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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FILE NO. 0-27125
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS USERS
UNDER SECTION 12(b) or 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
SILK BOTANICALS.COM, INC.
(formerly Diversified Restaurant Holdings, Inc.)
(Name of Small Business Issuer In Its Charter)
FLORIDA 65-0886132
- ------- ----------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
975 S. CONGRESS AVENUE, SUITE 102, DELRAY BEACH, FLORIDA 33445
- -------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(561) 265-3600
------------------------------------------
(Issuer's Telephone Number)
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH EACH
TO BE REGISTERED- - CLASS IS TO BE REGISTERED
N/A N/A
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SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:
===============================================================================
TITLE OF EACH CLASS TO BE REGISTERED
Common Stock Par Value $.001
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Copies of Communications Sent to:
Robert C. Hackney, Esq.
Hackney & Miller, P.A.
4400 PGA Blvd., Suite 505
Palm Beach Gardens, Florida 33410
Telephone: (561-627-0677) Fax: (561) 625-4685
<PAGE>
PART I
Forward-Looking Statements. This Registration Statement includes
"forward-looking statements" which represent the Company's objectives,
expectations or beliefs, including but not limited to, statements concerning
industry performance, the Company's operations, economic performance, financial
conditions, growth strategies and margins and growth in sales of the Company's
products. For this purpose, any statements contained in this Registration
Statement that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, words such as "may,"
"will," "expect," "believe," "anticipate," "intend," "plan," "believe,"
"estimate," "consider," or similar expressions are used.
You should not construe any forward-looking statement as a guarantee of future
performance. These statements inherently involve risks, uncertainties and
assumptions. The Company's future results and stockholder values will differ
from those expressed in these forward-looking statements, and those variations
may be material and adverse. Many of the factors that will affect these results
and values are beyond our ability to control or predict. In addition, we do not
have any intention or obligation to update forward-looking statements after this
registration statement becomes effective, even if new information, future events
or other circumstances have caused statements expressed in this registration
statement to become incorrect or misleading.
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY. Silk Botanicals.Com, Inc. was formed on November 20, 1998, under
the name of Diversified Restaurant Holdings, Inc., a Florida corporation
("Diversified"). On April 9, 1999, Diversified, an inactive corporation at this
time, acquired JRB Marketing of South Florida, Inc., a Florida corporation
incorporated on October 2, 1996, through a reverse acquisition. On August 2,
1999, Diversified filed a name change to Silk Botanicals.Com, Inc.
JRB Marketing of South Florida, Inc. and Silk Botanicals.Com, Inc. are herein
jointly referred to as the "Company."
BUSINESS OF THE COMPANY. The Company develops, markets and distributes three
lines of high-quality artificial flowers - artificial greenery and floral
arrangements in baskets and containers and artificial floral arrangements in
clear glass vases set in epoxy providing the illusion of fresh flowers in water.
These products are marketed under the Silk Botanicals, "Living Silk/registered
trademark/" and "Forever Fresh/registered trademark/." names. The Company
markets and sells these products to gift retailers, decorative accessory
retailers, and the hospitality industry. The artificial foliage and flowers are
imported primarily from Taiwan, Hong Kong and the Peoples Republic of China. The
Company purchases artificial flowers from U.S. based importers and U.S.
subsidiaries of foreign companies located in the U.S. Glassware is purchased
from domestic manufacturers. The Company's silk botanical products are produced
by JRB Enterprises, Inc. under a Manufacturing Agreement. Although JRB
Enterprises, Inc. and the Company are controlled by Joseph R. Bergmann, the
Company will operate as a standalone business. Management has instituted
numerous firewalls to prevent commingling of the businesses through such
practices as separating office and warehouse space, maintaining separate
inventories, and separating accounting functions.
The Company is primarily a design, marketing, sales, and distribution company
which has other companies manufacture products to its specifications. JRB
Enterprises, Inc. is a manufacturer and assembler that primarily sells its
assembled products through its approximately 25 retail stores and to Silk
Botanicals.Com, Inc.
The Company became a corporate entity to disassociate itself from the retail
stores operated by JRB Enterprises, Inc. and to establish itself as a wholesale
supplier to retail operations nationally. In this way, if the future course of
business warrants, the companies can be sold individually without the overlap of
operations.
Independent research by Jacobs, Jenner & Kent of Baltimore, Maryland, marketing
and research consultants, in their study on the Permanent Floral Products
Industry, has revealed three important opportunities which the Company has and
will continue to address: (1) there is little awareness of artificial floral
brands among consumers, (2) merchandise with retail prices less than $30 is the
preferred choice for retailers and their customers, and (3) gift boxes enhance
merchandising. The Company plans to embark on a program to build brand
awareness, develop three product lines targeting three distinct markets - gift
retailers, decorative accessories retailers, and the hospitality industry - and
is developing gift boxes for select products.
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PRODUCTS. The Company has developed over 200 floral and greenery arrangements
and a special gift box for its line of bud vase arrangements. The Company
believes the gift box will be well accepted by national gift and retail store
chains and plans to develop gift boxes for other vases in its product lines.
Arrangements are sold as get well gifts by hospital gift shops and as gifts for
birthdays, anniversaries, Christmas, Chanukah, Valentines Day, Easter and
Mothers Day. Styles retailing for $20.00 to $50.00 have been strong sellers for
these markets. The Company further believes that the quality of the product will
enable customers to overcome any reluctance to buying artificial flowers. In
addition, styles priced from $58.00 to $198.00 are sold as decorative
accessories and house warming gifts for the consumer and decorative accents for
the hospitality industry. The Company plans to develop new products that would
be less seasonal.
It is estimated that approximately $500,000 will be required to fund this phase
of the Company's development. The funds will be used to expand marketing efforts
to include gift retailers in the western United States and the hospitality
industry, develop additional product and marketing materials enabling the
Company to separately target the gift and decorative accessories markets,
increase inventories and accounts receivables. In addition, management will
undertake an evaluation of alternative channels of distribution including
partnerships with major chains to home base distributors, web sites, and
franchising.
CUSTOMER SERVICE. The Company strives to serve its customers with accurate and
on-time delivery of its products. Retail and chain stores demand a high level of
service to assure full product availability for their customers. The Company
offers a variety of distribution services depending on its customers' needs. The
Company also provides its customers with high quality customer and ordering
services. Its sales force assists customers in identifying products from the
Company's lines and works closely with them to furnish the best products for
their store requirements.
QUALITY ASSURANCE. As part of its quality assurance program, the Company intends
to carefully selects its suppliers and perform periodic product inspections,
both prior to shipment and after receipt. The Company expects to experience
negligible returns of defective or damaged products.
COMPETITION. The artificial floral industry is competitive but highly fragmented
with many small players in the manufacturing end. Therefore, Management believes
that an excellent opportunity exists for the Company and its product lines and
that there are a variety of ways to compete in this industry.
The Company's primary competitors are other assemblers, importers and
distributors. Some of these competitors focus on price and others specialize in
a particular product segment. The Company competes primarily on the basis of
merchandising, high quality product lines, supply dependability, price and
brand name recognition. The Company's competitors are not focused on the gift
industry, have not developed products targeting the gift industry, nor have they
developed packaging to gift industry standards.
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The barriers to entry to the Company's industry are relatively low. The Company
believes, however, that attaining success in the industry is difficult but that
it has competitive advantages, including its ability to fill orders quickly and
completely and provide a high level of customer service, high quality products,
competitive prices and brand names. The Company believes the industry does not
have a single dominant retailer or wholesaler of high quality artificial
greenery and flower arrangements. To date, the only importer, manufacturer or
distributor of artificial flowers whose shares are publicly traded is Celebrity,
Inc. (FLWR).
SALES AND MARKETING. The Company intends to market its products using the
"Forever Fresh/registered trademark/" and "Living Silk/registered trademark/
trademarks which are licensed for thirty-six (36) years. The Company believes it
has found a niche in the gift industry. According to Retail Industry Indicators
in 1997, gift and general merchandise is a $49 billion market annually in the
United States. The overall target market for the Company's products is composed
of almost 200,000 stores, including general merchandise stores, catalog and mail
orders, florists, gift stores and furniture and home furnishing stores. The
Company intends to build a national base of gift stores and develop
relationships that have been recently forged with several regional and national
chains. The Company's marketing efforts will be through trade shows, direct
mail, telemarketing, targeted e-mail, and the use of sales representatives. The
Company believes, however, that a high percentage of sales will be obtained
through its web site, www.silkbotanicals.com, which is in the final stages of
development. For this reason, the Company included the ".Com" in its corporate
name to indicate its entrance into e-commerce marketing and sales.
EMPLOYEES. Currently the Company employs six part-time and six full-time
employees. It anticipates increasing the staff with six new employees at the end
of March 2000 and with an additional ten new employees by March 2001.
KEY EMPLOYEES: The Company's key employees are Joseph R. Bergmann, President,
Chief Executive Officer and Director; Regina M. Bergmann, Director of Personnel;
Jerry Frenz, Controller, Gail Scheel, Director of Advertising and Marketing; and
Joyce Bernard, Merchandise Manager.
LIMITED OPERATING HISTORY: The Company has a very limited operating history upon
which an evaluation of the Company's prospects can be made. The Company's
prospects must be considered speculative, considering the risks, expenses, and
difficulties frequently encountered in the establishment of a new business.
There can be no assurance that the Company will be able to achieve profitable
operations.
REPORTS TO SECURITY HOLDERS: Once this Registration Statement becomes effective,
the Company will become a reporting company with the Securities and Exchange
Commission ("SEC"), and will thereafter provide an annual report to its security
holders, which will include audited financial statements. The public may read
and copy any materials filed with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is WWW.SEC.GOV. The
Company currently maintains its own Internet address at WWW.SILKBOTANICALS.COM.
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ITEM 2. PLAN OF OPERATION
Based on financial projects prepared by management, the Company estimates that
approximately $500,000 will be required to fund its development plans. The
Company plans to obtain funding through a variety of sources, including but not
limited to, both institutional and private loans and the option by the
Manufacturer to advance some initial funding costs. The Company is in the
process of establishing a line of credit with Suntrust Bank. In addition, the
Company has obtained special 180-day financing terms with suppliers for
immediate product and supply purchases. The Company anticipates receiving the
initial funding within the next 90 days.
For the fiscal year ended May 31, 1999, the Company had no revenues. Expenses of
$694,688 consisted of $671,460 for the issuance costs of securities and $23,228
for general administrative expenses.
The funds will be used to expand marketing efforts to include gift retailers in
the western United States and in the hospitality industry, develop and expand
its Web site, develop additional product and marketing materials to enable the
company to separately target the gift and decorative accessories markets,
increase inventories and accounts receivables, develop new products, and
increase its marketing staff to expand into new markets. The Company has its
marketing plan in place and operational as of the first quarter fiscal year end
May 31, 2000.
PRODUCT DEVELOPMENT: Much of the efforts since its inception have been on
product design and development. The design staff studies competitive fresh cut
and artificial arrangements, researches new sources of stems and vases, surveys
retailers and end users for preferences, and tests prototypes in focus groups
and by sampling. The Company focuses on developing new product. The Company's
design staff have developed and refined over 200 arrangements by communicating
with customers and by attending silk and fresh flower trade shows.
As the product line has been refined, the focus has shifted to packaging and
merchandising. Although competitors offer similar products, the Company is not
aware of any that have focused its energies on developing a brand, marketing to
the gift market, and responding to the packaging requirements of this market.
The Company will continue to diversify to meet retailers' demands for quality
and value. The products will create revenue streams as follows:
BASIC LINE: The basic line is drawn from the existing unboxed designs, sold and
shipped in bulk. These are inexpensive and serve as the opening price point for
gift stores. The Company believes that this product sells especially well for
tabletop displays, for parties, and to the hospitality market.
FOREVER FRESH/registered trademark/ GIFT-BOXED LINE: This line is the Forever
Fresh arrangements packaged in a branded window gift box. Benefits to the
retailer include Uniform Product Code ("UPC") labels for inventory and Point of
Sale ("P.O.S."), reduction of breakage, and enhanced on-shelf merchandising.
Wholesale prices range from $8.00 to $14.00 and retail from $16.00 to $30.00 per
unit. This product line includes some of the following:
o Special Occasion merchandise (Easter, Valentine's Day, Birthdays,
Get Well) and for special people (Wives, Mothers, Teachers).
o Twin-pack boxed gifts will also be tested, i.e. small floral
vase with candle.
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o Special seasonal arrangements, country arrangements, exotic
florals, and greenery.
o Desktop accessories such as bud vases and mini floral arrangements.
CATALOG PROGRAM SALES: Catalog program sales are basic line and custom products
that are suitable for "drop shipping." The Company's products will appear in
upcoming Smithsonian Institute and Touch of Class catalogs. The Company
continually seeks new and diversified catalogs to carry their products.
GENERIC/PRIVATE LABEL GIFT-BOXED PRODUCT: The Company will develop and package a
line of 10-12 permanent floral gifts in private label windowed gift boxes with
seasonal designs.
SIGNATURE SERIES: The Company's design staff is developing the Company's
signature line of large floral arrangements. These arrangements will wholesale
for $100.00 to $300.00. Upon completion this line will be released and marketed
to home accessories retailers and hospitality providers through manufacturers'
representatives. Other designer containers will be introduced that will enhance
the silk flowers and fit into custom interiors.
MARKET DEVELOPMENT: The Company will continue to cater to the needs of gift
retailers and expand its marketing efforts to include the western half of the
United States. The Company plans to target five segments of the market:
INDEPENDENT GIFT SHOPS. Businesses that own/operate one or two retail locations;
STRAND GIFT BUSINESSES: Companies that own/operate from three to twenty- five
retail locations;
CHAIN STORES: Companies that own a nationally or regionally recognized retail
gift business;
CATALOGS: Companies that sell products directly to consumers via direct mail
catalogs; and,
DEPARTMENT STORES: The Company has begun to work closely with department stores,
rather than discounters, to develop products to meet their specifications.
By identifying and categorizing the prospect list, current sales presentations
will be modified and new presentations developed, to meet specific needs of
current and future customers. Secondary target markets will continue to include
home furnishings retailers, hotels and restaurants, corporate gifts and
furnishings, the military (exchanges, commissaries, and officers clubs).
SALES AND MARKETING. The Company will use the following marketing tactics to
achieve its financial objectives:
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TRADE SHOWS: The Company believes most sales are generated through trade shows
where the products can be properly displayed to their fullest effect. The
Company currently participates in wholesale trade shows and anticipates
increasing the number of shows they attend:
GIFT INDUSTRY TRADE SHOWS. The gift and general merchandise industries purchase
approximately $1 billion of products at gift trade shows each year. Buyers
prefer to view the merchandise in person before buying for their businesses and
trade shows provide this opportunity. The Company believes that participating in
these shows will enhance sales due to the visual nature of the product.
HIGH POINT, NC FURNITURE SHOW. This trade show is the only resource dedicated by
the Company to general sales within the furniture industry. Furniture stores
represent a projected 13% of the Company's sales, making attendance at this show
cost effective. The Company anticipates participation in other furniture shows
as well.
ALA MILITARY TRADE SHOW. The ALA Military Trade Show is the annual, exclusive
buying show for military bases and exchanges. It represents the only opportunity
to show and sell products to this lucrative business category. Forever
Fresh/registered trademark/ and the Department of the Air Force expect to
finalize a Non-Appropriated Funds Contract in the Fall of 1999 enabling the
Company to provide artificial floral arrangements to all military installations.
RESTAURANT SUPPLY TRADE SHOWS: The Company has initiated a search to retain a
sales organization that targets restaurants and hotels. Trade shows will be an
important component of the sales efforts.
SALES REPRESENTATIVES: Independent sales organizations sell products through
road sales and trade shows. The Company has signed contracts with representative
companies that maintain permanent showrooms in Atlanta, Columbus and Chicago for
the east coast of the United States. The Company plans to increase
representation on the west coast with representatives who can provide quality
temporary or permanent show space.
COLOR CATALOGS: Full color catalogs have been produced for both Forever
Fresh/registered trademark/ and Living Silk/registered trademark/. These are
being used to sell the most important and popular designs in both lines.
DIRECT MAIL: Holiday and seasonal product designs will be presented to existing
customers and prospects through direct mail. Trade show schedules and special
events are also announced through direct mail.
