As filed with the Securities and Exchange Commission on February 29, 2000.
Registration No. 333-91177
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Take to Auction.com, Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Florida 7389 65-0924433
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
(305) 436-8070
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Albert Friedman
President and Chief Executive Officer
2335 N.W. 107th Avenue, Suite 2M-23
Miami, Florida 33172
(305) 436-8070
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
Keith Wasserstrom, Esq. Joel D. Mayersohn, Esq.
Baker & McKenzie Matthew W. Miller, Esq.
1200 Brickell Avenue, Suite 1900 Atlas, Pearlman, Trop & Borkson, P.A
Miami, Florida 33131 200 East Las Olas Boulevard, Suite 1900
Facsimile Number: (305) 789-8953 Fort Lauderdale, Florida 33301
Facsimile Number: (954) 766-7800
</TABLE>
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ___________.
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ____________.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ____________.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of Each Class of Securities to be Registered Proposed Maximum Aggregate Offering Price (1) Amount of Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common shares, par value $0.001 per share....... $15,600,000 $4,118.40
====================================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
amount of the registration fee.
---------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE HAVE FILED A REGISTRATION STATEMENT RELATING TO THESE SECURITIES WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT
SOLICITING OFFERS TO BUY SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
Subject To Completion, Dated February 29, 2000
1,300,000 Shares
[LOGO]
Take to Auction.com, Inc.
Common Shares
This is an initial public offering of our common shares.
Prior to the offering, there has been no public market for the common
shares. We have applied to list our common shares on the American Stock Exchange
under the symbol TTA. We currently estimated that the initial public
offering price will be between $10.00 and $12.00 per share. For factors to be
considered in determining the initial public offering price, see "Underwriting."
See "Risk Factors" beginning on page 4 to read about certain factors
you should consider before buying these securities.
---------------------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
---------------------------------
Per Share Total
--------- -----
Initial public offering price................. $ 11.00 $ 14,300,000
Underwriting discounts........................ $ 0.66 $ 858,000
Proceeds, before expenses, to Take to
Auction.com................................... $ 10.34 $ 13,442,000
The underwriters may, under certain circumstances, purchase up to an
additional 195,000 common shares from Take to Auction.com solely to cover
over-allotments.
---------------------------------
The underwriters expect to deliver the shares in , on
, 2000.
The date of this prospectus is , 2000.
---------------------------------
Noble International
Investments, Inc.
<PAGE>
[INSIDE FRONT COVER]
Step 1 Register Step 6 Spread the Word
Sign-Up and become <-------- Tell your friends and family
a TaketoAuction(SM) Member. about our community.
| ^
| |
| |
v |
Step 2 Select Product Step 5 Collect your Profit
Choose an item from our We handle billing and collection.
Online catalog of collectibles
and specialty merchandise.
| ^
| |
| |
v |
Step 3 TaketoAuction(SM) Step 4 SOLD!
With one click send your item to The item is packaged and
auction. No obligation to purchase -------> shipped from our warehouse to
the item if it is not sold at the buyer.
auction.
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<PAGE>
Prospectus Summary
This summary highlights the material information about our business and
this offering, but you should read the entire prospectus, including the
financial statements and the notes to those statements appearing elsewhere in
this prospectus, before deciding to purchase our common shares. Unless otherwise
specifically stated, the information in this prospectus assumes (A) that the
underwriters will not exercise their over-allotment option and no options are
presently exercisable under our stock option plan (B) a 1,000-for-one
stock-split of our outstanding common shares effected on August 26, 1999 and (C)
a subsequent 2.326530644-for-one stock split of our outstanding common shares
effected on November 3, 1999. You should carefully consider the information set
forth under the heading "Risk Factors."
Our Business
We are an Internet-based community providing our entrepreneurial
members an online catalog of authentic collectibles and factory-new specialty
merchandise to sell at online auction sites, such as eBay(SM), FairMarket(SM),
Amazon(SM) and Yahoo!(SM). eBay, FairMarket, Amazon and Yahoo! are registered
service marks of eBay Inc., FairMarket, Inc., Amazon.com, Inc. and Yahoo! Inc.,
respectively. Currently, we have no formal relationship or agreement with any of
these online auction sites, although we will be pursuing such relationships or
agreements in the future.
Our members pay an annual membership fee and, at no additional cost,
they select merchandise from our Web site that we then list automatically on
their behalf on a popular online auction site for one week at a time. Each
membership lasts for one year. Our members have the ability to earn money by
selling items through popular online auction sites at prices in excess of the
prices listed on our Web site. Our business model is distinct from and
complements the more than 200 online auction sites. We do not merely provide a
forum for buyers and sellers to meet, but rather we provide a total solution for
our members where they can take our merchandise and list it on popular online
auction sites. By doing this, we provide the various online auctions with
additional merchandise available to be placed for auction on their sites. We
intend to develop and expand our online membership base under the Take to
Auction brand by attracting Internet users who can earn additional income
through our Web site. We create Web site affinity by offering our members the
ability to follow their portfolio of merchandise currently listed on online
auction sites and to track their accumulated profits from completed online
auctions. In the near future we intend to conduct monthly and annual
competitions for the purpose of keeping members returning to our Web site.
We are a development stage company, having launched our Web site in
July 1999. We provide our members with a total solution to take items to online
auction sites. Our principal sources of revenues are membership fees, the
purchase of additional credits and the sale of products. In the future, we also
anticipate receiving fees from third parties for advertising their products and
services on our Web site. As our membership base expands and the volume of
merchandise increases, our purchasing power and economies of scale should enable
us to offer a broader array of merchandise at even better prices.
We believe that our approach will appeal to Web users, create community
affinity and increase user traffic on online auction sites because:
o we provide members with a broad array of merchandise (currently
2,000 types of items) to take to online auctions;
o members never have to purchase or take possession of the
merchandise;
o members do not have to take extensive steps to list items online
such as photographing the item, scanning or cropping the photograph,
writing the copy, setting the price, setting the length of auction,
setting the minimum bid, setting the delivery options, and setting
the payment options;
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o we facilitate transactions, free of charge to the member, by
accepting credit cards and electronic checks and by handling
shipping and delivery; and
o our service is designed to promote an active membership community to
provide a positive environment for advertising and electronic
commerce.
Risk Factors
Our risks can be divided into the following three broad areas - risks
related to our business - risks related to our industry - and risks related to
this offering. Some, but not all, of the risks related to our business are based
on the fact that we are a new company and include the following:
o our limited operating history makes it difficult to evaluate our
business;
o we have an accumulated deficit and we anticipate that our losses
will continue; and
o we have received a going concern opinion from our independent
auditors that expresses substantial doubt as to our ability to
continue as a going concern as a result of our operating losses.
In addition, some of the other risks related to our business include
the following:
o we expect to grow rapidly and managing our growth may be difficult;
o we will have broad discretion in allocating the proceeds of this
offering; and
o because our business model is unproven, we cannot assure you that
our revenues will grow or that we will become profitable.
Most, but not all, of the risks related to our industry are concerned
with the current unsettled state of the Internet and include the following:
o concerns about Web security pose risks to our entire business;
o we depend on the continuing development of the Web infrastructure
and the unavailability of technology to meet the growth in use of
the Web for online commerce may reduce our revenues and profits;
o governmental regulation and legal uncertainties relating to the Web
could increase our costs of transmitting data and increase our legal
and regulatory expenditures and could decrease our membership base;
and
o we may be subject to liability for the products sold at auction by
our members.
Many, but not all, of the risks related to this specific offering
include the following:
o we may not be able to obtain or maintain a listing on the American
Stock Exchange, so you may not be able to sell your shares easily;
o possible volatility of our stock price could harm our shareholders;
o control by principal shareholders, executive officers and directors
could harm our shareholders; and
o we will need to raise additional capital which may affect our
shareholders, and our business will be harmed if we are unable to
obtain additional capital.
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<PAGE>
Our Strategy
Our strategy is to use our innovative business model to capitalize on
the current popularity of online person-to-person auction sites. We believe we
are the only online business which enables its members to sell, for a profit,
products that they do not own or possess at online auction sites. Our strategy
includes the following key elements:
o take advantage of our innovative business model by providing our
members with a total solution to sell products at online auction
sites to attract more members;
o grow the Take to Auction.com community and increase the membership
base;
o promote the Take to Auction.com brand;
o forge business relationships with leading online auction sites such
as eBay, FairMarket, Yahoo! and Amazon to improve brand-name
recognition and the efficiency of our network systems;
o enhance the Take to Auction.com Web site features and functionality
by adding unique content to our membership community; and
o generate revenues from the sale of online advertising.
Our Corporate History
Take to Auction.com, Inc. was incorporated in Florida in June 1999. Our
principal executive offices are located at 2335 N.W. 107th Avenue, Suite 2M-23,
Miami, Florida 33172. Our telephone number is (305) 436-8070, and our Web site
is located at www.taketoauction.com. The information contained on our Web site
is not incorporated by reference into this prospectus.
The Offering
Common shares offered by
Take to Auction.com........................... 1,300,000 Shares
Common shares to be outstanding after this
offering...................................... 19,300,000 Shares
Use of proceeds............................... Fund the development of our
network infrastructure,
implement our growth strategy,
launch a targeted
advertisement campaign,
increase our inventory and for
working capital, general
administrative and other
expenses. Please see "Use of
Proceeds."
Proposed American Stock Exchange symbol....... TTA
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<PAGE>
Summary Financial Data
The following summary of the financial data for our business should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and the
accompanying notes to those statements included elsewhere in this prospectus.
<TABLE>
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For the period
from June 2, 1999
(date of inception)
through December 31, 1999
----------------------------------
<S> <C>
Statement of Operations Data:
Net revenues $ 70,067
Operating expenses (483,687)
Net loss (549,662)
Basic and diluted loss per share $ (0.03)
==================================
Weighted average number of
common shares outstanding 17,090,297
==================================
December 31, 1999
------------------------------------
Actual As adjusted (1)
Balance Sheet Data:
Cash and cash equivalents $ 856,949 $ 13,298,949
Working capital 288,032 12,730,032
Total assets 2,579,739 15,021,739
Shareholders' equity 1,150,338 13,592,338
</TABLE>
(1) Adjusted to give effect to the sale of the common shares offered by us (at
the assumed initial public offering price of $11.00 per share), and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds."
-----------------
We have applied for registration of the service marks Take to
Auction.com, Take to Auction, Take2Auction and Take2Auction.com with the U.S.
Patent and Trademark Office. We have also applied for a U.S. patent registration
of our method for providing merchandise to online auction sites. We cannot
assure you that a patent will be issued to us, or, if issued, will provide us
with all of the protections that we have sought. This prospectus also includes
tradenames and trademarks that belong to other companies. Use or display by us
of other parties' trademarks, tradenames or products is not intended to, and
does not imply a relationship with, or endorsement or sponsorship of, Take to
Auction by the trademark or tradename owners.
6
<PAGE>
Risk Factors
This offering involves a high degree of risk. You should carefully
consider the risks described below and the other information in this prospectus
before you decide to invest in our common shares. If any of the following risks
occur, our business, results of operations or financial condition could be
harmed. This prospectus contains certain forward-looking statements that involve
risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. When used in this prospectus, the words "expect,"
"anticipate," "intend," "hope," "design," "plan" and similar expressions are
intended to identify certain of these forward-looking statements. The cautionary
statements made in this prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this prospectus. Our
actual results could differ significantly from those discussed in this
prospectus. Factors that could cause or contribute to such differences include
those discussed below as well as those discussed elsewhere in this prospectus.
Risks Related to Our Business
Our limited operating history makes it difficult to evaluate our business
We commenced operations in June 1999 and launched our Web site in July
1999. There are no period-to-period comparisons of our operating results from
which to evaluate our performance. An investor in our common shares must
consider the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets such as online commerce. These
risks include depleting our cash reserves, lower than expected revenues and
earnings and not being able to pay expenses as they come due, as well as the
following:
o we may not be able to establish and grow our membership base;
o we may not be able to establish and maintain commercial
relationships with suppliers of merchandise to increase the number
of items listed on our service;
o we may not be able to maintain and enhance our brand and implement
and execute our business and marketing strategy;
o we may not be able to continue to develop and upgrade our technology
and information processing systems;
o we may not be able to provide superior customer service;
o we may not be able to secure adequate financing to fund growth;
o we may not be able to respond effectively to competitive
developments and a rapidly changing market; and
o we may not be able to attract qualified personnel, and if attracted,
we may not be able to integrate, retain and motivate such personnel.
Our failure to accomplish any of these objectives would harm our
business, financial condition and results of operations.
We have an accumulated deficit and we anticipate that our losses will continue
We launched our Web site in July 1999 and had only approximately 230
members as of February 24, 2000, representing approximately $147,000 of annual
membership fees. We have only generated revenues of approximately $70,000 as of
December 31, 1999. Therefore, we have not achieved profitability and expect to
incur operating losses for the foreseeable future. We incurred net losses of
approximately $550,000 for the period from June 2, 1999 (inception) through
December 31, 1999. We expect to continue to incur significant operating and
capital expenditures and net operating losses arising from initial development
costs, technology improvements and implementation of our business strategy. We
currently forecast an increased loss of approximately $7 million for fiscal year
2000. Our current and future expense levels are based largely on our investment
plans and estimates of future revenues and are, to a large extent, fixed. We
estimate fixed expenses over the next 12 months to be approximately
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$3.1 million. We may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues relative to our planned expenditures would have an
immediate harmful effect on our business, financial condition and results of
operations. Further, as a strategic response to changes in the competitive
environment, we may from time to time make certain pricing, service or marketing
decisions that could harm our short-term or medium-term financial condition and
results of operations.
We may not achieve profitability. Even if we do so, we may never
sustain or increase profitability on a quarterly or annual basis in the future.
If revenues grow slower than we anticipate, or if operating expenses exceed our
expectations or cannot be adjusted accordingly, our business, financial
condition and results of operations will be harmed. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
We received a going concern opinion from our independent auditors
We received an opinion from our independent auditors on our December
31, 1999 financial statements expressing substantial doubt as to our ability to
continue as a going concern as a result of our operating losses during the
development stage and our need for substantial amounts of additional funding to
continue our operations.
We may face competition from existing online auction sites or new
person-to-person trading Web sites which may harm our business
Currently we believe that we are the only entity using our innovative
business model. However, we could face competition from existing online auction
sites or new person-to-person trading Web sites that may provide the Take to
Auction concept in the future. In the event that existing online auction sites
begin to provide the Take to Auction concept in the future, they could attempt
to block us from accessing their auction sites. Barriers to entry are relatively
low and future competitors could launch new sites at a relatively low cost using
commercially available software. Likewise, it would not be costly for existing
online auction sites to modify their format to provide the Take to Auction
concept. Many of the major online auction sites, if they were to compete with us
in the future, have longer operating histories, larger user bases, longer
relationships with consumers, greater brand or name recognition and
significantly greater financial, technical and marketing resources than we do.
Competitive pressures created by any one of these companies, or by new entries
using the Take to Auction concept, could harm our business, financial condition
and results of operations. Please see "Business - Competition."
We expect to grow rapidly and managing our growth may be difficult
We expect to grow rapidly by expanding our membership base. This growth
is likely to place a significant strain on our resources and systems. To manage
the expected growth of our operations and personnel, we will be required to
improve existing and implement new transaction processing, operational and
financial systems, procedures and controls, and to augment, train and manage our
growing employee base. We also will be required to expand our finance,
administrative and operations staff.
We may have to cease accepting new members if we fail to meet
internally set minimum inventory requirements. In such case, prospective members
will be placed on a waiting list until we are able to stock sufficient
inventory. Each prospective member on the waiting list will be contacted and
granted membership status once we determine that our inventory is sufficiently
stocked.
Our success is dependent upon our management team who have only recently started
working together in this relatively new industry
Our success is dependent upon our management team which has only
recently started working together in this relatively new industry. All members
of our senior management recently joined us. Although our executive management
team has some experience in operating businesses engaged in electronic commerce,
due to the relatively short-lived nature of the electronic commerce industry, it
is
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more difficult to assess and evaluate management in the electronic commerce
industry than it is in other industries. Our new employees include a number of
key managerial, marketing, planning, technical and operations personnel who have
not yet been fully integrated into our company, and we expect to add additional
key personnel in the near future. These individuals have not previously worked
together and, as a result, may not work together effectively as a team to
successfully manage our growth. Please see "Business - Employees."
We will have broad discretion in allocating the proceeds of this offering
We have allocated a portion of the net proceeds of this offering for
use as working capital. As to such funds, you will be relying on our judgment
and discretion without specific information as to the uses which are proposed to
be made of such funds. Please see "Use of Proceeds."
If we are unable to adequately assess the demand for merchandise listed on our
Web site, our business would be harmed
We intend to rely on the expertise of our purchasing and marketing
professionals to select and purchase merchandise that is saleable on online
auction sites. Our evaluation of market demand for merchandise will be based on
internal periodic reports that will contain an analysis of the most popular
items sold at major online auction sites and our projections of new consumer
trends. The volume and type of merchandise that we maintain in our inventory
will also be based on these evaluations and projections. The lack of market
acceptance for the items of merchandise selected and purchased by us would
significantly reduce our revenues and, therefore, harm our business, results of
operation and financial condition. Please see "Business - Purchasing and
Inventory."
Difficulties associated with our brand development may harm our ability to
attract members
We believe that our growth will depend on the strengthening of our
brand which is critical to achieving widespread acceptance of Take to
Auction.com, particularly in light of the competitive nature of the online
commerce industry. Promoting and positioning our brand will depend largely on
the success of our marketing efforts and our ability to provide high quality
services. To promote our brand, we will need to increase our marketing budget
and otherwise increase our financial commitment to create and maintain brand
loyalty among users. We intend to increase our marketing efforts and budget as
our membership base expands. Over the next 12 months, we are estimating our
marketing expenses to be $100,000. Brand promotion activities may not yield
increased revenues and any such revenues may not offset the expenses incurred by
us in attempting to build our brand. Further, new users attracted to Take to
Auction.com may not conduct transactions through our Web site on a regular
basis. If we fail to promote and maintain our brand or if we incur substantial
expenses in an attempt to promote and maintain our brand or if our future
strategic relationships fail to promote our brand or increase brand recognition,
our business, financial condition and results of operations would be harmed.
Please see "Business - Take to Auction Strategy."
Because our business model is unproven, we cannot assure you that our revenues
will grow or that we will become profitable
Our business model depends upon our ability to leverage and to expand
our network of members, suppliers, manufacturers, wholesalers and online
advertisers to generate multiple revenue streams. The potential profitability of
this business model is unproven, and to be successful we must, among other
things, develop and market additional products and services to existing members
effectively. Furthermore, we may be forced by competitive pressures, industry
consolidation or otherwise, to change our business model, in which case our
financial results could be harmed. Our business model may not be successful and
we may not achieve revenue growth or profitability.
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Many of the online auction sites that are accessed by our members through our
services are emerging Internet companies that represent business and credit
risks
We expect to derive a significant portion of our revenues from the sale
of memberships and additional credits to Web users who want to earn additional
income by taking merchandise to online auction sites. Many of these online
auction sites have limited operating histories, are operating at a loss and have
limited access to capital. If the online auction sites or our online advertising
customer base experience financial difficulties or fail to experience commercial
success, we may lose a significant source of revenue and our business will
suffer. Ultimately, the success of these entities is entirely outside our
control.
The revenue expected from online advertising may not materialize
We also plan to generate revenues from the sale of advertising and
navigation services to other Internet companies, including Web site owners,
Internet retailers, Internet portals and regional Internet Service Providers. It
is anticipated that this will be a relatively minor revenue stream which will
not severely impact us if it does not materialize. We currently have banner
arrangements with two entities: Perfumania.com, Inc. and SR7 Leasing, Inc.,
doing business as Potamkin Auto Leasing. These entities are permitted to display
their banners on our Web site, and in return we receive a small portion of any
sales which result from the banners. In the future, we may have "per click"
arrangements whereby a company is permitted to display its banner on our Web
site and we are compensated based on the number of "clicks" or "hits" on the
banner.
Our success depends on the success of online auction Web sites, and the market
for online auction sites is developing and depends on the continued growth of
online person-to-person commerce.
Our business depends on the continued growth and success of online
auction sites. The growth and popularity of online auctions, if maintained,
should allow us to retain members who are interested in making money by taking
goods to online auction sites. Online auction sites are part of a developing
market which, like us, depends on the continued growth of online
person-to-person commerce. The market for the sale of goods over the Internet,
particularly through person-to-person trading, is a new and emerging market. The
future revenues and profits of online auction sites and, consequently, our
revenues and profits, are substantially dependent upon the widespread acceptance
and use of the Internet and other online services as a medium for commerce by
consumers. Rapid growth in the use of and interest in the Web, the Internet and
other online services is a recent phenomenon and this acceptance and use may not
continue to develop. A sufficiently broad base of consumers may not adopt, and
continue to use, the Internet as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty, and few proven services and products
exist. Growth in our member base relies on attracting consumers who have
historically used traditional means of commerce to purchase goods and on
entrepreneurial individuals who may desire to augment their income. We will only
be successful if these consumers and entrepreneurs accept and use novel ways of
conducting business and exchanging information.
Changes in consumer trends may harm our business
The popularity of certain categories of items, such as toys, dolls and
memorabilia, among consumers may vary over time due to perceived scarcity,
subjective value, and societal and consumer trends in general. A decline in the
popularity of, or demand for, certain collectibles or other specialty items
taken to auction through our service could reduce the overall volume of
transactions on our Web site, resulting in reduced revenues. Certain consumer
"fads" may temporarily inflate the volume of certain types of items provided on
our service, placing a significant strain upon our infrastructure and
transaction capacity. The decline of a "fad" would leave us with a large
inventory of unsaleable goods and could harm our business, financial condition
and results of operations.
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Unexpected increases in traffic may stress our systems
We intend to generate a high volume of traffic and transactions on the
Take to Auction.com service. Accordingly, the satisfactory performance,
reliability and availability of our Web site, processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain large numbers of members who take merchandise to online auction sites
while maintaining adequate customer service levels. Our revenues depend on the
number of items listed by us, the number of members that join our service, the
success of our members in completing online auction transactions and our ability
to attract online advertisers. Any system interruptions that result in the
unavailability of our service or reduced member activity would reduce the volume
of items taken to online auction sites and online auction sales completed and
could affect the average selling price of the items. Interruptions of service
may also diminish the attractiveness of our services. The online auction sites
have experienced, and our service will likely experience, periodic system
interruptions, which we believe will continue to occur from time to time. Since
the opening of our Web site to the public, we have experienced only one
interruption of service, which lasted approximately 8 hours. Any substantial
increase in the volume of traffic on our Web site or in the number of members
selecting merchandise to take to online auction sites will require us to expand
and upgrade our technology, transaction processing systems and network
infrastructure. We may be unable to accurately project the rate or timing of
increases, if any, in the use of our service or expand and upgrade our systems
and infrastructure to accommodate such increases in a timely manner. Any failure
to expand or upgrade our systems could harm our business, financial condition
and results of operations. Please see "Business - Operations and Technology."
We may be unable to respond to the rapid technological change in our industry
Our market is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product announcements,
introductions and enhancements and changing customer demands. Accordingly, our
future success will depend on our ability to adapt to rapidly changing
technologies, to adapt our services to evolving industry standards and to
continually improve the performance, features and reliability of our service in
response to competitive service and product offerings and evolving demands of
the marketplace. Our failure to adapt to these changes would harm our business,
financial condition and results of operations. In addition, the widespread
adoption of new Internet, networking or telecommunications technologies or other
technological changes could require substantial expenditures by us to modify or
adapt our services or infrastructure, which could strain our resources, require
us to modify our business plan and harm our business, financial condition and
results of operations. Please see "Business - Operations and Technology."
Risks Related to Our Industry
Concerns about Web security pose risks to our entire business
A significant barrier to the public's acceptance of online commerce and
communications is the secure transmission of confidential information over
public networks. We expect that a significant number of buyers of merchandise
auctioned by our members will authorize us to bill their credit card accounts
directly for all transaction fees charged by us. We rely on encryption and
authentication technology licensed from a third party to provide the security
and authentication technology to effect secure transmission of confidential
information, including buyer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the technology used by us
to protect customer transaction data. If any such compromise of our security
were to occur, it could harm our reputation and, therefore, our business,
financial condition and results of operations. Please see "Business Operations
and Technology."
Our operating results would be harmed if we experience significant credit card
fraud
Under current practices, we are liable for fraudulent credit card
transactions because we do not require a customer's signature to authorize a
transaction. Our failure to adequately control fraudulent credit card
transactions would harm our business, financial condition and results of
operations. Although
11
<PAGE>
we do not maintain a reserve fund to cover potential fraudulent credit card
transactions, we have never experienced a fraudulent credit card transaction. If
such loss would exist in the future, we would record the loss in the period
incurred.
We depend on the continuing development of the Web infrastructure, and the
unavailability of technology to meet the growth in use of the Web for online
commerce may reduce our revenues and profits
The success of our service will depend in large part upon the
development and maintenance of the Web infrastructure, such as a reliable
network backbone with the necessary speed, data capacity and security. We also
depend on timely development of complementary products, such as high speed
modems, for providing reliable Web access and services. Because global commerce
and the online exchange of information is new and evolving, it is difficult to
predict with any assurance whether the Web will prove to be a viable commercial
marketplace in the long-term. The Web has experienced, and is expected to
continue to experience, significant growth in the numbers of users and amount of
traffic. To the extent that the Web continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements of users, the Web
infrastructure may not continue to be able to support the demands placed on it
by this continued growth and the performance or reliability of the Web may be
compromised. The infrastructure or complementary products or services necessary
to make the Web a viable commercial marketplace for the long-term may not be
developed and, even if they are developed, the Web may not become a viable
commercial marketplace for services such as those offered by us. If the
necessary infrastructure, standard or protocols or complementary products,
services or facilities are not developed, or if the Web does not become a viable
commercial marketplace, our business, financial condition and results of
operations will be harmed. Even if the infrastructure, standards or protocols or
complementary products, services or facilities are developed and the Web becomes
a viable commercial marketplace in the long term, we might be required to incur
substantial expenditures in order to adapt our service to changing Web
technologies, which could harm our business, financial condition and results of
operations. Please see "Business - Industry Background."
Legal risks associated with information disseminated through our service may
harm our business
The law relating to the liability of online services companies for
information carried on or disseminated through their services is currently
unsettled. It is possible that claims could be made against online services
companies under both United States and foreign law for defamation, libel,
invasion of privacy, negligence, copyright or trademark infringement, or other
theories based on the nature and content of the materials disseminated through
their services. Several private lawsuits seeking to impose such liability upon
other online services companies are currently pending. In addition, legislation
has been proposed in several states, including California, Maryland, Nevada,
Virginia and Washington that imposes liability for or prohibits the transmission
over the Internet of certain types of unsolicited e-mail or advertisements. The
imposition upon us and other online service providers of potential liability for
information carried on or disseminated through their services could require us
to implement measures to reduce our exposure to such liability, which may
require us to expend substantial resources and/or to discontinue certain service
offerings. In addition, the increased attention focused upon liability issues as
a result of these lawsuits and legislative proposals could impact the growth of
Internet use. We do not carry liability insurance. Therefore, any costs incurred
by us as a result of such liability or asserted liability could harm our
business, financial condition and results of operations. Please see
"Business-Government Regulation" and " - Privacy Policy."
Governmental regulation and legal uncertainties relating to the Web could
increase our costs of transmitting data and increase our legal and regulatory
expenditures and could decrease our membership base
Government regulation of communications and commerce on the Internet
varies greatly from country to country. Unlike some countries and the European
Union, the United States Congress has, to date, enacted relatively few laws
expressly aimed at e-commerce. For example, the Trademark Cyberpiracy Prevention
Act of 1999 seeks to help trademark owners protect their intellectual property
12
<PAGE>
against "cybersquatters" who register Internet domain names resembling famous
trademarks in order to extort money from or defame the trademark owner. Due to
the increasing popularity and use of the Internet and other online services, it
is possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
freedom of expression, pricing, content and quality of products and services,
taxation, advertising, intellectual property rights, enforceability of contracts
and information security. Because our services are accessible worldwide, and we
facilitate sales of goods to users worldwide, any jurisdiction in which our
services can be accessed or are used may seek to impose its laws on us and to
enforce those laws in proceedings in those countries where we could be forced to
defend ourselves. Please see "Business -Government Regulation."
The imposition of sales and other taxes on our business or on products we offer
to our members and on Internet services generally could impair the growth of
electronic commerce
We do not collect sales or other similar taxes with respect to goods
sold through our service. However, one or more states or countries may seek to
impose sales tax collection obligations on out-of-state companies which engage
in or facilitate online commerce, and a number of proposals have been made at
the Federal, state and local level, as well as in foreign jurisdictions, that
would impose additional taxes on the sale of goods and services through the
Internet. In addition, a bill was introduced in the U.S. Congress in July 1999
that would impose a 5% Federal tax on sales by a merchant over the Internet that
are not otherwise taxable. These proposals, if adopted, could substantially
impair the growth of electronic commerce, and could harm our opportunity to
derive financial benefit from such activities. Moreover, a successful assertion
by one or more states or any foreign country that we should collect sales or
other taxes on the exchange of merchandise on our system could harm our
business, financial condition and results of operations. Please see "Business -
Government Regulation."
International barriers may increase our costs and risks of doing business
Because we facilitate sales of goods to users worldwide, we may be
subject to significant costs and risks with respect to potentially complex
personal data privacy protection and online contracting regulatory requirements,
export and import restrictions, customs clearance, currency exchange controls,
and tariffs and other trade barriers.
We may be subject to liability for products whose sale we facilitate
Buyers of our products may sue us if they are harmed by any of the
products whose sales we facilitate. Although we do not manufacture these
products, we are exposed to potential liability. Liability claims could require
us to spend significant time and money in litigation or to pay significant
damages, which could harm our business, financial condition and results of
operations. Although we intend to disclaim all warranties and to rely on the
manufacturers to fulfill their warranty obligations, we cannot be certain that
such disclaimers will always be enforceable outside of the United States or that
the manufacturers will be able to fulfill their warranty obligations. Please see
"Business - Product and Service Warranties."
Our failure to protect our intellectual property rights could harm our
brand-building efforts and ability to compete effectively
We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success, and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. We have applied for registration of the service marks
Take to Auction.com, Take to Auction, Take2Auction and Take2Auction.com with the
U.S. Patent and Trademark Office. We have also applied for a U.S. patent
registration on our method for providing merchandise to online auction sites.
The patent may not be issued to us, or, if issued, it may not provide us with
all of the protections that we have sought. Please see "Business--Intellectual
Property Rights."
13
<PAGE>
We have entered into confidentiality and invention assignment
agreements with our employees and contractors, and nondisclosure agreements with
parties with which we conduct business to limit access to and disclosure of our
proprietary information. These contractual arrangements or the other steps taken
by us to protect our intellectual property may be insufficient to prevent
misappropriation of our technology and may not deter independent third-party
development of similar technologies. To date, we have not been notified that our
technologies infringe the proprietary rights of third parties, but third parties
may claim infringement by us with respect to past, current or future
technologies. We expect that participants in our markets will be increasingly
subject to infringement claims as the number of services and competitors in our
industry segment grows. Any such claim, whether meritorious or not, could be
time-consuming, result in costly litigation, cause service upgrade delays or
require us to enter into royalty or licensing agreements. These royalty or
licensing agreements might not be available on terms acceptable to us. As a
result, any such claim could harm our business, financial condition and results
of operations. Please see "Business--Intellectual Property Rights."
We could still face problems related to the Year 2000 issue which could be
disruptive to our business operations
To date, we have not experienced any problems as a result of the
commencement of the Year 2000. Nevertheless, computer experts have warned that
there may still be residual consequences stemming from the change in centuries
and, if these consequences become widespread, they could result in a decrease in
sales of our services, increased operating expenses and other business
interruptions. Year 2000 problems would also decrease our reputation for
reliability when we are trying to grow the membership base. We have not
developed any specific contingency plan for Year 2000 issues. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Impact of Year 2000."
Risks Related to this Offering
We may not be able to obtain or maintain a listing on the American Stock
Exchange, so you may not be able to sell your shares easily
Because we may not be able to obtain or maintain a listing on the
American Stock Exchange ("AMEX"), your shares may be difficult or impossible to
sell. Trading in our common shares, if any, is intended to be conducted on the
AMEX after the initial offering period. However, if we are unable to qualify for
this listing, we believe that our common shares may trade on the
over-the-counter market in the so-called "pink sheets" or the OTC Bulletin
Board, which was established for securities that do not meet the AMEX listing
requirements. Consequently, selling your common shares would be more difficult
because smaller quantities of common shares could be bought and sold,
transactions could be delayed, and coverage of us by securities analysts and
news media may be reduced. As a result, shareholders may not be able to sell
their shares, which illiquidity may cause a decreased trading price and larger
spreads in the bid and ask price for our common shares.
Broker-dealers may be unable to sell our common shares because of the low price
Although we intend to be listed on the AMEX, we cannot assure you that
we will be able to qualify and obtain this listing. If our application is not
approved, our shares may trade only on the OTC Bulletin Board or in the National
Quotation Bureau, LLC's Pink Sheets. The effects of not being eligible for
trading on the AMEX include the limited release of the market prices of our
stock and limited news coverage of us. Ineligibility may also restrict
investors' interest in our stock and materially adversely affect the trading
market and prices for our stock and our ability to issue additional securities
or to secure additional financing. In addition, if our stock is not eligible for
trading on the AMEX, and the trading price of our common stock was less than
$5.00 per share, our common stock could be subject to Rule 15g-9 under the
Securities and Exchange Act of 1934, as amended. That rule, otherwise known as
the "Penny Stock Rule," requires that broker-dealers satisfy special sales
practice requirements, including making individualized written suitability
determinations and receiving purchasers' written consents, prior to any
14
<PAGE>
transaction. If our common stock is deemed to be a penny stock under the
Securities Enforcement and Penny Stock Reform Act of 1990, this would require
additional disclosure in connection with trades in our common stock, including
the delivery of a disclosure schedule explaining the nature and risks of the
penny stock market. Such requirements could severely limit the liquidity of our
common stock, the ability of broker-dealers to sell our common shares and the
ability of purchasers in this offering to sell their securities in the secondary
market.
We may be unable to sell shares in some states due to blue sky regulations
If we are unable to list our shares on the AMEX, we must register the
common shares in any state where we desire to sell our common shares. We must
also register our officers and directors as broker dealers in any state in which
we seek to sell our common shares or seek an exemption to such registration. The
underwriter must also register in such an event. If a registration of the common
shares in various states is not approved, it will not be possible for us to sell
the common shares. We intend to use our best efforts to register in every state
where we believe there is a significant market for our common shares. Should any
or all common share registrations not be approved, this would prohibit us from
selling the common shares offered for sale in such jurisdictions, would make it
more difficult for you to sell your common shares and could adversely affect the
overall success of this offering.
Possible volatility of our stock price could harm our shareholders
The stock markets in general, and the market for Internet-related and
technology companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. The trading prices of many technology stocks are
at or near historical highs and reflect valuations substantially above
historical levels. These trading prices and valuations may not be sustained.
These broad market and industry factors may harm the market price of our common
shares, regardless of our operating performance. Market fluctuations, as well as
general political and economic conditions such as recession or interest rate or
currency rate fluctuations, may also harm the market price of our common shares.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted against
the company. This litigation, if instituted, could result in substantial costs
and a diversion of management's attention and resources, which would harm our
business, financial condition and results of operations.
Control by principal shareholders, executive officers and directors could harm
our shareholders
Upon completion of this offering, our executive officers and directors
and greater-than-five-percent shareholders will, in the aggregate, own
approximately 44% of the outstanding common shares (43% if the underwriters'
over-allotment option is exercised in full). Further, our bylaws provide for a
classified board of directors which is controlled by our founders. This means
that the board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board of
directors will be elected each year. This makes it more difficult to gain
control of the board of directors and may delay, defer or prevent a change in
control of our company. As a result, the executive officers, directors and
greater-than-five-percent shareholders, acting together, will have the ability
to control most, if not all, matters submitted to shareholders and directors for
approval (including the election and removal of directors and officers and any
merger, consolidation or sale of all or substantially all of our assets) and to
control our management and affairs. Accordingly, this concentration of
ownership, as well as the classified board of directors, may have the effect of
delaying, deferring or preventing a change in our control, impede a merger,
consolidation, takeover or other business combination involving us or discourage
a potential acquirer from making a tender offer or otherwise attempting to
obtain our control, which in turn could harm the market price of our common
shares. The following four individuals own greater than 5% of the Company:
Horacio Groisman; Albert Friedman; Hugo Calemczuk; and Magdalena Zafir. In
addition, Ilia Lekach owns all of Pacific Investments, which in turn owns
greater than 5% of the Company. Please see "Management" and "Principal
Shareholders."
15
<PAGE>
Shares eligible for public sale after this offering could harm our stock price
Sales of substantial amounts of common shares (including shares issued
upon the exercise of outstanding options) in the public market after this
offering could harm the market price of our common shares. These sales also
might make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deem appropriate. In addition to the
common shares we are offering (assuming no exercise of the underwriters'
over-allotment option), as of the date of this prospectus, there will be
18,000,000 common shares outstanding, all of which are "restricted securities"
under the Securities Act of 1933, as amended. Notwithstanding any earlier
eligibility for sale under the provisions of Rule 144, due to lock-up agreements
with the representatives of the underwriters, none of the restricted securities
will be available for sale in the public market until at least 180 days after
the date the registration statement is declared effective by the of the
Securities and Exchange Commission. Following the expiration of the 180 day
lock-up agreements, ____ of the restricted securities will be available for sale
in the public market until the expiration of any applicable holding periods
under Rule 144 of the Securities Act and our right to repurchase unvested
shares. In addition, as of the date of this prospectus, there were outstanding
options to purchase 815,000 common shares, none of which were immediately
exercisable or exercisable within 60 days of the date of this prospectus.
Notwithstanding any earlier eligibility for sale under the provisions of Rule
144(k), due to lock-up agreements with the representatives of the underwriters,
none of the outstanding options will be available for sale in the public market
until at least 180 days after the date the registration statement is declared
effective by the of the Securities and Exchange Commission. Following the
expiration of the 180 day lock-up agreements, none of the outstanding options
will be available for sale in the public market until the expiration of the
applicable holding periods under Rule 144(k) of the Securities Act. The
representative of the several underwriters acting together may, in their sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. Immediately after this offering, we
intend to register approximately 2,442,857 common shares subject to outstanding
options and reserved for issuance under our stock option and purchase plans.
Please see "Shares Eligible for Future Sale."
We will need to raise additional capital which may affect our shareholders, and
our business will be harmed if we are unable to obtain additional capital
We currently anticipate that the net proceeds of this offering,
together with our available funds, will be sufficient to meet our anticipated
needs for working capital, capital expenditures and business expansion through
at least the next 12 months. Thereafter, we will need to raise additional funds.
We may need to raise additional funds sooner in order to fund more rapid
expansion, to develop new or enhanced services or products, to respond to
competitive pressures or to acquire complementary products, businesses or
technologies. If additional funds are raised through the issuance of equity or
convertible debt securities, your percentage ownership will be reduced, you may
experience additional dilution and these securities may have rights, preferences
and privileges senior to those of the common shares. Additional financing may
not be available on terms favorable to us or at all. If we are unable to list
the shares of common stock on the AMEX, it may be more difficult to raise
additional funds. If adequate funds are not available or are not available on
acceptable terms, we may not be able to fund our expansion, take advantage of
unanticipated acquisition opportunities, develop or enhance services or products
or respond to competitive pressures. Our inability to raise additional capital
on acceptable terms could harm our business, financial condition and results of
operations. Please see "Management's Discussion and Analysis of Financial
Conditions and Results of Operations--Liquidity and Capital Resources."
You will incur immediate and substantial dilution and may face further dilution
The initial public offering price of the common shares paid by you is
substantially higher than the net tangible book value per outstanding share of
our common shares. Purchasers of the common shares in this offering will suffer
immediate and substantial dilution of $10.30 per share in the net tangible book
value of the common shares from the initial public offering price, assuming an
initial public offering price of $11.00 per share. To the extent that
outstanding options to purchase our common shares are exercised, there may be
further dilution. Please see "Dilution."
16
<PAGE>
Market Data
This prospectus contains market data related to Take to Auction.com and
the Internet. This data has been included in the studies published by the
Internet market research firms of International Data Corporation and Forrester
Research, Inc. This market data includes projections that are based on a number
of assumptions. These assumptions include that:
o the number of people online and the total number of hours spent
online will increase significantly over the next five years;
o the use of online auction sites will increase;
o Internet security and privacy concerns will be adequately addressed;
and
o no catastrophic failure of the Internet will occur.
If any one or more of these assumptions turns out to be incorrect,
actual results may differ significantly from the projections based on these
assumptions.
Use of Proceeds
At an assumed initial public offering price of $11.00 per share, we
estimate that the net proceeds to us from the sale of the common shares will be
approximately $12.4 million (approximately $14.5 million if the over-allotment
option is exercised in full) after deducting the estimated underwriting discount
and estimated offering expenses. We intend to use the net proceeds in
approximately the following manner:
Inventory $10,720,000
Salaries 475,000
Network Infrastructure 410,000
Marketing / advertising 50,000
Working capital 790,000
Within the above categories, we intend that our management will have
broad discretion in the application of the net proceeds. Remaining amounts, if
any, will be used for general corporate purposes. Pending such uses, we intend
to invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities. Please see "Risk Factors - Risks Related to this
Offering - We will likely need to raise additional capital which may affect
shareholders, and our business will be harmed if we are unable to obtain
additional capital."
