U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of
The Securities Exchange Act of 1934
QCL GROUP, INC.
(Name of small business issuer in its Charter)
Nevada 581789436
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
119 Commerce Boulevard, Bogart, Georgia 30622
(Address of principal executive offices)
Issuer's telephone number, including area code:
(706) 354-2024
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
to be so registered which each class is to be
Registered
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
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QCL GROUP, INC. PAGE
Description of Business...................................................... 3
Property..................................................................... 9
Management's Discussion and Analysis of Financial Condition ................ 10
Security Ownership of Certain Beneficial Owners
and Management ............................................................ 14
Management................................................................... 15
Executive Compensation....................................................... 17
Transactions with Management and Others...................................... 17
Legal Proceedings............................................................ 17
Market for Common Equity and Related Stockholder
Matters...................................................................... 18
Description of Securities.................................................... 19
Recent Sales of Unregistered Securities ..................................... 19
Indemnification of Directors and Officers ................................... 20
Changes in and Disagreements with Accountants On
Accounting and Financial Disclosure ........................................ 21
Financial Schedules and Exhibits ............................................ 21
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DESCRIPTION OF BUSINESS
General Development of Business
QCL Group Inc., a Nevada corporation (the "Company"), was incorporated on
October 30, 1986 under the name Recording Sciences, Inc. ("Recording").
Recording was originally formed to seek an acquisition of an audio and/or visual
recording business.
On March 3, 1988, QCL Group, Inc., a privately held Georgia holding
corporation, which was then primarily engaged in the development of dry cleaning
locations through its Quality Cleaners & Laundry, Inc., subsidiary and soft
serve yogurt shops through it Honey Bee Yogurt Shoppes, Inc. subsidiary, was
merged into Recording. In connection with this transaction, Recording issued
2,600,000 shares of stock in exchange for 100% of the issued and outstanding
shares of QCL, Group, Inc. As of the date of the merger, including the shares
issued to the shareholders of QCL Group, Inc., there were 4,000,000 shares of
Recording issued and outstanding. Recording thereafter changed its corporate
name to QCL Group, Inc. ("QCL").
QCL presently operates out of its corporate headquarters located at 119
Commerce Boulevard, Bogart, Georgia 30622. QCL functions as a holding company
for six subsidiaries, QCL Communications, Inc., which operates as a reseller of
air time for telecommunication paging services, and which is developing a number
of internet "web" sites to take advantage of the growing e-commerce market; OTC
Filing.com, Inc., which operates an internet stock and financial information
service; Retail Convenience Stores, Inc., which owns two convenience stores in
the Athens, Georgia area; Petroleum Products Southern, Inc., a refined fuel
hauler; Independent Southern, Inc., which operates two bulk fuel storage
facilities in Georgia; and Southeastern Baking Company, Inc., which operates a
commercial bakery in Sarasota, Florida.
QCL's corporate management is comprised of individual with extensive
experience in managing, operating and developing retail operation in the fuel
delivery and convenience store areas, the traditional focus of QCL's business,
as well as with experience and expertise in the development of a cutting edge
internet financial information service. The Company's senior management are
Peter Iodice ("Iodice"), Raymond Firth ("Firth") and Scott Smith ("Smith"). See
"Management".
During the year ended December 31, 1999, the Company's operations produced
$1,743,858 in net revenues. Cost of goods sold and operating expenses and the
compensatory element of common stock
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issuances aggregated $1,752,532 which resulted in a net loss of $6,957 after a
provision for and income tax benefit of $1,717. The year end audited statement
reflects shareholder equity of $190,911. See "Financial Schedules and Exhibits".
Description of Business
The Company is a holding corporation with six active operating
subsidiaries. QCL is a diversified company with an established business presence
in traditional business involving the fuel oil and food industries, as well as
an expanding "e-commerce" presence in the financial services and information
industries.
QCL Communications, Inc. is a wholly owned subsidiary of QCL which focuses
on the communications industry. For a number of years, QCL Communications, Inc.
has acted as a reseller of air time for telecommunications paging services. QCL
Communications, Inc. is actively seeking to expand its business into the
cellular telecommunications industry, and is looking at the opportunities
available with respect to voice over internet telecommunications services.
In 1999, QCL issued 6,500,000 shares of restricted common stock to B & E
Holdings, Inc. to acquire full ownership of OTC Filing.com. QCL now operates OTC
Filing.com ("OTC Filing") as a wholly owned subsidiary. OTC Filing operates a
Internet web site (www.otcfiling.com) which provides information about publicly
traded securities, as well as other financial information. This website
generates income for OTC Filing both from advertising as well as from payments
from publicly traded companies which seek to have information disseminated to
the public to create awareness about those companies in the public marketplace.
In December, 1999, OTC Filing entered into a contract with Shanecy, Inc.
Pursuant to this contract OTC Filing agreed to provide the following services to
Shanecy: a) Assistance in the development and design of a proprietary Internet
website; b) "hosting" of the Shanecy website; c) Distribution of corporate press
releases and other informational items about the company in the StockFiling.com
web site, including within that web sites corporate and news sections; d)
Inclusion in the StockFiling stock news database; and e) advertising banners
will be included on the StockFiling web site, at Shanecy's request, throughout
the course of the contract. OTC Filing is to receive for these services the sum
of $15,000 per month and the aggregate of 200,000 restricted shares of Shanecy
common stock. The term of this agreement is two years.
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The Agreement with Shanecy will serve as the prototype of the agreements
which OTC Filing hopes to enter into during the year 2000. OTC Filing is
currently negotiating similar agreements with a number of publicly traded
companies which it hopes to enter into within the next three months.
The Company's fuel oil and petroleum operations are conducted through two
wholly owned subsidiaries, Petroleum Products Southern, Inc. ("Petroleum") and
Independent Southern, Inc. ("Independent"). Petroleum is a refined fuel hauler
operating in Georgia. Petroleum acts solely as a transport company for the
purpose of delivering fuel on a wholesale basis to gas stations and convenience
stores. Petroleum has engaged in this business since 1996.
Independent operates two bulk fuel terminals in Georgia. Independent acts
as a wholesale seller of fuel and petroleum products. Independent has an
established customer base, and has been engaged in the sale of fuel and
petroleum products since 1996. In 1999, Independent together with Petroleum
accounted for $1,656,104 in revenue.
Retail Convenience Stores, Inc., another wholly owned subsidiary, leases
two convenience stores in the Athens Georgia area. Those stores are located at
1121 MLK Parkway, Athens, Georgia, which is leased for $12,000 per year (through
October 31, 2004); 2477-441 South Concourse Highway, Commerce, Georgia, which is
leased for $12,000 per year through 2009 and $14,400 per year from 2009 to 2019.
Both of those leases generate profits for the Company.
Southeastern Baking Company, Inc. is a wholly owned subsidiary which owns
and operates Panificio Wholesale Italian Bakery ("Panificio"). Panificio was
acquired effective November 24, 1999. Panificio is both a retail and wholesale
bakery, supplying baked goods throughout north and central Florida. In fiscal
1998 (ten months), Panificio had revenues of $229,299, and a net loss of $37,355
(unaudited). In fiscal 1999, Panificio's revenues grew to $467,195, and its net
loss was reduced to $10,180. Panificio has been producing baked goods since
1997, and has an established clientele which includes numerous restaurants,
hotels and other commercial establishments.
Principal Suppliers
The Company is not dependent on any single supplier, or on a few major
suppliers, for any of its essential products. Independent Southern receives fuel
oil from several readily available sources. Other sources are readily available
for the
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supply of fuel and petroleum products, and Independent Southern does not
anticipate any difficulties in obtaining a supply of any required fuel oil or
petroleum products.
Southeastern Baking Company receives its supplies from a variety of
sources, including Best Brands, Progresso Foods and Dade Paper Company. These
supplies are readily available from other sources as well.
None of QCL's other operating entities rely on any major suppliers.
Distribution and Marketing Operations
The Company's traditional areas of business, its fuel oil and food
subsidiaries, rely on standard methods of distribution and marketing. Both
Independent Southern and Southeastern Bakery monitor the availability of
commercial accounts, and actively bid for those accounts. Both fuel and bakery
subsidiaries seek to maintain competitive pricing structures for their products
and disseminate this information to the public. Both Independent Southern and
Southeastern Baking utilize both billboard and media advertising for their
products.
The Company's merchandising and marketing programs are designed to promote
convenience to its customers through a streamlined computerized ordering and
delivery system. The Company also utilizes an employee training program which
emphasizes the importance of customer service.
OTC Filing.com, and the Company's other e-commerce ventures, utilize a
variety of marketing and distribution methods. Among them are direct mail
advertising to a targeted group of potential users and customers. OTC Filing.com
has also placed advertisements on other internet sites, such as Smartmoney.com,
and will continue to do so. These internet advertisements contain "links" to the
Company's websites. The Company also plans to place targeted advertisements in
financial publications, to further enhance pubic awareness of its operations and
offerings.
Competition
The Company faces significant competition in all aspects of its business.
OTC Filing.com, which is the Company's primary "e-commerce" subsidiary, is
involved in a highly competitive environment
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involving the dissemination of financial and stock information through the
development of a highly sophisticated web site and internet delivery systems.
The Company believes its main competitors are other e-commerce news and
information distributors such as PR Newswire, Business Wire, Bloomberg and
Jagnotes, among many others, which are currently in the marketplace. These
companies have greater distribution and financial resources than the Company and
OTC Filing.com which permit them to engage in greater marketing efforts and
obtain greater support systems. The Company believes that its software and
technology capabilities will, over time, allow it to compete effectively with
current competition. There can be no assurance, however, that OTC Filing.com, or
the Company will be successful in these efforts.
The Company also faces significant competition in the marketing and sale of
its fuel and food products from other suppliers and manufacturers. Both the
bakery and fuel oil supply businesses are highly competitive, with numerous
other companies providing like services within the same geographical areas. The
Bakery's principal competitor in the Sarasota, Florida area is St Armond's
Bakery. The principal competitors in the fuel supply area are Steven's Oil
Company, Pruitt Oil Company and Redmond Petroleum, all located in and around
Athens, Georgia. In order to remain competitive in these fields, both
Independent Southern and Southeastern Bakery are committed to delivering fast
and efficient service to their customers at competitive prices.
Business Strategy
The Company plans to concentrate its efforts to expand its e- commerce
presence by developing state of the art software and software applications which
will allow it to become the premiere supplier of financial and stock information
on the internet. Along with this ability, OTC Filing.com will focus on
developing relationships with small to medium sized public companies, such as
Shanecy, Inc., which will benefit by having information about those companies
publicized in the financial marketplaces. OTC Filing.com is presently in
negotiation with a number of such companies, although there can be no assurance
that any of these negotiations will lead to formal contracts.
In addition to further developing its financial information services, The
Company, through QCL Communications is also working to expand its offering of
e-commerce sites. QCL Communications now owns and operates the TheKidSite.com,
an internet web site which was launched in July, 1999. This site has editorial,
educational and entertainment content aimed at the youth market and will provide
on-line shopping opportunities. It is anticipated that
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this site will be fully developed during the course of fiscal year 2000, and
that it will provide an additional presence for the Company in the rapidly
expanding e-commerce area.
The Company's fuel and petroleum subsidiaries are seeking to expand by
attracting more customers and offering a larger variety of products on
competitive terms: it also intends to exercise its option to purchase the bulk
fuel facility in Bogart, Georgia and expand that facility to enhance Independent
Southern's ability to deliver product, and the type of product it can deliver.
The Company will look to lease or acquire other facilities where needed. The
Company will continue to identify other product lines where its storage and
distribution facilities can be profitably utilized.
The Company's food and baking subsidiary, Southeastern Baking Company, Inc.
is actively engaged in bidding for expanded business with both restaurants and
hotels in Florida. To become more competitive, Southeastern Baking plans to
expand its line of products during the course of 2000 to include more American
style breads, and to add additional lines of deserts. By adding additional
products, the company hopes to be able to both obtain additional commercial
baking business, as well as expand the amount of business presently being
conducted with established customers.
Patents, Trademarks, Licenses
The Company does not presently maintain any patents, trademarks or
licenses. The Company and its subsidiaries own a number of internet domain
addresses, including, Sportsofcourse.com, Stockfiling.com, StockEnews.com,
TheKidsSite.com, QCLGroup.com and Quickvend.com.
Government Regulation
The Company is not subject to any Government regulations at this time.
Environmental Issues
To date, the Company has been in full compliance with all federal, state
and local environmental regulations, and is unaware of any environmental issues
or problems that may effect the Company of any of its subsidiaries. Independent
Southern, the Company's fuel oil subsidiary, carefully monitors its bulk fuel
facilities to insure full compliance with all regulations applicable to the
storage of fuel oil and petroleum products. To date, the cost of compliance with
all applicable environmental laws has been minimal,
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and management does not anticipate any increase of said costs in the future. The
Company maintains $1 million in insurance coverage to insure against any type of
environmental problem that may arise by virtue of the operation of the fuel
business.
Employees
As of December 31, 1999, the Company and its subsidiaries employed 10
persons on a full time basis. None of the Company's employees are represented by
unions. The number of employees, by subsidiary, are as follows:
QCL Communications 1
OTC Filing.com 2
Petroleum Products 1
Independent Southern 1
Southeastern Baking Co. 5
PROPERTY
Independent Southern, pursuant to a year to year lease agreement with
Vi-Mac, Inc., leases a Bulk Storage Plant and Warehouse for its bulk storage of
fuel oil at 111 Commerce Boulevard, Bogart, Georgia. The term of the lease
commenced on March 1, 1999. Annual rent is $30,000. Independent Southern has the
option to purchase the property for $225,000, with a credit of $10,000 towards
such purchase price from the rental payments made. The Company also maintains
it's principal executive and administrative offices at this facility.
Independent Southern, pursuant to a twenty year lease which commenced in
1996 with Central of Georgia Railroad Company, leases a Bulk Storage Plant for
its bulk storage of fuel oil at 1121 Dixie Avenue, Madison Georgia. Annual rent
is set at the de minimis amount of $315.
OTC Filing.com, Inc. pursuant to a three year lease with 1718 Main Street
Joint Venture, Ltd, leases executive and administrative offices at 1718 Main
Street, Sarasota, Florida. The term of the lease commenced on October 1, 1999.
Annual rent is $25,430.76 during the first year of lease, escalating to
$27,195.72 during the final year of the lease.
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Retail Convenience Stores, Inc. leases two convenience stores located in
the Athens Georgia area. Those leases are as follows: a five year net lease,
with two five year renewal options, with Jerry Brown for premises located at
1121 Martin Luther King, Jr. Parkway, Athens, Georgia. The term of the lease
commenced on August 25, 1999. Annual rent is $4,800, with annual increases based
on the Consumer Price Index; and a two year net lease, with two two year renewal
options and a purchase option, for premises located at 2477-441 South Concourse
Highway, Commerce, Georgia. Annual rent in $8,400, with increases every two
years of 10%.
YEAR 2000 COMPLIANCE
The Company has reviewed its internal computer programs, software
applications, and related equipment and systems to ensure that the programs and
systems are fully Year 2000 compliant. The Company has not encountered any
problems and believes that its computer systems are fully Year 2000 complaint.
Should any difficulties arise, the estimated cost of corrective efforts, if any,
is not expected to be material to the Company's financial position or any year's
results of operations, although there can be no assurance as to this effect.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
This Registration Statement on Form 10-SB contains forward- looking
statements. Such statements consist of any statement other than a recitation of
historical facts and can be identified by words such as "may," "expect,"
"anticipate," "estimate," "hopes," "believes," "continue," "intends," "seeks,"
"contemplates," "suggests," "envisions" or the negative therefor other
variations thereon or comparable terminology. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, including but not limited to: those risks associated
with economic conditions generally and the economy in those areas where the
Company has or expects to have assets and operations, including, but not
restricted to Nevada, Georgia and Florida, and eventually other jurisdictions;
competitive and other factors affecting the Company's operations, markets,
products and services; those risks associated with the ability to maintain
current technology and e-commerce abilities to be able to enhance QCL
Communication's growth in a highly competitive environment, the ability to
obtain traditional contracts in the fuel and food industries, the ability to
meet funding needs of the Company, and other costs associated with the
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Company's marketing strategies; those risks associated with the Company's
ability to successfully negotiate with certain business owners; those risks
relating to estimated contract costs, risks relating to the ability of Company
to raise the funds necessary to fully develop business, and risks relating to
changes in interest rates and in the availability, cost and terms of financing;
risks related to the performance of financial markets; risks related to changes
in domestic and foreign laws, regulations and taxes; risks related to changes in
business strategy or development plans; risks related to any possible future
lawsuits against the Company and the associated costs, and risks associated with
future profitability. Many of these factors are beyond the Company's control.
Actual results could differ materially from these forward-looking statements. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this registration statement on Form
10-SB will, in fact, occur. The Company's actual results may differ materially
as a result of certain factors, including those set forth in this Form 10-SB.
Potential investors should consider carefully the previously stated factors, as
well as the more detailed information contained elsewhere in this Form 10-SB,
before making a decision to invest in the common stock of the Company. The
following is a discussion of the financial condition and results of operations
of the Company as of the date of this Registration Statement. This discussion
and analysis should be read in conjunction with the accompanying audited
Financial Statements of the Company including the Notes thereto which are
included elsewhere in this Form 10-SB and the notice regarding forward-looking
statements.
Prior to 1998 the Company operated primarily as a seller of fuel oil and
petroleum products through its Independent Southern, Inc. and Petroleum Products
subsidiaries. In 1998, the Company began to extensively develop its convenience
store operations through its Retail Convenience Stores Subsidiary. Revenues for
both fiscal 1998 and 1999 reflect the operations of both the fuel oil
subsidiaries as well as the convenience store operations.
In 1999, QCL issued 6,500,000 shares of restricted common stock to B & E
Holdings, Inc. to acquire full ownership of OTC Filing.com. QCL now operates OTC
Filing.com ("OTC Filing") as part of QCL Communications, Inc. OTC Filing.com's
website www.otcfiling.com, which provides information about publicly traded
securities, as well as other financial information, through a state of the art
internet presentation. OTC Filing.com began generating revenues in December,
1999.
Effective November 24, 1999, QCL acquired full ownership of Panificio
Wholesale Italian Bakery ("Panificio"). QCL now operates
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Panificio through its wholly owned subsidiary Southeastern Baking Company.
Panificio is both a retail and wholesale bakery, supplying baked goods
throughout north and central Florida. Panificio began generating revenues in
December, 1999.
Although there can be no assurance of success, based on performance to
date, the Company anticipates extensive growth during fiscal, 2000. Revenues
generated by the OTC Filing.com, QCL Communications, Inc. and Southeastern
Bakery, Inc. subsidiaries should substantially expand the Company's revenue base
and, management believes, enhance the Company's profitability. This assessment
is based, in large part on the performance to date of OTC Filing.com, which has
demonstrated a capacity to generate revenues with minimal costs required.
Results of Operations
Comparison of the Year Ended December 31, 1999 and the Year Ended
December 31, 1998
Revenues increased from $1,189,302 in fiscal 1998 to $1,743,858 in 1999.
Included in the 1999 figures are $63,088, representing one month's revenues from
OTC Filing.com and $24,667, representing one month's revenues from Southeastern
Bakery, Inc. The cost of revenues increased from $1,101,533 (equal to 92.6% of
sales) in fiscal 1998 to $1,571,539 (90.1% of sales) in 1999. The lower
percentage of cost of revenues is largely attributable to the low cost of
revenue of OTC Filing.com, which was $692 during its one month of operation.
General and administrative expenses increased from $97,542 in fiscal 1998
to $161,162 in fiscal 1999. This increase is attributable to the expansion of
operations by the Company in 1999, including the acquisitions of OTC Filing.com,
and the commencement of the bakery operations. Total operating costs increased
from $101,059 in fiscal 1998 to $163,766 in 1999.n payroll costs from increased
personnel.
Interest expense, net of interest income, was $4,087 in 1998 and $17,227 in
1999. This increase in 1999 is attributable to the cost of equipment of
Independent Southern.
The tax benefit of $3,441 in fiscal 1998 was the result of the pre-tax loss
of $17,377 while the tax benefit of $1,717 in 1999 was the result of the pre-tax
loss of $8,674 in 1999. The Company had a net loss in 1999 of $6,957, as against
a net loss in 1998 of $13,936.