TELEMARKETING: The Company plans to contact its complete customer base at least
four times a year. Two of the calls will be used for pre-show marketing and the
other two calls will sell specific holiday packages (the Valentine's Day and
Mother's Day collections). Additionally, all direct mail recipients will receive
a follow-up call.
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WEB SITE: The Company has plans to fully develop its Web site,
WWW.SILKBOTANICALS.COM. The site is expected to be operational in the fall of
1999. The Company will display its product lines and accept orders through its
site, as well as provide information on the company for potential investors.
SELL SHEETS: Sell Sheets will be used to show the individual products at trade
shows and in direct mail presentations. The Company will use sell sheets to
expand the use of packages, to introduce and sell new products, and increase
Basic Line sales. The package themes include: Valentine and Mother's Day,
Summer, Christmas, and the Table Top Collection.
EARLIER MARKETING ACTIVITIES: The Company, since its inception under the name of
JRB Marketing of South Florida, Inc.,
1. Conducted market research
2. Developed products
3. Identified suppliers
4. Purchased an existing customer base from Forever Fresh/registered
trademark/
5. Purchased marketing rights and registered trademarks
6. Began the development of a major web site; and
7. Planned to position itself to market its products worldwide.
Because it was a development company, these early activities were accomplished
by Related Parties. The objective was to develop a business plan to obtain
future funding. Operations would not commence until this funding was expected to
become available.
CUSTOMER BASE: The sales and marketing plans take into account the Company's
desire to expand operations both financially and geographically. The Company
will continue to build on the solid base of 2,000+ customers acquired through
JRB Marketing of South Florida, Inc.'s agreement with Forever Fresh/registered
trademark/ and by virtue of cobranding Forever Fresh's/registered trademark/
popular silk floral products. With additions to the sales force, enhanced trade
shows schedules, print advertising, direct mail programs, product development,
and the web-site, it will be able to achieve its revenue and market share
objectives.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's administrative, warehousing and distribution facilities are
located at 955 and 975 South Congress Avenue in Delray Beach, Florida.
The Company subleases approximately 2,000 square feet of furnished office space
and warehouse facilities from JRB Enterprises, Inc. This space has been
specifically identified and designated for the Company.
The Company plans to continue to sublease this space until May 2001 at a fixed
cost of $1,667 per month. The Sublease allows for two five-year renewal options.
The Company's tangible property consists of computer equipment and software
which is located in its office space.
The Company believes that these facilities are adequate for the foreseeable
future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial
ownership of the Company's common stock as of August 2, 1999, by (i) each person
or entity known by the Company to be beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the Company's directors and
named executive officers, and (iii) all directors and executive offices of the
Company as a group.
<TABLE>
<CAPTION>
TITLE OF CLASS NAME & ADDRESS AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER CLASS
<S> <C> <C>
Common Joseph R. Bergmann 4,042,687 Shares* 64.7%
Par Value $.001 975 S. Congress Ave President & Director
Delray Beach, FL
Common Directors & Officers 4,042,687 Shares* 64.7%
Par Value $.001 As a Group
</TABLE>
*Of this number, 1,042,688 shares are issued to Joseph R. Bergmann IRA.
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CHANGES IN CONTROL. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF THE COMPANY. Said persons are
listed on the following tables:
BOARD OF DIRECTORS
NAME POSITION AGE
- --------------------------------------------------------------------------------
Joseph R. Bergmann Chairman of the Board 51
Note: Joseph R. Bergmann is currently the sole Director and Chairman. The
Company expects to expand its Board with 90 days to include additional
directors, with at least two being outside, unaffiliated persons.
OFFICERS
BIOGRAPHICAL INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS:
JOSEPH R. BERGMANN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr.
Bergmann currently oversees the entire operation of the Company. He is
responsible for merchandising of products, as well as the formation and
implementation of the Company's marketing plans. From 1990 to the present, Mr.
Bergmann has also been the President and CEO of JRB Enterprises, Inc. From 1986
to 1989, he was President of Jewelmasters, Inc., a public multimillion dollar
fine jewelry company. He also served as Senior Vice President of Federated
Department Stores. He is a graduate of Queens College in New York.
BIOGRAPHICAL INFORMATION ON SIGNIFICANT EMPLOYEES:
REGINA M. BERGMANN, DIRECTOR OF PERSONNEL. Ms. Bergmann currently serves as the
Company's Director of Personnel and participates in the daily operations of the
business. She has also been Director of Personal for JRB Enterprises, Inc. since
September 1995. From October 1990 to the present, Ms. Bergmann has served as the
Corporate Secretary and a Director of JRB Enterprises, Inc.
JOYCE BERNARD, MERCHANDISE MANAGER. Ms. Bernard currently has direct
responsibility for the Company's purchasing, inventory control and shipping
functions. She also serves as Merchandise Manager for JRB Enterprises, Inc.
since 1996 where she oversees the manufacturing functions as well. Ms. Bernard
was a District Manager for JRB Enterprises, Inc. from 1994 and a Store Manager
for Silk, Silk, Silk from 1993 to 1994. With over 15 years' experience in the
floral industry, Ms. Bernard also held various positions with Ben Franklin
Stores, Inc.
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JERRY FRENZ, CONTROLLER. Mr. Frenz is responsible for the financial reporting as
well as budgeting cash management and special product analysis. He also serves
as the Controller for JRB Enterprises since April 1994. Mr. Frenz has over 25
years of experience in key financial management positions including Controller,
and Director of Accounting. Mr. Frenz began his career in public accounting as a
CPA with Arthur Andersen & Co. He held various financial management positions at
two multi-billion dollar companies, Case and FPL Group, Inc. and received his
Accounting degree at the University of Wisconsin - Whitewater.
GAIL SCHEEL, DIRECTOR OF ADVERTISING AND MARKETING. Ms. Scheel is responsible
for the Company's advertising programs including media analysis and selection,
advertising scheduling and advertising promotion. Ms. Scheel also serves as the
Director of Advertising and Marketing as well as for Store Operations for JRB
Enterprises, Inc. since October 1990. Ms. Scheel majored in Marketing at DePaul
University.
FAMILY RELATIONSHIPS. Joseph R. Bergmann, President, Chief Executive Officer and
Director and Regina M. Bergmann, Director of Personnel, are husband and wife.
ITEM 6. EXECUTIVE COMPENSATION
The Table below summarizes the annual compensation for services in all
capacities to the company for the (i) person(s) serving as the Company's Chief
Executive Officer; and (ii) the Company's four most highly compensated executive
officers other than the CEO for the last fiscal year:
<TABLE>
<CAPTION>
(i)
NAME TITLE SALARY/FISCAL YEAR BONUS AWARDS
RESTRICTED STOCK
<S> <C> <C>
Joseph R. Bergmann President $35,000.00 N/A N/A
(ii)
Not Applicable.
</TABLE>
Joseph R. Bergmann is also an officer and director of JRB Enterprises, Inc.
Together, the Company and JRB Enterprises, Inc. have engaged in numerous
transactions including, but not limited to, the Manufacturing Agreement, the
Sub-Lease Agreement, and a Licensing Agreement. Mr. Bergmann's role in these
transactions was to negogiate and procure the Agreements and he received no
compensation save for his income received in the ordinary course of business.
For the Officers and Directors of JRB Enterprises, Inc. the following outlines
compensation received for the last three fiscal years:
NAME TITLE YEARS COMPENSATION
PER YEAR
Joseph R. Bergmann Director 1996-1998 -0-
Joseph R. Bergmann President 1996-1998 $150,000
Regina M. Bergmann Director 1996-1998 -0-
Regina M. Bergmann Secretary 1996-1998 $ 25,000
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 9, 1999, Diversified Restaurant Holdings, Inc. acquired JRB Marketing
of South Florida, Inc. from Joseph R. Bergmann in a stock for stock exchange.
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The Company will purchase its silk botanical products from JRB Enterprises,
Inc., which is owned by the Company's President and majority stockholder. On
April 1, 1999, the Company entered into a Manufacturing and Distribution
Agreement with JRB Enterprises, Inc. for a term of six years with the right to
extend the term for six additional terms. JRB Enterprises, Inc. will invoice the
Company for products and distribution of the products at rates to be negotiated
periodically between the Company and JRB Enterprises, Inc.
Additionally, the Company shares office facilities, certain office equipment and
certain employees with JRB Enterprises, Inc. At May 31, 1999, the Company had
issued 1,900 shares of preferred stock to JRB Enterprises, Inc. for the license
rights to the trademarks Living Silk and certain manufacturing processes. The
Company owed JRB Enterprises, Inc. $138,338 at May 31, 1999, for the purchase of
inventory, a computer and software, and monies JRB Enterprises, Inc. had
advanced the Company in acquiring the trademark and manufacturing process rights
to the Forever Fresh/registered trademark/ line of floral arrangements.
Currently, JRB Enterprises, Inc., also controlled by Joseph R. Bergmann,
President and Majority Stockholder of the Company, is one of the primary
suppliers to the Company. The Company purchases, under a Manufacturing Agreement
with JRB Enterprises, Inc., certain floral arrangements, greenery arrangements
and natural trunk trees product.
The Company also orders its supplies from the following companies:
o Private label floral cleaning products - S.S.G. Incorporated
o Company designed faux stone planters - Millenium Designs
o Company designed table top vases, urns & containers -
Pompadour Products
Additional manufacturers and potential suppliers will be identified through the
Company's participation in industry trade shows and exhibits.
On April 10, 1999, the Company entered into an exclusive license agreement to
market and distribute artificial greenery and floral arrangements with the
Living Silk and Silk Botanicals trademarks owned by JRB Enterprises, Inc.
Additionally, the license agreement granted the Company the exclusive right to
use the manufacturing process of the Living Silk(TM) and Silk Botanicals(TM)
products. As consideration for the license agreement the Company issued
preferred stock to JRB Enterprises, Inc. valued at $190,000. The Company further
agreed to pay JRB Enterprises, Inc. royalty payments of 5% of the net amount
invoiced by the Company, or any affiliate, for Living Silk(TM) or Silk
Botanicals(TM) products invoiced to any third party during the initial six year
term. For additional periods of up to six, six year terms, the Company agreed to
pay one quarter of one percent (.25%) of its net sales per annum for all Living
Silk(TM) and Silk Botanicals(TM) products sold to any third party.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 25,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. As of August 2, 1999, 6,250,000 shares of common stock were
issued and outstanding.
The Company is authorized to issue 5,000,000 shares of preferred stock at $.001
par value. As of August 2, 1999, 1,900 shares of preferred stock were issued and
outstanding. The preferred shares were designated and issued upon such terms and
conditions as the Board of Directors determined appropriate and as more
particularly defined in the Board of Directors Resolution dated April 10, 1999.
The terms and conditions stated the following: a) Payment of a quarterly
dividend at the annual rate of 6.0%; b) Said dividends to be cumulative and have
priority over the Common Stock; (c) The Preferred Stock will not be convertible
and shall have no voting rights; and (d) The Preferred Stock will have a value
of $100.00 per share. No additional shares of preferred stock have been issued.
If additional shares are issued, the conditions that may be set by the Board of
Directors include, but are not limited to, the entitlement of the holders of the
preferred shares to (a) cumulative, non-cumulative or partially cumulative
dividends, (b) the preference over any other class or classes of shares as to
the payment of dividends, (c) the preference in the assets of the corporation
over any other class or classes of shares upon the voluntary or involuntary
liquidation of the corporation, (d) the convertibility, if any, into shares of
any class or into shares of any series of the same or any other class, and (e)
voting rights, if any.
11
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
MARKET INFORMATION.
Currently the Company's equity is not publicly traded.
HOLDERS.
As of October 21, 1999, the Company has a total of 75 holders of its common
stock.
DIVIDENDS.
There have been no cash dividends declared on the Company's common stock since
the Company's inception. Dividends will be declared at the sole discretion of
the Company's Board of Directors.
ITEM 2. LEGAL PROCEEDINGS.
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
12
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company pursuant to Item 304 of Regulations S-B.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
USE OF PROCEEDS
From November 20, 1998 through April 6, 1999, the Company issued 1,814,187
shares of its common stock to a total of 69 individuals in an offering exempt
from registration under Rule 504 of Regulation D promulgated pursuant to the
Securities Act of 1933.
Regarding the shares issued under Rule 504, the aggregated transactions
consisted of the following: On November 20, 1998, the Company issued 335,187
shares of common stock to 46 individuals and recorded an expense of $335 for the
issuance. These shares were issued at par value since no operations existed in
the Company. Between November 30, 1998 and March 31, 1999, the Company issued
26,250 shares of common stock as compensation for services rendered to three
individuals and recorded an expense of $26. From January 2, 1999 until March 31,
1999, the Company issued 99,000 shares of common stock for cash of $49,500 to 14
individuals, which was utilized prior to the recapitalization. The Company
issued, from April 1, 1999 through April 6, 1999, 1,353,750 shares of common
stock to 6 individuals and recorded an expense in accordance with generally
accepted accounting principles of $671,460, which approximates market value. All
of the stock issued has been restated to reflect the reverse stock split of 1
for 4.
On April 9, 1999, the Company issued an aggregate of 4,435,813 shares in an
offering exempt from registration under Section 4(2) of the Securities Act of
1933, in exchange for all of the issued and outstanding common stock of JRB
Marketing of South Florida, Inc.
USE OF PROCEEDS: All funds generated will be used by the Company for working
capital.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act eliminates the personal liability of the
Company's Directors to the Company and its shareholders for monetary damages as
a result of a breach of fiduciary duty with certain exceptions. Such a provision
makes it more difficult to assert a claim and obtain damages from a director in
the event of breach of his fiduciary duty.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
MAY 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
13
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
TABLE OF CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations F-3
Statements of Changes in Stockholders' Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Silk Botanicals.Com, Inc.
formerly known as Diversified Restaurant Holdings, Inc.
We have audited the accompanying balance sheet of Silk Botanicals.Com, Inc.,
formerly known as Diversified Restaurant Holdings, Inc. (a development stage
company), as of May 31, 1999, and the related statements of operations,
stockholders' deficit and cash flows for the years ended May 31, 1999 and 1998
and for the period from October 2, 1996 (inception) to May 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Silk Botanicals.Com, Inc.,
formerly known as Diversified Restaurant Holdings, Inc. (a development stage
company), as of May 31, 1999, and the results of its operations and its cash
flows for the years ended May 31, 1999 and 1998 and for the period from October
2, 1996 (inception) to May 31, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered losses from operations and has a
net capital deficiency that raise substantial doubt about its ability to
continue as a going concern. In addition, the Company is significantly dependent
on its Manufacturer. Management's plans in regard to these matters are also
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Sweeney, Gates & Co.
