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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
NEW BRIDGE PRODUCTS, INC.
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(Exact name of registrant as specific in its charter)
Nevada 86-0799994
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(State of Incorporation) (I.R.S. Employer I.D. No.)
3145 West Lewis
Phoenix, AZ 85009
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(Address of principal executive offices, including zip code)
(602) 274-1432
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(Registrant's telephone number, including area code)
Copies to:
Gary A. Agron, Esq.
5445 D.T.C. Parkway, Suite 520
Englewood, CO 80111
Securities to be registered pursuant to Section 12(b) of the Act:
None
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.003 par value per share
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(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Introduction
The Company was organized as a Nevada corporation under the name Care
Concepts, Inc. in August 1995 and changed its name to New Bridge Products, Inc,
in October 1997. Since 1995, the Company has designed, produced and sold
customized minivans for physically handicapped drivers and passengers. The
Company's customers consist of individual retail customers, primarily wheelchair
users and the elderly, as well as private and public organizations and agencies
throughout the United States that provide services to the physically
handicapped.
The Company's primary product, the "Carevan", is customized from Chrysler
and Ford front-wheel drive minivans by lowering the vehicles' floor forward of
the rear axle, relocating and modifying the suspension system and installing an
electric or manually-operated door and ramp system which provides access from
ground level to a height of 14 inches. The Company offers other custom features
including the installation of a raised roof, the conversion of the left side
rear door for wheelchair access, and the removal or substitution of either the
front seats or second row seats for wheelchair use. Depending upon the
purchaser's requirements, the Company can also provide and install a variety of
optional adaptive equipment that makes it easier for a physically handicapped
person to drive the Carevan or use it as a passenger.
According to the United States Department of Transportation, over 3 million
Americans suffer disabilities that affect their mobility. The market for
handicapped-accessible transportation is dominated by larger vans that employ
hydraulic or electric lifts for wheelchair access. The lifts present risks to
the user from falling because the lifts suspend the user up to three feet above
the ground and because the vehicle tilts while the lift is in motion. In
addition, the lifts are burdensome to operate, and the larger vans needed to
accommodate the lifts are more difficult to drive, park and garage.
The Carevan
The Company believes that the Carevan brings the safety, convenience,
comfort, ease of use and affordability of standard minivans to physically
handicapped drivers and passengers without the drawbacks associated with larger
vans that require hydraulic or electric lifts for wheelchair access.
In particular, the Carevan:
o Provides quick, safe ramp access from ground level to a height of
approximately 14 inches;
o Permits entry and movement by wheelchair users and standing
passengers, such as attendants;
o Permits consecutive entry by multiple wheelchair users without the
delay of a lifting cycle;
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o Provides the availability of optional equipment that makes it easier
for the physically handicapped to drive the vehicle;
o May be operated by either a wheelchair user or a driver using a
reinstallable seat;
o Provides increased visibility to the wheelchair user who sits at the
same eye level as a passenger in the vehicle's standard seats;
o Provides the comfort, fuel efficiency, ease of repair and outward
appearance of standard model minivans; and
o Provides convenient access to car washes, garages and other drive-up
facilities such as restaurants and banks.
Current Operations
The Carevan is the Company's principal product. To produce the Carevan, the
Company modifies a standard Chrysler or Ford minivan by lowering the vehicle's
floor forward of the rear axle, relocating and modifying the suspension system
and installing an electric or manually operated door and ramp system that allows
wheelchair access from ground level to a height of approximately 14 inches. The
Company modifies the driver and front passenger seats to allow for a wheelchair
to occupy either front position. The Company also removes the van's second row
bench seat, permitting wheelchairs to occupy two positions previously used for
the second row bench seat.
The Company can also customize the vehicle by providing a raised roof, a
left side wheelchair accessible door and various seating and wheelchair
configurations. At the time of modification, and depending upon the purchaser's
requirements, the Company may provide and install additional adaptive equipment,
which makes it easier for a physically handicapped person to drive the vehicle
or use it as a passenger.
The various model designations of the Carevan indicate the type and variety
of options made available by the Company. Current model designations are the
Care-Taxi (designed for the commercial transportation industry) the Commuter
(designed for the consumer market), the Executive Commuter (which offers
additional options to that of the Commuter) and the Transporter (designed for
the commercial market). Retail prices for the Carevan currently range from
approximately $35,000 to $45,000, depending upon the model designation and the
options included. Generally, the Company requires 50% of the estimated
modification cost and 100% of the Company's cost for the vehicle chassis as a
down payment. The remaining 50% of the modification cost is paid upon delivery.
Purchases by individuals and by commercial customers represented
approximately 25% and 75% respectively of total sales in 1998. In 1999
approximately 90% of total sales were to commercial customers.
All new Carevans sold by the Company include Chrysler and Ford original
limited warranties. The Company provides a limited warranty of 36 months or
36,000 miles, whichever occurs first, for its modifications.
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Governmental Regulations
General
Many federal, state and local government agencies have enacted and continue
to enact safety and other requirements for motor vehicles in general that also
apply to the Company's vehicles. Such requirements include Federal Motor Vehicle
Safety Standards under the National Traffic and Motor Vehicle Safety Act, as
amended and Emissions Standards under the National Emissions Standards Act, as
amended. No specific governmental approvals, however, are currently required for
the Company to sell its products. Although the Company believes it is in
compliance with all applicable regulations, additional regulations or approval
requirements could be enacted in the future that would adversely affect the
Company's ability to produce or market its products. Any such regulations or
approval requirements could have an adverse effect on the Company's business,
operating results and financial condition.
Crash Tests
In 1996, the Carevan was crash-tested in Canada under the authority of the
Canadian government and in the United States by Failure Analysis Associates, an
independent, industry-recognized research laboratory. The results of these crash
tests indicated that the Carevan met or exceeded the relevant safety and
performance standards. However, the Company is required to complete a more
recent test if it elects to sell Carevans to certain federal governmental
customers. The Company has no present plans to conduct a new crash test on the
Carevan.
V.A. Program
In 1986, the Veteran's Administration adopted a program to reimburse
physically handicapped veterans for a portion of their cost to acquire a
modified vehicle. The Company's Carevan is included in the V.A. reimbursement
plan.
The ADA
The Americans With Disabilities Act (the "ADA") guarantees disabled
individuals access to most public transportation services offered by both public
and private entities. Although previous legislation such as the Rehabilitation
Act prohibited discrimination against individuals in federally-funded programs
and activities, including transportation, the ADA is far more specific in its
requirements. Generally, the ADA compels transportation services to be readily
accessible to and usable by individuals with disabilities. Regulations issued by
the United States Department of Transportation (the ADOT@) list hydraulic lifts
or ramps in the specifications for accessibility. Accordingly, the Company
believes that sales of the Carevan, with its ramp system, are encouraged by ADA
regulations.
Vanpools often are used by public entities that operate transportation
systems at the request of the user (i.e. "demand responsive" systems). With
limited exceptions, the ADA requires public entities that operate either fixed
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route or demand responsive systems to ensure that all newly purchased or leased
vehicles are accessible. Although existing vehicles do not have to be
retrofitted, their replacements must be accessible. The ADA also requires public
entities to implement Aparatransit@ systems whenever they offer fixed route
transportation. AParatransit@ systems use small buses or vans on a demand
responsive basis to serve those individuals who otherwise could not use public
transportation The system must be comparable, in the level of service and
response time, to public transportation offered to nondisabled persons. Certain
forms of transportation are exempt from the paratransit requirement including
commuter bus, commuter rail and intercity systems. Public entities may seek
permission to phase-in the paratransit systems over a five-year period and also
may obtain temporary waivers of some requirements that would impose an "undue
financial burden."
Private entities that offer public transportation services are subject to
the same anti-discrimination laws that govern accommodations businesses such as
hotels, restaurants, nursing homes, hospitals and stores. Generally, entities
primarily engaged in public transportation must ensure that newly-purchased
vehicles seating eight or more persons are accessible unless the providers'
systems, as a whole, offer equivalent service to disabled and nondisabled
individuals. Taxicab companies are exempt from this requirement entirely unless
they use vans. Private entities that furnish public transportation as an
auxiliary service on a fixed route (such as hotels, amusement parks and private
schools) also must ensure that all newly purchased or leased vehicles that seat
16 or more persons are accessible. Vehicles that seat fewer than 16 persons may
be used if the fixed route system offers equivalent service to disabled people.
Auxiliary demand responsive system providers who acquire vehicles that seat 16
or more persons must ensure that those vehicles are accessible unless their
systems offer equivalent service to disabled persons.
Production and Suppliers
The Company produces the Carevan at its Phoenix, Arizona facility. Actual
production is in response to customer purchase orders in the case of individual
purchasers, and accepted bid packages in the case of governmental or other
commercial purchasers. The production process involves seven phases; (a) the
stripping phase, in which the interior and undercarriage components of the
minivan back of the firewall are removed; (b) the welding phase, in which the
existing floor is removed, the lowered floor is installed and the raised roof,
roll cage, fourth door or extended doorway modifications, if ordered, are
installed or performed; (c) the undercarriage phase, in which the undercarriage
is primed and undercoated and the fuel, exhaust and brake systems are
reinstalled; (d) the interior/electrical phase, in which the interior floor
coverings and wiring harness for the power systems are installed; (e) the body
and paint phase, in which custom body panels are installed and the body is
prepared and painted; (f) the final assembly phase, in which the ramp system,
interior panels and adaptive driving equipment are installed; and (g) the
quality control phase, in which the vehicle is measured giving the Company's
criteria for quality.
The Company currently modifies Chrysler and Ford minivans, which it obtains
from dealers on a purchase order basis. All other parts used in the conversion
process are either manufactured internally or are readily available from a large
number of suppliers.
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Marketing, Sales and Distribution
In 1998, approximately 25% of the Company's Carevan sales were to
individual purchasers, with the remaining 75% of sales to commercial purchasers
that provide services to the physically handicapped. For the nine month period
ended September 30, 1999, commercial sales increased to 90% of sales. Individual
purchasers are primarily wheelchair users and the elderly and are desirable due
to higher available margins, product visibility and superior payment terms.
Governmental purchasers generally consist of municipal and state agencies
responsible for transporting physically handicapped individuals within their
jurisdictions. Commercial users are desirable because they purchase in volume.
Other commercial users include private dial-a-ride companies, taxi and livery
companies, hospitals (for both out-patient transportation and mobile medical
equipment), and national service agencies such as the American Red Cross
Association and Easter Seals. One purchaser accounted for more than 10% of the
Company's sales during 1998 and two customers accounted for 90% of the Company's
sales for the nine months ended September 30, 1999.
Individual purchasers buy their vans prior to conversion, and pay one-half
of the production costs in advance. The balance, together with all freight
charges, is due when the Carevan is ready to be delivered. Commercial purchasers
generally make payment after delivery of the finished product. Some government
purchasers seek terms of payment extending to up to 90 days after the delivery
of the vehicles. The Company often uses factors to finance its purchase of
minivan chassis.
The Company markets it products through its own personnel and from time to
time through dealers and independent sales representatives. In the past, the
Company has displayed the Carevan at trade shows, professional meetings and
public events which feature products for the physically handicapped. These
events generally are attended by prospective purchasers and representatives of
local, state and federal governmental and quasi-governmental agencies that have
the responsibility or authority for the purchase of vehicles accessible to the
physically challenged.
The Company has also placed direct response advertising in trade journals
and magazines for the physically handicapped and has engaged in the direct
solicitation of large volume public agencies. The Company has also marketed
through retail car dealers whereby new car salesmen introduce the vehicle to
individual and commercial prospects. Some of the Company's sales also result
from customer referrals. The Company has sold Carevans to cities, hospitals,
insurance companies, vocational rehabilitation centers, and federally and
privately funded transportation agencies.
Competition
The market for modified vehicles for the physically handicapped is extremely
competitive. The Company competes with several large, multinational companies
that manufacture wheelchair lifts for sale to van conversion companies
(including Braun, Collins and Ricon) and that offer their own minivan
conversions. The Company also competes with many smaller companies (including
Independent Mobility Systems and Vantage) that modify existing production
vehicles for use by the physically handicapped. Most of the Company's
competitors have longer operating histories and substantially greater marketing
and financial resources, manufacturing capability, customer support
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organizations and name recognition than those of the Company. Moreover,
competition in the industry has intensified as competitors have expanded their
product lines and new companies have entered the market. There are no
significant barriers to entry into the minivan conversion industry. A further
increase in competition from existing competitors or the entry of new
competitors (such as large automobile manufacturers) could have a material
adverse effect on the Company's business, operating results and financial
condition. There can be no assurance that the Company will be able to compete
successfully in the future with existing or new competitors.
The Company believes that the Carevan offers competitive advantages over
the traditional larger lift vans due to its standard size and ramp access. The
lowered floor of the minivan allows the Company to install an electronic or
manually operated ramp to provide access from ground level to a height of
approximately 14 inches. This configuration also increases visibility with
wheelchair users at the same eye level as passengers in the vehicle's standard
seats. In addition, the Carevan may be operated by either a wheelchair user
operating from his or her own wheelchair or a driver using a reinstallable seat.
The ramp system opens and closes faster than a lift and allows access by
consecutive wheelchair users without the delay of the lifting cycle. The ramp
plus the optional raised roof and additional left side door make the Carevan
suitable for taxi or limousine service. Finally, the Carevan is more economical
and easier to repair than, and has greater access to standard vehicular
conveniences (such as car washes, garages and drive-up facilities including
restaurants and banks) than larger vans.
Competition factors with respect to the sale of minivan conversions include
price, warranty, experience in the conversion business and reputation. The
Company believes it competes favorably with other minivan conversion companies.
However, the Company is one of the smaller minivan conversion companies
operating in the United States, and accordingly, has less marketing and finance
resources.
Development of the Sportster
The Company has begun development of the Sportster, a single rider electric
golf cart designed for disabled golfers who are unable to stand in order to
strike a golf ball. The Sportster will have hand operated throttle and brake
controls, a 360-degree swivel seat and a light tire footprint which will allow
the Sportster to be driven on tees, greens and in sand traps. The Company
believes that the Sportster will assist golf courses to be in compliance with
ADA requirements for equal access to golf course facilities by the disabled.
The Sportster is expected to be offered in front wheel and four wheel drive
configurations and will be marketed as a personal transportation vehicle as well
as a golf cart.
To date, the Company has built two prototypes of the Sportster and is
currently seeking funding to further develop the product. Unless and until
funding is available, the Company will not devote significant cash resources to
further develop the vehicle.
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Product Protection and Infringement
The Company seeks to protect its confidential information, know-how and
proprietary rights relating to the Carevan. Despite these precautions,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as confidential or
proprietary, and may be able to develop vehicles with features similar to or
competitive with the Company's Carevan.
The Company does not believe that its products and trademarks and other
confidential or proprietary rights infringe upon the proprietary rights of third
parties. There can be no assurance, however, that third parties will not assert
infringement claims against the Company in the future. The successful assertion
of such claims would have a material adverse effect on the Company's business,
operating results and financial condition.
Employees
The Company employs 15 persons, including its three executive officers, two
persons involved in management and administration and ten production workers.
None of the Company's employees is represented by a labor union. The
Company has experienced no work stoppages and believes that its relations with
its employees are excellent.
Reports to Security Holders
As a result of its filing of this Form 10-SB, the Company will become
subject to reporting obligations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These obligations include the required filing of
an annual report on Form 10-KSB, with audited financial statements, unaudited
quarterly reports and the requisite proxy statements with regard to annual
shareholder meetings. The public may read and copy any materials the Company
files with the Securities and Exchange Commission (the "Commission") at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information of the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0030. The Commission
maintains an Internet site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission.
Risk Factors
Investors should carefully consider the following risk factors and the
other information contained in this Registration Statement before making an
investment in the Company. Information contained in this Registration Statement
contains "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes", "expects", "may", "will",
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. No assurance can be given
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that the future results covered by the forward-looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements and
projections including certain risks and uncertainties that could cause actual
results to vary materially from the future results covered in such
forward-looking statements and projections. Other factors could also cause
actual results to vary materially from the future results covered in such
forward- looking statements and projections.
Operating Losses; Deficit in Working Capital and Negligible Stockholders'
Equity; Going Concern Qualification
The Company incurred operating losses for the years ended December 31, 1997
and 1998 of $204,158 and $671,240, respectively and had a deficit in working
capital and a deficit in stockholders' equity at December 31, 1998 of $ $528,781
and $82,024, respectfully. For the nine months ended September 30, 1999 the
Company lost $730,957, had a deficit in working capital of $431,415, an
accumulated deficit since inception (August 1995) of $1,847,864 and negligible
stockholders' equity of $56,900. For these reasons, the Company's auditors have
stated there is a substantial doubt as to whether the Company can continue as a
going concern. See "Financial Statements".
Lack of Capital to Fulfill Orders
The Company's working capital deficit, its limited cash flow and its
inability to obtain financing on acceptable terms have impaired its ability to
acquire vehicle chassis necessary to fulfill purchase orders for the Carevan and
therefore significantly reduced Carevan sales. The Company's inability to fill
orders due to capital constraints in the future could result in the cancellation
of orders, imposition of monetary penalties for late deliveries of vehicles,
reduced revenue and operating losses.
Delays in Payment; Cash Flow Difficulties
Commercial purchasers (such as private organizations and governmental
agencies which provide services to the physically handicapped) generally make
payment for the vehicles after delivery of the finished product. Some government
purchasers seek terms of payment extending to up to 90 days after delivery of
the vehicles. Approximately 90% of the Company's sales of Carevans during the
nine months ended September 30, 1999 were made to commercial purchasers.
To timely service and fill commercial orders, the Company must maintain
cash reserves or be able to finance the purchase of vehicles, parts and
equipment. In the past, the Company has had cash flow difficulties and has been
unable to obtain financing on acceptable terms. The number of vehicles the
Company is able to produce and sell in the future will depend upon the Company's
working capital, cash flow from operations and available financing. The
Company's inability to obtain financing or to raise additional capital, if
needed, in amounts or on terms favorable to the Company could have an adverse
effect on the Company's business, operating results and financial condition. See
"Financial Statements."
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Significant Competition
The market for modified vehicles for the physically handicapped is
extremely competitive. The Company competes with several large multinational
companies as well as with numerous small companies that modify existing
production vehicles for use by the physically handicapped. Most of the Company's
competitors have longer operating histories, benefit from substantially greater
market recognition and have substantially greater financial, manufacturing and
marketing resources than the Company. In addition, there are few significant
barriers to entry into the Company's business. An increase in competition from
existing competitors or the entry of new competitors (such as large automobile
or truck manufacturers) could have a material adverse effect on the Company's
business, operating results and financial condition. There can be no assurance
that the Company will be able to compete successfully in the future with
existing or new competitors.
Dependence Upon Key Employees
The Company's success depends to a significant extent upon the services of
Jack D. Kelley, its Chief Executive Officer, Gary W. Tandy, its President, and
Derold L. Kelley, its Vice-President. The loss of the services of any of these
individuals could have a material adverse effect on the Company. Mr. Tandy
devotes only 25% of his time to the Company's operations.
Significant Severance Benefits
In August 1995 the Company entered into five-year employment agreements
with Jack D. Kelley, Brian J. Kelley (its former President) and Derold L. Kelley
which provided under certain circumstances for payments upon termination of
employment resulting from a change in control of the Company. For purposes of
the agreements, a change in control will result if, among other things, Jack D.
Kelley, Brian J. Kelley and Derold L. Kelley, or their nominees, cease to
constitute a majority of the members of the Company's board of directors for any
reason other than their voluntary withdrawal or resignation. Termination
payments will equal 3.98 times the total compensation payable to the terminated
executive through the remainder of the agreement's five year term, which expires
in August 2000.
Severance benefits to any of the Kelleys could constitute Aparachute
payments.@ In general, a Aparachute payment@ is a compensatory payment that is
payable to an individual as a result of a change in ownership or control of a
corporation, and that equals or exceeds three times the individual's average
compensation over the preceding five taxable years. An Aexcess parachute
payment@ is the portion of a parachute payment which exceeds an individual's
average compensation over the preceding five taxable years. A portion of the
termination payment due the Kelleys could be deemed to constitute an excess
parachute payment. In such event, the Company would be unable to deduct the
amount of the excess parachute payment, and the Kelleys would be subject to a
non-deductible 20% excise tax on the excess amount.
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Reliance of Significant Customers
For the nine months ended September 30, 1999 two of the Company's customers
accounted for 30% and 60% respectively of the Company's revenue for the period.
The loss of either of these customers would adversely affect the Company's
business.
Limited Sources of Supply
The Company's ability to fill orders for the Carevan depends in large on
its ability to procure the necessary minivan chassis to produce its products.
The Company's business is currently limited to the modification of Chrysler and
Ford minivans which the Company obtains from dealers on a purchase order basis.
Historically, the Company has had difficulty obtaining chassis as needed due in
part to its working capital difficulties and in part to scarcity during model
year changeovers. Factors such as model-year changeovers, strikes and production
cut backs by Chrysler or Ford are beyond the control of the Company and may
limit the number of minivans available to the Company in the future and thereby
materially and adversely affect the Company's business, operating results and
financial condition.
Significant Government Regulation
Governmental agencies continuously promulgate safety and other requirements
for motor vehicles including Federal Motor Vehicle Safety Standards under the
National Traffic and Motor Vehicle Safety Act, as amended and Emissions
Standards under the National Emissions Standards Act, as amended. No specific
governmental approvals, however, currently are required for the Company to sell
its products. Although the Company believes it is in compliance with all
applicable regulations, additional regulations or approval requirements could be
enacted in the future that would adversely affect the Company's ability to
produce or market its products. Any such regulations or approval requirements
could have an adverse effect on the Company's business, operating results and
financial condition.
Company Subject to Liability
As is typical in the automobile industry, the Company is subject to
liability claims by drivers, passengers and others in the ordinary course of its
business. The Company maintains general liability insurance providing coverage
it believes to be adequate. Although the cost of such insurance has not
increased significantly in recent years, there can be no assurance that such
insurance will continue to be available at acceptable costs or that claims in
excess of coverage, or not covered by the Company's insurance, will not be
asserted against the Company.
Shares Eligible for Future Sale
All of the Company's outstanding Common Stock is available for resale in
the public market without restriction. Sales of substantial amounts of these
shares in the public market could adversely affect the market price of the
Common Stock.
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Anti-Takeover and other Effects of Preferred Stock Issuances
The Company may seek the authority from its stockholders to issue shares of
preferred stock in the future. Such shares could have dividend, liquidation,
conversion, voting and other rights and privileges that are superior or senior
to the Common Stock. Issuance of preferred stock could result in the dilution of
the voting power of the Common Stock, adversely affect holders of the Common
Stock in the event of liquidation of the Company or delay, defer or prevent a
change in control of the Company. In certain circumstances, such issuance could
have the effect of decreasing the market price of the Common Stock.
No Dividends
The Company intends to retain any earnings to finance the expansion of its
business and for general corporate purposes and does not anticipate paying any
cash dividends on its Common Stock for the foreseeable future.
Lack of Liquidity Caused By Penny Stock Disclosure
The Commission has adopted rules that define a Apenny stock@ as equity
securities under $5.00 per share which are not listed for trading on Nasdaq
(unless the issuer (i) has a net worth of $2,000,000 if in business for more
than three years or $5,000,000 if in business for less than three years or (ii)
has had average annual revenues of $6,000,00 for the prior three years). The
Company's securities are characterized as penny stock, and therefore
broker-dealers dealings in the securities are subject to the disclosure rules
for transactions involving penny stock which require the broker-dealer, among
other things, to (i) determine the suitability of purchasers of the securities,
and obtain the written consent of purchasers to purchase such securities and
(ii) disclose the best (inside) bid and offer prices for such securities and the
price at which the broker-dealer last purchased or sold the securities. The
additional requirements imposed upon broker-dealers discourage them from
engaging in transactions in penny stocks, which reduces the liquidity of the
Company's securities.
Risks of Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two-digit entries to represent years in the date code field.
