------- --------- ---------
INCOME FROM OPERATIONS 129,087 68,505 37,574 17,508
OTHER, Net (158) (2,810) 1,554 (550)
--------- --------- --------- ---------
NET INCOME BEFORE INCOME
TAX PROVISION 128,929 65,695 39,128 16,958
PROVISION FOR INCOME TAXES 32,484 12,660 6,187 2,584
--------- --------- --------- ---------
NET INCOME $ 96,445 $ 53,035 $ 32,941 $ 14,374
========== ========= ========= =========
</TABLE>
See notes to financial statements.
F-24
<PAGE>
UNIQUE IMAGES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
PERIOD FROM JANUARY 1, 1999 TO AUGUST 10, 1999 AND YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- RETAINED
SHARES AMOUNT EARNINGS TOTALS
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 - $ - $ - $ -
Proceeds from issuance of common stock 1,000 1,000 1,000
Net income 14,374
-------- ------- --------- --------
BALANCE, DECEMBER 31, 1996 1,000 1,000 14,374 15,374
Net income 32,941 32,941
-------- ------- --------- --------
BALANCE, DECEMBER 31, 1997 1,000 1,000 47,315 48,315
Net income 53,035 53,035
-------- ------- --------- --------
BALANCE, DECEMBER 31, 1998 1,000 1,000 100,350 101,350
Net income 96,445 96,445
-------- ------- --------- --------
BALANCE, AUGUST 10, 1999 1,000 $1,000 $196,795 $197,795
========= ======= ========= ==========
</TABLE>
See notes to financial statements.
F-25
<PAGE>
UNIQUE IMAGES, INC.
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1, 1999 TO AUGUST 10, 1999 AND
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED
1999 TO DECEMBER 31,
AUGUST 10, ---------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 96,445 $ 53,035 $ 32,941 $ 14,374
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization 4,980 3,862 5,300 2,970
Deferred income taxes 3,935 3,665 260 533
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (82,107) (44,517) (36,671) (62,627)
Prepaid expenses and deposits (9,654) (2,578) 2,042 (5,159)
Inventory (10,180) (10,780) (3,626) (11,094)
Other assets (21,242) (15,542)
Increase from changes in -
Accounts payable and other current liabilities 16,180 10,886 16,136 53,697
------- ------- ------- -------
Net cash (used in) provided by operating activities (1,643) (1,969) 16,382 (7,306)
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (38,799) (22,224) (4,403) (20,555)
Proceeds from sale of assets, net 2,382
------- ------- ------- -------
Net cash used in investing activities (38,799) (19,842) (4,403) (20,555)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,000
Proceeds from (payments on) debt, net 11,748 39,881 (80) 31,152
------- ------- ------- -------
Net cash provided by (used in) financing activities 11,478 39,881 (80) 32,152
------- ------- ------- -------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (28,694) 18,070 11,899 4,291
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,260 16,190 4,291
------- ------- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,566 $ 34,260 $ 16,190 $ 4,291
======== ======== ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
Cash paid during the year for:
Federal income tax $ 18,624 $ 8,263 $ 2,051 $
Interest $ 3,248 $ 4,359 $ 6,814 $ 550
</TABLE>
See notes to financial statements.
F-26
<PAGE>
UNIQUE IMAGES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unique Images, Inc. (the "Company") was incorporated on December 29, 1995.
Operations commenced in January 1996. On August 11, 1999, the Company
entered into a stock exchange agreement with americabilia.com, Inc., a
Florida corporation. Under the stock exchange agreement, americabilia.com,
Inc. acquired all of the Company's stock. The Company's former stockholder
became an officer in americabilia.com, Inc.
Unique Images provides framing and matting services to retailers including
those in the memorabilia and collectibles markets. The Company has a
single segment for accounting purposes.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents are defined as
highly liquid investments with original maturities of three months or less
and consist of amounts held as bank deposits.
REVENUES - Revenues are recognized as the products are sold and shipped to
customers.
ADVERTISING AND PROMOTIONAL COSTS - All advertising and promotional costs
associated with advertising and promoting the Company are expensed in the
period incurred.
INVENTORIES - Inventories, consisting primarily of sports memorabilia
products and acrylic cases, are valued at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO) method for both
raw materials and finished goods.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided for using the straight-line method over the
estimated useful lives of the assets ranging from five to seven years.
Leasehold improvements are amortized over the lease period or the
estimated useful life of the improvements, whichever is less.
Maintenance and repairs are charged to expense as incurred and major
renewals and betterments are capitalized. Gains and losses are credited or
charged to earnings upon disposition.
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and
circumstances indicate that the carrying value of long-lived assets may be
impaired, an evaluation of recoverability is performed by comparing the
estimated future undiscounted cash flows associated with the asset to the
asset's carrying amount to determine if a write-down to market value or
discounted cash flow is required. At August 10, 1999, no write-downs were
deemed necessary.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of cash and cash
equivalents, accounts receivable, accounts payable, debt and accrued
liabilities approximated their fair values because of the short maturity
of these instruments.
INCOME TAXES - The Company accounts for income taxes under the asset and
liability method. Under this method, deferred income taxes are required
for the tax consequences of temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss carryforwards. Deferred tax assets
and liabilities are measured using
F-27
<PAGE>
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 taxes of a change in tax rates is recognized in
income in the period that the change in the rate is enacted.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and related notes to the financial
statements. Estimates are used when accounting for uncollectible accounts
receivable, inventory obsolescence, depreciation, and taxes, among others.
Actual results could differ from those estimated by management and changes
in such estimates may affect amounts reported in future periods.
2. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk are cash and cash equivalents and accounts
receivable arising from its normal business activities.
Regarding accounts receivable, the Company believes that credit risk is
limited due to the large number of entities comprising the Company's
customer base. The Company performs certain credit evaluation procedures
and does not require collateral. The Company believes that credit risk is
limited because the Company routinely assesses the financial strength of
its customers, and based upon factors surrounding the credit risk of
customers, establishes an allowance for uncollectible accounts and, as a
consequence, believes that its accounts receivable credit risk exposure
beyond such allowances is limited. The Company had a consolidated
allowance for doubtful accounts at August 10, 1999 of approximately
$6,500. The Company believes any credit risk beyond this amount would be
negligible.
3. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt consists of the following at August 10, 1999 and December
31, 1998 and 1997:
F-28
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
AUGUST 10, -------------------
1999 1998 1997
<S> <C> <C> <C>>
Note payable to a bank, interest at 8%, due December 31,
1999, secured by factored accounts receivable $63,654 $63,413 $12,873
Capitalized lease obligations with interest at 9.569%
and 13.376% collateralized by certain manufacturing
equipment due in 2000 and through 2002 18,597 4,978
Loans from shareholders, no interest, balance payable
upon demand 2,562 18,199
Other debt 450
--------- ------- --------
Total debt 82,701 70,953 31,072
Less current portion (due within the next 12 months) 72,883 70,953 31,072
--------- ------- --------
Long-term debt $ 9,818 $ - $ -
========= ======== ==========
</TABLE>
At August 10, 1999, annual maturities based upon a year ending December 31
on long-term debt and capitalized lease obligations were as follows:
<TABLE>
<S> <C>
1999 $67,447
2000 5,436
2001 5,979
2002 3,839
--------
$82,701
=========
</TABLE>
4. LEASES
The Company leases certain equipment and office space. Commitments for
minimum rentals under noncancelable lease at August 10, 1999 are as
follows:
F-29
<PAGE>
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASE
<S> <C> <C>
1999 $3,550 $30,000
2000 6,661 84,000
2001 6,661 60,000
2002 3,936 60,000
2003 - 60,000
2004 - 60,000
Thereafter - 280,000
-------- ----------
Total minimum lease payments 20,808 $634,000
==========
Less amount representing interest 2,211
-------
Present value of net minimum lease payments, including current
maturities through December 31, 1999 and 2000 of $3,343 and
$5,436, respectively. $18,597
=========
Property, plant and equipment at August 10, 1999 include the following
amounts for capitalized leases:
Machinery and equipment $25,251
Less allowance for depreciation 1,936
---------
Net book value of equipment under capital lease $23,315
=========
</TABLE>
See also Note 6 regarding rent expense with a related party.
F-30
<PAGE>
5. INCOME TAXES
The effective tax rate varies from the U.S. Federal statutory tax rate for
the period ended August 10, 1999, and for the years ended December 31,
1998, 1997, and 1996 principally due to the following:
<TABLE>
<CAPTION>
AUGUST 10, DECEMBER 31,
----------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
U.S. Federal statutory rate 24.90 % 17.40 % 15.00 % 15.00 %
Total deduct -
All other 0.30 % 1.90 % 0.80 % 0.20 %
------- ------- ------- -------
Effective tax rate 25.20 % 19.30 % 15.80 % 15.20 %
======= ======= ======= =======
</TABLE>
The differences between the provision for income taxes at the U.S.
statutory rate and the Company's effective rate are summarized as follows:
<TABLE>
<CAPTION>
AUGUST 10, DECEMBER 31,
----------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Provision at U.S. statutory rate $32,086 $11,423 $ 5,869 $ 2,543
Non-deductible items and other 398 1,237 318 41
--------- --------- --------- ---------
Provision for income taxes $32,484 $12,660 $ 6,187 $ 2,584
========= ========= ========= =========
</TABLE>
The benefits for taxes for the period ended August 10, 1999 and for the
years ended December 31, 1998, 1997, and 1996 consist of:
<TABLE>
<CAPTION>
AUGUST 10, DECEMBER 31,
----------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Current federal $ 36,419 $ 16,325 $ 5,927 $ 2,051
Deferred federal (3,935) (3,665) 260 533
--------- --------- --------- ---------
Provision for income tax $ 32,484 $ 12,660 $ 6,187 $ 2,584
========= ========= ========= =========
</TABLE>
The tax effects of items comprising the Company's net deferred tax
liability consist of the following:
<TABLE>
<CAPTION>
AUGUST 10, DECEMBER 31,
------------------------
1999 1998 1997
<S> <C> <C> <C>
Deferred tax liability -
Difference between book and tax depreciable property $7,600 $3,665 $793
========= ========= =========
</TABLE>
The accompanying financial statements do not include a provision for state
income tax as the Company's income is earned in Nevada, which does not
have a corporate income tax.
F-31
<PAGE>
SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized. At August 10, 1999, no valuation allowance of the net deferred
tax asset was recorded.
6. COMMITMENTS AND CONTINGENCIES
SALE OF COMPANY - In connection with the purchase of Unique Images,
americabilia.com, Inc. assumed all assets, liabilities, and leases of the
Company.
RELATED PARTY TRANSACTIONS - The Company leases its office space,
production facilities and certain equipment from a related party. These
multiple lease agreements require base monthly payments of $8,000 at
August 10, 1999, and have been classified as operating leases. These
leases require the Company to provide insurance, repairs and maintenance,
and to pay real estate taxes on the leased property. These leases expire
at various dates through September 1, 2009. Lease expense for the period
from January 1 through August 10, 1999 under these lease agreements was
$57,800. For the years ended December 31, 1998, 1997, and 1996, the rent
expense was $96,000.
******
F-32
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
americaBILIA.com, Inc.,
a Florida corporation
Date: March 2, 2000 By: /s/ Gary Moore
------------------------------
Gary Moore, President
-33-
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and entered
into this 31st day of August, 1999 by and among TERRA INTERNATIONAL
PHARMACEUTICALS, INC., a Florida corporation having its principal place of
business at 2741 McMillan Avenue, Bldg. E, San Luis Obispo, California
93401-5742, ("Parent"), WORLDWIDE COLLECTIBLES, INC., a Nevada corporation and
wholly owned subsidiary of Parent ("Sub") and AMERICABILIA.com, a Nevada
corporation having its principal place of business at 9155 Las Vegas Boulevard
South, Suite 242, Las Vegas Nevada, ("Target") (Sub and Target hereinafter
collectively referred to as the "Constituent Corporations") and DANIEL TENNANT
and CAROL SLAVIN ("Terra Shareholders").
RECITALS
A. The Boards of Directors of Parent, Sub and Target have approved the
acquisition of Target by Parent.
B. The Boards of Directors of Parent, Sub and Target have approved the
merger of Target into Sub (the "Merger"), pursuant to the Agreement of Merger
set forth in Exhibit A hereto ("Merger Agreement") and the transactions
contemplated hereby in accordance with the applicable provisions of the statutes
of the State of Nevada, which permit such Merger.
C. For federal income tax purposes, it is intended that the Merger shall
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
D. Each of the parties to this Agreement also desires to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions thereto.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties agree as follows:
1. THE MERGER.
(a) At the Effective Time (as defined in Section 1.2) and subject to
the terms and conditions of this Agreement and the Merger Agreement, Target
shall be merged into Sub and the separate existence of Target shall thereupon
cease, in accordance with the applicable provision of the General Corporation
Law of the State of Nevada (the "NGCL").
(b) Sub will be the surviving corporation in the Merger (sometimes
referred to herein as the "Surviving Corporation" and will continue to be
governed by the laws of the State of Nevada, and the separate corporate
existence of Sub and all of its rights, privileges,
1
<PAGE>
immunities and franchises, public or private, and all its duties and liabilities
as a corporation organized under the NGCL, will continue unaffected by the
Merger.
(c) The Merger will have the effects specified by the NGCL.
1.2 EFFECTIVE TIME. As soon as practicable following fulfillment or waiver
of the conditions specified in Article VI hereof, and provided that this
Agreement has not been terminated or abandoned pursuant to Article IX hereof,
the Constituent Corporations shall cause Articles of Merger to be filed with the
office of the Secretary of State of the State of Nevada as provided in Section
92A.200 of the NGCL. Subject to and in accordance with the laws of the State of
Nevada, the Merger will become effective at the date and time the Articles of
merger are filed with the office of the Secretary of State of the State of
Nevada or such later time or date as may be specified in the Articles of Merger
(the "Effective Time"). Each of the parties will use its best efforts to cause
the Merger to be consummated as soon as practicable following the fulfillment or
waiver of the conditions specified in Article VI hereof.
ARTICLE II
THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of Sub as in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation after the Effective Time.
2.2 BYLAWS. The Bylaws of Target as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time.
2.3 BOARD OF DIRECTORS. From and after the Effective Time, the Board of
Directors of Target shall be the Board of Directors of the Surviving
Corporation.
2.4 OFFICERS. From and after the Effective Time, the Officers of Target
shall be the Officers of the Surviving Corporation.
ARTICLE III
CONVERSION OF SHARES
3.1 CONVERSION OF TARGET SHARES IN THE MERGER. Pursuant to the Merger
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of any holder of any capital stock of Target:
(a) all shares of Common Stock, par value $.001 per share, of Target
("Target Common Stock") owned by Parent or any subsidiary of Parent or Target
shall be canceled and shall cease to exist from and after the Effective Time;
and
(b) each remaining issued and outstanding share of Target Common
Stock, other than Target Dissenting Shares (as defined in Section 3.4 hereof),
shall be converted into, and become exchangeable for, one (1) share of validly
issued, fully paid and nonassessable common stock, $.001 par value per share, of
Parent ("Parent Common Stock"). The
2
<PAGE>
consideration referred to in this Section 3.1 is hereinafter referred to as the
"Merger Consideration."
3.2 STATUS OF SUB SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of any capital stock of Sub,
each issued and outstanding share of common stock of Sub shall continue
unchanged and remain outstanding as a share of common stock of the Surviving
Corporation.
3.3 EXCHANGE OF STOCK CERTIFICATES.
(a) Immediately following the Closing, Parent shall provide
instructions to its transfer agent, Interwest Transfer Company ("Exchange
Agent"), which shall be effective as of the Effective Time, to issue the
certificates representing shares of Parent Common Stock required to effect the
exchange referred to in Section 3.3(b). Shares of Parent Common Stock into which
shares of Target Common Stock shall be converted in the Merger shall be deemed
to have been issued at the Effective Time.
(b) From and after the Effective Time, each holder of a certificate
which immediately prior to the Effective Time represented outstanding shares of
Target Common Stock, other than shares with respect to which dissenter's rights,
if any, are granted by reason of the Merger under the NGCL, shall be entitled to
receive in exchange therefor, upon surrender to the Exchange Agent, a
certificate or certificates representing the number of whole shares of Parent
Common Stock into which such holder's shares of Target common Stock were
converted pursuant to Section 3.1. From and after the Effective Time, Parent
shall be entitled to treat the certificates which immediately prior to the
Effective Time represented shares of Target Common Stock and which have not been
surrendered for exchange as evidencing the ownership of the number of shares of
Parent Common Stock into which the shares of Target Common Stock represented by
such certificates shall have been converted pursuant to Section 3.1,
notwithstanding the failure to surrender such certificates.
(c) As soon as practicable after the Effective Time, Parent shall
deliver to Darran Wells in exchange for the options to acquire 5,000 shares of
Target Common Stock held by him, options to acquire an equal number of shares of
Parent Common Stock on the terms and conditions set forth in the options being
exchanged.
3.4 DISSENTING SHARES. Notwithstanding anything to the contrary contained
in this Agreement or the Merger Agreement, holders of shares of Target Common
Stock with respect to which dissenter's rights, if any, are granted by reason of
the Merger under the NGCL and who comply with the NGCL ("Target Dissenting
Shares"), shall not be entitled to shares of Parent Common Stock pursuant to
Section 3.1, unless and until the holder thereof shall have failed to perfect or
shall have effectively withdrawn or lost such holder's right to dissent from the
Merger under the NGCL, and shall be entitled to receive only the payment
provided for pursuant to the NGCL. If any holder shall have failed to perfect,
or shall have effectively withdrawn or lost such holder's dissenter's rights
under the NGCL, such holder's Target Dissenting Shares shall thereupon be deemed
to have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration.
3
<PAGE>
3.5 CLOSING OF TRANSFER BOOKS. From and after the Effective Time, the stock
transfer books of Target shall be closed and no transfer of shares of Target
common Stock shall thereafter be made. If, after the Effective Time, Target
Certificates are presented to Parent, they shall be canceled and exchanged for
the Merger Consideration in accordance with the procedures in this Article III.
3.6 CLOSING. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at (a) the officers of Target's counsel at
9:00 a.m., local time, on the later of September 6, 1999, and (ii) the second
business day immediately following the date on which the last of the conditions
set forth in Article VI hereof is fulfilled or waived, or (b) at such other time
and place on such other date as Parent and Target shall agree (the "Closing
Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TARGET
Except as set forth in the Target Disclosure Schedule delivered to Parent on the
Closing Date, and signed by the President and Secretary of Target (the "Target
Disclosure Schedule"), the sections of which are numbered to correspond to the
subsection numbers of this Agreement, Target hereby represents and warrants to
Parent as follows:
4.1 ORGANIZATION, QUALIFICATION.
(a) Target is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. Target has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(b) Target has delivered to Parent complete and accurate copies of its
Articles of Incorporation and Bylaws, each as amended, minutes of all its
directors' and shareholder meetings, and a shareholder list correctly setting
forth the record ownership as of the date of this Agreement of all outstanding
shares.
4.2 CAPITALIZATION. As of the Closing Date, Target shall have authorized
capital stock of 50,000,000 of Common Stock, $.001 par value, of which no more
than 537,500 shares will be issued and outstanding and 5,000 shares shall be
reserved for issuance upon the exercise of options. All outstanding shares of
Target capital stock have been duly authorized, validly issued, fully paid and
nonassessable and are not be subject to preemptive rights created by statute,
the Articles of Incorporation or Bylaws of Target or any agreement to which
Target is a party or by which it is bound.
4.3 SUBSIDIARIES. Except for Target's wholly owned subsidiary, Veltre
Enterprises, Inc., Target does not have and has never had any subsidiaries and
does not directly or indirectly own any equity interest in, or any interest
convertible into or exchangeable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
4
<PAGE>
4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Target has full corporate power
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by the Board of Directors of Target.
4.5 FINANCIAL STATEMENTS OF TARGET. The business, assets, liabilities and
financial condition of Target are, in all material respects, as set forth in the
financial statements ("Target Financial Statements") and other representations
attached hereto as Schedule 3.5, which financial statements do not fail to state
any material fact necessary to make the information therein not misleading.
4.6 UNDISCLOSED LIABILITIES. Target does not have any material liabilities,
whether absolute, accrued, contingent or otherwise, and whether due or to become
due, except for those liabilities which (i) are accrued or fully reserved
against in the balance sheet of the Target Financial Statements; or (ii) are of
a normally recurring nature and were incurred after in the ordinary course of
business consistent with past practice. Section 3.6 of the Target Disclosure
Schedule lists all liabilities of Target incurred after June 30, 1999 which are
of a type required to be disclosed or reflected in financial statements and
which either (a) are not in the ordinary course of business, or (b) exceed
$1,000,000 with respect to any single transaction or single series of related
transactions.
4.7 ABSENCE OF CHANGES. Since June 30, 1999, there has not been any
material adverse change in the business, assets, liabilities, financial
condition, results of operations or prospects of Target taken as a whole.
4.8 PROPERTIES AND INVENTORIES. Target has good and marketable title to,
valid leasehold interests in or other valid right to use all of the material
assets used in its operations or necessary for the conduct of its business,
subject to no security interests, licenses, encumbrances, restrictions or
adverse claims, except as disclosed in the notes to the Target Financial
Statements and except for any lien for taxes not yet due and payable and except
for any statutory liens for which payment is not delinquent.
4.9 REAL PROPERTY. Section 4.9 of the Target Disclosure Schedule contains a
list and description of all real property owned and all real property leased by
Target. Prior to the Closing, Target will provide Parent with copies of all of
the referenced leases. Target has either fee simple title or enforceable
leasehold interests in all property shown in the Target Disclosure Schedule.
4.10 LITIGATION. Target is not engaged in, nor has it been threatened with,
any material litigation, arbitration, investigation or other legal proceeding
relating to Target or its business, property or employee benefit plans or
policies, nor, to the knowledge of Target, is there any valid basis for any such
proceeding.
4.11 PURCHASE, SALE AND OTHER AGREEMENTS. Target shall list in its
Disclosure Schedule each contract or agreement, oral or written, which may
materially affect its financial statements.
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4.12 LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS. To the best of
Target'S knowledge, Target owns, is licensed or otherwise entitled to use, or
can obtain the right to use on a basis which is commercially reasonable, all
patents, trademarks, trade names, service marks, copyrights, and other
proprietary rights, and necessary to the business of Target as currently
conducted or as contemplated by its current business plan. Section 4.12(a) of
the Target Disclosure Schedule lists all Target patents and registered
trademarks, trade names and service marks and copyrights, and applications for
any of the foregoing. Except as set forth in Section 4.12(b) of the Target
Disclosure Schedule, no claims (including any request to enter into a license
agreement) have been asserted or threatened by any person (i) to the effect that
any activity in which Target is engaged infringes on any patents or other
proprietary rights, (ii) against the use by Target of any trademarks, trade
names, technology, know-how or processes necessary for the operation of the
business of Target as currently conducted or presently contemplated, or (iii)
challenging or questioning the validity or effectiveness of any of the Target
Intellectual Property; and Target is not aware of any valid basis for any such
claim. To the best of its knowledge, no party is infringing the Target
Intellectual Property.
4.13 EMPLOYEES. Section 4.13 of the Target Disclosure Schedule identifies
all consulting or employment agreements and other agreements with individual
consultants or employees to which Target is a party and which are either
currently effective or will become effective at the Closing.
4.14 COMPLIANCE WITH CONTRACTS. Target has performed all material
obligations required to be performed by it as of the date of this Agreement
under each material contract, obligation, commitment, agreement, undertaking,
arrangement or lease referred to in this Agreement or the Target Disclosure
Schedule and has not received any notice that it is in default thereunder. To
its knowledge no other party is in default under such material agreements. The
Merger and the actions contemplated thereby will not conflict with or result in
a breach of the terms, conditions or provisions of any such material agreement
or cause any acceleration of maturity of any such material agreements.
4.15 COMPLIANCE WITH LAWS. Target has substantially complied with all laws,
regulations, judgments, decrees or orders of any court or governmental agency or
entity applicable in any material respect to the conduct of its business.
4.16 TAXES. All United States, foreign, state and local tax returns and
reports (collectively "Target Returns") required to be filed to date with
respect to the operations of Target have been accurately prepared in all
material respects. and duly filed, or an extension therefrom has been duly
obtained.
4.17 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the balance
sheet of Target at June 30, 1999 are bona fide, arose in the ordinary course of
business in the aggregate amount thereof and, to the best of Target'S knowledge,
are collectible (less any reserve for doubtful accounts and normal discounts) in
the ordinary course of business.
4.18 INVESTMENT REPRESENTATIONS. Target understands and acknowledge that
the Parent Common Stock will not be registered under the Securities Act nor
qualified under the securities laws of Florida or Nevada, by virtue of
exemptions thereto. Each of the Target shareholders
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(either alone or in conjunction with his or her professional advisers) has such
experience and knowledge in investment, financial and business matters in
investments similar to Parent Common Stock that her, she or it is are capable of
protecting his, her or its own interest in connection therewith and qualifying
for such exemptions. Further, each shareholder of Target is acquiring Parent
Common Stock for investment purposes only for such shareholder's own account,
and not on behalf of any other person nor with a view to, or for resale in
connection with any distribution thereof. The certificates representing the
Parent Common Stock will be stamped with a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE ISSUER
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.19 TAX CONSEQUENCES. Although the exchange of shares and subsequent
merger of Target with and into Sub by this Agreement is intended to be a "tax
free reorganization" pursuant to Section 368(a) of the Internal Revenue Code of
1986, as amended, Target understands that no assurance is given by Parent that
such transaction shall be deemed by the Internal Revenue Service to be a
transaction upon which no gain or loss is recognized.
7
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND TERRA SHAREHOLDERS
Parent and the Terra Shareholders hereby, jointly and severally, represent
and warrant to Target as follows:
5.1 CAPITALIZATION. The authorized capital stock of Parent consists of
50,000,000 shares of common stock, of which 44,270,000 are issued and
outstanding, all of which outstanding shares are duly authorized, validly
issued, fully paid and nonassessable. There is no commitment, plan or
arrangement to issue and no outstanding options, warrants or other rights
calling for the issuance of any share of capital stock of Parent or any security
or other instrument convertible into, exercisable for or exchangeable for
capital stock of Parent. There is outstanding no security or other instrument
convertible into or exchangeable for capital stock of Parent. By authority of
the shareholders given to the Board of Directors of Parent at a shareholders
meeting duly held on August 9, 1999, the outstanding stock of the corporation
will be reverse split, upon the execution of this Agreement, and in
contemplation of the Merger and prior to the Closing such that no more than
537,500 shares of common stock of Parent shall be outstanding immediately prior
to the Merger of Target into Sub.
5.2 ISSUANCE AND DELIVERY OF PARENT COMMON STOCK. The issuance and delivery
of the Parent Common Stock has been duly authorized, and the shares of Parent
Common Stock, when issued and delivered in accordance with the terms of this
Agreement, shall be duly authorized, validly issued, fully paid and
nonassessable.
5.3 ORGANIZATION. Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has the
corporate power and authority to own its properties and to carry on its business
as now being conducted.
5.4 AUTHORITY, BINDING AGREEMENT. This Agreement has been approved by the
Board of Directors of Parent. No consents, authorizations or approvals, whether
of a governmental agency or instrumentality or otherwise, are necessary in order
to enable Parent to enter into and perform this Agreement. This Agreement
constitutes the legal, valid and binding obligation of Parent and is enforceable
against Parent in accordance with its terms.
5.5 FINANCIAL CONDITION. The business, assets, liabilities and financial
condition of Parent are, in all material respects, as set forth in the financial
statements and other representations attached hereto as Schedule 5.5 ("Parent
Financial Statements"), which Parent Financial Statements (i) have been prepared
in conformity with generally accepted accounting principles, consistently
applied, and (ii) do not fail to state any material fact necessary to make the
information therein not misleading.
5.6 LITIGATION. There is no suit, action or other legal or administrative
proceeding pending or threatened against Parent, and to its knowledge, no
circumstances exist or have occurred which may lead to any suit, action,
proceeding or investigation which could materially and adversely affect its
business, assets or financial condition. Parent has received no notice from
8
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any federal, state or local governmental agency asserting any violation by
Parent of any law, ordinance or regulation.
5.7 SUBSIDIARIES. Parent does not have and has never had any subsidiaries
and does not directly or indirectly own any equity interest in or any interest
convertible into or exchangeable for any equity or similar interest in any
corporation, partnership, joint venture or other business association or entity.
5.8 CONSENTS AND APPROVAL; NO VIOLATION. There is no requirement for Parent
to make any filing with or to obtain any permanent authorization, consent or
approval of any governmental or regulatory authority as a condition to the
lawful consummation by Parent of the transactions contemplated by this
Agreement.
5.9 UNDISCLOSED LIABILITIES. Parent does not have any material liabilities,
whether absolute, accrued, contingent or otherwise and whether due or to become
due except for those liabilities which (1) are accrued and fully reserved
against in the Parent Financial Statements or (2) are of a normally recurring
nature and were incurred after June 30, 1999 in the ordinary course of business
consistent with past practice. Subsequent to June 30, 1999, Parent does not have
any liabilities of a type required to be disclosed or reflected in financial
statements and which either (a) are not in the ordinary course of a business
transaction or (b) exceed $5,000 with respect to any single transaction or
single series of related transactions.
5.10 ABSENCE OF CHANGES. Since June 30, 1999 there have not been any
material adverse changes in the business, assets, liabilities, financial
condition, results of operation or prospects of Parent taken as a whole.
5.11 PURCHASE, SALE AND OTHER AGREEMENTS. Parent is not a party to any
contract or agreement, oral or written, which may materially affect the Parent
Financial Statements.
5.12 COMPLIANCE WITH LAWS. Parent has substantially complied with all laws,
regulations, judgments, decrees or orders of any court or governmental agency or
entity applicable in any material respects to the conduct of its business.
5.13 TAXES. All United States, foreign, state and local tax returns and
reports (collectively the "Returns") required to be filed to date with respect
to the operations of Parent have been accurately prepared in all material
respects and duly filed or an extension therefrom has been duly obtained.
5.14 REVIEW OF INFORMATION. Parent has such knowledge and experience in
investment, financial and business matters that is capable of protecting its own
interests. Parent has been provided complete access to all books and records of
Target and is entering into this transaction based solely upon its business
knowledge and experience and written information provided to Parent by Target.
Parent is not relying upon any oral representations of any officer, director,
agent or employee of Target in entering into this transaction.
5.15 NAME CHANGE. By authority of the shareholders given to the Board of
Directors of Parent at a shareholders meeting, on August 9, 1999 the name of
Parent shall be changed to americabilia.com upon the execution of this Agreement
and prior to the Closing.
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5.16. RECAPITALIZATION. By authority of the shareholders given to the Board
of Directors of Parent at a shareholders meeting, on August 9, 1999 the negative
retained deficit of additional paid in capital of Parent be restated to $0 as of
December 31, 1998, the end of most recent fiscal year, and the difference be
charged off to additional paid in capital.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment of all of the following conditions precedent at or prior to the
Effective Time:
(a) The Merger shall be approved by the shareholders of Target.
(b) Parent shall have taken all required action to comply with Rule
506 of the Securities Exchange Act of 1933 and the blue sky laws of the states
in which the shareholders of Target reside in connection with the issuance of
the Parent Common Stock.
(c) There shall be no injunction, order or decree by any Federal,
state or foreign court which prevents the consummation of the Merger.
(d) There shall have been no statute or regulation enacted which would
prevent consummation of the Merger.
(e) All governmental consents and approvals required for the Merger
shall have been obtained. Any of such conditions may be waived by all parties
but only in writing.
6.2 CONDITIONS TO OBLIGATIONS OF TARGET TO EFFECT THE MERGER. The
obligation of Target to effect the Merger is subject to the fulfillment of all
of the following conditions precedent at or prior to the Effective Time:
(a) The representations and warranties made by Parent and Sub shall be
true and correct as of the Closing.
(b) All obligations of Parent and Sub under this Agreement and the
Merger Agreement shall have been complied with and performed in all material
respects.
(c) There shall be no material change in the business, assets,
liabilities or financial condition of Parent from that set forth in the Parent
Financial Statements.
(d) Target shall have received an opinion of counsel for Parent and
Sub in the form of Exhibit B hereto dated as of the Closing Date.
(e) Parent shall have effected a reverse stock split of its common
stock such that the outstanding shares of common stock of Parent shall have been
reduced to no more than 537,500 shares.
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(f) Parent shall have amended its Articles of Incorporation to change
its corporate name to "americabilia.com".
(g) Parent shall have obtained a new CUSIP number for its common
stock.
(h) Parent shall have changed the trading symbol for its common stock
to "ACOM" or such other trading symbol as it approved by Target.
(i) Target shall have completed its due diligence investigation of
Parent and shall be satisfied in its sole discretion with the results of such
investigation.
Any of such conditions may be waived by Target but only in writing.
6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger are subject to the
fulfillment of all of the following conditions precedent at or prior to the
Effective Time:
(a) The representations and warranties made by Target shall be true
and correct as of the Closing.
(b) All obligations of Target under this Agreement and the Merger
Agreement shall have been complied with and performed in all material respects.
(c) There shall be no material change in the business, assets,
liabilities or financial condition of Target from that set forth in the Target
Financial Statements.
(d) Parent shall have received an opinion of counsel for Target in the
form of Exhibit C hereto dated as of the Closing Date.
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ARTICLE VII
INDEMNIFICATION
8.1 INDEMNIFICATION OF TARGET. Terra Shareholders shall indemnify, save and
keep Target and its affiliates, successors and assigns including Sub and Parent
("Target Indemnitees") harmless against and from all liability, demands, claims,
actions or causes of action, assessments, losses, fines, penalties, costs,
damages and expenses, including reasonable attorneys' fees, disbursements and
expenses (collectively, "Damages") sustained or incurred by Target Indemnitees
as a result of, arising out of or by virtue of any misrepresentation, breach of
any warranty or representation or non-fulfillment of any agreement on the part
of Parent, Sub or Terra Shareholders, contained in this Agreement or the Merger
Agreement or any exhibit or schedule hereto or thereto.
8.2 INDEMNIFICATION OF PARENT. Target and Sub shall indemnify, save and
keep Parent and its affiliates, successors and assigns ("Parent Indemnitees")
harmless against and from all liability, demands, claims, actions or causes of
action, assessments, losses, fines, penalties, costs, damages and expenses,
including reasonable attorneys' fees, disbursements and expenses (collectively,
"Damages") sustained or incurred by Parent Indemnitees as a result of, arising
out of or by virtue of any misrepresentation, breach of any warranty or
representation or non-fulfillment of any agreement on the part of Target,
contained in this Agreement or the Merger Agreement or any exhibit or schedule
hereto or thereto.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of Target:
(a) by mutual consent of Parent and Target; or
(b) by either Parent or Target if (i) the Merger shall have not been
consummated on or before September 15, 1999 (the "Termination Date"), (ii) the
requisite vote of the shareholders of Target to approve the Merger shall not be
obtained, (iii) any court of competent jurisdiction in the United States or any
state shall have issued an order, judgment or decree restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or decree shall have
become final and nonappealable; or
(c) by Target in its sole discretion based on its due diligence
investigation of Parent.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either Parent or Target, as provided in Section 8.1, this Agreement shall
forthwith become void and there shall be no liability on the part of either
Target, Parent or Sub or their respective officers or directors (except as set
forth in this Section 8.2) and each party shall bear its own costs incident to
the negotiation, preparation and anticipated Closing of this Agreement. In such
event, each party shall return any data, material or assets of the other party
received by it in contemplation of
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the Closing. Nothing in this Section 8.2 shall relieve any party from liability
for any breach of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 OTHER DOCUMENTS. Target shall, at any time after the Closing upon the
request of Parent, execute and deliver to Parent such documents or instruments
of conveyance, license or assignment or take such other action as is reasonably
necessary to complete the transfer of the Target Common Stock or other
transactions contemplated by this Agreement.
9.2 COSTS. Except as otherwise specifically provided herein, Parent shall
pay the Closing costs and transfer cost applicable to this Agreement and the
transfer of Parent Common Stock hereunder. Each party hereto shall bear the
costs of their respective counsel and all other legal fees and costs related
thereto. Parent shall pay all of such costs and fees prior to the Closing. Both
Parent and Target each hold the other harmless from any obligation for the
payment of any finders fees or commissions in connection with the transactions
contemplated by this Agreement as a result of any action of the indemnifying
party.
9.3 INVALIDITY, MODIFICATION AND WAIVER. If any provision of this Agreement
shall be held to be invalid or void, the remaining provisions shall nevertheless
remain in effect. No provision of this Agreement may be modified and the
performance or observance thereof may not be waived except by written agreement
of the parties affected thereby. No waiver of any violation or nonperformance of
any provision of this Agreement shall be deemed to be a waiver of any subsequent
violation or nonperformance of the same or any other provision of this
Agreement.
9.4 DISPUTES, CHOICE OF LAW. This Agreement, the performance of the parties
hereunder and any disputes related hereto shall be governed by the laws of the
State of Nevada and subject to the exclusive jurisdiction of the courts therein.
If either party shall initiate a legal proceeding to enforce its rights
hereunder, the prevailing party in such legal proceedings shall be entitled to
recover from the other party all costs, expenses and reasonable attorney's fees
incurred in connection with such proceedings.
9.5 ENTIRE AGREEMENT. This Agreement is and represents the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes any prior or contemporaneous discussions or agreements related
thereto.
9.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be originals and enforceable, and together
shall constitute a single agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized representative as of the date first
written above.
"Parent"
TERRA INTERNATIONAL
PHARMACEUTICALS, INC.,
a Florida corporation
By:
-------------------------------------
Carol Slavin, President
By:
-------------------------------------
Natasha Tennant, Secretary
"Terra Shareholders"
DANIEL TENNANT
CAROL SLAVIN
[Signatures continue]
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"Sub"
WORLDWIDE COLLECTIBLES, INC.,
a Nevada corporation
By:
-------------------------------------
Carol Slavin, President
By:
-------------------------------------
Natasha Tennant, Secretary
"Target"
AMERICABILIA.com,
a Nevada corporation
By:
-------------------------------------
Gary Moore, President
By:
-------------------------------------
Dixie Cartwright, Secretary
15
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Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
FIRST ZURICH INVESTMENTS, INC.
We, the undersigned, hereby associate ourselves together for the purpose
of becoming a corporation under the laws of the State of Florida, by and
under the provisions of the Statutes of the said State of Florida.
ARTICLE I
The name of this corporation shall be:
First Zurich Investments, Inc.
ARTICLE II
The corporation may engage in any activity or business permitted under
the laws of the United States and of the State of Florida.
ARTICLE III
The maximum number of shares of capital stock at that this corporation
is authorized to have outstanding at any time is FIVE HUNDRED (500) shares of
common stock, having a par value of ONE ($1.00) DOLLAR PER SHARE.
ARTICLE IV
The amount of capital with which this corporation will begin business
shall be the sum of not less than FIVE HUNDRED ($500.00) DOLLARS.
ARTICLE V
This corporation shall exist perpetually unless sooner dissolved
according to law.
ARTICLE VI
The initial street of the principal office of the corporation shall be:
800 East Cypress Creek Road, Suite 209
Ft. Lauderdale, Florida 33334
ARTICLE VII
The number of directors of this corporation shall be at least one (1) and no
more than five (5).
<PAGE>
ARTICLE VIII
The names and street addresses of the members of the first Board of
Directors of this corporation are as follows:
James R. Beckett
ARTICLE IX
The names and street addresses of the persons signing these Articles of
Incorporation as subscribed is as follows:
James R. Beckett
800 East Cypress Creek Road, Suite 209
Ft. Lauderdale, Florida 33334
ARTICLE X
The corporate existence of this corporation shall begin on the date the
Articles of Incorporation as filed of record.
IN WITNESS WHEREOF, the undersigned, James R. Beckett, both being
natural persons, competent to contract, have hereunto set their hands and
seals this 15th day of August, 1989.
________________________________________________________________________(SEAL)
________________________________________________________________________(SEAL)
STATE OF FLORIDA )
) ss
COUNTY OF BROWARD )
BEFORE ME, the undersigned Notary Public of the State of Florida
personally appeared James R. Beckett and to me well
known and known to me to be the individuals described in and who executed the
foregoing Articles of Incorporation, and they acknowledged before me that
they executed the same freely and voluntarily for the purpose therein
expressed.
WITNESS my hand and official seal this 15th day of August 1989.
_____________________________________
Notary Public, State of Florida
(NOTARY SEAL) My Commission Expires:
<PAGE>
CERTIFICATE DESIGNATING PLACE OF BUSINESS OR DOMICILE
FOR THE SERVICE WITHIN THIS STATE,
NAMING AGENT UPON WHOM PROCESS MAY BE SERVED
First Zurich Investments, Inc.
In pursuance of Chapter 48.091, Florida Statutes, the following is
submitted, in compliance with said Act:
FIRST: That First Zurich Investments, Inc. desiring to organize under
the Laws of the State of Florida with its principal offices as indicated in
the Articles of Incorporation, in the City of Ft. Lauderdale, County of
Broward, State of Florida, has named James R. Beckett, located at 800 East
Cypress Creek, as its agents to accept services of process within the state.
ACKNOWLEDGEMENT
Having been named to accept services of process for the above stated
corporation, at the place designated in this certificate, I hereby accept to
act in this capacity, and agree to comply with the provisions of said Act
relative to keeping open said office.
By:_____________________________
Resident Agent
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
americabilia.com, Inc.
A Florida Corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The principal office shall be in
the City of LasVegas, County of Clark, State of Nevada.
Section 2. OTHER OFFICES. The board of directors may at any
time establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall
be held at any place within or without the State of Nevada designated by the
board of directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETINGS. The annual meetings of
stockholders shall be held at a date and time designated by the board of
directors. (At such meetings, directors shall be elected and any other
proper business may be transacted by a plurality vote of stockholders.)
Section 3. SPECIAL MEETINGS. A special meeting of the
stockholders, for any purpose or purposes whatsoever, unless prescribed by
statute or by the articles of incorporation, may be called at any time by the
president and shall be called by the president or secretary at the request in
writing of a majority of the board of directors, or at the request in writing
of stockholders holding shares in the aggregate entitled to cast not less
than a majority of the votes at any such meeting.
The request shall be in writing, specifying the time of such
meeting, the place where it is to be held and the general nature of the
business proposed to be transacted, and shall be delivered personally or sent
by registered mail or by telegraphic or other facsimile transmission to the
chairman of the board, the president, any vice president or the secretary of
the corporation. The officer receiving such request forthwith shall cause
notice to be given to the stockholders entitled to vote, in accordance with
the provisions of Sections 4 and 5 of this Article II, that a meeting will be
held at the time requested by the person or persons calling the meeting, not
less than thirty-five (35) nor more than sixty (60) days after the receipt of
the request. If the
-1-
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notice is not given within twenty (20) days after receipt of the request, the
person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 3 shall be construed as limiting,
fixing or affecting the time when a meeting of stockholders called by action
of the board of directors may be held.
Section 4. NOTICE OF STOCKHOLDERS' MEETINGS. All notices of
meetings of stockholders shall be sent or otherwise given in accordance with
Section 5 of this Article II not less than ten (10) nor more than sixty (60)
days before the date of the meeting being noticed. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting the general nature of the business to be transacted, or (ii) in the
case of the annual meeting those matters which the board of directors, at the
time of giving the notice, intends to present for action by the stockholders.
The notice of any meeting at which directors are to be elected shall include
the name of any nominee or nominees which, at the time of the notice,
management intends to present for election.
If action is proposed to be taken at any meeting for approval of
(i) contracts or transactions in which a director has a direct or indirect
financial interest, (ii) an amendment to the articles of incorporation, (iii)
a reorganization of the corporation, (iv) dissolution of the corporation, or
(v) a distribution to preferred stockholders, the notice shall also state the
general nature of such proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of stockholders shall be given either personally or by
first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the stockholder at the address of such stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent by mail or telegram to the corporation's principal executive office, or
if published at least once in a newspaper of general circulation in the
county where this office is located. Personal delivery of any such notice to
any officer of a corporation or association or to any member of a partnership
shall constitute delivery of such notice to such corporation, association or
partnership. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other
means of written communication. In the event of the transfer of stock after
delivery or mailing of the notice of and prior to the holding of the meeting,
it shall not be necessary to deliver or mail notice of the meeting to the
transferee.
If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
stockholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available
to the stockholder upon written demand of the stockholder at the principal
executive office of the corporation for a period of one year from the date of
the giving of such notice.
An affidavit of the mailing or other means of giving any notice of
any stockholders' meeting shall be executed by the secretary, assistant
secretary or any transfer agent
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of the corporation giving such notice, and shall be filed and maintained in
the minute book of the corporation.
Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 6. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
stockholders shall constitute a quorum for the transaction of business,
except as otherwise provided by statute or the articles of incorporation.
The stockholders present at a duly called or held meeting at which a quorum
is present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the
shares required to constitute a quorum.
Section 7. ADJOURNED MEETING AND NOTICE THEREOF. Any
stockholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of the majority of the shares
represented at such meeting, either in person or by proxy, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken. At any adjourned meeting the corporation may transact
any business which might have been transacted at the original meeting.
Section 8. VOTING. Unless a record date set for voting
purposes be fixed as provided in Section 1 of Article VII of these bylaws,
only persons in whose names shares entitled to vote stand on the stock
records of the corporation at the close of business on the business day next
preceding the day on which notice is given (or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held) shall be entitled to vote at such meeting. Any stockholder
entitled to vote on any matter other than elections of directors or officers,
may vote part of the shares in favor of the proposal and refrain from voting
the remaining shares or vote them against the proposal, but, if the
stockholder fails to specify the number of shares such stockholder is voting
affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares such stockholder is entitled to
vote. Such vote may be by voice vote or by ballot; provided, however, that
all elections for directors must be by ballot upon demand by a stockholder at
any election and before the voting begins.
When a quorum is present or represented at any meeting, the vote of
the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the articles of incorporation a different vote is required in
which case such express provision shall govern and control the decision of
such question. Every stockholder of record of the corporation shall be
entitled at each meeting of stockholders to one vote for each share of stock
standing in his name on the books of the corporation.
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Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT STOCKHOLDERS.
The transactions at any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though
had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, not present in person or by proxy,
signs a written waiver of notice or a consent to a holding of the meeting, or
an approval of the minutes thereof. The waiver of notice or consent need not
specify either the business to be transacted or the purpose of any regular or
special meeting of stockholders, except that if action is taken or proposed
to be taken for approval of any of those matters specified in the second
paragraph of Section 4 of this Article II, the waiver of notice or consent
shall state the general nature of such proposal. All such waivers, consents
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance of a person at a meeting shall also constitute a waiver
of notice of such meeting, except when the person objects, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice if such objection is expressly made at the meeting.
Section 10. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action which may be taken at any annual or special meeting of
stockholders 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
holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted. All
such consents shall be filed with the secretary of the corporation and shall
be maintained in the corporate records. Any stockholder giving a written
consent, or the stockholder's proxy holders, or a transferee of the shares of
a personal representative of the stockholder of their respective proxy
holders, may revoke the consent by a writing received by the secretary of the
corporation prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
Section 11. PROXIES. Every person entitled to vote for
directors or on any other matter shall have the right to do so either in
person or by one or more agents authorized by a written proxy signed by the
person and filed with the secretary of the corporation. A proxy shall be
deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney in fact. A validly executed proxy
which does not state that it is irrevocable shall continue in full force and
effect unless revoked by the person executing it, prior to the vote pursuant
thereto, by a writing delivered to the corporation stating that the proxy is
revoked or by a subsequent proxy executed by, or attendance at the meeting
and voting in person by the person executing the proxy; provided, however,
that no such proxy shall be valid after the expiration of six (6) months from
the date of such proxy, unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is to continue
in force, which in no case shall exceed seven (7) years from the date of its
execution. Subject to the above and the provisions of the Florida 1989
Business Corporation Act, any proxy duly executed
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is not revoked and continues in full force and effect until an instrument
revoking it or a duly executed proxy bearing a later date is filed with the
secretary of the corporation.
Section 12. INSPECTORS OF ELECTION. Before any meeting of
stockholders, the board of directors may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are appointed, the chairman of the
meeting may, and on the request of any stockholder or his proxy shall,
appoint inspectors of election at the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a
meeting on the request of one or more stockholders or proxies, the holders of
a majority of shares or their proxies present at the meeting shall determine
whether one (1) or three (3) inspectors are to be appointed. If any person
appointed as inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment by the board of directors before the
meeting, or by the chairman at the meeting.
The duties of these inspectors shall be as follows:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine the election result; and
(f) Do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
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ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the Florida
1989 Business Corporation Act and any limitations in the articles of
incorporation and these bylaws relating to action required to be approved by
the stockholders or by the outstanding shares, the business and affairs of
the corporation shall be managed and all corporate powers shall be exercised
by or under the direction of the board of directors.
Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors shall have
the power and authority to:
(a) Select and remove all officers, agents, and employees of
the corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the articles of incorporation or these bylaws,
fix their compensation, and require from them security for faithful service.
(b) Change the principal executive office or the principal
business office from one location to another; cause the corporation to be
qualified to do business in any other state, territory, dependency, or
foreign country and conduct business within or without the State; designate
any place within or without the State for the holding of any stockholders'
meeting, or meetings, including annual meetings; adopt, make and use a
corporate seal, and prescribe the forms of certificates of stock, and alter
the form of such seal and of such certificates from time to time as in their
judgment they may deem best, provided that such forms shall at all times
comply with the provisions of law.
(c) Authorize the issuance of shares of stock of the
corporation from time to time, upon such terms as may be lawful, in
consideration of money paid, labor done or services actually rendered, debts
or securities cancelled, tangible or intangible property actually received.