Ft. Lauderdale, FL
August 11, 1999
F-1
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
1999 1999
(UNAUDITED)
--------- -----------
ASSETS
<S> <C> <C>
Current assets:
Accounts receivable $ -- $ 55,508
Inventory 57,353 38,896
--------- ---------
Total current assets 57,353 94,404
Property and equipment, net 1,500 1,374
License rights, net of valuation allowance
accumulated amortization 42,500 40,730
--------- ---------
$ 101,353 $ 136,508
LIABILITIES AND STOCKHOLDERS' DEFICIT ========= =========
Current liabilities:
Accounts payable $ 21,414 $ 25,014
Accounts payable due to related party 101,353 134,551
--------- ---------
Total current liabilities 122,767 159,565
--------- ---------
Stockholders' deficit:
Series A preferred stock, $.001 par value, 1,900 shares
authorized, issued and outstanding 2 2
Preferred stock, $.001 par value, 4,998,100 authorized,
none issued and outstanding -- --
Common stock, $.001 par value, 25,000,000 shares authorized,
6,250,000 shares issued and outstanding (Note 8) 6,250 6,250
Additional paid-in capital 861,458 861,458
License rights allowance, net (190,000) (182,083)
Deficit accumulated during the development stage (699,124) --
Retained deficit -- (708,684)
--------- ---------
Total stockholders' deficit (21,414) (23,057)
--------- ---------
$ 101,353 $ 136,508
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 2,
1996 THREE
(INCEPTION) MONTHS
THROUGH ENDED
YEARS ENDED MAY 31, MAY 31, AUGUST 31,
1999 1998 1999 1999
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ 112,462
Cost of goods sold -- -- -- 78,723
----------- ----------- ----------- -----------
Gross profit -- -- -- 33,739
----------- ----------- ----------- -----------
Operating expenses:
Securities issuance costs (Note 6) 671,460 -- 671,460 --
General and administrative 23,228 -- 27,664 43,299
----------- ----------- ----------- -----------
694,688 -- 699,124 43,299
----------- ----------- ----------- -----------
Net loss (694,688) -- (699,124) (9,560)
Preferred dividend requirement -- -- -- 2,850
----------- ----------- ----------- -----------
Net loss available to common
shareholders $ (694,688) $ -- $ (699,124) $ (12,410)
=========== =========== =========== ===========
Net loss per share of common stock:
Basic and diluted $ (0.14) $ -- $ (0.00)
=========== =========== ===========
Weighted average number of common
shares outstanding 4,865,095 4,435,813 6,250,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at October 2, 1996 (inception) -- $ -- -- $ --
Issue founders shares -- -- 4,435,813 4,436
Net loss -- -- -- --
--------- --------- --------- ---------
Balance, May 31, 1997 -- -- 4,435,813 4,436
Net loss -- -- -- --
--------- --------- --------- ---------
Balance, May 31, 1998 -- -- 4,435,813 4,436
Issuance of preferred stock 1,900 2 -- --
Issuance of stock to additional
founding stockholders -- -- 335,187 335
Issuance of stock in a 504 offering -- -- 1,452,750 1,453
Issuance of stock for services rendered -- -- 26,250 26
License rights allowance -- -- -- --
Net loss -- -- -- --
--------- --------- --------- ---------
Balance, May 31, 1999 1,900 2 6,250,000 6,250
Transfer of balances -- -- -- --
Amortization of valuation allowance -- -- -- --
Net loss for the three months period
ended August 31, 1999 (unaudited) -- -- -- --
--------- --------- --------- ---------
Balance, August 31, 1999 (unaudited) 1,900 $ 2 6,250,000 $ 6,250
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL LICENSE DURING THE
PAID-IN RIGHTS DEVELOPMENT ACCUMULATED
CAPITAL ALLOWANCE STAGE DEFICIT TOTALS
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at October 2, 1996 (inception) $ -- $ -- $ -- $ -- $ --
Issue founders shares -- -- -- -- 4,436
Net loss -- -- (4,436) -- (4,436)
--------- --------- --------- --------- ---------
Balance, May 31, 1997 -- -- (4,436) -- --
Net loss -- -- -- -- --
--------- --------- --------- --------- ---------
Balance, May 31, 1998 -- -- (4,436) -- --
Issuance of preferred stock 189,998 -- -- -- 190,000
Issuance of stock to additional
founding stockholders -- -- -- -- 335
Issuance of stock in a 504 offering 671,460 -- -- -- 672,913
Issuance of stock for services rendered -- -- -- -- 26
License rights allowance -- (190,000) -- -- (190,000)
Net loss -- -- (694,688) -- (694,688)
--------- --------- --------- --------- ---------
Balance, May 31, 1999 861,458 (190,000) (699,124) -- (21,414)
Transfer of balances 699,124 (699,124) --
Amortization of valuation allowance -- 7,917 -- -- 7,917
Net loss for the three months period
ended August 31, 1999 (unaudited) -- -- -- (9,560) (9,560)
--------- --------- --------- --------- ---------
Balance, August 31, 1999 (unaudited) $ 861,458 $(182,083) $ -- $(708,684) $ (23,057)
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
OCTOBER 2,
1996 THREE
(INCEPTION) MONTHS
THROUGH ENDED
YEARS ENDED MAY 31, MAY 31, AUGUST 31,
1999 1998 1999 1999
--------- -------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(694,688) $ -- $(699,124) $ (9,560)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization -- -- -- 9,813
Common stock issued in noncash
transactions 673,274 -- 677,710 --
Changes in assets and liabilities:
Increase in accounts receivable -- -- -- (55,508)
(Increase) decrease in inventory (57,353) -- (57,353) 18,457
Increase in license rights (42,500) -- (42,500) --
Increase in accounts payable 21,414 -- 21,414 3,600
Increase in due to related parties 101,353 -- 101,353 33,198
Increase in dividends payable -- -- -- --
--------- -------- --------- ---------
Net cash used in operating activities 1,500 -- 1,500 --
Cash flows from investing activities:
Purchase of property and equipment (1,500) -- (1,500) --
--------- -------- --------- ---------
Net increase (decrease) in cash -- -- -- --
Cash at beginning of period -- -- -- --
Cash at end of period $ -- $ -- $ -- $ --
========= ======== ========= =========
Supplemental disclosures:
Cash payments during the development stage for interest and income taxes:
None
Noncash disclosure of financing activities:
Preferred stock issued for
licensing rights $ 190,000 $ -- $ 190,000 $ --
========= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
1. ORGANIZATION
NATURE OF ORGANIZATION - Silk Botanicals.Com, Inc. (the "Company"), formerly
known as Diversified Restaurant Holdings, Inc., was organized November 20, 1998
in the state of Florida. The Company was a development stage company until June
1999 when it commenced operations. The Company develops, markets and distributes
high quality artificial flowers, artificial greenery and floral arrangements
under the trademark names, Forever Fresh/registered trademark/, Living
Silk/trademark/ and Silk Botanicals/trademark/.
On April 9, 1999, the Company acquired all the outstanding common stock of JRB
Marketing of South Florida, Inc., ("JRB") a Florida corporation formed October
2, 1996. For accounting purposes, the transaction has been treated as a reverse
acquisition of the Company by JRB and as a recapitalization of JRB. The
recapitalization resulted in the issuance of 4,435,813 shares and the recording
of $4,436 in expenses. The historical financial statements prior to November 20,
1998 are those of JRB. No pro forma information is presented, as the acquisition
is not a business combination. At the time of this transaction, JRB had no
assets, liabilities, or operations. As such, the financial statements of the
Company reflect the accounting for JRB as if JRB had been the reporting entity
from inception.
Prior to acquiring JRB, the Company owned 99% of the stock of Southern Dragon,
Inc. ("Southern"), also a development stage company, in the restaurant industry.
On March 31, 1999, the Company sold the stock of Southern back to Southern and
began concentrating on the development, marketing and distribution of artificial
flowers, greenery and floral arrangements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - Revenue is recognized, net of discounts and estimated
returns, upon shipment of product.
INVENTORY - Inventory consists primarily of finished floral and greenery
arrangements and is valued at the lower of cost or market.
FURNITURE AND EQUIPMENT - Furniture and equipment are recorded at cost.
Depreciation will be provided on a straight-line basis over the estimated useful
lives of the assets.
LICENSE RIGHTS - The license rights acquired by the Company have been recorded
at cost less a valuation allowance. The rights and valuation allowance are
amortized on the straight-line basis over the term of the license rights
agreements, which is six years.
F-6
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount of trade receivables
and payables approximate fair value. Because of the relationship of the Company
and its related party, there is no practical method that can be used to
determine the fair value of accounts payable due the related party.
INCOME TAXES - The Company accounts for income taxes on an asset and liability
approach to financial accounting. Deferred income tax assets and liabilities are
computed annually for the difference between the financial statement and tax
basis of assets and liabilities that will result in taxable or deductible
amounts in the future, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period, plus or minus the change during the period
in deferred tax assets and liabilities.
ESTIMATES - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EARNING PER SHARE - The Company has utilized Financial Accounting Standards No.
128, "Earnings per Share" ("FAS 128"). FAS 128 requires presentation of earnings
or loss per share on basic and diluted earnings per share. The Company does not
have any potentially dilutive shares outstanding. Earnings or loss per share is
computed by dividing net income by the weighted average number of shares
outstanding during the period.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the recoverability of
its property and equipment, and other assets in accordance with Statement of
Financial Accounting Standards No.121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires recognition
of impairment of long-lived assets in the event the net book value of such
assets exceeds the estimated future undiscounted cash flows attributable to such
assets or the business to which such intangible assets relate. No impairments
were required to be recognized during the period from October 2, 1996 to August
31, 1999.
SEGMENT REPORTING - In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information"("SFAS 131"). This statement
requires companies to report information about operating segments in interim and
annual financial statements. It also requires segment disclosures about products
and services, geographic areas and major customers. The Company has determined
that it did not have any separately reportable operating segments as of May 31,
1999 and August 31, 1999.
F-7
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTERIM FINANCIAL STATEMENTS - The financial statements for the three-month
period ended August 31, 1999 and all related footnote information for this
period are unaudited and reflect all normal and recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of the financial
position, operating results and cash flows for a fair presentation of the
interim period. The results of operations for the three-month period ended
August 31, 1999 are not necessarily indicative of the results to be achieved for
the fiscal year ending May 31, 2000.
RECENT ACCOUNTING PRONOUNCEMENT - In April 1998, the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5 requires that start-up costs, including
organizational costs, be expensed as incurred. The Company has accepted early
adoption of SOP 98-5 and expensed all start-up costs.
3. LIQUIDITY AND GOING CONCERN
The accompanying financial statements have been prepared on a going concern
7basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business.
The Company has minimal capital available to meet future obligations and to
carry out its planned operations. The Company reported a net loss, has negative
working capital, STOCKHOLDERS' DEFICIT, and as of May 31, 1999, had not
commenced the marketing and distribution of artificial floral and greenery
arrangements.
To address this issue, the Company signed a non-exclusive manufacturing
agreement with an established manufacturer of silk botanical products (the
"Manufacturer") (see Note 4). The Company will concentrate on marketing quality
products to new wholesale markets. Management anticipates funding the Company's
initial operations through advances from the Manufacturer, if required. If
circumstances permit, the Company intends to pursue other sources of capital in
the equity market; however, the Company is dependent on the manufacturer for
financial support until such time as positive cash flow is generated or outside
capital raised. The Company cannot predict whether the operating and financing
plans described above will be successful. If the Company is unable to
successfully commence operations or obtain additional financing, it may not be
able to continue as a going concern and may be unable to meet its obligations.
The financial statements do not include any adjustments that might result from
the outcome of the uncertainty.
F-8
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
4. PROPERTY AND EQUIPMENT
At May 31, and August 31, 1999, property and equipment included the following:
ESTIMATED
MAY 31, AUGUST 31, USEFUL LIFE
1999 1999 (IN YEARS)
------------ ------------ -----------
(Unaudited)
Computer equipment $ 1,500 $ 1,500 3
Less accumulated depreciation -- (126)
------------ ------------
$ 1,500 $ 1,374
============ ============
Depreciation expense was $0 and $126 for the year ended May 31, 1999 and for the
three months ended August 31, 1999, respectively.
5. RELATED PARTY TRANSACTIONS
The Company intends to purchase its silk botanical products from the
Manufacturer owned by the Company's President and majority stockholder; however,
the Company may purchase its products from other suppliers. On April 1, 1999,
the Company entered into a non-exclusive manufacturing and distribution
agreement with the Manufacturer for a term of six years with the right to extend
the agreement for six additional six-year terms. The Manufacturer will invoice
the Company for products and distribution of the products at rates to be
negotiated periodically between the Company and the Manufacturer. As of May 31,
and August 31, 1999, the Company had purchased $57,353 and $60,266, respectively
of inventory from the Manufacturer.
Additionally, the Company subleases office facilities and certain office
equipment from the Manufacturer (see Note 9). The Company has issued 1,900
shares of preferred stock to the Manufacturer for the license rights to the
trademarks Living Silk/registered trademark/ and Silk Botanicals/trademark/, and
for certain manufacturing processes. The Company owed the Manufacturer $101,353
and $134,551 at May 31, and August, 31 1999, respectively, which is recorded as
an accounts payable, for the purchase of inventory, a computer and software,
operational expenses and advances to acquire the trademark and manufacturing
process rights to the Forever Fresh/registered trademark/ line of floral
arrangements. Through August 31, 1999, the Manufacturer continued to pay the
expenses of the Company. During September 1999 the company established a
checking account.
No formal arrangement on terms and conditions relating to advances, should they
be required, had been entered into by the Company with the manufacturer as of
August 31, 1999.
F-9
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
6. LICENSE RIGHTS
On December 21, 1998, the Company purchased an exclusive license for the right
to assemble and distribute the "water-look" floral arrangements and the
trademark and copyright materials of Forever Fresh/registered trademark/ from a
third party manufacturer and distributor in South Florida. The term of the
license agreement is for six years with the right to extend for additional terms
of six years each, unless terminated by either party at the end of any six-year
term. As part of the agreement, the Company paid $42,500 FOR the license rights.
The Manufacturer advanced the funds for the payment. Additionally, the Company
agreed to make royalty payments to the licensor of 5% of the net amount invoiced
by the Company or any affiliate, for Forever Fresh/registered trademark/
products during the initial six year term. For additional periods of up to six,
six-year terms, the Company agreed to pay to the licensor one quarter of one
percent (.25%) of its net sales per annum of all Forever Fresh/registered
trademark/ products sold to any third party.
During April 1999, the Company entered into an exclusive license agreement to
market and distribute artificial greenery and floral arrangements with the
Living Silk and Silk Botanicals trademarks owned by the Manufacturer.
Additionally, the license agreement granted the Company the exclusive right to
use the manufacturing process of the Living Silk/trademark/ and Silk
Botanicals/trademark/ products. As consideration for the license agreement, the
Company issued preferred stock to the Manufacturer valued at $190,000. Since the
transaction was a nonmonetary transaction between related parties, a valuation
allowance of $190,000 has been provided against the license rights and as an
offset to stockholders' equity and as a noncash item on the Company's statement
of cash flows. The Company further agreed to pay the Manufacturer royalty
payments of 5% of the net amount invoiced by the Company, or any affiliate, for
Living Silk/trademark/ or Silk Botanicals/trademark/ products invoiced to any
third party during the initial six-year term. For additional periods of up to
six, six-year terms, the Company agreed to pay one quarter of one percent (.25%)
of its net sales per annum for all Living Silk/trademark/ and Silk
Botanicals/trademark/ products sold to any third party.
7. EQUITY
PREFERRED STOCK - The Company is authorized to issue 5,000,000 shares of
preferred stock of which a total of 1,900 shares were designated as Series A
preferred stock. This series is entitled to receive dividends at the rate of
$6.00 per share per annum payable quarterly. Such dividends are cumulative and
hold a preference over any other distribution. This series shall have no voting
rights or conversion features. The rights, preferences and limitations of any
additional series of preferred stock will be determined by the Board of
Directors.
F-10
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
7. EQUITY (CONTINUED)
COMMON STOCK - On November 20, 1998, the Company issued 335,187 shares of common
stock to additional founders of the Company and recorded an expense of $335 for
the issuance. These shares were issued at par value since no operations existed
in the Company. Between November 30, 1998 and March 31, 1999, the Company issued
26,250 shares of common stock as compensation for services rendered and recorded
an expense of $26. From January 2, 1999 until March 31, 1999, the Company issued
99,000 shares of common stock for cash of $49,500, which was utilized by
Southern prior to the recapitalization. The Company issued, from April 1, 1999
through April 6, 1999, 1,353,750 shares of common stock and recorded an expense
In accordance with generally accepted accounting principles of $671,460, which
approximates market value. All of the stock issued has been restated to reflect
the reverse stock split of 1 for 4 (see Note 9).
8. INCOME TAXES
The Company had no taxable income since its inception, and as a result recorded
no tax expense. Timing differences primarily relate to noncash stock
transactions and a valuation allowance. The Company had available at May 31,
1999, approximately $28,000 of unused operating loss carryforwards that may be
applied against future taxable income that expires through 2019. The Company has
recorded a deferred tax asset of approximately $7,000, and has offset the
deferred tax asset with a valuation allowance of $7,000, since realization of
the deferred tax asset is uncertain. Utilization of the operating loss
carryforwards may be severely limited by the change of business and control.
9. COMMITMENTS - RELATED PARTY
The company has a lease, which expires April 30, 2001, with the manufacturer for
500 square feet of furnished office space, including office equipment, and
approximately 1,500 square feet of warehouse and shipping space at a cost of $10
per square foot. For the fiscal years ended May 31, 1999 and 1998, and
cumulatively for the period from october 2, 1996 (inception) to may 31, 1999, no
rental expense had been incurred. Minimum future rental payments under the
non-cancelable operating lease as of May 31, 1999 are as follow:
YEARS ENDED MAY 31,
2000 $ 20,000
2001 18,333
F-11
<PAGE>
SILK BOTANICALS.COM, INC.
