UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(Mark One)
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED __________________
[X] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM OCTOBER 1, 1997 TO JANUARY 31, 1998
COMMISSION FILE NUMBER 33-26828
WINDSOR CAPITAL CORP.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 58-1921737
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5008 NORTH FEDERAL HIGHWAY, LIGHTHOUSE POINT, FLORIDA 33064
------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER (954) 429-0035
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SECURITIES REGISTERED UNDER SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
- ------------------- ON WHICH REGISTERED
---------------------
NONE NONE
- ------------------- ---------------------
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT:
NONE
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(TITLE OF CLASS)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. [X] Yes [ ] No
<PAGE>
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year are $6,645,134.
The aggregate market value of the common stock held by non-affiliates
of the registrant, computed using a value of $.50 per share, the closing price
of the Common Stock on April 30, 1998, was $2,062,750 on that date.
The number of shares outstanding of the issuer's common stock, $.001
par value per share, as of April 30, 1998 is 9,999,053.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
The Company is a mall-based specialty retailer. It owns and operates 14
kiosks under the name "Simply Cigars" in malls located in Connecticut, Illinois,
Maryland, Massachusetts, Michigan and Ohio. These stores sell hand-rolled
premium cigars, cigar-related items and upscale non-tobacco-related gift items
("gentlemen's accessories"). In addition, the Company operates six in-line
stores in South Florida malls under the name "Smoker's Gallery." These stores
carry a wide range of tobacco products and accessories, including cigars, pipes
and pipe tobacco, as well as gentlemen's accessories.
The Company commenced operations under the Simply Cigars name in
November 1996, operating kiosks through its predecessor Woodfield Enterprises,
Inc., a Florida corporation ("Woodfield"), which was incorporated in July 1996.
The Company was incorporated in Delaware in June 1988; however, the Company had
no operations until December 31, 1997, when Woodfield merged into the Company.
On January 30, 1998, Boynton Tobacconists, Inc., a Florida corporation
("Boynton") which owned and operated one Smoker's Gallery store and owned five
subsidiaries each owning and operating a Smoker's Gallery store, merged into the
Company. Boynton commenced operations in 1981.
The Company's executive offices are located at 5008 North Federal
Highway, Lighthouse Point, Florida 33064. The Company's telephone number is
(954) 429-0035, and its fax number is (954) 429-0914.
THE CIGAR MARKET
Until 1993, the cigar industry experienced a long continuing decline in
cigar consumption. This trend has reversed in recent years with unit sales
beginning to grow in 1994 and strong growth continuing, although the rate of
growth has declined since 1996. Dollar sales have increased as a result of price
increases and a substantial increase in the demand for all classifications of
cigars, including high-priced premium cigars and mass market non-premium cigars.
Cigars are produced with three tobacco components: filler, binder and
wrapper. In order to make premium cigars, binder tobacco is hand-wrapped around
filler to create the "bunch" which is placed into a mold. Then, "wrapper"
tobacco is hand-wrapped around the bunch, creating a premium cigar. A premium
cigar uses
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only long-filler tobacco and binders and wrappers that are composed solely of
tobacco leaf. Long-filler tobacco consists of half tobacco leaves rolled up,
whereas short-filler tobacco consists of smaller pieces of tobacco, including
the portions of long-filler tobacco which are cut and discarded in producing
premium cigars. The quality of a cigar is based on the quality and age of the
tobacco used for the filler, binder and wrapper. Cigars that are not premium
cigars typically use short-filler and may be wholly or partially manufactured by
machine.
The Company believes that the increase in cigar consumption and retail
sales is the result of a number of factors, including: (i) the increase in the
number of adults over the age of 50 (a demographic group believed to smoke more
cigars than any other demographic segment); and (ii) the emergence of an
expanding base of younger affluent adults who have recently started smoking
cigars and who tend to smoke premium cigars, seeing them as an "affordable
luxury". The Company believes the increase in cigar smoking is in large part
attributable to a positive and improving image of cigar smoking resulting from
increased publicity, including the success of Cigar Aficionado magazine, the
increased visibility of use by celebrities and the proliferation of "Cigar
Smokers" dinners and other special events for cigar smokers. This image may
become threatened, however, by increasing negative publicity from the media,
government officials and scientists concerning the risks of cigar smoking. See
"Government Regulation; Tobacco Industry Risks."
United States consumption of premium cigars increased at a compound
annual unit growth rate of 2.4% during the period of 1976 to 1991, and at a
compound annual unit growth rate of 8.9% from 1991 to 1994, and the growth rate
reached 30.6% in 1995, 67.3% in 1996 and 35% in 1997, when 370.3 million units
were sold. The mass market segment of the industry, which declined from 1964 to
1993, has also experienced increased consumption with a compound annual growth
rate of 10% from 1993 to 1997, when 4.8 billion units were sold. Total retail
sales of cigars have increased at a compound annual growth rate of 4.5% from
1991 to 1997, when sales hit $916 million, while the corresponding compound
annual unit growth rate was 7.0%.
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The following table illustrates the trends in unit consumption and
retail sales experienced by the premium and mass market segments of the U.S.
cigar industry from 1991 to 1997.
<TABLE>
<CAPTION>
U.S. CIGAR INDUSTRY(1)
(Millions)
1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Unit Consumption:
Premium 97.2 98.9 109.6 125.5 163.9 274.3 370.3
Mass market 3,433.3 3,419.2 3,313.8 3,592.5 3,896.6 4,314.3 4,858.7
------- ------- ------- ------- ------- ------- -------
Total 3,530.5 3,518.1 3,423.4 3,718.0 4,060.5 4,588.6 5,229.0
======= ======= ======= ======= ======= ======= =======
Retail Sales $ 705.0 $ 715.0 $ 730.0 $ 766.0 $ 846.0 $ 874.0 $ 916.0
------- ------- ------- ------- ------- ------- -------
<FN>
- ----------
(1) Source: Cigar Association of America, Inc.
</FN>
</TABLE>
STORES
The Company's Simply Cigars kiosks are located in upscale regional
malls in the Northeastern and Midwestern United States, while the Smoker's
Gallery stores are all located in upscale regional malls in South Florida.
Regional malls draw from a trade area with an average radius of 20 miles and
250,000 consumers. According to industry estimates, each consumer visits a mall
an average of 1.4 times per month. By focusing its strategy on opening and/or
acquiring several kiosks/stores in each geographic area, the Company believes
that it will enjoy economies of scale and build well-recognized brands which
will be enhanced by multiple exposure to millions of consumers.
Regional malls are classified into four categories: AA; A; B; and C.
The Company, however, due to its focus on upscale consumers with substantial
discretionary income, has outlets only in AA and A malls and intends to acquire
and/or open additional outlets only in those premium tiers. AA and A malls
generally have around 1,000,000 square feet of gross leasable area, at least
three major department stores, better than average income per household in the
surrounding area, and annual sales in excess of $250 per square foot. Although
the Company does not intend to target B malls, it may, on occasion, open a B
mall outlet if, as part of a package deal, access to AA and A malls is offered
by a common landlord on advantageous terms. Also, the Company may acquire
tobacconist chains which have outlets in B malls, as well as AA and A malls.
Mall owners frequently do not lease space to multiple vendors of
specialty products with a niche as precise as the Company's product line.
Therefore, the Company's stores and kiosks benefit from a strong barrier to
entry that limits competition in the malls where those outlets are located.
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As of April 30, 1998, the Company's outlets are as follows:
<TABLE>
<CAPTION>
MARKET MALL NAME RATING DEVELOPER DATE OPEN
- ------ --------- ------ --------- ---------
SIMPLY CIGARS
- -------------
<S> <C> <C> <C> <C>
Boston Cambridgeside A Wells Park 11/96
Detroit Lakeside A Taubman 11/96
Detroit Briarwood A Taubman 11/96
Detroit Twelve Oaks A Taubman 11/96
Boston Natick A General Growth 11/96*
Chicago Woodfield AA Taubman 12/96
Boston Northshore A Wells Park 04/97
Detroit Woodland A Taubman 04/97
Boston Emerald Square A Wells Park 06/97
Columbus Tuttle Crossing A Taubman 07/97
Chicago Stratford A Urban 11/97
Connecticut Crystal A Wells Park 11/97
Washington Annapolis A Westfield 12/97
Washington Montgomery A Westfield 12/97
SMOKER'S GALLERY
- ----------------
South Florida Boynton Beach A DeBartolo 11/85
South Florida Galleria A Keystone 11/81
South Florida Palm Beach Gardens AA Forbes Cohen 11/92
South Florida Sawgrass Mills AA Western Dev. 10/90
South Florida Boca Town Center AA DeBartolo 12/96
South Florida The Falls A Taubman 12/96
<FN>
- ----------
* In December 1996, the Company opened a kiosk at the Atrium Mall in
metropolitan Boston. In September 1997, that kiosk was closed and moved to the
Natick Mall.
</FN>
</TABLE>
SIMPLY CIGARS
The Simply Cigars kiosks consist of approximately 100 square feet of
display space each and are located either at center court or in the highway of
the mall. As the name suggests, these kiosks are focused on the sale of premium
cigars and related accessories. Each kiosk stocks approximately 200 boxes of
various premium cigar brands and sizes, together with an assortment of cigar
accessories and gentlemen's accessories. The cigars are sold individually and by
the box.
The Company commenced operations in each of its Simply Cigars markets
through kiosks rather than in-line stores due to the speed and relatively low
start-up cost involved. By placing a kiosk in a desirable location, the Company
is able to "test the waters" by opening an outlet with little lead time, thereby
preempting potential competition, and with a modest investment in construction,
fixtures and inventory.
The Company estimates that the monthly operating expenses for a kiosk are
approximately two-thirds those of a typical 1000-square-foot in-line store
($8,050 as opposed to $12,250) while a store has several times the revenue
potential due to much greater display area; however, the investment
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<PAGE>
in construction, fixtures and inventory required to open a kiosk is
approximately one-fifth the investment required for a store ($50,000 as opposed
to $250,000). The Company believes that its strategy is prudent because it
limits the capital investment and operating costs in a location until that
location has proven to be successful. Given the much greater sales potential of
in-line stores, the Company intends to convert successful kiosks to in-line
stores and close unsuccessful kiosks.
The Company has selected the Stratford and Woodfield mall kiosks to be the
first for conversion to in-line stores, with conversion scheduled to commence in
June and July 1998, respectively. The Company has not yet signed leases for
these stores; however, the Company believes that it is in the final stages of
lease negotiations for the stores. Completion for each conversion is scheduled
for approximately 90 days after commencement. The Company intends to keep the
kiosks open while the stores are prepared for occupancy.
SMOKER'S GALLERY
The Smoker's Gallery chain, which merged into the Company in January 1998,
was founded by Joel A. Wolk (now the Company's Chief Operating Officer) in 1981
and consists of six in-line stores averaging approximately 1,000 square feet
each. The Smoker's Gallery stores are "tobacconist" stores, offering a full line
of tobacco and tobacco-related products, including premium and non-premium
cigars, pipes, pipe tobacco, cigarettes and related accessories. The stores also
carry gentlemen's accessories.
PRODUCTS
The Company sells a wide range of tobacco products and tobacco-related
accessories, as well as a select line of non-tobacco-related gentlemen's
accessories; however, the Company's principal product is premium cigars, which
represented a majority of sales at the Simply Cigars kiosks and the Smoker's
Gallery stores during the fiscal year ended January 31, 1998.
CIGARS
The Company has established relationships with wholesalers and
manufacturers of name-brand premium cigars such as Macanudo, Punch, H. Uppman,
Montecristo, Partagas and many others. The Company carries most or all of these
brands at its outlets; however, given the dramatic expansion of the industry,
many new premium brands have recently come onto the market. These new brands,
which may not be as well recognized, present the Company with the opportunity to
introduce higher margin lines to the growing population of new cigar smokers.
The Smoker's Gallery stores sell non-premium cigars; the Simply Cigars kiosks do
not. The Company may add non-premium cigars to the Simply Cigars product
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line.
CIGAR ACCESSORIES
The Company has established relationships with wholesalers and
manufacturers of cigar accessories. These products include humidors for storing
cigars, cigar cutters, lighters, ashtrays, and the like. In addition, the
Company plans to private-label many of these same items with the Simply Cigars'
logo, toll-free phone number and e-mail address (to be established) so that
consumers can purchase the Company's products without having to visit the mall.
PIPES, PIPE TOBACCO AND PIPE ACCESSORIES
The Company sells pipes, pipe tobacco and related accessories, including
tobacco pouches and pipe cleaners, only at the Smoker's Gallery stores; however,
the Company may begin to sell some of these products at its Simply Cigars
kiosks. Through Smoker's Gallery, the Company has long-established relationships
with wholesalers and manufacturers of these products.
OTHER TOBACCO PRODUCTS
The Smoker's Gallery stores and the Simply Cigars kiosks also sell
cigarettes. The Smoker's Gallery stores also sell smokeless tobacco products.
GENTLEMEN'S ACCESSORIES
In order to increase its overall sales and to diversify its product line
so as to guard against possible softness and/or declines in demand for premium
cigars and other tobacco-related products, the Company has introduced a
selection of "gentlemen's accessories" in its outlets. These products consist of
high quality yet practical items, well suited for gifts and designed for the
young to middle-age upscale adult male consumer, including writing instruments,
umbrellas, flasks, shaving apparatus, leather goods and porcelain and bronze
figurines. The Company believes that the current retail environment underserves
demand for these products. The selection and presentation of the gentlemen's
accessories product line is designed to appeal to female as well as male buyers.
According to industry figures, approximately 25-30% of purchases in tobacco
stores consist of purchases by women on behalf of men, approximately 34% of
purchasers are 35-49 years old, and approximately 30% of purchasers are 21-34
years of age.
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The following table summarizes the Company's sales by product during the
fiscal year ended January 31, 1998:
PRODUCT %COMPANY %SIMPLY %SMOKER'S
- ------- SALES CIGARS SALES GALLERY SALES
----- ------------ -------------
CIGARS 56 55 57
CIGAR
ACCESSORIES 30 43 23
PIPE TOBACCO 1 -- 1
PIPES/PIPE
ACCESSORIES 2 -- 3
OTHER TOBACCO
PRODUCTS 6 -- 9
GENTLEMEN'S
ACCESSORIES 5 2 7
--- --- ---
100% 100% 100%
SEASONALITY
The Company's business is highly seasonal, with sales peaking in the
November-December holiday season, when historically approximately 40% of annual
sales have been generated. Thus, the success of the holiday season will be a
major determinant of the Company's profitability each year.
EXPANSION AND ACQUISITIONS
The Company believes that, in order to achieve profitability, it needs to
rapidly expand the number of its outlets and achieve economies of scale. The
Company is seeking attractive acquisition targets as well as locations for new
in-line stores. As set forth above, in June 1998, the Company intends to begin
the process of converting its successful kiosks into in-line stores.
In order to diversify away from the tobacco industry, the Company is also
pursuing possible acquisitions of non-tobacco companies. The Company is
currently in various stages of negotiations to acquire several companies, one of
which is not involved in the tobacco industry. The Company is currently engaged
in a "due diligence" review of these targets and their financial statements.
There can be no assurance that these, or any other potential acquisitions will
be consummated or that, if consummated, any such acquisitions will prove to be
beneficial to the Company.
