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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
August 30, 1999
CHOICES ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 000-17001 52-1529536
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(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
2455 East Sunrise Boulevard
Suite 313
Ft. Lauderdale, Florida 33304
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(Address of principal executive offices)
954-567-4100
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(Registrant's telephone number, including area code)
10770 Wiles Road
Coral Springs, Florida 33076
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(Former name or former address, if changed since last report)
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CHOICES ENTERTAINMENT CORPORATION
ITEM 2. Acquisition or Disposition of Assets.
On or about August 30, 1999, the Company entered into a binding letter
of intent with Republic Hotel Investors, Inc. ("RHII") of Seattle, Washington
to acquire its business. RHII is in the business of acquiring, developing,
owning, operating, managing and disposing of hotel properties. RHII has been
developing its business since at least 1995. RHII does not currently own or
operate any hotel properties. The accounting impact of the acquisition
transaction on the financial statements of the Company is considered by us to
be immaterial. See, "Item 7." below.
The letter of intent provides that the Company will acquire all of the
right, title and interest in and to RHII's assets consisting of books,
documents, records, papers, human resources network (consisting of names,
telephone numbers, contact and other information) business plan, goodwill,
hotel acquisition and development agreements in various stages of
negotiation, proprietary information, and other miscellaneous categories of
business assets in exchange for the issuance to RHII by the Company of
144,789,382 shares of its restricted common stock (the "Transaction").
The Company's obligation to issue the shares of restricted common stock is
subject to certain vesting requirements as follows:
i. The first 2,100,000 shares of Choices common stock shall vest
immediately upon execution of the Purchase and Sale Agreement;
ii. The next 6,531,605 shares of Choices common stock shall vest
immediately upon the execution of any agreement to acquire a
hotel property or portfolio of hotel properties;
iii. The next 68,078,888 shares of Choices common stock shall be
subject to forfeiture if and in the event that within twelve
(12) months of the execution of the Purchase and Sale Agreement
contemplated hereby, Choices has hotel assets under contract
having a fair market value, exclusive of indebtedness, of less
than $50,000,000 and earnings before taxes, depreciation and
amortization (EBITDA) of less than $5,000,000. If RHII achieves
these goals, the shares of common stock of Choices payable to
RHII in the amount stated above in this sub-paragraph iii. shall
be thereafter vested and non-forfeitable;
iv. The next 34,039,444 shares of Choices common stock shall be
subject to forfeiture if and in the event that twenty-four
months after the execution of the Purchase and Sale Agreement
contemplated hereby Choices has hotel assets under contract
having a fair market value, exclusive of indebtedness thereon,
of less than $75,000,000 and EBITDA of less than $7,000,000. If
RHII achieves these goals, the shares of common stock of Choices
payable to RHII in the amount stated above in this sub-paragraph
iv. shall be thereafter vested and non-forfeitable;
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CHOICES ENTERTAINMENT CORPORATION
v. The next 34,039,444 shares of Choices common stock shall be
subject to forfeiture if and in the event that thirty-six months
after the execution of the Purchase and Sale Agreement
contemplated hereby Choices has hotel assets under contract
having a fair market value, exclusive of indebtedness thereon,
of less than $100,000,000 and EBITDA of less than $9,000,000. If
RHII achieves these goals, the shares of common stock of Choices
payable to RHII in the amount stated above in this sub-paragraph
v. shall be thereafter vested and non-forfeitable.
The current authorized capital of Choices is 50,000,000 shares of capital
stock and therefore is insufficient to provide for the issuance of the shares
to RHII as provided in sub-paragraphs iii.-v. above. Accordingly, RHII and
Choices have agreed that although the obligation to issue such shares shall
become fixed at the time of execution of a definitive purchase and sale
agreement, subject to forfeiture, the shares issuable as provided above shall
be considered unissued and not outstanding until the vesting provisions as
provided herein have been satisfied and the common stock issuable hereunder
has been issued in fact. Further, Choices and its current board of directors
have agreed to do such things as are necessary to assure that Choices has
sufficient authorized and unissued capital stock to provide for the issuance
of the shares of common stock contemplated by this letter of intent.
In addition to agreeing to purchase RHII's business for the shares of
common stock of Choices as more fully set forth above, the Company has agreed
to do such things as are necessary to change the name of Choices to "Republic
Lodging Corporation". In that regard, the Company is advised by counsel that
a shareholders meeting or solicitation of written consents is necessary to
effect a name change and the Company has agreed to hold such meeting or
solicit such consents at the earliest practicable time, and to recommend
approval of the proposed change of name as specified.
In addition to acquiring the assets of RHII, the Company will obtain the
personal services of Lorne Bradley and Tracy M. Shier, Esq., both of whom
have experience in the area of hotel development, acquisition, law and
finance. Messrs. Bradley and Shier each hold 50% of the outstanding common
stock of RHII. As part of the agreement, Mr. Bradley has been appointed to
the Board of Directors of the Company and designated Chairman. Also, Mr.