Dividend Policy
We have not declared or paid any cash dividends on our capital stock.
We presently intend to retain future earnings, if any, to finance the expansion
of our business and fund operating losses and do not anticipate paying any cash
dividends in the foreseeable future.
17
<PAGE>
Capitalization
The following table sets forth our capitalization as of December 31,
1999:
o on an actual basis;
o on an as adjusted basis to reflect the estimated net proceeds from
the sale of the common shares offered by us after deducting the
underwriting discount and estimated offering expenses payable by us.
Please see "Use of Proceeds."
You should read this information together with our financial statements and the
accompanying notes to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------
Actual As adjusted
------ -----------
<S> <C> <C>
Stockholders' equity:
Preferred stock, $0.001 par value,
10,000,000 shares authorized, no shares
issued and outstanding actual, pro forma and
as adjusted..................................... $ --- $ ---
Common stock, $0.001 par value,
50,000,000 shares authorized, 18,000,000
shares issued and outstanding actual;
19,300,000 shares issued and outstanding
as adjusted.....................................
18,000 19,300
Additional paid-in capital...................... 1,682,000 14,122,700
Accumulated deficit............................. (549,662) (549,662)
--------------- -----------------
Total stockholders' equity................. 1,150,338 13,592,338
--------------- -----------------
Total stockholders' equity................. $ 1,150,338 $ 13,592,338
=============== =================
</TABLE>
18
<PAGE>
Dilution
Our net tangible book value as of December 31, 1999 was approximately
$1.2 million or $0.06 per common share. Net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of common shares outstanding.
After giving effect to the sale of common shares offered by us at an
assumed initial public offering price of $11.00 per share, and the application
of the estimated net proceeds therefrom, our net tangible book value as of
December 31, 1999, would have been approximately $13.6 million or $0.70 per
common share. This represents an immediate increase in net tangible book value
of $0.64 per share to existing shareholders and an immediate dilution of $10.30
per share to new shareholders purchasing common shares in this offering. The
following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $11.00
Net tangible book value per share prior to this offering.......... $ 0.06
Increase per share attributable to new shareholders............... 0.64
----
Net tangible book value per share after this offering............. 0.70
----
Total net tangible book value dilution per share to new
shareholders.................................................... $10.30
======
</TABLE>
The following table summarizes as of December 31, 1999, on the pro
forma basis described above, the number of common shares purchased from us, the
total consideration paid to us and the average price per share paid by existing
shareholders and by investors purchasing common shares in this offering (before
deducting the estimated offering expenses):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------- -------------------------
Number Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Existing shareholders............... 18,000,000 93.3% $ 1,700,000 10.6%
New investors (1)................... 1,300,000 6.7 14,300,000 89.4
---------- ------- ------------- --------
Total............................... 19,300,000 100.0% $ 16,000,000 100.0%
========== ======= ============= ========
</TABLE>
(1) If the underwriters' over-allotment is exercised in full, the number of
shares held by new investors will be increased to 1,495,000, or 7.7% of
the total common shares to be outstanding after this offering.
The foregoing discussion and tables assume no exercise of any stock
options outstanding as of the date of this prospectus. As of the date of
this prospectus, there were options outstanding to purchase a total of 815,000
common shares with a weighted average exercise price of $5.23 per share. To the
extent that any of these options are exercised, there will be further dilution
to new investors in this offering.
19
<PAGE>
Selected Financial Data
The following selected financial data should be read in conjunction
with, and are qualified by reference to, the financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus. The financial
statement data as of December 31, 1999 and for the period from June 2, 1999
(date of inception) through December 31, 1999 are derived from, and are
qualified by reference to, the audited financial statements of Take to
Auction.com (which report includes an explanatory paragraph related to the
Company's ability to continue as a going concern) included elsewhere in this
prospectus (excluding the balance sheet as adjusted, which gives effect to the
sale of common shares offered by us).
For the period
from June 2, 1999
(date of inception)
through
December 31, 1999
-------------------
Statement of Operations Data:
Net revenues $ 70,067
Cost of net revenues 136,042
--------------------
Gross margin (65,975)
--------------------
Operating expenses:
General and administrative 383,630
Auction fees 5,727
Sales and marketing 19,061
Fulfillment 42,632
Web site development
expenses 32,637
--------------------
Total operating expenses 483,687
--------------------
Net loss $ (549,662)
====================
Basic and diluted loss
per common share $ (0.03)
====================
Weighted average number of
common shares outstanding 17,090,297
====================
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------------------------------
Actual As adjusted (1)
------ ---------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 856,949 $ 13,298,949
Working capital 288,032 12,730,032
Total assets 2,579,739 15,021,739
Shareholders' equity 1,150,338 13,592,338
</TABLE>
(1) Adjusted to give effect to the sale of the common shares offered by us (at
the assumed initial public offering price of $11.00 per share), and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds."
20
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations
is based upon and should be read in conjunction with our financial statements
and their related notes included elsewhere in this prospectus.
This prospectus contains certain "forward-looking statements" based on our
current expectations, assumptions, estimates and projections about us and our
industry. These forward-looking statements involve risks and uncertainties. Our
actual results could differ materially from those anticipated in such
forward-looking statements as a result of factors more fully described in this
section and elsewhere in this prospectus. We undertake no obligation to update
publicly any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future, unless new information
renders items herein misleading, or unless required by law. Please see the
introductory paragraph in "Risk Factors" for additional discussion of the risks
of forward-looking statements.
Overview
Take to Auction.com, Inc. was formed as a Florida corporation in June
1999 and operates its online service under the name of "Take to Auction.com".
We are a development stage company, having launched our Web site in
July 1999. Our operations for the period from June 2, 1999 through December 31,
1999 were primarily limited to organizing our company, raising operating
capital, hiring initial management and employees and refining our business
model. We also began to target potential customers and to build and promote our
interactive-based community and brand through word-of-mouth marketing efforts,
as well as repeat business.
We provide our members with a total solution to take items to online
auction sites. Our revenues are from memberships purchased by our members,
additional credits purchased by existing members and sales of products. In the
future, we also anticipate receiving fees from third parties for online
advertising. We believe that word-of-mouth and repeat business from existing
members are the most effective means of implementing our growth strategy.
Members purchase membership credits to enable them to select items to take to an
online auction site. Each annual membership costs a minimum of $100.00 and
allows a member to take any number of items which have an aggregate value of
$100.00 or less from our Web site to an online auction site for one week at a
time. Each membership lasts for one year.
In order for a member to recoup his or her entire membership fee, he or
she must earn $100.00 from auctions over the course of the membership term. By
accumulating additional credits, the member will be eligible to list multiple
items and/or items that have greater value. The total number of credits and,
consequently, our revenues depend upon our members' interest in listing multiple
items at one time or seeking more valuable merchandise. That is because the more
credits a member purchases, the more (both in number and value) items he or she
can send to auction. The more credits a member purchases, the more revenues are
generated for Take to Auction.
Our rate of expense growth will follow revenue growth and will be
primarily driven by increases in membership and by the volume of successful
online transactions completed by existing members. That is because the more
members we have, the more expenses we incur, such as listing fees, customer
service, merchandise and warehouse expenses. In the short term, we intend to
increase our expenses significantly in an effort to attain a high level of
revenue growth.
Results of Operations
Net revenues. Net revenues include the membership fees charged to our
members, prorated over the annual membership, and the sale of products to our
members upon a successfully completed auction. Net revenues amounted to
approximately $70,000 for the period from June 2, 1999 through December
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31, 1999. We had approximately 600 completed transactions during the period from
June 2, 1999 through December 31, 1999 at an average sale price of approximately
$97.
Cost of net revenues. Cost of net revenues consist primarily of the cost of
the merchandise sold and inbound shipping costs related to those items. Cost of
net revenues amounted to approximately $136,000 for the period from June 2, 1999
through December 31, 1999. We believe that offering our members attractive
pricing is a key component to our success. The majority of our negative margins
is attributable to offering our current members discounted pricing to promote
our brand during our development stage. Our gross margin will improve as we
improve our supply chain management, including buying directly from the
manufacturers and taking advantage of volume purchase discounts. We expect to
realize positive margins from the sale of products in the future, although we
cannot assure you that this will prove to be the case.
General and administrative expenses. General and administrative expenses
consist of payroll and related expenses for executive, accounting and
administrative personnel, professional fees and other general corporate
expenses. General and administrative expenses amounted to approximately $384,000
for the period from June 2, 1999 through December 31, 1999. General and
administrative expenses will continue to increase as we expand our staff and
incur additional costs to support the growth of our business.
Auction fees. Auction fees consist of fees incurred for posting and selling
items at on line auction sites. Auction fees amounted to approximately $6,000
for the period from June 2, 1999 through December 31, 1999. Auction fees will
continue to increase as the number of items listed and sold at on line auction
sites increase through our increased membership base.
Sales and marketing. Sales and marketing expenses consist of fees incurred
for advertising and promotion. Sales and marketing expenses amounted to
approximately $19,000 for the period from June 2, 1999 through December 31,
1999. Sales and marketing expenses will continue to increase as we increase our
marketing efforts to attract new members.
Fulfillment fees. Fulfillment fees consist of fees incurred to implement our
outsource agreement with our third party warehousing facility and to warehouse,
fulfill and ship products to the highest bidders for completed auctions.
Fulfillment fees amounted to approximately $43,000 for the period from June 2,
1999 through December 31, 1999. Fulfillment fees will continue to increase as
our sales increase.
Web site development expenses. Web site development expenses consist
principally of expenses incurred to develop our network operations and systems
and telecommunications infrastructure. Web site development expenses amounted to
approximately $33,000 for the period from June 2, 1999 through December 31,
1999. Web site development expenses are expected to increase as we increase our
network infrastructure to facilitate our operations.
Income taxes. We were incorporated in June 1999 and have not yet filed a
federal income tax return or a State of Florida income tax return. Our 1999
fiscal year ended on December 31, 1999. We expect to have operating losses for
the foreseeable future and do not expect to have any federal or state income tax
liability until we are profitable and utilize our operating loss carry forwards.
Net loss. As a result of the factors discussed above, primarily relating to
the general corporate expenses incurred in our start up activities, the net loss
totaled approximately $550,000 for the period from June 2, 1999 through December
31, 1999. We expect to incur net losses for the foreseeable future.
Liquidity and Capital Resources
Our principal capital requirements are acquiring merchandise and
maintaining and improving our Web site.
We used approximately $349,000 of cash from operating activities for
the period from June 2, 1999 through December 31, 1999. This was primarily the
result of a loss of approximately $550,000 for
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the period from June 2, 1999 through December 31, 1999. The additional changes
in other operating assets and liabilities were principally related to increases
in accounts payable and accrued expenses offset by an increase in inventory.
We used cash in investing activities of approximately $191,000 during
the period from June 2, 1999 through December 31, 1999, primarily related to the
purchase of computer hardware and software.
Cash provided by financing activities for the period from June 2, 1999
through December 31, 1999 was approximately $1,397,000. This was the result of
proceeds received on our stock subscriptions receivable (relating to our initial
capitalization) in the amount of approximately $364,000, proceeds received from
the sale of our common shares to SLI.com Ventures Ltd. in the amount of
$350,000, proceeds received from the sale of our common shares to Dominion
Income Management in the amount of $350,000, and proceeds received for an
advance of $1,000,000 from Perfumania, Inc., a company related through common
chairman of the board, offset by payments made for offering costs of
approximately $668,000. The sale of common shares to SLI.com Ventures Ltd. and
Dominion Income Management was not part of the August 26, 1999 $1 million
initial capitalization.
Subsequent to December 31, 1999, we collected the remaining balance of
our initial capitalization in the amount of approximately $635,000.
We believe that funds generated from our initial capitalization, other
private placements, operations and the net proceeds of this offering will be
sufficient to finance our current and anticipated operations for at least 12
months after this offering. Our long-term capital requirements beyond this
period will depend on numerous factors, including, but not limited to, the
following:
o The ability to expand our member base;
o The cost of upgrades to our Web site; and
o The level of expenditures for sales and marketing and other factors.
Without the proceeds from this offering, we will not have sufficient
funds to fund operations for the next twelve months. We would need to raise
additional funds by incurring debt or through other public or private offerings
of our capital stock. We may not be able to do either on terms favorable to us,
if at all.
Impact of Year 2000
Even though the date is now past January 1, 2000, and we have not
experienced any immediate adverse impact from the transition to the Year 2000,
we cannot provide complete assurance that we have not been affected in a manner
that is not yet apparent. In addition, some computer programs which were date
sensitive to the Year 2000 may not have been programmed to process the Year 2000
as a leap year, and any negative consequential effects remain unknown. As a
result, we will continue to monitor our Year 2000 compliance and the Year 2000
compliance of our third party vendors and licensors of material hardware and
software services.
State of Readiness
Prior to January 1, 2000, we had made a preliminary assessment of the
Year 2000 readiness of our operating financial and administrative systems,
including the hardware and software that support our systems.
Our assessment plan consisted of:
o quality assurance testing of our internally developed proprietary
software;
o contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of our services to our users to assess their Year 2000
readiness;
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o contacting vendors of third-party systems to assess their Year 2000
readiness;
o assessing repair or replacement requirements; and
o implementing repair or replacement procedures.
We have developed testing procedures for all software and other systems
that we believe might be affected by Year 2000 issues. Since third parties
developed and currently support many of the systems that we use, a significant
part of this effort has been and will be to ensure that these third-party
systems are Year 2000 compliant. We received assurances that the existing
third-party software and the existing hardware is Year 2000 compliant through a
combination of representations by these third parties regarding their products'
Year 2000 compliance, as well as specific testing of these systems.
Continuing Risks
We are heavily dependent on a significant number of third-party vendors
to provide both network services and equipment. A significant Year 2000-related
disruption of the network, services or equipment that third-party vendors
provide to us could cause our members and visitors to consider seeking alternate
providers or cause an unmanageable burden on our technical support, which in
turn could harm our business, financial condition and results of operations.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be Year 2000 compliant. The failure by such entities to be Year 2000
compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our customers, decrease the use of
the Internet or prevent users from accessing our Web site which could harm our
business, financial condition and results of operations.
Contingency Plans
Based on the above actions, we have not developed a formal contingency
plan to be implemented as part of our efforts to identify and correct Year 2000
problems affecting our internal systems. However, if we believe it is necessary,
we may take the following actions:
o Short to medium-term use of backup equipment and software;
o Increased work hours for our personnel; and
o Other similar approaches.
If we are required to implement any of these contingency plans, such
plans could have a material adverse effect on our business. Based on the actions
taken to date, and the lack of any problems to date, we are reasonably certain
that we have identified and resolved all Year 2000 problems that could harm our
business.
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Business
Take to Auction.com
We are an Internet-based community providing our entrepreneurial
members an online catalog of authentic collectibles and factory-new specialty
merchandise to sell at online auction sites, such as eBaySM, FairMarketSM,
AmazonSM and Yahoo! SM. Our members pay an annual membership fee and, each week,
if they so choose, at no additional cost, select from more than 2,000 types of
items in more than 10 categories of merchandise from our Web site that we then
list automatically on a popular online auction site for one week at a time for
the duration of the one-year membership. Our business model is distinct from and
complements the more than 200 online auction sites. We intend to develop and
expand our online membership base under the Take to Auction brand by attracting
Internet users who can earn additional income through our Web site. We create
significant Web site affinity by offering our members the ability to follow
their portfolio of merchandise currently listed on online auction sites and to
track their accumulated profits from completed online auctions. We believe that
adding monthly and annual competitions, category indices and personalized
features such as the ability to track portfolios and members' profits will keep
members returning to our Web site.
We are a development stage company, having launched our Web site in
July 1999. We provide our members with a total solution to take items to online
auction sites. Our principal sources of revenues are derived from membership
fees, the purchase of additional credits and sales of products. In the future,
we also anticipate receiving fees from third parties for advertising their
products and services on our Web site. As our membership base expands and the
volume of merchandise increases, our purchasing power and economies of scale
should enable us to offer a broader array of merchandise at even better prices.
Industry Background
The Internet has emerged as a global medium enabling millions of people
worldwide to share information, communicate and conduct business electronically.
It also provides businesses with an attractive means of selling and marketing
their products. International Data Corporation, or IDC, estimates that the
number of Web users worldwide will grow to approximately 508 million by the year
2003. This growth is expected to be driven by the large and growing number of
PCs installed in homes and offices, the decreasing cost of PCs, easier, faster
and cheaper access to the Internet, improvements in network infrastructure, the
proliferation of Internet content and the increasing familiarity and acceptance
of the Internet by businesses and consumers. The Internet has a number of unique
characteristics that differentiate it from traditional media: users communicate
or access information without geographic or temporal limitations; users access
dynamic and interactive content on a real-time basis; and users communicate and
interact instantaneously with a single individual or with entire groups of
individuals. As a result of these characteristics, Web usage is expected to
continue to grow.
The growing adoption of the Web represents an opportunity for
businesses to conduct commerce over the Internet. IDC estimates that the total
value of commerce over the Internet will increase to approximately $1 trillion
worldwide by the year 2003.
Online auction sites like eBay, the only online auction site we
currently use and whose source code we have utilized to become fully integrated,
pioneered person-to-person trading of a wide range of goods over the Internet
using an efficient and entertaining auction format and has grown into the
largest and most popular person-to-person trading community on the Internet. We
believe that there are currently over 200 online auction sites on the Internet.
Online auction services permit sellers to list items for sale, buyers to bid for
and purchase items of interest and all auction users to browse through listed
items from any place in the world at any time. Online auction sites offer buyers
a large selection of new and used items that can be difficult and costly to find
through traditional means such as classified advertisements, collectibles shows,
garage sales and flea markets or through intermediaries, such as auction houses
and local dealer shops. Online auction sites also enable sellers to reach a
larger number of potential buyers more cost-effectively than traditional
person-to-person trading forums. However, the volume of activity on existing
online auction sites is subject to some of the following limitations:
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o Sellers on online auction sites own the listed merchandise and must
pay all listing fees assessed by certain online auction sites;
o Sellers of products own a limited supply of merchandise to place on
online auction sites;
o If the online auction of an item is unsuccessful, the seller
continues to own the item;
o Sellers of products are responsible for the collection of the
purchase price and the delivery of the merchandise to buyers;
o Sellers do not know the buyer so they are unsure whether the buyer
will pay for the merchandise;
o Sellers do not have an automatic and secure payment system;
o Buyers must rely on the sellers to make sure that the items
purchased are in good condition and are actually delivered;
o The process of listing an item on an online auction site is
typically limited to Internet savvy users; and
o Sellers can earn a profit only after deducting the price paid by
them for the merchandise and the related listing fees and other
expenses.
The Take to Auction.com Solution
We capitalize on the success of online auction sites by supplying these
online auction markets with many categories of collectibles and factory-new
specialty merchandise. Using our purchasing expertise, we supply entrepreneurial
members with items to bring to auction.
We believe that the Take to Auction concept will appeal to Web users,
create community affinity and increase user traffic on online auction sites for
the following reasons:
We provide members with a broad array of merchandise to take to online
auctions
While a typical seller has limited items to place for auction, we
currently provide our members with over 2,000 types of items of merchandise in a
broad array of categories from which to make a selection. The merchandise
categories include the following:
autos and auto products; dolls & figurines;
antiques; jewelry & gemstones;
books; photo & electronics;
movies & music; pottery & glass;
coins & stamps; sports memorabilia;
collectibles; toys & plush; and art.
In addition to providing single items, we also expect to offer bundled items of
merchandise from time to time to lower the reserve price of each item and,
therefore, improve the chances of a successful online auction.
Members never have to purchase or take possession of the merchandise
Unlike traditional auction settings where sellers place their own items
up for auction, our members enter our Web site, browse through a product catalog
and select an item to be listed at an online auction site. If the item does not
sell, the item returns to our electronic warehouse automatically without the
member incurring any expenses. There is no additional cost to the member and,
therefore, no
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risk to have items listed at an online auction site because the minimum bid
prices always cover the value of the merchandise. The differential between the
reserve price and the highest bid, the spread, constitutes a member's profit.
Members do not have to take complicated steps to list items online
To list an item on a traditional online auction site, often a digital
photograph of the item must be taken by the seller and then fitted according to
the required layout of the online auction site. Information about the seller and
the particular item must be entered into the system. We facilitate the auction
process because, once a member registers, the only thing he or she has to do is
select an item from our product catalog and choose from a drop down menu the
auction site where he or she desires to place the item (presently, only eBay).
Once an item is selected and the member has chosen the online auction site, we
automatically register the member and the item's specifications on the online
auction site, providing membership information, a photograph and a description
of the item.
We facilitate transactions by accepting credit cards and electronic
checks and by handling shipping and delivery
Buyers of our merchandise have the ability to pay by credit card or
electronic check protected by security services such as VeriSign, Inc. and SSL
Security Systems. This payment medium is not offered by online auction sites
because a typical seller is small and, therefore, not equipped to have a credit
card processing system or the ability to receive an electronic check. We also
package and ship the merchandise to the buyer, at the buyer's expense.
Our service is designed to promote an active membership community to
provide a positive environment for advertising and commerce
We intend to encourage active participation in our community and to
offer a number of programs to increase levels of participation. We currently
provide our members with a personalized auction tracking page which advises
members of the status of their current auctions, as well as a status report of
the sales completed and profits earned to date. In the near future, we intend to
provide monthly and annual competitions, category indices and other personalized
features designed to keep members returning to our Web site.
We believe that all of these features will appeal to advertisers and
consumers because advertisers will be able to specifically target their
advertisements based upon the information members provide us in their
applications and by tracking merchandise taken by our members to other auction
sites. Additionally, the banner ads and hyperlinks will not require a member to
leave our Web site in order to visit an advertiser or sponsor's Web site.
Take to Auction Strategy
Our objective is to become a leading Internet based community offering
a broad array of products and services to our members. Our strategy includes the
following key elements:
Grow the Take to Auction community and increase the membership base
Because we intend to derive a large portion of our revenues from the
sale of membership credits, our success depends on our ability to grow our
membership base. We intend to use "word-of-mouth" referrals and targeted
marketing to buyers of our merchandise posted on online auction sites to expand
our membership community.
Promote the Take to Auction brand
We believe that building greater awareness of our brand within and
beyond the Take to Auction.com community is critical to maintaining and
expanding our user base and promoting online
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advertising revenues. We believe that controlled growth of the Take to
Auction.com community and brand will maximize customer satisfaction and promote
our brand. All merchandise listed by us on online auction sites will contain a
banner which provides hyperlink access to our Web site. We also intend to use a
portion of the proceeds from the offering to launch an advertising campaign to
increase our membership base.
Forge business relationships with online auction sites and other strategic
partners to improve brand-name recognition and the efficiency of our network
systems
Although we do not have any yet, we intend to form strategic alliances
with online auction sites to improve our "brand name" recognition and the
performance and efficiency of our network systems. These strategic alliances
would mainly consist of arrangements with online auction sites in the following
areas: cross marketing; discounted fees; direct electronic interfacing; and
mutual name protection. We believe that alliances with online auction sites will
improve brand name recognition by enabling our members to benefit from enhanced
services provided by online auction sites, including special recognition in the
"featured auctions" Web page of online auction sites and allowing us to place
our banner in each auction posted by us on behalf of our members. We believe
that strategic alliances with online auction sites will improve the efficiency
and performance of our network systems by enabling us to interface directly with
the online auction systems instead of simulating a standard manual posting. By
interfacing directly with online auction sites, we hope to accelerate the
information throughput, avoid errors caused by previously unannounced protocol
changes, reduce personnel and maximize our Web site's processing power.
Leverage our innovative business model
We believe that our business model provides a number of competitive
advantages. We have a unique appeal to entrepreneurial Web users because we can
provide them with the means to earn additional income at no additional risk
other than the amounts members pay for membership credits. Our current volume of
activity is approximately 22,000 transactions, based on the current level of
membership on an annualized basis. Our current variety of merchandise equals
over 2,000 types of items. As we increase our volume of activity and the variety
of merchandise available to take to online auction sites, we expect to purchase
merchandise at a greater discount, thereby increasing the potential profits of
the members.
Enhance the Take to Auction.com Web site features and functionality by adding
unique content to our membership
We intend to update and enhance the features and functionality of our
Web site frequently to continue to improve the user's trading experience by
introducing features such as new category-specific content. For example, we
intend to provide stock quotes, a "tell your story" section and category
indexing. The category indexing we intend to offer will show the recent sales
trends in many of the categories of items we offer for auction. We also intend
to provide a real time confirmation of a completed auction to our members and to
the buyer, which will include a link for the buyer to click to facilitate
payment. We will continue to refine system response and transaction processing
time by investing in our infrastructure to accommodate additional users, content
and online auction sites. We believe that our format and Web site encourage
users and members to return on a frequent basis to review the inventory of items
available to them, to check the status of on-going auctions and to track their
historical success. The regular rotation of merchandise also encourages
customers to revisit the site frequently. Further, we anticipate that our online
advertising customers will benefit from our ability to provide targeted
marketing opportunities.
Generate revenues from the sale of online advertising
We intend to generate a minor portion of our revenues from online
advertising by leveraging our user database to enable Internet retailers to
advertise their products to our members. Our system provides these retailers
with information about the spending habits of our members based on information
obtained by tracking the posting habits of our members. We do not provide
retailers with personally identifiable information about our users. Currently,
we provide our members with an auction portfolio
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tracking page. In the future, we intend to provide to our members with a stock
portfolio tracking system, a "tell your story" section and category indexing.
These current and future features, we believe, will foster community affinity by
encouraging our members to spend more time on our Web site. These factors, we
believe, will appeal to Internet retailers that desire to advertise their
products because we can provide them with the opportunity for a relatively
captive audience. Currently, we have arrangements with several entities whereby
these entities display their banner on our Web site. Please see "Risk Factors -
Revenue expected from online advertising may not materialize" for a more
detailed discussion of our online advertising. To date, we have derived no
revenues from online advertising.
The Take to Auction Service
Our platform is an Internet-based community supplying merchandise to
entrepreneurial members through an online catalog of collectibles and
factory-new specialty merchandise. The following describes our purchase and sale
process:
What can be taken to auction
Our service will offer our members numerous product categories. We
expect the number of product categories to grow in the future. Each category
below has numerous subcategories. Merchandise is available individually or as
bundled items. Current product categories include:
Autos and Auto Products Great Collections
Antiques Jewelry, Gemstones
Art Photo & Electronics
Books, Movies, Music Pottery & Glass
Coins, Stamps Sports Memorabilia
Collectibles Toys, Plush
Dolls, Figurines
Registration
Members purchase membership credits to enable them to select an item to
take to an online auction site. An annual membership costs a minimum of $100.00
for 100 credits, which allows a member to take any number of items which have an
aggregate value of $100.00 or less from our Web site to an online auction site
for one week at a time for the duration of the one-year membership. In addition,
as a member purchases additional credits, the member will be eligible to list
additional items or items that have greater value and/or are more difficult to
find. Initially, each additional credit beyond the membership fee costs $1.
However, the cost of additional credits will be prorated based on when they are
purchased within the members' membership term. Additional credits may be
purchased in 25 credit increments. The user interface clearly indicates to the
member how much it will cost to purchase additional credits. The number of
credits and, consequently, our revenues depend upon our members' interest in
listing multiple items at one time or more valuable items.
Selecting an Item
With the purchase of a membership, a member can access our site and
select one or more items from our fully automated catalog and post such
merchandise on an online auction site. Members select items based on the number
of their credits. Each credit is valued at $1.00. A member's membership, which
costs a minimum of $100.00, equals 100 credits. Additional credits can be
purchased as set forth in the above section. Members can increase their selling
power by purchasing additional credits. Additional credits allow members to list
multiple items simultaneously or items of greater value, always based on the
number of accumulated credits. For example, if a member purchases an additional
100 credits, such member would have 200 credits, 100 credits from his or her
membership fee plus the additional credits. Since the credits are valued at
$1.00, the member may now take any number of items which have an aggregate value
of $200.00 or less from our Web site to an online auction.
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Taking an item to auction
Members can take an item they choose to an online auction site by
clicking on the item, causing a drop-down menu to list the popular online
auction sites to which members can choose to take the selected merchandise
(presently, only eBay). By highlighting and clicking on the online auction site,
the item, with its description and reference information (including minimum bids
for opening price and member information), is transferred to the auction site
automatically. Our domain name and the member's user name are displayed on the
online auction site to identify to potential buyers that a Take to Auction.com
member is placing the item on the online auction site. Our personalized Web
address ensures member anonymity and informs potential bidders that the item is
backed by the Take to Auction brand name. Of course, the backing of the Company
will only become relevant to online bidders if Take to Auction.com gains brand
name recognition as a safe and reliable company with which to do business.
Selling an item at auction
Once the item is listed on an auction site, buyers from around the
world may bid on the item according to the rules of the selected online auction
site, usually 24 hours a day, seven days a week.
How transactions are completed
At the end of an auction period, if a bid meets or exceeds the minimum
price, we automatically notify the buyer and the member via e-mail and the buyer
can then consummate the transaction through Take to Auction.com. The member does
not take possession of the item being sold and is not responsible for the
collection of the buyer's payment for the item. We arrange for the shipment and
payment collection for the item. We accept electronic checks and credit cards.
We charge the buyer handling and shipping fees for the merchandise.
Communications with the winning bidder
With the delivery of the merchandise, the winning bidder receives a
letter thanking him or her for purchasing an item from us, inviting the buyer to
join Take to Auction.com and explaining our services.
Marketing and Advertising
To promote the Take to Auction.com brand and to attract traffic and new
members, we currently employ "word-of-mouth" marketing. In addition, we also
have banners and links on our members' listings at the online auction sites.
These links will provide additional traffic to our Web site. In the near future
we intend to use a portion of the proceeds from this offering to expand our
marketing department and to target specific Web users with traditional and
Web-based marketing programs.
We believe that "word-of-mouth" referrals, sometimes referred to as
"viral dissemination," is the most effective means to attract new members
because referrals by existing members lend credibility to our service and brand
name by demonstrating to potential members that other individuals have
successfully used our service. We believe that we would impair the quality of
our service and the level of customer satisfaction if we were to embark on a
high-profile advertising campaign that generates attention in the short-term,
placing too great a burden on our existing infrastructure. We believe that we
can only achieve sustainable growth by proving to potential users that others
have benefited from our services and their experience was very satisfactory
through positive feedback on the online auctions. Likewise, we believe that the
marketing of our services to buyers of Take to Auction merchandise on online
auction sites will be effective because buyers know from experience that the
Take to Auction.com service works. Please see "Risk Factors - Unexpected
increases in traffic may stress our systems."
Customer Support
We provide customer service and support. Customer support is offered
through a toll-free telephone number and an e-mail address which are monitored
by our staff from 9:00 a.m. to 5:00 p.m.,
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from Monday through Friday. Most customer support inquiries are handled via
e-mail, with customer inquiries typically being answered within one business day
after submission. We also offer an online tutorial for new Take to Auction.com
users.
Operations and Technology
We are operating our first generation user interface and transaction
processing system that is based on internally-developed proprietary software.
Our system currently handles all aspects of the Take to Auction process
including notification of members via e-mail when they initially register for
the service, confirmation of the selection of the merchandise to take to
auction, registration of the item on an online auction site and notification to
our selling member and the buyer upon the successful completion of an auction.
The system maintains member registration information, billing accounts, current
auctions and historical listings. All data is regularly archived to a data
warehouse. Complete listings of all items for sale are generated on a daily
basis. The system sends electronic invoices to all buyers of merchandise sold by
our members via e-mail immediately after auction.
Our system has been designed around industry standard architectures and
has been designed to reduce downtime in the event of outages or catastrophic
occurrences. Our service is designed to be available 24 hours a day, seven days
a week. Our system hardware is hosted at a third party facility in Cary, North
Carolina, which provides redundant communications lines and emergency power
backup. Our system consists of one database running SQL relational database
management systems and a suite of Dual and Quad PentiumIII-based Microsoft(TM)
Internet servers running Windows NT operating system. Our Internet servers also
utilize VeriSign, Inc. SSL digital certificates for authentication. We have a
load balancing Web system with redundant servers to provide for fault tolerance.
Dell(TM) currently provides all of our hardware and we use both 6300 and 2400
series servers.
We are in the process of implementing a second-generation system using
internal resources. We expect this to cost approximately $250,000. The two main
reasons for the upgrade of the system are fault tolerance and scalability. Due
to the amount of data that must be stored and the expected volume of
transactions we expect to experience, we will replace our current Microsoft SQL
database server with Oracle's 8i database server, which will also allow for
better scalability. We are also in the process of mirroring the entire Web
system on a different geographical location for added redundancy. We continually
evaluate the latest technologies to provide the smartest solution available. In
the near future, we will out grow our Microsoft based solution, and we will
migrate to Sun Micro Systems running the Solaris operating systems, Zeus for our
Web services and Chili soft for ASP with an Oracle DB backend.
Purchasing and Inventory
Purchasing
Our management has an aggregate of 75 years experience in sourcing
products for the resale market. Ilia Lekach has 30 years retail and wholesale
experience; Lucien Lallouz has 30 years marketing experience; Albert Friedman
has 6 years retail, wholesale and manufacturing experience; Kevin Caricato has 9
years retail and wholesale experience. The items of merchandise posted at our
Web site will be purchased by us from manufacturers and wholesalers on the open
market. By that we mean that we will not commit to purchase from a small group
of manufacturers or wholesalers, but rather make our purchasing decisions solely
based on the best prices offered for quality merchandise. Because the types of
products listed on our Web site are generally available from a large number of
wholesalers and manufacturers, we believe that we can leverage our management's
purchasing expertise to obtain better prices for these products by purchasing
them in the open market. Therefore, we have not entered, and do not expect to
enter, into any medium- or long-term supply agreements with any manufacturers or
wholesalers of products. Also, because of the broad array of products we intend
to carry and since we do not have a catalog, the need to carry specific items is
minimal. If an item is not readily available to us, we may choose to discontinue
the item or suspend it temporarily from our product offerings. We may, however,
enter into strategic alliances with some manufacturers from time to time to
source unique
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merchandise to be listed on our Web site. Please see "Certain Relationships -
Exito Enterprises Sourcing Arrangement."
Inventory
We believe that we will be able to maintain an adequate inventory of
merchandise, which we will purchase from wholesalers and suppliers in the open
market (as discussed above), to meet projected demand. We believe that our
inventory will be adequate to meet the projected demand of our members and
potential buyers. Effective November 3, 1999, we entered into a six-month
service agreement with 2000 Logistics, Inc., an unrelated third party, to
outsource our warehouse and distribution functions. This service agreement
includes order processing, inventory management, warehousing, fulfillment and
shipping of product. The agreement is variable, based on volume of sales. We
estimate the cost of these services will be approximately $175,000 during the
initial term of the agreement. The majority of costs related to this agreement
are variable and thus based on the volume of sales. The agreement is cancelable
after 6 months and will automatically renew for successive one-year terms.
Product and Service Warranties
When buyers purchase our merchandise on online auction sites, we pass
on to these buyers the warranties made by the manufacturers of the merchandise.
We do not provide and assertively disclaim separate additional warranties.
Competition
We believe that we are the only entity currently using our innovative
business model. However, we could face competition from existing online auction
sites or new person-to-person trading Web sites that may provide the Take to
Auction concept in the future. In the event that existing online auction sites
begin to provide the Take to Auction concept in the future, they could attempt
to block us from accessing their auction sites. Barriers to entry are relatively
low and future competitors could launch new sites at a relatively low cost using
commercially available software. Likewise, it would not be costly for existing
online auction sites to modify their format to provide the Take to Auction
concept. Many of the major online auction sites, if they were to compete with us
in the future, have longer operating histories, larger user bases, longer
relationships with consumers, greater brand or name recognition and
significantly greater financial, technical and marketing resources than we do.
Competitive pressures created by any one of these companies, or by new entries
using the Take to Auction concept, could harm our business, financial condition
and results of operations.
Future competitors may include various online person-to-person auction
services that also serve as online clearing houses or sales and distribution
channels and auction sites for manufacturers and suppliers of a variety of
products, including First Auction(TM) (the auction site for Internet Shopping
Network, a wholly-owned subsidiary of the Home Shopping Network) and Ubid, Inc.,
an online auction site of surplus electronic and computer products. Other future
competitors may include business-to-consumer online auction services such as
Onsale and Surplus Auction. We may also face competition from a number of large
online communities and services that have expertise in developing online
commerce and in facilitating online person-to-person interaction. Certain of
these companies, including eBay(SM), FairMarket(SM), Amazon.com(SM), AOL(SM),
Microsoft(SM) and Yahoo!(SM), currently offer a variety of business-to-consumer
trading services and classified ad services, and certain of these companies
could introduce the Take to Auction concept in the future. Other large companies
with strong brand recognition and experience in online commerce, such as Cendant
Corporation, QVC and large newspaper or media companies may also seek to compete
in the online auction market, and upon doing so, introduce the Take to Auction
concept. Competitive pressures created by any one of these companies, or by new
entries using the Take to Auction concept, could harm our business, financial
condition and results of operations.
We believe that the principal competitive factors in the online auction
market are volume and selection of goods, population of buyers and sellers,
community cohesion and interaction, customer
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service, reliability of delivery and payment by users, brand recognition, Web
site convenience and accessibility, price, quality of search tools and system
reliability. Many of our potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing, technical and other resources than us. In addition, other
online trading services may be acquired by, receive investments from or enter
into other commercial relationships with larger, well-established and
well-financed companies as the use of Internet and other online services
increases and consolidates. Therefore, certain of our potential competitors may
be able to devote greater resources to marketing and promotional campaigns,
adopt more aggressive pricing policies or may try to attract traffic by offering
services for free and devote substantially more resources to Web site and
systems development than us. Increased competition may result in reduced
operating margins, loss of market share and diminished value in our brand. We
may be unable to compete successfully against future competitors. Further, as a
strategic response to changes in the competitive environment, we may, from time
to time, make certain pricing, service or marketing decisions or acquisitions
that could harm our business, financial condition and results of operations. New
technologies and the expansion of existing technologies may increase the
competitive pressures on us by enabling potential competitors to offer a
lower-cost service. Certain Web-based applications that direct Internet traffic
to certain Web sites may channel users to trading services that may compete with
us in the future. In addition, companies that control access to transactions
through network access or Web browsers could promote our future competitors or
charge us substantial fees for inclusion. Any and all of these events could harm
our business, financial condition and results of operations. Please see "Risk
Factors - We may face competition from existing online auction sites or new
person-to-person trading Web sites which may harm our business."
Intellectual Property
We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. We have also entered into confidentiality and invention
assignment agreements with our employees and contractors, and nondisclosure
agreements with our suppliers and strategic partners to limit access to and
disclosure of our proprietary information. These contractual arrangements or the
other steps taken by us to protect our intellectual property may be insufficient
to prevent misappropriation of our technology or to deter independent
third-party development of similar technologies. We are actively pursuing the
registration of our trademarks and service marks in the United States. We intend
to pursue the registration of our trademarks and service marks internationally
following completion of this offering. We have applied for a U.S. patent
registration of our proprietary system for taking merchandise to online auction
sites. This patent may not be issued to us or, if issued, may not provide us
with all of the protections that we have sought. We have also applied for the
registration of the service marks "Take2Auction" and "Take2Auction.com."
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which our services are made available online.
We may license in the future certain of our proprietary rights, such as
trademarks or copyrighted material, to third parties. We also rely on certain
technologies that we license from third parties, such as Microsoft, the
suppliers of key database technology, the operating system and specific hardware
components for the Take to Auction service.
Privacy Policy
We believe that issues relating to privacy and use of personal
information relating to Internet users are becoming increasingly important as
the Internet and its commercial use grow. We have adopted a detailed privacy
policy that outlines how we use information concerning our members and the
extent to which other registered members may have access to this information.
Members must acknowledge and agree to this policy when registering for the Take
to Auction service. We do not sell or rent any personally identifiable
information about our users to any third party. We use information about our
members for internal purposes only in order to improve our marketing and
promotional efforts, to statistically analyze site usage, and to improve
content, product offerings and site layout.
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<PAGE>
Government Regulation
Government regulation of communications and commerce on the Internet
varies greatly from country to country. Some countries, such as the United
States, have not adopted many laws and regulations to specifically regulate
online communications and commerce. Due to the increasing popularity and use of
the Internet and other online services, however, it is possible that a number of
laws and regulations may be adopted with respect to the Internet or other online
services covering issues such as user privacy, freedom of expression, pricing,
content and quality of products and services, taxation, advertising,
intellectual property rights, enforceability of contracts, and information
security. Because our services are accessible worldwide, and we facilitate sales
of goods to users worldwide, any jurisdiction in which our services can be
accessed or are used may seek to impose its laws on us and to enforce those laws
in proceedings in those countries, where we could be forced to defend ourselves.