COMPETITION
The tobacco industry in general, including the cigar industry,
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<PAGE>
is dominated by a small number of companies which are well known to the public;
however, the retail tobacconist marketplace is fragmented. According to the July
- - August 1997 issue of the tobacco industry's trade magazine, SMOKESHOP, there
are 4,948 tobacco shops in the United States. According to the magazine, the
industry remains firmly dominated by independent retailers, who accounted for
over 93% of all tobacco shops. The remaining stores are split almost equally
between franchises and multi-store "chains," the largest of which is "The Tinder
Box." In addition, due to the recent surge in demand for premium cigars, the
Company faces substantial competition from non-traditional outlets for premium
cigars, including bars, restaurants, gift shops, drug stores and other retail
stores.
GOVERNMENT REGULATION; TOBACCO INDUSTRY RISKS
The tobacco industry in general has been subject to regulation by Federal,
state and local governments, and recent trends have been toward substantially
increased regulation. Such regulations include health warning requirements,
limitations on advertising and prohibition of sales to minors, and laws
restricting smoking in public places and in offices, office buildings and
restaurants and other eating and drinking establishments. Effective January
1998, the State of California, which frequently starts national trends, banned
smoking in all bars and restaurants. In addition, cigars and other tobacco
products are subject to excise taxation at the Federal, state and local level,
and such taxation may increase substantially in the future. Tobacco products are
especially likely to be subject to increases in excise taxation because of the
perceived detrimental effects of tobacco on the health of both smokers and
others who inhale environmental tobacco smoke ("ETS").
While to date government regulation has focused on cigarettes, increasing
governmental attention has been directed in recent months to the cigar industry.
In April 1998, the Chairman of the Federal Trade Commission, citing a new
National Cancer Institute report which documents a high risk of mouth, throat
and lung cancer and other adverse health effects from cigar smoking, announced
his support for legislation regulating cigars on a basis comparable to that for
cigarettes. He specifically proposed health warnings on all cigar packaging and
advertising as well as curbs on marketing efforts that might be deemed directed
toward teenagers. No assurance can be given that future regulations, tax
policies or tobacco litigation will not have a material adverse effect upon the
ability of cigar companies and tobacconists, including the Company, to generate
revenue and profits. The Company believes that the principal regulatory risks it
faces arise from proposals for (i) increased taxes on cigars, (ii) restrictions
on cigar advertising, (iii) warning labels on cigars, and (iv) restrictions on
smoking in public places, especially bars and restaurants.
8
<PAGE>
During recent decades, the tobacco industry has been the subject of heavy
advertising and public service campaigns against smoking in general. While this
negative publicity has been focused on cigarettes, in recent months the news
media have increasingly emphasized the risks of cigar consumption and cigar ETS
and have suggested that cigars can be as hazardous as cigarettes. This publicity
could ultimately have a material adverse effect on the cigar industry in general
and on the Company in particular. Furthermore, litigation has been commenced in
a number of jurisdictions seeking damages from cigarette companies for damages
resulting from cancer caused by smoking and ETS. Although the Company is unaware
of any such litigation against tobacco retailers or cigar companies and all of
its sales have been made after both the risks of smoking and the addictive
nature of nicotine became generally known, no assurance can be given that the
Company will not be materially adversely affected by such litigation. In
addition, no assurance can be given that the Company will be able to obtain
adequate product liability insurance or, if such insurance is available, that it
will be available on commercially reasonable terms.
EMPLOYEES
At April 30, 1998, the Company had 104 employees. The Company is not and
never has been a party to a collective bargaining agreement. The Company
believes its relationship with its employees is good.
TRADEMARKS
The Company has filed federal trademark registration applications with the
U.S. Patent and Trademark Office covering the "Simply Cigars" name and the
Company's logo. The Company believes that these trademarks are valid and do not
infringe on the rights of any third parties; however, there can be no assurance
that they will not be successfully challenged by a third party.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report, including the exhibits hereto, contains "forward-looking
statements" within the meaning of the federal securities laws. These
forward-looking statements include, among others, statements relating to the
Company's growth strategy, which is based upon the Company's interpretation and
analysis of cigar and tobacconist industry trends and management's ability to
successfully develop and implement its expansion plan and market and sell its
products to retail consumers. This strategy assumes, among other things, that
(i) strong demand for premium cigars and accessories will continue and the
Company will be able to promptly and substantially increase its market share;
(ii) the Company will be able to promptly and substantially increase the number
of its retail outlets in Class A and AA malls and (iii) the Company will
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<PAGE>
be able to successfully diversify its revenues away from solely tobacco-related
products. Many known and unknown risks, uncertainties and other factors,
including general economic conditions, government regulations and taxation
relating to the tobacco industry, and risk factors detailed from time to time in
the Company's Securities and Exchange Commission filings, may cause these
forward looking statements to prove incorrect and may cause actual results to be
materially different from any future results expressed or implied by such
forward-looking statements.
ITEM 2. DESCRIPTION OF PROPERTY
All of the Company's 14 Simply Cigars kiosks and six Smoker's Gallery stores
are leased with lease terms expiring between 1998 and 2006. The rental payments
for most facilities are based on a minimum rental plus a percentage of gross
sales in excess of a stipulated amount. The Company is also generally obligated
for the facilities' operating costs including property taxes, insurance and
maintenance. Minimum monthly lease payments for the Company's kiosks and stores
range from approximately $2,000 to $4,600. The Company's headquarters and
central warehouse facility, located in Lighthouse Point, Florida, occupies 1,000
square feet of leased space. The Company rents its headquarters and central
warehouse facility on a monthly basis at a rate of $400 per month.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 22, 1997, the Company's shareholders approved by written
consent, in accordance with Delaware law, the merger of Woodfield into the
Company. Shareholders owning 5,071,150 of the 5,525,000 shares of Common Stock
then outstanding approved the merger, which was consummated on December 31,
1997.
On January 29, 1998, the Company's shareholders approved by written consent,
in accordance with Delaware law, the merger of Boynton into the Company.
Shareholders owning 5,402,650 of the 7,745,000 shares of Common Stock then
outstanding approved the merger, which was consummated on January 30, 1998.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market on the
National Association of Securities Dealers ("NASD") OTC Bulletin Board. Its
symbol is "WDSC". Until January 1998, following the merger of Woodfield into the
Company, only sporadic trading of the Common Stock occurred and no established
trading market existed for the Common Stock.
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The following table sets forth the range of high and low bid quotations for
the Common Stock for the last quarter of fiscal year 1998 and for the first
quarter of fiscal year 1999. These quotations were obtained from the NASD and
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not represent actual transactions.
FISCAL YEAR HIGH LOW
- ------------------------------------------------------------------------
1998
FOURTH QUARTER $ 2.00 $ .875
(January 1998 only)
1999
FIRST QUARTER $ 2.00 $ .50
(through April 30, 1998)
The Company had 84 shareholders of record as of April 30, 1998; however,
based on information provided by the Company's transfer agent, the Company
believes that the number of beneficial owners of the common stock is greater.
In July 1996, the Company sold 3,000,000 shares of its common stock to its
founders, Gary N. Mansfield, Harold S. Blue, Guy F. Wood and Michael Falk,
Messrs. Mansfield and Wood paid nominal consideration of $.001 per share for
750,000 shares each. Messrs. Blue and Falk paid $100,000 each for 750,000 shares
($.13 per share). Thereafter, the Company sold 1,250,000 shares of common stock
to investors at a price of $.50 per share between November 1996 and March 1997,
and the Company sold an additional 2,450,000 shares of Common Stock at a price
of $1.00 per share between April and December 1997. The Company also issued to
certain investors who purchased Common Stock warrants to purchase an aggregate
of 165,000 shares of Common Stock at an exercise price of $1.00 per share
through November 30, 2001. These warrants were issued at no extra cost to the
investors. In December 1997, the Company issued to Mr. Blue, as compensation for
his services to the Company as Chairman, warrants to purchase 387,500 shares of
Common Stock on the same terms as the investor warrants. Mr. Blue later
transferred warrants for 290,500 of these shares to other persons.
In January and February 1998, pursuant to a December 1997 call by the
Company, holders of the Company's Class A Warrants exercised 307,500 of such
warrants at a price of $.50 per share, yielding aggregate proceeds of $153,750
to the Company.
The foregoing sales of securities were made pursuant to the exemptions from
registration provided in Section 4(2) of the Act and Regulation D promulgated
thereunder.
The Company has not paid any dividends on its Common Stock. The Company
intends to retain any earnings for use in its operations and the expansion of
its business, and does not anticipate paying
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<PAGE>
any dividends on the Common Stock in the foreseeable future. The payment of
dividends is within the discretion of the Company's Board of Directors. Any
future decision with respect to dividends will depend on future earnings, future
capital needs and the Company's operating and financial condition, among other
factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table reflects the contributions of Simply Cigars and Smoker's
Gallery stores to the Company's sales and net loss during the fiscal years ended
January 31, 1998 ("Fiscal 1998") and January 31, 1997 ("Fiscal 1997").
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------- -----------
SIMPLY SMOKER'S SIMPLY GALLERY
CIGARS GALLERY CIGARS SMOKER'S
------ ------- ------ --------
<S> <C> <C> <C> <C>
Sales $2,289,806 $4,355,328 $ 407,706 $5,561,964
Net Income (Loss) $ (656,836) $ 563,987 $(132,563) $ (3,317)
</TABLE>
The Company's statement of operations for Fiscal 1997, reflects the
operations of Smoker's Gallery for the 12 months ended April 30, 1997, while
the statement of operations for Fiscal 1998 reflects only nine months of
Smoker's Gallery operations, from May 1, 1997, through January 31, 1998. As
Simply Cigars commenced operations in November 1996, only three months of its
operations are included in Fiscal 1997 while Fiscal 1998 reflects a full
operating year for Simply Cigars. Further, during Fiscal 1997, only six Simply
Cigars kiosks were operating, four of which were opened in November 1996, and
two of which opened in December 1996. The Company opened eight additional Simply
Cigars kiosks in Fiscal 1998, four of which were opened before the
November-December 1997 holiday season; the other four were opened in November
and December 1997 (two in each month). Four of the six Smoker's Gallery stores
were open throughout both fiscal years; the other two were opened in December
1996.
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The following table sets forth certain items expressed in percentages of
revenues for the periods indicated:
FISCAL YEAR
1998 1997
---- ----
Revenues 100.0% 100.0%
Cost of revenues 58.1% 63.3%
-----------------------
Gross Profit 41.9% 36.7%
Selling, general and
administrative expenses 41.6% 38.5%
Depreciation and amortization 1.8% 0.7%
-----------------------
Operating loss (1.5)% (2.5)%
Other income (expense) 0.4% 0.3%
-----------------------
Loss before provision for
income taxes (1.1)% (2.2)%
Provision for income taxes 0.3% 0.1%
-----------------------
Net loss (1.4)% (2.3)%
=======================
Revenues for Fiscal 1998 increased 11% to $6,645,134 from $5,969,670 in
Fiscal 1997. The increase in revenues was due to the increase in Simply Cigars
revenues of $1,882,100 ($2,289,806 for the 12 months ended January 31, 1998,
versus $407,706 for the three month period ended January 31, 1997) offset by a
decrease in Smoker's Gallery revenues of $1,206,636 ($4,355,328 for the 9 months
ended January 31, 1998 versus $5,561,964 for the 12 month period ended April 30,
1997).
Gross profit was $2,781,511, or 41.9% of revenues in Fiscal 1998, compared
with $2,193,538, or 36.7% in Fiscal 1997. The increase in gross profit as a
percentage of sales was primarily due to the increase in Simply Cigars revenues
in Fiscal 1998 which have had a higher gross margin than Smoker's Gallery
revenues. In Fiscal 1998, Simply Cigars' gross margin was $1,166,644, or 51% of
revenues whereas Smoker's Gallery's gross margin was $1,614,847, or 37% of
revenues.
Selling, general and administrative expenses increased 20% in Fiscal 1998 to
$2,761,785 from $2,298,874 in Fiscal 1997. The increase in selling, general and
administrative expenses was due to the increase in Simply Cigars selling,
general and administrative expenses of $1,398,649 ($1,736,711 for the 12 months
ended January 31, 1998 versus $338,062 for the three month period ended January
31, 1997) offset by a decrease in Smoker's Gallery selling, general and
administrative expenses of $935,738 ($1,025,074 for the 9 months ended January
31, 1998, versus $1,960,812 for the 12 month period ended April 30, 1997).
The Company's net loss of $92,849 for Fiscal 1998 reflects the Simply Cigars
loss of $656,836 mostly offset by Smokers Gallery's net income of $563,987.
During Fiscal 1998, Boynton Tobacconists, Inc. ("Boynton"), the former operator
of Smoker's Gallery, was a
13
<PAGE>
Subchapter S corporation, and substantially all of its net income was paid to
Wolk as a distribution. This distribution was not deducted for purposes of
calculating the Company's net loss.
The Company's Fiscal 1997 net loss of $135,880 reflects Simply Cigars' net
loss of $132,563 and Smokers Gallery's net loss of $3,317. During Fiscal 1997,
Boynton was a Subchapter C corporation and Wolk received aggregate salary and
bonus compensation of $550,010, which was deducted as an expense.
Due to the small scale of operations, Simply Cigars incurred net losses of
$132,563 in Fiscal 1997 (three months of operations) and $656,836 in Fiscal
1998, as gross profit was greatly outweighed by fixed overhead expenses, in
particular wages, rent and management fees.
During the November-December 1997 holiday season, the Company's same store
sales decreased 18.2% from the level for the 1996 holiday season. This reflects
a 7.9% increase for Simply Cigars and a 24.0% decrease for Smoker's Gallery.
Since January 1998, the Company has experienced a sharp decline in same store
sales. During the three months ended March 31, 1998, the Company's same store
sales were down 27% from the same period in 1997, reflecting a 14% decline at
Simply Cigars and a 29% decline at Smoker's Gallery. The Company believes that
this decline in sales is due to a general decline in same store sales
experienced throughout the retail tobacconist industry. The cause of this
general decline is uncertain; however, the Company believes that the decline is
due in large part to the greatly increased number of retail outlets competing
for premium cigar sales as well as a decline in the rate of growth of demand for
premium cigars. Unless the decline in the Company's same store sales is soon
reversed, the Company will be materially adversely affected.
The Company believes that the key to its achieving profitability is the
fulfillment of its expansion plan to have open at least 30 outlets, including 19
in-line stores, by December 31, 1998, with the conversion of certain high-volume
kiosks to stores to begin in June 1998. There can be no assurance that the
Company will be able to fulfill this plan or achieve profitability, especially
given the adverse trends in same store sales described above.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1998, the Company had working capital of $2,060,000; however,
in order to fully implement its expansion plan, the Company believes that it
will need to raise at least $3 million in new financing by August 1998. If such
funds are not raised, the Company will have to cut back on its expansion plan
accordingly. Further, even if such funds are raised, there can be no assurance
that the Company will be able to implement its
14
<PAGE>
expansion plan or achieve profitability. There can be no assurance that
sufficient cash flow from operations will be realized before available cash
resources and the net proceeds of any financing are exhausted. There can be no
assurance that such additional funds will be available when needed or, if
available, will be available on terms acceptable to the Company.
Net cash used in operating activities decreased 92% in Fiscal 1998 to
$69,419 from $841,858 in Fiscal 1997, primarily due to a reduction in the amount
of cash used in Fiscal 1998 to acquire merchandise inventories ($1,200,659
during 1997 versus $551,502 during 1998). During Fiscal 1997, Simply Cigars
commenced operations and Smoker's Gallery opened two new stores which resulted
in increased purchases of merchandise inventories.
Net cash used in investing activities decreased 34% in Fiscal 1998 to
$357,813 from $543,421 in Fiscal 1997 primarily as a result of the capital
expenditures required in Fiscal 1997 to commence operations for Simply Cigars
and open two new Smoker's Gallery stores offset by the capital expenditures
required in Fiscal 1998 to expand Simply Cigars' operations.