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Financial Condition
December 31, 1999 Compared to December 31, 1998
Cash and cash equivalents at December 31, 1999 of $36,510 is $14,386 less
than the cash and cash equivalents of $50,896 in December 31, 1998. This
decrease in cash is primarily the result of and increase in financing
activities, and a reflection of a one time receipt of proceeds b the Company in
1998.
Accounts receivable and inventories increased from $10,378 and ($13,336),
respectively, as of December 31, 1998 to $14,069 and $2,944 at December 31,
1998. This increase in 1999 is largely attributable to the Company's acquisition
of Panificio Bakery which included Panificio's accounts receivable and
inventory.
The Company expended $17,177 to acquire equipment and assets in 1999. The
Company expended $26,031 for similar expenses in 1998.
Accounts and acceptances payable increased from $64,238 at December 31,
1998, to $111,312 at December 31, 1999. This increase in 1999 is largely
attributable to the Company's assumption of $66,510 of the accounts payable of
Panificio Bakery.
Accrued expenses and other current liabilities decreased by $1,058 as of
December 31, 1998. Accrued expenses and other current liabilities increase by
$3,126 as of December 31, 1999. This change was the result of changes in income
tax accruals.
The Company had a net tax loss carryforward at December 31, 1999 of
$10,016. The net tax loss carryforward at December 31, 1998 was $2,542. The net
tax loss carryforward will begin to expire in 2019, although the Company
anticipates availing itself of it prior to that time.
Stockholders' equity increased from $42,976 as of December 31, 1998 to
$190,911 at December 31, 1999. The increase arises from the issuance of the
Company's common stock for services, various acquisitions, inventory and cash
during 1999.
Liquidity and Capital Resources
The Company's working capital at December 31, 1999 was $87,531, consisting
of $36,510 of cash on hand, $33,589 in accounts receivable and $17,432 in
inventories. At December 31, 1998, the Company had $90,792, consisting of
$50,896 in cash, $19,520 in accounts receivable and $20,376 in inventory.
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To date, the Company has not needed to maintain a large cash reserve or
working capital to meet its ongoing expenses. Currently, the Company's primary
cash requirements include the funding of its inventory purchases for and
receivables from sales of products and (ii) ongoing selling, administrative and
other operating expenses. Management believes that its present working capital,
together with the cash generated from operations should be, in the aggregate,
sufficient to fund the Company's operations for the next 12 months if the
Company's operations are consistent with management's expectations.
The Company may need additional financing should it wish to engage in any
expansion programs, particular in the e-commerce area. There can be no assurance
that the Company will be able to obtain financing on a favorable or timely
basis. The type, timing and terms of financing elected by the Company will
depend on its cash needs, the availability of other financing sources and the
prevailing conditions in the financial markets. The Company does not believe
that its ability to obtain financing will effect its ongoing business
operations.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the name and address of each officer and
director of the Company and each person who owns beneficially more than ten
percent of the Common Stock of the Company, and the number of shares owned by
each such person and by all officers and directors as a group:
Approx.
Name and Address of Amount and Nature % of
Beneficial Owner of Ownership Class
- ---------------- ------------ -----
Peter Iodice (1) 2,500,000, Beneficial 15.70%
Rebecca Sue Iodice(1) 4,009,000, Beneficial 25.17%
Raymond Firth (1)(2) 1,000,000, Beneficial 6.28%
Scott Smith (1)(3) 100,000, Beneficial .63%
All directors and 7,609,000 47.78%
officers as a group
(4 in number)
B & E Holdings, Inc. (4) 6,625,000, Beneficial 41.60%
(1) Messrs Iodice, Firth and Smith, and Ms. Iodice's business address is 119
Commerce Boulevard, Bogart, Georgia 30622.
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(2) No shares have yet been issued to Mr. Firth. The Company has agreed to
provide 1,000,000 shares of restricted common stock to Mr. Firth or his designee
in connection with Mr. Firth's employment with the Company.
(3) Mr. Smith is the sole shareholder of Ion Design, Inc. The Company has agreed
to transfer 100,000 shares of restricted common stock of the Company to Ion
Design in connection with Ion's sale of the TheKidsSite.com to the Company.
These shares have not yet been issued to Ion.
(4) See "Other Significant Employees" for a description of the ownership of B &
E Holdings.
MANAGEMENT
The officers and directors of the Company are as follows:
Name Age Position
- ---- --- --------
Peter Iodice 50 President and Director
Rebecca Sue Iodice 49 Secretary
Raymond Firth 44 Director
Scott Smith 37 Director
Peter Iodice has been the President and a director of QCL since 1988. Prior
to 1988, Mr. Iodice was President of QCL Group, Inc., the Georgia company that
was merged into Recording to form the Company. Mr. Iodice has extensive
experience in the commercial fuel oil and convenience store business. Mr. Iodice
is responsible for all aspects of the Company's business development, and
oversees the operations of Company's divisions and subsidiaries.
Rebecca Sue Iodice, who is the wife of Peter Iodice, has been secretary of
the Company since 1988. Ms. Iodice does not play a day to day role in its
management. Ms. Iodice had previously served as a director of the Company until
1998.
Raymond Firth has been a director of QCL since August 1,1999. Mr. Firth has
an extensive background in the computer and internet industries. After working
for 18 years for Wang Laboratories, Inc. (now Wang Global, Inc.) in both the
United States and Asia, Mr. Firth created his own internet service provider
business in 1995. This business, known as T-Net, became the fastest growing
internet
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service provider in Memphis, TN. Mr. Firth sold T-Net in 1997 and formed
Connectrics, Inc. At Connectrics, Mr. Firth has, among the many services offered
by the company, helped customers with website hosting, website design,
e-commerce applications, custom programming and scripting. Mr. Firth will bring
his expertise in internet applications to the Company. Mr. Firth is a graduate
of the University of Maryland with a degree in Business Management and Computer
Studies.
Scott Smith has been a director of QCL since July 1, 1999. Since October 1,
1999, Mr. Smith has also served as the Secretary of OTC Filing.com and Vice
President of QCL Communications. Mr. Smith is responsible for the design and
implementation of website design, and graphic design for QCL Communications, as
well as for public relations for the Company. Prior to working for the Company,
Mr. Smith acted as President and Chief Operating Officer of Ion Design, Inc., a
private corporation which operated a number of one- hour photo labs, and which
offered a variety of graphic design services. Mr. Smith, who is a certified
chef, owned and operated the Horse & Hound Cafe in Madison Georgia from 1995 to
1997, and Runnymede Farm in Brunswick, Georgia from 1991 to 1995. Mr. Smith
attended the University of the South, Sewanee, TN.
Other Significant Employees
Peter Lybrand has served as general manager of OTC Filing.com since it
acquisition by the Company in October, 1999. Mr. Lybrand has been intimately
involved in the development of StockFiling.com website, and the implementation
of OTC Filing.com's business plan.
Mr. Lybrand is an owner, along with his wife, of B&E Holdings, Inc., which
sold 100% of the shares in OTC Filing.com to the Company in return for 6,625,000
restricted shares of the Company's common stock.
Mr. Lybrand, who was formerly known as Peter Tosto, legally adopted his
wife's name on his marriage in May, 1997. Mr. Lybrand was convicted in 1990 in
the United States District Court for the Eastern District of New York of
conspiracy to commit securities fraud in violation of 18 U.S.C.ss.371. Mr.
Lybrand received a sentence of three years probation. On May 14, 1998, Mr.
Lybrand entered a plea of guilty to a criminal information in the United States
District Court for the Southern District of New York charging securities fraud
in violation of 15 U.S.C.ss.78j(b) and 78ff in connection with an alleged
fraudulent scheme involving the sale of securities in 1993 and 1994. Mr. Lybrand
is presently awaiting sentencing. In connection with the same conduct as
resulted in the 1998 plea of guilty, Mr. Lybrand, without admitting
16
<PAGE>
or denying liability, entered into a consent injunction in an Administrative
Action commenced by the Securities and Exchange Commission whereby he agreed to
cease and desist from any future violations of Section 17(a) of the Securities
Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934, and
agreed to pay a fine of $1,100,241.92. Mr. Lybrand also consented, without
admitting or denying liability, to the entry of a permanent injunction against
future violations of Sections 5 and 17(a) of the Securities Act of 1933 and
Sections 10(b) and 15 (a) of the Securities and Exchange Act of 1934 in an
action known as Securities and Exchange Commission v. Balance For Life, No.
95-D-2471 (D. Colo.) arising from the sale of unregistered stock in 1991-1992.
Mr. Tosto also consented to the entry of a fine of $71,791.99.
EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1999, Peter Iodice, the Company's
President received $60,000 in cash compensation. Mr. Iodice also received a one
time stock bonus of 2,500,000 shares of restricted common stock during fiscal
1999 in recognition of his service to the Company, and to compensate him for the
amount of his base salary. Other than Mr. Iodice, no salaries in excess of
$50,000 have been paid to any executive officer or director of the Company over
the past three years. Mr. Iodice received payment of $60,000 for 1998, and
$60,000 for 1999.
Name and Year Salary Bonus Long Term
Position Compensation
Peter Iodice 1999 $60,000 2,500,000 N/A
President Shares of Stock
1998 $60,000 N/A N/A
1997 $60,000 N/A N/A
TRANSACTIONS WITH MANAGEMENT AND OTHERS
There have been no transactions with management.
LEGAL PROCEEDINGS
The Company is a defendant in an action entitled Murphy Oil USA, Inc. v.
QCL Group, Inc., Case No. 99-CV-0283G, pending in the Superior Court of the
State of Georgia, Oconee County. This case involves a claim by Murphy Oil that
it is owed the sum of $32,000 for goods it asserts have been delivered. QCL
vigorously
17
<PAGE>
disputes the amount of this claim, as well as the quality of the product that
was allegedly delivered. The case is presently in discovery and is scheduled to
be placed in mediation.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In 1988, the Company's securities began trading on the NASD
over-the-counter Bulletin Board and in the over-the-counter market "pink
sheets". The Company's trading symbol is "QCLG". While the stock traded for
approximately one year after the commencement of trading in 1988, there was no
active public market for the Company's securities throughout the past decade
until the second quarter of 1999. At January 31, 2000, the average per share bid
price of the Company's common stock was $3.75. Over-the-counter market
quotations reflect inter-dealer prices, without retail mark- up, mark-down or
commissions and may not represent actual transactions. The following sets forth
the range of high and low bid information for the quarterly periods indicated as
reported by the National Quotation Bureau:
High Low High Low
1998: 1st Quarter (1) (1) 1999: 1st Quarter .01 .01
2nd Quarter (1) (1) 2nd Quarter 5.125 .01
3rd Quarter (1) (1) 3rd Quarter 5.50 1.375
4th Quarter (1) (1) 4th Quarter 3.00 1.50
2000: 1st Quarter 3.75 1.937
(through 1/31/00)
(1) Bid information not available.
Holders
As of November 17, 1999, the number of holders of record of shares of
common stock, excluding the number of beneficial owners whose securities are
held in street name was approximately 126.
Dividend Policy
The Company does not anticipate paying any cash dividends on its common
stock in the foreseeable future because it intends to retain its earnings to
finance the expansion of its business. Thereafter, declaration of dividends will
be determined by the Board of Directors in light of conditions then existing,
including
18
<PAGE>
without limitation the Company's financial condition, capital requirements and
business condition.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of common stock, $.001
par value of which 15,924,810 shares are issued and outstanding. The holders of
shares of common stock have one vote per share. None of the shares have
preemptive or cumulative voting rights, have any rights of redemption or are
liable for assessments or further calls. None of the shares will have any
conversion rights. The holders of common stock are entitled to dividends, when
and as declared by the Board of Directors from funds legally available therefor
and upon liquidations of the Company to share pro rata in any distribution to
shareholders.
Western States Transfer and Registrar, Inc., 4625 South 2300 East, Suite
207, Salt Lake City, Utah 84117, is the transfer agent and registrar for the
Company's common stock.
Shares Eligible for Future Sale
The Company has 15,924,810 shares of Common Stock outstanding but of these
shares, only 1,282,610 shares are freely tradeable. All of the remaining shares
of Common Stock are "restricted securities" and in the future, may be sold only
in compliance with Rule 144 or in an exempt transaction under the Securities Act
of 1933 (the "Act"), unless registered under the Act (the "restricted shares").
Peter Iodice and Rebecca Sue Iodice own collectively 6,509,000 restricted
shares, and B&E Holdings, Inc. owns 6,500,000 restricted shares. Ms. Iodice's
shares, totaling 4,009,000, may presently be sold pursuant to the requirements
of Rule 144 in such amount as permitted.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, a person, including an affiliate of the
Company (or persons whose shares are aggregated), who has owned restricted
shares of Common Stock beneficially for at least one year is entitled to sell
within any three month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the common stock is quoted on a national quotation system, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least two years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above.
19
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth information with respect to all
securities of the Company sold within the past three years without registering
the securities under the Act. The information includes the names of purchasers,
date of issue, number of shares issued and the consideration received by the
Company for the issuance of these shares.
On June 11, 1999, the Company agreed to issue 100,000 shares of restricted
common stock to Ion Design, Inc. for the rights to the website TheKidSite.com.
These shares have not yet been issued.
On July 29, 1999 the Company issued 2,500,000 shares of restricted common
stock to Peter Iodice, the President of the Company in return for services he
had rendered to the Company.
On August 31, 1999 the Company issued 6,500,000 shares of restricted common
stock to B & E Holdings, Inc. in return for full ownership of OTC Filing.com,
its software, domain names, and other assets. Thereafter an additional 125,000
shares of restricted common stock were issued in December, 1999 in connection
with the goods and services transferred in this transaction.
On December 21, 1999 the Company acquired all of the outstanding capital
stock of Panificio Wholesale Italian Bakery, LLC, a Florida Corporation in
exchange for 500,000 shares of the Company's common stock issued to the
following individuals:
Nicholas Castronuovo 200,000
Tracy Melone 200,000
Escrowed for future
Consideration 100,000
All of the aforesaid shares were issued without registration under the Act
by reason of the exemption from registration afforded by the provisions of
Section 4(2) thereof, as transactions by an issuer not involving a public
offering and/or Regulation D promulgated under the Act.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and
agents to the fullest extent permitted by Nevada law. The Company is also
empowered under its Bylaws to enter into indemnification agreements with its
directors and officers and to purchase insurance on behalf of any person it is
required or
20
<PAGE>
permitted to indemnify.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
FINANCIAL SCHEDULES AND EXHIBITS
There are filed as part of this Form 10-SB the following:
Financial Statements. The financial statements filed as part of this Form
10-SB are indexed below and are included at page F-1.
Independent Auditors' Report .................................. F-1
Balance Sheet as at December 31, 1999,
December 31,1998 and December 31, 1997
(audited) ..................................................... F-2
-F-3
Statement of Operations for the years
ended December 31, 1999, 1998 and
1997 (audited) ................................................ F-4
Statement of Stockholders' Equity for the years
ended December 31, 1999, 1998 and
1997 (audited) ................................................ F-5
Statements of Cash Flow for the years
ended December 31, 1999, 1998 and
1997 (audited) ................................................ F-6
Notes to Financial Statements ................................. F-7
- F-12
Exhibits.
3.(i)(a) Articles of Incorporation filed
on October 30, 1986.
(b) Articles and Plan of Merger
dated on March 3, 1988.
(c) Certificate of Amendment filed
on April 18, 1988
(d) Good Standing Certificate
21
<PAGE>
(ii) By-Laws
10. (a) Lease agreement between Independent Southern and
Vi-Mac, Inc. dated March 1, 1999.
(b) Lease agreement between Services Industries, Inc.
(predecessor in interest to Independent Southern) and
Central of Georgia Railroad Company dated October 17,
1996
(c) Sales Agreement between QCL Group, Inc. and Panificio
Wholesale Italian Bakery, LLC dated November 24,
1999, and Schedules and Addendum's thereto.
(d) Agreement dated August 31, 1999 between QCL Group,
Inc. and B & E Holdings, Inc.
21. Certificates of incorporation of subsidiaries.
99. Specimen Stock Certificate.
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf the
undersigned thereto duly authorized.
Dated: February 16,2000
QCL Group, Inc.
/s/ Peter Iodice
----------------------------
Peter Iodice, President
22
<PAGE>
David E Barnett, III
Certified Public Accountant
721 South Milledge Avenue
Athens, Georgia 30605
Member of the American (706)546-6777 Member of the Georgia
Institute of CPAs. Fax: (706)543-1085 Society of CPAs.
The Board of Directors and Stockholders
QCL Group, Inc.
I have examined the accompanying consolidated balance sheets of QCL Group,
Inc. as of December 31, 1999, 1998, and 1997, and the related consolidated
statements of operations, consolidated stockholders' equity and consolidated
cash flows for the years then ended. These financial statements are the
responsibility of QCL Group's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of QCL Group, Inc. as of
December 31, 1999, 1998, and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
February 15, 2000
Athens, Georgia
/s/ David E. Barnett, III
<PAGE>
QCL Group, Inc.
Consolidated Balance Sheets
At December 31, 1999, 1998 and 1997
ASSETS
1999 1998 1997
--------- --------- ---------
Current Assets:
Cash in banks $ 36,510 $ 50,896 $ 3,530
Accounts receivable - net 33,589 19,520 29,898
Fuel and supplies inventories 17,432 20,376 7,040
--------- --------- ---------
Total Current Assets 87,531 90,792 40,468
Property and Equipment:
Vehicles, tanks, and equipment 326,322 215,074 82,990
Accumulated Depreciation (53,964) (24,640) (7,050)
--------- --------- ---------
Total Property and Equipment 272,358 190,434 75,940
Other Assets:
OTCFILING.COM Website 6,625
Southeastern Bakery - Goodwill 111,552
Accumulated Amortization (620)
Rent and utility deposits 5,726 5,726
Deferred tax assets 10,015 2,542
--------- --------- ---------
Total Other Assets 133,298 8,268 0
--------- --------- ---------
Total Assets $ 493,187 $ 289,494 $ 116,408
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
QCL Group, Inc.
Consolidated Balance Sheets
At December 31, 1999, 1998 and 1997
(continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Liabilities:
Current Liabilities:
Accounts payable $111,312 $ 64,238 $ 10,538
Current portion of equipment notes 30,561 25,605 11,592
Current portion of Panificio note 10,686
Note payable to Wachovia Bank 34,889 40,862 --
Income taxes payable -- -- 4,024
-------- -------- --------
Total Current Liabilities 187,448 130,705 26,154
Noncurrent Liabilities:
Equipment notes less current portion 90,453 107,765 28,419
Panificio note less current portion 10,572
Deferred income taxes payable 13,803 8,048 4,923
-------- -------- --------
Total Noncurrent Liabilities 114,828 115,813 33,342
-------- -------- --------
Total Liabilities $302,276 $246,518 $ 59,496
Stockholders' Equity:
Common Stock, par value $0.001 per share;
authorized 50,000,000; issued and outstanding
6,299,810 at 12/31/97 and 12/31/98, 15,924,810
at 12/31/99. Free trading shares 1,282,610 and
restricted shares 14,642,200 $ 15,925 $ 6,300 $ 6,300
Additional paid in capital 159,642 14,375 14,375
Retained earnings 15,344 22,301 36,237
-------- -------- --------
Total Stockholders' Equity $190,911 $ 42,976 $ 56,912
-------- -------- --------
Total Liabilities and Stockholders' Equity $493,187 $289,494 $116,408
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
QCL Group, Inc.
Consolidated Statements Of Operations
For The 12 Month Periods Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Gross Revenues $ 1,743,858 $ 1,189,302 $ 739,796
Cost Of Revenues 1,571,539 1,101,533 647,349
----------- ----------- -----------
Gross Profit 172,319 87,769 92,447
Operating Expenses:
Sales and marketing 2,604 3,517 8,418
General and administrative 161,162 97,542 50,748
----------- ----------- -----------
Total Operating Expenses 163,766 101,059 59,166
----------- ----------- -----------
Income From Operations 8,553 (13,290) 33,281
Interest Income (Expense), net (17,227) (4,087) (658)
----------- ----------- -----------
Net Income Before Income Taxes (8,674) (17,377) 32,623
Income Tax (Expense) Benefit 1,717 3,441 (6,460)
----------- ----------- -----------
Net Income $ (6,957) $ (13,936) $ 26,163
=========== =========== ===========
Weighted average number of shares outstanding 8,942,276 6,299,810 6,299,810
----------- ----------- -----------
Earnings (loss) per share $ (0.001) $ (0.002) $ 0.004
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
QCL Group, Inc.