There have been several attempts to regulate the distribution of
"indecent" materials to minors over the Internet, including the Communications
Decency Act of 1996, or CDA and the Child Online Protection Act, or COPA. Large
portions of the CDA have been struck down as unconstitutional and the COPA is
currently subject to court challenge. Moreover, other laws on this subject have
been and are likely to continue to be proposed and enacted by the legislatures
of the various states. The nature of legislation on this subject and the manner
in which it may be interpreted and enforced cannot be fully determined and,
therefore, such legislation could subject us and/or our customers to potential
liability, which in turn could harm our business, financial condition and
results of operations. The adoption of any such laws or regulations might also
decrease the rate of growth of Internet use, which in turn could decrease the
demand for our service or increase the cost of doing business or in some other
manner harm our business, financial condition and results of operations. In
addition, applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of such laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies.
Some countries have enacted laws or regulations that limit the use of
personal user information gathered online or require online services to
establish privacy policies. The European Union recently enacted its own privacy
regulations. Several U.S. states have also proposed legislation that would
impose such limits. The Federal Trade Commission has also initiated action
against at least one online service regarding the manner in which personal
information is collected from users and provided to third parties. Changes to
existing laws or the passage of new laws intended to address these issues,
including some recently proposed changes, could create uncertainty in the
marketplace that could reduce demand for our services or increase the cost of
doing business as a result of litigation costs or increased service delivery
costs, or could in some other manner harm our business, financial condition and
results of operations.
In addition, because our services are accessible worldwide and we
facilitate sales of goods to users worldwide, other jurisdictions may claim that
we are required to qualify to do business as a foreign corporation in a
particular state or foreign country. We are qualified to do business in one
state in the United States. Our failure to qualify as a foreign corporation in a
jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in our inability to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to our business could harm our business, financial condition and
results of operations.
Several telecommunications companies have asked the U.S. Federal
Communications Commission to regulate Internet service providers and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees and universal service obligations on these companies.
Imposition of such fees or obligations could increase the cost of transmitting
data over the Internet, which would reduce Internet usage and harm our business,
financial condition and results of operations.
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In addition, numerous states, including California, have regulations
regarding the manner in which "auctions" may be conducted and the liability of
"auctioneers" in conducting such auctions. We do not believe that such
regulations, which were adopted prior to the advent of the Internet, govern the
operations of our business nor have any claims been filed by any state implying
that we are subject to such legislation. However, a state may attempt to impose
these regulations upon us in the future and this imposition may harm our
business, financial condition and results of operations. Please see "Risk
Factors - Governmental regulation and legal uncertainties relating to the Web
could increase our costs of transmitting data and increase our legal and
regulatory expenditures and could decrease our membership base."
Employees
As of the date of the prospectus, we had approximately 40 employees,
including our President and Chief Executive Officer, Chief Financial Officer and
Chief Technology Officer. We have never had a work stoppage and no employees are
represented under collective bargaining agreements. We consider our relations
with our employees to be good. Please see "Management - Employment
Arrangements."
Facilities
Our principal administrative, marketing and product development
facilities are located in approximately 2,000 square feet of leased office space
in Miami, Florida. Currently, we are lessees under a one year lease expiring in
August 2000. We have an option to terminate the lease after February 2000. Our
monthly lease payment during the initial term of this lease is approximately
$2,000. During January 2000, we notified the lessor that we would terminate the
lease during February 2000. On December 28, 1999, we entered into a five year
lease agreement for approximately 11,000 square feet of office space in Fort
Lauderdale, Florida. Monthly lease payments during the initial term of the lease
is approximately $12,500. We believe that our current facilities will be
adequate to meet our current needs.
Legal Proceedings
We are not currently a party to any formal legal proceedings. However,
a breach of contract lawsuit has been threatened by USinternetworking, Inc.
("USi"), a developer of Web sites. We signed a contract, effective as of
September 23, 1999, with USi for the development of our second generation user
interface, as well as certain other services (the "USi Agreement").
Subsequently, we notified USi that we were terminating the USi Agreement (as per
the terms of the USi Agreement) for material breach of USi's obligations
thereunder. The parties are currently discussing a resolution of the matter. We
believe that we have meritorious defenses, as well as counterclaims, to any
claim which may be brought by USi, and if any such claim is brought, we will
defend it vigorously.
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Management
Executive Officers and Directors
The following table sets forth certain information regarding our
executive officers and directors.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ilia Lekach....................... 50 Chairman of the Board of Directors and Class II Director
Horacio Groisman.................. 46 Vice-Chairman of the Board of Directors and Class III Director
Albert Friedman................... 27 President, Chief Executive Officer and Class III Director
Mitchell Morgan................... 29 Vice-President, Chief Financial Officer and Class II Director
Jonathan Geller................... 23 Vice-President, Chief Technology Officer and Class I Director
Hugo Calemczuk.................... 48 Class I Director
Garrick Hileman................... 26 Class I Director
Miguel Cauvi...................... 38 Class II Director
Alan Blaustein.................... 54 Class III Director
</TABLE>
Each director will hold office until their term expires and until his
or her successor at an annual meeting of shareholders is elected and qualified
or until his or her earlier resignation or removal. Each officer serves at the
discretion of the board of directors.
Ilia Lekach has been our Chairman of the Board and a Class II director
since October 1999. Mr. Lekach is a co-founder of Perfumania, Inc. and was
Perfumania, Inc.'s Chairman of the Board and Chief Executive Officer from its
incorporation in 1988 until his resignation in April 1994. In October 1998, Mr.
Lekach was re-appointed Perfumania, Inc.'s Chairman of the Board and Chief
Executive Officer. Mr. Lekach served as Chairman of the Board of L. Luria & Son,
Inc., a South Florida-based catalog retailer from January 1997 through August
1997. Mr. Lekach also serves as Chairman of the Board and Chief Executive
Officer of Parlux Fragrances, Inc., a publicly traded manufacturer of fragrance
and related products since 1990.
In August 1996 ORM Inc., and its affiliates, of which Mr. Lekach is a
principal, purchased a controlling interest in L. Luria & Son, Inc., a catalog
retailer with serious financial problems. On August 13, 1997, L. Luria & Son,
Inc. filed for relief under Chapter 11 of the Bankruptcy Code and has since been
liquidated.
Dr. Horacio Groisman served as our Chairman of the Board of Directors
from August 1999 until October 1999 and has been a Class III director since
August 1999. Since October 1999, Dr. Groisman has served as Vice-Chairman of our
Board of Directors. Dr. Groisman has been a practicing physician since 1984,
after having received specialty training at Georgetown University. Since June
1994, Dr. Groisman has been President of Otolaryngology, Head and Neck
Associates, in Miami, Florida. From January 1997 to December 1997, Dr. Groisman
was President and Chief of Staff of Cedars Medical Center in Miami, Florida.
Since January 1991, Dr. Groisman has been Chief of Services at Cedars Medical
Center. In addition, Dr. Groisman has been a director of Perfumania, Inc. since
March 1999.
Albert Friedman has been our President and Chief Executive Officer and
a director since July 1999 and a Class III director since August 1999. Prior to
joining us, Mr. Friedman served as Chief Operating Officer, Interim Chief
Financial Officer and director of Perfumania.com from its inception in January
1999 until June 1999. From April 1998 until January 1999, Mr. Friedman was
President of Corporate Communications Solutions, Inc., an investment banking
firm. From January 1997 until April 1998, Mr. Friedman was Executive Vice
President and Chief Financial Officer of L. Luria & Son, Inc., a catalog
showroom, where Mr. Friedman also served as a director. From June 1996 to
December 1996, Mr. Friedman served as an analyst for ORM, Inc., an
investment-banking boutique. From June 1994 to
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June 1996, Mr. Friedman was Vice President of Art and Precision, Inc., a
manufacturer and distributor of fine jewelry.
On August 13, 1997, L. Luria & Son, Inc. filed for relief under Chapter
11 of the Bankruptcy Code and was liquidated. Mr. Friedman was the senior
officer in charge of managing the liquidation process of L. Luria & Son, Inc.
Mitchell Morgan has been our Vice-President, Chief Financial Officer
and a Class II director since August 1999. From January 1994 to August 1999, Mr.
Morgan held various positions in PriceWaterhouseCoopers, LLP, most recently as
business assurance manager. Mr. Morgan holds a degree in accounting from the
University of Florida. Mr. Morgan is a Certified Public Accountant.
Jonathan Geller has been our Vice President, Chief Technology Officer
and a Class I director since October 1999. From January 1998 until September
1999, Mr. Geller was co-founder of Jackpot S.A, Lima Peru, a privately owned
company specializing in the development of Web pages, providing high bandwidth
Internet connections and custom Web applications, where he served as Chief
Executive Officer. From May 1995 to August 1995, in addition to his several
internships, Mr. Geller co-founded Serious Fun, Inc., an online casino Web site
that he designed. From January 1994 until December 1997, Mr. Geller attended
college at North Carolina State University where he graduated with a degree in
Industrial Engineering.
Hugo Calemczuk has been our Senior Vice President of Merchandising and
a Class I director since August 1999. Mr. Calemczuk resigned as our Senior Vice
President of Merchandising effective January 2000. Mr. Calemczuk has been
President of Exito Enterprises, a distributor of watches and electronics, since
its founding in 1987. From 1984 to 1987, Mr. Calemczuk was President of Levimar,
a distributor of duty-free merchandise, including watches, jewelry, perfumes,
electronics and collectibles.
Garrick Hileman has been a Class I director of our company since
November 1999. In February 2000, Mr. Hileman became a director of Envision
Development Corporation. Mr. Hileman has been a director of ZeroDotNet since
September 1999. ZeroDotNet is an Internet venture capital firm based in San
Francisco, California. Mr. Hileman specializes in business development, start-up
financing, merger and acquisition analysis and management at ZeroDotNet. From
August 1996 until August 1999, he was employed at Montgomery Securities where he
worked both in the financial services group, as a corporate financial analyst,
and in the financial services equity research area. He received his B.A. in
Business Administration from the University of Washington in 1996.
Miguel Cauvi is currently an executive with IBM Global Services since
October 1999. From October 1994 until October 1999, Mr. Cauvi was an independent
consultant. During this time Mr. Cauvi worked for Hencorp Beckstone & Co., a
privately held securities firm and Groupo Ormeno, a large Peruvian bus
transportation company. From July 1993 until October 1994, Mr. Cauvi was the
Chief Information Officer for JE Seagram & Sons, Inc. (Spain) and a member of
the JE Seagram & Sons, Inc. worldwide re-engineering team. From January 1991
until June 1993, Mr. Cauvi was the Director of Organization and Information
Systems with CPC Spain, S.A. an affiliate of Corn Product Corporation USA, the
manufacturer and distributor of Mazzola and Hellman's brands. From October 1989
until January 1991 Mr. Cauvi was a manager with Ernst & Young consulting
division. From January 1984 until March 1989 Mr. Cauvi was an Experienced Senior
of Arthur Andersen & Co. consulting division.
Alan Blaustein is currently the President & CEO (founder) of
Convergence2net, LLC, a startup company that focuses on outsourcing of
network-centric applications and services. As a Network Service Provider, C2Net
provides e-business and network services for the mid tier carriers, enterprise,
commercial and Internet businesses. From 1991 to 1999, Mr. Blaustein was
President, CEO & Vice Chairman (founder) of Maxnet Communication Systems, a
company specializing in the network augmentation services of large, complex
network systems for the Fortune 1000. Mr. Blaustein has more than 20 years
experience in data communication, with positions in advance engineering, sales,
systems and marketing with Motorola (ISG), ITT and Exxon Enterprise
(Periphonics).
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Classified Board of Directors
Our board of directors is divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
board of directors will be elected each year. These provisions, together with
provisions of our amended and restated articles of incorporation and bylaws,
allow the board of directors to fill vacancies or increase the size of the board
of directors, and may deter or hinder a shareholder from removing incumbent
directors and filling such vacancies with its own nominees in order to gain
control of the board.
Our board has resolved that Mr. Hugo Calemczuk, Jonathan Geller and
Garrick Hileman will serve as Class I Directors whose terms expire at the 2000
annual meeting of shareholders. Mr. Lekach, Mr. Morgan and Mr. Cauvi will serve
as Class II directors whose terms expire at the 2001 annual meeting of
shareholders. Mr. Friedman, Dr. Groisman and Mr. Blaustein will serve as Class
III directors whose terms expire at the 2002 annual meeting of shareholders.
Board Committees
The audit committee of our board of directors consists of Mr. Cauvi and
Mr. Blaustein. The audit committee reviews our financial statements and
accounting practices, makes recommendations to the board of directors regarding
the selection of independent auditors and reviews the results and scope of the
audit and other services provided by our independent auditors. The compensation
committee of our board of directors consists of Mr. Lekach and Dr. Horacio
Groisman. The compensation committee makes recommendations to the board of
directors concerning salaries and incentive compensation for our officers and
employees and administers our employee benefit plans. As of the date of this
prospectus, our board of directors has performed all functions of the
compensation and audit committees.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee of the board of
directors was at any time since our formation an officer or employee of ours.
Ilia Lekach, our Chairman of the Board of Directors, and Horacio Groisman, our
Vice-Chairman of the Board of Directors, serve as members of the board of
directors of Perfumania, Inc. There is no business relationship between us and
Perfumania, Inc., other than the $1,000,000 advance further described in
"Certain Transactions - Perfumania, Inc. Advance."
Director Compensation
Our independent directors receive cash compensation in the amount of
$2,500 and options to purchase 5,000 common shares per year for their services
as directors, and are reimbursed for their reasonable expenses for attending our
board of directors and board committee meetings. Directors compensation is paid
at the end of each year. The exercise price of the options which form part of
the compensation paid to directors is based on the market value at the time the
options are granted, which in turn has been based on the most recent private
financing secured by us. The market value will be based on the trading price at
the time the options are granted when our stock is traded on a recognized stock
exchange.
Employment Arrangements
In August 1999, each of Messrs. Albert Friedman, President, Chief
Executive Officer and director and Mitchell Morgan, Vice President, Chief
Financial Officer and director, entered into executive employment agreements
with Take to Auction.com. Each agreement has a term of three years unless
terminated earlier for cause, death, disability or upon a change in control of
Take to Auction.com. Mr. Friedman's agreement provides for an initial base
salary of $125,000. Mr. Morgan's agreement provides for an initial base salary
of $120,000. The above salaries are subject to annual increases equal to the
greater of 5% or the annual increase in the consumer price index plus other
annual increases, if any, as determined by the Compensation Committee in its
sole discretion. In addition, Mr. Friedman and Mr. Morgan were granted
non-qualified stock options to purchase a total of 75,000 and 175,000 common
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shares, respectively, exercisable at a weighted average range of $0.41 - $2.20,
per share, one third of which vest on each of the first, second and third
anniversaries of the agreements.
In October 1999, Jonathan Geller, our Chief Technology Officer, entered
into an executive employment agreement with Take to Auction.com. The agreement
has a term of three years and provides for an initial base salary of $120,000
subject to annual increases equal to the greater of 5% or the annual increase in
the consumer price index. In addition, Mr. Geller was granted non-qualified
stock options to purchase a total of 175,000 common shares, exercisable at a
weighted average price of $1.14 per share, one third of which vest on each of
the first, second and third anniversaries of the agreement.
In the event any of these individuals terminate the agreement (i)
within 180 days from the date a person or entity acquires the beneficial
ownership of 20 percent or more of the then outstanding common shares or 20
percent or more of the voting power, or (ii) pursuant to certain transactions
(including a merger or a sale of substantially all the assets) approved by the
shareholders, they will be entitled to receive severance compensation in the
amount of 200 percent of their annual base salary.
A committee of our Board of Directors determined the exercise price of
the options granted to the employees was the fair market value of the common
stock on the date of grant.
Executive Compensation
We commenced operations in June 1999, and no individual employed by us,
including our President and Chief Executive Officer, has been awarded, paid or
earned salary and bonus in excess of $100,000 since our inception. From July 31,
1999 through January 31, 2000, our President and Chief Executive Officer has
earned approximately $62,500 from us.
Option Grants from June 2, 1999 to January 31, 2000
The following table sets forth grants of stock options to our President
and Chief Executive Officer and our two most highly compensated executive
officers, other than our President and Chief Executive Officer, from inception
to January 31, 2000. We have never granted any stock appreciation rights. The
weighted average exercise price of each option is equal to $1.16 per share. The
potential realizable value is calculated based upon the term of the option at
its time of grant (seven years). It is calculated assuming that the value of
common shares on the date of our initial public offering appreciates at the
indicated annual rate compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for the
appreciated stock price. These numbers are calculated based on the requirements
of the Securities and Exchange Commission and do not reflect our estimate of
future stock price growth.
39
<PAGE>
<TABLE>
<CAPTION>
Option Grants
-------------------------------------------------------------------
Potential Realizable
Percentage of Value at Assumed
Number of Total Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees in Exercise Option Term (1) (2)
Options Period Price Per Expiration ----------------------
Name Granted (#) (%)(1) Share ($/Sh) Date 5%($) 10%($)
- --------------- ----------- ------ ------------ ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Albert Friedman 75,000 8.43% $0.41 08/01/06 1,160,858 1,607,692
Mitchell Morgan 145,408 16.35% $0.41 08/01/06 2,252,188 3,119,093
29,592 3.31% $11.00 01/31/07 456,480 632,187
------- ------ --------- ---------
175,000 19.66% 2,708,668 3,751,280
======= ====== ========= =========
Jonathan Geller 162,857 18.30% $0.41 10/01/06 2,520,718 3,490,984
12,143 1.36% $11.00 01/31/07 187,950 260,296
------- ------ --------- ---------
1757,000 19.66% 2,708,668 3,751,280
======= ====== ========= =========
</TABLE>
(1) Potential realizable value is based on the assumption that the common
share price appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. The amounts
have been calculated based on the requirements promulgated by the
Securities and Exchange Commission. The actual value, if any, a named
executive officer may realize will depend on the excess of the shares
on the date of exercise. Accordingly, there is no assurance that the
value realized will be at or near the potential realizable value as
calculated in the table.
(2) These options have a term of seven years from the date of grant.
The following table provides certain summary information concerning
stock options held as of January 31, 2000 by our President and Chief Executive
Officer and our two most highly compensated executive officers, other than our
President and Chief Executive Officer. No options have been exercised as of
January 31, 2000 by any of the officers. The value of unexercised in-the-money
options at January 31, 2000 is based on the value of the common shares at the
date of this offering.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money Options at
Options at January 31, 2000 January 31, 2000
------------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Albert Friedman --- 75,000 --- ---
Mitchell Morgan --- 175,000 --- ---
Jonathan Geller --- 175,000 --- ---
</TABLE>
EMPLOYEE BENEFIT PLANS
1999 Stock Option Plan
In August 1999, the Board adopted the 1999 Stock Option Plan, or Option
Plan. At that time, 2,442,857 common shares were reserved for issuance under the
Option Plan. Shares covered by any option granted under the Option Plan which
expires unexercised become available again for grant under the Option Plan. As
of January 31, 2000, options to purchase 815,000 common shares were outstanding
40
<PAGE>
with a weighted average exercise price of $5.23 per share, and 1,627,857 shares
were available for future grants.
SIMPLE IRA Plan
We sponsor the Take to Auction.com, Inc. SIMPLE IRA Plan, a defined
contribution plan provided pursuant to the requirements of the Internal Revenue
Code of 1986, as amended. All employees eligible to participate may enter the
SIMPLE IRA Plan as of the first day of any month. Participants may make pre-tax
contributions to the SIMPLE IRA Plan subject to a statutorily prescribed annual
limit. We will make matching contributions, not to exceed 3% of a participant's
annual compensation, to the SIMPLE IRA Plan. Each participant is fully vested in
their account, including the participant's contributions, our matching
contribution and the investment earnings thereon. Contributions by the
participants or by us to the SIMPLE IRA Plan, and the income earned on such
contributions, are generally not taxable to the participants until withdrawn.
Contributions by us are generally deductible by us when made. The participant's
and our contributions are held in an IRA. We made a matching contribution to the
SIMPLE IRA Plan for Fiscal 1999 of approximately $5,100 during January 2000.
Indemnification of Officers and Directors
Section 607.0850 of the Florida Business Corporation Act, or FBCA,
permits, in general, a Florida corporation to indemnify any person who was or is
a party to any action or proceeding by reason of the fact that he or she was a
director or officer of the corporation, or served another entity in any capacity
at the request of the corporation, against liability incurred in connection with
such proceeding including the estimated expenses of litigating the proceeding to
conclusion and the expenses actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof, if
such person acted in good faith for a purpose he or she reasonably believed to
be in, or not opposed to, the best interest of the corporation and, in criminal
actions or proceedings, additionally had no reasonable cause to believe that his
or her conduct was unlawful. Section 607.0850(6) of the FBCA permits the
corporation to pay such costs or expenses in advance of a final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount as and to the extent required by
statute. Section 607.0850 of the FBCA provides that the indemnification and
advancement of expense provisions contained in the FBCA shall not be deemed
exclusive of any rights to which a director or officer seeking indemnification
or advancement of expenses may be entitled.
Our amended and restated articles of incorporation provide, in general,
that we shall indemnify, to the fullest extent permitted by Section 607.0850 of
the FBCA, any and all persons whom it shall have the power to indemnify under
that section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said section. Our amended and restated
articles of incorporation also provide that the indemnification provided for
therein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions taken in his or her
official capacity and as to acts in another capacity while holding such office.
In accordance with that provision of our amended and restated articles
of incorporation, we shall indemnify any officer or director (including officers
and directors serving another corporation, partnership, joint venture, trust, or
other enterprise in any capacity at our request) made, or threatened to be made,
a party to an action or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he or she was serving in any of those
capacities against judgments, fines, amounts paid in settlement and reasonable
expenses (including attorney's fees) incurred as a result of such action or
proceeding. Indemnification would not be available if a judgment or other final
adjudication adverse to such director or officer establishes that (i) his or her
acts were committed in bad faith or were the result of active and deliberate
dishonesty or (ii) he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled.
Prior to the completion of this offering, we intend to enter into
indemnification agreements with each of our current directors and officers to
give these directors and officers additional contractual
41
<PAGE>
assurances regarding the scope of the indemnification set forth in our amended
and restated articles of incorporation and bylaws and to provide additional
procedural protections. At present, there is no pending litigation or proceeding
involving a director, officer or employee of Take to Auction.com regarding which
indemnification is sought, nor are we aware of any threatened litigation that
may result in claims for indemnification.
With approval of our board of directors, upon completion of this
offering, we expect to obtain directors' and officers' liability insurance.
42
<PAGE>
Certain Transactions
Since our inception in June 1999, there has not been nor is there
currently proposed any transaction or series of similar transactions to which we
were or are to be a party in which the amount involved exceeds $60,000 and in
which any director, executive officer or holder of more than 5% of our common
shares had or will have a direct or indirect interest other than (i)
compensation arrangements, which are described where required under "Management"
and (ii) the transactions described below.
Sales of Securities
Since our inception, we have made the following sales of our common
shares to our officers, directors and beneficial owners of 5% or more of all
outstanding common shares that were not registered under the Securities Act. The
common shares issued and listed hereunder reflect a split on a 1,000-to-1 basis
on August 26, 1999 and split on a 2.326530644-for-1 basis on November 3, 1999.
On August 26, 1999, we sold an aggregate of 16,283,387 common shares
under Rule 506, Regulation D, promulgated under the Securities Act, at a
purchase price of $0.06 per common share to certain sophisticated and accredited
investors, including the following officers, directors and beneficial owners of
5% or more of our issued and outstanding common shares:
<TABLE>
<CAPTION>
Purchase Total Total
Shares Price per share Proceeds Value (4)
------------------ --------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Horacio Groisman (1) 1,628,571 $ 0.06 $ 100,000 $ 17,914,281
Albert Friedman (2) 1,137,673 0.06 69,857 12,514,403
Hugo Calemczuk (1) 1,140,000 0.06 70,000 12,540,000
Pacific Investments (3) 4,560,000 0.06 280,000 50,160,000
Magdalena Zafir 1,628,571 0.06 100,000 17,914,281
</TABLE>
(1) Messrs. Groisman and Calemczuk have served as directors of Take to
Auction.com since August 1999.
(2) Mr. Friedman has been our President, Chief Executive Officer and director
since July 1999.
(3) Pacific Investments is owned 100% by Ilia Lekach. Mr. Lekach has been our
Chairman of the Board and director since October 1999.
(4) Total value is based on the aggregate value of the common shares at the
assumed initial public offering price of $11.00 per share.
Stock Options Issued to Directors and Officers
The following directors and officers were awarded options to purchase
the following number of common shares:
<TABLE>
<CAPTION>
Weighted
Average
Exercise Price Total Total
Grant Date Shares (1) per share Proceeds Value (5)
--------------------- ------------ ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Horacio Groisman August 25, 1999 45,000 $ 0.41 $ 18,450 $ 495,000
Albert Friedman (4) August 25, 1999 75,000 0.41 30,750 825,000
Mitchell Morgan (4) (2) 175,000 2.20 295,750 1,925,000
Jonathan Geller (4) (3) 175,000 1.14 164,500 1,925,000
Ilia Lekach January 31, 2000 270,000 11.00 2,970,000 2,970,000
</TABLE>
(1) All of such options vest equally over a three year period commencing one
year from the date of grant.
43
<PAGE>
(2) Mr. Morgan was awarded options to purchase 145,408 common shares on August
25, 1999 at an exercise price of $0.41 per share and an additional 29,592
common shares on January 31, 2000 at an exercise price of $11.00 per share.
(3) Mr. Geller was awarded options to purchase 162,857 common shares on October
1, 1999 at an exercise price of $0.41 per share and an additional 12,143
common shares on January 31, 2000 at an exercise price of $11.00 per share.
(4) Options were issued pursuant to employment agreements with Take to
Auction.com.
(5) Total value is based on the aggregate value of the common shares at the
assumed initial public offering price of $11.00 per share.
Exito Enterprises Sourcing Arrangement
From time to time, we purchase merchandise from Exito Enterprises or
Exito, a distributor of watches and electronics. Hugo Calemczuk, a director of
Take to Auction, is the President and majority shareholder of Exito. We have
purchased approximately $72,000 of merchandise from Exito as of December 31,
1999. We intend to purchase more items of merchandise from Exito in the future
if the terms and conditions of such proposed purchases are acceptable to us. All
purchases from Exito are made in the open market and all such transactions are
at "arms-length" and on terms and at prices we could readily obtain from
unaffiliated third parties. We are not now, and have never been, under an
obligation to purchase merchandise from Exito.
Perfumania, Inc. Advance
We received an advance of $1 million as of December 31, 1999 from
Perfumania, Inc. The chairman of the board of Perfumania, Inc. is also the
chairman of the board of Take to Auction. This advance is currently being
structured into a two-year convertible note agreement, bearing interest at six
percent (6%) per annum. Perfumania, Inc. will have the right to convert all, but
not less than all, of the principal amount into shares of our common stock at
the conversion price equal to our contemplated initial public offering price. In
addition, we have agreed to grant 300,000 warrants to Perfumania, Inc. at the
contemplated initial public offering price. These warrants expire one year from
the effective date of our contemplated initial public offering.
Employment agreements between us and our officers and directors
Pursuant to employment agreements between Take to Auction.com and each
of Messers. Friedman, Morgan and Geller, our executive officers and directors,
we have agreed to pay an initial annual base salary to them in the amount of
$125,000, $120,000 and $120,000, respectively.
44
<PAGE>
Principal Shareholders
The following table sets forth certain information known to us with
respect to the beneficial ownership of our common shares as of January 31, 2000
by (i) each shareholder known by us to be the beneficial owner of more than 5%
of our common shares, (ii) each director of Take to Auction.com and (iii) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
Common Shares Common Shares
Beneficially Owned Before Beneficially Owned After
the Offering(2) the Offering(2)
---------------------------- -------------------------
Name of Beneficial Owner (1) Number Percentage(3) Number Percentage(3)
- ---------------------------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C>
Horacio Groisman (3) 1,628,571 9.05% 1,628,571 8.44%
Albert Friedman (3) 1,140,000 6.33% 1,140,000 5.91%
Mitchell H. Morgan (4) 0 (*) 0 (*)
Hugo Calemczuk 1,140,000 6.33% 1,140,000 5.91%
Magdalena Zafir 1,628,571 9.05% 1,628,571 8.44%
Pacific Investments (5) 4,560,000 25.33% 4,560,000 23.63%
Jonathan Geller (6) 0 (*) 0 (*)
Executive officers and directors as a 8,468,572 47.05% 8,468,572 43.88%
group (7 persons)
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Unless otherwise noted, the address of each shareholder is our address,
which is 2335 N.W. 107th Avenue Suite 2M-23, Miami, Florida 33172
(2) Percentage of ownership is based on 18,000,000 shares outstanding as of
December 31, 1999 prior to the offering and 19,300,000 shares after the
offering. Common shares subject to options currently exercisable or
exercisable within 60 days of January 31, 2000 are deemed outstanding for
the purpose of computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
ownership of any other person. No options issued by us to date are
exercisable within 60 days of January 31, 2000. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
(3) Does not include options to purchase 45,000 and 75,000 shares granted to
Messrs. Groisman and Friedman, respectively, on August 25, 1999, one third
of which vest on the first, second and third anniversary of the date of
grant.
(4) Does not include options to purchase 175,000 common shares, granted to Mr.
Morgan on August 25, 1999 (145,408 shares) and January 31, 2000 (29,592
shares), one third of which vest on the first, second and third anniversary
of the date of grant.
(5) The address of this shareholder is 2335 NW 107th Avenue 2M-23, Miami,
Florida 33172. Ilia Lekach, our Chairman of the Board of Directors, owns
100 percent of the issued and outstanding shares of common stock of Pacific
Investments. Does not include options to purchase 270,000 shares granted to
Mr. Lekach on January 31, 2000, one third of which vests on the first,
second and third anniversary of the date of grant.
45
<PAGE>
(6) Does not include options to purchase 175,000 common shares, granted to Mr.
Geller on October 1, 1999 (162,857 shares) and January 31, 2000 (12,143
shares), one third of which vest on the first, second and third anniversary
of the date of grant.
46
<PAGE>
Description of Capital Stock
Our authorized capital stock consists of 50 million common shares,
$0.001 par value per share, and 10 million preferred shares, $0.001 par value
per share. As of January 31, 2000, there were outstanding 18,000,000 common
shares held of record by 27 shareholders and options to purchase 815,000 common
shares. As of January 31, 2000, there were no issued and outstanding preferred
shares.
Common Shares
Subject to preferences that may apply to preferred shares outstanding
at the time, the holders of our outstanding common shares are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as the board of directors may from time to time determine. Each
shareholder is entitled to one vote for each common share held on all matters
submitted to a vote of shareholders. Cumulative voting for the election of
directors is not provided for in our amended and restated articles of
incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The holders of common
shares are not entitled to preemptive rights and are not subject to conversion
or redemption. Upon a liquidation, dissolution or winding-up of Take to
Auction.com, the assets legally available for distribution to shareholders are
distributable ratably among the holders of the common shares and any
participating preferred shares outstanding at that time after payment of
liquidation preferences, if any, on any outstanding preferred shares and payment
of other claims of creditors. Each outstanding common share is, and all common
shares to be outstanding upon completion of this offering will be, duly
authorized, fully paid and nonassessable.
Preferred Shares
We are authorized to provide for the issuance of preferred shares in
one or more series, to establish from time to time the number of shares to be
included in each such series, to fix the rights, preferences and privileges of
the shares of each wholly unissued series and any qualifications, limitations or
restrictions thereon, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the shareholders. Our board of directors
may authorize the issuance of preferred shares with voting or conversion rights
that could significantly affect your voting power or your other rights. The
issuance of preferred shares, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of Take
to Auction.com and may harm the market price of the common shares and the voting
and other rights of the holders of common shares. We have no current plans to
issue any preferred shares.
Warrants
In connection with this offering, we have agreed to sell to the
representative for nominal consideration, the underwriter warrant to purchase up
to 195,000 common shares. The underwriter warrant is exercisable for a period of
four years commencing one year after the date of this prospectus at an exercise
price per share equal to $12.10 (based on the mid range price) (110% of the
public offering price). The underwriter warrant may not be sold, transferred,
assigned, pledged, or hypothecated for a period of 12 months from the date of
this prospectus, except to members of the selling group. The underwriter warrant
grants to the representative, with respect to the registration under the
Securities Act of the securities directly and indirectly issuable upon exercise
of the underwriter warrant, one demand registration right during the exercise
period, as well as piggyback registration rights at any time. The underwriter
warrant contains anti-dilution provisions providing for adjustments of the
exercise price and number of shares issuable on exercise of the underwriter's
warrant, upon the occurrence of some events, including stock dividends, stock
splits, and recapitalizations. The holders of the underwriter warrant have no
voting, dividend, or other rights as a shareholder with respect to shares of
common stock underlying the underwriter warrant, unless the underwriter warrant
shall have been exercised.
47
<PAGE>
Registration Rights
Pursuant to the underwriting agreement between us and the
representative of the underwriters in this offering, we have agreed to sell to
the representative one demand registration right during the exercise period as
well as "piggy-back" registration rights at any time. Please see "- Warrants."
No options or common shares issued prior to this offering are covered by any
registration rights agreements.
Certain Anti-Takeover Effects of Certain Provisions of Florida Law and the Take
to Auction.com's Amended and Restated Articles of Incorporation and Bylaws
Provisions
Some provisions of Florida law and of our amended and restated articles
of incorporation and amended and restated bylaws, which provisions are
summarized in the following paragraphs, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
shareholder might consider it in its best interest, including those attempts
that might result in a premium over the market price for the shares held by
shareholders.
Classified Board of Directors
According to our amended and restated articles of incorporation and
amended and restated bylaws, our board of directors is divided into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the board of directors will be elected each year.
These provisions, when coupled with the provision authorizing the board of
directors to fill vacant directorships or increase the size of the board of
directors, may deter a shareholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by such removal with its own nominees.
Authorized But Unissued Shares
The authorized but unissued common shares and preferred stock are
available for future issuance without shareholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued common shares
and preferred stock could render more difficult or discourage an attempt to
obtain control of us by means of a proxy contest, tender offer, merger or
otherwise. Such attempts may have resulted in a premium over the market price
for the shares held by shareholders.
Anti-Takeover Provisions under Florida law
We are subject to several anti-takeover provisions under Florida law
that apply to public corporations organized under Florida law unless the
corporation has elected to opt out of those provisions in its articles of
incorporation or its bylaws. We have not elected to opt out of these provisions.
The FBCA prohibits the voting of shares in a publicly held Florida
corporation that are acquired in a "control share acquisition" unless the board
of directors approves the control share acquisition or the holders of a majority
of the corporation's voting shares approve the granting of voting rights to the
acquiring party. A "control share acquisition" is defined as an acquisition that
immediately thereafter entitles the acquiring party, directly or indirectly, to
vote in the election of directors within any of the following ranges of voting
power:
o 1/5 or more but less than 1/3;
o 1/3 or more but less than a majority;
o a majority or more; or
o There are some exceptions to the "control share acquisition"
rules.
48
<PAGE>
The FBCA also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless:
o the transaction is approved by a majority of disinterested
directors before the person becomes an interested shareholder;
o the corporation has not had more than 300 stockholders of record
during the past three years;
o the interested shareholder has owned at least 80% of the
corporation's outstanding voting shares for at least five years;
o the interested shareholder is the beneficial owner of at least
90% of the voting shares (excluding shares acquired directly from
the corporation in a transaction not approved by a majority of
the disinterested directors);
o consideration is paid to the holders of the corporation's shares
equal to the highest amount per share paid by the interested
shareholder for the acquisition of the corporation's shares in
the last two years or the fair market value of the shares, and
other specified conditions are met; or
o the transaction is approved by the holders of two-thirds of the
company's voting shares other than those owned by the interested
shareholder.
An "interested shareholder" is defined as a person who, together with
affiliates and associates, beneficially owns more than 10% of a company's
outstanding voting shares. The FBCA defines "beneficial ownership" in more
detail.
Transfer Agent And Registrar
The Transfer Agent and Registrar for our common shares is American
Stock Transfer & Trust Company. Its address is 40 Wall Street, New York, New
York 10005, and its telephone number is (212) 936-5100.
Listing
We have applied to list our common shares on the AMEX under the trading
symbol TTA.
49
<PAGE>
Shares Eligible For Future Sale
Prior to this offering, there has been no market for our common shares,
and therefore a significant public market for the common shares may not develop
or be sustained after this offering. Future sales of substantial amounts of
common shares (including shares issued upon exercise of outstanding options) in
the public market after this offering could harm market prices prevailing from
time to time and could impair our ability to raise additional capital through
the sale of our equity securities. As described below, no shares currently
outstanding will be available for sale immediately after this offering due to
certain contractual and other restrictions on resale.
Upon completion of this offering, we will have outstanding 19,300,000
common shares, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options. Of these shares, the 1,300,000 shares
sold in this offering will be freely tradable without restriction under the
Securities Act unless purchased by "affiliates" of Take to Auction.com. An
"affiliate" is a person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
Take to Auction.com. The remaining shares held by existing shareholders are
subject to lock-up agreements generally providing that, with certain limited
exceptions, the shareholder will not (i) offer to sell, sell, contract to sell,
pledge or otherwise dispose of any common shares owned of record or beneficially
prior to the offering or any securities convertible into or exchangeable for
such common shares, (ii) establish a "put equivalent position" with respect to
such common shares within the meaning of Rule 16a-1(h) under the Securities
Exchange Act of 1934, as amended, or (iii) publicly announce an intention to
take any of the actions set forth in (i) or (ii) for a period of 180 days
following the date the registration statement is declared effective by the
Securities and Exchange Commission without the prior written consent of Noble
International Investment, Inc. acting alone or each of the above listed
representatives acting together. As a result of these lock-up agreements,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144 and 144(k), none of these shares will be saleable until 180 days after
the date the registration statement is declared effective by the Securities and
Exchange Commission. Beginning 180 days after the date the registration
statement is declared effective by the Securities and Exchange Commission,
_________ of these shares will be eligible for sale in the public market,
although a portion of such shares will be subject to certain volume limitations
pursuant to Rule 144. The 18,000,000 restricted shares will become eligible for
sale from time to time thereafter upon expiration of applicable holding periods
under Rule 144 under the Securities Act and our right to repurchase unvested
shares.
In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares for at least one year
(nobody in our case has held shares for more than one year) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of (i) 1% of the number of common shares then outstanding (which will
equal approximately 193,000 shares immediately after this offering) or (ii) the
average weekly trading volume of the common shares during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about Take to
Auction.com. Under Rule 144(k), a person who is not deemed to have been an
affiliate of Take to Auction.com at any time during the three months preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
two years, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Immediately after this offering, we intend to file a registration
statement under the Securities Act covering common shares subject to outstanding
options under the Option Plan. Based on the number of shares subject to
outstanding options at December 31, 1999 and currently reserved for issuance
under all such plans, such registration statement would cover approximately
2,442,857 shares. This registration statement will automatically become
effective upon filing. Accordingly, shares registered under such registration
statement will be available for sale in the open market immediately after the
180-day lock-up agreements expire. Also beginning six months after the date of
this offering, certain holders of common
50
<PAGE>
shares will be entitled to certain rights with respect to registration of such
common shares for offer and sale to the public. See "Description of Capital
Stock--Registration Rights."
51
<PAGE>
Underwriting
Subject to the terms and conditions contained in the underwriting
agreement, we have agreed to sell to each of the underwriters named below, and
each of the underwriters, for which Noble International Investments, Inc.
("Noble International") is acting as a representative, has severally, and not
jointly, agreed to purchase the number of shares offered in this offering set
forth opposite their respective names below.
Name Number of
Shares
Noble International Investments, Inc ..................
........................................................
Total .........................................
A copy of the underwriting agreement will be filed by amendment as an
exhibit to the registration statement of which this prospectus is a part. The
underwriting agreement provides that the obligation of the underwriters to
purchase the common shares is subject to some conditions. The underwriters shall
be obligated to purchase all of the common shares (other than those covered by
the underwriters' over-allotment option described below), if any are purchased.
Noble International has advised us that the underwriters propose to
offer the common shares to the public at the initial public offering price on
the cover page of this prospectus and that they may allow some dealers who are
members of the NASD, and some foreign dealers, concessions not in excess of $
per share, of which amount a sum not in excess of $ per share may in turn be
reallowed by such dealers to other dealers who are members of the NASD and to
some foreign dealers. After the commencement of this offering, the offering
price, the concession to selected dealers, and the reallowance to other dealers
may be changed by the representative.
We have agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities Act, or will
contribute to payments the underwriters may be required to make in this regard.
We have agreed to pay to Noble International an expense allowance on a
non-accountable basis, equal to 1% of the gross proceeds derived from the sale
of the 1,300,000 shares offered in this offering (or 1,495,000 common shares if
the underwriters' over-allotment option is exercised in full). We paid an
advance on this allowance in the amount of $50,000.
The following table provides information regarding the amount of the
discount we will pay to the underwriters:
Total Without Total With
Discount Exercise of Over- Exercise of Over-
Per Share Allotment Option Allotment Option
--------- ---------------- ----------------
Take to Auction $.066 $858,000 $999,570
52
<PAGE>
The following table sets forth the amount and nature of other forms of
compensation we will pay to Noble International in connection with the offering:
Type of Compensation Total Amount
- -------------------- ------------
We have also agreed to pay some of Noble International's expenses in
connection with this offering, including expenses in connection with qualifying
the common shares offered in this offering for sale under the laws of such
states as Noble International may designate, the placement of tombstone
advertisements and preparing bound volumes of the public offering documents. We
estimate that the total expenses of the offering, excluding the underwriting
discount, will be approximately $1,000,000.