Net cash provided by financing activities decreased 32% in Fiscal 1998 to
$990,858 from $1,461,364 in 1997. During Fiscal 1997, net borrowings amounted to
$671,264 whereas in Fiscal 1998, net repayments of amounts borrowed amounted to
$1,294,812. Also as previously discussed above, during Fiscal 1998, a
distribution in the amount of $565,000 was paid to Wolk. These amounts were
offset by an increase in Fiscal 1998 of proceeds from the sale of common stock
and cash acquired in the capital transaction of $2,060,570.
ITEM 7. FINANCIAL STATEMENTS
The Company's Financial Statements are included herein beginning on Page
F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
See the Company's Report on Form 8-K filed January 14, 1998, regarding the
change in the Company's independent auditors.
15
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION(S)
- -----------------------------------------------------
Gary N. Mansfield 37 Chairman, Chief Executive Officer,
Secretary, Director
Guy F. Wood 44 President
Joel A. Wolk 46 Chief Operating Officer
Karl E. Duell 41 Vice President/Chief Financial
Officer
Eugene R. Terry 59 Director
Harold S. Blue 37 Director
Hershel Krasnow 75 Director
GARY N. MANSFIELD
Mr. Mansfield, a co-founder of the Company, has served as Chief Executive
Officer, Secretary and a Director since July 1996. He became Chairman of the
Company in April 1998. He served as Executive Vice President - Corporate
Development of ProxyMed, Inc. (Nasdaq: PILL), a healthcare information
technology company based in Fort Lauderdale, Florida, from March 1993 until
September 1997, when he resigned that position to work for the Company. He
remained as a non-executive employee of ProxyMed until April 1, 1998. Mr.
Mansfield also was a member of ProxyMed's Board of Directors from June 1995
until September 1997. In these capacities at ProxyMed, Mr. Mansfield focused on
several initiatives including the acquisitions of several companies and contract
negotiations for strategic business alliances. From November 1991 to March 1993,
Mr. Mansfield was co-founder and Chief Executive Officer of Medical Containment
Systems, Inc., a software development firm which was acquired by ProxyMed. From
December 1985 to August 1988, Mr. Mansfield was a shareholder of Best Generics
and he was a Director of Best Generics at the time the company was acquired. Mr.
Mansfield also served as Vice President of Ocean Drugs, a pharmacy chain located
in South Florida from September 1985 to May 1989.
Mr. Mansfield holds a Masters of Business Administration degree in Finance
and Policy from the University of Chicago, Chicago, Illinois (1995); a Juris
Doctor from the University of Miami School
16
<PAGE>
of Law (1992); and a Bachelors degree in Business Administration (Management)
from the Wharton School of the University of Pennsylvania (1985). Mr. Mansfield
is a member in good standing of the American Bar Association and the Florida
Bar.
GUY F. WOOD
Mr. Wood, co-founder of the Company, has served as President since July 1996
and is responsible for all aspects of the Company's day-to-day operations. Mr.
Wood has 19 years management experience in high growth companies, nearly half of
which have been with companies involved in specialty retail. Most recently, from
March 1995 to September 1996, Mr. Wood served as an area developer of bagel
restaurants in the Chicagoland area. Previously, Mr. Wood served as Executive
Vice President and Chief Operating Officer of Gloria Jean's Gourmet Coffees,
Inc., from March 1987 through February 1995. Joining that company when there
were only seven stores, Mr. Wood developed and supervised a retail operations
department with three directors and eight district managers supporting 26
company and 200-plus franchised stores. He had complete responsibility for
profit and loss at a chain with annual sales in excess of $100,000,000. Prior to
joining Gloria Jean's, Mr. Wood served in various positions at Edward Hines
Lumber Co. in Chicago, Illinois, from March 1979 through March 1987, where not
only did he set the sales record for the largest single invoice, but also for
being one of the youngest ever to achieve his title of Branch Yard Manager in
the history of the 100-year old company.
Mr. Wood holds a Bachelor of Science degree in psychology from Southern
Illinois University.
JOEL A. WOLK
Mr. Wolk has worked in the retail tobacco industry since 1973, when he and
his father opened a Tinder Box franchise in the Staten Island Mall in New York.
Later, the Wolk family sold the Tinder Box store and Mr. Wolk opened and later
sold Smoker's Gallery stores in Binghampton, New York, and Phoenix, Arizona. In
1981, Mr. Wolk relocated to Boca Raton, Florida, where he opened the current
Smoker's Gallery chain, with the first store located at the Galleria Mall in
Fort Lauderdale. The chain grew to six stores by 1996. From 1993 to 1996, Mr.
Wolk served as a director of the Retail Tobacco Dealers of America. Mr. Wolk
became Chief Operating Officer of the Company on January 30, 1998, when the
Smoker's Gallery chain was acquired in the merger by Boynton into the Company.
KARL E. DUELL
Mr. Duell has served as Vice President and Chief Financial Officer of the
Company since January 1998. Mr. Duell has over 18 years experience working with
national, regional and local
17
<PAGE>
independent public accounting firms, most recently having served as a senior
manager with Ernst & Young L.L.P. from November 1996 to December 1997. Prior to
that, he was a manager with Coopers & Lybrand L.L.P., now the Company's
independent public accountants, from November 1992 to October 1996. Mr. Duell is
a Certified Public Accountant and holds a B.B.A. degree from Niagara University.
EUGENE TERRY
Mr. Terry became a Director of the Company in October 1997. He is a
pharmacist and the founder and Chairman of Bloodline, Inc., a New Jersey-based
company engaged in the blood services business, which he founded in 1980. In
1971, Mr. Terry founded Home Nutritional Support, Inc. ("HNSI"), one of the
first companies established in the home infusion industry. In 1984, HNSI was
sold to Healthdyne, Inc. HNSI was later sold to the W.R. Grace Group. From 1975
to 1984, Mr. Terry was also founder and Chief Executive Officer of Paramedical
Specialties, Inc., a respiratory and durable medical equipment company, which
was also sold to Healthdyne, Inc. From 1962 to 1985, Mr. Terry was a principal
of Terry Drug Company, an upscale retail drugstore chain in Northern New Jersey.
From 1970 to 1978, Mr. Terry was President of Pharmaceutical Specialties, a
Christmas mail order catalog company serving pharmacies nationwide. Mr. Terry
has been a director of ProxyMed since August 1995. Currently, Mr. Terry is also
a principal with Mr. Cooperman in T/C Solutions.
HAROLD S. BLUE
Mr. Blue, a co-founder of the Company, served as the Company's Chairman
from July 1996 until March 1998 and continues as a Director. He is currently
employed by ProxyMed as its Chairman and Chief Executive Officer. He has held
those positions since January 1993. In January 1991, Mr. Blue founded and then
served as Chief Executive Officer and Chairman of Health Services of Miami
Lakes, Inc., a multi-office provider of primary and specialty care services to
managed care patients. In December 1994, Mr. Blue sold that company to InPhyNet,
Inc., a publicly traded (Nasdaq National Market) physician practice management
company. Prior to founding Health Services, Mr. Blue was the founder of Best
Generics, Inc. in 1984. Best Generics was later sold to pharmaceutical
manufacturer Ivax Corporation, a publicly traded (AMEX) firm, in August 1988.
Mr. Blue served on the Board of Directors of Ivax for two years, and then served
as a consultant to Ivax for an additional three-year period. Mr. Blue served as
President and Chief Executive Officer of Budget Drugs, Inc., an independent
chain of retail pharmacies from 1979 to 1992. He currently serves as a director
of iMall, Inc. (OTC: IIML), which operates what it believes to be the largest
independent mall on the Internet, and Accumed, Inc. (Nasdaq: ACMIC), a
healthcare medical
18
<PAGE>
device company.
HERSHEL KRASNOW
Mr. Krasnow has been a director of Windsor Capital Corp. since its
incorporation in June 1988. He was a senior vice president of the investment
banking firm of Josephthal, Lyon & Ross from 1990 to February 1997. Since March
1997 he has been Senior Vice President of First Security Investments, Inc., a
registered broker/dealer. From August 1989 through March 1990, Mr. Krasnow was
an executive vice president of the investment banking firm of Castleton Rhodes,
Inc. From October 1988 until August 1989, he was an executive vice president of
Robyns Capital Corp., an investment banking firm. From May 1988 until October
1988, Mr. Krasnow was an executive vice president of
19
<PAGE>
Hibbard Brown & Company, Inc., an investment banking firm. From January 1987
until May 1988, Mr. Krasnow was an executive vice president of Philips, Appel &
Walden, Inc., an investment banking firm. From 1978 until January 1987, Mr.
Krasnow was an executive vice president of Rooney Pace, Inc., an investment
banking firm.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid since commencement of
the Company's operations to the Company's Chief Executive Officer and the only
other executive officer of the Company with annual compensation over $100,000
(the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------- ----------------------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY(S) BONUS COMPENSATION SECURITIES UNDERLYING OPTIONS/SARS
- ------------------ ---- --------- ----- ------------ ----------------------------------
<S> <C> <C> <C> <C> <C>
Gary N. Mansfield, 1998 $19,231 --- --- 200,000
Chief Executive Officer 1997 --- --- --- ---
Joel A. Wolk, 1998 --- --- $565,000(1) 100,000
Chief Operating Officer 1997 $550,010 --- --- ---
<FN>
- ----------
(1) Subchapter S shareholder distribution from Boynton.
</FN>
</TABLE>
In January 1998, the Company entered into three-year employment agreements
with Messrs. Mansfield, Wolk and Duell. These agreements provide for annual
salaries of $120,000, $125,000 and $70,000, respectively. The agreements provide
for customary employee benefits and standard confidentiality and non-competition
covenants. Upon a termination "without cause," Messrs. Mansfield and Duell are
entitled to nine and two months' salary respectively. Upon a termination
"without cause," Mr. Wolk is entitled to payment of his salary through the end
of the three-year term, less the amount he earns or reasonably could earn from
other employment.
The Company does not intend to pay any directors' fees through the end of
the fiscal year ended January 31, 1999.
20
<PAGE>
The following table provides information on stock option grants during
Fiscal 1998 to each of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SHARES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED (#) IN FY ($/Sh) DATE
- ---- ----------- ----- ------ ----
<S> <C> <C> <C> <C>
GARY N. MANSFIELD 200,000 63% $ .98 1/15/03
JOEL A. WOLK 100,000 32% $1.63 1/30/03
</TABLE>
The following table sets forth certain information concerning unexercised
options held by each of the named executive officers:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Shares Value Number of Number of Value of Value of
Acquired on Realized Securities Securities Unexercised Unexercised
Name Exercise(#) ($) Underlying Underlying In-the-Money In-the-Money
Options/SARs at Options/SARs at Options/SARs at Options/SARs
FY-End (#) FY-End (#) FY-End ($) at FY-End ($)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Gary N. Mansfield --- --- 200,000 --- $166,000 ---
Joel A. Wolk --- --- 100,000 --- $ 18,000 ---
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1998, with respect to
(i) each person known to the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director, (iii) each executive officer
named in the Executive Compensation Table, and (iv) all directors and executive
officers of the Company as a group.
SHARES OF THE COMPANY'S
COMMON STOCK BENEFICIALLY OWNED
NAME AND ADDRESS
OF BENEFICIAL OWNER(1) NUMBER PERCENT
- ---------------------- ------ -------
Harold S. Blue 798,000(2) 7.9%
Gary N. Mansfield 902,000(3) 8.8%
Joel A. Wolk 2,046,553(4) 20.3%
Guy F. Wood 770,000 7.7%
21
<PAGE>
Karl E. Duell --- ---
Eugene R. Terry 125,000(5) 1.2%
Hershel Krasnow 355,000(6) 3.6%
Michael Falk
830 Third Avenue
New York, NY 10017 825,000(7) 8.2%
J.F. Shea Co.
655 Brea Canyon Road
Walnut, CA 71789 750,000 7.5%
Bellingham Industries, Inc.
Farley Edge
Westerham
Kent TN16 1UB
England, UK 500,000 5.0%
Directors and executive officers
as a group 4,996,553(8) 47.9%
- ----------
*Less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the
exercise of any option, warrant or right. Shares of the Company's
common stock subject to any options, warrants or rights that are
currently exercisable or exercisable within 60 days are deemed
outstanding for purposes of computing the percentage ownership of the
person holding such options, warrants or rights, but are not deemed
outstanding for purposes of computing the percentage ownership of any
other person.
(2) Includes 97,000 shares issuable upon the exercise of currently
exercisable warrants.
(3) Includes 200,000 shares issuable upon the exercise of currently
exercisable options.
(4) Includes 100,000 shares issuable upon the exercise of currently
exercisable options.
(5) Includes 25,000 shares issuable upon the exercise of currently
exercisable warrants.
(6) These shares are held by a company jointly controlled by Mr. Krasnow
and another person. Mr. Krasnow owns less than one percent of the
capital stock of that company.
(7) Includes 75,000 shares issuable upon the exercise of currently
exercisable warrants.
(8) Includes 422,000 shares issuable upon the exercise of currently
exercisable options and warrants.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1996, Mr. Blue loaned $70,000 to the Company. This loan was
repaid in December 1996 without interest. In September 1997, Mr. Blue loaned
$50,000 to the Company. This loan was repaid in November 1997 without interest.
22
<PAGE>
ITEM 13. EXHIBIT LIST AND REPORTS ON FORM 8-K
(A) Exhibits
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation, as amended.
3.2 Bylaws.
10.1 Agreement and Plan of Merger among the Company, Woodfield Enterprises,
Inc. and International Asset Management Group, Inc., dated December 18,
1997 (incorporated by reference to Exhibit 2.1 of Form 8-K, File No.
033-26828, reporting an event dated December 31, 1997).
10.2 Agreement and Plan of Merger between the Company and Boynton
Tobacconists, Inc., dated January 29, 1998 (incorporated by reference
to Exhibit 2.1 of Form 8-K, File No. 033-26828, reporting an event
dated January 30, 1998).
10.3 Employment Agreement between the Company and Gary N. Mansfield.*
10.4 Employment Agreement between the Company and Joel A. Wolk.*
10.5 Employment Agreement between the Company and Karl E. Duell.*
- ----------
* Denotes employment agreement or compensatory plan.
(B) Reports on Form 8-K
During the quarter ended January 31, 1998, a Form 8-K report was filed
by the Company with the Securities and Exchange Commission on January
14, 1998, and amended in a filing on January 23, 1998, on Form 8-K/A
reporting (i) an event dated December 31, 1997 (the merger of Woodfield
Enterprises, Inc., into the Company, (ii) another event dated December
31, 1997 (the change of the Company's fiscal year from the calendar
year to the year ended January 31) and (iii) an event dated January 13,
1998, (the change in the Company's independent auditors).
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS.
No annual report or proxy material has been sent to security holders, nor
are such materials anticipated to be sent.
23
<PAGE>
WINDSOR CAPITAL CORP.
FINANCIAL STATEMENTS
PERIODS ENDED JANUARY 31, 1998 AND 1997
TABLE OF CONTENTS
Report of Independent Accountants............................................F-2
Financial Statements:
Balance Sheets...............................................................F-3
Statements of Operations.....................................................F-4
Statements of Stockholders' Equity...........................................F-5
Statements of Cash Flows.....................................................F-6
Notes to Financial Statements................................................F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Windsor Capital Corp.