(d) Borrow money and incur indebtedness for the purpose of
the corporation, and cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations, or other evidences of debt and securities
therefor.
Section 2. NUMBER OF DIRECTORS. The authorized number of
directors shall be no fewer than three (3) nor more than seven (7). The
exact number of authorized directors shall be set by resolution of the Board
of Directors, within the limits specified above. The maximum or minimum
number of directors cannot be changed, nor can a fixed number be substituted
for the maximum and minimum numbers, except by a duly adopted amendment to
this bylaw duly approved in accordance with Article III, Section 2.
Section 3. QUALIFICATION, ELECTION AND TERM OF OFFICE OF
DIRECTORS. Directors shall be elected at each annual meeting of the
stockholders to hold office until the next annual meeting, but if any such
annual meeting is not held or the directors are not elected at any annual
meeting, the directors may be elected at any special meeting of
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stockholders held for that purpose, or at the next annual meeting of
stockholders held thereafter. Each director, including a director elected to
fill a vacancy, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified or until his
earlier resignation or removal or his office has been declared vacant in the
manner provided in these bylaws. Directors need not be stockholders.
Section 4. RESIGNATION AND REMOVAL OF DIRECTORS. Any director
may resign effective upon giving written notice to the chairman of the board,
the president, the secretary or the board of directors of the corporation,
unless the notice specifies a later time for the effectiveness of such
resignation, in which case such resignation shall be effective at the time
specified. Unless such resignation specifies otherwise, its acceptance by
the corporation shall not be necessary to make it effective. The board of
directors may declare vacant the office of a director who has been declared
of unsound mind by an order of a court or convicted of a felony. Any or all
of the directors may be removed without cause of such removal is approved by
the affirmative vote of a majority of the outstanding shares entitled to
vote. No reduction of the authorized number of directors shall have the
effect of removing any director before his term of office expires.
Section 5. VACANCIES. Vacancies in the board of directors, may
be filled by a majority of the remaining directors, though less than a
quorum, or by a sole remaining director. Each director so elected shall hold
office until the next annual meeting of the stockholders and until a
successor has been elected and qualified.
A vacancy in the board of directors exists as to any authorized
position of directors which is not then filled by a duly elected director,
whether caused by death, resignation, removal, increase in the authorized
number of directors or otherwise.
The stockholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors, but any such
election by written consent shall require the consent of a majority of the
outstanding shares entitled to vote. If the resignation of a director is
effective at a future time, the board of directors may elect a successor to
take office when the resignation becomes effective.
If after the filling of any vacancy by the directors, the directors
then in office who have been elected by the stockholders shall constitute
less than a majority of the directors then in office, any holder or holders
of an aggregate of five percent or more of the total number of shares at the
time outstanding having the right to vote for such directors may call a
special meeting of the stockholders to elect the entire board. The term of
office of any director not elected by the stockholders shall terminate upon
the election of a successor.
Section 6. PLACE OF MEETINGS. Regular meetings of the board of
directors shall be held at any place within or without the State of Nevada
that has been designated from time to time by resolution of the board. In
the absence of such designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board
shall be held at any place within or without the State of Nevada that has
been designated in the notice of the meeting or, if not stated in the notice
or there is not notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors
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participating in such meeting can hear one another, and all such directors
shall be deemed to be present in person at such meeting.
Section 7. ANNUAL MEETINGS. Immediately following each annual
meeting of stockholders, the board of directors shall hold a regular meeting
for the purpose of transaction of other business. Notice of this meeting
shall not be required.
Section 8. OTHER REGULAR MEETINGS. Other regular meetings of
the board of directors shall be held without call at such time as shall from
time to time be fixed by the board of directors. Such regular meetings may
be held without notice, provided the notice of any change in the time of any
such meetings shall be given to all of the directors. Notice of a change in
the determination of the time shall be given to each director in the same
manner as notice for special meetings of the board of directors.
Section 9. SPECIAL MEETINGS. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the
chairman of the board or the president or any vice president or the secretary
or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at his or her address
as it is shown upon the records of the corporation. In case such notice is
mailed, it shall be deposited in the United States mail at least four (4)
days prior to the time of the holding of the meeting. In case such notice is
delivered personally, or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight
(48) hours prior to the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated to either the director
or to a person at the office of the director who the person giving the notice
has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose of the meeting nor the place if the
meeting is to be held at the principal executive office of the corporation.
Section 10. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of business, except
to adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board of directors, subject to
the provisions of the Florida 1989 Business Corporation Act. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved
by at least a majority of the required quorum for such meeting.
Section 11. WAIVER OF NOTICE. The transactions of any meeting
of the board of directors, however called and noticed or wherever held, shall
be as valid as though had at a meeting duly held after regular call and
notice if a quorum be present and if, either before or after the meeting,
each of the directors not present signs a written waiver of notice, a consent
to holding the meeting or an approval of the minutes thereof. The waiver of
notice of consent need not specify the purpose of the meeting. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting. Notice of a meeting shall also be
deemed given to any director who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to such director.
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Section 12. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given, unless the meeting is
adjourned for more than twenty-four (24) hours, in which case notice of such
time and place shall be given prior to the time of the adjourned meeting, in
the manner specified in Section 8 of this Article III, to the directors who
were not present at the time of the adjournment.
Section 14. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the board of directors may be taken without a
meeting, if all members of the board shall individually or collectively
consent in writing to such action. Such action by written consent shall have
the same force and effect as a unanimous vote of the board of directors.
Such written consent or consents shall be filed with the minutes of the
proceedings of the board.
Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees may receive such compensation, if any, for their
services, and such reimbursement of expenses, as may be fixed or determined
by resolution of the board of directors. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF DIRECTORS. The board of directors
may, by resolution adopted by a majority of the authorized number of
directors, designate one or more committees, each consisting of one or more
directors, to serve at the pleasure of the board. The board may designate
one or more directors as alternate members of any committees, who may replace
any absent member at any meeting of the committee. Any such committee, to
the extent provided in the resolution of the board, shall have all the
authority of the board, except with regard to:
(a) the approval of any action which, under the Florida 1989
Business Corporation Act, also requires stockholders' approval or approval of
the outstanding shares;
(b) the filing of vacancies on the board of directors or in
any committees;
(c) the fixing of compensation of the directors for serving
on the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
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(f) a distribution to the stockholders of the corporation,
except at a rate or in a periodic amount or within a price range determined
by the board of directors; or
(g) the appointment of any other committees of the board of
directors or the members thereof.
Section 2. MEETINGS AND ACTION BY COMMITTEES. Meetings and
action of committees shall be governed by, and held and taken in accordance
with, the provisions of Article III, Sections 6 (place of meetings), 8
(regular meetings), 9 (special meetings and notice), 10 (quorum), 11 (waiver
of notice), 12 (adjournment), 13 (notice of adjournment) and 14 (action
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of
directors and its members, except that the time or regular meetings of
committees may be determined by resolutions of the board of directors and
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee.
The board of directors may adopt rules for the government of any committee
not inconsistent with the provisions of these bylaws. The committees shall
keep regular minutes of their proceedings and report the same to the board
when required.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be
a president, a secretary and a treasurer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or
more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article V. Any two or
more offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the
corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article V, shall be chosen by
the board of directors, and each shall serve at the pleasure of the board,
subject to the rights, if any, of an officer under any contract of
employment. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, a vice president, a
secretary and a treasurer, none of whom need be a member of the board. The
salaries of all officers and agents of the corporation shall be fixed by the
board of directors.
Section 3. SUBORDINATE OFFICERS, ETC. The board of directors
may appoint, and may empower the president to appoint, such other officers as
the business of the corporation may require, each of whom shall hold office
for such period, have such authority and perform such duties as are provided
in the bylaws or as the board of directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. The officers
of the corporation shall hold office until their successors are chosen and
qualify. Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed,
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either with or without cause, by the board of directors, at any regular or
special meeting thereof, or, except in case of an officer chosen by the board
of directors, by any officer upon whom such power or removal may be conferred
by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Any such resignation is without prejudice to
the rights, if any, of the corporation under any contract to which the
officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in these bylaws for regular
appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board,
if such an officer be elected, shall, if present, preside at all meetings of
the board of directors and exercise and perform such other powers and duties
as may be from time to time assigned to him by the board of directors or
prescribed by the bylaws. If there is no president, the chairman of the
board shall in addition be the chief executive officer of the corporation and
shall have the powers and duties prescribed in Section 7 of this Article V.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the board of directors to the chairman of the board,
if there be such an officer, the president shall be the chief executive
officer of the corporation and shall, subject to the control of the board of
directors, have general supervision, direction and control of the business
and the officers of the corporation. He shall preside at all meetings of the
stockholders and, in the absence of the chairman of the board, of if there be
none, at all meetings of the board of directors. He shall have the general
powers and duties of management usually vested in the office of president of
a corporation, and shall have such other powers and duties as may be
prescribed by the board of directors or the bylaws. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent
of the corporation.
Section 8. VICE PRESIDENTS. In the absence or disability of
the president, the vice presidents, if any, in order of their rank as fixed
by the board of directors or, if not ranked, a vice president designated by
the board of directors, shall perform all the duties of the president, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them respectively by the board of directors or the bylaws, the president
or the chairman of the board.
Section 9. SECRETARY. The secretary shall attend all meetings
of the board of directors and all meetings of the stockholders and shall
record, keep or cause to be kept, at the principal executive office or such
other place as the board of directors may order, a book of minutes of all
meetings of directors, committees of directors and stockholders, with the
time and place of holding, whether regular or special, and, if special, how
authorized, the notice
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thereof given, the names of those present at directors' and committee
meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all
stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of stockholders and of the board of directors required by the bylaws
or by law to be given, and he shall keep the seal of the corporation in safe
custody, as may be prescribed by the board of directors or by the bylaws.
Section 10. TREASURER. The treasurer shall keep and maintain,
or cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements,
gains, losses, capital, retained earnings and shares. The books of account
shall at all reasonable times be open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in the
name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation,
and shall have other powers and perform such other duties as may be
prescribed by the board of directors or the bylaws.
If required by the board of directors, the treasurer shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The
corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except
an action by or in the right of the corporation, by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including
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attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, has no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation may
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses, including amounts
paid in settlement and attorneys' fees, actually and reasonably incurred by
him in connection with the defense or settlement of the action or suit if he
acted in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation. Indemnification may
not be made for any claim, issue or matter as to which such a person has been
adjudged by a court of competent jurisdiction, after exhaustion of all
appeals therefrom, to be liable to the corporation or for amounts paid in
settlement to the corporation, unless and only to the extent that the court
in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director,
officer, employee or agent of the corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2, or in defense of any claim, issue or matter therein, he
must be indemnified by the corporation against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the defense.
Section 4. REQUIRED APPROVAL. Any indemnification under
Sections 1 and 2, unless ordered by a court or advanced pursuant to Section
5, must be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
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<PAGE>
(d) If a quorum consisting of directors who were not parties
to the act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 5. ADVANCE OF EXPENSES. The articles of incorporation,
the bylaws or an agreement made by the corporation may provide that the
expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
Section 6. OTHER RIGHTS. The indemnification and advancement
of expenses authorized in or ordered by a court pursuant to this Article VI:
(a) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to Section 2 or for
the advancement of expenses made pursuant to Section 5, may not be made to or
on behalf of any director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs, executors
and administrators of such a person.
Section 7. INSURANCE. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions of
this Article VI.
Section 8. RELIANCE ON PROVISIONS. Each person who shall act
as an authorized representative of the corporation shall be deemed to be
doing so in reliance upon the rights of indemnification provided by this
Article.
Section 9. SEVERABILITY. If any of the provisions of this
Article are held to be invalid or unenforceable, this Article shall be
construed as if it did not contain such invalid or unenforceable provision
and the remaining provisions of this Article shall remain in full force and
effect.
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<PAGE>
Section 10. RETROACTIVE EFFECT. To the extent permitted by
applicable law, the rights and powers granted pursuant to this Article VI
shall apply to acts and actions occurring or in progress prior to its
adoption by the board of directors.
ARTICLE VII
RECORDS AND BOOKS
Section 1. MAINTENANCE OF SHARE REGISTER. The corporation
shall keep at its principal executive office, or at the office of its
transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its stockholders, giving
the names and addresses of all stockholders and the number and class of
shares held by each stockholder.
Section 2. MAINTENANCE OF BYLAWS. The corporation shall keep
at its principal executive office, or if its principal executive office is
not in this State at its principal business office in this State, the
original or a copy of the bylaws as amended to date, which shall be open to
inspection by the stockholders at all reasonable times during office hours.
If the principal executive office of the corporation is outside this state
and the corporation has no principal business office in this state, the
secretary shall, upon the written request of any stockholder, furnish to such
stockholder a copy of the bylaws as amended to date.
Section 3. MAINTENANCE OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the stockholders
and the board of directors and any committee or committees of the board of
directors shall be kept at such place or places designated by the board of
directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form.
Every director shall have the absolute right at any reasonable time
to inspect and copy all books, records and documents of every kind and to
inspect the physical properties of this corporation and any subsidiary of
this corporation. Such inspection by a director may be made in person or by
agent or attorney and the right of inspection includes the right to copy and
make extracts. The foregoing rights of inspection shall extend to the
records of each subsidiary of the corporation.
Section 4. ANNUAL REPORT TO STOCKHOLDERS. Nothing herein shall
be interpreted as prohibiting the board of directors from issuing annual or
other periodic reports to the stockholders of the corporation as they deem
appropriate.
Section 5. FINANCIAL STATEMENTS. A copy of any annual
financial statement and any income statement of the corporation for each
quarterly period of each fiscal year, and any accompanying balance sheet of
the corporation as of the end of each such period, that has been prepared by
the corporation shall be kept on file in the principal executive office of
the corporation for twelve (12) months.
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Section 6. ANNUAL LIST OF DIRECTORS, OFFICERS AND RESIDENT
AGENT. The corporation shall file with the Secretary of State of the State of
Florida, on the prescribed form, an Annual Report.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE. For purposes of determining the
stockholders entitled to notice of any meeting or to vote or entitled to
receive payment of any dividend or other distribution or allotment of any
rights or entitled to exercise any rights in respect of any other lawful
action, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days prior to
the date of any such meeting nor more than sixty (60) days prior to any other
action, and in such case only stockholders of record on the date so fixed are
entitled to notice and to vote or to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date fixed as aforesaid, except as otherwise provided in the
Florida 1989 Business Corporation Act.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held.
(b) The record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, when no prior
action by the board has been taken, shall be the day on which the first
written consent is given.
(c) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board
adopts the resolution relating thereto, or the sixtieth (60th) day prior to
the date of such other action, whichever is later.
Section 2. CLOSING OF TRANSFER BOOKS. The directors may
prescribe a period not exceeding sixty (60) days prior to any meeting of the
stockholders during which no transfer of stock on the books of the
corporation may be made, or may fix a date not more than sixty (60) days
prior to the holding of any such meeting as the day as of which stockholders
entitled to notice of and to vote at such meeting shall be determined; and
only stockholders of record on such day shall be entitled to notice or to
vote at such meeting.
Section 3. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except
as otherwise provided by the laws of Florida.
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Section 4. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All
checks, drafts or other orders for payment of money, notes or other evidences
of indebtedness, issued in the name of or payable to the corporation, shall
be signed or endorsed by such person or persons and in such manner as, from
time to time, shall be determined by resolution of the board of directors.
Section 5. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The board of directors, except as in the bylaws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances; and, unless so authorized or ratified by the board of directors or
within the agency power or authority to bind the corporation by any contract
or engagement or to pledge its credit or to render it liable for any purpose
or to any amount.
Section 6. STOCK CERTIFICATES. A certificate or certificates
for shares of the capital stock of the corporation shall be issued to each
stockholder when any such shares are fully paid, and the board of directors
may authorize the issuance of certificates or shares as partly paid provided
that such certificates shall state the amount of the consideration to be paid
therefor and the amount paid thereon. All certificates shall be signed in
the name of the corporation by the president or vice president and by the
treasurer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the stockholder. When the corporation is authorized to issue shares
of more than one class or more than one series of any class, there shall be
set forth upon the face or back of the certificate, or the certificate shall
have a statement that the corporation will furnish to any stockholders upon
request and without charge, a full or summary statement of the designations,
preferences and relatives, participating, optional or other special rights of
the various classes of stock or series thereof and the qualifications,
limitations or restrictions of such rights, and, if the corporation shall be
authorized to issue only special stock, such certificate must set forth in
full or summarize the rights of the holders of such stock. Any or all of the
signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue.
No new certificate for shares shall be issued in place of any
certificate theretofore issued unless the latter is surrendered and cancelled
at the same time; provided, however, that a new certificate may be issued
without the surrender and cancellation of the old certificate if the
certificate thereto fore issued is alleged to have been lost, stolen or
destroyed. In case of any such allegedly lost, stolen or destroyed
certificate, the corporation may require the owner thereof or the legal
representative of such owner to give the corporation a bond (or other
adequate security) sufficient to indemnify it against any claim that may be
made against it (including any expense or liability) on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
Section 7. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the articles of incorporation, if
any, may be declared by the board of
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directors at any regular or special meeting pursuant to law. Dividends may
be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the articles of incorporation.
Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserves in the
manner in which it was created.
Section 8. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the board of directors.
Section 9. SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its incorporation and the
words "Corporate Seal, Florida."
Section 10. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
chairman of the board, the president, or any vice president, or any other
person authorized by resolution of the board of directors by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations,
foreign or domestic, standing in the name of the corporation. The authority
herein granted to said officers to vote or represent on behalf of the
corporation any and all shares held by the corporation in any other
corporation or corporations may be exercised by any such officer in person or
by any person authorized to do so by proxy duly executed by said officer.
Section 11. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction, and
definitions in the Florida 1989 Business Corporation Act shall govern the
construction of the bylaws. Without limiting the generality of the
foregoing, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and
a natural person.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY STOCKHOLDERS. New bylaws may be
adopted or these bylaws may be amended or repealed by the affirmative vote of
a majority of the outstanding shares entitled to vote, or by the written
assent of stockholders entitled to vote such shares, except as otherwise
provided by law or by the articles of incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of
the stockholders as provided in Section 1 of this Article, bylaws may be
adopted, amended or repealed by the board of directors.
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C E R T I F I C A T E O F S E C R E T A R Y
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting secretary of
americaBILIA.com, Inc., a Florida corporation; and
2. That the foregoing Amended and Restated Bylaws, comprising
nineteen (19) pages, constitute the Bylaws of said corporation as duly
adopted and approved by the sole director of said corporation by written
consent on September 14, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said corporation this 14th day of September, 1999.
/s/ Natasha Tennant
Natasha Tennant, Secretary
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<PAGE>
Exhibit 3.3
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
FIRST ZURICH INVESTMENTS, INC.
THE UNDERSIGNED, being the sole director of FIRST ZURICH INVESTMENTS,
INC. does hereby amend the Articles of Incorporation of the FIRST ZURICH
INVESTMENTS, INC., as follows:
SHARES
The capital stock of this corporation shall consist of 50,000,000 shares
of common stock, $.001 par value.
I hereby certificate that the following was adopted by a majority
unanimous vote of the shareholders and directors of the corporation on June
6, 1996 and that the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation on June 7, 1996.
/s/ nancy Schwartz
- ---------------------------------------------
Nancy Schwartz, President and Sole Director
Subscribed and Swon on this 6th day of June, 1996,
Before me:
- -------------------------
Notary Public
My Commission Expires:
<PAGE>
Exhibit 3.4
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
FIRST ZURICH INVESTMENTS, INC.
THE UNDERSIGNED, being the sole director of First Zurich Investments,
Inc. does hereby amend the Articles of Incorporation of the Company as
follows:
ARTICLE I
NAME
The name of this corporation shall be Terra International
Pharmaceuticals, Inc.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on November 11, 1996 and
that the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation on November 11, 1996.
/s/ Nancy Schwartz
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Nancy Schwartz, President and Sole Director
The foregoing instrument was acknowledged before me on November 11,
1996, by Nancy Schwartz, who is personally known to me, or who has produced
Driver License as identification.
My commission expires: ----------------------------
Notary Public
<PAGE>
Exhibit 3.5
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
TERRA INTERNATIONAL PHARMACEUTICALS, INC.
THE UNDERSIGNED, being a director of Terra Pharmaceuticals, Inc. hereby
amends the Articles of Incorporation of the Company as follows:
ARTICLE I
NAME
The name of the Company shall be americabilia.com, Inc.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on August 9, 1999 and the
number of votes cast was sufficient for approval
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation on August 31, 1999.
/s/ Carol Slavin
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Carol Slavin
President and Sole Director
The foregoing instrument was acknowledged before me on August 31, 1999,
by Carol Slavin, who is personally known to me, or who has produced personal
identification.
SEE ATTACHED FORM FOR ---------------------------
NOTARY CERTIFICATE Notary Public
<PAGE>
EXHIBIT 4.1
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF
FLORIDA
NUMBER SHARES
americabilia.com, Inc.
CUSIP NO. 023658 10 7
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of americabilia.com, Inc. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ ILLEGIBLE /s/ ILLEGIBLE
- ------------------ -----------------
SECRETARY PRESIDENT
[SEAL]
INTERWEST TRANSFER CO. INC. P.O. BOX 17136/SALT LAKE CITY, UTAH 84117
COUNTERSIGNED & REGISTERED /s/ ILLEGIBLE
------------------
COUNTERSIGNED Transfer Agent--Authorized Signature
<PAGE>
Exhibit 10.1
americabilia.com, Inc.
1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of the americabilia.com, Inc. 1999 Stock
Option Plan (the "Plan") is to strengthen americabilia.com, Inc., a Florida
corporation ("Corporation"), by providing to employees, officers, directors,
consultants and independent contractors of the Corporation or any of its
subsidiaries (including dealers, distributors, and other business entities or
persons providing services on behalf of the Corporation or any of its
subsidiaries) added incentive for high levels of performance and unusual
efforts to increase the earnings of the Corporation. The Plan seeks to
accomplish this purpose by enabling specified persons to purchase shares of
the common stock of the Corporation, thereby increasing their proprietary
interest in the Corporation's success and encouraging them to remain in the
employ or service of the Corporation.
2. CERTAIN DEFINITIONS. As used in this Plan, the following words and
phrases shall have the respective meanings set forth below, unless the
context clearly indicates a contrary meaning:
2.1 "BOARD OF DIRECTORS": The Board of Directors of the
Corporation.
2.2 "COMMITTEE": The Committee which shall administer the Plan
shall consist of all of the members of the Board of Directors.
2.3 "FAIR MARKET VALUE PER SHARE": The fair market value per
share of the Shares as determined by the Committee in good faith. The
Committee is authorized to make its determination as to the fair market value
per share of the Shares on the following basis: (i) if the Shares are traded
only otherwise than on a securities exchange and are not quoted on the
National Association of Securities Dealers' Automated Quotation System
("NASDAQ"), but are quoted in the "pink sheets" published by the National
Daily Quotation Bureau, the greater of (a) the average of the mean between
the average daily bid and average daily asked prices of the
1
<PAGE>
Shares during the thirty (30) day period preceding the date of grant of an
Option, as quoted in the "pink sheets" published by the National Daily
Quotation Bureau, or (b) the mean between the average daily bid and average
daily asked prices of the Shares on the date of grant, as published in such
"pink sheets;" (ii) if the Shares are traded only otherwise than on a
securities exchange and are quoted on NASDAQ, the greater of (a) the average
of the mean between the closing bid and closing asked prices of the Shares
during the thirty (30) day period preceding the date of grant of an Option,
as reported by the Wall Street Journal and (b) the mean between the closing
bid and closing asked prices of the Shares on the date of grant of an Option,
as reported by the Wall Street Journal; (iii) if the Shares are admitted to
trading on a securities exchange, the greater of (a) the average of the daily
closing prices of the Shares during the ten (10) trading days preceding the
date of grant of an Option, as quoted in the Wall Street Journal, or (b) the
daily closing price of the Shares on the date of grant of an Option, as
quoted in the Wall Street Journal; or (iv) if the Shares are traded only
otherwise than as described in (i), (ii) or (iii) above, or if the Shares are
not publicly traded, the value determined by the Committee in good faith
based upon the fair market value as determined by completely independent and
well qualified experts.
2.4 "OPTION": A stock option granted under the Plan.
2.5 "INCENTIVE STOCK OPTION": An Option intended to qualify for
treatment as an incentive stock option under Code Sections 421 and 422, and
designated as an Incentive Stock Option.
2.6 "NONQUALIFIED OPTION": An Option not qualifying as an
Incentive Stock Option.
2.7 "OPTIONEE": The holder of an Option.
2.8 "OPTION AGREEMENT": The document setting forth the terms and
conditions of each Option.
2.9 "SHARES": The shares of common stock of the Corporation.
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<PAGE>
2.10 "CODE": The Internal Revenue Code of 1986, as amended.
2.11 "SUBSIDIARY": Any corporation of which fifty percent (50%)
or more of total combined voting power of all classes of stock of such
corporation is owned by the Corporation or another Subsidiary (as so defined).
3. ADMINISTRATION OF PLAN.
3.1 IN GENERAL. This Plan shall be administered by the Committee.
Any action of the Committee with respect to administration of the Plan shall
be taken pursuant to (i) a majority vote at a meeting of the Committee (to be
documented by minutes), or (ii) the unanimous written consent of its members.
3.2 AUTHORITY. Subject to the express provisions of this Plan,
the Committee shall have the authority to: (i) construe and interpret the
Plan, decide all questions and settle all controversies and disputes which
may arise in connection with the Plan and to define the terms used therein;
(ii) prescribe, amend and rescind rules and regulations relating to
administration of the Plan; (iii) determine the purchase price of the Shares
covered by each Option and the method of payment of such price, individuals
to whom, and the time or times at which, Options shall be granted and
exercisable and the number of Shares covered by each Option; (iv) determine
the terms and provisions of the respective Option Agreements (which need not
be identical); (v) determine the duration and purposes of leaves of absence
which may be granted to participants without constituting a termination of
their employment for purposes of the Plan; and (vi) make all other
determinations necessary or advisable to the administration of the Plan.
Determinations of the Committee on matters referred to in this Section 3
shall be conclusive and binding on all parties howsoever concerned. With
respect to Incentive Stock Options, the Committee shall administer the Plan
in compliance with the provisions of Code Section 422 as the same may
hereafter be amended from time to time. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option.
4. ELIGIBILITY AND PARTICIPATION.
3
<PAGE>
4.1 IN GENERAL. Only officers, employees and directors who are
also employees of the Corporation or any Subsidiary shall be eligible to
receive grants of Incentive Stock Options. Officers, employees and directors
(whether or not they are also employees) of the Corporation or any
Subsidiary, as well as consultants, independent contractors or other service
providers of the Corporation or any Subsidiary shall be eligible to receive
grants of Nonqualified Options. Within the foregoing limits, the Committee,
from time to time, shall determine and designate persons to whom Options may
be granted. All such designations shall be made in the absolute discretion
of the Committee and shall not require the approval of the stockholders. In
determining (i) the number of Shares to be covered by each Option, (ii) the
purchase price for such Shares and the method of payment of such price
(subject to the other sections hereof), (iii) the individuals of the eligible
class to whom Options shall be granted, (iv) the terms and provisions of the
respective Option Agreements, and (v) the times at which such Options shall
be granted, the Committee shall take into account such factors as it shall
deem relevant in connection with accomplishing the purpose of the Plan as set
forth in Section 1. An individual who has been granted an Option may be
granted an additional Option or Options if the Committee shall so determine.
No Option shall be granted under the Plan after September 13, 2009, but
Options granted before such date may be exercisable after such date.
4.2 CERTAIN LIMITATIONS. In no event shall Incentive Stock
Options be granted to an Optionee such that the sum of (i) aggregate fair
market value (determined at the time the Incentive Stock Options are granted)
of the Shares subject to all Options granted under the Plan which are
exercisable for the first time during the same calendar year, plus (ii) the
aggregate fair market value (determined at the time the options are granted)
of all stock subject to all other incentive stock options granted to such
Optionee by the Corporation, its parent and Subsidiaries which are
exercisable for the first time during such calendar year, exceeds One
Hundred Thousand Dollars ($100,000). For purposes of the immediately
preceding sentence, fair market value shall be determined as of the date of
grant based on the Fair Market Value Per Share as determined pursuant to
Section 2.3.
5. AVAILABLE SHARES AND ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
4
<PAGE>
5.1 SHARES. Subject to adjustment as provided in Section 5.2
below, the total number of Shares to be subject to Options granted pursuant
to this Plan shall not exceed 600,000 Shares. Shares subject to the Plan may
be either authorized but unissued shares or shares that were once issued and
subsequently reacquired by the Corporation; the Committee shall be empowered
to take any appropriate action required to make Shares available for Options
granted under this Plan. If any Option is surrendered before exercise or
lapses without exercise in full or for any other reason ceases to be
exercisable, the Shares reserved therefore shall continue to be available
under the Plan.
5.2 ADJUSTMENTS. As used herein, the term "Adjustment Event"
means an event pursuant to which the outstanding Shares of the Corporation
are increased, decreased or changed into, or exchanged for a different number
or kind of shares or securities, without receipt of consideration by the
Corporation, through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split, stock dividend, stock
consolidation or otherwise. Upon the occurrence of an Adjustment Event, (i)
appropriate and proportionate adjustments shall be made to the number and
kind of shares and exercise price for the shares subject to the Options which
may thereafter be granted under this Plan, (ii) appropriate and proportionate
adjustments shall be made to the number and kind of and exercise price for
the shares subject to the then outstanding Options granted under this Plan,
and (iii) appropriate amendments to the Option Agreements shall be executed
by the Corporation and the Optionees if the Committee determines that such an
amendment is necessary or desirable to reflect such adjustments. If
determined by the Committee to be appropriate, in the event of an Adjustment
Event which involves the substitution of securities of a corporation other
than the Corporation, the Committee shall make arrangements for the
assumptions by such other corporation of any Options then or thereafter
outstanding under the Plan. Notwithstanding the foregoing, such adjustment
in an outstanding Option shall be made without change in the total exercise
price applicable to the unexercised portion of the Option, but with an
appropriate adjustment to the number of shares, kind of shares and exercise
price for each share subject to the Option. The determination by the
Committee as to what adjustments, amendments or arrangements shall be made
pursuant to this Section 5.2, and the extent thereof, shall be final and
conclusive. No fractional Shares shall be issued under the Plan on account
of any such adjustment or arrangement.
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6. TERMS AND CONDITIONS OF OPTIONS.
6.1 INTENDED TREATMENT AS INCENTIVE STOCK OPTIONS. Incentive
Stock Options granted pursuant to this Plan are intended to be "incentive
stock options" to which Code Sections 421 and 422 apply, and the Plan shall
be construed and administered to implement that intent. If all or any part
of an Incentive Stock Option shall not be an "incentive stock option" subject
to Sections 421 or 422 of the Code, such Option shall nevertheless be valid
and carried into effect. All Options granted under this Plan shall be
subject to the terms and conditions set forth in this Section 6 (except as
provided in Section 5.2) and to such other terms and conditions as the
Committee shall determine to be appropriate to accomplish the purpose of the
Plan as set forth in Section 1.
6.2 AMOUNT AND PAYMENT OF EXERCISE PRICE.
6.2.1 EXERCISE PRICE. The exercise price per Share for each
Share which the Optionee is entitled to purchase under a Nonqualified Option
shall be determined by the Committee but shall not be less than eighty-five
percent (85%) of the Fair Market Value Per Share on the date of the grant of
the Nonqualified Option. The exercise price per Share for each Share which
the Optionee is entitled to purchase under an Incentive Stock Option shall be
determined by the Committee but shall not be less than the Fair Market Value
Per Share on the date of the grant of the Incentive Stock Option; provided,
however, that the exercise price shall not be less than one hundred ten
percent (110%) of the Fair Market Value Per Share on the date of the grant of
the Incentive Stock Option in the case of an individual then owning (within
the meaning of Code Section 424(d)) more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or of its
parent or Subsidiaries.
6.2.2 PAYMENT OF EXERCISE PRICE. The consideration to be
paid for the Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Committee and may consist of
promissory notes, shares of the common stock of the Corporation or such other
consideration and method of payment for the Shares as may be permitted under
applicable state and federal laws. Shares acquired by a non-employee of the
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Company using Shares of the Common Stock of the Corporation as payment must
be held for six months prior to any disposition thereof.
6.3 EXERCISE OF OPTIONS.
6.3.1 Each Option granted under this Plan shall be
exercisable at such times and under such conditions as may be determined by
the Committee at the time of the grant of the Option and as shall be
permissible under the terms of the Plan; provided, however, in no event shall
an Option be exercisable after the expiration of ten (10) years from the date
it is granted, and in the case of an Optionee owning (within the meaning of
Code Section 424(d)), at the time an Incentive Stock Option is granted, more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of its parent or Subsidiaries, such Incentive
Stock Option shall not be exercisable later than five (5) years after the
date of grant.
6.3.2 An Optionee may purchase less than the total number of
Shares for which the Option is exercisable, provided that a partial exercise
of an Option may not be for less than One Hundred (100) Shares and shall not
include any fractional shares.
6.4 NONTRANSFERABILITY OF OPTIONS. All Options granted under this
Plan shall be nontransferable, either voluntarily or by operation of law,
otherwise than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by such Optionee.
6.5 EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Except as otherwise determined by the Committee in connection with the grant
of Nonqualified Options, the effect of termination of an Optionee's
employment or other relationship with the Corporation on such Optionee's
rights to acquire Shares pursuant to the Plan shall be as follows:
6.5.1 TERMINATION FOR OTHER THAN DISABILITY OR CAUSE OR
DEATH. If an Optionee ceases to be employed by, or ceases to have a
relationship with, the Corporation for any reason other than for disability,
cause, or death, such Optionee's Options shall expire not later than three
(3) months thereafter. During such three (3) month period and prior to the
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expiration of the Option by its terms, the Optionee may exercise any Option
granted to him, but only to the extent such Options were exercisable on the
date of termination of his employment or relationship and except as so
exercised, such Options shall expire at the end of such three (3) month
period unless such Options by their terms expire before such date. The
decision as to whether a termination for a reason other than disability,
cause or death has occurred shall be made by the Committee, whose decision
shall be final and conclusive, except that employment shall not be considered
terminated in the case of sick leave or other bona fide leave of absence
approved by the Corporation.
6.5.2 DISABILITY. If an Optionee ceases to be employed by,
or ceases to have a relationship with, the Corporation by reason of
disability (within the meaning of Code Section 22(e)(3)), such Optionee's
Options shall expire not later than one (1) year thereafter. During such one
(1) year period and prior to the expiration of the Option by its terms, the
Optionee may exercise any Option granted to him, but only to the extent such
Options were exercisable on the date the Optionee ceased to be employed by,
or ceased to have a relationship with, the Corporation by reason of
disability and except as so exercised, such Options shall expire at the end
of such one (1) year period unless such Options by their terms expire before
such date. The decision as to whether a termination by reason of disability
has occurred shall be made by the Committee, whose decision shall be final
and conclusive.
6.5.3 TERMINATION FOR CAUSE. If an Optionee's employment by,
or relationship with, the Corporation is terminated for cause, such
Optionee's Option shall expire immediately; provided, however, the Committee
may, in its sole discretion, within thirty (30) days of such termination,
waive the expiration of the Option by giving written notice of such waiver to
the Optionee at such Optionee's last known address. In the event of such
waiver, the Optionee may exercise the Option only to such extent, for such
time, and upon such terms and conditions as if such Optionee had ceased to be
employed by, or ceased to have a relationship with, the Corporation upon the
date of such termination for a reason other than disability, cause, or death.
Termination for cause shall include termination for malfeasance or gross
misfeasance in the performance of duties or conviction of illegal activity in
connection therewith or any
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conduct detrimental to the interests of the Corporation. The determination
of the Committee with respect to whether a termination for cause has occurred
shall be final and conclusive.
6.5.4 DEATH OF AN OPTIONEE. If the Optionee ceases to be
employed by, or ceases to have a relationship with, the Corporation by reason
of death, such Optionee's Options shall expire not later than three (3)
months thereafter. During such three (3) month period and prior to the
expiration of the Option by its terms, such Option may be exercised by his
executor or administrator or the person or persons to whom the Option is
transferred by will or the applicable laws of descent and distribution, but
only to the extent such Options were exercisable on the date Optionee ceased
to be employed by, or ceased to have a relationship with, the Corporation by
reason of death.
6.6 WITHHOLDING OF TAXES. As a condition to the exercise, in
whole or in part, of any Options the Board of Directors may in its sole
discretion require the Optionee to pay, in addition to the purchase price of
the Shares covered by the Option an amount equal to any Federal, state or
local taxes that may be required to be withheld in connection with the
exercise of such Option.
6.7 NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Plan or in any Option Agreement shall obligate the
Corporation to employ or have another relationship with any Optionee for any
period or interfere in any way with the right of the Corporation to reduce
such Optionee's compensation or to terminate the employment of or
relationship with any Optionee at any time.
6.8 TIME OF GRANTING OPTIONS. The time an Option is granted,
sometimes referred to herein as the date of grant, shall be the day the
Corporation executes the Option Agreement; provided, however, that if
appropriate resolutions of the Committee indicate that an Option is to be
granted as of and on some prior or future date, the time such Option is
granted shall be such prior or future date.
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6.9 PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall be entitled
to the privileges of stock ownership as to any Shares not actually issued and
delivered to such Optionee. No Shares shall be purchased upon the exercise
of any Option unless and until, in the opinion of the Corporation's counsel,
any then applicable requirements of any laws or governmental or regulatory
agencies having jurisdiction and of any exchanges upon which the stock of the
Corporation may be listed shall have been fully complied with.
6.10 SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any Options are
granted under the Plan and before any Shares are issued pursuant to Options.
Without limiting the generality of the foregoing, the Corporation may require
from the Optionee such investment representation or such agreement, if any,
as counsel for the Corporation may consider necessary or advisable in order
to comply with the Securities Act of 1933 as then in effect, and may require
that the Optionee agree that any sale of the Shares will be made only in
such manner as is permitted by the Committee. The Committee in its
discretion may cause the Shares underlying the Options to be registered under
the Securities Act of 1933, as amended, by the filing of a Form S-8
Registration Statement covering the Options and Shares underlying such
Options. Optionee shall take any action reasonably requested by the
Corporation in connection with registration or qualification of the Shares
under federal or state securities laws.
6.11 OPTION AGREEMENT. Each Incentive Stock Option and
Nonqualified Option granted under this Plan shall be evidenced by the
appropriate written Stock Option Agreement ("Option Agreement") executed by
the Corporation and the Optionee in a form substantially the same as the
appropriate form of Option Agreement attached as Exhibit "I" or "II" hereto
(and made a part hereof by this reference) and shall contain each of the
provisions and agreements specifically required to be contained therein
pursuant to this Section 6, and such other terms and conditions as are deemed
desirable by the Committee and are not inconsistent with the purpose of the
Plan as set forth in Section 1.
7. PLAN AMENDMENT AND TERMINATION.
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7.1 AUTHORITY OF COMMITTEE. The Committee may at any time
discontinue granting Options under the Plan or otherwise suspend, amend or
terminate the Plan and may, with the consent of an Optionee, make such
modification of the terms and conditions of such Optionee's Option as it
shall deem advisable; provided that, except as permitted under the provisions
of Section 5.2, the Committee shall have no authority to make any amendment
or modification to this Plan or any outstanding Option thereunder which
would: (i) increase the maximum number of shares which may be purchased
pursuant to Options granted under the Plan, either in the aggregate or by an
Optionee (except pursuant to Section 5.2); (ii) change the designation of the
class of the employees eligible to receive Incentive Stock Options; (iii)
extend the term of the Plan or the maximum Option period thereunder; (iv)
decrease the minimum Incentive Stock Option price or permit reductions of the
price at which shares may be purchased for Incentive Stock Options granted
under the Plan; or (v) cause Incentive Stock Options issued under the Plan to
fail to meet the requirements of incentive stock options under Code Section
422. An amendment or modification made pursuant to the provisions of this
Section 7 shall be deemed adopted as of the date of the action of the
Committee effecting such amendment or modification and shall be effective
immediately, unless otherwise provided therein, subject to approval thereof
(1) within twelve (12) months before or after the effective date by
stockholders of the Corporation holding not less than a majority vote of the
voting power of the Corporation voting in person or by proxy at a duly held
stockholders meeting when required to maintain or satisfy the requirements of
Code Section 422 with respect to Incentive Stock Options, and (2) by any
appropriate governmental agency. No Option may be granted during any
suspension or after termination of the Plan.
7.2 TEN (10) YEAR MAXIMUM TERM. Unless previously terminated by
the Committee, this Plan shall terminate on September 13, 1999, and no
Options shall be granted under the Plan thereafter.
7.3 EFFECT ON OUTSTANDING OPTIONS. Amendment, suspension or
termination of this Plan shall not, without the consent of the Optionee,
alter or impair any rights or obligations under any Option theretofore
granted.
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8. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of August
11, 1999, the date the Plan was adopted by the Board of Directors and the
affirmative vote of a majority of the issued and outstanding Shares of common
stock of the Corporation represented and voting at a duly held meeting at
which a quorum is present within twelve (12) months thereafter. The
Committee shall be authorized and empowered to make grants of Options
pursuant to this Plan prior to such approval of this Plan by the
stockholders; provided, however, in such event the Option grants shall be
made subject to the approval of this Plan and such Option grants by the
stockholders in accordance with the provisions of this Section 8.
9. MISCELLANEOUS PROVISIONS.
9.1 EXCULPATION AND INDEMNIFICATION. The Corporation shall
indemnify and hold harmless the Committee from and against any and all
liabilities, costs and expenses incurred by such persons as a result of any
act, or omission to act, in connection with the performance of such persons'
duties, responsibilities and obligations under the Plan, other than such
liabilities, costs and expenses as may result from the gross negligence, bad
faith, willful conduct and/or criminal acts of such persons.
9.2 GOVERNING LAW. The Plan shall be governed and construed in
accordance with the laws of the State of Florida and the Code.
9.3 COMPLIANCE WITH APPLICABLE LAWS. The inability of the
Corporation to obtain from any regulatory body having jurisdiction authority
deemed by the Corporation's counsel to be necessary to the lawful issuance
and sale of any Shares upon the exercise of an Option shall relieve the
Corporation of any liability in respect of the non-issuance or sale of such
Shares as to which such requisite authority shall not have been obtained.
americabilia.com, Inc., a Florida corporation
By:/s/ Carol Slavin
--------------------------------
Carol Slavin, President
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Exhibit 10.2
STOCK PURCHASE AGREEMENT
dated July 23, 1999
for the purchase of
all the outstanding shares
of capital stock of
VELTRE ENTERPRISES, INC.
between
americaBILIA.com
Buyer
and
KEITH VELTRE
Seller
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 23rd day of July, 1999 by and between americaBILIA.com ("Buyer")
and KEITH VELTRE ("Seller") with respect to all of the outstanding capital
stock of VELTRE ENTERPRISES, INC., a Nevada corporation (the "Company"),
owned by Seller.
R E C I T A L S
A. Seller owns of record and beneficially, one thousand (1,000)
shares of capital stock of the Company representing all of the issued and
outstanding shares of capital stock of the Company (the "Shares"); and
B. Buyer desires to acquire and Seller desires to sell the Shares
on the terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES.
(a) On the terms and subject to the conditions of this
Agreement, Seller agrees to sell, assign, transfer and convey the Shares to
Buyer and Buyer agrees to purchase the Shares from Seller.
(b) The purchase and sale of the Shares shall be consummated
on the Closing Date (as hereinafter defined).
1.2 THE PURCHASE PRICE. The aggregate consideration ("Purchase
Price") to be paid by Buyer to Seller for the Shares shall be (i) Four
Hundred Thousand Dollars ($400,000.00) payable Two Hundred Thousand
($200,000) in cash and Two Hundred Thousand Dollars ($200,000) by delivery of
a Promisory Note in the form of Exhibit "A" hereto and (ii) One Hundred
Thousand (100,000) shares of common stock of the Buyer ("Buyer Shares").
1.3 SECURITY. The Promissory Note shall be secured by the pledge
of all of the outstanding common stock of the Company pursuant to a Pledge
Agreement in the form of Exhibit "B" hereto.
1.4 CLOSING. Upon satisfaction of all conditions to the
obligations of the parties contained herein (other than such conditions as
shall have been waived in accordance with the terms hereof), Seller will
sell, transfer, assign and deliver the Shares to Buyer, and Buyer will
acquire the Shares from Seller, at the Closing. Buyer shall pay the Purchase
Price to Seller by delivery of a cashiers' check for the cash portion of the
purchase price and delivery of certificates representing the Buyer Shares.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce Buyer to enter into this Agreement, to purchase the
Shares and to consummate the other transactions contemplated herein, Seller
makes the representations and warranties set forth in this Article 2 which
representations and warranties will be true and correct on the date of this
Agreement and on the Closing Date. Any reference herein to the "knowledge"
of Seller or similar words to that effect means the actual knowledge of
Seller and without the performance of additional inquiries by Seller in
connection with the execution and delivery of this Agreement.
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as
now conducted. The Company is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure so to qualify would
have a Material Adverse Effect on its business properties, prospects or
financial condition. Schedule 2.1 contains a list of all jurisdictions in
which the Company is qualified or licensed to do business. The Company does
not own (and has not at any time during the five (5) years preceding the date
set forth above owned) of record or beneficially any outstanding equity
securities or other ownership interest in any corporation, partnership or
other legal entity. "Material Adverse Effect" with respect to the Company
means an individual or cumulative adverse change in or effect on the
business, customers, customer relations, operations, properties, working
capital condition (financial or otherwise), assets, properties or liabilities
of the Company which is reasonably expected to be materially adverse to the
business, properties, working capital condition (financial or otherwise),
assets, or liabilities of the Company or would prevent the Company or the
Seller from consummating the transactions contemplated hereby.
2.2 CAPITALIZATION OF THE COMPANY. The authorized capital stock of
the Company consists of one thousand (1,000) shares of common stock, no par
value, of which one thousand (1,000) shares are issued and outstanding. All
issued and outstanding shares of capital stock are duly authorized, validly
issued, fully paid and non-assessable and were not issued in violation of,
preemptive rights. There are no other shares of capital stock issued and
outstanding, no shares of treasury stock, and no outstanding securities
convertible into or exchangeable for any of the Company's capital stock or
options, warrants, calls or other rights, with respect to the issued capital
stock of the Company, or to purchase or subscribe to capital stock of the
Company or securities convertible into or exchangeable for capital stock of
the Company. Seller is not a party to any voting trust agreement or other
contract, agreement, arrangement, commitment, plan, or understanding
restricting or otherwise relating to the Shares. Upon the consummation of
the transactions contemplated hereby, the Buyer will acquire good and
marketable title to the Shares free and clear of all Encumbrances. For
purposes of this Agreement, "Encumbrances" means pledges, liens, security
interests, restrictions, claims or charges of any kind.
2.3 AUTHORIZATION. Seller has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby
(including, without limitation, the power to sell, transfer and convey the
Shares). No action, consent or approval by or filing with any person or
entity, including, without limitation, any federal, territorial, state,
municipal, foreign or other court or governmental or administrative body or
agency or any securities or commodities exchange is required in connection
with the execution, delivery and performance by Seller of this
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Agreement and consummation by Seller of the transactions contemplated herein.
Without limiting the generality of the foregoing, Seller has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement is the legal, valid and binding
obligation of Seller enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the rights of creditors generally.
2.4 NON-CONTRAVENTION. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated herein will: (i) violate or be in conflict with any provision
of the articles of incorporation or bylaws of the Company; (ii) be in
conflict with, or constitute a default, however defined (or an event which,
with the giving of due notice or lapse of time, or both, would constitute
such a default), under, or cause or permit the acceleration of the maturity
of, or give rise to any right of termination, cancellation, imposition of
fees or penalties under any debt, note, bond, lease, mortgage, indenture,
license, obligation, contract, commitment, franchise, permit, instrument or
other agreement or obligation to which the Company or Seller is a party or by
which the Company or Seller or any of the Company's or Seller's properties or
assets is or may be bound or result in the creation or imposition of any
Encumbrance upon any property or assets of the Company or Seller under any
debt, obligation, contract, agreement or commitment to which the Company or
Seller is a party or by which the Company or Seller or any of the Company's
or Seller's assets or properties are bound; or (iii) violate any Law of any
Authority. "Laws" means any statute, treaty, law, judgment, writ,
injunction, decision, decree, order, regulation, ordinance or other similar
authoritative matters. "Authority" or "Authorities" means any foreign,
federal, state or local governmental or quasi-governmental, administrative,
regulatory or judicial court, department, commission, agency, board, bureau,
instrumentality or other authority.
2.5 CONSENTS AND APPROVALS. With respect to the Company and
Seller, no Consent from any individual or entity, including, without
limitation, any Authority, is required in connection with the execution,
delivery or performance of this Agreement by the Company or Seller or the
consummation by the Company or Seller of the transactions contemplated
herein. "Consent" means any consent, approval, order or authorization of or
from, or registration, notification, declaration or filing with any
individual or entity, including, without limitation, any Authority.