Shier has been appointed to the Board of Directors. Mr. Shier has served
Choices Entertainment Corporation in the past as legal counsel and was "of
counsel" to the law firm Monahan & Biagi, P.L.L.C. which law firm represented
the Committee for Change at Choices, an insurgent shareholder group the
activities of which succeeded in changing control of the Company. The Company
has agreed to pay Mr. Bradley compensation of not less than $120,000 per
year. So far in 1999 Mr. Shier has been paid $15,000 by the Company for legal
fees. See also, "Item 5." below.
As a result of the Transaction, and if the Company's plans are realized,
the Company will
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CHOICES ENTERTAINMENT CORPORATION
be engaged in the business of acquiring, developing, owning and operating
hotels. The Company's Board of Directors has commenced or caused to be
commenced concept development on a multi-state hotel chain based in the
Northwest region of the United States and featuring good quality limited
service hotels which will carry a unique proprietary name. In other words,
the hotels will be "self-flagged." The Company does not intend to limit its
business, however, and therefore some of the Company's hotel properties may
be franchised from national hotel franchisers.
For the fiscal year ended December 31, 1998, the Company had no revenues,
accounting income of $235,571, and net income of $232,908.
ITEM 5. Other Events.
In an unrelated action prior to the Transaction reported on above, the
Board of Directors of the Company has resolved that in recognition for the
services that have been performed since at least 1997 without compensation,
each of James Sink, Thomas Renna, George Pursglove and Tracy Shier, is
entitled to receive as compensation for such services the some of $120,000
for a total compensation package of $480,000. Each of the named persons has
been given the option of taking the compensation award either in cash or in
securities of the Company. Messrs. Sink, Renna and Pursglove are the current
Directors of the Company. Mr. Shier was a director nominee at the time the
action was taken and is now a Director of the Company. Mr. Shier has also
served the Company as legal counsel.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a)-(b) Financial statements and Pro Forma financial information for both
the Company and Republic Hotel Investors, Inc. has been omitted in reliance
on an automatic waiver of the requirement to include such information. The
financial impact of the acquisition disclosed in this report is not
considered by us to be material either in the size of the Transaction or the
financial impact on the Company of completion of the Transaction.
(c) Index to Exhibits
Exhibit 10.99 Letter of Intent between Choices Entertainment Corporation and
Republic Hotel Investors, Inc. dated August 30, 1999.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report on Form 8-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
CHOICES ENTERTAINMENT CORPORATION
Date: September 17, 1999 By: /s/ George Pursglove
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George Pursglove
Interim Chief Financial Officer
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TERM SHEET/LETTER OF INTENT
REPUBLIC HOTEL INVESTORS, INC. - CHOICES ENTERTAINMENT CORPORATION
August 30, 1999
1.) Choices Entertainment Corporation ("Choices") will acquire the business
and business prospects of Republic Hotel Investors, Inc. ("RHII") on
substantially the following terms.
2.) RHII is in the business of acquiring, developing, owning, operating,
managing and disposing of hotel properties. RHII has been developing
its business since at least 1995. RHII's assets consist of its books,
documents, records, papers, human resources network, business plan,
and goodwill and hotel acquisition and development agreements in
progress. A copy of the "Executive Summary" section of RHII's Business
Plan is attached hereto as Exhibit "A".
3.) Choices is not now carrying on a trade or business due to the sale of
all or substantially all of its assets in 1997. Choices is a reporting
company under the Securities Exchange Act of 1934 ( the "'34 Act")
and is in full compliance thereunder.
4.) Choices will enter into a purchase and sale agreement (the "Purchase and
Sale Agreement") to acquire the business and business prospects of
RHII. The material terms and conditions of the Purchase and Sale
agreement shall provide as follows:
4.1) In exchange for the assets of RHII and the agreement by RHII
to execute its business plan for the benefit of Choices and its
shareholders, Choices shall pay to RHII shares of Choices common stock
in the amount of 144,789,382. All of the shares of Choices common
stock to be issued to RHII shall vest in RHII in accordance with the
terms of this letter of intent at the following times and in the
following amounts based on RHII's performance in achieving its goals
and objectives:
i. The first 2,100,000 shares of Choices common stock shall vest
immediately upon execution of the Purchase and Sale Agreement;
ii. The next 6,531,605 shares of Choices common stock shall vest
immediately upon the execution of any agreement to acquire a
hotel property or portfolio of hotel properties;
iii. The next 68,078,888 shares of Choices common stock shall be
subject
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to forfeiture if and in the event that within twelve
(12) months of the execution of the Purchase and Sale
Agreement contemplated hereby, Choices has hotel assets under
contract having a fair market value, exclusive of
indebtedness, of less than $50,000,000 and earnings before
taxes, depreciation and amortization (EBITDA) of less than
$5,000,000. If RHII achieves these goals, the shares of common
stock of Choices payable to RHII in the amount stated above in
this sub-paragraph iii. shall be thereafter vested and non-
forfeitable;
iv. The next 34,039,444 shares of Choices common stock shall be
subject to forfeiture if and in the event that twenty-four
months after the execution of the Purchase and Sale Agreement
contemplated hereby Choices has hotel assets under contract
having a fair market value, exclusive of indebtedness thereon,
of less than $75,000,000 and EBITDA of less than $7,000,000.