We have audited the accompanying balance sheets of Windsor Capital Corp. as of
January 31, 1998 and 1997, and the related statements of operations,
stockholders' equity and cash flows for the periods then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Windsor Capital Corp. as of
January 31, 1998 and 1997, and the results of its operations and its cash flows
for the periods then ended in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Miami, Florida
April 10, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
WINDSOR CAPITAL CORP.
BALANCE SHEETS
JANUARY 31, 1998 AND 1997
ASSETS 1998 1997
---------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 720,079 $ 156,453
Receivables 3,272 14,401
Merchandise inventories 2,455,151 1,903,649
Prepaid expenses and other current assets 40,205 30,455
---------------- ----------------
Total current assets 3,218,707 2,104,958
Property and equipment, net 779,342 543,042
Other assets:
Deposits 13,380 14,505
Other 16,468 3,373
---------------- ----------------
$ 4,027,897 $ 2,665,878
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,009,336 $ 651,582
Borrowings under line of credit - 448,105
Accrued salaries and employee benefits 21,444 6,442
Other accrued expenses 128,168 61,914
---------------- ----------------
Total current liabilities 1,158,948 1,168,043
Notes payable to stockholder - 846,707
Commitments
Stockholders' equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized;
no shares issued or outstanding - -
Common stock, $0.001 par value; 25,000,000 shares authorized;
9,561,213 and 5,970,213 shares issued and outstanding, respectively 9,561 5,970
Additional paid in capital 3,658,109 786,030
Stock subscription receivable (1,400) (1,400)
Accumulated deficit (797,321) (139,472)
---------------- ----------------
Total stockholders' equity 2,868,949 651,128
---------------- ----------------
Total liabilities and stockholders' equity $ 4,027,897 $ 2,665,878
================ ================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
<TABLE>
<CAPTION>
WINDSOR CAPITAL CORP.
STATEMENTS OF OPERATIONS
PERIODS ENDED JANUARY 31, 1998 AND 1997
1998 1997
---------------- --------------
<S> <C> <C>
Revenues $ 6,645,134 $ 5,969,670
Cost of revenues 3,863,623 3,776,132
---------------- --------------
Gross profit 2,781,511 2,193,538
Operating expenses:
Selling, general and administrative expenses 2,761,785 2,298,874
Depreciation and amortization 121,513 44,973
---------------- --------------
Total operating expenses 2,883,298 2,343,847
---------------- --------------
Operating loss (101,787) (150,309)
---------------- --------------
Other income (expense):
Lottery income 60,985 71,283
Interest expense (29,047) (51,854)
---------------- --------------
31,938 19,429
---------------- --------------
Loss before provision for income taxes (69,849) (130,880)
Provision for income taxes 23,000 5,000
---------------- --------------
Net loss $ (92,849) $ (135,880)
================ ==============
Loss per common share, basic and diluted $ (.01) $ (.05)
================ ==============
Weighted average common shares outstanding 6,636,094 2,726,925
================ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
<TABLE>
<CAPTION>
WINDSOR CAPITAL CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
PERIODS ENDED JANUARY 31, 1998 AND 1997
ADDITIONAL
PREFERRED COMMON SUBSCRIPTION PAID IN ACCUMULATED
STOCK STOCK RECEIVABLE CAPITAL DEFICIT TOTAL
--------- ------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1996 $ - $ 1,770 $ - $ (1,270) $ (3,592) $ (3,092)
Issuance of common stock - 4,200 (1,400) 787,300 - 790,100
Net loss - - - - (135,880) (135,880)
--------- ------- ---------- ---------- --------- ----------
Balance at January 31, 1997 - 5,970 (1,400) 786,030 (139,472) 651,128
Issuance of common stock - 3,591 - 2,872,079 - 2,875,670
Distributions - - - - (565,000) (565,000)
Net loss - - - - (92,849) (92,849)
--------- ------- ---------- ---------- --------- ----------
Balance at January 31, 1998 $ - $ 9,561 $ (1,400) $3,658,109 $(797,321) $2,868,949
========= ======= ========== ========== ========= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
<TABLE>
<CAPTION>
WINDSOR CAPITAL CORP.
STATEMENTS OF CASH FLOWS
PERIODS ENDED JANUARY 31, 1998 AND 1997
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (92,849) $ (135,880)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 121,513 44,973
Non-cash professional fees 25,000 -
Deferred income taxes 23,000 (17,000)
Gain on sale of property and equipment - (6,576)
Changes in operating assets and liabilities:
Accounts receivable 11,129 2,256
Merchandise inventories (551,502) (1,200,659)
Prepaid expenses and other current assets (26,750) (10,330)
Deposits and other assets (17,970) (15,785)
Accounts payable 357,754 428,787
Accrued salaries and employee benefits 15,002 6,442
Other accrued expenses 66,254 61,914
----------- -----------
Net cash used in operating activities (69,419) (841,858)
----------- -----------
INVESTING ACTIVITIES
Capital expenditures (357,813) (590,709)
Disposals of property and equipment - 47,468
----------- -----------
Net cash used in investing activities (357,813) (543,241)
----------- -----------
FINANCING ACTIVITIES
Proceeds from borrowings 300,000 1,693,484
Repayment of amounts borrowed (1,594,812) (1,022,220)
Distributions (565,000) -
Cash acquired in capital transaction, net 486,517 -
Proceeds from sale of common stock, net 2,364,153 790,100
----------- -----------
Net cash provided by financing activities 990,858 1,461,364
----------- -----------
Net increase in cash and cash equivalents 563,626 76,265
Cash and cash equivalents at beginning of period 156,453 80,188
----------- -----------
Cash and cash equivalents at end of period $ 720,079 $ 156,453
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 29,047 $ 51,854
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-6
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
On December 31, 1997, Woodfield Enterprises, Inc., a Florida corporation
specialty retailer of premium cigars and accessories which operates in
regional malls primarily in the Midwest and Northeast United States
("Woodfield"), merged with and into Windsor Capital Corp. (the "Company").
Pursuant to the merger, 6,700,000 shares of the Company's common stock, par
value $0.001 per share, were issued to the former shareholders of Woodfield
in a private transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended. Prior to the merger, the Company had 5,525,000 shares of
common stock outstanding and effectuated a recapitalization, which included a
sale, by the Company's majority shareholder, International Asset Management
Group, Inc. ("IAMG") to Woodfield of 4,480,000 shares and 5,000,000 warrants,
which were canceled by Woodfield in accordance with the terms and conditions
of the Agreement and Plan of Merger, among the Company, IAMG and Woodfield
dated December 18, 1997 (the "Merger Agreement"). Upon completion of the
merger, the Company had 7,745,000 shares of common stock outstanding, of
which 6,700,000 were held by the former Woodfield shareholders.
On December 31, 1997, resignations were tendered by the executive officers
and all but one of the directors (Mr. Hershel Krasnow) of the Company, and
designees of Woodfield were elected to the Board of Directors and as
executive officers of the Company in accordance with the terms and conditions
of the Merger Agreement.
The series of transactions described above resulted in the Woodfield
shareholders controlling the Company's Board of Directors and having
approximately 87% ownership of the Company. Accordingly, the merger was
accounted for as a capital transaction, which is equivalent to the issuance
of stock by Woodfield for the Company's net monetary assets of approximately
$486,000, after the recapitalization. In addition, the historical results of
Woodfield became the operating results of the Company. In connection with the
merger, the Company changed its calendar year end to a fiscal year ending
January 31.
On January 30, 1998, pursuant to an Agreement and Plan of Merger (the
"Boynton Merger Agreement"), the Company acquired all of the business and
assets of Boynton Tobacconists, Inc., a privately-held Florida corporation
("Boynton"), and assumed all of Boynton's liabilities. Pursuant to the
merger, 1,770,213 shares (valued by the parties at $2.6 million, or $1.46875
per share, based on the contemporaneous market value of the Company's common
stock) of the Company's common stock, par value $0.001 per share, were issued
to the former shareholder of Boynton in a private transaction pursuant to
Section 4(2) of the Securities Act of 1933, as amended. Additional shares of
the Company's common stock, up to a maximum of 176,340 may be issued to the
selling shareholder based on a final valuation of certain assets and
liabilities of Boynton as of January 30, 1998.
F-7
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
The acquired business involves the operation of a chain of six specialty
retail outlets in South Florida under the name "Smoker's Gallery." These
outlets specialize in the sale of cigars, pipes and related products and
accessories. In connection with the merger, the selling shareholder and his
wife entered into three-year employment agreements with the Company, pursuant
to which they will serve, on a full time basis, as the Company's Chief
Operating Officer - Tobacconist Division and Director of Operations -
Tobacconist Division, respectively.
The merger with Boynton was accounted for as a pooling of interests and
therefore, all prior period financial statements presented have been restated
as if the merger took place at the beginning of such periods.
Boynton had a fiscal year ending April 30, and, accordingly, the Boynton
statement of operations for the fiscal year ended April 30, 1997 has been
combined with the Company's statement of operations for the period from
inception to January 31, 1997. For 1998, Boynton's statement of operations
for the nine month period ended January 31, 1998 has been combined with the
Company's statement of operations for the fiscal year ended January 31, 1998.
Separate results of operations for the periods prior to the merger with
Boynton are as follows:
PERIOD PERIOD
ENDED ENDED
JANUARY 31 JANUARY 31
1998 1997
-------------- --------------
Revenues:
The Company $ 2,289,806 $ 407,706
Boynton 4,355,328 5,561,964
-------------- --------------
Combined $ 6,645,134 $ 5,969,670
============== ==============
Net income (loss):
The Company $ (656,836) $ (132,563)
Boynton 563,987 (3,317)
-------------- --------------
Combined $ (92,849) $ (135,880)
============== ==============
F-8
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. At times, the Company
maintains cash in its corporate accounts in amounts which exceed federally
insured limits. The Company places its cash in high quality credit
institutions and has not experienced any losses in such accounts.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements
and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from sales of products is generally recognized upon delivery to
customers. The Company has established programs, which, under specific
conditions, enable customers to return products. The Company establishes
liabilities for estimated returns and allowances at the time of delivery to
customers.
MERCHANDISE INVENTORIES
Inventory is stated at the lower of cost or market, with cost determined
using the average cost method.
PROPERTY AND EQUIPMENT
Property and equipment, including leasehold improvements, are stated at cost
less accumulated depreciation. Depreciation and amortization are provided on
the straight-line basis over the estimated useful lives of the respective
assets. Leasehold improvements are amortized over the lesser of their
estimated useful life or the life of the lease. The range of estimated lives
for financial reporting purposes are as follows: leasehold improvements 5 to
10 years and equipment and other 3 to 7 years. Maintenance and repairs are
expensed as incurred. Expenditures for significant renewals or betterments
are capitalized. Gains or losses on dispositions are reflected in current
operations.
INCOME TAXES
Deferred income taxes are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Deferred tax assets are also established for the future
tax benefits of loss and credit carryovers. Valuation allowances are
established for deferred tax assets when it is more likely than not that such
amounts will not be realized.
F-9
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising expense was
approximately $68,700 and $52,000 for the periods ended January 31, 1998 and
1997, respectively.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
During fiscal 1997, the Company adopted the provisions of SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS. Impairment losses are
recorded on long-lived assets when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount.
PER SHARE DATA
During fiscal 1997, the Company adopted SFAS No. 128, "EARNINGS PER SHARE".
SFAS No. 128 specifies new standards to improve earnings per share ("EPS")
information provided in financial statements by simplifying the existing
computational guidelines, revising the disclosure requirements, and
increasing the comparability of EPS data on an international basis. EPS
disclosures have been restated for all periods presented.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "REPORTING COMPREHENSIVE INCOME". SFAS No. 130 establishes standards
for reporting and display of comprehensive income. The purpose of reporting
comprehensive income is to present a measure of all changes in equity that
result from recognized transactions and other economic events of the period
other than the transactions with owners in their capacity as owners. SFAS No.
130 requires that an enterprise classify items of other comprehensive income
by their nature in a financial statement and display the accumulated balance
of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet. SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997, with
earlier application permitted. Adoption of this pronouncement is not expected
to have a material effect on the Company's financial position or results of
operations.
F-10
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In June 1997, the FASB also issued SFAS No. 131, "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION". SFAS No. 131 specifies revised
guidelines for determining an entity's operating segments and the type and
level of financial information to be disclosed. Once operating segments have
been determined, SFAS No. 131 provides for a two-tier test for determining
those operating segments that would need to be disclosed for external
reporting purposes. In addition to providing the required disclosure for
reportable segments, SFAS No. 131 also requires disclosure of certain "second
level" information by geographic area and for production/services. SFAS No.
131 also makes a number of changes to existing disclosure requirements.
Management believes that the adoption of this pronouncement will not have a
material effect on the Company's financial statement disclosures.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of the Company's cash, trade accounts payable, borrowing
under line of credit and notes payable to stockholder approximate their fair
value.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
JANUARY 31
------------------------------------
1998 1997
---------------- ---------------
Leasehold improvements $ 309,909 $ 274,599
Equipment and other 787,139 464,636
---------------- ---------------
1,097,048 739,235
Less accumulated depreciation
and amortization (317,706) (196,193)
---------------- ---------------
$ 779,342 $ 543,042
================ ===============
F-11
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. BORROWINGS UNDER LINE OF CREDIT
Boynton has a commercial line of credit and term facility with a financial
institution which matures on March 31, 1998. The facility provides for
borrowings of up to $500,000 on the line of credit and up to $300,000 on the
term loan. The amount outstanding on the line of credit at April 30, 1997 was
$448,105. No amounts were outstanding at April 30, 1997 on the term loan. No
amounts were outstanding on the term loan or line of credit on January 31,
1998. Amounts borrowed on the line of credit bear interest at an annual rate
of interest based on the sum of 2.9% and the 30 day commercial paper rate as
published by the Wall Street Journal (8.5% at April 30, 1997). The line of
credit is collateralized by substantially all assets of Boynton.
5. NOTES PAYABLE TO STOCKHOLDER
Boynton's notes payable to stockholder at April 30, 1997 are
uncollateralized, bear interest at 7% and are due on demand. On January 30,
1998, in connection with the Boynton merger, the outstanding balance of notes
payable to stockholder of $968,821 was repaid in full.
6. INCOME TAXES
The Company recorded an income tax provision in the amount of $23,000 and
$5,000 for the years ended January 31, 1998 and 1997, respectively. The 1998
provision for income tax relates to the elimination of Boynton's deferred tax
asset upon its election to be treated as an "S" corporation effective May 1,
1997. The 1997 provision for income tax related to the earnings of Boynton.
In connection with the Company's merger with Boynton on January 30, 1998,
Boynton's "S" corporation status terminated. As a result of Boynton's
conversion from a non-taxable entity to a taxable entity, a deferred tax
asset of approximately $30,000 was realized, however, a full valuation
allowance was established against such deferred tax asset.
Based on the weight of available evidence, the Company has established a full
valuation allowance to offset net deferred tax assets of approximately
$323,500 and $49,000 at January 31, 1998 and 1997, respectively. These net
deferred tax assets relate, principally, to the tax effect of net operating
loss carryforwards. Realization of deferred tax assets is dependent upon
sufficient future taxable income during the period that temporary differences
and carryforwards are expected to be available to reduce taxable income.
Management does not believe that it is more likely than not that the deferred
tax asset will be realized.
The net operating loss carryforwards, which amount to approximately $791,000
and $133,000 as of January 31, 1998 and 1997, begin to expire in 2011.