2.6 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. Schedule 2.6
hereto will consist of true and complete copies of the unaudited balance
sheet and statements of operations, equity and cash flows of the Company at
December 31, 1998 and for the three calendar years then ended and the
unaudited balance sheet and statements of operations, equity and cash flows
of the Company at and for the six months ended June 30, 1999 ("Financial
Statements"). The Financial Statements are in accordance with the books and
records of the Company and have been prepared in good faith using accounting
principles which have been consistently applied for all periods.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. To Seller's knowledge,
the Company does not have any material liabilities or obligations of any
nature (absolute, accrued, contingent or otherwise) which were not reflected
or reserved against on the Financial Statements, except for liabilities and
obligations incurred since the date thereof in the ordinary course of the
Company's business and consistent with past practice and which, in any event,
in the aggregate, would not have a material adverse effect on the financial
condition or business of the Company. For
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purposes of this Section 2.7, the term "liabilities" shall include, without
limitation, any indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed,
asserted or unasserted, choate or inchoate, liquidated or unliquidated,
secured or unsecured.
2.8 ABSENCE OF CERTAIN ACTIONS. Since June 30, 1999, Seller has
not on behalf of Seller or the Company:
(a) Taken any action which might reasonably be expected to
have a material adverse effect on the business or financial condition of the
Company;
(b) Incurred any short-term or long-term liabilities or
obligations (absolute, accrued, contingent or otherwise) other than in the
ordinary course of business and consistent with past practice;
(c) Subjected any of the Company's property or assets (real,
personal or mixed, tangible or intangible) to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
(d) Canceled any debts or waived any claims or rights of
material value to the Company or agreed on behalf of Seller or the Company to
reduce or otherwise modify the payment terms of any account receivable owing
to the Company other than trade-outs of product for goods and services
provided to the Company;
(e) Sold, transferred or otherwise disposed of any of the
Company's properties or assets (real, personal or mixed, tangible or
intangible), except in the ordinary course of business and consistent with
past practice; or
(f) Agreed, whether in writing or otherwise, to take any
action described in this Section 2.8.
2.9 NO CLAIMS BASED ON SELLER'S ACTS. Except as otherwise
disclosed to Buyer in writing prior to the Closing, there is no threatened
charge or claim relating to or affecting: (i) the Company or Seller in his
capacity as a director, officer, employee or agent of the Company or (ii) the
assets, properties or business of the Company, nor, to Seller's knowledge, is
there any basis for any such charge or claim based on the affirmative acts of
Seller which could have an adverse effect on the assets, property or business
of the Company.
2.10 PERMITS. To Seller's knowledge, the Company has all franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted the lack of which could have a Materially
Adverse Effect on the business, properties, prospects or financial condition
of the Company.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS AND LAW. The Company is not
in violation or default in any material respect of any provision of its
Articles of Incorporation, Bylaws or, to Seller's knowledge, any material
contract to which it is a party or by which it is bound or, to Seller's
knowledge, of any federal or state judgment, order, writ, decree, statute,
rule or regulation applicable to the Company. To Seller's knowledge, the
Company has not previously failed and is not currently failing to comply with
any applicable Laws relating to the business of
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the Company or the operation of its assets, including, without limitation,
any import, export and immigration laws. There are no proceedings and no
proceedings are pending or to the Seller's knowledge threatened, nor has the
Company or Seller received any written notice regarding any violation of any
Law, including, without limitation, any requirement of any Authority.
2.12 LITIGATION. There are no actions, suits, proceedings or
investigations pending or currently threatened against the Company that might
result, either individually or in the aggregate, in any material adverse
change in the assets, business properties, prospects or financial condition
of the Company, or in any material change in the current equity ownership of
the Company.
2.13 ASSETS; NET WORTH.
(a) Except as set forth in the Financial Statements, the
Company has good and marketable title to all of its assets and properties
(including fee simple record title to all real property) whether or not
reflected in the most recent Balance Sheet or acquired after the date
thereof, free and clear of any Lien, other than Permitted Liens. "Liens"
means any mortgage, pledge, lien, security interest, conditional or
installment sales agreement, encumbrance, claim, easement, right of way,
tenancy, covenant, encroachment, restriction or charge of any kind or nature
(whether or not of record). "Permitted Liens" means (i) liens securing
specific Liabilities shown on the most recent Balance Sheet with respect to
which no breach, violation or default exists; (ii) mechanics', carriers',
workers' or other like liens arising in the ordinary course of business;
(iii) minor imperfections of title which do not individually or in the
aggregate, impair the continued use and operation of the real property assets
and fixtures to which they relate in the operation of the Company as
currently conducted; and (iv) liens for current taxes not yet due and payable.
(b) To Seller's knowledge, except as set forth in SCHEDULE
2.13(b), (i) all real properties owned and leased by the Company are free
from any structural defects, in good operating condition and repair, with no
material maintenance, repair or replacement having been deferred or
neglected, suitable for the intended use and free from other material
defects; (ii) each such real property and its present use conform in all
respects to all occupational, safety or health, zoning, planning,
subdivision, platting and similar Laws; and (iii) all public utilities
necessary for the use and operation of any facilities on the aforesaid real
properties are available for use or access at such properties and there is no
legal or physical impairment to free ingress or egress from any of such
facilities or real properties. Neither the Company nor Seller is a foreign
person, as the term foreign person is defined in Section 1445(f)(3) of the
Internal Revenue Code of 1986, as amended (the "Code").
(c) To Seller's knowledge, except as set forth in SCHEDULE
2.13(c), the machinery, equipment, vehicles and other personal property used
by the Company (whether or not reflected on the most recent Balance Sheet or
acquired after the date thereof) are in operating condition and fit for the
intended purposes thereof.
(d) To Seller's knowledge, the Company owns or leases all of
the assets and properties, and is a party to all licenses and other
agreements, presently used or necessary to carry on the business or
operations of the Company as presently conducted. At the Closing, the
Company will be leasing the real property on which the Company conducts its
business and a mat cutter from Seller or an affiliate of Seller. To the
knowledge of Seller, the Company does
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not own or lease any assets or properties that are not used in the ordinary
course of the Company's business. All leasehold interests relating to real
property, machinery, equipment, vehicles and other personal property are
valid and in full force and effect and enforceable in accordance with their
terms and there does not exist any violation, breach, or default thereof or
thereunder.
2.14 INVENTORIES. Except as set forth in Schedule 2.14, all
inventory as of the date of the most recent Balance Sheet is, and as of the
Closing Date will be, valued at the lower of cost or market. Except as set
forth in Schedule 2.14, all inventory of the Company, whether reflected in
the most recent Balance Sheet or otherwise, (i) consists of a quality and
quantity useable and salable in the ordinary course of business, and (ii) the
present quantities of all inventory of the Company are reasonable in the
present circumstances for the business as currently conducted or as proposed
to be conducted.
2.15 TRADE ACCOUNTS RECEIVABLE; NOTES RECEIVABLE AND PAYABLES.
(a) To Seller's knowledge, except as set forth in SCHEDULE
2.15, (i) the Company has good right, title and interest in and to all trade
accounts receivable and notes receivable reflected in the most recent Balance
Sheet and those acquired and generated since the date of the most recent
Balance Sheet (except for those paid since the date of the most recent
Balance Sheet) (the "Account Receivables"); (ii) none of such Account
Receivables is subject to any Lien, other than Permitted Liens; (iii) all of
the Account Receivables owing to the Company constitute valid and enforceable
claims arising from bona fide transactions in the ordinary course of
business, and there are no known claims, refusals to pay or other rights of
set-off against any thereof; (iv) no account or note debtor is delinquent in
payment by more than ninety (90) days; and (v) the reserve established by the
Company on the most recent Balance Sheet is adequate to cover any doubtful
accounts.
(b) All trade accounts payable and notes payable of the
Company reflected in the most recent Balance Sheet and those acquired and
generated since the date of the most recent Balance Sheet (except for those
paid since the date of the most recent Balance Sheet) (the "Accounts
Payables") arose from bona fide transactions in the ordinary course of the
Company's business and, except as set forth on SCHEDULE 2.15, no such
Accounts Payable is delinquent by more than thirty (30) days in its payment.
2.16. CONTRACTS; NO CONTRACT DEFAULTS.
(a) SCHEDULE 2.16 contains an accurate and complete list and
description of:
(i) All real property in which the Company has a
leasehold or other interest or which is used by the Company in
connection with the operation of its business, together with a
description of each lease, sublease, license, or any other
instrument under which the Company claims or holds such leasehold
or other interest or right to the use thereof or pursuant to which
the Company has assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.
(ii) All machinery, tools, equipment, motor vehicles,
rolling stock and other tangible personal property (other than
inventory and supplies), owned,
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leased or used by the Company, except for items having a value of
less than Five Thousand Dollars ($5,000) which do not, in the
aggregate, have a total value of more than Twenty-Five Thousand
Dollars ($25,000), setting forth with respect to all such listed
property a summary description of all leases, Liens, restrictions,
covenants and conditions relating thereto, identifying the parties
thereto, the rental or other payment terms, expiration date and
cancellation and renewal terms thereof.
(iii) All contracts, agreements and commitments, whether
or not fully performed, in respect of the issuance, sale or
transfer of the capital stock, bonds, options, warrants or other
securities of the Company or pursuant to which the Company has
acquired any substantial portion of its business or assets.
(iv) All contracts, agreements, commitments or
understandings that restrict the Company from carrying on its
businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity.
(v) All purchase or sale contracts or agreements that
call for aggregate purchases or sales in excess, over the course
of such contract or agreement, of Five Thousand Dollars ($5,000)
or which continues for a period of more than twelve (12) months
(including, without limitation, periods covered by any option to
renew or extend by either party) which is not terminable on sixty
(60) days' or less notice without cost or other Liability at or
any time after the Closing.
(vi) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or
retirement plans, employee stock options or stock purchase plans,
group life, health and accident insurance and other employee
benefit plans, agreements, arrangements or commitments, whether or
not legally binding, including, without limitation, holiday,
vacation and other bonus practices, to which the Company is a
party or is bound or which relate to the operation of the
Company's business.
(vii) All contracts, commitments, agreements and
arrangements with any "disqualified individual" (as defined in
Section 280G(c) of the Code) which contains any severance or
termination pay liabilities which would result in a disallowance
of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) under Section 280G of the Code.
(viii) The names and current annual salary rates of all
persons (including independent commission agents) whose annual
compensation (direct or indirect) from the Company is currently at
the rate of more than Fifty Thousand Dollars ($50,000) per annum
and showing separately for each such person the amounts paid or
payable as salary, bonus payments and any indirect compensation
for the year ended December 31, 1998 and to be paid for the year
ended December 31, 1999.
(ix) The names of all of the Company's directors and
officers.
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(x) All contracts, agreements and commitments, whether
written or oral, relating to the sale of the Company's products,
including, without limitation, any sales representative,
distributor or reseller agreements (the "Sales Agreements").
(xi) All contracts, agreements and commitments, whether
or not fully performed, relating to or arising out of the business
of the Company and not otherwise disclosed pursuant to this
Section 2.16.
To Seller's knowledge, all contracts, agreements, leases, licenses and
commitments (the "Assumed Contracts") required to be listed in SCHEDULE 2.16
(other than those which have been fully performed) are valid and binding,
enforceable in accordance with their respective terms, and are in full force
and effect and none of the Assumed Contracts contain a provision requiring
the consent of any party with respect to the consummation of the transaction
contemplated herein. To Seller's knowledge, the Company is not in breach,
violation or default, however defined, in the performance of any of its
obligations under any Assumed Contract, and no facts or circumstances exist
which, whether with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or thereof; and no
other parties thereto are in breach, violation or default, however defined,
thereunder or thereof, and no facts or circumstances exist which, whether
with the giving of due notice, lapse of time, or both, would constitute such
a breach, violation or default thereunder or thereof. All of the Sales
Agreements are terminable by the Company without notice and without Liability
of any kind. None of the Assumed Contracts is subject to renegotiation with
any government entity.
2.17 INTELLECTUAL PROPERTY RIGHTS. Schedule 2.17 contains a
listing of all (i) patents, patent applications (collectively the "Patents"),
(ii) copyrights, copyright applications (the "Copyrights"), (iii) tradenames,
registered and common law trademarks, trademark applications (the
"Trademarks"), (iv) service marks, service mark applications (the "Service
Marks"), and (v) computer programs and other computer software, trade
secrets, plans and specifications, inventions, know-how, technology,
proprietary processes and formulae (the "Trade Secrets") necessary or used in
connection with the conduct of the business of the Company (the Patents,
Copyrights, Trademarks, Service Marks and Trade Secrets are collectively
referred to as "Intellectual Property Rights"). To Seller's knowledge, the
Company owns, has the unrestricted right to use and has sole and exclusive
possession of and has good and valid title to, or sufficient license or other
rights to, all of the Intellectual Property Rights, free and clear of all
Liens. To Seller's knowledge, the use of all Intellectual Property Rights
necessary or required for the conduct of the business of the Company as
presently conducted and as proposed to be conducted does not and will not
infringe or violate any trade secrets, plans and specifications, patents,
copyrights, tradenames, registered and common law trademarks, trademark
applications, service marks, service mark applications, computer programs and
other computer software, inventions, know-how, technology, proprietary
processes and formulae or other intellectual property rights of any other
person or entity (the "Third Party Intellectual Property Rights"). The
Company is not using any confidential information or trade secrets of others.
All agreements relating to licenses of Intellectual Property Rights granted
by or to the Company are set forth in the Schedule 2.17 and, to Seller's
knowledge, are in good standing, valid and effective in accordance with their
respective terms and there is not, under any of such licenses, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default,
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or would constitute a basis for a claim of force majeure or other claim of
excusable delay or non-performance), in each case by the Company or by any
other party thereto.
2.18 ENVIRONMENTAL MATTERS. Neither the Company, any subsidiary or
former subsidiary of the Company, nor to Seller's knowledge, any previous
owner, tenant, occupant or user of any property owned or leased by or to the
Company or by or to any subsidiary or former subsidiary (the "Properties")
engaged in or permitted direct or indirect operations or activities upon, or
any use or occupancy of the Properties, or any portion thereof, for the
purpose of or in any way involving the handling, manufacture, treatment,
storage, use, generation, emission, release, discharge, refining, dumping or
disposal of any Environmentally Regulated Materials (whether legal or
illegal, accidental or intentional, direct or indirect) on, under, in or
about the Properties, or transported any Environmentally Regulated Materials
to, from or across the Properties, nor are any Environmentally Regulated
Materials presently constructed, deposited, stored, placed or otherwise
located on, under, in or about the Properties, nor have any Environmentally
Regulated Materials migrated from the Properties upon or beneath other
properties, nor have any Environmentally Regulated Materials migrated or
threatened to migrate from other properties upon, about or beneath the
Properties. To Seller's knowledge, the Properties do not contain any: (i)
underground or aboveground storage tanks; (ii) asbestos; (iii) equipment
using PCBs; (iv) underground injection wells; or (v) septic tanks in which
process waste water or any Environmentally Regulated Materials have been
disposed. For purposes of this Agreement, "Environmental and Occupational
Safety and Health Law" means any common law or duty, case law or other Law,
that (i) regulates, creates standards for or imposes liability or standards
of conduct concerning any element, compound, pollutant, contaminant, or toxic
or hazardous substance, material or waste, or any mixture thereof, or relates
in any way to emissions or releases into the environment or ambient
environmental conditions, or conduct affecting such matters, or (ii) is
designed to provide safe and healthful working conditions or reduce
occupational safety and health hazards. Such laws shall include, but not be
limited to, the National Environmental Policy Act, 42 U.S.C. Sections 4321
et seq., the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Sections 9601 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Sections 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Sections 1251 et seq., the Federal Clean
Air Act, 42 U.S.C. Sections 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. Sections 2601 et seq., the Emergency Planning and Community Right
to Know Act, 42 U.S.C. Section 11011, the Hazard Communication Act, 29
U.S.C. Sections 651 et seq., the Occupational Safety and Health Act, 29
U.S.C. Sections 651 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 136, and any case law interpretations,
amendments or restatements thereof, or similar enactments thereto, as is now
or at any time hereafter may be in effect, as well as their international,
state and local counterparts. For purposes of this Agreement,
"Environmentally Regulated Materials" means any element, compound, pollutant,
contaminant, substance, material or waste, or any mixture thereof,
designated, listed, referenced, regulated or identified pursuant to any
Environmental and Occupational Safety and Health Law.
2.19 EMPLOYEE BENEFIT PLANS. All employee benefit plans, as defined
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and any other employee benefit plan or fringe benefit arrangement of any
nature whatsoever established, maintained or contributed to by the Company
comply in all material respects with the requirements of all applicable laws,
including but not limited to ERISA, and no employee pension benefit plan (as
defined in ERISA) has incurred or assumed an "accumulated funding deficiency"
as defined by
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ERISA or has incurred or assumed any material liability (other than for the
payment of premiums) to the Pension Benefit Guaranty Corporation.
2.20 TAX RETURNS. The Company has filed all tax returns and reports
as required by law. These returns and reports are true and correct in all
material respects. The Company has paid all taxes and other assessments due
(other than those which are being contested in good faith by the Company).
The provision for taxes of the Company is adequate for taxes due or accrued
as of the date hereof.
2.21 BANK ACCOUNTS. Schedule 2.20 contains a list of the names of
all financial institutions, investment banking and brokerage houses, and
other similar institutions at which the Company maintains accounts, deposits,
safe deposit boxes of any nature, and the names of all persons authorized to
draw thereon or make withdrawals therefrom; and the names of all persons, if
any, holding tax or other powers of attorney from the Company and a summary
of the terms thereof.
2.22 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company,
Seller nor any director, officer, employee or agent of the Company, nor any
other person acting on behalf of the Company or Seller, has, directly or
indirectly, within the past five (5) years given or agreed to give any gift
or similar benefit to any customer, supplier, governmental employee or other
person who is or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (i) might subject the Company, Seller or Buyer to any
damage or penalty in any civil, criminal or governmental litigation
proceeding, (ii) if not given in the past, might have had an adverse effect
on the assets, business or operations of the Company as reflected in the
Financial Statements, or (iii) if not continued in the future, might
adversely affect the Company's assets, business, operations or prospects or
which might subject the Company, Seller or Buyer to suit or penalty in any
private or governmental litigation or proceeding.
2.23 ORDERS, COMMITMENTS AND RETURNS. All accepted and unfulfilled
orders for the sale of products with a customer and the performance of
services entered into by the Company and all outstanding contracts or
commitments for the purchase of supplies, materials and services were made in
bona fide transactions in the ordinary course of business. There are no
claims against the Company to return products by reason of alleged
over-shipments, defective products or otherwise, or of products in the hands
of customers, retailers or distributors under an understanding that such
products would be returnable.
2.24 PRODUCTS AND WARRANTIES. To Seller's knowledge, each product
manufactured, sold, leased, or delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and meets or exceeds the standards required by all Laws
now in effect and neither the Company nor Seller knows of any pending
legislation, ordinance or regulation, which if adopted, would have a Material
Adverse Effect upon the products sold by the Company. To Seller's knowledge,
the Company does not have any Liability (and there is no basis for any
present or any future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of it giving rise to any
Liability) for replacement or repair of any product manufactured, sold,
leased, or delivered by the Company or other damages in connection therewith.
No product manufactured, sold, leased, or delivered by the Company is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease.
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2.25 PRODUCT LIABILITY; AUTO LIABILITY AND WORKERS' COMPENSATION.
To Seller's knowledge, the Company does not have any Liability (and there is
no basis for any present or any future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to
any Liability) arising out of: (i) any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by the Company; or (ii) any injury to individuals
or property as a result of the ownership or lease by the Company of any
automobile. There are no open workers' compensation claims against the
Company.
2.26 CUSTOMER. The Company has not received any notice (written or
oral) within six months prior to the date of this Agreement that any customer
of the Company representing five (5%) of more of the revenues of the Company
during the prior twelve months will terminate its relationship with the
Company or, as the case may be, decrease its business with the Company, as a
result of the transactions contemplated by this Agreement or for any other
reason.
2.27 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to the Buyer, are complete and correct in all material respects.
Prior to the Closing, the minute books of the Company will contain accurate
and complete records of all formal meetings held of, and corporate action
taken by, the shareholders, the Board of Directors, and committees of the
Board of Directors of the Company. At the Closing, all of those books and
records will be in the possession of the Company.
2.28 BROKERS. Neither the Company, Seller nor any of its
directors, officers or employees has employed any broker, finder, or
financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to Seller for
any such fee or commission to be claimed by any person or entity.
2.29 ACCESS TO INFORMATION; FULL KNOWLEDGE. The Buyer Shares to be
received by Seller pursuant to this Agreement are being acquired for Seller's
own account, for investment purposes only and not with a view to any public
resale, public distribution or public offering thereof within the meaning of
the Securities Act of 1933, as amended (the "1933 Act") or any state
securities or Blue Sky law and such Buyer Shares will not be sold or
otherwise disposed of except in compliance with the 1933 Act, or in reliance
upon an exemption therefrom and in compliance with any state securities or
Blue Sky laws. The Buyer Shares have not been registered under the 1933 Act
or any state securities or Blue Sky law. Seller agrees that he, either alone
or with a representative, has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
prospective investment in the Buyer Shares and is able to bear the economic
consequences thereof. In making the decision to invest in the Buyer Shares,
Seller has relied upon Buyer's Confidential Private Placement Memorandum of
even date herewith, the representations and warranties of Buyer contained in
this Agreement and independent investigations made by him and, to the extent
believed by Seller to be appropriate, Seller's representatives, including
Seller's own professional, tax and other advisors. The Seller and his
representatives have been given a full opportunity to examine all documents
and to ask questions of, and to receive answers from Buyer and its
representatives concerning the terms of the transfer of the Shares to Buyer,
the Seller's investment in the Buyer Shares and the business of Buyer and
such other information as Seller desired in order to evaluate an investment
in the Buyer Shares, and all such questions have
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been answered to the full satisfaction of Seller. Seller has evaluated the
merits and risks of an investment in the Buyer Shares and has determined that
the Buyer Shares are a suitable investment for Seller in light of Seller's
overall financial condition and prospects. Buyer has not made any
representation, warranty, acknowledgment or covenant, in writing or
otherwise, to the Seller regarding the value of the Buyer Shares or the tax
consequences, if any, of the sale of the Shares or of the resale of the Buyer
Shares by Seller. Seller acknowledges that the Buyer Shares are personal to
Seller and may not be transferred or assigned. Seller has consented to the
placing of the following legend on the certificates for the Buyer Shares:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY BE SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A
REGISTRATION STATEMENT DESCRIBING SUCH PROPOSED
TRANSACTION IS IN EFFECT PURSUANT TO THE PROVISIONS
OF THAT ACT OR IF, IN THE OPINION OF COUNSEL, WHICH
OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE
ISSUER OF THESE SHARES AND ITS COUNSEL, AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THAT ACT IS
AVAILABLE.
2.30 ACCURACY OF INFORMATION. No representation or warranty by
Seller contained in this Agreement or in respect of the exhibits, schedules,
lists or other documents delivered to Buyer and referred to herein, and no
statement contained in any certificate furnished or to be furnished by or on
behalf of Seller pursuant hereto, or in connection with the transactions
contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such certificate is or will be
furnished, any untrue statement of a material fact, or omits, or will omit to
state as of the date such representation or warranty is made or such
certificate is or will be furnished, any material fact which is necessary to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 3
TITLE
In order to induce Buyer to enter into this Agreement, to purchase the
Shares and to consummate the transactions contemplated herein, Seller
represents and warrants to Buyer that he is the owner, beneficially and of
record, of the Shares and has good, valid and marketable title to the Shares
free and clear of all liens, encumbrances, security interests or claims,
whatsoever, with full power and authority to deliver the Shares to Buyer in
accordance with the terms of this Agreement. Seller will convey to Buyer at
the Closing good, valid and marketable title to the Shares free and clear of
all liens, encumbrances, security interests, restrictions or claims
whatsoever.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
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In order to induce Seller to enter into this Agreement and to sell the
Shares and consummate the other transactions contemplated herein, Buyer makes
the representations and warranties set forth in this Article 4.
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as
now conducted. Buyer is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
Material Adverse Effect on its business properties, prospects or financial
condition. Buyer is not qualified or licensed to do business in any other
state or jurisdiction. Buyer does not own (and has not at any time during
the five (5) years preceding the date set forth above owned) of record or
beneficially any outstanding equity securities or other ownership interest in
any corporation, partnership or other legal entity. "Material Adverse
Effect" with respect to Buyer means an individual or cumulative adverse
change in or effect on the business, customers, customer relations,
operations, properties, working capital condition (financial or otherwise),
assets, properties or liabilities of Buyer which is reasonably expected to be
materially adverse to the business, properties, working capital condition
(financial or otherwise), assets, or liabilities of Buyer or would prevent
Buyer from consummating the transactions contemplated hereby.
4.2 CAPITALIZATION OF BUYER. The authorized capital stock of Buyer
consists of ten million (10,000,000) shares of common stock, no par value, of
which five million (5,000,000) shares are issued and outstanding and an
additional one million (1,000,000) shares are reserved for issuance for sale
pursuant to Buyer's Confidential Private Placement Memorandum of even date
herewith. All issued and outstanding shares of capital stock are duly
authorized and validly issued and were not issued in violation of preemptive
rights. There are no other shares of capital stock issued and outstanding,
no shares of treasury stock, and no outstanding securities convertible into
or exchangeable for any of Buyer's capital stock or options, warrants, calls
or other rights, with respect to the issued capital stock of Buyer, or to
purchase or subscribe to capital stock of Buyer or securities convertible
into or exchangeable for capital stock of the Buyer. Upon the consummation
of the transactions contemplated hereby, the Buyer will acquire good and
marketable title to the Buyer Shares free and clear of all Encumbrances. For
purposes of this Agreement, "Encumbrances" means pledges, liens, security
interests, restrictions, claims or charges of any kind.
4.3 AUTHORIZATION. Buyer has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby
(including, without limitation, the power to issue the Buyer Shares). No
action, consent or approval by or filing with any person or entity,
including, without limitation, any federal, territorial, state, municipal,
foreign or other court or governmental or administrative body or agency or
any securities or commodities exchange is required in connection with the
execution, delivery and performance by Buyer of this Agreement and
consummation by Buyer of the transactions contemplated herein. Without
limiting the generality of the foregoing, Buyer has full power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. This Agreement is the legal, valid and binding obligation of Buyer
enforceable in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency or similar laws affecting the rights of
creditors generally.
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4.4 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. True and
complete copies of the unaudited balance sheet and statements of operations
of Buyer at June 30, 1999 and for the period from inception to June 30, 1999
are included in the Buyer's Confidential Private Placement Memorandum of even
date herewith ("Buyer Financial Statements"). The Buyer Financial Statements
are in accordance with the books and records of Buyer and have been prepared
in good faith.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. To Buyer's knowledge,
Buyer does not have any material liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) which were not reflected or
reserved against on the Buyer Financial Statements, except for liabilities
and obligations incurred since the date thereof in the ordinary course of
Buyer's business and consistent with past practice and which, in any event,
in the aggregate, would not have a material adverse effect on the financial
condition or business of Buyer. For purposes of this Section 4.5, the term
"liabilities" shall include, without limitation, any indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
4.6 NO CLAIMS BASED ON BUYER'S ACTS. Except as otherwise disclosed
to Seller in writing prior to the Closing, there is no threatened charge or
claim relating to or affecting the assets, properties or business of Buyer,
nor, to Buyer's knowledge, is there any basis for any such charge or claim
based on the affirmative acts of Buyer which could have an adverse effect on
the assets, property or business of Buyer.
4.7 PERMITS. To Buyer's knowledge, Buyer has all franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted the lack of which could have a Materially
Adverse Effect on the business, properties, prospects or financial condition
of Buyer.
4.8 COMPLIANCE WITH OTHER INSTRUMENTS AND LAW. Buyer is not in
violation or default in any material respect of any provision of its Articles
of Incorporation, Bylaws or, to Buyer's knowledge, any material contract to
which it is a party or by which it is bound or, to Buyer's knowledge, of any
federal or state judgment, order, writ, decree, statute, rule or regulation
applicable to Buyer. To Buyer's knowledge, Buyer has not previously failed
and is not currently failing to comply with any applicable Laws relating to
the business of Buyer or the operation of its assets, including, without
limitation, any import, export and immigration laws. There are no
proceedings and no proceedings are pending or to Buyer's knowledge
threatened, nor has Buyer received any written notice regarding any violation
of any Law, including, without limitation, any requirement of any Authority.
4.9 LITIGATION. There are no actions, suits, proceedings or
investigations pending or currently threatened against Buyer that might
result, either individually or in the aggregate, in any material adverse
change in the assets, business properties, prospects or financial condition
of Buyer, or in any material change in the current equity ownership of Buyer.
4.10 ASSETS; NET WORTH.
(a) Except as set forth in the Buyer Financial Statements,
Buyer has good and marketable title to all of its assets and properties
(including fee simple record title to all real
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property) whether or not reflected in the most recent Balance Sheet or
acquired after the date thereof, free and clear of any Lien, other than
Permitted Liens. "Liens" means any mortgage, pledge, lien, security
interest, conditional or installment sales agreement, encumbrance, claim,
easement, right of way, tenancy, covenant, encroachment, restriction or
charge of any kind or nature (whether or not of record). "Permitted Liens"
means (i) liens securing specific Liabilities shown on the most recent
Balance Sheet with respect to which no breach, violation or default exists;
(ii) mechanics', carriers', workers' or other like liens arising in the
ordinary course of business; (iii) minor imperfections of title which do not
individually or in the aggregate, impair the continued use and operation of
the real property assets and fixtures to which they relate in the operation
of Buyer as currently conducted; and (iv) liens for current taxes not yet due
and payable.
(b) To Buyer's knowledge, (i) all real properties owned and
leased by Buyer are free from any structural defects, in good operating
condition and repair, with no material maintenance, repair or replacement
having been deferred or neglected, suitable for the intended use and free
from other material defects; (ii) each such real property and its present use
conform in all respects to all occupational, safety or health, zoning,
planning, subdivision, platting and similar Laws; and (iii) all public
utilities necessary for the use and operation of any facilities on the
aforesaid real properties are available for use or access at such properties
and there is no legal or physical impairment to free ingress or egress from
any of such facilities or real properties. Buyer is not a foreign person, as
the term foreign person is defined in Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
(c) To Buyer's knowledge, the machinery, equipment, vehicles
and other personal property used by Buyer (whether or not reflected on the
most recent Balance Sheet or acquired after the date thereof) are in
operating condition and fit for the intended purposes thereof.
(d) To Buyer's knowledge, Buyer owns or leases all of the
assets and properties, and is a party to all licenses and other agreements,
presently used or necessary to carry on the business or operations of Buyer
as presently conducted. To the knowledge of Buyer, Buyer does not own or
lease any assets or properties that are not used in the ordinary course of
Buyer's business. All leasehold interests relating to real property,
machinery, equipment, vehicles and other personal property are valid and in
full force and effect and enforceable in accordance with their terms and
there does not exist any violation, breach, or default thereof or thereunder.
4.11 TRADE ACCOUNTS RECEIVABLE; NOTES RECEIVABLE AND PAYABLES.
(a) To Buyer's knowledge, (i) Buyer has good right, title
and interest in and to all trade accounts receivable and notes receivable
reflected in its most recent Balance Sheet and those acquired and generated
since the date of its most recent Balance Sheet (except for those paid since
the date of the most recent Balance Sheet) (the "Account Receivables"); (ii)
none of such Account Receivables is subject to any Lien, other than Permitted
Liens; (iii) all of the Account Receivables owing to Buyer constitute valid
and enforceable claims arising from bona fide transactions in the ordinary
course of business, and there are no known claims, refusals to pay or other
rights of set-off against any thereof; (iv) no account or note debtor is
delinquent in payment by more than ninety (90) days; and (v) the reserve
established by Buyer on its most recent Balance Sheet is adequate to cover
any doubtful accounts.
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(b) All trade accounts payable and notes payable of Buyer
reflected in the most recent Balance Sheet and those acquired and generated
since the date of the most recent Balance Sheet (except for those paid since
the date of the most recent Balance Sheet) (the "Accounts Payables") arose
from bona fide transactions in the ordinary course of Buyer's business and,
no such Accounts Payable is delinquent by more than thirty (30) days in its
payment.
4.12 CONTRACTS; NO CONTRACT DEFAULTS.
(a) SCHEDULE 4.12 contains an accurate and complete list and
description of:
(i) All real property in which Buyer has a leasehold or
other interest or which is used by Buyer in connection with the
operation of its business, together with a description of each
lease, sublease, license, or any other instrument under which
Buyer claims or holds such leasehold or other interest or right to
the use thereof or pursuant to which Buyer has assigned, sublet or
granted any rights therein, identifying the parties thereto, the
rental or other payment terms, expiration date and cancellation
and renewal terms thereof.
(ii) All machinery, tools, equipment, motor vehicles,
rolling stock and other tangible personal property (other than
inventory and supplies), owned, leased or used by Buyer, except
for items having a value of less than Five Thousand Dollars
($5,000) which do not, in the aggregate, have a total value of
more than Twenty-Five Thousand Dollars ($25,000), setting forth
with respect to all such listed property a summary description of
all leases, Liens, restrictions, covenants and conditions relating
thereto, identifying the parties thereto, the rental or other
payment terms, expiration date and cancellation and renewal terms
thereof.
(iii) All contracts, agreements and commitments, whether
or not fully performed, in respect of the issuance, sale or
transfer of the capital stock, bonds, options, warrants or other
securities of Buyer or pursuant to which Buyer has acquired any
substantial portion of its business or assets.
(iv) All contracts, agreements, commitments or
understandings that restrict Buyer from carrying on its businesses
or any part thereof anywhere in the world or from competing in any
line of business with any person or entity.
(v) All purchase or sale contracts or agreements that
call for aggregate purchases or sales in excess, over the course
of such contract or agreement, of Fifty Thousand Dollars ($50,000)
or which continues for a period of more than twelve (12) months
(including, without limitation, periods covered by any option to
renew or extend by either party) which is not terminable on sixty
(60) days' or less notice without cost or other Liability at or
any time after the Closing.
(vi) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or
retirement plans, employee stock options or stock purchase plans,
group life, health and accident insurance and other
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employee benefit plans, agreements, arrangements or commitments,
whether or not legally binding, including, without limitation,
holiday, vacation and other bonus practices, to which Buyer is a
party or is bound or which relate to the operation of Buyer's
business.
(vii) All contracts, commitments, agreements and
arrangements with any "disqualified individual" (as defined in
Section 280G(c) of the Code) which contains any severance or
termination pay liabilities which would result in a disallowance
of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) under Section 280G of the Code.
(viii) All contracts, agreements and commitments, whether
written or oral, relating to the sale of the Company's products,
including, without limitation, any sales representative,
distributor or reseller agreements (the "Buyer's Sales
Agreements").
(ix) All contracts, agreements and commitments, whether
or not fully performed, relating to or arising out of the business
of the Company and not otherwise disclosed pursuant to this
Section 4.12.
To Buyer's knowledge, all contracts, agreements, leases, licenses and
commitments (the "Buyer's Contracts") required to be listed in SCHEDULE 4.12
(other than those which have been fully performed) are valid and binding,
enforceable in accordance with their respective terms, and are in full force
and effect and none of the Buyer's Contracts contain a provision requiring
the consent of any party with respect to the consummation of the transaction
contemplated herein. To Buyer's knowledge, Buyer is not in breach, violation
or default, however defined, in the performance of any of its obligations
under any Buyer's Contract, and no facts or circumstances exist which,
whether with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or thereof; and no
other parties thereto are in breach, violation or default, however defined,
thereunder or thereof, and no facts or circumstances exist which, whether
with the giving of due notice, lapse of time, or both, would constitute such
a breach, violation or default thereunder or thereof. All of the Buyer's
Sales Agreements are terminable by the Company without notice and without
Liability of any kind. None of the Buyer's Contracts is subject to
renegotiation with any government entity.
4.13 INTELLECTUAL PROPERTY RIGHTS. Schedule 4.13 contains a
listing of all (i) patents, patent applications (collectively the "Patents"),
(ii) copyrights, copyright applications (the "Copyrights"), (iii) tradenames,
registered and common law trademarks, trademark applications (the
"Trademarks"), (iv) service marks, service mark applications (the "Service
Marks"), and (v) computer programs and other computer software, trade
secrets, plans and specifications, inventions, know-how, technology,
proprietary processes and formulae (the "Trade Secrets") necessary or used in
connection with the conduct of the business of Buyer (the Patents,
Copyrights, Trademarks, Service Marks and Trade Secrets are collectively
referred to as "Intellectual Property Rights"). To Buyer's knowledge, Buyer
owns, has the unrestricted right to use and has sole and exclusive possession
of and has good and valid title to, or sufficient license or other rights to,
all of the Intellectual Property Rights, free and clear of all Liens. To
Buyer's knowledge, the use of all Intellectual Property Rights necessary or
required for the conduct of the business of Buyer as presently conducted and
as proposed to be conducted does not and will not infringe or violate any
trade secrets, plans and specifications, patents, copyrights, tradenames,
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registered and common law trademarks, trademark applications, service marks,
service mark applications, computer programs and other computer software,
inventions, know-how, technology, proprietary processes and formulae or other
intellectual property rights of any other person or entity (the "Third Party
Intellectual Property Rights"). Buyer is not using any confidential
information or trade secrets of others. All agreements relating to licenses
of Intellectual Property Rights granted by or to Buyer are set forth in the
Schedule 4.13 and, to Buyer's knowledge, are in good standing, valid and
effective in accordance with their respective terms and there is not, under
any of such licenses, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default, or
would constitute a basis for a claim of force majeure or other claim of
excusable delay or non-performance), in each case by Buyer or by any other
party thereto.
4.14 ENVIRONMENTAL MATTERS. Neither Buyer, any subsidiary or former
subsidiary of Buyer, nor to Buyer's knowledge, any previous owner, tenant,
occupant or user of any property owned or leased by or to Buyer or by or to
any subsidiary or former subsidiary (the "Buyer Properties") engaged in or
permitted direct or indirect operations or activities upon, or any use or
occupancy of the Buyer Properties, or any portion thereof, for the purpose of
or in any way involving the handling, manufacture, treatment, storage, use,
generation, emission, release, discharge, refining, dumping or disposal of
any Environmentally Regulated Materials (whether legal or illegal, accidental
or intentional, direct or indirect) on, under, in or about the Buyer
Properties, or transported any Environmentally Regulated Materials to, from
or across the Buyer Properties, nor are any Environmentally Regulated
Materials presently constructed, deposited, stored, placed or otherwise
located on, under, in or about the Buyer Properties, nor have any
Environmentally Regulated Materials migrated from the Buyer Properties upon
or beneath other properties, nor have any Environmentally Regulated Materials
migrated or threatened to migrate from other properties upon, about or
beneath the Buyer Properties. To Buyer's knowledge, the Buyer Properties do
not contain any: (i) underground or aboveground storage tanks; (ii) asbestos;
(iii) equipment using PCBs; (iv) underground injection wells; or (v) septic
tanks in which process waste water or any Environmentally Regulated Materials
have been disposed.
4.15 EMPLOYEE BENEFIT PLANS. All employee benefit plans, as defined
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and any other employee benefit plan or fringe benefit arrangement of any
nature whatsoever established, maintained or contributed to by Buyer comply
in all material respects with the requirements of all applicable laws,
including but not limited to ERISA, and no employee pension benefit plan (as
defined in ERISA) has incurred or assumed an "accumulated funding deficiency"
as defined by ERISA or has incurred or assumed any material liability (other
than for the payment of premiums) to the Pension Benefit Guaranty Corporation.
4.16 TAX RETURNS. Buyer has filed all tax returns and reports as
required by law. These returns and reports are true and correct in all
material respects. Buyer has paid all taxes and other assessments due (other
than those which are being contested in good faith by Buyer). The provision
for taxes of Buyer is adequate for taxes due or accrued as of the date hereof.
4.17 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Buyer nor any
director, officer, employee or agent of Buyer, nor any other person acting on
behalf of Buyer, has, directly or indirectly, within the past five (5) years
given or agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other person who is or may be in a
position to help or hinder the business of Buyer (or assist Buyer in
connection with any actual or proposed
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transaction) which (i) might subject Buyer to any damage or penalty in any
civil, criminal or governmental litigation proceeding, (ii) if not given in
the past, might have had an adverse effect on the assets, business or
operations of Buyer as reflected in the Buyer Financial Statements, or (iii)
if not continued in the future, might adversely affect Buyer's assets,
business, operations or prospects or which might subject Buyer to suit or
penalty in any private or governmental litigation or proceeding.
4.18 BROKERS. Neither Buyer nor any of its directors, officers or
employees has employed any broker, finder, or financial advisor or incurred
any liability for any brokerage fee or commission, finder's fee or financial
advisory fee, in connection with the transactions contemplated hereby, nor is
there any basis known to Buyer for any such fee or commission to be claimed
by any person or entity.
4.19 ACCESS TO INFORMATION; FULL KNOWLEDGE. The Shares being
purchased by Buyer pursuant to this Agreement are being acquired for Buyer's
own account, for investment purposes only and not with a view to any public
resale, public distribution or public offering thereof within the meaning of
the Securities Act of 1933, as amended (the "1933 Act") or any state
securities or Blue Sky law and such Shares will not be sold or otherwise
disposed of except in compliance with the 1933 Act, or in reliance upon an
exemption therefrom and in compliance with any state securities or Blue Sky
laws. The Shares have not been registered under the 1933 Act or any state
securities or Blue Sky law. Buyer agrees that it has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the prospective investment in the Shares and is able
to bear the economic consequences thereof. In making the decision to invest
in the Shares, Buyer has relied upon the representations and warranties of
Seller contained in this Agreement and independent investigations made by it
and, to the extent believed by Buyer to be appropriate, Buyer's
representatives, including Buyer's professional, tax and other advisors.
Buyer and its representatives have been given a full opportunity to examine
all documents and to ask questions of, and to receive answers from Seller and
the Company and their respective representatives concerning the terms of the
purchase of the Shares by Buyer, the Buyer's investment in the Shares and the
business of the Company and such other information as Buyer desired in order
to evaluate an investment in the Shares, and all such questions have been
answered to the full satisfaction of Buyer. Buyer has consented to the
placing of the following legend on the certificates for the Shares:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY BE SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A
REGISTRATION STATEMENT DESCRIBING SUCH PROPOSED
TRANSACTION IS IN EFFECT PURSUANT TO THE PROVISIONS
OF THAT ACT OR IF, IN THE OPINION OF COUNSEL, WHICH
OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE
ISSUER OF THESE SHARES AND ITS COUNSEL, AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THAT ACT IS
AVAILABLE.
4.20 CONSENTS AND APPROVALS. No Consent is required by any person or
entity, including, without limitation, any Authority, in connection with the
execution, delivery and
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performance by Buyer of this Agreement, or the consummation of the
transactions contemplated herein, other than any Consent which, if not made
or obtained, will not, individually or in the aggregate, have a material
adverse effect on the business of Buyer taken as a whole.
4.21 ISSUANCE OF BUYER SHARES. The Buyer Shares to be issued to
Seller, upon delivery to Seller and receipt of the certificates for the
Shares by the Buyer, will be validly issued, fully paid and nonassessable.
Buyer has all requisite power and authority to issue, sell and deliver the
Buyer Shares in accordance with and upon the terms and conditions set forth
herein; and all corporate action required to be taken by Buyer for the due
and proper authorization, issuance, sale and delivery of the Buyer Shares has
been validly and sufficiently taken. Upon delivery of the Shares by Seller
to Buyer, the Buyer Shares will be, upon issuance and delivery thereof, duly
authorized, validly issued, fully paid and nonassessable.
4.22 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by Buyer contained in this Agreement, Buyer's Confidential Private
Placement Memorandum of even date herewith or in respect of the exhibits,
schedules, lists or other documents delivered to Seller and referred to
herein, and no statement contained in any certificate furnished or to be
furnished by or on behalf of Buyer pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain as of the date
such representation or warranty is made or such certificate is or will be
furnished, any untrue statement of a material fact, or omits, or will omit to
state as of the date such representation or warranty is made or such
certificate is or will be furnished, any material fact which is necessary to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
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ARTICLE 5
COVENANTS OF SELLER
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement, during the period from the date of this Agreement to the
Closing Date, Seller will cause the Company to conduct its business and
operations according to its ordinary and usual course of business, to
preserve substantially intact its business organizations and to preserve its
current relationships with customers, employees, suppliers and other persons
with which it has significant business relations. Without limiting the
generality of the foregoing, and, except as otherwise expressly provided in
this Agreement, prior to the Closing Date, without the prior written consent
of Buyer's President, Seller agrees that the Company will not:
(a) adopt any amendment to its articles of incorporation or
bylaws;
(b) issue, reissue, sell, deliver or pledge or authorize or
propose the issuance, reissuance, sale, delivery or pledge of shares of
capital stock of any class, or debt or other securities convertible into
capital stock of any class, or any rights, warrants or options to acquire
any convertible securities or capital stock;
(c) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities;
(d) (i) excluding regularly scheduled principal payments,
create, incur, assume or repay any long-term debt (including obligations
in respect of capital leases), or, except in the ordinary course of
business, create, incur, assume, repay, maintain or permit to exist any
short-term debt; or (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person;
(e) (i) increase in any manner the compensation of any of its
directors, officers or other employees; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
permitted by any existing plan, agreement or arrangement to any such
director, officer or employee, whether past or present; or (iii) commit
itself to any additional pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or to any employment agreement or
consulting agreement (arising out of prior employment) with or for the
benefit of any person, or, except to the extent required to comply with
applicable law, amend any of such plans or any of such agreements in
existence on the date of this Agreement;
(f) (i) sell, transfer, or otherwise dispose of, or agree to
sell, transfer, or otherwise dispose of, any properties or assets, real,
personal or mixed, (other than in the ordinary course of business) or
(ii) mortgage or encumber any properties or assets, real, personal or
mixed;
(g) permit any of its current insurance (or reinsurance)
policies to be canceled or terminated or any of the coverage thereunder
to lapse, unless simultaneously with such
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termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than coverage remaining under those
canceled, terminated or lapsed are in full force and effect;
(h) enter into other agreements, commitments or contracts not
in the ordinary course of business or in excess of current requirements;
(i) modify, amend or terminate any contract, waive, release,
relinquish or assign any contract or other right or claim;
(j) settle or compromise any suit, claim or dispute or
threatened suit, claim or dispute;
(k) except in the ordinary course of business, incur, assume,
suffer or become subject to, whether directly or by way of guarantee or
otherwise, any Liabilities which, individually or in the aggregate, are
material to the conduct of the businesses of the Company or hereof would
have a Material Adverse Effect on the Company;
(l) pay, discharge or satisfy any Liabilities of the Company
other than the payment, discharge or satisfaction in the ordinary course
of business and consistent with past practice;
(m) sell, transfer, or otherwise dispose of any of the
Company's properties or assets (real, personal or mixed, tangible or
intangible), other than inventory in the ordinary course of business and
consistent with past practice;
(n) permit or allow any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any Lien,
except for Liens for current taxes not yet due;
(o) write down the value of any Company inventory (including
write-downs by reason of shrinkage or mark-down) or write off as
uncollectible any of the Company's notes or accounts receivable, except
for immaterial write-downs and write-offs in the ordinary course of
business and consistent with past practice;
(p) dispose of, license, transfer or permit to lapse any rights
to the use of any of the Company's Intellectual Property Rights to any
individual, corporation, partnership, joint venture, association, trust,
unincorporated organization or, as applicable, any other entity other
than representatives of Buyer;
(q) make or enter into any commitment of the Company for
capital expenditures for additions to property, plant, equipment or
intangible capital assets;
(r) pay, lend or advance any amount to, or sell, transfer or
lease any of the Company's properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any agreement or arrangement
with, any of its officers, directors, shareholders or employees or any
affiliate or associate of any of its officers, directors, shareholders or
employees;
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(s) terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment identified in any
Schedule hereto, or take any action or omit to take any action which will
cause a breach, violation or default (however defined) under any such
items, except in the ordinary course of business and consistent with past
practice;
(t) acquire any of the business or assets of any other person
or entity except purchases in the ordinary course of business;
(u) change its accounting methods, principles or practices; or
(v) agree in writing or otherwise to take any of the foregoing
actions.
5.2 NO SOLICITATION OF ALTERNATE TRANSACTION. Seller will not, and
will ensure that the Company, its directors, officers and employees,
independent contractors, consultants, counsel, accountants, investment
advisors and other representatives and agents will not, directly or
indirectly, solicit or entertain offers from, negotiate with, provide any
nonpublic information to, enter into any agreement with, or in any manner
encourage, discuss, accept or consider any proposal of, any third party
relating to the acquisition of the Company, its assets or business, in whole
or in part, whether through a tender offer (including a self tender offer),
exchange offer, merger, consolidation, sale of substantial assets or of a
significant amount of assets, sale of securities, acquisition of the
Company's securities, liquidation, dissolution or similar transactions
involving the Company or any division of the Company (such proposals,
announcements or transactions being called herein "Acquisition Proposals").
The Company will promptly inform the Buyer of any inquiry (including the
terms thereof and the identity of the third party making such inquiry) which
it may receive in respect of an Acquisition Proposal and furnish to the Buyer
a copy of any such written inquiry.
5.3 FULL ACCESS TO BUYER. Throughout the period prior to Closing,
the Company and Seller will cause the Company to afford to Buyer and its
directors, officers, employees, counsel, accountants, investment advisors and
other authorized representatives and agents, access to the facilities,
properties, books and records of the Company in order that Buyer may have
full opportunity to make such investigations as it desires to make of the
affairs of the Company; provided, however, that Seller will not make
available the list of the Company's vendors prior to Closing. The Company
will furnish such additional financial and operating data and other
information in its possession as Buyer will, from time to time, reasonably
request, including, without limitation, access to the working papers of its
independent certified public accountants; provided, however, that any such
investigation shall not affect or otherwise diminish or obviate in any
respect any of the representations and warranties of Seller herein.