Consolidated Statements of Stockholders' Equity
For Years Ending December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Par Value $0.001
Common Stock Additional
--------------------------- Paid-In Retained
Shares Amount Capital Earnings Totals
------------ ----------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning Balance
January 1, 1997 6,299,810 $ 6,300 $ 14,375 $ 10,074 $ 30,749
Income (loss) for the year
ended December 31, 1997 26,163 26,163
----------------------------------------------------------------------------
Ending Balance
December 31, 1997 6,299,810 $ 6,300 $ 14,375 $ 36,237 $ 56,912
============================================================================
Income (loss) for the year
ended December 31, 1998 (13,936) (13,936)
----------------------------------------------------------------------------
Ending Balance
December 31, 1998 6,299,810 $ 6,300 $ 14,375 $ 22,301 $ 42,976
============================================================================
Issuance of restricted common stock
to officer for compensation
7/29/99 2,500,000 2,500 2,500
Issuance of restricted common stock
for S.E. Bakery assets
11/23/99 500,000 500 145,267 145,767
Issuance of restricted common stock
for OTCFiling.com assets
10/8/99 6,500,000 6,500 6,500
12/8/99 125,000 125 125
Income (loss) for the year
ended December 31, 1999 (6,957) (6,957)
Ending Balance
December 31, 1998 15,924,810 $ 15,925 $ 159,642 $ 15,344 $ 190,911
============================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
QCL Group, Inc.
Consolidated Statements of Cash Flows
For The 12 Month Periods Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Gain or (Loss) $ (6,957) $ (13,936) $ 26,163
Adjustments to reconcile net gain or (loss) to
cash provided by or (used in) operating activities:
Depreciation 29,324 17,590 5,790
Amortization 620
Deferred income taxes (1,717) (3,441) 6,460
Changes in operating assets and liabilities:
Accounts receivable 14,069 10,378 (15,640)
Inventories 2,944 (13,336) (7,040)
Prepaid assets and deposits (5,726)
Accounts payable (19,436) 53,700 8,477
Accrued expenses 3,126 (1,058) 1,274
--------- --------- ---------
Cash provided by operating activities 21,973 44,171 25,484
INVESTING ACTIVITIES:
Purchase of equipment (17,177) (26,031) (19,570)
--------- --------- ---------
Cash used in investing activities (17,177) (26,031) (19,570)
FINANCING ACTIVITIES:
Payments of equipment notes (9,191) (11,136) (4,509)
Payments of capital lease obligations (3,165) (500)
Proceeds from Wachovia Bank note 40,862
Payment of Wachovia Bank note (5,973)
Payment on Bakery note (853)
--------- --------- ---------
Cash (used in) or provided by financing activities (19,182) 29,226 (4,509)
--------- --------- ---------
Increase or (decrease) in cash (14,386) 47,366 1,405
Cash balance at beginning of period 50,896 3,530 2,125
--------- --------- ---------
Cash balance at end of period $ 36,510 $ 50,896 $ 3,530
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid 17,227 4,087 658
Taxes paid 0 0 0
SUPPLEMENTAL DISCLOSURES OF NON-CASH
ACTIVITIES:
Equipment acquired by issuance of notes payable 44,520
Equipment acquired under capital financing lease 105,545
Common stock issued to acquire OTCFILING.COM 6,625
Common stock issued to acquire assets of Panaficio
Bakery, net of trade payables and note assumed 145,767
Common stock issued to officer as compensation 2,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
QCL Group, Inc.
Notes To Consolidated Financial Statements
For Periods Ended December 31, 1999, 1998, and 1997
Note 1 - Significant Accounting Policies
a) Organization - QCL Group, Inc. is a Nevada corporation resulting from the
1988 merger between RSI Communications, a Nevada corporation, and QCL Group.
Before the merger QCL Group was a newly formed Georgia corporation. All the
stock of QCL was exchanged for stock in RSI, which was then renamed as the QCL
Group.
b ) Operations - QCL has operated primarily as a seller of petroleum products in
the Athens, Georgia geographical area. Through its wholly owned subsidiary,
Independent Southern, Inc., the company operates a bulk plant and storage
facility in Bogart, Georgia. Fuel is sold directly to business and industrial
accounts from this location. In 1998 QCL began the process of leasing and
developing retail quick serve locations which were later subleased out to
operators who purchase all fuel products from QCL. Currently two such retail
locations, operated by QCL subsidiary Retail Convenience Stores, Inc., have been
developed and subleased. Management intends to develop more locations as well as
continuing to develop sales to other industrial end users.
In October 1999 QCL purchased the OTCFILING.COM website from B & E Holdings. The
website provides an on-line information site for publicly traded corporations to
publish information. Revenues are derived from fees charged to public companies
who use the site as well as advertising sales.
In November of 1999 QCL purchased the assets of Panificio Wholesale Italian
Bakery, LLC, a Florida wholesale baker. QCL began operating this business in
December of 1999, as Southeastern Baking Company, Inc., a wholly owned QCL
subsidiary.
c) Principles of Consolidation - The financial statements presented include the
accounts and operations of all of its wholly owned companies. All material
intercompany balances and transactions have been eliminated in consolidation.
d) Inventory - Inventory is reported at the lower of cost or market value. Cost
is determined using the first in, first out method.
e) Property, Plant and Equipment - Equipment is carried at cost. Depreciation is
computed using the straight line method over 5 to 15 years. The cost of
upgrading fuel pumps to meet regulatory standards has been capitalized. Other
maintenance or repairs is charged to income as incurred.
f) Goodwill - Goodwill related to the purchase of Southeastern Bakery assets is
capitalized as an intangible asset and amortized over 15 years.
g) Revenue Recognition - Revenues are recognized as earned in accordance with
generally accepted accounting principles.
h) Income Taxes - Deferred income taxes are provided in amounts sufficient to
give effect to timing differences between financial and tax reporting,
principally related to the Company using the straight line method for financial
reporting and MACRS depreciation for tax reporting.
F-7
<PAGE>
QCL Group, Inc.
Notes To Consolidated Financial Statements
For Periods Ended December 31, 1999, 1998, and 1997
(continued)
Note 2 - Property, Plant and Equipment
1999 1998 1997 1996
---- ---- ---- ----
Equipment Capitalized:
- ---------------------
Fuel Business 17,177 132,084** 64,090 18,900
Bakery Assets 94,071 0 0 0
All equipment depreciated using straight line method over periods of 5 to 15
years.
Accumulated Depreciation:
- ------------------------
Fuel Business 53,180 24,640 7,050 1,260
Bakery Assets 784 0 0 0
Depreciation Expenses:
- ---------------------
Fuel Business 28,540 17,590 5,790 1,260
Bakery Assets 784 0 0 0
**Includes capital truck lease. See note regarding leased equipment.
Note 3 - Stock Exchanged for purchase of bakery assets
This asset purchase accounted for using the purchase method. Asset values and
liabilities assumed as follows:
Accounts Receivable $28,764
Machinery and Equipment $94,071
Accounts Payable Assumed ($66,510)
Panificio Bakery note payable assumed - $1,000 per month for 24 months. Unstated
interest. Discounted to present value of ($22,110.50) using 8%
assumed interest.
Amount paid in excess of assigned values - Goodwill $111,552
Assigned value of 500,000 shares restricted QCL stock issued in purchase
$145,766
Results of operations include bakery income and expenses from 11/23/99 to end of
year.
For the fiscal periods ending 9/30/99 and 9/30/98 the Bakery reported unaudited
net losses of ($10,180) and ($37,335) respectively. Unaudited gross sales
reported for the fiscal periods ending 9/30/99 and 9/30/98 (ten months) was
$467,195 and 229,299 respectively.
Note 4 - Stock Exchanged for OTCFILING.COM website business
Assigned value of 6,625,000 shares QCLG issued based on par value, $6,625.
Note 5 - Leased Equipment
Capital lease dated 9/23/98 for Sutton 3600 gallon tank truck. Total price of
tank truck was $105,545. Terms - 84 monthly lease payments of $1,794.37 and an
end of lease term purchase option of $21,108.96. This equipment was capitalized
under Vehicles, tanks, and equipment. Depreciation taken using 10 year straight
line method. Depreciation expense taken for 1998 and 1999 was $2,639 and $10,555
respectively.
F-8
<PAGE>
QCL Group, Inc.
Notes To Consolidated Financial Statements
For Periods Ended December 31, 1999, 1998, and 1997
(continued)
Note 5 - (continued)
Lease obligation: 1999 1998 1997
---- ---- ----
Current 11,426 6,631 0
Long-term 90,454 98,414 0
Schedule of minimum lease payments and imputed interest for succeeding five
years:
Year Payments Due Interest Present Value of Payments Due
2000 31,461** 20,866 90,454
2001 21,532 11,978 80,900
2002 21,532 10,064 69,432
2003 21,532 7,768 55,668
2004 21,532 5,010 39,146
**Current portion due includes $9,929 payments and fees due 12/31/99 paid in
January, 2000.
Note 6 - Accounts Receivable
Receivable balances at 12/31/99 were $2,927 for fuel sales and $30,661 for
bakery sales net of allowance for doubtful accounts of $1,614. Fuel sales are
primarily cash or credit card only with a few select credit accounts. Bakery
accounts are serviced on a daily basis and payments are received weekly to
monthly.
Note 7 - Notes Payable
QCL Group entered into a settlement agreement with Wachovia Bank in December
1998 regarding an unsecured note due in the amount of $40,861.71. Interest set
at 16% per annum. Note currently in default with payment under negotiation.
$30,785 principle due plus accrued interest of $4,105.
Current Monthly
Other Equipment Notes: Amount Due Interest Rate Payments
- ---------------------- ---------- ------------- --------
Little John Tank $8,418 unstated note has matured
CIT - Mack Truck $10,717 13.5% $908.00
Panificio - Bakery equipment $10,686 unstated $1,000
discounted at 8%
F-9
<PAGE>
QCL Group, Inc.
Notes To Consolidated Financial Statements
For Periods Ended December 31, 1999, 1998, and 1997
(continued)
Note 8 - Income Taxes
<TABLE>
<CAPTION>
Deferred Tax Liability:
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Temporary Differences:
Depreciation: book 1,260 5,790 17,590 29,324
tax 2,701 29,212 33,372 58,397
-------------------------------------------------
difference (1,441) (23,422) (15,782) (29,073)
Combined federal & state rate 0.198 0.198 0.198 0.198
Deferred Tax Liability (285) (4,638) (3,125) (5,756)
-------------------------------------------------
Cum. Deferred Tax Liability (285) (4,923) (8,048) (13,804)
=================================================
<CAPTION>
Income Tax Provisions: 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
PreTax Book Income 12,562 32,623 (17,379) (8,674)
Tax Rate 0.198 0.198 0.198 0.198
Financial Tax Expense (Benefit) 2,487 6,459 (3,441) (1,717)
-------------------------------------------------
Current Tax Liability/(NOL) 2,202 1,822 (6,566) (7,474)
-------------------------------------------------
(expense less deferred liability)
Cum. Tax Liability/(Asset) 2,202 4,024 (2,542) (10,016)
=================================================
(combined federal and state)
federal tax portion 1,574 2,877 (1,818) (7,161)
state tax portion 628 1,147 (725) (2,855)
</TABLE>
Net operation loss carryforwards from 1998 and will begin to expire in 2019.
F-10
<PAGE>
QCL Group, Inc.
Notes To Consolidated Financial Statements
For Periods Ended December 31, 1999, 1998, and 1997
(continued)
Note 9- Segment Reporting
For period ending 12/31/99:
12 months 1 month 1 month
Fuel Sales OTCFILING.COM Bakery
----------- ------------- -----------
Gross revenues $ 1,656,104 $ 63,088 $ 24,667
Costs of revenues 1,554,651 692 16,197
----------- ----------- -----------
Gross Income 101,453 62,396 8,470
Expenses:
Sales & marketing 1,274 1,330
General & administrative 139,523 17,939 3,700
----------- ----------- -----------
Total Expenses 140,797 19,269 3,700
----------- ----------- -----------
Income (Loss) from operations (39,344) 43,127 4,770
Interest expense 17,079 148 --
----------- ----------- -----------
Net income before taxes (56,423) 42,979 4,770
Income tax (expense) benefit 11,171 (8,510) (944)
----------- ----------- -----------
Net Income $ (45,252) $ 34,469 $ 3,826
=========== =========== ===========
Earnings (Loss) per share (0.0051) 0.0039 0.0004
Weighted average shares 8,942,276 8,942,276 8,942,276
For periods ending 12/31/98 and 12/31/97 all operations were fuel sales.
Note 10 - Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the 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 periods.
Actual results could differ from those estimates.
Note 11 - Advertising Costs
There are no direct response advertising costs. All advertising is expensed as
incurred. The following amounts are included as Sales and marketing expenses:
1999 - $1,274, 1998 - $1,247, and 1997 - $2,879.
F-11
<PAGE>
QCL Group, Inc.
Notes To Consolidated Financial Statements
For Periods Ended December 31, 1999, 1998, and 1997
(continued)
Note 12 - Legal Issues
Accounts Payable at December 31, 1999 includes $46,091 in fuel accounts payable
to Murphy Oil USA, Inc. This account is under litigation and QCL Group is
seeking a settlement agreement on the account. The account has been assigned to
Mediation and a meeting set for February 15, 2000 to resolve the dispute.
Note 13 - Subsequent Events
Two directors of QCL Group, Inc., Raymond Firth and Scott Smith, have signed
agreements with QCL Group to receive 1,000,000 shares and 100,000 shares
respectively, in exchange for internet web site design and development services.
These agreements were still in negotiation at December 31, 1999. It is expected
that restricted common shares will be issued to these parties during 2000.
F-12
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 30 1986
[ILLEGIBLE] SECRETARY OF STATE
/s/ ILLEGIBLE
No. 7679-86
ARTICLES OF INCORPORATION
OF
RECORDING SCIENCES, INC.
We, the undersigned natural persons being more than eighteen years of age,
acting as incorporators of a corporation pursuant to the provisions of the
Nevada Business Corporation Act, do hereby adopt the following Articles of
Incorporation for such corporation:
ARTICLE I
NAME
The name of the Corporation hereby created shall be:
RECORDING SCIENCES, INC.
ARTICLE II
DURATION
The Corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE III
PURPOSES
The purpose or purposes for which the Corporation is organized are:
1. To manufacture, produce, acquire, purchase, own, maintain, export,
import, sell, lease, license, distribute, exhibit and generally deal in video,
audio and recording equipment and production of every kind, nature and
description, including copyrights.
2. To acquire by purchase, exchange, lease or otherwise, and to own, use,
hold, sell, convey, exchange, lease, mortgage, work,
-1-
<PAGE>
improve, divide and otherwise handle, deal in and dispose of all kinds, types
and descriptions of real and personal property, and any interest or right
therein, whether as principal, agent, broker, lessor or otherwise, and to
manage, operate service, equip, furnish, alter and keep and repair, real and
personal property of every kind, nature and description, and generally to do
anything and everything necessary and proper in connection with owning,
managing, leasing and operating such real and personal property.
3. To conduct its business, carry on its operations and have offices and
exercise the powers granted by this act in any state, territory, district or
possession of the United States or any foreign country.
4. To elect or appoint officers and agents of the Corporation and define
their duties and fix their compensation.
5. To make and alter by-laws, not inconsistent with its Articles of
Incorporation or with the laws of this state, for the administration and
regulation of the affairs of the Corporation.
6. To engage in any and all other acts and activities related to or in
connection with the aforesaid purposes.
7. To engage in any other business or enterprise and any other acts or
activities for which corporations may be organized under the laws of the State
of Nevada and to exercise such other powers and engage in all transactions as
permitted by the laws of the State of Nevada.
-2-
<PAGE>
ARTICLE IV
CAPITALIZATION
The Corporation shall have authority to issue 100,000,000 common shares,
all of which shall have $.00l par value. Each share shall have equal rights as
to voting and in the event of dissolution or liquidation.
ARTICLE V
OFFICERS AND DIRECTORS CONTRACTS
No contract or other transaction between the Corporation and any firm or
other corporation shall be affected by the fact that a director or officer of
this Corporation has an interest in, or is a director or officer of such firm or
other corporation. Any officer or director, individually or with others, may be
a party to, or may have an interest in, any transaction of this Corporation or
any transaction in which this Corporation is a party or has an interest. Each
person who is or may become an officer or director of this Corporation is hereby
relieved from liability that might otherwise obtain in the event such officer or
director contracts with this Corporation for the benefit of himself or any firm
or corporation in which he may have an interest, provided such officer or
director acts in good faith with respect thereto.
ARTICLE VI
PAID-IN-CAPITAL
The Corporation shall not commence business until consideration of a value
of at least $1,000.00 has been received by it as consideration for the issuance
of its shares.
-3-
<PAGE>
ARTICLE VlI
DENIAL OF PRE-EMPTIVE RIGHTS
No holder of shares of the capital stock of the Corporation shall have any
pre-emptive rights or preferential rights of subscription to any shares of any
class of stock of the Corporation whether now or hereafter authorized, or to any
obligations convertible into stock of the Corporation, issued or sold.
ARTICLE VIII
DIRECTORS
Provisions for the regulation of the internal affairs of the Corporation
are as follows:
The affairs and management of this Corporation shall be under the control
of a board of directors consisting of not less than three (3) nor more than nine
(9) members as determined, from time to time, by the board of directors. The
original board of directors shall be comprised of three (3) persons. The names
and residence addresses of the persons who are to serve as directors until the
first annual meeting of the shareholders and until their successors are elected
and shall qualify are as follows:
Lloyd T. Rochford 22812 Via Orvieto
South Laguna, CA 92677
Carol Rochford 22812 Via Orvieto
South Laguna, CA 92677
Jean Parker 32511 Caribbean
Laguna Niguel, CA 92677
-4-
<PAGE>
ARTICLE IX
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is:
One East First Street
County of Washoe
Reno, Nevada 89501
and the name of its initial registered agent at such address is:
The Corporation Trust Company
of Nevada
ARTICLE X
INCORPORATORS
The names and residence addresses of the incorporators are:
Shanna Atkinson 635 East 6910 South
Midvale, Utah 84047
Paul H. Shaphren 3975 South 805 East
Salt Lake City, Utah 84107
Marsha Barber 435 East South Temple #25
Salt Lake City, Utah 84111
Dated this 24th day of October, 1986.
INCORPORATORS:
/s/ Shanna Atkinson
-------------------------
Shanna Atkinson
/s/ Paul H. Shapren
-------------------------
Paul H. Shapren
/s/ Marsha Barber
-------------------------
Marsha Barber
-5-
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of March 3
1988, by and among Recording Sciences, Inc., a Nevada corporation ("RSI"), QCL
Group, Inc., a Georgia corporation ("QCL") and Peter R. Iodice, Jr. and Hirsch
Friedman ("Shareholders").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of RSI and QCL and the Stockholder of QCL
have all approved an agreement and plan of reorganization (the "Reorganization")
of RSI with QCL pursuant to which all of the issued and outstanding capital
stock of QCL shall be exchanged by the Shareholders for shares of Common Stock,
$.00l par value, of RSI, and QCL shall continue as a wholly-owned subsidiary of
RSI; and
WHEREAS, the Reorganization is intended to qualify as a reorganization in
accordance with the provisions of Section 368(a)(l)(B) of the Internal Revenue
Code of 1986, as amended.
NOW THEREFORE, in consideration of the foregoing mutual covenants contained
herein, the parties hereto agree as follows:
SECTION 1. THE REORGANIZATION.
1.1 Closing. At a closing to take place at 11:00 o'clock a.m. on March 14,
1988, at the offices of Parsons & Crowther, 455 South 300 East, Suite 300, Salt
Lake City, Utah, or at such other time or place as shall be determined pursuant
to this Agreement, or shall otherwise be mutually agreeable to the parties, (the
"Closing," the date thereof being referred to herein as the "Closing Date"),
subject to satisfaction of the conditions stated in Sections 4 and 5, the
parties shall carry out the transaction described below.
1.2 Exchange of Shares.
(a) All shares of common stock, $1.00 par value, of QCL issued and
outstanding immediately prior to the Closing (the "QCL Shares") shall be
exchanged and the holder thereof shall receive in payment therefor, shares of
RSI common stock, $.00l par value, as hereinafter set forth (the "RSI Shares").
Each of the QCL Shares shall, as of the Closing, be exchanged, and the
Shareholders shall receive in payment 2,600,000 RSI Shares, of which Mr.