F-12
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS
The Company leases retail facilities in regional malls under noncancelable
operating leases with remaining terms in excess of one year. All of the
leases expire within the next ten years and have various renewal and
escalation clauses. The rental payments for most facilities are based on a
minimum rental plus a percentage of the gross sales in excess of a stipulated
amount. The Company is generally obligated for facilities operating costs
including property taxes, insurance and maintenance. Future minimum annual
lease payments pursuant to these operating leases existing as of January 31,
1998 are:
1999 $ 495,000
2000 502,000
2001 343,000
2002 210,000
2003 193,000
--------------
$ 1,743,000
==============
Included in the statements of operations for the periods ended January 31,
1998 and 1997 was approximately $620,800 and $192,300, respectively, for
minimum lease payments. Additional leases expenses included in the statements
of operations for the periods ended January 31, 1998 and 1997 was
approximately $238,000 and $377,400, respectively. The minimum and additional
lease expense relate to the above described operating leases and are recorded
as selling, general and administrative expenses.
8. STOCKHOLDERS' EQUITY
In connection with the issuance of common stock during the period July 15,
1996 (date of inception) to December 31, 1997, Woodfield issued warrants to
purchase 165,000 shares of common stock at an exercise price of $1.00 per
share, exercisable through November 30, 2001.
In connection with the issuance of common stock during November and December
of 1997, Woodfield issued warrants to purchase 387,500 shares of common stock
at an exercise price of $1.00 per share, exercisable through November 30,
2001.
Prior to the merger with Woodfield, the Company issued Class A warrants to
purchase 500,000 shares of common stock and one Class B warrant at an
exercise price of $.50 per share, exercisable through February 15, 1998.
During the period ended January 31, 1998, 46,000 Class A warrants were
exercised. Prior to their expiration date, an additional 261,500 Class A
warrants were exercised. Class B warrants issued in connection with the
exercise of Class A warrants entitle the holder to purchase one share of
common stock at an exercise price of $1.00 per share and are exercisable
through May 15, 1998.
F-13
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
During the period ended January 31, 1998, the Company granted options as
incentives to certain employees. The following table summarizes information
relative to such options:
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------- ---------
Outstanding at January 31, 1997 - $ -
Granted 315,000 1.16
------- ---------
Outstanding at January 31, 1998 315,000 $ 1.16
======= =========
Exercisable at January 31, 1998 300,000 $ 1.17
======= =========
Weighted-average fair value of options granted
during the period ended January 31, 1998 $ 1.16
=========
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" (APB 25) and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per share is required
by SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION", and has been
determined as if the Company had accounted for its employee stock options
under the fair value method required by SFAS No. 123. The fair value for
these options was estimated at the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions:
risk-free interest rate of 5.39%; expected volatility of 0%; and expected
life of 4.97 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options. Because the Company's employee stock
options have characteristics significantly different from those traded
options, and because subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.
F-14
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosure, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
1998
---------
Pro forma net loss $(177,016)
=========
Pro forma loss per share - basic and diluted $ (.03)
=========
The weighted-average remaining contractual life of options is 4.97 years.
9. SUBSEQUENT EVENT
On April 7, 1998, the Company entered into an agreement with a placement
agent under which the placement agent will, subject to satisfactory
completion of its due diligence review, act on a best efforts basis as the
Company's exclusive placement agent regarding the Company's intention of
raising a minimum of $2,500,000 and up to a maximum of $5,000,000 through the
issuance of the Company's common stock under Regulation D of the Securities
Act of 1933. At its option, the placement agent may raise an additional
$2,000,000.
F-15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: April 30, 1998
WINDSOR CAPITAL CORP.
By: /s/ GARY N. MANSFIELD
---------------------------
Gary N. Mansfield
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ GARY N. MANSFIELD Chief Executive Officer April 30, 1998
- -------------------------- (principal executive officer)
Gary N. Mansfield and Director
/s/ KARL E. DUELL Vice President and Chief April 30, 1998
- -------------------------- Financial Officer (principal
Karl E. Duell financial and accounting
officer)
/s/ HAROLD S. BLUE Director April 30, 1998
- --------------------------
Harold S. Blue
/s/ EUGENE R. TERRY Director April 30, 1998
- --------------------------
Eugene R. Terry
Director April 30, 1998
- --------------------------
Hershel Krasnow
24
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation, as amended.
3.2 Bylaws.
10.3 Employment Agreement between the Company and Gary N. Mansfield.*
10.4 Employment Agreement between the Company and Joel A. Wolk.*
10.5 Employment Agreement between the Company and Karl E. Duell.*
- ----------
* Denotes employment agreement or compensatory plan.
25
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
WINDSOR CAPITAL CORP.
------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is
WINDSOR CAPITAL CORP.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware is The Prentice-Hall Corporation
System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is 35,000,000, consisting of 10,000,000 shares of
Preferred Stock, all of a par value of $.01, and 25,000,000 shares of Common
Stock, all of a par value of $.001.
The Preferred Stock may be issued, from time to time, in one or more
series, with such designations, preferences and relative, participating,
optional or other rights, qualifications, limitations or restrictions thereof as
shall be stated and expressed in the resolution or resolutions providing for the
issue of such series adopted by the Board of Directors from time to time,
pursuant to the authority herein given, a copy of which resolution or
resolutions shall have been set forth in a Certificate made, executed,
acknowledged, filed and recorded in the manner required by the laws of the State
of Delaware in order to make the same effective. Each series shall consist of
such number of shares as shall be stated and expressed in such resolution or
resolutions providing for the issuance of the stock of such series. All shares
of any one series of Preferred Stock shall be alike in every particular.
<PAGE>
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
N.S. Truax 229 South State Street, Dover, Delaware
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws.
The phrase "whole Board" and the phrase "total number of directors"
shall be deemed to have the same meaning, to wit, the total number of
directors which the corporation would have if there were no vacancies.
No election of directors need be by written ballot.
2. After the original or other By-Laws of the corporation have
been adopted, amended, or repealed, as the case may be, in accordance
with the provisions of Section 109 of the General Corporation Law of
the State of Delaware, and, after the corporation has received any
payment for any of its stock, the power to adopt, amend, or repeal the
By-Laws of the
<PAGE>
corporation may be exercised by the Board of Directors of the
corporation; provided, however, that any provision for the
classification of directors of the corporation for staggered terms
pursuant to the provisions of subsection (d) of Section 141 of the
General Corporation Law of the State of Delaware shall be set forth in
an initial By-Law or in a By-Law adopted by the stockholders entitled
to vote of the corporation unless provisions for such classification
shall be set forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the holder
thereof to notice of, and the right to vote at, any meeting of
stockholders. Whenever the corporation shall be authorized to issue
more than one class of stock, no outstanding share of any class of
stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the
right to vote at any meeting of stockholders except as the provisions
of paragraph (2) of subsection (b) of section 242 of the General
Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied
voting power shall entitle the holder thereof to vote upon the increase
or decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the number and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
<PAGE>
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on JUNE 24, 1988.
/s/ N.S. TRUAX
--------------------------------
N.S. Truax, Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
WINDSOR CAPITAL CORP.
A DELAWARE CORPORATION
Pursuant to the Delaware General Corporation Law, Article I of the
Certificate of Incorporation of WINDSOR CAPITAL CORP., a Delaware corporation,
hereinafter referred to as the "Corporation", is amended to read as follows:
ARTICLE I
The name of the Corporation is Innovative Health Systems, Inc.
The foregoing Amendment to the Certificate of Incorporation of the
Corporation was proposed by the directors and approved by the Corporation's
shareholders on May 4, 1995, pursuant to Section 242 of the Delaware General
Corporation Law. The number of votes cast in favor of the amendment by the
shareholders was sufficient for approval of the amendment.
In accordance with Section 103 of the Delaware General Corporation Law,
this Amendment shall be effective upon filing by the Department of State of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed this Certificate of Amendment effective as of the 4th day of May, 1995.
WINDSOR CAPITAL CORP.
By: /s/ ROBERT M. LEOPOLD
-------------------------------------
Robert M. Leopold,
an officer thereof
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CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
INNOVATIVE HEALTH SYSTEMS, INC.
(F/K/A WINDSOR CAPITAL CORP.)
A DELAWARE CORPORATION
Pursuant to the Delaware General Corporation Law, Article I of the
Certificate of Incorporation of INNOVATIVE HEALTH SYSTEMS, INC., a Delaware
corporation formerly known as Windsor Capital Corp., hereinafter referred to as
the "Corporation", is amended to read as follows:
ARTICLE I
The name of the Corporation is Windsor Capital Corp.
The foregoing Amendment to the Certificate of Incorporation of the
Corporation was proposed by the directors and approved by the Corporation's
shareholders on July 12, 1995, pursuant to Section 242 of the Delaware General
Corporation Law. The number of votes cast in favor of the amendment by the
shareholders was sufficient for approval of the amendment.
In accordance with Section 103 of the Delaware General Corporation Law,
this Amendment shall be effective upon filing by the Department of State of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed this Certificate of Amendment effective as of the 12th day of July,
1995.
INNOVATIVE HEALTH SYSTEMS, INC.
By: /s/ ROBERT M. LEOPOLD
---------------------------------------
Robert M. Leopold,
an officer thereof
<PAGE>
CERTIFICATE OF MERGER
OF
WOODFIELD ENTERPRISES, INC. INTO WINDSOR CAPITAL CORP.
(Under Section 252 of the
General Corporation Law of the State of Delaware)
WINDSOR CAPITAL CORP. HEREBY CERTIFIES THAT:
1. Windsor Capital Corp., a Delaware corporation, and Woodfield
Enterprises, Inc., a Florida corporation, have entered into an Agreement and
Plan of Merger dated December 18, 1997.
2. The Agreement and Plan of Merger has been approved, adopted,
certified, executed, and acknowledged by each constituent corporation in
accordance with Section 252(c) of the Delaware General Corporation Law.
3. Windsor Capital Corp., a Delaware corporation, will be the surviving
corporation.
4. The certificate of incorporation of the surviving corporation shall
remain its certificate of incorporation after the merger.
5. The Agreement and Plan of Merger is on file at the principal place
of business of the surviving corporation:
350 E. Irving Park Road
Roselle, Illinois 60172
6. A copy of the Agreement and Plan of Merger will be given to any
shareholder of either constituent corporation on request and without cost.
7. The authorized capital stock of Woodfield Enterprises, Inc. consists
of 20,000,000 shares of common stock, $.001 per value.
IN WITNESS WHEREOF, Windsor Capital Corp. has caused this certificate
to be signed by its duly authorized officer, this 29th day of December, 1997.
WINDSOR CAPITAL CORP.
By: /s/ ROBERT M. LEOPOLD
--------------------------------
President
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CERTIFICATE OF MERGER
OF
BOYNTON TOBACCONISTS, INC. INTO WINDSOR CAPITAL CORP.
(Under Section 252 of the
General Corporation Law of the State of Delaware)
WINDSOR CAPITAL CORP. HEREBY CERTIFIES THAT:
1. Windsor Capital Corp., a Delaware corporation, and Boynton
Tobacconists, Inc., a Florida corporation, have entered into an Agreement and
Plan of Merger dated as of January 29, 1998.
2. The Agreement and Plan of Merger has been approved, adopted,
certified, executed, and acknowledged by each constituent corporation in
accordance with Section 252(c) of the Delaware General Corporation Law.
3. Windsor Capital Corp., a Delaware corporation, will be the surviving
corporation.
4. The certificate of incorporation of the surviving corporation shall
remain its certificate of incorporation after the merger.
5. The Agreement and Plan of Merger is on file at the principal place
of business of the surviving corporation:
2501 Davie Road
Suite 230
Ft. Lauderdale, Florida 33317
6. A copy of the Agreement and Plan of Merger will be given to any
shareholder of either constituent corporation on request and without cost.
7. The authorized capital stock of Boynton Tobacconists, Inc. consists
of 500 shares of common stock, $1.00 par value per share.
IN WITNESS WHEREOF, Windsor Capital Corp. has caused this certificate
to be signed by its duly authorized officer, this 29th day of January, 1998.
WINDSOR CAPITAL CORP.
By: /s/ GARY N. MANSFIELD
--------------------------------
Gary N. Mansfield,
Chief Executive Officer
EXHIBIT 3.2
BYLAWS
OF
WINDSOR CAPITAL CORP.
(a Delaware corporation}
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such a certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the
General Corporation Law, the Board of Directors of the corporation may provide
by resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
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3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full "share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix
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a new record date for the adjourned meeting. In order that the corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining the stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by the General Corporation Law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by the General
Corporation Law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action. In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall not be more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or
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upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, except as any provision of law
may otherwise require.
7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting. Shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to tome, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by
the directors or by any officer instructed by the directors to call
the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by
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mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States Mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a new record date for the adjourned meeting. Notice need not be given to any
stockholder who submits a written waiver of notice signed by him before or after
the time stated therein. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person
to act for him by proxy in all matters in which a stockholder is entitled to
participate, whether by waiving notice of any meeting, voting or participating
at a meeting, or expressing
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consent or dissent without a meeting. Every proxy must be signed by the
stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon
after three years from its date unless such proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and, if, and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock itself
or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The Stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holders thereof to one
vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
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8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of one person. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be one. The number
of directors may be increased or decreased by action of the stockholders or of
the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of
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stockholders or of special meetings of stockholders called for the election of
directors and/or for the removal of one or more directors and for the filling of
any vacancy in that connection, newly created directorships and any vacancies in
the Board of Directors, including unfilled vacancies resulting from the removal
of directors for cause or without cause, may be filled by the vote of a majority
of the remaining directors then in office, although less than a quorum, or by
the sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be
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construed as conflicting with any provisions of the General Corporation Law and
these Bylaws which govern a meeting of directors held to fill vacancies and
newly created directorships in the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the came may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
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ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing them, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
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ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
15th day of January, 1998, by and between WINDSOR CAPITAL CORP. ("Company") and
GARY N. MANSFIELD, residing at 20191 EAST COUNTRY CLUB DRIVE, #1502, AVENTURA,
FLORIDA 33180 ("Employee"). Reference herein to the Company shall include any
successors, if applicable.
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. RECITALS. All of the above recitals are true and correct.
2. TERM. The term of this Agreement shall commence on January 15, 1998
(the "Effective Date") and shall continue until the date prior to the third
anniversary of such first business day (hereafter the "Term"). This Agreement
and the employment of Employee hereunder shall be automatically extended from
year to year thereafter unless (x) terminated by the Company by delivery of not
less than 90 days' written notice to Employee prior to the end of the Term or
any extension thereof in which case the employment of Employee shall terminate
on the date specified for termination in such notice, or (y) terminated by
Employee by delivery of not less than 30 days' written notice to the Company in
which case the employment of Employee shall terminate on the date which is 30
days following the date notice is received by the Company or such later date as
the Company and Employee may agree to.
3. PURPOSE; DUTIES; LOYALTY; AUTHORITY OF EMPLOYEE.
a. PURPOSE. During the Term, the Employee will be employed as
Chief Executive Officer by the Company and shall render service to the Company
as an employee upon all terms, provisions and condition hereinafter set forth.
b. DUTIES. Employee is and shall be employed by the Company on
a substantially exclusive full-time basis. Employee shall perform the duties and
have the authority and responsibilities customarily accompanying that position.
c. LOYALTY. During the Term, Employee shall devote the
necessary time required for his employment position and shall give his best
efforts to the business of the Company and to the performance of the duties and
obligations of Employee described in this Agreement. Employee shall not,
directly or indirectly, alone, or as a partner, officer, director or shareholder
of any other institution, be engaged in any other commercial activities
whatsoever, or continue or assume any other corporate affiliations without the
prior written consent of the Company, except for (a) passive investments, and
(b) minimal time utilized for business activities that do not compete with the
business of the Company or its subsidiaries. No provision of this Agreement
shall apply to Gloria Jean's Gourmet Coffee, Franchised Companies owned and
operated by the Employee and members of his family.
d. AUTHORITY OF EMPLOYEE. Subject to the Articles and Bylaws
of the Company, Employee shall have the authority to accept orders binding upon
the Company and otherwise enter into binding agreements on behalf of the Company
appropriate to the Chief Executive Officer position.