FORMERLY KNOWN AS
DIVERSIFIED RESTAURANT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINED)
OCTOBER 2, 1996 (INCEPTION) TO MAY 31, 1999
10. SUBSEQUENT EVENTS
On August 2, 1999, the Company officially changed its name to Silk
Botanicals.Com, Inc.
On August 20, 1999, the Company's Board of Directors approved a 1 for 4 reverse
split of its common stock, retroactively effective as of May 31, 1999. All
common shares and the per share amounts in the accompanying audited financial
statements have been restated for the effects of the reverse split.
F-12
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
The Exhibits listed below are filed as part of this Registration Statement.
EXHIBIT NUMBER DOCUMENT
-------------- ---------
2.1 Articles of Incorporation*
2.2 Articles of Amendment to Articles of
Incorporation of Diversified Restaurant
Holdings, Inc.*
2.3 Articles of Amendment to Articles of
Incorporation of Silk Botanicals. Com, Inc.*
2.4 Bylaws*
6.1 License Agreement Between Forever Fresh,
Inc. and JRB Marketing of South Florida, Inc.*
6.2 Manufacturing and Distribution Agreement*
6.3 Agreement Between Diversified Restaurant
Holdings, Inc. and Joseph R. Bergmann*
6.4 License Agreement Between JRB Enterprises,
Inc. and JRB Marketing of South Florida,
Inc./Diversified Restaurant Holdings, Inc.*
6.5 Sublease Agreement
23.1 Consent of Sweeney, Gates & Co., Auditors
to the Company
- -----------------------
* Previously Filed
<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.
Dated: August 24, 1999 SILK BOTANICALS.COM, INC.
By: /s/ Joseph R. Bergmann
-----------------------
Joseph R. Bergmann
Its: President and Secretary
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
6.5 Sublease Agreement
23.1 Consent of Sweeney, Gates & Co., Auditors
to the Company
EXHIBIT 6.5
SUBLEASE AGREEMENT
This Sublease Agreement ("Sublease") is entered into this 31st day of May, 1999
by and between JRB ENTERPRISES, INC. d/b/a Silk, Silk, Silk, having an office at
975 South Congress Avenue, Suite 102, Delray Beach, FL 33445, (hereinafter
referred to as "Sublessor") and Diversified Restaurant Holdings, Inc. (To Be
Renamed "Silk Botanicals.Com, Inc."), having an office at 975 South Congress
Avenue, Suite 102, Delray Beach, FL 33445 (hereinafter referred to as
Sublessee). Sublessor hereby subleases and demises to Sublessee and Sublessee
hereby subleases and takes from Sublessor, the Premises defined below on the
terms and conditions set forth below:
1. The demised premises consist of a total of approximately 2,000 square feet,
divided into 500 square feet of furnished office space located at 975 South
Congress Ave., Suite 102, Delray Beach, Florida 33445, and approximately 1,500
square feet of inventory and shipping space located at 955 South Congress Ave.,
Delray Beach, Florida 33445 (the "Sublease Premises"), which Sublease Premises
is part of a larger property as described in the Master Lease Agreement ("Master
Lease"), such Master Lease described more fully in Paragraph 8 below.
2. The term of the Sublease is concurrent with the term of the Master Lease.
3. The Sublessee takes the Premises subject to all conditions, covenants and
terms described in the Master Lease.
<PAGE>
4. (a) The Rent for the Sublease Premises for the term hereof is $10.00 per
square foot per year payable in monthly installments of $1,666.67. Rent shall be
paid to Sublessor at Sublessor's address as first above written.
(b) In the event of default, the Sublessor, upon ten (10) days' written
notice, shall have the right of reentry and reverter and to take such inventory
valued at market price as consequential damages thereof.
5. This Sublease is subject to and conditioned upon consent of Sublessor's
Landlord and shall become effective upon Landlord's execution of the consent as
set forth below.
6. Sublessor and Sublessee represent and warrant, each to the other, that
neither has dealt with any real estate broker or finder in connection with this
Sublease Agreement.
7. Sublessee shall use and occupy the Premises for conducting its business of
sales, marketing and shipping of finished artificial floral products.
8. All of the terms and conditions of the Master Lease dated July 15, 1991
between Nathan Properties, Inc., and Properties of Delray, Inc. d/b/a Nathan
Delray, J.V., as Landlord and Sublessor as Tenant and as modified by the First
Amendment to Lease dated February 1, 1995, and further modified by Second
Amendment to Lease dated September 10, 1998, together with the Master Lease, are
incorporated herein by reference, copies of which are attached hereto as Exhibit
"A."
9. This Sublease is subject to the laws of the State of Florida.
2
<PAGE>
10. Each paragraph, term or provision of this Sublease shall be considered
severable and if, for any reason, any paragraph, term or provision is determined
to be invalid or contrary to any existing or future law or regulation, such will
not impair the operation, or effect the remaining portions, of this Sublease.
11. In the event of a breach or threatened breach by any party to this
agreement, either party shall be entitled in order to maintain the status quo
and seek an injunction or similar equitable relief restraining either party, as
the case may be, from committing or continuing any such breach or threatened
breach or granting specific performance of any act required to be performed
without the necessity of posting any bond or other security. The parties hereto
hereby consent to the jurisdiction of the Florida state courts located in the
15th Circuit Court for any proceedings under this paragraph.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease as of
the day and date first set forth above.
Witnessed by: SUBLESSEE: Diversified Restaurant Holdings, Inc.
(To Be Renamed "Silk Botanicals.Com,
Inc.")
/s/ Gail Scheel By: /s/ Joseph R. Bergmann
- ---------------------- ----------------------------------
SUBLESSOR: JRB Enterprises, Inc.
/s/ Gail Scheel By: /s/ Joseph R. Bergmann
- ---------------------- ----------------------------------
3
<PAGE>
CONSENT TO SUBLEASE
As Landlord to JRB Enterprises, Inc., d/b/a Silk, Silk, Silk ("Tenant"), we
hereby consent to the above and foregoing Sublease as of the day first above
written.
LANDLORD: NATHAN DELRAY, J.V
By: /s/ Bruce Schreiber
----------------------------------
Name Printed: Bruce Schreiber
Its: Vice President
4
<PAGE>
EXHIBIT "A"
LEASE
LINPRO DELRAY COMMERCE CENTRE LIMITED PARTNERSHIP
Landlord,
-and-
JRB ENTERPRISES, INC.
D/B/A SILK, SILK, SILK
Tenant.
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
1. Project 3
2. Building 3
3. Location 3
4. Rental Term 3
5. Rental Amount 3
6. Security Deposit 3
7. Estimated Occupancy Date 3
8. Rental Commencement Date 3
9. Rentable Area/Premises 3
10. Broker 3
11. Permitted Use 3
12. Tenant's Allocated Share 4
13. Notice Address/Contact 4
14. Definition of Landlord 4
15. Definition of Tenant 4
16. Construction by Landlord 4
17. Additional Rent 4
18. Rental Amount and Security Deposit 7
19. Late Charge and Interest on Overdue Rent 7
20. Utilities 7
21. Maintenance of Premises 8
22. Damage by Fire, Etc. 8
23. Eminent Domain 9
24. Assignment and Subletting 9
25. Subordination and Attornment 10
26. Tenant's Certificate 11
27. Indemnity 11
28. Landlord's Access to Premises 11
29. Vacancy 11
30. Surrender of Possession 11
31. Governmental Regulation 12
32. Mechanic's Liens 12
33. Tenant's Defaults and Landlord's Remedies 12
34. Notices 15
35. Brokers 15
36. Applicable Law 15
37. Signs 15
38. Waste 15
39. Gender 15
40. Joint and Several Liability 15
41. Captions 15
42. No Partnership 15
43. Entire Agreement 16
44. Substitution Space 16
45. Miscellaneous 17
46. Exhibits and Attachments 17
47. Special Provisions 17
Addendum A 19
Exhibit A - Legal Description 20
Exhibit B - Site Plan 21
Exhibit C - Tenant Improvements & Signage 22
Exhibit D - Building Rules & Regulations 23
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made this 15th day of JULY, 1991,
between LINPRO DELRAY COMMERCE CENTRE LIMITED PARTNERSHIP with offices at 975
SOUTH CONGRESS AVENUE, SUITE 102, DELRAY BEACH, FLORIDA 33445 ("Landlord"), and
JRB ENTERPRISES, INC., a FLORIDA CORPORATION with offices at 901 EAST SAMPLE
ROAD, #G, POMPANO BEACH, FL 33064 ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, for the rental term and upon the covenants and conditions herein
stated, the rental space and appurtenances, if any (the "Premises") located at
975 SOUTH CONGRESS AVENUE SUITE 102, DELRAY BEACH, FLORIDA 33445, described in
Exhibit "A" attached hereto.
1. PROJECT. Delray Commercial Centre.
2. BUILDING. "A"
3. LOCATION. 975 South Congress Ave., Suite 102, Delray Beach,
Florida 33445.
4. RENTAL TERM. The Rental Term is five (5) years (60) months.
5. RENTAL AMOUNT. The annual Rental Amount during the Rental Term is:
Fifty one thousand, four hundred forty-eight dollars and 68/100 ($51,448.68) per
annum paid in monthly installments of four thousand, two hundred eighty-three
dollars and 39/100 ($4.283.39), subject to provisions of Addendum "A" Paragraph
1 attached hereto and made a part hereof, beginning on the rental commencement
date as set forth in Article 8 below, plus estimated operating expenses and
applicable state sales tax. All rental payments shall be made to Landlord at
Landlord's address aforesaid or to such other payee and/or such other place as
Landlord by ten (10) days' notice shall designate to Tenant.
6. SECURITY DEPOSIT. Six thousand, three hundred forty-five and 52/100
($6,345.52).
7. ESTIMATED OCCUPANCY DATE. November 1, 1991.
8. RENTAL COMMENCEMENT DATE. Upon occupancy.
9. RENTABLE AREA/PREMISES. 4,857 sf, Suite 102 - Building "B"
"BUILDING", plus approximately 5,817 sf warehouse expansion = 10,674 total sf
(as outlined in Exhibit "B" attached hereto).
10. BROKER. Merin Realty.
11. PERMITTED USE. The Premises shall be used only for office,
industrial, warehousing and retail purposes as provided for under the MIC -
Mixed Industrial and Commercial Zoning Code of Delray Beach, Florida as it may
be amended from time to time. No part of the Premises shall ever be used or
caused to be used for any residential or other non-business purpose. All
operations shall be performed and carried out entirely within the Premises and
in such a manner that the enclosed operations and uses do not cause or produce a
nuisance to other portions of the Project, such as, but not limited to,
vibration, sound, electromechanical disturbance and radiation, electromagnetic
disturbance, radiation, air or water pollution, dust or emission of odors, toxic
or non-toxic matter.
Prohibited uses shall be those as set forth in the MIC -- Mixed
Industrial and Commercial Zoning Code of Delray Beach, Florida as it may be
amended from time to time.
Tenant's use of the Premises and rights therein shall be subject to all
applicable laws and governmental regulations, and to all reasonable requirements
of the insurer of the Premises or the Building of which the Premises are a part.
3
<PAGE>
12. TENANT'S ALLOCATED SHARE. 15.15% of 70,380 sf Premises (also
referred to as "Tenant's Project Proportionate Share"); 30.3% of 35,190 sf
Building (also referred to as "Tenant's Building Proportionate Share"), to be
adjusted subject to actual sf, per paragraph 1, Addendum A.
13. NOTICE ADDRESS/CONTACT. Joseph R. Bergmann, President & CEO, JRB
Enterprises, Inc. 901 East Sample Road, #G, Pompano Beach, FL 33064.
14. DEFINITION OF LANDLORD. The word "Landlord" is used herein to
include the Landlord named above and any subsequent owner of the Premises, as
well as their respective heirs, personal representatives, successors and
assigns, each of whom shall have the same rights, remedies, powers, authorities
and privileges as he would have had had he, it or they originally signed this
Lease as Landlord; but any owner of the Premises, whether or not named herein,
shall have no liability hereunder after it or he ceases to hold title to the
real estate, except for obligations which may have theretofore accrued; and in
all events, Tenant shall look solely to the Premises and rents derived therefrom
for enforcement of any obligation hereunder or by law assumed or enforceable
against Landlord.
Tenant agrees that the obligations of Landlord under and with respect
to this Lease do not constitute personal obligation of Landlord, or any of its
partners, and shall not create or involve any claim against, or personal
liability on the part of any of them, and that Tenant will look solely to
Landlord's interest in the Premises for satisfaction of any liability of
Landlord in respect to this Lease.
15. DEFINITION OF TENANT. The word "Tenant" is used herein to include
each and everyone of the firm or firms or persons named above as Tenant, jointly
and severally, as well as the heirs, personal representatives, or successors and
assigns of same, each of whom shall be under the same obligations, liabilities
and disabilities and have only such rights, privileges and powers as he, it or
they would have possessed as if original signatories to this Lease as Tenant.
16. CONSTRUCTION BY LANDLORD.
a. Landlord shall construct, alter or improve the Premises in
substantial conformity with the plans, and outline specifications, if any, on
Exhibit "C" attached hereto and which are herein incorporated by reference and
thereupon following Landlord's request and provision to Tenant of a copy of a
Certificate of Occupancy therefor, Tenant shall accept said Premises. If any
revision or supplement to such plans or outline specifications are deemed
necessary by Landlord, those revisions and supplements shall be submitted to
Tenant for approval which approval shall not be unreasonably withheld or denied.
b. The Premises shall be substantially completed by the Estimated
Occupancy Date, adjusted, however, by that period, if any, equal to the
aggregate time lost by Landlord due to strikes or other labor disputes,
intervening governmental restrictions, scarcity of labor or materials, war or
other national emergency, accidents, floods, fires or other casualties, weather
conditions, or any cause similar or dissimilar to the foregoing which is beyond
the reasonable control of Landlord. However, should Landlord fail to provide
existing Suite 102 by 10/1/91, then Tenant shall have option to cancel this
lease. Also, should Landlord fail to provide the warehouse expansion space (#8
on Exhibit B) according to Exhibit C of this Lease by 1/31/92, then Tenant shall
have the option to cancel this Lease. Landlord also agrees to apply for building
Permit within two (2) weeks of Lease execution and complete demising wall
cut-through within thirty (30) days after receipt of Building Permit.
17. ADDITIONAL RENT. As Additional Rent, Tenant shall pay to Landlord,
as set forth in subparagraph (e) below, Tenant's Building Proportionate Share
and/or Tenant's Project Proportionate Share, as applicable, of the following
charges: Tenant's estimated 1991 additional rent is set at $1.91/sf at the
inception of this Lease.
a. TAXES. Tenant's Building Proportionate Share of all taxes,
assessments and other governmental charges ("impositions"),
including, without limitation, special assessments for public
improvements, which are levied or assessed against the Building
during the Rental Term or, if levied or assessed prior or subject
to the Rental Term, which properly are allocable to the Rental Term
because part of the period for which the imposition is levied or
assessed is included in the Rental Term,
4
<PAGE>
and funds expended for the purposes of appealing real estate taxes
or any other impositions. Notwithstanding the foregoing, if such
impositions are levied or assessed against the Project of which the
Building is a part, Tenant shall pay Tenant's Project Proportionate
Share of such impositions. If such impositions are levied or
assessed against a portion of the Project of which the Building is
a part, Tenant shall pay Tenant's prorata share of Tenant's Project
Proportionate Share of such impositions. If Tenant fails to pay to
Landlord any impositions required to be paid by Tenant by the terms
of this Lease at the time specified herein and such failure causes
Landlord to be overdue in the payment of said impositions to the
lawful authority imposing the same, Tenant shall pay to Landlord,
as Additional Rent, any interest or penalty incurred by Landlord
due to the delay in payment of such impositions. The foregoing is
in addition to and not a limitation of any other remedies of
Landlord provided in this Lease.