Computer systems and products that do not accept four-digit entities will need
to be upgraded or replaced to accept four-digit entries to distinguish years
beginning with 2000 from prior years. The Company has evaluated the Year 2000
issue as it relates to its internal computer systems as well as computer systems
operated by third parties. The Company believes it is Year 2000 compliant and
that primarily all computer systems operated by third parties with which the
Company's systems interface are Year 2000 compliant. Any failure of the computer
systems of third parties to achieve Year 2000 compliance could adversely affect
the Company's business.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS
Results of Operations; Nine Months Ended September 30, 1999 Compared to Nine
Months Ended September 30, 1998
Revenues. Revenues increased by approximately $370,000 or about 68% due to
a higher volume of commercial contracts. Capital funds were not required to fund
the chassis because the chassis were supplied by the customers. A private
placement of securities in the early part of 1999 provided the capital needed to
increase revenues and to pursue larger commercial contracts.
Cost of Sales. Cost of sales increased to $1,213,925 in 1999 as compared to
$618,512 in 1998. The cost of sales in 1999 was approximately 138% of revenue as
compared to about 115% of revenues in 1998 due to the following factors: In the
second half of 1999 the new Sportster golf cart was being developed. During this
period, manufacturing personnel remained on payroll. Material costs also
increased during the development stages of the Sportster. In addition, a new
production manager was employed at a cost of approximately $8,000 a month.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $384,012 in 1999 as compared to $343,017 in 1998
for a total increase of about $41,000. However, as a percentage of revenues, the
selling, general and administrative expenses were 42% of revenues in 1999
compared to 64% in 1998. In 1999, a new President was hired at an approximate
cost of $15,000 per month, representing a significant increase in administrative
expenses, while at the same time the Company maintained control over other
selling, general and administrative expenses, which decreased overall.
Additionally, legal and professional fees increased during the first part of
1999 due to a private placement of securities.
Net Loss. The net loss increased by over $300,000 to $730,957 in 1999. Much
of this loss is attributed to the development of the Sportster product line. Key
production and operating personnel were retained during a period of decreased
manufacturing activity. A new production manager and President were hired
specifically for the Sportster product line. Management believes that as a
result of the changes described above, the Company will be better able to use
its manufacturing capabilities and provide a wider variety of products for its
customers.
Liquidity and Capital Resources; September 30, 1999 Compared to September 30,
1998
At September 30, 1999 the Company had a working capital deficit of
$431,425, as compared to a deficit of $268,544 at September 30, 1998. As part of
that deficit, notes payable to related parties were $219,478 in 1999 compared to
$353,365 in 1998 or 50% of the total deficit in 1999 as compared to 95% in 1998.
Part of the capital received from the private placement of securities was used
to pay down the notes payable to related parties. Inventories increased by over
$50,000 due to materials required for the Sportster product line. Emphasis was
placed on the collection of accounts receivables which resulted in an overall
decrease in receivables of about $84,000. Overall, current assets increased
about $1,000 in the 1999 period.
13
<PAGE>
Cash flow from financing activities totaled $1,044,270 for the period ended
September 30, 1999. The primary sources of this cash flow were the proceeds from
a private placement of securities. Some of the proceeds from the private
placement of securities were used to pay down approximately $134,000 of notes
payable to related parties. Trade accounts payable increased by almost $84,000
at September 30, 1999 as a result of material costs of increases in inventory
for the Sportster product line. Overall, the changes above increased the total
current liabilities of the Company by $64,000 to $734,647 at September 30, 1999.
Cash flow for investing activities was approximately $53,000 representing
the cost of molds and dies for the Sportster product line.
Due to the working capital deficit at September 30, 1999, the Company will
need additional capital. In addition, as the Sportster becomes ready for sales,
the cost of marketing and promotion will increase. The success of the Sportster,
the continuation of the sales of the Company's other products, competitive
conditions, rate of growth and the ability to generate profits and positive cash
flow are factors that will affect the capital requirements of the Company. There
can be no assurance that capital will be available, and the lack of capital
could have a material adverse effect on the Company's business, even to the
point of requiring it to significantly curtail operations.
The Company's operations are subject to all the risks inherent in an
emerging business enterprise. In past years, the Company has experienced
difficulty in obtaining financing for working capital, which will become more
critical as new product lines are developed.
Results of Operations: Year Ended December 31, 1998 Compared to Year-ended
December 31, 1997.
Revenues. Revenues decreased $1,419,755 or 68% from 1997 to 1998. The
decrease was due primarily to a lack of working capital throughout the year
which restricted the Company's ability to secure larger commercial contracts due
to the capital requirements of the contracts. The lack of capital also decreased
amounts spent on advertising and resulted in a reduction in the sales force.
Cost of Sales. Cost of sales decreased from $1,978,781 to $1,030,770.
However, cost of sales represented 155% of gross sales in 1998 versus 95% in
1997. Skilled manufacturing personnel and production management were retained on
payroll during the periods of manufacturing decreases. Although variable costs
were decreased significantly, fixed costs remained a high percentage of total
cost of sales in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $86,505 from 1997 to 1998. Much of the
decrease occurred in the area of advertising, promotion, sales salaries and
commissions. During this year of low sales activity, all but necessary expenses
were curtailed. Legal and professional fees increased about $24,000 in 1998.
Interest costs also increased by about $27,000 due to the increase in factoring
of receivables.
14
<PAGE>
Net Loss. The net loss increase by about $467,000 to a total loss of
$671,240 in 1998. The low volume of sales was due to several factors including
lack of capital, a decrease in the sales staff and decreases in advertising and
promotion. At the same time, skilled and manufacturing personnel were retained
at levels similar to 1997.
Liquidity and Capital Resources: December 31, 1998 Compared to December 31,
1997.
At the end of 1997, the Company had a working capital deficit of
approximately $445,000 as compared to a deficit of about $529,000 for the end of
1998. As part of that deficit, notes payable to related parties were about
$357,000 in 1997 as compared to $397,000 in 1998.
Work in progress remained a high portion of the inventory in both years.
Total assets decreased from $621,743 to $428,037 at the end of 1998 due
primarily to the change in the balance of accounts receivable. Most significant
was the decrease in accounts payable from 1997 to 1998 with an overall decrease
of about $151,000. Payroll taxes payable also decreased by almost $39,000 by the
end of 1998. Overall liabilities were reduced by approximately $110,000 during
1998.
Cash flow from financing activities totaled $567,460 for 1998 representing
the proceeds from the sale of common stock and short term notes. The cash flow
from financing activities along with the collection of accounts receivable was
used for the operating activities of the Company and the reduction of accounts
payable.
Cash flow from Investing Activity was used for the purchase of new molds
and dies (approximately $66,000) and for office equipment (approximately
$4,000).
Due to the working capital deficit at the end of 1998, the Company needed
and received a capital infusion in 1999 to develop the Sportster product line.
Additionally, capital was used to generate higher sales activity through
increases in advertising and promotion of the Carevan. Working capital sources
will continue to be needed in the future to maintain manufacturing capabilities
and expand product choices for customers.
Year 2000 Issue
Many currently installed computer systems and software products are coded
to accept only two-digit entries to represent years in the date code field.
Computer systems and products that do not accept four-digit entities will need
to be upgraded or replaced to accept four-digit entries to distinguish years
beginning with 2000 from prior years. The Company has evaluated the Year 2000
issue as it relates to its internal computer systems as well as computer systems
operated by third parties. The Company believes it is Year 2000 compliant and
that primarily all computer systems operated by third parties with which the
Company's systems interface are Year 2000 compliant. Any failure of the computer
systems of third parties to achieve Year 2000 compliance could adversely affect
the Company's business.
15
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY.
The Company leases approximately 40,000 square feet of office and
production space (including approximately 35,000 square feet of unimproved
outside yard space) in Phoenix Arizona under a lease which expires August 2000
at a rental of $6,400 per month.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by (i) each person who is
known by the Company to own of record or beneficially more than 5% of the
Company's Common Stock, (ii) the Company's Chief Executive Officer and each of
the Company's directors and (iii) all directors and officers of the Company as a
group. The persons listed in the table have sole voting and investment powers
with respect to the shares of Common Stock and the address of each person is in
care of the Company at 3145 West Lewis, Phoenix, Arizona 85009.
Amount of
Name Ownership Percent of Class
- ---- --------- ----------------
Jack D. Kelley 0 0%
Gary W. Tandy(1) 1,760,350 8.6%
Derold L. Kelley 530,200 2.6%
Brian J. Kelley(2) 1,944,200 9.5%
JDK Irrevocable Trust (3) 939,900 4.6%
Paradise Irrevocable Trust (2)(3) 1,602,650 7.9%
Gerry Kelley 1,711,258 8.4%
All directors as a
group (3 persons)(1) 2,290,550 11.2%
(1) Includes options to purchase 1,000,000 shares at $.025 per share until
December 1999.
(2) Does not include 2,542,550 shares held by the JDK Irrevocable Trust and the
Paradise Irrevocable Trust for which Brian J. Kelley acts as a Trustee.
(3) The Trusts are beneficially owned by the four children of Jack D. Kelley,
with Brian J. Kelley as Trustee.
16
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Information concerning each of the Company's executive officers and directors is
set forth below:
Officer or
Name Age Position Director Since
- ---- --- -------- --------------
Jack D. Kelley 64 Chief Executive Officer, 1995
and Director
Gary W. Tandy 36 President and Director 1999
Derold L. Kelley 41 Executive Vice President 1995
and Director
Directors hold office for a period of one year from their election at the
annual meeting of stockholders or until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. Jack D. Kelley is the father of Derold L. Kelley.
Jack D. Kelley has been chief executive officer of the Company since August
1995. From 1984 to 1995 he was chief executive officer of Care Concepts, Inc., a
privately held company also engaged in the conversion of minivans.
Gary Tandy was employed by Spreckels Sugar Company from 1987 to 1992 as
Maintenance Engineer, Resident Engineer and, from 1990 to 1992, as Production
Manager. From 1992 to 1994 he was Manager of Surface Operations for General
Chemical Company and from 1994 until he joined the Company in April 1999 he was
Vice President of Operations for Florida Crystals Refinery, Inc. He earned a
Master's Degree in Engineering from Coventry University in Coventry, England.
Derold L. Kelley has been executive vice president of the Company since
August 1995. From 1985 to 1995 he was executive vice president of production for
Care Concepts, Inc., a privately held company also engaged in the conversion of
minivans. Mr. Kelley is responsible for supervising the Company's production
facilities, procuring of sub-assemblies, vendor supplies and quality control.
17
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
The following summary compensation table sets forth information concerning
the compensation paid to Jack D. Kelley, the Company's chief executive officer
for the fiscal years ended December 31, 1997 and 1998. No executive officer or
director received compensation in excess of $100,000 for either year.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Securities All other
Name and annual Restricted underlying compen-
principal position Year Salary Bonus compensation stock awards options sation
- ------------------ ---- ------ ----- ------------ ------------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack D. Kelley 1997 $0 0 0 0 0 0
Jack D. Kelley 1998 $0 0 0 0 0 0
</TABLE>
In August 1995, the Company entered into five-year employment agreements
with Jack and Derold Kelley which currently provides for annual salaries of
$102,487 and $87,846 respectively, together with a non-competition clause for
one year following termination of their employment agreements. Jack and Derold
Kelley are also entitled under the employment agreements to annual bonuses for
each equal to 1.67% of the Company's annual pre-tax income in excess of
$1,000,000. The Company currently pays its President, Gary Tandy, a salary of
$12,000 per month and has granted him options to purchase 1,000,000 shares at
$.025 per share until December 31, 1999. Mr. Tandy devotes approximately 25% of
his time to the Company's operations. The Company also employs Brian J. Kelley
(Jack D. Kelley's son) as a consultant under a consulting agreement expiring in
August 2000 which provides for payments of approximately $7,200 per month and an
annual bonus equal to that provided to Jack Kelley and Derold Kelley.
Directors do not currently receive compensation for their services as
directors although they are provided reimbursement for out-of-pocket expenses
incurred in attending Board meetings.
1999 Stock Option Plan
The Company intends to adopt a stock option plan for officers, directors,
employees and consultants (the "Plan") which provides for the grant of options
intended to qualify as "incentive stock options" and "nonqualified stock
options" within the meaning of Section 422 of the United States Internal Revenue
Code of 1986 (the "Code"). Incentive stock options will be issuable only to
eligible officers and key employees of the Company, and nonqualified options
will be issuable to officers, employees, directors and consultants of the
Company.
The Plan will be administered by at least three members of the Board. The
Company expects to reserve up to 1,000,000 shares of Common Stock for issuance
under the Plan. Under the Plan, the Board of Directors will determine which
18
<PAGE>
individuals shall receive options, the time period during which the options may
be partially or fully exercised, the number of shares of Common Stock that may
be purchased under each option and the option price. Each option granted under
the Plan will be evidenced by a stock option agreement.
The per share exercise price of options granted under the Plan will not be
less than the fair market value of the Common Stock on the date the options are
granted. No person who owns, directly or indirectly, more than 10% of the total
combined voting power of all classes of stock of the Company will be eligible to
receive incentive stock options under the Plan unless the option price is at
least 110% of the fair market value of the Common Stock subject to the option on
the date of grant.
No options will be transferred by an optionee other than by will or the
laws of descent and distribution, and during the lifetime of an optionee, the
option may only be exercisable by the optionee. Options under the Plan will be
granted within 10 years from the effective date of the Plan and the exercise
date of an option will not be later than 10 years from the date of grant. Any
options that expire unexercised or that terminate upon an optionee's ceasing to
be employed by the Company become available once again for issuance. Shares
issued upon exercise of an option will rank equally with other shares then
outstanding.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In 1996, the JK Irrevocable Trust and The Paradise Irrevocable Trust (the
"Trusts"), principal stockholders of the Company, loaned the Company for working
capital an aggregate of $289,683 bearing interest at 8% per annum due on demand.
At September 30, 1999, the balance due on the loan was $219,408.
In July 1999, the Company issued 1,664,000 shares to Brian J. Kelley, a
former officer and director, and 1,600,000 shares to Gerry Kelley, an affiliate,
valued at $.025 per share, in exchange for cancellation of an aggregate of
$81,600 of indebtedness owed by the Company to those two individuals.
The Company believes that the transactions described above were fair,
reasonable and consistent with the terms of transactions which the Company could
have entered into with non-affiliated third parties. All future transactions
with affiliates will be approved by a majority of the Company's disinterested
directors.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 50,000,000 shares
of $.003 par value Common Stock, of which 20,403,897 shares were outstanding on
September 30, 1999. Voting rights for the Common Stock are not cumulative. Upon
liquidation, dissolution or winding up the Company, the assets of the Company,
after the payment of liabilities, will be distributed pro rata to the holders of
the Common Stock after distribution is made of any class of stock with priority
19
<PAGE>
over the Common Stock. The holders of the Common Stock do not have preemptive
rights to subscribe for additional shares of Common Stock. The shares of Common
Stock presently outstanding are fully paid and non-assessable. Holders of Common
Stock are entitled to share equally in dividends when, as and if declared by the
Board of Directors of the Company out of funds legally available therefor.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
Price Range of Common Stock
The Company's Common Stock has traded since May 1998 in the
over-the-counter market on the Electronic Bulletin Board. The following table
sets forth, for the periods indicated, the high and low closing price per share
for the Common Stock on the Electronic Bulletin Board. These quotations reflect
inter-dealer prices, without adjustments for retail mark-ups, mark-downs or
commissions, and do not represent actual transactions.
Calendar 1998 High Low
---- ---
Second Quarter $0.81 $0.50
Third Quarter $0.19 $0.16
Fourth Quarter $0.26 $0.15
Calendar 1999
First Quarter $0.25 $0.17
Second Quarter $0.26 $0.11
Third Quarter $0.10 $0.08
Fourth Quarter (through November 15, 1999) $0.08 $0.04
On September 30, 1999, the Company's Common Stock was held by approximately
85 holders of record. The Company does not intend to pay any cash dividends on
its Common Stock in the future. Earnings, if any, will be retained to finance
growth.
ITEM 2. LEGAL PROCEEDINGS.
The Company and its executive officers are defendants in a civil action
entitled "Westover vs. Care Concepts, Inc., New Bridge Products, Inc., et al.
Civil Action number CIV99-1098 filed in the United States District Court for the
District of Arizona in which Plaintiff seeks return of a $50,000 investment in
the Company and punitive damages, alleging conversion, breach of contract, and
rescission for fraud. The Company intends to vigorously contest the action.
20
<PAGE>
The Company is liable for a $60,000 judgment and a $33,000 tax lien. The
tax lien is being repaid at the rate of $3,000 per month.
The Company is not a party to any other material litigation and is not
aware of any other pending or threatened litigation that would have a material
adverse effect upon the Company's business, operations or financial condition.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no disagreements on accounting and financial disclosures
nor any change in accountants from the inception of the Company through the date
of this Registration Statement.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
All of the following securities were sold pursuant to the provisions of
Rule 504 and Rule 506 of Regulation D promulgated under the Securities Act of
1933:
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Brian J. Kelley 530,200 Founders Stock
Derold L. Kelley 530,200 Founders Stock
JDK Irrevocable 457,900 Founders Stock
Tr.
JDK Irrevocable 482,000 Founders Stock
Tr.
Paradise 1,602,650 Founders Stock
Irrevocable Trust
Gerry E. Kelley 301,250 Founders Stock
Don P. Crampton 96,400 Founders Stock
Sandra G. 6,667 1.50 07/1/97
McCarthy
Billy McCluskey 4,667 1.50 07/1/97
& V. Coline
Mc.Cluskey
William V. Noble 28,449 1.50 07/2/97
21
<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Albert J. Rose 1,834 1.50 07/8/97
Edward Entze 2,800 1.50 07/8/97
J. Stuart Grant 2,000 1.50 07/8/97
Ronald D. 667 1.50 08/08/97
Richmond
Jacqueline L. 667 1.50 08/08/97
Looney
Paul Ingerick 417 1.50 08/08/97
Craig F. Mueller 667 1.50 08/08/97
Esther M. Eunis 334 1.50 08/08/97
Steven H. Brandt 667 1.50 08/08/97
Patrica A. 3,334 1.50 08/08/97
Sanders
Jaunita Brown 3,334 1.50 08/08/97
Graeme Pilling 3,609 1.50 08/08/97
Sandra McCarthy 11,334 1.50 08/08/97
Winslow H. 167 1.50 08/07/97
Anderson
Kathleen M. 167 1.50 08/18/97
Brothers
Gerald M. Hardy 3,334 1.50 08/18/97
Kenneth M. Clark 1,667 1.50 08/18/97
Kwang N. Kang 3,000 1.50 09/03/97
James & Pam 10,000 1.50 09/03/97
Demetroulakos
R.L. Schmaus 6,667 1.50 09/03/97
Mee Sook Lisa 2,000 1.50 09/03/97
Chang
22
<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Winafred Jenkins 13,334 1.50 09/03/97
Kenneth M. Clark 2,334 1.50 09/03/97
R. L. Schmaus 3,334 1.50 09/17/97
Thomas P. 1,667 1.50 09/17/97
Tierney
Leon Schrader 834 1.50 12/09/97
Ali Schandanlou 3,334 1.50 12/09/97
Hossien 2,667 1.50 12/09/97
Shandanlou
Kim Sym 6,667 1.50 12/09/97
Elizabeth G. 667 1.50 12/09/97
Johnson
Georgia Hocke & 3,334 1.50 12/09/97
Steven Hocke
G. Tandy 23,334 1.50 12/09/97
Albert Jarrell 6,667 1.50 12/09/97
Steven Hocke 667 1.50 12/09/97
Jock Terry 6,667 1.50 12/09/97
Bobby York 6,667 1.50 12/09/97
Thomas L. 6,667 1.50 12/09/97
Johnson TTEE of
the Chester A.
Davies & Ardella
Davies Revocable
Trust
Larry Dell Aquila 6,667 1.50 12/09/97
Jim D. Boyd 6,667 1.50 12/09/97
James M. 6,667 1.50 12/09/97
Crawford
23
<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Gary Tandy 10,000 1.50 12/09/97
Todd Tindall 3,334 1.50 12/09/97
Roger Laufenberg 3,000 1.50 12/09/97
Richard T. 1,000 1.50 12/09/97
Hannon
Steve Soloman 667 1.50 12/09/97
Mark C. Johnson 6,667 1.50 12/09/97
Fred T. Soloman, 1,667 1.50 12/09/97
Jr.
Michael Notary 3,334 1.50 12/09/97
William C. Berry 6,667 1.50 12/09/97
Michael B. Hester 3,334 1.50 12/09/97
Arron Lee 1,334 1.50 12/09/97
Brockman
Steve Soloman 667 1.50 12/09/97
Mark C. Johnson 6,667 1.50 12/09/97
Steven & Georgia 334 1.50 01/07/98
Hocke
Bill Elliot 6,667 1.50 01/07/98
George Emerick 3,334 1.50 01/07/98
George Gerson 6,667 1.50 01/07/98
Jaun Mustafa 3,334 1.50 01/07/98
J. Stuart Grant 6,667 1.50 01/07/98
Steven Hocke 1,334 1.50 01/07/98
Gemini Capital 41,667 1.50 1/27/98
Patricia Sanders 400 1.50 02/06/98
Gary Tandy 10,000 1.50 02/06/98
24
<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Jock Terry 13,334 1.50 02/17/98
Michael Johnson 10,000 1.50 02/17/98
Michael Solomon 2,000 1.50 02/17/98
Don Thompson 2,000 1.50 02/17/98
Ronald Solomon 1,000 1.50 02/17/98
A. Rolando 334 1.50 02/17/98
Duane Sawtelle 1,000 1.50 02/17/98
Cindy Solomon 2,000 1.50 02/17/98
Patricia Sanders 16,667 1.50 02/25/98
Roger Laufenberg 3,667 1.50 02/25/98
J. D. Lawson 6,667 1.50 02/25/98
J. D. Lawson 6,667 1.50 03/30/98
Gary Tandy 33,334 1.50 04/06/98
Jaunita Brown 1,667 1.50 04/23/98
Troy Nowakoski 3,334 1.50 04/23/98
Ronald Holetzky 667 1.50 04/23/98
George Gerson 3,334 1.50 04/27/98
Gary Trump 14,134 .30 05/06/98
Ronald Soloman 2,000 1.50 05/06/98
Brian Salisbury 3,334 1.50 05/06/98
J.D. Lawson 6,667 1.50 05/06/98
John Constanzo 2,267 1.50 05/06/98
Larry Dillahunty 1,667 1.50 05/06/98
George Emerick 5,000 1.50 05/06/98
25
<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Howard J. 1,334 1.50 05/14/98
Williams &
Shirley Willams
JTWROS
Elizabeth Johnson 1,334 1.50 05/14/98
J. Stuart Grant 1,334 1.50 05/14/98
William J. 1,667 1.50 05/14/98
Harrington
Todd 6,667 1.50 05/14/98
Nowakowski
Jaun Mustafa 3,334 1.50 05/14/98
Steven Hocke 667 1.50 05/14/98
Gary A. Agron 66,667 .36(for services) 06/03/98
Jeffrey 3,334 1.50 06/08/98
Applebaum
Joseph Doscher 3,334 1.50 06/08/98
Walter Copeland 2,000 1.50 06/22/98
Gary Tandy 13,334 1.50 07/24/98
Above Shares Effective 8/17/98
reflect 3 for 1
split
George Gerson 50,000 .10 09/15/98
Executive 33,334 .75 09/25/98
Management
Corp.
Gary Tandy 230,000 .05 9/30/98
Michael Morrow 50,000 .10 9/30/98
Deborah Kline 90,000 .05 9/30/98
George Emerick 100,000 .075 9/30/98
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<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Greg Lovece 50,000 .05 9/30/98
Gary Leysock 50,000 .05 9/30/98
Gary Trump 200,000 .05 10/05/98
Michael Morrow 40,000 .10 10/13/98
Jeffrey 60,000 .14 10/21/98
Applebaum
Jeffrey 60,000 .14 10/22/98
Applebaum
Gary Trump 300,000 .05 10/22/98
Coastal 100,000 .10 11/10/98
International
Associates
Vision 100,000 .10 11/10/98
Management
Jim Phillips 100,000 .25 11/24/98
Jim Phillips 150,000 .075 11/24/98
Emerald Group, 142,857 .075 12/07/98
Inc.