In connection with this offering, we have agreed to sell to Noble
International for nominal consideration, the underwriter warrant to purchase up
to 195,000 common shares. The underwriter warrant is exercisable for a period of
four years commencing one year after the date of this prospectus at an exercise
price per share equal to $12.10 (based on the mid range price) (110% of the
public offering price). The underwriter warrant may not be sold, transferred,
assigned, pledged, or hypothecated for a period of 12 months from the date of
this prospectus, except to members of the selling group. The underwriter warrant
grants to the representative, with respect to the registration under the
Securities Act of the securities directly and indirectly issuable upon exercise
of the underwriter warrant, one demand registration right during the exercise
period, as well as piggyback registration rights at any time. The underwriter
warrant contains anti-dilution provisions providing for adjustments of the
exercise price and number of shares issuable on exercise of the underwriter
warrant, upon the occurrence of some events, including stock dividends, stock
splits, and recapitalizations. The holders of the underwriter warrant have no
voting, dividend, or other rights as a shareholder with respect to common shares
underlying the underwriter warrant, unless the underwriter warrant shall have
been exercised.
In connection with this offering, we have granted Noble International
the right, for the three-year period commencing on the closing date of this
offering, to appoint an observer to attend all meetings of our board of
directors. This designee has the right to notice of all meetings of the board of
directors and to receive reimbursement for all out-of-pocket expenses incurred
to attend these meetings. In addition, the designee will be entitled to
indemnification to the same extent as our directors.
Noble International has advised us that the underwriters do not intend
to confirm sales of the common shares offered in this offering to any account
over which they exercise discretionary authority.
We, and each of our officers, directors, and shareholders, have agreed
not to offer, assign, issue, sell, hypothecate, or otherwise dispose of any
common shares, securities of Take to Auction convertible into, or exercisable or
exchangeable for, common shares, or common shares received upon conversion,
exercise, or exchange of these securities, to the public without the prior
written consent of Noble International for a period of at least six months after
the date of this prospectus.
We and each of the selling shareholders have also granted to the
underwriters an option, exercisable during the 45-day period commencing on the
date of this prospectus, to purchase at the public offering price per share,
less the underwriting discount, up to an aggregate of 195,000 common shares. To
the extent this option is exercised, the underwriters will become obligated,
subject to some conditions, to purchase additional common shares. The
underwriters may exercise this right of purchase only for the purpose of
covering over-allotments, if any, made in connection with the sale of common
shares. Purchases of common shares upon exercise of the over-allotment option
will result in the realization of additional compensation by the underwriters.
Noble International has informed us that they do not expect
discretionary sales by the underwriters to exceed five percent of the shares
offered by this prospectus.
53
<PAGE>
The underwriters have reserved for sale up to 700,000 shares for our
employees, directors and certain other persons associated with us. These
reserved shares will be sold at the public offering price that appears on the
cover of this prospectus. The number of shares available for sale to the general
public in the offering will be reduced to the extent reserved shares are
purchased by such persons. The underwriters will offer to the general public, on
the same terms as other shares offered by this prospectus, any reserved shares
that are not purchased by such persons.
Rules of the Securities and Exchange Commission may limit the ability
of the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities in accordance with the rules:
o Stabilizing transactions. The underwriters may make bids or
purchases for the purpose of pegging, fixing or maintaining the
price of the common shares, so long as stabilizing bids do not
exceed a specified maximum.
o Over-allotments and syndicate coverage transactions. The
underwriters may create a short position in the common shares by
selling more shares than are set forth on the cover page of this
prospectus. If a short position is created in connection with the
offering, the representative may engage in syndicate covering
transactions by purchasing common shares in the open market. The
representative may also elect to reduce any short position by
exercising all or part of the over-allotment option.
o Penalty bids. If the representative purchases common shares in the
open market in a stabilizing transaction or syndicate coverage
transaction, they may reclaim a selling concession from the
underwriters and selling group members who sold those common
shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price
of the common shares to be higher than it would be in the absence of such
transactions. The imposition of a penalty bid might also have an effect on the
price of the common shares if it discourages resales of the common shares.
Neither we nor the underwriters makes any representation or prediction
as to the effect that the transactions described above may have on the price of
the common shares. These transactions may occur on the American Stock Exchange
or otherwise. If such transactions are commenced, they may be discontinued
without notice at any time.
We and the underwriters expect that the common shares will be ready for
delivery on the fourth business day following the date of this prospectus. Under
Securities and Exchange Commission regulations, secondary market trades are
required to settle in three business days following the trade date (commonly
referred to as "T-3"), unless the parties to the trade agree to a different
settlement cycle. As noted above, the common shares will settle in T-3.
Therefore, purchasers who wish to trade on the date of this prospectus or during
the next three succeeding business days must specify an alternate settlement
cycle at the time of the trade to prevent a failed settlement. Purchasers of the
shares who wish to trade shares on the date of this prospectus or during the
next 3 succeeding business days should consult their own advisors.
Prior to this offering, there has been no public market for the common
shares. Consequently, the initial public offering price was determined by
negotiations among us and the representative of the underwriters. Among the
factors considered in determining the initial public offering price of the
common shares were our record of operations, our current financial condition,
our future prospects, our markets, the economic conditions in and future
prospects for the industry in which Take to Auction competes, our management and
currently prevailing general conditions in the equity securities markets,
including current market valuations of publicly traded companies considered
comparable to us. However, the public offering price of the units does not
necessarily bear any relationship to our assets, net worth, earnings, book
value, or other criteria of value applicable to us and should not be considered
an indication of the
54
<PAGE>
actual value of the common stock. As a result, the prices at which the shares
will sell in the public market after this offering may be lower than the price
at which they are sold by the underwriters and an active trading market in the
common stock may not develop or continue after this offering.
55
<PAGE>
Legal Matters
The validity of the issuance of the common shares offered hereby will
be passed upon for us by Baker & McKenzie, Miami, Florida. Atlas Pearlman, P.A.
has served as counsel to Noble International in connection with this offering.
Experts
The financial statements included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein and elsewhere in the registration statement (which report
expresses an unqualified opinion and includes an explanatory paragraph referring
to our ability to continue as a going concern), and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
Where You Can Find Additional Information
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common shares offered hereby. This prospectus does not contain all of the
information set forth in the registration statement and accompanying exhibits
and schedule. For further information with respect to us and our common shares,
we refer you to the registration statement and the accompanying exhibits and
schedule. Statements contained in this prospectus regarding the contents of any
contract or any other document filed as an exhibit to which we refer are not
necessarily complete. In each instance, we refer you to the copy of such
contract or other document filed as an exhibit to the registration statement,
and each statement is qualified in all respects by that reference. Copies of the
registration statement and the accompanying exhibits and schedule may be
inspected without charge at the Securities and Exchange Commission's principal
office in Washington, D.C. or obtained at prescribed rates from the Public
Reference Section of the Securities and Exchange Commission, at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Securities and Exchange Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants, such as us, that file electronically
with the Securities and Exchange Commission. The address of this Web site is
http: //www.sec.gov.
56
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.............................................. F-2
Balance Sheet as of December 31, 1999..................................... F-3
Statement of Operations for the period from June 2, 1999
(date of inception) through December 31, 1999.......................... F-4
Statement of Changes in Shareholders' Equity for the
period from June 2, 1999 (date of inception) through
December 31, 1999...................................................... F-5
Statement of Cash Flows for the period from June 2, 1999
(date of inception) through December 31, 1999.......................... F-6
Notes to Financial Statements............................................. F-7
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and
Shareholders of Take to Auction.com, Inc.
We have audited the accompanying balance sheet of Take to Auction.com, Inc. (a
development stage enterprise) (the "Company") as of December 31, 1999, and the
related statements of operations, changes in shareholders' equity and cash flows
for the period from June 2, 1999 (date of inception) through December 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 audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Take to Auction.com, Inc. (a development
stage enterprise) as of December 31, 1999, and the results of its operations and
its cash flows for the period from June 2, 1999 (date of inception) through
December 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. The Company is a development stage
enterprise engaged in developing and marketing an internet-based community to
sell merchandise at online auction sites. As discussed in Note 2 to the
financial statements, the Company has incurred losses since inception, and its
ability to successfully complete its development program and, ultimately, obtain
profitable operations is dependent upon future events, including completing
product development, verifying market acceptance, achieving a level of
memberships adequate to support the Company's cost structure and obtaining
adequate financing to fulfill its development activities, which raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
DELOITTE & TOUCHE LLP
Miami, Florida
February 11, 2000
(February 28, 2000, as to the collection of the
stock subscription, as
described in Note 8)
F-2
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Balance Sheet as of December 31, 1999
ASSETS
Current assets:
Cash and cash equivalents............................. $ 856,949
Accounts receivable................................... 5,964
Stock subscription receivable......................... 635,466
Inventory............................................. 200,429
Prepaid expenses...................................... 18,625
--------------------
Total current assets...............................
Prepaid offering costs.................................. 667,842
Property and equipment, net............................. 186,041
Other .................................................. 8,423
--------------------
Total assets....................................... $ 2,579,739
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................... $ 289,719
Accrued expenses ..................................... 54,362
Accrued payroll ...................................... --
Accrued professional fees ............................ 55,000
Deferred revenue ..................................... 30,320
Due to affiliate ..................................... 1,000,000
--------------------
Total current liabilities.......................... 1,429,401
Commitments and Contingencies........................... --
Shareholders' equity:
Preferred shares, $0.001 par value, 10 million shares
authorized, no shares issued and outstanding....... --
Common shares, $0.001 par value, 50 million shares
authorized, 18,000,000 shares issued
and outstanding.................................... 18,000
Additional paid-in capital............................ 1,682,000
Accumulated deficit................................... (549,662)
--------------------
Total shareholders' equity......................... 1,150,338
--------------------
Total liabilities and shareholders' equity......... $ 2,579,739
====================
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Statement of Operations
For the period from June 2, 1999 (date of inception) through December 31, 1999
Net revenues......................................... $ 70,067
Cost of net revenues................................. 136,042
------------------------
Gross margin.................................... (65,975)
------------------------
Operating expenses:
General and administrative expenses................ 383,630
Auction fees....................................... 5,727
Sales and marketing................................ 19,061
Fulfillment........................................ 42,632
Web site development expenses...................... 32,637
------------------------
Total operating expenses........................ 483,687
------------------------
Net loss............................................. $ (549,662)
========================
Basic and diluted loss per common share:............. $ (0.03)
========================
Weighted average number of common shares
outstanding........................................ 17,090,297
========================
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Statement of Changes in Shareholders' Equity
For the period from June 2, 1999 (date of inception) through December 31, 1999
<TABLE>
<CAPTION>
Common Shares Additional
------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 2, 1999 (date of
inception)........................... 16,285,714 $ 16,286 $ 983,714 $ -- $ 1,000,000
Issuance of common shares.............. 1,714,286 1,714 698,286 -- 700,000
Net loss for the period from June 2,
1999 (date of inception) through
December 31, 1999...................... -- -- -- (549,662) (549,662)
-------------------------------------------------------------------------------------------
Balance at December 31, 1999........... 18,000,000 $ 18,000 $ 1,682,000 $ (549,662) $ 1,150,338
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
For the period from June 2, 1999 (date of inception) through December 31, 1999
Cash flows from operating activities:
Net loss................................................ $ (549,662)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.......................................... 4,886
Inventory writedown 39,000
Change in operating assets and liabilities:
Accounts receivable.................................. (5,964)
Inventory............................................ (239,429)
Prepaid expenses..................................... (18,625)
Other assets......................................... (8,423)
Accounts payable..................................... 289,719
Accrued expenses..................................... 54,362
Accrued professional fees............................ 55,000
Deferred revenue..................................... 30,320
-------------------
Net cash used in operating activities..............
(348,816)
-------------------
Cash flows from investing activities:
Purchase of property and equipment.................... (190,927)
-------------------
Net cash used in investing activities (190,927)
-------------------
Cash flows from financing activities:
Proceeds from issuance of common stock............... 1,064,534
Payments for offering costs.......................... (667,842)
Net borrowings from affiliate........................ 1,000,000
-------------------
Net cash provided by financing activities 1,396,692
-------------------
Net increase in cash and cash equivalents................. 856,949
Cash and cash equivalents at beginning of
period.................................................. --
-------------------
Cash and cash equivalents at end of period $ 856,949
===================
Supplemental cash flow information:
o No amounts were paid for interest or income taxes during 1999.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Take to Auction.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
Note 1. Nature of Operations:
Take to Auction.com, Inc. (the "Company") was incorporated in the State of
Florida on June 2, 1999. The Company is a development stage enterprise intending
to operate in the internet-based community providing its entrepreneurial members
with an online catalog of authentic collectibles and factory-new specialty
merchandise to sell at online auction sites. The Company is in the process of
developing its network infrastructure and implementing various growth
strategies.
Note 2. Significant Accounting Policies:
Significant accounting policies and practices used by the Company in the
preparation of the accompanying financial statements are as follows:
Basis of presentation
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the Company has been in operation for less than one year and
incurred a net loss of approximately $550,000 during the period from June 2,
1999 (date of inception) through December 31, 1999. In addition, the Company has
not yet completed product development or verified market acceptance.
These factors, among others, may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. The Company's continuation as a going concern is dependent
upon future events, including completing product development, verifying market
acceptance, achieving a level of memberships adequate to support the Company's
cost structure and obtaining adequate financing to fulfill its development
activities to successfully operate in the internet-based community. The Company
is in the process of filing an initial public offering, the proceeds of which
will be used toward its development activities. However, there can be no
assurance that such offering will be successful or that the ultimate proceeds
will prove to be adequate.
Effective August 26, 1999, the Company declared a share dividend of an aggregate
of 6,993,000 common shares, $0.001 par value, immediately payable to its
shareholders of record in order to effect the equivalent of a 1,000-for-1 stock
split to increase the number of common shares outstanding from 7,000 shares to
7,000,000 shares. On November 3, 1999, the Company declared a share dividend of
an aggregate of 10,263,158 common shares, $0.001 par value, immediately payable
to its shareholders of record in order to effect the equivalent of a
2.326530644-for-1 stock split to increase the number of common shares
outstanding from 7,736,842 shares to 18,000,000 shares. Shareholders' equity
gives retroactive recognition to the stock splits as of June 2, 1999.
Management 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.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Basic and diluted net loss per share
Basic and diluted net loss per share is computed by dividing the net loss
available to common shareholders for the period by the weighted average number
of common shares outstanding for the
F-7
<PAGE>
period. The calculation of basic and diluted net loss per share excludes common
shares issuable upon exercise of employee stock options as the effect of the
exercise would be antidilutive.
Inventory
Inventory, consisting of finished goods, is stated at the lower of cost or
market, cost being determined based on a moving average cost basis which
approximates the first-in, first-out method. The cost of inventory includes
product cost and freight charges. The Company recorded a provision of
approximately $39,000 for the period from June 2, 1999 (date of inception)
through December 31, 1999 to reduce the carrying value of inventory to its net
realizable value. Provision for potentially slow moving or damaged inventory is
recorded based on management's analysis of inventory levels, turnover ratios and
through specific identification of slow moving merchandise.
Property and equipment
Property and equipment is carried at cost, less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the related assets. Costs of major additions and improvements
are capitalized and expenditures for maintenance and repairs which do not extend
the useful life of the asset are expensed when incurred. Gains or losses arising
from sales or retirements are included in income currently. The Company reviews
its long-lived assets for impairment on a periodic basis and records an
impairment loss to operations if the sum of the expected future cash flows is
less than the carrying amount of the asset. To date, no such impairment losses
have been recorded.
Software development costs
In accordance with Statement of Position 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1"), the
Company capitalizes acquired and internally developed or modified software
solely to meet the Company's internal needs integral to the Company's Web site.
The Company capitalizes certain internal and external costs directly associated
with developing or modifying the internal use software, which begins with the
application development stage and ends when the project is substantially
complete and ready for its intended use. The amount of costs capitalized in 1999
relating to internal use software in process was approximately $130,000,
consisting principally of software purchased from an external vendor, and is
included in Property and Equipment, net in the accompanying Balance Sheets (see
Note 3). As of December 31, 1999, no internal use software development projects
were ready for their intended uses and therefore, no amortization cost related
to this software is included in the accompanying Statements of Operations. The
ongoing assessment of recoverability of capitalized software development costs
require considerable judgment by management with respect to certain external
factors, including, but not limited to, estimated economic life and changes in
software and hardware technologies.
Revenue recognition
Revenues from membership fees are deferred at the time of billing and are
recognized ratably over the term of annual membership. Revenues related to
auction sales are recognized at the time that the product is shipped to the
highest bidder.
Sales and marketing expenses
Marketing and sales expenses, which consist primarily of advertising and
promotional costs, are charged to operations as incurred.
Income taxes
The Company utilizes the asset and liability method of accounting for deferred
income taxes. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using tax rates in effect for the year in which the
differences are expected to reverse. A valuation allowance is established when
it is more likely than not that some or all of the deferred tax assets will not
be realized.
F-8
<PAGE>
Simple IRA Plan
The Company sponsors the Take to Auction.com, Inc. SIMPLE IRA Plan (the "Plan"),
a defined contribution plan provided pursuant to the requirements of the
Internal Revenue Code of 1986, as amended. All employees eligible to participate
may enter the Plan as of the first day of any month. Participants may make
pre-tax contributions to the Plan subject to a statutorily prescribed annual
limit. The Company is required to make matching contributions, not to exceed 3%
of a participant's annual compensation, to the Plan. Each participant is fully
vested in their account, including the participant's contributions, the
Company's matching contribution and the investment earnings thereon.
Contributions by the participants or by the Company to the Plan, and the income
earned on such contributions, are generally not taxable to the participants
until withdrawn. Contributions by the Company are generally deductible by the
Company when made. The participant's and the Company's contributions are held in
an IRA. The Company accrued a matching contribution to the Plan as of December
31, 1999 of approximately $5,100, which represents the total contribution made
to the Plan by the Company for the period from June 2, 1999 (date of inception)
through December 31, 1999.
Start up costs
The Company expensed all start up costs as incurred.
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"), establishes standards for recording and display of
comprehensive income and its components. SFAS No. 130 requires certain
components of equity to be recorded as other comprehensive income. The Company
has no other comprehensive income during the period from June 2, 1999 (date of
inception) through December 31, 1999.
Segment reporting
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"), establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company
operated in one operating segment during 1999.
Note 3. Property and Equipment:
Property and equipment include the following:
Estimated
useful lives
(in years) December 31, 1999
---------------- -----------------------
Computer equipment 3 $ 42,609
Furniture and fixtures 5 9,292
Telecommunication equipment 3 8,769
Software development costs 3 130,257
-----------------------
190,927
Less: accumulated depreciation (4,886)
-----------------------
Property and equipment, net $ 186,041
=======================
As discussed in Note 1, the Company capitalizes certain costs in connection with
internal use software which will be amortized when the software is available for
use or project modules are implemented. As of December 31, 1999, approximately
$130,000 related to internal use software in process not yet implemented is
included within Software Development Costs in the above table.
F-9
<PAGE>
Note 4. Income Taxes:
The income tax provision differs from the amount obtained by applying
the statutory Federal income tax rate to pretax income as follows:
Period from
June 2, 1999
(date of inception)
to December 31, 1999
--------------------
Benefit at Federal statutory rates.............
$ 186,885
State income taxes, net of Federal benefit.....
19,952
--------------------------
206,837
Valuation allowance............................ (206,837)
--------------------------
$ --
==========================
The primary components of temporary differences which give rise to the
Company's net deferred tax assets at December 31, 1999 are as follows:
Deferred tax assets:
Net operating losses carryforward............ $ 206,837
------------------------
Total deferred tax assets.................. 206,837
Valuation allowance.......................... (206,837)
------------------------
$ --
========================
The Company provides a valuation allowance against deferred tax assets
if, based on the weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized. The Company has
established a valuation allowance against deferred tax assets of $206,837 at
December 31, 1999.
The Company has Federal and State net operating loss carryforwards of
approximately $550,000 at December 31, 1999, both of which will begin to expire
in the year 2019.
Note 5. Related Party Transaction:
During December 1999, the Company received an advance of $1 million from
Perfumania, Inc. The chairman of the board of Perfumania, Inc. is also the
chairman of the board of Take to Auction. This advance is classified as Due to
Affiliate in the accompanying balance sheet. This advance is currently being
structured into a two-year convertible note agreement, bearing interest at six
percent (6%) per annum. The note holder will have the right to convert all, but
not less than all, of the principal amount into shares of the Company's common
stock at the conversion price equal to the Company's contemplated initial public
offering price. In addition, the Company will grant 300,000 warrants to the note
holder at the contemplated initial public offering price. These warrants expire
one year from the effective date of the Company's contemplated initial public
offering.
The Company purchases inventory in the normal course of business with a company
owned by a shareholder of the Company. During the period from June 2, 1999
through December 31, 1999, the Company purchased approximately $72,000 of
inventory from this company.
F-10
<PAGE>
Note 6. Commitments:
Effective August 25, 1999, the Company entered into employment agreements with
two executives for a three year initial term. On October 1, 1999, the Company
entered into an Employment Agreement with another executive for a three-year
term. The aggregate annual base salaries are $365,000. A total of 383,365
options to purchase common shares were granted (220,508 options were granted on
August 26, 1999 and 162,857 options were granted on October 1, 1999) at a
weighted average exercise price equal to $0.41 per share. These Options vest
over a three-year period from the date of grant. Upon a change of control of the
Company (as defined in the agreements), the executives will be entitled to
receive severance compensation in the amount of 200 percent of their annual base
salaries.
On December 28, 1999, the Company entered into a five year operating lease
agreement for its corporate headquarters. Monthly rent payments are
approximately $12,500 over this agreement.
Effective September 23, 1999, the Company entered into a 60 month service
agreement ("the USi Agreement") with USinternetworking, Inc. ("USi"), a software
and network provider, to develop and host the Company's Web site. The Company
paid an initial fee of $40,000 and the USi Agreement was for 60 equal monthly
service fee payments of $41,000 commencing on December 15, 1999 through December
14, 2004 (the "Initial Period"). During December 1999, the Company notified USi
that it was terminating the USi Agreement (as per the terms of the USi
Agreement) for material breach of its obligations thereunder. A breach of
contract lawsuit has been threatened by USi. The Company and USi are currently
discussing a resolution of the matter. The Company believes that it has
meritorious defenses, as well as counterclaims, to any claim which may be
brought by USi, and if any such claim is brought, the Company will defend it
vigorously.
On October 29, 1999, the Company entered into an agreement with ZeroDotNet, Inc.
("ZeroDotNet") to provide financial advisory and strategic planning services to
the Company. The term of the agreement is one year. The Company paid a $350,000
retainer fee to ZeroDotNet as compensation for services rendered under this
agreement.
Effective November 3, 1999, the Company entered into a six-month service
agreement to outsource its warehouse and distribution functions. This service
agreement includes order processing, inventory management, warehousing,
fulfillment and shipping of product. The Company paid an initial implementation
fee of $38,500 in connection with this agreement and the agreement will
automatically renew for successive one-year terms.
F-11
<PAGE>
Note 7. Stock Option Plan:
Effective August 1999, the Company adopted the 1999 Stock Option Plan (the
"Option Plan"). Officers, key employees and nonemployee consultants may be
granted stock options, stock appreciation rights, stock awards, performance
shares and performance units under the Option Plan. The Company has reserved
2,442,857 common shares for issuance under the Option Plan, subject to further
antidilution adjustments.
The Company will grant 5,000 non-qualified stock options to each non-employee
director nominee of the Company. The options will allow such directors to
purchase the common shares at an exercise price equal to the contemplated
initial public offering (the "Offering") price. These options will have a term
of ten years and vest on the date of grant.
Prior to establishment of a Compensation Committee (the "Committee") of the
Board of Directors, the Option Plan will be administered by the Board of
Directors of the Company. The Board of Directors or the Committee will be
authorized to determine, among other things, the key employees to whom, and the
time at which, options and other benefits are to be granted, the number of
shares subject to each option, the applicable vesting schedule and the exercise
price. The Board of Directors or the Committee will also determine the treatment
to be afforded to a participant in the Option Plan in the event of termination
of employment for any reason, including death, disability or retirement. Under
the Option Plan the maximum term of an incentive stock option is seven years and
the maximum term of a nonqualified stock option is seven years.
The Board of Directors has the power to amend the Option Plan from time to time.
Shareholder approval of an amendment is only required to the extent that it is
necessary to maintain the Option Plan's status as a protected plan under
applicable securities laws or the Option Plan's status as a qualified plan under
applicable tax laws.
As of December 31, 1999, options to purchase an aggregate of 428,265 shares have
been granted under the Option Plan to employees of the Company at a weighted
average exercise price equal to $0.41 per share. These options have a life of
seven years and vest over a three-year term.
Statement of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation ("SFAS No. 123"), encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company will measure compensation expense for the stock plan using
the intrinsic value method prescribed by Accounting Principal Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB No. 25"). Accordingly,
compensation expense for qualified and non-qualified employee stock options
granted under the Option Plan is equal to the difference between the fair market
value of the stock at the date of grant and the amount an employee must pay to
acquire the stock.
The fair value of each option grant under the Company's Stock Plans is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants in 1999:
Expected volatility 100.0%
Risk-free interest rate 6.0%
Dividend yield 0.0%
Expected life 7 years
F-12
<PAGE>
A summary of the status of the Company's Stock Plan as of December 31,
1999 is presented below:
Weighted
Average
Shares Exercise Price
Outstanding on June 2, 1999 -- $ --
Granted 428,265 0.41
Exercised -- --
Forfeited -- --
---------------- ------------------
Outstanding on December 31, 1999 428,265 $ 0.41
================ ==================
Options exercisable on December 31, 1999 --
================
Weighted- average fair-value of options
granted during the period $ 0.35
================
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------- ----------------------------------
Weighted-Average Weighted-
Range of Number Remaining Number Average
Exercise Outstanding at Contractual Life Weighted-Average Exercisable Exercise
Prices 12/31/99 (Years) Exercise Price at 12/31/99 Price
- ------------------------ ----------------- ---------------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
$0.41 428,265 6.70 $ 0.41 - $ -
</TABLE>
Had compensation cost for the Company's Stock Plans been determined based on the
fair value at the grant dates for awards under the Stock Plans consistent with
the method prescribed by SFAS 123, the Company's net loss and net loss per share
(diluted) for the period from June 2, 1999 (date of inception) through December
31, 1999 would have been reduced to the proforma amounts indicated below:
Net loss:
As reported $ (549,662)
Proforma (567,654)
Diluted net loss per common share:
As reported $ (0.03)
Proforma (0.03)
The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts. The Company anticipates that additional awards
will be granted in future years.
F-13
<PAGE>
Note 8. Capital Stock:
The Company concluded its $1 million initial capitalization on August 26, 1999,
of which $364,534 was received by December 31, 1999. All shares issued in
connection with the initial capitalization were given effect to the 1,000-for-1
and the 2.326530644-for-1 stock splits (See Note 2). The remaining balance of
$635,466 was collected in full by February 28, 2000 and is classified as an
asset in the accompanying balance sheet as of December 31, 1999.
Subsequent to the initial capitalization, the Company sold 1,714,286 common
shares for $700,000.
On August 25, 1999 the Company's shareholders approved an increase in the number
of authorized common shares from 7,500 shares to 50 million shares and a
reduction in the par value per share of common stock from $1 to $0.001. The
Company also authorized 10 million shares, par value $0.001 per share, of
preferred stock.
F-14
<PAGE>
[INSIDE OF BACK COVER]
[Artwork]
<PAGE>
<TABLE>
============================================================ ==========================================================
<S> <C>
You should rely only on the information contained in
this prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell, and seeking offers to 1,300,000 Shares
buy, common shares only in jurisdictions where offers and
sales are permitted. The information contained in this
prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this [LOGO]
prospectus or of any sale of our common shares. Take to
Auction.com, Inc.
------------
Common Shares
TABLE OF CONTENTS
Page
----
Prospectus Summary..................................
Risk Factors........................................
Forward Looking Statements; Market Data.............
Use of Proceeds..................................... -----------------------------
Dividend Policy ....................................
Corporate Information............................... P R O S P E C T U S
Capitalization......................................
Dilution............................................ -----------------------------
Selected Financial Data.............................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................
Business............................................ NOBLE INTERNATIONAL
Management.......................................... INVESTMENT, INC.
Certain Transactions................................
Principal Shareholders..............................
Description of Capital Stock........................
Shares Eligible for Future Sale.....................
Underwriting........................................
Legal Matters.......................................
Experts.............................................
Additional Information..............................
Index to Financial Statements....................... F-1
Until , 2000 (25 days after the date of this prospectus),
all dealers that buy, sell or trade our common shares, whether
or not participating in this offering, may be required to
deliver a prospectus. This requirement is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
, 2000
============================================================ ==========================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by
Take to Auction.com in connection with the registration of the common shares
hereunder. All of the amounts shown are estimates, except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the American Stock
Exchange filing fee.
Securities and Exchange Commission registration fee. $4,118.40**
NASD filing fee. *
American Stock Exchange filing fee. *
Accounting fees and expenses. 125,000
Legal fees and expenses. 350,000
Road show expenses. 100,000
Printing and engraving expenses. 75,000
Blue sky fees and expenses. *
Transfer agent and registrar fees and expenses. *
Miscellaneous. *
Total $ ---------
*To be completed by amendment.
**Payment of $6,672.00 already made.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850 of the Florida Business Corporation Act (the "FBCA")
permits, in general, a Florida corporation to indemnify any person who was or is
a party to any action or proceeding by reason of the fact that he or she was a
director or officer of the corporation, or served another entity in any capacity
at the request of the corporation, against liability incurred in connection with
such proceeding including the estimated expenses of litigating the proceeding to
conclusion and the expenses, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof, if
such person acted in good faith, for a purpose he or she reasonably believed to
be in, or not opposed to, the best interest of the corporation and, in criminal
actions or proceedings, in addition had non reasonable cause to believe that his
or he conduct was unlawful. Section 607.0850(6) of the FBCA permits the
corporation to pay in advance of a final disposition of such action or
proceeding upon receipt of any undertaking by or on behalf of the director or
officer to prepay such amount as, and to the extent, required by statute.
Section 607.0850 of the FBCA provides that the indemnification and advancement
of expense provisions contained in the FBCA shall not be deemed exclusive of any
rights to which a director or officer seeking indemnification or advancement of
expenses may be entitled.
Our Amended and Restated Articles of Incorporation provide, in general,
that we shall indemnify, to the fullest extent permitted by Section 607.0850 of
the FBCA, any and all persons whom we shall have the power to indemnify under
said section from and against any and all of the expenses, liabilities or other
matters referred to in, or covered by, said section. The Amended and Restated
Articles of Incorporation also provide that the indemnification provided for
therein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions taken in his or her
official capacity and as to acts in another capacity while holding such office.
II-1
<PAGE>
In accordance with our Amended and Restated Articles of Incorporation,
we shall indemnify any officer or director (including officers and directors
serving another corporation, partnership, joint venture, trust, or other
enterprise in any capacity at the company's request) made, or threatened to be
made, a party to an action or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he or she was
serving in any of those capacities against judgments, fines, amounts paid in
settlement and reasonable expenses (including attorney's fees) incurred as a
result of such action or proceeding. Indemnification would not be available if a
judgment or other final adjudication adverse to such director or officer
establishes that (i) his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty or (ii) he or she personally gained
in fact a financial profit or other advantage to which he or she was not legally
entitled.
We intend to enter into Indemnification Agreements with each of our
current directors and officers to give these directors and officers additional
contractual assurances regarding the scope of the indemnification set forth in
our Amended and Restated Articles of Incorporation and to provide additional
procedural protections. At present, there is no pending litigation or proceeding
involving a director, officer or employee of Take to Auction.com regarding which
indemnification is sought, nor are we aware of any threatened litigation that
may result in claims for indemnification.
We also refer you to Section of the Underwriting Agreement, which
provides for the indemnification of our officers, directors and controlling
persons against certain liabilities. The indemnification provision in our
Amended and Restated Articles of Incorporation, Amended and Restated Bylaws and
the Indemnification Agreements entered into between us and each of our directors
and officers may be sufficiently broad to permit indemnification of our
directors and officers for liabilities arising under the Securities Act.
We, with approval by our Board of Directors, expect to obtain
directors' and officers' liability insurance.
See also the undertakings set out in response to Item 17.
We refer you to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
Exhibit
Document Number
-------- ------
Form of Underwriting Agreement 1.01
Amended and Restated Articles of Incorporation as currently in effect 3.01
Amended and Restated Bylaws as currently in effect 3.02
Form of Indemnification Agreement to be entered into by Registrant
with each of its directors and executive officers 10.06
Registrant's 1999 Stock Option Plan and related documents 10.07
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities
sold by us since our inception on June 2, 1999:
<TABLE>
<CAPTION>
Number of Aggregate Purchase Price
Name of Purchasers Date of Sale Title of Securities Securities*/1 and Form of Consideration
- ------------------ ------------ ------------------- ------------ -------------------------
<S> <C> <C> <C> <C>
Albert Friedman 7/10/99 Common Stock 2,327 $ 142.86/Cash
Pacific Investments 8/26/99 Common Stock 4,560,000 $ 280,005.60/Cash
Horacio Groisman 8/26/99 Common Stock 1,628,571 $ 100,002.001/Cash
Magdelena Zafir 8/26/99 Common Stock 1,628,571 $ 100,002.001/Cash
Albert Friedman 8/26/99 Common Stock 1,137,673 $ 69,858.54/Cash
Hugo Calemczuk 8/26/99 Common Stock 1,140,000 $ 70,001.40/Cash
Pesia Leder 8/26/99 Common Stock 814,287 $ 50,001.00/Cash
Sharon Lallouz 8/26/99 Common Stock 651,429 $ 40,000.80/Cash
Maurice Alcavez 8/26/99 Common Stock 651,429 $ 40,000.80/Cash
Dr. Michelle Fisher 8/26/99 Common Stock 244,286 $ 15,000.30/Cash
Nadine Lallouz 8/26/99 Common Stock 244,286 $ 15,000.30/Cash
Zouhir Beidoun 8/26/99 Common Stock 488,571 $ 30,000.60/Cash
Isaac Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash
David Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash
Jassi Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash
The Joseph Trust 8/26/99 Common Stock 325,714 $ 20,000.40/Cash
(Issac Shalom)
Hannah Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash
Rachmil Lekach 8/26/99 Common Stock 325,714 $ 20,000.40/Cash
Dr. Bernard Weinbach 8/26/99 Common Stock 162,857 $ 10,000.20/Cash
Mayi De La Vega 8/26/99 Common Stock 162,857 $ 10,000.20/Cash
Glenn Gopman 8/26/99 Common Stock 162,857 $ 10,000.20/Cash
Israel Lewin 8/26/99 Common Stock 162,857 $ 10,000.20/Cash
Alice Lekach 8/26/99 Common Stock 162,857 $ 10,000.20/Cash
Andrea Koplowitz 8/26/99 Common Stock 162,857 $ 10,000.20/Cash
Gabriel Groisman 8/26/99 Common Stock 81,429 $ 5,000.10/Cash
Melissa Groisman 8/26/99 Common Stock 81,429 $ 5,000.10/Cash
SLI.com Venture I, Ltd. 8/26/99 Common Stock 857,143 $ 350,000 Cash
Dominion Income Mgmt. 10/20/99 Common Stock 857,143 $ 350,000 Cash
------------------
18,000,000
</TABLE>
* On June 6, 1999 we sold 100 shares of Common Stock to Sharon J. Lallouz who
transferred the common shares back to us on July 10, 1999.
1/ Assumes 1,000 for stock split effective August 26, 1999 and 2.326530644 for 1
stock split effective November 3, 1999.
No common shares were issued to Registrant's officers, directors,
employees and consultants pursuant to the exercise of stock options granted
under the Option Plan.
All other sales were made in reliance on Section 4(2) of the Securities
Act and/or Regulation D promulgated under the Securities Act. These sales were
made without general solicitation or advertising. Each purchaser was a
sophisticated investor with access to all relevant information necessary to
evaluate the investment and represented to the Registrant that the shares were
being acquired for investment.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
EXHIBIT
NUMBER
- --------
1.01 Form of Underwriting Agreement.*
3.01 Amended and Restated Articles of Incorporation as currently in
effect.**
3.02 Amended and Restated Bylaws as currently in effect.**
4.01 Form of Specimen Certificate for common shares.*
4.02 Form of Lock-up Agreement.*
4.03 Form of Underwriters Warrant.*
5.01 Opinion of Baker & McKenzie regarding legality of the securities
being registered.
10.01 Executive Employment Agreement between Registrant and Albert
Friedman dated August 25, 1999.**
10.02 Executive Employment Agreement between Registrant and Mitchell H.
Morgan dated August 25, 1999.**
10.03 Executive Employment Agreement between Registrant and Jonathan
Geller dated October 1, 1999.
10.04 Office Building Net Lease between Anglers Office Park, Inc., a
Florida corporation doing business as Anglers Corporate Center, and
the Registrant dated December 28, 1999.
10.05 Office Lease between Miami Freezone Corporation, a Florida
corporation, and the Registrant dated August 4, 1999.**
10.06 Form of Indemnification Agreement to be entered into by Registrant
with each of its directors and executive officers.**
10.07 Registrant's 1999 Stock Option Plan and related documents.**
10.08 Stock Purchase Agreement between Registrant and SLI.com Venture I,
Ltd. dated August 26, 1999.**
10.09 Stock Purchase Agreement between Registrant and Dominion Income
Management dated October 20, 1999.**
10.10 Form of Stock Option Agreement and related schedule.
10.11 Form of Warrant Agreement.
10.12 Financial Advisory and Strategic Planning Services Agreement
between Registrant and ZeroDotNet, Inc. dated October 29, 1999.
23.01 Consent of Baker & McKenzie (included in Exhibit 5.01).
II-4
<PAGE>
EXHIBIT
NUMBER
- --------
23.02 Consent of Deloitte & Touche LLP.
24.01 Power of Attorney (see Page II-6 of this Registration Statement).
27.01 Financial Data Schedule.
* To be supplied by amendment.
** Incorporated by reference.
(b) Financial statement schedules.
No financial statement schedules are provided because the information
called for is not required or is shown either in the financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Take to
Auction.com pursuant to the provisions described under Item 14 above, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Take to Auction.com of expenses incurred or paid by a director, officer or
controlling person of Take to Auction.com in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
We hereby undertake that:
(1) We will provide to the underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
(2) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by Take to Auction.com pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the securities act of 1933, as amended,
Take to Auction.com has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of Miami,
state of Florida, on the 29th day of February, 2000.
Take to Auction.com, Inc.
By: /s/ Albert Friedman
--------------------------------
Albert Friedman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Albert Friedman and Mitchel H. Morgan,
and each of them, his or her true and lawful attorneys-in-fact and agents with
full power of substitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act, and all post-effective amendments thereto,
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their substitute or
substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the securities act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
Principal Executive Officer
/s/ Albert Friedman President, Chief Executive February 29, 2000
- ------------------------------- Officer and Director
Albert Friedman
Principal Financial Officer
and Principal Accounting
Officer
/s/ Mitchell Morgan Vice President, February 29, 2000
- ------------------------------- Chief Financial Officer
Mitchell Morgan and Director
/s/ Jonathan Geller Vice President, February 29, 2000
- ------------------------------- Chief Technology
Jonathan Geller Officer and Director
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
ADDITIONAL DIRECTORS
/s/ Horacio Groisman Director February 29, 2000
- -------------------------------
Horacio Groisman
/s/ Ilia Lekach Director February 29, 2000
- -------------------------------
Ilia Lekach
/s/ Garrick Hileman Director February 29, 2000
- -------------------------------
Garrick Hileman
/s/ Hugo Calemczuk Director February 29, 2000
- -------------------------------
Hugo Calemczuk
/s/ Miguel Cauvi Director February 29, 2000
- -------------------------------
Miguel Cauvi
/s/ Alan Blaustein Director February 29, 2000
- -------------------------------
Alan Blaustein
</TABLE>
II-7
EXHIBIT 5.01
[Baker & McKenzie Letterhead]
February 29, 2000
Take To Auction.com, Inc.
2335 N.W. 107th Avenue
Suite 2M-23
Miami, Florida 33172
Gentlemen:
Take To Auction.com, Inc., a Florida corporation (the "Company"), is
filing with the Securities and Exchange Commission a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"). Such Registration Statement relates to the registration by
the Company of 1,300,000 common shares, par value $.001 per share (the "Common
Shares"). We have acted as counsel to the Company in connection with the
preparation and filing of the Registration Statement.
In connection with the rendering of this opinion, we have examined,
considered and relied upon copies of the following documents (collectively, the
"Documents"): (i) the Company's Articles of Incorporation, as amended, and the
bylaws, as amended; (ii) resolutions of the Company's Board of Directors
authorizing the offering, issuance and registration of the Common Shares; (iii)
the Registration Statement and schedules and exhibits thereto; and (iv) such
other documents and instruments that we have deemed necessary for the expression
of the opinions herein contained. In making the foregoing examinations, we have
assumed without investigation, the genuineness of all signatures and the
authenticity of all documents submitted to us as originals, the conformity to
authentic original documents of all documents submitted to us as copies, and the
veracity of the documents. As to various questions of fact material to the
opinion expressed below, we have relied, to the extent we deemed reasonably
appropriate, upon the representations or certificates of officers and/or
directors of the Company and upon documents, records and instruments furnished
to us by the Company, without independently verifying the accuracy of such
certificates, documents, records or instruments.