Nothing herein contained shall be construed to include as
"impositions" any inheritance, estate, succession, transfer, gift,
franchise, corporation, net income or profit tax or capital levy
that is or may be imposed upon Landlord; provided, however, that if
at any time during the Rental Term the method of taxation
prevailing at the commencement of the Rental Term shall be altered
so that in lieu of or as a substitute for the whole or any part of
the impositions now levied, assessed or imposed on the Building
and/or the Project, or any part thereof, there shall be levied,
assessed or imposed (i) a tax on the rents received from the
Premises.
b. INSURANCE PREMIUMS. Tenant's Building Proportionate Share of all
premiums paid or payable by Landlord for insurance shall be as
follows:
(1) Fire and extended coverage insurance of the Building in the
amount of the replacement cost thereof (including demolition and
debris removal);
(2) Insurance against Landlord's rental loss or abatement, from
damage to or destruction of the Building from fire or other
casualty, in the amount of the rental, impositions and insurance
premiums payable by all tenants of the Building during the year
immediately succeeding such damage or destruction, as reasonably
determined by Landlord;
(3) Landlord's comprehensive liability insurance (including
bodily injury and property damage) and boiler insurance in such
amounts as Landlord may reasonably require; and
(4) Such other insurance in such amounts as any reputable
mortgage lending institution holding a mortgage on the Building
may require.
Notwithstanding the foregoing, if any insurance covers the Project
of which the Building is a part, Tenant shall pay Tenant's Project
Proportionate Share of the insurance premium. If coverage period of
any such insurance obtained by Landlord commences before or extends
beyond the Rental Term, the premium therefor shall be paid by
Landlord. If any such insurance is provided by blanket coverage,
the part of the premium therefor allocated to the Premises shall be
prorated, based upon percent of occupancy as set forth in Paragraph
12 - Tenant's Allocated Share. Should Tenant's occupancy or use of
the Premises at any time cause an increase in such insurance
premiums on the Building and/or on the Project, Tenant shall pay to
Landlord the entire amount of such increase as Additional Rent
hereunder. Notwithstanding any contribution by Tenant to the cost
of insurance premiums, as provided herein, Tenant acknowledges that
it has no right to receive any proceeds from any such insurance
policies carried by Landlord and that such insurance will be for
the sole benefit of Landlord with no coverage for Tenant for any
risk insured against. Further, Landlord shall be under no
obligation to insure any alterations, installations,
5
<PAGE>
changes, fixtures, decorations, replacements, additions or
improvements made or installed in the Premises by or on behalf of
Tenant.
To the extent consistent with the provisions of the fire and
extended coverage insurance policies aforesaid, Landlord hereby
releases Tenant and Tenant hereby releases Landlord from liability
for loss or damage on or to the Premises covered by said policies,
excluding negligence by either party.
Tenant shall obtain and keep in effect throughout the Rental Term,
an insurance policy or policies insured by any insurance carriers
licensed to do business in the State of Florida, providing general
public liability insurance claims for personal injury (including
death) and property damage in amounts of not less than
$1,000,000.00 combined single limit for bodily injury (including
death) or property damage or a combination thereof. Such insurance
shall not be subject to cancellation without at least ten (10)
days' prior notice to all insureds, and shall name Landlord and
Tenant as insureds and, if requested by Landlord, shall also name
as an additional insured any mortgagee or holder of any mortgage
which may be or become a lien upon any part of the Building or the
Project. Prior to the commencement of the Rental Term, Tenant shall
provide Landlord with certificates or copies of the policy or
policies of insurance to be maintained by Tenant as herein referred
to, with evidence that the premium(s) have been paid in full for
the policy period(s). Tenant also shall furnish to Landlord
throughout the Rental Term, replacement certificates or copies of
renewal policies, together with evidence of like premium payment,
at least ten (10) days prior to the expiration date(s) of the then
current policy or policies.
c. COMMON AREA PRORATA CHARGES. Tenant's Project Proportionate
Share of the actual cost and expenses excluding capital
expenditures incurred by Landlord during the Rental Term in the
maintenance, repair and operation of the common areas of the
Project, including, without limitation, the cost of maintaining and
repairing the driveways, parking areas and landscaping of the land
of which the Premises are a part and the removal of trash, rubbish
and other refuse therefrom; the cost of all common utilities; the
cost of guard and/or security service for the Project, if utilized;
the cost of personnel to implement such services, to direct parking
and to police the common facilities; and the cost of maintaining
and repairing sewers and utility lines. Landlord will designate a
management services company to provide for all common area
maintenance of the Project and management of the Project. Such
management services may be provided by an affiliate of Landlord. As
part of the Additional Rent, Tenant shall pay Tenant's Project
Proportionate Share for such management services, including the
cost of accounting services necessary to compute and keep record of
the rents and charges payable by tenants of the project, and any
related management service fees.
d. BUILDING COSTS. Tenant's Building Proportionate Share of the
actual costs and expenses incurred by Landlord during the Rental
Term in the maintenance, repair and operation of the Building,
together with any and all fixtures and appurtenances thereto.
e. ESTIMATE AND PAYMENT OF ADDITIONAL RENT. In addition to the
Rental Amount, each month during the Rental Term, Tenant shall pay
to Landlord, in advance, one-twelfth (1/12) of the annual amount of
taxes, insurance, common area charges, building costs and all other
sums to be paid by Tenant to Landlord as Additional Rent pursuant
to this Lease, as such annual sums to be due from Tenant may be
estimated from time to time by Landlord acting reasonably and in
good faith. Such estimate may be adjusted periodically by Landlord,
and Tenant shall pay installments of Additional Rent according to
such estimate or any adjustments thereto. Periodically, but no less
often than once every twelve (12) months, on a date selected by
Landlord, Landlord shall certify to Tenant the actual expense
incurred by Landlord for taxes, insurance, common area charges,
building costs and other costs and expenses for which tenant is
required to reimburse Landlord as set forth in this Lease,
whereupon such actual expenses shall be compared to payments made
by Tenant pursuant to Landlord's estimate of such expenses and an
appropriate adjustment shall be made, i.e., if Tenant's Building
6
<PAGE>
Proportionate Share and/or Tenant's Project Proportionate Share, as
appropriate, of such actual expenses for the applicable time period
exceeds the actual sums paid by Tenant pursuant to Landlord's
estimate of such expenses for the applicable time period, the
difference shall be paid forthwith by Tenant to Landlord and if
Tenant's Building Proportionate Share and/or Tenant's Project
Proportionate Share, as appropriate, of such actual expenses for
the applicable time period is less than the actual sums paid by
Tenant pursuant to Landlord's estimate of such expenses for the
applicable time period, the difference shall be paid forthwith by
Landlord to Tenant. For the protection of Tenant, Landlord shall
maintain books of account which shall be open for inspection by
Tenant and Tenant's representative for thirty (30) days after
billing for Additional Rent, at all reasonable times, so that
Tenant can determine that such Additional Rent costs, have, in
fact, been paid or incurred by Landlord.
f. Notwithstanding anything to the contrary above, if such charges
(or portion thereof) as set forth in this Paragraph 17 are directly
related to Tenant's occupancy of the Premises, then Tenant shall be
fully responsible for the same to the extent of said direct
relationship.
18. RENTAL AMOUNT AND SECURITY DEPOSIT.
a. Tenant shall pay to Landlord, without notice or demand, and
without setoff, the Rental Amount payable in the monthly
installments of Rent as set forth in Paragraph 5, in advance on the
first day of each calendar month during the Term. The Rental Amount
and all other sums payable by Tenant to Landlord hereunder shall be
paid in lawful currency of the United States of America to Landlord
at the address listed above, or to such other person and at such
other place as Landlord may from time to time designate in writing.
b. Tenant also has paid on execution hereof a Security Deposit in
the amount shown in Paragraph 6. In the event of Tenant's default,
Landlord may use or apply all or any part of said Security Deposit
to cure the default, in whole or in part, and also to defray any
expenses reasonably incurred by Landlord by reason of the default.
To the extent that the Security Deposit is thus utilized and if
this Lease, notwithstanding the default, continues in force and
effect, Tenant agrees to pay to Landlord within ten (10) days of
demand by Landlord, an additional sum to replenish the Security
Deposit to the amount stated in Paragraph 6, and such additional
payment also shall be deemed part of Tenant's Security Deposit and
available for use or application as aforesaid in the event of
Tenant's default.
The aforesaid Security Deposit shall not be considered to be a
payment of any of Tenant's obligations hereunder (and in no event
shall it be available to Tenant for application in payment of any
installment of the Rental Amount or Additional Rent); and the same
is not held in trust by Landlord and may be reflected as a debt
owing Tenant as follows: upon expiration of the Rental Term,
provided Tenant has performed its obligations hereunder including,
but not limited to, payment of all Rental Amount(s), Additional
Rent and other charges due Landlord and has maintained the Premises
in good order and condition, Landlord shall refund such Security
Deposit without interest (or the balance not expended or applied as
aforesaid) to Tenant within thirty (30) days following expiration
of the Rental Term.
19. LATE CHARGE AND INTEREST ON OVERDUE RENT. If any installment of
Base Rent or Additional Rent is not received within fifteen (15) days after the
due date thereof (without in any way implying Landlord's consent to such late
payment), Tenant agrees to pay Landlord the Late Charge, of $250 per
installment, in addition to said installment of Base Rent or Additional Rent, it
being understood that the Late Charge shall constitute liquidated damages and
such liquidated damages shall be solely for the purpose of reimbursing Landlord
for the additional costs and expenses which Landlord presently expects to incur
in connection with the handling and processing of late payments of Base Rent
and/or Additional Rent. Landlord and Tenant agree that in the event of any such
late payment by Tenant, the damages resulting to Landlord will be difficult to
ascertain precisely, and that the Late Charge constitutes a reasonable and good
faith estimate by the parties of the extent of such damages. In addition to the
Late Charge, Tenant agrees to pay Landlord interest, at the Overdue Rent
interest
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rate of 1 1/2% per month, on any installment of Base Rent or Additional Rent not
paid within thirty (30) days after the due date thereof, which interest shall
accrue from the due date to the date of payment. Notwithstanding the foregoing,
the Late Charge shall not apply to any sum which may have been advanced by
Landlord to or for the benefit of Tenant pursuant to any provision of this
Lease, it being understood that such sum shall bear interest, which Tenant
agrees to pay Landlord, at the interest rate specified in such provision.
20. UTILITIES. Tenant shall pay, when due, all charges by public
authority or private utility for any and all water, sewer, electric, gas and
other utility service to the Premises during the Rental Term, not payable in the
first instance by Landlord, and if such charges are payable by Landlord in the
first instance, Tenant shall reimburse Landlord for Tenant's prorate share of
such charges, as determined by Landlord, within fifteen (15) days of Landlord
notifying Tenant of the amount of said charges.
21. MAINTENANCE OF PREMISES. Tenant is responsible for maintaining the
Premises, except as otherwise provided herein. Tenant, at Tenant's sole expense,
shall maintain the Premises in good order and condition and make all repairs and
replacements necessary or appropriate for heat, air-conditioning, plumbing and
electrical systems or equipment contained within the Premises. Landlord shall
provide Tenant with a first year warranty on said systems in the instance of a
newly constructed building.
Tenant shall make no alterations or additions to the Premises or erect
any exterior signs other than a building standard Tenant sign (if any) provided
by Landlord or as may be made with Landlord's prior written consent. All
alterations or additions made with such consent shall be part of the Premises
and the property of Landlord, subject to the terms of this Lease unless
otherwise provided by the instrument of consent. Tenant's trade fixtures/signage
not provided byh Landlord, equipment or other personal property placed on the
Premises may be removed by Tenant at any time during the Rental Term; but if
installation of any of same in or on the Premises or the removal therefrom of
any thereof could deface the Premises, Landlord's written consent to
installation must first be procured and, upon removal, all damage to the
Premises caused thereby shall be fully repaired promptly by Tenant at Tenant's
expense. There shall be no outside storage of any kind whatsoever.
Notwithstanding anything to the contrary contained herein, Tenant shall not be
responsible for roof or structural maintenance except to the extent the same may
be occasioned by Tenant's negligence.
22. DAMAGE BY FIRE, ETC. Except as provided below, in case of damage to
the Premises by fire or other insured casualty, Landlord shall repair the
damage. Such repair work shall be made with due diligence, taking into account
the time required for Landlord to effect a settlement with and procure insurance
proceeds from the insurer, except for delays due to governmental regulations,
scarcity of or inability to obtain labor or material, intervening Acts of God or
other similar or dissimilar causes beyond Landlord's reasonable control.
a. Notwithstanding the foregoing, if (i) the damage is of a nature
or extent that, in Landlord's reasonable judgement, the repair and
restoration work would require more than thirty (30) consecutive
days to complete after commencement of work and assuming the use of
normal work crews not engaged in overtime, or (ii) if more than
thirty percent (30%) of the total area of the Building is
extensively damaged, Landlord shall have the right to terminate
this Lease and all the unaccrued obligations of the parties
thereto, by sending written notice of such termination to Tenant
within thirty (30) days of Landlord's knowledge of such damage, the
notice to specify a termination date no less than fifteen (15) days
after its transmission unless Tenant shall have vacated the
Premises because the nature or extent of the damage rendered the
Premises untenantable, and by notice in writing to Landlord within
(5) days thereafter elects to make same retroactive to the date of
such vacation of the Premises.
b. If the insurance proceeds received by Landlord (excluding any
rent insurance proceeds) would not be sufficient to pay for
repairing the damage or are required to be applied on account of
any mortgage which encumbers any part of the Premises or Building,
or if the nature of loss is not covered by Landlord's fire
insurance coverage, Landlord may elect either to (i) repair the
damage as above provided notwithstanding such fact or (ii)
terminate this Lease, by giving Tenant, within thirty (30) days
after Landlord's knowledge of the damage and determination of
availability
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or sufficiency of insurance proceeds, notice of Landlord's election
- and if the election be to terminate - at least fifteen (15) days'
prior notice specifying the termination date. Notwithstanding
anything to the contrary in this Paragraph 22, if Premises are
damaged to such an extent as to prevent Tenant's normal business
operation and such damage is not repaired such that Tenant's normal
business operations can resume within thirty (30) days of the date
of such damage. Tenant may elect to terminate this Lease.
c. To the extent that Landlord receives rent insurance proceeds
attributable to the Premises and for the period during which it was
damaged, (which insurance Landlord agrees to maintain) Tenant's
obligations to continue to pay the Rental Amount and Additional
Rent on a current basis shall not be affected by damage to or
destruction of the Premises or any part thereof, regardless of
cause; and so long as this Lease continues in force and effect,
there shall be no abatement, diminution or reduction of the Rental
Amount(s) or Additional Rent by reason thereof, except to the
extent that such damage materially or substantially hinders or
prevents Tenant's normal operation of business.
23. EMINENT DOMAIN. Except as legally entitled, Tenant hereby assigns
to Landlord all rights to compensation or damages, if any, sustained as Tenant
on condemnation of the Premises in whole or in part under power of eminent
domain; but Landlord shall pay to Tenant from the condemnation award, if and
when received by Landlord, the amount, if any, by which such award was increased
by virtue of condemnation of equipment, fixtures and/or improvements which
Tenant, on termination of the Rental Term, is entitled to remove.
If such condemnation of the Premises reduces the floor area of the
Premises available for Tenant's use by more than twenty-five percent (25%) or
renders the part thereof not condemned permanently untenantable, either party
hereto, by thirty (30) days' notice to the other, may terminate this Lease; but
if the Lease is not so terminated, Landlord shall make such repairs, if any, as
are reasonably necessary to restore the part thereof not condemned to tenantable
condition. Landlord, in so doing, shall not be required to expend more than the
net amount received by Landlord in the condemnation proceedings for damage to
such part of the Premises not condemned unless Tenant pays the amount of the
excess of expenditure and, before commencement of the restoration repairs,
provides Landlord with reasonable security for such payment by Tenant.
Restoration repairs, if made, shall begin promptly after Tenant vacates the part
of the Premises '; condemned and be completed with reasonable diligence,
subject, however, to delays incident to governmental regulation, unavailability
of material or labor and other causes beyond the Landlords' control.
24. ASSIGNMENT AND SUBLETTING.
a. Tenant shall not, without prior written consent of Landlord and
such consent will not be unreasonably withheld, (i) assign or in
any manner transfer this Lease or any estate or interest therein,
or (ii) permit any assignment of this Lease or any estate or
interest therein by operation of law, or (iii) sublet the Premises
or any part thereof, or (iv) grant any license, concession or other
right of occupancy of any portion of the Premises or (v) permit the
use of the Premises by any parties other than Tenant, its agents
and employees. Any such acts without Landlords's prior written
consent shall be void and of no effect. Consent by Landlord to one
or more assignments or sublettings shall not operate as a waiver of
Landlord's rights as to any subsequent assignments and sublettings.