Notwithstanding anything to the contrary contained herein, Buyer is relying
only upon the representations and warranties set forth in Articles 2 and 3 of
this Agreement.
5.4 CONFIDENTIALITY OF INFORMATION. After the Closing, Seller will
hold in confidence all Intellectual Property Rights, trade secrets and other
confidential or proprietary documents and information related to the Company
or Buyer and will refrain from disclosing any such confidential information
to or for the benefit of any third party. This obligation of confidentiality
and non-use will not apply, or will cease to apply, to such information which
is in the public domain as of the Closing Date or subsequently comes into the
public domain through a source
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other than Seller, or which is required to be disclosed by order of any court
or governmental agency of competent jurisdiction.
5.5 FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms
and conditions herein provided, Seller will use his reasonable best efforts
to take or cause to be taken all actions and do or cause to be done all
things necessary, proper or advisable under applicable Laws to consummate and
make effective, as soon as reasonably practicable, the transactions
contemplated hereby, including, without limitation, obtaining all Consents of
any person or entity, whether private or governmental, required in connection
with the consummation of the transactions contemplated herein. In
furtherance, and not in limitation of the foregoing, it is the intent of the
parties to consummate the transactions contemplated herein at the earliest
practicable time, and they respectively agree to exert their reasonable best
efforts to that end, including, without limitation: (i) the removal or
satisfaction, if possible, of any objections to the validity or legality of
the transactions contemplated herein; and (ii) the satisfaction of the
conditions to consummation of the transactions contemplated hereby.
5.6 FURTHER ASSURANCES. Seller will, before, at and after Closing,
execute and deliver such instruments and take such other actions as Buyer,
may reasonably require in order to carry out the intent of this Agreement.
Without limiting the generality of the foregoing, at any time after the
Closing, at the request of Buyer and without further consideration, the
Company and Seller will execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation and take such action as
Buyer may reasonably deem necessary or desirable in order to more effectively
consummate the transactions contemplated hereby and to vest in the Buyer good
and marketable title to the Shares without further cost or expense to the
Buyer.
5.7 DISCLOSURE OF DEVELOPMENTS. During the period prior to
Closing, Seller will promptly notify Buyer of any event or development which,
if existing or occurring at or prior to the date of this Agreement, would
have been required to be set forth or described in Schedule to this Agreement
or which is necessary to correct any information in any Schedule to this
Agreement or in any representation and warranty of Seller which has been
rendered inaccurate by reason of such event or development. For purposes of
determining the accuracy as of the date hereof of the representations and
warranties of Seller contained in Article 2 hereof in order to determine the
fulfillment of the conditions set forth herein, the Schedules to this
Agreement will be deemed to exclude any information contained in any
supplement or amendment hereto delivered after the initial delivery of this
Agreement and the Schedules hereto.
ARTICLE 6
COVENANTS OF BUYER
6.1 CONDUCT OF BUSINESS OF BUYER. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, Buyer will conduct its business and operations according to its
ordinary and usual course of business, to preserve substantially intact its
business organizations and to preserve its current relationships with
customers, employees, suppliers and other persons with which it has
significant business relations and in accordance with Buyer's Confidential
Private Placement Memorandum of even date herewith.
6.2 FULL ACCESS TO THE COMPANY. Throughout the period prior to
Closing, Buyer will afford to Seller and his counsel, accountants, investment
advisors and other authorized
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representatives and agents, access to the facilities, properties, books and
records of Buyer in order that Seller may have full opportunity to make such
investigations as he desires to make of the affairs of Buyer; provided,
however, that Buyer will not make available the list of Buyer's vendors prior
to Closing. Buyer will furnish such additional financial and operating data
and other information in its possession as Seller will, from time to time,
reasonably request, including, without limitation, access to the working
papers of its independent certified public accountants; provided, however,
that any such investigation shall not affect or otherwise diminish or obviate
in any respect any of the representations and warranties of Buyer herein.
Notwithstanding anything to the contrary contained herein, Seller is relying
only upon the representations and warranties set forth in Article 4 of this
Agreement and Buyer's Confidential Private Placement Memoradum of even date
herewith.
6.3 CONFIDENTIALITY OF INFORMATION. Prior to the Closing, Buyer
will hold in confidence all Intellectual Property Rights, trade secrets and
other confidential or proprietary documents and information related to the
Company or Seller and will refrain from disclosing any such confidential
information to or for the benefit of any third party of using such
information for Buyer's benefit. This obligation of confidentiality and
non-use will not apply, or will cease to apply, to such information which is
in the public domain as of the Closing Date or subsequently comes into the
public domain through a source other than Buyer, or which is required to be
disclosed by order of any court or governmental agency of competent
jurisdiction.
6.4 FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms
and conditions herein provided, Buyer will use its reasonable best efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including, without limitation, obtaining all Consents of any person
or entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and
not in limitation of the foregoing, it is the intent of the parties to
consummate the transactions contemplated herein at the earliest practicable
time, and they respectively agree to exert their reasonable best efforts to
that end, including, without limitation: (i) the removal or satisfaction, if
possible, of any objections to the validity or legality of the transactions
contemplated herein; and (ii) the satisfaction of the conditions to
consummation of the transactions contemplated hereby.
6.5 FURTHER ASSURANCES. Buyer will, before, at and after Closing,
execute and deliver such instruments and take such other actions as Seller,
may reasonably require in order to carry out the intent of this Agreement.
Without limiting the generality of the foregoing, at any time after the
Closing, at the request of Seller and without further consideration, Buyer
will execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as Seller may reasonably
deem necessary or desirable in order to more effectively consummate the
transactions contemplated hereby and to vest in Seller good and marketable
title to the Buyer Shares without further cost or expense to Seller.
6.6 DISCLOSURE OF DEVELOPMENTS. During the period prior to
Closing, Buyer will promptly notify Seller of any event or development which,
if existing or occurring at or prior to the date of this Agreement, would
have been required to be set forth or described in Schedule to this Agreement
or which is necessary to correct any information in any Schedule to this
Agreement or in any representation and warranty of Buyer which has been
rendered inaccurate by reason of such event or development. For purposes of
determining the accuracy as of the date
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hereof of the representations and warranties of Buyer contained in Article 4
hereof in order to determine the fulfillment of the conditions set forth
herein, the Schedules to this Agreement will be deemed to exclude any
information contained in any supplement or amendment hereto delivered after
the initial delivery of this Agreement and the Schedules hereto.
ARTICLE 7
CONDITIONS TO THE CLOSING
7.1 BUYER'S CONDITIONS. Buyer's obligation to close the
transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions, any of which may be waived by Buyer in its sole
discretion, prior to the Closing:
(a) Buyer shall have raised $750,000 from sales of its
common stock pursuant to Buyer's Confidential Private Placement Memorandum of
even date herewith.
(b) The representations and warranties of Seller set forth
in Articles 2 and 3 of this Agreement shall be true and correct as of the
Closing.
(c) The net worth of the Company as of the date of the
Closing demonstrated to the reasonable satisfaction of Buyer shall be in
excess of $160,000.
(d) The Company shall have not received any notice (written
or oral) within six months prior to Closing that any customer of the Company
representing five (5%) of more of the revenues of the Company during the
prior twelve months will terminate its relationship with the Company or, as
the case may be, decrease its business with the Company, as a result of the
transactions contemplated by this Agreement or for any other reason.
(e) Buyer shall have obtained the assurance of Deloitte &
Touche LLP that Deloitte & Touche LLP is able to provide the Company with
audited financial statements including an unqualified opinion for the periods
from and after January 1, 1997.
7.2 SELLER'S CONDITIONS. Seller's obligation to close the
transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions, any of which may be waived by Seller in his sole
discretion, prior to the Closing:
(a) Buyer shall have raised $750,000 from sales of its
common stock pursuant to Buyer's Confidential Private Placement Memorandum of
even date herewith.
(b) The representations and warranties of Buyer set forth in
Article 4 of this Agreement shall be true and correct as of the Closing.
ARTICLE 8
THE CLOSING
8.1 OBLIGATIONS OF SELLER AND THE COMPANY. The Closing Date shall
be held on the date selected by Buyer which date shall be on or before
September 15, 1999. At the Closing, Seller and the Company shall deliver to
Buyer against delivery of each of the items required to be delivered by
Seller under Section 8.2:
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(a) Certificates representing the Shares to be purchased and
sold hereunder, registered in the name of Seller and duly and validly
endorsed by Seller for transfer to Buyer free of any encumbrance or
restriction whatsoever (other than restrictions on resale arising under
federal or state securities laws);
(b) Pledge Agreement duly executed by Seller;
(c) Duly executed resignations of all directors and officers
of the Company in form and content satisfactory to Buyer and its counsel, and
effective as of the Closing;
(d) Lease between the Company and Seller for the facility
located at 6430 Sunset Corporate Drive, Las Vegas, Nevada 89120 in the form
of Exhibit "C" attached hereto ("Lease") duly executed by Seller; and
(e) Equipment lease between the Company and Seller for the
mat cutting matchine in the form of Exhibit "D" attached hereto ("Equipment
Lease") duly executed by Seller; and
(f) Employment agreement between the Company and Seller in
the form attached hereto as Exhibit "E" ("Employment Agreement") duly
executed by Seller.
8.2 OBLIGATIONS OF BUYER. At the Closing, and against delivery of
each of the items required to be delivered by Seller under Section 8.1 above,
Buyer shall deliver to Seller.
(a) Cashiers' check representing the cash portion of the
Purchase Price; and
(b) Promissory Note duly executed by Buyer;
(c) Pledge Agreement duly executed by Buyer;
(d) Certificates representing the Buyer Shares;
(e) The Lease duly executed by the Company;
(f) The Equipment Lease duly executed by the Company;
(g) The Employment Agreement duly executed by the Company;
and
(h) Note purchase guaranty between Seller and Henry E.
Cartwright and Gary Moore in the form attached hereto as Exhibit "F".
ARTICLE 9
TERMINATION OF AGREEMENT
9.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be
terminated at any time upon the mutual agreement of Buyer and Seller.
9.2 OUTSIDE CLOSING DATE. In the event the Closing has not
occurred on or before September 15, 1999, this Agreement shall automatically
terminated without further action on the part of Buyer or Seller unless Buyer
and Seller have entered into a written amendment to this
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Agreement to extend the outside date on which the transactions contemplated
by this Agreement must close.
ARTICLE 10
INDEMNIFICATION
10.1 SELLER WARRANTY CLAIMS. From and after the Closing, Seller
shall indemnify and hold harmless Buyer, and its successors and assigns, and
their respective officers, directors, employees, stockholders, agents and
affiliates (collectively, "Buyer Indemnitees") against, and in respect of any
out of pocket loss, any and all damages, claims, losses, liabilities and
expenses, including, without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation of this
Agreement by Seller; or (ii) any breach of any of the representations,
warranties or covenants made in this Agreement by the Seller; or (iii) any
inaccuracy or misrepresentation in the Schedules hereto or in any certificate
or document delivered in accordance with the terms of Agreement by Seller
(collectively, "Seller Warranty Claims").
10.2 BUYER WARRANTY CLAIMS. From and after the Closing, Buyer shall
indemnify and hold harmless Seller, and his successors and assigns, and their
respective officers, directors,
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employees, stockholders, agents and affiliates (collectively, "Seller
Indemnitees") against, and in respect of any out of pocket loss, any and all
damages, claims, losses, liabilities and expenses, including, without
limitation, legal, accounting and other expenses, which may arise out of: (i)
any breach or violation of this Agreement by Buyer; or (ii) any breach of any
of the representations, warranties or covenants made in this Agreement by the
Buyer; or (iii) any inaccuracy or misrepresentation in the Schedules hereto
or in any certificate or document delivered in accordance with the terms of
Agreement by Buyer (collectively, "Buyer Warranty Claims").
ARTICLE 11
GENERAL PROVISIONS
The respective representations and warranties of the parties contained
herein or in any documents delivered at the Closing shall not be deemed
waived or otherwise affected by any investigation made by any party hereto.
ARTICLE 12
MISCELLANEOUS
12.1 EXPENSES. Buyer and Seller shall bear their own costs and
expenses in connection with the transactions contemplated by this Agreement.
12.2 NOTICES AND LEGAL PROCESS. All notices and other
communications and legal process shall be in writing and shall be personally
delivered, delivered by commercial delivery service, transmitted by
facsimile, or transmitted by registered or certified mail with return receipt
requested, as elected by the party giving such notice, addressed as follows:
(a) If to Buyer:
americaBILIA.com
9155 Las Vegas Boulevard South
Suite 242
Las Vegas, NV 89123
(b) If to Seller:
Keith Veltre
804 Blue Springs Drive
Henderson, NV 89015
Notices shall be deemed to have been given upon delivery, or, if delivered
outside of business hours, then on the next business day. "Business hours"
are defined for this purpose to be Monday through Friday, 8:00 a.m. to 5:00
p.m., excluding holidays. Any party hereto may change its address for
purposes hereof by notice to the other parties hereto.
12.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which together
shall constitute but one and the same instrument.
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12.4 ENTIRE AGREEMENT. Unless otherwise specifically agreed in
writing, this Agreement and the Schedules and Exhibits hereto represent the
entire understanding of the parties with reference to the transactions set
forth herein and supersede all prior representations, warranties,
understandings and agreements heretofore made by the parties, and neither
this Agreement nor any provisions hereof may be amended, waived, modified or
discharged except by an agreement in writing signed by the party against whom
the enforcement of any amendment, waiver, change or discharge is sought.
12.5 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
12.6 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Nevada without regard to principles of conflicts of laws. All actions or
proceedings with respect to this Agreement may be instituted in the courts of
the State of Nevada or the United States District Court in Nevada. Each
party consents to the exclusive jurisdiction of such courts.
12.7 ATTORNEYS' FEES. In any legal action brought to enforce the
provisions of this Agreement, including the breach thereof, the prevailing
party shall be entitled to recover all costs and expenses, including
reasonable attorneys' fees, incurred in enforcing or attempting to enforce
any of the terms, covenants or conditions, including costs incurred prior to
commencement of legal action, and all costs and expenses, including
reasonable attorneys' fees, incurred in any appeal from an action brought to
enforce any of the terms, covenants or conditions.
12.8 CAPTIONS. The captions of the various Sections and subsections
hereof and on the Exhibits and Schedules hereto are for convenience of
reference only, and shall not affect the meaning or construction of any
provision hereof or of any such Exhibits or Schedules.
12.9 SEVERABILITY; CONSTRUCTION. In the event any provision hereof
is determined to be invalid or unenforceable, the remaining provisions hereof
shall be deemed severable therefrom and shall remain in full force and
effect. Words and phrases defined in the plural shall also be used in the
singular and vice versa and be construed in the plural or singular as
appropriate and apparent in the context used.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"SELLER"
/s/ Keith Veltre
KEITH VELTRE
"BUYER"
americaBILIA.com,
a Nevada corporation
By:/s/ Gary Moore
Gary Moore, President
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SPOUSE'S CONCURRENCE
The undersigned, Tricia Veltre, does hereby certify that she is the
wife of Keith Veltre; that she has carefully read the foregoing Stock
Purchase Agreement and understands its meaning and effect; that she is aware
that under the provisions of the foregoing instrument her spouse agrees to
sell the outstanding common stock of Veltre Enterprises, Inc. ("Shares") in
which she may have an interest; that she fully agrees to be bound by the
terms of the foregoing Stock Purchase Agreement to the extent of any interest
that she may now or hereafter have in any Shares, without determining at this
time whether any such interest exists and the extent thereof; and further
that she agrees that her spouse may join in any future amendments or
modifications of the foregoing Stock Purchase Agreement without any further
signature, acknowledgment, agreement, concurrence or consent on her part.
TRICIA VELTRE
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Exhibit "A"
$200,000.00 ____________, 1999
SECURED PROMISSORY NOTE
1. OBLIGATION. For value received, americaBILIA.com, a Nevada
corporation ("Maker") promises to pay to KEITH VELTRE ("Holder") the
Principal Amount and Interest (both as defined below) in the manner and upon
the terms and conditions set forth herein (the "Obligation").
2. AMOUNT AND PAYMENT. The principal amount ("Principal Amount")
of this Note is Two Hundred Thousand Dollars ($200,000.00). This Note shall
bear interest on the unpaid Principal Amount at the rate of eight percent
(8%) per annum ("Interest"). The entire Principal Amount and Interest shall
be all due and payable on the earlier to occur of (i) March 31, 2000 of (ii)
Maker's completion of a public offering of its securities raising gross
proceeds in excess of $2,000,000. In the event that the Principal and
Interest shall not be paid when due, the Note shall thereafter bear interest
at the rate of thirteen percent (13%) per annum.
3. MANNER AND PLACE OF PAYMENT. Payments of the Principal Amount
and Interest shall be made in lawful money of the United States of America.
Principal and Interest are payable at 804 Blue Springs Drive, Henderson,
Nevada 89015 or at such place as Holder may designate in writing.
4. PREPAYMENT. Maker shall have the right, at its option, to
prepay this Note, in part or in full, at any time and from time to time,
prior to maturity, without penalty, bonus or charge.
5. EVENTS OF DEFAULT. The following shall each constitute an
"Event of Default" under this Note: (i) default in the payment when due of
Principal Amount and Interest, (ii) default in the payment of any amount due
Maker to Keith Veltre and (iii) any of the following events of bankruptcy or
insolvency: (A) the Maker shall file a voluntary bankruptcy or reorganization
petition under the provisions of the Federal Bankruptcy Act, any other
bankruptcy or insolvency law or any other similar statute applicable to the
Maker ("Bankruptcy Laws"), (B) the Maker shall consent to the filing of any
bankruptcy or reorganization petition against it under any Bankruptcy Law,
(C) the Maker shall make an assignment for the benefit of his creditors, (D)
the Maker shall admit in writing its inability to pay its debts generally as
they become due, (E) the Maker shall consent to the appointment of a
receiver, trustee, or by the order of a court of competent jurisdiction, a
receiver, liquidator or trustee of the Maker or of any substantial part of
its property shall not have been discharged within a period of sixty (60)
days, (F) by decree of such a court, the Maker shall be adjudicated bankrupt
or insolvent or any substantial part of the property of the Maker shall have
been sequestered and such degree shall have continued undischarged and
unstayed for a period of sixty (60) days after the entry thereof, or (G) an
involuntary bankruptcy reorganization petition pursuant to any Bankruptcy Law
shall be filed against the Maker (and, in the case of any such petition filed
pursuant to any provision of a statute which requires the approval of such
petition by a court, shall be approved by such a court) and shall not be
dismissed within sixty (60) days after such filing.
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<PAGE>
6. ACCELERATION UPON EVENT OF DEFAULT. Upon the occurrence of an
Event of Default specified in Section 5 above, all Principal and Interest of
this Note shall, at the option of Holder, become immediately due and payable,
without further presentment, notice or demand for payment.
7. SECURITY. This Note is secured by a Pledge Agreement of even
date herewith between Maker and Holder.
8. EXPENSES OF ENFORCEMENT. Maker agrees to pay all reasonable
costs and expenses, including, without limitation, reasonable attorneys'
fees, as a court of competent jurisdiction shall award, which Holder shall
incur in connection with any legal action or legal proceeding commenced for
the collection of this Note or the exercise, preservation or enforcement of
Holder's rights and remedies thereunder.
9. CUMULATIVE RIGHTS AND REMEDIES. All rights and remedies of
Holder under this Note shall be cumulative and not alternative and shall be
in addition to all rights and remedies available to Holder under applicable
law.
10. GOVERNING LAW. This Note shall be governed by and interpreted
and construed in accordance with the laws of the State of Nevada without
regard to the principals of conflicts of laws. Further, the exclusive forum
for adjudication of any disputes hereunder shall be the state or federal
courts located in Clark County, Nevada.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered at Las Vegas, Nevada as of the day and year first above written.
americaBILIA.com, a Nevada corporation
By:____________________________________
Gary Moore, President
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Exhibit "B"
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") is entered into as of
____________, 1999, by and between KEITH VELTRE, a Nevada corporation
("Secured Party") and americaBILIA.com, a Nevada corporation ("Pledgor").
R E C I T A L S
A. Pledgor has requested that Secured Party loan Pledgor the sum
of $200,000.00 to be evidenced by a Secured Promissory Note of even date
herewith ("Note");
B. As a condition to the loan by Secured Party to Pledgor, Pledgor
has agreed to enter into this Agreement to secure payment of the Note.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged and confessed, the parties do hereby agree as follows:
A G R E E M E N T
1. GRANT OF SECURITY AND PLEDGE. In order to further secure
Pledgor's full and complete performance of all obligations under the Note,
Pledgor hereby pledges, collaterally assigns and grants to Secured Party a
security interest (the "Security Interest") in all of Pledgor's right, title
and interest in and to one thousand (1,000) shares of voting common stock of
Veltre Enterprises, Inc., a Nevada corporation, standing in Pledgor's name
and represented by certificate number _________, together with any additional
securities received with respect thereto (all collectively, the "Pledged
Shares"), and all rights and privileges pertaining thereto as well as all
products, proceeds, profits, interest, dividends, increases and distributions
received therefor, including distributions or payments in partial or complete
liquidation or redemption as the result of a reclassification, readjustment
or reorganization or change in the capital structure of any issuer thereof or
any other profit at any time or from time to time receivable or otherwise
distributed or delivered to Pledgor in connection therewith and all rights
and privileges pertaining thereto, together with all proceeds and
substitutions, including all securities, subscription rights, dividends
(including, without limitation, cash dividends, stock dividends, dividends
paid in stock, liquidated dividends, dividends paid in other property) or
other property or benefits to which Pledgor are entitled to receive on
account of any of the foregoing Pledged Shares, indirectly or directly.
2. PERFECTION OF SECURITY INTEREST. Concurrently with the
execution of this Agreement, Pledgor shall deliver to and deposit with
Secured Party the certificates representing or evidencing the Pledged Shares
along with appropriate stock power(s), duly executed in blank. Pledgor shall,
from time to time, promptly execute and deliver to Secured Party all such
stock powers, assignments, certificates, supplements to this Agreement and
other supplemental writings, financing statements and other items and do all
other acts and things as Secured Party
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<PAGE>
may reasonably request in order to more fully evidence and perfect the
security interest of Secured Party in the Pledged Shares.
3. INDEBTEDNESS. The Security Interest is hereby created to secure
the payment and performance of all of the loans, principal, interest, fees,
expenses, obligations and liabilities of Pledgor to Secured Party arising
pursuant to the Note, and all amendments, supplements and modifications
thereto (the "Indebtedness").
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND FURTHER AGREEMENTS.
Pledgor makes the following representations, warranties covenants and further
agreements.
4.1 TITLE. Except for the Security Interest, Pledgor has good
and indefeasible title to all of the Pledged Shares free from any lien,
security interest, encumbrance or claim and Pledgor will, during the term of
this Agreement, at Pledgor's cost, keep the Pledged Shares free from other
liens, security interests, encumbrances or claims, and defend any action
which may affect the Security Interest or Pledgor's title to the Pledged
Shares.
4.2 STATUS. This Agreement, the certificates evidencing the
Pledged Shares, and any instrument, document or writing which is, or shall
be, included in the Pledged Shares are, and shall be, genuine and legally
enforceable and free from any setoff, counterclaim or defense. Pledgor's
transfer of the certificates evidencing the Pledged Shares is effective and
rightful, no such certificate has been (and no such certificate hereafter
transferred to or delivered to the possession of Secured Party will be)
altered and Pledgor knows of no facts which might impair the validity of any
such certificate now or hereafter transferred to Secured Party. No dispute,
right of setoff, counterclaim or defense exists with respect to any part of
the Pledged Shares.
4.3 PERFECTION. So long as the Indebtedness, or any portion
thereof, shall remain outstanding and unpaid or unperformed, the Pledged
Shares shall be held by and in the custody of Secured Party, and neither
Pledgor nor any other person shall have the right to procure the release of
any of the Pledged Shares from the Security Interest except upon and in
compliance with the terms and conditions herein set forth. All stock
certificates, voting trust shares and certificates and other instruments
which may constitute at any time or from time to time a part of the Pledged
Shares shall be endorsed in blank for transfer or be accompanied by proper
instruments of assignment and transfer properly endorsed in blank with
signatures medallion guaranteed by a bank or member firm of the New York
Stock Exchange upon delivery to Secured Party.
4.4 NO ASSIGNMENT. Pledgor hereby covenants that so long as
the Indebtedness remains unpaid, Pledgor will not sell or otherwise dispose
of all or any part of the Pledged Shares without the prior consent of Secured
Party.
4.5 MAINTENANCE. So long as no default shall exist hereunder,
all securities pledged hereunder shall remain registered in the name of, and
any voting rights of such securities may be exercised by, Pledgor; provided,
however, that Pledgor will not exercise, or cause to be exercised any such
voting rights, without the prior written consent of Secured Party, if the
direct or indirect effect of such vote results in a default hereunder.
Pledgor hereby irrevocably appoints Secured Party to be his attorney to
transfer the Pledged Shares on the books of any issuer of the Pledged Shares
into the name of Secured Party. Pledgor will pay promptly when due all taxes
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and assessments on the Pledged Shares. Secured Party may, at his option,
discharge such taxes and assessments, and all sums so expended shall be part
of the Indebtedness.
4.6 ADDITIONAL PROPERTY. If, from time to time, Pledgor shall
be entitled to receive any properties described in Section 1 hereof not
already received by Pledgor and delivered to Secured Party upon execution of
this Agreement, in any such case, said property shall be received by Pledgor
in trust for Secured Party, shall not be commingled with any other funds or
properties of Pledgor, shall be deemed to be pledged to Secured Party as
additional security for the payment and performance of the Indebtedness, and
shall be subject to the terms hereof. Immediately upon receipt thereof,
Pledgor shall deliver to and deposit with Secured Party the property or any
certificates or other written documents evidencing and representing all such
property. In the event that during the term of this Agreement, any share
dividend, reclassification, readjustment or other change is declared or made
in the capital structure of the issuer of the Pledged Shares, all new,
substituted and additional shares, or other securities, issued by reason of
any such change shall be held by Secured Party under the terms of this
Agreement in the same manner as the shares originally pledged hereunder. In
the event that during the term of this Agreement, subscription warrants or
any other rights or options shall be issued in connection with the Pledged
Shares, such warrants, rights and options shall be immediately delivered by
Pledgor to Secured Party, and all new shares or other securities so acquired
shall be immediately delivered to Secured Party, together with such
instruments or powers of transfer as Secured Party may request, to be held
under the terms of this Agreement in the same manner as the shares originally
pledged hereunder. If the property received by Pledgor in the foregoing
events shall be shares of stock or other securities, such shares of stock or
other securities shall be duly endorsed in blank or accompanied by proper
instruments of transfer and assignment duly executed in blank with signatures
medallion guaranteed by a bank or member firm of the New York Stock Exchange.
Secured Party shall be deemed to have possession of any Pledged Shares in
transit t Secured Party. The Pledged Shares also includes all money or
property of Pledgor in Secured Party's possession, held for or owed to
Secured Party, Secured Party being granted herein the right to set off such
money and property against the Indebtedness.
4.7 RELEASE OF PLEDGED SHARES. Any of the Pledged Shares may
be released from this Agreement without altering, varying or diminishing in
any way the force, effect, lien, pledge, security interest or charge of this
Agreement as to the Pledged Shares not expressly released or the validity and
effect of any guaranty delivered in connection with the Indebtedness, and
this Agreement shall continue as a first priority lien, security interest,
pledge and charge on all the Pledged Shares not expressly released as long as
any of the Indebtedness remains outstanding. Any future assignment or
attempted assignment or transfer of the interest of any person (other than
Secured Party) in and to any of the Pledged Shares shall not deprive Secured
Party of the right to sell or otherwise dispose of or utilize all the Pledged
Shares as above provided or necessitate the sale or disposition thereof in
parcels or in severalty.
4.8 NOTICE OF CHANGES. Pledgor will immediately notify Secured
Party of any change occurring in or to the Pledged Shares, of a change in
Pledgor's address, or any change in any fact or circumstance warranted or
represented by Pledgor to Secured Party, or if any event of default occurs.
Pledgor shall promptly notify Secured Party of any claim, action or
proceeding affecting title to the Pledged Shares or any part thereof, or the
security interest of Secured Party therein, and, at the request of Secured
Party, appear in and defend at Pledgor's expense, any such action or
proceeding.
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4.9 AUTHORITY. Pledgor has all requisite power and authority
to enter into this Agreement, to pledge the Pledged Shares and create the
Security Interest, and to consummate the transactions contemplated hereby.
Upon the execution and delivery by Pledgor, this Agreement and such documents
as are executed and delivered pursuant to this Agreement will constitute
valid and binding obligations of Pledgor, enforceable against Pledgor in
accordance with their terms.
4.10 NO RESTRICTIONS. The Pledged Shares are not subject to
any purchase rights, shareholder agreements, voting agreements, voting
trusts, trust deeds, irrevocable proxies, or any other similar agreements or
instruments restricting the transfer, pledge or encumbrance of the Pledged
Shares, except for any proxies or encumbrances created in this Agreement and
any requirements under the federal securities laws restricting
transferability of any of the Pledged Shares.
4.11 FEES AND EXPENSES. Pledgor shall, promptly after being
requested by Secured Party pay to Secured Party the amount of all reasonable
expenses, including reasonable attorneys' fees and other legal expense,
incurred by Secured Party in perfecting and enforcing this Agreement and the
security interest hereby created.
5. RIGHTS OF SECURED PARTY. Pledgor hereby irrevocably appoints
Secured Party as Pledgor's attorney-in-fact to do any act which Pledgor is
obligated by this Agreement to do, to exercise all rights, voting (in the
event of default hereunder) and otherwise, of Pledgor in the Pledged Shares,
and to do all things deemed necessary by Secured Party to perfect the
Security Interest and preserve, collect, enforce and protect the Pledged
Shares, all at Pledgor's cost and without any obligation on Secured Party so
to act, including, but not limited to, transferring title into the name of
Secured Party or his nominees, or receipting for, settling, or otherwise
realizing upon the Pledged Shares. Secured Party may, at his sole discretion,
require Pledgor to give possession or control of the Pledged Shares to
Secured Party; endorse as Pledgor's agent any instruments or documents
constituting or relating to the Pledged Shares; take control of the Pledged
Shares or proceeds thereof, including among others, stock or cash dividends
or stock splits, and use cash proceeds to reduce any part of the
Indebtedness; require Pledgor to use his best efforts to cause the issuer of
the Pledged Shares to register any or all of the Pledged Shares under
applicable securities laws, at the expense of Pledgor or such issuer; require
additional Pledged Shares; reject as unsatisfactory any property hereafter
offered by Pledgor as substitute collateral; and designate, at any time and
from time to time, a certain percentage of the Pledged Shares as the loan
value and require Pledgor to maintain the Indebtedness at or below such
figure. Secured Party may, without notice to Pledgor, notify and direct any
issuer of the Pledged Shares or holder of any proceeds, distributions or
dividends therefrom to thereafter make all payments on such Pledged Shares
directly to Secured Party, regardless of the medium in which paid and whether
they are ordinary or extraordinary, and regardless of whether Pledgor was
previously making collections thereon. Each obligor or issuer making payment
to Secured Party hereunder shall be fully protected in relying on the written
statement of Secured Party for such payment and shall not be required to see
to the application of such payment. Secured Party shall not be liable for any
act or omission on the part of his agents or employees, except willful
misconduct, nor shall Secured Party be responsible for depreciation in value
of the Pledged Shares or for preservation of rights against prior parties.
The foregoing rights and powers of Secured Party may be exercised before
(except voting rights) or after default and shall be in
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addition to, and not a limitation upon any rights and powers of Secured Party
given herein or by law, custom or otherwise.
6. EVENTS OF DEFAULT. Pledgor shall be in default under this
Agreement upon the happening of any of the following events or conditions:
6.1 Adverse change in any fact warranted or represented in
this Agreement;
6.2 Levy on, seizure, or attachment of all or part of the
Pledged Shares; or
6.3 The occurrence of any event of default with respect to the
Note.
7. REMEDIES OF SECURED PARTY UPON DEFAULT. Upon the occurrence of
any event of default, and at any time thereafter during the continuance
thereof, Secured Party may proceed to exercise any and all of the rights and
remedies provided by the Uniform Commercial Code then in effect in the State
of Illinois ("Code"), as well as all other rights and remedies possessed by
Secured Party under this Agreement or otherwise at law or in equity, and,
without limiting the foregoing, Secured Party may sell all or any part of the
Pledged Shares at public or private sale. In connection with any such sale, a
question of registration of the Pledged Shares under the Securities Act of
1933, as amended (the "Act") may arise. In that connection, compliance with
the Act may impose limitations on Secured Party if Secured Party was to
attempt to dispose of certain portions of the Pledged Shares. Similarly,
there may be other legal restrictions or limitations affecting Secured Party
in any attempts to dispose of certain portions of the Pledged Shares. For
these reasons, Secured Party is hereby authorized, upon the occurrence of any
event of default, and at any time thereafter during the continuance thereof,
to sell all or any part of the Pledged Shares at private sale, or in any
other manner which will not require the Pledged Shares, or any part thereof,
to be registered in accordance with the Act, or the rules and regulations
promulgated thereunder, at the best price reasonably obtainable by Secured
Party at any such private sale or other disposition in the manner mentioned
above. Additionally, because there may be no available market for the Pledged
Shares and because it may be unlikely that any person will become or be
interested in purchasing the Pledged Shares as a result of the giving of a
notice of public sale, Pledgor agrees that any sale of the Pledged Shares may
be private and without competitive bidding. Pledgor further acknowledges
that, notwithstanding any claim that a higher price might be obtained for the
Pledged Shares at a public sale, a private sale of the Pledged Shares is
hereby consented to and agreed to be reasonable and acceptable to Pledgor.
The parties hereto clearly understand that Secured Party may approach a
restricted number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Pledged Shares, or any part or
parts thereof, than would otherwise be obtainable if same were registered and
sold in the open market. Pledgor agrees that any notice of any action will
have been reasonably given if given at least five (5) days before the action
notified. Expenses of preparing for sale, selling, or the like, shall
include, without limitation, Secured Party's reasonable attorneys' fees and
all such expenses shall be recovered by Secured Party before applying the
proceeds from the disposition of the Pledged Shares and Pledgor will remain
liable for any deficiency remaining after such disposition. The proceeds of
any such disposition or other action by Secured Party shall be applied as
follows:
7.1 First, to the costs and expenses incurred in connection
with the sale or incidental thereto or to the care or safekeeping of any of
the Pledged Shares or in any way
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relating to the rights of Secured Party hereunder, including reasonable
attorneys' fees and legal expenses;
7.2 Second, to the satisfaction of the obligation of Pledgor
with respect to the Note;
7.3 Third, to the payment of any other amounts required by
applicable law; and
7.4 Then, to Pledgor to the extent of any surplus proceeds.
All rights and remedies of Secured Party hereunder are cumulative and may be
exercised singly or concurrently. The exercise of any right or remedy will
not be a waiver of any other.
8. VOTING RIGHTS. In addition to any other remedies herein
provided, upon the occurrence of an event of default hereunder or under the
Note, Secured Party or his nominees shall have, with respect to the Pledged
Shares, the right to exercise all voting rights as to the Pledged Shares, and
all other rights and all conversions, exchange, subscription or other rights
privileges or options pertaining thereto, as if Secured Party was the
absolute owner thereof, including, without limitation, the right to exchange
any or all of the Pledged Shares upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the issuer thereof,
or upon the exercise by such issuer of any right, privilege or option
pertaining to any of the Pledged Shares, and in connection therewith, to
deliver any of the Pledged Shares to any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as
Secured Party may determine, all without liability except to account for
property actually received by Secured Party; but Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing. Without
limiting the generality of the foregoing, Pledgor, to the extent permitted by
applicable law, hereby appoints and constitutes Secured Party as Pledgor's
true and lawful proxy with respect to exercising all voting or other rights
or executing consents, waivers, releases or objections to consents with
respect to the Pledged Shares at any shareholders' meeting, from and after
the occurrence of an event of default. Such proxy is coupled with an interest
and shall be irrevocable and continue in force and effect until the
Indebtedness has been paid in full.
9. INDEMNITY. Except for matters occurring by reason of Secured
Party's gross negligence or willful misconduct, Pledgor shall indemnify and
hold Secured Party harmless from and against any and all claims, demands,
losses, judgments and liabilities of whatever kind or nature and shall
reimburse Secured Party for all costs and expenses, including reasonable
attorneys' fees, growing out of or resulting from this Agreement or the
exercise by Secured Party of any rights or remedies granted to Secured Party
hereunder. In no event shall Secured Party be liable under this Agreement,
in the absence of gross negligence or willful misconduct on Secured Party's
part, for any matter or thing in connection with this Agreement other than to
account for the Pledged Shares or monies actually received, and applied, by
Secured Party in accordance with the terms of this Agreement.
10. RETURN OF SHARES. Upon payment in full of the Indebtedness,
Secured Party shall return the Pledged Shares to Pledgor.
11. GENERAL PROVISIONS.
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11.1 AMENDMENTS AND WAIVERS. Secured Party and Pledgor may,
subject to the provisions of this Section 11.1, from time to time enter into
written supplemental agreements to this Agreement, for the purpose of adding
or deleting any provisions to or from this Agreement or otherwise changing or
varying in any manner the rights of Secured Party or Pledgor hereunder or the
conditions, provisions or terms hereof or waiving any default hereunder. Any
such supplemental agreements to this Agreement shall be binding upon Pledgor
and Secured Party. No waiver by Secured Party of any right hereunder or of
any default by Pledgor shall be binding upon Secured Party unless in writing
executed by Secured Party. In the case of any waiver, Pledgor and Secured
Party shall be restored to their former position and rights under this
Agreement and any default waived shall be deemed to be cured and not
continuing, but no such waiver shall extend to any subsequent or other
default, or impair any right consequent thereon.
11.2 REMEDIES. No course of dealing among Pledgor and Secured
Party, and no delay or omission of Secured Party to exercise any right under
this Agreement shall impair such right or be construed to be a waiver of any
default or an acquiescence therein, and any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the
exercise of any other right. All remedies contained in this Agreement or by
law afforded shall be cumulative and all shall be available to Secured Party
until the Note has been paid in full. Secured Party may exercise such
remedies in any order of priority.
11.3 SURVIVAL OF REPRESENTATIONS. All representations and
warranties of Pledgor contained in this Agreement shall survive delivery of
the Note and the making of the loan.
11.4 CHOICE OF LAW AND CONSTRUCTION. This Agreement shall be
construed in accordance with the laws of the State of Nevada applicable to
contracts made and performed in Nevada by a Nevada secured party and a
pledgor located in Nevada. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under such applicable law, but, if any provisions of this Agreement shall be
held to be prohibited or invalid under such applicable law, such provisions
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
11.5 ATTORNEYS' FEES. Should any litigation be commenced
between the parties hereto concerning, this Agreement, or the rights and
duties of the parties in relation hereto, the prevailing party in any such
litigation shall be entitled to such reasonable attorneys' fees as the court
may award.
11.6 SEVERABILITY. The unenforceability of any provision of
this Agreement shall not affect the enforceability or validity of any other
provision hereof.
11.7 SECTION HEADINGS AND REFERENCES. Section headings in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement. All references to
sections in this Agreement are to the section of this Agreement in which such
section reference appears.
11.8 NOTICES. All notices, requests and demands to or upon the
parties to this Agreement required or permitted to be given under this
Agreement shall be deemed given: (a) three (3) days following deposit in the
United States mail, postage prepaid; (b) upon delivery to the telegraph
company for transmission, charges prepaid; (c) in the case of telex notice,
when
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sent, answerback received; or (d) when physically delivered by hand to the
addressee of such notice by or on behalf of the person initiating such
notice; in each case addressed to the address of Pledgor or Secured Party, as
the case may be, appearing below their respective signatures to this
Agreement. Pledgor and Secured Party may each change the address for service
of notice upon it or him by a notice in writing to the others.
11.9 LAWFUL MONEY. Each reference in this Agreement to payment
of any amount of money is to lawful money of the United States of America.
11.10 ENTIRE AGREEMENT. The documents referred to herein
embody the entire agreements and understandings among Pledgor and Secured
Party and supersede all prior agreements and understandings among Pledgor and
Secured Party relating to the subject matter thereof, as the case may be.
11.11 FURTHER ASSURANCES. Pledgor hereby further agrees with
Secured Party to execute, acknowledge and deliver any and all such further
assurances and other agreements or instruments, and to take or cause to be
taken all such other actions, as shall be reasonably requested by any Secured
Party from time to time in order to give full effect to this Agreement and to
maintain, preserve, safeguard and continue at all times the rights, remedies,
powers and privileges of Secured Party under this Agreement, all without any
cost or expense to Secured Party.
11.12 COUNTERPARTS. This Agreement may be executed by the
parties hereto and thereto individually or, in any combinations of the
parties hereto, in several separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
agreement.
11.13 WAIVERS BY PLEDGOR. Pledgor hereby waives presentment,
demand, notice of intention to accelerate, notice of acceleration, notice of
dishonor, protest, and notice of protest, and all other notices with respect
to collection, or acceleration of maturity, of the Pledged Shares and
Indebtedness.
IN WITNESS WHEREOF, Pledgor and Secured Party have executed this
Agreement as of the date first above written.
"Pledgor"
americaBILIA.com, a Nevada corporation
By:____________________________________
Gary Moore, President
9155 Las Vegas Boulevard South
Suite 242
Las Vegas, NV 89123
"Secured Party"
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<PAGE>
KEITH VELTRE
804 Blue Springs Drive
Henderson, NV 89105
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<PAGE>
Exhibit "C"
LEASE
C-1
<PAGE>
Exhibit "D"
EQUIPMENT LEASE
This Equipment Lease ("Lease") is entered into as of _____________,
1999, by and between KEITH VELTRE ("Lessor"), and VELTRE ENTERPRISES, INC., a
Nevada corporation ("Lessee").
1. LEASE. Lessor hereby leases to Lessee, and Lessee hereby leases
and hires from Lessor, all equipment and other property described in Schedule
"A" as executed by the parties concurrently herewith and made a part hereof.
All said equipment and other property described in said Schedule "A" is
hereinafter collectively referred to as the "Equipment."
2. TERM. The term of this Lease shall commence upon the date hereof
and shall continue for a period of one (1) year, unless such period of time
is lengthened or shortened in accordance with the provisions of this Lease.
3. RENTAL. The rent for the Equipment shall be the sum of $3,000.00
per month. Lessee shall pay Lessor said rent in arrears on the last day of
each month.
4. USE. Lessee shall use the Equipment in a careful and proper
manner and shall comply with and conform to all national, state, municipal,
and other laws, ordinances and regulations relating to the possession, use or
maintenance of the Equipment. If at any time during the term hereof Lessor
supplies Lessee with labels, plates or other markings, stating that the
Equipment is owned by Lessor, Lessee shall affix and keep the same upon a
prominent place on the Equipment.
5. LESSEE'S INSPECTION; CONCLUSIVE PRESUMPTIONS. Lessee shall
inspect the Equipment within forty-eight (48) hours after receipt thereof.
Unless Lessee within said period of time gives written notice to Lessor,
specifying any defect in or other objection to the Equipment, Lessee agrees
that it shall be conclusively presumed, as between Lessor and Lessee, that
Lessee has fully inspected and acknowledged that the Equipment is in good
condition and repair, and that Lessee is satisfied with and has accepted the
Equipment in good condition and repair.
6. LESSOR'S INSPECTION. Lessor shall, at any and all times during
Lessee's normal business hours, have the right to enter the premises where
the Equipment is located for the purpose of inspecting the same or observing
the use thereof. Lessee shall not be permitted to remove any item of
Equipment from the location indicated on the Schedule without the prior
written consent of Lessor.
7. REPAIRS. Lessee, at its own cost and expense, shall keep the
Equipment in good repair, condition and working order and shall furnish any
and all parts, supplies, mechanisms and devices required to keep the
Equipment in good mechanical and working order.
8. ALTERATIONS. Without the prior written consent of Lessor, Lessee
shall not make any alterations, additions or improvements to the Equipment.
Any permitted alterations, additions or improvements may, at Lessee's option,
be removed by Lessee upon the expiration or earlier termination of this Lease
if, and only if, such removal may be accomplished without damage to
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the Equipment or otherwise reducing its value below that which it would have
had in the event no such alterations, additions or improvements had been made.
9. LOSS AND DAMAGE. Lessee hereby assumes and shall bear the entire
risk of loss and damage to the Equipment from any and every cause whatsoever.
No loss or damage to the Equipment or any part thereof shall impair any
obligation of Lessee under this Lease which shall continue in full force and
effect in spite of such damage. In the event of loss or damage of any kind
whatever to any item of Equipment Lessee shall: (a) Restore the same to good
repair, condition and working order, or replace the same with like Equipment
in good repair, condition and working order; or (b) If in the reasonable
judgment of Lessor any item of Equipment is determined by Lessor to be lost,
stolen, destroyed or damaged beyond repair, pay Lessor therefor in cash the
fair market value of the affected Equipment. Upon such payment this Lease
shall terminate with respect to such item of Equipment so paid for, Lessee
shall become the owner of such item of Equipment on as-is-where-is basis,
without warranty, express or implied and the rent payable pursuant to
Paragraph 3 hereof shall be equitably adjusted by mutual agreement of the
parties.
10. SURRENDER. Upon the expiration or earlier termination of this
Lease, with respect to any item of Equipment, Lessee shall (unless Lessee has
paid Lessor in cash the fair market value of such item of Equipment pursuant
to paragraph 9 hereof) return the same to Lessor in good repair, condition
and working order, ordinary wear and tear resulting from proper use thereof
alone excepted, in the manner specified by Lessor as follows: (a) By
delivering such item of Equipment at Lessee's cost and expense to such place
as Lessor shall specify within the city or county in which the same was
delivered to Lessee or to which same was moved with the written consent of
Lessor; or (b) By loading such item of Equipment at Lessee's cost and expense
on board such carrier as Lessor shall specify and shipping the same, freight
collect, to the destination designated by Lessor.
11. INSURANCE. Lessee shall keep the Equipment insured against all
risks of loss or damage by fire and such other risks as are covered by
endorsement commonly known as supplemental or extended coverage for not less
than the replacement value thereof. Such insurance shall name both Lessor
and Lessee as insureds. Lessee may effect such coverage under its blanket
policies. All such policies shall be written by companies presently insuring
the Lessee or other companies reasonably satisfactorily to the Lessor and
certificates showing such coverage to be in effect shall be furnished to the
Lessor upon request.
12. TAXES. Lessee shall keep the Equipment free and clear of all
levies, liens and encumbrances and shall pay when due all fees, assessments,
charges and taxes (municipal, state and federal) which may now or hereafter
be imposed upon the ownership, leasing, renting, sale possession or use of
the Equipment, excluding, however, all taxes on or measured by Lessor's
income.
13. LESSOR'S PAYMENT. In case of failure of Lessee to comply with
the provisions of Paragraphs 11 or 12, Lessor shall have the right but shall
not be obligated, to purchase such insurance, or pay said fees, assessments,
charges and taxes, as the case may be. In that event, the cost thereof shall
be repayable to Lessor with the next installment of rent, and failure to
repay the same shall carry with it the same consequence, including interest
at ten percent (10%) per annum, as a failure to pay any installment of rent
when due.
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14. WARRANTIES. LESSOR MAKES NO WARRANTIES, EITHER EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, EXCEPT THAT LESSOR WARRANTS THAT THE
EQUIPMENT IS IN GOOD WORKING ORDER AND THAT LESSOR HAS NO KNOWLEDGE OF ANY
DEFECTS IN THE EQUIPMENT.
15. INDEMNITY. Lessee shall indemnify Lessor against, and hold
Lessor harmless from, any and all claims, actions, suits, proceedings, costs,
expenses, damages and liabilities, including reasonable attorneys' fees,
arising out of, connected with, or resulting from the use and operation of
the Equipment, including without limitation its manufacture, selection,
delivery, possession, use, operation or return. Each party agrees that it
will give the other prompt notice of the assertion of any such claim or the
institution of any such action, suit or proceeding respecting the Equipment.
16. DEFAULT. If Lessee with regard to any item or items of Equipment
fails to pay any amount herein provided within ten (10) days after the same
is due and payable, or if Lessee with regard to any item or items of
Equipment fails to observe, keep or perform any other provision of this
Lease, required to be observed, kept or performed by Lessee, and if Lessee
fails to remedy, cure or remove such failure in payment of such other failure
in observing, keeping or performing the provisions of this Lease within ten
(10) days after receipt of written notice thereof from Lessor, Lessor shall
have the right to exercise any one or more of the following remedies: (a) To
declare the entire amount of rent hereunder immediately due and payable as to
any or all items of Equipment, without notice or demand to Lessee; (b) To sue
for and recover all rents, and other payments, then accrued or thereafter
accruing with respect to any or all items of Equipment; (c) To take
possession of any or all items of Equipment, without demand or notice,
wherever same may be located, without any court order or other process of
law; (d) To terminate this Lease as to any or all items of Equipment; or (e)
To pursue any other remedy available to Lessor at law or in equity. Lessee
hereby waives any and all damages occasioned by such taking of possession
unless caused by Lessor's gross negligence or willful misconduct. Any such
taking of possession shall not constitute a termination of this Lease as to
any or all items of Equipment unless Lessor expressly so notifies Lessee in
writing. Notwithstanding any said repossession, or any other action which
Lessor may take, Lessee shall be and remain liable for the full performance
of all obligations on the part of Lessee to be performed under this Lease.