Based upon the foregoing, and subject to the qualifications set forth
below, we are of the opinion that: (i) the Common Shares have been duly and
validly authorized; and (ii) when issued and delivered in accordance with the
terms of the Underwriting Agreement filed as Exhibit 1.01 to the Registration
Statement, the Common Stock will be validly issued, fully paid and
nonassessable.
Although we have acted as counsel to the Company in connection with the
preparation and filing of the Registration Statement, our engagement has been
limited to certain matters about which we have been consulted. Consequently,
there may exist matters of a legal nature involving the Company in which we have
not been consulted and have not represented the Company. We express no opinion
as to the laws of any jurisdiction other than the laws of the State of Florida.
This opinion letter is limited to the matters stated herein and no opinions may
be implied or inferred beyond the matters expressly stated herein. The opinions
expressed herein are given as of this date, and we assume no obligation to
update or supplement our opinions to reflect any facts or circumstances that may
come to our attention or any change in law that may occur or become effective at
a later date.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus comprising a part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
<PAGE>
Take to Auction.com, Inc.
February 29, 2000
Page 2
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations promulgated thereunder.
Sincerely,
/s/ Baker & McKenzie
--------------------
BAKER & MCKENZIE
EXHIBIT 10.03
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement"), by and among
Take to Auction.com, Inc., a Florida corporation ("Company") and Jonathan Geller
("Employee"), is hereby entered into as of this 1st day of October, 1999.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby employs Employee as Chief Technology Officer of the Company. As such,
Employee shall have responsibilities, duties and authority reasonably accorded
to and expected of such position and will report directly to the Board. Employee
hereby accepts this employment upon the terms and conditions herein contained
and, subject to paragraph 1(b) hereof, agrees to devote Employee's full business
time, attention and efforts to promote and further the business of the Company.
Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(b) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. TERM. The Company employs Employee for a period commencing the date hereof
and ending on the third anniversary of the date hereof (the "Term"), subject to
termination prior to such date pursuant to Section 6 hereof. Sixty (60) days
prior to the end of the Term (or any renewal term), either the Company or
Employee may give notice to the other of its determination not to renew this
Agreement. If a notice of non-renewal is not delivered, this Agreement will
automatically continue in effect for successive one (1) year renewal term
subject to termination prior to such date pursuant to Section 6 hereof. If such
notice of non-renewal is given by any party, then Employee's employment will
terminate at the end of such term (or on such other date as the parties mutually
agree).
3. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
<PAGE>
(a) BASE SALARY. The base salary payable hereunder to Employee shall
equal $120,000 per year, payable on a regular basis in accordance with the
Company's standard payroll procedures but not less than monthly. On at least an
annual basis, the Company's Board (the "Board"), together with the Compensation
Committee of the Company's Board, will review Employee's performance and may
make increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would require approval by the Board or a
duly constituted committee thereof.
(b) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance plans that
the Company may have in effect from time to time. The benefits provided to
Employee under this clause (i) shall be at least equal to such benefits provided
to executives or employees in similar positions at the Company.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the performance of
Employee's services pursuant to this Agreement. All reimbursable expenses shall
be appropriately documented in reasonable detail by Employee upon submission of
any request for reimbursement, and in a format and manner consistent with the
Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites (including, but not limited to, participation in the Company's
Long-Term Incentive Plan) as may be available to or deemed appropriate for
Employee by the Board and participation in all other Company-wide employee
benefits as available from time to time. Employee shall be entitled to four
weeks of vacation per year in addition to all Federal and religious holidays.
4. NON-COMPETITION AND NON-SOLICITATION.
(a) Employee acknowledges that during the course of Employee's
employment Employee will receive confidential and proprietary information from
and concerning the Company. Employee also acknowledges that the Company will
make substantial investments in the development of the Company's goodwill and in
Employee's professional development. The capital expended to develop this
goodwill directly benefits Employee and should continue to do so in the event
that the relationship between the Company and Employee is terminated. Likewise,
the Company has conferred and will confer a direct economic benefit on Employee.
Employee agrees that the Company is entitled to protect these business interests
and investments and to prevent Employee from using or taking advantage of the
foregoing economic benefits to the Company's detriment.
(b) Employee agrees that, except for services and duties performed for
or on behalf of the Company according to this Agreement, Employee will not,
during the period of Employee's employment with the Company, and for a period
(the "Restricted Period") of one (1) year immediately following the termination
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of Employee's employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation, association,
enterprise, venture or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, lender or in a managerial capacity, whether as an
employee, independent contractor, agent, consultant or advisor or as a sales
representative, in any online auction facilitation or similar business in direct
competition with those aspects of the business of the Company or any subsidiary
of the Company, with which Employee has had any involvement, within United
States of America, Canada and all other countries in which customers of the
Company have access to the world wide web (the "Territory");
(ii) solicit any person who is, at that time, or who has been
within one (1) year prior to that time, an employee of the Company for the
purpose or with the intent of enticing such employee away from or out of the
employ of the Company;
(iii) solicit any person or entity which is, at that time, or
which has been within one (1) year prior to that time, a customer, doctor,
service provider or supplier of the Company for the purpose of soliciting or
selling products or services in direct competition with those aspects of the
business of the Company or any subsidiary of the Company with which Employee has
had any involvement, within the Territory; or
(iv) solicit any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor or potential competitor,
which candidate was, to Employee's knowledge, either called upon by the Company
or for which the Company made an acquisition analysis, for the purpose of
acquiring such entity. Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit Employee from acquiring as an investment not more than
two percent (2%) of the capital stock of a competing business, whose stock is
traded on a national securities exchange or over-the-counter.
(c) In recognition of the substantial nature of such potential damages
and the difficulty of measuring economic losses to the Company as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to the Company for which they would have no other
adequate remedy, Employee agrees that in the event of breach by Employee of the
foregoing covenant, the Company shall be entitled to specific performance of
this provision and co-injunctive and other equitable relief.
(d) It is agreed by the parties that the foregoing covenants in this
paragraph 4 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of the Company and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Company throughout the term of this Agreement, whether before or after
the date of termination of the employment of Employee. For example, if, during
the term of this Agreement, the Company engages in new and different online
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auction facilitation activities, or establishes new locations for its current
activities or business and Employee is involved with providing such new online
auction facilitation services, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within the United
States of America through the term of this Agreement.
(e) All of the covenants in this paragraph 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. Further, this
paragraph 4 shall survive the termination of this Agreement and the termination
of Employee's employment with the Company. It is specifically agreed that the
period of one (1) year following termination of employment stated at the
beginning of this paragraph 4, during which the agreements and covenants of
Employee made in this paragraph 4 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 4.
5. TERMINATION; RIGHTS ON TERMINATION. This Agreement and Employee's employment
may be terminated for any one of the following causes:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate, heirs or
other descendants or representatives.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company Employee's base salary at the rate then in effect,
payable at the Company's regular and customary intervals for the payment of
salaries as then in effect, less any amounts Employee might receive under the
Company's disability insurance policy, if any, for whatever time period is
remaining under the Term or for six (6) months, whichever amount is less.
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(c) CAUSE. The Company may, in its sole and absolute discretion,
terminate the employment of Employee hereunder immediately upon after delivery
of written notice to Employee, or at such later time as the Company may specify
in such notice, for "Cause." As used in this Agreement "Cause" includes, but is
not limited to, the following: (1) Employee's willful and material breach of
this Agreement; (2) Employee's gross negligence in the performance, or
intentional nonperformance, (continuing for ten (10) days after receipt of
written notice of need to cure) of any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty or fraud, whether
or not with respect to the business or affairs of the Company, which affects the
operations, property or reputation of the Company; (4) Employee's conviction of
a felony crime; (5) chronic alcohol or illegal drug abuse by Employee; (6)
Employee's willful injury to any independent contractor, employee or agent of
the Company, or to any other person in the course of Employee's performance of
services for the Company; or (7) If Employee sexually harasses any employee,
agent or contractor of the Company or commits any act which otherwise creates an
offensive work environment for employees, agents or contractors of the Company.
The Company shall not be limited to termination as a remedy for any
damaging, injurious, improper or illegal act by Employee, but may also seek
damages, injunction, or such other remedy as the Company may deem appropriate
under the circumstances. If Employee's employment is terminated for Cause,
Employee agrees to vacate the Company's offices on or before the effective date
of the termination and to return and deliver to the Company at such time all
Company property. In the event of a termination for Cause, as enumerated above,
Employee shall have no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
provided the Company does not have Cause to terminate Employee pursuant to (c)
above, Employee may, without Cause, terminate this Agreement and Employee's
employment, effective ninety (90) days after written notice is provided to the
Company. Employee may only be terminated without Cause by the Company during the
Term hereof if such termination is approved by a majority of the members of the
Board. Should Employee be terminated by the Company without Cause during the
Term, Employee shall be entitled to receive from the Company one (1) year's base
salary (at Employee's then current base) payable over the course of the year
following such termination. The severance compensation shall be paid in
accordance with the Company's standard payroll procedures but not less than
monthly. If Employee resigns or otherwise terminates Employee's employment
without cause pursuant to this paragraph 5(d), Employee shall receive no
severance compensation.
(e) TERMINATION BY EXECUTIVE FOR GOOD REASON OR UPON CHANGE IN CONTROL.
Upon the termination of the Employee's employment hereunder by the Employee (i)
for "Good Reason", as specified in Section 5(e)(B) hereof, or (ii) within 180
days after the occurrence of a "Change in Control" as specified in Section
5(e)(A) hereof, the Company shall (i) continue to pay to the Employee the base
salary through the effective date of termination specified in such notice and
(ii) pay to the Employee, in a lump sum, an amount equal to 200% of the annual
base salary prevailing on the date of such termination. In addition, upon such
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<PAGE>
termination, all options to purchase shares of the Company's common stock, if
any, shall accelerate and become immediately exercisable.
(A) For purposes of this Agreement, a "Change in Control"
shall mean:
(i) The acquisition (other than by or from the
Company), at any time after the date hereof, by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors (together with such common stock, "Voting Securities"); or
(ii) Approval by the shareholders of the Company of
(x) a reorganization, merger or consolidation with respect to which persons who
were the shareholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (y) a liquidation or dissolution of the Company or (z) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
(B) For purposes of this Agreement, "Good Reason" shall mean:
(i) The assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 1 of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(ii) Any failure by the Company to comply with any of
the provisions of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Employee;
(iii) The Company's requiring the Employee to be
based at any office or location other than the Company's offices in Miami,
Florida, except for travel reasonably required in connection with the
performance of the Employee's responsibilities hereunder; or
(iv) Any purported termination by the Company of the
Employee's employment other than as expressly permitted by this Agreement.
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<PAGE>
(f) Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above. All
other rights and obligations of the Company and Employee under this Agreement
shall cease as of the effective date of termination, except that the Company's
obligations under paragraph 10 hereof and Employee's obligations under
paragraphs 4, 8, 9 and 11 hereof shall survive such termination in accordance
with their terms. Further, unless Employee and the Company otherwise agree in
writing, upon termination of this Agreement for any reason, Employee will
immediately resign from all director, officer or other positions held with the
Company.
(g) If termination of Employee's employment arises out of the Company's
failure to pay Employee the amounts to which he is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined pursuant to the provisions of paragraph 16 below, the Company shall
pay all amounts and damages to which Employee may be entitled as a result of
such breach, including interest thereon and all reasonable legal fees and
expenses and other costs incurred by Employee to enforce Employee's rights
hereunder. Further, none of the provisions of paragraph 4 hereof shall apply in
the event this Agreement is terminated as a result of a material breach by the
Company.
6. PARTICIPATION IN STOCK OPTION PLAN.
The Employee shall be granted an option (the "Option") to purchase
70,000 shares of the Company's Common Stock, par value $0.001 per share ("Common
Stock"), at an exercise price of $0.41, the fair market value of the Company's
common stock on October 1, 1999. The Option may be exercised, in whole or in
part, in accordance with the following vesting schedule: (i) 1/3 of the Option
shall vest one year after the signing of this Agreement, (ii) 1/3 of the Option
shall vest two years after the signing of this Agreement, and (iii) 1/3 of the
Option shall vest three years after the signing of this Agreement. The Option
shall expire ten (10) years from the date hereof (the "Expiration Date"), and
must be exercised, if at all, in whole or in part, on or before the Expiration
Date. The Option Agreement will be in substantially the form of Exhibit A
attached hereto.
7. PURCHASE RIGHT ON EMPLOYEE'S STOCK AND OPTIONS.
(a) Irrevocable Option to Purchase. Upon (i) the death or Retirement of
Employee, (ii) the Company's termination of Employee's employment with the
Company by reason of Employee's Disability pursuant to the provisions of
paragraph 5(b) (a "Disability Termination") or for any other reason except a
termination for Cause pursuant to the provisions of paragraph 5(c) (a "Non-Cause
Termination"), or (iii) the termination of Employee's employment with the
Company by Employee for any reason other than a termination which follows less
than six months service to the Company or is effected upon less than 90 days'
prior written notice to the Company of such termination (hereinafter, a "Proper
Employee Termination"), then the Company shall have the exclusive and
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irrevocable right and option, exercisable in the sole judgment and discretion of
the Board, to purchase and acquire from Employee, or from Employee's Estate, all
of Employee's shares of Company capital stock ("Stock") (if any) and all of
Employee's options or rights to purchase Stock ("Options") (if any) in
accordance with the terms and conditions provided in this paragraph 7. Employee
or Employee's Estate hereby irrevocably and unconditionally agrees to transfer
Employee's Stock and Employee's Options on the terms and conditions set forth in
this paragraph 7.
(b) Purchase Price. The purchase price to be paid for any Stock to be
acquired under this paragraph 7 shall be the fair market value of such Stock as
of the last day of the calendar month immediately preceding the date of death or
termination of employment as described in paragraph 7(a) hereof. The purchase
price to be paid for Employee's Options to be acquired under this paragraph 7
shall be the fair market value of the Stock for which Employee's Options are
exercisable (the "Vested Options" as of the last day of the calendar month
immediately preceding the date of death or termination of employment as
described paragraph 7(a) hereof), less an amount equal to the exercise price of
Employee's Options in respect of such Stock. In each case, the fair market value
of the Stock shall be determined in good faith by the Board (not taking into
account any discount for non-voting nature (if applicable), minority interest or
restriction on transferability) and, if Employee or Employee's Estate does not
object to such determination in a writing delivered to and received by the
Company within ten (10) business days of the Company's delivery of such
determination to such party, such Board' determination shall be conclusive and
binding upon Employee or Employee's Estate, as the case may be, for all purposes
hereunder. If Employee or Employee's Estate makes a timely (i.e., within the 10
business days) written objection to the determination of fair market value made
by the Board, the determination of such fair market value of the Stock shall be
submitted to an investment banking or valuation firm selected by the Board after
consultation with Employee or Employee's Estate (the "Primary Investment Firm"),
whose fees and expenses shall be shared equally by the Company, on the one hand,
and Employee or Employee's Estate, on the other hand. If Employee and the
Company agree in advance in writing to the selection of the Primary Investment
Firm, then such Primary Investment Firm's determination shall be conclusive and
binding upon Employee or Employee's Estate, as the case may be, for all purposes
hereunder. If Employee and the Company do not agree in advance in writing to the
selection of the Primary Investment Firm, then the Primary Investment Firm shall
determine the fair market value of the Stock promptly following its selection by
the Board; if, following such determination of fair market value by such Firm,
either the Company or Employee or Employee's Estate objects to such
determination in a writing delivered to the other party within ten (10) business
days of receipt thereof, the Company and Employee or Employee's Estate shall
mutually agree to a second investment banking or valuation firm (the "Secondary
Investment Firm"), who shall make a determination of such fair market value of
the Stock and whose fees and expenses shall be paid by the person objecting to
the determination made by the Primary Investment Firm. If such valuation by the
Secondary Investment Firm is procured, it shall be delivered to the other party,
and the average of the fair market values as determined by the Primary
Investment Firm and the Secondary Investment Firm shall be the fair market value
for purposes of this Paragraph 7 and shall be conclusive and binding on all
parties for all purposes hereof.
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(c) Upon termination of Employee for Cause, the Company shall have the
right and option to acquire Employee's Stock for the Net Book Value per share of
such Stock, based upon the Company's latest audited financial statements. All of
Employee's Options shall be terminated, expired, void and of no further force or
effect.
(d) Employee must deliver stock certificates representing his Stock to
the Company within five business days of a demand in writing to such effect. If
Employee fails to so deliver the stock certificates, the Company may mail a
check for the purchase price or the net book value purchase price of such Stock
to Employee's last known address and cancel such Stock on the books and records
of the Company and such Stock shall have no further force or effect. In the case
of a negative net book value, no purchase price need be delivered before
canceling the Stock.
8. COMPANY PROPERTY; INVENTIONS.
(a) All records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, and other property delivered to or
compiled by Employee by or on behalf of the Company or their representatives,
vendors, or customers which pertain to the business of the Company shall be and
remain the property of the Company, as the case may be, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials, and other similar data pertaining to the
business, activities, or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
(b) Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of Employee's employment by the Company. Employee hereby
assigns and agrees to assign all of Employee's interests therein to the Company
or its nominee. Whenever requested to do so by the Company, Employee shall
execute any and all applications, assignments, or other instruments that the
Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
9. CONFIDENTIALITY AND PROPRIETARY INFORMATION.
(a) Acknowledgement. Employee acknowledges and agrees that in the
course of rendering services to the Company and its customers, Employee will
have access to and will become acquainted with confidential and proprietary
information about the professional, business and financial affairs of the
Company, its affiliates and its vendors, suppliers and customers, and that
Employee may have contributed to or may in the future contribute to such
information. Employee further recognizes that Employee is being employed as a
key employee, that the Company is engaged in a highly competitive business, and
that the success of the Company in the marketplace and business depends upon its
goodwill and reputation for integrity, quality and dependability. Employee
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recognizes that in order to guard the legitimate interests of the Company it is
necessary for the Company to protect all such confidential and proprietary
information, goodwill and reputation.
(b) Proprietary Information. In the course of Employee's service to the
Company, Employee may have access to confidential know-how, business documents
or information, marketing data, client lists and trade secrets which are
confidential. Such information shall hereinafter be called "Proprietary
Information" and shall include any and all items enumerated in the preceding
sentence which come within the scope of the business activities of the Company
as to which Employee has had or may have access, whether previously existing,
now existing or arising hereafter, whether or not conceived or developed by
others or by Employee alone or with others during the period of his service to
the Company, and whether or not conceived or developed during regular working
hours. "Proprietary Information" shall not include any information which is in
the public domain during the period of service by Employee or becomes public
thereafter, provided such information is not in the public domain as a
consequence of disclosure by Employee in violation of this Agreement.
(c) Fiduciary Obligations. Employee agrees and acknowledges that the
Proprietary Information is of critical importance to the Company and a violation
of this Section 8 will seriously and irreparably impair and damage the Company's
business. Employee therefore agrees, while he is an employee of the Company and
at all times thereafter, to keep all Proprietary Information strictly
confidential.
(d) Non-Disclosure. Except as required by law or order of any court or
governmental entity or in connection with the proper performance of his duties
hereunder, Employee shall not disclose, directly or indirectly (except as
required by law), any Proprietary Information to any person other than (a) the
Company, (b) persons who are authorized employees of the Company at the time of
such disclosure, (c) such other persons, including prospective investors or
lenders, to whom Employee has been instructed to make disclosure by the
Company's Board, or (d) Employee's counsel, so long as such counsel agrees to
keep all Proprietary Information confidential (in the case of clauses (b) and
(c), only to the extent required in the course of Employee's service to the
Company). Upon any termination of Employee's employment hereunder, Employee
shall deliver to the Company all notes, letters, documents, tapes, discs,
recorded data and records which may contain Proprietary Information which are
then in Employee's possession or control and shall not retain, use, or make any
copies, summaries or extracts thereof.
10. INDEMNIFICATION. In the event Employee is made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against
Employee), by reason of the fact that Employee is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including reasonable attorneys' fees), judgments, fines, and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
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party to the same third-party action, complaint, suit, or proceeding, the
Company agrees to engage competent legal representation, and Employee agrees to
use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and the Company shall pay all
reasonable attorneys' fees of such separate counsel. Further, while Employee is
expected at all times to use Employee's best efforts to faithfully discharge his
duties under this Agreement, Employee cannot be held liable to the Company for
errors or omissions made in good faith where Employee has not exhibited gross,
willful and wanton negligence and misconduct or performed criminal and
fraudulent acts which materially damage the business of the Company.
11. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of Employee's duties hereunder will not violate
or be a breach of any agreement with a former employer, client, or any other
person or entity. Further, Employee agrees to indemnify the Company for any
claim, including but not limited to attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company based upon or arising out of any
noncompetition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
Employee has and will continue to truthfully disclose to the Company
the following matters, whether occurring, at any time during the five (5) years
immediately preceding the date of this Agreement or at any time during the term
of this Agreement:
(1) any criminal complaint, indictment or criminal
proceeding in which Employee is named as a defendant;
(2) any allegation, investigation, or proceeding,
whether administrative, civil or criminal, against Employee by any
licensing authority or industry association; and
(3) any allegation, investigation or proceeding,
whether administrative, civil, or criminal, against Employee for
violating professional ethics or standards, or engaging in illegal,
immoral or other misconduct (of any nature or degree), relating to the
business of the Company.
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12. ASSIGNMENT; BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding on Employee and the Company and Employee's and the Company's
respective heirs, personal representatives, successors and assigns; provided,
however, that Employee shall have no right to assign Employee's rights or duties
under this contract to any other person. In the event of the sale, merger or
consolidation of the Company, Employee specifically agrees that the Company may
assign the Company's rights and obligations hereunder to the Company's
successor, assign or purchaser. In addition, and in any event, the Company may,
at any time, assign the Company's rights and obligations under this Agreement to
any person that is an affiliate of the Company or to any person which, after any
such assignment, employs at least 50% of the employees employed by the Company
immediately prior to the assignment.
13. COMPLETE AGREEMENT; AMENDMENTS. This Agreement supersedes any other
agreements or understandings, written or oral, among the Company and Employee,
and Employee has no oral representations, understandings or agreements with the
Company or any of its officers, directors, or representatives covering the same
subject matter as this Agreement. This written Agreement is the final, complete,
and exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement, and it cannot be varied,
contradicted, or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This written Agreement may not be later modified except
by a written instrument signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a written
instrument signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Take to Auction.com, Inc.
2315 N.W. 107th Avenue, Suite 1 M-28
Miami, Florida 33172
Attention: President
To Employee: Jonathan Geller
________________________
________________________
Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or, in any other case, when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this paragraph 14.
15. SEVERABILITY. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. Employee and
the Company agree and acknowledge that the provisions of paragraphs 4 and 9 are
12
<PAGE>
material and of the essence to this Agreement. If the scope of any restriction
or covenant contained therein should be or become too broad or extensive to
permit enforcement thereof to its fullest extent, then such restriction or
covenant shall be enforced to the maximum extent permitted by law, and Employee
hereby consents and agrees that (a) it is the parties intention and agreement
that the covenants and restrictions contained therein be enforced as written,
and (b) in the event a court of competent jurisdiction should determine that any
restriction or covenant contained therein is too broad or extensive to permit
enforcement thereof to its fullest extent, the scope of any such restriction or
covenant may be modified accordingly in any judicial proceeding brought to
enforce such restriction or covenant, but should be modified to permit
enforcement of the restrictions and covenants contained herein to the maximum
extent the court, in its judgment, will permit.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement or Employee's employment with the Company (or any
termination thereof) shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Broward County, Florida, in
accordance with the rules of the American Arbitration Association then in
effect. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The prevailing party shall receive and the unsuccessful party
shall pay the reasonable fees and expenses of any arbitration proceeding in
connection with this Agreement.
17. GOVERNING LAW. This Agreement shall in all respects be construed according
to the laws of the State of Florida.
18. HEADINGS. The paragraph headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define, or limit the extent
or intent of the Agreement or of any part hereof.
19. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute but one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement as of the date first above written.
The Company:
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
-----------------------
Name: Albert Friedman
Title: President and CEO
Employee:
/s/ Jonathan Geller
-------------------
Jonathan Geller
14
EXHIBIT 10.04
OFFICE BUILDING NET LEASE
This Lease Agreement (sometimes hereinafter referred to as the "Lease")
is made and entered into this____ day of December,1999 by and between ANGLERS
OFFICE PARK, INC., a Florida corporation doing business as Anglers Corporate
Center (hereinafter called "LANDLORD"), whose address for purposes hereof is
2860 Pershing Street, Hollywood, Florida 33020 and TAKE TO AUCTION.COM, INC., a
Florida corporation (hereinafter called "TENANT" ), whose address for purposes
hereof is 2335 NW 107th Avenue, Suite 2M-23, Miami, Florida 33172.
WITNESSETH:
LANDLORD and TENANT agree to the following definitions for the defined terms
contained herein:
DEFINITIONS
a) Premises or Leased Premises is hereby defined as: Suite Number 16 located in
the Building and such Leased Premises being more particularly described as
approximately 10,545 square feet of office space.
b) Building is hereby defined as Anglers Corporate Center located at 5555
Anglers Avenue, Ft. Lauderdale, Broward County, Florida.
c) Base Rental is hereby defined as follows:
<TABLE>
<CAPTION>
Year Per Square Foot Monthly Annually
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 13.00 $11,423.75 $137,085.00
2 13.65 $11,994.94 $143,939.25
3 14.33 $12,592.49 $151,109.85
4 15.05 $13,225.19 $158,702.25
5 15.80 $13,884.25 $166,611.00
Total Base Rental: $757,447.35
</TABLE>
Base Rental plus applicable sales/use tax is payable in equal monthly
installments on the first day of each month of the Lease Term (hereinafter
defined).
d) Lease Term or Term is hereby defined as being for a period of Five (5) years
commencing on that date which is the earlier of occupancy or five days after
written notice from LANDLORD to TENANT that any improvements to the Premises to
be effected by LANDLORD as described in Exhibit "A" hereto have been certified
for occupancy by all applicable authorities (the "Commencement Date").
e) TENANT's Proportionate Share to be paid by the TENANT for Operating Expenses
and Impositions (as hereinafter defined) is hereby defined to be the percentage
which the area leased by the TENANT in the Building bears to the total area
contained in the Building which is approximately 43,925 square feet. This
percentage is 24%.
f) Operating Expenses, including Impositions, are hereby estimated as of the
inception of the Lease at $3.50 per square foot. Notwithstanding, Operating
Expenses and Impositions shall be fixed during year 1 of the Lease Term at $2.50
per square foot. Operating Expenses and Impositions are subject to change during
the remainder of the Lease Term and any renewal term.
g) Security Deposit is hereby defined to be $0 which TENANT has deposited
concurrently with LANDLORD upon the execution of the Lease by TENANT.
<PAGE>
h) Use or Purpose for which the TENANT will use and occupy the Leased Premises
shall be for the sole purpose of general office use only.
i) Parking Spaces shall consist of 40 non-designated, non-reserved parking
spaces in the Building's parking areas which shall be made available for use by
the TENANT and its employees, agents and invitees.
j) Upon execution and delivery of this Lease to LANDLORD, LANDLORD hereby
acknowledges payment by TENANT as follows:
First Month's Base Rental $11,423.75
First Month's Estimated Operating Expenses and Impositions $2,196.88
Sales/Use Tax $817.24
Security Deposit $0
Other $0
Total $14,437.87
With the submission of this Lease for LANDLORD's consideration, TENANT also
includes proof of insurance as described in Paragraph 15.
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<PAGE>
TERMS
The terms and conditions of the Office Building Net Lease attached hereto are
incorporated by reference and made a part hereof.
IN WITNESS WHEREOF, the parties hereto have signed, sealed and
delivered this Lease in quadruplicate at Broward County, Florida on the date and
year first written above.
LANDLORD:
ANGLERS OFFICE PARK, INC.
Witnesses: a Florida corporation
By: /s/ Marvin Mandel
- -------------------------------- ---------------------
Marvin Mandel, President
TENANT:
TAKE TO AUCTION.COM, INC.
Witnesses: a Florida corporation
By: /s/ Albert Friedman
- -------------------------------- --------------------
Albert Friedman, President
Attachments: Office Building Net Lease
Rules and Regulations
Exhibit "A" - Floor and Site Plans & LANDLORD's Work
Addendum to Office Building Net Lease
Guaranty of Lease
<PAGE>
OFFICE BUILDING NET LEASE
1. LEASED PREMISES: Subject to and upon the terms, provisions, covenants and
conditions hereinafter stated, and each in consideration of the duties,
covenant, and obligations of the other hereunder, LANDLORD does hereby lease,
demise and let to TENANT; and TENANT does hereby lease, demise and let from
LANDLORD those Leased Premises as reflected on the floor and site plans attached
hereto as Exhibit "A" and made a part hereof.
The size of the Leased Premises and of the Building as set forth in the
Definitions are hereby stipulated and agreed to whether the same should be more
or less as a result of variations resulting from actual construction and
completion of the Leased Premises and of the Building. The TENANT acknowledges
that the LANDLORD has made no representations with regard to the actual square
footage.
Additionally, by its acceptance of possession of the Premises, and the
commencement of rent payments by TENANT, TENANT hereby confirms that it has had
a full and adequate opportunity to inspect, examine and measure the Leased
Premises and the Building. As a result, TENANT hereby irrevocably stipulates to
the square footage of the Leased Premises set forth in paragraph (a) of the
Definitions herein. TENANT also stipulates to the square footage of the Building
set forth in paragraph (e) of the Definitions. TENANT further stipulates that
such square footage calculations shall not be subject to question,
interpretation, or modification either during or after the Term hereof, or any
extensions or renewals of this Lease, notwithstanding any subsequently
discovered discrepancy, regardless of kind or amount, between the actual square
footage and the square footage calculations set forth in paragraphs (a) and (e)
of the Definitions.
By occupying the Premises, TENANT shall be conclusively deemed to have
accepted the same as complying fully with LANDLORD'S covenants and obligations
to deliver the Premises as required hereby, subject to LANDLORD punch list items
which shall be completed within a reasonable period subject to availability of
materials and labor.
2. TERM: This Lease shall be for the Term herein previously defined unless
sooner terminated or extended as provided herein. If LANDLORD is unable to give
possession of the Leased Premises on the date of the commencement of the
aforesaid Lease Term by reason of the holding over of any prior tenant or
tenants or for any other reason, an abatement or diminution of the rent to be
paid hereunder shall be allowed TENANT under such circumstances until possession
is given to TENANT; but nothing herein shall operate to extend the initial Lease
Term beyond the agreed expiration date, and said abatement in rent shall be the
full extent of LANDLORD's liability to TENANT for any loss or damage to TENANT
because of said delay in obtaining possession of the Premises. There shall be no
delay in the commencement of the Term of this Lease nor shall there be any
abatement or diminution of the rent to be paid hereunder where TENANT fails to
occupy the Premises upon the Commencement Date, or in the event that LANDLORD
shall be delayed in substantially completing such work within the Leased
Premises as a result of:
a. TENANT's failure to promptly furnish working drawings and
plans as may be required to be provided by TENANT; or
b. TENANT's failure to approve cost estimates or other items
requiring TENANT's approval within one (1) week of receipt
from LANDLORD; or
c. TENANT's failure to promptly select materials, finishes, or
installation; or
d. TENANT's changes in plans (notwithstanding LANDLORD's approval
of any such changes); or
e. Any other act of omission by TENANT or its agents, or failure
to promptly make other decisions
necessary to the preparation of the Leased Premises for
occupancy; or
f. TENANT's failure to obtain any permits and inspections
required to be obtained by TENANT; or
g. TENANT's failure to obtain an occupational license.
The commencement of the Term and the payment of rent shall not be
affected, delayed or deferred on account of any of the foregoing. For the
<PAGE>
purposes of this paragraph, the Leased Premises shall be deemed substantially
completed and ready for occupancy by TENANT (subject to the issuance of any
required certificate of occupancy) when LANDLORD's supervising architect
certifies that the work required of LANDLORD, if any, has been substantially
completed in accordance with the approved plans and specifications.
Taking possession of the Leased Premises by TENANT shall be conclusive
evidence as against TENANT that the Leased Premises were in good and
satisfactory condition, completed in accordance with the approved plans, when
possession was so taken. If TENANT, with LANDLORD's consent, shall occupy the
Leased Premises prior to the beginning of the Lease Term as specified
hereinabove, all provisions of this Lease shall be in full force and effect
commencing upon such occupancy; and rent for such period shall be paid by TENANT
at the same rate herein specified unless otherwise provided herein.
Provided that TENANT is not then in default in the performance
of any provision of this Lease, nor has it been in default during the previous
six months, the TENANT shall have the option to renew this Lease for one
additional term of Five (5) years commencing at the expiration of the initial
Lease Term. All of the terms and conditions of this Lease shall apply during the
renewal term. Base Rental during the first year of the renewal term of this
Lease shall be calculated based upon the rate of $15.07 per square foot.
Thereafter, the Base Rental shall increase at the rate of three (3%) percent
annually during the renewal term. This option to renew shall be exercised by
written notice given to LANDLORD not less than 120 days prior to the expiration
of the initial Lease Term. If notice is not given in the manner provided herein
within the time specified, this option shall expire.
3. BASE RENTAL: TENANT agrees to pay LANDLORD the Base Rental in advance,
without prior demand or any abatement, deduction or set-off, in monthly
installments on the first day of each and every month during the Term. If the
Lease Term commences on any day of a month except for the first day, TENANT
shall pay LANDLORD Base Rental as provided for herein for such commencement
month on a prorated basis (such proration to be based on the actual number days
in the commencement month); and the first month's rent paid by TENANT, if any,
upon execution of this Lease shall apply and be credited to the next full
month's rent due hereunder. Base Rental for any partial month of occupancy at
the end of the Term of this Lease shall be prorated, such proration to be based
on the actual number of days in the partial month. Rent is payable at LANDLORD's
office at 2860 Pershing Street, Hollywood, Florida 33020 unless LANDLORD
notifies TENANT otherwise.
The Base Rental does not include electricity, telephone service or any
utilities (other than water and sewer) which serve the Premises or accommodate
the use of the Premises by TENANT. Telephone service, janitorial service to the
Leased Premises and interior maintenance shall be the TENANT's separate
responsibility.
In addition to Base Rental, TENANT shall and hereby agrees to pay to
LANDLORD each month a sum equal to any sales tax, tax on rentals, and any other
charges, taxes and/or impositions now in existence or hereafter imposed based
upon the privilege of renting the space leased hereunder or upon the amount of
rentals collected therefor. However, nothing herein shall be taken to require
TENANT to pay any part of any federal and state taxes on income imposed upon
LANDLORD.
If TENANT shall fail to pay any installment of Base Rental, or any item
of additional rent within ten (10) days after its due date, such unpaid amounts
shall bear interest from the due date thereof to the date of payment at a rate
which shall be eighteen percent (18%) per annum, or the maximum rate permitted
by applicable usury laws if such rate is different from eighteen (18%) percent
per annum. In addition thereto, if TENANT shall fail to pay any installment of
Base Rental, or any item of additional rent within five (5) days of written
notice from LANDLORD of non-payment, then TENANT shall also pay to LANDLORD a
late payment service charge ("Late Charge") contributing to administrative and
overhead expenses equal to five cents (5(cent)) per each dollar so overdue. In
addition thereto, if any check tendered by TENANT to LANDLORD is returned unpaid
for any reason, then TENANT shall also pay to LANDLORD a Returned Check Charge
of $50.00 contributing to administrative and overhead expenses and bank charges.
The failure of TENANT to pay such Returned Check Charge within five (5) days
after being notified of the returned check shall constitute a default under this
Lease. The provisions herein for the payment of the Late or Returned Check
Charge shall not be construed to represent interest but are intended to
reimburse LANDLORD for its overhead and expense so incurred and shall not be
construed to extend the date for payment of any sums required to be paid by
2
<PAGE>
TENANT hereunder or to relieve TENANT of its obligation to pay all such sums at
the time or time herein stipulated. Interest, Late Charges and Returned Check
Charges are considered additional rent.
4. ADDITIONAL RENT:
A. TENANT shall pay to LANDLORD as additional rent TENANT's
Proportionate Share of the Operating Expenses of the Building as provided
hereinafter. The term "Operating Expenses" as used herein shall mean all
expenses, costs and disbursements of every kind and nature which LANDLORD shall
pay or become obligated to pay because of or in connection with the ownership,
maintenance and/or operation of the Building, computed on the accrual basis, but
shall not include new capital improvements. By way of explanation and
clarification, these Operating Expenses shall include, without limitation, the
following:
1. Wages and salaries of all employees and management
engaged in operation and maintenance of the Building,
employer's social security taxes, unemployment taxes
or insurance, and any other taxes which may be levied
on such wages and salaries, the cost of disability,
hospitalization and workers compensation insurance,
pension or retirement benefits, or any other fringe
benefits for such employees.
2. All supplies and materials used in operation and
maintenance of the Building.
3. Cost of all utilities including water and sewer for
the entire Building and electricity used by the
Building and not charged directly to any tenant.
4. Cost of customary building management, trash and
garbage removal from dumpsters, water and sewer,
painting, window cleaning, landscaping and gardening,
lawn sprinklers, parking lot maintenance, servicing
and maintenance of all systems and equipment serving
the common areas exclusively, including but not
limited to, plumbing, lighting, electrical, fire
pumps, fire extinguishers and hose repair, cabinets,
and staging; and damage caused by fire or other
casualty not otherwise recovered including the
deductibles applicable to any insurance policies.
5. Cost of insurance for property, loss of rents, flood,
casualty and other liability applicable to the
Building and LANDLORD's personal property used in
connection therewith.
Notwithstanding any other terms of this Lease, the term "Operating
Costs" shall not include the following items:
(i) Any payments under a ground lease or master lease relating to the
Building;
(ii) Costs of a capital nature (including amortization payments and
depreciation of any type), including but not limited to capital improvements,
alterations and repairs;
(iii) Rentals for items which if purchased, rather than rented, would
constitute a capital improvement or equipment;
(iv) The cost of any item to the extent LANDLORD receives reimbursement
from insurance or condemnation proceeds;
(v) Costs, including permit, license and inspection costs, incurred
with respect to the installation of tenants' or other occupants' improvements
made for tenants or other occupants in the Building or incurred in renovating or
otherwise improving, decorating, painting or redecorating space for tenants or
other occupants of the Building;
(vi) Marketing and promotional costs, including but not limited to
leasing commissions, real estate brokerage commissions, and attorneys' fees in
3
<PAGE>
connection with the negotiation and preparation of letters, deal memos, letters
of intent, leases, subleases and/or assignments, space planning costs, and other
costs and expenses incurred in connection with lease, sublease and/or assignment
negotiations and transactions with present or prospective tenants or other
occupants of the Building;
(vii) Costs of services, utilities, or other benefits which are not
offered to TENANT or for which TENANT is charged for directly but which are
provided to another tenant or occupant of the Building, including, but not
limited to, above Building standard heating, ventilation and air conditioning,
janitorial services and exclusive use Common Areas;
(viii) Costs incurred by LANDLORD due to any violation of the terms and
conditions of any lease of space or occupancy agreement in the Building;
(ix) Costs and the overhead and profit increment paid to LANDLORD, to
affiliates or partners of LANDLORD, partners or affiliates of such partners, or
affiliates of LANDLORD for goods and/or services in the Building to the extent
the same exceeds the costs or the overhead profit increment, as the case may be,
of such goods and/or services rendered by unaffiliated third parties on a
competitive basis in comparable buildings;
(x) Interest, principal, attorneys' fees, environmental investigations
or reports, points, fees and other lender costs and closing costs on debts or
amortization on any mortgage or mortgages or any other debt instrument
encumbering the Building or any part thereof or on any unsecured debt.
(xi) LANDLORD's general overhead and general and administrative
expense, other than the management fee being paid and included in Operating
Costs, including costs relating to accounting, payroll, legal and computer
services which are partially or totally rendered in locations outside the
Building;
(xii) Salaries of officers, executives or other employees of LANDLORD,
any affiliate of LANDLORD, or partners or affiliates of such partners or
affiliates, other than any personnel engaged exclusively in the management,
operation, maintenance, and repair of the Building (but not leasing or
marketing), and working in the Building management office and not typically
included in the management fee being paid and included in Operating Costs;
provided such individuals do hold a position which is generally considered to be
higher in rank than the position of the manager of the Building or the chief
engineer of the Building.