Notwithstanding any assignment or subletting, Tenant and any
guarantor of Tenant's obligations under this Lease shall at all
times remain fully responsible and liable for the payment of the
Rental Amount(s) and Additional Rent herein specified and for
compliance with all of Tenant's other obligations under this Lease.
If an Event of Default, as herein defined, should occur while the
Premises or any part hereof are then assigned or sublet, Landlord,
in addition to any other remedies herein provided by law, may at
its option collect directly from such assignee of subtenant all
Rental Amount(s) becoming due to Tenant under such assignment or
sublease and apply such Rental Amount(s) against any sums due to
Landlord by Tenant hereunder, and Tenant hereby authorizes and
directs any such assignee or subtenant to make such payments of
rent directly to Landlord upon receipt of notice from Landlord. No
direct collection by Landlord from any such assignee or subtenant
shall be construed to constitute a novation or a release of Tenant
or any guarantor of Tenant from the
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further performance of its assignee, subtenant or occupant of the
Premises and shall not be deemed a waiver of the covenant in this
Lease contained against assignment and subletting or a release of
Tenant under this Lease. The receipt by Landlord from any such
assignee or subtenant obligated to make payments of the Rental
Amount(s) and/or Additional Rent shall be a full and complete
release, discharge, and acquittance to such assignee or subtenant
to the extent of any such amount of the Rental Amount(s) and/or
Additional Rent so paid to Landlord. Landlord is authorized and
empowered on behalf of Tenant to endorse the name of Tenant upon
any check, draft, or other instrument payable to Tenant evidencing
payment of such rent, or any part thereof, and to receive and apply
the proceeds therefrom in accordance with the terms hereof.
Excluding inventory, Tenant shall not mortgage, pledge or otherwise
encumber its interest in this Lease or in the leased Premises.
b. If Tenant requests Landlord's consent to an assignment of the
Lease or subletting of all or part of the Premises, it shall submit
to Landlord, in writing, the name of the proposed assignee or
subtenant and the nature and character of the business of the
proposed assignee or subtenant, the term, use, rental rate and
other particulars of the proposed subletting or assignment,
including, without limitation, evidence satisfactory to Landlord
that the proposed subtenant or assignee is financially responsible
and will immediately occupy and thereafter use the Premises (or any
sublet portion thereof) for the remainder of the Rental Term (or
for the entire term of the sublease, if shorter). Landlord shall
have the option (to be exercised within thirty (30) days from
submission of Tenant's written request) to cancel this Lease (or
for the applicable portion thereof as to a partial subletting) as
of the commencement date stated in the above-mentioned subletting
or assignment. If Landlord elects to cancel this Lease, as herein
provided, then the Rental Term of this Lease, and the tenancy and
occupancy of the Premises by Tenant thereunder, shall cease,
terminate and expire, with respect to that portion of the Premises
so assigned or sublet as if the cancellation date were the original
termination date of this Lease and Tenant shall pay to Landlord all
costs or charges which are the responsibility of Tenant hereunder
with respect to that portion of the Premises so assigned or sublet,
and Tenant shall, at its own cost and expense, discharge in full
any outstanding commission obligation to Landlord with respect to
this Lease, or any part hereof cancelled. Thereafter Landlord may
lease the Premises to the prospective subtenant or assignee without
liability to Tenant. If Landlord does not thus cancel this Lease,
the terms and provisions of Paragraph (a) hereof will apply.
c. If Landlord consents to any subletting or assignment by Tenant
as hereinabove provided, and subsequently any rents received by
Tenant under any such sublease are in excess of the Rental
Amount(s) payable by Tenant under this Lease, or any additional
consideration is paid to Tenant by the assignee under any such
assignment, then Landlord may, at its option, either (i) declare
such excess rents under any sublease or such additional
consideration for any assignment to be due and payable by Tenant to
Landlord as Additional Rent hereunder, or (ii) elect to cancel this
Lease as provided in Sub-paragraph b hereof.
d. Landlord shall have the right to transfer, assign and convey, in
whole or in part, the Building and any and all of its rights under
this Lease, and in the event Landlord assigns its rights under this
Lease, Landlord shall thereby be released from any further
obligations hereunder, and Tenant agrees to look solely to such
successor in interest of the Landlord for performance of such
obligations.
25. SUBORDINATION AND ATTORNMENT.
a. This Lease shall be subject and subordinate at all times to the
lien, security interest and assignment of any mortgages now or
hereafter placed upon the Premises or the Building and land of
which they are a part without the necessity of any further
instrument or act on the part of Tenant to effectuate such
subordination. Tenant further agrees to execute and deliver upon
demand such further instrument or instruments evidencing such
subordination of this Lease to the lien of any such mortgage and
such further instrument or instruments of attornment as shall be
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desired by any mortgagee or proposed mortgagee or by any other
person. Tenants failure to execute and deliver such further
instruments on demand shall be deemed Tenant's approval and
confirmation of the contents and effect thereof. Notwithstanding
the foregoing, any mortgagee may at any time subordinate its
mortgage to this Lease, without Tenant's consent, by notice in
writing to Tenant, and thereupon this Lease shall be deemed prior
to such mortgage without regard to their respective dates of
execution and delivery, and in that event such mortgagee shall have
the same rights with respect to this Lease as though it had been
executed prior to the execution and delivery of the mortgage.
b. In the event the Landlord shall be or is alleged to be in
default of any of its obligations owing to Tenant under this Lease,
Tenant agrees to give to the holder of any mortgage (collectively
the "Mortgagee") now or hereafter placed upon the Premises or the
Building and land, notice by registered mail of any such default
notice of which default Tenant shall have served upon the Landlord,
provided that prior thereto Tenant has been notified in writing (by
way of Notice of Assignment of Rents and/or Leases or otherwise) of
the name and addresses of any such Mortgagee. Tenant shall not be
entitled to exercise any right or remedy as there may be because of
any default by Landlord without having given such notice to the
Mortgagee; and Tenant further agrees that if Landlord shall fail to
cure such default: (i) the Mortgagee shall have an additional
thirty (30) days (measured from the later of the date on which the
default should have been cured by Landlord or the Mortgagee's
receipt of such notice from Tenant) within which to cure such
default, provided that Mortgagee may take additional reasonable
time if such default be such that the same could not be cured
within such thirty (30) day period and Mortgagee is diligently
pursuing the remedies necessary to effectuate the cure (including,
but not limited to, foreclosure proceedings if necessary to
effectuate the cure); and (ii) Tenant shall not exercise any right
or remedy as there may be arising because of Landlord's default,
including, but not limited to, termination of this Lease as may be
expressly provided for herein or available to Tenant as a matter of
law, if the Mortgagee either has cured the default within such
thirty (30) day period, or as the case may be, has initiated the
cure of same within such thirty (30) day period and is diligently
pursuing the cure of same as aforesaid. Where Landlord has failed
to cure a default, and an emergency exists, Tenant shall have the
option to remedy default and deduct costs together with any
reasonable attorney's fees.
26. TENANT'S CERTIFICATE. Tenant agrees at any time and from time to
time, within five (5) days after Landlord's written request, to execute,
acknowledge and deliver to Landlord a written instrument in recordable form
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that it is in full force and effect as modified
and stating the modifications), and the dates in which the Rental Amount(s),
Additional Rent and other charges have been paid in advance, if any, and stating
whether or not to the best knowledge of the signer of such certificate, Landlord
is in default in the performance of any covenant, agreement or condition
contained in this Lease and, if so, specifying each such default of which the
signer may have knowledge. It is intended that any such certification and
statement delivered pursuant to this Section may be relied upon by any
prospective purchaser of the fee or any mortgagee thereof or any assignee of
Landlord's interest in this Lease or of any mortgage upon the fee of the
Premises or any part thereof.
27. INDEMNITY. Tenant shall indemnify and hold harmless Landlord from
and against any and all claims arising from Tenant's use of the Premises, or
from the conduct of Tenant's business or from any activity, work or things done,
permitted or suffered by Tenant in or about the Premises or elsewhere and shall
further indemnify and hold harmless Landlord from and against any and all claims
arising from any breach or default in the performance of any obligation of
Tenant's part to be performed under the terms of this Lease, or arising from any
negligence of the Tenant, or any of the Tenant's agents, contractors, or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon, and in case any action or proceeding shall be
brought against Landlord by reason of any such claim, Tenant, upon notice from
Landlord, shall defend the same at Tenant's expense.
Excluding Landlord negligence, Tenant shall indemnify and save harmless
the Landlord against and from all liabilities, obligations, damages, penalties,
claims, costs, charges and expenses which may be imposed upon or incurred by, or
asserted against Landlord by reason of: (i) loss of
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life, personal injury and/or damage to property occurring in or about, or
arising out of the Premises, adjacent sidewalks and common areas appurtenant to
the Building or occasioned wholly or in part by reason of any negligent act or
omission of Tenant, its agents, contractors, invitees or employees and (ii) any
failure on the part of Tenant to keep, observe and perform any of the terms,
covenants, agreements, conditions or limitations contained in this Lease on
Tenant's part to be kept, observed and performed.
28. LANDLORD'S ACCESS TO PREMISES. At any reasonable time and in a
reasonable manner, Landlord may inspect the Premises and show same to
prospective purchasers, lienholders and others having a legitimate interest
therein and enter the Premises for any purpose of this Lease. Landlord may also
place, in reasonable locations on the Premises, notices for sale or lease
thereof or any part thereof such notice not to exceed 3' x 3' at any time within
nine (9) six (6) months before expiration of the Rental Term.
29. VACANCY. Tenant shall neither vacate the Premises nor permit same
to become unoccupied at any time during the Rental Term without prior
notification to Landlord and in conformance with all other obligations under
this Lease.
30. SURRENDER OF POSSESSION. Tenant shall surrender the Premises to
Landlord in the condition in which Tenant is required to keep same hereunder,
with all signs, trade FLxtures, equipment and other property that the Tenant is
entitled hereunder to retain removed therefrom without damage thereto.
31. GOVERNMENTAL REGULATION. Tenant, throughout the Rental Term, shall
fully comply with all laws and governmental regulations applicable to the
Premises. Tenant may legally contest the validity or applicability of any such
law or regulation provided, however, that such contest does not jeopardize the
Premises or Landlord's interest therein and that Tenant indemnifies Landlord
against all loss, cost and expense incident to such contest or resulting
therefrom.
32. MECHANICS' LIENS. Tenant will not voluntarily suffer or permit any
mechanics', laborers' or materialmens' liens to be filed against the Premises or
any part thereof by reason of work, labor services or materials supplied or
claimed to have been supplied to Tenant; and if any mechanics', laborers' or
materialmens' lien shall at any time be filed against the Premises or any part
thereof, Tenant, within fifteen (15) days after notice of the filing thereof,
shall cause it to be discharged of record by payment, deposit, bond, order of a
court of competent jurisdiction or otherwise. If Tenant shall fail to cause such
lien to be discharged within the period aforesaid, then in addition to any other
right or remedy, Landlord may, but shall not be obligated to, discharge it
either by paying the amount claimed to be due or by procuring the discharge of
such lien by deposit or by bonding proceedings. Any amount so paid by Landlord,
plus all of Landlord's costs and expenses associated therewith, shall constitute
Additional Rent payable by Tenant under this Lease and shall be paid by Tenant
to Landlord on demand. Pursuant to the provisions of Florida Statute 713.10, the
interest of the Landlord shall not be subject to the liens for improvement made
by the Tenant.
Nothing contained in this Lease shall be deemed or construed in any way
as constituting consent by Landlord for the making of any alterations or
additions by Tenant.
33. TENANT'S DEFAULTS AND LANDLORD'S REMEDIES. If (i) Tenant fails to
pay an installation of the Rental Amount(s) or any amount of Additional Rent
when due and such failure continues for a period of ten (10) days after notice
from Landlord, (ii) Tenant vacates the Premises or permits the same to be
unoccupied, as aforesaid, (iii) Tenant fails to observe or perform any of the
other Tenant's agreements herein contained and such failure continues after
notice for more than thirty (30) days and such additional time, if any, as is
reasonably necessary to cure such failure, (iv) Tenant makes any assignment,
excluding inventory, for the benefit of creditors, (v) Tenant commits an act of
bankruptcy or files a petition or commences any proceeding under any bankruptcy
or insolvency law, (vi) a petition is filed or any proceeding is commenced
against Tenant under any bankruptcy or insolvency law and such petition or
proceeding is not dismissed within thirty (30) days, (vii) Tenant is adjudicated
a bankrupt, (viii) Tenant by any act indicates its consent to, approval of or
acquiescence in, or a court approves, a petition filed or proceeding commenced
against Tenant under any bankruptcy or insolvency law, (ix) a receiver or other
official is appointed for Tenant or for a substantial part of Tenant's assets or
for Tenant's interests in this Lease, (x)
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any attachment or execution against a substantial part of Tenant's assets or of
Tenant's interests in this Lease remains unstayed or undismissed for a period of
more than ten (10) days, or (xi) a substantial part of Tenant's assets or of
Tenant's interest in this Lease is taken by legal process in any action against
Tenant, then, in any such event, an Event of Default shall be deemed to exist
and Tenant shall be in default hereunder. If an Event of Default shall occur,
the following provisions shall apply and Landlord shall have the rights and
remedies set forth therein which rights and remedies may be exercised upon or at
any time following the occurrence of an Event of Default unless, prior to such
exercise, Landlord shall agree in writing with Tenant that the Event(s) of
Default has been cured by Tenant in all respects:
b. TERMINATION OF LEASE. By notice to Tenant, Landlord shall have
the right to terminate the Lease as of a date specified in the
notice of termination and in such case, Tenant's right, including
any based on any option to renew, to the , . possession and use of
the Premises shall end absolutely as of the termination date; and
this Lease shall also terminate in all respects except for the
provisions hereof regarding Landlord's damages and Tenant's
liabilities arising prior to, out of and following the Event of
Default and the ensuing termination.
Following such termination (as well as upon any other termination
of this Lease by expiration of the term or otherwise) Landlord
immediately shall have the right to recover possession of the
Premises; and to that end, Landlord may enter the Premises and take
possession, without the necessity of giving Tenant any notice to
quit or any other further notice, with or without legal process or
proceedings, and in so doing Landlord may remove Tenant's property
(including any improvements or additions to the Premises which
Tenant made, unless made with Landlord's consent which expressly
permitted Tenant to not remove the same upon expiration of the
Term), as well as the property of others as may be in the Premises,
and place in storage thereof in such manner as Landlord may deem to
be commercially reasonable and necessary under the circumstances.
c. TENANT'S CONTINUING OBLIGATIONS - LANDLORD'S RELETTING RIGHTS.
(1) Unless and until Landlord shall have terminated this Lease
under Sub- paragraph b. above, Tenant shall remain fully liable
and responsible to perform all of the covenants and to observe
all the conditions of this Lease throughout the remainder of the
Rental Term; and, in addition, Tenant shall pay to Landlord,
upon demand and as Additional Rent, the total sum of all costs,
losses, and expenses, including reasonable counsel fees, as
Landlord incurs, directly or indirectly, because of any Event of
Default having occurred.
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(2) If Landlord either terminates Tenant's right to possession
without terminating this Lease or terminates this Lease and
Tenant's leasehold estate as above provided, Landlord shall have
the unrestricted right to relet the Premises or any part(s)
thereof to such tenant(s) on such provisions and for such
period(s) as Landlord may deem appropriate. It is understood
that Landlord shall have no obligation to have the Premises
available for reletting or otherwise endeavor to relet so long
as Landlord (or any related entity) has other comparable vacant
space or property available for leasing to others in the complex
of which the Building is a part; and that notwithstanding
nonavailability of other space or property, Landlord's
obligations to mitigate damages shall be limited to such efforts
as Landlord, in its sole reasonable judgment, deems appropriate.
d. LANDLORD'S DAMAGES.