Emerald Group, 200,000 .10 12/08/98
Inc.
Steven D. Bakalar 133,333 .075 12/15/98
J. Prince, Inc. 250,000 .10 12/29/98
Coral Cove 156,210 .08 01/20/99
Partners, Inc.
Gary Leysock 35,000 .065 01/20/99
J. Prince, Inc. 156,210 .08 01/20/99
Gary Tandy 700,000 .05 02/02/99
Diego Davis 285,714 .07 02/12/99
27
<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Emerald Group, 388,889 .18 02/23/99
Inc.
Coral Cove 166,667 .18 02/23/99
Partners
Bobby York 950,000 .10 02/26/99
John York 100,000 .10 02/26/99
F. Marcucella 800,000 .10 02/26/99
Nash S. Fancy & 100,000 .10 02/26/99
Christina Fancy
JTTen
Richard Farmer 100,000 .10 02/26/99
Albert Jarrell 100,000 .10 02/26/99
Thomas Sholar 150,000 .10 02/26/99
Hyam Weinstein 50,000 .10 02/26/99
& Charlotte
Weinstein Jt Ten
Martin G. 50,000 .10 02/26/99
Summitt &
Mollye Summit
JT Ten
Allen Weinstein 50,000 .10 02/26/99
Sandra K. Cotton 50,000 .10 02/26/99
Robert W. 200,000 .10 02/26/99
Copozzoli
Buddy Shelton 100,000 .10 02/26/99
Walter Johnson 50,000 .10 02/26/99
Bill Kemp 70,000 .10 02/26/99
Jim Phillips 127,000 15 02/26/99
Fred Dulock 100,000 .10 02/26/99
28
<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Yuvoone L. 30,000 .15 02/26/99
Barker
I. Mollen 500,000 .10 02/26/99
Deborah H. Kline 100,000 .05 03/02/99
Patricia A. 100,000 .05 03/02/99
Solomon
Gary Leysock 36,428 .05
Eurostar, Int'l 600,000 .10 04/04/99
Generation 100,000 .10 04/04/99
Capital Associates
William Davis 50,000 .10 04/04/99
Heather Davis 50,000 .10 04/04/99
Charlene Davis 50,000 .10 04/04/99
Daniel & Jane 50,000 .10 04/04/99
Welischar JTTEN
Paul Bowers 50,000 .10 04/08/99
Mark Rush 50,000 .10 04/08/99
Michael Rush 50,000 .10 04/08/99
Koreen Diatte 50,000 .10 04/08/99
Cameron 50,000 .10 04/08/99
Bernadsky
Wayne 50,000 .10 04/08/99
Busdiecker
MaryBeth 150,000 .10 04/08/99
Williamson
Jack Williamson 150,000 .10 04/08/99
John Williamson 150,000 .10 04/08/99
David Curry 150,000 .10 04/08/99
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<PAGE>
Shareholder Number of Shares Price Per Share Date Issued
Name
- --------------------------------------------------------------------------------
Michael Rush 25,000 .10 04/14/99
Denise Weinstein 20,000 .10 04/14/99
Paul Talchik, Jr. 30,000 .10 04/14/99
Dennis Strum 300,000 .10 04/14/99
Dorel Shanaby 20,000 .10 04/14/99
Julie Mitzelfield 50,000 .10 04/14/99
Lawrence Kravetz 20,000 .10 04/14/99
Michael Gorton 50,000 .10 04/14/99
Richard Newberg 100,000 .10 04/14/99
Stock Tech 200,000 .10 04/14/99
Thomas Allen 100,000 .10 04/14/99
Michael Louis 50,000 .10 04/14/99
Growth Capital 50,000 .10 04/14/99
Consultants, Inc.
Jim Phillips 6,700 .28 04/14/99
Henry Winkler 400,000 .025 04/29/99
Michael Winkler 170,500 .025 04/29/99
C. James, Inc. 205,000 .025 04/29/99
Terry Capital 150,000 .025 04/29/99
Corporation
Joseph D. Glass 100,000 .025 04/29/99
Brian J. Kelley 1,664,000 .025 07/26/99
Gerry E. Kelley 1,600,000 .025 07/26/99
Eurostar 416,667 .12 09/24/99
International, Inc.
- --------------------------------------------------------------------------------
20,403,897
- --------------------------------------------------------------------------------
30
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that liability of directors
to the Company for monetary damages is eliminated to the full extent provided by
Nevada law. Under Nevada law, a director is not personally liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law;
(iii) for authorizing the unlawful payment of a dividend or other distribution
on the Company's capital stock or the unlawful purchases of its capital stock;
(iv) a violation of Nevada law with respect to conflicts of interest by
directors; or (v) for any transaction from which the director derived any
improper personal benefit.
The effect of this provision in the Articles of Incorporation is to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages from a
director for breach of the fiduciary duty of care as a director (including any
breach resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (v) above. This provision does not
limit or eliminate the rights of the Company or any security holder to seek
non-monetary relief, such as an injunction or rescission, in the event of a
breach of a director's duty of care or any liability for violation of the
federal securities laws.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
31
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
- -------------------- ----
Independent Auditors Report...........................................
Balance Sheets as of December 31, 1998, 1997 and 1996.................
Statement of Operations for the Years Ended December 31,
1998, 1997 and 1996..................................................
Statement of Stockholders' equity (Deficit) as of December 31,
1998, 1997 and 1996..................................................
Statement of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996..................................................
Notes to Financial Statements.........................................
Balance Sheets as of September 30, 1999 and 1998......................
Statement of Operations for the Nine Months Ended
September 30, 1999 and 1998..........................................
Statement of Stockholders' Equity at September 30, 1999 and 1998......
Statement of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998..........................................
Notes to Financial Statements.........................................
32
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
<PAGE>
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT AUDITORS' REPORT....................................... F-1
FINANCIAL STATEMENTS
Balance Sheets............................................ F-2
Statement of Operations................................... F-3
Statement of Stockholders' Equity (Deficit)............... F-4
Statements of Cash Flows.................................. F-5-F-6
Notes to Financial Statements............................. F-7-F-15
<PAGE>
MOFFITT & COMPANY, P.C.
- --------------------------------------------------------------------------------
Certified Public Accountants 5040 East Shea Blvd. Suite 270
Scottsdale, Arizona 85254
(480) 951-1416
Fax (480) 948-3510
[email protected]
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
New Bridge Products, Inc.
(Formerly known as Care Concepts, Inc.)
Phoenix, Arizona
We have audited the accompanying balance sheets of New Bridge Products, Inc. as
of December 31, 1998, 1997 and 1996, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the management of New Bridge
Products, Inc. Our responsibility is to express an opinion on these financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Bridge Products, Inc. as of
December 31, 1998, 1997 and 1996, and the results of its operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note P to the
financial statements, the company has suffered recurring losses from operations,
has a deficit working capital position and is delinquent in the payment of
payroll tax liabilities, all of which raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Moffitt & Company, P.C.
March 25, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
BALANCE SHEETS
DECEMBER 31, 1998, 1997 AND 1996
ASSETS
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 235 $ 10,007 $ 0
Accounts receivable, trade 147,101 318,818 70,050
Accounts receivable, related entity 14,379 11,246 0
Inventories 257,015 267,189 68,302
Other current assets 9,307 14,483 13,459
---------- ---------- ----------
TOTAL CURRENT ASSETS 428,037 621,743 151,811
PROPERTY AND EQUIPMENT 198,356 204,187 199,512
INTANGIBLES 235,419 271,210 307,001
OTHER ASSETS 12,982 8,707 6,558
---------- ---------- ----------
TOTAL ASSETS $ 874,794 $1,105,847 $ 664,882
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank overdraft $ 0 $ 0 $ 4,334
Accounts payable 310,983 461,873 114,300
Customer deposits 83,630 20,419 101,331
Payroll taxes payable 58,263 97,077 105,295
Other current liabilities 87,396 112,177 72,887
Notes payable, factor 19,530 18,624 0
Notes payable, related entities 397,016 0 50,000
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 956,818 710,170 448,147
LONG-TERM DEBT 0 356,993 378,688
----------- ----------- -----------
TOTAL LIABILITIES 956,818 1,067,163 826,835
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock, par value .003(cent)
per share In 1998 and .001(cent) in
1997 and 1996
Authorized - 20,000,000 shares in 1998
and 25,000,000 shares in 1997 and 1996 21,222 12,988 166
Additional paid-in capital 959,105 416,807 24,834
Retained earnings (deficit) (1,062,351) (391,111) (186,953)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) (82,024) 38,684 (161,953)
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 874,794 $ 1,105,847 $ 664,882
=========== =========== ===========
See Accompanying Notes and Independent Auditors' Report.
F-2
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Years Ended December 31,
-------------------------------------------------------------
1998 1997 1996
----------- ----------- -----------
SALES $ 663,674 $ 2,083,429 $ 1,177,507
COST OF SALES 1,030,770 1,978,781 1,258,268
----------- ----------- -----------
GROSS PROFIT (LOSS) (367,096) 104,648 (80,761)
GENERAL, ADMINISTRATIVE AND
SELLING EXPENSES 304,094 390,599 356,227
----------- ----------- -----------
(LOSS) FROM OPERATIONS (671,190) (285,951) (436,988)
UNUSUAL ITEM - CANCELLATION
OF DEBT 0 81,793 254,882
----------- ----------- -----------
(LOSS) BEFORE CORPORATION
INCOME TAXES (671,190) (204,158) (182,106)
CORPORATION INCOME TAXES 50 0 0
----------- ----------- -----------
NET (LOSS) $ (671,240) $ (204,158) $ (182,106)
=========== =========== ===========
NET (LOSS) PER COMMON SHARE
BASIC AND DILUTED $ (0.14) $ (0.05) $ (3.20)
=========== =========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
BASIC AND DILUTED 4,706,403 4,329,550 55,333
=========== =========== ===========
See Accompanying Notes and Independent Auditors' Report.
F-3
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
DECEMBER 31, 1998, 1997 AND 1996
Common Stock Additional Total
-------------------------- Paig-in Retained Stockholders'
Shares Amount Capital Earnings Equity
----------- ----------- ----------- ----------- -----------
BALANCE, JANUARY 1, 1996 166,000 $ 166 $ 24,834 $ (4,847) $ 20,153
NET (LOSS) FOR THE YEAR
ENDED DECEMBER 31, 1996 0 0 0 (182,106) (182,106)
----------- ----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 1996 166,000 166 24,934 (186,953) (161,953)
72.29 TO 1 FORWARD STOCK SPLIT 11,835,800 11,835 (11,835) 0 0
STOCK ISSUED IN PRIVATE OFFERING
At .50(cent)per share 886,851 887 442,539 0 443,426
At .05(cent)per share 100,000 100 4,900 0 5,000
Less costs to obtain financing 0 0 (43,631) 0 (43,631)
NET (LOSS) FOR THE YEAR
ENDED DECEMBER 31, 1997 0 0 0 (204,159) (204,158)
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 12,988,651 12,988 416,807 (391,111) 38,684
STOCK ISSUED
At .50(cent)per share 574,400 574 286,626 0 287,200
For legal services 200,000 200 23,800 0 24,000
===========
STOCK ISSUED AFTER REVERSE
STOCK SPLIT 4,584,388 0 0 0 0
STOCK ISSUED
At .05(cent)to .25(cent)per share 2,489,524 7,460 224,005 0 231,465
LESS COST TO OBTAIN FINANCING 0 0 (23,800) 0 (23,800)
DONATED CAPITAL 0 0 31,667 0 31,667
NET (LOSS) FOR THE YEAR ENDED
DECEMBER 31, 1998 0 0 0 (671,240) (671,240)
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 7,073,912 $ 21,222 $ 959,105 $(1,062,351) $ (82,024)
=========== =========== =========== =========== ===========
See Accompanying Notes and Independent Auditors' Report.
F-4
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Years Ended December 31,
-----------------------------------------------
1998 1997 1996
--------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) $(671,240) $(204,158) $(182,106)
Adjustments to reconcile net
(loss) to net cash provided
(used) by operating activities:
Depreciation 71,414 58,235 45,944
Amortization 35,791 35,093 35,791
Issuance of company stock for legal fee 24,000 0 0
Changes in operating assets and liabilities:
Accounts receivable 171,717 (248,768) (18,305)
Loan receivable (3,133) (11,246) 0
Inventories 10,174 (198,887) 65,777
Other current assets 5,176 (1,024) 65,014
Accounts payable (150,890) 347,573 (14,384)
Customer deposits 63,211 (80,912) (49,556)
Payroll taxes payable (38,814) (8,218) 60,167
Other current liabilities (24,781) 39,290 29,187
--------- --------- ---------
NET CASH FLOWS PROVIDED
(USED) BY OPERATING
ACTIVITIES (507,375) (273,022) 37,529
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (65,582) (62,910) (60,665)
Other (4,275) (1,451) (197,392)
--------- --------- ---------
NET CASH FLOWS (USED) BY
INVESTING ACTIVITIES (69,857) (64,361) (258,057)
--------- --------- ---------
See Accompanying Notes and Independent Auditors' Report.
F-5
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Years Ended December 31,
---------------------------------------------------
1998 1997 1996
--------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Bank overdraft $ 0 $ (4,334) $ 4,334
Proceeds from sale of common stock 494,865 404,795 0
Proceeds from short-term notes 71,689 0 50,000
Proceeds from long-term notes 0 0 182,164
Net proceeds from factoring line 906 (31,376) 0
Repayment on long-term notes 0 (21,695) 0
--------- --------- ---------
NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES 567,460 347,390 236,498
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (9,772) 10,007 15,990
CASH AT BEGINNING OF YEAR 10,007 0 (15,990)
--------- --------- ---------
CASH AT END OF YEAR $ 235 $ 10,007 $ 0
========= ========= =========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW DATA:
Interest paid $ 47,167 $ 20,546 $ 36,943
========= ========= =========
Taxes paid $ 50 $ 50 $ 50
========= ========= =========
NON CASH FINANCING ACTIVITIES
Issuance of company stock for legal fees $ 24,000 $ 0 $ 0
========= ========= =========
Donated capital, cancellation of debt $ 31,666 $ 0 $ 0
========= ========= =========
See Accompanying Notes and Independent Auditors' Report.
F-6
</TABLE>
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE A SUMMARY OF SIGNIFICANT ACCOUNT PRINCIPLES
Name Change
-----------
On October 10, 1997, the company changed its name to New Bridge
Products, Inc.
Organization
------------
The company was incorporated on August 7, 1995 in the State of Nevada.
The corporation designs and builds specialized motor vehicles for
physically handicapped drivers and passengers. The company's unique
manufacturing process converts a standard size minivan into an easy
access vehicle for both wheelchair and ambulatory drivers and
passengers.
Allowance for Doubtful Accounts
-------------------------------
The company provides an allowance for uncollectible accounts based
upon prior experience and management's assessment of the
collectibility of existing specific accounts. Management believes all
accounts receivable were collectible at December 31, 1998, 1997 and
1996.
Inventories
-----------
Inventories are states at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventories at
December 31, consist of:
1998 1997 1996
--------- -------- --------
Work in progress $ 215,533 $246,531 $ 39,802
Parts 20,482 20,658 25,000
Trade-in units 21,000 0 3,500
--------- --------- -------
$ 257,015 $ 267,189 $ 68,302
========= ========= ========
See Accompanying Notes and Independent Auditors' Report.
F-7
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE A SUMMARY OF SIGNIFICANT ACCOUNT PRINCIPLES (CONTINUED)
Property and Equipment
----------------------
Property and equipment are stated at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the
related assets as follows:
Molds and dies - 5 years
Leasehold improvements - lessor of the length of the related
lease or the estimated useful lives of the assets
Office furniture and computers - 5 years
Depreciation is computed on the straight-line method for financial
reporting purposes and on accelerated methods for income taxes.
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred.
Income Taxes
------------
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax basis of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109 Accounting for Income
Taxes. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
Deferred income taxes provide for the temporary differences
attributable to:
1. Different depreciation methods for financial statement and
tax reporting.
2. Deductions for product warrant liabilities.
See Accompanying Notes and Independent Auditors' Report.
F-8
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE A SUMMARY OF SIGNIFICANT ACCOUNT PRINCIPLES (CONTINUED)
Product Warranty Liability
--------------------------
The company warrants that its products are free from defects for a
period of 36 months or 36,000 miles, whichever comes first.
Accounting Estimates
--------------------
Management uses estimates and assumption in preparing financial
statements in accordance with generally accepted account principles.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from
the estimates that were used.
Revenue Recognition
-------------------
The company recognizes its revenue at the time the conversion of the
vehicle is completed.
Employee Benefits
-----------------
The cost of employee benefits and compensated leave time are accrued
as they are vested to the employee. The company does not maintain any
retirement plans.
Net Loss Per Share
------------------
Net loss per share is computed by dividing net loss by the weighted
average number of shares outstanding during the period. The weighed
average share for 1997 and 1996 have been converted to correspond to
.003(cent) par value per share common stock.
See Accompanying Notes and Independent Auditors' Report.
F-9
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE B PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1998 1997 1996
--------- -------- ---------
Molds and dies $ 336,515 $ 275,65 $ 214,795
Office furniture and equipment 6,772 2,050 0
Leasehold improvements 44,659 44,659 44,659
--------- -------- ---------
387,946 322,364 259,454
Less accumulated depreciation
and amortization 189,591 118,177 59,942
--------- -------- ---------
Book value $ 198,355 $ 204,187 $ 199,512
========= ========= =========
Annual depreciation $ 71,414 $ 58,235 $ 45,944
========= ========= =========
NOTE C INTANGIBLES
On October 10, 1995, the company entered into a preliminary agreement
with Care Concepts, Inc. (Delaware) whereby the company would purchase
all of the assets of Care Concepts, Inc. (Delaware). The acquisition
was not consummated, but the company did acquire the technology
rights, trade name, trademarks, patents and customer lists for a cost
of $330,000. The asset is being amortized on a straight line basis
over a ten year period. The asset is comprised of the following at
December 31:
1998 1997 1996
--------- --------- ---------
Cost $ 330,000 $ 330,000 $ 330,000
Accumulated amortization 99,000 66,000 33,000
--------- --------- ---------
Book value $ 231,000 $ 264,000 $ 297,000
========= ========= =========
See Accompanying Notes and Independent Auditors' Report.
F-10
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE D INCOME TAXES
Current income taxes are based on the taxable income for the year, as
measured by the current year's tax returns.
The provision for income taxes consists of the following:
1998 1997 1996
------- ------ ------
Current $ 50 $ 0 $ 0
Deferred 0 0 0
------- ------ -----
Total provision for
income taxes $ 50 $ 0 $ 0
======= ====== =====
The company has available at December 31, 1998 a net operating loss
carryforward for federal income tax purposes of approximately $315,800
and the losses expire on the following dates:
December 31, 2011 $ 178,962
December 31, 2012 180,848
December 31, 2018 688,000
----------
Total $1,047,810
==========
The principal temporary income tax differences between financial
reporting purposes and income tax purposes are immaterial. The tax
effect of the net operating losses is approximately $298,000, and a
valuation allowance of $298,000 equal to the amount has been recorded,
since realization is uncertain.
A summary of the deferred tax asset is as follows:
1998 1997 1996
--------- --------- -------
Deferred tax asset $ 298,000 $ 123,000 $ 0
Valuation allowance 298,000 123,000 0
--------- --------- -------
Net deferred tax asset $ 0 $ 0 $ 0
========= ========= =======
See Accompanying Notes and Independent Auditors' Report.
F-11
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE E PAYROLL TAXES PAYABLE
The company is delinquent in the amount of $55,000 on the payment of
prior year payroll taxes and has negotiated a monthly payment plan
with the Internal Revenue Service.
NOTE F NOTE PAYABLE - FACTOR
In February 1997, the company entered into a non-recourse factoring
agreement with Syntrix Financial. Under the agreement, the factor will
purchase, at a discount, all approved receivables of the company after
a vehicle has been accepted by the customer.
The Syntrix Financial note was paid off and on February 17, 1999, the
company obtained a new non-credit recourse factoring line of credit
from Riviera Finance of Texas, Inc. The Riviera line is secured by all
company assets. The line is for a maximum borrowing of $250,000,
expires on August 16, 1999 and requires a minimum maintenance charge
(interest) of $2,5000 per month.
NOTE G NOTES PAYABLE
1998 1997 1996
----------- --------- ---------
RELATED ENTITIES
The notes payable to officers,
stockholders and related
entities are unsecured. At
December 31, 1998, the notes
were due on demand and the
interest rate was 8%. At
December 31, 1197, the notes
were due on January 10, 1999
and the interest rate was 10%.
Interest has been waived on
all notes except for one in
the amount of $94,225 $ 397,016 $ 356,993 $ 378,688
UNRELATED ENTITIES
Unsecured 90 day note with
interest at 10% 0 0 50,000
----------- --------- ---------
397,016 356,993 428,688
Less current portion 397,016 0 50,000
----------- --------- ---------
Long-term portion $ 0 $ 356,993 $ 378,688
=========== ========= =========
See Accompanying Notes and Independent Auditors' Report.
F-12
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE H PAR VALUE OF STOCK
In 1998, the company changed its par value on its common stock from
.001(cent) to .003(cent) and changed its authorized common shares from
25,000,000 shares to 20,000,000.
NOTE I RELATED PARTY TRANSACTIONS
The company leases furniture and equipment from a related entity on a
month to month rental of $833 per month.
NOTE J OPERATING LEASE
The company leases its manufacturing and office facilities under a
non-cancelable operating lease agreement expiring August 31, 2000. The
minimum basic rent exclusive of rental taxes starts at $5,132 per
month and increases to $6,558 per month. The lease also provides for
additional rent if operating costs and taxes paid by the landlord
during the years exceed the amounts paid in the base year.
Future minimum lease payments are as follows for the years ending
December 31:
1998 1997 1996
--------- --------- ---------
1997 $ 0 0 67,288
1998 0 72,995 72,995
1999 76,407 76,407 76,407
2000 52,463 52,463 52,463
--------- --------- ---------
$ 128,870 $ 201,865 $ 269,153
========= ========= =========
NOTE K SELF INSURANCE
The company is self insuring its product liability insurance.
NOTE L UNUSUAL ITEM - CANCELLATION OF DEBT
In 1996, the stockholders of the company entered into an agreement
with Care Financial Group, Inc. whereby Care Financial Group, Inc.
would exchange its shares of stock for Care Concepts, Inc. stock plus
obtain additional financing for the corporation in the amount of
$750,000. Care Financial Group, Inc. was unable to obtain the agreed
upon financing. In a settlement agreement with the company, it
canceled and forgave $254,882 of loans and paid the company an
additional $81,793.
See Accompanying Notes and Independent Auditors' Report.
F-13
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE M EXECUTIVE COMPENSATION PLANS
On August 6, 1995, the company entered into a five-year employment
agreement with three of the company's officers. The agreements
established the initial officers' salaries ranging from $60,000 to
$70,000 per year plus annual increases of 10%.
Each officer is entitled to an annual bonus of 1.67% of annual pre-tax
income provided pre-tax income is in excess of $1,000,000. There are
also additional bonuses due if the employees' contracts are
terminated.
For 1998, 1997 and 1996 the officers waived their salaries.
NOTE N SALES IN EXCESS OF 10%
In 1998, 1997 and 1996, the company had two customers whose sales
exceeded 10% of the company's annual sales.
NOTE O STOCK OPTIONS
On December 31, 1998, the company granted options to purchase 161,850
shares of its common stock at an exercise price of .60(cent) per
share. The options shall expire on December 31, 1999; however, the
company reserves the right to call the stock with 30 day notice
providing the stock is trading at a minimum of .90(cent) per share.
NOTE P GOING CONCERN
As shown in the accompanying financial statements, the company has
incurred the following items which hamper its financial position:
1. Net losses of $1,062,351 since its date of incorporation.
2. Deficit working capital of $528,781.
3. Delinquent payroll tax liabilities of $56,000.
For the period from January 1, 1999 to February 24, 1999, management
received $382,000 from the sale of new common stock.