(xiii) All items and services for which TENANT or any other tenant in
the Building is required to reimburse LANDLORD (other than through TENANT's
Share or any other tenant's share of Operating Costs);
(xiv) Advertising and promotional expenditures, including but not
limited to tenant newsletters, other than Building's tenant newsletter received
by the tenants of the Building or Building promotional gifts, events or parties
for existing or future occupants, and the costs of signs (other than the
Building directory) in or on the Building identifying the owner of the Building
or other tenants' signs and any costs related to the celebration or
acknowledgment of Holidays, other than reasonable costs for refreshments and
food served to all tenants of the Building for such Holiday celebrations or
acknowledgments;
(xv) Electric power or other utility costs for which any tenant
directly contracts with the local public service company;
(xvi) All management fees and costs, and the wages, salaries, employees
benefits and taxes for personnel working in connection with the ownership,
operation and management of the parking areas of the Building, including any
adjacent parking structure and any off-site parking areas used by tenants of the
Building (collectively, the "Parking Facility");
(xvii) Costs incurred in connection with any governmental laws and
regulations applicable to the Building which were enacted prior to the
Commencement Date, including, but not limited to life, fire and safety codes,
environmental and hazardous materials laws and federal, state, or local laws or
regulations relating to disabled access, including, but not limited to, the
Americans with Disabilities Act;
4
<PAGE>
(xviii) Costs, penalties, fines or awards and interest incurred as a
result of LANDLORD's negligence in LANDLORD's operation of the Building,
violations of law, negligence or inability or unwillingness to make payments
and/or to file any income tax, or other tax or informational returns when due.
(xix) Costs which are covered by and reimbursable under any contractor,
manufacturer or supplier warranty or service contract;
(xx) Costs arising from the negligence, or intentional acts of LANDLORD
or its agents, or any other tenant, or any vendors, contractor, subcontractors
or providers of materials or services selected, hired or engaged by LANDLORD or
its agents to the extent LANDLORD receives reimbursement therefrom;
(xxi) Costs arising from the presence or removal which removal is
required in compliance with any governmental laws, ordinances, regulations or
orders which are enacted prior to the Commencement Date) of Hazardous Materials
located in the Building, including, without limitation, any costs incurred
pursuant to the requirements of any governmental laws, ordinances, regulations
or orders relating to health safety or environmental conditions, including but
not limited to regulations concerning asbestos, soil and ground water conditions
or contamination regarding Hazardous Materials or substances;
(xxii) Costs arising from LANDLORD's charitable or political
contributions;
(xxiii) Costs arising from any type of insurance maintained by LANDLORD
which is not required or allowed to be maintained by LANDLORD pursuant to this
Lease;
(xxiv) Costs for the maintenance or repair of the objects of art
located in the Building if serviced by the original artist thereof or its agent
or employee and costs for sculpture; paintings or other objects of art which are
not, as of the date of this Lease, located in the Building;
(xxv) Costs (including in connection therewith all attorneys' fees and
costs of settlement judgments and payments in lieu thereof) arising from claims,
disputes or potential disputes in connection with potential or actual claims,
litigation or arbitration pertaining to LANDLORD and/or the Building;
(xxvi) Costs, including but not limited to attorneys' fees associated
with the operation of the business of the partnership or entity which
constitutes LANDLORD as the same are distinguished from the costs or operation
of the Building, including partnership accounting and legal matters, costs of
defending any lawsuits with any mortgagee, costs of selling, syndicating,
financing, mortgaging or hypothecating any of LANDLORD's interest in the
Building or any part thereof, costs of any disputes between LANDLORD and its
employees, disputes of LANDLORD with Building management or personnel, or
outside fee paid in connection with disputes with other tenants;
(xxvii) Costs incurred in removing and storing the property of former
tenants or occupants of the Building;
(xxviii) The cost of any work or services performed for any tenant
(including TENANT) at such tenant's cost;
(xxix) The cost of correcting major and/or latent defects in the
design, construction or equipping of the Building or in the Building equipment;
(xxx) Intentionally Deleted;
(xxxi) The cost of any work or service performed for any tenant of the
Building (other than TENANT) to a materially greater extent or in materially
more favorable manner than that offered to TENANT;
5
<PAGE>
(xxxii) Premiums for insurance to the extent LANDLORD is reimbursed
therefore (such proceeds to be excluded from Operating Costs in the year in
which received, except any reasonable deductible amount under any insurance
policy);
(xxxiii) The cost of furnishing and installing non-Building Standard
replacement bulbs and ballasts in tenant spaces;
(xxxiv) The cost of any labor, service, materials, supplies or
equipment, which is not comparable to the prevailing market rate for such labor,
service, materials, supplies or equipment at the time in the comparable
buildings;
(xxxv) The entertainment expenses and travel expenses of LANDLORD, its
employees, agents, partners and affiliates;
(xxxvi) Any improvement installed or work performed or any other cost
or expense incurred by LANDLORD after the Commencement Date in order to comply
with requirements for obtaining or renewing a certificate of occupancy for the
Building or any space therein;
(xxxvii) Intentionally Deleted;
(xxxiii) Any costs recovered by LANDLORD to the extent such cost
recovery allows LANDLORD to recover more than 100% of Operating Costs for any
Fiscal Year from tenants of the Building;
(xxxix) Any profit made by LANDLORD in connection with LANDLORD's
collections of Operating Costs; and,
(xl) Any costs for which LANDLORD has been reimbursed or receives a
credit, refund or discount, provided if LANDLORD receives the same in connection
with any costs or expenditures previously included in Operating Costs for a
Fiscal Year, LANDLORD shall immediately credit against Base Rent any overpayment
for such previous Fiscal Year.
LANDLORD shall notify TENANT at the inception of the Lease and after
the end of each calendar year during the Term hereof, of the amount which
LANDLORD estimates (as evidenced by budgets prepared by or on behalf of
LANDLORD) shall be the amount of TENANT"s Proportionate Share of Operating
Expenses for the then current calendar year and TENANT shall pay such sum in
advance to LANDLORD in equal monthly installments, during the balance of said
calendar year, commencing on the first day of the first month following TENANT's
receipt of such notification. Following the end of each calendar year, LANDLORD
shall submit to TENANT a statement showing the actual amount which should have
been paid by TENANT with respect to Operating Expenses for the past calendar
year, the amount thereof actually paid during that year by TENANT and the amount
of the resulting balance due thereon, or overpayment thereof, as the case may
be. Within thirty (30) days after receipt by TENANT of said statement, TENANT
shall have the right in person to inspect LANDLORD's books and records showing
the Operating Expenses for the Building for the calendar year covered by said
statement. Said statement shall become final and conclusive between the parties,
their successors and assigns as to the matters set forth therein unless LANDLORD
receives written objections with respect thereto within said thirty (30) days of
TENANTS receipt of said statement. Any balance shown to be due pursuant to said
statement shall be paid by TENANT to LANDLORD within thirty (30) days following
TENANT's receipt thereof and any overpayment shall be immediately credited
against TENANT's obligation to pay expected additional rent in connection with
anticipated increases in Operating Expenses or, if by reason of any termination
of the Lease no such future obligation exists, refunded to TENANT. Anything
herein to the contrary notwithstanding, TENANT shall not delay or withhold
payment of any balance shown to be due pursuant to a statement rendered by
LANDLORD to TENANT, pursuant to the terms hereof, because of any objection which
TENANT may raise with respect thereto. LANDLORD shall immediately credit any
overpayment found to be owing to TENANT against TENANT's Proportionate Share of
increases in Operating Expenses for the then current calendar year (and future
calendar years, if necessary) upon the resolution of said objection or, if at
the time of the resolution of said objection, the Lease Term has expired,
immediately refund to TENANT any overpayment found to be owing to TENANT.
6
<PAGE>
LANDLORD agrees to maintain accounting books and records reflecting Operating
Expenses of the Building in accordance with generally accepted accounting
principles.
Additional rent, due by reason of the provisions of this Subparagraph
4A for the final months of this Lease, is due and payable even though it may not
be calculated until subsequent to the termination date of the Lease; the
Operating Expenses for the calendar year during which the Lease terminates shall
be prorated according to that portion of said calendar year that this Lease was
actually in effect. TENANT expressly agrees that LANDLORD, at LANDLORD's sole
discretion, may apply the Security Deposit specified in Paragraph 7 hereof, if
any, in full or partial satisfaction of any additional rent due for the final
months of this Lease by reason of the provisions of this Subparagraph 4A. If
said Security Deposit is greater than the amount of any such additional rent,
and there are no other sums or amount owed LANDLORD by TENANT by reason of any
other terms, provisions, covenants or conditions of this Lease, then LANDLORD
shall refund the balance of said Security Deposit to TENANT as provided in
Paragraph 7 hereof. Nothing herein contained shall be construed to relieve
TENANT, or imply that TENANT is relieved of the liability for or the obligation
to pay any additional rent due for the final months of this Lease by reason of
the provisions of this Paragraph 4A if said Security Deposit is less than such
additional rent; nor shall LANDLORD be required to first apply said Security
Deposit to such additional rent if there are any other sums or amounts owed
LANDLORD by TENANT by reason of any other terms, provisions, covenants or
conditions of this Lease.
B. TENANT shall pay to LANDLORD, as additional rent, TENANT's
Proportionate Share of the Impositions for each calendar year, if any.
The term "Impositions" as used herein shall mean all impositions, tax
assessments (special or otherwise), water and sewer assessments and other
governmental liens or charges of any and every kind, nature and sort whatsoever,
ordinary and extraordinary, foreseen and unforeseen, and substitutes therefore,
including all taxes whatsoever (except only those taxes of the following
categories: any inheritance, estate, succession, transfer, gift or income taxes
imposed upon the LANDLORD) attributable in any manner to the Building, the land
on which the Building is located or the rents (however the term may be defined)
receivable therefrom, or any part thereof, or any use thereon, or any facility
located therein or used in conjunction therewith or any charge of other payment
required to be paid to any governmental authority, whether or not any of the
foregoing shall be designated "real estate tax", "sales tax", "rental tax",
"excise tax", "business tax", or designated in any other manner.
LANDLORD shall notify TENANT at the inception of the Lease and after
the end of each calendar year during the Term hereof of the amount which
LANDLORD estimates (as evidenced by budgets prepared by or on behalf of
LANDLORD) shall be the amount of TENANT's Proportionate Share of Impositions for
the then current calendar year; and TENANT shall pay such sum to LANDLORD in
equal monthly installments during the balance of said calendar year, in advance
on the first day of each month commencing on the first day of the first month
following TENANT's receipt of such notification. Following the date on which
LANDLORD receives a tax bill or statement showing what the actual Impositions
are with respect to each calendar year, LANDLORD may submit to TENANT a
statement showing the actual amount to be paid by TENANT in the year in question
with respect to Impositions for such year, the amount thereof actually paid by
TENANT and the amount of the resulting balance due thereon, or overpayment
thereof, as the case may be. Any balance shown to be due pursuant to said
statement shall be paid by TENANT to LANDLORD within ten (10) days following
TENANT's receipt thereof and any overpayment shall be immediately credited
against TENANT's obligation to pay such additional rent in connection with
increased Impositions in later years, or, if no such future obligation exists,
be immediately refunded to TENANT.
Additional rent, due by reason of the provisions of this Subparagraph
4B for the final months of this Lease, shall be payable even though the amount
thereof is not determinable until subsequent to the termination of the Lease;
the Impositions for the calendar year during which the Lease terminates shall be
prorated according to that portion of said calendar year that this Lease was
actually in effect. TENANT expressly agrees that LANDLORD at LANDLORD's sole
discretion, may apply the Security Deposit specified in Paragraph 5 hereof, if
any, in full or partial satisfaction of any additional rent due for the final
months of this Lease by reason of the provisions of this Paragraph 4B. If said
Security Deposit is greater than the amount of such additional rent and there
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are no other sums or amounts owed LANDLORD by TENANT by reason of any other
terms, provisions, covenants or conditions of this Lease, then LANDLORD shall
refund the balance of said Security Deposit to TENANT as provided in Paragraph 5
hereof. Nothing herein contained shall be construed to relieve TENANT, or imply
that TENANT is relieved of the liability for or the obligation to pay any
additional rent due for the final months of this Lease by reason of the
provisions of this Paragraph 4B if said Security Deposit is less than such
additional rent; nor shall LANDLORD be required to first apply said Security
Deposit to such additional rent if there are any other sums or amounts owed
LANDLORD by TENANT by reason of any of the terms, provisions, covenants, or
conditions of this Lease.
C. It is the intention of the parties hereto to provide that TENANT
shall pay in advance of their due date TENANT's Proportionate Share of Operating
Expenses and Impositions and to share in reduction only by category to the end
that an increase in Operating Expenses shall not be offset by a decrease in
Impositions and vice versa. In no event shall the Base Rental be reduced by
reason of decreases in Operating Expenses and/or Impositions. This Paragraph
shall survive the termination of the Lease.
5. SECURITY DEPOSIT: The Security Deposit shall be retained by LANDLORD as
security for the payment by TENANT of the rents and all other payments herein
agreed to be paid by TENANT and for the faithful performance by TENANT of the
terms, provisions, covenant and conditions of this Lease. It is agreed that
LANDLORD, at LANDLORD's option may, at the time of any default by TENANT under
any of the terms, provisions, covenants or conditions of the Lease, apply said
sum or any part thereof toward the payment of the rents and all other sums
payable by TENANT under this Lease, and towards the performance of and every one
of TENANT's covenants under this Lease, but such covenants and TENANT's
liability under this Lease shall thereby be discharged only pro tanto, that
TENANT shall remain liable for and shall pay within ten (10) days after demand
by LANDLORD any amounts that such sum shall be insufficient to pay; that
LANDLORD may exhaust any and all rights and remedies against TENANT before
resorting to said sum, but nothing herein contained shall require or be deemed
to require LANDLORD to do so; that, in the event this deposit shall not be
utilized for any such purposes, then such deposit shall be returned by LANDLORD
to TENANT within fifteen (15) days after the expiration of the Term of this
Lease (and the return of the keys to the LANDLORD)or the determination and
payment of the amount due under Paragraph 4 of this Lease, if any, whichever
occurs later. The TENANT shall not attempt to apply the security deposit to
rent. Any attempt to hold back rent payments or any other payments due to
LANDLORD under this Lease by directing the LANDLORD to apply all or part of the
security deposit to rent shall be deemed, at the option of LANDLORD, a default
in this Lease. The LANDLORD shall not be required to pay TENANT any interest on
said Security Deposit. The LANDLORD may commingle the security deposit with its
own funds.
6. USE: TENANT shall use and occupy the Leased Premises for the use or purpose
as hereinbefore stated and for no other use or purpose. The use of the premises
shall be further limited to office and/or showroom use only. No manufacturing,
warehousing or distribution shall be permitted upon or from the Leased Premises.
The TENANT's use of the Leased Premises is subject to all applicable zoning and
use regulations and it shall be TENANT's responsibility to obtain an
occupational license for its business at the Leased Premises prior to the
commencement date of the Lease.
TENANT shall not do or permit to be done in or about the Premises, nor
bring or keep or permit to be brought or kept therein, anything which is
prohibited by or will in any way conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated, or which is prohibited by any standard form of fire insurance
policy. TENANT shall not use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose; nor shall TENANT cause, maintain, or
permit any nuisance in, on, or about the Premises or commit or suffer to be
committed any waste in, on, or about the Premises. TENANT shall not do or permit
anything to be done in or about the Premises which will, in any way, obstruct or
interfere with the rights of other tenants of the LANDLORD in the Building, or
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injure or annoy them; nor shall TENANT cause, maintain, or permit any nuisance
in, on, or about the Premises. No outside storage of any kind shall be
permitted. TENANT shall at all times keep the outside of the Premises, the
common areas of the Building and the parking areas free from all refuse, packing
materials, crates, pallets and similar materials. TENANT shall not overload the
dumpsters. TENANT shall at no time block access, ingress or egress to the
Building, the parking areas or the property upon which the Building is located
or any portion of it.
TENANT shall promptly execute and comply with all statutes, ordinances,
rules, orders, regulations and requirements of the Federal, State, county and
city governments, and of any and all their departments, bureaus or agencies
applicable to the Leased Premises for the correction, prevention and abatement
of nuisance or other grievances, in, upon or connected with said Premises,
during the Lease Term. TENANT shall comply with all applicable fire regulations
enforced by the City of Dania Beach or any other governmental agency having
jurisdiction over the Leased Premises or TENANT's use thereof.
TENANT covenants that no nuisance or hazardous trade or occupation
shall be permitted or carried on, in or upon the Leased Premises; no act or
thing shall be done or permitted; and nothing shall be kept in or about the
Leased Premises which will cause cancellation of the risk or hazard insurance in
effect for the Leased Premises. The TENANT agrees to pay to the LANDLORD upon
demand, damages for injury to the Leased Premises or to the Building of which
the Leased Premises are a part, which injury shall be caused or suffered by the
TENANT or its agents, employees or invitees. The TENANT further covenants not to
conduct any business or permit any act or thing contrary to or in violation of
the laws of the United States of America, or the State of Florida, or of the
Ordinances of the City of Dania Beach, County of Broward, in or about said
Leased Premises. The TENANT shall promptly after discovery of any unlawful,
disreputable, or extra-hazardous use of the Premises, take all necessary steps,
legal and equitable, to compel the discontinuance of such use and to oust and
remove any subtenants, occupants or other persons guilty of such unlawful
disreputable, or extra-hazardous use. The TENANT shall indemnify the LANDLORD
against all costs, expenses, liabilities, losses, damages, injunctions, suits,
fines, penalties, claims and demands, including reasonable attorney's fees,
arising out of any violation of, or default in, these covenants.
The TENANT, at its sole expense, shall comply with all laws, orders,
and regulations of Federal, State and municipal authorities, and with any
direction of any public officer, pursuant to law, which shall impose any duty
upon the LANDLORD or the TENANT with respect to the Leased Premises. The TENANT,
at its sole expense, shall obtain all licenses or permits which may be required
for the conduct of its business within the terms of this Lease, or for the
making of repairs, alterations, improvements, or additions.
7. GOVERNMENTAL REQUIREMENTS: TENANT, at TENANT's sole expense, shall comply
with all laws, rules, orders, ordinances, directions, regulations and
requirements of federal, state, county and municipal authorities pertaining to
TENANT's use of the Premises and with the recorded covenants, conditions and
restrictions, regardless of when they become effective, including, without
limitation, all applicable federal, state and local laws, regulations or
ordinances pertaining to fire and safety, persons with disabilities, air and
water quality, Hazardous Materials (as hereinafter defined), waste disposal, air
emissions and other environmental matters, all zoning and other land use
matters, utility availability, and with any duty imposed upon LANDLORD or TENANT
with respect to the use or occupation of the Premises. TENANT shall comply at
TENANT's sole cost and expense with all provisions of the Americans with
Disabilities Act (ADA) in connection with any alterations or improvements
undertaken by TENANT upon the Premises and TENANT agrees to indemnify and hold
LANDLORD harmless from and against any and all fines, penalties, suits, actions,
damages, claims, demands, liabilities, expenses (including attorneys fees) and
losses arising out of TENANT's failure to comply with the Americans with
Disabilities Act with respect to TENANT's use of the Premises or any
alterations, additions or modifications to the Premises by TENANT
notwithstanding LANDLORD's approval of same. TENANT shall obtain all licenses
and permits from time to time required to enable TENANT to conduct its business
under this Lease. No failure of TENANT to obtain or maintain licenses or
permits, or extensions or renewals shall release TENANT from the performance or
observance of its obligations under this Lease.
LANDLORD represents and warrants to TENANT that as of the date of the
execution of this Lease the Building complies with the provisions of the ADA.
Each party (the " Indemnifying Party") shall and hereby agrees to indemnify and
hold harmless the other party (the "Indemnified Party") and its agents and their
respective affiliates, agents, officers, and employees, from and against all
costs, liabilities and causes of action occurring or arising as a result of the
Indemnifying Party's failure to comply with any of the Disability Acts or as a
result of any violation of any of the Disability Acts by the Indemnifying Party
or its agents, and, at the Indemnified Party's option, the Indemnifying Party
will defend the Indemnified Party and its agents and their respective
affiliates, agents, officers, and employees against all such costs, liabilities
and causes of action.
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8. LANDLORD CONTROLLED AREAS: All automobile parking areas, driveways, entrances
and exits thereto, common areas, truck ways, loading areas, pedestrian walkways
and ramps, landscaped areas, corridors, and other areas and improvements
provided by LANDLORD for the general use, in common, of tenants, their officers,
agents, employees, servants, invitees, licensees, visitors, patrons and
customers shall be at all times subject to the exclusive control and management
of LANDLORD; and LANDLORD shall have the right from time to time to establish,
modify and enforce rules and regulations with respect to all facilities and
areas and improvements; from time to time to change the area, level and location
and arrangement of parking areas and other facilities hereinabove referred to;
to restrict parking by and to tenants, their officers, agents, invitees,
employees, servants, licensees, visitors, patrons and customers, to temporarily
close all or any portion of said areas or facilities to discourage non-tenant
parking, and to do and perform such other acts in and to said areas and
improvements as, in the sole judgement of LANDLORD, LANDLORD shall determine to
be advisable with a view to the improvement of the convenience and use thereof
by tenants, their officers, agents, employees, servants, invitees, visitors,
patrons, licensees and customers. LANDLORD shall operate and maintain the common
areas and other facilities referred to in such reasonable manner as LANDLORD
shall determine from time to time. Without limiting the scope of such
discretion, LANDLORD shall have the full right and authority to make and enforce
all rules and regulations pertaining to and necessary for the proper operation
and maintenance of the parking area and/or common areas and other facilities.
Reference in this paragraph to parking area and/or facilities shall in no way be
construed as giving TENANT hereunder any rights and/or privileges in connection
with such parking areas and/or facilities unless such rights and/or privileges
are expressly set forth in this Lease.
9. RULES AND REGULATIONS: TENANT agrees to comply with all rules and regulations
the LANDLORD may adopt from time to time for operation of the Building and
parking facilities and for the protection and welfare of the Building and
parking facilities, and the tenants, visitors and occupants of the Building. The
present rules and regulations, which TENANT hereby agrees to comply with,
entitled "Rules and Regulations" are attached hereto and are by this reference
incorporated herein. Any future rules and regulations adopted from time to time
by LANDLORD shall become a part of the Lease, and TENANT hereby agrees to comply
with the same upon delivery of a copy thereof to TENANT providing the same do
not materially deprive TENANT of its rights established under this Lease.
10. INSPECTION OF PREMISES: Prior to the TENANT'S taking possession of the
Leased Premises, the TENANT shall have fully inspected the Leased Premises and
accepted the Leased Premises in their then existing "AS-IS" condition. Such
inspection shall encompass all physical facts which are deemed by the TENANT to
be relevant and material, and the taking of possession shall be an acceptance of
the Leased Premises.
11. MAINTENANCE AND REPAIR: LANDLORD shall maintain in good order and repair the
Building (excluding repairs to be made by TENANT hereunder), including the
public areas, parking areas, landscape areas, and the structure itself,
including the roof, foundations, exterior walls of the Premises and the
Building, all structural members of the Building and all underground utility
lines serving the Building. Provided, however, the cost of any repairs or
maintenance to the foregoing necessitated by the gross negligence or intentional
act of TENANT or its agents, contractors, employees or invitees shall be
reimbursed by TENANT to LANDLORD upon demand as additional rent.
At its sole cost, TENANT shall maintain in good repair and clean and
orderly condition, that portion of the Premises within the demising walls
thereof, including all interior and exterior walls, floors, ceiling, all doors,
windows, glass, electrical, plumbing, mechanical and HVAC systems and including
any systems or other equipment below the floor or above the ceiling that was
installed for or by TENANT. TENANT's maintenance obligation shall extend to all
improvements and contents within the Premises. LANDLORD shall assign to TENANT
any warranty rights it may have as to the HVAC and other systems serving the
Premises. TENANT shall contract for, in its own name, and shall pay for a
qualified service contractor to inspect, adjust, clean and repair heating,
ventilating and air conditioning equipment, including changing filters on a
quarterly basis.
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12. INITIAL IMPROVEMENTS AND SUBSEQUENT ALTERATIONS AND IMPROVEMENTS:
At the commencement of the Term of this Lease LANDLORD shall deliver
the Premises to the TENANT with the improvements described in Exhibit "A" which
shall be constructed, unless otherwise noted on Exhibit "A", by LANDLORD at
LANDLORD'S expense and such expense shall not be charged, in any manner, to
TENANT as an Operating Expense. LANDLORD shall not be responsible for any costs
or allowances towards the cost of any improvements that TENANT makes to the
Leased Premises unless specifically provided for in this Lease.
TENANT shall obtain LANDLORD'S prior written consent before making any
structural alterations, improvements or modifications to or which affect the
Leased Premises and TENANT shall furnish copies of the plans to LANDLORD for
LANDLORD'S consideration and approval prior to commencing any work for any
structural improvements, alterations or modifications. All improvements,
alterations and modifications to the Premises by TENANT shall be undertaken in
accordance with all applicable building codes and the requirements of the
Americans with Disabilities Act. The approval by LANDLORD of the plans and
specifications shall not constitute the assumption of any liability on the part
of LANDLORD for their compliance or conformity with applicable building codes
and the requirements of this Lease or for their accuracy, and TENANT shall be
solely responsible for such plans and specifications. Such alterations,
improvements and additions to the Premises by TENANT shall be done in a good
workmanlike manner using first-quality materials. Any structural alterations,
improvements or modifications made by TENANT, shall, at LANDLORD's option and
upon written notice to TENANT, be removed by TENANT at the termination of the
Lease at TENANT's expense and the Premises shall be restored by TENANT to their
original structural condition as of the commencement of the Lease.
TENANT shall conduct any work done to the Leased Premises in such a
manner as to maintain harmonious labor relations and not to adversely affect any
warranties pertaining to the existing premises. Prior to commencement of any
structural work, TENANT shall submit to LANDLORD copies of all necessary permits
and approved plans. LANDLORD reserves the right to have final approval of the
contractors and plans used by TENANT to effect any structural modifications,
alterations or improvements to the Leased Premises.
TENANT, at its sole cost, may make non-structural alterations or
non-structural modifications or additions within the Premises subject to the
following conditions:
a. TENANT shall give LANDLORD prior written notice of its intention to
make such alterations or additions or modifications; and
b. LANDLORD reserves the right to approve the plans and specifications
for such alterations, additions or modifications in advance and such approval
shall not be unreasonably withheld or delayed; and
c. TENANT shall only use licensed contractors who are approved by
LANDLORD in advance, and such contractors shall be first required to furnish
evidence of insurance coverage, including public liability, workers
compensation, and automobile liability coverage, as well as any other coverage
reasonably required by LANDLORD. The limits of such coverage shall be no less
than those required of TENANT. TENANT shall obtain any required permits before
commencing the work and shall cause such work to be performed in accordance with
all applicable building codes and other governmental regulations and to be
completed and paid for in full and shall discharge any and all liens or claims
of lien arising therefrom, or if TENANT disputes any such lien or claim of lien,
TENANT shall post a bond in accordance with applicable law to remove the lien
from the Premises within ten (10) days.
All alterations, additions, modifications or improvements, whether
temporary or permanent in character, made in or upon the Premises by LANDLORD or
TENANT shall be LANDLORD'S property and at the end of the Term hereof shall
remain in or upon the Premises without compensation to TENANT. All of TENANT'S
furniture, movable trade fixtures, and equipment not attached to the Premises
may be removed by TENANT at the termination of this Lease, if TENANT so elects,
and shall be so removed, if required by LANDLORD, and, if not so removed, shall,
at the option of LANDLORD, become the property of LANDLORD. TENANT shall repair
any damage to the Premises occasioned by the removal of its furniture and
movable fixtures and equipment.
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13. MECHANIC'S LIENS: TENANT further agrees that TENANT shall pay all liens of
contractors, subcontractors, mechanics, laborers, materialmen, and other items
of like character, and shall indemnify LANDLORD against all expenses, costs, and
charges, including bond premiums for release or transfer of liens and attorney's
fees and costs reasonably incurred in and about the defense of any suit in
discharging the said Premises or any part thereof from any liens, judgements, or
encumbrances caused or suffered by TENANT. In the event any such lien shall be
made or filed, TENANT shall bond against or discharge the same within ten (10)
days after the same has been made or filed. It is understood and agreed between
the parties hereto that the expenses, costs and charges above referred to shall
be considered as rent due and shall be included in any lien for rent.
TENANT shall not have any authority to create any liens for labor,
materials or improvements on LANDLORD's interest in the Leased Premises, and
TENANT shall place all persons contracting with TENANT for the destruction or
removal of any facilities or other improvements or for the erection,
installation, alteration, or repair of any facilities or other improvements on
or about the Leased Premises, and all materialmen, suppliers, contractors,
subcontractors, mechanics, and laborers on notice that they must look only to
TENANT and to TENANT's interest in the Leased Premises to secure the payment of
any charges for work done or material furnished at the request or instruction of
TENANT or any party contracting with or through the TENANT. The TENANT shall not
be deemed to be the agent of the LANDLORD, so as to confer upon a laborer
bestowing labor upon the Leased Premises, or upon a materialman who furnishes
material incorporated in the construction of improvements upon the Leased
Premises, a mechanics' lien upon the LANDLORD'S estate under the provisions of
Chapter 713, Florida Statutes, and subsequent revisions thereof.
14. INDEMNITY AND DISCLAIMER: LANDLORD shall not be liable for and TENANT hereby
agrees to indemnify and hold LANDLORD, its officers, directors, agents and
employees harmless from any and all fines, suits, actions, damages, claims,
demands, liabilities, expenses, losses and causes of action arising out of (i)
the use or occupancy of the Leased Premises by TENANT, its agents, contractors
or employees or invitees; or (ii) TENANT's performance or nonperformance of any
term or condition of this Lease; or (iii) the use by TENANT of LANDLORD's
roadways and parking areas and utilities; or (iv) the violation by TENANT of any
ordinance, permit, order, law, regulation, statute, legislation, judgement or
decree including, but not limited to, the requirements of any law or regulation
on the environmental condition or hazardous materials on the Premises; or (v)
any other use by TENANT of the Premises or any common area or adjacent property,
including TENANT's presence, occupancy or use of the Premises prior to the
commencement date and after the termination of this Lease. The foregoing
indemnification by the TENANT of the LANDLORD shall be applicable regardless of
whether the claim is based upon TENANT's negligence, intentional tort, or
omissions arising during or after the term of this Lease or with respect to any
personal injury, loss of life, and damage to any property or to any person that
occurs on or about the Leased Premises, or the appurtenances thereto, or upon
the adjacent parking areas, sidewalks or streets caused by the negligence,
misconduct, error or omission or breach of this Lease by TENANT, its agents,
subtenants, contractors or employees or invitees or by any other person entering
the Premises under express or implied invitation of TENANT. This indemnification
shall also include any claims based upon the alleged negligence or fault of the
LANDLORD. The indemnities herein provided by TENANT to LANDLORD shall include an
indemnity against all costs, attorneys fees, expenses and liabilities incurred
in and about any such claim, the investigation thereof, or the defense of any
action, or proceeding, brought thereon, and from and against any orders,
judgments and decrees, which may be entered therein, which is caused by the acts
or neglect of the TENANT, its agents, subtenants, contractors or employees or
invitees.
LANDLORD shall not be liable or responsible for any loss or damage to
property or death or injury to any person occasioned by theft, fire, act of God,
public enemy, injunction, riot, strike, insurrection, war, court order,
requisition of other governmental body or authority, or of any matter beyond the
control of LANDLORD, or for any injury or damage or inconvenience which may
arise through repair or alteration of any part of the Leased Premises, or
failure to make repairs, or from water damage to the Premises or its contents,
or from any cause whatever. LANDLORD shall not be responsible to TENANT for any
damage, loss or injury suffered or incurred by TENANT with respect to or arising
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out of any defects in the Premises or Building; defects in the cooling, heating,
electric, plumbing, or other applicable apparatus or systems or water discharge
in the Building; theft, mysterious disappearance or loss of any property of
TENANT, or water damage to the Leased Premises or its contents. Notwithstanding
any contrary provision of this Lease, TENANT shall look solely (to the extent
insurance coverage is not applicable or available) to the interest of LANDLORD
in the Building for the satisfaction of any judgement or the judicial process
requiring the payment of money as a result of any negligence or breach of this
Lease by LANDLORD and LANDLORD shall have no personal liability hereunder of any
kind.
LANDLORD shall have no obligation to make an investigation of any
tenant, employee or proprietor thereof, or of any guest or any other person
entering the Leased Premises.
It is expressly acknowledged by TENANT that this indemnification and
the provisions of this section of the Lease shall survive and continue to be
effective beyond the expiration or other termination of this Lease and shall
inure to the benefit of LANDLORD, its successors and assigns.
For purposes of this section of the Lease the term "TENANT" includes
but is not limited to any act or omission of TENANT's agents, employees,
managers, visitors, contractors, subcontractors, TENANT's, subtenants, invitees,
licensees, customer, concessionaires or assignees.
15. INSURANCE:
A. TENANT shall on or before the date upon which TENANT first enters
the Premises for any purpose, obtain and keep in full force and effect at all
times thereafter while it is in possession or occupancy of the Leased Premises
the following insurance coverages in the stated amounts:
(i) Commercial General Liability Insurance insuring against
loss or liability in connection with bodily injury, death, or property damage or
destruction, occurring on or about the Premises, its appurtenances and adjoining
areas. Each policy shall be written on an occurrence basis and shall contain
coverage at least as broad as that provided under ISO CGL Form CG 0001. The
insurance coverage shall be in an initial amount of not less than $1,000,000 per
occurrence, $2,000,000 general aggregate, Personal and Advertising and
Products/Completed Operations. Each policy shall also include the broad form
comprehensive general liability endorsement or equivalent. The aforesaid
insurance policies shall name the LANDLORD as an additional insured and shall
provide that they may not be terminated or modified in any way that would
materially decrease the protection afforded LANDLORD under this Lease without 30
days advance notice to LANDLORD.
(ii) All risk property insurance, including but not limited to
fire and lightning, extended coverage (all risk of physical loss), theft,
vandalism and malicious mischief and flood (if required by LANDLORD, any
mortgagee or governmental authority) in an amount adequate to cover the full
replacement cost of TENANT's personal property, the property of others in the
care, custody or control of TENANT, and any improvements and betterments
installed by TENANT and loss of use (business interruption).
(iii) Workers compensation insurance in the amount required by
law and employer's liability coverage of a minimum of $500,000 per occurrence
and covering all persons employed, directly or indirectly by TENANT, in
connection with TENANT's business and TENANT's improvements and any repairs,
improvements, modifications or alterations made to the Premises by TENANT.
(iv) Business income and extra expense income covering those
risks referred to in subsection A(ii) on an actual loss sustained basis, but in
all events in an amount sufficient to prevent TENANT from being a co-insurer of
any loss covered under the applicable policy or policies.
(v) Automobile liability insurance to cover owned, non-owned,
and hired vehicles with a combined single limit of not less than $1,000,000.
(vi) Such other insurance as may be carried on the Leased
Premises and TENANT's operation thereof as may be reasonably required by
LANDLORD from time to time.
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B. Except for work to be performed by LANDLORD, before undertaking any
alterations, additions, modifications or improvements to the Premises, TENANT
shall obtain and maintain at its expense, or TENANT shall require any contractor
performing work on the Premises to obtain and maintain at no expense to
LANDLORD, in addition to workers compensation insurance required by law,
commercial general liability insurance (including contractor's liability
coverage, contractual liability coverage, completed operations coverage, broad
form property damage coverage and contractor's protective liability) written on
an occurrence basis with limits of not less than $1,000,000. The contractor's
general liability insurance shall cover claims arising out of (i) the general
contractor's operations; (ii) acts of independent contractors; (iii)
products/completed operations; (iv) liability assumed under contract; (v)
explosion, collapse and underground damage hazards, when applicable; and (vi)
owned/non-owned/hired vehicles.
C. All insurance policies shall be in a form reasonably satisfactory to
LANDLORD and written with insurance companies reasonably satisfactory to
LANDLORD having a "Best's" rating of at least "A-X" and authorized to engage in
business in Florida. The coverage afforded by such insurance shall in no way
limit or diminish TENANT's liability hereunder. If TENANT fails to obtain and
provide any or all of the aforesaid insurance, then LANDLORD may, (but shall not
be required to) purchase such insurance on behalf of TENANT and TENANT shall, on
demand, reimburse LANDLORD for the cost of such insurance together with interest
thereof (from the date on which LANDLORD paid such cost to the date on which
TENANT reimburses LANDLORD therefore) at the maximum rate permitted by law and
same shall constitute additional rent.
D. The TENANT shall deliver to the LANDLORD an insurance certificate as
set forth above showing the LANDLORD as a named additional insured prior to its
entry onto the Leased Premises and shall, on each anniversary date of this
Lease, give evidence of the existence of the insurance required by this Lease
and that same is in effect. The certificates shall include an acknowledgment
that the policies have been amended to provide thirty (30) days prior notice of
termination or material modification to LANDLORD.
E. LANDLORD and TENANT each expressly, knowingly, and voluntarily waive
and release any claims that they may have against the other or the other's
employees, agents, or contractors and against every other tenant in the Building
who shall have executed a waiver similar to this one for damage to its
properties and loss of business (specifically including loss of rent by LANDLORD
and business interruption by TENANT) as a result of the acts or omissions of the
other party or the other party's employees, agents, or contractors (specifically
including the negligence of either party or its employees, agents, or
contractors and the intentional misconduct of the employees, agents, or
contractors of either party), which claims are covered by the standard property
insurance coverages described in subsection A(ii) or other property insurance
that either party may carry at the time of an occurrence. LANDLORD and TENANT
shall each, on or before the date on which TENANT first enters the Premises for
any purpose, obtain and keep in full force and effect at all times thereafter a
waiver of subrogation from its insurer concerning the property, rent loss, and
business interruption insurance maintained by it for the Building and the
property located in the Building. This subsection shall not apply to claims for
personal injury or wrongful death.
F. LANDLORD shall maintain fire and extended coverage insurance on the
Building and on the improvements and betterments to the Premises which were
either constructed or paid for by LANDLORD and are identified in Exhibit "A" to
this Lease, in an amount not less than 80% of the replacement cost of the
Building and such improvements and betterments and LANDLORD shall also maintain
commercial general liability insurance relating to the Building and its
appurtenances in an amount not less than $3 million per occurrence. In addition,
Landlord may, at its option, maintain coverages in excess of the limits set
forth in this subsection and additional coverages as specified in the definition
of Operating Expenses. The total cost of all insurance maintained by LANDLORD
under this subsection shall be included in Operating Expenses.
16. TENANT CHARGES: It is understood and agreed between the parties hereto that
any charges against TENANT by LANDLORD for services or for work done on the
Leased Premises by order of TENANT, or otherwise accruing under this Lease,
shall be considered as rent due and shall be included in any lien for rent.
17. PARKING: Pursuant to all of the terms, provisions, covenants and conditions
contained herein, during the Term of this Lease, TENANT shall be entitled to use
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of the Parking Spaces, as defined. No commercial vehicles, trucks or
recreational vehicles shall be permitted to park in the parking areas. No
trailers or boats shall be permitted in the parking areas.
TENANT agrees to hold LANDLORD harmless for damage to the vehicles or
personal property in vehicles that may occur while the vehicles are parked in
the parking areas of the Building.
18. SIGNS: LANDLORD shall have the sole right to install signs on the exterior
of the Leased Premises and on the Building. The LANDLORD shall, at TENANT's
expense, place TENANT's name on the exterior of the fixed glass door side panel
of the Leased Premises in a manner uniform with that of all other tenants. There
will be no directory of tenants. Subject to LANDLORD's prior written consent
which may be withheld in its sole discretion, no signs, door plaques,
advertisements, notices or information may be painted, posted, displayed, placed
or affixed in any manner to the exterior of the Leased Premises or on the
Building or on the property on which the Building is located by or for the
TENANT. TENANT may not place any signs, logos, advertisements, notices or other
information on the interior of the Leased Premises where the same is visible
from the outside of the Leased Premises through the glass. LANDLORD may at its
discretion change the Building's name or street address.
19. ESTOPPEL AGREEMENT: TENANT agrees that from time to time, upon not less than
seven (7) days prior request by LANDLORD, TENANT shall deliver to LANDLORD a
statement in writing certifying (a) that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that the Lease as
modified is in full force and effect and stating the modifications); (b) the
dates to which the rent and other charges have been paid; and (c) that LANDLORD
is not in default under any provisions of this Lease, or, if in default, the
nature thereof in detail.
20. SUBORDINATION: If the Building and/or Leased Premises are any time subject
to a mortgage and/or deed of trust, and TENANT has received written notice from
the mortgagee of same, then in any instance in which TENANT gives notice to
LANDLORD alleging a default by LANDLORD hereunder, TENANT shall also
simultaneously give a copy of such notice to each LANDLORD's mortgagee; and each
LANDLORD's mortgagee shall have the right (but not the obligation) to cure or
remedy such default during the period that is permitted to LANDLORD hereunder,
plus an additional period of thirty (30) days, and TENANT shall accept such
curative or remedial action (if any) taken by LANDLORD's mortgagee with the same
effect as if such action had been taken by LANDLORD.
This Lease shall at LANDLORD's option, which option may be exercised at
any time during the Lease Term, be subject and subordinate to any mortgage now
or hereafter encumbering the Building. This provision shall be self-operative
without the execution of any further instruments. Notwithstanding the foregoing,
however, TENANT hereby agrees to execute any instruments which LANDLORD may deem
desirable to evidence the subordination of this Lease to any and all such
mortgages. Failure to execute a subordination agreement within seven (7) days
after request from LANDLORD shall be deemed a default hereunder. LANDLORD agrees
to provide TENANT with a non-disturbance agreement from LANDLORD's lender in the
form attached to this Lease as Exhibit "C".