Friedman shall receive 504,000 RSI Shares in exchange for 504 QCL Shares and Mr.
Iodice shall receive 2,096,000 RSI Shares in exchange for 2,096 QCL Shares. RSI
will at the Closing or as promptly thereafter as practicable (and in no event
later
-1-
<PAGE>
than five business days after the Closing) deliver to the Shareholders a total
of 2,600,000 RSI Shares.
(b) At the Closing, the Shareholders of QCL shall deliver to RSI
certificates representing all of the QCL Shares owned by such Shareholders. Such
certificate(s) shall be duly endorsed in blank for transfer or shall be
presented with stock powers duly executed in blank, with such signature
guaranties by national or state bank, together with all such other documents as
may be required to effect a valid transfer of such QCL Shares by such
Shareholders, free and clear of any and all liens, encumbrances, charges or
claims, under Article 8 of the Uniform Commercial Code or otherwise. Upon the
surrender of such certificate(s) to RSI, such holders shall receive in exchange
therefor the RSI Shares as set forth above.
1.3 Officers and Directors. At the Closing and upon satisfaction of the
conditions set forth herein, the directors of RSI shall be as follows: Peter R.
Iodice, Jr.; Rebecca Sue Iodice and Roy Waddle. Such persons shall hold office
until the next annual meeting of RSI and until their successors have been duly
elected and qualified.
1.4 Further Assurances. QCL and the Shareholders agree that if, at any time
after the Closing, any deeds or assignments shall be deemed by RSI to be
necessary or desirable to vest, perfect or confirm title to any property or
rights of RSI, the officers and directors will take such steps as necessary to
effectuate this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF QCL AND THE SHAREHOLDERS.
QCL and the Shareholders, hereby jointly and severally represent and
warrant to RSI as of the date hereof as follows;
2.1 Organization and Qualification. QCL and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia and has full power and authority under the laws of the
State of Georgia to own or lease its properties and to conduct its business as
such properties are owned or leased and as such business is conducted. The
copies of QCL's Articles of incorporation as amended to date, and of QCL's
By-Laws as amended to date (hereinafter referred to as its "By-Laws"), certified
by QCL's Secretary, and heretofore delivered to RSI's counsel, are complete and
correct. QCL and each of its subsidiaries is qualified to do business as a
foreign corporation in each state other than Georgia in which it owns or leases
property or where the conduct of its business would require such qualification,
except where the failure to so qualify would not have a material adverse effect
upon QCL.
-2-
<PAGE>
2.2 Capitalization. QCL's authorized capital stock consists of
1,000,000 shares of Common Stock, $1.00 par value, of which 2,600 shares are
issued and outstanding on the date hereof and none is held in QCL's treasury.
None of the QCL Shares have been issued in violation of any federal or state
law. There are no outstanding options, warrants, rights or agreements of any
kind for the issuance or sale of, or outstanding securities convertible into,
any additional shares of capital stock of any class of QCL. The QCL Shares are
duly authorized, validly issued, fully paid, non-assessable and free of
pre-emptive rights and are held of record and beneficially by the Shareholders.
2.3 Subsidiaries. QCL has the following wholly owned subsidiaries: Quality
Cleaners & Laundry, Inc.; Honey Bee Yogurt Shoppes, Inc.; QCL, Inc.; QCL
Communications, Inc.; Georgia-Quality Cleaners & Laundry, Inc.; and QCL
Acceptance Corporation. QCL and its subsidiaries are not a partner or
participant in any partnership or joint venture of any kind. There are no
outstanding options, warrants, rights or agreements of any kind for the issuance
or sale of outstanding securities convertible into any additional shares of
capital stock of any subsidiary.
2.4 Financial Statements. RSI has received unaudited financial statements
for QCL for the year ended December 31, 1987 and for Quality Cleaners & Laundry,
Inc., which was the holding company prior to the formation of QCL in 1987, for
the periods ended December 31, 1984, 1985 and 1986. All such financial
statements are collectively referred to as the "Financial Statements." The 1984
and 1985 Financial Statements have been compiled by Pappadakis, Nelson &
Bohannon, P.C., Certified Public Accountants compilation report with respect
thereto has been delivered to RSI. The 1986 Financial Statements have been
compiled by Thomas J. Smith, P.C., Certified Public Accountants, whose
compilation report with respect to 1986 has been delivered to RSI. The 1987
Financial Statements have been reviewed by David T. Thomson, P.C., Certified
Public Accountant, and his review report has been delivered to RSI. Said
Financial Statements have all been prepared in accordance with generally
accepted accounting principles applied consistently during the periods covered
thereby, and said Financial Statements present fairly the financial condition of
QCL at the date of said Financial Statements.
2.5 Title to Properties; Liens; Condition of Properties. QCL and its
subsidiaries own no real property at the date hereof, except as disclosed in the
Schedule of Property attached hereto, and QCL, except as disclosed under
Paragraph 2.8., and its subsidiaries are not a party to any leases for real or
personal property except as set forth in the Schedule of Leases attached hereto.
QCL and its subsidiaries own no machinery or equipment with an individual value
in excess of $5,000, except as set forth on its Schedule of Machinery and
Equipment. QCL and its subsidiaries have good and marketable title to all of the
property owned by it and all of its leases are valid and subsisting and no
-3-
<PAGE>
default by QCL or its subsidiaries exists under any thereof and none of the
property or assets of QCL or its subsidiaries is subject to any mortgage,
pledge, lien, conditional sale agreement, security interest, encumbrance or
other charge except as specifically disclosed in the Financial Statements.
All buildings, machinery and equipment owned or leased by QCL or its
subsidiaries are in good repair, have been properly maintained, and conform with
all applicable ordinances, regulations and zoning or other laws and do not
encroach on property of others, and such machinery and equipment is in good
working order, subject to normal wear and tear.
As of the date hereof there is no pending or threatened change in any such
ordinance, regulation or zoning or other law, and there is no pending or
threatened condemnation of any such property to the extent that such change or
condemnation would have a material adverse effect on QCL.
2.6 Taxes. QCL and its subsidiaries have filed all federal and state income
tax returns required to be filed by it, except for its 1987 tax returns. Neither
the Internal Revenue Service nor any other taxing authority is now asserting or
is threatening to assert against QCL or its subsidiaries any deficiency or claim
for additional taxes or interest thereon or penalties in connection therewith.
2.7 Absence of Undisclosed Liabilities. As of the date of the Financial
Statements QCL had, and as of the date hereof QCL has, no liabilities of any
nature which in the aggregate would exceed $1,000, whether accrued, absolute,
contingent or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others, or liabilities for taxes due
or then accrued or to become due), except liabilities reflected in the Financial
Statements or on Exhibits and Schedules attached hereto.
2.8 Notes Receivable. The Installment Notes Receivable of QCL and its
subsidiaries existing on the date hereof are subject to no set-off or
counterclaim and are fully collectible in the normal course of business. QCL and
its subsidiaries have no material accounts receivable or loans receivable from
any person, firm or corporation which is affiliated with it or from any of its
directors, officers, employees or shareholders.
2.9 Quality Cleaners & Laundry, Inc., Bankruptcy. In May of 1987 Quality
Cleaners & Laundry, Inc., filed for reorganization protection from creditors
under Chapter 11 of the Bankruptcy Code. As of the date of this Agreement a plan
has not been proposed; and in the event the Company's suit against Family Credit
Services, Inc., is successful, the Company will immediately emerge from the
proceeding paying all other creditors in full. In the opinion of the company's
attorney, Hirsch Friedman,
-4-
<PAGE>
the Company will prevail on the suit against Family Credit Services, Inc. A copy
of such opinion is attached hereto as Exhibit "A".
2.10 Absence of Certain Changes. Since the date of the December 31, 1987,
Financial Statements, there has not been:
(a) Any change in the financial condition, properties, assets, liabilities,
business or operations of QCL or its subsidiaries known to QCL or the
Shareholders, which change, by itself or in conjunction with all other such
changes, whether or not arising in the ordinary course of business, has been or
is likely to be materially adverse with respect to QCL or its subsidiaries
(including, by way of example and not of limitation, the loss of any significant
clients, the announcement of new developments in competitive technology, or the
intention on the part of any key employee of QCL or its subsidiaries to leave);
(b) Any material contingent liabilities incurred by QCL or its subsidiaries
as guarantor or otherwise with respect to the obligations of others;
(c) Any mortgage, encumbrance or lien placed on any of QCL or its
subsidiaries' properties which remains in existence on the date hereof;
(d) Any obligation or liability incurred by QCL or its subsidiaries, other
than obligations and liabilities incurred in the ordinary course of business;
(e) Any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any material part of
QCL or its subsidiaries' properties or assets other than in the ordinary course
of business;
(f) Any other material transaction entered into by QCL or its subsidiaries
other than transactions in the ordinary course of business;
(g) Any material damage, destruction or loss, whether or not covered by
insurance, affecting QCL or its subsidiaries' properties, assets or business;
(h) Any declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of QCL or its subsidiaries' capital
stock, or any direct or indirect redemption, purchase or other acquisition by
QCL or its subsidiaries of its own capital stock, or any issuance of QCL or its
subsidiaries' capital stock, or options, warrants, or rights to acquire QCL or
its subsidiaries capital stock;
(i) Any change in the compensation payable or to become payable or any
loans made or committed to by QCL or its
-5-
<PAGE>
subsidiaries to any of its officers, employees or agents, or any bonus payment
or arrangement made to or with any of such officers, employees or agents;
(j) Any change with respect to QCL or its subsidiaries' management or
supervisory personnel;
(k) Any payment or discharge of a material lien or liability of QCL or its
subsidiaries which was not shown on the Financial Statements or incurred in the
ordinary course of business thereafter;
(l) Any capital expenditure or contracts entered into by QCL or its
subsidiaries in which the aggregate exceeds $25,000;
(m) Any recapitalization, reorganization, amendment to the By-Laws or
Articles of Incorporation of QCL or its subsidiaries or other change.
2.11 Operations. Between the date of the Financial Statements and the date
hereof, QCL and its subsidiaries have conducted their business only in the
ordinary course, except as disclosed in this Agreement and Schedules and
Exhibits hereto.
2.12. Banking Relations. All of the arrangements which QCL or its
subsidiaries have with any banking institutions are completely and accurately
described in the Schedule of Banking Arrangements indicating with respect to
each of such arrangements the type of arrangement maintained (such as checking
account, borrowing arrangements, safe deposit box, etc.) and the person or
persons authorized to act on behalf of QCL or its subsidiaries in respect
thereof.
2.13 Trade Names and Trademarks. QCL and its subsidiaries the registered
copyrights, trade names, registered trademarks and trademark applications listed
on the Schedules of Trademarks and Trade Names. Use of said trademarks, trade
names and copyrights does not require the consent of any other person and the
same is freely transferable (except as otherwise provided by law) and is owned
exclusively by QCL or its subsidiaries free and clear of any attachments, liens,
encumbrances or adverse claims. The trademarks, trade names and copyrights are
not being infringed by others, and are not subject to any outstanding order,
decree, judgment or stipulation. No claim has been made and no proceeding has
been filed or is threatened to be filed charging QCL or any of its subsidiaries
with infringement of any adversely held trademarks, trade names or copyrights.
2.l4 Trade Secrets and Customer Lists. QCL and its subsidiaries have the
right to use, free and clear of any claims or rights of others, all trade
secrets, customer lists, secret processes and know-how (if any) required for or
used in the supply
-6-
<PAGE>
or marketing of all products and services either being sold, or under
development by QCL and its subsidiaries, including products and services
licensed from others. QCL and its subsidiaries are not in any way making an
unlawful or wrongful use of any confidential information, know-how, or trade
secrets of any third party, including without limitation any former employer of
any present or past employee of QCL or its subsidiaries. The Shareholders is not
a party to any non-competition or confidentiality agreement with any party other
than QCL or its subsidiaries.
2.15 Contracts. QCL and its subsidiaries are not a party to or subject to:
(a) any plan or contract providing for bonuses, pensions, options, stock
purchases, deferred compensations retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
(b) any employment contract or contract for services not terminable within
31 days by and without penalty or further liability to QCL or its subsidiaries;
(c) any contract or agreement for the purchase of any commodity, material
or equipment, other than purchase orders entered into in the ordinary course of
business which in the aggregate do not exceed $5,000;
(d) any contract or agreement for the sale of any commodity, material,
equipment or service, other than contracts with customers entered into in the
ordinary course of business;
(e) any contract or agreement, other than contracts for the purchase or
sale of commodities, material, equipment or services in the ordinary course of
business, entered into after the date of the balance sheet;
(f) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier,
or for periodic minimum purchases of a particular product from a supplier;
(g) any contract or agreement which by its terms does not terminate or is
not terminable without penalty by QCL or its subsidiaries and any successor or
assignee of QCL or its subsidiaries on thirty days' notice other than purchase
orders and sales orders entered into in the ordinary course of business for
goods to be delivered within 90 days;
(h) any contract or agreement for the sale or lease of its products or
provision of its services not made in the ordinary course of business;
-7-
<PAGE>
(i) any material contract with any sales agent, or distributor of products
or services of QCL or its subsidiaries;
(j) any contract containing covenants limiting in any material respect QCL
or its subsidiaries' freedom to compete in any line of business or with any
person or entity;
(k) any material contract or agreement for the purchase of any fixed asset,
whether or not such purchase is in the ordinary course of business, which has
not previously been disclosed in the Schedules hereto or in the Financial
Statements;
(l) any license agreement (as licensor or licensee), except as it relates
to the Notes Receivable disclosed in Paragraph 2.8 of this Agreement; or
(m) any contract or agreement with any present or former officer, director
or shareholder of QCL or with any persons or organizations controlled by or
affiliated with any of them.
QCL and its subsidiaries are not in default under any contracts,
commitments, plans, agreements or licenses where such default would have an
adverse effect upon the business or properties of QCL or its subsidiaries (a
"default" being defined for purposes hereof as an actual default or any set of
facts which would, upon receipt of notice or passage of time, constitute a
default).
2.l6 Litigation. Other than as disclosed in this Agreement and the Schedule
of Litigation, there is no litigation pending or threatened against QCL or its
subsidiaries, and QCL and its subsidiaries are not engaged as a party in any
litigation.
2.l7 Compliance with Laws. QCL and its subsidiaries are not violating any
laws and regulations which apply to the conduct of its business, where such
violation would cause an adverse effect upon the business or properties of QCL
or its subsidiaries, including, without limitation, laws and regulations
relating to employment, occupational safety, the use of public airwaves and
environmental matters. There has never been any citation, fine or penalty
imposed or asserted against QCL or its subsidiaries under any federal, state or
local law or regulation elating to employment, occupational safety,
telecommunications, zoning or environmental matters.
2.l8 Insurance. Quality Cleaners & Laundry, Inc., a subsidiary of QCL is
currently insured by United States Fidelity and Guaranty Company. Said insurance
is adequate and customary for the business engaged in by QCL or its
subsidiaries. QCL and its subsidiaries' workmen's compensation insurance
complies with applicable statutory requirements as to the amount of such
coverage.
-8-
<PAGE>
2.l9 Warranty or Other Claims. There are no existing or threatened claims
against QCL or its subsidiaries for services or merchandise which are defective
or fail to meet any service or product warranties, or any facts which, if
discovered by a third party, would support such a claim and that would have a
material adverse effect upon QCL or its subsidiaries' business. No claim has
been asserted against QCL or its subsidiaries for renegotiation or price
redetermination of any business transaction, and there are no facts upon which
any such claim could be based.
2.20 Powers of Attorney. QCL and its subsidiaries have no outstanding
powers of attorney.
2.21 Finder's Fee. Neither QCL Shareholders nor QCL or its subsidiaries
have incurred or will become liable for any broker's commission or finder's fee
relating to or in connection with the transactions contemplated by this
Agreement.
2.22 Permits; Burdensome Agreements. QCL and its subsidiaries hold all
licenses, permits and franchises which are required to permit it to conduct its
business in Georgia, and other jurisdictions where QCL and its subsidiaries
operate. QCL and its subsidiaries are not subject to or bound by any agreement,
judgment, decree or order which does or may in the future adversely affect their
business or prospects, their condition, financial or otherwise, or any of their
assets or property.
2.23 Minute Books. QCL and its subsidiaries' minute books heretofore made
available to RSI accurately record all corporate action taken by its
shareholders and board of directors and committees thereof from the date of
organization of QCL and its subsidiaries through the date hereof.
2.24 Transactions with Interested Persons. None of the Shareholders nor any
officer, supervisory employee or director of QCL or its subsidiaries owns
directly or indirectly, on an individual or joint basis, any material interest
in, or serves as an officer or director of, any customer, competitor or supplier
of QCL or its subsidiaries, or any organization which has a material contract or
arrangement with QCL or its subsidiaries.
2.25 Employees Benefit Plans. QCL and its subsidiaries have no, and have
never had any, employee benefit plans, as that term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974.
2.26 Disclosure of Material Information. Neither this Agreement nor any
Schedule or Exhibit hereto contains any untrue statement of a fact, or omits to
state a fact necessary to make the statements herein or therein not misleading,
relating to the business or affairs of QCL or its subsidiaries. There is no fact
which adversely affects or may in the future adversely affect the present scope
of the business, operations, properties or condi-
-9-
<PAGE>
tion (financial or otherwise) of QCL or its subsidiaries which has not been set
forth herein or in a Schedule or Exhibit attached hereto.
2.27 Other Agreements. There are no material agreements or arrangements not
contained herein, or disclosed in any Schedule hereto, to which either of the
Shareholders is a party relating to the business of QCL or its subsidiaries or
to such Shareholders's rights and obligations as a shareholder, director or
officer of QCL or its subsidiaries.
2.28 Disclosure of Potential Adverse Developments. QCL, its subsidiaries
and the Shareholders have reported to RSI any and all indications of which they
have knowledge of potential adverse factors in the business of QCL and its
subsidiaries (other than factors affecting industry generally), such as (by way
of example, not of limitation) loss of a distributor, new announcements in
competitive technology, intentions of key employees to resign or leave QCL or
its subsidiaries, or any other adverse factor taking place.
2.29 Copies of Documents. QCL and its subsidiaries have made available for
inspection and copying by RSI and its counsel true and correct copies of all
documents referred to in this Section 2 or in the Schedules delivered to RSI
pursuant to this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF RSI.
RSI hereby represents and warrants as follows:
3.1 Organization and Good Standing of RSI. RSI is a corporation duly
organized, existing, and in good standing under the laws of the State of Nevada
with full corporate power to carry on its business as it is now being conducted.
3.2 Authority of RSI. RSI has the corporate power to enter into this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by RSI have been duly and validly
authorized and approved by all necessary corporate action on the part of RSI,
and this Agreement is the legal and binding obligation of RSI. The entering into
of this Agreement by RSI does not, and the consummation by RSI of the
transactions contemplated hereby will not, violate the provisions of (i) any
applicable laws of the United States or any state or jurisdiction in which RSI
does business, (ii) the Articles of Incorporation or By-Laws of RSI or (iii) any
judgment or decree applicable to RSI. No default or breach will occur in any
material respect by virtue of the consummation of the transactions contemplated
herein under any material contract, agreement, indenture or other instrument
applicable to RSI.
-10-
<PAGE>
3.3 Finder's Fee - RSI. RSI has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
3.4 Stock. The RSI Common Stock to be issued by RSI to the Shareholders
pursuant to this Agreement will be when issued, duly authorized, validly issued,
fully paid, non-assessable, and free and clear of all liens, encumbrances,
charges or claims, under Article 8 of the Uniform Commercial Code or otherwise.
3.5 RSI Reports. RSI's due diligence file dated September 15, 1987, and
unaudited financial statements for the period ended January 31, 1988, which have
been provided to the QCL shareholders in connection with this Agreement, are
true and accurate in all material respects. RSI has agreed to issue to an
unrelated thirty party 100,000 shares of its "restricted stock" as defined by
Rule 144 promulgated pursuant to Section 4(1) of the Securities Act of 1933, as
payment for public relations services for RSI. The financial statements will be
affected by expenses incurred by RSI in connection with the negotiation and
preparation of this Agreement, the investigation of this acquisition, the
expense of the shareholders' meeting and closing of this transaction.
3.6 Further Representations. The RSI Shares to be issued by RSI to the
Shareholders shall be fully paid common voting stock without any limitations or
restrictions on the right to vote such stock by the holders thereof. RSI
confirms that the QCL Shares to be acquired by it are being acquired for
investment, and not with a view to sale or distribution thereof except to the
extent permitted by the Securities Act of 1933 and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder as amended from
time to time.