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4. COMPENSATION AND EXPENSES.
a. SALARY. During the Term, in consideration for the services
rendered by the Employee under this Agreement, the Company shall pay the
Employee $120,000 on an annual basis (the "Base Salary") in accordance with the
Company's customary payroll practices, and a $500 per month car allowance,
subject to federal and state taxes, if any.
b. ADDITIONAL COMPENSATION. During the Term, as a further
incentive and inducement to the Executive to accept employment by the Company
and to devote his best efforts to the business and affairs of the Company, the
Employee shall be entitled to bonuses that may be awarded from time to time by
the Board of Directors of the Company and to participate in any stock option or
bonus plans which the Company may now have or in the future develop.
c. OPTIONS. Employee will receive a stock-option agreement for
a five (5) year term to purchase up to 200,000 shares of the Company's common
stock at its fair market value defined as mean of the high and low prices at
which common stock is reported to have traded on the over-the-counter System at
the close of business on the Effective Date of this Agreement. The options will
vest upon Employee's execution of this Agreement.
d. EXPENSES. During the Term of this Agreement, the Company
shall promptly pay or reimburse the Employee for all reasonable business
expenses actually incurred or paid by the Employee in the performance of his
services hereunder in accordance with the policies and procedures of the Company
for the reimbursement of business expenses, including without limitation
reasonable expenses relating to travel, hotel and related costs associated with
transportation to and from Employee's principal residence to Company's principal
corporate office, provided that the Employee properly accounts therefor in
accordance with the Company's policies for 6 months after the Effective Date of
the Agreement.
e. TAX WITHHOLDING. The Company shall have the right to deduct
or withhold from the compensation due Employee hereunder any and all sums
required for Federal income and social security taxes and all state or local
taxes now applicable or that may be enacted and become applicable in the future.
5. BENEFITS.
a. VACATION. Each year, Employee shall be entitled to such
time out of the office and away from his duties for vacation and attendance at
business meetings as the Company may deem reasonable and necessary; provided,
however, Employee shall be entitled to a minimum of 2 weeks of vacation leave
with pay during any calendar year.
b. PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled
to participate in whatever benefit plans, including health insurance that are
extended to all employees of the Company, on the same terms that such benefits
are so extended. Employee shall be entitled to family health insurance coverage
beginning 90 days from the commencement of employment from the Company's
insurance carrier.
6. TERMINATION.
a. TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. The Company
may, at its sole option, terminate this Agreement without any cause or reason.
In addition, this Agreement will automatically terminate upon Employee's death
or Disability (as defined herein). Upon termination for Disability, Employee
shall be entitled to receive the amounts payable under Section 6 (c)(i) and (ii)
(base salary for 9 months and prorated bonus) less any amounts payable under any
disability insurance policy or plan. For purposes of this Agreement,
"Disability" is defined to mean the inability of Employee due to illness or
physical or mental infirmity (as determined by a
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physician selected by Employee and acceptable to the Company) to perform his
duties hereunder on a full-time basis for six consecutive months with reasonable
accommodation by the Company.
b. TERMINATION FOR CAUSE. The Company may terminate Employee's
employment hereunder for "cause". For purposes of this Agreement, the term
"cause" shall be limited to (i) a felony conviction, or (ii) Employee's willful
misconduct which is demonstrably and materially injurious to the Company. If at
any time the Company shall determine that Employee has engaged in one or more
activities constituting "cause" for termination hereunder, the Company shall
provide Employee with an opportunity to appear before the Board of Directors of
the Company. If after this opportunity to be heard, the Board with the advice of
counsel determines that there is cause for termination, the Company may
terminate Employee's employment forthwith. In the event Employee is terminated
with cause, Section 7a and 7b will be of no force or effect.
c. PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event of
termination without cause, other than by reason of Employee's death or
Disability, Employee (or his estate) shall be entitled to severance pay of (i)
an amount equal to Employee's Base Salary on the date of termination for 9
months commencing on the date of termination payable in accordance with the
Company's customary payroll practices, plus (ii) a pro rata portion of any bonus
compensation which would have been paid to Employee under any bonus plan which
is adopted by the Company's Compensation Committee or Board of Directors in such
year if the Company had met the targeted goals to the date of termination, plus
(iii) the continuation of all benefit plans (including, without limitation, all
insurance plans) for 9 months after termination, plus (iv) any remaining
unvested options shall vest.
If the Company defaults in the payment of any amounts owed
hereunder to Employee following written notice by Employee and fails to cure
such default within ten days from the date of such notice, Employee shall be
entitled to accelerate the entire amount due hereunder. The Company shall have
the opportunity to cure a monetary default one time after which time, if another
default occurs, Employee shall be entitled to accelerate the entire amount due
hereunder upon written notice by Employee without affording the Company an
opportunity to cure.
d. RETURN OF COMPANY PROPERTY. Upon notice of termination by
the Company or resignation by Employee, Employee shall immediately return to the
Company all property of the Company in Employee's possession, including
Confidential Information (as defined below). Employee acknowledges that the
Company may withhold any compensation owed to Employee hereunder until all such
property is returned.
7. COVENANTS OF EMPLOYEE.
a. Employee agrees that during the Term and for a period of
time equal to two years following a termination of employment for any reason, he
will not, directly or indirectly, engage, assist or participate in, whether as a
director, officer, executive, agent, manager, consultant, partner, owner or
independent contractor or other participant, in any Line of Business (as defined
below) which is the same as the Company or any of its subsidiaries as of the
Effective Date of this Agreement. Employee and Company agree that this clause is
to protect the interests of the Company while at the same time allowing the
Employee to pursue gainful employment with any other company Employee so
chooses, so long as such Employee does not, within the time period herein, work
in a line of business that directly competes with any Line of Business engaged
in by the Company or any of its subsidiaries as of the Effective Date of this
Agreement. Nothing contained herein shall prevent Employee from acquiring less
than 1% of any class of securities of any company that has any of its securities
listed on a national securities exchange or traded in the over-the-counter
market provided Employee remains a passive investor.
For the purposes of Section 7.a), Lines of Business shall be
defined as those businesses which Company is engaged in as of the Effective Date
of this Agreement as follows: (1) retail tobacconist stores.
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<PAGE>
b. Employee agrees that during the Term and for a period of
two years after the termination of this Agreement for any reason, he will not
induce or solicit any person employed or hereafter employed by the Company or
any of its subsidiaries to leave the employ of the Company or any of its
subsidiaries. Further, Employee agrees that for a period of two years after the
termination of this Agreement for any reason, he will not solicit, divert away,
take away, or attempt to take away any customer of the Company who was a
customer while Employee was with the Company. Regarding the latter sentence,
Company and Employee agree that Employee may contact and do business with those
customers, however during the relevant time period, he may not solicit or sell
them any product or service in the Lines of Business that were the same as then
being offered by the Company or any of its subsidiaries as of the Effective Date
of this Agreement.
c. Employee agrees and acknowledges that the Confidential
Information of the Company and its subsidiaries (as hereinafter defined) is
valuable, special and unique to their business, that such business depends on
such Confidential Information by keeping it confidential for the use and benefit
of the Company. Based on the foregoing, Employee agrees to undertake the
following obligations with respect to such Confidential Information.
i. Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company.
ii. Employee agrees that, except as required by
Employee's duties or authorized in writing by the Company and its subsidiaries
or required by applicable law, he will not at any time during and for a period
of 3 years after the termination of his employment with the Company and its
subsidiaries, disclose, directly or indirectly, any Confidential Information of
the Company or any of its subsidiaries
iii. Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company or its subsidiaries, to ensure
that all Confidential Information of the Company is kept confidential for the
use and benefit of the Company and its subsidiaries; and
iv. Employee agrees that, upon termination of his
employment by the Company or any of its subsidiaries or at any other time the
Company may in writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all copies thereof)
that are in the possession of or under the control of Employee. Employee further
agrees that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), he will not make or retain any copy or extract
from such materials.
For the purposes of this Section 7 (c), Confidential
Information means any and all information developed by or for the Company or any
of its subsidiaries of which Employee gained knowledge by reason of his
employment by the Company or any of its subsidiaries prior to the date hereof or
his employment under this Agreement that is not generally known in any industry
in which the Company or its subsidiaries is or may become engaged.
d. INJUNCTIVE RELIEF.
i. Employee acknowledges and agrees that the
covenants and obligations contained in this Section 7 relate to special, unique
and extraordinary matters and that a violation of any of the terms of this
Section will cause the Company irreparable injury for which adequate remedies at
law are not available. Therefore, Employee agrees that the Company shall be
entitled to an injunction, restraining order, or other equitable relief from any
court of competent jurisdiction, restraining the Employee from committing any
violation of the covenants and obligations set forth in this Section 7.
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<PAGE>
ii. The Company's rights and remedies under this
Section are cumulative and are in addition to any other rights and remedies the
Company may have pursuant to the specific provisions of this Agreement and at
law or in equity.
8. MISCELLANEOUS.
a. ATTORNEY'S FEES. In the event a proceeding is brought to
enforce or interpret any part of this Agreement or the rights or obligations of
any party to this Agreement, each party shall pay its own fees and expenses.
b. SUCCESSORS AND ASSIGNS. This Agreement and the benefits
hereunder are personal to the Company and are not assignable or transferable by
the Employee without the written consent of the Company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and the Employee and the Employee's heirs and legal representatives, and
the Company's successors and assigns.
c. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Florida, without regard
to the application of principles or conflict of laws.
d. NOTICES. All notices and other communications required and
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified mail,
return receipt requested, postage prepaid, to the parties to this Agreement
addressed to the Company at its then principal office, as notified to Employee,
or to the Employee at his address specified on page 1 of this Agreement, or to
either party hereto at such other address or addresses as he or it may from time
to time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of delivery.
e. MODIFICATIONS; WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such modification, waiver or discharge
is approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Employee and such officer. 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 prior or subsequent time.
f. COMPLETE UNDERSTANDING. 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 set forth expressly in this
Agreement.
g. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of this Agreement.
h. VALIDITY. The invalidity or unenforceability of any one or
more provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
i. SEVERABILITY. The invalidity of any one or more of the
words, phrases, sentences, clauses or sections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted.
5
<PAGE>
j. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
k. ARBITRATION. Except for disputes relating to Section 7 of
this Agreement, any and all disputes or controversies that shall arise under or
in connection with this Agreement or in any other way related to Employee's
employment by the Company, including termination of employment, shall be
submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the Federal Arbitration Act takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or grant, except that they will have
no authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Arbitration shall be held either in Broward County or Dade County,
Florida, and the parties hereby agree to accept service of process at the
address above written and in the personal jurisdiction and venue as set out
herein. Both parties expressly covenant and agree to be bound by the decision of
the arbitrators as the final determination of the matter in dispute. Judgment
upon the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. Any fees or costs of such arbitration shall be share
equally by the parties.
l. INDEMNIFICATION. In accordance with the Company's Articles
and Bylaws, the Company agrees to defend, indemnify and hold harmless the
Employee ("Indemnified Party") for acts in his capacity as Employee to the
fullest extent permitted by Florida corporate law at the present time (or as
such right of indemnity may be increased in the future) including in particular
and without limitation with respect to the execution and delivery of this
Agreement or Employee's accepting employment with the Company. The Company
agrees to reimburse the Indemnified Party in advance for any costs of defending
any action or investigation (including reasonable attorneys' fees and expenses)
regarding Employee's performance of his duties under this Agreement, subject to
an undertaking from the Indemnified Party to repay the Company if the
Indemnified Party in determined not to be entitled to such indemnity by a court
of competent jurisdiction; provided that, the Company shall first have the
opportunity to defend Employee so long as counsel hired by the Company does not
have a conflict with representation of both the Company and the Employee and
Employee approves of such counsel.
m. Sections 2x and y; 6a and c; 7 and 8 shall survive the
termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
COMPANY:
WINDSOR CAPITAL CORP., a Delaware
corporation
By: /s/ HAROLD S. BLUE
----------------------------------
EMPLOYEE:
/s/ GARY N. MANSFIELD
--------------------------------------
Gary N. Mansfield
6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
30th day of January, 1998, by and between WINDSOR CAPITAL CORP. ("Company") and
Joel A. Wolk, 4850 Regency Court, Boca Raton, Florida 33434-5327, ("Employee").
Reference herein to the Company shall include any successors, if applicable.
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. RECITALS. All of the above recitals are true and correct.
2. TERM. The term of this Agreement shall commence on January 30, 1998
(the "Effective Date") and shall continue until the date prior to the third
anniversary of such date (hereafter the "Term"). This Agreement and the
employment of Employee hereunder shall be automatically extended from year to
year thereafter unless (x) terminated by the Company by delivery of not less
than 90 days' written notice to Employee prior to the end of the Term or any
extension thereof in which case the employment of Employee shall terminate on
the last day of such Term or extension or such other date as the parties may
agree, or (y) terminated by Employee by delivery of not less than 30 days'
written notice to the Company in which case the employment of Employee shall
terminate on the last day of such Term or extension or such other date as the
parties may agree.
3. PURPOSE; DUTIES; LOYALTY; AUTHORITY OF EMPLOYEE.
a. PURPOSE. During the Term, the Employee will be employed as
Chief Operating Officer - Tobacconist Division by the Company and shall render
service to the Company as an employee upon all terms, provisions and condition
hereinafter set forth.
b. DUTIES. Employee is and shall be employed by the Company on
a full-time basis. Employee shall perform the duties and have the authority and
responsibilities customarily accompanying his position. Employee shall report to
the Company's Chief Executive Officer.
c. LOYALTY. During the Term, Employee shall devote the
necessary time required for his employment position and shall give his best
efforts to the business of the Company and to the performance of the duties and
obligations of Employee described in this Agreement. Employee shall not,
directly or indirectly, alone, or as a partner, officer, director or shareholder
of any other institution, be engaged in any other commercial activities
whatsoever, or continue or assume any other corporate affiliations without the
prior written consent of the Company, except for (a) passive investments, and
(b) minimal time utilized for business activities that do not compete with the
business of the Company or its subsidiaries.
d. AUTHORITY OF EMPLOYEE. Subject to the Certificate of
Incorporation and Bylaws of the Company, Employee shall have the authority to
accept orders binding upon the Company and otherwise enter into binding
agreements on behalf of the Company appropriate to his position.
4. COMPENSATION AND EXPENSES.
a. SALARY. During the Term, in consideration for the services
rendered by the Employee under this Agreement, the Company shall pay the
Employee a gross annual salary of $125,000 (the "Base Salary") in
<PAGE>
accordance with the Company's customary payroll practices, and a $500 per month
car allowance, subject to federal and state taxes, if any.
b. ADDITIONAL COMPENSATION. During the Term, as a further
incentive and inducement to the Executive to accept employment by the Company
and to devote his best efforts to the business and affairs of the Company, the
Employee shall be entitled to bonuses that may be awarded from time to time by
the Board of Directors of the Company and to participate in any stock option or
bonus plans which the Company may now have or in the future develop.
c. OPTIONS. Employee will receive a stock-option agreement
exercisable for a period of five (5) years commencing on the date hereof to
purchase up to 100,000 shares of the Company's common stock at its fair market
value defined as mean of the high and low prices at which common stock is
reported to have traded on the over-the-counter System at the close of business
on the date of this Agreement. The options will vest upon Employee's execution
of this Agreement.
d. EXPENSES. During the Term of this Agreement, the Company
shall promptly pay or reimburse the Employee for all reasonable business
expenses actually incurred or paid by the Employee in the performance of his
services hereunder in accordance with the policies and procedures of the Company
for the reimbursement of business expenses.
e. TAX WITHHOLDING. The Company shall have the right to deduct
or withhold from the compensation due Employee hereunder any and all sums
required for Federal income and social security taxes and all state or local
taxes now applicable or that may be enacted and become applicable in the future.