All such remedies are cumulative, and may be exercised concurrently or
separately. In no event, however, shall these remedies be exercised in such a
manner that the Lessor recovers more than the balance of rent and any other
amounts payable by Lessee to Lessor hereunder, plus the fair market value
which the Equipment would have at the end of the initial term of this Lease,
discounted from the date of the default to the end of the initial term of
this Lease at a rate of nine percent (9%) per annum.
17. BANKRUPTCY. Neither this Lease nor any interest herein is
assignable or transferable by operation of law. If any proceeding under the
Bankruptcy Act, as amended, is commenced by Lessee, or such an action is
commenced against Lessee and is not dismissed within sixty (60) days after
the commencement thereof, or if the Lessee is adjudged insolvent, or if the
Lessee makes any assignment for the benefit of its creditors, or if a writ of
attachment or execution is levied on any item or items of the Equipment and
is not released or satisfied within ten (10) days thereafter, or if a
receiver is appointed in any proceeding or action to which the Lessee is a
party with authority to take possession or control of any item or items of
the Equipment, Lessor shall have and may exercise any one or more of the
remedies set forth in Paragraph 16 hereof; and this
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Lease shall, at the option of Lessor on notice to Lessee, immediately
terminate and shall not be treated as an asset of Lessee after the exercise
of said option.
18. CONCURRENT REMEDIES. No right or remedy herein conferred upon or
reserved to Lessor is exclusive of any other right or remedy provided herein
or provided or permitted at law or in equity but each shall be cumulative of
every other right or remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise, and may be enforced concurrently
therewith or from time to time.
19. LESSOR'S EXPENSES. Lessee shall pay Lessor all costs and
expenses, including reasonable attorneys' fees, incurred by Lessor in
exercising any of its rights or remedies hereunder or enforcing any of the
terms, conditions, or provisions hereof.
20. ASSIGNMENT. Without the prior written consent of Lessor, Lessee
shall not (a) assign, transfer, pledge or hypothecate this Lease, the
Equipment or any part thereof, or any interest therein or (b) sublet or lend
the Equipment or any part thereof, or permit the Equipment or any part
thereof to be used by anyone other than Lessee or Lessee's employees.
Consent to any of the foregoing prohibited acts applies only in the given
instance; and shall not be a consent to any subsequent like act by Lessee or
any other person; provided, however, that without such prior written consent
but with notice to Lessor, Lessee may assign this Lease to any corporation
into which Lessee may merge or consolidate or which may acquire all or
substantially all of Lessee's assets, and may sublease any of the Equipment
subject to this Lease to any subsidiary of Lessee or to Lessee's parent or
any subsidiary of Lessee's parent. No such permitted sublease shall operate
to relieve the Lessee of its obligations hereunder which shall remain those
of a principal and not a guarantor. Subject always to the foregoing, this
Lease inures to the benefit of, and is binding upon, the heirs, legatees,
personal representatives, successors and assigns of the parties hereto.
21. PURCHASE OPTION. Upon the expiration of the original term
hereof, provided that Lessee has paid in full all amounts owing hereunder and
is not otherwise in default hereunder, Lessee shall have the option to
purchase said Equipment at the price of $75,000. Lessee shall exercise such
option by giving written notice to Lessor not less than thirty (30) days
prior to expiration of the original term hereof.
22. OWNERSHIP. The Equipment is, and shall at all times be and
remain, the sole and exclusive property of Lessor; and the Lessee shall have
no right, title or interest therein or thereto except as expressly set forth
in this Lease.
23. PERSONAL PROPERTY. The Equipment is, and shall at all times be
and remain, personal property notwithstanding that the Equipment or any part
thereof may now be, or hereafter become, in any manner affixed or attached
to, or imbedded in, or permanently resting upon, real property or any
building thereon, or attached in any manner to what is permanent as by means
of cement, plaster, nails, bolts, screws or otherwise.
24. INTEREST. Should Lessee fail to pay any part of the rent herein
reserved or any other sum required by Lessee to be paid to Lessor, within ten
(10) days after the due date thereof, Lessee shall pay unto the Lessor
interest on such delinquent payment from the expiration of said ten (10) days
until paid at the rate of ten percent (10%) per annum.
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25. OFFSET. Lessee hereby waives any and all existing and future
claims, and offsets, against any rent or other payment due hereunder and
agrees to pay the amounts hereunder regardless of any offset or claim which
may be asserted by Lessee or on its behalf.
26. NON WAIVER. No covenant or condition of this Lease can be waived
except by the written consent of Lessor. Forbearance or indulgence by Lessor
in any regard whatsoever shall not constitute a waiver of the covenant or
condition to be performed by Lessee to which the same may apply, and, until
complete performance by Lessee of said covenant or condition, Lessor shall be
entitled to invoke any remedy available to Lessor under this Lease or by law
or in equity despite said forbearance or indulgence.
27. ENTIRE AGREEMENT. This instrument constitutes the entire
agreement between Lessor and Lessee; and it shall not be amended, altered or
changed except by a writing signed by the parties hereto.
28. NOTICES. Service of all notices under this agreement shall be
sufficient if given personally or mailed via registered mail to the party
involved at its respective address set forth herein, or at such address as
such party may provide in writing from time to time. Any such notice mailed
to such address shall be effective when deposited in the United States mail,
duly addressed and with postage prepaid.
29. TITLES. The titles to the paragraphs of this Lease are solely
for the convenience of the parties, and are not intended as an aid in the
interpretation of the instrument.
30. TIME. Time is of the essence to this Lease and each and all of
its provisions.
31. LESSOR'S CONSENT. Whenever the consent or approval of Lessor is
required hereunder, Lessor agrees that same will not be unreasonably withheld.
32. CLAIMS. The Lessor hereby appoints and constitutes Lessee as its
agent and attorney-in-fact during the term of this Lease to assert and
enforce, at the sole cost and expense of the Lessee, whatever claims and
rights the Lessor may have as owner of the Equipment against any vendors,
manufacturers, suppliers or contractors in respect thereof.
33. GOVERNING LAW. The validity of this Lease and of any of its
terms or provisions, as well as the rights and duties of the parties
hereunder, shall be governed by the laws of the State of Nevada.
The parties have executed this Lease on the day and year first above written.
"LESSOR"
_______________________________________
KEITH VELTRE
"LESSEE"
AMERICABILIA.com,
a Nevada corporation
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By:_______________________________________
Gary Moore, President
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SCHEDULE "A"
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<PAGE>
Exhibit "E"
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made this ____ day of August, 1999, by
and between VELTRE ENTERPRISES, INC., a Nevada corporation (the
"Corporation") and KEITH VELTRE ("Employee"). In consideration of the mutual
covenants and promises contained herein, the parties agree as follows:
1. EMPLOYMENT. The Corporation hereby employs Employee as its
President and Chief Executive Officer. Employee shall report directly to the
President of AMERICABILIA.com, the parent corporation of the Corporation.
Employee shall be responsible for overall supervision of the day to day
operations of the Corporation's business including product development and
implementation of sales and marketing direction and strategy. Employee
hereby accepts such employment and agrees to perform the foregoing and such
other duties as are customarily performed by one holding such position in
other, same or similar businesses as that engaged in by the Corporation and
to render any such other services and duties as may be assigned from time to
time by the President of AMERICABILIA.com or the Board of Directors of the
Corporation.
2. PERFORMANCE OF EMPLOYEE'S DUTIES. The Employee agrees to
devote his full time attention and efforts to the faithful and loyal
performance of his duties for the Corporation and to render service to the
Corporation to the best of his ability, experience and talent to the
reasonable satisfaction of the Corporation. Such duties shall be rendered at
such place or places as the Corporation shall require in accordance with the
best interests, needs, business and opportunities of the Corporation.
3. TERM OF EMPLOYMENT. The term of employment shall be for a
period of five (5) years, commencing on August ___, 1999, and terminating on
August ___, 2004, unless earlier terminated as provided herein.
Notwithstanding the foregoing, Employee shall have the option to terminate
this Agreement in the event the Corporation or its business are sold.
4. LIMITATIONS ON OTHER EMPLOYMENT. During the term hereof,
Employee shall not enter into the services of or be employed in any capacity
or for any purposes whatsoever, whether directly or indirectly, by any
person, firm, corporation or entity other than the Corporation, and will not,
during said period of time, be engaged in any business, enterprise or
undertaking other than employment by the Corporation except as approved in
writing by the Chief Executive Officer of the Corporation. Employee may
engage in personal recreation and community or civic service so long as these
activities do not detract from the full discharge of Employee's duties
hereunder.
5. COMPENSATION. Provided Employee continues to be employed by
the Corporation pursuant to the terms of this Agreement, the Corporation
agrees to pay Employee and Employee agrees to accept from the Corporation, in
payment for Employee's services hereunder, base compensation at the rate of
Six Thousand Five Hundred and 00/100 Dollars ($6,500.00) per month payable in
accordance with the Corporation's normal pay practices. The amount of
Employee's compensation shall be reviewed at each one year anniversary date
of this Agreement
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and may be increased by the Board of Directors in its sole discretion. The
compensation has been expressed in terms of a gross amount, and the Company
is required to withhold from such gross amount deductions in respect of
federal, state or local income taxes, FICA and the like.
6. BUSINESS EXPENSES. The Corporation shall reimburse Employee or
otherwise provide for or pay for all reasonable expenses incurred by employee
in furtherance or in connection with the business of the Corporation,
including, but not by way of limitation, traveling expenses, and reasonable
entertainment expenses (whether incurred while traveling, or otherwise) in a
manner consistent with the Corporation's policy regarding such expenses. If
such expenses are paid in the first instance by employee, the Corporation
will reimburse him therefor. Expenses shall be reported and documented as
required by the Corporation and the United States Treasury Department for
deductible business expenses.
7. OTHER BENEFITS. The Corporation shall provide Employee with
medical insurance and such other fringe benefits which are at least equal to
the medical insurance and other fringe benefits being provided by the
Corporation to Employee as of July 1999.
8. VACATION. Employee shall be entitled to vacation time in
accordance with the vacation policies of the Corporation. Scheduled vacation
time must be approved in advance by the President of AMERICABILIA.com.
9. TERMINATION BY COMPANY FOR CAUSE. Employee's employment under
this Agreement may be terminated immediately by Company upon the occurrence
of one or more of the following causes:
(a) Employee's conviction of any criminal act involving
moral turpitude or which otherwise tends to bring disrepute upon Company;
(b) The commission by Employee of any act of dishonesty in
connection with the performance of any of Employee's duties hereunder
(including, but not limited to falsification of Company records, making false
statements of material facts to third parties regarding Company's business,
fraud, and misappropriation or embezzlement against Company or any of its
customers or suppliers);
(c) Any willful material breach by Employee of any of the
covenants, conditions or restrictions pertaining to disclosure or use of
confidential information, proprietary rights and materials of the Corporation
or unfair competition as set forth in Sections 10, 11 or 12 of this Agreement;
(d) The material failure to perform Employee's duties,
and/or to observe the written rules, regulations, policies, directions or
restrictions adopted by the Company from time to time to the extent such
rules, regulations, policies, directions or restrictions are not inconsistent
with the terms of this Agreement, provided that such failure shall not have
been cured within ten (10) days after Employee is given specific notice and
an opportunity to cure such failure;
(e) If Employee dies or becomes disabled (Employee shall be
deemed "disabled" for purposes of this Agreement if he is unable, by reason
of illness, accident, or other
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physical or mental incapacity, to perform substantially all of his regular
duties for a continuous period of one hundred eighty (180) days); and
(f) Repeated abuse of alcohol or illegal narcotics confirmed
by testing which results in the failure of Employee to perform his duties
hereunder. Employee agrees to submit to drug and alcohol testing as deemed
necessary by Employer in its reasonable discretion.
Upon termination of Employee's employment by Company for cause, Employee
shall be entitled to all compensation accrued but unpaid to the date of
termination, but Employee shall have no further rights to any salary,
benefits or other compensation of any kind or nature.
10. DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION.
(a) DEFINITION OF CONFIDENTIAL INFORMATION. As used herein,
the term "Confidential Information" means any and all trade secrets or other
confidential information of any kind, nature or description concerning any
matters affecting or relating to the business of the Corporation which
derives economic value, actual or potential, from not being generally known
to the public or to other persons who can obtain economic value from its
disclosure or use and which is subject to efforts by the Corporation that are
reasonable under the circumstances to maintain its secrecy. Confidential
Information shall include information (not readily compiled from publicly
available sources) which is made available to Employee during the course of
his employment including, but not limited to, operations and financial
information concerning the Corporation's business; customer names, addresses,
buying habits, needs and the methods of fulfilling those needs; supplier
names, addresses and pricing policies; and the Corporation's pricing
policies. Employee agrees to cooperate with the Corporation to maintain the
secrecy of and limit the use of such Confidential Information.
Employee further agrees that he is under no obligation to any
former employer which is in any way inconsistent with this Agreement or which
imposes any restriction on the Corporation. Employee also acknowledges that
he has been instructed that during the term of employment by the Corporation,
he is not to divulge to the Corporation, its employees or its consultants any
confidential information or trade secrets obtained from any previous
employers or any other person.
(b) FIDUCIARY DUTY; APPROPRIATION OF CONFIDENTIAL
INFORMATION. Employee agrees to perform his duties pursuant to this Agreement
in good faith and in a manner which he honestly believes to be in the best
interests of the Corporation, and with such care, including reasonable
inquiry, as an ordinary prudent person in a like position would use under
similar circumstances. Employee agrees to observe a duty of loyalty to the
Corporation placing the interests of the Corporation ahead of his own.
Employee will keep confidential and will not directly or indirectly divulge
to anyone (except as required by applicable law or in connection with the
performance of his duties and responsibilities as an employee hereunder) nor
use or otherwise appropriate for Employee's own benefit, or on behalf of any
other person, firm, partnership or corporation by whom Employee might
subsequently be employed or otherwise associated or affiliated with, any
Confidential Information. Employee agrees that he will not at any time
during or after the termination or expiration of his employment, except as
authorized or directed in writing by the Corporation, use the Confidential
Information for Employee's own benefit or copy, reveal, divulge or make known
in any manner to any person, firm or corporation the Confidential Information.
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11. PROPRIETARY RIGHTS AND MATERIALS. All documents, memoranda,
reports, notebooks, correspondence, files, lists and other records, and the
like, designs, drawings, specifications, computer software and computer
equipment, computer printouts, computer disks, and all photocopies or other
reproductions thereof, affecting or relating to the business of the
Corporation, which Employee shall prepare, use, construct, observe, possess
or control ("the Corporation Materials"), shall be and remain the sole
property of the Corporation. Upon termination of this Agreement, Employee
shall deliver promptly to the Corporation all such the Corporation Materials.
12. COVENANT AGAINST UNFAIR COMPETITION. During the term of this
Agreement, Employee agrees (i) he will not, directly or indirectly, own an
interest in, operate, join, control or participate in, or be connected as an
officer, employee, agent, independent contractor, partner, shareholder or
principal of any corporation, partnership, proprietorship, firm,
association, person or other entity providing services which directly or
indirectly compete with the Corporation's business; (ii) he will not
undertake planning for or organization of any business activity competitive
with the Corporation's business or combine or conspire with other employees
or representatives of the Corporation's business for the purpose of
organizing any such competitive business activity; (iii) he will not,
directly or indirectly, either for Employee or for any other person, firm or
corporation, divert or take away or attempt to divert or take away of the
Corporation's customers, including but not limited to those upon whom
Employee called or whom Employee solicited or serviced or with whom Employee
became acquainted while engaged as an employee in the Corporation's business;
and (iv) he will not, directly or indirectly or by action in concert with
others, induce or influence (or seek to induce or influence) any person who
is engaged (as an employee, agent, independent contractor or otherwise) by
the Corporation to terminate his or her employment or engagement.
13. TERM CORPORATION AS INCLUDING CORPORATE AFFILIATES. For
purposes of this Agreement, the term "Corporation" shall be deemed to include
any corporation which is in control of, controlled by, or under common
control with the Corporation, whether or not Employee is directly employed by
such other corporation or corporations.
14. ATTORNEYS' FEES. If any legal action arises under this
Agreement or by reason of any asserted breach of it, the prevailing party
shall be entitled to recover all costs and expenses, including reasonable
attorneys' fees, incurred in enforcing or attempting to enforce any of the
terms, covenants or conditions, including costs incurred prior to
commencement of legal action, and all costs and expenses, including
reasonable attorneys' fees, incurred in any appeal from an action brought to
enforce any of the terms, covenants or conditions.
15. ENFORCEMENT; SEVERABILITY. The Corporation and Employee
recognize and acknowledge that Employee is employed under this Agreement as
an employee in a position where Employee will be rendering personal services
of a special, unique, unusual and extraordinary character requiring
extraordinary ingenuity and effort by Employee. Employee agrees that the
breach by him of this Agreement, including its covenants, could not
reasonably or adequately be compensated in damages in an action at law and
that the Corporation shall be entitled to injunctive relief, which may
include but shall not be limited to restraining Employee from rendering any
service that would breach this Agreement. However, no remedy conferred by
any of the specific provisions of this Agreement is intended to be exclusive
of any other remedy, and each and every remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or
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otherwise. The election of any one or more remedies by the Corporation shall
not constitute a waiver of the right to pursue other available remedies. If
in any proceeding, an arbiter shall refuse to enforce this Agreement, whether
because the restrictions contained herein are more extensive than is
necessary to protect the business of the Corporation, it is expressly
understood and agreed between the parties hereto that this Agreement is
deemed modified to the extent necessary to permit this Agreement to be
enforced in any such proceedings. The validity and enforceability of the
remaining provisions or portions thereof shall not be affected thereby and
shall remain valid and enforceable to the fullest extent permitted under
applicable laws.
16. CONTINUING OBLIGATIONS. Employee's obligations pursuant to
Paragraphs 10 and 11 of this Agreement and the rights and remedies of the
Corporation hereunder shall continue in effect beyond the term of this
Agreement and such obligations shall be binding on Employee's assigns, heirs,
executors, administrators and other legal representatives.
17. ACCOUNTING FOR PROFITS. Employee covenants and agrees that if
he violates the provisions of Paragraphs 10, 11 or 12, the Corporation shall
be entitled to an accounting and repayment of all profits, compensation,
commissions, remuneration or other benefits that Employee has realized and/or
may realize as a result of or in connection with any such violation. These
remedies shall be in addition and not in limitation of any injunctive relief
or other rights or remedies to which the Corporation is or may be entitled
at law, in equity or under this Agreement.
18. ARBITRATION. Any controversy or dispute between the parties to
this Agreement involving the construction, interpretation, application or
performance of the terms, covenants or conditions of this Agreement, or in
any way arising under this Agreement shall, be decided by neutral binding
arbitration in accordance with the rules of the American Arbitration
Association, and not by court action except as provided by Nevada law for
judicial review of arbitration proceedings. Judgment upon the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction thereof.
The parties shall have the right to discovery. The filing of a judicial
action to enable the recording of a notice of pending action, for order of
attachment, receivership, injunction, or other provisional remedies, shall
not constitute a waiver of the right to arbitrate under this provision.
19. WAIVER OR MODIFICATION. No waiver or modification of this
Agreement or of any covenant, condition, or limitation herein contained shall
be valid unless in writing and duly executed by the party to be charged
therewith. Furthermore, no evidence of any modification or waiver shall be
offered or received as evidence in any arbitration between the parties
arising out of or affecting this Agreement or the rights or obligations of
any party hereunder, unless such waiver or modification is in writing, duly
executed as aforesaid. The provisions of this Paragraph may not be waived
except as herein set forth.
20. ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement between the parties as to the matters contained herein, and
supersedes any and all other agreements between them. The parties
acknowledge and agree that neither of them has made any representation with
respect to such matters of this Agreement or any representations except as
are specifically set forth herein, and each party acknowledges that he or it
has relied on his or its own judgment in entering into this Agreement. The
parties further acknowledge that statements or representations that may have
been heretofore made by either of them to the other
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are void and of no effect and that neither of them has relied thereon in
connection with his or its dealing with the other.
21. CHOICE OF LAW. This Agreement and the performance hereunder
and all suits and special proceedings hereunder shall be construed in
accordance with the laws of the State of Nevada.
22. BINDING EFFECT OF AGREEMENT; ASSIGNMENT; MERGER; DISSOLUTION.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their heirs, successors, assigns and legal representatives. This
Agreement shall be construed as a contract for personal services by Employee
to the Corporation and shall not be assignable by Employee. In the event of
the sale, merger or consolidation of the Corporation and subject to
Employee's right to terminate this Agreement as herein provided, Employee
agrees that the Corporation may assign its rights and obligations hereunder
to its successor or purchaser.
23. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall
be deemed to have been duly given when delivered by hand or when mailed by
certified registered mail, return receipt requested, with postage prepaid to
their current address or to such other address as they request in writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first written above.
"Corporation"
AMERICABILIA.com
By:_____________________________
Gary Moore, President
"Employee"
_______________________________
KEITH VELTRE
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Exhibit "F"
NOTE PURCHASE GUARANTY
As an inducement to Keith Veltre to sell the outstanding common stock
of Veltre Enterprises, Inc. to AMERICABILIA.com, a Nevada corporation (the
"Company"), pursuant to the Stock Purchase Agreement dated July 23, 1999 and
to accept as partial consideration the Promissory Note ("Note") of the
Company in the principal amount of $200,000, the undersigned hereby, jointly
and severally, absolutely and unconditionally, guarantee that in the event
that the Note has not been paid in full on or before November 15, 1999, the
undersigned will purchase the Note (including any security for the Note)
from Keith Veltre for an amount equal to the unpaid principal balance and any
accrued and unpaid interest on the Note (the "Note Balance").
In the event the undersigned become obligated to purchase the Note
hereunder, the undersigned shall deliver to Keith Veltre a cashiers' check in
the amount of the Note Balance against delivery by Keith Veltre to the
undersigned of the original Note endorsed in favor of the undersigned and the
assignment of the rights of Keith Veltre in any security for the Note.
The undersigned's obligation to purchase the Note on the terms set
forth herein shall be primary, direct, immediate, absolute, continuing,
unconditional, and unlimited. The undersigned further promise to pay to
Keith Veltre the expenses, including reasonable attorneys' fees, incurred in
the collection or attempted collection of this Note Purchase Guaranty.
This Note Purchase Guaranty shall inure to the benefit of and be
enforceable by Keith Veltre, his successors and assigns, and shall bind the
heirs, executors, administrators, successors and assigns of the undersigned.
The validity, construction and performance of this Note Purchase Guaranty
shall be governed by the laws of the State of Nevada.
This Note Purchase Guaranty is executed as of __________________, 1999.
HENRY E. CARTWRIGHT
GARY MOORE
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Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made this 11th day of August, 1999, by
and between VELTRE ENTERPRISES, INC., a Nevada corporation (the
"Corporation") and KEITH VELTRE ("Employee"). In consideration of the mutual
covenants and promises contained herein, the parties agree as follows:
1. EMPLOYMENT. The Corporation hereby employs Employee as its
President and Chief Executive Officer. Employee shall report directly to the
President of americabilia.com, the parent corporation of the Corporation.
Employee shall be responsible for overall supervision of the day to day
operations of the Corporation's business including product development and
implementation of sales and marketing direction and strategy. Employee
hereby accepts such employment and agrees to perform the foregoing and such
other duties as are customarily performed by one holding such position in
other, same or similar businesses as that engaged in by the Corporation and
to render any such other services and duties as may be assigned from time to
time by the President of americabilia.com or the Board of Directors of the
Corporation.
2. PERFORMANCE OF EMPLOYEE'S DUTIES. The Employee agrees to devote
his full time attention and efforts to the faithful and loyal performance of
his duties for the Corporation and to render service to the Corporation to
the best of his ability, experience and talent to the reasonable satisfaction
of the Corporation. Such duties shall be rendered at such place or places as
the Corporation shall require in accordance with the best interests, needs,
business and opportunities of the Corporation.
3. TERM OF EMPLOYMENT. The term of employment shall be for a period
of five (5) years, commencing on August 11, 1999, and terminating on August
10, 2004, unless earlier terminated as provided herein. Notwithstanding the
foregoing, Employee shall have the option to terminate this Agreement in the
event the Corporation or its business are sold.
4. LIMITATIONS ON OTHER EMPLOYMENT. During the term hereof, Employee
shall not enter into the services of or be employed in any capacity or for
any purposes whatsoever, whether directly or indirectly, by any person, firm,
corporation or entity other than the Corporation, and will not, during said
period of time, be engaged in any business, enterprise or undertaking other
than employment by the Corporation except as approved in writing by the Chief
Executive Officer of the Corporation. Employee may engage in personal
recreation and community or civic service so long as these activities do not
detract from the full discharge of Employee's duties hereunder.
5. COMPENSATION. Provided Employee continues to be employed by the
Corporation pursuant to the terms of this Agreement, the Corporation agrees
to pay Employee and Employee agrees to accept from the Corporation, in
payment for Employee's services hereunder, base compensation at the rate of
Six Thousand Five Hundred and 00/100 Dollars ($6,500.00) per
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month payable in accordance with the Corporation's normal pay practices. The
amount of Employee's compensation shall be reviewed at each one year
anniversary date of this Agreement and may be increased by the Board of
Directors in its sole discretion. The compensation has been expressed in
terms of a gross amount, and the Company is required to withhold from such
gross amount deductions in respect of federal, state or local income taxes,
FICA and the like.
6. BUSINESS EXPENSES. The Corporation shall reimburse Employee or
otherwise provide for or pay for all reasonable expenses incurred by employee
in furtherance or in connection with the business of the Corporation,
including, but not by way of limitation, traveling expenses, and reasonable
entertainment expenses (whether incurred while traveling, or otherwise) in a
manner consistent with the Corporation's policy regarding such expenses. If
such expenses are paid in the first instance by employee, the Corporation
will reimburse him therefor. Expenses shall be reported and documented as
required by the Corporation and the United States Treasury Department for
deductible business expenses.
7. OTHER BENEFITS. The Corporation shall provide Employee with
medical insurance and such other fringe benefits which are at least equal to
the medical insurance and other fringe benefits being provided by the
Corporation to Employee as of July 1999.
8. VACATION. Employee shall be entitled to vacation time in
accordance with the vacation policies of the Corporation. Scheduled vacation
time must be approved in advance by the President of americabilia.com.
9. TERMINATION BY COMPANY FOR CAUSE. Employee's employment under this
Agreement may be terminated immediately by Company upon the occurrence of one
or more of the following causes:
(a) Employee's conviction of any criminal act involving moral
turpitude or which otherwise tends to bring disrepute upon Company;
(b) The commission by Employee of any act of dishonesty in
connection with the performance of any of Employee's duties hereunder
(including, but not limited to falsification of Company records, making false
statements of material facts to third parties regarding Company's business,
fraud, and misappropriation or embezzlement against Company or any of its
customers or suppliers);
(c) Any willful material breach by Employee of any of the
covenants, conditions or restrictions pertaining to disclosure or use of
confidential information, proprietary rights and materials of the Corporation
or unfair competition as set forth in Sections 10, 11 or 12 of this Agreement;
(d) The material failure to perform Employee's duties, and/or to
observe the written rules, regulations, policies, directions or restrictions
adopted by the Company from time to time to the extent such rules,
regulations, policies, directions or restrictions are not inconsistent with
the terms of this Agreement, provided that such failure shall not have been
cured within ten (10) days after Employee is given specific notice and an
opportunity to cure such failure;
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(e) If Employee dies or becomes disabled (Employee shall be deemed
"disabled" for purposes of this Agreement if he is unable, by reason of
illness, accident, or other physical or mental incapacity, to perform
substantially all of his regular duties for a continuous period of one
hundred eighty (180) days); and
(f) Repeated abuse of alcohol or illegal narcotics confirmed by
testing which results in the failure of Employee to perform his duties
hereunder. Employee agrees to submit to drug and alcohol testing as deemed
necessary by Employer in its reasonable discretion.
Upon termination of Employee's employment by Company for cause, Employee
shall be entitled to all compensation accrued but unpaid to the date of
termination, but Employee shall have no further rights to any salary,
benefits or other compensation of any kind or nature.
10. DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION.
(a) DEFINITION OF CONFIDENTIAL INFORMATION. As used herein, the
term "Confidential Information" means any and all trade secrets or other
confidential information of any kind, nature or description concerning any
matters affecting or relating to the business of the Corporation which
derives economic value, actual or potential, from not being generally known
to the public or to other persons who can obtain economic value from its
disclosure or use and which is subject to efforts by the Corporation that are
reasonable under the circumstances to maintain its secrecy. Confidential
Information shall include information (not readily compiled from publicly
available sources) which is made available to Employee during the course of
his employment including, but not limited to, operations and financial
information concerning the Corporation's business; customer names, addresses,
buying habits, needs and the methods of fulfilling those needs; supplier
names, addresses and pricing policies; and the Corporation's pricing
policies. Employee agrees to cooperate with the Corporation to maintain the
secrecy of and limit the use of such Confidential Information.
Employee further agrees that he is under no obligation to any
former employer which is in any way inconsistent with this Agreement or which
imposes any restriction on the Corporation. Employee also acknowledges that
he has been instructed that during the term of employment by the Corporation,
he is not to divulge to the Corporation, its employees or its consultants any
confidential information or trade secrets obtained from any previous
employers or any other person.
(b) FIDUCIARY DUTY; APPROPRIATION OF CONFIDENTIAL INFORMATION.
Employee agrees to perform his duties pursuant to this Agreement in good faith
and in a manner which he honestly believes to be in the best interests of the
Corporation, and with such care, including reasonable inquiry, as an ordinary
prudent person in a like position would use under similar circumstances.
Employee agrees to observe a duty of loyalty to the Corporation placing the
interests of the Corporation ahead of his own. Employee will keep confidential
and will not directly or indirectly divulge to anyone (except as required by
applicable law or in connection with the performance of his duties and
responsibilities as an employee hereunder) nor use or otherwise appropriate for
Employee's own benefit, or on behalf of any other person, firm, partnership or
corporation by whom Employee might subsequently be employed or otherwise
associated or affiliated with, any Confidential Information. Employee agrees
that he will not at
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any time during or after the termination or expiration of his employment,
except as authorized or directed in writing by the Corporation, use the
Confidential Information for Employee's own benefit or copy, reveal, divulge
or make known in any manner to any person, firm or corporation the
Confidential Information.
11. PROPRIETARY RIGHTS AND MATERIALS. All documents, memoranda,
reports, notebooks, correspondence, files, lists and other records, and the
like, designs, drawings, specifications, computer software and computer
equipment, computer printouts, computer disks, and all photocopies or other
reproductions thereof, affecting or relating to the business of the
Corporation, which Employee shall prepare, use, construct, observe, possess
or control ("the Corporation Materials"), shall be and remain the sole
property of the Corporation. Upon termination of this Agreement, Employee
shall deliver promptly to the Corporation all such the Corporation Materials.
12. COVENANT AGAINST UNFAIR COMPETITION. During the term of this
Agreement, Employee agrees (i) he will not, directly or indirectly, own an
interest in, operate, join, control or participate in, or be connected as an
officer, employee, agent, independent contractor, partner, shareholder or
principal of any corporation, partnership, proprietorship, firm,
association, person or other entity providing services which directly or
indirectly compete with the Corporation's business; (ii) he will not
undertake planning for or organization of any business activity competitive
with the Corporation's business or combine or conspire with other employees
or representatives of the Corporation's business for the purpose of
organizing any such competitive business activity; (iii) he will not,
directly or indirectly, either for Employee or for any other person, firm or
corporation, divert or take away or attempt to divert or take away of the
Corporation's customers, including but not limited to those upon whom
Employee called or whom Employee solicited or serviced or with whom Employee
became acquainted while engaged as an employee in the Corporation's business;
and (iv) he will not, directly or indirectly or by action in concert with
others, induce or influence (or seek to induce or influence) any person who
is engaged (as an employee, agent, independent contractor or otherwise) by
the Corporation to terminate his or her employment or engagement.
13. TERM CORPORATION AS INCLUDING CORPORATE AFFILIATES. For purposes
of this Agreement, the term "Corporation" shall be deemed to include any
corporation which is in control of, controlled by, or under common control
with the Corporation, whether or not Employee is directly employed by such
other corporation or corporations.
14. ATTORNEYS' FEES. If any legal action arises under this Agreement
or by reason of any asserted breach of it, the prevailing party shall be
entitled to recover all costs and expenses, including reasonable attorneys'
fees, incurred in enforcing or attempting to enforce any of the terms,
covenants or conditions, including costs incurred prior to commencement of
legal action, and all costs and expenses, including reasonable attorneys'
fees, incurred in any appeal from an action brought to enforce any of the
terms, covenants or conditions.
15. ENFORCEMENT; SEVERABILITY. The Corporation and Employee recognize and
acknowledge that Employee is employed under this Agreement as an employee in a
position where Employee will be rendering personal services of a special,
unique, unusual and extraordinary character requiring extraordinary ingenuity
and effort by Employee. Employee
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agrees that the breach by him of this Agreement, including its covenants,
could not reasonably or adequately be compensated in damages in an action at
law and that the Corporation shall be entitled to injunctive relief, which
may include but shall not be limited to restraining Employee from rendering
any service that would breach this Agreement. However, no remedy conferred
by any of the specific provisions of this Agreement is intended to be
exclusive of any other remedy, and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by the Corporation shall not constitute
a waiver of the right to pursue other available remedies. If in any
proceeding, an arbiter shall refuse to enforce this Agreement, whether
because the restrictions contained herein are more extensive than is
necessary to protect the business of the Corporation, it is expressly
understood and agreed between the parties hereto that this Agreement is
deemed modified to the extent necessary to permit this Agreement to be
enforced in any such proceedings. The validity and enforceability of the
remaining provisions or portions thereof shall not be affected thereby and
shall remain valid and enforceable to the fullest extent permitted under
applicable laws.
16. CONTINUING OBLIGATIONS. Employee's obligations pursuant to
Paragraphs 10 and 11 of this Agreement and the rights and remedies of the
Corporation hereunder shall continue in effect beyond the term of this
Agreement and such obligations shall be binding on Employee's assigns, heirs,
executors, administrators and other legal representatives.
17. ACCOUNTING FOR PROFITS. Employee covenants and agrees that if he
violates the provisions of Paragraphs 10, 11 or 12, the Corporation shall be
entitled to an accounting and repayment of all profits, compensation,
commissions, remuneration or other benefits that Employee has realized and/or
may realize as a result of or in connection with any such violation. These
remedies shall be in addition and not in limitation of any injunctive relief
or other rights or remedies to which the Corporation is or may be entitled
at law, in equity or under this Agreement.
18. ARBITRATION. Any controversy or dispute between the parties to
this Agreement involving the construction, interpretation, application or
performance of the terms, covenants or conditions of this Agreement, or in
any way arising under this Agreement shall, be decided by neutral binding
arbitration in accordance with the rules of the American Arbitration
Association, and not by court action except as provided by Nevada law for
judicial review of arbitration proceedings. Judgment upon the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction thereof.
The parties shall have the right to discovery. The filing of a judicial
action to enable the recording of a notice of pending action, for order of
attachment, receivership, injunction, or other provisional remedies, shall
not constitute a waiver of the right to arbitrate under this provision.
19. WAIVER OR MODIFICATION. No waiver or modification of this
Agreement or of any covenant, condition, or limitation herein contained shall
be valid unless in writing and duly executed by the party to be charged
therewith. Furthermore, no evidence of any modification or waiver shall be
offered or received as evidence in any arbitration between the parties
arising out of or affecting this Agreement or the rights or obligations of
any party hereunder, unless such waiver or modification is in writing, duly
executed as aforesaid. The provisions of this Paragraph may not be waived
except as herein set forth.
5
<PAGE>
20. ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement between the parties as to the matters contained herein, and
supersedes any and all other agreements between them. The parties
acknowledge and agree that neither of them has made any representation with
respect to such matters of this Agreement or any representations except as
are specifically set forth herein, and each party acknowledges that he or it
has relied on his or its own judgment in entering into this Agreement. The
parties further acknowledge that statements or representations that may have
been heretofore made by either of them to the other are void and of no effect
and that neither of them has relied thereon in connection with his or its
dealing with the other.
21. CHOICE OF LAW. This Agreement and the performance hereunder and
all suits and special proceedings hereunder shall be construed in accordance
with the laws of the State of Nevada.
22. BINDING EFFECT OF AGREEMENT; ASSIGNMENT; MERGER; DISSOLUTION. This
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their heirs, successors, assigns and legal representatives. This
Agreement shall be construed as a contract for personal services by Employee
to the Corporation and shall not be assignable by Employee. In the event of
the sale, merger or consolidation of the Corporation and subject to
Employee's right to terminate this Agreement as herein provided, Employee
agrees that the Corporation may assign its rights and obligations hereunder
to its successor or purchaser.
23. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered by hand or when mailed by certified
registered mail, return receipt requested, with postage prepaid to their
current address or to such other address as they request in writing.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written above.
"Corporation"
americabilia.com
By:/s/ GARY MOORE
------------------------------------
Gary Moore, President
"Employee"
/s/ Keith Veltre
-----------------------------------------
KEITH VELTRE
7
<PAGE>
EXHIBIT 10.4
PROMISSORY NOTE
(Interest Only--Balloon)
$16,372.13 Las Vegas, Nevada November 30, 1999
FOR VALUABLE CONSIDERATION, the undersigned promises to pay to:
HENRY E. CARTWRIGHT
The sum of Sixteen Thousand Three Hundred Seventy Two and 13/100 DOLLARS
together with interest on the unpaid principal from December 1, 1999 at the
rate of Nine (9%) percent per annum, payable at maturity, and continuing
until June 1, 2000 at which time the payment of principal and accrued
interest will be due and payable in full.
PREPAYMENT CLAUSE: In the event of prepayment by borrower of the outstanding
principal balance at any time during the term of this loan, there will be no
prepayment penalty, nor will there be any refund of prepaid interest.
LATE CHARGE CLAUSE: In the event any payment is not paid within five (5) days
of the due date, a late charge equal to five (5%) of the payment due will
apply. In the event the balloon payment is not made within five (5) days of
the due date, a late charge of five (5%) percent of the balloon payment will
apply.
DEFAULT RATE: In the event any payment becomes delinquent more than thirty
(30) days, interest shall accelerate to Fifteen (15%) percent per annum
until the principal balance and accrued interest thereon are paid in full.
Should interest not be paid it shall thereafter bear like interest as the
principal. Principal and interest payable in lawful money of the United
States. If action be instituted in any Court to enforce any obligation
hereunder, the undersigned promise to pay such sum as the court may fix as
attorney's fees in said action.
AMERICABILIA.COM, INC.
By: /s/ GARY R. MOORE
- -----------------------------
Gary R. Moore, President
<PAGE>
EXHIBIT 10.5
PROMISSORY NOTE
(Interest Only--Balloon)
$17,457.88 Las Vegas, Nevada November 30, 1999
FOR VALUABLE CONSIDERATION, the undersigned promises to pay to:
GARY R. MOORE
The sum of Seventeen Thousand Four Hundred Fifty Seven and 88/100 DOLLARS
together with interest on the unpaid principal from December 1, 1999 at the
rate of Nine (9%) percent per annum, payable at maturity, and continuing
until June 1, 2000 at which time the payment of principal and accrued
interest will be due and payable in full.
PREPAYMENT CLAUSE: In the event of prepayment by borrower of the outstanding
principal balance at any time during the term of this loan, there will be no
prepayment penalty, nor will there be any refund of prepaid interest.
LATE CHARGE CLAUSE: In the event any payment is not paid within five (5) days
of the due date, a late charge equal to five (5%) of the payment due will
apply. In the event the balloon payment is not made within five (5) days of
the due date, a late charge of five (5%) percent of the balloon payment will
apply.
DEFAULT RATE: In the event any payment becomes delinquent more than thirty
(30) days, interest shall accelerate to Fifteen (15%) percent per annum
until the principal balance and accrued interest thereon are paid in full.
Should interest not be paid it shall thereafter bear like interest as the
principal. Principal and interest payable in lawful money of the United
States. If action be instituted in any Court to enforce any obligation
hereunder, the undersigned promise to pay such sum as the court may fix as
attorney's fees in said action.
AMERICABILIA.COM, INC.
By: /s/ DIXIE CARTWRIGHT
- -----------------------------------------
Dixie Cartwright, Secretary/Treasurer
<PAGE>
Exhibit 10.6
LEASE
- BETWEEN -
KPT REMIC LOAN LLC
LANDLORD
- AND -
AMERICABILIA, INC.
DBA AMERICABILIA
TENANT
VEGAS POINTE PLAZA
LAS VEGAS, NEVADA
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. SUMMARY OF TERMS
1.01. LANDLORD
1.02. TENANT
1.03. TRADE NAME
1.04. GUARANTOR
1.05. BROKER
1.06. PERMITTED USE
1.07. SHOPPING CENTER
1.08. PREMISES
1.09. CONDITION OF PREMISES
1.10. SIGN(S)
1.11. PROJECTED DELIVERY DATE
1.12. COMMENCEMENT DATE
1.13. TERM
1.14. OPTION TERM
1.15. TENANT IMPROVEMENT ALLOWANCE
1.16. RADIUS
1.17. SECURITY DEPOSIT
1.18. MINIMUM RENT
1.19. PERCENTAGE RENT RATE AND AMOUNTS
1.20. ADDITIONAL CHARGES
ARTICLE 2. SPECIAL TERMS
ARTICLE 3. DEFINITIONS
3.01. ADDITIONAL CHARGES
3.02. BUILDING
3.03. COMMON AREA
3.04. CONSUMER PRICE INDEX
3.05. DELIVERY DATE
3.06. EFFECTIVE DATE
3.07. GROSS SALES
3.08. HAZARDOUS MATERIALS
3.09. LEASE YEAR
3.10 MAJOR TENANT
3.11 PERCENTAGE RENT
3.12 PRIME RATE
3.13 RENT
3.14 STATE
3.15 TAX YEAR
3.16 TAXES
3.17 TENANT'S PROPORTIONATE SHARE
ARTICLE 4. GRANT AND TERM
4.01. SHOPPING CENTER; PREMISES
4.02. TERM
ARTICLE 5. PREPARATION/CONDITION OF PREMISES; ALTERATIONS
5.01. LANDLORD'S WORK
5.02. DELIVERY DATE
5.03. TENANT'S WORK
5.04. PERFORMANCE OF TENANT'S WORK AND OTHER ALTERATIONS
5.05. REMOVAL BY TENANT
2
<PAGE>
ARTICLE 6. CONDUCT OF BUSINESS
6.01 USE AND TRADE NAME
6.02 OPERATION OF BUSINESS
6.03 UTILITIES
6.04 SIGN
6.05 TENANT'S ADDITIONAL COVENANTS
6.06 STORAGE AND OFFICE SPACE
6.07 CARE OF PREMISES REGARDING HEAVY EQUIPMENT/FIXTURES
6.08 NOTICE BY TENANT
6.09 RADIUS
6.10 HAZARDOUS MATERIALS
ARTICLE 7. RENT
7.01. PAYMENTS BY TENANT
7.02. MINIMUM RENT
7.03. PERCENTAGE RENT
7.04. ADDITIONAL CHARGES
7.05. INTEREST ON PAST-DUE SUMS/LATE CHARGE
7.06. SECURITY DEPOSIT
ARTICLE 8. COMMON AREA
8.01. USE OF COMMON AREA
8.02. COMMON AREA MAINTENANCE EXPENSES
ARTICLE 9. TAXES
9.01. TENANT TO PAY PROPORTIONATE SHARE OF TAXES
ARTICLE 10. INSURANCE, INDEMNITY AND LIABILITY
10.01 LANDLORD'S INSURANCE OBLIGATIONS
10.02. TENANT'S INSURANCE OBLIGATIONS
10.03. GENERAL PROVISIONS
10.04. COVENANTS TO HOLD HARMLESS
10.05. LIABILITY OF LANDLORD TO TENANT
ARTICLE 11. ADVERTISING AND MARKETING
11.01 MARKETING FUND
11.02. TENANT'S CONTRIBUTION
11.03. MISCELLANEOUS MARKETING REQUIREMENTS
ARTICLE 12. REPAIRS AND MAINTENANCE
12.01. LANDLORD'S RESPONSIBILITIES
12.02. TENANT'S RESPONSIBILITIES
ARTICLE 13. DEFAULT AND REMEDIES
13.01 ELEMENTS OF DEFAULT
13.02. LANDLORD'S REMEDIES
13.03. BANKRUPTCY
13.04. ADDITIONAL REMEDIES AND WAIVERS
13.05. CURE OF TENANT'S FAILURE
ARTICLE 14. DESTRUCTION OF PREMISES
14.01 CONTINUANCE OF LEASE
14.02. RECONSTRUCTION
3
<PAGE>
ARTICLE 15. CONDEMNATION
15.0 EMINENT DOMAIN
15.02. RENT APPORTIONMENT
15.03. TEMPORARY TAKING
ARTICLE 16. ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE
16.01. NO ASSIGNMENT, ETC. WITHOUT LANDLORD'S CONSENT
16.02. TENANT REQUEST
16.03. LANDLORD'S RIGHT TO TERMINATE
16.04. COSTS
16.05. ASSUMPTION OF OBLIGATIONS
16.06. CHANGE OF CONTROL
ARTICLE 17. SUBORDINATION; FINANCING; TRANSFERS
17.01. SUBORDINATION
17.02. ATTORNMENT
17.03. FINANCING REQUIREMENTS
17.04. TRANSFER OF LANDLORD'S INTEREST
17.05. ESTOPPEL CERTIFICATE
ARTICLE 18. DELAYS
ARTICLE 19. END OF TERM
19.01. RETURN OF PREMISES
19.02. HOLDING OVER
ARTICLE 20. COVENANT OF QUIET ENJOYMENT
ARTICLE 21. MISCELLANEOUS
21.01. ENTIRE AGREEMENT
21.02. NOTICES
21.03. GOVERNING LAW
21.04. SUCCESSORS
21.05. LIABILITY OF LANDLORD
21.06. BROKERS
21.07. NO PARTNERSHIP
21.08. ACCORD AND SATISFACTION
21.09. WAIVER OF COUNTERCLAIMS
21.10. WAIVER OF JURY TRIAL
21.11. SEVERABILITY
21.12. RULES AND REGULATIONS
21.13. FINANCIAL STATEMENTS
21.14. RELOCATION
21.15. FINANCING
21.16. LIEN ON FIXTURES
21.17. ATTORNEY FEES
21.18. GOOD STANDING AND DUE AUTHORIZATION
21.19. REIT QUALIFICATIONS
21.20. GENERAL RULES OF CONSTRUCTION
21.21. RECORDING
21.22. EFFECTIVE DATE
21.23. HEADINGS
</TABLE>
Exhibit A Site Plan
Exhibit B Landlord's Work/Tenant's Work
Exhibit C Tenant Sign Criteria
4
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made as of the 7 day of May,
1999, by and between the Landlord and Tenant named below who, in consideration
of the mutual covenants and agreements m this Lease, agree as follows:
ARTICLE 1. SUMMARY OF TERMS
Where used in this Lease, the following Terms shall have the meanings
ascribed:
<TABLE>
<S> <C> <C>
1.01. LANDLORD: KPT REMIC LOAN LLC
NOTICE ADDRESS: KPT REMIC LOAN LLC
C/O KONOVER PROPERTY TRUST, INC.
11000 REGENCY PARKWAY
THIRD FLOOR, EAST TOWER
CARY, NORTH CAROLINA 27511
ATTENTION: VEGAS POINTE PLAZA, LAS VEGAS,
NEVADA
PAYMENT ADDRESS: KONOVER PROPERTY TRUST, INC
KPT REMIC LOAN LLC
POST OFFICE BOX 601240
CHARLOTTE, NORTH CAROLINA 28260-1240.
ATTENTION: VEGAS POINTE PLAZA, LAS VEGAS,
NEVADA
TELEPHONE NUMBER: (919) 462-8787
TELECOPIER NUMBER: (919) 462-8799
1.02. TENANT: AMERICABILIA, INC.
NOTICE ADDRESS: 9155 LAS VEGAS BLVD., SOUTH
SUITE 242
LAS VEGAS, NEVADA 89123
TELEPHONE NUMBER: (702) 795-1580
TELECOPIER NUMBER: (702) 795-1584
OPERATIONS CONTACT: HANK CARTWRIGHT
1.03. TRADE NAME: AMERICABILIA
1.04. GUARANTORS: HANK CARTWRIGHT AND DIXIE CARTWRIGHT
1.05. BROKER: N/A
1.06. PERMITTED USE: THE SALE, AT RETAIL, OF MEMORABILIA. TENANT
MAY SELL VITAMINS IN AN AREA NOT TO EXCEED
300 SQUARE FEET OF THE SALES FLOOR IN THE
PREMISES AND TEN PERCENT (10%) OF TENANT'S
GROSS SALES.
1.07. SHOPPING CENTER: VEGAS POINTE PLAZA
LAS VEGAS, NEVADA
5
<PAGE>
1.08. PREMISES: BUILDING 2, SUITE NUMBER N/O, CONSISTING OF
APPROXIMATELY 6,500 SQUARE FEET OF LEASABLE
AREA AS SHOWN ON EXHIBIT A.
1.09. CONDITION OF PREMISES: TENANT SHALL RECEIVE THE PREMISES IN "AS IS"
CONDITION. AS A RESULT, THE "LANDLORD'S WORK"
PORTION OF EXHIBIT B SHALL ONLY APPLY IN THE
EVENT OF CASUALTY.
1.10 SIGN(S): IN ADDITION TO SECTION 6.04, ALTHOUGH THE
TENANT SHALL, AT ITS EXPENSE, PROVIDE ITS
UNDERCANOPY SIGN IN ACCORDANCE WITH EXHIBIT
C, LANDLORD SHALL INSTALL SUCH UNDERCANOPY
SIGN AT TENANT'S EXPENSE (WHICH EXPENSE TO
TENANT SHALL IN NO EVENT EXCEED $175.00).