21. ATTORNMENT: If the interest of LANDLORD under this Lease shall be
transferred voluntarily or by reason of foreclosure or other proceedings for
enforcement of any mortgage on the Leased Premises; TENANT shall be bound to
such transferee (herein sometimes called the "Purchaser") for the balance of the
Term hereof remaining, and any extensions or renewals thereof which may be
effective in accordance with the terms and provisions hereof with the same force
and effect as if the Purchaser were LANDLORD under this Lease, and TENANT does
hereby agree to attorn to the Purchaser, including the mortgagee under any such
mortgage if it be the Purchaser, as its said attornment to be effective and
self-operative without the execution of any further instruments upon the
Purchaser succeeding to the interest of the this Lease. The respective rights
and obligations of TENANT and the Purchaser upon such attornment, to the extent
of the then remaining balance of the Term of this Lease and any such extensions
and renewals, shall be and are the same as those set forth herein. In the event
of such transfer of LANDLORD's interests, LANDLORD shall be released and
relieved from all liability and responsibility thereafter accruing to TENANT
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under the Lease or otherwise and LANDLORD's successor by acceptance of rent from
TENANT hereunder shall become liable and responsible to TENANT in respect to all
obligations of LANDLORD under this Lease thereafter accruing.
22. MORTGAGE, TRANSFER, ETC. BY LANDLORD: The LANDLORD reserves the right to
sell, purchase, mortgage, hypothecate and convey in any form the Leased
Premises, the Building and the real property upon which it is situate without
the permission of the TENANT. It is further agreed that the LANDLORD shall have
the right to assign this Lease and all rentals accruing hereunder without the
permission of the TENANT.
23. ASSIGNMENT: Without the written consent of LANDLORD first obtained in each
case, which consent shall not be unreasonably withheld, TENANT shall not,
voluntarily or involuntarily, whether by operation of law or otherwise, assign,
transfer, mortgage, pledge or otherwise encumber or dispose of this Lease or
sublease the Leased Premises or any part thereof or permit the Leased Premises
or any part thereof to be occupied by other persons.
In lieu of consenting or not consenting, LANDLORD may, at its option,
(i) in the case of a proposed assignment of this Lease or a proposed subletting
of all of the Leased Premises, terminate this Lease in its entirety, or (ii) in
the case of a proposed subletting of a portion of the Leased Premises, terminate
this Lease as to that portion of the Premises which TENANT has proposed to
sublet. In the event LANDLORD elects to terminate this Lease pursuant to clause
(ii) of this paragraph, TENANT's obligation as to Base Rental and additional
rent shall be reduced in the same proportion that the Net Rentable Area of the
portion of the Premises which TENANT proposed to sublet bears to the total Net
Rentable Area of the Premises. If without LANDLORD's written consent having been
first obtained, this Lease is assigned or if the Leased Premises or any part
thereof is sublet or occupied by anybody other than TENANT, voluntarily or
involuntarily, whether by operation of law or otherwise, LANDLORD may (whether
or not there is a default under this Lease) collect or accept rent from the
assignee, subtenant or occupant and apply the net amount collected or accepted
to the rent herein reserved; but such collection or acceptance of rent shall not
be deemed a waiver of the foregoing covenants or the acceptance of the assignee,
subtenant or occupant as TENANT hereunder; nor shall it be construed as or
implied to be a release of TENANT from the further observance and performance by
TENANT of the terms, provisions, covenants and conditions herein contained.
In the event TENANT is a partnership, corporation or other firm or
entity, any transfer to one transferee of fifty (50%) percent or more of the
equity, right, title or interest herein, existing as of the date hereof, shall,
for the purposes hereof, be deemed to be an assignment. Fifty percent (50%) of
any sums or other economic considerations received by TENANT as a result of a
subletting, whether denominated rentals under the sublease or otherwise, which
exceed, in the aggregate, the total sums which TENANT is obligated to pay
LANDLORD under this Lease (prorated to reflect obligations applicable to that
portion of the Leased Premises subject to such sublease) shall be payable to
LANDLORD, immediately following TENANT's receipt of the same, under this Lease
without affecting or reducing any other obligations of TENANT hereunder and
shall constitute additional rent. Fifty percent (50%) of any sums or other
economic considerations received by TENANT as a result of an assignment of this
Lease, whether denominated rentals under the assignment or otherwise, shall be
payable to LANDLORD, immediately following TENANT's receipt of the same under
this Lease without affecting or reducing any other obligations of TENANT
hereunder and shall constitute additional rent.
TENANT shall have no right of assignment or subletting if it is in
default under any of the terms or conditions of this Lease. Notwithstanding any
assignment of the Lease, or the subletting of the Premises, or any portion
thereof, TENANT shall continue to be liable for the performance of the terms,
conditions and covenants of this Lease including, but not limited to, the
payment of rent and any other charges imposed hereunder. 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. At
LANDLORD's option, in the event of default by any assignee or subtenant under
the terms, conditions or covenants of this Lease, LANDLORD may, at its option,
seek enforcement of any of its available remedies solely against the TENANT.
If there are one or more assignments or sublettings by TENANT to which
LANDLORD consents, the parties understand and agree, anything to the contrary
notwithstanding that any and all renewal options to be exercised subsequent to
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the date of such assignment or subletting are absolutely waived and terminated
at LANDLORD's sole option. Any request by TENANT to LANDLORD to permit a
subletting or assignment shall contain or be accompanied by a financial
statement of the proposed subtenant or assignee and such other information and
references as LANDLORD deems necessary to reasonably evaluate the acceptability
of such prospective subtenant or assignee. LANDLORD may deny an assignment or
subletting based strictly upon type of business or tenant mix.
In the event of the transfer and assignment by LANDLORD of its interest
in this Lease and/or sale of the Building containing the Premises, 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.
24. DESTRUCTION OR DAMAGE:
A. If: (i) the Building shall be so damaged that substantial alteration
or reconstruction of the Building shall, in the LANDLORD's opinion, be required
(whether or not the Premises shall have been damaged by the casualty); or (ii)
any mortgagee of the Building should require that the insurance proceeds payable
as a result of a casualty be applied to the payment of the mortgage debt; or
(iii) there is any material loss to the Building that is not covered by
insurance required to be maintained by LANDLORD under this Lease; or (iv) the
Premises shall be partially damaged by casualty during the last two years of the
Lease Term, and the estimated cost of repair exceeds 10% of the Base Rental then
remaining to be paid by TENANT for the balance of the Lease Term; LANDLORD may,
within 120 days after the casualty, give notice to TENANT of LANDLORD's election
to terminate this Lease, and the balance of the Lease Term shall automatically
expire on the fifth day after the notice is delivered.
B. If LANDLORD does not have the right to terminate this Lease under
Subsection A, or if LANDLORD has the right to terminate and does not elect to do
so, LANDLORD shall proceed with reasonable diligence to restore the Building and
the Premises to substantially the same condition they were in immediately before
the happening of the casualty. However, LANDLORD shall not be required to
restore any unleased Premises in the Building or any portion of TENANT's
property or the improvements made by TENANT and LANDLORD's restoration
obligations shall exist only to the extent that LANDLORD actually receives
insurance proceeds in the amount of the estimated cost of the restoration. When
repairs to the Premises that are LANDLORD's obligation under this section, if
any, have been completed by LANDLORD, TENANT shall complete the restoration or
replacement of the Premises, the improvements made by TENANT and all of TENANT's
property necessary to permit TENANT's re-occupancy of the Premises.
C. Rent shall abate in proportion to the portion of the Premises not
useable by TENANT as a result of any casualty, as of the date on which the
Premises becomes unusable. LANDLORD shall not be liable to TENANT for any delay
in restoring the Premises or any inconvenience or annoyance to TENANT or injury
to TENANT's business resulting in any way from the damage or the repairs,
TENANT's sole remedy being the right to an abatement of rent.
D. The rights provided to TENANT under this section are in lieu of and
override any rights that TENANT may have by statute.
25. EMINENT DOMAIN: If there shall be taken during the Term of this Lease, any
portion of the Leased Premises other than a part not interfering with
maintenance, operation or use of the Leased Premises, LANDLORD may elect to
terminate this Lease or to continue same in effect. If LANDLORD elects to
continue the Lease, the rental shall be reduced in proportion to the area of the
Leased Premises so taken and LANDLORD shall repair any damage to the Leased
Premises resulting from such taking. If any part of the Leased Premises is taken
by condemnation or eminent domain which renders the Premises unsuitable for its
intended use, TENANT may elect to terminate this Lease; or if any part of the
Leased Premises is so taken which does not render the Premises unsuitable for
its intended use, this Lease shall continue in effect; and the rental shall be
reduced in proportion to the area of the Leased Premises so taken and LANDLORD
shall repair any damage to the Leased Premises resulting from such taking. If
all of the Leased Premises is taken by condemnation or eminent domain, this
Lease shall terminate on the date possession is taken by the authority. All sums
awarded or agreed upon between LANDLORD and the condemning authority for the
taking of the interest of LANDLORD whether as damages or as compensation, and
whether for partial or total condemnation, shall be the sole property of
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LANDLORD and TENANT shall not be entitled to any apportionment. If this Lease
should be terminated under any provisions of this paragraph, rental shall be
payable up to the date that possession is taken by the authority, and LANDLORD
shall refund to TENANT any prepaid unaccrued rent less any sum or amount then
owing by TENANT to LANDLORD.
26. NON-RECORDING OF LEASE: TENANT shall not record this Lease nor any
memorandum thereof in the Public Records of Broward County, Florida, and should
the same be recorded by the TENANT it shall constitute an irrevocable and
immediate default in the terms of this Lease permitting the LANDLORD to pursue
all of the remedies contained in this Lease or provided by statute. In addition
thereto, the LANDLORD shall be entitled to all consequential damages which may
occur as a result of having to remove the Lease from the public records of
Broward County, Florida, together with any and all consequential damages which
may occur to the title of the fee owner of the property. These expenses shall
include, but shall not be limited to, attorneys fees, accountants' fees,
surveying fees, recording fees, and any and all damages which may occur to
LANDLORD or the fee simple owner as a result of any cloud cast upon title to the
property affected by the recording of this Lease.
27. DEFAULT:
A. Events of Default. LANDLORD at its election may exercise any one or
more of the options referred to below upon the happening or at any time after
the happening of any one or more of the following events of default, to-wit:
(1) TENANT'S failure to pay the rents, or any other sums
payable hereunder for a period of three (3) days after written notice by
LANDLORD;
(2) TENANT'S failure to abide by any of the non-monetary terms
of this Lease and failing to cure any non-compliance noticed by LANDLORD which
specifies the TENANT'S failure to observe, keep, or perform any of the
non-monetary covenants, agreements or conditions of this Lease within ten (10)
days of said notice, unless the non-compliance is of such a nature that in
LANDLORD's sole determination it must be cued within a shorter period to avoid
substantial interference with the rights of LANDLORD or any other tenant(s) in
connection with the Leased Premises or the Building.
(3) Should the TENANT, at any time during the term of this
Lease, suffer or permit an involuntary or voluntary petition in bankruptcy to be
filed against it, or should a receiver or trustee be appointed for the TENANT's
property because of TENANT's insolvency, and the said appointment is not vacated
within thirty (30) days thereafter, or should the TENANT's leasehold interest be
levied on and the lien thereof not discharged within thirty (30) days after said
levy has been made, or should the TENANT fail to promptly make the necessary
returns and reports required of it by the State and Federal law, or should the
TENANT fail to promptly comply with all governmental regulations, local, State
and Federal;
(4) TENANT making an assignment for the benefit of creditors;
(5) A receiver or trustee being appointed for TENANT or a
substantial portion of TENANT's assets;
(6) TENANT's attempting to mortgage or pledge its interest
hereunder;
(7) TENANT's vacating or abandoning the Premises or ceasing
doing business therein;
(8) TENANT's interest under this Lease being sold without
LANDLORD's consent under execution, other legal process or by operation of law;
(9) TENANT's interest under this Lease being assigned, the
Premises or a portion thereof being sublet or transferred by operation of law
without LANDLORD's prior written consent;
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(10) Should the TENANT, at any time, fail to abide by the
provisions of this Lease and should the TENANT suffer by way of legal remedy or
equitable remedy an injunction, either of a civil or criminal nature, or should
the TENANT fail to comply with safety regulations or fail to comply with any
governmental regulations so that it is necessary by process of law to terminate
or shut down TENANT's activities, then, subject to the provision of subparagraph
(2) above, the TENANT shall be in default of this Lease.
B. Remedies upon Default. In the event of any of the foregoing
happenings, or any other default by TENANT, the LANDLORD, at its election, may
without further notice to the TENANT exercise any one or more of the following
options, the exercise of any of which shall not be deemed to preclude the
exercise of any others herein listed or otherwise provided by statute or general
law or in equity at the same time or in subsequent times or actions.
(1) Declare this Lease to be terminated and retake possession
of the Premises by eviction or otherwise for LANDLORD's own account and purposes
whereupon all right, title and interest of the TENANT in the Premises shall end;
(2) Terminate TENANT's right to possession under the Lease by
eviction or otherwise and retake possession of the Premises for the account of
TENANT and relet or attempt to relet the Premises on behalf of TENANT. LANDLORD
shall not be deemed to have thereby accepted a surrender of the Premises and
TENANT shall remain liable for all sums due under this Lease for the balance of
the Lease Term and for all damages suffered or costs incurred by LANDLORD
including agents or brokers fees to find a new tenant, damages to the Premises,
renovation and alteration expense and reasonable attorney's fees and costs in
recovering possession of the Premises and advising and protecting LANDLORD's
interests under the circumstances less the amount in good faith the LANDLORD may
recover from reletting the Premises;
(3) Accelerate and declare all remaining sums due from TENANT
for rent under this Lease through the end of the Lease Term to be immediately
due payable. LANDLORD may collect all remaining sums due by distress or
otherwise. In any judgment entered against the TENANT for accelerated rent, the
amount of accelerated rent shall be reduced to present money value based upon an
interest rate at the then "Prime Rate" less two (2%) percent. In the event
LANDLORD subsequently re-lets the Leased Premises for any portion of the Lease
Term, then TENANT shall be credited with the amount of any rent received by
LANDLORD through the end of the Lease Term against the sums owed by TENANT to
LANDLORD under any judgment for accelerated rent. Any judgment entered against
TENANT for accelerated rent shall include a provision for a future accounting in
the event of subsequently received rents.
C. No re-entry or retaking of the Premises by LANDLORD shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention be given to TENANT. Nor shall pursuit of any remedy
herein provided constitute a forfeiture or waiver of sums due to LANDLORD
hereunder or any damages accruing to LANDLORD by reason of the violations of any
of the terms, provisions and covenants herein contained. LANDLORD's acceptance
of any rent or other sums following any event of default hereunder shall not be
construed as LANDLORD's waiver of such event of default. No forbearance by
LANDLORD of action upon any violation or breach of any of the terms, provisions,
and covenants herein contained shall be deemed or construed to constitute a
waiver of the terms, provisions, and covenants herein contained. Forbearance by
LANDLORD to enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute a waiver of any other
violation or default. Legal actions to recover for loss or damage that LANDLORD
may suffer by reason of termination of this Lease, recovery of possession or the
deficiency from any reletting as provided for above shall include the expenses
of repossession and any repairs or remodeling undertaken by LANDLORD following
repossession.
D. The parties hereto agree that any and all suits for any and every
breach of this Lease shall be instituted and maintained only in State Courts for
Broward County, Florida and TENANT, whether or not a resident or doing business
in the State of Florida hereby submits itself to the jurisdiction of the State
of Florida and the courts of Broward County where venue shall lie, and LANDLORD
may effect service of process by any lawful means in order to confer in personam
jurisdiction in the courts of this state over TENANT.
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E. Time is of the essence in this Lease and in case TENANT shall fail
to perform the covenants on its part to be performed at the time fixed for the
performance of such respective covenants by the provisions of this Lease,
LANDLORD may declare TENANT to be in default of this Lease.
28. WAIVER OF DEFAULT: Failure of the LANDLORD to declare any default
immediately upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default; but LANDLORD shall have the right to
declare any such default at any time and take such action as might be lawful or
authorized hereunder, in law and/or in equity. Failure of the LANDLORD to insist
upon the strict performance of any of the covenants, conditions and agreements
of this Lease in any one or more instances, shall not be construed as a waiver
or relinquishment in the future of any such covenants, conditions and
agreements. No waiver by LANDLORD of a default by TENANT shall be implied, and
no express waiver by LANDLORD shall affect any default other than the default
specified in such waiver and that only for the time and extension therein
stated. No waiver of any term, provision, condition or covenant of this Lease by
LANDLORD shall be deemed to imply or constitute, a further waiver by LANDLORD of
any other term, provision, condition or covenant of this Lease.
LANDLORD may, at its option, accept partial payments of Base Rental or
Additional Rent without waiving any rights concerning the existence of any
monetary or non-monetary default under this Lease, which default shall serve and
continue unaffected by the receipt of any such partial payment.
29. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS: If TENANT shall at any time
fail to pay any sums due under this Lease in accordance with the provisions of
this Lease, or to take out, pay for or maintain any insurance required by this
Lease to be maintained, or shall fail to make any other payment or perform any
other act on its part to be made or performed, then, LANDLORD, after ten (10)
days written notice to TENANT (or without notice in case of an emergency) and
without waiving or releasing TENANT from any obligation of TENANT contained in
this Lease, may (but shall be under no obligation to):
A. Pay any sum payable by TENANT pursuant to the provisions of
this Lease; or
B. Take out, pay for and maintain any insurance policy
required to be maintained by TENANT under this Lease; or
C. Make any other payment or perform any other act on TENANT'S
part to be made or performed as provided for in this Lease. LANDLORD may enter
upon the Leased Premises for such purpose and take all such action thereon as
may be reasonably necessary therefor without notice to the TENANT.
All sums so paid by LANDLORD and all costs and expenses incurred by
LANDLORD in connection with the performance of any such act, together with
interest thereon at the rate of eighteen (18%) percent per annum from the date
of LANDLORD'S making of such payment shall constitute additional rent payable by
TENANT under this Lease and shall be paid by TENANT to LANDLORD on demand.
LANDLORD shall not be limited in the proof of any damages which LANDLORD may
claim against TENANT arising out of, or by reason of, TENANT'S failure to
provide and keep in force insurance as aforesaid to the amount of the insurance
premium or premiums not paid or incurred by TENANT and which would have been
payable upon such insurance, but LANDLORD shall also be entitled to recover as
damages for such breach, the uninsured amount of any loss.
30. RIGHT OF ENTRY: LANDLORD, or any of its agents, shall have the right to
enter the Leased Premises during all reasonable hours to examine the same,
prevent waste, or to make such repairs, additions or alterations as may be
deemed necessary for the safety, comfort, or preservation thereof, or to said
Building, or to exhibit said Leased Premises at any time within one hundred
eighty (180) days before the expiration of this Lease. Said right of entry shall
likewise exist for the purpose of removing placards, signs, fixtures,
alterations, or additions which do not conform to this Lease. All inspections
except for those required by an emergency shall be subject to reasonable prior
notice and conducted during normal business hours of TENANT.
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<PAGE>
31. CONDITION OF PREMISES ON TERMINATION OF LEASE AND HOLDING OVER:
TENANT agrees to surrender to LANDLORD, at the end of the Term of this
Lease and/or upon any cancellation of this Lease, said Leased Premises in as
good condition as said Leased Premises were at the beginning of the Term of this
Lease, ordinary wear and tear excepted. TENANT agrees that if TENANT does not
surrender said Leased Premises to LANDLORD at the end of the Term of this Lease,
then TENANT shall pay to LANDLORD double the amount of the current rental for
each month or portion thereof that TENANT holds over plus all damages that
LANDLORD may suffer on account of TENANT's failure to so surrender to LANDLORD
possession of said Leased Premises and shall indemnify and save LANDLORD
harmless from and against all claims made by any succeeding tenant of said
Leased Premises against LANDLORD on account of delay of LANDLORD in delivering
possession of said Leased Premises to said succeeding tenant so far as such
delay is occasioned by failure to so surrender said Leased Premises in
accordance herewith or otherwise.
No receipt of money and acceptance by LANDLORD from TENANT after
termination of this Lease or the service of any notice of commencement of any
suit or final judgement for possession shall reinstate, continue or extend the
Term of this Lease or affect any such notice, demand, suit or judgement. No act
or thing done by LANDLORD or its agents during the Term hereby granted shall be
deemed an acceptance of a surrender of the Leased Premises, and no agreement to
accept a surrender of the Leased Premises shall be valid unless it be made in
writing and subscribed by a duly authorized officer or agent of LANDLORD.
32. OCCUPANCY TAX: TENANT shall be responsible for and shall pay before
delinquency all municipal, county or state taxes assessed during the Term of
this Lease against any occupancy interest or personal property of any kind,
owned by or placed in, upon or about the Leased Premises by TENANT.
33. INTEREST ON PAST DUE SUMS: All sums of money required to be paid by the
TENANT to the LANDLORD shall bear interest from due date, or maturity thereof,
at the highest rate allowed by law until paid.
34. ATTORNEYS' FEES: If either party defaults in the performance of any of the
terms, provisions, covenants and conditions and by reason thereof and the other
party employs the services of an attorney to enforce performance of the
covenants, or to perform any service based upon a default under the Lease,
regardless of the initiation of court proceedings, then in any of said events,
the prevailing party shall be entitled to reasonable attorneys' fees and all
expenses and costs incurred by the prevailing party pertaining thereto and in
enforcement of any remedy (including costs and fees relating to any appeal and
in bankruptcy proceedings).
35. LITIGATION VENUE: All litigation between the parties hereto relating to this
Lease shall be instituted, maintained and prosecuted in the State Courts of
Broward County, Florida, having jurisdiction over the subject matter.
36. NO TRIAL BY JURY: It is mutually agreed by and between LANDLORD and TENANT
that the respective parties hereto shall, and they hereby do WAIVE TRIAL BY JURY
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matters arising out of or in any way connected
with this Lease, the relationship of LANDLORD and TENANT, and TENANT's use or
occupancy of the Premises. TENANT further agrees that it shall not interpose any
counterclaims in a summary proceeding or in any action based upon non-payment of
rent or any other payment required of TENANT hereunder.
37. CROSS DEFAULT: If the term of any lease, other than this Lease, made by
TENANT for any other space in the Building shall be terminated or terminable
after the making of this Lease because of any default by TENANT under such other
lease, such default shall, ipso facto, constitute a default hereunder and
empower LANDLORD at LANDLORD's sole option, to any remedies with respect to this
Lease as herein provided in the event of default.
38. INVALIDITY OF PROVISION: If any term, provision, covenant or condition of
this Lease or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this Lease or the
21
<PAGE>
application of such term, provision, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby and each term, provision, covenant or condition of
this Lease shall be valid and be enforceable to the fullest extent permitted by
law. This Lease shall be construed in accordance with the laws of the State of
Florida.
39. TIME OF ESSENCE: It is understood and agreed between the parties hereto that
time is of the essence of all the terms provisions, covenants and conditions of
this Lease.
40. QUIET ENJOYMENT: Upon payment by TENANT of the rents herein provided, and
upon the observance and performance of all terms, provisions, covenants and
conditions on TENANT's part to be observed and performed, TENANT shall, subject
to all of the terms, provisions, covenants and conditions of this Lease,
peaceably and quietly hold and enjoy the Leased Premises for the Term hereby
demised.
41. EFFECTIVE DATE: Submission of this instrument for examination does not
constitute an offer, right of first refusal, reservation of or option for the
Leased Premises or any other space or premises in, on or about the Building.
This instrument becomes effective as a Lease only upon execution and delivery by
both LANDLORD and TENANT.
42. NOTICE: Any notice given LANDLORD as provided for in this Lease or otherwise
shall be in writing and be addressed to LANDLORD at the address where rent is
paid and sent by certified mail-return receipt requested or hand delivered or
sent by overnight courier. Any notice to be given TENANT under the terms of this
Lease shall be in writing and shall be sent by certified mail return receipt
requested to the office of TENANT in the Building or shall be hand delivered to
TENANT or sent by overnight courier. Notice shall be deemed to have been served
on the day given, if personally delivered; or upon receipt if by overnight
courier or by certified, first class, postage prepaid, return receipt requested
mail. Either party, from time to time, by written notice, may specify another
address to which subsequent notice shall be sent.
43. MISCELLANEOUS: The terms "LANDLORD" and "TENANT" as herein contained shall
include singular and/or plural, masculine, feminine and/or neuter, heirs,
successors, executors, administrators, personal representatives and/or assigns
wherever the context so requires or admits. The terms, provisions, covenants and
conditions of this Lease are expressed in the total language of this Lease
Agreement and the paragraph headings are solely for the convenience of the
reader and are not intended to be all inclusive. Any formally executed addendum
to or modification of this Lease shall be expressly deemed incorporated by
reference herein unless a contrary intention is clearly stated therein. The
terms, provisions, covenants, and conditions contained in this Lease shall apply
to, inure to the benefit of, and be binding upon the parties hereto, and upon
their respective successors in interest and legal representatives, except as
otherwise herein expressly provided. This Lease shall be deemed to have been
mutually drafted by the parties. Therefore, neither this Lease nor any section
hereof, amendment or addendum hereto shall be construed against any party due to
the fact that this Lease or any section hereof, amendment or addendum hereto may
have been primarily drafted by said party.
44. AGENCY DISCLOSURE: TENANT represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction other than
LANDLORD's broker, Properties Group, Inc., for which LANDLORD shall be
responsible for any commission or fee. TENANT agrees to indemnify and hold
LANDLORD harmless from and against any claims by any other broker, agent or
other person claiming a commission or other form of compensation by virtue of
having dealt with TENANT with regard to this leasing transaction. The provisions
of this paragraph shall survive the termination of this Lease.
45. FORCE MAJEURE: Neither LANDLORD nor TENANT shall be required to perform any
term, condition, or covenant in this Lease so long as such performance is
delayed or prevented by force majeure, which shall mean acts of God, labor
disputes (whether lawful or not), material or labor shortages, restrictions by
any governmental authority, civil riots, floods, and any other cause not
reasonably within the control of LANDLORD or TENANT and which by the exercise of
due diligence LANDLORD or TENANT is unable, wholly or in part, to prevent or
overcome. Lack of money shall not be deemed force majeure.
22
<PAGE>
Notwithstanding any other term herein contained, if the Commencement
date has not occurred on or before January 1, 2001 for any reason not
attributable to the fault of the TENANT, including by reason of any force
majeure described in this Section, then TENANT, upon written notice to LANDLORD
shall, at its option, be entitled to terminate this Lease and receive a refund
of all monies paid by it to LANDLORD, by way of deposit or otherwise,. upon
which this Lease shall be terminated and each party shall be released from any
and all claims against the other in connection with this Lease with the
exception of any claims related to TENANT's use or occupancy of the Temporary
Space which shall survive such termination.
46. CORPORATE TENANCY: If TENANT is a corporation, the undersigned officer of
TENANT hereby warrants and certifies to LANDLORD that TENANT is a corporation in
good standing and is authorized to do business in the State of Florida. The
undersigned officer of TENANT hereby further warrants and certifies to LANDLORD
that he or she, as such officer, is authorized and empowered to bind the
corporation to the terms of this Lease by his or her signature thereto.
47. RENT A SEPARATE COVENANT: TENANT shall not for any reason withhold or reduce
TENANT'S required payment of rent and other charges as provided in this Lease,
it being agreed that the obligations of LANDLORD hereunder are independent of
TENANT'S obligations.
48. USE OF HAZARDOUS MATERIALS AND INDEMNIFICATION: TENANT shall not cause or
permit any Hazardous Material to be generated, brought upon, kept, used,
disposed of or released on, in or about the Premises or the Building or the
property upon which the Building is located by TENANT, its agents, employees,
contractors or invitees. The TENANT irrevocably agrees that it will, at its sole
efforts and expense comply with all past, present and future laws, ordinances,
rules, regulations, orders, decrees or permits enacted or issued by any federal,
state, county or municipal governmental agency(s) or judicial body having
jurisdiction or control over environmental contamination or pollution with
respect to TENANT's use of the Leased Premises.
If TENANT breaches this obligation, TENANT shall indemnify, defend and
hold LANDLORD harmless from any and all claims, judgements, damages, penalties,
fines, liens, costs, expenses, liabilities or losses (including, without
limitation, diminution in value of the Premises or the Building, damages for the
loss or restriction on use of rentable space or of any amenity of the Premises
or the Building, damages arising from any adverse impact on marketing of space,
and sums paid in settlement of claims, attorneys' fees, consultant fees and
expert fees) which arise during or after the Lease Term as a result of such
contamination. This indemnification of LANDLORD by TENANT includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work required by
any federal, state or local governmental agency or political subdivision because
of Hazardous Material present in the soil or ground water, in the Premises or in
the Building.
Without limiting the foregoing, if the presence of any Hazardous
Material on the Premises or in the Building caused by TENANT, its agents,
employees, contractors or invitees results in any contamination of the Premises
and/or the Building, TENANT shall promptly take all actions at its sole expense
as are necessary to return the Premises and/or the Building to the conditions
existing prior to the introduction of any such Hazardous Material; provided that
LANDLORD's approval of such actions shall first be obtained, which approval
shall not be unreasonably withheld so long as such actions would not potentially
have any material adverse long-term or short-term effect on the Premises and/or
the Building. The foregoing indemnity shall survive the expiration or earlier
termination of this Lease. As used herein, the term "Hazardous Material" means
such hazardous or toxic substance, pollutant, material or waste, including, but
not limited to, those substances, materials, and wastes listed in the United
States Department of Transportation Hazardous Materials Table (49 CFR 172.101)
or by the Environmental Protection Agency as hazardous substances (40 CFR Part
302) and amendments thereto, or such substances, materials and wastes that are
or become regulated or defined as such under any applicable local, state or
federal law and also includes oil. LANDLORD and its agents shall have the right,
but not the duty, to inspect the Premises at any time to determine whether
TENANT is complying with the terms of this Lease. If TENANT is not in compliance
with this Lease, LANDLORD shall have the right to immediately enter Premises to
remedy any contamination caused by TENANT's failure to comply notwithstanding
any other provision of this Lease. LANDLORD shall use its best efforts to
minimize interference with TENANT's business but shall not be liable for any
23
<PAGE>
interference caused thereby. Any default under this paragraph shall be a
material default enabling LANDLORD to exercise any of the remedies set forth in
this Lease.
All of TENANT's obligations of indemnification to LANDLORD pursuant to
this section of the Lease shall survive indefinitely the termination or
expiration of this Lease.
49. Intentionally Deleted.
50. SUCCESSORS AND ASSIGNS: All terms, provisions, covenants and conditions to
be observed and performed by TENANT shall be applicable to and binding upon
TENANT's respective heirs, administrators, executors, successors and assigns,
subject however, to the restrictions as to assignment or subletting by TENANT as
provided therein. All expressed covenants of this Lease shall be deemed to be
covenants running with the land.
51. ENTIRE AGREEMENT: This Lease contains the final and entire agreement between
the parties hereto and all previous negotiations leading thereto, and it may be
amended or modified only by an agreement in writing signed by LANDLORD and
TENANT. No surrender of the Leased Premises, or of the remainder of the term of
this Lease, shall be valid unless accepted by LANDLORD in writing. TENANT
acknowledges and agrees that TENANT has not relied upon any statement,
representation, discussion, prior written or contemporaneous oral promises,
agreements, warranties or communications, oral or in writing except such as are
expressed herein.
52. RADON GAS: The following disclosure is required on all leases of real
property in Florida: "Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit."
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ADDENDUM TO OFFICE BUILDING NET LEASE
THIS ADDENDUM TO OFFICE BUILDING NET LEASE is made and entered into
this 28th day of December, 1999 by and between by and between ANGLERS OFFICE
PARK, INC., a Florida corporation doing business as Anglers Corporate Center
(hereinafter called "LANDLORD"), whose address for purposes hereof is 2860
Pershing Street, Hollywood, Florida 33020 and TAKE TO AUCTION.COM, INC.
(hereinafter called "TENANT" ) and amends and modifies that certain Office
Building Net Lease (the "Lease") with respect to the Premises located at
Suite16, 5555 Anglers Avenue, Ft. Lauderdale, Broward County, Florida, as
follows:
1. Unless the context otherwise requires, all initial capitalized terms
used but not defined in this Addendum, shall have the meaning or meanings given
to such terms in the Lease. This Addendum shall be deemed a part of, but shall
take precedence over and supersede any provisions to the contrary contained in
the Lease. All references in the Lease or this Addendum to the Lease shall be
deemed to refer to the Lease as modified by this Addendum, unless the context
otherwise requires.
2. LANDLORD shall provide TENANT with a total credit against Base
Rental in the amount of $58,277.58. This credit shall be applied in five equal
annual installments of beginning on the first anniversary of the Commencement
Date. The rent credit shall be forfeited if TENANT is in default under the Lease
on the date the credit would otherwise be due.
3. TENANT shall have temporary exclusive use and occupancy of Suite 9
in the Building during LANDLORD's build out of TENANT's Leased Premises and
until the Commencement Date (the "Temporary Space"). TENANT shall be in default
under this Lease if TENANT fails to vacate the Temporary Space and take
possession of the Leased Premises within ten (10) days of the Commencement Date.
During its occupancy of the Temporary Space, TENANT shall pay to the LANDLORD
the full amount of the rental required under the terms of this Lease including
Operating Expenses and Impositions. Rental due for the first month of occupancy
of the Temporary Space shall be paid to the LANDLORD upon the execution of this
Lease. All of the terms and provisions of this Lease shall apply to TENANT's use
and occupancy of the Temporary Space.
4. TENANT and/or its contractors shall have access to the Leased
Premises prior to the Commencement Date for installation of telephone and
telecommunications equipment provided said access is coordinated with LANDLORD
and its contractors and does not interfere with or delay the completion of
LANDLORD's work in the Leased Premises.
5. Except as expressly modified by this Addendum and any other addenda
executed by the parties, the provisions of the Lease are hereby ratified and
confirmed.
LANDLORD:
ANGLERS OFFICE PARK, INC.
Witnesses: a Florida corporation
By: /s/ Marvin Mandel
- -------------------------------- -----------------
Marvin Mandel, President
TENANT:
TAKE TO AUCTION.COM, INC.
Witnesses: a Florida corporation
By: /s/ Albert Friedman
- -------------------------------- ---------------------
Albert Friedman, President
<PAGE>
EXHIBIT "A"
FLOOR AND SITE PLANS AND LANDLORD'S WORK
----------------------------------------
I. FLOOR AND SITE PLANS - See Attached
II. LANDLORD'S WORK - LANDLORD shall complete the following improvements to
the Premises at LANDLORD's expense:
<PAGE>
EXHIBIT "B"
CONSTRUCTION SPECIFICATIONS
---------------------------
LANDLORD'S WORK
Landlord shall cause Landlord's contractor to construct the interior
improvements to the demised premises shown on Exhibit "A" containing the
improvements as described below ("Landlord's Work") at Landlord's sole cost and
expense, prior to Landlord's delivery of possession to Tenant.
<TABLE>
<CAPTION>
DESCRIPTION:
<S> <C> <C>
A. Floor Type
----------
Floor slab: Concrete slab ready for floor covering.
Floor Covering:
1) Office Area: Commercial grade, direct glue down, carpet at office area and storage closet with
vinyl cove base board . Color of Tenant's choice from Landlord's
samples.
2) Bathroom: Ceramic tile of Tenant's choice from Landlord's samples.
B. Electrical
----------
Electrical Service: 100 amp 120 volt, single phase.
Electrical Panel: One panel with 30 circuits. Any additional circuits needed by Tenant
shall be at the Tenant's sole cost and expense.
Wall Receptacle: Standard wall mounted 120-volt duplex receptacles to be located per
attached space plan.
Lighting: 2' x 4' flourescent, lay-in fixtures with acrylic lens.
Switches: Lighting control switches at entry/exit and at enclosed offices,
bathroom and storage closet.
Exit Lights/
Emergency Lighting: Installed per code.
C. Ceiling Type
------------
Lay in Ceiling: 2' x 2' lay in fiberboard tile (white flat fissure) with metal
ceiling grid.
Ceiling Height: 9'+/- above the concrete slab.
D. Air Conditioning
----------------
Tonnage: One split system HVAC unit at office area. Tonnage to be in accordance with
Florida Energy Code standards.
<PAGE>
Control Wiring: One control/thermostat per A/C unit.
E. Partitions
----------
Demising Walls: 5/8" type X drywall, fire taped and sanded, ready for paint. 3-5/8"
20 gauge metal studs at 24" on center.
Interior Walls: gypsum board on each side of 3-5/8" metal studs, 20-gauge, at 24" on
center, taped and sanded, ready for paint.
Wall Height All demising walls shall go from the concrete slab to the
underside of the roof deck. All interior walls at offices shall go
from the slab to the underside of the dropped ceiling grid, unless
otherwise indicated on the final plans.
Paint/Wall Covering: All interior walls to be
painted with two (2) coats of flat
latex paint of Tenant's choice from
Landlord's samples.
F. Doors
-----
Storefront Entry Door: 3'0" x 6'8" glass door in metal frame to match building shell
specifications.
Interior Door: 3'0" x 6'0" +/-, solid-core, stain-grade, wood doors with hollow metal frames
and lever-type passage set hardware.
G. Plumbing
--------
Bathroom: To be installed to code, in accordance with ADA requirements.
Coffee Bar: To be located as per attached space plan and to include bar sink with mica
counter top with cabinet below.
H. Telephone
---------
Telephone Conduit: Landlord will install one1/2" conduit to Tenant's space from the building
meter/telephone room. Tenant shall be responsible for the supply and
installation of all telephone lines and equipment necessary for
Tenant's phone system.
Telephone Outlets: Outlets to be located as per space plan. Cover plates not included.
</TABLE>
<PAGE>
EXHIBIT "C"
NON-DISTURBANCE AGREEMENT
-------------------------
<PAGE>
RULES AND REGULATIONS
The following Rules and Regulations, hereby accepted by TENANT, are
prescribed by LANDLORD to enable LANDLORD to provide, maintain, and operate, to
the best of LANDLORD's ability, orderly, clean and desirable premises, Building
and parking facilities for tenants therein at as economical a cost as reasonably
possible and in as efficient a manner as reasonably possible and to regulate
conduct in and use of said Premises, Building and parking facilities in such
manner as to minimize interference by others in the proper use of same by
TENANT.
1. TENANT, its officers, agents, servants and employees shall not block
or obstruct any of the entries, passages, doors, walkways and hallways of the
Building or parking facilities, or place, empty or throw any rubbish, litter,
trash or material of any nature into such areas, or permit such areas to be used
at any time except for ingress or egress of TENANT, its officers, agents,
servants, employees, patron, licensees, customers, visitors or invitees.
2. LANDLORD shall not be responsible for lost or stolen property,
equipment, money or any article taken from Leased Premises, Building or parking
facilities regardless of how or when such loss occurs.
3. No additional locks shall be placed on any door or changes made to
existing locks in the Building without the prior written consent of LANDLORD.
LANDLORD shall furnish two keys to each lock on the door to the Leased Premises.
LANDLORD may, at all times, keep a pass key to the Leased Premises. All keys
shall be returned to LANDLORD promptly upon termination of this Lease.
4. If TENANT desires alarm or other utility or service connection
installed or changed, such work shall be done at the expense of TENANT, with the
prior approval and under the direction of LANDLORD.
5. TENANT, its officers, agents, servants and employees shall not
permit the operation of any musical or sound producing instruments or device
which may be heard outside the Leased Premises, Building or parking facilities,
or which may emanate electrical waves which shall impair radio or televisions
broadcasting or reception from or in the Building.
6. All plate and other glass now in the Leased Premises or Building
which is broken through cause attributable to TENANT, its officers, agents,
servants and employees, patrons, licensees, customers, visitors or invitees
shall be replaced by and at the expense of TENANT under the direction of
LANDLORD.
7. The plumbing facilities shall not be used for any purpose other than
that for which they are constructed, and no foreign substance of any kind shall
be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by TENANT, who
shall, or whose officers, employees, agents, servants, patrons, customers,
licensees, visitors or invitees shall have caused it.
8. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Premises or the Building, nor placed in the
walkways, driveways or parking areas without the prior written consent of
LANDLORD.
9. Glass panel doors, that reflect or admit light into the Premises
shall not be covered or obstructed by TENANT, and TENANT shall not permit,
erect, and/or place drapes, furniture, fixtures, shelving, display cases or
tables, lights or signs and advertising devices in front of or in proximity of
exterior windows, glass panels, or glass doors providing a view into the
interior of the Leased Premises unless same shall have first been approved in
writing by LANDLORD.
10. Canvassing, soliciting and peddling in the Building or parking
facilities is prohibited and each TENANT shall cooperate to prevent the same. In
this respect, TENANT shall promptly report such activities to the LANDLORD.
<PAGE>
11. The TENANT shall maintain the interior of the Leased Premises in a
clean and orderly condition as LANDLORD does not provide any janitorial service.
TENANT shall place all of its refuse in the dumpsters provided by the LANDLORD
in the areas so designated. TENANT shall not place items other than customary
office refuse in the dumpsters. TENANT shall not place packing materials,
crates, pallets and similar materials in the dumpsters. In the event TENANT must
dispose of crates, boxes, etc., it shall be the responsibility of TENANT to make
arrangements for disposal of same. In no event, shall TENANT set such items in
the walkways, driveways, or other common areas of Building or parking
facilities.