See Accompanying Notes and Independent Auditors' Report.
F-14
<PAGE>
NEW BRIDGE PRODUCTS, INC.
(FORMERLY KNOWN AS CARE CONCEPTS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE P GOING CONCERN (CONTINUED)
The ability of the company to continue as a going concern is dependent
on obtaining additional capital and financing. The financial
statements do not include any adjustments that might be necessary if
the company is unable to continue as a going concern.
NOTE Q ANNUAL INTEREST EXPENSE
Interest expense for each year is as follows:
December 31, 1998 $ 47,167
December 31, 1997 20,546
December 31, 1996 36,943
NOTE R OFF-BALANCE SHEET RISK
The company's main source of income is derived from converting
Chrysler and Ford minivans into easy assess vehicles. The company
would incur substantial retooling costs if Chrysler and Ford
discontinued production of the minivans.
See Accompanying Notes and Independent Auditors' Report.
F-15
<PAGE>
NEW BRIDGE PRODUCTS, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
Page No.
--------
ACCOUNTANTS' REPORT........................................... F-1
FINANCIAL STATEMENTS
Balance Sheet.......................................... F-2 - F-3
Statement of Operations................................ F-4
Statement of Stockholders' Equity...................... F-5
Statement of Cash Flows................................ F-6 - F-7
Notes to Financial Statements.......................... F-8 - F-13
<PAGE>
ACCOUNTANTS' REPORT
To the Stockholders and Board of Directors
New Bridge Products, Inc.
Phoenix, Arizona
We have reviewed the accompanying balance sheet of New Bridge Products, Inc. as
of September 30, 1999, and the related statements of operations, stockholders'
equity and cash flows for the nine months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of New Bridge
Products, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 14 to the
financial statements, the company has suffered recurring losses from operations,
has a deficit working capital position and is delinquent in the payment of
payroll tax liabilities, all of which raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Moffitt & Company, P.C.
Scottsdale, Arizona
October 20, 1999
F-1
<PAGE>
NEW BRIDGE PRODUCTS, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
CURRENT ASSETS
Accounts receivable, trade $ 70,668
Accounts receivable, related entities 22,033
Inventories 186,300
Prepaid expenses 24,231
---------
TOTAL CURRENT ASSETS $ 303,232
PROPERTY AND EQUIPMENT 269,089
INTANGIBLES 206,250
OTHER ASSETS
Deposits 12,982
---------
TOTAL ASSETS $ 791,553
=========
See Accompanying Notes to Financial Statements
F-2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 4,042
Accounts payable
Trade $ 181,853
Chassis 23,000
---------
Total accounts payable 204,853
Customer deposits 35,195
Payroll taxes payable 46,144
Other current liabilities 90,005
Notes payable, related entities 219,408
Notes payable, other 135,000
---------
TOTAL CURRENT LIABILITIES 734,647
STOCKHOLDERS' EQUITY
Common stock, par value .003(cent) per share
Authorized - 20,000,000 shares
Issued and outstanding - 19,987,230 shares 59,962
Additional paid-in capital 1,844,808
Retained earnings (deficit) (1,847,864)
----------
TOTAL STOCKHOLDERS' EQUITY 56,906
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 791,553
=========
See Accompanying Notes and Accountants' Review Report.
F-3
<PAGE>
NEW BRIDGE PRODUCTS, INC.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
SALES $ 906,980
COST OF SALES 1,253,925
------------
GROSS (LOSS) (346,945)
GENERAL, ADMINISTRATIVE AND
SELLING EXPENSES 384,012
------------
(LOSS) BEFORE CORPORATION
INCOME TAXES (730,957)
CORPORATION INCOME TAXES 0
------------
NET (LOSS) $ (730,957)
============
NET (LOSS) PER COMMON SHARE
BASIC AND DILUTED $ (0.04)
============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
BASIC AND DILUTED 17,484,790
============
See Accompanying Notes and Accountants' Review Report.
F-4
<PAGE>
<TABLE>
<CAPTION>
NEW BRIDGE PRODUCTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1999
Common Stock Additional Total
--------------------------- Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
--------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 7,073,912 $ 21,222 $ 959,105 $(1,062,351) $ (82,024)
CORRECTION OF PRIOR YEAR
STOCK ISSUANCE 333,700 1,001 53,555 (54,556) 0
ISSUANCE OF COMMON STOCK
FOR CASH, NET OF FEES 8,290,118 24,870 777,130 0 802,000
ISSUANCE OF COMMON STOCK
FOR SERVICES 1,025,500 3,077 (3,077) 0 0
CANCELLATION OF RELATED
ENTITY DEBT 3,264,000 9,792 58,095 0 67,887
NET (LOSS) FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 0 0 0 (730,957) (730,957)
----------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999 19,987,230 $ 59,962 $ 1,844,808 $(1,847,864) $ 56,906
=========== =========== =========== =========== ===========
See Accompanying Notes and Accountants' Review Report.
F-5
</TABLE>
<PAGE>
NEW BRIDGE PRODUCTS, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) $ (730,957)
Adjustments to reconcile net
(loss) to net cash
(used) by operating activities:
Depreciation and amortization 89,132
Changes in operating assets and liabilities:
Accounts receivable 76,433
Accounts receivable, related entities (7,654)
Inventories 70,715
Prepaid expenses (14,924)
Accounts payable (106,130)
Customer deposits (48,435)
Payroll taxes payable (12,119)
Other current liabilities 2,609
---------
NET CASH FLOWS (USED) BY
OPERATING ACTIVITIES $ (681,330)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (130,696)
---------
NET CASH FLOWS (USED) BY INVESTING ACTIVITIES (130,696)
See Accompanying Notes and Accountants' Review Report.
F-6
<PAGE>
NEW BRIDGE PRODUCTS, INC.
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
CASH FLOWS FROM FINANCING
ACTIVITIES
Bank overdraft $ 4,042
Proceeds from sale of common stock 802,000
Proceeds from short-term notes 135,000
Repayment on notes payable (129,251)
---------
NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES $ 811,791
---------
NET (DECREASE) IN CASH (235)
CASH AT BEGINNING OF PERIOD 235
CASH AT END OF PERIOD $ 0
=========
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW DATA:
Interest paid $ 29,603
=========
Taxes paid $ 50
=========
NON CASH FINANCING ACTIVITIES
Issuance of company stock for fees $ 3,077
=========
Issuance of company stock for cancellation
of related entity debt $ 67,887
=========
See Accompanying Notes and Accountants' Review Report.
F-7
<PAGE>
NEW BRIDGE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization
------------
The company was incorporated on August 7, 1995 in the State of Nevada. The
corporation designs and builds specialized motor vehicles for physically
handicapped drivers and passengers. The company's unique manufacturing
process converts a standard size minivan into an easy access vehicle for
both wheelchair and ambulatory drivers and passengers.
Allowance for Doubtful Accounts
-------------------------------
The company provides an allowance for uncollectible accounts based upon
prior experience and management's assessment of the collectibility of
existing accounts. Management believes all accounts receivable were
collectible at September 30, 1999.
Inventories
-----------
Inventories are states at an estimated cost consisting of:
Work in progress - minivan conversion $ 50,300
Parts - minivan conversion 35,000
Parts - golf carts 80,000
Trade-in unit 21,000
----------
$ 186,300
==========
Property and Equipment
----------------------
Property and equipment are stated at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the related
assets as follows:
Molds and dies - minivans - 5 years
Molds and dies - golf carts - to be determined
Leasehold improvements - lessor of the length of the related lease
or the estimated useful lives of the assets
Machinery and equipment - 5 years
Office furniture and computers - 5 years
Prototype golf carts - to be determined
Depreciation is computed on the straight-line method for financial
reporting purposes and on accelerated methods for income taxes.
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred.
See Accompanying Notes and Accountants' Review Report.
F-8
<PAGE>
NEW BRIDGE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Income Taxes
------------
Provisions for income taxes are based on taxes payable or refundable for
the current year and deferred taxes on temporary differences between the
amount of taxable income and pretax financial income and between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in the
financial statements at currently enacted income tax rates applicable to
the period in which the deferred tax assets and liabilities are expected to
be realized or settled as prescribed in FASB Statement No. 109 Accounting
for Income Taxes. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income taxes.
Deferred income taxes provide for the temporary differences attributable
to:
1. Different depreciation methods for financial statement and tax
reporting.
2. Deductions for product warrant liabilities.
Product Warranty Liability
--------------------------
The company warrants that its products are free from defects for a period
of 36 months or 36,000 miles, whichever comes first.
Accounting Estimates
--------------------
Management uses estimates and assumption in preparing financial statements
in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were used.
Revenue Recognition
-------------------
The company recognizes its revenue at the time the conversion of the
vehicle is completed.
Employee Benefits
-----------------
The cost of employee benefits and compensated leave time are accrued as
they are vested to the employee. The company does not maintain any
retirement plans.
See Accompanying Notes and Accountants' Review Report.
F-9
<PAGE>
NEW BRIDGE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Net Loss Per Share
------------------
Net loss per share is computed by dividing net loss by the annualized
weighted average number of shares outstanding during the period.
NOTE 2 PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Molds and dies - minivans $ 336,515
Molds and dies - golf carts 95,000
Office furniture and computers 7,319
Machinery and equipment 7,192
Prototype golf carts 24,000
Leasehold improvements 48,616
----------
518,642
Less accumulated depreciation
and amortization 249,553
Book value $ 269,089
==========
Depreciation for nine months ended September 30, 1999 $ 67,132
==========
NOTE 3 INTANGIBLES
On October 10, 1995, the company entered into a preliminary agreement with
Care Concepts, Inc. (Delaware) whereby the company would purchase all of
the assets of Care Concepts, Inc. (Delaware). The acquisition was not
consummated, but the company did acquired the technology rights, trade
name, trademarks, patents and customer lists for a cost of $330,000. The
asset is being amortized on a straight line basis over a ten year period.
The asset is comprised of the following at September 30, 1999:
Cost $ 330,000
Accumulated amortization 123,750
-----------
Book value $ 206,250
===========
See Accompanying Notes and Accountants' Review Report.
F-10
<PAGE>
NEW BRIDGE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 4 INCOME TAXES
Current income taxes are based on the taxable income for the year as
measured by the current year's tax returns.
The provision for income taxes consists of the following:
Current $ 0
Deferred 0
----------
Total provision for income taxes $ 0
==========
The company has available at September 30, 1999 a net operating loss
carryforward for federal income tax purposes of approximately $1,649,145
and the losses expire on the following dates:
December 31, 2011 $ 178,962
December 31, 2012 180,848
December 31, 2018 688,000
December 31, 2019 601,335
----------
Total $1,649,145
==========
The principal temporary income tax differences between financial reporting
purposes and income tax purposes are immaterial. The tax effect of the net
operating losses is approximately $360,000, and a valuation allowance of
$360,000 equal to that amount has been recorded, since realization is
uncertain.
NOTE 5 PAYROLL TAXES PAYABLE
The company is delinquent in the amount of $36,000 on the payment of prior
year payroll taxes and has negotiated a monthly payment plan with the
Internal Revenue Service.
NOTE 6 NOTES PAYABLE
RELATED ENTITIES
The notes payable to officers, stockholders
and related entities are unsecured. At September 30,
1999, the notes were due on demand and the
interest rate was 8%. $ 219,408
=========
See Accompanying Notes and Accountants' Review Report.
F-11
<PAGE>
NEW BRIDGE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 6 NOTES PAYABLE (CONTINUED)
OTHER
Notes payable, other, are unsecured, payable
from 30-90 days with interest rates varying
from 0 % to fixed amounts of $5,000 $ 135,000
==========
NOTE 7 RELATED PARTY TRANSACTIONS
The company leases furniture and equipment from a related entity on a month
to month rental of $833.
NOTE 8 OPERATING LEASE
The company leases its manufacturing and office facilities under a
non-cancelable operating lease agreement expiring August 31, 2000. The
minimum basic rent exclusive of rental taxes starts at $5,132 per month and
increases to $6,558 per month. The lease also provides for additional rent
if operating costs and taxes paid by the landlord during the years exceed
the amounts paid in the base year.
Future minimum lease payments are as follows for the years ending September
30:
1999 $ 76,407
========
NOTE 9 SELF INSURANCE
The company is self insuring its product liability insurance.
NOTE 10 EXECUTIVE COMPENSATION PLANS
On August 6, 1995, the company entered into a five-year employment
agreement with three of the company's officers. The agreements established
the initial officers' salaries ranging from $60,000 to $70,000 per year
plus annual increases of 10%.
Each officer is entitled to an annual bonus of 1.67% of annual pre-tax
income provided pre-tax income is in excess of $1,000,000. There are also
additional bonuses due if the employees' contracts are terminated.
NOTE 11 SALES IN EXCESS OF 10%
The company had two customers whose sales exceeded 10% of the company's
annual sales.
See Accompanying Notes and Accountants' Review Report.
F-12
<PAGE>
NEW BRIDGE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 12 STOCK OPTIONS
On December 31, 1998, the company granted options to purchase 161,850
shares of its common stock at an exercise price of .60(cent) per share. The
options expire on December 31, 1999; however, the company reserves the
right to call the stock with 30 day notice providing the stock is trading
at a minimum of .90(cent) per share. The corporation must increase its
authorized shares before the option shares can be issues.
NOTE 13 EMPLOYEE STOCK OPTIONS
On April 23, 1999, the Board of Directors granted the president of the
company an option to acquire 1,000,000 shares of restricted company stock
at $.025 per share. The option expires eight months from date of grant. The
corporation must increase its authorized shares before the option shares
can be issued.
NOTE 14 GOING CONCERN
As shown in the accompanying financial statements, the company has incurred
the following items which hamper its financial position:
1. Net losses of $1,847,864 since its date of incorporation.
2. Deficit working capital of $431,415.
3. Delinquent payroll tax liabilities of $36,000.
The ability of the company to continue as a going concern is dependent on
the company operating at a profit and obtaining additional capital and
financing. The financial statements do not include any adjustments that
might be necessary if the company is unable to continue as a going concern.
NOTE 15 INTEREST EXPENSE
Interest expense for the nine months ended September 30, 1999 was $29,603.
NOTE 16 ADVERTISING EXPENSE
Advertising expense for the nine months ended September 30, 1999 was
$3,400.
NOTE 17 OFF-BALANCE SHEET RISK
The company's main source of income is derived from converting Chrysler and
Ford minivans into easy assess vehicles. The company would incur
substantial retooling costs if Chrysler and Ford discontinued production of
the minivans.
See Accompanying Notes and Accountants' Review Report.
F-13
<PAGE>
PART III
ITEMS 1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
Exhibit No. Description
- ----------- -----------
3.1 Articles of Incorporation of the Registrant, as amended.
3.2 By-laws of the Registrant.
4.1 Specimen Stock Certificate of the Registrant.
10.1 Employment Agreement (Jack D. Kelley)
10.2 Employment Agreement (Derold Kelley)
10.3 Consulting Agreement (Brian Kelley)
10.4 Office and Factory Lease.
23.1 Consent of Moffitt & Company, P.C., independent auditors
27.1 Financial Data Schedule
33
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized this 20 day of December 1999.
NEW BRIDGE PRODUCTS, INC.
By: /s/ Jack D. Kelley
---------------------------------------
Jack D. Kelley, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Jack D. Kelley
- -------------------------
Jack D. Kelley Chief Executive Officer, December 20, 1999
Chief Financial Officer
(Principal Accounting Officer)
and Director
/s/ Gary W. Tandy
- -------------------------
Gary W. Tandy President and Director December 20, 1999
/s/ Derold L. Kelley
- -------------------------
Derold L. Kelley Executive Vice President December 20, 1999
and Director
34
Exhibit 3.1
ARTICLE OF INCORPORATION
OF
Care Concepts, Inc.
Undersigned, in order to form a corporation for the purpose hereinafter
stated under the laws of the State of Nevada, do hereby certify as follows:
ARTICLE I
The name of the corporation is Care Concepts, Inc.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The nature of the business and objects and purposed proposed to be
transacted and carried on by the business are:
1. To manufacture, re-manufacture, modify and sell or lease vehicles.
2. To develop and sell products and service throughout the United States
and the world.
3. To carry on any other lawful business whatsoever in connection with
any of the foregoing businesses or other businesses, or carry on any
business which is calculated directly or indirectly to promote the
interest of the company, or in any lawful way enhance the value of
this corporation.
4. This corporation may conduct its business and all other corporate
matters both within and without the State of Nevada.
ARTICLE IV
The authorized capital of the corporation is $25,000, and the aggregate
number of shares which the corporation shall have authority to issue is twenty
five million (25,000,000) shares of common stock, each share having a par value
of $.001 per share. No shareholder or subscriber to the capital stock of the
corporation shall be under any obligation to the corporation or its creditors
with respect to such stock other than the obligation to pay the corporation the
full consideration for which the stock was issued to the shareholder or
subscriber.
1
<PAGE>
Any stock of the corporation may be issued for money, property, service
rendered, labor performed, cash advances made for or on behalf of the company,
or for any other assets of value in accordance with the action of the board of
directors, whose judgment as to value received in return therefore shall be
conclusive, and said stock when issued in exchange shall be fully paid and
non-assessable.
ARTICLE V
The name of the person designated as the corporation's resident agent and
agent for the service of process is the Nevada Agency and Trust Company, Suite
880, B of A Plaza, 50 West Liberty, Reno, Nevada, 89501.
ARTICLE VI
Cumulative voting of shares shall not be permitted.
ARTICLE VII
No shareholder shall have the pre-emptive right to acquire unissued or
treasury stock of company.
ARTICLE VII
All lawful restrictions on the sale or other disposition of shares of
company's stock may be placed upon all or a portion or portions of the
certificates evidencing the company's stock or shares.
ARTICLE IX
The members of the governing board of the corporation shall be styled and
known as "Directors," of who there shall originally be three, PROVIDED that at
any time subsequent to the original meeting of the Board of Directors of the
corporation, the Board may by majority vote of those then and there present
increase the composition of the Board by increasing it to not more than ten
persons, or by decreasing it to not less than one person, and PROVIDED, further,
that a person to be a director need not be a shareholder of the corporation.
The beginning directors of the corporation are:
1. Jack D. Kelley, 18014 North 78th Drive, Glendale, AZ 85308
2. Derold L. Kelley, 18014 North 78th Drive, Glendale, AZ 85308
3. Brian J. Kelley, 14018 North 63rd Avenue, Glendale, AZ 85306
2
<PAGE>
ARTICLE X
No officer or director of the corporation shall be personally liable to the
corporation or its shareholder for damages for breach of fiduciary duty as an
officer or director of the corporation, PROVIDED that any officer or director
shall remain liable to the corporation and its stockholder for:
a. Acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or
b. The payment or distributions in violation of NRS 78.300
ARTICLE XI
The names of the original incorporators executing these Articles of
Incorporation are:
1. Jack D. Kelley, 18014 North 78th Drive, Glendale, AZ 85308
2. Derold L. Kelley, 18014 North 78th Drive, Glendale, AZ 85308
3. Brian J. Kelley, 14018 North 63rd Avenue, Glendale, AZ 85306
ARTICLE XII
The Board of Directors of the corporation, as well as the shareholders at
duly constituted shareholders' meetings, may from time to time adopt, revise or
repeal by-laws for the company.
In witness whereof the undersigned have set their hands and seals this 2nd
day of August, 1995.
/s/ Jack D. Kelley /s/ Derold L. Kelley
- ------------------------------ -----------------------
Jack D. Kelley Derold L. Kelley
/s/ Brian J. Kelley
-------------------
Brian J. Kelley
STATE OF ARIZONA )
)SS
COUNTY OF MARICOPA )
The foregoing Articles of Incorporation were singed and executed before me
this 4th day of August, 1995, by Jack D. Kelley, Derold L. Kelley, and Brian J.
Kelley.
/s/ Signature on File
-------------------------------
Notary Public
My Commission Expires (dated)
-------------
3
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
CARE CONCEPTS, INC.
a Nevada Corporation
Derold L. Kelley of Care Concepts, Inc. do hereby certify
That the Board of Directors of said corporation at a meeting duly convened,
held on the 10th day of October 1997 adopted a resolution to amend the original
articles as follows:
Article ONE (1) is hereby amended to read as follows:
"The name of the corporation is New Bridge Products, Inc."
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the articles of incorporation is 12,281,151, that the said
change and amendment have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ Brian J. Kelley
---------------------------
Brian J. Kelley, President
/s/ Derold L. Kelley
---------------------------
Derold L. Kelley, Secretary
ACKNOWLEDGMENT
State of Arizona
ss.
County of Maricopa
On Oct. 14, 1997 personally appeared before me, a Notary Public, Brian J.
Kelley, President and Derold L. Kelley, Secretary who acknowledged that they
executed the above instrument.
/s/ Maria Y. Delgado
------------------------------
Signatory of Notary
Official Seal
MARIA Y. DELGADO
Notary Public - State of Arizona
MARICOPA COUNTY
My Commission Expires Feb. 23, 2001
<PAGE>
CERTIFICATE OF CHANGE (INCREASE) IN THE NUMBER
OF AUTHORIZED SHARES OF THE $.003 PAR VALUE COMMON STOCK
OF
NEW BRIDGE PRODUCTS, INC.
Come now this 5th day of December, 1998, the President and Secretary of New
Bridge Products, Inc., a Nevada corporation, and pursuant to NRS 78.209 do
hereby state and certify as follows:
1. The name of the corporation is New Bridge Products, Inc., a Nevada
corporation.
2. The current number of authorized shares of New Bridge Products, Inc.,
$.003 par value common stock, the only class and series of stock authorized to
the company, is 8,333,333 shares, which said $.003 par value common stock shall
continue to be the only class and series of stock authorized to the company.
3. The corporation desires to and hereby certifies that the company is
increasing and has increased its $.003 par value common stock authorized to the
company from 8,333,333 shares to 20,000,000 shares of $.003 par value common
stock, and that effective as of the change in the amount of authorized $.003 par
value common stock, the total amount of $.003 par value common stock authorized
to the company shall be and is 20,000,0000 shares of $.003 par value common
stock.
4. That pursuant to NRS 78.207, not any approval is required of the
stockholders of the company; that all necessary actions, resolutions and
documentation to effectuate the increase in the number of shares authorized to
the company have been taken, adopted and completed by the Board of Directors of
New Bridge Products, Inc.
5. That the change herein described and certified shall be and is effective
as of December 15, 1998, or upon that certain date this said Certificate is
filed with and accepted as effective with and by the Secretary of State of the
state of Nevada, if that latter date is later than December 15, 1998.
6. That the President of New Bridge Products, Inc., is now and has been at
all times material hereto Brian Kelley, and that the Secretary of the company is
now and has been at all times material hereto Derold Kelley.
Witness the hands and seals of the said President and Secretary this 4th
day of December, 1998.
/s/ Brian Kelley
--------------------------------
Brian Kelley, President
/s/ Derold Kelley
--------------------------------
Derold Kelley, Secretary
State of Arizona )
)ss.
County of Maricopa )
<PAGE>
This instrument was acknowledged before me, a Notary Public, this 4th day
of December, 1998, by Brian Kelley, President of New Bridge Products, Inc., and
Derold Kelley, Secretary of New Bridge Products, Inc., on behalf of said
corporation.
/s/ Cheri R. Sanchez
----------------------------------
Notary Public
My Commission Expires:
Sept. 14, 2001
Official Seal
CHERI R. SANCHEZ
Notary Public - State of Arizona
MARICOPA COUNTY
My Commission Expires Sep. 14, 2001
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
New Bridge Products, Inc.
We the undersigned, Gary Tandy, President, and Derold Kelley, Secretary, of
New Bridge Products, Inc. a Nevada Corporation, do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held of the 13th day of July, 1999, adopted a resolution to amend the original
articles, as amended, as follows:
Article IV is hereby amended as follows:
"The authorized capital of the corporation is $150,000, and the
aggregate number of shares which the corporation shall have authority
to issue is fifty million (50,000,000) shares of common stock, each
share having a par value of $.003 per share. No shareholder or
subscriber to the capital stock of the corporation shall be under any
obligation to the corporation or its creditors with respect to such
stock other than the obligation to pay the corporation the full
consideration for which the stock value limited to the shareholder or
subscriber."