5. BENEFITS.
a. VACATION. Each year, Employee shall be entitled to such
time out of the office and away from his duties for vacation and attendance at
business meetings as the Company may deem reasonable and necessary; provided,
however, Employee shall be entitled to a minimum of two weeks of vacation leave
with pay during any calendar year.
b. PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled
to participate in whatever benefit plans, including health insurance that are
extended to all employees of the Company, on the same terms that such benefits
are so extended. Employee shall be entitled to family health insurance coverage
beginning 90 days from the commencement of employment from the Company's
insurance carrier.
6. TERMINATION.
a. TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. The Company
may, at its sole option, terminate Employee's hereunder without any cause or
reason. In the event that the Company materially reduces Employee's duties or
status without his prior written consent, or materially breaches its obligations
under this Agreement, and fails to promptly (but, in any event, within ten (10)
days) remedy same after receipt of written notice from Employee, Employee, at
his option, may resign, whereupon such action shall be treated as a termination
without cause. In addition, this Agreement will automatically terminate upon
Employee's death or Disability (as defined herein). Upon termination for death
or Disability, Employee (or his estate) shall be entitled to receive the amounts
payable under Section 6 (c)(i) and (ii) for 9 months less any amounts payable
under any disability insurance policy or plan. For purposes of this Agreement,
"Disability" is defined to mean the inability of Employee due to illness or
physical or mental infirmity (as determined by a physician selected by Employee
and acceptable to the Company) to perform his duties hereunder on a full-time
basis for six consecutive months with reasonable accommodation by the Company.
b. TERMINATION FOR CAUSE. The Company may terminate Employee's
employment hereunder
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for "cause". For purposes of this Agreement, the term "cause" shall be limited
to (i) a felony conviction, or (ii) Employee's willful misconduct which is
demonstrably and materially injurious to the Company. If at any time the Company
shall determine that Employee has engaged in one or more activities constituting
"cause" for termination hereunder, the Company shall provide Employee with an
opportunity to appear before the Board of Directors of the Company. If after
this opportunity to be heard, the Board with the advice of counsel determines
that there is cause for termination, the Company may terminate Employee's
employment forthwith.
c. PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event of
termination without cause, other than by reason of Employee's death or
Disability, Employee shall not be required, in mitigation of damages or
otherwise, to seek or accept other employment, and Employee shall be entitled to
(i) payment of his Base Salary on the date of termination through the end of the
Term or applicable extension period payable in accordance with the Company's
customary payroll practices, plus (ii) a pro rata portion of any bonus
compensation which would have been paid to Employee under any bonus plan which
is adopted by the Company's Compensation Committee or Board of Directors in the
year of termination if the Company had met the targeted goals to the date of
termination, plus (iii) the continuation of all benefit plans (including,
without limitation, all insurance plans) through the end of the Term or the
applicable extension period, plus (iv) any remaining unvested options shall
vest.
If the Company defaults in the payment of any amounts owed
hereunder to Employee following written notice by Employee and fails to cure
such default within ten days from the date of such notice, Employee shall be
entitled to accelerate the entire amount due hereunder. The Company shall have
the opportunity to cure a monetary default one time after which time, if another
default occurs, Employee shall be entitled to accelerate the entire amount due
hereunder upon written notice by Employee without affording the Company an
opportunity to cure.
d. RETURN OF COMPANY PROPERTY. Upon notice of termination by
the Company or resignation by Employee, Employee shall immediately return to the
Company all property of the Company in Employee's possession, including
Confidential Information (as defined below). Employee acknowledges that the
Company may withhold any compensation owed to Employee hereunder until all such
property is returned.
7. COVENANTS OF EMPLOYEE.
a. Employee agrees that during the Term and any applicable
extension period and for a period of time equal to two years following a
termination of employment for any reason other than a termination by the Company
without cause, he will not, directly or indirectly, engage, assist or
participate in, whether as a director, officer, executive, agent, manager,
consultant, partner, owner or independent contractor or other participant, in
any Line of Business (as defined below) which is the same as the Company or any
of its subsidiaries as of the Effective Date of this Agreement. Employee and
Company agree that this clause is to protect the interests of the Company while
at the same time allowing the Employee to pursue gainful employment with any
other company Employee so chooses, so long as such Employee does not, within the
time period herein, work in a line of business that directly competes with any
Line of Business engaged in by the Company or any of its subsidiaries as of the
Effective Date of this Agreement. Nothing contained herein shall prevent
Employee from acquiring less than 1% of any class of securities of any company
that has any of its securities listed on a national securities exchange or
traded in the over-the-counter market provided Employee remains a passive
investor.
For the purposes of Section 7.a), Lines of Business shall be
defined as those businesses which Company is engaged in as of the Effective Date
of this Agreement as follows: (1) retail tobacconist stores.
b. Employee agrees that during the Term and any applicable
extension period and for a period of two years after the termination of his
employment for any reason other a termination by the Company without cause, he
will not induce or solicit any person employed or hereafter employed by the
Company or any of its subsidiaries to leave the employ of the Company or any of
its subsidiaries. Further, Employee agrees that during
3
<PAGE>
the Term and any applicable extension period and for a period of two years after
the termination of his employment for any reason other than a termination by the
Company without cause, he will not solicit, divert away, take away, or attempt
to take away any customer of the Company who was a customer while Employee was
with the Company. Regarding the latter sentence, Company and Employee agree that
Employee may contact and do business with those customers, however during the
relevant time period, he may not solicit or sell them any product or service in
the Lines of Business that were the same as then being offered by the Company or
any of its subsidiaries as of the Effective Date of this Agreement.
c. Employee agrees and acknowledges that the Confidential
Information of the Company and its subsidiaries (as hereinafter defined) is
valuable, special and unique to their business, that such business depends on
such Confidential Information by keeping it confidential for the use and benefit
of the Company. Based on the foregoing, Employee agrees to undertake the
following obligations with respect to such Confidential Information.
i. Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company.
ii. Employee agrees that, except as required by
Employee's duties or authorized in writing by the Company and its subsidiaries
or required by applicable law, he will not at any time during and for a period
of 3 years after the termination of his employment with the Company and its
subsidiaries, disclose, directly or indirectly, any Confidential Information of
the Company or any of its subsidiaries
iii. Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company or its subsidiaries, to ensure
that all Confidential Information of the Company is kept confidential for the
use and benefit of the Company and its subsidiaries; and
iv. Employee agrees that, upon termination of his
employment by the Company or any of its subsidiaries or at any other time the
Company may in writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all copies thereof)
that are in the possession of or under the control of Employee. Employee further
agrees that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), he will not make or retain any copy or extract
from such materials.
For the purposes of this Section 7 (c), Confidential
Information means any and all information developed by or for the Company or any
of its subsidiaries of which Employee gained knowledge by reason of his
employment by the Company or any of its subsidiaries prior to the date hereof or
his employment under this Agreement that is not generally known in any industry
in which the Company or its subsidiaries is or may become engaged.
d. INJUNCTIVE RELIEF.
i. Employee acknowledges and agrees that the
covenants and obligations contained in this Section 7 relate to special, unique
and extraordinary matters and that a violation of any of the terms of this
Section will cause the Company irreparable injury for which adequate remedies at
law are not available. Therefore, Employee agrees that the Company shall be
entitled to an injunction, restraining order, or other equitable relief from any
court of competent jurisdiction, restraining the Employee from committing any
violation of the covenants and obligations set forth in this Section 7.
ii. The Company's rights and remedies under this
Section are cumulative and are in addition to any other rights and remedies the
Company may have pursuant to the specific provisions of this Agreement and at
law or in equity.
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8. MISCELLANEOUS.
a. ATTORNEY'S FEES. In the event a proceeding is brought to
enforce or interpret any part of this Agreement or the rights or obligations of
any party to this Agreement, each party shall pay its own fees and expenses.
b. SUCCESSORS AND ASSIGNS. This Agreement and the benefits
hereunder are personal to the Company and are not assignable or transferable by
the Employee without the written consent of the Company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and the Employee and the Employee's heirs and legal representatives, and
the Company's successors and assigns.
c. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Florida, without regard
to the application of principles or conflict of laws.
d. NOTICES. All notices and other communications required and
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified mail,
return receipt requested, postage prepaid, to the parties to this Agreement
addressed to the Company at its then principal office, as notified to Employee,
or to the Employee at his address specified on page 1 of this Agreement, or to
either party hereto at such other address or addresses as he or it may from time
to time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of delivery.
e. MODIFICATIONS; WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such modification, waiver or discharge
is approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Employee and such officer. 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 prior or subsequent time.
f. COMPLETE UNDERSTANDING. 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 set forth expressly in this
Agreement.
g. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of this Agreement.
h. VALIDITY. The invalidity or unenforceability of any one or
more provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
i. SEVERABILITY. The invalidity of any one or more of the
words, phrases, sentences, clauses or sections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted.
j. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
k. ARBITRATION. Except for disputes relating to Section 7 of
this Agreement, any and all disputes or controversies that shall arise under or
in connection with this Agreement or in any other way related to
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Employee's employment by the Company, including termination of employment, shall
be submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the Federal Arbitration Act takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or grant, except that they will have
no authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Arbitration shall be held either in Broward County or Dade County,
Florida, and the parties hereby agree to accept service of process at the
address above written and in the personal jurisdiction and venue as set out
herein. Both parties expressly covenant and agree to be bound by the decision of
the arbitrators as the final determination of the matter in dispute. Judgment
upon the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. Any fees or costs of such arbitration shall be share
equally by the parties.
l. INDEMNIFICATION. In accordance with the Company's
Certificate of Incorporation and Bylaws, the Company agrees to defend, indemnify
and hold harmless the Employee ("Indemnified Party") for acts in his capacity as
Employee to the fullest extent permitted by Delaware corporate law at the
present time (or as such right of indemnity may be increased in the future)
including in particular and without limitation with respect to the execution and
delivery of this Agreement or Employee's accepting employment with the Company.
The Company agrees to reimburse the Indemnified Party in advance for any costs
of defending any action or investigation (including reasonable attorneys' fees
and expenses) regarding Employee's performance of his duties under this
Agreement, subject to an undertaking from the Indemnified Party to repay the
Company if the Indemnified Party in determined not to be entitled to such
indemnity by a court of competent jurisdiction; provided that, the Company shall
first have the opportunity to defend Employee so long as counsel hired by the
Company does not have a conflict with representation of both the Company and the
Employee and Employee approves of such counsel.
m. Sections 2x and y; 6a and c; 7 and 8 shall survive the
termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
EMPLOYEE: COMPANY:
WINDSOR CAPITAL CORP., a
Delaware corporation
/s/ JOEL A. WOLK
- ------------------------------
Joel A. Wolk
By: /s/ GARY N. MANSFIELD, CEO
-----------------------------
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
3rd day of December 1997, by and between WOODFIELD ENTERPRISES, INC. d/b/a
SIMPLY CIGARS ("Company") and Karl E. Duell, C.P.A. residing at 450 South Park
Road, Apt. 109, Hollywood, Florida 33021("Employee"). Reference herein to the
Company shall include any successors, if applicable.
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. TERM. The term of this Agreement shall commence on January 1, 1998 (the
"Effective Date"), and shall continue until December 31, 2000 (hereafter the
"Term) and shall be automatically extended from year to year thereafter unless
(i) terminated by the Company by delivery of not less than thirty (30) days
written notice to Employee prior to the end of the initial Term or any extension
thereof, in which case the employment of Employee shall terminate on the date
specified for termination in such notice, or (ii) terminated by Employee by
delivery of not less than thirty (30) days written notice to the Company, in
which case the employment of Employee shall terminate on the date which is
thirty (30) days following the date notice is received by the Company.
2. POSITION; DUTIES; LOYALTY.
(a) POSITION. Employee will be employed as Vice President & Chief
Financial Officer by the Company and shall render service to the Company as an
employee upon all terms, provisions and conditions hereinafter set forth.
(b) DUTIES. Employee shall be employed by the Company on a full-time
exclusive basis. Employee shall perform the duties and have the authority and
responsibilities customarily accompanying responsibility for the Company's Vice
President & Chief Financial Officer.
(c) LOYALTY. Employee shall devote the full time required for his
position and shall give his best efforts to the business of the Company and to
the performance of the duties and obligations described in this Agreement.
Employee shall not, directly or indirectly, alone, or as a partner, officer,
director or shareholder of any other institution, be engaged in any other
commercial activities whatsoever, or continue or assume any other corporate
affiliations without the prior written consent of the Company, which consent
shall not be unreasonably withheld, except for (I) passive investments..
3. COMPENSATION AND EXPENSES.
(a) SALARY. In consideration for the services rendered by the Employee
under this Agreement, the Company shall pay the Employee an annual base salary
of $70,000 (the "Base Salary") in accordance with the Company's customary
payroll practices. The annual base salary during months 13-24 of this agreement
shall be $75,000, and the base salary thereafter shall be $80,000. Employee
performance reviews (with or without a wage increase) will be conducted
annually.
(b) ADDITIONAL COMPENSATION. As a further incentive and inducement to
the Employee to accept employment by the Company and to devote his best efforts
to the business and affairs of the
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Company, the Employee shall be entitled to such bonuses that may be awarded from
time to time by the Compensation Committee or the Board of Directors of the
Company, and to participate in any stock option or bonus plans which the Company
may now have or in the future develop.
(c) OPTIONS. Employee will receive a stock option agreement for a five
(5) year term to purchase up to 15,000 shares of the Company's common stock at
its fair market value defined as the last price at which common stock was sold
pursuant to a Private Placement Memorandum (one dollar [$1.00]). The options
will vest over a three (3) year period as follows: Five thousand (5,000) on the
first anniversary of Employee's employment, five thousand (5,000) on the second
anniversary of Employee's employment, and five thousand (5,000) on the day
before the third anniversary of Employee's employment.
(d) EXPENSES. Company shall promptly pay or reimburse the Employee for
all reasonable business expenses actually incurred or paid by the Employee in
the performance of his services hereunder in accordance with the policies and
procedures of the Company for the reimbursement of business expenses for its
senior level executives, provided that the Employee properly accounts therefor
in accordance with the Company's policy.
(e) TAX WITHHOLDING. The Company shall have the right to deduct or
withhold from the compensation due Employee hereunder any and all sums required
for Federal income and social security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
4. BENEFITS.
(a) VACATION. Employee shall be entitled to two (2) weeks of vacation
with pay in the first year of employment, and thereafter. Vacation not taken
during a calendar year does not accrue unless approved in writing by the
Company. Employee shall not be entitled to receive any additional compensation
from the Company on account of his failure to take a vacation.