SECTION 4. CONDITIONS PRECEDENT TO RSI'S OBLIGATIONS.
4.1 Conditions. The obligation of RSI to consummate this Agreement and the
transactions contemplated hereby is subject to the fulfillment, prior to or at
the Closing, of the following conditions precedent.
4.2 Absence of Litigation. No order shall have been entered by any court or
administrative body, and no private or governmental proceeding shall be pending
or threatened which seeks to restrain, enjoin or otherwise prevent the
consummation of the transactions contemplated herein.
4.3 Investment Letters. The QCL Shareholders shall have executed and
delivered to RSI an investment letter, satisfactory to RSI to the effect that
QCL Shareholders are acquiring the RSI Shares for their own account and not with
a view toward sale or distribution thereof. Such letter will also acknowledge
that QCL
-11-
<PAGE>
Shareholders have been advised that the RSI Shares have not been registered
under the Securities Act of 1933 and that they may not be sold without
registration or an exemption therefrom.
4.4 Continuing Covenants.
(a) QCL Shareholders agree that following the Closing, and for a period of
three years subsequent to Closing, they shall cause RSI to keep information
regarding RSI publicly available so as to allow for the public sale of
restricted shares of RSI pursuant to the requirements of Rule 144 promulgated by
the Securities and Exchange Commission pursuant to Section 4(1) of the
Securities Act of 1933. This obligation shall survive paragraph 6.1 of this
Agreement.
(b) QCL Shareholders agree that they will cause RSI to provide audited
financial statements on a consolidated basis for the year ended December 31,
1988.
4.5 Representations, Warranties and Covenants. Each of the representations
and warranties of the Shareholders in Section 2 shall remain true and correct at
the Closing Date as fully as if made on the Closing Date.
4.6 Shareholder Approval. RSI Shareholder approval of this Agreement
including the proposed name change and directors.
SECTION 5. CONDITIONS PRECEDENT TO QCL AND SHAREHOLDERS' OBLIGATIONS.
5.1 Conditions. QCL and Shareholders' obligations to consummate this
Agreement and the transactions contemplated hereby are subject to the
fulfillment, prior to or at the Closing, of the following conditions precedent.
5.2 Opinion of Counsel. QCL shall have received from Parsons & Crowther an
opinion, dated as of the Closing Date to the effect that:
(1) RSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, with full corporate power and
authority to conduct its business as such business is now conducted.
(2) The RSI Shares will be, when delivered pursuant to this Agreement, duly
authorized, validly issued, fully paid and non-assessable.
(3) The execution, delivery and performance of this Agreement by RSI have
been duly authorized by all necessary corporate action by RSI, and this
Agreement has been duly executed and delivered by RSI and constitutes the valid
and legally binding obligation of RSI, enforceable in accordance with its terms,
subject to laws of general application affecting creditors' rights and the
exercise of judicial discretion in accordance with general equitable principles.
-12-
<PAGE>
(4) The execution, delivery and performance by RSI of this Agreement do not
and will not violate the Articles of Incorporation or By-Laws of RSI, as amended
to the date hereof, or any statute of the United States or Nevada which is
applicable to RSI or its properties and do not and will not violate in any
material respect, or result in a material default or any material change in the
rights or obligations of RSI under, any mortgage, lien, lease, agreement,
contract, instrument, order, arbitration award, judgment or decree known to such
counsel and material to RSI and its subsidiaries on a consolidated basis.
(5) To the best knowledge and information of such counsel, there is no
suit, action, or legal, administrative or other proceeding or governmental
investigation which is pending or threatened against RSI which would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
In rendering the foregoing opinion such counsel may, when reasonable,
states its opinions on specific matters of fact to the best of its knowledge
and, to the extent they deem such reliance proper, may rely on (i) certificates
of public officials, (ii) certificates of officers of RSI.
5.3 Representations and Warranties. Each of the representations and
warranties of RSI in Section 3 shall remain true and correct at the Closing
Date.
SECTION 6. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
6.1 Survival of Representations and Warranties. All representations,
warranties, agreements, covenants and obligations herein or in any schedule,
certificate or financial statement delivered by RSI to the Shareholders or by
QCL or the Shareholders to RSI incident to the transactions contemplated hereby
are material, shall be deemed to have been relied upon by the other party and
shall survive the execution hereof for a period of twelve (12) months from the
date hereof regardless of any investigation and shall not merge in the
performance of any obligation by any party hereto.
SECTION 7. MISCELLANEOUS.
7.1 Fees and Expenses. Each of the parties to this Agreement will bear its
own expenses in connection with the negotiation and consummation of the
transactions contemplated by this Agreement.
7.2 Law Governing. This Agreement shall be construed under and governed by
the laws of the State of Utah.
7.3 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered, telegraphed or
mailed by certified or registered mai1:
-13-
<PAGE>
To: Lloyd T. Rochford
Recording Sciences, Inc.
22812 Via Orvieto
South Laguna, California 92677
With a copy to:
Richard T. Beard, Esquire
Parsons & Crowther
455 South 300 East, Suite 300
Salt Lake City, Utah 84111
To: QCL Group, Inc.
480 East Broad Street, Suite 113-C
Athens, Georgia 30601
To: Peter R. Iodice, Jr.
1140 Summit Circle
Watkinsville, Georgia 30677
With a copy to:
Hirsch Friedman, Esquire
335 Kelson Drive
Atlanta, Georgia 30327
or to such other address or which any party may notify the other parties as
provided above.
7.4 Entire Agreement. This Agreement, including the Schedules and Exhibits
referred to herein, is complete; and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof, and all inducements to the making of this Agreement relied upon by all
the parties hereto, have been expressed herein or in said Schedules or Exhibits.
7.5 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties named herein and their
respective successors and assigns. This Agreement may not be assigned by
Shareholders without the prior written consent of the other parties.
7.6 Waivers; Severability. The failure of any of the parties to this
Agreement to require the performance of a term or obligation under this
Agreement or the waiver by any of the parties to this Agreement of any breach
hereunder shall not prevent subsequent enforcement of such term or obligation or
be deemed a waiver of any subsequent breach hereunder. In case any one or more
of the provisions of this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall
-14-
<PAGE>
not affect any other provision or part of a provision of this Agreement but this
Agreement shall be construed as if such invalid or illegal or unenforceable
provision or part of a provision had never been contained herein.
7.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
7.8 Attorneys Fees. In the event there is a default under this Agreement
and it becomes necessary for any party to enforce his rights hereunder, then
with or without litigation, the prevailing party shall be entitled to his
expenses, including reasonable attorneys' fees, arising out of such enforcement
of his rights hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
RECORDING SCIENCES, INC.
By /s/ Lloyd T. Rochford
---------------------------------
Lloyd T. Rochford, President
QCL GROUP, INC.
By /s/ Peter R. Iodice, Jr.
---------------------------------
Peter R. Iodice, Jr., President
SHAREHOLDERS:
/s/ Peter R. Iodice, Jr.
---------------------------------
Peter R. Iodice, Jr., President
/s/ Hirsch Friedman /s/ Hirsch Friedman
Friedman makes no representations ---------------------------------
with respect to Section 2. Hirsch Friedman
Friedman makes no representations
or warranties with respect to
provisions contained in this Agreement
-15-
<PAGE>
SCHEDULE OF PROPERTY
(Paragraph 2.5)
That certain real property described in that certain document entitled
"Contract and Purchase and Sale" between Charles Parrott and Norman Hardin and
Georgia Quality Cleaners & Laundry, Inc., dated October 20, 1987.
<PAGE>
SCHEDULE OF LEASES
(Paragraph 2.5)
A written one year office lease with Franklin House Executive office Suites
dated June 4, 1987.
A written five year lease with Homart Development Co., dated December 3,
1987.
Contingent liabilities on leases sold as part of the sale of stores.
<PAGE>
SCHEDULE OF MACHINERY & EQUIPMENT
(Paragraph 2.5)
one (1) Model 750C El0 Steam Dry Cleaning Machine for $11,800
one (1) Model CM 280 S Universal Utility Press for $6,400
one (1) Model CM 282 S Oval Utility Legger Press for $6,600
one (1) Model CM 120 S Form Finisher for $3,100
one (1) self contained shirt unit consisting of body press, collar/cuff,
sleever with boiler and air compressor for $14,200
<PAGE>
BANKING RELATIONS
(Paragraph 2.11)
Bank: Bank South, P.O. Box 4387, Athens, Georgia 30302
Authorized Persons: Peter and Rebecca Sue Iodice
Accounts: Checking account for QCL Acceptance Corporation, account # 3716988;
checking account for QCL, Inc., account #3717011 (presently used for QCL
Communications, Inc., which has not established an account); checking account
for Quality Cleaners & Laundry, Inc., account #3716945; and checking account for
Georgia Quality Cleaners and Laundry, Inc., account #3717283.
Bank: First Union National Bank of Georgia, P.O. Box 1700,
Atlanta, Georgia 30370
Authorized Persons: Peter and Rebecca Sue Iodice
Accounts: Savings account, Quality Cleaners & Laundry, Inc. Account #8060011246
Bank: First National Bank of Atlanta, P.O. Box 105291, Atlanta, Georgia 30348
Authorized Persons: Peter and Rebecca Sue Iodice
Accounts: Savings account, QCL Acceptance Corporation, Account #56653L
Bank: Oconee State Bank, P.O. Box 205, Watkinsville, Georgia 30677
Authorized Persons: Peter Iodice and Roy Waddle
Accounts: Honey Bee Yogurt Shoppes, Inc., Account #161682
Brokerage Firm: Johnson, Lane, Space, Smith & Co., 101 East Bay Street,
Savannah, Georgia 31401
Account: QCL Acceptance Corporation, Account #04441088
<PAGE>
SCHEDULE OF TRADEMARKS AND TRADE NAMES
(Paragraph 2.12)
Quality Cleaners & Laundry, Inc., owns a State of Georgia Service Mark in
the name "Quality Cleaners" referenced as File Number S-6153.
<PAGE>
SCHEDULE OF LITIGATION
Quality Cleaners & Laundry, Inc., Bankruptcy
<PAGE>
EXHIBIT "A"
Friedman & Associates, P.C.
ATTORNEY AT LAW
P.O. Box 52406
ATLANTA, GEORGIA 30355
(404) 951-2001
1-800-444-3427
HIRSCH FRIEDMAN
DANIEL P. WOODARD, III
KATHLEEN S. WOMACK
February 15, 1988
RE: FAMILY CREDIT SERVICES, INC. v. QUAlITY CLEANERS & LAUNDRY, INC.,
United States District Court, Northern District of Georgia, Civil
Action No. 1:87-cv- 2738-HTW
To Whom it May Concern:
This firm represents Quality Cleaners & Laundry, Inc. "Quality"), in
the above referenced action, which originally began as an adversary
proceeding in the United States Bankruptcy Court. The proceeding involved a
dispute between Quality and Family Credit Services, Inc. ("Family Credit")
as to priority of security interests perfected by both in collateral owned
by the Debtor in the main Bankruptcy proceeding. On cross motions for
summary judgment, the Bankruptcy Court ruled in favor of Family Credit as
to liability, reserving the issue of damages for trial. Quality appealed
the judgment of the Bankruptcy Court to the United States District Court,
where the matter is currently pending. Should Quality not prevail in its
appeal, a contribution lawsuit will be filed against the law firm that
prepared Quality's security agreement documents, said law firm having
previously been placed on notice as to its potential liability.
Based upon our understanding of the law and facts available to us, it
is our opinion that Quality will be successfu1 in this appeal and will be
relieved of any financial obligations to Family Credit. In rendering this
opinion we must note that we are not independent counsel as a principal of
this firm is a stockholder in Honey Bee Yogurt Shoppes, Inc., which is a
"related" company to Quality Cleaners & Laundry, Inc.
We have not been retained to provide any services to The QCL Group,
Inc., or its subsidiaries in regards to the contemplated Agreement and Plan
of Reorganization. We have read the documents relating to this Plan, and
expressly do not render any opinion or certification as to the contents
thereof, and disclaim any responsibility for their preparation.
Sincerely
/s/ Hirsch Friedman
----------------------------------
Hirsch Friedman
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
APR 18 1988
[ILLEGIBLE] SUE DEL PAPA SECRETARY OF STATE
/s/ [ILLEGIBLE] Sue Del Papa
7679-86
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
RECORDING SCIENCES, INC.
Pursuant to the provisions of the Nevada Private Corporation Act, the
undersigned Corporation hereby adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is "Recording Sciences, Inc."
SECOND: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the Corporation:
AMENDMENT
Article I - "Name" is hereby deleted in its entirety. A new Article I is
hereby inserted in place thereof to read:
"Article I - Name
The name of the Corporation is QCL Group, Inc."
THIRD: The foregoing Amendment to the Articles of Incorporation was adopted
by the shareholders on the 14th day of March, 1988, in the manner prescribed by
the laws of the State of Nevada.
FOURTH: The number of shares issued and outstanding on said date was
1,500,000 shares and the number of shares entitled to vote thereon was 1,500,000
shares.
FIFTH: The number of shares present at the shareholders meeting and voted
for said Amendment was 756,000 shares; -0- shares present at the shareholders'
meeting voted against said amendment and -0- shares present at the shareholders'
meeting abstained from voting.
SIXTH: No class of shares were entitled to vote thereon as a class.
<PAGE>
DATED THIS 22 day of March, 1988.
RECORDING SCIENCES, INC.
By /s/ Lloyd T. Rochford
---------------------------
Lloyd T. Rochford, President
By /s/ Carol Rochford
---------------------------
Carol Rochford, Secretary
STATE OF CALIFORNIA )
: SS.
COUNTY OF ORANGE )
On the 22nd day of March, 1988, personally appeared before me Lloyd T.
Rochford and Carol Rochford, who being by me first duly sworn did say, each for
himself and herself that he, the said Lloyd T. Rochford is the President and
she, the said Carol Rochford is the Secretary of Recording Sciences, Inc. and
that the within and foregoing instrument was signed in behalf of said
Corporation by authority of a resolution of its Board of Directors.
/s/ Ila M. Gibel
------------------------------
Notary Public Ila M. Gibel
My Commission expires:
11-4-88 Residing at San Juan Capistrano, CA
- ----------------------
OFFICIAL SEAL
[SEAL] ILA M. GIBEL
NOTARY PUBLIC . CALIFORNIA
PRINCIPAL OFFICE IN
ORANGE COUNTY
My Commission Exp Nov. 4. 1988
SECRETARY OF STATE
[GRAPHIC] [SEAL] [GRAPHIC]
THE GREAT SEAL OF THE STATE OF
NEVADA
STATE OF NEVADA
CERTIFICATE OF EXISTENCE
WITH STATUS IN GOOD STANDING
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that I am, by the laws of said State, the custodian of the
records relating to filings by corporations, limited-liability companies,
limited partnerships, limited-liability partnerships and business trusts
pursuant to Title 7 of the Nevada Revised Statutes which are either presently in
a status of good standing or were in good standing for a time period subsequent
of 1976 and am the proper officer to execute this certificate.
I further certify that the records of the Nevada Secretary of State, at the date
of this certificate, evidence, QCL GROUP, INC., as a corporation duly organized
under the laws of Nevada and existing under and by virtue of the laws of the
State of Nevada since October 30, 1986, and is in good standing in this state.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the Great Seal of State, at my office, in Carson City,
Nevada, on February 3, 2OOO.
/s/ Dean Heller
[SEAL]
THE GREAT SEAL OF THE STATE OF Secretary of State
NEVADA
By /s/ C Morton
Certification Clerk
BY-LAWS
OF
RECORDING SCIENCES, INC.
ARTICLE I. OFFICES
The principal office of the corporation in the State of California shall be
located in the City of South Laguna. The corporation may have such other
offices, either within or without the State of Nevada, as the Board of Directors
may designate or as the business of the corporation may require from time to
time.
The registered office of the corporation required by the Nevada Revised
Statutes to be maintained in the State of Nevada may be, but need not be,
identical with the principal office in the State of Nevada, and the address of
the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held on the third Thursday in the month of October, in each year, beginning with
the year 1987, at the hour of 10:00 o'clock a.m., for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday in the
State of Nevada, such meeting shall be held on the next succeeding business day.
If the election of directors shall not be held on the day designated herein or
any annual meeting of the shareholders, or at any adjournment thereof, the Board
of Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as is convenient.
Section 2. Special Meeting. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President, the Chairman of the Board of Directors or by the Board of
Directors, and shall be called by the President at the request of the holders of
not less than one-tenth of all outstanding shares of the corporation entitled to
vote at the meeting.
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Nevada, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Nevada, as the place
for the holding of such meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the principal office
of the corporation in the State of Nevada.
-1-
<PAGE>
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten nor more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
or the Secretary, or the persons calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than fifty days and, in case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders, or
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
Section 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such list shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof.
-2-
<PAGE>
Section 7. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of
the corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.
Section 9. Voting of Shares. Each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, unless provided otherwise in the corporation's Articles of
Incorporation.
Section 10. Voting of Shares by Certain Holders. Shares outstanding in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
-3-
<PAGE>
Neither shares of its own stock held by the corporation, nor those held by
another corporation if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the corporation,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
Section 11. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors. The Board of Directors may designate
a committee or committees consisting of not less than two directors, which
committee or committees shall have and may exercise all of the authority
designated to it or them by the Board of Directors; but, the designation of such
committees and the delegation thereto of authority shall not operate to relieve
the Board of Directors or any member thereof of any responsibility imposed upon
it or him by law.
Section 2. Number, Tenure and Qualifications. The number of directors of
the corporation shall be not less than three (3) nor more than nine (9) as
determined, from time to time, by the Board of Directors. Each Director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the State of Nevada or shareholders of the corporation. The Board of
Directors may elect from its own number a Chairman of the Board, who shall
preside at all meetings of the Board of Directors, and shall perform such other
duties as may be prescribed from time to time by the Board of Directors.
Section 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Nevada, for the holding of additional regular meetings without other
notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the President or the Chairman of the Board of
Directors or any two Directors. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State
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<PAGE>
of Nevada, as the place for holding any special meeting of the Board of
Directors called by them.
Section 5. Notice. Notice of any special meeting shall be given at least
two days previously thereto by written notice delivered personally or mailed to
each Director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail, so
addressed, with postage thereon prepaid. If notice be given by telegram such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any Director may waive notice of any meeting. The attendance
of a Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 6. Quorum. A majority of the number of Directors fixed by Section
2. of this Article III shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors, but if less than such majority is
present at a meeting, a majority of the Directors present may adjourn the
meeting from time to time without further notice.
Section 7. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. Any action which may be taken at a meeting of the Directors may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the Directors.
Section 8. Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors. A Director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
Directors may be filled by election by the Board of Directors for a term of
office continuing only until the next election of Directors by the shareholders.
Section 9. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as Director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor.
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<PAGE>
Section 10. Presumption of Assent. A Director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the corporation shall be a President,
one or more Vice-Presidents (the number thereof to be determined by the Board of
Directors), a Secretary and a Treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or more
offices may be held by the same person, except the offices of President and
Secretary.
Section 2. Election and Term of Office. The officers of the corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby, but any such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. The President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He
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<PAGE>
shall, when present, preside at all meetings of the shareholders and of the
Board of Directors, unless the Directors have designated a Chairman in
accordance with Article III, Section 2., of these By-Laws. He may sign, with the
Secretary or any other proper officer of the corporation thereunto authorized by
the Board of Directors, certificates for shares of the corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 6. The Vice-President. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice-President may sign, with the Secretary
or an Assistant Secretary, certificates for shares of the corporation; and shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
Section 7. The Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder; (e) sign with the
President, or a Vice-President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 8. The Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
such
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banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article V.
Section 9. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
President or a Vice-President certificates for shares of the corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall, respectively, if required by the
Board of Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors shall determine. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 10. Salaries. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositaries as the Board of Directors may
select.
ARTICLE VI. INDEMNIFICATION
Section 1. Indemnification of Third Party Actions. The corporation shall
have the power to indemnify any person who was or
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is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorney's
fees), judgments, fines, and amounts paid in settlement actually and reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe that his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. Indemnification - Corporation Actions. The corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
Section 3. Determination. To the extent that a director, officer, employee
or agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to in Sections 1 and 2 of
this Article VI, or in defense of any claim, issue, or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith. Any other
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<PAGE>
indemnification under Sections 1 and 2 of this Article VI shall be made by the
corporation upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or 2 hereof. Such
determination shall be made either by (1) the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, (2) by independent legal counsel in a written opinion, or
(3) by the shareholders by a majority vote of a quorum of shareholders at any
meeting duly called for such purpose.