The number of shares of the corporation outstanding and entitled to vote
out an amendment to the Articles of Incorporation is 19,967,250; that pursuant
to NRS 78.320 the said changes and amendments have been attended to and approved
in writing by a majority of the stockholders holding at least a majority of each
class of stock outstanding and entitled to vote thereon.
/s/ Gary Tandy
------------------------------
Gary Tandy, President
/s/ Derold Kelley
------------------------------
Derold Kelley, Secretary
Exhibit 4.1
Number Shares
NB
NewBridge Products, Inc.
See Reverse For
Incorporated under Certain Definitions
the laws of the State of Nevada
COMMON STOCK CUSIP 642637 10 2
This Certifies That
Is The Owner Of
Fully Paid and Non-Assessable Shares of Common Stock of $.001 Par Value Each of
NewBridge Products, Inc.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Nevada,
and to the Certificate of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
Countersigned:
Executive Registrar & Transfer Agency, Inc.
P.O. Box 56517, Phoenix, AZ 85079
Transfer Agent
By:
Authorized Signature
(Seal Graphic Omitted)
/s/ Signature on File /s/ Signature on File
Secretary C.E.O.
<PAGE>
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:
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 in common Act
(State)
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 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
--------------------------------
----------------------------------------
NOTICE: The Signature to this Assignment
Must Correspond with the Name as Written
Upon the Face of the Certificate in
Every Particular, Without Alteration or
Enlargement or any Change Whatsoever.
The Signature to this Assignment Must Correspond with the Name as Written Upon
the Face of the Certificate in Every Particular, Without Alteration or
Enlargement or any Change Whatsoever, and Must be Guaranteed by a Commercial
Bank or Trust Company or a Member Firm of a National or Regional or Other
Recognized Stock Exchange in Conformance with a Signature Guarantee Medallion
Program.
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the sixth
(12th) day of August, 1995, between Care Concepts, Inc.,,a Nevada corporation
(the "Company"), and Jack D. Kelley (the "Employee").
RECITALS
A. The Company is engaged, among other things, in the business of
developing, building and marketing specialized motor vehicles for physically
handicapped drivers and passengers. The Employee has been employed by the
Company since its inception and has substantial experience and expertise in
managing and operating the business of the Company.
B. The Company desires to retain the services of the Employee as its
President and Chief Executive Officer, and the Employee desires and is willing
to continue employment with the Company in that capacity.
C. The Company and Employee desire to embody the terms and conditions of
the Employee's employment in a written agreement, which will supersede all prior
agreements of employment, whether written or oral, pursuant to the terms and
conditions hereinafter set forth.
NOW, THEREFORE THE PARTIES AGREE AS FOLLOWS:
TERMS AND CONDITIONS
1. Employment. The Employee is employed as President and Chief Executive
Officer of the Company from the Effective Date (as hereinafter defined) through
the Term of this Agreement (as hereinafter defined). The Employee shall have
such duties and responsibilities as shall be allocated to him from time to time
by the Board of Directors of the Company (the "Board") in his capacity as the
President and as the Chief Executive Officer of the Company. During the Term of
this Agreement, the Employee shall be based in the principal offices of the
Company in Phoenix, Arizona, and shall not be required to be based anywhere
other than Phoenix, Arizona, except for travel as reasonably required in the
performance of his duties hereunder.
2. Term. The Term of this Agreement shall be f or a period of five (5)
years, commencing on the Effective Date.
3. Effective Date. The Effective Date of this Agreement shall be the, date
hereof.
4. Salary. Subject to the further provisions of this Agreement, the Company
agrees to pay the Employee: during the first (lst) year of salary at an annual
rate-equal to an annual rate of $70,000 with an increase of 10% in each
subsequent year of the Term of this Agreement. Notwithstanding the foregoing,
the salary of the Employee shall not be decreased at any time during the Term of
this Agreement from the amount of salary then in effect. Participation in
deferred compensation, bonus, retirement and other employee benefit plans and in
fringe benefits shall not reduce the salary payable to the Employee under this
Section 4. The salary under this Section 4 shall be payable by the Company to
the Employee in advance in equal bi-weekly installments, or on such other
periodic basis as the Company and the Employee may agree but in any case not
less frequently than monthly.
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5. Bonuses. Subject to the further provisions of this Agreement, during the
Term of this Agreement, the Employee shall be entitled to participate in an
equitable manner with all other senior executives of the Company in such
bonuses, including but not limited to, bonuses provided pursuant to any
management bonus plan that the Company may adopt (based upon the performance of
the Employee and the Company), as may be authorized, declared and paid by the
Board to its senior executives or paid by any person in control of the Company
to that person's senior executives (the "Annual Bonus"). No other compensation
provided for in this Agreement shall be deemed a substitute for the Employee's
right to participate in such bonuses when and as declared by such Board of
Directors or person in control of the Company. Nothing in this Section shall be
deemed to limit the ability of the Employee to be paid and receive bonuses from
the Company, based solely on the Employee's performance, without regard to the
payment of bonuses to any other officers of the Company.
Without limiting the foregoing or any other provisions of this Agreement,
the Company shall pay to the Employee, within thirty (30) days, or within such
other period as the Employee and the Company may designate, of the filing of the
Company's Form 10K with the Securities and Exchange Commission for each of the
next five (5) years commencing with the year ending December 31, 1995, a bonus
equal to one point sixty seven percent (1.67%) of each year's pre-tax income of
the Company as shown on the Form 10K for each such year provided pre-tax income
is in excess of $1,000,000 (the "1.67% Bonus").
6. Participation in Retirement and- Employee Benefit Plans. The Employee
shall be entitled to participate in any plan of the Company relating to stock
options, restricted stock awards, stock purchases, pension, thrift, profit
sharing, life insurance, medical coverage, education or other retirement or
employee benefits that the Company has adopted or may adopt for the benefit of
its senior executives.
7. Fringe Benefits. In addition to the benefit plans referred to in Section
6 hereof, the Employee shall be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Company's senior
executives, and any other benefits which are commensurate with the duties and
responsibilities to be performed by the Employee under this Agreement.
Notwithstanding the foregoing, the benefits provided under this Section 7 shall
not be decreased following a Change in Control (as hereinafter defined) without
the written consent of the Employee, which consent may be withheld for any
reason; provided, however, that the benefits provided under this Section 7 shall
cease upon the Employee I s Date of Termination (as herein after defined).
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<PAGE>
8. Voluntary Absences; Vacations. The Employee shall be entitled, without
loss of pay, to be absent voluntarily for reasonable periods of time from the
performance of the duties and responsibilities of the Employee under this
Agreement. All such voluntary absences shall count as paid vacation time, unless
the Board otherwise determines. As of the Effective Date, the Employee shall be
entitled to an annual paid vacation of twenty-five (25) days per year or such
longer period as the Board may approve, which vacation time shall be in addition
to Saturdays, Sundays and holidays recognized by the Company. The timing of paid
vacations shall be scheduled in a manner reasonably acceptable to the Company.
9. Termination.
(a) Termination for Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the full-time performance of the Employee's duties with the Company
for six (6) consecutive months, and within thirty (30) days after written notice
of termination is given, the Employee shall not have returned to the full-time
performance of the Employee's duties, the Employee's employment may be
terminated by the Company for "Disability."
(b) Termination for Cause. Subject to the notice provisions set forth in
subsection (c) below, the Company may terminate the Employee's employment for
"Cause" at any time. "Cause" shall mean termination upon (i) the willful failure
by the Employee to substantially perform the Employee's duties with the Company
(other than any such failure resulting from the Employee's incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Employee by the Board, which demand specifically identifies
the manner in which the Board believes that the Employee has not substantially
performed the Employee's duties,, (ii) the willful engaging by the Employee in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise, or (iii) the conviction of the Employee of a felony.
For purposes of this subsection (b), no act,, or failure to act, on the
Employee's part shall be deemed "willful,, unless done, or omitted to be done,
by the Employee not in.good faith and without the reasonable belief that such
action or omission was in the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds
(2/3) of the entire membership of the Board (exclusive of the Employee if the
Employee is a member of the Board) at a meeting of such Board (after reasonable
notice to the Employee and an opportunity for the Employee, together with the
Employee's counsel, to be heard before such Board) , finding that the Employee
has engaged in the conduct set forth above in this subsection (b) and specifying
the particulars thereof in detail.
(c) Notice of Termination. Any termination of the Employee's employment by
the Company or by the Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13. "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision of this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for the termination of
the Employee's employment under the provision so indicated.
(d) Date of Termination, Etc. The term "Date of Termination"shall mean (i)
if the Employee's employment is terminated by the Employee's death, the last day
of the sixth month after the date of his death; (ii) if the Employee's
employment is terminated for Disability, thirty (30) days after the Notice of
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<PAGE>
Termination is given (provided that the Employee shall not have returned to the
full-time performance of the Employee's duties during such thirty (30)-day
period); (iii) if the Employee's employment is terminated for Cause, the date
specified in the Notice of Termination (which shall not be less than thirty (30)
days from the date such Notice of Termination is given) ; and (iv) if the
Employee's employment is terminated for any other reason, the date specified in
the Notice of Termination.
(e) Change in Control. A "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(i) Any "person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the"Exchange Act") or "persons"
acting in concert, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty five percent (25%) or more of the combined voting
power of the Company's then outstanding securities; provided that the term
"person" for purposes of this Section 9 (e) (i) shall exclude the Company; any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company; or
(ii) In the event Jack D. Kelley, Brian J. Kelley and Derold L. Kelley, or
the nominees of any of them or their personal representatives or estates cease
for any reason to constitute a majority of the Board other than by reason of
voluntary withdrawal or resignation; or
(iii) The stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving-
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at least
seventy-five percent (75%) of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no person
acquires more than fifty percent (50%) of the combined voting power of the
Company's then outstanding securities; or
(iv) The stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement f or the sale or disposition by the Company of
all or substantially all the Company=s assets.
For purposes of Section 9(e)(ii), a nominee means a person serving on the
Board of Directors in place of and occupying the seat formerly occupied by Jack
D. Kelley, Brian J. Kelley or Derold L. Kelley who shall have been voluntarily
nominated by any of them or their personal representatives or estates.
(f) Termination for Good Reason. At any time following a Change in Control,
the Employee may terminate his employment hereunder for "Good Reason". "Good
Reason" shall mean the occurrence (without the Employee's express written
consent, which consent may be withheld for any reason) of any one of the
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<PAGE>
following acts by the Company, or failures by the Company to act, unless, in
the case of any act or failure to act described in paragraphs (i), (v), (vi)
or (vii) below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof:
(i) The assignment to the Employee of any duties inconsistent with the
Employee's status as the senior executive of the Company or a substantially
adverse alteration in the nature or status of the Employee's responsibilities
from those in effect immediately prior to the Change in Control;
(ii) A reduction by the Company in the Employee's annual base salary
as in ef f ect on the date hereof or as the same may be increased from time to
time;
(iii) The relocation of the Company's principal offices to a location
outside of Phoenix, Arizona (or, if different, the metropolitan area in which
such offices are located immediately prior to the Change in Control) or the
Company's requiring the Employee to be based anywhere other than the Company's
principal executive office (or, if different, the metropolitan area in which
such offices are located immediately prior to the Change in Control), except for
required travel on the Company's business to an extent substantially consistent
with the Employee's present business travel obligations;
(iv) The failure by the Company, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation, or to
pay to the Employee any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven (7) days of the
date such compensation is due;
(v) The failure by the Company to continue in effect any compensation
plan in which the Employee participates immediately prior to the capital change
in capital control which is material to the Employee's total compensation,
unless an equitable arrangement approved in writing by the Employee (embodied in
an ongoing substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the Employee's participation
therein (or in such substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount of benef its provided and the level
of the Employee's participation relative to other participants, as existed
immediately prior to the Change in Control;
(vi) The f ailure by the Company to continue to provide the Employee
with benef its substantially similar to those enjoyed by the Employee under any
of the Company's pension, life insurance, medical, health and accident,
disability or other plans in which the Employee was participating immediately
prior to the Change in Control, the taking oi any action by the Company which
would directly or indirectly materially reduce any of such benefits or deprive
the Employee of any material fringe benefit enjoyed by the Employee immediately
prior to the Change in Control, or the failure by the Company to provide the
Employee with the number of paid vacation days to which the Employee is entitled
on the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect immediately prior to the Change in
Control; or
(viii) Any purported termination of the Employee's employment which is
not ef f ected pursuant to a Notice of Termination satisfying the requirements
of this Agreement; f or purposes of this Agreement, no such purported
termination shall be effective. The Employee=s right to terminate the Employee's
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<PAGE>
employment for Good Reason shall not be affected by the Employee's incapacity
due to physical or mental illness. The Employee Is continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
10. Compensation upon Termination or During Disability. The Employee shall
be entitled to the following benefits during a period of disability, or upon
termination of the Employee's employment, as the case may be, provided that such
period or termination occurs during the Term of this Agreement;
(a) During any period that the Employee fails to perform his full-time
duties with the Company as a result of incapacity due to physical or mental
illness, the Employee shall continue to receive the Employee's base salary at
the rate in effect at the commencement of any such period, together with all
compensation payable to the Employee under the Company's disability plan or
program or other plan during such period, until the Employee's employment is
terminated pursuant to Section 9(a) hereof. Thereafter, or in the event the
Employee's employment shall be terminated by reason of the Employee's death, the
Employee's benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(b) If at any time the Employee's employment shall be terminated (i)
by reason of the Employee's death, (ii) by the, Company for Cause or Disability
or (iii) by the Employee for any reason (other than, following the occurrence of
a Change in Control, for Good Reason), the Company shall pay him or the
appropriate payee, as the case may be (as determined in accordance with Section
11(b) hereof) the Employee's full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which the Employee is entitled under any compensation plan of the
Company At the time such payments are due, and the Company shall have no further
obligations to the Employee under this Agreement.
(c) If, prior to a Change in Control, the Employee's employment should
be terminated by the Company other than for Cause or Disability, the Employee
shall be entitled to the benefits provided below:
(i) The Company shall pay to the Employee his full base salary through
the Date of Termination at the rate in effect at the time the Notice of
Termination is given, no later than the fifth (Sth) day following the Date of
Termination, plus all other amounts to which he is entitled under any
compensation plan of the Company, at the time such payments are due;
(ii) The Company shall pay the Employee, in a lump sum payment, no
later than the fifth (Sth) day following the Date of Termination, all salary,
annual bonus payments and two percent (2%) bonus payments that would have been
payable to the Employee pursuant to this Agreement had the Employee continued to
be employed for the remaining Term of this Agreement, assuming for the purpose
of such continuing payments that the Employee's salary for each year of such
remaining Term is equal to his salary at the Date of Termination and that his
annual bonus and two percent (2%) bonus for each year of such remaining Term is
equal to the average of the annual bonuses and two percent (2%) bonuses paid to
him by the Company with respect to the three (3) fiscal years ended immediately
prior to the fiscal year in which the Date of Termination occurs; and
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<PAGE>
(iii) The Company shall continue in effect for the benefit of the
Employee all insurance or other provisions for indemnification and defense of
officers or directors of the Company which are in effect on the date the Notice
of Termination is sent to the.Employee with respect to all of his acts an
omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against actions which may be applicable to such acts or
omissions.
(d) If, following a Change in Control, the Employee's employment
should be terminated by the Company other than for Cause or Disability, of the
Employee's employment should be terminated by the Employee for Good Reason, he
shall be entitled to the benefits provided below:
(i) The Company shall pay to the Employee in a lump sum payment no
later than the fifth (5th) day following the Date of Termination all salary
through the Date of Termination at the rate in effect at the time the Notice of
Termination is given, plus all salary, annual bonus payments and two percent
(2%) bonus payments that would have been payable to the Employee pursuant to
this Agreement had the Employee continued to be employed for the remaining Term
of this Agreement, assuming for the purpose of such payments that his salary for
each year of such remaining Term is equal to his salary at the Date of
Termination and that his annual bonus and two percent (2%) bonus for each year
of such remaining Term is equal to the average of the annual bonuses and two
percent (2%) bonuses paid to him by the Company with respect to the three (3)
fiscal years ended immediately prior to the fiscal year in which the Date of
Termination occurs; plus all other amounts to which he is entitled under any
compensation plan of the Company, and
(ii) An amount equal to 2.98 times the total compensation paid and
payable to the employee under this agreement during and f or the year in which
the change of control occurs in a total lump sum to be paid to Employee under
Section 10(d)(i), above.
(iii) The Company shall continue in effect for the benefit o the
Employee all insurance or other provisions for indemnification and def ense of
of f icers or directors of the Company which are in ef f ect on the date the
Notice of Termination is sent to the Employee with respect to all of his acts
and omissions while an officer or director as f ully and completely Ai3 if such
termination had not o'ccurred, and until the final expiration or running of all
periods of limitation against actions which may be applicable to such acts or
omissions.
(e) The Employee shall not be required to mitigate the amountof any
payment provided for in this Section 10 by seeking other employment or
otherwise.
(f) In the event the employment of the Employee is terminated by the
Company without Cause or the Employee's employment is terminated by the Employee
under conditions entitling him to payment hereunder and the Company f ails to
make timely payment of the amounts then owed to the Employee under this
Agreement, the Employee shall be entitled to interest on such amounts at the
rate of five percent (5%) above the prime rate (defined as the base rate on
corporate loans at large U.S. money center commercial banks as published by the
Wall Street Journal), compounded monthly, for the period from the date such
amounts were otherwise due until payment is made to the Employee (which interest
shall be in addition to all rights which the Employee is otherwise entitled to
under this Agreement.)
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11. No Assignments. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto, except
that this Agreement shall be binding upon and inure to the benefit of any
successor corporation to the Company.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Employee and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amount would still be payable to him hereunder had
he continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his devisee, legatee
or other designee or, if there is no such designee, to his estate.
12. Noncompetition. As part of the Employee's employment with the Company,
the parties acknowledge that the Employee has executed and delivered to the
Company a Nondisclosure and Noncompetition Agreement, dated as of the date
hereof.
13. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other
addresses as either party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt:
To the Company: Care Concepts, Inc.
Attention: Secretary 3145 W. Lewis
Phoenix, Arizona 85009
To the Employee: Jack D. Kelley
3145 W. Lewis
Phoenix, Arizona 85009
14. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by all parties hereto.
15. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation.of this Agreement.
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16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not af f
ect the validity or enf orceability of the other provisions hereof.
17. Counterparts. This Agreement may be executed in several counter-parts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
18. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Phoenix, Arizona in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrators award in any court having jurisdiction; provided,
however, that the Employee shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement. The
costs and expenses of such arbitration shall be borne in accordance with the
determination of the arbitrators.
19. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
pr3.or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Arizona without regard to its conflicts of law
principles.
All references to sections of the Exchange Act shall be deemed also to refer to
any successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state or
local law. The obligations of the Company under section 10 and Section 12 shall
survive the expiration of the Term of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first indicated above.
THE COMPANY:
CARE CONCEPTS, INC.
a Nevada corporation
Attest: By:
------------------------------- -------------------------------
Derold L. Kelley Secretary Brian J. Kelley, Executive
Vice President
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EMPLOYEE:
----------------------------------------
Jack D. Kelley
JK 1st year $70,000 95 96
2nd year $77,000 96 97
3rd year $84,700 97 98
4th year $93.170 98 99 /12 = 7,674.16 x 4 months $31,057
5th year $102,487 99 00 93,170/26=3,983.46
BK 1st year $65,000
2nd year $71,500
3rd year $78,650
4th year $86,525 /12 = 7,209.58 86,515/26=3,327.50
5th year $95,165
DK 1st year $60,000
2nd year $66,000
3rd year $72,600
4th year $79,860 /12 = 6,655.00 79,860/26= 3,071,53
5th year $87,846
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JK 5th year $102,487 (first 6 months 99 $93,170 annually)
BK 5th year $ 95,165
DK 5th year $ 87,846
Paid July 99 one month $4,829.12 New Bridge Products, Inc. (Owed 5 months pay)
11
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the sixth
(12th) day of August, 1995, between Care Concepts, Inc.,,a Nevada corporation
(the "Company"), and Darold L. Kelley (the "Employee").
RECITALS
A. The Company is engaged, among other things, in the business of
developing, building and marketing specialized motor vehicles for physically
handicapped drivers and passengers. The Employee has been employed by the
Company since its inception and has substantial experience and expertise in
managing and operating the business of the Company.
B. The Company desires to retain the services of the Employee as its
President and Chief Executive Officer, and the Employee desires and is willing
to continue employment with the Company in that capacity.
C. The Company and Employee desire to embody the terms and conditions of
the Employee's employment in a written agreement, which will supersede all prior
agreements of employment, whether written or oral, pursuant to the terms and
conditions hereinafter set forth.
NOW, THEREFORE THE PARTIES AGREE AS FOLLOWS:
TERMS AND CONDITIONS
1. Employment. The Employee is employed as President and Chief Executive
Officer of the Company from the Effective Date (as hereinafter defined) through
the Term of this Agreement (as hereinafter defined). The Employee shall have
such duties and responsibilities as shall be allocated to him from time to time
by the Board of Directors of the Company (the "Board") in his capacity as the
President and as the Chief Executive Officer of the Company. During the Term of
this Agreement, the Employee shall be based in the principal offices of the
Company in Phoenix, Arizona, and shall not be required to be based anywhere
other than Phoenix, Arizona, except for travel as reasonably required in the
performance of his duties hereunder.
2. Term. The Term of this Agreement shall be f or a period of five (5)
years, commencing on the Effective Date.
3. Effective Date. The Effective Date of this Agreement shall be the, date
hereof.
4. Salary. Subject to the further provisions of this Agreement, the Company
agrees to pay the Employee: during the first (lst) year of salary at an annual
rate-equal to an annual rate of $60,000 with an increase of 10% in each
subsequent year of the Term of this Agreement. Notwithstanding the foregoing,
the salary of the Employee shall not be decreased at any time during the Term of
this Agreement from the amount of salary then in effect. Participation in
deferred compensation, bonus, retirement and other employee benefit plans and in
fringe benefits shall not reduce the salary payable to the Employee under this
Section 4. The salary under this Section 4 shall be payable by the Company to
the Employee in advance in equal bi-weekly installments, or on such other
periodic basis as the Company and the Employee may agree but in any case not
less frequently than monthly.
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5. Bonuses. Subject to the further provisions of this Agreement, during the
Term of this Agreement, the Employee shall be entitled to participate in an
equitable manner with all other senior executives of the Company in such
bonuses, including but not limited to, bonuses provided pursuant to any
management bonus plan that the Company may adopt (based upon the performance of
the Employee and the Company), as may be authorized, declared and paid by the
Board to its senior executives or paid by any person in control of the Company
to that person's senior executives (the "Annual Bonus"). No other compensation
provided for in this Agreement shall be deemed a substitute for the Employee's
right to participate in such bonuses when and as declared by such Board of
Directors or person in control of the Company. Nothing in this Section shall be
deemed to limit the ability of the Employee to be paid and receive bonuses from
the Company, based solely on the Employee's performance, without regard to the
payment of bonuses to any other officers of the Company.
Without limiting the foregoing or any other provisions of this Agreement,
the Company shall pay to the Employee, within thirty (30) days, or within such
other period as the Employee and the Company may designate, of the filing of the
Company's Form 10K with the Securities and Exchange Commission for each of the
next five (5) years commencing with the year ending December 31, 1995, a bonus
equal to one point sixty seven percent (1.67%) of each year's pre-tax income of
the Company as shown on the Form 10K for each such year provided pre-tax income
is in excess of $1,000,000 (the "1.67% Bonus").
6. Participation in Retirement and- Employee Benefit Plans. The Employee
shall be entitled to participate in any plan of the Company relating to stock
options, restricted stock awards, stock purchases, pension, thrift, profit
sharing, life insurance, medical coverage, education or other retirement or
employee benefits that the Company has adopted or may adopt for the benefit of
its senior executives.
7. Fringe Benefits. In addition to the benefit plans referred to in Section
6 hereof, the Employee shall be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Company's senior
executives, and any other benefits which are commensurate with the duties and
responsibilities to be performed by the Employee under this Agreement.