(b) PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in whatever benefit plans, including health insurance, that are
extended to all executives of the Company, on the same terms that such benefits
are so extended. Employee shall be entitled to family health insurance coverage
beginning ninety (90) days from the commencement of employment from the
Company's insurance carrier. If Employee elects any other option offered by the
Company, any additional premium will be payable by Employee. The Company agrees
to reimburse Employee for actual expenses of COBRA coverage from Employee's
prior employer for the first ninety (90) days of employment, but not to exceed
the cost of the Company's HMO coverage. The Company shall not be obligated to
maintain any special or additional plans for Employee's benefit. Employee shall
also be entitled to participate in benefit plans extended to other senior
executives of the Company.
5. TERMINATION.
(a) TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. In the event of
Employee's Disability (as defined herein), this Agreement may be terminated at
the election of the Company. Upon termination for death or Disability, Employee
or his/her beneficiary or estate or legal representative shall be entitled to
receive the amounts payable under Section 5(c). For purposes of this Agreement,
"Disability" is defined to mean the inability of Employee due to illness or
physical or mental infirmity (as determined by a physician selected by Employee
and
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acceptable to the Company) to perform his duties hereunder on a full-time basis
for six consecutive months with reasonable accommodation by the Company.
Employee shall, upon request of the Company, furnish information and assistance
to the Company, and, in addition, upon reasonable request of the Company's Board
of Directors or its designees, shall make himself available to undertake
reasonable assignments consistent with the dignity, importance and scope of his
position and his physical and mental health.
(b) TERMINATION FOR CAUSE. The Company may terminate Employee's
employment hereunder for "cause", effective immediately upon giving written
notice thereof. For purposes of this Agreement, the term "cause" shall be
limited to (i) conviction of a felony or of any crime involving fraud or
misrepresentation; (ii) the continued failure by Employee to substantially
perform his duties to the Company after receipt of written notice from the
Company specifying any action or inaction by Employee which is deemed by the
Company to constitute a failure to perform his duties hereunder with
suggestions, where feasible, as to how Employee may remedy such failure, and
Employee has failed to correct the unsatisfactory performance within thirty (30)
days of such notice; (iii) Employee's negligence or willful misconduct which is
materially injurious to the Company, monetarily or otherwise; (iv) proven
dishonesty affecting the Company; (v) excessive use of alcohol or illegal drugs
interfering with the performance of Employee's duties and the continuance
thereof after written warning; or (vi) any material breach by Employee of the
Company's policies or of the covenants contained in Section 6 of this Agreement
regarding confidentiality. For purposes of the paragraph, no act or failure to
act on Employee's part shall be considered "willful" unless done, or omitted to
be done, by Employee not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company. If at any time the
Company shall determine that Employee has engaged in one or more activities
constituting "cause" for termination hereunder, Employee's employment shall be
terminated for cause. Company shall pay Employee his full Base Salary through
the date of termination at the then current rate (including any applicable bonus
and accrued vacation pay), and all stock options, if any, which have become
vested and exercisable on or before the date of termination, with such options
remaining exercisable for such period of time specified as in Employee's Stock
Option Agreement(s). Company shall then have no further obligations to Employee.
Employee may give a written request to the Company within thirty (30) days after
such termination requesting an opportunity to be heard by the Board of Directors
of the Company. If Employee timely so requests such an opportunity to be heard,
such opportunity shall be made available to Employee within thirty (30) days
after such written request. If the Board, with the advice of counsel, determines
that there was cause for termination, its determination shall be deemed to be
conclusive and final. In the event Employee is terminated for cause, Section
6.a) and 6.b) will be of no force or effect. If it determines in its reasonable
judgment that there was not sufficient basis to terminate Employee for cause,
Employee shall be reinstated with all back pay and benefits restored.
(c) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event of termination
without cause, Employee shall be given thirty (30) days prior written notice.
Employee shall execute a full and complete release of any and all claims against
the Company in a form satisfactory to the Company, in which event Employee (or
his estate) shall be entitled to severance pay of (i) an amount equal to
Employee's Base Salary on the date of termination for two (2) months commencing
on the date of termination payable in accordance with the Company's customary
payroll practices, plus (ii) a pro rata portion of any bonus compensation which
would have been paid to Employee under any bonus plan which is adopted by the
Company's Compensation Committee or Board of Directors in such year if the
Company and Employee had met the targeted goals to the date of termination, plus
(iii) the continuation of all benefit (including, without limitation, all
insurance plans) for 6 months after termination, plus (iv) any remaining
unvested options shall vest. A termination pursuant to Section 1 above shall not
be deemed to be a termination without cause under this Section or a termination
for Good Reason under Section 5(e) or subject to this Section 5(c).
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(d) RETURN OF COMPANY PROPERTY. Upon notice of termination by the
Company or resignation by Employee, Employee shall immediately return to the
Company all property of the Company in Employee's possession, including
Confidential Information (as defined below). Employee acknowledges that the
Company may withhold any compensation and benefits owed to Employee hereunder
until all such property is returned.
(e) EMPLOYEE TERMINATION FOR GOOD REASON. Employee may terminate this
Agreement for Good Reason by giving Company thirty (30) days prior written
notice. Good Reason means: (i) the assignment of any duties inconsistent in any
respect with Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities hereunder, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose as isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice from Employee;
(ii) any reduction of Employee's Base Salary. In such event, Employee's
termination shall be treated as a termination without cause, and he shall be
entitled to the payments enumerated in Section 5(c) above.
(f) MITIGATION. If Employee becomes entitled to compensation pursuant
to Section 5(c) or 5(e) above, Employee shall use reasonable efforts to seek
other employment; provided, however, that he shall not be required to accept a
position of less importance or dignity or of a substantially different character
than the position held as of the date of termination or a position that could
require Employee to engage in activity in violation of the non-competition
provisions of Section 6 hereof. The amount of any cash compensation paid or
payable from any such employment shall be reported to the Company on a monthly
basis and such amount shall be credited against amounts otherwise payable by the
Company to Employee under Sections 5(c) or 5(e) above. Other than as provided in
this Section 5(f), Employee shall have no duty to mitigate the amount of any
payment provided for in this Agreement.
6. COVENANTS OF EMPLOYEE.
(a) Employee agrees that during the Term and for two (2) years
following a termination of employment for any reason, he will not, directly or
indirectly, engage, assist or participate in, whether as a director, officer,
executive, agent, manager, consultant to vendors/sellers (but may consult to end
users/purchasers), partner, owner or independent contractor or other
participant, in any line of business which is the same as the Company or any of
its subsidiaries are engaged in as of the termination of this Agreement without
the written consent of the Company. Employee and Company agree that this clause
is to protect the interests of the Company while at the same time allowing the
Employee to pursue gainful employment with any other company Employee so
chooses, so long as such Employee does not, within the relevant time period
herein, engage in any line of business that directly competes with any line of
business engaged in by the Company or any of its subsidiaries as of the date
Employee terminates his employment with Company. Nothing contained herein shall
prevent Employee from acquiring less than 1% of any class of securities of any
company that competes with the Company that has any of its securities listed on
a national securities exchange or traded in the over-the-counter market,
provided Employee remains a passive investor.
(b) Employee agrees that during the Term and for two (2) years after
the termination of employment for any reason, he will not, directly or
indirectly, without the prior written consent of the Company, induce or solicit
any person employed or hereafter employed by the Company or any of its
subsidiaries to leave the employ of the Company or any of its subsidiaries or
solicit, recruit,hire or attempt to solicit, recruit or hire any person employed
by the Company. Further, Employee agrees that for a period of three years after
the termination of this Agreement, he will not, directly or indirectly, without
the prior written consent of the Company, solicit, divert away, take away, or
attempt to take away any customer of the Company who was a customer which
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Employee had, alone or in conjunction with others, served, solicited or had
material contacts with during his employment with the Company.
(c) Employee agrees and acknowledges the he will disclose promptly to
the Company every discovery, improvement and invention made, conceived or
developed by Employee during the entire period of employment (whether or not
during working hours) which discoveries, improvements, or inventions are capable
of use in any way in connection with the business of Company. To the fullest
extent permitted by law, all such discoveries, inventions and improvements will
be deemed works made for hire. Employee grants and agrees to convey to Company
or its nominee the entire right, title and interest, domestic and foreign, which
he may have in such discoveries, improvements or inventions, or a lesser
interest therein, at the option of Company. Employee further agrees to promptly,
upon request, sign all applications for patents, copyrights, assignments and
other appropriate documents, and to perform all acts and to do all things
necessary and appropriate to carry out the intent of this section, whether on
not I am still an employee of the Company at the time of such requests.
(d) Employee agrees and acknowledges that the Confidential Information
of the Company and its subsidiaries (as hereinafter defined) is valuable,
special and unique to its business, that such business depends on such
Confidential Information, and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, Employee agrees to undertake the following
obligations with respect to such Confidential Information.
(i) Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;
(ii) Employee agrees that, except as required by Employee's
duties or authorized in writing by the Company and its subsidiaries, he will not
at any time during and for a period of 10 years after the termination of his
employment with the Company and its subsidiaries, disclose, directly or
indirectly, any Confidential Information of the Company or any of its
subsidiaries. except as maybe required by applicable law or court order, in
which case Employee shall promptly notify Company so as to allow it to seek a
protective order if it so elects;
(iii) Employee agrees to take all reasonable steps necessary,
or reasonably requested by the Company or its subsidiaries, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
(iv) Employee agrees that, upon termination of his employment
by the Company or any of its subsidiaries or at any other time the Company may
in writing so request, he will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof) that are in
the possession of or under the control of Employee. Employee further agrees
that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), he will not make or retain any copy or extract
from such materials.
For the purposes of this Section 6(c), Confidential
Information means any and all information developed by or for the Company or any
of its subsidiaries of which Employee gained knowledge by reason of his
employment by the Company or any of its subsidiaries prior to the date hereof or
during his employment that is not generally known in any industry in which the
Company or its subsidiaries is or may become engaged, but does not apply to
information which is generally known to the public or the trade, unless such
knowledge results from an unauthorized disclosure by Employee. Confidential
Information includes, but is not limited to, any and all information developed
by or for the Company concerning plans, marketing and sales methods, materials,
processes, business forms, procedures, devices used by the Company, its
subsidiaries, suppliers and customers with which the Company had dealt with
prior to Employee's termination of employment with the Company and its
subsidiaries, plans for development of new products, services and
5
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expansion into new areas or markets, internal operations, and any trade secrets,
proprietary information of any type owned by the Company and its subsidiaries,
together with all written, graphic and other materials relating to all or any
part of the same. The Company will receive all materials, including, software
programs, source code, object code, specifications, documents, abstracts, and
summaries developed in connection with Employee's employment. Employee
acknowledges that the programs and documentation developed in connection with
Employee's employment with the Company shall be the exclusive property of the
Company, and that the Company shall retain all right, title and interest in such
materials, including without limitation patent and copyright interests. Nothing
herein shall be construed as a license from the Company to make, use, sell or
copy any inventions, ideas, trade secrets, trademarks, copyrightable works, or
other intellectual property of the Company during the term of this Agreement or
subsequent to its termination.
(f) Employee confirms that he is not bound by the terms of any
agreement with any previous employer or other party which restricts in any way
his use or disclosure of information or his engagement in any business, except
as Employee may disclose in a separate schedule attached to this Agreement prior
to Company's and Employee's execution of this Agreement. Further, Employee
represents that he has delivered to the Company prior to executing this
Agreement true and complete copies of any agreements disclosed on such attached
schedule. Employee represents to the Company that his execution of this
Agreement, employment with the Company and the performance of his proposed
duties for the Company will not violate any obligations Employee may have to any
such previous employer or other party. In any work for the Company, Employee
will not disclose or make use of any information in violation of any agreements
with or rights of any such previous employer or other party, and will not bring
to the premises of the Company any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(g) INJUNCTIVE RELIEF.
(i) Employee acknowledges and agrees that the covenants and
obligations contained in this Section 6 relate to special, unique and
extraordinary matters and that a violation of any of the terms of this Section
will cause the Company irreparable injury for which adequate remedies at law are
not available. Therefore, Employee agrees that the Company shall be entitled
(without having to post a bond or other surety) to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from committing any violation of the covenants and
obligations set forth in this Section 6.
(ii) The Company's rights and remedies under this Section are
cumulative and are in addition to any other rights and remedies the Company may
have pursuant to the specific provisions of this Agreement and at law or in
equity.
7. MISCELLANEOUS.
(a) ATTORNEY'S FEES. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, the non- prevailing party shall pay the prevailing party's
fees and expenses, including reasonable attorney fees, unless the court or panel
of arbitrators determine otherwise.
(b) SUCCESSORS AND ASSIGNS. This Agreement and the benefits hereunder
are personal to the Company and are not assignable or transferable by the
Employee without the written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Company and
the Employee and the Employee's heirs and legal representatives, and the
Company's successors and assigns.
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(c) GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of Florida, without regard to the
application of principles of conflict of laws.
(d) NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement addressed to the
Company at its then principal office, as notified to Employee, or to the
Employee at his address specified on page 1 of this Agreement, or to either
party hereto at such other address or addresses as he or it may from time to
time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of delivery.
(e) MODIFICATION; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Employee and such officer. 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 prior or subsequent time.
(f) COMPLETE UNDERSTANDING. 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 set forth expressly in this Agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
(h) VALIDITY. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(i) SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.
(j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(k) ARBITRATION. Except for disputes relating to Section 7 of this
Agreement, any and all disputes or controversies that shall arise under or in
connection with this Agreement or in any other way related to Employee's
employment by the Company, including termination of employment, shall be
submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the Federal Arbitration Act takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or
7
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grant, except that they will have no authority to award punitive damages or any
other damages not measured by the prevailing party's actual damages, and may
not, in any event, make any ruling, finding or award that does not conform to
the terms and conditions of this Agreement. Arbitration shall be held either in
Broward County or Dade County, Florida, and the parties hereby agree to accept
service of process at the address above written and in the personal jurisdiction
and venue as set out herein. Both parties expressly covenant and agree to be
bound by the decision of the arbitrators as the final determination of the
matter in dispute. Judgment upon the award rendered by the arbitrators may be
entered into any court having jurisdiction thereof. The non-prevailing party
shall pay the prevailing party's fees and costs, including reasonable attorney
fees.
(l) INDEMNIFICATION. In accordance with the Company's Articles and
Bylaws, the Company agrees to defend, indemnify and hold harmless the Employee
("Indemnified Party") for acts in his capacity as Employee to the fullest extent
permitted by Florida corporate law at the present time (or as such right of
indemnity may be increased in the future) including in particular and without
limitation with respect to the execution and delivery of this Agreement or
Employee's accepting employment with the Company. The Company agrees to
reimburse the Indemnified Party in advance for any costs of defending any action
or investigation (including reasonable attorneys' fees and expenses) regarding
Employee's performance of his duties under this Agreement, subject to an
undertaking from the Indemnified Party to repay the Company if the Indemnified
Party is determined not to be entitled to such indemnity by a court of competent
jurisdiction; provided that, the Company shall first have the opportunity to
defend Employee so long as counsel hired by the Company does not have a conflict
with representation of both the Company and the Employee and Employee approves
of such counsel. Notwithstanding the foregoing, the Company shall not be
required to advance expenses for the defense of Employee for any causes of
action that relate to activities of Employee that the Company in good faith
determines are outside of the scope of the duties required of Employee under
this Agreement and not related to the execution and delivery of this Agreement
or Employee's accepting employment with the Company, including without
limitation, for causes of action such as sexual harassment, torts, etc.
(m) Sections 5(a) and 5(c); 6 and 7 shall survive the termination of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
COMPANY:
WOODFIELD ENTERPRISES, INC. EMPLOYEE:
a Florida corporation
By: ______________________________________________________________________
Gary N. Mansfield
Chief Executive Officer