(1) The damages which Landlord shall be entitled to recover from
Tenant shall be the sum of:
(a) all Rental Amount(s) and Additional Rent accrued and
unpaid as of the termination date; and
(b) (i) all reasonable costs and expenses incurred by
Landlord in recovering possession of the Premises, including
removal therefrom and storage of Tenant's property, improvements
and alterations, (ii) the costs and expenses of restoring the
Premises to the condition in which the same were to have been
surrendered by Tenant as of the expiration of the Rental Term,
(iii) the costs of reletting including brokerage fees based on
the remaining term of the Lease and reasonable counsel fees; and
LESS (deducting from the total determined under subparagraphs (a),
(b), and all Rental Amount(s) and all other Additional Rent to the
extent determinable as aforesaid, (to the extent that like charges
would have been payable by Tenant) which Landlord receives from
other Tenant(s) by reason of the leasing of the Premises or part
thereof during or attributable to any period falling within the
otherwise remainder of the Rental Term.
(2) The actual sums payable by Tenant under the preceding
provisions of this Sub-paragraph (d) shall be payable on demand
from time to time as the amounts are determined; and if, from
Landlord's subsequent receipt of the Rental Amount(s) as
aforesaid from reletting, there be any excess payment(s) by
Tenant by reason of the crediting of such Rental Amount(s)
and/or Additional Rent thereafter received, the excess
payment(s) shall be refunded by Landlord to Tenant, without
interest.
e. INTEREST ON DAMAGE ACCOUNTS. Any sums payable by Tenant
hereunder, which are not paid after the same shall be due, shall
bear interest from that day until paid at the rate of two percent
(2%) over the then "Prime Rate" announced or being charged by the
Chase Manhattan Bank, N.A. for ninety (90) day unsecured loans to
major corporate borrowers (unless such rate be usurious as applied
to Tenant, in which case the highest permitted legal rate shall
apply).
f. LANDLORD'S STATUTORY RIGHTS. Landlord shall have all rights and
remedies now or hereafter existing at law with respect to the
enforcement of Tenant's obligations hereunder and the recovery of
the Premises, including, without limitation, those set forth in
Florida Statute 83.08 and Florida Statute 51.011, and
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all amendments, modifications and substitutions thereof hereafter
enacted. No right or remedy herein conferred upon or reserved to
Landlord shall be exclusive of any other right or remedy, but shall
be cumulative and in addition to all other rights and remedies
given hereunder or now or hereafter existing at law. Landlord shall
be entitled to injunctive relief in case of the violation, of any
covenant, agreement, conditions or provision of this Lease, or to a
decree compelling performance of any covenant, agreement, condition
or provision of this Lease.
g. REMEDIES NOT LIMITED. Nothing herein contained shall limit or
prejudice the right of Landlord to exercise any or all rights and
remedies available to Landlord by reason of default or to prove for
and obtain in proceedings under any bankruptcy or insolvency laws,
an amount equal to the maximum allowance by any law in effect at
the time when, and governing the proceedings in which, the damages
are to be proved, whether or not the amount be greater, equal to,
or less than the amount of the loss or damage referred to above.
h. NO WAIVER BY LANDLORD. No delay or forbearance by Landlord in
exercising any right or remedy hereunder, or Landlord's undertaking
or performing any act or matter which is not expressly required to
be undertaken by Landlord shall be construed, respectively, to be a
waiver of Landlord's rights or to represent any agreement by
Landlord to undertake or perform such act or matter thereafter.
Waiver by Landlord of any breach by Tenant of any covenant or
condition herein contained (which waiver shall be effective only if
so expressed in writing by Landlord) or failure by the Landlord to
exercise any right or remedy in respect of any such breach shall
not constitute a waiver or relinquishment for the future of
Landlord's right to have any such covenant or condition duly
performed or observed by Tenant, or of Landlord's rights arising
because of any subsequent breach of any such covenant or condition
nor bar any right or remedy of Landlord in respect of such breach
or any subsequent breach. Landlord's receipt and acceptance of any
payment from Tenant which is tendered not in conformity with the
provision of this Lease or following an Event of Default
(regardless of any endorsement or notation on any check or any
statement in any letter accompanying any payment) shall not operate
as an accord and satisfaction or a waiver of the right of Landlord
to recover any payments then owing by Tenant which are not paid in
full, or act as a bar to the termination of this Lease and the
recovery of the Premises because of Tenant's previous uncured
default.
34. NOTICES. All notices, certifications and requests hereunder by
either party hereto to the other shall be in writing hand-delivered, or sent by
registered or certified mail with return receipt requested, to Landlord at
Landlord's address aforesaid and to Tenant at the Premises or at Tenant's
address aforesaid. Either party, on ten (10) days' notice to the other, may
designate a different address to which notices, certifications or requests to
that party shall be delivered or addressed.
35. BROKERS. Tenant represents and warrants to Landlord that Tenant has
had no dealings, negotiations or consultations with respect to the Premises or
this transaction with any broker or finder other than the Broker, if any,
identified in Paragraph 10 herein; and that otherwise no broker or finder called
the Premises to Tenant's attention for Lease or took any part in any dealings,
negotiations or consultations with respect to the Premises or this Lease. Tenant
agrees to indemnify and hold Landlord harmless from and against all liability,
cost and expense, including attorney's fees and court costs, arising out of any
misrepresentation of breach of warranty by Tenant under this Paragraph 35.
36. APPLICABLE LAW. This Lease and the rights and obligations of both
parties hereto hereunder shall be governed by the laws of the State of Florida.
37. SIGNS. Except for signs which are located wholly within the
interior of the Premises and which are not visible from the exterior of the
Building, and those outlined in Exhibit C, no signs shall be placed, erected or
maintained at any place upon the Premises or the Building without prior written
consent of Landlord except for the single standard exterior sign provided by
Landlord, which consent shall not be unreasonably withheld.
15
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38. WASTE. Tenant shall not commit, or suffer any waste upon the
Premises or the Building, or any nuisance, or any other act or thing which may
disturb the quiet enjoyment of any other tenant in the Building or Project of
which the Building is a part.
39. GENDER. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
41. CAPTIONS. The captions contained in this Lease are for the
convenience of reference only, and in no way limit or enlarge the terms and
conditions of this Lease.
42. NO PARTNERSHIP. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant, or to create any other relationship between the parties hereto other
than that of Landlord and Tenant.
43. ENTIRE AGREEMENT. This Lease, together with the Exhibits attached
hereto, contains and embodies the entire agreement of the parties hereto, and no
representations, inducements or agreements, oral or otherwise, between the
parties not contained in this Lease and the Exhibits, shall be of any force or
effect. This Lease may not be modified, changed or terminated in whole or in
part in any manner other than by an agreement in writing duly signed by both
parties hereto.
44. SUBSTITUTION SPACE.
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(d) If Landlord offers to relocate tenant and tenant accepts,
Landlord shall reimburse Tenant for Tenant's reasonable
out-of-pocket expenses for moving Tenant's furniture, equipment,
supplies and telephones and telephone equipment from the present
Premises to the Substitution Space and for reprinting Tenant's
stationery in the same quality and quantity of Tenant's stationery
supply on hand immediately prior to Landlord's notice to Tenant of
the exercise of this relocation right.
45. MISCELLANEOUS.
(a) Any approval by Landlord or Landlord's architects and/or
engineers of any of Tenant's drawings, plans and specifications
which are prepared in connection with any construction of
improvements in the Premises shall not in any way be construed or
operate to bind Landlord or to constitute a representation or
warranty of Landlord as to the adequacy or sufficiency of such
drawings, plans and specifications, or the improvements to which
they relate, for any use, purpose, or condition, but such approval
shall merely be the consent of Owner as may be required hereunder
in connection with construction of Tenant's improvements in the
leased Premises in accordance with such drawings, plans and
specifications.
(b) There shall be no merger of this Lease or of the leasehold
estate hereby created with the fee estate in the leased Premises or
any part thereof by reason of the fact that the same person may
acquire or hold, directly or indirectly, this Lease or the
leasehold estate hereby created or any interest in this Lease or in
such leasehold estate as well as the fee estate in the leasehold
Premises or any interest in such fee estate.
(c) Neither Landlord nor Landlord's agents or brokers have made any
representations or promises with respect to the Premises, the
Building or the Land except as herein expressly set forth and no
rights, easements or licenses are acquired by Tenant by implication
or otherwise except as expressly set forth in the provisions of
this Lease.
(d) The submission of this Lease to Tenant shall not be construed
as an offer, nor shall Tenant have any rights with respect thereto
unless and until Landlord shall,
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or shall cause its managing agent to, execute a copy of this Lease
and deliver the same to Tenant.
(e) If Tenant signs as a corporation, (each of) the person(s)
executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation,
qualified to do business in the State of Florida, that the
corporation has the full right and authority to enter into this
Lease, and that (each and both of) the person(s) signing on behalf
of the corporation is (are) authorized to do so.
46. EXHIBITS AND ATTACHMENTS. All Exhibits, attachments, riders and
addenda referred to in this Lease are incorporated into this Lease and made a
part hereof for all intents and purposes.
47. SPECIAL PROVISIONS. Special provisions of this Lease designated as
Addendum "A" attached hereto are incorporated into this Lease and made a part
hereof for all intents and purposes.
IN WITNESS WHEREOF, the parties hereto have executed the Lease as of
the day and year first above written.
Signed, sealed and delivered in the LANDLORD: LINPRO DELRAY COMMERCE
presence of: CENTRE LIMITED PARTNERSHIP
By: /s/ [ILLEGIBLE]
- ------------------------------------ ----------------------------------
- ------------------------------------ Title: General Partner
TENANT: JRB ENTERPRISES, INC., D/B/A
presence of: SILK, SILK, SILK
/s/ JUDITH S. FRIEDSTOR By: /s/ [ILLEGIBLE]
- ------------------------------------ ----------------------------------
- ------------------------------------ Title: President & CEO
By: 7/30/91
Title:
Corporate Seal (if applicable)
18
<PAGE>
ADDENDUM "A"
TO THE LEASE
DATED July 15, 1991
BY AND BETWEEN
LINPRO DELRAY COMMERCE CENTRE LIMITED PARTNERSHIP ("LANDLORD")
AND
JRB ENTERPRISES, INC. ("TENANT")
1. RENTAL AMOUNT. Rental Amount is calculated as $4.82 psf rate x
10,674 sf. The total area of 10,674 sf is approximated by adding the existing
Suite #102 area of 4,857 sf to an approximated warehouse expansion of 5,817 sf.
When final plans for the 5,817 sf warehouse expansion are completed, they will
be made a part of this Lease per Exhibit C. The square footage per final plans
will be used to adjust the approximated Rental Rate to Actual.
2. ESCALATIONS. Base Rental Amount specified in Paragraph (5) of the
Lease Agreement will increase six percent (6%) per annum beginning in month
thirteen (13) of the initial Rental Term for the entire Term.
3. OPTION TO RENEW. Provided Tenant is not then in default, Tenant
shall have two (2) five (5) year Options to Renew at market rents to be mutually
agreed upon within one hundred eighty (180) days prior to Initial Lease
expiration or any subsequent extension thereof.
4. NOTICE TO VACATE OR RENEW. With respect to the Option to Renew set
forth above in Paragraph (5) above, Tenant shall provide Landlord with one
hundred eighty (180) days prior written notice of intent to vacate or of intent
to renew as of the end of the Rental Term or any extension thereof and such
notice shall be sufficient to bind the parties to such vacation or renewal as of
the end of the Rental Term or any extension thereof.
5. RENTAL ABATEMENT. Landlord agrees to allow Tenant a monthly Rental
Amount abatement for the initial five (5) months of the Rental Term. However,
this abatement does not apply to Estimated Operating Expenses.
19
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EXHIBIT A
LEGAL DESCRIPTION
A Tract of land lying in the East half (E1/2) of the Northeast Quarter
(NE1/4) of Section 19, Township 46/degrees/ South, Range 43/degrees/ East, lying
West of the West right of way line of Seaboard Airline Railroad and more
particularly described as follows:
Commence at the Quarter corner in the East line of Section 19, Township
46/degrees/ South, Range 43/degrees/ East, Palm Beach County, Florida; thence
Westerly along the centerline of said Section 19, a distance of 991.27 feet;
thence Northerly, parallel to the West right of way line of Seaboard Airline
Railroad, a distance of 55.0 feet to the Point of Beginning; thence continue
Northerly along the preceding course a distance of 1125 feet; thence Easterly,
parallel to said centerline of Section 19, a distance of 425.0 feet to a point
in the Westerly right of way line of the Seaboard Airline Railroad; thence
Southerly, along said West right of way line, a distance of 1125 feet; thence
Westerly, parallel to and 55.0 feet North (measured at right angles) of the
centerline of said Section 19, a distance of 425.00 feet to the Point of
Beginning.
LESS the West 46/degrees/ thereof, LESS the external area formed by a curve,
concave to the Northeast and having a radius of 25 feet at the intersection of
the North right of way line of S.W. 10th Street and the present East right of
way line of Congress Avenue, and less the North 345 feet thereof.
20
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EXHIBIT "B"
SITE PLAN
21
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EXHIBIT "C"
Tenant Improvement construction plans and outline specifications to be
attached upon completion by Architect. Notwithstanding the foregoing, Tenant
Improvements to be provided by Landlord are limited to the following:
1. Approximately 5,817 sf warehouse expansion per Exhibit "B" to include
two (2) bathrooms, warehouse lighting and electric, turbine roof
ventilators, demising wall separating suites #107 and #108 from
warehouse expansion area, installation of dock-high loading door, and
black- out of storefronts either by window tint or other method.
2. Modifications to 4,857 sf, Suite #102 to include demising wall
cut-throughs to be specified by Tenant, removal of interior partition
on north side of reception area, interior touch-up and cleaning and new
insert for lighted sign above Suite 102 door.
3. Landlord hereby grants to Tenant, subject to proper permitting, the
following signage:
a) A double slated sign on I-95 reader board, top positioning only, at
Landlord's expense;
b) A single slated sign on Congress Avenue, top positioning only, at
Landlord's expense;
c) An illuminated box sign, for Tenant's showroom and facing Congress
Avenue (replacing Linpro sign), at Landlord's expense;
d) Channel letter signage, consistent in size and color, with signage
used through the project (facing Congress Avenue) at Tenant's
expense, as approved by the City of Delray Beach;
e) A non-flashing neon "OPEN" sign, not to exceed 10" x 30", to be
located in front window of Tenant's showroom, at Tenant's expense,
as approved by the City of Delray Beach.
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<PAGE>
EXHIBIT "D"
BUILDING RULES AND REGULATIONS
The following rules and regulations shall apply, where applicable, to
the Premises, the Building, the Land situated beneath the Building and the
appurtenances thereto;
1. Sidewalks, doorways, vestibules, halls elevators, stairways and
other similar areas shall not be obstructed by any tenant or such tenant's
agents, employees or invitees or used by any tenant or such tenant's agents,
employees or invitees for any purposes other than ingress and egress to and from
the leased premises and for going from one to another part of the Building.
2. The sashes, sash doors, sky lights, windows and doors that reflect
or admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by any tenant, nor shall any
bottles, parcels or other articles be placed upon window ledges.
3. Plumbing, fixtures and appliances shall be used only for the
purposes for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed therein. Only standard toilet tissue may be
flushed in commodes. Damage resulting to any such fixtures or appliances from
misuse by a tenant or such tenant's agents, employees or invitees, shall be paid
by such tenant, and Landlord shall not in any case be responsible therefor.
4. No signs, showcase, advertisements, notices or other lettering shall
be exhibited, inscribed, painted or affixed on or to any windows or doors or
other part of the Building except of such color, size and style and in such
places as shall be first approved in writing by Landlord. No wiring, nails,
hooks or screws shall be driven or inserted in any part of the exterior of the
Building except by the Building maintenance personnel, nor shall any part of the
Building be defaced by tenants. No curtains or other window treatments shall be
placed between the glass and the Building interior or standard window
treatments, if any. In the event of violation by any tenant, Landlord may
correct the same without any liability therefore and may charge the reasonable
cost thereof to tenant.
5. Landlord will provide and maintain an alphabetical directory board
for all tenants in the first floor (main lobby) of the Building and/or elsewhere
proximate to the Building site and no other directory shall be permitted unless
previously consented to by Landlord in writing.