12. TENANTS shall be responsible for any damage to the Leased Premises,
including carpeting and flooring, as a result of rust or corrosion of file
cabinets, roller chairs, metal objects or spills of any type of liquid, beyond
normal wear and tear.
13. If the Premises demised to TENANT become infested with vermin,
TENANT, at its sole cost and expense, shall cause its premises to be
exterminated from time to time, to the satisfaction of LANDLORD, and shall
employ such extermination therefore as shall be approved by Landlord.
14. TENANT shall not install or place any antenna, aerial wires, aerial
or satellite dish of any type on the roof of the Building or elsewhere outside
of the Premises. Nor shall TENANT install any radio or television equipment, or
any other type of equipment, inside or outside the Building, without LANDLORD's
prior approval in writing, and upon such terms and conditions as may be
specified by LANDLORD in each and every instance.
15. TENANT shall not advertise the business, profession or activities
of TENANT in any manner which violates the letter of spirit of any code of
ethics adopted by any recognized association or organization pertaining thereto,
or use the name of the Building for any purpose other than that of the business
address of TENANT.
16. TENANT, its officers, agents, employees, servants, patrons,
customers, licensees, invitees and visitors shall not solicit business in the
Building's parking facilities or common areas, nor shall TENANT distribute any
handbills or other advertising matter in automobiles parked in the Building's
parking facilities.
17. TENANT shall not conduct its business in such manner as to create
any nuisance, or interfere with, annoy or disturb any other TENANT in the
Building, or LANDLORD in its operation of the Building or commit waste or suffer
or permit waste to be committed in the Leased Premises, Building or parking
facilities. In addition, TENANT shall not allow its officers, employees, agents,
servants, patrons, customers, licensees, and visitors to conduct themselves in
such a manner as to create any nuisance or interfere with, annoy or disturb any
other TENANT in the Building or LANDLORD in its operation of the Building or
commit waste or suffer or permit waste to be committed in the Leased Premises,
Building or parking facilities.
18. TENANT, its officers, employees, agents, servants, patrons,
customers, licensees, and visitors shall not bring, store or maintain any
flammable fluids or explosives on or into the Premises.
19. TENANT, its officers, employees, agents and servants shall not use
Leased Premises, Building or parking facilities for housing, lodging or sleeping
purposes or for the cooking or preparation of food.
20. TENANT, its officers, employees, agents, servants, patrons,
customers, licensees, visitors or invitees shall not bring into parking
facilities, Building or Leased Premises or keep on the Leased Premises any fish,
fowl, reptile, insect, or animal.
21. Neither TENANT nor any officers, employees, agents, servants,
patrons, customers, licensees, visitors or invitees of any TENANT shall go upon
the roof of the Building, other than to service the HVAC.
22. TENANT shall use only office machines and equipment that operate on
the Building's standard electric circuits, but which in no event shall overload
the Building's standard electric circuits.
2
<PAGE>
23. LANDLORD shall supply TENANT with hurricane shutters for the
Premises which TENANT shall store in the Premises. TENANT shall be responsible
for installation of the hurricane shutters in advance of any threatened
hurricane or tropical storm and for the removal of same after the threat or
storm passes. In the event that TENANT fails to promptly install the hurricane
shutters in advance of a threatened hurricane or tropical storm, LANDLORD may,
at its option but without any obligation to do so, install the hurricane
shutters on TENANT's Premises and charge TENANT a reasonable fee for such
installation as additional rent.
3
<PAGE>
GUARANTY OF LEASE
WHEREAS, a certain Lease, hereinafter referred to as the "Lease", of
even or approximate date herewith has been, or shall be, executed by and between
ANGLERS OFFICE PARK, INC., a Florida corporation doing business as Anglers
Corporate Center, therein and herein referred to as "LANDLORD", and TAKE TO
AUCTION.COM, INC., therein and herein referred to as "TENANT", with respect to
certain premises located at 5555 Anglers Avenue, Ft. Lauderdale, Florida 33312;
and
WHEREAS, LANDLORD under the Lease requires as a condition to its
execution of the Lease that the undersigned ("GUARANTOR") personally guaranty
the full performance of the obligations of TENANT under the Lease; and
WHEREAS, the undersigned is/are desirous that LANDLORD enter into the
Lease with TENANT,
NOW THEREFORE, in consideration of the execution of the Lease by
LANDLORD, and in consideration of other good and valuable considerations, the
receipt and adequacy of which are hereby acknowledged, the undersigned hereby
unconditionally guarantee(s) the full, faithful and punctual performance of each
and all of the terms, covenants, agreements and conditions of the Lease to be
kept and performed by TENANT, in accordance with and within the time prescribed
by the Lease, including, but not limited to, the payment of all rentals and
other charges to accrue thereunder. The undersigned further agrees as follows:
1. This covenant and agreement on its part shall continue in favor of
LANDLORD notwithstanding any extension, modification, amendment, or alteration
of the Lease entered into by and between the parties thereto, or their
successors or assigns, and notwithstanding any assignment of the Lease or
subletting thereunder, with or without the consent of LANDLORD, and no
extension, modification, amendment, alteration, or assignment or subletting of
the Lease, and no forbearance which may be granted to TENANT, and no waiver by
LANDLORD, and no other agreements between LANDLORD and TENANT (with or without
notice to or knowledge of the undersigned) shall in any manner release or
discharge the undersigned; and it does hereby consent thereto. This is an
absolute, unconditional and continuing guaranty of payment and performance and
not of collection.
2. This Guaranty shall continue unchanged by any bankruptcy,
reorganization or insolvency of TENANT or any successor or assignee thereof or
by any disaffirmance or abandonment by TENANT or a trustee of TENANT.
3. LANDLORD may, without notice, assign this Guaranty of Lease in whole
or in part and no assignment or transfer of the Lease shall operate to
extinguish or diminish the liability of the undersigned hereunder.
4. The liability of the undersigned under this Guaranty of Lease shall
be primary and in any right of action which shall accrue to LANDLORD under the
Lease, LANDLORD may, at its option, proceed against the undersigned without
having commenced any action, or having obtained any judgment, against TENANT.
5. The undersigned shall pay LANDLORD's attorney's fees, including
appellate fees and those incurred in bankruptcy proceedings, and all costs
incurred in any collection or attempted collection or in any negotiations
relative to the obligations hereby guaranteed or in enforcing this Guaranty of
Lease against the undersigned, individually and jointly.
6. The undersigned does hereby waive any and all notices and demands by
LANDLORD, including, but not limited to, default in the payment of rent or any
other amounts contained or reserved in the Lease.
7. The undersigned hereby waive: (a) notice of acceptance of this
Guaranty; (b) demand of payment, presentation and protest; (c) all right to
assert or plead any statute of limitations as to or relating to this Guaranty
and the Lease; (d) any right to require LANDLORD to proceed against TENANT or
<PAGE>
any other Guarantor or any other person or entity liable to LANDLORD; (e) any
right to require LANDLORD to apply to any default, any Security Deposit or other
security it may hold under the Lease; (f) any right to require LANDLORD to
proceed under any other remedy LANDLORD may have before proceeding against
Guarantor; and (g) any right of subrogation.
8. The undersigned does hereby subordinate all existing or future
indebtedness of TENANT to Guarantors to the obligations owed to LANDLORD under
the Lease and this Guaranty.
9. The obligations of TENANT under the Lease to execute and deliver
estoppel statements and financial statements, as therein provided, shall be
deemed to also require the Guarantor hereunder to do so and provide the same
relative to Guarantor(s).
10. The use of the singular herein shall include the plural. The
obligation of two (2) or more parties shall be joint and several. The terms and
provisions of this Guaranty shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties herein named.
11. The undersigned acknowledge that this Guaranty is entered into in
Broward County, Florida and stipulate to venue in all legal actions in
connection herewith in the State Courts in Broward County, Florida. This
Guaranty shall be deemed to have been made under and shall be governed by the
Laws of the State of Florida in all respects, including matters of construction,
validity and performance. No modification of the provisions of this Guaranty
shall be effective unless the same shall be in writing and signed by LANDLORD.
12. Notwithstanding anything to the contrary contained herein, the
maximum liability of GUARANTOR under this Guaranty shall be limited to
$75,000.00, plus interest, costs and attorneys fees. Further, on each
anniversary date of the Lease, the maximum liability of GUARANTOR hereunder
shall be reduced by $15,000.00, not including interest, costs and attorneys
fees.
13. GUARANTOR AND LANDLORD HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION BASED UPON THE LEASE, THIS GUARANTY OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THE LEASE OR THIS GUARANTY, INCLUDING ANY ACTION,
PROCEEDING OR COUNTERCLAIM IN CONNECTION THEREWITH. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR LANDLORD ENTERING INTO THE LEASE.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
executed as of this day of December, 1999.
GUARANTOR:
PERFUMANIA, INC.
a Florida corporation
By: /s/ Ilia Lekach
--------------------
Ilia Lekach, President
/s/ Albert Friedman
-------------------
Witness
(This Guaranty of Lease must be completed in full prior to submission
to LANDLORD for execution.)
2
EXHIBIT 10.10
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
-------------------------
This agreement ("Agreement") by and between Take To Auction.Com, Inc.,
a Florida corporation (the "Company"), and _____________ (the "Optionee")
currently residing at _____________________________, is entered into as of this
___ day of ______________, ______ (the "Grant Date"). Under this Agreement, the
Company grants an option (the "Option") to the Optionee to purchase a total of
___________________________ (_______) shares (the "Shares") of Common Stock, par
value $.001 per share of the Company (the "Common Stock") at the exercise price
determined as provided herein, pursuant to the Take To Auction.Com, Inc. 1999
Stock Option Plan (the "Plan") adopted by the Company, which is incorporated
herein by reference. The Optionee hereby acknowledges receipt of the Plan and
agrees to be bound by all of the terms and conditions thereof. Capitalized terms
used but not otherwise defined herein shall have the same meanings as provided
in the Plan.
1. Nature of the Option. This Option is a Non-Statutory Stock Option
and is not intended to constitute an "incentive stock option" as that term is
used in Code Section 422.
2. Exercise Schedule. Except as otherwise provided herein or in the
Plan, this Option shall be exercisable in accordance with Section 6 in whole or
in part and cumulatively according to the following schedule:
(a) _____________ shares of Common Stock shall vest one year
after the signing of this Agreement.
(b) _____________ shares of Common Stock shall vest two years
after the signing of this Agreement.
(c) _____________ shares of Common Stock shall vest three
years after the signing of this Agreement.
provided, however, that in no event shall the Option be exercisable after the
expiration of 7 years from the Grant Date. Notwithstanding any other provision
herein, each increment of this Option set forth in the schedule above shall vest
and become exercisable by the Optionee if and only if the Optionee is in the
employ of the Company on the relevant date or dates indicated above.
3. Change of Control; Acceleration of Vesting. In the event of a Change
of Control this Option may, at the sole discretion of the Committee: (a) become
immediately vested and exercisable in full; or (b) be converted into an option
or similar equity security of the surviving or successor company having, as
similar as possible or better, the rights, value, terms and characteristics of
this Option, or (c) terminate immediately prior to the consummation of such
proposed action; provided, that if the Option is then exercisable, the Optionee
shall have received written notice within a reasonable time prior to the
consummation of such action advising the Optionee of (i) any of the foregoing
and (ii) that the Optionee has the opportunity to exercise his Option during
<PAGE>
such period. The Committee may, in the exercise of its sole discretion, in such
instances declare that this Option shall terminate as of a date fixed by the
Board and give the Optionee the right to exercise his or her Option.
4. Exercise Price. The exercise price of the Shares subject to this
Option is $___ for each Share.
5. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become unexercisable at the time of the
earliest to occur of the following:
(i) one year after the date on which the Optionee's
employment or service with the Company or a Subsidiary is terminated for any
reason, including, but not limited to a Disability, other than by reason of (A)
Cause, (B) voluntary termination of employment by the Optionee, or (C) the
Optionee's death;
(ii) immediately upon the termination by the Company
or any Subsidiary of the Optionee's employment or service for Cause;
(iii) ninety days after the voluntary termination of
employment or service with the Company or any Subsidiary by the Optionee;
(iv) one year after the date of the Optionee's death;
provided, that if the Optionee shall die after terminating employment or service
by reason of Disability, the unexercised portion of any Option may be
exercisable only until the later to occur of one year following the Optionee's
termination of employment or service, or one month following the Optionee's
death.
(b) The Committee in its sole discretion may, by giving
written notice ("cancellation notice") to the Optionee, cancel, effective upon
the date of the consummation of any Change of Control, any Option that remains
unexercised on such date. Such cancellation notice shall be given within a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 5, any Option (or portion thereof) not previously
exercised pursuant to Section 7 hereof shall be canceled.
6. Transferability of Options.
(a) This Option is not subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or by the
laws of descent and distribution and any attempt to make such a prohibited
transfer shall be void. Notwithstanding, the Committee hereby permits the
Optionee to transfer this Non Statutory Stock Option to a family member or trust
for the benefit of a family member, provided such transfer does not violate the
requirements of Rule 16-3. The Option shall be exercisable during the Optionee's
2
<PAGE>
lifetime only by the Optionee or, in the event this Non Statutory Stock Option
has been assigned or otherwise transferred, only by such assignee.
(b) Provided the transaction does not violate the requirements
of Rule 16b-3, no Shares acquired by an Officer or Director, as these terms are
defined under Rule 16b-3, pursuant to the exercise of an Option may be sold,
assigned, pledged or otherwise transferred prior to the expiration of the
six-month period following the Grant Date.
7. Exercise of Options.
(a) The Optionee shall exercise the Option in whole or in part
by filing a written notice in the form of an "Exercise Letter" (attached hereto
as Exhibit 1) with the Secretary of the Company at its corporate headquarters.
The Exercise Letter shall specify the number of Shares that the Optionee elects
to purchase, and shall be accompanied by payment of the exercise price for such
Shares as indicated in the Exercise Letter.
(b) The exercise price of the Option may be paid in cash, by
certified or official bank check, by personal check (with the approval of the
Committee), by money order, with Shares owned by the Optionee that have been
owned by the Optionee for more than 6 months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings for
financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the exercise price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
exercise price or by a combination of the above, or by promissory note. If the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Exercise Letter is
filed with the Company.
(c) The Optionee shall not be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to the Optionee under the terms of this Option and
the Plan (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). Until the issuance of the
stock certificate evidencing the shares as to which an Option has been
exercised, no right to vote or to receive dividends or any other rights as a
shareholder shall exist with respect to shares of Common Stock subject to an
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
notwithstanding the exercise of such Option, except as expressly provided in
Section 10 hereof.
8. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal and State laws pertaining to the issuance of securities. If the Company
reaches such a determination, it shall use all reasonable efforts to obtain
compliance to such laws, rules or regulations. In making any determination
hereunder, the Company may rely on the opinion of counsel for the Company. As a
condition to the exercise of this Option, the Company may require the Optionee
3
<PAGE>
to make any representation and warranty to the Company as may be required by any
applicable law or regulation.
9. Death of Optionee. Upon the death of Optionee this Option may be
exercised by the executor or administrator of the Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death and only for such period of time as shall be permitted pursuant to Section
5(a) hereof, and subject to all of the restrictions contained in this Agreement
and the Plan.
10. Adjustment of Shares.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the aggregate number
of Shares which have been authorized for issuance hereunder, as well as the
exercise price per share of Common Stock covered by this Option, shall be
appropriately adjusted for any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a stock dividend or through
any recapitalization, reclassification, stock split-up, combination or exchange
of Common Stock (other than any such exchange or issuance of Common Stock
through which Common Stock is issued to effect an acquisition of another
business or entity or the Company's purchase of Common Stock to exercise a
"call" purchase option). Such adjustments shall be made by the Committee, whose
determination in this respect shall be final, binding and conclusive.
(b) The Committee may change the terms of Options outstanding
under the Plan, with respect to the exercise price or the number of Shares
subject to this Option, or both, when, in the Committee's sole judgment and
discretion, such adjustments become appropriate by reason of a Change of
Control.
(c) Except as expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such shares, or upon conversion of
shares or obligations of the Company convertible into such shares or securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to this Option.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate: (i)
any or all adjustments, recapitalizations, reclassifications, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference
stock, that would rank senior to or above the Shares subject to outstanding
Options; (iv) any purchase or issuance by the Company of Shares or other classes
of common stock or common equity securities; (v) the dissolution or liquidation
of the Company; (vi) any sale, transfer, encumbrance, pledge or assignment of
4
<PAGE>
all or any part of the assets or business of the Company; or (vii) any other
corporate act or proceeding, whether of a similar character or otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise her or his
Option.
11. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any law, regulation, agreement or other applicable restriction,
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all
of the terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including without limitation any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and (B) any restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
12. Redemption of Shares by the Corporation.
(a) Right to Redeem. Subject to any restrictions under
applicable corporate or other laws, and notwithstanding any other provisions to
the contrary, and in addition to the rights of the Company contained in Section
5 hereof, the Company shall have the right to redeem any Shares issued to the
Optionee pursuant to the exercise by such Optionee of the Option granted to him
hereunder immediately upon the termination of Optionee's employment or services
arising from: (i) a Disability; (ii) the death of the Optionee; (iii) the
voluntary termination of employment or services of the Optionee; or (iv) the
termination of employment or services of the Optionee for Cause (each an "Event
of Redemption").
5
<PAGE>
(b) Redemption Price.
(i) Subject to clause (ii) below, the purchase price
(the "Redemption Price"), to be paid by the Company to the Optionee at the
Redemption Closing (as defined below) for the Shares of the Optionee upon the
occurrence of an Event of Redemption pursuant Section 12(a)(i)-(iii), shall be
the Fair Market Value of the Shares on the date of the Event of Redemption as
determined in accordance with Section 2(n) of the Plan.
(ii) In the event that the Corporation's right to
redeem pursuant to Section 12(a) above occurs as a result of the termination of
employment or services of the Optionee for Cause, as set forth in Section
12(a)(iv) hereof, the Optionee shall not be entitled to receive any compensation
for his Shares, and the Optionee shall immediately surrender the Shares to the
Company without payment of any further compensation for the Shares.
(c) Redemption Closing. The closing (the "Redemption Closing")
shall take place no later than thirty (30) days after the date of the occurrence
of the Redemption Event. At the Redemption Closing: (i) the Optionee shall
deliver to the Company the share certificate or certificates evidencing the
ownership of the Shares together with duly executed stock powers endorsed in
blank and such other documents as the Company shall require; and (ii) the
Company shall pay to the Optionee the Redemption Price (if any) by wire
transfer, certified check or, in the Company's sole discretion, by delivery of a
promissory note to the Optionee in the principal amount of the Redemption Price
and payable on such terms as the Company may deem appropriate.
13. Withholding. In the event the Company determines that it is
required to withhold Federal, state, or local taxes in connection with the
purchase or disposition of Shares, the Optionee or any person succeeding to the
rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Company to enable it to
satisfy no more than the statutory minimum of such withholding requirements.
14. Miscellaneous.
(a) If any provision of this Agreement should be held invalid
for the granting of Options or illegal for any reason, such determination shall
not affect the remaining provisions hereof, but instead this Agreement shall be
construed and enforced as if such provision had never been included in this
Agreement.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida.
(c) Headings contained in this Agreement are for convenience
only and shall in no manner be construed as part of this Agreement.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) Neither the Plan nor any Option granted pursuant thereto
shall be construed to give any person the right to remain in the employ or
6
<PAGE>
service of the Company or any Affiliate, or to affect the right of the Company
or any Affiliate to terminate such individual's employment or service at any
time with or without cause. The grant of an Option shall not entitle the
Optionee to, or disqualify the Optionee from, participation in the grant of any
other Option under the Plan or participation in any other benefit plan
maintained by the Company or any Affiliate.
(f) This Agreement shall be binding upon the Company's
successors and assigns and shall inure to the benefit of any representative,
executor, administrator, heir or legatee of the Optionee.
15. Acknowledgment. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Plan or this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
TAKE TO AUCTION.COM, INC.
By:_____________________________
-------------, -------------
Accepted and Agreed to on the
date first above written.
OPTIONEE
- -------------------------------
- -------------
7
<PAGE>
Exhibit 1
TAKE TO AUCTION.COM, INC.
1999 STOCK OPTION PLAN
Election to Exercise Stock Option
---------------------------------
To:
From:
Date:
Pursuant to the provisions of my Option Agreement (the "Agreement")
issued under the Take To Auction.Com, Inc. 1999 Stock Option Plan (the "Plan")
with the grant date of _______________ [insert Grant Date], I hereby elect to
exercise on the exercise date indicated below the option evidenced by that
Agreement (the "Option") with respect to ___________ [insert number] Shares of
Take To Auction.Com, Inc. (the "Option Shares"). I agree to purchase the Option
Shares at the price and terms established under the Agreement and the Plan. I am
attaching $_____________ (__________ U.S. Dollars) as payment in full of the
exercise price of the Option Shares in the form of cash, bank check, certified
check or personal check (with the consent of the Committee) [circle one].
I hereby represent that I am acquiring the Option Shares for my own
account for investment and that I have no present intention of distributing or
otherwise disposing of any such shares in violation of the Securities Act of
1933, as amended (the "Securities Act"). I understand that no delivery of the
Option Shares will be made to me until the Committee has determined that such
delivery complies with applicable federal and state securities laws.
I also recognize that such shares constitute "restricted securities"
under the Securities Act and have not been registered under the Securities Act
or any applicable state securities laws, that the certificate will contain a
legend restricting their transfer, that the transfer agent for Take To
Auction.Com, Inc. (the "Company") will be instructed not to effectuate a
transfer without written authorization from the Company and that the Option
Shares may not be transferred or sold unless they are subsequently registered or
an exemption from such registration is available. I understand that the Company
is under no obligation to register the Option Shares.
I am aware of the Company's business affairs and financial condition
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Option Shares. I acknowledge that I
8
<PAGE>
have received from the Company a copy of the Plan and a copy of the Agreement. I
have substantial knowledge and experience in financial and business matters so
that I am capable of evaluating the merits and risks of acquiring the Option
Shares and have the capacity to protect my own interests.
[I am an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.]
I further understand that pursuant to the Agreement the Option Shares
are subject to additional restrictions regarding transfer and resale and Company
repurchase rights.
I hereby warrant that I am entitled under the Agreement and the Plan to
purchase the Option Shares which I have agreed to purchase herein.
I further understand that the Company may refrain from delivering or
transferring the Option Shares until the Committee has determined that I have
made payment in full of the Purchase Price for all Option Shares designated in
this document (e.g., my check has cleared, if payment is made by personal check)
and I have tendered to the Company (or, if applicable, an affiliate of the
Company) cash or other consideration acceptable to the Committee which is
sufficient to pay any federal, state or local taxes that the Committee
determines the Company (or, if applicable, an affiliate of the Company) is
required to withhold as a result of my exercise of the Option and that the
Company (or, if applicable, an affiliate of the Company) has the right to deduct
from cash payments otherwise due to me any such tax.
____________________________________
(signature)
Exercise Date:______________________
9
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
<S> <C> <C> <C> <C>
Optionee Position Options Exercise Price Grant Date
Albert Friedman CEO/Pres 75,000 0.41 08/26/1999
Mitchell Morgan CFO 145,408 0.41 08/26/1999
Mitchell Morgan CFO 29,592 11.00 01/31/2000
Jonathan Geller CTO 162,857 0.41 10/01/1999
Jonathan Geller CTO 12,143 11.00 01/31/2000
Ilia Lekach Chairman 270,000 11.00 01/31/2000
Horacio Groisman Vice-Chairman 45,000 0.41 08/26/1999
Reinaldo Romeu Controller 30,000 7.00 01/18/2000
Kevin Caricato MIS 15,000 8.00 01/04/2000
Mark Kiessung MIS 10,000 11.00 01/25/2000
Jason Kline MIS 10,000 11.00 01/25/2000
Nicolae Paraschiv MIS 10,000 11.00 01/25/2000
------------------
815,000
==================
10
</TABLE>
EXHIBIT 10.11
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT
OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
____________ ____, 2000
TAKE TO AUCTION.COM, INC.
(Incorporated under the laws of the State of Florida)
Warrant for the Purchase of Shares of Common Stock
--------------------------------------------------
FOR VALUE RECEIVED, TAKE TO AUCTION.COM, INC., a Florida corporation
(the "Company"), hereby certifies that ______________ or assigns (the "Holder")
is entitled, subject to the provisions of this Warrant, to purchase from the
Company, ________ fully paid and non-assessable shares of Common Stock at a
price of $_______ per share (the "Exercise Price").
The term "Common Stock" means the Common Stock, par value $.001 per
share, of the Company as constituted on the date hereof (the "Base Date"). The
number of shares of Common Stock to be received upon the exercise of this
Warrant may be adjusted from time to time as hereinafter set forth. The shares
of Common Stock deliverable upon such exercise, and as adjusted from time to
time, are hereinafter referred to as "Warrant Stock." The term "Other
Securities" means any other equity or debt securities that may be issued by the
Company in addition thereto or in substitution for the Warrant Stock. The term
"Company" means and includes the corporation named above as well as (i) any
immediate or more remote successor corporation resulting from the merger or
consolidation of such corporation (or any immediate or more remote successor
corporation of such corporation) with another corporation, or (ii) any
corporation to which such corporation (or any immediate or more remote successor
corporation of such corporation) has transferred its property or assets as an
entirety or substantially as an entirety.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
<PAGE>
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held subject to, all of the conditions,
limitations and provisions set forth herein.
1. Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time after 180 days from the consummation of the Initial Public
Offering of any equity securities of the Company (the "IPO Date") and prior to
the date which is seven (7) years after the IPO Date, or if such day is a day on
which banking institutions in Florida are authorized by law to close, then on
the next succeeding day that shall not be such a day, by presentation and
surrender of this Warrant to the Company at its principal office, or at the
office of its stock transfer agent, if any, with the Warrant Exercise Form
attached hereto duly executed and accompanied by payment of the Exercise Price,
either in cash, by certified or official bank check made payable to the Company,
or with shares of Common Stock (which may include Warrant Stock to be received
upon the exercise of this Warrant) having a fair market value on the date of
delivery equal to the aggregate exercise price of the shares of Common Stock as
to which this Warrant is being exercised, or by any combination of such methods
of payment or by any other method of payment as may be permitted under
applicable law and as may be authorized by the Company for the number of shares
specified in such form and instruments of transfer, if appropriate, duly
executed by the Holder or his or her duly authorized attorney. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the shares purchasable
hereunder. Upon receipt by the Company of this Warrant, together with the
Exercise Price, at its office, or by the stock transfer agent of the Company at
its office, in proper form for exercise, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. The Company shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on exercise of this Warrant.
2. Reservation of Shares. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and Other Securities) from time
to time receivable upon exercise of this Warrant. All such shares (and Other
Securities) shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and non-assessable and free of all preemptive
rights.
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant. For purposes of this Warrant, the
fair market value of a share of Common Stock shall be determined as follows: The
average of the closing bid and asked prices of the Company's Common Stock quoted
in the over-the-counter market in which the Company's Common Stock is traded or
the closing price quoted on any exchange on which the Company's Common Stock is
listed, whichever is applicable, as published in The Wall Street Journal for ten
(10) trading days prior to the date of determination of Fair Market Value. If
2
<PAGE>
the Company's Common Stock is not traded on an over-the-counter market or an
exchange, the fair market value shall be the price per share that the Company
could obtain from a willing buyer for such shares sold by the Company from
authorized but unissued shares, as such price shall be determined in good faith
by the Company's Board of Directors.
4. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations, entitling the
Holder or Holders thereof to purchase in the aggregate the same number of shares
of Common Stock purchasable hereunder. Upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be canceled. This Warrant may be divided or combined
with other Warrants that carry the same rights upon presentation hereof at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
6. Adjustments; Anti-Dilution Provisions.
6.1 No Dilution; Adjustment for Recapitalization. If the
Company shall at any time subdivide its outstanding shares of Common Stock (or
Other Securities at the time receivable upon the exercise of the Warrant) by
recapitalization, reclassification or split-up thereof, or if the Company shall
declare a stock dividend or distribute shares of Common Stock to its
stockholders, the number of shares of Common Stock subject to this Warrant
immediately prior to such subdivision shall be proportionately increased and the
Exercise Price shall be proportionately decreased, and if the Company shall at
any time combine the outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock or
Other Securities subject to this Warrant immediately prior to such combination
shall be proportionately decreased and the Exercise Price shall be
proportionately increased. Any such adjustments pursuant to this Section 6.1
shall be effective at the close of business on the effective date of such
subdivision or combination or if any adjustment is the result of a stock
dividend or distribution then the effective date for such adjustment based
thereon shall be the record date therefor.
6.2 Adjustment for Reorganization, Consolidation, Merger, Etc.
In case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the Base Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
3
<PAGE>
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property receivable upon the exercise of this
Warrant after such consummation.
6.3 Further Assurances. The Company will not, by amendment of
its Articles of Incorporation or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant against
dilution or other impairment. Without limiting the generality of the foregoing,
while this Warrant is outstanding, the Company (a) will not permit the par
value, if any, of the shares of Common Stock receivable upon the exercise of
this Warrant to be above the amount payable therefor upon such exercise and (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue or sell fully paid and non-assessable
shares of capital stock upon the exercise of this Warrant.
6.4 Certificate as to Adjustments. In each case of an
adjustment in the number of shares of Warrant Stock or Other Securities
receivable on the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment in accordance with the terms of this Warrant
and prepare a certificate executed by an executive officer of the Company
setting forth such adjustment and showing in detail the facts upon which such
adjustment is based. The Company will forthwith mail a copy of each such
certificate to the Holder.
6.5 Notices of Record Date, Etc. In case:
(a) the Company shall take a record of the holders of
its Common Stock (or Other Securities at the time receivable upon the exercise
of the Warrant) for the purpose of entitling them to receive any dividend (other
than a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities,
or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation; or
(c) of any voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, and in each such case, the
Company shall mail or cause to be mailed to each Holder of the Warrant at the
time outstanding a notice specifying, as the case may be, (i) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(ii) the date on which such reorganization, reclassification, consolidation,
4
<PAGE>
merger, conveyance, dissolution, liquidation or winding up is to take place, and
the time, if any, is to be fixed, as to which the holders of record of Common
Stock (or such other securities at the time receivable upon the exercise of the
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least 20
days prior to the date therein specified and the Warrant may be exercised prior
to said date during the term of the Warrant.
7. Transfer to Comply with the Securities Act. This Warrant and any
Warrant Stock or Other Securities may not be sold, transferred, pledged,
hypothecated or otherwise disposed of except as follows: (a) to a person who, in
the opinion of counsel to the Company, is a person to whom this Warrant or the
Warrant Stock or Other Securities may legally be transferred without
registration and without the delivery of a current prospectus under the
Securities Act with respect thereto and then only against receipt of an
agreement of such person to comply with the provisions of this Section 7 with
respect to any resale or other disposition of such securities; or (b) to any
person upon delivery of a prospectus then meeting the requirements of the
Securities Act relating to such securities and the offering thereof for such
sale or disposition, and thereafter to all successive assignees.
8. Legend. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of the Warrants
and the issuance of any of the shares of Warrant Stock or Other Securities, all
certificates representing such securities shall bear on the face thereof
substantially the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, offered for sale, assigned, transferred or
otherwise disposed of, unless registered pursuant to the
provisions of that Act or unless an opinion of counsel,
satisfactory to the Corporation, is obtained stating that such
disposition is in compliance with an available exemption from
such registration.
9. Notices. All notices required hereunder shall be in writing and
shall be deemed given when telegraphed, delivered personally or within two days
after mailing when mailed by certified or registered mail, return receipt
requested, to the Company at its principal office, or to the Holder at the
address set forth on the record books of the Company, or at such other address
of which the Company or the Holder has been advised by notice hereunder.
10. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holder
hereof and their respective successors and assigns.
11. Applicable Law. The Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of Florida, without giving effect to the choice of law rules thereof.
5
<PAGE>
IN WITNESS HEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
TAKE TO AUCTION.COM, INC.
By:
__________________________
6
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing shares of Common Stock of Take to Auction.com, Inc., a
Florida corporation, and hereby makes payment of $ in payment therefor.
________________________________
Signature
________________________________
Signature, if jointly held
________________________________
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
----------------------------------
(if other than to the registered holder of the within Warrant)
Name____________________________________________________________________________
(Please typewrite or print in block letters)
Address_________________________________________________________________________
________________________________________________________________________________
Social Security or
Taxpayer Identification Number__________________________________________________
7
<PAGE>
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED,_____________________________________________________________
hereby sells, assigns and transfers unto
Name____________________________________________________________________________
(Please typewrite or print in block letters)
the right to purchase Common Stock of Take to Auction.com, Inc., a Florida
corporation, represented by this Warrant to the extent of shares as to which
such right is exercisable and does hereby irrevocably constitute and appoint
______________________________________ Attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
DATED: __________________.
________________________________
Signature
________________________________
Signature, if jointly held
8
EXHIBIT 10.12
-------------
TAKE TO AUCTION.COM. INC.
-------------------------
CONFIDENTIAL
Mr. Albert Friedman
President & Chief Executive Officer
Take to Auction.com, Inc.
2335 N.W. 107th Ave. Ste. 2M 23
Miami, FL 33172
1. This letter sets forth the terms of the engagement of ZeroDotNet, Inc.
("ZeroDotNet") by Take to Auction.com, Inc. ("Take to Auction" or the "Company")
to provide financial advisory and strategic planning services to the Company to
evaluate its strategic and financial alternatives. Capitalized terms not
otherwise defined are defined in the Glossary attached as EXHIBIT "A". Such
services may include:
(a) assisting the Company in considering strategic alternatives
for its long-term financial plans, including undertaking a
financial evaluation and analysis of one or more of the
strategic alternatives such as a Take to Auction Private
Placement and/or Initial Public Offering; and
(b) being available to meet with the Company's officers and board
of directors to discuss strategic alternatives and their
financial implications.
2. The Company will cooperate with and provide to ZeroDotNet all information
requested by ZeroDotNet in connection with this engagement. ZeroDotNet may rely,
without independent investigation, on the accuracy and completeness of all
information furnished by the Company.
3. The Company agrees that ZeroDotNet will have the exclusive first right of
refusal to serve as the Company's exclusive lead placement agent or financial
advisor, as the case may be, during the term hereof and for a period of twelve
months from the date of this Engagement Letter, in connection with: (i) any
private issuance of debt or equity securities (ii) a Corporate Transaction or
(iii) any financial or restructuring of indebtedness. The terms and conditions
of the engagement will be set forth in a separate engagement agreement
specifying the services, fees and indemnification of ZeroDotNet for the
transaction. The compensation provided ZeroDotNet pursuant to such future
engagement will be mutually agreed upon by the parties and will be based on the
compensation paid to nationally recognized investment banking firms involved in
transactions of similar size, scope, complexity, and value.
4. As compensation for its services under this engagement, ZeroDotNet will
receive a non-refundable cash retainer fee of $350,000 upon execution of this
Engagement Letter. Any monthly reimbursement for ZeroDotNet's Out-Of-Pocket
Expenses will be discussed and approved by the Company in advance. If the
company separately engages ZeroDotNet to act as its exclusive placement agent
for the Company's Private Placement and/or Initial Public Offering, then the
retainer fee will be credited agaist fees otherwise due for that Offering.
<PAGE>
5. This Engagement Letter and its contents, including the Offering and pricing
process and other proprietary information of ZeroDotNet, will be treated by the
Company as confidential. Any advice rendered by ZeroDotNet pursuant to this
engagement is also confidential. Confidential information may not be disclosed
publicly in any manner without ZeroDotNet's prior written approval.
6. The initial term of this engagement will be one year and the engagement will
automatically renew on a quarterly basis thereafter until terminated in writing
by either party. The engagement will terminate immediately: (i) upon execution
of a separate engagement letter regarding ZeroDotNet's engagement in connection
with a specific Transaction or Offering; (ii) upon manual written consent of
both parties; or (iii) if ZeroDotNet determines in its discretion that
completion of additional services is impractical, undesirable, or not advisable.
The provisions of paragraphs 3 and 5 through 9, will survive any termination.
7. This Engagement Letter will be governed by and construed and enforced in
accordance with the laws of the state of California, without regard to
principles of conflicts of laws. Any action arising out of any disputes between
the parties to this engagement letter shall be brought in either the Superior
Court for the County of San Francisco or the United States District Court of the
Northern District of California, and each of the parties hereto hereby submits
to the jurisdiction of such courts for purposes of any such action.
8. Any dispute arising between the parties hereunder will be resolved by
arbitration in accordance with the rules then in effect of the NASD, as governed
by the laws of the State of New York, which must be commenced by a written
notice of intention to arbitrate. Judgment upon an arbitration award may be
rendered in any court of competent jurisdiction. The parties agree to the
following facts about the arbitration procedures:
(1) Arbitration is final and binding on the parties.
(2) The parties are waiving their right to seek remedies in court,
including the right to jury trial.
(3) Pre-arbitration discovery is generally more limited than and
different from court proceedings.
(4) The arbitrator's award is not required to include factual
findings or legal reasoning and any party's right to appeal or
to seek modification of ruling by the arbitrators is strictly
limited.
(5) The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities
industry.
2
<PAGE>
No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any pre-dispute arbitration agreement against any person who has
initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until:
o the class certification is denied;
o the class is decertified; or
o the customer is excluded from the class by the court.
Such forbearance to enforce an agreement to arbitrate shall not constitute a
waiver of any rights under this agreement except to the extent stated herein.
9. This Engagement Letter constitutes the entire understanding among the parties
and supersedes, in their entirety, any and all understandings, agreements,
contracts, arrangements, communications, discussions, representations and
warranties, whether oral or written, among the parties respecting the subject
matter.
Please confirm that the terms set forth in this Engagement Letter are in
accordance with your understanding by signing and returning to us the enclosed
duplicate of this Engagement Letter, along with a check for the retainer fee. We
look forward to working with you on this transaction. Please note that this
Engagement Letter contains a pre-dispute arbitration agreement, which is set
forth in Section 8 on page 2 of this Engagement Letter.
Very truly yours,
ZERODOTNET, INC.
By: /s/ Joe M. Marenda
----------------------
Title: Managing Director
--------------------
AGREED and CONFIRMED
TAKE TO AUCTION.COM, INC.
By: /s/ Albert Friedman
------------------------
Title: President & CEO
-----------------------
Date: 10/29/99
---------------
3
<PAGE>
EXHIBIT A - GLOSSARY
--------------------
Unless otherwise expressly provided for, or unless the context otherwise clearly
requires, the definitions set forth in this Glossary govern the defined terms
used in the Engagement Letter and is part of, and is incorporated by reference
therein.
"Corporate Transaction" means any of the following:
(i) the sale of all or substantially all of the assets of the
Company or the acquisition of more than 50% of the voting
power of the Company by another entity by means of any
transaction or series of related transactions (including,
without limitation, any acquisition of capital stock,
reorganization, merger, or consolidation, but excluding any
merger effected exclusively for the purpose of changing the
domicile of the Company),
(ii) the sale of any equity or debt securities, or
(iii) any recapitalization or refinancing (except of real estate or
equipment indebtedness.)
"Engagement Letter" means the Engagement Letter between the Company and
ZeroDotNet relating to its services, including the Exhibits to the Engagement
Letter, and all documents executed in connection therewith.
"ZeroDotNet Private Placement" means the offer and sale of the Securities
conducted in compliance with Regulation D under the Securities Act of 1933,
including Rule 506, to "accredited investors", as that term is defined under
Rule 501(a).
"Out-of-Pocket Expenses" means any fees and expenses of ZeroDotNet's attorneys,
accountants, and other professionals of ZeroDotNet, if any, in connection with
services.
"ZeroDotNet" means ZeroDotNet, Inc., its parent corporation or any of the
parent's other subsidiaries.
"Representatives" means officers, directors, members, agents, employees,
consultants, management, or equity holders of at least 5% of the voting power of
the Company and attorneys, accountants, and other professionals.
"Retainer Fee" means the non-refundable retainer fee set forth in Section 4 of
the Engagement Letter.
"Securities" means the equity, equity-related, equity-linked or other securities
offered and sold by the Company.
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the Company's
financial statements as of December 31, 1999 and the period from June 2, 1999
(date of inception) through December 31, 1999 and is qualified in its entirety
by reference to such financial statements and notes thereto.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jun-02-1999
<PERIOD-END> Dec-31-1999
<CASH> 856,949
<SECURITIES> 0
<RECEIVABLES> 641,430
<ALLOWANCES> 0
<INVENTORY> 200,429
<CURRENT-ASSETS> 1,717,433
<PP&E> 186,041
<DEPRECIATION> 4,886
<TOTAL-ASSETS> 2,579,739
<CURRENT-LIABILITIES> 1,429,401
<BONDS> 0
0
0
<COMMON> 18,000
<OTHER-SE> 1,132,338
<TOTAL-LIABILITY-AND-EQUITY> 2,579,739
<SALES> 70,067
<TOTAL-REVENUES> 70,067
<CGS> 136,042
<TOTAL-COSTS> 136,042
<OTHER-EXPENSES> 483,687
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (549,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> (549,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (549,662)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