Section 4. General Indemnification. The indemnification provided by this
Article shall not be deemed exclusive of any other indemnification granted under
any provision in the corporations Articles of Incorporation, By-Laws, agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office.
Section 5. Advances. Expenses incurred in defending a civil or criminal
action, suit or proceeding as contemplated in this Article may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon a majority vote of a quorum of the Board of Directors and upon
receipt of an undertaking by or on behalf of the director, officer, employee, or
agent to repay such amount or amounts unless it ultimately be determined that he
is to be indemnified by the corporation as authorized by this Article.
Article 6. Scope of Indemnification. The indemnification authorized by this
Article shall apply to all present and future directors, officers, employees and
agents of the corporation and shall continue as to such persons who cease to be
directors, officers, employees, or agents of the corporation and shall inure to
the benefit of the heirs, executors, and administrators of all such persons and
shall be in addition to all other indemnification permitted by law.
Section 7. Insurance. The corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against any
such liability under the provisions of this Article VI or the laws of the State
of Nevada, as the same may hereafter be amended or modified.
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<PAGE>
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or Vice-President
and by the Secretary or an Assistant Secretary and sealed with the corporate
seal or a facsimile thereof. The signatures of such officers upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or one of its
employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificates for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VIII. FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January
and end on the last day of December in each year.
ARTICLE IX. DIVIDENDS
The Board of Directors may, from time to time, declare and the corporation
may pay dividends on its outstanding shares in the manner, and upon the terms
and conditions provided by law and its articles of incorporation.
ARTICLE X. CORPORATE SEAL
The Board of Directors may in its discretion provide a corporate seal.
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ARTICLE XI. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or Director
of the corporation under the provisions of these By-Laws or under the provisions
of the Articles of Incorporation or under the provisions of the Nevada Revised
Statutes, waiver thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Attendance of a Director at any meeting
of Directors shall constitute a waiver of notice of such meeting, except where a
Director attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE XII. AMENDMENTS
These By-Laws may be altered, amended or repealed and new by-laws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors.
ARTICLE XIII. PROCEDURE FOR CONDUCTING MEETINGS
All shareholder and director meetings shall be conducted in accordance with
the rules and procedures set forth in the most current edition of Roberts' Rules
of Order.
A true copy adopted by the Board of Directors the ___ November, 1986.
ATTEST:
/s/ Carol A. Rochford
-------------------------
Secretary
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LEASE AGREEMENT
STATE OF GEORGIA
COUNTY OF CLARKE
THIS LEASE, made and entered into this 1st day of March 1999 by and between
Vi-Mac, Inc., A GEORGIA CORPORATION, hereinafter referred to as Lessor, and
INDEPENDENT SOUTHERN, INC. hereinafter referred to as Lessee.
WITNESSETH:
1. Lessor hereby leases and lets unto Lessee that certain tract or parcel
of land, with all buildings, structures, improvements and equipment thereon,
situated in the County of Clarke and State of Georgia, described as the Bulk
Storage Plant and Warehouse located at 111 COMMERCE BOULEVARD, BOGART, GEORGIA,
30622, together with all appurtenances thereto belonging or in anywise
appertaining, and all right, title and interest of Lessor in and to any and all
roads, streets, alleys, and ways bounding said premises.
2. TERM
(a) To have and to held the same unto the Lessee for a period of one (1)
year beginning the 1st day of March, 1999 hereinafter referred to as the
"original term".
3. RENTAL
Lessee agrees to pay Lessor in advance without demand on the first day of
each month during the term of this lease the sum of TWENTY FIVE HUNDRED DOLLARS
($2500.00). As additional rent, Lessee agrees to
<PAGE>
assume and pay when due all occupancy cost of the Leased premises including,
without limitation, real estate taxes, insurance (par.17), maintenance and
repairs (par.7).
4. TAXES
Lessor agrees to pay all ad valorem taxes on said property.
5. UTILITY BILLS
Lessee shall pay water, gas, electricity, fuel, light, heat and power bills
for leased premises, or used by Lessee in connection therewith. If Lessee does
not pay the same, Lessor may pay the same and such payments shall be added to
the rental of the premises.
6. USE OF PREMISES
Premises shall be used for the sale of petroleum products only. Any
variance of this use by Lessee must receive the written permission of the
Lessor.
7. MAINTENANCE AND REPAIR
Lessee agrees, as a part of its additional rent, to keep and maintain the
Building and all other Improvements on the Leased Premises, in as good a state
of repair as the same are turned over to it, and in a clean, safe and sanitary
condition, and agrees to make all necessary repairs, interior, exterior, and
structural, to said Building and other Improvements during the term of this
Lease; and, additionally, Lessee shall pay and hold Lessor free and harmless
from bills or assessments for light, heat, water, gas, sewer rentals or charges
and any other expenses arising out of or incidental to the occupancy of said
Leased Premises. Lessee agrees to return said premises to Lessor at the
expiration, or prior termination, of the Lease in as good condition and repair
as when first received, including removal of all vehicles, auto part, junk and
debris.
<PAGE>
8. INDEMNITY
Lessee, for itself, its agents, servants and customers, agrees to indemnify
and save harmless the Lessor against all claims for damages to persons or
property by reason of the use of occupancy of the leased premises, and all
expenses incurred by Lessor because thereof, including attorney's fees and Court
costs. Lessor shall not be responsible for any monies paid by lessee to any
other parties for the goodwill, inventory, or any other part of the business.
9. GOVERNMENTAL ORDERS
Lessee agrees, at its own expense, to promptly comply with all rules,
ordinances, orders, regulations, and requirements of any legally constituted
public authority or department thereof having jurisdiction over the premises.
10. CONDEMNATION
If the whole of the demised premises, or such portion thereof as will make
the demised premises unusable for the operation of a petroleum bulk plant shall
be taken by or pursuant to any governmental authority or through the exercise of
the right of eminent domain, then and in either of said events the terms hereby
granted shall cease from the time when possession thereof is taken by public
authorities, and rental shall be accounted for as between Lessor and Lessee as
of that date. Any award made by such condemning authority shall be made to
Lessor only and it is agreed that Lessee shall have no rights in any such award.
The determination as to whether the taking amounts to one which would render the
premises unusable for the operation of a petroleum bulk plant shall be made
solely by Lessor.
11. LESSEE'S RIGHT TO IMPROVE PREMISES
Lessee shall not have the right to construct and erect or to cause to be
constructed any building or improvement on the premises
<PAGE>
without the express written consent of the Lessor.
12. LESSEE'S RIGHT TO ENCUMBER PREMISES
Lessee shall have no right to assign this lease or to encumber by mortgage
or deed to secure debt the leasehold interest created hereby without the prior
written consent of the Lessor.
13. IMPROVEMENTS PART OF PREMISE
All structures, gasoline tanks, including those which may be underground
pumps, air compressors and other equipment (including those not related to the
sale of petroleum products) which may be or which heretofore have been erected,
installed or placed upon said premises shall become a permanent part of the real
estate and shall remain on the premises for the benefit of the Lessor. Any items
placed on the premises which are not to be controlled by the terms of this
paragraph shall be itemized in writing and such intent shall be recognized in
writing by both parties hereto.
14. ASSIGNMENTS
Lessee may not sell, transfer or assign this Lease or any interest
thereunder or sublet the premises in whole or in part without the prior written
consent of the Lessor. If Lessor gives the required written consent for such
sale, transfer or assignment, the sub-tenants or assignees shall without
relieving Lessee's liability.
15. DESTRUCTION OF PREMISES
If premises are totally destroyed by storm, fire, lightning, earthquake or
other casualty, this lease shall terminate as of the date of such destruction,
and rental shall be accounted for as between Lessor and Lessee as of that date.
If premises are damaged, but not wholly destroyed by any such casualties, rental
shall abate in such proportion as use of premises has been destroyed, and Lessor
shall restore premises to substantially the same conditions as before damage
<PAGE>
as speedily as practicable, whereupon full rental shall recommence, provided,
further, however, that if the damage shall be so extensive that the same cannot
be reasonably repaired and restored within three (3) months' time from date of
the casualty. And, in such event, rental shall be apportioned and paid up to the
date of such casualty.
16. CONSIDERATION FOR OPTION
The payments made and to be made hereunder by Lessee to Lessor shall be
considered sufficient consideration for any and all options herein granted by
Lessor to Lessee.
17. INSURANCE
Lessee shall keep and maintain adequate public liability, with minimum
limit of $500,000. Fire and extended coverage insurance on the building equal to
90% of the value, on the demised premises during the term of this lease. Lessee
shall furnish Lessor with an Insurance Certificate showing Lessor as an
additional insured on a yearly basis.
18. CANCELLATION OF LEASE
It is mutually agreed that in the event that Lessee shall default in the
payment of rent herein reserved, when due, and fails to cure said default within
fifteen (15) days; or if Lessee shall be in default in performing any of the
other terms or provisions of this lease, and fails to cure said default within
15 days after the date of receipt of written notice of default from Lessor; or
if Lessee is adjudicated bankrupt; or if a permanent receiver is appointed for
Lessee's property and such receiver is not removed within thirty (30) days after
written notice from Lessor to Lessee to obtain such removal; or if, whether
voluntarily or involuntarily, Lessee takes advantage of any debtor relief
proceedings under any present or future law, whereby rent or any part thereof
is, or is proposed to be, reduced or payment
<PAGE>
thereof deferred; or if Lessee makes an assignment for benefit of creditors; or
if Lessee's effects should be levied upon or attached under process against
Lessee, not satisfied or dissolved within fifteen (15) days after written notice
from Lessor to Lessee to obtain satisfaction thereof; then, and in any of those
events, Lessor may at his option declare this lease to be null and void and
cancel the same without the necessity of legal process. Lessor may forthwith
re-enter the premises and repossess himself thereof, and remove all persons and
effects therefrom, using such force as may be necessary without being guilty of
trespass, forcible entry or retainer, or other tort.
19. HOLD HARMLESS AGREEMENT
Lessee, for itself, its agents, servants and customers, agrees to indemnify
and save harmless the Lessor against all claims for damages to persons or
property by reason of the use or occupancy of the leased premises.
20. LANDLORD AND TENANT
This contract shall create the relationship of Landlord and tenant between
Lessor and Lessee; no estate shall pass out of Lessor; Lessee has only a
usufruct, not subject to levy and sale.
21. RELETTING BY LESSOR
Lessor, as Lessee's agent, without terminating this lease, upon Lessee's
breaching this contract and upon Lessee's failure to remedy said default within
fifteen (15) days after receipt of written notice, may at Lessor's option enter
upon and rent premises at the best price obtainable by reasonable effort,
without advertisement and by private negotiations and for any term Lessor deems
proper. Lessee shall be liable to Lessor for the deficiency, if any, between
Lessee's rent hereunder and the price obtained by Lessor on reletting.
<PAGE>
22. ATTORNEY'S FEES
In the event that it is necessary for Lessor to collect any rent due
hereunder by an action at law or through an attorney at law, Lessee agrees to
pay fifteen percent (15%) of such rent then due as costs of collection.
23. EFFECTS OF TERMINATION OF LEASE
No termination of this lease prior to the normal ending thereof, by lapse
of time or otherwise, shall affect Lessor's right to collect rent for the period
prior to termination thereof.
24. HOLDING OVER
If Lessee remains in possession of the premises after expiration of the
term of this lease, without the express consent of the Lessor, such tenancy
shall not be construed as a renewal thereof but as a periodic tenancy from month
to month. There shall be no renewal of this lease by operation of law.
25. RIGHTS CUMULATIVE
All rights, powers and privileges conferred hereunder upon parties hereto
shall be cumulative but not restrictive to those give by law.
26. TIME OF ESSENCE
Time is of the essence of this Agreement.
27. DEFINITIONS
Lessor shall include first party, his heirs, legal representatives, assigns
and successors in title. Lessee shall include second party, its successors, and
assigns. "Lessor" and "Lessee" include male and female, singular and plural,
corporation, partnership or individual, as may fit the particular parties.
<PAGE>
28. BENEFIT OF PARTIES
This lease shall be binding upon and shall inure to the benefit of the
parties and their respective legal representatives, successors, heirs and
assigns.
29. NOTICES
Any notice given pursuant to this lease shall be in writing and sent by
certified or registered mail as follows:
(a) If to Lessor, at 1595 McCurdy Road, Stone Mountain, Georgia 30083.
(b) If to Lessee, at 111 Commerce Boulevard, Bogart, Georgia.
30. DAILY RECONCILIATION OF UNDERGROUND STORAGE TANK
The lessee agrees to read all pump meters, gauge all tanks, and do a daily
and monthly reconciliation of all of the gasoline and diesel fuel. The lessee
will immediately notify VI-MAC INC., in writing, of any suspected leaks and/or
any unusual overages or shortages. A copy of the daily reconciliation sheets
will be submitted to VI-MAC INC. at the end of each month along with the monthly
reconciliation figures.
31. HANDLING OF HAZARDOUS WASTE
Lessee agrees to handle and dispose of all new and used motor oil,
transmission fluid, antifreeze, and all other products classified as Hazardous
Waste in a manner as outlined by the Environmental Protection Division. Any
deviation from this would result in the Lessee being responsible for the cleanup
of Leased Property covered by this lease. Any fines or legal fees which might
result from Lessee's actions will be the sole responsibility of the Lessee.
<PAGE>
32. OPTION TO PURCHASE
Lessee is hereby granted the option of purchasing the leased property at
the end of the "original term". Lessee must give written notice to Lessor at
least sixty (60) days prior to the expiration of the "original term" of his
intentions. If lessee agrees to exercise purchase option of this lease, then the
terms of purchase will be as follows. Total purchase price of property will be
TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS ($225,000.00). TEN THOUSAND DOLLARS
($10,000.00) of the first year's original term rent will be applied toward the
purchase price and down payment, with and additional FIFTEEN THOUSAND DOLLARS
($15,000.00) to be paid at closing for a total of TWENTY FIVE THOUSAND DOLLARS
($25,000.00) down payment. The balance of TWO HUNDRED THOUSAND DOLLARS
($200,000.00) will be financed by sellers for FIFTEEN (15) YEARS at a PER ANNUM
rate of EIGHT AND ONE HALF PERCENT (8 1/2%) with a monthly payment of NINETEEN
HUNDRED SIXTY NINE DOLLARS AND FORTY EIGHT CENTS ($1969.48).
The parties recognize that the property has been used as a Petroleum
Distribution Facility and the option price recognizes possible contamination due
to its use.
33. ENTIRE AGREEMENT
This lease constitutes the entire agreement between the parties and no
representations, inducements, promise or agreements, oral or otherwise between
the parties, not embodied herein, shall be of any force of effect, nor shall any
modification hereof be effective unless in writing and signed by Lessor and
Lessee.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals the day and year first above written.
<PAGE>
/s/ Raymond L. Viers
-------------------------
"LESSOR"
RAYMOND L. VIERS
VI-MAC, INC.
/s/ Peter Iodice President
-------------------------
"LESSEE"
PETE IODICE
INDEPENDENT SOUTHERN, INC.
Signed, sealed and delivered in
the presence of:
/s/ Darrell Dyals
- -------------------------
Notary Public
Notary Public, Walton County, Georgia
My Commission Expires October 31, 2000
THIS AGREEMENT, made and entered into this 17th day of October, 1996, by
and between
CENTRAL OF GEORGIA RAILROAD COMPANY, a Georgia corporation, hereinafter
styled Company; and
SERVICE INDUSTRIES, INC., a Georgia corporation, hereinafter styled
Licensee;
W I T N E S S E T H :
THAT the PARTIES HERETO agree as follows:
ARTICLE 1. Company, insofar as its right, title, and interest enables it so to
do, and without warranty, and in consideration of the covenants of Licensee,
hereby grants unto Licensee the right to occupy and use for the purpose or
purposes hereinafter mentioned:
One parcel of the right of way or property of Company at MADISON, Morgan
County, Georgia, having an area of 26,760 square feet, more or less, the
location and dimensions of which arc substantially as shown hatched on
print of Drawing No. TA-74-0217, dated March 25, 1974, hereunto attached
and made a part hereof (hereinafter "Premises"); TOGETHER with the right to
maintain three (3) existing underground tanks ( two, 1,000 gallon tanks and
one, 550 gallon tank) thereon; which said three (3) existing underground
tanks shall not become a fixtures upon the realty, but shall remain the
property of Licensee and shall be removed from the Premises upon
termination of this Agreement.
Company reserves unto itself, and its permittees, the permanent right to
maintain, operate, renew, or reconstruct upon, under, or over said Premises, any
existing pipe, electric transmission, telephone, telegraph, and signal lines, or
any other facilities of like character. Licensee agrees that its occupation and
use of the Premises is subject to any or all such rights and uses and to such
rights as the owners or users thereof may have to use any road or highway, or
portion thereof, which may be located upon or which may traverse said Premises.
ARTICLE 2. Licensee will use said Premises for the purpose of bulk distribution
plant in connection with the gasoline and oil products business of Licensee and
for no other purpose without the written consent of Company. This license is a
personal privilege to Licensee and shall not be assigned without the written
consent of Company, nor shall Licensee, except with such written consent, permit
said Premises to be used for any purpose by any other party, firm, or
corporation.
ARTICLE 3. Licensee will pay unto Company as rent the sum of THREE HUNDRED AND
FIFTEEN AND 00/100 DOLLARS ($315.00) per annum, payable annually in advance,
beginning as of the 17th day of October, 1996, which is the effective date
hereof. If Licensee shall default in the payment of rental hereunder for a
period of 30 days after the same shall be due, a late payment charge in the
amount of 1/2 of 1% of such rent for each month or portion thereof that the same
shall remain unpaid shall be charged to Licensee. Licensee will pay such late
payment charge together with rental due hereunder. If Company cancels or
terminates this Agreement for any reason except default of Licensee, Company
shall refund to Licensee its pro rata portion of rent paid for the unexpired
period, but if Company cancels or terminates because of default of Licensee,
then Company may retain the rent paid for the unexpired period as liquidated
damages.
<PAGE>
ARTICLE 4. Licensee will pay to Company amounts sufficient to cover all taxes,
license fees, or other charges assessed or levied upon or because of the
property of or the business conducted by Licensee upon said Premises of Company.
Licensee will also pay to Company amounts sufficient to cover all assessments or
charges made against said Premises or against Company as owner of said Premises
for street or sidewalk paving or other public improvements. At the option of
Company, Licensee shall pay Company for such taxes, license fees, charges and
assessments either in lump-sums or in annual installments.
ARTICLE 5. Licensee will not construct or install upon said Premises any
buildings, structures, or improvements unless specifically permitted hereby or
by written consent of Company. Any buildings, structures, or improvements
erected by Licensee on said Premises, shall be substantially constructed or
installed, maintained, and used in such manner as not to interfere with the
business of Company, shall be kept in good repair and presentable condition,
shall be located as described herein or otherwise approved in writing by
Company, and shall, not be relocated upon Company Premises except with the
written consent of Company. Licensee will be responsible for all snow and ice
removal and will keep said Premises in clean and sanitary condition, free of
waste, trash, or unsanitary or flammable matter, and prevent the posting of
advertising bills or signs upon said Premises, except the usual business sign of
Licensee.
ARTICLE 6. Licensee shall obtain all permits, certificates, licenses, and
authorizations required by any governmental authority for any improvements to or
use of the Premises.
ARTICLE 7. Licensee shall pay, satisfy, and discharge all claims, judgments or
liens for material and/or labor, used or employed by Licensee or its agents in
the construction, repair, maintenance, or removal of any buildings or structures
located upon the Premises, whether the buildings or structures shall, under the
terms of this Agreement, be the property of Company or Licensee, and Licensee
shall indemnify and save harmless Company, its officers, agents and employees,
from all such claims, judgments, liens, or demands whatsoever.
ARTICLE 8. In its use and occupancy of the Premises, Licensee will comply with
the requirements of all federal, state, and local safety, health, environmental,
and sanitation laws, rules, regulations, and ordinances, and, will at its own
expense make all corrections, repairs, or additions to said Premises or the
facilities thereon which are necessary to ensure compliance with such laws,
rules, regulations, and ordinances. If Licensee is required by any such laws,
rules, regulations, and ordinances to obtain insurance or furnish other
documentation of financial responsibility, Licensee shall provide evidence of
such insurance or documentation to Company prior to occupancy. Any insurance
obtained by Licensee pursuant to this Agreement shall be maintained in force for
the duration of this Agreement and shall provide for notice to Company at least
30 days prior to cancellation or termination.