Notwithstanding the foregoing, the benefits provided under this Section 7 shall
not be decreased following a Change in Control (as hereinafter defined) without
the written consent of the Employee, which consent may be withheld for any
reason; provided, however, that the benefits provided under this Section 7 shall
cease upon the Employee I s Date of Termination (as herein after defined)
8. Voluntary Absences; Vacations. The Employee shall be entitled, without
loss of pay, to be absent voluntarily for reasonable periods of time from the
performance of the duties and responsibilities of the Employee under this
Agreement. All such voluntary absences shall count as paid vacation time, unless
the Board otherwise determines. As of the Effective Date, the Employee shall be
entitled to an annual paid vacation of twenty-five (25) days per year or such
longer period as the Board may approve, which vacation time shall be in addition
to Saturdays, Sundays and holidays recognized by the Company. The timing of paid
vacations shall be scheduled in a manner reasonably acceptable to the Company.
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9. Termination.
(a) Termination for Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the full-time performance of the Employee's duties with the Company
for six (6) consecutive months, and within thirty (30) days after written notice
of termination is given, the Employee shall not have returned to the full-time
performance of the Employee's duties, the Employee's employment may be
terminated by the Company for "Disability.@
(b) Termination for Cause. Subject to the notice provisions set forth in
subsection (c) below, the Company may terminate the Employee's employment for
"Cause" at any time. "Cause" shall mean termination upon (i) the willful failure
by the Employee to substantially perform the Employee's duties with the Company
(other than any such failure resulting from the Employee's incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Employee by the Board, which demand specifically identifies
the manner in which the Board believes that the Employee has not substantially
performed the Employee's duties,, (ii) the willful engaging by the Employee in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise, or (iii) the conviction of the Employee of a felony.
For purposes of this subsection (b), no act,, or failure to act, on the
Employee's part shall be deemed "willful, unless done, or omitted to be done,
by the Employee not in.good faith and without the reasonable belief that such
action or omission was in the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds
(2/3) of the entire membership of the Board (exclusive of the Employee if the
Employee is a member of the Board) at a meeting of such Board (after reasonable
notice to the Employee and an opportunity for the Employee, together with the
Employee's counsel, to be heard before such Board) , finding that the Employee
has engaged in the conduct set forth above in this subsection (b) and specifying
the particulars thereof in detail.
(c) Notice of Termination. Any termination of the Employee's employment by
the Company or by the Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13. "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision of this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for the termination of
theEmployee's employment under the provision so indicated.
(d) Date of Termination, Etc. The term "Date of Termination"shall mean (i)
if the Employee's employment is terminated by the Employee's death, the last day
of the sixth month after the date of his death; (ii) if the Employee's
employment is terminated for Disability, thirty (30) days after the Notice of
Termination is given (provided that the Employee shall not have returned to the
full-time performance of the Employee's duties during such thirty (30)-day
period); (iii) if the Employee's employment is terminated for Cause, the date
specified in the Notice of Termination (which shall not be less than thirty (30)
days from the date such Notice of Termination is given) ; and (iv) if the
Employee's employment is terminated for any other reason, the date specified in
the Notice of Termination.
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(e) Change in Control. A "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(i) Any "person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the"Exchange Act") or "persons"
acting in concert, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) ,directly or indirectly, of securities of the
Company representing twenty five percent (25%) or more of the combined voting
power of the Company's then outstanding securities; provided that the term
"person" for purposes of this Section 9 (e) (i) shall exclude the Company; any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company; or
(ii) In the event Jack D. Kelley, Brian J. Kelley and Derold L. Kelley, or
the nominees of any of them or their personal representatives or estates cease
for any reason to constitute a majority of the Board other than by reason of
voluntary withdrawal or resignation; or
(iii) The stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving-
entity) , in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at least
seventy-five percent (75%) of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no person
acquires more than fifty percent (50%) of the combined voting power of the
Company's then outstanding securities; or
(iv) The stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement f or the sale or disposition by the Company of
all or substantially all the Company=s assets.
For purposes of Section 9(e)(ii), a nominee means a person serving on the
Board of Directors in place of and occupying the seat formerly occupied by Jack
D. Kelley, Brian J. Kelley or Derold L. Kelley who shall have been voluntarily
nominated by any of them or their personal representatives or estates.
(f) Termination for Good Reason. At any time following a Change in Control,
the Employee may terminate his employment hereunder for "Good Reason". "Good
Reason" shall mean the occurrence (without the Employee's express written
consent, which consent may be withheld for any reason) of any one of the
following acts by the Company,, or failures by the Company to act, unless, in
the case of any act or failure to act described in paragraphs (i) , (v) , (vi)
or (vii) below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof:
(i) The assignment to the Employee of any duties inconsistent with the
Employee's status as the senior executive of the Company or a substantially
adverse alteration in the nature or status of the Employee's responsibilities
from those in effect immediately prior to the Change in Control;
(ii) A reduction by the Company in the Employee's annual base salary
as in ef f ect on the date hereof or as the same may be increased from time to
time;
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<PAGE>
(iii) The relocation of the Company's principal offices to a location
outside of Phoenix, Arizona (or, if different, the metropolitan area in which
such offices are located immediately prior to the Change in Control) or the
Company's requiring the Employee to be based anywhere other than the Company's
principal executive office (or, if different, the metropolitan area in which
such offices are located immediately prior to the Change in Control), except for
required travel on the Company's business to an extent substantially consistent
with the Employee's present business travel obligations;
(iv) The failure by the Company, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation, or to
pay to the Employee any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven (7) days of the
date such compensation is due;
(v) The failure by the Company to continue in effect any compensation
plan in which the Employee participates immediately prior to the capital change
in capital control which is material to the Employee's total compensation,
unless an equitable arrangement approved in writing by the Employee (embodied in
an ongoing substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the Employee's participation
therein (or in such substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount of benef its provided and the level
of the Employee's participation relative to other participants, as existed
immediately prior to the Change in Control;
(vi) The f ailure by the Company to continue to provide the Employee
with benef its substantially similar to those enjoyed by the Employee under any
of the Company's pension, life insurance, medical, health and accident,
disability or other plans in which the Employee was participating immediately
prior to the Change in Control, the taking oi any action by the Company which
would directly or indirectly materially reduce any of such benefits or deprive
the Employee of any material fringe benefit enjoyed by the Employee immediately
prior to the Change in Control, or the failure by the Company to provide the
Employee with the number of paid vacation days to which the Employee is entitled
on the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect immediately prior to the Change in
Control; or
(viii) Any purported termination of the Employee's employment which is
not ef f ected pursuant to a Notice of Termination satisfying the requirements
of this Agreement; f or purposes of this Agreement, no such purported
termination shall be effective. The Employee=s right to terminate the Employee=s
employment for Good Reason shall not be affected by the Employee's incapacity
due to physical or mental illness. The Employee Is continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
10. Compensation upon Termination or During Disability. The Employee shall
be entitled to the following benefits during a period of disability, or upon
termination of the Employee's employment, as the case may be, provided that such
period or termination occurs during the Term of this Agreement;
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<PAGE>
(a) During any period that the Employee fails to perform his full-time
duties with the Company as a result of incapacity due to physical or mental
illness, the Employee shall continue to receive the Employee's base salary at
the rate in effect at the commencement of any such period, together with all
compensation payable to the Employee under the Company's disability plan or
program or other plan during such period, until the Employee's employment is
terminated pursuant to Section 9(a) hereof. Thereafter, or in the event the
Employee's employment shall be terminated by reason of the Employee's death, the
Employee's benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(b) If at any time the Employee's employment shall be terminated (i)
by reason of the Employee's death, (ii) by the, Company for Cause or Disability
or (iii) by the Employee for any reason (other than, following the occurrence of
a Change in Control, for Good Reason), the Company shall pay him or the
appropriate payee, as the case may be (as determined in accordance with Section
11(b) hereof) the Employee's full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which the Employee is entitled under any compensation plan of the
Company At the time such payments are due, and the Company shall have no further
obligations to the Employee under this Agreement.
(c) If, prior to a Change in Control, the Employee's employment should
be terminated by the Company other than for Cause or Disability, the Employee
shall be entitled to the benefits provided below:
(i) The Company shall pay to the Employee his full base salary through
the Date of Termination at the rate in effect at the time the Notice of
Termination is given, no later than the fifth (Sth) day following the Date of
Termination, plus all other amounts to which he is entitled under any
compensation plan of the Company, at the time such payments are due;
(ii) The Company shall pay the Employee, in a lump sum payment, no
later than the fifth (Sth) day following the Date of Termination, all salary,
annual bonus payments and two percent (2%) bonus payments that would have been
payable to the Employee pursuant to this Agreement had the Employee continued to
be employed for the remaining Term of this Agreement, assuming for the purpose
of such continuing payments that the Employee's salary for each year of such
remaining Term is equal to his salary at the Date of Termination and that his
annual bonus and two percent (2%) bonus for each year of such remaining Term is
equal to the average of the annual bonuses and two percent (2%) bonuses paid to
him by the Company with respect to the three (3) fiscal years ended immediately
prior to the fiscal year in which the Date of Termination occurs; and
(iii) The Company shall continue in effect for the benefit of the
Employee all insurance or other provisions for indemnification and defense of
officers or directors of the Company which are in effect on the date the Notice
of Termination is sent to the.Employee with respect to all of his acts an
omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against actions which may be applicable to such acts or
omissions.
(d) If, following a Change in Control, the Employee's employment
should be terminated by the Company other than for Cause or Disability, of the
Employee's employment should be terminated by the Employee for Good Reason, he
shall be entitled to the benefits provided below:
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<PAGE>
(i) The Company shall pay to the Employee in a lump sum payment no
later than the fifth (5th) day following the Date of Termination all salary
through the Date of Termination at the rate in effect at the time the Notice of
Termination is given, plus all salary, annual bonus payments and two percent
(2%) bonus payments that would have been payable to the Employee pursuant to
this Agreement had the Employee continued to be employed for the remaining Term
of this Agreement, assuming for the purpose of such payments that his salary for
each year of such remaining Term is equal to his salary at the Date of
Termination and that his annual bonus and two percent (2%) bonus for each year
of such remaining Term is equal to the average of the annual bonuses and two
percent (2%) bonuses paid to him by the Company with respect to the three (3)
fiscal years ended immediately prior to the fiscal year in which the Date of
Termination occurs; plus all other amounts to which he is entitled under any
compensation plan of the Company, and
(ii) An amount equal to 2.98 times the total compensation paid and
payable to the employee under this agreement during and f or the year in which
the change of control occurs in a total lump sum to be paid to Employee under
Section 10(d)(i), above.
(iii) The Company shall continue in effect for the benefit o the
Employee all insurance or other provisions for indemnification and def ense of
of f icers or directors of the Company which are in ef f ect on the date the
Notice of Termination is sent to the Employee with respect to all of his acts
and omissions while an officer or director as f ully and completely Ai3 if such
termination had not o'ccurred, and until the final expiration or running of all
periods of limitation against actions which may be applicable to such acts or
omissions.
(e) The Employee shall not be required to mitigate the amountof any
payment provided for in this Section 10 by seeking other employment or
otherwise.
(f) In the event the employment of the Employee is terminated by the
Company without Cause or the Employee's employment is terminated by the Employee
under conditions entitling him to payment hereunder and the Company f ails to
make timely payment of the amounts then owed to the Employee under this
Agreement, the Employee shall be entitled to interest on such amounts at the
rate of five percent (5%) above the prime rate (defined as the base rate on
corporate loans at large U.S. money center commercial banks as published by the
Wall Street Journal), compounded monthly, for the period from the date such
amounts were otherwise due until payment is made to the Employee (which interest
shall be in addition to all rights which the Employee is otherwise entitled to
under this Agreement.)
11. No Assignments. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto, except
that this Agreement shall be binding upon and inure to the benefit of any
successor corporation to the Company.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
7
<PAGE>
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Employee and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amount would still be payable to him hereunder had
he continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his devisee, legatee
or other designee or, if there is no such designee, to his estate.
12. Noncompetition. As part of the Employee's employment with the Company,
the parties acknowledge that the Employee has executed and delivered to the
Company a Nondisclosure and Noncompetition Agreement, dated as of the date
hereof.
13. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other
addresses as either party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt:
To the Company: Care Concepts, Inc.
Attention: Secretary 3145 W. Lewis
Phoenix, Arizona 85009
To the Employee: Darold L. Kelley
3145 W. Lewis
Phoenix, Arizona 85009
14. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by all parties hereto.
15. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation.of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not af f
ect the validity or enf orceability of the other provisions hereof.
17. Counterparts. This Agreement may be executed in several counter-parts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
18. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Phoenix, Arizona in accordance with
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<PAGE>
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrators award in any court having jurisdiction; provided,
however, that the Employee shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement. The
costs and expenses of such arbitration shall be borne in accordance with the
determination of the arbitrators.
19. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
pr3.or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Arizona without regard to its conflicts of law
principles.
All references to sections of the Exchange Act shall be deemed also to refer to
any successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state or
local law. The obligations of the Company under section 10 and Section 12 shall
survive the expiration of the Term of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first indicated above.
THE COMPANY:
CARE CONCEPTS, INC.
a Nevada corporation
Attest: By:
------------------------------ -----------------------------
Derold L. Kelley Secretary Jack D. Kelley, President
EMPLOYEE:
--------------------------------
Darold L. Kelley
9
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the sixth
(12th) day of August, 1995, between Care Concepts, Inc.,,a Nevada corporation
(the "Company"), and Brian J. Kelley (the "Employee").
RECITALS
A. The Company is engaged, among other things, in the business of
developing, building and marketing specialized motor vehicles for physically
handicapped drivers and passengers. The Employee has been employed by the
Company since its inception and has substantial experience and expertise in
managing and operating the business of the Company.
B. The Company desires to retain the services of the Employee as a
consultant and the Employee desires and is willing to continue employment with
the Company in that capacity.
C. The Company and Employee desire to embody the terms and conditions of
the Employee's employment in a written agreement, which will supersede all prior
agreements of employment, whether written or oral, pursuant to the terms and
conditions hereinafter set forth.
NOW, THEREFORE THE PARTIES AGREE AS FOLLOWS:
TERMS AND CONDITIONS
1. Employment. The Employee is employed as Operations Manager (revised
4-23-99) the Company from the Effective Date (as hereinafter defined) through
the Term of this Agreement (as hereinafter defined). The Employee shall have
such duties and responsibilities as shall be allocated to him from time to time
by the Board of Directors of the Company (the "Board") in his capacity as the
Operations Manager of the Company. During the Term of this Agreement, the
Employee shall be based in the principal offices of the Company in Phoenix,
Arizona, and shall not be required to be based anywhere other than Phoenix,
Arizona, except for travel as reasonably required in the performance of his
duties hereunder.
2. Term. The Term of this Agreement shall be f or a period of five (5)
years, commencing on the Effective Date.
3. Effective Date. The Effective Date of this Agreement shall be the, date
hereof.
4. Salary. Subject to the further provisions of this Agreement, the Company
agrees to pay the Employee: during the first (lst) year of salary at an annual
rate-equal to an annual rate of $65,000 with an increase of 10% in each
subsequent year of the Term of this Agreement. Notwithstanding the foregoing,
the salary of the Employee shall not be decreased at any time during the Term of
this Agreement from the amount of salary then in effect. Participation in
deferred compensation, bonus, retirement and other employee benefit plans and in
fringe benefits shall not reduce the salary payable to the Employee under this
Section 4. The salary under this Section 4 shall be payable by the Company to
the Employee in advance in equal bi-weekly installments, or on such other
periodic basis as the Company and the Employee may agree but in any case not
less frequently than monthly.
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5. Bonuses. Subject to the further provisions of this Agreement, during the
Term of this Agreement, the Employee shall be entitled to participate in an
equitable manner with all other senior executives of the Company in such
bonuses, including but not limited to, bonuses provided pursuant to any
management bonus plan that the Company may adopt (based upon the performance of
the Employee and the Company), as may be authorized, declared and paid by the
Board to its senior executives or paid by any person in control of the Company
to that person's senior executives (the "Annual Bonus"). No other compensation
provided for in this Agreement shall be deemed a substitute for the Employee's
right to participate in such bonuses when and as declared by such Board of
Directors or person in control of the Company. Nothing in this Section shall be
deemed to limit the ability of the Employee to be paid and receive bonuses from
the Company, based solely on the Employee's performance, without regard to the
payment of bonuses to any other officers of the Company.
Without limiting the foregoing or any other provisions of this Agreement,
the Company shall pay to the Employee, within thirty (30) days, or within such
other period as the Employee and the Company may designate, of the filing of the
Company's Form 10K with the Securities and Exchange Commission for each of the
next five (5) years commencing with the year ending December 31, 1995, a bonus
equal to one point sixty seven percent (1.67%) of each year's pre-tax income of
the Company as shown on the Form 10K for each such year provided pre-tax income
is in excess of $1,000,000 (the "1.67% Bonus").
6. Participation in Retirement and-Employee Benefit Plans. The Employee
shall be entitled to participate in any plan of the Company relating to stock
options, restricted stock awards, stock purchases, pension, thrift, profit
sharing, life insurance, medical coverage, education or other retirement or
employee benefits that the Company has adopted or may adopt for the benefit of
its senior executives.
7. Fringe Benefits. In addition to the benefit plans referred to in Section
6 hereof, the Employee shall be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Company's senior
executives, and any other benefits which are commensurate with the duties and
responsibilities to be performed by the Employee under this Agreement.
Notwithstanding the foregoing, the benefits provided under this Section 7 shall
not be decreased following a Change in Control (as hereinafter defined) without
the written consent of the Employee, which consent may be withheld for any
reason; provided, however, that the benefits provided under this Section 7 shall
cease upon the Employee I s Date of Termination (as herein after defined)
8. Voluntary Absences; Vacations. The Employee shall be entitled, without
loss of pay, to be absent voluntarily for reasonable periods of time from the
performance of the duties and responsibilities of the Employee under this
Agreement. All such voluntary absences shall count as paid vacation time, unless
the Board otherwise determines. As of the Effective Date, the Employee shall be
entitled to an annual paid vacation of twenty-five (25) days per year or such
longer period as the Board may approve, which vacation time shall be in addition
to Saturdays, Sundays and holidays recognized by the Company. The timing of paid
vacations shall be scheduled in a manner reasonably acceptable to the Company.
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9. Termination.
(a) Termination for Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the full-time performance of the Employee's duties with the Company
for six (6) consecutive months, and within thirty (30) days after written notice
of termination is given, the Employee shall not have returned to the full-time
performance of the Employee's duties, the Employee's employment may be
terminated by the Company for "Disability."
(b) Termination for Cause. Subject to the notice provisions set forth in
subsection (c) below, the Company may terminate the Employee's employment for
"Cause" at any time. "Cause" shall mean termination upon (i) the willful failure
by the Employee to substantially perform the Employee's duties with the Company
(other than any such failure resulting from the Employee's incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Employee by the Board, which demand specifically identifies
the manner in which the Board believes that the Employee has not substantially
performed the Employee's duties,, (ii) the willful engaging by the Employee in
conduct which is demonstrably and materially injurious to the Company,
momentarily or otherwise, or (iii) the conviction of the Employee of a felony.
For purposes of this subsection (b), no act,, or failure to act, on the
Employee's part shall be deemed "willful,, unless done, or omitted to be done,
by the Employee not in good faith and without the reasonable belief that such
action or omission was in the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds
(2/3) of the entire membership of the Board (exclusive of the Employee if the
Employee is a member of the Board) at a meeting of such Board (after reasonable
notice to the Employee and an opportunity for the Employee, together with the
Employee's counsel, to be heard before such Board) , finding that the Employee
has engaged in the conduct set forth above in this subsection (b) and specifying
the particulars thereof in detail.
(c) Notice of Termination. Any termination of the Employee's employment by
the Company or by the Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13. "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision of this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for the termination of
the employee's employment under the provision so indicated.
(d) Date of Termination, Etc. The term "Date of Termination"shall mean (i)
if the Employee's employment is terminated by the Employee's death, the last day
of the sixth month after the date of his death; (ii) if the Employee's
employment is terminated for Disability, thirty (30) days after the Notice of
Termination is given (provided that the Employee shall not have returned to the
full-time performance of the Employee's duties during such thirty (30)-day
period); (iii) if the Employee's employment is terminated for Cause, the date
specified in the Notice of Termination (which shall not be less than thirty (30)
days from the date such Notice of Termination is given) ; and (iv) if the
Employee's employment is terminated for any other reason, the date specified in
the Notice of Termination.
(e) Change in Control. A "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
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(i) Any "person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the"Exchange Act") or "persons"
acting in concert, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty five percent (25%) or more of the combined voting
power of the Company's then outstanding securities; provided that the term
"person" for purposes of this Section 9 (e) (i) shall exclude the Company; any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company; or
(ii) In the event Jack D. Kelley, Brian J. Kelley and Derold L. Kelley, or
the nominees of any of them or their personal representatives or estates cease
for any reason to constitute a majority of the Board other than by reason of
voluntary withdrawal or resignation; or
(iii) The stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving-
entity) , in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at least
seventy-five percent (75%) of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no person
acquires more than fifty percent (50%) of the combined voting power of the
Company's then outstanding securities; or
(iv) The stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement f or the sale or disposition by the Company of
all or substantially all the Company's assets.
For purposes of Section 9(e)(ii), a nominee means a person serving on the
Board of Directors in place of and occupying the seat formerly occupied by Jack
D. Kelley, Brian J. Kelley or Derold L. Kelley who shall have been voluntarily
nominated by any of them or their personal representatives or estates.
(f) Termination for Good Reason. At any time following a Change in Control,
the Employee may terminate his employment hereunder for "Good Reason". "Good
Reason" shall mean the occurrence (without the Employee's express written
consent, which consent may be withheld for any reason) of any one of the
following acts by the Company, or failures by the Company to act, unless, in
the case of any act or failure to act described in paragraphs (i), (v), (vi) or
(vii) below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof:
(i) The assignment to the Employee of any duties inconsistent with the
Employee's status as the senior executive of the Company or a substantially
adverse alteration in the nature or status of the Employee's responsibilities
from those in effect immediately prior to the Change in Control;
(ii) A reduction by the Company in the Employee's annual base salary
as in effect f ect on the date hereof or as the same may be increased from time
to time;
(iii) The relocation of the Company's principal offices to a location
outside of Phoenix, Arizona (or, if different, the metropolitan area in which
such offices are located immediately prior to the Change in Control) or the
4
<PAGE>
Company's requiring the Employee to be based anywhere other than the Company's
principal executive office (or, if different, the metropolitan area in which
such offices are located immediately prior to the Change in Control), except for
required travel on the Company's business to an extent substantially consistent
with the Employee's present business travel obligations;
(iv) The failure by the Company, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation, or to
pay to the Employee any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven (7) days of the
date such compensation is due;
(v) The failure by the Company to continue in effect any compensation
plan in which the Employee participates immediately prior to the capital change
in capital control which is material to the Employee's total compensation,
unless an equitable arrangement approved in writing by the Employee (embodied in
an ongoing substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the Employee's participation
therein (or in such substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount of benefit its provided and the
level of the Employee's participation relative to other participants, as existed
immediately prior to the Change in Control;
(vi) The f failure by the Company to continue to provide the Employee
with benefit its substantially similar to those enjoyed by the Employee under
any of the Company's pension, life insurance, medical, health and accident,
disability or other plans in which the Employee was participating immediately
prior to the Change in Control, the taking oi any action by the Company which
would directly or indirectly materially reduce any of such benefits or deprive
the Employee of any material fringe benefit enjoyed by the Employee immediately
prior to the Change in Control, or the failure by the Company to provide the
Employee with the number of paid vacation days to which the Employee is entitled
on the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect immediately prior to the Change in
Control; or
(viii) Any purported termination of the Employee's employment which is
not effect f ected pursuant to a Notice of Termination satisfying the
requirements of this Agreement; f or purposes of this Agreement, no such
purported termination shall be effective. The Employee=s right to terminate the
Employee=s employment for Good Reason shall not be affected by the Employee's
incapacity due to physical or mental illness. The Employee Is continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder.