1.11. PROJECTED DELIVERY DATE: MAY 15, 1999
1.12. COMMENCEMENT DATE: JUNE 1, 1999
1.13. TERM: ONE (1) YEAR
1.14. OPTION TERM: ONE (1) THREE (3) YEAR OPTION (SEE SECTION
4.02)
1.15. TENANT IMPROVEMENT
ALLOWANCE: N/A
1.16. RADIUS: FIVE (5) MILES FROM THE OUTSIDE BOUNDARY OF
THE SHOPPING CENTER.
1.17. SECURITY DEPOSIT: $3,500.00 (SEE SECTION 7.06)
1.18. MINIMUM RENT:
</TABLE>
<TABLE>
<CAPTION>
YEAR MONTHLY RENT MONTHLY RENT
---- ------------ ------------
<S> <C> <C>
MONTHS 1-6 $3,000.00 $3,000.00
MONTHS 7-12 $3,500.00 $3,500.00
</TABLE>
<TABLE>
<CAPTION>
OPTION YEARS ANNUAL RENT PSF MONTHLY RENT ANNUAL RENT
------------ --------------- ------------ -----------
<S> <C> <C> <C>
2 $6.84 $3,705.00 $44,460.00
3 $8.04 $4,355.00 $52,260.00
4 $9.24 $5,005.00 $60,060.00
</TABLE>
1.19. PERCENTAGE RENT RATES AND AMOUNTS: N/A
1.20. ADDITIONAL CHARGES: N/A
6
ARTICLE 2. SPECIAL TERMS
None.
ARTICLE 3. DEFINITIONS
Where used in this Lease, the following Definitions shall have the
meanings ascribed:
3.01. "ADDITIONAL CHARGES" means all sums of money or charges of any kind
other than Minimum Rent and Percentage Rent payable by Tenant to Landlord
pursuant to this Lease. Additional Charges shall be considered "Rent" for all
purposes.
3.02. "BUILDING" means the structure in which the Premises is located.
3.03. "COMMON AREA" means the parking areas, pedestrian sidewalks and
bridges, mall areas, truck ways, loading docks, landscaped areas, delivery
areas, park areas, access and perimeter roads, and elevators, escalators and
stairs not contained in leased areas, and any other areas in the Shopping
Center designated by Landlord from time to time as Common Area.
3.04. "CONSUMER PRICE INDEX" means the Revised Consumer Price Index for the
U.S. Department of Labor for all urban consumers (all items, 1982-84=100). The
"Previous Index" with respect to each Lease Year means the Index published for
the month closest, but prior to the first day of the immediately preceding
Lease Year. The "Current Index" with respect to each Lease Year, means the
Index published the month closest, but prior to, the first day of the Lease
Year.
3.05. "DELIVERY DATE" means the date that any existing occupant has vacated
and surrendered the Premises, Landlord's Work is substantially completed,
except for any work dependent upon work to be performed by the Tenant, and
Landlord notifies the Tenant that the Premises are available to Tenant to
perform Tenant's Work (as defined in Section 5.03).
3.06. "EFFECTIVE DATE" means the date the Lease has been executed by both
parties.
3.07. "GROSS SALES" means the total amount of the actual sales price of all
sales of merchandise or services arising out of or payable on account of all
the business conducted in, on, or from the Premises by or because of Tenant or
any other seller (including sublessees, assignees, licensees and
concessionaires), including all orders for merchandise taken or filled at or
from the Premises, and including all deposits not refunded to customers.
3.08. "HAZARDOUS MATERIALS" means and includes any materials or components
of materials now or hereafter designated or regulated as hazardous, dangerous,
toxic or harmful by any governmental authority with jurisdiction over the
Shopping Center or by orders, awards and standards relating to Hazardous
Materials adopted by any federal, state or local government or by any court,
agency, instrumentality, regulatory authority or commission with jurisdiction
over the Shopping Center.
3.09. "LEASE YEAR" means:
(a) for purposes of calculating and referring to Percentage Rent,
for the first (potentially partial) Lease Year, the period that begins on the
first day of the month following the Commencement Date (or, if the Commencement
Date is the first day of the month, on the Commencement Date) and ends on the
following December 31. After the first Lease Year, the term "Lease Year" means
a period of twelve (12) consecutive calendar months beginning January 1 and
ending December 31, except that the final Lease Year shall end on the sooner of
the date the Term expires or the date Lease is terminated. The first and final
Lease Years may consist of fewer than twelve (12) full calendar months; and
(b) for all other purposes, for the first Lease Year, the period
from the Commencement Date to the last day of the twelfth (12th) calendar month
next following. After the first Lease Year, "Lease Year" means a period of
twelve (12) consecutive calendar months beginning the next day following the
end of the prior Lease Year.
7
<PAGE>
3.10. "MAJOR TENANT" means any single tenant that leases at least twenty
thousand contiguous square feet in the Shopping Center.
3.11. "PERCENTAGE RENT" means the Percentage Rent Rate in Section 1.19
multiplied by all Gross Sales during a Lease Year in excess of the applicable
Sales Breakpoint for that Lease Year.
3.12. "PRIME RATE" means the prime rate published from time to time in the
Wail Street Journal.
3.13. "RENT" means the sum of the Minimum Rent and all Additional Charges.
3.14. "STATE" means the state where the Shopping Center is located.
3.15. "TAX YEAR" means a period established as the real estate tax year by
the taxing authorities having jurisdiction over the Shopping Center.
3.16. "TAXES" means and includes:
(a) All real estate taxes, assessments, license fees or charges,
excises on rent, water and sewer rents, and other governmental impositions that
are levied in connection with the use, occupancy or possession of all land,
buildings, and improvements comprising the Shopping Center during the Term;
(b) All expenses incurred in connection with the institution,
prosecution, conduct and maintenance of any negotiations, settlements, actions,
or proceedings relating to the amount of any Taxes and including a fair and
equitable allocation of Landlord's costs in administering the Taxes payable and
paid;
(c) Any current installment of any assessment for public
betterment or improvement and the interest on unpaid installments;
(d) Any payments in lieu of taxes ("PILOT") made to any
governmental authority pursuant to any PILOT or similar agreement entered into
with the governmental authority in connection with any industrial development
authority financing. The amount of PILOT payments included in Taxes shall not
exceed an amount equal to what the Taxes would have been if the Shopping Center
was owned by a taxable entity.
"TAXES" do not include:
(a) Any charge such as a water meter charge or sewer rent
measured by the consumption of the actual user of the item or service for which
the charge is made;
(b) Any inheritance, estate, succession, transfer, gift,
franchise, corporate, income or profit tax or capital levy imposed upon
Landlord.
3.17 "TENANT'S PROPORTIONATE SHARE" OR "PROPORTIONATE SHARE" means, in the
first calendar year or partial calendar year and with respect to Common Area
Maintenance Expenses, Taxes, and Marketing Fund, the then current estimated
amount, which may differ from that shown in Section 1.20. After the first
calendar year or partial calendar year, as applicable: (a) with respect to
Carmon Area Maintenance Expenses, and Taxes, the term means the product of
Landlord's estimate for the charges multiplied by a fraction, the numerator of
which is the gross leasable area of the Premises and the denominator of which
shall be the total gross leasable area in the Shopping Center, less the gross
leasable area leased by Major Tenant(s); and (b) with respect to all other
charges, the term means the product of Landlord's estimate for the charges
multiplied by a fraction, the numerator of which is the gross leasable area of
the Premises and the denominator of which shall be the number of square feet of
leased area in the Shopping Center, less the gross leasable area leased by
Major Tenant(s).
8
<PAGE>
ARTICLE 4. GRANT AND TERM
4.01. SHOPPING CENTER; PREMISES.
(a) Landlord leases to Tenant and Tenant leases from Landlord the
Premises in the Shopping Center shown on Exhibit A (the "Site Plan").
(b) Landlord is not leasing the roof, floor, ceiling, the
exterior of the walls, and the area above and beneath the Premises to the
Tenant. Landlord may, at any time, enter the Premises and any of its
appurtenances (including with workers and materials) to: (i) inspect the
Premises; (ii) make repairs, replacements or alterations to the Premises or the
Shopping Center; or (iii) show the Premises to prospective purchasers, lenders
or lessees. Except in the event of an emergency, Landlord shall notify Tenant
prior to entering the Premises. In the event of an emergency, no notice shall
be required. Landlord may erect, use, maintain, and repair pipes, conduits,
plumbing, vents, ducts and wires in, to, under, over and through the Premises
as Landlord determines necessary or appropriate for the proper operation and
maintenance of the Premises and the Shopping Center. Landlord shall perform
work in a manner so as not to unreasonably interfere with Tenant's operations
in the Premises, considering the nature of the work to be performed. Landlord's
exercise of its rights under this subsection shall never constitute an eviction
or permit Tenant to abate or otherwise reduce any payment of Rent.
(c) The Premises includes all of the area within the mid-line of
interior walls that separate the Premises from other leasable areas and within
the exterior face of all other demising walls, including any entranceways and
vestibules to the Premises. The "leasable area" set forth in Section 1.08 shall
be used for all calculations throughout this Lease based on square footage,
except Landlord may enter the Premises at any time to measure and obtain exact
square footage of the Premises. If the measurement reveals that the gross
leasable area of the Premises is different from that indicated in Section 1.08,
Landlord may make an appropriate adjustment to all Rent and other charges based
on the actual square footage of the Premises effective from the Commencement
Date.
(d) The Site Plan sets forth the general layout of the Shopping
Center. Landlord specifically reserves the right to change the number and
location of buildings, building dimensions, the number of floors in any of the
buildings, store dimensions, Common Area, and the identity and type of other
stores and tenancies and or at the Shopping Center. Landlord may locate or
erect in or on the Shopping Center permanent or temporary kiosks, structures
and other improvements of any type. Landlord's exercise of its rights under
this subsection may temporarily restrict or diminish the free flow of traffic
in the Shopping Center or temporarily create noise or other annoyances but
shall never constitute an eviction of Tenant or a disturbance of the use and
possession of the Premises.
4.02. TERM.
(a) The Term begins on the Commencement Date and expires at 11:59
p.m. local time on the last day of the last Lease Year of the Term set forth in
Section 1.13 (the "Expiration Date"), unless sooner terminated in accordance
with the provisions of this Lease.
(b) So long as this Lease has not expired or been terminated and
Tenant is not in Default either at the time of exercise of any Option Term or
at the commencement of any Option Term, Tenant may in accordance with
subsection (c) below extend the Term for the Option Term[s] set forth in
Section 1.14. Except as otherwise provided in this subsection, all terms and
conditions of this Lease shall apply during the Option Term[s], subject to any
adjustments to the Minimum Rent as described in Article 1. Sections 5.01 and
5.02 of this Lease shall not apply during any Option Term, as the Tenant shall
accept the Premises, Building, and Shopping Center in "as is" condition at the
beginning of any Option Term. Tenant shall, prior to the commencement of each
Option Term, make all alterations and improvements necessary for the Premises
to appear to be in substantially the same condition as the Premises existed at
the commencement of the Term.
(c) If Tenant is not in Default at the time of exercise, each
respective Option Term shall be considered exercised unless Tenant gives
Landlord written notice to the contrary at least ninety (90) days prior to the
expiration of the Term preceding an Option Term.
9
<PAGE>
ARTICLE 5. PREPARATION/CONDITION OF PREMISES; ALTERATIONS
5.01. LANDLORD'S WORK.
(a) Landlord does not make any representations about the
Premises, the Building, or the Shopping Center except as expressly set forth in
this Lease. Tenant acquires no rights, easements, licenses, or exclusives
unless expressly granted in this Lease. The Premises and its systems and
equipment are being delivered to Tenant in their "as is" condition as of the
date of this Lease, except that: (i) the HVAC unit shall be delivered in
working order; and (ii) Landlord, at its expense, shall perform the work (if
any) described in Exhibit B ("Landlord's Work"). Any other work performed by
Landlord, other than the Landlord's Work, shall be at Tenant's request and
expense and the cost of the additional work, plus a fifteen percent (15%)
administrative fee, shall be paid by the Tenant within ten (10) days after the
Landlord presents a bill for the work to the Tenant. Acceptance of possession
of the Premises by Tenant shall be conclusive evidence that Landlord's Work has
been fully performed in the manner required.
If any portion of Landlord's Work is dependent upon Tenant's plans
and specifications or other information or materials to be supplied by Tenant,
and Tenant fails to provide the plans and specifications or other information
or materials properly or timely then, at Landlord's option: (1 ) Landlord may
elect not to perform that portion of Landlord's Work, (2) Landlord may perform
that portion of Landlord's Work in accordance with plans and specifications or
other information determined by Landlord in its sole discretion to be
appropriate, or (3) Landlord may wait for the appropriate plans and
specifications or other information or materials from the Tenant. Should
Landlord elect to wait for the appropriate plans and specifications or other
information or materials from Tenant, then Tenant shall be required to pay
Minimum Rent and Additional Charges for a period preceding the Commencement
Date equal to the number of days that the Delivery Date was delayed as a result
of such wait.
(c) Within ten (1 O) days after the expiration or early
termination of this Lease, Tenant shall provide Landlord with documentation
satisfactory to Landlord evidencing that, as of the expiration or termination
date, all systems and equipment in the Premises were in working order. If
Tenant fails to provide the required documents or fails to return all systems
and equipment in the Premises to Landlord in working order, and Landlord incurs
costs as a result, Tenant shall reimburse Landlord for its costs within ten
(1O) days after Landlord sends Tenant a request for reimbursement.
5.02. DELIVERY DATE. Landlord makes no representation as to the Delivery
Date or the Commencement Date of this Lease. The obligations of Tenant under
this Lease shall not be affected by a postponement of the Projected Delivery
Date. Landlord shall not be liable for failure to deliver possession of the
Premises on any projected Delivery Date or Commencement Date, and Tenant
expressly waives the provisions of any law to contrary. If requested by Tenant,
Landlord shall confirm the Delivery Date in writing. Tenant shall be required
to provide the following prior to Landlord's providing Tenant with possession
of the Premises;
(a) evidence of all insurance required under this Lease;
(b) the security deposit (if any); and
(c) the first month's Minimum Rent.
Should Tenant fail to provide Landlord with the items described in
(a) through (c) within thirty (30) days after Landlord has notified Tenant of
the Delivery Date, Landlord may terminate this Lease and shall be entitled to
recover from Tenant all costs incurred by Landlord as a result of Tenant's
failure to obtain possession.
5.03. TENANT'S WORK.
(a) Tenant shall complete the build-out of the Premises and
install its fixtures and equipment in accordance with that part of Exhibit B
entitled "Tenant's Work". Landlord may perform any part of Tenant's Work if
Tenant fails to perform any of Tenant's Work or if, in Landlord's reasonable
judgment, it is necessary to coordinate the opening of or maintain the existing
operation of the Shopping Center. Tenant shall reimburse Landlord for any of
Tenant's Work performed by the Landlord within ten (10) days after Landlord
presents an invoice for the work to Tenant. During the course of Tenant's
Work, Tenant shall be responsible for collecting and removing all trash and
construction debris. Landlord may elect to furnish trash or construction debris
receptacles. If the Landlord provides trash or construction debris receptacles,
Tenant shall reimburse Landlord for the cost (as reasonably estimated by
Landlord) of the receptacles and for removing Tenant's trash. In addition,
Tenant shall reimburse Landlord (as reasonably estimated by Landlord) for any
temporary electricity or other utilities furnished by Landlord to the Premises
and any required construction barricades. Tenant shall perform any other work
necessary to open its store for business, including obtaining all approvals and
certificates of occupancy. The Premises shall be stocked with suitable
merchandise by Tenant, fully staffed and open for business to the public, on or
before the Commencement Date.
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(b) Tenant agrees to furnish to Landlord its plans and
specifications for the Premises prepared in the manner and within the time
periods prescribed by Landlord. Tenant shall be solely responsible for its
plans and specifications. Landlord's approval or modifications of Tenant's
plans and specifications shall not constitute the assumption of any
responsibility by Landlord for their accuracy or sufficiency. In addition to
complying with the requirements in Exhibit B, Tenant shall comply with any
reasonable rules and regulations Landlord may impose regarding work performed
by Tenant, including rules pertaining to installations on and access to the
roof of the Building. Landlord may prohibit access to the roof of the Building
by anyone other than Landlord's contractors. Tenant shall schedule its work so
as not to interfere with any work being performed by Landlord or by any other
tenant in the Shopping Center or with the operation of any tenant's business at
the Shopping Center. Landlord shall not be liable for any loss of or damage to
any fixtures, equipment, merchandise, or other property belonging to Tenant or
its agents, employees and contractors installed or left in the Premises prior
to the Commencement Date. Tenant's entry upon and occupancy of the Premises
prior to the Commencement Date shall be governed by the terms of this Lease.
5.04. PERFORMANCE OF TENANT'S WORK AND OTHER ALTERATIONS.
(a) Except for painting and carpeting, Tenant shall not make or
cause to be made any alterations, repairs, additions or improvements in or to
the Premises without providing to Landlord all plans and specifications
required by Landlord and obtaining Landlord's prior written consent. Any
repairs, alterations, additions or improvements shall be performed in a good
and workmanlike manner and in accordance with all applicable legal and
insurance requirements and all plans and specifications approved by Landlord.
Any work performed by Tenant shall be subject to Landlord's inspection and
approval after completion.
(b) Prior to the commencement of any work by Tenant, Tenant shall
obtain public liability, workers' compensation and builder's risk insurance, in
amounts and with coverage satisfactory to Landlord, to cover every contractor,
subcontractor and material supplier providing materials and/or labor for the
Premises. Tenant shall deliver duplicate originals or certificates of all
required insurance to Landlord for written approval. Landlord shall not
unreasonably withhold or delay approval of Tenant's required insurance.
Required policies shall name Landlord as an additional insured, shall be
non-cancelable without thirty (30) days' prior written notice to Landlord, and
shall be with companies acceptable to Landlord. In addition, should Tenant have
a net worth in excess of Fifty Million Dollars ($50,000,000), Landlord may,
prior to the commencement of Tenant's Work or in connection with any other
alterations, repairs, additions or improvements to be made by Tenant, require
Tenant to furnish Landlord with labor and material payment and performance
bonds on A.I.A. forms, in favor of and in amounts satisfactory to Landlord
underwritten by a surety company acceptable to Landlord, guaranteeing the
completion of all work and payment of all persons providing materials and labor
for the Premises.
Tenant shall timely obtain and deliver to Landlord a copy of all
certificates and approvals with respect to work done and installations made by
Tenant required for the issuance of a certificate of occupancy or the
Premises. Tenant shall promptly repair, clean and restore to their prior
condition all portions of the Shopping Center affected by any work of Tenant.
It shall be Tenant's continuing obligation to keep and maintain the Premises
and all other parts of the Shopping Center free from all liens arising out of
any work performed, materials furnished, or obligations incurred by or for
Tenant. Tenant shall discharge or bond off any lien within ten (10) days after
the lien is filed. If Tenant fails to discharge any lien, Landlord may bond or
pay the lien without inquiring into the validity or merits of the lien. All
sums advanced and fees incurred (including legal fees) by Landlord in
discharging a lien or posting a bond shall be paid by Tenant on demand as
Additional Charges. In addition, Tenant shall replace any bond posted by
Landlord on Tenant's behalf with an equivalent bond within seven (7) days after
Landlord demands a replacement bond.
5.05. REMOVAL BY TENANT. Upon expiration or termination of the Lease, if
Tenant has paid all Rents in full and performed all of its other obligations
under this Lease, Tenant may remove trade fixtures, furniture and equipment
installed by Tenant. Prior to the expiration or termination of the Lease,
Landlord may, by written notice, designate any alterations, decorations,
additions and improvements that shall be removed by Tenant. Tenant shall
promptly remove all alterations, decorations, additions and improvements
designated by Landlord and repair any damage caused by removal. Except as
otherwise provided in this section, all repairs, alterations, decorations,
additions and improvements made by Tenant shall attach to the leasehold and
become the property of the Landlord and shall not be removed by the Tenant upon
expiration or termination of the Lease.
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ARTICLE 6. CONDUCT OF BUSINESS
6.01. USE AND TRADE NAME. Tenant shall continuously use, occupy and operate
the Premises solely for the Permitted Use. Tenant shall operate its business in
the Premises only under the Trade Name. Tenant shall refer to the Shopping
Center by its name and 1ogo whenever designating the location of the Premises
in all local or regional advertising, billboards, stationery and other local or
regional media.
6.02. OPERATION OF BUSINESS.
(a) Tenant shall use, occupy, and operate the entire Premises by
being open for business to the public every day during the Term other than on
the days Landlord permits the Shopping Center to be closed. Notwithstanding
the foregoing, Tenant's hours of operation shall be at least the following days
and hours: Monday through Friday from 8:00 a.m. to 6:00 p.m. Tenant's vacating
the Premises or ceasing operation shall not relieve Tenant of its obligations
under this Lease. Tenant shall conduct its business at all times in a high
class and reputable manner and in such a way to maximum Gross Receipts,
maintaining at all times a full staff of employees and a complete stock of
merchandise. All merchandise shall be first quality, unless Tenant's Permitted
Use allows sales at a discount. If Tenant's Permitted Use allows sales at a
discount, Tenant shall devote no more than five percent (5%) of the sales floor
area of the Premises for selling "seconds". "Seconds" shall be clearly marked
as "seconds." Tenant shall not conduct or advertise any auction, fire, going
out of business or bankruptcy sale in or about the Premises. Tenant shall
conduct its business in the Premises in a lawful manner and shall not engage in
any act that Landlord determines might damage the reputation of the Shopping
Center.
(b) Tenant shall install and maintain at all times any display
windows of the Premises. Tenant shall keep its display windows well lit during
all hours that the Shopping Center is open to the general public and during any
other hours designated by Landlord.
(c) If any governmental license or permit is required to conduct
any activity carried on in the Premises, or if the failure to procure any
license or permit might or would adversely affect Landlord or the Shopping
Center, then Tenant shall procure and maintain the license or permit. Tenant
shall provide copies of any required licenses or permits for Landlord's
inspection. Tenant shall comply with the requirements of any required license
or permit.
(d) If Tenant fails to comply with the provisions of Section 6.01
and this Section 6.02, Landlord shall be entitled to the liquidated damages
provided for in Section 7.03(i) and all remedies available at law and in
equity, including injunctive relief, to compensate Landlord for Landlord's
estimated damages during any period Tenant is not in full compliance with
Sections 6.01 and 6.02.
6.03. UTILITIES. Commencing with the Delivery Date and continuing
throughout the Term and any Option Term, Tenant shall arrange for and pay all
costs and charges for all utilities and services provided to the Premises.
Tenant shall pay directly to the public utility companies the cost of any
installation of all services and meters not included in Landlord's Work. Tenant
agrees to indemnify and hold Landlord harmless from and against any and all
claims arising from the installation and maintenance of utility services and
from all costs and charges for utilities used on or in the operation of the
Premises. Landlord may elect to provide any or all utilities directly to the
Premises, including electric, gas, water, sewer, heat, ventilation, chilled
water and air conditioning, and charge Tenant for these utilities directly as
Additional Charges pursuant to meters or submeters installed by Landlord, or
based on another method employed by Landlord. Landlord's charge to Tenant for
any and all utilities provided by Landlord shall not exceed the amount that
Tenant would pay for such utilities if furnished directly to Tenant by the
public utility. However, charges for electricity used to operate the Premises
shall be based on meter or submeter readings in the absence of actual readings.
6.04. SIGN. Tenant shall install and maintain one ( 1 ) sign affixed to the
front of the Premises. Prior to installing the sign, Tenant must obtain
Landlord's written approval of the sign's design, material, and location.
Tenant's sign shall conform to all applicable legal and insurance requirements.
Tenant's sign shall conform to Exhibit C. Tenant shall pay for all costs in
connection with the sign, including the cost of its proper installation and
removal and as well as damage to the Premises or Shopping Center caused by
installation or removal of the sign. Tenant shall keep its sign lit during all
hours that the Shopping Center is open for business and during any other hours
designated by the Shopping Center property manager or Landlord in its rules and
regulations for the Shopping Center. Landlord may remove Tenant's sign in order
to conduct Building repairs or alterations, but shall replace the sign as soon
as practicable. No additional signs, graphics or appliques that can be seen
from outside the Premises shall be installed or displayed in, on or about the
Premises without Landlord's prior written consent. Any interior signs shall be
tasteful and professionally prepared. Landlord, without incurring any liability
for removal, may remove any sign or display that violates this section.
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6.05. TENANT'S ADDITIONAL COVENANTS. Tenant agrees that in the operation of
its business within the Premises, Tenant shall:
(a) pay before delinquency Rent and all taxes, assessments and public
charges levied, assessed or imposed upon Tenant's business or upon any fixtures,
furnishings, equipment, or other property in the Premises and pay when due all
license fees, permit fees and similar charges for the conduct of any business in
or from the Premises;
(b) not use any space in the Shopping Center outside the storefront and
wails of the Premises, including any entrance way or vestibule, for selling or
storing merchandise or for any other undertaking;
(c) not use the plumbing facilities in or serving the Premises other
than for the purpose for which they were constructed;
(d) not use any advertising medium, lights, or sound devices which
may be heard or observed from outside the Premises;
(e) not permit any odor to emanate from the Premises to which
Landlord or any occupant of the Shopping Center objects and shall, upon
written notice from Landlord, immediately stop causing the odor;
(t') keep the Premises and the interior and exterior of Tenant's
storefront in good repair and in neat, clean, safe and sanitary condition.
Tenant shall store all its trash and garbage in suitable receptacles within
the Premises and, if so directed by Landlord, shall at its own cost and
expense contract directly with a duly licensed carting company approved by
Landlord to remove and dispose of refuse and rubbish from the Premises daily.
Should Landlord elect to contract with a carting company on behalf of all or
substantially all the tenants, Tenant shall pay to Landlord Tenant's
Proportionate Share of Landlord's reasonable costs either as a separate
charge or as part of Common Area Maintenance Expenses or pay the carting
company directly, at Landlord's direction. Tenant shall not permit the undue
accumulation of rubbish, trash, garbage, debris, boxes, cans, or other refuse
in the Premises, or in any other part of the Shopping Center. If so directed
by Landlord, Tenant shall use the dumpster designated for Tenant's use;
(g) not leave any debris on or cause any damage to any platform,
loading dock or service area or any other portion of the Common Area used by
Tenant;
(h) not leave any awning or other projection to the outside wail or
window of the Building unless Tenant first obtains Landlord's written consent.
Landlord reserves the right not to consent to any awning or projection;
(i) not exhibit, inscribe, paint, or affix any sign, decals or
lettering on any part of the outside or inside of the Premises that are visible
from the exterior without first obtaining Landlord's written consent. No
showcases or other fixtures or goods associated with a Tenant's business shall
be placed in front of or affixed to any part of the exterior of the Building or
placed in any halls, corridors, aisles or the like or other parts of the
Building without first obtaining Landlord's written consent;
(.j) obtain prior consent of the Landlord before moving any freight or
furniture or bulky matter of any kind to or from the Premises. Tenants shall
cause all loading, unloading and deliveries to be made at the rear of their
store. Tenant shall not permit any delivery vehicle to park in the Shopping
Center any longer than necessary to load and unload. No hand trucks shall be
utilized in the delivery or receipt of any merchandise unless equipped with
rubber tires and side guards. The costs of any damage resulting from deliveries
shall be borne exclusively by Tenant;
(k) not bring or keep at or about the Premises any flammable,
combustible or explosive fluid, chemical or substances. Tenants shall obey all
fire regulations and procedures governing the Premises and the Building;
(1) not request Shopping Center employees to perform work outside of
their regular duties;
(m) not keep or permit the presence of any animal in the Premises or in
any other portion of the Shopping Center other than an animal being utilized by
a sight-impaired person or by law enforcement in carrying out their duties;
(n) not install or permit the installation of any antenna, satellite
dish or other receiving device on the Premises or the Building without
Landlord's prior written consent;
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(0) not tie into or permit others to tie into any utility located in
the Shopping Center, including electrical or water supply, or utilize the
services of an alternative electricity service provider, without Landlord's
prior written consent;
(p) not remove, alter or replace the Building standard ceiling light
diffusers in any portion of the Premises without Landlord's prior written
consent;
(q) not utilize any mechanical equipment that causes any noise or
vibration objectionable to Landlord or to any other tenant in the Building
unless installing vibration eliminators or other devices sufficient to eliminate
any noise or vibration;
(r) not place any vending machines in or about any portion of the
Premises;
(s) notify Landlord of any damage to Landlord's properly or accident.
fire or disorder occurring in the Premises or at the Shopping Center that comes
to Tenant's attention;
(t) ensure that its employees, agents, contractors and shippers park
only in areas designated by Landlord. Tenant agrees to pay Landlord a fee (not
to exceed $10.00 per vehicle per day) for any vehicle parked in violation of
this covenant. At Landlord's request, every tenant shall furnish Landlord with a
list of such tenant's employees and of the license plates of its employees'
vehicles;
(u) maintain at all times a service contract on the HVAC serving the
Premises, requiring (i) all air conditioning filters to be changed at least five
(5) times per year and (ii) the HVAC to be professionally inspected and
generally serviced at least quarterly. Tenant shall provide Landlord with a copy
of all such service contracts. All HVAC service contractors shall be required to
check in at the management office before and after each service call. If Tenant
does not comply with the foregoing, then in addition to all other rights and
remedies set forth in the Lease, Landlord shall be entitled to enter into a
service contract on Tenant's behalf, and have Tenant's HVAC units serviced, as
set forth in Section 13.05 of the Lease;
(v) promptly comply with all laws, ordinances, orders, rules,
regulations and requirements of all governmental authorities having jurisdiction
over the Shopping Center, and observe and comply with all covenants,
requirements, and restrictions of record and all notices from Landlord,
Landlord's mortgagee, or any insurance company relating to the Shopping Center
or the Premises, whether substantial, foreseen or unforeseen, ordinary or
extraordinary, or necessitating structural changes or improvements, or
interfering with Tenant's use or enjoyment of the Premises;
(w) not use the Common Area for display, sale, hand billing,
advertising, solicitation or any other similar undertaking;
(x) contract for semi-annual termite and pest control services for the
Premises, providing Landlord a copy of the contract for these services;
(y) participate in any recycling programs either sponsored by Landlord
or required by law;
(z) participate in any window cleaning program sponsored by Landlord;
(aa) keep the temperature within the Premises at a level so as to prevent
water from freezing in pipes and fixtures; and
(bb) unless specified otherwise under Tenant's Permitted Use, not operate
any food preparation equipment in the Premises or the Shopping Center, including
fryers, bakers, grills, or ovens. However, Tenant may keep one microwave oven on
the Premises for its employee's use.
6.06. STORAGE AND OFFICE SPACE. Tenant shall use as much of the Premises as
possible for selling space. Tenant shall store in the Premises only merchandise
that Tenant intends to offer for sale in the Premises. Tenant shall use for
office, clerical or other non-selling purposes only space in the Premises that
is reasonably required for Tenant's business.
6.07. CARE OF PREMISES REGARDING HEAVY EQUIPMENT/FIXTURES. Tenant shall not
move any safe or any other heavy or bulky equipment or fixtures in nor out of
the Premises without Landlord's prior written consent. Landlord shall not
unreasonably withhold consent to move these items. Tenant agrees that it will
not place a load on the floor of the Premises that exceeds the designed floor
load per square foot and will only install, operate or maintain any heavy
equipment in the Premises in a manner so as to achieve a proper distribution of
weight.
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6.08. NOTICE BY TENANT. Tenant shall notify Landlord promptly of any
damage to or accidents in the Premises or in the Building and of the need for
any repairs Tenant believes Landlord is obligated to make under this Lease.
6.09. RADIUS. In the event that during the Term Tenant or any person, firm
or corporation who or that controls Tenant or is controlled by Tenant or is
under common control with Tenant shall directly or indirectly, either
individually or as a partner or stockholder or otherwise, own, operate or become
financially interested in any similar or competitive store located within the
Radius, then Landlord may terminate this Lease upon sixty (60) days' notice.
Provided a different Trade Name is used, this section shall not apply to any
store that is open and is being operated by Tenant within the Radius before the
Effective Date or to any chain often (10) or more stores acquiring Tenant or
acquired by Tenant after the Effective Date.
6.10. HAZARDOUS MATERIALS.
(a) Notwithstanding anything to the contrary set forth below, Landlord
indemnifies and shall defend and hold harmless Tenant from and against all
claims associated with the presence of any Hazardous Materials existing on the
Premises as of the Delivery Date or placed on or around the Premises or the
Shopping Center by Landlord, its agents, employees or contractors.
(b) Tenant and its employees, agents and contractors shall not use nor
cause to be used any Hazardous Materials within the Premises or in the Shopping
Center in any manner that violates or may violate federal, state or local laws,
ordinances, rules, regulations or policies governing the use, storage,
treatment, transportation, manufacture, reftnement, handling, production or
disposal of Hazardous Materials.
(c) Except as otherwise provided in Section 6.10(a) above: (1) Tenant
shall be solely responsible for and shall comply with all laws, rules,
ordinances or regulations of any governmental authority having jurisdiction over
the Premises with respect to the presence or removal of Hazardous Materials
within the Premises and compliance with any environmental laws or ordinances
relating to the Premises or Tenant's use of the Premises; (2) Tenant shall be
responsible for all costs including costs incurred from monitoring, clean-up or
compliance incurred with respect to any Hazardous Materials placed in the
Premises after the Delivery Date and shall be responsible for all costs incurred
with respect to any Hazardous Materials placed in, on or under the Shopping
Center by Tenant or its agents, employees or contractors; and (3) Tenant shall
indemnify and hold harmless Landlord from and against any and all costs, claims,
suits, causes of action, losses, injury or damage, including personal injury or
property damage, and all sums paid for in settlement of claims, reasonable
attorney's fees, consultant and expert fees arising during or after the Term as
a result of Tenant's breach of its obligations under this section or resulting
from the presence or removal of any Hazardous Materials located in the Premises
on or before the date Tenant vacates and surrenders the Premises. (d) If
Tenant keeps any Hazardous Materials for use, disposal, generation, storage or
sale in or about the Premises, Landlord may require Tenant to obtain
environmental impairment liability insurance with a company or companies
satisfactory to Landlord with coverage of no less than One Million Dollars
($1,000,000.00) per occurrence to ensure that anything contaminated by Hazardous
Materials will be removed from the Premises and that the Premises will be
restored to a clean, neat, attractive, healthy, sanitary and non-contaminated
condition.
ARTICLE 7. RENT
7.01. PAYMENTS BY TENANT. Unless otherwise provided, Tenant shall pay to
Landlord Rent on or before the first day of every calendar month, without
demand, deductions, set-offs or counterclaims. All Rent shall be paid in United
States funds, made payable to Landlord and delivered to Landlord's Payment
Address unless otherwise specified by written notice from Landlord to Tenant.
7.02. MINIMUM RENT. Each month, Tenant shall pay base rent ("Minimum Rent")
for the Premises in the amount described in Section 1.18 for the applicable
Lease Year. The first payment of Minimum Rent shall be paid upon full execution
of this Lease. Minimum Rent for any partial calendar month shall be prorated
daily.
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7.03. PERCENTAGE RENT.
(a) Purposely omitted.
(b) Purposely omitted
(c) A "sale" occurs, and the entire amount of the sales price is
included in Gross Sales, whenever any of the following occurs, irrespective of
the type or method of payment:
(1) the transaction is initially reflected in the books or records of
Tenant or other seller;
(2) Tenant or other seller receives all or any portion of the sales
price; or
(3) the applicable goods or services are delivered to the customer.
(d) "Gross Sales" shall exclude: (1) proceeds from any sales tax, gross
receipts tax or similar tax that are separately stated and in addition to the
purchase price, (2) bona fide transfers of merchandise from the Premises to any
other stores or warehouses of Tenant (except when made to circumvent the terms
of this paragraph), and (3) sales of Tenant's fixtures and equipment not in the
ordinary course of Tenant's business. Refunds to customers for merchandise
purchased at the Premises and returned or exchanged, if previously included in
Gross Sales, shall be deducted from Gross Sales.
(e) Tenant shall operate its business in the Premises so that a
duplicate sales slip, invoice, non-resettable, serially numbered cash register
receipt, or other device for recording sales approved by the Landlord, shall be
issued for every sale or transaction. Tenant shall keep at the Premises or at
Tenant's home office, for at least three (3) years after the end of each Lease
Year, records in such form and with such detail as Landlord directs.
(f) On or before the tenth ( 10th) day of each calendar month, Tenant
shall submit a statement to Landlord showing Gross Sales for the preceding
month (the "Gross Sales Statement") and a true copy of any of its monthly sales
tax reports submitted to applicable governmental authorities. The Gross Sales
Statement shall be in a form satisfactory to Landlord and certified by Tenant
or, as applicable, an officer, its general partner, or owner. Landlord shall
keep Tenant's Gross Sales information confidential unless a prospective
mortgagee or purchaser of all or any part of the Shopping Center requires i t
or, if Landlord is required by law or court order to reveal it. Tenant shall
orally report its Gross Sales to Landlord when Landlord requests it.
(g) Within thirty (30) days after the end of each Lease Year, Tenant
shall submit to Landlord an annual statement setting forth the amount of Gross
Sales for each month during the Lease Year and the amount of Percentage Rent
required to have been paid by Tenant for the Lease Year. The annual statement of
Gross Sales shall be certified by a licensed certified public accountant. If
Tenant fails to deliver this annual statement to Landlord, Landlord may,
pursuant to Section 13.05, examine Tenant's records and prepare the required
annual statement on Tenant's behalf. An annual statement prepared by Landlord
shall be conclusive for the Lease Year in question.
(h) Landlord may inspect or audit Tenant's records. Any Landlord
inspection or audit of Tenant's records shall occur during Tenant's regular
business hours and at Tenant's offices within the continental United States. In
addition, if Tenant's records or record-keeping procedures were inadequate to
conduct an audit under generally accepted auditing standards, then Tenant shall
pay Landlord's costs of the audit or inspection.
(i) If Tenant fails to open the Premises to the public for business by
the Commencement Date or fails to operate its business in the Premises every day
according to this Lease, then as liquidated damages, and not as a penalty,
Tenant shall pay to Landlord each month, in addition to all other Rent, fifty
percent (50%) of the Minimum Rent until Tenant opens or resumes operation of
its business in accordance with Section 6. Liquidated damages for partial months
shall be prorated. This remedy shall be in addition to any and all other
remedies provided for in this Lease, including those set forth in Article 13.
Tenant agrees that the purpose of the liquidated damages payable under this
subsection is to compensate Landlord for the loss of Percentage Rent the
Landlord might have earned and for Landlord's other damages that cannot be
accurately calculated, including damages arising from the loss of the traffic
that would reduce the Percentage Rent Landlord might have earned from other
tenants, as well as the impact of a "dark" store on security, overall safety
perception, store maintenance, and similar concerns.
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7.04. ADDITIONAL CHARGES.
(a) Purposely omitted.
(b) Purposely omitted.
(c) Purposely omitted.
7.05. INTEREST ON PAST-DUE SUM/LATE CHARGE. If Tenant fails to pay when
due any sum payable under this Lease, the past-due sum shall accrue interest,
from the due date until paid, at the annualized rate of eighteen percent (18%)
or the highest rate permitted by applicable law, whichever is less. Interest on
past-due sums shall be considered Additional Charges for purposes of this Lease.
In addition, should Landlord receive any payment due under this Lease more than
five (5) days after the payment is due, Tenant shall pay Landlord an
administrative fee of Seventy-five Dollars ($75.00). This section shall not be
construed to extend the date for any payment required under this Lease.
Landlord's collection of a late charge or interest also shall not operate to
cure a Default. It is agreed that any late charge or the imposition of interest
is fair and reasonable under the circumstances and shall not be construed as
interest on debt.
7.06. SECURITY DEPOSIT. Upon Tenant's execution of this Lease, Tenant
shall deposit with Landlord the amount shown as the Security Deposit in Section
1.17. Landlord shall hold the Security Deposit as collateral security for
Tenant's faithful performance of all of the covenants and conditions contained
in this Lease. If at any time during the Lease Term any sum payable by Tenant
shall become overdue, then Landlord may apply any portion of the Security
Deposit to pay the overdue sum. If Tenant fails to keep or perform any of the
terms, covenants and conditions of this Lease, Landlord may apply any part or
all of the Security Deposit to compensate Landlord for its loss or damage due to
Tenant's breach. Should the Security Deposit or any portion of it be applied by
Landlord pursuant to this section, upon Landlord's written demand, Tenant shall
send Landlord a sufficient amount in cash to restore the Security Deposit to the
original sum deposited. Tenant's failure to restore the Security Deposit within
five (5) days after receipt of Landlord's demand shall constitute a Default. The
Security Deposit shall be returned to Tenant at the end of the Lease Term if
Tenant has made all payments and performed all covenants and agreements under
this Lease.
ARTICLE 8. COMMON AREA
8.01. USE OF COMMON AREA.
(a) Landlord agrees to operate, manage and maintain the Common Area of
the Shopping Center. Any food court in the Common Area, public rest rooms and
comfort stations, all roads and driveways serving the Shopping Center and all
other areas or improvements that may be provided for the convenience and use of
the occupants and tenants of the Shopping Center and their respective agents,
employees, customers and invitees and other licensees of Landlord shall be
maintained or repaired by Landlord or at Landlord's expense.
(b) Tenant's use and occupancy of the Premises shall include the
non-exclusive use of the Common Area and of the other facilities designated
by Landlord from time to time, subject to Landlord's rules concerning their
prescribed use.
(c) Landlord may, at any time, do any of the following regarding the
Common Area:
( 1 ) temporarily close any part to make repairs or changes;
(2) prevent the acquisition of public rights;
(3) discourage non-customer use;
(4) modify the traffic flow pattern and layout of parking spaces
and the entrances-exits to adjoining public streets or
walkways;
(5) utilize portions for entertainment, programs and displays;
(6) establish and modify reasonable rules;
(7) enter into, modify, and terminate easements and other
agreements; and
(8) perform other acts as Landlord finds appropriate.
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8.02. COMMON AREA MAINTENANCE EXPENSES.
(a) Purposely omitted.
(b) Purposely omitted.
(c) Purposely omitted.
(d) Purposely omitted.
(e) Purposely omitted.
(f) Landlord shall manage trash removal and recycling. Landlord may
retain an outside contractor to provide trash removal and recycling for the
tenants in the Shopping Center and authorize the contractor to charge the
tenants directly. If Landlord elects to contract for trash and garbage removal,
Tenant shall pay the contractor directly for the services rendered by the
contractor Recycling revenues, if any, shall belong to Landlord.
(g) Purposely omitted.
ARTICLE 9. TAXES
9.01. TENANT TO PAY PROPORTIONATE SHARE OF TAXES.
(a) Purposely omitted.
(b) Purposely omitted
(c) Tenant shall be responsible for all Taxes measured by rent payable by
Tenant, Taxes on Tenant's business, and Taxes, on Tenant's personal property.
ARTICLE 10. INSURANCE, INDEMNITY AND LIABILITY
10.01. LANDLORD'S INSURANCE OBLIGATIONS. Landlord shall maintain, in amounts
determined by Landlord, insurance covering: (a) the buildings in the Shopping
Center, including coverage for vandalism and general plate glass breakage, (b)
the improvements designated as Landlord's Work, and (c) the improvements to the
Premises provided by Tenant pursuant to this Lease exclusive of Tenant's
merchandise, trade fixtures, furnishings, equipment, plate glass, signs and
personal property. Landlord also shall carry, in amounts determined by Landlord,
a commercial general liability insurance including coverage for personal injury
and death property damage, defamation, and false arrest, and rental interruption
insurance.
10.02. TENANT'S INSURANCE OBLIGATIONS. Tenant shall maintain in effect at
all times the following insurance:
(a) Personal Property Insurance. Special form property insurance
against fire, vandalism, malicious mischief, sprinkler leakage and additional
perils included in a standard "All Risk" coverage endorsement insuring Tenant's
money and securities, accounts payable, merchandise, fixtures, furnishings,
equipment, plate glass and all items of business personal property of Tenant
located o# or in the Premises, in an amount not less than the full replacement
value of the items insured. This coverage should remain in force for as long as
this Lease is in effect.
(b) Commercial General Liability Insurance. A commercial general
liability insurance policy written on an occurrence form insuring against
liability risk on or about any part of the Premises or its appurtenances, or
arising from any of the acts set forth in Section 10.05 against which Tenant is
required to indemnify Landlord. The commercial general liability insurance shall
have. combined single limit coverage of not less than One Million Dollars
($1,000,000.00) per occurrence and not less than Two Million Dollars
($2,000,000.00) in the aggregate, including $300,000.00 Fire Legal Liability.
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(c) Product Liability Insurance. Product liability insurance for
merchandise offered for sale or lease from the Premises, including, if this
Lease covers leased premises in which food or beverages (particularly
alcoholic beverages) are sold or consumed, coverage for liability arising out
of the consumption of food or alcoholic beverages on or obtained at the
Premises, with a combined single limit coverage of not less than One Million
Dollars ($ 1,000,000.00) per occurrence and not less than Two Million Dollars
($2,000,000.00) in the aggregate.
(d) Liquor Liability Insurance. Should Tenant sell alcoholic
beverages for consumption on the Premises, liquor liability coverage in the
minimum amount of Two Million Dollars ($2,000,000.00).
(e) Workers compensation insurance and any other policies of
insurance required by law.
(f) During any time when construction is being performed, builder's
risk property insurance, and Owners, Contractors Protective (OCP) liability
or comparable commercial general liability insurance in the name of Landlord
with a combined single limit coverage of not less than One Million Dollars
($1,000,000.00) per occurrence and not less than Two Million Dollars
($2,000,000.00) in the aggregate.
(g) Any other policies of insurance requested by Landlord and
customarily maintained by persons in the same business
as Tenant. Landlord may increase any of the minimum limits prescribed in this
section.
10.03. GENERAL PROVISIONS.
(a) All insurance policies required to be maintained by Tenant
shall: (1) be issued by insurance companies reasonably satisfactory to
Landlord and authorized to do business in the State; (2) be written as
primary policy coverage and not contributing with or in excess of any
coverage which Landlord may carry; and (3) name Landlord and any managing
agent and Mortgagee of the Shopping Center as additional insureds as their
respective interests may appear. Neither the issuance of any insurance policy
required under this Lease, nor the minimum limits specified with respect to
Tenant's insurance coverage, shall be considered to limit or restrict
Tenant's liability arising out of this Lease. Before Tenant takes possession
of or commences work in the Premises, or before any required insurance policy
shall expire, Tenant shall deliver to Landlord a duplicate original or
certified copy of each required policy or renewal of required policy,
together with evidence of payment of all applicable premiums. In the event
that Tenant shall fail promptly to furnish evidence of any insurance
coverage, Landlord, at its sole option, may obtain the required insurance as
set forth in Section 13.05.
(b) Insurance required under this Lease may be carried under a
blanket policy covering the Premises and other locations of Tenant, provided
that the coverage required is at all times in effect. Required insurance may
be carried under a primary and an excess coverage policy. Each required
insurance policy shall provide, and any certificate evidencing the existence
of each insurance policy shall certify that, unless Landlord shall receives
thirty (30) days' prior written notice: (1) the insurance policy shall not be
cancelled and shall continue in full force and effect, (2) the insurance
carrier shall not fail to renew the insurance policy, and (2) no material
changes may be made in the insurance policy. "Insurance policy" as used in
this subsection includes any extensions or renewals of the insurance policy.
(c) Tenant shall not do or permit to be done any act upon the
Premises that violates the terms of Landlord's insurance policies referred to
in this Article 7 or cause an increase in the premiums. If any act or
omission of Tenant, its agents, employees or contractors causes an increase
in Landlord's insurance premiums or results in other increased costs to
Landlord in connection with the insurance policies, then Tenant shall
reimburse Landlord on demand as Additional Charges the amount of any costs or
increased premiums. If Tenant uses the Premises for the preparation of food,
Tenant shall reimburse Landlord on demand for any part of the premium for
insurance coverage under Section 10.01 that is required to be paid on account
of Tenant's use of the Premises for preparation of food.
(d) The parties agree that the all required fire and extended
coverage insurance policies shall contain a waiver of subrogation as
prescribed in Section 10.05.
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10.04. COVENANTS TO HOLD HARMLESS.
(a) Landlord and Tenant agree that with respect to any loss
generally covered under fire and extended coverage insurance, the party
suffering the loss releases the other party, its officers, directors,
employees, and agents from any and all claims and liability or responsibility
with respect to the loss, including losses arising out of the inability to
conduct business. The parties further agree that their respective insurance
companies shall have no right of subrogation against the other on account of
this release.
(b) Tenant indemnifies and agrees to hold harmless Landlord, its
officers, directors, partners, employees and agents and any mortgagee or
master lessor of the Shopping Center (the "Indemnitees") from and against any
and all claims, actions, damages, liability, costs and expense, including
attorneys' fees, that
( 1 ) arise from or are in connection with the operation of Tenant's
business at the Shopping Center, including injury to Tenant's
employees;
(2) arise from or are in connection with any acts, omissions, or
negligence of Tenant or Tenant's agents, employees,
contractors, licensees or invitees;
(3) result from any default, breach, violation or nonperformance
of any provision of this Lease by Tenant; or
(4) result from injury to person or property or loss of life
sustained in or about the Premises.