If RHII achieves these goals, the shares of common stock of
Choices payable to RHII in the amount stated above in this
sub-paragraph iv. shall be thereafter vested and non-
forfeitable;
v. The next 34,039,444 shares of Choices common stock shall be
subject to forfeiture if and in the event that thirty-six
months after the execution of the Purchase and Sale Agreement
contemplated hereby Choices has hotel assets under contract
having a fair market value, exclusive of indebtedness thereon,
of less than $100,000,000 and EBITDA of less than $9,000,000.
If RHII achieves these goals, the shares of common stock of
Choices payable to RHII in the amount stated above in this
sub-paragraph v. shall be thereafter vested and non-
forfeitable.
vi. RHII hereby understands and acknowledges that the current
authorized capital of Choices is 50,000,000 shares of capital
stock and therefore is insufficient to provide for the
issuance of the shares to RHII as provided in sub-paragraphs
iii.-v. above. Accordingly, RHII and Choices hereby agree that
although the obligation to issue such shares shall become
fixed at the time of execution of a definitive purchase and
sale agreement, subject to forfeiture, the shares issuable as
provided above shall be considered unissued and not
outstanding until the vesting provisions as provided herein
have been satisfied and the common stock issuable hereunder
has been issued in fact. Further, Choices and its current
board of directors hereby undertake to do such things as are
necessary to assure that Choices has sufficient authorized
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and unissued capital stock to provide for the issuance of the
shares of common stock contemplated by this letter of intent.
5.) In addition to agreeing to purchase RHII's business for the shares of
common stock of Choices as more fully set forth above, Choices agrees
to immediately appoint two persons of RHII's choosing to the Board of
Directors of Choices, which board of directors consists of three
persons at this time. Further, Choices agrees to do such things as are
necessary to change the name of Choices to "Republic Lodging
Corporation". In that regard, Choices is advised by counsel that a
shareholders meeting or solicitation of written consents is necessary
to effect a name change and Choices agrees to hold such meeting or
solicit such consents at the earliest practicable time, and to
recommend approval of the proposed change of name as specified. Also,
Choices agrees to propose at the same time a Board of Director slate
to the shareholders of Choices, which slate shall have at least a
majority of nominees selected by RHII and its representatives.
Finally, and in connection with the shareholders meeting or
solicitation of written consents agreed to be conducted hereby,
Choices agrees to devise and propose to its shareholders, and
recommend the approval thereof, a plan of recapitalization having as
its goal a reduction or other rationalization of the total number of
shares issued and outstanding. The purpose of this recapitalization is
to enhance the ability of Choices to raise needed capital in the
public or private capital markets.
6.) In addition to the foregoing, Choices agrees to appoint Lorne Bradley as
Chairman of the Board and Chief Executive Officer and Tracy M. Shier
as General Counsel and Executive Vice President. In their capacity as
officers, Lorne Bradley and Tracy Shier may be granted options to
acquire the common stock of Choices and shall also be paid salaries in
amounts which are usual and customary for persons holding similar
positions in company's of similar size and financial condition in the
hotel industry. Such options shall be subject to a vesting schedule
based on the performance of the company. Notwithstanding the
foregoing, initially Lorne Bradley shall be entitled to receive
compensation in the amount of not less than US$120,000 per year
payable in monthly amounts of not less than $10,000 when, as, and if
Choices has sufficient funds to pay such compensation plus accountable
out-of-pocket expenses.
7.) Choices hereby acknowledges that some minimum amount of working capital
is required in order for Choices to commence its new line of business
and therefore agrees to use its best efforts to complete an offering
of Choices convertible preferred stock in the amount of US$1,500,000,
with net cash proceeds to Choices of approximately US$1,000,000. RHII
agrees to use its best efforts to assist Choices in completing such
offering. The parties hereto intend to close this offering on or
before September 30, 1999 and all parties agree to co-operate in
whatever manner necessary to complete the
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offering.
8.) Choices and its current officers and directors may enter into consulting
contracts with Choices for assisting in the development of the
company's business.
9.) The terms of this letter are binding upon the parties hereto, subject to
mutual due diligence inquiry. The parties may issue a Joint Press
Release and subject to the advice of counsel, may file a Form 8-K to
announce the material terms of the proposed acquisition of RHII's
business by Choices, provided however, that no Joint Press Release
shall be issued without prior review and approval by both parties
hereto. The parties will endeavor to execute formalized agreements
within forty-five days of the date of this binding letter of intent
as to the terms expressed herein.
Choices Entertainment Corporation
By: /s/ James D. Sink
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James D. Sink, Chairman of the Board
Republic Hotel Investors, Inc.
By: /s/ Lorne Bradley
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Lorne Bradley, Chairman of the Board and President
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