ARTICLE 9. (a) Inasmuch as Licensee will be maintaining an underground storage
tank on the Premises, Licensee agrees to comply with all regulations and
requirements applicable to underground storage tanks that are promulgated under
any federal or state statute, including but not limited to, Subtitle I of the
Resource Conservation and Recovery Act and any amendments thereto. Licensee also
agrees to comply with Norfolk Southern Corporations's Requirements for
Underground Storage Tank Systems Located on Leased Properties, a copy of which
is attached hereto as Exhibit B. Such requirements will include, but are not
limited to, evidencing financial responsibility, corrosion protection, providing
requisite notifications, testing of tanks for leaks, periodic monitoring of the
tanks and adjacent soil to detect any leakage and the taking of necessary
corrective action if a release from a tank does occur.
Licensee agrees to send a copy of any notification filed with any federal
or state agency regarding the underground tanks to Company and to notify Company
in writing of any detected leakage of
-2-
<PAGE>
a tank within three working days of discovery of the leakage at the address
provided in article 11 below. In the event any leakage is detected from a tank,
Licensee agrees to replace the tank immediately and remove and restore any soil
or groundwater contaminated by said leakage.
(b) Licensee agrees to store only gasoline and oil products in the
underground storage tank since storage of any other regulated substance in the
tank is prohibited by this Agreement. Licensee further agrees to remove said
tanks upon vacation of the property and remove and restore any contaminated soil
and groundwater at that time. In addition, Licensee shall not install any
additional underground tanks or associated underground piping on the Premises
without the express written consent of Company given prior to installation.
ARTICLE 10. Licensee shall not dispose of any wastes of any kind, whether
hazardous or not, on said Premises and Licensee shall not conduct any activity
on said Premises which may or does require a hazardous waste treatment storage
or disposal facility permit from either the federal or state agencies.
ARTICLE 11. Licensee shall furnish Company with a written report detailing all
releases, as defined in 101(22) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (Superfund Act), P. L. 96-510, on or from
the Premises whenever such releases are required to be reported to any Federal,
State, or local authority in accordance with any Federal, State, or local laws,
rules, regulations, and ordinances, and any regulations issued thereunder,
including, but not limited to, those laws listed in Exhibit A attached hereto.
Such written report shall identify the substance released, the amount released,
and the measures undertaken to clean up and remove the released material and any
contaminated soil or water, and shall further certify that no contamination
remains or will remain after the cleanup measures have been completed. Such
reports shall be supplemented by providing the Company with copies of any
written reports required to be submitted by Licensee to any Governmental agency
in accordance with any Federal, State, or local law, rule, regulation, or
ordinance, or by the Council on Environmental Quality's National Oil and
Hazardous Substances Pollution Contingency Plan as it now exists or as it may
hereafter be amended. The foregoing reports to Company and copies of reports to
Governmental agencies shall be sent to Company's Director of Environmental
Protection and Emergency Response, c/o Norfolk Southern Corporation, 110
Franklin Road, S.E., Roanoke, Virginia 24042-0022, within fifteen days after
notification, whether written or otherwise, is required to be given by Licensee
to any such Governmental agency.
ARTICLE 12. (a) If Company detects any violation of Articles 8, 9, 10 and 11,
including any contamination of the Premises, Company shall so notify Licensee of
the violation and Licensee shall take immediate steps to eliminate such
violation. Licensee hereby agrees to indemnify and hold harmless Company, its
officers, agents and employees, from all liability resulting from violations of
Articles 8, 9, 10 and 11 of this Agreement and agrees to reimburse Company for
all actual costs and expenses incurred by Company in eliminating such
violations, including, but not limited to, all costs and expenses to
decontaminate the Premises.
(b) Licensee agrees that it will reimburse Company for and hold harmless
Company, its officers, agents and employees, from all fines or penalties made or
levied against Company by any Governmental agency or authority as a result of or
in connection with Licensee's use of the Premises or of the facilities thereon
or as a result of any release of any nature onto the ground or into the water or
air by the Licensee from or upon the Premises. Licensee also agrees that it will
reimburse Company for and hold Company harmless from any and all costs,
expenses, and attorneys' fees and from all penalties or civil judgments
incurred, entered, assessed, or levied against Company as a result of Licensee's
use of the Premises or as a result of any release of any nature onto the ground
or into the water or air by the Licensee from or upon
-3-
<PAGE>
the Premises. Such reimbursement or indemnification shall include but not be
limited to any and all judgments or penalties to recover the cost of cleanup of
any such release by Licensee from or upon the Premises and all expense incurred
by Company as a result of such civil action including but not limited to
attorneys' fees.
(c) The provisions of this Article 12 shall apply regardless of
acquiescence or negligence or allegations thereof on the part of either party.
(d) The foregoing provisions of this Article 12 shall apply notwithstanding
any other provision of this Agreement to the contrary.
ARTICLE 13. The liability of the parties to this Agreement, as between
themselves, for death, personal injury, and property loss and damage which
occurs by reason of, or arises out of, or is incidental to, the use or occupancy
by Licensee of the Premises covered by this Agreement, shall be determined in
accordance with the following provisions regardless of considerations of fault
or negligence:
(a) Licensee shall be solely responsible for, and shall bear all cost,
expense, and liability resulting from, loss of or damage to property by fire;
(b) Licensee shall be solely responsible for, and shall bear all cost,
expense, and liability resulting from, death, personal injury, and loss and
damage to property caused solely by the acts or omissions of Licensee, or of the
agents or employees of Licensee, or by the violation by Licensee or its agents
or employees of any of the terms of this Agreement, or by the acts or omissions
of Licensee concurring with the negligence of a third party;
(c) Except as provided in subparagraph (a) above, Company shall be solely
responsible for, and shall bear all cost, expense, and liability resulting from
death, personal injury, and property loss and damage caused solely by the acts
or omissions of Company, or of the agents or employees of Company, or by the
acts or omissions of Company concurring with the negligence of a third party;
(d) Except as provided in subparagraphs (a) and (b) above, Company and
Licensee shall be jointly responsible for and shall bear equally all cost,
expense, and liability resulting from death, personal injury, and property loss
and damage caused by their joint and concurring acts;
(e) Licensee hereby agrees to indemnify and save harmless Company, its
officers, agents and employees, from all of the liabilities and expenses assumed
and undertaken by Licensee in this Article 13. Likewise, Company hereby agrees
to indemnify and save harmless Licensee, its officers, agents and employees,
from all of the liabilities and expenses assumed and undertaken by Company in
this Article 13;
(f) Knowledge on the part of Company of a continuing violation of the terms
of this Agreement by Licensee shall constitute neither an omission nor
acquiescence on the part of Company, and shall in no event relieve Licensee of
any of the responsibilities imposed upon Licensee hereunder.
ARTICLE 14. (a) In connection with the use of the Premises covered by this
Agreement, Licensee agrees to observe and be bound by the rules of the Company
with respect to standard clearances for all railroad tracks located on or
adjacent to the Premises covered by this Agreement, that is to say the Licensee
agrees to maintain and preserve an overhead space of 23 feet measured
perpendicularly from the top of the rail (except that overhead clearance where
wire lines extend over said track shall be such as may be prescribed by
-4-
<PAGE>
the Company) and a space 18 feet in width, measured 9 feet on each side from the
centerline of said track; provided, however, that the side clearance of 9 feet
must be increased one and one-half(l-1/2) inches for every degree of curvature,
which space shall be kept clear of any obstruction whatever, including but not
limited to, all structures, facilities, or property of the Licensee which are or
may be placed or erected above or parallel to said track.
(b) Notwithstanding anything contained in this Agreement, and irrespective
of any joint or concurring negligence of Company, Licensee shall assume sole
responsibility for and shall indemnify, save harmless, and defend Company, its
officers, agents and employees, from and against all claims, actions, or legal
proceedings arising, in whole or in part, from the failure of Licensee to comply
with any clearance requirements set forth in this Agreement. In this connection,
it is specifically understood that knowledge on the part of Company of a
violation of any such clearance requirements, whether such knowledge is actual
or implied, shall not constitute a waiver and shall not relieve Licensee of its
obligations to indemnify Company for losses and claims resulting from any such
violation.
ARTICLE 15. In the event that the whole or any part of the Premises occupied by
Licensee hereunder shall be taken for any purpose under the power of eminent
domain, Licensee shall not be entitled to share in any award resulting from any
such taking, nor shall Licensee have any claim against the Company for any
expense which may be incurred by Licensee as a result of such taking or as a
result of termination of this Agreement by reason of such taking, as hereinafter
provided. In the event that the taking shall be of the whole of the property
herein occupied by Licensee or of such part as shall render said Premises
untenantable for the uses at such time made of the Premises by the Licensee,
then this Agreement and all rights and interests acquired hereunder shall
terminate as of the date of the vesting of title to the property in the
condemning authority, and in no event shall Licensee have any claim for the
value of any unexpired period of this Agreement.
ARTICLE 16. This Agreement shall continue in effect from the date hereinabove
set forth until terminated by either party upon thirty (30) days' written notice
to the other party, except that if Licensee shall default in the payment of
rentals, or violate any other covenants herein, Company may terminate this
Agreement by 10 days' written notice to Licensee of election so to do; service
of such notice to be made either (a) by delivering a copy of the notice to
Licensee, or (b) by mailing the same to or leaving it at the last known address
of Licensee and posting in any conspicuous place upon said Premises.
ARTICLE 17. (a) Within five days of giving or receiving notice of termination of
this Agreement, Licensee shall furnish Company with a written certification that
the Premises have not been contaminated by Licensee's operations, or if a
condition of contamination exists or is believed to exist on any part of the
Premises, Licensee shall give written notice of that fact to Company, and
Licensee shall promptly eliminate said condition.
(b) Upon the termination of this Agreement, for whatever cause, Licensee
will vacate the Premises immediately, remove all improvements owned by or placed
thereon by Licensee, and leave the Premises, including the subsurface, in as
good order and condition as said Premises may have been prior to the use and
occupation thereof by Licensee and free from holes, obstructions, debris,
wastes, or contamination of any kind.
(c) If Licensee fails to restore the Premises as provided herein prior to
the date that Licensee is required to vacate such Premises, then Company may, at
its option but at the sole cost and expense of Licensee, remove or arrange to
remove all such property, improvements, obstructions, debris, waste, and
contamination, and restore or arrange to restore both the surface and the
subsurface of the Premises to as good
-5-
<PAGE>
[PAGE 6 OMITTED]
<PAGE>
ARTICLE 25. Any notice required or permitted to be delivered hereunder shall be
deemed to be delivered, when deposited in the United States Postal Service,
postage prepaid, registered or certified mail, return receipt requested,
addressed to Company or Licensee, as the case may be, at the address set forth
below.
Company: Licensee:
Director Pete Iodice
Real Estate and Contract Services Service Industries, Inc.
Norfolk Southern Corporation 1140 Summit Circle
Suite 1650, One Georgia Center Watkinsville, Georgia 30677
600 West Peachtree Street
Atlanta, Georgia 30308-3603
ARTICLE 26. This Agreement hereby supersedes and cancels as of the effective
date hereof the agreement dated November 29, 1974 between Central of Georgia
Railroad Company and Madison Gas & Oil Inc. concerning lease of 26,760 square
feet of Company's property at Madison, Georgia; Licensee hereby representing to
Company that it has acquired all right, title and interest in and to said
agreement dated November 29, 1974 and all improvements of Madison Gas & Oil Inc.
located upon the Premises.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate, each part being an original, as of the date hereinabove first
recited.
In presence of: CENTRAL OF GEORGIA RAILROAD
COMPANY
/s/ Margaret Ann Lowe By: /s/ Richard Brooks
- ------------------------- --------------------------
As to Company Title: Real Estate Manager
In presence of: SERVICE INDUSTRIES, INC.
/s/ ILLEGIBLE By: /s/ Peter Iodice President
- ------------------------- --------------------------
As to Licensee Title:
-7-
STATE OF FLORIDA
COUNTY OF SARASOTA
SALES AGREEMENT FOR ASSET SALE
THIS AGREEMENT made this 24th day of November, 1999, between PANIFICIO
WHOLESALE ITALIAN BAKERY, LLC, A Florida Limited Liability Corporation
(hereinafter referred to as ("Seller"), and QCL GROUP, INC, a Georgia
Corporation (hereinafter referred to as "Purchaser").
1.
Sale of Business Assets: The Seller shall sell to the Purchaser all assets
of the Seller's bakery business owned and operated under the trade name
"Panificio Wholesale Italian Bakery", located at 1540 12th Street East,
Palmetto, Florida, 34221 (the "Premises") free from all liabilities and
encumbrances except the Permitted Exceptions as shown on Exhibit B, as a going
concern, including the good will of the business, all accounts receivable of
Seller, all interest of Seller in and to the Lease Agreement between Seller and
its Landlord ("the Lease") regarding said Premises, all inventory as of the date
hereof, all transferable licenses, and all furniture, fixtures, supplies, and
equipment now used by the businesses as shown on Exhibit A (all of the foregoing
being hereinafter sometimes referred to as "the Transferred Assets").
2.
Purchase Price: The total purchase price shall be paid by and through a
transfer of stock in Purchaser's corporation. The purchase price shall be
payable in the following manner:
(a) Purchaser shall transfer and assign or issue capital stock to Seller
in the equivalent of 500,000 shares of restricted stock in QCL Group,
Inc., said stock comprising
1
<PAGE>
the entire purchase price for the Transferred Assets, subject to the
setoff amount (the "Setoff") as set forth in paragraph ten (10)
hereof.
(b) Purchaser shall pay to Seller $1,000.00 per month for 24 months
following the Closing. Such payment shall be made on the first day of
each month beginning December 1, 1999 and continuing the first day of
each month thereafter.
3.
Closing: The closing of the transaction contemplated herein and transfer of
possession of the Premises and assets (the "Closing") shall be completed upon
execution of this Agreement and transfer of all documents necessary to transfer
ownership of the Transferred Assets.
4.
No Assumptions of Obligations: Purchaser and Seller agree and acknowledge
that Purchaser is not assuming any debts of Seller except the Permitted
Exceptions and that Seller shall remain liable for all debts and obligations of
Seller except the Permitted Exceptions.
5.
Use of Trade Name: Purchaser may use the trade name "Panificio" for
wholesale purposes but not for retail purposes. Seller may not open retail store
for sale of bakery products solely using the name "Panificio" for its store
name. Seller may however use the name "Panificio" for the following permitted
uses, this list not being exclusive but only explicatory:
1. Purchaser may open retail outlets using the following name, "Southeastern
Baking Company, Inc. selling Panificio Bread";
2. Purchaser may make retail sales from the Premises;
3. Purchaser may use the following name on all advertising "Southeastern
Baking Company, Inc. selling Panificio Bread."
<PAGE>
6.
Accounts Payable/ Accounts Receivable: A list of which is attached hereto
as Exhibit C. Seller agrees that should the amount of Seller's Accounts Payable
exceed the amounts shown on Exhibit C, the difference shall be deducted from the
purchase price as a setoff as set forth in paragraph number ten (10) hereof.
7.
Lease: Purchaser agrees to assume Seller's lease for the Premises and
agrees to indemnify and hold harmless Seller for any claims arising from and for
past due rent thereon.
8
Consultation: Nicholas Castronuovo agrees to work for Purchaser a minimum
of ten (10) hours per month for (12) months after closing for no compensation.
Such work shall include consultation and procurement of new business and
accounts. Should Nicholas Castronuovo fail to work said ten (10) hours for any
month during said twelve (12) month time period as agreed herein, Seller shall
forfeit payment of the $1,000.00 per month portion of the purchase price until
such time as Nicholas Castronuovo works said minimum ten (10) hours per month.
9
Representations and Warranties of Seller: The Seller warrants and
represents the following:
Seller shall pay and be responsible for all unpaid taxes and all other
claims, obligations or liabilities due at or accruing prior to the date of
Closing hereunder except the Permitted
<PAGE>
Exceptions. Seller shall remain liable for all taxes except tangible property
tax as set forth [ILLEGIBLE] accruing prior to the date of Closing including,
but not limited to, all sales taxes or payroll taxes owed by the Seller pursuant
to Seller's operation of the business. Seller shall remain liable for the
payment of any lawful demands, penalties, assessments, or levies filed against
Seller by any tax authorities for taxes accruing during the period prior to
Closing. Further, the Seller covenants that the Seller will file such final tax
returns and reports and make all payments required under the same as are
required under the law; and
All equipment is in working order. All service agreements or warranties if
any, pertaining to the equipment and allowed to be transferred under the
provisions thereof will be transferred to Purchaser under this Agreement at no
additional cost to Purchaser; and
All financial and other information provided to Purchaser and all
representations and warranties contained herein are true and correct in all
material aspects or facts and there are no material ommissions of fact which
would render said information, representations or warranties misleading.
Seller further warrants and represents the following:
(a) Seller is the owner of and has good fee simple marketable title to all
the Transferred Assets, free from all encumbrances.
(b) To its knowledge, Seller has complied with all laws, rules and
regulations of the applicable county, state and federal governments.
(c) Seller has paid all applicable social security, withholding, sales and
unemployment insurance taxes levied by county, state and federal
governments to date.
(d) Seller has not entered into any other contract to sell or mortgage its
business, the Premises, the Transferred Assets, or any portion
thereof.
(e) There are no judgments, liens, actions or proceedings pending against
Seller in any
<PAGE>
court except these Disclosed Lawsuits listed in Exhibit D.
(f) All state and county licenses and zoning requirements applicable to
the Premises and/or the Transferred Assets have been met by Seller.
(g) Seller is a limited liability corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida.
Seller has full power and authority to own its properties and assets
and to carry on its business as it is now being conducted.
(h) By appropriate vote and by unanimous written consent of its members,
all in accordance with Florida Law and its Operating Agreement,
Seller, by and through its authorized agent, has full power to execute
and perform this Agreement and to transfer his properties and assets
as herein provided, and such executive and performance does not
conflict with any provisions of its Operating Agreement or with any
contract to which it is a part or to which it is subject.
(i) There have been no actual claims, litigation, administrative
proceedings, judgments or orders and to the best of Seller's belief
and knowledge, none are threatened, relating to any hazardous
substances, hazardous wastes, discharges, omissions or other forms of
pollution relating in any way to any real estate leased by Seller and
used in connection with the businesses.
(j) There have been no hazardous substances or hazardous wastes, as
defined by the Resource Conservation and Recovery Act (42 U.S.C.
Subsection 6901, et seq., generated, manufactured, refined,
transported, treated, stored, handled or disposed of on any of the
Premises by Seller or, to Seller's knowledge without independent
investigation, any lessor, previous owner or occupant of the Premises
or any other person.
(k) There have been no discharges, spillages or disposals of hazardous
substances or
<PAGE>
hazardous wastes (as defined herein) on any of the Premises by Seller,
or to Seller's knowledge without independent investigation, and lessor
or previous owner or occupant of the Premises or any other person.
(l) The lease for the Premises is in full force and effect and no
violation thereof exists as of the date of Closing.
(m) The bill of sale and instruments of assignment delivered herewith will
transfer all of the Transferred Assets, free of all encumbrances, and
will contain the usual warranties and affidavits of title.
(n) The business of the Seller has been and is being conducted up to the
date of this Closing in accordance with all laws, rules and
regulations of the county, state and federal governments.
(o) All suppliers and creditors of the business shall be paid in full as
of the date of Closing except as shown on Exhibit C. In signing this
Agreement Seller warrants and affirms to Purchaser there no others
suppliers or creditors of the Seller's business, except as shown on
Exhibit C, that have not been paid in full as of the date of Closing.
(p) The Seller represents that there are no liens, encumbrances or
security interests on any of the property to be sold to the Purchaser,
and warrants that the title conveyed to the Purchaser is free and
clear.
All representations and warranties made by the Seller shall survive the
Closing and be independently enforceable.
<PAGE>
10.
Escrow and Setoff: The entire purchase price shall be held in escrow by
Seller for twelve (12) months from the date of the Closing. Said purchase price
shall be disbursed at the end of said twelve (12) months as follows:
Seller shall receive the full amount of the purchase price less and except
the following:
1. Any setoff for Accounts Payable-Purchaser shall deduct an amount of stock
in QCL Group, Inc. from the purchase price equivalent to the amount
Purchaser paid for Seller's Accounts Receivable which is greater than that
amount shown on Exhibit C.