10. Compensation upon Termination or During Disability. The Employee shall
be entitled to the following benefits during a period of disability, or upon
termination of the Employee's employment, as the case may be, provided that such
period or termination occurs during the Term of this Agreement;
(a) During any period that the Employee fails to perform his full-time
duties with the Company as a result of incapacity due to physical or mental
illness, the Employee shall continue to receive the Employee's base salary at
5
<PAGE>
the rate in effect at the commencement of any such period, together with all
compensation payable to the Employee under the Company's disability plan or
program or other plan during such period, until the Employee's employment is
terminated pursuant to Section 9(a) hereof. Thereafter, or in the event the
Employee's employment shall be terminated by reason of the Employee's death, the
Employee's benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(b) If at any time the Employee's employment shall be terminated (i)
by reason of the Employee's death, (ii) by the, Company for Cause or Disability
or (iii) by the Employee for any reason (other than, following the occurrence of
a Change in Control, for Good Reason), the Company shall pay him or the
appropriate payee, as the case may be (as determined in accordance with Section
11(b) hereof) the Employee's full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which the Employee is entitled under any compensation plan of the
Company At the time such payments are due, and the Company shall have no further
obligations to the Employee under this Agreement.
(c) If, prior to a Change in Control, the Employee's employment should
be terminated by the Company other than for Cause or Disability, the Employee
shall be entitled to the benefits provided below:
(i) The Company shall pay to the Employee his full base salary through
the Date of Termination at the rate in effect at the time the Notice of
Termination is given, no later than the fifth (Sth) day following the Date of
Termination, plus all other amounts to which he is entitled under any
compensation plan of the Company, at the time such payments are due;
(ii) The Company shall pay the Employee, in a lump sum payment, no
later than the fifth (Sth) day following the Date of Termination, all salary,
annual bonus payments and two percent (2%) bonus payments that would have been
payable to the Employee pursuant to this Agreement had the Employee continued to
be employed for the remaining Term of this Agreement, assuming for the purpose
of such continuing payments that the Employee's salary for each year of such
remaining Term is equal to his salary at the Date of Termination and that his
annual bonus and two percent (2%) bonus for each year of such remaining Term is
equal to the average of the annual bonuses and two percent (2%) bonuses paid to
him by the Company with respect to the three (3) fiscal years ended immediately
prior to the fiscal year in which the Date of Termination occurs; and
(iii) The Company shall continue in effect for the benefit of the
Employee all insurance or other provisions for indemnification and defense of
officers or directors of the Company which are in effect on the date the Notice
of Termination is sent to the Employee with respect to all of his acts an
omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against actions which may be applicable to such acts or
omissions.
(d) If, following a Change in Control, the Employee's employment
should be terminated by the Company other than for Cause or Disability, of the
Employee's employment should be terminated by the Employee for Good Reason, he
shall be entitled to the benefits provided below:
6
<PAGE>
(i) The Company shall pay to the Employee in a lump sum payment no
later than the fifth (5th) day following the Date of Termination all salary
through the Date of Termination at the rate in effect at the time the Notice of
Termination is given, plus all salary, annual bonus payments and two percent
(2%) bonus payments that would have been payable to the Employee pursuant to
this Agreement had the Employee continued to be employed for the remaining Term
of this Agreement, assuming for the purpose of such payments that his salary for
each year of such remaining Term is equal to his salary at the Date of
Termination and that his annual bonus and two percent (2%) bonus for each year
of such remaining Term is equal to the average of the annual bonuses and two
percent (2%) bonuses paid to him by the Company with respect to the three (3)
fiscal years ended immediately prior to the fiscal year in which the Date of
Termination occurs; plus all other amounts to which he is entitled under any
compensation plan of the Company, and
(ii) An amount equal to 2.98 times the total compensation paid and
payable to the employee under this agreement during and f or the year in which
the change of control occurs in a total lump sum to be paid to Employee under
Section 10(d)(i), above.
(iii) The Company shall continue in effect for the benefit o the
Employee all insurance or other provisions for indemnification and defense of
officers or directors of the Company which are in effect on the date the Notice
of Termination is sent to the Employee with respect to all of his acts and
omissions while an officer or director as fully and completely Ai3 if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against actions which may be applicable to such acts or
omissions.
(e) The Employee shall not be required to mitigate the amountof any
payment provided for in this Section 10 by seeking other employment or
otherwise.
(f) In the event the employment of the Employee is terminated by the
Company without Cause or the Employee's employment is terminated by the Employee
under conditions entitling him to payment hereunder and the Company f ails to
make timely payment of the amounts then owed to the Employee under this
Agreement, the Employee shall be entitled to interest on such amounts at the
rate of five percent (5%) above the prime rate (defined as the base rate on
corporate loans at large U.S. money center commercial banks as published by the
Wall Street Journal), compounded monthly, for the period from the date such
amounts were otherwise due until payment is made to the Employee (which interest
shall be in addition to all rights which the Employee is otherwise entitled to
under this Agreement.)
11. No Assignments. This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto, except
that this Agreement shall be binding upon and inure to the benefit of any
successor corporation to the Company.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes this Agreement by operation of law, or otherwise.
7
<PAGE>
(b) This Agreement shall inure to the benefit of and be enforceable by
the Employee and his personal or legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Employee should die while any amount would still be payable to him hereunder had
he continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his devisee, legatee
or other designee or, if there is no such designee, to his estate.
12. Non competition. As part of the Employee's employment with the Company,
the parties acknowledge that the Employee has executed and delivered to the
Company a Non disclosure and Non competition Agreement, dated as of the date
hereof.
13. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other
addresses as either party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt:
To the Company: Care Concepts, Inc.
Attention: Secretary 3145 W. Lewis
Phoenix, Arizona 85009
To the Employee: Brain J. Kelley
3145 W. Lewis
Phoenix, Arizona 85009
14. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by all parties hereto.
15. Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or un-enforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Counterparts. This Agreement may be executed in several counter-parts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
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18. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Phoenix, Arizona in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrators award in any court having jurisdiction; provided,
however, that the Employee shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement. The
costs and expenses of such arbitration shall be borne in accordance with the
determination of the arbitrators.
19. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
pr3.or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Arizona without regard to its conflicts of law
principles.
All references to sections of the Exchange Act shall be deemed also to refer to
any successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state or
local law. The obligations of the Company under section 10 and Section 12 shall
survive the expiration of the Term of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first indicated above.
THE COMPANY:
CARE CONCEPTS, INC.
a Nevada corporation
Attest: By:
------------------------------ -----------------------------
Derold L. Kelley Secretary Jack D. Kelley, President
EMPLOYEE:
---------------------------------
Brain J. Kelley
9
Exhibit 10.4
CB INDUSTRIAL REAL ESTATE LEASE
Commercial (SINGLE-TENANT FACILITY)
FICB CB COMMERCIAL REAL ESTATE GROUP. INC.
BROKERAGE AND MANAGEMENT
LICENSED REAL ESTATE BROKER
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read In conjunction with the Basic Terms.
Section 1.01. Date of Lease: August 24, 1995
Section 1.02. Landlord (include legal entity): Mr. Elias Paul
Address of Landlord: 140 East San Miguel,. Phoenix, Arizona 85012
Section 1.03. Tenant (include legal entity): Care Concects, Inc., a Nevada
corporation
Address of Tenant: 3145 West Lewis, Phoenix, AZ
Section 1.04. Property: (include street address, approximate square footage
and description) an approximately 14,256 square foot industrial building located
at 3145 West Lewis in Phoenix Arizona
Section 1.05. Lease Term: 5 (five) years ------- months beginning on
September 1, 1995 or such other date as is specified in this Lease, and ending
on ___________________
Section 1.06. Permitted Uses: (See Article Five) conversion of vans or
vehicles for handicap use.
Section 1.07. Tenant's Guarantor: (If none, so state)
Section 1.08. Brokers: (See Article Fourteen) (If none, so state)
Landlord's Broker: CB Commercial, Rob Stephens
Tenant's Broker: Landmark Realty Advisors, Andy Mellon
Section 1.09. Commission Payable to Landlord's Broker: (See Article
Fourteen $- as per agreement
Section 1.10. Initial Security Deposit: (See Section 3.03) $6,557.76
Section 1.11. Vehicle Parking Spaces Allocated to Tenant: NIA
Section 1.12. Rent and Other Charges Payable by Tenant:
(a) BASE RENT. Five Thousand One Hundred Thirty Two and Sixteen/00 Dollars
($5,132.16) per month for the first 12 (twelve) - months, as provided
in Section 3.01, and shall be increased on the first day of the - thirteenth
month(s) after the Commencement Date, either (i) as provided in Section 3.02, or
(ii), See Rental Schedule attached.
(If (ii) is completed, then (1) and Section 3.02 are inapplicable.)
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes above the "Base Real
Property Taxes" (See Section 4.02); (il) Utilities (See Section 4.03); (iii)
Increased Insurance Premiums above "Base Premiums" (See Section 4.04); (iv)
Impounds for Tenant's Share of Insurance Premiums and Property Taxes (See
Section 4.07); (v) Maintenance, Repairs and Alterations (See Article Six).
<PAGE>
Section 1.13. Costs and Charges Payable by Landlord: (a) Base Real Property
Taxes (See Section 4.02); (b) Base Insurance Premiums (See Section 4.04(c); (c)
Maintenance and Repair (See Article Six).
Section 1.14. Landlord's Share of Profit on Assignment or Sublease: (See
Section 9.05) percent - 50 %) of the Profit (the "Landlord's Share").
Section 1.15. Riders: The following Riders are attached to and made a part
of this Lease: (If none, so state)
See Rent Schedule attached.
Addendum to Lease
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above forthe
beginning ofthe Lease Term, unless advanced or delayed under any provision of
this Lease.
1988 Southern California Chapter Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
.1 Section 2.02. Delay In Commencement. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60) -day period ends. If Tenant gives such notice, the Lease shall be cancelled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior to the
Commencement Date, Tenant's occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.
Section2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnity Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).
<PAGE>
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.
Section 3.02. Cost of Living Increases. The Base Rent shall be increased on
each date (the "Rental Adjustment Date") stated in Paragraph 1.12(a) above in
accordance with the increase in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for All Urban Consumers (all items for
the geographical Statistical Area in which the Property is located on the basis
of 1982-1984 = 100) (the "Index") as follows:
(a) The Base Rent (the "Comparison Base Rent") in effect immediately before
each Rental Adjustment Date shall be increased bythe percentage that the Index
has increased from the date (the "Comparison Date") on which payment of the
Comparison Base Rent began through the month in which the applicable Rental
Adjustment Date occurs. The Base Rent shall not be reduced by reason of such
computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase between
those two Indices, and the new Base Rent. Any Increase in the Base Rent provided
for in this Section 3.02 shall be subject to any minimum or maximum increase, if
provided for in Paragraph 1.12(a).
(b) Tenant shall pay the new Base Rent from the applicable Rental
Adjustment Date until the next Rental Adjustment Date. Landlord's notice may be
given after the applicable Rental Adjustment Date of the increase, and Tenant
shall pay Landlord the accrued rental adjustment for the months elapsed between
the effective date of the increase and Landlord's notice of such increase within
ten (10) days after Landlord's notice. If the format or components of the Index
are materially changed after the Commencement Date, Landlord shall substitute an
index which is published by the Bureau of Labor Statistics or similar agency and
which is most nearly equivalent to the Index in effect on the Commencement Date.
The substitute index shall be used to calculate the increase in the Base Rent
unless Tenant objects to such index in writing within fifteen (15) days after
receipt of Landlord's notice. If Tenant objects, Landlord and Tenant shall
submit the selection of the substitute index for binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association at its office closest to the Property. The costs of arbitration
shall be borne equally by Landlord and Tenant.
Section 3.03. Security Deposit; Increases.
(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a
cash Security Deposit in the amount set forth in Section 1.10 above. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses'any part of the Security Deposit, Tenant shall restore the Security Deposit
to its full amount within ten (10) days after Landlord's written request.
Tenant's failure to do so shall be a material default under this Lease. No
interest shall be paid on the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from its other accounts and no trust
relationship is created with respect to the Security Deposit.
(b) Each Time the Base Rent is increased, Tenant shall deposit additional
funds with Landlord sufficient to increase the Security Deposit to an amount
which bears the same relationship to the adjusted Base Rent as the initial
Security Deposit bore to the initial Base Rent.
Section 3.04. Termination; Advance Payments. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant's successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lepse provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
1988 Southern California Chapter 2 Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
INDUSTRIAL REAL ESTATE LEASE
(SINGLE-TENANT FACILITY)
CB COMMERCIAL REAL ESTATE GRoup, INC.
CB BROKERAGE AND MANAGEMENT
COMMERCIAL LICENSED REAL ESTATE BROKER
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.
Section 1.01. Date of Lease: August 24, 1995
Section 1.02. Landlord (include legal entity): Mr. Elias - Paul
Address of Landlord: 140 East San Miguel, Phoenix, Arizona 85012
Section 1.03. Tenant (include legal entity): Care Concepts, Inc., a Nevada
corporation
Address of Tenant: - 3145 West Lewis, Phoenix, AZ
Section 1.04. Property: (include street address, approximate square footage
and description) an approximately 14,256 square foot industrial building located
at 3145 West Lewis in Phoenix, Arizona
Section 1.05. Lease Term: 5 (five) - years --- months beginning on
September 1, 1995 or such other date as is specified in this Lease, and ending
on ____________________
Section 1.06. Permitted Uses: (See Article Five) conversion of vans or
vehicles for handicap use.
Section 1.07. Tenant's Guarantor: (If none, so state)
Section 1.08. Brokers: (See Article Fourteen) (If none, so state)
Landlord's Broker: CB Commercial, Rob Stephens
Tenant's Broker: Landmark Realty Advisors, Andy Mellon
Section 1.09. Commission Payable to Landlord's Broker: (See Article
Fourteen) $ as per agreement
Section 1.10. Initial Security Deposit: (See Section 3.03) $6,557.76
Section 1.11. Vehicle Parking Spaces Allocated to Tenant: N/A
Section 1.12. Rent and Other Charges Payable by Tenant:
(a) BASE RENT. Five Thousand One Hundred Thirty Two and Sixteen/00
Dollars($5,132.16) per month for the first 12 (twelve) months, as provided in
Section 3.01, and shall be increased on the first day of the thirteenth month(s)
after the Commencement Date, either (i) as provided in Section 3.02, or
(ii) See Rental Schedule attached
(if (ii) is completed, then (i) and Section 3.02 are inapplicable.)
<PAGE>
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes above the "Base Real
Property Taxes" (See Section 4.02); (ii) Utilities (See Section 4.03); (iii)
Increased Insurance Premiums above "Base Premiums" (See Section 4.04); (iv)
Impounds for Tenant's Share of Insurance Premiums and Property Taxes (See
Section 4.07); (v) Maintenance, Repairs and Alterations (See Article Six).
Section 1.13. Costs and Charges Payable by Landlord: (a) Base Real Property
Taxes (See Section 4.02); (b) Base Insurance Premiums (See Section 4.04(c); (c)
Maintenance and Repair (See Article Six).
Section l.14. Landlord's Share of Profit on Assignment or Sublease: (See
Section 9.05) percent (50%) of the Profit (the "Landlord's Share").
Section 1.15. Riders: The following Riders are attached to and made a part
of this Lease: (if none, so state)
See Rent Schedule attached.
Addendum to Lease
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
1988 Southern California Chapter 1 Initials
of the Society of Industrial
and Office Realtors," Inc. (Single-Tenant Gross Form)
<PAGE>
(Single-Tenant Gross Form) Section 2.02. Delay in Commencement. Landlord
shall not be liable to Tenant if Landlord does not deliver possession of the
Property to Tenant on the Commencement Date. Landlord's non-delivery of the
Property to Tenant on that date shall not affect this Lease or the obligations
of Tenant under this Lease except that the Commencement Date shall be delayed
until Landlord delivers possession of the Property to Tenant and the Lease Term
shall be extended for a period equal to the delay in delivery of possession of
the Property to Tenant, plus the number of days necessary to end the Lease Term
on the last day of a month. If Landlord does not deliver possession of the
Property to Tenant within sixty (60) days after the Commencement Date, Tenant
may elect to cancel this Lease by giving written notice to Landlord within ten
(10) days after the sixty (60)-day period ends. If Tenant gives such notice,
the Lease shall be cancelled and neither Landlord nor Tenant shall have any
further obligations to the other. If Tenant does not give such notice, Tenant's
right to cancel the Lease shall expire and the Lease Term shall commence upon
the delivery of possession of the Property to Tenant. If delivery of possession
of the Property to Tenant is delayed, Landlord and Tenant shall, upon such
delivery, execute an amendment to this Lease setting forth the actual
Commencement Date and expiration date of the Lease. Failure to execute such
amendment shall not affect the actual Commencement Date and expiration date of
the Lease.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior to the
Commencement Date, Tenant's occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.
Section 2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.
Section 3.02. Cost of Living Increases. The Base Rent shall be increased on
each date (the "Rental Adjustment Date") stated in Paragraph 1.12(a) above in
accordance with the increase in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for All Urban Consumers (all items for
the geographical Statistical Area in which the Property is located on the basis
of 1982-1984 = 100) (the "Index") as follows:
(a) The Base Rent (the "Comparison Base Rent") in effect immediately before
each Rental Adjustment Date shall be increased by the percentage that the Index
has increased from the date (the "Comparison Date") on which payment of the
Comparison Base Rent began through the month in which the applicable Rental
Adjustment Date occurs. The Base Rent shall not be reduced by reason of such
computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase between
those two Indices, and the new Base Rent. Any increase in the Base Rent provided
for in this Section 3.02 shall be subject to any minimum or maximum increase, if
provided for in Paragraph 1.12(a).
(b) Tenant shall pay the new Base Rent from the applicable Rental
Adjustment Date until the next Rental Adjustment Date. Landlord's notice may be
given after the applicable Rental Adjustment Date of the increase, and Tenant
shall pay Landlord the accrued rental adjustment for the months elapsed between
the effective date of the increase and Landlord's notice of such increase within
ten (10) days after Landlord's notice. If the format or components of the Index
are materially changed after the Commencement Date, Landlord shall substitute an
index which is published by the Bureau of Labor Statistics or similar agency and
which is most nearly equivalent to the Index in effect on the Commencement Date.
The substitute index shall be used to calculate the increase in the Base Rent
unless Tenant objects to such index in writing within fifteen (15) days after
receipt of Landlord's notice. If Tenant objects, Landlord and Tenant shall
submit the selection of the substitute index for binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association at its office closest to the Property. The costs of arbitration
shall be borne equally by Landlord and Tenant.
<PAGE>
Section 3.03. Security Deposit; Increases.
(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a
cash Security Deposit in the amount set forth in Section 1.10 above. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses any part of the Security Deposit, Tenant shall restore the Security Deposit
to its full amount within ten (10) days after Landlord's written request.
Tenant's failure to do so shall be a material default under this Lease. No
interest shall be paid on the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from its other accounts and no trust
relationship is created with respect to the Security Deposit.
(b) Each Time the Base Rent is increased, Tenant shall deposit additional
funds with Landlord sufficient to increase the Security Deposit to an amount
which bears the same relationship to the adjusted Base Rent as the initial
Security Deposit bore to the initial Base Rent.
Section 3.04. Termination; Advance Payments. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant's successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Sectio 4.01. Additional Rent. All charges payable by Tenant other than Base
Rent are called "Additional Rent." Unless this Lease provides otherwise, Tenant
shall pay all Additional Rent then due with the next monthly installment of Base
Rent. The term "rent" shall mean Base Rent and Additional Rent.
1988 Southern California Chapter 2 Initials
of the Society of industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
Section 4.02. Property Taxes.
(a) Real Property Taxes. Landlord shall pay the "Base Real Property Taxes"
on the Property during the Lease Term. Base Real Property Taxes are real
property taxes applicable to the Property as shown on the tax bill for the most
recent tax fiscal year ending prior to the Commencement Date. However, if the
structures on the Property are not completed by the tax lien date of such tax
fiscal year, the Base Real Property Taxes are the taxes shown on the first tax
bill showing the f ull assessed value of the Property after completion of the
structures. Tenant shall pay Landlord the amount, if any, by which the real
property taxes during the Lease Term exceed the Base Real Property Taxes.
Subject to Paragraph 4.02(c), Tenant shall make such payments within fifteen
(15) days after receipt of Landlord's statement showing the amount and
computation of such increase. Landlord shall reimburse Tenant for any real
property taxes paid by Tenant covering any period of time prior to or after the
Lease Term.
(b) Definition of "Real Property Tax."Real property tax" means:(i) any fee,
license fee, license tax, business license fee, commercial rental tax, levy,
charge, assessment, penalty or tax imposed by any taxing authority against the
Property: (ii) any tax on the Landlord's right to receive, or the receipt of,
rent or income I rom the Property or against Landlord's business of leasing the
Property; (iii) any tax or charge for fire protection, streets, sidewalks, road
maintenance, ref use or other services provided to the Property by any
governmental agency; (iv) any tax Imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; and (v) any charge or fee replacing any tax previously included within
the definition of real property tax. "Real property tax" does not, however,
include Landlord's federal or state income, franchise, inheritance or estate
taxes.
(c) Joint Assessment. If the Property is not separately assessed, Landlord
shall reasonably determine Tenant's share of the real property tax payable by
Tenant under Paragraph 4.02(a) from the assessor's worksheets or other
reasonably available Information. Tenant shall pay such share to Landlord within
fifteen (15) days after receipt of Landlord's written statement.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the Property,
Tenant shall pay Landlord the taxes for the personal property within fifteen
(15) days after Tenant receives a written statement from Landlord for such
personal property taxes.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
Section 4.04. Insurance Policies.
(a) Liability Insurance. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (I) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (III) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result f rom the negligence of Tenant. The amount and
coverage of such insurance shall not limit Tenant's liability nor relieve Tenant
of any other obligation under this Lease. Landlord may also obtain comprehensive
public liability insurance in an amount and with coverage determined by Landlord
Insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance.
<PAGE>
(b) Property and Rental Income Insurance. During the Lease Term, Landlord
shall maintain policies of insurance covering loss of oir damage to the Property
in the full amount of its replacement value. Such policy shall contain an
Inflation Guard Endorsement and shall provide protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk), sprinkler leakage and
any other perils which Landlord deems reasonably necessary. Landlord shall have
the right to obtain flood and earthquake Insurance If required by any lender
holding a security interest in the Property. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements installed by Tenant
on the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, In an amount equal to
one year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or
permit anything to be done which invalidates any such insurance policies.
(c) Payment of Premiums.
(i) Landlord shall pay the "Base Premiums" for the insurance policies
maintained by Landlord under Paragraph 4.04(b). If the Property has been
previously fully occupied, the "Base Premiums" are the insurance premiums paid
during or applicable to the last twelve (12) months of such prior occupancy. If
the Property has not been previously fully occupied or has been occupied for
less than twelve (12) months, the Base Premiums are the lowest annual premiums
reasonably obtainable for the required insurance for the Property as of the
Commencement Date.
(ii) Tenant shall pay Landlord the amount, if any, by which the
insurance premiums for all policies maintained by Landlord under Paragraph
4.04(b) have increased over the Base Premiums, whether such increases result
from the nature of Tenant's occupancy, any act or omission of Tenant, the
requirement of any lender referred to in Article Eleven (Protection of Lenders),
the increased value of the Property or general rate increases. However, if
Landlord substantially increases the amount of insurance carried or the
percentage of insured value afterthe period during which the Base Premiums were
calculated, Tenant shall only pay Landlord the amount of increased premiums
which would have been charged by the
1988 Southern California Chapter 3 Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
insurance carrier if the amount of insurance or percentage of insured value had
not been substantially increased by Landlord. This adjustment in the amount due
from Tenant shall be made only once during the Lease Term. Thereafter, Tenant
shall be obligated to pay the full amount of any additional increases in the
insurance premiums, including increases resulting from any further increases in
the amount of insurance or percentage of insured value. Tenant shall pay
Landlord the increases over the Base Premiums within fifteen (15) days after
receipt by Tenant of a copy of the premium statement or other evidence of the
amount due. If the insurance policies maintained by Landlord cover improvements
or real property other than the Property, Landlord shall also deliver to Tenant
a statement of the amount of the premiums applicable to the Property showing, in
reasonable detail, how such amount was computed. If the Lease Term expires
before the expiration of the insurance period. Tenant's liability shall be pro
rated on an annual basis.