Tenant shall defend any and all claims actions, suits and proceedings that
may be brought against any Indemnitee with respect to the matters described
in this subsection. Tenant shall pay, satisfy and discharge any and all
judgments, orders and decrees that are entered against any indemnitee with
respect to the matters described in this subsection. Notwithstanding the
foregoing, any Indemnitee shall have the right, in its sole discretion, to
defend or move to intervene in any action to protect its interest. Should any
Indemnitee elect to defend or to intervene, Tenant shall continue to hold
harmless the Indemnitee and shall pay all costs, expenses and attorneys' fees
incurred or paid by the Indemnitee in connection with the action.
10.05. LIABILITY OF LANDLORD TO TENANT. Except with respect to any
damages resulting from Landlord's gross negligence, Landlord shall not be
liable to Tenant for, and Tenant hereby releases Landlord of and from, any
damage, loss, compensation, accident, or claims arising out of any of the
following:
(a) necessary repair of the Shopping Center;
(b) any interruption of Tenant's use of the Premises;
(c) the use or operation of any elevators, heating, cooling,
electrical or plumbing equipment;
(d) the termination of this Lease by reason of the destruction of
the Premises;
(e) any fire, robbery, theft, or any other casualty;
(f) any leakage in any part or portion of Premises or the Shopping
Center;
(g) any water, wind, rain or snow that may leak into, or flow from
part of the Premises or the Shopping Center;
(h) any acts or omissions of any other tenant in the Shopping Center;
(i) any explosion, casualty, utility failure or malfunction, or
falling objects; or
(.i) the bursting, stoppage or leakage of any pipes, drains,
conduits, appliances or plumbing works.
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ARTICLE 11. ADVERTISING AND MARKETING
11.01. MARKETING FUND. Purposely omitted.
11.02. TENANT'S CONTRIBUTION. Purposely omitted.
11.03. MISCELLANEOUS MARKETING REQUIREMENTS. Tenant agrees that it shall:
(a) Purposely omitted.
(b) Purposely omitted.
(c) Purposely omitted.
(d) Spend at least two percent (2%) of its annual Gross Sales on
advertising.
(e) Refer to the name and address of the Shopping Center, identify its
business activity, and use Tenant's Trade Name and the Shopping Center's 1ogo
in all its advertising for its business in the Premises.
ARTICLE 12. REPAIRS AND MAINTENANCE
12.01. LANDLORD'S RESPONSIBILITIES. Landlord shall maintain the sewer,
utility and water lines installed by Landlord located outside of and
servicing the Premises and the roof, foundation, floor slab, and exterior
walls of the Building, unless a need for repair arises from an act or
omission of Tenant, its agents, employees or contractors. All costs incurred
by Landlord for maintenance as described in this section shall be included in
Common Area Maintenance Expenses.
12.02. TENANT'S RESPONSIBILITIES.
(a) Except for the repair and maintenance obligations of Landlord
described in Section 12.01, Tenant shall maintain the Premises and all
equipment and fixtures within or appurtenant to the Premises in good
tenantable condition. Tenant's responsibilities include maintaining and
promptly making any and all necessary repairs to or replacement of the
following:
( 1 ) that portion of any pipes, lines, ducts, wires or conduits
contained within and serving solely the Premises;
(2) all windows, doors, glass, window frames and door frames
comprising the storefront of the Premises;
(3) Tenant's sign;
(4) the floors and floor coverings, doors, windows, walls,
partitions and ceilings in the Premises, including all entranceways and
vestibules;
(5) the heating, ventilating, air conditioning, electrical and
plumbing equipment and fixtures serving solely the Premises; and
(6) any pan of the Premises or the Shopping Center damaged as a
result of any act or omission of Tenant, its agents, contractors, employees
or invitees, or by the failure of Tenant to perform any of its obligations
under this Lease.
(b) Tenant, at its expense, shall maintain the Premises in a
sanitary and safe condition in accordance with State laws. Tenant shall
comply with all laws, ordinances, rules, regulations and orders of any lawful
authority having jurisdiction affecting the Premises or Tenant's use of the
Premises.
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(c) Tenant shall install and maintain fire extinguishers and other
fire protection devices required by any governmental agency or insurer. If
any governmental authority requires or recommends any changes in the
sprinkler system or other fire equipment by reason of Tenant's business or
the location of partitions, trade fixtures, or other contents of the
Premises, or if for any of these reasons any changes become necessary to
prevent the imposition of a penalty or charge against the full allowance for
a sprinkler system in insurance rates, Landlord's contractor shall promptly
make the changes, and Tenant shall pay Landlord for the changes within ten
(10) days after Landlord's request for payment.
ARTICLE 13. DEFAULT AND REMEDIES
13.01. EVENTS OF DEFAULT. If any one or more of the following events
occur, the event or events shall constitute a "Default" under this Lease.
(a) Tenant fails to operate its business in compliance with Sections
6.01 and 6.02.
(b) Tenant fails to pay Rent when it becomes due and payable or
fails to furnish an estoppel certificate and either failure continues for
five (5) days after written notice from Landlord to Tenant.
(c) Tenant fails to perform or comply with any term or condition of
this Lease other than those set forth in the other subsections of this
Section 13.01, and the failure continues for twenty (20) days after written
notice from Landlord to Tenant. If Tenant begins to cure the failure during
the twenty (20) day period but the term or condition is of a nature that it
cannot with continuous diligence be cured within the twenty (20) day period,
and provided that Tenant notifies Landlord that it cannot completely cure the
failure within the twenty (20) day period and diligently continues to make
all reasonable efforts to cure the failure, then the period shall be extended
for the number of days required to effect the cure.
(d) Tenant is given three (3) notices under Section 13.01(a),
13.01(b,) or 13.01(c) in any 24-month period, notwithstanding any subsequent
cure of the failure to perform or observe the terms or conditions of the
Lease as identified in the notices.
(e) Any lien, execution, levy, attachment or other legal process of
law shall occur upon Tenant's goods, fixtures, or interest in the Premises or
relating to the Shopping Center that is not discharged or bonded within ten
(10) days after the occurrence.
(f') Tenant is in Default as specifically provided in other sections
of this Lease or in any other lease between Tenant and Landlord or its
affiliate.
13.02. LANDLORD'S REMEDIES.
(a) Should a Default occur under this Lease (whether before or
during the Term) and continue beyond any applicable cure period, then in
addition to all other rights or remedies it may have, Landlord may terminate
this Lease and the Term effective on a date specified by Landlord in a notice
to Tenant. The termination date shall not be less than five (5) days after
Landlord's notice. Upon termination, Tenant shall quit and
surrender the Premises to Landlord. Notwithstanding any termination pursuant
to this section, Tenant shall remain liable for all obligations that would
have arisen under this Lease during the balance of the Term and for other
damages as described in this section. Landlord may bring an action to recover
possession from Tenant holding over and Landlord may, without notice,
re-enter the Premises, recover possession of and dispossess the Premises from
Tenant, and remove and dispose of the contents of and hold the Premises as if
this Lease had not been made.
(b) If this Lease is terminated or Tenant is dispossessed before the
expiration of the Term under this section, or if Tenant abandons or vacates
the Premises before the expiration or termination of the Term without having
paid the full Rent for the remainder of the Term, Landlord may relet the
Premises under terms as the Landlord may determine in its sole discretion. If
the full rental reserved under this Lease and any of the costs, expenses or
damages described below shall not be realized by Landlord, Tenant shall be
liable for all damages sustained by Landlord, including any Rent deficiency.
For purposes of the deficiency in Rent that would have been due under this
Lease during any period following Landlord's election to accelerate Rent,
deficiency means the excess of the future rent that would have been payable
under this Lease over the rental value of the Premises for the balance of
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the Term, discounted to present value as of the date of acceleration based on
an interest rate equal to 200 basis points below the Prime Rate. If, at the
time that damages are to be determined under this section Landlord has relet
the Premises in whole or in pan, then the deficiency in Rent means the excess
of the future rent that would have been payable under this Lease over the
future rent called for in the re-lease during the remainder of the Term and
the deficiency shall be discounted to net present value based on an interest
rate equal to 200 basis points below the Prime Rate. Tenant also shall be
liable for all of Landlord's costs associated with Tenant's Default and any
attempts by Landlord to relet the Premises, including Landlord's reasonable
attorney's fees, brokerage fees, construction costs, tenant allowances, and
expenses incurred in taking the actions set forth in this section in order to
place the Premises in first class condition and to re-let the Premises.
Landlord, in preparing the Premises for reletting, may make alterations,
repairs or replacements in the Premises as Landlord determines advisable, and
the making of the alterations, repairs or replacements shall not operate to
release Tenant from liability under this Lease. Landlord shall not be liable
for failure to relet the Premises, or, in the event that the Premises are
relet, for failure to collect the rent under reletting. Tenant shall not be
entitled to receive the excess or any credit with respect to the excess, if
any, of net rent collected over the sums payable by Tenant to Landlord.
(c) Any loss of rent and other damages sustained by Landlord may be
recovered by Landlord: (1 ) either before or after any reletting; (2) in one
or more separate actions, from time to time in Landlord's discretion, as
loss of rents or damages shall accrue; or (3) in a single proceeding deferred
until the expiration of the Term, in which event Tenant hereby agrees that
the cause of action shall not be considered to have accrued until the
original date of expiration of the Term. Nothing in this Lease shall be
construed to require Landlord to wait until this Lease or the Term would have
expired had there been no Default by Tenant or no cancellation or
termination. All amounts due under this section, including all attorneys'
fees and other Landlord expenses, shall be considered. Additional Charges
and may be recovered by Landlord in the same manner as Minimum Rent. Landlord
shall be entitled to any deficiency in Rent upon demand.
(d) Nothing contained in this Lease shall prevent Landlord from
enforcing any claim it may have against Tenant for anticipatory breach of the
unexpired Term. In the event of a breach or anticipatory breach by Tenant of
any of the provisions of this Lease, and in addition to the remedies provided
for under this Lease, Landlord may seek an injunction or any remedy provided
for at law or in equity. Mention in this Lease of any particular remedy shall
not preclude Landlord from resorting to any other remedy, in law or in
equity. Tenant expressly waives, so far as permitted by law, the service of
any notice of intention to reenter provided for in any statute, or the
institution of legal proceedings to that end. Tenant, for and on behalf of
itself and all persons claiming through or under Tenant, also waives any and
all rights of redemption or re-entry or repossession granted by or under any
laws in the event Tenant is evicted or dispossessed for any cause, or in the
event Landlord obtains possession of the Premises.
13.03. BANKRUPTCY.
(a) No interest in this Lease shall pass to any trustee or receiver
or assignee for the benefit of creditors or otherwise unless specifically
provided by law. Tenant's voluntary or involuntary bankruptcy, including
reorganization under the Bankruptcy Code, shall constitute a Default.
(b) Rights and Obligations Under the Bankruptcy Code.
( 1 ) Upon filing of a petition by or against Tenant under the
Bankruptcy Code, Tenant, as debtor and as debtor-
in-possession, and any trustee who may be appointed with respect
to Tenant's assets or estate shall pay monthly in advance on the
first day of each month, as reasonable compensation for the use
and occupancy of the Premises, an amount equal to all Minimum
Rent and all other Additional Charges otherwise due pursuant to
this Lease.
(2) It is agreed that this Lease is a lease of real property in a
shopping center as described in Section 365 of the Bankruptcy
Code.
(3) Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of
the assumption or assignment of this Lease are the following
conditions and obligations:
(i) to cure any monetary defaults, including default in Tenant's
obligation to reimburse Landlord for Landlord's reasonable
attorneys' fees and disbursements incurred (i) in enforcing this
Lease under Section 13.05 and (ii) in connection with the
assignment of this Lease under Section 16.01) and reimbursement
of pecuniary loss within not more than thirty (30) days of
assumption or assignment;
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(ii) to deposit an additional sum equal to three (3) months'
Minimum Rent and Additional Charges to be held by Landlord
to secure the future performance under this Lease of Tenant
or its assignee;
(iii) to not change the Permitted Use and Trade Name as set forth
in Sections 1.06 and 1.03, respectively, of this Lease and
the quality, quantity and lines of merchandise, goods or
services required to be offered for sale; and
(iv) to obtain prior written consent of any Mortgagee of the
Shopping Center to the assumption or assignment.
13.04. ADDITIONAL REMEDIES AND WAIVERS. The rights and remedies of
Landlord described in this Lease shall be in addition to any other fight and
remedy now or hereinafter provided by law, and all rights and remedies shall
be cumulative. No action or inaction by Landlord shall constitute a waiver of
default or termination and no waiver of default or termination shall be
effective unless it is in writing and signed by Landlord.
13.05. CURE OF TENANT'S FAILURE. If Tenant fails to perform any of its
obligations under this Lease (including complying with the rules and
regulations of the Shopping Center), Landlord may, but is not obligated, upon
ten (10) days written notice to Tenant (except in the event of an emergency,
in which event no notice shall be required), cure Tenant's failure at
Tenant's expense. If Landlord has already terminated this Lease, Landlord's
cure or attempt to cure any failure that occasioned termination of this Lease
shall not result in a waiver of the termination. Tenant shall reimburse
Landlord for Landlord's reasonable attorneys' fees, costs, and expenses
incurred to enforce this Lease. Tenant agrees to promptly repay Landlord as
Additional Charges all sums paid by Landlord pursuant to this Article, plus a
service fee of fifteen percent (15%).
ARTICLE 14. DESTRUCTION OF PREMISES
14.01. CONTINUANCE OF LEASE.
(a) Landlord may terminate this Lease upon written notice to Tenant
under the following circumstances:
(1) More than 25% of the square footage of the Premises is damaged
by fire or other casualty during the last three (3) years of the
Term and the cost of repair, in the Landlord's estimate, exceeds
$25,000. Tenant may avoid termination under this subsection if it
has an option to renew the term and it notifies the Landlord
within ten (10) days of the date of Landlord's notice of
termination that it chooses to exercise that option;
(2) Landlord is unable to rebuild any damaged portion of the
Shopping Center because it cannot obtain required governmental
approval to rebuild;
(3) More than 35% of the square footage of the Shopping Center is
damaged by fire or other casualty; or
(4) All or part of the Shopping Center is damaged by the occurrence
of a risk not covered by the insurance required under Article 10.
(b) Should Landlord choose to terminate this Lease pursuant to this
section, it shall give written notice to Tenant within ninety (90) days after
the damage occurs or Landlord determines it cannot obtain governmental
approval to rebuild, whichever is later.
(c) Upon termination of the Lease pursuant to this section:
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(1) the entire proceeds of the insurance provided for in Section
10.01 shall be paid by the insurance company or companies
directly to Landlord and shall belong to Landlord;
(2) the portion of the proceeds of the insurance provided for in
Section 10.02 that is allocable to equipment, fixtures and other
items and that belong to the Landlord upon the termination of
this Lease under the terms of the Lease shall be paid by the
insurance company or companies directly to Landlord and shall
belong to Landlord, and any balance of the proceeds shall be paid
to Tenant; and
(3) Landlord and Tenant shall be relieved from any and all further
liability or obligation accruing under this Lease after the date
of the termination.
(d) Tenant waives all rights that it may have pursuant to law to
terminate this Lease by reason of damage to the Premises by fire or other
casualty and agrees that the provisions of this article shall control in the
event of fire or other casualty.
14.02. RECONSTRUCTION.
(a) If fire or other casualty damages all or any portion of the
Premises and Landlord elects not to terminate this Lease, then Landlord shall
repair the damage to the extent of available insurance proceeds promptly upon
receipt of the insurance proceeds. During the time the Premises is being
repaired, all Rent shall be reduced in proportion to the floor area of the
Premises rendered unusable. Resumption of full payment of Rent shall occur,
and Tenant shall be obligated to reopen all of the Premises for business, by
the fifteenth (15th) day after Landlord notifies Tenant that the Premises
have been repaired. If Tenant opens at an earlier time in the damaged area or
remains open in the damaged area, then there shall be no reduction in Rent
for those days Tenant is open in the damaged area.
(b) Landlord may direct Tenant to repair and reconstruct the
improvements to the Premises originally provided by Tenant. Should Landlord
direct Tenant to make repairs, Tenant shall commence repairs within ten (10)
days following Landlord's notice and shall diligently pursue the completion
of the repairs and cause them to be completed as soon as possible, but in any
event within thirty (30) days following the substantial completion of any of
Landlord's repair work. In making repairs or reconstruction, Tenant, at its
expense, shall comply with all laws, ordinances and governmental rules or
regulations, shall perform all work or cause such work to be performed with
due diligence and in a first-class manner, and shall obtain all necessary
permits.
(c) In the event of any repair and reconstruction by Tenant,
Landlord shall make available to Tenant any applicable portion of any of
Landlord's insurance proceeds received for Tenant's improvements. Unless
Tenant has designated in writing to Landlord in advance of the fire or
casualty the reasonable replacement value of its improvements, Landlord shall
determine how much of Landlord's insurance proceeds shall be allocated for
Tenant's improvements. In the event of any repair or reconstruction by
Tenant, Landlord's architect or other representative shall direct the payment
of the insurance proceeds to the Tenant, payable to Tenant only upon receipt
by Landlord of certificates of the architect stating that the payments
specified are properly payable for the purpose of reimbursing Tenant for
expenditures actually made by Tenant in connection with the repairs or
reconstruction. At the election of Landlord or Landlord's mortgagee, direct
payments may be made to contractors, material suppliers and laborers upon
written certification by the architect that the payments are due and payable.
Any insurance proceeds in excess of Tenant's actual expenditures shall belong
to Landlord. Any amount expended by Tenant in excess of any insurance
proceeds received by Landlord and made available to Tenant shall be the sole
obligation of Tenant.
(d) Tenant shall ensure that anyone repairing Tenant's improvements
to the Premises shall do so in accordance with Tenant's plans and
specifications originally approved by Landlord pursuant to Exhibit B and in
accordance with subsequent working drawings and specifications previously
approved by Landlord, or, at Landlord's sole election, with new drawings
prepared by Tenant and approved in writing by Landlord.
(e) Landlord shall not be required to repair or replace Tenant's
merchandise, trade fixtures, furnishings and equipment. Except as provided in
this Article, Landlord shall not be liable or obligated to Tenant by reason
of any fire or other casualty damage to the Premises, or any damages suffered
by Tenant or the deprivation of Tenant's possession of all or any part of the
Premises.
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ARTICLE 15. CONDEMNATION
15.01. EMINENT DOMAIN. If greater than fifty percent (50%) of the
leasable area of the Premises is taken or condemned by any governmental
authority, including by purchase by a governmental authority in lieu of a
taking (an "act of eminent domain"), then either party may terminate this
Lease by giving notice to the other party not more than sixty (60) days after
the date title vests in the governmental authority. If by act of eminent
domain the parking facilities of the Shopping Center are reduced below the
minimum parking requirements required by applicable authorities, Landlord may
terminate this Lease by giving Tenant notice within one hundred twenty (120)
days after title vests in the governmental authority. In addition, if the
leases of tenants occupying more than fifty percent (50%) of the leasable
area of the Shopping Center terminate pursuant to an act of eminent domain,
Landlord may terminate this Lease by providing sixty (60) days' written
notice to Tenant. In the case of any act of eminent domain, whether or not
the term of this Lease shall terminate, all of the condemnation award shall
belong to Landlord. However, Tenant shall be entitled to any statutory
relocation awards and to any award for trade fixtures and other equipment,
not including any Tenant's Work required or permitted under this Lease which
under the terms of this Lease would have become the property of Landlord. Any
award to Tenant shall not be in diminution of any award otherwise to be made
to Landlord in the absence of an award to Tenant.
15.02. RENT APPORTIONMENT. In the event of any act of eminent domain,
Tenant's Minimum Rent and Sales Breakpoint shall be reduced as of the date of
vesting of title based on the proportion that the leasable area taken from
the Premises bears to the entire leasable area of the Premises immediately
prior to the vesture. Likewise, all Additional Charges under this Lease that
are based on the leasable area of the Premises or the leasable floor area in
the Shopping Center shall be adjusted accordingly.
15.03. TEMPORARY TAKING. Notwithstanding anything to the contrary in
this article, the requisitioning of all or any part of the Premises by
military or other public authority because of a temporary emergency or other
circumstance shall only constitute an act of eminent domain when the use by
the requisitioning authority is expressly provided to continue, or has
continued, for a period of more than one hundred and eighty (180) days. If,
after 180 days, this Lease is not terminated under Section 15.01, then for
the duration of any period of use of the Premises by the requisitioning
authority, all the terms and provisions of this Lease shall remain in full
force and effect, except that the Minimum Rent and Sales Breakpoint shall be
reduced in the same proportion that the leasable area of the Premises
requisitioned bears to the total leasable area of the Premises. Landlord
shall be entitled to any compensation paid by the requisitioning authority
for the use and occupation of the Premises.
ARTICLE 16. ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE
16.01. NO ASSIGNMENT, ETC. WITHOUT LANDLORD'S CONSENT. Notwithstanding any
references to assignees, licensees, subtenants, concessionaires or other
similar entities in this Lease, Tenant shall not, without Landlord's prior
written consent:
(a) assign or otherwise transfer, or mortgage or encumber this Lease or
any of Tenant's rights under the Lease, (b) sublet all or any part of the
Premises or permit the use of any part of the Premises by any persons other
than Tenant; or (c) permit the assignment or other transfer of this Lease by
operation of law. Any prohibited assignment, sublease, or transfer shall be
null and void and shall not confer any rights upon any purported transferee,
assignee, mortgagee, subtenant or occupant, and shall constitute an event of
Default subject to the provisions of Section 13.02.
16.02. TENANT REQUEST.
(a) Tenant may request that it be allowed to assign this Lease or
sublet the Premises by addressing a request to Landlord in writing at least
sixty (60) days prior to the proposed commencement date of the sublease or
assignment. Tenant's request shall include, as applicable: (1) the name and
address of the proposed sublessee or assignee; (2) the current credit rating
and financial statements for the most recent three annual periods of the
proposed sublessee or assignee; (3) a description and drawing of the portion
of the Premises to be sublet; (4) the rent to be paid by such sublessee or
assignee; (5) a description of and documentation evidencing all the other
terms and conditions of the proposed subletting or assignment of lease; and
(6) any other information as Landlord may request. Landlord shall have no
obligation to consent to any proposed assignment or sublease.
(b) In addition to any other conditions applicable to the proposed
assignment or subletting, Landlord may also consider, in determining whether
it will consent to the proposed assignment or sublease:
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(1) whether Tenant has operated the Premises for at least one year
under the Trade Name and for the Permitted Use and neither has been
nor is not then in Default under this Lease or any other agreement
with Landlord;
(2) whether occupancy by the proposed sublessee or assignee will be
consistent with the dignity and character of the Shopping Center and
will not be more objectionable or more hazardous than that of Tenant;
(3) the financial standing of and whether the proposed assignee or
sublessee has sufficient prior experience in similar retail
operations;
(4) in the case of a nationally known Tenant, whether the subletting
or assignment shall be to a tenant who is a nationally known
manufacturer of consumer products of comparable quality to that of
Tenant;
(5) whether the proposed sublease will be expressly subject to all of the
obligations of Tenant under this Lease, and shall specifically
provide that there shall be no further subletting of the Premises or
assignment or mortgaging of the sublease;
(6) whether the proposed sublessee or assignee is not already a tenant,
subtenant or assignee of any premises within the Shopping Center, or
that there is no unleased comparable space in the Shopping Center;
(7) Purposely omitted; and
(8) whether the proposed use in connection with the assignment or
sublease is the same as the Permitted Use, or, if not the same, is
compatible, with the uses and tenant mix then existing within the
Shopping Center, and that the proposed use will not otherwise be in
violation of any exclusive right then in existence at the Shopping
Center.
16.03. LANDLORD RIGHT TO TERMINATE. Unless a transfer is part of a
transaction involving the transfer of the Premises and at least ten (10)
other retail store locations of Tenant, if Tenant submits a written request
to sublease or assign all or a portion of the Premises or this Lease, then
Landlord may terminate this Lease and regain possession of the Premises. If
Landlord elects to terminate this Lease pursuant to this section, it shall do
so within thirty (30) days after it receives Tenant's written request.
Landlord's notice shall state the date this Lease shall terminate, which
shall be between thirty (30) and ninety (90) days after Landlord's notice.
However, Tenant may, within fifteen (15) days after Landlord's termination
notice, vitiate Landlord's termination notice by notifying Landlord in
writing that it withdraws its request to assign or sublease. After
termination, Landlord may lease the Premises on any terms and conditions as
Landlord determines appropriate in its sole and absolute discretion. Tenant
shall be responsible for any brokerage or similar fees incurred by Landlord
in releasing the Premises.
16.04. COSTS.
(a) Should Landlord consent to Tenant's sublease or assignment: (1)
Tenant shall pay Landlord all consideration accruing to Tenant as the result
of any assignment of this Lease; and (2) Tenant shall pay Landlord all
consideration accruing to Tenant as the result of any subletting or other
occupancy arrangement with respect to the Premises in excess of the Rent then
payable, determined on a square foot basis if only a portion of the Premises
is being sublet. In the case of an assignment, the consideration, and in the
case of a subletting or other occupancy arrangement, the excess, shall be
paid when received by Tenant. For purposes of this subsection, consideration
means the net consideration received after payment of bona fide brokerage
fees to unrelated parties. Tenant shall deliver to Landlord a certificate
specifying the full amount of all consideration within five (5) days after
Landlord requests it.
(b) Tenant shall pay, as Additional Charges, any costs and expenses,
including attorney's fees, incurred by Landlord in connection with any
request for any proposed or purported assignment, transfer or sublease. In
addition, Tenant shall pay a review fee of One Thousand and No/100 Dollars
($1,000.00) payable as follows: $500.00 payable upon Tenant's request and
$500.00 payable upon the assignment, transfer, or sublease.
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16.05. ASSUMPTION OF OBLIGATIONS. Should Landlord consent to any sublease
of the Premises or assignment of this Lease, and as a condition to Landlord's
consent, the sublessee or assignee shall assume the performance of all of
Tenant's covenants, conditions and obligations under this Lease, including
any accrued outstanding obligations of Tenant at the time of the assignment
or subletting. This assumption shall be by written recordable instrument, in
form and substance satisfactory to Landlord, duly executed and delivered to
Landlord prior to such sublessee or assignee taking possession of all or any
part of the Premises. No assignment or sublease shall release the Tenant from
any obligation under this Lease.
16.06. CHANGE OF CONTROL. If Tenant is a corporation, then the sale,
issuance or transfer of any voting stock of Tenant or of any corporate entity
which directly or indirectly controls Tenant that results in a change in the
voting control of Tenant or the corporate entity which controls Tenant is a
prohibited assignment of this Lease. If Tenant is a partnership or an
unincorporated association, then the sale, issuance or transfer of a majority
interest, or the transfer of a majority interest in or a change in the voting
control of any partnership or unincorporated association or corporation which
directly or indirectly controls Tenant, or the transfer of any portion or all
of any partnership or managing partnership interest in Tenant or other entity
is a prohibited assignment of this Lease. The provisions of this subsection
shall not apply if the entity is a corporation subject to the reporting
requirements of the Securities Exchange Act of 1934 or if Tenant operates or
the entity controls companies that operate at least twenty-five other stores
of similar nature and under the same trade name as Tenant.
16.07. NO WAIVER. Neither the consent by Landlord to any assignment,
transfer, or sublease to any party, nor the collection or acceptance of rent
from any third party shall be construed as a waiver or release of Tenant from
any covenant or obligation under this Lease. Any consent by Landlord to any
transfer shall not operate as a waiver of any of Tenant's responsibilities in
the future or the requirement to obtain Landlord's consent to any subsequent
transfer.
ARTICLE 17. SUBORDINATION; FINANCING; TRANSFERS
17.01. SUBORDINATION. Tenant agrees that this Lease is subordinate to
any ground leases, mortgages or deeds of trust that are now or may hereafter
be placed upon the Premises, and to any and all advances, interest,
easements, right of ways or other agreement benefitting the Premises and
transfers pursuant to Landlord's exercise of its right(s) to purchase under
any ground lease or agreement to purchase, and renewals, replacements and
extensions of any of the foregoing (collectively, "Encumbrances"). Tenant
agrees that upon Landlord's request, or the request of any ground lessor,
mortgagee, trustee, transferee or beneficiary (each of whom shall be referred
to in this article as a "Mortgagee"), Tenant shall execute whatever
instruments may be required to carry out the intent of this article.
17.02. ATTORNMENT. If and so long as any Encumbrance is effective, then
at the Mortgagee's option: (a) This Lease and Tenant's tenancy will continue
in full force and effect notwithstanding: (1) the occurrence of an event of
default under the Encumbrance; (2) any failure by Landlord to comply with any
provision of this Lease; (3) any defense, counterclaim or set-off to which
Tenant might be entitled against Landlord; (4) any delay or omission by the
Mortgagee in exercising, or any waiver by the Mortgagee of any right or
remedy under the Encumbrance or the note that it secures ("Note"); (5) any
amendment of or supplement to the Note or the Encumbrance that does not
affect any rights of Tenant under this Lease; or (6) any bankruptcy,
receivership, insolvency, reorganization, composition, dissolution,
liquidation, or similar proceeding with respect to Landlord.
(b) If any Mortgagee enters into and possesses all or any part of
the Premises through summary or other proceedings, Tenant shall be obligated
to pay to the Mortgagee the rent payable under the Lease and otherwise shall
comply with the Lease.
(c) 1f any Mortgagee or any purchaser at any public or private
foreclosure sale resulting from any default under any Encumbrance shall enter
into and possess all or any part of the Premises through summary or other
proceedings, Tenant, without charge, shall attorn to the Mortgagee or
purchaser and recognize the Mortgagee or purchaser as its Landlord under this
Lease and will promptly execute upon request of the Mortgagee or purchaser an
agreement of attornment that is in recordable form.
17.03. FINANCING REQUIREMENTS. If any construction lender, land lessor, or
permanent lender for the Shopping Center requires, as a condition to
financing, modifications to this Lease that do not materially alter the
approved working plans, do not increase the Rent to be paid under this Lease,
and do not materially increase Tenant's obligations or materially decrease
Tenant's
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rights under this Lease, Landlord may submit to Tenant a written amendment
with the required modifications. Tenant shall execute the amendment and
return it within ten (10) days after Landlord has submitted the amendment. If
Tenant fails to execute and return the amendment within the prescribed time,
Landlord may elect either (a) to execute the amendment in Tenant's name and
on Tenant's behalf, Tenant herein granting to Landlord an irrevocable
power-of-attorney to do so, or (b) declare a Default, in which case, Landlord
shall have all of the rights set forth in Section 13.02.
17.04. TRANSFER OF LANDLORD'S INTEREST. Landlord may transfer its interest
in the Premises or the Shopping Center or this Lease, including by sale or
assignment ("Landlord Transfer") without notice to or the consent of Tenant.
In the event of Landlord Transfer, Landlord shall be automatically relieved
of any of its obligations under the Lease. Upon delivery to a successor
Landlord of any funds then in Landlord's possession in which Tenant has an
interest, Landlord shall be released of all of its obligations with respect
to the funds. A Landlord Transfer shall not release Tenant of its obligations
under the Lease, and Tenant agrees to attorn to Landlord's transferee upon
written notice of a Landlord Transfer.
17.05. ESTOPPEL CERTIFICATE. Tenant shall, without charge and at any time
within ten (10) days after a request by Landlord execute and deliver to
Landlord a written estoppel certificate in reasonable form certifying to
Landlord or any other person(s) designated by Landlord: (a) that the Premises
have been delivered to Tenant in the condition required by this Lease and
that Tenant is in possession of the Premises and is currently paying Rent in
full; (b) that the Lease is unmodified and in full force and effect, or if
there have been modifications, that the Lease is in full force and effect as
modified and setting forth the modifications; (c) whether or not there are
then existing any set-offs or defenses against the enforcement of any right
or remedy of Landlord, or of any duty or obligation of Tenant under the
Lease, and if so, describing the setoffs or defenses; (d) the dates, if any,
any Rent has been paid in advance; (e) that Tenant has no knowledge of any
uncured defaults on the part of Landlord under this Lease, or if Tenant knows
of any event, a description of the event; (f) that Tenant has no knowledge of
any event that authorized Tenant to terminate this Lease (or if Tenant has
any knowledge, specifying the event in detail); (g) the current and future
schedule of Rent; (h) the expiration date of the Term and of any Option Term;
and (i) any other matters that Landlord or such other person(s) may require
to be confirmed. Tenant's failure to respond within the ten (10) day period
prescribed in this section shall constitute Tenant's irrevocable acceptance
and approval of the facts set forth in any statement delivered by Landlord to
Tenant pursuant to this section and shall thereafter be estopped from
asserting any claims contrary to the statements contained in the estoppel
certificate.
ARTICLE 18. DELAYS
If either party is delayed or prevented from performing any of their
respective obligations because of acts of nature, casualty, strikes,
lockouts, labor troubles, inability to procure materials, failure of power,
governmental restrictions or reasons of a like nature not the fault of the
party delayed in performing the obligation, and provided that the party
promptly notifies the other, then the period of delay shall be added to the
time provided for the performance of the obligation, and the defaulting party
shall not be liable for losses or damages caused by the delay. However, the
provisions of this article shall not affect Tenant's obligation to pay Rent,
notwithstanding that the performance of Tenant's Work may be delayed, or
affect any obligation of Landlord or Tenant that can be satisfied by the
payment of money, and shall not excuse Tenant from its obligation to
continuously operate its business within the Premises in accordance with the
provisions of Sections 6.01 and 6.02.
ARTICLE 19. END OF TERM
19.01. RETURN OF PREMISES. Upon the Expiration Date or sooner termination of
the Term, Tenant shall surrender the Premises to Landlord free of Tenant's
inventory, fixtures and storefront sign(s), broom-clean and in good
condition, ordinary wear and tear excepted. Tenant shall turn over all keys
to the Premises and inform Landlord of all combinations of locks, safes and
vaults, if any, in the Premises. Termination of this Lease for any reason
shall not relieve Tenant from any obligation arising under this section, or
from any obligation or damages arising out of any breach by Tenant, and
Landlord's right to enforce such obligations and recover damages shall
survive termination. Subject to the provisions of Section 5.05, Tenant shall
promptly remove all of its personal property, including its storefront
sign(s), repair all damage to the Premises caused by the removal of Tenant's
property and restore the Premises to the condition it was in prior to the
installation of the property removed. Any personal property of Tenant not
removed within ten (10) days following the expiration or earlier termination
of this Lease shall be considered abandoned by Tenant and, at Landlord's
option, becomes Landlord's property and may be retained or, at Tenant's
expense, disposed of by Landlord. Tenant's obligation to observe or perform
the covenants in this section shall survive the termination of this Lease.
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19.02. HOLDING OVER. If Tenant remains in possession of the Premises after
the expiration or termination of this Lease, Tenant shall be considered to be
occupying the Premises at double the Rent in effect during the last Lease
Year of the Term and otherwise subject to all of the terms and conditions of
this Lease. At Landlord's option, Landlord may treat the Tenant's holdover
occupancy as a month-to-month Tenancy, or Landlord may exercise any other
remedies it has under this Lease or at law or in equity, including
instituting an action for wrongfully holding over and recovery of all damages
resulting from the holdover, including damages rounded upon the rights of any
subsequent tenant or other occupant.
ARTICLE 20. COVENANT OF QUIET ENJOYMENT
Landlord covenants that so long as Tenant pays Rent in full and performs
all of its obligations under this Lease, Tenant hall hold and enjoy the
Premises without any interruption or disturbance from Landlord or anyone
lawfully or equitably claiming through or under Landlord, subject to the
terms of this Lease and any mortgage or deed of trust to which this Lease
shall be subordinate.
ARTICLE 21. MISCELLANEOUS
21.01. ENTIRE AGREEMENT. This Lease, together with the Exhibits and any
Addendum(s), contains the entire agreement between the parties and there are
no promises, agreements, conditions, undertakings or warranties or
representations, oral or written, express or implied. No change or
modification to this Lease or a waiver of any of its provisions shall be
effective unless in writing and signed by both parties. All of the Exhibits
described in this Lease and any Addendum(s) to this Lease are a part of this
Lease as though set out at length.
21.02. NOTICES. No notice or other communication given to Tenant or
Landlord under this Lease shall be effective (a) unless and until the same is
in writing and is delivered either in person or by a national overnight air
courier providing written evidence of delivery, or (b) unless mailed by
registered or certified mail, return receipt requested, first class, postage
prepaid, in which case the notice or other communication shall be effective
two (2) days after being deposited in the U.S. Mail. Any notice or
communication shall be addressed:
(1) If to Landlord, to Landlord's Notice Address or to any other
address as Landlord shall designate by giving notice to Tenant.
(2) If to Tenant, to the Premises or to Tenant's Notice Address or
any other address as Tenant shall designate by l giving notice to Landlord.
Notwithstanding the foregoing, any notice or other communication may be
transmitted by telecopier to Tenant's or Landlord's telecopier numbers set
forth in Section 1.01 and Section 1.02 or any other number as may be
designated by a party, provided that a copy of the notice is mailed within
five (5) days after the notice is telecopied in the manner described above.
21.03. GOVERNING LAW. All questions with respect to the construction of
this Lease and the rights and liabilities of the parties shall be determined
in accordance with the laws of the State. The parties agree to the exclusive
jurisdiction of any federal or state court located in the State, and agree to
accept service of process in any action, regardless of where and by what
method served.
21.04. SUCCESSORS. All rights and liabilities given to, or imposed upon,
the respective parties shall extend to and bind their several respective
heirs, executors, administrators, successors, and assigns. If there is more
than one Tenant, or more than one person or entity acting collectively as
Tenant, they shall all be bound jointly and severally by the terms, covenants
and agreements in this Lease. Any restriction on or requirement imposed upon
Tenant in this Lease shall extend to Tenant's guarantor, Tenant's subleases
and assignees, if any, and Tenant's invitees. It shall be Tenant's obligation
to ensure compliance with the restrictions or requirements of this Lease. No
rights shall inure to the benefit of any assignee or other transferee of
Tenant, and no rights or benefits shall be conferred upon any assignee or
transferee by reason of this section, unless rights or benefits shall be
expressly set forth elsewhere in this Lease.
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21.05. LIABILITY OF LANDLORD. Neither Landlord, Landlord's beneficiaries,
any persons or entities comprising Landlord, nor any agent of or successor in
interest to Landlord shall have any personal liability for any failure by
Landlord or its agents to perform any term, covenant, or condition of this
Lease applicable to Landlord. Tenant shall look solely to the equity in the
Shopping Center of the then owner of the Premises to satisfy any remedies of
Tenant in the event of a breach by Landlord or its agents of any of
Landlord's obligations under this Lease.
21.06. BROKERS. Landlord and Tenant warrant and represent that they did not
deal with any broker or agent who was instrumental in consummating this
Lease or have any arrangements with any broker or agent applicable to this
Lease. Landlord and Tenant each indemnify and agree to hold harmless the
other party against any claims for brokerage commissions or other fees
arising by reason of a breach by the party of this representation and
warranty.
21.07. NO PARTNERSHIP. Notwithstanding that a portion of the Rent reserved
under this Lease may be a percentage of Tenant's Gross Sales, and
notwithstanding anything else to the contrary, Landlord shall not be
considered a partner of or joint venturer with Tenant. The parties agree,
however, that Percentage Rent is intended to be a material part of the Rent
to which Landlord is entitled. Neither Landlord nor Tenant makes any
representation as to the amount of Gross Sales Tenant may be expected, or
expects, to earn from the Premises.
21.08. ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord
of a lesser amount than the correct amount due under the terms of this Lease
shall be considered to be other than a payment on account of the earliest
amount due. No endorsement, instructions or statement on any check or
communication concerning any check for payment of rent or any other amounts
owed to Landlord will be considered effective or evidence an accord and
satisfaction. Landlord may accept any check or payment and apply the check or
payment in any way without prejudice to Landlord's right to recover the
balance of the rent or other amount owed or to pursue any other remedy
provided in this Lease or at law.
21.09. WAIVER OF COUNTERCLAIMS. Tenant shall not assert any permissive
counterclaims in a summary proceeding or other action based on termination or
holdover.
21.10. WAIVER OF JURY TRIAL. Landlord and Tenant waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties against
the other relating to any matter connected with this Lease, the relationship
of Landlord and Tenant under this Lease, Tenant's use or occupancy of the
Premises, or any claim for injury or damage.
21.11. SEVERABILITY. If any provision or application of this Lease to any
person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of the provision to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected, and each provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law. The parties acknowledge that
Tenant's obligation to pay Rent under this Lease is in consideration of the
grant of the leasehold interest in the Premises and is independent of
Landlord's duties under this Lease, and all Rent shall be paid when due
without any offset or deduction of any kind or nature whatsoever, unless
otherwise specifically permitted.
21.12. RULES AND REGULATIONS. Tenant agrees to comply with all rules and
regulations established by Landlord for the Shopping Center. Landlord
reserves the right to amend, alter, rescind or waive its rules and
regulations at any time. No rescission, amendment, alteration or waiver of
any rule or regulation as it relates to one tenant shall operate in favor of
any other tenant. Tenant's failure to observe Landlord's rules and
regulations shall, after notice pursuant to Section 13.01, constitute a
Default.
21.13. FINANCIAL STATEMENTS. Upon Landlord's written request, Tenant shall
promptly furnish to Landlord financial statements describing Tenant's then
current financial condition.
21.14. RELOCATION. Landlord may, not more than once during the Term and
after prior written notice to Tenant, relocate Tenant to another space in the
Shopping Center. The relocated space (the "New Premises") shall be of
comparable size and location as the Premises. Tenant agrees that any
relocation shall be effected pursuant to a timetable reasonably determined by
Landlord after consultation with Tenant, but on not less than thirty (30) nor
more than ninety (90) days' notice. If Landlord relocates Tenant, Landlord
shall pay the reasonable and necessary costs of moving Tenant's inventory and
trade fixtures to the New Premises. Landlord shall use reasonable efforts not
to relocate Tenant between October l and December 31 of any year and to
ensure that Tenant's downtime is minimized. To the extent practical, Landlord
shall maintain signage at the Premises indicating the location of the New
Premises for no more than thirty (30) days after Tenant vacates the Premises
or until the Premises is delivered to a subsequent tenant, whichever is
sooner. If Tenant refuses to relocate to the New Premises, Landlord may
terminate this Lease upon written notice to Tenant.
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21.15. FINANCING. If this Lease is for Premises located in a Shopping Center
that has not already been constructed as of the date of execution of this
Lease, if Landlord is unable to obtain a firm commitment for a loan sufficient
to complete construction of the Shopping Center within two years after the date
of this Lease, or if construction of the Shopping Center has not begun before
that date, Landlord may terminate this Lease at any time after that date upon
written notice to Tenant.
21.16. LIEN ON FIXTURES. In addition to any available statutory lien, Landlord
shall have an express lien upon Tenant's trade fixtures, inventory, stock, and
other properly placed at any time in the Premises to secure the complete
performance of all of the terms of the Lease including the payment of Rent.
Upon Landlord's request, Tenant shall deliver any documents necessary in order
to perfect any Landlord lien.
21.17. ATTORNEY FEES. If either party initiates any litigation against the
other party relating to this Lease, the prevailing party shall be entitled to
recover its court costs and reasonable attorney fees incurred relating to the
litigation.
21.18. GOOD STANDING AND DUE AUTHORIZATION. Tenant warrants to Landlord:
(a) Tenant has the authority to execute this Lease and any other
related documents and to perform all of its obligations under this Lease.
(b) If Tenant is not an individual, it is a duly formed entity
authorized to transact business and in good standing in the State.
(c) Tenant's execution of this Lease will not violate the terms of
another agreement Tenant has with a third party.
(c) Tenant is aware of no fact or condition that would prevent the
enforceability of this Lease once fully executed.
21.19 REIT QUALIFICATIONS. Minimum Rent and any other terms of rent paid
to Landlord under this Lease shall qualify as "rents from real property" as
defined in Internal Revenue Code ("Code') Section 856(c) and Treasury
Regulation ("Regulation") Section 1.856-4. Should the Code or Regulation be
amended so that any rent payable to landlord under this Lease no longer
qualifies as "rents from real property", then the rent shall be adjusted so
that it will qualify as "rents from real property". Any adjustments required
pursuant to this section shall not operate to change the amount of rent Tenant
is obligated to pay. Tenant agrees to enter into any amendment to this Lease
necessary to effectuate this section.
21.20. GENERAL RULES OF CONSTRUCTION.
(a) This Lease may be executed in several counterparts, and the
counterparts shall constitute one and the same instrument.
(b) Landlord may act under this Lease through its attorney, agent or
other designee.
(c) Wherever a requirement is imposed on Tenant under this Lease,
Tenant shall be required to perform the requirement at its sole cost and
expense unless it is specifically otherwise provided.
(d) (1) Wherever appropriate, the singular includes the plural and
the plural includes the singular.
(2) Whenever the word "including" is used, means "including, but
not limited to." Whenever the word "include" is used, it
means "include, but not limited to."
(3) the words "re-enter" and "re-entry" shall be restricted to
their technical legal meaning.
(4) Pronouns shall refer to the identity of the appropriate
part.
32
<PAGE>
(e) Anything in this lease to the contrary notwithstanding:
(1) Any provision which permits or requires a party to take any
particular action shall consider to permit or require, as
the case may be, the party to cause the action to be taken,
and
(2) Any provision that requires any party not to take any
particular action shall be considered to require the party
to prevent the action to be taken by any person or by
operation of law.
(f) Any requirement that requires any party not to take any
particular action shall be considered to require the twenty
percent (20%) below the average retail price of the merchandise
within the fifty (50) mile radius of the Shopping Center.
21.20. RECORDING. Neither this Lease nor any memorandum of this Lease may
be recorded without the express written consent of Landlord.
21.22. EFFECTIVE DATE. Prior to the Effective Date, this Lease shall not be
legally binding on either Landlord or Tenant, and the submission of this Lease
by Landlord to Tenant prior to the Effective Date for examination or
consideration by Tenant or discussion between Landlord and Tenant shall not
constitute a reservation of or option for the Premises or create any legal
obligation on Landlord.
21.23. HEADINGS. The headings, captions, section numbers, article numbers
and index appearing in this Lease are inserted only as a matter of convenience
and in no way define, limit, construe, or describe the scope or intent of the
sections or articles or otherwise affect this Lease.
[SIGNATURES ON FOLLOWING PAGE]
33
<PAGE>
IN WITNESS WHEREOF, LANDLORD AND TENANT HAVE EXECUTED THIS LEASE AS OF THE DAY
AND YEAR FIRST ABOVE WRITTEN.
LANDLORD
KPT REMIC LOAN LLC, A DELAWARE
LIMITED LIABILITY COMPANY
BY: KPT REMIC LOAN, INC., A DELAWARE
CORPORATION (SEAL) ITS MANAGER
/s/ SYLVIA H. GURLEY BY: /s/
- ----------------------------- ------------------------------------
WITNESS
ITS: EXECUTIVE VICE PRESIDENT
AND CHIEF OPERATING OFFICER
/s/ LAURA BEAN ATTEST: /s/ ROB W. MALPHIS
- ----------------------------- ----------------------------------
NOTARY PUBLIC
ITS: SECRETARY
MY COMMISSION EXPIRES:
[CORPORATE SEAL}
12-28-02
- -----------------------------
[AFFIX NOTARIAL SEAL]
TENANT
AMERICABILIA, INC.
/s/ RICHARD HOOTON BY: /s/ HANK CARTWRIGHT
- ----------------------------- ------------------------------------
WITNESS
ITS: VICE PRESIDENT
/s/ CARLA THERESE KUHL ATTEST: /s/ DIXIE CARTWRIGHT
- ----------------------------- ---------------------------------
NOTARY PUBLIC
ITS: SECRETARY
MY COMMISSION EXPIRES:
[CORPORATE SEAL]
5-11-2002
- -----------------------------
[AFFIX NOTARIAL SEAL]
34
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE AGREEMENT ("Amendment") is made this 14th
day of July, 1999, by and between KPT REMIC LOAN LLC ("Landlord"), and
AMERICABILIA.COM, dba Americabilia ("Tenant").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of that certain lease entered into between
Landlord and Tenant dated May 7, 1999 ("Lease"), Landlord leased and demised to
Tenant, and Tenant leased and accepted from Landlord approximately 6,500 square
feet of space located at VEGAS POINTE PLAZA - LAS VEGAS, NEVADA, Suite N/O,
Building 2 ("the Premises"), subject to the terms of the Lease; and
WHEREAS, Landlord and Tenant desire to amend and restate certain portions
of the Lease to reflect the agreement of the parties.
NOW, THEREFORE, and in consideration of the promises, mutual covenants,
and agreements contained in the Lease and in this Amendment, and for other good
and valuable consideration. the receipt, adequacy and sufficiency of which are
acknowledged, Landlord and Tenant agree as follows:
1. Tenant agrees to expand its Premises in the Shopping Center
approximately an additional 4,500 square feet representing
Suite 2-M (the "Expansion Space"). Landlord shall deliver the
Expansion Space to Tenant on or before August 1, 1999. Tenant shall
receive the Expansion Space in "as is" condition. Effective August 1#
5999', all references in the Leases to "Premises" shall be read to
include Suites 2-M, N and O, for a total of approximately 11,000
square feet, and the plot plan labeled Exhibit "A" of the lease is
deleted and Exhibit "A" attached to this Amendment is substituted in
lieu thereof. Tenant shall pay Minimum Rent and any other charges in
accordance with the Lease and with this Amendment, except Tenant's
amount of Minimum Rent, and any other charges in the Lease based upon
the square footage of the Premises shall be adjusted according to the
new square footage, set forth above and as shown on Schedule "A"
attached. Either party may, at its expense, have the square footage of
the Premises measured by an independent, professional, licensed
architect who will certify to Landlord and Tenant the actual square
footage of the Premises (the "Certified Square Footage"). If the
Certified Square Footage varies from the square footage as set forth
in this Amendment, the parties shall execute an amendment to the Lease
revising the Square footage of the Premises and Minimum Rent and all
other charges which are based upon the gross leasable ,square footage
of the Premises.