6. Landlord shall provide all locks not already provided for in Exhibit
"C", for the entry door(s) to each tenant's leased premises, at the cost of such
tenant, and no tenant shall place any additional lock or locks on any door in
its leased area without Landlord's prior written consent. A reasonable number of
keys (2) to the locks on the doors to each tenant's leased premises shall be
furnished by Landlord to each tenant, at the cost of such tenant, and the
tenants shall not have any duplicate keys made, except for Tenant's employees.
Each tenant upon the termination of tenancy must restore to Landlord all keys
for all doors and restrooms whether furnished by Landlord or otherwise procured
by tenant.
7. With respect to work being performed by tenants in any leased
premises with the approval of Landlord, all tenants will refer all contractors,
contractors' representatives and installation technicians rendering any service
to them to Landlord for Landlord's supervision, approval and control before the
performance of any contractual services. This provision shall apply to all work
performed in the Building including, but not limited to, installations of
telephones, telegraph equipment, electrical and plumbing devices and
attachments, doors, entranceways, and any and all installations of every nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment and any
other physical portion of the Building.
8. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which requires use of elevators or stairways, or movement through the
Building entrances or lobby shall be restricted to such hours as Landlord shall
designate. All such movement shall be under the supervision of Landlord and in
the manner agreed between the tenants and Landlord by prearrangement before
performance.
Any weighted material to be placed in any elevator shall not exceed the lifting
capacity of the
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elevator. Such prearrangement initiated by a tenant will include determination
by Landlord, and subject to its decision and control, as to the time, method,
and routing of movement and as to limitations for safety or any other concern
including the prohibiting of any article, equipment or any other item from being
brought into the Building. The tenants are to assume all risks as to the damage
to articles moved and injury to persons or public engaged or not engaged in such
movement, including equipment, property and personnel of Landlord if damaged or
injured as a result of acts in connection with carrying out this service for a
tenant from the time of entering the property to completion of work; and
Landlord shall not be liable for acts of any person engaged in, or any damage or
loss to any of said property or persons resulting from any act in connection
with such service performed for a tenant.
9. Landlord shall have the power to prescribe the weight and position
of safes and other heavy equipment or items, which shall in all cases, to
distribute weight, stand on supporting devices approved by Landlord so as not to
exceed the designed structural capacity of the floors and their supporting
members. All damages to the Building caused by the installation or removal of
any property of a tenant, or caused by a tenant's property while in the
Building, shall be repaired at the expense of such tenant.
10. A tenant shall notify the Building Manager when safes or other
heavy equipment are to be taken in or out of the Building, and the moving shall
be done under the supervision of the Building Manager, after written permission
from Landlord. Persons employed to move such property must be acceptable to
Landlord.
11. Corridor doors, when not in use, shall be kept closed.
12. Each tenant shall cooperate with Landlord's employees in keeping
it's leased premises neat and clean.
13. Landlord shall be in no way responsible to the tenants, their
agents, employees, or invitees for any loss of property from the leased premises
or public areas or for any damages to any property thereon from any cause
whatsoever.
14. To insure orderly operation of the Building, Landlord shall have
the right to regulate and direct automobile parking in the public areas so
designated.
15. Should a tenant require telegraphic, telephonic, annunciator or
other communication service, Landlord in consultation with his electrical
consultant will direct the electrician where and how wires are to be introduced
and placed and none shall be introduced or placed except as Landlord shall
direct. Electric current shall not be used for power or heating without
Landlord's prior written permission.
16. With the exception of a microwave, No cooking shall be done or
permitted in or about the Premises. However, tenants may provide for coffee,
tea, soft-drinks, etc. for benefit of tenant, employees, agents and/or invitees.
Refrigerators are permitted. Tenants shall not make or permit any improper,
objectionable or unpleasant noises or odors in the Building or otherwise
interfere in any way with other tenants or persons having business with them nor
with respect to any neighboring buildings or premises. No tenant shall throw
anything out of the doors, windows or skylights nor down any passageways nor
stairwells.
17. Nothing shall be swept or thrown into the corridors, halls,
elevator shafts or stairways. No birds, fish or animals of any kind whatsoever
shall be brought into or kept in, on or about any tenant's leased premises.
18. With the exception of small equipment necessary to this operation
of Tenant's existing business, No machinery of any kind shall be operated by any
tenant on its leased area without the prior written consent of Landlord, nor
shall any tenant use or keep in the Building any flammable or explosive fluid or
substance without the prior written consent of Landlord.
19. No portion of any tenant's leased premises shall at any time be
used or occupied as sleeping or lodging quarters.
20. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further reasonable rules and regulations
as in its judgement shall from time to time
24
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be necessary for the safety, protection, care and cleanliness of the Building,
the operation thereof, the preservation of good order therein and the protection
and comfort of the tenants and their agents, employees and invitees, which rules
and regulations, when made and written notice thereof is given to tenant, shall
be binding upon it in like manner as if originally herein prescribed.
21. Landlord will not be responsible for lost or stolen personal
property, money or jewelry from tenant's lease premises or public or common
areas regardless of whether such loss occurs when the area is locked against
entry or not.
22. Landlord will not be responsible to any tenant for the
nonobservance or violation of any of these rules and regulations by any other
tenants.
23. Landlord reserves the right to exclude from the Building between
the hours of 8:00 p.m. and 8:00 a.m., all persons who do not present a pass to
the Building signed by the appropriate tenant or who otherwise cannot furnish
satisfactory identification or who, in Landlord's reasonable judgment should be
denied access.
24. No bicycles, mopeds, motorcycles, or other vehicles of any kind
shall be brought into or kept in, or about the Building except in those
locations, if any, specifically designated by Landlord for same.
25. Canvassing, soliciting and peddling in the Building are strictly
prohibited for the protection and convenience of all tenants, each of whom shall
cooperate to prevent the same.
26. Landlord hereby reserves to itself any and all rights not granted
to a tenant hereunder, including, but not limited to, the following rights which
are preserved to Landlord for its purpose in operating the Building and the
premises:
(a) the exclusive right to the use of the name of the Building for
all purposes, except that a tenant may use the name as its business
address and for no other purpose;
(b) the right to change the name of the Building at any time and
from time to time, without incurring any liability to a tenant for
so doing;
(c) the right to install and maintain a sign or signs on the
exterior of the Building and/or anywhere in the Building Area, so
long as such acts do not diminish Tenant's ability to do business;
(e) the right to grant to anyone the right to conduct any
particular business or undertaking in the Building or Building
Area, except that, in accordance with the respective Lease with the
party herein referenced, Landlord shall not rent any space,
Further, Landlord shall notlease space during the time period
extending from October 1, 1991 through September 30, 1996, within
the project to any company, other than JRB Enterprises, Inc., whose
primary business is the assembly, wholesale and retail sale orlease
of live, preserved, or artificial plants, trees,flowers, foliage
and uses related thereto, including containers therefor (i.e.
baskets, ceramics, brass containers), provided Tenant is not in
default.
25
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FIRST AMENDMENT TO THE LEASE
THIS FIRST AMENDMENT TO THE LEASE ("First Amendment") dated July 15, 1991 is
between Linpro Delray Commerce Centre Limited Partnership, which was assigned to
Nathan Delray, J.V., ("Landlord") and JRB Enterprises, Inc. d/b/a/ Silk, Silk,
Silk (Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Lease ("Lease"), on July 15,
1991 for that certain space known as Suite 102 in that industrial complex
known as Delray Commerce Centre ("Commercial Center"), and
B. Landlord and Tenant now desire to amend the Lease Agreement as provided in
this First Amendment.
AGREEMENT
NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) by each party
in hand paid to the other, the receipt and sufficiency whereof is hereby
expressly acknowledged by each party to the other, the terms and conditions
hereof, and other good and valuable consideration, it is agreed as follows:
1. Tenant agrees to lease an additional 9,333 square feet, subject to
architectural verification, known as Suite 101, 102, 108 and a portion of
107, 955 S. Congress Avenue, Building B. Delray Beach, Florida (site plan
attached as Exhibit "B"). Lease shall commence on the 1st day of May, 1995
and end on midnight on the 30th day of April, 1998, which is a total of 36
months. Landlord will use best effort to receive the Certificate of Occupancy
on or before June 1, 1995. Landlord will also advise Tenant as to progress of
Tenant Improvements.
2. The Base Rental amount for the additional space of 9,333 square feet is as
follows:
AMOUNT PER SQ. FT. TOTAL BASE RENT
Year 1 $5.50/SF $51,331.50
Year 2 $5.83/SF $54,411.39
Year 3 $6.18/SF $57,677.94
The Tenant shall not commence to pay base rent on the additional space until
sixty (60) days after the certificate of occupancy is issued. Tenant shall
pay additional rent to the Landlord during the sixty (60) day period of free
rent.
The Tenant has tendered a deposit in the amount of $12,366.22 to the Landlord
which is composed of the first month's rent in the amount of $6,183.11 and
security deposit in the amount of $6,183.11 for the additional space.
3. Operating expenses which include common area maintenance, real estate taxes
and insurance charges are estimated at two ($2.00) dollars per square foot
for 1995, in addition to the base rent and will be budget thereafter.
Notwithstanding the above, common area maintenance shall not increase by more
than six (6%) percent per year.
4. This amendment shall also amend the rental term and renewal options of the
original lease in order that all Lease space shall expire April 30, 1998.
5. Tenant's use of the Premises and rights therein shall be subject to all
applicable legally enforceable laws and governmental regulations, including
but not limited to obtaining occupational licenses from the City of Delray
Beach
<PAGE>
and Palm Beach County, and to all reasonable requirements of the Premises or
the Building of which the Premises are a part. Tenant does not and will not
engage in any activity which would involve the uses of the Premises for the
storage, use, treatment, transportation or disposal of any chemical,
material, or substance which is regulated as toxic or hazardous or exposure
to which is prohibited, limited or regulated by any federal, state, county,
regional, local or other governmental authority or which, even if not so
regulated, may or could pose a hazard to the health and safety of the other
tenants and occupants of Landlord's property. Notwithstanding the above,
Tenant shall be permitted to conduct its intended business.
6. Landlord will provide and pay for the following improvements to the new
premises, which meet Tenant's requirements:
Landlord to provide approximately 1,500 square feet (50" front x 30'
deep) of open showroom (no partitions) with standard finish which
includes carpet, lighting, drop ceiling, and air conditioning to
showroom, two restrooms to code with dual (office/warehouse) use.
Standard electric service to space, install another shipping bay door
of the same size and a ramp to one bay door. Also, to add ramp to
current space at 975 S. Congress. Sink and kitchen area to be installed
next to bathrooms. Landlord will also provide standard exterior
signage.
7. Provided Tenant is not in default of the Lease and or time First Amendment
thereto, Tenant shall have two (2) five (5) year options to renew at a rent
equal to the rental amount for the year immediately proceeding the option
plus a six (6%) percent increase, that wi11 increase by six (6%) percent each
and every year. Tenant shall give Landlord notice of their intention to
exercise their option, within one hundred eighty (180) days prior to Initial
Lease Expiration or any subsequent extension thereof.
8. All other teens and conditions of the Lease shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed the First Amendment To The Lease
Agreement on the respective dates indicated below.
Signed, Sealed and delivered LANDLORD:
in the presence of: NATHAN PROPERTIES, INC. &
PROPERTIES OF DELRAY, INC.
d/b/a NATHAN DELRAY, INC.
/s/ [ILLEGIBLE] By: /s/ BRUCE SCHREIBER
- -------------------------------- ------------------------------
Witness
/s/ [ILLEGIBLE] Name: Bruce Schreiber
- -------------------------------- ----------------------------
Witness
Title: Vice President
---------------------------
Date: Feb. 1, 1995
---------------------------
TENANT:
JRL ENTERPRISES, INC .
d/b/a SILK, SILK, SILK
/s/ [ILLEGIBLE] By: /s/ JOSEPH R. BERGMANN
- -------------------------------- ------------------------------
Witness
/s/ [ILLEGIBLE] Name: Joseph R. Bergmann
- -------------------------------- ----------------------------
Witness
Title: Pres. & CEO
---------------------------
Date: 2/1/95
---------------------------
<PAGE>
EXHIBIT "B"
Site Plan
<PAGE>
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO THE LEASE AGREEMENT originally dated July 15, 1991
is between Linpro Delray Commerce Centre Limited Partnership, which was assigned
to Nathan Properties, Inc., and Properties of Delray, Inc. d/b/a Nathan Delray,
J.V. ("Landlord") and JRB Enterprises, Inc., d/lo/a Silk, Silk, Silk ("Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Lease ("Lease") on July 15,
1991 for that certain space known as Suite 102 at 975 South Congress Avenue,
Building A and that First Amendment to the Lease dated February 1, 1995 added
additional space known as Suites 101, 102, 108 and a portion of 107 at 955 South
Congress Avenue, Building B and in that industrial complex known as Delray
Commercial Centre ("Commercial Center").
B. Landlord and Tenant now desire to amend the Lease Agreement as provided in
this Second Amendment.
AGREEMENT
NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) by each
party in hand paid to the other, the receipt and sufficiency whereof is hereby
expressly acknowledged by each party to the other, the terms and condition
hereof, and other good and valuable consideration, it is agreed as follows:
1. Landlord and Tenant hereby agree to extend the Lease which shall expire on
April 30, 1998 for a Period of three (3) years commencing on May 1, 1998 and
ending April 30, 2001.
2. Landlord and Tenant hereby agree that the Base Rent shall increase three
(3%) percent each and every year of the Lease and said increase shall commence
on May 1, 1998.
3. The Base Rent amount for the 10,030 square feet of space located at Suite
102, 975 South Congress Avenue, Building A is Currently $6.84 until April 30,
1998.
4. The Base Rent amount for the 9,550 square feet of space located at Suites
101, 102, 108 and a portion of 107 at 955 South Congress Avenue, Building B is
currently $6.18 until April 30, 1998.
5. Operating expenses which include common area maintenance, real estate
taxes, management fees, and insurance charges are estimated at $2.52 per square
foot for 1997/1998, in addition to the Base Rent and will be by budget
thereafter. Common area maintenance, exclusive of insurance, real estate taxes,
and the management fee shall not increase by more than six (6%) percent per
year.
6. Sales tax will be added to each month's Base Rent plus operating expenses
charges.
<PAGE>
7. Landlord hereby grants the Tenant an option to lease the space at Suites
110, 11:, 116 117 and a portion of Suites 109 and 114 located at 955 South
Congress, Building B upon the current Tenant vacating the premises and is
subject to and contingent upon the Tenant not being in default of any terms and
conditions of the Lease or Amendment thereto. If the space becomes available and
the Tenant exercises its option to lease same then Tenant will have the option
of vacating its space Suite 102 located at 975 South Congress Avenue, Building
A. Tenant shall pay the same per square foot Base rent for the new space as it
is currently (at the time the option is exercised) paying on the space they have
the option to vacate. Tenant shall have ten (10) days from Landlord's written
notice to decide to lease said space. In the event the option is not exercised
with the ten (10) days, the option is null and void.
8. Landlord hereby grants the Tenant an option to lease the Suite 109 located
at 955 South Congress, Building B upon the current tenant vacating the premises
and is subject to and contingent upon the Tenant not being in default of any
terms and conditions of the Lease or Amendment thereto. Tenant shall have ten
(l0) days from Landlord's written notice to decide to lease said space. In the
event the option is not exercised with the ten (10) days, the option is null and
void.
9. All other terms and conditions of the Lease Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Lease Amendment on the
respective dates indicated below.
WITNESS LANDLORD: NATHAN DELRAY, J.V.
/s/ [ILLEGIBLE] BY: /s/ BRUCE SCHREIBER
- -------------------------------- ------------------------------
Bruce Schreiber, Vice President of
Nathan Properties, Inc., Joint Venturer
/s/ [ILLEGIBLE] DATE: Sept. 10/98.
- -------------------------------- ----------------------------
WITNESS TENANT: JRB ENTERPRISES, INC.
D/B/A SILK, SILK, SILK
/s/ [ILLEGIBLE] BY: /s/ JOSEPH R. BERGMANN
- -------------------------------- ------------------------------
NAME: JOSEPH R. BERGMANN
- -------------------------------- ----------------------------
TITLE: Pres. & CEO
---------------------------
DATE:
---------------------------
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Silk Botanicals.Com, Inc.
We hereby consent to the use in the 1st Amendment of the Registration Statement
on Form 10SB of our report dated August 11, 1999, relating to the financial
statements of Silk Botanicals. Com, Inc.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
August 18, 1999