(d) General Insurance Provisions.
(i) Any insurance which Tenant is required to maintain under this
Lease shall include a provision which requires the insurance carrier to give
Landlord not less than thirty (30) days' written nofice prior to any
cancellation or modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or renewal to
Landlord required under this Lease within the prescribed time period or it any
such policy is cancelled or modified during the Lease Term without Landlord's
consent, Landlord may obtain such insurance, in which case Tenant shall
reimburse Landlord for the cost of such insurance within fifteen (15) days after
receipt of a statement that indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this Lease
with companies holding a "General Policy Rating" of A-12 or better, as set forth
in the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or,representatives
of the other, for loss of or damage to its property or the property of others
under Its control, if such loss or damage is covered by any insurance policy in
force (whether or not described in this Lease) at the time of such loss or
damage. Upon obtaining the required policies of insurance, Landlord and Tenant
shall give notice to the insurance carriers of this mutual waiver of
subrogation.
Section 4.05. Late Charges. Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
Section 4.06. Interest on Past Due Obligations. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of Interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate permitted by law.
<PAGE>
Section 4.07. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12)-month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent. Landlord shall hold such payments in a
non-interest bearing impound account. If unknown, Landlord shall reasonably
estimate the amount of real property taxes and insurance premiums when due.
Tenant shall pay any deficiency of funds in the impound account to Landlord upon
written request. If Tenant defaults under this Lease, Landlord may apply any
funds in the impound account to any obligation then due under this Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02. Manner of Use. Tenant shall not cause or permit the Oroperty
to be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
other tenants of Landlord, or which constitutes a nuisance or waste. Tenant
shall obtain and pay for all permits, including a Certificate of Occupancy,
required for Tenant's occupancy of the Property and shall promptly take all
actions necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.03. Hazardous Materials. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have adverse effects on the environment or the health and
safety of persons. Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or
about the Property by Tenant, its agents, employees, contractors, sublessees or
invitees without the prior written consent
1988 Southern California Chapter 4 Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
of Landlord. Landlord shall be entitled to take into account such other factors
or facts as Landlord may reasonably determine to be relevant in determining
whether to grant or withhold consent to Tenant's proposed activity with respect
to Hazardous Material. In no event, however, shall Landlord be required to
consent to the installation or use of any storage tanks on the Property.
Section 5.04. Signs and Auctions. Tenant shall not place any signs on the
Property without Landlord's prior written consent. Tenant shall not conduct or
permit any auctions or sheriff's sales at the Property.
Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
Section 5.06. Landlord's Access. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall give
Tenant prior notice of such entry, except in the case of an emergency. Landlord
may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. Quiet Possession. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. Existing Conditions. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders. Except as provided
herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use. Tenant represents and warrants that
Tenant has made its own inspection of and inquiry regarding the condition of the
Property and Is not relying on any representations of Landlord or any Broker
with respect thereto. If Landlord or Landlord's Broker has provided a Property
Information Sheet or other Disclosure Statement regarding the Property, a copy
is attached as an exhibit to the Lease.
Section 6.02. Exemption of Landlord from Liability. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or from other sources or places; or (d) any act or omission of any
other tenant of Landlord. Landlord shall not be liable for any such damage or
injury even though the cause of or the means of repairing such damage or injury
are not accessible to Tenant. The provisions of this Section 6.02 shall not,
however, exempt Landlord from liability for Landlord's gross negligence or
willful misconduct.
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Section 6.03. Landlord's Obligations. Subject to the provisions of Article
Seven (Damage or Destruction) and Article Eight (Condemnation), and except for
damage caused by any act or omission of Tenant, or Tenant's employees, agents,
contractors or invitees, Landlord shall keep the foundation, roof and structural
portions of exterior walls of the improvements on the Property in good order,
condition and repair. However, Landlord shall not be obligated to maintain or
repair windows, doors, plate glass or the surfaces of walls. Landlord shall not
be obligated to make any repairs under this Section 6.03 until a reasonable time
after receipt of a written notice from Tenant of the need for such repairs.
Tenant waives the benefit of any present or future law which might give Tenant
the right to repair the Property at Landlord's expense or to terminate the Lease
because of the condition of the Property.
Section 6.04. Tenant's Obligations.
(a) Except as provided in Article Seven (Damage or Destruction) and Article
Eight (Condemnation), Tenant shall keep all portions of the Property (including
structural, nonstructural, interior, exterior, and landscaped areas, portions,
systems and equipment) in good order, condition and repair (including interior
repainting and refinishing, as needed). If any portion of the Property or any
system or equipment in the Property which Tenant is obligated to repair cannot
be fully repaired or restored, Tenant shall promptly replace such portion of the
Property or system or equipment in the Property, regardless of whether the
benefit of such replacement extends beyond the Lease Term; but if the benefit or
useful life of such replacement extends beyond the Lease Term (as such term may
be extended by exercise of any options), the useful life of such replacement
shall be prorated over the remaining portion of the Lease Term (as extended),
and Tenant shall be liable only for that portion of the cost which is applicable
to the Lease Term (as extended). Tenant shall maintain a preventive maintenance
contract providing for the regular inspection and maintenance of the heating and
air conditioning system by a licensed heating and air conditioning contractor.
Landlord shall have the right, upon written notice to Tenant, to undertake the
responsibility for preventive maintenance of the heating and air conditioning
system at Tenant's expense. In addition, Tenant shall, at Tenant's expense,
repair any damage to the roof, foundation or structural portions of walls caused
by Tenant's acts or omissions. It is the intention of Landlord and Tenant that,
at all times during the Lease Term, Tenant shall maintain the Property in an
attractive, first-class and fully operative condition.
(b) Tenant shall fulfill all of Tenant's obligations under this Section
6.04 at Tenant's sole expense. if Tenant fails to maintain, repair or replace
the Property as required by this Section 6.04, Landlord may, upon ten (10)
days'prior notice to Tenant (except
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that no notice shall be required in the case of an emergency), enter the
Property and perform such maintenance or repair (including replacement, as
needed) on behalf of Tenant. In such case, Tenant shall reimburse Landlord for
all costs incurred in performing such maintenance or repair immediately upon
demand.
Section 6.05. Alterations, Additions, and Improvements.
(a) Tenant shall not make any alterations, additions, or improvements to
the Property without Landlord's prior written consent, except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property Is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
shall be done in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials.
(b) Tenant shall pay when due all claims for labor and material furnished
to the Property. Tenant shall give Landlord at least twenty (20) days' prior
written notice of the commencement of any work on the Property, regardless of
whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.
Section 6.06. Condition upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or Improvements (whether or
not made with Landlord's consent) prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant's expense. All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or earlier termination of the Lease, except that Tenant may
remove any of Tenant's machinery or equipment which can be removed without
material damage to the Property. Tenant shall repair, at Tenant's expense, any
damage to the Property caused by the removal of any such machinery or equipment.
In no event, however, shall Tenant remove any of the following materials or
equipment (which shall be deemed Landlord's property) without Landlord's
priorwritten consent: any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters, air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipr~ent and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property.
(a) Tenant shall notify Landlord in writing immediately upon the occurrence
of any damage to the Property. If the Property is only partially damaged (i.e.,
less than fifty percent (50%) of the Property is untenantable as a result of
such damage or less than fifty percent (50%) of Tenant's operations are
materially impaired) and it the proceeds received by Landlord from the insurance
policies described in Paragraph 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage
as soon as reasonably possible. Landlord may elect (but is not required) to
repair any damage to Tenant's fixtures, equipment, or improvements.
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(b) If the insurance proceeds received by Landlord are not sufficient to
pay the entire cost of repair, or if the cause of the damage is not covered by
the insurance policies which Landlord maintains under Paragraph 4.04(b),
Landlord may elect either to (i) repair the damage as soon as reasonably
possible, in which case this Lease shall remain in full force and effect, or
(ii) terminate this Lease as of the date the damage occurred. Landlord shall
notify Tenant within thirty (30) days after receipt of notice of the occurrence
of the damage whether Landlord elects to repair the damage or terminate the
Lease. If Landlord elects to repair the damage, Tenant shall pay Landlord the
"deductible amount" (if any) under Landlord's insurance policies and, if the
damage was due to an act or omission of Tenant, or Tenant's employees, agents,
contractors or invitees, the difference between the actual cost of repair and
any insurance proceeds received by Landlord. If Landlord elects to terminate the
Lease, Tenant may elect to continue this Lease in Full force and effect, in
which case Tenant shall repair any damage to the Property and any building in
which the Property is located. Tenant shall pay the cost of such repairs, except
that upon satisfactory completion of such repairs, Landlord shall deliver to
Tenant any insurance proceeds received by Landlord for the damage repaired by
Tenant. Tenant shall give Landlord written notice of such election within ten
(10) days after receiving Landlord's termination notice
(c) If the damage to the Property occurs during the last six (6) months of
the Lease Term and such damage will require more than thirty (30) days to
repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. Substantial or Total Destruction. It the Property is
substantlally or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence, if the Property can be rebuilt within six (6) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except
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for such possible reduction in Base Rent, insurance premiums and real property
taxes, Tenant shall not be entitled to any compensation, reduction, or
reimbursement from Landlord as a result of any. damage, destruction, repair, or
restoration of or to the Property.
Section 7.04. Waiver. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, orwhich is located on the Property, is taken, either
Landlord or Tenant mayterminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemni * ng authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its Interest In the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Cond ' emnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not suff icient to pay for such
repair, Landlord shall have the right to either terminate this Lease or make
such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlotd's Consent Required. No portion of the Property or of
Tenant's Interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord's prior written consent, except as provided In
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord's consent. If Tenant is a
corporation, any change in the ownership of a controlling interest of the voting
stock of the corporation shall require Landlord's consent.
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's Aff
iliate"). In such case, any Tenant'sAff iliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. No Release of Tenant. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease.
<PAGE>
Section 9.04. Off er to Terminate. If Tenant desires to assign the Lease or
sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.
Section 9.05. Landlord's Consent.
(a) Tenant's request for consent to any transfer described in Section 9.01
shall set forth in writing the details of the proposed transfer, including the
name, business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and the rent and security
deposit payable under any proposed assignment or sublease), and any other
information Landlord deems relevant. Landlord shall have the right to withhold
consent, if reasonable, or to grant consent, based on the following factors: (i)
the business of the proposed assignee or subtenant and the proposed use of the
Property; (il) the net worth and financial reputation of the proposed assignee
or subtenant; (iii) Tenant's compliance with all of its obligations under the
Lease; and (iv) such other factors as Landlord may reasonably deem relevant. If
Landlord objects to a proposed assignment solely because of the net worth and/or
financial reputation of the proposed assignee, Tenant may nonetheless sublease
(but not assign), all or a portion of the Property to the proposed transferee,
but only on the other terms of the proposed transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the Lease
the Landlord's Share (stated in Section 1.14) of the Profit (defined below) on
such transaction as and when received by Tenant, unless Landlord gives written
notice to Tenant and the assignee or subtenant that Landlord's Share shall be
paid by the assignee or subtenant to Landlord directly. The "Profit" means (A)
all amounts paid to Tenant for such assignment or sublease, including "key"
money, monthly rent in excess of the monthly rent payable under the Lease, and
all fees and other consideration paid for the assignment or sublease, including
fees under any collateral agreements, less (B) costs and expenses directly
Incurred by Tenant in connection with the execution and performance of such
assignment or sublease for real estate broker's commissions and
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of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
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costs of renovation or construction of tenant Improvements required under such
assignment or sublease. Tenant is entitled to recover such costs and expenses
before Tenant is obligated to pay the Landlord's Share to Landlord. The Profit
in the case of a sublease of less than all the Property is the rent allocable to
the subleased space as a percentage on a square footage basis.
(ii) Tenant shall provide Landlord a written statement certifying all
amounts to be paid from any assignment or sublease of the Property within thirty
(30) days after the transaction documentation is signed, and Landlord may
Inspect Tenant's books and records to verity the accuracy of such statement. On
written request, Tenant shall promptly furnish to Landlord copies of all the
transaction documentation, all of which shall be certified by Tenant to be
complete, true and correct. Landlord's receipt of Landlord's Share shall not be
a consent to any further assignment or subletting. The breach of Tenant's
obligation under this Paragraph 9.05(b) shall be a material default of the
Lease.
Section 9.06. No Merger. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. Defaults. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the Property
results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge when due;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30)-day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
(d) (i) If Tenant makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's Interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.
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(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.
Section 10.03. Remedies. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, With or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Property to Landlord. In such event, Landlord shall
be entitled to recover from Tenant all damages Incurred by Landlord by reason of
Tenant's default, including (I) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had earned at the
time of the termination; (ii) the worth at the time of the award of the amount
by which the unpaid Base Rent, Additional Rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, Additional Rent and other charges which Tenant would have paid
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
approximately caused by Tenant's failure to perform its obligations under the
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses Landlord incurs
in maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, Including
necessary renovation or alteration of the Property, Landlord's reasonable
attorneys' fees incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (iii) above, the "worth at the time
of the award" is computed by allowing interest on unpaid amounts at the rate of
fifteen percent (15%) per annum, or such lesser amount as may then be the
maximum lawful rate. As used in subpart (iii) above, the "Worth at the time of
the award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%). If Tenant has abandoned the Property, Landlord shall have the option of
(I) retaking possession of the Property and recovering from Tenant the amount
specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(4);
(b) Maintain Tenant's right to possession, in which case this Lease shall
continue in effect whether or not Tenant has abandoned the Property. In such
event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;
(c) Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decisions of the state in which the Property is located.
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of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
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Section 10.04. Repayment of "Free" Rent. It this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free". rent is called the "Abated
Rent". Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, Including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease.
Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's Intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action In any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section 10.06. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. Subordination. Landlord shall have the right to subordinate
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. Tenant shall cooperate with Landlord and any lender which is
acquiring a security interest in the Property or the Lease. Tenant shall execute
such further documents and assurances as such lender may require, provided that
Tenant's obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall not be deprived of its rights under this Lease. Tenant's right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant's obligations under this Lease
and is not otherwise in default. If any ground lessor, beneficiary or mortgagee
elects to have this Lease prior to the lien of its ground lease, deed of trust
or mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.
Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed,
stating how they have been changed); (ii) that this Lease has not been cancelled
or terminated; (iii) the last date of payment of the Base Rent and other charges
and the time period covered by such payment; (iv) that Landlord is not in
default under this Lease (or, if Landlord is claimed to be in default, stating
why); and (v) such other representations or information with respect to Tenant
or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request. Landlord
may give any such statement by Tenant to any prospective purchaser or
encumbrancer of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.
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(b) If Tenant does not deliver such statement to Landlord within such ten
(10)-day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) that not more than one month's Base
Rent or other charges have been paid in advance; and (iv) that Landlord is not
in default under the Lease. In such event, Tenant shall be estopped from denying
the truth of such facts.
Section l1.05. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verity the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord anyfinancial statements required by
such lender to facilitate the financing or refinancing of the Property. Tenant
represents and warrants to Landlord that each such financial statement is a true
and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in breach
or default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any costs or
expenses that
1988 Southern California Chapter 9 Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
the Nondefaulting Party incurs in connection with any breach or default of the
Defaulting Party under this Lease, whether or not suit is commenced or judgment
entered. Such costs shall include legal fees and costs incurred for the
negotiation of a settlement, enforcement of rights or otherwise. Furthermore, if
any action for breach of or to enforce the provisions of this Lease is
commenced, the court in such action shall award to the party in whose favor a
judgment is entered, a reasonable sum as attorneys' fees and costs. The losing
party In such action shall pay such attorneys' fees and costs. Tenant shall also
indemnity Landlord against and hold Landlord harmless from all costs, expenses,
demands and liability Landlord may Incur if Landlord becomes or Is made a party
to any claim or action (a) instituted by Tenant against any third party, or by
any third party against Tenant, or by or against any person holding any interest
under or using the Properly by licensee of or agreement with Tenant; (b) for
foreclosure of any lien for labor or material furnished to or for Tenant or such
other person; (c) otherwise arising out of or resulting from any act or
transaction of Tenant or such other person; or (d) necessary to protect
Landlord's interest under this Lease In a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as amended. Tenant shall
defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.
Section 12.02. Landlord's Consent. Tenant shall pay Landlord's reasonable
attorneys' fees Incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section l3.01. Non-Discrimination. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. Landlord's Liability; Certain Duties.
(a) As used in this Lease, the term "Landlord" means only the current owner
or owners of the fee title to the Property or the leasehold estate under a
ground lease of the Property at the time in question. Each Landlord is obligated
to perform the obligations of Landlord under this Lease only during the time
such Landlord owns such interest or title. Any Landlord who transfers its title
or interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to, its transferee all funds that Tenant
previously paid if such funds have not yet been applied under the terms of this
Lease.
(b) Tenant shall give written notice of any failure by Landlord to perform
any of its obligations under this Lease to Landlord and to any ground lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property whose
name and address have been furnished to Tenant in writing. Landlord shall not be
in default under this Lease unless Landlord (or such ground lessor, mortgagee or
beneficiary) fails to cure such non-performance within thirty (30) days after
receipt of Tenant's notice. However, if such non-performance reasonably requires
more than thirty (30) days to cure, Landlord shall not be in default if such
cure is commenced within such thirty (30)-day period and thereafter diligently
pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property, and neither the
Landlord nor its partners, shareholders, officers or other principals shall have
any personal liability under this Lease.
Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.04. Interpretation. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Properly with Tenant's expressed or
implied permission.
<PAGE>
Section 13.05. Incorporation of Prior Agreements; Modifications. This Lease
is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. Notices. All notices required or permitted under this Lease
shall be In writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03 above, except that upon Tenant's taking
possession of the Property, the Property shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.02 above. All notices shall be effective upon delivery. Either party
may change its notice address upon written notice to the other party.
Section 13.07. Waivers. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.08. No Recordation. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.
Section 13.09. Binding Effect; Choice of Law. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
1988 Southern California Chapter 10 Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant Is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it Is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.11. Joint and Several Liability. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.12. Force Majeure. If Landlord cannot perform any of Its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
Section 13.13. Execution of Lease. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. Survival. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.
ARTICLE FOURTEEN: BROKERS
Section 14.03. Agency Disclosure; No Other Brokers. Landlord and Tenant
each warrant that they have dealt with no other real estate broker(s) in
connection with this transaction except: CB COMMERCIAL REAL ESTATE GROUP, INC.,
who represents Landlord and Landmark Realty Advisors, who represents Tenant.
In the event that CC COMMERCIAL REAL ESTATE GROUP, INC. represents both
Landlord and Tenant, Landlord and Tenant hereby confirm that they were timely
advised of the dual representation and that they consent to the same, and that
they do not expect said Broker to disclose to either of them the confidential
Information of the other party.
ARTICLE FIFTEEN: COMPLIANCE
The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including, but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment In Real Property Tax Act, the Comprehensive
Environmental Response Compensation and Liability Act, and The Americans With
Disabilities Act.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO
OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED, PLEASE
DRAW A LINE THROUGH THE SPACE BELOW.
1988 Southern California Chapter 11 Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialled all Riders
which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on , 19 Elias Paul
--------------- -------------------------------------
at
--------------------------- -------------------------------------
By:
---------------------------------
Elias Paul
Its:
---------------------------------
By:
---------------------------------
Its:
--------------------------------
"TENANT"
Signed on , 19 Care Concepts
------------------- -------------------------------------
at a Nevada corporation
------------------------------ -------------------------------------
By:
----------------------------------
Its:
---------------------------------
By:
---------------------------------
Its:
--------------------------------
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A
PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION
OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE
REALMAST INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN
CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS, INC. ITS
LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR
AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT 08 TAX CONSEQUENCES OF THIS
LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO
ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL
COUNSEL.
1988 Southern California Chapter 12 Initials
of the Society of Industrial
and Office Realtors, Inc. (Single-Tenant Gross Form)
<PAGE>
ADDENDUM TO LEASE
1.15 Addendum to Lease dated August 24, 1995 by and between Elias Paul, as
Landlord, and Care Concepts, Inc., as Tenant.
Rent Schedule
Months Rent: Plus
1 & 2 $0.00 Applicable rental tax
3-12 $5,132.16 Applicable rental tax
13-24 $5,417.28 Applicable rental tax
25-36 $5,987.52 Applicable rental tax
37-48 $6,272.64 Applicable rental tax
49-60 $6,557.76 Applicable rental tax
Option to Renew
Landlord will grant Tenant one option to renew the Lease Agreement for a new
five (5) year term at the then market rate. Tenant must notify Lessor in writing
one hundred eighty (180) days prior to the termination of Lessee's existing
Lease.
--------
--------
Initials
<PAGE>
SECOND ADDENDUM
The following provisions shall be considered a part of the Lease by and between
Mr. Elias Paul (Landlord) and Care Concepts, Inc., (Tenant) dated August 28,
1995, In the event the terms hereof conflict or are inconsistent with any term
of provision of the Lease, this Addendum shall be controlling.
1. Warranty Of Premises.- Landlord shall deliver the Premises to Tenant clean
and free of debris on the Lease commencement date and Landlord warrants to
Tenant that the plumbing, lighting, air conditioning, heating, and loading doors
in the Premises shall be in good operating condition on the Lease commencement
date. In the event that it is determined that this warranty has been violated,
then it shall be the obligation of the Landlord, after receipt of written notice
from Tenant setting forth with specificity the nature of the violation, to
promptly, at Landlord's sole cost, rectify such violation. Tenant's failure to
give such written notice to Landlord within thirty (30) days after the Lease
commencement date shall cause the conclusive presumption that Landlord has
complied with all of Landlord's obligations.
2. Lease Commencement - Tenant shall have access and use of premises upon
agreement(agreement being [A]both parties in receipt of a fully executed copy of
the lease agreement and [B]the Landlord in receipt of a cashier's check in the
amount of $9,230.33 payable to Elias Paul) until 11/14/95 with all terms and
conditions of this lease agreement in full force and effect with the exception
of rental payment. Upon agreement, Tenant shall submit a check in the amount of
$9,230.33 to Landlord which is payment for the following:
3. Hazardous Materials Disclaimer - Landlord represents that to the best of his
knowledge, there are no hazardous materials, environmental contamination, or
toxic substances on the Property in violation of any governmental rule or
regulation. Tenant shall not be responsible for any and all hazardous problems
that may have occurred on the property prior to their tenancy.
Rent for the period of 11/15/95 - 11/30/95: $2,672.57 (Includes 4.5% Rental Tax)
Security Deposit equal to last months rent: $6,557.76 (Does not
include Rental Tax)
---------
Total due Landlord upon execution $9,230.33
=========
"Lessor", "Lessee"
Elias Paul Care Concepts, Inc.,
By: By:
---------------------------- -------------------------------
Elias Paul Date Jack Kelley Date
President
careadd
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form 10-SB for
New Bridge Products, Inc., of our report dated March 25, 1999, relating to the
December 31, 1998 and 1997 financial statements of New Bridge Products, Inc.,
which appears in such Registration Statement.
MOFFITT & COMPANY, P.C.
Phoenix, Arizona
December 20, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> (4,042)
<SECURITIES> 0
<RECEIVABLES> 92,701
<ALLOWANCES> 0
<INVENTORY> 186,300
<CURRENT-ASSETS> 303,232
<PP&E> 269,689
<DEPRECIATION> 90,685
<TOTAL-ASSETS> 791,553
<CURRENT-LIABILITIES> 734,649
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<COMMON> 54,962
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<SALES> 906,980
<TOTAL-REVENUES> 906,980
<CGS> 1,252,925
<TOTAL-COSTS> 1,637,947
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<INCOME-PRETAX> (730,957)
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