2. Tenant shall pay its pro-rata share of expenses during the Option
Terms.
3. Landlord and Tenant acknowledge and confirm that the Lease is valid
and binding and that both parries are legally bound by its terms and
conditions.
4. Except as expressly modified by this Amendment, the terms and
conditions of the Lease shall continue in full force and effect.
Landlord and Tenant confirm the terms and provisions of the Lease as
modified by this Amendment.
[SIGNATURES ON NEXT PAGE]
SCHEDULE A
35
<PAGE>
MINIMUM RENT
<TABLE>
<CAPTION>
YEARS MONTHLY RENT ANNUAL RENT
----- ------------ -----------
<S> <C> <C>
months 3 - 6 $5,250,000 $63,000.00
months 7 - 12 $5,750.00 $69,000.00
</TABLE>
<TABLE>
<CAPTION>
OPTION YEARS RENT PSF MONTHLY RENT ANNUAL RENT
------------ -------- ------------ ------------
<S> <C> <C> <C>
2 $6.84 $6,270.00 $ 75,240.00
3 $8.04 $7,370.00 $ 88,440.00
4 $9.24 $8,470.00 $101,640.00
</TABLE>
36
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of
the day and year first above written.
LANDLORD:
KPT REMIC LOAN LLC, A DELAWARE
LIMITED LIABILITY COMPANY (SEAL)
By: KPT REMIC Loan, Inc., a
/s/ Sylvia H. Gurley Delaware corporation (SEAL) its Manager
- --------------------------
Witness
By: /s/
-------------------------------
Executive Vice President
and Chief Operating Officer
Laura Bean
- --------------------------
Notary Public Attest: /s/ Rob W. Malphis
---------------------------
Its: Secretary
[CORPORATE SEAL]
My Commission Expires:
12-28-02
- --------------------------
[Affix Notarial Seal]
TENANT:
AMERICABILIA, INC.
/s/ Richard Hooton By: /s/ Henry E. Cartwright
- -------------------------- -----------------------------------
Witness
Its: Vice President
/s/ Carla Therese Kuhl
- --------------------------
Notary Public Attest: Dixie Cartwright
-----------------------------
Its: Sec/Treas
[CORPORATE SEAL]
My Commission Expires:
5-11-2002
- --------------------------
[Affix Notarial Seal] [SEAL]
37
<PAGE>
Exhibit 10.7
Commercial Lease Agreement
THIS LEASE AGREEMENT, is made and entered into as of this 1st day of
September, 1999, by and between Tricia Veltre (Lessor) of 804 Blue Springs
Drive, city of Henderson, state of NEVADA, and Veltre Enterprises Inc.
(Lessee) of 6430 Sunset Corporate Drive, city of Las Vegas, state of Nevada.
The aforementioned shall hereinafter jointly be referred to as the PARTIES.
WITNESSETH:
ARTICLE 1
LEASED PREMISES
In consideration of the rents herein provided and the terms, provisions and
covenants hereof, Lessor hereby leases, lets and demises to Lessee the following
described premises (hereinafter referred to as the Leased Premises): 6430 Sunset
Corporate Drive.
Approximately 7,616 square feet of gross rentable area, and more
particularly described in Exhibit B attached. Lessee hereby unequivocally
acknowledges by execution of this Lease Agreement that the aforementioned square
feet of gross rentable area may include Lessees pro rata share of common areas
shared by other tenants. In such event, Lessee may be actually occupying less
than 7,616 square feet; however, it shall not be construed that Lessee is in any
way relieved of paying rent pursuant to Article 3 herein.
EXHIBITS
- --------------------------------------------------------------------------------
ARTICLE 2
TERM
SUBJECT TO AND UPON THE CONDITIONS SET FORTH HEREIN, AND IN ANY EXHIBIT OR
ADDENDUM HERETO, THE TERM OF THIS LEASE (HEREINAFTER REFERRED TO AS THE LEASE
TERM) SHALL COMMENCE ON SEPTEMBER 1, 1999 (HEREINAFTER REFERRED TO AS THE
COMMENCEMENT DATE), AND SHALL CONTINUE FOR 120 MONTHS UNTIL SEPTEMBER 1, 2009,
AT WHICH TIME THIS LEASE SHALL EXPIRE. IMMEDIATELY UPON SAID DATE OF TERMINATION
OF THIS LEASE, LESSEE SHALL VOLUNTARILY SURRENDER THE LEASED PREMISES TO LESSOR.
UPON COMPLETION OF THE INITIAL 120 MONTH LEASE, THE LESSEE HAS THE OPTION TO
NEGOTIATE A RENEWAL OF THE LEASE IN TWO FIVE YEAR INCREMENTS.
ARTICLE 3
RENT
Lessee agrees to pay in advance to Lessor during the Term hereof, without
deduction, setoff, prior notice, or demand, monthly rental (hereinafter referred
to as the Base Monthly Rental) for the Leased Premises in the amount of:
$5,000.00 dollars, which
<PAGE>
amount shall be payable in advance on the first business day of each month of
the Lease Term. Payment of such rent shall be accompanied by all sales tax
levied by any federal, state, county, or city government or by any agency
authorized to levy and collect rent tax, and shall be payable in lawful money of
the United States of America to Lessor at the address of Lessor set forth below.
The amount of the monthly installments set forth above shall be subject to
escalation, and additional rent shall be due and payable from Lessee to Lessor,
as hereinafter provided. Other remedies for nonpayment of rent under this Lease
notwithstanding, if the rental payment is not received by Lessor on or before
ten (10) days after such rent is due, a service charge of five percent (5%) of
the rent then due shall become due and payable on demand in addition to the rent
owed under this Lease as remuneration for the additional expense for handling
late rentals.
ARTICLE 4
RENTAL ADJUSTMENT: CONSUMER PRICE INDEX
On the first day of the second lease year (which lease year shall commence
on the first anniversary of the Commencement Date if the Commencement Date is
the first day of a calendar month, or on the first day of the first calendar
month following the anniversary of the Commencement Date if the Commencement
Date is other than the first day of a calendar month), and on the first day of
each lease year (including renewals of this Lease Agreement, if any) thereafter
until this Lease is terminated as set forth herein, the Base Annual Rent shall
be adjusted and changed, on a cumulative basis, as follows:
The Base Annual Rent and the monthly rental installments payable for each
lease year during the Lease Term (other than the first lease year) shall be
computed by multiplying the Base Annual Rental (and the monthly rental
installment) as set forth in Article 3 above by a fraction, the numerator of
which shall be the Consumer Price Index (Urban, the United States city average
for urban wage earners, all items [Base 1982-84 = 100], issued by the Bureau of
Labor Statistics of the United States Department of Labor) for the second (2nd)
full month prior to the Commencement Date of this Lease; provided, however, that
in no event shall such increase in Annual Rent be less than five percent ( 5 %)
throughout the Lease Term.
In the event that the Consumer Price Index ceases to use the 1982-84
average of one hundred (100) as the basis of calculation, or if a change is made
in the terms of particular items contained in the Consumer Price Index, then the
Consumer Price Index shall, at the discretion of the Lessor, be adjusted to the
figure that would have been arrived at had the change in the manner of computing
the Consumer Price Index in effect at the commencement of the Lease Term not
been affected. In the event that such Consumer Price Index (or successor or
substitute Consumer Price Index) is not available, a reliable governmental or
other nonpartisan publication evaluating the purchasing power of money may be
used at the discretion of Lessor.
ARTICLE 5
SECURITY DEPOSIT
The Lessee agrees to pay a security deposit equal to five thousand
($5000.00) upon the beginning of the lease. Unless required under state law,
the security deposit will be released to the Lessor, who shall not be
required to maintain it in a separate account nor be charged interest thereon.
<PAGE>
The security deposit shall be used by the lessor to pay for any damage
caused by the Lessee during his occupancy, reasonable wear and tear excepted. In
addition, the security deposit may also be used to offset monetary damage of
unpaid rent or unpaid late fees.
ARTICLE 6
QUIET ENJOYMENT
The Lessor covenants and agrees that Lessee, on paying said monthly rent
and performing all the covenants of this Lease on the part of Lessee to be
performed herein, shall and may peaceably and quietly hold and enjoy the said
Leased Premises.
ARTICLE 7
OPERATING EXPENSE ADJUSTMENTS
It is understood that the Annual Rent specified in Articles 3 and 4 is in
anticipation of Lessor incurring certain expenses for taxes, operations, and
maintenance costs. Therefore, the Lessor and Lessee agree to the definitions and
terms set forth below:
A. Real Estate Taxes: Lessor shall pay real estate taxes imposed on the
Leased Premises. Lessee shall reimburse Lessor for any increase in
real estate taxes imposed on the Leased Premises over and above the
amount of these taxes for the calendar year 1999. Said increase shall
be payable on or before thirty (30) days after receipt of notice of
the amount from Lessor. The term real estate taxes shall include all
ad valorem taxes and general and special assessments levied against
the Leased Premises. Lessee shall be responsible for all taxes levied
on Lessees personal property.
B. Utility Service: Lessor shall provide the standard utility service
connections for water, sewer, electricity, and telephone into the
Leased Premises. Lessee shall pay the cost of all utility services for
the Leased Premises, including but not limited to initial connection
charges and/or deposits, all charges for water, sewer, telephone, and
electricity, and all replacement of electric light lamps, tubes, and
ballasts used on or in connection with the Leased Premises. The
Lessees pro rata share of the entire building is one hundred percent
(100%). Failure by the Lessor to make available these services, or any
cessation thereof, resulting from causes beyond the control of the
Lessor, shall neither render Lessor liable in any respect for damages
to either person or property, nor relieve Lessee from fulfillment of
any covenant of this Lease. Should any of the equipment or machinery,
under the control of the Lessor, necessary to provide such services
break down, or for any cause cease to function properly, Lessor shall
use reasonable diligence to repair the same properly.
C. Repairs and Maintenance: The Lessor and Lessee shall maintain the
Building and the Leased Premises in good repair and condition
according to the following schedule:
Mechanical, Heating, Ventilation, and Air Conditioning: Lessor
shall be responsible for all major maintenance and repairs to the
mechanical, heating, air conditioning, and ventilation systems;
provided, however, that Lessee shall pay the first $ 300.00 per
occurrence (for items not protected by service warranties) for all
maintenance and repairs of such systems within the Leased Premises or
<PAGE>
Lessees pro rata share of the total building if appropriate. Lessor
shall supply and change all air conditioning filters as required.
Lessee shall reimburse to Lessor the cost of supplying and changing
such filters within thirty (30) days of receiving bill from Lessor.
Plumbing and Electrical: Lessor shall be responsible for all
major repairs and maintenance of the plumbing and electrical systems;
provided, however, that Lessee shall pay the first $300.00 per
occurrence (for items not protected by service contracts or
warranties) for maintenance and repairs of such systems within the
Leased Premises or Lessees pro rata share of Building if the cost of
such repair and maintenance shall be billed to the Building as a
whole.
Interior Maintenance: Lessee shall clean, provide cleaning
supplies, and maintain the Leased Premises in a clean, sanitary, and
good condition. Lessee shall make all needed repairs, including but
not limited to interior pest control, and replacements to the interior
of the Leased Premises, except for those responsibilities expressly
imposed upon Lessor above. Lessee shall maintain and repair all
interior glass.
Common Area Maintenance Charges: Lessee shall pay its pro rata
share of the common area charges. Said charges are assessed by Lessor
to pay for maintenance, repairs, and replacements, as necessary, to
include, but not be limited to, the maintenance of common streets,
drives, street lighting, landscaping, swale and berm maintenance,
common area irrigation, fountains, walls, parking lot maintenance,
refuse service, building exteriors and roofs, et cetera. The Lessees
pro rata share of common area maintenance charges shall be computed by
multiplying the total common area maintenance charges by a fraction,
the numerator of which shall be the Lessees 7,616 square feet and the
denominator of which shall be 7,616 (the total number of square feet
of office buildings for which certificates of occupancy have been
issued in the building). Payment shall be made monthly by Lessee
within ten (10 ) days after Lessee receives notice from Lessor showing
the sum due, which notice shall state in reasonable detail the manner
in which Lessees share of common area maintenance is computed. Lessee
has the obligation to pay for any partial month at the commencement
and expiration or termination of the Lease Term.
D. Insurance: Lessor shall pay for fire and extended coverage insurance
for the Leased Premises. Lessee shall reimburse Lessor for any
increase in the cost of insurance that Lessor is responsible to carry
on the Leased Premises, over and above the insurance cost for the
calendar year 1999. Reimbursement shall be made by Lessee within ten
(10) days after Lessee receives notice from Lessor showing the sum
due, which notice shall state in reasonable detail the manner in which
Lessees share of insurance costs is computed. Lessee shall not be
obligated to reimburse Lessor for any portion of any increase in the
insurance premium caused by a particular use or activity of any other
tenant in the Building in which the Leased Premises is located.
Lessees obligation to pay the insurance costs shall be prorated for
any partial year at the commencement and expiration or termination of
the lease term. Lessee shall provide fire and extended coverage
insurance on its personal property and contents.
<PAGE>
ARTICLE 8
ALTERATIONS AND IMPROVEMENTS
Lessee shall not make or allow to be made any alterations or physical
additions in or to the Leased Premises without first obtaining the written
consent of Lessor, which consent may be withheld at the sole discretion of
Lessor for any reason. Any and all such alterations, physical additions, or
improvements to the Leased Premises, when made by Lessee, shall at once become
the property of Lessor and shall be surrendered to Lessor upon the termination
of this Lease, by lapse of time or otherwise; provided, however, this clause
shall not apply to movable equipment, partitions, or furniture owned by Lessee,
which may be removed by Lessee at the end of the term of this Lease if Lessee is
not then in default and if such equipment, partitions, and furniture are not
then subject to any other rights, liens, and interests of Lessor hereunder. All
damages to the Leased Premises caused by or becoming evident by the removal of
such movable equipment, furniture, or partitions or otherwise shall be repaired
by Lessee at Lessees cost prior to surrender of the Leased Premises.
ARTICLE 9
LIENS
It is expressly covenanted and agreed by and between the Parties hereto
that nothing contained in this Lease shall authorize Lessee to do any act which
shall in any way encumber the title of Lessor in and to the Building or the land
upon which the Building is situated, nor shall the interest or estate of Lessor
in the Leased Premises be in any way subject to any claim by way of lien or
encumbrance, whether by operation of law or by virtue of any express or implied
contract by Lessee, and any claim to or lien upon the Leased Premises arising
from any act or omission of Lessee shall accrue only against the leasehold
estate of Lessee and shall in all respects be subject and subordinate to the
paramount title and right of Lessor in and to the Leased Premises. Lessee will
not permit the Leased Premises to become subject to any mechanics, laborers, or
materialmens lien on account of labor or material furnished to Lessee or any
sublessee in connection with work of any character performed or claimed to have
been performed on the Leased Premises by or at the direction or sufferance of
Lessee; provided, however, that Lessee shall have the right to contest in good
faith and with reasonable diligence the validity of any such lien or claimed
lien if Lessee shall give to Lessor such reasonable security as may be demanded
by Lessor to ensure payment to prevent any sale, foreclosure, or forfeiture of
the Leased Premises by reason of nonpayment thereof. On final determination of
the lien or claim for lien, Lessee will immediately pay any judgment rendered
with all proper costs and charges and will at its own expense have the lien
released and any judgment satisfied. In case Lessee shall fail to contest the
validity of any lien or claimed lien and give security to Lessor to ensure
payment thereof, or having commenced to contest the same, and having given such
security, shall fail to prosecute such contest with diligence, or shall fail to
have the same released and satisfy any judgment rendered thereon, then Lessor
may, at its election and without any requirement that it do so, remove or
discharge such lien or claim for lien (with the right in its discretion to
settle or compromise the same), and any amounts advanced by Lessor for
<PAGE>
such purposes shall be so much additional rental due from Lessee to Lessor on
demand, with interest at the highest rate allowed by law from the date of
payment thereof by Lessor until the repayment thereof by Lessee to Lessor.
ARTICLE 10
FIRE AND CASUALTY
If the Leased Premises shall be injured or damaged by fire or other causes
and should Lessor elect to make repairs to the Leased Premises and complete said
repairs within one hundred and eighty (180) days of the damage, then this Lease
shall not be terminated. Should Lessor elect not to rebuild, it may terminate
this Lease by written notice to Lessee. In either event, Lessor shall give
Lessee written notice of its intention to rebuild or terminate this Lease within
thirty (30) days after the event that causes said injury or damage. In no event
shall Lessor be liable to Lessee in any respect whatsoever for Lessees inability
to operate its business as a result of any casualty, including but not limited
to injury or damage to the Leased Premises caused by fire or other causes.
Lessee shall carry a work/rental interruption insurance policy covering
risk of loss due to casualty in an amount not less than the aggregate amount to
be paid by Lessee to Lessor or to a third party under the terms and provisions
of this Lease, including but not limited to rent, real property taxes, and
common area maintenance charges, for a period of six (6) months following any
occurrence of the said casualty.
ARTICLE 11
LIABILITY INSURANCE
Lessee agrees to carry at its own expense a Lessor/Lessees Liability
Insurance policy from a company satisfactory to Lessor, with minimum limits for
general public liability insurance for personal injury including death in the
amount of three hundred thousand dollars ($300,000.00) and five hundred
thousand dollars ($500,000.00) for each occurrence, with one million dollars
($100,000,000.00) umbrella coverage, and for property damage insurance a single
limit of not less than one hundred thousand dollars ($100,000.00) for each
occurrence; such insurance shall be for the joint benefit of Lessor and Lessee
and shall name Lessor as an additional insured.
Irrespective of the adequacy of said insurance, Lessee shall indemnify and
save Lessor free and harmless from any and all claims, actions, damages,
expenses (including without limitation reasonable attorneys fees), and liability
whatsoever arising out of or in any way connected with injury (including death)
or property damage to any person, firm, corporation, or other entity, including
Lessor, arising directly or indirectly from being on the Leased Premises or the
use or occupancy of said Leased Premises.
Copies of all the Lessees required insurance policies shall be delivered to
Lessor prior to occupancy of the Leased Premises. On an annual basis, the Lessee
shall provide Lessor with a Certificate of Insurance reflecting the types of
policies held, their amounts, and the Lessors interest as loss payee. Lessee
agrees that every insurer shall agree by endorsement upon the policy(ies) issued
by it, that it will give Lessor thirty ( 30 ) days written notice at the address
where rental is paid before the policy(ies) is question shall be altered or
canceled.
<PAGE>
ARTICLE 12
WAIVER OF SUBROGATION
Anything in this Lease to the contrary notwithstanding, the Lessee hereby
waives any and all rights of recovery, claim, action, or cause of action against
Lessor, his agents, offices, and employees, for any loss or damage that may
occur to the Leased Premises hereby demised, or any improvements thereto, or
personal property located therein, or said Building of which the Leased Premises
are part, or any other cause which could be insured against under the terms of
standard fire and extended coverage insurance policies, regardless of cause or
origin, including negligence of the Parties hereto, their agents, officers, and
employees. Lessee agrees to make best efforts to have its insurance company
waive its subrogation rights under all policies.
ARTICLE 13
CONDEMNATION
Lessee agrees that if the said Leased Premises, or any part thereof, shall
be taken or condemned for public or quasi-public use or purpose by any
authority, Lessee shall have no claim against the Lessor and shall not have any
claim or right to any portion of the amount that may be awarded to the Lessee as
damages or paid as a result of such condemnation; all the rights of the Lessee
to damages thereof, if any, are hereby assigned by the Lessee to the Lessor. If
the condemnation or taking is for the entire Leased Premises, the term of the
Lease shall cease and terminate from the date of such governmental taking or
condemnation, and the Lessee shall have no claim against the Lessor for the
value of any unexpired term of this Lease. Should the taking or condemnation be
for a part of the Leased Premises, then at the sole option of the Lessor, this
Lease shall not cease and terminate, but continue in full force and effect.
ARTICLE 14
USAGE OF LEASED PREMISES
The Leased Premises are to be occupied and used by the Lessee for office(s)
and for warehousing of a picture framing and product development facility. Use
for any other purpose shall constitute a breach of this Lease. Lessee shall not
occupy or use, or permit any portion of the Leased Premises to be occupied or
used, for any business or purpose which is unlawful, disreputable, or deemed by
Lessor to be extrahazardous, or permit anything to be done which in any way will
increase the rate of insurance coverage on said Leased Premises, and in the
event that, by reason of such acts of Lessee, there shall be any increase in the
insurance rates for the building or contents above normal rates, Lessee agrees
to pay to Lessor upon receipt of notice, as additional rental, an amount equal
to all such increase. Lessee shall conduct its business and control its agents,
employees, invitees, and visitors in such a manner as not to create any
nuisance, or interfere with, annoy, or disturb any other Lessee, Lessor, or any
other party involved in the management of the Building.
<PAGE>
ARTICLE 15
COMPLIANCE WITH LAWS, REGULATIONS, AND RESTRICTIONS
Lessee shall comply with all laws, ordinances, orders, rules, and
regulations (state, federal, municipal and other agencies, or bodies having any
jurisdiction thereof) relating to the use, condition, or occupancy of the Leased
Premises. Lessee shall indemnify and save and hold Lessor harmless from Lessees
violation of any laws and ordinances. Lessee shall comply with all Building
Rules and Regulations of the Building as shown in Exhibit N/A.
ARTICLE 16
LESSORS RIGHT OF ENTRY
Lessee shall permit Lessor or its agents or representatives to enter into
and upon any part of the Leased Premises, at all reasonable hours, to inspect
the same, to clean or make repairs, alterations, or additions thereto, as Lessor
in its opinion may deem necessary or desirable, or for the purpose of
determining Lessees use thereof or whether an act of default under this Lease
has occurred.
ARTICLE 17
PARKING
Lessor shall provide nonexclusive parking for the benefit of Lessee, its
employees, customers, and visitors and for the benefit of other owners and
tenants, in the areas shown on the Site Plan attached hereto as Exhibit A .
Lessor has provided and Lessee exclusively designated for certain owners and
Lessees. Nineteen (19) exclusive parking spaces per One Thousand (1,000) square
feet of leasable area (within the Leased Premises) throughout the term of this
lease.
ARTICLE 18
SIGNS AND ADVERTISING
The Lessee shall have sign space on the following signs (see Exhibit B,
Sign Site Plan, for location of signs):
A. Building (Lessee) Identification Sign located near the Building.
B. Sign at the entrance to the Leased Premises.
All of the signs are to be in conformity with the building Sign Regulations
(see Exhibit C) and the county of Clark Sign Regulations. No other advertising
or signs shall be placed by Lessee so as to be visible from the exterior of the
Leased Premises without the prior consent and design approval of the Lessor. Any
such signs and advertising shall be placed where designated by the Lessor and
installed by Lessor at Lessees expense. The cost of constructing and placing any
exterior sign or signs shall be at Lessees expense.
ARTICLE 19
ASSIGNMENT OR SUBLEASE
The Lessee covenants and agrees not to encumber or assign this Lease or
sublet all or any part (including desk space or mailing privileges) of the
Leased Premises without the written consent of the Lessor, which consent may be
withheld by Lessor. Such assignment shall in no way relieve the Lessee from any
obligations, covenants, and provisions of this Lease. If Lessor grants its
consent to an assignment or subletting, rent under this Lease shall thereafter
be the greater of (a) the rent payable as per terms and
<PAGE>
conditions of this Lease, or (b) the rent payable by the Assignee or Subtenant
(including any consideration paid by Assignee or Subtenant).
In no event shall Lessee assign or sublet the Leased Premises for any
terms, conditions, and covenants other than those contained herein. In no event
shall this Lease be assigned or be assignable by operation of Law or by
voluntary or involuntary bankruptcy proceedings or otherwise, and in no event
shall this lease or any rights or privileges hereunder be an asset of Lessee
under any bankruptcy, insolvency, or reorganizational proceedings. Lessor shall
not be liable nor shall the Leased Premises be subject to any mechanics,
materialmens, or other type liens, and Lessee shall keep the Leased Premises and
land on which the Leased Premises are situated free from any such liens which
may occur because of acts of Lessee, notwithstanding any foregoing provision.
Any consent to any subletting or assignment shall not be deemed a consent
to any subsequent subletting or assignment. Any assignee, transferee, or
purchaser shall agree in writing to be bound by and comply with the provisions
of this Lease.
ARTICLE 20
not applicable
ARTICLE 21
TRANSFER BY LESSOR
If the interest of Lessor under this Lease shall be transferred, whether
voluntarily or by reason of foreclosure, voluntary sale, or other proceedings
for enforcement of any mortgage on the Leased Premises, Lessee shall be bound to
such transferee (herein sometimes called the Purchaser) under the terms,
covenants, and conditions of this Lease for the balance of the term hereof
remaining and any extensions or renewal hereof which may be effected in
accordance with the terms and provisions hereof, with the same force and effect
as if the Purchaser were the Lessor under this Lease, and Lessee does hereby
agree to attorn to the Purchaser, including the mortgagee under any such
mortgage, if it be the Purchaser, as its Lessor, said attornment to be effective
and self-operative without the execution of any further instruments upon the
Purchaser succeeding to the interest of the Lessor under this Lease. The
respective rights and obligations of Lessee and the Purchaser upon such
attornment, to the extent of the then remaining balance of the term of this
Lease and any such extensions and renewals, shall be and are the same as those
set forth herein.
ARTICLE 22
DEFAULT BY LESSEE
It shall be an event of default and shall be considered a breach of this
Lease by Lessee if one or any of the following shall occur:
A. Lessee shall make default in the payment of rent or other payment when
due as herein provided; and such default shall continue for a period
of ten (10) days or more; or default shall be made in any of the
other covenants, agreements,
<PAGE>
conditions, or undertakings herein required to be kept, observed, and
performed by Lessee, and such other default shall continue for ten
(10) days after notice thereof in writing to Lessee; or,
B. Lessee shall file a petition in voluntary or reorganization bankruptcy
or under applicable Chapters of the Federal Bankruptcy Act or similar
law, state or federal, whether now or hereafter existing, or an answer
admitting insolvency or inability to pay its debts, or fail to obtain
a vacation or stay of involuntary bankruptcy proceedings within sixty
(60) days as hereinafter provided; or,
C. Lessee shall be adjudicated a bankrupt, or a trustee or receiver shall
be appointed for all of its property or the major part thereof in any
involuntary proceedings, or any court shall have taken jurisdiction of
the property of Lessee or the major part thereof in any involuntary
proceedings for the reorganization, dissolution, liquidation, or
winding up of Lessee, and such jurisdiction is not relinquished or
vacated or stayed on appeal or otherwise within sixty (60) days; or,
D. Lessee shall make an assignment for the benefit of its creditors, or
shall vacate or abandon the Leased Premises.
ARTICLE 23
REMEDIES UPON DEFAULT
If any one or more of the events of default set forth in Article 22 occurs,
then Lessor may, at its election:
Give Lessee written notice of its intention to terminate this Lease on
the date of such notice or on any later date specified in such notice,
and, on the date specified in such notice, Lessees right to possession
of the Leased Premises will cease and the Lease will be terminated
(except as to Lessees liability set forth in this Article 23), as if
the date fixed in such notice were the end of the term of this Lease.
If this Lease is terminated pursuant to the provisions of this
Article, Lessee will remain liable to Lessor for damages in an amount
equal to the rent and other sums which would have been owing by Lessee
under this Lease for the balance of the term if this Lease had not
been terminated, less the net proceeds, if any, of any reletting of
the premises by the Lessor subsequent to such termination, and after
deduction of all Lessors expenses set forth in the Lease. Lessor will
be entitled to collect such damages from Lessee monthly on the days on
which the rent and other amounts would have been payable under this
Lease if this Lease had not been terminated, and Lessor will be
entitled to receive such damages from Lessee on each such day.
Alternatively, at the option of the Lessor, if this Lease is
terminated, Lessor will be entitled to recover from Lessee.
i. The worth at the time of award of the amount by which the unpaid rent
that would have been earned after termination until the time of award
exceeds the amount of such rent loss that Lessee proves could
reasonably have been avoided;
ii. The worth at the time of award of the amount by which the unpaid rent
for the balance of the term of this Lease after the time of award
exceeds the
<PAGE>
amount of such rent loss that Lessee proves could reasonably be
avoided; and
iii. Any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessees failure to perform its obligations under
this Lease or which in the ordinary course of things would be likely
to result from such failure. The worth at the time of award of the
amount referred to in clauses (i) and (ii) is computed by allowing
interest at the highest rate permitted by law. The worth at the time
of award of the amount referred to in clause (iii) is computed by
discounting such amount at the discount rate of the Federal Reserve
Bank of Atlanta at the time of award,
iv. If Lessor elects to take possession of the premises according to this
Lease paragraph without terminating this Lease, Lessee will pay Lessor
the rent and other sums which would be payable under this Lease as if
such repossession had not occurred, less the net proceeds, if any, of
the reletting of the premises after deducting all of Lessors expenses
incurred in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal
expenses, attorneys fees, expenses of employees, alterations,
remodeling and repair costs, and expenses of preparation for such
reletting. If, in connection with any reletting, the new Lease term
extends beyond the existing term, or the premises covered by such
reletting include areas which are not part of the premises, a fair
apportionment of the rent received from such reletting and the
expenses incurred in connection with such reletting will be made in
determining the net proceeds received from such reletting. In
addition, in determining the net proceeds from such reletting, any
rent concessions will be apportioned over the term of the new Lease.
Lessee will pay such amounts to Lessor monthly on the days on which
the rent and all other amounts owing under this Lease would have been
payable if possession had not been retaken, and Lessor will be
entitled to receive the rent and other amounts from Lessee on each
such day.
ARTICLE 24
WAIVER OF BREACH
Failure of Lessor to declare any default immediately upon occurrence
thereof, or delay in taking any action in connection therewith, shall not waive
such default, but Lessor shall have the right to declare any such default at any
time and take such action as might be lawful or authorized hereunder, either in
law or in equity.
ARTICLE 25
ABANDONMENT
In the event the Lease Premises are abandoned by Lessee, Lessor shall have
the right, but not the obligation, to relet the same for the remainder of the
term provided for herein and if the rent received through such reletting does
not at least equal the rent provided for herein, Lessee shall pay and satisfy
any deficiency between the amount of the rent so provided for and that received
through reletting, and, in addition thereto, shall pay all
<PAGE>
expenses incurred in connection with any such reletting, including, but not
limited to, the cost of renovation, altering, and decorating for a new occupant.
Nothing herein shall be construed as in any way denying Lessor the right in the
event of abandonment of said Leased Premises or other breach of this Agreement
by Lessee to treat the same as an entire breach and, at Lessors option, to
immediately sue for the entire breach of this Agreement and any and all damages
that Lessor suffers thereby.
ARTICLE 26
HOLDING OVER
IN THE EVENT OF HOLDING OVER BY LESSEE AFTER THE EXPIRATION OR TERMINATION OF
THIS LEASE, SUCH HOLDOVER SHALL BE AS A TENANT AT WILL, AND ALL OF THE TERMS AND
PROVISIONS OF THIS LEASE SHALL BE APPLICABLE DURING SUCH PERIOD, EXCEPT THAT
LESSEE SHALL PAY LESSOR AS RENTAL FOR THE PERIOD OF SUCH HOLDOVER AN AMOUNT
EQUAL TO ONE HUNDRED AND TWENTY FIVE PERCENT (125%) OF THE RENT WHICH WOULD HAVE
BEEN PAYABLE BY LESSEE HAD SUCH HOLDOVER PERIOD BEEN A PART OF THE ORIGINAL TERM
OF THIS LEASE, AND LESSEE WILL VACATE THE LEASED PREMISES AND DELIVER THE SAME
TO LESSOR UPON LESSEES RECEIPT OF NOTICE FROM LESSOR TO VACATE SAID PREMISES.
THE RENTAL PAYABLE DURING SUCH HOLDOVER PERIOD SHALL BE PAYABLE TO LESSOR ON
DEMAND. NO HOLDING OVER BY LESSEE SHALL OPERATE TO EXTEND THIS LEASE EXCEPT AS
HEREIN PROVIDED. LESSEE AGREES TO PAY LESSORS COSTS AND REASONABLE ATTORNEYS
FEES SHOULD LESSOR EXPEND MONIES FOR THE REMOVAL OF LESSEE OR ANY OF LESSEES
PROPERTY.
ARTICLE 27
ATTORNEYS FEES
In the event Lessee makes default in the performance of any of the terms,
covenants, agreements, or conditions contained in this Lease and Lessor places
the enforcement of this Lease, or any part thereof, or the collection of any
rent due or to become due hereunder, or recovery of the possession of the Leased
Premises, in the hands of an attorney, or files suit upon the same, Lessee
agrees to pay Lessors costs and reasonable attorneys fees for the services of
such attorneys. The obligation of Lessee to pay such costs of collections
including reasonable attorneys fees shall apply whether or not suit be brought,
and if suit be brought, then at both trial and appellate levels.
ARTICLE 28
HOLD HARMLESS
Lessee agrees to defend, indemnify, and hold Lessor harmless against any
and all claims, damages, accidents, and injuries to persons or property caused
by or resulting from or in connection with anything in or pertaining to or upon
the Leased Premises.
AS A MATERIAL PART OF THE CONSIDERATION TO BE RENDERED TO LESSOR UNDER THIS
LEASE, LESSOR SHALL NOT BE LIABLE FOR DAMAGE TO PROPERTY OF LESSEE OR OF OTHERS
LOCATED ON THE LEASED PREMISES OR BUILDING, NOR FOR THE LOSS OF OR DAMAGE TO ANY
PROPERTY OF LESSEE OR OF OTHERS BY THEFT, CASUALTY LOSS, OR OTHERWISE, NOR SHALL
LESSOR BE LIABLE TO LESSEE FOR LOSSES ARISING FROM THE INABILITY OF LESSEE TO
OPERATE ITS BUSINESS FOR ANY REASON WHATSOEVER, AND LESSEE HEREBY WAIVES ALL
SUCH CLAIMS AGAINST LESSOR AND WILL HOLD LESSOR EXEMPT AND HARMLESS FOR OR ON
ACCOUNT OF SUCH DAMAGE OR INJURY.
<PAGE>
LESSOR SHALL NOT BE LIABLE FOR ANY INJURY OR DAMAGE TO PERSONS OR PROPERTY
RESULTING FROM (BUT NOT LIMITED TO) FIRE OR EXPLOSION ON ANY PART OF THE LEASED
PREMISES OR BUILDING OR FROM THE PIPES, APPLIANCES, OR PLUMBING WORKS OR FROM
THE ROOF, STREET, OR SUBSURFACE OR FROM ANY PLACE OR BY DAMPNESS OR ANY OTHER
CAUSE OF WHATSOEVER NATURE. LESSOR SHALL NOT BE LIABLE FOR ANY SUCH DAMAGE
CAUSED BY OTHER TENANTS OR PERSONS IN THE BUILDING, OCCUPANTS OF ADJACENT
PROPERTY, OR THE PUBLIC, OR CAUSED BY OPERATIONS IN CONSTRUCTION OF ANY PRIVATE,
PUBLIC, OR QUASI-PUBLIC WORK. ALL PROPERTY OF THE LESSEE KEPT OR STORED ON THE
LEASED PREMISES SHALL BE SO KEPT OR STORED AT THE RISK OF LESSEE, AND LESSEE
SHALL HOLD LESSOR HARMLESS FROM ANY CLAIMS ARISING OUT OF DAMAGE TO THE SAME,
INCLUDING SUBROGATION CLAIMS BY LESSEES INSURANCE CARRIERS.
ARTICLE 29
LESSORS LIABILITY
The term Lessor as used in this Lease means only the owner from time to
time of the Leased Premises. Lessor shall be under no personal liability with
respect to any of the provisions of this Lease, and if Lessor is in default with
respect to its obligations hereunder, Lessee shall look solely to the equity of
the Lessor in the Leased Premises and Building for the satisfaction of the
Lessees remedies. It is expressly understood and agreed that the Lessors
liability under this Lease shall in no event exceed the loss of its equity
interest in the Leased Premises.
ARTICLE 30
FORCE MAJEURE
Lessor shall be excused for the period of any delay in the performance of
any obligation when the delay is a result of any cause or causes beyond its
control, which includes but is not limited to all labor disputes, governmental
regulations or control, fire or other casualty, or inability to obtain any
material, services, or financing.
ARTICLE 31
NOTICE
All rent and other payments required to be made by Lessee to Lessor
hereunder shall be payable to Lessor at the address set forth below, or such
other address as Lessor may specify from time to time, by written notice
delivered in accordance herewith. Unless otherwise provided to the contrary
herein, any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered (whether or not actually received) when
deposited in the United States mail, postage prepaid, Certified Mail, Return
Receipt Requested, addressed to the Parties hereto at the respective addresses
set out opposite their names below, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith:
LESSOR
TRICIA VELTRE
804 BLUE SPRINGS DRIVE
HENDERSON NV, 89015
<PAGE>
Lessee:
VELTRE ENTERPRISES INC.
6430 SUNSET CORPORATE DRIVE
LAS VEGAS NV, 89120
ARTICLE 32
Estoppel Certificates
Upon ten (10) days prior written notice from Lessor, Lessee shall execute
and deliver to Lessor a statement in writing (1) certifying that this Lease is
unmodified and in full force and effect, and dates to which the rent and other
charges are paid in advance, if any, and (2) acknowledging that to Lessees
knowledge there are not any uncured defaults on the part of Lessor hereunder and
that Lessee has no right of offset, counterclaim, or deduction in rent or
specifying such defaults, if any, or claim, together with the amount of any
offset, counterclaim, or deduction alleged by Lessee. Any such statement may be
relied upon by any prospective purchaser or lender upon the security of the real
property of which the Leased Premises are a part. Lessees failure to deliver
said statement within such time shall constitute agreement by Lessee (1) that
this Lease is in full force and effect without modification except as may be
represented by Lessor, (2) that there are no uncured defaults in Lessors
performance and that Lessee has no right of offset, counterclaim, or deduction
against rent, and (3) that no more than one months rent has been paid in
advance.
ARTICLE 33
LIENS FOR RENTS
not applicable
ARTICLE 34
SECURITY AGREEMENT
not applicable
ARTICLE 35
COMMON AREA USAGE
Should Lessee purchase or lease security, telephone, communications,
electronic, or any other kind of equipment, then said equipment shall not be
installed, placed, or stored in any common areas of the Park or Building. Should
Lessee place any such equipment or any kind of personal property in said common
areas, then Lessor, at his election, may remove said personal property at
Lessees expense.
<PAGE>
ARTICLE 36
FLOOR LOADS
Lessee shall not place a load upon the floor of the Leased Premises which
exceeds the floor load per square foot which such floor was designed to carry.
Floor load is stipulated to be 70 pounds per square foot. Lessor and Lessee will
determine jointly the approximate weight and the position of all safes and heavy
installations which the Lessee wishes to place in the Leased Premises so as to
distribute properly the weight thereof.
Business machines and mechanical equipment belonging to Lessee which cause
noise and/or vibration that may be transmitted to the structure of the Building
or to any leased space to such a degree as to be objectionable to Lessor or to
any tenants in the Building shall be placed and maintained by the party owning
the machines or equipment, at such partys expense, in a setting of cork, rubber,
or springs-type noise and/or vibration eliminators sufficient to eliminate
vibration and/or noise.
ARTICLE 37
GENERAL
A. This Lease shall be binding and inure to the benefit of the Parties
hereto and their respective heirs, personal representatives,
successors, and assigns.
B. This Lease shall create the relationship of Lessor and Lessee. No
estate shall pass out of the Lessor, and the Lessee shall have only a
right of use which shall not be subject to levy and sale.
C. The submission of this instrument for examination or signature by the
Lessee does not constitute a reservation of or an option for lease,
and it is not effective as a lease or otherwise until execution and
delivery by both Lessor and Lessee.
D. Lessor shall have the right to transfer and assign, in whole or in
part, all of its rights and obligations hereunder in the Building
and/or Leased Premises referred to herein.
E. The captions or headings of the various Articles in this Lease
Agreement are for convenience only, and are not to be construed as
part of this Lease, and shall not be construed as defining or limiting
in any way the scope or intent of the provisions hereof.
F. Time is of the essence of this Lease Agreement.
G. Any pronouns used in the Lease shall be deemed to include the
masculine, feminine, neuter, singular, and plural as appropriate.
H. This instrument embodies the whole agreement between the Parties, and
there are no promises, terms, conditions, or obligations other than
those herein contained. This agreement shall supersede all previous
communications, representations, proposals, or agreements, either
verbal or written, between the parties hereto and not herein
contained. This agreement shall not be modified or canceled unless
reduced in writing and signed by both parties, properly witnessed, and
by direct reference therein made a part hereof.
I. If any term, covenant, condition, or provision of the Lease or the
application thereof to any person or circumstance shall, at any time
or to any extent, be invalid or unenforceable, the remainder of this
Lease shall not be affected thereby, and each term, covenant,
condition, and provision of this Lease shall be valid and be enforced
to the fullest extent of the law. This Lease and the
<PAGE>
performance thereof shall be governed, interpreted, construed, and
regulated by the laws of the state of Nevada, and the venue of any
action shall lie in Clark County, Nevada.
J. The Parties hereto further understand and agree that this Lease shall
not be recorded in any Public Records of Clark County, Nevada , except
at the option of the Lessor. The Parties also agree, at the option of
the Lessor, to execute a short-form lease for recording, containing
the names of the parties and such other terms and conditions of the
Lease as may be requested by the Lessor.
K. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSOR AND LESSEE HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT
BY EITHER AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LESSOR AND
LESSEE, OR LESSEES USE OR OCCUPANCY OF THE LEASED PREMISES, OR ANY
EMERGENCY OR OTHER STATUTORY REMEDY WITH RESPECT HERETO.
ARTICLE 39
SIGNATURE PAGE
IN WITNESS WHEREOF, the Parties hereto have executed this Lease Agreement
on the day and year first above written. Signed, sealed, and delivered in the
presence of:
-------------------------------
Lessor
By
- ------------------------------- -------------------------------
Witness Authorized Representative
- -------------------------------
Witness
- ------------------------------- -------------------------------
Witness Lessee
By
- ------------------------------- -------------------------------
Witness Authorized Representative
Exhibit A Sign Site Plan
Exhibit B Site Plan
BUILDING RULES AND REGULATIONS
The following Rules and Regulations have been adopted by the owners for the
care and protection of the building located in 6430 Sunset Corporate Drive, and
for the general comfort and welfare of all occupants.
1. Wherever Tenant is obligated under these Rules and Regulations to do
or refrain from doing an act or thing, such obligation shall include
the exercise by Tenant
<PAGE>
of its best efforts to secure compliance with such obligation by the
servants, employees, contractors, jobbers, agents, invitees,
licensees, guests, sublessees, and visitors of Lessee. The term
Building shall include the structure within which the Leased Premises
is located, and any obligations of Tenant hereunder with regard to the
Building shall apply with equal force to the Leased Premises and to
other parts of the Building.
2. Tenant shall not obstruct or interfere with the rights of other
occupants in the Building, or of persons having business in the
Building in which the Leased Premises are located, or in any way
injure or annoy such persons.
3. Tenant shall not use the Leased Premises or the Building for lodging,
sleeping, cooking, or any immoral or illegal purposes, or for any
purpose that will damage the building, or the reputation thereof, or
for any purpose other than those specified in the Lease.
4. Canvassing, soliciting, and peddling in the Building are prohibited,
and Tenant shall cooperate to prevent such activities.
5. Tenant shall not bring or keep within the Building any animal or
motorcycle.
6. Tenant shall not conduct mechanical or manufacturing operations, cook
or prepare food, or place in use any inflammable, combustible,
explosive, or hazardous fluid, chemical device, substance, or material
in or about the Leased Premises or the Building without the prior
written consent of Landlord. Tenant shall comply with all rules,
orders, regulations, and requirements of the applicable Fire Rating
Bureau, or any other similar body, and Tenant shall not commit any act
or permit any object to be brought or kept in Leased Premises or the
Building which shall increase the rate of fire insurance on the
Building or on property located therein.
7. Not applicable
8. Tenant shall not install or use in the Leased Premises or Building any
engine, boiler, generator, heating unit, air conditioning unit (other
than the air conditioning and heating unit Landlord provides), stove,
water cooler, ventilator, radiator, or any other similar apparatus
without the prior written consent of Landlord.
9. Not applicable
10. Not applicable
11. Not applicable
12. Not applicable
13. Tenant shall not deposit any trash, refuge, cigarettes, or other
substances of any kind within or out of the Building except in the
refuse containers provided therefor. Tenant shall not introduce into
the Building any substance which might add an undue burden to the
cleaning or maintenance of the Leased Premises or the Building. Tenant
shall exercise its best efforts to keep the sidewalks, entrances,
passages, courts, lobby areas, parking areas, stairways, vestibules,
public corridors, and halls in and about the Building (hereinafter
referred to as Common Areas) clean and free from rubbish.
14. Tenant shall use the Common Areas only as a means of ingress and
egress, and Tenant shall permit no loitering by any persons upon
Common Areas. Common
<PAGE>
Areas and the roof of the Building are not for the use of the general
public, and Landlord shall in all cases retain the right to control or
prevent access thereto by all persons whose presence, in the judgment
of Landlord, shall be detrimental to the Building and/or its tenants.
Tenant shall not enter the mechanical room, air conditioning rooms,
electrical closets, janitorial closets, or similar areas or go upon
the roof of the Building without the prior written consent of
Landlord, unless such areas shall have been designated as part of the
Leased Premises.
15. Tenant shall not use the washrooms, rest rooms, and plumbing fixtures
of the Building, if any, and appurtenances thereto, for any purpose
other than the purposes for which they were constructed, and Tenants
shall not deposit any sweepings, rubbish, rags, or other improper
substances therein. Tenant shall not waste water by interfering or
tampering with the faucets or otherwise. If Tenant or Tenants
servants, employees, agents, contractors, jobbers, licensees,
invitees, guests, or visitors cause any damage to such washrooms, rest
rooms, plumbing fixtures, or appurtenances, such damage shall be
repaired at Tenants expense and Landlord shall not be responsible
therefor.
16. Tenant shall not mark, paint, drill into, cut, string wires, or in any
way deface any part of the Building without the prior written consent
of Landlord. Upon removal of any wall decorations or installations of
floor coverings by Tenant, any damage to the walls or floors shall be
repaired by Tenant at Tenants sole cost and expense. Tenant shall
refer all contractors, representatives, installations technicians, and
other mechanics, artisans, and laborers rendering any service in
connection with the repair, maintenance, or improvement of the Leased
Premises to Landlord for Landlords supervision, approval, and control
before performance of any such service. This Paragraph 16 shall apply
to all work performed in the building, including, without limitation,
installation of the telephones, telegraph equipment, electrical
devices, and attachments and installations of any nature affecting
floor, walls, woodwork, trim, windows, ceilings, equipment, or any
structural portion of the Building. Plans and specifications for such
work, prepared at Tenants sole expense, shall be submitted to Landlord
for its prior written approval in each instance before commencement of
work. All installations, alterations, and additions shall be
constructed by Tenant in a good and workmanlike manner, and only good
grades of material shall be used in connection therewith. The means by
which telephone, telegraph, and similar wires are to be introduced to
the Leased Premises and the location of telephones, call boxes, and
other office equipment affixed to the Leased Premises shall be subject
to the prior written approval of Landlord.
17. Tenant shall not obstruct, alter, or in any way impair the efficient
operation of the Leased Premises heating, ventilating, air
conditioning, electrical, fire, safety, or lighting systems.
18. Not applicable
19. Employees of the Landlord or the Building Association (Association)
shall not receive or carry messages for or to Tenant or any other
person, nor contact with nor render free or paid services to Tenant or
Tenants servants, employees, contractors, jobbers, agents, invitees,
licensees, guests, or visitors. In the event
<PAGE>
that any of Landlords or Associations employees perform any such
services, such employees shall be deemed to be the agents of Tenant
regardless of whether or how payment is arranged for such services,
and Tenant hereby indemnifies and holds Landlord or Association
harmless from any and all liability in connection with any such
services and any associated injury or damage to property or injury or
death to personal resulting therefrom.
20. No radio or television aerial or other similar device shall be
installed without first obtaining Landlords consent in writing on each
separate instance. No aerial shall be erected on the roof or exterior
walls of the Building, or on the grounds, without in each instance the
written consent of Landlord. Any aerial so installed without such
written consent shall be subject to removal without notice at any
time.
ACKNOWLEDGMENT OF RECEIPT
The undersigned hereby acknowledges receipt of a complete copy of the
foregoing Rules and Regulations.
BY
---------------------------------------
Authorized Representative for
<PAGE>
SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1
Name State of
Incorporation
------------------------------------------ --------------------
Veltre Enterprises, Inc. Nevada
Worldwide Collectibles, Inc. Nevada
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 323,127
<SECURITIES> 0
<RECEIVABLES> 236,583
<ALLOWANCES> 0
<INVENTORY> 446,448
<CURRENT-ASSETS> 1,029,954
<PP&E> 154,399
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,473,908
<CURRENT-LIABILITIES> 237,093
<BONDS> 0
0
0
<COMMON> 6,653
<OTHER-SE> 1,183,562
<TOTAL-LIABILITY-AND-EQUITY> 1,473,908
<SALES> 662,231
<TOTAL-REVENUES> 662,231
<CGS> 246,901
<TOTAL-COSTS> 626,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,648
<INCOME-PRETAX> (380,552)
<INCOME-TAX> (31,001)
<INCOME-CONTINUING> (349,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349,551)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