2. Any setoff for Disclosed Lawsuits--Purchaser shall deduct an amount of
stock in QCL Group, Inc. from the purchase price equivalent to the amount
of the claims in the Disclosed Lawsuits for any such lawsuit not resolved
and dismissed. Such amount shall continue to be held in escrow until such
claim is resolved and dismissed.
3. Any setoff for Other Claims--Purchaser shall deduct an amount of stock in
QCL Group, Inc. from the purchase price equivalent to the amount of any
other closing brought against Purchaser or Seller for Seller's operation of
the business. Such amount shall continue to be held in escrow until such
claim is resolved and dismissed.
11.
Brokers: Seller and Purchaser both represent to each other that they have
not dealt with any brokers, finders or realtors in connection with this
transaction. Both Seller and Buyer agree to indemnify, defend and hold each
other harmless from and against any liability, losses, costs, judgments, claims,
demands, damages, actions, causes of action, suits and expenses (including,
without limitation, reasonable attorneys' fees, court costs and disbursements,)
arising out of or resulting from the claim by any broker, finder or realtor that
such broker, finder, or realtor brought about this transaction through dealings
with Seller or Purchaser, as the case may be.
12.
Construction: This Agreement shall be construed under the laws of the State
of Florida.
<PAGE>
13.
Severability: The invalidity or unenforceability of particular provisions
of this Agreement shall not affect the other provisions hereof, and the
agreement shall be construed in all respects as if such uneforceable or invalid
provisions were omitted.
14.
Indemnification: Seller hereby agrees to defend and to indemnify and to
hold wholly harmless Purchaser, its officers, agents and assigns, from and
against any and all losses, liabilities, damages, costs (including without
limitation, court costs) and expenses (including without limitation, measurable
attorney's fees) which Purchaser may incur as a result of, or with respect to,
any inaccuracy in or breach of any representation, warranty, covenant or
agreement by or on behalf of Seller contained in this Agreement or contained in
any certificate, agreement or document of Seller or any certificate, agreement
and document of any director or officer of Seller delivered to Purchaser in
connection with the consummation of the transactions contemplated hereunder. By
way of explanation and not by way of limitation, Seller shall be obligated to
indemnify and hold harmless Purchaser against any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses incident to any
breach of any representation or warranty given by Seller. Further, Seller agrees
specifically to indemnify and hold harmless Purchaser from all liability from
and for the Disclosed Lawsuits.
15.
Non-Compete/Non Solicitation:
(a) Seller and its members individually and jointly covenant and agree that
for a period of 36 months the execution of this Agreement, they will not,
without the prior written consent of Purchaser, for themselves, as a consultant,
management, supervisory or executive employee of any company, of any company,
partnership or business concern, or as an independent contractor for any
company, partnership or business concern compete within the Territory, to be
defined as the county in which
<PAGE>
the Seller is located together with all counties touching said county, with the
business of the Purchaser for any competing business by providing services which
are the same as or substantially similar to the service provided by the Company.
(b) Seller and its members individually and jointly covenant and agree that
for 36 months after the date of this Agreement, they will not, without the prior
written consent of Purchaser, directly or indirectly, on their own behalf or in
the service or on behalf of others, solicit, attempt to solicit, divert or
appropriate away from Purchaser to any competing business, any persons and/or
entities who are customers of Purchaser for business of another.
(c) Seller and its members individually and jointly covenant and agree that
for a period of 36 months after the date of this Agreement, they will not,
either directly or indirectly, on their own behalf or in the service or on
behalf of others, solicit or attempt to solicit, divert or hire away any person
employed by the Purchaser.
16.
Encumbrances or Liens: Should Purchaser become aware of any liens or
encumbrances on the Transferred Assets and Seller fail to pay the same within
thirty (30) days of notice thereof from Purchaser to Seller, Purchaser may at
its option deduct the amount thereof from the purchase price as a setoff as set
forth in paragraph ten (10) hereof.
17.
Entire Agreement: This Agreement contains the entire agreement of the
parties hereto and no representations, inducements, promises or agreements, oral
or otherwise, between the parties not embodied herein shall be of any force or
effect, and no such representations, inducements, promises or agreements have
been made.
<PAGE>
18.
Exhibits: All exhibits hereto are hereby specifically incorporated herein
and made a part hereof by reference.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SELLER
PANIFICIO WHOLESALE ITALIAN BAKERY, LLC.
By: /s/ Nicholas Castronuovo (Seal)
-------------------------
NICHOLAS CASTRONUOVO,
Managing Member
By: /s/ Madeline O'dea, (SEAL)
-------------------------
MADELINE O'DEA,
Member
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of
/s/ William A. Dooley
- ------------------------------
Unofficial Witness
- ------------------------------
Notary Public, _____ Co., FL
My commission expires.
[STAMP OF NOTARY]
William A. Dooley
MY COMMISSION [ILLEGIBLE] EXPIRES:
August 29, 2001
[ILLEGIBLE]
<PAGE>
BUYER
QCL GROUP, INC.
By: /s/ Peter R. Iodice, Jr. (SEAL)
-------------------------------
PETER R. IODICE, JR., PRESIDENT
Attest: /s/ Rebecca S. Iodice (SEAL)
----------------------------
REBECCA S. IODICE, Secretary
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of:
_____________________________
Unofficial Witness
_____________________________
Notary Public, Morgan Co., GA
My commission expires:
<PAGE>
[HANDWRITTEN LIST OF EQUIPMENT INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. All amounts due Seller's landlord (the "Landlord") under its lease
agreement therewith for the Premises, better known as 1540 12th Street
East, Palmetto, Florida, 34221. Amount not to exceed $25,000.00.
2. All of Seller's Accounts Payable as shown on Exhibit C.
<PAGE>
EX C
Panificio Wholesale Italian Bakery, LC
A/R Aging Summary
As of November 24, 1989
[ILLEGIBLE AGING SCHEDULES INTENTIONALLY OMITTED]
<PAGE>
ADDENDUM TO SALES AGREEMENT FOR ASSET SALE
BETWEEN QCL GROUP, INC. AND
PANIFICIO WHOLESALE ITALIAN BAKERY, LLC
WHEREAS, QCL GROUP, INC. "BUYER" did make an offer to purchase the assets
of PANIFICIO WHOLESALE ITALIAN BAKERY, LLC, "SELLER", a copy of said Agreement
is attached hereto and made a part of this Addendum; and
WHEREAS, the original agreement has not been accepted by the BUYER subject
to modifications thereto by SELLER; and
WHEREAS, BUYER does hereby renew his offer to purchase the subject assets
with certain amendments as follows:
1. BUYER authorizes SELLER to transfer and assign 400,000 shares of the
500,000 shares of stock in QCL Group, Inc., the purchase price as follows:
1. 200,000 shares will be transferred and assigned to Nick Castronuovo; and
2. 200,000 shares will be transferred and assigned to Tracy Melone. The
remaining 100,000 shares of stock being the remainder of the purchase price
shall stay in the name of SELLER until one year from the date of this
agreement. All 500,000 shares of stock are subject to the restrictions
against sale and shall be held in escrow subject to the terms of the
agreement.
2. All stock issued as the purchase price shall be held in escrow pursuant to
the terms of the agreement by Nelson Hesse, Attorneys at Law, 2070 Ringling
Boulevard, Sarasota, Florida, 34237.
All other terms, conditions and agreements contained in the original
agreement shall remain the same and of full force and effect.
This the ___ day of December, 1999.
15
<PAGE>
SELLER
PANIFICIO WHOLESALE ITALIAN BAKERY, LLC.
By: /s/ Nicholas Castronuovo (Seal)
-------------------------
NICHOLAS CASTRONUOVO,
Managing Member
By: /s/ Madeline O'dea, (SEAL)
-------------------------
MADELINE O'DEA,
Member
[CORPORATE SEAL]
Signed, sealed and delivered
in the presence of
- ------------------------------
Unofficial Witness
- ------------------------------
Notary Public, _____ Co., FL
My commission expires.
16
AGREEMENT
Agreement entered into as of August 31, 1999 between QCL Group, Inc., a
Georgia Corporation, ("QCL") and B & E Holdings, Inc., a Georgia Corporation.
("Seller").
WHEREAS, Seller has conceived and designed a website tentatively to be
known as "OTCFILING.COM" which will provide an on-line information site for
publicly traded corporations to publish information; and
WHEREAS, QCL wishes to acquire all of Sellers rights, title and interest in
the OTCFILING.COM name, concept and design;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties agree as follows:
1. Seller hereby sells and assigns to QCL all rights, title and interest in
the OTCFILING.COM. name, along with any and all proprietary rights it has in any
design, intellectual property, website, or other work product related to the
OTCFILING.COM concept.
2. In consideration of the rights transferred pursuant to paragraph 1,
above, QCL shall issue to Seller 6,500,000 shares of QCL common stock. Seller
understands that the shares to be issued to it by QCL are not being registered
under the Securities Act of 1933 as amended (the "Securities Act"), and that
such shares may not be sold, pledged or otherwise transferred absent an
effective registration statement under the Securities Act, or pursuant to an
exemption from registration under the Securities Act, supported by an opinion of
counsel reasonably satisfactory to QCL that such registration is not required.
These shares shall be issued immediately by QCL in such manner and form as
designated by Seller.
3. In further consideration of the transfer of rights provided for pursuant
to paragraph 1, above, QCL agrees that it shall form a wholly owned subsidiary,
to be known as OTCFIL1NG.COM, Inc., which shall operate OTCFILING.COM separate
and apart from other QCL operating entities. In connection therewith, QCL agrees
that this new subsidiary shall maintain all of the required corporate
formalities and shall be solely responsible for all financial matters relating
to the operation of OTCFILING.COM, including, for example, collection of
receivables, payroll, advertising, rent, website maintenance, mail, telephone
and other similar matters.
4. Seller agrees to assist QCL in acquiring all rights, title and interest
in all "Domain" names relevant to the creation of the OTCFILING.COM website,
including, without limitation, the names OTCFILING, OTCFILINGS,
OVERTHECOUNTERFILING, PINKSHEETFILING, OTCBBFILING, NYSEFILING, AMEXFILING,
NASDAQFILING, and ASEFILING.
5. QCL and the new subsidiary to be formed shall enter into an agreement
<PAGE>
with Peter Lybrand to employ Lybrand to supervise the operations of
OTCFILING.COM. Said agreement shall be subject to the terms and conditions to be
agreed on by Lybrand and QCL. Should Lybrand and QCL fail to reach agreement as
to the terms of Lybrand's employment within sixty (60) days of the date of this
Agreement, than Seller, in its sole and absolute discretion may, at any time
between 60 and 120 days after the date of execution of this Agreement, terminate
this Agreement, and all rights, title and interest in the OTCFILING.COM concept
and website shall revert back to Seller. In order to exercise its rights
pursuant to this paragraph, Seller must notify QCL in writing by certified mail
of its determination to terminate this Agreement.
6. All prior negotiations and agreements, if any, between the parties
hereto with respect to the transaction provided for herein are superseded by
this Agreement and there are no representations, warranties, understandings or
agreements with respect to such transactions other than those expressly set
forth herein. No modification, waiver or termination of this Agreement or any
provisions hereof shall be effective unless set forth in writing and executed by
the party or parties sought to be bound thereby. No waiver by either party of
any breach of this Agreement shall be deemed a waiver of any preceding or
succeeding breach.
7. All notices, requests, demands and other communications under this
Agreement or in connection therewith shall be made in writing and sent by
registered or certified mail, return receipt requested, and shall be made upon
the respective parties hereto at the following addresses:
To: QCL Group, Inc.
Att'n Mr. Peter Iodice
1140 Summit Circle
Watkinsville, GA 30677
To: B & E Holdings, Inc.
c/o Mr. Peter Lybrand
115 South Main Street
Madison, Georgia 30650
8. All questions pertaining to the validity, construction, execution and
performance of this Agreement shall be construed in accordance with, and
governed by, the laws of the State of Georgia, applicable to contracts made and
to be performed entirely therein.
9. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument,
10. The parties shall each perform such acts, execute and deliver such
instruments and documents, and do all such other things as may be reasonably
necessary to accomplish the transactions contemplated in this Agreement.
-2-
<PAGE>
IN WiTNESS WHEREOF, the respective duly authorized representatives of the
parties have caused this Agreement to be executed as of the date first above
written.
ATTEST: QLC GROUP, INC.
/s/ Deborah K. Bewon /s/ Peter Iodice as President
- ---------------------- -----------------------------
ATTEST: B & E HOLDINGS, INC.
/s/ Deborah K. Bewon /s/ Peter C. Lybrand
- --------------------- ----------------------------
-3-
ARTICLES OF INCORPORATION
OF
OTCFILING.COM, INC.
ARTICLE I:
NAME
The name of the Corporation is: OTCFiling.com, Inc.
ARTICLE II:
SHARES
The Corporation is authorized to issue one thousand(1,000) shares.
ARTICLE III:
REGISTERED AGENT AND ADDRESS
The street address of the registered office is 119 Commerce Boulevard,
Athens, Georgia 30802 in Athens-Clarke County. The registered agent is Pete
Iodice.
ARTICLE IV:
The name and address of the incorporator is:
Pete Iodice
119 Commerce Boulevard
Athens, Georgia 30602
<PAGE>
ARTICLE V:
MAILING ADDRESS
The principal mailing address of the corporation is 119 Commerce Boulevard,
Athens, Georgia 30602.
IN WITNESS WHEREOF, The undersigned executed these Articles of
Incorporation, This 30th day of August 1999
/s/ Pete Iodice
-------------------------------
Pete Iodice,
Incorporator
<PAGE>
ARTICLES OF INCORPORATION
These articles of Incorporation are adopted by the undersigned for the
purpose of forming a Corporation pursuant to the provisions of the Georgia
Business Corporation Code.
ARTICLE I
NAME
The name of the Corporation is Independent Southern, Inc.
ARTICLE II
PURPOSE
The purpose or purposes for which the corporation is organized is to
operate petroleum fuel terminals and to own and operate the associated
facilities, equipment and real estate to render such service; and to transact
all lawful business for which Corporations may be organized under the Georgia
Business Corporation Code.
ARTICLE III
SHARES
The total number of shares which the corporation has authority to issue is
1,000,000 all of which will be common shares with a par value of $1.00 per
share.
ARTICLE IV
TERM
The term of existence of the corporation shall be perpetual.
ARTICLE V
EFFECTIVE DATE
The Corporation will not commence business until not less than $500.00 has
been received for the issuance of shares.
ARTICLE VI
DIRECTORS
The initial Board of Directors shall consist of one director. The name and
address of the director is:
Peter Iodice
1140 Summit Circle
Watkinsville, Ga. 30677
<PAGE>
ARTICLE VII
REGISTERED AGENT
The name and address of the initial registered agent is:
Peter Iodice
1140 Summit Circle
Watkinsville, Ga. 30677
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
QCL Group Inc.
1140 Summit Circle
Watkinsville, Ga. 30677
ARTICLE IX
The address of the principle office is:
1140 Summit Circle, Watkinsville, Ga. 30677
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 13th day of July, 1989.
By: /s/ Peter Iodice, its President
--------------------------------------
QCL Group, Inc.
<PAGE>
ARTICLES OF INCORPORATION
These articles of Incorporation are adopted by the undersigned for the
purpose of forming a Corporation pursuant to the provisions of the Georgia
Business Corporation Code.
ARTICLE I
NAME
The name of the Corporation is Petroleum Products Southern, Inc.
ARTICLE II
PURPOSE
The purpose or purposes for which the corporation is organized is to sell
and transfer petroleum products and to own and operate the associated
facilities, equipment and real estate to render such service; and to transact
all lawful business for which Corporations may be organized under the Georgia
Business Corporation Code.
ARTICLE III
SHARES
The total number of shares which the corporation has authority to issue is
1,000,000 all of which will be common shares with a par value of $1.00 per
share.
ARTICLE IV
TERM
The term of existence of the corporation shall be perpetual.
ARTICLE V
EFFECTIVE DATE
The Corporation will not commence business until not less than $500.0O has
been received for the issuance of shares.
ARTICLE VI
DIRECTORS
The initial Board of Directors shall consist of one director. The name and
address of the director is:
Peter Iodice
1140 Summit Circle
Watkinsville, Ga. 30677
<PAGE>
INCORPORATOR
The name and address of the incorporator is:
QCL Group, Inc.
Post Office Box 275
Bishop, Ga. 30621
ARTICLE IX
The address of the principle office:
1140 Summit Circle, Watkinsville, Ga. 30677
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 13th day of July, 1989.
By: /s/ Peter Iodice, its President
--------------------------------------
QCL Group, Inc.
<PAGE>
PROFIT CORPORATION
ARTICLES OF INCORPORATION
These articles of Incorporation are adopted by the undersigned for the
purpose of forming a Corporation pursuant to the provisions of the Georgia
Business Corporation Code.
ARTICLE I
NAME
The name of the Corporation is Retail Convenience Stores, Inc.
ARTICLE II
PURPOSE
The purpose or purposes for which the corporation is organized is to
operate convenience stores and to own and operate the associated facilities,
equipment and real estate to render such service; and to transact all lawful
business for which Corporations may be organized under the Georgia Business
Corporation Code.
ARTICLE III
SHARES
The total number of shares which the corporation has authority to issue is
l,000,000 all of which will be common shares with a par value of $1.00 per
share.
ARTICLE IV
TERM
The term of existence of the corporation shall be perpetual.
ARTICLE V
EFFECTIVE DATE
The Corporation will not commence business until not less than $500.00 has
been received for the issuance of shares.
ARTICLE VI
DIRECTORS
The initial Board of Directors shall consist of one director. The name and
address of the director is:
Peter Iodice
1140 Summit Circle
Watkinsville, Ga. 30677
<PAGE>
ARTICLE VII
REGISTERED AGENT
The name and address of the initial registered agent is:
Peter Iodice
1140 Summit Circle
Watkinsville, Ga. 30677
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
QCL Group Inc.
Post Office Box 275
Bishop, Ga. 30621
ARTICLE IX
The address of the principle office is:
1140 Summit Circle, Watkinsville, Ga. 30677
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 13th day of July, 1989.
Pete Iodice its President
--------------------------------------
QCL Group, Inc.
<PAGE>
ARTICLES OF INCORPORATION
OF
SOUTHEASTERN BAKING COMPANY, INC.
ARTICLE I:
NAME
The name of the Corporation is: Southeastern Baking Company, Inc.
ARTICLE II:
SHARES
The Corporation is authorized to issue one thousand(1,000) shares.
ARTICLE III:
REGISTERED AGENT AND ADDRESS
The street address of the registered office is 126 East Washington Street,
Madison, GA 30650 in Morgan County. The registered agent is George W. Brown,
III.
ARTICLE IV:
INCORPORATOR
The name and address of the incorporator is:
George W. Brown, III
126 East Washington Street
Madison, Georgia 30650
<PAGE>
ARTICLE V:
MAILING ADDRESS
The principal mailing address of the corporation is 126 East Washington
Street, Madison, Georgia 30650.
IN WITNESS WHEREOF, The undersigned executed these Articles of
Incorporation, This 16th day of November 1999.
/s/ George W. Brown, III
--------------------------------------
George W. Brown, III
Incorporator
======== ========
NUMBER [LOGO] SHARES
======== ========
------------------------------------------------------------
QCL o GROUP
------------------------------------------------------------
-------------------------- INC ---------------------------
AUTHORIZED STOCK: 50,000,000 SHARES
PAR VALUE $0.001 PER SHARE
This Certifies that * REBECCA SUE IODICE * is the
registered holder of * TWO MILLION NINETY SIX THOUSAND * Shares
QCL - GROUP, INC.
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this ___________________ day of 5/13/88 A.D. 19___
OCL GROUP, INC.
[CORPORATE SEAL]
/s/ Rebecca Sue Iodice /s/ [ILLEGIBLE]
- ---------------------- Nevada ------------------------
Secretary PRESIDENT
WESTERN STATES TRANSFER
P.O. BOX 11378
SALT LAKE CITY, UTAH 84147
REGISTRAR'S TRANSFER AGENT
BY [ILLEGIBLE]
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a registered
national stock exchange, or by a bank (other than a savings bank), or a
trust company. The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT --..........Custodian..........
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..........................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_____________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
NOTICE: ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
